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recognizing that both "[a]iding and abetting and conspiracy are theories of derivative or vicarious liability"
Summary of this case from Whitelock v. StewartOpinion
No. 17-1010 No. 18-0159
06-12-2020
Dawn NETTLES, Petitioner, v. GTECH CORPORATION, Respondent GTECH Corporation, Petitioner, v. James Steele, et al., Respondents
Thad D. Spalding, Dallas, Dana Brooke Levy, Mary Ellis Lagarde, Richard L. Lagarde, Manfred Sternberg Jr., Houston, for Petitioner. Warren Kenneth Paxton, Austin, Kyle D. Hawkins, Jason R. LaFond, Jeffrey C. Mateer, Austin, as Amicus Curiae. Arturo Munoz, Michael H. Bernick, Houston, Jason N. Jordan, Dallas, Michael A. Hatchell, Nina Cortell, Dallas, Kenneth E. Broughton, Kent G. Rutter, Houston, Christopher Knight, for Respondent GTECH Corporation. Ryan S. Mindell, for Respondent Texas Lottery Commission.
Thad D. Spalding, Dallas, Dana Brooke Levy, Mary Ellis Lagarde, Richard L. Lagarde, Manfred Sternberg Jr., Houston, for Petitioner.
Warren Kenneth Paxton, Austin, Kyle D. Hawkins, Jason R. LaFond, Jeffrey C. Mateer, Austin, as Amicus Curiae.
Arturo Munoz, Michael H. Bernick, Houston, Jason N. Jordan, Dallas, Michael A. Hatchell, Nina Cortell, Dallas, Kenneth E. Broughton, Kent G. Rutter, Houston, Christopher Knight, for Respondent GTECH Corporation.
Ryan S. Mindell, for Respondent Texas Lottery Commission.
Justice Busby delivered the opinion of the Court, in which Justice Lehrmann, Justice Devine, and Justice Bland joined, in Part III of which Chief Justice Hecht, Justice Green, and Justice Blacklock joined, and in Parts I and II of which Justice Boyd joined.
In this case, we consider whether derivative sovereign immunity bars claims against GTECH Corporation, a private contractor. GTECH provided instant ticket manufacturing and services to the Texas Lottery Commission. Several plaintiffs filed two separate suits against GTECH, alleging that the instructions on a scratch-off lottery ticket were misleading, causing them to believe they had winning tickets when they did not. GTECH filed pleas to the jurisdiction, asserting it was entitled to the same immunity held by the Lottery Commission. One of the trial courts granted GTECH's plea to the jurisdiction, but the other court denied the plea. On appeal, the Dallas Court of Appeals affirmed the trial court's grant of the plea to the jurisdiction. The Austin Court of Appeals affirmed in part and reversed in part the trial court's denial of the plea.
As to the plaintiffs' fraud claims, we hold that GTECH would not qualify for derivative sovereign immunity even if we recognized that doctrine because the Lottery Commission did not control GTECH's choices in writing the game instructions. We affirm the Austin Court of Appeals' judgment holding that GTECH is not entitled to immunity from the plaintiffs' fraud claims, and we reverse the portion of the Dallas Court of Appeals' judgment holding otherwise. GTECH is entitled to immunity, however, from the plaintiffs' allegations of aiding and abetting the Commission's fraud and of conspiracy with the Commission. Because the plaintiffs necessarily must override the substance of the Commission's underlying decisions in order to impose derivative liability on GTECH, these allegations implicate the purposes of sovereign immunity. We therefore affirm the Dallas Court of Appeals' judgment in part as to these allegations.
BACKGROUND
The Lottery Commission contracted with GTECH for instant ticket manufacturing and services. In performing its obligations under the contract, GTECH proposed the FUN 5's scratch-off game, which it had operated in other states. The Commission selected the game, and GTECH submitted working papers with images of the ticket, detailed specifications, and game parameters. In the working papers, the scratch-off ticket included five different games, including a tic-tac-toe game. A player would win the tic-tac-toe game if a ticket had three dollar-bill symbols in a single row, column, or diagonal line and would win the amount in a "PRIZE" box. The game also included a 5X multiplier box, which allowed a player to win five times the PRIZE amount if the box contained a 5 symbol. The working papers specified that a 5 symbol would only appear in the 5X box on eligible winning tickets. The proposed instructions for the tic-tac-toe game provided: "Reveal three Dollar Bill ‘[dollar bill icon]’ symbols in any one row, column, or diagonal line, win PRIZE in PRIZE box. Reveal a ‘5’ symbol in the 5X BOX, win 5 times that PRIZE."
The Lottery Commission responded to GTECH's working papers with changes to the game. For the tic-tac-toe game, the Commission requested that the dollar-bill icon be changed to a 5 symbol and that the multiplier 5 symbol in the 5X box be changed to a money-bag symbol. The Commission also notified GTECH that the money-bag symbol needed to appear on some non-winning as well as winning tickets in order to prevent microscratching—using a small, sharp object to reveal a microscopic portion of a ticket to determine whether it is a winner.
GTECH implemented the requested changes. Although GTECH had designed the multiplier symbol for use only on tickets containing a winning tic-tac-toe game, the symbol also appeared on some non-winning tickets as the Commission had instructed. GTECH did not change the instructions on the tickets for the tic-tac-toe game other than to reflect the new symbols. The final instructions read: "Reveal three ‘5’ symbols in any one row, column, or diagonal, win PRIZE in PRIZE box. Reveal a Money Bag ‘[money bag icon]’ symbol in the 5X BOX, win 5 times that PRIZE."
The Lottery Commission began selling the Fun 5's scratch-off game on September 2, 2014. Lottery players began calling the Lottery Commission about the game immediately, saying that they thought the money-bag symbol on their tickets meant an automatic win of five times the amount in the prize box. Callers complained that the game instructions were misleading, leading them to believe incorrectly that they had winning tickets even though they had not also won the tic-tac-toe game. Legislators also contacted the Lottery Commission regarding constituent complaints that the instructions were misleading. Based on these complaints, the Lottery Commission shut down the game on October 21.
Several people who had purchased non-winning Fun 5's tickets that included a money-bag symbol sued GTECH, claiming it misled them into believing they would win if their tickets revealed a money-bag symbol. James Steele and more than 1,200 other named plaintiffs (collectively, Steele) filed one suit against GTECH in Travis County. These plaintiffs brought claims for fraud, fraud by nondisclosure, aiding and abetting the Lottery Commission's fraud, tortious interference with the plaintiffs' contracts with the Texas Lottery, and conspiracy with the Lottery Commission. Dawn Nettles filed suit against GTECH in Dallas County. She similarly asserted claims for common-law fraud, fraud by nondisclosure, aiding and abetting the Lottery Commission's fraud, and conspiracy with the Lottery Commission.
Nettles also sued the Lottery Commission. The trial court granted the Lottery Commission's plea to the jurisdiction, and that order is not at issue in this appeal.
GTECH filed pleas to the jurisdiction in both counties. GTECH asserted that derivative sovereign immunity barred all the claims against it because the suits were premised on alleged conduct directed and controlled by the Lottery Commission, an entity with sovereign immunity. The Dallas County trial court granted GTECH's plea to the jurisdiction and dismissed the case, but the Travis County trial court denied GTECH's plea.
Nettles appealed the dismissal of her suit to the Dallas Court of Appeals. The Dallas Court affirmed, concluding that Nettles's claims were barred by immunity because GTECH met its burden of proving it acted as the Lottery Commission and did not exercise independent discretion in making the changes to the lottery tickets that were the basis of Nettles's claims. 581 S.W.3d 234, 244 (Tex. App.—Dallas 2017).
