Opinion

Court: United States Bankruptcy Court, E.D. Tennessee
Filed: Mar 17, 2026
Cited by: 0 cases
Authority: More cited than 39.3%

holding that the third factor weighed towards governmental function because the State provided most of the necessary funding

How later courts described this case

holding that the third factor weighed towards governmental function because the State provided most of the necessary funding
acknowledging that “‘golf course’ is not among those governmental functions listed in” the TTCA
stating “when circumstances impose upon a party a duty to speak and the party remains silent, the silence itself can be a false representation” if the allegedly defrauded party “reasonably relied on the silence to his detriment”
joining other circuits that apply the plausibility test to standing issues

Written by the judges who cited it.

The opinion

IN THE UNITED STATES BANKRUPTCY COURT FOR THE

EASTERN DISTRICT OF TENNESSEE

In re

Case No. 3:24-bk-30748-SHB

BUILD BAYTOWN I, LLC Chapter 7

Debtor

BUILD BAYTOWN I, LLC

Plaintiff

v. Adv. Proc. No. 3:24-ap-03029-SHB

THE CITY OF BAYTOWN

Defendant

M E M O R A N D U M

APPEARANCES: LAPIN & LANDA, LLP

Robert E. Lapin, Esq.

500 Jefferson

Suite 2000

Houston, Texas 77002-7371

Attorneys for Plaintiff, Build Baytown I, LLC

HUSCH & BLACKWELL LLP

Ryan A. Burgett, Esq.

736 Georgia Avenue

Suite 300

Chattanooga, Tennessee 37402

Lynn Hamilton Butler, Esq.

111 Congress Avenue

Suite 1400

Austin, Texas 78701

Attorneys for Defendant, The City of Baytown

SUZANNE H. BAUKNIGHT

UNITED STATES BANKRUPTCY JUDGE

This adversary proceeding was commenced by the filing of the Original Complaint and

Request for Declaratory Relief (“Complaint”) on November 20, 2024 [Doc. 1]. Before the Court

is Defendant’s Motion to Dismiss (“Dismissal Motion”) and supporting brief (“City’s Brief”)

filed on December 23, 2024 [Docs. 9, 10], asking the Court to dismiss this adversary proceeding.

Defendant, the City of Baytown,1 argues that Plaintiff2 has failed to allege facts showing that the

City waived its governmental immunity or that Plaintiff is entitled to its requested relief so that

the Complaint should be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack

of subject-matter jurisdiction and/or Rule 12(b)(6) for failure to state a claim on which relief can

be granted. Plaintiff filed its response brief (“Response”) on January 10, 2025 [Doc. 19],

arguing that the Dismissal Motion should be denied because the Complaint properly states

claims for relief under all causes of action and, based on Defendant’s proprietary actions,

governmental immunity does not apply to bar Plaintiff’s causes of action or to prevent the Court

from assessing liability against Defendant under Texas law. [Id.] As authorized by E.D. Tenn.

LBR 7007-1(a), the City timely filed a Reply on January 15, 2025 [Doc. 20].

The bankruptcy case was converted from Chapter 11 to Chapter 7 on May 7, 2025. John

P. Newton, Jr., who was appointed as Chapter 7 Trustee, filed a Notice of his intention to pursue

this adversary proceeding on July 29, 2025 [Doc. 24], and the parties advised the Court at the

status conference held July 31, 2025, that they did not intend to supplement the Dismissal

Motion, Response, or Reply.3

1 The City of Baytown will be referred to hereinafter as “Defendant” or the “City.”

2 Build Baytown I, LLC, will be referred to hereinafter as “Plaintiff” or “BBI.”

3 Because the matter was fully briefed before conversion and Mr. Newton’s intervention in the case as Chapter 7

Trustee, for purposes of this memorandum, the plaintiff in this action remains Build Baytown I, LLC. Moving forward

in this adversary proceeding, however, the Chapter 7 Trustee must be substituted as the plaintiff.

I. BACKGROUND FACTS4

BBI is a limited liability company organized under Texas law, and Defendant is a

municipality located in Texas. [Stip. Facts at ¶¶ 2-3.] The parties entered into a Chapter 380

Program Agreement for Economic Development Incentives (“380 Agreement”) on March 18,

2022, under which the City provided BBI with a $6,000,000.00 grant plus the costs of certain

bonds (not to exceed $80,000.00) and a waiver of project-related fees for BBI to develop and

operate a public golf course and related amenities as specified in the Lease Agreement (“Lease”)

executed by the parties on April 20, 2022. [Doc. 1 at ¶ 11; Doc. 1-1; Doc. 9 at ¶¶ 3-4; Stip. Facts

at ¶¶ 15-18.] In the Lease, BBI agreed “to use and occupy the Property only for (a) a public golf

course and (b) . . . golf-related retail purposes” for a term of 480 months. [Doc. 1-2; Doc. 9 at ¶¶

3, 5; see also Stip. Facts at ¶¶ 15, 18-19.] BBI leased “just over 105 acres comprised of the site

of the City’s former Evergreen municipal golf course plus approximately 12.5 acres of adjoining

property for the purpose of developing and operating a public golf course as well as other golf-

related amenities and retail businesses.” [Doc. 1-1 at ¶ 11.] The Lease also “authorized cash

incentive payments for qualified project costs associated with BBI’s development of this

project[] and . . . granted BBI a contingent option to lease an additional 8.5 acres at the northern

end of the property for commercial, hospitality or multi-family residential property

development.” [Id.]

