Contract limiting remedies to replace or replacement by the vendor preclude damages for repair or replacement by a third party for failed product.   

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Special contributing author Laura Mueller, City Attorney for Dripping Springs

New Braunfels I.S.D. v. FieldTurf USA Inc., No. 07-20-00308-CV (Tex. App.—Amarillo Nov. 12, 2021) (mem. op.).

In this appeal from a trial court’s judgment in favor of the school district on its breach of contract claim but against the district on its fraud and attorney’s fees claims.   The defendant cross-appealed on the breach of contract damages award arguing that the contract did not allow for damages, but only for repair and replacement.  The Seventh Court of Appeals reversed the trial court’s judgment on the breach of contract claim and held in favor of the defendant based on the plain language of the contract.

The school district and the defendant entered into a contract for turf for its sports field.  The contract included a provision that the school district’s only remedy for the turf wearing out early is repair or replacement.  The turf did wear out early and the school district informed the vendor defendant. The vendor defendant inspected the field but did not repair or replace the field.  The school district paid a third party to replace the field and then sued the vendor defendant for the amount paid for the replacement based on breach of contract and fraud.  The jury held in favor of the school district for damages for breach of contract but not for the fraud claim.  The trial court entered judgment on the jury’s award but struck the prejudgment interest from the judgment.

Appellate review of a trial court’s entry of judgment on a jury verdict is a pure question of law. Arbor Windsor Court, Ltd. v. Weekley Homes, LP, 463 S.W.3d 131, 136 (Tex. App.—Houston [14th Dist.] 2015, pet. denied).  The issue of interpretation of a contractual provision that is unambiguous is a question of law and the court reads the plain langue of the contract.   URI, Inc. v. Kleberg Cty., 543 S.W.3d 755, 763-64 (Tex. 2018).  The Texas UCC Section 2.719 provides that a remedy may be substituted in the contract for those in the UCC, but if the remedy fails its essential purpose, a remedy in the UCC may be used.  The court of appeals held that the remedy did not fail its essential purpose and the language in this agreement adequately provided an exclusive remedy:

[t]his warranty is limited to the remedies of repair or replacement, which shall constitute the exclusive remedies available under this warranty, and all other remedies or recourses which might otherwise be available are hereby waived by the Buyer.

See Equistar Chems., L.P. v. ClydeUnion DB, Ltd., 579 S.W.3d 505, 522 (Tex. App.—Houston [14th Dist.] 2019, pet. denied) (citing PPG Indus., Inc. v. JMB/Houston Ctrs. Ltd. P’ship, 146 S.W.3d 79, 98, 101 (Tex. 2004).  Because the exclusive remedy was repair or replacement, the school district’s remedy was limited to repair or replacement and it could not be awarded damages. Without prevailing on its claim for damages, the school district was also not able to recover attorney’s fees.

The court of appeals reversed the trial court’s judgment and dismissed the claim for damages because the exclusive remedy was repair or replacement of the turf.

If you would like to read this opinion click here.   Panel consists of Chief Justice Quinn and  Justices Pirtle and Doss.  Opinion by Justice Pirtle.

 

Dallas Court of Appeals holds commercial lease on property separated from airport was a proprietary function

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City of Dallas v. Oxley Leasing North Loop, LLC, 05-21-00241-CV, (Tex. App – Dallas, Nov. 12, 2021)

This is a breach of a lease agreement case where the Dallas Court of Appeals affirmed the denial of the City’s plea to the jurisdiction, holding the City was performing a proprietary function.

The City created a Land Use and Development Plan (“Development Plan”) for the airport. The Development Plan identified several portions of airport property for potential development, designating some as airfield operations, airfield-related development, non-aviation-related development, open space/recreational, and a commercial office park.  The City leased portions of the commercial office park (“the Property”) to First Continental Bank for an initial term of 40 years. The City agreed to construct a barrier and a road to physically separate the Property from the back of the airport. The lease was assigned several times, eventually being held by Oxley. The City and Oxley dispute whether Oxley property initiated an extension under the lease. The City, believing no renewal had occurred, moved to evict Oxley. Oxley filed suit for breach of the lease and the City filed a plea to the jurisdiction. The trial court denied the plea and the City appealed.

Leasing in a commercial park is not listed under the TTCA as a governmental function. As a result, the court must analyze the nature of the transaction under Wasson II standards. The mere fact that the City leased property located at the airport is not determinative of the nature of that activity.  Since the Property is identified by the City as nonaviation related, the court had little difficulty determining it was not related to the operation of the airport. Under Wasson II,  the City had no obligation to lease the Property to First Continental Bank, was discretionary, and the nature of the private lease necessarily excludes the general public from benefiting from the premises. The fact that a city’s proprietary action bears some metaphysical relation to a governmental function is insufficient to render the proprietary action governmental. As a result, the specific lease at issue is proprietary and the City is not entitled to immunity.

