San Jacinto River Authority v. City of Conroe, Texas and City of Magnolia, Texas

In The
Court of Appeals
Ninth District of Texas at Beaumont
__________________
NO. 09-20-00180-CV
__________________
SAN JACINTO RIVER AUTHORITY, Appellant
V.
CITY OF CONROE, TEXAS AND CITY OF
MAGNOLIA, TEXAS, Appellees
__________________________________________________________________
On Appeal from the 284th District Court
Montgomery County, Texas
Trial Cause No. 19-09-12611-CV
__________________________________________________________________
MEMORANDUM OPINION
This is an interlocutory appeal of a trial court’s order granting pleas to the
jurisdiction based on governmental immunity. San Jacinto River Authority
(“SJRA”) filed this appeal to challenge the trial court’s order granting the Appellees
City of Conroe and City of Magnolia’s (“the Cities”) pleas to the jurisdiction.1 In
1
See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(8) (permitting
interlocutory appeals from rulings on a governmental unit’s plea to the jurisdiction).
1
this appeal, we examine certain sections of Subchapter I of the Texas Local
Government Code known as the Local Government Contract Claims Act (“the Act”),
which set forth certain requirements for the adjudication of claims arising under
written contracts with local governmental entities. 2 SJRA alleged that the Cities have
breached certain contractual agreements with SJRA. The Cities alleged that the
claims asserted by SJRA against them should be dismissed because they have
governmental immunity from the claims, and the trial court agreed. SJRA argues
that the waiver of immunity provision in section 271.152 applies, and that the trial
court erred in granting the pleas to the jurisdiction. Because we conclude on the
record before us that the suit involves allegations of both payment and performance
defaults, and that SJRA failed to comply with a pre-suit limitation on the waiver of
immunity contained in the statute, we affirm.
Background and Related Litigation
The underlying dispute between the parties relates to a Groundwater
Reduction Plan (“GRP”) and certain contracts (“GRP Contracts”) or agreements
executed between the Cities and SJRA, which have been discussed in other court
opinions.3 SJRA “is a legislatively created conservation and reclamation district
2
See Tex. Loc. Gov’t Code Ann. §§ 271.151-160.
3
See, e.g., City of Conroe v. San Jacinto River Auth., 602 S.W.3d 444, 448
(Tex. 2020); Lone Star Groundwater Conservation Dist. v. City of Conroe, No. 09-
18-00383-CV, 2019 Tex. App. LEXIS 1089 (Tex. App.—Beaumont Feb. 14, 2019,
no pet.) (mem. op.); Lone Star Groundwater Conservation Dist. v. City of Conroe,
2
charged with regulating the water resources of the San Jacinto River Basin.”4 SJRA
developed what it styled as a “Groundwater Reduction Plan” in response to rules
promulgated by the Lone Star Groundwater Conservation District (“Lone Star”).5
Lone Star is a legislatively created entity with certain statutory authority under
Chapter 36 of the Texas Water Code. 6 In 2008, Lone Star required all large-volume
groundwater users—including the Cities—to develop and implement plans for
reducing their usage substantially.7 Mandatory groundwater-usage cutbacks took
effect in January 2016. 8 In anticipation of the Lone Star cutbacks, SJRA developed
a Groundwater Reduction Plan to draw surface water from Lake Conroe, treat the
water, and sell it to large-volume users. 9 The Groundwater Reduction Plan
developed by SJRA requires large volume groundwater users in Montgomery
County to reduce the production of groundwater by thirty percent or be subject to
financial penalties.10 SJRA entered into Contracts (“GRP Contracts”) with about
eighty water-system operators (“Participants”) in 2010, agreeing to provide them
515 S.W.3d 406, 410 (Tex. App.—Beaumont 2017, pet. dism’d by agr.) (hereinafter
“LSGCD”).
4
City of Conroe, 602 S.W.3d at 448.
5
Id.
6
Act of May 17, 2001, 77th Leg., R.S. ch. 1321, 2001 Tex. Gen. Laws 3246-
50.
7
City of Conroe, 602 S.W.3d at 448.
8
Id.
9
Id.
10
Quadvest v. San Jacinto River Auth., No. 4:19-CV-4508, 2020 U.S. Dist.
LEXIS 156144, at *4 (S.D. Tex. Aug. 14, 2020).
3
with surface water in exchange for monthly payments.11 The Cities executed GRP
Contracts with SJRA in 2010. Conroe’s GRP Contract with SJRA runs through
2089, and Magnolia’s GRP Contract runs through 2045.
