Court Opinion

ID: 5128163
Source: CourtListenerOpinion
Date Created: 2021-11-22 08:15:03.968277+00
Date Added: 2024-06-11T08:23:05.511555
License: Public Domain

Opinion issued November 18, 2021

                                       In The

                               Court of Appeals
                                      For The

                           First District of Texas
                              ————————————
                               NO. 01-20-00071-CV
                             ———————————
                    TITLEMAX OF TEXAS, INC., Appellant
                                         V.
     CITY OF AUSTIN AND RONDELLA HAWKINS, OFFICER, CITY OF
    AUSTIN OFFICE OF TELECOMMUNICATIONS AND REGULATORY
    AFFAIRS, IN HER OFFICIAL AND INDIVIDUAL CAPACITY, Appellees

                    On Appeal from the 353rd District Court1
                             Travis County, Texas
                    Trial Court Case No. D-1-GN-19-002613

1
       The Texas Supreme Court transferred this appeal from the Third Court of Appeals
       to this Court pursuant to its docket equalization powers. See TEX. GOV’T CODE §
       73.001.
                                    OPINION

      Appellant, TitleMax of Texas, Inc. [“TitleMax”], sought declaratory and

injunctive relief against appellee, the City of Austin [“the City”], relating to a city

ordinance intended to regulate payday lending practices. The City filed a plea to the

jurisdiction, asserting that, because the specific ordinance at issue was penal in

nature, the civil district court lacked jurisdiction to declare it unconstitutional or to

enjoin a prosecution filed thereunder. The trial court granted the City’s plea to the

jurisdiction and dismissed TitleMax’s case. This appeal followed. We reverse and

remand.

                                  BACKGROUND

      Before considering TitleMax’s issues on appeal, it is necessary to review the

ordinance at issue and documents filed in the case.

The Ordinances

      The City of Austin has payday lending ordinances (“the Ordinances”), first

enacted in 2011 and amended in 2015, which regulate credit access businesses such

as TitleMax. The Ordinances provides as follows:

      A credit services organization or credit access business that obtains for
      a consumer or advises or assists a consumer in obtaining an extension
      of consumer credit shall by the terms of the extension of consumer
      credit transaction:

             (1) require payment of the total amount of the extension of
                consumer credit transaction, including any principal, interest,

                                           2
                 fees, valuable consideration, credit access business fees, and
                 any other charges or costs, in four or fewer payments; and

              (2) reduce by at least 25 percent per payment the total amount of
                 the extension of consumer credit transaction, including any
                 principal, interest, fees, valuable consideration, credit access
                 business fees, and any other charges or costs.

Austin, Tex. Code § 4-12-22(D). The Ordinances further provide in relevant part:

      (A) A person who violates any section of this chapter commits a Class
         C misdemeanor punishable by a fine not to exceed $500.

      (B) Except as provided in Subsection (C), each day that a violation
         occurs is a separate offense.

      (C) Each extension of consumer credit transaction is a separate offense
         if the extension of consumer credit transaction violates:

         (1) Section 4-12-22 (Restrictions on Extensions of Consumer Credit
             Transactions)[.]
         ....
      (D)The penalties provided for in Subsection (A) are in addition to any
         other remedies available under City ordinance or state law.

      (E) . . . [A] culpable mental state is not required for a violation of this
         chapter and need not be proved.

Austin, Tex. Code § 4-12-26.

      In February 2019, the City audited two TitleMax stores in Austin for

compliance and concluded that two loans (Loan No. 22289-148-35407272 and Loan

No. 21189-1678-35508202) were made in violation of the above-referenced

Ordinances.

                                           3
Petition for Declaratory Relief and Application for Permanent Injunction

      On May 10, 2019, TitleMax filed suit against the City, seeking a declaration

that (1) the Ordinances do not apply to TitleMax’s activities, (2) section 4-12-22(D)

of the Ordinances is preempted by section 393.062(b) of the Texas Finance Code,

(3) section 4-12-26 is preempted by section 393.224 of the Texas Finance Code and

§ 6.02 of the Texas Penal Code, and (4) the Ordinances are unconstitutionally void

for vagueness and excessive fines. TitleMax’s petition also sought to permanently

enjoin the City “from any attempts to seek criminal enforcement of the Ordinance

and City Code Provisions against Plaintiff.”

