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Chisholm Trail SUD Stakeholders Group v. Chisholm Trail Special Utility District

Court of Appeals of Texas, Third District, Austin

May 11, 2017

Chisholm Trail SUD Stakeholders Group, Appellant
v.
Chisholm Trail Special Utility District and District Directors Delton Robinson, Ed Pastor, Mike Sweeney, James Pletcher, Robert Kostka, David Maserang, Gary Goodman, and Robert Johnson, Jr., in their Official Capacities; The City of Georgetown; and The Public Utility Commission of Texas and its Commissioners Donna L. Nelson, Kenneth W. Anderson, Jr., and Brandy Marty Marquez, in their Official Capacities, Appellees

         FROM THE DISTRICT COURT OF TRAVIS COUNTY, 419TH JUDICIAL DISTRICT NO. D-1-GN-15-003337, HONORABLE KARIN CRUMP, JUDGE PRESIDING

          Before Justices Puryear, Pemberton, and Goodwin

          MEMORANDUM OPINION

          Melissa Goodwin, Justice.

         Chisholm Trail SUD Stakeholders Group (the Stakeholders Group) appeals from the trial court's interlocutory order granting the pleas to the jurisdiction of appellees Chisholm Trail Special Utility District and its directors Delton Robinson, Ed Pastor, Mike Sweeney, James Pletcher, Robert Kostka, David Maserang, Gary Goodman, and Robert Johnson, Jr., in their official capacities; the City of Georgetown; and the Public Utility Commission of Texas and its Commissioners Donna L. Nelson, Kenneth W. Anderson, Jr., and Brandy Marty Marquez, in their official capacities. Because we conclude that the Stakeholders Group failed to demonstrate the trial court's jurisdiction over the claims that appellees challenged in their pleas to the jurisdiction, we affirm the trial court's order granting the pleas.

          BACKGROUND

         By 2013, Chisholm Trail Special Utility District (the District) had acquired a water supply and distribution utility system that served customers in Williamson, Burnet, and Bell counties. In October of that year, the District and the City of Georgetown (the City) entered into an asset transfer and utility system consolidation agreement. In exchange for the District's agreement to transfer all of its assets "used or held for use in connection with, the water and wastewater service provided by [the District]" except $500, 000 in cash, the City agreed to assume certain specified liabilities and obligations. Among other requirements for the closing of the transaction, the parties agreed to use their best efforts to obtain the approval of the transfer of the District's certificate of convenience and necessity (CCN) to the City. Pursuant to the terms of this agreement, the parties filed an application to transfer the certified service area, assets, and facilities subject to the District's CCN to the City, decertify the District's CCN, and amend the City's CCN to reflect incorporation of the District's service area and facilities.[1] In May 2014, the application was referred to the State Office of Administrative Hearings (SOAH) for a contested case hearing with protestants.

         In September 2014, the City and the District entered into a first amendment to the asset transfer and utility system consolidation agreement and a service area operations and management agreement. In the first amendment to the asset transfer and utility system consolidation agreement, the parties agreed that it was in the best interest of the parties for the District to maintain its CCN at and after closing the transaction. Under the terms of the management agreement, the District continued in its role as the CCN holder for water utility service with "all of the powers and duties of the CCN holder, " adopted rates, fees, and charges consistent with the City's rates, and agreed to a transition surcharge initially set at $4.75 per meter per month to offset operating costs and expenses associated with the transition of services to the City. In return, the City agreed to specified responsibilities of operating and maintaining the water utility system during the regulatory approval period, including paying $4.45 per meter per month of the transition surcharge to the District. At the same time that the parties entered into the first amendment and the management agreement, they closed on the transaction, transferring the specified assets and liabilities of the District to the City as outlined in the agreement.[2]

         In July 2015, the contested case hearing on the CCN transfer application occurred. The Stakeholders Group, a nonprofit corporation organized to advocate for residents and landowners in rural areas of Bell, Burnet, and Williamson counties concerning adequate water utility service, was not a party to the administrative proceeding. After the contested case hearing had concluded but before the PUC had entered a final order, the Stakeholders Group sued the District, the District's directors in their official capacities, the City, and the PUC, challenging the transfer of the District's water utility assets and certified service area to the City. The Stakeholders Group alleged ultra vires conduct and sought declaratory and injunctive relief under the Uniform Declaratory Judgments Act (UDJA). See Tex. Civ. Prac. & Rem. Code §§ 37.001-.011.[3] The District and its directors answered and asserted pleas to the jurisdiction. In their pleas, they argued that the trial court did not have jurisdiction over the Stakeholders Group's claims because the District was immune from suit, the Stakeholders Group lacked standing, and certain claims were not ripe for review.[4] The City also answered and asserted a plea to the jurisdiction on similar grounds.

