Fort Worth Court of Appeals hold EDC is not a governmental unit for immunity and contract purposes

Haltom City Economic Development Corporation v. Kent Flynn,  02-18-00145-CV, (Tex. App. – Fort Worth, March 21, 2019).

This is a breach of contract case where the Fort Worth Court of appeals upheld the denial of an EDC’s plea to the jurisdiction.

Haltom City Economic Development Corporation (HCEDC) and Flynn entered into an contract for services.  When Flynn believed the HCEDC did not properly pay the amounts owed under the contract, he sued. The HCEDC filed a plea to the jurisdiction, which was denied. The HCEDC appealed.

The HCEDC is a Type B economic development corporation. Section 505.106(b) of the Texas Local Government Code provides that for purposes of the Texas Tort Claims Act, a Type B EDC “is a governmental unit and the corporation’s actions are governmental functions.” Tex. Loc. Gov’t Code § 505.106(b). Section 505.106(a) provides that EDCs “are not liable for damages arising from the performance of a governmental function of a Type B [EDC] or the authorizing municipality.” Tex. Loc. Gov’t Code § 505.106(a). The Local Government Code specifically prohibits a municipality from “delegate[ing] to [an EDC] any of the [municipality’s] attributes of sovereignty, including the power to tax, the power of eminent domain, and the police power.” Tex. Loc. Gov’t Code § 501.010. The statute specifies that an EDC “is not a political subdivision . . . for purposes of the laws of this state.” Tex. Loc. Gov’t Code § 501.055(b).  Citing to Rosenberg Development Corp. v. Imperial Performing Arts, Inc., (summary found here) the Court held that EDCs “are not governmental entities in their own right and therefore are not entitled to governmental immunity.”  Essentially, they may only get liability protection in relation to tort claims, not contract claims. As a result, the plea was properly denied.

If you would like to read this opinion click here. Panel consists of Chief Justice Sudderth, Justice Pittman and Justice Bassel. Memorandum Opinion by Justice Pittman. The attorney listed for the EDC is Fredrick ‘Fritz’ Quast.  The attorneys listed for Kent are Stephen L. Tatum and David Fielding.