Panda Sherman Power Intermediate Holdings I, LLC v. Doggett

• Docket Number: 03-18-00695-CV
• Decision Date: 28 November 2023
• Parties: Panda Sherman Power Intermediate Holdings I, LLC; Panda Power Generation Infrastructure Fund, LLC, d/b/a Panda Power Funds; and Panda Sherman Power Holdings, LLC, Appellants v. H.B. "Trip" Doggett; Warren Lasher; Bill Magness; and Kent Saathoff, Appellees
• Court: Texas Court of Appeals

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Panda Sherman Power Intermediate Holdings I, LLC; Panda Power Generation Infrastructure Fund, LLC, d/b/a Panda Power Funds; and Panda Sherman Power Holdings, LLC, Appellants
v.
H.B. "Trip" Doggett; Warren Lasher; Bill Magness; and Kent Saathoff, Appellees

No. 03-18-00695-CV

Court of Appeals of Texas, Third District, Austin

November 28, 2023

FROM THE 419TH DISTRICT COURT OF TRAVIS COUNTY NO. D-1-GN-18-002944, THE HONORABLE JAN SOIFER, JUDGE PRESIDING

Before Chief Justice Byrne, Justices Baker and Triana

MEMORANDUM OPINION

Thomas J. Baker, Justice

Appellants Panda Sherman Power Intermediate Holdings I, LLC; Panda Power Generation Infrastructure Fund, LLC, d/b/a/ Panda Power Funds; and Panda Sherman Power Holdings, LLC (collectively, Panda) in 2018 sued executives of the Electric Reliability Council of Texas (ERCOT) for alleged fraudulent representations upon which Panda relied to its detriment and for alleged conspiracy to commit such fraud. In a combined order, the trial court granted the ERCOT executives' plea to the jurisdiction and motion to dismiss filed under the Texas Citizens Participation Act (TCPA), see Tex. Civ. Prac. & Rem. Code §§ 27.001-.011,^[1]

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which rulings Panda challenges on appeal. For the following reasons, we affirm the trial court's order.

BACKGROUND

For over ten years, this dispute has wended its way through Texas courts. The context is the now-deregulated electric-utility industry in Texas, set into motion by the Texas legislature in 1999 when it enacted the Texas Public Utility Regulatory Act (PURA) to restructure the industry. See Tex. Util. Code §§ 39.001-.919. Pursuant to PURA, the Public Utility Commission of Texas (PUC) was required to certify an "independent system operator" (ISO) to, among other functions, "ensure the reliability and adequacy of the regional electrical network." See id. § 39.151(a)-(c). In 2001, the PUC certified ERCOT, a Texas non-profit corporation, as the ISO.

Since then, ERCOT has managed intrastate transmission of electricity and performed other responsibilities assigned to it by statute and PUC regulations. See Electric Reliability Council of Tex., Inc. v. Panda Power Generation Infrastructure Fund, LLC, 619 S.W.3d 628, 631-32 (Tex. 2021) (Panda I). Among those duties is the annual publishing of "resource adequacy reports," providing a five-year forecast of the Texas power region's ability to generate and transmit sufficient electricity to meet projected demands, and specifically the publishing of a "Report on Capacity, Demand, and Reserves" (CDR) twice a year. See id. Participants in the electric industry, such as Panda, rely on the CDRs when deciding, for example, whether to invest in new generation plants or transmission facilities. See id. at 632.

In 2011 and 2012, ERCOT's CDRs projected a likelihood of severe energy shortfalls. Panda alleges that it relied on these reports when it decided to invest over $2 billion

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to build new power plants. After Panda began construction, however, ERCOT revised its forecasts and-instead of projecting a shortfall-now predicted an excess of generation capacity in the ERCOT region. Claiming that ERCOT's original CDRs misled it to invest in losing endeavors, Panda initially sued ERCOT and several of its executives (three of whom are the same as those sued in this suit) in Grayson County.^[2] The Grayson County trial court denied ERCOT's plea to the jurisdiction-in which ERCOT claimed to enjoy sovereign immunity and that the PUC has exclusive jurisdiction over the dispute-and ERCOT filed an interlocutory appeal and a petition for writ of mandamus in the Fifth Court of Appeals. That court dismissed ERCOT's interlocutory appeal by determining that ERCOT is not a governmental unit entitled to an interlocutory appeal, see Tex. Civ. Prac. & Rem. Code § 51.014(a)(8), but nonetheless granted conditional relief on the mandamus petition, directing the trial court to vacate its order denying ERCOT's plea to the jurisdiction, because it determined that ERCOT enjoys sovereign immunity due to its performance of mandatory regulatory duties. See Electric Reliability Council of Tex., Inc. v. Panda Power Generation Infrastructure Fund, LLC, 552 S.W.3d 297, 319-20 (Tex. App-Dallas 2018), pet. dism 'd w.o.j., Panda I, 619 S.W.3d 628.

