5th Circuit Court

New Law Alert:

The 5th Circuit Court of Appeals held that a Board member/public official does not have a First Amendment right to discuss topics that are not posted on a governmental entity’s agenda in the same capacity as a member of the public in the public comment portion of an open meeting.  Therefore, a Board member/public official cannot bring up topics that are not properly posted on an agenda in any capacity other than to request that an item be placed on a future Board meeting agenda.

Summary of Remaining Topics in Decision:

The 5th Circuit reversed the lower court’s ruling that dismissed the case based upon immunity, ripeness, Burford abstention issues. The case is remanded back to district court for trial on the merits.  The decision provided some discussion of considerations that the district court will have to evaluate during the trial on the merits, including groundwater regulation statutes in Chapter 36 of the Texas Water Code and the Texas Supreme Court’s decision in Edwards Aquifer Authority v. Day.

A full discussion of the case is provided as follows:

On May 29th, 2020, the United States Court of Appeals for the Fifth Circuit issued an opinion in Stratta/Fazzino v. Brazos Valley GCD.  Appellants Anthony Fazzino and David Stratta are landowners with property within the territorial boundaries of the Brazos Valley Groundwater Conservation District (“BVGCD”), which are coextensive with Robertson and Brazos Counties, Texas.   The landowners sued the BVGCD and its Board of Directors in an action before the U.S. District Court for the Western District of Texas. Appellant Fazzino contended that BVGCD had allowed the City of Bryan (“City”) to drain groundwater from under his property without compensation, violating the Constitution’s Equal Protection and Takings clauses.  Appellant Stratta, a Board Member of BVGCD, alleged that the Board deprived him of First Amendment rights by preventing him from speaking at a public meeting. The district court dismissed their claims on the grounds of Eleventh Amendment immunity, ripeness, Burford abstention, and qualified immunity. The 5th Circuit found that the district court erred on all grounds except the dismissal of the First Amendment claim, and therefore affirmed in part, reversed in part, and remanded the case for further proceedings on the merits.

Background

Appellant Fazzino owns 26.65 acres of real property in Brazos County, Texas.  The City owns a 2.7-acre tract that is less than 3,000 feet from Fazzino’s property. Appellee BVGCD is a Groundwater Conservation District (“GCD”) created under Section 59, Article XVI of the Texas Constitution and Chapter 36 of the Texas Water Code (“TWC”) for the purpose of managing groundwater resources within the District, including the authority to promulgate rules governing the production of groundwater.  On December 2, 2004, new BVGCD rules (“Rules”) took effect to regulate landowners’ production of groundwater by establishing three categories of wells: 1) Existing Wells; 2) New Wells; and 3) Wells with Historic Use. The Rules regulate groundwater pumpage through spacing requirements and production limitations. The Rules established maximum allowable production regulations for New Wells according to a formula that calculates the “total number of contiguous acres required to be assigned to the well site.”  The formula thus requires 649 contiguous acres surrounding a New Well producing 3,000 gallons per minute (“GPM”), which equates to a circle around the well with a radius of 3,003 feet.

BVGCD’s rules define “Existing Wells” as those wells “for which drilling or significant development of the well commenced before the effective date of these Rules,” but BVGCD’s Rules do not establish clear production limits for Existing Wells that have no established Historic Use.  On December 8, 2004, six days after the Rules took effect, the City began drilling Well No. 18 on its 2.7-acre tract of land and completed the well ten months later. In June 2006, the City applied for a permit to operate Well No. 18 at a production rate of 3,000 GPM.  BVGCD conditionally granted a permit authorizing production of 4,838 acre-feet annually at a rate of 3,000 GPM. Subsequently, with no change in the amount of City land surrounding the well or the Rules’ formula, the City received an identical conditional permit in April 2013. The basis for these permits is disputed.

Because no groundwater was pumped from the City’s well before the Rules were promulgated on December 2, 2004, it could not be classified as a Historic Use Well. BVGCD granted the conditional permits under a classification of Well No. 18 as an Existing Well, although its only “existence” before the date of the Rules must have been in the form of “significant development.” Appellants assert that Well No. 18 is a New Well, so the formula within the Rules would have capped the maximum allowable production on the City’s 2.7-acre tract at 192 GPM.  Not only did the City’s well far exceed the Rules’ limitation on acreage-based groundwater production for a New Well, but Fazzino’s property lies within 3,003 feet of Well No. 18 and therefore within its anticipated cone of depression, so the City’s well may threaten to dissipate Fazzino’s groundwater.

