City of Houston v. Downstream Environmental L.L.C. ( 2014 )

Opinion issued April 3, 2014
In The
Court of Appeals
For The
First District of Texas
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NO. 01-12-01091-CV
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THE CITY OF HOUSTON, Appellant
V.
DOWNSTREAM ENVIRONMENTAL, L.L.C., Appellee
On Appeal from the 295th District Court
Harris County, Texas
Trial Court Case No. 2011-29293
DISSENTING OPINION
Appellee, Downstream Environmental, L.L.C. (“Downstream”), claims that
it is entitled to damages and equitable relief for harm it alleges it suffered when
appellant, the City of Houston (“the City”), temporarily closed the discharge line
from Downstream’s liquid waste disposal facility into the City’s sewer system
without notice, kept the discharge line shut for twenty-seven days, and then
discriminatively overcharged it, denied it an administrative hearing on its over-
charge and abuse of process claims, and attempted to place a lien on its property. I
agree with the majority that Downstream’s claims for damages are barred by
governmental immunity. I disagree with the majority’s determination that
Downstream’s claims for equitable and injunctive relief under the Texas
Constitution’s due process and equal protection clauses, Article I, sections 3 and
19,1 are not likewise barred, that the Texas courts have subject matter jurisdiction
over them, and that Downstream is entitled to replead its constitutional claims.
I would reverse the trial court’s order denying the City’s plea to the
jurisdiction, and I would render judgment dismissing Downstream’s suit against
the City for lack of subject matter jurisdiction.
Background
In its constitutional claims, Downstream seeks to void or enjoin allegedly
unconstitutional governmental action by the City. Specifically, it alleges that the
1
Article I, section 19 of the Texas Constitution provides that “[n]o citizen of this
State shall be deprived of life, liberty, property, privileges or immunities, or in any
manner disfranchised, except by the due course of the law of the land.” TEX.
CONST. art. I, § 19. Article 1, section 3 of the Texas Constitution provides that
“[a]ll free men, when they form a social compact, have equal rights, and no man,
or set of men, is entitled to exclusive separate public emoluments, or privileges,
but in consideration of public services.” TEX. CONST. art. I, § 3.
2
City has violated its constitutional due process rights by closing its industrial
wastewater service without notice, discriminatively increasing its rates, denying it
timely administrative hearings on its wastewater bill, and endeavoring to file a lien
and foreclosure on its business. In its equal protection claim, it alleges that it has
been singled out for disparate treatment by the City without a rational basis. It
complains of the City’s sampling, laboratory, and testing methods relied upon to
increase Downstream’s wastewater rates, putting Downstream out of business.
Downstream contends that the City acted without a rational basis and treated it
differently from all other industrial wastewater customers, denying it equal
protection. It also claims that the City violated its due process rights by denying it
administrative hearings that are a prerequisite to filing a claim in state district
court. I would hold that Downstream’s due process and equal protection claims
are barred by the City’s governmental immunity, and, therefore, this Court and the
district court lack subject matter jurisdiction over them. I would further hold that
these claims fail to state a claim upon which relief can be granted and that they
cannot be repleaded to state a viable claim.
Standard of Review
A plea to the jurisdiction based on governmental immunity questions a trial
court’s subject matter jurisdiction. State v. Holland, 221 S.W.3d 639, 642 (Tex.
2007); Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 225–26 (Tex.
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2004). A court may grant a plea to the jurisdiction without affording the plaintiff
an opportunity to amend only if “the pleadings affirmatively negate the existence
of jurisdiction.” Miranda, 133 S.W.3d at 226–27. “Sovereign immunity and its
counterpart, governmental immunity, exist to protect the State and its political
subdivisions from lawsuits and liability for money damages.” Mission Consol.
Indep. Sch. Dist. v. Garcia, 253 S.W.3d 653, 655 (Tex. 2008). While sovereign
immunity protects the State, its agencies, and their officers, governmental
immunity protects subdivisions of the State, like municipalities and school
districts. Id. at 655 n.2 (citing Harris Cnty. v. Sykes, 136 S.W.3d 635, 638 (Tex.
2004)). Both sovereign and governmental immunity “afford the same degree of
protection and both levels of government are subject to the Tort Claims Act.” Id.;
see TEX. CIV. PRAC. & REM. CODE ANN. §§ 101.001–.109 (Vernon 2011 & Supp.
2013); Sykes, 136 S.W.3d at 638.
