City of Conroe v. Attorney Gen. of Tex.
| Decision Date | 22 July 2022 |
| Docket Number | 03-21-00137-CV |
| Parties | CITY OF CONROE, Texas ; City of Magnolia, Texas ; and City of Splendora, Texas, Appellants v. The ATTORNEY GENERAL OF TEXAS and San Jacinto River Authority, Appellees |
| Court | Texas Court of Appeals |
C. Brantley Jones, Marvin W. Jones, Amarillo, Michael V. Powell, Dallas, Ramon G. Viada III, Leonard V. Schneider IV, Houston, for T&W Water Service, E.S. Water Consolidators, Inc., Quadvest, L.P., Utilities Investment Co., Inc., Everett Square, Inc., Woodlands Oaks Utility, L.P.
Ramon G. Viada III, Houston, Marvin W. Jones, Amarillo, Leonard V. Schneider IV, Houston, C. Brantley Jones, Amarillo, Michael V. Powell, Dallas, for Appellants.
Cynthia A. Morales, Judd E. Stone II, for Appellee The Attorney General of Texas.
James Zucker, Houston, Constance H. Pfeiffer, Reagan Simpson, Houston, for Appellee San Jacinto River Authority.
Before Chief Justice Byrne, Justices Kelly and Smith
This is an appeal from the district court's order in a suit seeking a declaratory judgment pursuant to the Expedited Declaratory Judgment Act (EDJA), which permits issuers of bonds and other public securities to resolve certain disputes regarding their securities as to all interested parties on an expedited basis. See Tex. Gov't Code §§ 1205.001 -.151. The San Jacinto River Authority (SJRA), which has contracts to sell water to cities and other customers and uses the revenue to pay off its bonds, sought declarations regarding those contracts. On cross-motions for summary judgment, the district court rendered judgment granting SJRA's request for two declarations. The City of Conroe, the City of Magnolia, and the City of Splendora (collectively, the Cities) appealed the district court's order arguing principally that the court lacked jurisdiction to make the requested declarations. We will modify the district court's order and, as modified, affirm it.
The underlying dispute between the parties relates to a Groundwater Reduction Plan (GRP) and certain contracts (GRP Contracts) or agreements executed between the Cities and SJRA, which have been discussed in other court opinions.1 Our description of underlying events and transactions is drawn from those opinions.
The Cities are located in Montgomery County and as that county's population grew significantly in recent decades, so did concerns about the county's reliance on groundwater drawn from the Gulf Coast Aquifer. To address these concerns, the Legislature formed the Lone Star Groundwater Conservation District (Lone Star), which, in 2008, required all large-volume groundwater users—including the Cities—to develop and implement plans for substantially reducing their usage. Mandatory groundwater-usage cutbacks took effect in January 2016.
SJRA is a legislatively created conservation and reclamation district charged with regulating the water resources of the San Jacinto River Basin. In anticipation of mandatory groundwater-usage cutbacks, SJRA developed the GRP, which entailed drawing surface water from Lake Conroe, treating it, and selling it to large-volume users. To finance the GRP, SJRA issued seven series of bonds between 2009 and 2016. For each bond series, SJRA's Board of Directors adopted a resolution authorizing the bonds’ issuance and delivery and specifying the bonds’ purpose and terms. The resolutions pledged revenues from GRP water-sales contracts to service the bond debt, maintain a bond reserve fund, and cover operation and maintenance expenses for the GRP project.
In 2010, in accordance with its enabling legislation, SJRA entered into GRP Contracts with approximately 80 water-system operators, including the Cities, agreeing to provide them with surface water in exchange for monthly payments. To comply with several requirements of the Texas Government Code and the Texas Water Code, SJRA sought and obtained the Attorney General's approval of all the bonds and contracts. See Tex. Gov't Code §§ 1202.003 (), 1371.057 (review and approval of obligation, credit agreement, and contract by attorney general). After receiving the Attorney General's approval, the Comptroller registered them. See id. §§ 1202.005 (), 1371.058 (registration of obligation, credit agreement, and contract by comptroller).
