(Volume 3, Issue 6 – June/July 2008)
“Your Source for Information About the Texas City Attorneys Association”
Subprime Blues: The Crisis and Its Cause, Joe K. Longley, Austin: “Insurer downgrades, auction failures, rate resets, penalty rates, and material event disclosures” are words being heard more and more frequently by city treasurers and financial directors due to the subprime credit crisis. In early May 2008, the Wall Street Journal reported that loss estimates in the credit markets caused by a plague of home loan mortgage defaults and foreclosures on substandard credit risks range between $400 billion to over $1 trillion. This crisis has resulted in the recent demise of Bear Stearns and financial rating downgrades by rating agencies of many primary bond insurers, including Ambac, MBIA, XL Capital, and FGIC. On May 21, Moody’s downgraded CIFG (a French bond insurer) from A1 to a “junk” rating of Ba2. Some say the root cause of these insurance downgrades was the decision by the insurers to start underwriting the sale of instruments called Collateralized Debt Obligations (CDOs). Read more.
News and Updates
TCAA Adult Business Study Released: In 2007, the Texas City Attorneys Association Board of Directors commissioned a study to determine the extent that retail-only adult businesses with no on-premises entertainment cause harmful secondary effects on surrounding property values and ambient crime rates. The study was funded by TCAA and various cities, and is divided into two parts: (1) a survey of Texas appraisers; and (2) a study of crime-related secondary effects. The results of the study indicate that property values and ambient crime rates are negatively affected by the presence of retail-only adult businesses. The full document is available online at: http://www.texascityattorneys.org/pdf/StudyofSecondaryEffectsCrime_Final.pdf
2008 Fall Conference in San Antonio: The TCAA Fall conference will be held in conjunction with the TML Annual Conference on October 30, 2008, at the Henry B. Gonzalez Convention Center in San Antonio. Special thanks to our sponsor:
Nichols, Jackson, Dillard, Hager & Smith, LLP
Topics will include: (1) recent state and federal cases; (2) key construction law issues for city attorneys; (3) sign law; (4) cutting edge economic development tools; (5) ethics; and (6) legislative forecast. Attorneys can earn up to 4.75 MCLE hours, including 1 ethics hour. A link to registration and hotel information will be available soon on the front page of www.texascityattorneys.org. A separate e-mail and printed publicity will be sent to all members when registration is available.
2008 TCAA South Padre Conference: The 2009 TCAA Summer Conference in South Padre Island will be held at the Radisson Resort on June 10-12, 2009. Special thanks to the volunteer speakers who made this year’s conference so worthwhile. Some attendees expressed concern about hotel issues. For 2009, the TCAA room block at the Radisson will open earlier in the year, and TCAA staff will work to ensure that other, quality housing options are available to the members. Look for more details later this year. A final thanks to this year’s sponsors:
Municipal Attorney Job Openings: For the most recent Texas Municipal League classifieds postings, please click here.
TML/TCAA Legal Defense Program
Amicus Brief, Attorney General Opinion, and State Agency Comments Filed
Attorneys Fees: The City of Garland v. Roy Dearmore, et al., No. 07-1527, in the Supreme Court of the United States on petition for writ of certiorari. This case involves the proper construction of the term “prevailing party” in establishing whether a plaintiff is eligible for attorney’s fees under 42 U.S.C. § 1988(b). Dearmore argued that the term includes a party that has gained a preliminary injunction, regardless of whether there is ever a final decision on the merits. The Fifth Circuit allowed attorney’s fees based on this argument, holding that a preliminary injunction was “based upon an unambiguous indication of probably success on the merits.” TML and TCAA, joined by the National League of Cities and the International Municipal Lawyers Association, filed an amicus brief that argued that: (1) a plaintiff who obtains a preliminary injunction without a final decision is not a prevailing party; (2) a preliminary injunction is not a meritorious judgment for attorney’s fees purposes; and (3) the “catalyst theory” is not a permissible basis for awarding attorney’s fees. The amicus brief was filed on July 7, 2008 and a decision on the petition is pending.
