Kansas City Southern and the Texas Mexican Railway Company v. Port of Corpus Christi Authority of Nueces County, Texas ( 2009 )

NUMBER 13-09-00212-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
KANSAS CITY SOUTHERN AND THE
TEXAS MEXICAN RAILWAY COMPANY, Appellants,
v.
PORT OF CORPUS CHRISTI AUTHORITY
OF NUECES COUNTY, TEXAS, Appellee.
On appeal from the 319th District Court
of Nueces County, Texas.
OPINION
Before Chief Justice Valdez and Justices Rodriguez and Garza
Opinion by Justice Garza
This is an appeal from a final judgment granting an application for temporary
injunction and a motion to stay arbitration. Appellants, Kansas City Southern (“KCS”) and
the Texas Mexican Railway Company (“Tex Mex”), contend that the trial court erred in
granting the application and motion filed by appellee, the Port of Corpus Christi Authority
of Nueces County, Texas (“PoCCA”). By four issues, KCS and Tex Mex argue that: (1)
the trial court erred by failing to issue additional and amended findings of fact and
conclusions of law; (2) PoCCA’s sovereign immunity has been waived by certain provisions
of the Texas Local Government Code and Texas Water Code; (3) the claims at issue are
covered by binding arbitration agreements; and (4) PoCCA waived its sovereign immunity
as to attorney’s fees by filing a declaratory judgment action. We affirm.
I. BACKGROUND
The underlying dispute arose from PoCCA’s demolition of the Tule Lake Lift Bridge,
a moveable road and rail bridge built in the 1950s that connected the north and south sides
of the ship channel servicing the Port of Corpus Christi. In 1960, Tex Mex and two other
common carrier railroads entered into an agreement with the City of Corpus Christi,
Nueces County, and Nueces County Navigation District No. 1. That agreement, entitled
“Primary Agreement,” provided in part that the various rail carriers would operate and
maintain the rail facilities at the Port on an annually rotating basis. In exchange, the
navigation district1 would provide the rail carriers with free and equal access to the Port’s
facilities, including the Tule Lake Lift Bridge, without charge. The 1960 Primary Agreement
did not contain an arbitration clause.
Subsequently, in 1997, the rail carriers entered into additional agreements with
PoCCA, including a “Joint Operating Agreement” which created the Port of Corpus Christi
Railroad Association in order to provide what PoCCA describes as “an economical
common carrier switching service through a third-party contractor selected by [PoCCA].”
The Joint Operating Agreement included a promise by PoCCA to provide to the rail carriers
“equal rights and privileges . . . of joint use and operations over the Tule Lake Lift Bridge
and railroad trackage located thereon without payment of any rental or fee.” The Joint
Operating Agreement also stated in part that maintenance of the Tule Lake Lift Bridge
would be provided by Nueces County and maintenance of the railroad trackage located on
the bridge would be provided by PoCCA.
Another agreement, entitled the “Second Corpus Christi Joint Track Agreement,”
was executed in 1997 in order to define the rights and responsibilities of the various rail
1
In 1981, Nueces County Navigation District No. 1 was renam ed by the legislature as the Port of
Corpus Christi Authority of Nueces County, Texas.
2
carriers with respect to the Port facilities. In particular, this agreement defined which
parties would have control of operations and were responsible for maintenance with
respect to portions of track located on Port property known as the “Savage Lane Line” and
the “MoPac Connection.” The Joint Track Agreement provided, in part, that Tex Mex would
“at all times” have management rights and control of operations over “SL-3” and “SL-4,”
referring to segments of the Savage Lane Line precisely defined in the agreement. This
agreement also provided in part that “[m]aintenance of . . . [t]hat portion of SL-2 [another
defined segment of the Savage Lane Line] outside [Union Pacific’s] right-of-way, SL-3, [the
PoCCA]-owned portion of [MoPac Connection] . . . [and] SL-4 shall be performed by Tex
Mex.”
Both the 1997 Joint Operating Agreement and the 1997 Joint Track Agreement
included broad arbitration clauses. The Joint Operating Agreement provided:
In the event any disagreement shall arise between any two or more of the
parties hereto as to the meaning of any provision hereof, or as to any matter
arising under this agreement . . . or in the event any such disagreement shall
arise between any of the parties hereto on the one hand and [PoCCA] on the
other hand, then, upon the written request of any party involved on either
side of such disagreement, the matter in controversy shall be submitted to
three disinterested arbitrators . . . to be appointed as hereinafter provided.