SJRA began delivering water to the Cities in September 2015. Lone Star's groundwater-usage cutbacks took effect in January 2016. Shortly thereafter, the City of Conroe and other parties to GRP Contracts challenged the groundwater-usage cutbacks as unconstitutional and in excess of Lone Star's statutory authority.2 The dispute expanded to include SJRA after SJRA adopted a new rate order, effective for the 2017 fiscal year that increased the rates and charges for water under the GRP Contracts. The Conroe and Magnolia City Councils each passed resolutions accusing SJRA of overcharging for water in violation of its respective GRP Contract and questioning the legitimacy of the GRP program. The resolutions directed city officials to refuse payment of the increased rates and to pay SJRA the old rates.
In response, SJRA filed the underlying suit in Travis County, alleging that the rate increase was justified and seeking four declarations pursuant to the EDJA. The EDJA provides an "issuer" of "public securities" an expedited declaratory procedure to establish the "legality and validity" of public securities and "public securities authorizations." Id. § 1205.021. A proceeding under the EDJA is in rem and requires only the Attorney General's participation. Other interested parties may, however, choose to opt in after posting a bond. Id. §§ 1205.023, .041-.044, .063. The declarations SJRA sought addressed SJRA's authority to set rates pursuant to the procedures set forth in the GRP Contracts (the Authority Declaration); its compliance with the GRP Contracts in setting the rates (the Compliance Declaration); and the legality and validity of the 2017 fiscal year rate, the Rate Order, and the GRP Contracts (the Validity Declaration). SJRA also sought a declaration that the City of Conroe's refusal to pay the fiscal year 2017 rate was illegal and invalid and that its failure to pay constituted a breach of the GRP Contract (the Breach of Contract Declaration).
After SJRA gave notice of the EDJA action, the Cities, along with other parties to GRP Contracts, opted in as interested parties. The Cities then filed substantially similar pleas to the jurisdiction. The Cities asserted that the trial court lacked jurisdiction to make the requested declarations in the EDJA action because SJRA's claims did not seek declarations as to the "legality and validity" of a "public security authorization," but instead sought to litigate what were essentially suits on contracts and were, therefore, beyond the scope of the EDJA. The Cities also asserted governmental immunity as an independent jurisdictional bar. The trial court denied the pleas to the jurisdiction, and the Cities perfected an interlocutory appeal.
On appeal, this Court recognized that "questions regarding the EDJA's reach implicate the trial court's subject-matter jurisdiction to adjudicate the claims the Act would authorize." See Cities of Conroe, Magnolia, and Splendora v. Paxton , 559 S.W.3d 656, 668 (Tex. App.—Austin 2018), aff'd in part, rev'd and remanded in part sub nom City of Conroe v. San Jacinto River Auth. , 602 S.W.3d 444 (Tex. 2020). This Court held that the trial court properly denied the pleas to the jurisdiction as to the Authority Declaration, the Compliance Declaration, and the Validity Declaration. This Court reasoned that the EDJA conferred jurisdiction over these "declarations as to SJRA's own rights and the legal status of its own acts, without explicit regard to any other person or party." Id. at 678. By contrast, the Court concluded that the Breach of Contract Declaration concerned in personam rights and therefore did not fall within the EDJA's grant of in rem jurisdiction. Id. at 678, 683. The Court held that the trial court erred by denying the plea to the jurisdiction as to the Breach of Contract Declaration. The Court also held that the trial court did not err in denying the Cities’ plea to the jurisdiction based on governmental immunity. Id. at 680-81.
The Cities filed a petition for review in the Texas Supreme Court concerning this Court's disposition of their interlocutory appeal.3 The dispute between the Cities and the SJRA in the supreme court centered around whether the GRP Contracts, SJRA's Rate Order, and the rates SJRA set met the definition of "public security authorizations" in section 1205.001(3) of the EDJA. See Tex. Gov't Code § 1205.001(3) (). The Cities maintained that they did not and, consequently, the trial court lacked jurisdiction to make declarations, pursuant to the EDJA, about their "legality" or "validity." The Attorney General and SJRA argued that the items at issue did meet the definition of "public security authorization" and, "[b]ecause the declarations address the legality and validity of these public security authorizations [ ], the trial court had jurisdiction to make the declarations under the EDJA." City of Conroe , 602 S.W.3d at 451.
In its opinion, the supreme court analyzed whether, and to what extent, each of the requested declarations concerned the legality and validity of a "public security authorization" as that term is used in the EDJA. With regard to the Authority Declaration, the court held that because the rate orders and rates "are creatures of" the GRP Contracts, this declaration concerned, at least in part, the legality and validity of those contracts. Id. at 454. The court determined that the execution of the contracts had...
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