Ga. Dep't of Labor v. RTT Assocs., Inc.

• Decision Date: 23 May 2016
• Docket Number: No. S15G1780.,S15G1780.
• Citation: 299 Ga. 78,786 S.E.2d 840
• Parties: GEORGIA DEPARTMENT OF LABOR v. RTT ASSOCIATES, INC.
• Court: Georgia Supreme Court

299 Ga. 78

786 S.E.2d 840

GEORGIA DEPARTMENT OF LABOR

v.RTT ASSOCIATES, INC.

No. S15G1780.

Supreme Court of Georgia.

May 23, 2016.

William Wright Banks, Jr., Deputy Atty. Gen., Julie Adams Jacobs, Sr. Asst. Atty. Gen., Samuel S. Olens, Atty. Gen., Brittany H. Bolton, Asst. Atty. Gen., Atlanta, for appellant.

Christopher Scott Anulewicz, Balch & Bingham, LLP, Atlanta, for appellee.

BENHAM

, Justice.

This case involves a written contract between a vendor and a state agency that contained form language stipulating that amendments had to be in writing and executed by the agency and the contractor. The vendor asserts that the contract was extended by course of conduct as well as by certain internal writings created by the agency. By the terms of Georgia's Constitution, the state waives its sovereign immunity for breach of contract when it enters into a written contract.¹ At issue is whether an agency's waiver of immunity from a breach of contract claim as a result of entering into a written contract remains intact in the event the contract is extended without a written document signed by both parties expressly amending the contract, as required by its terms.

The record shows appellant Georgia Department of Labor (DOL) entered into the contract in question with appellee RTT Associates, Inc. (RTT) for the purpose of engaging RTT to develop certain computer software. A representative of both parties executed the written contract. The contract identified the beginning date to be March 1, 2012, and the expiration date, or “Date of Completion,” to be June 30, 2012.² The maximum amount to be paid under the contract was shown to be $247,422.68, and RTT's performance was secured by a performance bond in this amount. As noted, the contract specified that amendments must be in writing and fully executed by both parties. The contract specified that time is of the essence with respect to the contractor's performance. It contained an integration clause stating that the contract represents the entire agreement between the parties and that the parties shall not rely upon representations not included in the contract. It also stated that the contractor's obligations under the contract survived the expiration or termination of the contract.

DOL made one progress payment to RTT for the work involved in the first of four milestones in the contract, along with an advance toward the second milestone payment even though DOL claims that work was never delivered. In order to accommodate a change in federal law that impacted the desired software design, DOL executed an internal project change request by which it sought and was granted authority to increase the cost of the contract by $12,000. The change request, approved on June 12, 2012, states it does not impact the contract schedule. An internal purchase order, dated July 17, 2012, was prepared to support this change to the contract, and the purchase order references a contract date of August 30, 2012. In response to another change in federal law, a second internal project change request involving a $7,000 change to the scope of the contract was submitted on September 14 and approved on September 17, 2012. Neither of these change request documents was executed by RTT and no evidence exists that shows RTT was provided a copy of these documents at any time prior to the filing of RTT's lawsuit. No written amendment to the contract was executed by either party to extend the expiration date of the contract or modify any other contract term. RTT admits it did not complete the required work on or before the executed contract's expiration date.

The record reflects that even after the contract's stated expiration date, the parties continued to communicate and work together with respect to development and delivery of a workable software product that satisfied DOL's requirements. By letter dated April 3, 2013, however, DOL notified RTT that it was in breach of the contract for its failure to deliver a functional product that complied with the contract requirements, and that the contract was immediately terminated. Also on that date, DOL made a written claim against the performance bond. In a May 7, 2013, meeting between the parties' representatives, DOL informed RTT that it would not utilize RTT's software.

RTT filed suit against DOL seeking damages for, among other things, breach of contract. In its complaint, RTT asserted DOL improperly terminated the contract because it failed to give notice of a claim of default and an opportunity to cure default before termination, as required by the terms of the contract. After certain claims and counterclaims were disposed of by the trial court's orders, and after conducting an evidentiary hearing, the trial court granted DOL's motion for summary judgment on all remaining claims. The trial court concluded RTT had failed to carry its burden of proof that the contract had been extended or amended by a writing executed by both parties, as required by the terms of the contract. Instead, the trial court found that “[a]t best, the record evidences [DOL's] willingness to not hold [RTT] to the delivery deadline contained in the written [c]ontract.” Therefore, the trial court concluded, sovereign immunity was not waived, as required by constitutional and statutory provisions, beyond the required completion date of the contract.

