the City of Austin D/B/A Austin Energy And Larry Weis, General Manager, Austin Energy v. MET Center NYCTEX, Phase II, Ltd. ( 2014 )

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-11-00662-CV
The City of Austin d/b/a Austin Energy; and Larry Weis, General Manager,
Austin Energy, Appellants
v.
MET Center NYCTEX, Phase II, Ltd., Appellee
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 98TH JUDICIAL DISTRICT
NO. D-1-GN-10-004269, HONORABLE GISELA D. TRIANA, JUDGE PRESIDING
MEMORANDUM OPINION
In this interlocutory appeal, the City of Austin d/b/a Austin Energy, and Larry Weis,
General Manager, Austin Energy (jointly the City) challenge the trial court’s denial of their plea to
the jurisdiction based on governmental immunity. MET Center NYCTEX, Phase II, Ltd. (MET
Center) sued the City for breach of contract and declaratory relief regarding the parties’ rights and
obligations under the parties’ contract and certain city ordinances. Because we conclude that the
City has no immunity from this suit, we affirm the trial court’s denial of the City’s plea to
the jurisdiction.
BACKGROUND
MET Center, a commercial developer initiating a project targeting high technology
electric utility service users, and the City of Austin d/b/a Austin Energy (the City) entered into an
agreement whereby MET Center constructed a specialized conduit system known as an
“underground duct bank system” to carry high levels of electric service required by technology-based
users on Austin Energy’s electric distribution lines.1 MET Center constructed the duct bank to the
City’s specifications, and the City inspected and “accepted” it. Disputes subsequently arose over the
use of the duct bank, and MET Center sued the City alleging breach of contract, seeking declaratory
relief, and asserting ultra vires claims against the manager of Austin Energy. The City filed a plea
to the jurisdiction asserting that (1) it is immune from Met Center’s breach of contract claim because
section 271.152 of the Local Government Code, which provides a limited waiver of immunity for
certain contracts the City enters into, does not apply to the contract in this case, and (2) Met Center’s
claims for declaratory relief are merely an attempt to circumvent the City’s immunity to the breach
of contract claims. See Tex. Loc. Gov’t Code § 271.152; Tex. Civ. Prac. & Rem. Code § 37.004.
The trial court denied the City’s plea to the jurisdiction, and this appeal followed.
DISCUSSION
On appeal the City argues that it is immune from MET Center’s breach of contract
claim because section 271.152 of the Local Government Code does not apply so as to provide a
limited waiver of immunity, that MET Center’s claims for declaratory relief are an attempt to
circumvent the City’s immunity, and that MET Center failed to assert a proper ultra vires claim
1
The facts and procedural background of this case are well known to the parties, and we
therefore will not recite them in great detail in this opinion. See Tex. R. App. P. 47.1 (appellate
court opinions should be as “brief as practicable”), 47.4 (memorandum opinions should be “no
longer than necessary to advise the parties of the court’s decision and the basic reasons for it”).
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against Austin Energy’s manager. However, because we conclude that the City has no governmental
immunity from MET Center’s claims, we do not reach the City’s issues.
Austin Energy is the name under which the City provides electric utility services to
its customers. It is well settled that with respect to tort claims, the operation and maintenance of a
municipal utility is a proprietary function, for which the municipality enjoys no governmental
immunity.2 See Tex. Civ. Prac. & Rem. Code § 101.0215(b)(1) (listing operation and maintenance
of municipal utility as proprietary function); Tooke v. City of Mexia, 197 S.W.3d 325, 343 (Tex.
2006) (municipality not immune from suits for torts committed in performance of proprietary
functions); San Antonio Indep. Sch. Dist. v. City of San Antonio, 550 S.W.2d 262, 264 (Tex. 1976)
(operation of public utility is proprietary function under common law). Recently, this Court held that
(1) under the common law, the proprietary-governmental dichotomy also applies to contract claims
and (2) Local Government Code section 271.152 did not abrogate the common law’s treatment of
that dichotomy. See City of Georgetown v. Lower Colo. River Auth., 413 S.W.3d 803, 810–11, 814
(Tex. App.—Austin 2013, pet. filed); see also City of Seguin v. Lower Colo. River Auth.,
No. 03-13-00165-CV, 2014 Tex. App. LEXIS 401, at *3–4 (Tex. App.—Austin Jan. 15, 2014,
no pet. h.) (mem. op.) (explaining holding of City of Georgetown and following its reasoning in
related case).
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A proprietary function is one a municipality performs in its discretion for the benefit of its
inhabitants, as opposed to a governmental function, which is enjoined on a municipality by the state
to be exercised in the interest of the general public. See Tex. Civ. Prac. & Rem. Code § 101.0215(a),
(b); City of Georgetown v. Lower Colo. River Auth., 413 S.W.3d 803, 808–09 (Tex. App.—Austin
2013, pet. filed) (discussing history and rationale of proprietary-governmental dichotomy).
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In City of Georgetown, the Lower Colorado River Authority (LCRA) sued the city
for declaratory relief concerning the parties’ rights and obligations under a contract for the city’s
purchase of electricity from the LCRA for resale to the city’s retail customers through its municipal
utility. See 413 S.W.3d at 805–06. This Court concluded that the city was acting in its proprietary
capacity when it entered into its contract with the LCRA and therefore had no immunity from the
suit. Id. at 814 (citing Tex. Civ. Prac. & Rem. Code § 101.0215(b)(1) and Tooke, 197 S.W.3d at 344
(applying section 101.0215’s classification of municipal function in contract case)). Similarly, in
this case, we conclude that the City was acting in its proprietary capacity when it agreed with MET
Center to “collaborate about an underground duct bank system available for Austin Energy’s electric
distribution lines.” See Tex. Civ. Prac. & Rem. Code § 101.0215(b)(1); City of Georgetown,
413 S.W.3d at 805–06. Consequently, the City has no governmental immunity from MET Center’s
claims, and the trial court did not err in denying the City’s plea to the jurisdiction. See City of
Georgetown, 413 S.W.3d at 814; City of Seguin, 2014 Tex. App. LEXIS 401, at *4.
CONCLUSION
We affirm the trial court’s denial of the City of Austin’s plea to the jurisdiction.3
3
MET Center has filed a motion for temporary order pursuant to Texas Rule of Appellate
Procedure 29.3, and the City has filed a motion to strike MET Center’s motion for temporary orders
and an agreed motion for leave to file its amended motion to strike MET’s Center’s motion for
temporary orders, all of which are pending before this Court. These motions are dismissed as moot.
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_____________________________________________
Melissa Goodwin, Justice
Before Justices Puryear, Henson, and Goodwin
Justice Henson not participating
Affirmed
Filed: February 6, 2014
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