Petition for Writ of Certiorari — Youell & Cos. v. Getty Oil Co.

Al

Bageme Court, U.

92-1915) Free:

JUN 1 1993

OF THE CLERK |

_

In The

SUPREME COURT OF THE UNITED STATES

October Term, 1992

YOUELL & COMPANIES AND

INSURANCE COMPANY OF NORTH AMERICA

Petitioners,

VS.

GETTY OIL COMPANY AND

TEXACO INC.,

Respondents.

On Writ of Certiorari to the Texas Supreme Court

PETITION FOR WRIT OF CERTIORARI

Jack G. Carnegie Thomas W. Engelhardt

Attorney of Record McCullough, Campbell &

Emil T. Bayko Lane

Holtzman & Urquhart 401 North Michigan Ave.

909 Fannin Street, Suite 900 Chicago, Illinois 60611

Houston, Texas 77010-1005 (312) 923-4000

(713) 739-0000

Tom Lorance, P.C. Byron Lee

6001 Devon Drive Coats, Rose, Yale, Holm,

Amarillo, Texas 79109 Ryman & Lee, P.C.

(806) 356-8926 1100 Louisiana, Ste. 3500

Houston, Texas 77002

(713) 651-0111

ATTORNEYS FOR PETITIONERS

QUESTION PRESENTED

Does it constitute a denial of due process of law

under the 14th Amendment to the United States

Constitution if a state court of last resort, on plaintiffs

appeal of a grant of summary judgment for defendants,

reverses and grants a sua sponte partial Summary judgment

in favor of the plaintiff, when:

(i) the denial of plaintiffs earlier motion for partial

summary judgment was neither appealed nor

appealable, so that it was not before the court;

(ii) defendants’ responses to plaintiffs prior motion

for partial summary judgment were not contained in

the appellate record (because they were not relevant

to the limited motion which was on appeal);

(iii) defendants were given no notice that plaintiffs

motion for partial Summary judgment would be

considered by the court; and

(iv) defendants had no opportunity to present their

defenses to plaintiffs motion before any appellate

court, and will, as a result of the court’s binding

ruling, proceed to trial and final judgment without

ever being afforded the opportunity to present their

defenses on a critical issue?

ii

LIST OF PARTIES

A. Petitioners:

(1) Youell & Companies, a consortium of

offshore insurance companies and Lloyds syndicates

consisting of Bermuda Fire and Marine Insurance Company,

Limited; "Winterthur" Swiss Insurance Company, Limited;

Compagnie Europeenne d’Assurances Industrielles S.A;

CNA Reinsurance of London, Ltd.; Lexington Insurance

Company; British National Life Insurance Society, Ltd.;

Lloyds syndicates Nos. 190, 210, 918, 989, 279, 650, 940;

Sovereign Marine & General Insurance Company, Limited;

Toyko Marine & Fire Insurance Company (U.K.), Limited; |

Taisho Marine & First Insurance Company (U.K.), Limited;

Allianz International Insurance Company, Limited;

Storebrand Insurance Company (U.K.), Limited; The

Dominion Insurance Company, Limited; Stronghold

Insurance Company, Limited; Folksam International

Insurance Company (U.K.), Limited; Yasuda Fire & Marine

Insurance Company (U.K.), Limited

(2) Insurance Company of North America

B. Respondents: Getty Oil Company and

Texaco, Inc. (referred to herein as "Texaco")'

In the trial court, the plaintiff identified itself as “Getty Oil

Corporation, succeeded by and a division of Texaco, Inc." There is some

dispute below as to the identity of the proper party plaintiff, and any

reference herein to “Texaco” shall be without any prejudice to the

resolution of that issue. That dispute does not affect the deliberations of

this Court.

a

lil

a Additional Parties Below: NL Industries, Inc.;

Walbrook Insurance Company, Limited; El Paso Insurance

Company, Limited; Dart Insurance Company, Limited;

Louisville Insurance Company, Limited; Mutual Reinsurance

Company, Limited

iv

TABLE OF CONTENTS

A. I ares. Ob « wines oawkes

B. ee ee ee eee ee

ad Additional Parties Below ............

