Supreme Court of Texas
══════════
No. 20-0079
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James Construction Group, LLC and
Primoris Services Corporation,
Petitioners,
v.
Westlake Chemical Corporation,
Respondent
═══════════════════════════════════════
On Petition for Review from the
Court of Appeals for the Fourteenth District of Texas
═══════════════════════════════════════
CHIEF JUSTICE HECHT, joined by Justice Devine, Justice Busby,
and Justice Bland, dissenting in part.
Gregory Price, 55, suffered a fatal injury while working on a
construction project in December 2012 as a result of a serious safety
violation by his employer, James Construction. Price’s death was all
James’ fault. Price was standing on a ladder leaning against a truck
when a co-employee flagged the truck forward without checking to see if
Price was clear, even though that violated standard protocol and
common sense. Price fell, suffered a closed head injury, and died. His
tragic injury was entirely preventable, and OSHA issued James
multiple citations.
That was not the first time project owner Westlake Chemical had
to deal with James’ safety problems. In eight months as a general
contractor on the project in 2012, James had been cited multiple times
for safety violations. And despite Westlake’s repeated insistence that
James improve its record, safety violations continued even after Price’s
death. By April 2013, Westlake could take no more. Its managerial team
met with James’ team to tell them James was terminated for chronic,
serious safety violations. This upset James’ vice president. “[E]verybody
kills somebody on the job”, he said, “why are you penalizing us?”1 That
was the last straw for Westlake. A few days later, James acknowledged
in writing that it had been terminated.
Section 21.3 of the parties’ contract authorized Westlake to
terminate James for serious safety violations. The provision required
notice to James of the violations, Westlake’s dissatisfaction with
remediation efforts, and termination. Section 9.1 required that notices
be in writing. The Court acknowledges that “[s]ubstantial compliance is
the appropriate standard when evaluating whether a party complied
with a contractual notice condition.”2 Notice can be untimely, deficient,
sent in the wrong manner, or misdirected, and still be effective.3 “[A]s a
general principle of Texas law”, the Court declares, “a party’s minor
The Court dismisses the statement as “distasteful”. Ante at 36-37 n.20.
1
Westlake’s team was shocked. “It blew us away”, said one.
2 Id. at 20.
3 Id. at 22-23.
2
deviations from a contractual notice condition that do not severely
impair the purpose underlying that condition and cause no prejudice do
not and should not deprive that party of the benefit of its bargain.”4
The single exception, the Court holds, is the form of notice. If a
contract calls for a party to give written notice of a matter, then there
must be a writing of some kind, even if deficient, else the party forfeits
all contractual benefits, even though the opposing party was fully aware
of the matter and was not prejudiced in any way by the lack of a writing.5
The Court professes to have found no Texas case to the contrary, while
misreading a Fifth Circuit case and relying on dicta and inapposite
cases. Importantly, the Court altogether ignores a fundamental rule of
Texas law, that “[f]orfeitures are not favored in Texas, and contracts are
construed to avoid them.”6
Even if the Court were correct that parties must strictly comply
with the form of notice called for in their contract, Westlake met the
Court’s requirement of a writing, and the contents and manner of its
notices satisfy the substantial compliance standard the Court applies—
as found by the jury. The Court admits that Westlake’s emails regarding
safety violations, especially following Price’s death, may have been
sufficient for the first of three required notices. The Court faults
continuing email traffic between Westlake and James as being too
4 Id. at 23.
5 Id. at 29-30.
6 Aquaplex, Inc. v. Rancho La Valencia, Inc., 297 S.W.3d 768, 774 (Tex.
2009); see Sirtex Oil Indus., Inc. v. Erigan, 403 S.W.2d 784, 788 (Tex. 1966)
(noting that “the law abhors a forfeiture”).
3
encouraging and not expressive of Westlake’s dissatisfaction, though the
only reason for the emails was James’ continuing safety violations and
Westlake’s resulting concerns. And the Court concludes there was no
written notice at all of James’ termination, despite its project manager’s
letter to Westlake, stating: “Per the direction of Westlake[,] [James] has
discontinued mechanical work on the . . . project . . . .” James’ written
acknowledgment of termination should satisfy any requirement of a
writing.
