# the United Healthcare Choice Plus Plan for City of Austin Employees and the City of Austin v. Charles Lesniak

> Texas Court of Appeals, 3rd District (Austin) · July 15, 2015

URL: https://www.frixlaw.com/law-library/cases/4069870

## Case

- **Court:** Texas Court of Appeals, 3rd District (Austin)
- **Decided:** July 15, 2015
- **Precedential status:** Published
- **Opinion:** Opinion
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

ACCEPTED
03-15-00309-CV
6070665
THIRD COURT OF APPEALS
AUSTIN, TEXAS
7/15/2015 9:39:20 AM
JEFFREY D. KYLE
CLERK
No. 03-15-00309-CV
________________________________________________________________
FILED IN
3rd COURT OF APPEALS
IN THE THIRD COURT OF APPEALS AUSTIN, TEXAS
IN AUSTIN, TEXAS 7/15/2015 9:39:20 AM
____________________ JEFFREY D. KYLE
Clerk

City of Austin and The United Healthcare Choice Plus Plan
for City of Austin Employees

Appellants,
v.

Charles Lesniak

Appellee
____________________

On Appeal From the 419th District Court,
Travis County, Texas
____________________

APPELLEE BRIEF
____________________

James C. Plummer (16075700)
Amar Raval (24046682)
Plummer | Raval
4203 Montrose Blvd., Suite 270
Houston, TX 77006
(713) 522-2887
(713) 522-3605 Fax
jplummer@plummerlawyers.com
araval@plummerlawyers.com

COUNSEL FOR APPELLEE CHARLES LESNIAK

ORAL ARGUMENT REQUESTED
IDENTITIES OF PARTIES AND COUNSEL

City of Austin Appellant

Andralee Cain Lloyd (24071577)
Megan Mosby (24073392)
City of Austin - Law Department
P.O. Box 1546
Austin, TX 78767-1546
(512) 974-2918
andralee.lloyd@austintexas.gov
megan.mosby@austintexas.gov Counsel for Appellant

The United Healthcare Choice Plus
Plan for City of Austin Employees Appellant

Andrew G. Jubinsky (11043000)
Lance V. Clack (24040694)
Figari & Davenport, LLP
901 Main St., Suite 3400
Dallas, TX 75202
(214) 939-2000
andy.jubinsky@figdav.com
lance.clack@figdav.com Counsel for Appellant

Charles Lesniak Appellee

James C. Plummer (16075700)
Amar Raval (24046682)
Plummer | Raval
4203 Montrose Blvd., Suite 270
Houston, TX 77006
(713) 522-2887
jplummer@plummerlawyers.com
araval@plummerlawyers.com Counsel for Appellee

i
TABLE OF CONTENTS

Page

IDENTITIES OF PARTIES AND COUNSEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

INDEX OF AUTHORITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

STATEMENT OF THE CASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

STATEMENT REGARDING ORAL ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . v

STATEMENT OF FACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Standard of Review:.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Issue 1: Providing health insurance to city employees is a purely
proprietary function for which governmental immunity does not exist. . . . . 3

Issue 2: Governmental Immunity was Waived by
T EXAS L OCAL G OVT C ODE §271.152. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

PRAYER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

CERTIFICATE OF SERVICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

CERTIFICATE OF COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

ii
INDEX OF AUTHORITIES

Pages
Bailey v. City of Austin
972 S.W.2d 180, 192-93 (Tex.App.-Austin 1998, pet. denied). . . . . . . . . . . . . . . 5,7

Ben Bolt-Palito Blanco Consol. Indep. Sch. Dist. v. Texas Political Subdivisions
Prop.
212 S.W.3d 320 (Tex. 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,12

City of El Paso v. Henrich
284 S.W.3d 366, 371-72 (Tex. 2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,4

City of Galveston v. Posnainsky
62 Tex. 118 (1884).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

City of Georgetown v. Lower Colorado River Authority
413 S.W.3d 803, 811 (Tex.App.-Austin 2013, pet. dism’d). . . . . . . . . . . 5,13,14,15

