TitleMax of Texas, Inc. v. City of Austin and Anne Morgan, City Attorney of the City of Austin And Rondella Hawkins, Officer, City of Austin Office of Telecommunications and Regulatory Affairs, in Their Official and Individual Capacities ( 2021 )

Opinion issued November 18, 2021
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-20-00071-CV
———————————
TITLEMAX OF TEXAS, INC., Appellant
V.
CITY OF AUSTIN AND RONDELLA HAWKINS, OFFICER, CITY OF
AUSTIN OFFICE OF TELECOMMUNICATIONS AND REGULATORY
AFFAIRS, IN HER OFFICIAL AND INDIVIDUAL CAPACITY, Appellees
On Appeal from the 353rd District Court1
Travis County, Texas
Trial Court Case No. D-1-GN-19-002613
1
The Texas Supreme Court transferred this appeal from the Third Court of Appeals
to this Court pursuant to its docket equalization powers. See TEX. GOV’T CODE §
73.001.
OPINION
Appellant, TitleMax of Texas, Inc. [“TitleMax”], sought declaratory and
injunctive relief against appellee, the City of Austin [“the City”], relating to a city
ordinance intended to regulate payday lending practices. The City filed a plea to the
jurisdiction, asserting that, because the specific ordinance at issue was penal in
nature, the civil district court lacked jurisdiction to declare it unconstitutional or to
enjoin a prosecution filed thereunder. The trial court granted the City’s plea to the
jurisdiction and dismissed TitleMax’s case. This appeal followed. We reverse and
remand.
BACKGROUND
Before considering TitleMax’s issues on appeal, it is necessary to review the
ordinance at issue and documents filed in the case.
The Ordinances
The City of Austin has payday lending ordinances (“the Ordinances”), first
enacted in 2011 and amended in 2015, which regulate credit access businesses such
as TitleMax. The Ordinances provides as follows:
A credit services organization or credit access business that obtains for
a consumer or advises or assists a consumer in obtaining an extension
of consumer credit shall by the terms of the extension of consumer
credit transaction:
(1) require payment of the total amount of the extension of
consumer credit transaction, including any principal, interest,
2
fees, valuable consideration, credit access business fees, and
any other charges or costs, in four or fewer payments; and
(2) reduce by at least 25 percent per payment the total amount of
the extension of consumer credit transaction, including any
principal, interest, fees, valuable consideration, credit access
business fees, and any other charges or costs.
Austin, Tex. Code § 4-12-22(D). The Ordinances further provide in relevant part:
(A) A person who violates any section of this chapter commits a Class
C misdemeanor punishable by a fine not to exceed $500.
(B) Except as provided in Subsection (C), each day that a violation
occurs is a separate offense.
(C) Each extension of consumer credit transaction is a separate offense
if the extension of consumer credit transaction violates:
(1) Section 4-12-22 (Restrictions on Extensions of Consumer Credit
Transactions)[.]
....
(D)The penalties provided for in Subsection (A) are in addition to any
other remedies available under City ordinance or state law.
(E) . . . [A] culpable mental state is not required for a violation of this
chapter and need not be proved.
Austin, Tex. Code § 4-12-26.
In February 2019, the City audited two TitleMax stores in Austin for
compliance and concluded that two loans (Loan No. 22289-148-35407272 and Loan
No. 21189-1678-35508202) were made in violation of the above-referenced
Ordinances.
3
Petition for Declaratory Relief and Application for Permanent Injunction
On May 10, 2019, TitleMax filed suit against the City, seeking a declaration
that (1) the Ordinances do not apply to TitleMax’s activities, (2) section 4-12-22(D)
of the Ordinances is preempted by section 393.062(b) of the Texas Finance Code,
(3) section 4-12-26 is preempted by section 393.224 of the Texas Finance Code and
§ 6.02 of the Texas Penal Code, and (4) the Ordinances are unconstitutionally void
for vagueness and excessive fines. TitleMax’s petition also sought to permanently
enjoin the City “from any attempts to seek criminal enforcement of the Ordinance
and City Code Provisions against Plaintiff.”
The City files Criminal Complaints Against TitleMax
On May 30, 2019, after TitleMax had filed its petition, the City filed two
criminal complaints against TitleMax in Travis County Municipal Court, alleging
that the two loans that it had previously identified during its February 2019 audit
violated the section 4-12-22(D) by exceeding the number of installments permitted
for such loans.
