Court Opinion

ID: 9367877
Source: CourtListenerOpinion
Date Created: 2023-02-02 01:00:38.317601+00
Date Added: 2024-06-11T17:16:04.138917
License: Public Domain

Case: 22-50038        Document: 00516631263             Page: 1      Date Filed: 02/01/2023

             United States Court of Appeals
                  for the Fifth Circuit                                       United States Court of Appeals
                                                                                       Fifth Circuit

                                                                                     FILED
                                                                              February 1, 2023
                                       No. 22-50038                             Lyle W. Cayce
                                                                                     Clerk

   Laborfest, L.L.C.; Larry Williams,

                                                                  Plaintiffs—Appellants,

                                            versus

   City of San Antonio; “John Does” Unknown City
   Employees,

                                                                Defendants—Appellees.

                     Appeal from the United States District Court
                          for the Western District of Texas
                                USDC No. 5:19-CV-60

   Before Graves, Ho, and Duncan, Circuit Judges.
   Per Curiam:*
         Laborfest LLC contracted with the City of San Antonio, Texas (“the
   City”) to lease the City’s convention center for a concert. The concert did
   not go as planned. Laborfest could not pay some of the scheduled acts, who
   refused to perform, forcing Laborfest to cancel the concert. Laborfest then
   sued the City, alleging the City defrauded Laborfest by undercounting ticket

         *
             This opinion is not designated for publication. See 5th Cir. R. 47.5.
Case: 22-50038       Document: 00516631263          Page: 2   Date Filed: 02/01/2023

                                     No. 22-50038

   sales and withholding proceeds, causing the concert’s downfall. The district
   court ruled that Laborfest’s claims were barred by governmental immunity,
   and it also denied Laborfest’s motion to amend its complaint for the eleventh
   time. We affirm.
                                         I.
            Laborfest is a promotional company that organizes music festivals. In
   2016, it contracted with the City to lease the Henry B. Gonzales Convention
   Center. Laborfest planned to host a concert at the convention center
   featuring nationally acclaimed artists. The contract stipulated that all ticket
   sales would take place through Ticketmaster as the City’s exclusive ticketing
   agent.
            Unfortunately, the concert was not a success. Laborfest received only
   meager revenue from ticket sales and was unable to pay many of the artists,
   who refused to perform. Laborfest had to cancel the concert. Laborfest
   alleges that the City provided it with “altered and false reports about ticket
   sales,” systematically underreporting ticket sales to avoid remitting the
   proceeds to Laborfest.
            Laborfest sued the City in state court for breach of contract. After
   Laborfest amended its complaint several times and added federal claims, the
   City removed to federal court. Laborfest amended its complaint several more
   times, and the operative complaint is its Tenth Amended Complaint. As
   relevant here, that complaint brings claims under Texas law for breach of
   contract, tortious interference with a prospective economic relationship,
   negligence, negligent misrepresentation, conversion, and fraud.
            The City moved for summary judgment on Laborfest’s state law
   claims and, while that motion was pending, Laborfest moved to amend its
   complaint for an eleventh time. The district court denied Laborfest’s motion,
   finding that it was untimely and that amendment would require reopening
   discovery. The court subsequently granted summary judgment for the City,

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                                           No. 22-50038

   holding that the City was entitled to governmental immunity because it was
   performing a governmental function when it entered the contract. 1
           Laborfest now appeals the summary judgment, which we review de
   novo. Davidson v. Fairchild Controls Corp., 882 F.3d 180, 184 (5th Cir. 2018).
   It also appeals the denial of leave to amend its complaint, which we review
   for abuse of discretion. Herrmann Holdings Ltd. v. Lucent Techs. Inc., 302 F.3d
   552, 558 (5th Cir. 2002).
                                              II.
           Municipalities in Texas enjoy governmental immunity when they
   perform governmental functions but not when they perform proprietary
   functions. Wasson Interests, Ltd. v. City of Jacksonville, 489 S.W.3d 427, 429–
   30 (Tex. 2016) (“Wasson I”). The Texas Constitution empowers the
   legislature to draw the line between those two categories. See Tex. Const.
   art. XI, § 13(a) (“[T]he legislature may by law define for all purposes those
   functions of a municipality that are to be considered governmental and those
   that are proprietary, including reclassifying a function’s classification
   assigned under prior statute or common law.”). The legislature exercised
   that power in the Texas Tort Claims Act (“TTCA”). See Tex. Civ.
   Prac. & Rem. Code § 101.0215. The TTCA generally defines
   governmental and proprietary functions, while also delineating certain
   functions that fall conclusively on one side of the divide. See id. § 101.0215(a),
   (b). One function designated as governmental in the context of tort suits is
   operating “civic, convention centers, or coliseums.” Id. § 101.0215(a)(16).
           This dichotomy between governmental and proprietary functions also
   applies to suits against municipalities for breach of contract. Wasson I, 489

