Aqua Water Supply Corporation (Aqua) possesses a Certificate of Convenience and Necessity (CCN), which allows it to be the exclusive water service provider over a specified geographic area. Order at p. 1. After the Texas Commission on Environmental Quality (TCEQ) granted Austin Community College’s petition to have its property removed from Aqua’s CCN area, Aqua filed suit against TCEQ, seeking to overturn TCEQ’s decision on preemption grounds. Id. at 2. The Court granted TCEQ’s motion to dismiss, and TCEQ filed a motion for attorney’s fees, seeking $250,000 for defense of the federal suit and the simultaneous state court appeal of the TCEQ’s order approving ACC’s petition. Id. at 3.
Magistrate Austin first found that TCEQ’s request for attorney’s fees should be denied because TCEQ failed to comply with the court’s local rules regarding motions for attorney’s fees. Id. at 4.
TCEQ also requested attorney’s fees under 42 U.S.C. § 1988. Id. at 5. Noting that a court may grant fees under § 1988 “only where the plaintiff’s complaint was frivolous, unreasonable, or groundless, or if the plaintiff continued to litigate after the complaint was found so,” see Myers v. City of West Monroe, 211 F.3d 289, 292 (5th Cir. 2000), the magistrate recommended denial of TCEQ’s request for attorney’s fees. First, the Court found that TCEQ’s contention that Aqua’s preemption claim was frivolous lacked merit. Id. at 7. Furthermore, because the settlement between Aqua and ACC did not moot the Federal Court litigation, it was not groundless or frivolous for Aqua to continue to litigate the preemption issue in Federal Court. Id. at 8. Likewise, the Court found that Aqua’s failure to concede the merits of TCEQ’s Motion to Abstain did not render further litigation frivolous. Id. at 9. Thus, TCEQ was not entitled to attorney’s fees under § 1988.