In the Courts

Water Cases

San Jacinto River Auth. v. City of Conroe, 688 S.W.3d 124 (Tex. 2024).

A river authority (the “Authority”) entered into a groundwater reduction plan (“GRP”), which set goals for reducing the use of groundwater in Montgomery County. The GRP was intended to help its participants lower the cost of reducing groundwater use by sharing the costs of transitioning from groundwater use to surface water use. The GRP stated that the Authority would build and operate a treatment plant to treat water that the Authority drew out of Lake Conroe; the Authority would then sell this water to the GRP’s participants.

Several cities and utilities opted to join the GRP and entered into contracts with the Authority for the provision of drinking water. Following disputes over fees and rates for water, two cities (the “Cities”) stopped paying part of the balances owed under their contracts, and the Authority sued to recover the amounts owed. As governmental entities, the Cities are generally immune from suit absent an express legislative waiver.Texas Local Government Code § 271.152 waives governmental immunity for certain breaches of contract. In response to the Authority’s suit, the Cities filed pleas to the jurisdiction, arguing that their governmental immunity had not been waived under § 271.152 because the Authority did not follow the pre-suit mediation requirements included in the contracts. The Court granted the pleas and dismissed the Authority’s claims. The Authority appealed, arguing that procedures for adjudicating disputes in the contracts do not limit the waiver of governmental immunity.

On appeal, the Texas Supreme Court examined the Authority’s arguments, and looked to Local Government Code
§ 271.154, which states that adjudication procedures, such as alternative dispute resolution (“ADR”) proceedings, included in a contract subject to chapter 271 are enforceable and held that such procedures are subject to the § 271.152 waiver of immunity. The Court reasoned that without the waiver of immunity for adjudication procedures, a governmental entity could enforce mandatory ADR against a private party, but the private party would be unable to enforce the same against a governmental entity. The waiver ensures that both parties to the contract are on equal footing for enforcing adjudication procedure provisions. The Court held that the governmental immunity was waived, and the Court retains jurisdiction to order compliance with the pre-suit procedures included in a contract with a governmental entity.

The Court ultimately reversed the lower courts’ judgments granting the Cities’ pleas to the jurisdiction, and remanded the case, holding that contractual provisions for pre-suit dispute resolutions do not limit the waiver of governmental immunity provided for in Local Government Code § 271.152. Section 271.154 states that contractual provisions for pre-suit dispute resolutions are enforceable, and these two sections co-exist without impinging on the waiver of governmental immunity for breach of contract claims that government entities agree to when entering a contract.

City of Dripping Springs v. Lazy W Conservation Dist., No. 03-22-00296-CV, 2024 Tex. App. LEXIS 3774 (Tex. App.—Austin May 31, 2024, no pet. h.).

The City of Dripping Springs (the “City”) brought an eminent domain proceeding against the Lazy W Conservation District (the “District”) to condemn a portion of the District’s property to install an underground wastewater pipeline. Special commissioners in the condemnation proceeding awarded the City the land in exchange for damages paid to the District, and the District objected. The District then filed a plea to the jurisdiction, arguing that the District was entitled to governmental immunity, and the City was barred from condemning the property under the “paramount public importance doctrine.” The trial court granted the plea, and the City appealed.

On appeal, the Third Court of Appeals relied on a 2023 Texas Supreme Court decision which determined that governmental immunity is not applicable in eminent domain proceedings between two governmental entities. The Court determined that entirely immunizing a condemnee would undermine the condemnation power of the condemnor, essentially blocking the condemnor from fulfilling a public need. As such, the Court held that governmental immunity is not applicable to eminent domain proceedings between two governmental entities.

The District claimed that the doctrine of paramount public importance should operate as a jurisdictional bar. This doctrine allows a condemnee to prevent a condemnation of property already in public use if the condemnee establishes that the condemnation would “practically destroy the use” of the property, and the condemnor cannot show a great necessity for the condemnation. The Court held that while the doctrine is a claim that can be raised as a defense to a condemnation proceeding, it has no relevance in the present case to determine the grant of a plea to the jurisdiction.
The Court reversed the trial court’s granting of the plea to the jurisdiction, holding that governmental immunity is not applicable in eminent domain proceedings between two governmental entities, and the paramount public importance doctrine is not relevant until after jurisdiction is established.

Litigation Cases

In the October 2023 edition of The Lone Star Current, we spotlighted a few cases that were pending before the Texas Supreme Court. The Texas Supreme Court has since released its decision in each of those cases. Along with those updates, the Fifth Circuit has issued a decision relating to Winter Storm Uri, which is relevant in light of the impacts of Hurricane Beryl.

Campbellton Rd., Ltd. v. City of San Antonio, 688 S.W.3d 105 (Tex. 2024).

