### T E X A S C O U R T O F A P P E A L S , T H I R D D I S T R I C T , A T A U S T I N

NO. 03-16-00254- CV

Michael Mor ath, in h is Of fi cial Capacity as Texas Com m ission er of Edu cation; and Michael Ber ry, in his Of fi cial Capacity as Deputy Com m ission er of Edu cation, Appellan ts

v. P rogre so Ind ependent School District, Appellee

F ROM TH E DISTRI CT COURT O F TRAVIS CO UNTY, 345 TH JUDICI AL DISTRICT NO. D-1 -GN-1 6-0 0000 5, H ONO RAB LE GISELA D. TRI ANA, JUDGE P RESIDING

M E M O R A N D U M O P I N I O N

This is an interlocutory appea l from the trial court’s denial of t h e plea to the jurisdiction filed by Michae l Morath, in his officia l capa city as Texas Commi ssioner of Educa tion, and Michae l Be rry , in his officia l capa city as Deputy Commi ssioner of Educa tion (collec tively , the Commi ssi o n er ). Prog reso I ndepende nt School District (PI SD) sued the Commi ssioner for decla ratory and injunctive relief , alleg ing that the Commi ssioner acte d ultra vires in lowe ring PI SD’s

acc reditation rating and appointing a boar d of mana g ers in plac e of PI SD’s board of trustees. The Commi ssioner argues that PI SD’s claims are b ar re d b y sovere ign immunit y . For the rea sons

ex p l ained below, we will reve rse the trial court’s order denying the Commi ssioner’s plea to the jurisdiction and rende r judg ment dismiss ing PI SD’s claims.Background I n Aug ust 2013, the FB I arr ested two Prog reso I SD employ ees and one Prog reso I SD board me mber for

participation in a briber

y and kickba ck sche me involving f eder al funds. I n the

1 wake of these arr ests, the Texas Education Ag ency (TEA) initiated a s p ec i al acc reditation investigation (SAI ) of PI SD’s manag ement, acc ounting, and repor ting of fe dera l and state funds. See Tex. Educ. Code § 39.057 (authorizing Commi ssioner to conduct s p ec ial acc reditation investigations). The final repor t resulting from this SAI conclude d, among other things, that PI SD’s 2 board of trustees and executive leade rship failed to perf orm their duty to g overn, administer, and

overse e the manag ement of the district’s fu n d s ; and that the board, executive leade rship, and administration “k n o wi n gly allowed serious and perva sive violations of fede ral, state, and local require ments perta ining to financ ial manag ement, including contra cting and purcha sing laws.” The SAI repor t a lso de termined that PI SD lacked the auditing a nd financ ial controls nee ded to pr event the ty pe of fra ud that prompted the fede ral investigation, and rec ommended as sanctions that PI SD’s

acc reditation status be lowere d. See id. § 39.057(d) (listing actions Commi ssioner may take as result of SAI ). I n response to the SAI final repor t, the Commi ssioner appoint ed a m anag ement team

The employ ees and board member l at er p l eade d g uilty to, and wer e sentenc ed to prison 1 terms for, theft from an org anization or local g overnme nt that rec eives fede ral funds. See 18 U.S.C. § 666(a) (l)(A ) (theft or bribery conce rning prog rams rec eiving fede ral funds); see also, e.g. , D.O.J. News Release , Multiple Sentenc es Handed Down in Progreso Bribery Schem e , 2014 WL 12649558 (D.O.J. Aug. 11, 2014)

. Relevant sections of the Educ ation Code wer e amende d and partially rec odified in 2017. 2 See Act of May 29, 2017, 85th L eg ., R.S., ch. 807, §§ 6–23, __ Tex. Gen. L aws __ (codifie d in Tex. Educ. Code §§ 39.001–.301). Our ref ere nces to the Educa tion Code and Title 19 of the Texas Administrative Code, howeve r, are to provisions in eff ect as of Dec em b er 30, 2015, the date the Commi ssioner took the final a ctions at issue in this sui t. 2consisting of two conser vators to d i re ct t he board of direc tors in its oversig ht and g overna nce of the district. A few wee ks afte r TEA rele ased the final repor t from the SAI conducte d in the wake of the FB I indictments, the Commi ssioner initiated a second SAI to addre ss violations of statutes and regulations reg arding financ ial and internal-c ontrol proce dures that had been uncover ed by the first SAI