The Amended Petitions
On July 12, 2019, TitleMax filed its First Amended Petition, which added a
cause of action seeking a temporary injunction to “prohibit[] the City from any
attempts to seek criminal enforcement of the Ordinance and City Code Provisions
against Plaintiff pending trial of this matter.”
4
On September 10, 2019, TitleMax filed its Second Amended Petition, which
added claims against Anne Morgan, Austin’s City Attorney, and Rondella Hawkins,
of the City’s Office of Telecommunications and Regulatory Affairs.2
Pleas to the Jurisdiction
On September 20, 2019, the City filed a Plea to the Jurisdiction, alleging that,
because the Ordinances are penal in nature, a civil equity court has no jurisdiction
to declare them invalid or to enjoin a prosecution arising therefrom unless “(1) there
is evidence that the statute at issue is unconstitutionally applied by a rule, policy, or
other noncriminal means subject to a civil court’s equity powers and irreparable
injury to property or personal rights is threatened; or (2) the enforcement of an
unconstitutional statute threatens irreparable injury to vested property rights.”
On September 30, 2019, Hawkins also filed a Plea to the Jurisdiction, alleging
that she acted “well within her discretion in enforcing the Ordinance against
Plaintiff, which defeats Plaintiff’s ultra vires allegation against her and deprives [the
trial court] of subject-matter jurisdiction.”
Both the City and Hawkins requested that the claims against them be
dismissed; the City further requested that “because Plaintiff cannot cure the
2
All claims against Morgan, the City Attorney, have been nonsuited and are not a
part of this appeal.
5
[jurisdictional] defect through amendment, the City asks that [TitleMax’s live
pleading] be dismissed without leave to amend.”
The Trial Court’s Ruling
After a two-day hearing, the trial court, on November 27, 2019, signed an
Order Granting Pleas to the Jurisdiction, stating as follows:
Defendant City of Austin’s Plea to the Jurisdiction is GRANTED. The
City has initiated two Municipal Court prosecutions. Plaintiff may
argue that the underlying ordinance is unconstitutional in the criminal
proceedings. The Court also notes that plaintiff is not a small local
business.
Defendants Anne Morgan’s and Rondella Hawkins’s First Amendment
Pleas to the Jurisdiction is [sic] GRANTED. Defendant Morgan is
protected by absolute immunity. As discussed above, this Court has no
jurisdiction to determine the meaning and validity of this penal
ordinance on this procedural record. This Court should not, therefore,
exercise jurisdiction to determine the scope of Defendant Hawkins’
authority under the ordinance and whether she acted outside the bounds
of her granted authority.
This is a final order disposing of all claims and all parties and is
appealable.
Findings of Fact and Conclusions of Law
Upon TitleMax’s request, the trial court made the following findings of fact,
which are relevant to this appeal:
TitleMax of Texas, Inc. is not a small, local business. It is part of the
TMX Finance Family of Companies, which collectively do business in
at least 16 different states. TitleMax has nearly 275 locations across
Texas, including nine locations in Austin.
6
The City of Austin audited two TitleMax stores in February 2019 for
compliance with the Ordinance. Two loans were referred for
prosecution: Loan No. 2289-1948-3540272 (“7272 loan”) and Loan
No. 21189-1678-35508202 (“8202 Loan”). These prosecutions are
currently pending in Municipal Court.
TitleMax has not shown that it is currently facing a threat of irreparable
injury to vested property rights, or that such a threat is reasonably
foreseeable.
The Supreme Court of Texas found a threat of irreparable injury to
vested property rights when an ordinance “imposes a substantial per
violation fine that effectively precludes small local businesses from
testing the ban’s constitutionality in defense to a criminal prosecution.”
City of Laredo v. Laredo Merchants Association, 550 S.W.3d 586, 592
fn. 28 (Tex. 2018). While the Ordinance here arguably could impose
substantial fines, TitleMax is not a small local business that is
effectively precluded from testing the Ordinance’s constitutionality in
defense to a criminal prosecution.
The trial court also made the following conclusions of law:
The Ordinance is a penal ordinance.
