Court Opinion

ID: 46263
Source: CourtListenerOpinion
Date Created: 2010-04-25 22:55:59+00
Date Added: 2024-06-11T17:17:36.180148
License: Public Domain

United States Court of Appeals
                                                                Fifth Circuit
                                                             F I L E D
              IN THE UNITED STATES COURT OF APPEALS
                                                             October 11, 2006
                       FOR THE FIFTH CIRCUIT
                                                         Charles R. Fulbruge III
                       _____________________                     Clerk

                            No. 04-41196
                       _____________________

WESTERN SEAFOOD COMPANY,

               Plaintiff - Appellant,

                                 v.

UNITED STATES OF AMERICA, ET AL,

               Defendants,

CITY OF FREEPORT, TEXAS; FREEPORT ECONOMIC DEVELOPMENT
CORPORATION,

               Defendants - Appellees.

_________________________________________________________________

           Appeal from the United States District Court
                for the Southern District of Texas
                          No. 3:03-CV-811
_________________________________________________________________

Before DEMOSS, BENAVIDES, and PRADO, Circuit Judges.

EDWARD C. PRADO, Circuit Judge:*

     In this takings case, Western Seafood Company (“Western

Seafood”) appeals the district court’s order granting summary

judgment in favor of the City of Freeport, Texas (“City”), and

     *
        Pursuant to 5TH CIRCUIT RULE 47.5, the Court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIRCUIT
RULE 47.5.4.

                                   1
the Freeport Economic Development Corporation (“FEDC”).   For the

reasons that follow, we affirm the order of summary judgment on

Western Seafood’s claim under the United States Constitution. On

Western Seafood’s claim under the Texas Constitution, we vacate

the order of the district court and remand for reconsideration of

Western Seafood’s claim in light of Texas Government Code §

2206.001 (“Limitations on the Use of Eminent Domain Act”).

                             I. BACKGROUND

     In an effort to foster economic development, the City seeks

to seize a portion of Western Seafood’s property along the Old

Brazos River, approximately 0.86 of an acre including about 330

feet of waterfront. The City intends to transfer the taken

property to Western Seafood’s neighbor, Freeport Waterfront

Properties, (“FWP”), a private entity, for the purpose of

building a private marina.    Western Seafood provides supplies and

services to commercial shrimp trawlers operating on the Old

Brazos River.   The contested land includes Western Seafood’s

docks, which the shrimp trawlers use to offload and deliver their

shrimp to Western Seafood for processing.

     In September 2001, the City initiated a master planning

process to develop a revitalization plan.    The resulting report

described the City’s downtown area as being in serious decline

and largely vacant.   The master plan argued that the creation of

                                   2
a marina was “probably the single most important development that

can bring significant economic stimulus to the city.”   The City

planned to finance the marina through low interest loans of

public money from the City through the FEDC.**   The marina would

be constructed, owned, and operated by FWP, a company owned by

Hiram Walker Royall. Mr. Royall is a member of the Blaffer

family, which is a major landowner in downtown Freeport.   On

February 2, 2003, the Freeport City Council passed a resolution

urging the FEDC to take on the marina project.   The FEDC passed a

resolution adopting the project on February 27, 2003.

                      II. PROCEDURAL HISTORY

     On September 25, 2003, when it learned that the City had

filed for a permit with the United States Army Corps of

Engineers, Plaintiff Western Seafood filed a complaint for

injunctive relief, seeking to prevent the United States and the

City from building marina piers in front of Western Seafood’s

property.   Western Seafood simultaneously filed a motion for

preliminary injunction to prevent the City from commencing a

condemnation suit in state court.    Because the City withdrew its

permit application, the district court denied the request for

injunctive relief at a December 5, 2003 hearing.   In addition,

the district court stayed and administratively closed the case,

suspending the hearing for settlement discussions.   At a status

     **
       The City incorporated the FEDC pursuant to the Texas
Development Corporation Act (“TDCA”) of 1979.

                                 3
conference on April 8, 2004, the district court granted Western

Seafood leave to file amended pleadings.     After the parties

failed to reach a settlement, the case was reopened in April 2004

and set for trial.

     Western Seafood anticipated that the City would seek

condemnation in county court during April 2004.     It therefore

filed another complaint seeking a temporary restraining order.