Panel consists of Justices Schenck, Smith, and Garcia. Affirmed. Memorandum Opinion by Justice Schenck can be read here. Docket page with attorney information found here.

First Court of Appeals holds 380 development agreement was an agreement for goods and services (waiving immunity) but dismissed all other claims brought against the City by the developer

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Town Park Center, LLC v. City of Sealy, Texas, Janice Whitehead, Mayor, Lloyd Merrell, City Manager and Warren Escovy, Assistant City Manager, 01-19-00768-CV, (Tex. App – Hou [1st], Oct. 28, 2021)

In this contract dispute, the First Court of Appeals in Houston affirmed in part and reversed in part the City’s plea to the jurisdiction. This is the third lawsuit involving the parties and underlying dispute.

Town Park Center and the City executed a “380” Economic Development Agreement (“the EDA”) to develop a commercial shopping center on Town Park’s property. Town Park Center agreed to develop and construct the shopping center according to a development plan that the City had approved. The City agreed to pay annual economic development grant payments (based on sales tax collections) to Town Park Center “as an incentive to comply with this Agreement.” Town Park Center first filed suit against the City and officials, asserting breach of contract and other claims. The basis was an assertion the EDA required the City to sell stormwater detention capacity to Town Park and failed. The City filed a plea to the jurisdiction, which was granted as to the city but not the individual officials. The officials appealed but Town Park non-suited. Town Park then filed a second suit against other officials, but which was otherwise identical.  Town Park later non-suited, only to file a third suit seeking mandamus, declaratory, injunctive relief, takings, ultra vires claims and claims under the “vested rights provision” of Local Government Code chapter 245. The factual allegations were nearly identical to the first and second suit. The City filed a plea to the jurisdiction and argued immunity as well as res judicata “ish” arguments. The trial court granted the plea and Town Park Center appealed.

The court noted that res judicata is an affirmative defense and could not be raised in a plea to the jurisdiction. It declined to consider the arguments through the lens of a summary judgment noting the trial court consideration lacked the hallmarks of a true summary judgment proceeding, including the required 21 days’ notice of a hearing date. However, the City also raised immunity defenses. The court held the EDA constituted a contract for goods or services which can trigger a waiver of immunity. The EDA included a provision for Town Park Central to build and dedicate a road to the City as part of the development, which therefore constitutes a service.  The trial court therefore erred in granting the plea as to the breach of contract claim. However, as to the Chapter 245 vested rights claim, Town Park Center did not identify any City order, regulation, ordinance, rule, or other requirement in effect when its rights in the project vested that mandates the sale of the capacity at issue. With no change in order or rule, Chapter 245 is inapplicable. As to Town Park’s takings claim, it failed to establish the City’s refusal to allow the purchase of detention capacity deprived them of the beneficial use of the property. Specifically, the court noted Town Park Center finished the development and sold it to host a grocery store. The City, therefore, did not deprive it of all economic use of the property. As to the ultra vires claims, the court first chastised the parties for failing to follow proper pleadings rules, making the determination more difficult on the court, specifically by labeling various amended pleadings as supplemental pleadings. Considering the pleadings as filed, the court held the City officials ended up joining the City’s plea as part of a supplement (without objection from the other side). Merely failing to comply with a contract does not give rise to an ultra vires claim.  While Town Park Central points to a city resolution allowing for detention capacity purchases, it does not mandate the sale of detention capacity. It instead only provides that the City may sell detention capacity, which is discretionary. As a result, the ultra vires claims were properly dismissed.

In short, the court reversed the dismissal of the breach of contract claim, ultimately affirmed the dismissal of all other claims, and remanded for trial.

Panel consists of Justices Kelly, Guerra, and Farris. Opinion by Justice Farris can be read here. Docket page with attorney information found here.

Since City’s plea to the jurisdiction only challenged non-jurisdictional facts, plea was property denied in breach of contract suit

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City of Del Rio v. Henry Arredondo, 04-20-00409-CV, (Tex. App – San Antonio, August 4, 2021)

This is a breach of contract suit where the Fourth Court of Appeals held that because the City’s plea only challenged non-jurisdictional facts, the plea was properly denied.

