## IN THE SUPREME COURT O F TEX AS

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. 15-0029

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O N P E T I T I O N F O R R E V I E W F R O M T H E C O U R T O F A P P E A L S F O R T H E F O U R T H D I S T R I C T O F T E X A S

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Argued January 14, 2016

J U S T I C E G R E E N delivere d the opinion of the Court.
I n W asson Interests, Ltd. v. City of Jack sonvi lle , we resolved the issue of whether the
distinction betwee n g overnme ntal and proprietary acts—sometimes refer red to as t he proprietary

g overnme ntal dichotomy —applies to brea ch-of

-contra ct claims ag ainst municipalities , and
conclude d that it does. ___ S.W .3d ___, ___ (Tex. 2016). We explained that, in both the contra ctclaims and tort-claims contexts, “ac ts perf ormed as part of a city ’s proprieta ry function do not implicate the state’s immunit y for the simple rea son that they are not perf ormed under the authority ,

or for the benef

it, of the sovere ign.” Id. This contra ct-c laims case require s us to deter mine whether

a claim for attorney ’s fee s for brea ch of a contra ct to install pollution control equipment at a power plant is proprieta

ry or g overnme ntal in nature

. I n light of W asson , we hold that (1) the actions of themunicipality in enter ing the contra ct—re lating to the opera tion of a public utilit y —are proprieta

ry ; and (2) a claim for attorney ’s fee s arising from those proprietary actions does not implicate
g overnme ntal immunit y
. We there fore reve rse the court of appea ls’ judgme nt and rema nd the case to the trial court.
I. F acts Effe ctive Aug ust 5 , 2 0 0 4 , Wheelabra tor Air Pollut ion Control, Casey I ndustrial, I nc., and City Pub l i c S er v i ce Bo ard of San Antonio, a municipal board of the City of San Antonio (CPS Energ y ), enter ed into a contra ct (the Ag ree ment) for the desig n and construction of the J .T. Dee ly 1
Ba g house Project (the Project), part of a coal- fired power station owned and op er at ed b y CPS Energ y
. CPS Energ y

is a municipally -owne d elec tric and g as ut ility in San Antonio, Texas. CPS Energ y ag ree d to pay Wheelabra tor $41,818,460 for g oods and service s in connec tion with the Project. Wheelabra tor completed all portions of it s work in 2007, but CPS Energ y notified
Wheelabra tor that it was withholding 10% of the total contra ct pri ce—the reta inag e amount

ac co rd i n g to the contra ct—bec ause of a dispute betwee n Casey I ndustrial and CPS Energ y
. Wheelabra tor filed sui t ag ainst CPS Energ y in Augus t 2 011, alleg ing brea ch of contra ct or, in the
alterna tive, asser

ting a quantum meruit claim, and reque sting reasona ble and nece ssary atto rn ey ’s
fee s, costs, and interest. There is no dispute that the Ag ree ment has been fully perf ormed and that
CPS Energ y has withheld the reta inag e from Wheelabra tor. I n its first appea ranc e, CPS Energ y filed

a plea to the jurisdiction asser ting g overnme ntal immunit y to the extent that Wheelabra tor’s claims

T h e C i t y o f S a n A n t o n i o a c t s b y a n d t h r o u g h C P S E n e r g y , s o C P S E n e r g y i s t r e a t e d a s a m u n i c i p a l i t y
. 1
2fell outside the waiver of immunit y under chapte r 271 of the Texas L ocal Gover nment Code, T E X
. L O C
. G O V ’ T C O D E §§ 271.151–.160, and specific ally immunit y from Wh e e la b r a to r ’ s q u a n tu m me r u it
claims. T h e trial court denied CPS Energ y ’s pl ea to the j urisdiction, the Fourth Court of Appeals

reve rsed, a

nd we de nied Wheelabr ator’s pe tition for r eview. City of San Antonio v. W heelabrator
Air Polluti on Control , 381 S.W .3d 597, 599 (Tex. App.—San Antonio 2012, pet. denied)

