White Lion Holdings, LLC v. State

ACCEPTED
01-14-00104-CV
FIRST COURT OF APPEALS
HOUSTON, TEXAS
6/26/2015 4:38:07 PM
CHRISTOPHER PRINE
CLERK

No. 01-14-00104-CV

IN THE COURT OF APPEALS FILED IN
1st COURT OF APPEALS
FOR THE FIRST JUDICIAL DISTRICT OF TEXAS AT HOUSTON
HOUSTON, TEXAS
6/26/2015 4:38:07 PM
WHITE LION HOLDINGS, L.L.C., CHRISTOPHER A. PRINE
Clerk
Appellant,
V.

STATE OF TEXAS,
Appellee.

On Appeal from the 98th Judicial District Court of Travis County, Texas

STATE OF TEXAS’ RESPONSE TO APPELLANT’S
MOTION FOR PANEL REHEARING AND
MOTION FOR RECONSIDERATION EN BANC

GREG ABBOTT CRAIG J. PRITZLAFF
Attorney General of Texas Assistant Attorney General
State Bar No. 24046658
DANIEL T. HODGE craig.pritzlaff@texasattorneygeneral.gov
First Assistant Attorney General
LINDA B. SECORD
JOHN B. SCOTT Assistant Attorney General
Deputy Attorney General State Bar No. 17973400
for Civil Litigation linda.secord@texasattorneygeneral.gov

JON NIERMANN Environmental Protection Division
Chief, Environmental Protection P.O. Box 12548, MC-066
Division Austin, Texas 78711-2548
Tel: (512) 463-2012
Fax: (512) 320-0911

ATTORNEYS FOR THE STATE OF
TEXAS
June 26, 2015

 Table of Contents

TABLE OF CONTENTS ............................................................................................i

INDEX OF AUTHORITIES...................................................................................... v

STATEMENT OF THE CASE .................................................................................. 1

RESPONSE TO WHITE LION’S STATEMENT ON ORAL ARGUMENT .......... 2

STATEMENT OF THE FACTS ............................................................................... 2

A. Timeline of the Morello Matter .................................................................. 4

STANDARD OF REVIEW ....................................................................................... 6

A. Order of Severance ..................................................................................... 6

B. Traditional Motion for Summary Judgment............................................... 6

ARGUMENT AND AUTHORITIES ........................................................................ 7

I. White Lion has Waived its Arguments Regarding the District
Court’s Severance Order ............................................................................ 7

A. White Lion has Waited Until the Motion for Rehearing Stage to
Challenge the Severance Order ............................................................. 7

B. Trying to Avoid the Effect of its Waiver of the Severance Issue,
White Lion Claims it Must be Heard Now Because of
“Jurisdiction.” However, this is Not a Jurisdictional Claim that
may be Raised at Anytime. The District Court did Not Lack
Jurisdiction to Issue the Severance Order and, Therefore,
Challenges to that Order Must be Preserved and Presented on
Appeal.................................................................................................... 8

C. The Cases that White Lion Relies on Actually Demonstrate that
Severance is an Issue that can be Waived ........................................... 10

ii 

 D. White Lion’s Excuse for Not Earlier Challenging the Severance
is Disingenuous ................................................................................... 11

II. Even if the Court Determines White Lion did not Waive its
Arguments, the District Court’s Severance was Proper Because the
State’s Suit was Against Two Separate Parties that Each
Committed Independent Violations.......................................................... 13

A. Severance Orders, such as that Issued by the District Court in
this Case, are Common and Appropriate ............................................ 13

B. Section 7.102 of the Texas Water Code is Not Limited to a
Single Person Per Non-Compliant Event ............................................ 15

C. The Suits Against White Lion and Morello are Separate and
Distinct ................................................................................................ 18

D. There is No Apportionment of Liability under Section 7.102 of
the Texas Water Code ......................................................................... 20

III. The Severance was Proper and the Court Retains Jurisdiction to
Consider this Appeal ................................................................................ 20

IV. The Civil Penalties Assessed are not Unconstitutionally Excessive
and Penalties Assessed Against two Separate Parties is Not a
Double Recovery ...................................................................................... 21

A. The District Court Awarded Only the Minimum Penalty
Permitted by Section 7.102 of the Texas Water Code ........................ 21

B. That White Lion and Morello are Related Parties does not
Make a Recovery Against Each Party under Section 7.102 of
the Texas Water Code an Impermissible Double Recovery ............... 24

C. Severance did not Deprive the District Court an Opportunity to
Review the Individual Liability of Each Party.................................... 25

D. White Lion has not been Deprived of an Ability to Litigate its
Defense ................................................................................................ 26

iii 

 V. White Lion Provides No Basis to Overturn this Court’s Decision
Based on Arguments Concerning Estoppel, Waiver, and Laches
Defenses Properly Rejected by the District Court and Not
Previously Briefed to this Court ............................................................... 27

A. White Lion has Waived its Arguments Regarding Waiver,
Estoppel, and Laches ........................................................................... 27

B. White Lion’s Defenses were Considered and Properly Rejected
by the District Court ............................................................................ 28

1. The Limited Exception Applying Estoppel Against the
Government is Not Applicable Here .............................................. 30

C. White Lion’s Renewed Assertions About the TCEQ’s
Obligations with Respect to Financial Assurance Mechanisms
are Wrong ............................................................................................ 32

D. White Lion’s Assertion that the TCEQ Interfered with White
Lion’s Discussions with the U.S. Environmental Protection
Agency are Erroneous ......................................................................... 33

VI. White Lion Improperly Cites to Documents Not in the Appellate
Record ....................................................................................................... 34

CONCLUSION AND PRAYER ............................................................................. 37

CERTIFICATE OF COMPLIANCE ....................................................................... 39

CERTIFICATE OF SERVICE ................................................................................ 39

iv 

 Table of Authorities
Cases Pages

Allright, Inc. v. Pearson,
735 S.W.2d 240 (Tex. 1987) ........................................................................... 7

Arredondo v. City of Dallas,
79 S.W.3d 657 (Tex. App.—Dallas 2002, pet. denied) ................................ 14

Capitol Rod & Gun Club v. Lower Colo. River Auth.,
622 S.W.2d 887 (Tex. App.—Austin 1981, writ ref’d n.r.e.) ....................... 29

Chapman v. Mitsui Eng’g and Shipbuilding Co.,
781 S.W.2d 312 (Tex. App.—Houston [1st Dist.] 1989, writ denied) ......... 35

Cherokee Water Co. v. Forderhause,
641 S.W.2d 522 (Tex. 1982) ......................................................................... 11

City of Hutchins v. Prasifka,
450 S.W.2d 829 (Tex. 1970). ........................................................................ 31

City of White Settlement v. Super Wash, Inc.,
198 S.W.3d 770 (Tex. 2006) ......................................................................... 28

Culver v. Smith,
74 S.W.2d 754 (Tex. Civ. App.—Austin 1934, writ ref’d)........................... 21

Dalisa, Inc. v. Bradford,
81 S.W.3d 876 (Tex. App.—Austin 2002, no pet.) ...................................9, 10

Daniels v. Walters,
No. 03-03-00375-CV, 2004 WL 741672 (Tex. App.—Austin,
April 8 2004, pet. denied) (mem.op) ............................................................. 35

Downer v. Aquamarine Operators, Inc.,
701 S.W.2d 238 (Tex. 1985) ........................................................................... 6

Enter. Leasing Co. of Houston v. Harris Cnty. Toll Rd. Auth.,
356 S.W.3d 85 (Tex. App.—Houston [1st Dist.] 2011, no pet.) ............. 29, 31

v 

F.F.P. Operating Partners L.P. v. Duenez,
237 S.W. 3d 680 (Tex. 2007) ........................................................................ 20

Graham v. Pazos de la Torre,
821 S.W.2d 162 (Tex. App.—Corpus Christi 1991, writ denied)................. 36

Guar. Fed. Sav. Bank v. Horseshoe Operating Co.,
793 S.W.2d 652 (Tex. 1990) ...............................................6, 9, 10, 11, 14, 19

Guidry v. Nat’l Freight, Inc.,
944 S.W.2d 807 (Tex. App.—Austin 1997, no writ.) .............................11, 14

Leyendecker & Assocs., Inc. v. Wechter,
683 S.W.2d 369, 375 (Tex. 1984) ................................................................. 17

Morgan v. Compugraphic Corp.,
675 S.W.2d 729 (Tex. 1984) ......................................................................... 14

N. H. Ins. Co. v. Tobias,
80 S.W.3d 146 (Tex. App.—Austin 2002, no pet.) ....................................... 35

Newell Recycling Co., v. E.P.A.,
231 F.3d 204 (5th Cir. 2000) ......................................................................... 21

