City of San Antonio v. Casey Industrial, Inc. ( 2015 )

Fourth Court of Appeals
San Antonio, Texas
DISSENTING OPINION
No. 04-14-00429-CV
CITY OF SAN ANTONIO,
Appellant
v.
CASEY INDUSTRIAL, INC.,
Appellee
From the 408th Judicial District Court, Bexar County, Texas
Trial Court No. 2008-CI-06252
Honorable Michael E. Mery, Judge Presiding
Opinion by: Sandee Bryan Marion, Chief Justice
Dissenting Opinion by: Patricia O. Alvarez, Justice
Sitting: Sandee Bryan Marion, Chief Justice
Patricia O. Alvarez, Justice
Jason Pulliam, Justice
Delivered and Filed: July 1, 2015
The majority assumes only arguendo that Casey raised a genuine issue of material fact on
whether Casey complied with the contract’s provisions to seek additional compensation, but it
concludes Casey failed to raise a fact issue on any damages due for additional work CPS Energy
directed it to perform. Based on these conclusions, the majority decides CPS Energy’s immunity
was not waived, and the trial court erred by denying CPS Energy’s plea to the jurisdiction. Because
Casey met its evidentiary burden and CPS Energy failed to conclusively disprove its immunity
was waived, I would affirm the trial court’s order. Therefore, I respectfully dissent.
Dissenting Opinion 04-14-00429-CV
PLEA TO THE JURISDICTION
In its plea to the jurisdiction, CPS Energy asserted its immunity from suit was not waived
and it moved to dismiss Casey’s claims. CPS Energy argued Casey failed to meet the statutory
requirements to waive CPS Energy’s immunity under Texas Local Government Code sections
271.152 and 271.153. See TEX. LOC. GOV’T CODE ANN. § 271.152 (West 2005); id. § 271.153
(West Supp. 2014). After Casey met its burden to raise a fact issue on waiver of immunity, then,
as the movant, CPS Energy had to conclusively disprove any essential element of waiver. In
reviewing the evidence, we take all of Casey’s evidence as true, and resolve any doubts and make
all reasonable inferences in its favor. See Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d
217, 228 (Tex. 2004). I address the evidence pertaining to the two sections’ requirements.
SECTION 271.152 REQUIREMENTS
A. Casey’s Burden
Casey’s burden was to plead facts supported by some evidence sufficient to raise a genuine
issue of material fact that it met the requirements of section 271.152. See Zachry Const. Corp. v.
Port of Hous. Auth. of Harris County, 449 S.W.3d 98, 110 (Tex. 2014). It pled that its suit was
against CPS Energy, a local governmental entity; that CPS Energy entered into a contract with
Casey; and its suit comprised claims for breach of that contract. I recite the supporting evidence.
• The City of San Antonio is a local governmental entity. See TEX. LOC. GOV’T CODE
ANN. § 271.152 (“local governmental entity” (emphasis added)).
• Acting through CPS Energy, the City was authorized by statute to enter into a contract
with Casey for the J.T. Deely power station modifications. See id. (“authorized by
statute . . . to enter into a contract” (emphasis added)); City of San Antonio ex rel.
City Pub. Serv. Bd. of San Antonio v. Casey Indus., Inc., 381 S.W.3d 589, 596 (Tex.
App.—San Antonio 2012, pet. denied) (citing TEX. LOC. GOV’T CODE ANN. § 271.119
(“Design-Build Contracts for Facilities”)).
• It did so in August 2004. See TEX. LOC. GOV’T CODE ANN. § 271.152 (“enters into a
contract” (emphasis added)); Casey Indus., 381 S.W.3d at 596–97.
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Dissenting Opinion 04-14-00429-CV
• In its pleadings, Casey (1) alleged that CPS Energy breached the August 2004 contract
and (2) provided evidence of the executed contract and affidavits supporting its
allegations of breach. Casey also provided evidence that contract provisions under
paragraph 14.1.2 include procedures for CPS Energy or Casey to modify the scope of
work, change the performance schedule, and seek an increase or decrease in the D/B
contractor’s (Casey’s) compensation. It argued and pled evidence showing that it
complied with the procedures to raise, discuss, and resolve a claim. See TEX. LOC.
