Green Valley Special Utility District v. Nelson et al

Filing 71

ORDER DENYING PUC Officials' 21 Motion to Dismiss. ORDER DENYING City of Schertz and John Kessel's 38 Motion to Dismiss for Failure to State a Claim. ORDER DENYING Guadalupe Valley Development Corporation's 54 Motion to Dismiss for Failure to State a Claim. Signed by Judge Sam Sparks. (lt)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION

GREEN VALLEY SPECIAL UTILITY
DISTRICT,
Plaintiff,

2a18

FEB -9

P11 2:

CAUSE NO.:
AU-17-CA-00819-SS

-vs-

DEANN T. WALKER, KENNETH W.
ANDERSON, JR., and BRANDY MARTY
MARQEUZ, in their official capacities as
Commissioners of the Public Utility
Commission of Texas; BRIAN H. LLOYD,
in his official capacity as Executive Director
of the Public Utility Commission of Texas;
CITY OF SCHERTZ, TEXAS; JOHN
KESSEL, in his official capacity as City
Man ager of the City of Schertz, Texas; and
GUADALUPE VALLEY DEVELOPMENT
CORPORATION,
Defendant.

[] 1 U

a;

BE IT REMEMBERED on this day the Court reviewed the file in the above-styled cause,
and specifically, Defendants DeAnn Walker, Kenneth Anderson, Brandy Marquez, and Brian H.

in their capacity as officials of the Public Utility Commission (collectively, the PUC

Lloyd1

Officials)'s Motion to Dismiss [#2 1], Green Valley's Response [#30] in opposition, and the PUC

The PUC Officials argue Lloyd should be dismissed because only Commissioners make decertification
decisions, and Lloyd is not a Commissioner but rather the Executive Director of the PUC. PUC Mot. Dismiss [#211
at 1. However, as Green Valley correctly observes, though Lloyd is not responsible for making decertification
decisions, he is partially responsible for enforcing them. See Resp. PUC Mot. Dismiss [#30] at 2 (citing TEX.
WATER CODE § 13.4151(c)). Given Lloyd's enforcement role, the Court denies the PUC Officials' request that the
Court dismiss Lloyd as a named defendant.
1

1

3g

Officials' Reply [#45] in support; Defendants City of Schertz and John Kessel2 (collectively, the
City of Schertz)'s Motion to Dismiss [#3 8], Plaintiff Green Valley Special Utility District (Green

VaIIey)'s Response [#51] in opposition, and the City's Reply [#53] in support; and Defendant
Guadalupe Valley Development Corporation (GVDC)'s Motion to Dismiss [#54], Green

Valley's Response [#56] in opposition, and GVDC's Reply [#57] in support. Having reviewed
the documents, the relevant law, and the case file as a whole, the Court now enters the following
opinion and orders.

Background
This is a federal preemption case. Green Valley is a special utility district with two
Certificates of Convenience and Necessity (CCN5)one for water service, the other for sewer
service. Second Am. Compl. [#25] at 3-4. The CCNs were issued by the Texas Public Utility

Commission (the PUC) and give Green Valley an exclusive right to provide water and sewer
service to a designated service area. Id.
In part, Green Valley has funded its operations with a federal loan obtained under
7 U.S.C. § 1926. Second Am. Compi. [#25] at 4. Under § 1926(b), the existence

of this federal

loan means "the service provided or made available" by Green Valley "shall not be curtailed or
limited by inclusion of the area served.

. .

within the boundaries of any municipal corporation or

other public body, or by the granting of any private franchise for similar service within such area
during the term of such loan." 7 U.S.C.

§

1926(b).

The City asserts Green Valley has not stated a claim against Kessel other than in his official capacity as
City Manager. It is true that under Kentucky v. Graham, there is "no longer a need to bring official-capacity actions
against local officials" because "local government units can be sued directly for damages and injunctive or
declaratory relief." 473 U.S. 159, 167 (1985). However, while Graham states it is unnecessary to bring such claims
against local officials, it does not state the claims must be dismissed. Because the City cites no further authority in
support of this argument, the Court denies the City's request that the Court dismiss Kessel as a named defendant.
2

2

The GVDC Application

On April 4, 2016, GVDC filed an application with the PUC for expedited decertification

of its property from Green Valley's sewer CCN pursuant to Texas Water Code
Second Am. Compl. [#25] at 6. Section 13.254(a-5) allows the owner of a

§

13.254(a-5).

qualifying3

tract of

land not receiving water or sewer service to petition the PUC for expedited release from a CCN.
The owner of the tract of land is "entitled" to be released from the CCN upon request. TEX.
WATER CODE § 13.254(a-5).

