ISI CONTRACTING INC v. METROPOLITAN TRANSIT AUTHORITY OF HARRIS COUNTY (2025)

OPINION

A contractor appeals the trial court's dismissal of its claims against a local governmental entity for lack of subject-matter jurisdiction based on governmental immunity. We conclude that the contractor has shown a waiver of governmental immunity under the Local Government Contract Claims Act as to some of its claims and affirm in part and reverse and remand in part.

I. Factual and Procedural Background

In 2014 appellant/plaintiff ISI Contracting, Inc. and appellee/defendant Metropolitan Transit Authority of Harris County, Texas (“Metro”) entered into Metro Contract CT1500001 (“Contract”).¹ ISI agreed to perform road construction and install storm sewer lines near Metro's Burnett Street Transit Center (the “Project”). ISI began work and submitted pay requests for completed work, which were approved and paid, less retainage of five percent of each progress payment made.

In March 2015, ISI encountered underground pipes not disclosed in the design documents and recently installed CenterPoint power lines that interfered with the work and prevented installation of the sewer lines. Metro directed ISI to suspend work beginning August 31, 2015 to allow Metro to resolve the conflicts. ISI removed its personnel and equipment from the site but did not fully demobilize, leaving materials on-site pending Metro's direction to resume work.

Metro issued successive change orders extending the completion date three months at a time. ISI continued to maintain the site, including barricades and other traffic-control devices. ISI eventually demobilized workers and equipment but kept some materials on site.

Metro insisted that it needed the work to be completed and asked ISI for proposals to remobilize on different occasions. Metro agreed that there was work that needed to be performed and that ISI should be compensated in accordance with the additional work items within the Contract or in accordance with a fair and reasonable negotiation. The discussions concerning the Project continued for an extended period. Those discussions and meetings are discussed in detail in ISI's live pleading—“Plaintiff's Second Amended Original Petition” (“Petition”).

ISI alleges that Metro interfered with ISI's ability to perform its work by delaying ISI's work, including by (1) allowing other structures and facilities to interfere with the construction, (2) directing ISI to be on hold and not proceed with work when work could have been performed, (3) failing to issue notices to proceed or remobilize, (4) failing to sign and proceed under change order 98 after Metro had promised and agreed to sign and proceed under this change order, and (5) misleading ISI to believe that Metro was ready and able to proceed with the work when it was not. In January 2021, Metro gave notice that it was terminating the Contract for convenience under section X, article 24 of the Contract.

After Metro refused to pay what ISI demanded, ISI filed suit against Metro, asserting claims for breach of contract, quantum meruit, and promissory estoppel. Metro filed a plea to the jurisdiction based on governmental immunity (“Jurisdictional Plea”). Metro asserted that the Petition was insufficient to assert a claim falling within any waiver of governmental immunity, including the waiver provided by the Local Government Contract Claims Act. Metro did not submit any evidence in support of the Jurisdictional Plea and did not challenge the existence of any jurisdictional fact. The trial court granted the Jurisdictional Plea and dismissed ISI's claims with prejudice. The trial court did not specify the grounds for its ruling.

ISI filed a motion for leave to file a supplemental or amended petition and a motion for new trial or to reconsider and modify the order granting the Jurisdictional Plea. The trial court signed orders denying these motions, and ISI timely perfected this appeal from the trial court's final judgment.

II. Issues and Analysis

Under ISI's first issue it asserts that the trial court erred in granting the Jurisdictional Plea and dismissing all of its claims with prejudice. A defendant may seek a dismissal on the ground that the trial court lacks subject-matter jurisdiction over claims against that defendant due to governmental immunity by filing a plea to the jurisdiction. See City of Dallas v. Carbajal, 324 S.W.3d 537, 538 (Tex. 2010). Because Metro filed a plea to the jurisdiction challenging the pleadings, the trial court was required to determine if ISI alleged facts sufficient to demonstrate a waiver of Metro's governmental immunity that would give the trial court jurisdiction. See City of North Richland Hills v. Friend, 370 S.W.3d 369, 371–72 (Tex. 2012); Stamos v. Houston Indep. Sch. Dist., No. 14-18-00340-CV, 2020 WL 1528047, at *2 (Tex. App.—Houston [14th Dist.] Mar. 31, 2020, no pet.) (mem. op.). Whether ISI met this burden is a question of law that we review de novo. Stamos, 2020 WL 1528047, at *2. We construe the pleadings liberally in ISI's favor, consider ISI's intent, and accept as true the factual allegations in the pleadings. Id. A party suing a governmental entity bears the burden of affirmatively demonstrating the trial court's jurisdiction by alleging a valid waiver of immunity. Dallas Area Rapid Transit v. Whitley, 104 S.W.3d 540, 542 (Tex. 2003). To determine if the party has met that burden, we consider the facts alleged by the party and, to the extent it is relevant to the jurisdictional issue, any evidence submitted by the parties. Id.

A. Did the trial court err in granting the Jurisdictional Plea as to the contract claims raised in ISI's appellate argument?

Metro is entitled to immunity from suit under the doctrine of governmental immunity unless its immunity has been waived. Kownslar v. Metropolitan Transit Auth. of Harris Cnty., 661 S.W.3d 499, 502 (Tex. App.—Houston [14th Dist.] 2023, no pet.). ISI does not assert that Metro was engaged in a proprietary function. See Dallas/Fort Worth Int'l Airport Bd. v. Vizant Technologies, L.L.C., 576 S.W.3d 362, 366–67 (Tex. 2019). Because Metro was performing governmental functions when it entered into the contract and allegedly engaged in the acts or omissions at issue in this case, Metro enjoys governmental immunity, unless that immunity has been waived. See id.

Governmental immunity has two components: immunity from liability and immunity from suit. See Tooke v. City of Mexia, 197 S.W.3d 325, 332 (Tex. 2006). By entering into a contract, a governmental entity like Metro necessarily waives immunity from liability, voluntarily binding itself like any other party to the terms of agreement, but it does not waive immunity from suit. See id. If Metro enjoys immunity from suit under the doctrine of governmental immunity, a court lacks subject-matter jurisdiction. See Tex. Dep't of Transp. v. Jones, 8 S.W.3d 636, 638 (Tex. 1999).

