contract dispute resolution sovereign immunity … · contract dispute resolution: sovereign...

CONTRACT DISPUTE RESOLUTIONSOVEREIGN IMMUNITY AND BREACH OF CONTRACT CLAIMS

KAREN PETTIGREWAssistant Attorney General

Financial Litigation DivisionOffice of the Attorney General

© 2004

State Bar of TexasSUING AND DEFENDING

GOVERNMENTAL ENTITIES COURSEJuly 22-23, 2004

Galveston

CHAPTER 10

KAREN PETTIGREWAssistant Attorney GeneralFinancial Litigation Division

Office of the Attorney General300 W. 15th St. 8th Fl.

Austin, Texas 78701512-475-2952

Fax: 512-477-2348

BIOGRAPHICAL INFORMATION

EDUCATION

B.A., Austin CollegeJ.D., with honors, University of Texas at Austin, School of Law

PROFESSIONAL ACTIVITIES

Staff Assistant, Lieutenant Governor Bill Hobby, 1979-1980Administrative Assistant, State Senator Bill Sarpalius, 1981Manager of Governmental Relations, Texas Association of School Boards, 1982-1984Manager of Governmental Relations, Houston Lighting & Power Co., 1984-1985Assistant Attorney General, Energy, Finance, General Counsel and Child Support Divisions, 1986 to 1995General Counsel, Texas Commission on Alcohol and Drug Abuse, 1995-2002Assistant Attorney General, Financial Litigation Division, 2002-presentCertified in Administrative Law by the Texas Board of Legal Specialization

LAW-RELATED PUBLICATIONS, ACADEMIC APPOINTMENTS AND HONORS

Presenter, State Bar of Texas, Advanced Administrative Law Seminar, 1991Presenter, State Bar of Texas, Advanced Administrative Law Seminar, 1990

Contract Dispute Resolution: Sovereign Immunity and Contract Claims Chapter 10

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TABLE OF CONTENTS

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. THE DOCTRINE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1A. The Federal Sign Decision (1997): Sovereign Immunity from Suit Not Waived by Contracting . . . . . . . . . . 1B. The Legislature enacts Ch. 2260 (1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2C. The Little-Tex Decision (February 2001): With Ch. 2260, No Waiver-by-Conduct . . . . . . . . . . . . . . . . . . . 2D. The IT-Davy Decision (2002): Ch. 2260 or Not, Only Legislature Can Waive Sovereign Immunity . . . . . . . 2

III. CHAPTER 2260: ADMINISTRATIVE RESOLUTION OF CERTAIN CONTRACT CLAIMS AGAINST THESTATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3B. When Does Chapter 2260 Apply? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

1. What are goods and services? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32. If Chapter 2260 Does not Apply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

C. Negotiation of a Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41. Notice and Counterclaim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42. Negotiations and Mediation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43. How a Negotiated Claim Gets Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44. When Negotiations are Unsuccessful . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

D. The Contested Case Hearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41. The Request for Hearing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42. The Hearing and Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53. Paying Costs at SOAH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

E. If the Contractor’s Claim is Found Valid at SOAH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51. Maximum Damages and Pre-Judgment Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52. How a Damages Award Gets Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

F. If the Contractor’s Claim is Not Found Valid at SOAH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51. No Judicial Review of the SOAH Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52. Remedy: Petition the Legislature for Consent to Sue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

IV. CASES BEFORE SOAH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6A. Decided Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

1. DalMac Constr. Co. v. Tex. A&M Univ.; No. 711-99-1589 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62. Next Generation Graphics, Inc. v. Tex. Lottery Comm’n; . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63. Lanier Worldwide, Inc. v. The University of Texas at Arlington, No. 714-03-2115.CC . . . . . . . . . . . . . 74. Metric Place, Inc. v. Tex. Bldg. & Procurement Comm’n, No. 303-02-3316.CC . . . . . . . . . . . . . . . . 7

B. Pending Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71. Hartford Fire Ins. Co. v. Univ. of Houston, Docket No. 730-01-2374.W . . . . . . . . . . . . . . . . . . . . . . 7

C. Cases Resolved Without Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71. O'Brien Kreitzberg, Inc. v. Tex. Tech Univ. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72. Assoc. Prof’l Counselors, PLLC v. Tex. Dep’t of Protective & Regulatory Svcs.; No.

530-02-3373.CC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83. Keane, Inc. v. Tex. Lottery Comm’n; No. 362-02-3614.CC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84. SCT Software & Resource Management Corp. vs. Texas Southern University; No. 717-03-1949.

CC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

V. CERTAIN TXDOT CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

VI. WAIVERS OF SOVEREIGN IMMUNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8A. A State Entity Waives Immunity by Initiating Judicial Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8


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B. The Settlement Agreement from a Suit in Which Immunity Has Been Waived Is Enforceable. . . . . . . . . . . . 9C. The Legislature May Waive Immunity in Clear and Unambiguous Statutes. . . . . . . . . . . . . . . . . . . . . . . . . 9

1. Section 89.004, Local Government Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92. Section 51.075, Local Government Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103. Education Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104. Section 281.056(a), Health & Safety Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105. Section 58.098, Water Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Chart: Procedural Timelines for a Chapter 2260 Claim


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CONTRACT DISPUTE RESOLUTION:SOVEREIGN IMMUNITY ANDCONTRACT CLAIMS

I. INTRODUCTION1

This paper offers an overview of sovereignimmunity as it applies to breach-of-contract claims;discusses Texas Government Code Chapter 2260, theadministrative remedy for resolving such claims againstthe State; and discusses other avenues for resolution ofcontract claims, administratively or judicially.

II. THE DOCTRINEThe common law doctrine of sovereign immunity

protects the State from lawsuits for damages.2 Itencompasses two principles: immunity from suit andimmunity from liability. See Tex. Natural Res.Conservation Comm’n, v. IT-Davy, 74 S.W.3d 849(Tex. 2002). Immunity from suit protects the State fromthe cost of defending a lawsuit by barring the suit absentLegislative consent. Immunity from liability protects theState from the cost of paying a money judgment evenwhen the Legislature has consented to the suit. See id. at853; TEX. CIV. PRAC. & REM . CODE § 107.002. Evenwhen the State’s liability is not disputed, as in the case inwhich the State enters into a contract with a privateentity, the State retains immunity from suit if theLegislature has not expressly waived it. See IT-Davy, 74S.W.3d at 853.

