Western Seafood Co. v. United States ( 2006 )

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
October 11, 2006
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
_____________________ Clerk
No. 04-41196
_____________________
WESTERN SEAFOOD COMPANY,
Plaintiff - Appellant,
v.
UNITED STATES OF AMERICA, ET AL,
Defendants,
CITY OF FREEPORT, TEXAS; FREEPORT ECONOMIC DEVELOPMENT
CORPORATION,
Defendants - Appellees.
_________________________________________________________________
Appeal from the United States District Court
for the Southern District of Texas
No. 3:03-CV-811
_________________________________________________________________
Before DEMOSS, BENAVIDES, and PRADO, Circuit Judges.
EDWARD C. PRADO, Circuit Judge:*
In this takings case, Western Seafood Company (“Western
Seafood”) appeals the district court’s order granting summary
judgment in favor of the City of Freeport, Texas (“City”), and
*
Pursuant to 5TH CIRCUIT RULE 47.5, the Court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIRCUIT
RULE 47.5.4.
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the Freeport Economic Development Corporation (“FEDC”). For the
reasons that follow, we affirm the order of summary judgment on
Western Seafood’s claim under the United States Constitution. On
Western Seafood’s claim under the Texas Constitution, we vacate
the order of the district court and remand for reconsideration of
Western Seafood’s claim in light of Texas Government Code §
2206.001 (“Limitations on the Use of Eminent Domain Act”).
I. BACKGROUND
In an effort to foster economic development, the City seeks
to seize a portion of Western Seafood’s property along the Old
Brazos River, approximately 0.86 of an acre including about 330
feet of waterfront. The City intends to transfer the taken
property to Western Seafood’s neighbor, Freeport Waterfront
Properties, (“FWP”), a private entity, for the purpose of
building a private marina. Western Seafood provides supplies and
services to commercial shrimp trawlers operating on the Old
Brazos River. The contested land includes Western Seafood’s
docks, which the shrimp trawlers use to offload and deliver their
shrimp to Western Seafood for processing.
In September 2001, the City initiated a master planning
process to develop a revitalization plan. The resulting report
described the City’s downtown area as being in serious decline
and largely vacant. The master plan argued that the creation of
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a marina was “probably the single most important development that
can bring significant economic stimulus to the city.” The City
planned to finance the marina through low interest loans of
public money from the City through the FEDC.** The marina would
be constructed, owned, and operated by FWP, a company owned by
Hiram Walker Royall. Mr. Royall is a member of the Blaffer
family, which is a major landowner in downtown Freeport. On
February 2, 2003, the Freeport City Council passed a resolution
urging the FEDC to take on the marina project. The FEDC passed a
resolution adopting the project on February 27, 2003.
II. PROCEDURAL HISTORY
On September 25, 2003, when it learned that the City had
filed for a permit with the United States Army Corps of
Engineers, Plaintiff Western Seafood filed a complaint for
injunctive relief, seeking to prevent the United States and the
City from building marina piers in front of Western Seafood’s
property. Western Seafood simultaneously filed a motion for
preliminary injunction to prevent the City from commencing a
condemnation suit in state court. Because the City withdrew its
permit application, the district court denied the request for
injunctive relief at a December 5, 2003 hearing. In addition,
the district court stayed and administratively closed the case,
suspending the hearing for settlement discussions. At a status
**
The City incorporated the FEDC pursuant to the Texas
Development Corporation Act (“TDCA”) of 1979.
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conference on April 8, 2004, the district court granted Western
Seafood leave to file amended pleadings. After the parties
failed to reach a settlement, the case was reopened in April 2004
and set for trial.
Western Seafood anticipated that the City would seek
condemnation in county court during April 2004. It therefore
filed another complaint seeking a temporary restraining order.
At an April 13, 2004 hearing, the City stated that it would not
proceed with condemnation proceedings in state court because the
FEDC would be responsible for initiating the matter.***
Accordingly, the court denied the request for a temporary
restraining order. Western Seafood thereafter dismissed the
United States and added the FEDC as a Defendant.
