In the Courts

Water Cases

Prototype Mach. Co. v. Boulware, Kinney Cty. Groundwater Conservation Dist., et al., No. 13-19-00491-CV, 2021 WL 3196235 (Tex. App.—Corpus Christi July 29, 2021, no pet. h.).

This case focused on a groundwater dispute which arose when several entities (the “Applicants”) filed permit applications with the Kinney County Groundwater Conservation District (the “District”) seeking authorization for the withdrawal of groundwater. In August 2004, the District held a preliminary hearing on the applications at which protestants could contest the permit applications. Under the District’s rules, a protestant needed to submit a registration form at the preliminary August 2004 hearing in order to protest the applications at a later date.

Ultimately, the District approved the Applicants’ requests, but authorized the use of significantly less groundwater than the Applicants sought. The Applicants were dissatisfied with the decision and filed a lawsuit against the District to contest the decision. The District and the Applicants eventually negotiated a settlement agreement and were preparing to dismiss the lawsuit when suddenly, over two years after the Applicants first filed suit against the District, Prototype Machine Company (“Prototype”) sought to intervene in the lawsuit. Prototype attempted to challenge the District’s 2005 decision to grant permits to the Applicants. The District and the Applicants filed a joint motion to sever all of Prototype’s causes of action into a separate suit, which the trial court granted.

Prototype’s subsequent attempt to prosecute its claims in the new, separate lawsuit failed—the trial court determined “that Prototype’s claims were untimely, that Prototype’s intervention would unduly complicate the case, and that Prototype lacked standing to bring its claims.” Prototype appealed this finding to the Thirteenth Court of Appeals. The court upheld the trial court’s determination, stating that “[t]o the extent that Prototype attempts to challenge the 2005 District-issued permits… we conclude that Prototype did not exhaust its administrative remedies as required by the water code to challenge the 2005 [D]istrict-issued permits.” The court reasoned that participation in the August 2004 preliminary hearing on the permit applications was a prerequisite to judicially challenging the 2005 District-issued permits. In other words, because Prototype did not administratively challenge the applications as allowed under the District’s rules, Prototype failed to exhaust its administrative remedies and lost its right to subsequently challenge the applications or related permits.

Neches and Trinity Valleys Groundwater Conservation Dist. v. Mountain Pure TX, LLC, No. 12-19-00172-CV, 2019 WL 4462677 (Tex. App.—Tyler Sept. 18, 2019, pet. denied) (petition for review denied by the Texas Supreme Court on September 3, 2021).

The dispute in this case arose from the efforts of the Neches and Trinity Valleys GCD (the “District”) to enforce its permitting rules against Mountain Pure TX, LLC (“Mountain Pure”). The District’s rules stated that generally all persons owning a groundwater well must obtain permits to drill and operate the well. As a governmental entity, the District was protected by governmental immunity, meaning that the District could not be sued in Texas courts except for in specific circumstances allowed by the State of Texas. Mountain Pure owned a spring water bottling plant within the District’s jurisdiction. Mountain Pure had never applied for a permit from the District because Mountain Pure contended that it did not own or operate a water well. Mountain Pure instead argued that the water it bottled and sold came from an “underground formation from which water flow[ed] naturally to the surface of the earth,” and that the District did not have authority to regulate spring water.

When the District demanded that Mountain Pure apply for groundwater operating permits and Mountain Pure refused, the District sued Mountain Pure and an affiliated entity, Ice River. Ice River immediately ceased its business with Mountain Pure. Mountain Pure proceeded to file two counterclaims against the District: (1) a claim for tortious interference with the Ice River contract; and (2) a takings claim alleging that the District’s regulation of Mountain Pure’s property (i.e. groundwater) entitled Mountain Pure to compensation. The trial court determined that the District’s governmental immunity protected the District against the claim for tortious interference, but allowed Mountain Pure to continue pursuing its takings claim against the District, reasoning that the Texas Constitution allows for takings claims against governmental entities. The District immediately appealed that decision to the Tyler Court of Appeals.

The Tyler Court of Appeals’ analysis largely focused on whether Mountain Pure properly asserted a takings claim. The court explained that a regulatory taking may occur in one of two ways. First, when a governmental agency imposes restrictions denying landowners all economically viable use of their property, rendering the property valueless. Second, when a governmental agency imposes restrictions that unreasonably interfere with landowners’ rights to use and enjoy the property. The Court ultimately held that no regulatory taking had occurred because: (1) even after the District’s threatened enforcement of its rules, the bottling plant retained a value of $4,090,000, meaning that Mountain Pure retained economically viable uses for the property; (2) Mountain Pure had only alleged economic impacts stemming from future lost profits, which are not generally considered in the takings analysis; and (3) Mountain Pure’s investment-backed expectation was “the bottling of spring water” and there was “no showing that the enforcement of the [rules] and accompanying… fee [would] affect production.” Because Mountain Pure failed to allege facts showing a regulatory taking under Texas law, the court found that the takings claim was not properly asserted and the District retained its governmental immunity insulating it from suit. Accordingly, the court reversed the trial court’s decision that had allowed Mountain Pure to maintain its takings claim, and the court dismissed Mountain Pure’s takings claim against the District.

In February of 2020, Mountain Pure filed a petition for review with the Texas Supreme Court. After receiving briefing on the petition, the Texas Supreme Court denied the petition for review on September 3, 2021.

Litigation Cases

Austin Court of Appeals Decides Contract Dispute by Analyzing the Entire Contract as Opposed to Analyzing a Clause in Isolation.

