Opinion
Civil Action No. SA-03-CA-0429-FB.
March 24, 2004
ORDER CONCERNING PENDING MOTIONS
Before the Court are the Motion to Dismiss of Defendant Edwards Aquifer Authority; Plaintiff's Brief in Support of Motion to Strike Defendant's Counterclaim for Attorney's Fees and Expenses, and Defendant's Motion to Strike Plaintiffs' Request for Attorney's Fees as well as the responses and replies thereto. Defendant contends this case should be dismissed based on theBurford and Pullman abstention doctrines, ripeness, and for the failure to name indispensable parties and that plaintiffs' appeal from the decision of the Edwards Aquifer Authority must be pursued in state court.
In response, plaintiffs believe defendant's request for a dismissal is mistaken because abstention has been held to be a deferral and must be balanced in its application on a case by case basis. A Burford abstention is not needed in this case because there are no difficult questions of state law bearing on policy problems of substantial public concern. With respect to the ripeness issue, plaintiff claims they pleaded for damages in the alternative because what they actually seek is the restoration of their property rights. Moreover, because the administrative law judge refused to hear their "takings" claim, that claim is now ripe. Should the Court believe additional parties should be joined as the defendant contends, plaintiffs request leave of court to amend their complaint to add these indispensable parties.
Background
According to the plaintiffs, they filed their application with defendant Edwards Aquifer Authority (Authority) on December 30, 1996, seeking to withdraw 700 acre-feet of water from the Edwards Aquifer. In 1998, plaintiffs were notified that their application to withdraw the 700 acre-feet of water had been technically and administratively approved. In 1999, the existing well was found to be in need of major repairs so an application was made to transfer the Initial Regular Permit from the existing well to a new well to be drilled. The permit to drill the new well was granted on December 10, 1999. On November 8, 2000, plaintiffs were notified that the general manager of the Authority was recommending to the Authority Board that plaintiffs be awarded "0" feet of water on the ground that plaintiffs did not prove that "Edward Aquifer Water was used for a purpose authorized by law." The plaintiffs' protest was referred to the State Office of Administrative Hearings in Austin, Texas, who heard the protest on June 28, 2002. The Administrative Law Judge (ALJ) recommended plaintiffs be given a permit for 14 acre-feet based on the evidence presented. Plaintiffs appealed this recommendation to the Board of Directors of the Edwards Aquifer Authority, and after a hearing on March 11, 2003, the Board adopted the recommendation of the ALJ "en toto." Thereafter, plaintiffs brought suit in federal court based on the following issues: (1) the illegal confiscation of an inviolate property right in violation of the Constitution of the United States of America and the Texas Constitution; (2) the Edwards Aquifer Authority Act is unconstitutional on its face and in its implementations in regard to the plaintiffs; (3) the procedure adopted by the Authority denies due process to United States citizens guaranteed by the Fourteenth Amendment to the United States Constitution; (4) plaintiffs' property rights have been confiscated without just compensation required by the United States and Texas Constitutions; (5) Section 11.021 of the Texas Water Code is in conflict with the rights guaranteed a United States citizen if applied in the manner sought to be applied in this case, and if found to be so applied by its terms in all cases is unconstitutional and should be declared void; (6) plaintiffs appeal the permit decision of the Authority; and (7) plaintiffs plead an alternative count for damages for the confiscation of private property.
Motion to Dismiss
Defendant contends that because the plaintiffs' case involves numerous questions of state law which are of vital local concern and because the state has in place a comprehensive administrative and appellate procedure for considering those questions, this Court should, pursuant to the Burford abstention doctrine, dismiss the case. In Sierra Club v. City of San Antonio, 112 F.3d 789 (5th Cir. 1997), the Fifth Circuit held thatBurford abstention was warranted in cases involving the Edwards Aquifer Authority. In holding abstention appeared so "manifestly warranted under Burford," the court wrote:
In Burford, the Court emphasized the elaborate and comprehensive nature of the state regulatory scheme in issue. It described the Railroad Commission order under consideration as "part of the general regulatory system devised for the conservation of oil and gas in Texas," noted that the Commission "carries out its functions of production control or proration by an elaborate system of orders, schedules, and reports," and that the state regulatory scheme provided a "well organized system of regulation and review.
