Agreement for jobs and fire hydrants in exchange for sewer line is not a contract for “goods or services” waiving immunity says 12th Court of Appeals.

City of Canton v ZANBAKA, USA, LLC d/b/a DUKE’S TRAVEL PLAZA, NO. 12-12-00006-CV (Tex. App. Tyler May 31, 2013).

This is an interlocutory appeal from the denial of a plea to the jurisdiction based on sovereign immunity from a contract. ZANBAKA, USA, LLC d/b/a DUKE’S TRAVEL PLAZA (“Dukes”) entered into a contract with the City of Canton EDC to fund a sewer line and lift station install.  Duke’s agreed to allow annexation of its property, create sixty to seventy jobs, install fire hydrants and several other conditions tied to the sewer install. After Duke’s performed it’s obligations the City Council delayed the sewer installation and  Duke’s filed suit under the Uniform Declaratory Judgment Act to declare rights under Texas Local Government Code §271.152 (waiver of immunity for contracts for goods or services.)  The City filed a plea to the jurisdiction which was denied and the City appealed. The Tyler Court of Appeals reversed and rendered.

The key question was whether the benefits received by the City under this contract were “goods or services” under Chapter 271. The court held the purpose of the agreement was to provide funding for a sewer line and lift station to Duke’s real property. Any benefits that would flow from that primary purpose are indirect and attenuated benefits for which no waiver of immunity exists under Chapter 271.  There must be a direct and primary benefit to the City to qualify. The court dismissed Duke’s claims.

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