With sleight of hand, the Court tries to make the issue whether
there were writings, then hold that there was at best only one of the
three the contract required because the writings that were indisputably
exchanged were deficient. The substance of Westlake’s notices is
governed, as the Court acknowledges, by the substantial-compliance
doctrine, and the jury found that Westlake satisfied it. The issue the
Court must address, yet avoids, is whether there is any evidence to
support the jury’s findings. There is.
This flaw in the Court’s analysis illustrates the difficulty of
carving out an exception to the substantial compliance rule generally
applicable to construction contracts. In some situations there may be no
writings at all, so that the issue is the form of the notice. But in many,
as here, there are writings, and the issue is not form, but substance, to
which the substantial-compliance doctrine applies.
The Court seeks to justify strict compliance with the form of
written notice by arguing that it “eliminates after-the-fact disputes
4
about exactly what notice was given.”7 But that is precisely why the
usual substantial compliance rule should apply. There are no such
credible disputes in this case. James’ safety violations were not “done in
a corner.”8 James had a terrible safety record and knew it. Even after a
fatal injury for which it was wholly at fault, and which was entirely and
easily preventable, James’ attitude was: “[E]verybody kills somebody on
the job”. This record does not contain even the slightest hint of dispute
about James’ safety record or the reason for its termination. The jury
affirmatively found that Westlake’s actual notice to James did not
“impair the purpose” of written notice “and caused no harm to James.”
On the other hand, the Court observes that the substantial-
compliance doctrine “serves the important purpose of preventing parties
from engaging in bad-faith, ‘gotcha’ tactics to avoid their own
contractual obligations based on a technicality.”9 Again, that is precisely
why the doctrine should apply in this case. Though James knew full well
everything of which Westlake repeatedly gave notice, the Court allows
James to escape its contractual obligation to pay the $1 million costs
Westlake incurred because of James’ termination. By the Court’s
reasoning, Westlake could have scribbled “terminated” on a napkin and
handed it to James’ angry project manager, and the result in this case
would be completely different. The absence of one word labeling what
everyone knew was happening results in a $1 million forfeiture of
contractual benefits awarded by the jury.
7 Ante at 27.
8 See Acts 26:26.
9 Ante at 24.
5
Finally, the Court holds that one provision of the parties’ contract
must be strictly enforced while another, which would also allow
Westlake to recover the same damages, does not mean what it says.
Section 17.2 gave Westlake, during James’ work, “the right to intervene
in any appropriate way,” particularly for safety’s sake. The Court
concludes that this remedy is subject to the notice requirements of
Section 21.3, ignoring the clear statement in Section 17.2: “This right is
in addition to any other remedies [Westlake] may have [under the
contract].” Because the provision authorizes Westlake to require James
to bear the cost of the intervention, the Court concludes that the
provision “implies” that James will still be on the job after the
intervention, even though the fact—not the implication—is that
Westlake claims James must bear the cost of the intervention after it
left the project. So: “written” means written, no matter what, but “any
appropriate way” means some appropriate way, not including
termination. The Court does not take notice of the inconsistency, much
less the irony, in its positions.
The jury found that James’ breaches of Sections 21.3 and 17.2 cost
Westlake $1,054,251.81, which the contract required James to
reimburse. Though James was well aware of its repeated, serious safety
violations and angry at Westlake for insisting on a safe jobsite, the Court
orders that Westlake forfeit its contractual rights for lack of a writing
that the jury found did not harm James. I disagree that Westlake failed
to comply with the notice requirements of Section 21.3 and that it cannot
recover its excess costs in completing the work under Sections 21.3 and
17.2. I therefore respectfully dissent.
6
I
The Court holds that the rule of substantial compliance applies to
contractual notice conditions in two ways. First, the rule applies to the
substance of the notice. In the example the Court cites, one parent’s
notice to the other of proposed international travel, required before the
other was required to consent, substantially complied with the divorce
decree even though it omitted significant information—like where they
would stay and when they would return.10
Second, the rule applies to the method of notice. In the Court’s
examples, notice need not be sent by registered mail, as the parties
contracted,11 or to the location directed in the contract,12 as long as it was
received. In the Court’s view, the content of the notice—which, after all,
is the very point of requiring that notice be given—and the manner of
the notice’s delivery need only substantially comply with the parties’
agreement. But if a contract calls for written notice, the Court decrees,
then there must be a writing, even if the parties’ contract does not insist
on strict compliance, and even if notice is completely ineffectual where,
as here, notice confers no information not already indisputably known
to both parties.