         In January 2016, the PUC issued its final order in the related administrative proceeding, approving the application.[5] The PUC thereafter filed a plea to the jurisdiction in this case, asserting that the trial court lacked jurisdiction over the claims against the PUC because the UDJA did not waive sovereign immunity over the claims asserted against the PUC and that the PUC had primary or exclusive jurisdiction to consider the CCN transfer application.

         Shortly after the PUC filed its plea to the jurisdiction, the District, its directors, and the City filed briefing and evidence (some of which we have previously summarized) in support of their pleas. Among other arguments, they argued that the Stakeholders Group had failed to plead a valid waiver of immunity as to the City and the District "because declaratory judgment suits against a governmental entity to invalidate a contract are barred by immunity" and that the Stakeholder Group's ultra vires claims were not proper because, as a matter of law, the Directors acted within their authority. The evidence to support the pleas included copies of the asset transfer and utility system consolidation agreement with exhibits, [6] the service area operations and management agreement dated September 12, 2014, and the first amendment to the asset transfer and utility system consolidation agreement dated September 12, 2014 (collectively the Agreements).[7]

         The hearing on appellees' pleas to the jurisdiction occurred on March 8, 2016. On the day of the hearing, the Stakeholders Group filed a first amended petition, continuing to seek declaratory and injunctive relief under the UDJA but adding the Commissioners of the PUC in their official capacities.[8] In addition to its allegations that the PUC was acting outside its statutory powers and jurisdiction by processing and granting the CCN transfer application, the Stakeholders Group alleged that the Commissioners acted ultra vires by processing and approving the application. As to its claims against the City, the District, and the Directors, the Stakeholders Group asserted that the first amendment to the asset transfer and utility consolidation agreement provided an "illegal grant of public funds, " violating article III, section 52 of the Texas Constitution. See Tex. Const. art. III, § 52. It also argued that the Agreements between the City and the District and the application for the CCN transfer would illegally render the District incapable of providing water utility services to its constituents, illegally nullify the District's landowners' and consumers' statutory right to vote on water utility issues, and effect an illegal dissolution of the District and an illegal transfer of the District's CCN.

          Following the hearing, the trial court granted appellees' pleas to the jurisdiction, specifically addressing the Stakeholders Group's various requests for declaratory and injunctive relief.[9] This interlocutory appeal followed.

         ANALYSIS

         In one issue, the Stakeholders Group argues that the trial court erred in granting appellees' pleas to the jurisdiction and addresses various pleaded claims "for declaratory and injunctive relief necessary to remedy the appellee[s]' unconstitutional, unlawful, and ultra vires acts, " asserting that its "pleadings clearly allege facts that affirmatively demonstrated the trial court's subject matter jurisdiction" over its claims.

         Standard of Review and Applicable Law

         "A plea to the jurisdiction challenges the court's authority to decide a case." Heckman v. Williamson Cty., 369 S.W.3d 137, 149 (Tex. 2012). We review a plea questioning the trial court's subject matter jurisdiction de novo. See Texas Dep't of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004). "The burden is on the plaintiff to affirmatively demonstrate the trial court's jurisdiction." Heckman, 369 S.W.3d at 150. When assessing a plea to the jurisdiction, we focus first on the plaintiff's petition to determine whether the facts that were pleaded affirmatively demonstrate that subject matter jurisdiction exists. Miranda, 133 S.W.3d at 226. We construe the pleadings liberally in favor of the plaintiff. Id. "However, if a plea to the jurisdiction challenges the existence of jurisdictional facts, we consider relevant evidence submitted by the parties when necessary to resolve the jurisdictional issues raised, as the trial court is required to do." Id. at 227 (citing Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 555 (Tex. 2000)).

         Governmental immunity generally precludes suits against political subdivisions of the State, such as the City (for its governmental functions) and the District, depriving the court of subject matter jurisdiction. See Wichita Falls State Hosp. v. Taylor, 106 S.W.3d 692, 694 n.3 (Tex. 2003) (explaining that governmental immunity protects political subdivisions of state from suit); City of Austin v. Utility Assocs., No. 03-16-00565-CV, 2017 Tex.App. LEXIS 2548, at *8-10 (Tex. App.-Austin Mar. 24, 2017, no pet. h.) (explaining doctrine of governmental immunity and distinction between governmental and proprietary functions).[10] Similarly, absent an express waiver, sovereign immunity generally deprives the courts of subject matter jurisdiction over suits against agencies of the State, such as the PUC. See State v. Shumake, 199 S.W.3d 279, 283 (Tex. 2006). But governmental and sovereign immunity do not bar certain claims for prospective relief against a government official who has acted ultra vires in carrying out his duties. City of El Paso v. Heinrich, 284 S.W.3d 366, 371-72 (Tex. 2009); see Houston Belt & Terminal Ry. Co. v. City of Hous., 487 S.W.3d 154, 158 n.1 (Tex. 2016) ("[W]hen a governmental officer is sued for allegedly ultra vires acts, governmental immunity does not apply from the outset."); Utility Assocs., 2017 Tex.App. LEXIS 2548, at *10-11 (describing requirements for bringing ultra vires claims). Suits alleging ultra vires acts may only be brought against state actors in their official capacities. See Heinrich, 284 S.W.3d at 373 ("[B]ecause the rule that ultra vires suits are not 'suits against the State within the rule of immunity of the State from suit' derives from the premise that 'acts of officials which are not lawfully authorized are not acts of the State, ' it follows that these suits cannot be brought against the state, which retains immunity, but must be brought against the state actors in their official capacity.") (internal citations omitted).