EE ad da A RAWEMAEARESORA a WE ewe cde

v

TABLE OF AUTHORITIES

Cases

Armstrong v. Manzo, 380 U.S. 545 (1965) .......... 11

Casso v. Brand, 776 S.W.2d 551 (Tex. 1989) ........ 11

Cleveland Board of Education v. Loudermill,

PPR NaN IE, owes dob Sw PRE ba hoon ee haens 9

Cohen v. Beneficial Industrial Loan Corp.,

ee ME Eo hee cs 6 ee ive 5S See 5

Ethyl Corporation v. Daniel Constr. Co.,

Fae SW28 FOS (Tem. OT)... ccc cwcccecns 6

Fountain v. Filson, 336 U.S. 681 (1949) ............. 9

Getty Oil Company and Texaco Inc. v. Insurance

Company of North America, et al.,

OREM We FOU CEO BUUE oc ices ccedcecceenne 1

Harbor Insurance Company v. Lewis,

562 F. Supp. 800 (E.D. Pa. 1983) ................. 7

Landry v. Air Line Pilots Association International

AFL-CIO, 901 F.2d 404 (5th Cir. 1990),

cert. denied 498 U.S. 895 (1990) ................. 10

Mathews v. Eldridge, 424 U.S. 319 (1976) ............ 9

vi

Mingus Constructors, Inc. v. U.S., 812 F.2d 1387

ee en hc choke Kaneko abe eee ek aoe 6, 8

Nebraska Press Assoc. v. Stuart, 423 U.S. 1327 (1975)... 5

Pennoyer v. Neff, 95 U.S. 714 (1878) ............05- 9

Peralta v. Heights Medical Center, Inc.,

Aft St | 6 PPO e TT REL eerCeTe eT Tee ere 7, 12

Powell v. U.S., 849 F.2d 1576 (Sth Cir. 1988) ......... 9

Prepo Corp. v. Pressure Can Corp., 234 F.2d 700

(7th Cir. 1956), cert. denied, 352 U.S. 892 (1956) .... 6,8

Rice v. English, 742 S.W.2d 439

(Tex. App.—Tyler, 1987, writ denied) ........... ce |

Saunders v. Shaw, 244 U.S. 317 (1917) ...........4.. 5

Western Fire Ins. Co. v. Copeland, 786 F.2d 649

TEER RIN ENE ERT PD 9

White v. Texas American Bank/Galleria, N.A.,

oe ee fe ee ee 4

Winbourne v. Eastern Air Lines, Inc., 632 F.2d 219

I MEE <5 x6-« 46.0.0 so i Be Cee 9

Woods v. William M. Mercer, Inc., 769 S.W.2d 515

rer TT eres ree rer re 11

vii

Statutes

OE OE oss WKKGb 6 Had bvine Kawiencedes 1

28 U'S.C. § 2101 (c) ..................00006..., 1

Supreme Court Rules PM i SA a wie ers ase tates 1

_ TEX. Bus. & CoM. CODE ANN. § 2.202 (Vernon 1968) . 7

TEX. Bus. & COM. CODE ANN. § 2.207 (Vernon 1968) . 7

TEX. Bus. & COM. CODE ANN. § 2.208 (Vernon 1968) . 7

TMK, RAPP. PL SOO) own ccc ccccccccccce, 3

U.S. CONST. amend. 8 2 ee en 2

Other Authoriti

10A Wright, Miller & Kane, FEDERAL PRACTICE AND

PROCEDURE: CIVIL 2d § 2720 34 Re 9

6 MOORE’s FEDERAL PRACTICE { 56.12 156-169

Se ERT RTE ES Ped pea iS 9

1

REFERENCES TO PRIOR OPINIONS IN THIS CASE

The opinion of the Texas Supreme Court, issued on

November 11, 1992, is reported in Getty Oil Company and

Texaco Inc. v. Insurance Company of North America, et al,

845 S.W.2d 794 (Tex. 1992). The Texas Supreme Court’s

opinion, judgment and order denying Petitioners’ motion for

rehearing are reprinted in Appendices A, B and C, respec-

tively. The opinion of the Fourteenth Court of Appeals was

reported in Getty Oil Company and Texaco Inc. v. Insurance

Company of North America, et al., 819 S.W.2d 908 (Tex.

App.—Houston [14th Dist.] 1991), and is reprinted in

Appendix D. The decision of the 280th District Court of

Harris County, Texas is unpublished and is reprinted in

Appendix E.