Governmental immunity includes both immunity from suit, which deprives a
court of subject matter jurisdiction, and immunity from liability, which is an
affirmative defense. Sweeny Cmty. Hosp. v. Mendez, 226 S.W.3d 584, 588–89
(Tex. App.—Houston [1st Dist.] 2007, no pet.) (citing Miranda, 133 S.W.2d at
224). “Immunity from suit bars a suit against the State unless the Legislature
expressly consents to the suit.” Id. at 589 (citing Tex. Natural Res. Conservation
Comm’n v. IT–Davy, 74 S.W.3d 849, 853 (Tex. 2002)). “If the Legislature has not
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expressly waived immunity from suit, the State retains immunity even if its
liability is not disputed.” Id. “Immunity from liability protects the State from
money judgments even if the Legislature has expressly given consent to sue.” Id.
Analysis
A. Due Process
Downstream contends that the City’s “illegal sampling and testing methods,
and illegal rate hikes, are unconstitutional and illegal, and constitutes [sic] an
arbitrary, capricious, and irrational action by the City,” resulting in overcharges of
“approximately $286,296.40,” and that it was denied “an administrative hearing to
address overcharging” by the City, in further violation of its constitutional due
process rights. I would hold that these “due process” claims are moot to the extent
they seek to enjoin the City’s past actions and that, to the extent they do not, they
are disguised claims for monetary damages. Downstream does not otherwise
assert a due process claim upon which relief can be granted, and I would conclude
that the facts in the record upon which Downstream predicates its due process
claims affirmatively negate the existence of any such claim. I would hold that the
Texas courts lack subject matter jurisdiction over Downstream’s due process
claims.
First, Texas courts lack jurisdiction to enjoin past actions. “A case becomes
moot if at any stage there ceases to be an actual controversy between the parties.”
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Nat’l Collegiate Athletic Ass’n v. Jones, 1 S.W.3d 83, 86 (Tex. 1999). An issue
may be moot if it becomes impossible for the court to grant effectual relief. In re
H&R Block Fin. Advisors, Inc., 262 S.W.3d 896, 900 (Tex. App.—Houston [14th
Dist.] 2008, orig. proceeding); see Rawlings v. Gonzalez, 407 S.W.3d 420, 428
(Tex. App.—Dallas 2013, no pet.) (holding that trial court could not enjoin actions
that had already occurred); see also Williams v. Lara, 52 S.W.3d 171, 184 (Tex.
2001) (holding that for plaintiff to have standing, controversy must exist between
parties at every stage of legal proceedings, including appeal; if case becomes moot
parties lose standing to maintain their claims). Thus, to the extent Downstream
seeks to enjoin the City’s past actions that Downstream claims wrongfully caused
it to incur debt to the City, its due process claims are moot, and the Texas courts
lack jurisdiction over them.
Second, to the extent Downstream seeks to enjoin the City’s attempt to
collect Downstream’s debt, I would hold that the claim is a disguised claim to
recover damages in the form of relief from an allegedly improperly-imposed debt
and is therefore barred by governmental immunity. Downstream has admitted, and
the law agrees, that “[t]he due process provisions of the Texas Constitution do not
imply a cause of action for damages.” See Smith v. City of League City, 338
S.W.3d 114, 127 (Tex. App.—Houston [14th Dist.] 2011, no pet.); see also
Hidalgo Cnty. v. Dyer, 358 S.W.3d 698, 708 (Tex. App.—Corpus Christi 2011, no
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pet.) (holding that Article I, Section 19 of Texas Constitution does not authorize
suit for money damages against political subdivision of state). Furthermore, “[a]
due process claim in which the plaintiff seeks monetary damages does not invoke
the trial court’s jurisdiction.” Smith, 338 S.W.3d at 127.
Third, to the extent Downstream seeks to enjoin the City’s collection efforts
on the ground that it was denied an administrative hearing, and thus deprived of
due process of law, the record refutes its contention. There is no indication in the
record that Downstream paid the City the amount of money whose collection it
now seeks to enjoin; nor does the record confirm that Downstream was denied an
administrative hearing on its complaints that it was overcharged and that the City
had wrongfully sought a lien on its property in denial of its due process rights.
Rather, the record reflects the opposite. Specifically, on September 26, 2012, at
Downstream’s request, the City held the requested administrative hearing on the
City’s intent to place a lien on Downstream’s plant for a portion of Downstream’s
past-due wastewater bill. The hearing resulted in a decision finding that
Downstream owed the City amounts in excess of $200,000 and allowing the City
to place the lien on Downstream’s property in the requested amount of $100,000. 2
2
Downstream could have filed a declaratory judgment action seeking to void “the
City’s administrative actions regarding rate increases and frivolous violations,” but
it did not. However, it could not have recovered damages even if it had filed such
an action. “The Declaratory Judgments Act (‘DJA’) provides an express waiver of
governmental immunity for declaratory relief, but not for money damages.”
