Texas Supreme Court Retroactive Ruling
The Texas Supreme Court rendered an opinion on a Petition for Review on Friday, March 15, 2024, and decided that a new law passed in 2023 by the Texas legislature, signed by Governor Abbott on June 9, 2023, (effective immediately) could be applied to cases already on file in Texas Courts. This was qualified by the Court in its opinion with the condition that the court finds that failure to enforce the new requirements would lead to an inequitable or unjust result.
The opinion was written in a case originally filed in 2020, involving a construction contract between a city and a contractor and the conflicts form required by Texas law to be signed by the construction contractor to enter a contract with a municipal entity. The City of Hutto, Texas was sued by a construction contractor that claimed it had not been fully paid and the City claimed the contract was not properly signed due to the lack of submission of a disclosure of interested parties. The 2020 case was appealed and after a 2022 decision by the appellate court in Amarillo, a petition for review was filed with the Texas Supreme Court; Legacy Hutto LLC v. City of Hutto, Texas, et al.; from Williamson County; 7th Court of Appeals District (07-21-00089-CV, ___ SW3d ___, 07-18-22.
That is a lot of background to make the point that a case filed in 2020 that worked its way to the Texas Supreme Court was decided in 2024 by the application of a new 2023 law.
The new legislation, HB 1817 which amended Texas Government Code, Section 2252.908(d) prohibits a governmental entity from entering into certain contracts with a business unless it submits a disclosure of interested parties to the governmental entity when the contract is signed. Chapter 2252 defines a governmental entity as nearly everyone you could think of including the Texas Supreme Court.
Municipal entities are subject to the Texas Local Government Code Chapters 252, 271 and Texas Government Code Chapters (too many to list here) for purchases of goods and services; but municipal procurement is a broad topic and the subject of a different blog. (there are a few on our firm’s blog page)
Back to the Hutto case; the City argued that the lack of disclosure meant that the contract was not “properly executed,” as required by Chapter 271 of the Local Government Code, which waives a governmental entity’s immunity to suit for breach of contract. Texas Local Government Code Section 271.152 waives sovereign immunity to suit for the purpose of adjudicating a claim for breach of the contract. Hutto argued that its immunity to suit was not waived for the Contractor’s claim absent the signed contract, and missing disclosure.
The 2023 amended Government Code Sec. 2252.908 requires that a governmental entity notify a business of the failure to submit a disclosure of interested parties, and lacking the disclosure the contract is voidable. Section 2252.908(f-1)(1) states a contract is voidable for failure to provide the disclosure “only if: (1) the governmental entity or state agency submits to the business entity written notice of the business entity’s failure to provide the required disclosure; and (2) the business entity fails to submit to the governmental entity or state agency the required disclosure on or before the 10th business day after the date the business entity receives the written notice…”
The Texas Supreme Court opined that “Texas H.B. 1817 modifies the law that applies to this case. The district court should address the new statutory requirements in the first instance.” As a result, the contract dispute will be returned to the Williamson County District Court where it was initially filed in 2020 and the new 2023 provision of Section 2252.908 presumably will be applied by that court.
Please do not rely on this article as legal advice. We can tell you what the law is, but until we know the facts of your given situation, we cannot provide legal guidance. This website is for informational purposes and not for the purposes of providing legal advice.
