San Antonio Lawyer, March/April 2024

Honorable Preston Hastings Dial, Jr.

Paul Frederick Anderson

Robert Arthur Anderson

Lamar “Ken” Bennight, Jr.

Loren D. Brunke

Lauro Bustamante, Jr.

Marion Isabel

Wright Cain

Charles Edward

Campion

Howard E. “Ben”

Davis, Jr.

Hon. Preston

Hastings Dial, Jr.

Dustin James Draper

Milton I. Fagin

Oscar Carl Gonzalez

Otto “Skip” Good

Prentis Otis

Marisa Huerta

John E. Murphy

Marian McDaniel

Musser

Joseph Weaver Russell

William Schmidt

David Schneider

Hugh Lappé Scott, Jr.

Jay Willard Silberman

David Charles Spoor

Pauline Billings Stout

Joseph William Taylor

Richard Earl Tinsman

Eugene P. “Gene”

Toscano

Blayne Scott Tucker

Bertram Oliver Wood

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Patricia “Patty”

Rouse Vargas

Treasurer

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Secretary

Jaime Vasquez

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Donna McElroy

Directors (2023-2025)

Kacy Cigarroa

Melissa Morales Fletcher

Elizabeth “Liz” Provencio

Krishna Reddy

Directors (2022-2024)

Emma Cano

Charla Davies

Charles "Charlie" Deacon

Jorge Herrera

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June Moynihan

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Lawrence Morales, II

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San Antonio Trial Lawyers Association

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TEX-ABOTA, American Board of Trial Advocates—San Antonio William S. Sessions Inn of Court

Checklist for Managing Negative Google Reviews

By Paul W. Bishop III

1. Review Google’s Guidelines: Access Google’s Prohibited and Restricted Content guidelines [https://support.google.com/localguides/answer/7400114?hl=en].

2. Assess Review Content: Compare the language of the negative review with Google’s guidelines to determine any violations.

3. Initiate Review Removal (if applicable): Follow these steps for actionable reviews:

• Report the inappropriate review via Google Maps or Google Search.

• Flag the review as inappropriate in Google Maps or Google Search.

• Use the Reviews Management Tool for reporting and tracking the review’s status [https://support.google.com/business/ workflow/9945796?hl=en]

4. Explore Legal Avenues (if necessary): If the review does not violate Google’s policies but seems defamatory or disparages business, consider legal options.

• Assess if the content is a matter of public interest.

• Understand potential legal implications, including fees for the prevailing party under the Citizens Participation Act. See Tex. Civ. Prac. & Rem. Code § 27.009.

Paul W. Bishop, III practices commercial litigation with Jones Davis Jackson, PC, in Dallas.

Paul Frederick Anderson died in January at the age of 79. Anderson received his undergraduate degree from Loyola University and his law degree from the University of Houston. He practiced law for more than fifty years.

Robert Arthur Anderson died in May at the age of 90. Anderson was born in Oakland, Nebraska. He received his undergraduate degree from the University of Texas at Austin. After graduation, he joined the United States Air Force and served as a fighter pilot stationed in Okinawa. Following separation from the service, he returned to Austin to attend law school. Upon graduation, Anderson and his brother founded Anderson Exploration, an oil and gas business based in Calgary.

Lamar “Ken” Bennight, Jr. died in May at the age of 75. Bennight was raised in Corpus Christi and graduated from Ray High School. He received his undergraduate and law degrees from the University of Texas at Austin. Following service in the United States Marine Corps, Bennight began his law career with Martin & Drought. He had a varied legal career—sole practitioner, instructor at San Antonio College, and most recently as an Assistant City Attorney for San Antonio.

Loren D. Brunke died in September at the age of 80. Brunke was born in Beatrice, Nebraska. He attended the University of Nebraska at Lincoln and received degrees in Zoology and Physiology. After graduation, he joined the United States Air Force. Following military service, Brunke enrolled in Baylor Law School and graduated in 1972. During his legal career, he served as an officer in the Judge Advocate General’s Corps, was in private practice in Sherman and San Antonio for a combined five years, and worked for twenty years with the Texas Department of Transportation.

Lamar “Ken” Bennight, Jr.

I met Ken Bennight when I was a young associate and he was a partner at Martin, Shannon & Drought (now Martin & Drought). Ken was the lawyer to whom every other lawyer in the firm went when they had an unusual legal problem but no idea how to even approach it. Ken would tackle anything, and he always came up with a solution that made sense. Ken was one of the friendliest people I ever met, defying the stereotype of a former Marine Corps officer, which he was. After leaving Martin & Drought, Ken had his own law practice, worked for the Texas General Land Office, and most recently served as an Assistant City Attorney for the City of San Antonio before retiring. Ken was interested in music, politics, aquariums, canoeing, scuba diving, bridge, reading, and writing. He authored the legal guide Texas Law of Streets and Alleys: A Handbook, and also wrote fiction, including a series of novels, the main character of which was Nacho Perez, a tough San Antonio detective. The term “Renaissance Man” fit Ken perfectly.

—Paul Curl

Lauro Bustamante, Jr. died in September at the age of 71. Bustamante was born in Asherton, Texas. He received his law degree from the University of Houston in 1979. He had a general civil practice in San Antonio for nearly fifty years.

Marion Isabel Wright Cain died in January at the age of 92. Cain was raised in Moorhead, Minnesota. She attended Concordia College, the University of Minnesota, and Northwestern University and earned a graduate degree in Nursing. She received her law degree from Lincoln Law School of Sacramento in 1976. She moved to San Antonio in 1980 and practiced law until January 2023 with an emphasis on Social Security and disability law.

Charles Edward Campion died in September at the age of 82. Campion received his law degree from St. Mary’s University in 1966. He practiced law for fifty-seven years and was a prominent member of the criminal defense bar of San Antonio.

Charles Edward Campion

Charles Campion graduated from St. Mary’s University School of Law in 1966 and practiced in San Antonio for 57 years. He was a member of the inaugural class of attorneys to be Board Certified in Criminal Law in 1975. Charles’ mild demeanor and charismatic personality yielded an uncanny ability to connect with people, both personally and professionally, even those to whom he had only known for a few minutes. These talents served as the foundation for his phenomenal success with juries. The list of high-profile cases he tried is impressive, but it was his desire to help the lowly and the less fortunate in our society that motivated him to work as long as he did, mentoring many young lawyers along the way. Although technology in the legal field seems to have taken the forefront, as long as we have juries, there will never be a substitute for old school advocacy, and no one did it better than Charles. His family, friends, colleagues, clients, and the community will miss him greatly.

—Bernard Campion

Howard E. “Ben” Davis, Jr. died in June at the age of 75. Davis was born in Providence, Rhode Island. Davis graduated from the University of Notre Dame (1969). He was drafted into the Army during the Vietnam War. Davis was awarded two Bronze Stars, the Vietnamese Cross of Gallantry, the Vietnamese Campaign Ribbon with three Battle Stars, and the Combat Infantryman’s Badge. He received his law degree from St. Mary’s University in 1975 and was member of its Law Journal. Davis was a highly respected trial attorney in San Antonio.

Hon. Preston Hastings Dial, Jr. died in January at the age of 94. Judge Dial was a native of San Antonio. He received both his undergraduate and law degrees from the University of Texas at Austin. He achieved the rank of Colonel in the Air Force and served in the Air Rescue Service in the Philippine Islands and Okinawa during the Korean War. Dial remained in the Air Force Reserves for thirty years. He was a Briefing Attorney for the Supreme Court of Texas, a federal prosecutor, and a First Assistant District Attorney for Bexar County. He served as Judge for the 175th District Court of Bexar County for thirteen years, followed by six years as Justice of the Fourth Court of Appeals. He retired from the bench in 1988.

Hon. Preston Hastings Dial, Jr.

When I was in law school, Judge Preston “Peppy” Dial’s judicial next-door neighbor was Judge Jim Barlow, our Criminal Law professor. He insisted that if we wanted to see a great criminal judge in action, go to Judge Dial’s courtroom—the 175th District Court—and I often did that during my clerking trips to the Old Red Courthouse. Many years later, I worked with Peppy on numerous state bar committees. I remember that—in 2002, when he won a later award—I congratulated him, and he said these funny words, which I’ve never forgotten: “At my age, when you win awards, you’re not looking for anything else for your resume. Now it’s for my obit!” Godspeed, you wonderful man! Your place is secure in the pantheon of great Texas judges.

—Claude Ducloux

Dustin James Draper died in July at the age of 39. Draper was born in Evanston, Wyoming. He received his undergraduate degree from Brigham Young University and his law degree from the University of Texas at Austin. He practiced Social Security and disability law.

Milton I. Fagin died in August at the age of 75. He received his undergraduate degree from Southern Methodist University and his law degree from St. Mary’s University. Fagin was Board Certified in Family Law. In 2023 Fagin celebrated his fiftieth year as a licensed attorney.

Oscar Carl Gonzalez died in January at the age of 90. A graduate of Baylor University School of Law, Gonzalez practiced law in San Antonio for sixty-two years.

Otto “Skip” Good died in February at the age of 73. Good was born in Middletown, Pennsylvania. He received his undergraduate degree from the University of Kentucky. He earned his law degree from St. Mary’s University. Good was recognized as a superlative attorney in the areas of commercial litigation and insurance law. He practiced with Shaddox Compere Walraven & Good for twenty-seven years, and with Langley & Banack, Inc. for sixteen years.

Prentis Otis Hibler died in April at the age of 83. Hibler was a native of Houston. He attended West Columbia High School where he was both student council president and salutatorian of his graduating class. He received his undergraduate degree in business administration and his law degree from the University of Texas at Austin. He began his law career at Cox & Smith and later opened his own civil litigation practice. After retiring from the practice, Hibler served on the Board of the National Bit Spur and Saddle Collectors Association for sixteen years and travelled to auctions throughout the western United States.