In both complaints, Western Seafood alleged that
Defendants’**** proposed taking of its property violated the TDCA,
TEX. REV. CIV. STAT. art. 5190.6; the takings clause of the Texas
Constitution,***** TEX. CONST. art. 1, § 17; and the Takings Clause
***
Under state law, the FEDC can exercise the right of
eminent domain if authorized to do so by the City. TEX. REV. CIV.
STAT. art. 5190.6, § 4A(g).
****
The City and the FEDC are hereinafter referred to as
“Defendants” or “Appellees.”
*****
The pertinent provision of the state constitution reads:
No person’s property shall be taken, damaged or destroyed
for or applied to public use without adequate compensation
being made, unless by the consent of such person; and, when
taken, except for the use of the State, such compensation
shall be first made, or secured by a deposit of money.
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of the United States Constitution,****** U.S. CONST. amend. V. On
April 19, 2004, the City filed its summary judgment motion in
both causes,******* arguing that because the principal purpose of
the marina project was to revitalize the downtown area and the
local economy, the project did not violate the takings provisions
of either the federal or state constitutions.
On August 5, 2004, the district court granted summary
judgment to Defendants. Western Seafood Co. v. City of Freeport,
346 F. Supp. 2d 892 ( S.D. Tex. 2004). Relying on Hawaii Housing
Authority v. Midkiff, 467 U.S. 229 (1984), the district court
held that the City’s proposed condemnation of Western Seafood’s
property fell within the scope of the Takings Clause. In Midkiff,
the Supreme Court upheld the Hawaii Land Reform Act of 1967,
which created a land condemnation scheme whereby property was
transferred from lessors to lessees in order to reduce the
concentration of land ownership in Hawaii. Midkiff, 467 U.S. at
233. The Supreme Court held that the Land Reform Act was
constitutional because it did not benefit a particular class of
individuals but rather served a conceivable public purpose by
attacking the perceived evils of concentrated property ownership.
TEX. CONST. art. 1, § 1.
******
The Takings Clause states: “nor shall private property
be taken for public use, without just compensation.” U.S. CONST.
amend. 5.
*******
On July 9, 2004, the two cases were consolidated.
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Id. at 241-42.
In the instant case, the district court found that the
City’s use of its eminent domain power to transfer property from
one private party to another was rationally related to the
conceivable public purpose of “promot[ing] the public interest in
a healthy local economy.” Western Seafood, 346 F. Supp. 2d at
901. The court stated, “The Supreme Court has made it abundantly
clear that decisions about the most economically efficient use of
property are squarely within the proper province of the
legislature . . . .” Id. at 902.
The district court also found that the Texas Constitution
did not protect Western Seafood’s property from the Defendants’
proposed exercise of eminent domain. Like its federal
counterpart, the Texas Constitution allows takings for public use
where adequate compensation is provided. The district court
noted that Texas courts have interpreted the takings clause of
the Texas Constitution, and in particular the “public use”
requirement, to “require substantial deference to the
legislature.” Id. at 899. Following this approach, the district
court looked to the TDCA, which declares that measures authorized
by it serve the public purpose of economic development.******** Id.
********
The court quoted the following provisions:
(a) It is hereby found, determined, and declared:
(1) that the present and prospective right to gainful
employment and general welfare of the people of this state
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Having earlier concluded that the development plan in question
was authorized by the TDCA, the district court reasoned that “the
legislature has determined that the project serves the public
interest in economic development.” Id. at 900. The court
therefore held that the proposed taking of Western Seafood’s
property did not offend the state constitution.
Western Seafood timely filed notice of appeal on August 30,
2004. It also filed motions in the district court and
subsequently in this court seeking a stay of judgment and
injunction pending appeal, both of which were originally denied.
After the Supreme Court agreed to hear Kelo v. City of New
London, 125 S. Ct. 2655 (2005), Western Seafood filed a motion
for reconsideration of the stay and a motion for injunction in
this court. This court granted Western Seafood’s motions and
abated the instant case pending the Kelo decision. After the
require as a public purpose the promotion and development of
new and expanded business enterprises and the promotion and
development of job training;
. . .
