Opinion ID: 4537908
Heading Depth: 4
Heading Rank: 1

Heading: Characterization in State Law and Case Law

Text: “The first factor we take into account is how the state, through its constitution, laws, judicial opinions, attorney general’s opinions, and other official statements, perceives the entity in question.” Hudson v. City of New Orleans, 174 F.3d 677, 683 (5th Cir. 1999). “If the state characterizes the [entity] as an arm of the state, this factor is counted in favor of Eleventh Amendment immunity.” Id. Forty years ago, the Texas Supreme Court, ruling on the question whether navigation districts are state agencies or political subdivisions, clearly distinguished between the two in three ways. Guaranty Petroleum Corp. v. Armstrong, 609 S.W.2d 529, 531 (Tex. 1980). A political subdivision has jurisdiction over a portion of the state, while a state agency exercises its jurisdiction throughout Texas. The governing members of a political subdivision are elected or appointed by locally elected officials, but heads of state agencies are elected statewide or appointed by state officers. And political subdivisions may assess and collect taxes, a power that state agencies lack. The court concluded that “the legislature has consistently recognized 10 Case: 18-50994 Document: 00515433679 Page: 11 Date Filed: 05/29/2020 No. 18-50994 these distinctions between departments, boards or agencies on the one hand and political subdivisions on the other.” Id. (footnote omitted). The navigation district was held to be a political subdivision. Guaranty Petroleum is relevant here because the navigation district was created, exactly like BVGCD, pursuant to Art. XVI, Section 59 of the Texas Constitution and, parallel to BVGCD, the navigation district is defined as a “district” under the Texas Water Code. The Code defines a “District” as “any district or authority created under . . . Section 59, Article XVI, Texas Constitution, that has the authority to regulate the spacing of water wells, the production from water wells, or both.” TEX. WATER CODE § 36.001(1). Further, the TWC defines “political subdivision” to include “a county, municipality, or other body politic or corporate of the state, including a district or authority created under Section 52, Article III, or Section 59, Article XVI, Texas Constitution, a state agency, or a nonprofit water supply corporation created under Chapter 67.” TEX. WATER CODE § 36.001(15). Finally, as was the case with the navigation district, the BVGCD is run by officials appointed by county officeholders, its jurisdiction is not statewide but covers only two counties, and it may assess and collect taxes. Despite this guidance from the Texas Supreme Court, federal case law has diverged when analyzing the Clark factors. To be sure, “comparisons [between like entities] cannot substitute for a careful examination of the particular entity at issue.” Sw. Bell Tel. Co. v. City of El Paso, 243 F.3d 936, 938 (2001) (quoting McDonald v. Board of Miss. Levee Comm’rs, 832 F.2d 901, 908 (5th Cir. 1987)) (internal quotation marks omitted). In Southwestern Bell, a water improvement district unsuccessfully claimed Eleventh Amendment immunity by resting on faulty precedent—from this court. Id. at 938–39. This court had to explain that pursuant to Clark, and a line of cases preceding 11 Case: 18-50994 Document: 00515433679 Page: 12 Date Filed: 05/29/2020 No. 18-50994 Clark, an entity is not an arm of the state “simply because it is a creature of state law and a political subdivision of the state;” such a “conclusion would entirely obviate the arm-of-the-state analysis” such that “every entity claiming Eleventh Amendment immunity is a ‘creature’ of some state law.” Id. at 939. Whether entities are created under the same law—e.g. the Texas Water Code or Article XVI, Section 59 of the Texas Constitution—cannot be the sole or sufficient factor when determining immunity. “[S]uch a test is no test at all.” Id. at 940. Most political subdivisions, in fact, are “not entitled to Eleventh Amendment immunity.” Sw. Bell, 243 F.3d at 939. Southwestern Bell thoroughly criticized and rejected as fundamentally inconsistent with our earlier precedent the cases that Appellees here rely on for their conclusion that BVGCD is an arm of the state. See Kamani v. Port of Houston Authority, 702 F.2d 612 (5th Cir. 1983); Pillsbury Co. v. Port of Corpus Christi Authority, 66 F.3d 103 (5th Cir. 1995). The Southwestern Bell court explained that “Kamani was an admiralty action in which the court stated without analysis that the Port of Houston Authority was ‘a “creature of state law and a political subdivision of the State of Texas”’ entitled to Eleventh Amendment immunity,” and “Pillsbury was a breach-of-contract action in which the court held that the Port of Corpus Christi Authority was factually and legally indistinguishable from the Port of Houston Authority, and was thus entitled to immunity under Kamani”. Sw. Bell, 243 F.3d at 938–40 (internal citations omitted). In light of Southwestern Bell, those two cases may not be relied on. 5 5 The district court’s citation of Celanese Corp. v. Coastal Water Auth., 475 F.Supp. 2d 623 (S.D. Tex. 2007) is also inapt. While the authority in that case (the “CWA”) was created pursuant to Art. XVI, Sec. 59 of the Texas Constitution to regulate water resources, the CWA is critically distinguishable from the instant GCD because several members of its Board are appointed by the governor and confirmed by the state Senate, imparting considerable direct state influence on its operations. Celanese, 475 F.Supp. 2d at 634. Moreover, unlike BVGCD, 12 Case: 18-50994 Document: 00515433679 Page: 13 Date Filed: 05/29/2020 No. 18-50994 The district court also relied on a Texas appellate case for the proposition that an underground water conservation district is “an arm of the state created to administer the enumerated governmental powers delegated to it.” Lewis Cox & Sons, Inc. v. High Plains Underground Water Conserv. Dist. No. 1, 538 S.W.2d 659, 662 (Tex. Civ. App.—Amarillo 1976). But the court overlooked what immediately followed: “[a]s constituted, the water district exists and functions as a governmental agency, a body politic and corporate, and stands upon the same footing as counties and other political subdivisions of the state.” Lewis Cox, 538 S.W.2d at 662 (internal citations omitted). Other case law besides Guaranty Petroleum characterizes water management entities, like that in Lewis Cox, as “political subdivisions” that “stand upon the same footing as a county.” South Plains Lamesa R.R., Ltd. v. High Plains Underground Water Conservation Dist. No. 1, 52 S.W.3d 770, 774 (Tex. App.—Amarillo 2001, no pet.); see also Coates v. Hall, 512 F.Supp.2d 770, 778 (W.D. Tex. 2007); Sullivan v. Chastain, 2005 WL 984348, at  (W.D. Tex. Apr. 28, 2005). Counties, of course, are not entitled to Eleventh Amendment immunity. See, e.g., Crane v. State of Texas, 759 F.2d 412, 415 (5th Cir. 1985). The application of this factor has been unfortunately complicated by our case law, but on balance, in light of our decision in Southwestern Bell and state law authority, this factor suggests BVGCD is not an arm of the state.