Posted by Rich Phillips, Melissa Davis, Emily Fitzgerald, and Connor Bourland
In its weekly orders on Friday, March 15, the Texas Supreme Court issued opinions in four argued cases. The Court did not grant any new petitions for review.
No. 17-0336, City of Denton v. Rushing — This interlocutory appeal from an order denying the City of Denton’s plea to the jurisdiction arose from City employees’ suit for breach of the City’s Policies and Procedures Manual. The employees argued that the manual created a unilateral contract for which the City could be sued under Texas Local Government Code sections 271.151-.160, which waive governmental immunity for certain contracts with local governmental entities. The City argued that the manual could not create a contract because it contained a general disclaimer stating that, “the contents of this manual do not in any way constitute the terms of a contract of employment.” In an opinion by Justice Devine, the Court agreed with the City. The Court held that although some of the provisions of the manual could suggest contractual intent, the disclaimer prevented the formation of a contract and, thus, the waiver in the Local Government Code did not apply. The Court held that while a policy manual can form the basis of a contract, it could not do so here because of the broad disclaimer.
No. 17-0423, Hays Street Bridge Restoration Group v. City of San Antonio — This case also arose from a plaintiff's attempt to invoke the waiver of governmental immunity in Texas Local Government Code sections 271.151-.160. In this case, the plaintiff sued the City of San Antonio seeking specific performance of a contract related to the restoration and preservation of the Hays Street Bridge. In the contract, the plaintiff promised to raise funds for the project and to transfer the funds to the City and the City promised to use those funds for the project. The plan included acquisition of a tract near the bridge that could be used for parking, educational facilities, restrooms, a park, and hike and bike trails. After the plaintiff arranged for the donation of the tract, the City contracted to sell that land to a private company instead of using it for the bridge project. The plaintiff sued, seeking specific performance of the parties' agreement. In an opinion by Chief Justice Hecht, the Court held first that the City was acting in a governmental capacity when it entered into the contract, and thus the City was entitled to immunity unless it has been waived. The Court then considered whether the waiver in the Local Government Code applied to suits for specific performance. Although the waiver excludes certain types of damages from the scope of the waiver, it does not exclude the remedy of specific performance. Accordingly, the Court held that the statute waived the City's immunity from suit for a claim for specific performance.
No. 17-0588, Hillman v. Nueces County — The Supreme Court held that a former assistant district attorney’s suit against Nueces County was barred by governmental immunity. Hillman served as an assistant district attorney in Nueces County. He sued Nueces County, asserting that he was fired for refusing an instruction to withhold exculpatory evidence from the defense while he was preparing to prosecute a charge of intoxicated assault and leaving the scene of an accident. The county asserted that Hillman’s claim was barred by governmental immunity. In an opinion by Justice Boyd, the Supreme Court agreed with the county. The Court held that its prohibition on terminating an at-will employee for the sole reason that the employee refused to perform an illegal act, as articulated in Sabine Pilot Service, Inc. v. Hauck, 687 S.W.2d 733 (Tex. 1985), was inapposite because Sabine Pilot involved a private-sector employer, not a governmental employer protected by immunity. The Court declined Hillman’s request to extend Sabine Pilot to governmental employers. Further, the Court held that the Michael Morton Act, which requires the prosecution to disclose exculpatory evidence to the defense, does not clearly or unambiguously waive governmental immunity and is thus immaterial to the immunity analysis. Finally, the Court declined Hillman’s request to abolish governmental immunity altogether, deferring to the Legislature to deal with such policy concerns. Justice Guzman authored a concurring opinion, joined by Justices Lehrmann and Devine, urging the Legislature to address whether sovereign immunity should be waived when the employee alleges the termination was for the sole reason that the employee refused to perform an illegal act.
No. 17-0666, International Business Machines Corp. v. Lufkin Industries, Inc. — In this case, the Court was again asked to address what it takes to contractually disclaim a future fraud claim. IBM sold Lufkin Industries a business-management software system that IBM misrepresented in material ways. Lufkin sued to recover the extensive losses it suffered as a result of IBM’s failure to deliver. The jury awarded Lufkin millions of dollars for fraud and fraudulent inducement but nothing for negligent misrepresentation or breach of contract. In an opinion by Justice Boyd, the Court reiterated that not every disclaimer of reliance is effective and that courts must examine the contract itself and the totality of the surrounding circumstances to apply the factors identified in Schlumberger and Forest Oil to determine whether the disclaimer bars the claims at issue. After considering those factors, the Court determined that the disclaimer here barred Lufkin's fraud claims. The Court rejected Lufkin's argument that its claims were based on representations in the parties' agreements. The Court also rejected Lufkin’s argument that the disclaimer provisions themselves were not negotiated, pointing out that Lufkin admitted to negotiating other deal points. But the Court held that the evidence conclusively established that IBM’s breach of the purchase contract caused Lufkin some amount of damages. Therefore, the Court reversed the jury’s contrary finding and remanded for new trial on that claim. Justice Blacklock did not participate in this decision.
In nominations news, the Senate judiciary committee voted to advance the nomination of Brett Busby to fill Justice Johnson's seat to the full Senate, which is expected to vote this week. And President Trump has nominated Justice Jeff Brown to become a federal district judge in the Southern District of Texas, so the governor will need to nominate a replacement once Justice Brown's nomination to the district court confirmed by the U.S. Senate. President Trump has also nominated Justice Ada Brown from the Dallas Court of Appeals to become a district judge in the Northern District of Texas.