JURISDICTIONAL STATEMENT

The Texas Supreme Court initially issued its opinion

on November 11, 1992, and denied Petitioners’ Motion for

Rehearing on March 3, 1993.

Pursuant to 28 U.S.C. § 2101 (c) and Supreme Court

Rules 13.1, 13.4, Petitioners have applied for this writ of

certiorari within ninety days after the Texas Supreme Court

overruled Petitioners’ motion for rehearing. Therefore, this

Court has jurisdiction under 28 U.S.C. § 1257.

2

CONSTITUTIONAL PROVISION AT ISSUE

No State shall make or enforce any law which shall

abridge the privileges or immunities of citizens of the

United States; nor shall any State deprive any person

of life, liberty, or property, without due process of

law....

U.S. CONST. amend. XIV, § 1.

STATEMENT OF THE CASE

Texaco filed this lawsuit against NL Industries, Inc.

("NL") and its insurers, Insurance Company of North

America and Youell and Companies, seeking to require

them to pay the $14 million settlement of a wrongful death

judgment rendered against "Getty Oil Corporation and

Texaco, Inc." This lawsuit alleges the existence of a contract

between Texaco’s subsidiary Getty Oil Company and NL.

A critical disputed issue was whether the alleged contract

merely requires NL to carry insurance supporting its limited

indemnity obligation or whether the insurance requirement

is a separate obligation requiring NL to procure insurance

covering the wrongful death claim.

The existence and interpretation of the alleged con-

tract were the subject of a motion for partial summary

judgment by Texaco, a motion for summary judgment by

defendants, and a separate "mini-trial" in the trial court. No

judgment was rendered at the conclusion of the mini-trial,

but the trial court rendered a partial directed verdict that

the purported contract lacked consideration. The trial court

3

denied Texaco’s motion for partial summary judgment and

granted defendants’ motion for summary judgment.

Texaco appealed the grant of defendants’ motion for

Summary judgment. Neither the denial of Texaco’s motion

for partial summary judgment nor the mini-trial ruling was

at issue on appeal, nor could they have been under Texas

procedure." Texaco did not include defendants’ responses

to Texaco’s motion for partial summary judgment in the

appellate record, nor was any portion of the record from the

mini-trial included in the record on appeal.’

The Texas Fourteenth Court of Appeals affirmed the

summary judgment for defendants on res judicata grounds.

The Texas Supreme Court affirmed again as to NL, but

reversed the summary judgment as to Petitioners. Rather

than limiting itself to a ruling that Petitioners failed to

sustain their summary judgment burden, the Texas Supreme

Court went on to hold: "(T]he additional insured provision

of the contract does not support the indemnity agreement, -

4

but rather is a separate obligation. We disagree with the

concurring and dissenting opinion that the contract is

susceptible to any other reasonable interpretation." Thus,

the Texas Supreme Court overstepped its bounds and effec-

tively granted Texaco’s motion for partial summary

judgment.

The trial court’s denial of Texaco’s motion for partial

summary judgment on that issue was not before the Texas

Supreme Court. Petitioners’ responses to Texaco’s motion

were not in the appellate record, Petitioners had no notice

of the pendency of such motion and Petitioners had no

opportunity to present arguments or evidence directed to

that issue. The Texas Supreme Court thus had no possible

way of determining whether viable defenses to Texaco’s

interpretation might exist. In fact, it has never been

determined that a contract exists or that it applies to the

underlying circumstances. Yet, summary judgment on this

critical issue was granted for Texaco, sua sponte, by a

judicial body that gave neither notice of its intention to

consider Texaco’s motion, nor an opportunity for Petitioners

to be heard in opposition. The Texas Supreme Court’s

grant of summary judgment in favor of the non-moving

party -- without any argument, evidence, or briefing in the

record before it - denied Petitioners the due process of law

guaranteed by the United States Constitution.

Petitioners’ constitutional rights were violated for the

first time when the Texas Supreme Court issued its decision.