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Finally, to the extent Downstream is attempting to raise an inverse
condemnation claim alleging that the City has unconstitutionally taken or burdened
its property—also artfully cast as a due process claim—I would hold that the
district court lacked jurisdiction to consider this claim as a matter of law. “A
county court at law has exclusive jurisdiction in Harris County of eminent domain
proceedings, both statutory and inverse, regardless of the amount in controversy.”
TEX. GOV’T CODE ANN. § 25.1032(c) (Vernon Supp. 2013).
For the foregoing reasons, I would dismiss Downstream’s due process
claims as affirmatively negated by the record.
B. Equal Protection
Downstream also contends that the City has violated its constitutional right
to equal protection of the law by “willfully engag[ing] in the intentional
harassment of Downstream’s business by termination of wastewater services,
issuing frivolous violations, illegal sampling, non-approved testing of sample, and
overcharging in in the amount of $286,296.40.” It alleges that City employees
engaged in a “disparagement campaign” against it, that it “has been singled out for
maltreatment, bullying and harassment,” and that it has been “repeatedly denied
Administrative hearings to address overcharging.” Downstream contends that
Gatesco, Inc. v. City of Rosenberg, 312 S.W.3d 140, 144 (Tex. App.—Houston
[14th Dist.] 2010, no pet.) (citing TEX. CIV. PRAC. & REM. CODE ANN. § 37.004(a)
(Vernon 2008) (providing for “declaration of rights, status, or other legal
relations” when construction or validity of municipal ordinance is challenged)).
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“[n]o other industrial customer in the City has been treated like Downstream” and
that the closure of Downstream’s wastewater service on May 26, 2010, without
prior notice “violates the equal protection clause, Article I, Section 3 of the Texas
Constitution.” It therefore seeks to enjoin the City’s “administrative actions
regarding rate increases and frivolous violations.”
“[T]he equal protection clause of the state constitution directs governmental
actors to treat all similarly situated persons alike.” City of Houston v. Johnson, 353
S.W.3d 499, 503 (Tex. App.—Houston [14th Dist.] 2011, pet. denied); see City of
Cleburne v. Cleburne Living Ctr., 473 U.S. 432, 439–40, 105 S. Ct. 3249, 3254
(1985) (discussing federal constitution’s equal protection clause). “[T]o assert an
equal protection claim, the deprived party must establish two elements: (1) that he
was treated differently than other similarly-situated parties; and (2) he was treated
differently without a reasonable basis.” Sanders v. Palunsky, 36 S.W.3d 222, 225
(Tex. App.—Houston [14th Dist.] 2001, no pet.); City of Lubbock v. Corbin, 942
S.W.2d 14, 22 (Tex. App.—Amarillo 1996, writ denied). In an equal protection
case, “[w]here neither a suspect classification nor a fundamental right is involved,
the challenged law survives constitutional scrutiny if it is rationally related to a
legitimate governmental purpose.” Johnson, 353 S.W.3d at 503–04 (citing
Kadrmas v. Dickinson Pub. Sch., 487 U.S. 450, 457–58, 108 S. Ct. 2481, 2487
(1988)).
9
Here, the record shows that Downstream’s Industrial Waste Permit
authorizes it “to discharge into the City’s collection system raw liquid waste in
accordance with the effluent limitation, monitoring requirements and other
conditions” set forth in the Permit. The Permit is circumscribed by the City’s Code
of Ordinances, Chapter 47 (“Water and Sewers”), Article V (“Disposal of
Industrial Wastes Through City Sewer System”), and by the federal Clean Water
Act.
Downstream admits it accepted waste that was outside the limits of its
Permit. Specifically, in his affidavit to the Houston Police Department,
Downstream’s president Dan Noyes judicially admitted that, on the afternoon of
May 25, 2010, Downstream received from a G.I. Environmental truck
“approximately 1000-2000 gallons” of waste that was at first normal in
appearance, “but then turned nasty & malodorous with an industrial type odor” and
had an appearance “darker than usual.” Downstream also admitted in its original
petition that, on May 25 and 26, 2010, G.I. Environmental trucks delivered gallons
of “non-conforming waste” and that “[t]he non-conforming material was very dark
and smelled like onions. It was highly odorous. When the non-conforming
material was diluted, it turned from black to green.”
