Recent Texas Cases of Interest to Cities

Note: Included cases are from February 11 through March 10, 2019.

Pension Plan: Eddington v. Dallas Police & Fire Pension Sys., No. 17-0058, 2019 WL 1090799 (Tex. Mar. 8, 2019).  This is a statutory construction case where the Texas Supreme Court held the City of Dallas’s amendment to its pension plan did not violate the Texas Constitution.

Article XVI, Section 66 of the Texas Constitution prohibits the reduction of benefits in certain local public retirement plans. The Dallas Police and Fire Pension System (System) amended its pension plan to reduce the interest rate paid on Deferred Retirement Option Plan (DROP) accounts. After a member is eligible for retirement, the member can choose to continue working and draw a higher monthly annuity when he or she leaves active service. However, a member’s annuity is fixed at retirement age and does not increase with continued service. In effect, members working past retirement eligibility can choose between a higher annuity on leaving active service, or a lower annuity plus a forced savings account. The petitioners sued asserting the amendments to the changed interest rate was unconstitutional. The trial court and appellate court denied petitioner’s relief.

After analyzing the text of Section 66 and the uncontested facts asserted, the Texas Supreme Court held lowering the interest rate that as-yet unearned DROP payments will bear does not affect a benefit accrued or granted to employees. Interest already credited to DROP accounts is not impacted. The reduction in DROP account interest is prospective only. Section 66(d) protects only “accrued” benefits. Accrued benefits have been earned by service, not by future service.

Finally, the Court held the trial court did not err in excluding the legislative history evidence submitted and the fiscal notes of the Legislative Budget Board.  The Court reasoned that while the judiciary can consider such information, those are construction aides. Courts should rely heavily on the literal text, and the text of Section 66 is plain as it affects the parties, so the trial court did not err.*

Attorney-Client Privilege: In re City of Dickinson, No. 17-0020, 2019 WL 638555 (Tex. Feb. 15, 2019). This is a mandamus action of primary interest to litigators where the Texas Supreme Court held the attorney–client privilege protects expert testimony when the client is also the expert.

The City of Dickinson purchased a commercial windstorm policy from the Texas Windstorm Insurance Association (TWIA). In the underlying litigation, the city alleges that TWIA has not paid all it owes under the policy and sued. In the motion for summary judgment TWIA included the affidavit of its corporate representative and senior claims examiner, Paul Strickland. Strickland’s affidavit provided both factual and expert opinion testimony on TWIA’s behalf. Strickland’s affidavit had been revised in a series of emails between Strickland and TWIA’s counsel and the city sought the drafts in discovery. TWIA asserted the communications were privileged while the city asserted, as a testifying expert, the communications were not privileged. The trial court ordered TWIA to produce the communications. The court of appeals conditionally granted a writ of mandamus. The Texas Supreme Court heard the mandamus filed by the city.

TWIA responds that the expert disclosure rules do not override the attorney–client privilege and do not require a party to choose between defending itself and maintaining its privileges. It asserted the attorney–client privilege is substantively distinct from the work-product doctrine. There was no dispute the communications at issue were encompassed within the attorney–client privilege. The Court declined to create any new privileges in the opinion and confined its analysis to the rules of discovery already in place. Because the discovery rules are part of a cohesive whole, the Court considered them in context rather than as isolated provisions. While Texas Rule of Civil Procedure 192.3 states a party may discover expert information, it does not expressly permit discovery when the information is protected by the attorney–client privilege. In fact, Rule 192.3(a) expressly contains the phrase “absent some specific provision otherwise” which the Court interpreted to include the attorney–client privilege. Further, Rule 194.2 permits a party to seek a disclosure on expert information, but such disclosure is permissive, not mandatory, and is subject to privileged communications. Additionally, the official comments to Rule 194 explain that a responding party may assert any privilege to a Rule 194.2 request except work-product. The city’s supporting cases were largely based in the work-product privilege, not the attorney–client privilege. As a result, they are inapplicable. The Court reemphasized some of its more recent opinions holding the attorney–client privilege is “quintessentially imperative” to our legal system. A lawyer’s candid advice and counseling is no less important when a client also testifies as an expert. As a result, it upheld the mandamus and allowed TWIA to withhold the communications.*

Texas Tort Clams Act: City of Forest Hill v. Cheesbro, No. 02-18-00289-CV, 2019 WL 984170 (Tex. App.—Fort Worth Feb. 28, 2019.) (mem. op.).  This is Texas Tort Claims Act case primarily of interest to litigators.  The Second Court of Appeals determined that only the City of Forest Hill’s plea to the jurisdiction on the pleadings should have been granted, but that Cheesbro should be granted leave to amend.

