Court Opinion

ID: 4076930
Source: CourtListenerOpinion
Date Created: 2016-09-30 19:13:13.221246+00
Date Added: 2024-06-11T14:33:14.461042
License: Public Domain

ACCEPTED
                                                                                              04-14-00429-CV
                                                                                  FOURTH COURT OF APPEALS
                                                                                       SAN ANTONIO, TEXAS
                                                                                         8/31/2015 1:47:50 PM
                                                                                               KEITH HOTTLE
                                                                                                       CLERK

                                        NO. 04-00429-CV

                          IN THE COURT OF APPEALS FOR THE       FILED IN
                                                         4th COURT  OF APPEALS
                         FOURTH COURT OF APPEALS DISTRICTSAN ANTONIO,     TEXAS
                                 SAN ANTONIO, TEXAS      08/31/2015 1:47:50 PM
                                                                         KEITH E. HOTTLE
                                                                              Clerk
                           CITY OF SAN ANTONIO, ACTING THROUGH
                         CITY PUBLIC SERVICE BOARD OF SAN ANTONIO
                                                            Appellant,
                                                v.
                                      CASEY INDUSTRIAL, INC.,

                                                            Appellee.

                    On Appeal from the 408th Judicial District Court
                                 Bexar County, Texas
                         The Hon. Michael E. Mery, Presiding

                     CPS ENERGY’S RESPONSE TO
                MOTION FOR RECONSIDERATION EN BANC

JUDITH R. BLAKEWAY                                   ANNALYN G. SMITH
State Bar No. 02434400                               State Bar No. 18532500
STRASBURGER & PRICE, LLP                             SCHMOYER REINHARD, LLP
2301 Broadway                                        17806 IH-10 West, Suite 400
San Antonio, Texas 78215                             San Antonio, Texas 78257
Telephone: (210) 250-6000                            Telephone: (210) 447-8033
Facsimile: (210) 250-6100                            Facsimile: (210) 447-8036
judith.blakeway@strasburger.com                      asmith@sr-llp.com

                                   ATTORNEYS FOR APPELLANT
                                         CPS ENERGY

1937549.2/SPSA/22244/0110/083115
                                        TABLE OF CONTENTS
TABLE OF CONTENTS ................................................................................... i
TABLE OF AUTHORITIES ............................................................................ ii
ARGUMENT .................................................................................................... 1
A.        The panel majority properly considered relevant evidence
          necessary to resolve the plea to the jurisdiction without
          reaching the merits. .............................................................................. 4
B.        Because Casey does not claim damages recoverable under
          section 271.153, the panel majority correctly found that CPS
          Energy’s immunity from Casey’s claims was not waived. .................... 6
          1.         There is no balance due and owed by CPS Energy under
                     section 271.153(a)(1). ....................................................................7
          2.         The “additional work” for which Casey seeks another $12
                     million was already included within contract price for the
                     fixed-price contract, so Casey is not entitled to recover
                     under section 271.153(a)(2). ........................................................ 8
C.        There is no factual issue whether there is a writing signed by
          CPS Energy committing the ratepayers to pay an extra $12
          million dollars—it is undisputed that there is no such writing. .......... 11
D.        Casey had a full and fair opportunity in the trial court to
          develop the record as to immunity; it failed to request a
          continuance; and in the absence of written change orders—
          which Casey admits do not exist—supplementation would be
          futile. .................................................................................................... 12
CONCLUSION ............................................................................................... 13
CERTIFICATE OF COMPLIANCE ................................................................ 14
CERTIFICATE OF SERVICE......................................................................... 14

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                                   TABLE OF AUTHORITIES
                                                                                           Page(s)
CASES
City of San Antonio v. Casey Indus., Inc.,
   381 S.W.3d 589 (Tex. App.—San Antonio 2012, pet. denied) .................10

Lubbock Cnty. Water Control and Imp. Dist. v. Church & Akin, LLC,
  44 S.W.3d 297 (Tex. 2014) ......................................................................... 1
Sharyland Water Sys. v. City of Alton,
  354 S.W.3d 407 (Tex. 2011) ....................................................................... 6
Texas Dept. of Parks & Wildlife v. Miranda,
  133 S.W.3d 217 (Tex. 2004) ....................................................................... 5
Tooke v. City of Mexia,
  197 S.W.3d 325 (Tex. 2006) ..................................................................... 12
Ulico Gas Co. v. Allied Pilots Ass’n,
   262 S.W.3d 773 (Tex. 2008) ..................................................................... 11
Zachry Constr. Corp. v. Port of Houston Auth.,
  449 S.W.3d 98 (Tex. 2014) .......................................................... 1, 9, 11, 12
STATUTES
TEX. LOC. GOV’T. CODE § 271.152 .................................................................... 13
TEX. LOC. GOV’T. CODE § 271.153(a)(1). ................................................... 7, 8, 9
TEX. LOC. GOV’T. CODE § 271.153(a)(2)............................................................ 8