Upon review, the PUC Officials concluded

allow the PUC to deny a petition received under

outstanding loan under
§ 13 .254(a-6)

§

§

§

13.254(a-6) does not

13.254(a-5) on the basis Green Valley has an

1926. Second Am. Compl. [#25] at 6, 30;

see also TEX. WATER CODE

("The utility commission may not deny a petition received under Subsection (a-5)

based on the fact that a certificate holder is a borrower under a federal loan program."). The PUC
Officials therefore granted GVDC' s application for decertification. Second Am. Compl. [#25] at
6. Green Valley appealed this decision to state district court. See Advisory Ct. [#67].

The City of Schertz Application
On May 11, 2016, the City of Schertz filed an application with the PUC for certification

of an area within the City's corporate limits. Second Am. Compl. [#25] at 6-7. Because the area
fell within Green Valley's sewer CCN, this required decertifying a portion of Green Valley's

service area and recertifying the same area to the City. Id. The City of Schertz filed its

application to replace Green Valley in reliance on Texas Water Code

§

13.255(b)(c). Section

13.255 states a municipality may file an application with the PUC to be granted certification to

provide water or sewer service to an area annexed or incorporated by the municipality. TEX.
WATER CODE. §

13.255(a)(b). Section 13.255(c) further states the PUC

"shall

grant single

Section 13.254(a-5) imposes several conditions on release which are not relevant for the purposes of this
suit. See TEx. WATER CODE § 13.254(a-5).
3

certification to the municipality" upon receipt of an application. Id.

§

13.255(c) (emphasis

added). Upon review, the PUC Officials determined they lacked authority to consider whether
7 U.S.C. § 1926(b) preempts §

13.244(b)(c). Second Am. Compl. [#25] at 40.

The Present Federal Action
Green Valley now brings this action against the uc Officials, the City of Schertz, and
GVDC (collectively, Defendants), alleging Defendants are illegally encroaching on Green

Valley's service area in violation of
Valley argues

§

§

1926(b). Second Am. Compl. [#25]. Specifically, Green

1926(b) preempts portions of § 13.254 and

§

12.255 and limits the authority of

the PUC Officials to decertify land from Green Valley's service area. Id. On this basis, Green

Valley asks the Court to declare portions of

§ 13 .254(a- 1)

and

§ 13 .254(a-6)

are preempted by

federal law and to enjoin the PUC Officials from decertifying land from Green Valley's territory

under

§

13.254(a-l), 13.254(a-5), 13.254(a-6), or 13.255((b)(c). Id. at 13-16. Additionally,

Green Valley seeks to enjoin GVDC and the City from attempting to curtail or limit Green

Valley's CCNs pursuant to a decertification decision made under

§

13.254(a-5) or

§

13.255(b)

(c). Id.

The PUC Officials, the City, and GVDC move to dismiss. PUC Mot. Dismiss [#21]; City
Mot. Dismiss [#38]; GVDC Mot. Dismiss [#54]. Following a hearing before this Court on

January 23, 2018, these pending motions are now ripe for review.

Analysis
Due to the overlapping nature of Defendants' motions to dismiss, the Court examines the

motions collectively, argument by argument. The Court first addresses the contention that Green

Valley's claims against the PUC Officials are barred by Eleventh Amendment sovereign
immunity. The Court then turns to Defendants' various abstention arguments. Finally, the Court

ri

addresses Defendants' arguments that Green Valley's suit must be dismissed for failure to state a

claim on which relief can be granted.

I.

Eleventh Amendment Sovereign Immunity
The PUC Officials argue Green Valley's claims against the PUC commissioners are

barred by Eleventh Amendment sovereign immunity. PUC Mot. Dismiss [#2 1] at 9-13. Neither

party contends Texas has waived its Eleventh Amendment immunity in this case. See Pace

v.

Bolagusa City Sch. Rd., 403 F.3d 272, 276-78 (5th Cir. 2005). Therefore, in order for Green

Valley's suit to proceed, it must demonstrate this action satisfies the requirements of Ex parte
Young's equitable exception to Eleventh Amendment sovereign immunity. See Air Evac EMS,
Inc. v. Tex.,

Dep't of Ins., Div. of Workers' Comp., 851 F.3d 507, 515 (5th Cir. 2017). In

determining whether the doctrine of Ex parte Young allows Green Valley to avoid an Eleventh

Amendment bar to suit, a court need only conduct a "straightforward inquiry" into whether the
complaint alleges "an ongoing violation of federal law and seeks relief properly characterized as

prospective." Verizon Md., Inc.

v.