SJRA asserts that it uses revenues from the Participants’ payments to “pay
down” the bonds SJRA used to finance the project. Although SJRA’s enabling
statute12 empowers it to set rates sufficient to repay its bonds, this case is not about
the bonds or funding for SJRA’s projects. Rather, the issue before us involves the
application of the Legislature’s statutory waiver of immunity in Chapter 271.13
Before we examine the application of the statute, we briefly review some of the
underlying facts.
Underlying Facts
In 2015, SJRA began delivering water to the Cities under their respective GRP
Contracts, and Lone Star’s groundwater-usage cutbacks took effect in January
2016. 14 Several Participants, including the City of Conroe, filed a lawsuit against
Lone Star in Montgomery County in 2015 challenging Lone Star’s mandatory
groundwater-usage cutbacks as unconstitutional and exceeding Lone Star’s statutory
11
City of Conroe, 602 S.W.3d at 448
12
Act of May 25, 1967, 60th Leg., R.S., ch. 547, § 3(xviii), 1967 Tex. Gen.
Laws 1212, 1214 (generally empowering SJRA to establish rates and other charges
for water, water transmission, treatment, and related services and facilities).
13
See Tex. Loc. Gov’t Code Ann. §§ 271.151-.160.
14
Id.
4
authority. 15 The trial court in that case ruled that Lone Star’s rules requiring a
reduction in groundwater usage “were adopted by [Lone Star] without legal
authority and consequently are, and have been, unlawful, void, and
unenforceable[.]” Lone Star initially appealed that ruling and then dismissed its
appeal, and the trial court entered a Final Judgment declaring Lone Star’s rules
requiring a reduction in groundwater usage to be unlawful, void, and
unenforceable.16
During certain years, Montgomery County has experienced very high rainfall
amounts, which SJRA contends leads to a reduced demand for groundwater and a
reduction in GRP revenues and funding.17 SJRA promulgated a new rate order to be
effective in 2017 (a high rainfall year) that increased the rates and charges for water
under the GRP Contracts. 18 In response to the new increased rates, the Cities passed
resolutions alleging that SJRA was overcharging for water in violation of the GRP
Contracts and questioning the legitimacy of the entire GRP program.19 SJRA then
15
See LSGCD, 515 S.W.3d at 410 (In an interlocutory appeal of the trial
court’s rulings denying Lone Star’s and its individual directors’ pleas to the
jurisdiction, we affirmed in part and reversed and remanded in part.).
16
See Lone Star Groundwater Conservation Dist., 2019 Tex. App. LEXIS
1089.
17
In its First Amended Counterclaim and Cross-Claim, SJRA stated, “Wet
years reduce participants’ demand for water, lowering SJRA’s GRP revenue and
ability to pay project debt, fund operations, and maintain and replenish reserves.”
18
See City of Conroe, 602 S.W.3d at 449.
19
See id.
5
filed a lawsuit in Travis County against certain “Participant cities,” Conroe,
Magnolia, and Splendora, alleging that the rate increase was justified and seeking
declarations under the Expedited Declaratory Judgment Act (“EDJA”).20 Conroe,
Magnolia, and Splendora filed pleas to the jurisdiction in the Travis County suit
asserting governmental immunity.21 The district court denied the cities’ pleas to the
jurisdiction, and the Austin Court of Appeals ruled for SJRA.22 On petition for
review to the Texas Supreme Court, the Court reversed in part and remanded,
holding that:
[T]he EDJA permits the trial court to exercise jurisdiction over SJRA’s
proposed Authority and Validity Declarations insofar as they concern
the valid execution of the GRP contracts, but it does not confer
jurisdiction over the proposed Compliance Declaration. We also hold
that the Cities’ governmental immunity does not bar this EDJA suit.23
Pleadings in the Trial Court
a. Original Petition Filed by the Non-governmental Entities
The underlying case in this interlocutory appeal began in September 2019
when six privately-owned water and sewer utility companies, Quadvest, L.P., d/b/a
Quadvest Water and Sewer Utility, Woodland Oaks Utility, L.P., Everett Square,
Inc., E.S. Water Consolidators, Inc., Utilities Investment Co., Inc., and T&W Water
20
Id.; see also Tex. Gov’t Code Ann. §§ 1205.001-.152.
21
City of Conroe, 602 S.W.3d at 450.
22
Id.
23
Id. at 458-59.
6
Service Company (collectively the “Non-governmental Plaintiffs”), filed suit against
SJRA (the “Quadvest Suit”). 24, 25 In their original petition filed against SJRA in the
Quadvest Suit, the Non-governmental Plaintiffs asserted a claim against SJRA for
breach of the GRP Contracts and alleged:
SJRA breached the GRP Contracts by failing to comply with its
contractual obligation to provide a reasonable allowance for Plaintiffs’
costs of operating and maintain[ing] their groundwater wells, and
therefore SJRA failed to comply with its obligation to set groundwater
pumpage fees at a rate such that groundwater producers are neither
benefitted nor penalized for relying on their groundwater resources.