As rationales for its new rule, the Court offers precedent and
policy.
Id. at 22-23 (citing In re G.D.H., 366 S.W.3d 766, 771 (Tex. App.—
10
Amarillo 2012, no pet.)).
Id. at 23 (citing Barbier v. Berry, 345 S.W.2d 557, 562 (Tex. Civ.
11
App.—Dallas 1961, no writ)).
Id. (citing Tex. Utils. Elec. Co. v. Aetna Cas. & Sur. Co., 786 S.W.2d
12
792, 793 (Tex. App.—Dallas 1990, writ denied)).
7
A
As for precedent, the Court says it has found “no Texas cases
holding that a party’s provision of oral notice complies, substantially or
otherwise, with a requirement of written notice.”13 Actually, there is one,
which the Court has found but does not recognize: South Texas Electric
Cooperative v. Dresser–Rand Co.,14 decided by three Texas judges on the
federal appeals court applying Texas law.
In South Texas, Dresser contracted to repair any defects in the
electric turbine it sold the Co-op after the Co-op provided written notice
of such defects. If Dresser failed to make the repairs, the Co-op, after a
second, ten-day written notice to Dresser, had the right to repair the
defects itself at Dresser’s expense. From startup, vibrations in the
turbine impaired its use. Dresser knew of the problems, and for two
years the parties emailed back and forth about them. Finally, the Co-op,
“without providing Dresser further written notice, employed outside
consultants to do the repair work.”15
“[T]he jury found that [the Co-op] substantially complied with the
contract’s notice provisions”,16 and the Circuit held that was sufficient
to allow it to recover. The Circuit rejected Dresser’s argument that the
substantial-compliance doctrine did not apply to a contractual
requirement for written notice. Further, the Circuit held that “Dresser’s
13 Id. at 24.
14 575 F.3d 504 (5th Cir. 2009) (opinion by Haynes, J., joined by Jones,
C.J., and Higginbotham, J.).
15 Id. at 506.
16 Id.
8
arguments are contrary to well-established Texas law, recognizing the
applicability of the doctrine of substantial compliance to contractual
notice provisions.”17 Dresser knew that the Co-op was consulting with
experts, even though the Co-op did not give Dresser written notice that
the experts would repair the turbine at Dresser’s expense. The Circuit
concluded: “[T]he evidence here supports a conclusion that the
underlying purpose of the ten-day notice requirement . . . was fully
served by the actual notice received by Dresser.”18
This Court dismisses South Texas as inapposite because the
Circuit stated that the Co-op had hired outside consultants to repair the
turbine “without providing Dresser further written notice”,19 noting that
the parties had exchanged writings on the need for repairs. But the
Circuit’s opinion clearly states, and the Co-op did not dispute, that the
Co-op did not give Dresser the contractually required written notice that
repairs were to be made. Dresser argued on appeal that whatever it may
have known about the Co-op’s use of experts, it was entitled to the
written notice for which it contracted. This Court says that the Circuit’s
“focus was not on the lack of a writing”,20 but that was the very focus of
the entire case. The Circuit’s opinion refers to “written” notice five times.
The parties’ contract required written notice. None was given. The
Circuit applied the substantial-compliance doctrine and held, as the jury
had found, that the Co-op satisfied it.
17 Id. at 507.
18 Id. at 508.
19 Ante at 29 (quoting S. Tex. Elec. Coop., 575 F.3d at 506).
20 Id.
9
The Court also dismisses South Texas because “federal law” is not
needed to “fill in [a] gap” in Texas jurisprudence.21 With respect, the
Court’s statement makes no sense. South Texas did not apply federal
law; it applied Texas law to a Texas case. There was no “gap” in Texas
law; the applicability of substantial compliance to contractual written
notice provisions was “well-established”.22 The Court can certainly
disagree with South Texas; it cannot dismiss it.
The Court cites four cases in support of its holding. Two, Cheung–
Loon, LLC v. Cergon, Inc.,23 and Tennessee Gas Pipeline Co. v. Technip
USA Corp.,24 have nothing whatever to do with substantial compliance.
