Statutory Waiver of Immunity of Local Governments to Certain Contract Claims

Governmental Immunity

Governmental immunity protects political subdivisions of the State, including cities, from lawsuits for money damages, unless their immunity has been waived. Reata Constr. Corp. v. City of Dallas, 197 S.W.3d 371, 374 (Tex. 2006). Governmental immunity, like sovereign immunity, involves immunity from suit and immunity from liability. Harris Cnty.Hosp. Dist. v. Tomball Reg’l Hosp., 283 S.W.3d 838, 842 (Tex. 2009). Immunity from suit is jurisdictional and bars suit, whereas immunity from liability is not jurisdictional and protects political subdivisions from judgments. Id. Governmental immunity is waived only by clear and unambiguous language indicating the Legislature’s intent to do so.Kirby Lake Dev., Ltd. v. Clear Lake City Water Auth., 320 S.W.3d 829, 838 (Tex. 2010).

Waiver of Immunity for Certain Contract Claims

Local Government Code section 271.152, which waives a local governmental entity’s immunity from suit for certain contract claims, provides:

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). This statute defines a “[c]ontract 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). The total amount of money which may be awarded under this section is “the balance due and owed by the local government entity under the contract,” any amount owed for change order or additional work the governmental entity directed it to perform, and interest as allowed by law. Id. § 271.153(a) (Vernon Supp. 2011).The purpose of this section is to “limit the amount due by a governmental agency on a contract once liability has been established, not to foreclose the determination of whether liability exists.” Kirby Lake, 320 S.W.3d at 840.

The jurisdictional elements for a claim of waiver of immunity based on section 271.152 are as follows: (1) the party against whom the waiver is asserted must be a “local governmental entity”;(2) the entity must be authorized by statute or the Constitution to enter into contracts; and (3) the entity must in fact have entered into a contract that is “subject to this subchapter.” City of Houston v. Williams, 353 S.W.3d 128, 134 (Tex. 2011).

SOURCE: HOUSTON FIRST COURT OF APPEALS – 01-10-00240-CV – 4/5/12

D. Application of Law to Facts

Inits second issue, the City argues that “Atser’s allegations of failure-to-use services allegedly causing it lost profits of $250,000.00 are not actionable under chapter 271, Subchapter I.” This issue apparently challenges a claim by Atser for lost profit damages, which the City contends are not allowed by statute. The City bases this assertion, not on the language of Atser’sthird amended petition, which asks only for damages within the confines of section 271.153(a), but on Atser’s discovery responses, in which Atser states that “it has been damaged in the amount of $250,000 by Defendant’s refusal to use ATSER pursuant to the 2006 Contract.” The City argues that it had no contractual duty to use Atser’s services and, thus, that there can be no amount “due and owed.” It also claims that Atser’s alleged request for consequential damages seeks damages outside the scope of damages allowed by section 271.153.

These arguments, however, go far beyond a challenge to the jurisdiction and instead address the merits of Atser’s claim. Our determination of subject matter jurisdiction is not to be based on the substance of the case, but on whether a court has the power to reach the merits of the claim. S. Elec. Servs., 273 S.W.3d at 744. This involves a review of the pleadings themselves and any jurisdictional matters raised therein, and not of the merits of the case. See Miranda, 133 S.W.3d at 226 (“When a plea to the jurisdiction challenges the pleadings, we determine if the pleader has alleged facts that affirmatively demonstrate the court’s jurisdiction to hear the case.”).

As noted above, the jurisdictional elements for a claim of waiver of immunity based on section 271.152 are: (1) the party against whom the waiver is asserted must be a “local governmental entity”;(2) the entity must be authorized by statute or the Constitution to enter into contracts; and (3) the entity must in fact have entered into a contract that is “subject to this subchapter.” Williams, 353 S.W.3d at 134. Here, Atser has pledall three of these elements, and the City has not contradicted or challenged them.

In its third amended petition,Atserpled breach of the pertinent contracts and asked for damages based on (1) the balance due and owing by the City, (2) the amount owed for additional work performed at the City’s direction, and (3) interest as allowed by law. These are precisely the damages the statute allows when immunity is waived. See Tex. Loc. Gov’t Code Ann. § 271.153.The City’s challenge to the trial court’s jurisdiction, then, is not based on what Atserpled, but on its own construction ofAtser’spleadings. This is not the proper function of a challenge to the jurisdiction.See S. Elec. Servs., 273 S.W.3d at 744 (holding that appellate court’s duty in reviewing challenge to jurisdiction is not to adjudicate substance of claim, but to determine whether trial court has power to reach merits).

The City in essence asks that we find that Atser’s claim lacks merit and that Atser asks for improper damages. “But an ‘adjudication’ of such a claim is exactly what the Legislature allows in Section 271.152.” Id.Section 271.153, the damages section of the statute, does not retract the waiver of immunity granted in section 271.152 to adjudicate claims for breach of contract“if a plaintiff alleges facts to support such a claim and seeks recovery only of damages to the extent allowed.” Id.; see alsoCity of Mesquite v. PKG Contracting, Inc., 263 S.W.3d 444, 448 (Tex. App.—Dallas 2008, pet. denied) (holding that statutory limitations on contractor’s recoverable damages imposed by section 271.152 did not deprive trial court of subject matter jurisdiction to adjudicate breach of contract claim); City of N. Richland Hills v. Home Town Urban Partners, Ltd., 340 S.W.3d 900, 910 (Tex. App.—Fort Worth 2011, no pet.) (“We decline to adjudicate Appellee’s damage claims by applying Section 271.153 within the procedural context of the City’s pleas to the jurisdiction.”). If the pleadings themselves “allege sufficient facts to qualify the case as a waiver of sovereign immunity as granted by statute, by alleging facts to support their claim that the City has not paid ‘the balance due and owed under the contract,’ then a challenge to the jurisdiction of the trial court must fail.”S. Elec. Servs., 273 S.W.3d at 744.

We conclude that Atser’sthird amended petition alleges sufficient facts to qualify the case as a waiver of sovereign immunity as granted by statute. We overrule the City’s second issue.

Conclusion

We affirm the trial court’s order denying the City’s Partial Motion for Summary Judgment on the ground of governmental immunity. We dismiss the remainder of the appeal for lack of jurisdiction.

Evelyn V. Keyes,

Justice

Panel consists of Justices Keyes, Sharp, and Massengale.

Justice Sharp, concurring in the judgment only.

Justice Massengale, concurring in part and dissenting in part.

SOURCE: HOUSTON FIRST COURT OF APPEALS – 01-10-00240-CV – 4/5/12