Nwokedi v. Unlimited Restoration Specialists, Inc.,
428 S.W.3d 191, (Tex. App.—Houston [1st Dist.] 2014, pet. denied) ......... 17

Pennington v. Singleton,
606 S.W.2d 682 (Tex. 1980) ...................................................................21, 22

Pierce v. Reynolds,
329 S.W.2d 76 (Tex. 1959) ........................................................................... 11

Pirtle v. Gregory,
629 S.W.2d 919 (Tex. 1982). .......................................................................... 8

Provident Life & Accident Ins. Co. v. Knott,
128 S.W.3d 211 (Tex. 2003) ..................................................................... 6, 28

vi 

R. Commc’ns, Inc. v. Sharp,
875 S.W.2d 314 (Tex. 1994) ......................................................................... 26

Richards v. Comm’n for Lawyer Discipline,
35 S.W.3d 243 (Tex. App.—Houston [14th Dist.] 2000, no pet.) ................ 35

S.O.C. Homeowners Ass’n v. City of Sachse,
741 S.W.2d 542 (Tex. App.—Dallas 1987, no writ)..................................... 19

Seguin v. Bexar Appraisal Dist.,
373 S.W.3d 699 (Tex. App.—San Antonio 2012, pet. denied) .................... 29

Sherrod v. Moore,
819 S.W.2d 201 (Tex. App.—Amarillo 1991, no writ) .................................. 7

State v. City of Greenville,
726 S.W.2d 162 (Tex. App.—Dallas 1986, writ ref’d n.r.e.) ........................ 23

State v. Durham,
860 S.W.2d 63 (Tex. 1993) ........................................................................... 28

State v. Laredo Ice Co.,
73 S.W. 951 (Tex. 1903) .........................................................................21, 22

State v. Malone Serv. Co.,
853 S.W.2d 82 (Tex. App.—Houston [14th Dist.] 1993,
writ denied) ........................................................................................16, 17, 25

Stroud v. VBFSB Holdings,
901 S.W.2d 657 (Tex. App.—San Antonio 1995, writ denied),
opinion withdrawn and superseded, 917 S.W.2d 75
(Tex. App.—San Antonio 1996) ................................................................... 11

Tex. Cent. R. Co. v. Hannay-Frerichs & Co.,
142 S.W. 1163 (Tex. 1912) .....................................................................21, 22

Tex. Dep’t of Transp. v. A.P.I. Pipe and Supply, LLC,
397 S.W.3d 162 (Tex. 2013) ......................................................................... 31

vii 

Tex. Mun. Power Agency v. Public Util. Comm’n of Tex.,
150 S.W.3d 579, (Tex. App.—Austin 2004),
rev’d in part sub nom. on other grounds, 253 S.W.3d 184 (Tex. 2007). ........ 7

Tex. First. Nat’l Bank v. Ng,
167 S.W.3d 842 (Tex. App.—Houston [14th Dist.] 2005),
pet. granted, judgm’t vacated, remanded by agr. (Sept. 23, 2005) ............... 36

United States v. Bajakajian,
524 U.S. 321 (1998)....................................................................................... 22

Washington v. Walker Cnty.,
708 S.W.2d 493 (Tex. App.—Houston [1st Dist.] 1986, writ ref’d n.r.e.) ..... 7

Whitney Stores, Inc. v. Summerford,
280 F.Supp. 406 (D.S.C. 1968), aff’d 393 U.S. 9 (1968).............................. 24

Statutes

Tex. Gov’t Code
§ 311.005(2) ................................................................................................... 16

Tex. Water Code
§ 5.013 ........................................................................................................... 29
§ 7.102 ....................................................................................................passim
§ 7.032 ........................................................................................................... 15
§ 27.101 ......................................................................................................... 16

Rules

30 Tex. Admin. Code § 305.64(g) ........................................................................... 32

Tex. Civ. Prac. & Rem. Code
§ 51.014 ........................................................................................................... 9

Tex. R. Civ. P.
§ 166a(c) .......................................................................................................... 6

Tex. R. App. P.
§ 34.1 ............................................................................................................. 35
viii 

 § 34.5 ............................................................................................................. 35
§ 34.6 ............................................................................................................. 35
§ 49.6 ............................................................................................................... 4

ix 

TO THE HONORABLE FIRST COURT OF APPEALS:

The Appellee, State of Texas opposes Appellant, White Lion Holdings,

L.L.C.’s Amended Motion for Panel Rehearing and revised Motion for

Reconsideration En Banc.

STATEMENT OF THE CASE

White Lion Holdings, L.L.C. (“White Lion”) is attempting to utilize the

motion for rehearing and reconsideration procedures to revise and redirect this

appeal to include irrelevant issues never before raised, considered, or briefed before

this Court issued its opinion on April 9, 2015. The new issues asserted by White

Lion include (1) a multi-phased challenge of the District Court’s order severing

White Lion from a case pending against another party, Bernard Morello; 1 and (2) a

restatement of arguments asserted to the District Court, but not to this Court,

concerning various affirmative defenses (estoppel, waiver, laches) pled by White

Lion and properly rejected by the District Court.2 None of these issues merits

reversal of this Court’s opinion.

1
White Lion presents the severance issue as several different issues in its revised Motion for
Reconsideration En Banc, and as one issue with multiple subparts in its Amended Motion for Panel
Rehearing. Nevertheless, because the arguments concerning severance are essentially identical
between White Lion’s motions, for economy, the State shall respond to each of White Lion’s
arguments in one consolidated response.
2
White Lion does not include the affirmative defense issue in its revised Motion for
Reconsideration En Banc.

State’s Response to White Lion’s Motion for Panel Rehearing Page 1
and Motion for Reconsideration En Banc
 RESPONSE TO WHITE LION’S STATEMENT ON ORAL ARGUMENT

Oral argument is not necessary. White Lion’s complaints amount to nothing

more than an attempt to continue its delay coming into compliance. White Lion’s

motions for rehearing and reconsideration are based on points of error that have been

long waived by White Lion, are based on erroneous and incorrect characterizations

of the State’s suit against two separate parties, and concern issues to be decided in a

separate case pending against Bernard Morello, should Morello choose to appeal that

matter. Nevertheless, if the Court believes that oral argument would be helpful and

grants White Lion’s request for oral argument, the State requests to be heard as well.

STATEMENT OF FACTS

After White Lion ignored the Texas Commission on Environmental Quality’s

(“TCEQ’s”) attempts to obtain the company’s compliance, the matter was referred

to the Attorney General and the State brought suit in 2006. Bernard Morello was

added to the lawsuit in 2007. On September 19, 2013, the State obtained summary

judgment against White Lion for White Lion’s failure to comply with a Compliance

Plan that, at White Lion’s request, was transferred to it by the TCEQ in July 2004.

(CR 117-171). The Compliance Plan is part of a regulatory scheme governing long-

term post closure care of a series of hazardous waste impoundments at White Lion’s

facility. (CR 86-115, CR 170, and CR 192-193). Contamination from the hazardous

waste impoundments leaked from the impoundments into groundwater at the

State’s Response to White Lion’s Motion for Panel Rehearing Page 2
and Motion for Reconsideration En Banc
facility. (CR 192). The Compliance Plan specifies the means and methods for

treating and monitoring the groundwater contamination. (CR 117-148, CR 171, and

CR 192-193.) For nearly ten years, White Lion ignored completely its obligations

under the Compliance Plan. (CR 191-197).

When the District Court granted summary judgment, it also granted the State’s

conditional motion for severance (CR 554), which was included in the State’s

motion for summary judgment (CR 38-39), thus severing the proceeding against

White Lion from the proceeding pending against Bernard Morello, the sole owner

and operator of White Lion. The State’s motion for severance was never challenged

by White Lion at the District Court – not in White Lion’s response to the State’s

motion for summary judgment (CR 278-286), not at the hearing on the motion for

summary judgment, and not in White Lion’s motion for new trial (CR 555-566).

White Lion also did not raise the severance as an issue or point of error in its initial

or reply briefs in this appeal. On October 24, 2014, White Lion filed its initial brief

in this appeal. The State filed its response brief in this appeal on December 18, 2014,

and, on January 9, 2015, White Lion filed its final reply brief.

After requesting and receiving a 30 day extension of time to file its motion for

rehearing, White Lion filed its Motions for Panel Rehearing and Reconsideration En

State’s Response to White Lion’s Motion for Panel Rehearing Page 3
and Motion for Reconsideration En Banc
Banc on May 26, 2015. 3 White Lion filed an Amended Motion for Panel Rehearing

(“Motion for Rehearing”) and revised Motion for Reconsideration En Banc

(“Motion En Banc”) on June 12, 2015 and again on June 15, 2015. 4 The arguments

presented by White Lion in the multiple filings are generally similar, and although

they are expanded upon in each filing, the State believes the core of White Lion’s

arguments have been carried forward and refined through each subsequent motion,

including those filed on June 15. Therefore, the State is responding only to White

Lion’s last filed motions.