Recent Texas Cases of Interest to Cities
Note: Included cases are from the period beginning on the 10th of the previous month through the 10th of the current month.
Constitutional Rights: District of Columbia v. Dick Anthony Heller, No. 07-0290 (U.S. June 26, 2008). Police officer and others brought action seeking, on Second Amendment grounds, to enjoin the district from enforcing gun control prohibitions. The trial court granted the city’s motion to dismiss and the police officers appealed. The court of appeals reversed. The Supreme Court of the United States held that the city’s ordinance was invalid and that statutes banning handgun possession in the home violated the Second Amendment. The court also held that the Second Amendment right to bear arms is not unlimited. It is not a right to keep and carry any weapon whatsoever in any manner whatsoever and for whatever purpose. For example, concealed weapons prohibitions had been upheld under the Second Amendment or state analogues, and the Court's holding should not be taken to cast doubt on longstanding prohibitions on the possession of firearms by felons and the mentally ill, or laws forbidding the carrying of firearms in sensitive places such as schools and government buildings, or laws imposing conditions and qualifications on the commercial sale of arms.
Sovereign Immunity—Contract: City of Houston v. Petroleum Traders Corp., No.14-07-00752-CV (Tex. App.—Houston [14th Dist.] July 3, 2008). The City of Houston accepted a bid from Petroleum Traders Corporation (PTC) to supply fuel to the city. The city began to place fuel orders with PTC in July 2005, but stopped orders in May 2008. PTC sued the city for breach of contract and quantum merit. The city filed a plea to the jurisdiction asserting that it is immune from suit. PTC added claims for takings and conversion, and the city filed a second plea to address the new claims. The trial court denied the city’s first plea to jurisdiction and granted the city’s second plea on the takings claim. The court of appeals concluded that the contract between the city and PTC was properly executed and the city’s immunity from suit on PTC’s contract claim has been waived by statute. The court of appeals further concluded that the city was immune from suit on PTC’s remaining claims.
Public Information Act: City of Fort Worth v. Abbott, No. 03-07-00553-CV (Tex. App.—Austin July 3, 2008). The Attorney General issued a letter ruling concluding that certain DNA records held by the City of Fort Worth’s forensic science laboratory were subject to disclosure under the Texas Public Information Act (PIA). The city filed suit challenging the ruling and the requestors intervened and sought a writ of mandamus to compel the disclosure of the information. The trial court granted the requestors’ writ of mandamus and ordered the city to disclose the information at issue. Because Government Code Section 411.153(b) prohibits the release of information in the DNA records at issue, and exempts that information from disclosure under the PIA, the court of appeals reversed the trial court’s order granting the writ of mandamus and rendered judgment in favor of the city.
Elections: Pedro Mendez v. City of Amarillo, No. 07-07-0207-CV (Tex. App.—Amarillo June 30, 2008). A group of citizens commenced a petition drive seeking to amend the City of Amarillo charter to reform the method of electing city commissioners. The group sought to increase the number of commissioners and also sought to establish election by single member districts. The two amendments were combined when placed on the ballot. After the proposition was defeated, Mendez filed suit contending that the wording of the ordinance violated state law. The city filed a plea to jurisdiction, contending that the trial court had never acquired jurisdiction. The trial court granted the city’s plea, and the court of appeals affirmed the ruling.
Employment: Paul T. Kuykendall v. City of Grand Prairie, et. al., No. 05-07-00788-CV (Tex. App.—Dallas June 26, 2008). A City of Grand Prairie fire department captain exposed himself in front of another firefighter, and was demoted by two ranks. A hearing on the city’s recommendation was conducted before a hearing examiner. The hearing examiner rendered his decision that insufficient evidence supported the allegation that the employee exposed himself, but determined that the employee was involved in “inappropriate behavior” and imposed a thirty-day suspension without pay. The employee appealed the examiner’s decision to the trial court, pleading that the hearing examiner’s decision to reject the recommended demotion was correct, but that the examiner exceeded his jurisdiction by imposing the suspension. The trial court granted the city’s motion for summary judgment. The city appealed and the court of appeals reversed the trial court’s judgment, rendering judgment that the hearing examiner’s order of suspension be set aside.
