Commission is mere funding conduit and not recipient of “goods or services” under disaster relief contract; warranty and indemnity clause does not alter status

South East Texas Regional Planning Commission v. Byrdson Services, LLC, d/b/a Excello Construction, LLC, 09-14-00198-CV (Tex. App. – Beaumont, January 22, 2015).

This is an interlocutory appeal from the denial of a plea to the jurisdiction in which the Beaumont Court of Appeals reversed the denial and dismissed the Commission.

As a result of Hurricane Ike, the South East Texas Regional Planning Commission (“Commission”) used federal funds for home repairs. Byrdson sued the Commission alleging it failed to pay for some work completed and refused to allow other work to proceed. The Commission filed a plea to the jurisdiction which the trial court denied. The Commissioned appealed.

The court first analyzed the changes to Chapter 271 of the Texas Local Government Code which waives immunity for breach of contracts in certain circumstances. However, the Commission notes the contracts expressly state it is a “contract administrator” but not a party to the contract. However, the nature of the contract benefits the Commission, Byrdson and the various home owners. It also gave the Commission the power to terminate. The Commission was therefore a party to the contract. However, under the contracts, private homes damaged were to be repaired using public money from a limited public fund. The various contracts subjected the contractors to oversight by the governmental entity that was tasked with disbursing the funds for the repairs. The Commission was not obligated to complete the repairs if Byrdson defaulted and it was the homeowner who was solely responsible for ensuring performance. As a result, the goods and services were provided to the homeowner, not the Commission. The fact the Commission received a warranty and indemnity provision was irrelevant as that was not the basis of the suit and was merely common language to protect the fund administrator (i.e. “a conduit of federal funds “) from liability attributable to Byrdson. Importantly, the court held “Chapter 271 does not include express language waiving immunity for the contingent claims, such as future warranty and indemnity claims that might be made, when such claims do not form the basis of the claims on which Byrdson sued.”  As a result, the Commission maintains it immunity from suit.

If you would like to read this opinion click here. Panel: Chief Justice McKeithen, Justice Kreger, and Justice Horton. Opinion by Justice Horton. The attorneys listed for the Commission are Jon B. Burmeister, Scot Sheldon, Heather L. Blackwell, and Jamie Matuska. The attorney listed for Byrdson Services Richard Griffin Jr.