A. Timeline of the Morello Matter

To correct various factual omissions, namely White Lion’s assertions that it

“did not anticipate that the State” would continue its case against Morello (Motion

En Banc at 5), the State offers the following for contextual reference.

After the District Court granted summary judgment against White Lion,

discovery and settlement discussions continued in the Morello matter, including

3
On May 22, 2015, White Lion filed a request for additional time to file the motions for rehearing
and also filed a motion to supplement the record. Before the State could respond to White Lion’s
request for more time, this Court granted White Lion additional time to file the motions for
rehearing and reconsideration, until June 12, 2015. On May 28, 2015, the State filed its opposition
to White Lion’s motion to supplement the record.
4
White Lion did not seek leave to refile its motions on June 15, and the June 15 filings are therefore
untimely and should be struck. Tex. R. App. P. 49.6. Furthermore, the certificates of service in
the June 15 amended filings assert that copies of the briefs were served on counsel for the State by
email on June 12. This is wrong. The State did not receive an e-filing notification from e-
FileTexas until June 15. Nevertheless, the only changes between the June 12 and June 15
submissions appear to be to the organization and wording of various headings in the briefs.

State’s Response to White Lion’s Motion for Panel Rehearing Page 4
and Motion for Reconsideration En Banc
additional written discovery, culminating with the deposition of Morello in

September 2014.5 The deposition transcript of Morello was certified on October 31,

2014, and three weeks later, on November 21, 2014 (seven weeks before White

Lion’s reply brief in this appeal was filed), the State filed a motion for summary

judgment against Morello, seeking a hearing on December 16, 2014. However, the

hearing was delayed when one of Morello’s many counsel abruptly left the case

(who was also counsel assisting in White Lion). See e.g., Appellant Counsel’s

Motion to Withdraw, filed December 3, 2014. The hearing was ultimately held on

February 19, 2015. The trial court released a letter granting the summary judgment,

however, Morello resisted entry of a judgment. On April 14, after additional briefing

and a hearing to consider Morello’s objections, the trial court entered final judgment.

On May 14, Morello filed a motion for new trial, to which the State responded. The

trial court then denied Morello’s motion for new trial.

5
The deposition was delayed by Morello’s refusal to agree to a date. Morello also sought to quash
the deposition at the final hour.

State’s Response to White Lion’s Motion for Panel Rehearing Page 5
and Motion for Reconsideration En Banc
 STANDARD OF REVIEW

A. Order of Severance

A trial court has broad discretion to consider severance of joined cases. When

reviewing a trial court’s decision to grant severance, this Court considers whether

the trial court has abused its discretion. Guar. Fed. Sav. Bank v. Horseshoe

Operating Co., 793 S.W.2d 652, 658 (Tex. 1990). A trial court abuses its discretion

when it acts “without reference to any guiding rules and principles.” Downer v.

Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985).

B. Traditional Motion for Summary Judgment

When, as in this case, the trial court’s order does not specify the grounds for

granting final summary judgment, the trial court’s order should be affirmed if any

of the grounds presented in the motion is meritorious. See Provident Life & Accident

Ins. Co. v. Knott, 128 S.W.3d 211, 216 (Tex. 2003). The reviewing court may

consider only evidence and arguments expressly presented at the summary judgment

hearing. Tex. R. Civ. P. 166a(c).

State’s Response to White Lion’s Motion for Panel Rehearing Page 6
and Motion for Reconsideration En Banc
 ARGUMENT AND AUTHORITIES

I. White Lion has Waived its Arguments Regarding the District Court’s
Severance Order

A. White Lion has Waited Until the Motion for Rehearing Stage to
Challenge the Severance Order

White Lion did not challenge the State’s Conditional Motion for Severance or

the District Court’s Order of Severance. The first time White Lion raised severance

as an issue or point of error in this appeal was in its motions for rehearing and

reconsideration. “A point of error not preserved, is not before the appellate court for

review.” Allright, Inc. v. Pearson, 735 S.W.2d 240, 240 (Tex. 1987). An issue or

assignment of error raised for the first time in an appellant’s motion for rehearing in

the Court of Appeals is too late to be considered. See Washington v. Walker Cnty.,

708 S.W.2d 493, 497 (Tex. App.—Houston [1st Dist.] 1986, writ ref’d n.r.e.);

Sherrod v. Moore, 819 S.W.2d 201, 205 (Tex. App.—Amarillo 1991, no writ) (“It

is well established that points of error raised for the first time in a motion for

rehearing are too late and will not be considered.”). A motion for rehearing does not

afford a party an opportunity to raise new issues after the case has been briefed,

argued, and decided on other grounds unless the error is fundamental.” Tex. Mun.

Power Agency v. Public Util. Comm’n of Tex., 150 S.W.3d 579, 592 n.13 (Tex.

App.—Austin 2004), rev’d in part sub nom. on other grounds, 253 S.W.3d 184 (Tex.

2007). “Fundamental error exists ‘in those rare instances in which the record shows

State’s Response to White Lion’s Motion for Panel Rehearing Page 7
and Motion for Reconsideration En Banc
the court lacked jurisdiction or that the public interest is directly and adversely

affected as that interest is declared in the statutes or the Constitution of Texas.’” Id.

citing Pirtle v. Gregory, 629 S.W.2d 919, 920 (Tex. 1982).

B. Trying to Avoid the Effect of its Waiver of the Severance Issue, White
Lion Claims it Must be Heard Now Because of “Jurisdiction.” However,
this is Not a Jurisdictional Claim that may be Raised at Anytime. The
District Court did Not Lack Jurisdiction to Issue the Severance Order
and, Therefore, Challenges to that Order Must be Preserved and
Presented on Appeal.

White Lion asserts that severance was fundamental error, invalid, and void,

depriving this Court of jurisdiction and making rehearing essential so that the Court

can “reexamine” its jurisdiction and “resolve the procedural dilemma” of whether to

dismiss for lack of jurisdiction or remand. (Motion En Banc at 5, 12-16). The terms

“fundamental error,” “invalid,” and “void” are buzzwords associated with

judgments issued by courts lacking jurisdiction. Because jurisdiction can be raised

at any time, including in a motion for rehearing, White Lion hopes to avoid being

deemed to have waived its complaint about severance. And by coupling these

buzzwords with concerns about this Court’s jurisdiction, White Lion seeks to

heighten the sense that the Court must look at severance, even though severance was

not objected to, not identified as an issue on appeal, not briefed—not even

mentioned—until now. But White Lion has conflated two distinctly different types

of jurisdiction—jurisdiction in the trial court and jurisdiction in this Court—into a

single, muddled, attempt to grab the Court’s attention.

State’s Response to White Lion’s Motion for Panel Rehearing Page 8
and Motion for Reconsideration En Banc
 There is no question that the District Court had jurisdiction over the severance

issue. Indeed, severance is committed to the sound discretion of district courts and

overturned only for abuse of discretion. Guar. Fed. Sav. Bank, 793 S.W.2d at 658.

Even if the severance was erroneous (an issue to be preserved for and pursued on

appeal), the District Court’s severance order was not issued without jurisdiction. It

is not a void order that can be attacked at any time. White Lion waived any

complaint about that order and cannot raise it in its rehearing motions.

Instead of focusing on the District Court’s jurisdiction, White Lion relies on

cases involving the jurisdiction of the Courts of Appeals, which is limited to review

of final judgments and those interlocutory orders for which an appeal is expressly

provided, such as those listed in Section 51.014 of the Civil Practices and Remedies

Code. According to White Lion, those cases stand for the proposition that an

appellate court may lack jurisdiction over a matter improperly severed, such as

happened in Dalisa, Inc. v. Bradford, 81 S.W.3d 876 (Tex. App.—Austin 2002, no

pet.) when the trial court severed the Plaintiff’s declaratory judgment claims from

the attorney’s fees to be assessed in accordance with the judgment on those claims.

Id. at 880. However, Dalisa does not stand for the proposition that the trial court in

Dalisa lacked jurisdiction to issue the erroneous severance, any more than the

District Court in this case (though here, severance was proper). The severance in

State’s Response to White Lion’s Motion for Panel Rehearing Page 9
and Motion for Reconsideration En Banc
Dalisa was error, but it was not void. White Lion cites no case in which severance

was allowed to be raised only at the motion for rehearing stage.

