San Antonio River Authority v. Austin Bridge & Road, L.P. and Hayward Baker, Inc.

IN THE SUPREME COURT OF TEXAS
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No. 17-0905
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SAN ANTONIO RIVER AUTHORITY, PETITIONER,

v.

AUSTIN BRIDGE & ROAD, L.P. AND HAYWARD BAKER, INC., RESPONDENTS

══════════════════════════════════════════
ON PETITION FOR REVIEW FROM THE
COURT OF APPEALS FOR THE FOURTH DISTRICT OF TEXAS
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JUSTICE BOYD, joined by CHIEF JUSTICE HECHT, JUSTICE GUZMAN, and JUSTICE DEVINE,
dissenting.

Because I do not agree that the San Antonio River Authority was authorized to resolve its

dispute with Austin Bridge & Road through binding arbitration, 1 I respectfully dissent.

I.
No Authority to Engage in Binding Arbitration

This case presents a deceptively significant issue. Although we have often acknowledged

the benefits that binding arbitration can provide over litigation in the courts, we have also

recognized that a party’s election to submit disputes to binding arbitration is “consequential” for a

number of important reasons. Robinson v. Home Owners Mgmt. Enters., Inc., 590 S.W.3d 518,

1
The Court also holds that (1) the courts (and not the arbitrator) must decide whether governmental immunity
bars the claims that Austin Bridge asserted against the River Authority, and (2) governmental immunity does not bar
the claims because chapter 271 of the Local Government Code waives that immunity. I agree that chapter 271 waives
the River Authority’s governmental immunity against Austin Bridge’s claims, for the reasons the Court explains. See
ante at ___. In light of my conclusion that the River Authority lacked authority to agree to engage in binding
arbitration, I would not reach the question whether the court or the arbitrator should decide whether governmental
immunity bars the claim.
526 (Tex. 2019). Binding arbitration substantially limits the role elected judges and our

constitutionally provided judicial process can play in resolving the dispute. See id. (noting that a

trial court “can set aside the arbitrator’s decision only in finite circumstances”). While private

parties may decide that the benefits of binding arbitration are well worth the trade-off, the decision

to allow private individuals (instead of elected judges) to utilize private procedures (instead of

constitutionally authorized and enacted procedural rules and standards) to resolve disputes

involving governmental entities raises substantially different considerations.

Nevertheless, our resolution of this important issue depends on the legislature’s assessment

of the wisdom of resolving governmental disputes through private proceedings, not on ours. When

deciding whether a dispute must be resolved through binding arbitration instead of through

litigation in the courts, “the question is not which forum is quicker, cheaper, or more convenient,

but which one the parties picked.” In re Merrill Lynch Tr. Co. FSB, 235 S.W.3d 185, 187 (Tex.

2007). Austin Bridge and the River Authority indisputably “picked” binding arbitration as the

method to resolve their contract dispute, but because the River Authority is a statutorily created

local governmental entity, its “pick” does not ultimately matter. See ante at ___. As a political

subdivision of the State, the River Authority can only exercise powers that a statute expressly or

impliedly confers. See ante at ___. Ultimately, the State itself—acting through the legislature—

must have authorized the River Authority to resolve this dispute through binding arbitration. If (as

I conclude) it didn’t, the River Authority’s agreement to engage in binding arbitration is void and

unenforceable. See ante at ___.

2
A. No express authority

Three statutes are relevant to the question of whether the legislature has expressly

authorized the River Authority to engage in binding arbitration, but none of them supports the

Court’s conclusion.

1. The GDR Act & the ADR Act

The first relevant statute is the Governmental Dispute Resolution Act (the GDR Act), see

TEX. GOV’T CODE §§ 2009.001–.055, which expresses the state’s policy that “disputes before

governmental bodies be resolved as fairly and expeditiously as possible and that each

governmental body support this policy by developing and using alternative dispute resolution

procedures in appropriate aspects of the governmental body’s operations and programs.” Id.

§ 2009.002. To support this policy, the GDR Act authorizes governmental entities to “develop and

use” the “alternative dispute resolution procedures” described in the second relevant statute, the

Alternative Dispute Resolution Procedures Act (the ADR Act). Id. §§ 2009.003(1), .051(a).