SJRA’s failure to comply with this contractual obligation caused
Plaintiffs’ injuries by requiring Plaintiffs to pay exorbitantly high
pumpage fees to SJRA for use of Plaintiffs’ own groundwater.
24
The Quadvest Suit was filed as trial cause No. 19-09-12611 in the 284th
District Court for Montgomery County, Texas.
25
Certain Participants (including Quadvest) also have litigation pending
against SJRA about the GRP Contracts in federal court. In 2019, several private
utility companies sued SJRA in federal district court alleging violations of federal
antitrust law, seeking declaratory relief based on the illegality and unenforceability
of their contracts with SJRA, and seeking injunctive relief to enjoin SJRA from
enforcing the contracts. Quadvest, 2020 U.S. Dist. LEXIS 156144, at **1, 8.
Plaintiffs argued in part that they had to sign contracts with SJRA to avoid the risk
of penalty from violating the Lone Star Ground Water Reduction Management Plan,
and a state court later entered a final judgment that Lone State lacked the legal
authority to require Montgomery County users to reduce their groundwater
consumption by thirty percent. Id. at **8, 28-29. SJRA filed a motion to dismiss the
claims. Id. at *9. The federal district court denied SJRA’s motion to dismiss. Id. at
*30. On appeal, the Fifth Circuit affirmed the district court’s denial based on state-
action immunity and explained that SJRA’s enabling statute that authorized it to
participate in the market did not constitute authority to monopolize that market.
Quadvest, L.P. v. San Jacinto River Auth., 7 F.4th 337, 347-48 (5th Cir. 2021).
7
The Non-governmental Plaintiffs are not a party to this appeal. We mention their
claim solely to explain the context of the pleadings filed by SJRA against the Cities
in the Quadvest Suit.
b. SJRA’s Claims Against the Cities
In March 2020, SJRA filed an Original Counterclaim and Cross-Claim in the
Quadvest Suit. 26 The Cities filed pleas to the jurisdiction and answers subject to the
pleas to the jurisdiction, and First Amended Pleas to the Jurisdiction and answers.
SJRA then filed a First Amended Counterclaim and Cross-Claim against the Cities.
SJRA’s original and first amended cross-claims named the Cities as “cross-
defendants.” 27 SJRA sought declaratory relief and also asserted a breach of contract
claim against the Cities. SJRA requested damages, attorney’s fees and costs. SJRA’s
original cross-claim against the Cities did not plead a waiver of immunity, but in its
Amended Counterclaim and Cross-Claim, SJRA pleaded that governmental
26
SJRA filed its counterclaim and what it styled as it’s original “cross-claim”
alleging for the first time claims against the Cities. At that time, the Cities were not
parties to the Quadvest Suit that had been filed by the Non-governmental Plaintiffs
against SJRA. As to SJRA’s claims against the Cities, the original pleading SJRA
filed against the Cities should have been styled as a third-party claim because the
Cities were not parties to the Quadvest Suit. For purposes of resolving the issues
now before us we will continue to refer to SJRA’s pleadings against the Cities as
“cross-claims.” The cross-claims were filed by SJRA on March 27, 2020, in the
Montgomery County Quadvest Suit—the same day the Texas Supreme Court issued
its opinion in the appeal of the Travis County lawsuit in City of Conroe. See 602
S.W.3d at 448.
27
The original cross-claim also named the City of Splendora as a cross-
defendant. In its amended cross-claim, SJRA non-suited the City of Splendora.
8
immunity was waived under the common law, under section 11.05 of the GRP
Contracts, and under section 271.152 of the Texas Local Government Code.