City of Houston v. Williams
353 S.W.3d 128, 134 (Tex. 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,7

City of Terrell v. McFarland
766 S.W.2d 809, 813 (Tex.App.-Dallas 1988, writ denied). . . . . . . . . . . . . . . . . . . 4

City of Mexia v. Tooke
197 S.W.3d 328 (Tex. 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,5,6,12,13,14

Dillard v. Austin Indep. Sch. Dist.
806 S.W.2d 589, 594-595 (Tex.App.-Austin 1991, writ denied). . . . . . . . . . . . . . . 4

East Houston Estate Apartments, L.L.C. v. City of Houston
294 S.W.3d 723, 731-32 (Tex.App.-Houston [1st Dist.] 2009, no pet.).. . . . . . . . . . 5

Entergy Gulf States, Inc. v. Summers
282 S.W.3d 433, 437 (Tex. 2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

First Am. Title Ins. Co. v. Combs

iii
258 S.W.3d 627, 631-32 (Tex. 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Foster v. Teacher Ret. Sys.
273 S.W.3d 883, 886 (Tex.App.-Austin 2008, no pet.). . . . . . . . . . . . . . . . . . . . . . 11

Gates v. City of Dallas
704 S.W.2d 737, 738-39 (Tex. 1986). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Gay v. City of Wichita Falls
2014 WL 393141 (Tex.App.-El Paso Aug. 13, 2014, no pet.). . . . . . . . . . . . . 12,13

Houston Mun. Empls. Pension Sys. v. Ferrell
248 S.W.3d 151 (Tex. 2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Richardson Hosp. Auth. v. Duru
387 S.W.3d 109, 113 (Tex.App-Dallas 2012, no pet.). . . . . . . . . . . . . . . . . . . . . . 11

Texas Dept. of Parks and Wildlife v. Miranda
133 S.W.3d 217, 226 (Tex. 2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Tex. Natural Res. Conservation Comm’n v. IT-Davy
74 S.W.3d 849, 854 (Tex. 2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

VanDevender v. Woods
222 S.W.3d 430, 433 (Tex.2007).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

STATUTES

T EX. INS. C ODE §1575. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

T EX. L OCAL G OVT. C ODE §51.075. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

T EX. L OCAL G OVT. C ODE §271.152. . . . . . . . . . . . . . . . . . . 7,8,9,10,11,12,13,14,15

T EX. L OCAL G OVT. C ODE §271.151. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,8,9

T EX. L OCAL G OVT. C ODE §271.158. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

iv
STATEMENT OF THE CASE

This is an interlocutory appeal of a denial of a plea to the jurisdiction. The suit involves
the denial of medical treatment at an eating disorder facility for the dependent of a City
of Austin employee. Appellants City of Austin and The United Healthcare Choice Plus
Plan for City of Austin Employees contend that governmental immunity shields them
both from suit and liability. Appellee contends that governmental immunity does not
exist or has been waived by statute.

STATEMENT REGARDING ORAL ARGUMENT

Appellee believes that oral argument will be helpful to the Court because (a) this case
involves a claim for benefits under the City of Austin’s health benefit plan, with
technical terms that may require assistance from counsel, and (b) the Court will be able
to question Appellants on their position that City of Austin employees should have no
access to the judicial system if their health insurance claims are denied.

v
STATEMENT OF FACTS

1. This is a lawsuit for health benefits by a City of Austin employee against the City

of Austin (“Austin”) and the United HealthCare Choice Plan for City of Austin

Employees (“Plan”). Mr. Lesniak works for Austin as an environmental policy

program manager. C.R. 186. He enrolled in the Plan in 2013 and 2014 to obtain

health insurance for himself and his eligible dependents. Id.

2. The Plan is self funded by Austin. C.R. 30. Austin designated United Healthcare

Services, Inc. (“United”) as the Plan Administrator of the Plan. C.R. 30. United

was responsible for processing claims and payments and conducting appeals of

adverse benefit determinations on behalf of Austin. C.R187.