TEX. LOC. GOV’T. CODE § 271.153(b)(1) ............................................................ 9

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1937549.2/SPSA/22244/0110/083115
                                   ARGUMENT
          The Texas Local Government Contract Claims Act does not waive

immunity from suit for damages not recoverable under section 271.153.

The waiver does not depend on the outcome, but it “does require a showing

of a substantial claim that meets the Act’s conditions.” Zachry Constr.

Corp. v. Port of Houston Auth., 449 S.W.3d 98, 109 (Tex. 2014). Casey

contends the panel majority impermissibly considered facts relating solely

to the merits of Casey’s claim and CPS’s affirmative defenses rather than

limiting its review to facts relevant to the trial court’s jurisdiction. Not so.

          “[U]nder Chapter 271, the terms of the written contract are

themselves the substance that determines whether immunity is waived.

Lubbock Cnty. Water Control and Imp. Dist. v. Church & Akin, LLC, 44
S.W.3d 297, 304 (Tex. 2014). Here, the contract was a fixed-price contract

under which CPS agreed to pay $85,760.12, and not a penny more. There is

no writing in which CPS Energy agreed to pay an extra $12 million. That in

itself demonstrates that the additional $12 million was not contemplated by

the parties to the contract.

          That conclusion is buttressed by other terms of the contract. The

contract charges Casey (the “D/B Contractor”) with the responsibility to act

as the overall construction manager of the contract and oversee

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Wheelabrator’s performance using the “design-build” project delivery

method consistent with a traditional turnkey approach. C.R. 156. Casey is

responsible for delivering the complete and fully operational facility to CPS

Energy on a lump-sum fixed-price basis. C.R. 79. Casey—not CPS Energy—

assumes all risks of delay in the project’s schedule and is responsible for all

costs related to bringing the project back on schedule. C.R. 108. To obtain

a schedule relief change order, the contract requires Casey to show CPS

Energy-caused delay. C.R. 114-15. Casey agreed that it was not entitled to

more time or money for delays caused by Wheelabrator. C.R. 141, 142.

Casey expressly agreed that no adjustment to price or schedule would be

authorized as a result of mistakes relating to Casey or Wheelabrator’s

respective portions of the work.     C.R. 118.   And although the contract

authorized Casey to request a change order for more time or money if Casey

was not in default itself and a default by Wheelabrator resulted in

impairment of Casey’s work through no fault of Casey, C.R. 135, Casey

never requested or obtained any change orders for the claims for which CPS

Energy sought dismissal. Each of these provisions is just as relevant to

determination of the trial court’s jurisdiction as the one sentence that Casey

plucks out of context (Casey has no responsibility for Wheelabrator’s

obligations).

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          As conceded by Casey’s counsel at oral argument:

                 Casey agreed there was no indication of owner-caused delays;

                 Casey agreed there were no construction change directives;

                 Casey agreed there were no actual change orders.

          In the absence of any of these facts, Casey’s claims do not fall within

section 271.173 and, hence, there is no claim for damages allowed by section

271.153, and thus no waiver of governmental immunity.

          Also without merit is Casey’s contention that CPS’s alleged waiver of

compliance with the change order procedure somehow waived immunity

from suit. This is a red herring. Even if Casey had complied with the

change order procedure in every respect, but CPS Energy still refused to

issue a change order or amend the contract to award Casey another $12

million (i.e., there was no meeting of the minds on the terms of an

amendment), Casey would not be entitled to damages under section 271.153

and, thus, there would be no waiver of immunity.

          The court’s jurisdiction does not depend on CPS Energy’s conduct. If

the court has jurisdiction, nothing CPS Energy can do will deprive it of

jurisdiction. Conversely, if the court does not have jurisdiction, there is

nothing CPS Energy can do to give it jurisdiction. Only the Legislature can

determine the jurisdiction of the courts by saying who can sue

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1937549.2/SPSA/22244/0110/083115
governmental entities. If the legislature says a contractor must have a

properly executed writing to waive immunity from suit, a contractor cannot

sue without one, no matter what CPS Energy says or does. So any factual

issue about whether CPS Energy waived contractual procedures is

immaterial.

