Scott K. Field, Justice

FROM THE DISTRICT COURT OF SAN SABA COUNTY, 424TH JUDICIAL DISTRICT
NO. 9589, HONORABLE EVAN C. STUBBS, JUDGE PRESIDING MEMORANDUM OPINION

This is an interlocutory appeal from the trial court's order granting the City of San Saba's plea to the jurisdiction in part and denying the plea in part. In a single appellate issue, the City contends that the trial court erred in denying its plea to the jurisdiction as to the Higginbothams' claim for the breach of a settlement agreement. Because we conclude that the City did not waive its governmental immunity by signing the settlement agreement, we will reverse the trial court's order in part and render judgment dismissing the Higginbothams' breach-of-contract claim.

BACKGROUND

In February 2014, sewage backed up into the Higginbothams' home. The Higginbothams sued both the City and San Saba Pecan, LP, alleging that this incident was caused by San Saba Pecan dumping pecan shells and residue into the public sewer system. The Higginbothams further alleged that the City was aware of San Saba Pecan's dumping activities and allowed them to continue. The Higginbothams brought tort claims against each defendant.

In April 2014, the Higginbothams, the City, and San Saba Pecan entered into a written agreement entitled "Agreement in Anticipation of Resolution of Issues and Settlement" (the Agreement). In the Agreement, the City and San Saba Pecan agreed to equally split the cost of repairing the Higginbothams' property. In return, the Higginbothams agreed to release the City and San Saba Pecan from all liability after the Higginbothams were satisfied with the repairs.

The City later filed a plea to the jurisdiction requesting that the trial court dismiss the Higginbothams' suit. In their Second Amended Petition, the Higginbothams added a breach-of-contract claim against each defendant. The Higginbothams alleged that the City committed anticipatory breach of the Agreement by filing the plea to the jurisdiction. The Higginbothams asked for specific performance and restitution. The City filed an amended plea to the jurisdiction requesting dismissal of all the Higginbothams' claims.

The trial court granted the City's plea to the jurisdiction as to the Higginbothams' tort claims but denied the plea as to their breach-of-contract claim. In its order, the trial court reasoned that the City's decision to enter into the Agreement was a proprietary function because it was an action conducted in its private capacity for the benefit only of those within its corporate limits. This interlocutory appeal followed. See Tex. Civ. Prac. & Rem. Code § 51.014(a)(8).

DISCUSSION

In its sole appellate issue, the City contends that the trial court erred in denying its plea to the jurisdiction as to the Higginbothams' breach-of-contract claim. We review a trial court's ruling on a plea to the jurisdiction de novo. See McLane Co. v. Texas Alcoholic Beverage Comm'n, 514 S.W.3d 871, 874 (Tex. App.—Austin 2017, pet. denied) (citing Houston Belt & Terminal Ry. Co. v. City of Houston, 487 S.W.3d 154, 160 (Tex. 2016)). "We must grant the plea to the jurisdiction if the [plaintiffs'] pleadings affirmatively negate the existence of jurisdiction." Heckman v. Williamson Cty., 369 S.W.3d 137, 150 (Tex. 2012).

Because the City is a subdivision of the state, it possesses governmental immunity from suit, which bars the Higginbothams' suit unless the City's immunity has been waived clearly and unambiguously by the legislature. See Wasson Interests, Ltd. v. City of Jacksonville, 489 S.W.3d 427, 429-30 (Tex. 2016) ("Political subdivisions of the state—such as counties, municipalities, and school districts—share in the state's inherent immunity."); National Media Corp. v. City of Austin, No. 03-16-00839-CV, 2018 WL 1440454, at *3 (Tex. App.—Austin Mar. 23, 2018, no pet. h.) (mem. op.) ("Without this legislative waiver, courts have no jurisdiction to adjudicate any claim against the municipality."). However, immunity only protects cities when they are performing governmental functions—"[a]cts done as a branch of the state"—not when they are performing proprietary functions—acts "not done as a branch of the state, but instead for the private advantage and benefit of the locality and its inhabitants." See Wasson, 489 S.W.3d at 433 (cleaned up).

Here, the parties disagree about which of the City's actions we should consider when applying our proprietary-governmental analysis. The City argues that the relevant action is "the operation of a sewer system," while the Higginbothams argue that "[t]he City of San Saba was performing a proprietary function, and not a governmental function, when it entered the [A]greement . . . ." The Higginbothams do not argue on appeal that the operation of a sewer system is a proprietary function. Therefore, our analysis turns on whether the relevant action by the City is its entering into the Agreement and, if so, whether entering into the Agreement was a proprietary function.