Civil courts have jurisdiction to enjoin or declare void an
unconstitutional penal ordinance when there is a threat of irreparable
injury to vested property rights.
Because there is no jurisdiction for the Court to hear TitleMax’s claims
against the City, the Court declines to exercise jurisdiction to determine
TitleMax’s ultra vires claims against Rondella Hawkins.
TitleMax timely appealed the trial court’s granting of the City’s and
Hawkins’s pleas to the jurisdiction and judgment dismissing its claims against both.
7
PROPRIETY OF ORDER GRANTING PLEAS TO THE JURISDICTION
In its sole issue on appeal, TitleMax contends that “[t]he district court erred
in granting the City’s and Hawkins’s pleas to the jurisdiction.” Specifically,
TitleMax argues that, “[t]hrough the guise of a preempted and unconstitutional
Ordinance, the City seeks to regulate TitleMax and similarly situated businesses
despite licensing requirements and comprehensive statutory and regulatory
requirements already imposed by the State of Texas” and that, because TitleMax has
shown a threat of irreparable injury to vested property rights, the civil district court
has jurisdiction to enjoin or declare void the Ordinance at issue in this case.
Standard of Review
Subject-matter jurisdiction is essential to a court’s power to decide a
case. Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 443 (Tex. 1993).
The plaintiff bears the burden of affirmatively demonstrating that the trial court has
subject-matter jurisdiction over its case. Heckman v. Williamson Cty., 369 S.W.3d
137, 150 (Tex. 2012); Tex. Ass’n of Bus., 852 S.W.2d at 446. A plea to
the jurisdiction is a dilatory plea that seeks dismissal of a case for lack of subject-
matter jurisdiction. Harris Cty. v. Sykes, 136 S.W.3d 635, 638 (Tex.
2004); Villarreal v. Harris Cty., 226 S.W.3d 537, 541 (Tex. App.—Houston [1st
Dist.] 2006, no pet.). We review a trial court’s ruling on a plea to the jurisdiction de
novo. See Ben Bolt-Palito Blanco Consol. Indep. Sch. Dist. v. Tex. Political
8
Subdivs. Prop./Cas. Joint Self-Ins. Fund, 212 S.W.3d 320, 323 (Tex. 2006); City of
Houston v. Vallejo, 371 S.W.3d 499, 501 (Tex. App.—Houston [1st Dist.] 2012, pet.
denied). A defendant may use a plea to the jurisdiction to challenge whether the
plaintiff has met its burden of alleging jurisdictional facts or to challenge the
existence of jurisdictional facts. See Tex. Dep’t of Parks & Wildlife v. Miranda, 133
S.W.3d 217, 226–27 (Tex. 2004).
When a plea to the jurisdiction challenges the pleadings, we determine
whether the pleader has alleged facts that affirmatively demonstrate the trial court’s
jurisdiction. Id. at 226. We construe the pleadings liberally in favor of the pleader,
accept all factual allegations as true, and look to the pleader’s intent. Heckman, 369
S.W.3d at 150. If the pleadings are insufficient, the court should afford an
opportunity to replead if the defects are potentially curable but may dismiss if the
pleadings affirmatively negate the existence of jurisdiction. City of Houston v.
Guthrie, 332 S.W.3d 578, 586–87 (Tex. App.—Houston [1st Dist.] 2009, pet.
denied).
Review of a plea challenging the existence of jurisdictional facts mirrors that
of a matter-of-law summary-judgment motion. Mission Consol. Indep. Sch. Dist. v.
Garcia, 372 S.W.3d 629, 635 (Tex. 2012); Miranda, 133 S.W.3d at 228 (“[T]his
standard generally mirrors that of a summary judgment under Texas Rule of Civil
Procedure 166a(c). . . . By requiring the [S]tate to meet the summary judgment
9
standard of proof . . . , we protect the plaintiff[ ] from having to put on [its] case
simply to establish jurisdiction.”) (internal quotations and citations omitted); see
also TEX. R. CIV. P. 166a(c). “[A] court deciding a plea to the jurisdiction . . . may
consider evidence and must do so when necessary to resolve the jurisdictional issues
raised.” Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 555 (Tex. 2000). And a
court may consider evidence as necessary to resolve a dispute over the jurisdictional
facts even if the evidence “implicates both the subject[-]matter jurisdiction of the
court and the merits of the case.” Miranda, 133 S.W.3d at 226.