The Texas Supreme Court has long recognized that"it is the Legislature's sole province to waive or abrogatesovereign immunity." Id. at 853 (quoting Federal Sign v.Tex. S. Univ., 951 S.W.2d 401, 409 (Tex. 1997)). TheCourt’s deference to the Legislature on waivers ofsovereign immunity is meant to protect the Legislature’spolicymaking function, in keeping with the Legislature’sexpressed desire “to preserve [its] interest in managing

state fiscal matters through the appropriation process.”IT-Davy, 74 S.W.3d at 854; TEX. GOV’T CODE §311.034. Specifically, the Court has explained, theLegislature is better suited to decide when sovereignimmunity should be waived, because subjecting thegovernment to liability “may hamper governmentalfunctions by shifting tax resources away from theirintended purposes toward defending lawsuits and payingjudgments.” IT-Davy, 74 S.W.3d at 854.3

The Legislature may consent to suits against theState by statute or by resolution. See IT-Davy, 74S.W.3d at 853-4. Legislative consent to sue the Statemust be expressed in clear and unambiguous language.See TEX. GOV’T CODE § 311.034; IT-Davy, 74 S.W.3dat 854. When legislative consent is granted by resolution,such resolutions are governed by Chapter 107 of theTexas Civil Practice and Remedies Code. See TEX . CIV.PRAC. & REM . Code § 107.001, et seq.

A. The Federal Sign Decision (1997): SovereignImmunity from Suit Not Waived by ContractingParties seek to avoid requesting legislative consent

began arguing that the State waived sovereign immunityby entering in to a contract. The courts of appealsdecisions were inconsistent.

In 1997, however, in Federal Sign v. TexasSouthern University, the Texas Supreme Court held thatthe State does not waive immunity from suit simply byentering into a contract. 951 S.W.2d 401. The Court“expressly overrule[d] any cases that hold to thecontrary.” Id. at 408. Although when the Statecontracts with private citizens it waives immunity fromliability, the Court said, the act of contracting does notwaive the State’s immunity from suit. A private citizenmust simply have legislative consent to sue the State ona breach of contract claim. See id. at 408. The Courtreaffirmed its past holdings that “it is the Legislature’ssole province to waive or abrogate sovereign immunity.”Id. at 409.

However, a footnote in the decision createdambiguity regarding whether the State could waivesovereign immunity by its conduct.

1 The views expressed in this paper are those of the author anddo not necessarily reflect the litigation position of the Office ofthe Attorney General for the State of Texas or any agencyrepresented by the Office. The author thanks Linda Shaunessyand Sarah Wells, Assistant Attorneys General, for allowing theauthor to use their prior work as the basis for this paper.

2 The Supreme Court has distinguished suits seeking damagesfor breach of contract from suits to determine or protect aprivate party’s rights against a state official acting withoutlegal or statutory authority. Suits of the latter nature are notbarred by sovereign immunity from suit. See Federal Sign, 951S.W.2d at 404-05; see also King v. Tex. Dep’t of Human Svcs.ex rel. Bost, 28 S.W.3d 27, 33 (Tex. App.–Austin 2000, no pet.).

3 Note that in determining whether or not the Patients Bill ofRights waived sovereign immunity for tort claims against astate hospital, the Texas Supreme Court specifically considered“whether the statute also provides an objective limitation onthe State’s potential liability.” Wichita Falls State Hospital v.Taylor, 106 S.W.3d 692, 698 (Tex. 2003).

http://www.TexasBarCLE.com/CLE/PMCasemaker.asp?table=TX_caselaw&volume=74&edition=S.W.3d&page=849&id=12707_01















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B. The Legislature enacts Ch. 2260 (1999)In 1999, Chapter 2260 of the Government Code was

created to provide an administrative process for resolvingbreach of contract claims against the State. See TEX.GOV’T CODE §§ 2260.001-.108. While Chapter 2260provides an administrative remedy, it does not waive theState’s sovereign immunity from suit or liability inbreach of contract cases. See TEX. GOV’T CODE §2260.006; IT-Davy, 74 S.W.3d at 854.

C. The Little-Tex Decision (February 2001): WithCh. 2260, No Waiver-by-ConductIn 2001, after several courts of appeals issued

opinions about waiver of sovereign immunity by conduct,the Texas Supreme Court clarified that there is no waiverof sovereign immunity by conduct, notwithstandinglanguage in a footnote to the court’s opinion in FederalSign. Gen. Servs. Comm’n v. Little-Tex Insulation Co.39 S.W.3d 591 (Tex. 2001).4

While the Little-Tex court recognized that languagein Federal Sign may have justified the lower courts’waiver-by-conduct doctrine, it dec lared that theLegislature’s enactment of Chapter 2260 changed thes ituation. See Little-Tex, 39 S.W.3d at 595. Thecontractors claimed that Chapter 2260 did not apply towaiver-by-conduct cases. See id. Since Chapter 2260 isa prerequisite to seeking legislative consent underChapter 107, they argued, therefore, it does not applywhere legislative consent is unnecessary because theState has already waived immunity by conduct. See id.at 596. The Court disagreed, rejecting the underlyingpremise that a waiver-by-conduct exception to sovereignimmunity exists. It based its refusal to judicially adopt thewaiver-by-conduct doctrine on the Legislature’senactment of Chapter 2260, in deference to theLegislature’s control over waivers of sovereign immunity.The Court concluded that “there is but one route to thecourthouse for breach-of-contract claims against theState, and that route is through the Legislature.” Id. at597.

D. The IT-Davy Decision (2002): Ch. 2260 orNot, Only Legislature Can Waive SovereignImmunityIn IT-Davy v. Texas Natural Res. Conservation

Comm’n, the Texas Supreme Court reviewed the court

of appeals’ pre-Little-Tex denial of TNRCC’s plea to thejurisdiction based on waiver-by-conduct reasoning. 74S.W.3d 849, 851-52 (Tex. 2002). IT-Davy offered fourtheories to support its contention that the State waivedimmunity from suit: (1) by its conduct in acceptingcontractual benefits; (2) by entering into a contract thatexpressly allowed the parties to resolve disputes in court;(3) legislative consent to suit is found in the Texas WaterCode; and (4) legislative consent is found in theDeclaratory Judgment Act. See id. at 856. The Courtrejected all four theories, reversed the court of appeals’judgment, and dismissed IT-Davy’s claims for want ofjurisdiction. Id. at 851, 856.