4 In addition to the facts stated in the Complaint, the Court detailed the parties’ relationship in its Memorandum and

Order entered on November 21, 2024, which resolved the City’s motion to transfer venue in the underlying bankruptcy

case. [Case No. 3:24-bk-30748-SHB, ECF No. 118.] As authorized by Federal Rule of Evidence 201, to the extent

that it provides the Court additional background in connection with this adversary proceeding, the Court takes judicial

notice of the parties’ Stipulation of Undisputed Facts filed in connection with the motion to transfer venue. [See Case

No. 3:24-bk-30748-SHB, ECF No. 100 at 2-5.] All references to the Stipulation of Undisputed Facts will be “Stip.

Facts at ¶ _” without further reference to the citation from the bankruptcy case.

BBI alleges the following additional facts in its Complaint:

12. The Chapter 380 Agreement and the Lease Agreement envisioned BBI and its

affiliate entities not simply redeveloping a golf course but, instead, creating a true

community-gathering experience for the citizens of the City of Baytown and

beyond which would serve as a catalyst for the kind of commercial development

growth envisioned by the City’s leadership. Toward that end, BBI associated one

of the country’s top golf architects to design a golf course which incorporated the

unique, patent-pending double loop “T-36” golf course design created by BBI’s

principals which resulted in a United States Golf Associated-rated 18-hole golf

course which utilized half the acreage required by traditional golf course designs,

making the course more environmentally-friendly and thereby unlocking the

remaining acreage for further commercial, hospitality or multi-family residential

development.

13. Pursuant to the Chapter 380 Agreement and Lease Agreement, BBI was granted

a 40-year lease of the property and BBI’s pro forma projections anticipated that

golf and related operations at the T36 at Baytown course would experience the

expected “ramp up” performance but would begin to turn a profit just 2-3 years into

the 40-year lease term. Moreover, by early-2024, BBI affiliates had worked with

architects to develop site plans for commercial development of the remaining

acreage which had generated interest from hotel operators and others which

portended a bright and successful future for the project.

14. On or about May 1, 2023, BBI’s affiliate, T36 Golf Holdings, LLC (“T36”)

entered into a Golf Facility Management Agreement (“the Management

Agreement”) with Troon Golf, L.L.C. (“Troon”), the world’s largest golf and golf-

related hospitality company, pursuant to which, in return for the payment of

management fees, payroll reimbursement, and expenses, Troon agreed to provide

operational and facility management of the golf course.

15. Notwithstanding BBI having overcome some costly delays and significant

challenges presented by several vendors and by the City, on December 13, 2023,

BBI opened the golf course under the name “T36 at Baytown” to rave reviews from

the City’s leadership and others.

. . . .

18. The City not only acknowledged BBI’s role in successfully furthering the City’s

economic development, it expanded BBI’s role when, in February of 2024, the

Baytown City Council voted 7-0 to proceed forward with Project Vector - a

strategic initiative designed to unlock the untapped potential of the City’s south

side by creating a hotel and a mixed-use project on land adjacent to the golf course

- all with BBI as the developer of these tracts of land.

. . . .

21. BBI did not look to or request from the City any of the additional funding

needed and, instead, pursued an avenue granted to BBI under the Lease Agreement;

namely, seeking the necessary bridge funding from an entity which would qualify

as a “Tenant Affiliate” under §10.1.2 of the Lease Agreement. Pursuant to §§ 10.1.1

and 10.1.2 of the Lease Agreement, BBI was permitted to transfer part of BBI’s

leasehold interest in the property to a qualifying Tenant Affiliate with notice to the

City in which case, in the event the City’s consent to the transfer was required, the

City had obligated itself in the Lease Agreement not to unreasonably withhold its

consent.

[Doc. 1 at 4-6; see also Stip. Facts at ¶¶ 18-19, 23, 26-27.] Improvements to the property

included a 17,800 square foot newly renovated clubhouse, a 5,000 square foot golf-cart storage

facility, and a 5,000 square foot maintenance facility. [Stip. Facts at ¶ 24.]

On April 2, 2024, the City provided BBI with a notice of default, demanding that BBI

produce information regarding its operations, outstanding projects at the golf course, and

outstanding debts and requesting documentation concerning the golf course and an accounting of

its use of the $6,000,000.00 grant. [Id. at ¶ 29.]

II. DISCUSSION

Under Federal Rule of Civil Procedure 12, made applicable to adversary proceedings by

Federal Rule of Bankruptcy Procedure 7012, “a party may assert the following defenses by

motion: (1) lack of subject-matter jurisdiction . . . [and] (6) failure to state a claim upon which

relief can be granted.” Fed. R. Civ. P. 12(b).

