UI SD is located in L are do. 1 

### TEXA S C OU R T OF A PPEAL S, THIR D DIST R ICT , AT AU STIN

NO. 03-04-00662- CV

United Ind ependent School District and Sh irley J. Ne ely, Com m ission er,

Texas Edu cation Agency, A ppellan ts

v. Ann Wh itehawk , Appellee

F ROM THE DISTRICT CO URT OF TRAVIS COUNTY , 201ST JUDICI AL DISTRICT NO. GN202020 , HO NORAB LE JOH N K. DIETZ, JUDGE PRESI DING

M E M O R

A N D U M O P I N I O N This is an administrative appe al from a decision b y t h e Commissi oner, Te x as Education Age ncy , denying the appea l of Ann Whit ehaw k’s grieva nce ag ainst her e mploy er, U nited I ndepende nt School District (UI SD). See Tex. Educ
. Code Ann. § 7.057(d) ( West 1996 & Supp. 1 2005). In her g rieva

nce, Whit ehaw k complained that UI SD had violated district policy by reduc ing its mont hly contribution to he r health insuranc e pre miums under the district’s g roup plan to less than 90 perc ent of the monthly premium. UI SD and then the Commissioner denied Whitehawk’ s g rieva nce, but the district c ourt re v er s ed , finding that the Commiss ioner’s de cision was not2

supported by substantial e vidence and was arbitra ry and capr icious. We w ill re verse th e d i s t rict court a nd reinstate the Commi ssioner’s de cision.
BACK GR OUND As the dis tr ic t c ourt

ob se rv e d, the a dmi nis tr a tiv e re c or d in th is pro c e e din g is n ot a model of cla

rity . I t is unclear, at best, conc erningsever al pivotal events unde rlying Whitehawk’ s g rieva nce. We c an g lean the f

ollowing sa lient fac ts, however
. I n 1993, UI SD adopt e d

B o a r d Po licy CRD (L ocal) , which re serve s to the UI SD Boa rd the a ut ho ri ty to det erm in e th e sch oo l d is tr ict ’s c on tr ib ut io n t o em pl oy ees’ heal th ins ur a nc e pr e miu

ms
on an a nnua l ba sis :
DI STRI CT CONTRI BU TI ON The B oard a nnually shall determine its contribution to employ ees’ health insurance premiums as part of the employ ee contribution and benef i t s sy stem ap p roved in the budge t development and a doption proce ss . . . . The pa rties ag ree that this official B oard policy is a term of Whitehawk’ s employ ment contra ct. See Perry v. Houston I.S.D. , 902 S.W .2d 544, 547 (Tex. App.—Houston [1s t Dist.] 1995, writ dism’d w.o.j.). This policy

rema ined in eff

ect at all times relevant to this appea l. On August 3, 1999, UI SD’s direc tor of risk manag ement sent a letter to the district’s principals, depa

rtme nt m a n a g e r s , a n d a d ministrator s notifying the m of cha ng es in the district’s g roup health insurance plan. The letter announce d that UI SD w as switching health insuranc e ca rrier s from Humana to Tr

ustmark, and e nclosed a

schedule of informational meeting s and enr ollment sessions throug hout the district, an election form, and compar isons betwee n the current Humana plan and twoAt the tim e of

Whit e ha wk ’s g ri e va

nc e , s e c tio n 2 2. 00 4 p ro vid e d, in r e le va nt p art : 2 (a ) E ac h d i s t r i ct s h al l m ak e a v ai l ab l e t o i t s em p l o y ee s gro u p h ea l t h co v er age provided by

a ri s k p o o l established by one or more school districts under Chapter 172, L ocal Gover n m en t Code, or under a policy of insuranc e or 3 c ov e ra g e pla

ns to be of

fe re d by Tr

us tma rk , a “H ig h Plan ” and a “ B a sic Plan. ” Ac c or din g to t he se
mate ri a ls, the Hi g h Plan pr ov ide d be ne fi ts c omp ara ble to the Humana Plan bu t at a hig he r p re mium, $1 98 .4 9 p e r m on th f

or e mpl oy ee-o nly

c ov e ra g e and

$5 02 .9 3 p e r m on th f

or e mpl oy e e and

fa mil y
cover ag e, as c ompare d to Humana’ s monthly premiums of $132.30 for

employ ee- only

cover ag e and $333.22 for e mploy ee a

nd family cover ag e. The Bas i c Plan was closer in cost to the Humana Plan— $1 34 .6 0 p e r m on th f or e mpl oy e e -o nly

c ov e ra g e and

$3 41 .0 2 f

or e mpl oy e e and

fa mil y
c ov e ra g e —b ut p ro vid e d r e du c e d b e ne fi ts.

