A TSU Case Again Sets Precedent in Texas Sovereign Immunity Law As Houston's First Court of Appeals Embraces Waiver-by-Conduct Exception Jan 11. 2007 - First Court of Appeals Justice Evelyn Keyes joins majority in TSU breach-of-contract case and calls on Supreme Court to recognize waiver-by-conduct exception to sovereign immunity in breach of contract cases against state entities; but would hold that contractors may proceed with inverse condemnation case against TSU because the contract with TSU was illusory; issues new opinion. TSU v. State Street Bank and Trust Company (Tex.App.--Houston [1st Dist.] Jan. 11, 2007)(substituted separate opinion by Keyes) Majority issues new opinion, again authored by Justice George C. Hanks. Tex. S. Univ. v. State Street Bank and Trust Co. II (Tex.App.-Houston [1st Dist.] Jan. 11, 2007)(substitute opinion by Justice Hanks)(holding that waiver by conduct theory was valid basis for denial of TSU's plea to the jurisdiction, but rejecting inverse condemnation claim). Texas Supreme Court had rejected recognition of waiver-by-conduct theory of immunity waiver every time it was raised in previous cases. The Court had left open the possibility of such an exception in a footnote in a previous breach of contract case against TSU, a historically black university in Houston. See  Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401, 408 (Tex. 1997). UPDATE: The Texas Supreme Court denied review in this case in August 2007, thus leaving the viability of the waiver-by- conduct theory unsettled. The First Court of Appeals has since declined to apply the theory in another suit against TSU. See Priscilla D. Slade v. Texas Southern University Board of Regents, No. 01-06-00990-CV (Tex.App.- Houston [1st Dist.] , Aug. 30, 2007)(Opinion by Justice Sam Nuchia)(breach of contract claim against state university barred by sovereign immunity, waiver-by-conduct theory not applicable) In 2006 the Texas Supreme Court decided numerous Sovereign Immunity Appeals, and held, inter alia, that a statutory provision stating that a public entity may sue and be sued does not waive its immunity. See Tooke v. City of Mexia No. 03- 0878 (Tex. June 30, 2006)(opinion by Justice Hecht); Tooke v. City of Mexia, 197 S.W.3d 325 (Tex. 2006). The Evolving Sovereign Immunity Doctrine in Texas BY WOLFGANG P. HIRCZY DE MINO Sovereign immunity, sometimes called governmental immunity, is a judicially created doctrine that allows government agencies and officials to avoid being held liable for wrongdoing when sued. It results in claims being dismissed regardless of merit and before evidence is obtained through pretrial discovery. Unlike affirmative defenses to liability, which a defendant has to prove in a summary judgment proceeding or at trial on the merits in order to prevail, sovereign immunity provides a basis for prompt dismissal of a suit based on the pleadings only, the factual allegation in which are taken as true. The procedural device used to assert sovereign immunity is either a motion to dismiss for want of jurisdiction, or a plea to the jurisdiction. The trial court’s ruling on such a plea by a government defendant can be appealed immediately, even if the plea does not dispose of all legal claim and parties in that suit. Such an interim appeal is also called an interlocutory appeal, and is authorized by statute. See Civ. Prac. & Rem. Code §51.014(a)(8). APPELLATE REVIEW OF PLEAS TO THE JURISDICTION When the appellate court determines that the government agency is immune, it either reverses or affirms the lower court, depending on how the trial court ruled on the plea and whether the plaintiff or the defendant prevailed. The dispositions of sovereign immunity appeals (affirm, reverse & render, reverse & remand) thus vary even where the appellate courts’ holding on the immunity issue is consistent. For the same reason, state entities and cities appear before the appeals courts both as appellants and appellees, and as petitioners and respondents in the Texas Supreme Court. In some instances, the appellate court remands the case to the trial court, to give the plaintiff an opportunity to amend the pleadings and attempt to show that it can assert claims not barred by immunity, or that a waiver of immunity applies. STATUTORY AND JUDICIAL WAIVERS OF SOVEREIGN IMMUNITY Waivers of immunity come in two forms: statutory waivers and judicially recognized waivers. Statutory waivers are provisions enacted by the state legislature stating that immunity is waived for specific agencies or type of agencies, or for specific types of claims. A provision in the charter of a home-rule city might be thought to accomplish the same by expressly stating that the city may be sued, e.g. for