Ac Interests, L.P. v. Tex. Comm'n On Envtl. Quality

• Decision Date: 23 March 2018
• Docket Number: NO. 16–0260,16–0260
• Citation: 543 S.W.3d 703
• Parties: AC INTERESTS, L.P., formerly American Coatings, L.P., Petitioner, v. TEXAS COMMISSION ON ENVIRONMENTAL QUALITY, Respondent
• Court: Texas Supreme Court

543 S.W.3d 703

AC INTERESTS, L.P., formerly American Coatings, L.P., Petitioner,

v.TEXAS COMMISSION ON ENVIRONMENTAL QUALITY, Respondent

NO. 16–0260

Supreme Court of Texas.

Argued October 11, 2017

Opinion Delivered: March 23, 2018

Priscilla M. Hubenak, Anthony C. Grigsby, Atty. Gen. W. Kenneth Paxton Jr., James E. Davis, Heather Gebelin Hacker, Brantley D. Starr, Jeffrey C. Mateer, Cynthia Woelk, for Texas Commission on Environmental Quality.

Claude William Smalling III, for AC Interests, L.P. formerly American Coatings, L.P.

John P. Devine, Justice

The Texas Clean Air Act provides that a person adversely affected by a Texas Commission on Environmental Quality (TCEQ) ruling may appeal by filing a petition in a Travis County District Court within 30 days of the ruling. TEX. HEALTH & SAFETY CODE § 382.032(a), (b). The Act further requires serving citation on the TCEQ within 30 days of filing the petition. Id, § 382.032(c). The petitioner here failed to meet this latter requirement, and the district court dismissed the appeal on the TCEQ's motion. The court of appeals affirmed, concluding that the service deadline was mandatory and required dismissing the appeal. 521 S.W.3d 58, 62–63 (Tex. App.–Houston [1st Dist.] 2016) (mem. op.). We do not understand the Act to require dismissal under the circumstances here. Accordingly, we reverse and remand.

I. Background

The TCEQ is charged with administering the Texas Clean Air Act, which establishes a regulatory scheme to "safeguard the state's air resources from pollution." TEX. HEALTH & SAFETY CODE §§ 382.002(a), .011(a)(1). As part of the Act's implementation, the TCEQ has adopted rules to regulate and control air pollution and contaminants. See 30 TEX. ADMIN. CODE §§ 101.300 – .304 (Tex. Comm'n on Envtl. Quality, Emission Credit Program) (2018). These rules authorize the TCEQ to grant Emission Reduction Credits (ERCs) when certain authorized emissions are reduced or eliminated under an emissions banking and trading program. See id. § 101.301. A company may generate ERCs, for example, by permanently shutting down a facility that lawfully emits volatile organic compounds or nitrogen oxides. Id. §§ 101.302(a)(1), .303(a)(1)(A).

An ERC created under the TCEQ's rules is a limited authorization to emit pollutants. Id. § 101.302(k). The emission reduction, however, must be certified, which means that the reduction must be "enforceable, permanent, quantifiable, real and surplus," among other things. Id. § 101.302(d)(1)(A). If the TCEQ certifies the reduction, the company may trade or use its ERCs within a designated area, for example, to offset emissions from a new source. Id. § 101.306(a)(1).

In 2013, AC Interests asked the TCEQ to certify ERCs. The TCEQ reviewed and denied the application. This prompted AC Interests to seek judicial review. AC Interests filed its petition in Travis County District Court on December 10, 2014, and hand delivered a copy to the TCEQ a couple of days later. But AC Interests did not formally serve the TCEQ until 58 days after filing the petition. In the interim, the TCEQ moved to dismiss because it had not been served within 30 days of the petition's filing, per § 382.032(c). The district court granted the motion and dismissed the petition. AC Interests appealed, and this Court transferred the appeal from the Third Court of Appeals in Austin to the First Court in Houston, as a routine docket-equalization matter. See TEX. GOV'T CODE § 73.001 (granting the Supreme Court authority to transfer appellate cases); see also Miles v. Ford Motor Co. , 914 S.W.2d 135, 137 (Tex. 1995) (noting authority typically exercised to equalize dockets). The First Court, applying the Third Court's precedent, affirmed the dismissal. 521 S.W.3d at 63 & n.3 (citing TEX. R. APP. P. 41.3).

II. The Standard of Review

The TCEQ asserted Rule 91a as the basis for its dismissal motion. See TEX. R. CIV. P. 91a. Rule 91a permits a party to "move to dismiss a cause of action on the grounds that it has no basis in law or fact." Id. 91a.1. "A cause of action has no basis in law if the allegations, taken as true, together with inferences reasonably drawn from them, do not entitle the claimant to the relief sought." Id. "A cause of action has no basis in fact if no reasonable person could believe the facts pleaded." Id. The motion must (1) state that it is made pursuant to Rule 91a, (2)"identify each cause of action to which it is addressed," and (3) "state specifically the reasons the cause of action has no basis in law, no basis in fact, or both." Id. 91a.2. The court is not to consider evidence but "must decide the motion based solely on the pleading of the cause of action, together with any pleading exhibits permitted by Rule 59." Id. 91a.6.

