Split in circuits regarding abrogation of proprietary v governmental dichotomy in contracts continues.

City of Seguin, Texas v. Lower Colorado River Authority, 03-13-00165-CV (Tex. App. – Austin, January 15, 2014).

This is an interlocutory appeal from the denial of a plea to the jurisdiction involving whether immunity protects the City of Seguin from a breach of contract suit from the Lower Colorado River Authority’s (“LCRA”) breach of contract suit. The Third Court of Appeals affirmed the denial, which further expands an apparent split in the circuits.

LCRA entered into wholesale power agreements (“WPAs”) to sell electrical power to entities including the cities of Seguin and Georgetown which were set to expire in 2016. However, in 2012 the City of Seguin along with numerous other entities declared LCRA in breach and terminated the agreement. LCRA filed suit for injunctive relief to declare they did not breach and the WPA could not be unilaterally terminated. The cities filed separate but near identical pleas to the jurisdiction which the trial court denied. After a severance of the defendants (so each could pursue their own appeal or case) the City of Seguin appealed.

A 3rd Court of Appeals majority panel affirmed the denial in the Georgetown appeal late last year. See City of Georgetown, Tex. v. Lower Colo. River Auth., No. 03-12-00648- CV, 2013 WL 4516110, at *1 (Tex. App.—Austin Aug. 23, 2013, pet. filed)(summary here) holding that the act of purchasing electricity is a proprietary function for which the City did not retain immunity. This panel affirmed the denial by simply stating that the reasoning is the same from the Georgetown case and they see no reason to reiterate it again. That’s where the opinion ends.

The split in the circuits comes from the Georgetown case from the 3rd and the City of San Antonio ex rel. City Pub. Serv. Bd. v. Wheelabrator Air Pollution Control, Inc., 381 S.W.3d 597 (Tex. App.—San Antonio 2012, pet. denied) out of the 4th Court of Appeals.  One week prior to the issuance of this opinion, the 4th also issued an opinion where LCRA lost in a near identical type of case and plea. Lower Colorado River Authority v. City of Boerne, Texas, 04-13-00108-CV (Tex. App. – San  Antonio, January 8, 2014)(summary located here).  The split comes from statutory construction arguments where the 4th Court held that the legislature’s passage of Chapter 271 of the Texas Local Government Code (waiving immunity for certain types of contracts) abrogated the distinction between proprietary and governmental functions for contracts. The 3rd (as noted above) holds there is no such abrogation and no immunity for proprietary functions in contracts.

If you would like to read this opinion click here.  Before Justices Puryear, Rose, and Goodwin. The lawyers for the City of Sequin ares listed as Mr. Paul M. Gonzalez, Mr. R. Gaines Griffin, Mr. Jose E. De La Fuente, Mr. John W. Davidson, Mr. Lambeth Townsend, and Ms. Amy M. Emerson.   The lawyers for LCRA are listed as Mr. James N. Rader, Mr. John W. Davidson, Mr. John W. Rubottom, Ms. Jane M. N. Webre,

Mr. Steve E. McConnico,Mr. Ryan Squires.