Kansas City Southern and the Texas Mexican Railway Company v. Port of Corpus Christi Authority of Nueces County, Texas

NUMBER 13-09-00212-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI - EDINBURG

KANSAS CITY SOUTHERN AND THE

TEXAS MEXICAN RAILWAY COMPANY, Appellants,

v.

PORT OF CORPUS CHRISTI AUTHORITY

OF NUECES COUNTY, TEXAS, Appellee.

On appeal from the 319th District Court

of Nueces County, Texas.

O P I N I O N

Before Chief Justice Valdez and Justices Rodriguez and Garza

Opinion by Justice Garza

This is an appeal from a final judgment granting an application for temporary

injunction and a motion to stay arbitration. Appellants, Kansas City Southern ("KCS") and

the Texas Mexican Railway Company ("Tex Mex"), contend that the trial court erred in

granting the application and motion filed by appellee, the Port of Corpus Christi Authority

of Nueces County, Texas ("PoCCA"). By four issues, KCS and Tex Mex argue that: (1)

the trial court erred by failing to issue additional and amended findings of fact and

conclusions of law; (2) PoCCA's sovereign immunity has been waived by certain provisions

of the Texas Local Government Code and Texas Water Code; (3) the claims at issue are

covered by binding arbitration agreements; and (4) PoCCA waived its sovereign immunity

as to attorney's fees by filing a declaratory judgment action. We affirm.

I. Background

The underlying dispute arose from PoCCA's demolition of the Tule Lake Lift Bridge,

a moveable road and rail bridge built in the 1950s that connected the north and south sides

of the ship channel servicing the Port of Corpus Christi. In 1960, Tex Mex and two other

common carrier railroads entered into an agreement with the City of Corpus Christi,

Nueces County, and Nueces County Navigation District No. 1. That agreement, entitled

"Primary Agreement," provided in part that the various rail carriers would operate and

maintain the rail facilities at the Port on an annually rotating basis. In exchange, the

navigation district (1) would provide the rail carriers with free and equal access to the Port's

facilities, including the Tule Lake Lift Bridge, without charge. The 1960 Primary Agreement

did not contain an arbitration clause.

Subsequently, in 1997, the rail carriers entered into additional agreements with

PoCCA, including a "Joint Operating Agreement" which created the Port of Corpus Christi

Railroad Association in order to provide what PoCCA describes as "an economical

common carrier switching service through a third-party contractor selected by [PoCCA]."

The Joint Operating Agreement included a promise by PoCCA to provide to the rail carriers

"equal rights and privileges . . . of joint use and operations over the Tule Lake Lift Bridge

and railroad trackage located thereon without payment of any rental or fee." The Joint

Operating Agreement also stated in part that maintenance of the Tule Lake Lift Bridge

would be provided by Nueces County and maintenance of the railroad trackage located on

the bridge would be provided by PoCCA.

Another agreement, entitled the "Second Corpus Christi Joint Track Agreement,"

was executed in 1997 in order to define the rights and responsibilities of the various rail

carriers with respect to the Port facilities. In particular, this agreement defined which

parties would have control of operations and were responsible for maintenance with

respect to portions of track located on Port property known as the "Savage Lane Line" and

the "MoPac Connection." The Joint Track Agreement provided, in part, that Tex Mex would

"at all times" have management rights and control of operations over "SL-3" and "SL-4,"

referring to segments of the Savage Lane Line precisely defined in the agreement. This

agreement also provided in part that "[m]aintenance of . . . [t]hat portion of SL-2 [another

defined segment of the Savage Lane Line] outside [Union Pacific's] right-of-way, SL-3, [the

PoCCA]-owned portion of [MoPac Connection] . . . [and] SL-4 shall be performed by Tex

Mex."

Both the 1997 Joint Operating Agreement and the 1997 Joint Track Agreement

included broad arbitration clauses. The Joint Operating Agreement provided:

In the event any disagreement shall arise between any two or more of the

parties hereto as to the meaning of any provision hereof, or as to any matter

arising under this agreement . . . or in the event any such disagreement shall

arise between any of the parties hereto on the one hand and [PoCCA] on the

other hand, then, upon the written request of any party involved on either

side of such disagreement, the matter in controversy shall be submitted to

three disinterested arbitrators . . . to be appointed as hereinafter provided.