The TCEQ's motion does not address the pleadings or the deficiency of any cause of action. It instead asks the court to dismiss the appeal because AC Interests failed to comply with a statutory requirement—the timely service of citation. We review Rule 91a motions de novo , but as the court of appeals correctly points out, that was not the proper motion to file. See 521 S.W.3d at 60 (stating the matter is not one "that can be resolved by looking only at the allegations in the pleadings"). Even so, the court concluded that the TCEQ's motion was in substance a general motion to dismiss that the court could review. Id. Further, because the motion concerned a legal question requiring statutory construction—the consequences for AC Interests's failure to comply with the Clean Air Act's 30–day service deadline—the court declared that the standard of review was de novo . Id. at 61 (quoting City of Rockwall v. Hughes , 246 S.W.3d 621, 625 (Tex. 2008) ("Statutory construction is a legal question we review de novo .").

We agree that the TCEQ's dismissal motion is premised on matters of statutory construction rather than on any matter subject to Rule 91a and, therefore, treat it as a general motion to dismiss or dilatory plea premised on the TCEQ's interpretation of the statute. Cf. Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 554 (Tex. 2000) ("The purpose of a dilatory plea is not to force the plaintiffs to preview their case on the merits but to establish a reason why the merits of the plaintiff's claim should never be reached."); Kelley v. Bluff Creek Oil Co. , 158 Tex. 180, 309 S.W.2d 208, 214 (1958) (noting "a speedy and final judgment may be obtained on the basis of matters in bar and without the formality of a trial on the merits, if the parties so agree"). AC Interests complains here that its district court appeal should not have been dismissed because either (1) the Clean Air Act's 30–day service deadline does not apply to AC Interests, or (2) if it does, the requirement is neither mandatory nor a legitimate basis for dismissal. We consider these issues in turn.

III. Analysis

A. Does the Clean Air Act's 30–day service requirement in TEX. HEALTH & SAFETY CODE § 382.032(c) apply to AC Interests's appeal?

In the court of appeals, AC Interests argued that the 30–day-service requirement did not apply because its TCEQ appeal was premised on the Water Code, not the Clean Air Act. Like the Clean Air Act, the Water Code requires that an appeal must be filed within 30 days of the TCEQ's ruling. TEX. WATER CODE § 5.351(b). Unlike the Clean Air Act, the Water Code does not provide for the service of citation within 30 days of the petition's filing. Compare TEX. WATER CODE § 5.351, with TEX. HEALTH & SAFETY CODE § 382.032(c). Instead, the Water Code provides for dismissal one year after the petition's filing if the plaintiff has not secured proper service or prosecuted the suit within that time, unless good cause exists for the delay. TEX. WATER CODE § 5.353. AC Interests therefore concludes that its service on the TCEQ a mere 58 days after the filing of its petition was timely.

The court of appeals recognized that the Water Code provides general authority for judicial review of TCEQ rulings. See 521 S.W.3d at 62 (citing TEX. WATER CODE § 5.351 ). The court also acknowledged that AC Interests's petition in the district court cites both the Water Code and the Clean Air Act, but necessarily relies on the Clean Air Act as "the authority for the TCEQ to regulate air emissions." Id. at 63. And because the Clean Air Act not only authorizes the particular TCEQ decision but also specifically provides for its judicial review, the court concluded that the Clean Air Act controls over the more general Water Code provision. See id. (quoting "the traditional statutory construction principle that the more specific statute controls over the more general" from Horizon/CMS Healthcare Corp. v. Auld , 34 S.W.3d 887, 901 (Tex. 2000) ).

We agree that the Clean Air Act controls AC Interests's request for judicial review in the district court and that the 30–day service requirement was therefore applicable. See TEX. HEALTH & SAFETY CODE § 382.032(c).

B. Is the Clean Air Act's 30–day service requirement in TEX. HEALTH & SAFETY CODE § 382.032(c) mandatory or directory?

The Clean Air Act provides successive 30–day deadlines in connection with the appeal of a TCEQ ruling. The first deadline is to file the petition that initiates the appeal. TEX. HEALTH & SAFETY CODE § 382.032(a) - (b). The second is to serve citation on the TCEQ. Id. § 382.032(c). The parties agree that the filing deadline is a mandatory, jurisdictional requirement and that the service deadline is not jurisdictional. The parties disagree about whether the service deadline is mandatory and about what consequence follows failing to meet this service deadline.

AC Interests argues that the service deadline is directory and that, because AC Interests complied with the statute's essential purpose by hand-delivering the petition to the TCEQ two days after filing, dismissal is not required. It submits that statutory provisions that "are included for the purpose of promoting the proper, orderly and prompt conduct of business" are not...