Recent Texas Cases of Interest to Cities

Note:  Included cases are from January 9, 2014 through February 10, 2014.

Contractual Immunity: City of Willow Park v. E.S. & C.M., Inc., No. 02-13-00272-CV, 2014 WL 468878 (Tex. App.—Fort Worth Feb. 6, 2014).      An engineering firm sued the City of Willow Park after the city failed to pay the firm under a contract between the two entities. The firm sued the city for breach of contract under Texas Local Government Code Section 271.152, quantum meruit, and attorney’s fees.  The city replied to the suit by asserting immunity based on a provision in the contract that stated that the city did not waive its immunity by entering into the contract.  The firm argued, among other things, that such a provision was against public policy, immunity was still waived under state law, and other provisions in the contract contemplated litigation and thus obviated the city’s immunity provision.  The contractual provision stated:

12.11 Sovereign ImmunityThe parties agree that the City has not waived its sovereign immunity by entering into and performing its obligations under this Agreement.

The court of appeals held that the above provision was sufficiently clear to contract around Section 271.152, but that it could not be enforced  based on the legislative history and public policy of Chapter 271 of the Local Government Code–that local government entities be held accountable for their contracts.  The court also held that the city retained its immunity from attorney’s fees based on a prior version of Chapter 271 that was in place when the contract was executed, and that there was not a valid claim for quantum meruit under Chapter 271.  

Whistleblower:  Forth Worth Indep. Sch. Dist. v. Palazzolo, No. 02-13-00006-CV, 2014 WL 69889 (Tex. App.—Fort Worth Jan. 9, 2014) (mem. op.).    An employee of a high school made allegations of illegal activity occurring at the school to school district officials and employees as well as to other organizations.  After these allegations were made, the employee received a poor evaluation and was transferred to a new school, a position with lower pay.  The employee pursued grievances at different levels against the school and had his transfer changed to a better school, his pay reinstated, and his poor performance evaluation changed to a positive evaluation.  At the last grievance hearing, the employee stated that he was fine with the transfer and the evaluation.  After this occurred, he sued the school district for a whistleblower claim under Government Code Chapter 554 because: (1) he was transferred; (2) he received the negative evaluation; and (3) the school lifted a trespass warning against a parent of another student who had been allegedly threatening the employee’s daughter.  The school argued that the employee failed to comply with Section 554.006 of the Texas Whistleblower Act that requires initiation of grievance procedures before filing a whistleblower claim and that the lift of the trespass warning was not an adverse employment action.  The court held that an employee does not satisfy the initiation requirement of Section 554.006 if he or she purposely tries to circumvent the employer’s efforts to redress the grievance through its procedures.  The court held that the employee in this case had purposely circumvented the school’s grievance process by stating to the grievance board that he was satisfied with the action taken by the school in reaction to his grievance as to the transfer and the evaluation issues, and thereby denied the school the possibility of further addressing his grievance.  The court of appeals also held that the timing of the lifting of the trespass warning excluded it from being an “adverse employment action” under the Whistleblower Act.

Age Discrimination: City of Austin v. Chandler, No. 03-12-00057-CV, 2014 WL 524671 (Tex. App.—Austin Feb. 7, 2014).  In this case, several public safety officers over 40 years of age sued the City of Austin when they lost rank and years of service due to a merger of the Public Safety Emergency Management Department (PSEM) and the Austin Police Department (APD). A jury found for the officers and the city appealed the judgment.  The Third Court of Appeals affirmed.

The City of Austin is a civil-service city with labor agreements with the APD union. APD has strict objective standards for determining an officer’s pay and rank, including exam scores, seniority points, education points and other requirements.  Prior to the merger of departments, PSEM was a non-civil-service agency encompassing the city’s airport, park, and municipal-court law-enforcement operations.  According to the city, PSEM officers had significantly lower pay, but were eligible for different pay stipends. The city and APD union negotiated a consolidation agreement, but PSEM was not included at the time because it was not part of the employees union.  The consolidation agreement provided that no PSEM employee could transfer to APD at a rank higher than “officer” and start with a base salary higher than a 16-year APD officer, and only three years of service counted. To compensate for the loss of most of their pay stipends, the city gave all transferring PSEM employees a lump sum payment to ensure that they at least maintained their final PSEM salary for their first two years at APD.

