In the Courts

Water Cases

Travis Cnty. Mun. Util. Dist. No. 10 v. Waterford Lago Vista, LLC, No. 07-23-00182-CV, 2023 WL 8042570 (Tex. App.—Amarillo, Nov. 20, 2023).

A developer and a municipal utility district (the “MUD”) entered into an agreement (the “Agreement”) that provided for the acquisition of sites and the design and construction of water, sewer, and drainage facilities to serve property owned by the developer and within the MUD’s jurisdiction. The Agreement also provided for cost allocation, in which the developer was responsible for payment for the costs of the project, and the MUD was to “obtain approval for the sale of bonds” to reimburse the developer. The developer defaulted, and following foreclosure, the property and all rights were conveyed to Waterford LT Partners (“Waterford”), including the right to reimbursement. Waterford requested reimbursement, but the MUD refused payment, claiming that the contract assignment was not properly executed. Waterford sued to recover costs. Following a plea to the jurisdiction, the trial court held that the MUD waived its governmental immunity by entering a contract for services, and Waterford had standing to sue despite being a non-party in the agreement. The MUD appealed, claiming the trial court erred in its holding for both governmental immunity and standing. The appellate court affirmed the trial court on both issues.

On appeal, the MUD argues that the agreement is not the type of contract in which immunity may be waived. However, the Appellate Court argues that Section 271.152 of the Local Government Code “provides a clear and unambiguous waiver of governmental immunity from suit in the context of a breach of contract claim.” A waiver is triggered by the act of entering into a contract for goods and services executed on behalf of a local governmental entity. Moreover, the Court noted that “services” is a broad term that includes an array of activities, even ones not for the primary purpose of the agreement so long as they are “neither indirect nor attenuated.” Here, the Court concluded that when the developer and the MUD entered into the contract to buy the sites and to design and construct the water, sewer, and drainage facilities, the “services” performed by the developer were directly to fulfill the purpose of the contract – i.e., serve real property within the MUD’s jurisdiction.

Regarding standing, the MUD argued that the developer lacked standing to pursue a claim under Local Government Code Chapter 271 because (1) the developer lost its waived immunity through the assignment of the contract, and (2) the contractual rights for reimbursement were not assigned. The Appellate Court turned to precedent on Chapter 271 that states “the legislature waived sovereign immunity for suits brought by assignees of those who enter into contracts.” Because the developer is an assignee, immunity survives the assignment. The Appellate Court dismissed the second part of this issue because the ability to be reimbursed under the contract is not an issue of standing but capacity.

Cockrell Inv. Partners, L.P. v. Middle Pecos Groundwater Conservation Dist., 676 S.W.3d 677 (Tex. App.—El Paso, Jul. 10, 2023).

Cockrell Investment Partners, L.P. (“Cockrell”) owns property in Pecos County, where it holds permits issued by the Middle Pecos Groundwater Conservation District (the “District”). Fort Stockton Holdings, L.P. (“FSH”) owns a groundwater estate of approximately 18,000 acres of land in the same county, also owning permits issued by the District. In 2017, the District entered into a settlement agreement with FSH, approving permit applications in favor of FSH: (1) a permit amending the amount of production in its historical and existing use permit, and (2) an export permit giving it the right to produce and export 28,400 acre-feet of groundwater for a three-year term. Cockrell filed suit against the District, and on appeal was dismissed for failing to exhaust its administrative remedies before seeking judicial review.

In 2020, FHS sent a letter to the District about its application to renew the 2017 Regular Production Permit for an additional three-year term and requested the District consider the letter as a renewal application under Section 36.1145 of the Texas Water Code. Cockrell filed a written request for party status in any hearing on the permit renewal. The District granted its renewal request such that FHS “satisfactorily addresses Special Permit Conditions.” Cockrell then sought a declaration under the Texas Uniform Declaratory Judgments Act (“UDJA”) as to whether a three-year export permit could be renewed or extended without the construction of a water conveyance system. Cockrell also sought a review of the District’s failure to conduct a permit renewal hearing and permit its party status.

