The City of Houston v. Atser, L.P.--Appeal from 334th District Court of Harris County (Majority)
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Opinion issued April 5, 2012
Court of Appeals
First District of Texas
THE CITY OF HOUSTON, Appellant
ATSER, L.P., Appellee
On Appeal from the 334th Judicial District Court
Harris County, Texas
Trial Court Case No. 2008-48039
This is a case stemming from an alleged breach of a contract between
appellant, the City of Houston (the ―City‖), and appellee, Atser, L.P. (―Atser‖).
The City appeals from an interlocutory order denying its no-evidence and
traditional motion for partial summary judgment against Atser in which, according
to the City, it asserted challenges to the trial court‘s jurisdiction. In two issues, the
City contends that:(1) Atser‘s breach of contract allegations do not fall within the
limited waiver of immunity set forth in Texas Local Government Code Chapter
271; and (2) Atser‘s allegations of failure-to-use services, allegedly causing it lost
profits of $250,000, are not actionable under Chapter 271, Subchapter I of the
We dismiss the City‘s appeal as to its first issue for lack of jurisdiction, and
we affirm the trial court‘s order as to the second issue.
In 1999, the City and Atser entered into a construction contract (the ―1999
Contract‖) which required Atser to provide the labor, materials, and supervision
necessary to complete various construction projects. In 2003, the parties amended
the contract to require Atser to implement a computerized ―Project Management
System‖ for the construction projects (the ―2003 Amendments‖). In 2006, the
parties entered into a contract for software technical support and programming
services (the ―2006 Contract‖).
On page seven of its appellate brief, the City lists four ―issues presented.‖ These
―issues,‖ however, differ from the issues listed in the Table of Contents and are
not briefed by the City. Accordingly, we confine our opinion to the issues actually
briefed by the City. See TEX. R. APP. P. 38.1(i) (―The brief must contain a clear
and concise argument for the contentions made, with appropriate citations to
authorities and to the record.‖).
Eventually, the City and Atserdisagreed about the parties‘ duties under these
contracts. Their disagreements initially centered around a former Atser employee
who had come to work for the City.Atser believed that this employee
misappropriated trade secret information and began using the information to
Atser‘s detriment and the City‘s benefit. Atser brought suit against this employee.
Atser later substituted the City as a defendant and pled claims for breach of the
1999 Contract, the 2003 Amendments, and the 2006 Contract, as well as claims for
quantum meruit and unjust enrichment. Atser alleged that the trial court had
jurisdiction over its claims pursuant toTexas Local Government Code Chapter 271.
The City answered Atser‘s petition and pled, among other defenses,
immunity from both suit and liability. The City then filed two sets of special
exceptions to Atser‘s claims. In its first special exceptions, the City claimed that
Local Government Code Chapter 271 waived immunity only for breach of contract
claims and, therefore, the City was immune from claims such as quantum meruit or
unjust enrichment. It also claimed that, under the facts pled by Atser, section
271.152 did not waive the City‘s immunity from suit for breach of contract. In
response, Atser filed a Second Amended Petition. The City then filed special
exceptions to Atser‘sSecond Amended Petition. In those special exceptions, the
City claimed that Atser‘s pleadings were so devoid of facts as to deny the City fair
notice of Atser‘s claims, and it claimed that Atser failed to adequately plead
jurisdiction. The City also argued that Atser failed to plead the maximum amount
of damages it sought,failed to plead special damages, and failed to prove that the
damages sought were recoverable under Local Government Code section
271.153(b). Atser then amended its pleading again and dropped its equitable
claims, leaving only its breach of contract claims.
In this Third Amended Petition, Atser claimsthat:(1) it had valid,
enforceable contracts with the City; (2)it has standing to sue the City; (3) the City
has waived its sovereign immunity pursuant to section 271.152; (4) its claims are
for an adjudication of the City‘s breach of contract; (5) it has performed, tendered
performance, or was excused from performing its contractual obligations, and it
has provided all goods, services, and materials as requested by the City and
required by the terms of the contracts; and (6) the City breached the contracts by
―failing to meet its payment obligations and other duties under these contracts.
