Rosenberg Development Corporation v. Imperial Performing Arts, Inc. , 571 S.W.3d 738 ( 2019 )

IN THE SUPREME COURT OF TEXAS
══════════
No. 17-0660
══════════
ROSENBERG DEVELOPMENT CORPORATION, PETITIONER,
V.
IMPERIAL PERFORMING ARTS, INC., RESPONDENT
═══════════════════════════════════════════════════════
ON PETITION FOR REVIEW FROM THE
COURT OF APPEALS FOR THE FOURTEENTH DISTRICT OF TEXAS
═══════════════════════════════════════════════════════
Argued October 11, 2018
JUSTICE GUZMAN delivered the opinion of the Court.
CHIEF JUSTICE HECHT filed a concurring opinion.
The sovereign immunity doctrine prohibits suits against the government without the state’s
consent. Though rooted in the feudal fiction that the “king can do no wrong,” 1 modern
justifications for sovereign immunity are political, pecuniary, and pragmatic. 2 Among other
benefits, sovereign immunity maintains equilibrium among the branches of government by
honoring “the allocation of responsibility” for resolving disputes with the state. 3 The immunity
doctrine also protects the public coffers by deferring to the Legislature’s policy decisions about
1
Wasson Interests, Ltd. v. City of Jacksonville (Wasson I), 489 S.W.3d 427, 431 (Tex. 2016) (observing rationales
for sovereign immunity originated from the English legal fiction that “[t]he King can do no wrong” (quoting 1
WILLIAM BLACKSTONE, COMMENTARIES 246)).
2
See Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401, 413-16 (Tex. 1997) (Hecht, J., concurring) (exploring
considerations underlying modern justifications for sovereign immunity).
3
Id. at 416 (Hecht, J., concurring); see State v. Snyder, 18 S.W. 106, 109 (1886) (sovereign immunity is premised
on the conclusive presumption that, absent express waiver of immunity from suit, the state “fully recognizes every
just claim the citizen has against it, that in its own way it will do justice in reference thereto, and that it has ability to
do so”); Borden v. Houston, 2 Tex. 594, 611 (1847) (“sovereignty” and “coercion” are incompatible).
“when to allow tax resources to be shifted ‘away from their intended purposes toward defending
lawsuits and paying judgments.’” 4 But while the doctrine “shield[s] the public from the costs and
consequences of [the] improvident actions of their government,” 5 protecting the purse comes at
the expense of ensuring accountability under the law for the government’s breaches. 6 To facilitate
equipoise in the doctrine’s operation, “[t]he judiciary determines the applicability of immunity in
the first instance and delineates its boundaries,” but we defer to the Legislature to waive immunity
when it exists. 7
As an extension of sovereign immunity, governmental immunity protects political
subdivisions performing governmental functions as the state’s agent. 8 The issue of first impression
in this contract dispute is whether a municipally created economic development corporation is
entitled to immunity from suit as if it were a political subdivision of the state. The Texas
Development Corporation Act 9 authorizes political subdivisions to create nonprofit corporations
to undertake projects designed to spur economic growth and reduce unemployment, 10 but at the
same time expressly (1) denies those corporate entities status as political subdivisions and
(2) forbids authorizing municipalities from delegating any attributes of sovereignty to those
4
Brown & Gay Eng’g, Inc. v. Olivares, 461 S.W.3d 117, 121 (Tex. 2015) (quoting Tex. Nat. Res. Conservation
Comm’n v. IT-Davy, 74 S.W.3d 849, 854 (Tex. 2002) (plurality op.)).
5
Tooke v. City of Mexia, 197 S.W.3d 325, 332 (Tex. 2006).
6
See Brown & Gay Eng’g, 461 S.W.3d at 121 (sovereign immunity places the burden of shouldering the “costs
and consequences of improvident actions” on injured parties); see TEX. CONST. art. 1, § 13 (“All courts shall be open,
and every person for an injury done him, in his lands, goods, person or reputation, shall have remedy by due course
of law.”).
7
Wasson I, 489 S.W.3d at 435.
8
Ben Bolt–Palito Blanco Consol. Indep. Sch. Dist. v. Tex. Political Subdivisions Prop./Cas. Joint Self-Ins. Fund,
212 S.W.3d 320, 323-24 (Tex. 2006); Tooke, 197 S.W.3d at 343, 345.
9
TEX. LOC. GOV’T CODE §§ 501.001-507.202.
10
Id. §§ 501.004, .054(a).
2
entities. 11 Consistent with these express indicators of legislative intent and with the immunity
doctrine’s underlying purposes, we hold economic development corporations are not
governmental entities in their own right and therefore are not entitled to governmental immunity.
We accordingly affirm the court of appeals’ judgment denying the economic development
corporation’s plea to the jurisdiction.