Both denied recovery because no notice of any kind was given. In the
former, the court stated that “appellees point to no evidence that any of
the alleged notifications informed [the opposing party] of their position
[or] the contractual right they now claim was breached.”25 In the latter,
a case factually similar to the present one, the court rejected the
argument that “no notice is required” of one party’s intent to repair
defective workmanship at the other’s expense.26 Neither the words
“substantial compliance” nor the concept appear in either case.
In a third case, Emerald Forest Utility District v. Simonsen
21 Id. at 28.
22 S. Tex. Elec. Coop., 575 F.3d at 507.
23 392 S.W.3d 738 (Tex. App.—Dallas 2012, no pet.).
24 No. 01-06-00535-CV, 2008 WL 3876141 (Tex. App.—Houston [1st
Dist.] Aug. 21, 2008, pet. denied).
25 Cheung–Loon, 392 S.W.3d at 745.
26 Tennessee Gas Pipeline, 2008 WL 3876141, at *20.
10
Construction Co., the court stated that “[t]he controlling issue is whether
[a party] warranted the sufficiency of the design of the sewer system.”27
In dicta, the court noted that “[w]hen a contract provides for a particular
form of notice, compliance with such provisions is a condition precedent
to invoking the contract rights which are conditioned on the notice.”28
But the court did not state that substantial compliance does not apply.
Again, neither the words nor the concept appear in the opinion.
The fourth case the Court cites is Shaller v. Commercial Standard
Insurance Co., a decision of this Court.29 The jury in the case found that
the insureds had not consented to the cancellation of two insurance
policies, but the court of appeals reversed judgment on the verdict,
holding that consent was established as a matter of law. This Court
reversed, holding that the insureds had no notice at all their policies
would be cancelled, and therefore whether the insureds consented was
a fact question for the jury.30 The Court added that a policy provision
requiring prior written notice of cancellation should be enforced absent
waiver, agreement, or estoppel,31 but it did not discuss substantial
compliance. Neither the words nor the concept appear in the opinion.
The Court can hold that the substantial-compliance doctrine
applies to construction contracts generally and notice provisions in
27 679 S.W.2d 51, 52 (Tex. App.—Houston [14th Dist.] 1984, writ ref’d
n.r.e.).
28 Id. at 54.
29 309 S.W.2d 59 (Tex. 1958).
30 Id. at 66.
31 Id.
11
particular and carve out a single exception for the form of notice. What
it cannot do—or at least what it cannot do legitimately—is claim for its
authority cases that do not discuss substantial compliance while
dismissing a contrary case that does.
B
The Court argues that its exception to the substantial compliance
rule is good policy because it avoids after-the-fact disputes over what
notice was given and what the parties actually knew. But while such
disputes are certainly worth avoiding, none exist in this case. Before and
after an on-the-job death, Westlake and James were in constant
conversation about how to improve safety on the project and whether
James could continue on as a contractor.
In this situation, there is a stronger countervailing policy: the
law’s abhorrence of forfeitures and construction of contracts to avoid
them. The Court agrees that Westlake would have strictly complied with
the written notice requirement if it had scribbled only a few words, like
“21.3” plus “safety”, “dissatisfied”, and “terminated”. For want of a few
words, Westlake forfeits the more than $1 million in damages found by
the jury. And words would have added nothing to the parties’ awareness
of the safety problems and the unavoidable consequences.
The Court apologizes that it must read contracts the way the
parties write them, but in this case, that is simply not true. Parties need
only substantially comply with the substance of a contract’s notice
requirements. The Court demands that formal requirements must be
read as written, but not substantive requirements. Here are the Court’s
words:
12
The courts’ unfailing refusal to deem oral notice compliant
with a contractual condition requiring written notice, like
the doctrine of substantial compliance as a general matter,
is consistent with our repeated affirmation that “[a]bsent
compelling reasons, courts must respect and enforce the
terms of a contract the parties have freely and voluntarily
entered.” The bargained-for requirement of written notice
necessarily serves a purpose beyond actual notice;
otherwise, its inclusion is useless.32
How is the application of substantial compliance in this case
inconsistent with respecting and enforcing the parties’ terms as written?
A bargained-for requirement of written notice is not useless, any more
so than a bargained-for requirement of registered mail or destination.
The requirement sets the standard for the parties’ desired certainty.
