Cook Children's Health Care System and S.W. and J.W., Individually and on Behalf of Their Minor Child, J.W. v. Nocona General Hospital

COURT OF APPEALS

SECOND DISTRICT OF TEXAS

FORT WORTH

NO. 02-17-00128-CV

COOK CHILDREN’S HEALTH APPELLANTS

CARE SYSTEM AND S.W. AND

J.W., INDIVIDUALLY AND ON

BEHALF OF THEIR MINOR CHILD

J.W.

V.

NOCONA GENERAL HOSPITAL APPELLEE

----------

FROM THE 97TH DISTRICT COURT OF MONTAGUE COUNTY

TRIAL COURT NO. 2016-0481M-CV

----------

MEMORANDUM OPINION1

----------

I. INTRODUCTION

In this interlocutory appeal, Appellants Cook Children’s Health Care

System (Cook Children’s) and S.W. and J.W.,2 individually and on behalf of their

1

See Tex. R. App. P. 47.4.

minor child J.W., challenge the trial court’s order granting Appellee Nocona

General Hospital’s (Hospital) plea to the jurisdiction.3 Appellants assert that

Texas Local Government Code section 271.152 waives the Hospital’s immunity

from Appellants’ suit. The dispositive issue we address in this appeal is whether

the Nocona General Hospital Health Benefit Plan (the Plan) meets the statutory

definition of a “contract subject to this subchapter” as required to trigger a waiver

of immunity under section 271.152.4 See Tex. Loc. Gov’t Code Ann. § 271.152

(West 2016); see also id. § 271.151(2) (West 2016) (setting forth definition of

“contract subject to this subchapter”). Because we hold that the Plan does meet

the requisite statutory definition of a “contract subject to this subchapter” and that

section 271.152 waives the Hospital’s immunity from Appellants’ suit, we will

reverse the trial court’s order granting the Hospital’s plea to the jurisdiction

concerning Appellants’ breach-of-contract claim and remand that claim to the trial

court.

II. FACTUAL AND PROCEDURAL BACKGROUND

S.W. was an employee of the Hospital. Employees of the Hospital could

elect to pay premiums to participate in the Plan. S.W. elected to, and did, pay

Hereinafter, our references to J.W. refer to S.W.’s and J.W.’s minor son.

2

3

See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(8) (West Supp. 2017)

(authorizing interlocutory appeal from grant of plea to the jurisdiction by

governmental unit).

4

The parties conceded and agreed on this issue during oral argument.

2

premiums to participate in the Plan. S.W.’s minor son J.W. was a “covered

person” as defined by the Plan. The Plan was signed by the CEO of the

Hospital, Lance Meekins, and is contained in the record before us.

The Hospital is the administrator of the Plan, but the Hospital hired a third-

party administrator, Group Resources, to serve as the administrative-service

agent and as the claims-paying agent. The Hospital’s contract with Group

Resources also was signed by Meekins as CEO of the Hospital and is contained

in the record before us. The Hospital purchased excess-loss, reimbursement

insurance from Fidelity Security Life Insurance Company (FSL) for benefits to be

paid under the Plan in excess of $50,000. The Hospital’s contract with FSL was

signed by Meekins as CEO of the Hospital and is contained in the record before

us.

J.W. sustained very serious injuries in an all-terrain vehicle (ATV) accident.

He was taken to the Hospital and subsequently transported by air ambulance to

Cook Children’s. Cook Children’s provided medical services to J.W. and

submitted a claim for payment to the Plan as assignee of the rights of J.W.

Group Resources denied the claim submitted by Cook Children’s under the

“illegal activity exclusion” of the Plan.5 Appellants filed this suit against the

Hospital, FSL, and Group Resources alleging breach-of-contract claims—and

5

A letter from Group Resources to S.W. stated that the illegal-activity

exclusion of the Plan applied because J.W. was not properly supervised while

riding the ATV and had not been wearing a helmet or goggles, all of which were

required by law.

3

other claims—and seeking to recover benefits allegedly owed to them under the

Plan.

The Hospital filed a plea to the jurisdiction asserting that it possessed

governmental immunity from Appellants’ breach-of-contract claim because there

“is no waiver of immunity for breach of contract under Tex. Loc. Gov’t Code Ch.

271.” Appellants filed a response. The trial court conducted a hearing and

signed an order granting the Hospital’s plea to the jurisdiction on Appellants’

breach-of-contract claim because the Plan “is not a contract for which immunity is

waived under Tex. Loc. Gov’t Code Ch. 271.” Appellants then perfected this

interlocutory appeal.

III. THE TRIAL COURT ERRED BY GRANTING THE

HOSPITAL’S PLEA TO THE JURISDICTION

In their first issue, Appellants argue that they pleaded and proved the

requisites necessary to establish a waiver of the Hospital’s immunity under Texas

Local Government Code section 271.152 and that, accordingly, the trial court

erred by granting the Hospital’s plea to the jurisdiction.