The Joint Track Agreement stated:

In case any disagreement shall arise between two or more of the parties

hereto relative to the construction or interpretation of any part of this

agreement, or concerning the observance or performance of any of its terms

or conditions, or as to any other matter of dispute arising under this

agreement, then such question shall be submitted to the arbitrament of

persons . . . to be chosen as follows . . . .

By the 1990s, the Tule Lake Lift Bridge had become antiquated and was in such a

state of disrepair that PoCCA determined "it was dangerous, no longer functional and

should be replaced." (2) In order to preserve the rail carriers' access to the north side of the

ship channel, PoCCA constructed the Joe Fulton International Trade Corridor (the "Fulton

Corridor"), which consisted in part of rail trackage extending the full length of the north side

of the ship channel, thereby linking the south and north sides of the ship channel by

circumventing the channel altogether. The Fulton Corridor trackage was put into service

in 2007. Subsequently, PoCCA removed the span of the Tule Lake Lift Bridge, and on

April 11, 2008, it demolished the remaining lifting towers.

On September 26, 2008, KCS (3) sent a letter to PoCCA demanding arbitration of

claims arising from the failure to maintain and the eventual demolition of the Tule Lake Lift

Bridge. Specifically, KCS asserted that the Port breached the 1960 and 1997 agreements

by failing to properly maintain the bridge and its trackage and by failing to provide free,

open, and equal access to the bridge for as long as Tex Mex desired. KCS would later

argue that it suffered "direct damages" as a result of the bridge's removal, in that: (1) it

must now "travel a long circuitous route" to gain access to the Port's Joint Yard and

Common Interchange Yard, causing "additional direct expenses for added fuel, locomotive

use and crew time"; and (2) in order to get to the north side of the Port, it must now use

tracks belonging to Union Pacific and must pay trackage fees to Union Pacific for such use.

In response to the arbitration demand, PoCCA filed an application for temporary

injunction and motion to stay arbitration with the trial court on October 22, 2008. See Tex.

Civ. Prac. & Rem. Code Ann. § 171.023 (a) (Vernon 2005) (providing that "[a] court may

stay an arbitration commenced or threatened on application and a showing that there is

not an agreement to arbitrate"). In its petition, PoCCA sought injunctive and declaratory

relief, contending that there is no arbitrable dispute for the following reasons: (1) there was

no arbitration clause in the 1960 Primary Agreement; (2) KCS was not a party to either the

Primary Agreement or the 1997 Joint Operating Agreement; (3) PoCCA was not

responsible for maintenance of the Tule Lake Lift Bridge under the Joint Operating

Agreement; (4) the Joint Operating Agreement "does not provide for arbitration of a dispute

related to the removal" of the bridge; and (5) PoCCA "is immune from suit or arbitration"

under the principle of sovereign immunity.

On November 11, 2008, KCS answered, arguing in part that: (1) PoCCA was

obligated under the Joint Operating Agreement to provide free and equal access to the

bridge and to maintain the trackage on the bridge; (2) the question of whether the dispute

arose under the 1997 Joint Operating Agreement is for the arbitrators to decide; and (3)

PoCCA's sovereign immunity has been waived pursuant to chapter 271 of the Texas Local

Government Code. See Tex. Loc. Gov't Code Ann. §§ 271.151 -.160 (Vernon 2005 &

Supp. 2009) (waiving immunity for certain breach of contract claims against local

government entities). KCS also filed a counterclaim seeking: (1) a declaration that its

claims are not barred by immunity; (2) an order compelling arbitration of KCS's claims; and

(3) attorney's fees and costs of court. See Tex. Civ. Prac. & Rem. Code Ann. § 37.004 (a)

(Vernon 2008). KCS specifically asserted in its counterclaim that by initiating the action

in the trial court, PoCCA waived any sovereign immunity it may have otherwise enjoyed.

After a hearing, the trial court rendered its final judgment on March 10, 2009,

granting all relief requested by PoCCA, including an injunction staying the arbitration

proceedings and a declaration that PoCCA's immunity had not been waived. (4)

Subsequently, in response to a request by KCS, the trial court entered findings of fact and

conclusions of law, providing in relevant part as follows:

The claims which [KCS] and [Tex Mex] sought to arbitrate are not within the

scope of the arbitration provision in the 1997 Agreements.

. . . .

Neither KCS nor Tex-Mex provided "goods or services" to [PoCCA] under

any contract between KCS or Tex-Mex and [PoCCA] as that term is used in

[section 271.151 of the local government code].

