Proprietary-governmental dichotomy no longer applicable in contract claims says 4th Court of Appeals.


Lower Colorado River Authority v. City of Boerne, Texas, 04-13-00108-CV (Tex. App. – San  Antonio, January 8, 2014).

This is a declaratory judgment action where the Lower Colorado River Authority (“LCRA”) brought a suit to enforce a 25 year term contract for the purchase of electricity. The City filed a plea to the jurisdiction which the trial court granted and the Fourth Court of Appeals now affirms.

Boerne agreed to purchase 100% of its total annual electric power and energy requirements from LCRA in a WPA and over the years negotiations resulted in a new agreement to expire in June 2016 with a notice of termination in June 2011, which the City timely provided. Additionally, the City sent a breach of contract notice in 2011 stating LCRA violated the Uniform Rate Clause by permitting other customers a reduction not provided to the City and cancelled it early. LCRA sued seeking a declaration it did not breach the agreement.  The trial court dismissed the suit in an order granting the City’s plea.

LCRA argues that the City of Boerne was engaged in a proprietary function when it entered into the agreement and therefore is not immune from suit. The Fourth Court noted that in City of San Antonio ex rel. City Pub. Serv. Bd. v. Wheelabrator Air Pollution Control, Inc., 381 S.W.3d 597 (Tex. App.—San Antonio 2012, pet. denied) it held that the legislature did away with the proprietary-governmental distinction in contracts in 2005 when it amended Chapter 271 of the Texas Local Government Code. And since immunity is the default rule, the City possessed immunity from suit.  Further, the legislature has not waived immunity in declaratory judgment suits like this one where a declaration would impose liability under the contract.

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