A. Standard of Review

Governmental immunity has two components: immunity from liability and

immunity from suit. Tooke v. City of Mexia, 197 S.W.3d 325, 332 (Tex. 2006). A

governmental entity that enters into a contract waives its immunity from liability

but retains its immunity from suit unless its immunity from suit is specifically

waived by the legislature. Id. Governmental immunity from suit deprives the trial

4

court of subject-matter jurisdiction. Tex. Dep’t of Parks & Wildlife v. Miranda, 133

S.W.3d 217, 224 (Tex. 2004).

Whether a court has subject-matter jurisdiction is a question of law, and we

review the trial court’s grant or denial of a plea to the jurisdiction de novo. Id.

When reviewing a grant or denial of a plea to the jurisdiction, we consider the

plaintiff’s pleadings and any evidence relevant to jurisdiction without weighing the

merits of the claim. Cty. of Cameron v. Brown, 80 S.W.3d 549, 555 (Tex. 2002);

see also Miranda, 133 S.W.3d at 228.

A plea to the jurisdiction may challenge either the pleadings or the

existence of jurisdictional facts. Miranda, 133 S.W.3d at 226‒27. When a plea

to the jurisdiction challenges a plaintiff’s pleadings, we consider whether the

pleader has alleged sufficient facts to demonstrate the court’s subject-matter

jurisdiction over the suit, construing the pleadings liberally in favor of the plaintiff

and looking to the pleader’s intent. Id.; see City of Waco v. Kirwan, 298 S.W.3d

618, 621 (Tex. 2009). If a plea to the jurisdiction challenges the existence of

jurisdictional facts, we consider relevant evidence submitted by the parties when

necessary to resolve the jurisdictional issues that have been raised. Miranda,

133 S.W.3d at 227. If the relevant evidence is undisputed or fails to raise a fact

question on the jurisdictional issue, the trial court rules on the plea to the

jurisdiction as a matter of law. Id. at 228.

5

B. Appellants’ Pleadings and Jurisdictional Evidence

Appellants’ third amended original petition set forth the facts forming the

basis of their claims. In addition to pleading the facts set forth above, the petition

alleged the following:

11. . . . JW was a “covered person” as defined by the Nocona

General Hospital Employee Benefit Plan (Exh A, page 20); and the

Fidelity Security Policy. (Exh C, page 4) JW, SW[,] and their minor

son were at least, third party beneficiaries of the Fidelity Security

policy. Cook is an assignee of the rights of JW. (Exh D)

....

19. . . . The Nocona General Hospital is a local governmental entity

with limited boundaries. The enabling law gives express permission

for the Nocona General Hospital to be sued[.] (Tex. Special District

Local Laws Code 1081.001, et seq.)

The petition then pleads a breach-of-contract claim against the Hospital as

follows:

b. Breach of Contract.

34. Plaintiffs will show that defendants’ conduct constitutes a

breach of contract, specifically the Nocona General Hospital

Employee Benefit Plan and the FSL insurance policy. The

insured/depend[e]nt, JW, who received the necessary care and

treatment was covered under the Plan[,] and defendants agreed and

promised to timely pay benefits for the medical treatment Plaintiff

provided to JW. However, defendants failed to pay the benefits not

only timely but at all, thereby breaching the contracts set out in

Exhibits A and C. Defendants’ breach is a direct, proximate, and

producing cause of economic damages to Plaintiffs in the amount of

at least $750,000.00, together with statutory interest and penalties

as prescribed by law.

35. Plaintiffs, SW and JW[,] provided payments and services

pursuant to a signed agreement with Nocona General Hospital and

Nocona General Hospital Employee Benefit Plan. Nocona General

6

Hospital and Nocona General Hospital Employee Benefit Plan

agreed to provide employee benefits pursuant to the signed

contract. The contract has provisions for appeal of disrupted claims.

It gives permission to sue and collect if benefits are not paid.

Plaintiffs complied with all conditions precedent.

36. The enabling statu[t]e for these defendants gives express

permission for the Nocona General Hospital to be sued. (Tex.

Special District Local Laws Code 1081.001, et seq.)

37. Plaintiffs will show that all conditions precedent have been

fully performed by Plaintiffs for recovery of these medical expenses

under said contracts and defendants have waived any entitlement to

a contractual discount for the services provided to its patient JW for

defendants’ unilateral breach of the covenants and conditions

therein.

38. Plaintiffs will show that all medical treatment rendered to

patient JW was reasonable and necessary for the care and

treatment and the charges for said care and treatment were

reasonable charges in the areas those services were rendered.

Plaintiffs sue defendants for their unilateral breach of the

Plan/Agreement and the remainder of the usual and customary

charges in the amount of at least $750,000.00, together with

statutory interest and penalties as prescribed by law.

39. Nocona General Hospital and Nocona General Hospital

Employee Benefits Plan were performing a proprietary function in

serving as a conduit for health insurance benefits. The provision of

health insurance benefits was not a governmental function. Nocona

General Hospital and Nocona General Hospital Employee Benefit

Plan received services and premium payments for the insurance

benefits and forwarded those payments to Group Resources, FSL[,]

and the agents of Group Resources and FSL.

Appellants attached the following documents to their third amended original

petition:

A. Plan document of Nocona General Hospital Employee Benefit

Plan. [The “Plan” executed by the Hospital and distributed to the

Hospital’s employees.]