At an April 13, 2004 hearing, the City stated that it would not

proceed with condemnation proceedings in state court because the

FEDC would be responsible for initiating the matter.***

Accordingly, the court denied the request for a temporary

restraining order.     Western Seafood thereafter dismissed the

United States and added the FEDC as a Defendant.

     In both complaints, Western Seafood alleged that

Defendants’**** proposed taking of its property violated the TDCA,

TEX. REV. CIV. STAT. art. 5190.6; the takings clause of the Texas

Constitution,***** TEX. CONST. art. 1, § 17; and the Takings Clause

     ***
         Under state law, the FEDC can exercise the right of
eminent domain if authorized to do so by the City. TEX. REV. CIV.
STAT. art. 5190.6, § 4A(g).
     ****
        The City and the FEDC are hereinafter referred to as
“Defendants” or “Appellees.”
     *****
             The pertinent provision of the state constitution reads:

     No person’s property shall be taken, damaged or destroyed
     for or applied to public use without adequate compensation
     being made, unless by the consent of such person; and, when
     taken, except for the use of the State, such compensation
     shall be first made, or secured by a deposit of money.

                                    4
of the United States Constitution,****** U.S. CONST. amend. V.     On

April 19, 2004, the City filed its summary judgment motion in

both causes,******* arguing that because the principal purpose of

the marina project was to revitalize the downtown area and the

local economy, the project did not violate the takings provisions

of either the federal or state constitutions.

     On August 5, 2004, the district court granted summary

judgment to Defendants. Western Seafood Co. v. City of Freeport,

346 F. Supp. 2d 892 ( S.D. Tex. 2004).      Relying on Hawaii Housing

Authority v. Midkiff, 467 U.S. 229 (1984), the district court

held that the City’s proposed condemnation of Western Seafood’s

property fell within the scope of the Takings Clause. In Midkiff,

the Supreme Court upheld the Hawaii Land Reform Act of 1967,

which created a land condemnation scheme whereby property was

transferred from lessors to lessees in order to reduce the

concentration of land ownership in Hawaii. Midkiff, 467 U.S. at

233. The Supreme Court held that the Land Reform Act was

constitutional because it did not benefit a particular class of

individuals but rather served a conceivable public purpose by

attacking the perceived evils of concentrated property ownership.

TEX. CONST. art. 1, § 1.
     ******
          The Takings Clause states: “nor shall private property
be taken for public use, without just compensation.” U.S. CONST.
amend. 5.
     *******
               On July 9, 2004, the two cases were consolidated.

                                    5
Id. at 241-42.

     In the instant case, the district court found that the

City’s use of its eminent domain power to transfer property from

one private party to another was rationally related to the

conceivable public purpose of “promot[ing] the public interest in

a healthy local economy.” Western Seafood, 346 F. Supp. 2d at

901. The court stated, “The Supreme Court has made it abundantly

clear that decisions about the most economically efficient use of

property are squarely within the proper province of the

legislature . . . .” Id. at 902.

     The district court also found that the Texas Constitution

did not protect Western Seafood’s property from the Defendants’

proposed exercise of eminent domain.       Like its federal

counterpart, the Texas Constitution allows takings for public use

where adequate compensation is provided.       The district court

noted that Texas courts have interpreted the takings clause of

the Texas Constitution, and in particular the “public use”

requirement, to “require substantial deference to the

legislature.” Id. at 899. Following this approach, the district

court looked to the TDCA, which declares that measures authorized

by it serve the public purpose of economic development.******** Id.

     ********
                The court quoted the following provisions:

     (a) It is hereby found, determined, and declared:

     (1) that the present and prospective right to gainful
     employment and general welfare of the people of this state

                                     6
Having earlier concluded that the development plan in question

was authorized by the TDCA, the district court reasoned that “the

legislature has determined that the project serves the public

interest in economic development.” Id. at 900. The court

therefore held that the proposed taking of Western Seafood’s

property did not offend the state constitution.

     Western Seafood timely filed notice of appeal on August 30,

2004.   It also filed motions in the district court and

subsequently in this court seeking a stay of judgment and

injunction pending appeal, both of which were originally denied.

