Kleberg Cnty. v. URI, Inc.

540 S.W.3d 597

KLEBERG COUNTY, Appellant,

v.URI, INC., Appellee.

NUMBER 13–14–00158–CV

Court of Appeals of Texas, Corpus Christi-Edinburg.

Delivered and filed January 28, 2016

Review Granted June 23, 2017

Bradley L. Rockwell, Marisa Perales, Austin, TX, for Appellant.

Amy Emerson, Duncan C. Norton, Jeffrey Reed, Jose E. De La Fuente, Austin, TX, Jo Ellen Hewins, Corpus Christi, TX, for Appellee.

Before Justices Benavides, Perkes, Longoria

Opinion by Justice Perkes

Appellant Kleberg County (Kleberg) and cross-appellant URI, Inc. (URI) dispute various provisions of a settlement agreement regarding URI's uranium mine operations.¹ URI filed suit against Kleberg pursuant to the Declaratory Judgments Act seeking a declaration that URI had complied with the well restoration pre-requisites of the settlement agreement. Kleberg filed an answer and counter-petition alleging four separate theories of breach of contract and requesting declaratory relief. URI responded to Kleberg's counter-petition by raising affirmative defenses. After a bench trial, the trial court found in favor of Kleberg on one of its breach of contract claims—that URI failed to restore a well to its pre-mining water quality—and awarded Kleberg nominal damages and partial specific performance. The trial court declined to award attorney fees.

By four issues, Kleberg argues: (1) the trial court erred by failing to award attorney fees to Kleberg; (2) the trial court erred by ordering specific performance that deviated from the terms of the settlement agreement; (3) URI breached its water treatment obligations; and (4) URI breached its duty to provide written notice and reports.²

By two cross-appeal issues, which we address first, URI argues: (1) the trial court erred by finding URI breached its restoration obligations; and (2) the case should be remanded to the trial court to determine attorney's fees. We reverse and remand.

I. BACKGROUND

URI operates the Kingsville Dome (KVD) uranium mine; located approximately eight miles southeast of Kingsville. The KVD site is roughly within a half-mile of several domestic water wells and shares its geological formation with an aquifer. The mine is divided into three productions areas, PAA–1, PAA–2, and PAA–3.

Beginning in 1985, before commencing mining operations, URI drilled wells in PAA–1 to test the underground aquifer water. The water in one of those test wells, I–11, met the then-current standards for irrigation. In 1987, URI retested its wells, including I–11. The 1987 samples showed that the groundwater from well I–11 contained a higher level of uranium, rendering the well unsuitable for irrigation. Also in 1987, URI submitted a permit application for PAA–1 to the Texas Water Commission, the precursor to the Texas Commission on Environmental Quality (TCEQ). With the permit application, URI included the results of the well I–11 samples taken in 1985, but not the samples taken in 1987. TCEQ issued the permit in 1988, and URI mined uranium in PAA–1 from 1988 to 1991, and again from 1996 to 1999. In 2004, URI sought and received authorization from TCEQ to commence mining in PAA–3.

Also in 2004, Kleberg and URI entered into a settlement agreement pertaining to URI's mining activities at KVD, specifically, the restoration of groundwater. URI's post-mining restoration of groundwater is at the heart of this dispute. The agreement states in pertinent part:

1.4 Restore 240,000,000 Gal./Yr.—20,000,000 Gal./month averaged over one year. Beginning on the Effective Date and continuing until groundwater restoration in Production Areas 1, 2, and 3 at URI's Kingsville Dome Mine in Kleberg County, Texas is completed and approved by TCEQ and TDH. URI will conduct its operations at its Kingsville Dome Mine so as to restore the ground water in the mine zone in the said Production Areas at a treatment rate equal to or greater than 240,000,000 gallons per year, all to be recorded and reported as provided for in paragraph 1.5(1).

....

1.5. Record and Report to Kleberg County. Beginning on the Effective Date and continuing until groundwater restoration in all Production Areas 1, 2, 3, and subsequently approved PAA's at URI's Kingsville Dome Mine is completed and approved in writing by TCEQ and TDH, URI will:

(1) make and maintain records of the rates and amounts of pumping of contaminated ground water and the disposal of liquids in any disposal well(s) on at least a weekly basis;

(2) make, as nearly as practicable at the time of the event, and maintain thereafter, records of any spill, excursion or noncompliance with this Agreement or with any permit or license from TCEQ or TDH; and,

(3) beginning on January 15, 2005, and continuing thereafter until restoration of Production Areas 1, 2, 3, and subsequently approved PAA's of the Kingsville Dome Mine has been completed, provide copies of the said records in a quarterly report to the Kleberg County Judge no later than the 10th working day following the end of each calendar quarter, together with an estimate of the time URI estimates it will need to complete groundwater restoration for any Kingsville Dome Mine Production Area which has been mined but at which groundwater has not yet been restored.