I. Background
Rosenberg Development Corporation (RDC) is a Type B economic development
corporation created by the City of Rosenberg under the authority of the Development Corporation
Act (the Act). 12 RDC was incorporated “exclusively for the purposes of . . . promoting, assisting[,]
and enhancing economic and industrial development activities and . . . promot[ing] or develop[ing]
new or expanded business enterprises, including public facilities . . . .”
In March 2012, RDC executed a contract (Performance Agreement) with Imperial
Performing Arts, Inc. (Imperial), a nonprofit organization that promotes and produces performance
and visual art. RDC agreed to pay Imperial $500,000 to, among other things, (1) lease, renovate,
and reopen an arts center by the end of September 2012, (2) arrange to renovate and open a historic
theater by the end of 2014, and (3) promote RDC as an underwriter of six events at each facility.13
Under the contract’s terms, RDC’s board of directors retained sole discretion to grant an extension
of the opening date for each location, but permission could not be “unreasonably withheld.”
11
Id. §§ 501.010, .055(b).
12
Id. §§ 505.001–.355.
13
Imperial characterizes the payments as “‘seed money’ for its cultural and performing arts initiative in
Rosenberg, Texas.”
3
In accordance with the Performance Agreement, RDC paid Imperial $500,000 in two equal
payments. However, both projects turned out to be more time-consuming and expensive than
contemplated, with the theater requiring so much work that the “renovation” would effectively
require rebuilding at an alleged cost of up to $5 million over the course of up to five years. Despite
these challenges, Imperial completed and opened the arts center in November 2012 after receiving
an extension from RDC. But when Imperial asked RDC to extend the deadline to complete the
theater’s renovation and also to amend the Performance Agreement to allow Imperial to either
select or construct an alternative venue, RDC allegedly refused. Imperial ceased work on the
theater project in June 2014, and this legal dispute followed.
The litigation has a complicated procedural posture and involves myriad claims,
counterclaims, and third-party claims, 14 but the immunity issue on appeal is limited to Imperial’s
breach-of-contract and declaratory-judgment claims. The former asserts that RDC breached the
Performance Agreement by “unreasonably refusing to grant [Imperial] an extension,” while the
latter requests a declaration that the $500,000 RDC paid under the contract was an unconditional
and absolute grant of those funds to Imperial that need not be refunded.
Assuming its immunity from suit, RDC filed a plea to the jurisdiction arguing that
(1) Imperial’s consequential-damages claims are barred by section 271.153 of the Texas Local
Government Code; (2) Imperial failed to plead a valid waiver of governmental immunity because
the breach-of-contract immunity waiver in section 271.152 of the Local Government Code applies
14
Imperial initially asserted tort and declaratory-judgment claims against RDC and two of its directors. After
RDC sought discovery about Imperial’s expenditures, Imperial nonsuited its complaint. On the same day as the
nonsuit, but before the trial court signed a dismissal order, RDC filed counterclaims against Imperial and, alternatively,
asserted claims as an intervening counter-plaintiff against Imperial and several of its directors. Imperial then
reasserted its claims against RDC.
4
only to political subdivisions not economic development corporations; 15 (3) RDC is immune from
liability for damages under section 505.106 of the Local Government Code as to its performance
of governmental functions; and (4) RDC did not waive immunity from suit by asserting claims
against Imperial. The trial court granted the plea in part but denied it in most respects, allowing
Imperial’s breach-of-contract and declaratory-judgment claims to move forward. RDC appealed.
The court of appeals affirmed the trial court’s order denying RDC’s plea to the
jurisdiction. 16 As a preliminary matter, the court addressed sua sponte its jurisdiction over the
interlocutory appeal, holding RDC satisfied the statutory definition of “governmental unit” for
purposes of the interlocutory-appeal statute. 17 Then, because RDC’s appellate arguments assumed
its immunity from suit—a matter implicating subject-matter jurisdiction—the court considered sua
sponte whether RDC actually enjoys such immunity. 18
The court first determined that RDC, which is neither a state agency nor a political
subdivision, is not immune from suit under the common law. 19 The court then examined the
Development Corporation Act’s provision limiting liability for Type B economic development
corporations and held the Legislature did not purport to grant economic development corporations
immunity from suit for non-tort claims. 20 Section 505.106 of the Act provides:
15
See id. §§ 271.151(3) (defining “local governmental entity”), .152 (waiver of immunity from suit for certain
claims against a “local governmental entity”), .153 (limitation on amount and type of damages in an adjudication
against a “local governmental entity”), § 501.055(b) (“A corporation is not a political subdivision or a political
corporation for purposes of the laws of this state . . . .”).
16
526 S.W.3d 693, 709 (Tex. App.—Houston [14th Dist.] 2017).
17
Id. at 698-701.
18
Id. at 701.
19
Id. at 704-06.
20
Id. at 708-09.
5
(a) The following are not liable for damages arising from the performance of a
governmental function of a Type B corporation or the authorizing
municipality:
(1) the corporation;
(2) a director of the corporation;
(3) the municipality;
(4) a member of the governing body of the municipality; or
(5) an employee of the corporation or municipality.