Marisa Huerta died in April at the age of 54. Huerta was born in Freeport, Texas. She received an undergraduate degree from Harvard University and a doctorate degree in English literature from Brown University. She held several academic positions before attending Rutgers University School of Law in Camden, New Jersey. She graduated in 2020. Huerta was an attorney with the U.S. Equal Employment Opportunity Commission at the time of her death.

Otto “Skip” Good

Skip Good was a respected trial lawyer of the “old school” variety. Trained by the best at Groce, Locke and Hebdon, he left in 1980 and, with his friends and partners, started what would become Shaddox, Compere, Walraven & Good, PC, one of the first boutique litigation firms in San Antonio. Skip was distinguished for his academic mind (he literally memorized the law) and for his prowess in the courtroom. He was also an excellent mentor, sparing no words, actions, or red pencil in making new lawyers understand the errors of their ways. Skip also provided equal opportunity for women lawyers at a time when this was not the norm. Under his tutelage, women became independent, capable, and caring trial lawyers. Skip was loyal and would stand in the line of fire to protect his team, including staff. Skip was entertaining and could regale all with his trial stories, whether winning or losing the issue at hand. He always had these reassuring words: “If you’re not getting hit, you aren’t trying enough cases. If you aren’t getting hit BIG, you aren’t trying big enough cases. Welcome to the Club.” Skip was gruff and grumpy, but a Teddy Bear inside. He will be sorely missed.

—Linda S. McDonald, Ruben Valadez, Ian McLin

John E. Murphy

I had the privilege of knowing John Murphy for most of his career. “Murphy,” as he was known by most of us, was an excellent attorney and prosecutor. He was very good at evaluating the facts of a case and organizing it for presentation in court. It was a thrill to see him cross-examine a criminal defendant. Murphy was well known for his sarcastic wit that we all loved. He was a mentor to the younger prosecutors who followed him in the United States Attorney’s Office. Murphy was a very competent supervisor and staff manager. He knew his personnel well and how to delegate the workload according to their strengths and weaknesses. Above all, John was a dear friend, respected by all.

—Edward C. Prado

John E. Murphy died in September at the age of 75. A native of Scranton, Pennsylvania, Murphy earned both his undergraduate and law degrees from St. Mary’s University. Murphy began his legal career with the U.S. Department of Justice in Washington in 1973 and enjoyed a long career as a trial attorney with the U.S. Attorney’s Office for the Western District of Texas. Murphy was the First Assistant U.S. Attorney for the District for more than twenty years and served as U.S. Attorney for the District from 2009-2011.

Marian McDaniel Musser died in October at the age of 86. The Wichita Falls native received her undergraduate education at the University of North Texas and Texas Christian University. She received her law degree from St. Mary’s University in 1977 at a time when women were in the minority in law. She served as an Assistant Attorney General for the State of Texas.

Joseph Weaver Russell died in June at the age of 77. Russell received his undergraduate degree in Economics from the University of Texas at Austin in 1967. Upon graduation he enrolled at the Law School but was soon drafted into the Army. He returned to Austin in 1970 to complete his studies. Russell was a member of the Editorial Board of the Texas Law Review and served as Briefing Attorney for Texas Supreme Court Chief Justice Calvert and Justice Sam Johnson. He worked with several firms prior to his founding, in 2002, the firm of J.W. Russell PC where he practiced law with his son.

William Schmidt died in August at the age of 86. Schmidt received his law degree from the University of Texas at Austin in 1963. He practiced law in San Antonio for more than sixty years, with an emphasis on real estate, estate planning, and probate matters.

David Schneider died in January at the age of 66. He was born in Des Moines, Iowa, and was the son of a university professor. Consequently, he lived in many places during his youth and ultimately settled in Texas. He received his undergraduate degree from the University of Texas at Austin. He received his law degree from the University of Houston Law Center in 1981. Schneider joined the family oil and gas business, Olsen Energy, as Vice President, and had a successful career in the oil and gas industry.

Hugh Lappé Scott, Jr. died in June at the age of 72. Scott was a native of New Orleans. He attended the University of Texas at Austin and graduated with a degree in German. He received his law degree from St. Mary’s University. Following graduation, Scott and his wife moved to Houston, where he worked for Exxon. They later returned to San Antonio, where Scott continued his work in the oil and gas industry.

Jay Willard Silberman died in June at the age of 84. Silberman received a degree in Business Administration from Northwestern University in 1960 and his law degree from DePaul University College in 1966. He practiced law in Chicago for many years before moving to San Antonio in 1983. He did not practice law in San Antonio. Rather, he owned and managed The Inn at Turtle Creek and, with his wife, opened Cruise Consultants, a business that booked cruise vacations and land tours.

David Charles Spoor died in May at the age of 84. Spoor was born in Houston and graduated from Lamar High School. He received his undergraduate and law degrees from the University of Texas at Austin. In 1963, Spoor began his legal career with Cox & Smith in San Antonio and made partner in 1968. Spoor served as a member of the firm’s Executive Committee and became Head of the Real Estate practice group until his (first) retirement in 1995. After leaving the firm, Spoor served as an officer and General Counsel for the Cancer Therapy and Research Center for four years. Thereafter, he returned to Cox & Smith as a member of its Health Care practice group until his second retirement in 2004.

Pauline Billings Stout died in August at the age of 97. Stout was born in 1925 in Choctaw County, Oklahoma. After high school, Stout moved to San Antonio and married U.S. Army Air Corps M.P. David Massengale at Kelly Field Chapel in 1942. She worked during the day and attended classes at St. Mary’s University at night. She received her undergraduate degree in 1967, passed the CPA exam, and continued attending night courses at St. Mary’s Law School. She received her law degree in 1973 and was admitted to the Bar in 1974. Stout practiced until she was 93, with an emphasis on tax, tax return preparation, wills, and probate.

Joseph William Taylor died in May at the age of 71. Taylor was born in Uvalde, grew up in Crystal City, and lived in San Antonio for thirty-four years. He was a graduate of Southwestern University and received his law degree from the University of Houston. He practiced law in South Texas until his death. His counsel was sought in matters of real estate and oil and gas by both his clients and the many attorneys in the state who counted him as one of their friends. He was a member of St. Mary’s Episcopal Church, the Texas Cavaliers, the Order of the Alamo, the German Club, and the Sons of the Republic.

Richard Earl Tinsman died in July at the age of 89. Tinsman was born in Detroit. His family moved to San Antonio when he was a teen. Tinsman graduated from Alamo Heights High School and received both his undergraduate and law degrees from the University of Texas at Austin. He entered the practice of law in 1957 and earned the nickname “Tiger” for his aggressive approach in the representation of his clients.

Eugene P. “Gene” Toscano died in February at the age of 89. Toscano attended St. Mary’s University on a music scholarship and graduated with a degree in English in 1954. He was an accomplished trumpet player, playing both professionally and during his years of military service (1955–1957). He received his law degree from St. Mary’s University in 1961. He founded the law firm Gene Toscano, Inc, in 1965 on San Antonio’s westside. He practiced for fifty-seven years before his retirement in 2018.

Richard “Tiger” Tinsman

It was 1981, and I was being courted to join the firm of Tinsman and Houser. Fresh out of St. Mary’s Law School, I was excited to meet the name partner, Richard Tinsman. It was a beautiful, blue-sky day, and we were seated at Casa Rio restaurant overlooking the picturesque San Antonio River. As I was talking with Bob Scott, out of the corner of my eye I saw a man with red hair approaching. He wore the brightest “grabber blue” leisure suit I had ever seen! It didn’t take long to recognize Mr. Tinsman was highly intelligent and that no subject was off the table. The interview wrapped up with what was NOT acceptable. Dick said he thought I would make a great addition to the firm and raced back to the courthouse. After Dick left, Bob Scott asked, “Well, what do you think about Mr. Tinsman?” “Truthfully, sir, I like him! He is highly intelligent and unafraid to ask anything. But boy, is he eccentric!” I added. Bob smiled and agreed, “Yes, he is!” Forty-three years later, it’s now Tinsman & Sciano, and another of my good friends and partners is gone. Known for his passion for his clients, Dick was an admired trial stalwart. A quote by Oscar Wilde: “Be yourself; everyone else is already taken.” Mr. Tinsman, Mr. T, Dick, “Tiger” Tinsman— old friend, you did you well!

—Daniel J. T. Sciano

Blayne Scott Tucker died in late December of 2022, at the age of 42. He received his undergraduate degree from the University of Nevada at Las Vegas, and his law degree from Texas A&M University (formerly Texas Wesleyan). His life and career centered on championing musicians and musical venues. He was one of the owners of The Mix, a North St. Mary’s Street music venue, and was instrumental in securing financial support for struggling music venues crippled by the pandemic.

Bertram Oliver Wood died in June at the age of 71. Wood was born in Monahans. He received his undergraduate degree from the University of Texas at Austin and his law degree from St. Mary’s University Law School. He practiced for forty years as a criminal defense attorney.

Produced Water: Legislative History and Current Controversies PART II

By Bobby Biedrzycki, Peter Hosey, Reagan Marble

Introduction: Part I of this article discussed the legal framework that treats produced water as wastewater and explained that the value and utility of produced water changed in the last decade. Part II now explores how the Texas Legislature and Texas courts have addressed the changing dynamics between surface owners and mineral estate owners.

Recent Legislation

In 2013, the Texas Legislature passed HB 2767—adding Section 122 to the Natural Resources Code—to encourage the recycling of produced water. Prior to HB 2767, neither legislation nor Texas courts prescribed the ownership of oil and gas waste, mainly because produced water was viewed as waste to be disposed. The Texas Legislature passed HB 2767 to clarify ambiguity and provide recyclers comfort that once they take possession of oil and gas waste, they own it. Notably, Section 122 includes “produced water” in the statutory definition of “fluid oil and gas waste.” Section 122 provides that when a person takes possession of produced water to treat it for a subsequent beneficial use, that produced water becomes that person’s property.