After the Supreme Court agreed to hear Kelo v. City of New

London, 125 S. Ct. 2655 (2005), Western Seafood filed a motion

for reconsideration of the stay and a motion for injunction in

this court.   This court granted Western Seafood’s motions and

abated the instant case pending the Kelo decision.   After the

     require as a public purpose the promotion and development of
     new and expanded business enterprises and the promotion and
     development of job training;

     . . .

     (4) that the means and measures authorized by this Act and
     the assistance provided in this Act, especially with respect
     to financing, are in the public interest and serve a public
     purpose of the state in promoting the welfare of the
     citizens of the state economically by the securing and
     retaining of business enterprises and the resulting
     maintenance of a higher level of employment, economic
     activity, and stability; . . . .

TEX. REV. CIV. STAT. art. 5190.6, §3(a).

                                  7
Supreme Court decided in favor of the City of New London in Kelo,

this court lifted the abatement on Defendants’ motion and

reinstated the district court’s order denying the injunction.

Having received the required authorization from the City under

TEX. REV. CIV. STAT. art. 5190.6, § 4B(j), the FEDC brought

condemnation proceedings on August 16, 2004 in state court.*********

     In this appeal, Western Seafood seeks: (1) reversal and

remand on both federal and state constitutional questions; or (2)

reversal and remand on the federal constitutional question, in

light of Kelo, and certification to the Texas Supreme Court of

constitutionality of the City’s taking under the State

constitution and its legality under newly enacted state

legislation placing limits on the government’s eminent domain

powers, TEX. GOV’T CODE § 2206.001 (“Limitations on the Use of

Eminent Domain Act”).   In addition, Western Seafood seeks an

injunction against the state condemnation proceedings.

                           III. ANALYSIS

A. Standard of Review

     *********
           On August 18, 2004, the county court appointed a
panel of special commissioners to conduct a hearing to determine
the fair market value of the property. On April 17, 2006, the
special commissioners conducted an administrative hearing and
determined the amount of compensation to be paid to Western
Seafood. On April 27, 2006, Western Seafood filed a pleading
challenging the county court’s jurisdiction, inter alia, through
assertion of its state constitutional and statutory claims. On
May 10, 2006, the FEDC filed it response.

                                 8
     We review the district court’s grant of summary judgment de

novo and employ the same standard as did the district court.

Baton Rouge Oil & Chem. Workers Union v. ExxonMobil Corp., 289
F.3d 373, 376 (5th Cir. 2002); Forsyth v. Barr, 19 F.3d 1527,

1533 (5th Cir. 1994).   We view the summary judgment evidence in

the light most favorable to Western Seafood, the non-movant.     Id.

B. Federal Constitutional Claim

     The taking at issue does not offend the Fifth Amendment.

Kelo, 125 S. Ct. 2655, which was issued after the district

court’s summary judgment order, is directly on point and supports

this conclusion.

     The facts in Kelo bear a strong resemblance to the

circumstances of the instant case. Officials of the City of New

London and the State of Connecticut recognized that New London

faced serious economic decline. Id. at 2658. In response, New

London authorized the New London Development Corporation (NLDC),

with support of a state bond issue, to devise a plan to increase

local economic activity and bolster tax revenue. Id. at 2659. The

resulting plan focused on the waterfront Fort Trumbull area and

proposed a comprehensive development containing commercial,

residential and recreational spaces, the majority to be privately

owned. Id. This proposal was thoroughly analyzed and deliberated

prior to its adoption by the city council. The city council then

authorized the NLDC to acquire property by eminent domain in the

city’s name, relying on a state statute that authorized the use

                                  9
of eminent domain for economic development purposes.     Id. at

2660.

     In its decision in Kelo, the Court wrote that the “public

use” requirement of the takings clause of the United States

Constitution had long been interpreted to require only that a

governmental taking have a “public purpose.” Id. at 2662. In

turn, the Court found that “public purpose” had been broadly

defined, with substantial deference to legislative judgments. Id.

at 2663. Reasoning that “[p]romoting economic development is a

traditional and long accepted function of government” and that

there is “no principled way of distinguishing economic

development from the other public purposes that we have

recognized,” the Court concluded that economic development

qualifies as a legitimate “public use” under the United States

Constitution. Id. at 2665.

     That the proposed taking involved the transfer of property

from one private party to another, and that it directly

benefitted a private party, did not invalidate the taking, the

Court explained in Kelo, since “the government’s pursuit of a

public purpose will often benefit individual private parties.”