Sovereign Immunity—Tort: Indemnity Insurance Co. v. City of Garland, No. 05-06-01250-CV (Tex. App.—Dallas June 24, 2008). An accident involving a City of Garland truck, driven by John Morrow, injured Lee Brown. Indemnity Insurance paid Brown’s workers’ compensation claims. Indemnity filed a subrogation lawsuit against the city under the Texas Tort Claims Act for the alleged negligence of the city’s employee, Morrow. Indemnity Insurance agreed to dismiss its claims against Morrow with prejudice. The city then moved for summary judgment seeking dismissal of all claims against it. The trial court granted the city’s motion and ordered that Indemnity Insurance take nothing “on the grounds that the agreed order of dismissal with prejudice of Indemnity’s claims against the city’s employee bars any recovery against the city.” The court of appeals held that the order dismissing Indemnity’s claims against Morrow was not a judgment “against” Morrow for purposes of Section 101.106(d), and that Indemnity’s claims against the city are not barred by Section 101.102(1)(b) or by collateral estoppel.
Employment Discrimination: Tarris Woods v. City of Galveston et. al., No. 14-06-01022-CV (Tex. App.—Houston [14th Dist.] June 24, 2008). Woods, a firefighter, requested disability retirement. His employment was terminated, but he received disability retirement benefits from the City of Galveston. The city received notice that his disability had ended, and quit paying disability benefits. Woods tried to be reinstated by the city, but did not get recertified by the Texas Commission on Fire Protection after being instructed to do so by the city. Woods sued the city arguing racial discrimination in the city’s refusal to reinstate his employment. The trial court dismissed Woods’ claims because he did not establish a prima facie case of discrimination. The court of appeals affirmed.
Hotel Tax: City of Eagle Pass et. al. v. Alejandro Wheeler, No. 04-07-00817-CV (Tex. App.—San Antonio June 18, 2008). Alejandro Wheeler secured approval from the City of Eagle Pass to use hotel tax money to promote an upcoming boxing match and subsequently submitted six documents to the city’s finance department. The city suspected that at least one of the documents had been altered and submitted fraudulently. Wheeler was charged with a felony for intending to defraud the city. Wheeler subsequently sued the city and others, asserting claims for malicious prosecution and defamation. The trial court denied the city’s pleas. The court of appeals held that the city is immune from the Wheeler’s claims.
Civil Procedure: City of Reno v. Todd Stephens d/b/a Stephens and Sons, No. 06-08-00049-CV (Tex. App.—Texarkana June 17, 2008). Todd Stephens conducted a business within the corporate limits of the City of Reno wherein he was removing and transporting dirt. The city obtained a temporary restraining order to prohibit this practice on the basis that the operation was in violation of a city ordinance. The trial court denied the city’s motion for summary judgment. The court of appeals held that the trial court’s ruling is not appealable, and the city has not invoked the jurisdiction of the court. The court of appeals dismissed the appeal for want of jurisdiction.
Open Meetings Act: Love Terminal Partners, L.P. et. al. v. City of Dallas et. al., No. 05-07-00383-CV (Tex. App.—Dallas June 24, 2008). Airport terminal lessees brought an action against the City of Dallas and city officials for declaratory and injunctive relief concerning Open Meetings Act violations arising from closed-door negotiations prior to an agreement to limit passenger air traffic at the airport. The trial court held that the passage of the Wright Amendment Reform Act of 2006, which incorporated the airport agreement, rendered the Open Meetings Act action moot. The court of appeals affirmed.
Civil Service: Bartholomew U. Stephens v. City of Houston et. al., No. 01-06-00851-CV (Tex. App.—Houston [1st Dist.] June 12, 2008). Williams, the director of the city’s Health and Human Services Department, indefinitely suspended Stephens pursuant to the Houston City Charter and Houston City Code. Stephens appealed William’s decision to the Civil Service Commission (CSC). The CSC “upheld and sustained” Stephens’s indefinite suspension, resulting in permanent dismissal from city employment. Stephens then filed a petition seeking a declaration that his dismissal was beyond the power of the department head and wrongful, and he sought reinstatement to his prior position and back pay. The city filed a plea to the jurisdiction. The court of appeals dismissed the appeal because Stephens did not appeal the CSC’s final dismissal order on constitutional grounds, and therefore had no right to appeal the trial court’s order.
