90 F.4th 820
5th Cir.2024Background
- American Precision Ammunition, LLC (APA) entered into a Tax Abatement Agreement with the City of Mineral Wells, Texas, under which the City would gift APA $150,000 and ten years of tax abatements if APA relocated and invested at least $250,000 in improvements.
- Approximately a year after the agreement, the City revoked the contract, citing that the $150,000 gift was illegal under the Texas Constitution (Art. III, § 52(a)), which prohibits gratuitous payments of public funds.
- APA sued for breach of contract and also alleged violations of the Texas Open Meetings Act (TOMA), federal due process, and the Texas Constitution's due course of law clause.
- The district court dismissed all claims with prejudice, except the TOMA claim (dismissed as moot without prejudice), holding that the contract was illegal and thus void.
- APA appealed the district court’s decisions, asking the Fifth Circuit to reverse the dismissal and challenge the contract’s illegality.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Legality of the $150,000 payment | The payment was consideration for APA’s relocation and investment | The payment was a forbidden gratuitous gift under TX Constitution | The payment was a gratuitous gift; contract illegal and void |
| TOMA Violation | City council’s agenda lacked notice for contract revocation | No enforceable contract remained, so no relief possible | Dismissed as moot because contract is void |
| Due Process/ Due Course of Law | Contract created protectable property interests | No property interest from illegal contract | No property interest violated; claims fail |
| Motions for Reconsideration/Amend | District court abused discretion denying these motions | Contract’s illegality is clear; amendment futile | No abuse of discretion; contract is unambiguously void |
Key Cases Cited
- In re OCA, Inc., 552 F.3d 413 (5th Cir. 2008) (Texas law voids contracts that require illegal acts)
- Tex. Mun. League Intergovernmental Risk Pool v. Tex. Workers’ Comp. Comm’n, 74 S.W.3d 377 (Tex. 2002) (defines when public payments are non-gratuitous under TX Const. Art. III, § 52(a))
- Bell v. Eagle Mountain Saginaw Indep. Sch. Dist., 27 F.4th 313 (5th Cir. 2022) (Rule 12(b)(6) standards; plausibility and affirmative defenses)
- Pathfinder Oil & Gas, Inc. v. Great W. Drilling, Ltd., 574 S.W.3d 882 (Tex. 2019) (plain language principles for interpreting contracts)
- Mosley v. Tex. HHS Comm’n, 593 S.W.3d 250 (Tex. 2019) (due process claims under Texas law follow federal standards)