Failure to qualify as a “change order” under the contract’s defined terms means immunity is not waived for breach says Fourth Court of Appeals

City of San Antonio v. Casey Industrial, Inc. 04-14-00429-CV (Tex. App. – San Antonio, July 1, 2015)

This is an immunity in contract case where the Fourth Court of Appeals reversed the denial of a jurisdictional challenge to a breach of contract suit based on change orders.

CPS Energy (a division of the City) contracted with Casey and Wheelabrator Air Pollution Control, Inc., to add pollution control systems to one of CPS Energy’s coal-fired power stations. After some disputes between the parties, Casey sued CPS Energy for breach of contract and quantum meruit.  Casey sought to recover additional costs it alleged it incurred as a result of Wheelabrator’s failure to meet its obligations. [Comment: Numerous claims and several opinions have already been issued regarding this dispute and summaries can be found here and here. ]   After a prior interlocutory opinion,  CPS filed a motion to dismiss Casey’s claims asserting the claims are outside of the contract’s scope and the City retains immunity. The motion was denied and this appeal followed.

The court first analyzed the Texas Supreme Court’s opinion of Zachry Construction Corp. v. Port of Houston Authority of Harris County, 449 S.W.3d 98, 110 n.54 (Tex. 2014) and held that to establish a proper waiver of immunity in contracts, a claimant must show 1) the existence of the specific type of contract for which immunity is waived under Tex. Loc. Gov’t Code §271.152 and whether the damages sought are recoverable under §271.153.  Without both, there is no jurisdiction. Under §271.153, damages include amounts owed under the contract, increased costs due to owner-caused delay, and additional work or change order payments. The City asserted delays were caused by Wheelabrator, not the City and Casey produced no evidence to create a fact issue on this point. Delays caused by Wheelabrator do not fall within the “owner-caused” delay section, even though Casey was required to deliver a finished product. The crux of Casey’s claims truly focus on compensation owed due to change orders and additional work Casey asserts it had to perform due to Wheelabrator’s breach. Casey admitted no written change orders actually exist. And while the contract addressed situations where Casey could be entitled to a change order, none of the evidence submitted falls within the definition of “change order” in the contract.  In the absence of a change order, immunity is waived if additional work was “directed” to be performed by CPS. None of the evidence submitted indicates CPS directed any additional work to be performed. The general requirement in the contract that Casey must deliver a completed product is not the type of direction contemplated even though Casey could face liquidated damages for untimely completion.  As a result, the breach of contract claims are dismissed.

The dissent disagreed that Casey failed to meet its evidentiary burden to create a fact question.

If you would like to read this opinion click here. For Justice Alvarez’ dissent click here. Panel: Chief Justice Marion, Justice Alvarez, and Justice Pulliam.  Opinion by Chief Justice Marion.  The attorneys listed for CPS are Annalyn Garrett Smith and Judith Reed Blakeway.  The attorneys listed for Casey are Nissa M. Dunn, John Claiborne Howell, and Samuel V. Houston, III.