Id. at 2666. While a “one-to-one transfer of property, executed

outside the confines of an integrated development plan” might be

suspect, such a situation was not present. Id. at 2667. The Court

found that “[t]he City has carefully formulated an economic

development plan it believes will provide appreciable benefits to

                               10
the community . . .” and concluded that the “plan unquestionably

serves a public purpose.” Id. at 2665.

     As in Kelo, the City of Freeport seeks to develop its

waterfront to revitalize a flagging local economy. The proposed

taking of Western Seafood’s property is the result of a carefully

considered development plan. It followed a commissioned study

that reported on the economically depressed downtown area and

suggested strategies for its revival. Appellees submitted

approximately 240 pages of evidence for summary judgment that

describe plans for the marina and related public improvement as

part of an integrated redevelopment scheme created as the result

of the study. The record does not suggest that the City is

seeking an end other than economic development.   Therefore, we

hold that the City’s exercise of eminent domain does not violate

the Takings Clause of the United States Constitution.

     Western Seafood argues that Kelo is distinguishable because

in the New London case the beneficiaries of the transfer of

property were not identified prior to New London’s exercise of

eminent domain.   Western Seafood cites Kelo’s warning that “the

City [would not] be allowed to take property under the mere

pretext of a public purpose, when its actual purpose was to

bestow a private benefit.” Kelo, 124 S. Ct. at 2661. Western

Seafood maintains that in its own case, the beneficiary FWP was

identified prior to or at the earliest stages of the City’s

                                11
planning process. Relying on Justice Kennedy’s concurrence in

Kelo, Western Seafood argues that these facts warrant a stricter

standard of scrutiny than rational basis.     While acknowledging

that a rational basis standard may be appropriate for many

takings cases, Justice Kennedy argued in Kelo that a heightened

standard, even a presumption of invalidity, was warranted for

“private transfers in which the risk of undetected impermissible

favoritism of private parties is [] acute. . . .” Id. at 2670.

     We decline to address whether a heightened standard is

necessary in certain cases because the facts in the instant case

do not warrant it.   Western Seafood offers three pieces of

evidence in support of its claim that the City exhibited

favoritism towards the FWP and the Blaffer family.**********   But

because the Blaffer estate heirs own acres of property along the

river where the marina is to be built, the City’s interest in

their collaboration is logical.    The evidence provided by Western

Seafood does not support the inference that the City exhibited

     **********
            First, at the December 5, 2003 hearing for
preliminary injunction, the City’s counsel stated, “[the
Blaffers] were the ones who came forward and said, Hey, we’d like
to do this project for you.” Second, at the April 8, 2004 status
conference, Defendants’ counsel replied to the district court’s
inquiry regarding the participation of the developer Royall by
saying, “Mr. Royall is the principal, the, I guess, person in
charge.” Third, Western Seafood cites to the master plan
document dated October 2002 to demonstrate that the marina
project had been proposed by the Blaffers before the development
plan was drafted. The document says, “Building a state-of-the-
art marina right on the riverfront as proposed by the Intermedics
property owners . . . .” Western Seafood points out that the
Blaffer heirs owned the Intermedics property.

                                  12
favoritism or has a purpose other than to promote economic

development in Freeport.

C. State Constitutional Claim

     The district court decided Western Seafood’s claims under

the Texas Constitution before the enactment of Texas Government

Code § 2206.001, the Limitations on Use of Eminent Domain Act

(“Act”),*********** which went into effect on August 10, 2005.

Because the Texas Courts have interpreted the “public use”

language of the Texas Constitution with an eye to legislative

declarations, and because the Act can be construed as a recent

statement of the legislature’s view of what constitutes “public

use,” we believe that the Act should be considered when assessing

Western Seafood’s claims under the Texas Constitution.

     Article I, Section 17 of the Texas Constitution provides,

“No person’s property shall be taken, damaged, or destroyed for

     ***********
                   The Act states, in pertinent part:

     (b) A governmental or private entity may not take private
     property through the use of eminent domain if the taking:
     (1) confers a private benefit on a particular private party
     through the use of property;
     (2) is for a public use that is merely a pretext to confer a
     private benefit on a particular private party; or
     (3) is for economic development purposes, unless the
     economic development is a secondary purpose resulting from
     municipal community development or municipal urban renewal
     activities to eliminate an existing affirmative harm on
     society from slum or blighted areas . . . .

