Campbellton Rd. v. San Antonio: Sewer Capacity Contract Dispute

In 2003, Campbellton Road, Ltd. entered into an Outer Service Area Sewer Service Contract with the San Antonio Water System (SAWS), the City of San Antonio's water and wastewater agency. The developer planned to build two residential subdivisions on a 585-acre tract of land outside the city limits but within SAWS's service area. The contract outlined SAWS's obligation to provide sewer service to the development and detailed the developer’s responsibilities, including submitting master plans and paying impact fees. The agreement had a ten-year term.

The contract also included an option for the developer to participate in SAWS’s Southside project, which involved constructing oversized lift stations and force mains. The developer elected to participate, paid millions toward the project, and earned collection impact-fee credits in return. These credits were designed to offset future fees for sewer services.

Dispute Over Capacity

Although the developer paid for participation in the Southside project, it did not complete the planned subdivisions within the contract’s ten-year term. In 2019, six years after the contract expired, Campbellton Road, Ltd. requested sewer capacity for its developments. By then, SAWS informed the developer that no unused capacity was available and that new agreements would require additional upgrades estimated at $7.7 million. After an unsuccessful administrative appeal, the developer filed suit for breach of contract, alleging vested rights to sewer capacity.

SAWS argued that governmental immunity barred the lawsuit, contending that the contract was not an agreement to provide services to SAWS under the Local Government Contract Claims Act.

Lower Court Decisions

The trial court denied SAWS’s plea to the jurisdiction, allowing the case to proceed. SAWS appealed, and the Court of Appeals for the Fourth District reversed. It held that the contract’s purpose was for the developer to receive services from SAWS, not for SAWS to receive services, and therefore the Act did not waive immunity. The appellate court concluded that any benefit to SAWS was indirect.

Supreme Court of Texas Review

The Texas Supreme Court reviewed whether the contract fell under the Local Government Contract Claims Act, which waives governmental immunity for certain breach-of-contract claims. The Court analyzed whether the contract was a written agreement stating essential terms for providing services to SAWS. It determined that the developer’s participation in and funding of the Southside project created a binding contract, regardless of whether it was unilateral or bilateral.

The Court emphasized that SAWS received direct services because the developer funded construction of infrastructure that became part of SAWS’s system. SAWS gained ownership of the facilities and could use them to service other developments and generate revenue. The Court found that these services were not indirect but provided concrete benefits to SAWS.

Court’s Decision

The Texas Supreme Court reversed the Court of Appeals’ decision, holding that the contract was subject to the Local Government Contract Claims Act and that immunity was waived. The case was remanded to the trial court for further proceedings on the merits of the developer’s breach-of-contract claim.

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