Cheesbro claimed he was driving his motorcycle on one of the city’s streets when “his tire caught in a defect on the road[,] which caused him to lose control . . . and crash.” Cheesbro suffered injuries and sued the city for damages, asserting a negligence claim. Without specifying what the “defect” was, he pleaded on “information and belief” that before the crash, the city was aware of the defect and the danger it caused and did not warn motorists of the danger. The city filed a plea to the jurisdiction based on the petition, claiming that Cheesbro: (1) had not described facts to establish the existence or nature of a defect, but had only asserted the defect in a conclusory fashion; and (2) had not described facts supporting his claim that the city knew or should have known of the defect.  The trial court denied the city’s plea and the city appealed.

The Second Court of Appeals determined that Cheesbro had not provided enough facts in the petition to waive the city’s sovereign immunity.  The Court noted that Cheesbro had not pled facts to allow the city to determine if it was being sued for a premises defect or a special defect. The difference between the two determines the duty the city would owe Cheesbro between that of an invitee or a licensee.

Although the court found that the petition did not allege sufficient facts to waive the city’s sovereign immunity, it held that the petition did not demonstrate an incurable jurisdictional defect. Therefore, it remanded the case to the trial court to afford Cheesbro an opportunity to amend the pleadings.

Employment Discrimination: Lund v. Texas Health & Human Servs. Comm’n, No. 04-17-00625-CV, 2019 WL 1049347 (Tex. App.—San Antonio Mar. 6, 2019) (mem. op.).  This is an employment discrimination and retaliation case in which the court of appeals affirmed the trial court’s decision in favor of the Texas Health and Human Services Commission (commission).

On April 30, 2015, Deborah Lund, an employee of the commission, filed an internal complaint alleging that she was not selected, after applying, for a certain position that was posted in April 2015, as a result of disability discrimination and retaliation for filing previous complaints against the commission. She identified the protected activity underlying her retaliation claim as an Equal Employment Opportunity Commission (EEOC) charge she had filed in 2010. On June 26, 2015, she filed a similar charge of discrimination and retaliation with the EEOC, complaining of the commission’s failure to hire her for a position that was posted in February 2015, and for the April 2015 position.  In this charge, she identified the protected activity underlying her retaliation claim as EEOC charges she had filed in 2009 and 2010. She further alleged that the commission learned about her disability in March 2013.

Meanwhile, on June 3, 2015, Lund’s mother reported to the commission her belief that Lund had improperly certified her own daughter for Medicaid pregnancy benefits and that Lund was improperly using a Lone Star Card issued to her nephew. An internal investigation revealed that Lund had accessed her daughters’ commission records in 2013 and performed 22 actions while logged into those records, and that she had used her nephew’s card to make purchases at a store. Lund learned of the internal investigation on August 10, 2015, when an investigator called to ask her to meet with him to discuss the allegations. Lund told him that she was on medical leave and could not meet with him at the office, and later informed him that she had an attorney and the investigator could discuss the matter with her attorney. Lund never met with the investigator. On August 14, 2015, Lund submitted a Family Medical Leave Act (FMLA) certification to the commission, which noted that she suffered from severe depression, bipolar depression, and anxiety, and that she was considered a suicide risk until better control of her symptoms were obtained. On September 25, 2015, Lund’s supervisor sent her formal written notice of the internal investigation allegations against her and asked her to provide any information in defense or mitigation of the allegation by September 30, 2015. Lund did not provide a written response, but she stated she spoke with her supervisor by telephone instead, and denied committing any violations. On October 2, 2015, Lund was terminated for violating policy by accessing her daughter’s case without a valid business reason and using her nephew’s card without authorization. Four days later, Lund filed an additional charge with the EEOC alleging disability discrimination and retaliation based on “being forced to disclose her disability and forced to complete paperwork for FMLA” and having her terminated for employee misconduct. The EEOC filed a dismissal and notice of claim stating that it was unable to conclude, after investigation, that there were any statutory violations. Lund filed suit, and the commission filed a plea to the jurisdiction asserting sovereign immunity. The trial court granted the plea and dismissed Lund’s claims. This appeal followed.