In its original counterclaim and cross-claim, SJRA asserted a claim for breach
of contract and declaratory judgment against all Plaintiffs and the Cities, seeking a
judicial declaration “that SJRA’s fees, rates, and charges for fiscal years 2017, 2018,
2019, and 2020 comply with the GRP Contracts.” After the Cities filed their Original
and First Amended Pleas to the Jurisdiction, SJRA filed its First Amended Cross-
Claim. Therein, in paragraph 2, SJRA described the “Nature of the Action” as a
“Counterclaim and Cross-Claim for declaratory relief and breach of contract relating
to the parties’ rights and obligations under contracts between each of the
Plaintiffs/Counter-Defendants and Cross-Defendants[,]” and it alleged that each of
the “contract counterparties in this lawsuit have and continue to claim that SJRA’s
fees, rates, and charges…are not in compliance with the GRP Contracts[;]” that each
of the “Plaintiffs/Counter-Defendants and Cross-Defendants” have either “refused
to pay SJRA’s rates” or “have disputed those rates” as not in compliance with the
GRP Contracts; that “[a] real, substantial, and ju[st]iciable controversy exists
between the parties concerning the compliance of SJRA’s rates with the GRP
Contracts[;]” and that “the Cities [] breached their GRP contracts with SJRA, for
which SJRA seeks damages and other relief.” Further, in paragraph 28 of the First
Amended counterclaim and cross-claim, SJRA alleged:
9
28. In the years since Conroe’s and Magnolia’s refusal to pay the
fiscal year 2017 rate, the Cities and the Utilities have disputed SJRA’s
compliance with the GRP Contract in setting the rates for fiscal years
2017, 2018, 2019, and 2020. A real, substantial, and ju[st]iciable
controversy exists between the parties concerning the compliance of
SJRA’s rates with the GRP Contracts. Moreover, Conroe and Magnolia
have in fact failed to pay the rates set for fiscal years 2017, 2018, 2019,
and 2020.
In subsequent paragraphs of SJRA’s First Amended counterclaim and cross-claim,
it labeled its first cause of action as a “Declaratory Judgment Against All Counter-
Defendants[,]” and it labeled its second cause of action as a “Breach of Contract—
Against the [Cities.]” In paragraphs 33 through 35, SJRA described its second cause
of action by first realleging the “material facts alleged in the preceding
paragraphs[,]” and further alleged that “SJRA performed under the respective GRP
Contracts[,]” that the Cities “breached their respective contracts[,]” and that the
Cities conduct constituted a “Payment Default.”
c. The Cities’ Pleas to the Jurisdiction
In the Cities’ Pleas to the Jurisdiction, the Cities asserted governmental
immunity. First, the Cities argued that the waiver of immunity in section 271.152
does not apply because SJRA failed to engage in mandatory mediation after the
Cities gave notice demanding mediation. According to the Cities, the essence of
SJRA’s cross-claim against the Cities is “whether [SJRA] has committed a
performance default by breaching or violating its obligations under the GRP
Contracts as to the fees, rates, and charges it seeks to collect from the Cities.” The
10
Cities argued that section 11.02 of the GRP Contract requires pre-suit mediation for
claims of performance default. The Cities expressly alleged that section 271.154 of
the Local Government Code requires pre-suit alternative dispute resolution and
limits the scope of the waiver in section 271.152.
Second, the Cities argued that the fees on which SJRA based its claim for
damages are not set forth in the GRP Contracts but rather in Rate Orders that the
Cities have not executed. According to the Cities, section 271.152 does not waive
immunity for SJRA’s cross-claim for nonpayment of “‘fees, rates and charges’ set
forth only in SJRA’s unilaterally-released ‘Rate Orders.’” Because the GRP
Contracts do not include the rates on which SJRA’s claim for damages is based, the
Cities contend the GRP Contracts fail to state “the essential terms of the agreement,”
they do not meet the definition of a “contract subject to this subchapter” in section
271.151(2)(A), and there is no waiver of immunity from suit under section 271.152.
The Cities also argued that, to bring its claims against the Cities, SJRA must first
establish that it has performed without default and prove that the Rate Orders that
sought a unilateral increase in fees, rates, and charges were not “contrary to,
inconsistent with, or prohibited by” the GRP Contracts.
The Cities explained as well that the GRP Contracts were intended only to
ensure the Participants’ compliance with the Lone Star regulations that have now
been found to be “unlawful, void, and unenforceable.” According to the Cities, the
11
Cities “as a whole no longer need[] any volume of water to comply with [Lone
Star’s] ‘unlawful, void, and unenforceable’ regulations and ‘mandate[,]’” and
specifically “there is no way to calculate the volume of treated surface water Conroe
is legally obligated to purchase each month or year from SJRA under Conroe’s GRP
Contract, unless that volume is zero.”
d. SJRA’s Response to the Pleas to the Jurisdiction
Responding to the Cities’ pleas to the jurisdiction, SJRA argued that the
Cities’ immunity is expressly waived under section 11.05 of the GRP Contracts,
which reads:
Section 11.05: Waiver of Governmental Immunity. The
Authority and Participant agree that this Contract constitutes an
agreement for the provision of goods and services and is subject to the
provisions of the Subchapter I, Chapter 271, Texas Local Government
Code, as amended, and any successor statute. In accordance with
Sections 271.152 and 271.153 thereof, and as between the Parties, the
Parties hereby waive and acknowledge waiver of all constitutional,
statutory, or common law rights to sovereign or governmental
immunity from liability or suit and expressly consent to be sued and to
be liable to the limited extent necessary for a Party to enforce this
Contract against the other Party….