. . . .

[PoCCA] is immune from suit, including the allegations of KCS/Tex Mex in

their Counterclaim against [PoCCA] and those allegations in the KCS/Tex-Mex demand for arbitration of September 26, 2008, based upon the doctrine

of [sovereign] immunity.

. . . .

[PoCCA] did not waive its immunity from suit by filing its "Petition for

Declaratory Relief, Application for Temporary Restraining Order and

Injunctive Relief."

. . . .

[PoCCA] did not waive [sovereign] immunity from suit by entering into a

written contract with KCS or Tex-Mex as alleged in Defendants' Plea to the

Jurisdiction, Original Answer and Counterclaim.

. . . .

In addition, the damages KCS/Tex-Mex are claiming in their demand for

arbitration and/or counterclaim are not the type of damages which can be

recovered under [section] 271.153 [of the local government code].

KCS filed a request for additional and amended findings of fact and conclusions of

law on April 27, 2009; however, the trial court did not issue any additional or amended

findings or conclusions. This appeal followed.

II. Discussion

A. Trial Court's Failure to Issue Additional and Amended Findings of Fact and

Conclusions of Law

By its first issue, KCS argues that the trial court erred by failing to issue additional

and amended findings of fact and conclusions of law in response to its request.

Specifically, KCS contends that the original findings of fact and conclusions of law

rendered by the trial court "are conclusory and omit findings and conclusions on many

specific issues necessary for a proper appellate review of the district court's judgment" and

that KCS was "harmed in effective presentation of their appeal by the conclusory and

incomplete nature" of the original findings and conclusions.

In its brief on appeal, KCS does not direct this Court to any case law, rule, or statute

indicating that the trial court was somehow obligated to enter findings of fact or conclusions

of law more detailed or comprehensive than those which were originally issued.

Accordingly, without considering the merits of this issue, we conclude that it has been

inadequately briefed and therefore waived. See Tex. R. App. P. 38.1(i) ("The [appellant's]

brief must contain a clear and concise argument for the contentions made, with appropriate

citations to authorities and to the record."). KCS's first issue is overruled.

B. Sovereign Immunity (5)

By its second issue, KCS argues that PoCCA's sovereign immunity has been

waived pursuant to chapter 271 of the local government code and chapter 49 of the water

code. By its fourth issue, KCS contends that PoCCA waived its immunity as to KCS's

attorney's fees by initiating the underlying declaratory judgment action. We consider these

issues together.

Before we do, however, we must address KCS's preliminary contention that,

assuming the underlying claims are covered by the arbitration agreements, the issue of

whether PoCCA is immune to suit should be decided in arbitration. Neither party has

directed us to any authority, and we have found none, discussing whether arbitration itself

is the proper forum to address whether the immunity of an arbitration respondent has been

waived. We conclude that it is the judiciary's primary responsibility to decide whether an

arbitration respondent's immunity has been waived. Sovereign immunity is jurisdictional

in nature. See, e.g., Reata Constr. Corp. v. City of Dallas , 197 S.W.3d 371, 379 (Tex.

2006) (op. on reh'g); Mo. Pac. R.R. Co. v. Brownsville Navigation Dist. , 453 S.W.2d 812,

814 (Tex. 1970). Therefore, if PoCCA's immunity has not been waived, not only would the

trial court lack jurisdiction to adjudicate KCS's claims, but it would also lack jurisdiction to

either compel PoCCA to participate in arbitration or to enforce any arbitration award

entered against PoCCA. See Town of Highland Park v. Iron Crow Constr., Inc. , 168

S.W.3d 313, 317 (Tex. App.-Dallas 2005, no pet.) (noting that sovereign immunity is

implicated where a private party sought a declaratory judgment compelling defendant city

to arbitration). In other words, if a party is immune to a suit alleging a particular claim, it

is also immune to the judicial enforcement of any arbitration award based upon that same

claim. Just as it is the judiciary's proper role to determine whether a claim is covered by

an arbitration agreement, see Tex. Civ. Prac. & Rem. Code Ann. § 171.021 (b) (Vernon

2005), it is similarly the primary function of the courts to determine whether a government

defendant retains immunity as to any arbitration award. (6) Accordingly, we reject KCS's

argument that the immunity issue should be submitted to arbitration; instead, we conclude

that the question was properly addressed in the trial court.

