Rtt Associates, Inc. v. Georgia Department of Labor ( 2015 )

THIRD DIVISION
ELLINGTON, P. J.,
DILLARD and MCFADDEN, JJ.
NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
http://www.gaappeals.us/rules/
July 14, 2015
In the Court of Appeals of Georgia
A15A0792. RTT ASSOCIATES, INC. v. GEORGIA JE-037
DEPARTMENT OF LABOR.
ELLINGTON, Presiding Judge.
RTT Associates, Inc. brought this action in the Superior Court of Fulton
County against the Georgia Department of Labor for breach of contract and breach
of the implied covenants of good faith and fair dealing. After a hearing, the trial court
determined that RTT failed to show that the State had waived sovereign immunity
and granted the Department’s motion for summary judgment on that basis. RTT
challenges that ruling on appeal, along with the denial of its motion for judgment on
the pleadings. For the reasons explained below, we affirm the trial court’s denial of
RTT’s motion for judgment on the pleadings and reverse the grant of summary
judgment in the Department’s favor.
1. RTT contends that its claims constitute an action ex contractu for the breach
of a written contract and, therefore, that the trial court erred in ruling that the State
is entitled to sovereign immunity. It is undisputed that the parties entered into a
written contract for RTT to develop a software program for the Department and that
the Department refused to pay RTT the full contract price. In its complaint, RTT
alleged, inter alia, that the Department breached the contract by refusing to
compensate RTT for work performed under the contract and by purporting to
terminate the contract for cause without giving RTT an opportunity to cure its default.
In granting the Department’s motion for summary judgment on the basis of sovereign
immunity, the trial court noted that the parties’ written contract provided that it would
terminate on a specified date, which had passed. The trial court held that, as a result,
RTT could only maintain an action for breach of that written contract by producing
a written extension or amendment that contained all of the terms required to
constitute a valid contract, including consideration for extending or amending the
contract and the parties’ mutual assent to any such changes. The trial court
determined that RTT had failed to establish any written extension or amendment and
ruled that RTT’s claim was therefore not one for breach of a written contract for
which the State had waived its sovereign immunity. RTT contends that, at a
2
minimum, a material question of fact exists regarding whether the parties agreed to
extend the written contract and that the trial court therefore erred in finding as a
matter of law that the Department is immune from suit. We agree.
On the subject of sovereign immunity, the Georgia Constitution of 1983
provides that “sovereign immunity extends to the State and all of its departments and
agencies[,]” except as otherwise provided in Art. 1, § 2, ¶ 9 or unless the General
Assembly in an Act “specifically provides that sovereign immunity is thereby waived
and the extent of such waiver.” Ga. Const. 1983, Art. 1, § 2, ¶ 9 (e). “[S]overeign
immunity of a State agency is not an affirmative defense, going to the merits of the
case; instead it raises the issue of the trial court’s subject matter jurisdiction to try the
case.” (Punctuation and footnotes omitted.) Dept. of Transp. v. Kovalcik, 328 Ga.
App. 185, 189-190 (1) (b) (761 SE2d 584) (2014). “Jurisdiction [to afford the relief
sought] either exists or does not exist without regard to the merits of the case.”
(Citations and punctuation omitted.) Dept. of Transp. v. Dupree, 256 Ga. App. 668,
671 (1) (570 SE2d 1) (2002). Further, because “immunity from suit is a privilege that
is subject to waiver by the State,” rather than “an affirmative defense that must be
established by the party seeking its protection,” the claimant, as the party seeking to
benefit from the waiver, has the burden of establishing the waiver. (Punctuation and
3
footnotes omitted.) Tift County Sch. Dist. v. Martinez, - Ga. App. - (1) (Case No.
A14A1988, decided March 20, 2015).
When a court either has or lacks subject matter jurisdiction, regardless of any
conflict in the facts that go to the merits of the case, the trial court should determine
whether it has jurisdiction to afford the relief sought as a threshold issue at the outset.
