In the Courts

Water Cases

San Jacinto River Auth. v. Ross, No. 14-23-00923-CV, 2025 LX 476204 (Tex. App.—Houston [14th Dist.] Oct. 16, 2025, no pet. h.).

The Fourteenth Court of Appeals reversed the trial court’s denial of the San Jacinto River Authority’s (“SJRA”) plea to the jurisdiction and dismissed statutory takings claims arising from emergency reservoir releases during Hurricane Harvey. Homeowners downstream of Lake Conroe alleged that SJRA’s emergency releases caused flooding of their properties and those releases constituted a taking under Chapter 2007 of the Texas Government Code. SJRA argued that its actions were exempt from takings liability under Chapter 2007’s emergency-action exclusion, which applies when a governmental entity acts under a reasonable good faith belief that the action is necessary to prevent a grave and immediate threat to life or property.

The court agreed with SJRA, concluding that Hurricane Harvey presented an undisputed grave and immediate threat and that SJRA released water in accordance with its established gate operations policy to reduce the risk of dam failure and catastrophic flooding. The record showed that SJRA’s releases were designed to mitigate downstream flooding compared to natural conditions and were consistent with professional engineering standards. The court held that SJRA’s actions were objectively reasonable and taken in good faith, satisfying the statutory exclusion as a matter of law. Because the emergency action exclusion applied, the court concluded that the trial court lacked subject matter jurisdiction over the homeowners’ Chapter 2007 statutory takings claims. The court emphasized that its ruling was limited to statutory takings claims and did not resolve any separate constitutional takings claims that may remain pending.

Wayne-Sanderson Farms, LLC v. Neches & Trinity Valleys Groundwater Conservation District, Cause No. DCCV25-5642-369.

Wayne-Sanderson Farms, individual plaintiffs, and Consolidated Water Supply Corporation filed suit against the Neches & Trinity Valleys Groundwater Conservation District (“NTVGCD”) challenging the District’s handling of applications for large-capacity groundwater wells proposed to pump significant volumes of groundwater from the Carrizo-Wilcox Aquifer for commercial export. The permit applications were filed by entities affiliated with investor Kyle Bass, including Redtown Ranch Holdings LLC and Pine Bliss LLC. The suit focused on the District’s board action deeming the applications administratively complete, a determination that allowed the permitting process to proceed toward contested case hearings and potential approval.

Among other allegations, plaintiffs asserted that the administrative-completeness determination was invalid because it was taken by an improperly constituted board. The petition alleged that one director participated in the vote despite having an impermissible conflict of interest arising from his company’s alleged involvement in drilling the proposed wells. Plaintiffs further alleged that another director was ineligible to serve at the time of the vote due to dual office holding, based on his simultaneous service as a member of a municipal governing body. According to the plaintiffs, these conflicts and eligibility defects rendered the administrative-completeness determination void or voidable and tainted subsequent permitting actions taken in reliance on that determination.

Following the filing of suit, the plaintiffs and the District negotiated an agreed resolution. In October 2025, the district court approved an agreed final judgment and entered a permanent injunction that voided the District’s prior actions related to the applications, including the administrative-completeness determination, and suspended further consideration of the high-capacity permits pending completion of specified scientific studies. The Bass-affiliated applicant entities were not parties to the settlement and have sought to intervene after judgment, asserting interests in the suspended permit applications. As of late 2025, the final judgment and permanent injunction remain in effect, and disputes regarding post-judgment intervention and appellate proceedings are ongoing.

Litigation Cases

4 Fams. of Hobby, LLC v. City of Hous., No. 24-0796, 2026 LX 91195, at *1 (Jan. 9, 2026).

In 4 Fams. of Hobby, LLC, the City of Houston decided to contract with a new party to oversee concessions at Hobby Airport after the existing contract with the previous contractor expired. Id. at *2. The previous contractor sued, contending that the new contract was void because it required expenditures of more than $50,000 and therefore triggered Section 252.021(a) of the Texas Local Government Code, which waives immunity to suits for violation of that chapter. Id. at *2–3. After some expedited jurisdictional discovery, the City filed a Plea to the Jurisdiction, which the trial court denied. Id. at *3–4. The Court of Appeals reversed, citing the contract’s language: “nothing in this Agreement shall be construed to require that the City make any expenditure of its funds by, through or under this Agreement” (the “Expenditure Clause”). Id. at *4.

The Texas Supreme Court reversed, ruling that the court of appeals erred by not allowing further jurisdictional discovery to parse the inconsistent language within the contract and evidence. Id. at *6. Although the Expenditure Clause was some evidence that the City had not trigged Section 252.021(a), the court noted the contract also stated the “City shall provide and maintain all utilities” and the “City shall . . . maintain all public areas and facilities.” Id. at *6–7. The court ruled that the latter two clauses could “reasonably be read to require city expenditures of more than $50,000,” and the court of appeals erred by not remanding for further jurisdictional discovery. Id. at *10.

On a practical note, for governmental entities entering into quasi-expenditure-revenue contracts, the court held that an Expenditure Clause that contains “language indicating it overrides any other provisions potentially requiring city expenditures [] would be sufficient to resolve the analysis without jurisdictional discovery.” Id. at *8. Accordingly, adding an overriding clause would likely be sufficient to circumvent Section 252.021 and avoid a corresponding waiver to sovereign immunity.

1 Coventry Court, LLC v. Downs of Hillcrest Residential Ass’n, Inc., No. 24-1047, 2026 LX 36727, at *1 (Jan. 9, 2026).

In this opinion, the Texas Supreme Court’s holding is very narrow: when a party challenges the validity of an agreement that waives its appellate rights, Courts of Appeals are required to determine the validity of that waiver. Id. at *1–2, 8–9. However, the Court provided important dicta that indicates contracting parties should tread carefully when drafting, agreeing to, or intending to agree to any purported settlement agreement that is less than a fully-materialized, final agreement.