While the Little-Tex Court rejected the waiver-by-conduct exception based primarily on the provision of aChapter 2260 administrative remedy, the IT-Davy Courtheld that Chapter 2260 did not apply because the contractwas executed before August 30, 1999. See id. at 856.Instead, the IT-Davy Court rejected the waiver-by-conduct exception based solely on deference to theLegislature in waiving immunity:

Because we have consistently held that onlythe Legislature can waive sovereign immunityfrom suit, allowing other governmental entitiesto waive immunity by conduct . . . would befundamentally inconsistent with our establishedjurisprudence and with the existing legislativescheme.

Id. at 857. The Court also pointed out that a waiver-by-conduct exception would force the State to expendresources in litigation before enjoying sovereign immunityand thereby defeat many of the doctrine’s principles. Id.The Court concluded that when Chapter 2260 does notapply to a contract claim against the State, the privateparty’s only option is to obtain legislative consent to sueunder Chapter 107 of the Texas Civil Practice andRemedies Code. Id.

Next, the Court rejected IT-Davy’s waiver-by-contract argument, holding that because only theLegislature can waive immunity from suit, administrativeagencies and their agents – part of the executive branchof government – cannot waive immunity even when theyhave statutory authority to execute contracts. Id. at 858.

Third, the Court found that the Texas Water Code’sprovision that a person affected by a TNRCC “ruling,order, decision, or other act” or “inaction” may seekjudicial review of such action or inaction in district courtdid not waive TNRCC’s immunity from suit. The Courtheld that the provision gives trial courts only power to

4 But see Catalina Development, Inc. v. County of ElPaso, 121 S.W.3d 704 (Tex. 2003)(The county did notwaive immunity from suit by its conduct when it stoppedthe sale of property).








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review administrative actions of a regulatory nature, notoriginal jurisdiction to decide contract claims.5 Id.

The Court reasoned the provision was not a clearand unambiguous waiver of sovereign immunity asrequired by section 311.034 of the Government Code,adding that “the Legislature knows how to clearly andunambiguously waive sovereign immunity from suit.”

For instance, the Texas Tort Claims Actprovides that "[s]overeign immunity to suit iswaived and abolished to the extent of liabilitycreated by this chapter." TEX. CIV. PRAC. &REM . CODE § 101.025(a).

Id. at 859.

Finally, the Court held that declaratory judgmentactions on contract disputes which would impose liabilityon the State are not exceptions to sovereign immunity.6

III. CHAPTER 2260: ADMINISTRATIVERESOLUTION OF CERTAIN CONTRACTCLAIMS AGAINST THE STATE

A. IntroductionChapter 2260 of the Texas Government Code

provides an administrative remedy for some contractclaims against the State. It does not waive the State’ssovereign immunity from suit or liability in breach ofcontract cases. TEX. GOV’T CODE § 2260.006; IT-Davy,74 S.W.3d at 854. Chapter 2260 also does not divest theLegislature of its sole authority to waive immunity andgrant consent to sue. TEX. GOV’T CODE § 2260.007.Chapter 2260 can only take the contractor to the door ofthe Legislature, never to the courthouse. In other words,before enactment of Chapter 2260 there was a one stepprocess to the courthouse: the Legislature. Now, whereChapter 2260 applies, there are two steps: first, a

Chapter 2260 proceeding, and second, a petition to theLegislature.

B. When Does Chapter 2260 Apply?As set out in sections 2260.001 and 2260.002,

Chapter 2260 applies to:

1. a written contract;2. between a unit of state government (including

universities) and an independent, privatecontractor;7

3. for (a) goods, (b) services, or (c) constructionprojects under § 2166.001;

4. executed or awarded on or after August 30,1999.

Chapter 2260 does not apply to personal injury orwrongful death claims arising from a breach of contract.TEX. GOV’T CODE § 2260.002.

1. What are goods and services?Black's Law Dictionary defines “goods,” in the

context of “goods and services,” as “tangible or movablepersonal property other than money; esp., articles oftrade or items of merchandise. BLACK'S LAWDICTIONARY (7th ed. 1999). The Uniform CommercialCode adds:

‘Goods’ means all things, including speciallymanufactured goods, that are movable at thetime of identification to a contract for sale andfuture goods. The term includes the unbornyoung of animals, growing crops, and otheridentified things to be severed from realproperty . . . [but] does not include money inwhich the price is to be paid, the subject matterof foreign exchange transactions, documents,letters of credit, letter-of-credit rights,instruments, investment property, accounts,chattel paper, deposit accounts, or generalintangibles.

UCC § 2-102(a)(24).

“Service,” in the context of a contract for goods andservices, is defined by Black’s as “an intangiblecommodity in the form of human effort, such as labor,

5 The Court cited an analogous court of appeals decision inState of Texas/Operating Contractors ABS Emissions, Inc. v.Operating Contractors/State of Texas, 985 S.W.2d 646, 656 n.14 (Tex. App.–Austin 1999, pet. denied).

6 See also Denver City Indep. Sch. Dist. v. Moses , 51 S.W.3d386, 392 (Tex.App.–Amarillo 2001, no pet.)(object of suit isrestitution of some or all of the money paid pursuant to thecontract; state’s immunity is intact); Smith v. Lutz , No. 3-04-074-CV, 2004 WL 1270326 (Tex.App.–Austin 2004, no pet.h.)(declaratory judgment seeking to establish a contract’svalidity or to enforce performance under a contract requires awaiver of sovereign immunity.)

7 The unit of state government and the private contractordefined in this section are referred to as agency and contractor,respectively.






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skill, or advice.” BLACK'S LAW DICT IONARY (7th ed.1999).

Note that in Docket No. 303-03-3316.CC [Metric],described below, SOAH determined that a lease fallswithin the grant of jurisdiction under Chapter 2260.

2. If Chapter 2260 Does not ApplyChapter 2260 does not apply to all written state

contracts to which a state agency is a party. Universityof Texas Medical Branch at Galveston v. Harrison,2003 WL 21803314 (Tex.App.–Houston [14th Dist.]2003, pet. denied)(Chapter 2260 does not apply tocontracts donating bodies to UTMB).

