North Central Texas Council of Governments v. MRSW Management, LLC

• Court: Court of Appeals of Texas
• Decided: June 20, 2013
• Docket: 03-12-00692-CV
• Status: Published

Opinion

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-12-00692-CV

North Central Texas Council of Governments, Appellant

v.

MRSW Management, LLC, Appellee

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 200TH JUDICIAL DISTRICT NO. D-1-GN-11-002447, HONORABLE AMY CLARK MEACHUM, JUDGE PRESIDING

CONCURRING OPINION

I join Justice Goodwin’s opinion. I write separately to express my concern that our

Majority Opinion, when combined with the opinion of the San Antonio Court of Appeals in MRSW

Management LLC v. Texas Department of Public Safety, ___ S.W.3d ___, No. 04-12-00715-CV,

2013 WL 1830968 (Tex. App.—San Antonio May 1, 2013, no pet. h.), may produce a result that is

contrary to the legislature’s intent.

As stated in Justice Goodwin’s opinion, MRSW Management agreed to provide

goods and services for the sole benefit of the Texas Department of Public Safety (DPS). For

purposes of entering into a contract, however, the North Central Texas Council of Governments

(NCTCOG) was inserted as a “conduit for funding” in between those parties. While the goods and

services themselves were to go directly from MRSW to the DPS, “[t]he funds to pay for the services

were to flow from DPS to NCTCOG to MRSW.” Slip Op. at 2. And there were two contracts, one between DPS and NCTCOG and another (in the form of purchase orders) between NCTCOG and

MRSW. There was no contract between DPS and MRSW, at least not directly.

It is quite common for a governmental entity to enter into a contract to purchase goods

or services from a private party. Not surprisingly, disputes occasionally arise regarding performance

of those contracts. Sometimes those disputes lead the governmental entity to conclude that it can

and should refuse to pay the contract price, even if the goods and services have already been

delivered. Sometimes that conclusion is warranted and sometimes it is not. Societies wisely

establish neutral arbiters, such as courts and judges, to resolve contract disputes. The doctrines of

governmental and sovereign immunity, however, usually have the effect of eliminating a neutral

arbiter in disputes that involve a governmental entity, thereby leaving a private party in the

unfortunate position of having the governmental entity itself be the sole decider of the correctness

of its decision not to pay under the contract.

In an effort to alleviate that unfairness, the legislature has, in the last 15 years or so,

tried to ensure that parties that enter into contracts with governmental entities have a just and

meaningful way to resolve any such contract disputes and, if they show themselves entitled, get paid.

One such process created by the legislature is contained in Subchapter I of Chapter 271 of the Texas

Local Government Code. Under that subchapter, governmental immunity is waived when a private

party has entered into a contract to provide goods or services “to [a] local governmental entity.” See

Tex. Local Gov’t Code §§ 271.151, .152. That is all well and good, but in the present case it is

undisputed that MRSW did not provide any goods or services “to NCTCOG.” Rather, as noted

in Justice Goodwin’s opinion, the goods and services were provided directly to the DPS, so

2 Subchapter I of Chapter 271 is inapplicable and does not waive NCTCOG’s governmental immunity

under these circumstances.

Another process by which the legislature has attempted to alleviate the unfairness

noted above is through Chapter 2260 of the Texas Government Code. That chapter established a

procedure by which a private party that “directly” enters into a contract with a Texas governmental

entity may assert a breach-of-contract claim to that entity. Tex. Gov’t Code § 2260.051. If the claim

cannot be resolved by negotiation or mediation, the private party may request a contested-case

hearing before the State Office of Administrative Hearings. Id. § 2260.102. In a separate claim and

subsequent lawsuit against the DPS, MRSW has sought to invoke this procedure. But in that case

the San Antonio Court of Appeals has held that Chapter 2260 is not available to MRSW because

MRSW did not have a contract “directly” with the DPS. See 2013 WL 1830968, at *3. Rather,

MRSW’s contract was with NCTCOG, the “conduit for funding,” and the court held that Texas

agency law did not alter this result. Id. at *3-4. That is indeed a Catch-22 situation and threatens

to deprive MRSW of any remedy at all.

Even more unfortunate is that the confluence of these opinions could create an avenue

by which any Texas governmental entity could, in future contracts with private parties, avoid the

neutral arbiter intended by the legislature simply by inserting a “middle-man” in the transaction. I

do not believe the legislature intended for such a loophole to exist. This Court, however, is not in

a position to change that outcome. The purpose of this concurring opinion is simply to call this

anomaly to the attention of the supreme court and legislature.

3 _____________________________________________

J. Woodfin Jones, Chief Justice

Joined by Justices Goodwin and Field

Filed: June 20, 2013