The Joint Track Agreement stated:
In case any disagreement shall arise between two or more of the parties
hereto relative to the construction or interpretation of any part of this
agreement, or concerning the observance or performance of any of its terms
or conditions, or as to any other matter of dispute arising under this
agreement, then such question shall be submitted to the arbitrament of
persons . . . to be chosen as follows . . . .
By the 1990s, the Tule Lake Lift Bridge had become antiquated and was in such a
state of disrepair that PoCCA determined “it was dangerous, no longer functional and
should be replaced.”2 In order to preserve the rail carriers’ access to the north side of the
2
According to KCS, the prim ary m otivation for PoCCA to rem ove the Tule Lake Lift Bridge was the
fact that large oil tankers could not easily pass through the bridge’s relatively narrow opening. To support this
contention, KCS points to a 2007 presentation by PoCCA to its governing com m ission supporting rem oval of
the bridge, in which a large oil tanker’s passage through the bridge opening is likened to “[t]hreading the eye
of the needle.” PoCCA denies that the accom m odation of large oil tankers was a reason for the bridge’s
rem oval.
3
ship channel, PoCCA constructed the Joe Fulton International Trade Corridor (the “Fulton
Corridor”), which consisted in part of rail trackage extending the full length of the north side
of the ship channel, thereby linking the south and north sides of the ship channel by
circumventing the channel altogether. The Fulton Corridor trackage was put into service
in 2007. Subsequently, PoCCA removed the span of the Tule Lake Lift Bridge, and on
April 11, 2008, it demolished the remaining lifting towers.
On September 26, 2008, KCS3 sent a letter to PoCCA demanding arbitration of
claims arising from the failure to maintain and the eventual demolition of the Tule Lake Lift
Bridge. Specifically, KCS asserted that the Port breached the 1960 and 1997 agreements
by failing to properly maintain the bridge and its trackage and by failing to provide free,
open, and equal access to the bridge for as long as Tex Mex desired. KCS would later
argue that it suffered “direct damages” as a result of the bridge’s removal, in that: (1) it
must now “travel a long circuitous route” to gain access to the Port’s Joint Yard and
Common Interchange Yard, causing “additional direct expenses for added fuel, locomotive
use and crew time”; and (2) in order to get to the north side of the Port, it must now use
tracks belonging to Union Pacific and must pay trackage fees to Union Pacific for such use.
In response to the arbitration demand, PoCCA filed an application for temporary
injunction and motion to stay arbitration with the trial court on October 22, 2008. See TEX .
CIV . PRAC . & REM . CODE ANN . § 171.023(a) (Vernon 2005) (providing that “[a] court may
stay an arbitration commenced or threatened on application and a showing that there is
not an agreement to arbitrate”). In its petition, PoCCA sought injunctive and declaratory
relief, contending that there is no arbitrable dispute for the following reasons: (1) there was
no arbitration clause in the 1960 Primary Agreement; (2) KCS was not a party to either the
Primary Agreement or the 1997 Joint Operating Agreement; (3) PoCCA was not
responsible for maintenance of the Tule Lake Lift Bridge under the Joint Operating
3
Tex Mex becam e a wholly-owned subsidiary of KCS on January 1, 2005. In 2006, the federal
Surface Transportation Board approved Tex Mex’s assignm ent of its trackage and operating rights to KCS.
Appellants will be collectively referred to as “KCS” unless otherwise indicated.
4
Agreement; (4) the Joint Operating Agreement “does not provide for arbitration of a dispute
related to the removal” of the bridge; and (5) PoCCA “is immune from suit or arbitration”
under the principle of sovereign immunity.
On November 11, 2008, KCS answered, arguing in part that: (1) PoCCA was
obligated under the Joint Operating Agreement to provide free and equal access to the
bridge and to maintain the trackage on the bridge; (2) the question of whether the dispute
arose under the 1997 Joint Operating Agreement is for the arbitrators to decide; and (3)
PoCCA’s sovereign immunity has been waived pursuant to chapter 271 of the Texas Local
Government Code. See TEX . LOC . GOV’T CODE ANN . §§ 271.151-.160 (Vernon 2005 &
Supp. 2009) (waiving immunity for certain breach of contract claims against local
government entities). KCS also filed a counterclaim seeking: (1) a declaration that its
claims are not barred by immunity; (2) an order compelling arbitration of KCS’s claims; and
(3) attorney’s fees and costs of court. See TEX . CIV. PRAC . & REM . CODE ANN . § 37.004(a)
(Vernon 2008). KCS specifically asserted in its counterclaim that by initiating the action
in the trial court, PoCCA waived any sovereign immunity it may have otherwise enjoyed.