C. The Cases that White Lion Relies on Actually Demonstrate that
Severance is an Issue that can be Waived

White Lion relies heavily on Guar. Fed. Sav. Bank, 793 S.W.2d 652. But that

reliance is misplaced on the question of whether complaints about severance can be

waived. Although it reversed most of the judgment and remanded to the trial court,

the Supreme Court of Texas expressly affirmed “that portion of the judgment of the

Fifth Court of Appeals” regarding severance. Id. at 659. The Supreme Court is

referring to the Fifth Court of Appeals’ overruling of Guaranty’s third point of error,

which claimed that the trial court erred in severing one set of claims against Guaranty

from the claims against third-party defendants. See Guar. Fed. Sav. & Loan Ass’n

v. Horseshoe Operating Co., 748 S.W.2d 519, 530-31 (Tex. App.—Dallas 1988,

writ granted), aff’d in part, rev’d in part sub nom. Guar. Fed. Sav. Bank v. Horseshoe

Operating Co., 793 S.W.2d 652 (Tex. 1990). The Fifth Court held that even though

Guaranty claimed that the severance prejudiced it,

Guaranty, however, filed no response or objection to Horseshoe’s
motion for severance. We conclude that if Guaranty considered
severance would act to its prejudice, Guaranty should have made that
fact known to the trial court before it ordered severance. Hence, we
conclude that the trial court did not abuse its discretion in ordering
severance when Guaranty never told the trial court that severance acts
to Guaranty’s prejudice. Consequently, we conclude that the trial court
did not err in ordering severance . . .
Id. at 531.
State’s Response to White Lion’s Motion for Panel Rehearing Page 10
and Motion for Reconsideration En Banc
 Although the analysis did not involve waiver, in another case relied on by

White Lion, the appellate court noted that “[t]he severance was granted over the

objections of appellant.” Stroud v. VBFSB Holdings, 901 S.W.2d 657, 658

(Tex. App.—San Antonio 1995, writ denied), opinion withdrawn and superseded,

917 S.W.2d 75 (Tex. App.—San Antonio 1996).

Complaints about severance can be—and in this case were—waived. That

core principle was noted, albeit in dicta, more than a half century ago when the

Supreme Court of Texas stated that “[t]he rule against splitting causes of action . . .

is for the benefit of and may be waived by the defendant.” Pierce v. Reynolds,

329 S.W.2d 76, 78 (Tex. 1959). This Court should not accept White Lion’s

invitation to disturb that principle.

D. White Lion’s Excuse for Not Earlier Challenging the Severance is
Disingenuous

Trial courts have jurisdiction to issue severance orders. Indeed, severance is

a matter committed to the trial court’s discretion and may not be disturbed on appeal

absent a showing of abuse of discretion. See Guar. Fed. Sav. Bank, 793 S.W.2d at

658. There was no fundamental error here. It is common (and expected) to sever a

single defendant from a case with multiple defendants when summary judgment is

granted against one defendant so that case may be appealed. See Cherokee Water

Co. v. Forderhause, 641 S.W.2d 522, 525-526 (Tex. 1982); and Guidry v. Nat’l

Freight, Inc., 944 S.W.2d 807, 812 (Tex. App.—Austin 1997, no writ.) (“Where

State’s Response to White Lion’s Motion for Panel Rehearing Page 11
and Motion for Reconsideration En Banc
summary judgment in favor of a single defendant is proper in a case with multiple

defendants, severance of that claim is also proper so that it may be appealed.”).6

White Lion had multiple opportunities to challenge the severance order at the

trial court and in this appeal, and passed on them each time. The only party that

prevented this Court from earlier addressing the severance was White Lion. As an

excuse for not previously addressing the issue, White Lion asserts it “did not

anticipate that the State” would continue to press its case against Morello “because

at the time of briefing [this appeal] the State had not filed its” motion for summary

judgment against Morello. (Motion En Banc at 4, 5, and 8; Motion for Rehearing at

2, 4, and 5). This is a misstatement.

White Lion was not ignorant of the State’s intentions regarding its case

pending against Morello. White Lion and its counsel (the same counsel representing

Morello) were aware of the State’s position before and throughout its appeal,

including during briefing of issues. The claims against Morello remained pending

in the trial court after White Lion was severed. Morello was served with discovery

early in the case and again in 2014, including the deposition of Morello in late

6
White Lion also asserts that the severance was untimely because Tex. R. Civ. P. 41 prohibits
severance after the case is submitted to the trier of fact. (Motion En Banc at 8, fn. 2). White Lion
cites to no authority for this erroneous argument. If true, the legion of decisions affirming
severance in multi-party cases after summary judgment would be void. Furthermore, parties
seeking summary judgment in multi-party cases would have to first sever, then obtain summary
judgment. If they did not prevail on summary judgment, they might have to seek to rejoin the
case, which is hardly an efficient use of judicial resources.

State’s Response to White Lion’s Motion for Panel Rehearing Page 12
and Motion for Reconsideration En Banc
September 2014. Finally, with specific respect to White Lion’s statement that it was

unaware of the State’s motion for summary judgment against Morello during this

appeal, that motion was filed in November 2014,7 some seven weeks before White

Lion filed its final reply brief in this appeal.

Summary judgment against White Lion was proper, and the District Court did

not commit fundamental error or abuse its discretion in severing the State’s claims

against White Lion from those against Bernard Morello. White Lion never

challenged nor raised the issue of improper severance until its motions for rehearing

and reconsideration. Therefore, White Lion has waived this issue on appeal.

II. Even if the Court Determines White Lion did not Waive its Arguments,
the District Court’s Severance was Proper Because the State’s Suit was
Against Two Separate Parties that Each Committed Independent
Violations

A. Severance Orders, such as that Issued by the District Court in this Case,
are Common and Appropriate

Rule 41 of the Texas Rules of Civil Procedure expressly provides that “[a]ny

claim against a party may be severed and proceeded with separately.” The rule

affords trial courts broad discretion in the matter of severance, and the trial court’s

7
White Lion’s implied notion that the State waited in the weeds to file its motion against Morello
until after White Lion filed its initial brief in this appeal is erroneous. The State filed its motion
in the other case as soon as the State was able to assemble affidavits and other evidence, following
Morello’s deposition in late September (including the final deposition transcript which was not
certified until October 31, 2014, a week after White Lion’s initial brief in this matter was filed).
The timing of the filing of White Lion’s initial brief and other briefs in this appeal was irrelevant
to the Morello matter.

State’s Response to White Lion’s Motion for Panel Rehearing Page 13
and Motion for Reconsideration En Banc
ruling will not be disturbed unless it has abused its discretion. See Guar. Fed. Sav.

Bank, 793 S.W.2d at 658. Courts typically allow single defendants to be severed

from a case with multiple defendants when summary judgment is proper and granted

as to one defendant. See e.g., Morgan v. Compugraphic Corp., 675 S.W.2d 729,

733-734 (Tex. 1984) (finding no error in severance of judgment entered against one

of two defendants in tort case alleging indivisible injury against two wrongdoers);

Guidry, 944 S.W.2d at 812 (no error in severance of one summary judgment entered

in favor of one defendant in tort case brought by plaintiff against multiple defendants

for single injury); and Arredondo v. City of Dallas, 79 S.W.3d 657, 665 (Tex. App.—

Dallas 2002, pet. denied) (severance of one plaintiff that obtained summary

judgment in case involving sixteen plaintiffs, all with identical claims against the

City, was proper).

Courts may also examine the following three factors when determining if

severance is proper: (1) the controversy involves more than one cause of action; (2)

the severed claim is one that would be the proper subject of a lawsuit if

independently asserted; and (3) the severed claim is not so interwoven with the

remaining action that they involve the same facts or issues. See Guar. Fed. Sav.

Bank, 793 S.W.2d at 658. White Lion relies upon these factors and, to make them

fit, argues that the claims against Morello and White Lion are too interwoven to be

separated and that severance improperly splits a single statutory violation that is

State’s Response to White Lion’s Motion for Panel Rehearing Page 14
and Motion for Reconsideration En Banc
based on identical conduct. (Motion En Banc at 2). White Lion also asserts that the

State did not seek judgment against Morello “based on his individual, independent

conduct” and that it was “seeking the identical statutory penalties that were awarded

in the judgment against White Lion, based upon the same violations.” (Motion En

Banc at 4). This is a significant mischaracterization of the State’s action.

B. Section 7.102 of the Texas Water Code is Not Limited to a Single Person
Per Non-Compliant Event

White Lion and Morello are two different persons, and each took distinct and

separate actions or inactions to cause the violations alleged by the State. The core

of the State’s claim against each party is based on Section 7.102 of the Texas Water

Code, which provides: 8

A person who causes, suffers, allows, or permits a violation of a statute,
rule, order, or permit relating to any other matter within the
commission's jurisdiction to enforce, ... shall be assessed for each
violation a civil penalty not less than $50 nor greater than $25,000 for
each day of each violation as the court or jury considers proper. Each
day of a continuing violation is a separate violation.