Pub. Serv. Comm 'n ofMd., 535 U.S. 635, 645 (2002) (citation

omitted).

The PUC Officials suggest Exparte Young does not apply because (1) Green Valley has
no federal right; (2) Green Valley seeks retrospective relief; (3) Green Valley has not

demonstrated entitlement to injunctive relief; and (4) Ex parte Young does not apply because
Texas has a special sovereignty interest in regulating water utilities. PUC Mot. Dismiss [#2 1].
1.

Federal Right

The PUC Officials first argue Exparte Young does not apply because Green Valley lacks
a federal right

of action. Id. at

11. However, the Fifth Circuit has repeatedly allowed suits

seeking equitable relief on the basis of federal preemption to proceed under Ex parte Young. See,

5

e.g., Air Evac, 851 F.3d at 515 (finding Ex parte Young exception applied in action seeking

injunctive relief against state officers on the basis of federal preemption); Planned Parenthood of

Houston & Se. Tex.

v.

Sanchez, 403 F.3d 324, 33 1-33 & n.46 (5th Cir. 2005) (recognizing

implied right of action to assert preemption claims seeking injunctive and declaratory relief);
Cox v. City of Dallas, Tex., 256 F.3d 281, 307-08 (5th Cir. 2001) (concluding Pennhurst did not

bar suit against state officials where plaintiff alleged violations of federal law rather than state
law);

cf

Pennhurst State Sch. & Hosp.

v.

Halderman, 465 U.S. 89, 106, 159-60 (1984)

(concluding Ex parte Young is "inapplicable in a suit against state officials on the basis of state
law").4

The Court finds Green Valley possesses a federal right for purposes ofExparte Young.
2.

Prospective Relief

The PUC Officials argue prospective relief is not available with respect to GVDC

because the order has become final and is subject only to state court review. PUC Mot. Dismiss
[#21] at 10 ("Jurisdiction over the action has passed to the Travis County District

Courts.").5

According to the PUC Officials, declaratory or injunctive relief issued by this Court to reverse
the PUC order would qualify as retrospective relief unavailable under Exparte Young. Id.

The Court finds Green Valley's request that the Court enjoin an allegedly ongoing
violation of federal law qualifies as prospective relief. Indeed, it is nearly axiomatic that an

The PUC Officials attempt to avoid these precedential constraints by arguing the Court should define
Green Valley's federal right with extreme particularity. See PUC Mot. Dismiss [#211 at 11-12 (arguing § 1926(b)
may provide Green Valley with a federal right to protect its territory from encroachment but does not apply to
decertification under TEX. WATER CODE § 13.254). There are two problems with this argument. First, and most
obviously, Ex parte Young simply requires Green Valley to assert a federal right, as opposed to a state right, as its
basis for relief. See Cox, 256 F.3d at 307-08. By the PUC Officials' own admission, Green Valley has done so here.
See PUC Mot. Dismiss [#21] at 11-12 (acknowledging § 1926(b) confers a federal right). Second, in asking the
Court to find Green Valley lacks a federal right because § 1926(b) does not preempt § 13.254, the PUC Officials
have improperly imported a merits inquiry into Exparte Young. See Air Evac, 851 F.3d at 520 (noting consideration
of merits questions is "beyond the threshold jurisdictional question posed by Ex parte Young").

The PUC Officials do not appear to argue prospective relief is unavailable with respect to Green Valley's
claims against the City of Schertz.

injunction prohibiting state administrative officials from enforcing preempted state regulations
qualifies as prospective relief under Exparte Young. See, e.g., Air Evac, 851 F.3d at 512-13, 520

(finding plaintiff sought prospective relief in requesting court enjoin administrative enforcement

of state regulation allegedly preempted by federal law, despite pending appeal in state court of an
administrative law judge ruling that found state regulation was not preempted); see also Verizon,
535 U.S. at 645 ("The prayer for injunctive

reliefthat

state [administrative] officials be

restrained from enforcing an order in contravention of controlling federal
our 'straightforward inquiry' [under Exparte

lawclearly satisfies

Young].").6

In sum, the Court rejects the PUC Officials' suggestion that the requested equitable relief
is retrospective and unavailable under Exparte Young.