(b) For purposes of Chapter 101, Civil Practice and Remedies Code, a Type B
corporation is a governmental unit and the corporation’s actions are
governmental functions. 21
Applying the statute’s plain language, the court held: (1) subsection (a) provides immunity only
from liability—not from suit—and only for claims arising from an economic development
corporation’s performance of governmental functions, and (2) subsection (b) “invoke[s] the
common law doctrine of governmental immunity” for economic development corporations, but
only for tort claims covered by the Texas Tort Claims Act, not the non-tort claims at issue here. 22
In so holding, the court distinguished cases from other Texas appellate courts RDC cited
as immunizing economic development corporations from liability or suit. 23 The court disapproved
of the analysis in Weir Bros., Inc. v. Longview Economic Development Corp., which affirmed a
judgment granting an economic development corporation’s jurisdictional plea on fraud, antitrust,
and breach-of-contract claims. 24 Though finding subject-matter jurisdiction lacking, the Weir
court only considered whether subsection (a) sheltered the corporation from liability, not immunity
21
TEX. LOC. GOV’T CODE § 505.106 (emphasis added); see id. § 504.107 (similar provision applicable to Type A
corporations).
22
526 S.W.3d at 708-09 (citing City of Leon Valley Econ. Dev. Corp. v. Little, 422 S.W.3d 37, 44 (Tex. App—
San Antonio 2013, no pet.).
23
Id. at 706-07.
24
373 S.W.3d 841, 843 (Tex. App.—Dallas 2012, no pet.) (applying a similarly worded liability limitation
applicable to Type A economic development corporations).
6
from suit. 25 Here, the lower court observed that treating immunity from liability as a jurisdictional
matter is erroneous because immunity from liability is an affirmative defense that is not a proper
basis for a jurisdictional plea. 26 The court of appeals also distinguished City of Weslaco v. Borne
as involving tort claims and thus invoking subsection (b) and its limitations, 27 which are
inapplicable to the non-tort claims at issue in this case. 28
We granted RDC’s petition for review to address whether economic development
corporations are governmental entities immune from suit.
II. Discussion
A. Economic Development Corporations
Economic development corporations are authorized under and subject to the Development
Corporation Act (Title 12, Subtitle C1 of the Local Government Code). 29 The Act authorizes
municipalities like the City of Rosenberg to form economic development corporations for the
limited purpose of promoting and developing enterprises that, in turn, promote and encourage
employment and the public welfare. 30 In adopting the Act, the Legislature found “the present and
prospective right to gainful employment and the general welfare of the people of this state” require
25
See id. at 846 (concluding the corporation was “immune from liability”).
26
526 S.W.3d at 707; accord State v. Lueck, 290 S.W.3d 876, 880 (Tex. 2009) (“[I]mmunity from liability is an
affirmative defense that cannot be raised by a plea to the jurisdiction.”).
27
210 S.W.3d 782, 788 n.1 (Tex. App.—Corpus Christi 2006, pet. denied).
28
526 S.W.3d at 707.
29
TEX. LOC. GOV’T CODE §§ 501.001–507.202. The Development Corporation Act defines “corporation” as any
corporation “organized under [the Act],” id. § 501.002(5), which includes “county alliance corporations” and
“spaceport development corporations,” id. §§ 506.001–.202, 507.001–.202. But only Type A and Type B
corporations are referred to as “economic development corporations.” E.g., Type A and B Economic Development
Corporations Overview, TEXAS COMPTROLLER, https://comptroller.texas.gov/economy/local/type-ab/index.php.
30
TEX. LOC. GOV’T CODE §§ 501.004(a)(6), .051(c).
7
these activities “as a public purpose.” 31 The Legislature has therefore determined that establishing
and funding economic development corporations is “in the public interest” and “serve[s] a public
purpose.” 32
Depending mainly on the size of the authorizing municipality, economic development
corporations are categorized as either Type A or Type B. 33 Each type is authorized to finance “one
or more projects” that may be funded, in part, by local taxes or the proceeds of revenue bonds. 34
“Projects” are delineated by the statute, but broadly defined. All economic development
corporations are authorized to undertake projects related to creating or retaining primary jobs, job
training, and improving infrastructure. 35 Type B corporations, like RDC, may also undertake
projects related to recreational or community facilities, affordable housing, water-supply facilities,
water-conservation programs, and airport facilities. 36
The corporations are specifically empowered to lease or sell a project, 37 donate property to
a higher-education institution, 38 issue bonds to defray the costs of a project, 39 and sue or defend a
suit in their corporate name. 40 However, economic development corporations may only incur
financial obligations that can be paid from bond proceeds, revenue realized from the lease or sale
31
Id. § 501.004(a)(1).
32
Id. § 501.004(a)(1), (4), (6).
33
Id. §§ 504.001–.002; 505.001–.002.