At trial court, Cockrell filed a motion for partial summary judgment, alleging that the District had improperly renewed the permit under the Texas Water Code. The District filed a cross motion for partial summary judgment, claiming no hearing was required for the request for permit renewal. The trial court denied Cockrell’s motion and granted the District’s but did not specify the basis for these rulings. Cockrell appealed, and the issues on appeal are whether the trial court erred in denying its motion for partial summary judgement regarding the proper construction of Section 36.122 of the Texas Water Code, and whether Cockrell had party status to the application to renew FHS’s 2017 permit.

Cockrell asserted a claim under the UDJA requesting an interpretation of portions of the Texas Water Code because it alleged that the District renewed the permit outside of the scope of Chapter 36. The Court noted that the UDJA is “merely a procedural device for deciding cases already within a court’s jurisdiction” and such actions are barred by sovereign immunity when against political divisions. Accordingly, the Court held that “the UDJA does not enlarge the trial court’s jurisdiction” to decide cases such as this one. Generally, a party may seek a declaration of their rights under the UDJA, but if the action is against a party with governmental immunity, they must also plead a waiver of immunity. Cockrell sought an interpretation of the Water Code, not a declaration of its rights, and the UDJA does not waive the District’s immunity for that purpose.

Regarding party status, Cockrell argued that it had exhausted its administrative remedies before filing its suit by sending a motion for rehearing to the District on July 6, 2020 that the District did not formally act on. A request for rehearing is deemed denied 90 days after submitted. Cockrell filed the underlying suit on September 11, 2020, but the denial would not have been until October 5, 2020. The Court noted that filing a suit before a motion for rehearing has been ruled on is premature, and such a prematurely filed suit does not exhaust administrative remedies. Therefore, the Court held that Cockrell lacked standing to pursue a complaint on the District’s denial of party status. Accordingly, absent party status, Cockrell could not challenge the District’s decision to renew the permit.

Based on Cockrell’s lack of party status, it cannot challenge the District’s renewal of FSH’s application. Because Cockrell did not establish the prerequisite (a waiver of immunity) for filing a suit to challenge the District’s renewal of FSH’s permit, the Court upheld the trial court’s granting of the motion for partial summary judgment.

Litigation Cases

Sanders v. Boeing Co., No. 23-0388, 2023 WL 8285824 (Tex. Dec. 1, 2023). (Certified Question from the United States Court of Appeals for the Fifth Circuit).

Deciding certified questions from the United States Fifth Circuit Court of Appeals, the Texas Supreme Court recently interpreted the limitations-savings statute for jurisdictional defects. The Supreme Court decided that a case’s statute of limitations may be tolled if a party refiles even when a plaintiff could have invoked jurisdiction but failed to do so in their pleading. Further, the tolling begins 60 days after all appellate remedies have been exhausted if an appeal is filed and not 60 days after the trial court that dismissed the claims loses its plenary powers.

This case was brought by a group of flight attendants against Boeing and others after a smoke alarm’s ringing burst the flight attendants’ eardrums on a Boeing plane. Suit was filed in three different trial courts in this case. First, the plaintiffs brought their case in a federal court in Houston, but then voluntarily dismissed it. They then refiled in a federal court in Dallas, which dismissed the case sua sponte because the plaintiffs did not adequately plead diversity jurisdiction. Plaintiffs then filed in a Houston state court.

Boeing removed the case to federal court and moved to dismiss on the grounds that limitations had expired. Plaintiffs argued that under Texas Civil Practice & Remedies Code Section 16.064, the jurisdiction-saving statute, limitations were tolled because the Dallas lawsuit was dismissed for lack of jurisdiction and the plaintiffs refiled the lawsuit less than 60 days after that dismissal. The Fifth Circuit later certified two questions for the Texas Supreme Court: (1) can the savings statute be invoked based on a lack of jurisdiction even if the jurisdiction could have been properly pleaded, and (2) when does a decision become “final” to trigger the 60-day refiling requirement under Section
16.064(a)(2)?

