law-waiver-by-conduct (governmental / sovereign immunity)

the Texas Supreme Court has consistently held that a governmental entity does not waive immunity from
suit by accepting the benefits of a contract.  See Tex. A&M Univ. Sys. v. Koseoglu, 233 S.W.3d 835, 840
(Tex. 2007); Little-Tex, 39 S.W.3d at 598; Catalina Dev. Co., 121 S.W.3d at 705-06; Travis County v.
Petzel & Assocs., Inc., 77 S.W.3d 246, 248 (Tex. 2002); IT-Davy, 74 S.W.3d at 860.  We decline the
invitation to depart from these authorities and therefore re-affirm that, even if the Port derived benefits
from a contract to which it was not a party, the Port did not thereby waive its immunity from suit.

Seureau v. Exxon Mobil Corp (Tex.App.- Houston [14th Dist.] Oct. 16, 2008)(Brown)
Even were the Port obligated by ExxonMobil's contractual obligations, a governmental entity's immunity
from suit is not waived merely because the entity breaches a contract.  “When the State contracts, it is
liable on contracts made for its benefit as if it were a private person.  Consequently, when the State
contracts with private citizens it waives immunity from liability.  But the State does not waive immunity
from suit simply by contracting with a private person." Little-Tex, 39 S.W.3d at 594 (citations omitted);
Slade v. Tex. S. Univ. Bd. of Regents, 232 S.W.3d 395, 400 (Tex. App.- Houston [1st Dist.] 2007, no
pet.) (upholding immunity from suit despite plaintiff's pleading of facts potentially demonstrating breach
of contract by governmental entity).  
One of the reasons that courts defer to the Legislature to waive immunity from suit is so that the
Legislature may revise existing agreements if doing so would benefit the public.  IT-Davy, 74 S.W.3d at
854.  Thus, legislative control ensures that current policymakers are neither bound by, nor held
accountable for, their predecessors' rationale for entering into long-term contracts.  See id.  For this
reason, finding waiver by conduct merely because the plaintiff alleges that the governmental entity
breached the contract would render immunity useless by permitting the exception to swallow the rule.

Waiver by Conduct

In 1997, the Texas Supreme Court held that a governmental entity does not waive immunity from a
breach-of-contract suit simply by entering into a contract for goods and services.  Fed. Sign v. Tex. S.
Univ., 951 S.W.2d 401, 408 (Tex. 1997).  In a footnote, Justice Baker's majority opinion suggested that A
[t]here may be other circumstances where the State may waive its immunity by conduct other than simply
executing a contract so that it is not always immune from suit when it contracts."  Id. at 408 n.1.  

Justice Hecht concurred, offering that “today's decision does not hold that the State is always immune
from suit for breach of contract absent legislative consent; it holds only that the mere execution of a
contract for goods and services, without more, does not waive immunity from suit."  Id. at 413 (Hecht, J.,

Relying on the footnote, several courts of appeals opted to recognize a judicially imposed, equitable
waiver of immunity from suit.  Gen. Servs. Comm'n v. Little-Tex Insulation Co., 39 S.W.3d 591, 595 (Tex.
2001).  Those courts concluded that the State waives immunity from a breach-of-contract suit if it
accepts benefits under a contract for goods or services.  See id.

But in 2002, Justice Baker, writing for a plurality of four justices, insisted that no such “waiver by
conduct" exception exists:

We again reaffirm that it is the Legislature's sole province to waive or abrogate sovereign immunity. . . .  
Creating a waiver-by-conduct exception would force the State to expend its resources to litigate the
waiver-by-conduct issue before enjoying sovereign immunity's protections - and this would defeat many
of the doctrine's underlying policies.

. . . .  Because we have consistently held that only the Legislature can waive sovereign immunity from
suit, allowing other governmental entities to waive immunity by conduct that includes accepting benefits
under a contract would be fundamentally inconsistent with our established jurisprudence. . . .  
Accordingly, we reject IT-Davy's argument that we should fashion such a waiver-by-conduct exception in
a breach-of-contract suit against the State.

IT-Davy, 74 S.W.3d at 857 (citations omitted).  Justice Hecht, writing a concurring opinion for a plurality
of four justices, found no waiver because IT-Davy presented “nothing more than an ordinary contract
dispute," but refused to foreclose altogether the possibility of a waiver-by-conduct exception in a
subsequent lawsuit.  See id. at 860-61 (Hecht, J., concurring).  

In a dissenting opinion, Justice Enoch admonished his colleagues for continuing to offer “false hope" to
litigants by failing to outline the parameters that constitute waiver by conduct:

Oddly, Justice Hecht, rather than join Justice Baker, offers hope that there remains another key - a
magic key that will loosen sovereign immunity's lock and open the courthouse doors.  But it is false
hope.  He is unable to identify and can give only vague clues about what that key may look like.  This
just encourages endless, fruitless litigation as each new contracting party, thinking it has discovered the
key, seeks to open the courthouse door. . . . [IT-Davy] will learn from this Court that, alas, it didn't have
the magic key.