After a hearing, the trial court rendered its final judgment on March 10, 2009,
granting all relief requested by PoCCA, including an injunction staying the arbitration
proceedings and a declaration that PoCCA’s immunity had not been waived.4
Subsequently, in response to a request by KCS, the trial court entered findings of fact and
conclusions of law, providing in relevant part as follows:
The claims which [KCS] and [Tex Mex] sought to arbitrate are not within the
scope of the arbitration provision in the 1997 Agreements.
....
Neither KCS nor Tex-Mex provided “goods or services” to [PoCCA] under
any contract between KCS or Tex-Mex and [PoCCA] as that term is used in
[section 271.151 of the local government code].
....
4
The final judgm ent also stated that “all claim s for relief not expressly granted are hereby denied.”
5
[PoCCA] is immune from suit, including the allegations of KCS/Tex Mex in
their Counterclaim against [PoCCA] and those allegations in the KCS/Tex-
Mex demand for arbitration of September 26, 2008, based upon the doctrine
of [sovereign] immunity.
....
[PoCCA] did not waive its immunity from suit by filing its “Petition for
Declaratory Relief, Application for Temporary Restraining Order and
Injunctive Relief.”
....
[PoCCA] did not waive [sovereign] immunity from suit by entering into a
written contract with KCS or Tex-Mex as alleged in Defendants’ Plea to the
Jurisdiction, Original Answer and Counterclaim.
....
In addition, the damages KCS/Tex-Mex are claiming in their demand for
arbitration and/or counterclaim are not the type of damages which can be
recovered under [section] 271.153 [of the local government code].
KCS filed a request for additional and amended findings of fact and conclusions of
law on April 27, 2009; however, the trial court did not issue any additional or amended
findings or conclusions. This appeal followed.
II. DISCUSSION
A. Trial Court’s Failure to Issue Additional and Amended Findings of Fact and
Conclusions of Law
By its first issue, KCS argues that the trial court erred by failing to issue additional
and amended findings of fact and conclusions of law in response to its request.
Specifically, KCS contends that the original findings of fact and conclusions of law
rendered by the trial court “are conclusory and omit findings and conclusions on many
specific issues necessary for a proper appellate review of the district court’s judgment” and
that KCS was “harmed in effective presentation of their appeal by the conclusory and
incomplete nature” of the original findings and conclusions.
In its brief on appeal, KCS does not direct this Court to any case law, rule, or statute
indicating that the trial court was somehow obligated to enter findings of fact or conclusions
of law more detailed or comprehensive than those which were originally issued.
6
Accordingly, without considering the merits of this issue, we conclude that it has been
inadequately briefed and therefore waived. See TEX . R. APP. P. 38.1(i) (“The [appellant’s]
brief must contain a clear and concise argument for the contentions made, with appropriate
citations to authorities and to the record.”). KCS’s first issue is overruled.
B. Sovereign Immunity5
By its second issue, KCS argues that PoCCA’s sovereign immunity has been
waived pursuant to chapter 271 of the local government code and chapter 49 of the water
code. By its fourth issue, KCS contends that PoCCA waived its immunity as to KCS’s
attorney’s fees by initiating the underlying declaratory judgment action. We consider these
issues together.
Before we do, however, we must address KCS’s preliminary contention that,
assuming the underlying claims are covered by the arbitration agreements, the issue of
whether PoCCA is immune to suit should be decided in arbitration. Neither party has
directed us to any authority, and we have found none, discussing whether arbitration itself
is the proper forum to address whether the immunity of an arbitration respondent has been
waived. We conclude that it is the judiciary’s primary responsibility to decide whether an
arbitration respondent’s immunity has been waived. Sovereign immunity is jurisdictional
in nature. See, e.g., Reata Constr. Corp. v. City of Dallas, 197 S.W.3d 371, 379 (Tex.
