Opinion
CIVIL ACTION NO. 3:03-CV-0110-G.
July 3, 2003.
MEMORANDUM ORDER
Before the court is the motion to dismiss of the defendant Dallas Area Rapid Transit ("DART"). For the following reasons, the motion is granted.
I. BACKGROUND
Martin K. Eby Construction Company, Inc. ("Eby") is a Kansas corporation with its principal place of business in Wichita, Kansas. Plaintiff's Original Complaint ("Complaint") ¶ 1.
DART is a regional transit authority created as a political subdivision under Texas Transportation Code chapter 452. Complaint ¶ 2; Defendant DART's Motion to Dismiss and Brief in Support Thereof ("Motion") at 3. Its principal place of business is in Dallas, Texas. Complaint ¶ 2.
DART and its construction manager LAN/STV developed plans and specifications in conjunction with construction of a section of the DART light rail transit system known as NW-1A. Id. ¶¶ 5, 6. DART then issued the plans and specifications on a competitive bid basis. Id. ¶ 6.
Eby relied on these plans and specification in preparation of its bid for the project. Id. Eby had performed similar projects for DART. Id. Before the contract was awarded, DART informed Eby that award of the contract and a notice to proceed would issue by February 2002. Id. ¶ 7.
The contract contained several completion milestones associated with the project. Id. ¶ 8. Each of the milestone dates was connected to a liquidated damages penalty for each day that Eby did not meet the schedule. Id. For example, Milestone C, or the OC-1 portion of the project, required Eby to complete that milestone by November 2, 2002 or DART would assess a $5700 daily liquidated damages penalty. Id. Anticipating that DART would issue a notice to proceed in February 2002, Eby secured "the necessary forces, materials, and supplies for immediate execution of OC-1 in order to meet this milestone." Id. ¶ 9; see also id. ¶ 10.
DART did not issue a contract award or a notice to proceed during February 2002. Id. ¶ 11. During the months of March, April, May, and into June 2002, DART led Eby to believe that issuance of the notice to proceed was imminent. Id.
On April 10, 2002, DART awarded Eby the contract to construct NW-1A. Id. ¶ 5. On June 10, 2002, DART issued its notice to proceed. Id. ¶ 11. By that date, Eby "had expended hundreds of thousands of dollars in supervisory and administrative costs in reliance on DART's representations." Id. Specifically, as of June 2002, Eby had expended over $300,000 in anticipation of meeting the OC-1 milestone as required. Id. ¶ 12.
From June 2002 through December 2002, Eby had staffed the NW1-A project, but had been not made significant progress due to "the extraordinary number of problems encountered in performance . . . which arise out of inaccuracies in the plans and drawings, inadequacy of the plans as drawn and extensive numbers of concrete and foundation designs which are impossible to construct given the conditions encountered." Id. ¶ 16. Eby asserts that days before it was set to commence work on the project, DART modified and revised much of the work on which Eby had bid. Id. ¶ 13. These change orders, which Eby maintains are due to errors in DART's bid documents, continue to this date. Id. LAN/STV, DART's agent, has not accepted responsibility for the inaccuracies. Id. ¶ 21. DART's changes have prevented Eby from completing requisite milestones. Id. ¶ 14. However, Eby has been worked on the project on a "piecemeal basis" at cost in an effort to make some progress. Id. ¶ 15; see also id. ¶ 21.
Eby filed this suit on January 16, 2003. In it, Eby avers that design deficiencies and inaccuracies, along with DART's failure to coordinate the project design with existing structures, have caused Eby to incur losses to date of over $2,000,000. Id. ¶ 17. Eby asserts causes of action for breach of contract and misrepresentation. See id. ¶¶ 19-24. Eby seeks to rescind the contract and to recover in quantum merit. Id. ¶ 22. Eby also seek's attorney's fees. See id. ¶¶ 25-26. Because the parties are citizens of different states, the basis of federal jurisdiction is diversity of citizenship. See 28 U.S.C. § 1332.
On February 6, 2003, DART answered Eby's complaint, filed a motion to dismiss Eby's complaint, and asserted a counterclaim in the event that the court did not dismiss Eby's claims. See generally Defendant's Original Answer and Counterclaim Subject to Motion for Dismissal.
II. ANALYSIS A. Legal Standard
Federal Rule of Civil Procedure 12(b)(6) authorizes dismissal of a complaint for "failure to state a claim upon which relief can be granted." There are two primary principles that guide the court's determination of whether dismissal under Rule 12(b)(6) should be granted. First, a motion under Rule 12(b)(6) should be granted only if it appears beyond doubt that the plaintiff could prove no set of facts in support of its claim that would entitle it to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Leffall v. Dallas Independent School District, 28 F.3d 521, 524 (5th Cir. 1994) (citations omitted); see also Kaiser Aluminum Chemical Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982) (citing WRIGHT MILLER, FEDERAL PRACTICE AND PROCEDURE: CIVIL § 1357 at 598 (1969), for the proposition that "the motion to dismiss for failure to state a claim is viewed with disfavor and is rarely granted."), cert. denied, 459 U.S. 1105 (1983). Second, the court must accept all well-pleaded facts as true and view them in the light most favorable to the nonmovant. Capital Parks, Inc. v. Southeastern Advertising and Sales System, Inc., 30 F.3d 627, 629 (5th Cir. 1994) (citation omitted); Norman v. Apache Corporation, 19 F.3d 1017, 1021 (5th Cir. 1994) (citations omitted); Chrissy F. by Medley v. Mississippi Department of Public Welfare, 925 F.2d 844, 846 (5th Cir. 1991).
