Opinion
NO. 03-18-00043-CV
03-10-2021
Glenn Hegar, Comptroller of Public Accounts of the State of Texas, and Ken Paxton, Attorney General of the State of Texas, Appellants v. Allen Sena, Inc., Appellee
FROM THE 459TH DISTRICT COURT OF TRAVIS COUNTY
NO. D-1-GN-17-006148 , THE HONORABLE KARIN CRUMP, JUDGE PRESIDING MEMORANDUM OPINION
The Comptroller appeals from the district court's interlocutory order overruling its plea to the jurisdiction in Allen Sena, Inc.'s (ASI) taxpayer suit. Because the Legislature has not waived sovereign immunity for ASI's claim for declaratory relief, we reverse the district court's order in part and render judgment dismissing ASI's claim for declaratory relief.
In 2017, the Comptroller levied an assessment of more than $1.6 million against ASI for allegedly operating a Houston-area bar and grill as a "sexually oriented business" (SOB). See Tex. Bus. & Com. Code §§ 102.051-.052 (imposing $5-per-customer fee on businesses that offer live nude entertainment where alcohol is consumed). After exhausting its administrative remedies, ASI filed the underlying suit for injunctive relief against the Comptroller under Chapter 112 of the Tax Code. See Tex. Tax Code §§ 112.101-.1011 (waiving sovereign immunity for taxpayer injunction suit). In lieu of a protest payment, ASI filed an oath of inability to pay. See id. §§ 112.101 (requiring payment under protest for injunction suit), .108 (providing an inability-to-pay exception to the prepayment prerequisite). ASI also asked the district court for a declaration that it did not owe the fee imposed by the Comptroller because its bar and grill is not a sexually oriented business.
The Comptroller responded with a plea to the jurisdiction, principally asserting that sovereign immunity barred ASI's injunction suit because ASI had not complied with the Tax Code's prepayment prerequisite. See id. § 112.101; In re Nestle USA, Inc., 387 S.W.3d 610, 616 (Tex. 2012) (characterizing prepayment prerequisite as jurisdictional requirement to challenging tax assessment). The Comptroller also argued that sovereign immunity barred ASI's claim for declaratory relief because Chapter 112 of the Tax Code, which is the exclusive means for challenging a tax assessment, does not authorize declaratory relief, see In re Nestle USA, Inc., 359 S.W.3d 207, 208-09 (Tex. 2012) (noting that trial court generally lacks jurisdiction to hear taxpayer challenge to tax assessment, but Legislature has waived sovereign immunity for protest, injunction, and refund suits), and because the relief requested is redundant to that sought in ASI's Chapter 112 claims, see, e.g., Texas Mun. Power Agency v. Public Util. Comm'n, 253 S.W.3d 184, 200 (Tex. 2007) (explaining that under redundant-remedies doctrine, court lacks jurisdiction over declaratory claim if same claim could be pursued through different channels). The district court overruled the Comptroller's plea, and the Comptroller appealed. See Tex. Civ. Prac. & Rem. Code § 51.014(a)(8) (authorizing interlocutory appeal from order granting or denying governmental entity's plea to the jurisdiction).
Because issues in the cases overlapped, we abated this appeal pending the supreme court's resolution of EBS Solutions, Inc. v. Hegar, 601 S.W.3d 744 (Tex. 2020) (addressing constitutionality and scope of section 112.108), and asked the parties to file supplemental briefs, if needed, to address the effect of EBS on this appeal. On reinstatement, the Comptroller has withdrawn its argument related to the district court's jurisdiction over ASI's Chapter 112 injunction action, and therefore we do not address that issue here. See Tex. R. App. P. 47.1 (requiring appellate courts to address every issue raised and necessary to final disposition of appeal); see also Roper v. CitiMortgage, Inc., No. 03-11-00887-CV, 2013 WL 6465637, at *20 (Tex. App.—Austin Nov. 27, 2013, pet. denied) (mem. op.) (noting that we are required to consider only those arguments presented on appeal). Instead, the Comptroller asserts only that the district court lacks jurisdiction over ASI's claim for declaratory relief. ASI did not address the Comptroller's challenge to its declaratory claim in its initial brief to this Court, and it has not filed a supplemental brief on reinstatement.