Similarly, the Edwards Aquifer Act can fairly be characterized as a comprehensive regulatory scheme. It represents a sweeping effort by the Texas Legislature to regulate the aquifer, with due regard for all competing demands for the aquifer's water. The Act vests the Edwards Aquifer Authority with "all the powers and privileges necessary to manage, conserve, preserve, and protect the aquifer. . . ." The Authority controls withdrawals from the aquifer through a permit system. Section 1.25 of the Act charges the Edwards Aquifer Authority with developing "a comprehensive water management plan that includes conservation, future supply, and demand management plans". . . .
Burford emphasized that the state regulatory scheme in issue concerned the "very large" interest of the state in conserving oil and gas, and that the Railroad Commission's regulation of oil and gas production was "of vital interest to the general public . . . with implications to the whole economy of the state." The regulation of water resources is likewise a matter of great state concern. As the Texas Supreme Court stated in Barshop, "[c]onservation of water has always been a paramount concern in Texas especially in times, like today, of devastating drought." It characterized the Edwards Aquifer as "the primary source of water for residents of the south central part of this state. It is vital to the general economy and welfare of the State of Texas." The court recognized that "the State has the responsibility under the Texas Constitution to preserve and conserve water resources for the benefit of all Texans." The Texas Legislature, speaking through § 1.01 of the Edwards Aquifer Act, found that the aquifer "is a unique and complex hydrological system, with diverse economic and social interest dependent on the aquifer for water supply."Id. at 793-94 (citations in footnotes omitted). In addition, the court acknowledged that because the aquifer is completely intrastate, its management is a matter of "peculiar importance to the state." Id. at 794. In continuing its analysis underBurford, the court explained:
As in Burford, there is a need for unified management and decision-making regarding the aquifer, since allowing one party to take water necessarily affects other parties. The Court in Burford noted that for many reasons "each oil and gas field must be regulated as a unit," that well spacing and proration "are a part of a single integrated system and must be considered together," and that "[t]he state provides a unified method for the formation of policy and determination of cases by the Commission and by the state courts." The Court stressed the need for unitary enforcement of the regulatory scheme by noting the problem of drainage: "Since the oil moves through the entire field, one operator can not only draw oil from under his own surface area, but can also, if he is advantageously located, drain oil from the most distant part of the reservoir. The practice of attempting to drain oil from under the surface holdings of others leads to offset wells and other wasteful practices; and this problem is increased by the fact that the surface rights are split up into many small tracts." The Court noted that "the physical facts are such that an additional permit may affect pressure on a well miles away. The standards applied by the Commission in a given case necessarily affect the entire state conservation system."
Similar concerns surely affect regulation of an aquifer. As our court stated in the Babbitt appeal:
[t]he Edwards aquifer contains a finite amount of water, and as such, the need for uniform regulation is paramount. The Supreme Court has recognized that such circumstances sometimes require the federal courts to abstain to allow the state's comprehensive regulatory scheme to operate without the risk of competing attempts between that regulator and the federal courts to exercise control over the same entity.
The opinion goes on to state that "[a]s with the oil fields at issue in [Burford], in the present case, Texas clearly has an interest in uniform decision-making regarding this finite amount of water."Id. 794-95 (citations in footnotes omitted). Defendant maintains that the circumstances before this Court are even more similar to those in Burford than in Sierra Club. As inBurford, plaintiffs here are appealing a permitting decision by the Authority. Each permitting decision is part of a larger, comprehensive regulatory scheme devised to conserve the Edwards Aquifer and the diverse interests that are dependent upon that resource. The conservation of that resource is of vital interest to the general public in that region. Because the aquifer is a finite resource, issuance of permits lessens the availability of water for other users. Therefore, defendant argues, there is a need for unified management and decision-making by a single entity. In addition, Chapter 36 of the Texas Water Code provides for state court appellate review of the Authority's permitting decisions in the counties within the Authority's jurisdiction.
