Background
In 2017 and 2019, the Texas Legislature reduced the fees that cities could charge telecommunications companies for running equipment on public rights-of-way. A group of cities, led by the City of McAllen, responded by suing “the State of Texas” seeking a declaration that the reduced rates violated the Texas Constitution’s Gift Clauses (Article III, Section 52(a) and Article XI, Section 3). The cities argued that charging below-market rates for public property amounted to an unconstitutional gift to telecom companies.
The trial court issued a partial declaration in the cities’ favor, and the Third Court of Appeals went further, largely agreeing with the cities’ Gift Clause theory. The State of Texas petitioned for review.
The case had been pending since 2017—nine years of litigation involving a core question about the limits of municipal revenue authority in the telecom industry.
The Court’s Holding
The Texas Supreme Court vacated the lower courts’ judgments and dismissed the case for lack of jurisdiction—without ever reaching the Gift Clause merits. Chief Justice Blacklock, writing for the Court, held that the cities sued the wrong defendant.
The Court emphasized that the judicial power requires a judgment that redresses injuries traceable to the named defendant. Naming “the State of Texas” as a generic defendant is “not a cheat code for bypassing the requirement” to sue the party whose actions actually cause the alleged injury. The cities’ real dispute was with the telecom companies, who would be the ones paying (or refusing to pay) higher rates. A judgment against “the State” would not bind the telecom companies and would not resolve the cities’ actual injury.
The Court also vacated the court of appeals’ opinion on the Gift Clauses, declaring it would have “no continuing precedential effect” on that question. The Court left open the possibility that the cities could refile in a “justiciable posture”—potentially against the Public Utility Commission or the telecom companies themselves.
Key Takeaways
- Cities and other governmental entities cannot sue “the State of Texas” generically to challenge the constitutionality of a statute—they must identify the specific officer, agency, or private party whose conduct causes the alleged injury.
- The Uniform Declaratory Judgments Act does not “license litigants to fish in judicial ponds for legal advice.” Courts exist to resolve concrete disputes, not to make precedent.
- The decision continues the Texas Supreme Court’s recent trend of strictly policing proper-defendant requirements in constitutional litigation, following Zurawski (2024) and MALC (2022).
- The underlying Gift Clause question—whether legislatively reduced telecom rates constitute unconstitutional gifts—remains unresolved and could be relitigated with proper parties.
Why It Matters
This decision has immediate significance for Texas municipalities that rely on right-of-way fees as a revenue source and for telecom companies benefiting from the 2017 and 2019 rate reductions. After nine years of litigation, cities are back to square one—though the Court signaled the dispute may be justiciable if brought against the telecom companies directly or potentially the PUC.
More broadly, the opinion reinforces the Texas Supreme Court’s increasingly strict approach to standing and proper-defendant requirements in constitutional challenges. Texas litigators bringing facial constitutional challenges to statutes should take careful note: a declaratory judgment action naming only the State is unlikely to survive jurisdictional scrutiny unless the State, through a specific officer or agency, is directly causing the challenged harm.