Your Legal Defense Fund at Work: ASA Fights for Subcontractors in Prompt Pay Case in Texas

The American Subcontractors Association is moving forward with a friend-of-the-court brief in Texas, seeking an appeal on a decision that held that an entity could not be sued for prompt payment violations because it had not waived sovereign immunity. The case, Texas Southern University v. Pepper Lawson Horizon International Group, LLC,is currently on appeal to the Texas Supreme Court.

At issue is the construction of a new student house at Texas Southern University. In February 2014, the University and Pepper Lawson Horizon (“Contractor”) International Group entered into a contract for the work. Shortly after beginning work, while drilling piers for the foundation, the Contractor discovered that a previous building at the worksite had not been fully demolished and remnants of that building were buried beneath the worksite and obstructed progress on the Project. Though the University agreed to a cost increase to pay the Contractor to remove the obstructions, it denied the Contractor’s request for additional time.  The Contractor’s progress was further slowed as it encountered other problems and delays, including weather delays, power delays and problems arising out of defective plans, but the University denied all requests for additional time. At completion, the Contractor invoiced the University for claimed balance due, but the University refused to pay. The Contractor sued, asserting that the University had breached the parties' contract by failing to pay and by denying its requests for an equitable time extensions.

The University denied the Contractor’s allegations, arguing that “sovereign immunity has not been waived for [the Contractor’s] claims." It also stated that the Contractor had failed to point to a specific contractual provision that it had breached and that the Prompt Pay Act does not expressly waive sovereign immunity. The trial court denied the University’s jurisdictional defenses and set the matter for trial. On appeal, however, the Court of Appeals of Texas, First District, Houston, reversed. The appeals court rendered judgment dismissing the case for lack of subject matter jurisdiction.  The Contractor is appealing, seeking review from the Texas Supreme Court.

The Subcontractor Legal Defense Fund determined in its evaluation that, though the statute is Texas specific, the principle of the necessity of a waiver of sovereign immunity as a pre-requisite to public owner liability is widespread across the 50 states.  An unfavorable result could have the potential to have a ripple effect into other states.

Brian Carroll, Sanderford & Carroll, P.C., San Antonio, TX, will prepare the brief for ASA. ASA’s Subcontractors Legal Defense Fund financed the brief. ASA’s Subcontractors Legal Defense Fund supports ASA’s critical legal activities in precedent-setting cases to protect the interests of all subcontractors. ASA taps the SLDF to fund amicus curiae, or “friend-of-the-court,” briefs in appellate-level cases that would have a significant impact on subcontractor rights. Contributions to the SLDF may be made online.

Founded in 1966, ASA promotes the rights and interests of subcontractors, specialty contractors and suppliers by building strength in community through education, advocacy, networking and professional growth. ASA adheres to and promotes quality construction, ethical and equitable business practices, safety in the work environment, and best industry practices. For more information about ASA, visit www.asaonline.com, and for more information about the SLDF, visit www.sldf.net.