City hired Arredondo as its City Manager. The parties entered into an Employment Agreement, which provided Arredondo served “at the pleasure of the City Council.” The City Council later voted to terminate the Employment Agreement. Arredondo then sued the City, alleging the City Council did not obtain a majority vote to terminate his employment, which constituted a breach of contract claim. He also pled an alternative breach of employment contract claim. The City filed a plea to the jurisdiction, which was denied.

Section 271.152 of the Texas Local Government Code waives governmental immunity for the adjudication of certain breach of contract claims. The City asserts the contract did not alter the employment-at-will doctrine and the City complied with the contract. The crux of this appeal is whether the facts asserted by the City are “jurisdictional facts.”  Not all facts relating to the merits are necessarily jurisdictional facts. The at-will nature and city’s compliance with the contract, in this situation, were not jurisdictional facts, so the plea was properly denied.

Panel consists of Chief Justice Martinez, and Justices Chapa and Valenzuela. Affirmed. Memorandum Opinion by Justice Chapa can be read here. Docket page with attorney information found here.

 

Termination of as needed contract did not result in any damages under chapter 271, so no waiver of immunity exists

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Special contributing author Laura Mueller, City Attorney for Dripping Springs

City of Heath v. Robert Williamson d/b/a PCNETSYS, No. 05-20-00685-CV (Tex. App.—Dallas, May 3, 2021) (mem. op.).

In this interlocutory appeal from a trial court’s holding denying a city’s plea to the jurisdiction on a contract claim, the Fifth Court of Appeals vacated the trial court’s judgment and dismissed the case because damages falling under Chapter 271 of the Local Government Code were not part of the claim as an as-needed services contract.

The plaintiff sued the city after his contract with the city for IT services was terminated early.  The agreement provided that the plaintiff would be paid a monthly retainer for IT services “as may be required by the City.”  The agreement was set to terminate in October 2021, but the city terminated the agreement effective April 30, 2019.  Both parties agreed that the plaintiff had been paid for all services already provided.  The plaintiff sued the city for breach of contract arguing that he was owed lost profits and “loss of the benefit/expectation of the contract.”  The city argued that the contract was not properly executed and created an unconstitutional debt.  The trial court denied the city’s plea to the jurisdiction related to the claim and the city appealed.

Chapter 271 of the Texas Local Government Code waives a city’s immunity when there is a claim for certain types of damages related to a written contract including the “balance due and owed”.  Tex. Loc. Gov’t Code §A271.153.  Immunity is not waived for consequential damages.  The court of appeals held that there was no claim for recoverable damages because there was no balance due and owing as the plaintiff had already been paid for all services rendered.  Thus, immunity had not been waived.  The court also held there was no reason to allow further discovery or allow repleading because the parties were in agreement that all services had been paid for and it was only future payments that the plaintiff was seeking.

The court of appeals vacated the trial court’s denial of the city’s plea to the jurisdiction because no damages that waive contractual immunity had been pled or existed.

If you would like to read this opinion click here.   Panel consists of Justices Reichek, Schenck, and Carlyle.  Opinion by Justice Amanda L. Reichek.

Dallas Court of Appeals holds grading of land for sports facility is proprietary in specific situation with land lease

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The City Carrollton, Texas v. Weir Brothers Contracting, LLC, 05-20-00714-CV (Tex App. – Dallas, March 22, 2021)

This is a contractual immunity case where the Dallas Court of Appeals held the City’s lease of certain land was a proprietary function, therefore immunity did not apply.

The City advertised for proposals to bid on purchasing or leasing several acres of City owned land.  The City then executed a land lease with Blue Sky Sports Center of Carrollton, LP (“Blue Sky”) for 30 acres to “operate a multi-use sports, recreational, entertainment, and related service facility.” Blue Sky was required to use the leased premises “solely for the purpose of constructing, maintaining, and operating the Facilities.”  Blue Sky was allowed to enter into sublease agreements for the provision of food and refreshments, a pro shop, an arcade, and several other services. The Lease required the facilities to be open to the public “during reasonable times as is customary for [Blue Sky’s] type of business.” Blue Sky was further permitted to charge fees for use of the facilities. Shortly less than a year later the City and Arthur James, Inc. (“AJI”) entered into a contract for the grading of several acres which included the 30 acres that had been leased to Blue Sky. As compensation, AJI would receive 6.27 acres of the tract. However, during the grading, AJI’s contractor dug into a capped landfill. All work stopped until the City could develop a solution. The City terminated its agreement with AJI due to work not being completed within the specified time period. The City refused to pay the contractor, Weir. Weir obtained an assignment from AJI and sued the City for breach of contract, quantum meruit, promissory estoppel, and tortious interference with contract. The City filed a plea to the jurisdiction which was denied. The City appealed.

