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West Travis County Public Utility Agency v. Travis County Municipal Utility District No. 12

Court of Appeals of Texas, Third District, Austin

August 29, 2017

West Travis County Public Utility Agency, Appellant
v.
Travis County Municipal Utility District No. 12, Appellee

         FROM THE DISTRICT COURT OF TRAVIS COUNTY, 201ST JUDICIAL DISTRICT NO. D-1-GN-16-002274, HONORABLE STEPHEN YELENOSKY, JUDGE PRESIDING

          Before Justices Puryear, Pemberton, and Goodwin

          OPINION

          David Puryear, Justice

         In this appeal we must determine whether the Legislature's waiver of sovereign immunity as codified in the Texas Local Government Contract Claims Act (the Act), see Tex. Loc. Gov't Code §§ 271.151, .152, extends to legal claims arising from a wholesale water-services contract wherein the main provision of services flows from a governmental entity to a municipal water district (MUD) but wherein the MUD has also agreed to install and convey to the governmental entity a water meter to enable the MUD's water use to be accurately measured and billed. We hold that the Act's waiver of immunity does not extend to the contract and, accordingly, reverse the trial court's order denying the plea to the jurisdiction of the West Travis County Public Utility Agency (the Agency), grant the plea, and render judgment dismissing the claims of the Travis County Municipal Utility District No. 12 (MUD 12) for want of jurisdiction.

          BACKGROUND[1]

         In 2008, the Lower Colorado River Authority (LCRA) and MUD 12 entered into a "Water Sale Contract" (more commonly referred to by the parties as the "Raw Water Contract") in which the LCRA agreed to provide MUD 12 with raw water from the Colorado River in exchange for specified payments. "To measure the amount of [raw] water" provided to MUD 12, the Raw Water Contract also required MUD 12 to install-at its own expense-a meter, subject to the LCRA's approval of design and location, and to maintain and repair the meter as required under the Raw Water Contract's terms. The Raw Water Contract called for an effective date of the last date of execution by both parties and was duly executed.

         About a year later, the LCRA and MUD 12 entered into a second contract, the "Wholesale Water Services Agreement"-under which MUD 12 sued the Agency[2] and that allegedly waived the Agency's sovereign immunity-in which the LCRA agreed to provide MUD 12 with "wholesale services for the treatment of raw water and delivery of potable water" in exchange for MUD 12's agreement to pay for the services as provided in the contract. The Wholesale Water Services Agreement (the Services Contract) called for MUD 12's payment of each (1) a flat "Monthly Charge"; (2) a "Volumetric Rate" (based on the amount of potable water actually provided to MUD 12 as measured by a "Master Meter" to be installed by MUD 12 and accepted by the LCRA prior to the contract's effective date); and (3) a "Connection Fee" for each new retail water customer that MUD 12 acquired, with specified minium payments for connection fees. The Services Contract specified that its term would be the same as that agreed to in the Raw Water Contract: 40 years, unless terminated by either party as specified in the contracts.[3] The Raw Water Contract remained in force, and the Services Contract "in no way modifie[d] or amend[ed] the Raw Water Contract, nor the obligations and rights contained therein except with regard to the maintenance, repair and replacement, as necessary, of the Master Meter."

         With respect to the Master Meter-the fixture at the heart of this dispute-the Services Contract provided:

[MUD 12] shall install the Master Meter at or near the Delivery Point. The design, location and installation of the Master Meter is subject to prior review and approval by LCRA, which approval shall not be unreasonably withheld or delayed. LCRA acknowledges that timely review and approval of the plans for the Master Meter are necessary in order for [MUD 12] to begin providing service [to its retail customers] as contemplated by this Agreement. Accordingly, LCRA agrees to review the plans and either approve them or provide written comments specifically identifying any required changes within ten working days of receipt of the plans. If LCRA fails to either approve the submitted plans or provide the written comments within this ten-day period, the plans will be deemed approved. After completion of installation of the Master Meter, [MUD 12] shall dedicate and convey the Master Meter (together with associated easements, rights-of-way, permits, licenses or appurtenances) to LCRA free and clear of any liens, claims and encumbrances and execute an appropriate document in form and substance reasonably acceptable to LCRA evidencing the dedication and conveyance. Thereafter, the Master Meter will be part of the LCRA system and LCRA will repair, maintain and replace the Master Meter.

         Unlike the Raw Water Contract, which became effective upon both parties' execution of the document, the Services Contract provided that it would become effective only after the LCRA accepted the Master Meter:

"Effective date" means the date (i) this Agreement has been executed by both [MUD 12] and LCRA, (ii) LCRA has accepted the Highlands master meter and the 16-inch water line between LCRA's Highway 71 water line and the Highlands master meter and (iii) LCRA has provided a copy of its acceptance letter for the Highlands master meter and the 16-inch water line to [MUD 12].

Evidence admitted at the hearing demonstrates that MUD 12 spent over $100, 000 to install the Master Meter in two concrete tanks approximately 20 feet deep, located at the end of the LCRA's 24-inch transmission main-a location that was not "convenient" for MUD 12 because it required extending its own transmission lines by about 2 miles beyond its usage point to reach LCRA's designated Delivery Point. As one of MUD 12's witnesses explained, "You go to the LCRA; they don't come to you."

         In a proposed letter agreement from the LCRA to MUD 12, the LCRA enclosed (a) a letter accepting the completed Master Meter and (b) the "proposed" Services Contract, executed by the LCRA. MUD 12 indicated its acceptance of the Services Contract by signing the letter agreement and executing the Services Contract.

         The parties then conducted business under the terms of the Services Contract-the Agency delivering potable water to MUD 12 and MUD 12 paying for such services-until a dispute arose concerning the rates that the Agency was charging.[4] MUD 12 filed this lawsuit against the Agency, contending that the Agency breached the Services Contract by charging MUD 12 "excessive fees" and "setting excessive rates that are not authorized and/or are prohibited" by the Services Contract. MUD 12 pleaded that the Agency's sovereign immunity was waived by the Act because of MUD 12's agreement in the Services Contract to provide "services" to the Agency in the form ...


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