34
Id. §§ 501.151, .201, 504.251–.254, 505.251–.254, .302; see also TEXAS COMPTROLLER, BIENNIAL ECONOMIC
DEVELOPMENT CORPORATION REPORT 2016-2017, at 2, https://comptroller.texas.gov/transparency/reports/economic-
development-corporation/ (breaking down economic development corporations’ source of funds).
35
TEX. LOC. GOV’T CODE §§ 501.101-103.
36
Id. §§ 505.152-.154, 505.161.
37
Id. § 501.153.
38
Id. § 501.154.
39
Id. § 501.201.
40
Id. § 501.060.
8
of a project, revenue realized from a loan to finance or refinance a project, or money granted under
contract with a municipality. 41
The Development Corporation Act characterizes economic development corporations as
nonprofit corporate entities with “the powers, privileges, and functions of a nonprofit corporation,”
except to the extent of any conflict between the Act and the laws governing nonprofits. 42 Even
though the corporations are private entities, 43 the Legislature demands transparency with regard to
corporate endeavors by requiring compliance with the Texas Open Meetings Act and the Texas
Public Information Act. 44 And along with public oversight afforded under the open-government
laws, authorizing municipalities have some supervisory control over economic development
corporations. 45 Ultimately, however, “[a]ll of the powers of [the] corporation are vested in” the
corporation’s board of directors. 46
The Act does not speak to governmental immunity directly, but in section 505.106, the
Legislature has declared that (1) a Type B corporation is “not liable for damages arising from the
performance of a governmental function of a Type B corporation or the authorizing municipality,”
and (2) “[f]or purposes of Chapter 101, Civil Practice and Remedies Code, a Type B corporation
41
Id. § 501.008.
42
Id. §§ 501.053–.054.
43
See id. §§ 504.102, 505.102 (authorizing Type A and Type B corporations to “contract with another private
corporation” for certain purposes (emphasis added)).
44
Id. § 501.072.
45
See, e.g., id. § 501.054(b)(2) (with respect to projects, the corporation’s exercise of power is “subject to the
control of the governing body of the corporation’s authorizing unit”), .073 (“The corporation’s authorizing unit will
approve all programs and expenditures of a corporation and annually review any financial statements of the
corporation.”), .073(a) (the corporation’s authorizing unit may access the corporation’s records at any time).
46
Id. § 501.062(a). A Type B corporation’s seven-member board is appointed by the authorizing municipality;
none of the board members are required to be employees, officers, or members of the governing body and at least
three cannot be; and any member of the board of directors may be removed by the governing body without cause.
Id. §§ 505.051, .052.
9
is a governmental unit and the corporation’s actions are governmental functions.” 47 Notably,
however, an economic development corporation “is not a political subdivision or a political
corporation for purposes of the laws of this state . . . .” 48 And the Legislature has forbidden
authorizing municipalities from bestowing on the corporation any “attributes of sovereignty.” 49
B. Sovereign and Governmental Immunity
Sovereign immunity has long been described as one of the “attributes of sovereignty.” 50
Unless waived, sovereign immunity protects the state and its agencies from lawsuits for damages. 51
In Texas, the immunity doctrine has two aspects: (1) immunity from suit even when the
sovereign’s liability is not disputed and (2) immunity from liability even though the sovereign has
consented to the suit. 52 Immunity from suit recognizes the judiciary’s limited authority over its
sovereign creator and thus implicates the courts’ subject-matter jurisdiction to resolve a dispute
against the state. 53 In comparison, immunity from liability only protects the state from money
judgments, is not jurisdictional, and must be raised as an affirmative defense rather than by
47
Id. § 505.106.
48
Id. § 501.055(b).
49
Id. § 501.010 (“A unit may not delegate to a corporation any of the unit’s attributes of sovereignty, including
the power to tax, the power of eminent domain, and the police power.”).
50
See City of Galveston v. State, 217 S.W.3d 466, 477 (Tex. 2007) (noting states joining the federal system had
forfeited certain attributes of sovereignty, but not traditional immunity from private suits, “an inherent attribute of
sovereignty”); Wichita Falls State Hosp. v. Taylor, 106 S.W.3d 692, 695 (Tex. 2003) (describing sovereign immunity
from private suit without consent as “one of the attributes of sovereignty” (quoting The Federalist No. 81, at 487
(Alexander Hamilton) (Clinton Rossiter ed. 1961)); Herring v. Hous. Nat’l Exch. Bank, 269 S.W. 1031, 1032 (Tex.
1925) (describing immunity as “an attribute of sovereignty”); Bd. of Land Comm’rs v. Walling, Dallam 524, 526 (Tex.
1843) (“That it is one of the essential attributes of sovereignty not to be amenable to the suit of a private person without
its own consent has grown into a maxim, sanctioned as well by the laws of nations as the general sense and practice
of mankind.”).
51
E.g., Rusk State Hosp. v. Black, 392 S.W.3d 88, 93 (Tex. 2012).
52
See id.