A. Lack of Subject Matter Jurisdiction Under Rule 12(b)(1)

Rule 12(b)(1) requires dismissal of a complaint for a “lack of subject-matter jurisdiction,”

which must be decided first because “the Rule 12(b)(6) challenge becomes moot if this [C]ourt

lacks subject matter jurisdiction.” Moir v. Greater Cleveland Reg’l Transit Auth., 895 F.2d 266,

269 (6th Cir. 1990). When subject matter jurisdiction is challenged under Rule 12(b)(1), the

plaintiff bears the burden to prove jurisdiction to survive the motion. Arnold v. Moore & Smith

Tree Care LLC, No. 25-5221, 2025 WL 3483272, at *2 (6th Cir. Oct. 6, 2025). Motions to

dismiss under Rule 12(b)(1) are based on either facial attacks related to the sufficiency of the

allegations or factual attacks under which there is no presumption of truthfulness applied to the

allegations. L.C. v. United States, 83 F.4th 534, 542 (6th Cir. 2023).

A facial attack addresses whether the complaint alleges a basis for subject matter

jurisdiction but does not challenge the facts alleged, requiring the court to accept the factual

allegations as true. Id. Facial attacks, therefore, are subject to the plausibility test set forth by the

Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). See Morgeson v.

Freeman, No. 1:23-cv-269, 2024 WL 1406105, at *5 n.6 (S.D. Ohio Apr. 2, 2024 (“The Court

acknowledges that Iqbal and Twombly are Rule 12(b)(6) cases, not Rule 12(b)(1) cases assessing

facial challenges to the Court’s subject-matter jurisdiction. But they provide the contours for

deciding what constitute the ‘reasonable inferences’ to which a complaint’s well-pleaded

allegations give rise. And that inquiry parallels the question the Court must decide in assessing

its subject-matter jurisdiction from the face of the complaint.” (citations omitted)); cf. Ass’n of

Am. Physicians & Surgeons v. U.S. Food & Drug Admin., 13 F.4th 531, 543-44 (6th Cir. 2021)

(joining other circuits that apply the plausibility test to standing issues).

Factual attacks, on the other hand, “‘challenge[] the factual existence of subject matter

jurisdiction’ . . . [and] ‘attack[] the factual allegations underlying the assertion of jurisdiction,

either through the filing of an answer or otherwise presenting competing facts.’” L.C., 83 F.4th at

542 (citations omitted). Further,

[w]hen adjudicating “a factual attack, a court has broad discretion with respect to

what evidence to consider in deciding whether subject matter jurisdiction exists,

including evidence outside of the pleadings, and has the power to weigh the

evidence and determine the effect of that evidence on the court’s authority to hear

the case.”

Id. (quoting Cartwright v. Garner, 751 F.3d 752, 759-60 (6th Cir. 2014)). An attack based on an

assertion of sovereign immunity can be either facial or factual. See L.C., 83 F.4th at 542.

The City expressly couches its Rule 12(b)(1) argument as a facial attack against the

jurisdictional allegations of the Complaint concerning the City’s immunity. [See Doc. 10 at ¶ 8

(acknowledging that the Court must take the allegations of the Complaint as true in its Rule

12(b)(1) analysis).] It asserts: “Plaintiff fails to allege facts showing the City waived its

governmental immunity as to the claims asserted in the complaint or to the damages requested”

[Doc. 9 at ¶ 2], and “the Court’s lack of subject-matter jurisdiction is evident from the face of the

pleadings and the exhibits incorporated into that pleading.” [Doc. 10 at ¶ 9.] More specifically,

the City argues:

Plaintiff fails to adequately plead factual allegations indicating the City’s immunity

is waived for the full extent of Plaintiff’s claims. The City acted in a governmental

capacity by contracting with Plaintiff to perform what Texas statutory and common

law expressly deem a governmental function – namely, operating recreational

facilities. Plaintiff’s claims for fraud and unjust enrichment are inadequately pled,

and claims for which no waiver of immunity exists under Texas law. Finally, even

to the extent a waiver of the City’s immunity from suit could be identified, Plaintiff

has failed to state any claim for which the City’s immunity from liability is waived.

[Id. at ¶ 35 (citation omitted).]

In summary, the City argues that the Complaint should be dismissed under Rule 12(b)(1)

because it, “as a governmental entity, is immune from both suit and liability for such claims [as

breach of contract, common-law fraud, unjust enrichment, and declaratory relief,]” and it has not

waived its immunity. [Id.at ¶ 12.] The City asserts that it is protected by immunity from suit for

breach of contract because it acted in its governmental, not proprietary, capacity when it entered

into the 380 Agreement. The City also asserts that it is immune from suit for intentional torts

under the Texas Tort Claims Act (“TTCA”) and that it, likewise, is immune from suit under the

5 The City’s brief contains two paragraphs numbered 3.

equitable theory of unjust enrichment and the Uniform Declaratory Judgement Act as codified in

Texas. Finally, the City asserts immunity from contract liability under the Texas Local

Government Code section 271.152.

