Supreme Court of Texas.
BROWN & GAY ENGINEERING, INC., Petitioner,
Zuleima OLIVARES, Individually and as the Representative of the Estate of Pedro Olivares, Jr., & Pedro Olivares, Respondents
Argued October 15, 2014
Opinion Delivered: April 24, 2015
*119 ON PETITION FOR REVIEW FROM THE COURT OF APPEALS FOR THE FOURTEENTH DISTRICT OF TEXAS
Attorneys & Firms
William R. Allensworth, Allensworth & Porter L.L.P., Austin, for Amicus Curiae American Council of Engineering Companies of Texas.
Murray Fogler, Beck Redden LLP, Houston, for other interested party Mike Stone Enterprises, Inc.
Sean Higgins, Wilson Elser Moskowitz Edelman & Dicker LLP, Houston, for Petitioner Brown & Gay Engineering, Inc.
Ricardo Molina, Molina Law Firm, Houston, for Respondent Zuleima Olivares, Individually and as the Representative of the Estate of Pedro Olivares, Jr., & Pedro Olivares.
Justice Devine joined.
The doctrine of sovereign immunity bars suit against the government absent legislative consent. In this case, a private engineering firm lawfully contracted with a governmental unit to design and construct a roadway, and a third party sued the firm for negligence in carrying out its responsibilities. The firm filed a plea to the jurisdiction seeking the same sovereign-immunity protection that the governmental unit would enjoy had it performed the work itself. The trial court granted the plea, but the court of appeals reversed, holding that the firm was not immune from suit. We hold that extending sovereign immunity to the engineering firm does not serve the purposes underlying the doctrine, and we therefore decline to do so. Accordingly, we affirm the court of appeals’ judgment.
During the early hours of January 1, 2007, an intoxicated driver entered an exit ramp of the Westpark Tollway in Fort Bend County. He proceeded east in the westbound lanes for approximately eight miles before colliding with a car driven by Pedro Olivares, Jr. Both drivers were killed.
The Fort Bend County portion of the Tollway fell under the purview of the Fort Bend County Toll Road Authority, a local government corporation created to design, build, and operate the Tollway. Rather than utilize government employees to carry out its responsibilities, the Authority entered into an Engineering Services Agreement with Brown & Gay Engineering, Inc. pursuant to Texas Transportation Code section 431.066(b), which authorizes local government corporations to retain “engineering services required to develop a transportation facility or system.” Under that agreement, the Authority delegated the responsibility of designing road signs and traffic layouts to Brown & Gay, subject to approval by the Authority’s Board of Directors.1 Brown & Gay was contractually responsible for furnishing the necessary equipment and personnel to perform its duties and was required to *120 maintain insurance for the project, including workers’ compensation, commercial general liability, business automobile liability, umbrella excess liability, and professional liability.
Olivares’s mother, individually and as representative of his estate, and his father sued the Authority and Brown & Gay, among others,2 alleging that the failure to design and install proper signs, warning flashers, and other traffic-control devices around the exit ramp where the intoxicated driver entered the Tollway proximately caused Olivares’s death. The Authority filed a plea to the jurisdiction on governmental-immunity grounds. The trial court denied the plea, but on interlocutory appeal the court of appeals reversed, holding that the Authority was immune from claims based on its discretionary acts related to the placement and sufficiency of signs and other traffic-control and traffic-safety devices. Id. at 129. On remand, the Olivareses nonsuited the Authority, whose immunity is no longer at issue in this proceeding.
Brown & Gay then filed its own plea to the jurisdiction, arguing that it was an employee of the Authority being sued in its official capacity and was therefore entitled to governmental immunity. See Authority as that term is defined in the Texas Tort Claims Act.3 401 S.W.3d 363, 378–79 (Tex.App.–Houston [14th Dist.] 2013).