We agree with the Comptroller that the district court lacks jurisdiction over ASI's declaratory claim. The Legislature has waived the State's sovereign immunity for only three types of tax challenges—protests, injunctions, and refunds. EBS, 601 S.W.3d at 749-50 (citing Tex. Tax Code §§ 112.001, .051, .101, .108); In re Nestle, 359 S.W.3d at 209. It has not waived immunity for the declaratory relief requested here; to the contrary, the Legislature has explicitly precluded such relief in section 112.108. See Tex. Tax Code § 112.108 (stating that "a court may not issue . . . declaratory judgment . . . relating to the applicability, assessment, collection, or constitutionality of a tax or fee"); see also EBS, 601 S.W.3d at 751 (noting that "section 112.108 as amended[] bans declaratory relief"); In re Nestle, 359 S.W.3d at 211 ("The [predecessor to Chapter 112] did not preclude declaratory judgment actions, but in 1989, section 112.108 was added, making the actions it permitted exclusive for challenging state taxes covered by the chapter."). Although the supreme court has previously allowed taxpayers to seek declaratory relief despite the Tax Code's ban, it did so to remedy constitutional defects created by former section 112.108. See R Commc'ns v. Sharp, 875 S.W.2d 314, 317-18 (Tex. 1994) (holding that combination of former section 112.108's ban on declaratory judgments and Chapter 112's prepayment requirements created an unconstitutional financial barrier to court access, and remedying constitutional infirmity by recognizing trial court's jurisdiction over taxpayer's declaratory claim); see also EBS, 601 S.W.3d at 750 (explaining its decision in R Communications to allow declaratory judgment in taxpayer cases). But after the supreme court's holding in EBS that section 112.108's ban on declaratory relief was not unconstitutional as applied to EBS because it provides an inability-to-pay exception to the prepayment requirement, there is no jurisdictional basis for allowing the declaratory relief requested by ASI here. See EBS, 601 S.W.3d at 750, 760; In re Nestle, 359 S.W.3d at 211 ("The [predecessor to Chapter 112] did not preclude declaratory judgment actions, but in 1989, section 112.108 was added, making the actions it permitted exclusive for challenging state taxes covered by the chapter. The actions permitted are a suit after payment under protest, suit for injunction after payment or posting of a bond, and a suit for a refund."). We note further that regardless of the Tax Code's ban, ASI's declaratory claim would be barred under the redundant-remedies doctrine because the relief sought—i.e., a declaration that the Comptroller may not collect the SOB fee because ASI is not subject to that fee—is redundant to the relief ASI requests by its Chapter 112 injunction suit—i.e., an order prohibiting the Comptroller from collecting the SOB fee because ASI is not subject to that fee. See Patel v. Texas Dep't of Licensing & Reg., 469 S.W.3d 69, 79 (Tex. 2015) ("Under the redundant remedies doctrine, courts will not entertain an action brought under the UDJA when the same claim could be pursued through different channels. The focus of the doctrine is on the initiation of the case, that is, whether the Legislature created a statutory waiver of sovereign immunity that permits the parties to raise their claims through some avenue other than the UDJA." (internal citations omitted)).
Because sovereign immunity bars ASI's declaratory claim, it was error for the district court to overrule the Comptroller's plea to the jurisdiction as to that claim. See Texas Dep't of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 224 (Tex. 2004) ("In Texas, sovereign immunity deprives a trial court of subject matter jurisdiction for lawsuits in which the state or certain governmental units have been sued unless the state consents to suit."). Accordingly, we reverse the part of the district court's order overruling the Comptroller's plea to the jurisdiction as to ASI's declaratory claim and render judgment dismissing ASI's declaratory claim for lack of jurisdiction.
Because the Comptroller has withdrawn its challenge as to ASI's injunction action, that claim remains pending before the district court.
/s/_________
Darlene Byrne, Chief Justice Before Chief Justice Byrne, Justices Goodwin and Kelly Reversed and Rendered Filed: March 10, 2021