Texas Southern University v. Araserve Campus Dining Services of Texas, Inc.

• Decision Date: 20 November 1998
• Docket Number: No. 01-98-00366-CV,01-98-00366-CV
• Citation: 981 S.W.2d 929
• Parties: 131 Ed. Law Rep. 858 TEXAS SOUTHERN UNIVERSITY, Appellant, v. ARASERVE CAMPUS DINING SERVICES OF TEXAS, INC., Appellee. (1st Dist.)
• Court: Texas Court of Appeals

Page 929

981 S.W.2d 929

131 Ed. Law Rep. 858

TEXAS SOUTHERN UNIVERSITY, Appellant, v. ARASERVE CAMPUS DINING SERVICES OF TEXAS, INC., Appellee.

No. 01-98-00366-CV.

Court of Appeals of Texas Houston (1st Dist.).

Nov. 20, 1998.

Rehearing Overruled Dec. 23, 1998.

Rande K. Herrell, Austin, for Appellant.

Jeffrey C. Londa, Stephen H. Dimlich, Jr., Houston, for Appellee.

Before Justices COHEN, HEDGES, and TAFT.

OPINION

MURRY B. COHEN, Justice.

This is an interlocutory appeal from an order denying appellant's plea to the jurisdiction based on sovereign immunity. See TEX. CIV. PRAC. & REM.CODE ANN. § 51.014(a)(8) (Vernon Supp.1998). We modify the order to dismiss Araserve's tort and constitutional claims, and we affirm the order, including that portion denying sovereign immunity on Araserve's contract claims, as so modified.

I. Background

We construe Araserve's pleadings in its favor and take those allegations as true. Texas Ass'n of Bus. v. Texas Air Control Bd., 852 S.W.2d 440, 446 (Tex.1993).

In 1981, TSU and Araserve's predecessor contracted for Araserve to provide food services for TSU. Araserve provided $122,778.50 in food and services that TSU requested but refused to pay for.

Araserve sued, asserting claims for: (1) contract; (2) quasi-contract (quantum meruit, unjust enrichment, and detrimental reliance); (3) tort (common-law fraud, misrepresentation, and negligent misrepresentation); and (4) constitutional violations (due process, due course of law, and equal protection violations ¹). In its tort and constitutional law claims, Araserve sought money damages for the value of the goods and services TSU had accepted. Araserve did not seek injunctive or declaratory relief.

TSU filed a jurisdictional plea based on sovereign immunity. The trial judge denied TSU's plea and abated the cause while the Texas Supreme Court considered Texas Southern University v. Federal Sign ² and Alcorn v. Vaksman. ³ After the Supreme Court decided Federal Sign, TSU again asserted its jurisdictional plea, and the trial judge again denied it. TSU appeals.

II. Contract and Quasi-Contract Claims

TSU contends sovereign immunity from suit bars Araserve's contract and quasi-contract claims.

As a general rule, the State cannot be sued for damages without its express permission. Federal Sign v. Texas S. Univ., 951 S.W.2d 401, 405 (Tex.1997). Even if the State consents to be sued, it generally remains immune from liability. Id. TSU is a State agency entitled to sovereign immunity. Id. TSU concedes it waived immunity from liability by contracting with Araserve, but TSU contends it remains immune from suit.

The precise issue here is whether a government contractor that fully performs its contract must obtain legislative consent to sue for agreed payment. Both parties contend this case is controlled by Federal Sign v. Texas Southern University.

A. Federal Sign v. Texas Southern University

TSU accepted Federal Sign's bid to build and deliver basketball scoreboards. See Federal Sign, 951 S.W.2d at 403. After Federal Sign began work, but before completion or delivery, TSU contracted with another company. Id. TSU asserted sovereign immunity from Federal Sign's breach of contract suit, but the judge granted judgment for Federal Sign. Id. The court of appeals and the Supreme Court held the suit was barred by sovereign immunity.

The Supreme Court recognized that sovereign immunity is a court-made rule. Id., 951 S.W.2d at 416 (Hecht, J., concurring), 417 (Enoch, J., dissenting). Nevertheless, it held that only the legislature can waive sovereign immunity.

The six-justice majority held:

Therefore, when the State contracts with private citizens, the State waives only immunity from liability. However, a private citizen must have legislative consent to sue the State on a breach of contract claim. The act of contracting does not waive the State's immunity from suit. Accordingly, we expressly overrule any cases that hold to the contrary.