Sovereign Immunity—Tort: City of Pasadena v. Roland C. Kuhn, No. 01-07-00812-CV (Tex. App.—Houston [1st Dist.] June 24, 2008). Roland Kuhn filed a personal injury action against the City of Pasadena following a collision at an intersection with a police car. The trial court denied the city’s plea to the jurisdiction, and the city appealed. The court of appeals held that the city retained sovereign immunity from suit under the Texas Tort Claims Act because the officer did not act recklessly. The court of appeals reversed the trial court’s order and rendered judgment that the case be dismissed.
Collective Bargaining: City of Santa Fe v. Victor Boudreaux and Jeremy Creech, No. 14-06-0299CV (Tex. App.—Houston [14th Dist.] May 29, 2008). The City of Santa Fe terminated the employment of police officers Victor Boudreaux and Jeremy Creech. Under the terms of a collective bargaining agreement between the city and its police department, both officers appealed their termination. The city argued that the provision allowing disciplined police officers to appeal to a Citizen’s Review Committee represents an unconstitutional private delegation of legislative authority. The trial court held in favor of the employees, and ordered the city to participate in the grievance process. The city appealed on the grounds that the appeal provision was unconstitutional. The court of appeals held that the provision was unconstitutional, reversed the trial court’s judgment, and rendered judgment for the city.
Property Tax: 21st Century Home Mortgage v. City of El Paso, No. 08-06-00189-CV (Tex. App.—El Paso May 22, 2008). The City of El Paso brought tax delinquency suit against a lienholder after the lienholder repossessed property on which back property taxes were owed. The trial court entered a default judgment against the lienholder and denied the lienholder’s motion for a new trial. The lienholder appealed. The court of appeals affirmed the trial court’s default judgment, holding that the lienholder was unable to show that it was unaware of the suit.
Official Immunity: John Anderson, Jr. v. City of San Antonio et. al., No. 04-07-00385-CV (Tex. App.—San Antonio May 21, 2008). John Anderson, a San Antonio fire employee, accepted outside employment from a company that contracts with the city. The chief subsequently denied Anderson’s request for permission to do so. As a result, Anderson ceased his employment with the company and filed suit against the chief and the city seeking declaratory, injunctive, and monetary relief. The city filed a motion for summary judgment claiming that Anderson failed to plead a viable cause of action and that, even if he had, there was no evidence showing that the city violated the law. The trial court denied the city’s motion for summary judgment, but granted the chief’s motion for summary judgment on the basis of official immunity. Anderson appealed the judgment in favor of the chief. The court of appeals affirmed the trial court’s grant of the chief’s summary judgment.
Vested Rights: Brooks Hardee et. al. v. City of San Antonio, No. 04-07-00740-CV (Tex. App.—San Antonio May 21, 2008). The underlying dispute is whether Brooks Hardee et. al. (developers) are entitled to vested rights with regard to the development of several tracts of land. In their petition, the developers requested an injunction to prevent the city from enforcing “any of the development ordinances” against the property. In its plea to the jurisdiction, the city asserted that the developers’ claims were not ripe for judicial consideration because the city had not made a decision regarding the application of the various ordinances to the development of the property. The trial court granted the plea to the jurisdiction and the developers appealed. The court of appeals affirmed the trial court’s ripeness order because the city had not made a determination on which land use regulations would apply to the developers’ property.
Sovereign Immunity—Tort: Carmela Bustillos v. City of Midland, No. 11-07-00038-CV (Tex. App.—Eastland May 15, 2008). Carmela Bustillos filed suit against the City of Midland for injuries she sustained when she stepped into an uncovered water meter box. She alleged that this condition of the property constituted a special defect under the Texas Tort Claims Act. The city filed a plea to the jurisdiction that contested the status of the open water meter box as a special defect. The trial court granted the city’s plea to the jurisdiction and dismissed Bustillos’s suit. The court of appeals affirmed.