When the October edition was released, we also pointed out that the Texas Supreme Court had granted Campbellton Road’s Petition for Review and would soon be issuing a decision. The Court’s decision is now here, and it is significant because it involves the Court denying a governmental entity’s plea to the jurisdiction when the developer exercised its option in a Contract years after the apparent Contract expiration.

Specifically, the developer, Campbellton, entered into a Contract with San Antonio Water System (“SAWS”) to provide water and sewer connections to a 585-acre development. This Contract was to remain in full force and effect for ten years. In exchange for SAWS’s promise to reserve capacity to provide sewer connections to the subdivision, Campbellton promised to build and convey oversized wastewater facilities to SAWS.

But sixteen years later, when Campbellton asked to connect the new subdivision to the sewer system, SAWS asserted that the Contract had expired six years earlier and that it had already allocated capacity to other customers. SAWS contended that the necessary upgrades required six years after the 10-year contract term would cost $7.7 million. Likewise, Campbellton complained that it spent millions participating under the contract and building infrastructure. When Campbellton lost in the administrative appeal, Campbellton sued the City of San Antonio by and through SAWS for breach of contract.

SAWS filed a plea to the jurisdiction asserting its governmental immunity, which the trial court denied. On appeal, the Court of Appeals rejected Campbellton’s argument that the Contract Claims Act applied, concluding that the City received no goods or services from the contract and any benefit the City received was merely indirect and not part of the essential terms of the agreement. Without a waiver of immunity, Campbellton would be without a judicial remedy.

On April 12, 2024, the Texas Supreme Court reversed, holding that the Contract Claims Act applied, and waiving SAWS’s governmental immunity. The Court held that the parties formed a contract when Campbellton participated in the off-site oversizing project. Despite SAWS’s argument that Campbellton’s performance was optional and a contract could not form until Campbellton fully performed, the Court ultimately held that Campbellton had participated in and performed the project sufficient to form a contract.

The Court also found that the Contract stated the essential terms of the agreement. Despite SAWS’s argument that the Contract did not contain any terms requiring SAWS to pay Campbellton, the Court explained that SAWS and Campbellton agreed to and expressly chose a method of payment: collection credits. The Court further explained that collection credits were valuable because they could be transferred to another development and used to satisfy the assessed collection impact fees.

Finally, the Court found the agreement was for services that were not too indirect or attenuated to fall outside the Contract Claims Act’s waiver of immunity. The Court stated that SAWS received the benefit of having its capital improvements financed at the time of construction without any up-front expenditure of governmental funds. Thus, the benefits to SAWS were sufficiently direct and concrete for the contract to waive the governmental entity’s immunity.

Though the Court did not discuss the merits of Campbellton’s breach of contract claim, the Court stated that Campbellton had pleaded a claim entitling Campbellton to its day in court. The Court’s decision raises concerns for water providers that allocate capacity to other customers once a contract appears to expire. Going forward, water providers may choose to be cautious when re-allocating capacity to other customers when option contracts may still be in place.

City of Denton v. Grim, No. 22-1023, 2024 Tex. LEXIS 318 (May 3, 2024).

In our October edition, we also mentioned that the Supreme Court had granted the petition filed by the City of Denton in a case brought by two former employees of its electric utility under the Whistleblower Act.

There, the employees alleged they were fired for accusing a member of the city council of leaking documents to the Denton Record-Chronicle. At the district court level, the City argued that the Whistleblower Act did not apply to the employees’ claims because the alleged violation of law they reported was not committed “by the employing governmental entity or another public employee” as required by the Whistleblower Act in Texas Government Code § 554.002(a). The trial court was not convinced, and the case proceeded to a jury trial, which resulted in a $4 million judgment against the City. When the City appealed to the Court of Appeals, the Court of Appeals affirmed.

On May 3, 2024, the Texas Supreme Court reversed, holding that the city council member’s alleged violation of the law was not a violation “by the employing governmental entity or another public employee.” Because city council members are not paid for their service, they are not “another public employee.” And because the specific city council member’s actions were not imputed to the City in this case, the violation was not “by the employing governmental entity.” As a result, the Whistleblower Act’s limited waiver of governmental immunity did not apply.
In coming to its decision, the Court clarified the scope of the Whistleblower Act, stating that it is not enough that the alleged violation “concerns city business” or “was committed by the city council member in [their] official capacity” because the Act was not intended to protect all reports of wrongdoing. Instead, the Whistleblower Act protects only express reports to an appropriate law enforcement authority that unambiguously identify the employing governmental entity or another public employee as the violator. Notably, the Court discussed scenarios in which a city council member could be deemed to be acting on behalf of the governmental entity.