breach of contract. However, the Texas Supreme Court in 2006 said otherwise. See Tooke v. City of Mexia, 197 S.W.3d 325 (Tex. 2006). The Legislature can also waive immunity in individual cases by passing a resolution granting the plaintiff the right to sue. The only circumstances in which the Texas Supreme Court has recognized a nonlegislative waiver is where the agency itself appears as the plaintiff or counterclaimant seeking affirmative relief (waiver by suing) and where the agency violated a settlement agreement based on claims for which immunity had been waived by statute. The general rule is that governmental entities cannot be sued for breaching contracts and for committing torts. Waivers remain the exception. The Tort Claims Act provides for a limited waiver of both immunity to suit and immunity to liability in narrowly defined circumstances, including automobile accidents caused by public employees. CONSEQUENCES OF SOVEREIGN IMMUNITY DISMISSALS Dismissal of claims based on sovereign immunity is generally without prejudice, but the principle that a court cannot dismiss with prejudice when it has not reached the merits is under attack too. So is the plaintiff’s right to replead in order to fix (“cure”) jurisdictional shortcomings in its live pleadings. ISSUES BEFORE THE TEXAS SUPREME ON PETITION FOR REVIEW FROM THE LOWER COURTS In 2006 there were three major issues before the Texas Supreme Court in the sovereign immunity cases then pending before it. The lower appellate courts had handed down conflicting rulings on them. The Supreme resolved some of  the conflicts in 2006. 1. Statutory waiver of immunity. Does language in a statute or city charter that state that the entity has the power to “sue and be sued” constitute a valid waiver of immunity to suit? In Missouri Pac. R.R. Co. v. Brownsville Navigation Dist., 453 S.W.2d 812 (Tex. 1970) (“MoPac”), the Supreme Court said yes, but in several pending cases the Court has been asked to overrule MoPac and to hold that such an entity cannot be sued unless some other waiver applied. Several appellate courts took the position that “sue and be sued” does not waive immunity, thus creating a conflict with MoPac and with the majority of courts that hold that “sue and be sued” language amounts to a valid waiver. Tomball Regional Hospital v. Harris County Hospital District, 178 S.W.3d 244 (Tex.App.-- Houston [14th Dist.] 2005, pet. filed)(surveying cases); also see A. Craig Carter, Is Sue & Be Sued Language a Clear & Unambiguous Waiver of Immunity?,  35 ST. MARY’S L. J. 275 (2004). The Supreme Court resolved the conflict on June 30, 2006: No Waiver ----->  Supreme Court Sets New Immunity Precedents 2. Waiver by conduct. Can a governmental entity waive its immunity to suit by its conduct? In Federal Sign v. Texas S. Univ., 951 S.W.2d 401 (Tex. 1997), the Supreme Court held that a state university did not waive immunity by entering a contract, and thus could not be sued for breach-of-contract. The Court suggested in a footnote that there may be circumstances when the entity may have waived its immunity, but failed to state what those circumstances were. On every occasion on which the Supreme Court had the opportunity to answer that question, it declined to recognize waiver predicated on the agency’s conduct. The intermediate courts of appeals now typically decline to recognize such waivers, referring to the lack of guidance on the matter from the Texas Supreme Court. See, e.g., Smith v. Lutz, 149 S.W.3d 752 (Tex. App.—Austin 2004, no pet.). The only exception recognized by the Supreme Court is the scenario where the government initiates a law suit, or asserts a counterclaim for affirmative relief in a suit brought against it. See Reata Const. Corp. v. City of Dallas, 197 S.W.3d 371 (Tex. 2006) NEW DEVELOPMENT: On June 8, 2006 a panel of the First Court of Appeals adopts the waiver-by-conduct exception in case of egregious abuse of the protection afforded by the doctrine of sovereign immunity  by a state university in Houston. See Texas Southern University v. State Street Bank (Tex.App.–Houston [1st Dist.] 2006)(plurality op. by Hanks)(Keyes, J., concurring and dissenting in part). These opinions were superseded with substitute opinions in January 2007, but the essential holding remains the same. See Tex. S. Univ. v. State Street Bank and Trust Co.(Tex.App.-Houston [1st Dist.] Jan. 11, 2007)(subst. op.)(holding that waiver by conduct theory was valid basis for denial of TSU's plea to the jurisdiction, but rejecting inverse condemnation claim against the University). 