Court Opinion

ID: 6347127
Source: CourtListenerOpinion
Date Created: 2022-06-06 00:11:03.721396+00
Date Added: 2024-06-11T12:08:29.905185
License: Public Domain

Supreme Court of Texas
                             ══════════
                              No. 21-1088
                             ══════════

                Fire Protection Service, Incorporated,
                                Appellant,

                                    v.

             Survitec Survival Products, Incorporated,
                                 Appellee

   ═══════════════════════════════════════
               On Certified Question from the
      United States Court of Appeals for the Fifth Circuit
   ═══════════════════════════════════════

                        Argued March 22, 2022

      JUSTICE HUDDLE delivered the opinion of the Court.

      A life-raft supplier entered into an oral agreement with a dealer
allowing the dealer to sell and service the life rafts. The parties operated
under their at-will agreement for years.          During that time, the
Legislature passed a statute that requires good cause for suppliers to
terminate certain dealer agreements and imposes liability on suppliers
who fail to comply. The supplier here terminated the agreement without
cause six years after the statute took effect.       The dealer sued for
damages, claiming the termination was wrongful because the supplier
lacked the good cause the statute required.
      The Fifth Circuit asks whether application of the statute to the
parties’ preexisting agreement violates the Texas Constitution’s
prohibition against retroactive laws. We conclude it does not.
                          I.     Background
      Survitec Survival Products, Inc., manufactures marine safety
equipment, including life rafts. In the 1990s, Fire Protection Service,
Inc., (FPS) orally agreed to be an authorized dealer and servicer of
Survitec’s life rafts. The parties agreed either of them could terminate
their agreement at any time, for any reason or for no reason.
      Several years later, the Legislature enacted the Fair Practices of
Equipment Manufacturers, Distributors, Wholesalers, and Dealers Act.
See TEX. BUS. & COM. CODE §§ 57.001–.402. The Act prohibits a supplier
from terminating a dealer agreement without good cause. Id. § 57.153.
      Nearly six years after the Act took effect, Survitec notified FPS
that it was terminating their relationship.       It is undisputed that
Survitec did not provide FPS any reason for the termination. FPS sued
Survitec in state district court, and Survitec removed the case to federal
court. FPS alleges that Survitec violated the Act by, among other things,
terminating without cause.
      The case was tried to the district court without a jury. At the end
of FPS’s case-in-chief, Survitec moved for judgment on partial findings
under Federal Rule of Civil Procedure 52(c).        Survitec argued that
applying the Act to the parties’ preexisting at-will agreement would
violate the prohibition on retroactive laws in Article I, Section 16 of the

                                    2
Texas Constitution. The district court agreed. It granted Survitec’s
motion and entered judgment for Survitec.
       FPS appealed and, at FPS’s request, the Fifth Circuit certified to
us the following question:
       Does the application of the [Act] to the parties’ agreement
       violate the retroactivity clause in article I, section 16 of the
       Texas Constitution?
Fire Prot. Serv., Inc. v. Survitec Survival Prods., Inc., 18 F.4th 802, 805
(5th Cir. 2021).
                          II.    Applicable Law
A.     Business and Commerce Code Chapter 57
       The Fair Practices of Equipment Manufacturers, Distributors,
Wholesalers, and Dealers Act regulates the business relationships
between manufacturers or suppliers of certain types of equipment and
the independent dealers that sell the equipment to the public. Act of
May 25, 2011, 82d Leg., R.S., ch. 1039, § 1, 2011 Tex. Gen. Laws 2646,
2646. The Act applies to a “dealer agreement,” which the Act defines as
“an oral or written agreement or arrangement, of definite or indefinite
duration, between a dealer and a supplier that provides for the rights
and obligations of the parties with respect to the purchase or sale of
equipment or repair parts.” TEX. BUS. & COM. CODE § 57.002(4). It
provides that “[a] supplier may not terminate a dealer agreement
without good cause.” Id. § 57.153.1 And it enumerates circumstances in