2006) (op. on reh’g); Mo. Pac. R.R. Co. v. Brownsville Navigation Dist., 453 S.W.2d 812,
814 (Tex. 1970). Therefore, if PoCCA’s immunity has not been waived, not only would the
trial court lack jurisdiction to adjudicate KCS’s claims, but it would also lack jurisdiction to
5
The term s sovereign im m unity and governm ental im m unity, although often used interchangeably,
involve two distinct concepts:
Sovereign im m unity refers to the State’s im m unity from suit and liability. In addition to
protecting the State from liability, it also protects the various divisions of state governm ent,
including agencies, boards, hospitals, and universities. Governm ental im m unity, on the other
hand, protects political subdivisions of the State, including counties, cities, and school
districts.
W ichita Falls State Hosp. v. Taylor, 106 S.W .3d 692, 694 (Tex. 2003) (internal citations om itted). For ease
of reference, we will use the term “sovereign im m unity” to refer to both sovereign im m unity and governm ental
im m unity. See Reata Constr. Corp. v. City of Dallas, 197 S.W .3d 371, 374 n.1 (Tex. 2006) (op. on reh’g).
7
either compel PoCCA to participate in arbitration or to enforce any arbitration award
entered against PoCCA. See Town of Highland Park v. Iron Crow Constr., Inc., 168
S.W.3d 313, 317 (Tex. App.–Dallas 2005, no pet.) (noting that sovereign immunity is
implicated where a private party sought a declaratory judgment compelling defendant city
to arbitration). In other words, if a party is immune to a suit alleging a particular claim, it
is also immune to the judicial enforcement of any arbitration award based upon that same
claim. Just as it is the judiciary’s proper role to determine whether a claim is covered by
an arbitration agreement, see TEX . CIV. PRAC . & REM . CODE ANN . § 171.021(b) (Vernon
2005), it is similarly the primary function of the courts to determine whether a government
defendant retains immunity as to any arbitration award.6 Accordingly, we reject KCS’s
argument that the immunity issue should be submitted to arbitration; instead, we conclude
that the question was properly addressed in the trial court.
1. Applicable Law and Standard of Review
In Texas, sovereign immunity has two components: (1) immunity from liability,
which bars enforcement of a judgment against a governmental entity, and (2) immunity
from suit, which bars suit against the entity altogether. Tooke v. City of Mexia, 197 S.W.3d
325, 332 (Tex. 2006). Immunity from liability is an affirmative defense that must be
pleaded, or else is waived. Kinnear v. Tex. Comm’n on Human Rights, 14 S.W.3d 299,
300 (Tex. 2000). By entering into a contract, a governmental entity necessarily waives
immunity from liability, voluntarily binding itself like any other party to the terms of the
agreement. Tooke, 197 S.W.3d at 332. However, the act of entering into a contract does
not waive immunity from suit; instead, we defer to the legislature to waive immunity from
suit because this allows the legislature to protect its policymaking function. Id. This is
particularly true in the context of contract claims, where “legislative control over sovereign
6
Of course, had PoCCA chosen to participate in arbitration in response to KCS’s dem and, PoCCA
could have sim ply asserted its sovereign im m unity defense in that forum . In such a situation, there would be
nothing preventing the arbitrators from dism issing KCS’s claim if they determ ined that PoCCA’s im m unity has
not been waived. In other words, although courts have the primary responsibility for determ ining whether an
arbitration respondent’s im m unity has been waived, there is nothing preventing arbitrators from exercising that
responsibility if the m atter is never brought to a court for consideration.
8
immunity allows the legislature to respond to changing conditions and revise existing
agreements if doing so would benefit the public.” Id. (quoting Tex. Natural Res.
Conservation Comm’n v. IT-Davy, 74 S.W.3d 849, 854 (Tex. 2002)); see Catalina Dev. Inc.
v. County of El Paso, 121 S.W.3d 704, 705-06 (Tex. 2003). Accordingly, sovereign
immunity from suit may be waived only by “clear and unambiguous” statutory language.
Tooke, 197 S.W.3d at 329, 332-33; see TEX . GOV’T CODE ANN . § 311.034 (Vernon Supp.
2009) (“In order to preserve the legislature’s interest in managing state fiscal matters
through the appropriations process, a statute shall not be construed as a waiver of
sovereign immunity unless the waiver is effected by clear and unambiguous language.”).
Neither party disputes the fact that PoCCA’s immunity from liability was waived by
its entering into the 1960 and 1997 agreements with the various rail carriers; accordingly,
we are only concerned with PoCCA’s immunity from suit. Immunity from suit deprives a
court of subject matter jurisdiction. Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d
217, 224 (Tex. 2004); Sweeny Cmty. Hosp. v. Mendez, 226 S.W.3d 584, 589 (Tex.
