$30 Million Lawsuit Against Dallas Revived

DALLAS (CN) – A Texas appeals court reinstated the bulk of a natural gas driller’s $30 million lawsuit against Dallas, alleging a bait-and-switch scheme in which the city accepted money for mineral rights but denied the necessary drilling permits.

In its 3-0 ruling Tuesday, a panel with the Fifth Court of Appeals in Dallas reversed the trial court’s dismissal of Trinity East Energy’s tort, breach of contract and declaratory relief claims. The firm sued the city in February 2014 in Dallas County Court after it paid Dallas $19 million for oil and gas mineral rights on 3,600 acres of city-owned land northwest of downtown.

Trinity claims the city disregarded its “constitutional and contractual obligations” when its Planning Commission rejected the required permit applications in March 2013. Trinity appealed to the City Council, which also rejected the permits.

Trinity claims it has spent $30 million relying on the city’s promises and has “lost hundreds of millions more in lost profits.”

Writing for the Fifth Court, Justice Elizabeth Lang-Myers rejected Dallas’s claim of governmental immunity. She concluded the city engaged in a proprietary function instead of a governmental function when it leased the mineral rights.

“Trinity alleged that the city was suffering a budgetary shortfall and was seeking sources of additional revenue,” the 16-page opinion states. “A city employee testified that the purpose of the leases was ‘developing the city’s minerals in a safe and efficient manner that both protects the public safety and promotes the maximum revenue for the city.’ These functions would benefit the residents within the city’s corporate limits, but they would not benefit the public at large, that is, the state.”

Nor was Lang-Myers persuaded by Dallas’s argument that Trinity’s real gripe was with the permit denials, which Dallas considers “garden variety” zoning denials. It unsuccessfully argued that Trinity cannot have a complaint “centered directly on a governmental function” that splits “various aspects of the operation and recharacterize some of them as proprietary.”

The appeals court wrote in its judgment: “We REVERSE that portion of the trial court’s order that granted Appellant/Cross-Appellee City of Dallas’s plea to the jurisdiction on Appellee/Cross-Appellant Trinity East Energy, LLC’s claims for breach of contract, declaratory judgment, common law and statutory fraud, fraud by nondisclosure, promissory estoppel, negligent misrepresentation, and attorney’s fees, and REMAND those claims to the trial court for further proceedings consistent with this opinion. We AFFIRM the trial court’s March 18, 2016 order denying the City of Dallas’s plea to the jurisdiction on Trinity East Energy, LLC’s claim for inverse condemnation.”