. After the court of appea ls rema nded the case to the trial court, CPS Energ y filed an amende d

answe r and plea to the jurisdiction alleg ing immunit y from all claims except those within the scope of section 271.152 of the L ocal Gover nment Code. CPS Energ y arg ued that the prior version of the statute, which did not allow rec overy of attorney ’s fee s, applied beca use the Ag ree me n t w a s e xecute d
in 2004, befor e Chapter 271’s enac tment in 2005. Additionally , CPS Energ y filed a motion to consolidate the Wheelabra tor case with the suit Casey I ndustrial filed ag ainst CPS En erg y , explaining that “CPS E n erg y reta ined the amount [wit hheld from Wheelabra tor] beca use of a dispute
betwee n CPS Energ y and Casey [I ndustrial] under the [Agre ement]” and that the case s arose out of
the same Ag ree ment, involve the same parties, and prese nt the same questions of law and fac t. The
trial court, despite Wheelabra tor’s opposition, g rante d the motion to consolidate on Marc h 31, 2014.
At this point, CPS Energ y filed a p l ea t o t he jurisdiction seeking dismiss al of Casey
I ndustrial’s and Wheelabra tor’s claims for attorney ’s fee s for lack of jurisdiction, arg uing that attorney ’s fee s wer e outside the scope of statutorily -wa ived immunit y as the statute was written in 2004, the time of the Ag ree ment. Wheelabra tor arg ued in re s p o n s e: (1) CPS Energ y had no 2

C P S E n e r g y a l s o f

i l e d a s e c o n d p l e a t o t h e j u r i s d i c t i o n a s t o C a s e y I n d u s t r i a l ’ s b r e a c h

- o f

- c o n t r a c t c l a i m s , 2
a r g u i n g t h a t C a s e y I n d u s t r i a l s o u g h t d a m a g e s o u t s i d e t h e s c o p e o f s e c t i o n 2 7 1

. 1 5 3 o f t h e L o c a l G o v e r n m e n t C o d e
. T h i s s e c o n d p l e a t o t h e j u r i s d i c t i o n i s n o t r e l e v a n t t o t h e c u r r e n t i n t e r l o c u t o r y a p p e a l

. 3immunit y from suit from Wheelabra tor’s claims beca use CPS Energ y was perf

orming a proprieta

ry function i n its dealing s with Wheelabra tor; (2) a plea to the jurisdiction i s not the proper basis for challeng ing liability for attorney ’s fee s beca use it is prema ture; and, a lternatively , (3) CPS Ene rg y waived immunit y from suit by asser ting an offse t claim ag ainst Wheelabra tor. The tr ial court g rante d
CPS Energ y ’s plea to the jurisdiction and dismi s s ed with prejudice Casey I ndustrial’s and
Wheelabra tor’s claims for attorney ’s fee s. Wheelabra tor broug ht an interlocutory appeal an d the

court of appea ls aff

irmed. ___ S.W .3d ___, ___ (Tex. App.—San Anto n io 2014, pet. g rante d).
Wheelabra tor ag ain broug ht an interlocutory appea l to this Court. For the rea sons explained below,

we r ever se the c ourt of appe als’ judg ment.
II. Dichotom y Appli cability
I n the trial court, CPS Energ y arg ued that Wheelabra tor failed to alleg e a valid waive r o f
immunit y from suit and the court there fore lacke d subject matter jurisdiction. Gene rally , “immunity
from suit implicates courts’ subject-matter jurisdiction.” Rusk State Hosp. v. Black , 392 S.W .3d 88, 91 (Tex. 2012). Thus, it “ is pr operly asser ted in a plea to the jurisdiction.” Tex. De p’t of Parks &
W ildlif e v. Miranda , 13 3 S

. W

. 3 d 2 1 7 , 225–26 (Tex. 2004). Whether a court has subject matter jurisdiction is a question of law that we revie w de novo. Id. at 226. As previously established, a city
does not ha

ve deriva tive immunit y when it e ng ag es in a proprieta ry function, even in the contra ctclaims context. W

asson , ___ S.W .3d at ___. There fore , in deter mining whether Wheelabra tor’s suit
for attorney ’s fee s is barr ed by g overnme ntal immunit y , we must first deter mine whether the subject

mat t er o f t he suit stems from a proprieta ry or a g overnme ntal function of the municipality

. I f we deter mine the action arose out of the municipality ’s perf ormanc e of a proprieta

ry function, then the

4case proce eds as if the claim wer e asse rted a g ainst a private person. See id. at ___. Alterna tively ,

should we deter

mine the action arose out of the municipality ’s perf ormanc e of a g ov ernme ntal function, immunit y applies and it must be overc ome by a claimant establishing a valid waiver