While the Supreme Court’s ruling in this case turned out in the City’s favor and clarified that the Whistleblower Act’s waiver of governmental immunity does not extend to rogue city council members or others acting without proper authorization, it should serve as a warning that action by a city council member can be deemed an act of the governmental entity in some scenarios.

La Union Del Pueblo Entero v. Abbott, 93 F.4th 310 (5th Cir. 2024).

In 2021, the Texas Legislature enacted Senate Bill (“S.B.”) 1, which related to voter registration, voting by mail, poll watches, and other aspects of election integrity and security. Five lawsuits were filed alleging that S.B. 1 chilled voter registration and was enacted with intent to discriminate against minorities. These lawsuits were consolidated with La Union del Pueblo Entero (“LUPE”) as the first named plaintiff in the class and the State of Texas, the Secretary of Texas, the Attorney General of Texas, and several county law enforcement and election officials as defendants. Harris County Republican Party (“HCRP”) subsequently intervened as a defendant.

During discovery, LUPE moved to compel HCRP to produce documents and communications relating to S.B. 1 that HCRP had sent or exchanged with the Texas Legislature and various members of the Texas executive branch. HCRP designated Alan Vera as the document custodian, and Vera asserted legislative privilege when the scope of questions sought communications with legislative personnel. LUPE filed a motion to compel, which the district court granted. The legislators appealed to the 5th Circuit.

In its opinion, the 5th Circuit provided an excellent overview of the legislative privilege. In short, legislative privilege protects certain documents and communications from discovery. It is broad, covering all aspects of the legislative process including material prepared for the legislator’s understanding of the legislation and materials relating to the potential legislation. Though this privilege is personal to the legislator, this privilege can be invoked on behalf of the legislator by the legislator’s aids, assistants, and third parties working with the legislator (i.e., advocacy groups, political interest groups, constituents, etc.).

The 5th Circuit then explained that Vera properly invoked legislative privilege because he was a third party brought into the legislative process and his acts occurred within the sphere of legitimate legislative activity. Namely, the legislators sought his comments on drafts, Vera provided feedback, and Vera emailed senators suggested language for S.B. 1. Consequently, the 5th Circuit held that Vera could invoke legislative privilege for those acts since they were taken at the direction, instruction, or for a legislator.

The 5th Circuit noted that narrow exceptions to legislative privilege exist and provided a three-part test for determining whether these exceptions applied. Ultimately, however, the 5th Circuit held that legislative privilege was properly invoked in this case and that the privilege protected documents and communications shared between the legislators and Vera.

The takeaway for governmental officials is that communications and documents shared with legislators may be protected by legislative privilege, depending on the context of the communications.

City of Houston. v. Sauls, 690 S.W.3d 60 (Tex. 2024).

Around 9:00 p.m. on the night of October 8, 2019, police officers Hewitt and Curtis were patrolling their assigned beat for the Houston Police Department. Following a 911 call “regarding a suicide in progress,” Officers Hewitt and Curtis responded, accelerating to 62 miles per hour in a 40-mph speed limit zone. They did so without emergency lights or sirens. This was consistent with common practice—the idea was to avoid agitating the patient who was on the verge of committing suicide. While the Officers could have requested to use lights and sirens for the approach and then turn them off when they neared the patient’s location, they did not. At the same time, a bicyclist – Dwayne Foreman – was turning left in the intersection onto the same street as the Officers when Mr. Foreman was hit by the Officers. The accident tragically ended Dwayne Foreman’s life.

Foreman’s family and estate sued the City for wrongful death, alleging that the City was liable because the City’s employee negligently and proximately caused Mr. Foreman’s death while operating a motor vehicle. The City filed a motion for summary judgment, arguing that it was immune under the Texas Tort Claims Act because Officer Hewitt was entitled to official immunity. The trial court denied the motion. The City appealed, and the Court of Appeals affirmed.

The Texas Supreme Court reversed, dismissing the case for two reasons. First, the Court held that Officer Hewitt had immunity because he was performing a discretionary duty while acting within his scope of authority in responding to the emergency call. Second, he was acting in good-faith – i.e., he acted just like a reasonably prudent officer in the same or similar circumstances. Though Foreman’s estate argued that Officer Hewitt was not responding to an emergency, the Court found that Hewitt was, and noted that Transportation Code authorizes a police officer to disregard certain traffic laws when responding to emergency calls so long as the officer operates the vehicle with the appropriate regard for safety and without reckless disregard.

Though the Texas Supreme Court found in this case that the Houston Police Department was not required to use alternatives, such as approaching with lights and sirens and then turning them off when nearing the patient’s location, this case also highlights that prudent city governments and police departments should weigh their department practices with the possible tragic consequences.

Tex. Tech. Univ. Sys. v. Martinez, No. 22-0843, 2024 LEXIS 463 (Tex. June 14, 2024).

