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HOU 408242630v6 

Case No. 14-14-00294-CV 

_____________________________________________________________ 

IN THE FOURTEENTH COURT OF APPEALS 

HOUSTON, TEXAS 

_____________________________________________________________ 

CITY OF GALVESTON AND STERLING PATRICK, 

DIRECTOR OF THE CITY GRANTS AND HOUSING 

DEPARTMENT, AND DOROTHY PALUMBO, GALVESTON CITY 

ATTORNEY, IN THEIR OFFICIAL CAPACITIES, 

Appellants, 

v. 

CDM SMITH INC., 

Appellee. _____________________________________________________________ 

ON APPEAL FROM THE 

56t h DISTRICT COURT, GALVESTON COUNTY, TEXAS 

Cause No. 13-CV-0844 

____________________________________________________________ 

UNOPPOSED SUPPLEMENT TO APPELLEE’S 

BRIEF AND APPENDIX OF APPELLEE 

_____________________________________________________________ 

Roland Garcia, Esq. 

State Bar 07645250 

Jennifer Tomsen, Esq. 

GREENBERG TRAURIG, LLP 

1000 Louisiana Street, Suite 1700 

Houston, Texas 77002 

Telephone (713) 374-3500, Facsimile (713) 374-3505 

garciar@gtlaw.com 

Andrew Mytelka, Esq. 

Joseph Russo, Esq. 

GREER, HERZ & ADAMS, LLP 

1 Moody Plaza, Floor 18 

Galveston, Texas 77550 

Telephone: (409) 797-3200 

ACCEPTED

14-14-00294-cv

FOURTEENTH COURT OF APPEALS

HOUSTON, TEXAS

1/7/2015 7:00:06 PM

CHRISTOPHER PRINE

CLERK

 FILED IN 14th COURT OF APPEALS HOUSTON, TEXAS 1/7/2015 7:00:06 PM CHRISTOPHER A. PRINE Clerk
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TO THE HONORABLE COURT OF APPEALS: 

At oral argument on December 4, 2014, Appellee CDM Smith urged that the 

Court should uphold the lower court’s ruling that the City of Galveston was not 

immune to CDM Smith’s claim for interest under the Prompt Payment Act, among 

other arguments. In support, CDM Smith had recently located legislative history 

to the 2011 amendments to Chapter 271, specifically House Bill 345 from the 2011 

Regular Session of the Legislature, which proposed the revision to Section 

271.153(a) of the Texas Local Government Code. See Act of June 17, 2011, 82nd 

Leg., R.S., ch. 226, §271.153, 2011 Tex. Sess. Law Serv. 809 (courtesy copy 

attached). These are publicly available records that CDM Smith intended to show 

the Panel on the Elmo during oral arguments, but the Elmo was not available as 

requested. CDM Smith understood the Panel to grant leave to supplement the 

record with this authority. (If not, then leave is hereby requested to consider this 

supplemental submission, and counsel for the City of Galveston is unopposed to 

this submission.) Accordingly, CDM Smith hereby offers this supplement to its 

previously filed Appellee’s Brief and Appendix. 

Section 271.152 waives immunity to suit for municipalities that enter 

contracts for services under that subchapter. House Bill 345 proposed amending 

Section 271.153(a) by the addition of the text in bold below: 

Section 1. Section 271.153(a), Local Government Code, is amended to 

read as follows: 
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(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: 

. . . . 

(4) interest as allowed by law, including interest as 

calculated under Chapter 2251, Government Code [the 

Prompt Payment Act]. 

Id. (parenthetical added). The amendment would apply to adjudications 

“commenced on or after the effective date of this Act.” See Exhibit A, Section 2. 

The amendment reflected in House Bill 345 was adopted and took effect on 

September 1, 2011. See Tex. Local Gov’t Code § 271.153; Appellee’s Brief, Tab 

B (courtesy copy attached). 

 Chapter 2251 of the Government Code is the Prompt Payment Act. 

Accordingly, the Legislature acted in 2011 to specifically reference interest under 

the Prompt Payment Act as allowable damages. Because Section 271.153 already 

made reference to “interest as allowed by law,” the Legislature’s amendment to 

specifically reference interest calculated under the Prompt Payment Act can only 

mean that where immunity is waived under Section 271.152, immunity is 

necessarily waived also for the purposes of an award of Prompt Payment Act 

interest on the contract. 