(4) that the means and measures authorized by this Act and
the assistance provided in this Act, especially with respect
to financing, are in the public interest and serve a public
purpose of the state in promoting the welfare of the
citizens of the state economically by the securing and
retaining of business enterprises and the resulting
maintenance of a higher level of employment, economic
activity, and stability; . . . .
TEX. REV. CIV. STAT. art. 5190.6, §3(a).
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Supreme Court decided in favor of the City of New London in Kelo,
this court lifted the abatement on Defendants’ motion and
reinstated the district court’s order denying the injunction.
Having received the required authorization from the City under
TEX. REV. CIV. STAT. art. 5190.6, § 4B(j), the FEDC brought
condemnation proceedings on August 16, 2004 in state court.*********
In this appeal, Western Seafood seeks: (1) reversal and
remand on both federal and state constitutional questions; or (2)
reversal and remand on the federal constitutional question, in
light of Kelo, and certification to the Texas Supreme Court of
constitutionality of the City’s taking under the State
constitution and its legality under newly enacted state
legislation placing limits on the government’s eminent domain
powers, TEX. GOV’T CODE § 2206.001 (“Limitations on the Use of
Eminent Domain Act”). In addition, Western Seafood seeks an
injunction against the state condemnation proceedings.
III. ANALYSIS
A. Standard of Review
*********
On August 18, 2004, the county court appointed a
panel of special commissioners to conduct a hearing to determine
the fair market value of the property. On April 17, 2006, the
special commissioners conducted an administrative hearing and
determined the amount of compensation to be paid to Western
Seafood. On April 27, 2006, Western Seafood filed a pleading
challenging the county court’s jurisdiction, inter alia, through
assertion of its state constitutional and statutory claims. On
May 10, 2006, the FEDC filed it response.
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We review the district court’s grant of summary judgment de
novo and employ the same standard as did the district court.
Baton Rouge Oil & Chem. Workers Union v. ExxonMobil Corp., 289
F.3d 373, 376 (5th Cir. 2002); Forsyth v. Barr, 19 F.3d 1527,
1533 (5th Cir. 1994). We view the summary judgment evidence in
the light most favorable to Western Seafood, the non-movant. Id.
B. Federal Constitutional Claim
The taking at issue does not offend the Fifth Amendment.
Kelo, 125 S. Ct. 2655, which was issued after the district
court’s summary judgment order, is directly on point and supports
this conclusion.
The facts in Kelo bear a strong resemblance to the
circumstances of the instant case. Officials of the City of New
London and the State of Connecticut recognized that New London
faced serious economic decline. Id. at 2658. In response, New
London authorized the New London Development Corporation (NLDC),
with support of a state bond issue, to devise a plan to increase
local economic activity and bolster tax revenue. Id. at 2659. The
resulting plan focused on the waterfront Fort Trumbull area and
proposed a comprehensive development containing commercial,
residential and recreational spaces, the majority to be privately
owned. Id. This proposal was thoroughly analyzed and deliberated
prior to its adoption by the city council. The city council then
authorized the NLDC to acquire property by eminent domain in the
city’s name, relying on a state statute that authorized the use
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of eminent domain for economic development purposes. Id. at
2660.
In its decision in Kelo, the Court wrote that the “public
use” requirement of the takings clause of the United States
Constitution had long been interpreted to require only that a
governmental taking have a “public purpose.” Id. at 2662. In
turn, the Court found that “public purpose” had been broadly
defined, with substantial deference to legislative judgments. Id.
at 2663. Reasoning that “[p]romoting economic development is a
traditional and long accepted function of government” and that
there is “no principled way of distinguishing economic
development from the other public purposes that we have
recognized,” the Court concluded that economic development
qualifies as a legitimate “public use” under the United States
Constitution. Id. at 2665.
That the proposed taking involved the transfer of property
from one private party to another, and that it directly
benefitted a private party, did not invalidate the taking, the
Court explained in Kelo, since “the government’s pursuit of a
public purpose will often benefit individual private parties.”