On appeal the only waiver of governmental immunity asserted by ISI is the Local Government Contract Claims Act (“Act”). See Tex. Loc. Gov't Code Ann. § 271.151 et seq. The Act by clear and unambiguous language waives a local governmental entity's governmental immunity from suit for certain breach-of-contract claims.² See Zachry Constr. Corp. v. Port of Houston Auth., 449 S.W.3d 98, 106–07 (Tex. 2014); City of Dallas v. Albert, 354 S.W.3d 368, 377 (Tex. 2011). Section 271.152 of the Act provides that “a local governmental entity that is authorized by statute or the constitution to enter into a contract and that enters into a contract subject to this subchapter waives sovereign immunity to suit for the purpose of adjudicating a claim for breach of the contract, subject to the terms and conditions of this subchapter.” Tex. Loc. Gov't Code Ann. § 271.152 (West, Westlaw through 2023 4th C.S.). A “contract subject to this subchapter” includes “a written contract stating the essential terms of the agreement for providing goods or services to the local governmental entity that is properly executed on behalf of the local governmental entity.” Tex. Loc. Gov't Code Ann. § 271.151(2) (West, Westlaw through 2023 4th C.S.). Subject to an exception not applicable to today's case, the total amount of money awarded in an adjudication brought against a local governmental entity for breach of such a contract is limited to the following:

(1) the balance due and owed by the local governmental entity under the contract as it may have been amended, including any amount owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays or acceleration;

(2) the amount owed for change orders or additional work the contractor is directed to perform by a local governmental entity in connection with the contract;

(3) reasonable and necessary attorney's fees that are equitable and just; and

(4) interest as allowed by law, including interest as calculated under Chapter 2251, Government Code.

Tex. Loc. Gov't Code Ann. § 271.153(a),(c) (West, Westlaw through 2023 4th C.S.). Damages awarded in such an adjudication may not include “consequential damages, except as expressly allowed under Subsection (a)(1) ․ or ․ damages for unabsorbed home office overhead.” Tex. Loc. Gov't Code Ann. § 271.153(b) (West, Westlaw through 2023 4th C.S.). Thus, section 271.153 includes within the Act's waiver of governmental immunity claims for direct damages for breach of a “contract subject to this subchapter” as well as claims for consequential damages for such a breach for the increased cost to perform the work as a direct result of owner-caused delays or acceleration, but excluding other claims for consequential damages. See id. § 271.153(a),(b); Zachry Constr. Corp., 449 S.W.3d 98, 111–12.

To establish a waiver of immunity under the Act, a plaintiff must assert a claim for damages recoverable under section 271.153. See Tex. Loc. Gov't Code Ann. § 271.153; Zachry Constr. Corp., 449 S.W.3d at 109–10. But the purpose of section 271.153 “is to limit the amount due by a governmental agency on a contract once liability has been established, not to foreclose the determination of whether liability exists.” Kirby Lake Dev., Ltd. v. Clear Lake City Water Auth., 320 S.W.3d 829, 840 (Tex. 2010). The waiver of governmental immunity in the Act does not depend on ultimate liability on a claim. See id.; Garland Indep. Sch. Dist. v. Reeder General Contractors, Inc., No. 05-22-00855-CV, 2024 WL 1208304, at *8 (Tex. App.—Dallas Mar. 21, 2024, pet. denied) (mem. op.).

In the Zachry case, the Supreme Court of Texas stated that the waiver of immunity in the Act “does require a showing of a substantial claim that meets the Act's conditions.” Zachry Constr. Corp., 449 S.W.3d at 109. The high court stated that “[b]y ‘substantial’ claim we mean, as we held in Texas Department of Parks and Wildlife v. Miranda, that the claimant must plead facts with some evidentiary support that constitute a claim for which immunity is waived, not that the claimant will prevail.” Id. at 110. The only authority cited by the Zachry court for the definition of “substantial claim” is the Miranda case, which as the Zachry court noted, states that “[w]hen a plea to the jurisdiction challenges the pleadings, we determine if the pleader has alleged facts that affirmatively demonstrate the court's jurisdiction to hear the cause. We construe the pleadings liberally in favor of the plaintiffs and look to the pleaders’ intent.” Id. at 110 n.53. (quoting Texas Dept. of Parks and Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004) (citation omitted)). The Zachry case involved an appeal from a final judgment rendered after a jury trial, rather than an appeal from a ruling on a plea to the jurisdiction in which the governmental entity only challenged the pleadings. See Zachry Constr. Corp., 449 S.W.3d at 104. The parties have not cited and research has not revealed a precedent from the Supreme Court of Texas or this court concluding that this requirement of a substantial claim with some evidentiary support applies to a plea to the jurisdiction that argues the defendant has immunity from suit under the Act based only on a challenge to the pleadings. We presume, without deciding, that this requirement does apply in that situation and that it applies to today's case.

In the Petition ISI alleges that Metro is a transit authority and a political subdivision of the state of Texas created under chapter 451 of the Texas Transportation Code. Metro has not asserted otherwise. See Russell v. Metropolitan Transit Auth. of Harris Cnty., 343 S.W.3d 825, 828 (Tex. App.—Houston [14th Dist.] 2011, no pet.) (stating that Metro is a political subdivision of the state). A transit authority under chapter 451 of the Transportation Code is not a unit of state government, as that term is defined by Government Code section 2260.001. See Gov't Code Ann. § 2260.001(4) (West, Westlaw through 2023 4th C.S.). If as ISI alleges Metro is a political subdivision of this state that is a transit authority, Metro is not a county or a unit of state government as that term is defined by Government Code section 2260.001, and therefore Metro is a local governmental entity. See id.; Tex. Loc. Gov't Code Ann. § 271.151(3); Russell, 343 S.W.3d at 828. If Metro is a transit authority created under chapter 451 of the Texas Transportation Code, then Metro is authorized by statute to enter into a contract. See Tex. Transp. Code Ann. §§ 451.001(2), 451.055(a) (West, Westlaw through 2023 4th C.S.). ISI alleges that Metro entered into the Contract with ISI, and Metro agrees.

