Sovereign Immunity Protects Public Texas University in Construction Dispute

Saul Ewing Arnstein & Lehr LLP
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Saul Ewing Arnstein & Lehr LLP

On December 1, 2020, the Court of Appeals of Texas (1st District) reversed a lower court decision and held that where a party fails to show that a public university defendant has expressly breached a contractual provision, Texas sovereign immunity law shields the public university from a lawsuit See Texas Southern University v. Pepper Lawson Horizon International Group, LLC, No. 01-19-00395, 2020 WL 703584 (Court of Appeals (Tx. 1st District) December 1, 2020).

General contractor, Pepper Lawson Horizon International Group, LLC (“Pepper Lawson”) entered into a construction contract (the “Contract”) with project owner, Texas Southern University (“Texas Southern”) for the construction of a new student housing project (the “Project”) for $41.5 million. Pepper Lawson alleged that Texas Southern, among other issues, failed to disclose the presence of remnants of a previous building on the site, the discovery and removal of which caused Pepper Lawson large delays and additional costs by pushing the Project into the “wet season.” Pepper Lawson requested extensions, but Texas Southern granted only a portion of the time requested. Pepper Lawson subsequently sued Texas Southern for $6 million in delay damages after finishing the job over budget and past the substantial completion deadline.

Applying Texas law, courts do not have subject matter jurisdiction to hear a breach of contract case against a public entity such as Texas Southern unless there is a clear and unambiguous waiver of a Texas public entity’s sovereign immunity. The Texas Civil Practice and Remedies Code Chapter 114 provides that if the plaintiff can allege facts that give rise to a claim for breach of an express provision of the parties’ contract, it shall constitute a waiver as a matter of the Texas sovereign immunity law. Here, the Court of Appeals of Texas ruled that Pepper Lawson could not show that Texas Southern was obligated under the Contract to make disclosures about the existence of the previous building, nor could it point to any contractual provision that expressly allowed recovery for owner-caused delays. This case serves as a reminder to public entities and contractors negotiating construction contracts to carefully consider the implications of sovereign immunity.

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