The appellate court first looked at whether Lund had stated a claim for conduct that violates the Texas Commission on Human Rights Act such that the claim waives immunity from suit. The court applied the McDonnell Douglas burden-shifting framework to determine whether Lund had raised a fact issue regarding waiver of immunity. The court determined that the commission produced evidence of legitimate nondiscriminatory reasons for not hiring Lund for the February and April positions, and for terminating her employment. The court concluded that Lund failed to sustain her burden of producing evidence beyond her own subjective belief that those stated reasons were false and were a pretext for discrimination or retaliation. As such, the court affirmed the trial court’s order granting the commission’s plea to the jurisdiction and dismissing Lund’s claims for lack of subject matter jurisdiction.

Breach of Contract: Primestar Constr., Inc. v. City of Dallas, No. 05-17-01447-CV, 2019 WL 1033978 (Tex. App.—Dallas Mar. 5, 2019) (mem. op.). This is a breach of contract case in which the court of appeals affirmed the trial court’s order upholding the City of Dallas’s plea to the jurisdiction.

The city awarded Primestar Construction, Inc. (Primestar) a contract to renovate and expand a recreational center. The contract provided that the work would be completed in 200 days for a total sum of approximately $1.3 million. Travelers Casualty and Surety Company of America (Travelers) issued performance and payment bonds for the project after entering into an indemnity agreement with Primestar. Under the indemnity agreement, Primestar agreed to indemnify Traveler’s against losses related to Primestar’s contract with the city and gave Primestar sole discretion to pay or settle claims on the bond. The city subsequently terminated the contract with Primestar for cause and demanded that Travelers complete the project. Traveler’s completed the project and the city paid Travelers the remaining amounts due under the contract with Primestar. Travelers subsequently brought suit against Primestar in federal district court seeking to recover its losses under the bonds and obtain judgement against Primestar.  Primestar then filed a suit against the city alleging that the city wrongfully terminated the contract.

The city filed a plea to the jurisdiction on two grounds: (1) Primestar’s lack of standing; and (2) the city’s immunity from suit and liability. The city also filed a plea of res judicata and collateral estoppel and a motion to dismiss for failure to file a certificate of merit.  Primestar asserted that the city had waived its immunity by entering into the contract under Section 271.152 of the Local Government Code. The trial court granted the plea to the jurisdiction, the pleas of res judicata and collateral estoppel, and the motion to dismiss. Subsequently, the trial court denied Primestar’s motion to modify the judgement and motion for new trial and its request for findings of fact and conclusions of law.

Primestar appealed arguing that: (1) the city’s immunity had been waived by statute; (2) the doctrines of res judicata and collateral estoppel do not apply to preclude its claims against the city; (3) Primestar had standing to pursue its cause of action for breach of contract; (4) Primestar was not required to file a certificate of merit to pursue claims against the city; and (5) the trial court erred by not entering findings of fact and conclusions of law when Primestar properly request the court to do so.

The court concluded that because Primestar assigned its “rights, title and interest” in its contract with the city to Travelers, Primestar lacked standing to sue the city. Additionally, the court found that Primestar did not raise a fact issue that it had standing to assert a claim for which the city’s immunity was waived under Section 271.153 of the Local Government Code. With respect to the claim for findings of fact and conclusions of law, Civil Procedure Rule 296 provides that in any case tried in district court without a jury, a party may request the court to state in writing its findings of fact and conclusions of law.  However, a trial court’s refusal to make findings and conclusions upon proper request is presumed reversible error unless the record affirmatively shows that the requesting party suffered no harm. The court determined that Primestar had not pointed out and the court did not see how the trial court’s failure to make findings and conclusions of law caused Primestar to guess at the basis for the court’s rulings or prevented it from properly presenting its case to the court. As such the trial did not err in not entering findings of fact and conclusions of law. Accordingly, the court affirmed the trial court’s order dismissing the case for want of jurisdiction.

