Recent Texas Cases of Interest to Cities

Note:  Included cases are from August 11, 2014 through September 10, 2014.

Whistleblower Act:  Texas Dep’t of Human Servs. v. Okoli, No. 10-0567, 2014 WL 4116807 (Tex. Aug. 22, 2014). Okoli, a state employee, sued the state after he was terminated.  Okoli alleged that he was terminated because he reported illegal activity of his supervisor to other supervisors.  He filed suit under the Whistleblower Act (Act).  He did not report the illegal activity to law enforcement or to the Office of Inspector General which handles enforcement of state law for the Department of Human Services, but instead followed an internal policy requiring  reporting  any complaints up the chain of command.  The issue was whether his supervisors were appropriate law enforcement authorities under the Act.  Under prior case law, a plaintiff must report the illegal activity to an appropriate law enforcement authority or show that he had a good faith, reasonable belief that he reported the activity to an appropriate law enforcement authority.  Okoli’s supervisors are not appropriate law enforcement authorities.  While Okoli’s supervisors may have had an obligation to pass on Okoli’s report to an appropriate law enforcement authority, this was not enough to make his report a report to an appropriate law enforcement authority.  The court held that his report was not enough under the Act and dismissed Okoli’s claims.

Contractual Immunity: Zachry Construction Corp. v. Port of Houston Auth., No. 12-0772, 2014 WL 4472616 (Tex. Aug. 29, 2014).   In this case, Zachry entered into a contract with the Port of Houston for a complex construction at the wharf that included a requirement that any delay would result in damages owed by Zachry to the port. The contract also contained a provision shielding the port from any of Zachry’s delay or additional costs or damages caused by the port’s negligence or other fault of the port.  Such costs and damages were incurred by Zachry, allegedly caused by the port.  Zachry sued the port for the costs, arguing that the port’s no-damages-for-delay contract provision was invalid when the port’s intentional conduct caused the damages.  The port argued that its damages-for-delay provision was valid and that even if it were invalid, it was still immune under Chapter 271 of the Local Government Code.  The Supreme Court of Texas held for Zachry and that a claim for delay damages was not barred by immunity or by the no-damages-for-delay provision of the contract.   A dissent of four justices was filed as well and may give insight on how the Court may decide other contractual immunity cases on its docket.

Public Information: El Paso v. Abbott, No. 03-13-00820-CV, 2014 WL 4413601 (Tex. App.—Austin Aug. 29, 2014).  This opinion withdrew a prior opinion of August 1, 2014, and substituted this opinion.  This substituted opinion simply clarifies that the attorney general did not oppose the city’s plea to the jurisdiction filed in the district court, did not oppose the city’s appeal and, consequently, did not file an appellate brief in response.  The original summary of the case is still accurate, and is available here.

Signs: National Media Corp. & Anchor Equities, Ltd. v. City of Austin, No. 03-12-00188-CV, 2014 WL 4364815 (Tex. App.—Austin Aug. 27, 2014) (mem. op.).  This is a board of adjustment case involving a sign permit. The Austin Court of Appeals reversed the granting of the city’s summary judgment motion and remanded. The court does not go into much factual detail and only references facts relating to the analysis.   This makes the analysis difficult to apply to other situations, however, some use of the opinion is possible. National Media Corporation and Anchor Equities (“plaintiffs”) contend the city’s zoning code regarding “abandonment of non-conforming use” was improperly used to deny a sign registration permit and that the board of adjustment abused its discretion when it affirmed the denial. The trial court granted the city’s summary judgment motion and the plaintiffs appealed. The court noted that an entity acts arbitrarily and capriciously when it acts in a way or enforces regulations that do not give a party the ability to “know what is expected of them in the administrative process.”  Based on the city’s previous history of using the sections and the wording of the various codes (which the court does not provide), the panel simply states the plaintiffs could not have known or expected the city to use that zoning provision to deny the sign registration application.  In other words, the panel thought the city’s use of that section (whateverit was) was a stretch to try and apply. The court then stated that, under statutory construction principles, the code sections are not related to each other or do not have the same general purpose so should not be interpreted together. The zoningregulations and the sign ordinance were not designed to interconnect. The sign regulations are specific in nature designed to regulate signs and their usage/placement, while the zoning regulation being argued is general and makes no reference to signs. As a result, the specific controls over the general and the more recent controls over the older. The city applied the wrong ordinance and the city and board abused its discretion in denying the application. The summary judgment is reversed and the case is remanded.*