TEX. GOV’T CODE § 2206.001(b) (emphases added). The statute lists
in subsection (c) those “traditional” public use projects that
remain unaffected by the statute’s limitations.

                                     13
or applied to public use without adequate compensation being made

....” Tex. Const. Art. I §17. Texas courts have held that the

scope of “public use” in the above clause should be ascertained

in part by reference to legislative determinations of public use.

In Housing Authority of Dallas v. Higginbotham, 143 S.W.2d 79, 83

(Tex. 1940), the Texas Supreme Court declared, “The question of

what is a public use is a question for the determination of the

courts; however, where the legislature has declared a certain

thing to be for public use, such declaration of the legislature

must be given weight be the courts.” See also West v. Whitehead,

238 S.W. 976, 978 (Tex. Civ. App.–-San Antonio 1922, writ ref’d).

     In Atwood v. Willacy County Navigation District, 271 S.W.2d
137, 140 (Tex. Civ. App.–-San Antonio 1954, writ ref’d n.r.e.),

the Texas Court of Civil Appeals strongly endorsed this

deferential approach, writing “[t]he declaration of the

Legislature upon the subject . . . is entitled to great weight

and respect in arriving at a final decision of the question.”. In

that port-development case, the court further noted that “the

Legislative branch through its use of committees and other fact

finding methods may perhaps occupy a more favorable position than

a judicial body in determining what is necessary to a successful

operation of a municipal enterprise such as a port.” Id. at 141.

It concluded, “Consequently, the implied declaration by the

legislative branch of government, that a taking under a right of

eminent domain was for the public use, will be given deference by

                               14
the courts, until it is shown to involve an impossibility.” Id.

at 143. In Davis v. City of Lubbock, 326 S.W.2d 699 (Tex. 1959),

while citing Higginbotham approvingly, the Texas Supreme Court

undertook a more traditional judicial approach to interpreting

public use. Higginbotham, Atwood, and Davis, while not recent

cases, are the most recent cases on point.

     The Act places new limitations on the use of eminent domain

for economic development purposes, or where the taking confers a

benefit on a particular private party. Tex. Govt. Code § 2206.001

(b). If the Act is construed as a legislative effort to narrow or

redefine “public use,” then, in light of the above-cited Texas

caselaw, the Act may implicate Western Seafood’s claims under the

Texas Constitution. The Act does not hold itself out explicitly

as narrowing or redefining public use, but the language of §

2206.001 (b) addresses the uses to which the taken property will

be put.   Moreover, the Act was passed in response to Kelo, which

turned on the interpretation of the public use clause in the

United States Constitution. Following West, Higginbotham, Atwood,

and to a lesser extent Davis, therefore, a Texas court

interpreting the Constitutional provision might look to the Act

as recent legislative declaration regarding the scope of the

public use provision. For these reasons, we remand Western

Seafood’s claim under the Texas Constitution to the district

                                 15
court for reconsideration of in light of the Act.************

D. STATE STATUTORY CLAIM

     Western Seafood also makes a direct challenge to the taking

of its property under the Act.      Because Western Seafood did not

raise its state statutory claim before the district court, we

decline to address it on appeal.*************   Tex. Commercial Energy

v. TXU Energy, Inc., 413 F.3d 503, 510 (5th Cir. 2005), cert.

denied, 126 S. Ct. 1033 (2006).

E. INJUNCTION

     Finally, Western Seafood challenges the district court’s

denial of its request for a temporary and a permanent injunction.

Because the state court proceedings are already underway, and

because none of the exceptions to the Anti-Injunction Act apply,

see 28 U.S.C. § 2283, we affirm.

                             IV. CONCLUSION

     Accordingly, we AFFIRM on federal constitutional and VACATE

and REMAND on state constitutional grounds.

      ************
             As noted,    a parallel proceeding involving this
matter is under way in    the Texas court system. It may be wisest
for the district court    to abstain and allow the Texas courts to
address the effect, if    any, of the Act on the Texas Constitution.
      *************
              We note that it was impossible for Western Seafood
to have raised this issue in the district court, and that Western
Seafood has properly brought this issue before the state court in
pending condemnation proceedings.

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