         We also observe that the Stakeholders Group's claims are brought under the UDJA. The UDJA does not create or augment a trial court's subject matter jurisdiction-it is "merely a procedural device for deciding cases already within a court's jurisdiction." Texas Ass'n of Bus. v. Texas Air Control Bd., 852 S.W.2d 440, 444 (Tex. 1993); see Texas Dep't of Transp. v. Sefzik, 355 S.W.3d 618, 621-22 (Tex. 2011) (per curiam) (noting that Texas Supreme Court has consistently stated that "UDJA does not enlarge the trial court's jurisdiction but is 'merely a procedural device for deciding cases already within a court's jurisdiction'"). The UDJA also "is not a general waiver of sovereign immunity." Texas Parks & Wildlife Dep't v. Sawyer Trust, 354 S.W.3d 384, 388 (Tex. 2011); see Tex. Civ. Prac. & Rem. Code §§ 37.004 (addressing subject matter of relief), .006 (addressing required parties); Ex parte Springsteen, 506 S.W.3d 789, 798-99 (Tex. App.-Austin 2016, pet. filed) ("[T]he UDJA's sole feature that can impact trial-court jurisdiction to entertain a substantive claim is the statute's implied limited waiver of sovereign or governmental immunity that permits claims challenging the validity of ordinances or statutes." (citing Texas Lottery Comm'n v. First State Bank of DeQueen, 325 S.W.3d 628, 634-35 (Tex. 2010) (citing Tex. Civ. Prac. & Rem. Code § 37.006(b)))). "And a litigant's couching its requested relief in terms of declaratory relief does not alter the underlying nature of the suit." See Sawyer Trust, 354 S.W.3d at 388 (citing Heinrich, 284 S.W.3d at 370-71; Texas Nat. Res. Conservation Comm'n v. IT-Davy, 74 S.W.3d 849, 855 (Tex. 2002)). Applying these standards, we address the Stakeholders Group's arguments on appeal as to their pleaded claims.

         Constitutional Claims Against the City and the District

         The Stakeholders Group argues that the trial court has jurisdiction over its claims brought against the City and the District under article III, section 52(a) of the Texas Constitution because "[s]ection 52(a) provides a right of action against the government for violations of that provision without the need for legislative consent or waiver of immunity." See Tex. Const. art. III, § 52(a). According to the Stakeholders Group, the Agreements violate section 52(a) and, thus, are void. To support its position, it argues that "[w]hen a political subdivision transfers funds, it must be for a public purpose with a clear public benefit received in return" and that "the political subdivision must retain some degree of control over the performance of the contract, " such as the Agreements at issue here, to be in compliance with the prohibitions in section 52(a).

         Section 52(a) of article III states in relevant part: "[T]he Legislature shall have no power to authorize any county, city, town or other political corporation or subdivision of the State to lend its credit or to grant public money or thing of value in aid of, or to any individual, association or corporation whatsoever." Id. The Texas Supreme Court has explained that the prohibition of granting public money in section 52(a) "means that the Legislature cannot require gratuitous payments to individuals, associations, or corporations, " but "[a] political subdivision's paying public money is not 'gratuitous' if the political subdivision receives return consideration." See Texas Mun. League Intergovernmental Risk Pool v. Texas Workers' Comp. Comm'n, 74 S.W.3d 377, 383 (Tex. 2002) (citations omitted) (emphasis in original). The Texas Supreme Court also has determined that "section 52(a) does not prohibit payments to individuals, corporations, or associations so long as the statute requiring such payments: (1) serves a legitimate public purpose; and (2) affords a clear public benefit received in return." Id. at 383-84. "A three-part test determines if a statute accomplishes a public purpose consistent with section 52(a)." Id. at 384. "Specifically, the Legislature must: (1) ensure that the statute's ...


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