GOV’T CODE ANN. § 271.152 (“claim for breach of contract” (emphasis added)).
Taking Casey’s evidence as true and making all reasonable inferences in its favor, I
conclude Casey met its burden to raise a genuine issue of material fact that CPS Energy’s immunity
was waived under section 271.152. See Miranda, 133 S.W.3d at 228; see also Zachry Const., 449
S.W.3d at 109 (“The waiver does not depend on the outcome, though it does require a showing of
a substantial claim that meets the Act’s conditions.”).
B. CPS Energy’s Burden
Although Casey met its burden, CPS Energy’s plea to the jurisdiction could be granted if
CPS Energy conclusively disproved any essential element of waiver of immunity. See Miranda,
133 S.W.3d at 226–28; Elliott-Williams Co. v. Diaz, 9 S.W.3d 801, 803 (Tex. 1999) (“The
defendant as movant must disprove at least one of the essential elements of the plaintiff’s causes
of action to prevail on summary judgment.”). To conclusively disprove any waiver of immunity,
CPS Energy argued that Casey did not comply with what CPS Energy asserts are the applicable
contract procedures, e.g., contract Article 9.1 Change Orders. CPS Energy contended that the only
contractual procedure to modify Casey’s scope of work was the change order provision, Casey
never requested a change order for the work in question, CPS Energy did not issue one, and
therefore any additional work Casey did was not covered by a written contract. Thus, CPS Energy
argues, without a written contract for the additional work, Casey did not meet section 271.152’s
requirements and CPS Energy’s immunity was not waived.
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Dissenting Opinion 04-14-00429-CV
C. Contract Provisions to Request Additional Compensation
But CPS Energy’s view ignores other contract provisions that expressly create procedures
for Casey to request additional compensation. I trace the path along the applicable contract articles
and recite some of the evidence relating to each article.
1. Article 14.1.2
In its January 3, 2006 letter, CPS Energy notified Wheelabrator that Wheelabrator was in
default under the contract. Under Article 14.1.2, a default by Wheelabrator constitutes a Force
Majeure.
Provided D/B Contractor is not in Default itself, a Default by Wheelabrator under
Section 14.1.1, which results in an impairment or frustration of D/B Contractor’s
Work through no fault of D/B Contractor, shall be considered a “Force Majeure”
event and will entitle D/B Contractor to request an extension of time and/or
additional compensation by Notice to Owner as required in Section 9.1.3.
(Emphasis added).
2. Article 9.1.3
Wheelabrator’s default—a force majeure—invokes Article 9.1.3’s provisions.
D/B Contractor shall provide Owner with Notice of any circumstance described in
Section 9.1.4 which D/B Contractor believes will entitle D/B Contractor to a
Change Order modifying the Scope of Work, Project Schedule, Contract Price, or
other obligations of D/B Contractor under this Agreement. D/B Contractor shall
bear the burden of establishing that it is entitled to such relief under Section 9.1.4,
that the relief sought is the minimum relief required, and that any monetary relief
requested by D/B Contractor is in excess of any insurance proceeds recoverable by
D/B Contractor. Such Notice shall be issued within ten (10) Days after D/B
Contractor’s knowledge of a circumstance described in Section 9.1.4, and such
Notice shall describe such occurrence in detail. Within ten (10) Days following
delivery of such Notice, or such other period as may be agreed upon by the Parties,
D/B Contractor shall submit to Owner a written estimate (including detailed
calculations supporting such estimates) of any adjustments to the Scope of Work
(including adjustments to the Facility Guarantees or warranties), Project Schedule,
Contract Price (including adjustments to the Schedule of Values and other
obligations of D/B Contractor under this Agreement requested by it. Following
Owner’s receipt of such Notice, Owner shall determine whether it agrees with such
adjustments to the Scope of Work, Project Schedule, Contract Price or any other
obligations of D/B Contractor. If Owner agrees with such adjustments, the Parties
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shall execute an appropriate Change Order. In the event that the Parties reach
agreement on all terms of a Change Order except for a lump sum price, Owner may
direct D/B Contractor to proceed with such additional Work with the price to be
established in accordance with Section 9.1.5. If Owner disagrees with such
adjustments, the Parties shall attempt to negotiate an equitable resolution, failing
which the Parties shall resolve such disagreement in accordance with Article 15.