. See, 3

e.g. , PKG Contracting, Inc. v. City of Mesquite , 197 S.W .3d 388, 388–89 (Tex. 2006) (per curia m) (holding that the city was acting in its g overnme ntal capa city when it enter ed the contra ct with PKG
and that it had not waive d immunit y from suit).
A. CP S En ergy’ s F unction
Wheelabra tor asser

ts, and CPS Energ y neither conce des nor disputes, tha t a municipality ’s
opera tion and maintenanc e of a publi c uti lity is a proprietary function. This comports with Texas
law. This Court has previously held that a municipality ’s o p er at i o n of its own public utilit y is a proprieta ry function

. S

a n Antonio Indep. Sch. Dist. v. City of San Antonio , 550 S.W .2d 262, 264 (Tex. 1976) (“A city which owns and opera tes its own pu b l i c u t i l i ty does so in its proprieta ry
capa city .”). Fur

thermore , the Texas T ort Claims Act (TTCA), which we have previously defe rre d

to when classify

ing functions in contra ct disputes, lists opera tion of a public utilit y as a proprieta ry fu n cti on. See T E X
. C I V
. P R A C
. & R E M
. C O D E § 101.0215(b)( 1) (stating that “propr iet ar y functions,

. . . includ[e]

. . . the opera tion and maintenanc e of a public utilit y ”). I n PKG Contracting , this Court looked to the TTCA for g uidance in classify ing a municipality ’s actions as proprieta ry or
g overnme ntal in a bre ach- of-c ontrac t action. 197 S.W.3d at 388–89. The Court ex plained:

A s w e s a i d i n W

a s s o n , “ [ o ] u r c a s e l a w
. . . p r e s c r i b e s a r e l a t i v e l y s i m p l e t w o - s t e p p r o c e s s f o r a d d r e s s i n g t h e 3
a p p l i c a b i l i t y o f i m m u n i t y [ : ] [ ( 1 ) ] T h e j u d i c i a r y d e t e r m i n e s t h e a p p l i c a b i l i t y o f i m m u n i t y i n t h e f i r s t i n s t a n c e a n d d e l i n e a t e s i t s b o u n d a r i e s [ ; ] [ ( 2 ) ] I f i m m u n i t y i s a p p l i c a b l e , t h e n t h e j u d i c i a r y d e f e r s t o t h e [ L ] e g i s l a t u r e t o w a i v e s u c h i m m u n i t y
. ”

_ _ _ S

. W

. 3 d a t

_ _ _ ( e m p h a s i s i n o r i g i n a l )

. 5Be cause the L eg islature has statutorily included “sanitar y and storm sewe rs” among a municipality ’s g overnme ntal functions for purposes of tort liability , and we see no rea son to think that the classifica tion would be differ ent under the common law, we conclude that the City was acting in its g overnme ntal capa city when it contra cted with PKG to construct a storm dra inag e sy stem. Id. (quoting T E X
. C I V
. P R A C
. & R E M
. C O D E § 101.0215(a) (9)) (interna l quotation omitted); s ee also
Tooke v. City of

Mex ia , 197 S.W .3d 325, 343–44 (Tex. 2006) (borr owing the TTCA’s classifica tion
of “g arba g e and solid waste remova l, collection, and disposal” as g overnme ntal in a contra cts dispute). I n W

asson , we rea ffirme d the appropr iateness of defe rring to the TTCA when classifying

acts in the contra ct-c laims context. ___ S.W .3d at ___ (“I n deter mining the boundarie s of immunit y

as it rela tes to whether a function is proprieta ry or g overnme ntal

. . . courts should be g uided

. . . by
the TTCA’s tre atment of the pr oprietar y -g overnme ntal distinction.”).
CPS Energ y is a municipally -owne d elec tric and g as utilit y
. I t executed the Ag ree ment under
which Wheelabra tor would provide g oods and service s for the desig n and construction of pollution
control equipment for a coal- fired power station that CPS Energ y owns and opera tes. Both our common-law prec edent and the TTCA—which, as discussed above, we find appropr iate to defe r to—have classified a municipality ’s operation and maintena nce of a public utility as a proprieta ry function. See, e.g. , San Antonio Indep. Sch. Dist. , 550 S. W

. 2 d at 2 64 (“A city which owns and
opera tes its own public utilit y does so in its proprieta ry capa city .”). Under these fac ts, there fore , we conclude that CPS Energ y is not shielded by g overnme ntal immunit y
. See W asson , ___ S.W .3d at
___; San Antonio Indep

. S ch

. Di st. , 550 S.W .2d at 264; T E X
. C I V
. P R A C
. & R E M
. C O D E § 101.0215(b)( 1).