In opposition, BBI argues that the City wrongly focused on waiver of sovereign

immunity rather than its applicability and that Texas law has clearly established that immunity

does not apply to cities acting in a proprietary rather than governmental capacity. [Doc. 19 at ¶¶

14-31.] In support of its argument, Plaintiff relies on League City v. Jimmy Changas, Inc., 670

S.W.3d 494 (Tex. 2023), in which the Texas Supreme Court directed courts to apply four factors

to analyze immunity in deciding whether a municipality was acting in a governmental or

proprietary capacity when it entered into a contract. Although the City asserted in its Reply that

“Plaintiff places excessive reliance on its misinterpretation of [Jimmy Changas],” [Doc. 20 at ¶

10], the City failed to address the factors. This Court, however, deems application of the factors

provided by the Texas Supreme Court to be dispositive of much of the Dismissal Motion.

As an initial matter, to “‘shield the public from the costs and consequences of

improvident actions of their governments,’ sovereign immunity generally bars claims against the

State and its agencies.” Jimmy Changas, Inc., 670 S.W.3d at 498-99. “Governmental immunity

encompasses the following two principles: (1) immunity from suit, which precludes a lawsuit

against the entity unless the Legislature has expressly consented to the suit, and (2) immunity

from liability, which precludes a judgment against the government even if the Legislature has

expressly consented to the suit.” City of Friendswood v. Horn, 489 S.W.3d 515, 522 (Tex. App.

2016) (citing City of Dallas v. Albert, 354 S.W.3d 368, 373 (Tex. 2011)). “If a governmental

entity is engaged in a proprietary function, immunity is unavailable; the governmental entity

may be sued and can be held liable to the same extent as a private entity or individual.” Id. at

523 (emphases added). This is true for any type of claim, as explained by the Texas Supreme

Court in Wasson Interests, Ltd. v. City of Jacksonville (Wasson I), 489 S.W.3d 427, 434 (Tex.

2016): “[A]cts performed as part of a city’s proprietary function do not implicate the state’s

immunity for the simple reason that they are not performed under the authority, or for the

benefit, of the sovereign.” Accordingly, treatment for cities and municipalities varies, depending

on whether the governmental entity was acting in a governmental or a proprietary capacity.

Municipal corporations often function in a governmental capacity on the State’s

behalf but at other times function as “a private corporation,” City of Tyler v. Ingram,

139 Tex. 600, 164 S.W.2d 516, 519 (1942), “for the private advantage and benefit

of the locality and its inhabitants.” Wasson I, 489 S.W.3d at 433. Because

“sovereign immunity is inherent in the State’s sovereignty,” municipalities “share

that protection when they act ‘as a branch’ of the State but not when they act ‘in a

proprietary, non-governmental capacity.’” Wasson Ints., Ltd. v. City of Jacksonville

(Wasson II), 559 S.W.3d 142, 146 (Tex. 2018) (quoting Wasson I, 489 S.W.3d at

430).

Jimmy Changas, 670 S.W.3d at 499.

Under long-standing Texas law, “[a] municipality is not immune from suit for torts

committed in performance of its proprietary functions.” Wasson II, 559 S.W.3d at 145 (quoting

Wasson I, 489 S.W.3d at 433). A municipality is immune from suit, however, “for torts

committed in the performance of its governmental functions.” Id. (quoting Wasson I, 489 S.W.3d

at 433)). The same is true for contracts or, indeed, for any type of claim: “If [a court]

determine[s] the action arose out of the municipality’s performance of a proprietary function,

then the case proceeds as if the claim were asserted against a private person.” Wheelabrator Air

Pollution Control, Inc. v. City of San Antonio, 489 S.W.3d 448, 451 (Tex. 2016) (citing Wasson

I, 489 S.W.3d at 431). The question the Court must answer is whether the City “was engaged in

a governmental or proprietary function when it entered into the [380 Agreement], not when it

allegedly breached that contract.” Wasson II, 559 S.W.3d at 149.

Concerning the governmental-proprietary dichotomy, the Texas Supreme Court directed

that “[i]f a particular activity is not included in the statutory list of governmental functions,

[courts] look to the general definitions under both the common law and the statute . . . ,

consider[ing] . . . four factors.” Jimmy Changas, 670 S.W.3d at 500. Thus, central to both

immunity from suit and from liability for any type of claim is whether the City was acting in its

governmental or proprietary capacity, and the Texas Supreme Court’s recent analysis of that

issue in Jimmy Changas governs the issues raised in the Dismissal Motion.

In Jimmy Changas, the Texas Supreme Court was asked to determine whether the trial

and appellate courts correctly decided that League City was acting in a proprietary capacity when

it entered into a chapter 380 agreement with Jimmy Changas, Inc. for the construction of a

restaurant in exchange for the city’s reimbursement of “capital-recovery fees for water and

wastewater services, all fees Jimmy Changas would pay to obtain plat approvals and building

permits, and a percentage of Jimmy Changas’s local-sales-tax payments based on the restaurant’s

total annual sales.” Jimmy Changas, 670 S.W.3d at 498. The chapter 380 agreement with

League City

recited that its purposes were “to promote state or local economic development and

to stimulate business and commercial activity in the City,” to “contribute to the

economic development of the City by generating employment and other economic

benefits to the City,” and to encourage Jimmy Changas to develop the property “in

a manner that establishes the area as a regional destination.”