3.

Traditional Requirements for Injunctive Relief

Third, the PUC Officials argue Green Valley cannot meet the traditional requirements for

injunctive relief and therefore cannot obtain injunctive relief under Ex parte Young. PUC Mot.
Dismiss [#21] at 12. Specifically, the PUC Officials contend Green Valley is not entitled to

injunctive relief because it has an adequate remedy at law. Id.
The Court finds consideration of the merits of Green Valley's request for injunctive relief
to be premature at the motion to dismiss stage. To survive the pending motions to dismiss, Green

Valley need only plead sufficient facts to state a claim for relief See Air Evac, 851 F.3d at 520
("[H] aving determined [plaintiffs] action satisfies the Ex parte Young exception, we need not

The Court notes in passing that equitable relief is particularly unlikely to qualify as retrospective where,
as here, the sought-after relief is not likely to have any direct impact upon state coffers. SeeEdelman v. Jordan, 415
U.S. 651, 663 (1974) (finding retroactive award of monetary relief almost certain to be paid with state fundsrather
than by individual state officialsimpermissible under Ex parte Young); see also Verizon, 535 U.S. at 646
(distinguishing Edelman on the ground that declaratory relief would "not impose upon the State a monetary loss
resulting from a past breach of a legal duty on the part of the defendant state officials" (internal quotation marks
omitted)).
6

7

consider

.

.

.

whether the requirements for temporary or permanent equitable relief are also

present.")

Sovereignty Interest

4.

Fourth, the PUC Officials argue Exparte Young should not apply because Texas's role in

utility regulation qualifies as a "special sovereignty interest" under Idaho

v.

Coeur d 'Alene Tribe

ofIdaho, 521 U.S. 261, 262 (1997). PUC Mot. Dismiss [#21] at 12-13. But the Fifth Circuit does
not interpret Coeur d'Alene to alter the general contours of Ex parte Young. See AT&T
Commc 'ns

v.

Bellsouth Telecomms., Inc., 238 F.3d 636, 648-49 (5th Cir. 2001) (concluding

Fifth Circuit "has rejected the idea that Coeur d 'Alene affects the traditional application of Ex

parte Young); see also Verizon, 535 U.S. at 645 (suggesting Coeur d'Alene did not meaningfully
impact Ex parte Young). Thus, Texas's interest in utility regulation does not constitute a "special
state sovereignty interest" precluding application ofExparte Young.

II.

Exercise of Jurisdiction
Defendants suggest this Court should abstain from exercising jurisdiction under a variety

of equitable and statutory principles. In particular, Defendants argue (1) Burford abstention
applies; (2) Pullman abstention applies; (3) the Court should exercise equitable restraint under
Younger

v.

Harris; (4) the Anti-Injunctive Act bars the claims for injunctive relief and (5) the

Court should decline to exercise jurisdiction under the Declaratory Judgment Act. Before turning
to Defendants' various abstention arguments, the Court notes federal courts have a "virtually

unflagging obligation
Conservation Dist.

v.

.

.

.

to exercise the jurisdiction given them." Cob. River Water

United States, 424 U.S. 800, 817 (1976).

A.

Burford Abstention

Burford abstention is appropriate in two circumstances: (1) cases involving difficult
questions of state law bearing on policy problems of substantial public import whose importance

transcends the result in the

case;7

or (2) where federal adjudication of the case would disrupt

state efforts to establish a coherent policy with respect to matters of substantial public

importance. Munich Am. Reinsurance Co.
New Orleans Pub. Serv., Inc.

v.

v.

Crawford, 141 F.3d 585, 589 (5th Cir. 1998) (citing

Council of City of New Orleans, 491 U.S. 350, 361 (1989)

(NOPSI)). Factors relevant to the Court's decision to abstain under Burford include (1) whether

the cause of action arises under federal or state law; (2) whether the case requires inquiry into
unsettled issues of state law; (3) the importance of the state interest involved; (4) the state's need
for a coherent policy in that area; and (5) the presence of a special state forum for judicial
review. Wilson

v.

Valley Elec. Membership Corp., 8 F.3d 311, 314 (5th Cir. 1993) (citations

omitted).
Defendants argue Burford abstention is appropriate because Green Valley's suit raises

both state law and constitutional grounds and because Texas has a substantial interest in
maintaining a comprehensive regulatory scheme for the provision of water and wastewater
services. PUC Mot. Dismiss [#21] at 17; City Mot. Dismiss [#38] at 12-15.

