When it pertains to federal, state, and local governments, one of the main doctrines of law is that they have sovereign immunity; i.e. the “sovereign or entity” cannot commit a legal wrong and is immune from civil suit or criminal prosecution. In the last legislature, Texas passed a law which changed that with respect to contracts. With HB 586, you are now allowed to bring a suit against a state agency with whom you had a contract and whom you allege is in violation of said contract. Of course, as with any law, there are a myriad of rules and guidelines.
First, this only applies to a claim for breach of written contract for engineering, architectural, or construction services, and for materials related to those services by a party to the contract, and the contract must be with a state agency, not with a county, municipality, etc. Additionally, the damages, not including attorney’s fees, penalties, costs, expenses, and prejudgment interest, must exceed $250,000. This law does not apply to any contract that is subject to Section 201.112 of the Transportation Code; e.g., any TxDot contract. Finally, the new law went into effect on September 1, 2013, so it will only apply to contracts entered into after that date.
If you were to succeed with your claim, it allows for the award to include the following items:
- The balance due and owed by the state agency under the contract as it may have been amended, including any amount owed as compensation for the increased cost due to owner delay;
- The amount owed pursuant to written change orders;
- Reasonable attorney’s fees only if the written contract expressly provides recovery of fees;
- Interest at a rate up to 10%.
And it cannot include:
- Consequential damages;
- Exemplary damages;
- Damages for unabsorbed home office overhead.
After receiving a Judgment, you would then proceed with the collections process, which also has limitations. Payment of a Judgment is not allowed to come from the State’s general revenue unless expressly given for that purpose. Additionally, you are not allowed to seize, attach, garnish, or take any other normal creditor remedy typically used to satisfy a judgment.
Even despite these limitations and restrictions, this is a significant change in the law and helps keep the State accountable for contracts it enters into and is definitely a step towards making the State of Texas accountable under the same rules as everyone else.