53
Nazari v. State, 561 S.W.3d 495, 500 (Tex. 2018).
10
jurisdictional plea. 54 As a common-law doctrine, the judiciary determines whether immunity
exists in the first instance, and if it does, we defer to the Legislature to waive or abrogate it. 55
Political subdivisions of the state—such as counties, cities, and school districts—are not
sovereign entities, but under the governmental-immunity doctrine, 56 they share the state’s
immunity when performing governmental functions as the state’s agent. 57 Governmental
immunity applies to municipalities, like the City of Rosenberg, because they are quasi-public in
nature with powers “pertaining to the administration of general laws made to enforce the general
policy of the state.” 58 And when enforcing the state’s laws, municipalities “stand as does
sovereignty, whose agents they are.” 59 Unlike the state, however, municipalities can exercise their
broad powers in two different capacities: proprietary and governmental. 60 Because governmental
immunity extends “as far as the state’s [immunity] but no further,” no immunity exists for acts
performed in a proprietary, non-governmental capacity. 61
The threshold issue on appeal here is whether RDC—a municipality’s statutorily
authorized corporate creation—is immune from suit under the common law even though RDC is
neither a sovereign entity nor a political subdivision of the state. Though RDC claims both
54
Fort Worth Transp. Auth. v. Rodriguez, 547 S.W.3d 830, 840 (Tex. 2018); State v. Lueck, 290 S.W.3d 876, 880
(Tex. 2009).
55
Wasson I, 489 S.W.3d 427, 435 (Tex. 2016); Tooke v. City of Mexia, 197 S.W.3d 325, 332 (Tex. 2006).
56
Though the terms are often used interchangeably, sovereign immunity and governmental immunity protect
distinct entities. See, e.g., Wichita Falls State Hosp. v. Taylor, 106 S.W.3d 692, 694-95 & n.3 (Tex. 2003).
57
Wasson I, 489 S.W.3d at 429-30.
58
City of Galveston v. Posnainsky, 62 Tex. 118, 127-28 (1884).
59
Id. at 127.
60
Gates v. City of Dallas, 704 S.W.2d 737, 738 (Tex. 1986).
61
Wasson I, 489 S.W.3d at 430, 433-34 (proprietary acts “are not done as a branch of the state, but instead ‘for
the private advantage and benefit of the locality and its inhabitants’” (citations omitted)).
11
immunity from suit and immunity from liability, the latter is not properly before us on a plea to
the jurisdiction, and we do not consider it.
We also do not consider the existence vel non of RDC’s statutory immunity under the
Development Corporation Act because section 505.106 does not purport to grant immunity. More
specifically, subsection (a)’s plain terms only seek to limit an economic development corporation’s
liability for certain remedies—that is, “damages” arising from the corporation’s performance of
any governmental functions—without reference to the corporation’s “governmental status” or
“immunity.” 62 And subsection (b) merely imports the Texas Tort Claims Act’s limitations on
liability and damages. As we have observed, “the Tort Claims Act does not create sovereign
immunity[;] it provides a limited waiver of that immunity,” such that an entity may be sued and
damages had on the terms specified in the Tort Claims Act. 63 Because section 505.106 merely
purports to limit the remedies available when economic development corporations perform
governmental functions, we need not consider whether the Legislature can confer immunity by
statute or only waive it. 64
C. Interlocutory Appeal Jurisdiction
As a preliminary matter we must determine whether the interlocutory order denying RDC’s
plea to the jurisdiction is immediately appealable. Jurisdiction over interlocutory appeals is
62
TEX. LOC. GOV’T CODE § 505.106(a); see Fort Worth Transp. Auth. v. Rodriguez, 547 S.W.3d 830, 841 (Tex.
2018) (noting the Legislature did not purport to grant immunity to independent contractors under a similar statute that
caps contractors’ liability for performing governmental functions because “neither ‘governmental status’ nor
‘immunity’ appears in the statute”) (citing TEX. TRANSP. CODE § 452.056(d)); cf., e.g., Sharyland Water Supply Corp.
v. City of Alton, 354 S.W.3d 407, 423 (Tex. 2011) (distinguishing remedies at law, like money damages, from equitable
relief, like an injunction or specific performance).
63
Brown & Gay Eng’g, Inc. v. Olivares, 461 S.W.3d 117, 123 n.6 (Tex. 2015) (quoting Tex. Dep’t of Parks &
Wildlife v. Miranda, 133 S.W.3d 217, 224 (Tex. 2004)) (internal quotation marks omitted); see also TEX. LOC. GOV’T
CODE § 505.106(b).
64
See Rodriguez, 547 S.W.3d at 842 n.2 (reserving judgment on that issue); LTTS Charter Sch., Inc. v. C2 Constr.,
Inc., 342 S.W.3d 73, 78 n.44 (Tex. 2011) (same).