Allowing notice sent by regular mail or to a different office does not
disrespect the parties’ right to contract. Rather, it assumes the parties
contracted in good faith and not with the intent to spring technical
“gotchas” on each other to avoid their obligations. Notice tantamount to
written notice, which James clearly had, should be sufficient.
II
In the end, the Court’s rule that parties must strictly comply with
a contractual requirement for the form of notice is of little significance
to a decision in this case. The issue is not whether there were writings,
but what they contained. On this issue, the Court is bound by the jury’s
findings that Westlake substantially complied with the contract unless
there was no evidence to support them.
Westlake hired James in May 2012 as a general contractor to
32 Ante at 26-27.
13
work on Westlake’s chlor-alkali plant,33 only their contract did not
require Westlake to assign James work, or James to accept an
assignment. Westlake was free to retain other contractors to do work
James could do.
Section 21.3 of their contract provided:
If [Westlake] discovers or determines in its reasonable
opinion that . . . [James] has serious safety violations[,]
then [Westlake] may so notify James. Upon receipt of any
such notice [James] shall begin to remedy the breach or
defect cited within seventy-two (72) hours. If at any time
[Westlake] is not reasonably satisfied with the pace and the
quality of the remediation effort, [Westlake] will so notify
[James] and [Westlake] may thereafter, at its sole
discretion, elect to either terminate this Contract or portion
of the Work by providing notice to that effect. After
providing such notice [Westlake] shall have the
unrestricted right to take possession of the Work or the
portion thereof terminated and to purchase and/or hire
materials, tools, supervision, labor, and equipment for the
completion of the Work or of the unremedied condition, as
[Westlake] elects. Any extra costs in excess of the Contract
Price incurred by [Westlake] in this regard shall be at the
expense of [James]. This right is in addition to any other
remedies [Westlake] may have hereunder.
The provision thus called for Westlake to give three notices: of its
opinion that James had serious safety violations, of its dissatisfaction
with James’ remediation effort, and of termination of James’ work. The
contract required that all notices be written.
On December 28, James’ employee Gregory Price suffered a fatal
head injury on the job. He fell from a ladder propped against the side of
33 The chlor-alkali process produces chlorine and caustic soda by the
electrolysis of brine.
14
a truck, helping to load it, when the driver was directed to pull ahead
without checking to see that no one was near. OSHA cited James for a
serious safety violation. It was the latest in a steady stream of violations.
The same day, Westlake’s project manager, Abram Kuo,
forwarded to his counterpart at James, Rusty DeBarge, an email Kuo
had received from his superior stating that Price’s death was
“completely preventable”, asking for James’ incident rate of safety
violations, proposing a safety review for James to show how it would
prevent further incidents, and requiring James “to develop [a]
preventive safety mind set [sic] with some extraordinary measures on
job safety.” Kuo followed up in a meeting with DeBarge a few days later,
together reviewing James’ safety record and emphasizing the
importance of James’ improving its safety performance.
The Court calls it “questionable” whether the December 28 email
was the first notice under Section 21.3 because it did not mention that
provision and did not specify when James’ 72 hours to remediate began.
But the contract required neither. The Court itself holds that the
substance of the notice need only substantially comply with the
contractual requirement. It certainly did, as the jury found. By any
measure, an email stating that a preventable death on the job required
a complete safety review expresses a reasonable opinion that there had
been serious safety violations.
On January 18, DeBarge emailed Kuo to “appeal” “potential
changes in the execution of the project going forward”—specifically
James’ removal from the project. Kuo emailed back the same day,
confirming that Westlake might bring another contractor onto the
15
project. Quoting DeBarge’s email back to him, Kuo agreed that everyone
“would like to be judged by [their] intentions” but “are in fact judged by
the results.” Kuo added: “we all make mistakes and we all need to learn
from [them].” On January 30, Westlake transferred work from James to
a new contractor.
The Court concludes that this email was not the second notice
called for by Section 21.3 because, like the December 28 email, it did not
mention that provision, and because it acknowledged steps James had
taken to improve safety and did not express dissatisfaction with James’
performance. But the email exchange was precipitated by rumors
DeBarge had heard that Westlake was going to switch to another
contractor. Westlake was not terminating James because it was
satisfied with James’ work. The email exchange was premised on
Westlake’s dissatisfaction, and Westlake terminated part of James’
work a few days later.