Petitioners immediately moved for rehearing, challenging

the grant of partial summary judgment in favor of the non-

moving party upon appeal. See App. F. When violation of

5

a constitutional right to due process arises for the first time

in a decision of a state supreme court, objection is timely

made if raised on motion for rehearing. Saunders v. Shaw,

244 U.S. 317, 320 (1917). In Petitioners’ motion for

rehearing as supplemented, Petitioners properly objected to

the lack of due process inherent in grant of summary

judgment in favor the non-moving party. The Texas

Supreme Court overruled the motion for rehearing without

opinion.

The action of the Texas Supreme Court, if left

unreviewed at this stage of the proceedings will, as a

practical matter, permanently deprive Petitioners of a

federal due process right. The trial court is bound by the

ruling of the Texas Supreme Court as to the interpretation

of the alleged contract, and must go forward on the issues

remaining for trial on the unconstitutional premise of a par-

tial summary judgment having been rendered against

Petitioners without due process of law. The deprivation of

Petitioners’ due process rights will not "ripen" or develop by

further trial proceedings in this matter; on the contrary,

further proceedings below will only lend a permanence to

the deprivation of due process, and the deprivation of due

process will color all further trial proceedings and settlement

negotiations in an insidious way. Practically viewed, failure

to review this case at this stage would prevent any

meaningful review.‘

“ The requirement of finality should be given practical application, not

a technical one. See Cohen v. Beneficial Loan Corp., 337 US. 541, 546

(1949); Nebraska Press Assoc. v. Stuart, 423 U.S. 1327 (1975).

6

ARGUMENT: Denial of Due Process

Petitioners’ motion for summary judgment on the

contract interpretation issue presented a narrowly-drawn

argument that under Texas’ "express negligence” rule, they

should prevail on the bare language of the document at

issue. See Ethyl Corporation v. Daniel Constr. Co., 725

S.W.2d 705 (Tex. 1987). Petitioners’ motion assumed,

arguendo, that the document relied on by Texaco was a valid

contract. It presented no extrinsic evidence as to the

meaning of the document, and it accepted the language of

the alleged contract in the light most favorable to Texaco,

uncolored by course of performance, course of dealing, or

usage of trade, and unencumbered by a multitude of related

commercial documents. In fact, Petitioners chose not even

to attempt to rebut Texaco’s extrinsic evidence regarding the

meaning of the alleged contract because, if the express

negligence doctrine were applicable, such evidence would be

neither relevant nor admissible.

The fact that those matters are not raised in

Petitioners’ motion for summary judgment does not mean

that they do not exist. See Prepo Corp. v. Pressure Can

Corp., 234 F.2d 700, 703 (7th Cir. 1956), cert. denied, 352

U.S. 892 (1956); Mingus Constructors, Inc. v. U.S., 812 F.2d

1387, 1391 (Fed. Cir. 1987). In the absence of the express

negligence doctrine, they are highly relevant to the

interpretation of the document relied upon by Texaco, par-

ticularly in light of the trial court’s thus far unchallenged

ruling that the alleged contract lacks consideration and is

only applicable, if at all, as part of a larger course of

7

dealing.” See TEx. Bus. & COM. CODE ANN. §§ 2.202,

2.207, 2.208 (Vernon 1968). See also Harbor Insurance

Company v. Lewis, 562 F. Supp. 800 (E.D. Pa. 1983). Since

such evidence was not relevant to Petitioner’s motion, it was

not before the Texas Supreme Court.

In making its sua sponte ruling in favor of Texaco, the

Texas Supreme Court must have presumed, wrongly, that

Petitioners had no defenses to Texaco’s prior motion,

because its ruling has effectively precluded all of Petitioners’

defenses on the contract interpretation issue, depriving

Petitioners of any procedural opportunity ever to raise these

defenses in any forum. Because the Texas Supreme Court

is the court of last resort in Texas, review by this Court is

Petitioners’ only avenue for redress. The Texas Supreme

Court’s ruling has not merely deprived Petitioners of an

opportunity to be heard on these defenses “at a meaningful

time and in a meaningful manner;" it has deprived

Petitioners of any opportunity to present these defenses at

all - and it has done so without even having before it the

information necessary to evaluate the nature or merits of the

defenses.

For example, if Petitioners were unable to establish

that the express negligence rule mandated their interpreta-

tion of the alleged contract, they could have presented an

alternative argument that the document was ambiguous and

‘ This Court need not address the substance of these contract

defenses. The proper inquiry for due process purposes is merely whether

an adequate opportunity to present the defenses was afforded. Peralta v.