The City files Criminal Complaints Against TitleMax

      On May 30, 2019, after TitleMax had filed its petition, the City filed two

criminal complaints against TitleMax in Travis County Municipal Court, alleging

that the two loans that it had previously identified during its February 2019 audit

violated the section 4-12-22(D) by exceeding the number of installments permitted

for such loans.

The Amended Petitions

      On July 12, 2019, TitleMax filed its First Amended Petition, which added a

cause of action seeking a temporary injunction to “prohibit[] the City from any

attempts to seek criminal enforcement of the Ordinance and City Code Provisions

against Plaintiff pending trial of this matter.”

                                            4
      On September 10, 2019, TitleMax filed its Second Amended Petition, which

added claims against Anne Morgan, Austin’s City Attorney, and Rondella Hawkins,

of the City’s Office of Telecommunications and Regulatory Affairs.2

Pleas to the Jurisdiction

      On September 20, 2019, the City filed a Plea to the Jurisdiction, alleging that,

because the Ordinances are penal in nature, a civil equity court has no jurisdiction

to declare them invalid or to enjoin a prosecution arising therefrom unless “(1) there

is evidence that the statute at issue is unconstitutionally applied by a rule, policy, or

other noncriminal means subject to a civil court’s equity powers and irreparable

injury to property or personal rights is threatened; or (2) the enforcement of an

unconstitutional statute threatens irreparable injury to vested property rights.”

      On September 30, 2019, Hawkins also filed a Plea to the Jurisdiction, alleging

that she acted “well within her discretion in enforcing the Ordinance against

Plaintiff, which defeats Plaintiff’s ultra vires allegation against her and deprives [the

trial court] of subject-matter jurisdiction.”

      Both the City and Hawkins requested that the claims against them be

dismissed; the City further requested that “because Plaintiff cannot cure the

2
      All claims against Morgan, the City Attorney, have been nonsuited and are not a
      part of this appeal.
                                            5
[jurisdictional] defect through amendment, the City asks that [TitleMax’s live

pleading] be dismissed without leave to amend.”

The Trial Court’s Ruling

      After a two-day hearing, the trial court, on November 27, 2019, signed an

Order Granting Pleas to the Jurisdiction, stating as follows:

      Defendant City of Austin’s Plea to the Jurisdiction is GRANTED. The
      City has initiated two Municipal Court prosecutions. Plaintiff may
      argue that the underlying ordinance is unconstitutional in the criminal
      proceedings. The Court also notes that plaintiff is not a small local
      business.

      Defendants Anne Morgan’s and Rondella Hawkins’s First Amendment
      Pleas to the Jurisdiction is [sic] GRANTED. Defendant Morgan is
      protected by absolute immunity. As discussed above, this Court has no
      jurisdiction to determine the meaning and validity of this penal
      ordinance on this procedural record. This Court should not, therefore,
      exercise jurisdiction to determine the scope of Defendant Hawkins’
      authority under the ordinance and whether she acted outside the bounds
      of her granted authority.

      This is a final order disposing of all claims and all parties and is
      appealable.

Findings of Fact and Conclusions of Law

      Upon TitleMax’s request, the trial court made the following findings of fact,

which are relevant to this appeal:

      TitleMax of Texas, Inc. is not a small, local business. It is part of the
      TMX Finance Family of Companies, which collectively do business in
      at least 16 different states. TitleMax has nearly 275 locations across
      Texas, including nine locations in Austin.

                                          6
      The City of Austin audited two TitleMax stores in February 2019 for
      compliance with the Ordinance. Two loans were referred for
      prosecution: Loan No. 2289-1948-3540272 (“7272 loan”) and Loan
      No. 21189-1678-35508202 (“8202 Loan”). These prosecutions are
      currently pending in Municipal Court.

      TitleMax has not shown that it is currently facing a threat of irreparable
      injury to vested property rights, or that such a threat is reasonably
      foreseeable.

      The Supreme Court of Texas found a threat of irreparable injury to
      vested property rights when an ordinance “imposes a substantial per
      violation fine that effectively precludes small local businesses from
      testing the ban’s constitutionality in defense to a criminal prosecution.”
      City of Laredo v. Laredo Merchants Association, 550 S.W.3d 586, 592
      fn. 28 (Tex. 2018). While the Ordinance here arguably could impose
      substantial fines, TitleMax is not a small local business that is
      effectively precluded from testing the Ordinance’s constitutionality in
      defense to a criminal prosecution.