In this case, the parties effectively signed a preliminary agreement that required the parties to “execute a full and final settlement agreement and release of all claims and defenses asserted in the lawsuit.” Id. at *3. However, one party viewed this as a final, enforceable agreement whereas the other party as a tentative settlement agreement. Id. at *3–4. Ultimately, the trial court sided with the party asserting it as a final, enforceable agreement, and required the other party to execute a (contested) proposed final agreement, under the pain of possible criminal contempt and incarceration. The other party did so, and appealed—but the appeal was dismissed by the appellate court based on the waiver contained in the final contested agreement

The Supreme Court specified that it was not ruling on the validity of waiver, but only that the Court of Appeals was required to review and make that determination. Id. at *8–9. However, it noted that the Parties’ disagreement of material terms and one of the parties’ judicially coerced assent could have invalidated the waiver. Id. at *7.

Parties should be cautious assenting to anything less than a final settlement agreement, and if they choose to do so, appropriate clauses and disclaimers should be included that make it clear that the instrument is not a final, enforceable contract, but only preliminary and that it reflects the parties’ intention to negotiate and possibly reach a final agreement.

Mesquite Asset Recovery Grp., L.L.C. v. City of Mesquite, 154 F.4th 313, 314 (5th Cir. 2025).

In 2008, development groups (the “Contractors”) purchased several acres of land from the City of Mesquite (the “City”) and subsequently entered into a public-improvement contract (“Original Contract”) with the City. Id. at 314. During this period of time, the City exempted the Contractors from the requirement to obtain a standard advisory opinion from the Federal Emergency Management Agency (“FEMA”).

In the following years, the Contractors spent millions of dollars developing the area for the City, and in 2018 the Parties entered into two updated contracts, one being the Master Development Agreement (“MDA”). Id. at 315. The MDA automatically terminated after 5 years, which would also contractually terminate the City’s reimbursement obligations to the Contractor. Id. The MDA also had a provision that the contract could only be extended if the Contractors obtained all permits and passed certain inspections. Id. Nearing the 5-year mark, the City informed the Contractors it would not renew the MDA, because the Contractors had not received FEMA clearance under the MDA. The Contractors sued alleging an unconstitutional taking under the United States and Texas Constitutions.

The Contractors claimed that the City acted as a government entity—rather than in a commercial capacity—primarily because it changed the rules (previous FEMA-clearance exemption) during the MDA’s period. Id. at 317–18. The Fifth Circuit noted that although only a governmental entity can change the regulatory landscape, that in of itself is insufficient to establish governmental or sovereign capacity. Id. The Fifth Court held that refusing to renegotiate a contract, even by a governmental entity, results in a contractual dispute rather than a taking. Id.

The Fifth Circuit’s ruling is important because it explains that governmental action that affects private property or a financial interest is, by itself, insufficient to constitute a taking. More is necessary, such as affirmative regulatory action that effectively prohibits a property from being developed when there is no contractual relationship between the developer and the city. Id. (citing Kopplow Dev., Inc. v. City of San Antonio, 399 S.W.3d 532, 534 (Tex. 2013)).

DM Arbor Court, Ltd. v. City of Houston, 150 F.4th 418, 420 (5th Cir. 2025).

In contrast to City of Mesquite, the Fifth Circuit ruled that a City’s denial of a permit amounted to an unconstitutional taking under the Fifth Amendment of the United States Constitution. Id. at 420–21.

In 2016, DM Arbor Court Ltd. (“DMAC”) purchased a multifamily apartment complex (“Arbor Court”) in Houston, Texas. DMAC operated Arbor Court under a contract with the U.S. Department of Housing and Urban Development (“HUD”) to provide subsidized housing to low-income residents. Id. at 421. Arbor Court lies in a 100-year floodplain and an ordinance by the City of Houston (the “City”) requires that existing structures, such as Arbor Court, undergo “substantial improvement” to be elevated above the minimum flood protection elevation. Id. In 2016, after flooding, DMAC sought and received permits to make repairs to Arbor Court without elevating any building. In 2017, after Hurricane Harvey, DMAC again sought permits to repair damages to Arbor Court—this time the City denied the permits, stating that since Arbor Court had substantial damage, no permits would be issued until all buildings were elevated.

The Fifth Circuit held that by denying the permits on a rarely used (the Court noted the scarcity several times) section of the flood ordinance, the City deprived DMAC of all economically beneficial use of Arbor Court, constituting a categorical taking under Lucas, notwithstanding the trial court’s ruling that a different property owner could have used the property for some other economically beneficial use. Id. at 422–23. (citing Lucas v. S.C. Coastal Council, 505 U.S. 1003 (1992)).

The Court reversed the trial court because it found, based on both Parties’ experts, that there was no viable economic use of Arbor Court without repairs and the necessitating permits to conduct them. Id. at 425. Notably, in dicta, the Court explained that the application of a flood ordinance can result in a taking. Id. at 426–27.

Taken together, these Fifth Circuit cases reiterate the fact-intensive nature of takings claims under the United States and Texas Constitutions, and that the overall relationship, including past practices, may impact whether a governmental entity’s actions may rise to the level of an unconstitutional taking.

“In the Courts” is prepared by Stephen Malish in the Firm’s Districts, Water, and Litigation Practice Groups and Nathan Marroquin in the Firm’s Litigation Practice Group. If you would like additional information or have questions related to these cases or other matters, please contact Stephen at 512.322.5875 or smalish@lglawfirm.com, or Nathan at 512.322.5886 or nmarroquin@lglawfirm.com.