Heights Medical Center, Inc., 485 U.S. 80, 84-87 (1988).

8

that its interpretation was a jury issue. For obvious reasons,

Petitioners presented no such argument in their motion for

summary judgment. Yet, even without the benefit of those

arguments and supporting evidence, three dissenters on the

Texas Supreme Court found the document to be ambiguous,

and its interpretation to be a question for the jury. More

members of the court might have reached the same conclu-

sion if Petitioners had the opportunity to present their

evidence and arguments on that issue. The point is,

Petitioners never had that opportunity.

There is a vast difference, procedurally and

substantively, between a ruling that Petitioners failed to

sustain their summary judgment burden as to the

interpretation of the alleged contract and a ruling that

Texaco’s opposing interpretation is correct as a matter of

law. A movant on summary judgment must establish the

absence of material facts in light of its proposed legal

interpretations; however, this is not the same as admitting the

absence of material facts if its proposed legal interpretations

are rejected. Prepo, 234 F.2d at 703; Mingus, 812 F.2d at

1391 (“[Bly the filing of a motion a party concedes that no

issue of fact exists under the theory he is advancing, but he

does not thereby so concede that no issues remain in the

event his adversary’s theory is adopted.") Petitioners’

motion was not required, and did not purport, to present

every defense to Texaco’s interpretation of the alleged

contract. Thus, it is no answer for Texaco to argue that

Petitioners’ own motion for summary judgment involved

interpretation of the contract.

9

Just as a trial court cannot grant a sua sponte

summary judgment without notice and an opportunity for

the parties to present all of their defenses, neither may an

appellate court, in reviewing a summary judgment for one

party, grant summary judgment for the other non-moving

party without due process and an opportunity to be heard,

Fountain v, Filson, 336 U.S, 681, 682-83 ( 1949),*

The rule in Fountain v, Filson is firmly grounded in

principles of due process, The 14th Amendment to the

United States Constitution forbids the exercise of judicial

power without notice to the defendant and an opportunity

to be heard, Pennoyer v, Neff, 95 U.S, 714, 732-33 (1878),

Notice and an opportunity to be heard are required “even if

the facts are clear." Cleveland Board of Education v.

Loudermill, 470 U.S. 532, $43 (1985). And, of course, “the

fundamental requirement of due process is to be heard ’at

a meaningful time and in a meaningful manner.”

Mathews v. Eldridge, 424 U.S. 319, 333 (1976). This is the

reason a summary judgment proceeding requires "adequate

procedural opportunity to oppose the motion." White v.

Texas American Bank/Galleria, N.A., 958 F.2d 80, 82-85 (Sth

Cir. 1992), Accord Powell v. U.S., 849 F.2d 1576, 1579-82

\

* See 10A Wright, Miller & Kane, FeDHRAL PRActiCN AND

PRocepunm snery fodpuntan od reas ea noe chal

not reverse @ summary and order judgment for the nonmoving

on the beats of an that the movant had no opportunity to meet

the district court, ee PREDERAL PRACTION 1 56,19, at

15169 (1002) 4 fe court should wot order summary

judgment for the aon party, but should remand for further

development of the case, may include the making of a motion for

sopeal) Ummemt by the prior nom-moving party who prevalied on the

appeal,

10

(Sth Cir, 1988) ("[T]he . . . court must give proper notice to

insure that the nonmoving party had the opportunity to

make every possible factual and legal argument"); Western

Fire Ins, Co, v. Copeland, 786 F.2d 649, 652 (Sth Cir, 1986)

(purpose of summary judgment notice requirement is to

afford a “reasonable and meaningful opportunity” to be

heard); Winbourne v. Eastern Alr Lines, Ine., 632 F.2d 219,

223 (2d Cir, 1980) (party must be afforded the “due process

protection specified in” the summary judgment rule),

The Court of Appeals for the Fifth Circuit has

recognized that appellate courts sometimes err by going “too

fast in making findings against” movants, thereby depriving

movants of the necessary notice of possible findings against

them. Landry v. Air Line Pilots Association International

AFL-CIO, 901 F.2d 404, 437-38 (Sth Cir. 1990), cert. denied

498 U.S. 895 (1990) (modification of opinion on motion for

rehearing). In such a circumstance, the overreaching

opinion should be limited by modification upon motion for

rehearing. Id. The Texas Supreme Court did not take the

opportunity on rehearing to modify its opinion, thereby

finalizing the violation of Petitioners’ due process rights.

