HOUSTON BELT & TERMINAL RAILWAY CO., et al. v. CITY OF HOUSTON, TEXAS AND DANIEL KRUEGER, IN HIS OFFICIAL CAPACITY AS DIRECTOR OF PUBLIC WORKS AND ENGINEERING, 14-0459 (Tex. April 1, 2016)
This is an ultra-vires case where the Texas Supreme Court holds acts can be ultra-vires and without legal authority even if they involve some level of discretion.
The City of Houston enacted a drainage-fee ordinance. Charges are calculated based on a specified rate per “square [foot] of impervious surface on each benefitted property.” The ordinance gives the city’s Director of Public Works and Engineering—in this case, Daniel Krueger—authority to administer its provisions, subject to the terms of the ordinance itself. Petitioners (collectively, the “railroads”) received notices of proposed charges of about $3 million annually based on Krueger’s determination that all of the railroads’ properties within Houston were “benefitted” and that the surfaces of nearly all of those properties were also “impervious.” Krueger made his determination based upon aerial images—looking to see if the properties appeared green or brown—rather than digital map data. Generally, under this method, if the property appeared brown, Krueger determined it was impervious; if it appeared green, he determined it was pervious. The railroads filed suit alleging ultra vires claims against Krueger and seeking prospective injunctive relief. The City and Krueger filed a plea to the jurisdiction which the trial court granted. The court of appeals affirmed in part and reversed in part. The parties cross-appealed.
The parties dispute the meaning of “exercise of discretion” and “without legal authority” as used in Heinrich for ultra vires determinations. To the city, “exercise of discretion” means any decision made in which the officer has the authority to use his personal judgment, and “a mistake in exercising his judgment is not an ultra vires act.” The railroads assert discretion means absolute discretion—discretion where no specific, substantive, or objective standards govern the exercise of judgment. Heinrich’s claim was against the officers for acting pursuant to, yet outside the limits of, a statutory grant of authority. Heinrich alleged that the officers, making the type of determination which they had authority to make, made that determination in a way the law did not allow. That is the proper standard. The Court then analyzed several cases since Heinrich and determined none could be read to shield unlawful action simple because the action was discretionary. And while “the protections of governmental immunity remain robust, they are not absolute.” Accordingly, “the principle arising out of Heinrich and its progeny is that governmental immunity bars suits complaining of an exercise of absolute discretion but not suits complaining of either an officer’s failure to perform a ministerial act or an officer’s exercise of judgment or limited discretion without reference to or in conflict with the constraints of the law authorizing the official to act. Only when such absolute discretion—free decision-making without any constraints—is granted are ultra vires suits absolutely barred.” [Comment: That gets into an “unbridled discretion” problem.] And, as a general rule, “a public officer has no discretion or authority to misinterpret the law.” However the court emphasized that this opinion is not to be interpreted as a way “to allow a new vehicle for suit to masquerade as an ultra vires claim” and that the exception still remains extremely narrow in application.
The Court then analyzed the ordinance in question and determined Krueger’s determinations did not meet the definitions found in the ordinance. The railroad properties are not “benefitted properties” under the ordinance’s definition and while Krueger may have some authority with respect to determining which properties are benefitted, he does not have authority to make that determination in a way that conflicts with other provisions of the ordinance, including its definition and usage of “benefitted property.” Further, “Impervious surface” is defined and Krueger’s determinations did not meet the ordinance definitions either. And while he may rely on “reliable data” to make a determination, the data must be similar to the types of data described in the ordinance. The railroads properly alleged an ultra vires claim so the case is remanded for further proceedings.