On Friday, March 29, 2013, the Texas Supreme Court handed down a ruling against the City of McKinney in a government “takings” case. In this case, a real estate developer, El Dorado Land Company, had a contract with McKinney in which it had the future right to buy back land. McKinney refused to honor the buyback right, and when the developer sued, McKinney asked the court to dismiss the case, claiming “sovereign immunity.”
This same argument has been made by the City of Irving in the suit filed by developer Las Colinas Group over the troubled Irving Entertainment Center. Under “sovereign immunity,” a government cannot be sued – even if it breaches its contract – unless the legislature gives permission to sue.
One exception to “sovereign immunity” is when a government “takes” a person’s property without paying for it. In the case before the Texas Supreme Court, the developer argued that McKinney’s refusal to honor the buyback right amounted to a government “taking” of the developer’s rights in the property. In a 9-0 opinion, the Texas Supreme Court agreed, unanimously slapping down McKinney’s sovereign immunity argument.
A similar claim has been made by Las Colinas Group against Irving. One of the developer’s complaints is that the City seized control and ownership of its intellectual property rights without providing just compensation, which the developer estimates at $75 million. Irving made the same argument as McKinney – sovereign immunity.
The trial court disagreed with Irving’s sovereign immunity argument and denied its request to dismiss the “takings” claim. Ernest Leonard, Las Colinas Group’s lawyer (who was also the developer’s lawyer against McKinney) said, “we believe that the recent decision by the Texas Supreme Court strengthens the rights of property owners against governments, and gives added strength to Las Colinas Group’s claims against the City of Irving for its unjust taking of the intellectual property rights.”
