© 2016 The Texas Lawbook.
By Janet Elliott
AUSTIN (April 22) – The Supreme Court of Texas in two cases this month limited municipal immunity for cities engaged in discretionary activity. The court ruled in a third case that city officers must act within their legal authority for immunity to apply.
The unanimous decisions are expected to impact pending cases, including a $19 million gas lease fight between the City of Dallas and Trinity East Energy. The lawyer representing Trinity East said the court is signaling its willingness to look critically at municipal immunity.
“The cases provide more opportunities for private parties to enforce their rights and override the immunity defense,” said Art Anderson, a Dallas-based Winstead shareholder.
“The court in the past has spoken very broadly about governmental immunity,” said Craig Enoch. “Now it may have decided it had spoken too broadly and will pay more attention to property rights.”
Ruling in a dispute over attorney’s fees, the court held that a contract to install pollution control equipment at a power plant owned by CPS Energy was proprietary in nature. The court said a claim for attorney’s fees arising from these proprietary actions does not implicate government immunity.
The attorney fee dispute grew out of a breached of contract suit filed by Wheelabrator Air Pollution Control, Inc. against CPS Energy. The contractor said it had completed its work on a coal-fired power plant and disputes the utility’s withholding 10 percent because of a dispute with another contractor.
In the April 15 opinion, Justice Paul Green said the Tort Claims Act lists operation of a public utility as a proprietary function.
“Both our common-law precedent and the TTCA – which, as discussed above, we find appropriate to defer to – have classified a municipality’s operation and maintenance of a public utility as a proprietary function,” Justice Green said.
The court reversed the ruling from the 4th Court of Appeals in San Antonio, which had upheld the trial court’s dismissal of Wheelabrator’s attorney’s fees claim.
Green cited the court’s April 1 ruling in Wasson Interests Ltd. v. City of Jacksonville that the common law distinction between governmental and proprietary acts applies to contract claims just as it does in tort claims. When a city performs discretionary functions on its own behalf it ceases to derive its authority from the state’s sovereignty, the court said in that case, which involved a lease dispute over lakefront property owned by the City of Jacksonville.
Anderson said he would cite the Supreme Court’s Wasson ruling in the company’s pending appeal to the 2nd Court of Appeals. Trinity East sued Dallas in 2014 after it paid the city $19 million for a mineral lease only to have the city council later reject Trinity’s drilling permit. Dallas has argued that it has immunity.
Tort Claims Act Offers Guidance on Classifying Functions
Justice Jeffrey Brown wrote the opinion for a unanimous court in Wasson Interests Ltd. v. City of Jacksonville. He said it is not always easy to determine whether a city function is governmental or proprietary, and suggested courts look at how the Texas Legislature has defined 36 governmental functions in the Texas Tort Claims Act.
“While such a dichotomy may at times be difficult to apply, the Texas judiciary has been doing so for more than 130 years,” said Brown. “Moreover, and perhaps most importantly, the Legislature has provided definitional tools to aid our inquiry.”
The court remanded the case to the 12th Court of Appeals to address whether the lease agreement was proprietary or governmental and other defenses raised by the city.
The Texas Municipal League and Texas City Attorneys Association had argued in amicus briefs that governmental immunity allows cities to provide services free from the constant threat of expensive litigation. Without predictability on contract liability, cities could find it difficult to budget, the officials said.
Trinity East, in its amicus brief, said the expense of city contracts could increase because the default risk for contractors would be too high if a city cannot be held liable for its proprietary actions.
Third Case Chips at Immunity
In another opinion authored by Justice Brown on April 1, the court held that the Houston’s public works director might have acted without legal authority in determining which properties pay a drainage utility-district fee. That case is Houston Belt & Terminal Railway Co, et al. v. City of Houston.
Acts done without legal authority are not done as a branch of the state, Justice Brown said, and officers must act within their granted discretion for immunity to apply.
The railroads argued that the director based the assessments on aerial maps instead of digital-map data required by city ordinance.
The court cautioned lawyers that it clarified the ultra vires standard and did “not create a new vehicle for suits against the state to masquerade as ultra vires claims.”
“Although only exercises of absolute discretion are absolutely protected, whether a suit attacking an exercise of limited discretion will be barred is dependent upon the grant of authority at issue in any particular case,” Brown said. “Any so many legislative grants of authority, although not absolute, will be broad enough to bar most, if not all, allegedly ultra vires claims.”
© 2016 The Texas Lawbook. Content of The Texas Lawbook is controlled and protected by specific licensing agreements with our subscribers and under federal copyright laws. Any distribution of this content without the consent of The Texas Lawbook is prohibited.
If you see any inaccuracy in any article in The Texas Lawbook, please contact us. Our goal is content that is 100% true and accurate. Thank you.