3. The Plan includes coverage for inpatient and outpatient mental health care

services determined in accordance with prevailing medical standards and clinical

guidelines. Mr. Lesniak’s coverage under the Plan extended to his dependent

daughter, Alice. C.R. 187.

4. Alice suffered from symptoms of anorexia nervosa that led to weight loss,

malnutrition, abnormal heart rhythm, and other signs of poor health. C.R. 187.

Her parents and medical providers decided that she needed residential treatment

in a facility with continuous monitoring and intensive therapy. Id. Because no

facilities near Austin would accept someone as young as Alice, she enrolled in

1
Avalon Hills Eating Disorder Treatment Center (“Avalon”) in Logan, Utah in

August 2013. C.R. 188. United approved and periodically re-authorized

residential treatment until October 29, 2013. Id.

5. On October 30, 2013, United advised Avalon that it would not authorize further

treatment because it claimed that Alice’s condition had improved to the extent

that she could be adequately treated at a lower level of care known as “partial

hospitalization”. C.R. 188.

6. Avalon filed an appeal, which United denied in November 2013. C.R. 188.

Although Alice remained in treatment at Avalon, United only authorized payment

for the reduced partial hospitalization level beginning November 21, 2013,

leaving Mr. Lesniak responsible for the balance. Id. Avalon submitted a second

appeal, which United denied in February 2014. C.R. 189. With the denial of the

second appeal, all required appeals under the Plan had been exhausted. C.R. 190.

Alice remained in treatment at Avalon until February 18, 2014. Id.

7. Mr. Lesniak filed suit against Austin and the Plan for breach of contract on

January 6, 2015. C.R. 3. Austin and the Plan filed a plea to the jurisdiction. C.R.

29. The plea was denied by the trial court on April 29, 2015. C.R. 206.

Appellants filed their notice of appeal on May 18, 2015. C.R. 207-208.

2
ARGUMENT

The issues presented by this appeal are based on the limits of governmental immunity.

Austin cannot escape judicial review of its decision to deny health insurance coverage

to city employees and their dependents. Governmental immunity does not exist for two

reasons. First, Austin’s creation of a health insurance plan for city employees is a purely

proprietary function not subject to immunity. Second, immunity does not exist because

the Texas Legislature codified a waiver of governmental immunity that applies here.

The trial court’s ruling should thus be upheld, and this case should be remanded to the

trial court.

Standard of Review:

The standard of review for a trial court’s ruling on a plea to the jurisdiction is

de novo. Houston Mun. Empls. Pension Sys. v. Ferrell, 248 S.W.3d 151, 156 (Tex.

2007); Texas Dept. of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 228 (Tex.

2004).

Issue 1:

Providing health insurance to city employees is a purely proprietary function
for which governmental immunity does not exist.

Before a court considers whether governmental immunity has been waived, it

must determine if immunity even exists. City of El Paso v. Henrich, 284 S.W.3d 366,

3
371-72 (Tex. 2009). The limits of governmental immunity were first explored by the

Texas Supreme Court 131 years ago. City of Galveston v. Posnainsky, 62 Tex. 118

(1884). The Court noted that when a municipality exercises powers “exclusively public

in character”, immunity should exist unless it has been waived. Id. However, when a

municipality assumes powers “intended for the private advantage and benefit of its

locality and its inhabitants”, there is no policy reason for immunity. Id.

Posnainsky thus created a distinction between governmental and proprietary

functions. A city performs governmental functions when it acts “as an agent of the state

in furtherance of general law for the interest of the public at large”. City of Terrell v.

McFarland, 766 S.W.2d 809, 813 (Tex.App.-Dallas 1988, writ denied). A city

performs proprietary functions when it acts for the benefit of those within its municipal

limits. Id. The city is not traditionally entitled to governmental immunity when

performing proprietary functions. Id.; Dillard v. Austin Indep. Sch. Dist., 806 S.W.2d

589, 594-595 (Tex.App.-Austin 1991, writ denied).

