Gtech Corp. v. Steele

• Citation: 549 S.W.3d 768
• Decision Date: 11 January 2018
• Docket Number: NO. 03-16-00172-CV,03-16-00172-CV
• Parties: GTECH CORPORATION, Appellant v. James STEELE, et al., Appellees
• Court: Court of Appeals of Texas

549 S.W.3d 768

GTECH CORPORATION, Appellant

v.James STEELE, et al., Appellees

NO. 03-16-00172-CV

Court of Appeals of Texas, Austin.

Filed: January 11, 2018

Mr. Kevin P. Parker, The Lanier Law Firm, P. O. Box 691448, Houston, TX 77269-1448, for Appellees.

Ms. Nina Cortell, Haynes and Boone, LLP, 2323 Victory Avenue, Suite 700, Dallas, TX 75219, for Appellant.

Before Justices Puryear, Pemberton, and Field

OPINION

Bob Pemberton, Justice

This appeal requires us to ascertain the nature and parameters of "derivative" sovereign immunity for government contractors as recognized under current Texas law—a matter going to the trial court's jurisdiction to adjudicate a lawsuit and not necessarily the merits of the lawsuit itself. Our conclusions and their application to the record in this case require us to affirm in part and reverse in part.

BACKGROUND

In September 2014, the Texas Lottery launched retail sales of a "scratch-off" or "instant" ticket product known as "Fun 5's." As the name alludes, Fun 5's combined five different instant games onto a single ticket and was sold for a retail price of $5 each. A reduced-size image of the Fun 5's ticket sold at retail is provided below¹ :

Our focus is the game situated in the lower right-hand corner of the Fun 5's ticket and featured in the inset, labeled as "Game 5." In Game 5, a contestant won a prize if three "5" symbols appeared in any one row of the tic-tac-toe grid when the latex coating was removed. The amount of that prize was revealed in the "PRIZE" box below the grid, and ranged between $5 to $100,000. However, if a "moneybag" icon appeared in the "5x BOX" below the grid, the prize amount would be increased fivefold, elevating the range to between $25 and $500,000.

Although the moneybag icon was a prize multiplier having effect only on tickets that won in tic-tac-toe, Game 5 was configured so that the moneybag multiplier would appear not only on a subset of the winning tickets, but also on roughly 25 percent of non-winning tickets, a security measure deemed advisable by the Texas Lottery Commission (TLC) to prevent advance discovery of winning tickets merely by "microscratching" the 5x BOX to find moneybag icons. But after Fun 5's sales began, a number of purchasers who had uncovered moneybag icons on non-winning tickets in Game 5 asserted that the game instructions printed on the ticket—

Reveal three "5" symbols in any one row, column, or diagonal, win PRIZE in PRIZE box. Reveal a Money Bag "[icon]" symbol in the 5X BOX, win 5 times that PRIZE.

—meant or appeared to mean that the moneybag icon alone entitled them to a prize equaling five times the amount shown in the PRIZE box. In other words, these purchasers claimed to understand that the second sentence of the instructions, referencing the moneybag icon, promised an independent, alternative means of winning in Game 5 in addition to the tic-tac-toe game referenced in the first sentence, as opposed to describing what was actually a multiplier contingent upon a single method of winning a prize through tic-tac-toe. In some instances, including some that were reported in the media, this asserted discrepancy between Game 5's instructions versus actual parameters purportedly misled some Fun 5's purchasers to perceive themselves winners of large prizes when uncovering moneybag icons on their tickets, only to have their elation crushed when they attempted to collect. The TLC ultimately ended sales of Fun 5's earlier than it had planned, citing "feedback from some players expressing confusion regarding certain aspects of this popular game," and adding that "a few opportunistic individuals appear to be exploiting the situation."

Ensuing lawsuits grew to include over 1,200 original or intervening plaintiffs who had allegedly purchased Fun 5's tickets and incurred injury from the asserted discrepancy between Game 5's instructions and actual parameters. While a single plaintiff (Nettles) filed suit in Dallas County, the others (the Steele Plaintiffs) joined in the cause giving rise to this appeal, filed in Travis County district court. Both suits targeted GTECH Corporation (GTECH), which participated, under contract with the TLC, in the development, printing, and distribution of the Fun 5's product and programming of the computer system used to verify winners.² The merits of these claims or of their underlying reading of the Game 5 instructions are not yet before us. Our present concern, rather, relates to the sovereign immunity that would unquestionably be implicated were the claims asserted instead against TLC, a state agency,³ and whether GTECH can "derivatively" benefit from that immunity here.⁴

