Pipeline Prevails Over Governmental Entity in Condemnation Dispute

Gray Reed
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Gray Reed

A pipeline company condemning property of a governmental entity? That’s something you don’t see every day. Score a win for “big pipe” against “big government”. In Harris County Fresh Water Supply District No. 61 v. Magellan Pipeline Company, LP and V-Tex Logistics, LLC, a special purpose district unsuccessfully argued that it had governmental immunity from a pipeline condemnation suit.

Background

Magellan and V-Tex are pipeline companies who entered into an agreement to construct a pipeline for refined petroleum products. One of the parcels that needed to be acquired for the project was a 30-acre tract of land owned by Harris County Fresh Water Supply District used for a stormwater-detention pond. The parties entered into negotiations for an easement in late 2017 but could not reach an agreement. Eventually, an idea was floated to make an initial payment and resolve issues related to additional compensation in a condemnation proceeding. The pipeline companies’ counsel sent an email to the district’s counsel summarizing the proposal, to which the district’s counsel responded, “Very good. Thank you.”

The Condemnation Proceedings

The pipeline companies commenced condemnation proceedings shortly thereafter. The parties executed an agreement providing for partial settlement, setting out the terms for payment (i.e., an initial payment of approximately $500,000 and additional compensation as awarded) and providing that the district would not contest the condemnation proceedings. At the administrative portion of the proceeding, the appointed special commissioners assessed that the additional compensation should be $160,000. At the judicial portion of the proceeding, the district objected, arguing that the property was already devoted to an existing public use and that the $160,000 award was not adequate compensation. After summary judgment and a trial as to remaining fact issues, judgment was entered for the pipeline companies. The companies would have their easement and the district would receive the initial payment and the additional compensation as assessed by the special commissioners.

Governmental Immunity Arguments

The district appealed, arguing first that it enjoyed immunity from condemnation suits as a subdivision of the state. Generally, there are two situations in which a governmental entity may not be immune from suit: legislative waiver and judicial abrogation. Legislative waiver occurs when the legislature consents to suits against a governmental entity. Judicial abrogation involves modification of the common law concepts of sovereign immunity due to the conduct of the governmental entity or when a governmental entity voluntarily engages in litigation.

In this instance, the court of appeals found that the district’s voluntary participation in the condemnation proceeding was an abrogation of its right to claim governmental immunity. Agreeing to the concept by email (“Very good. Thank you.”) and entering into an agreement for partial settlement “clearly indicated that [the district] was contractually agreeing to participate in the condemnation proceeding.”

Additional Arguments

The district also argued that the pipeline company had not presented sufficient evidence of its common-carrier status (required for condemnation) and that the district’s use of the tract was more important the pipeline companies’ proposed use. The court ultimately held that these issues were waived by the district when it agreed not to contest the proceeding. The trial court ruling was affirmed.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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