San Antonio River Auth. v. Austin Bridge & Rd., L.P.

• Decision Date: 09 August 2017
• Docket Number: No. 04–16–00535–CV,04–16–00535–CV
• Citation: 581 S.W.3d 245
• Court: Texas Court of Appeals
• Parties: SAN ANTONIO RIVER AUTHORITY, Appellant v. AUSTIN BRIDGE & ROAD, L.P. and Hayward Baker Inc., Appellees

581 S.W.3d 245

SAN ANTONIO RIVER AUTHORITY, Appellant

v.AUSTIN BRIDGE & ROAD, L.P. and Hayward Baker Inc., Appellees

No. 04–16–00535–CV

Court of Appeals of Texas, San Antonio.

Delivered and Filed: August 9, 2017

APPELLANT ATTORNEY, David W. Ross, Law Offices of David Ross, PC, 115 E. Travis St., Suite 1630, San Antonio, TX 78205.

APPELLEE ATTORNEY, Timothy R. George, Thomas W. Fee, Fee, Smith, Sharp, & Vitullo, LLP, Three Galleria Tower, Dallas, TX 75240-5019, Gregory Alan Harwell, Matthew Waterman, Slates Harwell LLP, 1700 Pacific Ave., Suite 3800, Dallas, TX 75201-4761.

Sitting: Karen Angelini, Justice, Marialyn Barnard, Justice, Luz Elena D. Chapa, Justice

MEMORANDUM OPINION

Opinion by: Marialyn Barnard, Justice

This is an appeal from a final order denying appellant's, San Antonio River Authority ("the River Authority"), motion to stay arbitration and motion for summary judgment. Appellees, Austin Bridge and Road, L.P. ("Austin Bridge") and Hayward Baker, Inc. ("Hayward Baker"), initiated an arbitration proceeding against the River Authority, alleging the River Authority breached a construction contract regarding a repair project involving the Medina Lake Dam (the "Medina Lake Dam Project"). Thereafter, the River Authority filed a declaratory judgment action, seeking a declaration that appellees' breach of contract claim asserted against it in arbitration is barred by governmental immunity. Both parties filed competing motions for summary judgment, and the River Authority filed a motion to stay the arbitration proceedings. The trial court ultimately rendered an order denying the River Authority's motion to stay arbitration on the basis that the parties agreed to submit the question of immunity to the arbitrator. The trial court also granted appellee's motion for summary judgment and denied the River Authority's motion for summary judgment. On appeal, the River Authority argues the trial court erred in denying its motions because: (1) it is not authorized to agree to binding arbitration; and (2) section 271.152 of the Texas Local Government Code does not waive its immunity from suit.

After reviewing the trial court's order, we reverse the portion of the trial court's order denying the River Authority's motion to stay arbitration, and we render judgment declaring the matter of governmental immunity an issue that must be determined by the trial court. We also affirm the portion of the trial court's order granting appellees' motion for summary judgment and denying the River Authority's motion for summary judgment. We further remand this cause to the trial court with instructions to enter an order compelling arbitration and staying all other proceedings pending the outcome of the arbitration.

BACKGROUND

The underlying matter arises out of a construction contract dispute concerning the Medina Lake Dam Project. Medina Lake Dam is a dam located in Medina County and is operated by Bexar–Medina–Atascosa Counties Water Control and Improvement District No. 1 ("BMA"). In late 2000, BMA determined the dam needed certain repairs—specifically, the structure needed to be stabilized. As a result, BMA sought state funding for the repairs. Estimating the repairs would cost approximately $10 million, the Legislature appropriated $4 million to the Texas Water Development Board for a grant to BMA to pay for a portion of the estimated cost. In addition to this appropriation, the Legislature proposed House Bill 1741, which directed four local governmental entities—BMA, the Edwards Aquifer Authority, the Bexar Metropolitan Water District, and the River Authority—to enter into a cooperative interlocal agreement and to work together on planning, funding, and implementing the Medina Lake Dam Project. The bill also indicated any other local entity with the ability to assist in the project could be included in the interlocal agreement. House Bill 1741 further defined the duties of each of the entities with regard to the project. Specifically, it designated the River Authority as the project manager and contract administrator for the project.

