Governmental Immunity: Waiver-by-Conduct Exception Rarely Viable

GOVERNMENT CONTRACTS AND SOVEREIGN IMMUNITY Governmental units do not waive their immunity from suit simply by contracting with a private party. Federal Sign v. Texas S. Univ., 951 S.W.2d 401, 408 (Tex. 1997). The supreme court's decision in Federal Sign, however, appeared to leave open the possibility that a governmental unit could waive its immunity from suit, absent legislative action, by conduct that amounted to something more than merely contracting with a private party. Id. at 408 n.1. Justice Baker, writing for a plurality of the supreme court in IT-Davy, seemed to foreclose the option altogether; however, five justices, writing in concurrence and dissent, suggested that there may be equitable circumstances that would justify it. See, e.g., 74 S.W.3d at 862 (Hecht, J., concurring) ("I cannot absolutely foreclose the possibility that the State may waive immunity in some circumstances other than by statute."). WHEN DOES A GOVERNMENTAL ENTITY WAIVE ITS IMMUNITY BY ITS CONDUCT (IF EVER)? While there is no supreme court decision approving of a specific waiver by conduct, at least one recent case from the First Court of Appeals provides guidance. See Texas S. Univ. v. State St. Bank & Trust Co., 212 S.W.3d 893 (Tex. App.--Houston [1st Dist.] 2007, pet. denied). In that case, Texas Southern University contracted with CMS Viron to lease heavy equipment to the University. Id. at 897. Attached to the Master Lease Agreement was an opinion letter from TSU's general counsel giving assurances to CMS that the contract was binding against the University and that CMS would be able to collect on a judgment against TSU, should the need arise. Id. at 898. After CMS delivered the equipment, TSU refused to honor its agreement, citing sovereign immunity. Id. The court held that TSU waived immunity by its conduct. Id. at 908. The court focused primarily on the fact that TSU gave false assurances of the validity and enforcability of the contract to "lure" CMS into the contract, then reneged on its agreement, and tried to hide behind the cloak of immunity. Id. CONDUCT WAS NOT EGREGIOUS ENOUGH TO EFFECT WAIVER In the present case, we have no such egregious conduct by the City. Smith does not allege that the City lured him into the deal with representations that the City would not be immune from suit should the need arise to sue. He does not contend that the City did anything other than what one would expect of any ordinary contracting party. While Smith may have been under the impression that the City would not be immune from suit, he does not allege that the City did anything to plant or foster the mistaken belief. Smith does not allege that the City provided him with a legal opinion on which to rely, nor does Smith claim that the City made any representations to him concerning immunity at all. Smith's potential misunderstanding of the law is not enough to justify an equitable waiver of immunity against the City. Likewise, Smith's reliance on the City's promise to build and maintain a river crossing is not sufficient. The existence of mutual promises is a necessary element of most contracts, and the supreme court has held that merely contracting with a private party, without more, is not enough to waive governmental immunity by conduct. See Fed. Sign, 951 S.W.2d 408. Nor is it even enough that the City accepted the benefits of the contract. See Texas A&M Univ. Sys. v. Koseoglu, 233 S.W.3d 835, 840 (Tex. 2007); IT-Davy, 74 S.W.3d at 860. SOURCE: 03-08-00784-CV (10/8/09) (Austin Court of Appeals)