Specifically it has not fully compensated Plaintiff pursuant to the terms of the
The City filed a plea to the jurisdiction concerning this Third Amended
Petition. The City alleged that the only exception to governmental immunity
thatAtser could plead was provided by Local Government Code section 271.152
and that Atser‘s claim did not fall within the parameters of thatsection, and itasked
the trial court to dismiss Atser‘s claim for lack of jurisdiction. The trial court
denied the plea to the jurisdiction.
Discovery proceeded in the lawsuit and ended in January 2010. The City
then filed a ―No-Evidence and Traditional Motion for Partial Summary Judgment‖
(―Partial Motion for Summary Judgment‖). The ―no-evidence‖ section of the
Partial Motion for Summary Judgment assertedthat Atser presented no evidence of
one or more essential elements of its claim for breach of contract.
―traditional‖ part of the Partial Motion for Summary Judgmentargued that the City
was entitled to judgment as a matter of law on Atser‘s breach of contract claim.
Within this Partial Motion for Summary Judgment,the City also claimed that one
portion of Atser‘s breach of contract claim ―fails as a matter of law because the
Legislature did not waive the City‘s immunity for the types of damages Atser
The trial court denied the Partial Motion for Summary Judgment. The City
filed a notice of appeal from the denial of its Partial Motion for Summary
Judgment as an accelerated appeal. As there has been no final judgment in this
case, we gave the City notice that the appeal might be involuntarily dismissed for
want of jurisdiction, and we gave the parties the opportunity to provide further
briefing on the jurisdictional issue, which the City did.
This Court’s Jurisdiction Over This Appeal
The City claims that, despite the fact that there is no final judgment or order
in this case, it can appeal the interlocutory denial of its Partial Motion for
Summary Judgment on the basis that this motionwas actually a challenge to the
trial court‘s jurisdiction.
A. The Law
As a general rule, appeals may be taken only from final judgments or orders.
SeeTEX. CIV. PRAC. & REM. CODE ANN.§ 51.014 (Vernon Supp. 2001); Qwest
Commc’ns Corp.v. AT&T Corp., 24 S.W.3d 334, 336 (Tex. 2000). An exception
to this rule, however, is found in Civil Practice and Remedies Code section
This section allows an appeal from an interlocutory order that
―grants or denies a plea to the jurisdiction by a governmental unit as that term is
defined in Section 101.001.‖ TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(a)(8).
An interlocutory appeal may be had when a trial court denies a governmental unit‘s
challenge to subject matter jurisdiction, ―irrespective of the procedural vehicle
used.‖ Id.;Thomas v. Long, 207 S.W.3d 334, 339 (Tex. 2006). The availability of
an interlocutory appeal will not be decided by the form or caption of a pleading,
but will be determined by the substance of the motion to determine the relief
sought. Myers Corp. v. Abel, 997 S.W.2d 598, 601 (Tex. 1999).
In order for a party to be entitled to an interlocutory appeal, section
51.014(a)(8) requires the denial of a jurisdictional challenge. TEX. CIV. PRAC. &
REM. CODEANN.§ 51.014(a)(8); Thomas, 207 S.W.3d at 339. Even in the absence
of an explicit denial of a jurisdictional challenge, however, if a trial court rules on
the merits of an issue without explicitly rejecting an asserted jurisdictional attack,
it has implicitly denied the jurisdictional challenge.Thomas, 207 S.W.3d at 339–
40.This implicit denial satisfies section 51.014(a)(8) and gives the court of appeals
jurisdiction to consider an interlocutory appeal. See TEX. CIV. PRAC. & REM. CODE
ANN. § 51.014(a)(8); TEX. R. APP. P. 33.1(a)(2)(A); Thomas, 207 S.W.3d at 340.
B. Application of Law to Facts
The City‘s Partial Motion for Summary Judgment is divided into two
sections: (1) the no-evidence section and (2) the traditional section. In the noevidence section, the City listed the elements of a breach of contract claim as
(1) the existence of a valid contract; (2) performance or tendered performance by
the plaintiff; (3) breach of the contract by the defendant; and (4) damages to the
plaintiff from the breach. Wright v. Christian &Smith, 950 S.W.2d 411, 412 (Tex.
App.—Houston [1st Dist.] 1997, no writ).