Tex. Water Code. § 7.102 (emphasis added). The provision imposes penalties on

individual persons rather than assessing a collective penalty per non-compliant

event. Each actor proven to have caused, suffered, allowed, or permitted a violation

is subject to a penalty.

8
The State also had a claim for injunctive relief under Section 7.032 of the Texas Water Code,
which it chose to pursue against White Lion only.

State’s Response to White Lion’s Motion for Panel Rehearing Page 15
and Motion for Reconsideration En Banc
 White Lion interprets Section 7.102 as limiting the State to enforcement

against only one single person. (Motion En Banc at 11). This is an erroneous

interpretation. The term “person” includes “‘a corporation…and any other legal

entity,’ which includes natural persons. Tex. Gov’t Code Ann. § 311.005(2).” State

v. Malone Serv. Co., 853 S.W.2d 82, 84 (Tex. App.—Houston [14th Dist.] 1993,

writ denied). The statute encompasses all persons that commit a violation, and each

may be held individually liable for their own acts. The State may properly bring

separate enforcement actions for a non-compliant event against each and every actor

responsible, including a corporate entity and its principals. See Malone Serv. Co.,

853 S.W.2d at 83-85 (affirming judgment against a corporation, its president, and its

plant manager for their actions participating in or directing violations of a deep well

injection permit; the relevant statutory provision at the time, Tex. Water Code

§ 27.101, is similar to § 7.102 in that liability for a penalty is triggered when a

“person” violates any permit provision). As stated by the court in Malone Service

with respect to the State’s case against individual corporate actors, “[l]iability is

based on the agent’s own actions, not his status as an agent. (citation omitted).

Indeed, in federal environmental cases, courts have applied the personal

State’s Response to White Lion’s Motion for Panel Rehearing Page 16
and Motion for Reconsideration En Banc
participation doctrine to ‘persons’ who are not permit holders.” Malone Serv. Co.,

853 S.W.2d at 85. 9

White Lion’s attempt to distinguish a limited liability company from other

corporate entities is a distinction without a difference under Tex. Water Code

§ 7.102. The corporate shield afforded members of an LLC does not deflect the

liability from those members, officers, and other agents that take personal action to

violate or direct the violation of state environmental laws or permits. See

Leyendecker & Assocs., Inc. v. Wechter, 683 S.W.2d 369, 375 (Tex. 1984) (it is the

general rule in Texas that an individual is personally liable for wrongful acts which

he directs, participates in, or has knowledge of and assented to during his

employment); and Nwokedi v. Unlimited Restoration Specialists, Inc.,

428 S.W.3d 191, 201 and 210 (Tex. App.—Houston [1st Dist.] 2014, pet. denied)

(affirming judgment against president of an LLC in tort action based on knowing

participation in wrongful acts).

9
Malone Service contradicts White Lion’s assertion that no court has held employees liable for
statutory compliance failures. (Motion for Rehearing at 1). White Lion also includes the term
“breach of contract” in its sentence. However, this case is not a contract action, it is a statutory
enforcement action for violations of a Compliance Plan issued by the TCEQ and related
regulations.

State’s Response to White Lion’s Motion for Panel Rehearing Page 17
and Motion for Reconsideration En Banc
C. The Suits Against White Lion and Morello are Separate and Distinct

In this matter, the claims against White Lion and Morello may be under the

same statute and concern the Compliance Plan, but the cases are not identical and

are based on completely different conduct and legal principles. They could have

been brought as two separate cases. The case against White Lion is simpler than

that against Morello—it concerns White Lion’s direct and continuing failure to

comply with the Compliance Plan. The case against Morello is somewhat more

complicated and concerns Morello’s deliberate interference with and failure to

cause, allow, or permit his company to perform its duties under the Compliance Plan.

The suit against Morello necessitated a detailed investigation into his own actions,

conduct, and omissions, and also concerned a different period of time. 10 As

highlighted by White Lion in its brief, this examination presents a variety of factual

and legal questions not related to White Lion. (Motion En Banc at 2-3 and 10, and

Motion for Rehearing at 8, listing a series of purported legal questions raised by the

case against Morello). These questions are not intertwined with the action against

White Lion, and are best answered in the case pending against Morello, should he

choose to appeal. Contrary to White Lion’s belief, the State will not avoid those

10
White Lion is correct that the State did not plead or attempt to “pierce the corporate veil.”
(Motion for Rehearing at 5). The State’s claim was based on its enforcement authority under
Chapter 7 of the Texas Water Code.

State’s Response to White Lion’s Motion for Panel Rehearing Page 18
and Motion for Reconsideration En Banc
legal issues and will address them in any appeal filed by Morello. (Motion for

Rehearing at 8).

The severance order was proper to separate and make final the action against

White Lion from that pending against Bernard Morello and did not result “in

duplicitous trials of interwoven or identical issues.” S.O.C. Homeowners Ass’n v.

City of Sachse, 741 S.W.2d 542, 544 (Tex. App.—Dallas 1987, no writ) (severance

was proper). Critically, a final judgment against White Lion was required so that

the injunctive relief awarded (i.e., ordering White Lion to comply with the

Compliance Plan) could proceed unanchored by the more complicated issues likely

to be presented in the case proceeding against Morello. Further delay in obtaining

such relief prejudices the State’s ability to enforce the Compliance Plan and its

statutes. See Guar. Fed. Sav. Bank v. Horseshoe Operating Co., 793 S.W.2d at 658

(The reasons for a proper grant of severance “are to do justice, avoid prejudice and

further convenience.”). Even if the case was not severed, there would have been no

change in the outcome—the case would have proceeded against Morello as it did.

The only difference would have been the significant prejudice to the State in seeking

finalization of its injunctive relief against White Lion and further delays in its efforts

to achieve compliance in this matter.

State’s Response to White Lion’s Motion for Panel Rehearing Page 19
and Motion for Reconsideration En Banc
D. There is No Apportionment of Liability under Section 7.102 of the Texas
Water Code

White Lion also argues that each party cannot be separated because the court

must apportion liability between the two actors. (Motion En Banc at 10-11). White

Lion cites to F.F.P. Operating Partners, L.P. v. Duenez, 237 S.W.3d 680

(Tex. 2007) in support. However, F.F.P. dealt with a statute that provided for

apportionment of damages. It is irrelevant here. The White Lion matter is not a case

concerning damages, and there is no apportionment of liability under Section 7.102

of the Texas Water Code. Each person is either liable for his own conduct and

violation, or he isn’t, and the penalties are based upon each person’s own individual

conduct within the ranges set by statute.

III. The Severance was Proper and the Court Retains Jurisdiction to
Consider this Appeal

In its opinion, this Court rejected all of White Lion’s arguments. Now White

Lion seeks rehearing on the basis of improper severance, an unpreserved and

meritless ground. Because White Lion’s severance complaint is waived and wrong,

this Court should not have to reach the arguments regarding whether an appellate

court finding improper severance should dismiss for lack of jurisdiction or remand

to the lower court. (Motion En Banc at 12-16; Motion for Rehearing at 9-11). For

all the attention that White Lion devotes to it, there is very little practical difference

between dismissal for lack of jurisdiction or vacatur of the severance order and

State’s Response to White Lion’s Motion for Panel Rehearing Page 20
and Motion for Reconsideration En Banc
remand. Even White Lion considers the question of how the Court’s judgment

should read to be one of “conflict” that is “emerging.” (Motion En Banc at 13-14).

Moreover, neither choice—dismissal or remand—suits this case. The proper

disposition has already been made. White Lion’s rehearing motions should be

rejected and the Court’s opinion and judgment should stand.

IV. The Civil Penalties Assessed are not Unconstitutionally Excessive and
Penalties Assessed Against two Separate Parties is Not a Double Recovery

White Lion alleges that the separate penalties collected from White Lion and

Morello, when aggregated, constitute a double recovery, an excessive fine, and

violate due process. White Lion’s arguments are unavailing.

A. The District Court Awarded Only the Minimum Penalty Permitted by
Section 7.102 of the Texas Water Code

Civil penalties may be subject to excessive fines review under both the Texas

and United States Constitutions. See Newell Recycling Co. v. E.P.A., 231 F.3d 204,

210 (5th Cir. 2000); and Pennington v. Singleton, 606 S.W.2d 682, 690 (Tex. 1980).