Premises Defect Liability: City of Richardson v. Slaver, No. 05-18-00562-CV, 2019 WL 967333 (Tex. App.—Dallas Feb. 28, 2019) (mem. op.). This is a personal injury case in which the court of appeals reversed the trial court’s order denying the City of Richardson’s plea to the jurisdiction.

Deborah Slaver filed suit against the city alleging that she fell and sustained injuries as a result of stepping on a water meter cover, located on private parking lot, that gave way and flipped open under her. She further alleged that the city, acting through one or more of its employees, agents, and/or servants, removed the cover to read the meter in the hole beneath the cover or for some other reason, and failed to secure the cover, creating an unreasonable risk of harm. Based on these allegations, Slaver asserted claims of negligence and premises liability. The city responded with a plea to the jurisdiction asserting that the basis of the suit did not occur on premises owned by the city, and the city’s immunity under the Texas Tort Claims Act was not waived because the city did not have actual knowledge of any condition that presented an unreasonable risk of harm. After conducting a hearing, the district court denied the city’s plea. This appealed followed.

The court first looked at whether the claim was based on a premises defect or on the condition or use of real property. The court determined that although the water meter was in the ground under the level of the parking lot and the water meter cover was separate from the water meter and could be removed, this was a premises defect case because the allegedly defective property was affixed to the land or other property regardless of whether the water meter cover could be removed.

Next, the court looked at whether the city had actual knowledge of the premises defect. The city submitted evidence to show that, one week before Slaver’s accident, the water meter cover was properly in place and there were no reports to the city of any safety issues concerning the meter. The evidence further showed that the cover was stable when properly in place and was not moved by the city employee who read the meter.  In contrast, Slaver did not submit any evidence to show that the city had actual knowledge that the meter cover was unstable or had been moved. As a result, Slaver failed to raise a fact issue regarding the city’s lack of knowledge of the alleged premises defect that caused her accident. Accordingly, the court held that the city demonstrated its immunity was not waived, and reversed the trial court’s order denying the city’s plea and dismissed Slaver’s claims against the city for lack of jurisdiction.

Texas Tort Claims Act: Running v. City of Athens, No. 12-18-00047-CV, 2019 WL 625972 (Tex. App.—Tyler Feb. 14, 2019) (mem. op.). Peter Running filed negligence, state and federal inverse condemnation, and Texas Water Code violation claims against the City of Athens, alleging that the city caused water to overflow from its water treatment plan, which flooded Running’s home. The trial court denied the city’s plea to the jurisdiction as to Running’s negligence claim and state and federal inverse condemnation claims. The city appealed.

On appeal, the city claimed that Running failed to establish the Texas Tort Claims Act (TTCA) requirement that his claim arose from the use or operation of motor-driven equipment. The court held that while motor-driven pumps do constitute “motor-driven equipment,” in this case the use or operation of the high service pumps merely furnished the condition that allowed the backflow to occur. The defective, non-motorized mechanical valve was the actual cause of the overflow, not the motor-driven high service pumps, which was insufficient to establish a waiver under the TTCA.

The city also claimed that the trial court erred because Running failed to raise a viable inverse condemnation claim under the Texas Constitution. In an inverse condemnation suit under the Texas Constitution, the plaintiff must prove that the government intentionally performed certain acts. Because Running’s claim centers upon the city’s negligence in failing to prevent overflow from its water treatment plant, the requisite intent was not present and the claim cannot be a viable inverse condemnation claim. Further, Running’s federal takings claim was subsumed into his nonviable state inverse condemnation claim.

The court reversed the trial court’s order denying the city’s plea to the jurisdiction and dismissed Running’s suit against the city for lack of subject matter jurisdiction.