This is not a situation in which Burford abstention is applicable. Green Valley seeks

injunctive and declaratory relief on the basis of federal preemption. See Second Am. Compi.
[#25]. Though the Fifth Circuit does not appear to have weighed in on the matter, numerous

courts of appeals and the Supreme Court have concluded Burford abstention should not apply
when plaintiffs present a colorable federal preemption claim. See NOPSI, 491 U.S. at 362
Collectively, the Defendants' arguments in favor of Burford abstention have failed to identify any
unsettled issue of state law that might weigh in favor of Burford abstention. See PUC Mot. Dismiss [#211 at 16-17;
City Mot. Dismiss [#38J at 12-15.

("Unlike a claim that a state agency has misapplied its lawful authority or has failed to take into
consideration or properly weigh relevant state-law factors, federal adjudication of this sort of

preemption claim would not disrupt the State's attempt to ensure uniformity in the treatment of
an 'essentially local problem" (citation omitted)); Int'l Bhd. OfElec. Workers, Local Union No.

1245

v.

Pub. Serv. Comm 'n of Nev., 614 F.2d 206 211-12 & n.1 (9th Cir. 1980) (noting "the

advisability of Burford abstention is particularly questionable when the basis of the plaintiff's
claims is preemption" because while "the purpose of Burford abstention is to avoid federal

intrusion into matters which are largely of local concern[,].

. .

[a] preemption claim alleges

Congress has determined that particular matters are of national concern and should be

administered by national, rather than local, institutions"); see also Neufeld v. City of Baltimore,
964 F.2d 347, 350 (4th Cir. 1992) ("As the Supreme Court has emphasized, a federal court

should not abstain under Burford just because resolution of a federal question may result in

overturning state policy." (citing NOPSI, 491 U.S. at 363)). The Court concludes Burford
abstention does not preclude consideration of Green Valley's preemption claims.
B.

Pullman Abstention

Pullman abstention is appropriate in actions involving (1) a federal constitutional
challenge to state action and (2) an unclear issue of state law that, if resolved, would make it

unnecessary for us to rule on the federal constitutional question. Nationwide Mut. Ins. Co.

v.

Unauthorized Practice of Law Comm., 283 F.3d 650, 652-53 (5th Cir. 2002) (citing Haw. Hous.
Auth. v. Midkiff 467 U.S. 229, 236 (1984)). In order for Pullman abstention to apply, the state

statute must be "fairly subject to an interpretation which will render unnecessary adjudication of

the federal constitutional question." Midkiff 467 U.S. at 236 (internal quotation marks and

citation omitted)

10

The PUC Officials suggest two ways in which

§

13.254 and 13.254 might be

ambiguous. However, in neither instance do the PUC Officials suggest an interpretation which
might render adjudication of the federal question unnecessary, and as a result, the Court finds
Pullman

abstention does not apply here.

The PUC Officials first argue "[t]he reimbursement provision requiring compensation for

property rendered valueless may mitigate any harm that

§

1926(b) was enacted to prevent." PUC

Mot. Dismiss [#21] at 19. While the reimbursement provision may in fact mitigate harm, this

would not render ambiguous the express command of § 1926(b) that "service provided or made

available" by an association with a

§

1926(a) loan "shall not be curtailed or limited" in a manner

prohibited by § 1926(b).
The PUC Officials next argue that if "receiving water or sewer service" in
interpreted similarly to "service provided or made available" as used in

§

§

13.254 is

1926(b), "there will be

no preemption." Id. at 19. However, the PUC officials do not explain how the alleged ambiguity

in

§

13.254's reference to "receiving water or sewer service" might be resolved in such way as to

render unnecessary the interpretation of
statutory language within

§

§

1926(b). Absent such argument, the Court finds the

13.254(a-5) to be unambiguous.

In sum, the Court finds the PUC Officials have failed to identify an interpretation of
§

13.254 or 13.255 which would render unnecessary adjudication of the federal question. The

Court therefore concludes Pullman abstention does not apply because the state statute is not

"fairly subject to an interpretation which will render unnecessary adjudication of the federal
constitutional question." Id.8

Additionally, it is arguable whether a preemption claim under the Supremacy Clause is a substantial
constitutional issue for the purposes of Pullman abstention. See United Servs. Auto. Ass 'n v. Muir, 792 F.2d 356,
364 (3d Cir. 1986) ("[W]e hold that preemption claims under the Supremacy Clause are not substantial federal
constitutional issues for which Pullman abstention might be appropriate."); see also Fleet Bank, Nat '1 Ass 'n v.
8

11

C.