In 2019, HB 3246 amended Section 122 to provide a carve-out for oil or gas leases and surface use agreements. HB 3246 also changed Section 122.002 to include—as owners of fluid oil and gas waste— operators that reuse produced water for beneficial use. While sparse case law strongly suggests produced water is part of the groundwater estate, and thus the property of the surface owner, HB 2767 and 3246, in effect, transferred ownership of what is a real property right from one party (the surface owner) to another party (the operator or recycler).

As discussed in Part I, the dominant mineral estate comes with an implied right to use as much of the surface—including groundwater— as is reasonably necessary to extract and produce the minerals. As part of that implied right, operators have a duty to dispose of the waste, including the produced water that is a byproduct of the oil and gas process. Typically, disposal occurs when the produced water is treated and injected into an injection well. Nevertheless, one man’s trash

Now that produced water has become a commodity with economic value, surface owners want—and deserve—compensation. Where surface owners or groundwater lessees are not compensated, disputes arise.

is another man’s treasure. Now that produced water has become a commodity with economic value, surface owners want—and deserve— compensation. Where surface owners or groundwater lessees are not compensated, disputes arise.

Present Litigation Landscape

For those in the oil patch, the case to watch is COG Operating LLC (COG) v. Cactus Water Services, LLC (Cactus Water). In Cactus Water, COG acquired oil and gas leasehold rights in 37,000 acres in the Delaware Basin (the COG Leases). After COG entered the COG Leases, Cactus Water entered “Produced Water Lease Agreements” with a surface owner for underground water in depths covering the same acreage covered by the COG Leases. Under the Produced Water Lease Agreements, Cactus Water would pay the surface owner a royalty for such water once monetized. Simultaneously, COG received payment for dedicating its produced water to a third-party service provider. Thereafter, Cactus Water made demand on COG’s service providers and COG filed suit. Cactus Water did not dispute COG’s leasehold rights, but claimed COG improperly profited from the sale of produced water rightfully belonging to the surface owner, who had already leased the produced water to Cactus Water. COG maintained that, under Section 122, produced water is not groundwater, but ordinary oil and gas waste. Therefore, COG argued that the possessor of the produced water was the owner and party obligated to dispose, or to treat and reuse, the produced water.

The Reeves County District Court granted COG’s motion for summary judgment, giving COG ownership rights in the disputed

produced water and holding that COG: (1) owns, among other things, the oil, gas, and other products contained in the commercial oil and gas bearing formations from COG wells on four leases; and (2) has the right to exclusive possession, custody, control, and disposition of the product stream, including water produced from COG’s oil and gas wells. The court’s decision was based largely on an examination of the granting clause in the COG Leases, which provided COG the right of “investigating, exploring, prospecting, drilling, mining and operating for oil and gas and other hydrocarbons” and for “laying pipelines . . . and building tanks, power stations and other structures thereon, to produce, save, take care of, store and treat products produced hereunder, and then transport those products from the land.”

On appeal to the Eighth Court of Appeals in El Paso, Cactus Water argued that produced water in the formation was not encompassed by the right to “oil, gas and other hydrocarbons” conveyed in the oil and gas leases. Cactus Water contended that the leases’ limitations regarding use of surface water prohibited COG from selling produced water to third parties for off-premises use. In response, COG argued that by conveying the right to “oil, gas and other hydrocarbons,” the parties intended to convey oil and gas in all forms—including the hydrocarbons contained within produced water. COG maintained its development rights include the right to dispose of waste generated by its wells.

The court of appeals took a different approach. Specifically, the court of appeals stated that the issue of whether produced water is part of the mineral estate “depends on whether produced water is, as a matter of law, water or if it is waste.”1 The Texas Natural Resources Code provides that oil and gas waste means waste “that arises out of or incidental to the drilling for or producing of oil or gas . . . includ[ing] salt water, brine, sludge, drilling mud, and other liquid, semiliquid, or

solid waste material.”2 Another provision includes “produced water” in the meaning of “fluid oil and gas waste.”3 The Texas Water Code defines “groundwater” as “water percolating below the surface of the earth.” The court of appeals explained that this statutory and regulatory framework “draws a clear distinction between produced water and groundwater.”4

Additionally, the court of appeals stated that treating produced water as oil and gas waste remains consistent with industry practice: “Indeed, produced water has long been treated as a liability, not an asset, both throughout the fracing industry and in the context of COG’s operations on the Leased Land.”5 The court explained that the surface owners never claimed ownership over the produced water before entering a lease with Cactus Water: “To read the mineral leases as reserving produced water— something that exists separate from oil and gas only after processing and treatment—for the surface estate would give the surface estate (and thus Cactus Water) the benefit of costs and risks [COG] voluntarily undertook.”6 The court of appeals affirmed the trial court’s summary judgment, holding the lease restriction of COG’s use of “water” on the leased land “has no bearing on COG’s right to the oil and gas waste byproduct from its wells.”7 Therefore, the subsequent leases conveying produced water to Cactus Water were void.

Nevertheless, the opinion was not unanimous and drew a lengthy dissent from the Court’s most senior justice—Justice Gena M. Palafox. The dissent begins by recognizing that water has long been part of the surface in Texas. Justice Palafox, however, disagreed with the majority and characterized the majority opinion as “upend[ing] this balancing of competing rights and responsibilities.”8 Justice Palafox would interpret the lease language as conveying oil, gas, and hydrocarbons produced from the leased land, but not the produced water. Reasoning that, because the lease does not mention either “produced water” or “oil and gas waste,” the question is whether the entire “product stream” is conveyed by a granting clause conveying only oil and gas,9 Justice Palafox noted that although typical reservation language addressed “oil, gas, and other minerals, here the reservation language only addressed ‘oil, gas, and other hydrocarbons’”10—a stricter limitation within which water does not fall. Thus, unless expressly reserved or conveyed, water remains with the surface owner.

Relying on Robinson v. Robbins Petroleum Corporation, Justice Palafox reasoned that just because water is produced from an oil and gas well, that does not necessarily change its character. Based on Robinson’s reasoning that “the water itself is an incident of surface ownership in the absence of specific conveyancing language to the contrary,”11 Justice Palafox harmonized this approach with the accommodation doctrine, reasoning that COG had the right to use as much of the produced water as necessary to produce the underlying minerals. Finally, Justice Palafox reasoned that the fact that the parties only recently perceived the produced water as having any value is inapplicable. That COG contractually agreed to dispose of, or deal with, the produced water does not change the severance of the mineral and surface estates.

Constitutionality of Section 122

Unfortunately, Cactus Water does not fully address the constitutionality of Section 122 and the effect of HB 2767 and HB 3246, saving the inevitable constitutional fight for another day. Future disputes over produced water will implicate the constitutionality of this legislation. Considering the Supreme Court of the United States’ admission that “[c]ases attempting to decide when a regulation becomes a taking are among the most litigated and perplexing in current law,”12 the produced water issue rises quickly. As a result, those in the oil patch had best brush up on regulatory takings under the Fifth Amendment. Although not exhaustive, the following discussion serves as a refresher of how the Supreme Court of the United States and the Supreme Court of Texas have addressed regulatory takings:

The Takings Clause. The Takings Clause of the Fifth Amendment to the United States Constitution, made applicable to the States through the Fourteenth Amendment, provides that private property shall not “be taken for public use, without just compensation.”13 The Takings Clause “does not prohibit the taking of private property, but instead places a condition on the exercise of that power.”14 In other words, the Takings Clause “is designed not to limit the governmental interference with property rights  per se, but rather to secure  compensation  in the event of otherwise proper interference amounting to a taking.”15

The Texas constitutional guarantee, though comparable, is worded differently. The Texas Constitution provides that “[n]o person’s property shall be taken, damaged or destroyed for or applied to public use without adequate compensation being made. . . .” The Takings Clause of the Fifth Amendment states: “nor shall private property be taken

for public use without just compensation.”16 The Supreme Court of Texas has acknowledged that “[o]ne could argue that the differences in the wording of the two provisions are significant.”17 Accordingly, an examination of federal and Texas law is necessary.

The Federal Approach. The paradigmatic taking requiring just compensation is a direct government appropriation or physical invasion of private property.18 Until Pennsylvania Coal Company v. Mahon, 19 “it was generally thought that the Takings Clause reached  only a ‘direct appropriation’ of property, or the functional equivalent of a ‘practical ouster of [the owner’s] possession.’”20 Beginning with  Mahon, the Supreme Court of the United States recognized that government regulation of private property may, in some instances, be so onerous that its effect is tantamount to a direct appropriation or ouster—and that such “regulatory takings” may be compensable under the Fifth Amendment. As Justice Holmes opined, “[W]hile property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.”21 This article focuses on regulatory takings.

Supreme Court precedents stake out two categories of regulatory action that generally constitute per se  takings for Fifth Amendment purposes. The first category is where the government requires an owner to suffer a permanent physical invasion of the owner’s property; in this category, however minor the invasion, the government must provide just compensation.22 The second category applies to total regulatory takings—those that completely deprive an owner of “all economically beneficial us[e]” of her property.23 For this category, the government must pay just compensation for such “total regulatory takings,” except to the extent that “background principles of nuisance and property law”

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independently restrict the owner’s intended use of the property.24

Outside these two categories (and the special context of land-use exactions), the standards set forth in  Penn Central Transportation Company v. New York City 25 apply to regulatory takings challenges. In Penn Central ,  the Court acknowledged that it had previously been “unable to develop any ‘set formula’” for evaluating regulatory takings claims but identified “several factors that have particular significance.” 26 Foremost among those factors are “[t]he economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations.” 27 Additionally, the “character of the governmental action”—for instance whether it amounts to a physical invasion, or instead merely affects property interests through “some public program adjusting the benefits and burdens of economic life to promote the common good”—may be relevant in discerning whether a taking has occurred. 28

The  Penn Central factors—though each has given rise to vexing subsidiary questions—have served as the principal guidelines for resolving regulatory takings claims that do not fall within the physical takings or the Lucas rules.29 Regulatory takings jurisprudence is not unified, but the inquiries reflected in  Loretto, Lucas, and  Penn Central share a common goal. The  Penn Central inquiry turns in large part, albeit not exclusively, upon the magnitude of a regulation’s economic impact and the degree to which it interferes with legitimate property interests.

