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Environmental Blog

  • 16
  • October
  • 2015

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Texas Supreme Court Denies Review of a Water Well Damage Dispute

On September 25, the Supreme Court of Texas denied a petition for review filed by Canadian River Municipal Water Authority. Canadian argued that property owner Hayhook Ltd. could not file suit to enforce a settlement agreement between the parties, and sought reversal of a ruling by the Seventh Court of Appeals that held that governmental immunity cannot be invoked to evade enforcement of a settlement agreement that covers claims for which immunity had been waived. The case is Canadian River Municipal Water Authority v. Hayhook Ltd., No. 07-15-00064 (Tex. App—Amarillo, June 30, 2015).

Governmental immunity shields governmental entities, including cities and their political subdivisions, from suits and liability. Yet immunity can be waived by a clear and unambiguous statutory or constitutional waiver. Thus, immunity does not shield governmental entities from suits seeking compensation for takings of private property: compensation is required by Article I, section 17 of the Texas Constitution. And the Legislature, through the Texas Local Government Code, has expressly waived the immunity of local governmental entities when they enter into written contracts for goods and services.

Canadian River Municipal Water Authority holds interests in groundwater beneath West Texas property once owned by the Campbell family. In 2000, Canadian began condemnation proceedings to obtain temporary work easements, a permanent water line easement, and rights to the surface so that it could construct a pump station and other facilities. The parties, however, could not agree upon the value of the land taken or the amount of compensatory damages. They eventually reached a settlement agreement that gave Canadian the right to install pipelines and facilities to transport water from the pump station. Since the execution of the agreement, the Campbells passed away, and their rights were assigned to Hayhook.

When Canadian built a new pipeline in late 2009 or early 2010, Hayhook complained that Canadian’s excavation and construction activities damaged several dozen acres on the property. Hayhook claimed that it was owed $1,980 per acre under the settlement agreement, but Canadian refused to pay, prompting Hayhook to file suit alleging breach of the settlement agreement.

Canadian filed a plea to the jurisdiction—a challenge to the trial court’s authority to hear the lawsuit—claiming governmental immunity. The trial court, however, found that immunity did not extend to Hayhook’s breach of contract claim because the settlement agreement had resolved an underlying claim to which Canadian was not immune (i.e. the Campbell’s takings claim based on Canadian’s eminent domain action). The trial court also found that the settlement agreement was a contract for goods or services for which immunity has been waived by the Legislature under Texas Local Government Code section 271.152.

Canadian appealed and the Seventh Court of Appeals affirmed the trial court decision. Adopting the reasoning of the Texas Supreme Court’s plurality opinion in Texas A&M University—Kingsville v. Lawson, 87 S.W.3d 518 (Tex. 2002), the appeals court held that “immunity does not bar the prosecution of a claim founded upon the breach of a settlement agreement when the agreement encompasses resolution of a claim against which the state has no immunity.” Stated differently, when a governmental entity is exposed to suit because of a waiver of immunity, it cannot nullify that waiver by settling the claim with an agreement on which it cannot be sued.

Posted at 10/16/2015 11:43 AM

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