Equitable Restraint via Younger

The Younger doctrine bars federal courts from enjoining ongoing state judicial
proceedings. Younger

v.

Harris, 401 U.S. 37, 40-41 (1971). "When a federal court is asked to

interfere with a pending state prosecution, established doctrines of equity and comity are

reinforced by the demands of federalism, which require that federal rights be protected in a
manner that does not unduly interfere with the legitimate functioning of the judicial systems of

the States." Kugler

v.

Helfant, 421 U.S. 117, 123 (1975). Equitable restraint under Younger is

proper when three criteria are met: "(1) the dispute should involve an 'ongoing state judicial

proceeding;' (2) the state must have an important interest in regulating the subject matter of the
claim; and (3) there should be an 'adequate opportunity in the state proceedings to raise

constitutional challenges." Wightman

v. Tex.

Supreme Court, 84 F.3d 188, 189 (5th Cir. 1996)

(quoting Middlesex Cly., 457 U.S. at 435-37); see also Bishop

v.

State Bar of Tex., 736 F.2d 292,

294 (5th Cir. 1984)).

Though courts may only exercise equitable restraint under Younger if the dispute
involves ongoing state judicial proceedings, "abstention is not required in every case of parallel

state-court proceedings." Google, Inc.

v.

Hood, 822 F.3d 212, 222 (5th Cir. 2017) (citing Sprint

Commc 'ns v. Jacobs, 134 S. Ct. 584, 591 (2013)). Rather, federal courts should only abstain

when confronted with one of three "exceptional" categories of state proceedings: "ongoing
criminal prosecutions, certain civil enforcement proceedings akin to criminal prosecutions, and

Burke, 160 F.3d 883, 890, 893 (2d Cir. 1998) ("[P]reemption claims, though implicating the Supremacy Clause,
have been recognized as presenting a constitutional issue of a lesser magnitude than suits challenging the authority
of state officials on the ground that their actions will violate the substantive limitations of the Constitution."); id.
("[A] plaintiff asserting federal preemption of an indisputably applicable state statute has a clear right to obtain a
federal court resolution of its preemption claim."). However, the Court need not reach this issue here, because
neither § 13.254 nor § 13.255 present a materially uncertain issue of state law. See Nationwide, 283 F.3d at 652-53;

see also Midkzff 467 U.S. at 236.

12

pending civil proceedings involving certain orders.

. .

uniquely in furtherance of the state courts'

ability to perform their judicial functions." Hood, 822 F.3d at 222 (internal quotation marks and
citations omitted).
The Court finds Younger is inapplicable because neither the proceedings before the PUC
nor the lawsuit in state court fall within any of the three exceptional categories of state

proceedings enumerated in Hood. Indeed, the City of Schertz does not even attempt to explain
how the state proceedings at issue here might merit the application of Younger, contending only
that "clearly this is an ongoing state judicial proceeding." City Mot. Dismiss [#38] at 16.
D.

Anti-Injunction Act

The PUC Officials argue the Court must dismiss Green Valley's claims against state

officials because the Anti-Injunction Act, 28 U.S.C.

§

2283, prohibits this Court from enjoining

state courts' consideration of appeals from PUC decisions. PUC Mot. Dismiss [#21] at

13l6.

The Court finds it cannot apply the Anti-Injunction Act here because Green Valley has

not sought to enjoin state court proceedings. See Second Am. Compi. [#25] at 13-16. Rather, it
seeks to enjoin the PUC, which conducts administrative proceedings. The Anti-Injunction Act
does not apply to state administrative proceedings. See BudAntle, Inc.

v.

Barbosa, 45 F.3d 1261,

1271 (9th Cir. 1994) ("[E]very circuit to decide the question has held that the Anti-Injunction

Act

. . .

limits a federal court's power to enjoin proceedings in a State court[]

. . .

but does not

affect the power to enjoin proceedings in any other entity of state government, such as a state

administrative agency."). Therefore, as Green Valley has not requested this Court enjoin state
court proceedings,

§

2283 does not apply here.

See Tex. Emp'rs Ins. Ass'n

v.

Jackson, 862 F.2d 491, 498 (5th Cir. 1988) ("[A] claim of federal

preemptioneven one which is unmistakably clearis not within any of the exceptions stated in section 2283 and
hence does not suffice to authorize an injunction of state court proceedings." (citing At!. Coast Line R.R. Co.
ofLocomotiveEng'rs, 398 U.S. 281 (1970)).
13

v. Rd.

