Exide Technologies v. Frisco City of, et al

Filing 38

MEMORANDUM ADOPTING 34 REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE. Defendants' Motion to Dismiss Pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) (Dkt. #14) is GRANTED as to Exide's recovery of attorneys' fees against the City and DENIED in all other respects. Signed by District Judge Amos L. Mazzant, III on 1/29/2018. (rpc, )

United States District Court
EASTERN DISTRICT OF TEXAS

SHERMAN DIVISION
EXIDE TECHNOLOGIES,
Plaintiff,
v.
THE CITY OF FRISCO, FRISCO ECONOMIC
DEVELOPMENT CORPORATION, and
FRISCO COMMUNITY DEVELOPMENT
CORPORATION,
Defendants.

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Case No. 4:17-CV-311

MEMORANDUM ADOPTING REPORT AND RECOMMENDATION OF
UNITED STATES MAGISTRATE JUDGE
Came on for consideration the report of the United States Magistrate Judge in this action,
this matter having been heretofore referred to the United States Magistrate Judge pursuant to 28
U.S.C. § 636. On November 27, 2017, the report of the Magistrate Judge was entered containing
proposed findings of fact and recommendations (see Dkt. #34) that Defendants The City of Frisco,
Texas (the “City” or “Frisco”), the Frisco Economic Development Corporation (“FEDC”), and the
Frisco Community Development Corporation’s (“FCDC”) (collectively, “Defendants”) Motion to
Dismiss Pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) (the “Motion”) (Dkt.
#14) be GRANTED IN PART and DENIED IN PART.

The Court recommended that

Defendants’ Motion (Dkt. #14) be GRANTED as to Exide’s recovery of attorneys’ fees against
the City and DENIED in all other respects.
Defendants filed objections to the report (the “Objections”) (Dkt. #35), and Plaintiff Exide
Technologies (“Exide” or “Plaintiff”) filed a reply (Dkt. #37). The Court has made a de novo
review of the objections raised by Defendants and is of the opinion that the findings and

conclusions of the Magistrate Judge are correct and the objections are without merit as to the
ultimate findings of the Magistrate Judge. The Court hereby adopts the findings and conclusions
of the Magistrate Judge as the findings and conclusions of the Court.
I.

BACKGROUND

This case arises from a land-purchase contractual dispute between Exide and Defendants.
Since 1964, Exide operated a battery recycling facility (the “Recycling Facility” or the “Facility”)
in Frisco, near the intersection of the Dallas North Tollway and Cotton Gin Road. The Facility was
situated on approximately ninety acres of land (referred to as the “Bowtie Parcel,” due to its shape)
(Dkt. #1 at ¶21). Surrounding the Bowtie Parcel is 180 acres of undeveloped land (known as the
“J Parcel,” due to its shape). Id. a ¶22. The J Parcel had acted as a buffer zone between the
Recycling Facility and the surrounding properties. Id. The two parcels are collectively referred to
herein as the “Property.”
After an “agreement in principle” failed to come to fruition, both the City and Exide
threatened litigation against each other (see id. at ¶¶ 17-19; see also Dkt. #23 at 9), and ultimately
entered into a “Master Settlement Agreement” (the “MSA”), under which Exide agreed to: (1)
close the Facility; (2) remediate the J Parcel; and (3) sell the J Parcel in two tracts to FEDC and
FCDC for a combined total of $45 million.1 Dkt. #1 at ¶22. Prior to the sale, and pursuant to the
MSA, Exide agreed that, with the City’s financial assistance, it would remediate the J Parcel under
the Texas Commission on Environmental Quality (“TCEQ”) voluntary cleanup program (“VCP”).
See id. at ¶2. Defendants were required to place $1 million in “Remediation Funds” into an escrow
account for Exide to use in remediation efforts. Id. at ¶27; see also Dkt. #14-3 at 13-14, MSA
Section 5.2. Defendants also agreed they would deposit up to an additional $500,000.00, after

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The MSA provided that Exide would sell the J Parcel in two tracts—one tract to FEDC for $27 million,
and the other tract to FCDC for $18 million, for a combined total of $45 million. Dkt. 1 at ¶22.