SJRA alleged the Cities’ immunity is waived under section 271.152 because the
Cities expressly agreed that the GRP Contracts are subject to Chapter 271 and “the
GRP Contracts contain the essential terms of the parties’ agreement for goods or
services and were properly executed on the Cities’ behalf.”
12
In addition, SJRA argued that the GRP Contracts only require mediation for
a Performance Default and not a Payment Default,28 and section 11.02 of the GRP
Contracts provides in relevant part:
Section 11.02: Default and Remedies. (a) Default shall occur in
the event either Party (i) fails to timely pay any fees, rates, charges, or
other amounts due hereunder (“Payment Default”), or (ii) fails to
perform or is in breach or violation of any of its other obligations
hereunder (“Performance Default”).
After a hearing on the pleas to the jurisdiction,29 the trial court signed an order
granting the Cities’ pleas to the jurisdiction and dismissing with prejudice SJRA’s
claims against the Cities. SJRA filed a motion to reconsider, and the Cities
28
SJRA also alleged that the 98th District Court in Travis County rejected the
Cities’ argument that the parties must mediate this Payment Default. In the Travis
County litigation, the Cities filed pleas in abatement in which they argued that
SJRA’s claims against them for failure to pay required pre-suit mediation. After a
hearing, the Travis County district court denied the Cities’ pleas in abatement by
order signed on November 17, 2016. SJRA did not argue that the Cities were barred
from challenging the Travis County district court’s order based on collateral estoppel
or res judicata in this case. As to SJRA’s argument that judicial estoppel bars the
Cities’ claims of governmental immunity, SJRA did not make this argument in the
trial court, and so, it failed to preserve error on this point.28 Moreover, the Texas
Supreme Court has explained that “[a] party cannot by his own conduct confer
jurisdiction on a court when none exists otherwise.” Wilmer-Hutchins Indep. Sch.
Dist. v. Sullivan, 51 S.W.3d 293, 294 (Tex. 2001); see also In re Crawford & Co.,
458 S.W.3d 920, 928 n.7 (Tex. 2015) (explaining that the doctrine of judicial
estoppel cannot create subject-matter jurisdiction where it does not otherwise exist).
29
SJRA also filed an Opposed Motion to Sever its claims against the Cities
from the claims with Quadvest and other Non-governmental Plaintiffs. SJRA argued
that its disputes with the Non-governmental Plaintiffs and with the Cities involve
different breaches and resulting damages, and that any judgment involving the
Plaintiffs would have no impact on its dispute with the Cities. The trial court denied
the Motion to Sever.
13
responded.30 The trial court denied the motion to reconsider, and SJRA timely filed
a notice of appeal challenging the trial court’s order granting the Cities’ pleas to the
jurisdiction.
Issue on Appeal
SJRA contends the trial court erred by granting the Cities’ pleas to the
jurisdiction which were based on governmental immunity. SJRA requests that this
Court reverse and remand. SJRA groups its arguments into five statements it calls
“issues,” but we consider all points as one issue: Whether the trial court erred in
granting the Cities’ pleas to the jurisdiction based on governmental immunity?
Discussion
The enforceability of the GRP Contracts is a separate inquiry from whether
SJRA has met the statutory test for a waiver of immunity. 31 Parties to a contract with
30
SJRA argued that SJRA and related entities have issued millions in bonds
to finance this and other projects that are then paid for by SJRA from the proceeds
under the GRP Contracts. SJRA contends it would be devastating to it and other
utility and water supply entities if the court held that these type of long-term supply
contracts fail because they lack “essential terms.” In their response to SJRA’s motion
to reconsider, the Cities noted that ten of the thirteen water contracts SJRA attached
to its motion to reconsider were from the 1970s and before the Legislature enacted
section 271.152. The Cities also argued that it is immaterial what other contracts
may state or that bonds have been issued to finance the project because this dispute
is governed by the Cities’ GRP Contracts and applicable legal standards pertaining
to the Cities’ governmental immunity.
31
See W. Travis Cty. Pub. Util. Agency v. Travis Cty. Mun. Util. Dist. No. 12,
537 S.W.3d 549, 557 (Tex. App.—Austin 2017, pet. denied) (“[T]he issue here is
not the enforceability of the Services Contract, but, rather, whether the contract
meets the explicit requirements of the Act[.]”); see also ICI Constr., Inc. v.