Similar to the GDR Act, the ADR Act expresses the state’s policy to “encourage the

peaceable resolution of disputes . . . and the early settlement of pending litigation through voluntary

settlement procedures.” TEX. CIV. PRAC. & REM. CODE § 154.002. To support this policy, the ADR

Act authorizes courts to refer pending disputes for possible resolution through specified

alternative-dispute-resolution procedures. Id. § 154.021(a). These procedures include

“[n]onbinding arbitration” 2 and—if “the parties stipulate in advance”—arbitration that is

“binding” and “enforceable in the same manner as any contract obligation.” Id. § 154.027

2
Nonbinding arbitration is “a forum in which each party and counsel for the party present the position of the
party before an impartial third party, who renders a specific award” that “is not binding and serves only as a basis for
the parties’ further settlement negotiations.” TEX. CIV. PRAC. & REM. CODE § 154.027 (emphasis added).
3
(emphases added). Except for binding arbitration to which the parties stipulate in advance, none

of the ADR Act’s authorized procedures result in a binding opinion or resolution. 3

Read together, the provisions of the GDR Act and the ADR Act would appear to authorize

governmental entities to engage in binding arbitration, so long as the parties stipulate to that

method in advance. But the GDR Act—which specifically addresses the use of alternative dispute

resolution by governmental entities—expressly forecloses that conclusion. Anticipating the issue

before us today, the Act authorizes governmental entities to engage only in the ADR Act’s non-

binding procedures: “Nothing in this chapter authorizes binding arbitration as a method of

alternative dispute resolution.” TEX. GOV’T CODE § 2009.005(c) (emphasis added). In light of this

provision, we cannot read the GDR Act or the ADR Act to authorize governmental entities to

engage in binding arbitration. 4

2. Chapter 271

The third potentially relevant statute, and the one on which the Court hangs its hat, is

chapter 271 of the Local Government Code. This statute provides that a local governmental entity

that is “authorized by statute or the constitution to enter into a contract and that enters into a

contract subject to this subchapter waives sovereign immunity to suit for the purpose of

3
See id. §§ 154.023–.026. The ADR Act’s other authorized methods are mediation, mini-trials, moderated
settlement conferences, and summary jury trials.
4
The court of appeals construed subsection 2009.005(c) to mean only that “the [GDR] Act does not waive
governmental immunity if a governmental agency decides to engage in binding arbitration.” San Antonio River Auth.
v. Austin Bridge & Rd., L.P., 581 S.W.3d 245, 258 (Tex. App.—San Antonio 2017) (emphasis added). So construed,
the court held, “subsection (c) of section 2009.005 does not prohibit the River Authority from engaging in binding
arbitration.” Id. (emphasis added). But the issue is not whether subsection (c) prohibits the River Authority from
engaging in binding arbitration. Because the River Authority possesses only the authority that the legislature has
expressly or impliedly granted to it, the issue is whether some statute authorizes it to engage in binding arbitration.
Section 2009.005(c) clearly and unambiguously provides that nothing in the GDR Act (including, therefore, its
authorization of the use of methods described in the ADR Act) grants such authorization.
4
adjudicating a claim for breach of the contract, subject to the terms and conditions of this

subchapter.” TEX. LOC. GOV’T CODE § 271.152 (emphases added). The statute defines the term

“adjudication” to include not only litigation, but also “the bringing of an authorized arbitration

proceeding and prosecution to final resolution in accordance with any mandatory procedures

established in the contract subject to this subchapter for the arbitration proceedings.” Id.

§ 271.151(1) (emphases added).

Noting that section 271.152 refers to governmental entities that are “authorized by statute

or the constitution” to enter into a contract but section 271.151(1) refers to an “authorized

arbitration proceeding” without any reference to statutes or the constitution, the Court concludes

that “an authorized arbitration proceeding” refers to any such proceeding the governmental entity

has contractually authorized, including a binding arbitration proceeding that results in a “final

resolution.” Ante at ___. But even if section 271.151(1) impliedly refers to a “[contractually]

authorized arbitration proceeding,” we must still determine whether the governmental entity was

“authorized by statute or the constitution” to enter into that contract authorizing binding

arbitration.