When G.I. Environmental filed suit against Downstream over the May 25
and May 26 incidents, Downstream counterclaimed, alleging that the non-
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conforming waste it received was a result of G.I. Environmental’s negligent
“failure to wash out their truck after hauling hazardous industrial” waste and that
G.I. Environmental’s “[n]egligence caused pollution damages to Downstream’s
plant operations, and the shut down by the City.” Downstream stated that “[t]he
plant was closed by the City for 27 days of investigation due to problems at the
City’s plant, and the mixed loads brought by G.I. Environmental to Downstream.”
In other words, Downstream admitted to releasing large amounts of hazardous
industrial waste into the City’s waste-water treatment system that caused harm at
the City’s water treatment facility and that also caused its own plant to be shut
down for twenty-seven days for investigation into the cause of the release of toxic
pollutants into the City’s waste-water treatment system, and it blamed G.I.
Environmental for causing the damage to the City’s water treatment facility and
the shutdown of its own plant. By contrast, in this litigation, Downstream
inconsistently blames the City for causing its losses by shutting down its facility
and calls the City’s actions, including the losses due to the shutdown and the rate
hike following the contamination, a violation of Downstream’s right to equal
protection of the law.
Downstream does not claim that it belongs to a suspect class or that the
constitutional rights the City allegedly violated were fundamental. Therefore, it
can establish that it was denied equal protection only by showing that the City had
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no rational basis for its ordinances circumscribing Downstream’s permit to
discharge treated wastewater into the City’s sewer system. See Kadrmas, 487 U.S.
at 457–58, 108 S. Ct. at 2487; Johnson, 353 S.W.3d at 503. However, it is clear
that a municipality, as a governmental entity of the state, has not only the
constitutional right but the constitutional responsibility to regulate the discharge of
toxic pollutants into the municipality’s water supply to protect the public health
and safety of its residents. See U.S. CONST. amend. X (setting out “police powers”
of state). Downstream does not allege that the City has no such power, nor could
it.
Moreover, Downstream has alleged no facts that support its claim that the
City violated its equal protection rights by “willfully engag[ing] in the intentional
harassment of Downstream’s business by termination of wastewater services,
issuing frivolous violations, illegal sampling, non-approved testing of samples, and
overcharging in in the amount of $286,296.40”—and the acknowledged emergency
circumstances of the City’s actions refute any such allegation. Downstream has
recited no facts to support its conclusory allegation that City employees engaged in
a “disparagement campaign” against it or that it “has been singled out for
maltreatment, bullying and harassment.” Nor has Downstream set forth any basis
for its contentions that “[n]o other industrial customer in the City has been treated
like Downstream” and that the closure of Downstream’s wastewater service on
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May 26, 2010—the second consecutive day on which Downstream discharged
hazardous industrial waste into the City’s sewer system that Downstream admits
caused pollution damages to its plant operations and the shut down by the City—
“violates the equal protection clause, Article I, Section 3 of the Texas
Constitution.”
Contrary to Downstream’s equal protection allegations, no rational
governmental entity could deem Downstream’s violations of the City’s ordinances
designed to protect the public health and safety to be “frivolous violations” when
those violations permitted large amounts of hazardous industrial waste to be
discharged by Downstream into the City’s waste-water treatment system. The
record demonstrates that the City shut down Downstream’s plant until the source
and nature of the contamination could be identified and the contamination stopped,
it passed on to Downstream the costs of its investigation, and it passed on to
Downstream the costs of its remedial actions to protect the municipal water supply.
No rational jury could find that these actions constitute “frivolous” or irrational
administrative actions. Finally, the record does not support Downstream’s claim
that it was discriminated against by being denied an administrative hearing to
protest the City’s actions and rate hike or by the City’s placement of a lien on its
property to secure its unpaid debt to the City.
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A court may grant a plea to the jurisdiction without affording the plaintiff an
opportunity to amend when “the pleadings affirmatively negate the existence of
jurisdiction.” Miranda, 133 S.W.3d at 226–27. I would hold that that is plainly
the case here.
Conclusion
I would hold that Downstream has failed to state a constitutional due process
or equal protection claim and that its claims cannot be restated to support a
constitutional claim over which the Texas state courts have jurisdiction. Therefore,
I would reverse the judgment of the trial court denying the City’s plea to the
jurisdiction, and I would render judgment dismissing Downstream’s suit for lack of
subject matter jurisdiction.
Evelyn V. Keyes
Justice
Panel consists of Justices Keyes, Higley, and Massengale.
Keyes, J., dissenting.
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