          To allow a waiver of a written change order procedure to permit a

contractor to recover without a signed writing would defeat the purpose of

the statute. In effect, it would allow a contractor to recover the reasonable

value of its services when the government entity had not agreed to pay, i.e.,

in quantum meruit. It would also frustrate the purpose of the competitive

bidding statute if a contractor could submit the low bid, be awarded a fixed-

price contract, and then recover an additional $12 million when/if that

amount had been included in its original bid, the contractor would never

have been awarded the contract in the first place.

          The panel majority got it right.   The motion for reconsideration

should be denied.

A.        The panel majority properly considered relevant evidence
          necessary to resolve the plea to the jurisdiction without
          reaching the merits.
          Despite Casey’s attempts to convince this Court otherwise, the panel

majority did not improperly consider the merits, rather than limiting its

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review to jurisdictional facts. “If a plea to the jurisdiction challenges the

existence of jurisdictional facts, a court is required to consider relevant

evidence submitted by the parties.” Texas Dept. of Parks & Wildlife v.

Miranda, 133 S.W.3d 217, 226-28 (Tex. 2004). The court takes all evidence

favorable to the nonmovant as true and indulges every reasonable inference

and resolves any doubts in the nonmovant’s favor. Id. at 228. If the

evidence raises a fact issue regarding the jurisdictional issue, then the trial

court cannot grant the plea to the jurisdiction, and the fact issue must be

left to be resolved by the fact finder. Id. However, if the relevant evidence

fails to raise a fact question on the jurisdictional issue or is undisputed,

then the trial court must rule on the plea to the jurisdiction as a matter of

law.       Id.       There is not the slightest indication that the panel majority

deviated from these standards.

          Casey argues that failure to give notice or follow a contract procedure

does not deprive a court of jurisdiction. This is true, but beside the point.

A failure to give notice under an agreement, i.e., to comply with the

provisions of existing contract, is different than a failure to bind a party to

an agreement in the first place, i.e., to obtain an amendment or change

order. Here there is no agreement by CPS Energy to amend the contract to

increase the fixed price by $12 million. Contractual procedures may be

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waived, but subject matter jurisdiction cannot be. Sharyland Water Sys. v.

City of Alton, 354 S.W.3d 407, 413-14 (Tex. 2011). If the Legislature says a

contractor must have a properly executed writing to waive immunity from

suit, a contractor cannot sue without one, even if CPS Energy expressly

agrees in the contract to waive immunity from suit. Allowing a contractor to

recover for additional costs when an owner refuses to issue a change order

would allow massive cost overruns for which the taxpayers could be liable

when no one had authorized the additional work. But the panel majority

did not hold that CPS Energy’s immunity was not waived because Casey

failed to comply with the notice provisions of the contract. Rather, it held

that Casey did not seek damages recoverable under section 271.153.

B.        Because Casey does not claim damages recoverable under
          section 271.153, the panel majority correctly found that CPS
          Energy’s immunity from Casey’s claims was not waived.
          Mindful of its obligation to find waivers of governmental immunity

only in “clear and unambiguous language” that leaves “no doubt”— to

accord proper deference to the Legislature’s prerogative to decide whether,

when, and how to waive the government’s immunity—the panel majority

carefully and strictly construed the limitations found in section 271.153.

Contractors can recover three categories of damages under section 271.153:

                   (1) the balance due and owed by the local governmental
                entity under the contract as it may have been amended,

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1937549.2/SPSA/22244/0110/083115
                including any amount owed as compensation for the
                increased cost to perform 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; and

                     (3)           interest as allowed by law.

TEX. LOCAL GOV’T. CODE § 271.153(a)

          But contractors cannot recover “consequential damages, except as

expressly allowed under Subsection (a)(1).” Id. § 271.153(b).

          1.         There is no balance due and owed by CPS Energy
                     under section 271.153(a)(1).
          It is undisputed that Casey was fully paid all sums due under the

lump sum contract except for properly withheld retainage. It is undisputed

that the contract was never amended to increase the price by $12 million. It

is undisputed that there is no amount owed for increased cost “as a direct

result of owner-caused delays;” it is undisputed the delays were caused by

Wheelabrator, not CPS Energy.                         Casey misunderstands the majority’s

statement that “accordingly any compensation owed to Casey for delays

caused by Wheelabrator does not fall within the scope of Subsection (a)(1)

to 271.153(a).”                    The reason that Wheelabrator’s default is not within

271.153(a)(1) is because Subsection (a)(1) allows costs caused by owner-

caused delays, and Casey is seeking damages for delays caused by

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Wheelabrator.                  Thus, Casey is not entitled to damages under section

271.153(a)(1).

