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

Opinion issued October 30, 2014
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-13-01015-CV
———————————
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
MEMORANDUM OPINION
The City of Houston appeals from an interlocutory order denying its request
to vacate a previously entered agreed order, which the City contends is a temporary
injunction. We agree that it is a temporary injunction. Because it does not comply
with the requirements of the Rules of Civil Procedure, it is void. Accordingly, we
reverse.
Background
For more than four years, the parties in this case have been embroiled in a
dispute relating to Downstream Environmental, L.L.C.’s wastewater treatment
facility. In May 2010, an off-specification discharge into the City’s sewer system
led to the temporary shutdown of Downstream’s facility. Approximately a year
later, Downstream stopped paying for wastewater services and sued the City for
damages arising from the shutdown. Based on an analysis of wastewater samples,
in October 2011 the City informed Downstream that its cost to discharge
wastewater into the sewer system would be increased by approximately 700%.
Downstream argued that this rate increase effectively would put it out of business.
While Downstream sought administrative review of the rate increase, the litigation
between the parties continued.
In April 2012, the City filed a plea to the jurisdiction, arguing that it was
immune from suit under the doctrine of governmental immunity. Downstream
responded that the City had engaged in a proprietary function by offering
wastewater treatment services to industrial users, and therefore it was not immune
from suit. Over the next several months, Downstream responded to the plea, the
City filed a reply, the trial setting was continued, and Downstream moved for
2
summary judgment on the question of whether the City was engaged in a
proprietary or governmental function.
Meanwhile, Downstream continued to seek administrative review of its
complaints regarding the rate increase and sampling procedures. In
September 2012 an administrative hearing was held, but the rate increase issue was
deferred to the trial court. In late October 2012 and without any resolution of the
dispute regarding the rate increase, the City sent Downstream a “Turn Off Notice,”
stating that the account was “seriously past due” and the current balance exceeded
$200,000. The notice advised Downstream that service was scheduled to be
disconnected on November 7, 2012.
In early November 2012, Downstream supplemented its pleadings to request
temporary and permanent injunctive relief. It requested that the court require the
City to take specific actions in regard to sampling of wastewater, to apply specified
discharge rates, and to take “no further administrative action (such as filing a lien
or shutting off wastewater services) without first obtaining a Court Order.”
On November 5, 2012, the district court granted a temporary restraining
order. The TRO required that “wastewater services shall remain on at . . .
Downstream’s place of business.” It did not grant any of Downstream’s other
requested relief. That same day, the court heard arguments on the City’s plea to the
jurisdiction.
3
A temporary injunction hearing was scheduled for November 19, 2012, but
that hearing was continued at the City’s request. Pursuant to a joint motion of the
parties, the November 5 TRO was “continued until the Court rules on the
temporary injunction.”
The trial court later denied the City’s plea to the jurisdiction, and on
November 30, 2012, the City filed a notice of appeal from that interlocutory order.
See TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(a)(8) (West Supp. 2014)
(permitting interlocutory appeal from an order that “grants or denies a plea to the
jurisdiction by a governmental unit as that term is defined in Section 101.001”).
On December 3, the parties filed another joint motion to continue the
temporary injunction hearing, and the following day another order was entered,
which again “continued” the TRO “until the Court rules on the Temporary
Injunction.” Then on December 13, the trial court held a hearing on Downstream’s
application for temporary injunction. Downstream argued that the City intended to
discontinue wastewater services based on an allegedly past-due bill which was the
subject of the parties’ dispute in the trial court, and that it was seeking a temporary
injunction to prevent the discontinuation of wastewater services to its facility. The
City objected to proceeding with the hearing because its interlocutory appeal was
pending, though it did not specifically argue that the proceedings were
automatically stayed. The trial court asked the parties whether an agreement could
4
be reached. The City insisted on some payment, and Downstream conceded that
some payment was due though it disputed the amount. The court then recessed the
hearing, and the parties reached an agreement as a result of off-the-record
discussions. The court then read the parties’ agreement into the record and signed
the parties’ “Rule 11 Agreement and Agreed Order.” Among other things, the
agreed order required that Downstream pay $7,500 to the City toward its
wastewater bill and provided that the City would keep Downstream’s wastewater
services operational until further order of the court or until a further written
agreement of the parties. In addition, the order noted that the case was set for trial
on February 4, 2013.