3. Opportunity to amend. Is the Plaintiff entitled to an opportunity to amend her pleadings before her suit can be dismissed for lack of jurisdiction? Established Supreme Court precedent says that the plaintiff must be given an opportunity to amend, and that the plaintiff is entitled to that opportunity after a ruling on the defendant’s plea to the jurisdiction (or special exceptions), unless the jurisdictional defect is incurable. Harris County v. Sykes, 136 S.W.3d 635, 639 (Tex. 2004); Friesenhahn v. Ryan, 960 S.W.2d 656, 658-59 (Tex. 1998); Continental Coffee Prods. Co. v. Cazarez., 937 S.W.2d 444 (Tex. 1996). The Court has been asked to overrule those precedents and adopt the position that the plaintiff should do his best to amend when the defendant files its jurisdictional plea, and that the plaintiff should lose the right to complain if he fails to do so before the trial court rules on the plea and dismisses his suit for want of subject-matter jurisdiction. UPDATE: In an opinion by Justice Green released Sep. 7, 2007, the Supreme Court held a state employee did not have to be given an opportunity to amend following the university's successful plea to the jurisdiction. The Court opined that any amendment would be futile and would not overcome the governmental defendants' sovereign immunity. Texas A&M Univ. vs. Koseoglu (Tex. 2007);

2007- 08 Texas Supreme Court   Sovereign Immunity Cases Also see Tooke v. City of Mexia Progeny Mission Consolidated ISD v. Garcia, No. 05-0734 (Tex. Mar. 28, 2008)(O’Neill)(public employment, wrongful termination claim, TTCA, tort claims, TCHRA claim, immunity waiver) Trend Offset Printing Services, Inc. v. Collin County Community College District (CCCCD)  No. 06-0525 (Tex. Mar. 28, 2008)(per curiam) (governmental immunity, breach of contract, statutory waiver) City of Dallas v. DeQuire, No. 06-0543 (Tex. Mar. 28, 2008)(per curiam) (local governmental entities, immunity waiver) Nueces County v. San Patricio County, No. 07-0166 (Tex. Jan. 25, 2008)(per curiam) (governmental immunity, county vs county dispute over wrongfully collected property taxes) Fort Worth ISD v. Service Employment Redevelopment, No. 05-0427 (Tex. Aug. 24, 2007)(per curiam) (breach of contract claim immunity, Tooke)   Texas Parks & Wildlife Dep't v. E.E. Lowrey Realty, Ltd., No. 05-0157 (Tex. Sep. 28, 2007)(per curiam) (sovereign immunity, official capacity claims) Lamesa ISD v. Booe dba Booe Roofing Co., No. 05- 0959 (Tex. Sep. 28, 2007)(per curiam)(sovereign immunity to contract claims, opportunity to amend) Texas A & M Univ. Sys. v. Koseoglu, No. 05-0321 (Tex. Sep. 7, 2007)(Green) (public employment, governmental entities, sovereign immunity, breach of settlement agreement, ILA, opportunity to amend) Fort Worth I.S.D. v. Service Employment Redevelopment, No. 05-0427 (Tex. Aug. 24, 2007)(per curiam) (breach of contract immunity, Tooke)    Stephen F. Austin State Univ. v. Flynn, No. 04-0515 (Tex. Jun. 29, 2007) (Medina) (Recreational Use Statute, TTCA, plea to the jurisdiction, sovereign immunity; suit dismissed as jurisdictionally barred) State of Texas v. Fidelity and Deposit Co. of Maryland, No. 04-0180 (Tex. May 4, 2007)(per curiam) (sovereign immunity to counterclaims waived under Reata) City of Arlington v. Matthews, No. 06-0251 (Tex. Jun. 1, 2007)(per curiam)(Tooke) City of Pasadena v. Kinsel Industries, No. 06-0353 (Tex. Jun. 1, 2007)(per curiam)(Tooke) City of Elsa v. M.A.L., No. 06-0516 (Tex. Jun. 1, 2007) (per curiam)(sue and be sued, governmental immunity) Tellez v. City of Socorro, No. 05-0629 (Tex. Jun. 1, 2007) (per curiam)(zoning, jurisdiction) Dallas Fire Fighters Association v. City of Dallas, No. 04-0821 (Tex. Jun. 1, 2007)(per curiam)(Tooke) Abilene Housing Authority v. Gene Duke Builders, No. 05-0631 (Tex. Jun. 1, 2007)(per curiam)(Tooke) U.S. v. Boateng, No. 05-0752 (Tex. Apr. 20, 2007)(per curiam)(sovereign immunity, bill of review State of Texas v. Precision Solar Controls, Inc., No. 06-0348 (Tex. Apr. 5, 2007)(per curiam)(prior denial withdrawn upon motion for rehearing) (sovereign immunity) City of Dallas v. Saucedo-Falls, et al. No. 05-0973 (Tex. Mar. 9, 2007)(per curiam) (sovereign immunity law; fire fighters given chance to argue waiver by conduct or statute on remand) City of Sweetwater, Texas v. Waddell, et al No. 05-1033 (Tex. Mar. 9, 2007)(per curiam)(“sue and be sued” provision in charter does not waive city’s immunity under Tooke v. City of Mexia; firefighters given opportunity of argue new limited statutory immunity waiver on remand) City of Galveston v. State of Texas, No. 04-0890 (Tex. Mar. 2, 2007)(Brister)(sovereign immunity law, statutory immunity waiver, permission to sue) The City of Houston v. Williams, No. 06-0093 (Tex. Feb. 23, 2007)(per curiam) (interlocutory appeal, ILA, sovereign immunity, waiver, declaratory relief, circumvention of immunity by UDJA not permitted)