1. Applicable Law and Standard of Review

In Texas, sovereign immunity has two components: (1) immunity from liability,

which bars enforcement of a judgment against a governmental entity, and (2) immunity

from suit, which bars suit against the entity altogether. Tooke v. City of Mexia , 197 S.W.3d

325, 332 (Tex. 2006). Immunity from liability is an affirmative defense that must be

pleaded, or else is waived. Kinnear v. Tex. Comm'n on Human Rights , 14 S.W.3d 299,

300 (Tex. 2000). By entering into a contract, a governmental entity necessarily waives

immunity from liability, voluntarily binding itself like any other party to the terms of the

agreement. Tooke , 197 S.W.3d at 332 . However, the act of entering into a contract does

not waive immunity from suit; instead, we defer to the legislature to waive immunity from

suit because this allows the legislature to protect its policymaking function. Id. This is

particularly true in the context of contract claims, where "legislative control over sovereign

immunity allows the legislature to respond to changing conditions and revise existing

agreements if doing so would benefit the public." Id. (quoting Tex. Natural Res.

Conservation Comm'n v. IT-Davy , 74 S.W.3d 849, 854 (Tex. 2002)); see Catalina Dev. Inc.

v. County of El Paso , 121 S.W.3d 704, 705-06 (Tex. 2003). Accordingly, sovereign

immunity from suit may be waived only by "clear and unambiguous" statutory language.

Tooke , 197 S.W.3d at 329, 332-33 ; see Tex. Gov't Code Ann. § 311.034 (Vernon Supp.

2009) ("In order to preserve the legislature's interest in managing state fiscal matters

through the appropriations process, a statute shall not be construed as a waiver of

sovereign immunity unless the waiver is effected by clear and unambiguous language.").

Neither party disputes the fact that PoCCA's immunity from liability was waived by

its entering into the 1960 and 1997 agreements with the various rail carriers; accordingly,

we are only concerned with PoCCA's immunity from suit. Immunity from suit deprives a

court of subject matter jurisdiction. Tex. Dep't of Parks & Wildlife v. Miranda , 133 S.W.3d

217, 224 (Tex. 2004); Sweeny Cmty. Hosp. v. Mendez , 226 S.W.3d 584, 589 (Tex.

App.-Houston [1st Dist.] 2007, no pet.). Whether the trial court has subject matter

jurisdiction is a question of law that we review de novo. See Miranda , 133 S.W.3d at 226 ;

IT-Davy , 74 S.W.3d at 855 .

2. Water Code Chapter 49

KCS first asserts that section 49.066(a) of the Texas Water Code serves to waive

PoCCA's sovereign immunity. See Tex. Water Code Ann. § 49.066 (a) (Vernon 2008).

We disagree. Section 49.066(a) provides specifically that:

A district may sue and be sued in the courts of this state in the name of the

district by and through its board. A suit for contract damages may be

brought against a district only on a written contract of the district approved

by the district's board. All courts shall take judicial notice of the creation of

the district and of its boundaries.

Id.

As the Texas Supreme Court explained in Tooke v. City of Mexia , dozens of Texas

statutes provide that various government entities may "sue and (or) be sued," "(im)plead

and (or) be impleaded," "prosecute and defend," "defend or be defended," "answer and be

answered," "complain and (or) defend," or some combination of these phrases. 197

S.W.3d at 328, 347-55 (providing a partial listing of such statutes). However, such words

"do not, in and of themselves, waive immunity from suit." Id. at 328-29. Instead, the effect

of a "sue and be sued" clause in an organic statute depends on the context in which it is

used. Id. at 337. The words can mean that immunity is waived, but they can also mean

only that a governmental entity, like others, has the capacity to sue and be sued in its own

name. Id.

Since Tooke , all courts of appeal that have considered the "sue or be sued"

language in section 49.066 have concluded that the language does not waive immunity.

See Boyer, Inc. v. Trinity River Auth. of Tex. , 279 S.W.3d 354, 358 (Tex. App.-Fort Worth

2008, pet. denied); Clear Lake City Water Auth. v. Friendswood Dev. Co. , 256 S.W.3d 735,

744 (Tex. App.-Houston [14th Dist.] 2008, pet. dism'd); Bexar Metro. Water Dist. v. Educ.