Dept. of Transp. v. Dupree, 256 Ga. App. at 671-672 (1). Sometimes, however, the
determination of subject matter jurisdiction and waiver of sovereign immunity is so
factually intertwined with determination of the merits of the case that the trial court
may defer final determination of such issues until after the presentation of all the
evidence at trial. Id. at 672 (1) (a).
We review de novo a trial court’s ruling on the issue of whether it lacks subject
matter jurisdiction under the doctrine of sovereign immunity, which is a question of
law, but factual findings by the trial court in support of its legal decision are sustained
if there is evidence authorizing them. Dept. of Transp. v. Kovalcik, 328 Ga. App. at
186; Dept. of Corrections v. James, 312 Ga. App. 190, 193 (718 SE2d 55) (2011).
This case concerns the constitutional provision that the State’s defense of
sovereign immunity is waived “as to any action ex contractu for the breach of any
4
written contract[.]” Ga. Const. 1983, Art. 1, § 2, ¶ 9 (c).1 As a result, “to overcome the
Department’s assertion of sovereign immunity, [RTT] has the burden of showing that
the contract sought to be enforced is in writing and contains all of the terms necessary
to constitute a valid contract.” (Citations omitted.) Dept. of Community Health v.
Data Inquiry, LLC, 313 Ga. App. 683, 685 (1) (722 SE2d 403) (2012).
The record shows the following undisputed facts. The Department hired RTT
in March 2012 to develop software for the Department to use in implementing the
Work Opportunity Tax Credit program.2 RTT and the Department entered into a
written contract, State of Georgia State Entity Standard Contract Form, Contract No.
GL12005-2717, which was signed on behalf of both parties. The contract provides
for a maximum payment by the Department to RTT of $247,422.68 and specified a
“Date of Completion” of June 30, 2012. The contract further provides that it “shall
begin and end on the dates specified in the State Entity Standard Contract Form
unless terminated earlier in accordance with the applicable terms and conditions.”
1
OCGA § 50-21-1 (a) restates this constitutional waiver of sovereign immunity
and provides: “The defense of sovereign immunity is waived as to any action ex
contractu for the breach of any written contract[.]”
2
The Work Opportunity Tax Credit (“WOTC”) program, which the
Department coordinates, provides employers with financial incentives, in the form of
reduced federal income tax liability, when hiring workers from targeted groups.
5
The contract provides for immediate termination under certain circumstances,
termination upon written notice under certain circumstances, and termination for
cause in the case of certain defaults by RTT. In the event of a default by RTT, the
contract requires the Department to give RTT written notice of the default and specify
a time period in which it may remedy the default. The contract also provides that it
“may be amended in writing from time to time by mutual consent of the parties.”
The work to be performed by RTT, and corresponding payment by the
Department, was divided into four “Milestones.” On March 8, 2012, the Department
submitted a partial payment of $82,474.23 to RTT. RTT failed to deliver fully
functional WOTC software by June 30, 2012 , the “Date of Completion” specified in
Contract No. GL12005-2717.
During the latter half of 2012 and continuing into early 2013, the Department
continued to work with RTT in an effort to allow RTT to deliver the WOTC software.
The Department received multiple editions of the WOTC software from RTT, tested
each new edition of the software, and determined that it was not fully functional. In
a letter to RTT dated April 3, 2013, the Department notified RTT that it was in breach
and noncompliance of Contract No. GL12005-2717 and that the contract was thereby
“terminated immediately.” In the letter, the Department stated that the contract had
6
been “extended multiple times [after] June 30, 2012[,] to allow [RTT] to complete
and deliver satisfactory WOTC Processing System to [the Department].” On the same
date, in a letter to Evergreen National Indemnity Company, the Department notified
the bond company that Contract No. GL12005-2717 had been “extended multiple
times [after] June 30, 2012[,] to allow completion and delivery of a Contract
compliant WOTC processing System to [the Department]” and that, as of the date of
the letter, “the Contract terms have not been met by RTT.” In that letter, the
Department notified the bond company of the costs it expected to incur to bring an
alternative product on-line. According to a Department employee, RTT’s software
was never fully functional and did not meet the requirements of the contract and, at
a meeting on May 7, 2013, the Department informed RTT of that fact, that the
Department had decided not to use RTT’s software, and that the contract was
terminated.
