the City of Galveston, Texas BP Energy Company, Intervenor Board of Trustees of the Galveston Wharves v. Nancy Saint-Paul

Opinion issued February 14, 2008  

    In The  

Court of Appeals

For The  

First District of Texas

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NO. 01-06-00580-CV  

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CITY OF GALVESTON, TEXAS, BP ENERGY COMPANY, AND THE BOARD OF TRUSTEES OF THE GALVESTON WHARVES, Appellants/Cross-Appellees

V.

NANCY SAINT-PAUL, Appellee/Cross-Appellant  

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On Appeal from the 122nd Judicial District

Galveston County, Texas

Trial Court Cause No. 05CV0503

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MEMORANDUM OPINION

          This appeal concerns whether three meetings that resulted in an option for a lease for property on Pelican Island, which is owned by appellant, the City of Galveston (“the City”), but controlled and managed by appellant, the Board of Trustees of the Galveston Wharves (“the Board”), met the requirements of the Texas Open Meetings Act (“the Act”). See Tex. Gov’t Code Ann. §§ 551.001–.146 (Vernon 2004 & Supp. 2007). After a bench trial, the trial court determined that (1) the notice for the meeting by the Board to approve a Lease Option Agreement (“the Option Agreement”) with BP Energy Company was inadequate under the Act because it “did not provide sufficient information on the subject to be considered by the governing body”; (2) the notice for the City’s meeting for the attornment of the lease was also inadequate under the Act because it “did not provide sufficient information on the subject to be considered by the City Council”; and (3) the notice for the meeting by the Board to approve the Replacement Lease Option Agreement (“the Replacement Agreement”) met the requirements of the Act, replaced the Option Agreement, and was not a ratification of the Option Agreement.  

          In a single issue, the Board asserts that the notice for the meeting at which it agreed to the Option Agreement was adequate. In two issues, the City contends that its notice for the Attornment Agreement meeting met the requirements of the Act and that it should have been the prevailing party entitled to an award of attorney’s fees under the Act. In four issues in the cross-appeal, appellee, Nancy Saint-Paul, contends that the trial court erred (1) by finding valid the Replacement Agreement because it merely ratified the Option Agreement that had been formed in violation of the Act; (2) by refusing to hold the Option Agreement invalid on the grounds that it violated the Texas Government Code as it did not involve competitive bidding and it was a sale disguised as a lease; and (3) by sustaining the Board’s claim of the attorney-client privilege for certain documents requested during discovery.

          We conclude that the notice of the Board’s meeting to consider the Replacement Agreement met the requirements of the Act and therefore affirm the trial court’s determination that the Replacement Agreement was valid. We dismiss as moot the Board’s sole issue, which asserts that the notice for its meeting regarding the Option Agreement met the requirements of the Act, because the Option Agreement was replaced by the Replacement Agreement. We also dismiss Saint-Paul’s challenges aimed at voiding the Option Agreement for the Board’s failure to comply with the bidding requirements because she lacks standing to make that complaint. We reverse the portion of the trial court’s judgment in which it ruled that the notice for the City’s Attornment Agreement meeting did not meet the requirements of the Act, and we remand to the trial court to consider the City’s request for attorney’s fees. We also do not reach Saint-Paul’s evidentiary challenge, which is contingent on a remand of the Board’s appeal.  

Background

          The City set aside its wharf and terminal properties as a separate city utility known as the Galveston Wharves. The Galveston Wharves and the “income and revenue therefrom” are “fully managed, controlled, maintained and operated by a Board of Trustees.” Although the City retains ownership of the property, the Board has the powers of “fixing of charges, the authorization of expenditures, the acquisition of properties, the determination of policies, and, in general, the complete management and control of the Galveston Wharves and the income and revenue thereof.”

          The Board, created in 1940 by the City, consists of seven members and has regularly scheduled meetings once a month. It takes four members to constitute a quorum. To carry out its day to day business, the Galveston Wharves has a full time staff led by the Port Director, Steve Cernak.