The Texas Approach. Although the property protection offered under the Texas Constitution differs slightly from that under the United States Constitution, Texas courts follow and apply the standards laid out in Penn Central. Unfortunately, Texas state law does not simplify takings cases. In fact, the Supreme Court of Texas has called such disputes as “a ‘sophistic Miltonian Serbonian Bog,’”30 although it has also acknowledged that “[t]here are small islands in the bog.”31 Lower courts follow the Supreme Court of Texas’s categories of per se and total regulatory takings,32 while also recognizing the federal admonition that a regulation “effects a taking if [it] does not substantially advance legitimate state interests.”33 In determining whether a regulation has gone “too far” and has become too much like a physical taking requiring compensation, Texas courts must

carefully analyze how the regulation affects the balance between the public’s interest and that of private landowners.

In short, both the Supreme Court of the United States and the Supreme Court of Texas look to the following factors: (1) “the economic impact of the regulation on the claimant”; (2) “the extent to which the regulation has interfered with distinct investment-backed expectations”; and (3) “the character of the governmental action.”34 Nevertheless, the Courts have cautioned that these factors do not comprise a formulaic test: “Penn Central does not supply mathematically precise variables, but instead provides important guideposts that lead to the ultimate determination whether just compensation is required.”35 For example, the economic impact of a regulation may indicate a taking even if the landowner has not been deprived of all economically beneficial use of his property. Moreover, the three  Penn Central factors are not exclusive in determining whether the burden of regulation ought “in all fairness and justice” to be borne by the public.36 Whether a regulatory taking has occurred, “necessarily requires a weighing of private and public interests”37 and a “careful examination and weighing of all the relevant circumstances in this context.”38 Accordingly, the Supreme Court of Texas has stated, “We consider all of the surrounding circumstances”39 in applying “a fact-sensitive test of reasonableness.”40

While determining whether a property regulation is constitutional requires the consideration of factual issues and surrounding circumstances—and the appellate courts depend on the district court to resolve disputed facts regarding the extent of the governmental intrusion on the property—the ultimate determination of whether the facts are sufficient to constitute a taking is a question of law,41 and more than a decade ago the Supreme Court of Texas anticipated the likelihood of the legal battle:

Suppose a landowner were prohibited from all access to groundwater. In its brief, the State concedes: “Given that there is a property interest in groundwater, some manner and degree of groundwater regulation could, under some facts, effect a compensable taking of property.” We agree, but the example demonstrates the validity of Day’s claim. Groundwater rights are property rights subject to constitutional protection, whatever difficulties may lie in determining adequate compensation for a taking.42

Analytical Framework

If courts decide that title to the produced water belongs to a landowner (or a lessee pursuant to a lease agreement with a landowner), then the laws passed in 2013 and 2019 must be narrowly construed to exclude produced water to avoid a takings challenge. If “fluid oil and gas waste” includes produced water, as stated in Section 122, and courts disagree and decide produced water is groundwater owned by a landowner (or groundwater lessee), then Section 122 would violate the Fifth Amendment’s Takings Clause. The authors’ views about the result of the application of the Penn Central factors follows: Deprivation of Economic Use. The first

consideration is whether all economically viable use of a property has been denied. This determination “entails a relatively simple analysis of whether value remains in the property after the governmental action.”43 It is difficult to see how selling and transferring away a surface owner’s water does not deprive the surface owner of economic use. In Texas, groundwater is a vested property interest. Like any vested property interest, it is specific, has value, and is transferable. Injecting and back-flowing groundwater and renaming it “produced water” does not change title.

Treating produced water is typically a three-phase process by which the recycler separates—among other things—raw oil and gas products from water. These minerals are counted by the operators in total production and sent to the refinery. Co-mingling minerals with water does not change who holds title—the operator holds title. Logically, if the operator uses but does not own groundwater—as is its right under an oil and gas lease—the water separated from the oil and gas during recycling should return to the surface owner.

Prior to the economic viability of produced water, the operator’s use of the water ended once all minerals were extracted. Historic practices dictated that the water was disposed of through injection into injection wells. Nevertheless, ownership remained unchanged and, through time, operators and water recyclers created a market for recycled fracing water. Unquestionably, the Texas Legislature intended to clarify the responsibility for disposal of produced water by passing HB 2767 and HB 3246; but just as the minerals in produced water have economic value, so does the remaining treated produced water. When produced water is injected into disposal wells, sold, or reused by the operator on another lease, the surface owner is left

without economic value of the property—thus, a regulatory taking occurs. The question then becomes whether the taking advances a legitimate state interest.

Legitimate State Interest The government may effect a partial taking, if the taking serves a “substantially legitimate government interest.”44 Water recycling likely serves a substantially legitimate government interest, but HB 2767 and HB 3246 did not partially deprive landowners of their water; instead, the legislation completely deprived a surface owner of any continual enjoyment and use.

According to bill analysis, the legislature proposed that operators would be less likely to recycle water if there was no basis for them to profit from it.45 Unquestionably, the state has an interest in recycling produced water, seeing operators reuse produced water in fracing operations, and therefore reducing the amount of potable water necessary to produce future wells. But the Legislature’s reasoning was flawed for two reasons. First, one of the primary reasons for treating and recycling produced water is to extract the last remaining traces of oil and gas, which the operator then sells to the refiner. Second, the rising value of produced water incentivizes operators to use more ground water in fracing operations, knowing that doing so increases the amount of produced water in their control that can later be sold.

Proper Exercise of Police Power There are no unfettered rights— let alone property rights—as “[a]ll property is held subject to the valid exercise of the police power.”46 The authors do not question whether the legislature may regulate the exploration and exploitation of the state’s natural resources. As shown in Edwards Aquifer Authority. v. Day, 47 Texas has protected—and continues to protect—water as a natural and finite resource. The Supreme Court of Texas, however, also knows the fight over groundwater is coming;48 and the Court has previously shown that it will protect the groundwater rights of surface owners much the same as it does the oil and gas rights of the mineral estate owner.49 Accordingly, it seems a complete economic deprivation of a surface owner’s groundwater rights—simply because the groundwater has been injected into a well or was percolating in an oil producing strata—appears to be government overreach.

Conclusion

How landowners and operators should respond varies and depends largely on the date and terms of applicable oil and gas leases. If currently bound by a lease, the lease terms will govern since HB 3246 provides a carve-out to the ownership section, allowing a contractual provision to override the statutory provision. Nevertheless, the carve-out does not affect surface use agreements that are silent on the issue. Alternatively, operators and surface owners may consider entering new leases that add language affording them the right, but not the obligation, to take the produced water in kind for their purposes. Either way, produced water’s ongoing transformation from liability to asset is certain to create litigation until the constitutionality of HB 2767 and HB 3246 is resolved.

Bobby Biedrzycki is an associate in the Trial & Appellate Litigation practice of Jackson Walker’s San Antonio office. His practice spans a broad range of litigation and transactional matters, with a concentration on complex oil and gas disputes. Prior to law school, Bobby founded a company providing alternative power solutions to the oil and gas sector.

Reagan Marble is a partner in the Energy and Trial & Appellate Litigation practice of Jackson Walker’s San Antonio office. Reagan’s practice spans a broad range of litigation and transactional matters, with a concentration on complex energy disputes and deals. Reagan not only represents clients in court, but also advises clients in the development and preservation of both their mineral and surface estates.

Peter Hosey is a partner in the Energy practice of Jackson Walker’s San Antonio office. Peter has more than forty years of experience representing clients in the energy and natural resources area. He has advised clients concerning all aspects of exploration, production, transportation, processing, sale and marketing of oil and gas and other natural resources. Peter not only advises clients with regard to oil and gas matters, but also has many years’ experience with regard to the exploration, production, transportation and leasing of hard minerals, including coal and uranium.

ENDNOTES

1Cactus Water Services, LLC v. COG Operating, LLC, 676 S.W.3d 733, 738 (Tex. App.‒El Paso 2023, pet. filed).

2Tex. Nat. Res. Code Ann. § 91.1011.

3Id. at § 122.001(2).

4Cactus Water, 676 S.W.3d at 739.

5Id. at 740.

6Id.

7Id. at 741.

8Id. at 742 (Palafox, J., dissenting).

9Id. at 743.

10Id.

11Id. at 746.

12Eastern Enters. v. Apfel, 524 U.S. 498, 541 (1998)

13See Chicago, B. & Q.R. Co. v. Chicago, 166 U.S. 226 (1897).

14First English Evangelical Lutheran Church of Glendale v. County of Los Angeles, 482 U.S. 304, 314 (1987).

15Id. at 315 (emphasis in original).

16Tex. Const. art. I, § 17. U.S. Const. amend. V.

17Sheffield Dev. Co. v. City of Glenn Heights, 140 S.W.3d 660, 669 (Tex. 2004).

18See, e.g., United States v. Pewee Coal Co., 341 U.S. 114 (1951) (government seizure and operation of a coal mine to prevent a national strike of coal miners effected a taking).

19260 U.S. 393 (1922).

20Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992) (citations omitted and emphasis added; brackets in original); Id. at 1028, n.15(“[E]arly constitutional theorists did not believe the Takings Clause embraced regulations of property at all”).

21Mahon, 260 U.S. at 415.

22Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982) (state law requiring landlords to permit cable companies to install cable facilities in apartment buildings effected a taking).

23Lucas, 505 U.S. at 1019 (emphasis in original)

24Id. at 1026–32

25438 U.S. 104 (1978).

26Id. at 124

27Id.

28Id.

29See, e.g., Palazzolo v. Rhode Island, 533 U.S. 606, 617–18 (2001); id. at 632–34 (O’Connor, J., concurring).

30City of Austin v. Teague, 570 S.W.2d 389, 391 (Tex. 1978) (quoting Brazos River Auth. v. City of Graham, 354 S.W.2d 99, 105 (Tex. 1962))

31Sheffield, 140 S.W.3d at 671.

32Id.

33Agins v. City of Tiburon, 447 U.S. 255, 260 (1980) (citation omitted); see also Mayhew, 964 S.W.2d at 933–34

34Connolly v. Pension Benefits Guar. Corp., 475 U.S. 211, 225 (1986) (quoting Penn Cent. Transp. Co. v. City of New York, 438 U.S. at 124).

35Palazzolo, 533 U.S. at 634 (O’Connor, J., concurring).

36See, e.g., Teague, 570 S.W.2d at 393 (“There is still another test which is sometimes helpful. It allows recovery of damages when the government’s action against an economic interest of an owner is for its own advantage.”).

37Agins, 447 U.S. at 261.

38See Tahoe-Sierra Preservation Council v. Tahoe Regional Planning Agency, 535 U.S. 302 326-27 (2002) (quoting  Palazzolo, 533 U.S. at 636 (O’Connor, J., concurring)).

39Mayhew v. Town of Sunnyvale, 964 S.W.2d 922, 933 (Tex. 1998)

40City of College Station v. Turtle Rock Corp., 680 S.W.2d 802, 804 (Tex. 1984).

41Mayhew, 964 S.W.2d at 932–33.

42Edwards Aquifer Auth. v. Day, 369 S.W.3d 814, 833 (Tex. 2012).

43Id. at 935.

44Sheffield, 140 S.W.3d at 670.

45See generally House Comm. on Energy Resources, Bill Analysis, Tex. H.B. 3246, 86th Leg., R.S. (2019).

46Sheffield, 140 S.W.3d at 670.

47Day, 369 S.W.3d at 835.

48Id.

49Id.; Robinson v. Robbins Petroleum Corp, 501 S.W.2d 865 (Tex. 1973); Humble Oil & Ref. Co. v. West, 508 S.W.2d 812 (Tex. 1974).

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Demystifying CryptocurRency:

A GUIDE FOR LAWYERS, PART III

By Daniel Wood

Introduction

It’s pretty cool living in the future.

This is the third and final installment of a series of articles intended to provide attorneys, of all knowledge and experience levels, with an approachable introduction to cryptocurrency and blockchain technology. The series is also intended to help you see past the clickbait headlines about the Crypto Winter and $400,000 NFTs of cartoon apes to get an idea of the technological marvels that might just change how we do business.

As a quick recap, the following are some of the key points from the first two parts of the series, to help inform the topics covered in Part 3:

• A crypto coin or token is a string of unique characters that is associated with an address (a wallet) on the blockchain and can be moved from one wallet to another but can never be copied or counterfeited. Coins are generally used as a form of digital money, while tokens provide some utility, such as access to the functionality of a distributed application (dapp—more on those below). Sometimes the terms “coin” and “token” are used interchangeably, but there are technical differences between the two.

• The blockchain is a technological platform that forms a peer-to-peer network of every user of the software and creates a publicly accessible ledger that records every transaction involving the coins (such as Bitcoin) or tokens (such as NFTs) that exist on the network.

• The nature of a peer-to-peer network is that there is no central administrator or authority; the network operates automatically, with each user (called a client) having an equal role in the performance of the network. This distributes across all clients both the computational labor and the recordkeeping required to implement the system and keep it running.

• Transactions are processed automatically by the blockchain protocols, which removes the need for an intermediary.

• Some blockchains, such as the Ethereum network, were created to

support new uses for blockchain technology such as dapps (which can also be written as dApp, Dapp, or DApp—there are no rules; we live in chaotic universe).

This article will dig a little further into the concept of decentralization that is a core part of blockchain and crypto technology and introduce the developments that are taking blockchains from cryptocurrency networks to a massively expanded universe of functions and industries.

Trusted Intermediaries

Before we explore decentralization, we should first discuss centralization. The idea that every system we use in everyday life— money and banking, for instance, or a social media platform—is run by someone is taken for granted to such an extreme that the parties involved in facilitating, administering, and controlling the various systems we interact with daily are effectively invisible. They are like the air: until you are deprived of them, you are likely unaware of their presence.

In the context of financial or commercial transactions, these centralized authorities act as trusted intermediaries that provide security and efficiency in an exchange between two parties that may not know or fully trust one another. When a person goes to a clothing store and pays with cash, there is no need for an intermediary: each party contemporaneously receives what he, she, or it bargained for (cash for the store and clothes for the customer). However, when the customer pays by check or credit card, neither the customer nor the store clerk may even realize that he, she, or it needs an intermediary to complete the transaction.

When a customer pays by check, for example, both the customer’s bank and the store’s bank become involved. In its simplest terms, the store’s bank receives the check, endorsed by the store, and contacts the customer’s bank to confirm that the customer’s checking account has sufficient funds to cover the check. After certain other procedures are followed, the customer’s bank deducts the funds from the customer’s account and transfers them to the store’s bank. Upon settlement, the

As has been the case with every major new technology in the past—from automobiles to computers to the internet—it is not necessary to understand the inner workings to be able to use them or to provide clients with guidance about them.

store’s bank credits the store’s account with the funds. All of these steps happen without the input or knowledge of the two parties to the transaction.

Similarly, if the customer pays by credit card, a point-of-sale terminal reads the customer’s credit card information and communicates that information to the bank that issued the credit card. A third party under contract with the store—a payment processor—operates the systems that communicate with the card-issuing bank and the store’s bank. The processor verifies the availability of funds or credit associated with the card and instructs the card-issuing bank to send funds to the store’s bank account.

As a different example, consider escrow agents. In certain transactions, the escrow agent steps between the parties to verify and handle both money and documents or goods. In a real estate transaction, for instance, the escrow agent holds both the funds and certain documents necessary to close the transaction. The escrow agent ensures that the buyer pays good funds for the transaction and that the seller provides the goods or necessary documents. Then, upon completion of all contractual conditions, the escrow agent releases the escrowed funds or goods to the other parties.

In all of these examples, trusted intermediaries act as impartial entities, mitigating risks and building trust between transacting parties by verifying and facilitating the exchange of value. Bitcoin brought about the possibility of using blockchain technology to replace the human-based trusted intermediaries with automated, programmatic systems that obviate the need for any human intervention.

DapPs

As explained in Part 1 of this series, the bitcoin protocols create a peer-to-peer network by joining each computer running the client software together. The source code that runs the Bitcoin protocols includes a set of complex rules that allow the network to effectively run autonomously, leveraging the computational contributions of each software client on the network. Peer-to-peer networks are generally decentralized—there is no central administrator controlling access to, and the functions of, the network.

In the case of Bitcoin, the blockchain network mainly functions to allow the creation and transfer of its cryptocurrency between users. It mimics existing monetary systems, like the Federal Reserve banking system and Fedwire, but removes the trusted intermediary—the Federal Reserve—replacing it with a set of protocols that generally function without human control. When a person transfers Bitcoins to another person, there is no need for a financial institution to verify the value being transferred and perform clearing and settlement services the way that banks intermediate electronic transfers of dollars. The Blockchain network takes over that role.

The development of dapps takes this concept and applies it to more complex functionality, such as gaming, financial services, supply chain management, and social media platforms. Dapps usually look and behave like any other app you might have on your devices, but because they run on a blockchain, they typically come with additional security, transparency, and user control. In some cases, the lack of trusted intermediaries can reduce costs, as well. However, despite the potential for truly disintermediated transactions, many dapps are released by forprofit organizations who find ways other than trusted intermediation to generate revenue—which is to say, some critics argue that truly administrator-less dapps are rarer than one might think.

When Ethereum was launched in 2015, its core concept was to build upon the foundation of blockchain technology pioneered by Bitcoin to create an operating environment for decentralized applications. The Ethereum Foundation built its blockchain network with developers in mind, giving them a programming language and tools to dream up and build new decentralized applications. Developers have been releasing dapp projects on Ethereum ever since; but before we delve into some of the more notable types of dapps, it is important to understand smart contracts.

Smart Contracts

As lawyers, the first thing you should know is that smart contracts are not really contracts. In law school, we all learned that a contract is an agreement between parties that creates mutual obligations that are enforceable by law. By contrast, a smart contract is a blockchain-based software program, although it is more similar to contracts, as we know them, than might seem obvious at first.

The idea of smart contracts was first conceived in 1994 by a computer scientist named Nick Szabo. As originally expressed by Szabo, a smart contract is “a computerized transaction protocol that executes the terms of a contract.” Put another way, a smart contract was envisioned as a tool to automate the performance and enforcement of an agreement. Though the idea was put forward in 1994, smart contracts did not become a practical reality until Ethereum launched.

Today, smart contracts are the atoms that make up dapps on programmable blockchains like Ethereum. Written in a specialized type of computer code, smart contracts are a series of rules and functions that follow a basic “if X happens, then perform Y” pattern. More than that, though, smart contracts are also a form of blockchain wallet: they have an address (remember: a unique string of characters that tokens can be associated with) on the blockchain and can receive, hold, and transfer tokens just like a Bitcoin wallet does with Bitcoins. Generally, smart contracts are permissionless (any user on the peerto-peer network can write and deploy one) and cannot be altered once they are deployed on the blockchain. Users can interact with a smart contract in a number of ways, most simply by submitting token transfers to the smart contract address.

