Recent Texas Cases of Interest to Cities

Note:  Included cases are from June 11, 2015 through July 10, 2015.

Public Information Act:  Greater Houston P’ship v. Paxton, No. 13-0745, 2015 WL 3978138 (Tex. June 26, 2015).  In this case, the Supreme Court of Texas reviewed when a private company becomes a governmental body for purposes of the Public Information Act (PIA).  Section 552.003 of the Government Code extends the PIA to any entity, or part of an entity, that is “supported in whole or in part by public funds.”  The Greater Houston Partnership (GHP) is a nonprofit corporation that provides services to the city under a contract.  The court held that GHP is not a governmental entity because it is not funded wholly or in part by public funds.   Some of the factors the court used to make its decision included: (1) GHP has over 2,000 members and only four are cities, a few clients among many; (2) GHP could run without public funds; and (3) other courts exclude companies who receive public funds pursuant to “quid pro quo agreements.” The court determined GHP is not a governmental body under the PIA under this test.  However, if an entity needs public funds to exist, then it would be a governmental entity.

Regulation:  Patel v. Texas Dep’t of Licensing & Regulation, No. 12-0657, 2015 WL 3982687 (Tex. June 26, 2015) In this case, the Supreme Court of Texas held that the state regulation for licensing of eyebrow threaders is not rationally related to health and safety.  The importance of this case to local governments is the analysis of the extent to which any governmental regulation must be tied to its governmental purpose.

Eyebrow threading involves the removal of eyebrow hair and shaping of eyebrows with cotton thread. In 2011, commercial threading became regulated under Texas Occupations Code Section 1602.002 as a cosmetology practice. An operator must complete between 750 and 1,500 hours of instruction and pass a test (depending on the type of license) to be licensed to thread. The plaintiffs (Threaders) sought a declaration that the state regulations are unconstitutional because the regulations place “senseless burdens on eyebrow threaders and threading businesses without any actual benefit to public health and safety.” For example, out of the required hours, substantial time must be spent on topics such as makeup, management, cleansing, and aromatherapy. The tests required do not normally have questions regarding threading.  The state filed a plea to the jurisdiction and traditional summary judgment. The trial court denied the plea, but granted the state’s motion for summary judgment and denied the Threader’s motion for summary judgment.

The court first determined that the declaratory judgment claims triggered jurisdiction.  It carefully carved out an explanation that the case is not one about ultra vires actions, because such claims are to prevent officials from acting unlawfully. Instead, it is a claim directly challenging the constitutionality of a statute/regulation. The state is therefore a proper party, not simply the officials. The Threaders had standing to make the challenge, although the court only focused on the two who were issued notices of violations. The cases are ripe because administrative enforcement, although not yet underway, is more than simply speculative. Additionally, because the relief available on administrative appeal is more limited than the relief sought in the present suit, the doctrine of redundant remedies (preventing UDJA actions on the same subjects as other avenues of relief) does not apply.  Further, because the Threaders could not challenge the constitutionality of the rule under the administrative process, the doctrine likewise does not apply. The court then held that Article I, section 19 of the Texas Constitution (due course of law provision) affords more protection than the federal constitution, so the federal “rational basis” standard is not applicable.

After a detailed analysis of the proper standard to review a due course of law challenge, the court ultimately held that to overcome the presumption a statute is constitutional “the proponent of an as-applied challenge to an economic regulation statute under § 19’s substantive due course of law requirement must demonstrate that either (1) the statute’s purpose could not arguably be rationally related to a legitimate governmental interest; or (2) when considered as a whole, the statute’s actual, real-world effect as applied to the challenging party could not arguably be rationally related to, or is so burdensome as to be oppressive in light of, the governmental interest.” Under this standard, the court did hold that the general regulation of threading is proper as some health concerns are associated with improper threading techniques. However the court held 42% of the training required had nothing to do with public health and safety relating to threading. The percentage is not as important if the hours are low in number, however, the cost and burden increase the larger the number of hours. “In the case of the Threaders, however, the large number of hours not arguably related to the actual practice of threading, the associated costs of those hours in out-of-pocket expenses, and the delayed employment opportunities while taking the hours makes the number highly relevant to whether the licensing requirements as a whole reach the level of being so burdensome that they are oppressive.”

