Opinion
Civil Action No. EP-98-CA-114-EP
May 17, 2000.
ORDER
On this date the Court considered El Paso County Water Improvement District No. 1's Motion for Dismissal Pursuant to Eleventh Amendment, filed December 1, 1999 and Southwestern Bell's Response. El Paso County Water Improvement District No. 1's letter briefs have also been considered. Also on this date, the Court considered Southwestern Bell's Conditional Motion to Substitute Officials of El Paso County Water Improvement District No. 1, as well as the response to that motion. After careful consideration, the Court will deny the motion to dismiss and will deny the conditional motion as moot.
Background and Procedural History
Southwestern Bell Telephone Company ("SWBT"), a provider of telecommunications services holding a certificate of convenience and necessity issued by the Public Utility Commission of Texas ("PUC"), brought this suit for declaratory and injunctive relief originally against the City of El Paso ("City"). In its original petition, SWBT sought declarations that (1) a proposed city ordinance that would require SWBT to pay the City 5% of all gross revenues from services to customers within El Paso violated the Federal Telecommunications Act of 1996, 47 U.S.C. § 151 et seq., ("FTA"); (2) certain buyout provisions of a then-current ordinance as well as the proposed ordinance also violated the FTA; (3) the proposed ordinance violated the Texas Public Utilities Regulation Act, Title II of the Texas Utilities Code, ("PURA"); (4) the buy-out provisions violated Article 1416 of the Texas Revised Civil Statutes; (5) no SWBT property would be subject to the buyout provisions; and (6.) the buyout provision is unenforceable.
El Paso County Water Improvement District No. 1 ("District") was added as a Defendant in SWBT's First Amended Complaint. The District is a water improvement district operating under Article XVI, Section 59 of the Texas Constitution. At the center of the controversy between SWBT and the District is a series of irrigation ditches deeded from the federal Bureau of Reclamation to the District in January 1996. Development in the area of the ditches has resulted in a number of roads being built crossing ditches and has also resulted in an increase in demand for telephone service.
The District has established certain application procedures for entities wanting to cross the canals, laterals and ditches. These procedures require an entity, such as SWBT, to complete an application, pay an application fee of $500 and obtain a survey. Before the survey is ordered, the District's Board of Directors must preliminarily approve the application. After the survey is completed, the Board assesses a charge, which can be determined on an ad hoc basis, based on the length of the crossing.
In its claims against the District, SWBT seeks declaratory relief, arguing that (1) the District's application procedures and fees violate both ETA and PURA; (2) roads and highways crossing the District's ditches and canals are public roadways; (3) the District has no right to charge for telephone lines crossing its canals and ditches when those lines are within the rights-of-way of city or county roads;(4) the water flowing through the District's canals and ditches is public; and (5) the District has no right to charge for telephone lines crossing public waters. The District filed a counterclaim, alleging that SWBT has trespassed on its property, or alternatively, that SWBT has taken its property for public use without compensating the District.
SWBT and the City have settled their claims, leaving the District as the only defendant remaining in the case.
Standards for Eleventh Amendment Immunity
The District moves to dismiss this case on the basis that it is barred by the Eleventh Amendment. In the absence of valid Congressional abrogation or state consent, the Eleventh Amendment prohibits a plaintiff from suing a state in federal court. College Sav. Bank v. Florida Prepaid Postsecondary Educ. Expense Bd., 119 S.Ct. 2219, 2223 (1999).
The District argues that it is a branch of the state and is, therefore, immune from suit. SWBT argues that the District is more like a municipality, county or a school district, none of which are protected by Eleventh Amendment immunity. Hess v. Port Authority Tans-Hudson Corp., 513 U.S. 30, 47 (1994); Mt. Healthy City Sch. Dist. Bd of Educ. v. Doyle, 429 U.S. 274, 280 (1977).
In Clark v. Tarrant County, 798 F.2d 736 (5th Cir. 1986), the Fifth Circuit established a six-factor test for determining whether an entity is a branch of the state for purposes of the Eleventh Amendment. These factors are:
1.) Whether the state statutes and case law view the agency as an arm of the state:
2.) The source of the entity's funding;
3.) The entity's degree of local autonomy;
4.) Whether the entity is concerned primarily with local, as opposed to statewide, problems;
5.) Whether the entity has the authority to sue and be sued in its own name; and
6.) Whether the entity has the right to hold and use property.Hudson v. City of New Orleans, 174 F.3d 677, 679 (5th Cir. 1999). See also Clark, 798 F.2d at 744-45.
However, there is another line of Fifth Circuit case law on this subject to which the District directs the Court's attention. In this line of cases, port authorities, which also operate under Article XVI, Section 59 of the Texas Constitution, are held to be immune arms of the state. Pillsbury Co., Inc. v. Port of Corpus Christi Auth., 66 F.3d 103, 104 (5th Cir. 1995); Kamani v. Port of Houston Auth., 702 F.2d 612 (5th Cir. 1983).