Each plaintiff filed letter complaints with the Federal Equal Employment Opportunity Commission.  The city argued the letter complaints did not include disparate-impact discrimination, the sole cause of action in the live pleadings. The jury found that the city’s decision not to include years of service was discriminatory and without justification. The Austin Court of Appeals held that regardless of the fact that disparate-impact wording was not in the letter complaint, the plaintiffs exhausted their administrative remedies because the letters referenced a facially neutral policy which had an adverse effect on a specific category of employee. The court went into the prima facie elements of a disparate-impact case and why the evidence at trial was legally and factually sufficient to support the jury verdict.*

Zoning: Sewell v. City of Llano, No. 03-13-00580-CV, 2014 WL 411654 (Tex. App.—Austin Jan. 29, 2014) (mem. op.).  Marc Sewell filed a “verified petition” under Chapter 211 of the Local Government Code stating that a decision of the Llano Board of Adjustment was illegal.  The trial court issued a one sentence order denying the petition, without conducting a hearing on the merits.  Sewell attempted to appeal that order in this case.  The Austin Court of Appeals stated that the trial court’s one-sentence order did not constitute a ruling on the merits, and thus, no final, appealable judgment was rendered.  Therefore, the court dismissed the case for want of jurisdiction.

Contractual Immunity: City of Seguin v. Lower Colorado River Auth., No. 03-13-00165-CV, 2014 WL 258847 (Tex. App.—Austin Jan. 15, 2014) (mem. op.).  This is an interlocutory appeal from the denial of a plea to the jurisdiction involving whether immunity protects the City of Seguin from a breach of contract suit brought by the Lower Colorado River Authority (LCRA). The Third Court of Appeals affirmed the denial, which further expands a split among the circuits regarding whether the legislature abrogated the proprietary/governmental dichotomy in contracts.

LCRA entered into wholesale power agreements (WPAs) to sell electrical power to the cities of Seguin and Georgetown.  These WPAs were set to expire in 2016. However, in 2012, the City of Seguin along with numerous other entities declared LCRA in breach of their WPA and terminated the agreement. LCRA sued seeking a declaration that it did not breach the agreement.  The cities filed separate but near identical pleas to the jurisdiction, asserting governmental immunity to both the declaratory judgment and breach of contract claims.  The trial court denied these pleas. After a severance of the defendants, the City of Seguin appealed. Late last year, a Third Court of Appeals panel affirmed the denial in City of Georgetown v. Lower Colo. River Auth., No. 03–12–00648–CV, 2013 WL 4516110 (Tex. App.—Austin Aug. 23, 2013, pet. filed). The court held that the act of purchasing electricity is a proprietary function for which the city did not retain immunity. The panel affirmed the denial of the City of Seguin’s appeal by simply stating that the reasoning is the same as in the Georgetown case and there was no reason to reiterate it again.

Condemnation: City of San Antonio v. Kopplow Dev., Inc., No. 04-09-00403-CV, 2014 WL 462294 (Tex. App.—San Antonio Feb. 5, 2014).  This is a case on remand to the San Antonio Court of Appeals from the Supreme Court of Texas.  The underlying lawsuit involved a project by the City of San Antonio to reduce downstream flooding.  The city built a permanent, concrete inflow wall across an easement owned by Kopplow.  Kopplow sued the city for a taking, and the city counterclaimed for condemnation of the easement.  At the trial court, the jury awarded damages to Kopplow.  Both parties appealed.  On the original submission to the San Antonio Court of Appeals, the court affirmed part of the damage award and reversed a portion of the damage claim.  The petition for review was granted by the Supreme Court of Texas.  The Supreme Court of Texas held that the fact that flooding has not yet occurred does not render Kopplow’s inverse condemnation claim premature because the claim is based on the thwarting of approved development, not flooding.  The Supreme Court of Texas remanded the case back to the San Antonio Court of Appeals to consider Kopplow’s cross-appeal point that its vested right to develop the property meant the trial court erred in excluding evidence of the value of the entire property.  The San Antonio Court of Appeals concluded that because the jury did not hear evidence related to the cost to fill the entire property, Kopplow was harmed.  Therefore, the court reversed and remanded the case back to the trial court.