The dissent by Chief Justice Hecht took great issue with the new “oppressive” standard adopted by the majority. He would have held the federal “rational basis” test is all that is needed and if the regulations are rationally related to the objective, then the regulation is proper. The majority’s opinion was simply legislating from the bench and created a very impractical standard. Justice Guzman also dissented and emphasizes the impracticality of the new standard as well as the assertion the majority is legislating.*

Public Information Act:  Boeing Co. v. Paxton, No. 12-1007, 2015 WL 3854264 (Tex. June 19, 2015).  Boeing sued the Texas Attorney General’s (AG) office after an AG letter ruling stated that a governmental entity had to release Boeing’s information because the information did not meet the requirements of Texas Government Code Section 552.104 of the Public Information Act (PIA).  Section 552.104 allows information to be withheld under the PIA if the information, “if released, would give advantage to a competitor or bidder.”  The statute and the PIA allow either a city or a company to send information to the AG’s office if the city or entity wishes to keep this type of information private.  Boeing argued to the AG that the information in question should be protected under Section 552.104.  The AG argued that the section only protects a governmental entity’s rights, not the rights of any third party. Boeing argued that it does have the right to benefit from Section 552.104 because it has the right to object to the release of the information under the statute.  The Supreme Court of Texas agreed, and held that both the government and private parties can invoke Section 552.104 and protect their privacy.  The Court also held that Boeing had sufficiently shown that the information in question met the requirements of Section 552.104 and held that the information could be withheld by the governmental entity.

Governmental Immunity-Tort: Suarez v. City of Texas City, No. 13-0947, 2015 WL 3802865 (Tex. June 19, 2015). This case concerns a wrongful death suit brought under the Texas Tort Claims Act (TTCA) by the mother and widow of three family members who drowned in water off a man-made beach in Texas City. In October 2010, Edith Suarez, with her husband, twin daughters, and other family and friends, went to a picnic area located upon the Texas City Dike, a man-made dike over 100 years old and used as a public recreational area since 1963. The children drowned after being caught in an undertow in knee-deep water; their father drowned while trying to save them. Hurricane Ike had caused major damage to the dike in 2008, and the city closed the dike for repairs until September 2010. Mrs. Suarez claimed that the city was negligent in not posting adequate signage to warn recreational users of dangerous swimming conditions when reopening the area to the public. The trial court denied the city’s plea to jurisdiction and motion for summary judgment on grounds of immunity, and the city filed an interlocutory appeal. The court of appeals reversed the decision of the trial court and the complaint was dismissed for lack of subject matter jurisdiction. The court held that the city retained immunity from suit under the recreational use statute, because Suarez failed to bring a valid gross-negligence claim as required by that statute.

In reviewing the case, the Supreme Court acknowledged that the city, prior to Hurricane Ike, had additional signs posted warning of rip currents and undertows, implying that the city had an understanding of the dangers near the dike. However, Suarez was found to have failed to produce evidence of gross negligence by the city required to invoke the waiver of immunity from suit allowed under the TTCA, given the family’s recreational use of the facility. See City of Bellmead v. Torres, 89 S.W.3d 611, 614 (Tex.2002). The court of appeals’ judgment in favor of the city was affirmed.

