Spring 2015

Immunity from Breach of Contract Claims

This lawsuit arises from La Joya ISD’s contract with a third party administrator (TPA) for administrative services related to the district’s self-funded health benefits plan.  The contract between the district and the TPA contained a clause stating: “This Agreement is solely for the benefit of the parties and their successors and permitted assigns, and does not confer any rights or remedies on any other person or entity.”

However, an exhibit to the contract provided that Ruth Villarreal, the district’s insurance agent, would receive a monthly fee of $2.35 multiplied by the actual number of participating employees at the beginning of each month for consulting services.  When newly-elected members joined the board, it voted to terminate Villareal as the district’s insurance agent.  Villareal filed suit against the district and individual board members for breach of contract.

The district filed a plea to the jurisdiction, arguing that the district enjoyed governmental immunity from the suit under Chapter 271 of the Texas Local Government Code; Villarreal lacked standing to sue because she was not a party to the contract; and the contract expressly stated that it did not confer rights or remedies to third parties.

The trial court denied the plea, and the Thirteenth Court of Appeals for Corpus Christi/Edinburg upheld the decision, concluding that the district did not have immunity from Villareal’s breach of contract claim and that Villareal was a third party beneficiary to the contract.

The district filed a petition for review to the Texas Supreme Court, and LAF filed an amicus brief with the court encouraging granting the petition for review in order to correct the lower courts’ rulings.  On June 5, 2015, the Texas Supreme Court denied the petition for review.  The district filed a motion for rehearing, which was denied on August 21, 2015.  La Joya Indep. Sch. Dist. v. Villareal, No. 14-0771 (Texas Supreme Court).  LAF’s Attorneys:  Jennifer Powell and Eric Muñoz, Eichelbaum Wardell Hansen Powell & Mehl, P.C., Austin.