Courts expanded Posnainsky’s governmental-proprietary distinction to the

contract context. In 2006, the Texas Supreme Court seemed to cast doubt on the

governmental-proprietary distinction for contracts. City of Mexia v. Tooke, 197 S.W.3d

328 (Tex. 2006). Tooke focused on the viability of governmental immunity under

T EXAS L OCAL G OVT. C ODE §51.075. In dicta, it noted that it had never held that the

4
governmental-proprietary distinction should apply in the contract context. However, the

Court wisely sidestepped the issue, as it noted that “we need not determine that issue

here”. Id. at 333. As a result, many courts continue to apply the governmental-

proprietary test to contract claims. City of Georgetown v. Lower Colorado River

Authority, 413 S.W.3d 803, 811 (Tex.App.-Austin 2013, pet. dism’d); East Houston

Estate Apartments, L.L.C. v. City of Houston, 294 S.W.3d 723, 731-32 (Tex.App.-

Houston [1 st Dist.] 2009, no pet.).

The issue in this case is whether providing health insurance to city employees is

considered a governmental function or a proprietary function. Courts have routinely

labeled it a proprietary function, including a previous health benefit plan offered by

Austin. See Bailey v. City of Austin, 972 S.W.2d 180, 192-93 (Tex.App.-Austin 1998,

pet. denied) (city’s provision of health insurance to its employees is a proprietary

function; no governmental immunity); Gates v. City of Dallas, 704 S.W.2d 737, 738-

39 (Tex. 1986) (city providing self funded health insurance to its employees is a

proprietary function).

Austin chose to provide its employees with medical and prescription drug

benefits. It created a self funded plan and contracted with United to administer the Plan

and process payment or reimbursement for covered medical expenses. Both the 2013

and 2014 Plans are contracts (“The Plan and its application of the Covered Persons, if

5
any, constitute the entire contract of Coverage under the Plan between the City, the Plan

Administrator, and the Covered Persons”). C.R. 46. By entering into contract for the

benefit of its employees, Austin engaged in a proprietary function for which

governmental immunity does not exist.

Understanding their disadvantage, Appellants are limited to arguing the scope of

the Tooke case. They contend that Tooke definitively eliminated the applicability of the

governmental-proprietary distinction in the contract context. However, the words of the

Court betray their position: “we need not determine that issue here” (emphasis

added). City of Mexia v. Tooke, 197 S.W.3d 328, 333 (Tex. 2006). This is in line with

the well settled principle of judicial restraint when deciding cases. VanDevender v.

Woods, 222 S.W.3d 430, 433 (Tex. 2007) (“The cardinal principle of judicial

restraint-if it is not necessary to decide more, it is necessary not to decide

more-counsels us to go no further.”). The governmental-proprietary distinction in the

contract context remains viable. Standing alone, it is sufficient to deny Appellants’ plea

to the jurisdiction.

Issue 2:

Governmental Immunity was Waived by Texas Local Govt Code §271.152.

Municipalities have governmental immunity from suit unless the Legislature

expressly waives it by statute. City of Houston v. Williams, 353 S.W.3d 128, 134 (Tex.

6
2011). The Legislature is better suited to weigh conflicting public policies associated

with waiving immunity and subjecting the government to increased liability. Tex.

Natural Res. Conservation Comm’n v. IT-Davy, 74 S.W.3d 849, 854 (Tex. 2002). In

2005, the Texas Legislature enacted T EX. L OCAL G OVT. C ODE §271.152, which waives

immunity for certain contractual claims against governmental entities. This waiver

applies if the party against whom waiver is asserted is (1) a local governmental entity,

(2) authorized to enter into contracts, and (3) entered into a “contract subject to this

subchapter”. T EX. L OCAL G OVT. C ODE §271.152.

Here, there is no dispute that the City of Austin is a qualifying local

governmental entity under the statute. Second, there is no dispute that Austin was

authorized to enter into this contract to provide health benefits for its employees. Austin

has traditionally offered life, health, and dental insurance to its employees, their

spouses, and dependent children. Bailey v. City of Austin, 972 S.W.2d 180, 183

(Tex.App.-Austin 1998, pet. denied).

