Texas Supreme Court Decision Creates Trap for the Unwary

by James F. Parker

On April 10, the Texas Supreme Court issued its decision in Spectrum Gulf Coast, LLC v. City of San Antonio—a case involving Spectrum’s contract with the City allowing Spectrum to attach telecommunications equipment to the City’s public utility’s electric poles. Under the parties’ 1984 contract, Spectrum agreed initially to pay $3.75 per pole attachment with annual rate increases. The contract further stated that the parties would “at all times observe and comply with . . . all laws, ordinances, and regulations which in any manner affect the rights and obligations of the parties hereto.”

Three years later, the City entered into a similar contract with AT&T. But whereas the City’s contract with Spectrum included an annual escalator clause, the AT&T contract did not. The result was that AT&T continued paying the 1984 rate of $3.75 per pole attachment while Spectrum’s rate had increased each year.

That became important when the Legislature amended the Public Utility Regulatory Act (“PURA”) in 2005 to prohibit municipalities from discriminating for or against telecommunications providers, including as to terms and pole-attachment rates. On the basis of the PURA amendment, Spectrum sued for breach of the contract, alleging that the contract’s language by which the parties agreed that they would comply with all laws incorporated PURA’s 2005 anti-discrimination requirement and thus required the City to charge Spectrum the same, lower rate that it charged AT&T under its contract.

The Supreme Court agreed with Spectrum’s argument. The contract “usefully and sensibly facilitate[d]” the parties’ “long-term relationship[] by accounting for—not seeking to evade—future regulatory changes.” “[T]he parties’ mutual commitment to ‘at all times observe and comply with . . . all laws’” reflected the parties’ expectation of future legal changes that, in the absence of such language, would require that the contract be terminated and renegotiated every time the Legislature passed a new law affecting a party’s substantive rights.

Particularly in regulated industries, parties in long-term contracts should be aware of this new rule, particularly if their contracts similarly include an agreement to observe and comply with all laws and regulations (as public entity-contracts often do). The Supreme Court observed that language incorporating all laws and regulations has the benefit of ensuring that long-term contracts do not have to be frequently renegotiated. But that also creates the risk that a party may be bound by a contract term imposed by subsequent legislation that it neither anticipated nor would have agreed to.

To limit such risk, a long-term contract that incorporates and/or makes itself subject to subsequent changes to the law should be made readily terminable if a subsequent change to the law materially impacts certain essential terms of the contract, including the price to be paid under the contract. Alternatively, the parties could agree that in the event of such a future change in the law, the parties will agree to renegotiate the contract’s terms within a certain period of time for the contract to continue. In any event, parties to such existing contracts should be aware that the provisions set out in the document—including fundamental terms like the contract price—may be changed by the Legislature or an administrative agency without their consent or knowledge.

Spectrum Gulf Coast, LLC v. City of San Antonio, No. 24-0794 (Tex. Apr. 10, 2026) is accessible on the Texas Supreme Court website here.

James Parker is a Principal in the Firm’s Litigation Practice Group. If you would like additional information or have questions, please contact James at 512.322.5878 or jparker@lglawfirm.com.