When Chapter 2260 does not apply to a contractclaim against the State, the private party’s only option isto obtain legislative consent to sue under Chapter 107 ofthe Texas Civil Practice and Remedies Code. IT-Davy,74 S.W.3d at 857.

C. Negotiation of a ClaimSee Appendix, Chart: Procedural Timelines for

a Chapter 2260 ClaimThe parties must negotiate the claim before a

contested hearing takes place.

1. Notice and CounterclaimA contractor must provide written notice of a claim

for breach of contract to the agency no later than 180days after the breach. The notice must state the natureof the alleged breach, the amount of damages sought, andthe legal theory of recovery. Any counterclaim by theagency must be asserted in writing 90 days after thenotice of claim or, the agency waives its right tocounterclaim. TEX. GOV’T CODE § 2260.051.

2. Negotiations and MediationThe agency must negotiate with the contractor in an

effort to resolve the claim. It must begin negotiations bythe 60th day after the later of (1) the contract terminationdate; (2) the contract completion date; or (3) the date theclaim is received. However, the agency may delaynegotiations until after the 180th day after the breach.TEX. GOV’T CODE § 2260.052. Any agreement orsettlement of issues under this negotiation process mustbe reduced to writing and signed by both parties. TEX.GOV’T CODE § 2260.053.

Mediation under Chapter 2260 does not appear to bemandatory. Section .056 provides that “the parties mayagree to mediate a claim.” It also provides a deadline

before which mediation “may” occur8 and that “themediation shall be conducted” according to rulesdeveloped under section 2260.052. The act of mediationappears voluntary, but in the event mediation is chosen,the time and method are mandated.

3. How a Negotiated Claim Gets PaidIf a claim is resolved in accordance with these

negotiations, the agency may pay the claim only frommoney appropriated to it specifically for the payment ofcontract claims. If the agency does not have enoughpreviously appropriated money, “the balance of the claimmay be paid only from money appropriated by theLegislature for payment of the claim.” TEX. GOV’TCODE § 2260.054. Apparently, a contractor may be paidonly that amount determined by the Legislature, whetherdetermined before the dispute by usual appropriation orafter the dispute by petition.

4. When Negotiations are UnsuccessfulIf a claim is not entirely resolved by the 270th day

after the date of the notice of claim, the contractor“may” request a contested case hearing before the StateOffice of Administrative Hearings. The parties canextend this deadline by written agreement. It is unclearwhether Chapter 2260 prohibits a contractor fromrequesting a hearing, and the agency from referring theclaim to SOAH, before the 270th day. TEX. GOV’T CODE§ 2260.055.

D. The Contested Case Hearing1. The Request for Hearing.

A contractor unsatisfied with negotiations can file arequest for hearing with the agency. The request “muststate the factual and legal basis for the claim and requestthe claim be referred to [SOAH] for a contested casehearing.” On receipt of such a request, the agency mustrefer the claim to SOAH for hearing. Chapter 2260 doesnot give agencies a deadline for making this referral.TEX. GOV’T CODE § 2260.102.

If the contractor requests a hearing, Chapter 2260requires agencies to refer all claims to SOAH for ahearing. Even a dispute regarding whether thecontractor timely gave notice under Chapter 2260 doesnot relieve the agency of its duty to refer the case toSOAH once a request is made. In Hawkins v.Community Health Choice, Inc. , the Austin Court of

8 Before the 270th day after the notice of claim, and before theexpiration of any extension of time to request a hearing. TEX.GOV'T CODE § 2260.056.



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Appeals held that “a question regarding whether a partyhas in fact complied with the pre-suit notice requirementsof Chapter 2260 is a question of fact that, like the issuesunderlying the breach-of-contract claim, must be referredto SOAH.” 127 S.W.3d 322, 327 (Tex. App.–Austin2004, no pet.)

2. The Hearing and DecisionA SOAH administrative law judge conducts the

hearing in accordance with procedures adopted by thechief administrative law judge. TEX. GOV’T CODE §2260.104. SOAH’s procedures are found at 1 TexasAdministrative Code, Chapter 155. They can be beaccessed from either the Secretary of State’s orSOAH’s internet sites, www.sos.state.tx.us orwww.soah.state.tx.us. The Attorney General mustdefend the agency in the hearing and may settle a claim.TEX. GOV’T CODE § 2260.108. Within a reasonable timeafter the hearing, SOAH must issue a written decision,based on the pleadings filed and the evidence received,containing findings of fact, conclusions of law, and asummary of the evidence. The agency may not modifythe decision. TEX. GOV’T CODE § 2260.104.

3. Paying Costs at SOAHThe chief administrative law judge may set a fee for

recovering SOAH’s costs of holding a hearing under thisChapter. TEX. GOV’T CODE § 2260.103. After the caseis docketed at SOAH, each party must then pay a depositbased upon the amount of the claim or counterclaim.

SOAH may either assess the fee (deposit) againstthe losing party or apportion the fee against the parties inan equitable manner. TEX. GOV’T CODE § 2260.103.

E. If the Contractor’s Claim is Found Valid atSOAH

1. Maximum Damages and Pre-Judgment InterestAn “award of damages” occurs when SOAH finds

by a preponderance of the evidence that the contractorhas a valid claim.9 TEX. GOV’T CODE §§ 2260.105,2260.003.

The total amount of money recoverable on a claimmay not exceed the sum of (1) the amount due on thecontract price for work performed, and (2) the amount orfair market value of additional work requested by theState that was actually performed TEX. GOV’T CODE §2260.003. A contractor may not have consequential,exemplary, or unjust enrichment damages, attorney fees,or “home office overhead.” TEX. GOV’T CODE §

2260.003. Any pre-judgment interest award is governedby Chapter 304 of the Texas Finance Code and may notexceed six percent. TEX. GOV’T CODE § 2260.106.

2. How a Damages Award Gets PaidIf SOAH awards damages, a contractor can be paid

by two sources: the agency or the Legislature.Regardles of the source, actual payment is conditional, onthe claim amount and the agency’s available funds, or onthe Legislature’s will.

The agency must pay the claim if (1) the totalamount is less than $250,000 and (2) money to pay thatclaim has been appropriated to the agency for payingcontract claims. TEX. GOV’T CODE § 2260.105.