Id. at 863 (Enoch, J., dissenting).

Although the Texas Supreme Court has yet to find, much less define, waiver by conduct, the Court has
strongly hinted that equitable concerns would come into play:

In Federal Sign, we noted that there might be circumstances “where the State may waive its immunity by
conduct other than simply executing a contract," although under the facts of that case, it was not
necessary to indicate what those circumstances might be.  Since Federal Sign, we have had several
occasions to consider circumstances that were urged to constitute a waiver by conduct.  We held that
the facts these cases presented did not support an equitable waiver by conduct of the governmental
entities' immunity.

Catalina Dev., Inc. v. County of El Paso, 121 S.W.3d 704, 705 (Tex. 2003) (citations omitted) (emphasis
added).  Finding that the governmental entity “did not profit unfairly" at the expense of the party with
which it contracted, the Court held that “the equitable basis for such a waiver simply does not exist
under this set of facts."  Id. at 706.  Instead of adopting a categorical approach or bright-line rule, it
appears that courts are to evaluate the waiver-by-conduct exception on the facts and equity of each
case.  See Tex. S. Univ. v. State Street Bank & Trust Co., 212 S.W.3d 893, 907 (Tex. App.- Houston [1st
Dist.] 2007, pet. denied).

Last year, the First Court of Appeals found that under “extraordinary factual circumstances" a
governmental entity engaged in conduct so inequitable and egregious as to waive its immunity.  See id.
at 907-08.  Texas Southern University had contractually agreed to lease physical-plant equipment from
CMS Viron Corporation.  See id. at 897.  Attached as an exhibit to the Master Lease between TSU and
Viron was an opinion letter authored by TSU's general counsel, upon which Viron was entitled to rely.  
See id. at 898.  The opinion letter assured Viron that the Master Lease was legal, valid, binding, and
enforceable, and that, in the event of a judgment for money damages, TSU would be “obligated to pay"
any judgment.  See id.  After Viron installed the equipment, however, TSU announced that the Master
Lease was void and unenforceable.  See id. at 898, 899.  After Viron filed suit, TSU then attempted to
invoke sovereign immunity.  See id. at 897.  The appellate court found waiver by conduct:

[Viron] argues . . . that “the injustice is even worse, because this case also includes an additional fact
that appears in none of the prior [immunity] cases:  The government officials lured Viron into the Master
Lease with false promises that the contract would be valid and enforceable, then disclaimed any
obligation on the contract by taking the position that the contract was not valid after all.”

We agree.  Based on the facts before us, we . . . hold that sovereign immunity does not defeat the trial
court's subject-matter jurisdiction over Viron's claims for breach of contract.

Id. at 908.  

Seureau v. Exxon Mobil Corp (Tex.App.- Houston [14th Dist.] Oct. 16, 2008)(Brown)
In this case, Father attempts to analogize the Port's conduct to TSU's in State Street, and asserts that
he, too, carries the “magic key" to unlock the courthouse doors.  See IT-Davy, 74 S.W.3d at 863
(Enoch, J., dissenting).  He does not.  We will discuss his specific allegations below; generally, he
asserts that the Port (1) engaged in a joint enterprise with ExxonMobil to acquire the Seureaus' lands;
(2) enjoyed benefits from the 1966 Letter Agreement used to acquire those lands; (3) refused to honor
the obligations owed by its joint-enterprise agent under the Letter Agreement; and (4) tried to exercise
its eminent-domain powers inequitably.

Moreover, the Seureaus - who rejected the proposal - have not demonstrated that by  merely offering to
swap land tracts, the Port profited unfairly at their expense.  See Catalina Dev., Inc., 121 S.W.3d at 706;
see also IT-Davy, 74 S.W.3d at 861 (Hecht, J., concurring) (“My hypothetical [in Federal Sign] supposed
a governmental entity that chiseled a contractor just because it could get away with doing so.").  In a
general sense, waiver involves an “intentional relinquishment of a known right or intentional conduct
inconsistent with claiming that right."  Jernigan v. Langley, 111 S.W.3d 153, 156 (Tex. 2003) (citations
omitted).  Thus, one can envision waiver by conduct where, for example, the governmental entity lures
one into a contract by promising that the contract would be enforceable, legal, valid, and binding, and
that the governmental entity would be obligated to pay damages for breaching same.  See, e.g., State
Street, 212 S.W.3d at 898, 908.  Such an example evinces an implied promise that the governmental
entity has intentionally relinquished its right to claim immunity.  See generally id.  This case does not
involve the type of “extraordinary circumstances" present in State Street.  Waiver by conduct is not
warranted in ordinary contract disputes.  See Slade, 232 S.W.3d at 400; IT-Davy, 74 S.W.3d at 861
(Hecht, J., concurring).  Thus, we are disinclined to extend waiver by conduct to a case that does not
even involve a contract with a governmental entity.

Accordingly, we affirm the trial court's order granting the Port's plea to the jurisdiction and dismissing, for
lack of subject-matter jurisdiction, the Seureaus' claims against the Port.