Environmental and Energy Law Blog

Friday, May 5, 2017

Texas Supreme Court to Review Emission Credit Suit v TCEQ

The Texas Supreme Court on Friday granted review to interior and exterior coating manufacturer AC Interests, which argues that a lower appellate and trial court wrongly dismissed its lawsuit against the Texas Commission on Environmental Quality after it missed the 30-day deadline to notify the agency of the suit.  

In its April 2016 petition for review, AC Interests argues it was an abuse of discretion to dismiss the suit against the state environmental agency, because the 30-day deadline isn't mandatory, but “directory.” The suit — brought regarding AC's right to certain emissions credits from the TCEQ — shouldn't have been dismissed because the agency wasn't “prejudiced by the delay,” and in fact was hand-delivered notice of the suit two days after it was filed in December 2014.  

AC Interests told the court that the Texas Rule of Civil Procedure 91a motion to dismiss — which allows dismissal of claims that have no basis in law or fact — should not have been granted because it “included no basis in AC Interests' pleadings.”  

“In other words, the trial court and Court of Appeals [are] applying the 30-day service of citation rule to AC Interests, while allowing the TCEQ to escape the requirements of proving up the Rule 91a motion, which the TCEQ elected to file,” the petition for review reads.  

In arguing that the service deadline is not mandatory, AC Interests said that while the statute says service must be made within 30 days, it doesn't “specify the proper consequences for noncompliance.” AC Interests explained in the petition that it was a “misunderstanding on the part of trial counsel” that led to the delay in service, because the attorney incorrectly believed electronic filing would also serve as service of the citation.  

“A conclusion that the service deadline is directory is especially compelling when we consider the alternate consequences. Under the alternate interpretation, any delay in service of citation for any reason results in the dismissal of the case,” the petition reads. “This result is particularly harsh given the relatively short deadline for service and the fact that service may be delayed by circumstances outside the control of the plaintiff. We do not believe that the service deadline was 'intended to create a procedural trap allowing the [commission] to obtain dismissal' when service has been diligently pursued and the commission has not been prejudiced by the delay."  
According to the petition, AC Interests filed its lawsuit after the TCEQ denied its application for certification of the emission credits. AC argued it deserved the credits because it had complied with TCEQ standards, earning the credits by “emitting fewer toxins into the water and air.”  

In arguing against high court review, the TCEQ told the court that its motion to dismiss was proper, and the 30-day deadline is clear. The Legislature was clear in setting the deadline and there's precedent from the Austin Court of Appeals upholding mandatory service requirements, it argued.  

“Although the Water Code arguably allows for service of citation to be accomplished within one year, the Clean Air Act has an express deadline of 30 days,” the response reads. “The commission asserted that the 30-day service-of-citation deadline in Clean Air Act section 382.032(c) applied because the cause of action arose from the commission’s actions under the Clean Air Act.”  

The TCEQ told the court to reject AC's reasoning about why service was delayed, because the reason doesn't matter. The First Court of Appeals correctly held that neither due diligence nor good cause “provides an exception to the mandatory requirements” in the Clean Air Act.   

Claude William Smalling III, who represents AC Interests, told Law360 on Friday the court was correct in granting review of the case.  

“Obviously we believe we have right on our side,” he said.  

The Texas Supreme Court had not set a date for oral arguments in the case as of Friday.  

TCEQ is represented by Priscilla M. Hubenak, Anthony C. Grigsby, James E. Davis, Brantley D. Starr, Cynthia Woelk, Jeffrey C. Mateer and Ken Paxton of the Texas Attorney General's Office.  

AC Interests is represented by Claude William Smalling III of The Law Office of C. William Smalling PC.  

The case is AC Interests LP v. Texas Commission on Environmental Quality, case number 16-0260, in the Texas Supreme Court.  

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