Liberally construing the Petition in ISI's favor, ISI alleges that Metro is a local governmental entity under the Act that is authorized by statute to enter into a contract and that has entered into a “contract subject to this subchapter”—the Contract. See Tex. Transp. Code Ann. §§ 271.151(2), 271.152. The Petition includes a copy of the Contract that shows the Contract is a written contract stating the essential terms of the agreement for providing goods or services to Metro that is properly executed on behalf of Metro.

Metro does not argue that the requirements of sections 271.151 and 271.152 are not satisfied as to the Contract. Rather, Metro argues that the alleged damages sought by ISI do not fall within the scope of section 271.153 and therefore there is no waiver of governmental immunity under the Act. See id. §§ 271.151, 271.152, 271.153. As to the breach of contract claims raised in its appellate challenges to the trial court's judgment, ISI argues that the Texas legislature has waived Metro's governmental immunity under the Act because ISI seeks damages allowed by section 271.153 of the Local Government Code. See Tex. Transp. Code Ann. §§ 271.151(2), 271.152, 271.153.

1. Claim for Unpaid Retainage and Termination for Convenience

In the Petition,³ ISI alleges that Metro breached the Contract by failing to pay ISI the amounts required to be paid by Metro under section X, article 24(F), including the retainage due and owed by Metro under the Contract. ISI asserted that through November 30, 2015, Metro withheld $106,892.59 in retainage, an amount equal to five percent of the value of the work ISI performed on the Project. ISI quoted from section VI, article 2 of the Contract, which requires Metro to make progress payments in percentages for the Work ⁴ that has been completed and to retain five percent for each progress payment amount until final completion and acceptance of the contract work from ISI. This provision provides that Metro shall pay the retainage to ISI upon Metro's review and acceptance of the Contract Work.

ISI relied on section X, article 24 of the Contract, which provides in pertinent part as follows:

A. [Metro] may terminate performance of the work under this Contract in whole or, from time to time in part, if the Contracting Officer[5] determines that a termination is in [Metro's] interest. The Contracting Officer shall effect such a termination by delivering to [ISI] a Notice of Termination specifying the extent of termination and the effective date.

․

D. After termination, [ISI] shall submit a final termination settlement proposal to the Contracting Officer in the form and with the certification prescribed by the Contracting Officer. [ISI] shall submit the proposal promptly, but no later than one (1) year from the effective date of termination, unless extended in writing by the Contracting Officer upon written request by [ISI] within this one-year period. However, if the Contracting Officer determines that the facts justify it, a termination settlement proposal may be received and acted on after one year or any extension. If [ISI] fails to submit the proposal within the time allowed, the Contracting Officer may determine, on the basis of information available, the amount, if any, due [ISI] because of the termination and shall pay the amount determined.

E. [ISI] and the Contracting Officer may agree upon the whole or any part of the amount to be paid because of the termination. The amount may include a reasonable allowance for profit on work done. However, the agreed amount, whether under this paragraph or Paragraph F. below, exclusive of costs shown in Subparagraph F.2 below, may not exceed the total Contract price as reduced by the amount of payments previously made and the Contract price of work not terminated. The Contract shall be amended, and [ISI] paid the agreed amount. Paragraph F. below shall not limit, restrict, or affect the amount that may be agreed upon to be paid under this paragraph.

F. If [ISI] and Contracting Officer fail to agree on the whole amount to be paid [ISI] because of the termination of work, the Contracting Officer shall pay [ISI] the amounts determined as follows, but without duplication of any amounts agreed upon under Paragraph E, above:

1. For Contract Work performed before the effective date of termination, the total (without duplication of any items) of:

a. The cost of this Work;

b. The cost of settling and paying termination settlement proposals under terminated subcontracts that are property chargeable to the terminated portion of the Contract if not included in Subdivision a. above; and

c. A sum, as profit on a. above, determined by the Contracting Officer to be fair and reasonable; however, if it appears that [ISI] would have sustained a loss on the entire Contract had it been completed, the Contracting Officer shall allow no profit under this subdivision and shall reduce the settlement to reflect the indicated rate of loss.

2. The reasonable costs of settlement of the Work terminated, including:

a. Accounting, legal, clerical, and other expenses reasonably necessary for the preparation of termination settlement proposals and supporting data;

b. The termination and settlement of subcontracts (excluding the amounts of such settlements); and

c. Storage, transportation, and other costs incurred, reasonably necessary for the preservation, protection, or disposition of the termination inventory.

G. Except for normal spoilage, and except to the extent that [Metro] expressly assumed the risk of loss, the Contracting Officer shall exclude from the amounts payable to [ISI] under Paragraph F. above, the fair value, as determined by the Contracting Officer, of property that is destroyed, lost, stolen, or damaged so as to become undeliverable to [Metro] or to a buyer.

H. The cost principles and procedures of Part 31 of the Federal Acquisition Regulation, in effect on the date of this Contract, shall govern all costs claimed, agreed to, or determined under this Article.

I. In arriving at the amount due [ISI] under this Article, there shall be deducted:

1. All unliquidated advance or other payments to [ISI] under the terminated portion of this Contract;

2. Any claim which [Metro] has against [ISI] under this Contract; and

3. The agreed price for, or the proceeds of sale of, materials, supplies, or other things acquired by [ISI] or sold under the provisions of this Article and not recovered by or credited to [Metro].

