San Jacinto River Auth. v. City of Conroe
| Decision Date | 21 April 2022 |
| Docket Number | 09-20-00180-CV |
| Parties | SAN JACINTO RIVER AUTHORITY, Appellant v. CITY OF CONROE, TEXAS AND CITY OF MAGNOLIA, TEXAS, Appellees |
| Court | Texas Court of Appeals |
Submitted on June 22, 2021
On Appeal from the 284th District Court Montgomery County, Texas Trial Cause No. 19-09-12611-CV
BEFORE GOLEMON, C.J., KREGER AND JOHNSON, JJ.
This is an interlocutory appeal of a trial court's order granting pleas to the jurisdiction based on governmental immunity. San Jacinto River Authority ("SJRA") filed this appeal to challenge the trial court's order granting the Appellees City of Conroe and City of Magnolia's ("the Cities") pleas to the jurisdiction.[1] In this appeal, we examine certain sections of Subchapter I of the Texas Local Government Code known as the Local Government Contract Claims Act ("the Act"), which set forth certain requirements for the adjudication of claims arising under written contracts with local governmental entities.[2] SJRA alleged that the Cities have breached certain contractual agreements with SJRA. The Cities alleged that the claims asserted by SJRA against them should be dismissed because they have governmental immunity from the claims, and the trial court agreed. SJRA argues that the waiver of immunity provision in section 271.152 applies, and that the trial court erred in granting the pleas to the jurisdiction. Because we conclude on the record before us that the suit involves allegations of both payment and performance defaults, and that SJRA failed to comply with a pre-suit limitation on the waiver of immunity contained in the statute, we affirm.
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.[3] SJRA "is a legislatively created conservation and reclamation district charged with regulating the water resources of the San Jacinto River Basin."[4] SJRA developed what it styled as a "Groundwater Reduction Plan" in response to rules promulgated by the Lone Star Groundwater Conservation District ("Lone Star").[5]Lone Star is a legislatively created entity with certain statutory authority under Chapter 36 of the Texas Water Code.[6] In 2008, Lone Star required all large-volume groundwater users-including the Cities-to develop and implement plans for reducing their usage substantially.[7] Mandatory groundwater-usage cutbacks took effect in January 2016.[8] In anticipation of the Lone Star cutbacks, SJRA developed a Groundwater Reduction Plan to draw surface water from Lake Conroe, treat the water, and sell it to large-volume users.[9] The Groundwater Reduction Plan developed by SJRA requires large volume groundwater users in Montgomery County to reduce the production of groundwater by thirty percent or be subject to financial penalties.[10] SJRA entered into Contracts ("GRP Contracts") with about eighty water-system operators ("Participants") in 2010 agreeing to provide them with surface water in exchange for monthly payments.[11] The Cities executed GRP Contracts with SJRA in 2010. Conroe's GRP Contract with SJRA runs through 2089, and Magnolia's GRP Contract runs through 2045.
SJRA asserts that it uses revenues from the Participants' payments to "pay down" the bonds SJRA used to finance the project. Although SJRA's enabling statute[12] empowers it to set rates sufficient to repay its bonds, this case is not about the bonds or funding for SJRA's projects. Rather, the issue before us involves the application of the Legislature's statutory waiver of immunity in Chapter 271.[13]Before we examine the application of the statute, we briefly review some of the underlying facts.
