City of Georgetown v. Lower Colo. River Auth.

• Decision Date: 13 November 2013
• Docket Number: No. 03–12–00648–CV.,03–12–00648–CV.
• Citation: 413 S.W.3d 803
• Parties: CITY OF GEORGETOWN, Texas, Appellant v. LOWER COLORADO RIVER AUTHORITY, Appellee.
• Court: Texas Court of Appeals

413 S.W.3d 803

CITY OF GEORGETOWN, Texas, Appellant

v.LOWER COLORADO RIVER AUTHORITY, Appellee.

No. 03–12–00648–CV.

Court of Appeals of Texas, Austin.

Aug. 23, 2013.

Rehearing Overruled Nov. 13, 2013.

Lambeth Townsend, Jose De La Fuente, Daniel Gonzales, Amy M. Emerson, Lloyd, Gosselink, Rochelle & Townsend, PC, Austin, TX, for Appellant.

John W. Rubottom, James N. Rader, Lower Colorado River Authority, Associate General Counsel, Kennon L. Wooten, Stephen E. McConnico, Jane M.N. Webre, Scott, Douglass & McConnico, LLP, Austin, TX, for Appellee.

Before Chief Justice JONES, Justices GOODWIN and FIELD.

OPINION

SCOTT K. FIELD, Justice.

In this interlocutory appeal, appellant City of Georgetown (the City) challenges the trial court's order denying its plea to the jurisdiction based on governmental immunity. The underlying controversy concerns the City's long-term contract to purchase electricity from appellee, the Lower Colorado River Authority (the LCRA). The LCRA sought declaratory relief concerning the parties' rights and obligations under the contract, and the City filed a plea to the jurisdiction, asserting that the LCRA's pleadings fail to demonstrate a valid waiver of governmental immunity. Because we conclude that the City has no immunity from this suit, we affirm the trial court's order denying the City's plea to the jurisdiction.

BACKGROUND

According to its pleadings, the LCRA entered into standard “Wholesale Power Agreements” with various municipalities, including the City, in 1974. Under the terms of the Wholesale Power Agreement, the City would purchase 100% of its electricity from the LCRA and then resell that electricity to the City's retail customers through its municipal utility. The Wholesale Power Agreement is set to expire June 25, 2016, and the City has given LCRA notice of its intent not to renew the contract.

The LCRA asserts that on June 28, 2012, the City sent a letter to the LCRA in which it alleged that the LCRA had breached the terms of the Wholesale Power Agreement by selling electricity to other customers at a lower rate. According to the LCRA, the letter stated that the City would terminate the Wholesale Power Agreement within thirty days unless the LCRA cured the alleged breach. On August 13, 2012, the City sent a follow-up letter in which it declared that the Wholesale Power Agreement was terminated.

In response, the LCRA filed this underlying action, seeking a declaratory judgment that it has not materially breached the Wholesale Power Agreement. ¹ The City filed a plea to the jurisdiction, asserting that the LCRA's pleadings fail to affirmatively demonstrate a waiver of the City's governmental immunity. In its amended pleadings, the LCRA asserts that the City has no governmental immunity because this case arises out of the City's proprietary function, rather than its governmental function. Alternatively, the LCRA asserts that if the City has governmental immunity, that immunity has been waived by statute. SeeTex. Loc. Gov't Code § 271.152 (waiving sovereign immunity for breach of contract claims “subject to the terms and conditions of this subchapter”). Following a hearing, the trial court denied the City's plea to the jurisdiction. This interlocutory appeal followed. See Tex.R.App. P. 51.014(a)(8) (permitting interlocutory appeal from denial of plea to jurisdiction).

STANDARD OF REVIEW

A plea to the jurisdiction is a dilatory plea that challenges the trial court's authority to determine the subject matter of a specific cause of action. See Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 553–54 (Tex.2000). Governmental immunity from suit deprives a court of subject-matter jurisdiction and therefore is properly asserted in a plea to the jurisdiction. State v. Lueck, 290 S.W.3d 876, 880 (Tex.2009). Whether a trial court has subject-matter jurisdiction is a question of law that we review de novo. Westbrook v. Penley, 231 S.W.3d 389, 394 (Tex.2007). When, as here, the plea to the jurisdiction challenges the pleadings, we construe the pleadings liberally in favor of the plaintiff, and unless challenged with evidence, we accept all allegations as true. Texas Dep't of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226–27 (Tex.2004).