Declaratory Judgment Act

E.

Because the Court finds it has jurisdiction over Green Valley's claims for injunctive
relief, Defendants' arguments regarding the Court's discretion to decline to exercise jurisdiction

under the Declaratory Judgment Act are inapplicable. Cf PUC Mot. Dismiss [#2 1] at 19 ("Given
the lack of jurisdiction over Green Valley's injunction request, the Court should abstain from

hearing any remaining declaratory judgment claims.

. .

."). Accordingly, the Court denies

Defendants' request that the Court abstain from exercising its jurisdiction under the Declaratory

Judgment Act.

III.

Failure to State a Claim
Defendants argue Green Valley fails to state a claim for relief because (1) 7 U.S.C.

§

1926(b) does not apply to Texas Water Code

§

13.254(a-6); (2) a declaration that § 13.254(a-6)

is unconstitutional would not give Green Valley relief because the PUC would still be required to

grant municipalities' requests to provide service under

§

13.255; and (3) Green Valley has not

pled facts demonstrating it has "provided or made available" service within the meaning of
§

1926(b).
First, the Court turns to Defendants' argument Green Valley has not stated a claim for

relief because

§

1926(b) does not apply to Texas Water Code

§

13.254(a-6). PUC Mot. Dismiss

[#2 1] at 6-8; GVDC Mot. Dismiss [#54] at 14. In two conclusory paragraphs, the PUC Officials

and GVDC assert
municipal

§

1926(b) does not apply to

§

13.254 because § 1926(b) only prevents

encroachment, whereas the instant case involves a landowner attempting to flee from

Green Valley's service area. Id.

Notwithstanding Defendants' arguments to the contrary, Green Valley has stated a claim
for relief by alleging

§

1926(b) preempts

§

13.254. See

14

Sanchez,

403 F.3d at 33 1-33 & n.46

(recognizing implied right of action to assert preemption claims seeking injunctive and

declaratory relief). Even if, as Defendants appear to suggest,
preempt

§

§

1926(b) does not expressly

13.254, Green Valley has still stated a plausible claim for relief under a theory of

conflict preemption. See Crosby

v.

Nat'l Foreign Trade Council, 530 U.S. 363, 372-73 (2000)

(explaining state statutes may be preempted "to the extent of any conflict with a federal statute"
so long as the challenged state law "stands as an obstacle to the accomplishment and execution

of the full purposes and objectives of Congress" (citing Hines

v.

Davidowitz, 312 U.S. 52, 67

(1941) (internal quotation marks omitted)); Second Am. Compi. [#25] at 7-9 (alleging

Defendants' actions under

§

13.254 and 13.255 impair Green Valley's ability to service its

federal loan); Resp. PUC Mot. Dismiss [#30] at 7-10 (arguing

purpose in enacting

§

§

13.254 undercuts Congress's

1926(b)).'°

Second, the Court addresses the PUC Officials' suggestion Green Valley has failed to

state a claim because a declaration finding § 13 .254(a-6) unconstitutional would not afford Green

Valley relief. PUC Mot. Dismiss [#2 1] at 8. The PUC Officials argue invalidation of
§

13.254(a-6) would not alter the PUC Officials' obligation to approve applications for

decertification1' because the PUC Officials would still lack discretion to deny applications for

expedited release under

§

13.254(a-5) and because the PUC Officials would still lack authority to

adjudicate preemption issues when considering applications for decertification. Id.; see also

TEX.

Especially in light of the paucity of Defendants' briefing on this matter, the Court believes the question
of conflict preemption is better addressed outside the scope of the pending motions to dismiss. Cf Crosby, 530 U.s.
at 373 ("What is a sufficient obstacle [to trigger conflict preemption] is a matter of judgment, to be informed by
examining the federal state as a whole and identifying its purpose and intended effect[.]" (citing Savage v. Jones,
225 U.s. 501, 533 (1912)).
10

Obviously, to the extent § 13.254(a-6) does purport to alter the PUC Officials' certification decisions by
overriding federal law, it is unconstitutional under the Supremacy Clause, and to the extent § 13.254(a-6) represents
an attempt by the Texas legislature to interpret federal law, it is entitled to no weight in this Court's statutory
analysis. However, as noted in the previous footnote, the pending motions to dismiss do not require the Court to
issue a ruling on the merits of Green Valley's preemption claims.
15