In the no-evidence section of its Partial Motion for Summary Judgment, the
City claimed that there was no evidence for each of the elements of Atser‘s breach
of contract claim. However, the City did not challenge the trial court‘s subject
matter jurisdiction in any way in this section. We therefore have no jurisdiction
over an appeal from the denial of the no-evidence portion of the City‘sPartial
Motion for Summary Judgment.
SeeTEX. CIV. PRAC. & REM. CODE
In the traditional section of its Partial Motion for Summary Judgment, the
City claimed that it was entitled to summary judgment as a matter of law on
Atser‘s breach of contract claim. It dividedAtser‘sbreach of contract pleading into
three claims, one for $5 million, one for $250,000, and one for $2,000.2
In the first section of its traditional motion concerning what the City calls the
―$5M Claim,‖ the City asserted that two alleged admissions byAtserdefeat the
second element of a breach of contract claim, i.e., performance or tendered
performance by the plaintiff.
See Wright, 950 S.W.2d at 412.
presented evidence of these admissions and cited the City‘s summary judgment
evidence. In the body of this section, however, the City made the following
Atser‘sThird Amended Petition, however, makes no such division. It alleges a
single breach of contract and an aggregate amount of damages, which Atser claims
is the combination of the balance due and owed by the City under the contracts,
the amount owed for additional work Atser performed at the City‘s request, and
interest. The City apparently makes these divisions of the damages from breach of
contract based on Atser‘s response to discovery in this suit and not based on the
language of the petition itself. To determine the jurisdictional issue, however, we
will look only to the City‘s motion to see if it appropriately challenges subject
In essence, Atser‘s $5M Claim is nothing more than a tort or
quasi-contract claim. Indeed, Atser has already termed it as such. In
fact, Atser still maintains that it is an ―option‖ that its former
employee stole the software and gave it to the City. But the City is
immune from these types of claims because chapter 271 of the TEXAS
LOCAL GOVERNMENT CODE, the only statutory waiver of the City‘s
governmental immunity from suit claimed by Atser, contains a limited
waiver of immunity from suit only ―for the purpose of adjudicating a
claim for breach of contract,‖ not for any other claims in law or
equity. Therefore, in response to the City‘s Pleas to the Jurisdiction,
Atser attempts in its Third Amended Petition to recast un-waived
tort/quasi-contract claims as a breach of contract claim.
(Internal citations omitted.)
However, although this passage cites the governmental immunity statute, it
concludes with the following:
In sum, Atser‘s admissions, as well as the January 8, 2008
Letter, conclusively establish that Atser failed to perform or tender
performance, and that even if it had, such performance would not give
rise to any contractual obligation for the City to pay for the ―core
technology‖ source code because the City never agreed pursuant to
the ―Supplemental Activities‖ provision of the 1999 Contract to pay
for this ―supplemental‖ product. As there is no evidence to the
contrary, and there is no disputed issue of material fact, summary
judgment in favor of the City on Atser‘s $5M Claim is appropriate.
Thus, although the City announced that the ―$5M Claim‖ was ―nothing more
than a tort or aquasi-contract claim‖ and that ―the City is immune from these types
of claims,‖ the City did not ask for relief from the trial court on this basis. Instead,
it asked the trial court to grant summary judgment because the evidence
established that Atser could not meet an element of its breach of contract claim.
We conclude that when the trial court denied the City‘s Partial Motion for
Summary Judgment concerning the ―$5M Claim,‖ it did not implicitly or explicitly
deny a challenge to the trial court‘s jurisdiction over that claim. SeeThomas, 207
S.W.3d at 339. As the substance of the motion on that point was a traditional
motion for summary judgment, and not a challenge to the trial court‘s jurisdiction,
we conclude that we have no jurisdiction to hear an interlocutory appeal on this
issue. SeeMyers Corp., 997 S.W.2d at 601.
Concerning the City‘s first issue, challenging the trial court‘s ruling on its
no-evidence motion for summary judgment and its challenge to Atser‘s ―$5M
Claim‖ in its traditional motion for summary judgment, we dismiss this portion of
the appeal for lack of jurisdiction.
Remaining Issue Concerning Lost Profits
In its second issue, the City claims that Atser‘s allegations of failure-to-use
services, allegedly causing it lost profits of $250,000, are not actionable under
Chapter271, Subchapter I.
