601 S.W.3d 616
Tex.2020Background
- San Antonio River Authority (the Authority) contracted with Austin Bridge to repair Medina Lake Dam; the written construction contract included an AAA Construction Industry arbitration clause.
- Hayward Baker (subcontractor) claimed extra costs from defective bid specifications; Hayward demanded arbitration against Austin Bridge, and Austin Bridge demanded arbitration against the Authority for breach of contract.
- The Authority appeared in arbitration and asserted governmental immunity; the arbitrator denied the immunity defense.
- After that ruling the Authority filed suit in state district court seeking to enjoin arbitration and assert immunity; the trial court compelled arbitration and the court of appeals reversed in part, holding the Authority was authorized to arbitrate but a court (not an arbitrator) must decide immunity and concluding chapter 271 waived immunity.
- The Texas Supreme Court granted review and held: (1) Local Government Code Chapter 271 authorized the Authority to agree to arbitrate; (2) courts — not arbitrators — must decide governmental-immunity questions affecting subject-matter jurisdiction and enforceability of awards; and (3) chapter 271 waives the Authority’s immunity for the covered breach-of-contract claim (subject to chapter 271 damage limits).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of arbitration clause | Authority: as a local government it lacked statutory authority to agree to binding arbitration, so clause is void | Austin Bridge: Chapter 271 authorizes adjudication by arbitration and §271.154 deems such contractual procedures enforceable | Enforceable: Chapter 271 authorizes local entities to agree to arbitration for contracts subject to the subchapter and §271.154 makes such adjudication procedures enforceable |
| Who decides governmental immunity (court vs arbitrator) | Authority: courts must decide immunity because it implicates subject-matter jurisdiction and enforcement of awards | Austin Bridge: the AAA rules and delegation clause give the arbitrator power to decide jurisdictional issues including immunity | Court decides: judicial determination is required because immunity affects court jurisdiction to compel/stay arbitration and to enforce awards; parties cannot contractually confer jurisdiction on courts by delegating immunity questions to arbitrators |
| Whether chapter 271 waives the Authority’s immunity here | Authority: contract primarily benefited the District (dam owner), so §271 waiver doesn’t apply; also argues claimant seeks consequential damages not recoverable under §271.153 | Austin Bridge: contract also required services directly benefitting the Authority (project management/oversight); claimed damages are amounts due and owed under the contract (direct damages) | Waiver applies: the contract provided goods/services to the Authority (not merely indirect/attenuated benefits), so §271.152 waives immunity for the adjudication of the breach claim; claimed damages include amounts "due and owed" under §271.153 and thus fall within the waiver subject to statutory damage limitations |
| Scope of recoverable damages under §271.153 | Authority: claimed recovery is consequential (beyond unit prices) and thus barred by §271.153(b) | Austin Bridge: seeks payment for work performed and change orders—direct damages (balance due and owed) | Limited recovery: §271.153 limits recoverable amounts to the contract balance/change orders/attorney fees/interest; consequential damages are barred except as expressly allowed by subsection (a)(1) |
Key Cases Cited
- Royston, Rayzor, Vickery & Williams, LLP v. Lopez, 467 S.W.3d 494 (Tex. 2015) (arbitration is a consensual alternative forum)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (U.S. 1995) (courts presumptively decide arbitrability absent clear and unmistakable delegation)
- RSL Funding, LLC v. Newsome, 569 S.W.3d 116 (Tex. 2018) (delegation to arbitrator requires clear and unmistakable evidence)
- Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217 (Tex. 2004) (sovereign immunity deprives trial court of subject-matter jurisdiction unless waived)
- Zachry Constr. Corp. v. Port of Houston Auth. of Harris Cty., 449 S.W.3d 98 (Tex. 2014) ("balance due and owed" under §271.153 covers damages payable for breach)
- Kirby Lake Dev., Ltd. v. Clear Lake City Water Auth., 320 S.W.3d 829 (Tex. 2010) (scope of "services" under chapter 271 — excludes only indirect/attenuated benefits)
- Byrdson Servs., LLC v. S. E. Tex. Reg’l Planning Comm’n, 516 S.W.3d 483 (Tex. 2016) (contracts performing duties the government otherwise must perform fall within §271 waiver)
- Lower Colo. River Auth. v. Papalote Creek II, L.L.C., 858 F.3d 916 (5th Cir. 2017) (a court lacking subject-matter jurisdiction cannot compel arbitration)