Some of the issues in this case concern interpretation of statutes, which is a question of law that we review de novo. See First Am. Title Ins. Co. v. Combs, 258 S.W.3d 627, 631 (Tex.2008). When construing a statute, our primary objective is to ascertain and give effect to the legislature's intent. Id. at 631–32. In determining legislative intent, we first consider the plain language of the statute. GMC v. Bray, 243 S.W.3d 678, 685 (Tex.App.-Austin 2007, no pet.). When statutory text is clear, it is determinative of legislative intent, unless enforcing the plain meaning of the statute's words would produce an absurd result. Entergy Gulf States, Inc. v. Summers, 282 S.W.3d 433, 437 (Tex.2009). Our analysis of the statute is also informed by the presumption that “the entire statute is intended to be effective” and that “a just and reasonable result is intended.” Tex. Gov't Code § 311.021(2), (3). We may consider such matters as “the object sought to be attained,” “the circumstances under which the statute was enacted,” legislative history, and “common law or former statutory provisions, including laws on the same or similar subjects.” Id. § 311.023(1)-(4).

DISCUSSION

A municipality performs a governmental function when it acts “as the agent of the State in furtherance of general law for the interest of the public at large.” Gates v. City of Dallas, 704 S.W.2d 737, 738–39 (Tex.1986) (internal quotations omitted), superseded by statute on other grounds as stated in City of Terrell v. McFarland, 766 S.W.2d 809, 813 (Tex.App.-Dallas 1988, writ denied). Given that the municipality is effectively acting on behalf of the state when it performs a governmental function, it is imbued with the state's sovereign immunity, and therefore is entitled to governmental immunity.²Id. By contrast, “[p]roprietary functions are those functions performed by a city, in its discretion, primarily for the benefit of those within the corporate limits of the municipality.” Id. Because the municipality is not acting on behalf of the state when it performs proprietary functions, the municipality traditionally is not entitled to governmental immunity for those functions, and thus has “the same duties and liabilities as those incurred by private persons or corporations.” Id.; see also Bailey v. City of Austin, 972 S.W.2d 180, 192–93 (Tex.App.-Austin 1998, pet. denied) (concluding that city's provision of health insurance to its employees is proprietary function for which governmental immunity does not apply).

The LCRA asserts that when the City contracted to purchase power as a municipal utility, the City performed a proprietary function rather than a governmental function. SeeTex. Civ. Prac. & Rem.Code § 101.0215(b)(1) (defining “operation or maintenance of a public utility” as proprietary function for purposes of Texas Tort Claims Act). Therefore, according to the LCRA, the City has no governmental immunity from this suit, which arises out of its operation of a municipal utility.

The City asserts that “the proprietary-governmental function dichotomy is a creature of tort law” that does not apply to contract claims. Specifically, the City argues that because section 271.152 of the Local Government Code—the statute that waives sovereign immunity for certain contract claims—does not mention the proprietary-governmental dichotomy, the legislature intended for the dichotomy not to apply to contract claims. Therefore, according to the City, municipalities have governmental immunity for contract claims regardless of whether the claim arises out of their proprietary or governmental functions. As a result, the City asserts that it has governmental immunity from LCRA's claims and that LCRA cannot demonstrate a clear and unambiguous waiver of the City's immunity. See Tooke v. City of Mexia, 197 S.W.3d 325, 332 (Tex.2006) (noting that legislature must clearly and unambiguously waive sovereign immunity).

The arguments in this case primarily concern whether the proprietary-governmental dichotomy applies to contract claims. As we will explain, this issue involves two separate legal questions: (1) does the proprietary-governmental dichotomy apply to contract claims under the common law and (2) if so, has the legislature abrogated the common law? In making these determinations, we first discuss the history and underlying rationale for treating proprietary functions differently than governmental functions. Next, we consider whether the common law applies the proprietary-governmental dichotomy to contract claims. Finally, we determine whether the legislature has abrogated common-law precedent, thereby ending the application of the dichotomy to contract claims.

History and rationale for proprietary-governmental dichotomy

Texas has long recognized sovereign immunity as the bedrock principle that “ ‘no state can be sued in her own courts without her consent, and then only in the manner indicated by that consent.’ ” See Tooke, 197 S.W.3d at 331 (quoting Hosner v. DeYoung, 1 Tex. 764, 769 (1847)). This immunity extends to the various divisions of the state government as well as its political subdivisions, such as the City. See supra n. 2. “[G]overnmental immunity has two components: immunity from liability, which bars enforcement of a judgment against a governmental entity, and immunity from suit, which bars suit against the entity altogether.” Tooke, 197 S.W.3d at 332. When a governmental entity enters into a contract it “necessarily waives immunity from liability, ... but it does not waive immunity from suit.” Id. Thus, when governmental immunity applies, a governmental entity may not be sued for breach of contract unless its immunity from suit has been waived. Id. We defer to the legislature to...