Employment Discrimination: Beebe v. City of San Antonio, No. 04–13–00134-CV, 2014 WL 4437648 (Tex. App.—San Antonio Sept. 10, 2014) (mem. op.). This is an employment discrimination/retaliation case based on race, color and age. The San Antonio Court of Appeals affirmed the trial court’s granting of CPS Energy’s (CPS) summary judgment. Beebe, an African-American male over forty, was an account manager for CPS. At CPS, there were two types of account managers, a BAM for mid-market accounts and an ESM for larger commercial accounts. Although BAMs and ESMs had similar duties, the level of responsibility between the two positions varied greatly. ESMs made higher salaries than BAMS due to the greater responsibilities.  When a BAM position was advertised, a female candidate named Read applied. CPS discovered she had skills and experience better suiting her for the ESM position than the BAM position, and when an ESM position became available, she was given the job. Beebe sued alleging discrimination and retaliation but the trial court dismissed his claims on summary judgment. Beebe appealed. The court first held that selecting a more qualified applicant generally constitutes a legitimate, non-discriminatory reason for failing to hire/promote.  Directly comparing Beebe and Read demonstrates she is easily more qualified than Beebe. The only evidence and argument Beebe presented to establish a pretext was the fact CPS did not post the ESM position but simply offered it to Read. However, the fact that CPS managers feared they would lose Read to another company if they did not offer her the job without posting does not create a fact issue of pretext (i.e. that the offered non-discriminatory reason is not true or not worthy of credence.)  As a result, Beebe failed to meet his burden to establish pretext after CPS established Read was more qualified. The summary judgment was affirmed.*

Condemnation: City of San Antonio v. Alamo Aircraft Supply, Inc., No. 04-14-00057-CV, 2014 WL 3927722 (Tex. App.—San Antonio Aug. 13, 2014).  This is an interlocutory appeal where the Fourth Court of Appeals reversed the denial of the city’s plea to the jurisdiction and dismissed Alamo Aircraft Supply’s claims. As part of a street widening project, the city filed a condemnation suit in probate court against certain adjoining property owners. Afterwards the parties entered into a possession and use agreement (PUA). While the condemnation suit was still pending, the property owners filed a separate suit against the city asserting breach of the PUA. The city filed a plea to the jurisdiction claiming governmental immunity from such a breach claim. The trial court denied the plea and the city appealed. The crux of the suit is a disagreement about the nature of the PUA, specifically whether it is a settlement of the condemnation suit over which the plaintiffs can sue under a Lawson theory. Under the PUA, the city deposited certain funds into the court’s registry. In return, it received immediate possession subject to specified conditions. The parties agreed the only remaining issues to be litigated were (1) the amount of money each landowner was due and (2) the city’s right to take portions of their properties. As part of the project, the contractor ended up obstructing access to the properties and required relocation of property. Plaintiffs sued for breach and asserted immunity is waived because the city initiated suit against them first. It also settled the claims for which immunity was waived, therefore they could sue to enforce the settlement. The city agreed immunity for the condemnation dispute is waived under the Texas Constitution, but not for any breach of a PUA, which is only a temporary document to control while the overall dispute is on-going. The court noted the express language within the PUA states the agreement does not prejudice in any way the outcome of the condemnation issues. It expressly disavows either the amount of adequate compensation or the city’s right to take the properties. As a result, it does not settle a claim for which immunity is already waived and the city retains immunity from suit.*