& Econ. Dev. Joint Venture , 220 S.W.3d 25, 29-32 (Tex. App.-San Antonio 2006, pet.

dism'd); see also Valley Mun. Util. Dist. No. 2 v. Rancho Viejo, Inc. , No. 13-07-545-CV ,

2008 Tex. App. LEXIS 1109 , at *9-11 (Tex. App.-Corpus Christi Feb. 14, 2008, no pet.)

(mem. op.). KCS has not offered any reason why this Court should stray from this

precedent. Accordingly, we conclude that PoCCA's immunity from suit has not been

waived by section 49.066 of the Texas Water Code. (7)

3. Local Government Code Chapter 271

KCS next contends that PoCCA's immunity from suit has been waived by the

provisions of subchapter I of chapter 271 of the Texas Local Government Code. See Tex.

Loc. Gov't Code Ann. §§ 271.151 -.160. Section 271.152 provides:

A local governmental entity that is authorized by statute or the constitution

to enter into a contract and that enters into a contract subject to this

subchapter waives sovereign immunity to suit for the purpose of adjudicating

a claim for breach of the contract, subject to the terms and conditions of this

subchapter.

Id. § 271.152. A "contract subject to this subchapter" is defined as "a written contract

stating the essential terms of the agreement for providing goods or services to the local

governmental entity that is properly executed on behalf of the local governmental entity."

Id. § 271.151(2). (8)

On appeal, KCS and PoCCA center their arguments on whether the 1997 Joint

Operating Agreement called for KCS to provide "goods or services" to PoCCA such that

the agreement qualifies as a "contract subject to this subchapter" under section

271.151(2). See id. This particular dispute turns on the interpretation of the Texas

Supreme Court's opinion in Ben Bolt-Palito Blanco Consolidated Independent School

District v. Texas Political Subdivisions Property/Casualty Joint Self-Insurance Fund , 212

S.W.3d 320 (Tex. 2006). (9)

However, even assuming that the 1997 Joint Operating

Agreement was a "contract subject to this subchapter" under section 271.151(2), PoCCA's

immunity has not been waived because the damages that KCS seeks are not of the type

recoverable under the statute.

For immunity to be waived under section 271.152, the claimant must plead damages

that are recoverable under section 271.153. See Tooke , 197 S.W.3d at 346 (holding that

defendant city's immunity was not waived because plaintiffs sought only lost profits, which

are consequential damages that are not recoverable under section 271.153); City of Alton

v. Sharyland Water Supply Corp. , 277 S.W.3d 132, 145-46 (Tex. App.-Corpus Christi

2009, pet. filed) (op. on reh'g); City of Houston v. S. Elec. Servs. , 273 S.W.3d 739, 744

(Tex. App.-Houston [1st Dist.] 2008, pet. denied) (noting that "[s]ection 271.153 does not

retract the privilege granted in [s]ection 271.152 to adjudicate the claim for breach, if a

plaintiff alleges facts to support such a claim and seeks recovery only of damages to the

extent allowed " (emphasis added)); Judson Indep. Sch. Dist. v. ABC/Associated Benefit

Consultants, Inc. , 244 S.W.3d 617, 621 (Tex. App.-San Antonio 2008, no pet.); but cf. City

of Mesquite v. PKG Contracting, Inc. , 263 S.W.3d 444, 448 (Tex. App.-Dallas 2008, pet.

filed) (noting that "statutory limitations on [plaintiff]'s recoverable damages [in section

271.153] do not deprive the trial court of subject matter jurisdiction to adjudicate [plaintiff]'s

breach of contract claims"). Section 271.153 states:

(a) The total amount of money awarded in an adjudication brought

against a local governmental entity for breach of a contract subject to

this subchapter is limited to the following:

(1) the balance due and owed by the local governmental entity

under the contract as it may have been amended, including

any amount owed as compensation for the increased cost to

perform the work as a direct result of owner-caused delays or

acceleration;

(2) the amount owed for change orders or additional work the

contractor is directed to perform by a local governmental entity

in connection with the contract; and

(3) interest as allowed by law.

(b) Damages awarded in an adjudication brought against a local

governmental entity arising under a contract subject to this subchapter

may not include:

(1) consequential damages, except as expressly allowed under

Subsection (a)(1);

(2) exemplary damages; or

(3) damages for unabsorbed home office overhead.