As the City in its Partial Motion for Summary
Judgmentasked the trial court to rule that this claim failed as a matter of law
―because the Legislature did not waive the City‘s immunity for the types of
damages Atser seeks,‖ we will review this issue as the denial of a jurisdictional
A. Standard of Review
We review de novo a trial court‘s ruling on a jurisdictional plea. See Tex.
Dep’t of Parks &Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004). When
reviewing a trial court‘s ruling on a plea, ―we first look to the pleadings to
determine if jurisdiction is proper, construing them liberally in favor of the
plaintiffs and looking to the pleader‘s intent,‖ and ―we consider relevant evidence
submitted by the parties when necessary to resolve the jurisdictional issues raised.‖
City of Waco v. Kirwan, 298 S.W.3d 618, 621–22 (Tex. 2009). In considering this
evidence, we ―take as true all evidence favorable to the nonmovant‖ and ―indulge
every reasonable inference and resolve any doubts in the nonmovant‘s favor.‖
Kirwan, 298 S.W.3d at 622. We do not adjudicate the substance of the case, but
instead determine whether a court has the power to reach the merits of the claim.
City of Houston v. S. Elec. Servs., Inc., 273 S.W.3d 739, 744 (Tex. App.—Houston
[1st Dist.] 2009, pet. denied) (citing Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d
547, 554 (Tex. 2000)).
B. Governmental Immunity
Governmental immunity protects political subdivisions of the State,
including cities, from lawsuits for money damages, unless their immunity has been
waived. Reata Constr. Corp. v. City of Dallas, 197 S.W.3d 371, 374 (Tex. 2006).
Governmental immunity, like sovereign immunity, involves immunity from suit
and immunity from liability. Harris Cnty.Hosp. Dist. v. Tomball Reg’l Hosp., 283
S.W.3d 838, 842 (Tex. 2009). Immunity from suit is jurisdictional and bars suit,
whereas immunity from liability is not jurisdictional and protects political
subdivisions from judgments. Id. Governmental immunity is waived only by clear
and unambiguous language indicating the Legislature‘s intent to do so.Kirby Lake
Dev., Ltd. v. Clear Lake City Water Auth., 320 S.W.3d 829, 838 (Tex. 2010).
C. Waiver of Immunity for Certain Contract Claims
Local Government Codesection 271.152, which waives a local governmental
entity‘s immunity from suit for certain contract claims, provides:
A local governmental entity that is authorized by statute or the
constitution to enter into a contract and that enters into a contract
subject to this subchapter waives sovereign immunity to suit for the
purpose of adjudicating a claim for breach of the contract, subject to
the terms and conditions of this subchapter.
TEX. LOC. GOV‘T CODE ANN. § 271.152 (Vernon 2005). This statute defines a
―[c]ontract subject to this subchapter‖ as ―a written contract stating the essential
terms of the agreement for providing goods or services to the local governmental
entity that is properly executed on behalf of the local governmental entity.‖ Id.
§ 271.151(2) (Vernon 2005). The total amount of money which may be awarded
under this section is ―the balance due and owed by the local government entity
under the contract,‖ any amount owed for change order or additional work the
governmental entity directed it to perform, and interest as allowed by law. Id.
§ 271.153(a) (Vernon Supp. 2011).The purpose of this section is to ―limit the
amount due by a governmental agency on a contract once liability has been
established, not to foreclose the determination of whether liability exists.‖ Kirby
Lake, 320 S.W.3d at 840.
The jurisdictional elements for a claim of waiver of immunity based on
section 271.152 are as follows: (1) the party against whom the waiver is asserted
must be a ―local governmental entity‖;(2) the entity must be authorized by statute
or the Constitution to enter into contracts; and (3) the entity must in fact have
entered into a contract that is ―subject to this subchapter.‖ City of Houston v.
Williams, 353 S.W.3d 128, 134 (Tex. 2011).
D. Application of Law to Facts
Inits second issue, the City argues that ―Atser‘s allegations of failure-to-use
services allegedly causing it lost profits of $250,000.00 are not actionable under
chapter 271, Subchapter I.‖ This issue apparently challenges a claim by Atser for
lost profit damages, which the City contends are not allowed by statute. The City
bases this assertion, not on the language of Atser‘sthird amended petition, which
asks only for damages within the confines of section 271.153(a), but on Atser‘s
discovery responses, in which Atser states that ―it has been damaged in the amount
of $250,000 by Defendant‘s refusal to use ATSER pursuant to the 2006 Contract.‖
The City argues that it had no contractual duty to use Atser‘s services and, thus,
that there can be no amount ―due and owed.‖ It also claims that Atser‘s alleged
request for consequential damages seeks damages outside the scope of damages
allowed by section 271.153.