14
a governmental entity may not contractually waive immunity from a breach of
contract suit, because only the Legislature may waive a political subdivision’s
immunity from suit. 32
Sovereign immunity and its counterpart, governmental immunity, exist to
protect the State and its political subdivisions from lawsuits and liability for money
damages. 33 Governmental immunity protects political subdivisions of the State, like
counties, cities, and school districts.34
We interpret statutory waivers of sovereign immunity narrowly, as the Texas
Legislature’s intent to waive immunity must be clear and unambiguous. 35 Without
an express waiver of governmental immunity, Texas courts do not have subject-
matter jurisdiction over suits against political subdivisions of the State. 36
Orangefield Indep. Sch. Dist., 339 S.W.3d 235, 238 (Tex. App.—Beaumont 2011,
no pet.) (The statutory waiver of immunity in section 271.152 of the Texas Local
Government Code “waives the immunity of local government entities that are
authorized to make contracts ‘subject to this subchapter.’”).
32
Tex. Nat. Res. Conservation Comm’n v. IT-Davy, 74 S.W.3d 849, 858 (Tex.
2002) (rejecting waiver of immunity by contract argument and noting that waivers
of immunity from suit are made only by the Legislature).
33
Id. at 853.
34
See Ben Bolt-Palito Consol. Indep. Sch. Dist. v. Tex. Political Subdivisions
Prop./Cas. Joint Self-Ins. Fund, 212 S.W.3d 320, 323-24 (Tex. 2006).
35
See Tex. Gov’t Code Ann. § 311.034 (immunity waivers must be “effected
by clear and unambiguous language”); Tooke v. City of Mexia, 197 S.W.3d 325, 333
(Tex. 2006) (“a waiver of immunity must be clear and unambiguous”); Wichita Falls
State Hosp. v. Taylor, 106 S.W.3d 692, 697 (Tex. 2003) (any waiver of immunity
must be construed in favor of retaining immunity).
36
See Tex. Gov’t Code Ann. § 311.034; State v. Shumake, 199 S.W.3d 279,
283 (Tex. 2006); Tex. Dep’t of Parks and Wildlife v. Miranda, 133 S.W.3d 217, 224-
15
SJRA initially argues that the GRP Contracts do not require pre-suit mediation
of their claims against the Cities because they have only alleged a payment default,
so the absence of mediation does not limit the Cities’ waiver of immunity under
section 271.152. According to SJRA, the GRP Contracts only require mediation for
a “performance default” and not for a payment default and “[t]here is no reference
anywhere in the GRP Contracts to mediating Payment Defaults.” SJRA also argues
that, in the EDJA suit in Travis County, the district court rejected the Cities’
argument that the parties must mediate the alleged payment default, citing to the
district court’s order denying the Cities’ pleas to the jurisdiction. 37
SJRA alleges that section 11.02 of the GRP Contracts contains language that
mentions Payment Default and Performance Default and provides that a “Payment
Default” occurs if either party “fails to timely pay any fees, rates, charges, or other
amounts due hereunder” and a “Performance Default” occurs if either party “fails to
perform or is in breach or violation of any of its other obligations hereunder[.]”
Section 11.02 also provides:
…In the event of a Payment Default, notice of such default and the time
for institution of proceedings for collection of any amounts due shall be
given and conducted in the manner provided in this Contract, the
applicable provisions of the Rate Order, any other order of the
25 (Tex. 2004); San Antonio River Auth. v. Austin Bridge & Rd., L.P., 581 S.W.3d
245, 254 (Tex. App.—San Antonio 2017), aff’d, 601 S.W.3d 616, 625 (Tex. 2020).
37
In its order of November 17, 2016, the Travis County district court denied
the Cities’ Motions to Transfer Venue, Pleas to the Jurisdiction, and Pleas in
Abatement without giving any findings of fact or conclusions of law.
16
Authority relating thereto, and applicable law. In the event of a
Performance Default, the non-defaulting Party shall give the defaulting
Party written notice describing such default and demanding cure of
such default.
[] Should a Performance Default not be fully cured within a reasonable
time, but not more than sixty (60) days after notice of default has been
given to the defaulting Party, or should the defaulting Party deny or
dispute such default, the Parties agree to submit such dispute to non-
binding mediation in accordance with the provisions of Section 11.03
hereof; provided, however, that either Party may seek injunctive relief,
and only injunctive relief, prior to such mediation in order to preserve
the status quo or to prevent irreparable harm; provided, however, a
Party may commence litigation if same could be barred within sixty
(60) days by an applicable law or statute of limitations.
