Green Valley Special Util. Dist. v. City of Schertz

• Citation: 969 F.3d 460
• Decision Date: 07 August 2020
• Docket Number: No. 18-51092,18-51092
• Parties: GREEN VALLEY SPECIAL UTILITY DISTRICT, Plaintiff—Appellee Cross—Appellant, v. CITY OF SCHERTZ, TEXAS ; DeAnn T. Walker, in her official capacity as Chairman and Commissioner of the PUC; Arthur C. D'Andrea, in his official capacity as a Commissioner of the PUC; John Paul Urban, in his official capacity As Executive Director of the Public Utility Commission of Texas; Brian James, in his official capacity as the City Manager of the City of Schertz, TX; Shelly Botkin, Defendants—Appellants Cross—Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

969 F.3d 460

GREEN VALLEY SPECIAL UTILITY DISTRICT, Plaintiff—Appellee Cross—Appellant,

v.CITY OF SCHERTZ, TEXAS ; DeAnn T. Walker, in her official capacity as Chairman and Commissioner of the PUC; Arthur C. D'Andrea, in his official capacity as a Commissioner of the PUC; John Paul Urban, in his official capacity As Executive Director of the Public Utility Commission of Texas; Brian James, in his official capacity as the City Manager of the City of Schertz, TX; Shelly Botkin, Defendants—Appellants Cross—Appellees.

No. 18-51092

United States Court of Appeals, Fifth Circuit.

FILED August 7, 2020

Paul M. Terrill, III, Esq., G. Alan Waldrop, Terrill & Waldrop, Mark H. Zeppa, Law Offices of Mark H. Zeppa, Austin, TX, for Plaintiff - Appellee Cross-Appellant.

Lowell Frank Denton, Denton, Navarro, Rocha, Bernal & Zech, P.C., San Antonio, TX, for Defendant - Appellant Cross-Appellee City of Schertz, Texas and Brian James, in his official capacity as the City Manager of the City of Schertz, TX.

Jason R. LaFond, Office of the Attorney General, Office of the Solicitor General, John Richard Hulme, Esq., Assistant Attorney General, Office of the Attorney General, Environmental Protection & Administrative Law Division, Linda B. Secord, Assistant Attorney General, Office of the Attorney General for the State of Texas, Austin, TX, for Defendant - Appellant Cross-Appellee DeAnn T. Walker, in her official capacity as Chairman and Commissioner of the PUC, Arthur C. D'Andrea, in his official capacity as a Commissioner of the PUC, John Paul Urban, in his official capacity as Executive Director of the Public Utility Commission of Texas, and Shelly Botkin.

Richard W. Fryer, Fryer & Hansen, P.L.L.C., McAllen, TX, for Amicus Curiae North Alamo Water Supply Corporation.

Jonathan F. Mitchell, Austin, TX, for Amicus Curiae Texas Rural Water Association.

Before Owen, Chief Judge, and Jones, Smith, Stewart, Dennis, Elrod, Southwick, Haynes, Graves, Higginson, Costa, Willett, Ho, Duncan, Engelhardt, and Oldham, Circuit Judges.^*

Jerry E. Smith, Circuit Judge, joined by Jones, Stewart, Dennis, Elrod, Southwick, Haynes, Graves, Higginson, Costa, Willett, Ho, Duncan, Engelhardt, and Oldham, Circuit Judges:

This appeal arose out of two orders of the Texas Public Utility Commission ("PUC") decertifying territory from the certificate of convenience and necessity ("CCN") issued to Green Valley Special Utility District ("Green Valley") for sewer (wastewater) service. Green Valley sued, averring that, because it had "provided or made available" sewer service, 7 U.S.C. § 1926(b) protected that service from encroachment.

We granted en banc hearing to consider the meaning of "provided or made available" in § 1926(b). We hold that a utility has "provided or made available" service if it (1) has adequate facilities to provide service to the relevant area within a reasonable time after a request for service is made and (2) has the legal right to provide service. The panel opinion in North Alamo Water Supply Corp. v. City of San Juan , 90 F.3d 910 (5th Cir. 1996) (per curiam), is overruled. As for the district court's judgment, we affirm in part, vacate in part, and remand.

I.

Green Valley is a special utility district¹ that provides water and sewer service in an area that includes parts of Bexar, Comal, and Guadalupe Counties. Green Valley's mostly rural service territory is east of San Antonio, near the Cities of Schertz and Cibolo. Green Valley provides service under two CCNs issued and regulated by the PUC. Under Texas law, CCNs "give holders the exclusive right to provide water or sewer service within particular service areas."² "In 2003, Green Valley obtained a $584,000 loan from the [U.S. Department of Agriculture "(USDA") ] to fund its water service. That loan, which remains outstanding, is secured by Green Valley's water utility revenues."³

In April 2016, Guadalupe Valley Development Corporation ("GVDC") petitioned the PUC to decertify its approximately 160-acre parcel from Green Valley's sewer CCN. Shortly thereafter, the City of Schertz and its City Manager (jointly "Schertz"), after notifying Green Valley of its intent to provide sewer service, petitioned the PUC to decertify a separate 405-acre tract that fell within its corporate limits.