          2.         The “additional work” for which Casey seeks another
                     $12 million was already included within contract price
                     for the fixed-price contract, so Casey is not entitled to
                     recover under section 271.153(a)(2).
          There is no amount owed for change orders or additional work CPS

Energy directed Casey to perform. Casey never requested—and CPS Energy

never signed—any change orders for the claims for which CPS Energy

sought dismissal.                  There was no “additional work” the contractor was

directed to perform by CPS Energy.                     Casey agreed there were no

construction change directives, and there is no evidence of any directive

from CPS Energy.

          Furthermore, the work for which Casey sought $12 million was not

“additional work.” It was work already included in the contract price of the

fixed-price contract. Allowing Casey to recover additional compensation

would not only bypass the change order procedure in the contract, but flatly

contradict its negotiated terms, reallocating the risk of loss in a carefully

negotiated fixed-price contract, depriving CPS Energy of the benefit of its

bargain and imposing on innocent ratepayers costs that they never agreed

to pay.

                                                  8
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          In an attempt to avoid section 271.153(b)(1)’s unmistakable

prohibition on the recovery of consequential damages except as expressly

allowed under subsection (a)(1), Casey argues that delay damages were

specifically contemplated by parties in the contract, and thus were direct

damages, not consequential damages. There is absolutely nothing in the

contract that supports that notion. Far from demonstrating that the parties

intended for Casey to recover damages for performing Wheelabrator’s

work, the contract in fact provides just the opposite. Casey agreed that if

additional costs were incurred because of Wheelabrator delays (Section

15.3) or Wheelabrator’s work (Section 9.4), the additional costs were to be

borne by Casey. C.R. 142, 118. Casey was not entitled to recover more time

or money for delays caused by Wheelabrator (C.R. 142), and not entitled to

any adjustment to price as a result of mistakes relating to Wheelabrator’s

work (C.R. 118).                   Thus, those damages were consequential damages

forbidden by section 271.153(b). Zachry Constr. Corp. v. Port of Houston

Auth., 449 S.W.3d 98, 113 n.71 (Tex. 2014) (“Delay damages are

consequential damages”).

          Similarly misguided is Casey’s argument that the provision that

“Casey shall bear no responsibility or liability for [Wheelabrator’s]

obligations …” entitled Casey to additional compensation. The fact that

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Casey did not have to pay CPS Energy for Wheelabrator’s obligations does

not mean that CPS Energy had to pay Casey for Wheelabrator’s obligations.

The        inference               the   dissenting   opinion   draws—that   Casey   cured

Wheelabrator’s work because CPS Energy directed it to do so, even though

there is no evidence that is so—is not reasonable. Casey did not perform

Wheelabrator’s work because CPS Energy directed Casey to do so. Casey

performed Wheelabrator’s work because Casey was contractually obligated

to do so at no additional cost to CPS Energy. The contract obligated Casey

to act as overall construction manager of the project and oversee

Wheelabrator’s performance (C.R. 156), to be responsible for delivering a

complete and fully operational facility to CPS Energy on a lump sum, fixed-

price basis (C.R. 79), and to assume all risk of delays in the project schedule

and responsibility for all costs related to bringing the project back on

schedule (C.R. 108). Casey also agreed in the contract that it was not

entitled to more time or money for delays caused by Wheelabrator (C.R.

142) or any adjustment to price as a result of mistakes relating to

Wheelabrator’s work (C.R. 118). This court has already decided that this

contract is a true design-build contract and that Casey and Wheelabrator

were a design-build team, City of San Antonio v. Casey Indus., Inc., 381
S.W.3d 489, 596 (Tex. App.—San Antonio 2012, pet. denied). As Casey

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concedes “under a true design-build contract, under no circumstance would

the design-build contractor be entitled to seek additional compensation

from the owner for a default by a member of the design build-team.” Id. at

594.