[] Upon conclusion of mediation proceedings or in the event of failure
by a defaulting party to mediate timely and in good faith, then except
as provided in Section 11.04 hereof, the non-defaulting Party may
pursue any and all remedies existing at law and in equity from any
court, agency or other entity with jurisdiction over the subject matter at
such time.
We construe pleadings and unambiguous contract terms as a matter of law.38
Although SJRA argues that its claims against the Cities are merely for a payment
default, its pleadings tell a different story. In SJRA’s breach of contract claim against
the Cities, SJRA alleged that the Cities “breached their respective GRP contracts by
refusing to pay the GRP rates adopted in accordance with their GRP contracts.”
(emphasis added). SJRA also stated, “[t]here is a real and substantial ju[st]iciable
38
See In re Freestone Underground Storage, Inc., 429 S.W.3d 110, 114 n.9
(Tex. App.—Texarkana 2014, orig. proceeding) (citing Hendee v. Dewhurst, 228
S.W.3d 354, 368 (Tex. App.—Austin 2007, pet. denied); Guerrero v. Guerra, 165
S.W.3d 778, 782 (Tex. App.—San Antonio 2005, no pet.)).
17
controversy between the parties over their respective rights and obligations under
the GRP Contract. [] Accordingly, [] SJRA seeks a judicial declaration that SJRA’s
fees, rates, and charges for fiscal years 2017, 2018, 2019, and 2020 comply with the
GRP Contracts.” Also, SJRA asserted that “[a] real, substantial, and ju[st]iciable
controversy exists between the parties concerning the compliance of SJRA’s rates
with the GRP Contracts.” (emphasis added). In other words, SJRA’s claims include
performance defaults and payment default allegations and include a claim for a
judgment that its fees, rates and charges comply with the terms of the GRP Contracts
and seek a declaration that SJRA complied with “other obligations” in the GRP
Contracts. We conclude that the essence of the claims asserted by SJRA and
allegations between the parties include breach of contract claims and performance
default allegations, and the matter seeks relief that falls outside of the definition of
a mere “payment default.” Even after resolving doubts in favor of the nonmovant,39
we conclude that the requirement for pre-suit mediation in section 11.02 of the GRP
Contracts was triggered because that requirement applies to the allegations contained
in SJRA’s pleadings which include an alleged Performance Default.
SJRA also argues that, even if mediation were required by the GRP Contracts,
section 271.154 40 allows the Cities to enforce that requirement, but it does not limit
39
See Miranda, 133 S.W.3d at 228.
40
Section 271.154 provides as follows:
18
the waiver of immunity under section 271.152. We disagree. According to SJRA,
the Texas Supreme Court has stated that section 271.154 is an authorization—but
not a limitation—to local governments to agree to arbitration. SJRA cites to San
Antonio River Authority for this proposition, but we find the holding in that case to
be inapposite to the facts in our case.41 Rather, we find the analysis in Zachry
Construction Corp. v. Port of Houston Authority, to be controlling.42 In Zachry, the
Adjudication procedures, including requirements for serving notices or
engaging in alternative dispute resolution proceedings before bringing
a suit or an arbitration proceeding, that are stated in the contract subject
to this subchapter or that are established by the local governmental
entity and expressly incorporated into the contract or incorporated by
reference are enforceable except to the extent those procedures conflict
with the terms of this subchapter.
Tex. Loc. Gov’t Code Ann. § 271.154. Section 271.151 does not define “alternative
dispute resolution,” but the Texas Alternative Dispute Resolution Act defines it as
“an informal forum in which mediation, conciliation, or arbitration is used to resolve
disputes[.]” See Tex. Civ. Prac. & Rem. Code Ann. § 152.001.
41
See San Antonio River Auth., 601 S.W.3d at 625 (The question before the
Court on appeal did not focus on the waiver of immunity by a governmental entity
as set forth in the Statute. Rather, it focused on the authority of a governmental entity
to enter into binding arbitration. The majority explained that section 271.154 gives
local governments permission to agree to binding arbitration in contracts within
Chapter 271’s scope stating, “Section 271.154 does not contemplate adjudication
procedures that may be enforceable; it declares they ‘are enforceable except to the
extent those procedures conflict with the terms of this subchapter.’”) (quoting Tex.
Loc. Gov’t Code Ann. § 271.154). The Court held that the River Authority had the
authority to engage in binding arbitration, and that a court, and not an arbitrator,
must determine whether immunity was waived and that no additional authorization
from the Legislature was required to enable the River Authority to engage in binding
arbitration. Id. at 618, 621, 624-25. The dissent disagreed that the Legislature had
granted the River Authority the authority to engage in binding arbitration. Id. at 632
(Boyd, J., dissenting).