          As early as 2002, Cernak began discussions with BP about a possible lease of a site for BP to construct and operate a liquefied natural gas terminal. In May 2003, two representatives from BP met with three members of the Board. The meeting was held over lunch in a restaurant. The participants in this meeting described the discussion as a “get-to-know-you meeting,” where the BP representatives provided a general description of the proposed project. In April 2004, Cernak signed a Letter of Option Intent that set forth the initial business terms concerning a lease option agreement that included a confidentiality provision that prohibited disclosure of the existence of the negotiations or subject matter. Through the summer of 2004, BP’s counsel worked with Hulse Wagner, counsel for the Galveston Wharves, to prepare a proposed agreement that would require approval by the Board.  

          The Board’s meeting to discuss the Option Agreement occurred on September 20, 2004. The notice for that meeting was posted in public on September 16, four days before the meeting. The notice stated that the meeting was to “Discuss and Consider Approval of Option Agreement for the Lease of Approximately 185 Acres of Land on Pelican Island.” After the meeting was convened, the Board met in an executive session, which is closed to the public, to discuss the lease. During the executive session, the Board desired changes to the proposed agreement. Cernak left the room to call a BP representative to discuss whether BP would accept the proposed changes and BP agreed to the changes. The Board adjourned its executive session, but immediately reconvened in an open meeting, where it approved the agreement. The terms of the Option Agreement gave BP a three-year option to enter a lease on a 185 acre tract on Pelican Island to allow BP to construct a liquefied natural gas import terminal or for other “energy-related purposes.” The underlying lease has a 35-year term, with two 15 year extensions.   

          Although Pelican Island is managed by the Board, it is owned by the City, which therefore also had to approve the lease through an attornment agreement. The City’s meeting to discuss the Attornment Agreement was on September 23, 2004. The Attornment Agreement provided that the City would assume the rights and obligations of the Board under the lease if the Board ever ceased to be the lessor of the property. The notice for that City Council’s meeting stated,

Consider for action approving an agreement to execute an Attornment Agreement between the City of Galveston, the Port of Galveston, and BP Energy company relating to a Lease Agreement by and between the Board of Trustees of the Galveston Wharves and BP Energy Company for approximately 185.134 acres located on Pelican Island.

The City agreed to the Attornment Agreement at that meeting.

          At about the same time as the City’s meeting, media attention surrounded the topic of the lease of the land on Pelican Island. In a six month period of time beginning on September 21, 2004, the Galveston Daily News published multiple articles regarding the proposed liquefied natural gas project. The Houston Chronicle also published articles. Advertisements supporting and opposing the project were published by BP and groups opposed to the project, respectively. To inform the public about the proposed project, BP representatives also made presentations to community groups and neighborhood associations and held two open houses. On its website, BP also provided information about the project.

          About five months after the Board agreed to the Option Agreement, it had a meeting on February 28, 2005 to discuss an agreement to replace the Option Agreement. The highly detailed notice for that meeting undisputedly complied with the Act. At the meeting, the Board approved the Replacement Agreement, which was intended to supercede and replace the Option Agreement, although the underlying lease remained the same. The Board wanted to replace the Option Agreement with the Replacement Agreement so that an additional matter could be added into the agreement. The Board, which had received some criticism about the notice for the meeting where it entered into the Option Agreement, also wanted to respond to the criticism by holding another meeting about the lease with a more detailed notice about the topic. After the Board voted to approve the Replacement Agreement, Saint-Paul filed suit to challenge the actions by the Board and the City.   

Saint-Paul’s Cross-Appeal

          In four issues, Saint-Paul challenges the trial court’s rulings that did not void the Replacement Agreement or the Option Agreement and that allowed the Board to exclude discovery by its claim of the attorney-client privilege.

A.      The Replacement Agreement

          In her first issue, Saint-Paul contends that the trial court erred by not voiding the Replacement Agreement because the vote to accept the Replacement Agreement is an illegal ratification of the Board’s prior void action approving the Option Agreement. Specifically, Saint-Paul asserts that the essential terms of the Replacement Agreement are the same as the Option Agreement, in that the rentals, base terms, and extension terms are the same. She contends that the Option Agreement was “tainted irretrievably by the fact that the agreement was reached in a closed session pursuant to an ineffective notice.” She points to Cernak’s actions in leaving the closed meeting and then returning to the meeting after speaking to the BP representative as violations of the requirement that votes be conducted in open meetings. Further, she points to evidence that she claims shows that the Board “‘cut’ their deal with BP at or before the closed session.”   