Fazzino filed a complaint with BVGCD in January 2017, asserting that Well No. 18 was not a Historic Use or Existing Well and therefore must adhere to the production limitations imposed on New Wells. He asked BVGCD to initiate proceedings to reduce Well No. 18’s authorized production. After the State Office of Administrative Hearings (“SOAH”) found that Fazzino was not permitted to assert such a complaint, Fazzino applied for a permit to produce 3,000 GPM from a New Well on his 26-acre property in order to “offset” the production from Well No. 18. Twice, the District advised Fazzino that his application was administratively incomplete without proof that he owned or controlled sufficient acreage—649 acres—to support production of 3,000 GPM. Fazzino acknowledged this deficiency, but he renewed the permit request to offset production from Well No. 18, and requested a variance to BVGCD’s spacing and production rules. Shortly afterward, BVGCD informed Fazzino that his application had lapsed due to his failure to provide documentation of land ownership and the BVGCD did not grant variances. BVGCD’s Rules provide no mechanism to obtain Board action on an administratively incomplete permit.

Appellant Stratta is a member of the BVGCD Board of Directors who became concerned by what he considered unequal application of BVGCD’s rules. He requested that the agenda for the Board’s March 8, 2018 meeting include discussion of whether Well No. 18 was a New Well or Existing Well. The Board President and another Board member told Stratta no such discussion would take place due to pending litigation. Stratta attended the March 8th Board meeting and signed in as a member of the public and Brazos County landowner. He submitted a registration form to make a public comment on an “open” agenda item to request that the Board include the status of Well No. 18 on the agenda at its next meeting.  He was prohibited from speaking on the grounds that “Directors” may not discuss subjects that are not on the agenda even though “Public Comment” on “non-agenda items” was specified as an agenda item.

Fazzino sued BVGCD and its Directors in their individual and official capacities alleging that their unequal application of BVGCD’s Rules violated his right to equal protection under the law and constituted a taking of his property interest in subsurface water beneath his land. Stratta joined the suit and alleged violation of his First Amendment Rights. In response, BVGCD and its Directors filed motions to dismiss. BVGCD and its Directors moved for dismissal for lack of jurisdiction because BVGCD is an arm of the state that enjoys Eleventh Amendment sovereign immunity; Fazzino failed to exhaust state court remedies for his takings claim; and Burford abstention is required on the takings claim because Texas law is unsettled as to Fazzino’s property interest in the groundwater. BVGCD asserted failure to state a claim because Fazzino’s property interest in groundwater is not “clearly established,” his claims against the Directors are barred by qualified immunity, and Stratta’s right to speak, as a Board member, is regulated by the Texas Open Meetings Act (“TOMA”) and in any event not clearly established.

The district court held: (1) that it lacked jurisdiction over claims against BVGCD (and its Directors) because the District is an “arm of the state” immune from federal suits as a sovereign under the Eleventh Amendment; (2) Fazzino’s takings claim was not ripe; and (3) the takings claim was subject to Burford abstention because exactly what protectible rights Fazzino has in groundwater subject to regulation by BVGCD is an unsettled question of Texas law. Granting BVGCD’s motion to dismiss for failure to state a claim with prejudice, the court held that without clearly established rights to groundwater, Fazzino’s equal protection claim cannot succeed on the merits and the Directors enjoy qualified immunity. Further, Stratta failed to show that BVGCD’s conduct in prohibiting him from speaking was objectively unreasonable in light of clearly established law. The 5th Circuit Court disagreed with each of these conclusions.

5th Circuit’s Opinion

US 5th Circuit Court

Jurisdictional Issues

Eleventh Amendment Immunity

The 5th Circuit found that the district court erroneously concluded that BVGCD is an arm of the State of Texas and therefore immune from suit in federal court under the Eleventh Amendment.  The Court considered six factors in determining whether an entity is an arm of the state and therefore immune from suit in federal court under the Eleventh Amendment, including: (1) whether the state statutes and case law view the agency as an arm of the state; (2) the source of funds for the entity; (3) the degree of local autonomy the entity enjoys; (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. The second factor, the source of the entity’s funding, is the weightiest factor because the Eleventh Amendment exists mainly to protect state treasuries.

The Court discussed a number of considerations related to the six factors, including GCDs are funded by locally assessed taxes and fees; BVGCD Directors are appointed by the commissioners courts of Robertson and Brazos counties, and are thus indirectly accountable to local constituents; GCDs are authorized to exercise their authority only within their territorial boundaries; and most political subdivisions are not entitled to Eleventh Amendment immunity. Upon review of the six factors, the Court held that five of the six factors weighed against finding BVGCD is an arm of the state of Texas for which Eleventh Amendment immunity is appropriate.  The Directors are likewise not entitled to assert such immunity. Most importantly, funds from the Texas treasury will not be used to satisfy a judgment against BVGCD.  The Court held that the district court erred in dismissing the landowners’ action for lack of jurisdiction on this basis.