The PUC recognized that Green Valley "intend[ed] to build a regional wastewater-treatment plant" and had "an agreement to deliver waste to the city of Marion's wastewater-treatment plant." Nevertheless, the PUC found that Green Valley hadn't "committed facilities or lines providing sewer service" or "performed acts or supplied anything" to the property. The PUC also determined that, as a matter of both law and fact, the tract wasn't "receiving sewer service from Green Valley." Based on that conclusion, the PUC ruled that, under Texas Water Code ("TWC") § 13.254(a-5),⁴ GVDC was entitled to have its petition approved. Finally, the PUC noted that, under TWC § 13.254(a-6),⁵ it could not deny GVDC's "petition based on the fact that Green Valley ... [wa]s a borrower under a federal loan program." The PUC granted the petition, removing GVDC's 160-acre property from Green Valley's sewer CCN.

Schertz's petition was similarly successful. The PUC found that Green Valley "provide[d] no retail sewer service," had no contractual obligations to do so, and had not received any requests for such service in the tract that Schertz sought to decertify. Moreover, Green Valley "ha[d] made no physical improvements" to the tract, "ha[d] no existing retail sewer infrastructure anywhere within the boundaries of its CCN," and "[wa]s not currently capable of providing sewer service to anyone in the decertificated area." The PUC thus granted Schertz's petition and amended Green Valley's CCN to remove the decertified tract, concluding that TWC § 13.255(c) required it do so. The PUC also determined that Green Valley was not entitled to any compensation for future lost profits, because "[n]o property of Green Valley will be rendered useless or valueless ... by the decertification."

Green Valley sought relief related to those two orders—the GVDC Order and the Schertz Order, respectively—by (1) seeking judicial review in state court⁶ and (2) suing GVDC, Schertz, and several PUC commissioners in their official capacities (collectively, "PUC Officials") in this action under 42 U.S.C. § 1983. Green Valley averred that its 2003 USDA loan protected its service territory from encroachment. The key federal statute, 7 U.S.C. § 1926(b), confers that protection:

The service provided or made available through any such association shall not be curtailed or limited by inclusion of the area served by such association within the boundaries of any municipal corporation or other public body, or by the granting of any private franchise for similar service within such area during the term of such loan....

Green Valley also asserted that § 1926(b) preempted TWC §§ 13.254(a-1) and 13.2541(d).⁷ Green Valley sought, inter alia , declaratory and injunctive relief to prevent (1) the PUC from enforcing §§ 13.254(a-1) and 13.2541(d), (2) the PUC from decertifying any portion of its service territory, and (3) any other utility from making service available within its service territory.

Shortly after Green Valley filed its first amended complaint, the PUC Officials moved to dismiss.⁸ They asserted Eleventh Amendment immunity, averring that Ex parte Young , 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908), did not apply or, alternatively, that it did not entitle Green Valley to an injunction. The PUC Officials also averred that Green Valley had failed to state a claim; Schertz and GVDC filed similar motions. The district court denied them all.

Six months later,⁹ every party moved for summary judgment. The district court denied GVDC's and Schertz's motions but granted Green Valley's and the PUC Officials’ motions in part. Relying on North Alamo , the court granted summary judgment to Green Valley on its § 1926(b) claims, finding that the PUC had not determined that Green Valley had failed to fulfill its state-law duty to provide service to the Schertz and GVDC tracts. Conversely, the court granted summary judgment to the PUC Officials on the preemption claims, holding (1) that Green Valley lacked standing to challenge TWC § 13.254(a-1) and (2) that § 13.2541(d) was not preempted "because it neither directly conflict[ed] with § 1926(b) nor pose[d] an obstacle to the goals and purpose of Congress in enacting § 1926(b)."

GVDC, Schertz, and the PUC Officials appealed as to the § 1926(b) claims, and Green Valley cross-appealed as to both the § 1926(b) and preemption claims. Shortly thereafter, GVDC settled with Green Valley and dismissed its appeal. We granted Schertz's and the PUC Officials’ petitions for hearing en banc.

II.

"This court has a continuing obligation to assure itself of its own jurisdiction, sua sponte if necessary." United States v. Pedroza-Rocha , 933 F.3d 490, 493 (5th Cir. 2019) (per curiam), cert. denied , ––– U.S. ––––, ––– S.Ct. ––––, 2020 WL 2515686, 2020 U.S. LEXIS 2749, 206 L. Ed. 2d 940 (2020). Before considering the merits, we address three jurisdictional issues: (1) whether Green Valley has standing to press its preemption claims as to TWC § 13.254(a-1) ; (2) whether the Green Valley's settlement with GVDC mooted any of its claims; and (3) whether state sovereign immunity bars Green Valley's suit against the PUC Officials.

A.

To have standing, Green Valley "must demonstrate (1) that [it] suffered an injury in fact that is concrete, particularized, and actual or imminent, (2) that the injury was caused by the defendant[s], and (3) that the injury would likely be redressed by the requested judicial relief." Thole v. U.S. Bank N.A. , ––– U.S. ––––, 140 S. Ct. 1615, 1618, ––– L.Ed.2d –––– (2020).

Green Valley maintains that it has standing to challenge § 13.254(a-1) as preempted. Its theory is as follows: First, when "decertifying the Schertz Property, the PUC [Officia...