Downstream paid the $7,500 specified in the agreed order. However, the
case did not proceed to trial on February 4, 2013. Downstream continued using the
City’s wastewater services. However, consistent with its litigation position that it
had a credit with the City due to prior overpayment, Downstream did not make any
payments in addition to the $7,500 required by the agreed order. With its first
interlocutory appeal (from the denial of the jurisdictional plea) still pending, on
October 4, 2013 the City filed a motion in the trial court to vacate the
December 2012 Rule 11 Agreement and Agreed Order. The motion asserted that
since the entry of that order, Downstream had incurred additional charges of more
than $80,000 yet had paid nothing more than the $7,500 required by the order. At
5
that time, the City alleged that Downstream owed in excess of $300,000. The City
argued that it had “no obligation to provide Downstream with free wastewater
service,” it would have disconnected Downstream’s industrial service months
earlier if not for the agreed order, and it no longer agreed with the terms of the
agreed order. The motion did not refer to the agreed order as a temporary
injunction.
At the hearing on the motion to vacate the December 2012 agreed order, the
argument centered on the applicability of an automatic stay arising from the City’s
interlocutory appeal of the denial of its plea to the jurisdiction. See TEX. CIV. PRAC.
& REM. CODE ANN. § 51.014(b), (c). The transcript showed that both the court and
the parties believed such a stay was in effect. During the hearing, neither the
parties nor the court referred to the December 2012 agreed order as an “injunction”
or discussed whether it was void for failure to comply with the formal
requirements for an injunction in the Rules of Civil Procedure. See TEX. R. CIV. P.
681–684. The trial court denied the City’s motion to vacate the agreed order, and
the City filed this interlocutory appeal.
Analysis
On appeal, the City characterizes the December 2012 agreed order as a
temporary injunction and argues that its motion to vacate was, therefore, a motion
to dissolve a temporary injunction. Thus the City argues that the trial court’s denial
6
of its motion to vacate was an appealable interlocutory order. See TEX. CIV. PRAC.
& REM. CODE ANN. § 51.014(a)(4). Downstream contends that the December 2012
order was not an injunction, but rather a Rule 11 agreement. Downstream further
contends, therefore, that the order denying the City’s motion to vacate is not an
appealable interlocutory order, and it urges us to dismiss this appeal for want of
jurisdiction.
I. Interlocutory appellate jurisdiction
We first determine if we have jurisdiction over this interlocutory appeal.
This is a question of law which we review de novo. Texas A & M Univ. Sys. v.
Koseoglu, 233 S.W.3d 835, 840 (Tex. 2007). Ordinarily, Texas appellate courts
have jurisdiction only over final judgments. Rusk State Hosp. v. Black, 392 S.W.3d
88, 92 (Tex. 2012). An exception to this general rule exists when a statute
authorizes an interlocutory appeal. CMH Homes v. Perez, 340 S.W.3d 444, 447
(Tex. 2011). The Civil Practice and Remedies Code provides for an interlocutory
appeal from an order that “grants or refuses a temporary injunction or grants or
overrules a motion to dissolve a temporary injunction as provided by Chapter 65.”
TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(a)(4). Thus we must determine
whether the December 2012 order was a temporary injunction.
A temporary injunction is an extraordinary remedy, the purpose of which is
“to preserve the status quo of the litigation’s subject matter pending a trial on the
7
merits.” Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002). An
applicant seeking a temporary injunction must plead and prove: “(1) a cause of
action against the defendant; (2) a probable right to the relief sought; and (3) a
probable, imminent, and irreparable injury in the interim.” Id. The applicant is not
required to establish that he will prevail trial on the merits; rather, the only
question before the trial court is whether the applicant is entitled to preservation of
the status quo in the meantime. Walling v. Metcalfe, 863 S.W.2d 56, 58 (Tex.
1993); Intercontinental Terminals Co. v. Vopak N. Am., Inc., 354 S.W.3d 887, 897
(Tex. App.—Houston [1st Dist.] 2011, no pet.).
Rules of Civil Procedure 683 and 684 set forth the formal requirements for
an order granting a temporary injunction. Rule 683 provides:
Every order granting an injunction and every restraining order shall
set forth the reasons for its issuance; shall be specific in terms; shall
describe in reasonable detail and not by reference to the complaint or
other document, the act or acts sought to be restrained; and is binding
only upon the parties to the action, their officers, agents, servants,
employees, and attorneys, and upon those persons in active concert or
participation with them who receive actual notice of the order by
personal service or otherwise.
Every order granting a temporary injunction shall include an order
setting the cause for trial on the merits with respect to the ultimate
relief sought. The appeal of a temporary injunction shall constitute no
cause for delay of the trial.
8
TEX. R. CIV. P. 683. Rule 684 requires that an order granting a temporary
injunction “fix the amount of security to be given by the applicant.” TEX. R. CIV.