Nonconforming Use: Anderton v. City of Cedar Hill, No. 05–12–00969–CV, 2014 WL 4291492 (Tex. App.—Dallas Aug. 22, 2014). The City of Cedar Hill filed suit against Patsy and Doyle Anderton regarding the nonconforming use of property owned by the Andertons.  The Andertons were operating a business selling landscaping and building materials.  The lots being used were classified by the city’s zoning ordinance as a “Local Retail District,” so the Anderton’s business violated the zoning ordinance.  The Andertons filed an application for a change in zoning; however, the city council denied the proposed zoning change.  The Andertons believed the use was legally nonconforming and refused to terminate the use.  The city code enforcement supervisor issued five citations to the Andertons for the unlawful expansion of a nonconforming land use.  A jury found the Andertons “not guilty” on all five citations.

The city then filed a petition against the Andertons for violations of its zoning ordinance and building code seeking declaratory judgment, civil penalties, and injunctive relief.  The Andertons responded by asserting counterclaims for violations of their vested rights under Chapter 245 of the Texas Local Government Code.   The trial court originally denied the city’s motion for partial summary judgment, then on the same day signed another order granting the motion.  The Andertons appealed.

The Dallas Court of Appeals concluded that the Andertons did present evidence of a disputed fact: whether the lot in question was being used for the nonconforming use prior to the city’s ordinance amendment prohibiting the activity.  Thus, the court reversed the trial court’s judgment and remanded the case.  The court also concluded that the Andertons’ inverse condemnation claim is ripe, and the trial court erred in dismissing it.  Finally, the court concluded that the operation of a business is not a “project” creating any vested right under Chapter 245 and stated the trial court did not err in dismissing the Andertons’ Chapter 245 counterclaim.

Inverse Condemnation:  Appaloosa Dev., L.P. v. City of Lubbock, No. 07-13-00290-CV, 2014 WL 3906458 (Tex. App.—Amarillo Aug. 11, 2014) (mem. op.). This is an inverse condemnation case where the Amarillo Court of Appeals affirmed a take nothing judgment against the plaintiffs. Appaloosa is a partnership which buys land for commercial development. Water Rampage is a waterpark but had several acres of undeveloped land Appaloosa purchased. After the purchase, Appaloosa applied for a zoning change to allow commercial development. While the city’s planning and zoning commission recommended approval, the city council denied the application. Appaloosa brought suit for inverse condemnation. After a bench trial, the trial court ruled in favor of the city and dismissed Appaloosa’s claims. Appaloosa appealed.

The court first determined there was no negative economic impact because the property could still be used for single family, the use permitted when Appaloosa purchased the property. While the value of the land would have increased if zoning changed, the proper standard is the value comparison of before the regulation and after.  The city’s regulation remained the same in this case. The court then noted that the “character of governmental action” was removed from the analysis under the U.S. Supreme Court’s decision in Lingle v. Chevron U.S.A., Inc., 544 U.S. 528, 543 (2005).  However, since the Texas Supreme Court has not provided guidance, the court analyzed that factor as well. The city had legitimate reasons to keep the zoned uses since it received several objections to the rezoning application from neighbors based on increased noise, traffic, and crime in their neighborhood; decreased property values; and ill effects from  increased urbanization. The court determined the city did not target Appaloosa since it did not initiate a regulation, but merely kept the zoning exactly the same. Appaloosa failed to establish the city somehow sought an unfair advantage to its own projects by denying the request. The evidence was factually sufficient to support legitimate governmental purposes for keeping the zoning the same. As a result, the trial court judgment was affirmed.*