 The City relied on McMahon Contracting, L.P. v. City of Carrollton, 277 

S.W.3d 458 (Tex. App.—Dallas 2009, pet. denied) to oppose waiver of immunity 
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for interest under the Prompt Pay Act. CDM Smith briefed reasons why McMahon

does not apply here, and was wrongly decided. Whether or not McMahon was 

correctly decided, the 2011 amendment to Section 271.153 renders McMahon and 

the cases following McMahon outdated and no longer applicable, because, among 

other reasons previously briefed, they were decided before the Legislature 

amended Section 271.153 to expressly permit Prompt Payment Act interest as 

allowable damages, i.e., as part of the damages “as allowed by law.” See Section 

271.153(a)(4). See also McMahon Contracting, L.P. v. City of Carrollton, 277 

S.W.3d 458, 465 (Tex. App.—Dallas 2009, pet. denied); Harris Co. Flood Control 

Dist. v. Great American Ins. Co., 309 S.W.3d 614, 617-618 (Tex. App.—Houston 

[14th Dist.] 2010, no pet.). City of Midland v. M.T.D. Environmental, L.L.P. was 

decided after the 2011 amendment but is also not applicable, not only because it 

relied on the cases following McMahon, but because the 2011 amendment 

referencing the Prompt Payment Act applied to adjudications commenced after the 

Act’s effective date. 429 S.W.3d 800, 806 (Tex. App.—Eastland 2014, no pet.).1

 

The litigation here was commenced in 2013. 

 CDM Smith has not located any other case on point post the 2011 legislative 

amendments. The Panel’s decision in this case should clarify the state of the law 

                                                            

1

 The case does not reference the date that suit was commenced, but the court decided that the 

city was immune from Prompt Payment Act claims because the 2011 amendment “applied 

prospectively only,” suggesting a litigation commencement date prior to the effective date of the 

amendment. City of Midland, 429 S.W.3d at 806. 
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on the Prompt Payment Act, and give effect to the Texas Legislature’s 2011 

amendment to Section 271.153, i.e. to allow recovery of Prompt Payment Act 

interest from a local government entity. 2

 

 This Supplement is filed as soon as practicable considering the holidays and 

the undersigned counsel’s schedule, and is not sought for purposes of delay, but so 

that justice may be served. 

WHEREFORE, CDM Smith requests that the Court consider this 

supplement to its Brief and Appendix, and affirm the District Court’s denial of the 

Plea to the Jurisdiction by Appellants. 

                                                            

2 See Senate Comm. on Intergovernmental Relations, Bill Analysis, Tex. H.B. 345, 82nd Leg., 

R.S. (2011)(“Author’s/Sponsor’s Statement of Intent”)(“In general, a contractor, subcontractor, 

or supplier is entitled under state law to receive interest, commonly called prompt pay interest, 

on past due payments for work performed on a public construction project owned by the state or 

other governmental entity. Some interested parties contend that recent court decisions have 

misinterpreted Texas law regarding whether prompt pay interest on public jobs is barred 

by governmental immunity. H.B. 345 seeks to clarify that issue.”) (emphasis added) 

(courtesy copy attached). Moreover, the Bill Analysis of HB 345 by the House Research 

Organization further clarified the Legislature’s intent: “HB 345 would allow for the recovery of 

‘prompt pay interest’ from local government entities in breach of contract claims, resolving a 

misinterpretation of the law. Government Code, sec. 2251.042, which allows for prompt pay 

interest from a governmental entity, was enacted in 1993. Local Government Code, sec. 271-

153, which provides for ‘interest as allowed by law’ in a contract claim against a local 

government, was enacted in 2005. Therefore, prompt pay interest should be interest allowed 

by law in 2005. However, recent court decisions in this area have not been consistent with 

the plain meaning of the law. HB 345 would clarify this issue.” House Comm. on Judiciary 

and Civil Jurisprudence, Bill Analysis, Tex. H.B. 345, 82nd Leg., R.S. (2011)(“Supporters Say,” 

emphasis added) (courtesy copy attached).
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Respectfully submitted, 

 /s/Roland Garcia 

Roland Garcia, Esq. 

State Bar 97645250 

Jennifer Tomsen, Esq. 

 State Bar No. 24064535 

GREENBERG TRAURIG, LLP 

1000 Louisiana Street, Suite 1700 

Houston, Texas 77002 

Telephone (713) 374-3500, 

Facsimile (713) 374-3505 

garciar@gtlaw.com

tomsenj@gtlaw.com

Andrew Mytelka, Esq. 

Joseph Russo, Esq. 

GREER, HERZ & ADAMS, LLP 

1 Moody Plaza, Floor 18 

Galveston, Texas 77550 

Telephone: (409) 797-3200 

Facsimile (409) 766-6424 

amytelka@greerherz.com 

jrusso@greerherz.com 

COUNSEL FOR APPELLEE 

CERTIFICATE OF SERVICE 

 This will certify that a true and correct copy of the foregoing was served on 

the 7th day of January, 2015 via electronic filing on all counsel of record. 

