Court Opinion

ID: 9396316
Source: CourtListenerOpinion
Date Created: 2023-05-21 14:06:29.281748+00
Date Added: 2024-06-11T17:19:16.080339
License: Public Domain

Supreme Court of Texas
                             ══════════
                              No. 21-0966
                             ══════════

         Pepper Lawson Horizon International Group, LLC,
                              Petitioner,

                                  v.

                     Texas Southern University,
                              Respondent

   ═══════════════════════════════════════
              On Petition for Review from the
       Court of Appeals for the First District of Texas
   ═══════════════════════════════════════

                             PER CURIAM

      This interlocutory appeal involves the application of a statutory
immunity waiver in a suit alleging breach of a contract to construct
university housing. See TEX. CIV. PRAC. & REM. CODE § 114.003. The
trial court held that the university was not immune from suit, but the
court of appeals reversed and rendered judgment dismissing the
contract claims for want of subject-matter jurisdiction. We reverse and
remand to the trial court.
      In 2014, Texas Southern University (TSU) executed a contract
naming    “Pepper-Lawson/Horizon       International   Group”   as   the
“Contractor” on a project to construct student housing. Representatives
of Pepper Lawson Construction and Horizon International Group each
signed the contract as part of a joint venture subsequently formed as
Pepper Lawson Horizon International Group, LLC (PLH). PLH sued
TSU, alleging that, as recounted below, the university defaulted on its
payment obligations under the construction contract.
      The construction contract required substantial project completion
by July 1, 2015, and final completion by August 31, 2015, subject to
justified time extensions and equitable price adjustments for certain
types of delays. See infra note 1. PLH did not complete the project until
February 2016. On completion, PLH invoiced TSU for $3,320,605—the
remaining “balance due” under the contract, as adjusted by approved
change orders—plus $3,677,580 for “additional direct costs” PLH had
allegedly incurred due to “excusable delays.”
      TSU refused to pay the adjusted contract balance because the
project was completed 155 days late and a liquidated-penalty clause in
the construction contract entitles TSU to deduct $20,000 per day for
untimeliness. TSU declined to pay the additional direct costs based on
Section 9.7 of the construction contract, which states, “Contractor has
no claim for monetary damages for delay or hindrances to the work from
any cause, including without limitation any act or omission of [TSU].”
      After completing a contractually required dispute-resolution
process, PLH sued TSU for breach of contract.        PLH asserted that
(1) TSU failed to grant contractually required extensions of the
completion deadline for excusable delays, as provided in contract

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Sections 9.6.2.2 and 9.6.3;1 (2) the liquidated-penalty clause did not
preclude recovery of the amount due under the contract, including the
excusable-delay costs, because TSU should have extended the
completion deadline, which would have made the February completion
date timely; and (3) PLH was not seeking delay damages under contract

       1   “Excusable Delay” is defined in Section 9.6.2.2 of the contract:
       Excusable Delay. Contractor is entitled to an equitable
       adjustment of the Contract Time, issued via change order, for
       delays caused by the following: [1] Errors, omissions and
       imperfections     in    design . . . [2] Unanticipated   physical
       conditions at the Site, which A/E [Architect/Engineer] corrects
       by means of changes to the Drawings and Specifications or for
       which ODR [Owner’s Designated Representative] directs
       changes in the Work identified in the Contract Documents.
       [3] Changes in the Work that effect [sic] activities identified in
       Contractor[’]s schedule as “critical” to completion of the entire
       Work, if such changes are ordered by ODR or recommended by
       A/E and ordered by ODR. [4] Suspension of Work for unexpected
       natural events (sometimes called “acts of God”), civil unrest,
       strikes or other events which are not within the reasonable
       control of Contractor. [5] Suspension of Work for convenience of
       ODR, which prevents Contractor from completing the Work
       within the Contract Time.
As provided in Section 9.6.3 of the contract:
       Contractor[’]s relief in the event of such delays is the time impact
       to the critical path as determined by analysis of Contractor[’]s
       schedule. In the event that Contractor incurs additional direct
       costs because of the excusable delays other than [Suspension of
       Work for unexpected natural events (sometimes called ‘acts of
       God’), civil unrest, strikes or other events which are not within
       the reasonable control of Contractor] and within the reasonable
       control of [TSU], the Contract price and Contract Time are to be
       equitably adjusted by [TSU] pursuant to the provisions of
       Article 11.
(Emphases added.)