Official Immunity: City of Dallas v. Loncar, No. 05-12-00705-CV, 2014 WL 198408 (Tex. App.—Dallas Jan. 16, 2014) (mem. op.).  This is an interlocutory appeal from the denial of a plea to the jurisdiction involving a vehicle collision at an intersection between Loncar and a City of Dallas emergency response vehicle (fire engine). The trial court denied the plea and the Dallas Court of Appeals reversed. The city’s fire engine was responding to an emergency call. Evidence submitted notes the fire engine was proceeding properly through the streets, approached an intersection, evaluated the traffic situation as it approached, believed the traffic was clear to enter, but collided with a vehicle trying to beat the yellow light. Loncar, the driver of the vehicle sued the driver of the fire truck, Ferguson. The trial court denied Ferguson’s claim of official immunity and he appealed. The Dallas Court of Appeals first went through the details of Ferguson’s affidavit. It explained away Loncar’s assertions of contradictory statements and Loncar’s attempt to create a fact issue, and determined the evidence and testimony as stated posed no fact question. It noted that the legislature “has placed a higher burden upon civilian drivers than upon emergency vehicle drivers; this burden is justified because emergency vehicle operators face more exigent circumstances than civilian drivers and because civilian drivers have the advantage of being able to prevent collisions with emergency vehicles due to the emergency vehicles’ use of sirens and lights and due to the conspicuous coloring of emergency vehicles. . . . Emergency responders are entitled to presume other drivers will respect emergency priorities.”  The court determined the uncontroverted evidence established as a matter of law that Ferguson acted in good faith and was entitled to official immunity.*

Contractual Immunity:  Republic Power Partners, L.P. v. City of Lubbock, No. 07-12-00438-CV, 2014 WL 486411 (Tex. App.—Amarillo Feb. 5, 2014).  This is an accelerated appeal.  Republic Power Partners (RPP) appeals the granting of the city’s plea to the jurisdiction.  The Amarillo Court of Appeals joins the San Antonio Court of Appeals in a split between the intermediate appellate courts regarding whether the legislature abrogated the proprietary/governmental dichotomy in contracts.

RPP sued the city and West Texas Municipal Power Agency (WTMPA) for breach of contract regarding a power development agreement.  WTMPA is a municipal power agency formed by the cities of Brownfield, Floydada, Lubbock and Tulia. WTMPA entered into a development agreement with RPP to help find and purchase power. WTMPA‘s board of directors created the High Plains Diversified Energy Corporation (High Plains) as the local government corporation designated to own and operate the electric energy generation and transmission facilities to be built. RPP raised millions and expended considerable sums completing feasibility studies and arranging for financing of the project. The City of Lubbock believed it should receive a greater share of any surplus revenue and objected to the issuance of revenue bonds arguing High Plains was not a valid local government and WTMPA did not have the authority to create it.  The district court agreed and no bonds were issued. RPP then sued WTMPA and the City of Lubbock under a joint enterprise theory for breach of the development agreement. The trial court granted the city’s plea to the jurisdiction, noting the city retained immunity from suit, and RPP appealed.

