EDC not a governmental entity for sovereign immunity purposes says Fourth Court of Appeals.

Leon Valley Economic Development Corp. v Little,  No. 04-12-00142-CV  (Tex. App. – San Antonio, June 19, 2013)

In this case the Fourth Court of Appeals held that a Type B economic development corporation is not a governmental entity entitled to sovereign/governmental immunity for breach of contract purposes.

Little agreed to sell certain land to the City’s EDC as part of a project if the EDC could obtain some specific financing terms. When the EDC was unable to obtain the financing under the conditions and time frame it desired it did not purchase and Little sued claiming a breach of contract. The EDC filed a plea to the jurisdiction asserting it was immune from such breach of contract claims.  When the trial court denied the plea, the EDC filed an interlocutory appeal.

The Fourth Court began its analysis stating it was considering its jurisdiction to hear the interlocutory appeal sua sponte. The court noted that TEX. LOC. GOV’T CODE ANN. §501.055(b) specifically states that EDCs are not political subdivisions but are instead non-profit corporations and only governmental units can take interlocutory appeals.  It then noted that §505.106(b) states EDCs perform governmental functions for purposes of the Texas Tort Claims Act negligence claims (and are therefore entitled to immunity).  However, since Little’s claims are only breach of contract claims, the EDC is not entitled to immunity for such claims. While the San Antonio court recognized several other courts have determined EDCs are governmental entities for breach of contract claims, they distinguish such cases noting that because their sister courts did not analyze why the EDCs are governmental entities, they are not persuaded the holdings should apply in this case.   As a result, the court dismissed the appeal for a lack of interlocutory jurisdiction.

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