If the agency does not have enough appropriatedmoney to pay the entire claim, the balance may be paidonly from money appropriated by the Legislature to paythat particluar claim. TEX. GOV’T CODE § 2260.105.

If the amount awarded is $250,000 or more, SOAHmust submit a written report to the Legislature containingits findings and recommending the Legislatureappropriate money to pay the claim. TEX. GOV’T CODE§ 2260.1055. Whether the contractor is paid in thesecircumstances is purely the Legislature’s decision. TheTexas Supreme Court has explained that SOAH’s reportto the Legislature is simply a recommendation which theLegislature may accept or reject based on its own policyconcerns. Little-Tex, 39 S.W.3d at 599-600.

F. If the Contractor’s Claim is Not Found Validat SOAHChapter 2260 specifically provides that if SOAH

does not award any damages on a claim involving$250,000 or more, SOAH must submit a written reportto the Legislature containing its findings andrecommending that the Legislature (1) decline toappropriate money to pay the contractor and (2) denyconsent to suit under Chapter 107. TEX. GOV’T CODE §2260.1055.

While no one section of Chapter 2260 specificallyprescribes what must occur in the event the contractorloses on a claim involving less than $250,000, or in theevent the contractor loses on any amount of claim,sections 2260.005, 2260.006,2260 .007, and 2260.104,read together, indicate that the only recourse is to petitionthe Legislature for consent to sue the State in court.

1. No Judicial Review of the SOAH DecisionSection 2260.104 expressly provides that the

decision issued in a contested case hearing under thatchapter “may not be appealed.”

9 References claim include part of the claim.




6

The Texas Supreme Court in Little-Tex upheld theconstitutionality of this provision. Little-Tex argued thatChapter 2260 violates the separation-of-powers doctrinebecause the Legislature acts as an appellate body whenit reviews an administrative body’s decision withoutopportunity for judicial review. Little-Tex asserted thatresolution of contract claims by administrative hearingcan only be constitutional if the judiciary retains itsreview power. The Court rejected the argument, findingthat the Legislature does not act as an appellate body.The Legislature does not “review” the administrativejudge’s decision as an appellate court reviews a trialcourt’s decision, the Court reasoned, because theadministrative judge’s report to the Legislature is not anorder but simply a recommendation which the Legislaturemay accept or reject.

In determining which course to follow, theLegislature is faced with policy concerns notpresented to [SOAH]. Because theLegislature is not reviewing the [SOAH]decision on the merits, it is not exercising apower inherently or historically belonging to theJudiciary.

Little-Tex, 39 S.W.3d at 599-600.

2. Remedy: Petition the Legislature for Consent to SueSection 2260.005 provides that “the procedures

contained in this chapter are exclusive and requiredprerequisites to suit in accordance with Chapter 107, CivilPractic e and Remedies Code.” Chapter 107 governslegislative resolutions granting consent to sue.Compliance with Chapter 2260 is a necessary stepbefore a party can petition to sue the State. Little-Tex,39 S.W.3d at 597.

IV. CASES BEFORE SOAHThe following are summaries of a sample of

contract cases that have been filed with SOAH.

A. Decided Cases1. DalMac Constr. Co. v. Tex. A&M Univ.; No.

711-99-1589In 1993, Texas A&M contracted with DalMac

Construction Company to build A&M a nearly$30,000,000 recreational sports building and natatorium.DalMac’s completion of the facility was delayed inviolation of the contract, and additional costs wereincurred during construction which were not reimbursedby A&M. DalMac claimed that A&M breached thecontract by causing the delays and additional costs.

A&M maintained that the delays and additional costsresulted from DalMac’s poor contract performance.

DalMac obtained legislative permission to have itscontract dispute resolved through the then newly createdadministrative process at SOAH.

DalMac claimed its delays and additional costsresulted from A&M’s defective specifications. DalMacalso alleged that A&M acted in bad faith by knowinglygiving defective specifications, denying requests for moretime, and failing to pay claims timely.

A&M claimed DalMac’s additional cost and delaysresulted from DalMac’s underbidding and failing toproperly manage the project. A&M counterclaimed thatDalMac’s poor management constituted a breach.

SOAH found DalMac was entitled to recover only$46,150 for additional costs incurred as a result ofA&M’s changes to the specifications. SOAH also foundDalMac was entitled to four additional days of contracttime, reducing by $4,000 the amount to which A&Mcould be entitled to under the contract for DalMac’sdelay in completing the project. SOAH found that A&Mdid not breach the contract and was entitled to $182,000in liquidated damages for DalMac’s delay.

SOAH also held that DalMac was not entitled tointerest on its claims because neither section 2260.106nor section 28.001(4) of the Government Code applied,and Senate Concurrent Resolution 24 did not expresslyprovide for the recovery of interest.

SOAH assessed 65% of its costs to DalMac and35% to A&M.

2. Next Generation Graphics, Inc. v. Tex. LotteryComm’n; No. 362-02-0319.CCThe Texas Lottery Commission contracted with

Next Generation Graphics to print and deliver two millionbrochures for TLC. The contract required that thebrochures be delivered by August 31, 2000. On August1, 2000, NGG notified TLC that NGG had misquoted itsbid by $21,000 because it overlooked a contractspecification. TLC responded that NGG was required toproduce the brochures as specified and priced by thecontract and that TLC was unable to pay additionalcompensation. NGG replied it would comply with thecontract despite incurring a loss.

In September 2000, NGG billed TLC forapproximately $16,000 over the contract amount forovertime and additional brochure layout work. WhenTLC did not pay the additional invoice, NGG gave TLCnotice of its claim for breach of contract. In September2001, it requested its claim be referred to SOAH

SOAH determined that it had jurisdiction to hear thedispute involving the written contract between TLC and




7

NGG and that the issue before it was whether the writtencontract, with written amendments, provided for NGG’sadditional overtime and layout costs.

SOAH first found NGG failed to establish thecontract was orally amended to provide for its additionallayout costs. Next, SOAH found that the writtencontract did not authorize overtime payments, noting thatTLC had reiterated its expectation that NGG comply withthe contract’s August 31, 2000, deadline at the contrac tprice.

NGG’s claim for attorney fees was denied. SOAHassigned all hearing costs to TLC.