The trial court also made the following conclusions of law:

      The Ordinance is a penal ordinance.

      Civil courts have jurisdiction to enjoin or declare void an
      unconstitutional penal ordinance when there is a threat of irreparable
      injury to vested property rights.

      Because there is no jurisdiction for the Court to hear TitleMax’s claims
      against the City, the Court declines to exercise jurisdiction to determine
      TitleMax’s ultra vires claims against Rondella Hawkins.

      TitleMax timely appealed the trial court’s granting of the City’s and

Hawkins’s pleas to the jurisdiction and judgment dismissing its claims against both.

                                          7
 PROPRIETY OF ORDER GRANTING PLEAS TO THE JURISDICTION

      In its sole issue on appeal, TitleMax contends that “[t]he district court erred

in granting the City’s and Hawkins’s pleas to the jurisdiction.” Specifically,

TitleMax argues that, “[t]hrough the guise of a preempted and unconstitutional

Ordinance, the City seeks to regulate TitleMax and similarly situated businesses

despite licensing requirements and comprehensive statutory and regulatory

requirements already imposed by the State of Texas” and that, because TitleMax has

shown a threat of irreparable injury to vested property rights, the civil district court

has jurisdiction to enjoin or declare void the Ordinance at issue in this case.

Standard of Review

      Subject-matter jurisdiction is essential to a court’s power to decide a

case. Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 443 (Tex. 1993).

The plaintiff bears the burden of affirmatively demonstrating that the trial court has

subject-matter jurisdiction over its case. Heckman v. Williamson Cty., 369 S.W.3d

137, 150 (Tex. 2012); Tex. Ass’n of Bus., 852 S.W.2d at 446. A plea to

the jurisdiction is a dilatory plea that seeks dismissal of a case for lack of subject-

matter jurisdiction. Harris   Cty.   v.   Sykes,   136   S.W.3d     635,   638    (Tex.

2004); Villarreal v. Harris Cty., 226 S.W.3d 537, 541 (Tex. App.—Houston [1st

Dist.] 2006, no pet.). We review a trial court’s ruling on a plea to the jurisdiction de

novo. See Ben Bolt-Palito Blanco Consol. Indep. Sch. Dist. v. Tex. Political

                                           8
Subdivs. Prop./Cas. Joint Self-Ins. Fund, 212 S.W.3d 320, 323 (Tex. 2006); City of

Houston v. Vallejo, 371 S.W.3d 499, 501 (Tex. App.—Houston [1st Dist.] 2012, pet.

denied). A defendant may use a plea to the jurisdiction to challenge whether the

plaintiff has met its burden of alleging jurisdictional facts or to challenge the

existence of jurisdictional facts. See Tex. Dep’t of Parks & Wildlife v. Miranda, 133

S.W.3d 217, 226–27 (Tex. 2004).

      When a plea to the jurisdiction challenges the pleadings, we determine

whether the pleader has alleged facts that affirmatively demonstrate the trial court’s

jurisdiction. Id. at 226. We construe the pleadings liberally in favor of the pleader,

accept all factual allegations as true, and look to the pleader’s intent. Heckman, 369

S.W.3d at 150. If the pleadings are insufficient, the court should afford an

opportunity to replead if the defects are potentially curable but may dismiss if the

pleadings affirmatively negate the existence of jurisdiction. City of Houston v.

Guthrie, 332 S.W.3d 578, 586–87 (Tex. App.—Houston [1st Dist.] 2009, pet.

denied).

      Review of a plea challenging the existence of jurisdictional facts mirrors that

of a matter-of-law summary-judgment motion. Mission Consol. Indep. Sch. Dist. v.

Garcia, 372 S.W.3d 629, 635 (Tex. 2012); Miranda, 133 S.W.3d at 228 (“[T]his

standard generally mirrors that of a summary judgment under Texas Rule of Civil

Procedure 166a(c). . . . By requiring the [S]tate to meet the summary judgment

                                          9
standard of proof . . . , we protect the plaintiff[ ] from having to put on [its] case

simply to establish jurisdiction.”) (internal quotations and citations omitted); see

also TEX. R. CIV. P. 166a(c). “[A] court deciding a plea to the jurisdiction . . . may

consider evidence and must do so when necessary to resolve the jurisdictional issues

raised.” Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 555 (Tex. 2000). And a

court may consider evidence as necessary to resolve a dispute over the jurisdictional

facts even if the evidence “implicates both the subject[-]matter jurisdiction of the

court and the merits of the case.” Miranda, 133 S.W.3d at 226.

