Int'l Paper Co. v. Harris Cnty.

• Decision Date: 25 July 2013
• Docket Number: No. 01–12–00538–CV.,01–12–00538–CV.
• Citation: 445 S.W.3d 379
• Parties: INTERNATIONAL PAPER COMPANY, Waste Management, Inc., Waste Management of Texas, Inc., and McGinnes Industrial Maintenance Corporation, Appellants v. HARRIS COUNTY, Texas and The State of Texas, Acting by and Through the Texas Commission on Environmental Quality, A Necessary and Indispensable Party, Appellees.
• Court: Texas Court of Appeals

445 S.W.3d 379

INTERNATIONAL PAPER COMPANY, Waste Management, Inc., Waste Management of Texas, Inc., and McGinnes Industrial Maintenance Corporation, Appellants

v.HARRIS COUNTY, Texas and The State of Texas, Acting by and Through the Texas Commission on Environmental Quality, A Necessary and Indispensable Party, Appellees.

No. 01–12–00538–CV.

Court of Appeals of Texas, Houston (1st Dist.).

July 25, 2013.

Glenn A. Ballard, Jr., Jeffrey L. Oldham, Christopher L. Dodson, Yvonne Y. Ho, Bracewell & Giuliani LLP, Houston, TX, John A. Riley, Bracewell & Giuliani LLP, Austin, TX, Thomas T. Hutcheson, Albert R. Axe, Winstread PC, S. Shawn Stephens, James L. Moore, Matthew W. Caligur, Joshua C. Thomas, Baker & Hostetler LLP, Houston, TX, for Appellants.

Rock W.A. Owens, Vince Ryan, Harris County Attorney, Terence L. O'Rourke, First Asst. Harris County Attorney, Debra Tsuchiyama Baker, Michael Connelly, Earnest W. Wotring, John Muir, David George, Connelly, Baker, Wotring, LLP, Houston, TX, for Appellees.

Panel consists of Justices KEYES, MASSENGALE, and BROWN.

OPINION

HARVEY BROWN, Justice.

This is an interlocutory appeal from the denial of a temporary injunction to prevent Harris County from prosecuting an environmental action against International Paper Company, Waste Management, Inc., Waste Management of Texas, Inc., and McGinnes Industrial Maintenance Corporation (collectively “Defendants”) using private attorneys retained on a contingent-fee basis.¹ On appeal, Defendants contend that the trial court erred in denying their request for temporary injunctive relief because (1) the County did not comply with the statutory provisions that control when a governmental entity can hire attorneys on a contingent-fee basis; (2) the County violated the state constitution's separation-of-powers doctrine by agreeing to payment of the private attorneys' contingent fee from funds to which the state may be entitled; and (3) the federal constitution's due-process guarantee prohibits private attorneys from prosecuting a quasi-criminal action on a governmental entity's behalf for a contingent fee. To the extent this interlocutory appeal has not been mooted by the intervening amendments to the fee agreement, we find no error and affirm.

Background

This environmental action arises out of the disposal of paper mill waste along the San Jacinto River east of the City of Houston. In the mid–1960s, McGinnes built waste ponds, known as impoundments, along the river to dispose of waste generated by the Champion paper mill in Pasadena.² For reasons the parties dispute, the river inundated the impoundments. Whether and to what extent the inundation has caused—and continues to cause—the release of carcinogenic waste into the river is the subject of the lawsuit.

The lawsuit

The Harris County Commissioners Court authorized the County Attorney to file an environmental enforcement action. Under that authorization, the County filed its original petition, alleging that McGinnes, the Waste Management entities (which acquired the stock of McGinnes's parent company), and International Paper (which acquired Champion) were responsible for the San Jacinto River contamination and seeking civil penalties of up to $25,000 per day for violations of laws regulating the disposal of industrial waste.³

In its resolution approving the lawsuit, the Commissioners Court authorized the County to retain the law firm of Connelly • Baker • Wotring LLP (CBW) as “special counsel” for the suit on a contingent-fee basis. The County's fee agreement with CBW provided that:

• the County found “a substantial need for the legal services which cannot be adequately performed by the attorneys of a governmental entity, nor can be reasonably obtained under a contract providing only for the payment of hourly fees”;

• CBW, as “special counsel[,] shall prosecute civil enforcement cases on behalf of [the] County against defendants and seek necessary and appropriate temporary and permanent injunctive relief, damages, civil penalties, and attorney's fees and such other pecuniary recovery as may be provided for by the laws ... in connection with the discharge of Hazardous Substances from [the San Jacinto River Superfund Site] .... and will work specifically with [designated attorneys in the County Attorney's Office];

• the County, among other things, would “cooperate fully” with CBW so that the firm may “provide effective representation”;

