Citizens Against Lawsuit Abuse of Central Texas

The Austin American Statesman
February 2, 2010

The Lower Colorado River Authority scored a major victory Monday over the San Antonio Water System when a state district judge threw out a lawsuit against the river authority.

The San Antonio utility had sued the LCRA, which provides water to more than 1 million Central Texans, after a multibillion-dollar water-sharing agreement fell apart last year.

After the first public squaring-off between the two sides at the Travis County Courthouse, Judge Stephen Yelenosky, in a ruling from the bench, effectively short-circuited the suit.

He agreed with an LCRA argument that it was protected by sovereign immunity rules, which limit suits against governmental agencies.

San Antonio Water System CEO and President Robert Puente said he would recommend to the system's board that it appeal the decision and ask the Legislature for relief. "We can't walk away from this," he said.

Before the ruling, San Antonio Water System lawyer Jim George told the judge that the LCRA's "intention was to steal from the people of San Antonio."

George argued that the LCRA was in breach of contract and never intended to follow through on the proposed deal. In its suit, the San Antonio system claims the LCRA killed the project to keep water in its basin for lucrative power plant deals.

The system was seeking $1.23 billion, a figure based largely on the utility's estimated cost of finding an equal amount of water from desalination.

George also said that the water system had spent at least $42 million to study the feasibility of the project, to reserve the water and to pay its staff working on the deal.

He and other water system lawyers said they wanted to depose current and former LCRA board members and staff members; state Sen. Glenn Hegar, R-Katy, whose district includes the LCRA's lower basin; power industry officials; and Matagorda County Judge Nate McDonald.

"This is a complete fishing expedition," Pete Schenkkan, a lawyer for the LCRA, told the judge. "This discovery is enormously expensive and time-consuming, delaying resolution of this issue."

The LCRA argued that it is protected by sovereign immunity, which shields the public from the costs and consequences of improper actions by a government agency and deprives courts of the authority to hear a case at all.

Yelenosky agreed, saying that there was no "explicit waiver" to the sovereign immunity rule that would allow the San Antonio Water System to press forward.

"The judge's view of law in this case was that LCRA was right," said Robert Cullick, an LCRA spokesman.

The San Antonio system could appeal to the 3rd Court of Appeals and then to the Texas Supreme Court, but it is unlikely to gain much traction, said Jeff Boyd, an Austin attorney who has written about sovereign immunity and water development.

For the courts to recognize a waiver to the sovereign immunity principle, and thereby allow the San Antonio utility to move forward in its suit, the waiver has to "clearly and unambiguously be provided by the Legislature in the statutes," Boyd said.

As for the claim that the LCRA was acting underhandedly, neither the 3rd Court of Appeals nor the Texas Supreme Court has recognized a waiver "based on the conduct of a governmental authority," he said.

San Antonio Water System officials said the ruling would have important negative consequences because the LCRA could pull out of contracts with other entities, including the City of Austin, and be insulated from claims.

"For better or worse, the fact that LCRA can always pull out of contracts with other entities doesn't change the analysis" of the law, Boyd said. "That's a policy argument, and the court has always said the Legislature needs to make those policy decisions."

The Legislature has the power to pass a resolution that waives sovereign immunity in specific cases, but it does so rarely, Boyd said.

Puente said he would recommend that the San Antonio system board pursue such a resolution or try to amend a section of the government code to allow a waiver of sovereign immunity between two governmental entities.

"When every other governmental entity in this state realizes that whatever agreements they've entered into — for fire protection, for work force development — are in jeopardy, we'll find support from people we never thought we'd hear support from," Puente said.

asherprice@statesman.com; 445-3643