In the Petition ISI alleges that (1) in January 2021 Metro terminated performance of the work under the Contract under section X, article 24 of the Contract; (2) on or about October 30, 2021, ISI submitted its final termination settlement proposal (“Termination Proposal”) under section X, article 24(D) of the Contract; (3) not counting interest, the Termination Proposal was for Metro to pay ISI $193,050; (4) on December 16, 2021, Metro responded that it had determined that the Termination Proposal had no merit and was denied in its entirety; and (5) Metro stated that the Contract had been terminated and that Metro considered the matter closed. ISI asserts that Metro had the right to terminate performance of the work under the Contract under section X, article 24 but that this provision does not give Metro the right to terminate the Contract. ISI alleges that because Metro and ISI did not agree on the amount Metro should pay ISI because of the termination of the work, Metro must pay ISI the amounts listed in section X, article 24(F) of the Contract, including the retainage, which ISI asserts is part of the “cost of this Work” under section X, article 24(F)(1)(a). See 4922 Holdings, LLC v. Rivera, 625 S.W.3d 316, 326–27 (Tex. App.—Houston [14th Dist.] 2021, pet. denied) (concluding that the evidence was legally sufficient to support the jury's finding that the owner/general contractor failed to comply with contract by failing to pay the subcontractor retainage it withheld for the work that the subcontractor performed before the owner/general contractor terminated the contract for its convenience). ISI also alleged under Texas Rule of Civil Procedure 54 that all conditions precedent to the relief requested in the Petition have been performed, satisfied, waived, or excused. Metro did not specifically deny any condition precedent. See Pepper Lawson Horizon Int'l Group v Texas Southern Univ., 669 S.W.3d 205, 212 (Tex. 2023). ISI's allegations are supported by the testimony of its General Manager Brad Young in his affidavit which is attached to the Petition. ISI alleges that Metro breached the Contract by failing to pay ISI the amounts listed in section X, article 24(F) of the Contract, including $106,892.59 in retainage.

Metro asserts that ISI's breach-of-contract claim for the retainage does not fall within the scope of Local Government Code section 271.153 because (1) Section VI of the Contract provides that Metro does not have to pay retainage to ISI until after completion of the Contract Work and because the Contract Work was not completed, the retainage is not an amount due and owed under Local Government Code section 271.153(a)(1) or an amount owed under section 271.153(a)(2); (2) ISI's inclusion of the unpaid retainage amount in its final termination settlement proposal under section X, article 24(D) of the Contract does not impose on Metro a duty under the Contract to pay any retainage; and (3) ISI is not entitled to payment of any retainage under section X, article 24(F) of the Contract because retainage does not fall within the meaning of the term “The cost of this Work” as used in this provision.

As to the second point, presuming that ISI's inclusion of the unpaid retainage amount in its final termination settlement proposal under section X, article 24(D) does not impose on Metro a duty to pay any retainage, the absence of a duty for this reason is not relevant to whether Metro has a duty to pay the retainage under section X, article 24(F). As to the first and third points, Metro simply disagrees with ISI on the merits, interpreting the Contract not to require payment of the retainage under article 24(F) if ISI and the Contracting Officer fail to agree on the whole amount to be paid because of Metro's termination of the work for its convenience. This disagreement on the merits of ISI's breach-of-contract claim is not relevant to the determination of whether this claim falls within the Act's waiver of Metro's governmental immunity. San Antonio River Auth. v. Austin Bridge & Road, L.P., 601 S.W.3d 616, 630–31 (Tex. 2020); Wheelabrator Air Pollution Control, Inc. v. City of San Antonio, 489 S.W.3d 448, 453 (Tex. 2016) (stating that the purpose of a plea to the jurisdiction is to defeat a claim without regard to whether the claim has merit); Beaumont Indep. Sch. Dist. v. LRG-Loss Recovery Group, LLC, No. 09-22-00144-CV, 2023 WL 3521936, at *9–10 (Tex. App.—Beaumont May 18, 2023, pet. denied) (mem. op.). Metro argues that if the parties are unable to agree on the amount of the termination offer, the Contract only requires Metro to pay ISI the cost of the work performed before the effective date of termination, which Metro contends it has done. But the Contract, which is attached to the Petition, provides that in that situation Metro must pay all the items listed in section X, article 24(F), and the cost of the Contract Work performed before the effective date of termination is only the first item listed. As to this first item, ISI alleges that Metro has not paid this full amount because it has failed to pay the retainage.

At times in its briefing Metro appears to argue that for a balance to be “due and owed” by Metro under the Contract, the Act requires that the contract explicitly state that the balance is due and owed or specifically state, for example, that Metro must pay the retainage under section X, article 24(F). But the Supreme Court of Texas explained in the Zachry case that “the balance due and owed” by the local governmental entity under the contract is “the amount of damages for breach of contract payable and unpaid,” even if the amount is not “stated in,” “expressly provided for in,” or even “ascertainable from” the contract. San Antonio River Auth., 601 S.W.3d at 630 (quoting Zachry Constr. Corp., 449 S.W.3d at 110–12, 114). Direct damages for breach of section X, article 24(F) qualify as a balance due and owed by Metro under the Contract even if that provision does not contain the word “retainage.” See Zachry Constr. Corp., 449 S.W.3d at 111.

On appeal Metro notes that ISI has stated that the damages sought in some of its breach of contract claims overlap with each other. Metro appears to argue that if these damages overlap, then there is no waiver of Metro's governmental immunity. In the judgment a plaintiff may only recover a single recovery of damages for an injury or loss, but in the pleadings a plaintiff may assert alternative claims seeking the same or different damages to compensate for the same injury or loss. See Tex. R. Civ. P. 48; Hatfield v. Solomon, 316 S.W.3d 50, 58–59 (Tex. App.—Houston [14th Dist.] 2010, no pet.). Courts determine subject-matter jurisdiction on a claim-by-claim basis. Herrera v. Mata, 702 S.W.3d 538, 543 (Tex. 2024). Thus, if a plaintiff pleads alternative claims seeking overlapping damages and the defendant challenges the trial court's subject-matter jurisdiction over these claims, the trial court determines its subject-matter jurisdiction over each claim, and the fact that the damages sought overlap is not relevant to whether the trial court has subject-matter jurisdiction over each claim. See Bailey v. Smith, 581 S.W.3d 374, 386 (Tex. App.—Austin 2019, pet. denied) (concluding that the fact that an issue in the claim under consideration was also an issue in other claims by the plaintiff was irrelevant to determining the trial court's subject-matter jurisdiction over the claim under consideration).