• in the event of a judgment against Defendants, the County would pay “a fee consisting exclusively of all the attorney's fees awarded ..., and 25% of each additional dollar in excess of the award of attorney's fees awarded to the County and collected by [CBW]”;

• in the event of a settlement with Defendants, the County would pay “35% of any settlement to [CBW] if [the settlement] does not contain a separate allocation for the award of attorney's fees; or in the event the settlement provides for a separate allocation for the recovery of attorney's fees, [CBW] shall recover attorney's fees plus 25% of each additional dollar awarded to the County and collected by [CBW]”;

• the County “shall have the absolute right to settle the case for no penalty which would yield no contingent fee on penalties to [CBW],” and CBW “has no authority to settle or otherwise compromise the position of [the County] or any of its officers”; and

• unless the fee set out in the agreement was “determined to be prohibited by law,” the fee would be paid “exclusively out of any recovery (including but not limited to any attorney's fees and expenses, as well as penalties) awarded in any judgment resulting from the Representation, or any settlement during the Representation” and “the fees described above shall be the sole source of compensation to [CBW].”

Defendants answered the lawsuit and filed counterclaims seeking a declaration that the County's contingent-fee agreement with CBW was void because, among other reasons, it (1) was not approved by the Texas Comptroller and violated subchapter C of chapter 2254 of the Government Code, section 403.0305 of the Government Code, and section 30.003(3) of the Water Code ;⁴ (2) calculated the contingent fee based on the total recovery in the underlying lawsuit and therefore pledged monies earmarked by statute for the state's treasury to private attorneys without legislative consent and in violation of the separation-of-powers doctrine;⁵ and (3) authorized private attorneys with a direct pecuniary interest in the outcome of the proceedings to exercise the County's enforcement powers in violation of Defendants' due process rights.

The temporary-injunction proceedings

Defendants sought to temporarily and permanently enjoin the lawsuit's prosecution by contingent-fee lawyers.⁶ Defendants' evidence at the temporary-injunction hearing included: (1) the Commissioners Court Resolution authorizing the lawsuit and the engagement of CBW on a contingent-fee basis; (2) the contingent-fee agreement; (3) the Comptroller's certification that no records existed of any request for approval of the County's contingent-fee agreement with CBW; (4) a Commissioners Court commendation for McGinnes's, International Paper's, and other non-party entities' efforts to remediate the San Jacinto River Superfund Site; (5) media coverage of the lawsuit; and (6) various discovery requests propounded on Defendants under CBW's signature.

After considering the evidence and arguments of counsel, the trial court denied Defendants' temporary-injunction application, finding in pertinent part that:

1. On December 20, 2011, the Harris County Commissioners Court passed a two-part resolution entitled “Order Authorizing County Attorney to Execute Professional Services Agreement with [CBW] as Special Counsel and Order Authorizing the Filing of Suit to Enforce State Environmental Laws” (the Resolution);

2. The portion of the Resolution authorizing the Harris County Attorney to file the lawsuit in the above case passed by the Harris County Commissioners Court complies with the requirements of the Texas Water Code. See Tex. Water Code Ann. § 7.352 ;

...

4. The portion of the resolution authorizing the Harris County Attorney to execute a professional services agreement with [CBW] as special counsel to assist with the prosecution of this lawsuit does not comply with the requirements of the Texas Water Code and the Texas Government Code. See Tex. Water Code Ann. § 30.003(3) & Tex. Gov't Code Ann. § 403.0305 ; and

5. The portion of the Resolution approving the Professional Services Agreement between the Harris County Attorney and [CBW] is distinct and severable from the remainder of the December 20, 2011, Resolution.

As a result of these findings, the trial court reached two conclusions: first, “[t]he County Attorney has the authority to proceed with this law [ ]suit,” but second, “[t]he Agreement between the Harris County Attorney and [CBW] approved by the Harris County Commissioners Court on December 20, 2011, is void.” Thus, although the trial court denied their request for a temporary injunction, Defendants prevailed in part because the trial court determined that the contingent-fee agreement was void for statutory noncompliance.

The execution of a new contingent-fee agreement

Defendants filed a notice of appeal challenging the trial court's denial of temporary injunctive relief.⁷ During the pendency of the appeal, the County and CBW executed multiple amended contingent-fee agreements. Those parts of the original fee agreement providing the basis for Defendants' application for a temporary injunction in the trial court were modified in the current fee agreement to (1) reflect the Comptroller's approval of the agreement; (2) subject CBW to “the supervision, direction, and control of the [County Attorney]”; and (3) provide that “[a]ny fee payable to [CBW] will be from the portion of any award, judgment, and/or settlement allocated by law to [the] County,” not out of any recovery to which the State is entitled by law.

Mootness

The...