Here is a simple example: for a transaction in cryptocurrency, a smart contract can take the place of an escrow agent. A buyer named Bob and

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Edward Pina

210.614.6400 epina@arielhouse.com

seller named Sally may agree on the terms of a sale of one cryptocurrency for another. They write a smart contract and deploy it on the blockchain. Bob sends his cryptocurrency payment to the smart contract address. The smart contract holds the cryptocurrency, which cannot be transferred out of the smart contract unless the specific conditions written into the smart contract are met. When Sally sends her cryptocurrency to Bob, which satisfies the terms of the smart contract, the smart contract then automatically transfers the escrowed cryptocurrency to Sally. If, instead, the conditions are not met, then at a prescribed time, the smart contract transfers the escrowed cryptocurrency back to Bob, and the deal is off. The smart contract in this example uses the blockchain to provide a decentralized and trustless way to secure the transaction without the parties having to rely on a centralized (and potentially expensive) trusted intermediary like an escrow agent.

Smart Contract Limitations and Risks

Richard L. Reed, Sr. 210.953.0172

rick.reed@steptoe-johnson.com

Wade Shelton

210.219.6300

wadebshelton@gmail.com

Thomas Smith

210.227.7565

smith@tjsmithlaw.com

Richard Sparr 210.828.6500

rsparr@sparrlaw.net

John Specia

210.734.7092

jspecia@macwlaw.com

Phylis Speedlin

210.405.4149

phylis@justicespeedlin.com

Lisa Tatum 210.249.2981

ltatum@tatum-law.com

William Towns 210.819.7453

bill.towns@townsadr.com

James Upton

361.884.0616 jupton@umhlaw.com

Smart contracts can, of course, be much more complex. They can even deploy other smart contracts; but they are not without limitations and risks. For one thing, because they exist only on a blockchain, smart contracts cannot, by themselves, gather any information that is not also on the blockchain. For instance, if in our escrow example, the agreement involved Bob buying US dollars from Sally, the smart contract would have no way of determining whether Sally had sent the real-world currency in order to release Bob’s escrowed cryptocurrency payment. To solve this problem of off-chain conditions, developers use oracles

It is easiest to think of an oracle as an application that is able to communicate with sources outside the blockchain. An oracle can usually send information from the blockchain to external systems, as well as pull and verify information from external systems to the blockchain. In the previous scenario, Bob and Sally could use an oracle that is able to pull data from Bob’s online banking account. When Sally’s payment is deposited into Bob’s bank account, the oracle pulls that information and updates the smart contract. The smart contract, triggered by the oracle’s update, automatically transfers the escrowed cryptocurrency to Sally’s blockchain wallet.

Or imagine another real-world example. Bob owns a vacation home and wants to rent it to Sally for a week in July. He installs a smart lock on the front door of the house and writes a

Recommended by Judges and Attorneys

smart contract based on the terms he and Sally agreed to. Sally sends Bob an electronic bank transfer to pay for her vacation week. One oracle pulls the information from Bob’s bank account to verify that the correct payment was made, then updates the smart contract. Because the required condition in the smart contract is met, it executes a function that tells another oracle to send a command that unlocks the smart lock on the front door of the vacation home. After one week, the smart contract instructs the oracle to lock the smart lock again.

But what if something goes wrong?

Because smart contracts are programs written by humans, they are subject to all the same problems as any other piece of software, such as coding errors, vulnerabilities, or exploits. Smart contracts cannot be hacked once they are deployed, but mistakes in the code can lead to unintended consequences. Additionally, the legal status and enforceability of smart contracts is very much in flux. What if Bob’s smart contract contained an error that resulted in its locking Sally out of the vacation house after only one day? If Bob refuses to refund Sally’s money, what are her options? If the parties relied entirely on the smart contract and an oral agreement, the resulting dispute could be difficult for a court to resolve.

Attorneys encountering smart contract situations should understand that thorough code auditing and developer best practices may be important considerations. In some instances, drafting a traditional written contract in conjunction with a smart contract may mitigate these risks and provide more certain remedies or dispute resolutions. Also understand that the selection of oracles for use with a smart contract can be an important part of a deal. Oracles can be developed by the parties to a transaction or, more commonly, by third-parties; they can be decentralized or centralized; and they can use a single data source or multiple data sources. The security and quality of oracles is a crucial element of complex smart contracts.

DeFi

DeFi—short for decentralized finance—is a type of dapp used to deliver certain financial services using a decentralized model. The most common financial services provided through DeFi are trading, lending, and borrowing. As you may have already figured out, by decentralizing the delivery of financial services, DeFi replaces the central authority of a financial institution (like a bank) with the distributed, peer-to-peer blockchain network.

DeFi generally requires complex smart contracts to deliver the services.

As an example, a decentralized exchange (DEX) is a platform that allows users to trade cryptocurrencies with each other, making transfers from one user’s wallet to another’s through the use of smart contracts. The DEX acts as a marketplace or matching service. The example of Bob and Sally trading cryptocurrencies is a simple version of a DEX. In many cases, though, the buyers and sellers using a DEX will never know each other. When users want to trade on this type of DEX, they send their cryptocurrency to a smart contract address. In addition to holding the cryptocurrency in escrow, the smart contract will match the buyer with an appropriate seller and then execute the trade automatically when the applicable conditions are satisfied. Alternatively, smart contracts can be configured to accept and execute trade requests directly from one user’s wallet to another’s, without holding the digital assets in the smart contract wallet.

DeFi can also include democratized lending models. Instead of borrowers applying for loans from banks or consumer lending companies, they can use cryptocurrency and leverage automated crowdfunding. Here is how it works. Users who wish to lend their digital assets can “deposit” cryptocurrency into the DeFi lending protocol (e.g., by sending cryptocurrency to a smart contract). The protocol pools the assets deposited by various lenders. The terms of the smart contract may, for instance, return interest in one form or another to the lenders. Borrowers can borrow assets from the liquidity pool by providing collateral of some kind, also received and held by a smart contract. Often, the interest rates are algorithmically determined, based on the general market supply and demand for the cryptocurrency involved. When the borrower finishes repaying the loan, the smart contract automatically releases the collateral. Lenders who wish to exit the liquidity pool can withdraw their digital assets—provided they have met whatever requirements may have been in place—and receive interest on their deposits. All of the above happens automatically, executed by smart contracts, with no need for a central lender.

Pros and Cons of DeFi

DeFi has potential to provide a number of benefits that might be preferred over traditional, centralized financial service providers. If a DeFi operates on a public blockchain like Ethereum, the underlying code of a smart contract is generally viewable by all

parties—by all users on the network, in fact— after it has been deployed on the blockchain. There are software tools available, such as blockchain explorers, which allow any user on the network to find the smart contract’s address and inspect its code. This transparency enhances trust and security, and once data has been written to the blockchain it cannot be altered or erased, which reduces the risk of unauthorized or fraudulent changes. Further, because a blockchain contains a publicly available distributed ledger that records every transaction, every user can see any transaction going back to the launch of the DeFi. This also enhances trust and accountability. Additionally, the distributed architecture of a DeFi service, as with all dapps, makes it less susceptible to single points of failure (such as a network outage or natural disaster) or cyberattacks; and the most commonly cited benefit is lower—in some cases, substantially lower—costs.

There are also some cons, however. As noted above, smart contracts can have coding errors, and the quality and security of the oracles that smart contracts depend upon can vary. Because DeFi platforms are fundamentally dependent on the use of smart contracts and oracles, they inherit the vulnerabilities and risks of these elements. Financially, DeFi platforms can be risky to users simply because of the volatility inherent in many cryptocurrencies. In addition to sudden price fluctuations, rapid market changes can cause liquidity problems; and the legal landscape remains somewhat unsettled for many DeFi platforms, which means regulatory changes or enforcement actions can happen suddenly, affecting the operation of a DeFi platform.

Other Notable DapPs

We will run out of space long before we run out of blockchain topics, but it is good know a little bit about some of the ways that

distributed, peer-to-peer blockchain networks are developing:

Gaming. For example, launched in 2017, CryptoKitties is a blockchain-based collectible game where users collect, breed, and trade virtual cats. Each CryptoKitty is an NFT—a unique crypto token—which contains “DNA” and certain attributes that can be inherited by offspring of CryptoKitties, who are bred. Because the CryptoKitties are NFTs, users can buy and sell them on the secondary market, all without the intervention or administration of the developer of the game.

Distributed computing. Golem is a platform that allows users to contribute their computers’ processing power to a global network of shared computing resources in return for rewards. While a user’s computer is idle, the Golem protocol borrows the computer’s processing power, forming a massive network of such computers all working together. Developers can then use this powerful distributed computational power for more ambitious projects than might otherwise be feasible.

Supply chain management. A number of supply chain solutions have been created as dapps. By recording parts or products on a blockchain, participating businesses can track and verify their goods throughout the supply chain. This can reduce fraud and enhance efficiency.

Social media. There are several decentralized social media platforms that remove the for-profit, ad-based model of centralized social media platforms. Some reward users for creating content, while others focus on preserving user privacy and complete freedom of expression. Generally, these platforms provide users with increased control over their data and content.

DAOs. A decentralized autonomous organization (DAO) is an organization that is managed by operation of a peer-to-peer

network on a blockchain. Governance is usually conducted through proposals that members vote on through the blockchain. Members gain voting rights by acquiring and using tokens or NFTs that convey voting power and certain other rights within the DAO. More of an organizational model than an application, DAOs can be created for any purpose. One was created for the purpose of purchasing an original copy of the United States Constitution. Others have been created to issue and manage stablecoins, as democratized venture capital enterprises, and to operate DEXs, as just a few examples.

