City of Galveston, Dorothy Palumbo, City Attorney and Sterling W. Patrick, Director of Grants and Housing v. CDM Smith, Inc.

CourtCourt of Appeals of Texas
DecidedJanuary 7, 2015
Docket14-14-00294-CV
StatusPublished

This text of City of Galveston, Dorothy Palumbo, City Attorney and Sterling W. Patrick, Director of Grants and Housing v. CDM Smith, Inc. (City of Galveston, Dorothy Palumbo, City Attorney and Sterling W. Patrick, Director of Grants and Housing v. CDM Smith, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
City of Galveston, Dorothy Palumbo, City Attorney and Sterling W. Patrick, Director of Grants and Housing v. CDM Smith, Inc., (Tex. Ct. App. 2015).

Opinion

ACCEPTED 14-14-00294-cv FOURTEENTH COURT OF APPEALS HOUSTON, TEXAS 1/7/2015 7:00:06 PM CHRISTOPHER PRINE CLERK

Case No. 14-14-00294-CV _____________________________________________________________

IN THE FOURTEENTH COURT OF APPEALS FILED IN 14th COURT OF APPEALS HOUSTON, TEXAS HOUSTON, TEXAS _____________________________________________________________ 1/7/2015 7:00:06 PM CHRISTOPHER A. PRINE CITY OF GALVESTON AND STERLING PATRICK,Clerk DIRECTOR OF THE CITY GRANTS AND HOUSING DEPARTMENT, AND DOROTHY PALUMBO, GALVESTON CITY ATTORNEY, IN THEIR OFFICIAL CAPACITIES,

Appellants,

v.

CDM SMITH INC.,

Appellee. _____________________________________________________________

ON APPEAL FROM THE th 56 DISTRICT COURT, GALVESTON COUNTY, TEXAS Cause No. 13-CV-0844 ____________________________________________________________

UNOPPOSED SUPPLEMENT TO APPELLEE’S BRIEF AND APPENDIX OF APPELLEE _____________________________________________________________

Roland Garcia, Esq. State Bar 07645250 Jennifer Tomsen, Esq. GREENBERG TRAURIG, LLP 1000 Louisiana Street, Suite 1700 Houston, Texas 77002 Telephone (713) 374-3500, Facsimile (713) 374-3505 garciar@gtlaw.com

Andrew Mytelka, Esq. Joseph Russo, Esq. GREER, HERZ & ADAMS, LLP 1 Moody Plaza, Floor 18 Galveston, Texas 77550 Telephone: (409) 797-3200 1 HOU 408242630v6

TO THE HONORABLE COURT OF APPEALS:

At oral argument on December 4, 2014, Appellee CDM Smith urged that the

Court should uphold the lower court’s ruling that the City of Galveston was not

immune to CDM Smith’s claim for interest under the Prompt Payment Act, among

other arguments. In support, CDM Smith had recently located legislative history

to the 2011 amendments to Chapter 271, specifically House Bill 345 from the 2011

Regular Session of the Legislature, which proposed the revision to Section

271.153(a) of the Texas Local Government Code. See Act of June 17, 2011, 82nd

Leg., R.S., ch. 226, §271.153, 2011 Tex. Sess. Law Serv. 809 (courtesy copy

attached). These are publicly available records that CDM Smith intended to show

the Panel on the Elmo during oral arguments, but the Elmo was not available as

requested. CDM Smith understood the Panel to grant leave to supplement the

record with this authority. (If not, then leave is hereby requested to consider this

supplemental submission, and counsel for the City of Galveston is unopposed to

this submission.) Accordingly, CDM Smith hereby offers this supplement to its

previously filed Appellee’s Brief and Appendix.

Section 271.152 waives immunity to suit for municipalities that enter

contracts for services under that subchapter. House Bill 345 proposed amending

Section 271.153(a) by the addition of the text in bold below:

Section 1. Section 271.153(a), Local Government Code, is amended to read as follows: 2 HOU 408242630v6

(a) The total amount of money awarded in an adjudication brought against a local governmental entity for breach of a contract subject to this subchapter is limited to the following: .... (4) interest as allowed by law, including interest as calculated under Chapter 2251, Government Code [the Prompt Payment Act].

Id. (parenthetical added). The amendment would apply to adjudications

“commenced on or after the effective date of this Act.” See Exhibit A, Section 2.