Th e mate ri a ls a lso ind ic a te d th a t U I SD w ou ld c on tr ibute $1 21 .3 7 t o w ard the mon thl y premium of any plan and cover ag e the employ ee selec ted, a slig ht increa se fr om its previous y ear ’s
c on tr ibutio n o f $ 11 9. 07 . D ivi din g the se fi g ur e s in to t he pr e mium amou

nts re ve a ls that UI SD w ou ld have c ontributed exactly

90 perc ent of the pr emium amount under the Humana plan for e mploy eeonly cover a g e an d

s li g h tl y o v e r 9 0 p e r c e n t o f

th e p r e mi u m f

o r e mp lo y e e - o n ly

c o v e r a g e u n d e r

the Trustmark B asic Plan. Howe ver, unde r the Tr ustmark Hig h Plan, UI SD’s contribution of $121.37 repr esente d slightly

over 61 pe rce nt of the pre mium for employ ee- only cover ag e. Ann Whiteh aw k , an art te a c h e r a t U n it e d H ig h Sc h o o l, a tt e n d e d o n e o f the informational mee tings on August 26, 1999, and lear ned of the chang es in insuranc e bene fits. She fi l eda Lev el On e gr i ev an ce co mp l ai n i n g t h at n ei t h e r T ru s tm ark p l an co mp l i edwi t h t h e c o v er age require ments of sec tion 2 2
. 0 0 4 o f t he educ ation code, that the district was improper ly cutting 2g roup contract issued by an insurer , a compa

ny subject to Chapter 20, I nsuran c e Co d e , o r

a h e a lt h ma in te n an c e o r g an iz a ti o nu n d e r th e T e x as Hea lth Maintenance Org anization Act (Chapter 20A, Ver

non’s Texas I n s u ra n ce C o d e)
. T h e c o v er a g e m u s tm ee tt h e s u b s t an t i v e c o v er age require ments of Article 3.51-6, Insuranc e Code, a nd any other law applicable to gr oup health insuranc e policies or contra cts issued in this st ate. Act of Ma

y 27, 1995, 74th L eg ., R.S., ch. 260, § 1, 1995 Tex. Ge n. L aws 2207, 2282-83 ( amende d 1997, 1999, 2001, 2003, 2005) (cur rent version at Tex. Educ
. Code Ann. § 22.004 (W es t S u pp. 2005). Th e re c or d in dic a te s th a t a pp ro xima te ly on e hund

re d o the r U I SD e mpl oy e e s h a d in iti a lly 3 joined in Whi tehawk’ s g rieva nce. T hey

are no longe r par

ties to this proceeding
. 4 benef its, and that U I S D h ad p rovi ded inade quate notice of the c hang es. She soug ht two forms of
re lie f: (1 ) the dis tr ic t sh ou ld of fe r its e mpl oy e e s a he a lthins ur anc e pla n th a t me e ts o r i s c omp ara ble to that require d under se ction 22.004 of the e ducation code; and (2) “[t] he district should continue to pa y 90% of the employ ee’ s [i ]nsurance premiums as they ag ree d to do in the past,” in cl uding pa ying90 pe rc e nt o f p re miums f or a pla n c omp ara

ble to t he se c tio n 2 2. 00 4 s tand ard s. 3 A subse q u e nt O c to b e r

1 1 , 1 9 9 9 me mo r a

n d u m f r o m UI SD’s risk manag ement dire ctor repr esents that UI SD added a third Trustmark c overa g e plan, a “State Pl an , ” with cove rag es
co mp ar ab l e t o t h e s ec t i o n 2 2
. 0 0 4 s t an d ar d s b u tat a p re m i u m h i gh er t h an ei t h er

t h e B as i c o r H i gh P l an s . T h e t o t al m o n t h l y p re m i u m u n d er

t h e S t at e p l an wa s $ 2 6 5
. 5 4 fo r e mp l o y e e- o n l y co v er age
and $6 72 .8 4 fo r e mpl oy e e and fa mil y c ov e ra g e . Th e mate ri a ls r e fl e c te d th a t, a s w a s th e c a se wi th the two other Tr

ustmark plans, UI SD’s contribution toward St ate Plan monthly premiums would be $121.37, meaningthat employ ees would absorb $144.17 per month for employ ee- only cover ag e and $551.47 per month for family cover ag e. I n perc entag e terms, UI SD’s contribution would repr esent5