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which Exide and Defendants would share equally in any further costs. Dkts. #1 at ¶29; #14-3 at
13-14. The purchase price for the J Parcel was held in escrow along with the executed deeds until
the Closing Date, which will occur after remediation of the J Parcel is complete and the TCEQ
issues a confirmatory certificate referred to as a “Certificate of Completion.” Dkt. 1 at ¶22.
In December 2016, Exide notified the City that the estimated costs of the J Parcel
remediation would total $2,706,000.00, and requested the City to remit an additional $500,000.00,
to the Remediation Funds Escrow Account. Id. at ¶30. According to Exide, the City refused to
provide the additional funds—in spite of “the voluminous supporting information Exide had
provided.” Id. at ¶¶31-37.
Exide brought the present lawsuit on May 9, 2017, alleging breach of contract against
Defendants based on the City’s denial of Exide’s request for the additional $500,000.00 required
to continue the remediation efforts, in violation of the MSA. Id. at ¶59. Exide further alleges the
City breached the MSA by obstructing Exide’s efforts to obtain a wastewater discharge permit
from the North Texas Municipal Water District (the “NTMWD”), as the parties’ agreement states
that the City is supposed to “cooperate and assist Exide in its permitting needs.” Id. at ¶60. Exide
also seeks reasonable attorneys’ fees pursuant to Section 38.001 of the Texas Civil Practice and
Remedies Code. Id at ¶61.
Defendants seek dismissal of the lawsuit pursuant to Rule 12(b)(1) and 12(b)(6) for lack
of subject matter jurisdiction and failure to state a claim upon which relief can be granted, asserting
governmental immunity and arguing that Exide’s complaint does not establish the legislature’s
consent to the lawsuit and neither the City, nor the FCDC, nor the FEDC, has waived immunity
from suit. See Dkt. 14 at 9. Defendants also argue that Exide is not entitled to recover attorneys’
fees. See id.

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II.

DISCUSSION

The Court finds Defendants’ objections are essentially the same arguments presented in
their Motion (Dkt. #14) and reply (Dkt. #23) and which are extensively addressed in the Magistrate
Judge’s report (the “Report”) based on her review of the briefing and the evidence, as well as oral
argument. The Magistrate Judge’s conclusion, that Defendants’ entry into the MSA and the
breaches thereof that form the basis of Plaintiff’s claims involve the exercise of proprietary
functions for which there is no immunity, is well reasoned and supported by the record.
A. THE CITY’S IMMUNITY FROM SUIT
Defendants first object to the Magistrate Judge’s determination that the City is not immune
from Plaintiff’s suit. See Dkt. #35 at 1-2. Defendants argue the Magistrate Judge’s conclusions
arise from the “faulty premise” that “Defendants’ ‘ultimate goal’ was to purchase and develop
land.” Id. at 2.
As explained in the Report, the issue of the City’s immunity from suit turns on whether the
City was exercising governmental functions or proprietary functions when it breached the MSA.
See Dkt. 34 at 10; Wasson Interests, Ltd. v. City of Jacksonville (Wasson I), 489 S.W.3d 427, 430
(Tex. 2016), reh’g denied (June 3, 2016). The Report went on to explain that the relevant issue is
not whether the City exercised any governmental function in entering into the contract, or whether
any part of the contract implicates any governmental function, but rather, whether the City was
performing a governmental function in breaching the contract. Dkt. 34 at 10 (citing Wasson I, 489
S.W.3d at 439; Canario’s, Inc. v. City of Austin, 2015 WL 5096650, at *2 (Tex. App.—Austin
2015, pet. denied)).
The Report provides detailed rationale and legal authority to support the Magistrate Judge’s
rejection of Defendants’ arguments attempting to categorize the MSA in terms of the City’s

