Be Aware of Sovereign Immunity
Construction and Procurement Law News, Q1 2018
Sovereign immunity is the legal doctrine, dating back to the days of the British monarchy, that a sovereign or state cannot commit a legal wrong and is immune from suit: in essence, “the king can do no wrong.” Fulton County v. SOCO Contracting Co., a recent decision by the Georgia state appeals court, reminds contractors on government projects that sovereign immunity, although sometimes disclaimed or waived by contract, may still limit a contractor’s ability to recover.
SOCO Contracting Co. (“SOCO”) entered into a contract with Fulton County (the “County”) for the construction of a local cultural center. The contract specified completion within 287 days from the issuance of the notice to proceed or the day the work began, whichever came first. Additionally, changes in the scope of work, or delays, or events not the fault of the contractor would increase the period of performance if authorized in a change order. The contract also provided that the County could order changes to the scope of the contract, and the County’s policy and procedure for such changes required that they be effected through a written, bilateral agreement.
SOCO did not achieve substantial completion within the scheduled period of performance and asserted that the delays were due to adverse weather conditions, delays caused by the County’s design, the County’s unwillingness to make timely design changes, and the impact that the federal government shutdown had on obtaining certain permits. Because of these delays, the County ordered changes to SOCO’s scope of work, with the program manager listing more than thirty change orders in the change order evaluation log. However, there was nothing in the record to indicate that the parties had executed bilateral, written agreements, as required by the change order procedure. SOCO admitted that the County never issued a written change order extending the contract time or altering the scope.
SOCO ultimately brought an action against the County for breach of contract and bad faith performance of the contract. SOCO and the County filed cross motions for summary judgment on all claims. The County asserted that the doctrine of sovereign immunity barred any claims arising from unwritten change orders. The trial court denied the County’s motion and granted summary judgment in favor of SOCO, and the County appealed.
In Georgia, only an act of the General Assembly or the Constution itself may waive the doctrine of sovereign immunity. Sovereign immunity is a threshold issue that must be addressed before the court may reach the merits of a case, and the party seeking the benefit of the waiver of sovereign immunity bears the burden of proving such waiver. Further, whether sovereign immunity has been waived, if the facts are undisputed, is a question of law.
The County argued before the appellate court that although it waived sovereign immunity for breach of the written contract, it did not waive sovereign immunity for claims arising from modifications to the written contract that failed to follow the written change order policy outlined in the contract. The appellate court concluded that SOCO provided no evidence that it complied with the change order procedure, and that the County could not waive sovereign immunity by actions outside of the written contract. The court was unable to create an exception to the rules regarding waiver of sovereign immunity based on any reliance that SOCO may have placed on the County’s request for changes, upon the parties’ course of conduct, or upon facts that were deemed admitted.
In this case, the appellate court determined that there was a question of fact, however, as to whether the County waived sovereign immunity. The court remanded the case for further consideration regarding whether the parties strictly complied with the contract’s procedure regarding written change orders.
This case serves as a stark reminder that contractors must follow the terms of a state or municipal contract to ensure the validity of an argument that the government waived sovereign immunity for breach of contract. Each state differs significantly regarding the waiver of sovereign immunity, as to how it is waived and what levels of government enjoy the immunity, and whether any legislative process affects payment by a governmental entity. We urge each general contractor to check this legal issue when it is contracting with a public body in any particular state.