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1 tz<-..,,jj" c[n~~~llpp{tt, NO CV JUL LISA MATz Jn tbt jfiftb 1ai~ttitt QCourt of ~peaiiatral&iiwitrtcr WEIR BROS. INC., Appellant, v. LONGVIEW ECONOMIC DEVELOPMENT CORPORTATION, BOB METZLER, DAVID HOUSTON, DONNY STUCKEY, DAN DROEGE, RICHARD ANDREWS, WILLIAM MILLER, GAYLON BUTLER AND STEVE METCALF, Appellees. On appeal from Cause No , Pending in the 191 st Judicial District Court of Dallas County, Texas REPLY BRIEF OF APPELLANT July 27,2011 Mark A. Herndon State Bar No Luna Road Dallas, Texas Tel Fac. Attorney for Appellant

2 Identity of Parties and Their Counsel Pursuant to Texas Rule of Appellate Procedure 38.l(a) and 38.2(a)(l)(A), the following are the parties to the trial court's judgment being appealed and their counsel: 1. Appellant 2. Counsel for Appellant 3. Appellees/Cross-Appellants 4. Counsel for Appellees 5. Trial Judge Weir Bros. Inc. Mark A. Herndon (trial and appellate counsel) Luna Road Dallas, Texas Longview Economic Development Corporation, Bob Metzler, David Houston, Donny Stuckey, Dan Droege, Richard Andrews, William Miller, Gaylon Butler and Steve Metcalf Jason L. Wren (appellate counsel) Jerry L. Ewing, Jr. (trial and appellate counsel) Walters, Balido & Crain, LLP Founders Square 900 Jackson Street, Suite 600 Dallas, Texas The Honorable Gena Slaughter, Presiding Judge of the 191 st Judicial District Court, Dallas County, Texas Definitions. The following capitalized terms will be ascribed the following meanings: "Weir Bros." means Appellant Weir Bros. Inc.; "LEDCO" means Longview Economic Development Corporation; "Board of Directors" means the individual Appellees, collectively; and "Trial Court" means Gena Slaughter, Presiding Judge of the 191 st Judicial District Court of Dallas County, Texas. 11

3 Table of Contents Identity of Parties and Their Counsel.... ii Table of Contents... iii Table of Authorities... iv Statement of the Case... 1 Statement Regarding Oral Argument... 1 Issues for Review... 1 Statement of Facts... 2 Summary of the Argument... 4 Argument and Authorities Standard of Review The Trial Court Erred by Granting the Plea to the Jurisdiction with respect to LEDCO The Trial Court Erred by Granting the Plea to the Jurisdiction with respect to the individual members oft he Board of Directors The Trial Court was correct in dismissing the claims against LEDCO and the Board of Directors without prejudice... 7 Conclusion and Prayer... 8 Certificate of Service... 9 l1l

4 Table of Authorities Cases Bland Ind. School Dist. v. Blue, 34 S. W.3d 547, 555 (Tex. 2000)... 7 City of Gladewater v. Pike, 727 S. W.2d 514 (Tex. 1987)... 5 City of Lancaster v. Chambers, 883 S. W.2d 650 (Tex. 1994)... 6 City of Waco v. Hester, 805 S.W.2d 807 (Tex.App.-Waco1990, writ den.)... 6 Dilley v. City of Houston, 148 Tex.191, 222 S.W.2d 992 (1949)... 5 State v. Terrell, 588 S.W.2d 784 (Tex. 1979)... 6 Texas A&M University System v. Koseoglu, 233 S. W.3d 835 (Tex. 2007)... 7 Texas Natural Res. Conservation Comm'n v. IT-Davy, 74 S. W.3d 849 (Tex. 2002)... 4 Turvey v. City of Houston, 602 S. W.2d 517 (Tex. 1980)... 5 Other Authorities Op. Att'y Gen. JM Section , Tex. Gov. Code... 2 Section 15.05(a), Tex. Bus. & Comm. Code... 1, 3 Section 15.21(a), Tex. Bus. & Comm. Code... l, 3 Section , Tex. Local Gov. Code... 4 Texas Development Corporation Act, Section , et seq, Tex. Local Gov. Code... 3 lv