       1  The Act contains separate subchapters dealing with termination of
“single-line dealer agreements” and termination of “agreements other than
single-line dealer agreements.” Id. §§ 57.151–.155, .201–.205; see also id.
§ 57.002(16) (defining “single-line dealer agreement”). Both parties cite to the

                                       3
which good cause for termination of a dealer agreement exists. Id.
§ 57.154(a).
       The Act provides dealers a statutory remedy for violations. It
states:
       If a supplier violates any provision of this chapter, a dealer
       may bring an action against the supplier in a court of
       competent jurisdiction for damages sustained by the dealer
       as a consequence of the supplier’s violation, including
       damages for lost profits, together with the actual costs of
       the action, including the dealer’s attorney’s fees and
       paralegal fees and the costs of arbitrators.
Id. § 57.401(a). The statutory remedy is not exclusive and is in addition
to any other remedy permitted by law or that may exist under the
parties’ agreement. Id. §§ 57.401(b), .402.
       The Legislature passed the Act on May 25, 2011, and the
Governor signed it into law the following month, on June 17, 2011. It
took effect two and a half months later, on September 1, 2011. Act of
May 25, 2011, § 5. The Act applies to all dealer agreements entered into
or renewed on or after the Act’s effective date. Id. § 4(a)(1). A dealer
agreement existing before September 1, 2011, is governed by the law in
effect before then, unless it “has no expiration date” and “is a continuing
contract.” Id. § 4(a)(2), (b).

subchapter governing agreements other than single-line dealer agreements, so
we assume without deciding that the parties’ agreement here is not a “single-
line dealer agreement.” We note, however, that both subchapters similarly
prohibit a supplier from terminating a dealer agreement without good cause.
Id. §§ 57.153, .202.

                                     4
B.    Texas Constitution Article I, Section 16
      The Texas Constitution commands: “No bill of attainder, ex post
facto law, retroactive law, or any law impairing the obligation of
contracts, shall be made.”       TEX. CONST. art. I, § 16.       The U.S.
Constitution, unlike the Texas Constitution, does not expressly prohibit
“retroactive” laws. But it does prohibit bills of attainder, ex post facto
laws, and laws impairing the obligation of contracts. See U.S. CONST.
art. I, §§ 9 (“No Bill of Attainder or ex post facto Law shall be passed.”),
10 (“No State shall . . . pass any Bill of Attainder, ex post facto Law, or
Law impairing the Obligation of Contracts . . . .”).
      As the U.S. Supreme Court has observed, a “presumption against
retroactive legislation is deeply rooted in our jurisprudence.” Landgraf
v. USI Film Prods., 511 U.S. 244, 265 (1994). It rests on the “principle
that the legal effect of conduct should ordinarily be assessed under the
law that existed when the conduct took place.” Id. (quoting Kaiser
Aluminum & Chem. Corp. v. Bonjorno, 494 U.S. 827, 855 (1990) (Scalia,
J., concurring)).
      Distilling over 150 years of precedents involving the Texas
Constitution’s prohibition against retroactive laws, we set forth in
Robinson v. Crown Cork & Seal Co. a “fuller statement of its proper
application.” 335 S.W.3d 126, 136 (Tex. 2010). We observed that the
presumption against retroactive laws advances two fundamental
objectives of our system of government: the protection of “reasonable,
settled expectations” and protection against “abuses of legislative
power.”    Id. at 139 (citing Landgraf, 511 U.S. at 265–66).            Put
differently, our constitutional prohibition against retroactive laws