Conclusion

For lawyers who do not practice in technology-heavy areas, it may be tempting to ignore developments in cryptocurrency and blockchain. But these technologies are incredibly flexible, going well beyond digital money or NFTs of cartoon characters, and will be changing whole industries in the decades to come. As has been the case with every major new technology in the past— from automobiles to computers to the internet—it is not necessary to understand the inner workings to be able to use them or to provide clients with guidance about them. Blockchain networks and applications appear to be growing, not shrinking, so arm yourself with knowledge now to prepare for whatever is to come. Cryptocurrencies and blockchain may not be the future that was dreamed about, but even without the flying cars and personal jetpacks, it is pretty cool living in the future.

Daniel Wood is Counsel with Pillsbury Winthrop Shaw Pittman, LLP, as part of the Fintech, Payments & Blockchain team, advising on matters related to financial services regulation. Prior to joining Pillsbury, he was an Assistant General Counsel for the Texas Department of Banking, where among other things he primarily drafted the agency’s policy memo on cryptocurrency.

Cheers to 30 Years!

Congratulations on 30 Years of San Antonio Lawyer®!

A volunteer corps of dedicated bar leaders, editors and contributors manage the flagship magazine of the San Antonio legal community. The award-winning publication has grown from the first 1993 Fall edition, a 28-page black-and-white glossy, to a fullcolor magazine published 6 times yearly. The magazine continues to include court updates, substantive law articles, and profiles of local community leaders. Along the way, the magazine featured a wine column and restaurant reviews.

Mark S. Kloster and Curt Cukjati, Co-Editors, 1993-1996

“The first issue of the San Antonio Lawyer went to press in the fall of 1993. I was 30 years old then, and I now have a 30-year-old son who’s been practicing law with my firm for 5 years now, so I am OFFICIALLY old!

[The late] Mark Kloster and I both worked long hours in the litigation section at (then) Cox & Smith. It was Mark’s idea to launch the magazine. We had an idea, sure, but zero experience, talent, or even a blueprint. But the endeavor promised a diversion from the endless discovery and sanctions battles (prevalent in the early ‘90’s), and a chance to continue publishing, which we both enjoyed. The venture also held the promise of meeting other attorneys in a collaborative, social setting. In those early days, every San Antonio Lawyer Board of Editors meeting was full of fun people, creative ideas, lively debate, and alcohol.”

—Curt Cukjati

The San Antonio community is blessed with a cohort of talented member-authors who enjoy sifting through notes, interpreting data and statutes, and conducting interviews to create interesting substantive law articles and provide insightful profiles of legal legends and community leaders.

The San Antonio Bar community toasts the former and current Editorial boards of San Antonio Lawyer®. Cheers to the next 30 years!

Hon. Barbara Nellermoe, Editor-in-Chief, 1997-2014

For the first few years, the Editorial Board spent hours batting around ideas for content (we still do!) starting with one-themed issues. We soon realized that we weren’t reaching the broad and diverse interests of the San Antonio legal community. Our focus gradually centered on local bar member-authors. In addition to short, readable articles on various practice points, rules changes, local trends, and historical topics, San Antonio Lawyer has published profiles of many local legal stars and judges, as well as an annual obituary issue to pay due respect to the passing of our colleagues. While there have been regular offers from marketing agencies to increase our output to monthly issues, the Board has resisted this and steadfastly remains a volunteer board of writers and editors and has demonstrated that SAL remains a professional periodical.”

—Hon. Barbara Nellermoe

Sara Murray, Editor-in-Chief, 2014-Current

“To me, the success of San Antonio Lawyer is directly attributable to the dedication and commitment of the Publications Committee members, many of whom have also served since the magazine’s inception. When the COVID pandemic forced us to switch to bi-monthly Zoom meetings, but I wondered how successful that would be. To my delight, the Committee members continued to attend the meetings and work on the magazine, just as they always had done. Switching to Zoom meetings allowed committee members who no longer lived in San Antonio to attend the meetings. All of a sudden, we had people attending our meetings from Washington, D.C., Minnesota, Austin, and wherever else they might be. It has been my honor and privilege to work on the magazine with all these wonderful people. Together, we have shaped San Antonio Lawyer into the award-winning publication it has been for decades now. I invite you to join us on the Publications Committee.”

—Sara Murray

New Year, New Members!

By Chief Justice Rebeca C. Martinez

In lieu of a traditional update on recent opinions handed down by the Fourth Court of Appeals, I take this opportunity to introduce the newest additions to the Fourth Court Family, Clerk of Court Tommy Stolhandske, and central staff attorneys Tom Mitchell and Aron Cooper.

The court bids farewell to our departing Clerk of Court Michael Cruz. Mike’s dedicated service and perseverance in the last four years, through challenging times for the state judiciary, will leave a mark on the history of the Fourth Court and in our hearts and minds.

In early February 2024, we welcomed Tommy Stolhandske as Mike’s successor. Born and raised in San Antonio, Tommy was an all-city basketball player at Churchill High School and, after graduation, moved down the road to Texas Lutheran University in Seguin. While at TLU, he was a member of the men’s basketball team and a three-time All-American and two-time finalist for the Josten’s National Player of the Year Trophy.

After graduating from TLU and spending a year working in sports marketing, Tommy decided to follow in the footsteps of his father, local attorney Matt Stolhandske, and his grandfather, former Bexar County Commissioner Tom Stolhandske, and attended St. Mary’s University School of Law. After becoming licensed as an attorney, Tommy launched his own practice and shared an office with his father and grandfather.

In 2014, Tommy was elected to serve as the Judge of Bexar County Court at Law No. 11 and took office on January 1, 2015. During his time on the bench, he volunteered to oversee the Adult Drug Court and DWI Treatment Courts. In 2021, Tommy was nominated to serve as the Chair of the Texas Center for the Judiciary Curriculum Committee and remained in that position until leaving the County Court at Law Bench at the end of 2022. For the last year, Tommy has served as a Visiting Judge for the 4th Judicial Administrative Region in both County and District Courts in Bexar, Webb, and Atascosa Counties.

Tommy and his wife Tina are the proud parents of a nine-year-old daughter and a six-

year-old son. In his free time, Tommy can be found volunteering with and coaching his children’s volleyball, baseball, and basketball teams. He is a huge sports fan and loves to attend Cubs, Spurs, Avalanche, Longhorn, and FC Barcelona games. Tommy and his family love being outdoors at his grandparents’ ranch in the Hill Country or spending time at the lake.

The court also welcomed a new central staff attorney, Aron Cooper, who primarily manages the court’s original proceedings docket. Bradley “Aron” Cooper is a graduate of the University of Texas School of Law and licensed in both Texas and New York. After clerking for the Honorable Jorge A. Solis of the United States District Court, Northern District of Texas, Aron worked in both large and small private firms, primarily in appellate matters in both state and federal court. Aron has practiced predominantly in Dallas and is extremely happy to be back home in Spurs Country as a San Antonio native, having graduated from James Madison High School. In his spare time, Aron enjoys researching and writing about the intersection of theological and legal history, and “binge watching” almost everything.

Following the 88th Regular Session, the Fourth Court benefitted from additional funding that enabled the court to employ a second central staff attorney. The court welcomed Tom Mitchell on September 1, 2023. Tom graduated magna cum laude from Texas A&M University before attending Notre Dame Law School, where he was a Note Editor on the Notre Dame Law Review. After graduating cum laude from Notre Dame, Tom had the pleasure of serving as a Judicial Clerk for the Honorable Hilda G. Tagle, Senior United States District Judge for the Southern District of Texas. Licensed in both Florida and Texas, Tom continued his public service, accumulating more than seven years’ experience as a state prosecutor and nearly five years as a staff attorney, including as Chief Central Staff Attorney at the First Court of Appeals. Tom brings with him a wealth of institutional knowledge and enjoys his free time playing PlayStation 5.

Chief Justice Rebeca C. Martinez has served on the Fourth Court of Appeals since January 2013, and as Chief Justice since January 2021. Chief Justice Martinez previously served for United State Magistrate Judge Eduardo E. de Ases for the Western District of Texas, served for Justice Federico Hinojosa on the Thirteenth Court of Appeals, and practiced trial law for over twenty years.

Tommy Stolhandske

Aron Cooper

Tom Mitchell

The San Antonio Bar Foundation Welcomes the Elected Fellows Class of 2024

By SABA Staff

The San Antonio Bar Foundation is pleased to announce its 2024 class of twenty newly elected Fellows. Selection as a Foundation Fellow is by nomination only and restricted to members of the San Antonio Bar Association (SABA). Fellows must demonstrate professional achievement, an exemplary reputation, and commitment to the legal community. Each year’s class is limited to no

more than one third of one percent of SABA members and is subject to confirmation by the Foundation Board of Trustees. Today, the program is comprised of more than 650 Fellows who volunteer and financially support the Foundation’s programs and mission.

Established in 1984, the San Antonio Bar Foundation (SABF) is the philanthropic arm of the San Antonio Bar Association. The Foundation is comprised of Fellows

who serve as patrons of the charitable heart of the legal community. The Foundation hosts civic education programs, helps fill the access to justice gap, and supports the pipeline of future leaders in the San Antonio legal family.

For more information about the Fellows Program, the Foundation, or SABA, please visit www.sabar.org

Demetrio Duarte, Jr. Duarte & Molina, PC

Josué J. Galván Jackson Walker LLP

Elizabeth C. Boddy Person, Mohrer, Morales, Boddy, Garcia & Gutierrez, PLLC

Elizabeth H. Fry Hornberger Fuller & Garza, Inc.

Paul Garcia Paul Garcia & Associates

Joseph L. Korbel Davis, Cedillo & Mendoza, Inc.

Byron L. LeFlore, Jr. Pulman, Cappuccio & Pullen, LLP

Daniela Gonzalez de Serna Alamo Trust, Inc.