C.        There is no factual issue whether there is a writing signed
          by CPS Energy committing the ratepayers to pay an extra
          $12 million dollars—it is undisputed that there is no such
          writing.
          Assuming for the sake of argument that Casey complied with all

contract procedures governing a request for a change order, it is still

undisputed that Casey did not get one. In the absence of a written change

order, there is nothing signed by the government authority agreeing to pay

Casey additional compensation for curing Wheelabrator’s work. In effect,

Casey is attempting to establish a contract by waiver. However, a contract

cannot be created by waiver. Ulico Gas Co. v. Allied Pilots Ass’n, 262
S.W.3d 773, 779 (Tex. 2008). Allowing Casey to recover without a signed

writing—a change order as required by the contract—defeats the purpose of

governmental immunity. In effect, it allows a contractor to recover the

reasonable value of its services when the government entity has not agreed

to pay (i.e., in quantum meruit).

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D.        Casey had a full and fair opportunity in the trial court to
          develop the record as to immunity; it failed to request a
          continuance; and in the absence of written change orders—
          which Casey admits do not exist—supplementation would
          be futile.

          Casey’s plea that it be given more time to bring forth evidence

creating a factual dispute on jurisdiction should be rejected. This case has

been pending since April, 2008. The parties have conducted discovery for

years, producing over a million pages of documents and taking the

depositions of numerous fact and expert witnesses. Casey had a full and

fair opportunity in the trial court to—and did—develop the record as to

immunity, amend its pleadings, and submit the evidence it chose. Casey

failed to ask for a continuance and failed to tell the trial court—or this

court—what it would prove if it was given more time. It is too late now for

Casey to ask for another opportunity, especially when the undisputed

evidence shows that the dispute is legal, not factual.

          Moreover, as the Supreme Court noted in Zachry, the conclusion

reached in Zachry that a local government entity waived sovereign

immunity subject only to the terms and conditions of the Act was reached

in Tooke v. City of Mexia, 197 S.W.3d 325 (Tex. 2006) and was in the

Court’s word “obvious” and “the text of section 271.152 and our decision in

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Tooke ought to have settled the matter.” Zachry Const. Corp. v. Port of

Houston Auth., 449 S.W.3d 98, 107 (Tex. 2014).

          In any event, in addition to the fact that Casey is not seeking damages

recoverable under 271.153, Casey does not have a properly executed written

contract in which the local government entity agreed to pay an additional

$12 million. For this additional reason, there is no waiver of governmental

immunity under section 271.152, regardless of what damages Casey seeks

under section 271.153. TEX. LOC. GOV’T. CODE § 271.152.

                                       CONCLUSION
          The motion for reconsideration should be denied.

                                           Respectfully submitted,

JUDITH R. BLAKEWAY                             ANNALYN G. SMITH
State Bar No. 02434400                         State Bar No. 18532500
STRASBURGER & PRICE, LLP                       SCHMOYER REINHARD, LLP
2301 Broadway                                  17806 IH-10 West, Suite 400
San Antonio, Texas 78215                       San Antonio, Texas 78257
Telephone: (210) 250-6000                      Telephone: (210) 447-8033
Facsimile: (210) 250-6100                      Facsimile: (210) 447-8036
judith.blakeway@strasburger.com                asmith@sr-llp.com

                                           By: / S / Judith R. Blakeway
                                               Judith R. Blakeway

                                   ATTORNEYS FOR APPELLANT
                                        CPS ENERGY

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                                   CERTIFICATE OF COMPLIANCE
     In accordance with Texas Rule of Appellate Procedure 9.4, the
undersigned certifies that this Response to Motion for Reconsideration En
Banc contains 2,745 words.

                                               / S / Judith R. Blakeway
                                             Judith R. Blakeway

                                    CERTIFICATE OF SERVICE
     The undersigned certifies that a true and correct copy of this
document has been delivered, pursuant to the Texas Rules of Appellate
Procedure on the 31st day of August, 2015, to the following:

ALLEN STEIN & DURBIN, P.C.                     WATT TIEDER HOFFAR & FITZGERALD,
John C. Howell                                 LLP
SBN 10101650                                   Christopher A. Wright
6243 IH-10 West, Suite 700                     Pro Hac Vice
San Antonio, Texas 78201                       1215 Fourth Avenue, Suite 2210
(210) 734-7488                                 Seattle, Washington 98161
(210) 738-8036 (Fax)                           (206) 204-5800
jhowell@asdh.com                               (206) 204-0284 (Fax)
                                               cwright@wattieder.com

HOUSTON DUNN, PLLC
Nissa M. Dunn
SBN 14766450
4040 Broadway, Suite 440
San Antonio, Texas 78209
(210) 775-0880
(210) 826-0075 (Fax)
nissa@hdappeals.com

                                              /S/ Judith R. Blakeway
                                             Judith R. Blakeway

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