3. Lanier Worldwide, Inc. v. The University ofTexas at Arlington, No. 714-03-2115.CCIn 1999, Lanier agreed to provide certain copying

services to UT Arlington in exchange for monthly leasepayments over a 60 month period. In October 2001, UTArlington gave notice of cancelling the lease. In April2002, Lanier submitted a notice of claim for breach ofcontract. After a mandatory negotiation period, Lanierrequested a referral to SOAH, and the case wasdocketed there in February 2003.

Lanier sought approximately $500,000 in damagesfor the early termination of the lease. UT Arlingtonmaintained that the terms of the lease permittedcancellation on each 12 month anniversary of the leasewithout cause and regardless, there were grounds ofcancellation for cause because the copiers failed to meetminimum production requirements. UT Arlingtonc ounterclaimed for approximately $500,000 in damagesresulting from the poor performance of the copiers.

After a hearing on the merits, the ALJ ruled thatneither party was entitled to recover damages. Theparties were ordered to split SOAH’s costs.

4. Metric Place, Inc. v. Tex. Bldg. & ProcurementComm’n, No. 303-02-3316.CC In July 2000, Metric Place, Inc. and the Texas

Building and Procurement Commission entered into alease agreement to provide office space for theDepartment of Human Services. In April 2001, TBPCterminated the lease, claiming Metric failed to correctunacceptable environmental conditions found on theproperty as required by the lease.

Although TBPC disputed SOAH’s jurisdiction overa lease, TBPC referred Metric’s claim to SOAH in June,2002.

SOAH retained jurisdiction and issued a decisionawarding Metric $249,999, including pre-judgmentinterest, and allocating all costs to TBPC.

After the award order became final, TBPC notifiedMetric that pursuant to section 2260.105(b) it had nomoney appropriated for payment of the lease that wasthe subject of the claim. Therefore, the award can onlybe paid from money appropriated by the Legislature inthe future.

B. Pending Case1. Hartford Fire Ins. Co. v. Univ. of Houston ,

Docket No. 730-01-2374.WIn 1993, the University of Houston contracted with

David E. Harvey Builders to construct the university'sAlumni Athletic Facility. Hartford Fire InsuranceCompany provided a liability policy for the project, withboth UH and Harvey as insureds. When the facilityflooring proved unuseable, UH sued Harvey for damages(Univ. of Houston Sys. v. David E. Harvey Builders,Inc., No. 98-38329, Harris County District Court).Hartford at first denied Harvey coverage, but ultimatelyprovided a defense and indemnification. When theparties settled, Hartford paid the full amount allocated toHarvey.

About May 2000, Hartford demanded UH refund it$250,000 of the settlement amount as a deductible. InFebruary 2001, Hartford requested its breach of contractclaim be referred to SOAH. The hearing on the meritswas held in October 2003 and the ALJ is expected toissue a report and recommendation in July 2004.

C. Cases Resolved Without Decision1. O'Brien Kreitzberg, Inc. v. Tex. Tech Univ.; No.

733-02-0676.CIn 1998, O'Brien Kreitzberg, Inc. and Texas Tech

University contracted for construction management andconsulting services for Texas Tech's United Spirit Arenaproject. In December 2000, O'Brien gave Texas Technotice of its claim for unpaid invoice amounts. InNovember 2001, O'Brien filed a request to docket thecase with SOAH and sought to recover approximately$560,000 plus interest.

Texas Tech claimed O'Brien's invoices exceededthe total contract amount. Initially, O'Brien claimed oralmodifications had increased the contract amount. Athearing, O'Brien claimed the total written contrac tamount was greater than the invoice amount. OnO'Brien's first argument, Texas Tech challengedSOAH's jurisdiction on the basis that only a writtencontract could be the subject of a 2260 hearing, and thatalleged oral modifications could not be considered.SOAH denied this challenge, deciding it could not rulewithout seeing the "evidence as a whole." On O'Brien'strial argument, Texas Tech challenged SOAH's


8

jurisdiction on the ground that, because there was nomeeting of the minds in forming the contract, there wasno contract under Texas law and no jurisdiction underChapter 2260.

After hearing the case on the merits and beforeissuing any decision, SOAH ordered the parties tomediation, which resulted in a settlement of all issues.

2. Assoc. Prof’l Counselors, PLLC v. Tex. Dep’t ofProtect ive & Regulatory Svcs. ; N o .530-02-3373.CCThe Texas Department of Protective and

Regulatory Services entered into contracts for serviceswith Associated Professional Counselors . In August2002, DPRS terminated the contracts after discoveringAPC’s owner allegedly falsified information submitted toDPRS regarding his criminal history. In November 2001,APC gave DPRS notice of its claim for breach ofcontract alleging wrongful termination. After APCrequested submission to SOAH, the case was docketedthere in June 2002.

The parties subsequently reached a settlementagreement.

3. Keane, Inc. v. Tex. Lottery Comm’n; No.362-02-3614.CCThe Texas Lottery Commission contracted with

Keane, Inc. to create and build a computer system forTLC’s Charitable Bingo Division. Keane gave TLCnotice of a claim for breach of contract in August 2001,claiming TLC breached by failing to provide requiredresources and delaying acceptance of deliverables. TLCsubmitted a counter-claim. The case was docketed atSOAH in July 2002. The parties reached a settlementagreement.

4. SCT Software & Resource Management Corp.vs . Texas Southern Univers i ty ; No .717-03-1949.CCIn 1997 SCT Software & Resource Management

Corp. and Texas Southern University entered into anagreement by which SCT would implement and supportcertain information systems environments for TSU. InJune 2002, TSU notified SCT that SCT had breached theagreement and TSU would terminate it. The next month,SCT submitted to TSU a notice of claim for breach ofcontract. The case was referred to SOAH in January2003.

TSU claimed SCT failed to (1) implement a legallymandated reporting system, (2) ensure informationsecurity; (3) provide adequate internet performance

needed to support critical operations; and (4) ensureadequate network performance.

SCT denied any breach and claimed TSU breachedby wrongfully terminating without allowing SCT time tocure and by failing to pay for services performed. SCTclaimed approximately $3,000,000 in damages.

The parties settled the dispute prior to the hearing onthe merits.

