DALLAS - The Texas attorney general's office plans to approve the sale of the Houston Independent School District's $805 million of general obligation bonds today, ending three months of uncertainty caused by litigation.
The approval could help nearby Waller Independent School District issue its $49 million GO bond issue that has been halted by a similar lawsuit, according to Vinson & Elkins attorney Patrick W. Mizell, who represents both districts.
"The letter from the attorney general is actually good news for Waller ISD because it clears the roadmap for approval," Mizell said.
The letter of approval will be issued after a U.S. District Court hearing in Houston today, at which attorney Ty Clevenger expects to withdraw from the case. Clevenger said he has not been paid by clients who hired him to sue the district along lines similar to the Waller ISD, suit claiming racial discrimination in the proposed use of bond proceeds.
Clevenger said he would continue to represent Waller plaintiff DeWayne Charleston, a parent in the district and a county justice of the peace, on a pro bono basis.
"I think we're going to win the Waller case," Clevenger said. "In the Houston ISD case, it was never agreed that I would finance the case, and I haven't been paid."
Waller ISD, which planned to issue its bonds in June 2007, is in danger of losing its triple-A backing from the Texas Permanent School Fund if it does not sell the debt by mid-March.
Clevenger said he plans to seek a Texas Supreme Court ruling next week that the bond approval process for the Waller ISD bonds is unconstitutional. A ruling in his favor could force the Legislature to rewrite the state's Expedited Declaratory Judgment Act, designed to prevent a single disgruntled voter from tying up a bond sale through litigation. Under the law, an issuer can seek court validation of a bond issue before any lawsuits are filed.
Houston won a Travis County state district court's validation before Clevenger filed his suit. Waller won court validation after Clevenger's initial suit was dismissed. Clevenger's appeals in state court still stand in the way of the attorney general office's approval for the Waller ISD bonds. Clevenger also has a federal suit pending against Waller ISD.
In a letter to the attorneys in the case, David Mattax, chief of financial litigation for Attorney General Gregg Abbott, noted that no appeals of state court rulings are pending in the Houston ISD case. In Waller ISD, however, "the plaintiff's timely state court appeal constitutes the primary difference between the two cases," Mattax wrote.
"Thus, although both bond packages are still the subject of federal court challenges, unlike Waller County, the HISD litigation is no longer pending before state courts," Mattax wrote. "The mere pendency of a federal court challenge is insufficient to prevent bonds from being approved. This is because the plaintiffs' federal claims explicitly challenge the constitutionality of a state law. As the agency charged with providing legal representation to the state of Texas, we must presume that statutes passed by the Legislature are constitutional."
Despite the outcome in the Houston case, both Mizell and Clevenger agree that the Expedited Declaratory Judgment Act needs some fixes.
"The way the bond validation statute is written is just plain unconstitutional," Clevenger said.