12
limited, 65 but section 51.014(a)(8) of the Texas Civil Practice and Remedies Code permits an
appeal from an interlocutory order granting or denying “a plea to the jurisdiction by a
governmental unit as that term is defined in Section 101.001” of the Texas Tort Claims Act. 66
Section 101.001’s definition of “governmental unit” does not include economic
development corporations by name or by reference to the Development Corporation Act.
Subsection (3)(D), however, broadly applies the governmental-unit label to any “institution,
agency, or organ of government the status and authority of which are derived from the Constitution
of Texas or from laws passed by the legislature under the constitution.” 67 The court of appeals
undertook an analysis of subsection (3)(D)’s definition as applied to economic development
corporations, 68 but we find it unnecessary to do so because section 505.106(b) of the Development
Corporation Act states that “[f]or purposes of Chapter 101, Civil Practice and Remedies Code [the
Texas Tort Claims Act], a Type B corporation is a governmental unit . . . .” 69 Because the
Legislature expressly expanded section 101.001’s governmental-unit definition to include
economic development corporations, RDC is a governmental unit for purposes of the interlocutory
appeal authorized by section 51.014(a)(8). 70
65
See TEX. CIV. PRAC. & REM. CODE § 51.014.
66
Id. § 51.014(a)(8) (citing id. § 101.001); see Univ. of the Incarnate Word v. Redus, 518 S.W.3d 905, 906 (Tex.
2017) (observing the term “governmental unit” for purposes of section 51.014(a)(8) has the same meaning as it does
in the Texas Tort Claims Act).
67
TEX. CIV. PRAC. & REM. CODE § 101.001(3)(D).
68
526 S.W.3d at 698-701.
69
TEX. LOC. GOV’T CODE § 505.106(b). A nearly identical provision applies to Type A corporations.
See id. § 504.107(b).
70
Until recently, this Court’s jurisdiction over most interlocutory appeals had been limited to those involving a
conflict or dissent. See Pidgeon v. Turner, 538 S.W.3d 73, 81 (Tex. 2017) (citing former TEX. GOV’T CODE
§ 22.225(c)). But for orders issued after September 1, 2017, the restraints on our interlocutory-appeal jurisdiction
have been lifted. See TEX. GOV’T CODE § 22.001, as amended by Act effective Sept. 1, 2017, 85th Leg. Ch. 150, § 1,
sec. 4(1), 2017 Tex. Gen. Laws 291, 292 (codified as TEX. GOV’T CODE § 22.001 et. seq.); see TEX. GOV’T CODE
§ 22.225, as amended by Act effective September 1, 2017, 85th Leg. Ch. 150, § 1, sec. 4(3), 2017 Tex. Gen. Laws
291, 292 (codified at TEX. GOV’T CODE § 22.225). We generally apply jurisdictional statutes as they exist at the time
13
D. Immunity from Suit
“[W]hether an entity is entitled to an interlocutory appeal and whether an entity has
sovereign immunity are separate questions with separate analytical frameworks.” 71 Accordingly,
we turn now to the main issue presented: whether a corporation organized and formed by a
municipality under the Development Corporation Act enjoys governmental immunity from suit as
an arm of the state. We begin by looking to the Act to determine whether the Legislature intended
such an entity to have discrete governmental-entity status separate and apart from its authorizing
municipality. 72 We conclude it did not.
An entity claiming governmental immunity must ordinarily be a political subdivision.
RDC is not. In the Development Corporation Act, the Legislature explicitly rejects an economic
development corporation’s political-subdivision status. 73 Taking the matter one step further, the
Legislature prohibits an authorizing municipality from delegating “any of [its] attributes of
sovereignty, including the power to tax, the power of eminent domain, and the police power” to
the corporation. 74
of our judgment, see Texas Mun. Power Agency Pub. Util. Comm’n of Tex., 253 S.W.3d 184, 198 (Tex. 2007),
“[b]ecause application of a new jurisdictional rule generally takes away no substantive right but simply impacts a
tribunal’s power to hear the case,” Univ. of Tex. Sw. Med. Ctr. v. Estate of Arancibia, 324 S.W.3d 544, 548 (Tex.
2010). We have jurisdiction over this appeal under the current jurisdictional statute and, to the extent a conflict would
have been required under the former statute, the jurisdictional analysis and disposition in Weir Bros., Inc. v. Longview
Economic Development Corp., 373 S.W.3d 841, 843 (Tex. App.—Dallas 2012, no pet.), conflicts with the court of
appeals’ holding in this case that dismissal on jurisdictional grounds is not appropriate on the basis of an entity’s
immunity from liability. See former TEX. GOV’T CODE § 22.225(c), (e).
71
Univ. of the Incarnate Word v. Redus, 518 S.W.3d 905, 911 (Tex. 2017).
