City of Houston v. Downstream Environmental L.L.C.

• Court: Court of Appeals of Texas
• Decided: April 3, 2014
• Docket: 01-12-01091-CV
• Status: Published

Opinion

Opinion issued April 3, 2014

In The

Court of Appeals For The

First District of Texas ———————————— NO. 01-12-01091-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

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.

3 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

4 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.”

5 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

6 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.”

7 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)).

8 “[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-

10 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

11 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

12 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.

13 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.