       We take as true all evidence favorable to the non-movant and we indulge

every reasonable inference and resolve any doubts in the non-movant’s favor. Id. at

228. If the defendant meets its burden to establish that the trial court lacks

jurisdiction, the plaintiff is then required to show that there is a material fact question

regarding the jurisdictional issue. Id. at 227–28. If the evidence raises a fact issue

about jurisdiction, the plea cannot be granted, and a fact finder must resolve the

issue. Id. On the other hand, if the evidence is undisputed or fails to raise a fact issue,

the plea must be determined as a matter of law. Id. at 228; Garcia, 372 S.W.3d at

635.

Cases Predating Texas Propane Gas Association v. City of Houston

       Both parties agree that the issue in this case—whether the civil district court

has subject-matter jurisdiction to interpret or enjoin the City’s Ordinances—is

                                            10
governed by the recent Texas Supreme Court decision in Texas Propane Gas

Association v. The City of Houston, 622 S.W.3d 791 (Tex. 2021). However, the

parties disagree with how the holding in Texas Propane should be applied in the

current case. Before analyzing Texas Propane, it is appropriate to discuss several

cases predating it on which the supreme court relied or distinguished in reaching its

decision.

      In City of Austin v. Austin City Cemetery Association, the cemetery

association challenged a city ordinance prohibiting burials within certain geographic

limits of the City of Austin. 28 S.W. 528 (Tex. 1894). The supreme court

acknowledged that, “as a general rule, the aid of a court of equity cannot be invoked

to enjoin criminal prosecutions” and that “anyone prosecuted under its provisions

may have it [] declared [void], either in the original criminal action, or by suing out

a writ of habeas corpus.” Id. at 336. But, the court noted that “[a] criminal

prosecution is unpleasant to all people who have due respect for the law, and almost

necessarily involves inconvenience and expense.” Id. The very existence of the

statute, as long as it remains undisturbed, “acts in terrorem, and practically

accomplishes” its goal. Id. at 336–37. The court noted that no one would be willing

to purchase a cemetery plot for fear that it could not be used for its intended purpose

without violating the ordinance, thus “result[ing] in a total destruction of the value

of [the cemetery association’s property] for the purpose for which it was acquired.”

                                          11
Id. at 336. Given the threat that a business in the locality might be “effectually

destroyed” by the ordinance, the court concluded that the business “should have the

right to . . . enjoin its enforcement.” Id. at 337.

      In State v. Morales, the trial court found the State’s sodomy statute

unconstitutional and enjoined its enforcement. 869 S.W.2d 941, 942 (Tex. 1994).

The State appealed, arguing “that civil courts under these circumstances have no

power to grant either injunctive or declaratory relief based on the unconstitutionality

of a criminal statute.” Id. at 943. The court agreed, noting that when a criminal

statute is enforced and the charged party is being prosecuted or the threat of

prosecution is imminent, the constitutionality of the criminal statute should be

determined by courts exercising criminal jurisdiction “unless the statute is

unconstitutional and there is the threat of irreparable injury to vested property

rights.” Id. at 945. However, if there is no actual or threatened enforcement of the

penal statute and no complaint of specific conduct remediable by injunction, “[a]

civil court simply has no jurisdiction to render naked declarations of ‘rights, status

or other legal relationships arising under a penal statute.’” Id. at 947 (citing Malone

v. City of Hous., 278 S.W.2d 204, 206 (Tex. Civ. App.—Galveston 1955, writ ref’d

n.r.e.)). Because no property rights were involved, and there was no prosecution or

threatened prosecution, the supreme court held that the civil district court had no

                                            12
jurisdiction to declare the sodomy statute unconstitutional or to enjoin its

enforcement. Id. at 947.

      Finally, in City of Laredo v. Laredo Merchants Association, a merchants

association sued the city seeking a declaration that an ordinance prohibiting the use

of plastic or paper “checkout bags” was unconstitutional and enjoining its

enforcement. 550 S.W.3d 586, 591 (Tex. 2018). The City of Houston, as amicus

curiae, argued that the civil court lacked jurisdiction because the ordinance was

penal in nature, not civil, and could only be challenged as a defense to a criminal

prosecution for violating it. Id. at 592 n.28. The supreme court disagreed, noting

that “civil courts have jurisdiction to enjoy or declare void an unconstitutional penal

ordinance when ‘there is the threat of irreparable injury to vested property rights.’”