In 2015, SJRA began delivering water to the Cities under their respective GRP Contracts, and Lone Star's groundwater-usage cutbacks took effect in January 2016.[14] Several Participants, including the City of Conroe, filed a lawsuit against Lone Star in Montgomery County in 2015 challenging Lone Star's mandatory groundwater-usage cutbacks as unconstitutional and exceeding Lone Star's statutory authority.[15] The trial court in that case ruled that Lone Star's rules requiring a reduction in groundwater usage "were adopted by [Lone Star] without legal authority and consequently are, and have been, unlawful, void, and unenforceable[.]" Lone Star initially appealed that ruling and then dismissed its appeal, and the trial court entered a Final Judgment declaring Lone Star's rules requiring a reduction in groundwater usage to be unlawful, void, and unenforceable.[16]
During certain years, Montgomery County has experienced very high rainfall amounts, which SJRA contends leads to a reduced demand for groundwater and a reduction in GRP revenues and funding.[17] SJRA promulgated a new rate order to be effective in 2017 (a high rainfall year) that increased the rates and charges for water under the GRP Contracts.[18] In response to the new increased rates, the Cities passed resolutions alleging that SJRA was overcharging for water in violation of the GRP Contracts and questioning the legitimacy of the entire GRP program.[19] SJRA then filed a lawsuit in Travis County against certain "Participant cities," Conroe, Magnolia, and Splendora, alleging that the rate increase was justified and seeking declarations under the Expedited Declaratory Judgment Act ("EDJA").[20] Conroe, Magnolia, and Splendora filed pleas to the jurisdiction in the Travis County suit asserting governmental immunity.[21] The district court denied the cities' pleas to the jurisdiction, and the Austin Court of Appeals ruled for SJRA.[22] On petition for review to the Texas Supreme Court, the Court reversed in part and remanded, holding that:
The underlying case in this interlocutory appeal began in September 2019 when six privately-owned water and sewer utility companies, Quadvest, L.P., d/b/a Quadvest Water and Sewer Utility, Woodland Oaks Utility, L.P., Everett Square, Inc., E.S. Water Consolidators, Inc., Utilities Investment Co., Inc., and T&W Water Service Company (collectively the "Non-governmental Plaintiffs"), filed suit against SJRA (the "Quadvest Suit").[24], [25] In their original petition filed against SJRA in the Quadvest Suit, the Non-governmental Plaintiffs asserted a claim against SJRA for breach of the GRP Contracts and alleged:
SJRA breached the GRP Contracts by failing to comply with its contractual obligation to provide a reasonable allowance for Plaintiffs' costs of operating and maintain[ing] their groundwater wells, and therefore SJRA failed to comply with its obligation to set groundwater pumpage fees at a rate such that groundwater producers are neither benefitted nor penalized for relying on their groundwater resources. SJRA's failure to comply with this contractual obligation caused Plaintiffs' injuries by requiring Plaintiffs to pay exorbitantly high pumpage fees to SJRA for use of Plaintiffs' own groundwater.
The Non-governmental Plaintiffs are not a party to this appeal. We mention their claim solely to explain the context of the pleadings filed by SJRA against the Cities in the Quadvest Suit.
In March 2020, SJRA filed an Original Counterclaim and Cross-Claim in the Quadvest Suit.[26] The Cities filed pleas to the jurisdiction and answers subject to the pleas to the jurisdiction, and First Amended Pleas to the Jurisdiction and answers. SJRA then filed a First Amended Counterclaim and Cross-Claim against the Cities. SJRA's original and first amended cross-claims named the Cities as "cross-defendants."27[] SJRA sought declaratory relief and also asserted a breach of contract claim against the Cities. SJRA requested damages, attorney's fees and costs. SJRA's original cross-claim against the Cities did not plead a waiver of immunity, but in its Amended Counterclaim and Cross-Claim, SJRA pleaded that governmental immunity was waived under the common law, under section 11.05 of the GRP Contracts, and under section 271.152 of the Texas Local Government Code.
In its original counterclaim and cross-claim, SJRA asserted a claim for breach of contract and declaratory judgment against all Plaintiffs and the Cities, seeking a judicial declaration "that SJRA's fees, rates, and charges for fiscal years 2017, 2018, 2019, and 2020 comply with the GRP Contracts." After the Cities filed their Original and First Amended Pleas to the Jurisdiction, SJRA filed its First Amended Cross-Claim. Therein, in paragraph 2, SJRA described the "Nature of the Action" as a "Counterclaim and Cross-Claim for declaratory relief and breach of contract relating to the parties' rights and obligations under contracts between each of the Plaintiffs/Counter-Defendants and Cross-Defendants[, ]" and it alleged that each of the "contract counterparties in this lawsuit have and continue to claim that SJRA's fees, rates, and charges…are not in compliance with the GRP Contracts[;]" that each of the "Plaintiffs/Counter-Defendants and Cross-Defendants" have either "refused to pay SJRA's rates" or "have disputed those rates" as not in compliance with the GRP Contracts; that "[a] real,...
To continue reading
Request your trial