In this Court, Brown & Gay argues that its status as an independent contractor rather than a government employee does not foreclose its entitlement to the same immunity afforded to the Authority. It argues that the court of appeals’ reliance on the Tort Claims Act was misplaced because the Act “uses ‘employee’ to delineate the circumstances where the government will be liable under a waiver of immunity,” not “to limit the scope of ... unwaived governmental immunity.” Brown & Gay further argues that the purposes of sovereign immunity are served by extending it to private entities performing authorized governmental functions for which the government itself would be immune.
*121 II. Analysis
A. Origin and Purpose of Sovereign Immunity
Once again we are presented with questions about the parameters of sovereign immunity, the well-established doctrine “that ‘no state can be sued in her own courts without her consent, and then only in the manner indicated by that consent.’ ” Wichita Falls State Hosp. v. Taylor, 106 S.W.3d 692, 696 (Tex.2003).
Although the doctrine’s origins lie in the antiquated “feudal fiction that ‘the King can do no wrong,’ ” modern-day justifications revolve around protecting the public treasury. Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401, 414 (Tex.1997) (Hecht, J., concurring) (outlining modern political and financial justifications for sovereign immunity).
Sovereign immunity thus protects the public as a whole by preventing potential disruptions of key government services that could occur when government funds are unexpectedly and substantially diverted by litigation. It also recognizes that the Legislature has the responsibility to determine how these public funds will be spent. But with this benefit comes a significant cost: in “shield[ing] the public from the costs and consequences of improvident actions of their governments,” Id.
In this case, we do not consider whether a governmental unit is immune from suit or whether the government’s immunity has been waived. Instead, a private company that performed allegedly negligent acts in carrying out a contract with a governmental unit seeks to invoke the same immunity that the government itself enjoys. With the considerations outlined above in mind, we examine the parties’ arguments.
B. Effect of Statutes Extending or Limiting Immunity
Notwithstanding the doctrine’s judicial origins, both parties argue in part that the Legislature has resolved whether to extend sovereign immunity to a private contractor like Brown & Gay. Brown & Gay cites a statute that explicitly prohibits private parties that contract with the government to finance, construct, operate, maintain, or manage correctional facilities from claiming sovereign immunity in a suit arising from services under the contract. TEX. GOV’T CODE §§ 495.001, .005.5 Brown & Gay infers from this provision that sovereign immunity extends to private entities contracting to perform government functions, unless otherwise provided by statute. We disagree. The fact that a statute recognizes that private contractors are not entitled to sovereign immunity under certain circumstances does not imply that such entities are entitled to immunity in all other situations.
On the other hand, the Olivareses contend that affirmative statutory extensions of immunity to private contractors in some instances demonstrate legislative intent to foreclose such immunity absent a specific legislative grant. For example, the Transportation Code provides that an independent contractor of a regional transportation authority that “performs a function of the authority or [certain other specified entities] is liable for damages only to the extent that the authority or entity would be liable” for performing the function itself. TEX. TRANSP. CODE § 452.056; see also id. § 452.0561 (extending the same immunity to independent contractors of certain statutory transportation entities). The Olivareses argue that the absence of similar legislation applicable to contractors of local government corporations like the Authority evinces legislative intent to deprive such contractors of immunity. That may be the case, but it does not answer the question before us.
Sovereign immunity is a common-law creation, and “it remains the judiciary’s responsibility to define the boundaries of the ... doctrine and to determine under what circumstances sovereign immunity exists in the first instance.” Id. Accordingly, the absence of a statutory grant of immunity is irrelevant to whether, as a matter of common law, the boundaries of sovereign immunity *123 encompass private government contractors exercising their independent discretion in performing government functions.6 For the reasons discussed below, we hold that they do not.
C. Sovereign Immunity and Private Contractors
1. Extending Sovereign Immunity to Brown & Gay Does Not Further the Doctrine’s Rationale and Purpose
Guiding our analysis of whether to extend sovereign immunity to private contractors like Brown & Gay is whether doing so comports with and furthers the legitimate purposes that justify this otherwise harsh doctrine. Brown & Gay contends that extending immunity serves these purposes. We disagree.