The court held the true nature of the dispute revolves around the City’s lease of property for the recreation facility and not the mere grading of a road. Recreational facilities are listed as governmental functions, but Blue Sky’s construction and operation of the facility is not a function of the City or on the City’s behalf. Although the extent to which the bidder’s use of the property would “complement” a nearby public recreational facility owned and managed by the City, nothing in the record suggests the lease with Blue Sky was essential to the City’s operation of that public facility so as to render the act governmental. As a result, the court held the actions were proprietary. The City does not enjoy immunity from suit and the plea was properly denied.

If you would like to read this opinion click here. Panel consists of e Justices Molberg, Reichek, and Nowell. Opinion by Justice Reichek.

13th Court of Appeals holds remainder of employment contract was consequential damages, not amounts due and owed, therefore no waiver of immunity exists for breach

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Edinburg Housing Authority, Dr. Martin Castillo, Gabriel Salinas, Simon Garza, Marissa Chavana, and Juan Guzman v. Rodolfo Ramirez, 13-19-00269-CV, (Tex. App – Corpus Christi Feb. 25, 2021)

This is an interlocutory appeal from the denial of a housing authority’s motion to dismiss on jurisdictional grounds in an employment dispute. The Corpus Christi Court of Appeals reversed the denial and dismissed the case.

Ramirez signed a three-year employment contract with the Housing Authority to be its Executive Director and was extended for another three years, to end in 2021. However, in 2018 the board of the housing authority terminated Ramirez. Ramirez sued the Authority as well as individual commissioners (hereinafter “Authority Defendants”) for breach of contract, as well as constitutional due course of law, equal protection, and declaratory judgment relief. The Authority Defendants filed a motion to dismiss under Rule 91a citing a lack of jurisdiction. The trial court denied the motion and the Authority Defendants appealed.

The court first decided that, contrary to the individual commissioner’s assertion, the court did have interlocutory jurisdiction to hear the appeal involving them individually as well as in their official capacities. Section 51.014(a)(5) of the Texas Civil Practice & Remedies Code allows interlocutory appeal for the denial of a motion for summary judgment based on an individual’s immunity.  While the underlying motion was a motion to dismiss as opposed to an MSJ, the court determined they are treated the same for purposes of §51.014(a)(5). Next, suits brought pursuant to a Texas constitutional provision are limited to equitable relief and do not allow a claim for monetary damage.  This applies to the entity as well as individual employees and officials. Ramirez’s constitutional claims should have been dismissed because they sought only the recovery of monetary damages. Next, to trigger the waiver of immunity for contract claims under Tex. Loc. Gov’t Code § 271.152, a plaintiff must claim damages within the limitations of the chapter, i.e. balances due and owed, but not paid. Consequential damages are specifically excluded. Ramirez does not claim that the Housing Authority and its Commissioners failed to pay him for work he completed as the Housing Authority’s Executive Director. Rather, Ramirez seeks recovery of the wages he would have earned had his employment contract continued through the end of its extended term. These future wages would be considered “lost profits,” which are “consequential damages excluded from recovery.”  As a result, no jurisdiction exists as to the contract claim. The court then determined Ramirez’s constitutional claims against the commissioners, individually, cannot be brought against them as private actors. Because the individual commissioners are not the State or an entity thereof, these claims cannot stand. Further, Ramirez signed a contract with the Authority, not the individual commissioners. As a result, the commissioners cannot be individually sued for breach of contract. Finally, Ramirez had the opportunity to amend and failed to correct any defects. As a result, he is not entitled to amend.  Finally, the court determined the Authority Defendants were entitled to attorney’s fees and remanded to the trial court for such a determination.

If you would like to read this opinion click here. Panel consists of Chief Justice Contreras, and Justices Hinojosa and Silva. Reversed and remanded. Opinion by Justice Hinojosa. Docket page with attorney information found here.

Dallas Court of Appeals holds City waived immunity in lease agreement for use of soccer fields in exchange for upgrades and maintenance

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City of McKinney, Texas v. KLA International Sports Management, LLC, 05-20-00659-CV, (Tex. App – Dallas, Feb. 4, 2021)

This is a contractual immunity case where the Dallas Court of Appeals held the City’s immunity was waived.