P. 684.
This case is materially similar to Qwest Communications Corp. v. AT&T
Corp., 24 S.W.3d 334 (Tex. 2000), in which AT&T sued Qwest for damages to its
fiber optic cables, and it also sought a temporary injunction. 24 S.W.3d at 335. At
the hearing on AT&T’s application for a temporary injunction, the parties
informed the trial court that they had reached an agreement and read the agreement
into the record. Id. The agreement required Qwest to notify AT&T of construction
near AT&T’s underground facilities and to conduct certain monitoring during
construction activities. Id. The agreement “dissolved the previously granted
temporary restraining order bond, left open claims for damages, and expired three
years from the date it became effective unless extended or modified in a signed
writing by the parties.” Id. At the conclusion of the hearing, the trial court stated
that judgment was rendered with respect to the application for temporary
injunction. Id. The court instructed AT&T’s counsel to prepare a written order, but
the parties could not agree to the terms of a written order to be submitted to the
court. Id. The trial court later “signed an order following the terms recited into the
record at the temporary injunction hearing.” Id.
9
Qwest filed an interlocutory appeal. Id. The court of appeals noted that the
order did not satisfy the procedural requirements for issuance of a temporary
injunction. Qwest Commc’ns Int’l Inc. v. AT&T Corp., 983 S.W.2d 885, 888 (Tex.
App.—Austin 1999), rev’d, Qwest, 24 S.W.3d 334. For example, it exceeded what
was necessary to preserve the status quo that existed immediately prior to trial,
made no provision for security, and did not set a date for trial. Id. The court of
appeals thus concluded that the order was not a temporary injunction but rather a
“non-appealable interlocutory order enforcing an agreement compromising certain
issues in dispute.” Id. at 889.
The Supreme Court reversed, holding that whether an order complies with
the formal, procedural requirements is not determinative of whether the order is a
temporary injunction because it is the character and function of an order, not
matters of form, that determine its classification. Qwest, 24 S.W.3d at 336–38. The
Court noted that the order restricted Qwest’s conduct, required it to provide notice
and conduct monitoring during certain construction activities, was entered upon
AT&T’s request, was effective immediately, and operated during the pendency of
the suit. Accordingly, the Court concluded that the order was a temporary
injunction. Id. at 336–37.
In this case, Downstream sued the City for damages to its facility and in
regard to a dispute over rates charged for discharging water into the City’s sewer
10
system. Downstream sought to prevent the City from discontinuing wastewater
services. It first obtained a temporary restraining order. At the hearing on the
application for a temporary injunction, in response to a specific question from the
trial court, Downstream affirmed that it was seeking a temporary injunction to
prevent the City from discontinuing wastewater services. After off-the-record
discussions, the parties informed the court that they had reached an agreement, and
the court read the agreement into the record. The court and the parties referred to
the agreement as both a “Rule 11 agreement” and an “agreed order.” The
agreement required the City to continue providing wastewater services to
Downstream’s facility and to undertake and share the costs of additional sampling
and testing. The agreed order provided that it “is in effect until further written
agreement of the parties or Order of this Court.” As in Qwest, the order here
restricted the City’s conduct, required it to undertake certain actions, was entered
after a hearing on Downstream’s request for a temporary injunction, was effective
immediately, and operated during the pendency of the suit. Accordingly, we
conclude that the December 2012 order functions as a temporary injunction for
purposes of determining our interlocutory appellate jurisdiction. See Qwest, 24
S.W.3d at 336–37.
Downstream argues that the December 2012 order was an agreement
pursuant to Rule 11 of the Rules of Civil Procedure, and that this court lacks
11
jurisdiction to review an order denying a motion to vacate such an agreement.
Rule 11 provides that “no agreement between attorneys or parties touching any suit
pending will be enforced unless it be in writing, signed and filed with the papers as
part of the record, or unless it be made in open court and entered of record.” TEX.
R. CIV. P. 11. Although the Supreme Court has “generally treated Rule 11
agreements as separate and distinct from agreed judgments entered thereon,” it
recently held that “nothing in the rules of procedure prohibits a Rule 11 agreement
from being, itself, an agreed judgment, so long as the agreement meets the
requirements for a final judgment.” In re Vaishangi, Inc., No. 13-0169, 2014 WL
2535996, at *2 (Tex. June 6, 2014). Likewise, nothing in the rules of procedure
prohibits a Rule 11 agreement from also being an agreed temporary injunction.
