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It used to be that a taxpayers could expect a certain level of immunity for their municipalities. After all, why should taxpayers be punished for the rogue actions of one particular individual? A recent case from the Texas Supreme Court, however, should have taxpayers and municipalities concerned that the protection of governmental immunity is eroding. In Wasson v. City of Jacksonville (Wasson II), the Texas Supreme Court ruled that the city waived its immunity.

In an earlier case (called Wasson I), the court took a novel approach and applied a standard from Texas injury law to a contract dispute between the city and a commercial business called Wasson Interests Ltd. (Wasson). Under that standard, a city could be found to either be performing a “governmental function” or a “proprietary function” (i.e., more like a commercial business).

When the Wasson case was sent back to the trial court, the trial court (and later the appellate court) then determined that in making a lease with Wasson, that the city had been performing a governmental function. Therefore, immunity from Wasson’s lawsuit still applied.

With all of that considered, though, the Texas Supreme Court here in Wasson II decided that Jacksonville had not been acting in its governmental capacity when it leased property to Wasson. The court ruled that the city was acting in a proprietary function despite the fact the lease language itself prohibited the use of the property for commercial purposes (the tenant had used the property for commercial purposes, had been evicted by the city, and had then sued the city).

The proprietary function is distinct from governmental function. Whereas immunity applies to the city if it is determined to be performing a governmental function, it does not apply if the city is found to be performing a proprietary function. Wasson’s lawsuit against the city for breach of contract, therefore, could now proceed.

These changes could portend a dramatic change in Texas municipal law. Cities throughout the state should consult with counsel to review its practices in light of the Wasson cases.

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