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

• Decision Date: 01 May 2020
• Docket Number: No. 17-0905,17-0905
• Parties: SAN ANTONIO RIVER AUTHORITY, Petitioner, v. AUSTIN BRIDGE & ROAD, L.P. and Hayward Baker, Inc., Respondents
• Court: Texas Supreme Court

601 S.W.3d 616

SAN ANTONIO RIVER AUTHORITY, Petitioner,

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

No. 17-0905

Supreme Court of Texas.

Argued September 18, 2019

OPINION DELIVERED: May 1, 2020

Patrick J. Wielinski, Travis M. Brown, Cokinos | Young, Irving, for Amici Curiae Associated General Contractors of America and Texas Building Branch - Associated General Contractors of America.

David W. Ross, Law Offices of David W. Ross, P.C., San Antonio, Scott Keller, Baker Botts LLP, Austin, for Petitioner.

Anton Ernest Hackebeil, Bexar County Criminal District Attorney, Hondo, Gregory A. Harwell, Matthew M. Waterman, Slates Harwell LLP, Dallas, for Respondent Austin Bridge & Road, L.P.

Jennifer M. Lee, Thomas W. Fee, Timothy R. George, Fee Smith Sharp & Vitullo LLP, Dallas, for Respondent Hayward Baker, Inc.

Justice Bland delivered the opinion of the Court, in which Justice Green, Justice Lehrmann, Justice Blacklock, and Justice Busby joined.

This construction contract dispute involves repairs to the Medina Lake Dam that went over budget. The San Antonio River Authority hired Austin Bridge and Road L.P. as its general contractor for the project. The parties agreed—in bid documents proffered by the River Authority—to submit any disputes about the contract to arbitration. When disagreements about the scope of work and payment arose, Austin Bridge invoked the contract's arbitration provisions. Arbitration proceedings commenced. But after the arbitrator denied the River Authority's plea of governmental immunity, the River Authority objected to continuing the arbitration. The River Authority then sued its contractors in state district court, contending that it had lacked any authority to agree to the contract's arbitration provisions.

We conclude that Local Government Code Chapter 271 provided that authority. Chapter 271 authorizes local governments, like the River Authority, to agree to arbitrate claims brought under the chapter. Chapter 271 further provides that the final resolution of an arbitration proceeding is "enforceable" insofar as immunity is waived. What is enforceable is authorized.

Because the River Authority possessed the authority to agree to arbitrate claims under chapter 271, and exercised that authority in this contract, we must determine whether an arbitrator may decide matters of governmental immunity. Immunity implicates subject-matter jurisdiction; it may be waived only by the legislature's consent. And enforcement of a judgment against a local government requires the exercise of state judicial power. Courts are empowered to enforce such judgments only to the extent that immunity is waived. Accordingly, the judiciary retains the duty to decide whether a local government has waived its immunity, and the extent to which any arbitration award is recoverable against a local government—the parties' agreement to arbitrate notwithstanding. Finally, we conclude that the River Authority's immunity has been waived in this case. Because the court of appeals reached similar conclusions, we affirm its judgment.

I

The Bexar–Medina–Atascosa Counties Water Control and Improvement District No. 1 owns and operates the Medina Lake Dam, built more than a hundred years ago.¹ About twenty years ago, the District discovered that the dam was falling apart. The Texas Legislature authorized $4 million in state funds for needed repairs.²

The District and four other local governments—Bexar County, the Bexar Metropolitan Water District, the San Antonio River Authority, and the Edwards Aquifer Authority—agreed to undertake the repair project through a "Cooperative Agreement." In that agreement, the District and Bexar County each promised to provide $3 million for the project. For its part, the San Antonio River Authority agreed to serve as the "project manager and contract administrator." In exchange for a fee for its services, the River Authority promised to "ensure quality construction and execution of the project" and to "manage and deliver the [project] within authorized funding levels."

After soliciting bids for the work, the River Authority awarded the construction contract to Austin Bridge. The construction contract required Austin Bridge to repair the dam within a year. In return, the River Authority agreed to pay Austin Bridge under a project-management schedule.

The contract includes an arbitration provision requiring that disputes arising under the contract "be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association." The contract further provides that an "award rendered by the arbitrators will be final, judgment may be entered upon it in any court having jurisdiction thereof, and will not be subject to modification or appeal except to the extent permitted by Sections 10 and 11 of the Federal Arbitration Act."