The third element is that the governmental enter into a “contract subject to this

subchapter”. A “contract subject to this subchapter” is (1) in writing, (2) states the

essential terms of the agreement, (3) provides for goods or services, (4) to the local

governmental entity, and (5) is executed on behalf of the local governmental entity.

7
T EX. L OCAL G OVT. C ODE §271.151; City of Houston v. Williams, 353 S.W.3d 128, 135

(Tex. 2011).

Here, Appellants have provided all of the evidence required to prove that the

Plans are contracts “subject to this subchapter”. The 2013 and 2014 Plans are in

writing. They state the essential terms of the agreement. (“The Plan and its application

of the Covered Persons, if any, constitute the entire contract of Coverage under the Plan

between the City, the Plan Administrator, and the Covered Persons”). C.R. 46. The

Plans provide medical and prescription drug benefits to Austin employees, their

spouses, and dependent children. The Plan also provides services to Austin, as it details

the role United plays as Plan Administrator to interpret the Plan terms, make factual

determinations, and determine eligibility for benefits. C.R. 93-94. Finally, the Plans are

executed on behalf of Austin.

Conceding the other elements, Appellants limit their argument to element 4: the

contract must provide goods or services to the local governmental entity. T EX. L OCAL

G OVT. C ODE §271.151. Appellants contend that no services were provided to Austin

directly, so governmental immunity should shield them from suit and liability. This

argument is defeated by the Texas Supreme Court’s review of T EX. L OCAL G OVT. C ODE

§271.152's legislative history.

8
Other governmental entities have unsuccessfully tried to argue that the fourth

element of T EX. L OCAL G OVT. C ODE §271.151 limited the waiver of governmental

immunity. In Ben Bolt, the Fund argued that it was immune from suit because nothing

was provided to it directly; it simply provided insurance to its members in exchange for

payment. Ben Bolt-Palito Blanco Consol. Indep. Sch. Dist. v. Texas Political

Subdivisions Prop., 212 S.W.3d 320 (Tex. 2006). Here, Appellants argue that they are

immune because nothing is provided to them directly1 . In rejecting this argument, the

Court reviewed the legislative history of T EX. L OCAL G OVT. C ODE §271.152 and how

it was intended to loosen the shackles of immunity:

all local governmental entities that have been given or are given the
statutory authority to enter into contracts shall not be immune from
suits arising from those contracts.

House Comm. On Civil Practices, Bill Analysis, Tex. H.B. 2039,
79th Leg., R.S. (2005); Id at 327.

While the mere act of self insuring was not a waiver of immunity, entering into a

written contract stating the essential terms of an agreement for providing goods and

services to a local governmental entity “clearly does”. Id.

In Appellants’ crabbed interpretation, governmental immunity applies if no

services were directly provided to Austin. This begs the question: what services are

1
Appellants continue to cite Ben Bolt to argue that they are immune from suit
when providing benefits to employees. The analysis of the opinion does not support this
position.

9
provided to Austin? Mr. Lesniak provides his services to Austin as a city employee.

Like many other employers who seek the best and brightest talent, Austin provides

health insurance benefits as part of an employee benefit plan. The health insurance

benefits provided by the Plan are part of a bargained-for benefit of employment with

Austin.

Another way to look at what services are being provided to Austin is by looking

at what the Plan provides it. The Plans provide medical and prescription drug benefits

to Austin employees, their spouses, and dependent children. The Plan also provides

services to Austin, as it details the role United plays as Plan Administrator to interpret

the Plan terms, make factual determinations, and determine eligibility for benefits. C.R.

93-94.

This expansive approach to providing goods or services to the local governmental

entity complies with judicial deference to legislative intent. When construing a statute,

the court’s primary goal is to give effect to the legislature’s intent. First Am. Title Ins.

Co. v. Combs, 258 S.W.3d 627, 631-32 (Tex. 2008). When statutory text is clear, it is

determinative of legislative intent, unless enforcing the plain meaning of the statute’s

words would produce an absurd result. Entergy Gulf States, Inc. v. Summers, 282

S.W.3d 433, 437 (Tex. 2009). This approach to waiver is also supported by the statute

itself. Nothing in T EX. L OCAL G OVT. C ODE §271.152 “shall constitute a grant of

10
immunity to a local governmental entity”. T EX. L OCAL G OVT. C ODE §271.158. Thus,

to the extent that any governmental immunity exists, it has been waived by statute.