B. Breach of Contract Claim
Texas Transportation Code § 452.106 (Vernon 1999) grants the DART board of directors the authority to adopt and enforce rules regarding the resolution of contract disputes. Motion at 3. The DART board of directors has promulgated rules under this statute. Id. at 4. Section 10-400 of the DART Procurement Regulations ("DPR") pertains to contract dispute procedures. See Appendix to Defendant DART's Motion to Dismiss and Brief in Support Thereof ("Appendix") at 9-11. These procedures apply to "controversies between [DART] and a contractor which arise under, or by virtue of, a contract between them . . . includ[ing], without limitation, controversies based upon breach of contract, mistake, misrepresentation, or other cause for contract modification, reformation, or recission." DPR § 10-401(2), located in Appendix at 9.
DPR allows administrative appeals to the DART board of directors under DPR § 10-503 or the disputes clause of a DART contract. See generally id. § 10-500, located in Appendix at 11-12. Procedures for these administrative appeals are contained in DART's "Contract Appeals Procedures" and "Procedures for Appointment and Selection of Administrative Judges." Motion at 4; see also Appendix at 13-21. The contract contains a disputes clause which reads, in pertinent part, as follows:
Except as otherwise provided in this contract, any dispute concerning a question of fact or law arising under or related to this contract which is not disposed of by agreement shall be decided by the Contracting Officer, who shall reduce his decision to writing and . . . furnish a copy . . . to the Contractor. The decision of the Contracting Officer shall be final and conclusive unless, on or before the 90th day from the date of receipt of such copy, the Contractor . . . furnishes a written appeal addressed to [DART]. The decision of [DART] or its duly authorized representative on such appeal shall be final and conclusive as to questions of fact. . . . The decision of [DART] or its duly authorized representative shall not be final and conclusive as to questions of law. . . . In connection with any appeal of the Contracting Officer's decision, the Contractor shall be afforded an opportunity to be heard and to offer evidence in support of its appeal.
Appendix at 28.
DART moves to dismiss Eby's lawsuit because Eby has not exhausted its administrative remedies. Motion at 3; Defendant DART's Reply to Plaintiff's Response to DART's Motion to Dismiss ("Reply") at 1. DART contends that after Eby exhausts its administrative remedies, Eby may proceed to court for a limited review of the facts and a de novo review of questions of law. Motion at 13; Reply at 2.
The contract contains the following provision:
By submission of a bid, proposal, offer, or quotation in response to this solicitation, the bidder or offeror agrees to exhaust its administrative remedies under Chapter 10 of the Authority's Procurement Regulations or the Disputes Clause of any resulting contract prior to seeking judicial relief of any type in connection with any matter related to this solicitation, the award of any contract, and any dispute under any resulting contract.
Appendix at 27.
As previously noted, the Texas Transportation Code empowers the DART board of directors to promulgate rules regarding the resolution of contract disputes. The contract between Eby and DART specified that Eby first must submit its dispute to a Contracting Officer. Because Eby has not exhausted its requisite administrative remedies prescribed by the contract, it is not entitled to judicial review. See generally Texas Department of Transportation v. Jones Brothers Dirt Paving Contractors, Inc., 92 S.W.3d 477 (Tex. 2002); see also Bandera Downs, Inc. v. Alvarez, 824 S.W.2d 319, 321 (Tex.App.-San Antonio 1992, no writ); Patton Wrecking Demolition Co. v. Tennessee Valley Authority, 465 F.2d 1073, 1076-80 (5th Cir. 1972) (discussing history and purpose of disputes clauses).
B. Misrepresentation Claim
DART argues that it is entitled to sovereign immunity on Eby's claim for misrepresentation. Motion at 14. DART is a governmental entity, as well as a political subdivision. See Stephens v. Dallas Area Rapid Transit, 50 S.W.3d 621, 632 (Tex.App.-Dallas 2001, writ denied). The tort liability of the state of Texas and its political subdivisions, such as DART, is strictly limited. See Federal Sign v. Texas Southern University, 951 S.W.2d 401, 405 (Tex. 1997) (discussing the doctrine of sovereign immunity under Texas law); see also Knowles v. City of Granbury, 953 S.W.2d 19, 23 (Tex.App. — Ft. Worth 1997, writ denied) ("Generally, municipalities and other government entities have governmental or sovereign immunity from private litigation."). Because DART is entitled to sovereign immunity, DART is not liable for Eby's misrepresentation claim.
III. CONCLUSION
For the reasons stated, DART's motion is GRANTED, and DART's counterclaim is DENIED as moot. Judgment will be entered that Eby take nothing on its claims against DART.
SO ORDERED.