KLA, a private sports management company and the City signed a non-exclusive revocable license agreement on December 18, 2018, giving KLA “recreational use” of three fields at the city-owned park. By an amendment, KLA agreed to replace two existing artificial turf soccer fields (Fields 1 and 2) and rehabilitate a grass field. The work, once commenced, was required to be completed within 180 days.  In exchange, the City granted KLA a priority 30-year license entitling it to use the improved fields for only soccer practice and soccer games in accordance with an agreed annual use calendar.  The City later issued a notice of default to KLA, alleging construction and timeliness deficiencies and other breaches. Ultimately the City terminated the contract under a theory of breach. KLA sued the City for breach of contract seeking specific performance, damages, attorney’s fees, and injunctive relief. The City filed a plea to the jurisdiction, which was denied. The City appealed.

The court first stated the standards from Wasson II relating to the governmental/proprietary dichotomy does not apply if the function is listed as governmental in a statute. The court determined the City’s license contract constituted a governmental function.  Section 271.152 of the Texas Local Government Code provides a “limited waiver of immunity for local governmental entities that enter into certain contracts.” Chapter 271 does not define “services,” but the Texas Supreme Court has interpreted the term in this context as “broad enough to encompass a wide array of activities.” The agreement to provide services need not be the primary purpose of the agreement. “When a party has no right under a contract to receive services, the mere fact that it may receive services as a result of the contract is insufficient to invoke chapter 271’s waiver of immunity.” However, the license here required KLA to (1) improve or rehabilitate the three fields to a standard that reasonably equated to a FIFA-certified playing surface using industry-standard components and materials from a FIFA-approved turf manufacturer and (2) to provide year-round maintenance services on those fields. Thus, the City’s license agreement provided for both goods and services and provided more than indirect benefits to the City. The City need not pay currency in order to constitute proper consideration. Improving, rehabilitating, and maintaining the soccer fields was proper consideration for nonexclusive use of the fields and satisfies the requirements of Chapter 271.  The plea was properly denied.

If you would like to read this opinion click here. Panel consists of Justices Molberk, Reichek, and Nowell. Affirmed. Opinion by Justice Reichek. Docket page with attorney information found here.

Tyler Court of Appeals holds District is immune from sewer backup as 20 year old plastic coupler which failed was not part of the motor system

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Sean Self v. West Cedar Creek Municipal Utility District, 12-20-00082-CV, (Tex. App – Tyler, Jan. 6, 2021)

This is an appeal from the granting of a plea to the jurisdiction in a sewage backup case in which the Tyler Court of Appeals affirmed the order.

Self and his wife Kimberly entered into a contract with the District in 2012  water and sewer services. After sewage backed up into their home in April 2015, the District made some repairs to the vault system. Another backup occurred in 2016 and Sean Self sued the District alleging negligent use of motor-driven equipment, premises defect, unconstitutional taking, non-negligent nuisance, and breach of contract. The District filed a plea to the jurisdiction, which was granted. Self appealed.

It is undisputed that a plastic coupler (known as a quick connect) failed causing the backup. Self argued the motors, pipes and couplers are all one system. The court explained in detail how the Self system worked. The coupler gives District employees the ability to remove the pump without cutting pipes. There is no motor in the coupler. It merely assists in disconnecting the pump if it needs to be worked on. If the coupler fails, gravity will cause any sewage coming from a higher-grade property to backfill Self’s property. Self’s expert plumber testified the pumps used can cause high pressure, which could potentially break the coupler, but he did not know that is what occurred in this instance.  However, there was no evidence that the coupler assists in sewage collection other than to the extent it helps maintain the connection between the pump and the discharge line. The evidence shows that, if the coupler breaks, whether the pump is on or not, the sewage in the tank would flow out to the ground or through the line in the tank and back into the house, due to the force of gravity, not the operation or use of motorized equipment. Under a premise defect theory, the duty owed by an owner of premises to an invitee is not that of an insurer. The coupler was placed in 1995. The fact that materials deteriorate over time and may become dangerous does not itself create a dangerous condition, and the actual knowledge required for liability is of the dangerous condition at the time of the accident, not merely of the possibility that a dangerous condition can develop over time. No evidence of actual knowledge existed. In the context of an inverse condemnation claim, “the requisite intent is present when a governmental entity knows that a specific act is causing identifiable harm or knows that the harm is substantially certain to result.” A taking cannot be established by proof of mere negligent conduct. No knowledge of intent is present. While Self alleged a claim for non-negligent nuisance, there is no separate waiver of governmental immunity for nuisance claims. Finally, as to the breach of contract claim, no goods are services were provided to the District, it was the District providing services to Self. As a result, no waiver of immunity exists.

If you would like to read this opinion click here. Panel consists of Chief Justice Worthen, and Justices Hoyle and Neeley.  Affirmed. Opinion by Justice Neeley. Docket page with attorney information found here.