7

[No exhibit B listed.]

C. Fidelity Security Life Insurance Company Policy. [The excess-

loss, reimbursement contract executed by the Hospital with Fidelity

“in consideration of [the Hospital’s] Application and the payment of

premiums.”]

D. Assignment of Benefits to Cook Children[’]s[.]

E. The claim file provided by Group Resources, Inc.

F. Group Resources[’] Denial Letter.

G. Notice letter from Rickey J. Brantley to Defendants requesting

status of appeal.

H. Group Resources[’] responses to requests for information on

appeal.

I. Nocona Entities’ Response to Request for Admissions.

Appellants attached some of these same documents to their response to the

Hospital’s plea to the jurisdiction, along with excerpts from Meekins’s deposition

and relevant provisions of the Texas Local Government Code and the enabling

legislation regarding the Hospital.

C. The Law Concerning Waiver of Immunity Under Section 271.152

Local government code section 271.152 creates a waiver of governmental

immunity from suit for certain breach-of-contract claims brought against

qualifying local governmental entities:

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 contract, subject to the

terms and conditions of this subchapter.

8

Tex. Loc. Gov’t Code Ann. § 271.152; see La Joya Indep. Sch. Dist. v. Villarreal,

No. 13-13-00325-CV, 2014 WL 3050484, at *3 (Tex. App.—Corpus Christi July 3,

2014, pet. denied) (mem. op.).

Section 271.152’s waiver of immunity from suit applies to a breach-of-

contract claim when the following three elements are established: (1) the party

against whom the waiver is asserted must be a “local governmental entity” as

defined by section 271.151(3); (2) the entity must be authorized by statute or the

constitution to enter into contracts; and (3) the entity must in fact have entered

into a “contract subject to this subchapter,” as that phrase is defined by local

government code section 271.151(2). See Tex. Loc. Gov’t Code Ann. § 271.152;

Zachry Constr. Corp. v. Port of Houston Auth. of Harris Cty., 449 S.W.3d 98,

109–10 (Tex. 2014); City of Houston v. Williams, 353 S.W.3d 128, 134 (Tex.

2011); City of Denton v. Rushing, 521 S.W.3d 88, 92–93 (Tex. App.—Fort Worth

2017, pet. filed). In order for a contract to meet the statutory definition of a

“contract subject to this subchapter,” as that term is defined in local government

code section 271.151(2), the contract must (1) be in writing, (2) state the

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

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

governmental entity. See Tex. Loc. Gov’t Code Ann. § 271.151(2)(A) (defining

“[c]ontract subject to this subchapter”); Williams, 353 S.W.3d at 134–35. Section

251.152’s statutory waiver of immunity from suit is not dependent on the outcome

of the breach-of-contract suit, though it does require a showing of a substantial

9

claim that meets the statutory requisites necessary to trigger the waiver. Zachry

Constr. Corp., 449 S.W.3d at 109–10. A substantial claim is shown when the

claimant pleads facts with some evidentiary support that constitute a claim for

which immunity is waived. Id.

D. Analysis

In their first issue, Appellants identify and discuss how their pleadings and

jurisdictional evidence support each of the elements necessary to trigger section

271.152’s waiver of immunity and each of the statutory requisites necessary to

show that the Plan is a “contract subject to this subchapter.” Although Appellants

briefed each of the statutory requisites necessary to trigger section 271.152’s

waiver of immunity, the Hospital agreed in its brief and during oral argument that

the parties’ disagreement on appeal is limited to whether the Plan meets the

statutory definition of a “contract subject to this subchapter.” Thus, we focus the

analysis of our opinion on the Hospital’s three contentions that it does not. But

first, we make it clear, however, that in conducting our de novo review of the trial

court’s ruling on the Hospital’s plea to the jurisdiction, we have reviewed the

record before us and have ascertained that Appellants pleaded facts and

provided some evidentiary support (in documents attached to their third amended

original petition and response to the Hospital’s plea to the jurisdiction) showing

each requisite—even those not disputed by the Hospital on appeal—necessary

to trigger application of section 271.152’s waiver of immunity.

10

Concerning the first, second, and a portion of the third elements necessary

to trigger application of section 271.152’s waiver of immunity, the parties agree

and—after reviewing the record before us, including the executed copy of the

Plan and Meekins’s deposition testimony—we also agree, that the Hospital is a

local governmental entity that is authorized by statute or the constitution to enter

into a contract and that the Plan constitutes a written contract entered into by the

Hospital and executed on the Hospital’s behalf by its CEO. See Tex. Loc. Gov’t

Code Ann. §§ 271.151(3)(C), 271.152; Harris Cty. Hosp. Dist. v. Tomball Reg’l

Hosp., 283 S.W.3d 838, 842 (Tex. 2009) (stating that “[h]ospital districts have

such [governmental] immunity”); see also Tex. Spec. Dist. Code Ann.

§§ 1081.001–.307 (West Supp. 2017) (addressing Nocona General Hospital

District), § 1081.115 (West Supp. 2017) (providing that Nocona General Hospital

District may sue and be sued). To the extent the Hospital argues in its brief that

the Hospital District’s enabling legislation does not waive immunity from suit, we

agree. See, e.g., Ben Bolt-Palito Blanco Consol. Indep. Sch. Dist. v. Tex.

