Opinion ID: 76107
Heading Depth: 2
Heading Rank: 1

Heading: Void on Sovereign Immunity Ground

Text: First, the City argues that the indemnity agreement constitutes an impermissible waiver of the municipality’s sovereign immunity. “The common law doctrine of sovereign immunity, adopted by [Georgia] in 1784, protected governments at all levels from unconsented-to legal actions.” Gilbert v. Richardson, 452 S.E.2d 476, 478 (Ga. 1994) (footnote omitted). By statute, municipalities are clothed with immunity and shielded from “liab[ility] for failure to perform or for errors in performing their legislative or judicial powers.” O.C.G.A. § 36-33-1(b) (2000). 4 Thus, “[i]n Georgia a municipal corporation is not liable in damages for injuries arising from the exercise of a governmental function.” Boone v. City of Columbus, 75 S.E .2d 338 , 339 (G a. Ct. Ap p. 1953 ). “The General Assembly may waive the immunity of counties, municipalities, and school d istricts by law .” Ga. C onst. art. IX , sec. II, par a. IX. R elying on this 4 However, “[f]or neglect to perform or improper or unskillful performance of their ministerial duties, they shall be liable.” Id. 7 provision, with two exceptions relating to the purchase of liability insurance, “the General Assembly . . . declares it is the public policy of the State of Georgia that there is no waiver of the so vereign immun ity of mu nicipal co rporatio ns of the state and such municipal corporations shall be immune from liability for damages.” O.C.G .A. § 36 -33-1( a). Gen erally, “a mu nicipality ca nnot ratif y the unla wful ac ts of its sub ordinate officials d one in p ursuan ce of its go vernm ental fun ctions so as to make itself liable for such acts.” Boone, 75 S.E.2d at 340. Accordingly, “[a] municip al corpo ration sh all not w aive its imm unity by th e purchase of liab ility insurance, except as provided in Code Section 33-24-51, or unless the policy of insurance issued covers an occurrence for which the defense of sovereign immunity is available, and then only to the extent of the limits of such insurance policy.” O.C.G.A. § 36-33-1(a).5 5 Section 33-24-51(a) permits a municipality to procure liability insurance covering bodily injury or death or property damage “arising by reason of ownership, maintenance, operation, or use of any motor vehicle by the municipal corporation.” Whenever a municipal corporation . . . shall purchase the insurance authorized by subsection (a) of this Code section to provide liability coverage for the negligence of any duly authorized officer, agent, servant, attorney, or employee in the performance of his official duties, its governmental immunity shall be waived to the extent of the amount of insurance so purchased. O.C.G.A. § 33-24-51(b). Because the indemnification provision involved here exposes the city to liability far beyond the limits of § 33-24-51(b) and the district court itself relied on the general insurance waiver provision in § 36-33-1(a), we will do the same. 8 Since these two code sections are the only ones to waive municipal immunity, the more specific question we need answered is whether the validity of an agree ment by a Geor gia mun icipality to co ntractually indemn ify a priva te party is first even controlled by O.C.G.A. § 36-33-1(a). 6 If so, we then ask the effect of 6 Indeed, this is the true bone of contention here. CSX, Garden City, and the district court all agree that CSX’s claim does not sound in tort, which clearly would involve the doctrine of sovereign immunity, but, rather, in contract. See Appellants’s Supplemental Br. at 1 (“The Court may decide this appeal on a contract rather than a tort theory . . . .”); Appellee’s Br. at 17 (“[T]he central principle in this appeal does not involve immunity and can be stated simply: without a valid contract with the City, there can be no contract action against the City.”); R7-87 at 6 (“CSX is advancing a contract (not tort) claim against the City (i.e., it is seeking recovery under the indemnification contract for the cost of any tort claims brought against it).”). CSX principally argues, however, that, because its claim is grounded on the indemnification agreement alone, it is a pure breach of contract action for which the defense of sovereign immunity is not available at all. Thus, the threshold issue is not whether this is a tort or contract action, but whether sovereign immunity is even involved in this case. The City contends that CSX is estopped from so arguing under the law of the case doctrine, pointing to our statement in CSX I that the indemnity agreement “required the City to