           1
             The district court granted the City summary judgment on Laborfest’s federal law
   claims as well as its state law claims. Laborfest has not briefed its federal claims on appeal,
   so we do not consider them. See Willis v. Cleco Corp., 749 F.3d 314, 319 (5th Cir. 2014).

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   S.W.3d at 439. To determine whether a breach of contract suit implicates a
   municipality’s governmental or proprietary functions, courts follow a three-
   step inquiry. First, courts defer to the TTCA if the function at issue is
   specifically enumerated there as governmental or proprietary. Hays St. Bridge
   Restoration Grp. v. City of San Antonio, 570 S.W.3d 697, 704–05 (Tex. 2019);
   see also Wheelabrator Air Pollution Control, Inc. v. City of San Antonio, 489
   S.W.3d 448, 452 (Tex. 2016) (reaffirming “the appropriateness of deferring
   to the TTCA when classifying acts in the contract-claims context”). 2 If the
   function is not enumerated, courts apply the TTCA’s general definitions of
   governmental and proprietary functions using a four-factor test. 3 Hays St.
   Bridge Restoration Grp., 570 S.W.3d at 705. Finally, if the four factors point in
   different directions, courts classify the function as governmental or
   proprietary in light of “immunity’s nature and purpose and the derivative
   nature of a city’s access to that protection.” Ibid. (quoting Wasson Ints., Ltd.
   v. City of Jacksonville, 559 S.W.3d 142, 154 (Tex. 2018) (“Wasson II”)).

           2
              Strictly speaking, the TTCA’s enumeration of governmental and proprietary
   functions is persuasive rather than binding in the context of contract claims. Hays St. Bridge
   Restoration Grp., 570 S.W.3d at 705 n.46. But in practice, Texas courts, including the Texas
   Supreme Court, give the TTCA’s classifications dispositive weight. See Wasson Ints., Ltd.
   v. City of Jacksonville, 559 S.W.3d 142, 150 (Tex. 2018) (“Wasson II”) (“Because the Tort
   Claims Act does not enumerate leasing property as a governmental or a proprietary
   function, we must apply the general definitions.”); M.E.N. Water Supply Corp. v. City of
   Corsicana, 564 S.W.3d 474, 487 (Tex. App. 2018) (holding, in a breach of contract suit, that
   “[i]f the City’s actions are listed as a governmental function under the TTCA, we have no
   discretion, regardless of the City’s motives, to declare the actions as proprietary”).
           3
             Those factors are: (1) whether the city’s act of entering the contract was
   mandatory or discretionary; (2) whether the contract was intended to benefit the city’s
   residents or the general public; (3) whether the city acted on the state’s behalf in entering
   the contract; and (4) whether entering the contract was so related to a governmental
   function as to render the contract governmental even if it would have otherwise been
   proprietary. Wasson II, 559 S.W.3d at 150.

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          The first step is determinative here because the TTCA enumerates
   the operation of “civic, convention centers, or coliseums” as a governmental
   function, see Tex. Civ. Prac. & Rem. Code § 101.0215(a)(16), and the
   City’s contract with Laborfest was essentially about the City’s convention
   center. The relevant inquiry is “whether the municipality was engaged in a
   governmental or proprietary function when it entered the contract, not when
   it allegedly breached that contract.” Wasson II, 559 S.W.3d at 149. In other
   words, “the focus belongs on the nature of the contract, not the nature of the
   breach.” Ibid. Laborfest claims the City breached the contract by
   underreporting ticket sales and withholding money from Laborfest. That
   focuses on the nature of the breach, however. By contrast, the contract’s
   basic point was for Laborfest to obtain the use of the center. The very first
   section provides that the City “agree[s] to furnish certain space . . . located
   in the San Antonio Convention Facilities,” while Laborfest agrees to pay
   “for the right herein granted to use the [convention center.]” The district
   court was therefore correct that the contract concerns the operation of
   “civic, convention centers, or coliseums” under the TTCA. See, e.g., Hays
   Street Bridge Restoration Grp., 570 S.W.3d at 705 (city’s contract to revitalize
   bridge and surroundings fell within TTCA’s governmental functions of
   “bridge construction and maintenance” and “community development or
   urban renewal activities”).
          Laborfest argues that even if the contract’s “underlying function” is
   governmental, precedent allows us to “split” the contract into “discrete
   functions” and focus on the City’s leasing and ticketing duties, which
   Laborfest argues are proprietary functions. We disagree. To hair-split the
   contract in this way ignores the Texas Supreme Court’s command to focus
   on “the nature of the function the municipality was performing when it

