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Romulus Group, Inc. v. City of Dallas

Court of Appeals of Texas, Fifth District, Dallas

May 2, 2017

ROMULUS GROUP, INC., Appellant
v.
CITY OF DALLAS, Appellee

         On Appeal from the 191st Judicial District Court Dallas County, Texas Trial Court Cause No. DC-14-15032.

          Before Justices Francis, Lang-Miers, and Whitehill

          MEMORANDUM OPINION

          MOLLY FRANCIS JUSTICE

         Romulus Group, Inc. challenges the trial court's orders granting the City of Dallas's pleas to the jurisdiction and dismissing its claims for breach of contract and attorney's fees. For reasons set out below, we reverse the trial court's orders and remand the case to the trial court for further proceedings consistent with this opinion.

         In 2011, the City solicited bids for a thirty-six-month contract to provide temporary clerical and professional labor. The contract specifications requested unit prices, or hourly rates, for a specific quantity of hours at which the bidders could provide temporary employees in twenty-five specific categories based on a skill level/classification criterion set by the City. All fees and charges were to be included in the bid rate.

         Romulus submitted a bid of $13, 503, 090. The bid was calculated by multiplying the unit cost, or hourly rate, by the annual quantity of hours for each category requested by the City. Romulus was the lowest bidder and was awarded the contract in January 2012. Under the contract, the City agreed to pay Romulus "in accordance with the Specifications and Bid." The contract also expressly disallowed any modifications "without written supplemental agreement executed by both parties." The contract could be terminated by the City with ten days advance written notice for cause or for convenience, but in such an event, the City was required to compensate Romulus "in accordance with the terms of this Contract for Contract Work properly performed prior to the date of termination . . . . "

         Romulus began performance, screening candidates for the positions and then supplying employees who provided services to the City. At some point, a dispute arose between Romulus and the City over the payment of some of these workers. The City complained Romulus failed to "meet its payroll obligations" to some employees. According to the City, Romulus designated some employees as "professional contractors" and paid these employees as "1099 contractors instead of W2 Romulus employees" in violation of the contract. Romulus complained the City had begun designating employees into a new category, "Clerical Positions Not Listed, " and was setting the pay rate for them and then adding a 21.8 percent markup, which Romulus said was below the contract rate and below a number at which it could "do business."

         In November 2013, the City terminated the contract and requested Romulus remit all invoices for services prior to the termination date for payment. Four months later, Romulus made written demand for almost $1.6 million in damages for the "underpayment for services provided." When the City failed to pay, Romulus sued the City for breach of a services contract and sought damages and attorney's fees under section 271.153 of the Texas Local Government Code. Attached to the petition were copies of the bid specifications and the contract.

         The City filed an answer that included special exceptions and a plea to the jurisdiction. In its plea, the City first asserted that Romulus's petition affirmatively demonstrated the alleged conduct did not constitute a breach of the contract. Specifically, the City argued Romulus alleged it "acceded to demands by the City to provide labor that was not contracted for, at rates that were below [Romulus's] costs to provide the labor." Thus, the City asserted the "alleged demands were not a breach of any promise in the contract." Second, the City alleged the requested damages were not contract damages and were not within the limitations required under section 271.153 of the local government code. Finally, the City argued Romulus did not have a valid claim for attorney's fees because such fees were not provided by contract or statute.

         At a hearing on the plea, the City continued its argument that the nature of Romulus's complaint was that the City demanded it provide services "outside the contract" and any damages were not in connection with the contract. Romulus responded the "demands" made by the City required "no different type of work" than under the contract, but the City "just called it something different." The trial court ordered Romulus to replead "due to ambiguous statements in the pleadings." Additionally, the trial court granted the plea as to attorney's fees and dismissed that claim for lack of subject matter jurisdiction.

         In response to the trial court's order, Romulus filed an amended pleading that alleged in part the following:

14. When it came time to pay [Romulus] for the services provided, however, [the City] re-designated certain of the temporary employees to a non-listed category called "Clerical Positions Not Listed, " and paid for them at a lower rate, even though the skill set and work required, in substance, was no different than that already encompassed by one of the other category designations and should have been paid for at the contracted-for rates.
15. In other words, [the City] merely used the non-listed label when it came time to pay [Romulus] so that [the City] could attempt to pay [Romulus] at a different rate. As a result, [the City] failed to pay the amount due and owing for the work [Romulus] actually provided to [the City].
16. [The City's] actions constitute a breach of the Contract and have resulted in severe underpayment to [Romulus]. [The City] terminated the Contract effective November 11, 2013, at which time [the City] failed to pay the balance of the amount due and payable under the Contract.

         The City specially excepted to the amended petition, arguing Romulus needed to identify at least one employee who had been re-designated to a non-listed category from a specific category, the rate at which the employee was paid that was below the agreed rate for the listed category, and when the alleged underpayment occurred. The City also specially excepted to Romulus's allegations regarding notice, asserting Romulus needed to allege facts demonstrating at least one specific breach of contract occurred within 180 days of a specified date of notice of breach to the City as required by Dallas City Code section 2-86.

         Following a hearing, the trial court sustained only the special exception as to notice and gave Romulus an opportunity to replead to address the notice issue. In response to the court's order, Romulus filed supplemental exhibits to its first amended petition. These exhibits included two "notice" letters dated September 13, 2013 and March 24, 2014 and the City's termination letter. One of ...


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