Hegar v. Space City Mgmt.

• Decision Date: 29 November 2021
• Docket Number: 08-20-00229-CV
• Parties: GLENN HEGAR, COMPTROLLER OF PUBLIC ACCOUNTS OF THE STATE OF TEXAS and KEN PAXTON, ATTORNEY GENERAL OF THE STATE OF TEXAS, Appellants, v. SPACE CITY MANAGEMENT, L.L.C., Appellee.
• Court: Texas Court of Appeals

GLENN HEGAR, COMPTROLLER OF PUBLIC ACCOUNTS OF THE STATE OF TEXAS and KEN PAXTON, ATTORNEY GENERAL OF THE STATE OF TEXAS, Appellants, v. SPACE CITY MANAGEMENT, L.L.C., Appellee.

No. 08-20-00229-CV

Court of Appeals of Texas, Eighth District, El Paso

November 29, 2021

Appeal from the 353rd District Court Of Travis County, Texas (D-1-GN-19-005242)

Before Rodriguez, C.J., Palafox, and Alley, JJ.

OPINION

YVONNE T. RODRIGUEZ, CHIEF JUSTICE.

Appellants Glenn Hegar, Texas Comptroller of Public Accounts of the State of Texas and Ken Paxton, Attorney General of the State of Texas (collectively, "Appellants"), appeal the trial court's partial denial of its plea to the jurisdiction.^[1] Appellee, Space City Management, L.L.C. (d/b/a "Colette"), maintain constitutional challenges as applied to Section 102.051 of the Texas Business and Commerce Code and Section 3.722 of the Texas Administrative Code, and to the investigative tactics of Appellants. TEX.BUS.&COM.CODE ANN. § 102.051; 34 TEX.ADMIN.CODE ANN. § 3.722.

In Issue One, Appellants argue the trial court did not possess jurisdiction over Colette's ultra vires claims. Colette counters, sovereign immunity does not bar ultra vires claims based on violations of constitutional rights. In Issue Two Appellants argue the trial court did not possess jurisdiction over Colette's injunctive relief claims. Colette maintains jurisdiction is proper because it is not required to exhaust administrative remedies before seeking relief of constitutional violations.

BACKGROUND

Factual Background

Colette is a private, alternative lifestyle "swingers club" that provides a meeting place for its members. It does not sell alcohol and is open to the public, so long as each member signs and adheres to a membership agreement. All members must sign a membership agreement upon entrance; the membership agreement contains several contractual provisions and outlines the prohibition of cell phone usage beyond the lobby, as well as cameras, video, and audio equipment.

Comptroller agents inspected Colette on April 23, 2017, October 20, 2017 and November 30, 2018, at each of which visit they indicated Colette was not a SOB ("Sexually Oriented Business") under Section 102.051 and Section 3.722 TEX.BUS.&COM.CODE ANN. § 102.051; 34 TEX.ADMIN.CODE ANN. § 3.722. In November of 2018 and May of 2019, Colette alleges unidentified individuals, employed either by the Texas Comptroller or the Harris County Sheriff's Department, signed the membership agreement, entered the establishment, and videotaped at least two members of Colette engaged in sexual activity. Colette and the members at issue did not consent to this "search and videotaping." Oral depositions of Deputy "TB" and Deputy "AC" confirm these officials visited Colette and did not possess warrants. Deputy TB stated he did not believe a warrant was required because he paid the entrance fee like everyone else. Deputy TB described "it's open to anybody with an I.D. and money. There was no vetting that went on. There's no card that they gave you. There's nothing to say, okay, fill out this application for membership.... As a matter of fact, one of the investigators [who was admitted into Colette] didn't even have an I.D." Deputy AC also confirmed he did not have a warrant in November 2018 when he visited Colette because he "walk[ed] into a business that's open to the public, which I was just a normal everyday patron entering it." During Deputy AC's deposition, a narrative was read aloud:

Narrative: On Thursday, November 1, 2018, I, Sergeant E. Thomas . . . was employed by the Harris County Sheriff's Office as a sergeant investigator assigned to the vice unit. On the aforementioned date, the vice unit initiated an undercover investigation, was conducted to ascertain if illegal activities, namely, prostitution and any violations of state law and the Occupations Codes was occurring at the business.

A disposition of an unidentified investigative report was also read aloud during the deposition, "It says: No violations of the Harris County Sexually Oriented Business Regulations, Case will be closed."

According to Colette, it was informed by Harris County agents and employees about the existence of the video and it serving as the basis for the Comptroller's position that Colette is a SOB; the video was characterized as depicting "nudity in plain view" and "sex in plain view[.]" Colette alleges this case has not proceeded to a final tax determination, and that it has not received a written determination that it is a SOB or that it is subject to the SOBF ("Sexually Oriented Business Fee") statute and rules.