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   entered into the contract,” rather than the particulars of the alleged breach.
   Wasson II, 559 S.W.3d at 154; id. at 149. 4
           Finally, Laborfest argues that any immunity the City may have is
   waived by a provision of the government code concerning procurement
   contracts. See Tex. Loc. Gov’t Code § 271.152. But Laborfest forfeited
   this argument by failing to raise it before the district court. See Def.
   Distributed v. Grewal, 971 F.3d 485, 496 (5th Cir. 2020). Indeed, the district
   court noted that Laborfest did not argue waiver in opposing summary
   judgment. Laborfest cannot do so for the first time here. See Chevron USA,
   Inc. v. Aker Mar. Inc., 689 F.3d 497, 504 (5th Cir. 2012). 5
           In sum, the district court correctly granted the City summary
   judgment based on governmental immunity.
                                            III.
           Laborfest also argues that the district court abused its discretion in
   denying it leave to file an eleventh amended complaint. We disagree.
           Because Laborfest filed its motion after the deadline to amend
   pleadings, it had to show good cause. See Fed. R. Civ. P. 16(b)(4); see also

           4
             Even if we accepted Laborfest’s framing and found the leasing and ticketing were
   proprietary functions, Laborfest would still not prevail. The Texas Supreme Court has
   explained that “a city’s proprietary action may be treated as governmental . . . if it is
   essential to the city’s governmental actions.” Wasson II, 559 S.W.3d at 153; see also City of
   Houston v. Petroleum Traders Corp., 261 S.W.3d 350, 356 (Tex. App.—Houston [14th Dist.]
   2008, no pet.) (similar). That is the case here. When a city owns a convention center,
   providing leasing and ticketing services are “essential” to the city’s performance of that
   governmental function.
           5
             In any event, the waiver argument is meritless. Laborfest relies on a provision
   waiving immunity for contract claims arising out of “a written contract stating the essential
   terms of the agreement for providing goods or services to the local governmental entity.”
   Tex. Loc. Gov’t Code § 271.151(a); id. § 271.152. That provision is inapplicable
   because the contract here involved the City providing services to Laborfest, not vice versa.
   See M.E.N. Water Supply Corp., 564 S.W.3d at 489–90 (addressing a similar argument based
   on § 271.152).

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                                    No. 22-50038

   Sw. Bell Tel. Co. v. City of El Paso, 346 F.3d 541, 546 (5th Cir. 2003). Four
   factors govern whether good cause exists: “(1) the explanation for the failure
   to timely move for leave to amend; (2) the importance of the amendment; (3)
   potential prejudice in allowing the amendment; and (4) the availability of a
   continuance to cure such prejudice.” Sw. Bell Tel. Co., 346 F.3d at 546
   (quoting S&W Enters., L.L.C. v. SouthTrust Bank of Ala., NA, 315 F.3d 533,
   536 (5th Cir. 2003)).
          Laborfest addresses only the first factor, arguing it obtained discovery
   in May and August 2021 that required amendment to add new facts and
   claims. But this does not explain why it waited until October 2021 to file its
   motion, more than a year after the amendment deadline of August 2020. In
   any event, Laborfest fails to address the other factors. For example, as the
   district court noted, Laborfest’s motion came well after the close of discovery
   and after the City had already moved for summary judgment. It is particularly
   prejudicial to try to amend pleadings after summary judgment motions have
   been filed. See Squyres v. Heico Cos., L.L.C., 782 F.3d 224, 239 (5th Cir.
   2015); Parish v. Frazier, 195 F.3d 761, 764 (5th Cir. 1999) (per curiam).
          The district court did not abuse its discretion in denying Laborfest’s
   eleventh motion to amend.
                                                                  AFFIRMED.

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