Elections: Dacus v. Parker, No. 13-0047, 2015 WL 3653295 (Tex. June 12, 2015).  This case questioned whether ballot language was sufficiently misleading to invalidate an election.  Mayor Parker and the City of Houston (city) argued that the language was sufficient to notify voters and that the city did not need to go into additional detail because it is assumed that voters are educated about ballot measures before they come to vote.  The Supreme Court of Texas held that the standard for a ballot proposition was whether it submits the question with “definiteness and certainty” and describes the key features of an amendment.  The court held that the ballot language in this case was insufficient because it left out the key feature of future drainage charges.  The court mentioned TML and TCAA’s amicus brief, but held that the arguments were unpersuasive and that it is the Election Code and common law that governs this dispute, not charter language.

Takings:  Harris Cnty. Flood Control Dist. v. Kerr, No. 13-0303, 2015 WL 3641517 (Tex. June 12, 2015).  The Kerrs sued the county and the flood control district (the entities) when their property flooded due to overdevelopment and arguably faulty flood planning and implementation.  The Kerrs brought a takings claim, arguing that the entities’ approval of new development without adding additional flood control measures caused their home to flood.  The entities argued that there is no evidence that their intent in flood planning or development approval was to damage the Kerr’s property for a public purpose.  Both the trial court and the court of appeals denied the entities plea to the jurisdiction. To move forward with their case, the Kerrs were required to show that the governmental entities intended to take their property, that the entities caused the taking, and that the taking was for public use.  The Supreme Court of Texas held that the Kerrs had raised a fact issue as to these three elements. The court noted that the Kerrs did not argue that the entities had a duty to stop all flooding, but only that once the entities knew that flooding was substantially certain to occur, that they should not have approved the new development as they did, and that they adopted incorrect flood plans. The court held that the approval of new development and the adoption of flood control measures was for the public.

The dissent by Justice Willett points out that, after this case, governmental entities will be better off not doing anything about planning or preventing flooding because they have liability for damages if they do anything at all.

Takings:  Church v. City of Alvin, No. 01-13-00865-CV, 2015 WL 3916708 (Tex. App.—Houston [1st Dist.] June 25, 2015)(mem. op.).  Church filed a takings claim against the city after the city agreed to allow the Texas Department of Transportation (TxDOT) to rebuild a city bridge which impaired access to Church’s property, destroyed some trees, and changed the drainage to his property. Church argued that the city is also liable under the Tort Claims Act because motor-driven equipment was used to build the bridge.  First, the court of appeals dismissed Church’s takings claim because Church’s access was not materially or substantially impaired. The court determined that his driveway was not completely or permanently obstructed and he still had reasonable access to his driveway.  The court of appeals then reviewed whether the city’s agreement to allow TxDOT to undertake the bridge project led to the drainage issues and destruction of the trees.  The court held that the city’s agreement with TxDOT did not show an intent or certainty that damage would occur to Church’s property, two requirements of a takings claim.  Finally, the court of appeals reviewed Church’s third argument that the city’s immunity was waived under the Tort Claims Act because motor-driven equipment caused the tree destruction and drainage problems.  The court dismissed this argument because no city employee was involved in the project in the use of motor-driven equipment; the city had only agreed to allow TxDOT to undertake the project.  The court of appeals upheld the trial court’s grant of the plea to the jurisdiction.

Water: Navarro Cnty. Wholesale Ratepayers v. Covar, No. 01-14-00102-CV, 2015 WL 3916249 (Tex. App.—Houston [1st Dist.] June 25, 2015)(mem. op.). The City of Corsicana (city) sells water to both residential and wholesale customers, and the city’s rates treat residential and wholesale customers the same. As the amount of water a customer uses increases, the cost per 1,000 gallons of water increases, making wholesalers pay much more for the majority of their water compared to residential customers.  The wholesale customers argued that the city’s rates affected the public interest as defined by the Texas Administrative Code, and brought this argument to the Texas Commission on Environmental Quality (TCEQ) for a hearing.  The case was heard by the State Office of Administrative Hearings (SOAH) and the judge found that the rate did not adversely affect the public interest.  TCEQ and the district court agreed with the judge.  The wholesale ratepayers brought four arguments to the court of appeals: (1) rate discrimination must be considered in a public interested hearing; (2) TCEQ’s agency rules are invalid if TCEQ can interpret the public interest rules as not allowing the consideration of rate discrimination; (3) a wastewater subsidy is not a “cost of service” under the rules; and (4) a utility fund is not a “changed condition” under agency rules.

