TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-10-00094-CV

City of Galveston and Texas Commission on Environmental Quality, Appellants

v.

Flagship Hotel, Ltd., Appellee

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 98TH JUDICIAL DISTRICT

NO. D-1-GN-09-000651, HONORABLE RHONDA HURLEY, JUDGE PRESIDING

O P I N I O N

This case involves an administrative determination by appellant Texas Commission

on Environmental Quality (TCEQ) that it has no jurisdiction over a dispute between appellee

Flagship Hotel, Ltd. and appellant City of Galveston. Flagship sought a determination from TCEQ

that the agency had no jurisdiction over the dispute, and TCEQ issued a final order in the case to

that effect. Flagship then filed suit in district court appealing and challenging the result that it had

requested. We conclude that Flagship is not aggrieved by TCEQ’s final order and, therefore, is not

entitled to judicial review under section 2001.171 of the Administrative Procedure Act (APA). We

dismiss Flagship’s suit for lack of subject-matter jurisdiction.

Factual and Procedural Background

At all times relevant to this lawsuit, Flagship was the lessee and operator of the

Flagship Hotel—located on a pier in Galveston, Texas—and the City was the lessor and owner. 
During the 1990s, a dispute arose between the City and Flagship regarding amounts owed for

municipal water service provided to the hotel.

Flagship filed suit in Galveston County against the City and in 2001 obtained

a temporary restraining order enjoining the City from discontinuing water service to the hotel. The

City appealed the temporary injunction. In March 2002, the First Court of Appeals held that the

trial court lacked jurisdiction to issue the injunction because the Texas Natural Resource

Conservation Commission (TNRCC)—the predecessor agency to TCEQ—had exclusive

appellate jurisdiction over the City’s order, based on Texas Water Code section 13.042(d). See

City of Galveston v. Flagship Hotel, Ltd., 73 S.W.3d 422, 426-27 (Tex. App.—Houston [1st Dist.]

2002, no pet.); see also Tex. Water Code Ann. § 13.042(d) (West 2008) (“The commission shall

have exclusive appellate jurisdiction to review orders or ordinances of those municipalities

as provided in this chapter.”). Four days later, Flagship requested an emergency orderfrom TNRCC

with respect to the dispute. TNRCC did not issue any ruling at that time, but a TNRCC employee

replied by letter that the agency “has no jurisdiction to issue an emergency order in this matter.”

Nine days later, the Galveston County district court entered a final judgment based on both parties’

motions for summary judgment on the remaining issues. Both parties appealed the judgment. In

addition to addressing other portions of the district court’s judgment, the Texarkana Court of

Appeals found the First Court of Appeals’ reasoning in the previous appeal “persuasive,” and held

that Flagship had to exhaust its administrative remedies through TCEQ. See Flagship Hotel, Ltd.

v. City of Galveston, 117 S.W.3d 552, 562-63 (Tex. App.—Texarkana 2003, pet. denied).

In April 2007, Flagship filed with TCEQ an “Amended Petition for Review of the

City of Galveston with Respect to the City of Galveston’s Failure to Refund Sums Paid to Avoid

2
Disconnection of Water Service.” Flagship requested that TCEQ rule on its jurisdiction to hear the

dispute between the City and Flagship—the same subject matter over which the two courts of

appeals had held TCEQ has exclusive appellate jurisdiction. In the petition, Flagship prayed that:

[TCEQ] set this matter for hearing on the issue of jurisdiction and issue a final ruling

that [TCEQ] has no jurisdiction over this dispute and [Flagship] is free to pursue its

claims against the City of Galveston in a state court.

Alternately, Flagship prayed that:

In the unlikely event that [TCEQ] holds that it has jurisdiction over this matter,

[Flagship] requests that [TCEQ] review the City of Galveston’s failure to refund

certain sums [Flagship] paid to avoid disconnection of its water service and, after a

hearing on the same, order the City of Galveston to refund the amount [Flagship]

paid to avoid disconnection of its water service, and for such other and further relief

to which [Flagship] may be justly entitled.

TCEQ referred the case to the State Office of Administrative Hearings (SOAH). The

SOAH administrative law judge, in turn, certified to TCEQ the question of whether TCEQ has

exclusive appellate jurisdiction to review orders of a governing municipality pursuant to water code

section 13.042(d). TCEQ answered the certified question in the negative. According to TCEQ,

the City of Galveston is a municipally owned utility. See Tex. Water Code Ann. § 13.002(13)

(West 2008). The water code states that TCEQ does not have jurisdiction to regulate or supervise

the rates or service of a utility owned and operated by a municipality within its corporate limits. See

id. § 13.042(f); see also id. § 13.043(a) (West 2008) (“Any party to a rate proceeding before the

governing body of a municipalitymay appeal the decision of the governing body to the commission.