approximately

46 perc ent of the monthly premium for e mploy ee- only cover ag e under

the State Plan. Whit ehaw k ultimately

enrolled in the State pla

n. UI SD therea fter de nied W hitehawk’ s L evel One g rieva nce on the basis that it had complied with section 22.004 by offe ring the State Plan, that it had no obligation to contribute 90 perc ent of e mploy ees’ health insuranc e pre miums, and that it had provided ade quate notice of the plan cha ng es. Whitehawk continued to pre ss her g rieva nce tha t s h e wa s leg ally

entitled to have UI SD contribute 90 per cent of the premium cost of t he section 22.004-compatible State Plan. Afte r the district denied both her L evel Two g rieva nce (to the UI SD assistant superintendent for human
resour ces) and L evel Three g rieva nce (to the UI SD boa

rd), she had exhausted her r emedies w ith the distr i ct
. She appea led the district’s denia l of her g rieva nce to the Commissioner. See Tex. Educ. Code Ann. § 7.057(a ) (West 1996 and Supp. 2005).

A hea ring was h el d b efor e a T exas Education Ag ency administrative law judg e. Whit ehaw k urg ed that UI SD ha d adopted a policy since 1991 of contributing 90 perc ent of e mploy ee health insuranc e premium costs, that this poli cy was incor porate d into her employ

ment contra ct, and that the district had bre ache d the contra ct by contributing a lower

perc entag e of the premium in the 19 99 -2 00 0 s c ho ol ye ar. UI SD c ounte re d th a t, whil e it h a d c on tr ibute d 9 0 p e rc e nt o f p re mium c os ts in prior y ear s, it had no y ear -to-y ear policy that it would continue making such contributions nor any other oblig ation to do so in 1999.

I n reply , Whit ehaw k argued that there wa s no evidenc e in the administrative r ecor d that the UI SD board had ever acte d under this wr itten policy to of ficially chang e what Whi tehawk char acte rized as UI SD’s y ear -to-y ear de fa cto policy to contribute 90 per cent of employ ee pr emiumThis court has a lso rece ived an amicus curiae brief from the Tex as Association of School 4 B oa rd s L e g a l A ssi sta

nc e F un d urg ingre ve rs a l. 6 costs
. Whil e ac knowledg ing the corr espondenc e and materials re fer ence d above c oncer ning the new Trustmark p l an s , W h i t eh aw k ch ar ac t er i z edt h em m erely as communica

tions from subordinate district employ ees, not e vidence of off icial UI SD board a ction. The Commissioner, adopting the AL J ’s re commendations, denie d Whit ehaw k’s appea l. Whi tehawk br oug ht a suit for judicial revie w of the Commissioner’s dec ision in t he district court. See id. § 7.0 57 (d ). Th e dis tr ic t c ourt re ve rs e d th e Com mis sio ne r’ s d e c isi on , f ind ingthat it was not supported by

substantial evidence and wa s arbitra ry and ca pricious. This appea l followed.
DI SCU SSIO N UI SD and the Commissi oner e ach a ppeale d the district c ourt’s judg ment. I n UI SD’s 4 fourth issue on appe al and the Commissioner’s third issue, t hey argue that the Commissioner’s de c isi on de nyingWhit e ha

wk ’s a pp e a l of he r g ri e va

nc e is s up po rt e d b y su

bs tanti a l e vid e nc e and

is
no t arb itr ary

and c a pr ic iou s. Th e se iss ue s p ro ve to b e dis po sit ive , a nd we ne e d n ot r e a c h th e pa

rt ie s’ oth e r i ssu e s.
Sub stantial evidence Stan dard of rev iew

When review ing a

n ag ency decision under

the “substantial evide nce” standard, w e consider the reliable and probative e vidence in the rec ord as a whole. Te x . Gov’t Code Ann. § 2001.174(2)( E) (West 2004). We may not substitut e our judgme nt for that of the ag ency and may7

only consider the rec ord on which the ag ency based its dec ision. Stratton v . A us tin In de p. Sc h. Di st. , 8 S.W .3d 26, 30 (Tex. App.—Austin 1999, no pet.). The issue befor e us is not whether the ag ency
rea ched the corr ect conclusion, but whether there is some basis in the rec ord for its action. Se e City of E l Paso v. Pub l i c U

t i l

. Comm’n , 8 83 S.W. 2d 17 9, 18 5 ( Te x. 19 94 ); se e als o Te x as He alt h Facilities Comm’n v. Charter Me d.-Dallas, Inc. , 665 S.W .2d 446, 452 (Tex. 1984). “Substantial evidenc e does not mea