Id. at 408 (emphasis in original). The majority opinion six times stated that only the legislature may waive sovereign immunity from suit. Id. at 405, 408, 409, 412. However, the majority also stated:

We hasten to observe that neither this case nor the ones on which it relies should be read too broadly. We do not attempt to decide this issue in any other circumstances other than the one before us today. There may be other circumstances where the State may waive its immunity by conduct other than simply executing a contract ⁴ so that it is not always immune from suit when it contracts.

Id. at 408 n. 1 (emphasis added).

Four justices who joined the majority opinion also concurred, emphasizing that the issue before the Court was narrow: whether "the State, merely by entering into a contract for goods and services, waives immunity from suit for breach of the contract before the other party has tendered performance." Id. at 412 (Hecht, J., concurring) (emphasis added). The concurring opinion stated:

We do not address whether the State is immune from suit on debt obligations, such as bonds. Second, at the time of TSU's breach (as found by the jury), Federal Sign had not performed. To be sure, Federal Sign purchased equipment for the contract that it could not otherwise use and lost profits it had bargained for. But Federal Sign never tendered performance, never performed services on TSU's property, and never delivered TSU any materials. Would the result be different if Federal Sign had already installed the scoreboards and TSU refused to pay the agreed price? Or if TSU had accepted the scoreboards, acknowledged that Federal Sign had fully complied with the contract, but refused to pay the agreed price? Or if TSU refused to pay in order to force Federal Sign to make a concession on another contract? We do not attempt to decide such hypotheticals today, but they do suggest that the State may waive immunity by conduct other than simply executing a contract, so that it is not always immune from contract suits.

Categorical statements in the Court's opinion must be read in this context. For example, the Court states that "when the State contracts with private citizens, the State waives only immunity from liability. " Ante at 406. Later it states: "We hold that sovereign immunity from suit without legislative consent applies to contract claims against the State." Ante at 412. These statements do not apply to all contracts--state bonds, for example--or to all circumstances. In short, today's decision does not hold that the State is always immune from suit for breach of contract absent legislative consent; it holds only that the mere execution of a contract for goods and services, without more, does not waive immunity from suit.

Id. at 412-13 (emphasis in original). However, in explaining why the Court would not abolish sovereign immunity from all contract suits, the concurring opinion then set out four "compelling reasons" to defer to the legislature to waive immunity from suit: (1) the handling of contract claims against the government involves complex policy choices (and the legislature has repeatedly considered but rejected waiving all immunity from contract suits); (2) not all factors that weigh in determining the State's contract liability can be assessed in a judicial proceeding (for example, whether the State must honor long- term contracts when public needs or administrations change); (3) even if immunity from contract suits were abolished, successful plaintiffs could still not be paid without legislative appropriation; and (4) the legislature has long provided for redress by allowing petitions for consent to sue the State for contract breach. Id. at 413-15. The concurring opinion concluded with the following:

While the judiciary is better suited to solve factual and legal issues in contract disputes, the legislature is not incapable of considering such issues, and is better suited to deciding the kinds of political issues that also attend claims against the State. For this Court to invade matters so laden with political policy concerns and, by abolishing immunity from suit, to disrupt the procedures the legislature has fashioned, would be not only contrary to our precedents but also unsound jurisprudence.

Id. at 415 (Hecht, J., concurring).

B. The Parties' Interpretation of Federal Sign

TSU reads Federal Sign 's majority opinion broadly, concluding "a private citizen must have legislative consent to sue the State on a breach of contract claim." Federal Sign, 951 S.W.2d at 408. It relies also on the concurring opinion's compelling reasons to leave sovereign immunity's waiver to the legislature alone. Id. at 413-15. In contrast, Araserve relies upon the portion of Federal Sign 's concurring opinion (and the majority opinion's footnote one) suggesting "the State may waive immunity by conduct other than simply executing a contract." Id. at 412-13 (Hecht, J., concurring). As another court recently asked, do we follow the Federal Sign majority opinion's broad language or the concurring opinion's strong suggestion? See Alamo Community College Dist. v. Obayashi Corp., 980 S.W.2d 745, 748 (Tex.App.--San Antonio Aug. 31, 1998, pet. filed) (designated for publication). What of the fact that both opinions leave open the possibility of waiver without legislative approval, while also reaffirming decades of law that only the legislature may or should waive immunity from contract suits?

C. Waiver by Conduct Beyond the Contract's Execution

We agree with the Obayashi court that Federal Sign 's holding was only that sovereign immunity from suit is not waived merely by executing a contract. Obayashi, op. at 748. Accordingly, we hold TSU did not waive its sovereign immunity from suit merely by executing the contract. See id. That does not decide this case, of course, because Araserve did more than tender performance--it performed, fully and repeatedly. Neither Federal Sign nor the three Supreme Court opinions on which it...