On April 12, 2010, the four designated entities and Bexar County signed the interlocal agreement. In addition to the $4 million appropriated by the Legislature,¹ BMA and Bexar County each contributed $3 million to the project. Under the signed interlocal agreement, the River Authority, acting as project manager and contract administrator, was responsible for obtaining construction bids for the project and executing a contract with the lowest bidder subject to the approval of BMA, Bexar County, and the Bexar Metropolitan Water District in the event the bid exceeded $10 million. The River Authority ultimately awarded a unit-price contract² to Austin Bridge and executed a construction agreement with Austin Bridge (the "Agreement").

The Agreement identified the River Authority as the "manager" of the Medina Lake Dam Project and Austin Bridge as the contractor of the project. Under the terms of the Agreement, Austin Bridge was responsible for substantially completing the Medina Lake Dam Project within one year. The Agreement also provided the River Authority would be responsible for paying Austin Bridge in accordance with a project management schedule. The Agreement further outlined the parties' responsibilities to each other and identified twelve documents as the "Contract Documents," stating they comprised the entire agreement between the River Authority and Austin Bridge.

Pertinent to this appeal, the Agreement included the following statement at the top of the first page: "THIS CONTRACT IS SUBJECT TO ARBITRATION UNDER THE TEXAS GENERAL ARBITRATION ACT." Section 17.1 of the General Conditions, one of the twelve Contract Documents identified as comprising part of the entire agreement, included the following arbitration clause:

All claims, disputes and other matters in question between OWNER and CONTRACTOR arising out of, or relating to the Contract Documents or the breach thereof except for claims which have been waived by the making or acceptance of final payment as provided by paragraph 14.16, shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then obtaining subject to the limitations of this Article 16. This agreement so to [sic] arbitration and any other agreement or consent to arbitrate entered into in accordance herewith as provided in this Article 16 will be specifically enforceable under the prevailing arbitration law of any court having jurisdiction.

After executing the Agreement, Austin Bridge subcontracted with Hayward Baker to perform portions of the repair work. According to appellees, Hayward Baker had to utilize more labor and materials, specifically cement, than it originally had anticipated for the repair project because some of the cement leaked out of the cavities in the dam's embankments. As a result, appellees maintain that because the Agreement was a unit price contract, the River Authority is responsible for compensating Austin Bridge for the total cost of materials and labor provided. The River Authority, however, disagreed and declined to pay Austin Bridge for the additional costs.

On February 11, 2014, Hayward Baker initiated arbitration proceedings against Austin Bridge for its extra labor and materials claims. Thereafter, Austin Bridge initiated arbitration proceedings against the River Authority for breach of contract, alleging the River Authority breached the Agreement by failing to pay for the additional labor and materials provided for the project. In response, the River Authority filed a motion to dismiss arbitration, asserting the defense of governmental immunity. The arbitrator ultimately denied the River Authority's motion, and six months later, the River Authority filed a petition seeking declaratory and injunctive relief. In its suit, the River Authority sought a declaration that appellees' breach of contract claim was barred by governmental immunity. The River Authority argued section 271.152 of the Texas Local Government Code does not waive its immunity from suit because: (1) the Agreement does not constitute a contract within the requirements of the section, and (2) appellees did not claim damages within limitations of the section. See TEX. LOC. GOV'T CODE ANN . § 271.152 (West 2016) (providing for a limited waiver of governmental immunity in breach of contract claims). The River Authority also sought a temporary restraining order to enjoin appellees from participating any further in the pending arbitration proceeding until a final adjudication of its declaratory judgment claim by the trial court.

Appellees filed a joint motion for summary judgment, arguing the trial court should dismiss the River Authority's suit against them and allow the matter to proceed in arbitration. In its motion, appellees argued the issue of whether its breach of contract claim against the River Authority is barred by governmental immunity is a matter for the arbitrator—not the trial court—to determine as a matter of law, and in this case, the arbitrator determined Austin Bridge's claim is not barred. According to appellees' motion, this preliminary question is a matter of procedural arbitrability for the arbitrator. Appellees further asserted in their motion that in the event this preliminary question is a matter of substantive arbitrability, then there is clear and unmistakable evidence the parties intended to submit all disputes, including matters related to jurisdiction, to the arbitrator. The motion also asserted that even if waiver of governmental immunity is a matter for the trial court to decide, section 271.152 of the Texas Local Government Code waives the River Authority's immunity from suit as a matter of law because the Agreement constitutes a contract under section 271.152 and the damages claimed are recoverable under the section's limitations.

In response, the River Authority filed a cross motion for...