Seizing on the general purpose of protecting the public fisc, Brown & Gay argues that immunity for government contractors will save the government money in the long term. More specifically, while Brown & Gay recognizes that its exposure to defense costs and a money judgment will not affect the Tollway project’s cost to the government, Brown & Gay asserts that the increased costs generally associated with contractors’ litigation exposure will be passed on to the government, resulting in higher contract prices and government expense. Citing the same rationale, an amicus brief urges us to adopt a framework that would extend sovereign immunity to a private entity performing discretionary government work, so long as the contractor is authorized to do so and the government would be immune had it performed the work itself. In proposing this test, the amicus contends that, just as sovereign immunity has been extended to political subdivisions performing governmental functions, it should be extended to private entities authorized to perform those functions.
As an initial matter, we note that Brown & Gay cites no evidence to support its proposed justification and ignores the many factors at play within the highly competitive world of government-contract bidding. It also disregards the fact that private companies can and do manage their risk exposure by obtaining insurance, as Brown & Gay did in this case. But even assuming that holding private entities liable for their own negligence in fact makes contracting with those entities more expensive for the government, this argument supports extending sovereign immunity to these contractors only if the doctrine is strictly a cost-saving measure. It is not.
Sovereign immunity has never been defended as a mechanism to avoid any and all increases in public expenditures. Rather, it was designed to guard against the “unforeseen expenditures” associated with the government’s defending lawsuits and paying judgments “that could hamper government functions” by diverting funds from their allocated purposes. IT–Davy, 74 S.W.3d at 853. Immunizing a private contractor in no way furthers this rationale. Even if holding a private party liable for its own improvident actions in performing a government contract indirectly leads to higher overall costs to government entities in engaging private contractors, those costs will be reflected in the negotiated contract price. This allows the government to plan spending on the project with reasonable accuracy.
*124 By contrast, immunizing the government—both the State and its political subdivisions—from suit directly serves the doctrine’s purposes because the costs associated with a potential lawsuit cannot be anticipated at the project’s outset. Litigation against the government therefore disrupts the government’s allocation of funds on the back end, when the only option may be to divert money previously earmarked for another purpose.7 It is this diversion—and the associated risk of disrupting government services—that sovereign immunity addresses. Accordingly, the rationale underlying the doctrine of sovereign immunity does not support extending that immunity to Brown & Gay.
2. Sovereign Immunity Does Not Extend to Private Companies Exercising Independent Discretion
We have never directly addressed the extension of immunity to private government contractors, but our analysis in K.D.F. required us to interpret statutory language that is not at issue here; however, in rejecting the private company’s assertion that any lawsuit against it was “indirectly” a lawsuit against the system, we tellingly noted:
While sovereign immunity protects the activities of government entities, no sovereign is entitled to extend that protection ad infinitum through nothing more than private contracts. [The private entity] is not entitled to sovereign immunity protection unless it can demonstrate its actions were actions of the Kansas government, executed subject to the control of [the system].
Id. This reasoning implies that private parties exercising independent discretion are not entitled to sovereign immunity.
The control requirement discussed in Id. at 466.
This limitation on the extension of immunity to government contractors is echoed in other cases. For example, in Yearsley, 309 U.S. at 20, 60 S.Ct. 413 (holding that a contractor directed by the federal government to construct several dikes was immune from claims arising from the resulting erosion and loss of property when the damage was allegedly caused by the dikes’ existence, not the manner of their construction).
We cited Id. at 644.