In Groba v. Loree & Lipscomb, the Austin Court of Appeals held a contingent-fee provision was unambiguous when read together with another provision limiting its scope. No. 03-20-00137-CV (Tex. App.—Austin July 22, 2021, no pet. h.) (mem. Op.). Groba hired the Loree & Lipscomb law firm (“Law Firm”) to represent him in litigation against Groba’s insurance company. Groba entered into a contingent-fee contract with Law Firm. Law Firm informed Groba of a settlement offer from Groba’s insurance company, advising Groba to accept. Groba refused, instructing Law Firm to continue the litigation. Groba’s counsel informed Groba that, due to Groba’s unreasonable refusal of the settlement offer, Law Firm would be withdrawing from representation. The withdrawal was authorized by the parties’ contingent-fee contract. Law firm then asserted its interest in fees and expenses. Groba challenged the interest. The trial court held in favor of Law Firm. Groba appealed.

The issue before the Austin Court of Appeals was whether the contractual provision obligating Groba to reimburse Law Firm’s costs and expenses was ambiguous. In analyzing the issue, the Austin Court of Appeals found the pertinent provisions of the Contract came from paragraph 2 and paragraph 6. Paragraph 2 provided, in relevant parts:
“If Attorney chooses not to pursue or to discontinue any litigation, unless otherwise herein provided, Client shall not be obligated to pay attorney’s fees or reimburse Attorney’s expenses advanced on behalf of client.”

Paragraph 6 provided, in relevant parts:

“Nevertheless, if in Attorney’s opinion a fair and reasonable settlement offer has been made and Client rejects the advice of Attorney to settle, Client, at Attorney’s option, shall be obligated to immediately reimburse Attorney for costs and expenses incurred to that time. Attorney may also withdraw from the case and retain a lien on said claims and causes of action for the attorney’s fees and expenses referred to above.”

Groba argued there was an issue of material fact concerning the meaning of paragraph 2, because the paragraph “would cause an ordinary person to believe that if the representation ended by attorney’s choice then there would not be any funds required to be paid.” The court disagreed, concluding that the only reasonable interpretation is that Paragraph 6 set forth an exception to paragraph 2. Thus, the Contract provision was interpreted in the context of the entire contract. The Contract was held to be unambiguous as a matter of law.

Austin Court of Appeals Denies Motion to Compel Arbitration.

In St. David’s Healthcare Partnership, LP et al. v. Fuller, the Austin Court of Appeals affirmed the denial of a motion to compel arbitration, because the binding arbitration policy was not incorporated by reference into the employment agreement. No. 03-19-00820-CV (Tex. App.—Austin June 3, 2021, no pet. h.). Appellant Fuller sued St. David’s Healthcare Partnership (the “Hospital”) for wrongful termination. In response, the Hospital filed a motion to compel arbitration under the Federal Arbitration Act (“FAA”). The trial court denied the motion. The Hospital filed an interlocutory appeal.

Upon being hired, Fuller signed an employment agreement with the Hospital which waived her right to a jury trial in the event of litigation arising out of the Agreement. The Employment Agreement contained an amendment provision, which stated:

“Amendment. No amendment or other modification of this Agreement will be effective unless and until it is embodied and until it is embodied in a written document signed by [the Hospital] and [Fuller].”

Later, in employment orientation, Fuller signed a separate agreement, agreeing to the Hospital’s “Mandatory Binding Arbitration Policy.” This separate agreement was not signed by the Hospital.

On appeal, the Hospital asserted that Fuller received notice of the Mandatory Binding Arbitration Policy and accepted its terms; Fuller’s claims fell within the scope of the policy and therefore the Court should compel arbitration. Fuller contended the Hospital’s Mandatory Binding Arbitration Policy was an invalid amendment, because it was not signed by the Hospital.

The Austin Court of Appeals concluded that the clear and unambiguous language of the Employment Agreement established “that the parties intended to require any amendment or modification to the term of Fuller’s employment to be in writing and signed by both parties.” Thus, the Court held the arbitration agreement was invalid.

Air and Waste Cases

TJFA, L.P. v. Tex. Comm’n on Envtl. Quality, No. 03-19-00815-CV, 2021 WL 3118423 (Tex. App.—Austin July 23, 2021, no pet. h.).

On July 23, 2021, the Third District Court of Appeals in Austin rendered a decision in TJFA, L.P. v. TCEQ and 130 Environmental Park, LLC concerning whether or not TCEQ erred in issuing a municipal solid waste (“MSW”) permit to 130 Environmental Park, LLC (“130 EP”) to construct and operate a new Type I MSW landfill in Caldwell County. The appellate court found in favor of TCEQ and 130 EP after examining a range of issues raised by the plaintiff-appellant, TJFA, L.P.

First, the Court considered whether filing a Parts I/II MSW permit application effectively grandfathers an application from a later enacted county siting ordinance. The Court ruled that if a Parts I/II permit application is declared administratively complete before a siting ordinance is enacted, it is sufficient to grandfather the application from the later enacted county siting ordinance.

Second, the Court upheld the TCEQ’s long-standing practice of allowing access roads and screening berms to be outside of the permit boundary. The Court’s reasoning is notable because it found that the TCEQ has authority to make the applicant comply with the permit conditions even outside of the permit boundary.

Finally, the Court also examined issues pertaining to alleged spoliation of evidence, drainage, and land-use, finding in favor of TCEQ and 130 EP on each of those issues.

“In the Courts” is prepared by James Muela in the Firm’s Water Practice Group; Wyatt Conoly in the Firm’s Litigation Practice Group; and Sam Ballard 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 James at 512.322.5866 or jmuela@lglawfirm.com, Wyatt at 512.322.5805 or wconoly@lglawfirm.com, or Sam at 512.322.5825 or sballard@lglawfirm.com.