Sovereign Immunity—Tort: City of Dallas v. Kenneth Reed, No. 07-0469 (Tex. May 16, 2008). Kenneth Reed, a motorcyclist, had a single vehicle accident and brought a personal injury action against the City of Dallas, alleging that his accident was caused by a two-inch to three-inch difference in elevation between lanes in the roadway. The district court denied the city’s plea to the jurisdiction and the court of appeals affirmed, holding that the two-inch difference in elevation between lanes in the roadway was a “special defect” for purposes of the Tort Claims Act. The city appealed and the Supreme Court reversed the court of appeal’s judgment, holding that: (1) variance in elevation in roadway was not a “special defect”; and (2) the city did not know of the roadway’s allegedly dangerous condition in order to warn of the danger.
Takings: City of Dallas v. VRC LLC, No. 05-06-01056-CV (Tex. App—Dallas May 19, 2008). VRC LLC, a towing company, sued the City of Dallas for injunctive and declaratory relief and damages, alleging that the city-regulated price of nonconsent tows was below a price that was fair and reasonable in violation of the state and federal constitutions. The city filed a plea to the jurisdiction, alleging that the court lacked subject matter jurisdiction over the company’s state and federal takings claims. The trial court denied the plea and the city appealed. The court of appeals reversed the trial court’s order denying the city’s plea to the jurisdiction and rendered judgment dismissing VRC’s takings claims, holding that a ceiling on nonconsent tow fees did not constitute a regulatory taking under the state or federal constitution.
Sovereign Immunity—Tort: City of El Paso v. Jackie Lynn Wilkins, No. 08-07-00087-CV (Tex. App.—El Paso May 15, 2008). Wilkins, a widow, brought a wrongful death action against the City of El Paso alleging that the two and one-half hour delay in police response to her husband’s 9-1-1 call caused his death by suicide. The trial court denied the city’s plea to the jurisdiction, and the city appealed. The court of appeals held that Wilkins failed to allege that a condition of property contributed to her husband’s death as required to have a claim under the Texas Tort Claims Act.
Sign Regulation: City of Argyle v. David Pierce et. al., No. 02-07-255-CV (Tex. App.—Fort Worth May 15, 2008). A property owner and outdoor sign company brought a declaratory judgment and inverse condemnation action against the City of Argyle when the city tried to enforce its sign ordinance prohibiting off-premises outdoor advertising in its extraterritorial jurisdiction. The trial court denied the city’s plea to the jurisdiction and the city appealed. The court of appeals reversed the trial court’s order denying the city’s plea to the jurisdiction with regard to the inverse condemnation and deprivation of property claims, holding that the owner and company did not have a property interest that could be taken by the city in an inverse condemnation claim. The court of appeals affirmed the trial court’s order denying the city’s plea to the jurisdiction with regard to the declaratory judgment claims, and held that the sign regulation was not a penal statute that could only be challenged during a criminal prosecution.
Clean Water Act: Environmental Conservation Organization v. City of Dallas, No.07-10583 (5th Cir. July 3, 2008). The Environmental Conservation Organization brought a citizen enforcement action against the City of Dallas under the Clean Water Act, alleging that the city failed to develop and implement an effective program to monitor and reduce its discharge of storm water pollutants into a river. The district court granted the city’s motion for summary judgment on the ground that the suit was barred under the doctrine of res judicata, and the organization appealed. The court of appeals held that: (1) the citizen suit could not be dismissed on the ground of res judicata; (2) the claims for injunctive relief were moot; and (3) the claims for civil penalties were also moot. The court of appeals vacated the district court’s summary judgment in favor of the city and remanded the case.
Federal Telecommunications Act: Southwestern Bell Telephone, L.P. v. City of Houston, No. 07-20320 (5th Cir. May 20, 2008). Southwestern Bell filed suit against the City of Houston, claiming that the city’s ordinance requiring owners of facilities located in public rights-of-way to bear the cost of relocating their equipment to accommodate public works projects violated the federal Telecommunications Act (Act). The district court dismissed the claims, and the court of appeals affirmed holding that there is no private right of action for telecommunications companies under the Act.