WATER CODE
§

§

13 .254(a-5)

(stating submission of a valid certification petition under

13.254(a-5) "entitle{s]" a landowner to release from a CNN); Second Am. Compi. [#25] at 21-

23 (concluding the PUC "does not have authority to determine" whether § 1926(b) preempts

portions of the Texas Water Code).
In arguing Green Valley has not stated a claim for declaratory relief as to

§ 13 .254(a-6)

because its requested relief would be ineffective, the PUC Officials confuse two separate issues:
the ability to state a claim upon which relief can be granted and the efficacy of that relief. The

efficacy of Green Valley's requested relief does not bear on its ability to state a claim. Rather,
the efficacy of Green Valley's requested relief goes to redressabilityan issue which is relevant
in establishing Article III standing and also in discerning whether Green Valley is entitled to

equitable relief. It is not relevant, however, in assessing whether Green Valley has stated a viable

preemption claim.'2
Third and finally, the Court considers Defendants' argument Green Valley has not stated
a claim because Green Valley has not pled facts showing it "provided or made available" sewer

service within the meaning of § 1926(b). City Mot. Dismiss [#38] at 6-11; GVDC Mot. Dismiss
[#54] at 10-14. Section 1926(b) only protects service "provided or made available" through an

association with a federal loan under

§

1926(a). In reliance on the decisions of courts of appeals

in several other circuits, Defendants argue

§

1926(b) requires Green Valley have a "pipe in the

ground" or "physical ability" to provide service to the area in question. City Mot. Dismiss [#3 8]
at 10; GVDC Mot. Dismiss [#54] at 10-14.
In a related argument, GVDC has similarly muddled the distinction between claim and relief. GVDC
argues Green Valley's "Water CCN-Related claims" must be dismissed for lack of subject matter jurisdiction
because they are not ripe. See GVDC Mot. Dismiss [#54] at 10 (noting GVDC "has not petitioned the PUC to
remove its land from Green Valley's Water CCN"). GVDC misunderstands what constitutes a claim. Essentially,
Green Valley has two claimsone claim alleges § 1926(b) preempts § 13.254; the other claim alleges § 1926(b)
preempts § 13.255. Indisputably, both of these claims are ripe, because the PUC Officials have issued orders under
both statutory provisions which purport to decertify land from Green Valley's service area. Accordingly, GVDC's
motion to dismiss Green Valley's "Water CCN-Related claims" under Rule 12(b)(1) is denied.
12

16

The Court finds Fifth Circuit precedent conclusively precludes interpreting
require a "pipe in the ground" requirement. In North Alamo Water Supply Corp.
Juan,

v.

1926(b) to

§

City of San

Texas, the Fifth Circuit held "a Utility's state law duty to provide service is the legal

equivalent to the Utility's 'making service available' under

§

1926(b)." 90 F.3d 910, 916 (5th

Cir. 1996) (per curiam). More recently, in Green Valley Special Utility District v.

City

of Cibolo,

Texas, the Fifth Circuit reaffirmed that "[w]here a CCN imposes a duty on a utility to provide a

service, that utility has 'provided or made available' that service under

§

1926(b)." 90 F.3d 910,

916 (5th Cir. 1996). Though other courts of appeals have questioned the wisdom of this

interpretation, this Court is bound by the holdings of the circuit in which it sits. Therefore, the
Court finds Green Valley was not required to plead facts showing it had met a "pipe in the

ground" requirement. Under the Fifth Circuit's interpretation of

§

1926(b), Green Valley need

only plead it possesses a CCN imposing a duty on Green Valley to provide service. Because

Green Valley has done so, it has pled sufficient facts to bring an action arguing it is entitled to
the protection of

1926(b).

Conclusion
The Court determines Green Valley's claims against the PUC Officials are not barred by
Eleventh Amendment sovereign immunity. Additionally, the Court finds Defendants' abstention

arguments are unavailing and further concludes Green Valley's claims should not be dismissed
under Rule 12(b)(6).
Accordingly,
IT IS ORDERED the PUC Officials' Motion to Dismiss [#21] is DENIED;

IT IS FURTHER ORDERED the City of Schertz's Motion to Dismiss [#3 8] is
DENIED; and

17

IT IS FINALLY ORDERED the GVDC's Motion to Dismiss [#54] is DENIED.

SIGNED this the

ay of February 2018

SENIOR UNITED STATES DISTRICT JUDGE