On July 10, 2013, RTT filed its complaint for breach of contract and breach of
the implied covenants of good faith and fair dealing. The Department asserted a
counterclaim for breach of contract, alleging that RTT breached the contract by
failing to complete and deliver the work required under Milestone 2, for which the
7
Department had issued advance payment, and by failing to timely deliver fully
functional software that met the terms of the contract.
In granting the Department’s motion for summary judgment, the trial court
determined that RTT could only show that its claims constitute an action ex contractu
for the breach of a written contract, and thereby satisfy its burden of proving a waiver
of sovereign immunity, “by establishing a written extension or amendment to the
Contract” between the parties, Contract No. GL12005-2717, under which RTT agreed
to deliver the WOTC software by June 30, 2012. The court found that RTT failed to
do so and that, “[a]t best, the record evidences [the Department’s] willingness to not
hold [RTT] to the delivery deadline contained in the written Contract[.]” On appeal,
the Department defends the trial court’s analysis, arguing that the written contract
expired by its terms on June 30, 2012; neither party was bound by the terms of the
contract after that date; and any work RTT performed after that date was not under
any written contract. As the Department would have it, RTT “must logically be
proceeding under a theory of implied contract for the period after June 30, 2012, and
therefore the waiver of sovereign immunity contained in OCGA § 50-21-1[3] is
inapplicable.” (emphasis supplied).
3
See footnote 1, supra.
8
The Department’s position lacks merit. First, in some circumstances, certain
obligations under a contract may survive the end of the contract. Nebo Ventures, LLC
v. NovaPro Risk Solutions, L.P., 324 Ga. App. 836, 844 (4) (752 SE2d 18) (2013);
McDevitt & Street Co. v. K-C Air Conditioning Svc., 203 Ga. App. 640, 643 (2) (418
SE2d 87) (1992).4 Therefore, even if the passing of the specified “date of completion”
meant that the written contract had expired, it does not follow that neither party was
bound by any of the terms of the contract after that date.
In addition, “a written contract may be modified by mutual consent of the
parties, which need not be expressed in words, in writing or signed, but the parties
must manifest their intent to modify the original contract.” Ryder Truck Lines v. Scott,
129 Ga. App. 871, 873-874 (4) (201 SE2d 672) (1973). See also Medical Doctor
Associates, Inc. v. Lab-Quip Co., 201 Ga. App. 880, 882 (1) (b) (412 SE2d 625)
(1991) (accord); Dan Gurney Indus. v. Southeastern Wheels, 168 Ga. App. 504, 505
(1) (308 SE2d 637) (1983) (accord). Most pertinently, a provision that limits the time
4
In the contract at issue in this case, for example, RTT agreed not to
disseminate any confidential information it used in the course of performing the
contract, an obligation that expressly survived termination of the contract, and the
Department agreed not to reverse engineer RTT’s product or create derivative works
based thereon, an obligation that inherently survived the delivery of the completed
custom software.
9
for performance may be waived, and “a subsequent offer to fulfill the contract and
urging a compliance with the contract by the party of the other part, instead of
treating the contract as at an end, amounts to a waiver.” (Citation and punctuation
omitted.) Seay v. Malone, 219 Ga. 149, 151 (1) (132 SE2d 261) (1963). See also
Bolton v. Barber, 233 Ga. 646, 648 (2) (212 SE2d 766) (1975) (“[I]f time is of the
essence of a contract, it may be waived; and . . . subsequent conduct of the obligor
may have that effect.”) (citations omitted).