Governmental Immunity-Contract:  Gay v. City of Wichita Falls, No. 08-13-00028-CV, 2014 WL 3939141 (Tex. App.—El Paso Aug. 13, 2014). This is a contractual immunity case involving the payment of disability benefit premiums for city police officers. The El Paso Court of Appeals joins the San Antonio Court of Appeals in a split amongst the intermediate appellate courts on whether the proprietary/governmental dichotomy exists in contract claims. Gay and Carroll were police officers for the City of Wichita Falls. The city created a trust to obtain group insurance.  Once obtained, the city paid the premiums for its employees. After their retirement in 2011, Gay and Carroll filed claims for disability benefits. Sun Insurance denied their claims. They filed suit against the city for breach of contract, promissory estoppel and a host of other causes of action. The city filed a plea to the jurisdiction asserting it does not administer the policy and makes no decisions regarding benefits. It merely pays the premiums. It also does not have a contract with Sun Insurance, the trust does. The trial court granted the plea and the plaintiffs appealed.

The court first addressed the plaintiffs’ primary argument, which is that the providing of insurance benefits is a proprietary function and so they can bring a breach of contract claim without triggering immunity. The El Paso Court of Appeals addressed the split in the courts of appeals on this subject, where the Third Court believes the proprietary/governmental dichotomy exists in contract claims and the Fourth Court and several others hold it does not. After a lengthy analysis, the El Paso Court agreed with the San Antonio Court and held the dichotomy does not exist in a contract context.  This is mainly due to the legislature’s enactment of Texas Local Government Code Chapter 271, which waives governmental immunity in contracts only under very specific conditions. The city was therefore involved in governmental functions by providing premiums for benefits. And since Chapter 271 does not waive immunity for unwritten contracts or promises, (the contract was between the trust and Sun Insurance only) no waiver of immunity exists.*

Contractual Immunity: Schoffstall v. City of Corpus Christi, No. 13-13-00531-CV, 2014 WL 4249801 (Tex. App.—Corpus Christi Aug. 25, 2014) (mem. op.). This is a contractual immunity case involving a community development program. The Thirteenth Court of Appeals affirmed the granting of the city’s plea to the jurisdiction.

Schoffstall is the daughter and executrix of Hortensia Hernandez, the party involved in the underlying suit. Hernandez received an interest-free loan from the city to finance the demolition and construction of a new home as part of the city’s community development program. Bodine was a builder Hernandez hired for the work, but Hernandez and Bodine had a disagreement resulting in a suit. The city withdrew its loan resulting in Hernandez and Bodine suing the city. The city filed a plea to the jurisdiction asserting governmental immunity, which the trial court granted and Hernandez’ estate appealed.

The court first noted community development is a governmental function. A community development agreement for an interest-free loan is not a contract for providing goods or services “to” the city, so Chapter 271 of the Local Government Code does not waive immunity. References in the deed of trust accompanying the agreement which references the FTC Rule (placing the holder in the shoes of the seller) is likewise not a waiver, since only the legislature can waive immunity. And since the city has not obtained any benefits from the zero-interest loan, equitable estoppel and waiver-by-conduct do not apply, even if all other conditions of these exceptions existed. Finally, given the facts, there is no way to replead to establish a waiver, so no opportunity to replead is required. The trial court’s dismissal of Hernandez’ claims was affirmed.*

Constitutional Holdover Provision: Bianchi v. State of Texas, No. 13-14-00303-CV, 2014 WL 4160036 (Tex. App.—Corpus Christi Aug. 21, 2014). This is a quo warranto case where the central issue is the interaction between the “resign-to-run” rule under the Texas Constitution and the constitutional “holdover” provision. The Thirteenth Court of Appeals held the holdover provision controls regardless of the automatic nature of the resign-to-run rule.

Bianchi was the County Attorney for Aransas County who was elected to office. He announced to the commissioner’s court that he was running for county judge and that this means he was automatically resigning his position under Texas Constitution Article XVI, Section 65(b).  While the commissioner’s court had the right and power to appoint his successor, they chose not to do so, stating in depositions that he was doing a good job. Bianchi stated on numerous occasions in the record that he did resign but was obligated under the Texas Constitutional holdover provision, Article XVI, Section 17, to continue with his office until his replacement is appointed.  The district attorney believed the automatic nature of the resign-to-run rule in the Constitution trumped the hold over provision and that the resignation was automatic in all respects.  He brought suit on behalf of the State of Texas via quo warranto against Bianchi for illegally holding office. The trial court issued an order removing Bianchi and issued findings of facts and conclusions of law. Bianchi appealed.