We take as true all evidence favorable to the non-movant and we indulge
every reasonable inference and resolve any doubts in the non-movant’s favor. Id. at
228. If the defendant meets its burden to establish that the trial court lacks
jurisdiction, the plaintiff is then required to show that there is a material fact question
regarding the jurisdictional issue. Id. at 227–28. If the evidence raises a fact issue
about jurisdiction, the plea cannot be granted, and a fact finder must resolve the
issue. Id. On the other hand, if the evidence is undisputed or fails to raise a fact issue,
the plea must be determined as a matter of law. Id. at 228; Garcia, 372 S.W.3d at
635.
Cases Predating Texas Propane Gas Association v. City of Houston
Both parties agree that the issue in this case—whether the civil district court
has subject-matter jurisdiction to interpret or enjoin the City’s Ordinances—is
10
governed by the recent Texas Supreme Court decision in Texas Propane Gas
Association v. The City of Houston, 622 S.W.3d 791 (Tex. 2021). However, the
parties disagree with how the holding in Texas Propane should be applied in the
current case. Before analyzing Texas Propane, it is appropriate to discuss several
cases predating it on which the supreme court relied or distinguished in reaching its
decision.
In City of Austin v. Austin City Cemetery Association, the cemetery
association challenged a city ordinance prohibiting burials within certain geographic
limits of the City of Austin. 28 S.W. 528 (Tex. 1894). The supreme court
acknowledged that, “as a general rule, the aid of a court of equity cannot be invoked
to enjoin criminal prosecutions” and that “anyone prosecuted under its provisions
may have it [] declared [void], either in the original criminal action, or by suing out
a writ of habeas corpus.” Id. at 336. But, the court noted that “[a] criminal
prosecution is unpleasant to all people who have due respect for the law, and almost
necessarily involves inconvenience and expense.” Id. The very existence of the
statute, as long as it remains undisturbed, “acts in terrorem, and practically
accomplishes” its goal. Id. at 336–37. The court noted that no one would be willing
to purchase a cemetery plot for fear that it could not be used for its intended purpose
without violating the ordinance, thus “result[ing] in a total destruction of the value
of [the cemetery association’s property] for the purpose for which it was acquired.”
11
Id. at 336. Given the threat that a business in the locality might be “effectually
destroyed” by the ordinance, the court concluded that the business “should have the
right to . . . enjoin its enforcement.” Id. at 337.
In State v. Morales, the trial court found the State’s sodomy statute
unconstitutional and enjoined its enforcement. 869 S.W.2d 941, 942 (Tex. 1994).
The State appealed, arguing “that civil courts under these circumstances have no
power to grant either injunctive or declaratory relief based on the unconstitutionality
of a criminal statute.” Id. at 943. The court agreed, noting that when a criminal
statute is enforced and the charged party is being prosecuted or the threat of
prosecution is imminent, the constitutionality of the criminal statute should be
determined by courts exercising criminal jurisdiction “unless the statute is
unconstitutional and there is the threat of irreparable injury to vested property
rights.” Id. at 945. However, if there is no actual or threatened enforcement of the
penal statute and no complaint of specific conduct remediable by injunction, “[a]
civil court simply has no jurisdiction to render naked declarations of ‘rights, status
or other legal relationships arising under a penal statute.’” Id. at 947 (citing Malone
v. City of Hous., 278 S.W.2d 204, 206 (Tex. Civ. App.—Galveston 1955, writ ref’d
n.r.e.)). Because no property rights were involved, and there was no prosecution or
threatened prosecution, the supreme court held that the civil district court had no
12
jurisdiction to declare the sodomy statute unconstitutional or to enjoin its
enforcement. Id. at 947.
Finally, in City of Laredo v. Laredo Merchants Association, a merchants
association sued the city seeking a declaration that an ordinance prohibiting the use
of plastic or paper “checkout bags” was unconstitutional and enjoining its
enforcement. 550 S.W.3d 586, 591 (Tex. 2018). The City of Houston, as amicus
curiae, argued that the civil court lacked jurisdiction because the ordinance was
penal in nature, not civil, and could only be challenged as a defense to a criminal
prosecution for violating it. Id. at 592 n.28. The supreme court disagreed, noting
that “civil courts have jurisdiction to enjoy or declare void an unconstitutional penal
ordinance when ‘there is the threat of irreparable injury to vested property rights.’”