Section 271.152 “waives sovereign immunity to suit” for the purpose of “bringing an

authorized arbitration proceeding” to enforce a contract against a governmental entity, but it does

not itself authorize the arbitration proceeding, and it does not waive immunity at all unless the

governmental entity itself is “authorized by statute or the constitution” to enter into the contract.

Id. §§ 271.151(1), .152. So although section 271.152 waives immunity to allow claims to be

resolved through a binding arbitration proceeding, it does so only if the parties have agreed to

resolve their dispute through binding arbitration and that agreement itself was “authorized by

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statute or the constitution.” Id. § 271.152. A local governmental entity that contractually

“authorizes” binding arbitration accomplishes nothing if it has no statutory or constitutional

authority to engage in binding arbitration.

To be sure, the legislature knows how to statutorily authorize—and even require—

governmental entities to resolve disputes through binding arbitration, and it has done so in several

specific contexts. 5 When a governmental entity that is legislatively authorized to engage in binding

arbitration agrees to resolve disputes through that process, section 271.152 waives immunity to

allow an “adjudication” through the authorized binding arbitration proceeding, which provides a

“final resolution.” TEX. LOC. GOV’T CODE §§ 271.151(1), .152. But when the governmental entity

lacks authority to engage in binding arbitration, its agreement to resolve disputes through that

process is not “authorized” by statute or the constitution, and that method of adjudication is

unavailable. See id. § 271.152. Sections 271.151 and 271.152 waive immunity to allow

adjudication of a contract claim, including adjudication through binding arbitration when that

method is authorized, but they do not themselves authorize governmental entities to authorize that

method. Id. §§ 271.151(1), .152.

5
See, e.g., TEX. EDUC. CODE § 29.012(d)(6) (requiring certain state agencies to enter an agreement that
provides for binding arbitration); TEX. GOVT. CODE § 2258.053(a) (requiring disputes over penalties assessed against
government contractors who fail to pay prevailing wage rates to be resolved through binding arbitration); TEX.
HEALTH & SAFETY CODE §§ 242.252(a) (permitting certain disputes between state agency and nursing facilities to be
resolved through binding arbitration as an alternative to a contested case hearing or judicial proceeding), 775.0221(a)
(requiring municipalities and emergency-services districts to resolve certain territory disputes using binding
arbitration); TEX. INS. CODE § 2210.554(a) (permitting persons insured by Texas Windstorm Insurance Association to
purchase an endorsement requiring binding arbitration of coverage disputes); TEX. LOC. GOVT. CODE §§ 142.064(b)
(permitting public employers and police-officer associations to provide for binding arbitration in meet-and-confer
agreements), 242.0015(a) (permitting counties and municipalities to resolve certain disputes through binding
arbitration); TEX. OCC. CODE § 2027.056(b) (permitting greyhound racetrack association and state greyhound breed
registry to resolve certain disputes by binding arbitration); TEX. TAX CODE § 41A.01 (permitting property owners to
resolve certain appraisal-review-board appeals through binding arbitration); TEX. TRANSP. CODE § 451.756(b)
(permitting certain agreements between public employers and peace officers to provide for binding arbitration).
6
The Court holds, however, that section 271.154 authorizes the River Authority to engage

in binding arbitration. 6 Section 271.154 provides:

Adjudication procedures, including requirements for serving notices
or engaging in alternative dispute resolution proceedings before
bringing a suit or an arbitration proceeding, that are stated in the
contract subject to this subchapter or that are established by the local
governmental entity and expressly incorporated into the contract or
incorporated by reference are enforceable except to the extent those
procedures conflict with the terms of this subchapter.

Id. § 271.154.

According to the Court, the “adjudication procedures” this section makes “enforceable”

include “an arbitration proceeding,” and therefore the section declares “that agreements to arbitrate

claims brought under the subchapter are ‘enforceable.’” Ante at ___; see also ante at ___

(construing section 271.154 to provide that “agreements to arbitrate claims under [chapter 271]

‘are enforceable’”). This construction contradicts the statute’s language, punctuation, and

structure.

