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Click here for the full text of this decision FACTS:Paula Construction Inc. and the city of Lytle entered into a contract in October 2002 to remove sludge material from two of the city’s wastewater treatment pond. A dispute soon arose and Paula sued the city for the city’s failure to pay for certain services under the contract. The city filed a plea to the jurisdiction, saying it had not waived its immunity from suit for any cause of action. Paula referred to Local Government Code �51.013, which sets out guidelines for Type A municipalities such as Lytle, and which allows the to “sue and be sued, implead and be impleaded, and answer and be answered in any matter in any court or other place.” The trial court agreed with the city and dismissed the case. On May 3, 2006, this court reversed in a panel decision. The city petitioned for rehearing in light of the Texas Supreme Court’s decision in Tooke v. City of Mexia, 49 Tex.Sup.Ct.J. 819 (Tex. June 30, 2006). HOLDING:Rehearing granted, but trial court still reversed. The court agrees that, as in Tooke, �51.013 does not reveal a clear intent to waive immunity from suit. The city was thus immune from suit on Paula’s contract claims based on this code section. On the other hand, the court agrees with Paula that the city’s immunity from suit was waived by the retroactive application of Local Government Code �271.152, which waives immunity from suit on contract claims against most local governments in certain circumstances. The statute became effective Sept. 1, 2005, long after Paula and the city entered into their contract. The court points out, however, that the historical note following the provision says that the law applies “to a claim that arises under a contract executed before the effective date . . . only if sovereign immunity has not been waived with respect to the claim before the effective date of this Act.” Because the city would have been immune from a breach of contract suit brought before Sept. 1, 2005, �271.152 has retroactive application and the city’s immunity from Paula’s suit has been waived. The city claims that even if immunity has been waived by retroactive application of �271.152, not all of Paula’s claims fall within those that will be allowed. Paula’s pleadings seek actual damages to include “all natural and probable consequential damages, damages that arise out of claims of subcontractors with suppliers as well as the administrative and legal expenses associated with having to deal with such claims flowing from the defendants’ failure to timely deliver payment to the plaintiff, unreimbursed expenses incurred in hauling and disposing of sludge from theproject, and any unpaid contractual obligations for the removal of soil, and other related expenses to include consequential and or incidental damages.” Construing the pleadings in Paula’s favor, the court finds that the construction company has plead facts that establish jurisdiction. OPINION:Phylis J. Speedlin, J.; L�pez, C.J., Stone and Speedlin, J.J.

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