Supreme Court of Texas, No. 18-0059 (May 17, 2019)
Opinion by Justice Boyd (linked here)
Vizant Technologies entered into a consulting contract with the Airport under which Vizant would receive a specified percentage of any resulting savings in the Airport’s payment-processing costs. Upon completion of its work, Vizant asserted the agreed formula entitled it to be paid over $300,000. The contract, however, required Airport Board approval for any amount over $50,000, and promised a “good faith effort to receive board authorization to increase the compensation.” Vizant was paid $50,000, but the board denied the request to amend the contract to increase the compensation. Vizant sued for breach of contract (as well as various torts).
The district court denied the Airport’s plea to the jurisdiction, holding that governmental immunity did not bar Vizant’s claims because the Airport’s management of payment-processing costs is a proprietary, not a governmental, function. The court based its holding on its interpretation of Wasson Interests v. City of Jacksonville, 559 S.W.3d 142 (Tex. 2018), in which the Texas Tort Claims Act’s governmental/proprietary dichotomy was applied to contract disputes.
On the Airport’s interlocutory appeal, the Dallas Court of Appeals held the contract involved airport operations, which are statutorily defined as a governmental function and thus trigger immunity against both contract and tort claims. The court held, however, the Airport’s immunity was waived for contract claims by Local Government Code § 271.152, as construed by the Texas Supreme Court in Zachry Construction Corp. v. Port of Houston Authority, 449 S.W.3d 98 (Tex. 2014). It therefore affirmed the trial court’s ruling on the contract claim and remanded for trial on the merits of that claim.
The Airport sought review by the Texas Supreme Court on whether the alleged breach of contract was subject to section 271.152 of the Local Government Code, which waives immunity for certain contract claims, and whether any waiver was negated because the alleged damages were barred by section 271.153. Vizant argued the Airport breached the “good-faith-efforts” provision of the contract, causing damages that were not barred by the statute. Vizant also argued the appellate court’s judgment could be upheld by reversing that court’s holding that the contract involved the Airport’s governmental, rather than proprietary, functions.
The Texas Supreme Court reversed and rendered a take-nothing judgment against Vizant. The Court agreed with the appellate court that the contract involved the Airport’s governmental functions of “maintenance, operation, [and] regulation” of an airport, so immunity applied unless waived. But the Court disagreed with the lower court’s application of chapter 271’s waiver provisions. First, it held the good-faith-efforts clause did not “state the essential terms of a legally enforceable agreement” under section 271.151(2), so chapter 271 did not apply. Second, even if the contract were enforceable, the Court held the damages sought by Vizant were consequential damages that were not recoverable under section 271.153(b). The statute therefore did not waive the Airport’s governmental immunity against Vizant’s claims.