Federal Government Sanctioned

The United Sates District Court in the Southern District of Texas sanctioned the Federal Government in a case where the government sued a real estate developer. The court found the government’s conduct in this case to be oppressive and dishonest.

View the court’s ruling Opinion on Summary Judgment.

United States of America v. Lipar

Thomas Lipar through his companies, is a real-estate developer in Texas with smaller developments in the Georgia, Florida and Arizona. In 2004, Lipar began two developments on wetlands in north Houston called Benders Landing and Lake Windcrest. Before starting the project Lipar retained professional engineers to advise him on whether the land was covered under the Clean Water Act. The engineer’s opinion was that the lands were not covered and well upstream of any jurisdictional waters.

In 2007, after nearly three years of development the Environmental Protection Agency (EPA) visited the site and stated that the land was covered under the Act. In March 2007 the EPA told Lipar and his company to stop development on the project.

The United States sued Lipar and his companies on May 27, 2010 claiming that they had violated the Act. The suit claims that the Lipar and his companies “discharged fill into the waters of the United States” without a permit at the Bender’s Landing and Lake Windcrest locations.

Michael P. Fleming & Associates were not only successful in getting sanctions against the Federal Government in this case, Judge Hughes also decided that the plaintiff shall pay all attorney’s fees incurred defending the lawsuit. Our firm handles many types of litigation including business lawsuit defense, real estate, partnership disputes and breach of contract

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Lake Windcrest

Part of the initial development was to fill the wetlands and build Lake Windcrest. The government claimed that the surrounding wetlands of Spring Creek, Mill Creek and Dry Creek were covered under the Act. Under the Act wetlands are covered if they posses a “significant connection to the waters of the United States, waters that are navigable”. The court ruled that the wetlands within the Lake Windcrest development were not covered under the Act. At most they found that one could navigate Spring Creek in a canoe or kayak. In the case of Mill Creek and Dry Creek it was found that both of these were little more than “drainage ditches”.

Houston ship channel

Barge and cargo ships in the navigable waters of the Houston ship channel

In the Act navigable waters are those waters that can be used “in its ordinary condition, as a highway for commerce, over which trade and travel are or may be conducted in the customary modes on water”. Customary modes for trade and travel do not include canoes or kayaks but rather riverboats, yachts, barges, cargo ships and tankers. None of the latter modes of travel would have any chance of navigating these creeks.

Sanctions

In their ruling the District Court stated that the government, after 10 years of investigation (5 years before suing Lipar and 5 years after) “discovered no fact to show that the developed areas were jurisdictional wetlands”. In addition the court was very specific in claiming that the government was oppressive and dishonest.

  • Privilege. The government grossly misused the law of disclosure and identified most of their documents as “privileged” which means information was not produced or shared with the defendant prior to court appointed conferences. It was only after a special master was appointed to review the privilege logs that it was discovered that 88% of the documents did not meet the Department of Justice’s own guidelines for privileged information, essentially the government was withholding information in the case illegally.
  • Good Faith. The government had very little proof that the wetlands in question were covered by the Act. Based on the government’s data the court found the wetlands to be, at best “marshy coastal prairie” far different from the types of waters covered by the Act. The government in fact could not even identify where the wetlands they contend were filled were located. Knowing they had poor data to support their claim, the government, in a heavy handed way threatened Lipar with daily fines of $32,500 if development didn’t cease immediately. Later, government papers were found suggesting that they sued Lipar to deter other developers from doing the same.
  • Disclosure. The court found the government to be especially defiant in producing technical data related to the case. Only after months and a compelled deposition did they comply.
  • Inherent Power. Courts have the power to sanction or penalize parties in a lawsuit when they fail to obey orders of discovery, withhold information under claims of privilege or simply act in bad faith. In this case judge Lynn Hughes sanctioned the government by requiring them to pay for all the defendant’s attorney’s fees. He even went as far to say the government acted maliciously, were grossly incompetent and “brow-beat the defendants and discouraged their competitors” from carrying on in their business of developing residential lands in one of the fastest growing cities in the United States.
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