Southeast Texas Record

Saturday, February 29, 2020

Appeals court dismisses utility company's suit against Fort Bend Independent School District

By Taryn Phaneuf | Nov 22, 2016

Late 01

TYLER — A utility company can’t force a school district to settle an outstanding invoice for services because a state law grants the district immunity from lawsuits.

In a decision delivered Oct. 31, a three-member panel of the 12th Court of Appeals in Tyler dismissed a breach of contract claim brought by TXU Energy Retail Company against the Fort Bend Independent School District. At the time, however, the two parties were not operating under a valid written contract, the court determined, which undermines the utility company’s ability to sue the school district.

In 2010, the Fort Bend ISD started its search to procure an electricity provider, seeking bid for one- or two-year contracts beginning June 2011. In May 2010, at the end of the competitive bidding process, the district made a one-year deal with TXU Energy Retail Company to supply electricity. The contract gave TXU the option to unilaterally extend service for another year, through May 2013, as long as it gave 90 days notice.

Early on during the contracted year, the district and TXU negotiated a new contract that would continue service through May 2014 with a similar option to extend a year. The new contract superseded the old one.

However, in January 2013, the district informed TXU that the second contract was void because it believed agreeing to a contract that extended past June 2013 violated competitive bidding rules. The school began the process of soliciting bids while TXU continued to provide service. As a result of the bidding process, the district entered an agreement with a different provider, and TXU terminated service at the end of July 2013.

Six months later, in December 2013, TXU sent a final invoice to the district for nearly $3.2 million — an amount it said the district owed based on a recalculation of electricity charges from the beginning of the second contract. It said the charges aligned with a provision of the original contract that allowed TXU to charge a standard list price offer rate for service after the termination of that contract. The district refused to pay the balance, leading TXU to file a lawsuit involving several allegations, including an amended claim that added a breach of the 2010 contract.

Responding to two motions for summary judgment, the 116th District Court in Dallas County dismissed the claims against the school district because of a lack of subject-matter jurisdiction. The 12th Court of Appeals was asked to review the second dismissal, involving the breach of contract claims. Writing for the panel, Justice Greg Neely affirmed the district court’s ruling.

On its appeal, TXU attempted to argue the school district had agreed to pay a higher rate for electricity consumed after the end of the 2010 contract. Thus, it should pay the unresolved amount on the December 2013 invoice. But the appeals court didn’t consider that argument because it agreed with the district court that it didn’t have jurisdiction over the case because the two entities weren’t bound by a written contract.

Under state law, government entities, including school districts, are immune from lawsuits over any claims not based on a valid written contract. When the second contract was voided, the school district no longer waived its immunity and couldn’t be sued.

TXU argued the initial contract was still in place because the second agreement was invalidated. But the court disagreed, saying the 2010 contract gave the utility provider a chance to extend, which it didn’t do. Without an extension, the contract lapsed in May 2012.

“As set forth in the Dallas court’s opinion, two years was the longest possible term for which the District could enter into a contract,” the appellate panel’s opinion stated. “Although the parties sought to replace the 2010 contract with a second contract for a longer term, the second contract violated competitive bidding statutes and was declared void. The legal effect of this voidance is that from June 1, 2012, through July 31, 2013, the parties were not operating under a valid written contract. Absent a valid written contract, the district could not waive governmental immunity and it is immune from suit.”

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Organizations in this Story

Fort Bend Independent School District