42
449 S.W.3d 98, 106 (Tex. 2014).
19
Supreme Court interpreted the scope of the Local Government Contract Claims
Act’s waiver of immunity for contract suits against local governmental entities.
Subsection 271.152 of the Act expressly “waives sovereign immunity to suit for the
purpose of adjudicating a claim for breach of contract, subject to the terms and
conditions of this subchapter.”43 The Court noted that the phrase “subject to the
terms and conditions of this subchapter” in section 271.152 expressly references the
terms and conditions that “are found in the Act’s other nine sections.” 44 In its
discussion, the Court specifically mentioned each of the other nine sections, sections
271.153-160.45 The Court concluded that section 271.153, like the other provisions
of the Act, “define the scope of [section 271.152’s] waiver of immunity.”46 Applying
Zachry’s reasoning here, we conclude that section 271.152’s waiver is limited by
section 271.154.
Section 271.152 expressly states that the waiver of immunity is “subject to”
the terms and conditions of the Act, so the other provisions in the Act are limitations
on the waiver of immunity set forth in 271.152.47 Section 271.154 is one of the
43
Tex. Loc. Gov’t Code Ann. § 271.152.
44
449 S.W.3d at 106.
45
Id. at 107.
46
Id. at 108.
47
See also Hays St. Bridge Restoration Grp. v. City of San Antonio, 570
S.W.3d 697, 706 (Tex. 2019) (explaining that the phrase “subject to” in section
271.152 “incorporates the other provisions of the Act to define the scope of its
waiver of immunity[]”) (quoting Zachry Constr. Corp., 449 S.W.3d at 108).
20
limitations in the Act, and “to show waiver of immunity, a claimant must plead facts
showing that the conditions of section 271.154 have been met.” 48 In this case, SJRA
has failed to plead facts showing that conditions of section 271.154 have been met.
Notably, SJRA failed to plead that it gave the notice required under section 11.02 of
the GRP Contracts, and it failed to allege facts that it engaged in mediation as
provided for in the GRP Contracts.
We conclude that section 271.154 is a limitation on the waiver of immunity
in this lawsuit.49 SJRA failed to plead facts showing compliance with the required
pre-suit mediation outlined in the GRP Contracts and failed to meet the requirements
of subsection 271.154. We find this issue to be dispositive and need not address
whether the GRP Contracts contain “essential terms.”50 We expressly do not reach
48
See Mission Consol. Indep. Sch. Dist. v. ERO Int’l, LLP, 579 S.W.3d 123,
128 (Tex. App.—Corpus Christi-Edinburg 2019, no pet.) (“[T]o show waiver of
immunity, a claimant must plead facts showing that the conditions of section
271.154 have been met.”); see also Tex. Gov’t Code Ann. § 311.034 (“Statutory
prerequisites to a suit, including the provision of notice, are jurisdictional
requirements in all suits against a governmental entity.”).
49
See Tex. Gov’t Code Ann. § 311.034; Zachry Constr. Corp., 449 S.W.3d at
108; Mission Consol. Indep. Sch. Dist., 579 S.W.3d at 128. In Mission Consolidated
ISD, the Corpus Christi Court applied the Supreme Court’s analysis in Zachry to
reject earlier cases from other Courts of Appeals that came to a different conclusion.
579 S.W.3d at 128-29 (rejecting Tex. Mun. League Intergovernmental Risk Pool v.
City of Abilene, 551 S.W.3d 337 (Tex. App.—Eastland 2018, pet. dism’d); Romulus
Grp., Inc. v. City of Dallas, No. 05-16-00088-CV, 2017 Tex. App. LEXIS 4011(Tex. App.—Dallas May 2, 2017, pet. denied) (mem. op.)).
50
See Tex. R. App. P. 47.1.
21
the merits of any of the underlying claims or defenses between the parties.51
Therefore, we affirm the trial court’s decision.
Conclusion
For all these reasons, we conclude that the trial court did not err in granting
the pleas to the jurisdiction. We decline to address any of Appellant’s remaining
points because they are unnecessary to our disposition.52 We affirm the trial court’s
order.
AFFIRMED.
_________________________
LEANNE JOHNSON
Justice
Submitted on June 22, 2021
Opinion Delivered April 21, 2022
Before Golemon, C.J., Kreger and Johnson, JJ.
See Cty. of Cameron v. Brown, 80 S.W.3d 549, 555 (Tex. 2002); Bland
51
Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 554 (Tex. 2000); Hocevar v. Molecular
Health, Inc., 593 S.W.3d 764, 768 (Tex. App.—Beaumont 2019, no pet.).
52
See Tex. R. App. P. 47.1.
22