72
Ben Bolt–Palito Blanco Consol. Indep. Sch. Dist. v. Tex. Political Subdivisions Prop./Cas. Joint Self-Ins. Fund,
212 S.W.3d 320, 324-25 (Tex. 2006) (examining various statutory provisions to determine whether statutorily
authorized governmental self-insurance fund’s “‘nature, purposes and powers’ demonstrate legislative intent that it
exist as a distinct governmental entity entitled to assert immunity in its own right for the performance of a
governmental function” (quoting Harris Cty. Flood Control Dist. v. Mann, 140 S.W.2d 1098, 1101 (Tex. 1940)).
73
TEX. LOC. GOV’T CODE § 501.055(b).
74
Id. § 501.010.
14
Nonetheless, “where the governing statutory authority demonstrates legislative intent to
grant an entity the ‘nature, purposes, and powers’ of an ‘arm of the State government,’ that entity
is a government unit unto itself” and is entitled to assert immunity in its own right as to the
performance of governmental functions. 75 In determining whether the Legislature intended
economic development corporations to exist as distinct governmental entities, we find analytical
guidance in Ben Bolt–Palito Blanco Consolidated Independent School District v. Texas Political
Subdivisions Property/Casualty Joint Self-Insurance Fund, which involved a self-insurance fund
composed of several political subdivisions. 76 We held the fund itself was a governmental entity
in its own right and was therefore entitled to immunity on equal footing with its constituent
members. 77
In so holding, we identified several indicia of legislative intent in the Texas Interlocal
Cooperation Act and the Texas Government Code’s self-insurance provisions. First, under the
Interlocal Cooperation Act’s special definitions, the fund was a “local government.” 78 That
enactment also “expressly authorized combinations of political subdivisions”—like the fund—“to
perform governmental functions and services,” which were defined as including “governmental
functions in which the contracting parties are mutually interested.” 79 We noted that local
governments have an interest in guarding against risk and the Legislature explicitly authorized
political subdivisions to combine to provide self-insurance and “use available money to finance a
75
Ben Bolt–Palito, 212 S.W.3d at 325-26.
76
Id. at 320.
77
Id. at 320, 326.
78
Id. at 324-25 (citing TEX. GOV’T CODE § 791.003(4)(A), (E)).
79
Id. at 324-25 (citing TEX. GOV’T CODE § 791.003(3)(N), (4)(E), .011(a)) (emphasis added).
15
self-insurance pool” “as a ‘public purpose’ of the governmental unit.” 80 Thus, although the fund
was simply a collection of other political subdivisions, the fund’s “nature, purposes, and powers”
demonstrated the Legislature’s intent that the fund exist as a distinct governmental entity. 81
The statutes in Ben Bolt–Palito are distinguishable in terms of the Legislature’s
characterization of the entity. While the self-insurance fund fell within the Interlocal Cooperation
Act’s definition of a local government, economic development corporations are described as
private, nonprofit corporations and empowered as such. 82 More significantly, the Legislature has
expressly denied economic development corporations significant governmental characteristics—
political-subdivision status and attributes of sovereignty. In a telling comparison, the Local
Government Code identifies another type of local economic-development initiative—the
“municipal management district”—as “a governmental agency, a body politic and corporate, and
a political subdivision of the State.” 83 The Development Corporation Act thus evinces clear
legislative intent that an economic development corporation is not an arm of state government.
Both RDC and amicus Midland Development Corporation direct us to other aspects of the
Development Corporation Act they assert bear contrary indicia. They point out that economic
development corporations are not “ordinary” nonprofits because they are subject to statutory
restrictions and requirements that do not generally apply to non-governmental organizations, such
as certain open-government requirements. But heavily regulating an entity does not equate to
conferring governmental-entity status. On this front, the statute is, at best, a “mixed bag,” but
80
Id. at 325.
81
Id. 325-26 & n.3.
82
See TEX. LOC. GOV’T CODE §§ 501.053, .054.
83
Id. § 375.004(a).
16
there is precious little in the statute to overcome the Legislature’s clear and express directives,
which are notably unique in and of themselves. 84
Although the Development Corporation Act describes promoting and developing business
enterprises and job training as public purposes, 85 merely engaging in an act that serves a public
purpose says nothing about the nature of the entity itself 86—as our opinion in Brown & Gay
Engineering, Inc. v. Olivares makes clear. 87 Serving public purposes, as many nonprofits and
public contractors do, does not ipso facto equate to status as a governmental entity for
governmental immunity purposes. By and large, the projects an economic development
corporation are authorized to pursue have a governmental flair, but not so uniquely or so
definitively that only a governmental entity would engage in those activities.
Our holding today does not imply that the Legislature could de facto grant an entity
immunity simply by designating it as a “governmental entity.” The common-law rule of immunity
is exclusively for the judiciary to define, and in doing so, we do not just consider whether the entity
performs governmental functions, but also the “nature and purposes of immunity.” 88 Aside from
the statutory indicators of legislative intent, granting immunity to economic development
84
Indeed, section 501.010 of the Act appears to be the only statute referring to sovereign attributes, one way or
the other, and the directness of section 501.005 in denying political-subdivision status is similarly unmatched
elsewhere.