Pending such resolution, the Owner shall issue a Construction Change Directive in
accordance with Section 9.2.
(Emphasis added). Casey’s December 30, 2005 letter advised CPS Energy that Wheelabrator’s
problems were costing Casey money, and if Wheelabrator failed to compensate Casey, “Casey will
formally notify CPS that your action is requested. At that time, Casey will request that CPS
exercise your rights, through the Contract, to compensate Casey for the recovery costs.”
(emphasis added).
Even if the December 30, 2005 letter alone was not sufficient notice under Article 9.1.3,
the record shows Casey had recurring project status meetings with CPS Energy and one may
reasonably infer that Casey informed CPS Energy of Wheelabrator’s performance issues. E.g.,
Casey’s December 30, 2005 letter to CPS Energy states Casey will give CPS Energy copies of the
documents Casey issues to Wheelabrator regarding project progress; CPS Energy’s January 3,
2006 letter referring to the “December 14, 2005 Weekly Construction Meeting.” Further, CPS
Energy declared Wheelabrator in default, and CPS Energy unquestionably knew that Wheelabrator
was failing to perform and Wheelabrator’s default would impair or frustrate Casey’s work.
Taking Casey’s evidence as true and making reasonable inferences in its favor, Casey gave
CPS Energy written notice in accordance with Article 9.1.3 and Casey was entitled to request relief
under Article 9.1.3. In such a circumstance, if the parties agree on relief, CPS Energy issues a
change order. If the parties do not agree, then Article 15, Claims and Dispute Resolution, is
invoked.
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3. Article 15, Claims and Dispute Resolution
Article 15.2.1 addresses claims procedures:
A Claim is a demand or assertion by the Parties, as a matter of right, adjustment or
interpretation of Contract terms, payment of money, Extension of Time or other
relief with respect to the terms of the Contract. The term “Claim” also includes
other disputes and matters in question between the Owner, Wheelabrator and/or
D/B Contractor arising out of or relating to the Contract.
(Emphasis added).
Article 15.2.2 addresses initiating a claim:
Claims must be initiated within 10 days after occurrence of the event giving rise to
such Claim or within 10 days after the claimant first recognizes the condition giving
rise to the Claim, whichever is later. Claims must be initiated by written notice to
the other Parties. Claims submitted to the Owner after the ten-day period will be
rejected.
(Emphasis added).
Taking Casey’s evidence as true and making all reasonable inferences in its favor, I
conclude Casey’s December 30, 2005 letter to CPS Energy, combined with Casey’s project reports
and CPS Energy’s written declaration that Wheelabrator was in default, satisfied the written notice
requirement. See Zachry Const., 449 S.W.3d at 110 (requiring the claimant to “plead facts with
some evidentiary support that constitute a claim for which immunity is waived”). After
intervening months and meetings, Casey’s letter of August 3, 2007 states it has already tried the
lower levels for dispute resolution, and it is seeking senior level review. Casey attached
documentation “in accordance with . . . Article 9 of the Contract” which “includes backup
documentation to identify and support individual cost issues.” CPS Energy’s letter of July 27,
2007 shows the items in dispute under Article 15.1.1.
Even assuming Casey did not meet the Article 15.2.2 notice requirement, CPS Energy may
have waived notice. See Jernigan v. Langley, 111 S.W.3d 153, 156 (Tex. 2003) (“‘Waiver is
defined as ‘an intentional relinquishment of a known right or intentional conduct inconsistent with
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claiming that right.’” (quoting Sun Exploration & Prod. Co. v. Benton, 728 S.W.2d 35, 37 (Tex.
1987))). In its August 15, 2007 letter, CPS Energy acknowledged outstanding disputed items,
requested more information on the claims, and participated in dispute resolution procedures under
Article 15. I agree with the majority’s conclusion that “[t]he 2007 correspondence indicates the
parties’ attempt to resolve their dispute pursuant to the contract’s ‘Clams and Dispute Resolution’
provisions as set forth in Article 15 of the contract.”