Focusing first on the statute’s language, the Court’s construction ignores the distinction

that chapter 271 consistently recognizes between “procedures” and “proceedings.” As noted,

section 271.151(1) defines an “adjudication” to include both litigation and “the bringing of an

authorized arbitration proceeding and prosecution to final resolution in accordance with any

mandatory procedures established in the contract subject to this subchapter for the arbitration

proceedings.” TEX. LOC. GOV’T CODE § 271.151(1) (emphases added). This definition distinctly

6
None of the parties relied on section 271.154 in the courts below or in their briefing in this Court. We invited
the parties to submit supplemental briefs addressing section 271.154, and they did so. The State of Texas, represented
by the Attorney General, also filed an amicus curiae brief, arguing that section 271.154 does not authorize local
governmental entities to engage in binding arbitration.
7
refers separately to an “arbitration proceeding” (which must be “authorized”) and to any

“mandatory procedures” that may govern the arbitration proceeding (which must be agreed to in

the contract). Under this definition, an “adjudication” includes an “authorized arbitration

proceeding,” and contractually agreed-upon “mandatory procedures” may apply to that

proceeding.

In the same way, section 271.154 addresses contractually incorporated “[a]djudication

procedures” that may apply to an authorized “arbitration proceeding” and makes those procedures

(but not the arbitration proceeding itself) “enforceable.” Id. § 271.154 (emphases added). As the

section itself explains, these contractually agreed-upon “[a]djudication procedures” consist of

procedural “requirements”—such as a notice requirement or a requirement that the parties engage

in nonbinding dispute resolution—that the party must satisfy “before bringing a suit or an

arbitration proceeding.” Id. § 271.154 (emphasis added). 7

The Court concedes its unwillingness to even address chapter 271’s clear and consistent

distinction between “procedures” and “proceedings” because “they derive from the same root

word.” Ante at ___ n.37. On this erroneous foundation, it concludes that, because section

271.151(1) defines “adjudication” to include an “arbitration proceeding” and section 271.154

7
As several courts of appeals have recognized, these “adjudication procedures” include requirements like
filing deadlines, notice-of-claim requirements, and appraisal requirements. See, e.g., Mission Consol. Indep. Sch. Dist.
v. ERO Int’l, LLP, 579 S.W.3d 123, 126–27 (Tex. App.—Corpus Christi-Edinburg 2019, no pet.) (holding that
contractual deadline to file administrative complaint and contractual requirement to initially file a “level 1” appeal
were “adjudication procedures” under section 271.154); Tex. Mun. League Intergovernmental Risk Pool v. City of
Abilene, 551 S.W.3d 337, 345 (Tex. App—Eastland 2018, pet. dism’d) (holding that contractual appraisal provision
“constitutes an adjudication procedure under Section 271.154”); Port Freeport v. RLB Contracting Inc., 369 S.W.3d
581, 592 (Tex. App.—Houston [1st Dist.] 2012, pet. denied) (recognizing contractual notice-of-claim requirement as
an adjudication procedure under section 271.154).
8
makes “adjudication procedures” enforceable, section 271.154 must also make “arbitration

proceedings” enforceable. Id.

The Court suggests that section 271.151(1)’s definition of “adjudication” supports its

construction, but like section 271.154, section 271.151(1) clearly distinguishes between

procedures and proceedings. Section 271.154 makes “[a]djudication procedures” enforceable,

and section 271.151(1) defines “adjudication” to include an “authorized arbitration proceeding.”

Importing the definition into the phrase at issue, section 271.154 does not make “arbitration

proceedings” enforceable—it makes “[arbitration proceeding] procedures” (that is, procedures that

apply to an arbitration proceeding) enforceable.

By discounting the statute’s clear distinction between “adjudication procedures” and

“arbitration proceedings,” the Court slides easily into its erroneous conclusion that section

271.154, which declares that “adjudication procedures” are enforceable, somehow also declares

that an “arbitration proceeding” is enforceable. To reach that conclusion, however, the Court must

ignore not just the section’s plain language, but also its punctuation and grammatical structure. 8

Section 271.154 consists of a single sentence containing only two commas, which appear in the

middle of the single sentence. The commas set off from the rest of the sentence the nonessential

phrase that appears between them, which serves only to provide additional information about the

noun that proceeds it (“procedures”). 9 Visually reflecting the punctuation’s natural effect, the