5 Statement of the Case This appeal arises from the Trial Court's granting of Appellees' Plea to the Jurisdiction filed in Cause No , Weir Bros. Inc. v. Longview Economic Development Corporation, et al, Judicial District of Dallas County, Texas. C.R Weir Bros. causes of action are against LEDCO and the individual members of the Board of Directors of LEDCO for violation of the Texas Free Enterprise and Antitrust Act (included in Chapter 15 of the Texas Business & Commerce Code and referred to herein as the "Texas Free Enterprise Act"), fraud and breach of contract for failing to disclose, and then applying, a local preference in connection with a publicly advertised bid for a construction project and awarding that bid to the fourth lowest responsive bidder. C.R The Trial Court granted Appellees' Plea to the Jurisdiction with respect to LEDCO on July 28, 2010, and, on August 16, 2010, included the Board of Directors. C.R. 152 and A notice of appeal was filed by Weir Bros. on September 3, C.R Statement Regarding Oral Argument No oral argument is requested pursuant to Local Rule 7. Weir Bros. believes that this case can be decided on the basis of the Court Record ("C.R.") and briefs. Issues for Review Weir Bros. appeal presents the following issues for the Court's review: (1) whether the Trial Court properly granted Appellees' Plea to the Jurisdiction with respect to LEDCO, and (2) whether the Trial Court properly granted Appellees' Plea to the Jurisdiction with respect to the individual members of the Board of Directors. Appellees, as Cross-Appellants, presented the following issue for the Court's review: whether the Trial Court properly dismissed the claims against LEDCO and the Board of

6 Directors without prejudice. Statement of Facts Weir Bros. is a construction company engaged in the construction of public and private projects, as both a prime contractor and subcontractor. C. R.144. LEDCO publicly advertised for bid the North Business Park, Phase 1 Project ("Project"), located in Longview, Texas. C.R.144. In connection with the bidding process for the Project, Appellees adopted and rigorously followed the competitive sealed proposal method for public entities (other than disclosure of the local preference), as generally described in Section of the Tex. Gov. Code. C.R In accordance with that method, LEDCO published public notices for bidding on the Project and distributed construction documents, selection criteria, project scope, schedule and other information on the Project, including bonding requirements and the procedure for collecting sealed bids and for publicly opening and reading those bids (collectively, "Request for Proposal"). C.R Under the competitive sealed proposal method adopted and followed by LEDCO, LEDCO was required to state in the Request for Proposal all of the selection criteria to be used in selecting the successful contractor to perform the work. C.R.144 In determining best value for LEDCO, LEDCO was not restricted to considering price alone, but could consider any other valid factor expressly stated as selection criteria in the Request for Proposal. C.R.144. Nowhere was a local preference mentioned in the Request for Proposal. C.R Weir Bros. responded to the public advertising for the Project, obtained the Request for Proposal and submitted a fully responsive bid on the Project. C.R When the bids on the Project were publicly opened and read on March 19, 2009, Weir Bros. was the lowest responsive bidder. C.R

7 LEDCO and the Board of Directors then formed the Construction Committee of the Board of Directors and recommended that the Project be awarded to East Texas Bridge, Inc., a local Longview contractor who was the 4th lowest responsive bidder. C.R The three lowest responsive bidders were from Dallas, Mesquite and Sulphur Springs, Texas. C.R Based upon the recommendation of the Construction Committee of the Board of Directors, which was unanimously approved, on March 25, 2009, by the Board of Directors, LEDCO awarded the Project to the 4th lowest responsive bidder, based upon the undisclosed selection criteria of "local contractor", despite the fact that the local contractor's bid exceeded Appellant's qualified and responsive bid by $182, C.R The Board of Directors and LEDCO acted in bad faith and with a corrupt motive by forming a Construction Committee of the Board of Directors in order to disguise their intent and surreptitiously scheme to improperly award the Project to a local Longview contractor, by applying an undisclosed local preference. C.R The application of this secret and clearly determinative selection criteria in the award process demonstrates that the actions by the individual members of the Board of Directors were in bad faith and contrary to their lawful authority. C.R Weir Bros. asserts causes of action for prohibited restraint of trade in violation of Sections 15.05(a) and 15.21(a) of the Tex. Bus. & Comm. Code (the operative provisions of the Texas Free Enterprise Act for private actions), fraud and breach of contract. C.R LEDCO, a Texas development corporation organized under the Development Corporation Act of 1979 (now Section , et seq., Tex. Local Gov. Code) and its individual 3