App.–Houston [1st Dist.] 2007, no pet.). Whether the trial court has subject matter
jurisdiction is a question of law that we review de novo. See Miranda, 133 S.W.3d at 226;
IT-Davy, 74 S.W.3d at 855.
2. Water Code Chapter 49
KCS first asserts that section 49.066(a) of the Texas Water Code serves to waive
PoCCA’s sovereign immunity. See TEX . W ATER CODE ANN . § 49.066(a) (Vernon 2008).
We disagree. Section 49.066(a) provides specifically that:
A district may sue and be sued in the courts of this state in the name of the
district by and through its board. A suit for contract damages may be
brought against a district only on a written contract of the district approved
by the district’s board. All courts shall take judicial notice of the creation of
the district and of its boundaries.
Id.
As the Texas Supreme Court explained in Tooke v. City of Mexia, dozens of Texas
statutes provide that various government entities may “sue and (or) be sued,” “(im)plead
9
and (or) be impleaded,” “prosecute and defend,” “defend or be defended,” “answer and be
answered,” “complain and (or) defend,” or some combination of these phrases. 197
S.W.3d at 328, 347-55 (providing a partial listing of such statutes). However, such words
“do not, in and of themselves, waive immunity from suit.” Id. at 328-29. Instead, the effect
of a “sue and be sued” clause in an organic statute depends on the context in which it is
used. Id. at 337. The words can mean that immunity is waived, but they can also mean
only that a governmental entity, like others, has the capacity to sue and be sued in its own
name. Id.
Since Tooke, all courts of appeal that have considered the “sue or be sued”
language in section 49.066 have concluded that the language does not waive immunity.
See Boyer, Inc. v. Trinity River Auth. of Tex., 279 S.W.3d 354, 358 (Tex. App.–Fort Worth
2008, pet. denied); Clear Lake City Water Auth. v. Friendswood Dev. Co., 256 S.W.3d 735,
744 (Tex. App.–Houston [14th Dist.] 2008, pet. dism’d); Bexar Metro. Water Dist. v. Educ.
& Econ. Dev. Joint Venture, 220 S.W.3d 25, 29-32 (Tex. App.–San Antonio 2006, pet.
dism’d); see also Valley Mun. Util. Dist. No. 2 v. Rancho Viejo, Inc., No. 13-07-545-CV,
2008 Tex. App. LEXIS 1109, at *9-11 (Tex. App.–Corpus Christi Feb. 14, 2008, no pet.)
(mem. op.). KCS has not offered any reason why this Court should stray from this
precedent. Accordingly, we conclude that PoCCA’s immunity from suit has not been
waived by section 49.066 of the Texas Water Code.7
3. Local Government Code Chapter 271
KCS next contends that PoCCA’s immunity from suit has been waived by the
provisions of subchapter I of chapter 271 of the Texas Local Government Code. See TEX .
LOC . GOV’T CODE ANN . §§ 271.151-.160. Section 271.152 provides:
A local governmental entity that is authorized by statute or the constitution
to enter into a contract and that enters into a contract subject to this
7
Even if section 49.066 were to be construed as an effective waiver of sovereign im m unity, it is
doubtful that such a waiver would apply to PoCCA, because chapter 49 explicitly states that it does not apply
to “any navigation district or port authority created under general or special law.” T EX . W ATER C OD E A N N . §
49.001(a) (Vernon 2008).
10
subchapter waives sovereign immunity to suit for the purpose of adjudicating
a claim for breach of the contract, subject to the terms and conditions of this
subchapter.
Id. § 271.152. A “contract subject to this subchapter” is defined as “a written contract
stating the essential terms of the agreement for providing goods or services to the local
governmental entity that is properly executed on behalf of the local governmental entity.”
Id. § 271.151(2).8
On appeal, KCS and PoCCA center their arguments on whether the 1997 Joint
Operating Agreement called for KCS to provide “goods or services” to PoCCA such that
the agreement qualifies as a “contract subject to this subchapter” under section
271.151(2). See id. This particular dispute turns on the interpretation of the Texas
Supreme Court’s opinion in Ben Bolt-Palito Blanco Consolidated Independent School
District v. Texas Political Subdivisions Property/Casualty Joint Self-Insurance Fund, 212
S.W.3d 320 (Tex. 2006).9 However, even assuming that the 1997 Joint Operating
8
Both parties agree that PoCCA is a “local governm ental entity” as defined in the statute. See T EX .