waive its sovereign immunity vis-a-vis CSX,” 235 F.3d at 1329, and citing our decision in A.A. Profiles, Inc. v. City of Fort Lauderdale, 253 F.3d 576, 582 (11th Cir. 2001) (stating that “[g]enerally, the law of the case doctrine requires a court to follow what has been explicitly or by necessary implication decided by a prior appellate decision”). We agree with CSX that we made no decision in CSX I as to whether the indemnity agreement constituted a waiver of sovereign immunity. We merely said that the agreement, “in effect, required” such waiver, 235 F.3d at 1329, but we did not decide, and remanded to the district court to determine, “whether Garden City effectively waived its immunity by its agreement to indemnify CSX.” Id. at 1331. We only granted CSX’s motion to enlarge the record because “[t]he existence or non-existence of insurance . . . was pivotal to the district court’s resolution of th[e] case.” Id. at 1330. Nevertheless, the doctrine of sovereign immunity and its permissible waiver is clearly implicated in this case. Were it not, we would have little need to certify these questions to the Georgia Supreme Court, since it is clear under Georgia law that “[t]he doctrine of sovereign immunity is available to a municipality against claims based on negligence . . . [but] is not applicable to claims against a municipality which are contractual in nature.” City of Atlanta v. Atlantic Realty Co., 421 S.E.2d 113, 116 (Ga. Ct. App. 1992); see also Precise, 403 S.E.2d at 49 (holding that “municipal immunity is not a valid defense to an action for breach of contract”). As we observed in a remarkably similar case involving Florida law, however, “[i]ndemnification agreements appear to occupy a grey area between two lines of [state law] precedent that address state sovereign immunity, one of which deals with tort actions, the other with breach-of-contract actions.” Nat’l R.R. Passenger Corp. (Amtrak) v. Rountree Transp. & Rigging, Inc., 286 F.3d 9 § 36-33-1(a) on the indemnification agreement. In this case, the City purchased a GIRM A liability policy.7 The Georgia Supreme Court has held that such a policy constitutes the purchase of liability insurance within the meaning of § 36-33-1(a), after having concluded that the statutory provision to the contrary remained uncon stitutional. See Gilbert, 452 S.E.2d at 482.8 We are uncertain, however, 1233, 1269 (11th Cir. 2002). CSX’s argument is not furthered by the recent holding in Satilla Cmty. Serv. Bd v. Satilla Health Servs., Inc., 555 S.E.2d 188, 191, 192 (Ga. Ct. App. 2001), that a state agency “has no sovereign immunity as to claims sounding in breach of contract or indemnity as a contractual right,” where the court found that a fourth-party action against the agency “sounds in implied contract of indemnity.” After granting certiorari, the Georgia Supreme Court found “no support in Georgia law for ‘identical reciprocal implied contractual indemnification.’” Satilla Cmty. Serv. Bd. v. Satilla Health Servs., Inc., 573 S.E.2d 31, 32 (Ga. 2002). Thus, although “th[e] dispute is about the breath of the City’s authority to enter into the subject contract, and not simply what its obligations are under it,” R7-87 at 7, what we must determine is whether a municipal corporation’s agreement with a private party is void in part ab initio because one of its obligations, indemnification, constitutes an impermissible waiver of its tort immunity. The threshold question under that analysis is whether the statutory waiver provision strictly limiting a municipality’s authority to waive its sovereign immunity is even controlling. Ordinarily, “[w]hat can not be done by an ordinance can not be done by a contract.” Screws v. City of Atlanta, 8 S.E.2d 16, 20 (Ga. 1940). Thus, we must decide whether municipal indemnification is tantamount to waiving immunity in the first place. 7 The policy covers “all sums which [Garden City] shall be obligated to pay as money damages by reason of liability . . . assumed by [Garden City] under contract or agreement.” R4-58, Ex. B at 27. Thus, if § 36-33-1(a) is controlling and does permit the indemnification agreement at issue here, the City’s sovereign immunity will be waived “to the extent of the limits of [the] insurance policy.” § 36-33-1(a). Here, that limit is $ 1,000,000 per occurrence under the policy’s casualty coverage. R4-58, Ex. B at 1. If the property coverage section applies, the policy covers “all risks of physical loss or damage to all Real or Personal Property of every kind and description wherever located in the world occurring during the period of this coverage,” id. at 15, including “property which [Garden City] . . . agrees to cover by any contractual agreement normal to its operations.” Id. at 17. The per-occurrence limit is on file with GIRMA and therefore unknown to us. Id. at 1. 