6B. Attor ney’s F ees C laim

Her e, the attorney ’s fee s claim stems direc tly from Wheelabra tor’s brea ch-of -contra ct action
ag ainst CPS Energ y , the s ubject matter of which we have determined was a p roprieta ry function.
I n W asson , we explained that a municipality “is cloake d in the state’s i m m u n i t y when it acts as a branc h of the state, but only when it acts as a branc h of the state.” ___ S.W .3d at ___ (empha sis in orig inal). Ther ef

o re , we held that a municipality had no immunit y when it contra cted in its proprieta ry capa city

. Id. Her e, although the claim i s for attorney ’s fe es, such f ees a re a ncillary to Wheelabra tor’s bre ac h -o f- contra ct claim. J ust as the nature of g overnme ntal immunit y does not 4
“inher ently limit [] the dich o t omy ’s application to tort claims,” it likewise does not inhere ntly
prec lude a clai m fo r attorney ’s fee s from a brea ch-of -contra ct claim arising from a proprieta ry function. Id. There fore , we hold that Wheelabr ator’s c laim for attorney ’s fees does not implicate
immunit y
. Reg ardle ss of whether Wheelabra tor’s claim for attorney ’s fee s is barr ed by immunit y , CPS Energ y ar gu es t h at Wheelabra tor is not entitled to a claim for attorney ’s fee s “whe ther ag ainst a
g overnme ntal entity or not,” unless the contra ct or a statute p ro v i d es fo r rec overy , and that
Wheelabra tor has failed to alleg e either. Ultimately , CPS Energ y arg ues, Wheelabra tor has not pointed to a statute that waives g overnme ntal immunit y for a ttorney ’s fe es, the jurisdictional fa cts

are undisputed, and additional discovery will not enable Wheelabra tor to find a basis for waiver of
immunit y
. I n response , Wheelabra tor arg ues t hat C PS Energ y ’s pl ea to the j urisdiction cannot be

T e x a s f o l l o w s t h e A m e r i c a n r u l e o n a t t o r n e y ’ s f e e s , w h i c h p r o v i d e s t h a t , g e n e r a l l y , “ a p a r t y m a y n o t r e c o v e r 4
a t t o r n e y ’ s f

e e s u n l e s s a u t h o r i z e d b y s t a t u t e o r c o n t r a c t

. ” W e l l s F a r g o B a n k N A v
. M u r p h y , 4 5 8 S

. W

. 3 d 9 1 2 , 9 1 5 ( T e x
. 2 0 1 5 )

. 7used to decide the merits of a claim and that CPS Energ y ’s attempt to obtain “summary judgme nt”

on the m erits t hroug h its dilatory plea to the j u ri s d iction is improper. Fur thermore , Wheelabra tor

asser ts that with additional discovery , Wheelabra tor may proper ly develop the rec ord and amend its pleading s on the merits of its attorney ’s fee s claim. “A plea to the jurisdiction is a dilatory plea, the purpose of

which is to defe at a cause of ac tion without reg ard to whe ther the c laims asserted ha ve merit.” Bland Indep. Sch. Dist. v. Blue , 34 S.W

. 3 d 5 4 7 , 554 (Tex. 2000). Fur thermore , “[t] he
purpose of a dilatory plea is not to forc e the plaintiffs to previe w their case on the merits but to establish a rea son why the merits of the plaintiffs’ claims should never be rea ched.” Id. CPS Energ y confla tes the issues. Her e, we are fac ed with the deter mination of whether CPS Energ y ’s plea to the jurisdiction should be g rante d and, more fundame ntally , whether CPS Energ y was p er fo rm i ng a proprieta ry or g overnme ntal function, wh i ch d etermines whether CPS Energ y is protec ted by
g overn m en tal immunit y from suit in the first place

. Be cause we hold that CPS Energ y is not protec ted by g overnme ntal immunit y , we need not addre ss wh et h er t he attorney ’s fee s claim has
merit.
III. Conclusi on We hold that CPS Energ y was perf orming a proprieta

ry function and is there fore not immune
from suit based on g overnme ntal immunit y
. We reve rse the court of appea ls’ judgme nt and rema nd
the ca se to the trial cour

t for fur ther proc eeding s consistent with this opi nion.

___________________________________ Paul W. Green J ustice

OPI NI ON DEL I VERED: April 15, 2016

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