Id.6 In evaluating the agreement, the court examined the differences between the types of

functions that a municipality would perform, i.e., proprietary functions or governmental

functions.

6 Under Texas law, which governs the parties’ 380 Agreement, the purpose of a chapter 380 agreement is to allow

“cities to provide ‘economic development’ incentives ‘to promote state or local economic development and to

stimulate business and commercial activity in the municipality.’” Jimmy Changas, 670 S.W.3d at 498 (quoting Tex.

Loc. Gov’t Code § 380.001(a)).

Under the common law, proprietary functions are those that a city performs

in its discretion primarily for the benefit of those within the corporate limits of the

municipality, and not as an arm of the government or a branch of the state or under

the authority, or for the benefit, of the sovereign. Proprietary functions can be, and

often are, provided by private persons.

Governmental functions under the common law are those that involve the

performance of purely governmental matters solely for the public benefit, are

normally performed by governmental units, and are performed as a branch of the

state – such as when a city exercises powers conferred on it for purposes essentially

public pertaining to the administration of general laws made to enforce the general

policy of the state.

. . . .

The Texas Constitution specifically authorizes the legislature to define

governmental and proprietary functions for all purposes. Exercising this authority,

the legislature has addressed the dichotomy for purposes of tort claims but not for

claims for breach of contract. Generally consistent with the common-law

descriptions, the Tort Claims Act defines proprietary functions as those functions

that a municipality may, in its discretion, perform in the interest of the inhabitants

of the municipality. Statutorily, proprietary functions include, but are not limited

to, the operation and maintenance of a public utility, amusements owned and

operated by the municipality, and any activity that is abnormally dangerous or

ultrahazardous.

By contrast, the Act defines governmental functions as those functions that

are enjoined on a municipality by law and are given it by the state as part of the

state’s sovereignty, to be exercised by the municipality in the interest of the general

public. In addition to this general definition, the Act includes a non-exclusive list

designating thirty-six specific activities as governmental functions, ranging from

police and fire protection and control to animal control.

Id. at 499–500 (citation modified).

Recognizing that the “statutory definitions and designations apply expressly to tort

claims,” the Texas Supreme Court reiterated that such definitions and designations “can also ‘aid

[an] inquiry’ when applying the dichotomy in the contract-claims context.” Id. at 500 (quoting

Wasson II, 559 S.W.3d at 147-48). Thus, if a city’s activity is not enumerated in the statutory

list detailing governmental functions, the courts must “look to the general definitions to

determine whether the activity is ‘governmental’ or ‘proprietary.’ Particularly in breach-of-

contract cases, [the courts] consider ‘both the statutory provisions and the common law in

determining whether a city’s contractual conduct is governmental or proprietary.’” Id. at 503

(quoting Wesson II, 559 S.W.3d at 150, 148).

After looking to “the general definitions under both the common law and the statute,” the

Texas Supreme Court espoused the following factors to be considered by courts when discerning

whether a city’s conduct is proprietary or governmental:

(1) whether the city’s act of entering into the contract was mandatory or

discretionary, (2) whether the contract was intended to benefit the general public or

the city’s residents, (3) whether the city was acting on the State’s behalf or its own

behalf when it entered the contract, and (4) whether the city’s act of entering into

the contract was sufficiently related to a governmental function to render the act

governmental even if it would otherwise have been proprietary.

Id. at 500 (citing Wasson II, 559 S.W.3d at 150).

In opposition to the Dismissal Motion, BBI argued that it sufficiently pleaded facts in the

Complaint to satisfy the Jimmy Changas factors for its claims. Specifically, Plaintiff argued that

the City’s decision to enter into the 380 Agreement (and the associated Lease) was discretionary,

not mandatory; that the City entered into the 380 Agreement primarily for its own citizens; that

the City was acting on its own behalf and not that of the State of Texas when it entered into the

380 Agreement, and that the City’s entering into the 380 Agreement was not related to any

governmental function. [See Doc. 19 at ¶¶ 24a.-d.]

Notably, the City did not address the Jimmy Changas factors in its opening brief. [See

Doc. 10.] Instead, it discussed the decision generally with respect to the Texas Supreme Court’s

statement that the definitions for a municipality’s functions under the TTCA are the starting

point for any immunity analysis. [Id. at ¶ 17.] It also cited Jimmy Changas for the proposition

that economic development activities underlying a chapter 380 agreement do not compel a

finding that a municipality has acted in a proprietary capacity, asserting that the Jimmy Changas

court noted that chapter 380 agreements may “embrace ‘many different municipal functions that

may otherwise be considered governmental.’” [Id. at ¶ 22 (quoting Jimmy Changas, Inc., 670

S.W.3d at 502 n.4).]

For its main argument that BBI failed to allege that the City waived its immunity, the

City relied on a decision from the Texas Court of Appeals predating Jimmy Changas by

approximately fourteen years. [Id. at ¶ 15 (citing City of Plano v. Homoky, 294 S.W.3d 809 (Tex.