The District argues that, based on these cases, the Fifth Circuit has created a bright-line test for entities organized and operated under Article XVI, Section 59 of the Texas Constitution, and that an examination of the Clark factors would be inappropriate. Particularly, the District points to language in Pillsbury emphasizing the creation of the port authority pursuant to Article XVI, Section 59 of the Texas Constitution. Pillsbury, 66 F.3d at 104-05.
The Court is convinced that the language in Pillsbury does not have the broad significance that the District would attribute to it. The basis for the Fifth Circuit's decision in Pillsbury is that the Port of Corpus Christi Authority is factually and legally indistinguishable from the Port of Houston Authority, which the court in Kamani had previously held immune from suit under the Eleventh Amendment. Pillsbury, 66 F.3d at 104. Therefore, Pillsbury was essentially decided on the basis of stare decisis.
Kamani, too, was decided on the basis of a previous case, McCrea v. Harris County Houston Ship Channel Navigation Dist., 423 F.2d 605 (5th Cir. 1970). The court in Kamani, in holding the Houston port immune from suit, cited McCrea's statement that the Port of Houston Authority was "a creature of state law and a political subdivision of the State of Texas." Kamani, 702 F.2d at 613. In McCrea, the issue of whether the Houston port was an arm of the state for Eleventh Amendment purposes was never raised; rather, the court was describing the Harris County Houston Ship Channel Navigation District. McCrea, 423 F.2d at 607. Therefore, neither Kamani nor McCrea hold that an entity created and run under Article XVI, Section 59 of the Texas Constitution is automatically protected by the Eleventh Amendment.
Further, the context of the statement in Pillsbury indicates that the Fifth Circuit did not intend to create a bright-line test for Eleventh Amendment immunity. The plaintiff in Pillsbury had argued that the Supreme Court case Hess v. Port Authority Trans-Hudson Corp., 513 U.S. 30 (1994), overruled Kamani. In Hess, the Supreme Court held that a bi-state railroad created by an interstate compact was not subject to Eleventh Amendment immunity. Hess, 513 U.S. at 38. The Pillsbury court distinguished the analysis in Hess by stating:
We view Hess as a limited holding addressing the standard to be applied to bi-state entities not created pursuant to state statute. Because the Corpus Port and the Houston Port were both created and still operate pursuant to Article XVI, Section 59 of the Texas Constitution, Hess does not overrule Kamani or control the disposition of this appeal.Pillsbury, 66 F.3d at 104-05.
Thus, in context, the court in Pillsbury is not indicating that there should be a bright line rule — that everything created pursuant to a particular section in the Texas Constitution is entitled to immunity — but is instead distinguishing the facts before it from the facts before the Supreme Court in Hess. Therefore, the Court will examine the six Clark factors to determine the status of the District.
Cf. Flores v. Cameron County, 92 F.3d 258, 268 (5th Cir. 1996) ("analogies between like entities cannot replace consideration of the six relevant factors"); Laje v. R.E. Thomason Gen. Hosp., 665 F.2d 724, 727 (5th Cir. 1982) ("[a] federal court must examine the particular entity in question and its powers and characteristics as created by state law to determine whether the suit is in reality a suit against the state itself").
The six factors
The six Clark factors are not given equal weight, and it is common for several of the factors to weigh in favor of viewing the entity as an arm of the state and for several to weigh against it. Hudson, 174 F.3d at 682-83.
The source of the District's funding
Of the six Clark factors, the source of the entity's funding has been held to be the most important. Hudson, 174 F.3d at 679; Delahoussaye v. City of New Iberia, 937 F.2d 144, 147 (5th Cir. 1991). This is essentially a question of whether the state would be liable for a judgment against the entity. See Regents of the Univ. of Cal. v. Doe, 519 U.S. 425, 430 (1997). The Court notes that SWBT is not seeking any monetary damages from the District.
The District is funded by local user fees (assessments), local taxes and bonds. See TEX. WATER CODE § 49.107 (authorizing a district to levy and collect taxes for operation and maintenance); Id. at § 55.354 (assessments); Id. at § 55.491 (authorizing bond election); Id. at § 55.491 (amount of the bonds should be sufficient to pay for proposed improvements); Id. at § 55.651 et seq. (levying taxes to pay principal and interest on bonds).
More importantly, it appears that the District itself, and not the state, is responsible for any judgments against it. Harris County Flood Control Dist. v. Mihelich, 525 S.W.2d 506 (Tex. 1975); Op. Att'y Gen. No. H-1111, 1978 WL 24366 (Jan. 6, 1978) (both stating that a judgment against district operating pursuant to Article XVI, Section 59 of the Texas Constitution should be paid from the district's maintenance fund). See also TEX. WATER CODE § 49.066(b) (a state court rendering judgment against a district may order the district to collect taxes to pay the judgment). Therefore, a judgment against the District would not be paid from the state treasury.
