Gone are the days of absolute sovereign immunity. The king can now (sometimes) do wrong. Governments today consent to liability and can have their immunity abrogated by superior powers. The Federal Tort Claims Act is an example of the former, while Title VII suits against states illustrate the latter. Because local governments are not sovereign, their liability is subject to federal and state law. Recently, in Rosenberg Development Corporation v. Imperial Performing Arts, Inc., the Texas Supreme Court determined that economic development corporations (EDCs) created by municipalities are not governmental entities for the purpose of claiming governmental immunity. While this decision cuts another path for holding quasi-public entities accountable, courts should consider the uphill realities of these suits.
This dispute was about a contract signed by Rosenberg Development Corporation (RDC), an economic development corporation created by the City of Rosenberg following a ballot initiative in 1995, and Imperial Performing Arts, a nonprofit. RDC agreed to pay $500,000 to Imperial to reopen two arts centers. Imperial, needing more time and money, asked RDC to delay the timeline and alter other terms. When RDC did neither, Imperial stopped work and brought suit. While RDC claimed immunity from suit, the trial and appeals courts both held that RDC did not enjoy such immunity.
The Texas Supreme Court affirmed. Writing for the majority, Justice Eva Guzman first separated the issue of immunity from suit and immunity from liability. Unlike immunity from suit, which is jurisdictional, immunity from liability is non-jurisdictional and is raised as an affirmative defense following a waiver of immunity from suit. The Court therefore declined to consider immunity from liability at the jurisdictional stage of litigation.
Justice Guzman held that EDCs are not governmental entities for the purposes of immunity from suit. First, the court determined that the legislature did not intend EDCs to stand as governmental entities separate from their municipality. Not only does the legislature expressly deny labeling such corporations political subdivisions, it also bars parent municipalities from delegating to EDCs any “attributes of sovereignty.” The court then evaluated EDCs against the political, pecuniary, and pragmatic purposes of immunity. First, EDCs do not provide essential governmental services. Moreover, due to the limited purpose and advance planning undertaken by EDCs, the court saw no “genuine risk of unforeseen expenditures to be visited on the government.” Though Justice Guzman suggested that immunity could derive from their municipality, the court did not resolve that issue.
Chief Justice Nathan Hecht concurred. He emphasized that EDCs remain immune from liability for damages that arise from its governmental functions. Adding that judgments against them may be unenforceable because EDCs can only spend at the permission of their parent municipality, he wrote that “[s]uch a suit would simply be a waste of resources.” As a result, the “practical consequence” of this decision does little to deny EDCs’ immunity from suit.
In separating analysis of immunity from suit and immunity from liability, the court separated the issue of which claims the court will accept from the issue of who can feasibly bring such claims. If EDCs are not liable for damages following contract breach, this distinction favors those litigants who can afford to “waste” resources. As a result, this analytical separation hampers the accountability principles driving the doctrine of governmental immunity.
EDCs are normally accountable to their parent municipality. That accountability is structural––the board of RDC is comprised of Rosenberg city councilors and those appointed by the city council, and the city must approve RDC’s expenditures; and political––Rosenberg voters can shape the RDC by pressuring the city council at the ballot box. These safeguards, however, better protect larger causes and more politically powerful groups of voters.
Litigation provides a different forum of accountability that is more protective of individuals or small entities injured by the government. Indeed, the Texas Supreme Court acknowledged these stakes, noting that “sovereign immunity places the burden of shouldering [the] costs and consequences [of improvident actions] on injured individuals.” In this way, denying immunity corrects a power imbalance between institutions and individuals where the political, pecuniary, and practical interests of the public are not on the line.
But immunity from liability forces the injured party to continue shouldering most such costs and consequences following improvident government action. It is strange to hold that a party can bring claims but cabin consideration of the feasibility of those claims. Even if immunity from liability is non-jurisdictional, it determines the exercise of a jurisdictional right. Courts should consider both dimensions of immunity in concert.