8 The statutory provision invalidated provides that participation in the GIRMA plan by a municipality “shall not constitute the obtaining of liability insurance and no sovereign immunity 10 whether the policy “covers an occurrence for which the defense of sovereign immunity is available.” O.C.G.A. § 36-33-1(a). The City indemnified and h eld CSX harm less from any and all liability, loss, and damage it suffered in connection with the project, unless solely the fault of CSX , includin g the neg ligence o f others f or wh ich the m unicipality would otherwise not be liable.9 Thus, it exposed itself to liability for “occurrences” for which the sove reign im munity d efense, ab sent wa iver, wo uld be b oth availa ble 10 shall be waived on account of such participation.” O.C.G.A. § 36-85-20. Though Gilbert specifically referred to § 33-24-51(b) at issue in that case, we see no reason to distinguish the case on that ground. The overriding statutory provision is § 36-33-1(a). 9 Section 9.1 of the contract in pertinent part provides: [Garden City] hereby assumes, and, to the fullest extent permitted by State law (Constitutional or Statutory, as amended), shall defend, indemnify and save [CSX] harmless from and against any and all liability, loss . . . [or] damage . . . arising out of, resulting from, or in any way connected with the construction, presence, existence, repair, maintenance, replacement, operations, use or removal of [a p]ipeline [used for the transmission of raw or treated sewage] or any structure in connection therewith, . . . EXCEPT when caused solely by the fault or negligence of [CSX]. R4-58, Ex. A at 5. 10 For instance, under a pure tort theory, the City would normally be immunized from damages arising from its own negligence in the performance of governmental functions, see Koehler, 191 S.E.2d at 833, such as “[t]he establishment and maintenance of a sewerage system,” see City of Douglas v. Cartrett, 137 S.E.2d 358, 360 (Ga. Ct. App. 1964), including that of its contractors and subcontractors under circumstances for which the City would otherwise be liable, see Fulton County St. R.R. Co. v. McConnell, 13 S.E. 828, 829 (Ga. 1891) (“If [an] independent contractor is guilty of an act of negligence which causes injury to a third person, and the evidence shows that the act does not fall within any of [the statutory] exceptions, the employer is not liable.”); O.C.G.A. §§ 51-2-4 to -5. 11 and un available 11 in a pure tort action . If § 36- 33-1(a ) is to be re ad for its p lain meaning, then, waiver of sovereign immunity as to the former would be permissible as, presumably, would an indemnity agreement to that effect, whereas waiver as to the latte r wou ld be imp ermissib le as, presu mably, w ould an indemn ity 11 By contrast, under a pure tort theory, the City would normally not be immunized from damages arising from its own negligence in the performance of its ministerial functions, see O.C.G.A. § 36-33-1(b); Atlantic Realty Co., 421 S.E.2d at 116, or from its own negligence in creating or maintaining “a nuisance, permanent in its character, and dangerous to life and health,” Bass Canning Co. v. Mayor of Milledgeville, 162 S.E. 687, 689-90 (Ga. 1932), including that of its contractors and subcontractors, see Mayor & Aldermen of Savannah v. Waldner, 49 Ga. 316, 324 (1873) (holding “that if the [private] builders of the sewer in this case, negligently left it unguarded, by not having proper barriers, or lights, or other protection against danger, and it was so permitted to continue for an unreasonable or unnecessary time by the municipal authorities, who had notice, or there are facts from which notice could be reasonably inferred, they are liable for injuries resulting from such neglect to perform their duty”). Indemnifying a private party for these acts does not appear to waive sovereign immunity, since it would not be available in the first place and, therefore, would not be prohibited by § 36-33-1(a). However, the Georgia law on that point is not entirely clear. In addition, sovereign immunity might not be an “available” defense if the City were sued in tort for damages arising from the negligence or fault of other actors, simply because the claim would most likely not survive a motion to dismiss or for summary judgment. It is not clear, then, whether an indemnity contract assuming liability for the torts