On March 27, 2020, the Texas Supreme Court delivered a huge victory for Montgomery County water users and a resounding defeat for the San Jacinto River Authority. The Court was called on to review a case filed by SJRA in Travis County where SJRA asked the trial judge to declare that its actions in setting exorbitant rates could never be questioned in court, anywhere at any time.
The Cities of Conroe, Splendora and Magnolia had challenged the rates set by SJRA—rates that nearly doubled the water bills for all Montgomery County residents. Refusing to admit its errors, SJRA filed suit against the cities in a court in Austin, far away from the ratepayers most hurt by its actions. SJRA’s lawsuit was filed under an obscure Texas law designed to protect bond issuers from multiple taxpayer suits that would hamper the issuance of bonds. In its lawsuit, SJRA claimed that the actions it takes under its contracts with the water suppliers of Montgomery County, and the contracts themselves could never be challenged in a lawsuit—the rates were, SJRA claimed, “incontestable.” Conroe, joined by Quadvest Water and Sewer Utility and several other Montgomery County water suppliers, pointed out that the obscure statute—the Expedited Declaratory Judgment Act—was not designed to be used to determine whether SJRA’s rates had been set in compliance with its contractual agreements with the cities and the utilities.
The Texas Supreme Court sided with Conroe and the utilities. It rejected SJRA’s furtive attempt to avoid judicial scrutiny, holding that the EDJA could not be used to shield SJRA from court challenges of its ever-increasing rates. Specifically, the Court held that SJRA could not use the EDJA to sue the cities for their refusal to pay the increased part of SJRA’s rates. The Court further held that the EDJA could not be used to shield SJRA from facing a jury over the way it set its recent rates.
In the face of this loss, SJRA bizarrely claimed victory, issuing a press release saying it had been vindicated by the high court. Reading the opinion of the Supreme Court shows that SJRA’s bravado is more than misplaced, it is almost completely wrong. The only “victory” the Court handed to SJRA was a ruling that the EDJA could be used to determine whether it had the authority to enter into the contractual agreements and whether someone with authority from SJRA executed the agreements. But these issues had not been raised by Conroe or anyone else, which makes the “victory” pyrrhic at best.
Particularly troubling in the SJRA press release is its claim that the Supreme Court sided with it in holding that the agreements are “incontestable.” That statement is hard to square with what the Supreme Court actually said: “The scope of this interlocutory appeal is limited to the denial of the Cities’ pleas to the jurisdiction concerning the EDJA, and incontestability does not inform that analysis. Should the parties choose, they may present their arguments on remand regarding the role of incontestability statutes in EDJA litigation.”
So, no ruling that the contracts are “incontestable.” In fact, no ruling at all.
“When I saw SJRA’s press release on the Supreme Court holding, I thought it was just an April Fool’s joke. I thought the folks at SJRA could understand what we all can read in that opinion. If they can’t, maybe they shouldn’t be trusted with something as important as flood control and providing water to our citizens”, exclaimed Simon Sequeira, President of Quadvest Water and Sewer Utility.
In 2019, Quadvest and other utilities filed a separate suit in Montgomery County claiming SJRA had breached the agreements by setting rates for groundwater pumpers that did not comply with the contracts. Knowing it had lost every vital ruling in the Supreme Court, SJRA the same day filed an amended answer in that litigation. In that answer, SJRA joined the issue on the question of its rates and brought Conroe, Splendora and Magnolia into the case. By filing that answer, SJRA admitted that the core and essential disputes about rates are no longer in its Travis County EDJA suit but are now instead squarely in front of a Montgomery County jury.
More information about Quadvest can be found by visiting their website at www.Quadvest.com.