Appellants cited Richardson Hosp. Auth. v. Duru to argue that a municipality

offering insurance to employees did not fall within the waiver of T EX. L OCAL G OVT.

C ODE §271.152. Richardson Hosp. Auth. v. Duru, 387 S.W.3d 109, 113 (Tex.App-

Dallas 2012, no pet.). In Richardson, the plaintiff sued for breach of contract for legal

services he claimed he never received. The court found no waiver of immunity under

§271.152 because there was no evidence of a written contract between the parties. That

is distinguishable from this case, where Appellants have produced the 2013 and 2014

Plans that provide health insurance benefits to Mr. Lesniak and his dependent.

Appellants also cite Foster v. Teacher Ret. Sys. to argue that a state agency did

not waive immunity by providing benefits via a self funded plan. Foster v. Teacher Ret.

Sys., 273 S.W.3d 883, 886 (Tex.App.-Austin 2008, no pet.). The plaintiff in Foster

sought a waiver of governmental immunity through T EX. INS. C ODE §1575, which

regulates the Texas Teachers Retirement System (“TRS”). The Plan here is not part of

TRS. Moreover, Mr. Lesniak does not contend that the mere act of self insuring is a

waiver of immunity. It is when the parties entered into a written contract stating the

essential terms of an agreement for providing goods and services to a local

governmental entity that T EX. L OCAL G OVT. C ODE §271.152 applied.

11
Appellants rely most heavily on Gay v. City of Wichita Falls to support their

position that T EX. L OCAL G OVT. C ODE §271.152 does not apply to them. Gay v. City

of Wichita Falls, 2014 WL 393141 (Tex.App.-El Paso Aug. 13, 2014, no pet.) In Gay,

police officers filed for disability benefits from a trust established by Wichita Falls. The

court determined that Tooke eliminated the governmental-proprietary distinction in

contractual claims. It also concluded that the officers’ promissory estoppel claim fell

outside T EX. L OCAL G OVT. C ODE §271.152 because the waiver only applies to a written

contract. Id.

Gay is full of poor reasoning, not controlling law, and should not be followed.

In it, the court noted that the city was not a party to the contract because the contract

was between the trust and the insurance company. This is a distinction without a

difference. In Ben Holt, the risk pool fund formed to provide insurance considered itself

a separate entity entitled to governmental immunity. Implicit in this position was the

argument that the city was not a party to the contract. The Fund argued that its insurance

contract was immune because nothing was provided to it directly. The Court rejected

the argument, noting the expansive nature of T EX. L OCAL G OVT. C ODE §271.152. Ben

Bolt-Palito Blanco Consol. Indep. Sch. Dist. v. Texas Political Subdivisions Prop.,

212 S.W.3d 320, 327 (Tex. 2006).

12
Second, Gay improperly analyzed the governmental-proprietary common law and

its connection to §271.152. In doing so, it misread the plain language of Tooke and

bluntly ignored the logic and analysis provided in City of Georgetown. Gay contended

that the Texas Supreme Court had “never held the proprietary/governmental dichotomy

to be determinative of immunity from suit in contractual claims”. However, it ignored

the very next sentence, in which the Texas Supreme Court continued, “we need not

determine that issue here”. City of Mexia v. Tooke, 197 S.W.3d 328, 333 (Tex. 2006).

The Court specifically chose not to rule on the governmental-proprietary distinction.

The Gay court misread Tooke and mistook clearly labeled dicta for controlling law.

To the extent Gay has any persuasive authority, it is easily distinguished. In Gay,

the officers relied on a promissory estoppel claim, not a written contract. Here, Mr.

Lesniak relies on a written Plan created by Austin, which is clearly provided for in T EX.

L OCAL G OVT. C ODE §271.152. The Plan meets the test of the statute and falls under the

waiver of immunity established by the Legislature.