Political Subdivisions, 212 S.W.3d 320, 324 (Tex. 2006) (explaining that “[b]y

entering into a contract the State waives its immunity from liability but not its

immunity from suit. . . . Thus, . . . immunity from suit bars a remedy until the

[l]egislature consents to suit”). It is section 271.152 that Appellants contend, and

that we ultimately hold, waives the Hospital’s immunity from suit in this case, not

the Hospital District’s enabling legislation.

11

We also note that the breach-of-contract damages alleged by Appellants

against the Hospital—at least $750,000 in economic damages for medical

expenses covered by the Plan that were incurred by J.W. as a result of the ATV

accident—constitute a claim for damages that is within the scope of section

271.153’s limitation on damages recoverable against a local governmental unit

for breach of contract when immunity is waived by section 271.152. See, e.g.,

Zachry Constr. Corp., 449 S.W.3d at 108 (reconciling alleged conflict between

Kirby Lake and Tooke by clarifying that section 271.152’s “subject to” language

limits the amount owed by a local governmental entity on a contract once its

liability for breach of contract has been established so long as the claimant seeks

damages recoverable under section 271.153 and citing Kirby Lake Dev., Ltd. v.

Clear Lake City Water Auth., 320 S.W.3d 829, 840 (Tex. 2010), and Tooke, 197

S.W.3d at 346).

Because Appellants have met their burden with respect to the first, second,

and a portion of the third discussed elements of a substantial breach-of-contract

claim—that the Hospital is a local governmental entity that is authorized by

statute or the constitution to enter into a contract, that the Plan is a written

contract, that the Plan was executed on behalf of the Hospital by its CEO, and

that Appellants have pleaded breach-of-contract damages against the Hospital

that fall within the limitation on damages available under section 271.153—and

because the Hospital agrees that the dispute on appeal centers on whether the

Plan meets the statutory definition of a “contract subject to this subchapter,” we

12

do not discuss these other requisites further. See Zachry Constr. Corp., 449

S.W.3d at 109–10 (explaining that when the claimant pleads facts with some

evidentiary support that constitute a claim for which immunity is waived, the

claimant has shown a substantial claim); McMahon Contracting, L.P. v. City of

Carrollton, 277 S.W.3d 458, 464 (Tex. App.—Dallas 2009, pet. denied) (holding

plaintiffs met their burden with respect to establishing requisites of a section

271.152 waiver of immunity for a governmental entity in a breach-of-contract

suit).

Turning to the Hospital’s contentions on appeal, in a total of four pages of

argument in their brief, the Hospital argues that Appellants failed to establish that

the Plan is a “contract subject to this subchapter” under section 271.151’s

definition of that term. The Hospital argues that the Plan does not qualify as a

“contract subject to this subchapter” for three reasons: because it is not an

agreement by Appellants (S.W. and J.W., individually and on behalf of J.W., and

Cook Children’s), because it is not an agreement to provide services to the

Hospital, and because it contains no essential terms.6 Finally, the Hospital

argues that the case of United Healthcare Choice Plus Plan for City of Austin

Employees v. Lesniak, No. 03-15-00309-CV, 2015 WL 7951630 (Tex. App.––

6

The Hospital does not segregate these contentions but argues them

jointly in its brief. Although we address these arguments individually, the

analysis of them is somewhat overlapping, and our disposition of each contention

must be viewed in light of our entire opinion.

13

Austin Dec. 1, 2015, pet. denied) (mem. op.), controls the outcome here. We

address the Hospital’s contentions.

1. The Hospital’s Contention that the Plan is not an

Agreement by Appellants

The Hospital argues that the Plan does not meet the statutory definition of

a “contract subject to this subchapter” because it is not an agreement by

Appellants (S.W. and J.W., individually and on behalf of J.W., and Cook

Children’s) to provide services to the Hospital. The first part of the Hospital’s

contention—that the Plan is not a “contract subject to this subchapter” because it

is not an agreement by Appellants—although not so phrased by the Hospital, is a

challenge to Appellants’ standing. That is, the Hospital contends that only a

party, i.e., a signatory, to a contract with the Hospital, possesses standing to sue

under section 271.152’s waiver of immunity.

The Texas Supreme Court has rejected the Hospital’s argument. See

Williams, 353 S.W.3d 145–46. In Williams, the Texas Supreme Court held that

section 271.152’s waiver of immunity applied to breach-of-contract suits filed by

third-party beneficiaries of a “contract subject to this subchapter.” Id. at 145–46.