Here the parties reached an agreement pursuant to Rule 11, and they also agreed to
entry of an agreed order. We have already concluded that the order was a
temporary injunction; the fact that the document also satisfied the requirements of
Rule 11 does not preclude it from also being classified as a temporary injunction
subject to interlocutory appellate review. See Qwest, 24 S.W.3d at 336–38; cf.
Vaishangi, 2014 WL 2535996, at *2.
Having concluded that the December 2012 order was a temporary
injunction, we also conclude that the order denying the City’s motion to vacate was
an order denying a motion to dissolve a temporary injunction. See Qwest, 24
12
S.W.3d at 336–38. Thus, we have jurisdiction over the interlocutory appeal from
that order. See TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(a)(4).
II. Validity of temporary injunction order
The City argues that the agreed temporary injunction order is void because it
does not strictly comply with Rules 683 and 684. Specifically, the City argues that
the order does not set out the reasons for its issuance, does not set a bond to be
given by Downstream, and does not contain a valid trial setting because the trial
setting in the order has long since passed.
Rule 683 requires that an order granting a temporary injunction “set forth the
reasons for its issuance” and set the cause for trial on the merits. TEX. R. CIV. P.
683; see Qwest, 24 S.W.3d at 337; Conlin v. Haun, 419 S.W.3d 682, 685–86 (Tex.
App.—Houston [1st Dist.] 2013, no pet.). Rule 684 requires that in an order
granting a temporary injunction, “the court shall fix the amount of security to be
given by the applicant.” TEX. R. CIV. P. 684; see Qwest, 24 S.W.3d at 337. “These
procedural requirements are mandatory, and an order granting a temporary
injunction that does not meet them is subject to being declared void and
dissolved.” Qwest, 24 S.W.3d at 337; see InterFirst Bank San Felipe, N.A. v. Paz
Constr. Co., 715 S.W.2d 640, 641 (Tex. 1986) (stating that requirements of Rule
683 are mandatory and must be strictly followed); Conlin, 419 S.W.3d at 686
(aggregating cases).
13
“The trial court has broad discretion to grant or deny a motion to dissolve a
temporary injunction.” Conlin, 419 S.W.3d at 686; accord Tex. State Optical, Inc.
v. Wiggins, 882 S.W.2d 8, 11–12 (Tex. App.—Houston [1st Dist.] 1994, no writ).
“A trial court abuses its discretion only if it reaches a decision so arbitrary and
unreasonable that it amounts to a clear and prejudicial error of law or if it clearly
fails to correctly analyze or apply the law.” Conlin, 419 S.W.3d at 686 (citing
Intercontinental Terminals, 354 S.W.3d at 892). But a trial court has no discretion
to deny a motion to dissolve a void temporary injunction. See id. at 686–87.
Whether a temporary injunction is void for lack of compliance with the rules of
civil procedure is a question that may be addressed for the first time on appeal. See
Courtlandt Place Historical Found. v. Doerner, 768 S.W.2d 924, 926 (Tex.
App.—Houston [1st Dist.] 1989, no writ) (holding that complaining party need not
“point out the facial inadequacy of the temporary injunction order to the trial
court” before raising such a challenge on appeal); see also 360 Degree Commc’ns
Co. v. Grundman, 937 S.W.2d 574, 575 (Tex. App.—Texarkana 1996, no writ)
(“We are persuaded that the great weight of authority . . . militates against
validating the defective order by means of waiver.”); Fasken v. Darby, 901 S.W.2d
591, 593 (Tex. App.—El Paso 1995, no writ) (rule that injunction is void if it fails
to identify harm that will be suffered if it does not issue “operates to invalidate an
injunction even when the complaining party fails to bring the error to the trial
14
court’s attention.”); cf. Qwest, 24 S.W.3d at 337 (parties did not argue that
injunction was void in trial court or court of appeals because dispute centered on
whether document was a temporary injunction or a Rule 11 agreement).
The agreed temporary injunction in this case did not set forth the reasons for
its issuance or fix the amount of security to be given by the applicant,
Downstream. Accordingly, the injunction is void and must be dissolved. See
Qwest, 24 S.W.3d at 337; InterFirst Bank, 715 S.W.2d at 641 (stating that
requirements of Rule 683 are mandatory and must be strictly followed); Conlin,
419 S.W.3d at 686.
We sustain the City’s first issue. Because we have concluded that the
temporary injunction order must be dissolved, we do not reach the City’s other
issues challenging the order.
15
Conclusion
We reverse the trial court’s order denying the City’s motion to vacate and
remand with instructions to the trial court to dissolve the December 2012 Agreed
Order.
Michael Massengale
Justice
Panel consists of Justices Jennings, Bland, and Massengale.
16