Sovereign Immunity—Tort: City of Austin v. Trudy Leggett, No. 03-07-00345-CV (Tex. App.—Austin June 12, 2008). The mother of seventeen year-old who drowned while driving through a flooded street intersection sued the city for a wrongful death. The trial court denied the city’s plea to the jurisdiction. The court of appeals reversed the trial court holding that: (1) the condition that caused her son’s death was not the city’s storm water detention pond or other city property; (2) the flooding of city intersection was an ordinary defect and not a special defect; and (3) the city had no actual knowledge that the street intersection had flooded before the boy drowned.
Regulatory Taking: Texas Bay Cherry Hill, L.P. v. City of Fort Worth, No. 02-06-325-CV (Tex. App.—Fort Worth May 29, 2008). An apartment complex owner sued the city, alleging that the city tried to diminish the complex’s value by disparaging it and interfering with business relationships when the complex was targeted for redevelopment by the city. The trial court granted the city’s plea to the jurisdiction. The court of appeals affirmed, holding that the redevelopment was a governmental function and the city was immune from suit for the redevelopment.
Sovereign Immunity—Contracts: City of Mesquite v. PKG Contracting, Inc., No. 05-07-00627-CV (Tex. App.—Dallas July 9, 2008). PKG contracted with the city to construct a storm drainage system and disputes arose over which party was responsible for moving certain utilities from the construction right-of-way. PKG sued the city, claiming the city represented that utility lines would be removed before PKG began work, and that the city failed to move the utility lines as it was required to do under the contract. The city filed a plea to the jurisdiction based on immunity from suit, which the trial court denied. The court of appeals affirmed, holding that the city waived its immunity from suit under Local Government Code Section 271.152 when it entered into a properly executed written contract for goods and services.
Employment Discrimination: Debra S. Sarpy v. Town of Homer, No. 07-30904 (5th Cir. July 07, 2008) (per curiam). The Town of Homer formerly employed Sarpy, an African-American female. After an election in the fall of 2002, Homer elected a new mayor and a new board of selectmen. At that time, Homer faced financial troubles and decided to reduce its workforce. Of Homer’s thirty employees (composed of five white employees and twenty-five African-American employees), eight employees were terminated, including Sarpy, seven of whom were African-American. The employees were notified that they were terminated due to Homer’s financial condition. Appellants filed suit against Homer alleging race and gender discrimination. The district court granted summary judgment in favor of the town on all claims, holding that even assuming that Sarpy established a prima facie case of race and gender discrimination, Homer’s need to reduce the workforce in order to manage its financial difficulties was a legitimate, nondiscriminatory rationale. The court of appeals affirmed.
Attorney General Opinions of Interest to Cities
Note: Included opinions are from the period beginning on the 10th of the previous month through the 10th of the current month.
Opinion No. GA-0630 (Zoning): concludes that a landowner is eligible to sign a protest to a proposed zoning change under Section 211.006(d)(2), Local Government Code, if the lot or land is within the specified geographic limits and ownership is indicated on the most recently approved city tax roll.
Opinion No. GA-0637 (Impact Fees): concludes that, under Section 395.022(b), Local Government Code, a school district is not required to pay an impact fee imposed under Chapter 395 unless the district's board of trustees consents to the payment of such fee by entering into a contract with the political subdivision that imposes the fee.
You can view attorney general opinions at www.oag.state.tx.us. On the same site, you can also sign up to receive e-mail updates of opinion requests and newly released opinions.
As a supplement to TCAA News, please check the TML Legislative Update Newsletter and TML’s Connect News Service .
Please contact Scott Houston, TCAA General Counsel, with your news, questions, and/or comments by e-mail at firstname.lastname@example.org or by phone at 512-231-7400.
TCAA members may use the information herein for any purpose. No other person may reproduce, duplicate, or distribute any part of this document without the written authorization of the Texas City Attorneys Association.
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