We begin with the Texas Supreme Court's plurality opinion in Texas A&M University-Kingsville v. Lawson, 87 S.W.3d 518 (Tex. 2002). In Lawson, the university terminated the plaintiff's employment, and the plaintiff sued the university. See id. at 518-19 (plurality op.). The parties reached a settlement agreement. Id. at 519. Later, the plaintiff brought an action against the university for allegedly breaching the settlement agreement. Id. The question before the Texas Supreme Court was, "If a government entity agrees to settle a lawsuit from which it is not immune, can it claim immunity from suit for breach of the settlement agreement?" Id. at 518. The plurality concluded that "when a governmental entity is exposed to suit because of a waiver of immunity, it cannot nullify that waiver by settling the claim with an agreement on which it cannot be sued." Id. at 521.

Following the plurality's reasoning in Lawson, Texas courts, including this Court, have concluded that, whereas a governmental entity does not have immunity from a suit for the breach of a settlement agreement when it was not immune from the underlying lawsuit, a governmental entity does have immunity from a suit for the breach of a settlement agreement when it was immune from the underlying lawsuit. In other words, courts have concluded that Lawson provides a carve-out from the general rule that governmental entities are immune from suit, and this carve-out only applies when the government is sued for breaching a settlement agreement when the government was not immune from the underlying claim. See A.I. Divestitures, Inc. v. Texas Comm'n on Envtl. Quality, No. 03-15-00814-CV, 2016 WL 3136850, at *8 (Tex. App.—Austin June 2, 2016, no pet.) (mem. op.) ("[B]ecause the Commission did not waive its sovereign immunity, the AFJ does not constitute an agreement settling a claim for which the Commission has waived its immunity . . . . The Lawson exception to sovereign immunity is simply not implicated when there has been no legislative waiver of the State's immunity."); Texas Dep't of Health v. Neal, No. 03-09-00574-CV, 2011 WL 1744966, at *4 (Tex. App.—Austin May 6, 2011, pet. denied) (mem. op.) ("The legislature has not waived immunity from suit over settlement agreements generally. It is important to note that the [Lawson] plurality expressly avowed this rule . . . and found a waiver of immunity in the situation at bar only because it concluded that the Legislature intended one.") (citations omitted); id. at *5 ("[T]he Department did not waive its immunity from suit on those claims. It follows that the Department did not waive its immunity from suit for breaching the agreement settling those claims. Lawson does not contradict this result; indeed, in its emphasis on effectuating the legislature's intent, it fully supports it."); see also Hughes v. Tom Green Cty., No. 03-16-00132-CV, 2017 WL 1534203, at *5 (Tex. App.—Austin Apr. 20, 2017, pet. filed) (mem. op.) ("[E]ven if we were to somehow construe the MPA as a settlement agreement, the holding in Lawson is limited to circumstances in which the government's immunity is statutorily waived."); Livecchi v. City of Grand Prairie, 109 S.W.3d 920, 922 (Tex. App.—Dallas 2003, pet. dism'd) ("[T]o avoid a plea to the jurisdiction for a breach of contract suit, the plaintiff must allege facts that present breaches of the settlement agreement and must show the settlement is for a suit in which the governmental entity waived sovereign immunity.").

In light of this case law, we conclude that the relevant action to which we must apply the proprietary-governmental analysis is the City's operation of a public sewer system. If it were true that the relevant action was the City's decision to enter into a settlement agreement and if, as the Higginbothams contend, that decision were a proprietary function, then a municipality would never be immune to a claim for the breach of a settlement agreement and the case law discussed above would be irrelevant. In the absence of clear authority to that effect, which the Higginbothams have not provided and we have not found, we cannot sanction such a broad waiver of governmental immunity.

The Higginbothams have not argued on appeal that operating a sewer system is a proprietary function, and we conclude that it is a governmental function. See PKG Contracting, Inc. v. City of Mesquite, 197 S.W.3d 388, 388-89 (Tex. 2006) (per curiam) ("Because the Legislature has statutorily included 'sanitary and storm sewers' among a municipality's governmental functions for purposes of tort liability, [Tex. Civ. Prac. & Rem. Code § 101.0215(a)(9)], and we see no reason to think that the classification would be different under the common law, we conclude that the City was acting in its governmental capacity when it contracted with PKG to construct a storm drainage system."). Because the operation of a sewer system is a governmental function, the City is immune from suit for claims arising from the operation, absent some waiver of immunity. Therefore, the mere fact that the City entered into an agreement to potentially settle the Higginbothams' claims does not negate the City's immunity. See, e.g., A.I. Divestitures, 2016 WL 3136850, at *8; Neal, 2011 WL 1744966, at *4-5.

We conclude that the trial court erred when it determined that the City's entering into the Agreement was a proprietary function and when it denied the City's plea to the jurisdiction as to the Higginbothams' breach-of-contract claim on that basis. Accordingly, we sustain the City's appellate issue.

CONCLUSION

We reverse the trial court's order to the extent that it denies the City's plea to the jurisdiction as to the Higginbothams' breach-of-contract claim, and we render judgment dismissing that claim.

/s/_________

Scott K. Field, Justice Before Chief Justice Rose, Justices Goodwin and Field Reversed and Rendered Filed: May 1, 2018