Introduction. Doing business with a governmental entity can be tricky business because of the doctrine of governmental immunity. If this doctrine applies, the governmental entity may escape liability for harm it causes to others. Recently, the City of Carrolton  filed a plea to the jurisdiction claiming that it was immune from a lawsuit filed by Weir Brothers Contracting, LLC for unpaid grading work that amounted to over seven hundred thousand dollars. The Dallas District Court denied the City’s plea because it found that the City was engaged in performing proprietary rather than governmental functions. See City Carrollton v. Weir Bros. Contracting, LLC, No. 05-20-00714-CV, 2021 WL 1084554 (Tex. App.—Dallas Mar. 22, 2021, pet. denied).

Background and analysis. The City published a proposal for the lease or sale of 38 acres. The bid criteria included price, property use, financing, bidder experience and how the proposed project would enhance the McInnis Sports Complex. The City signed a lease agreement with Blue Sky Sports Center of Carrolton, LP.  Under the lease, Blue Sky would lease 30 acres of the property to “operate a multi-use sports, recreational, entertainment, and related service facility.” Id at *1.

On July 13, 2016, the City entered into a contract with AJI to grade a 41.94-acre tract that included the 30 acres leased to Blue Sky. In exchange, AJI would receive approximately 6 acres of the tract. In turn, AJI hired Weir Brothers Contracting, LLC to perform the grading, and, for its part, Weir would receive an interest in the 6 acres. Weir began the grading in February 2017 and in March encountered a capped landfill. The City issued an order to stop work until the problem could be remediated. Subsequently, the City terminated its agreement with AJI on the grounds that AJI failed to complete the grading working within 90 days. A couple of months later the city hired Blue Sky’s general contractor to finish the grading.

On October 20, 2017, Weir submitted an invoice to the City in the amount of $728,270 for work performed. The City refused to pay and terminated its contract with AJI. Weir obtained an assignment of all claims that AJI had against the City. Weir sued the City for breach of contract, quantum meruit, promissory estoppel, and tortious interference with a contract. The City filed a plea to the jurisdiction contending it was immune from the lawsuit under the governmental immunity doctrine. The trial court denied the plea and the City appealed.

The Dallas Court of Appeals explained that a municipality like the City exercises its powers through governmental and proprietary roles. Governmental immunity protects a City from suit based on the performance of a governmental function. However, it does not protect the City when performing a proprietary function. Here, the City was performing a proprietary function by engaging in the preparation and leasing of real property for the tenant’s use. The leasing of property is not a function that falls under the statutory definition of a governmental function.

Furthermore, the record shows that the City’s decision to lease the land was a discretionary act conducted on the City’s own behalf primarily for the benefit of its residents.

Id at *5.

Conclusion. The Court of Appeals concluded that the City’s actions were proprietary. Therefore, the City was not protected by the Governmental immunity doctrine.  As can be seen from this case, conducting business with a governmental entity can be risky business. If the Court had found that the governmental immunity doctrine applied, then the City would have been immune from the lawsuit and shielded from liability for payment of the grading work.