Since extension agreement violated competitive bidding requirements, contract was void and no waiver of immunity exists

TXU Energy Retail Company L.L.C. v. Fort Bend Independent School District, 05-14-01515-CV (Tex. App. – Dallas, August 25, 2015).

This is a sovereign immunity in contract case where the Fifth District Court of Appeals affirmed the granting of FBISD’s plea to the jurisdiction.

The District (“FBISD”) solicited competitive bids electric service.  The District indicated it would be evaluating the bids on various enumerated criteria, including “blend and extend availability” which lets the district take advantage of price decreases by blending the fixed contract rate with market rate. FBISD elected TXU. However, a few years later, after a contract extension FBISD determined the extension was not competitively bid and therefore improper. It notified TXU it would no longer purchase electricity under the contract. TXU sued the District asserting claims for breach of contract and, alternatively, promissory estoppel. The District filed a plea to the jurisdiction and motion for summary judgment.  The trial court granted both and TXU appealed.

The District successfully argued in the trial court that because the extension agreement violates the competitive bidding requirements it is void and immunity is not waived pursuant to section 271.152.  TXU contends that because the blend and extend provision was in the original one-year contract, any extension period did not need to be competitively bid. The court noted TXU’s argument misses the proper question – whether the extension agreement negotiated pursuant to a blend and extend provision is valid and enforceable when it clearly exceeds the contract term.  Allowing an entity to avoid future competitive bidding requirements by merely extending existing contracts based on changing market rates defeats the purpose of the competitive bidding laws. Since FBISD was not authorized to enter into such an agreement, the waiver of immunity found in Chapter 271 of the Texas Local Government Code does not apply.  And since courts have consistently refused to adopt a waiver by conduct in contract doctrine, the plea was properly granted.

If you would like to read this opinion click here. Panel: Justice Bridges, Justice Lang, and Justice Evans.  Opinion by Justice Evans.  The attorneys listed for FBISD are Stephanie Maher, Jonathan Griffin Brush, and Richard Alan Morris.  The attorneys listed for TXU are A. Shonn Brown, Jonathan Childers, Michael K. Hurst and John Franklin Guild