L O C . G O V ’T C OD E A N N . § 271.151(3) (Vernon 2005).
9
In Ben Bolt, the suprem e court considered whether chapter 271 had waived the im m unity of a state-
sponsored self-insurance fund (the “Fund”) when one of the Fund’s m em bers, a school district (the “District”),
sued the Fund after the Fund denied a claim for benefits under the District’s insurance policy. Ben Bolt-Palito
Blanco Consol. Indep. Sch. Dist. v. Tex. Political Subdivisions Prop./Cas. Joint Self-Ins. Fund, 212 S.W .3d
320, 322 (Tex. 2006). The Fund argued, as PoCCA does here, that the contract at issue is not a “contract
subject to this subchapter” because it does not call for goods or services to be provided to the Fund. Id. at
327. The suprem e court disagreed, noting that the Fund’s m em bers, including the District, “elect a governing
board, and a board subcom m ittee resolves claim s disputes. To that extent, at least, the Fund’s m em bers
provide services to the Fund.” Id. The Court then concluded:
Because the Fund is a “local governm ent entity” as defined by Section 271.151(3) and “was
authorized . . . to enter” and did in fact enter into “a written contract stating the essential
term s of the agreem ent for providing [insurance] services to [a] local governm ental entity,”
which agreem ent was properly executed, Tex. Loc. Gov’t Code § 271.151(2), we conclude
that the statutory waiver applies to this insurance-coverage dispute.
Id. at 328 (brackets and ellipsis in original).
According to KCS and at least one other court of appeals, the Ben Bolt decision represents a very
broad construction of section 271.151(2), under which the provision of any goods or services to the local
governm ent entity m akes the contract “subject to this subchapter,” regardless of whether that provision of
goods or services bears any relation to the underlying dispute. See Clear Lake City W ater Auth. v.
Friendswood Dev. Co., 256 S.W .3d 735, 749-50 (Tex. App.–Houston [14th Dist.] 2008, pet. dism ’d). This
interpretation of Ben Bolt assum es that the C ourt’s conclusion rested on the fact that the school district
“elect[s] a governing board” for the Fund, thereby providing a “service” that brought the contract at issue under
the purview of chapter 271.
On the other hand, as PoCCA notes, the Ben Bolt Court appears to state that its decision instead
rested on the fact that the Fund provided “[insurance] services” to the District under the contract at issue.
11
Agreement was a “contract subject to this subchapter” under section 271.151(2), PoCCA’s
immunity has not been waived because the damages that KCS seeks are not of the type
recoverable under the statute.
For immunity to be waived under section 271.152, the claimant must plead damages
that are recoverable under section 271.153. See Tooke, 197 S.W.3d at 346 (holding that
defendant city’s immunity was not waived because plaintiffs sought only lost profits, which
are consequential damages that are not recoverable under section 271.153); City of Alton
v. Sharyland Water Supply Corp., 277 S.W.3d 132, 145-46 (Tex. App.–Corpus Christi
2009, pet. filed) (op. on reh’g); City of Houston v. S. Elec. Servs., 273 S.W.3d 739, 744
(Tex. App.–Houston [1st Dist.] 2008, pet. denied) (noting that “[s]ection 271.153 does not
retract the privilege granted in [s]ection 271.152 to adjudicate the claim for breach, if a
plaintiff alleges facts to support such a claim and seeks recovery only of damages to the
extent allowed” (emphasis added)); Judson Indep. Sch. Dist. v. ABC/Associated Benefit
Consultants, Inc., 244 S.W.3d 617, 621 (Tex. App.–San Antonio 2008, no pet.); but cf. City
of Mesquite v. PKG Contracting, Inc., 263 S.W.3d 444, 448 (Tex. App.–Dallas 2008, pet.
filed) (noting that “statutory limitations on [plaintiff]’s recoverable damages [in section
271.153] do not deprive the trial court of subject matter jurisdiction to adjudicate [plaintiff]’s
breach of contract claims”). Section 271.153 states:
(a) The total amount of money awarded in an adjudication brought
against a local governmental entity for breach of a contract subject to
this subchapter is limited to the following:
(1) the balance due and owed by the local governmental entity
under the contract as it may have been amended, including
any amount owed as compensation for the increased cost to
Because the contract at issue called for “[insurance] services” to be provided “to [a] local governm ent entity,”
the Court reasoned, then the Fund’s im m unity had been waived for the underlying insurance coverage dispute.
