General Services Comm'n v. Little-Tex Insulation Co.

• Decision Date: 05 April 2001
• Docket Number: 99-1071,No. 99-1015,99-1015
• Parties: (Tex. 2001) General Services Commission, Petitioner v. Little-Tex Insulation Company, Inc., Respondent Texas A&M University and Board of Regents of Texas A&M University, Petitioners v. DalMac Construction Company, Inc., Respondent
• Court: Texas Supreme Court

Page 591

39 S.W.3d 591 (Tex. 2001)

General Services Commission, Petitioner v. Little-Tex Insulation Company, Inc., Respondent Texas A&M University and Board of Regents of Texas A&M University, Petitioners v. DalMac Construction Company, Inc., Respondent

No. 99-1015, 99-1071

SUPREME COURT OF TEXAS

Argued September 20, 2000.

Decided February 1, 2001.

Rehearing Overruled April 5, 2001.

On Petitions for Review from the Court of Appeals for the Third District of Texas

[Copyrighted Material Omitted] Justice Baker delivered the opinion of the Court, in which Chief Justice Phillips, Justice Hecht, Justice Owen, Justice Hankinson, and Justice O'Neill joined, and in which Justice Abbott joined except as to Part III(B).

We recently held that the State does not waive its immunity from suit for breach of contract simply by entering into a contract for goods and services. Federal Sign v. Texas S. Univ., 951 S.W.2d 401, 408 (Tex. 1997). We specifically reserved judgment on whether other circumstances may exist in which "the State may waive its immunity by conduct other than simply executing a contract." Federal Sign, 951 S.W.2d at 408 n.1. The Third Court of Appeals has held that by accepting benefits under a contract the State waives its immunity from suit. DalMac Constr. Co. v. Texas A&M Univ., 35 S.W.3d 654; Little-Tex Insulation Co. v. General Servs. Comm'n, 997 S.W.2d 358. However, after we issued Federal Sign, the Legislature established an administrative procedure for certain breach-of-contract claims against the State. See Tex. Gov't Code § 2260.001-.108. We conclude that the Legislature intended this procedure to be the exclusive method available for resolving these cases. We therefore reverse the court of appeals' decisions in both cases and dismiss the plaintiffs' claims for want of jurisdiction.

I. BACKGROUND

A. Texas A&M University v. DalMac Construction Co.

Texas A&M University contracted with DalMac to build a $30 million recreational sports building and natatorium. DalMac complained that the initial bid's unclear specifications frequently conflicted, and because of necessary modifications, DalMac incurred expenses beyond the original contract. Urging an adjustment to the contract price, DalMac submitted a claim to TAMU for $2.4 million. TAMU paid only $255,171 of the claim. After exhausting its remedies under the contract, including a TAMU Board of Regents' review, DalMac sued TAMU for more than $3 million. The trial court granted TAMU's plea to the jurisdiction. The court of appeals reversed and remanded the case to the trial court to allow DalMac to discover information necessary to support its theory that TAMU waived its immunity from suit. 35 S.W.3d at 657.

B. Little-Tex Insulation Co. v. General Services Commission

The General Services Commission awarded Little-Tex a contract for asbestos abatement on two floors in a state office building. After the State paid Little-Tex's first invoice, a dispute arose between the parties about Little-Tex's performance. The Commission refused further payments until Little-Tex corrected certain safety violations. Never satisfied with those corrections, the Commission eventually terminated the contract. When the termination occurred, Little-Tex had completed thirty percent of one floor.

The abatement contract mandated an administrative review process before filing suit. Accordingly, Little-Tex submitted a claim to the Commission. The Commission's executive director reviewed the claim but denied it in a formal opinion. Little-Tex then sued in district court. The trial court granted the State's plea to the jurisdiction and dismissed the suit. The court of appeals reversed and remanded, holding that the State's acceptance of a benefit from Little-Tex's performance of the contract waived the State's immunity from suit. 997 S.W.2d 358.

II. BREACH-OF-CONTRACT CLAIMS

A. Applicable Law

Sovereign immunity, unless waived, protects the State from lawsuits for damages. Federal Sign, 951 S.W.2d at 405. Sovereign immunity encompasses two principles: immunity from suit and immunity from liability. Texas Dep't of Transp. v. Jones, 8 S.W.3d 636, 638 (Tex. 1999); Federal Sign, 951 S.W.2d at 405; Missouri Pac. R.R. v. Brownsville Navigation Dist., 453 S.W.2d 812, 813 (Tex. 1970). Immunity from suit bars a suit against the State unless the Legislature expressly gives consent. Federal Sign, 951 S.W.2d at 405; Missouri Pac. R.R., 453 S.W.2d at 813. Immunity from liability protects the State from judgments even if the Legislature has expressly given consent to sue. Federal Sign, 951 S.W.2d at 405; Missouri Pac. R.R., 453 S.W.2d at 813. A party may establish consent by referencing a legislative statute or a resolution granting express legislative permission. Jones, 8 S.W.3d at 638. Legislative consent to sue the State must be expressed in "clear and unambiguous language." University of Tex. Med. Branch v. York, 871 S.W.2d 175, 177 (Tex. 1994).