This is a 31-page opinion where a large part of the opinion is the reciting of evidence, testimony, and findings of the trial court. The bottom line is the commissioner’s court could have appointed a replacement but chose not to do so. This left Bianchi in the position of county attorney as a holdover while running for another office. The trial court started the legal analysis noting the ancient nature of a quo warranto proceeding then went into the nature of the two constitutional provisions, then statutory construction principles. In the end,, the court held the resign-to-run rule is subject to the holdover provision and since the commissioner’s court has made the express decision not to appoint a replacement, Bianchi was still lawfully holding office. That decision is not subject to collateral attack in court as it is in the sole discretion of the commissioner’s court.  The State did not sue the commissioner’s court, only Bianchi, so their decision cannot be attacked as arbitrary. As a result, the trial court order is reversed and judgment is rendered for Bianchi to remain in office until a successor is appointed.

The court went on to cite to another reason for its opinion, holding “[a]s well intentioned and diligently reasoned as it was, the district court’s decision would have uprooted a firmly founded and widely accepted understanding of a critical aspect of Texas constitutional law that is of vital importance to certain public officials. . . .The Texas quo warranto statute was never intended to allow for judicial second-guessing of decisions committed to the sound discretion of the County Judge and Commissioners Court. Such decisions are best left to locally-elected public officials who are in the best position to judge the needs of these particular issues and to exercise sound discretion in addressing them. We will not disturb the orderly balance of powers as expressed by the will of the people. . . . ”*

Animal Control: Greater Houston German Shepherd Dog Rescue, Inc. v. Lira, No. 14-13-00240-CV, 2014 WL 4199165 (Tex. App.—Houston [14th Dist] Aug. 26, 2014). This case deals with a dog owner’s ability to reclaim a dog that was impounded by the city after running at large and transferred to a local dog rescue organization in accordance with the city’s ordinance.

In this case, a dog was impounded by the City of Houston after it was found running at large without any identification, license, or rabies tags. The dog tested positive for heartworms, which meant under the city’s ordinance that the dog had to either be euthanized or transferred to a humane shelter for adoption. The dog was not redeemed by its previous owners, the Liras, during the requisite three-day impoundment window, so the city transferred the dog to the rescue organization. When the rescue organization refused to transfer the dog to the Liras, the Liras filed suit against the rescue organization (not the city) alleging numerous causes of action. The trial court issued a final judgment in favor of the Liras, concluding that no state or local laws operated to divest the Liras of their ownership rights, and that the rescue organization had converted the Liras’ personal property. The rescue organization appealed.

Relying on numerous statutes and cases supporting the notion that dogs are personal property and are subject to regulation under the city’s police power, the court of appeals determined that the city exercised its police power to provide for the humane disposition of an unhealthy dog by transferring it to a non-profit humane shelter. The city’s ordinance expressly created an exclusive procedure for an owner to redeem the dog when it was impounded by the city. The Liras did not redeem the dog in compliance with the timeline and procedures established by the city’s ordinance. In order for the Liras to prevail on a claim on conversion, they needed to show (among other things) that they were legally entitled to posses the dog at the time the city transferred possession of the dog to the rescue organization. The court held that because the Liras did not comply with the city’s procedure for redeeming the dog, they were not legally entitled to possess the dog when the city made its ordinance-mandated choice between euthanizing the dog or transferring it to a humane shelter. As a result, the court of appeals held that the trial court erred when it concluded that the humane organization had converted the dog and granted declaratory and injunctive relief that the Liras were entitled to possession.

*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