Texas Water Code Sections 11.036 and 11.041 prohibit discrimination in the prices and terms of water contracts.  Case law and TCEQ rules state that TCEQ can only change a rate if the rate “adversely affect[s] the public interest.” See Texas Water Comm’n v. City of Fort Worth, 875 S.W.2d 332, 335 (Tex. App.—Austin 1994, writ denied). TCEQ’s rules require that the TCEQ determine that the rates affect the public interest before it can review the rates themselves. The court of appeals noted that just because a rate is more than the cost of providing the service does not mean the rate is adversely affecting the public interest.  The court held that the rules governing whether a rate adversely affects the public interest does not take into account any differences between how retail and wholesale ratepayers are treated.  Also, the ratepayers in this case were all paying the same rates.  The court then held that the rules were valid and did take into account discrimination, just not possible discrimination based on a difference between how retail and wholesale ratepayers are treated.  Because the court of appeals held that there was no proof that the city’s rates adversely affected the public interest, the court then declined to review the ratepayers other two issues which were based on a review of the rates themselves (cost of service and wastewater subsidy).  The court of appeals upheld the trial court’s judgment for the city.

Governmental Immunity: City of San Antonio v. Casey Indus., Inc., No. 04-14-00429-CV, 2015 WL 4002221 (Tex. App.―San Antonio July 1, 2015). Casey Industrial (Casey) sued CPS Energy (city) for breach of contract, among other causes of action. The claims stem from a contract the city entered into with Casey and Wheelebrator Air Pollution Control to add pollution control systems to one of the city’s coal-fired power stations. Disputes between the parties led to Casey suing the City San Antonio for breach of contract. After the trial court granted Casey’s motion for summary judgment, the court of appeals reversed and remanded the case to the trial court. On remand, the city filed a motion to dismiss the claim for lack of jurisdiction. The city asserted Casey’s claims are outside the contract and its immunity from suit is not waived for an “extra-contractual” claim. The trial court disagreed and denied the motion. The city then filed this appeal asserting that the trial court erred in denying its motion to dismiss.

The city argued that the claims and additional compensation sought by Casey did not fall within the waiver of governmental immunity provided in Local Government Code Sections 271.152 and 271.153. As a result, Casey’s claims should be dismissed for lack of jurisdiction. The San Antonio Court of Appeals cited the decision of the Texas Supreme Court in Zachry Constr. Corp. v. Port of Houston Auth., 449 S.W.3d 98 (Tex. 2014), in concluding that in order for the trial court to have jurisdiction over a contract claim asserted against a governmental entity, the claimant must establish the existence of a specific type of contract under Section 271.152 of the Local Government Code and a demand for certain kinds of damages that are allowed under Section 271.153.

In analyzing the damages owed to Casey, the court looked at the limits provided in Section 271.153 of the Local Government Code for breach of contract: “(1) the balance due and owed by the local governmental entity under the contract as it may have been amended, including any amount owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays or acceleration; (2) the amount owed for change orders or additional work the contractor is directed to perform by a local governmental entity in connection with the contract.” The court noted that the parties to the contract acknowledged that the contract itself provides a mechanism by which Casey could seek additional compensation, so compensation owed to Casey for delays caused by a third party does not fall within Subsection 271.153(1).

The court noted that “change order” as it is used in Local Government Code Subsection 271.153(2) should be narrowly construed to mean only a change order as that phrase is defined in the contract. The court looked at the contract in question and concluded that Casey did not raise a fact issue on whether a change order was submitted, in accordance with the contract. Lastly, the court concluded that Casey was not directed to perform any additional work by the City of San Antonio. Therefore, the court reversed the trial court’s order and rendered a dismissal of Casey’s claims against the city.     