Id. (quoting Morales, 869 S.W.2d at 945). The supreme court held that this “rule

applies here, where the ordinance prohibits the complaining vendors from using

noncompliant bags and, if they do, imposes a substantial per-violation fine that

effectively precludes small local businesses from testing the ban’s constitutionality

in defense to a criminal prosecution.” Id. Thus, the civil court had jurisdiction over

the case. Id.

Texas Propane Gas Association v. City of Houston

      The Texas Supreme Court has again addressed the issue of when a civil court

may declare a penal statute unconstitutional and enjoin its enforcement in Texas

                                          13
Propane Gas Association. v. City of Houston, 622 S.W.3d 791 (Tex. 2021). In Texas

Propane, the gas association sued the city for a declaratory judgment that its

ordinances regulating the liquefied petroleum gas [“LPG”] industry were

unconstitutional because they were preempted by state law. Id. at 793. One of those

ordinances imposed monetary penalties for a violation that ranged from $500 to

$2,000 per day. Id. at 794. The city argued that “civil courts lack subject-matter

jurisdiction to enforce the [gas association’s] preemption claim because the local

regulations it challenges carry criminal penalties.” Id. at 793. The city argued that

the case was controlled by Morales, and that City of Laredo and Austin City

Cemetery should not be followed. Id. at 797. Specifically, the city argued that City

of Laredo should not be followed because, in Austin City Cemetery, the ordinance

threatened “the total destruction of the value of the challenger’s property,” whereas

in City of Laredo, the “regulations posed much less of a threat to the [challengers’]

property[.]” Id. at 798. Thus, the city would have had the civil jurisdiction limited to

cases in which the criminal ordinance would “totally destroy” the value of the

challenger’s property. The supreme court rejected this argument, holding that “the

threat of prosecution and the fines imposed in [both City of Laredo and Texas

Propane] were similar.” Id. Following City of Laredo and not Morales, the supreme

court concluded that “just as in City of Laredo, the City’s LPG regulations threaten

irreparable injury to vested property rights.” Id. at 798.

                                          14
      However, the supreme court did not stop after finding irreparable injury to the

challengers’ vested property rights—the court further concluded that the gas

association’s lawsuit was “not a ‘criminal matter’ outside a Texas civil court’s

subject-matter jurisdiction.” Id. at 798. The court held that “to determine the

boundary between civil and criminal jurisdiction, courts ‘must look to the essence

of the case to determine whether the issues it entails are more substantively criminal

or civil.’” Id. (citing Heckman, 369 S.W.3d at 146).

      Disputes arising over the enforcement of statutes governed by the Texas
      Code of Criminal Procedure or as a result of or incident to a criminal
      prosecution are usually criminal law matters. But the mere existence
      of some criminal law question, characteristic, or contest will not
      transform a dispute that is fundamentally civil into a criminal law
      matter.

Id. (citations and internal punction omitted). The court noted that the “essence test”

from Heckman “requires a holistic, common-sense analysis” and concluded that the

essence of the gas association’s case was “a dispute over the City’s legal authority

to regulate a specific category of commercial activity, the LPG industry.” Id. at 798.

In so holding, the supreme court stated:

      Though violating the City’s LPG regulations may result in a criminal
      proceeding or monetary penalty, that fact is merely incidental to the
      legal issue TPGA raises. Accepting the City’s argument would allow a
      political subdivision to evade a preemption challenge by cloaking its
      commercial regulations with criminal features. And it would result in
      the anomaly of civil courts having jurisdiction to adjudicate the validity
      of local LPG regulations that do not carry criminal penalties but no
      jurisdiction to adjudicate local regulations that do.

                                           15
      Both Morales and City of Laredo repeated the rule that a civil court has
      jurisdiction to declare a criminal statute invalid only when irreparable
      injury to vested property rights is threatened. Viewed in the context of
      our case law as a whole, the rule is but a corollary to the ultimate test
      articulated in Heckman: looking to the essence of the case, are the
      issues presented more substantively civil or criminal? Protection of
      property rights is a core civil-law function. In a suit challenging the
      constitutionality of a criminal statute, the threat of irreparable injury to
      property rights may tip the scales in favor of the matter being a civil
      one.