Furthermore, a provision in a written contract that it may only be modified in
writing may be waived, and waiver of such a written modification requirement may
be established through the course of conduct of the parties. Handex of Florida, Inc.
v. Chatham County, 268 Ga. App. 285, 288 (1) (602 SE2d 660) (2004); Caribbean
Lumber Co. v. Anderson, 205 Ga. App. 415, 417, n. 1 (2) (422 SE2d 267) (1992).
Generally, whether there has been a mutual departure from the terms of a contract,
with a resulting modification of a contract, is generally a question for the jury. Lynx
Real Estate, Inc. v. F. A. L. Investments, LLC, 312 Ga. App. 324, 327 (1) (718 SE2d
552) (2011); Handex of Florida, Inc. v. Chatham County, 268 Ga. App. at 288;
Norair Engineering Corp. v. Porter Trucking Co., 163 Ga. App. 780, 784 (295 SE2d
155) (1982).
10
In this case, the Department admits that it signed a legally valid, written
contract, so the existence of a written contract vel non is not at issue.5 And the record
contains some evidence, recounted above, that, through their course of conduct, the
Department and RTT waived or extended the required date of completion6 and,
likewise, waived the provision that the contract could be amended (only) in writing.
The specific allegations of RTT’s complaint, viewed in context of the documents of
record, show that RTT is seeking recovery under a written contract, as (allegedly)
amended. The Department’s position that it did not intend to extend the time for
RTT’s performance that was specified in the written contract at issue in this case, at
5
For this reason, Bd. of Regents of Univ. Sys. of Ga. v. Barnes, 322 Ga. App.
47 (743 SE2d 609) (2013), cited by the trial court, is inapposite, as it concerns a case
where there was no written contract in the form of a single document. 322 Ga. App.
at 50 (2) (for purposes of a waiver of sovereign immunity under Ga. Const. 1983, Art.
1, § 2, ¶ 9 (c), and OCGA § 50-21-1 (a), no written contract was established by an
unauthenticated partial copy of the student code of conduct, which was not signed by
either party, and a counseling center consent form, which was signed only by the
plaintiff). See also Dept. of Community Health v. Data Inquiry, LLC, 313 Ga. App.
at 686-687 (1) (b) (The claimant failed to show a waiver of sovereign immunity for
its breach of contract claim where it failed to show that anyone ever executed the
proposed written agreement on behalf of the State or the department and failed to
show that the department paid the retainer as required in the written contract.).
6
This is consistent with the trial court’s acknowledgment that “the record
evidences [the Department’s] willingness to not hold [RTT] to the delivery deadline
contained in the written Contract[.]”
11
most, points to a disputed issue of material fact, and the question whether there has
been a mutual departure from the terms of the written contract is a question for the
jury.7 We conclude that the trial court erred in ruling that RTT’s claims, as a matter
of law, do not constitute an action ex contractu for breach of a written contract.
Consequently, the trial court erred in granting the Department’s motion for summary
judgment on the basis of sovereign immunity.
2. RTT contends that the record establishes as a matter of law that the
Department failed to send RTT written notice of its default under the contract and an
opportunity to cure the default and, therefore, that the Department did not satisfy the
conditions precedent in the termination-for-cause provision of the contract. As a
result, RTT contends, the trial court erred in denying its motion for judgment on the
pleadings on its breach of contract claims.
7
For example, the Department raises an issue regarding the authority of its
employee to modify and extend the contract, saying, “one employee’s characterization
of the contract as extended [past June 30, 2012,] and terminated in April 2013 does
not make it so. . . . [T]he Department is not bound by the unauthorized acts of its
employees.” Whether its employees had or lacked authority to modify the contract is
a fact issue. See Caribbean Lumber Co. v. Anderson, 205 Ga. App. at 417-418 (2)
(Because there were issues of material fact concerning the scope of an engineer’s
actual and/or apparent authority to waive or change certain contractual provisions
and, if he had authority to waive or change certain contractual provisions, which ones
were waived by him, the trial court erred in granting the other party’s motion for
summary judgment.).