GTECH appealed the denial of its plea in the Steele case to the Austin Court of Appeals. The Austin Court affirmed in part and reversed and rendered in part. As for Steele's claims of aiding and abetting fraud, tortious interference, and conspiracy, the court held they implicated sovereign immunity because the complaints substantively challenged underlying Lottery Commission decisions and directives. 549 S.W.3d 768, 796 (Tex. App.—Austin 2018). But the court held the plea had been properly denied as to the fraud claims, which related to actions taken by GTECH within its independent discretion. Id. at 802–03. The court explained that if "the relevant contracts would leave the government contractor discretion to comply with the asserted tort duty and avoid the conduct alleged to be wrongful," as the contract did here, "there is no derivative immunity." Id. at 803.
Both GTECH and Nettles filed petitions for review in this Court, which we granted. The parties disagree regarding what GTECH must prove to be entitled to the Commission's immunity and whether it met that legal standard as to each of the claims against it. ANALYSIS
I. Standard of review
Sovereign immunity is the "well-established doctrine ‘that no state can be sued in her own courts without her consent, and then only in the manner indicated by that consent.’ " Brown & Gay Eng'g, Inc. v. Olivares , 461 S.W.3d 117, 121 (Tex. 2015) (quoting Tooke v. City of Mexia , 197 S.W.3d 325, 331 (Tex. 2006) ). Sovereign immunity is a common-law doctrine. Id. at 122. It is the responsibility of the judiciary to decide when our State and its political subdivisions have immunity and to define its boundaries, and the responsibility of the Legislature to determine whether to waive immunity and to what extent. Id.
Immunity from suit implicates a court's subject-matter jurisdiction and is properly asserted in a plea to the jurisdiction. Hous. Belt & Terminal Ry. v. City of Houston , 487 S.W.3d 154, 160 (Tex. 2016). Because subject-matter jurisdiction is a question of law, we review de novo a trial court's ruling on a plea to the jurisdiction. See Brown & Gay , 461 S.W.3d at 120.
II. GTECH is not entitled to derivative immunity from suit on the plaintiffs' fraud claims.
A. The standard for derivative immunity discussed in Brown & Gay considers contractor discretion and government control.
We have not had many opportunities to address whether a Texas government agency's immunity from suit might extend to its private contractors, and if so under what circumstances. See Rosenberg Dev. Corp. v. Imperial Performing Arts, Inc. , 571 S.W.3d 738, 751 (Tex. 2019). Federal courts, and some Texas courts of appeals, have held that "government contractors obtain certain immunity in connection with work which they do pursuant to their contractual undertakings with the [government]." Campbell-Ewald Co. v. Gomez , ––– U.S. ––––, 136 S. Ct. 663, 672, 193 L.Ed.2d 571 (2016) (quoting Brady v. Roosevelt S.S. Co. , 317 U.S. 575, 583, 63 S.Ct. 425, 87 L.Ed. 471 (1943) ). "[U]nlike the sovereign's," however, that immunity "is not absolute." Id.
We most recently addressed the subject of derivative immunity for private contractors in Brown & Gay. In that case, Brown & Gay Engineering contracted with the Fort Bend County Toll Road Authority, a governmental entity, to build a roadway. 461 S.W.3d at 119. Brown & Gay was sued after a fatal accident on the roadway and asserted that as a contractor, it was entitled to the same governmental immunity as the Authority. Id. at 120. We concluded Brown & Gay was not entitled to share the Authority's immunity. Id. at 127.
In addressing whether to extend immunity to the private contractor, we concluded that doing so would not further the rationale or purpose of the immunity doctrine and also considered cases where the "complained-of conduct for which the contractor was immune was effectively attributed to the government." Id. at 123-25. In K.D.F. v. Rex , for example, we explained that under Kansas law a private company operating "solely upon the direction" of a state government entity, and exercising "no discretion in its activities," was "not distinguishable" from the entity such that "a lawsuit against one [was] a lawsuit against the other." 878 S.W.2d 589, 597 (Tex. 1994). And in Butters v. Vance International, Inc. , 225 F.3d 462, 464 (4th Cir. 2000), the court held that a security firm was immune from suit where it was following orders from the federal government. Brown & Gay explained that in cases where a contractor shared in immunity, the conduct complained of 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." Brown & Gay , 461 S.W.3d at 125.
In contrast, the plaintiffs alleged Brown & Gay was independently negligent in designing the road signs and traffic layouts. Id. at 126. Even though Brown & Gay's design plans were subject to approval by the Authority, Brown & Gay was responsible under the contract for preparing the specifications for all signs. Id. at 126 ; see also id. at 131 (Hecht, C.J., concurring) (pointing out that Authority "supervised the firm's work" but "did not tell Brown & Gay how to do the work"). The suit against Brown & Gay did not complain of the existence of the project or seek to hold it liable for implementing the Authority's specific directions, so we concluded Brown & Gay was responsible for its own negligence. Id. at 127.
We quoted a federal court as "aptly summariz[ing] the framework governing the extension of derivative immunity to federal contractors." Id. at 125 n.9 (quoting Bixby v. KBR, Inc. , 748 F. Supp. 2d 1224, 1242 (D. Or. 2010) ). That framework includes three scenarios involving a government contractor's derivative immunity: (1) a contractor is entitled to the same immunity as the government when the government specifies the manner in which a task is to be performed, the contractor complies, and the contractor is sued for a harm caused by its compliance with specifications; (2) a contractor is not entitled to derivative immunity when the contractor is allowed to exercise discretion in how to perform a task and the manner of performing the task ultimately causes harm; and (3) a contractor is not entitled to immunity when it is hired to perform a task according to precise specifications but fails to comply with the specifications. Id.
In sum, as we explained in Brown & Gay , the primary considerations some courts have used in deciding whether to extend sovereign immunity to private contractors are the government's control and the contractor's discretion. Id. at 124–26 ; see also id. at 130–31 (Hecht, C.J., concurring). In determining how those considerations come into play, courts that have considered the possibility of contractor immunity have looked to the pleadings: does the suit complain of a governmental decision the contractor was implementing, or of the manner in which the contractor performed a contractual obligation? Id. at 130 & nn. 5–6 (Hecht, C.J., concurring). Put simply, these courts ask (1) did the government tell the contractor what to do and how to do it (as opposed to the contractor having "some discretion in performing the contract" ); and, if so, (2) did the contractor do as it was told? When the answer to both questions is yes, these courts extend a form of immunity to the contractor's conduct. Ultimately, we did not decide whether derivative sovereign immunity could ever apply to a government contractor and did not adopt this or any other immunity standard in Brown & Gay because it was unnecessary to do so. Id. at 126. Having concluded that the Authority exercised "no control" over the contractor's complained-of conduct, we observed that "[w]e need not establish today whether some degree of control by the government would extend its immunity protection to a private party." Id.
Brown & Gay , 461 S.W.3d at 130 n.6 (Hecht, C.J., concurring) (quoting Allen Keller Co. v. Foreman , 343 S.W.3d 420, 425–26 (Tex. 2011) ).
We note this control-based standard is similar to the test for distinguishing between independent contractors and employees. See Limestone Prods. Distribution, Inc. v. McNamara , 71 S.W.3d 308, 312 (Tex. 2002) ("The test to determine whether a worker is an employee rather than an independent contractor is whether the employer has the right to control the progress, details, and methods of operations of the work."). Government employees sued in their official capacity are entitled to assert the government's own immunity from suit (unless they act ultra vires ), and employees sued in their individual capacity are protected by official immunity. See Hous. Belt & Terminal Ry. , 487 S.W.3d at 164 & n.7 ; Brown & Gay , 461 S.W.3d at 126 (discussing Ross v. Linebarger, Goggan, Blair & Sampson, L.L.P. , 333 S.W.3d 736 (Tex. App.—Houston [1st Dist.] 2010, no pet.) ); Steele , 549 S.W.3d at 783–84. In this case, however, GTECH's contracts with the Commission specify that it is an independent contractor, and GTECH has not argued it should nevertheless be considered an employee for immunity purposes.
