Opinion ID: 6347127
Heading Depth: 2
Heading Rank: 1

Heading: Does the Act apply in this case?

Text: The district court found the Act unconstitutionally retroactive as applied to the parties’ preexisting agreement. Notably, the Act applies to a dealer agreement entered into before the Act’s effective date only if it has no expiration date and is a continuing contract. Act of May 25, 2011, § 4(a)(2). The parties do not dispute that theirs was such an agreement. Thus, for purposes of answering the certified question, we assume without deciding that the parties’ agreement was the type of “continuing contract” to which the Act applies. Survitec also argued in the district court the Act was inapplicable for a different reason: life rafts do not constitute “equipment” under the Act. See TEX. BUS. & COM. CODE § 57.002(7)(A) (defining “equipment” to include “machinery, equipment, or implements or attachments to the machinery, equipment, or implements used for, or in connection with, any of the following purposes: . . . industrial, construction, maintenance, mining, or utility activities or applications”); see also id. § 57.002(4) (defining “dealer agreement” to mean an agreement regarding the purchase or sale of equipment). The district court denied Survitec’s motion for summary judgment and initially “conclude[d] without reservation that the Survitec life rafts are ‘equipment’ for purposes of the Act’s applicability.” But the district court’s later order granting 8 Survitec’s motion for judgment and declaring the Act unconstitutionally retroactive states that the district court “need not address definitively the difficult question whether the life rafts are ‘equipment’ under the Act.” Survitec pressed this argument as an alternative ground for affirmance, but the certified question does not mention it, and neither party briefed the issue in this Court. The State, as amicus, on the other hand, urges us to decide whether life rafts are “equipment” covered by the Act, arguing that our precedents require resolution of that question before reaching the constitutional question the Fifth Circuit posed. We of course adhere to our rule that courts must avoid reaching constitutional questions when issues can be resolved on nonconstitutional grounds. See Phillips v. McNeill, 635 S.W.3d 620, 630 (Tex. 2021) (describing this rule as “not optional”). But this case comes to us not through an appeal from a Texas state court, but on a certified question. We therefore decline the State’s invitation to address Survitec’s claim that life rafts are not “equipment” under the Act, and we express no opinion on it. See Richards v. State Farm Lloyds, 597 S.W.3d 492, 497 n.6 (Tex. 2020) (“To avoid exceeding our jurisdiction, ‘we answer only the questions certified and nothing more.’” (quoting Moreno v. Sterling Drug, Inc., 787 S.W.2d 348, 349 (Tex. 1990))). B. Did Survitec rely on the wrong clause of Article I, Section 16? In a waiver-like argument, FPS asserts that Survitec’s constitutional challenge should fail because it should have been (but was not) brought under the clause of Article I, Section 16 prohibiting “any law impairing the obligation of contracts.” TEX. CONST. art. I, § 16. FPS 9 contends that Survitec’s reliance on a distinct clause in Article I, Section 16 prohibiting a “retroactive law” is improper. It argues these two clauses must not be read as interchangeable, or one would be rendered superfluous.2 Survitec responds that its challenge under the retroactivity clause is proper because the contracts clause addresses only a party’s right to enforce the other party’s contractual obligations. Survitec thus disclaims any reliance on the contracts clause. Survitec asserts its “right to enforce a contractual termination right” is a positive-law right with which the Act interferes. Alternatively, Survitec contends that overlap between the clauses would not render either superfluous. We need not decide whether Survitec brought its challenge under the wrong clause of Article I, Section 16 because we conclude that the Act’s application to the parties’ agreement does not violate the prohibition against retroactive laws as Survitec asserts. Survitec does not assert that the Act’s application violated the contracts clause, and the certified question does not address the issue. We therefore express no opinion on whether the Act’s application may have been unconstitutional under that clause as a law impairing the obligation of contracts. C. Does application of the Act violate the retroactivity clause? Neither party disputes that their agreement was at-will such that, before the Act’s effective date, either party could terminate the 2While FPS’s opening brief devotes significant attention to this argument, it was not mentioned at oral argument. 10 agreement at any time for any reason (or no reason) without penalty. Once the Act became effective, however, Survitec could no longer terminate the agreement without good cause. TEX. BUS. & COM. CODE § 57.153. Survitec thus argues that the Act is unconstitutionally retroactive because it “eliminated Survitec’s right to have an at-will relationship with FPS.” We disagree. FPS asserts that Survitec violated the Act when it terminated their agreement. Yet it is undisputed that the Act did not change the legal consequences of termination after the termination had already occurred. Because “the legal effect of [Survitec’s] conduct [is being] assessed under the law that existed when the conduct took place,” see Landgraf, 511 U.S. at 265, and, as discussed below, Survitec had an opportunity to avoid those consequences before the Act took effect, the application of the Act presents no problem of retroactivity in the constitutional sense. As applied here, the Act does not “change [the rules] after the game has been played.” Robinson, 335 S.W.3d at 139. Under Survitec’s view, the Act retroactively eliminated its right to continue its at-will relationship with FPS in perpetuity. But this misunderstands the protections afforded by the retroactivity clause. It protects only “settled expectations.” Id. at 145; see A.V., 113 S.W.3d at 361 (“A law that does not upset a person’s settled expectations in reasonable reliance upon the law is not unconstitutionally retroactive.”). Survitec entered into an agreement that could be terminated at any time by either party. It had no reasonable settled expectation that it would have the right to continue to operate in a relationship with FPS under 11 those same terms, or any terms, for any length of time, let alone in perpetuity. Indeed, Survitec’s continued performance under the parties’ atwill agreement after the Act was passed demonstrates its assent to operate under the Act’s requirements. As we explained in Hathaway v. General Mills, Inc., if an employee has notice of a proposed change to an at-will employment contract and continues working with knowledge of the changes, that employee “has accepted the changes as a matter of law.” 711 S.W.2d 227, 229 (Tex. 1986); see also In re Halliburton Co., 80 S.W.3d 566, 568 (Tex. 2002). So too in this context. Survitec also argues that the Act eliminated its contractual “right to terminate [the relationship] at will” without further duties or liabilities. But Survitec had an opportunity to avoid the consequences that the Act attached to termination without cause. The period between the Act’s enactment and effective date provided Survitec with sufficient notice of the Act’s requirements in that it allowed Survitec time to order its affairs as it chose. Survitec had a window of ninety-nine days from the Act’s passage and seventy-six days from the Governor’s signature, during which it could have taken action to avoid or defer application of the Act. It could have terminated the agreement during that grace period, which would have allowed it to avoid the Act’s application altogether. Or it could have entered into a new agreement with FPS for a fixed term that otherwise contained the same terms as the parties’ previous agreement, including the ability to terminate at will, and thus avoided the Act’s application to the agreement during the new 12 agreement’s term. See Act of May 25, 2011, § 4(b). Survitec instead chose to continue operating under the parties’ agreement. Survitec responds that the period between the Act’s passage and effective date was insufficient to provide Survitec with notice of the Act’s potential effect on its asserted right to terminate without cause. In support, Survitec relies primarily on Missouri, K. & T. Ry. Co. of Texas v. State, 100 S.W. 766 (Tex. 1907). That case involved a railroad company’s due-process challenge to a statute that required construction and maintenance of restrooms at each passenger station and imposed weekly fines for noncompliance. We observed that compliance would have been “practically impossible” because the railroad company had only one week after the statute’s effective date in which to build compliant restrooms at every station. Id. at 767. Accordingly, we held that, despite the ninety-day period between the statute’s enactment and effective date, this requirement was “so oppressive and arbitrary” that it violated due process. Id. In doing so, we noted that “the railroads were not required to take notice of [the statute] until it became operative.” Id. at 768. Survitec urges us to read Missouri to hold that enactment of a statute cannot constitute notice of a forthcoming change in the law. But that is not what Missouri held. Missouri did not involve an assertion that the law was retroactive. Our concern in that case was whether a penal statute afforded parties sufficient time to build the structures necessary to comply. We did not hold that a statute’s enactment cannot serve as notice of an upcoming change in the law. 13 Survitec cites other cases that cite Missouri, but they do not support Survitec’s argument. For example, in Popham v. Patterson, we were asked to determine when a statute that changed the term length of an elected position took effect. 51 S.W.2d 680, 683 (Tex. 1932). Citing Missouri, we noted that “[n]o act of the Legislature is operative as notice until it becomes a law.” Id. But the issue in that case was when the statute became operative. Popham is not a retroactivity case and our reference to “notice” had nothing to do with the question of whether a party receives sufficient notice that the law is about to change. Likewise, in Norton v. Kleberg County, our only concern was “determining when an Act goes into effect as law.” 231 S.W.2d 716, 718 (Tex. 1950). In short, the cases on which Survitec relies to support its claim that it had no notice that the Act could alter the consequences of Survitec’s contract termination do not address the concerns that animate our constitutional prohibition against retroactive laws. In contrast, our retroactivity cases have considered the period of time between a statute’s enactment and effective date in weighing the degree of notice afforded and a statute’s impairment of a party’s rights. See Likes, 962 S.W.2d at 502 (holding an amendment to the Tort Claims Act was not unconstitutionally retroactive and noting the plaintiff had “more than two months from the time the change was made until the [amendment] became effective”); Union Carbide, 438 S.W.3d at 58 (describing the period between a statute’s enactment and effective date as a “grace period for suits to be filed under the law as it previously existed”). These constitutionally required grace periods are designed “to give notice” so the public can adjust to the new law. Halbert, 34 S.W. at 14 639 (discussing TEX. CONST. art. III, § 39). Survitec’s contention that enactment of a statute does not provide notice of an upcoming change in the law flies in the face of these precedents, and we reject it. Under these facts, we conclude that the Act’s application did not retroactively disrupt or impair any reasonable settled expectation of Survitec. We thus conclude the application of the Act to Survitec’s termination of the agreement is not unconstitutionally retroactive. See Robinson, 335 S.W.3d at 145; A.V., 113 S.W.3d at 361.