/s/ Roland Garcia 

Roland Garcia 

CERTIFICATE OF COMPLIANCE 

This Brief complies with the type-volume limitation of TEX. R. APP. P.

9.4(i)(2)(B) because the aggregate of all of Appellee’s briefs contain fewer than 
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27,000 words, excluding the parts of the Brief exempted under the Rule. 

/s/ Roland Garcia 

Roland Garcia 

Attorney for Appellee CDM Smith Inc.
TEXAS SESSION LAWS 2011 

GENERAL AND SPECIAL 

Eighty-Second Legislature, Regular Session 

CHAPTER 226 

H.B. No. 345 

AN ACT 

relating to limitations on awards in an adjudication brought against a local governmental entity for 

breach of contract. 

Be it enacted by the Legislature of th6 State of Tems: 

SECTION 1. Section 271.153(a), Local Government Code, is amended to read as follows: 

(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 perfonn 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 

perfonn by a local governmental entity in connection with the contract; 

(S) reasonable and necessary attorney's fees that are equitable and just; and 

(4) interest as allowed by law, including interest as calculated unckr Chapter ~51, 

Govemment Code. 

SECTION 2. The change in law made by this Act applies only to an adjudication 

commenced on or after the effective date of this Act. An adjudication commenced before the 

effective date of this Act is governed by the law applicable to the adjudication immediately 

before the effective date of this Act, and the fonner law is continued in effect for that 

purpose. 

SECTION 8. This Act takes effect September 1, 2011. 

Passed by the House on April 19, 2011: Yeas 142, Nays 0, 2 present, not voting; the 

House concurred in Senate amendments to H.B. No. 345 on May 19, 2011: Yeas 

140, Nays 0, 2 present, not voting; passed by the Senate, with amendments, on May 

17,2011: Yeas 31, Nays 0. 

Approved June 17, 2011. 

Effective September 1, 2011. 

CHAPTER 227 

H.B. No. 350 

AN ACT 

relating to discharging fines and costs assessed against certain juvenile defendants through community service or tutoring. 

809 
LIMITATIONS ON AWARDS IN AN ADJUDICATION ... , 2011 Tex. Sess. Law •.• 

2011 Tex. Sess. Law Serv. Ch. 226 (H.B. 345) (VERNON'S) 

VERNON'S TEXAS SESSION LAW SERVICE 2011 

Eighty-Second Legislature, 2011 Regular Session 

Additions are indicated by ;J!~~; deletions by +tm. 

Vetoes are indicated by 

stricken material by ·' 

CHAPTER226 

H.B.No.345 

LIMITATIONS ON AWARDS IN AN ADJUDICATION BROUGHT AGAINST A LOCAL GOVERNMENTAL 

ENTTIY FOR BREACH OF CONTRACT 

AN ACT 

relating to limitations on awards in an adjudication brought against a local governmental entity for breach of contract. 

Be it enacted by the Legislature of the State of Texas: 

SECTION 1. Section 271.153(a), Local Government Code, is amended to read as follows: 

<< TX LOCAL GOVT § 271.153 » 

(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 perfonn 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; 

(3) reasonable and necessary attorney's fees that are equitable and just; and 

( 4) interest as allowed by law,lit~'Cl.~t(iiig:ljnteT:~S:t:aS'~a1culat~i:i;iulidet.lCiia:Pter tlSt, GovernmenfCode. 

«Note: TX LOCAL GOVT § 271.153 >> 

SECTION 2. The change in law made by this Act applies only to an adjudication commenced on or after the effective date of 

this Act. An adjudication commenced before the effective date of this Act is governed by the law applicable to the 

adjudication immediately before the effective date of this Act, and the former law is continued in effect for that purpose. 

SECTION 3· This Act takes effect September 1, 2011. 

WestlawNext © 2014 Thomson Reuters. No claim to original U.S. Government Works. 
LIMITATIONS ON AWARDS IN AN ADJUDICATION .•. , 2011 Tex. Sess. Law ..• 

Passed by the House on April 19, 2011: Yeas 142, Nays 0, 2 present, not voting; the House concurred in Senate 

amendments to H.B. No. 345 on May 19, 2011: Yeas 140, Nays 0, 2 present, not voting; passed by the Senate, with 

amendments, on May 17,2011: Yeas 31, Nays 0. 

Approved June 17,2011. 

Effective September 1, 2011. 

End of Document © 2014 Thomson Reuters. No claim to original U.S. Government Works. 