Id. (quoting Morales, 869 S.W.2d at 945). The supreme court held that this “rule
applies here, where the ordinance prohibits the complaining vendors from using
noncompliant bags and, if they do, imposes a substantial per-violation fine that
effectively precludes small local businesses from testing the ban’s constitutionality
in defense to a criminal prosecution.” Id. Thus, the civil court had jurisdiction over
the case. Id.
Texas Propane Gas Association v. City of Houston
The Texas Supreme Court has again addressed the issue of when a civil court
may declare a penal statute unconstitutional and enjoin its enforcement in Texas
13
Propane Gas Association. v. City of Houston, 622 S.W.3d 791 (Tex. 2021). In Texas
Propane, the gas association sued the city for a declaratory judgment that its
ordinances regulating the liquefied petroleum gas [“LPG”] industry were
unconstitutional because they were preempted by state law. Id. at 793. One of those
ordinances imposed monetary penalties for a violation that ranged from $500 to
$2,000 per day. Id. at 794. The city argued that “civil courts lack subject-matter
jurisdiction to enforce the [gas association’s] preemption claim because the local
regulations it challenges carry criminal penalties.” Id. at 793. The city argued that
the case was controlled by Morales, and that City of Laredo and Austin City
Cemetery should not be followed. Id. at 797. Specifically, the city argued that City
of Laredo should not be followed because, in Austin City Cemetery, the ordinance
threatened “the total destruction of the value of the challenger’s property,” whereas
in City of Laredo, the “regulations posed much less of a threat to the [challengers’]
property[.]” Id. at 798. Thus, the city would have had the civil jurisdiction limited to
cases in which the criminal ordinance would “totally destroy” the value of the
challenger’s property. The supreme court rejected this argument, holding that “the
threat of prosecution and the fines imposed in [both City of Laredo and Texas
Propane] were similar.” Id. Following City of Laredo and not Morales, the supreme
court concluded that “just as in City of Laredo, the City’s LPG regulations threaten
irreparable injury to vested property rights.” Id. at 798.
14
However, the supreme court did not stop after finding irreparable injury to the
challengers’ vested property rights—the court further concluded that the gas
association’s lawsuit was “not a ‘criminal matter’ outside a Texas civil court’s
subject-matter jurisdiction.” Id. at 798. The court held that “to determine the
boundary between civil and criminal jurisdiction, courts ‘must look to the essence
of the case to determine whether the issues it entails are more substantively criminal
or civil.’” Id. (citing Heckman, 369 S.W.3d at 146).
Disputes arising over the enforcement of statutes governed by the Texas
Code of Criminal Procedure or as a result of or incident to a criminal
prosecution are usually criminal law matters. But the mere existence
of some criminal law question, characteristic, or contest will not
transform a dispute that is fundamentally civil into a criminal law
matter.
Id. (citations and internal punction omitted). The court noted that the “essence test”
from Heckman “requires a holistic, common-sense analysis” and concluded that the
essence of the gas association’s case was “a dispute over the City’s legal authority
to regulate a specific category of commercial activity, the LPG industry.” Id. at 798.
In so holding, the supreme court stated:
Though violating the City’s LPG regulations may result in a criminal
proceeding or monetary penalty, that fact is merely incidental to the
legal issue TPGA raises. Accepting the City’s argument would allow a
political subdivision to evade a preemption challenge by cloaking its
commercial regulations with criminal features. And it would result in
the anomaly of civil courts having jurisdiction to adjudicate the validity
of local LPG regulations that do not carry criminal penalties but no
jurisdiction to adjudicate local regulations that do.
15
Both Morales and City of Laredo repeated the rule that a civil court has
jurisdiction to declare a criminal statute invalid only when irreparable
injury to vested property rights is threatened. Viewed in the context of
our case law as a whole, the rule is but a corollary to the ultimate test
articulated in Heckman: looking to the essence of the case, are the
issues presented more substantively civil or criminal? Protection of
property rights is a core civil-law function. In a suit challenging the
constitutionality of a criminal statute, the threat of irreparable injury to
property rights may tip the scales in favor of the matter being a civil
one.
