City immune from monetary damages in emergency sewer shutdown but not injunction relief

City of Houston v. Downstream Environmental L.L.C., 01-12-01091-CV (Tex. App. – Houston [1st Dist.], April 3, 2014).

This is an interlocutory appeal from the denial of a plea to the jurisdiction arising from claims associated with alleged damages from the discharge of sewer lines and rate increases after a temporary shutdown of the sewer system. The Houston Court of Appeals for the 1st District reversed in part, holding sovereign immunity barred all monetary claims for breach of contract, negligence, and alleged constitutional violations.  However, the case was remanded to consider injunctive relief based on Texas constitutional claims.

Downstream Environmental, LLC (“Downstream”) is a liquid waste disposal business that operates a nonhazardous waste treatment plant under a Houston industrial waste permit. Downstream disposed of some non-conforming waste before realizing its hazardous potential. Then-unknown toxic substance killed all of the biological treatment microorganisms at the City’s wastewater treatment plant. An emergency was declared and parts of the sewer lines were disconnected and had to be decontaminated. Downstream remained closed for 27 days while the City investigated and disconnected the lines. Under the City’s ordinances, Downstream appealed to an administrative law judge who ordered the lines reconnected. A little over a year later, the City increased the per-gallon discharge cost to Downstream by 700%, which it later reduced to 300%. Downstream sued the City for the lost business and increase in rates. It further alleged due process and equal protection violations. The City filed a plea to the jurisdiction which the trial court denied and the City appealed.

Downstream argued the sewer service was a proprietary function and immunity did not apply, however, sanitary and storm sewer operations are statutorily designated as governmental under the Texas Tort Claims Act.  The City’s functions here fall under the definition (despite Downstream’s arguments to the contrary). Several pages were dedicated to explaining why the services did more than merely “touch upon” governmental functions and were not proprietary.  Next the court held that since the phrase “plead and be impleaded” is not a waiver of immunity, the City retained its immunity despite counter-suing for a past due bill.  Further, immunity is not waived for alleged “duress, coercion, and bullying.”

However, Downstream’s alleged various administrative actions taken by the City against it, despite Downstream’s evidence that other carriers were the cause, could qualify as proper constitutional claims entitling it to injunctive relief. The argument that the City had a rational basis for its actions, even if true, go to the merits of the claims, not the jurisdiction of the court to hear the case. No monetary damages are permitted, but injunctive relief was properly pled.

If you would like to read this opinion click here. Panel: Justice Keyes, Justice Higley, and Justice Massengale.  Opinion by Justice Massengale. The attorneys listed for the City of Houston are Hope E. Hammill-Reh and Robert W. Higgason.  The attorney listed for Downstream Environmental is Michael M. Essmyer Sr.



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