Here, the parties have not briefed the questions whether we should recognize a doctrine of derivative sovereign immunity for contractors, or if so, what standard we should adopt for determining the scope of that immunity. As in Brown & Gay , we need not decide those questions today. The parties focus their arguments instead on the control-based standard used by the courts whose decisions we discussed in Brown & Gay. For the reasons explained below, we hold GTECH would not be entitled to immunity under that standard.
We therefore express no view in this case on the arguments presented by Justice Boyd .
B. Because GTECH exercised discretion in choosing the game instructions, it would not be entitled to derivative immunity from fraud claims based on those instructions.
We first apply the control-based immunity standard to the claims of fraud by misrepresentation and non-disclosure brought by Steele and Nettles. GTECH contends that the Lottery Commission's exercise of statutory and contractual control over the form of the Fun 5's ticket entitles GTECH to share in the Commission's immunity. Nettles and Steele assert that GTECH is not entitled to immunity because it exercised at least some discretion in creating and producing the Fun 5's game. If we recognized derivative sovereign immunity under the control standard discussed above, we would have to determine whether the Lottery Commission had sufficient control over GTECH's actions that they were effectively attributable to the Commission and were not GTECH's independent actions, or whether GTECH had some discretion.
Before we can make this determination under the control standard, we must first define precisely what conduct of GTECH is at issue. GTECH had multiple responsibilities under its contract with the Commission, including submitting working papers to the Commission and manufacturing game tickets, and the parties disagree about which conduct is at issue here. In Brown & Gay , we referred to the "complained-of conduct" in discussing cases in which a contractor shared the government's immunity. 461 S.W.3d at 125. We noted Brown & Gay was sued for failure to design and install proper signs and other traffic-control devices, and we ultimately determined it could not be entitled to immunity under the control standard because it had discretion over these designs. Id. at 120, 126. Following this approach, we would look first to the "complained-of conduct" in the pleadings to determine whether a party could be entitled to derivative immunity. See id. at 125 ; see also Orion Real Estate v. Sarro , 559 S.W.3d 599, 607 (Tex. App.—San Antonio 2018, no pet.) (looking to negligence claim to determine the "complained-of conduct").
According to Nettles's and Steele's fraud allegations, the tickets contained a representation that a player would win if the ticket included a money-bag symbol, but this was a false representation because not all tickets with a money-bag symbol were winning tickets. Nettles alleged that GTECH "crafted" the representation on the Fun 5's tickets. Similarly, Steele alleged that GTECH "chose the wording" of the representation on the Fun 5's tickets. Both plaintiffs asserted that the wording chosen by GTECH was misleading given the change in game parameters. They also asserted that GTECH failed to disclose to plaintiffs that not all tickets with a money-bag symbol were winning tickets.
We express no view regarding the merit of these fraud allegations, as that issue is not before us.
GTECH counters that the conduct at issue is GTECH "accepting and implementing the Commission's directions," but we disagree with this characterization of the claims. Plaintiffs are challenging GTECH's actions in choosing the wording of the instructions initially as well as in maintaining that wording even after the change in game parameters. We therefore examine the extent to which GTECH had discretion and the Commission had control with regard to this conduct.
In this examination, we are "not required to look solely to the pleadings but may consider evidence and must do so when necessary to resolve the jurisdictional issues raised." Bland Indep. Sch. Dist. v. Blue , 34 S.W.3d 547, 555 (Tex. 2000). Here, the evidence necessary to resolve this jurisdictional issue includes the parties' contract as well as evidence regarding the course of performance. See Bay, Inc. v. Ramos , 139 S.W.3d 322, 327 (Tex. App.—San Antonio 2004, pet. denied) (considering contract as well as testimony regarding contractor's responsibilities when considering whether contractor had immunity); see also Dow Chem. Co. v. Bright , 89 S.W.3d 602, 607–08 (Tex. 2002) (considering evidence of performance when analyzing whether premises owner actually exercised control over contractor's work). We review the evidence under a standard mirroring that of summary judgment, taking as true all evidence favoring the plaintiff and indulging reasonable inferences and resolving doubts in the plaintiff's favor. See Sampson v. Univ. of Tex. at Austin , 500 S.W.3d 380, 384 (Tex. 2016).
The contract for instant ticketing manufacturing and services, and the Lottery Commission's request for proposals incorporated into the contract, required GTECH to provide suggested game designs. After receiving approval from the Lottery Commission, GTECH was to provide draft working papers with specifications of the game, the Commission was to request any changes, and then GTECH was to provide final working papers. The contract provided that "[f]inal decisions regarding the direction or control of the Lottery are always the prerogative of the Texas Lottery in its sole discretion" and that the tickets would "conform to, and function in accordance with, Texas Lottery-approved specifications and designs."
The contract also provided that GTECH's game development team was required to demonstrate knowledge and experience with game design elements, graphic design, and product management. The GTECH customer service representative who prepared the Fun 5's working papers testified that after the Lottery Commission made any comments or notes regarding working papers, she would "take a look at the change and then decide from there" about making the change. She testified that it is the job of GTECH's customer service representative to review the instructions after the Commission has asked for a change in parameters to make sure the instructions are clear and unambiguous, and do not need to be changed. The GTECH account development manager testified he would expect that if GTECH employees saw a change from the Commission that would harm the game, they would attempt to let someone know to address it with the Commission. The Commission's instant product coordinator testified he would expect GTECH to notify the Commission if it saw concerns with a game, including misleading instructions.
After the Commission approved the suggested game design for the Fun 5's tickets, GTECH internally reviewed the artwork, instructions, and parameters for the game and submitted working papers to the Commission. As previously explained, the working papers featured a tic-tac-toe game that included a 5X multiplier box, which allowed a player to win five times the PRIZE amount if the box contained a 5 symbol. The working papers specified that a multiplier 5 symbol would appear only on tickets with winning tic-tac-toe games. The Commission asked for changes to the tic-tac-toe game, including changing the winning symbol in the 5X multiplier box from a 5 to a money-bag symbol and including the multiplier money-bag symbol on some non-winning tickets. According to GTECH's regional sales director, after the Commission requested that the multiplier symbol also appear on non-winning tickets, it would be the responsibility of GTECH's customer service representative to look at the language of the instructions and determine whether they needed to be changed. There is also evidence that GTECH's customer service representative actually reviewed the instructions and decided they did not need to be changed.
Based on the contract and other evidence, we agree with Nettles and Steele that GTECH had some discretion with regard to the conduct at issue. In K.D.F. , we held that an independent contractor investment advisor to KPERS—a Kansas governmental entity—could not benefit from the sovereign immunity of Kansas. 878 S.W.2d at 597. We recognized that the contractor's "role [was] more in the nature of advising KPERS how to proceed, rather than being subject to the direction and control of KPERS." Id. The contractor's "activities necessarily involve[d] considerable discretion." Id.
Similarly here, GTECH's role with regard to the conduct at issue—"crafting" or "choosing the wording" of the representation on the Fun 5's tickets before and after the change in parameters—was in the nature of advising the Commission how to proceed. The contract not only gave GTECH discretion, it required GTECH to provide recommendations for all parts of the game. The contract also specified that the Commission "may rely upon the guidance of [GTECH] in all matters related to instant game development and manufacturing services." In providing this guidance, GTECH was not "simply implementing the [Commission's] decisions" such that its conduct could be "effectively attributed to the government." Brown & Gay , 461 S.W.3d at 126 ; accord id. at 130 (Hecht, C.J., concurring). As we noted in K.D.F. , there is a distinction between a contractor that advises a governmental entity how to proceed and one that "operates solely upon the direction of" that entity. 878 S.W.2d at 597.
GTECH stresses that the Commission possessed and exercised total control over all aspects of the Fun 5's tickets through the contract and the State Lottery Act. The contract provided that "[f]inal decisions regarding the direction or control of the Lottery are always the prerogative of the Texas Lottery in its sole discretion." The Lottery Act provides that the Commission "shall exercise strict control and close supervision over all lottery games." TEX. GOV'T CODE § 466.014(a).
The Lottery Act also authorizes the Commission's executive director to "contract with or employ a person to perform a function, activity, or service in connection with the operation of the lottery," which is what occurred here. Id. § 466.014(c).
But close supervision and final approval of work over which a contractor has discretion are not the same as the government specifying the manner in which a task is to be performed. See Brown & Gay , 461 S.W.3d at 125 n.9 (quoting Bixby , 748 F. Supp. 2d at 1242 ). In Brown & Gay , for example, the Fort Bend County Toll Road Authority delegated responsibility to Brown & Gay to design road signs and traffic layouts "subject to approval by the Authority's Board of Directors." Id. at 119. We nevertheless concluded that the entity had "no control" over Brown & Gay's work. Id. at 126. And in Lenoir v. U.T. Physicians , U.T. Physicians operated a medical clinic under contract with a governmental entity. 491 S.W.3d 68, 77 (Tex. App.—Houston [1st Dist.] 2016, pet. denied). The contract provided that U.T. Physicians would provide all nursing personnel, but the entity had the right to approve all personnel and to require removal of any personnel in certain circumstances. Id. at 86. Relying on Brown & Gay , the court of appeals held U.T. Physicians was not entitled to immunity in a suit for a nurse's negligence because it was granted contractual discretion to provide nursing and clinical personnel, even though the governmental entity had the right to approve and remove personnel. Id.
Chief Justice Hecht disputes the relevance of this conclusion, asserting that the complaint in Brown & Gay "was about the engineer's design," while "[t]he plaintiffs' complaint here is about the Commission's game." Post at ––––. But as discussed above, the plaintiffs' petitions show their complaint is about the instructions furnished by GTECH for the Commission's game, just as the complaint in Brown & Gay was about the design furnished by the engineer for the Authority's road.
In Brown & Gay , we quoted a case explaining that federal contractors are entitled to the same immunity as the government when "the government hires a contractor to perform a given task, and specifies the manner in which the task is to be performed, and the contractor is later hauled into court to answer for a harm that was caused by the contractor's compliance with the government's specifications." 461 S.W.3d at 125 n.9 (quoting Bixby , 748 F. Supp. 2d at 1242 ). But where a contractor has been granted discretion to perform a task and the government approves those discretionary plans, the government has not specified the manner in which the task is to be performed. See id. at 127.
In this case, GTECH was contractually obligated to design the tickets, and it submitted working papers to the Commission that included game specifications and instructions. The Commission did not tell GTECH how to write the instructions. The Commission did instruct GTECH to include the multiplier money-bag symbol on some non-winning tickets, and GTECH changed the final working papers accordingly. The Commission then approved those final working papers. Both before and after making the changes requested by the Commission, GTECH had discretion regarding the conduct at issue: choosing the wording of the game instructions. The Commission did not specify the manner in which that task was to be performed; it only approved GTECH's proposed instructions. GTECH points to nothing in the contract, the statute, or the evidence that left GTECH without discretion to propose complete and non-misleading instructions. Thus, even if we recognized derivative sovereign immunity for contractors, GTECH would not be entitled to immunity from suit on the fraud claims under the control standard.
See Steele , 549 S.W.3d at 802–03 (considering whether "government contractor's contract would leave it no discretion to comply with an asserted tort duty").
C. GTECH's remaining arguments regarding the fraud claims cannot be resolved on a plea to the jurisdiction.
GTECH also asserts that any representation on the Fun 5's tickets was made by the Commission and that any failure of GTECH to suggest to the Commission that it should consider changing the tickets' content is not a misrepresentation to plaintiffs that could form the basis of any alleged fraud. Similarly, CHIEF JUSTICE HECHT contends that plaintiffs cannot complain of GTECH's faulty counsel to the Commission. Post at ––––. But whether GTECH's conduct does or does not constitute fraud, or whether any fraud was solely the result of the Commission's representations, are merits issues separate from whether GTECH could have derivative immunity.
The only issue in this appeal is whether the trial courts lacked jurisdiction based on GTECH's claim to be protected by derivative immunity. See Hous. Belt & Terminal Ry. , 487 S.W.3d at 160 (recognizing immunity from suit implicates a court's subject-matter jurisdiction so it is properly asserted in a plea to the jurisdiction). A challenge to an element of a plaintiff's claim by a defendant who lacks immunity from suit does not implicate the jurisdiction of the court; it should be raised in a motion for summary judgment rather than a plea to the jurisdiction. See Frost Nat'l Bank v. Fernandez , 315 S.W.3d 494, 508 (Tex. 2010) ("A defendant who conclusively negates at least one of the essential elements of a cause of action or conclusively establishes an affirmative defense is entitled to summary judgment."); Werth v. Johnson , 294 S.W.3d 908, 909 (Tex. App.—Beaumont 2009, no pet.) (defendant in fraud claim filed motion for summary judgment claiming there was no evidence she made any false representations).
D. Extending immunity from the fraud claims to GTECH would not further the purposes of immunity.
GTECH asserts as an additional ground that extending derivative immunity to it would serve the pecuniary justification for sovereign immunity. In Brown & Gay , we discussed whether extending sovereign immunity to the private contractor would "comport[ ] with and further[ ] the legitimate purposes that justify this otherwise harsh doctrine" and concluded it would not. 461 S.W.3d at 123. We explained that sovereign immunity was "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." Id. (quoting Tex. Dep't of Transp. v. Sefzik , 355 S.W.3d 618, 621 (Tex. 2011) ). We concluded that immunizing the private contractor would not further this rationale because even if holding a contractor liable for its own actions in performing a government contract would lead to higher overall governmental costs, those costs would be reflected in a negotiated contract price. Id.
In addition to the pecuniary justification of protecting the public fisc discussed in Brown & Gay , considerations of government structure underlie the immunity doctrine. Rosenberg Dev. Corp. , 571 S.W.3d at 750. "[T]he immunity doctrine respects the separateness of the branches of government," id. at 751, and immunity seeks to maintain that separateness by preventing the judiciary from interfering with the responsibilities of other branches. See Hughes v. Tom Green County , 573 S.W.3d 212, 218 (Tex. 2019) (citing Brown & Gay , 461 S.W.3d at 121 ).
Another justification for immunity is pragmatic: to benefit the public by preventing disruptions of key government services. Rosenberg Dev. Corp. , 571 S.W.3d at 750. GTECH does not claim that any key government services are at issue here.
GTECH contends these justifications for immunity are implicated here because these suits attack the Commission's decisions about the form and content of the Fun 5's game, seeking to control the State's choices about the use of public funds. But as discussed above, plaintiffs' fraud claims complain of GTECH's choices in writing the alleged misrepresentation, not of any decision by the Commission. As for GTECH's argument that the Commission itself made the representation on the tickets (an issue we do not decide as discussed above), GTECH is free to present this ground in a motion for summary judgment or argue it at trial. Allowing courts to entertain the claims would not force the Commission to make unexpected financial expenditures or interfere with its responsibilities. We therefore conclude that granting GTECH derivative sovereign immunity from suit on these claims would not further the purposes of immunity.
III. GTECH is entitled to immunity from Nettles's allegations of conspiracy and of aiding and abetting.
Also before us in Nettles's case are allegations that GTECH conspired with the Commission, and aided and abetted an alleged fraud by the Commission. Aiding and abetting and conspiracy are theories of derivative or vicarious liability. See KCM Fin. LLC v. Bradshaw , 457 S.W.3d 70, 85–86 (Tex. 2015). These liability-spreading theories depend upon liability for an underlying tort, and they survive or fail alongside that tort. Agar Corp. v. Electro Circuits Int'l, LLC , 580 S.W.3d 136, 141 (Tex. 2019) (citing NME Hosps., Inc. v. Rennels , 994 S.W.2d 142, 148 (Tex. 1999) ). For example, in Chu v. Hong , we found no basis for holding an alleged co-conspirator liable where the underlying torts did "not exist." 249 S.W.3d 441, 444 (Tex. 2008).
Steele also alleged that GTECH conspired with the Commission, and aided and abetted the Commission's fraud. The court of appeals dismissed these theories for want of jurisdiction, see 549 S.W.3d at 804, and Steele does not challenge that holding in this Court.
We also addressed the viability of conspiracy and aiding-and-abetting theories in Ernst & Young, L.L.P. v. Pacific Mutual Life Insurance Co. , 51 S.W.3d 573, 583 (Tex. 2001). We held that the trial court properly granted summary judgment on a fraud claim because the defendant negated an element of the claim. Id. at 582–83. We then considered whether the trial court also properly granted summary judgment on conspiracy and aiding-and-abetting theories that were premised on the alleged fraud. Id. at 583. We held that failure of the underlying claim "necessarily dispose[d]" of these theories. Id.
In this case, Nettles's theories of conspiracy and of aiding and abetting against GTECH are wholly derivative of an alleged underlying fraud by the Commission alone. Unlike the fraud claims against GTECH analyzed above, these alternative theories assume that the Commission is responsible for the game instructions and committed fraud through those instructions; they focus on GTECH's subsequent actions of printing the allegedly misleading and deceptive instructions and distributing the tickets with those instructions.
We note this will not be true of all aiding-and-abetting or conspiracy theories involving government as well as non-government actors. For example, the underlying tort could be committed by government as well as non-government actors, or committed by non-government actors whom a government actor aided (or with whom the government actor conspired). We express no view on whether sovereign immunity will extend to non-government actors based on allegations of conspiracy or of aiding and abetting other than those before us.
The record shows that the Commission specified the manner in which GTECH was to print and distribute the tickets. Once the Commission authorized the Fun 5's working papers, GTECH was to manufacture the game according to detailed specifications. Any changes after the Commission approved the final working papers required written authorization from the Commission's executive director. Distribution was also strictly directed by the Commission, including packaging, delivery vehicles, and delivery location. The parties' contract obligated GTECH to "accept and support" the Commission's decisions and to conform its "tickets, games, goods, and services" to the Commission's specifications.
Taken together, the pleadings and record show that Nettles can prevail on her conspiracy and aiding-and-abetting theories against GTECH only by proving that the Commission's actions within its delegated powers were fraudulent. See Agar Corp. , 580 S.W.3d at 140 ; Ernst & Young , 51 S.W.3d at 583. Nettles's allegations of derivative liability for the Commission's decisions therefore implicate the purposes of sovereign immunity recognized in our cases. As discussed above, immunity preserves the separation of powers by preventing the judiciary from interfering with the policymaking responsibilities of other branches of government and seeking to control their choices regarding the use of public funds. Hughes , 573 S.W.3d at 218 ; Rosenberg Dev. Corp. , 571 S.W.3d at 750 ; Catalina Dev., Inc. v. County of El Paso , 121 S.W.3d 704, 706 (Tex. 2003). Because Nettles necessarily must override the substance of the Commission's underlying decisions in order to impose derivative liability on GTECH, we hold GTECH is entitled to immunity from the theories of conspiracy and of aiding and abetting alleged here.
CONCLUSION
GTECH is not entitled to derivative immunity from Steele's or Nettles's fraud claims. GTECH is entitled to immunity, however, from Nettles's allegations of conspiring with the Commission, and aiding and abetting an alleged fraud by the Commission. We therefore affirm the judgment of the Austin Court of Appeals and reverse the judgment of the Dallas Court of Appeals as to the fraud claims, affirm the judgment of the Dallas Court of Appeals as to the allegations of conspiracy and of aiding and abetting, and remand the fraud claims to the trial courts for further proceedings.
Chief Justice Hecht filed an opinion concurring in part and dissenting in part in which Justice Green and Justice Blacklock joined.
Justice Boyd filed an opinion concurring in part and dissenting in part.
Justice Guzman did not participate in the decision.
BOYD, J., concurring in part and dissenting in part.
Immunity protects the government. An independent contractor is not the government. Therefore, immunity does not protect an independent contractor. That simple syllogism seems to me to resolve this case.
Brown & Gay Eng'g, Inc. v. Olivares , 461 S.W.3d 117, 129 (Tex. 2015) ( Hecht , C.J., concurring).
This Court recently flirted with the notion that derivative sovereign immunity could protect private companies against suits based on conduct performed pursuant to a contract with the government. See Brown & Gay , 461 S.W.3d at 123. The Court declined to decide that issue, however, concluding instead that even assuming we recognized such derivative sovereign immunity from suit, it would not have protected the private contractor in that case because the government exercised "no control" over that contractor's work. Id. at 126 ("We need not establish today whether some degree of control by the government would extend its immunity protection to a private party; we hold only that no control is determinative.").
Today the Court reaches nearly the same result. As in Brown & Gay , the Court concludes that it "need not decide" whether to recognize a "doctrine of derivative sovereign immunity for contractors" or what standard to apply to determine the scope of any such immunity. Ante at ––––. Yet it explains that, were it to "recognize[ ] derivative sovereign immunity under the control standard," it would "have to determine" whether the Texas Lottery Commission had "sufficient control" over GTECH to establish derivative immunity under a "control-based standard." Ante at ––––. Finding insufficient control, the Court concludes that GTECH "is not entitled to derivative immunity" against the plaintiffs' fraud claims, ante at ––––, but is entitled to immunity from derivative liability on the claims for conspiracy and aiding and abetting, ante at ––––.
For the sake of other government contractors and those with claims against them—not to mention the trial and appellate courts that must resolve those claims—I would eliminate the uncertainty and decide the issue the Court has been avoiding. And I would reach the simple, logical conclusion that sovereign immunity only protects the sovereign. Because a contract with the government does not make private entities sovereign or governmental, it should never entitle them to sovereign or governmental immunity from suit.
To be clear, I have no problem with the idea that sovereign immunity from suit protects entities that are designed and created with the "nature, purposes, and powers" of an "arm of the State" when they are sued for conduct performed in that capacity. See, e.g. , Harris Cty. Flood Control Dist. v. Mann , 135 Tex. 239, 140 S.W.2d 1098, 1101 (1940) (holding statutorily created flood-control district was "an arm of the State government,[ ] that is, a State governmental agency"). For the same reasons that sovereign (or governmental) immunity from suit protects state agencies, counties, cities, and other political subdivisions, it also protects open-enrollment charter schools, see El Paso Educ. Initiative v. Amex Properties, LLC , 602 S.W.3d 521, 524-25 (Tex. 2020), but not private universities, see Univ. of the Incarnate Word v. Redus , 602 S.W.3d 398, 402-03 (Tex. 2020), or economic-development corporations, Rosenberg Dev. Corp. v. Imperial Performing Arts, Inc. , 571 S.W.3d 738, 749–50 (Tex. 2019). Although state agencies, political subdivisions, and arm-of-the-state entities are not themselves the sovereign State of Texas, they are by nature a branch of the sovereign and thus enjoy a form of derivative sovereign immunity. See Ben Bolt-Palito Blanco Consol. Indep. Sch. Dist. v. Tex. Political Subdivisions Prop./Cas. Joint Self-Ins. Fund , 212 S.W.3d 320, 326 (Tex. 2006) (holding statutorily authorized self-insurance fund created by and comprised of political subdivisions possessed, by design, the nature, purposes, and powers of the government and thus could assert governmental immunity).
Nor do I have any problem recognizing that a form of "qualified immunity" may protect individuals who act in good faith as agents of the government, even if they are not technically government employees. See, e.g. , Filarsky v. Delia , 566 U.S. 377, 393–94, 132 S.Ct. 1657, 182 L.Ed.2d 662 (2012) (extending "qualified immunity" to individuals who contract to act as government agents just as to those who are government employees); Incarnate Word , 602 S.W.3d at 411-12 (discussing official immunity). And I have no problem recognizing a type of "government-contractor defense" against liability on the merits , to protect a private party from liability for non-negligent conduct performed in compliance with a government contract and under the government's direction and control. See Torrington Co. v. Stutzman , 46 S.W.3d 829, 846 (Tex. 2000).
We have acknowledged that the federal common-law government-contractor defense generally protects government contractors from liability for defectively designed products when (1) the government provided "reasonably precise specifications" for the contractor's product, (2) the contractor's product conformed to those specifications, and (3) the contractor warned the government about any dangers the contractor knew about but the government did not. See Torrington , 46 S.W.3d at 846 ; see also Boyle v. United Techs. Corp. , 487 U.S. 500, 512, 108 S.Ct. 2510, 101 L.Ed.2d 442 (1988) (adopting government-contractor defense against "[l]iability for design defects in military equipment"). Courts have recognized a form of government-contractor defense not only against products liability, but also against liability for harm arising from services provided pursuant to a government contract. See, e.g. , Yearsley v. W.A. Ross Const. Co. , 309 U.S. 18, 20–21, 60 S.Ct. 413, 84 L.Ed. 554 (1940).
But treating private entities as a sovereign entity simply because they contract with the government is another matter altogether. Private entities that are neither designed nor created by the sovereign to act as or on behalf of the sovereign do not possess the sovereignty that justifies sovereign immunity from suit—even if they are regulated or controlled by the sovereign and are sued for conduct that fulfills a public purpose. See, e.g. , Incarnate Word , 602 S.W.3d at 412-14 (holding a private university is not an arm of the state protected by sovereign immunity from suit against claims arising from the conduct of its statutorily authorized police department); Rosenberg , 571 S.W.3d at 751 (holding governmental immunity does not protect municipally created economic development corporations because they are not governmental entities "in their own right"). Granting sovereign immunity from suit to a non-sovereign entity distorts the very meaning of sovereign immunity, even if the entity promotes public purposes under a contract with the sovereign. The entity's conduct may promote the sovereign's objectives, but its own nature, purposes, and power as an entity do not thereby become sovereign.
See Katherine Florey, Sovereign Immunity's Penumbras: Common Law, "Accident," and Policy in the Development of Sovereign Immunity Doctrine , 43 Wake Forest L. Rev. 765, 768 (2008) ("[S]overeign immunity doctrine as a whole has proven susceptible to a kind of definition creep.").
Sovereign immunity (or governmental immunity, when referring to political subdivisions) protects sovereign entities against both lawsuits and legal liabilities. Hillman v. Nueces County , 579 S.W.3d 354, 357 (Tex. 2019). We first recognized sovereign immunity as a principle of Texas common law over 170 years ago, but it has existed for more than 600 years and is now a well-established doctrine across the globe. Id. at 361. Sovereign immunity includes both immunity from liability—which protects governmental entities from liability on judgments against them—and immunity from suit, which protects them from "the burdens of litigation altogether." Tarrant County. v. Bonner , 574 S.W.3d 893, 900 (Tex. 2019). Sovereign immunity is a common-law doctrine; only this Court can declare its existence and scope. But we defer to the legislature, as the policy-making branch of government, to decide whether and when to waive it. Hillman , 579 S.W.3d at 361.
See also Hughes v. Tom Green County , 573 S.W.3d 212, 218 (Tex. 2019) (summarizing the doctrine's history in British, U.S., and Texas law).
Two fundamental characteristics of sovereign immunity simply preclude its application to non-sovereign entities. First, just as its name indicates, sovereign immunity exists because it is "inherent in the state's sovereignty." Dall./Fort Worth Int'l Airport Bd. v. Vizant Techs., LLC , 576 S.W.3d 362, 366 (Tex. 2019) ; Wasson Interests, Ltd. v. City of Jacksonville , 559 S.W.3d 142, 146 (Tex. 2018). As Alexander Hamilton explained long ago, "It is inherent in the nature of sovereignty not to be amenable to the suit of an individual WITHOUT ITS CONSENT." THE FEDERALIST No. 81, at 487 (Alexander Hamilton) (Clinton Rossiter ed., 1961). The State of Texas is "inviolably sovereign" because "sovereignty is inherent in its statehood," Wasson Interests, Ltd. v. City of Jacksonville , 489 S.W.3d 427, 429 (Tex. 2016), and sovereign immunity from suit is one of the "attributes" of its sovereignty, Rosenberg , 571 S.W.3d at 746. Because "sovereignty itself remains an important justification for sovereign immunity," Nazari v. State , 561 S.W.3d 495, 508 (Tex. 2018), extending sovereign immunity to a non-sovereign entity contradicts and distorts the very nature of sovereign immunity.
Second, sovereign immunity from suit implicates the courts' subject-matter jurisdiction over suits against the sovereign, see Vizant Techs. , 576 S.W.3d at 367, and thus "bars suit against the entity altogether," Tooke v. City of Mexia , 197 S.W.3d 325, 332 (Tex. 2006). This means the courts have no power over claims against the entity, "without regard to whether the claims asserted have merit," Bland Indep. Sch. Dist. v. Blue , 34 S.W.3d 547, 554 (Tex. 2000), "even if the State acknowledges liability on a claim," Wichita Falls State Hosp. v. Taylor , 106 S.W.3d 692, 696 (Tex. 2003), and when "the sovereign's liability is not disputed," Rosenberg , 571 S.W.3d at 746.
As a result, "just as immunity is inherent to sovereignty, unfairness is inherent to immunity," City of Galveston v. State , 217 S.W.3d 466, 480 n.38 (Tex. 2007) (Willett, J., dissenting). Sovereign immunity from suit "allows the ‘improvident actions’ of the government to go unredressed," Hall v. McRaven , 508 S.W.3d 232, 243 (Tex. 2017), and thus "places the burden of shouldering" the "costs and consequences" of those actions "on injured individuals," rather than on the entity that caused those consequences, Brown & Gay , 461 S.W.3d at 121. Even though the sovereign acted negligently, violated a legal standard, or otherwise breached a duty, sovereign immunity prevents the courts from providing "accountability under the law for the government's breaches." Rosenberg , 571 S.W.3d at 741.
Recognizing that sovereign immunity derives solely from sovereignty, divests courts of their constitutional powers, and defends the sovereign even when it wrongfully harms one of the sovereign's citizens, I see no reason why sovereign immunity from suit should ever apply to protect a non-sovereign entity—even those that contractually agree to allow the sovereign to control their actions.
Extending sovereign immunity to such entities is not only inconsistent with the very nature of sovereign immunity, it does nothing to support the purposes for which we have continued to recognize sovereign immunity. Initially, courts recognized sovereign immunity under the theory that "the king can do no wrong," Tooke , 197 S.W.3d at 331, but we have rejected that "feudal fiction" under our democratic form of government, Rosenberg , 571 S.W.3d at 740–41. Nevertheless, we continue to recognize sovereign immunity because of its "political, pecuniary, and pragmatic" purposes. Id. at 740.
Politically, we continue to recognize sovereign immunity because it "preserves separation-of-powers principles by preventing the judiciary from interfering with the Legislature's prerogative to allocate tax dollars." Brown & Gay , 461 S.W.3d at 121. By preserving the common-law doctrine of sovereign immunity, the courts maintain an "equilibrium among the branches of government" by allowing the legislature to decide, as a policy matter, when to "allow tax resources to be shifted ‘away from their intended purposes toward defending lawsuits and paying judgments.’ " Rosenberg , 571 S.W.3d at 740–41 (quoting Brown & Gay , 461 S.W.3d at 121 ). In short, sovereign immunity prevents the courts from "intruding into" the policy-making branch's role of managing and appropriating the public's funds. Hughes , 573 S.W.3d at 218.
By requiring a legislative decision to make tax dollars available to pay the costs of litigation and judgments, Chambers-Liberty Ctys. Navigation Dist. v. State , 575 S.W.3d 339, 347 (Tex. 2019), sovereign immunity serves the pecuniary purpose of ensuring "that the taxes the public pays are used ‘for their intended purposes.’ " Hillman , 579 S.W.3d at 361 (quoting Reata Const. Corp. v. City of Dallas , 197 S.W.3d 371, 375 (Tex. 2006) ). It "protect[s] the public treasury," Wichita Falls State Hosp. , 106 S.W.3d at 695, by "shield[ing] the public from the costs and consequences of improvident actions of their governments," Tooke , 197 S.W.3d at 332.
And pragmatically, sovereign immunity "serves to prevent governmental paralysis" by protecting "the State and its political subdivisions from endless litigation," Hughes , 573 S.W.3d at 218, which "hamper[s] government functions." Ben Bolt , 212 S.W.3d at 326. It safeguards "the public as a whole" by protecting its governmental agencies from both the "distraction" of lawsuits and the risks that litigants could control government action through the courts instead of through the political process. Hays St. Bridge Restoration Grp. v. City of San Antonio , 570 S.W.3d 697, 703–04 (Tex. 2019) (quotation and citation omitted).
Extending sovereign immunity from suit to non-sovereign entities merely because they contract with the sovereign does nothing to promote these purposes. Requiring private entities to defend suits alleging they engaged in harmful conduct poses no threat to the separation of powers because the legislature does not fund private entities through tax appropriations or "allocate tax dollars" to pay for judgments against them. Brown & Gay , 461 S.W.3d at 121. When the government contracts to obtain services or products from a private entity, the government pays only the amount it chooses to pay through the contracting process. If the private contractor must defend against or pay a judgment based on its own harmful conduct, its payment of those costs (whether from its own funds or using insurance benefits, see id. at 123 ) comes from private coffers, not from public funds. And even if the risk of litigation or liability increases the government's costs to obtain the services or products, it still remains the government's political choice to use tax dollars to pay that cost for its "intended purposes." Id. at 121, 123 (noting that sovereign immunity is not "strictly a cost-saving measure"). Because sovereign immunity protects the sovereign entity even if its private contractor is sued or found liable, the litigation will not interfere with the government's business or control the government's actions. In short, as we said in Brown & Gay , extending sovereign immunity from suit to non-sovereign government contractors simply does not serve these purposes. Id. at 119.
Without citing authorities and with little discussion, we extended a form of a "sovereign immunity" to a government contractor in K.D.F. v. Rex , 878 S.W.2d 589 (Tex. 1994). That decision, however, sought to promote a unique purpose by extending a comity-based refusal to exercise jurisdiction in light of the sovereign immunity of the State of Kansas, based on a Kansas statute that waived immunity but required suits complaining of "acts of the [state's retirement] system" to be brought in a specific Kansas county. Id. at 596. In light of that statute, we held that the contractor could benefit "indirectly" from the system's sovereign immunity because it was effectively the system's "agent." Id. Regardless of whether that holding was correct as a general principle, K.D.F. is not controlling on the present issue because it "required us to interpret statutory language that is not at issue here." Brown & Gay , 461 S.W.3d at 124.
Nor do these purposes justify the Court's decision today to extend sovereign immunity from suit to private entities that are sued on derivative claims like conspiracy and aiding and abetting. See ante at ––––. The Court suggests that imposing "derivative liability" on GTECH based on the Commission's decisions and actions "implicate[s]" sovereign immunity's purposes by requiring courts to interfere with the Commission's "policymaking responsibilities" and controlling its "choices regarding the use of public funds." Ante at 739. But it does no such thing. Courts can easily resolve such claims against private entities without having to exercise any control over the governmental entity, its policy choices, or its use of tax dollars. And if, as the Court suggests, a private entity cannot be "derivatively liable" for conspiring with or abetting a governmental entity, courts can simply dispose of such derivative claims on summary judgment, or even on the pleadings under Rule 91a. See Joe v. Two Thirty Nine Joint Venture , 145 S.W.3d 150, 154 (Tex. 2004) (holding law firm was entitled to summary judgment on derivative claims based on attorney's actions when attorney was protected by legislative immunity). Requiring private entities to assert and establish a merits defense in no way undermines the purposes of sovereign immunity, and depriving courts of the power to adjudicate that defense does nothing to promote those purposes.
Finally, extending sovereign immunity from suit to non-sovereign government contractors would make Texas an outlier among other U.S. jurisdictions. Although other jurisdictions have recognized liability defenses for government contractors, and even referred to such defenses as a form of derivative or acquired immunity, they have not extended true sovereign immunity from suit to non-sovereign entities.
The United States Supreme Court first recognized derivative protection for government contractors in Yearsley but acknowledged only a protection against "liability"—not "immunity" and not against "suit"—and even then only if the contractor acted under and within a validly conferred authority. 309 U.S. at 20–21, 60 S.Ct. 413. More recently, the Court explained that this protection does not offer contractors an "unqualified immunity," even "from liability," and the contractor's protection, "unlike the sovereign's , is not absolute." Campbell-Ewald Co. v. Gomez , 577 U.S. 153, 136 S. Ct. 663, 672, 193 L.Ed.2d 571 (2016) (emphasis added). Instead of "acquir[ing] the Government's embracive immunity," the contractor enjoys no protection when it "violates both federal law and the Government's explicit instructions." Id. As one commentator has observed, the protection the Supreme Court has extended to government contractors might qualify as a form of "derivative immunity," but it is not "derivative sovereign immunity," and certainly not derivative sovereign immunity from suit. Jason Malone, Derivative Immunity: The Impact of Campbell-Ewald Co. v. Gomez , 50 CREIGHTON L. REV. 87, 88 n.6, 124 (2016).
Similarly, the federal circuits have generally refused to recognize a derivative sovereign immunity from suit that both deprives the courts of jurisdiction and protects private government contractors even against their own wrongful conduct. Some circuits have expressly rejected a derivative immunity that deprives the courts of jurisdiction, holding instead that the protection for government contractors merely provides a form of "qualified immunity" that must "be reviewed on the merits rather than for jurisdiction." Adkisson v. Jacobs Eng'g Grp., Inc. , 790 F.3d 641, 647 (6th Cir. 2015) ; see also Ackerson v. Bean Dredging LLC , 589 F.3d 196, 207–08 (5th Cir. 2009) (holding that protection for contractors under Yearsley is not "shared" sovereign immunity and "does not deny the court of subject-matter jurisdiction"); U.S. ex rel. Ali v. Daniel, Mann, Johnson & Mendenhall , 355 F.3d 1140, 1146–47 (9th Cir. 2004) (holding that the government contractor defense does not confer sovereign immunity on contractors).
While other federal circuits have extended Yearsley to provide what they called "jurisdictional" protection, they too acknowledged that it is not true "sovereign immunity" because it applies only if the contractor "adhered to the terms of its contract with the government" and engaged in no negligence or other misconduct. See McMahon v. Presidential Airways, Inc. , 502 F.3d 1331, 1345 (11th Cir. 2007) ("[J]ust as in the area of official immunity, the immunity of a common law agent must be affirmatively justified."); Myers v. United States , 323 F.2d 580, 583 (9th Cir. 1963) (recognizing protection against "liability" for contractors, but only to the extent they performed their work "in conformity with the terms of said contract").
See also In re KBR, Inc., Burn Pit Litig. , 744 F.3d 326, 345 (4th Cir. 2014) (holding contractor was entitled to derivative sovereign immunity if it adhered to the terms of its contract with the government); but see Butters v. Vance Int'l, Inc. , 225 F.3d 462, 466 (4th Cir. 2000) (extending broad sovereign immunity to foreign government's contractor/agent under the federal Foreign Sovereign Immunities Act, so long as contractor was "following Saudi Arabia's orders not to promote" a female employee).
In the same way, none of the states have extended true sovereign immunity from suit to private government contractors. Some states have expressly rejected any form of derivative sovereign immunity from suit for government contractors. Others have recognized something akin to the government-contractor defense on the merits, or perhaps a limited "immunity from liability," by granting protection against "liability" so long as the contractor complies with the contract and does not engage in negligence or other wrongful conduct. Still others have referred to the protection as a form of "immunity," but their analyses and holdings make clear that it is not sovereign immunity from suit because it applies only if the contractor was not negligent and did not otherwise engage in wrongful conduct. Consistent with the great weight of our national jurisprudence, the very nature of sovereign immunity, and the purposes for which we continue to uphold the doctrine, I would not extend sovereign immunity from suit to non-sovereign government contractors. While I would support the Court's recognition of an affirmative defense to liability on the merits against any such claims, these cases come before us today as appeals from the trial courts' rulings on GTECH's jurisdictional pleas. In the absence of sovereign immunity from suit, the trial courts had jurisdiction over the claims, so I would reverse both appellate court judgments and remand the cases to the trial courts for consideration of GTECH's merits-based defenses.
See Colo. Rev. Stat. § 24-50-505 (2019) ("The sovereign immunity and governmental immunity of the contracting agency shall not extend to the contractor, except as otherwise provided by law. Neither the contractor nor the insurer of the contractor may plead the defense of sovereign immunity or governmental immunity in any action arising out of the performance of the contract."); Atkinson v. Sachno , 261 Va. 278, 541 S.E.2d 902, 905 (2001) ("[W]hile some employees or agents of the Commonwealth may be entitled to the protection of sovereign immunity, all independent contractors are excluded from that protection."); Evans v. Patterson , 269 Ala. 250, 112 So. 2d 194, 198 (1959) ("[A] highway contractor in building a road under a contract with the state does not enjoy the same privilege as the state does of immunity from suits for personal injuries sustained by travellers on the highway undergoing construction, maintenance or repairs.") (emphasis added); Ference v. Booth & Flinn Co. , 370 Pa. 400, 88 A.2d 413, 414 (1952) ("It is hornbook law that the immunity from suit of the sovereign state does not extend to independent contractors doing work for the state.").
See, e.g. , Black v. Peter Kiewit Sons' Co. , 94 Idaho 755, 497 P.2d 1056, 1058 (1972) ("[I]f a contractor performs his work according to plans and specifications, no liability may be imposed upon him for any damage resulting from such construction.") (emphasis added); City of Louisville v. Padgett , 457 S.W.2d 485, 488 (Ky. 1970) (holding state contractor who "performs his contract in conformity with the plans and specifications of the contract will not be held liable for injury to the public in the absence of a negligent ... or a willful tortious act"); Ference , 88 A.2d at 414 (holding contractor "is not liable" if he "performs his work in accordance with the plans and specifications and is guilty of neither a negligent nor a willful tort"); Wood v. Foster & Creighton Co. , 191 Tenn. 478, 235 S.W.2d 1, 3–4 (1950) ("The contractor thus not being guilty of negligence and having merely followed the directions of its superior, the State, in doing this work is clearly not liable herein.") (emphases added); Tillotson v. Fair , 160 Kan. 81, 159 P.2d 471, 476 (1945) ("[A]n independent contractor who is awarded a contract by the State Highway Commission for the construction of a highway improvement authorized by statute, and who performs that contract according to plans and specifications with proper care and skill, is not liable in damages for incidental injuries involved in the performance of such contract after the work required by its terms has been completed and the improvement turned over to and accepted by the Commission.") (emphasis added); Broadhurst v. Blythe Bros. Co. , 220 N.C. 464, 17 S.E.2d 646, 649–50 (1941) ("[N]or is a contractor, though working under contract with the Highway Commission, relieved of liability for injuries proximately caused by its negligence.").
See, e.g. , Smith v. Rogers Grp., Inc. , 348 Ark. 241, 72 S.W.3d 450, 456, 460 (2002) (recognizing that "acquired immunity" protects a contractor "who performs in accordance with the terms of its contract with a governmental agency and under the direct supervision of the governmental agency," unless "the contractor is negligent in the performance of the contract" but such acquired immunity "is not immunity from suit; rather, it is immunity from liability"); McLain v. State , 563 N.W.2d 600, 605 (Iowa 1997) ("The rule is well established that a contractor for the State is not liable to a third party for damages if the contractor complies with the State's plans and specifications and is not negligent in performing its work. In other words, in those situations the contractor shares the same immunity as the State.... However, if a contractor acts negligently, it cannot enjoy any immunity."); W. Contracting Corp. v. Titter , 255 Md. 581, 258 A.2d 600, 605 (1969) ("[T]his immunity of the contractor doing work for the government in navigable waters does not protect the contractor from liability for his own negligence."); Abercrombie v. Ledbetter-Johnson Co. , 116 Ga.App. 376, 157 S.E.2d 493, 494 (1967) ("It is the settled law of this State that a contractor engaged in public work under contract with the State or one of its political subdivisions is not immune to liability for injuries caused by its negligence while performing the contract.") (emphases added); Valley Forge Gardens, Inc. v. James D. Morrissey, Inc. , 385 Pa. 477, 123 A.2d 888, 890 (1956) ("[I]t has been uniformly held that in the absence of negligence or wilfully tortious conduct on the part of an independent contractor, he is not liable for injury to another's property which is caused by the performance of his contract with a governmental instrumentality in accordance with its plans and specifications."); Stiers v. Mayhall , 207 Okla. 219, 248 P.2d 1047, 1052 (1952) ("We, therefore, hold in this case, along with the great weight and trend of modern authorities that, one who contracts with a public body is not entitled to avail himself of the immunity of the latter for liability from injuries resulting from negligence in the performance of public work.").