8
See Tex. Health Presbyterian Hosp. of Denton v. D.A., 569 S.W.3d 126, 131 (Tex. 2018) (“Punctuation can
be helpful, and even determinative, when construing statutes and other written texts.”).
9
See THE OXFORD DICTIONARY OF ENGLISH GRAMMAR 279 (2d ed. 2014) (defining “non-defining relative
clause” as “a relative clause that gives additional information about the head with which it is associated, but is not a
defining relative clause because the noun phrase of which it is a part is already defined and its referent is identifiable”
and noting that it “is usually separated from the rest of the sentence in which it occurs by a comma or commas, and if

9
provision reads as a single sentence in which is embedded a non-essential phrase that describes

the noun that precedes it:

Adjudication procedures,
including requirements for serving notices or
engaging in alternative dispute resolution
proceedings before bringing a suit or an arbitration
proceeding,
that are stated in the contract subject to this subchapter or that are
established by the local governmental entity and expressly
incorporated into the contract or incorporated by reference are
enforceable except to the extent those procedures conflict with the
terms of this subchapter.

Removing the non-essential phrase, the section reads naturally:

“Adjudication procedures . . . that are stated in the contract subject
to this subchapter or that are established by the local governmental
entity and expressly incorporated into the contract or incorporated
by reference are enforceable except to the extent those procedures
conflict with the terms of this subchapter.”

Id. (emphases added). Focusing on the noun and verb in this sentence’s structure, the section

provides simply that “[a]djudication procedures . . . are enforceable” if the procedures are stated

in or incorporated into the contract unless the procedures conflict with the subchapter’s terms. Id.

The phase “arbitration proceeding,” on which the Court’s construction relies, does not

appear in this language at all. Instead, it appears in the non-essential appositive phrase between

the commas, which merely provides more information about the “adjudication procedures.”

Contrary to the Court’s construction, the appositive phrase does not explain that adjudication

it is omitted, the sentence will still make complete sense”). See also Bryan A. Gardner, THE REDBOOK: A MANUAL
ON LEGAL STYLE § 1.6(a) (3rd ed. 2013) (defining nonrestrictive clause as “one that could be taken out of the sentence
without changing the essential meaning” and instructing to use commas to set off the nonrestrictive phrase); Bryan A.
Gardner, A DICTIONARY OF MODERN ENGLISH USAGE 766 (2nd ed. 2001) (“Nonrestrictive clauses . . . are so loosely
connected with the essential meaning of the sentence that they might be omitted without changing the essential
meaning.”).
10
procedures “include” an “arbitration proceeding.” Instead, it explains that adjudication procedures

include “requirements,” and it lists two examples of such “requirements” (serving notice and

engaging in ADR), which must be met “before bringing a suit or an arbitration proceeding” (that

is, before initiating an “adjudication,” as section 271.151(1) defines that term). Id. Read as written,

the section does not make enforceable “adjudication procedures, including . . . arbitration

proceedings;” it makes enforceable “adjudication procedures, including” notice and ADR

requirements that must be met before initiating an adjudication in the form of a suit or an arbitration

proceeding. Id. Consistent with section 271.151(1), section 271.154 makes enforceable

“procedures” that govern an “authorized arbitration proceeding,” but it does not itself authorize an

arbitration proceeding. Id. §§ 271.151(1), .154.

B. No implied authority

Having concluded that none of the three potentially relevant statutes expressly authorizes

the River Authority to resolve this dispute through binding arbitration, I further conclude that the

statutes do not impliedly grant such authority. It is a “general and undisputed proposition of law”

that governmental entities have and may wield only powers that are (a) “granted in express words,”

(b) “necessarily or fairly implied in or incident to the powers expressly granted,” or (c) “essential

to the accomplishment of the declared objects and purposes of the corporation”—that is, “not

simply convenient, but indispensable.” Anderson v. City of San Antonio, 67 S.W.2d 1036, 1037

(Tex. 1934). Should doubts arise, we presume that the legislature did not impliedly grant a power.

See id. (“Any fair, reasonable, substantial doubt concerning the existence of power is resolved by

the courts against the corporation, and the power is denied.”).