                                     5
“protects settled expectations that rules are to govern the play and not
simply the score, and prevents the abuses of legislative power that arise
when individuals or groups are singled out for special reward or
punishment.”     Id. at 145.      To determine whether a statute is
unconstitutionally retroactive, we first consider the nature of the rights
claimed and the statute’s impact on them. Id. at 147. If the statute
disturbs a party’s settled expectations, we then must consider whether
the statute serves a public interest as opposed to simply benefiting one
or a few private entities. Id. at 149.
      Although Robinson refined our framework for analyzing whether
laws are unconstitutionally retroactive, it did not break new ground but,
rather, provided a unifying statement of the principles that we had
applied in our earlier cases. One key principle is that a law is not
retroactive in the constitutional sense unless it disrupts or impairs
settled expectations. As we stated in In re A.V., “[a] law that does not
upset a person’s settled expectations in reasonable reliance upon the law
is not unconstitutionally retroactive.” 113 S.W.3d 355, 361 (Tex. 2003)
(citing Landgraf, 511 U.S. at 269–70). In that case, we held that an
amendment to the Family Code creating a new ground for parental
termination based on criminal conduct and incarceration was not
unconstitutionally retroactive as applied to a father who had been
convicted before the amendment was enacted.         Id. at 361–62.    We
concluded that the father “could not reasonably expect that the State
would not act to provide a safe environment for his children while he
was imprisoned.”      Id. at 361.    Similarly, in Texas Water Rights
Commission v. Wright, we upheld a statute authorizing the forfeiture of

                                     6
water permits for non-use, even though the permits were issued before
the statute’s enactment. 464 S.W.2d 642, 649 (Tex. 1971). We held that
permit holders “could reasonably expect that their rights would be
subjected to a remedy enforcing the conditions inherently attached to
those rights.” Id.
       In determining whether a law disrupts or impairs settled
expectations, we consider whether the law gives parties a “grace period”
to adapt before the law takes effect. In City of Tyler v. Likes, we held
that an amendment to the Tort Claims Act that made the city immune
from a negligence claim for flooding that occurred before the
amendment’s effective date was not unconstitutionally retroactive. 962
S.W.2d 489, 502 (Tex. 1997). We noted that the amendment did not
entirely eliminate the plaintiff’s right to sue because she had time to file
her lawsuit before the amendment took effect, including “more than two
months from the time the change was made until the [amendment]
became effective.” Id. And in Union Carbide Corp. v. Synatzske, we
observed that the period between the enactment and effective date of a
statute imposing new prerequisites on asbestos-related claims “allowed
a grace period for suits to be filed under the law as it previously existed.”
438 S.W.3d 39, 58 (Tex. 2014).           We held the statute was not
unconstitutionally retroactive when applied to a claim that had accrued
(but had not been filed) before the statute’s effective date. Id. at 60.
These statutory grace periods are required by our Constitution, which
mandates that (with limited exceptions) statutes not take effect until
ninety days after the legislative session adjourns. TEX. CONST. art. III,
§ 39. Not long after our Constitution’s adoption, we explained that the

                                     7
object of that section “was to give notice to the people of its passage, that
they might obey it when it should become effective, and also to enable
them to adjust their affairs to the change made, if any.” Halbert v. San
Saba Springs Land & Live-Stock Ass’n, 34 S.W. 639, 639 (Tex. 1896).
                            III.   Discussion
A.     Does the Act apply in this case?
       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’ at-
will 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.
                           IV.    Conclusion
      Survitec had no reasonable settled expectation that it could
continue to operate under its open-ended, at-will agreement in
perpetuity.    And Survitec had sufficient time between the Act’s
enactment and effective date to take whatever steps it thought
necessary to avoid the Act’s effects. Survitec could have ordered its
affairs to avoid or defer the Act’s application to its contractual
relationship but instead chose to continue operating under its
agreement until the Act took effect. For these reasons, we conclude that
application of the Act in this case does not violate the constitutional
prohibition against retroactive laws in Article I, Section 16. We answer
the certified question “no.”

                                         Rebeca A. Huddle
                                         Justice

OPINION DELIVERED: June 3, 2022

                                    15