Defendant acknowledges that after the Sierra Club opinion was issued, section 1.11(h) which provided that the Authority was subject to the Texas Administrative Procedure Act was repealed. However, the Authority remains subject to statutory provisions ensuring state court appellate review of Authority permitting decisions as provided in Chapter 36 of the Texas Water Code. The language found in TEX. WATER CODE ANN. § 36.251 allows a "person, firm, corporation, or association of persons "affected by and dissatisfied with any provisions or with any rule or order made by" the Authority to file a suit against the Authority to "challenge the validity of the law, rule or order." This section requires suit to be filed "in a court of competent jurisdiction in any county in which the district or any part of the district is located" and only "after all administrative appeals to the district are final." This language, according to defendant, does not cerate an independent basis for federal court jurisdiction but allows the state judiciary to give definite answers to the questions of state law raised in appeals.
Plaintiffs contend that despite all of defendant's proclamations of its "civil goals and wonders the Legislature is attempting to create by the Act, the Defendant totally and wholly fails to show where and how that provision of the Act which guarantees the right of ownership in the water beneath the land of each individual is respected, guarded and paid for if taken." Plaintiffs point to section 1.07 of the Edwards Aquifer Act which provides:
The ownership and rights of the owner of the land and the owner's lessees and assigns, including holders of recorded liens or other security interests in the land, in underground water and the contract rights of any person who purchases water for the provision of potable water to the public or for the resale of potable water to the public for any use are recognized. However, action taken pursuant to this Act may not be construed as depriving or divesting the owner or the owner's lessees and assigns, including holders of recorded liens or other security interest in the land, of these ownership rights or as impairing the contract rights of any person who purchases water for the provision of potable water to the public or for resale of potable water to the public for any use, subject to the rules adopted by the authority or a district exercising the powers provided by Chapter 52, Water Code. The legislature intends that just compensation be paid if implementation of this article causes a taking of private property or the impairment of a contract in contravention of the Texas or federal constitution.
Plaintiffs state the Authority Board "washed its hands of this matter," and referred the plaintiffs to a hearing before an administrative law judge in Austin. Although plaintiffs requested the ALJ determine their "taking issue," that request was denied. Plaintiffs also take issue with defendant's assertion that a procedure exists whereby plaintiffs can be compensated for the condemning of their property. Plaintiffs contend the decision in Bragg v. Edwards Aquifer Authority "viscerated [sic] the State Law that would have given a property owner the right to bring an action for damages from a wrongful taking by a regulatory agency." Plaintiffs believe "the Burford decision does not require abstention in this case because there are no difficult questions of Texas law bearing on policy problems of substantial public import whose importance transcends the results in this case at bar, or the exercise of federal review of any question in this case and in similar cases which would be disruptive of state efforts to establish a coherent policy with respect to a matter of substantial public concern." Plaintiffs also contend Sierra Club v. City of San Antonio, is inapplicable to this case because the administrative process is finished.
In her Conclusions of Law, the ALJ noted that the Authority and the ALJ may exercise only those powers granted by statutes, and the constitutional issues raised by the applicant could not be addressed in that proceeding. In addition, the ALJ concluded, "[u]ntil the Authority carries out its rules and permitting actions, any `taking' of property rights is hypothetical." The ALJ cited Barshop v. Medina County Underground Water Cons. Dist., 925 S.W.2d 618 (Tex. 1996), in support of this proposition.
In reply to plaintiffs' response, defendant notes that plaintiffs have argued the merits of their underlying claims instead of addressing the issues raised in the motion to dismiss. Defendant does, however, reply to plaintiffs' assertion thatBurford abstention principles no longer apply in this case because the administrative process is finished. Defendant maintains that it is clear from Burford that the state appellate process is a core part of the "comprehensive regulatory scheme" which the Burford doctrine is intended to protect. The state court appellate review process to which the Authority's permitting decision is subject is part of the overall regulatory scheme at issue.