At the age of 72, and after 11 years of working for the Texas Tech University (“TTU”) Health Sciences Center (“HSC”), Pureza Martinez was fired by the president for allegedly failing to maintain the new president’s confidences. However, only a month before, the president sent an email to the department stating that the TTU System and Board were concerned about the age of its leadership and that there was a need to begin succession planning—i.e., developing a written plan of their transition to retirement.

After Martinez was fired, she later sued the TTU HSC, alleging age discrimination. No one disputed that the TTU HSC was subject to the court’s jurisdiction. The issue in this case, however, was whether Martinez’s pleadings alleged facts supporting her age discrimination against two other defendants: the TTU System and the TTU System’s Board of Regents.

On appeal, the Texas Supreme Court concluded that Martinez’s petition did not allege facts demonstrating that the TTU System or the Board were sufficient to waive their immunity for an age discrimination claim because neither employed Martinez directly or controlled access to and interfered with her employment. While the Court noted that the Board had a general right to “direct, manage, and control” the HSC, that did not equate to actual control over Martinez’s employment opportunities to waive its immunity. While Martinez’s petition included allegations that the Board “wanted to reduce the average age of [the Health Sciences Center’s] senior leadership” and that the Board asked the president of the TTU HSC to reduce the age of senior leadership, the Court found these insufficient to waive immunity. The Court held that Martinez might be able to cure the pleading deficiency, however, because of the facts she was already able to allege. Ultimately, the Court remanded back to the trial court so that Martinez could replead.

While this case is instructive in terms of whether a plaintiff can sue a parent company or a governing body in a university system for unlawful discrimination, this case is also an instructive example of what to avoid when succession planning. In a footnote, the Court notes that a better method for preparing a governmental body for new leadership is to “create redundant knowledge within an organization” so that no person is a “single repository of key information.”

MIECO, L.L.C. v. Pioneer Nat. Res. USA, Inc., No. 23-10575, 2024 U.S. App. Lexis 17462 (5th Cir. July 16, 2024).

This case arose when MIECO, an energy trading firm specializing in buying and reselling natural gas, incurred an additional $9 million in costs for natural gas during Winter Storm Uri. This increase was a result of gas shortages caused by rapid freeze-offs of wells and pipelines.

Almost a decade before Winter Storm Uri, MIECO contracted with Pioneer Natural Resources, a natural gas producer and retailer. The Parties agreed that Pioneer would sell natural gas to MIECO (the “Firm Contract”). To memorialize the Firm Contract, the Parties used the base contract published by the North American Energy Standards Board (“NAESB”), a contract widely adopted in the oil and gas industry. The Firm Contract allows either party to interrupt its performance without liability “only to the extent that such performance is prevented for reasons of Force Majeure.” The Firm Contract also defined Force Majeure to include “weather related events affecting an entire geographic region, such as low temperatures which cause freezing or failure of wells or lines of pipe.” The Firm Contract also required both Parties to “make reasonable efforts to avoid the adverse impacts of a Force Majeure and to resolve the event or occurrence once it has occurred in order to resume performance.”

When MIECO sought $9 million in cover damages from Pioneer for the gas it had to purchase on the spot market due to Pioneer’s failure to perform, Pioneer claimed that Winter Storm Uri qualified as a Force Majeure event. The District Court ruled in favor of Pioneer, finding that Pioneer was not required to purchase available spot market gas to satisfy its contractual obligations, and that Pioneer properly invoked the Force Majeure clause. Subsequently, MIECO appealed.

On July 16, 2024, the Fifth Circuit concluded that the Firm Contract did not require Pioneer to prove that performance was impossible, nor did it require Pioneer to purchase available gas on the spot market. The Court did, however, reverse back to the trial court on one issue: whether Pioneer exercised due diligence to overcome Uri’s impact on its ability to deliver gas to MIECO.

This case is important because it clarifies that the Force Majeure clause in this specific version of the NAESB Firm Contract—which is widely adopted—does not require parties to prove that performance is impossible. Rather, this specific NAESB Firm Contract requires parties to exercise due diligence and make reasonable efforts to overcome the impacts of a force majeure event. The Fifth Circuit’s decision should remind those in the energy industry that a Force Majeure clause is an important provision in their contractual arrangements and while powerful, the Force Majeure clause may require due diligence and reasonable efforts to perform even in the presence of a major weather event like Winter Storm Uri or Hurricane Beryl. In the aftermath of Hurricane Beryl, businesses and utility companies should review the force majeure clauses in relevant contracts, ensure that they account for climate-related risks, and then make and document efforts to mitigate force majeure events.

“In the Courts” is prepared by Lora Naismith in the Firm’s Water Practice Group and Riley Zoch from the Firm’s Litigation 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 James Parker at 512.322.5878 or jparker@lglawfirm.com.