Court of Appeals Allows Enforcement Against State of Terms Outside Written Contract

August 28, 2015

The Georgia Court of Appeals continued its clarification of the Sovereign Immunity doctrine in the recent decision of RTT Associates, Inc. v. Georgia Dep’t of Labor, 2015 WL 4231879 (Ga. Ct. App. July 14, 2015). In RTT Associates, the Georgia Department of Labor (the “Department”) entered into a written contract with RTT pursuant to which RTT would develop software for the Department.

The contract specified: (1) that it could be terminated for cause in the event of default by RTT upon written notice to RTT and an opportunity to remedy the default; (2) that it could only be amended in writing by mutual consent of both parties; and (3) that the software must be provided to the Department by June 30, 2012. After RTT was unable to deliver fully functional software to the Department by the June 30, 2012 deadline, the Department allowed RTT an opportunity to cure its default and provide a functional product. On April 30, 2013, the Department notified RTT that it was terminating the contract due to RTT’s breach and noncompliance and refused to pay RTT under the terms of the contract. RTT thereafter brought suit alleging the Department breached the contract by failing to provide RTT written notice of default and an opportunity to cure. The Superior Court granted the Department’s motion for summary judgment on Sovereign Immunity grounds, finding that the parties’ contract terminated as of June 30, 2012 and thus RTT could only maintain an action on the contract “by producing a written extension or amendment that contained all of the terms required to constitute a valid contract.” RTT appealed contending that a question of material fact existed as to whether the parties agreed to extend the written contract, precluding the Department’s Sovereign Immunity claim.

The Court of Appeals began by noting the Georgia Constitutional provision granting Sovereign Immunity to the State and its departments, and the corresponding Constitutional provision waiving the State’s Sovereign Immunity “in any action ex contractu for the breach of a written contract.” Thus, Sovereign Immunity is only waived by the State for actions brought upon valid written contracts. The Court ultimately reversed the decision of the lower court on the ground that a jury question existed as to whether the suit was brought upon a valid written contract. The Court based its decision on three premises: (1) “certain obligations under a contract [such as a specified ‘date of completion’] may survive the end of the contract”; (2) “a written contract may be modified by mutual consent of the parties, which need not be expressed in words, in writing or signed, but the parties must manifest their intent to modify the original contract”; and (3) the Department’s courts of conduct could waive the express contractual provision requiring a specific date of completion or that any modification to the contract be in writing. Noting that whether there has been a mutual departure from the terms of a contract is typically a jury question, summary judgment was inappropriate given that the record contained evidence the Department waived both the date of completion and the written amendment provisions.

Although the decision is physical precedent only – one judge specially concurred – the case presents a landmark shift towards allowing private parties to hold the State liable for terms outside those expressly included in its written contracts. It can be exceedingly difficult to recover against the State when attempting to bind it to terms outside not included in its written contracts. Additionally, navigating the Georgia Sovereign Immunity doctrine can prevent a barrier to a lawsuit altogether. The attorneys at Parks, Chesin & Walbert have the knowledge and experience required to handle cases involving Sovereign Immunity and Government Contracts. Contact our firm today at 404-873-8048 or firm@pcwlawfirm.com.