The supreme court in Williams further held that firefighters—as third-party

beneficiaries of a Meet and Confer Agreement (MCA) executed between the

Houston Professional Fire Fighters Association and the City of Houston—had

standing to sue the City for the City’s alleged breach of the MCA. Id. Courts of

appeals across Texas have held likewise—third-party beneficiaries of contracts

14

meeting the statutory definition of a “contract subject to this subchapter” as set

forth in section 271.151(2) possess standing to sue a local governmental entity

whose immunity from suit is waived by section 271.152. See, e.g., La Joya

Indep. Sch. Dist., 2014 WL 3050484, at *5–6 (recognizing that breach-of-contract

claim of third-party beneficiary falls within section 271.152’s waiver of immunity

when other requisites necessary to trigger waiver are met); S. Coast Spine &

Rehab. P.A. v. Brownsville Indep. Sch. Dist., No. 13-11-00270-CV, 2014 WL

1789546, at *5 (Tex. App.—Corpus Christi Apr. 30, 2014, no pet.) (holding that

“BISD waived its immunity from suit by entering into the benefits plan” and that

“South Coast has a right to sue [BISD] as an assignee that was intended under

the employee benefits plan”); Galveston Indep. Sch. Dist. v. Clear Lake Rehab.

Hosp., LLC, 324 S.W.3d 802, 807 (Tex. App.—Houston [14th Dist.] 2010, no

pet.) (holding that “when a governmental entity and a contracting party enter into

a contract [to provide insurance] . . . and denominate a third-party beneficiary of

that contract, the third-party beneficiary’s claim for breach of contract falls within

the waiver of immunity authorized under section 271.152”).

We next address whether S.W.—individually and as next friend of her

minor son J.W. and a “covered person” under the Plan7—is “at least” a third-party

beneficiary of the Plan. The law is well-settled that third parties have standing to

7

The Plan defines “Dependent” as including, in part, an employee’s spouse

and an employee’s child who is less than twenty-six years of age. “Covered

Person” is defined as meaning the employee or a Dependent for whom coverage

is provided by the Plan.

15

recover under a contract that is clearly intended for their direct benefit. First

Bank v. Brumitt, 519 S.W.3d 95, 103 (Tex. 2017); Williams, 353 S.W.3d at 145;

Stine v. Stewart, 80 S.W.3d 586, 589 (Tex. 2002). When deciding whether the

parties to an unambiguous contract intended to create a third-party beneficiary,

courts must look solely to the contract’s language. Brumitt, 519 S.W.3d at 107;

see Stine, 80 S.W.3d at 590 (explaining that to determine whether a contract is

intended for the direct benefit of a third party, we look to the entire agreement,

giving effect to all its provisions).

The agreement, however, need not have been executed solely to benefit

the noncontracting party in order to confer third-party-beneficiary status. Stine,

80 S.W.3d at 591. Instead, the contract must only include “a clear and

unequivocal expression of the contracting parties’ intent to directly benefit a third

party,” and any implied intent to create a third-party beneficiary is insufficient.

Tawes v. Barnes, 340 S.W.3d 419, 425 (Tex. 2011); MCI Telecomms. Corp. v.

Tex. Utils. Elec. Co., 995 S.W.2d 647, 651–52 (Tex. 1999). Nonetheless, to

clearly express the contracting parties’ intent to directly benefit a third party, the

agreement need not utilize particular phraseology, such as “third-party

beneficiary” or similar magic words. See Stine, 80 S.W.3d at 590–91. A contract

that benefits a third party only incidentally, however, rather than being clearly

intended for the direct benefit of the third party, is not enforceable by the

incidental beneficiary. Sharyland Water Supply Corp. v. City of Alton, 354

S.W.3d 407, 412 (Tex. 2011); MCI, 995 S.W.2d at 651–52.

16

Appellants point out that the Hospital admitted that S.W. and her son J.W.,

as “covered person[s],” were intended third-party beneficiaries of the Plan. In

response to requests for admission, the Hospital made the following admissions:

Nocona admits that it established and maintains the Nocona

General Hospital Employee Health Benefit Plan for the benefit of its

employees. Nocona admits that it could not have this plan but for re-

insurance as set forth in the attached contract. Nocona also admits

that employees benefitted from the attached contract by participating

in the Plan.

Appellants also point out that the Plan provides8

reimbursement for covered charges incurred as a result of Medically

Necessary treatment for Illness or Injury of the Company’s eligible

Employees and their eligible Dependents.

....

TO ALL EMPLOYEES:

We are all aware of the financial disaster that a family may

experience as a result of a serious or prolonged Illness or Accident.

The medical benefits available under the Nocona General Hospital

Employee Health Benefit Plan (the Plan) and described in this Plan

document and summary plan description (SPD) are designed to

provide some protection for you and your family against such

disaster.

....

8

Neither party claims the Plan is ambiguous; we agree that it is not. See

Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983) (stating that when contracts

are so worded that they can be given a certain or definite legal meaning or

interpretation, then they are not ambiguous, and the court will construe them as a

matter of law); see also Lopez v. Munoz, Hockema & Reed, L.L.P., 22 S.W.3d

857, 861 (Tex. 2000) (stating that court will enforce an unambiguous contract “as

written”).

17

. . . We are pleased to offer the benefits under this Plan for

you and your covered family members as an expression of our

appreciation for your efforts on behalf of our Company.

....

REQUIRED EMPLOYEE CONTRIBUTIONS:

Employees do contribute toward the cost of Employee and

Dependent Coverage.

The amount that Employees contribute is calculated by the Plan

Administrator and is a portion of the cost of coverage under the

Plan.