The essence of this case is civil, as was the essence of City of
Laredo. Accordingly, this case is within the trial court’s subject-matter
jurisdiction.
Id. at 799 (citations omitted).
Analysis
The City contends that we are not compelled to follow Texas Propane because
it is distinguishable. Specifically, the City contends that Texas Propane is
distinguishable because the “essence” of the case here is criminal, not civil. We will
address several points the City raises to support this assertion.
First, the City argues that, because there are pending criminal proceedings, the
“only issues in this case are the viability of TitleMax’s defenses to active criminal
prosecution” and that “[t]he procedural posture of the criminal enforcement actions”
makes the present case distinguishable.
We begin by noting that, at the time TitleMax filed suit in civil district court,
there was no criminal prosecution, which was initiated after TitleMax first sought
declaratory and injunctive relief. The issue is not whether the municipal court
16
criminal proceeding served to usurp the civil district court’s subject-matter
jurisdiction, but whether the civil district court had subject-matter jurisdiction at the
time TitleMax’s suit was filed. See Tex. Ass’n of Bus., 852 S.W.2d at 446 n.9 (noting
that because standing—in terms of a party’s right to initiate a lawsuit and the trial
court’s power to hear it—is determined when suit is filed, subsequent events do not
deprive the court of subject-matter jurisdiction); see also Bell v. Moores, 832 S.W.2d
749, 754 (Tex. App.—Houston [14th Dist.] 1992, writ denied) (“A trial court
determines its jurisdiction at the time a suit is filed. At that time, the court either has
jurisdiction or it does not.”). That there are now criminal prosecutions pending is
certainly a factor to consider in conducting the “holistic, common-sense” analysis
required for the Texas Propane “essence” test, but the existence of subsequently
filed prosecutions is not outcome determinative.
Instead, we must determine if “the issues presented [in the case are] more
substantively civil or criminal’? See Texas Propane, 622 S.W.3d at 799. In Texas
Propane, the supreme court held that “[t]he essence of this case is a dispute over the
city’s legal authority to regulate a specific category of commercial activity, the LPG
industry.” Id. at 798. The supreme court noted that the gas association’s substantive
claims were (1) that a civil statute forbade the city from regulating any aspect of the
industry without the Railroad Commission’s permission, and that (2) the city’s
regulations were preempted by other regulations promulgated by the State pursuant
17
to a civil statute. See id. at 799. Because adjudicating the merits of the gas
association’s claims would turn on the scope of a civil statute, the court concluded
that the “essence” of the case in Texas Propane was civil. Id.
In this case, TitleMax’s petition alleges that the City’s Ordinance, which
requires repayment of the total amount of the loan transaction—including credit
access business fees—in no more than four 25% installments, conflicts with section
393.602(b) of the Texas Finance Code, which provides that a credit access business
fee may be calculated “daily, biweekly, monthly, or another periodic basis.” See
TEX. FIN. CODE § 393.602(b). TitleMax also asserts that the Ordinance, by
eliminating any mens rea, conflicts with Texas Finance Code section 393.224 and
Texas Penal Code section 6.02(a) & (b), both of which require a showing of a
culpable mental state. See TEX. FIN. CODE § 393.224 (imposing administrative
penalties for “knowingly and willfully violating Chapter 393 or a rule adopted under
it and making such violation a Class B misdemeanor) and TEX. PENAL CODE §
6.02(a), (b) (requiring culpable mental state for Class B misdemeanors); see also
TEX. FIN. CODE § 224.501 (imposing criminal penalties for violations of Chapter 393
and classifying such violations as Class B misdemeanors). Additionally, TitleMax
claims that the Ordinances are unconstitutionally vague and impose excessive fines.
We believe that the “essence” of TitleMax’s claims, like the challenged
ordinance in Texas Propane, is essentially civil in nature and that the imposition of
18
the criminal monetary penalty is “merely incidental” to the issues TitleMax raises.