App. 2009)).] In Homoky, a golfer who was injured while walking through the clubhouse sued

the city, which owned and operated the golf course, including the bar and grill located inside the

clubhouse. See Homoky, 294 S.W.3d. at 811. The suit sounded in tort, not contract, under a

theory of premises liability. See id. Noting that the golf course was in a city-owned park, the

court acknowledged that “golf course” is not listed as a governmental function in the TTCA. Id.

at 814 (citing Tex. Civ. Prac. & Rem. Code § 101.0215(a)). The court of appeals then analyzed

the statutory terms “parks and zoos” and “recreational facilities, including but not limited to

swimming pools, beaches, and marinas” and the broad construction of such terms by Texas

courts, including a 1960 case, State v. Merrill, 334 S.W.2d 423 (Tex. 1960). Id. at 814.

In Merrill, the Texas Supreme Court reviewed whether “park purposes” in a lease of

property to the state included the “privilege of horseback riding” in a state park such that the

state was obligated to promulgate rules and regulations governing horseback riding to ensure

protection of the lessor’s grazing rights in the land. See id. at 434-35. As part of the discussion

about “park purposes,” the court cited a 1936 Iowa case for the following proposition: “‘It is a

matter of common knowledge that ‘parks’ are used by the public generally for recreation through

many different games, such as tennis, pitching horse shoes, croquet, baseball, basketball, golf,

walking horseback riding, picknicking [sic], and general outdoor exercise.’” Id. at 434 (emphasis

added) (quoting Golf View Realty Co. v. Sioux City, 269 N.W. 451, 455 (Iowa 1936)).

The Homoky court concluded that a “municipal golf course offers the same purposes

described [in Merrill], including activities ‘associated with enjoying nature or the outdoors.’”

Homoky, 294 S.W.3d at 814 (quoting Tex. Civ. Prac. & Rem. Code § 75.001(3)(L)7).

Notwithstanding that operating a golf course is not expressly identified in the TTCA as a

governmental function, the City summarily concluded that the City performed a governmental

function when it contracted with Plaintiff. [Doc. 10 at ¶ 15 (citing Homoky, 294 S.W.3d at 814-

15).]

Given the distinctions between the golf course in a public park (i.e., city-operated) and

the claim at issue (i.e., premises liability) in Homoky versus here, the Court finds that Homoky is

distinguishable. Moreover, given the Texas Supreme Court’s recent directive that the TTCA

“classifications merely serve as ‘guidance in the contract-claims context,’” Jimmy Changas, 670

S.W.3d at 502, and that the proprietary-governmental dichotomy must be viewed through the

lens of the four factors when, as here,8 a particular activity is not included in the list of

governmental activities in the TTCA, the Court finds that the Homoky court’s conclusion that the

city’s operation of the golf course was a governmental function does not control the Court’s

determination here of whether the City acted in its governmental or proprietary capacity.

Remarkably, even after Plaintiff filed its Response, which extensively addressed the

Jimmy Changas factors, the City chose not to address those factors in its Reply, standing instead

7 Section 75.001 is part of the Texas Recreational Use Statute, which governs the liability of a city as a premises owner

if a plaintiff engages in recreation on the premises. Homoky, 294 S.W.3d at 813.

8 Owning or operating a golf course is not identified as a governmental function in the TTCA. See Homoky, 294

S.W.3d at 814 (acknowledging that “‘golf course’ is not among those governmental functions listed in” the TTCA).

on the Homoky conclusion about the golf course at issue in that case. [Doc. 20 at ¶¶ 9, 16, 20.]

The City focused on the fact that the Jimmy Changas court did not hold that every chapter 380

agreement involves a proprietary function. [Id. at ¶¶ 14, 18.] The City argued simply that the

Texas Supreme Court noted that “it is the purpose of the underlying agreement, not simply the

fact that an agreement was made, that determines whether a proprietary or governmental function

is implicated.” [Id. at ¶ 10.]

The City also argued that its position is supported by the discussion in the Jimmy

Changas decision of the court of appeals’ decision in CHW-Lattas Creek, L.P. v. City of Alice,

565 S.W.3d 779 (Tex. App. 2018). Specifically, the City argued that although the supreme court

reversed the court of appeals holding that the chapter 380 agreement in the CHW-Lattas Creek

case involved a governmental function, “it did not disagree with that court’s ultimate conclusion

that the Chapter 380 agreement nevertheless involved other governmental functions and that the

City of Alice was therefore ‘engaged in a governmental function when it entered into [the

Chapter 380 agreement] at issue in that case.’” [Doc. 20 at ¶ 19 (quoting Jimmy Changas, 670

S.W.3d at 502 n.4).] A closer examination of the supreme court’s discussion of CHW-Lattas and

that case reveals the fallacy of the City’s argument here.