      The essence of this case is civil, as was the essence of City of
      Laredo. Accordingly, this case is within the trial court’s subject-matter
      jurisdiction.

Id. at 799 (citations omitted).

Analysis

      The City contends that we are not compelled to follow Texas Propane because

it is distinguishable. Specifically, the City contends that Texas Propane is

distinguishable because the “essence” of the case here is criminal, not civil. We will

address several points the City raises to support this assertion.

      First, the City argues that, because there are pending criminal proceedings, the

“only issues in this case are the viability of TitleMax’s defenses to active criminal

prosecution” and that “[t]he procedural posture of the criminal enforcement actions”

makes the present case distinguishable.

      We begin by noting that, at the time TitleMax filed suit in civil district court,

there was no criminal prosecution, which was initiated after TitleMax first sought

declaratory and injunctive relief. The issue is not whether the municipal court
                                          16
criminal proceeding served to usurp the civil district court’s subject-matter

jurisdiction, but whether the civil district court had subject-matter jurisdiction at the

time TitleMax’s suit was filed. See Tex. Ass’n of Bus., 852 S.W.2d at 446 n.9 (noting

that because standing—in terms of a party’s right to initiate a lawsuit and the trial

court’s power to hear it—is determined when suit is filed, subsequent events do not

deprive the court of subject-matter jurisdiction); see also Bell v. Moores, 832 S.W.2d

749, 754 (Tex. App.—Houston [14th Dist.] 1992, writ denied) (“A trial court

determines its jurisdiction at the time a suit is filed. At that time, the court either has

jurisdiction or it does not.”). That there are now criminal prosecutions pending is

certainly a factor to consider in conducting the “holistic, common-sense” analysis

required for the Texas Propane “essence” test, but the existence of subsequently

filed prosecutions is not outcome determinative.

       Instead, we must determine if “the issues presented [in the case are] more

substantively civil or criminal’? See Texas Propane, 622 S.W.3d at 799. In Texas

Propane, the supreme court held that “[t]he essence of this case is a dispute over the

city’s legal authority to regulate a specific category of commercial activity, the LPG

industry.” Id. at 798. The supreme court noted that the gas association’s substantive

claims were (1) that a civil statute forbade the city from regulating any aspect of the

industry without the Railroad Commission’s permission, and that (2) the city’s

regulations were preempted by other regulations promulgated by the State pursuant

                                            17
to a civil statute. See id. at 799. Because adjudicating the merits of the gas

association’s claims would turn on the scope of a civil statute, the court concluded

that the “essence” of the case in Texas Propane was civil. Id.

      In this case, TitleMax’s petition alleges that the City’s Ordinance, which

requires repayment of the total amount of the loan transaction—including credit

access business fees—in no more than four 25% installments, conflicts with section

393.602(b) of the Texas Finance Code, which provides that a credit access business

fee may be calculated “daily, biweekly, monthly, or another periodic basis.” See

TEX. FIN. CODE § 393.602(b). TitleMax also asserts that the Ordinance, by

eliminating any mens rea, conflicts with Texas Finance Code section 393.224 and

Texas Penal Code section 6.02(a) & (b), both of which require a showing of a

culpable mental state. See TEX. FIN. CODE § 393.224 (imposing administrative

penalties for “knowingly and willfully violating Chapter 393 or a rule adopted under

it and making such violation a Class B misdemeanor) and TEX. PENAL CODE §

6.02(a), (b) (requiring culpable mental state for Class B misdemeanors); see also

TEX. FIN. CODE § 224.501 (imposing criminal penalties for violations of Chapter 393

and classifying such violations as Class B misdemeanors). Additionally, TitleMax

claims that the Ordinances are unconstitutionally vague and impose excessive fines.

      We believe that the “essence” of TitleMax’s claims, like the challenged

ordinance in Texas Propane, is essentially civil in nature and that the imposition of

                                         18
the criminal monetary penalty is “merely incidental” to the issues TitleMax raises.