          The Board responds that the Replacement Agreement was valid because a governmental entity that has violated the Act may subsequently take the same action as long as the subsequent action complies with the Act’s provisions and the subsequent action does not have retroactive effect. The Board also asserts that the record does not contain any evidence that the Board violated the Act in its notice for the meeting where it agreed to the Option Agreement.  

          The purpose of the Act is to ensure that citizens have the opportunity to observe governmental decision making. Cox Enters., Inc. v. Bd. of Trs., 706 S.W.2d 956, 960 (Tex. 1986). The Act uses two principal mechanisms to accomplish this. First, subject to specified exceptions, the Act requires that meetings of a quorum of a government body be open to the public. Tex. Gov’t Code Ann. § 551.002 (Vernon 2006). Second, the Act entitles the public to receive advance notice of the subjects to be discussed at an open meeting so that citizens can decide if they want to observe the meeting. See id. at § 551.041. The Act ensures compliance with the public meeting and advance notice requirements by making “voidable” any action taken by a government body in violation of the Act. See id. at § 551.141. However, the Act does not prevent governmental bodies from curing prior Act violations. See Fielding v. Anderson, 911 S.W.2d 858, 864 (Tex. App.—Eastland 1995, writ denied); see also Smith County v. Thornton, 726 S.W.2d 2, 3 (Tex. 1986) (noting that original action that was voidable for lack of adequate notice can be authorized by later action by governmental body that complies with Act). An action taken in violation of the Act cannot be ratified to have retroactive effect, but the governmental body may reconsider and re-authorize an action. Burks v. Yarbrough, 157 S.W.3d 876, 883 (Tex. App.—Houston [14th Dist.] 2005, no pet.) (citing Markowski v. City of Marlin, 940 S.W.2d 720, 726 (Tex. App.—Waco 1997 pet. denied)); see also Fielding, 911 S.W.2d at 864–65 (holding that governmental body may re-authorize action taken at prior meeting that did not comply with Act because otherwise “once a governmental body has done a void act, the situation could never be corrected”).  

          Saint-Paul correctly notes that the Replacement Agreement is similar to the Option Agreement in that they both terminate on the same day, have the same underlying lease, and rely on the same consideration by BP since BP paid no new consideration under the Replacement Agreement. Although the agreements share similarities, we agree with the trial court’s determination that the Replacement Agreement was not merely a ratification of an earlier void act. The Replacement Agreement differed from the Option Agreement by including a term not in the Option Agreement, namely that BP would reimburse the Galveston Wharves for the cost of constructing a road to access the property. The Board gave a highly detailed notice for the meeting where it agreed to the Replacement Agreement and there is no dispute that the highly detailed notice satisfied the requisites of the Act. By its express terms, the Replacement Agreement supersedes and replaces the Option Agreement. We conclude that the trial court did not err by determining that the Board’s Replacement Agreement did not merely ratify the Option Agreement. See Burks, 157 S.W.3d at 883 (“Even assuming the Commissioners Court somehow held an unlawful meeting by signing the new check, any impropriety was corrected when the Commissioners Court, at Burks’s request, subsequently reconsidered the issue and again approved payment.”). 

