Andrew Wheat

The vested interests that bankrolled the Texas Supreme Court during much of retiring Chief Justice Tom Phillips’ 16-year reign could have left him alone last month to draft his resignation in peace. Instead they kept hammering the Phillips Court with briefs, demanding that it overturn adverse decisions by lower courts. It was a reminder that powerful business interests will continue to be behind—and in front of—the court long after its current chief is gone.

Some of the most powerful political and financial influences on the Phillips Court have been business opponents of consumer lawsuits, whose leaders include James Leininger and brothers David and Richard Weekley. These three businessmen, who collectively are associated with $167,037 in campaign contributions to the sitting justices, have stakes in four cases on the high court’s 2004 docket. Already this year the Texas Supremes have faced three lemon-home appeals from the Weekley family’s David Weekley Homes. The justices also are deliberating on a class-action lawsuit that consumers filed against State Farm and Wendy Gramm. Gramm sat on the board of State Farm, Texas’ top auto insurer, and still chairs the board of Leininger’s Texas Public Policy Foundation (TPPF) think tank, which shapes many of the state’s GOP policies. Leininger and Wendy Gramm—wife of ex-Senator Phil Gramm—carry great influence with Governor Rick Perry, who will have appointed four of the high court’s nine justices once he names chief Phillips’ successor.

WARNING: WENDY ON BOARD

From 1994 through 2001 Wendy Gramm simultaneously served on the boards of State Farm Mutual Automobile Insurance Company and Enron Corp. Both Wendy and Phil Gramm promoted the deregulatory agenda that fueled Enron’s astonishing $60 billion rise and fall. Phil Gramm sponsored a 2000 bill that aided Enron by deregulating financial markets. After Wendy Gramm deregulated energy futures markets as chair of the U.S. Commodities Futures Commission in the early 1990s, Enron stuck her on its see-no-evil corporate board. Last month, Gramm and 11 other ex-Enron board members tentatively agreed to pay $86.5 million to settle a bit of the $3 billion in pension-fund claims filed by ex-Enron employees. Although Gramm did not admit wrongdoing, the proposed settlement would bar her from being a trustee of federally regulated pension plans for five years.

This April, Texas Supreme Court justices heard arguments in a case that alleges that another company ran amok on Wendy’s watch. As a mutual insurer, State Farm Mutual Auto Co. ostensibly is owned by its policyholders, who have stakes in company dividends. The policyholder plaintiffs in State Farm Mutual Auto and Wendy Gramm v. Lopez alleges that Gramm and other board members shortchanged policyholders on dividends after State Farm Mutual reported a $37 billion surplus in 1997. An Edinburg trial judge certified the lawsuit as a class action on behalf of all of the company’s policyholders in Texas (including three high-court justices). State Farm appealed the judge’s certification of this class to an intermediate appeals court, which affirmed the class. In 2002, the Supremes ruled that they lacked jurisdiction to intervene in the matter. In a 2003 reversal, however, the high court agreed to hear State Farm’s appeal, after all.

The Gramms’ clout with this all-Republican court is impressive. In 2001 Governor Rick Perry appointed Wendy to another board: the Texas A&M Regents. After Enron’s implosion, Phil Gramm’s Senate war chest contributed $612,000 to Governor Perry in 2002. Perry recently took a Bahamas policy junket with TPPF’s director and James Leininger, whose family and corporate PAC has contributed $52,700 to the justices. The new chief justice whom Perry picks to complete Phillips’ term is likely to take office before the court rules in the State Farm-Gramm case.

Another Perry appointee, Insurance Commissioner Jose Montemayor, has filed two fanciful friend-of-the court briefs on behalf of State Farm (which this year is paying Montemayor’s predecessor more than $200,000 in lobby fees). A 2001 Texas Department of Insurance (TDI) brief warns the court that indulgent insurers could pay so much money in policyholder dividends that they would not have sufficient cash to cover catastrophic claims. During recent oral arguments, justices asked what remedies mutual policyholders have if an insurer with huge surpluses fails to pay dividends. A follow-up brief by TDI—which approves some of the highest insurance rates in the nation—responded: “While individual policyholders do not have an avenue in the courts for relief, the market and the regulatory environment work together to keep the surplus from being too large.”