In Jimmy Changas, the city argued that the chapter 380 agreement fell into the statutory

list of governmental functions in the TTCA, which includes “community development or urban

renewal activities undertaken by municipalities and authorized under Chapters 373 and 374,

Local Government Code.” Jimmy Changas, 670 S.W.3d at 501 (citation omitted). While

acknowledging that the city’s agreement did not fall under chapters 373 or 374, but under

chapter 380, the city relied on the court of appeals’ decision in CHW-Lattas Creek. See id. The

supreme court expressly disagreed with the court of appeals’ stretching of the TTCA categories

to cover chapter 380 agreements relating to community development activities. The court,

however, did not find faulty the ultimate conclusion of the court of appeals that the city had

engaged in a governmental function, saying,

Even if that contract did not fall within subsection (a)(34)’s description, it

concerned many different municipal functions that may otherwise be considered

governmental, including “street construction and design,” “sanitary and storm

sewers,” “waterworks,” “parks and zoos,” “civic, convention centers, or

coliseums,” and “recreational facilities, including but not limited to swimming

pools, beaches, and marinas.”

Id. at 502 n.4 (emphasis added) (citation omitted).

The chapter 380 agreement in CHW-Lattas Creek provided that the city would “construct

a multi-use complex, including but not limited to an outdoor amphitheater, an Aquatic Center [as

defined in the agreement] and a conference center, and w[ould] facilitate the construction of a

hotel within said 40 acres.” CHW-Lattas Creek, 565 S.W.3d at 782-83. The CHW-Lattas Creek

chapter 380 agreement also included functions that may be considered governmental under the

four factors that summarize both the common law and the statutory definitions. Notably, the

ultimate ruling in the CHW-Lattas Creek decision was not before the supreme court; the court

merely rejected the CHW-Lattas Creek analysis because League City had relied on the faulty

holding that chapter 380 agreements fall within the governmental function of community-

development activities under other chapters of the Texas Local Government Code. Thus, the

Court does not find persuasive the Texas Supreme Court’s failure to overturn the conclusion in

CHW-Lattas Creek that that particular chapter 380 agreement involved governmental functions.

Keeping in mind the party-presentation principle,9 given the City’s facial attack under

Rule 12(b)(1), the Court must accept as true the allegations of the Complaint. Those allegations

9 As explained by the Sixth Circuit in In Re Chrysler Pacifica Fire Recall Products Liability Litigation, 143 F.4th 718,

725–26 (6th Cir. 2025) (citation modified):

must be reviewed in light of the Jimmy Changas factors to determine whether BBI has alleged

that the City acted in a proprietary capacity in its dealings with BBI. As it relates to immunity

and the Jimmy Changas factors generally, the Complaint includes the following allegations:

7. The City was acting in its proprietary capacity – as opposed to its governmental

capacity – when it entered into the Chapter 380 Program Agreement for Economic

Development Initiatives and Lease Agreement with BBI discussed below.

8. The City’s decision to enter into the Chapter 380 Agreement was a discretionary

act and the agreement was intended to primarily benefit the residents of the City;

therefore, the City was acting on its own behalf when it entered into the agreement.

Moreover, the City’s act of entering into the agreement was not sufficiently related

to a governmental function to render the act governmental even if it would

otherwise have been proprietary. Hence, the doctrine of sovereign immunity does

not apply here and does not deprive this Court of subject matter jurisdiction over

any of the claims asserted herein. See City of League City v. Jimmy Changas, Inc.,

670 S.W.3d 494 (Tex. 2023).

9. The City therefore has no immunity from suit or liability in connection with any

of the claims asserted by BBI against the City herein.

[Doc. 1 at 2.]

BBI also incorporated into the Complaint by reference the 380 Agreement, which

contains the following:

WHEREAS, the CITY is authorized by . . . the Texas Constitution and Chapter

380 . . . to establish programs, including programs for making grants of public

resources, to promote state or local economic development and to stimulate

business and commercial activity in Baytown; and

WHEREAS, the CITY finds that the PROJECT will constitute a major economic

investment for Evergreen Park, and the CITY recognizes the positive economic

impact the PROJECT will have on the City and the surrounding community and

voluntarily desires to facilitate the success of the PROJECT; and

In our adversarial system, we follow the principle of party presentation, which means that we rely

on the parties to frame the issues for decision and assign to courts the role of neutral arbiter of

matters the parties present. A court transcends its limited role as neutral arbiter in this system if it

proceeds to act as a self-directed board of legal inquiry and decide issues that the parties never

presented. Indeed, our adversarial system is designed around the premise that the parties know what

is best for them and are responsible for advancing the facts and arguments entitling them to relief.

That is why courts in our system may not sally forth each day looking for wrongs to right but must

instead exist as passive instruments of government.

WHEREAS, the CITY has determined that a conditional and collateralized lease

of the LAND and a separate grant of public funds to incentivize the PROJECT will

(1) serve the public purposes of promoting local economic development, (ii)

encourage, stimulate and enhance significant new economic investment and

commercial activity in Evergreen Park in a controlled and responsible way, and

(iii) develop or expand local and state commerce; and

. . .

WHEREAS, the CITY desires to enter into this AGREEMENT with

DEVELOPER to implement the economic development program described herein

. . . ; and

WHEREAS, the Parties agree the provisions of this AGREEMENT substantially

advance a legitimate interest of CITY by expanding CITY’s tax base, increasing

employment reducing underemployment and stimulating economic development . .

. .