8 members of the Board of Directors, 1 assert governmental immunity as an absolute bar to all of the claims made by Weir Bros. Summary of the Argument Weir Bros. contends that it is entitled to submit appropriate issues in the Trial Court on whether or not the actions of LEDCO and the Board of Directors exceeded the bounds of governmental immunity protection, as well as whether any of them engaged in a proprietary function. Favorable findings on either of these issues preclude the successful assertion of governmental immunity as an absolute bar to Weir Bros. claims. Alternatively, the pleadings and extrinsic evidence should be considered by the Trial Court to determine whether Weir Bros. pleadings can be cured by amendment. Argument and Authorities 1. Standard of Review. The Trial Court's ruling on Appellees' Plea to the Jurisdiction is a legal question, subject to this Court's review under a de novo standard. Texas Natural Res. Conservation Comm 'n v. IT-Davy, 74 S. W3d 849, 855 (I'ex. 2002). 2. The Trial Court Erred by Granting the Plea to the Jurisdiction with respect to LEDCO. LEDCO's governmental immunity is derived from Section ofthe Tex. Local Gov. Code. That provision is expressly limited by actions which are "governmental functions." Weir Bros. has alleged that the protection of local contractors, by applying an undisclosed local preference selection criteria, cannot be considered a governmental function. C.R Weir Bros. concurs with Appellees' statement in footnote 3 of Appellees' Brief, on page 3, that one of the members of the Board of Directors (Vernon Stanmore) was named and served prior to the Trial Court's ruling on the Plea to the Jurisdiction. Since Mr. Stanmore had not answered, in order to expedite this appeal, he was nonsuited by Weir Bros. without prejudice. 4

9 None of the cases cited by Appellees stand for the proposition that the existence of a governmental function (assuming that the development of a business park is a governmental function) cloaks all the willful, bad faith and malicious actions taken by LEDCO related in any respect to the development of a business park from all liability for those improper actions. No Texas case has taken governmental immunity to those depths. Weir Bros. believes that it is entitled to a jury issue on whether the actions taken by LEDCO in protecting a purely local interest (local contractors), when coupled with the intentional failure to disclose that information to prospective bidders, rise to the level of an actionable, proprietary activity. With respect to Weir Bros. tort and contract claims, Weir Bros. can establish waiver of governmental immunity by pleading and proving that LEDCO was involved in a proprietary activity. Turvey v. City of Houston, 602 S. W2d 517 (Tex. 1980). The surreptitious protection of local contractors for the construction of a local business park through a rigged bidding process cannot be a proper governmental activity. A proprietary function is one a local governmental entity performs, in its discretion, primarily for the benefit of those within its local jurisdictional limits, rather than for the general public. City of Gladewater v. Pike, 727 S. W2d 514, 519 (Tex. 1987). As a derivative of sovereign immunity, governmental immunity necessarily requires that the interest of the state (all Texas contractors), as opposed to local interests (local contractors), be the subject of the activity. When a municipality commits a tort while engaged in a proprietary function, it is liable to the same extent as a private entity or individual. Dilley v. City of Houston, 148 Tex. 191, 193, 222 S.W2d 992, 993 (1949). 5