The Tenth Court of Appeals held immunity waived for airport lease based on improvements made by tenant

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Special contributing author Laura Mueller, City Attorney for Dripping Springs

City of Cleburne v. RT General, LLC, No. 10-20-00037-CV (Tex. App.—Waco  December 16, 2020) (mem. op.).

This is an interlocutory appeal from a trial court denial of the city’s plea to the jurisdiction on a breach of contract and related claims regarding an airport lease. The Waco Court of Appeals affirmed the denial.

The plaintiff sued the city after the city attempted to evict the plaintiff from the city’s airport under a lease agreement with the plaintiff.  The city and plaintiff entered into a lease agreement for airport facilities where the plaintiff could use the airport facilities at no charge for ten years because the plaintiff had expended over $300,000 in repairing the city’s airport facilities.  After the first ten years, the plaintiff was required to pay rent for use of the facilities.   Three years into the lease, the city sent a letter of eviction to the plaintiff, and the plaintiff sued the city for breach of contract, inverse condemnation, declaratory judgment, and fraud.  The city argued it had immunity from suit because the airport operation is a governmental function and the contract was missing an essential term, the rental payments for the first ten years.  The trial court denied the city’s plea to the jurisdiction.

Immunity is based on whether a function on which liability is based is a governmental or proprietary function.  Wasson Interests, Ltd. v. City of Jacksonville, 559 S.W.3d 142, 146 (Tex. 2018).  Operation of an airport is a governmental function.  Tex. Transp. Code § 22.021(a)(2).  Immunity from a governmental function can be waived by a contract claim if the contract falls within the provisions of Chapter 271 of the Local Government Code including stating the essential terms of the contract.  Tex. Loc. Gov’t Code § 271.152.  While price is an essential term of an agreement, the court of appeals held that past consideration could meet this requirement.  The court of appeals also held that claims for declaratory judgment and inverse condemnation can move forward on the same set of facts because immunity is waived under breach of contract.

Chief Justice Gray dissented by footnote stating that there was insufficient evidence that goods or services were provided to the city under the lease agreement.  Chief Justice Gray would also render judgment on the other claims as they are creative pleading efforts that should be dismissed as attempts to avoid the governmental immunity issue.

If you would like to read this opinion click here.   Panel consists of Chief Justice Gray and  Justices Davis and Neill. Opinion by John Neill and Chief Justice Gray dissenting by footnote within the opinion.

 

Attorney’s fees for breach of contract under Tex. Loc. Gov’t Code §271.153 valid only if equitable and just – denied for much smaller change order amount

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Dowtech Specialty Contractors, Inc. v. City of Weinert, 11-18-00246-CV (Tex. App. – Eastland, September 25, 2020)(mem. op.).

This is a breach of contract dispute where the Eastland Court of Appeals affirmed a trial court judgment awarding Dowtech a small amount of damages, but denied the contract remainder and attorney’s fees.

The City’s water supply is a combination of well water and water obtained from the North Central Texas Municipal Water Authority (the NCTMWA). The well water needed to be treated so the City, using several grants, decided to construct a pressurized system to keep the well water separate from NCTMWA water. During the bid process, the engineer advised the bidders to adjust a line item for instrumentation to allow NCTMWA to control certain valves/parts, but also a separate control system for the City. The revised bid specifically noted that not all necessary components for a full system were specified and the contractor must provide all items needed for a functional system. Dowtech was awarded the bid, but the main difference from the losing bidder was the cost of line item. Later, the City adjusted the pumphouse and issued a change order. When Dowtech asserted it was finished, the City noted it had not installed all parts of the instrumentation system, to which Dowtech asserted the bid did not require an operational system. After Dowtech submitted a final invoice, to which the City asserted it breached the agreement and refused to pay the final invoice. Dowtech sued the City for breach of contract and sought to recover both the contract balance and the charges for the additional work.  The City counterclaimed.  After a bench trial, the trial court awarded Dowtech $2,052.50 for the pumphouse work, but that Dowtech did not complete all work required by the contract so was not entitled to the contract price. It also denied the request for attorney’s fees and interest. Dowtech appealed.

The Court of Appeals held Dowtech did not plead the affirmative defense that its performance under the contract was excused and does not argue that the issue was tried by consent. But even if it had, the evidence was legally and factually sufficient to support the trial court’s determination Dowtech failed to complete all contracted work. Further, Dowtech did not file a motion for new trial or otherwise object to the trial court’s failure to award prejudgment interest on the change order amount. Therefore, Dowtech failed to preserve this issue for appeal.  Additionally, because the suit was brought under Tex. Loc. Gov’t Code §271.153, attorney’s fees can only be awarded if equitable and just. The trial court had discretion to award fees and the fact both parties failed in their primary claims (with Dowtech winning only as to the much smaller change order amount), the Court of Appeals felt the record did not reflect an arbitrary or unreasonable decision by the trial judge. The judgment was affirmed.