In each of these cases, the complained-of conduct for which the contractor was immune was effectively attributed to the government. That is, the alleged cause of the injury was not the independent action of the contractor, but the action taken by the government through the contractor.9 In *126 this case, the Olivareses do not complain of harm caused by Brown & Gay’s implementing the Authority’s specifications or following any specific government directions or orders. Under the contract at issue, Brown & Gay was responsible for preparing “drawings, specifications and details for all signs.” Further, the Olivareses do not complain about the decision to build the Tollway or the mere fact of its existence, but that Brown & Gay was independently negligent in designing the signs and traffic layouts for the Tollway. Brown & Gay’s decisions in designing the Tollway’s safeguards are its own.10
Similar principles have been echoed in Texas appellate court decisions, cited by Brown & Gay, addressing the extension of immunity to private agents of the government. Two of these cases extended immunity to private law firms hired to assist the government with collecting unpaid taxes. 827 S.W.2d at 479–80. In contrast, the Olivareses do not assert that Brown & Gay is liable for the Authority’s actions; they assert that Brown & Gay is liable for its own actions.
Regardless of whether these cases were correctly decided, the government’s right to control that led these courts to extend immunity to a private government contractor is utterly absent here. The evidence shows that Brown & Gay was an independent contractor with discretion to design the Tollway’s signage and road layouts. We need not establish today whether some degree of control by the government would extend its immunity protection to a private party; we hold only that no control is determinative.11
*127 Finally, Brown & Gay cites Id. at 890. However, the terms of the contract, the relationship between the state agency and the contractor, and the direct implication of state funds in that case distinguish it from the case at hand.
In Foster, which implicated both the state-funded insurance plan and the agency’s duty to indemnify Aetna, the underlying suit threatens only Brown & Gay’s pockets.
In sum, we cannot adopt Brown & Gay’s contention that it is entitled to share in the Authority’s sovereign immunity solely because the Authority was statutorily authorized to engage Brown & Gay’s services and would have been immune had it performed those services itself. That is, we decline to extend to private entities the same immunity the government enjoys for reasons unrelated to the rationale that justifies such immunity in the first place. The Olivareses’ suit does not threaten allocated government funds and does not seek to hold Brown & Gay liable merely for following the government’s directions. Brown & Gay is responsible for its own negligence as a cost of doing business and may (and did) insure against that risk, just as it would had it contracted with a private owner.
D. Justifications for Qualified and Official Immunity Do Not Support the Extension of Sovereign Immunity to Private Parties
In addition to the cost-saving rationale discussed above, Brown & Gay cites the U.S. Supreme Court’s opinion in Id.
Brown & Gay’s reliance on Id.
Qualified immunity is a uniquely federal doctrine, calling into further doubt City of Lancaster v. Chambers, 883 S.W.2d 650, 653 (Tex.1994).
In this case, Brown & Gay has never argued that the official-immunity defense may be asserted by a person performing government work “on something other than a permanent or full-time basis.” Filarsky, 132 S.Ct. at 1660. Nor has it ever pled or argued that the elements of the defense are satisfied here. Instead, Brown & Gay argues that it is entitled to the same immunity that the government *129 itself enjoys. But the policies underlying official and qualified immunity are simply irrelevant to that contention.
Brown & Gay also argues that declining to extend sovereign immunity to contractors like Brown & Gay will make it difficult for the government to engage talented private parties fearful of personal liability. As noted above, such speculation fails to take into account a private party’s ability to manage that liability exposure through insurance. It also ignores the countervailing considerations that make contracting with the government attractive, not the least of which is lack of concern about the government’s ability to pay.
Moreover, a long line of Texas case law recognizes government contractors’ liability for their negligence in road and highway construction. See, e.g., Strakos v. Gehring, 360 S.W.2d 787, 790, 793–94 (Tex.1962) (holding, in the context of rejecting the “accepted work” doctrine, that a county contractor hired to relocate fencing alongside widened roads was not insulated from tort liability for injuries that occurred after the county accepted the work but were caused by the condition in which the contractor left the premises). Brown & Gay cites no evidence supporting a shortage of willing contractors notwithstanding this line of cases.
We decline to extend sovereign immunity to private contractors based solely on the nature of the contractors’ work when the very rationale for the doctrine provides no support for doing so. We hold that the trial court erred in granting Brown & Gay’s plea to the jurisdiction and that the court of appeals properly reversed that order. Accordingly, we affirm the court of appeals’ judgment.