Article 15.2.4 addresses procedures for making a claim for “other reasonable grounds”:
If the D/B Contractor wishes to make a Claim for an increase in either the
Wheelabrator Contract Price or D/B Contractor’s Contract Price, or if the D/B
Contractor believes additional cost is involved for reasons including, but not
limited to, (1) an order by the Owner to stop or repair Work where the D/B
Contractor nor Wheelabrator was at fault, (2) in a situation in which the Work is
considered additional to the Specifications, (3) a written order for a change in the
Work issued by the Owner, or (4) other reasonable grounds, written Notice as
provided herein shall be given by the D/B Contractor before proceeding to execute
the Work.
(Emphasis added). This provision is not expressly tied to, or limited by, the change order
procedure. It requires notice, but making reasonable inferences in Casey’s favor based on the
evidence in the record such as the correspondence and weekly project meetings, Casey either gave
notice or CPS Energy waived the notice requirement.
Article 15.4.4 provides for redress from a rejected claim:
The Owner will approve or reject Claims by written decision, which shall state the
reasons therefore and which shall notify the D/B Contractor of any change in the
Contract Price or Contract Time, or both. The approval or rejection of a Claim by
the Owner shall be subject to dispute resolution as outlined in Section 15.1 prior to
litigation.
(Emphasis added).
Article 15.1, Procedure for Dispute Resolution, requires the parties to “use their Best
Efforts in good faith to reach a reasonable and equitable resolution of the matter.” If project level
managers are unable to resolve the matter, it is referred to senior officers. If they cannot resolve
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the matter, the parties must use their “Best Efforts in good faith” to agree on non-judicial
resolution. If the dispute resolution fails, neither party may sue until at least thirty days after the
senior officers received written notice of the dispute. Although Article 15.1 seeks to promote
alternate dispute resolution and avoid litigation, it expressly anticipates the parties may seek relief
in court.
Viewing the parties’ evidence in the light most favorable to Casey, Miranda, 133 S.W.3d
at 228, I conclude CPS Energy failed to meet its burden to disprove as a matter of law any essential
element of section 271.152, see Elliott-Williams Co., 9 S.W.3d at 803; cf. Mission Consol. Indep.
Sch. Dist. v. Garcia, 372 S.W.3d 629, 642 (Tex. 2012) (granting a plea to the jurisdiction on a
claim because the governmental entity negated an essential element of plaintiff’s claim and
plaintiff failed to raise a fact question on the negated element). Because “Section 271.152 uses
Section 271.153 to further define to what extent immunity has been waived,” I next consider
whether Casey’s claimed damages are of the type recoverable under section 271.153. See Zachry
Const., 449 S.W.3d at 110.
SECTION 271.153 REQUIREMENTS
A. Casey’s Burden
To show CPS Energy’s immunity was waived, Casey must also raise a genuine issue of
material fact on whether its damages are recoverable under section 271.153. See id.; Miranda,
133 S.W.3d at 228. Casey may recover damages from CPS Energy’s alleged breach of contract
for “(2) the amount owed for change orders or additional work the contractor is directed to perform
by a local governmental entity in connection with the contract.” TEX. LOC. GOV’T CODE ANN.
§ 271.153(a) (emphasis added).
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Disregarding the $150,000 per day liquidated damages provision, the majority states that
“Casey points to no evidence of any directive from CPS Energy” to perform any additional work.
But Casey’s vice-president’s affidavit averred that Casey performed work Wheelabrator—not
Casey—was otherwise obligated to perform and includes letters between CPS Energy and Casey.
For example, in an attachment to Casey’s August 3, 2007 letter to CPS Energy, Casey quoted
Article 20.20 of the contract: “[Casey] and its surety shall bear no responsibility or liability for
the Wheelabrator obligations, Wheelabrator’s design or the Performance Guarantees associated
with the Wheelabrator portion of the Work.” (emphasis added). Casey insisted that “as
construction manager Casey bore no responsibility for ensuring Wheelabrator’s performance,” and
Article 9.4 states that “[Casey] and Wheelabrator accepts [sic] the risk of mistake or error relating
to the portion of their respective Work as outlined in [the Split Contract Matrix].” There is also
evidence of weekly construction meetings and numerous letters between the parties addressing the
scope and progress of the construction. Further, in its response to CPS Energy’s motion to dismiss,
Casey pled that “Casey followed a process that was directed by CPS, all the while reserving
Casey’s rights to bring a claim for the Wheelabrator-caused impacts associated with the default as
acknowledged by CPS” and added that “Casey was continuously following CPS’[s] direction.”