....

4. Notices. Any notices or other communications to be given to or served upon any party to this Agreement in connection with this Agreement must be made in writing and may either be given by facsimile, certified mail, or overnight courier service. If not given in person, any notice shall be given to the parties of this Agreement at the following addresses:

....

If to Kleberg County, then to:

County JudgeKleberg CountyP.O. Box 752Kingsville, TX 78354

With a copy to:

Richard W. Lowerre44 East Avenue, Suite 101Austin, TX 78701

....

9. Force Majeure. URI shall not be deemed to have failed to meet any obligation under this agreement if URI's performance or failure to perform or delay in performance has been caused by any Act of God, war, strike, hot, electrical outage, fire, explosion, flood, blockade, governmental action, or other catastrophe (hereafter, "force majeure"). In the event of the occurrence of any event or events which constitute a "force majeure," URI shall notify Kleberg County as soon as practicable of such occurrence or occurrences. This Paragraph shall not apply to the obligations set out above in Paragraphs 1.1, 1.2, and 1.3 of this Agreement.

....

11. Other Provisions.

11.1. Resumption of PAA 3 Mining To Await PAA 1 Restoration Certificate and Data. URI will not resume economic mining in KVD Production Area 3 before it has submitted to the County Judge of Kleberg County both

(1) a sworn statement of a URI officer certifying to the Kleberg County Judge

(i) that URI has completed treatment of 6 pore volumes of water in KVD Production Area 1; and

(ii) that 90% or more of the combined total of TCDQ production area baseline wells in KVD Production Area 1 and any other wells in the production patterns that URI sampled and for which baseline is available before mining begins, whose water was suitable on a well-by-well basis before URI's mining in PAA 1 for use as either drinking water, livestock water, or irrigation water according to the criteria of 1,7(3) and parameters and limits set out in the Water Quality Use Limits Table in Par. 1.7 of this agreement, has been returned to suitability, based on the same parameters and limits on a well-by-well basis, for the same use to which it was suited before such mining; and,

(2) a copy of the analytical data the URI officer relies upon in making the certification under this sub-par 11.1 as to (i) which individual baseline wells are deemed to have produced water suitable for either drinking, stock watering, or irrigation use before URI's mining in PAA 1, and (ii) the use suitability to which post-mining water quality in the relevant Production Area 1 baseline wells has been returned.

The Agreement further included a table titled "Water Quality Use Limits" which showed the permissible levels of various chemicals and elements for different water uses: drinking; livestock; and irrigation.

URI began restoring wells in PAA–1, and, in 2006, submitted a certificate to the Kleberg County Judge showing that the wells in PAA–1 were sufficiently restored to allow commencement of mining in PAA–3. In 2007, the Kleberg County Commissioners, dissatisfied with URI's restoration efforts in PAA–1, adopted a resolution to enforce the requirements of the Agreement "by all legal means available including litigation before any further mining takes place in [PAA–3]."

II. LITIGATION HISTORY

URI filed suit against Kleberg in 2010 seeking declaratory relief. URI pleaded one cause of action under the Declaratory Judgment Act that it complied with the terms of paragraph 11.1 of the settlement agreement; most specifically that it complied with the agreement with respect to restoration of PAA–1. See TEX. CIV. PRAC. & REM. CODE. § 37.003 (West, Westlaw through 2013 R.S.). URI also requested recovery of attorney's fees.

Kleberg filed an answer and counter-petition, alleging that URI breached the Agreement by: (1) failing to provide notices to its attorney, Richard Lowerre³ ; (2) failing to restore PAA–1 per paragraph 11.1; (3) failing to treat groundwater at required rates; and (4) failing to provide fiscal security for restoration. Kleberg also sought declaratory relief, disgorgement of profits⁴ , nominal damages, and attorney's fees pursuant to section 37.009 of the Texas Civil Practice and Remedies Code. See id. § 37.009. Kleberg further sought court declarations for each of the four theories pleaded in its breach of contract cause of action.

In response to Kleberg's counter-petition, URI generally raised several affirmative defenses, including laches, waiver, estoppel, and failure to mitigate, but did not specify to which claims these defenses applied. URI also alleged that its failure to perform restoration at the agreed rate was excused by the force majeure provision of the Agreement.

Following a...