Tex. Loc. Gov't Code Ann. § 271.153 . Consequential damages are defined as "'those

damages which result naturally, but not necessarily,' from the defendant's wrongful acts."

Baylor Univ. v. Sonnichsen , 221 S.W.3d 632, 636 (Tex. 2007) (quoting Henry S. Miller Co.

v. Bynum , 836 S.W.2d 160, 163 (Tex. 1992) (Phillips, C.J., concurring)). Direct damages,

on the other hand, compensate for the loss that is the necessary and usual result of the act.

Id. (citing Arthur Andersen & Co. v. Perry Equip. Corp. , 945 S.W.2d 812, 816 (Tex. 1997)).

Here, KCS asserts that PoCCA's allegedly unfulfilled promise to maintain, operate,

and provide free and open access to the Tule Lake Lift Bridge represents a "balance due

and owed [by PoCCA to KCS] under the contract." See Tex. Loc. Gov't Code Ann. §

271.153 . We disagree. The only promises alleged to have been made by PoCCA in the

contracts at issue were to provide certain services to KCS and other rail carriers. Any

failure to fulfill those promises would not be, strictly speaking, directly remediable by money

damages. Moreover, the agreements did not provide that any monetary compensation such

as liquidated damages would be owed to an aggrieved party in the event of a material

breach. The damages that KCS claims are, at most, "natural[] but not necessar[]y" results

of PoCCA's alleged wrongful acts. See Sonnichsen , 221 S.W.3d at 636 . We therefore

conclude that, even if KCS's underlying factual allegations are taken as true, there is no

"balance due and owed" to KCS under any of the agreements. See Tex. Loc. Gov't Code

Ann. § 271.153 ; City of Alton , 277 S.W.3d at 146 . Accordingly, PoCCA's sovereign

immunity from suit has not been clearly and unambiguously waived by section 271.152 of

the local government code. See Tooke , 197 S.W.3d at 346 ; City of Alton , 277 S.W.3d at

145-46 ; City of Houston , 273 S.W.3d at 744 ; Judson Indep. Sch. Dist. , 244 S.W.3d at 621 .

KCS's second issue is overruled. (10)

4. Declaratory Judgment Action

By its fourth issue, KCS argues that, by filing the underlying declaratory judgment

action, PoCCA waived its sovereign immunity from suit with respect to KCS's attorney's

fees.

As noted, when a state entity contracts with a private party, it waives immunity from

liability but not from suit. Tooke , 197 S.W.3d at 332 . However, when a governmental entity

initiates suit against a private party, it waives immunity from suit with regard to any claims

that are "germane to, connected to, and properly defensive to the [governmental entity]'s

claims, to the extent [the private party]'s claims offset those asserted by the [governmental

entity]." Reata Constr. Corp. , 197 S.W.3d at 378. In Reata , a property owner sued a

government contractor and subcontractor for negligence. Id. at 373. The subcontractor

filed a third-party claim against the City of Dallas ("the City"), which issued the contract. Id.

Before answering the third-party claim, the City intervened in the case, asserting negligence

claims against the contractor and subcontractor. Id. The City also filed a plea to the

jurisdiction asserting sovereign immunity from suit, which the trial court granted. Id. The

court of appeals reversed the trial court's decision, finding that when a governmental entity

intervenes in a suit, "immunity still forecloses suit against that governmental entity." City of

Dallas v. Reata Constr. Corp. , 83 S.W.3d 392, 399 (Tex. App.-Dallas 2002), rev'd , 197

S.W.3d 371 . The Texas Supreme Court disagreed, noting that:

Once it asserts affirmative claims for monetary recovery, the City must

participate in the litigation process as an ordinary litigant, save for the

limitation that the City continues to have immunity from affirmative damage

claims against it for monetary relief exceeding amounts necessary to offset

the City's claims.

Reata Constr. Corp. , 197 S.W.3d at 377 (11) ; see Kinnear , 14 S.W.3d at 300 (finding immunity

from suit waived when private party sought attorney's fees as a consequence of a suit

brought by the State); TML Intergovernmental Employee Benefits Pool v. Prudential Ins. Co.

of Am. , 144 S.W.3d 600, 607 (Tex. App.-Austin 2004, pet. denied) (concluding that when

government entity brought a declaratory judgment action against a private party, "it waived

immunity from suit as to [the private party]'s request for attorney's fees under the same

statute").