The city relied on City of San Antonio v. Wheelabrator Air Pollution Control, Inc., 381 S.W.3d 597 (Tex. App.San Antonio 2012, pet. denied), where the court determined the proprietary/governmental distinction does not exist in contract claims after the adoption of Subchapter I of Chapter 271 of the Texas Local Government Code (waiver of immunity for contracts for goods and services). The Amarillo Court of Appeals agreed with the San Antonio Court of Appeals and held the city retained its immunity, regardless of whether it was performing proprietary or governmental functions. Further, the court held that Chapter 271 does not apply to the city in this case since it did not sign the development agreement.  This distinction is important, since the court affirmed the denial WTMPA’s plea in a separate opinion issued the same day, West Tex. Mun. Power Agency v. Republic Powers Parnters, L.P., No. 07-12-00374-CV, 2014 WL 486287 (Tex. App.—Amarillo Feb. 5, 2014), noting that while the proprietary/governmental distinction does not apply to contracts, RPP’s services of identifying and evaluating potential energy generation and transmissions lines and managing the development process does under Chapter 271’s waiver.*

Governmental Immunity: City of Corpus Christi v. Ferguson, No. 13-12-00679-CV, 2014 WL 495146 (Tex. App.—Corpus Christi Feb. 6, 2014). This is an interlocutory appeal from the denial of a plea to the jurisdiction in a premise liability case under the Texas Recreational Use Statute. Tex. Civ. Prac. & Rem. Code § 75.002.  Ferguson traveled from her home in San Antonio to Corpus Christi, where she planned to participate with her family in the Harbor Lights Festival boat parade at the city’s marina. The morning of the event, but before it started, Ferguson went to the shower facilities but slipped on ice along the way.  The city produced evidence that the water lines which allegedly leaked and caused the ice had been drained and turned off the night before, that it posted warning signs noting the lines were drained to prevent ice, and that Ferguson’s entry card did not show she was in the area at the time of the alleged fall. After a hearing the trial court denied the plea and the city appealed.

While Ferguson asserts she was not engaged in a recreational use, but was merely returning from a shower in the morning, the Corpus Christi Court of Appeals determined the activity at the marina fell within the Recreational Use Statute since she camped overnight on a sailboat dock at the marina.  In other words, “camping overnight on the boat was merely one stage of the broader boating activity . . . .” However, the court then noted that Ferguson was able to present sufficient facts to create a dispute regarding the city’s actual knowledge of the ice. Essentially a separate witness informed the city early in the morning that he noticed ice and that Ferguson and her father testified no warning sign was present.    A reader of the opinion should take the time to read the footnotes, which surgically cut out various distinguishing factors to make this holding more limited than it initially sounds. The court held that the plea was properly denied.*

Ordinance Construction: City of Houston v. Little Nell Apartments, No. 14-12-01157-CV, 2014 WL 257977 (Tex. App.—Houston [14th Dist.] Jan. 23, 2014). This is an interlocutory appeal from the denial of a plea to the jurisdiction involving a City of Houston employee’s actions, which the plaintiff asserts were ultra vires in that they subjected plaintiff to improper drainage fees. The city’s director of public works and engineering, Daniel Krueger, was sued in his official capacity. The court of appeals affirmed the denial.

In 2011, the city enacted a specific ordinance referred to as the “drainage fee ordinance.”  The ordinance created a municipal drainage utility which charged a fee to recover costs of service and used the fee exclusively for defined purposes. Fees are calculated based on square foot of impervious cover of a benefitted property.  Plaintiff asserts that some of its properties are not part of the city’s drainage system so should not be subject to the ordinance or charged the fee. After exhausting the administrative process under the ordinance (which yielded no change in the fees) the plaintiff sued the city and the director of public works for a declaration the ordinance is invalid and for ultra vires acts of imposing the fee by the director.  Defendants filed a plea to the jurisdiction. After an evidentiary hearing, the court granted the plea in part (mainly to the claims for monetary damages), but denied it as to declaratory claims involving ultra vires acts of Krueger.  Defendants filed this interlocutory appeal.