B. CPS Energy’s Burden
To be entitled to a grant of its plea to the jurisdiction, CPS Energy’s burden is to
conclusively disprove CPS Energy directed Casey to perform additional work in connection with
the contract. See TEX. LOC. GOV’T CODE ANN. § 271.153(a)(2); Miranda, 133 S.W.3d at 228.
CPS Energy’s evidence includes an affidavit that insists CPS Energy had little or no visibility into
the Casey-Wheelabrator interactions. It also argued that as of August 2006 Casey had not raised
any issues related to “the steel painting it performed which was within Wheelabrator’s scope of
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work or its costs related to an increase in steel quantities for the Project.” But CPS Energy
acknowledged that on May 2, 2007, Casey informed CPS Energy that Casey would seek
compensation from CPS Energy for the steel painting costs. This evidence supports the reasonable
inference that CPS Energy directed Casey to perform work that—at least in Casey’s view—Casey
was not otherwise obligated to perform by the contract.
Article 20.20 requires Casey to “act as the overall construction manager of the Project” and
to “oversee Wheelabrator’s . . . performance,” but Casey insists the article’s disclaimer that Casey
“shall bear no responsibility or liability for the Wheelabrator obligations” shows Casey was not
responsible for performing Wheelabrator’s work. Given Casey’s reliance on Article 20.20’s
disclaimer, it is not reasonable to infer that Casey volunteered to perform Wheelabrator’s work at
considerable expense to itself but at no cost to CPS Energy. To the contrary, considering the direct
and circumstantial evidence, it is quite reasonable to infer that Casey performed Wheelabrator’s
work because CPS Energy directed Casey to do so. It was CPS Energy’s burden to prove as a
matter of law that in its many communications to Casey, including letters and project meetings, it
did not direct Casey to perform the additional work. The evidence does not show CPS Energy met
that burden.
CONCLUSION
It is undisputed that Wheelabrator defaulted and Casey performed some of the work
originally assigned to Wheelabrator. CPS Energy seems to view Casey as a prime contractor with
an obligation to perform Wheelabrator’s work at no additional cost to CPS Energy. Casey sees
itself as Wheelabrator’s co-contractor, not its prime contractor, and Casey raises Article 20.20 as
evidence it was not obligated to perform Wheelabrator’s work without additional compensation.
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Dissenting Opinion 04-14-00429-CV
Although many statements in CPS Energy’s affidavits contradict assertions in, and
reasonable inferences I draw from, Casey’s evidence, this court must leave disputed questions of
material fact to the fact-finder. See Miranda, 133 S.W.3d at 228. Casey argued and pled facts
with supporting evidence that it complied with the contract’s procedures to request additional
compensation. Whether Casey can prove by a preponderance of the evidence that it actually
complied with the contract’s provisions is not the question before us. See Zachry Const., 449
S.W.3d at 110 (restating the claimant’s burden: “the claimant must plead facts with some
evidentiary support that constitute a claim for which immunity is waived, not [prove] that the
claimant will prevail”).
Our question is whether, viewing all the evidence in the light most favorable to Casey and
making all reasonable inferences in its favor, Casey raised a genuine issue of material fact on
whether its claims meet the statutory requirements to waive CPS Energy’s immunity. The
evidence shows Casey raised a genuine issue of material fact on whether it asserted a claim for
breach of a written contract, and thus Casey met its burden under section 271.152. The evidence
also shows Casey raised a genuine issue of material fact on whether CPS Energy directed Casey
to perform “additional work . . . in connection with the contract,” and thus Casey met its burden
under section 271.153.
Because Casey met its burdens, and CPS Energy failed to conclusively disprove any
essential element of waiver, I would affirm the trial court’s order. Because the majority reverses
the trial court’s order, I respectfully dissent.
Patricia O. Alvarez, Justice
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