IMMUNITY OF SUB-STATE GOVERNMENTAL UNITS (including local governments such as municipalities and special districts) AND LEGISLATIVE WAIVER OF SUCH IMMUNITY FOR CERTAIN CONTRACT CLAIMS
Governmental immunity has two components—immunity from liability and immunity from suit. Tooke v. City of Mexia, 197 S.W.3d 325, 332 (Tex. 2006). A unit of state government is immune from suit and liability unless the state consents. See Tex. Dep’t of Transp. v. Jones, 8 S.W.3d 636, 638 (Tex. 1999). Immunity from suit defeats a trial court’s subject matter jurisdiction and is properly asserted in a plea to the jurisdiction. Id. at 639. Immunity from liability protects the state from money judgments even if the Legislature has expressly given consent to sue. Tex. Natural Res. Conservation Comm’n v. IT-Davy, 74 S.W.3d 849, 853 (Tex. 2002).
By entering into a contract, a governmental entity waives its immunity from liability for breach of the contract, “but does not, merely by entering into a contract, waive immunity from suit.” Tex. A&M Univ.-Kingsville v. Lawson, 87 S.W.3d 518, 520 (Tex. 2002); Gen. Servs. Comm’n v. Little-Tex Insulation Co., 39 S.W.3d 591, 594 (Tex. 2001). When a state contracts, it is liable on contracts made for its benefit as if it were a private person. Little–Tex Insulation Co., 39 S.W.3d at 594 (citing Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401, 405 (Tex. 1997)). Immunity from suit bars a suit against a governmental entity unless the Legislature expressly consents to the suit by resolution or by clear and unambiguous statutory language. Tooke, 197 S.W.3d at 332–33; see also Tex. Gov’t Code Ann. § 311.034 (Vernon Supp. 2011) (providing that statute shall not be construed as waiving sovereign immunity unless waiver is effected by clear and unambiguous language).
Local Government Code Section 271.152 waives a governmental entity’s immunity from suit for certain contracts:
A local governmental entity that is authorized by statute or the constitution to enter into a contract and that enters into a contract subject to this subchapter waives sovereign immunity to suit for the purpose of adjudicating a claim for breach of the contract, subject to the terms and conditions of this subchapter.
Tex. Loc. Gov’t Code Ann. § 271.152 (Vernon 2005).
The Local Government Code defines “a contract subject to this subchapter” as “a written contract stating the essential terms of the agreement for providing goods or services to the local governmental entity that is properly executed on behalf of the local governmental entity.” Id. § 271.151(2) (Vernon 2005).
[f]or section 271.152’s waiver of immunity to apply, three elements must be established: (1) the party against whom the waiver is asserted must be a “local governmental entity” as defined by section 271.151(3), (2) the entity must be authorized by statute or by the Constitution to enter into contracts, and (3) the entity must in fact have entered into a contract that is “subject to this subchapter,” as defined by section 271.151(2).
City of Houston v. Williams, 353 S.W.3d 128, 134–35 (Tex. 2011). A contract must meet five elements in order to be a contract subject to section 271.152’s waiver of immunity: “(1) the contract must be in writing, (2) state the essential terms of the agreement, (3) provide for goods or services, (4) to the local governmental entity, and (5) be executed on behalf of the local governmental entity.” Id. at 135.
Section 271.153 provides “Limitations on Adjudication Awards”:
(a) The total amount of money awarded in an adjudication brought against a local governmental entity for breach of a contract subject to this subchapter is limited to the following:
(1) the balance due and owed by the local governmental entity under the contract as it may have been amended, including any amount owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays or acceleration;
(2) the amount owed for change orders or additional work the contractor is directed to perform by a local governmental entity in connection with the contract;
(3) reasonable and necessary attorney’s fees that are equitable and just; and
(4) interest as allowed by law. . . .
Tex. Loc. Gov’t Code Ann. § 271.153 (Vernon Supp. 2011).
Section 271.154 provides:
Adjudication procedures, including requirements for serving notices or engaging in alternative dispute resolution proceedings before bringing a suit or an arbitration proceeding, that are stated in the contract subject to this subchapter or that are established by the local governmental entity and expressly incorporated into the contract or incorporated by reference are enforceable except to the extent those procedures conflict with the terms of this subchapter. Id. § 271.154 (Vernon 2005).
The statute does not define “adjudication procedures,” but it provides:
“Adjudication” of a claim means the bringing of a civil suit and prosecution to final judgment in county or state court and includes the bringing of an authorized arbitration proceeding and prosecution to final resolution in accordance with any mandatory procedures established in the contract subject to this subchapter for the arbitration proceedings. Id. § 271.151(1).
SOURCE: HOUSTON COURT OF APPEALS - FIRST DISTRICT:
Port Freeport f/k/a Brazos River Harbor Navigation District v. RLB Contracting Inc.,
NO. 01-11-00778-CV (Tex.App.- Houston [1st Dist.] April 26, 2012) (port authority's jurisdictional plea in contract dispute properly denied by the trial court)