RTT timely appealed, and the Court of Appeals reversed the grant of summary judgment to DOL, finding, inter alia, that evidence of the parties' course of conduct created a question of fact as to whether the parties waived or extended the required completion date as well as the provision that the contract could be amended only in writing. RTT Associates, Inc. v. Georgia Dept. of Labor, 333 Ga.App. 173, 178(1), 775 S.E.2d 644 (2015)

. Consequently, the Court of Appeals held the trial court erred in concluding, as a matter of law, that RTT's claims were barred by the doctrine of sovereign immunity. Id. at 179(1), 775 S.E.2d 644. This Court granted DOL's petition for writ of certiorari to examine whether the Court of Appeals erred by reversing the trial court's grant of summary judgment. For the reasons set forth below, we reverse the Court of Appeals and hold that the trial court's order should be affirmed.

To summarize, RTT failed to complete its contractual obligations before the contract expired. Even if the parties' conduct after the expiration of the contract could be found to demonstrate an agreement between the parties to continue to perform under the original contract, as a matter of law neither that conduct nor the internal documents created by DOL after the contract expired establishes a written contract to do so. Without a written contract, the state's sovereign immunity from a contract action is not waived.

1. The Georgia Constitution addresses the waiver of the state's

immunity from liability for breach of contract as follows:

(c) The state's defense of sovereign immunity is hereby waived as to any action ex contractu for the breach of any written contract now existing or hereafter entered into by the state or its departments and agencies.

...

(e) Except as specifically provided in this Paragraph, sovereign immunity extends to the state and all of its departments and agencies. The sovereign immunity of the state and its departments and agencies can only be waived by an Act of the General Assembly which specifically provides that sovereign immunity is thereby waived and the extent of such waiver.

Ga. Const. of 1983, Art. I, Sec. II, Par. IX

(c) and (e). Accordingly, since the DOL is an agency of the state,³ it is immune from suit except as specifically waived in the Constitution or by an act of the General Assembly. Pursuant to OCGA § 50–21–1(a), the General Assembly has provided that sovereign immunity is waived in a contract action against a state agency “for the breach of any written contract....”

The burden of demonstrating a waiver of sovereign immunity rests upon the party asserting it. Bd. of Regents, etc. v. Barnes, 322 Ga.App. 47, 49–50(2), 743 S.E.2d 609 (2013)

(addressing the claimant's duty to establish the existence of a written contract in order to claim waiver of sovereign immunity, and holding that an implied contract will not support a waiver under the sovereign immunity provisions of the Georgia Constitution); Georgia Dept. of Community Health v. Data Inquiry, LLC, 313 Ga.App. 683, 685(1), 722 S.E.2d 403 (2012) (same). See also Bd. of Regents, etc. v. Daniels, 264 Ga. 328, 329, 446 S.E.2d 735 (1994) (addressing the claimant's duty in a tort action to demonstrate waiver of immunity through the state agency's purchase of liability insurance covering the claim). Whether sovereign immunity has been waived under the undisputed facts of this case is a question of law, and this Court's review is de novo. See Georgia Dept. of Natural Resources v. Center for a Sustainable Coast, Inc., 294 Ga. 593, 596(2), 755 S.E.2d 184 (2014). For reasons more fully set forth below, we find RTT has failed to meet its burden of showing waiver of sovereign immunity.

2. Citing, with one exception, cases involving contract disputes in which the state was not a party, the Court of Appeals ruled that

contractual obligations may survive the end of a written contract; that parties may modify the terms of a written contract by mutual consent and without a writing; and that the contracting parties may waive a provision that the contract may be modified only in writing. See RTT Associates, supra, 333 Ga.App. at 177

–178(1), 775 S.E.2d 644. While private parties, however, may be able to modify and extend written contracts by manifesting their intent to do so even without a written agreement, the enforceability of a contract against the state is governed by the Constitution and by statute. In order for sovereign immunity to be waived with respect to contract actions against the state, the contract must be in writing. The Court of Appeals erred in extending...