[Doc. 1-1 at 1-2 (emphases added).] These provisions of the 380 Agreement illustrate that the

Jimmy Changas factors lean heavily toward a conclusion that the City acted in its proprietary

capacity with BBI, and for purposes of the Dismissal Motion, they constitute sufficient

allegations that the City acted in a proprietary, not governmental, capacity.

1. Factor One: Discretionary Activity

The first factor, “discretionary activity,” considers whether the City’s “act of entering

into the contract was mandatory or discretionary.” Jimmy Changas, 670 S.W.3d at 504. Under

chapter 380, a municipality “‘may establish and provide for the administration of one or more

programs . . . to promote state or local economic development and to stimulate business and

commercial activity in the municipality.’” Id. (quoting Tex. Loc. Gov’t Code § 380.001(a)). As

pointed out by the Texas Supreme Court, the statutory language itself does not require a

municipality “to use public funds to promote economic development or to stimulate local

business.” Id.

The Complaint alleges – and the parties have stipulated – that they entered into the 380

Agreement. [Doc. 1 at ¶ 11; Doc. 1-1; Doc. 9 at ¶¶ 3-4; Stip. Facts at ¶¶ 15-17.] The Complaint

also includes an allegation that “[Defendant’s] decision to enter into the Chapter 380 Agreement

was a discretionary act.” [Doc. 1 at 1 ¶ 8.] Further, the 380 Agreement states expressly that the

City “voluntarily desires” to engage in the project. [Doc. 1-1 at 1 (emphasis added).]

This factor, as alleged by BBI, weighs in favor of the City having acted in its proprietary

capacity.

2. Factor Two: Primarily for the Benefit of City Residents

Concerning the second factor, the Texas Supreme Court explained: “Under the common

law, the[] [second] factor distinguishes a municipal corporation’s local purpose to serve its

residents from those it may perform ‘as the agent of the state in furtherance of general law for the

interest of the public at large.’” Jimmy Changas, 670 S.W.3d at 504 (citation omitted). The

chapter 380 agreement in Jimmy Changas stated that its purposes were to “‘stimulate business

and commercial activity in the City,’ to ‘contribute to the economic development of the City by

generating employment and other economic benefits to the City,’ ‘to encourage [Jimmy

Changas] to develop the [restaurant] in a manner that establishes the area as a regional

destination,’ to ‘promote local economic development,’ and to ‘raise funds for the city budget.’”

Id. (alteration in original).

Similarly, here, the City stated its recognition that the project:

• would have a “positive economic impact” “on the City and the surrounding

community,”

• would “serve the public purposes of promoting local economic development”

while encouraging, stimulating, and enhancing “significant new economic

investment and commercial activity in Evergreen Park,10” and

• was to advance the City’s legitimate interest in “expanding CITY’s tax base,

increasing employment, reducing underemployment, and stimulating economic

development.”

[Doc. 1-1 at 1-2 (emphases added).]

In discussing this second factor, the Jimmy Changas court rejected the city’s argument

that it intended to benefit the state and all of its citizens because the chapter 380 agreement there,

like here, confirms that the city entered into it “primarily for the benefit of those within the

corporate limits of the municipality.” Jimmy Changas, 670 S.W.3d at 504-04 (quoting Wasson II,

559 S.W.3d at 151). The 380 Agreement confirms the City’s intent to have a positive impact on

the City and surrounding communities. As in Jimmy Changas, this second factor weighs in favor

of a proprietary function.

3. Factor Three: Acting on the City’s Own Behalf

Like the second factor, the third factor considers whether the City was acting on its own

behalf or that of the state. Id. at 505. “This factor further distinguishes between acts a city

chooses to perform ‘in its private capacity’ to benefit its residents from those ‘sovereign’ acts it

is required to perform as an ‘arm or agent of the state in the exercise of a strictly governmental

function solely for the public benefit.’” Id. (citation omitted). The Texas Supreme Court

explained in rejecting the city’s argument that its intent was for state-wide economic

improvements:

10 Evergreen Park is the public park owned by the City for which BBI and the City contracted for the golf course to

be built and operated on the site of a previous municipal golf course. [Doc. 1-1 at 1.]

We have recognized that when the first and second factors both indicate that a city

entered into a contract as a proprietary function – that is, it entered into the contract

as a matter of its own discretion and did so primarily to benefit its own residents –

then the city was likely acting on its own behalf, at least absent some clear

indication to the contrary. See Wasson II, 559 S.W.3d at 152. Nevertheless, even

when a city exercises its own discretion to enter a contract, it may be acting on the

State’s behalf when, for example, the State provides funding or other support for

the city’s efforts. See, e.g., Hays St. Bridge Restoration Grp. v. City of San Antonio,

570 S.W.3d 697, 706 (Tex. 2019) (holding that the third factor weighed towards

governmental function because the State provided most of the necessary funding).

Id.

Here, the Complaint alleges that the 380 Agreement “was intended to primarily benefit

the residents of the City; therefore, the City was acting on its own behalf when it entered into the

agreement.” [Doc. 1 at 1 ¶ 8.] Plaintiff also alleges the following: