Brown & Gay Eng'g, Inc. v. Olivares
In Brown & Gay Eng'g, Inc. v. Olivares, 461 S.W.3d 117 (Tex. 2015) the Texas Supreme Court considered the scope of derivative immunity for government contractors. See id.
There, the plaintiff claimed that Brown & Gay, a government contractor, negligently designed and constructed a roadway, thereby causing a fatal accident. Id. at 121.
Brown & Gay argued that it was entitled to derivative immunity as an "employee" of the Fort Bend County Toll Road Authority (the "Authority"), the governmental entity that issued the contract. Id. at 120.
The trial court agreed with Brown & Gay and dismissed the case, but the Fourteenth Court of Appeals reversed, holding that Brown & Gay was not entitled to immunity because it was an independent contractor, rather than an employee, of the Authority. Id.
The Texas Supreme Court affirmed the court of appeals' decision. Id.
In Brown & Gay Eng'g, Inc. v. Olivares, the plaintiffs did not complain of harm caused by Brown & Gay's "implementing the Authority's specifications or following any specific government directions or orders," nor did they complain about the decision to build the roadway at issue or "the mere fact of its existence." Id.
Instead, the plaintiffs argued that Brown & Gay was "independently negligent in designing the signs and traffic layouts" for the roadway. Id.
Thus, the supreme court rejected Brown & Gay's "contention that it is entitled to share in the Authority's sovereign immunity solely because the Authority was statutorily authorized to engage Brown & Gay's services and would have been immune had it performed those services itself." Id. at 127.
The Brown & Gay Court also noted that the policy rationales underlying the doctrine of sovereign immunity would not be advanced by affording immunity to private contractors.
The Court explained that sovereign immunity is "designed to guard against the 'unforeseen expenditures' associated with the government's defending lawsuits and paying judgments 'that could hamper government functions' by diverting funds from their allocated purposes," but "immunizing a private contractor in no way furthers this rationale." Brown & Gay Eng'g, Inc. v. Olivares, 461 S.W.3d 117, 123 (Tex. 2015).
The Court explained:
even if holding a private party liable for its own improvident actions in performing a government contract indirectly leads to higher overall costs to government entities in engaging private contractors, those costs will be reflected in the negotiated contract price. This allows the government to plan spending on the project with reasonable accuracy. Id.
The Court reviewed federal case law establishing that derivate immunity is extended to private contractors "only in limited circumstances":
In Butters v. Vance International, Inc., a female employee of a private security firm hired to supplement security at the California residence of Saudi Arabian royals sued the firm for gender discrimination after being declined a favorable assignment. 225 F.3d 462, 464 (4th Cir. 2000). Although the firm had recommended the employee for the assignment, Saudi military supervisors rejected the recommendation on the grounds that the assignment would offend Islamic law and Saudi cultural norms. Id. Concluding that the Saudi government would be immune from suit under the Foreign Sovereign Immunities Act, the Fourth Circuit then considered whether that immunity attached to the security firm. Id. at 465. Holding that it did, the court relied on the fact that the firm "was following Saudi Arabia's orders not to promote the employee," expressly noting that the firm "would not have been entitled to derivative immunity" had the firm rather than the sovereign made the decision to decline the promotion. Id. at 466.
This limitation on the extension of immunity to government contractors is echoed in other cases. For example, in Ackerson v. Bean Dredging LLC, federal contractors were sued for damages allegedly caused by dredging in conjunction with the Mississippi River Gulf Outlet project. 589 F.3d 196 (5th Cir. 2009). Relying on Yearsley v. W.A. Ross Construction Co., 309 U.S. 18, 60 S. Ct. 413, 84 L. Ed. 554 (1940), the Fifth Circuit held that the contractors were entitled to immunity for their actions taken within the scope of their authority for the purpose of furthering the project. 589 F.3d at 206-07, 210. Notably, however, the court found significant that the plaintiffs' allegations "attacked Congress's policy of creating and maintaining the project, not any separate act of negligence by the Contractor Defendants." Id. at 207 ; see also Yearsley, 309 U.S. at 20 (holding that a contractor directed by the federal government to construct several dikes was immune from claims arising from the resulting erosion and loss of property when the damage was allegedly caused by the dikes' existence, not the manner of their construction).
The Court cited Yearsley in a case involving a city contractor hired to build sewer lines along a city-owned easement in accordance with the city's plans and specifications. Glade v. Dietert, 156 Tex. 382, 295 S.W.2d 642, 643 (1956). The city had inadvertently failed to acquire the entire easement as reflected in the plans, and the contractor was sued for trespass after bulldozing a portion of a landowner's property. Id. While immunity was not at issue in Glade because the city owed the landowner compensation for a taking, we cited Yearsley and other case law for the proposition that a public-works contractor "is liable to third parties only for negligence in the performance of the work and not for the result of the work performed according to the contract." Id. at 644. (Id. at 124-26.)
The Court noted that, in each of the cited cases, "the complained-of conduct for which the contractor was immune was effectively attributed to the government. That is, the alleged cause of the injury was not the independent action of the contractor, but the action taken by the government through the contractor." Id. at 125.