Texas W.C.C. v. City of Eagle Pass

Decision Date09 March 2000
Citation14 S.W.3d 801
Parties(Tex.App-Austin 2000) Texas Workers' Compensation Commission, Appellant v. City of Eagle Pass/Texas Municipal League Workers' Compensation Joint Insurance Fund; and Capital Metro Transportation Authority/Texas Municipal League Workers' Compensation Joint Insurance Fund, Appellees NO. 03-99-00406-CV
CourtTexas Court of Appeals


Before Chief Justice Aboussie, Justices B. A. Smith and Yeakel


Marilyn Aboussie, Chief Justice

Appellant, the Texas Workers' Compensation Commission ("the Commission"), appeals from a district court judgment reversing a Commission order assessing penalties. The judgment declared that appellees,1 as political subdivisions of the State, possess immunity from administrative penalties and that their immunity had not been waived. We will reverse the decision of the trial court and render judgment in accordance with the Commission's order.


The Commission is authorized to review and to audit the records of insurance carriers to determine if they are in compliance with the Workers' Compensation Act ("the Act"). See Tex. Lab. Code Ann. §§ 414.001-.007 (West 1996); 28 Tex. Admin. Code §§ 180.1-.8 (1999). The definition of insurance carrier includes political subdivisions that self-insure. See Tex. Lab. Code Ann. § 401.011(27)(C) (West Supp. 2000). Appellees are unquestionably political subdivisions of the State of Texas. In reviewing the records of the City of Eagle Pass ("Eagle Pass") and the Capital Metro Transportation Authority ("Capital Metro"), the Commission found that each appellee had twice violated section 409.023 of the Labor Code by making late payments of benefits. See id. § 409.023 (West 1996). Eagle Pass paid benefits four days late in March 1994 and one day late in November 1994. Capital Metro paid benefits eighteen days late in March 1995 and thirteen days late in April 1995. The Commission assessed administrative penalties against Eagle Pass in the amount of $1,875 and against Capital Metro in the amount of $7,275.

At an administrative hearing, appellees stipulated to the violations of section 409.023 and to the amount of the penalties imposed. Appellees' sole contention was that as political subdivisions, they were immune from the imposition of administrative penalties under the doctrine of sovereign immunity. The Administrative Law Judge ("ALJ") rejected appellees' argument and upheld the Commission's order assessing penalties. Appellees subsequently filed suit in district court in Travis County for judicial review of the ALJ's decision. In the suit, appellees again urged that the Commission could not assess administrative penalties against political subdivisions because the Legislature had not expressly waived the subdivisions' sovereign immunity from such penalties. In reversing the ALJ's decision, the district court concluded that sovereign immunity prevented the State's imposition of penalties absent the Legislature's express waiver of the subdivision's immunity. The Commission then appealed to this Court.

Sovereign Immunity

In its sole issue, the Commission contends that sovereign immunity does not apply to the present situation. As this issue is a pure question of law, we review the trial court's ruling de novo. See Republic W. Ins. Co. v. State, 985 S.W.2d 698, 701 (Tex. App.--Austin 1999, pet. dism'd w.o.j.).

The Commission argues that because municipalities and other political subdivisions of the State exist under the authority of the State and are subject to the State's regulatory authority, such entities do not enjoy sovereign immunity from state regulatory authority. We agree.

Appellees offer no authority for the proposition that political subdivisions such as municipalities are sovereign entities. To the contrary, municipalities are created as political subdivisions of the State and "represent no sovereignty distinct from the state and possess only such powers and privileges as have been expressly or impliedly conferred upon them." Payne v. Massey, 196 S.W.2d 493, 495 (Tex. 1946). A municipality's sovereignty is dependent upon that of the State. See City of Irving v. Dallas/Fort Worth Int'l Airport Bd., 894 S.W.2d 456, 465 (Tex. App.--Fort Worth 1995, writ denied). While it is well established that sovereign immunity protects the federal government from state suits and vice versa, this immunity stems from the basic precept of federalism that the federal and several state governments each possess independent sovereignty. Because political subdivisions of the State do not possess such independent sovereignty, they have no immunity as against the State.

