Martin K. Eby Construction Co. v. Dallas Area Rapid Transit

What This Case Is About

Martin K. Eby Construction Company contracted with DART to build a section of Dallas’s light-rail system. When Eby encountered allegedly deficient bid specifications, it sued DART in federal court for breach of contract and misrepresentation. The Fifth Circuit affirmed dismissal, holding that Eby must first exhaust DART’s administrative dispute-resolution process before seeking judicial relief.

The Facts

In April 2002, DART awarded Eby a contract to build a section of DART’s light-rail line near downtown Dallas. During the first six months, Eby made little progress, which it attributed to numerous deficiencies and inaccuracies in DART’s bid designs. DART blamed Eby.

DART’s bid solicitation — incorporated into the contract — required bidders to “exhaust administrative remedies” before seeking judicial relief. DART’s procurement regulations, authorized by Texas statute, established an administrative dispute-resolution process including submission to a contracting officer, administrative appeal before hearing officers (mostly current or former members of the Armed Services Board of Contract Appeals), and quasi-judicial proceedings with discovery and representation by counsel. DART’s contract contained a parallel disputes clause. Eby never submitted its claims to this process and instead filed suit in federal court.

What the Court Decided

The Fifth Circuit affirmed dismissal under Rule 12(b)(6). The court held that Texas law generally requires parties to exhaust administrative remedies before seeking judicial review of government entity decisions. Here, two independent grounds supported exhaustion: (1) the Texas Legislature delegated to DART the authority to “adopt and enforce” dispute-resolution procedures, and (2) Eby contractually agreed to submit disputes to DART’s administrative process.

The court rejected Eby’s arguments that governmental immunity (or its absence) eliminated the exhaustion requirement, and that alleging material breach excused performance of the exhaustion obligation. The court also held that Eby’s misrepresentation claim was really a subset of its breach-of-contract claim and was similarly subject to exhaustion.

Why This Case Matters for Your § 1983 Case

Although Martin K. Eby is a government contract case, the exhaustion of remedies principles it discusses are relevant to § 1983 litigation:

• Exhaustion of remedies: While § 1983 generally does not require exhaustion of state administrative remedies (under Patsy v. Board of Regents), the PLRA does require exhaustion for prisoner civil rights suits. Understanding exhaustion doctrine is essential.
• Contractual exhaustion agreements: If you signed a settlement agreement, consent decree, or employment contract with a dispute-resolution clause, defendants may argue you must exhaust that process before filing in court.
• Rule 12(b)(6) as exhaustion vehicle: This case confirms that failure to exhaust administrative remedies can be raised as a Rule 12(b)(6) motion, resulting in dismissal without prejudice.
• Texas government entities: If your § 1983 case involves a Texas regional authority (transit, water, housing), be aware that statutory dispute-resolution processes may exist and defendants may argue they must be exhausted first — though this argument generally does not apply to constitutional claims under § 1983.

Key Takeaway

When a government contract or enabling statute establishes an administrative dispute-resolution process, a contractor must exhaust that process before filing suit — and the exhaustion of remedies doctrine applies regardless of whether the government entity enjoys immunity, though § 1983 constitutional claims generally do not require exhaustion of state administrative remedies.