This subsection does not apply to a municipally owned utility.”). Based on TCEQ’s answer, the

3
administrative law judge dismissed the case from SOAH’s docket. On February 23, 2009, TCEQ

issued a final order dismissing Flagship’s petition for lack of jurisdiction.

Upon obtaining a final ruling that TCEQ has no jurisdiction over the

dispute, however, Flagship did not pursue its claims against the City. Instead, Flagship filed suit in

Travis County district court on February 27, 2009, seeking reversal of TCEQ’s final order that

it lacked jurisdiction. See Tex. Gov’t Code Ann. § 2001.176(a), (b) (West 2008). Appellants filed

pleas to the jurisdiction. On January 20, 2010, the district court denied appellants’ pleas to the

jurisdiction. Appellants filed this interlocutory appeal. See Tex. Civ. Prac. & Rem. Code Ann.

§ 51.014(a)(8) (West 2008).

Analysis

A plea to the jurisdiction challenges the trial court’s authority to determine the

subject matter of a specific cause of action. See Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 554

(Tex. 2000). Whether a court has subject-matterjurisdiction and whether a plaintiff has alleged facts

that affirmatively demonstrate subject-matter jurisdiction are questions of law that we review

de novo. Texas Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004). When a

plea to the jurisdiction challenges the plaintiff’s pleadings as to a cause of action, we determine if

the plaintiff has alleged facts that affirmatively demonstrate the court’s jurisdiction to hearthe cause.

Id. If the pleadings affirmatively negate the existence of jurisdiction, then the plea should be

granted. See id. at 227.

Governmental immunityfrom suit deprives a trial court of subject-matterjurisdiction

for lawsuits in which the State or certain governmental units have been sued, unless the State

4
consents to suit. See id. at 224. Flagship relies on section 2001.171 of the APA for waiver of

immunity. See Texas Dep’t of Protective&Regulatory Servs. v. Mega Child Care, Inc., 145 S.W.3d

170, 198 (Tex. 2004) (concluding that section 2001.171 provides limited waiver of sovereign

immunity). Section 2001.171 provides that a person “who is aggrieved by a final decision in a

contested case” is entitled to judicial review. See Tex. Gov’t Code Ann. § 2001.171 (West 2008).

Appellants contend that Flagship is not “aggrieved” because it obtained from TCEQ

the very relief it requested. We agree. The primary relief Flagship sought was a ruling that TCEQ

was without jurisdiction, and this is precisely the relief Flagship received. A party is not aggrieved

for purposes of APA section 2001.171 by a final order that provides the result that party sought.1

Flagship contends that it is aggrieved by TCEQ’s final order because there is now

no forum for its dispute against the City. Two courts of appeals declined to hear the dispute based

on their conclusion that TCEQ had exclusive appellate jurisdiction, and TCEQ determined that it did

not have appellate jurisdiction. However, before each tribunal, Flagship took the position that TCEQ

did not have jurisdiction. Therefore, to the extent that Flagship is aggrieved, it is the result of the

decisions by the courts of appeals, not the final order by TCEQ. Section 2001.171 of the APA

requires not that the person merely be aggrieved, but that the person be aggrieved by the

final decision in the contested case. See id.

This case is similar to GTE Southwest Inc. v. Public Utility Commission, 37 S.W.3d

546 (Tex. App.—Austin 2001, no pet.). In that case, the plaintiff, GTE, had sought dismissal by the

Flagship argues it should not be prejudiced by the fact that it “raised the issue” of 1

jurisdiction when TCEQ would have raised the issue even if Flagship had not. However, Flagship

did more than merely raise the issue. Flagship requested the very result that TCEQ reached.

5
state agency of an application made by another party, and the agency dismissed the application, but

on a separate basis than that requested by GTE. See 37 S.W.3d at 547-48. GTE sought judicial

review so as to challenge two conclusions of law in the agency’s final order. See id. at 548-49. This

Court held that GTE was not “aggrieved” as that term is used in APA section 2001.171 because,

although the agency issued conclusions of law that were contrary to GTE’s interests, GTE obtained

the relief it requested in the final order itself and did not challenge that order. See id. at 549. Here,

as in GTE Southwest, Flagship received the final order that it requested. Therefore, as in GTE

Southwest, Flagship is not aggrieved as that term is used in APA section 2001.171.

Because Flagship received the relief it requested, it is not aggrieved by TCEQ’s

final decision. Consequently, the district court lacks jurisdiction to entertain Flagship’s petition for

judicial review of the administrative decision. See C.O.N.T.R.O.L. v. Sentry Envtl., L.P., 916 S.W.2d

677, 678-79 (Tex. App.—Austin 1996, writ denied). We reverse the district court’s denial of

appellants’ pleas to the jurisdiction and dismiss Flagship’s suit for lack of subject-matterjurisdiction.

__________________________________________

G. Alan Waldrop, Justice

Before Justices Patterson, Waldrop and Henson

Reversed and Dismissed

Filed: August 27, 2010

6