V. CERTAIN TXDOT CLAIMSChapter 2260 does not apply to contracts subject to

section 201.112 of the Transportation Code. TEX.GOV’T CODE § 2260.001(1).

Section 201.112, enacted in 1997, provides a twostep process for administratively resolving certaincontract claims made against the Texas Department ofTransportation. State v. Fidelity and Deposit Companyof Maryland, 127 S.W.3d 339, 347 (Tex.App.–Austin2004, pet. filed)(The legislature intended section 201.112to apply only to the explicitly named sections andchapters in the statute). If a claim is not resolvedinformally, the contractor may request an administrativehearing. TEX. TRANS. CODE § 201.112(b). This processis the exclusive remedy for a contractor’s claims againstTxDOT. Texas Dep’t of Transp. v. Jones Bros. Dirt& Paving Contractors, Inc. , 92 S.W.3d 477, 479 (Tex.2002).

Note two distinctions between section 201.112 andChapter 2260. First, chapter 2001 of the GovernmentCode applies to section 201.112 administrative hearings.Chapter 2001 does not apply to chapter 2260 hearings.Second, a party may appeal a decision reached in asection 201.112 administrative hearing. The substantialevidence rule applies to the judicial proceeding. There isno judicial review of a chapter 2260 decision.

VI. WAIVERS OF SOVEREIGN IMMUNITYState entities may, in limited circumstances, waive

immunity from suit. Moreover, as discussed, theLegislature may waive immunity from suit, clearly andunambiguously, by statute.

A. A State Entity Waives Immunity by InitiatingJudicial Action.The governmental entity waives its immunity when

it initiates judicial action. In State v. Fidelity andDeposit Company of Maryland, the Texas Departmentof Transportation initiated suit against the sureties on theunderlying bond. The Third Court of Appeals found thatby initiating suit, TxDOT had waived immunity tocounterclaims that relate to the core factual and legalissues in the original suit. 127 S.W.3d at 345. In Reata





9

Construction Corp. v. City of Dallas, the TexasSupreme Court found that the city waived its immunity byintervening in a suit to assert claims for affirmative relief.Reata Construction Corp. v. City of Dallas, 2004 WL726906, 47 Tex. Sup. Ct. J. 408 (Tex. 2004, pet. filed).

The governmental entity waives its immunity fromhaving attorney’s fees assessed against it when it takescertain judicial action. The Texas Supreme Courtdetermined that the state entity could be liable for thedefendant’s attorney’s fees because the state entityinitiated suit under the Texas Fair Housing Act. Kinnearv. Texas Comm’n on Human Rights, 14 S.W.3d 299,300 (Tex. 2000). Similarly, the Third Court of Appealsfound that when the governmental entity, here a providerof health care benefits to employees of politicalsubdivisions, brings a UDJA suit as plaintiff, the entitywaives immunity from liability as to the defendant’sattorney’s fees. TML Intergovernmental EmployeeBenefits Pool v. Prudential Ins. Co. of America, 2004WL 1066344 (Tex.App.–Austin 2004, no pet. h.).

B. The Settlement Agreement from a Suit inWhich Immunity Has Been Waived IsEnforceable. In Texas A&M Univ.-Kingsville v. Lawson, 87

S.W.3d 518 (Tex. 2002), the Texas Supreme Court heldthat immunity from suit is waived when a governmentalentity enters into a settlement agreement. Id. Lawsonbrought suit against Texas A&M Kingsville under theWhistleblower Act. The Legislature has waivedsovereign immunity from suit and liability for violations ofthe Whistleblower Act. Id. At 521. Texas A&Msettled the suit with Lawson.

Lawson subsequently brought suit against TexasA&M asserting that they had breached the settlementagreement. The Supreme Court then noted that theLegislature had waived immunity from suit for violationsof the Whistleblower Act. Id.

Lawson was therefore entitled to sue the universityfor violating the [Whistleblower] statute and if heprevailed, to hold the university liable. We agreewith the trial court that when a governmental entityis exposed to suit because of waiver from immunity,it cannot nullify that waiver by settling the claimwith an agreement on which it cannot be sued. Thegovernment cannot recover waived immunity bysettling without defeating the purpose of the waiverin the first place.

Id.

The court pointed out that there were sound policyreasons for finding that Lawson could bring suit forbreach of the settlement agreement. No plaintiff wouldsettle with a governmental entity, especially if thecontract was executory at the time of its signing, becausethe government could then breach the contract and relyupon immunity from suit to defeat any subsequent claim.Id.; see also IT-Davy, 74 S.W.3d 862 (Hecht, J.concurring) (a governmental agency should not be ableto utilize sovereign immunity as a way to denycontractors amounts they were rightfully owed).Additionally, allowing a governmental entity to defeatLawson’s suit for breach of the settlement agreementwould violate the intent of the Legislature in waivingimmunity with the underlying claim. Lawson, 87 S.W.3dat 521-22.

C. The Legislature May Waive Immunity in Clearand Unambiguous Statutes.Because the Legislature may waive immunity from

suit, parties seeking to maintain suit against governmentalentities have relied on various statutes as the clear andunambiguous waiver of immunity. The outcome of theseattempts has been unpredictable.

1. Section 89.004, Local Government CodeSection 89.004 was and is a presentment statute.

The Texas Supreme Court determined that, in itsprevious version, the“statutory language does not clearlyand unambiguously waive immunity from suit.” TravisCounty v. Pelzel & Associates, Inc. , 77 S.W.3d 246,249 (Tex. 2002). The Court determined that the purposeof the statute was to “notify the commissioners court ofa claim and afford an opportunity to investigate and settlethe claim.” Id. Moreover, the Court noted that, at onetime, the statute contained “sue and be sued” language,“arguably showing intent to waive sovereign immunity forsuits against counties.” Id. Because this language hadlong before been deleted, sec tion 89.004 does not waiveimmunity. Id. at 250.

Subsequent to the Pelzel decision, the Legislatureamended section 89.004 and added sections 89.0041 and262.007 to the Local Government Code. Senate Bill1017, 78th Regular Session. New section 262.007specifically provides that “a county that is a party to awritten contract for engineering, architectural, orconstruction services or for goods related to engineering,architectural, or construction services may sue or besued.” TEX. LOC. GOV’T CODE § 262.007(a).