Construing the Petition liberally in ISI's favor, considering ISI's intent, and accepting as true the factual allegations in the Petition, we conclude that ISI alleged facts sufficient to affirmatively demonstrate that (1) in its claim for breach of section X, article 24(F), including Metro's failure to pay the retainage, ISI seeks to recover a balance due and owed by Metro under the Contract, reasonable and necessary attorney's fees that are equitable and just, and interest allowed under chapter 2251 of the Texas Government Code; (2) the clear and unambiguous waiver of governmental immunity under the Act applies to ISI's breach-of-contract claim against Metro for breach of section X, article 24(F); and (3) ISI has pled facts with some evidentiary support that constitute a breach-of-contract claim for failure to pay the amounts listed in article 24(F), for which Metro's governmental immunity has been waived under the Act.⁶ See Tex. Transp. Code Ann. § 271.153(a); In re Roy Frischhertz Construction Co., 401 Fed. Appx. 861, 862 (5th Cir. 2010) (not designated for publication); 4922 Holdings, LLC, 625 S.W.3d at 326–27; Stamos, 2020 WL 1528047, at *2; Beaumont Indep. Sch. Dist., 2023 WL 3521936, at *9–10.

2. Additional Work

ISI asserts that Metro's governmental immunity has been waived under the Act as to ISI's breach-of-contract claim seeking to recover the amount owed for change orders or additional work Metro directed ISI to perform. See Tex. Transp. Code Ann. § 271.153(a)(2). ISI bases this claim on Metro's alleged breach of section X, article 18 of the Contract; that article provides in pertinent part:

A. The President & Chief Executive Officer may or the duly authorized representative, at any time, without notice to the sureties, if any, by written order designated or indicated to be a change order, make changes in the Work within the general scope of the Contract ․

B. Any other written order or an oral order (which, as used in this paragraph, includes direction, instruction, interpretation, or determination) from the President & Chief Executive Officer or the duly authorized representative that causes a change shall be treated as a change order under this Article; provided, that [ISI] gives the Contracting Officer written notice stating the date, circumstances, and source of the order and that [ISI] regards the order as a change order.

C. Except as provided in this Article, no order, statement, or conduct of the President & Chief Executive Officer or the duly authorized representative shall be treated as a change under this Article or entitle [ISI] to an equitable adjustment hereunder.

D. If any change under this Article causes an increase or decrease in [ISI's] cost of, or the time required for, the performance of any part of the Work under this Contract, whether or not changed by any such order, the President & Chief Executive Officer or the duly authorized representative shall make an equitable adjustment and modify the Contract in writing. However, except for a “proposal for adjustment” (hereafter referred to as “proposal”) based on defective specifications, no proposal for any change under Paragraph B. above shall be allowed for any costs incurred more than twenty calendar (20) days before [ISI] gives written notice as required.

F.[sic] The parties agree that the terms and conditions of this contract may only be modified and/or amended by mutual agreement between the parties. Said mutually agreed upon amendment and/or modification shall be written and executed by both parties prior to becoming effective.

G. [ISI] must submit any proposal under this Article within thirty calendar (30) days after:

1. Receipt of a written change order under Paragraph A. above, or

2. The furnishing of a written notice under Paragraph B. above by submitting to the Contracting Officer a written statement describing the general nature and amount of the proposal, unless this period is extended by [Metro]. The statement of proposal for adjustment may be included in the notice under Paragraph B. above.

In its Petition ISI alleged that Metro breached the Contract by failing to make the equitable adjustment required by article 18(D). ISI also alleged under Texas Rule of Civil Procedure 54 that all conditions precedent to the relief requested in the Petition have been performed, satisfied, waived, or excused. Metro did not specifically deny any condition precedent. See Pepper Lawson Horizon Int'l Group, 669 S.W.3d at 212. ISI's allegations are supported by the testimony of its General Manager Brad Young.

Metro asserts that it is not arguing that any alleged change order is not enforceable; rather, Metro argues that any alleged change order was never a written change order executed by Metro and thus was not an independent “contract subject to this subchapter” under the Act. See Tex. Transp. Code Ann. § 271.151(2). But ISI does not allege that any such change order was an independent “contract subject to this subchapter” under the Act. Instead, liberally construing the Petition ISI asserts a claim based on Metro's alleged breach of article 18(D) by failing to make an equitable adjustment and written modification of the Contract (“Equitable Adjustment Claim”). Construing the Petition liberally in ISI's favor, considering ISI's intent, and accepting as true the factual allegations in the Petition, we conclude that ISI alleged facts sufficient to affirmatively demonstrate that (1) in its Equitable Adjustment Claim ISI seeks to recover an amount owed for change orders or additional work ISI was directed to perform by Metro in connection with the Contract, reasonable and necessary attorney's fees that are equitable and just, and interest allowed under chapter 2251 of the Texas Government Code; (2) the clear and unambiguous waiver of governmental immunity under the Act applies to ISI's Equitable Adjustment Claim; and (3) ISI has pled facts with some evidentiary support that constitute a breach-of-contract claim for failure to make an equitable adjustment and written modification of the Contract, for which Metro's governmental immunity has been waived under the Act.⁷ See Tex. Transp. Code Ann. § 271.153(a); Little Cypress-Mauriceville Consol. Indep. Sch. Dist. v. PAL Environmental Safety Corp., No. 09-24-00069-CV, 2025 WL 243029, at *9–10 (Tex. App.—Beaumont, Jan. 16, 2025, no pet.) (mem. op.); Garland Indep. Sch. Dist., 2024 WL 1208304, at *7; Stamos, 2020 WL 1528047, at *2.

3. Alleged Breaches of Articles 10 and 23 of Section X of the Contract

ISI alleges that Metro breached section X, article 10 of the Contract by failing to make an equitable adjustment to the Contract. This provision of the Contract provides in pertinent part:

A. [ISI] shall promptly, and before the conditions are disturbed, give a written notice to the [Metro] Project Manager of:

1. Subsurface or latent physical conditions at the site which differ materially from those indicated in this Contract ․

B. The [Metro] Project Manager shall investigate the site conditions promptly after receiving the notice. If the conditions do materially so differ and cause an increase or decrease in [ISI's] cost of, or the time required for, performing any part of the Work under this Contract, whether or not changed as a result of the conditions, an equitable adjustment shall be made and the Contract modified in writing accordingly.