Marc A. Notzon Law Office of Marc A. Notzon, PC

Jeffrey A. Saenz Gonzalez Chiscano Angulo & Kasson, PC

Oscar Quiroz Guerra LLP

Bennett L. Stahl Curl Stahl Geis, PC

Lauren A. Valkenaar Chasnoff | Stribling

Miguel Villarreal, Jr. Gunn, Lee & Cave, PC

West W. Winter The Winter Law Firm,PLLC

Veronica S. Wolfe Ford Murray, PLLC

Matthew B. Maupin Gonzalez Chiscano Angulo & Kasson, PC

Derick J. Rodgers Davis, Cedillo & Mendoza, Inc.

Zachary “Zach” K. Gilbert Davis, Cedillo & Mendoza, Inc.

Jobe S. Jackson Langley & Banack, Inc.

Western District of Texas Court Summaries

By Soledad Valenciano, Melanie Fry, and Jeffrie Lewis

If you are aware of a Western District of Texas order that you believe would be of interest to the local bar and should be summarized in this column, please contact Soledad Valenciano (svalenciano@svtxlaw.com, 210-787-4654) or Melanie Fry (mfry@dykema.com, 210-554-5500) with the style and cause number of the case, and the entry date and docket number of the order.

Discovery; Local Rule CV-16(e)

Xiaorong Lan v. Univ. of Tex. at San Antonio, SA-22-CV-00769-FB (Chestney, E., Nov. 13, 2023)

The plaintiff moved to compel the defendant to supplement production despite the defendant’s having supplemented its response three times. The plaintiff also filed a motion to reopen discovery and requested leave to depose two witnesses. Local Rule CV-16(e) provides that absent exceptional circumstances, no motions relating to discovery shall be filed after the expiration of the discovery deadline, unless the motion is filed within 14 days after the discovery deadline and pertains to conduct occurring during the final 7 days of discovery. To compel another party to initiate an additional search for responsive documents, the requesting party must point to a material or specific deficiency in the production and make a showing, including through the documents produced, that allows the court to reasonably deduce that other documents may exist or did exist and have been destroyed. Alternatively, the requesting party must point to the existence of additional responsive material. Simply arguing that only a few documents were produced is insufficient. In this case, the plaintiff failed to address the factors related to good cause—an explanation for the failure to comply with the scheduling order, the importance of the modification to the scheduling order, the potential prejudice in allowing the modification, and the availability of a continuance to cure such prejudice. Therefore, the motion to compel production was denied. Because the plaintiff could have timely noticed the two depositions within the discovery period and because the plaintiff failed to show good cause to extend the discovery deadline, the court also denied

the motions relating to the depositions. Finally, the defendant was protected from having to answer discovery served the day after discovery closed. Pursuant to Local Rule CV-16(e), written discovery is not timely unless the response would be due before the discovery deadline.

Toxic Torts; Causation; Summary Judgment

Odom v. BP Expl. & Prod., Inc ., et. al, SA: 17-CV-00202-OLG (Garcia, O., Nov. 21, 2023)

In this toxic tort case, the court adopted the report and recommendation of Magistrate Judge Henry J. Bemporad and granted the defendant’s first amended motion for summary judgment on the issue of general causation. The Fifth Circuit requires a “twostep process” for examining causation in toxic tort claims, requiring a plaintiff to show both general and specific causation. If the court finds no general causation evidence, there is no need to consider specific causation. Here, the plaintiff failed to present evidence on the issue of general causation—that a substance is capable of causing a particular injury or condition in the general population; or for Back-End Litigation Option matters—that exposure to a certain level of a certain substance for a certain period of time can cause a particular condition. Instead of providing such evidence, the plaintiff merely complained of the insufficiency of the monitoring data provided by the defendants. The court reminded the plaintiff that the causation expert could have consulted “the entire universe of relevant epidemiological evidence” to support an opinion on general causation and was not limited to sampling data provided by the defendants.

Trademark Infringement, Trade Dress Infringement, Motion to Dismiss

NS Brands, Ltd. v. Mastronardi Produce, Ltd ., SA-23-CV-00445-JKP (Pulliam, J., Dec. 14, 2023)

In a trademark dispute between two grape tomato sellers regarding their respective product packaging, the court denied the defendant’s motion to dismiss the plaintiff’s claims of trademark infringement and trade dress infringement. The court found that the plaintiff plausibly alleged a claim for trademark infringement and trade dress infringement because it could show: (1) the trademark or trade dress it alleged is protectable; and (2) the alleged infringer’s use creates a likelihood of confusion considering the “8 digits of confusion.” As to trademark infringement, the parties agreed that the plaintiff’s trademark qualified for protection. Trade dress or “the total image and overall appearance of a product” must be inherently distinctive or have achieved secondary meaning in the public’s mind to be protected. Fair notice, vagueness, and overprotection are considerations in a trade dress analysis. The court found that the plaintiff’s three definitions of its trade dress, which included use of the term “base” and “lid” alternatively, while confusing, was still sufficiently specific to provide notice of what the plaintiff was trying to protect, i.e., a twoelement trade dress of a yellow opaque plastic lid with a clear transparent dome, and therefore met the element of qualifying for protection. As to both claims, the plaintiff provided evidence of all 8 digits of confusion, including confusion by retailers who frequently intermixed and mistook the two products for the other. Additionally, the defendant moved for dismissal on its affirmative defense of estoppel, claiming that the plaintiff’s defini-

tion of trade dress was different from that defined in the parties’ 2021 settlement agreement, which was attached to the complaint. The court determined it would be improper to consider the settlement agreement at this stage of the litigation, as the document was not “central to the Plaintiff’s claims”—rather, it was central to the defendant’s claims. Moreover, the court found that a Rule 12(b)(6) motion was an improper vehicle to resolve an affirmative defense of estoppel.

Forum Non Conveniens; Forum Selection Clause; Motion to Dismiss; Venue

Holt Tex., Ltd. v. Vita Inclinata Techs., Inc., SA-23-CV-01130-JKP, (Pulliam, J., Nov. 20, 2023)

The court granted a motion to dismiss for forum non conveniens, enforcing a contractual forum selection clause wherein the parties agreed not to commence any litigation against the other “in any forum other than the United States District Court for the District of Delaware or the courts of the State of Colorado sitting in the County of Denver[.]”

After a dispute arose relating to an agreement between the parties under which the defendant became a distributor for the plaintiff’s products in specified territories, including Texas, the plaintiff terminated the agreement. The plaintiff filed a complaint in the United States District Court for the District of Colorado, invoking the agreement’s forum selection clause. The defendant then filed a motion to dismiss, arguing venue would be proper in Colorado state court or in Texas. Before the federal court in Colorado ruled, the plaintiff dismissed the lawsuit and refiled in Denver County, a Colorado state court. Before the Colorado defendant was formally served with the Colorado state court suit, it filed the instant action in Texas state court, which the Colorado plaintiff (now the defendant) removed based on diversity jurisdiction.

In response to the original plaintiff/subsequent defendant’s motion to dismiss, the court conducted a forum non conveniens analysis. The court rejected the original defendant/subsequent plaintiff’s arguments against dismissal, including that: (1) the original plaintiff/subsequent defendant breached the agreement and, therefore, the forum selection clause was ineffective; (2) the forum selection clause was actually a “venue selection clause” requiring a transfer pursuant to 28 U.S.C. 1404(a); and (3) the forum selec-

tion clause violated Texas law, which voids any provision in a dealer agreement that applies non-Texas state law. Instead, the court held that the clear language in the contract setting the forum in “U.S. District Court for the District of Delaware or the courts of the State of Colorado sitting in the County of Denver” did not include the forum selected by the original defendant/subsequent plaintiff, and granted the original plaintiff/subsequent defendant’s motion to dismiss.

Expert Report; Deadlines; Insurance

Shweiki v. Allied Prop. & Cas. Ins. Co., No. SA-22-CV-758-OLG, (Garcia, O., Dec. 5, 2023)

The court granted in part a motion to strike an expert witness’s untimely revised opinion testimony. Months after the designated deadline, the expert revised his report to nearly double the amount of damages originally estimated. Although supplement expert reports are permissible when information is not available prior to the deadline or to correct inaccuracies, they are not allowable when the information was available to the expert prior to the deadline. Because the expert’s report was untimely, the revised opinions were stricken and the expert’s testimony was limited to the analysis and opinions contained in the first report.

S.B.1.; Civil Rights Act

La Unión del Pueblo Entero v. Abbott , 5:21-CV-0844-XR (Rodriguez, X., Nov. 29, 2023)

The court considered challenges to certain provisions of Texas’s Election Protection and Integrity Act of 2021 (“S.B.1”). The plaintiffs alleged that S.B.1’s requirement for identification number-matching for Texas’s mail-in voting process violates Section 101 of the Civil Rights Act (CRA) of 1964 (the “Materiality Provision”). The number matching requirement calls for a Texas Driver’s License, Texas Personal Identification Number, Election Identification Certificate Number issued by DOT, or the last 4 digits of one’s Social Security Number. Election officials confirmed that the numbers are not used to ensure that voters are qualified to vote or to cast a mail ballot, to identify voters, or to flag potential fraud. Such validation is completed by using other information on mail ballots such as the voter’s name, date of birth, and address. The court considered whether the

number-matching provisions require election officials to disenfranchise voters for errors that are immaterial to their eligibility. The court concluded that Sections 5.07 and 5.13 of S.B.1, which require officials to reject mail ballot applications and mail ballots based on errors or omissions that are not material in determining whether voters are qualified under Texas law to vote or cast a mail ballot, deny the statutory right to vote protected by the Materiality Provision. Thus, Sections 5.07 and 5.13 of S.B.1 violate the CRA and a permanent injunction of those sections was warranted.

Soledad Valenciano practices commercial and real estate litigation with Spivey Valenciano, PLLC.

Melanie Fry practices commercial litigation and appellate law with Dykema Gossett PLLC.

Jeffrie B. Lewis is Assistant General Counsel with Zachry Group.

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