Chief Justice Guzman joined.
Justice Brown did not participate in the decision.
Chief Justice Guzman, concurring in the judgment.
Immunity protects the government. An independent contractor is not the government. Therefore, immunity does not protect an independent contractor. That simple syllogism seems to me to resolve this case.
An independent contractor may act as the government, in effect becoming the government for limited purposes, and when it does, it should be entitled to the government’s immunity. A statutory example is Section 495.005 of the Government Code, which provides that “[a] private vendor operating under a contract [for correctional facilities and services] may not claim sovereign immunity in a suit arising from the services performed”.2
In determining whether an independent contractor is acting as or only for the government, the extent of the government’s control over the independent contractor’s actions is relevant but not conclusive. For example, the government’s control over its lawyer is necessarily limited by the lawyer’s duty under the rules of professional conduct to “exercise independent professional judgment” in representing a client.3 That limited control notwithstanding, a lawyer has been said to be immune from suit for his conduct in representing a governmental entity.4 Courts have concluded that a construction contractor’s immunity from suit may depend, not on a governmental entity’s control over the contractor’s work, but rather over whether the suit complains of the very existence of a project, a governmental decision, as opposed to the contractor’s performance.5 A contractor may act for itself in the sense that it is liable for negligent performance of its work, but insofar as it is simply implementing the government’s decisions it is entitled to the government’s immunity.6 An independent contractor’s authority or even agency to serve the government are also relevant, but the ultimate issue is whether the independent contractor is actually authorized by the government to act in its place.
The Fort Bend County Toll Road Authority tasked Brown & Gay with selecting *131 and designing road signs and supervised the firm’s work. But the Authority did not tell Brown & Gay how to do the work. The discretion Brown & Gay retained separated it from the Authority and thus from the Authority’s immunity.7 I therefore concur in the Court’s judgment.
But I cannot join its opinion. In my view, it is unnecessary, and also incorrect, to argue, as the Court does, that affording a highway contractor immunity does not serve immunity’s purpose in shielding the government from financial liability. Brown & Gay argues that contractor liability, or the cost of insurance to cover it, increases construction costs, and consequently contract costs to the government, long-term. The Court’s response is that the purpose of immunity is only to protect the government from unforeseen expenditures, not merely to save costs. The Court’s position is contradicted by the very authority on which it relies: “While the doctrine of sovereign immunity originated to protect the public fisc from unforeseen expenditures that could hamper governmental functions, it has been used to shield the state from lawsuits seeking other forms of relief”.8 The Court’s restricted view of the purpose of immunity is not supported by authority.
The Authority maintained no full-time employees.
The Olivareses initially sued the Authority, Harris County, Fort Bend County, the Texas Department of Transportation, and the Harris County Toll Road Authority. They amended their petition to add Brown & Gay and Michael Stone Enterprises, Inc. as defendants. Harris County, Fort Bend County, TxDOT, and the Harris County Toll Road Authority have all been nonsuited. Stone Enterprises is not a party to the petition for review filed in this Court.
The Tort Claims Act defines “employee” as “a person, including an officer or agent, who is in the paid service of a governmental unit by competent authority, but does not include an independent contractor, an agent or employee of an independent contractor, or a person who performs tasks the details of which the governmental unit does not have the legal right to control.” TEX. CIV. PRAC. & REM. CODE § 101.001(2).
We will use the term sovereign immunity throughout the remainder of the opinion to refer to both doctrines.
“A private vendor operating under a contract authorized by this subchapter may not claim sovereign immunity in a suit arising from the services performed under the contract by the private vendor or county.” TEX. GOV’T CODE § 495.005.
To that end, Brown & Gay is correct that the Tort Claims Act does not create sovereign immunity; it “provides a limited waiver” of that immunity. Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 224 (Tex.2004).
As noted above, private parties like Brown & Gay have an established means of protecting themselves from the specter of costly litigation—insurance. Indeed, as noted above Brown & Gay was contractually required to, and did, purchase several categories of insurance coverage on the Tollway project. The premiums for this coverage were undoubtedly taken into account during the bidding process.