Texas courts look to the minimum statutory penalty as the basis for an excessive

fines review. See Tex. Cent. R. Co. v. Hannay-Frerichs & Co., 142 S.W. 1163, 1166

(Tex. 1912); State v. Laredo Ice Co., 73 S.W. 951, 953 (Tex. 1903); and

Culver v. Smith, 74 S.W.2d 754, 760 (Tex. Civ. App.—Austin 1934, writ ref’d).

Here, only the minimum penalty was awarded, negating any concern over excessive

fines. See Newell Recycling Co., 231 F.3d at 210 (analyzing a penalty statute

State’s Response to White Lion’s Motion for Panel Rehearing Page 21
and Motion for Reconsideration En Banc
authorizing civil penalties up to $25,000 per day, the court definitively stated that

“[n]o matter how excessive (in lay terms) an administrative fine may appear, if the

fine does not exceed the limits prescribed by the statute authorizing it, the fine does

not violate the Eighth Amendment.”).

In performing a review for whether a penalty is excessive, the court looks not

only to the statutory enactment (legislative deference), but also may consider (1) if

the penalty actually imposed is disproportionate to the offense, see Pennington,

606 S.W.2d at 690; (2) whether the penalty is fixed with reference to the object it is

to accomplish, see id. and Laredo Ice Co., 73 S.W. at 953; and (3) the number or

frequency of violations, see Hannay-Frerichs & Co., 142 S.W. at 1166. Federal

courts have derived a similar review, sometimes referred to as proportionality

review. See United States v. Bajakajian, 524 U.S. 321, 334-340 (1998) (holding

civil forfeiture excessive as disproportionate to underlying record-keeping

violation). The fact that a civil penalty may be imposed against an actor for a long

period of time or for multiple violations does not render the penalty

unconstitutionally excessive.

As discussed above, violations of TCEQ permits, orders, and related

regulations are subject to a civil penalty of not less than $50 nor more than $25,000

per day of violation. Tex. Water Code § 7.102. The assessment of at least a

minimum penalty for each violation and for each day of each violation is mandatory,

State’s Response to White Lion’s Motion for Panel Rehearing Page 22
and Motion for Reconsideration En Banc
not discretionary. See State v. City of Greenville, 726 S.W.2d 162, 169-70 (Tex.

App.—Dallas 1986, writ ref’d n.r.e.).

White Lion was assessed a civil penalty for two violations,11 one for violation

of the Compliance Plan as a whole from July 23, 2004 (the date the Compliance Plan

was transferred to White Lion) until July 29, 2013 (the date of an inspection of the

White Lion facility completed prior to the filing of the motion for summary

judgment), and one for failing to provide financial assurance as required by the

Compliance Plan and related TCEQ regulations from October 6, 2004 until July 29,

2013 (CR 29-30, and CR 195-196); which amount to an aggregate civil penalty of

$325,600 against White Lion 12—$164,700 ($50 x 3294 days) for violation of the

Compliance Plan, and $160,900 ($50 x 3218 days) for violation of the financial

assurance requirements.13

11
More violations could have been included for each discrete violation of a term, limitation, and
condition of a Compliance Plan.
12
The State could have received additional continuing violations up to the date of the hearing,
however, the State did not revise its motion during the summary judgment hearing. See CR 30 at
fn. 53.
13
White Lion was also ordered to pay $129,464.15 in unpaid annual hazardous waste facility fees,
and the State’s attorney’s fees in the amount of $40,800. Contrary to White Lion’s assertion, the
State has yet to “recover” these amounts from White Lion. (Motion for Rehearing at 11). It is
also noted that White Lion’s allegation of “$760,494” in “fines” is erroneous. The District Court
assessed against White Lion civil penalties in the aggregate amount of $325,600 for the two
violations. The Court assessed against Morello civil penalties in the aggregate amount of $367,250
for two violations (covering different periods of non-compliance). This discussion is provided,
not as a concession by the State that the two cases should even be compared, but to illustrate that
the numbers provided by White Lion simply do not add up.

State’s Response to White Lion’s Motion for Panel Rehearing Page 23
and Motion for Reconsideration En Banc
 That the violations continued for so long a period of time was the fault of

White Lion. White Lion was responsible for compliance, and its compliance

obligations were triggered the day the Compliance Plan was transferred to it by the

TCEQ. Instead of complying, it chose to ignore the costs of compliance for nearly

a decade by:

• ignoring the State (and the promises it made to the State to come into
compliance and file amendments to alter the Compliance Plan (CR 266-
267));
• never sampling a single drop of groundwater;
• never submitting a groundwater monitoring report to the TCEQ;
• removing all monitoring and treatment well equipment during the
course of this litigation; and
• never posting financial assurance.

The penalty assessed against White Lion was not excessive. See Whitney Stores,

Inc. v. Summerford, 280 F.Supp. 406, 411 (D.S.C. 1968), aff’d 393 U.S. 9 (1968)

(repeated violations resulting in higher fines are the fault of the actor, not the statute).

B. That White Lion and Morello are Related Parties does not Make a
Recovery Against Each Party under Section 7.102 of the Texas Water
Code an Impermissible Double Recovery

That the State also later obtained a judgment against White Lion’s principal

does not constitute a double recovery because the actions were separate and distinct.

The civil penalty statute imposes a civil penalty within the statutory range on each

“person who causes, suffers, allows, or permits a violation of a statute, rule, order,

or permit relating to any other matter ....” Tex. Water Code § 7.102. When there

State’s Response to White Lion’s Motion for Panel Rehearing Page 24
and Motion for Reconsideration En Banc
are multiple actors who each independently caused violations to occur, it is

appropriate to assess penalties against each for their own conduct to cause, suffer,

allow, or permit the violations. That the actors may be related by virtue of a

corporate connection does not make the penalty excessive or a double recovery. See

Malone Serv. Co., 853 S.W.2d at 84-85.

No federal or state constitutional issues are presented and White Lion raises

no issue suggesting that reversal is warranted.

C. Severance did not Deprive the District Court an Opportunity to Review
the Individual Liability of Each Party

White Lion asserts that by severing the two cases, White Lion (and Morello)

were deprived of an opportunity to “address the correct assessment and or

apportionment of liability in either case.” (Motion for Rehearing at 14). This is

erroneous. White Lion was able to (and did) challenge its liability and the penalty

assessed against it at the summary judgment hearing and also in prior briefing in this

appeal. The District Court correctly analyzed White Lion’s liability and assessed

the minimum penalty allowed as stipulated. Morello had the same opportunity in

his case, and will again on appeal. There is no apportionment of liability or penalties

under Section 7.102 of the Texas Water Code. Each person, if found liable, is

responsible for his own penalty.

State’s Response to White Lion’s Motion for Panel Rehearing Page 25
and Motion for Reconsideration En Banc
 D. White Lion has not been Deprived of an Ability to Litigate its Defense

White Lion asserts that a penalty is excessive and unconstitutional if “it

effectively deprives a citizen of the ability to litigate his defense to such penalty.”

(Motion for Rehearing at 13). As discussed above, such is not the case when the

statutory minimum penalty is imposed. White Lion cites to R. Commc’ns, Inc. v.

Sharp, 875 S.W.2d 314 (Tex. 1994) in support of its argument. However, this case

concerns a taxpayer’s challenge to additional tax imposed upon it following an audit

and hearing by the Comptroller of Public Accounts. The case is irrelevant here,

which is an action concerning the imposition of minimum statutory penalties

imposed following a finding of liability. Furthermore, the fact that two different,

but related parties, are each independently assessed penalties does not mean such

penalties can be aggregated for purposes of constitutional review.

Finally, White Lion (and Morello) have aggressively defended against the

State’s action, and have challenged and opposed nearly every step in the State’s

action in both cases. White Lion (and Morello) have at various times in this

proceeding employed at least eight attorneys in support of its defense. White Lion

cannot credibly assert that it has been deprived of its defense. That a party elects to

expend significant sums challenging the State’s action does not absolve it from

paying whatever penalties are assessed for its continuing non-compliance, nor from

complying with the State’s laws, regulations, and permits. Compliance with the law

State’s Response to White Lion’s Motion for Panel Rehearing Page 26
and Motion for Reconsideration En Banc
is not a choice and a party may not elect to spend its resources on fighting

compliance rather than on actual compliance. In other words, a person must comply,

but may defend.

V. White Lion Provides No Basis to Overturn this Court’s Decision Based
on Arguments Concerning Estoppel, Waiver, and Laches Defenses
Properly Rejected by the District Court and Not Previously Briefed to
this Court

In its Amended Motion for Panel Rehearing, 14 White Lion argues, for the first

time in this appeal, that the District Court failed to consider various affirmative

defenses asserted by White Lion, including that the State is estopped from

recovering civil penalties from White Lion because the State (1) failed to mitigate

its damages by not filing a claim against a financial assurance policy held by a former

owner of the White Lion property; and (2) the State delayed in obtaining a judgment

in the case. (Motion for Rehearing at 15). These issues were briefed by the parties,

considered by the District Court, and properly rejected.