Austin Bridge subcontracted part of the repair work to Hayward Baker, Inc. Hayward Baker expended more in labor and materials than projected, increasing the cost of the project. Both Austin Bridge and Hayward Baker attribute these costs to faulty specifications in the River Authority's bid documents, which resulted in change orders to the scope of their work; the River Authority disagrees. When the River Authority refused to pay these additional costs, Hayward Baker demanded arbitration against Austin Bridge, which in turn demanded arbitration against the River Authority. In its demand, Austin Bridge alleged that the River Authority breached the construction contract by failing to pay additional amounts owed under the agreement.

The River Authority appeared before the arbitrator and moved to dismiss the arbitration proceeding on the ground that governmental immunity bars the claim against it. The arbitrator denied the motion. Having lost that ruling before the arbitrator, the River Authority sued Austin Bridge and Hayward Baker in state district court. The River Authority requested that the court enjoin the arbitration proceeding and declare that governmental immunity bars the claim against the Authority. The parties moved for summary judgment on the immunity question. The trial court denied the River Authority's motion and granted Austin Bridge and Hayward Baker's, ruling that the arbitration provisions in the construction contract are enforceable.

The court of appeals reversed in part.³ It agreed with the trial court that the River Authority had the authority to agree to arbitrate but concluded that a court, not an arbitrator, must decide whether the River Authority is immune from the claims against it and from enforcement of any resulting award.⁴ The court of appeals then addressed the immunity issue, ruling in accord with the arbitrator and the trial court that Local Government Code Chapter 271 waives the River Authority's immunity from suit.⁵ The court of appeals remanded the case to the trial court with instructions to enter an order compelling arbitration and staying all other court proceedings pending the arbitrator's award.⁶

We granted the River Authority's petition for review. In this Court, the parties present three issues: (1) whether their agreement to arbitrate is enforceable, (2) if so, whether the courts must decide matters of governmental immunity, notwithstanding the agreement of the parties, and (3) whether immunity bars this breach-of-contract claim against the River Authority.

II

"Final and binding resolution of a dispute by arbitration is an accepted and adequate alternative to its resolution by a judge or jury."⁷ But it "is a matter of consent, not coercion."⁸ Thus, "a party cannot be forced to arbitrate absent a binding agreement to do so."⁹ When deciding whether parties must arbitrate their dispute, "the question is not which forum is quicker, cheaper, or more convenient, but which one the parties picked."¹⁰

The parties agree that Austin Bridge and the River Authority agreed to arbitrate any dispute arising under the construction contract. The River Authority, however, is a local government created under the Texas Constitution.¹¹ As a "political subdivision of the State [that] operates as a governmental agency performing governmental functions,"¹² the River Authority may "only exercise those powers granted by statute, together with those necessarily implied from the statutory authority conferred or duties imposed."¹³ Absent legislative authorization, the River Authority's agreement is "void ab initio,"¹⁴ and the River Authority has "the right to declare it null, and to refuse to comply with it."¹⁵ Accordingly, we examine whether a statute authorized the River Authority to agree to arbitrate this dispute.

A

The legislature has granted the River Authority "all of the powers of the State of Texas" to manage the waters within its four-county territory and "to do all things as are required therefor[e]."¹⁶ Among its powers is the power to "make contracts and to execute instruments necessary or convenient to the exercise of the powers, rights, privileges and functions conferred upon it,"¹⁷ including "contracts with municipalities and others involving the construction of reservoirs [and] dams" and "provisions for the operation, maintenance and ownership of such properties."¹⁸ As the construction contract in this case provides for repairs to the Medina Lake Dam, the legislature generally has authorized the River Authority to agree to it. The River Authority asserts, however, that its agreement to arbitrate required additional, express authorization.

Austin Bridge responds that Local Government Code Chapter 271 provides that authorization. Chapter 271, it argues, vests courts with jurisdiction to adjudicate a claim for breach of a contract with a local governmental entity. The chapter defines "adjudication" to include both "the bringing of a civil suit and prosecution to final judgment" and "the bringing of an authorized arbitration proceeding and prosecution to final resolution in accordance with any mandatory procedures...