. The final repor

t fr o m t h i s second SAI , rele ased in late Aug ust 2015, rec ommended that the Commi ss i o n er l ower PI SD’s 2014–2015 acc reditation rating and appoint a board of manag ers “bec ause the nature of t he viol ations uncover ed indi cate a widespr ead a nd sy stemic brea

kdown in the district’s g overna

nce that has cause d substantial harm to the public interest.” Soon there afte r the Commi ssioner notified PI SD that based on the district’s “def iciencie s in financ ial manag ement and leg al compliance ” as identified in the second final repor t and the manag ement team’s repor ts, he was lowering the district’s acc reditation status to “ac cre dited-wa rned.” The Commi ssioner also notified PI SD that he was i m p o s ing a board of manag ers—i.e., displacing the board of trustees—a nd appointing a new superintende nt based on the lowere d acc reditation status, the finding s in the second SAI repor t, and the fac t that a manag ement team had been in place for at least two consec utive y ear s. T h e C o m m issioner cited as authority for his action sections 39.052(d) and 39.057(d) of t h e Education Code and sections 97.1055, 97.1057, and 97.1059 of the TEA’s administrative rules as support for his deter

minations. See id. §§ 39.052(d) (authorizing loweri n g o f ac creditation status based on district’s perf

ormanc e), 39.057(d) (listing actions Commi ssioner may take in r esponse to SAI ); 19 Tex. Admin. Code §§ 97.1055 (TEA, Acc reditation Status), 39.1057 (TEA, I nterve ntions

3and Sanctions; L ower ed Rating or Acc reditation Status), 39.059 (TEA, Standards for All

Acc reditation Sanction De terminations).

Throug hout its oversig ht of t h e district, which beg an in J anuar y 2014, the manag ement team issued quarte rly repor ts to the Commi ssioner reg arding the district’s g overna nce and financ e. I n an early q

u a r te rly repor

t, the manag ement team rec ommended that the Commi ssioner appoint a board of manag ers to r eplac e the PI SD boa rd beca use, even though two new PI SD board members had been elec ted in the May 2014 elec tion, it did not appea r to the manag ement team that the board would be able to move forwa rd in a positive manner . I n subsequent quarte rly repor ts, the manag ement team noted improvement, but maintained its rec ommendation for continued oversig ht and g uidance throug h Aug ust 2015, namely due to board- member actions reg arding the distric t ’s financ es. I n its six th and, based on the rec ord here , final quarte rly repor t (issued shortly befor e the final repor

t for the second SAI ), the manage ment team sug g ested that PI SD’s board rema ined dy sfunctional, criticiz ing the board’ s handling of t he hiring of a new superintendent, the awa rd of

a roofing contra ct, and an employ ee- compensation matter. Ba s ed o n i t s “conc erns over district’s financ es and the board’ s inattention to district financ es,” the manag ement team rec ommended “that a boar d of mana g ers be put in place a s soon as possible.”

PI SD soug ht both formal an d informal revie w of the Commi ssioner’s decision to lower its acc reditation rating and appoint a board of manag ers to repla ce its board of trustees. PI SD argued in its appea l to the Commi ssioner that none of the provisio n s ci t ed b y the Commi ssioner—sec t ions 39.052(d) and 39.057(d) of the Educa tion Code and sections 97.1055, 97.1057, and 97.1059 of the TEA’s administrative rules—author ized the Commi ssioner to lower the

4district’s acc reditation rec ord. The district also emphasized that th e Co mm is s io n e r h ad not identified

a single violation of any Education Code standards that had occur red during the 2014–2015 school y ear for which its acc reditation status had been lowere d. On revie w, the Commi ssioner declined to chang e his decisions and, on the same day , lowere d the district’s acc reditation status and appointed the boar d of mana g ers.