Appellants’ third amended original petition, as set forth and quoted above,

pleaded that S.W. and her minor son J.W. were “at least” third-party beneficiaries

of the Plan. The Hospital’s CEO testified that the Hospital took money out of

employees’ paychecks to fund the Plan, that the Plan was a benefit it provided to

employees, that the Plan was implemented in part to assist the Hospital in

recruiting employees, that premiums for participation in the Plan were deducted

by the Hospital from employees’ paychecks, that S.W. participated in the Plan,

that J.W. was a covered person under the Plan, and that S.W. had paid all of her

premiums under the Plan via a paycheck deduction.

Appellants’ jurisdictional evidence, including the Hospital’s own admissions

and the express language of the Plan, established that S.W. and J.W. as

“covered person[s]” are “at least” intended third-party beneficiaries of the Plan.

Indeed, if the Hospital did not enter into the Plan with the intent to directly benefit

Plan participants like S.W. and J.W., then the Plan had no purpose whatever.

18

See Basic Capital Mgmt., Inc. v. Dynex Commercial, Inc., 348 S.W.3d 894, 900–

01 (Tex. 2011) (holding ART and TCI were third-party beneficiaries and noting

that if “[i]f Dynex and Basic did not intend the Commitment to benefit ART and

TCI directly, then the Commitment had no purpose whatever”).

To the extent the Hospital’s contention that the Plan is not a “contract

subject to this subchapter” because it is not an agreement “by Appellants”

includes the contention that the Plan is not an agreement by Cook Children’s as

an Appellant, we next address this contention. Appellants pleaded, and the

Hospital does not dispute, that Cook Children’s is the assignee of J.W.’s benefits.

In fact, the assignment to Cook Children’s is attached to Appellants’ third

amended original petition as exhibit D. We take this pleaded fact, supported by

Appellants’ jurisdictional evidence, as true. See Miranda, 133 S.W.3d at 228.

Section 271.152 waives sovereign immunity for suits brought by assignees of

those entitled to enforce a contract with a local governmental entity under

subchapter I. See First-Citizens Bank & Tr. Co. v. Greater Austin Area

Telecomms. Network, 318 S.W.3d 560, 568–69 (Tex. App.—Austin 2010, no

pet.). Therefore, we reject the contention that Cook Children’s—as the assignee

of the benefits owed to S.W.’s son J.W.—lacks standing to bring a breach-of-

contract suit against the Hospital under the waiver of immunity set forth in section

271.152.

Having determined that S.W., individually and as next friend of J.W., and

Cook Children’s possess standing to assert a breach-of-contract claim against

19

the Hospital under the statutory waiver of immunity set forth in section 271.152,

we reject the Hospital’s contention that the Plan is not a “contract subject to this

subchapter” because it is not an agreement by Appellants. Appellants pleaded

and presented jurisdictional evidence establishing their standing to bring suit to

enforce the Plan although they were not signatories to it.

2. The Hospital’s Contention that the Plan Is Not an

Agreement for Appellants to Provide Services to the Hospital

The Hospital also contends that the Plan does not meet the statutory

definition of a “contract subject to this subchapter” because it is not an

agreement to provide services to the Hospital; that is, the Hospital contends that

“the Plan contains no provisions or language whatsoever where [Appellants]

agree to provide any goods or services of any kind to the Hospital.” And the

Hospital asserted in its brief and at oral argument that because “the Plan in this

case contains no agreements to provide employment or other services to the

Hospital and does not identify any performance that covered persons must

complete to be entitled to benefits,” section 271.152’s waiver of immunity does

not apply.9 The plain language of the statute, however, as well as the

construction of it by Texas courts, is contrary to the Hospital’s position.

9

During oral argument, counsel for the Hospital argued that the Plan did

not constitute a contract under chapter 271 because “it doesn’t contain the

essential term of an agreement by the claimant for the claimant to provide

services to the governmental entity.” The Hospital’s counsel agreed that if the

job duties of each of the 100 to 200 employees of the Hospital constituting the

services provided by each of them to the Hospital were described in the Plan, it

“might very well be a contract under 271.”

20

The statute provides that immunity is waived for a breach-of-contract claim

when a local governmental entity that is authorized by statute or the constitution

to enter into a contract in fact does enter into a “contract subject to this

subchapter.” Tex. Loc. Govt. Code Ann. § 271.152. And a “contract subject to

this subchapter” is “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.

Juxtaposing the plain language of these two statutory provisions, no requirement

exists—as asserted by the Hospital—that the “claimant” in the breach-of-contract

suit be the person or the entity providing services to the governmental entity in

order for a contract to meet the definition of a “contract subject to this

subchapter.” To the contrary, as set forth above, courts recognize that section

271.152 waives a governmental entity’s immunity from suit when a breach-of-

contract claim is brought by a third-party beneficiary or an assignee of a “contract

subject to this subchapter.” See, e.g., Basic Capital Mgmt., Inc., 348 S.W.3d at

900–01; First-Citizens Bank & Tr. Co., 318 S.W.3d at 568–69.

And, likewise, juxtaposing the plain language of sections 271.151 and

271.152, no requirement exists—as asserted by the Hospital—that in order to

qualify as a “contract subject to this subchapter,” a contract actually be the

service contract; instead, to be a “contract subject to this subchapter,” a contract

must include essential terms of a service provided to the governmental entity,

even if that service is not the primary purpose of the contract. See Lubbock Cty.