          Saint Paul cites to Esperanza Peace and Justice Ctr. v. City of San Antonio, 316 F. Supp. 2d 433 (W.D. Tex. 2001) and Dallas County Flood Control Dist. No. 1 v. Cross, 815 S.W.2d 271, 283–84 (Tex. App.—Dallas 1991, writ denied), which hold that actions committed in violation of the Act can later be re-taken at a subsequent properly convened meeting, but determining that the Act was violated by facts that showed that the subsequent meeting merely ratified action taken at an earlier improper meeting. See Esperanza, 316 F.Supp.2d at 442 (determining Act was violated by facts that showed mayor and members of city council met in closed session, during which they approved budget through consensus memorandum that they signed and holding that subsequent open meeting when council reconvened next day did not satisfy Act because members had already signed their approval of consensus-memorandum-budget that eliminated funding for plaintiff’s organization prior to open meeting and no new discussion on budget occurred); Cross, 815 S.W.2d at 283–84 (determining that Act was violated by facts that showed that sale of property at closed meeting violated Act and that subsequent open meeting approving of sale was also in violation of Act because sale had been completed, consideration paid, and deed delivered before occurrence of open meeting; holding that subsequent meeting merely improperly ratified earlier sale). Assuming that Saint-Paul is correct that the Board violated the Act by reaching the agreement with BP before the meeting at which the Board agreed to the Option Agreement, an allegation that the trial court found she failed to prove, the facts are distinguishable from Esperanza and Cross. See Esperanza, 316 F.Supp.2d at 442; Cross, 815 S.W.2d at 283–84. Unlike Esperanza and Cross, the Replacement Agreement does not merely ratify the Option Agreement, but it instead supercedes that agreement and changes it by adding another term. See Esperanza, 316 F.Supp.2d at 442; Cross, 815 S.W.2d at 283–84. The trial court’s determination that the Replacement Agreement did not merely ratify the Option Agreement is also supported by facts that demonstrate that, in response to criticism about the notice for the meeting where it agreed to the Option Agreement, the Board desired to reconsider the matter after it posted a sufficiently detailed notice of the topic for consideration. We hold that the Board did not violate the Act by meeting to discuss and approve the Replacement Agreement. We overrule Saint-Paul’s first issue.

B.      The Option Agreement

          In her second and third issues, Saint-Paul contends that the proposed lease to BP is illegal and cannot be enforced because it was not the result of the bidding requirement in Local Government Code section 272.001 that applies to the sale of public land, which she claims applies here for this “sale disguised as a lease.”   Saint-Paul presents one joint argument under these two issues relating to whether the lease was in fact a sale. We therefore treat these issues together. The Board asserts that Saint-Paul does not have standing to contest the invalidity of the lease to BP. BP similarly asserts that Saint-Paul does not have standing to bring her suit because she cannot show a particularized injury, distinct from other members of the public.  

          Standing implicates a court’s subject matter jurisdiction. Patterson v. Planned Parenthood of Houston, 971 S.W.2d 439, 442–43 (Tex. 1998). Standing is a component of subject-matter jurisdiction, cannot be waived, and is essential to a court’s power to decide a case. Williams v. Lara, 52 S.W.3d 171, 178 (Tex. 2000); Bland Indep. School Dist. v. Blue, 34 S.W.3d 547, 553–54 (Tex. 2000). Unless a particular statute conveys standing, a plaintiff who sues to challenge governmental decision-making must demonstrate that she has an interest in a conflict separate from that of the general public and that the defendant’s actions have caused the plaintiff some particular injury. Williams, 52 S.W.3d at 178–79; Bland Indep. School Dist, 34 S.W.3d at 555–56.  

          To show standing under section 272.001, a plaintiff must show “a particular personal interest that was harmed by the alleged defect” in a disposition of public property. Bell v. Katy Indep. Sch. Dist., 994 S.W.2d 862, 866 (Tex. App.—Houston [1st Dist.] 1999, no pet.). Saint-Paul offered no evidence, nor does she claim, that she would have submitted a bid to purchase the property had a competitive bid process existed. She therefore lacks standing to assert a cause of action under section 272.001. See id. (holding that plaintiffs lacked standing where they did not contend that deficiency in notice under section 272.001 caused them to lose opportunity to bid on property or that they had interest in attempting to purchase property). Because we lack subject-matter jurisdiction, we dismiss Saint-Paul’s second and third issues.

