Conduit form of contracts provides immunity for entities even though they are purchasing goods or services from a private company says Third Court of Appeals.

North Central Texas Council of Governments v. MRSW Management, LLC, No. 03-12-00692-CV (Tex. App. Austin June 20, 2013).

This is a contractual immunity case in which the Austin Court of Appeals held that a local council of governments is immune when performing its function for administering funding programs. The analysis can be used to apply to various different interlocal agreements.

In this case, the North Central Texas Council of Governments (“NCTCOG”) entered into a procurement agreement with DPS to procure planning services statewide. One of the contracts to DPS was for homeland security grant management, which was provided by MRSW Management (“MRSW”). The funds to pay for the services were to flow from DPS to NCTCOG to MRSW. After DPS terminated the agreement and did not release funds to NCTCOG, it did not pay MRSW, which then filed this lawsuit. NCTCOG filed a plea to the jurisdiction on immunity grounds, which was initially granted, then reversed on a motion for new trial, and this interlocutory appeal followed.

The Austin Court of Appeals held that regional planning commissions like a local council of governments have express statutory authority to enter into contracts with the state and was therefore performing governmental functions.  The court discussed the proper definition of certain key terms such as “purchasing,” “planning” and “administrative functions.”  The court also took an interesting look at Tex. Loc. Gov’t Code §271.152 and determined the statute did not waive immunity since the “goods or services” of MRSW were not provided to NCTCOG but to DPS instead. Because of the plain language of §271.152, it applies only to goods or services provided to the contracting entity, not mere conduits of federal or state funding.  In a footnote, the court stated that MRSW brought a separate administrated claim heard by the State Office of Administrative Hearings (“SOAH”)  against DPS which was dismissed because the “contract” was not directly with DPS but with NCTCOG and was therefore not a “contract” under Chapter 2260 of the Government Code which waives the state’s immunity.  In other words, because of the “conduit” format of the contract, immunity was not waived for either DPS or NCTCOG, even though it might have been if any direct contract was entered into by either entity for direct goods or services.

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