Id. at 2666. While a “one-to-one transfer of property, executed
outside the confines of an integrated development plan” might be
suspect, such a situation was not present. Id. at 2667. The Court
found that “[t]he City has carefully formulated an economic
development plan it believes will provide appreciable benefits to
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the community . . .” and concluded that the “plan unquestionably
serves a public purpose.” Id. at 2665.
As in Kelo, the City of Freeport seeks to develop its
waterfront to revitalize a flagging local economy. The proposed
taking of Western Seafood’s property is the result of a carefully
considered development plan. It followed a commissioned study
that reported on the economically depressed downtown area and
suggested strategies for its revival. Appellees submitted
approximately 240 pages of evidence for summary judgment that
describe plans for the marina and related public improvement as
part of an integrated redevelopment scheme created as the result
of the study. The record does not suggest that the City is
seeking an end other than economic development. Therefore, we
hold that the City’s exercise of eminent domain does not violate
the Takings Clause of the United States Constitution.
Western Seafood argues that Kelo is distinguishable because
in the New London case the beneficiaries of the transfer of
property were not identified prior to New London’s exercise of
eminent domain. Western Seafood cites Kelo’s warning that “the
City [would not] be allowed to take property under the mere
pretext of a public purpose, when its actual purpose was to
bestow a private benefit.” Kelo, 124 S. Ct. at 2661. Western
Seafood maintains that in its own case, the beneficiary FWP was
identified prior to or at the earliest stages of the City’s
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planning process. Relying on Justice Kennedy’s concurrence in
Kelo, Western Seafood argues that these facts warrant a stricter
standard of scrutiny than rational basis. While acknowledging
that a rational basis standard may be appropriate for many
takings cases, Justice Kennedy argued in Kelo that a heightened
standard, even a presumption of invalidity, was warranted for
“private transfers in which the risk of undetected impermissible
favoritism of private parties is [] acute. . . .” Id. at 2670.
We decline to address whether a heightened standard is
necessary in certain cases because the facts in the instant case
do not warrant it. Western Seafood offers three pieces of
evidence in support of its claim that the City exhibited
favoritism towards the FWP and the Blaffer family.********** But
because the Blaffer estate heirs own acres of property along the
river where the marina is to be built, the City’s interest in
their collaboration is logical. The evidence provided by Western
Seafood does not support the inference that the City exhibited
**********
First, at the December 5, 2003 hearing for
preliminary injunction, the City’s counsel stated, “[the
Blaffers] were the ones who came forward and said, Hey, we’d like
to do this project for you.” Second, at the April 8, 2004 status
conference, Defendants’ counsel replied to the district court’s
inquiry regarding the participation of the developer Royall by
saying, “Mr. Royall is the principal, the, I guess, person in
charge.” Third, Western Seafood cites to the master plan
document dated October 2002 to demonstrate that the marina
project had been proposed by the Blaffers before the development
plan was drafted. The document says, “Building a state-of-the-
art marina right on the riverfront as proposed by the Intermedics
property owners . . . .” Western Seafood points out that the
Blaffer heirs owned the Intermedics property.
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favoritism or has a purpose other than to promote economic
development in Freeport.
C. State Constitutional Claim
The district court decided Western Seafood’s claims under
the Texas Constitution before the enactment of Texas Government
Code § 2206.001, the Limitations on Use of Eminent Domain Act
(“Act”),*********** which went into effect on August 10, 2005.
Because the Texas Courts have interpreted the “public use”
language of the Texas Constitution with an eye to legislative
declarations, and because the Act can be construed as a recent
statement of the legislature’s view of what constitutes “public
use,” we believe that the Act should be considered when assessing
Western Seafood’s claims under the Texas Constitution.
Article I, Section 17 of the Texas Constitution provides,
“No person’s property shall be taken, damaged, or destroyed for
***********
The Act states, in pertinent part:
(b) A governmental or private entity may not take private
property through the use of eminent domain if the taking:
(1) confers a private benefit on a particular private party
through the use of property;
(2) is for a public use that is merely a pretext to confer a
private benefit on a particular private party; or
(3) is for economic development purposes, unless the
economic development is a secondary purpose resulting from
municipal community development or municipal urban renewal
activities to eliminate an existing affirmative harm on
society from slum or blighted areas . . . .