C.      Evidentiary Ruling

          In her fourth issue, Saint-Paul contends that the trial court erred by “sustaining the [Board’s] plea of attorney-client privilege as to certain documents which had been released in discovery, and then recalled by the [Board].” Saint-Paul specifically points to Exhibit 48, which is an email dated February 13, 2004 from the Board’s attorney Wagner to Cernak. According to Saint’s Paul’s brief, the exhibit “is a sealed copy of a document which proves that the [Board] and their counsel knew at the outset that the course they eventually pursued as illegal.” The Board responds that the trial court did not err because the documents in question are protected by the attorney-client privilege.

          Saint-Paul’s fourth issue is contingent on remand. In her prayer, Saint-Paul states, “Cross Appellant conditionally prays that in the event of remand, the Court of Appeals reverse the trial Court’s holding as to PX-48 (Ground 4).” Although we are remanding to the trial court for consideration of attorney’s fees to the City, we are not remanding any part of the appeal concerning the Board, which is the entity to which this exhibit pertains. We therefore do not reach Saint-Paul’s fourth issue.   

Appeal by the Board

          In its sole issue, the Board asserts that the trial court erred by finding that the notice was inadequate under the Act for the meeting that resulted in the Board’s approval of the Option Agreement. In its appeal, the Board prays for reversal of the declaration that the notice was inadequate, but it does not affirmatively ask for rendition or remand, nor does it raise the issue of attorney’s fees. Having upheld the trial court’s determination that the Replacement Agreement properly replaced and superseded the Option Agreement, the matter of whether the Board’s notice concerning the meeting where it agreed to the Option Agreement is not a live controversy because the Option Agreement is no longer in effect. Because the Option Agreement is no longer in effect, any decision we might make will not affect the parties rights. See Pinnacle Gas Treating, Inc. v. Read, 104 S.W.3d 544, 545 (Tex. 2003) (noting that case is moot if court’s actions cannot affect parties’ rights). Therefore, any opinion on the adequacy of notice for the meeting that resulted in the Option Agreement would be impermissibly advisory. See Valley Baptist Med. Ctr. v. Gonzalez, 33 S.W.3d 821, 822 (Tex. 2000) (ruling on moot controversy constitutes impermissible advisory opinion). We dismiss the Board’s appeal as moot.   

Appeal by the City

          In two issues, the City challenges the trial court’s determination that the notice for the Attornment Agreement meeting was inadequate and the trial court’s failure to consider the City as the prevailing party for purposes of awarding attorney’s fees. In its findings of fact, the trial court concluded that the City’s “Notice of the subject matter (attornment agreement) of the 9/23/2004 workshop and council meetings was insufficient and violated [the Act].”   

A.      Sufficiency of the City’s Notice

          In its first issue, the City contends that the trial court erred by concluding that the notice did not meet the requirements of the Act because the notice fairly advised the “reader of the subject or topic for the governing body’s consideration.” The City contends that the notice satisfied the requirements of the Act by identifying the parties to the agreement and the type of agreement at issue, as well as the statement that it relates to an underlying lease between the Galveston Wharves and BP. Saint-Paul replies that the trial court correctly concluded that the notice was not adequate because it did not mention the purpose of the underlying lease, which was a liquefied natural gas facility, or the length of the term of the lease, which indicates that the transaction was in reality a sale disguised as a lease.

          The Act provides, “A governmental body shall give written notice of the date, hour, place, and subject of each meeting held by the governmental body.” Tex. Gov’t Code Ann. § 551.041 (Vernon 2004). When the contents of the notice are undisputed, as here, the sufficiency of the notice becomes a question of law that we review de novo. Burks, 157 S.W.3d at 883. “As long as a reader is alerted to the topic for consideration, it is not necessary to state all of the consequences which may flow from consideration of the topic.” Cox Enters., 706 S.W.2d at 958. “Even if a notice is not as clear as it could be, it is adequate as long as it is sufficiently descriptive to alert a reader that a particular subject will be addressed.” Burks, 157 S.W.3d at 883. However, the greater the public interest in the matter to be discussed, the more specific the notice must be. Cox Enters., 706 S.W.2d at 959; City of Laredo v. Escamilla, 219 S.W.3d 14, 19 (Tex. App.—San Antonio 2006, pet. denied) (citing Markowski, 940 S.W.2d at 726). “The focus of our analysis is a comparison between the content of the notice given and the action taken at the meeting.” Rettberg v. Tex. Dep’t of Health, 873 S.W.2d 408, 412 (Tex. App.—Austin 1994, no writ); see also Odessa Tex. Sheriff’s Posse, Inc. v. Ector County, 215 S.W.3d 458, 473 (Tex. App.—Eastland 2006, pet. denied); Markowski, 940 S.W.2d at 726.  