See Texas Propane, 622 S.W.2d at 799. Resolving TitleMax’s claims hinges on the

proper interpretation of state civil statutes and whether those state civil statutes

preempt the actions taken by the City in enacting the Ordinances. Like the ordinance

in Texas Propane, “[t]he ‘essence’ of this case is a dispute over the City’s legal

authority to regulate a specific category of commercial activity.” Id. In Texas

Propane, the supreme court rejected using the existence of criminal penalties as a

litmus test in determining whether an action was essentially civil or criminal:

       Though violating the City’s LPG regulations may result in a criminal
       proceeding or monetary penalty, that fact is merely incidental to the
       legal issue [the gas association] raises. Accepting the City’s argument
       would allow a political subdivision to evade a preemption challenge by
       cloaking its commercial regulation with criminal features. And it
       would result in the anomaly of civil courts having jurisdiction to
       adjudicate the validity of local LPG regulations that do not carry
       criminal penalties but no jurisdiction to adjudicate local regulations that
       do.

Id.

       We agree that the civil district court’s jurisdiction does not hinge upon

whether there is a criminal penalty attached to the statute; the issue is whether the

City had the authority to enact the statute in the first place, an issue that requires the

interpretation of state civil statutes.

       This leads us to consider the State’s second argument, i.e., that TitleMax has

no threatened “vested property interest” justifying its invocation of the civil court’s

                                           19
equity jurisdiction. Specifically, the City cites Texas Propane to argue that only a

“substantial per-violation fine that effectively preclude[s] small local businesses

from testing the ban’s constitutionality in defense to a criminal prosecution” is a

violation that threatens vested property rights. See id. (citing City of Laredo, 369

S.W.3d at 146). Indeed, the trial court premised its ruling on this basis, noting that

the “plaintiff is not a small local business” and that it “has nearly 275 locations across

Texas, including nine locations in Austin.”

      While it is true that Texas Propane quotes City of Laredo’s holding that, in

that case, a “substantial per-violation fine that effectively precludes small local

businesses from testing the ban’s constitutionality” was a threatened irreparable

injury to vested property rights, nothing in either opinion suggests that only small

local businesses can seek declaratory or injunctive relief from ordinances with

statutory penalties that threaten irreparable injury to their vested property rights. To

determine which plaintiffs have standing to bring such a challenge in civil district

court based simply on the size of their business is nonsensical. Either the civil district

court has jurisdiction to determine cases that threaten irreparable injury to vested

property rights or it does not. Indeed, the ordinance involved in City of Laredo

applied to any “commercial establishment” that used plastic or paper “checkout

bags.” 550 S.W.3d at 590. Presumably not all the merchants in the Laredo Merchants

Association were small local businesses in that the ordinance applied to any

                                           20
“commercial establishment.” And, the gas association in Texas Propane was a trade

association composed of “300 members statewide,” whose members included

“producers, wholesalers, propane retailers, manufacturers, fabricators, distributors,

service providers, engineers, plumbers, RV parks, associations and other involved

in the propane industry.” 622 S.W.3d at 793 n.5. Again, nothing suggests that all

members of the merchant’s association were “small local businesses” or that such a

status was a lynchpin for standing.

      In both City of Laredo and Texas Propane, the supreme court focused on the

“threat of prosecution and the fines imposed.” Id. at 798. In City of Laredo, the

challenged ordinance imposed monetary penalties of up to $2,000 per violation plus

court costs and expenses. Id. at 796 n.23. In Texas Propane, the challenged

ordinances imposed monetary penalties for a violation that ranged from $500 to

$2,000 per day. Id. at 794. In both cases, the supreme court concluded that these

“substantial per-violation” fines threatened irreparable injury to the challengers’

vested property rights. Similarly, in this case the challenged ordinance imposes a

fine not to exceed $500 and provides that each day that a violation occurs is a

separate offense. Austin, Tex. Code § 4-12-26. Thus, following both City of Laredo

and Texas Propane, we conclude that TitleMax has shown a threatened irreparable

injury to its vested property rights.

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      In sum, we conclude that City of Laredo and Texas Propane are

indistinguishable. Because TitleMax has shown a threatened irreparable injury to its

vested property rights and because the “essence” of its claims is not a “criminal law

matter” outside a Texas civil court’s subject-matter jurisdiction, we hold that the trial

court erred in granting the City’s Plea to the Jurisdiction and dismissing TitleMax’s

claims.

                                   CONCLUSION

      Because the civil district court has subject-matter jurisdiction, we reverse the

trial court’s order dismissing TitleMax’s claims and remand the case for further

proceedings.

                                                Sherry Radack
                                                Chief Justice

Panel consists of Chief Justice Radack and Justices Rivas-Molloy and Guerra.

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