Governmental Immunity:  Canadian River Mun. Water Auth. v. Hayhook, Ltd., No. 07-15-00064-CV, 2015 WL 3979941 (Tex. App.—Amarillo June 30, 2015).  This is an appeal from the denial of a plea to the jurisdiction filed by Canadian River Municipal Water Authority (CRMWA). Hayhook, Ltd. (Hayhook) sued CRMWA to enforce a settlement agreement entered into between the parties. CRMWA claimed that its sovereign immunity deprived the trial court of jurisdiction to entertain the suit.

Relying in part on the reasoning in a previous Texas Supreme Court case, Texas A & M Univ.—Kingsville v. Lawson, 87 S.W.3d 518 (Tex. 2002), the appellate court concluded that immunity does not bar the prosecution of a claim founded upon the breach of a settlement agreement when the agreement encompassed resolution of a claim against which the State had no immunity. Thus, the trial court’s order was affirmed.

Governmental Immunity-Annexation Agreement:  JNC Land Co., Inc. v. City of El Paso, No. 08–13–00165–CV, 2015 WL 3952680 (Tex. App.—El Paso June 26, 2015).  This is an appeal from an order granting a plea to the jurisdiction filed by JNC Land Company, Inc. (JNC).  JNC and the City of El Paso (city) entered into an annexation agreement.  JNC subsequently constructed two streets and sought reimbursement from the city for excess-width paving of the streets.  The city refused to pay.  JNC filed suit against the city for breach of contract.  The city filed a plea to the jurisdiction asserting its immunity had not been waived.  The trial court granted the plea and dismissed the suit.  JNC appealed.

JNC argued it should be reimbursed under Section 19.28.040 (which deals with excess-width paving) of the Municipal Code.  The city argued this was an attempt to import an external term into the agreement. Because the agreement required the property be developed in accordance with Title 19 of the Municipal Code, including Section 19.28.040, the court concluded that Section 19.28.040 was part of (not external to) the agreement.

Next, the court analyzed whether an annexation agreement is a contract for goods or services to the city under Local Government Code Section 271.152.  The city argues it is not because any benefit to the city is indirect and attenuated.  The court disagreed reasoning that once JNC proceeded with the development, the city had the right under the agreement to compel JNC to develop the property in accordance with certain regulations.  For instance, the agreement and ordinances that make up the agreement required that JNC improve certain rights of way and dedicate them to the city.

The city also argued that any breach of claim was not ripe because JNC failed to present its claim to the city council as required by the city’s charter.  Instead, JNC had sent a demand letter addressed to the city manager.  The court rejected this argument; the face of the letter reflected that it was received in the mayor’s office.

After disposing of some final arguments as to why there was no further basis upon which the trial court’s order could be properly sustained, the appellate court reversed and remanded the case back to the trial court.

Personal Injury: City of Brownsville v. Ahumada, No. 13-14-00265-CV, 2015 WL 4116731 (Tex. App.—Corpus Christi July 2, 2015) (mem. op.). Julio Ahumada brought a personal injury suit against the City of Brownsville for damages arising out of a traffic accident involving a city bus. The trial court granted judgment on a jury verdict awarding Ahumada $218,982.44 in damages, and the city appealed.

On appeal, the city contended that the trial court abused its discretion when it prohibited the city’s expert witness from opining as to the final resting place of Ahumada’s vehicle after the accident. The court pointed out that the rules regarding expert witness designations required the city to fully disclose the subject matter of their expert witness’s testimony. The city’s expert witness stated in his report and during his deposition that he would not be performing an accident reconstruction. As a result, the city’s expert could not be used at trial to rebut Ahumada’s testimony regarding post-accident vehicle positioning, and the trial court’s ruling limiting the expert witness testimony to the opinions disclosed in his report was not an abuse of discretion.