          The action taken at the meeting was that the City entered into an “Agreement Regarding Attornment Agreement.” The Agreement contained two exhibits: the proposed lease between BP and Galveston Wharves and a proposed attornment agreement between BP and the City. The Agreement provided that if BP entered into a lease with the Galveston Wharves “in substantially the form attached hereto” then the City would “enter into the Attornment Agreement in substantially the form attached hereto.”

          The notice for that City Council’s meeting states,

Consider for action approving an agreement to execute an Attornment Agreement between the City of Galveston, the Port of Galveston, and BP Energy company relating to a Lease Agreement by and between the Board of Trustees of the Galveston Wharves and BP Energy Company for approximately 185.134 acres located on Pelican Island.

          The City’s notice specifically discloses (1) the parties to the proposed agreement, namely, the City, the Port of Galveston, and BP; (2) the type of proposed agreement, namely, an attornment agreement; (3) the subject of the underlying agreement to be attorned, namely, a lease agreement; (4) the parties to the underlying lease agreement, who are identified as the Board and BP; and (5) the location and size of the property that is identified as 185.134 acres located on Pelican Island. The notice stated that the City would consider approving an “agreement to execute an Attornment Agreement,” which is what the City did. The notice further identified that the Attornment Agreement related to a lease between BP and the Galveston Wharves, which is the action taken at the meeting. We hold that the notice in this case is specific enough to notify a reader of the subject of the City’s meeting. See Rettberg, 873 S.W.2d at 412. We sustain the City’s first issue.

B.      Attorney’s fees

          In its second issue, the City contends that “[b]ecause the district court erred in failing to dismiss with prejudice all of St. Paul’s claims, the court correspondingly erred in failing to regard the City as a prevailing party for the purpose of determining whether the City is entitled to an award of attorneys’ fees under” the Act.  

          Section 551.142 of the Government Code provides that a prevailing party in a Texas Open Meetings Act suit may recover its fees and costs. Tex. Gov’t Code Ann. § 551.142 (Vernon 2004). Whether to make an award of fees and costs under the Act falls within the trial court’s sound discretion. Bell, 994 S.W.2d at 867. Here, the trial court granted the relief sought by Saint-Paul against the City, but ordered that each party bear its own attorney’s fees and costs. Because we have reversed the trial court’s judgment concerning the Act as against the City, we remand for the trial court to exercise its discretion whether to award attorney’s fees to the City. See Odessa Tex. Sheriff’s Posse, 215 S.W.3d at 474 (remanding for attorney’s fees issue when trial court did not have chance to exercise its discretion under Act); Moosavideen v. Garrett, No. 01-06-00002-CV, 2007 WL 2130566, at *8 (Tex. App.—Houston [1st Dist.] July 26, 2007, no pet. h.) (remanding to trial court to reconsider attorney’s fees issue when trial court’s declaratory judgment was reversed). We sustain the City’s second issue.

Conclusion

          We affirm the trial court’s judgment concerning the Board’s adoption of the Replacement Agreement. We dismiss Saint-Paul’s appeal concerning the lack of bidding because she lacks standing to assert that claim. We dismiss the appeal by the Board because the issue is moot. We do not reach the discovery challenge by Saint-Paul. We reverse the trial court’s declaration that the City’s notice was inadequate and hold that it was adequate to meet the requirements of the Texas Open Meetings Act. We remand this cause for the trial court to consider the City’s request for attorney’s fees under the Texas Open Meetings Act.

                                                             Elsa Alcala

                                                             Justice

Panel consists of Chief Justice Radack and Justices Jennings and Alcala.