After the Commi ssioner appointed the board of manag ers, but befor e the appointed board of manag ers could take their oaths of off ice, PI SD filed the under lying de clar atory action in Travis County District Court, asser ting that the Comm issioner and Deputy Commi ssioner acte d ultra vires in lowering PI SD’S acc reditation rating and appointing the board of manag ers. I n support of its claims, PI SD asser

ted that the statutory and regulatory provisions the Commi ssioner relied on did not authorize him to l ower PI SD’s rating and impose a board of manag ers. PI SD also argued that there was no evidenc e of poor g overna nce of the district following the first SAI

. As re l i ef , PI SD soug ht decla

rations that the Commi ssioner acte d outside his authority and temporar y and perma

nent injunctive relief prohibiting the Commi ssioner from lowering P I SD’s acc reditation rating and appointing a

board of manag ers. The Commi ssioner filed a plea to the jurisdiction in response to PI SD’s suit, arguing that the trial court lacke d jurisdiction over PI SD’s appea l beca use lowering acc reditation status and appoi n t i n g a b oard of manag ers are acts that are within the Commi ssioner’s statutory authority

. Af ter a hear ing, the trial court denied the Commi ssioner’s plea to the jurisdiction. I t is from thi s order denying his plea that the Commi ssioner now appea ls. See Tex. Civ. Prac. & Rem. Code

5§ 51.014(a) (8) (authorizing appea l from trial court’s denial of p l ea to jurisdiction asser ted by g overnme ntal body

).

Discussion The Com missioner challeng es t he trial court’s den i al of hi s plea to the j urisdiction in four issues on appea l: (1) an ultra vires claim cannot be used for judicial revie w, cannot operate retroa ctively , does not apply when a deter mination is made fi n al by statute or rule, and cannot be based on mere proce dural defe cts; (2) the Commi ssioner did not act ultra vires beca use the Educa tion Code expressly authorizes him to lower acc reditation status and appoint a board of manag ers; (3) the fac ts alleg ed by

the district do not constitute ultra vires ac ts; and (4) the te mporary injunction was an abuse of the district cour t’s discretion. Under the ultra vires doctrine, sovere ign imm u n i t y does not bar a suit ag ainst a g overnme nt office r to restra in acts that are bey ond the office r’s lawful authority

. See, e.g. , Houston Belt & Terminal Ry. Co. v. City of Hous ., 487 S.W .3d 154, 161 (Tex. 2016). There are four require ments for such a suit. Cit y o f A ustin v. Utility Assocs., Inc. , 517 S.W .3d 300, 308 (Tex. App.—Austin 2017, pet. denied) . First, the suit must formally be plea ded ag ainst a g overnme ntal officia l in his o r h er o ff

i cial capa city

. Id. (citing City of El Paso v. Heinrich , 284 S.W .3d 366, 372–73 (Tex. 2009)). Second, the “suit must not complain of a g overnme nt office r’s exercise of discretion, but rathe r must alleg e, and ultimately prove, that the office r acte d without leg al authority

or failed to perf

orm a purely minist eria l act.” Id. The third require ment, which rela tes to the nature and eff ect of the reme dy soug ht, require s that the reme dy m u s t b e prospec tive in nature —i.e., compelling leg al compliance g oing forwa rd, as opposed to awa

rding retrospe ctive relief to reme dy

6past violations. Id. at 309. The f ourth requir ement, which is c losely rela ted to the third, is that an ultra vires c la im o th e r

w is e w it h in th e tria l c ourt’s jurisdiction may independe ntly implicate immunit y if it would have t h e ef

fe ct of establishing a rig ht to relief ag ainst the g overnme nt for which the L e g is la tu r e h a s n o t w a iv ed immunit y . I d

. ( c it in g Te

x a s P a r k s & W il d li fe D e p ’ t v . S a wy e r Tr u s t , 3 5 4 S. W. 3 d 3 8 4 , 3 8 8

– 8 9 ( T e x. 2 0 1 1 ) ( ti tl e a s a g a in s t St a te ) ; Ci ty o f H o u s . v . W il li a m s , 2 1 6 S. W. 3 d 8 2 7 , 8 2 8