n a lar g e or c onsiderable amo u n t o f ev i d ence , but rather ‘such r eleva

nt evidenc e as a rea sonable mind might a cce pt as ade quate to support a c onclusion’ of fa ct.” Lauderdale v. De

p a r tment of Agric. , 923 S.W .2d 834, 836 (Tex. App.—Austin 1996, no pet.) (q u o t i n g Piercev. Unde rwood , 487 U.S. 5 5 2 , 5 6 4 -65 (1988)). We presume that the ag ency ’s finding s, infere nces, c onclusions, and dec isions are su p p o rt ed by substantial evidence , and the b u r d e nto p r o v e o th e r

w is e is o nth e p arty

c h a ll e n g in g th e d e cision. C h a rter Med. , 665 S.W .2d at 45 3; Stratton , 8 S.W .3d at 30. I f the a g ency offe rs more tha

n one g round as the ba sis for its decision,
we wi ll a ff

ir m if we fi nd

su bs tanti a l e vid e nc e su

pp or tin g on e g ro un d e ve n if

a ll b a se s g ive n w ou ld be indepe ndently

sufficie nt to support the decision. Texas State Bd. of Me dical Exam’rs v. Sche ffey , 94 9 S. W.2 d 4 31 , 43 6 (T e x. Ap p. —Aus tin 19 97 , wr it de nie d)
. F ina lly , th e a g e nc y ’s de c isi on sh ou ld be re verse d only

if the par ty challengingthe dec ision demonstrates that the abse nce of substantial evidenc e has pr ejudiced that party ’s substantial rig hts. Se e Loc k le ar v . Te x as Dep ’t

of I ns . , 30 S.W .3d 595, 597 (Tex. App.—Austin 2000, no pet.). Application

Re fl e c tin g t he app are nt f oc us of the dis tr ic t c ourt , th e pa

rt ie s d e vo te muc h o f t

he ir briefingto the question of whether t he adminis trative recor d contains subs tantial evidenc e that the8

UI SD board took off

icial ac tion to change its perce ntag e pre mium contribution for the 1999-2000 school y ear

from the 90 pe rce nt rate it applied in previous y ear s. All of this is predicated on w hat pr ov e s to be the c on tr oll ing iss ue in t his a pp e a l, h ow e ve r: whe the r subst ant ial e v idenc esup

po rts the Com m ission er’s de term inati on th at UISD had n o policy or other co n t i n u i ng obligat

ion requirin g it to pay 90 perce nt of its em ployee s’ health in suran ce prem ium s durin g the 1999-2000 school year. I f UI SD’s prior practice of contributing 90 perc ent di d not constitute a poli cy or other obligation to continue doing so y ear -to-y ear , it is i rre levant whe ther there is substantial evidenc e of officia l action to depar

t from that pra ctice. I n his d ec i s i o n , the Commiss ioner made finding s of fa ct and c onclusions of law. Se v e r a l ar e r e late d to Wh it e h aw k ’ s c e n tr a l c o n te n ti o n th a t U I SD w a s o b li g a te d to c ontribute 90 perc ent of he r hea lth ins u ra n ce p re m iums during the 1999- 2000 school y ear . The Commissioner fo un d th a t th e UI SD b oa rd ha d vo ted in 199 1 a

nd 19 93 to p ay

90 pe rc e nt o f e mpl oy e e s’ he a lth in s u r an c e p r e mi u ms an d th a t “ [f ]r o m M ay 1 9 9 1 un ti l A u g u s t 1 9 9 9 , Re s p o n d e n t p a id 9 0 % o f an employ ee’ s h e a lt

h in s u r an c e p r e mi u m. ” H e a ls o f o u n d th a t U I SD ’ s p o li c y

p r o v id e d , “ th e B oard annually shall determine its contribut i o n to employ ees’ health insuranc e pre miums as part of the empl o y e e c o n tr ib u ti o nan d b e n e f it s s y s te m a

p p r o v e d in th e b u d g e t d e v e lo p me n t a n d adoption proce ss.” The Commissioner made the following conclusions of law :
2. Re sp on de nt’ s v ote s in 19 91 and

19 93 to p ay

90% of it s empl oy e e s’ he a lth ins ur anc e pr e miums w e re vo te s to do so on ly fo r t ho se y e ars . 3. Respondent’s ac tions of paying 90% of its employ ees’ health insuranc e pr e miums f

or a numbe r of y e ars did no t e sta bli sh a bo ard po lic y that re qu ir e d it to pay 90% of its employ ees’ health insuranc e pre miums i n future year s.9