When the State contracts, it is liable on contracts made for its benefit as if it were a private person. Federal Sign, 951 S.W.2d at 405; State v. Elliot, 212 S.W. 695, 697-98 (Tex. Civ. App.--Galveston 1919, writ ref'd). Consequently, when the State contracts with private citizens it waives immunity from liability. See Federal Sign, 951 S.W.2d at 408. But the State does not waive immunity from suit simply by contracting with a private person. Federal Sign, 951 S.W.2d at 408. Legislative consent to sue is still necessary.

B. Analysis

Little-Tex and DalMac argue that, while the act of contracting alone may not waive immunity from suit, the State's conduct in these cases has waived its immunity from suit. Because the State has waived its immunity, they argue, it is not necessary to obtain the Legislature's consent to sue. Consequently, they contend, the dispute-resolution procedure that the Legislature recently adopted as a precursor to suits requiring legislative consent does not apply to waiver-by-conduct suits.

1. Waiver-by-Conduct Exception to Sovereign Immunity

Little-Tex and DalMac contend that once the State has accepted benefits under a contract, it is unfair to allow the State to shield itself from suit by evoking sovereign immunity. To support this argument, they rely on a footnote in Federal Sign, as well as language in its concurring opinion. 951 S.W.2d at 408 n.1; 951 S.W.2d at 412-13 (Hecht, J., concurring).

In Federal Sign, we held that the State's contracting for goods and services does not waive its immunity from suit. 951 S.W.2d at 408. We expressly left open the question of whether the State's conduct may waive its immunity from suit. Federal Sign, 951 S.W.2d at 408 n.1. Several courts of appeals have interpreted our opinion as suggesting that various other fact situations might warrant some judicially-imposed, equitable remedy. See, e.g., DalMac Constr. Co., 35 S.W.3d at 656; Little-Tex Insulation Co., 997 S.W.2d at 364-65; Aer-Aerotron, Inc. v. Texas Dep't of Transp., 997 S.W.2d 687, 692 (Tex. App.--Austin 1999, pet. granted); Texas Natural Resource Conservation Comm'n v. IT-Davy, 998 S.W.2d 898, 901-02 (Tex. App.--Austin 1999, pet. filed); Texas S. Univ. v. Araserve Campus Dining Servs., Inc., 981 S.W.2d 929, 934-35 (Tex. App.--Houston [1st Dist.] 1998, pet. denied); Alamo Cmty. Coll. Dist. v. Obayashi Corp., 980 S.W.2d 745, 749 (Tex. App.--San Antonio 1998, pet. denied). In particular, these courts have concluded that, by accepting benefits under the contract, the State waives its immunity from suit. See DalMac Constr. Co., 35 S.W.3d at 656; Little-Tex Insulation Co., 997 S.W.2d at 364-65; Aer-Aerotron, Inc., 997 S.W.2d at 692; IT-Davy, 998 S.W.2d at 902; Araserve Campus Dining Servs., Inc., 981 S.W.2d at 935; Obayashi Corp., 980 S.W.2d at 750.

We recognize that language in Federal Sign may justify this result. However, regardless of what we might have held in such a case had it come before the Court in 1997, the situation has changed. After Federal Sign, the Legislature enacted a dispute-resolution procedure to resolve certain breach-of-contract cases against the State. Historically, we have left to the Legislature whether to waive sovereign immunity. See Federal Sign, 951 S.W.2d at 409; Guillory v. Port of Houston Auth., 845 S.W.2d 812, 813 (Tex. 1993); Barr v. Bernhard, 562 S.W.2d 844, 846 (Tex. 1978); Lowe v. Texas Tech Univ., 540 S.W.2d 297, 298 (Tex. 1976). Today we once again adhere to this principle and defer to the Legislature.

2. The Legislature's Statutory Solution and Its Application

In 1999, the Legislature enacted what is now Chapter 2260 of the Texas Government Code. See Act of May 30, 1999, 76th Leg., R.S., ch. 1352, 1999 Tex. Gen. Law. 4578 (codified at Tex. Gov't Code §§ 2260.001-.108). Chapter 2260 retains sovereign immunity from suit in breach-of-contract cases against the State but provides an administrative process to resolve those claims. This administrative scheme applies to all written contracts for the sale of goods, services, or construction. Tex. Gov't Code § 2260.001(1). Intended to promote mediation and settlement, Chapter 2260 provides that if a contracting party believes the State has breached a written contract for goods, services, or construction, the party has 180 days to give written notice of the alleged breach to the governmental agency or unit. See Tex. Gov't Code §§ 2260.001(1), 2260.051(b). The agency's chief administrative officer must then examine the claim and attempt to resolve the claim through negotiation or mediation. Tex. Gov't Code §§ 2260.052, 2260.056. If still unsatisfied, the contracting party may request a contested-case hearing before the State Office of Administrative Hearings. Tex. Gov't Code § 2260.102. If the administrative judge determines that the party has a valid claim for less than $250,000, the State must pay the claim, if possible, with money previously appropriated for breach-of-contract claims. Tex. Gov't Code § 2260.105. If, however, the...