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Section 9.7,    but    rather,    an       equitable   adjustment     of   the
project-completion deadline and the contract price, as authorized under
Section 9.6.3 for excusable delays.
       PLH alleged that various issues delayed project completion and
increased PLH’s costs, including delays caused by TSU or within TSU’s
reasonable control. Among other things, PLH discovered that
“undisclosed underground obstructions” from a previous building—a
pool, basement walls, and piers—remained buried under the worksite.
While TSU agreed to a cost increase to remove the obstructions, it
denied PLH’s request for additional time to perform the work under
contract Sections 9.6.2.2 and 9.6.3. According to PLH, that delay had
the added effect of pushing construction into Texas’s “wet season,” which
had a record rainfall that further delayed construction. PLH requested
a 67-day extension to account for rain days under a contract provision
requiring TSU to extend the completion deadline for excusable delays
and certain “weather days,”2 but the university only granted a 21-day
extension. Finally, PLH alleged that TSU agreed to supply the project
with permanent power but missed the agreed deadline by 192 days.

       2 Section 9.6.2 of the contract provides for an extension of time on the
following terms: “When a delay defined herein as excusable prevents
Contractor from completing the Work within the Contract Time, Contractor is
entitled to an extension of time. [TSU] will make an equitable adjustment and
extend the number of days lost because of excusable delay or Weather Days, as
measured by Contractor[’]s progress schedule.”
       Section 9.6.2.1, in turn, defines a “Weather Day” as “a day on which
Contractor[’]s current schedule indicates Work is to be done, and on which
inclement weather and related site conditions prevent Contractor from
performing seven (7) continuous hours of Work between the hours of 7:00 a.m.
and 6:00 p.m. Weather days are excusable delays.”

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Because of the power delay, PLH requested a commensurate deadline
extension under the contract’s excusable-delay provision, but TSU
refused to grant any additional time.
       Along with sums allegedly due and owing under the construction
contract, PLH prayed for interest and attorney’s fees under the Texas
Prompt Payment Act (PPA) because the construction contract expressly
required TSU to comply with that statute3 and because TSU did not pay
PLH’s final invoice within the statutorily mandated 30-day period. See
TEX. GOV’T CODE § 2251.021(a).
       TSU generally denied PLH’s allegations and asserted sovereign
immunity to suit, among other defenses. Although PLH’s pleadings
expressly invoked the immunity waiver in Section 114.003 of the Texas
Civil Practice and Remedies Code, TSU filed a plea to the jurisdiction,
asserting Section 114.003 was inapplicable because PLH failed to plead
a claim covered by the waiver provision.
       Section 114.003 waives immunity to suit against “[a] state agency
that . . . enters into a contract subject to [Chapter 114]” but only “for the
purpose of adjudicating a claim for breach of an express provision of the
contract” and “subject to [Chapter 114’s] terms and conditions[.]” TEX.
CIV. PRAC. & REM. CODE § 114.003. Chapter 114 “applies only to a claim
for breach” of certain contracts, including “a written contract
for . . . construction services or for materials related to . . . construction

       3Section 6.4.2 of the contract references the PPA as follows: “Provided
that Contractor’s payment applications are submitted by the last day of each
month and approved by [TSU], [TSU] shall pay Contractor the approved
amount in accordance with Chapter 2251 of the Texas Government Code [the
PPA].”

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services brought by a party to the written contract.” Id. § 114.002. The
amount in controversy must be at least $250,000, but the awardable
damages are limited to:
      (1) the balance due and owed by the state agency under the
          contract as it may have been amended, including any
          amount owed as compensation for the increased cost to
          perform the work as a direct result of owner-caused
          delays or acceleration if the contract expressly provides
          for that compensation;

      (2) the amount owed for written change orders;

      (3) reasonable and necessary attorney’s fees based on an
          hourly rate that are equitable and just if the contract
          expressly provides that recovery of attorney’s fees is
          available to all parties to the contract; and

      (4) interest at the rate specified by the contract or, if a rate
          is not specified, the rate for postjudgment interest
          under Section 304.003(c), Finance Code, but not to
          exceed 10 percent.

