Mountain States Legal Foundation (MSLF) is joining the fight in a legal battle over government overreach in Texas. In the case of Quadvest, L.P. and Woodland Oaks Utility, L.P. v. San Jacinto River Authority, MSLF has filed an amicus curiae brief, spotlighting a crucial dispute over regulatory authority and contract law. With property rights and constitutional limits on government power hanging in the balance, MSLF argues that the outcome could have far-reaching consequences for both private citizens and public authorities alike and urges the Supreme Court of Texas to review this case.
The dispute centers around Groundwater Reduction Planning Contracts (GRP Contracts) between two privately owned water utilities, Quadvest, L.P. and Woodland Oaks Utility, L.P., and a government agency called the San Jacinto River Authority (SJRA). The SJRA forced the utilities and other groundwater users into GRP Contracts on the theory that the contracts were necessary to follow groundwater regulations enacted by the Lone Star Groundwater Conservation District. And the contracts required the utilities and others to pay fees to the SJRA. However, in a dramatic turn, the regulations that gave rise to these contracts were later invalidated by a Texas court.
Here’s where things get even more interesting: the SJRA had issued bonds to fund a surface water treatment plant and pointed to the fees in the GRP Contracts to support its efforts to get financing—. But the contracts were only valid if the underlying groundwater reduction rules were legitimate. A Texas court ruled that the regulations were adopted without proper legal authority, making them void from the beginning. Nevertheless, the SJRA contended that the contracts themselves created a separate basis to continue charging fees to the utilities and other groundwater users, even if the legal authority supposedly giving the SJRA a right to require the contracts was unlawful from the start and no longer on the books. What’s more, because of a provision of Texas law that supports the Texas Attorney General’s review of financing decision, the SJRA said not only that the GRP Contracts were valid, but also that they were “incontestable.” Thus—says SJRA—the utilities must pay the fees in the GRP Contracts and cannot even make an argument that the contracts should never have existed in the first place.
Unfortunately, the lower courts agreed with the SJRA, saying essentially, that the bond laws, which are designed to protect bondholders by preventing challenges to validated bonds, are also a shield to protect the underlying GRP Contracts that were part of the financing review.
The utilities, supported by MSLF disagree, arguing that this is an overreach of government power. Texas law is clear: government entities, like SJRA, can only do what the legislature explicitly allows them to do. They don’t get free rein to enforce contracts based on regulations that were never valid to begin with. The Texas courts say that the regulations that supposedly gave the SJRA authority to require the GRP Contracts were themselves illegal. We argue that means the SJRA never had authority to require, enter into, and then enforce the contracts in the first place, so the SJRA cannot do that now.
Moreover, basic contract law supports MSLF’s position. When both parties enter into a contract under a mutual mistake—like thinking the regulations behind the contract are valid—the contract can be rescinded. MSLF argues that since both the SJRA and the utilities mistakenly believed the contracts were legitimate, the utilities should at least be able to argue in court that there was never really a valid GRP Contract in the first place.
Drawing on its experience winning cases like Solenex, LLC v. Haaland, MSLF highlights the broader implications, warning that if the lower court’s decision stands, it could erode key legal protections against government overreach. Both the law and common-sense dictate that the utilities should at least be able to challenge the validity of the GRP Contracts.
With the stakes set so high, MSLF is calling for the Texas Supreme Court’s intervention to ensure that fundamental contract principles and the basic limits on regulatory authority apply to the SJRA. This case goes beyond legal theory—it’s a battle in the war over whether regulators have some inherent “authority” to do whatever they want to do, or whether instead they are bound to follow the rule of law.