Additionally, the city argued on appeal that the trial court placed damage issues with no evidentiary support before the jury. More specifically, the city contended that there was no evidence of the following damages: (1) future pain and mental anguish; (2) physical impairment in the past and future; (3) disfigurement in the past and future; and (4) medical expenses in the future. The trial court analyzed the record for evidence on each of the types of damages that were awarded, and in all instances found that there was more than a scintilla of evidence to warrant a submission of the damage question in the jury charge. The court affirmed the judgment of the trial court.

Contractual Immunity: Partners Dewatering Int’l, L.C. v. City of Rio Hondo, No. 13-13-00340-CV, 2015 WL 3637853 (Tex. App.—Corpus Christi June 11, 2015) (mem. op.). This is an interlocutory appeal from the granting of a plea to the jurisdiction in a contract case which the Thirteenth Court of Appeals reversed and remanded.

Partners Dewatering International (PDI) and the city entered into a lease agreement for a liquid waste de-watering facility which was to be located at the city’s waste water treatment plant. In 2013, the city voted to terminate the agreement. PDI sued the city. PDI asserted the contract was for goods and services and therefore governmental immunity was waived under Texas Local Government Code Section 271.152.  The city filed a plea to the jurisdiction asserting the contract was an operating lease agreement and no special services were part of the contract. The trial court granted the plea and PDI appealed.

The court first analyzed what a “service” means under Section 271.152.  PDI asserted it provided services involving the processing and disposal of sludge, the sampling, monitoring, and reporting of effluent, and the controlling of odor. The court first held the “activated sewer sludge” was not a service as it benefited PDI and only indirectly benefited the city. The same went for the effluent sampling and odor control. Further, the providing of improvements, including road and building modifications, were for the benefit of PDI in operating its business, not the city. However, PDI was also to collect, haul, and dispose of all sludge that was generated by the city’s waste facility. This was something the city would have had to do if PDI was not located on-site and contracted to perform.  It benefited the city directly, however, the city was not required to pay PDI for the acts.  PDI was solely responsible for the costs. Analyzing the lease agreement, the court determined it was possible (based on the placement of where the paragraph was in the agreement) the monthly rent could have included a partial discount to offset for this service. As a result, it’s a service for which immunity is waived.*

Delinquent Property Taxes: Heritage Operating, L.P. v. Barber Hill Indep. Sch. Dist., No. 14-14-00187-CV, 2015 WL 4051971 (Tex. App.—Houston [14th Dist] July 2, 2015) (mem. op.). Heritage owed a storage facility in the City of Mont Belvieu. Heritage paid property taxes on the property for the 2003-2007 tax years, with the exception of 2004, when Heritage claimed it did not receive notice of appraisal. The city, county, and school district (“taxing units”) sued Heritage for the over $800,000 in delinquent property taxes, penalties, and interest for the 2004 tax year. Heritage filed a counterclaim seeking a declaration that the 2004 tax was void due to the taxing units’ failure to comply with Tax Code provisions. The trial court ultimately granted the taxing units’ motion for summary judgment, and Heritage appealed.

On appeal, Heritage argued that the trial court erred by granting the taxing units’ motion for summary judgment because Heritage did not receive notice of appraised value from the chief appraiser as required by Tax Code Section 25.19. The court disagreed with Heritage, finding that Heritage did receive the tax bill in 2007, and was required to exhaust its administrative remedies in order to raise this issue to defeat a summary judgment. Tax Code Section 42.09 establishes a detailed set of exclusive procedures which property owners must exhaust before raising grounds of protest in defense of the suit to collect delinquent taxes. As a result, the taxing units conclusively established that they were entitled to summary judgment. The court overruled Heritage’s sole issue and affirmed the judgment of the trial court.

*Case summaries taken largely from the work of the Law Offices of Ryan Henry, PLLC, and reprinted with permission from Ryan Henry.  To sign up for the firm’s blog, go to