10 3. The Trial Court Erred by Granting the Plea to the Jurisdiction with respect to the individual members of the Board of Directors. Weir Bros. requests this Court determine the boundaries within which the members of the Board of Directors must act in order to prevail upon their contention that their activity is a protected governmental function, with all claims against them barred by governmental immunity. Simply awarding the bid on the Project is not the activity the subject of Weir Bros. complaint. The bidding procedure, governed and controlled by an undisclosed local preference selection criteria, and the award, based on that unfair procedure, is the issue. Appellees contend that there is no limitation on governmental immunity as long as the wrongdoing bears some tenuous relationship to a proper governmental function. 2 The only authority located by Weir Bros. which addressed the Texas Free Enterprise Act and governmental immunity is Op. Att'y Gen. JM-404. In this Attorney General Opinion, the boundary line is crossed when malicious and willful actions are proven. All Weir Bros. asks this Court to determine with respect to the members of the Board of Directors are (i) what jury finding is sufficient to trump their claim of governmental immunity and provide Weir Bros. with the opportunity to present that issue to a jury, and (ii) whether their actions were proprietary or governmental. 2 City of Lancaster v. Chambers, 883 S. W.2d 650, 654 (Tex. /994) (government employees entitled to official immunity when perfonning discretionary duties in good faith within scope of authority); State v. Terrell, 588 S. W.2d 784, (Tex. 1979) (highway patrolman's driving decisions outside scope of policy directives not covered by immunity); and City Waco v. Hester, 805 S. W.2d 807, (Tex.App-Waco /990, writ den.) (failing to follow city policy requiring segregation of inmates waived immunity because acts constituted negligent implementation of policy rather than formulation). 6

11 There necessarily must be bright line which cannot be crossed by individuals purporting to act in an official capacity without losing governmental immunity? Otherwise, the limitation on the grant of immunity by the inclusion of the phrase "governmental function" is meaningless. See, e.g., Sections (a) and (b) (the introductory paragraphs of each section), Tex. Local Gov. Code. 4. The Trial Court was correct in dismissing the claims against LEDCO and the Board of Directors without prejudice. The issue of whether the Trial Court's order should have been "with prejudice" or "without prejudice" is determined by whether or not Weir Bros. can amend its petition in the Trial Court to preclude the jurisdictional bar of governmental immunity to all of its claims. University System v. Koseoglu, 233 S. W3d 835, 840 (Tex. 2007). Texas A&M The 1ssue becomes one of whether Weir Bros. claims are incurably defective. Id at 839. Weir Bros. sued the members of the Board of Directors, individually, in their capacities as directors. Based upon the alleged willful, bad faith and malicious actions of the Board of Directors in secretly applying a local preference, actions clearly beyond any concept of "governmental function" recognized by Texas courts, this Court may determine that certain individual members of the Board of Directors can be sued personally for the individual bad faith actions of such individual members of the Board of Directors proven by Weir Bros. In this instance, Weir Bros. pleadings are not fatally defective and could be cured by an amended petition limiting 3 lf governmental immunity was truly as pervasive as Appellees suggest, there would be no need for governmental entities to obtain fidelity bonds and directors' and officers' insurance, as they routinely do. As embraced in Bland Ind. School Dist. v. Blue, 34 S. W3d 547, 555 (Tex. 2000), the Trial Court can consider extrinsic evidence and, in fact, must do so where jurisdiction is the issue and the pleadings do not clearly resolve this jurisdictional issue. 7

12 its claims to those individuals. Should the Trial Court's order be "with prejudice", it would preclude Weir Bros. from exercising its established right to amend its pleadings. There is no evidence that the Trial Court analyzed whether or not any pleading defect could be cured. Accordingly, the Trial Court's dismissal without prejudice preserves Weir Bros. right to amend its pleadings. Conclusion and Prayer Appellant prays that the Trial Court's order granting Appellees' Plea to the Jurisdiction be reversed, and this case be remanded to the Trial Court for trial, with instructions for the jury issues necessary to overcome a bar to Appellant's claims based upon governmental immunity. Alternatively, Appellant should be afforded the opportunity to amend its pleadings in order to cure any existing defects. Respectfully submitted, State Bar No Luna Road Dallas, Texas TELEPHONE FACSIMILE ATTORNEY FOR APPELLANT 8

13 CERTIFICATE OF SERVICE om J This is to certify that a true and correct copy of this instrument has been served upon all counsel of record, via facsimile, on this the 27'h day l. MARK A. HERNDON 9

14 TPANSMI::srm~ VEPIFICATIOI'l PEPOPT TIME 07/27/ :1S ~~AME FAX TEL SEP.# EPOM8J8S5453 DATE, TIME FAX ~10. / ~~AME DUPATION PAGE(S) RESULT MODE 07/27 15: :01:52 13 OK STAI'lDARD ECM