The Fourteenth Court of Appeals first determined if it had appellate jurisdiction over Krueger’s appeal since the original notice of appeal was only on behalf of the city (although it was amended later).  The court concluded the city and Krueger made a bona fide attempt to appeal, and based on Supreme Court precedent, an appellate court has jurisdiction over an appeal even if the notice of appeal has some defects.  The city and Krueger insist that the drainage fee ordinance grants Krueger the authority and discretion to assess drainage charges after making the threshold determination as to service area. Plaintiffs assert the question is not his authority to assess fees, but whether their properties fall under the ordinance at all since they are not within the service area. The court went through a lengthy analysis of the text of the drainage fee ordinance, analyzing various definitions and grants of authority. In the end, the court concluded that, under the plain language of the drainage fee ordinance, a property must be a benefitted property to be subjected to drainage charges. The ordinance, while granting the director authority to assess fees, does not give him authority to determine which properties are benefitted properties, so imposing fees on properties which are not benefitted properties is an ultra vires act. After examining the apparently large amount of evidence presented at the hearing (including proof of the property location, service areas, permits, etc.) the court concluded the pleadings and evidence establish the court has jurisdiction to determine if the director exceeded his authority by applying charges to the plaintiff’s property. It affirmed the denial.

The court spent a lot of time determining what authority the ordinance does not grant, so be careful of wording within an ordinance.    The opinion provides guidance to voyu attorneys as to what types of words they should put into ordinances in order to properly grant full authority to accomplish a particular purpose. Such authority needs to be balanced with avoiding an “unbridled discretion” problem.*

Ordinance Construction: Houston Belt & Terminal Ry. Co. v. City of Houston, No. 14-13-00273-CV, 2014 WL 258557 (Tex. App.—Houston [14th Dist.] Jan. 23, 2014).  This is a companion case to City of Houston v. Little Nell Apartments, No. 14-12-01157-CV, 2014 WL 257977 (Tex. App.—Houston [14th Dist.] Jan. 23, 2014), in that it deals with a similar application of the city’s drainage fee ordinance by the city’s director of public works and engineering, Daniel Krueger. In this case, Houston Belt and Terminal Railway Company, BNSF Railway Company, and Union Pacific Railroad Company (railroads) sued the city and Krueger for declarations with respect to the validity of the drainage fee ordinance, and if valid, whether Krueger violated the ordinance by: (1) imposing drainage charges on the railroads’ non-“benefitted properties”; and (2) determining the amount of drainage charges imposed on their properties. The city and Krueger filed a plea to the jurisdiction on governmental immunity grounds, and the trial court sustained the plea as to the railroads’ ultra vires claims against Krueger. The railroads appealed that decision, arguing that Krueger didn’t have the authority to determine whether some properties are subject to the ordinance, and for those that are subject to the ordinance, that he didn’t have the authority to determine whether they contained impervious surface.

As with the decision in Little Nell, the court rejected the city and Krueger’s argument that the ordinance gave Krueger the authority and discretion to impose drainage charges on all of the properties in question. The railroads argued that many of the properties in question do not fit within the definition of “benefitted property” in the ordinance because they do not make use of the city’s drainage system, and instead discharge directly to natural water sources not owned or controlled by the city. The court concluded that the pleadings and evidence establish that the trial court had jurisdiction with regard to Krueger’s alleged ultra vires actions in imposing fees on properties alleged not to be “benefitted properties.” The court reversed the trial court’s order on the city and Krueger’s plea to the jurisdiction as to the railroads’ claims that Kruger acted ultra vires by imposing drainage charges on properties that were not “benefited properties.”

The railroads acknowledged that some of their properties are “benefitted properties” as defined by the ordinance, and argued that for these properties Krueger exceeded his legal authority by applying drainage charges for areas that are not “impervious surfaces.” After reviewing the language of the ordinance, the court construed the plain language to grant Krueger the discretion to determine whether certain areas contained “impervious surface” for purposes of charging the drainage fee. Because the railroads only alleged facts demonstrating acts within Krueger’s legal authority and discretion under the ordinance, their claim that Krueger acted outside his legal authority was an attempt to control state action, and thus was barred by sovereign immunity. As a result, the court affirmed the granting of the city and Krueger’s plea to the jurisdiction as to the claim that Krueger acted ultra vires when determining the impervious square footage of the railroads properties subject to drainage charges.

*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