C. No request by the Contractor for an equitable adjustment to the Contract under this Article shall be allowed, unless the Contractor has given the written notice required.

ISI also alleges that Metro breached section X, article 23 of the Contract by failing to make the adjustment required by that provision, which provides as follows:

A. The Contracting Officer may order [ISI], in writing, to suspend, delay, or interrupt all or any part of the Work of this Contract for the period of time that the Contracting Officer determines appropriate for the convenience of [Metro].

B. If the performance of all or any part of the Work is, for an unreasonable period of time, suspended, delayed, or interrupted by an act of the Contracting Officer in the administration of this Contract, or by the Contracting Officer's failure to act within the time specified in this Contract (or within a reasonable time if not specified), an adjustment shall be made for any increase in the cost of performance of this Contract (excluding profit) necessarily caused by the unreasonable suspension, delay, or interruption, and the Contract modified in writing accordingly. However, no adjustment shall be made under this Article for any suspension, delay, or interruption to the extent that performance would have been so suspended, delayed, or interrupted by any other cause, including the fault or negligence of [ISI], or for which an equitable adjustment is provided for or excluded under any other term or condition of this Contract.

C. A claim under this Article shall not be allowed for any costs incurred more than twenty calendar (20) days before [ISI] shall have notified the Contracting Officer in writing of the act or failure to act involved (but this requirement shall not apply as to a claim resulting from a suspension order), and unless the claim, in an amount stated, is asserted in writing as soon as practicable after the termination of such suspension, delay, or interruption, but not later than the date of final payment under the Contract.

ISI alleges that it encountered undisclosed underground pipes in March 2015, and CenterPoint Power lines that prevented installation of the sewer lines in July 2015. ISI gave Metro notice in July 2015 of its intent to suspend work and demobilize from the site to allow Metro to resolve the conflicts and to mitigate the expense ISI would incur by keeping workers and equipment at a dormant project site. ISI asserted that per the August 28, 2018 Project Meeting Minutes prepared by Metro staff, Metro directed ISI to suspend work beginning August 31, 2015, to allow Metro to resolve the conflicts. ISI removed its personnel and equipment from the site, but did not fully demobilize, leaving thousands of dollars’ worth of materials on-site pending Metro's direction to resume work.

ISI stated that the original contractual completion date came and went, so Metro issued successive change orders extending the completion date for three months at a time and kept ISI on site. ISI claims that having been assured by Metro that the work was to resume, ISI continued to fulfill its contractual obligations by incurring the expense of maintaining road-side barricades and other traffic control devices at the site. In February 2016, Metro advised that relocation of the CenterPoint power poles was complete. ISI alleges that it was quickly apparent that the power poles had not been moved far enough, such that the power pole guy wire footings conflicted with the planned sewer installation. ISI contends that it incurred equipment rental and other overhead costs for just 11 days shy of a year before it demobilized its workers and equipment beginning on March 1, 2016. ISI claims it still had materials on site, while waiting for further instructions to remobilize and resume installation. According to ISI materials that it had purchased for the Project remained on-site until at least the summer of 2019. Over time, ISI claims it lost possession of the materials that were being kept on-site, but that ISI was never paid for these materials.

ISI also alleged under Texas Rule of Civil Procedure 54 that all conditions precedent to the relief requested in the Petition have been performed, satisfied, waived, or excused. Metro did not specifically deny any condition precedent. See Pepper Lawson Horizon Int'l Group, 669 S.W.3d at 212. ISI's allegations are supported by the testimony of its General Manager Brad Young in his affidavit attached to the Petition.

Liberally construing the Petition in ISI's favor, ISI alleges that (1) it encountered subsurface or latent physical conditions—underground pipes—that differed materially from those indicated in the Contract; (2) these conditions caused an increase in ISI's cost of, or the time required for, performing its work; (3) ISI suffered direct damages as a result of Metro's failure to make an equitable adjustment under section X, article 10 and modify the Contract in writing accordingly; (4) Metro ordered ISI in writing to suspend, delay, or interrupt its work; (5) the performance of part of the Work was, for an unreasonable period of time, suspended, delayed, or interrupted by an act of the Contracting Officer in the administration of this Contract, or by the Contracting Officer's failure to act within a reasonable time; (6) ISI suffered damages as a direct result of Metro's failure to make an equitable adjustment under section X, article 10 and modify the Contract in writing accordingly; and (7) ISI suffered direct damages as a result of Metro's failure to make an adjustment under section X, article 23 and modify the Contract in writing accordingly.

Under the applicable standard of review, we conclude that ISI alleged facts sufficient to affirmatively demonstrate that (1) in its claims for breach of section X, articles 10 and 23 of the Contract, ISI seeks to recover a balance due and owed by Metro under the Contract, reasonable and necessary attorney's fees that are equitable and just, and interest allowed under chapter 2251 of the Texas Government Code; (2) the clear and unambiguous waiver of governmental immunity under the Act applies to ISI's breach-of-contract claims against Metro for breach of section X, articles 10 and 23 of the Contract; and (3) ISI has pled facts with some evidentiary support that constitute a breach-of-contract claim for the breach of each of these provisions of the Contract, for which Metro's governmental immunity has been waived under the Act.⁸ See Tex. Transp. Code Ann. § 271.153(a); Stamos, 2020 WL 1528047, at *2; Beaumont Indep. Sch. Dist., 2023 WL 3521936, at *9–10.

4. Damages Allegedly Caused by Metro's Delay

On appeal ISI asserts that when Metro suspended work ISI was required to maintain the site, which involved work at the site as well as work by office personnel to coordinate and handle the related paperwork. ISI claims it suffered delay damages due to the costs of not working but being ready to resume work. ISI asserts that it does not seek to recover unabsorbed home office overhead or consequential damages not expressly allowed by Local Government Code section 271.153(a)(1). Instead, ISI claims that it seeks to recover “direct damages caused by [Metro's] breach of contract” and “field and office expenses directly caused by [Metro's] breach and delay.” ISI asserts that the Supreme Court in Zachry held that section 271.153(a)(1) specifically allows recovery for damages as a direct result of owner-caused delays, even though these may be consequential damages. Liberally construing ISI's briefing, ISI argues that the trial court erred in impliedly determining that (1) ISI has not alleged facts sufficient to affirmatively demonstrate that in its breach-of-contract claim for delay damages ISI seeks to recover a balance due and owed by Metro under the Contract, including amounts owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays; (2) the clear and unambiguous waiver of governmental immunity under the Act does not apply to ISI's breach-of-contract claim against Metro for delay damages; and (3) ISI has not pled facts with some evidentiary support that constitute a breach-of-contract claim for delay damages, for which Metro's governmental immunity has been waived under the Act.

