Appeals Court Upends Finding for Coach in Breach of Contract Case

Jan 2, 2009

A Texas state appeals court has reversed a trial court, which had found for a football coach who sued for breach of contract after he was suspended in connection with a hazing incident.
In reversing, the appellate court rejected plaintiff Damon Gracia’s assertion that the defendants waived their sovereign immunity under Tex. Loc. Gov’t Code Ann. §§ 271.151, 271.152 (2005)
Gracia was employed by the Donna Independent School District as a teacher and freshman football coach. In February 2005, a criminal investigation of hazing allegations in the high school boys’ athletic department was initiated. The investigation implicated Gracia, and the District suspended him. The District later notified Gracia that his teaching contract for the following year would not be renewed. In response to the District’s actions, Gracia requested a hearing examiner under the education code. See TEX. EDUC. CODE ANN. § 21.253 (Vernon 2006).
Before a hearing could take place, the District and Gracia entered into a settlement agreement. In the agreement, Gracia promised to tender a letter of resignation for his teaching contract and a motion to dismiss the hearing that he had requested. In return, the District promised to provide a neutral recommendation to prospective employers who inquired about Gracia’s employment history with the District. The agreement also contained a “miscellaneous” provision, which stated:
“Nothing contained in this Agreement shall constitute an acknowledgment that either DISD or Teacher have violated any laws, breached any agreements or acted improperly with respect to Teacher’s employment or termination of employment, [sic] with DISD. Teacher agrees and acknowledges that DISD, by entering into this Agreement and fulfilling its obligations hereunder, is not and shall not be considered an admission of any liability or wrongdoing by DISD. DISD agrees and acknowledges that Teacher, by entering into this Agreement and fulfilling its obligations hereunder, is not and shall not be considered an admission of any liability or wrongdoing by Teacher.”
The agreement was executed by the parties on May 11, 2005. On May 19, 2005, Gracia was arrested.
Gracia then sued the District for breach of contract, promissory estoppel, and negligence. The District answered with a general denial. Later, the District filed a plea to the jurisdiction. After considering the District’s plea to the jurisdiction and Gracia’s response, the trial court denied the plea. An interlocutory appeal followed.
In the District’s plea to the jurisdiction, it argued that “Gracia’s breach of contract claim was barred by sovereign immunity and that the local government code’s waiver of sovereign immunity dealing with contracts did not apply because the agreement was not a contract for goods and services. See TEX. LOC. GOV’T CODE ANN. §§ 271.151(2), 271.152 (Vernon 2005). Section 271.152 waives sovereign immunity for local governmental entities that enter into contracts that are ‘subject to this subchapter.’ Id. § 271.152. A contract subject to the applicable subchapter ‘means a written contract stating the essential terms of the agreement for providing goods or services to the local governmental entity . . . .’ Id. § 271.151(2). Gracia responded by arguing that the agreement resolved a termination dispute that was premised on Gracia’s teaching contract; therefore, the agreement involved a contract for services and waived the District’s sovereign immunity. The concurrence subscribes to the District’s argument, and it would bar Gracia’s suit because it believes that the underlying agreement is not premised on a contract for services.
“The issue, however, hinges on Gracia’s underlying claim. The Lawson case is the prism through which we should view how breach of contract claims implicate sovereign immunity. Tex. A&M Univ.-Kingsville v. Lawson, 87 S.W.3d 518 (Tex. 2002). In Lawson, a university faculty member sued his employer for violations of the Whistleblower Act. Id. at 518-19. A settlement agreement was reached between the parties; however, a dispute arose shortly after the agreement was reached. Id. at 519. The faculty member sued the university for breach of contract, and the university responded by filing a plea to the jurisdiction. The Texas Supreme Court, in a plurality opinion, held that when a governmental entity agrees to settle a lawsuit from which it is not immune, it is not immune from a suit for breach of the settlement agreement. Id. at 518.
“In rationalizing its decision, the Supreme Court noted that contractual claims against governmental entities may be generally categorized as claims for which immunity is waived and claims for which an administrative remedy is provided. Id. at 521. An action for a breach of a settlement agreement, however, does not neatly fall into either category. Id. The Lawson plurality found that:
“’Allowing suit against the government for breach of an agreement settling a claim for which immunity has been waived does not interfere with the Legislature’s policy choices. On the contrary, having determined to allow suits on such claims and prescribed the available remedies, the Legislature must surely have considered–indeed, hoped–that claims would often be settled. If anything, for the government to be immune from the enforcement of such settlements would impair the purposes of the waiver by limiting its effectiveness in cases not tried to a final judgment.’ Id. at 522.
“Basing its decision on legislative intent, the plurality rejected the appellate court’s waiver-by-conduct rationale, but ultimately affirmed the lower court’s decision to allow Lawson’s suit to proceed. Id. at 522-23.
Unlike Lawson, Gracia did not have a statutorily recognized claim pending in the trial court when he entered into an agreement with the District. The settlement agreement in this case was executed just as Gracia was instituting the administrative process that the State created for challenging the termination of teaching contracts. In short, Gracia settled a claim that, at that point in time, had no adjudicative value in our court system. If Gracia’s allegations are true, it strikes us as unfair to allow the District to renege on its promises without facing the legal consequences of its alleged actions. The Texas Supreme Court, however, has forestalled the waiver-by-conduct exception to sovereign immunity in situations where an administrative remedy is available. See IT-Davy, 74 S.W.3d at 857
Thus, the appeals court found that the “trial court erred in not dismissing Gracia’s breach of contract claim.”
The Donna Independent School District, et Al., v. Damon Gracia; Ct. App. Tex., 13th Dist., Corpus Christi-Edinburg; NUMBER 13-07-00255-CV, 2008 Tex. App. LEXIS 8085; 10/23/08
Attorneys of Record: (For appellants) Charles Willette Jr., WILLETTE & GUERRA, L.L.P., Brownsville, TX.; Melanie A. Moore, Brownsville, TX. (for appellee) Carlos Quintana, ATTORNEY at LAW, McAllen, TX.


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