See Texas Propane, 622 S.W.2d at 799. Resolving TitleMax’s claims hinges on the
proper interpretation of state civil statutes and whether those state civil statutes
preempt the actions taken by the City in enacting the Ordinances. Like the ordinance
in Texas Propane, “[t]he ‘essence’ of this case is a dispute over the City’s legal
authority to regulate a specific category of commercial activity.” Id. In Texas
Propane, the supreme court rejected using the existence of criminal penalties as a
litmus test in determining whether an action was essentially civil or criminal:
Though violating the City’s LPG regulations may result in a criminal
proceeding or monetary penalty, that fact is merely incidental to the
legal issue [the gas association] raises. Accepting the City’s argument
would allow a political subdivision to evade a preemption challenge by
cloaking its commercial regulation with criminal features. And it
would result in the anomaly of civil courts having jurisdiction to
adjudicate the validity of local LPG regulations that do not carry
criminal penalties but no jurisdiction to adjudicate local regulations that
do.
Id.
We agree that the civil district court’s jurisdiction does not hinge upon
whether there is a criminal penalty attached to the statute; the issue is whether the
City had the authority to enact the statute in the first place, an issue that requires the
interpretation of state civil statutes.
This leads us to consider the State’s second argument, i.e., that TitleMax has
no threatened “vested property interest” justifying its invocation of the civil court’s
19
equity jurisdiction. Specifically, the City cites Texas Propane to argue that only a
“substantial per-violation fine that effectively preclude[s] small local businesses
from testing the ban’s constitutionality in defense to a criminal prosecution” is a
violation that threatens vested property rights. See id. (citing City of Laredo, 369
S.W.3d at 146). Indeed, the trial court premised its ruling on this basis, noting that
the “plaintiff is not a small local business” and that it “has nearly 275 locations across
Texas, including nine locations in Austin.”
While it is true that Texas Propane quotes City of Laredo’s holding that, in
that case, a “substantial per-violation fine that effectively precludes small local
businesses from testing the ban’s constitutionality” was a threatened irreparable
injury to vested property rights, nothing in either opinion suggests that only small
local businesses can seek declaratory or injunctive relief from ordinances with
statutory penalties that threaten irreparable injury to their vested property rights. To
determine which plaintiffs have standing to bring such a challenge in civil district
court based simply on the size of their business is nonsensical. Either the civil district
court has jurisdiction to determine cases that threaten irreparable injury to vested
property rights or it does not. Indeed, the ordinance involved in City of Laredo
applied to any “commercial establishment” that used plastic or paper “checkout
bags.” 550 S.W.3d at 590. Presumably not all the merchants in the Laredo Merchants
Association were small local businesses in that the ordinance applied to any
20
“commercial establishment.” And, the gas association in Texas Propane was a trade
association composed of “300 members statewide,” whose members included
“producers, wholesalers, propane retailers, manufacturers, fabricators, distributors,
service providers, engineers, plumbers, RV parks, associations and other involved
in the propane industry.” 622 S.W.3d at 793 n.5. Again, nothing suggests that all
members of the merchant’s association were “small local businesses” or that such a
status was a lynchpin for standing.
In both City of Laredo and Texas Propane, the supreme court focused on the
“threat of prosecution and the fines imposed.” Id. at 798. In City of Laredo, the
challenged ordinance imposed monetary penalties of up to $2,000 per violation plus
court costs and expenses. Id. at 796 n.23. In Texas Propane, the challenged
ordinances imposed monetary penalties for a violation that ranged from $500 to
$2,000 per day. Id. at 794. In both cases, the supreme court concluded that these
“substantial per-violation” fines threatened irreparable injury to the challengers’
vested property rights. Similarly, in this case the challenged ordinance imposes a
fine not to exceed $500 and provides that each day that a violation occurs is a
separate offense. Austin, Tex. Code § 4-12-26. Thus, following both City of Laredo
and Texas Propane, we conclude that TitleMax has shown a threatened irreparable
injury to its vested property rights.
21
In sum, we conclude that City of Laredo and Texas Propane are
indistinguishable. Because TitleMax has shown a threatened irreparable injury to its
vested property rights and because the “essence” of its claims is not a “criminal law
matter” outside a Texas civil court’s subject-matter jurisdiction, we hold that the trial
court erred in granting the City’s Plea to the Jurisdiction and dismissing TitleMax’s
claims.
CONCLUSION
Because the civil district court has subject-matter jurisdiction, we reverse the
trial court’s order dismissing TitleMax’s claims and remand the case for further
proceedings.
Sherry Radack
Chief Justice
Panel consists of Chief Justice Radack and Justices Rivas-Molloy and Guerra.
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