North Central Texas Council of Governments v. MRSW Management, LLC ( 2013 )


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  •       TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
    NO. 03-12-00692-CV
    North Central Texas Council of Governments, Appellant
    v.
    MRSW Management, LLC, Appellee
    FROM THE DISTRICT COURT OF TRAVIS COUNTY, 200TH JUDICIAL DISTRICT
    NO. D-1-GN-11-002447, HONORABLE AMY CLARK MEACHUM, JUDGE PRESIDING
    CONCURRING OPINION
    I join Justice Goodwin’s opinion. I write separately to express my concern that our
    Majority Opinion, when combined with the opinion of the San Antonio Court of Appeals in MRSW
    Management LLC v. Texas Department of Public Safety, ___ S.W.3d ___, No. 04-12-00715-CV,
    
    2013 WL 1830968
    (Tex. App.—San Antonio May 1, 2013, no pet. h.), may produce a result that is
    contrary to the legislature’s intent.
    As stated in Justice Goodwin’s opinion, MRSW Management agreed to provide
    goods and services for the sole benefit of the Texas Department of Public Safety (DPS). For
    purposes of entering into a contract, however, the North Central Texas Council of Governments
    (NCTCOG) was inserted as a “conduit for funding” in between those parties. While the goods and
    services themselves were to go directly from MRSW to the DPS, “[t]he funds to pay for the services
    were to flow from DPS to NCTCOG to MRSW.” Slip Op. at 2. And there were two contracts, one
    between DPS and NCTCOG and another (in the form of purchase orders) between NCTCOG and
    MRSW. There was no contract between DPS and MRSW, at least not directly.
    It is quite common for a governmental entity to enter into a contract to purchase goods
    or services from a private party. Not surprisingly, disputes occasionally arise regarding performance
    of those contracts. Sometimes those disputes lead the governmental entity to conclude that it can
    and should refuse to pay the contract price, even if the goods and services have already been
    delivered. Sometimes that conclusion is warranted and sometimes it is not. Societies wisely
    establish neutral arbiters, such as courts and judges, to resolve contract disputes. The doctrines of
    governmental and sovereign immunity, however, usually have the effect of eliminating a neutral
    arbiter in disputes that involve a governmental entity, thereby leaving a private party in the
    unfortunate position of having the governmental entity itself be the sole decider of the correctness
    of its decision not to pay under the contract.
    In an effort to alleviate that unfairness, the legislature has, in the last 15 years or so,
    tried to ensure that parties that enter into contracts with governmental entities have a just and
    meaningful way to resolve any such contract disputes and, if they show themselves entitled, get paid.
    One such process created by the legislature is contained in Subchapter I of Chapter 271 of the Texas
    Local Government Code. Under that subchapter, governmental immunity is waived when a private
    party has entered into a contract to provide goods or services “to [a] local governmental entity.” See
    Tex. Local Gov’t Code §§ 271.151, .152. That is all well and good, but in the present case it is
    undisputed that MRSW did not provide any goods or services “to NCTCOG.” Rather, as noted
    in Justice Goodwin’s opinion, the goods and services were provided directly to the DPS, so
    2
    Subchapter I of Chapter 271 is inapplicable and does not waive NCTCOG’s governmental immunity
    under these circumstances.
    Another process by which the legislature has attempted to alleviate the unfairness
    noted above is through Chapter 2260 of the Texas Government Code. That chapter established a
    procedure by which a private party that “directly” enters into a contract with a Texas governmental
    entity may assert a breach-of-contract claim to that entity. Tex. Gov’t Code § 2260.051. If the claim
    cannot be resolved by negotiation or mediation, the private party may request a contested-case
    hearing before the State Office of Administrative Hearings. 
    Id. § 2260.102.
    In a separate claim and
    subsequent lawsuit against the DPS, MRSW has sought to invoke this procedure. But in that case
    the San Antonio Court of Appeals has held that Chapter 2260 is not available to MRSW because
    MRSW did not have a contract “directly” with the DPS. See 
    2013 WL 1830968
    , at *3. Rather,
    MRSW’s contract was with NCTCOG, the “conduit for funding,” and the court held that Texas
    agency law did not alter this result. 
    Id. at *3-4.
    That is indeed a Catch-22 situation and threatens
    to deprive MRSW of any remedy at all.
    Even more unfortunate is that the confluence of these opinions could create an avenue
    by which any Texas governmental entity could, in future contracts with private parties, avoid the
    neutral arbiter intended by the legislature simply by inserting a “middle-man” in the transaction. I
    do not believe the legislature intended for such a loophole to exist. This Court, however, is not in
    a position to change that outcome. The purpose of this concurring opinion is simply to call this
    anomaly to the attention of the supreme court and legislature.
    3
    _____________________________________________
    J. Woodfin Jones, Chief Justice
    Joined by Justices Goodwin and Field
    Filed: June 20, 2013
    4
    

Document Info

Docket Number: 03-12-00692-CV

Filed Date: 6/20/2013

Precedential Status: Precedential

Modified Date: 9/17/2015