Under the common law doctrine of immunity, municipalities and other political subdivisions of the State possess limited immunity from actions brought by private third parties. This immunity results from agency principles and the fact that municipalities and political subdivisions are agents of the State. See Lawrence v. City of Wichita Falls, 906 S.W.2d 113, 115 (Tex App.--Fort Worth 1995, writ denied). A political subdivision's immunity is a privilege afforded it based on its existence as a subdivision of the State, and "[a] municipality, as a political subdivision of the state, is not liable for the acts or conduct of its officers or employees . . . ." City of Lancaster v. Chambers, 883 S.W.2d 650, 658 (Tex. 1994) (emphasis added). Thus, a political subdivision's derivative immunity acts as a shield against actions brought by private parties but not as a shield against the State, from which the subdivision derives its immunity.

The cases appellees cite do not persuade us that political subdivisions possess immunity against the State. In their argument, appellees rely heavily on cases that involve conflicts between state and federal governments. Appellees rely upon cases that stand for the proposition that state and federal sovereigns lack power to regulate or sue one another absent consent. See, e.g., United States Dep't of Energy v. Ohio, 503 U.S. 607 (1992). In Ohio, the Supreme Court held that the State of Ohio could not collect administrative penalties against an agency of the federal government because Congress has not waived the federal government's sovereign immunity from liability for civil fines imposed by a state for violations of certain federal statutes. See id. at 611. Having determined that political subdivisions in Texas are not independently sovereign, we find that cases like Ohio, which involve conflicts between two independent sovereigns, offer no guidance in determining the present issue.

Appellees offer a single New Jersey opinion containing language that questions whether political subdivisions enjoy immunity against state regulation. See New Jersey Dep't of Envtl. Protection v. Middlesex County Bd. of Chosen Freeholders, 502 A.2d 1188 (N.J. Super. Ct. Ch. Div. 1985), aff'd, 506 A.2d 13 (N.J. Super. App. Div. 1986). However, that case was not decided on the basis of immunity. In Middlesex, the court held that a state regulatory agency charged with the administration of waste-management plans could not sue counties for alleged failure to adopt plans because "the exclusive remedy when a county fails to discharge its planning responsibilities under the [New Jersey Solid Waste Management Act] is for the [New Jersey Department of Environmental Protection] to exercise its own planning powers . . . ." Id. at 1196. Thus, Middlesex was decided on the basis of the agency's enabling statute. Because the holding in Middlesex did not turn on sovereign immunity, that case does not persuade us that political subdivisions of the State of Texas have independent sovereignty or sovereign immunity vis-a-vis the State. We sustain the Commission's contention that sovereign immunity is inapplicable in the present situation.

Application of Labor Code Provisions Against Subdivisions

Appellees respond by arguing that even if sovereign immunity does not protect them from state regulation, section 415.021 of the Labor Code, which authorizes the Commission to assess administrative penalties, does not empower the Commission to assess penalties against political subdivisions. Section 415.021 specifically authorizes the Commission to assess administrative penalties "against a person who commits an administrative violation." Tex. Lab. Code Ann. § 415.021(a) (West 1996) (emphasis added). Before 1993, the Act defined "person" as an "individual, corporation, organization, business trust, estate, trust, partnership, association, or other legal entity."2 The definition did not expressly include a governmental subdivision.

Appellees refer us to cases in which courts have found that the term "other legal entity" does not include a political subdivision. In Bridges v. Texas A&M University System, 790 S.W.2d 831, 834-35 (Tex. App.--Houston [14th Dist.] 1990, no writ), the court construed a definition of "person" under the Texas Insurance Code that was substantially similar to the pre-codified definition here and held that because the definition made no reference to the State or state agencies, the Legislature did not waive governmental immunity. See id. Because we have determined that sovereign immunity is not applicable in the present case, the reasoning in Bridges offers no guidance here. The only non-immunity case appellees cite involved a substantially different definition. In Lake LBJ Municipal Utility District v. Coulson & C.A.E., Inc., 839 S.W.2d 880, 890-91 (Tex. App.--Austin 1992, no writ), this Court held that article 2226,3 which subjected a "person" to liability for attorneys' fees, did not encompass a "governmental unit." However, article 2226 enumerated "person" and "other legal entity" as separate and distinct categories, whereas even the pre-codified workers' compensation statute defined "per...

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