– 2 9 ( T e x. 2 0 0 7 ) ( p e r c u r ia m) ( r e tr o s p e c ti v e mo n e ta

r y r e li e f ) )

. There is no dispute that PI SD’s pleading s comply with the first requir em en t

. But

even assuming without deciding that PI SD met the second require ment by alleg ing fac ts that would constitute conduct that is ultra vires of the Commi ssioner’s authority , PI SD’s ultra vires claims run afou l o f t h e third and fourth require ments beca use the claims complain of alleg ed past ultra vires conduct and seek relief that is retrospe ctive in nature

. PI SD seeks perma nent injunctions prohibiting the Commi ssioner “fr om lowering the PI SD acc reditation status for the 2014–2015 school y ear ” and “fr om appointing a board of manag ers for PI SD.” But the Commi ssioner has alre ady lowere d PI SD’s acc reditation status and has alre ady appointed a board of manag ers—in fac t, he did so on the

same day that he denied PI SD’s appea l of his deter minati o n s . Thus, to g rant PI SD the relief it seeks—its prior, highe r acc reditation status and no board of manag ers—would require the Court to

rea ch back in time to undo the past executive action of the TEA, presumably by order ing the Commi ssioner to chang e his prior final and unappea lable decisions to lower the acc reditation status and appoint the board of manag ers, and to reinstate PI SD’s acc reditation status. We have previously held that such an ultra vires claim—i.e., one that reque sts relief requiring the undoing of an alre ady

7final administrative act of the Commi ssioner—is jurisdictionally defe ctive. See Texas Educ. Agenc y v. Ame rican Y

outhworks, Inc. , 496 S.W .3d 244, 265–57 (Tex. App.—Austin 2016, pet. g rante d). The fac t that PI SD is challeng ing final and unappea lable decisions is another , related immunit y bar to its claims. See Morath v. Sterling City Indep. Sch. Dist. , 499 S.W .3d 407, 412–13 (Tex. 2016). I n Sterling City the supreme court dismiss ed for lack of jurisdiction ultra vires claims that complained of decisions by the C ommissi oner beca use the L eg islature had made the complained- of decisions final and unappea lable—i.e., bey ond judicial revie w. See id. Her e, simil ar to the provision at iss u e i n S t erl ing City , Educa tion Code section 39.151 specifie s that the Commi ssioner’s decisions on acc ountability rating s are final and m ay n o t be appea led. See Tex. Educ. Code § 39. 1 5 1 (d )–(e ). L ikewise, TEA rules stipulate that the Commi ssioner’s final order s following either informal or formal revie w are final and unappealable

. See 19 Tex. Admin. Code §§ 157.1123 (TEA, Informal Review) (final repor t following “informa l revie w is final and may not be appea led”) , 157.1136 (TEA, Final Orde r & Appea l) (final order issued following “for mal revie w is final and m ay n ot be appea led”) ; see also Tex. Educ. Code § 39.058 (re quiring TEA to offe r informal revie w befor e issuing SAI final repor t). As the plurality opinion in Sterling City noted, the Texas Supreme Court “has never allowed a challeng e to an executive decision made final by statute,” and it would not “abse nt a ‘manife st,’ ‘conspicuous and irrec oncilable’ conflict betwee n the action and the statutory authority asser ted by the executive.” 499 S

. W

. 3 d at 412–13 (citing Klumb v. Houston Mun. Emps. Pe nsion Sys. , 458 S.W .3d 1, 9 (Tex. 2015)).

We sustain the Commi ssioner’s first issue. Having done so, we need not addre ss his

rema ining issues.

8Conclusion We reve rse the district court’s order denying t h e C o m m issioner’s plea to the jurisdiction and rende r judg ment dismiss ing PI SD’s claims.

__________________________________________ J eff Rose, Chief J ustice Be fore Chief J ustice Rose, Jus tices Goodwin a nd Bour land Reverse d and Rende red Filed: De cembe r 7, 2017

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