Certificate of Convenience and Necessity: City of Palmview v. Agua Special Util. Dist., No. 13-18-00416-CV, 2019 WL 1066423 (Tex. App.—Corpus Christi Mar. 7, 2019) (mem. op.). The City of Palmview filed suit seeking a writ of mandamus against the Agua Special Utility District (Agua SUD) to permit the city to construct wastewater lines and facilities related to prospective businesses in an area of the city covered by Agua SUD’s certificate of convenience and necessity (CCN). Agua SUD filed a counterclaim in which it sought a permanent injunction prohibiting the city from constructing those utilities. The trial court granted Agua SUD’s request for an injunction and stated that the city acted in violation of the Texas Water Code. The city appealed.

On appeal, the court first addressed the city’s argument that the trial court lacked subject matter jurisdiction because Agua SUD failed to plead a waiver of the city’s governmental immunity. A governmental entity does not have immunity from suit for claims against it that are germane to, connected with, and properly defensive to affirmative claims made by the entity, to the extent that the claims against the entity offset the entity’s own claims. Because the city brought suit compelling Agua SUD to construct wastewater lines and facilities, and Agua SUD filed a counterclaim to the city’s initial claim, the trial court did not lack subject matter jurisdiction over the controversy due to the doctrine of governmental immunity.

Next, the court addressed the city’s argument that the trial court lacked subject matter jurisdiction because the Public Utility Commission (PUC) has exclusive jurisdiction over Agua SUD’s counterclaim. Holding that the PUC did not have exclusive jurisdiction, the court referenced Water Code Section 13.042, which provides that the governing body of a city by ordinance may elect to have the PUC exercise exclusive original jurisdiction over the utility rates, operation, and services of utilities within the incorporated limits of the city. The city did not present any evidence that it adopted an ordinance electing for the PUC to have exclusive original jurisdiction. Accordingly, the court held that the PUC did not have exclusive jurisdiction to issue the injunction in dispute.

The city also contended that the trial court abused its discretion when it granted Agua SUD’s request for a temporary injunction, as Agua SUD did not establish that it would suffer a probable, imminent, and irreparable injury. According to the court, there was evidence that because the wastewater lines and facilities would be useless to Agua SUD, and because the city had already begun construction and intended to continue with the construction, that there was evidence that the harm was imminent. Evidence also existed that Agua SUD would suffer irreparable injury from the time and money it would take to  maintain the lift station and main built by the city, because Agua SUD would be responsible for them as holder of the CCN. Finally, because at least some of the harm offered by Agua SUD could not be remedied with the recovery of money, the court held that Agua SUD lacked an adequate remedy at law.

The court concluded that the trial court did not abuse its discretion when it granted Agua SUD’s injunction.

Contractual Immunity: La Joya Indep. Sch. Dist. v. Trevino, No. 13-17-00333-CV, 2019 WL 613272 (Tex. App.—Corpus Christi Feb. 14, 2019) (mem. op.). This is a breach of contract case where the Thirteenth Court of Appeals reversed the denial of the school district’s plea to the jurisdiction and dismissed the case.

Pursuant to a written agreement between Trevino (an insurance agent/consultant) and La Joya Independent School District (LISD), Trevino would provide various services in connection with LISD’s provision of health care benefits to its employees. After LISD terminated the contract, Trevino filed suit alleging that LISD terminated it without good cause and without providing an opportunity to cure. LISD filed a plea to the jurisdiction, which was denied. LISD appealed.

The court first noted that Trevino’s argument the contract was proprietary is inapplicable because the proprietary/governmental dichotomy only applies to cities. Next, for a Texas Local Government Code Section 271.152 waiver of immunity to apply, a party must claim damages within the limitations of the chapter (i.e. balance due and owed). Trevino did not sue for non-payment of work actually performed, but for the benefit of the bargain in terms of lost profits. Trevino sought recovery of the fees and commissions he would have earned for future services rendered had the contract continued through the end of its term. Such damages are not permitted under Section 271.152 and no waiver of immunity therefore exists. Finally, Trevino amended his petition twice prior to the hearing on the plea, so had a reasonable opportunity to amend and correct any jurisdictional defects. No further opportunity is required.*

 

*Indicates 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 www.rshlawfirm.com.

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