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

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.

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