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2. Section 51.075, Local Government CodeSection 51.075 of the Local Government Code

provides that a municipality may plead or be impleaded inany court. The appellate courts are divided as towhether this language is a clear and unambiguous waiverof immunity from suit for breach of contract.

The Waco and Dallas Courts of Appeals haveconcluded that the “plead and be impleaded” languagedoes not waive immunity. City of Mexia v. Tooke, 115S.W.3d 618, 623 (Tex.App.–Waco 2003, pet.granted)(contract for curbside collection of brush andleaves); City of Carrollton v. McMahon Contracting,L.P., 134 S.W.3d 925, (Tex.App–Dallas 2004, no pet.h.)(contract for street repairs).

On the other hand, the Fort Worth, El Paso and FirstDistrict in Houston Courts of Appeals have found awaiver of immunity in section 51.075 in conjunction withcity charters permitting the city to “sue and be sued.”Knowles v. Granbury, 953 S.W.2d 19, 23(Tex.App.–Fort Worth 1997, pet denied)(contract forairplane storage); Goerlitz v. City of Midland, 101S.W.3d 573,577 (Tex.App.–El Paso 2003, pet.filed)(contract to chip wood); United Water Services,Inc. v. City of Houston, 2004 WL 909178(Tex.App.–Houston [1st Dist.] 2004, pet. filed)(contractto operate and maintain water purification plant); City ofHouston v. Kenneth S. Jones, 2004 WL 1472228(Tex.App.–Houston [1st Dist.] 2004, no pet. h.)(settlement agreement).

The Fourteenth Court of Appeals in Houston hasdetermined that section 51.075, by itself , waives thecity’s immunity from suit. City of Houston v. ClearChannel Outdoor, Inc. , 2004 WL 63561(Tex.App.–Houston [14th Dist.] 2004, pet. filed)(contractfor purchase of a billboard).

3. Education CodeSection 11.151 of the Education Code provides that

an independent school district may sue and be sued. Thislanguage does not clearly and unambiguously waiveimmunity from suit for breach of contract claims againstindependent school districts. Satterfield & PontikesConstruction, Inc. v. Irving Indep. Sch. Dist., 123S.W.3d 63, 68 (Tex.App.–Dallas 2004, pet. filed).Compare to Alamo Cmty. Coll. Dist. v. ObayashiCorp., 980 S.W.2d 745, 748 (Tex.App.–San Antonio1998, pet. denied), followed by Alamo Cmty. Coll. Dist.v. Browning Construction Co., 131 S.W.3d 146, 151(Tex.App.–San Antonio 2004, pet. filed)(junior collegenot immune from suit over breach of constructioncontract).

Section 135.55 of the Education Code specifies thatTexas State Technical College may sue and be sued.The Waco Court of Appeals concluded that, in the “sueand be sued” language, the Legislature granted consentfor TSTC to be sued. Bates v. Texas State TechnicalCollege, 983 S.W.2d 821, 827 (Tex.App.–Waco 1999,pet denied). This case involved breach of employmentcontract claims; TSTC had won on all claims bysummary judgment in the trial court and the court ofappeals affirmed the grant of summary judgment.

In arriving at its holding on the “sue and be sued”language, the Bates court relied on Fazekas v. Univ. ofHouston, 565 S.W.2d 299, 302 (Tex.Civ.App.–Houston[1st Dist.] 1978, writ ref’d n.r.e.). In Fazekas, the courtfound the “sue and be sued” language in section 111.33of the Education Code waived immunity. Subsequent tothe decision in Fazekas, section 111.33 was amended.The section now reads:

The board [of regents] now has the power to sueand be sued in the name of the University ofHouston. Venue shall be in either Harris County orTravis County. The University shall be impleadedby service of citation on the president or any of itsvice presidents. Nothing in this section shall beconstrued as granting legislative consent for suitsagainst the board, the University of HoustonSystem, or its component institutions and entitiesexcept as authorized by law.

Accordingly, there is now no waiver of immunity fromsuit for the University of Houston. Freedman v. TheUniversity of Houston, 110 S.W.3d 504, 508(Tex.App.–Houston [1st Dist] 2003, no pet.).

4. Section 281.056(a), Health & Safety CodeSection 281.056(a) of the Health & Safety Code, the

enabling legislation for the Tarrant County HospitalDistrict, provides that the district may sue and be sued.The “sue and be sued” language waives the hospitaldistrict’s immunity from suit for breach of contractclaims. Tarrant County Hosp. Dist. v. Bates, 52S.W.3d 434, 448 (Tex.App.–Fort Worth 2001, no pet.).

5. Section 58.098, Water CodeSection 58.098 of the Water Code specifies that

irrigation districts may sue and be sued. The “sue and besued” language provides “clear and unambiguousconsent” for the irrigation district to be sued. EngelmanIrrigation Dist. v. Shields Bros., Inc. , 960 S.W.2d 343,348 (Tex.App.–Corpus Christi 1998, pet. denied).


















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APPENDIXChart: Procedural Timelines for a Chapter 2260 Claim


13

STEP 2AAgency must assert anycounterclaim in writing

or waive right

§ 2260.051(d)

Texas Government Code § 2260Procedural Timelines in a Breach of Contract Claim against the State

Ifcounterclaim

Due: 90 Daysfrom Step 2

STEP 1The event giving rise to the claim

(breach) occurs

§ 2260.051(b)If agency receives noticeafter contract terminated

and after completion date...

STEP 2*Contractor must provide written

notice of the claim to agency*

§ 2260.051(b)

Due: 180 Daysfrom Step 1

*"Agency" and "contractor" mean the unit of state government and the private contractor to which Chapter 2260 applies.

If the parties choose to mediate...

STEP 3Agency must begin negotiations

with contractor

§ 2260.052(a),(b)

Due 60 Days from the later of:(1) contract termination; (2) contract completion

date; or (3) receipt of claim

STEP 5If claim is not entirely resolved,

contractor may request SOAH hearing

§ 2260.055

270 Days from notice of claimunless extended by written agreement

If the claim is not entirely resolved...

STEP 4The parties may mediate

§ 2260.056

Before 270 Days from notice of claimor before the agreed deadline requesting hearing

EXCEPT THATAgency may delayuntil after 180thday from Step 1

contract dispute resolution sovereign immunity … · contract dispute resolution: sovereign...

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