Minimum federal constitutional standards must be

observed under state practice rules, Indeed, in analyzing

this case, this Court will note that the Texas Supreme Court

has even violated its own rules of practice by granting

summary judgment for the nonemoving party,’ Texaco could

11

not have appealed the denial of its motion for partial

summary judgment on the contract interpretation issue.

Rice v. English, 742 S,W.2d at 444-46, It would be truly

anomalous for Texaco to receive from the Texas Supreme

Court, sua sponte, what it could not have received by

expressly attempting to appeal the trial court's denial of its

motion for summary judgment,

Petitioners’ situation is reminiscent of, but worse

than, the deprivation held to violate the 14th Amendment's

guarantee of due process in Armstrong v. Manzo, 380 U.S,

545, 551-52 (1965). There, Armstrong was given the oppor-

tunity to present his defenses, but under circumstances

which relieved the opposing party of its burden of proof and

shifted the burden to Armstrong. This Court held that the

shifting of the burden from what it would have been at trial

violated Armstrong’s right to due process. Similarly, here,

the Texas Supreme Court has unacceptably altered the

burdens of proof. Texaco would have had the burden of

proving its case at trial against whatever defenses the

Petitioners might have interposed. If neither side offered

evidence, Texaco would not prevail, having failed in its

burden. The Texas Supreme Court's ruling in Texaco’s

favor completely relieved Texaco of its burden to overcome

those defenses, not merely by shifting the burden to

Petitioners as in Armstrong v, Manzo, but by totally depriving

Petitioners of any opportunity even to raise those defenses,

summary judgment in its courts than does federal law, Caso 4 Brand,

716 3,W.2d 551, 556 (Tex, 1989); Woods 4 William M. Mercer Ine, 169

5,W.2d S15, 518 a, 2 (Tex, 1988), -

12

{t also makes no difference to Petitioners’ due

process rights whether the defenses Petitioners may raise are

ultimately held to be meritorious. At this stage, a

substantive inquiry into the merits of Petitioners’ defenses is

HOt Appropriate. Procedural due process is the paramount

concern. In Peralta v. Heights Medical Center, Inc., 485 U.S.

80, 84-87 (1988), this Court held that a judgment rendered

without constitutionally-mandated notice and an opportunity

to be heard may not be permitted to stand and that

consideration of the merits of any potential defenses was not

a relevant inquiry. It makes no difference if the same

judgment would be rendered on remand. It is the denial of

the opportunity to be heard which constitutes the due

process violation. Jd. at 86-87.

CONCLUSION

In ruling without notice on the complex subject

matter of a motion for summary judgment previously denied,

and never appealed, and on which there was incomplete

information in the record on appeal, the Texas Supreme

Court violated mandatory procedural safeguards which

resulted in Petitioners being deprived of any opportunity to

present all their defenses to plaintiffs position. By so

depriving Petitioners, the Texas Supreme Court has violated

Petitioners’ right to due process under the 14th Amendment

of the United States Constitution. Accordingly, Petitioners

13

request that this Court grant a writ of certiorari to review

the judgment of the Texas Supreme Court.

Respectfully submitted,

JACK G. CARNEGIE

Attorney of Record

EMIL T. BAYKO

Holtzman & Urquhart

900 Two Houston Center

909 Fannin Street

Houston, Texas 77010-1005

Telephone: (713) 739-0000

Telecopier: (713) 739-8432

OF COUNSEL:

THOMAS W. ENGELHARDT

McCullough, Campbell &

Lane

401 North Michigan Ave.

Chicago, Illinois 60611

(312) 923-4000

TOM LORANCE

6001 Devon Drive

Amarillo, Texas 79109

(806) 356-8926

ATTORNEYS FOR

YOUELL & COMPANIES

Y2964\07194\ JGCoert pet

14

Byron Lee

Coats, Rose, Yale, Holm,

Ryman & Lee, P.C.

1100 Louisiana, Ste. 3500

Houston, Texas 77002

(713) 651-0111

ATTORNEYS FOR

INSURANCE COMPANY OF

NORTH AMERICA