2024 Year in Review: Construction Law

Written for and published in Texas Bar Journal Volume 87, Number 11 (December 2024)

Below is a review of several recent (2024), significant developments in Texas construction law.

          In Lennar Homes of Tex., Inc. v. Rafiei,[i] the Supreme Court of Texas held that a party resisting arbitration failed to submit adequate evidence demonstrating the unconscionability of a delegation of arbitrability provision. Rafiei sued Lennar for premises liability and negligence, but the parties’ agreement included an arbitration clause specifying that the arbitrator would decide disputes over arbitrability. The court held that when parties delegate arbitrability to the arbitrator, the court decides the “narrow question” of whether the delegation provision is itself unconscionable. The court found that Rafiei could not establish unconscionability because the evidence presented in the district court – Rafiei’s and his attorney’s affidavits, as well as the AAA rules and fee schedule – was not sufficient to demonstrate that the cost of determining arbitrability (in arbitration) would prevent him from pursuing the merits of his claims. The court noted that a successful unconscionability argument requires “specific evidence that a party will actually be charged excessive arbitration fees[,]” but held that Rafiei’s evidence on arbitration costs was vague, speculative, an failed to demonstrate that he could not afford the fees. The court reversed and remanded, emphasizing that the arbitrator, not the court, should then resolve the unconscionability of the underlying arbitration.

          In Weekly Homes, LLC v. Paniagua,[ii] the Supreme Court of Texas held that Chapter 95 applies when an injury results from a condition or use of the same improvement on which a contractor is working when the injury occurs. The plaintiffs were injured when scaffolding they were transporting while working on a townhome contacted a wet, electrified driveway (that was not itself within their scope of work). The court ruled that the “electrified driveway, by reason of its proximity to the townhome, created a probability of harm to one who constructs, repairs, renovates, or modifies the townhome and was a condition of the townhome itself.” Therefore, Chapter 95 applied to the contractor’s claim.

          In Oscar Renda Contr., Inc. v. Bruce,[iii] the Supreme Court of Texas held that the burden to secure a unanimous jury verdict for exemplary damages rests with the plaintiff and “may not be shifted.” Oscar Renda Contracting allegedly damaged nearby homes during a pipeline construction project. Following a trial, a divided jury (10-2) awarded the plaintiff homeowners exemplary damages. In applying Section 41.003 of the Civil Practice and Remedies Code, the court concluded that the burden of establishing unanimity rested with the plaintiff, and that the plaintiff “must seek clarification to the extent that it asserts that the divided verdict inaccurately reflects the jury’s vote as to a particular question.” The court also held that the defendant had not waived the issue by waiting until after the verdict to challenge the exemplary damages award, as that would shift the burden contrary to the statute.

          In Legacy Hutto, LLC v. City of Hutto,[iv] the Supreme Court of Texas granted review after the passage of House Bill 1817 (88R), which amended Section 2252.908 of the Texas Government Code affecting contracts with governmental entities. The City of Hutto claimed immunity because it never received the contractor’s disclosure of interested parties (per the original version of 2252.908), arguing the contract was not “properly executed.” The court determined that HB 1817, which only voided contracts if the governmental entity does not receive the disclosure after it notifies the contractor of the deficiency, applied retrospectively, and remanded the case to the district court to address HB 1817’s effect.

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[i] 687 S.W.3d 726 (Tex. 2024).

[ii] 691 S.W.3d 911 (Tex. 2024).

[iii] 689 S.W.3d 305 (Tex. 2024).

[iv] 687 S.W.3d 67 (Tex. 2024).