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exercise of governmental functions. See Dkt. #34 at 11-12. Although Defendants’ Objection
points to the City’s efforts to address the environmental concerns from Plaintiff’s battery plant as
an exercise of the governmental function of health and sanitation (see Dkt. #35 at 2-3), the
Magistrate Judge explained the basis for her conclusion that the MSA’s requirement that Plaintiff
and Defendants submit a joint application to the TCEQ’s VCP for the cleanup of the J Parcel was
primarily to facilitate the real estate transaction. See Dkt. #34 at 11. And although Defendants take
issue with the term “$5 Billion Mile” (Dkt. 35 at 3), the Report—and the record—reveal numerous
examples of the City’s characterization of its arrangement to purchase the Property as an economic
investment that would have a positive return for the City. See Dkt. #34 at 11 (citing Dkt. #23-4).
Based on the foregoing, the Court finds no error in the Magistrate Judge’s finding that,
accepting Plaintiff’s allegations as true—as the Court is required to do at the motion to dismiss
stage—the alleged breach involved primarily proprietary functions (Dkt. 12), and it is not “beyond
doubt” that Plaintiff cannot prove a plausible set of facts to support its breach of contract claim.
See Lane v. Halliburton, 529 F.3d 548, 557 (5th Cir.2008). Accordingly, this Objection is
OVERRULED.
B. SETTLEMENT OF CLAIMS NOT IMMUNE FROM SUIT
The Court similarly finds no error with the Magistrate Judge’s conclusion that the City has
no immunity for breach of the MSA because the MSA was a settlement of claims for which the
City had no immunity. See Dkt. #34 at 13. Although Defendants argue that the Magistrate Judge’s
reliance on Texas A & M Univ.-Kingsville v. Lawson, 87 S.W.3d 518 (Tex. 2002) was misplaced,
they offer no countervailing authority. Defendants’ position—that Lawson is inapplicable because
no lawsuit was actually filed, and as a result, there can be settlement of claims—is unpersuasive.
As noted in the Report, Lawson “has been adopted and applied by several courts of appeals and

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has never been rejected.” Dkt. #34 at n.5 (citing Canadian River Mun. Water Auth. v. Hayhook,
Ltd, 469 S.W.3d 301, 303-04 (Tex. App.—Amarillo 2015, pet. denied); Harris County Hous. Auth.
v. Rankin, 414 S.W.3d 198, 203 (Tex. App.—Houston [1st Dist.] 2013, pet. denied); City of
Corinth v. NuRock Dev., Inc., 293 S.W.3d 360, 366-67 (Tex. App.—Fort Worth 2009, no pet.);
City of Carrollton v. Singer, 232 S.W.3d 790, 796 (Tex. App.—Fort Worth 2007, pet. denied);
Livecchi v. City of Grand Prairie, 109 S.W.3d 920, 922 (Tex. App.—Dallas 2003, pet. dism’d)).
Having reviewed these cases, the Court finds that Lawson and its progeny appear to focus
not on whether a suit was actually filed, but rather, whether the governmental entity was exposed
to a claim for which it had no immunity and then settled that claim. Here, the record establishes
that Defendants were exposed to statutory vested rights claims, constitutional claims, takings
claims, and declaratory judgment claims. See Dkt. #34 at n.5; Dkt. #23 at 31-32. Although
Defendants now dispute the Magistrate Judge’s conclusion that Defendants did not contest that
many of the released claims are claims for which the City has no immunity (see Dkt. #35 at 6),
they fail to point to any place in the briefing where they made such an argument.
Furthermore, even had Defendants presented such an argument, it is not likely that a
different outcome would have followed, given that the issue before the court is a motion to dismiss,
and the Court must accept as true all well-pleaded facts contained in Plaintiff’s complaint and view
them in the light most favorable to Plaintiff. Baker v. Putnal, 75 F.3d 190, 196 (5th Cir. 1996).
Accordingly, the Court finds the Magistrate Judge did not err in finding there is no immunity
because the MSA was a settlement of claims for which the City had no immunity, and this
Objection is likewise OVERRULED.

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C. IMMUNITY OF THE FEDC AND THE FCDC
Defendants’ final Objection challenges the Magistrate Judge’s conclusion that the FEDC
and the FCDC are also not immune from Plaintiff’s lawsuit. See Dkt. #35 at 7-8. The Report
explains that the FEDC and the FCDC, like the City, have no immunity because they exercised no
governmental function in connection with the MSA, or the claims asserted in this lawsuit.
Defendants fail to point out how there was any error in the Magistrate Judge’s conclusion.
Therefore, this Objection is also OVERRULED.
I.

CONCLUSION

Having found that all of Defendants’ Objections are without merit, the Magistrate Judge's
. Report is ADOPTED as the opinion of the Court, and Defendants’ Motion to Dismiss Pursuant to
Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) (Dkt. #14) is GRANTED as to Exide’s
recovery of attorneys’ fees against the City and DENIED in all other respects.
IT IS SO ORDERED.
SIGNED this 29th day of January, 2018.

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AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE

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