85
Id. § 501.004(a).
86
An activity may constitute a governmental function for one type of political subdivision but not for another.
See Guillory v. Port of Houston Auth., 845 S.W.2d 812, 814-15 (Tex. 1993) (distinguishing water-improvement
districts from municipalities by focusing on “the creation of the governmental unit instead of its function,” and noting
the governmental function performed by the port authority, a political subdivision, might be a proprietary function if
performed by the municipality).
87
461 S.W.3d 117, 127 (Tex. 2015) (rejecting the private contractor’s contention that it was entitled to share in
the toll road authority’s sovereign immunity solely because the authority was statutorily authorized to engage the
contractor’s services and would have been immune had the authority performed those services itself).
88
Wasson I, 489 S.W.3d 427, 432 (Tex. 2016).
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corporations is not necessary to satisfy the political, pecuniary, and pragmatic policies underlying
our immunity doctrines. Governmental immunity benefits the public by preventing disruptions of
key governmental services, but economic development corporations are not tasked with
performing essential services. 89 Rather, these entities are authorized for the limited purpose of
promoting and developing enterprises to encourage employment and the public welfare. 90 And
while the immunity doctrine respects the separateness of the branches of government, the
Legislature expressly chose not to imbue economic development corporations with indicia of
status as a distinct governmental entity. The Legislature simply did not grant these entities “powers
of government” to perform essential governmental functions or activities.
Public fisc concerns likewise do not justify extending immunity from suit to economic
development corporations. Economic development corporations may (but are not required to)
fund projects using a percentage of local taxes, but even if the municipality elects to fund projects
by assessing a tax, “[s]overeign immunity has never been defended as a mechanism to avoid any
and all increases in public expenditures.” 91 Rather, sovereign immunity is “designed to guard
against the unforeseen expenditures associated with the government’s defending lawsuits and
paying judgments.” 92 Because an economic development corporation’s activities center on
89
Whether a governmental function is “essential” is usually specified by statute. See, e.g., TEX. HEALTH &
SAFETY CODE § 772.113 (“The [emergency communication] district [in certain counties] is a public body corporate
and politic, exercising public and essential governmental functions . . . .”); TEX. TRANSP. CODE § 452.052(a) (“[A
regional transportation] authority: (1) is a public political entity and corporate body; . . . and (3) exercises public and
essential governmental functions.”); TEX. WATER CODE § 67.0105(b) (“The furnishing of a water supply and fire
hydrant equipment by a governmental entity or a volunteer fire department directly or through another entity . . . is an
essential governmental function . . . .”). The Development Corporation Act contains no similar language.
90
See TEX. LOC. GOV’T CODE § 501.051(c) (“The specified public purpose must be limited to the promotion and
development under this subtitle of enterprises to promote and encourage employment and the public welfare.”).
91
Brown & Gay Eng’g, 461 S.W.3d at 123.
92
Id. (internal quotation marks omitted).
18
specific “projects” that have been designated in advance and memorialized by performance
agreements and because the statutory scheme itself contains provisions limiting liability and
financial exposure, 93 we perceive no genuine risk of unforeseen expenditures to be visited on the
government.
When evaluating the nature and purposes of immunity, we remain ever mindful that
“sovereign immunity places the burden of shouldering [the] costs and consequences [of
improvident actions] on injured individuals.” 94 Considering the Development Corporation Act as
a whole, we conclude that the Legislature did not authorize municipalities to create economic
development corporations as distinct governmental entities entitled to assert immunity in their own
right. We have suggested, but never held, that a non-governmental entity can share a political
subdivision’s immunity derivatively. 95 The circumstances under which derivative immunity might
exist are ill-defined in our jurisprudence, except to the extent we have held that the absence of any
governmental control over a private contractor’s work affirmatively precludes it. 96 Derivative
immunity is a distinct analytical inquiry that the parties have not briefed—and the record is not
developed on this point—so we do not consider it. We hold only that RDC does not independently
possess governmental immunity as an arm of the state.
III. Conclusion
Governmental immunity does not extend like ripples from a pebble tossed into a pond but,
instead, is limited to those entities acting as an arm of state government. Despite fulfilling public
93
See TEX. LOC. GOV’T CODE §§ 501.008 (limiting the incurrable financial obligations), 505.106 (limiting
liability).
94
Brown & Gay Eng’g, 461 S.W.3d at 121 (internal quotation marks and citation omitted).
95
Id. at 126.
96
Id.
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purposes, economic development corporations do not exist quite like an arm of the state
government, imbued with aspects of sovereignty such as immunity from suit. Moreover, the
fundamental purposes of governmental immunity do not countenance immunizing economic
development corporations like RDC from suit nor does the Development Corporation Act purport
to contemplate the same. We therefore affirm the court of appeals’ judgment.
_______________________________
Eva M. Guzman
Justice
OPINION DELIVERED: March 8, 2019
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