If you would like to read this opinion click here. The panel consists of Chief Justice Bailey, Justice Stretcher, and Senior Justice Wright.  Memorandum opinion by  Chief Justice Bailey.

 

San Antonio Court of Appeals holds governmental immunity bars both suit and liability where the ‘only plausible remedy’ is invalidation of a government contract.

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City of San Antonio v. Patrick Von Dohlen, et al., 04-20-00071-CV (Tex. App.—San Antonio Aug. 19, 2020)

 This is an interlocutory appeal from the denial of a plea to the jurisdiction and Rule 91a motion to dismiss filed by the City of San Antonio.

Plaintiffs Patrick Von Dohlen, Brian Greco, Kevin Jason Khattar, Michael Knuffke, and Daniel Petri sued the City of San Antonio (“City”) seeking declaratory and injunctive relief.  Plaintiffs alleged that the City violated Government Code Chapter 2400 by continuing to exclude Chick-fil-A from operating a restaurant in the City’s airport based on Chick-fil-A’s financial support for “certain religious organizations that oppose homosexual behavior.”  Section 2400.002 of the Texas Government Code specifically prohibits governmental entities from taking any adverse action against any person or business based on “membership in, affiliation with, contribution, donation, or other support provided to a religious organization.”  This legislation took effect on September 1, 2019, more than five months after the San Antonio City Council voted to implement an amended concession agreement that required Chick-fil-A to be replaced with a different vendor.  The City filed a plea to the jurisdiction, asserting governmental immunity, and a Rule 91a motion to dismiss for lack of standing, both of which the trial court denied.  The City then appealed.

The Fourth Court of Appeals determined that although a plaintiff may properly sue for declaratory and injunctive relief when the governmental entity and its officers acted without legal or statutory authority, such a suit is precluded by governmental immunity if the purpose or result is to cancel or nullify a valid contract with the entity.  In this case, the court examined the nature of the plaintiffs’ claims and held that even though the plaintiffs purportedly sought only prospective relief against the City, the only plausible remedy for their claims was nullification of the amended concession agreement.  The court agreed with the City and found that plaintiffs’ suit sought to “undo and invalidate a contract previously approved by the city council, compel the City to re-open the contract approval process, and require the City to re-award the contract to a subcontractor that will operate a Chick-fil-A restaurant in the airport.”  Furthermore, where the “only plausible remedy” for the plaintiff’s claim is invalidation of a government contract, governmental immunity bars both suit and liability.  As a result, the plea should have been granted.

If you would like to read this opinion click here.  Panel consisted of Chief Justice Sandee Bryan Marion and Justices Patricia O. Alvarez and Irene Rios.  Opinion by Chief Justice Bryan Marion.  Docket page with attorney information can be found here.

Austin Court of Appeals held that a plaintiff has to allege recoverable damages to waive governmental immunity for breach of contract under Chapter 271 of the Local Government Code.

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Special contributing author Laura Mueller, City Attorney for Dripping Springs

Robert Lee Fitzsimmons, Jr. v. Killeen Indep. Sch. Dist., 03-19-00535-CV (Tex. App.—Austin, August 14, 2020).

In this governmental immunity case, the Austin Court of Appeals dismissed the case against the School District because the plaintiff failed to allege recoverable damages for breach of contract (Chapter 271 of the Local Government Code).

The plaintiff was a school teacher for the School District who was given the opportunity to resign after an accusation of “viewing inappropriate materials.”  The School District and the plaintiff entered into a “Settlement and Resignation Agreement” that included nondisclosure clauses to protect both the School District and the plaintiff.  The plaintiff later lost a job opportunity based on the allegations related to his prior position.  He sued the School District for breach of contract based on the Settlement Agreement.  The School District filed a plea to the jurisdiction arguing that its governmental immunity was not waived.  The trial court granted the School District’s plea to the jurisdiction.

To present a claim for breach of contract that waives immunity under Texas Local Government Code Chapter 271, a plaintiff has to allege that the contract in question is a contract “stating the essential terms of the agreement for providing goods or services to the local governmental entity that is properly executed on behalf of the local governmental entity.”  Tex. Loc. Gov’t Code § 271.151.  Also, a claim has to include an allegation of recoverable damages.  Id. § 271.153.  The plaintiff did not allege recoverable damages, thus the Court dismissed the plaintiff’s claim.