21

Water Control & Improvement Dist. v. Church & Akin, L.L.C., 442 S.W.3d 297,

302 (Tex. 2014) (“We also agree with Church & Akin that the agreement to

provide services to the governmental entity ‘need not be the primary purpose of

the agreement.’”); Kirby Lake Dev., Ltd., 320 S.W.3d at 839 (affirming court of

appeals’s rejection of governmental entity’s argument that agreement did not

constitute provision of services to entity); see also Byrdson Servs., LLC v. S. E.

Tex. Reg’l Planning Comm’n, 516 S.W.3d 483, 485 (Tex. 2016) (reversing court

of appeals’s decision that chapter 271 did not apply because Planning

Commission’s contracts with Byrdson did not state essential terms “for providing

goods or services to the local governmental entity”); Ben Bolt-Palito, 212 S.W.3d

at 327 (explaining that “the statute’s legislative history indicates that, by enacting

section 271.152, the [l]egislature intended to loosen the immunity bar so ‘that 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.’” (quoting House Comm. on Civ. Practices, Bill Analysis, Tex. H.B.

2039, 79th Leg., R.S. (2005))).

But, nonetheless, even if the Hospital is correct that to qualify as a

“contract subject to this subchapter” the Plan must state the essential terms of an

agreement for S.W. to provide services to the Hospital, the Plan does contain

those essential terms. The Plan is seventy-four pages long. As set forth above,

the Plan states that the Hospital is “pleased to offer the benefits under this Plan

for you and your covered family members as an expression of our appreciation

22

for your efforts on behalf of our Company” and is “for the benefit of eligible

Employees and their eligible Dependents.” An Employee is any person

employed on a regular basis by the “Company” in the conduct of the

“Company’s” regular business who is regularly scheduled to work at least thirty-

two hours per week and who is classified as a common-law Employee.

Employees are required to contribute toward the cost of Employee and

Dependent coverage. Such required contributions are subtracted from the

Employee’s gross pay each pay period. The Plan provides that it “is

administered by the Plan Administrator [which is the Hospital], with Group

Resources, an Administrative Service Agent, acting as [a] Claims Paying agent.”

Administrative Service Agent is defined as “the firm providing administrative

services to the Plan Administrator [the Hospital] in connection with the operation

of the Plan, such as maintaining current eligibility data, billing, processing and

payment of Claims[,] and providing the Plan Administrator with any other

information deemed necessary. Group Resources is the Administrative Services

Agent for the Plan.”

Thus, contrary to the Hospital’s assertion, the Plan does contain the

essential terms of services to be provided to the Hospital by Employees. The

essential terms of the services to be provided by its Employees include being

regularly scheduled to work at least thirty-two hours per week, and in exchange

for performing the service of at least thirty-two hours per week of work or “efforts

on behalf of the [Hospital]” and for consideration in the form of payment of

23

premiums deducted from their paychecks, Employees may contract with the

Hospital as the Plan Administrator for health-insurance benefits as specifically

set forth under the detailed terms of the Plan. Although these services by the

Employee are not the primary purpose of the Plan, the Plan does set forth the

essential terms for Employees providing services to the Hospital—a regular work

schedule of at least thirty-two hours per week, employment on the effective date

of the Plan or after a ninety-day waiting period, and continued employment along

with premium payments.

We reject the Hospital’s contention that the Plan is not a “contract subject

to this subchapter” based on the alleged deficiency of failing to state the essential

terms of the agreement for providing services to the local governmental entity.

Appellants pleaded and presented jurisdictional evidence that the Plan does

state essential terms of an agreement for Employees like S.W. to provide

services to the Hospital.

3. The Hospital’s Contention that the Plan Contains No Essential Terms

Finally, the Hospital argues that the Plan does not meet the statutory

definition of a “contract subject to this subchapter” because it “clearly contains no

essential terms.” Any written, authorized contract that states the essential terms

of an agreement for providing services to the governmental entity triggers the

waiver of immunity under chapter 271. Lubbock Cty. Water Control &

Improvement Dist., 442 S.W.3d at 302. There is no statutory definition for

“essential terms,” but the Supreme Court of Texas has characterized “essential

24

terms” as, among other things, “the time of performance, the price to be paid,

and the service to be rendered.” Williams, 353 S.W.3d at 138–39 (internal

quotation omitted); see also Kirby Lake Dev., Ltd., 320 S.W.3d at 838 (stating

that a written contract states the essential terms when it outlines the names of

the parties, the property at issue, and the parties’ “basic obligations”). Courts

consider each contract separately on a case-by-case basis to determine its

essential terms. See T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218,

221 (Tex. 1992). The Plan sets forth the essential terms of an employee’s

eligibility to participate in the Plan (as discussed above) and the Hospital’s

obligations when it accepts an employee’s premiums by deducting monies from

an employee’s paycheck. Thus, the Plan addresses the essential terms of time

of performance, price to be paid, and service to be rendered.