11
The specific power to engage in binding arbitration is not “fairly implied in,” “essential to

the accomplishment of,” or “indispensable” to the River Authority’s general power to manage

water resources or its more specific power to enter into a contract for that purpose. See id.; see also

Town of Lakewood Village v. Bizios, 493 S.W.3d 527, 536 (Tex. 2016) (“A power is not

‘reasonably necessary’ unless it is ‘indispensable’ to the purpose of the municipality.”). If it were,

section 2009.005(c)—which confirms that nothing in the GDR Act authorizes a governmental

entity to engage in binding arbitration—would be meaningless, because all governmental entities

would already have that authority by virtue of their general authority to enter into contracts. And

if that general authority to contract included the authority to do anything the governmental entity

contractually agrees to do, or even anything it is not expressly prohibited from doing, it would no

longer be true that governmental entities “may only exercise those powers granted by statute,

together with those necessarily implied from the statutory authority conferred or duties imposed.”

City of Sherman v. Pub. Util. Comm’n of Tex., 643 S.W.2d 681, 686 (Tex. 1983).

The legislature granted the River Authority broad authority to “do all things as are

required” to manage the waters within its territory and to “make contracts and to execute

instruments necessary or convenient” to accomplish that purpose. Acts of April 8, 1981, 67th Leg.,

R.S. ch. 60, 1981 Tex. Gen. Laws 123. But the ability to resolve disputes that arise from those

contracts through binding arbitration is neither essential to accomplish its purpose nor fairly

implied in the authority granted. As a result, the River Authority lacked implied authority to engage

12
in binding arbitration, 10 and thus its agreement to do so in this contract’s binding-arbitration clause

is unenforceable. 11

II.
Conclusion

I would hold that the San Antonio River Authority lacks statutory or constitutional

authority to resolve the parties’ dispute through binding arbitration, and its agreement to do so is

thus void and unenforceable. In the absence of an enforceable arbitration agreement, the arbitration

proceeding should be stayed. See TEX. CIV. PRAC. & REM. CODE § 171.023(a) (“A court may stay

an arbitration commenced or threatened on application and a showing that there is not an

agreement to arbitrate.”). I would further hold that chapter 271 waives the River Authority’s

governmental immunity against Austin Bridge’s breach-of-contract claims, for the reasons the

Court explains. I would reverse the court of appeals’ judgment and enter judgment staying the

arbitration proceeding and declaring that governmental immunity does not bar Austin Bridge’s

10
See, e.g., Tex. Student Hous. Auth. v. Brazos Cty. Appraisal Dist., 460 S.W.3d 137, 143 (Tex. 2015)
(holding higher education facilities authority had no implied authority “to acquire, hold, or use property beyond its
statutory authorization”); Cent. Educ. Agency of State of Tex. v. Upshur Cty. Comm’rs Court, 731 S.W.2d 559, 561
(Tex. 1987) (holding statute granting state education commissioner authority to “promot[e] efficiency and
improvement in the public school system” did not impliedly grant commissioner authority to detach territory from one
school district and annex it to another); City of Sherman, 643 S.W.2d at 686 (holding PUC is “neither expressly nor
impliedly granted power to regulate groundwater production or adjudicate correlative groundwater rights”); Mobil Oil
Corp. v. Matagorda Cty. Drainage Dist. No. 3, 597 S.W.2d 910, 913 (Tex. 1980) (holding county drainage district
had no implied authority to annex “lands upon which it cannot perform the services that the water code authorizes it
to perform”); Stauffer v. City of San Antonio, 344 S.W.2d 158, 160 (Tex. 1961) (holding statute requiring reinstatement
of firefighter returning from military service if firefighter is physically and mentally fit did not impliedly grant state
commission authority to conduct hearings and decide that issue).
11
This holding does not mean that the parties’ entire contract is unenforceable, because the unenforceable
arbitration clause is severable from the rest of the agreement. See In re Poly-Am., L.P., 262 S.W.3d 337, 360 (Tex.
2008) (citing Williams v. Williams, 569 S.W.2d 867, 871 (Tex. 1978)) (holding an illegal contract provision “may
generally be severed so long as it does not constitute the essential purpose of the agreement”).
13
breach-of-contract claims. Because the Court affirms the court of appeals’ judgment, I respectfully

dissent.

Jeffrey S. Boyd
Justice

Opinion delivered: May 1, 2020

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