In another decision rendered on April 1, 2016, the Texas Supreme Court, again, disagreed with a city’s effort to invoke governmental immunity protections. In Houston Belt & Terminal Railway Co. v. City of Houston[1], the Court was asked to determine whether governmental immunity barred a claim against a Public Works Director alleging he exceeded the authority granted to him under a local ordinance.

In this case, the City of Houston enacted a drainage-fee ordinance, which proposed a “pay-as-you-go” system. The ordinance gave the Public Works Director authority to administer its provisions in compliance with the terms of the ordinance, which included provisions to guide its application. Three railroad companies received notices of proposed charges totaling an estimated payment of $3 million annually based on the Director’s determination that the railroads’ properties contained about 93,000,000 square feet of impervious area. The railroads determined the impervious area of their properties was only 72,364 square feet, less than 1% of the city’s count (92,927,636 square feet less). The variance derives from the different measurement tools. The railroads used digital map data – a method expressly permitted under the ordinance – to determine the amount of impervious area. The Director, relying on “other similar reliable data” language in the ordinance, used aerial images, and decided that, if the area appeared green it was pervious, and if it appeared brown it was impervious, without regard to any other factors.

The city contended governmental immunity was an absolute bar to the suit because the Director exercised discretion granted to him under the ordinance. Specifically, the city alleged governmental immunity barred all claims against a governmental official who had some discretion to act. The railroads argued governmental immunity did not bar the claims because the Director exceeded his authority. Conceding that governmental immunity barred the claims if the ordinance afforded the Director absolute discretion (i.e., discretion where no specific, substantive, or objective standards govern the exercise of judgment), the railroads argued the ordinance is not that broad. Thus, the railroads argued the Director’s decisions were made “without legal authority” under the ordinance and, therefore, were not precluded by governmental immunity.

The Court agreed with the railroads. In doing so, it clarified that immunity only applies when a decision or act is committed to the public officer’s unfettered discretion:

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. And, as a general rule, ‘a public officer has no discretion or authority to misinterpret the law.’ … [G]overnmental immunity only extends to those government officers who are acting consistently with the law, which includes those who act within their granted discretion.

The Court found this rationale consistent with public policy because governmental immunity is intended to prevent suits designed to control state action by imposing liability on the state. Contrary to the city’s position, when properly alleged, “ultra vires suits do not attempt to exert control over the state – they attempt to reassert control of the state.” Thus, for government immunity to “serve the pragmatic purpose of protecting public resources, [the Court has] recognized … extending immunity to officers who violate the law [would] not further that goal.”

Applying these principles to the facts at hand, the Court concluded the ordinance did not grant the Director absolute discretion and, instead, imposed “specific restraints on the type of data that can be used to determine ‘impervious surface.’” Thus, by alleging the Director acted outside the bounds of the discretion afforded by the ordinance, the railroads asserted a viable claim, and trial court erred in dismissing the complaint. The Court remanded the case back to the trial court for further proceedings.

Although the Supreme Court has limited remedies for ultra vires claims against officers to prospective declaratory and injunctive relief, this decision highlights the importance of clearly stating who has, and how broad is the, discretion to enforce and carry out the laws passed by the elected.

Questions about this case or other commercial litigation matters may be referred to Barry Conge Bond LLP litigation partner and former Councilmember (City of Pearland, Texas, 2006-2012) Felicia L. Harris (fharris@barrycongebond.com; 713.331.7662) or appellate partner Andrew Parma (dparma@barrycongebond.com; 713.331.7624).

Barry Conge Bond LLP is a full-service law firm with experience representing clients in diverse legal matters including commercial litigation and appeals, corporate and energy.