GTECH filed a plea to the jurisdiction asserting that the Steele Plaintiffs' claims were barred by sovereign immunity derived from TLC's immunity, thereby depriving the Travis County district court of subject-matter jurisdiction to adjudicate the claims. GTECH had also asserted a similar plea in the Nettles suit. The Dallas district court granted that plea, and this ruling was recently upheld in a memorandum opinion of the Fifth Court of Appeals.⁵ But the Travis County district court denied GTECH's plea as to the Steele Plaintiffs' claims. In this cause, GTECH has appealed that order to this Court, urging that the district court erred in failing to grant the plea based on derivative sovereign immunity.⁶

STANDARD OF REVIEW

Because subject-matter jurisdiction is a question of law, we review de novo a trial court's ultimate ruling on a plea to the jurisdiction.⁷ The Steele Plaintiffs had the burden in the first instance to plead or present evidence of facts that would affirmatively demonstrate the district court's jurisdiction to decide their claims.⁸ We construe their pleadings liberally in favor of jurisdiction, taking their factual allegations as true except to the extent negated by evidence.⁹ Both the Steele Plaintiffs and GTECH presented evidence each deemed material to the jurisdictional issue. In practical terms, this proof could negate jurisdictional facts alleged by the Steele Plaintiffs only to the extent it is conclusively in GTECH's favor.¹⁰ We view the evidence in the light favorable to the Steele Plaintiffs.¹¹

Sovereign immunity—the age-old common-law doctrine holding that " 'no state can be sued in her own courts without her consent, and then only in the manner indicated by that consent' "¹² —encompasses an immunity from suit that implicates a trial court's jurisdiction to decide pending claims,¹³ and to this extent can properly be asserted through a plea to the jurisdiction.¹⁴ But sovereign immunity would come into play here only if GTECH has met an initial burden of establishing that the Steele Plaintiffs' claims against it actually implicate that immunity.¹⁵ While the parties agree that it is theoretically possible for claims against a private government contractor like GTECH to implicate the government's sovereign immunity, they differ regarding the conditions under which this is so and, in turn, the showing that GTECH must make.

THE IMPORT OF BROWN & GAY

GTECH argues that it is derivatively shielded by the TLC's sovereign immunity if it can show that it is being sued merely for complying with the TLC's decisions or directives—i.e., for what were ultimately actions of or attributable to TLC that GTECH merely carried out—on which GTECH exercised no "independent discretion." While agreeing with GTECH to the extent that the contractor must have "exercised no discretion in activities giving rise to [their] claims," the Steele Plaintiffs urge that GTECH was also required to make an additional, independent showing that "extending" TLC's immunity to GTECH under the particular circumstances of this case would actually advance the fiscal and policy rationales that underlie sovereign-immunity doctrine. The respective arguments are grounded in competing views of Brown & Gay Engineering, Incorporated v. Olivares ,¹⁶ the first case in which the Texas Supreme Court professed to "directly address[ ] the extension of immunity to private government contractors."¹⁷

Brown & Gay arose from a fatal automobile accident that occurred on a tollway under the purview of the Fort Bend County Toll Road Authority, a local-government corporation possessing delegated power to design, build, and operate the tollway.¹⁸ Through a statutorily authorized contract, the Authority had delegated to Brown & Gay Engineering, an independent contractor, the responsibility of designing road signs and traffic layouts on the tollway, subject to the approval of the Authority's governing board.¹⁹ The fatality occurred when, following construction, an intoxicated motorist drove onto the tollway through an exit ramp and continued for several miles in the wrong direction before colliding with a car driven by Pedro Olivares, killing both drivers.²⁰ Olivares' estate and his parents sued defendants that included Brown & Gay, alleging that the firm's negligent failure to design and install proper signs, warning flashers, and other traffic-control devices had proximately caused Olivares' death.²¹

Brown & Gay interposed a plea to the jurisdiction predicated on the same governmental immunity enjoyed by the Authority (whose immunity was ultimately uncontested).²² Brown & Gay prevailed in the trial court, lost in the court of appeals, and sought review in the Texas Supreme Court.²³ As Brown & Gay's jurisdictional theories had evolved by that juncture, its material arguments were that its status as an independent contractor of the Authority (as opposed to an Authority employee acting in official capacity) did not singularly foreclose its reliance on the Authority's immunity; that courts in Texas and elsewhere had previously recognized that independent government contractors could be shielded by the immunity of the governmental party to the contract; and that the underlying purposes of sovereign immunity are served by extending it to private entities performing authorized governmental...