See Ben Bolt, 212 S.W .3d at 328 (brackets in original). This interpretation suggests that the Ben Bolt Court
em ployed a m uch narrower construction of section 271.151(2). Moreover, as PoCCA notes, it would only
apply if both parties to a contract are local governm ent entities, which is not the case here.
In any event, we need not resolve this am biguity because, even assum ing that the 1997 Joint
Operating Agreem ent is a “contract subject to this subchapter,” see T EX . L O C . G O V ’T C OD E A N N . § 271.151(2),
PoCCA’s im m unity has not been waived with respect to KCS’s claim s for the reasons set forth herein.
12
perform the work as a direct result of owner-caused delays or
acceleration;
(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; and
(3) interest as allowed by law.
(b) Damages awarded in an adjudication brought against a local
governmental entity arising under a contract subject to this subchapter
may not include:
(1) consequential damages, except as expressly allowed under
Subsection (a)(1);
(2) exemplary damages; or
(3) damages for unabsorbed home office overhead.
TEX . LOC . GOV’T CODE ANN . § 271.153. Consequential damages are defined as “‘those
damages which result naturally, but not necessarily,’ from the defendant’s wrongful acts.”
Baylor Univ. v. Sonnichsen, 221 S.W.3d 632, 636 (Tex. 2007) (quoting Henry S. Miller Co.
v. Bynum, 836 S.W.2d 160, 163 (Tex. 1992) (Phillips, C.J., concurring)). Direct damages,
on the other hand, compensate for the loss that is the necessary and usual result of the act.
Id. (citing Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 816 (Tex. 1997)).
Here, KCS asserts that PoCCA’s allegedly unfulfilled promise to maintain, operate,
and provide free and open access to the Tule Lake Lift Bridge represents a “balance due
and owed [by PoCCA to KCS] under the contract.” See TEX . LOC . GOV’T CODE ANN . §
271.153. We disagree. The only promises alleged to have been made by PoCCA in the
contracts at issue were to provide certain services to KCS and other rail carriers. Any
failure to fulfill those promises would not be, strictly speaking, directly remediable by money
damages. Moreover, the agreements did not provide that any monetary compensation such
as liquidated damages would be owed to an aggrieved party in the event of a material
breach. The damages that KCS claims are, at most, “natural[] but not necessar[]y” results
of PoCCA’s alleged wrongful acts. See Sonnichsen, 221 S.W.3d at 636. We therefore
conclude that, even if KCS’s underlying factual allegations are taken as true, there is no
13
“balance due and owed” to KCS under any of the agreements. See TEX . LOC . GOV’T CODE
ANN . § 271.153; City of Alton, 277 S.W.3d at 146. Accordingly, PoCCA’s sovereign
immunity from suit has not been clearly and unambiguously waived by section 271.152 of
the local government code. See Tooke, 197 S.W.3d at 346; City of Alton, 277 S.W.3d at
145-46; City of Houston, 273 S.W.3d at 744; Judson Indep. Sch. Dist., 244 S.W.3d at 621.
KCS’s second issue is overruled.10
4. Declaratory Judgment Action
By its fourth issue, KCS argues that, by filing the underlying declaratory judgment
action, PoCCA waived its sovereign immunity from suit with respect to KCS’s attorney’s
fees.
As noted, when a state entity contracts with a private party, it waives immunity from
liability but not from suit. Tooke, 197 S.W.3d at 332. However, when a governmental entity
initiates suit against a private party, it waives immunity from suit with regard to any claims
that are “germane to, connected to, and properly defensive to the [governmental entity]’s
claims, to the extent [the private party]’s claims offset those asserted by the [governmental
entity].” Reata Constr. Corp., 197 S.W.3d at 378. In Reata, a property owner sued a
government contractor and subcontractor for negligence. Id. at 373. The subcontractor
filed a third-party claim against the City of Dallas (“the City”), which issued the contract. Id.