TEX. GOV’T CODE § 2206.001(b) (emphases added). The statute lists
in subsection (c) those “traditional” public use projects that
remain unaffected by the statute’s limitations.
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or applied to public use without adequate compensation being made
....” Tex. Const. Art. I §17. Texas courts have held that the
scope of “public use” in the above clause should be ascertained
in part by reference to legislative determinations of public use.
In Housing Authority of Dallas v. Higginbotham, 143 S.W.2d 79, 83
(Tex. 1940), the Texas Supreme Court declared, “The question of
what is a public use is a question for the determination of the
courts; however, where the legislature has declared a certain
thing to be for public use, such declaration of the legislature
must be given weight be the courts.” See also West v. Whitehead,
238 S.W. 976, 978 (Tex. Civ. App.–-San Antonio 1922, writ ref’d).
In Atwood v. Willacy County Navigation District, 271 S.W.2d
137, 140 (Tex. Civ. App.–-San Antonio 1954, writ ref’d n.r.e.),
the Texas Court of Civil Appeals strongly endorsed this
deferential approach, writing “[t]he declaration of the
Legislature upon the subject . . . is entitled to great weight
and respect in arriving at a final decision of the question.”. In
that port-development case, the court further noted that “the
Legislative branch through its use of committees and other fact
finding methods may perhaps occupy a more favorable position than
a judicial body in determining what is necessary to a successful
operation of a municipal enterprise such as a port.” Id. at 141.
It concluded, “Consequently, the implied declaration by the
legislative branch of government, that a taking under a right of
eminent domain was for the public use, will be given deference by
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the courts, until it is shown to involve an impossibility.” Id.
at 143. In Davis v. City of Lubbock, 326 S.W.2d 699 (Tex. 1959),
while citing Higginbotham approvingly, the Texas Supreme Court
undertook a more traditional judicial approach to interpreting
public use. Higginbotham, Atwood, and Davis, while not recent
cases, are the most recent cases on point.
The Act places new limitations on the use of eminent domain
for economic development purposes, or where the taking confers a
benefit on a particular private party. Tex. Govt. Code § 2206.001
(b). If the Act is construed as a legislative effort to narrow or
redefine “public use,” then, in light of the above-cited Texas
caselaw, the Act may implicate Western Seafood’s claims under the
Texas Constitution. The Act does not hold itself out explicitly
as narrowing or redefining public use, but the language of §
2206.001 (b) addresses the uses to which the taken property will
be put. Moreover, the Act was passed in response to Kelo, which
turned on the interpretation of the public use clause in the
United States Constitution. Following West, Higginbotham, Atwood,
and to a lesser extent Davis, therefore, a Texas court
interpreting the Constitutional provision might look to the Act
as recent legislative declaration regarding the scope of the
public use provision. For these reasons, we remand Western
Seafood’s claim under the Texas Constitution to the district
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court for reconsideration of in light of the Act.************
D. STATE STATUTORY CLAIM
Western Seafood also makes a direct challenge to the taking
of its property under the Act. Because Western Seafood did not
raise its state statutory claim before the district court, we
decline to address it on appeal.************* Tex. Commercial Energy
v. TXU Energy, Inc., 413 F.3d 503, 510 (5th Cir. 2005), cert.
denied, 126 S. Ct. 1033 (2006).
E. INJUNCTION
Finally, Western Seafood challenges the district court’s
denial of its request for a temporary and a permanent injunction.
Because the state court proceedings are already underway, and
because none of the exceptions to the Anti-Injunction Act apply,
see 28 U.S.C. § 2283, we affirm.
IV. CONCLUSION
Accordingly, we AFFIRM on federal constitutional and VACATE
and REMAND on state constitutional grounds.
************
As noted, a parallel proceeding involving this
matter is under way in the Texas court system. It may be wisest
for the district court to abstain and allow the Texas courts to
address the effect, if any, of the Act on the Texas Constitution.
*************
We note that it was impossible for Western Seafood
to have raised this issue in the district court, and that Western
Seafood has properly brought this issue before the state court in
pending condemnation proceedings.
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