PoCCA argues that it did not request attorney's fees in its petition for declaratory

relief and, therefore, that it did not waive any immunity from suit by filing the petition.

However, in its original petition, PoCCA asked for declaratory and injunctive relief as well

as "[s]uch other and further relief to which [PoCCA] may show itself to be justly entitled."

Under the Uniform Declaratory Judgments Act ("UDJA"), "[s]uch other and further relief"

arguably includes court costs and attorney's fees. See Tex. Civ. Prac. & Rem. Code Ann.

§ 37.009 (Vernon 2008) ("In any proceeding under this chapter, the court may award costs

and reasonable and necessary attorney's fees as are equitable and just."); see also

Barshop v. Medina County Underground Water Conservation Dist. , 925 S.W.2d 618, 637

(Tex. 1996) (noting that, under the UDJA, a party need not prevail on the merits in order to

be awarded attorney's fees).

Regardless of whether PoCCA's request for "[s]uch other and further relief"

constitutes an implicit request for attorney's fees, we nevertheless conclude that PoCCA

retained its immunity from suit because the trial court ultimately declined to award any such

fees to PoCCA. As noted, even when a governmental entity initiates suit, as PoCCA did

here, it retains immunity from affirmative claims against it for monetary relief exceeding

amounts necessary to offset the governmental entity's claims. Reata Constr. Corp. , 197

S.W.3d at 377. Here, even though the trial court had jurisdiction to award costs and

attorney's fees to PoCCA, the final judgment reflects that the trial court declined to do so. (12)

Because the trial court awarded no costs, fees, or other monetary relief to PoCCA, there

is no amount of monetary relief that could have been awarded to KCS that would have

merely "offset" PoCCA's claims. See id. at 378.

KCS's fourth issue is overruled.

III. Conclusion

We affirm the judgment of the trial court.

DORI CONTRERAS GARZA,

Justice

Delivered and filed the

10th day of December, 2009.

1. In 1981, Nueces County Navigation District No. 1 was renamed by the legislature as the Port of

Corpus Christi Authority of Nueces County, Texas.

2. According to KCS, the primary motivation for PoCCA to remove the Tule Lake Lift Bridge was the

fact that large oil tankers could not easily pass through the bridge's relatively narrow opening. To support this

contention, KCS points to a 2007 presentation by PoCCA to its governing commission supporting removal of

the bridge, in which a large oil tanker's passage through the bridge opening is likened to "[t]hreading the eye

of the needle." PoCCA denies that the accommodation of large oil tankers was a reason for the bridge's

removal.

3. Tex Mex became a wholly-owned subsidiary of KCS on January 1, 2005. In 2006, the federal

Surface Transportation Board approved Tex Mex's assignment of its trackage and operating rights to KCS.

Appellants will be collectively referred to as "KCS" unless otherwise indicated.

4. The final judgment also stated that "all claims for relief not expressly granted are hereby denied."

5. The terms sovereign immunity and governmental immunity, although often used interchangeably,

involve two distinct concepts:

Sovereign immunity refers to the State's immunity from suit and liability. In addition to

protecting the State from liability, it also protects the various divisions of state government,

including agencies, boards, hospitals, and universities. Governmental immunity, on the other

hand, protects political subdivisions of the State, including counties, cities, and school

districts.

Wichita Falls State Hosp. v. Taylor , 106 S.W.3d 692, 694 (Tex. 2003) (internal citations omitted). For ease

of reference, we will use the term "sovereign immunity" to refer to both sovereign immunity and governmental

immunity. See Reata Constr. Corp. v. City of Dallas , 197 S.W.3d 371 , 374 n.1 (Tex. 2006) (op. on reh'g).

6. Of course, had PoCCA chosen to participate in arbitration in response to KCS's demand, PoCCA

could have simply asserted its sovereign immunity defense in that forum. In such a situation, there would be

nothing preventing the arbitrators from dismissing KCS's claim if they determined that PoCCA's immunity has

not been waived. In other words, although courts have the primary responsibility for determining whether an

arbitration respondent's immunity has been waived, there is nothing preventing arbitrators from exercising that

responsibility if the matter is never brought to a court for consideration.

7. Even if section 49.066 were to be construed as an effective waiver of sovereign immunity, it is

doubtful that such a waiver would apply to PoCCA, because chapter 49 explicitly states that it does not apply

to "any navigation district or port authority created under general or special law." Tex. Water Code Ann. §

49.001 (a) (Vernon 2008).