Colette filed the underlying lawsuit in response to the Comptroller's SOB assessment. In its original petition for declaratory judgment and ancillary relief, Colette argued: the Comptroller could not rely on an illegal search, its members' right to privacy was violated, it was not a SOB, Section 102.051 of the Texas Business and Commerce Code and Section 3.722 are unconstitutional as applied, and requested injunctive relief to enjoin the enforcement of Section 102.051 and Section 3.722 and the use of the illegally obtained video, and orders compelling the Comptroller to produce a copy of the video. In response, Appellants filed a plea to the jurisdiction asserting sovereign immunity. The trial court partially granted the plea to the jurisdiction, dismissing Colette's applicability challenges for lack of jurisdiction, while denying the remainder of the plea. Appellants appeal the trial court's denial of the plea to the jurisdiction as to the ultra vires and injunctive claims.

Procedural Background

Colette commenced the underlying lawsuit against Glenn Hegar, Texas Comptroller of Public Accounts of the State of Texas, Ken Paxton, Attorney General of the State of Texas, Jesus Vela, and Harris County by filing its original petition for declaratory judgment and ancillary injunctive relief. It subsequently dropped Harris County as a named defendant in its notice of nonsuit. Appellants answered to the suit with a plea to the jurisdiction, asserting sovereign immunity and requesting Colette's claims be dismissed because it failed to plead cognizable APA and ultra vires claims and failed to follow the statutory prerequisites under the Tax Code. Colette thereafter filed a motion for summary judgment. In Appellants' responses to Colette's motion for summary judgment, and in their brief-and first amended brief-in support of their plea to the jurisdiction, Appellants raised the issue of ripeness as a threshold matter. Appellants maintained the issue of ripeness throughout the trial level, each time arguing there is no injury due to the absence of a decision by the Comptroller regarding Colette's SOB status. Appellants have now abandoned the issue of ripeness on appeal.

On July 30, 2020, the trial court held a remote hearing and denied Colette's motion for summary judgment. At that same hearing, the trial court granted in part and denied in part the plea to the jurisdiction; it granted Appellants' plea to the jurisdiction as to the applicability challenge under Section 2001.038 of the APA, and denied the plea as to all other claims. This appeal followed.

DISCUSSION

In two issues, Appellants challenge the trial court's denial of the plea to the jurisdiction as to Colette's ultra vires and injunctive relief claims. In Issue One, Appellants argue the trial court did not possess jurisdiction because Colette's ultra vires claims concern acts within the Comptroller's authority, seek retrospective relief, and are redundant to the relief it could obtain under the Tax Code. In Issue Two, Appellants maintain the trial court did not possess jurisdiction for Colette's injunctive relief claims because it failed to adhere to the statutory prerequisites of a Tax Code injunctive suit.

Standard of Review &Law Background

Sovereign immunity implicates a court's subject matter jurisdiction. EBS Solutions, Inc. v. Hegar, 601 S.W.3d 744, 749 (Tex. 2020). We review a trial court's decision of a plea to the jurisdiction de novo applying traditional principles of statutory interpretation to determine whether sovereign immunity has been waived. Id. "Although the trial court generally lacks jurisdiction to hear a taxpayer's challenge to a tax assessment, . . . the Legislature has waived the State's sovereign immunity as to three types of tax challenges-protests, injunctions, and refunds-conferring exclusive, original jurisdiction on the district courts of Travis County." Id. at 749-50; see TEX.TAX CODE ANN. §§ 112.108^[2], 112.001.

Although Appellants have not raised the issue of ripeness on appeal it is our duty and within our authority to do so. See MRC Permian Co. v. Point Energy Partners Permian LLC, 624 S.W.3d 643, 664 (Tex.App.-El Paso 2021, pet. filed)("A lack of subject matter jurisdiction cannot be waived, can be raised at any time, and may be considered by a court sua sponte. [] Ripeness is one component of subject matter jurisdiction that a court should consider when determining whether it has jurisdiction over a case.").

As a threshold matter, ripeness is a component of subject matter jurisdiction. Harris Cty. Appraised Dist. v. Boyaki No. 14-18-00017-CV, 2019 WL 1526431, at *5 (Tex.App.-Houston [14th Dist.] 2019, no pet.)(mem. op.). While standing hinges on who may bring an action, ripeness examines when an action may be brought. Lazarides v. Farris, 367 S.W.3d 788, 802 (Tex.App.- Houston [14th Dist.] 2012, no pet.). Ripeness requires a concrete injury and is invoked to determine whether a dispute has matured to the point that warrants a decision. City of Houston v. Commons at Lake Houston, Ltd., 587 S.W.3d 494, 499-500 (Tex.App.-Houston [14th Dist.] 2019, no pet.). ...