First, the Texas Supreme Court held that if a case is dismissed based on a lack of jurisdiction, regardless of whether it was the correct result or not, then Section 16.064 applies. Even though the flight attendants could have pleaded diversity but did not, the Dallas federal court’s reason for dismissal was lack of jurisdiction, and thus, under the plain language of the statute, Section 16.64 applied to the dismissal of the flight attendants’ claims.

Second, the flight attendants argued that if a party appeals a dismissal order, the 60-day refiling requirement should start running when the appellate remedies are exhausted. Boeing argued the decision was final earlier, or when the court that dismissed the action lost plenary power. The Texas Supreme Court agreed with the flight attendants and found that “final” for the purposes of Section 16.064 was when all appeals from the dismissal were exhausted and the appellate court lost plenary power.

Going forward, parties on both sides should be aware that the jurisdiction-saving provision under Section 16.064 maintains a party’s ability to toll the statute of limitations while a dismissal is being analyzed on appeal, thus extending the length of time parties may be engaged in litigation before reaching the merits of the underlying suit.

Ass’n of Club Execs. v. City of Dallas, 83 F.4th 958 (5th Cir. 2023).

The Fifth Circuit Court of Appeals recently upheld Dallas’s zoning ordinance requiring sexually oriented businesses to cease operations between 2 a.m. and 6 a.m. Dallas’s city council initially enacted the ordinance in response to an increase in violent gun crimes around sexually oriented businesses (“SOBs”) in the early morning hours. The council based its decision in part on data analyses from Dallas’s crime reports, academic studies, and similar reports from other Texas cities.

After enacting the ordinance, a trade association for owners and operators of SOBs sued the City in federal court, arguing that the ordinance violated their First Amendment right to free speech. The district court agreed with the trade association and enjoined Dallas’s enforcement of the ordinance, finding that the ordinance was not designed to combat the undesirable secondary effects of SOBs.

In October 2023, the Fifth Circuit vacated the injunction and remanded the case back to the district court for further proceedings. The Fifth Circuit analyzed the trade association’s likelihood of success on the merits based on the Supreme Court’s precedent regarding regulations for SOBs in City of Renton v. Playtime Theatres, 475 U.S. 41 (1986). Based on Renton, the Fifth Circuit acknowledged that Dallas’s ordinance must be upheld if (1) it was designed to serve a substantial governmental interest and (2) it allowed for reasonable alternative avenues of communication. The appellate court found that the ordinance was “designed to serve a substantial government interest and allow[ed] for reasonable alternative avenues of communication.” Unlike the district court, which held the city council to a higher evidentiary standard than required by Supreme Court precedent, the Fifth Circuit agreed the council relied on evidence that the council “reasonably believed to be relevant” in enacting the ordinance, rather than “shoddy” evidence. While the trade association argued that the evidence was not reasonably related to the ordinance, the court clarified that the applicable standard does not require an “ironclad connection” to support enacting the ordinance. Instead, the city council was permitted to “reasonably infer” based on the evidence presented that SOBs were responsible for the secondary effects (i.e., violent crime) targeted by the ordinance. The court restated the precedent that “a city must have latitude to experiment in addressing secondary effects” and that courts “should not be in the business of second-guessing fact-bound empirical assessments of city planners” who know their cities better than the courts.

At the temporary injunction phase in cases challenging similar regulations, cities should be prepared to present their statistical evidence to support their decision while also highlighting the significance of the courts’ support for cities to determine what is best for their own communities.

City of Kemah v. Joiner, No. 01-23-00105-CV, 2023 WL 8041040 (Tex. App.—Houston [1st Dist.] Nov. 21, 2023, no pet. h.).

Joiner previously served as the mayor of the City of Kemah (the “City”). During his term, the City undertook a large renovation project on various City properties. The City later hired a law firm to investigate whether the contracts for the renovation project were fulfilled and if there were any irregularities. The law firm issued a two-part report of its findings to the city council in January and May 2022. Joiner alleged that the purpose of the investigation was “the City’s drive to uncover alleged self-dealing, misappropriation of funds and/or mismanagement on [Joiner’s] part as Mayor of Kemah during the Renovation Project.”