In the absence of an enforceable contract provision to the contrary, a contractor is entitled to recover breach-of-contract damages from an owner for losses due to delay or hindrance of its work if the contractor proves: (1) that its work was delayed or hindered, (2) that it suffered damages because of the delay or hindrance, and (3) that the owner was responsible for the act or omission that caused the delay or hindrance. See Zachry Constr. Corp., 449 S.W.3d at 114–18; Port of Houston Auth. v. Zachry Constr. Corp., 513 S.W.3d 543, 560 (Tex. App.—Houston [14th Dist.] 2016, pet. denied). In the Petition ISI recited the elements of a claim for delay damages and asserted this claim against Metro.

In the Petition ISI alleges that Metro-caused delays extended the contractual completion date of September 20, 2015, by 1966 days before Metro notified ISI of termination of the work on January 12, 2021. ISI alleges that Metro breached the Contract by interfering with ISI's ability to perform the work required under the Contract by delaying ISI's work, including by allowing other structures and facilities to interfere with the construction, directing ISI to be on hold and not proceed with work when work could have been performed, and failing to issue notices to proceed or remobilize, and misleading ISI to believe that Metro was ready and able to proceed with the work when it was not. ISI alleged that Metro was responsible for the delays due to Metro's failure to ensure that CenterPoint's relocation adequately removed the power pole conflict from the footprint of the storm sewer, and in rejecting without discussion a proposal by ISI to jack and bore the storm sewer to circumvent the conflict with the guy wires.

ISI concedes that the Contract contains a no-damages-for-delay clause in which the parties agree that “[n]o claims for increased costs, charges, expenses, or damages of any kind shall be made by ISI against [Metro] for any delays or hindrances from any cause whatsoever; provided that [Metro], in [Metro's] discretion, may compensate [ISI] for any said delays by extending the time for completion of the Contract, as necessary.” Seeking to avoid enforcement of this clause, ISI has pleaded three of the exceptions to the enforceability of such a clause listed by the Supreme Court of Texas in the Zachry case: that the delay (1) was not intended or contemplated by the parties to be within the purview of the provision; (2) resulted from fraud, misrepresentation, or other bad faith on the part of one seeking the benefit of the provision; and (3) has extended for such an unreasonable length of time that the party delayed would have been justified in abandoning the contract. See Zachry Constr. Corp., 449 S.W.3d at 115.

ISI alleges that the delays ISI encountered were due to changed conditions not contemplated within the purview of the Contract. ISI contended that the CenterPoint power poles that obstructed ISI's ability to work and install storm sewers did not appear on the plans, because they were to have been removed before ISI began work. ISI alleges that Metro failed to arrange for the poles to be relocated before ISI started work. According to ISI Metro's failure to get the poles moved constituted a changed condition not contemplated under the Contract, and also constituted a conscious, intentional decision by Metro, which interfered with ISI's work. According to ISI, Metro directed ISI to stop work, rather than considering ISI's more cost-effective solution to keep the job moving and avoid delay costs by routing ISI's storm sewers around the CenterPoint power poles and guy line anchors. ISI states that for Metro to cause ISI to wait to be able to perform, relying on a promise of return to work, was fraud, misrepresentation, or other bad faith.

ISI alleges that almost three years of suspension and delay would certainly have justified ISI in abandoning the Contract. According to ISI Metro's interference with continuation of the work—its failure to ensure that CenterPoint's relocation adequately removed the power pole conflict from the footprint of the storm sewer, and its rejection of ISI's proposal to jack and bore the storm sewer to circumvent the conflict with the guy wires—constituted intentional interference or bad faith. ISI claims that Metro's “culpable state of mind” was aggravated because Metro knew that it did not have or had misappropriated the funds necessary to complete the work, while also requiring ISI to both stand-by, and also to be ready to complete the work. ISI asserts that such interferences and delays constituted active interference with ISI or extended the contract performance for such an unreasonable length of time that ISI would have been justified in abandoning the Contract. ISI's allegations regarding delay damages are supported by the testimony of its General Manager Brad Young in his affidavit which is attached to the Petition. Metro relies upon the no-damages-for-delay clause in the Contract, but we conclude that ISI has pleaded exceptions recognized by the Zachry court that, if proven, would make this clause unenforceable. See id.

Subject to an exception not applicable to today's case, the total amount of money awarded in an adjudication brought against a local governmental entity for breach of a “contract subject to this subchapter” is limited to, among other things, “the balance due and owed by the local governmental entity under the contract as it may have been amended, including any amount owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays.” Tex. Loc. Gov't Code Ann. § 271.153(a),(c). And damages awarded in such an adjudication may not include “consequential damages, except as expressly allowed under Subsection (a)(1) ․ or ․ damages for unabsorbed home office overhead.” Tex. Loc. Gov't Code Ann. § 271.153(b). In construing these provisions in Zachry, the Supreme Court of Texas concluded that section 271.153 allows recovery of only one type of consequential damages in the adjudication in question—“amount[s] owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays.” See id. § 271.153; Zachry Constr. Corp., 449 S.W.3d at 110–12. The Zachry court stated that these damages “are consequential damages” and that “[d]elay damages are consequential damages” Zachry Constr. Corp., 449 S.W.3d at 114, n.71. Generally, damages that are consequential damages as to the breach of one contract may be direct damages as to the breach of another. See McKinney & Moore, Inc. v. City of Longview, No. 14-08-00628-CV, 2009 WL 4577348, at *5–6 (Tex. App.—Houston [14th Dist.] Dec. 8, 2009, pet. denied) (mem. op.); DaimlerChrysler Motors Co. v. Manuel, 362 S.W.3d 160, 180 (Tex. App.—Fort Worth 2012, no pet.). But given the Supreme Court's statement that “[d]elay damages are consequential damages,” we conclude that in the context of the Act the Zachry precedent mandates the conclusion that any delay damages other than “amount[s] owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays” are consequential damages disallowed under section 271.153(b)(1). See Zachry Constr. Corp., 449 S.W.3d at 110–12, 114, n.71. Therefore, to the extent a breach-of-contract claim by ISI seeks delay damages for unabsorbed home office overhead or delay damages that are not “any amount owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays,” the trial court did not err by impliedly determining that (1) the clear and unambiguous waiver of governmental immunity under the Act does not apply to the claim; and (2) ISI has not pled facts with some evidentiary support that constitute a breach-of-contract claim for delay damages, for which Metro's governmental immunity has been waived under the Act. See Tex. Transp. Code Ann. § 271.153; Zachry Constr. Corp., 449 S.W.3d at 110–12, 114, n.71; Stamos, 2020 WL 1528047, at *2.