WestlawNext © 2014 Thomson Reuters. No claim to original U.S. Government Works. 2 
HOUSE 

RESEARCH 

ORGANIZATION bill analysis 4/18/2011 

HB345 

Kleinschmidt 

SUBJECT: 

COMMITTEE: 

VOTE: 

WITNESSES: 

BACKGROUND: 

Payment of interest by a local government in a breach of contract suit 

Judiciary and Civil Jurisprudence -favorable, without amendment 

10 ayes- Jackson, Lewis, Bohac, S. Davis, Hartnett, Madden, Raymond, 

Scott, Thompson, Woolley 

Onays 

1 present not voting - Castro 

For- Timothy Ross, Associated Builders & Contractors of Texas; 

(Registered, but did not testify: Jon Fisher, Associated Builders & 

Contractors of Texas; Corbin VanArsdale, Associated General 

Contractors of America-Texas Building Branch; Michael White, Texas 

Construction Association) 

Against- None 

Under Local Government Code, sec. 271.152, a local government entity 

waives sovereign immunity from a civil lawsuit for the purposes of a 

breach of contract claim. Sec. 271.153limits the available damages in 

breach of contract claims against a local government entity. Damages are 

limited to the balance due and owed, including any amounts owed for the 

increased cost of performing the work due to owner-caused delays or 

acceleration, change orders or additional work the contractor must perform 

in connection with the contract, attorney's fees, and interest as allowed by 

law. 

Government Code, sec. 2251.042 governs disputed invoices with a 

governmental entity. If a dispute is resolved in favor of the vendor, the 

vendor is entitled to receive interest on the unpaid balance of the invoice 

beginning on the date that the payment is overdue. If a dispute is resolved 

in favor of the governmental entity, the vendor must submit a corrected 

invoice, and the unpaid balance accrues interest if the corrected invoice is 

not paid by the appropriate date. 

\ 
DIGEST: 

SUPPORTERS 

SAY: 

OPPONENTS 

SAY: 

NOTES: 

HB345 

House Research Organization 

page2 

HB 345 would allow a plaintiff in a breach of contract claim against a 

local government entity to recover interest as allowed by law, including 

interest on the unpaid balance of a disputed, overdue payment as provided 

by Government Code, sec. 2251.042. 

The bill would take effect on September 1, 2011, and would apply only to 

suits commenced on or after the effective date. 

HB 345 would allow for the recovery of "prompt pay interest" from local 

government entities in breach of contract claims, resolving a 

misinterpretation of the law. Government Code, sec. 2251.042, which 

allows for prompt pay interest from a governmental entity, was enacted in 

1993. Local Government Code, sec. 271.153, which provides for "interest 

as allowed by law" in a contract claim against a local government, was 

enacted in 2005. Therefore, prompt pay interest should be interest allowed 

by law in 2005. However, recent court decisions in this area have not been 

consistent with the plain meaning of the law. HB 345 would clarify this 

issue. 

Creating an additional fmancial obligation for local governments could 

add further strain in a tight budget environment. 

The companion bill, SB 1382 by Wentworth, was referred to the 

Intergovernmental Relations Committee on March 22. 
Senate Research Center 

82R26295 NC-F 

BILL ANALYSIS 

AUTHOR'S I SPONSOR'S STATEMENT OF INTENT 

C.S.H.B. 345 

By: Kleinschmidt (Wentworth) 

Intergovernmental Relations 

5/5/2011 

Committee Report (Substituted) 

Current law specifies that a local government entity that is authorized to enter into certain 

contracts waives its right to sovereign immunity for a breach of contract claim relating to that 

contract. This wavier allows a contractor to sue that local government entity for nonpayment. 

Other statutory provisions specify the types of recovery available to plaintiffs in such a breach of 

contract dispute. In general, a contractor, subcontractor, or supplier is entitled under state law to 

receive interest, commonly called prompt pay interest, on past due payments for work performed 

on a public construction project owned by the state or other governmental entity. Some 

interested parties contend that recent court decisions have misinterpreted Texas law regarding 

whether prompt pay interest on public jobs is barred by governmental immunity. H.B. 345 

seeks to clarify that issue. 

C.S.H.B. 345 amends current law relating to limitations on awards in an adjudication brought 

against a local governmental entity for breach of contract. 

RULEMAKING AUTHORITY 

This bill does not expressly grant any additional rulemaking authority to a state officer, 

institution, or agency. 

SECTION BY SECTION ANALYSIS 

SECTION I. Amends Section 271.153(a), Local Government Code, as follows: 

(a) Provides that the total amount of money awarded in an adjudication brought against a 

local government entity for breach of a contract subject to this subchapter is limited to 

certain amounts, including as calculated under Chapter 2251 (Payment for Goods and 

Services), Government Code. 

SECTION 2. Makes application of this Act prospective. 

SECTION 3. Effective date: September 1, 2011. 

SRC-BCD C.S.H.B. 345 82(R) Page I oft