Joiner alleged that he saw the investigation report, but the city council refused to publicly release it. Joiner requested that the report be made public, arguing that the city council waived any attorney-client privilege when a city council member discussed the purpose of the investigation at a public meeting.

When the city council did not release the report publicly, Joiner filed suit seeking a declaratory judgment that the report was not privileged and ordering the report be made public. In response, the City filed a plea to the jurisdiction, arguing in part that Joiner had not alleged a waiver of its governmental immunity. The trial court denied the plea to the jurisdiction.

On appeal, the Houston Court of Appeals reversed and remanded, finding no applicable waiver of immunity. Joiner argued that the City’s immunity was waived under the Uniform Default Judgment Act (“UDJA”), the Texas Open Meetings Act (the “TOMA”), and the Texas Public Information Act (the “TPIA”). The court disagreed.

First, the UDJA waives immunity for claims challenging the validity of statutes or ordinances—it does not waive immunity when a plaintiff, like Joiner, seeks a declaration only of his rights under a statute or law. Second, the court found that the TOMA’s waiver did not apply because it does not extend to suits for declaratory judgment. Third, the waiver of immunity under the TPIA does apply to declaratory judgments, but only in suits brought by a district or county attorney or the attorney general based on information provided by a person who claims to be a victim of the TPIA violation. Joiner, as mayor, could not bring such a case. The court remanded to the trial court to afford Joiner the opportunity to replead a waiver of immunity, if possible. On December 18, 2023, Joiner filed an amended petition, dropped his declaratory-judgment action and now seeks a writ of mandamus.

Although the question of whether the City waived its attorney-client privilege remains, government agencies and entities should be mindful to balance public transparency and open government with the protections afforded by the attorney-client privilege.

Air and Waste Cases

Court Denies Negligence Claim Tied to CERCLA claim.

In 2020, Banfield Realty LLC (“Banfield”) purchased a property in New Hampshire that allegedly contained heavy metals, asbestos, and other toxins that the property owner had remediated. However, when further cleanup activities became necessary, Banfield was required to pay for cleanup costs. In light of these costs, Banfield sued the sellers for contribution under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), as well as for negligence. While the court upheld Banfield’s CERCLA claim, it denied the negligence claim, stating that “it would be a substantial stretch to conclude that, by dumping building and construction waste on privately owned property, with the permission of Property’s prior owners, [the sellers] somehow breached a common law duty owed to Banfield Realty, a subsequent owner of the Property some forty years later.” Banfield Realty LLC v. Copeland, No. 22-CV-0573-SM, 2023 WL 6796216 (D.N.H. Oct. 13, 2023).

Supreme Court Denies Free-market Group’s Petition to reopen 2009 GHG Case for Lack of Standing.

Earlier this year, free-market groups initiated litigation to reopen the 2009 greenhouse gas (“GHG”) case, Concerned Household Electricity Consumers Council et al v. EPA, urging the D.C. Circuit to reconsider a lower court decision that human-caused GHGs are the biggest contributor to climate change. The groups asserted they have standing to bring the case on the basis that overturning the lower court’s finding would prevent the opportunity for rulemaking—rulemaking which would increase electricity prices for power plants which would in turn harm the groups’ members and interests. EPA found that the groups had no standing, and the groups petitioned the Supreme Court for review, which the Supreme Court denied, effectively leaving in place the lower court’s holding.

“In the Courts” is prepared by Lora Naismith in the Firm’s Water Practice Group; Sydney Sadler in the Firm’s Litigation Practice Group; and Mattie Neira in the Firm’s Air and Waste Practice Group. If you would like additional information or have questions related to these cases or other matters, please contact Lora at 512.322.5850 or lnaismith@lglawfirm.com, or Sydney at 512.322.5856 or ssadler@lglawfirm.com, or Mattie at 512.322.5804 or mneira@lglawfirm.com.