SOVEREIGN IMMUNITY IN LIGHT OF FEDERAL SIGN vs. TEXAS SOUTHERN UNIVERSITY

• INTRODUCTION
• OVERVIEW: THE SUPREME COURT CAN ABROGATE IMMUNITIES
• ARGUMENT AND AUTHORITIES: POINT OF ERROR ONE - THE COURT OF APPEALS ERRED WHEN IT HELD THAT THE DOCTRINE OF SOVEREIGN IMMUNITY BARS A CAUSE OF ACTION FOR BREACH OF CONTRACT WHERE THE STATE OR ONE OF ITS AGENCIES HAS ENTERED INTO A VALID CONTRACT AND HAS RECEIVED BENEFITS THEREUNDER.
  1. The Doctrine of Sovereign Immunity Does Not Apply to Contracts.
  2. When the State Enters Into a Valid Contract, the State Implicitly Consents To Be Sued for Damages Arising Out of that Contract.
  3. Basic Principle of Contracts Is Mutuality of Obligations.
  4. A Cause of Action Alleging Unconstitutional Taking Overrides the Common Law Doctrine of Sovereign Immunity.
  5. State Agencies Must Act Within the Bounds of the Law.
  6. Public Policy Demands That the State Be Held To Its Contractual Obligations.
• POINT OF ERROR TWO - THE COURT OF APPEALS ERRED BECAUSE (A) GREEN HAS RAISED CONSTITUTIONAL CAUSES OF ACTION NOT BARRED BY SOVEREIGN IMMUNITY, (B) IT HAS MISCONSTRUED THE REQUIREMENTS FOR ESTABLISHING A CAUSE OF ACTION UNDER ART. I, ? 17 OF THE TEXAS CONSTITUTION AND THE FIFTH AMENDMENT TO THE UNITED STATES CONSTITUTION AND (C) GREEN HAS PLEADED A CAUSE OF ACTION FOR UNCONSTITUTIONAL TAKING.
  1. A Cause of Action Alleging Unconstitutional Taking Overrides the Common Law Doctrine of Sovereign Immunity.
  2. The Court of Appeals Misconstrued the Requirements for Establishing a Cause of Action Under Art. 1, § 17 of the Texas Constitution and the Fifth Amendment to the United States Constitution.
  3. The Court of Appeals Erred By Holding That Green Failed To Plead a Cause of Action for Unconstitutional Taking.
• POINT OF ERROR THREE - THE COURT OF APPEALS ERRED BECAUSE THE OPEN COURTS PROVISION UNDER ART. I, ? 13 OF THE TEXAS CONSTITUTION OVERRIDES THE APPLICATION OF SOVEREIGN IMMUNITY IN CONTRACT ACTIONS.
  1. Article I, § 13 of the Texas Constitution Guarantees Green Its Day In Court.
  2. When the Texas Constitution Was Adopted, There Was No Common Law Distinction Between Immunity From Liability and Immunity From Suit.
  3. The Application of Sovereign Immunity in this Case Fails the Texas Supreme Court's Test for Constitutionality.
  4. Green Does Not Seek Total Abrogation of the State's Immunity From Liability.

Abstract

In 1988, Texas Southern University in Houston, Texas sought proposals for the fabrication, delivery and installation of a basketball arena scoreboards. On November 16, 1988, Federal Sign submitted its proposal to Texas Southern. It offered to construct the arena scoreboards for $182,506.00. Following a period of negotiations, during which Federal Sign teamed with Pepsi, the parties agreed to a contract price of $158,404.00. The Federal-Pepsi proposal was accepted by Texas Southern's Board of Regents on February 3, 1989, with written confirmation sent to them five (5) days later. Before the middle of February, Texas Southern orally instructed Federal Sign to begin fabricating the scoreboards as soon as possible.

Federal Sign, in fact, began constructing the scoreboards. Some seven (7) months later, on September 5, 1989, Texas Southern informed Federal Sign that it had found other avenues to obtain the scoreboards. In fact, Coca-Cola had teamed with another sign manufacturer with whom Texas Southern thereafter entered into a contract. Federal Sign, which had essentially completed the fabrication efforts, filed suit on March 15, 1990, alleging breach of contract and seeking lost profits and unrecoverable expenses. Texas Southern responded, asserting, in essence, that as a subdivision of the State of Texas, it was immune from suit. The trial court initially abated the lawsuit, but on Motion for Rehearing, set aside the Order of Abatement and permitted the case to go to trial. Following a jury trial, Federal Sign was awarded $67,481.00 in damages.

Texas Southern appealed to the Fourteenth District Court of Appeals in Houston, Texas, raising one point of error. Texas Southern contended the trial court erred in overruling Texas Southern's plea to the jurisdiction, arguing the contract claims against the State and its subdivisions are barred by the doctrine of sovereign immunity. On October 13, 1994, the Houston Court of Appeals reversed the trial court, finding that the breach of contract lawsuit against Texas Southern amounted to a lawsuit against the State of Texas. Following the decision of the Austin Court of Appeals in Green International, Inc. v. State, 877 S.W.2d 428 (Tex. App. - Austin 1994, _________), the Court of Appeals held that "the State, as sovereign, is immune from suit without consent even if there is no dispute regarding the State's liability." In essence, the Houston Court of Appeals agreed with the Austin Court of Appeals determination that the State cannot be sued for breach of contract, even when there is no question that the State breached the contract and that the breach caused the aggrieved party significant economic loss.

Federal Sign prepared and submitted an Application for Writ of Error on December 19, 1994. Shortly thereafter, the Supreme Court of Texas granted the Application for Writ of Error submitted by Green International and set the Green case for hearing in September of 1995. The Supreme Court took no action on Federal Sign's Application.

Shortly before it was to be argued, the Green matter settled. Green's appeal was dismissed as settled in early November, 1995. The following day, the Supreme Court granted Federal Sign's Application for Writ of Error and scheduled the matter for argument three weeks later. The matter was argued during the last week of November, 1995. The Supreme Court has yet to render its decision.

In May, 1994 in the case of Green International, Inc. v. State of Texas, 877 S.W.2d 428 (Tex. App. - Austin 1994, writ pending), the Court of Appeals in Austin indicated that sovereign immunity acted to block the contractor's cause of action against the State of Texas and, specifically, the Texas Department of Criminal Justice, for breach of contract. In essence, the Court of Appeals indicated that an aggrieved contractor has no remedy against the State, and most of its agencies and subdivisions, in the event that the State breaches a contract. The Court acknowledged that the doctrine would apply even if the State intentionally breached the contract aware of the fact that the contracting party would suffer significant damages.

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