A. White Lion has Waived its Arguments Regarding Waiver, Estoppel, and
Laches

White Lion did not raise its defenses of estoppel, waiver, or laches as an issue

or point of error in any brief filed before its Motion for Rehearing. White Lion does

not assert or raise an issue of fundamental error on these issues. See case law cited

in I.A. above. Therefore, White Lion has waived these issues on appeal.

14
White Lion did not assert these arguments in its Motion En Banc.

State’s Response to White Lion’s Motion for Panel Rehearing Page 27
and Motion for Reconsideration En Banc
B. White Lion’s Defenses were Considered and Properly Rejected by the
District Court

White Lion asserted its defenses of waiver, estoppel, and laches in its response

to the State’s motion for summary judgment (CR 285-286) and in an amended

answer filed one week before the summary judgment hearing (CR 531-534). The

State responded to each defense. (CR 536-537). During oral arguments concerning

White Lion’s motion for continuance, the State also addressed the District Court’s

question concerning delay in the proceedings. (RR 16).

The District Court did not provide reasons for granting summary judgment,

and therefore, the District Court’s decision may be affirmed if any valid reason

supports the judgment. See Provident Life & Accident Ins. Co., 128 S.W.3d at 216.

Here, the evidence was overwhelming that White Lion ignored its obligations under

the Compliance Plan for nearly ten years, and summary judgment was proper.

The District Court was also correct to dismiss White Lion’s defenses for the

reasons articulated by the State. It is well settled that when a government is

exercising its governmental powers, affirmative defenses such as waiver, estoppel

or laches do not apply when the activity complained of is a governmental function.

See State v. Durham, 860 S.W.2d 63, 67 (Tex. 1993) (“[T]he State in its sovereign

capacity, unlike ordinary litigants, is not subject to the defenses of limitations,

laches, or estoppel.”); City of White Settlement v. Super Wash, Inc., 198 S.W.3d 770,

776 (Tex. 2006) (a governmental unit “will not be estopped if doing so would

State’s Response to White Lion’s Motion for Panel Rehearing Page 28
and Motion for Reconsideration En Banc
interfere with its ability to perform governmental functions”); Enter. Leasing Co. of

Houston v. Harris Cnty. Toll Rd. Auth., 356 S.W.3d 85, 90 (Tex. App.—Houston

[1st Dist.] 2011, no pet.) (affirmative defenses of waiver, estoppel, and laches do not

apply when the activity complained of is a governmental function); Capitol Rod &

Gun Club v. Lower Colo. River Auth., 622 S.W.2d 887, 896 (Tex. App.—Austin

1981, writ ref’d n.r.e.) (“[T]he general rule is that where a unit of government is

exercising its governmental powers, it is not subject to estoppel or laches.”).

Contrary to White Lion’s assertion, the TCEQ’s enforcement of state environmental

laws is undeniably a governmental function. See Tex. Water Code § 5.013.15

The rationale of this well-settled doctrine is especially evident with matters

concerning environmental protection. The State passed comprehensive

environmental protection laws to ensure the health, safety, and welfare of the public

and the environment. The State is empowered to enforce compliance with such laws.

The environmental protection laws and the State’s power to enforce them would be

nullified if polluters were allowed to use delay in compliance or delay in prosecution

15
Furthermore, even if the defenses could be raised against the State in this matter, the doctrine of
“unclean hands” would bar their assertion. This doctrine requires that one who comes seeking
equity must come with clean hands. See Seguin v. Bexar Appraisal Dist., 373 S.W.3d 699, 713
(Tex. App.—San Antonio 2012, pet. denied). Here, it is undisputed that White Lion did not
maintain and operate the groundwater monitoring and remediation system as required by the
Compliance Plan, nor did White Lion monitor and treat the contaminated groundwater as required
by the Compliance Plan. Indeed, during White Lion’s ownership, it caused, suffered, allowed, or
permitted the entire groundwater remediation and monitoring system to be removed or destroyed.
Thus, it cannot be said that White Lion has come in equity with clean hands.

State’s Response to White Lion’s Motion for Panel Rehearing Page 29
and Motion for Reconsideration En Banc
as a sword to defeat the State’s efforts to enforce compliance.

Furthermore, White Lion and White Lion alone is the only entity that could

cut off continuing penalties by coming into compliance. White Lion instead chose

to ignore the State, and during the course of the litigation, allowed the groundwater

monitoring wells and groundwater treatment system to be destroyed or removed

from the facility. (CR 193-196). Instead of filing for an amendment to alter the

terms of the Compliance Plan as it promised to submit in 2004 (CR 267), White Lion

decided it would be cheaper and less onerous to simply continue to ignore its

obligations for as long as possible. White Lion cannot use its own delay in

complying or defending this matter as an excuse to avoid liability for its blatant

noncompliance. That this matter has been pending in court for an extended period

of time in no way prevented White Lion from earlier coming into compliance, such

as by filing an amendment with the TCEQ to alter the Compliance Plan. 16

1. The Limited Exception Applying Estoppel Against the Government is
Not Applicable Here

White Lion argues that the “Supreme Court has held that estoppel may apply

against the government.” (Motion for Rehearing at 15). White Lion is correct that

courts have carved out a limited exception where a governmental unit may be

16
To the extent White Lion’s estoppel arguments may be construed as an argument that the State’s
claims are barred for failure to mitigate damages, such argument is invalid because this case is not
about damages, but rather civil penalties, unpaid hazardous waste fees, and injunctive relief.

State’s Response to White Lion’s Motion for Panel Rehearing Page 30
and Motion for Reconsideration En Banc
estopped “in those cases where justice requires its application, and there is no

interference with the exercise of its governmental functions.” Enter. Leasing Co.,

356 S.W.3d at 90 (citing City of Hutchins v. Prasifka, 450 S.W.2d 829, 836 (Tex.

1970)). However, this limited exception is not applicable here.

White Lion cites to Tex. Dep’t of Transp. v. A.P.I. Pipe and Supply, LLC,

397 S.W.3d 162, 170 (Tex. 2013) for the prospect that estoppel may apply against

the State. (Motion for Rehearing at 16). However, the Court in API refused to apply

estoppel against the State, even though the State had purportedly acquiesced to the

terms of a later judgment. For the exception to apply, the Court required a finding

that the government “acted deliberately to induce a party to act in a way that

benefitted the government,” and that a governmental function would not be impaired

by estoppel, neither of which were met. A.P.I Pipe and Supply, 397 S.W.3d at 170.

This matter is much simpler than API. It is a straight-forward enforcement

case. The State never acquiesced to White Lion’s noncompliance. There is no

evidence that the State “acted deliberately to induce” White Lion to remove or

destroy the groundwater monitoring wells and groundwater treatment system, to not

sample one single drop of groundwater, to not submit a single report to the TCEQ,

to not submit an amendment to the Compliance Plan as White Lion promised it

would, and to continue to not comply for nearly a decade.

White Lion is a defendant who egregiously and deliberately ignored its clear

State’s Response to White Lion’s Motion for Panel Rehearing Page 31
and Motion for Reconsideration En Banc
obligations, and who, to this day, continues to refuse to accept its obligations to

comply. To hold that estoppel applies in this case due to litigation delays in arriving

at a final judgment would encourage defendants across the State to give up

compliance with permits, orders, and regulations and simply sit out a subsequent

enforcement action brought by the State until ultimately forced to comply by a court,

following exhaustion of all appeals. Such a procedure would eviscerate completely

the State’s ability to enforce its environmental statutes and regulations and to prevent

pollution.

White Lion’s argument presents no fact issue or basis to overturn this Court’s

opinion. White Lion must be forced to comply and further delays in arriving at that

conclusion must come to an end.

C. White Lion’s Renewed Assertions About the TCEQ’s Obligations with
Respect to Financial Assurance Mechanisms are Wrong

White Lion recasts a failed argument made in its initial brief concerning

TCEQ’s purported failure to file a claim on a former owner’s financial assurance

mechanism. (Appellant’s Brief at 20 and Motion for Rehearing at 16). White Lion’s

statement reflects a continued misunderstanding of its obligation to provide financial

assurance. White Lion acquired the facility and had the Compliance Plan transferred

from the prior owner to itself. Within six months of acquiring the facility, White

Lion was obligated to provide a new financial assurance mechanism in its name—

something White Lion admits it never did. 30 Tex. Admin. Code 305.64(g);

State’s Response to White Lion’s Motion for Panel Rehearing Page 32
and Motion for Reconsideration En Banc
(CR 176, 183, and 196).