Before answering the third-party claim, the City intervened in the case, asserting negligence
claims against the contractor and subcontractor. Id. The City also filed a plea to the
jurisdiction asserting sovereign immunity from suit, which the trial court granted. Id. The
court of appeals reversed the trial court’s decision, finding that when a governmental entity
intervenes in a suit, “immunity still forecloses suit against that governmental entity.” City of
Dallas v. Reata Constr. Corp., 83 S.W.3d 392, 399 (Tex. App.–Dallas 2002), rev’d, 197
10
Because we find that PoCCA’s im m unity from suit has not been clearly and unam biguously waived
with respect to KCS’s claim s regarding the Tule Lake Lift Bridge, it follows that PoCCA would be im m une to
the enforcem ent of any arbitration award based upon those claim s. Accordingly, we need not address KCS’s
third issue arguing that its claim s are in fact covered by the arbitration agreem ents entered into by the parties.
See T EX . R. A PP . P. 47.1.
14
S.W.3d 371. The Texas Supreme Court disagreed, noting that:
Once it asserts affirmative claims for monetary recovery, the City must
participate in the litigation process as an ordinary litigant, save for the
limitation that the City continues to have immunity from affirmative damage
claims against it for monetary relief exceeding amounts necessary to offset
the City’s claims.
Reata Constr. Corp., 197 S.W.3d at 37711; see Kinnear, 14 S.W.3d at 300 (finding immunity
from suit waived when private party sought attorney’s fees as a consequence of a suit
brought by the State); TML Intergovernmental Employee Benefits Pool v. Prudential Ins. Co.
of Am., 144 S.W.3d 600, 607 (Tex. App.–Austin 2004, pet. denied) (concluding that when
government entity brought a declaratory judgment action against a private party, “it waived
immunity from suit as to [the private party]’s request for attorney’s fees under the same
statute”).
PoCCA argues that it did not request attorney’s fees in its petition for declaratory
relief and, therefore, that it did not waive any immunity from suit by filing the petition.
However, in its original petition, PoCCA asked for declaratory and injunctive relief as well
as “[s]uch other and further relief to which [PoCCA] may show itself to be justly entitled.”
Under the Uniform Declaratory Judgments Act (“UDJA”), “[s]uch other and further relief”
arguably includes court costs and attorney’s fees. See TEX . CIV. PRAC . & REM . CODE ANN .
§ 37.009 (Vernon 2008) (“In any proceeding under this chapter, the court may award costs
and reasonable and necessary attorney’s fees as are equitable and just.”); see also
Barshop v. Medina County Underground Water Conservation Dist., 925 S.W.2d 618, 637
11
The Reata Court recognized that the public policy underlying the im m unity doctrine includes
protection of the legislature’s role in m anaging fiscal affairs through the appropriations process. Reata Constr.
Corp., 197 S.W .3d at 375. Nevertheless, the Court justified its decision by noting:
[I]f the governm ental entity interjects itself into or chooses to engage in litigation to assert
affirm ative claim s for m onetary dam ages, the entity will presum ably have m ade a decision
to expend resources to pay litigation costs. If the opposing party’s claim s can operate only
as an offset to reduce the governm ent’s recovery, no tax resources will be called upon to pay
a judgm ent, and the fiscal planning of the governm ental entity should not be disrupted.
Therefore, a determ ination that a governm ental entity’s im m unity from suit does not extend
to a situation where the entity has filed suit is consistent with the policy issues involved with
im m unity.
Id.
15
(Tex. 1996) (noting that, under the UDJA, a party need not prevail on the merits in order to
be awarded attorney’s fees).
Regardless of whether PoCCA’s request for “[s]uch other and further relief”
constitutes an implicit request for attorney’s fees, we nevertheless conclude that PoCCA
retained its immunity from suit because the trial court ultimately declined to award any such
fees to PoCCA. As noted, even when a governmental entity initiates suit, as PoCCA did
here, it retains immunity from affirmative claims against it for monetary relief exceeding
amounts necessary to offset the governmental entity’s claims. Reata Constr. Corp., 197
S.W.3d at 377. Here, even though the trial court had jurisdiction to award costs and
attorney’s fees to PoCCA, the final judgment reflects that the trial court declined to do so.12
Because the trial court awarded no costs, fees, or other monetary relief to PoCCA, there
is no amount of monetary relief that could have been awarded to KCS that would have
merely “offset” PoCCA’s claims. See id. at 378.
KCS’s fourth issue is overruled.
III. CONCLUSION
We affirm the judgment of the trial court.
DORI CONTRERAS GARZA,
Justice
Delivered and filed the
10th day of December, 2009.
12
See supra n.4.
16