As with the December 28 email, the Court concludes that the
January 18 email did not qualify as written notice under Section 21.3,
not because it was not written, but because it was lacking in substance.
But again, that must be determined under the substantial-compliance
doctrine, and the jury found for Westlake. There was clearly some
evidence in the January 18 email of Westlake’s dissatisfaction with
James’ safety performance, which unquestionably existed. The Court
never addresses the jury’s verdict.
Finally, on April 11, after additional incidents even under a new
site manager, James and Westlake representatives met in person.
Westlake told James that its work was being reassigned to a different
16
contractor and that James had “five days to get [its] remaining piping
and mechanical people off the job.” Additionally, James was told that
Westlake had “done everything [it could] do”, and despite Westlake’s
efforts to help James, James “[fell] back into the same pattern” of safety
problems. James’ vice-president responded angrily: “[E]verybody kills
somebody on the job[.] [W]hy are you penalizing us?” James immediately
withdrew from the project.
On May 8, DeBarge emailed Westlake that “[p]er the direction of
Westlake site management, [James] has discontinued mechanical work
on the Chlor-Alkali project and we have completed the demobilization of
the mechanical forces.” The Court rejects this writing as complying with
Section 21.3 because it was not sent by Westlake, but in reciting the
notice Westlake gave at the earlier meeting, paired with James’
withdrawal from the project, it served the same purpose as if coming
from Westlake. Indeed, it showed James’ own understanding of the
situation.
The writings between Westlake and James satisfy the
requirements of Section 21.3. Certainly, they substantially complied
with those requirements, as the jury found.
III
The Court holds that Section 21.3 of the contract must be read as
written, but not Section 17.2. That provision states:
[Westlake] shall at any time during the execution of the
Work by [James] have the right to intervene in any
appropriate way, if in the reasonable opinion of [Westlake],
(a) [James’] performance is likely to lead to (i) defective
Work, (ii) a material breach of this Contract, (b) the
progress achieved by [James] is insufficient or likely to
17
result in the Work not being completed by the completion
date stated in any Work Order or (c) [James] is performing
its duties under this Contract in an unsafe way or manner
in which [Westlake] believes may cause injury or damage
to persons or property. In such cases [Westlake] shall have
the right to require [James] to immediately take remedial
action to the satisfaction of [Westlake]. [James] shall be
solely accountable for all costs associated with such
intervention and remedial action, whether incurred by
[James], [Westlake] or any third party.
The Court concludes that intervention “in any appropriate way” does not
mean requiring safety improvements and termination without notice,
otherwise Section 21.3 would be meaningless. But Section 21.3 itself
expressly states that the right it gives Westlake to intervene in James’
work with notice “is in addition to any other remedies Westlake may
have hereunder.” Despite this plain statement, the Court reads Section
21.3 to confer an exclusive right to intervene, not an additional one.
Neither section need be read to trump the other. They provide
alternative ways for Westlake to proceed. But, according to the Court,
Section 17.2 prevails over Section 21.3 because “Texas courts regularly
enforce unambiguous contract language agreed to by sophisticated
parties in arms-length transactions.”34 The Court cannot have it both
ways. If “written” must be read literally, then so must “any appropriate
way”.
* * * * *
I would not except the form of notice required by construction
contracts from the substantial-compliance doctrine, which applies to the
rest of the contract. I would not insist that part of a contract must be
34 Ante at 18.
18
read literally and that another part cannot be. I would hold that there
is evidence to support the jury’s findings that Westlake substantially
complied with the contract’s notice requirements. And I would not forfeit
the $1 million damages awarded Westlake by the jury for want of a word
or two. Therefore, I respectfully dissent.35
Nathan L. Hecht
Chief Justice
OPINION DELIVERED: May 20, 2022
35James raises an additional ground for reversal related to agency. The
Court did not reach the issue because it held that Westlake may not recover
under Section 21.3. Ante at 16-17 n.10. I would affirm the court of appeals’
holding on the issue in Westlake’s favor. Additionally, as to Part II(C) of the
Court’s opinion, I agree with the result that Westlake can recover on its
indemnity claim, but I disagree with the Court's rationale that Westlake failed
to comply with Section 21.3's notice requirements. Cf. id. at 42-43.
19