White Lion argues that the TCEQ could have brought the facility into

compliance sooner (admitting again the continued non-compliance) had the TCEQ

filed a claim under the prior owner’s policy. (Motion for Rehearing at 16).

However, the purposes of a financial assurance mechanism is not to bring a facility

into compliance (that is the purpose of the TCEQ’s and the State’s enforcement

authority), but to insure that the long-term treatment and monitoring obligations can

continue in the event the current owner is no longer able to perform. See 30 Tex.

Admin. Code chapter 37, Subchapter B. For example, after the former owner went

bankrupt, had White Lion not purchased the facility and the property remained

abandoned, at that time it may have been appropriate for the State to call upon the

policy to fund continued monitoring and treatment. White Lion’s argument presents

no fact issue or basis to overturn this Court’s opinion.

D. White Lion’s Assertion that the TCEQ Interfered with White Lion’s
Discussions with the U.S. Environmental Protection Agency are
Erroneous

White Lion also reasserts that the TCEQ somehow “interfered with White

Lion’s efforts to work with the EPA [U.S. Environmental Protection Agency] to

devise a less cumbersome plan.” (Motion for Rehearing at 18). What exactly White

Lion means by a “less cumbersome plan” is unclear. Furthermore, the TCEQ is the

entity that issued and that has authority over the Compliance Plan. The EPA has no

State’s Response to White Lion’s Motion for Panel Rehearing Page 33
and Motion for Reconsideration En Banc
jurisdiction at the facility or over the Compliance Plan. (CR 539-540). The EPA

confirmed this in its correspondence dated April 16, 2007. (CR 275-277). White

Lion’s argument is erroneous and provides no basis to overturn this Court’s opinion.

VI. White Lion Improperly Cites to Documents Not in the Appellate Record

On May 22, 2015, White Lion filed a motion to supplement the record to

which the State responded on May 28, 2015. The State incorporates by reference its

response and supplements it as set forth herein.

White Lion did not secure a ruling on its motion, but nevertheless has cited to

various documents referenced in four Appendices, not part of the record in this

appeal (supplemented or otherwise), which were included with White Lion’s

original motions for rehearing/reconsideration filed May 26. The documents

referenced are from filings in the case pending against Bernard Morello, from which

this matter was severed following entry of judgment. The documents were filed after

judgment was granted by the District Court in this matter, and were never before the

District Court.17 White Lion’s inclusion of the documents as an appendix to its

motion constitutes an improper attempt to create a new trial court record, and the

appendices and all references to them must be struck and removed from the record.

17
Curiously, in White Lion’s request to supplement the record in this case with filings in the
Morello matter (which the State opposes), it omits the briefing concerning Morello’s objections to
the trial court’s ruling, the State’s responses to those motions, the State’s response to Morello’s
motion for new trial, and the trial court’s denial of the motion for new trial. If this Court were to
entertain White Lion’s efforts to supplement the record with filings from the Morello matter, it
seems the full record should be included.

State’s Response to White Lion’s Motion for Panel Rehearing Page 34
and Motion for Reconsideration En Banc
 When a court severs a cause, “[a]ll documents filed in a cause before a

severance are part of the record of the severed cause.” N.H. Ins. Co. v. Tobias,

80 S.W.3d 146, 148 (Tex. App.—Austin 2002, no pet.) (emphasis added). The

appellate record consists only of documents submitted in the trial court in the cause

at issue, and does not include evidence or documents subsequently submitted in

other severed causes, even if related. See Tex. R. App. P. 34.1, 34.5, and 34.6; and

Daniels v. Walters, No. 03-03-00375-CV, 2004 WL 741672 *1 (Tex. App.—Austin

Apr. 8, 2004, pet. denied) (mem. op.). Contrary to White Lion’s assertion, severance

did not prevent either court from “having the full record before it.” (Motion for

Rehearing at 14). The full record up to severance was properly before the District

Court in this matter. The trial court in the Morello matter will have in its record all

documents filed in the case up to the moment when the judgment against him is final.

Tex. R. App. P. 34.5 provides the appellate court wide discretion for parties

to supplement an appellate record, but the rule does not allow the creation of a new

trial court record. See Richards v. Comm’n for Lawyer Discipline, 35 S.W.3d 243,

251 (Tex. App.—Houston [14th Dist.] 2000, no pet.). It is not error for an appellate

court to deny supplementation of a record after it issues an opinion. See Chapman

v. Mitsui Eng’g and Shipbuilding Co., 781 S.W.2d 312, 318 (Tex. App.—Houston

[1st Dist.] 1989, writ denied) (supplemental transcripts will not be allowed after a

court has written its opinion and rendered its judgment); and Tex. First Nat’l

State’s Response to White Lion’s Motion for Panel Rehearing Page 35
and Motion for Reconsideration En Banc
Bank v. Ng, 167 S.W.3d 842, 866 (Tex. App.—Houston [14th Dist.] 2005,

pet. granted), judgm’t vacated, remanded by agr. (Sept. 23, 2005). It is also not error

for an appellate court to deny supplementation of materials not at issue nor admitted

as evidence at the time the trial court made its ruling. See Graham v. Pazos de la

Torre, 821 S.W.2d 162, 165 (Tex. App.—Corpus Christi 1991, writ denied)

(refusing to supplement the record with a bankruptcy order from a separate

proceeding when it was not issued or admitted as evidence when the trial court made

its ruling).

None of the documents White Lion includes in its appendices was before the

District Court at the time of its decision. Furthermore, White Lion has not

authenticated the documents or otherwise asked this Court to take judicial notice of

the documents. It is improper for the Court to allow supplementation at this late

stage. To do so would impermissibly create a new trial court record. The State

requests that the appendices be struck from the record, and that all references to and

quotations from those documents in White Lion’s motions be similarly struck and

excluded.

State’s Response to White Lion’s Motion for Panel Rehearing Page 36
and Motion for Reconsideration En Banc
 CONCLUSION AND PRAYER

This Court did not err in issuing its opinion affirming the District Court’s grant

of summary judgment against White Lion. The District Court did not err in issuing

the summary judgment and did not err in severing White Lion from the case still

pending against Bernard Morello. Finality was needed so that the injunctive relief

afforded by the District Court requiring that White Lion come into compliance could

move forward expeditiously and unhindered by the separate and somewhat more

complicated proceeding pending against Morello.

Therefore, the State of Texas respectfully requests that this Court deny White

Lion’s Motion for Panel Rehearing (as amended), Motion for Reconsideration En

Banc (as amended), and Motion to Supplement the Record. The State also requests

that the appendices containing documents from the Morello matter and included with

White Lion’s motions be struck and removed from the record.

State’s Response to White Lion’s Motion for Panel Rehearing Page 37
and Motion for Reconsideration En Banc
 Respectfully submitted,

KEN PAXTON
Attorney General of Texas

CHARLES E. ROY
First Assistant Attorney General

JAMES E. DAVIS
Deputy Attorney General for Civil Litigation

JON NIERMANN
Chief, Environmental Protection Division

/s/ Craig J. Pritzlaff
CRAIG J. PRITZLAFF
Assistant Attorney General
State Bar No. 24046658

LINDA B. SECORD
Assistant Attorney General
State Bar No. 17973400

Office of the Attorney General
Environmental Protection Division
P.O. Box 12548, MC-066
Austin, Texas 78711-2548
Telephone: (512) 463-2012
Fax: (512) 320-0911
Craig.Pritzlaff@texasattorneygeneral.gov

ATTORNEYS FOR THE STATE OF
TEXAS

State’s Response to White Lion’s Motion for Panel Rehearing Page 38
and Motion for Reconsideration En Banc
 CERTIFICATE OF COMPLIANCE

In accordance with Tex. R. App. P. 9.4(i)(2), I certify that the computer program
used to prepare this document reported that there are 8,998 words in the pertinent
parts of the document.

/s/ Craig J. Pritzlaff
CRAIG J. PRITZLAFF

CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing pleading was e-
served and e-mailed to the following counsel for Appellant listed below on June 26,
2015.

Jacqueline Lucci Smith Joan Lucci Bain
Lucci Smith Law PLLC Bain & Bain PLLC
10575 Katy Freeway, Suite 470 10575 Katy Freeway, Suite 405
Houston, Texas 77024 Houston, Texas 77024
jls@luccismithlaw.com jbain@bainandbainlaw.net
Attorneys for Appellant

/s/ Craig J. Pritzlaff
CRAIG J. PRITZLAFF

State’s Response to White Lion’s Motion for Panel Rehearing Page 39
and Motion for Reconsideration En Banc