7th Court joins 4th Court in holding no proprietary/governmental distinction in contracts

 

Republic Power Partners, L.P. v. City of Lubbock, 07-12-00438-CV (Tex. App. – Amarillo, February 5, 2014)

This is an accelerated appeal where Republic Power Partners (“RPP”) appeals the granting of the City’s plea to the jurisdiction.  The Amarillo circuit joins on the side of the San Antonio Court of Appeals in a split between the circuits on whether the legislature abrogated the proprietary/governmental dichotomy in contracts.

RPP sued the City (and West Texas Municipal Power Agency (“WTMPA”)) for breach of contract regarding a power development agreement.  WTMPA is a municipal power agency formed by the cities of Brownfield, Floydada, Lubbock and Tulia. It entered into a Development Agreement with RPP to help find and purchase power when its contact with Southwestern Public Service expired. WTMPA‘s Board of Directors created the High Plains Diversified Energy Corporation as the local government corporation designated to own and operate the electric energy generation and transmission facilities to be built. RPP raised millions and expended considerable sums completing feasibility studies and arranging for financing of the project. The City of Lubbock believed it should receive a greater share of any surplus revenue and objected to the issuance of revenue bonds arguing High Plains was not a valid local government at WTMPA did not have the authority to create it.  The district court agreed and no bonds were issued. RPP then sued WTMPA and the City (under joint enterprise theory) for breach of the Development Agreement. The trial court granted the City’s plea to the jurisdiction noting the City retained immunity from suit. RPP appeals.

The City cited to the San Antonio opinion of City of San Antonio ex. rel. City Public Service Board v. Wheelabrator Air Pollution Control, Inc., 381 S.W.3d 597 (Tex. App.—San Antonio 2012, pet. denied) where the court determined the proprietary/governmental distinction does not exist in contract claims after the adoption of subchapter I of chapter 271 of the Texas Local Government Code (waiver of immunity for contracts for goods and services). The Amarillo Court of Appeals agreed with the 4th Court and held the City retained its immunity, regardless of whether it was performing proprietary or governmental functions. Further Chapter 271 does not apply to the City in this case nce it did not sign the Development Agreement.  This distinction is important, since this court affirmed the denial WTMPA’s plea in a separate opinion issued the same day (07-12-00374-CV) noting that while the proprietary/governmental distinction does not apply to contracts, RPP’s services of identifying and evaluating potential energy generation and transmissions lines and managing the development process does under Chapter 271’s waiver. For a good analysis of the definition of goods as well as services, you can read the WTMPA opinion here.

If you would like to read this City opinion click here. Panel Justices Campell, Hancock, and Pirtle; opinion by Justice Pirtle.  The attorneys listed for the City are Thomas S. Leatherbury, Adrian J. Rodriguez, and Matthew R. Stammel.  The attorneys listed for RPP are Rick Thompson, Harvey G. Joseph, Ryan D. Clinton, Deborah G. Hankinson, and John L. Hubble