Id. §§ 114.002, .004(a).
      Despite Chapter 114’s clear and unambiguous waiver of
immunity for construction-contract suits like this one, TSU claimed it
retained immunity to suit because (1) PLH failed to plead facts showing
“breach of an express provision of the contract”; (2) PLH failed to point
to a contractual provision expressly allowing recovery of damages for
owner-caused delays or attorney’s fees; (3) PLH’s “delay claim” for
alleged underground obstructions was moot because PLH executed a
change order that resolved those claims according to the procedure
provided by the construction contract; (4) PLH’s weather-delay claim
was moot because the parties executed a change order for the disputed

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weather days that resolved those claims according to the procedure
provided by the construction contract; (5) PLH could not recover
enhanced interest rates and attorney’s fees under the PPA because that
statute does not clearly and unambiguously waive sovereign immunity;
and (6) PLH failed to identify a separate immunity waiver that would
allow it to recover interest and fees under the PPA. TSU’s mootness
arguments hinged on contract provisions making the Contractor’s
signature on change orders conclusive as to the agreed contract price
and time adjustments.4 To support the plea, TSU attached the contract
and change orders.
      In response, PLH asserted that its petition sufficiently invoked
Section 114.003’s immunity waiver by pleading the express contract
provisions TSU allegedly breached and detailing how TSU defaulted on
its obligations under those provisions.
      The trial court denied TSU’s plea, but on interlocutory appeal, the
court of appeals reversed and rendered judgment dismissing the suit.
634 S.W.3d 428, 440 (Tex. App.—Houston [1st Dist.] 2021). The court
held that PLH “failed to show, as a matter of law,” that Chapter 114
waived immunity because “no express contract provision required TSU
to perform as PLH alleged in its second amended petition.” The court
further held that TSU was immune from suit for interest and attorney’s

      4  Uniform General Conditions Article 11.1, incorporated into the
construction contract, provides: “A Change Order signed by Contractor
indicates his agreement therewith, including the adjustment in the Contract
Sum and/or the Contract Time.” Article 11.10 further makes an executed
Change Order conclusive: “Upon execution of a Change order . . . by Owner,
Contractor and A/E, all costs and time issues regarding that change are final
and not subject to adjustment.”

                                     7
fees under the PPA because that statute contains no immunity waiver
and PLH failed to identify any other waiver of immunity applicable to
those claims. Id. at 436, 440. Having found no waiver of immunity
under Chapter 114, the court of appeals did not consider whether TSU’s
contractual agreement to abide by the PPA—“[TSU] shall pay
Contractor the approved amount in accordance with Chapter 2251 of the
Texas Government Code”—made TSU amenable to suit for attorney’s
fees and interest as provided in the PPA under the awardable damages
categories in Section 114.004(a)(3) and (a)(4). See id. at 435-36.
      PLH’s petition for review assails the court of appeals’ analysis on
both the contract and prompt-pay claims, asserting that the court
misapplied the standard of review articulated in Texas Department of
Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226-28 (Tex. 2004). In
response, TSU presents a new issue not raised in the courts below: that
PLH lacks “standing” to claim Chapter 114’s immunity waiver because
it was not “a party to the written contract.” See TEX. CIV. PRAC. & REM.
CODE § 114.002. We agree with PLH that the court of appeals erred in
its analysis of the issues before it, but for the reasons explained below,
we do not substantively address what the State characterizes as a
“standing” issue.
      Sovereign     immunity    protects   various   divisions   of   state
government, including state universities, from lawsuits for damages
unless the Constitution or a legislative enactment waives that
immunity. Wasson Ints., Ltd. v. City of Jacksonville, 489 S.W.3d 427,
433 (Tex. 2016); see Ben Bolt-Palito Blanco Consol. Indep. Sch. Dist. v.
Tex. Pol. Subdivisions Prop./Cas. Joint Self-Ins. Fund, 212 S.W.3d 320,

