Houston Belt & Terminal Railway Co., Bnsf Railway Co., and Union Pacific Railroad Co. v. City of Houston, Texas and Daniel Krueger, in His Official Capacity as Director of Public Works and Engineering, 487 S.W.3d 154

Background

In 2011 Houston adopted a drainage-fee ordinance charging properties for drainage service based on square feet of "impervious surface" on "benefitted property."
The ordinance assigns administration to the Director of Public Works (Daniel Krueger) and defines "benefitted property," "impervious surface," and prescribes that impervious area "shall be determined on the basis of digital map data ... or other similar reliable data as shall be determined by [the director]."
Krueger assessed roughly $3 million annually against three railroads by classifying most of their acreage as benefitted and impervious using an aerial-image ("brown/green") method rather than Houston’s digital map data.
The railroads requested verification, lost at administrative review, and sued the City and Krueger in his official capacity alleging ultra vires acts and seeking prospective relief; the trial court dismissed for lack of jurisdiction on governmental-immunity grounds.
The court of appeals held the railroads stated an ultra vires claim as to "benefitted property" but not as to "impervious surface" (finding the latter within the director’s discretion).
The Texas Supreme Court granted review to clarify whether limited/discretionary acts done "without legal authority" can be challenged as ultra vires and whether the railroads sufficiently pleaded ultra vires claims for both determinations.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether an officer’s exercise of limited discretion can be challenged as ultra vires when alleged to be "without legal authority"	Railroads: Limited discretion is reviewable if the officer exceeded the statutory/ordinance bounds or acted in conflict with law	City: Any act within the director’s discretionary authority under the ordinance is immune from ultra vires suit	The Court: Ultra vires suits may challenge acts of limited discretion when the officer acts beyond granted authority or contrary to the law; immunity protects only absolute, unconstrained discretion
Whether Krueger’s "benefitted property" determinations were ultra vires	Railroads: Properties that discharge into natural bayous not owned/controlled by the city are not "benefitted" under the ordinance; Krueger’s classifications violated the ordinance	City: Administration authority allows the director to determine which properties are benefitted; his decision is discretionary	Held: Pleadings sufficiently allege Krueger acted contrary to the ordinance’s definition of "benefitted property," so the claim is viable; affirming court of appeals on this point
Whether Krueger’s "impervious surface" determinations were ultra vires because he used aerial imagery rather than digital map data	Railroads: The ordinance requires digital map data or "similar reliable data"; aerial brown/green method is dissimilar and unreliable and produced grossly inflated impervious area	City: The ordinance grants the director authority to select data and exercise judgment; such mistakes are immune	Held: The pleadings plausibly allege Krueger chose dissimilar/unreliable data in violation of the ordinance’s constraints; ultra vires claim as to impervious surface survives dismissal
Proper scope/meaning of "as shall be determined by [the director]" in data-selection clause	Railroads: That clause is constrained by the ordinance’s explicit reference to digital map data and requires data "similar" and "reliable"	City: The clause gives the director discretion to choose methods and data	Held: The clause permits discretion but is limited — director must use data similar in substance and fit to be relied upon; he may not adopt methods that conflict with ordinance language

Key Cases Cited

Reata Const. Corp. v. City of Dallas, 197 S.W.3d 371 (Tex. 2006) (background on governmental immunity of political subdivisions)
Tooke v. City of Mexia, 197 S.W.3d 325 (Tex. 2006) (pragmatic purposes of immunity)
City of El Paso v. Heinrich, 284 S.W.3d 366 (Tex. 2009) (ultra vires suits challenge acts done "without legal authority")
Tex. Parks & Wildlife Dep’t v. Sawyer Trust, 354 S.W.3d 384 (Tex. 2011) (officer determinations that are judicial in nature may be subject to ultra vires review)
Klumb v. Houston Mun. Emps. Pension Sys., 458 S.W.3d 1 (Tex. 2015) (broad statutory grants of authority can limit judicial review absent a manifest conflict)
Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401 (Tex. 1997) (ultra vires doctrine distinguishing suits against officers from suits against the State)
IT-Davy, Inc. v. City of Austin, 74 S.W.3d 849 (Tex. 2002) (legislature is sole authority to waive sovereign immunity)
Rusk State Hosp. v. Black, 392 S.W.3d 88 (Tex. 2012) (immunity from suit implicates subject-matter jurisdiction)