Having determined that the Plan sets forth the essential terms for the

Hospital’s provision and administration of the Plan, S.W.’s payment for the Plan

via payroll deductions, and the services to be rendered under the Plan, we reject

the Hospital’s contention that the Plan is not a “contract subject to this

subchapter” because it “clearly contains no essential terms.” Appellants pleaded

and presented jurisdictional evidence that the Plan does contain its essential

terms.

4. The Hospital’s Reliance on Lesniak

The primary case relied upon by the Hospital in its brief and during oral

argument is United Healthcare Choice Plus Plan for City of Austin Employees v.

25

Lesniak, 2015 WL 7951630, at *1–3. In Lesniak, the City established a self-

funded insurance plan to provide medical benefits to its eligible employees and

contracted with United HealthCare Services, Inc. to administer the plan. Id. at *1.

Lesniak and his daughter were covered under the plan, and Lesniak paid

premiums to the plan for this coverage. Id. Lesniak sued the City and the Plan

for breach of contract, alleging that they had wrongfully denied benefits for a

portion of his daughter’s treatment at an inpatient facility. Id. The City and the

Plan filed a joint plea to the jurisdiction, which the trial court denied.

On appeal, the Austin Court of Appeals addressed the City and Plan’s

contention that chapter 271 did not apply “because Lesniak does not provide any

services to the City directly pursuant to the Plan.” Id. at *2. Because the Plan

Documents submitted by the City and the Plan in support of their plea to the

jurisdiction could not be construed as containing an agreement by Lesniak to

provide employment or other services to the City or identify any performance that

covered persons must complete to be entitled to benefits, because “the record

contains no other contracts stating the essential terms of any services to be

provided by any party, and [because] Lesniak’s pleadings do not allege the

existence of any other contract that the City and the Plan have breached except

for these Plan Documents,” the Austin Court of Appeals held that chapter 271 did

not apply to waive the City’s immunity from suit. Id. at *3. The Austin Court of

Appeals was careful, however, to premise its holding on the limited record before

it, stating that “[o]n this record, we conclude that the contracts under which

26

Lesniak sues the City and the Plan for breach of contract do not fall within the

limited waiver of immunity” in chapter 271. Id. at *3.

Contrary to the facts in Lesniak, however, the Plan here does identify

performance or services covered persons must complete to be entitled to

benefits—they must be routinely assigned to work at least thirty-two hours per

week, be employed on the date the Plan was executed or after a ninety-day

waiting period, and pay premiums via paycheck deductions. And the record

before us, unlike the record in Lesniak, contains not only the Plan but also two

other contracts: the Hospital’s contract with FSL and the Hospital’s contract with

Group Resources, which both state essential terms for providing services to the

Hospital. Also unlike Lesniak’s pleadings, Appellants’ pleadings do plead

breach-of-contract claims against the Hospital for breach of the Plan and for

breach of the FSL policy. Thus, because the record before us contains pleadings

and jurisdictional evidence absent from the record in Lesniak, we apply the law to

the record that is before us and reach a different result.

E. Summary

In summary, Appellants met their burden of pleading facts and providing

some evidentiary support showing the elements of a substantial breach-of-

contract claim necessary to trigger a waiver of immunity under chapter 271—that

the Hospital is a local governmental entity that is authorized by statute to enter

into a contract; that the Plan is a written contract; that the Plan states the

essential terms of the agreement for providing services to the Hospital; that the

27

Plan was properly executed on behalf of the Hospital; that Appellants have

pleaded breach-of-contract damages against the Hospital that fall within the

limitation on damages available under section 271.153; and that Appellants

possess standing to sue for breach of the Plan because they are “at least” third-

party beneficiaries of the Plan. See Zachry Constr. Corp., 449 S.W.3d at 109–10

(explaining that when the claimant pleads facts with some evidentiary support

that constitute a claim for which immunity is waived, the claimant has shown a

substantial claim). In other words, Appellants have met their burden with respect

to these elements or requisites of a section 271.152 waiver of immunity for a

governmental entity in a breach-of-contract suit. See McMahon Contracting,

L.P., 277 S.W.3d at 464. Accordingly, we sustain Appellants’ first issue.10

We also sustain Appellants’ fifth issue, arguing that the trial court erred by

granting the Hospital’s plea to the jurisdiction “[a]s to Plaintiffs’ additional tort

claims against the Hospital” because Appellant’s live pleading asserts no tort

claims against the Hospital.11

IV. CONCLUSION

Having sustained Appellants’ first and fifth issues, we reverse the trial

court’s order granting the Hospital’s plea to the jurisdiction concerning

10

Because we have sustained Appellants’ first issue and reversed the trial

court’s order, we need not address Appellants’ issues 2, 3, and 4 that raise

alternative grounds for reversal. See Tex. R. App. P. 47.1 (providing that

appellate court must address only issues necessary to disposition of appeal).

11

The Hospital’s brief contains no response to this issue.

28

Appellant’s breach-of-contract claims against the Hospital. We remand this case

to the trial court for further proceedings consistent with this opinion.

/s/ Sue Walker

SUE WALKER

JUSTICE

PANEL: WALKER, MEIER, and GABRIEL, JJ.

DELIVERED: April 5, 2018

29