How state law views the District
Although not binding on the Court, whether state law views the entity as an alter ego of the state is relevant to the determination of Eleventh Amendment immunity. The Texas Supreme Court has held that political subdivisions created by the Texas Legislature under article XVI, section 59 of the Texas Constitution are immune from suit in Texas courts. Guillory v. Port of Houston Auth., 845 S.W.2d 812, 812 (Tex. 1993). Although the entity at issue in Guillory was a port authority, the Texas Supreme Court also addressed the immunity of water improvement districts. Specifically, the Texas court stated that "[w]ater improvement districts . . . are different from municipalities in that the former are created by the Legislature for general public purposes, while the latter are created by consent of their inhabitants." Guillory, 845 S.W.2d at 814.
The Texas Supreme Court also stated that the Houston Port Authority was immune from federal suit, based on Kamani. Guillory, 845 S.W.2d a at 815. Because the same port authority was involved in both Kamani and Guillory, these statements do not persuade the Court that the District is immune under the Eleventh Amendment.
The district's degree of local autonomy
The District is run by a Board of Directors consisting of five locally elected directors who own land within the District. TEX. WATER CODE §§ 55.101; 55.102. The Board of Directors is permitted to purchase or make improvements and facilities for irrigation without state approval. Id. at § 55.163. Likewise, the District is authorized to enter into contracts with the United States without state approval. Id. at § 55.185. The District can also set its own fees, sell its property and annex land. Id. at §§ 49.212, 49.226, 49.301-.302. On the other hand, before a district can issue bonds to fund a project, the project must be approved by the Texas Natural Resource Conservation Commission. Id. at § 49.181. Nevertheless, on the whole, the District appears to have a significant amount of local autonomy.
Whether the district is concerned primarily with local, as opposed to statewide, problems
Although the use of water is of concern to the entire state of Texas, the District's powers appear limited to address issues of local concern. The Court notes the Texas Supreme Court's statement that entities created under Article XVI, Section 59 of the Texas Constitution are for "general public purposes." Guillory, 845 S.W.2d at 814. Nevertheless, on the whole, it appears that the District is primarily concerned with the area within the District itself. The purposes of a water improvement district are:
(a) to provide for irrigation of land within its boundaries.
(b)to furnish water for domestic, power, and commercial purposes.
(c) to cooperate with the United States under federal reclamation laws for the purpose of construction, operation and maintenance of irrigation and drainage facilities necessary to maintain the land's irrigability and to assume debts to the United States on account of district landsSee TEX. WATER CODE § 55.161.
These purposes strongly suggest that the District is primarily concerned with local problems.
Whether the entity has the right to sue and be sued in its own name whether the entity has the right to hold and use property.
These two factors are frequently considered to be the least important. See Hudson, 174 F.3d at 682. A water district is permitted to sue in its own name. See TEX. WATER CODE § 49.066(a) (a district, including a water improvement district, may sue and be sued); Id. at § 55.504 (before selling bonds, a water improvement district is to bring suit in district court); City of Pelly v. Harris County Water Control and Improvement Dist. No. 7, 195 S.W.2d 241 (Tex.Civ.App. .— Galveston 1946) (rev'd on other grounds).
Likewise, a water district can acquire property. TEX. WATER CODE § 49.218; See also Id. at 49.222 (eminent domain); El Paso County Water Improvement Dist. No. 1 v. City of El Paso, 133 F. Supp. 894, 914 (W.D.Tex. 1955) (the District has "a broad right of eminent domain").
Motion to Substitute Plaintiffs
In light of the Court's decision, it is unnecessary to decide whether SWBT could substitute the District's directors as defendants. The Court notes, however, that Ex Parte Young permits suit for prospective declaratory or injunctive relief against a state officer in his or her official capacity. Edelman v. Jordan, 415 U.S. 651 (1974); Ex Parte Young, 209 U.S. 123 (1908). Based on the nature of the suit and the prospective relief sought in this case, the Ex Parte Young doctrine would seem applicable. Therefore, if the District were considered an arm of the state for Eleventh Amendment purposes, the suit would be permitted to go forward by substituting the Directors of the District for the District itself.
Conclusion
ACCORDINGLY, it is ORDERED that El Paso County Water Improvement District No. 1's Motion for Dismissal Pursuant to Eleventh Amendment (Docket No. 49) is DENIED. It is also ORDERED that Southwestern Bell's Conditional Motion to Substitute Officials of El Paso County Water Improvement District No. 1 (Docket No. 55) is DENIED AS MOOT.