8. Both parties agree that PoCCA is a "local governmental entity" as defined in the statute. See Tex.

Loc. Gov't Code Ann. § 271.151 (3) (Vernon 2005).

9. In Ben Bolt , the supreme court considered whether chapter 271 had waived the immunity of a state-sponsored self-insurance fund (the "Fund") when one of the Fund's members, a school district (the "District"),

sued the Fund after the Fund denied a claim for benefits under the District's insurance policy. Ben Bolt-Palito

Blanco Consol. Indep. Sch. Dist. v. Tex. Political Subdivisions Prop./Cas. Joint Self-Ins. Fund , 212 S.W.3d

320, 322 (Tex. 2006). The Fund argued, as PoCCA does here, that the contract at issue is not a "contract

subject to this subchapter" because it does not call for goods or services to be provided to the Fund. Id. at

327 . The supreme court disagreed, noting that the Fund's members, including the District, "elect a governing

board, and a board subcommittee resolves claims disputes. To that extent, at least, the Fund's members

provide services to the Fund." Id. The Court then concluded:

Because the Fund is a "local government entity" as defined by Section 271.151(3) and "was

authorized . . . to enter" and did in fact enter into "a written contract stating the essential

terms of the agreement for providing [insurance] services to [a] local governmental entity,"

which agreement was properly executed, Tex. Loc. Gov't Code § 271.151(2), we conclude

that the statutory waiver applies to this insurance-coverage dispute.

Id. at 328 (brackets and ellipsis in original).

According to KCS and at least one other court of appeals, the Ben Bolt decision represents a very

broad construction of section 271.151(2), under which the provision of any goods or services to the local

government entity makes the contract "subject to this subchapter," regardless of whether that provision of

goods or services bears any relation to the underlying dispute. See Clear Lake City Water Auth. v.

Friendswood Dev. Co. , 256 S.W.3d 735, 749-50 (Tex. App.-Houston [14th Dist.] 2008, pet. dism'd). This

interpretation of Ben Bolt assumes that the Court's conclusion rested on the fact that the school district

"elect[s] a governing board" for the Fund, thereby providing a "service" that brought the contract at issue under

the purview of chapter 271.

On the other hand, as PoCCA notes, the Ben Bolt Court appears to state that its decision instead

rested on the fact that the Fund provided "[insurance] services" to the District under the contract at issue.

Because the contract at issue called for "[insurance] services" to be provided "to [a] local government entity,"

the Court reasoned, then the Fund's immunity had been waived for the underlying insurance coverage dispute.

See Ben Bolt , 212 S.W.3d at 328 (brackets in original). This interpretation suggests that the Ben Bolt Court

employed a much narrower construction of section 271.151(2). Moreover, as PoCCA notes, it would only

apply if both parties to a contract are local government entities, which is not the case here.

In any event, we need not resolve this ambiguity because, even assuming that the 1997 Joint

Operating Agreement is a "contract subject to this subchapter," see Tex. Loc. Gov't Code Ann. § 271.151 (2),

PoCCA's immunity has not been waived with respect to KCS's claims for the reasons set forth herein.

10. Because we find that PoCCA's immunity from suit has not been clearly and unambiguously waived

with respect to KCS's claims regarding the Tule Lake Lift Bridge, it follows that PoCCA would be immune to

the enforcement of any arbitration award based upon those claims. Accordingly, we need not address KCS's

third issue arguing that its claims are in fact covered by the arbitration agreements entered into by the parties.

See Tex. R. App. P. 47.1.

11. The Reata Court recognized that the public policy underlying the immunity doctrine includes

protection of the legislature's role in managing fiscal affairs through the appropriations process. Reata Constr.

Corp. , 197 S.W.3d at 375. Nevertheless, the Court justified its decision by noting:

[I]f the governmental entity interjects itself into or chooses to engage in litigation to assert

affirmative claims for monetary damages, the entity will presumably have made a decision

to expend resources to pay litigation costs. If the opposing party's claims can operate only

as an offset to reduce the government's recovery, no tax resources will be called upon to pay

a judgment, and the fiscal planning of the governmental entity should not be disrupted.

Therefore, a determination that a governmental entity's immunity from suit does not extend

to a situation where the entity has filed suit is consistent with the policy issues involved with

immunity.

Id.

12. See supra n.4.