Ripeness of Fazzino’s Taking Claims

The district court dismissed Fazzino’s takings claims as unripe because he had neither received a final decision regarding the application of the challenged regulations nor sought compensation for the alleged taking in state courts. In review of the facts and existing case law, the 5th Circuit disagreed and provided that the property owner has suffered a violation of his Fifth Amendment rights when the government takes his property without just compensation, and therefore may bring his claim in federal court. The Court thus held that Fazzino’s takings claim is ripe for adjudication because Fazzino fully pursued the administrative remedies available to him before filing this action.

Burford Abstention 

The 5th Circuit provided that Burford abstention is an “extraordinary and narrow exception to the duty of the District Court to adjudicate a controversy properly before it.” Burford itself involved a suit to enjoin the enforcement of an order of the Texas Railroad Commission, which at that time enforced a detailed regulatory scheme involving complicated oil and gas issues.  In Burford, the Court admonished that federal courts should be reluctant to get involved in inherently local matters involving the management of state interests covered by a complex regulatory scheme, where the inevitable result would be delay, misunderstanding of local law, and needless federal conflict with the State policy.

Five factors govern a federal court’s decision whether to abstain under Burford, including: (1) whether the cause of action arises under federal or state law; (2) whether the case requires inquiry into unsettled issues of state law or into local facts; (3) the importance of the state interest involved; (4) the state’s need for a coherent policy in that area; and (5) the presence of a special state forum for judicial review.  The 5th Circuit found that the district court cited this standard correctly, but abused its discretion in deciding to abstain under Burford, because the BVGCD is no Texas Railroad Commission, and the federal court should not have abstained from the constitutional issues raised by Fazzino. The Court further stated that the claims do not delve into unduly complex issues of state law, the state concerns that are implicated are not overriding in light of the remedy sought, no state law would be usurped by a federal decision, and statewide processes or regulatory regimes would not be disrupted.

Takings and Equal Protection Claims

Having decided that the court does in fact have jurisdiction, the 5th Circuit then provided limited discussion of the merits of the claims.  The district court dismissed Fazzino’s takings and equal protection claims because it believed that they rested on unsettled questions about the application of oil and gas law to the landowner’s rights in the groundwater beneath his property.  The 5th Circuit rejected these arguments, citing the Texas Supreme Court’s decision in Edwards Aquifer Authority v. Day (“Day”), that a landowner’s property rights include the ownership of groundwater in place beneath his acreage, and such ownership right is subject to takings claims. The Court further provided that the task of the district court will be to assess, as the state supreme court did in Day, whether the groundwater scheme effectuated by BVGCD’s Rules promulgated in December 2004 has resulted in a taking of Fazzino’s interest, and that while the task may be challenging, it is not infeasible.  The Court provided some discussion regarding Chapter 36 of the TWC of the TWC and Day’s holding related to landowner’s in a common reservoir receiving a fair share, but again, this was not an actual ruling of the 5thCircuit and was discussion related to the considerations for the district court to evaluate.

The Court also determined that Fazzino’s equal protection claim sufficiently alleged that BVGCD unequally applied its Rules by treating municipalities, like the City of Bryan, as exempt from the production limits required by the Rules’ surface area formula while enforcing those limits against Fazzino.  The Court found that Fazzino’s allegations of disparity and intentional conduct are sufficient to require further development rather than dismissal on the pleadings, and so the Court reversed dismissal.

The Court further stated that because neither BVGCD nor its Board was required to respond on the merits, the substance of these claims must be reviewed in trial. The Court remanded the case for further proceedings on the merits.

Stratta’s First Amendment Claims

The 5th Circuit affirmed the district court’s judgment dismissing Stratta’s First Amendment claims. The Court determined that given Stratta’s status as a member of the BVGCD Board, he was governed by the Texas Open Meetings Act (“TOMA”) and did not have the same rights as the “public” under the particular circumstances. The Court also provided that TOMA is designed to protect the public from Board member violations, not to allow Board members to circumvent its requirements by calling themselves “members of the public.” Stratta thus was not permitted to raise a new topic as a future agenda item during the existing meeting, because the item for public comment was limited to members of the public, which he was not.

Disclaimer: The information herein is intended to serve as a general update, and is not legal advice.  If you would like to receive additional information regarding this case or any other legal issue, please contact the firm directly. 

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