12
On appeal, we review de novo the trial court’s decision on a motion for
judgment on the pleadings, and we construe the pleadings in a light most
favorable to the appellant, drawing all reasonable inferences in her
favor. All well-pleaded material allegations of the opposing party’s
pleading are to be taken as true, and all allegations of the moving party
which have been denied are taken as false.
(Citation and punctuation omitted.) Poole v. In Home Health, LLC, 321 Ga. App. 674
(742 SE2d 492) (2013).8
8
The Department contends that RTT failed to preserve its right to appeal from
this interlocutory ruling by failing to obtain a certificate of immediate review and file
an application for interlocutory review under OCGA § 5-6-34 (b). This argument is
plainly unfounded. See OCGA §§ 5-6-34 (d) (Where a direct appeal is taken under
any provision of OCGA § 5-6-34 (a), (b), or (c), “all judgments, rulings, or orders
rendered in the case which are raised on appeal and which may affect the proceedings
below shall be reviewed and determined by the appellate court, without regard to the
appeal ability of the judgment, ruling, or order standing alone and without regard to
whether the judgment, ruling, or order appealed from was final or was appealable by
some other express provision of law contained in [OCGA § 5-6-34], or elsewhere.”);
9-11-56 (h) (“An order granting summary judgment on any issue or as to any party
shall be subject to review by appeal.”); Sotter v. Stephens, 291 Ga. 79, 84 (727 SE2d
484) (2012) (“[W]hen a direct appeal is taken, any other judgments, rulings or orders
rendered in the case and which may affect the proceedings below may be raised on
appeal and reviewed and determined by the appellate court.”) (citation and
punctuation omitted); Southeast Ceramics, Inc. v. Klem, 246 Ga. 294, 295 (271 SE2d
199) (1980) (“Although the appeal of a grant of a motion for summary judgment is
not one of the appeals authorized by [OCGA § 5-6-34 (a)], it is a judgment from
which direct appeal can be taken. . . . [Therefore,] when a direct appeal is taken [from
an order granting a motion for summary judgment], any other judgments, rulings or
orders rendered in the case and which may affect the proceedings below may be
13
In this case, RTT alleged that the Department failed to send RTT written notice
of its default under the contract and an opportunity to cure the default. In its answer,
the Department denied these allegations. For purposes of a motion for judgment on
the pleadings, therefore, RTT’s allegations are taken as false. Id. Although, as RTT
contends, the Department did not allege in its counterclaim that it had provided notice
of default and an opportunity to cure, this is not the same as admitting the opposite
proposition. The trial court did not err in denying RTT’s motion for judgment on the
pleadings. Id.
Judgment affirmed in part and reversed in part. McFadden, J., concurs.
Dillard, J., concurs in judgment only as to Division 1 and concurs fully in Division
2.
raised on appeal and reviewed and determined by the appellate court.”); Headrick v.
Stonepark of Dunwoody Unit Owners Assn., Inc., - Ga. App. - (1) (a) (Case No.
A14A1711, decided March 30, 2015) (accord); Schoenbaum Ltd. v. Lenox Pines,
LLC, 262 Ga. App. 457, 458-459 (1) (a) (585 SE2d 643) (2003) (accord).
14
A15A0792. RTT ASSOCIATES, INC. v. GEORGIA
DEPARTMENT OF LABOR.
DILLARD, Judge, concurring specially.
I concur fully in Division 2 of the majority’s opinion. I concur in judgment
only as to Division 1 because I do not agree with all that is said in that division of the
majority opinion. Thus, the majority’s opinion in Division 1 decides only the issues
presented in that division and may not be cited as binding precedent in future cases.
See Court of Appeals Rule 33(a).