                                    8
323-24 (Tex. 2006) (“The State’s sovereign immunity extends
to . . . [state] universities.”).    A statute does not waive sovereign
immunity absent clear and unambiguous language to that effect. TEX.
GOV’T CODE § 311.034; Kirby Lake Dev., Ltd. v. Clear Lake City Water
Auth., 320 S.W.3d 829, 838 (Tex. 2010).
       Section 114.003 clearly and unambiguously waives immunity
from suit for breach-of-contract claims against a “state agency,”
including “a university system or a system of higher education,” that has
entered into a written contract for construction services or materials.
TEX. CIV. PRAC. & REM. CODE §§ 114.001(3), .002, .003. But at the same
time, the statute cabins the waiver to “a claim for breach of an express
provision of the contract.” Id. § 114.003. The immunity waiver is also
“subject to [Chapter 114’s] terms and conditions,” id., and under a
similarly worded waiver provision applicable to local governmental
entities, we have held that such language waives immunity from suit
only to the extent the plaintiff seeks categories of damages that are
recoverable under the statute, cf. Zachry Constr. Corp. v. Port of Hous.
Auth. of Harris Cnty., 449 S.W.3d 98, 107-10 (Tex. 2014) (construing
TEX. LOC. GOV’T CODE §§ 271.151–.160). Here, the issue is not whether
a clear and unambiguous immunity waiver exists but whether PLH’s
breach-of-contract allegations and damages claims fall within the scope
of the express statutory waiver.
       Because     immunity         from       suit   implicates   subject-matter
jurisdiction, a defendant may properly raise the defense in a plea to the

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jurisdiction.5 Miranda, 133 S.W.3d at 225-26. In considering the plea’s
merits, the court must determine whether the plaintiff has met its
burden to allege facts affirmatively showing the trial court’s jurisdiction,
but the court “may [also] consider evidence and must do so when
necessary to resolve the jurisdictional issues raised.” Bland Indep. Sch.
Dist. v. Blue, 34 S.W.3d 547, 555 (Tex. 2000). But there is an important
caveat: a plea to the jurisdiction does not authorize an inquiry so far into
the substance of the claims that plaintiffs would be required to put on
their case to establish jurisdiction. Id. at 554. The court of appeals erred
in this regard.
       Pleading a claim under Chapter 114, PLH alleged that TSU
(1) entered a written contract with PLH for construction services, (2) did
not timely pay the balance owed under the contract, and (3) did not
equitably adjust the contract price and time as contractually required
for excusable delays.       PLH further identified the specific contract
provisions it contends TSU breached—Sections 9.6.2.2, 9.6.3, and
9.9.4.2. TSU’s jurisdictional plea argued that PLH could not prevail on
its claims under the construction contract and change orders, which
were attached to its plea.
       When analyzing TSU’s jurisdictional challenge, the court of
appeals     conflated    statutory-construction       rules     with    contract
interpretation. In doing so, the court required PLH to show that “the
parties’ contract unambiguously waives TSU’s immunity” and “show

       5While sovereign immunity implicates subject-matter jurisdiction, the
contours of the two are not co-extensive, and “sovereign immunity does not
equate to a lack of subject-matter jurisdiction for all purposes.” Gulf Coast Ctr.
v. Curry, 658 S.W.3d 281, 284 n.2 (Tex. 2022).

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breach of an express provision of the parties’ contract.” 634 S.W.3d at
433, 439. In short, TSU brought forward a host of contract defenses
pertaining to the merits of PLH’s claims, and the court of appeals
required PLH to prove its case.
      But PLH was not required to prove that “the parties’ contract
unambiguously     waives   TSU’s   immunity     from   suit   for    PLH’s
breach-of-contract claim,” as the court of appeals held. Id. at 439. PLH
only had to establish that Chapter 114, not the contract, unambiguously
waived immunity. See TEX. GOV’T CODE § 311.034; Kirby Lake Dev., 320
S.W.3d at 838. Because sovereign immunity is unambiguously waived
for Chapter 114 claims, PLH’s burden was to allege facts affirmatively
demonstrating the court’s jurisdiction to hear the cause, and it did. See
Miranda, 133 S.W.3d at 226-27. To the extent the jurisdictional inquiry
implicated the merits of PLH’s cause of action, TSU failed to
conclusively establish that (1) it did not breach an express provision of
the contract when it refused to equitably adjust the contract time and
price for “additional costs” incurred for PLH’s alleged excusable delays
that were within TSU’s “reasonable control” and (2) PLH did not follow
the procedures triggering TSU’s obligation to pay. See id. at 227.
      The court of appeals improperly held that the contract did not
obligate TSU to equitably adjust the time and price based on excusable
delays because PLH failed to allege or prove that it met the conditions
precedent for requesting a time extension. 634 S.W.3d at 434. PLH
generally pleaded that it had satisfied all conditions precedent, and TSU
neither specifically denied that PLH satisfied the payment conditions
nor challenged the facts that were actually pleaded.