Under the applicable standard of review, ISI has alleged facts sufficient to affirmatively demonstrate that (1) in its breach-of-contract claim for delay damages, ISI seeks to recover amounts that are not unabsorbed home office overhead and that are owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays; reasonable and necessary attorney's fees that are equitable and just; and interest allowed under chapter 2251 of the Texas Government Code; (2) the clear and unambiguous waiver of governmental immunity under the Act applies to ISI's breach-of-contract claim seeking to recover these amounts; and (3) ISI has pled facts with some evidentiary support that constitute a breach-of-contract claim seeking to recover these amounts, for which Metro's governmental immunity has been waived under the Act.⁹ See Tex. Transp. Code Ann. § 271.153(a); Stamos, 2020 WL 1528047, at *2; Beaumont Indep. Sch. Dist., 2023 WL 3521936, at *9–10.

Under the applicable standard of review, the Petition is sufficient to show that the clear and unambiguous waiver of governmental immunity under the Act applies to (1) ISI's breach-of-contract claims addressed in subsections 1, 2, and 3 of section II.A. of this opinion; and (2) ISI's breach-of-contract claim for delay damages to the extent that ISI seeks to recover amounts that are not unabsorbed home office overhead and that are owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays; reasonable and necessary attorney's fees that are equitable and just; and interest allowed under chapter 2251 of the Texas Government Code. Therefore the trial court erred in granting the Jurisdictional Plea as to these claims. We sustain the first issue to this extent and overrule the remainder of the issue.

B. Did the trial court err in dismissing ISI's claims with prejudice and in denying ISI's motion for leave to file a supplemental petition?

In its second issue ISI asserts that the trial court erred in denying its motion for reconsideration arguing that its claims should have been dismissed, if at all, without prejudice and in denying its motion for leave to file a supplemental petition. As to ISI's breach-of-contract claims discussed above, the second issue is moot because we are reversing the trial court's judgment as to these claims. As to ISI's remaining claims, in its opening brief, ISI does not provide any argument, or analysis in support of the proposition that the trial court erred in dismissing the remaining claims with prejudice or erred in denying leave to file a supplemental petition. Even construing ISI's opening brief liberally, we cannot conclude that ISI adequately briefed an argument challenging the trial court's judgment based on either of these propositions. See Marathon Petroleum Co. v. Cherry Moving Co., 550 S.W.3d 791, 798 (Tex. App.—Houston [14th Dist.] 2018, no pet.). Thus, as to ISI's remaining claims we find briefing waiver, and overrule the second issue.

III. Conclusion

Construing the Petition liberally in ISI's favor, considering ISI's intent, and accepting as true the factual allegations in the Petition, we conclude that (1) ISI alleged facts sufficient to affirmatively demonstrate that the clear and unambiguous waiver of governmental immunity under the Act applies to (1) ISI's breach-of-contract claims addressed in subsections 1, 2, and 3 of section II.A. of this opinion; and (2) ISI's breach-of-contract claim for delay damages to the extent that ISI seeks to recover amounts that are not unabsorbed home office overhead and that are owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays; reasonable and necessary attorney's fees that are equitable and just; and interest allowed under chapter 2251 of the Texas Government Code; and (2) as to each of these claims ISI has pled facts with some evidentiary support that constitute a breach-of-contract claim for which Metro's governmental immunity has been waived under the Act. Therefore, the trial court erred in granting the Jurisdictional Plea as to these claims. We reverse the trial court's judgment as to these claims, remand the claims to the trial court for further proceedings, and affirm the remainder of the trial court's judgment.

FOOTNOTES

1.   In its plea to jurisdiction Metro challenged the pleadings but did not challenge the existence of jurisdictional facts. These factual statements are from ISI's live pleading—the Second Amended Petition.

2.   The Act defines “local governmental entity” to mean “a political subdivision of this state, other than a county or a unit of state government, as that term is defined by Section 2260.001, Government Code, including a ․ special-purpose district or authority ․” Tex. Loc. Gov't Code Ann. § 271.151(3) (West, Westlaw through 2023 4th C.S.). ISI does not dispute that Metro is a local governmental entity.

3.   The body of the Petition contains 37 pages with single-spaced text. ISI includes more than two hundred pages of evidence in the Petition.

4.   Section IV, article 1 of the Contract provides that the term “Work” as used in the Contract means “all construction, labor, materials, equipment, and contractual requirements as specified, or indicated in the Contract Documents, including all alterations, amendments, or extensions thereto made by authorized changes.”

5.   Section IV, article 1 of the Contract provides that the term “Contracting Officer” as used in the Contract “means the Contract Administrator who has been designated the responsibility, by the METRO Chief Procurement Officer, for overall administration of the Contract, excluding the execution of contract modifications.”

6.   We make no comment on the merits of this breach-of-contract claim.

7.   We make no comment on the merits of this breach-of-contract claim.

8.   We make no comment on the merits of these breach-of-contract claims.

9.   We make no comment on the merits of this breach-of-contract claim.

Randy Wilson, Justice