If you would like to read this opinion click here.  Panel consists of Justices Goodwin, Kelly, and Smith.  Opinion by Justice Edward Smith.

Waco Court of Appeals held that a contract for a Water District to provide water services to a customer is not a contract that waives governmental immunity under Chapter 271 of the Local Government Code.

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Special contributing author Laura Mueller, City Attorney for Dripping Springs

Mclennan County Water Control and Improvement Dist. v. Matthew and Rachel Geer, et. al, 10-17-00399-CV (Tex. App.—Waco, July 22, 2020).

In this governmental immunity case, the Waco Court of Appeals dismissed the case against the Water District because the plaintiff failed to allege a cause of action that waives governmental immunity for breach of contract (Chapter 271 of the Local Government Code) or for negligence (Texas Tort Claims Act) for actions surrounding the turning off of the plaintiffs’ water by the District.

The plaintiffs are owners of property in the Water District.  The Water District turned off the plaintiffs’ water after it was discovered that the plaintiffs had two buildings hooked up to the same meter.  The Water District also sent an employee to the plaintiffs’ property and took pictures on-site without the plaintiffs’ consent.  The plaintiffs’ sued the Water District for breach of contract for turning off their water and for trespass under the Tort Claims Act for entering their property without permission.  The trial court denied the Water District’s plea to the jurisdiction and the Water District appealed.  The Court of Appeals held that the District’s governmental immunity had not been waived and dismissed the case.

To present a claim for breach of contract that waives immunity under Texas Local Government Code Chapter 271, a plaintiff has to allege that the contract in question is a contract “stating the essential terms of the agreement for providing goods or services to the local governmental entity that is properly executed on behalf of the local governmental entity.”  Tex. Loc. Gov’t Code        § 271.151.  To present a claim under the Tort Claims Act, the claim has to be based on a negligent, not intentional act.  Tex. Civ. Prac. & Rem. Code § 101.021. The Court of Appeals held that a contract for water service where the service is provided by the Water District to an individual is not a contract for which immunity is waived under Chapter 271 because the Water District is not contracting to receive goods or services.  The Court also held that the intentional act of entering someone’s property without permission is not a valid claim under the Tort Claims Act, because the Tort Claims Act is for negligent acts.

If you would like to read this opinion click here.  Panel consists of Chief Justice Gray and  Justices Davis and Neill. Opinion by Chief Justice Gray.

 

 

14th Court of Appeals holds 1) proof of causation necessary to maintain labor code disability discrimination & 2) plea was properly denied for breach of contract

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Special contributing author Laura Mueller, City Attorney for Dripping Springs

Norris Rogers v. Houston Community College, 14-18-00591-CV (Tex. App.—Houston [14th Dist.], July 14, 2020) (mem. op.).

This case contains two claims: (1) disability discrimination under Texas Labor Code Section 21.105; and (2) breach of contract under Chapter 271 of the Texas Local Government Code. The Court of Appeals reversed-in-part and affirmed-in-part the trial court’s orders and reinstated the contract claim.

The plaintiff, and adjunct electrical instructor, argued he was terminated by the College because of a disability which prevented him from performing carpentry work or general construction work.  He also argued a unilateral employment contract was created for employment.   The College filed a no-evidence summary judgment on the disability claim and a plea to the jurisdiction on the contract claim. The trial court granted both and Rogers appealed.

To establish a prima facie case of discrimination based on disability, a plaintiff must show that the plaintiff suffered an adverse employment decision because of the disability.  Donaldson v. Tex. Dept. of Aging & Disability Srvs., 495 S.W.3d 421, 436 (Tex. App.––Houston [1st Dist.] 2016, pet. denied).  The plaintiff did not establish he was terminated because of his disabilities.  During this analysis, the Court also discussed how a lack of causation in a no-evidence summary judgment argument can be presented.   The Court affirmed the trial court’s order dismissing the disability claims against the College.

Next, to establish a contract, and waiver of immunity, under Chapter 271 of the Texas Local Government Code the plaintiff must prove that the contract: (1) is in writing, (2) states the essential terms of the contract, (3) provides for goods or services for the entity; and (4) was properly executed for the entity.  The plaintiff presented evidence that a unilateral contract existed.  The College stated that its policies and procedures would not allow this type of contract, but the Court held that the policies presented did not sufficiently negate the contract could exist.  Because there was sufficient evidence from a jurisdictional standpoint that the contract could exist, the Court overturned the trial court’s order granting the plea to the jurisdiction.

If you would like to read this opinion click here. Panel consists of Justices Wise, Zimmerer, and Spain.  Opinion by Justice Ken Wise.