The amendment reflected in House Bill 345 was adopted and took effect on

September 1, 2011. See Tex. Local Gov’t Code § 271.153; Appellee’s Brief, Tab

B (courtesy copy attached).

Chapter 2251 of the Government Code is the Prompt Payment Act.

Accordingly, the Legislature acted in 2011 to specifically reference interest under

the Prompt Payment Act as allowable damages. Because Section 271.153 already

made reference to “interest as allowed by law,” the Legislature’s amendment to

specifically reference interest calculated under the Prompt Payment Act can only

mean that where immunity is waived under Section 271.152, immunity is

necessarily waived also for the purposes of an award of Prompt Payment Act

interest on the contract.

The City relied on McMahon Contracting, L.P. v. City of Carrollton, 277

S.W.3d 458 (Tex. App.—Dallas 2009, pet. denied) to oppose waiver of immunity

3 HOU 408242630v6

for interest under the Prompt Pay Act. CDM Smith briefed reasons why McMahon

does not apply here, and was wrongly decided. Whether or not McMahon was

correctly decided, the 2011 amendment to Section 271.153 renders McMahon and

the cases following McMahon outdated and no longer applicable, because, among

other reasons previously briefed, they were decided before the Legislature

amended Section 271.153 to expressly permit Prompt Payment Act interest as

allowable damages, i.e., as part of the damages “as allowed by law.” See Section

271.153(a)(4). See also McMahon Contracting, L.P. v. City of Carrollton, 277

S.W.3d 458, 465 (Tex. App.—Dallas 2009, pet. denied); Harris Co. Flood Control

Dist. v. Great American Ins. Co., 309 S.W.3d 614, 617-618 (Tex. App.—Houston

[14th Dist.] 2010, no pet.). City of Midland v. M.T.D. Environmental, L.L.P. was

decided after the 2011 amendment but is also not applicable, not only because it

relied on the cases following McMahon, but because the 2011 amendment

referencing the Prompt Payment Act applied to adjudications commenced after the

Act’s effective date. 429 S.W.3d 800, 806 (Tex. App.—Eastland 2014, no pet.).1

The litigation here was commenced in 2013.

CDM Smith has not located any other case on point post the 2011 legislative

amendments. The Panel’s decision in this case should clarify the state of the law

1 The case does not reference the date that suit was commenced, but the court decided that the city was immune from Prompt Payment Act claims because the 2011 amendment “applied prospectively only,” suggesting a litigation commencement date prior to the effective date of the amendment. City of Midland, 429 S.W.3d at 806. 4 HOU 408242630v6

on the Prompt Payment Act, and give effect to the Texas Legislature’s 2011

amendment to Section 271.153, i.e. to allow recovery of Prompt Payment Act

interest from a local government entity. 2

This Supplement is filed as soon as practicable considering the holidays and

the undersigned counsel’s schedule, and is not sought for purposes of delay, but so

that justice may be served.

WHEREFORE, CDM Smith requests that the Court consider this

supplement to its Brief and Appendix, and affirm the District Court’s denial of the

Plea to the Jurisdiction by Appellants.

2 See Senate Comm. on Intergovernmental Relations, Bill Analysis, Tex. H.B. 345, 82nd Leg., R.S. (2011)(“Author’s/Sponsor’s Statement of Intent”)(“In general, a contractor, subcontractor, or supplier is entitled under state law to receive interest, commonly called prompt pay interest, on past due payments for work performed on a public construction project owned by the state or other governmental entity. Some interested parties contend that recent court decisions have misinterpreted Texas law regarding whether prompt pay interest on public jobs is barred by governmental immunity. H.B. 345 seeks to clarify that issue.”) (emphasis added) (courtesy copy attached).

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Related

McMahon Contracting, L.P. v. City of Carrollton
277 S.W.3d 458 (Court of Appeals of Texas, 2009)
Harris County Flood Control District v. Great American Insurance Co.
309 S.W.3d 614 (Court of Appeals of Texas, 2010)
City of Midland v. M.T.D. Environmental, L.L.P.
429 S.W.3d 800 (Court of Appeals of Texas, 2014)

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City of Galveston, Dorothy Palumbo, City Attorney and Sterling W. Patrick, Director of Grants and Housing v. CDM Smith, Inc., Counsel Stack Legal Research, https://law.counselstack.com/opinion/city-of-galveston-dorothy-palumbo-city-attorney-and-sterling-w-patrick-texapp-2015.