Victor A. Flores 2017-12-20 21:07:40
This year was an active judicial and legislative year for government law. New laws were passed impacting governmental entities, including among others: SB 4 (enforcing federal and state immigration laws at the local level—pending litigation); SB 1004 (pre-empting cities from negotiating adequate compensation for the use of public property—pending litigation); HB 1704 (awarding court costs and attorneys’ fees to the prevailing party in an action under the “permit vesting” statute, Chapter 245 of the Texas Local Government Code); and from the special session, SB 6 (requiring cities in large counties to receive voter approval on whether involuntary annexations can proceed). In addition, Texas courts continued to make key distinctions in caselaw, including the following: Public Information and a “Sacrosanct” Privilege: Paxton v. City of Dallas 1 The city of Dallas requested relief from two attorney general decisions concluding that the city must disclose confidential attorney-client communications regarding the McCommas Bluff Landfill and a convention-center hotel. The issue surfaced as Dallas withheld confidential information without requesting an AG decision within the prescribed 10-day deadline. Dallas didn’t submit its request for an AG decision until 26 days after receiving the landfill request and 49 days after receiving the hotel request.2 Under the Texas Public Information Act, failure to assert exceptions within the statutory period generally results in a public-disclosure presumption. The governmental entity is then burdened with the responsibility of establishing a “compelling reason” to withhold that information. In the landfill and hotel requests, the AG determined that the attorney-client privilege was not a compelling reason. Following various trial and appellate court decisions (wherein the appellate courts held that the privilege was a compelling reason to withhold information), the AG filed its petition for review. The Texas Supreme Court held that documents containing communication protected by the attorney-client privilege are deemed confidential within the meaning of statutory exception for disclosure under the Public Information Act. Specifically, Justice Eva Guzman wrote, “Robotic perfection by a governmental body’s public information officer is a statutory ideal, not an absolute requirement. To err is human, but to conduct a city’s legal affairs without the occasional error would require divinity. … We therefore conclude a ‘compelling reason’ to withhold confidential attorney-client communications exists and, absent waiver, rebuts the presumption that the information protected by the privilege is ‘subject to required public disclosure.’”3 This case solidifies the importance of the attorney-client privilege as applied to the act. Wasson and the Tale of Two Leases: Wasson Interests, Ltd. v. City of Jacksonville;4 City of Dallas v. Trinity E. Energy, LLC; 5 and City of Tyler v. Owens6 In 2016, the Texas Supreme Court issued a significant opinion in the Wasson case. The city of Jacksonville leased its interest in lakefront property to Wasson Interests for residential use. Wasson then rented out that same property for commercial use, in violation of its lease agreement. The city issued Wasson an eviction letter and Wasson sued for breach of contract. Prior to Wasson, it was generally argued that, under Chapter 271 of the Texas Local Government Code, waiver of immunity only occurred when the contract was for goods or services. In Wasson, the court held that when a municipality enters any contract in its proprietary capacity, no immunity exists. This marks a significant change. Municipalities should anticipate that there will be increased litigation over what is or isn’t within their proprietary-governmental capacity, as it relates to contracts. The following 2017 cases represent this legal-knot. In Trinity,7 the city of Dallas decided to lease minerals on city-owned property. Trinity East Energy informed the city of probable drilling sites within the subject property and requested pre-approval of the same before entering the city’s lease. The lease stated that it would not unreasonably oppose Trinity’s request for a variance or waiver if necessary for its operations. After the Dallas City Plan and Zoning Commission denied some of the drilling permits, the Dallas City Council was unable to gather the supermajority vote that was required to overturn the commission’s denial. Trinity subsequently sued Dallas for breach of contract. Dallas argued that the denial of Trinity’s permits was an exercise of its governmental functions in regulating parks, floodplains, and building codes and inspections. The trial court granted the city’s plea to the jurisdiction. However, shortly after the trial court granted the city’s plea, the Texas Supreme Court issued its opinion in Wasson. Therefore, the 5th Court of Appeals in Dallas, applying the Wasson analysis to Trinity, held that the city acted in its proprietary capacity when it leased the mineral rights to Trinity and, as a result, governmental immunity did not apply. A few months later, another appellate court applied the Wasson analysis to a city of Tyler lease case. In Owens, Tyler had existing leases for land underneath Lake Tyler (constructed by the city), including those with the Owenses, Chatelains, and Terrys. In February 2017, the city issued the Chatelains a construction permit to build a boathouse. The Owenses filed a lawsuit alleging that the permitted boathouse was going to encroach onto their frontage. The city of Tyler filed a plea to the jurisdiction, asserting that it was operating in its governmental capacity, regulating land use. Conversely, the Owenses alleged that Tyler’s act of leasing the lakefront residential lots was a proprietary function. Here, the court determined that the heart of the case rested on Tyler’s decision to approve the location of the pier and boathouse and the issuance of the permit. The court further determined that Tyler had operated in its governmental capacity in regulating land use and was entitled to immunity, absent legislative waiver.8 It will be interesting if the Texas Supreme Court reviews either of these cases and makes any further distinctions on Wasson. As stated above, until more cases are litigated under Wasson, it is wise to inform municipal clients of the current legal discussions surrounding the proprietary-governmental dichotomy, as it relates to contracts. Notes 1) Paxton v. City of Dallas, 509 SW3d 247, 252 (Tex. 2017). 2) Id. at 253. 3) Id. at 266-67. 4) Wasson Interests, Ltd. v. City of Jacksonville, 489 SW3d 427 (Tex. 2016). 5) City of Dallas v. Trinity E. Energy, LLC, No. 05-16-00349-CV, 2017 WL 491259 (Tex. App.—Dallas Feb. 7, 2017, pet. filed). 6) City of Tyler v. Owens, No. 12-16-00128-CV, 2017 WL 3499949 (Tex.App.—Tyler Aug. 16, 2017, pet. filed). 7) In Trinity, Petitioners Brief on the Merits was filed October 2017. 8) In Owens, Petition for Review was filed October 2017. VICTOR A. FLORES is deputy city attorney of Denton, providing general counsel for all legal matters. He is also a fellow of the Texas Bar Foundation and serves on the council of the State Bar of Texas Government Law Section, the Texas Young Lawyers Association Board of Directors, and the Texas Bar Journal Board of Editors.
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