These arguments, however, go far beyond a challenge to the jurisdiction and
instead address the merits of Atser‘s claim. Our determination of subject matter
jurisdiction is not to be based on the substance of the case, but on whether a court
has the power to reach the merits of the claim. S. Elec. Servs., 273 S.W.3d at 744.
This involves a review of the pleadings themselves and any jurisdictional matters
raised therein, and not of the merits of the case. See Miranda, 133 S.W.3d at 226
(―When a plea to the jurisdiction challenges the pleadings, we determine if the
pleader has alleged facts that affirmatively demonstrate the court‘s jurisdiction to
hear the case.‖).
As noted above, the jurisdictional elements for a claim of waiver of
immunity based on section 271.152 are: (1) the party against whom the waiver is
asserted must be a ―local governmental entity‖;(2) the entity must be authorized by
statute or the Constitution to enter into contracts; and (3) the entity must in fact
have entered into a contract that is ―subject to this subchapter.‖ Williams, 353
S.W.3d at 134. Here, Atser has pledall three of these elements, and the City has
not contradicted or challenged them.
In its third amended petition,Atserpled breach of the pertinent contracts and
asked for damages based on (1) the balance due and owing by the City, (2) the
amount owed for additional work performed at the City‘s direction, and (3) interest
as allowed by law. These are precisely the damages the statute allows when
immunity is waived. See TEX. LOC. GOV‘T CODE ANN. § 271.153.The City‘s
challenge to the trial court‘s jurisdiction, then, is not based on what Atserpled, but
on its own construction ofAtser‘spleadings. This is not the proper function of a
challenge to the jurisdiction.See S. Elec. Servs., 273 S.W.3d at 744 (holding that
appellate court‘s duty in reviewing challenge to jurisdiction is not to adjudicate
substance of claim, but to determine whether trial court has power to reach merits).
The City in essence asks that we find that Atser‘s claim lacks merit and that
Atser asks for improper damages. ―But an ‗adjudication‘ of such a claim is exactly
what the Legislature allows in Section 271.152.‖ Id.Section 271.153, the damages
section of the statute, does not retract the waiver of immunity granted in section
271.152 to adjudicate claims for breach of contract―if a plaintiff alleges facts to
support such a claim and seeks recovery only of damages to the extent allowed.‖
Id.; see alsoCity of Mesquite v. PKG Contracting, Inc., 263 S.W.3d 444, 448 (Tex.
App.—Dallas 2008, pet. denied) (holding that statutory limitations on contractor‘s
recoverable damages imposed by section 271.152 did not deprive trial court of
subject matter jurisdiction to adjudicate breach of contract claim); City of N.
Richland Hills v. Home Town Urban Partners, Ltd., 340 S.W.3d 900, 910 (Tex.
App.—Fort Worth 2011, no pet.) (―We decline to adjudicate Appellee‘s damage
claims by applying Section 271.153 within the procedural context of the City‘s
pleas to the jurisdiction.‖). If the pleadings themselves ―allege sufficient facts to
qualify the case as a waiver of sovereign immunity as granted by statute, by
alleging facts to support their claim that the City has not paid ‗the balance due and
owed under the contract,‘ then a challenge to the jurisdiction of the trial court must
fail.‖S. Elec. Servs., 273 S.W.3d at 744.
We conclude that Atser‘sthird amended petition alleges sufficient facts to
qualify the case as a waiver of sovereign immunity as granted by statute. We
overrule the City‘s second issue.
We affirm the trial court‘s order denying the City‘s Partial Motion for
Summary Judgment on the ground of governmental immunity. We dismiss the
remainder of the appeal for lack of jurisdiction.
Evelyn V. Keyes,
Panel consists of Justices Keyes, Sharp, and Massengale.
Justice Sharp, concurring in the judgment only.
Justice Massengale, concurring in part and dissenting in part.