Corpus Christi Court of Appeals holds recovery in breach of contract case under Chapter 271 waiver of immunity dependent on contract definition of “owner” – attorney’s fees are recoverable for any contract covered by Chapter 271 waiver.

Special guest author Laura Mueller, City Attorney of Dripping Springs

City of Corpus Christi v. Graham Constr. Servs., Inc., 2020 WL 3478661, No. 13-19-00367-CV (Tex. App.—Corpus Christi June 25, 2020) (mem. op.).

This is a breach of contract claim under Chapter 271 of the Local Government Code involving a wastewater plant replacement project where the Court of Appeals affirmed the trial court’s denial of the city’s plea to the jurisdiction.

The City of Corpus Christi (City) entered into a contract with Graham Construction Services (Graham) for the replacement of a wastewater plant.  In the agreement, the City hired Carollo to provide engineering and contract administration services and Carollo was considered the owner’s representative.  The agreement had strict deadlines for the completion of the project in two different phases.  The agreement also had strict notice of claim requirements (i.e. less than 90 days after claim event).  Graham submitted over a dozen delay claims, arguing that it faced delays due to “unclear or conflicting specifications in the contract, unnecessarily burdensome testing requirements, and an uncooperative and obstructionist attitude on the part of Carollo”, but not within the time frames required by the agreement.  At some point, the City replaced Carollo with Freese & Nichols (Freese), but Carollo was still involved in the project.  Graham also submitted reports requesting an increase in price and extensions of the schedule.  The City reviewed the reports and met with Graham regarding these reports. The City refused to issue a certificate of substantial completion, and Graham left the job site.   Graham sued the City for breach of contract.  The City filed a counterclaim which included a third-party petition against Carollo.  Three years after the suit filing, the City filed a plea to the jurisdiction.  The trial court denied the plea as to the breach of contract and attorney fee claims and the City appealed.

Under Chapter 271 of the Texas Local Government Code’s waiver of immunity for goods/services contracts contract damages are limited to: (a) balance due including increased costs from owner caused delays; (b) change orders; (c) attorney’s fees; and (d) interest.  Id. § 271.153.  The chapter does not waive a contractor’s defense, but does require a contractor to comply with the adjudication methods found in the contract. Id. §§ 271.154; .155.  The City argued that it was not responsible for owner-caused delays because the delays were allegedly caused by Carollo, an independent contractor.  The Court held a fact issue exists because Carollo was listed as an Owner Representative in the agreement.  The Court also held (a) the City’s thirty and sixty-day notice of claim requirements are prohibited by § 16.071 of the Texas Civil Practice and Remedies Code; and (2) the City did not tell Graham it missed the notice of claim deadline but instead worked through the claim dispute.  These are permissible under § 271.155.  The Court compared this case to a recent contract case where the City did notify a contractor of the lateness of their claims.   See Mission Consol. Indep. Sch. Dist. v. ERO Int’l, LLP, 579 S.W.3d 123, 129 (Tex. App.—Corpus Christi–Edinburg 2019, no pet.).  Finally, the Court held that the contractor’s request for attorney’s fees was allowed because § 271.153 states that fair and equitable attorney’s fees are recoverable. The plea was properly denied.

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