of others would be an “occurrence” for which sovereign immunity is not available, and therefore prohibited under § 36-33-1(a), or whether that provision would have no application because, like indemnification for torts committed while performing ministerial duties, indemnification for the torts of others would not waive sovereign immunity at all, since it would not be available in the first place and, therefore, not prohibited. Finally, the term “occurrence” in § 36-33-1(a) could theoretically also refer to a breach of an indemnity contract itself, thus, rendering any such agreement void, irrespective of the type of liability it assumed, because sovereign immunity is not “available” for breach of contract claims. See Atlantic Realty Co., 421 S.E.2d at 116. However, because indemnity contracts “occupy a grey area” within the doctrine of sovereign immunity, see Nat’l R.R. Passenger Corp., 286 F.3d at 1269, it is questionable that the Georgia General Assembly intended such a result. 12 agreement to that effect. Yet, Garden City’s indemnity agreement covers them all.12 In addition to the absence of any express authority in § 36-33-1(a) as to the validity of a municipality’s indemnification agreement, there is no binding case law on the subje ct.13 To complicate matters even further, there are at least two, diametrically opposed policy arguments. On the one hand, “[c]ities [should] be able to induce the CSX’s of the world to cooperate in public works projects such as in the case sub judice by entering into contractual indemnity agreements.” R7-87 at 8. On the other hand, “one m odern purpose of the [so vereign immunity] 12 Section 18.4 of the contract here contains a severability clause. R4-58, Ex. A at 10. Thus, if § 36-33-1(a) permits indemnification for some damages but not for others, Garden City’s indemnity agreement may be saved by the clause. However, if the permissibility of indemnification agreements were variable as to the type of liability assumed, a municipality’s summary judgment motion on the ground of sovereign immunity would require a court hearing the motion to determine before trial where to lay blame. Indeed, the City argued to the district court in this case that “the Court must first determine that the City was negligent—CSX’s or a third party’s negligence could have caused the complained of damage—and then ‘determine whether Georgia law permits a waiver of sovereign immunity for purposes of assuming the tort liability of third parties.’” R7-87 at 3. 13 The holding in City of Douglas, 137 S.E.2d at 359, 360, 362, voiding a contract entered into by a municipality to pay damages to the owner of land, upon which the municipality had been granted an easement for the purpose of running a sewer line, for “any damage” to the owner’s land outside of the easement boundaries, does not help the City’s argument here. The contract was found void, not because it waived the city’s sovereign immunity, but because it “extend[ed] beyond the term of the council making” the contract and was not otherwise a covenant running with the land. Id. at 361. Also, the opinions of the state attorney general presented by the City, one of them formal, the other informal, suggesting that the indemnity agreement at issue is invalid, are not binding on Georgia courts and, therefore, not on federal courts sitting in diversity. Moore v. Ray, 499 S.E.2d 636, 637 (Ga. 1998); Nat’l R.R. Passenger Corp., 286 F.3d at 1266 n.32. 13 doctrine is to ‘preserve the protection of the public purse.’” Gilbert, 452 S.E.2d at 481 n.7 (citation omitted). Because “there is no provision of law for raising the funds w ith whic h to pay a claim no t authoriz ed or rec ognized by law[ , i]t stands to reason that a municipal corporation cannot make an illegal act legal by a simple act of waiver. In doing so, it would be encroaching on the powers of the State, of which it is only a creature.” Boone, 75 S.E .2d at 34 0. Othe rwise, as Garde n City points o ut, “corru pt or me rely inept p ublic off icers cou ld subjec t the pub lic to untold f inancial liab ility.” App ellee’s Br. a t 16. Th ese ration ales apply equally to waivers of sovereign immunity in tort actions and indemnity agreements having the same effect. Thus, even if § 36-33-1(a) were to control the question of the validity of municipal indemnity agreements, we decline to decide the operation of the provision as applied to the facts of this case, since they involve unsettled question s of state law and pu blic policy and, acco rdingly, c ertify the q uestion to the justices of the Georgia Supreme Court for their review.