While the Fifth Court's decision in the interlocutory appeal was under review by the supreme court, the trial court rendered a final judgment dismissing the case, which mooted both ERCOT's interlocutory appeal and Panda's petition for writ of mandamus. See Panda I, 619 S.W.3d at 631. Noting that the now-final judgment of the trial court was already the subject of a separate pending appeal in the Fifth Court, the supreme court dismissed for want of jurisdiction both the mandamus petition and the appeal. Id.

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While that second appeal was pending in the Fifth Court, Panda filed this underlying second lawsuit in Travis County against only the ERCOT executives, not ERCOT itself, purportedly for the executives' individual alleged acts of fraud and conspiracy stemming from the CDRs and other alleged misrepresentations. Before any discovery could be conducted, the ERCOT executives filed a plea to the jurisdiction and a TCPA motion to dismiss. In their plea to the jurisdiction, the ERCOT executives asserted that Panda's claims (1) fall within the exclusive jurisdiction of the PUC and (2) are barred by sovereign immunity and that (3) by electing to sue ERCOT in the first lawsuit, Panda is forever barred from bringing these claims against the ERCOT executives under Section 101.106(a) of the Texas Tort Claims Act (TTCA). See Tex. Civ. Prac. & Rem. Code § 101.106 ("Election of Remedies").

The trial court granted both the plea to the jurisdiction and the TCPA motion and awarded the ERCOT executives attorney's fees and sanctions under the TCPA. See id. § 27.009. Panda appealed to this Court, which abated the appeal per Panda's unopposed motion pending the supreme court's review of the then-pending second appeal from the Fifth Circuit, which the supreme court consolidated for review with another case involving identical issues of law pertaining to whether ERCOT enjoys sovereign immunity. See CPS Energy v. Electric Reliability Council of Tex., Inc., 671 S.W.3d 605 (Tex. 2023) (Panda II). That appeal has recently concluded, and we accordingly reinstated this appeal.

DISCUSSION

Whether the trial court erred in granting the ERCOT executives' plea to the jurisdiction

In its first issue, Panda contends that the trial court erred in granting the ERCOT executives' plea to the jurisdiction, which ruling we review de novo.

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See Matzen v. McLane, 659 S.W.3d 381, 388 (Tex. 2021). The supreme court's recent decision in Panda II resolves Panda's first issue on appeal. In that opinion, the supreme court determined that ERCOT is entitled to sovereign immunity and that the PUC has exclusive jurisdiction over the claims at issue. See Panda II, 671 S.W.3d at 611. When an agency has exclusive jurisdiction over disputes that arise within the agency's regulatory arena, the trial courts lack original jurisdiction over the dispute and must dismiss the case to allow a plaintiff to first exhaust all administrative remedies. See Oncor Electric Delivery Co. v. Chaparral Energy, LLC, 546 S.W.3d 133, 138 (Tex. 2018); Clint Indep. Sch. Dist. v. Marquez, 487 S.W.3d 538, 544 (Tex. 2016).

The supreme court in Panda II determined that PURA Section 39.151 constitutes a "pervasive regulatory scheme" that imparts exclusive jurisdiction on the PUC over an ISO (here, ERCOT), including "complete authority" to oversee and investigate ERCOT's finances, budget, and operations. See Panda II, 671 S.W.3d at 618. The PUC's exclusive jurisdiction includes "adjudicatory power" also, in that the PUC may "take appropriate action" to hold ERCOT accountable as appropriate. See id. at 618-19. Furthermore, the supreme court determined that the claims asserted by Panda-concerning whether the CDRs were fraudulent and whether ERCOT properly performed its functions, operations, and duties-fall within the scope of the PUC's exclusive jurisdiction. See id. That the PUC may not be authorized to award damages or other relief that might be available for Panda's claims under common law does not alter the PUC's original, exclusive jurisdiction. See id. at 619; see also Chaparral Energy, 546 S.W.3d at 141 (concluding that one electric utility suing another for breach of contract was required to first exhaust administrative remedies at PUC before seeking relief in district court due to "comprehensive regulatory scheme" created by PURA granting PUC exclusive jurisdiction over electric utilities' rates, operations, and services).

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We see no exception to the PUC's exclusive jurisdiction over the matters alleged in this lawsuit merely because Panda characterizes this lawsuit as being against the ERCOT executives in their "individual" capacities rather than in their "official" capacities. Panda is correct in its assertion that employees of entities that are entitled to sovereign immunity may not rely on sovereign immunity when sued in their individual capacities but must, instead, establish the affirmative defense of official immunity. See Texas A&M Univ. v. Starks, 500 S.W.3d 560, 576 (Tex. App-Waco 2016, no pet.); Cloud v. McKinney, 228 S.W.3d 326, 333 (Tex. App - Austin 2007, no pet.); see also Franka v. Velasquez, 332 S.W.3d 367, 383 (Tex. 2011) ("[P]ublic employees (like agents generally) have always been individually liable for their own torts, even when committed in the course of employment, and suit may be brought against a government employee in his individual capacity."). However, the capacity in which Panda has purportedly sued the executives, without more, does not remove its dispute concerning the executives' actions (taken in the scope of their employment at ERCOT) from the PUC's exclusive...