This Court agrees with plaintiffs' contention that federal courts have a "virtually unflagging obligation . . . to exercise the jurisdiction given them." Wilson v. Valley Elec. Membership Corp., 8 F.3d 311, 313 (5th Cir. 1993) (quoting Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976)). Accordingly, abstention is considered the exception and not the rule with several abstention doctrines being recognized by the Supreme Court including that discussed herein,Burford v. Sun Oil Co., 319 U.S. 315 (1943). Id. "Burford abstention does not so much turn on whether the plaintiff's cause of action is alleged under federal or state law, as it does on whether the plaintiff's claim may be `in any way entangled in a skein of state law that must be untangled before the federal case can proceed.'" Sierra Club v. City of San Antonio, 112 F.3d 789, 795 (5th Cir. 1997). Based on the foregoing, the Court concludes such an entanglement exists and abstention should be granted.
As noted by the parties, the Texas Supreme Court has considered a facial challenge to the constitutionality of the Edwards Aquifer Act at issue herein but has yet to be presented with an "as applied" challenge. Barshop v. Medina County Underground Water Conservation Dist., 925 S.W.2d 618 (Tex. 1996). Left unresolved were some of the issues plaintiffs have raised in this case including whether an unconstitutional taking of private property occurs if a landowner is denied a permit to drill a water well, whether a vested property right exists in water beneath the land, and the claim that the Authority will not "possess sufficient funds to compensate [landowners] for the taking of their property." Id. at 630-31. In addition, the Fifth Circuit Court of Appeals has previously considered and applied the Burford abstention doctrine in the context of the Edwards Aquifer. Sierra Club v. City of San Antonio, 112 F.3d 789 (5th Cir. 1997). In reaching that decision, the court noted that the Edwards Aquifer Act is considered a comprehensive regulatory scheme representing a "sweeping effort by the Texas Legislature to regulate the aquifer, with due regard for all competing demands for the aquifer's water." Id. at 794. Not only is the regulation of the aquifer of great state concern, it is of vital importance to the citizens of central Texas. Id. In addition, because the aquifer contains a finite amount of water, the court noted there "is a need for unified management and decision-making . . . since allowing one party to take water necessarily affects other parties." Id. at 794-95. Recognizing that the purpose of Burford abstention is to discourage "federal court second-guessing of state regulatory matters," abstention was found to be appropriate to avoid having the federal district court reach "a different answer than the [state] institutions with greater interest and familiarity with such matters." Id. at 796. The Court finds all of these factors still exist today and favor abstention. Moreover, the issue which fostered Judge Benavides' dissent inSierra Club, availability of "timely and adequate state court review," is available to the plaintiffs herein. Defendant acknowledges that following administrative review, adequate state-court review is provided for any Authority decision via the Texas Water Code. As this Court has previously stated, "federal court[s] should abstain from deciding cases to avoid needless conflict with a state's administration of its own affairs" and intends to remain true to its word. Casarez v. Val Verde County, 957 F. Supp. 847, 852 (W.D. Tex. 1997). Accordingly, the Court finds the exception exists in this case and Burford abstention is warranted.
In the alternative, defendant contends that because plaintiffs' case involves uncertain questions of state law, the resolution of which could eliminate or alter plaintiffs' constitutional claims, this Court should abstain from hearing those constitutional claims pursuant to the Pullman abstention doctrine. In addition, defendant maintains this Court lacks subject matter jurisdiction to hear plaintiffs' federal constitutional takings claims because they are not ripe for judicial review. Defendant also claims that because plaintiffs have challenged the constitutionality of the "statute creating the State Office of Administrative Hearings, sections 2001061, 2001.090, and 2003.0412 of the Texas Government Code, and section 11.021(a) of the Texas Water Code, the State of Texas is an indispensable party.
Based upon the arguments and authorities presented by the defendant in both its motion to dismiss and reply and the foregoing discussion, the Court agrees Pullman abstention is likewise applicable as is the assertion that plaintiffs' federal takings claim are not yet ripe for judicial review.
Accordingly, IT IS HEREBY ORDERED that the Motion to Dismiss of Defendant Edwards Aquifer Authority (docket #4) is GRANTED and this case is DISMISSED without prejudice.
It is so ORDERED.