The lawyers who drafted these TDI briefs worked for current and former Texas Attorneys General Greg Abbott and John Cornyn. Both Abbott and Cornyn were justices on the Texas Supreme Court. These two former high-court justices got more than $100,000 apiece for their attorney general campaigns from hospital-bed magnate James Leininger.

WEEKLEY APPEALS

Current Texas Supreme Court justices have taken $31,000 in campaign contributions from the family that owns Houston-based David Weekley Homes. These justices took another $83,337 from the state’s leading business tort group, Texans for Lawsuit Reform (TLR), headed by Richard Weekley.

The Weekley family’s interest in the civil-justice system is apparent from the docket at the Texas Supreme Court, which already has seen three Weekley Homes cases this year. After Austin’s Richardson family alleged that it was harmed by mold and toxic materials in its Weekley home (see “Privatizing Justice,” TO 6/21/02), lower courts forced the parents into arbitration but kept the claims of the children—who did not sign an arbitration contract—in court. Weekley appealed to the Texas Supreme Court to force the kids into arbitration, too. Last year the justices agreed to hear this appeal by one of their leading benefactors.

In 2003, after Weekley appealed the Richardson case, rumors circulated that the homebuilder’s representatives were privately lobbying justices to hear its appeal. Because such private judicial lobbying violates the Texas Code of Judicial Conduct, Texans for Public Justice requested copies of the then-sitting justices’ calendars. Five justices provided all or part of their calendars, while colleagues Craig Enoch, Nathan Hecht, Priscilla Owen, and Steven Smith provided nothing. The only remedy to this refusal is a circular appeal back to the same court. (In order to fend off legislation to subject judges to the same open-records rules that shine disinfecting light on the actions of all other state officials, the court in 1999 adopted its own self-administered and self-policed disclosure rules.) An out-of-court legal settlement of Richardson v. David Weekley Homes last March prevented the court from having to choose between servicing a powerful patron or depriving kids of their right to a jury trial.

Nonetheless, ex-Supreme Court Justice Raul Gonzalez—the defense attorney who appealed the Richardson case for Weekley Homes—has filed two new appeals this year urging the high court to impose arbitration on consumers who are claiming damages from Weekley-built lemon homes. One of the new appeals has a familiar ring. A Grapevine widower, Vernon Forsting, claims that Weekley built a home for both he and his daughter’s family that had numerous structural defects. The plaintiffs allege that the bungling efforts by Weekley workers to fix these problems sickened Forsting’s asthmatic daughter with dust and contaminants. Lower courts forced Forsting into arbitration but allowed daughter Patricia Von Bargen to pursue her claims in court. Again, Weekley Homes is urging the Supremes to trounce lower courts by imposing arbitration on someone who never signed away her right to a jury trial.

Efforts to strip jury-trial rights even from those who did not forfeit them by signing arbitration contracts have prompted concern even in unexpected quarters. The last friend-of-the-court brief filed in the now-settled Richardson case urged the court not to make a knee-jerk ruling for arbitration. That brief came not from the American Civil Liberties Union but from Halliburton subsidiary Kellogg Brown & Root (KBR).

This is all the more extraordinary given that Halliburton—under Dick Cheney’s stewardship in 1997—imposed arbitration on workers who never signed arbitration contracts. Instead, Halliburton simply notified employees that anyone showing up for work in the new year was tacitly “waiving all rights… to a trial by jury.” Overturning two lower courts, Chief Justice Phillips wrote a 2002 opinion that imposed this unsigned contract on a Halliburton worker. Yet Halliburton’s KBR, which frequently signs subcontracts lacking arbitration clauses, recently told the court that it is concerned about “the circumstances under which non-signatories may be compelled to arbitrate.”

With Phillips at the helm, the Texas Supreme Court has excelled at ruling for the powerful business interests that underwrite its justices’ expensive campaigns. Almost certainly the court will continue this legacy this fall, when Phillips heads to Houston to teach law and passes the gavel to a new chief picked by Governor Perry.

Frequent Observer contributor Andrew Wheat is research director of Austin-based Texans for Public Justice.