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       Plaintiffs may generally plead that all conditions precedent have
been performed or have occurred, and when they have done so, they need
not prove satisfaction of any conditions the opposing party has not
specifically denied.   See TEX. R. CIV. P. 54.       Because TSU did not
specifically deny that PLH satisfied all conditions precedent, the court
of appeals erred in holding that PLH failed to plead a cognizable
Chapter 114 claim based on any failure to satisfy contractual conditions
precedent to requesting a time extension.
       In its second issue, PLH challenges the court of appeals’
disposition on its PPA claims for attorney’s fees and interest. Having
erroneously found no waiver of immunity under Chapter 114, the court
of appeals did not consider whether PLH could recover PPA penalty
interest and attorney’s fees through Chapter 114’s waiver provision. We
hold that it can because (1) the construction contract expressly
incorporates and requires compliance with the PPA; (2) the categories of
damages sought under the PPA are included in the categories of
damages awardable under Chapter 114; and (3) Section 114.003 is a
clear and unambiguous waiver of immunity as to the awardable
categories of damages.6          See TEX. CIV. PRAC. & REM. CODE
§ 114.004(a)(3), (4); City of Houston v. Williams, 353 S.W.3d 128, 144
(Tex. 2011) (parties may incorporate a statute into their contract by
reference).

       6  Because we resolve the waiver issue based on the contract’s language
and the awardable damages under Section 114.004, we do not consider PLH’s
argument that the PPA would be rendered meaningless if it were not construed
as a self-executing waiver of sovereign immunity.

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       In a suit to which Chapter 114 applies, Section 114.004
authorizes an award of “reasonable and necessary attorney’s fees . . . if
the contract expressly provides that recovery of attorney’s fees is
available to all parties to the contract” and “interest at the rate specified
by the contract[.]” TEX. CIV. PRAC. & REM. CODE § 114.004(a)(3), (4).
Chapter 114 waives immunity for both categories of damages in this
case because the PPA through incorporation into the construction
contract (1) provides a formula to calculate the interest rate for untimely
payments and (2) makes attorney’s fees available to all parties by
providing that in a “judicial action to collect an invoice payment or
interest due under this chapter, the opposing party, which may be the
governmental entity or vendor, shall pay the reasonable attorney fees of
the prevailing party.” TEX. GOV’T CODE §§ 2251.025, .043.
       Finally, we address TSU’s new argument that PLH cannot claim
Section 114.003’s immunity waiver because it lacks “standing” to invoke
the waiver. Chapter 114 applies “only to a claim for breach of a written
contract . . . brought by a party to the written contract[.]” See TEX. CIV.
PRAC. & REM. CODE § 114.002 (emphasis added). TSU maintains that
PLH is not “a party to” the construction contract because PLH did not
exist when the contract was executed, is not named in the contract, and
is   not   a   contract   signatory.        Rather,   the   contract   named
“Pepper-Lawson/Horizon International Group” as the Contractor and
representatives of “Pepper Lawson Construction” and “Horizon
International Group” signed the contract.
       We need not consider whether the State has properly framed this
inquiry as involving a question about PLH’s standing. See Pike v. Tex.

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EMC Mgmt., LLC, 610 S.W.3d 763, 774, 778 (Tex. 2020) (“[A] plaintiff
does not lack standing in its proper, jurisdictional sense simply because
he cannot prevail on the merits of his claim; he lacks standing [when]
his claim of injury is too slight for a court to afford redress.” (internal
citations omitted)).    Even if the issue implicates subject-matter
jurisdiction, see TEX. GOV’T CODE § 311.034, we decline to consider it for
the first time on appeal because TSU has not conclusively established
either that PLH had a full and fair opportunity to develop the record in
the trial court and amend their pleadings or that it would be unable to
do so on remand, see Rusk State Hosp. v. Black, 392 S.W.3d 88, 100 (Tex.
2012).
         Accordingly, without hearing oral argument, we grant PLH’s
petition for review, reverse the court of appeals’ judgment, and remand
to the trial court for further proceedings. See TEX. R. APP. P. 59.1.

OPINION DELIVERED: May 19, 2023

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