The Fifth Circuit noted that the contractors’ entitlement to dismissal was not jurisdictional. 589 F.3d at 207.
One federal district court aptly summarized the framework governing the extension of derivative immunity to federal contractors as follows:
The rationale underlying the government contractor defense is easy to understand. Where the government hires a contractor to perform a given task, and specifies the manner in which the task is to be performed, and the contractor is later haled into court to answer for a harm that was caused by the contractor’s compliance with the government’s specifications, the contractor is entitled to the same immunity the government would enjoy, because the contractor is, under those circumstances, effectively acting as an organ of government, without independent discretion. Where, however, the contractor is hired to perform the same task, but is allowed to exercise discretion in determining how the task should be accomplished, if the manner of performing the task ultimately causes actionable harm to a third party the contractor is not entitled to derivative sovereign immunity, because the harm can be traced, not to the government’s actions or decisions, but to the contractor’s independent decision to perform the task in an unsafe manner. Similarly, where the contractor is hired to perform the task according to precise specifications but fails to comply with those specifications, and the contractor’s deviation from the government specifications actionably harms a third party, the contractor is not entitled to immunity because, again, the harm was not caused by the government’s insistence on a specified manner of performance but rather by the contractor’s failure to act in accordance with the government’s directives.
Bixby v. KBR, Inc., 748 F.Supp.2d 1224, 1242 (D.Or.2010).
At oral argument, Brown & Gay’s counsel recognized that the details of the Tollway project, or the “discretionary functions” as put by counsel, were delegated to Brown & Gay.
The amicus asserts that “no policy reason” supports employing a control-oriented analysis. In doing so, the amicus implicitly recognizes that policy concerns are central to deciding whether immunity should be extended. As discussed at length above, the policy behind immunity does not support its extension here regardless of whether a control-oriented analysis applies.
In 883 S.W.2d 650, 654 (Tex.1994).
§ 452.056(d) (“[A]n independent contractor ... that ... performs a function of [a regional transportation authority or certain other public transportation entities] is liable for damages only to the extent that the authority or entity would be liable if the authority or entity itself were performing the function....”); id. § 454.002(b) (“An independent contractor that on behalf of a municipality provides mass transportation service that is an essential governmental function ... is liable for damages only to the extent that the municipality would be liable if the municipality were performing the function.”); id. § 460.105(c) (“[A]n independent contractor of [a coordinated county transportation authority] that performs a function of the authority is liable for damages only to the extent that the authority would be liable if the [authority] itself were performing the function.”).
Id. § 495.005.
TEX. DISCIPLINARY R. PROF’L CONDUCT 2.01.
Ross v. Linebarger, Goggan, Blair & Sampson, L.L.P., 333 S.W.3d 736, 742, 745–747 (Tex.App.–Houston [1st Dist.] 2010, no pet.).
See Yearsley ‘s “government-contractor immunity” from liability where the lawsuit attacked Congress’s project rather than contractors’ own acts).
We recognized in Strakos v. Gehring, 360 S.W.2d 787, 803 (Tex.1962) (op. on rehearing)). That such a contractor acts as the government and may therefore be entitled to its immunity follows from the same principle.
The Legislature has also recognized that compliance with governmental direction may be a prerequisite for limits on liability. See, e.g., TEX. CIV. PRAC. & REM. CODE § 97.002 (“A contractor who constructs or repairs a highway, road, or street for the Texas Department of Transportation is not liable to a claimant for personal injury, property damage, or death arising from the performance of the construction or repair if, at the time of the personal injury, property damage, or death, the contractor is in compliance with contract documents material to the condition or defect that was the proximate cause of the personal injury, property damage, or death.”).
Tex. Dept. of Transp. v. Sefzik, 355 S.W.3d 618, 621 (Tex.2011) (per curiam) (emphasis added) (citations omitted).