Most disturbing of all, the Gay court ignored the policy reasons provided in City

of Georgetown for continuing to follow the governmental-proprietary distinction for

analyzing governmental immunity in contract claims. Just two years ago, this Court

directly addressed the applicability and scope of T EX. L OCAL G OVT. C ODE §271.152.

13
City of Georgetown v. Lower Colorado River Authority 413 S.W.3d 803 (Tex.App.-

Austin 2013, pet. dism’d).

In City of Georgetown, the city’s contract to purchase electricity from the Lower

Colorado River Authority was at issue. City of Georgetown at 803. The city filed a plea

to the jurisdiction, alleging that there was no valid waiver of governmental immunity.

Id. at 806. The court began with an overview of the governmental-proprietary test. The

city, just as Austin does here, argued that the test did not apply to contractual claims due

to the Texas Supreme Court’s ruling in Tooke.

The court cited Tooke and its clarification that it “need not determine that issue”.

Going forward, the court concluded:

until the supreme court answers this question, we rely on this Court’s
precedent, as well as the nearly unanimous opinions of our sisters courts,
to conclude that the proprietary-governmental dichotomy applies to
contract claims under the common law.

City of Georgetown at 810-811.

However, it did not stop there. The court searched for “any principled reason”

supporting applying the governmental-proprietary test to tort claims but not contract

claims. Id. Finding none, the court was reluctant to overturn its own precedent or

“disagree with persuasive authority from the majority of our sister courts” on the issue.

Id. Appellants have failed to provide any principled justification for abandoning this

precedent.

14
Next, the City of Georgetown court reviewed the legislative intent of T EX. L OCAL

G OVT. C ODE §271.152. Just as Austin does here, the city argued that because §271.152

had no text regarding the governmental-proprietary test, it no longed applied to contract

claims. City of Georgetown at 812. The court pointed out that the legislative history

of §271.152 evidenced its intent to expand, not limit, plaintiffs’ ability to sue

municipalities for contract damages. Id. 813. It thus ruled that governmental immunity

did not exist and denied the city’s plea to the jurisdiction.

The City of Georgetown case is this Court’s previous ruling on the precise issues

at stake here. It remains good law, and its review of the policy reasons behind the

governmental-proprietary test in contract claims, as well as its review of the legislative

intent of T EX. L OCAL G OVT. C ODE §271.152, represent the road map for deciding this

matter.

Prayer

For these reasons, Appellee Charles Lesniak requests that this Court (1) uphold

the Trial Court’s order denying Appellants’ Plea to the Jurisdiction, (2) remand this

matter back to the Trial Court, and (3) grant Appellee any further relief, whether legal

or equitable, to which he may be entitled.

15
Respectfully submitted,

By ___/s/ Amar Raval________________
James C. Plummer, TBA #16075700
Amar Raval, TBA # 24046682
PLUMMER | RAVAL
4203 Montrose Boulevard, Ste 270
Houston, Texas 77006
(713) 522-2887
(713) 522-3605 (Fax)
Jplummer@plummerlawyers.com
Araval@plummerlawyers.com

ATTORNEYS FOR APPELLEE

CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the above and foregoing Amended
Appellee Brief was served pursuant to Tex. R. App. Proc. 9.5 on July 15, 2015, to:

Andralee Cain Lloyd
Megan Mosby
City of Austin Law Department
P.O. Box 1546
Austin, TX 78767

Andrew Jubinski
Figari & Davenport, LLP
901 Main St., Suite 3400
Dallas, TX 75202

___/s/ Amar Raval________________

16
CERTIFICATE OF COMPLIANCE

Pursuant to Tex. R. App. Proc. 9.4(e)(i)(3), I hereby certify that this brief
complies with the word count limitations and type-volume limitations.

1. Exclusive of the exempted portions listed in Tex. R. App. Proc. 9.4(i)(1),
the brief contains 3,328 words.

2. This brief has been prepared in standard 10 character per inch monospaced
typeface using WordPerfect in Times New Roman 14.

___/s/ Amar Raval________________

17

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/4069870. Public record. Not legal advice.