4. Respondent did not have a policy for the 1999- 2000 school y ear that require d it to pay 90% of its employ ees’ health insuranc e pre miums.
Whit eha wk ch al l eng ed these conclusions of lawas ar bitrary and not supported by

substantial evidenc e. Th e re c or d c on ta ins e vi dence that, i n 1 99 1 a nd 19 93 , th e B oa

rd vo te d to se t it s contribution rate a

t 90 perc ent. On De cembe r 18, 1991, the B oard a dopted a motion “that the B oard pa y 90 % o f t he emp lo y ee’s he a lthins ur anc e pr e mium.” On May 13 , 1 99 3, the B oa

rd vo te d to ap p ro v e ah ea l t h i n s u ra n ce p ro v i d er “w i t h t h e cl ar i fi ca t i o n t h at t h e Bo ar d wo u l d p ay 9 0 % c o v er age on all employ ees at UI SD.” These votes wer e re flec ted in t h e C o m m i ssioner’s finding s. The Com mis sio ne r a lso fo un d th a t U I SD d id, in f a c t, c on tr ibute 90 perc e nt o f e mpl oy e e s’ he a lth ins ur anc e pr e miums b e tw e e n th e 19 91 -9 2 a nd 19 98 -9 9 sch oo l y e ars . Wh ite ha wk c on te nd s th a t th is evidenc e esta

blishes that the Boa

rd had a policy to c ontinue this pra ctice into the 1999- 2000 school y ear and “ elec ted to follow previous de cisions in the absenc e of a curr ent y ear

deter mination.” Howeve r, the Commissioner, concludingotherwise, r easoned that these votes a nd past prac tices sh ou ld b e vie we d in

lig ht o f U I SD’ s o ff

ic ia l B oa rd Pol ic y CRD (L oc a l) that “ Th e B oa rd annua lly shall determine its contribution to employ ees’ health insuranc e pre miums as part of the employ ee compensation and benef

its sy stem approve d in the budg et deve lopment and adoption proc ess.” Viewingthese fa cts in context wit h Boa rd Policy CRD (L ocal) , there is substantial
e vid e nc e that UI SD did no t bin d its e lf to a y e ar- to- y e ar po lic y to a lw ay s pa y 90 pe rc e nt of

its employ ees’ health insuranc e p r e mi u ms b ut r e s e r

v e d th e r ig h t t o deter mine its perce ntag e contr ibution
eac h y ear . There fore , in or der for Whit ehaw k to have pr evailed in he r appe al to the Commiss ioner,10

sh e wo uld

have ha d th e burd e n to pr ov e that th e B oard act ed un der Bo ard Pol ic y CRD (L oc a l) to adopt a 90 pe rce nt contribution fo r t h e 1 9 9 9 -2 000 school y ear . She did not attempt to do so, but instead urg es her argument only that the B oard “ elec ted inaction.” H oweve r, there is simpl y no evidenc e in the re cord tha t the Boa rd “e l ec t ed inaction” f

or the 1999-2000 sc hool y ear . We thus
co n c lu d e th a t W h it e h aw k h a s f a il e d to me e t h e r

b u r d e nto s h o w a

la c k o f s u b s ta n ti a l e v id ence supporting the Commi ssioner’s c onclusion that UI SD was not obligated t o contribute 90 perce nt of Whit ehaw k’s hea lth insurance pr emiums during the 1999-2000 school y ear . Ar bit r ar y a nd c apr ic iou s Stan dard of rev iew

Ag ency decisions that ar e not supported by substantial evidenc e ar e dee med ar bitrary and ca pricious. Public Util. Comm’n. v. Gulf States Util. Co. , 809 S.W .2d 201, 2 1 1 (T ex . 1991). An a g e nc y de c isi on is a rb itr ary wh e n its fi na l or de r d e nie s p art ie s d ue pr oc e ss o f l aw o r f

a ils to demonstrate a

connec tion between the ag ency decision and the factors t hat ar e made rele vant to that decision by

the applica

ble statutes and regulations. Reliant Energy, I nc. v. P ublic Util. Comm’n , 153 S.W. 3d 17 4, 18 4 (T e x. Ap p. —Aus tin 20 04 , no pe t.)
. A c ourt re vie wi ng a de c isi on fo r a rb itr ari ne ss should consider a ll releva nt fac tors and may

not substit ute its judgment for that of t he age ncy . See Gulf States , 809 S.W .2d at 211. Application

We h a v e a lr e a dy c o n c lu d e d th a t th e Co mm is s io n e r ’ s d e c is io n w a s s u p p o rte d by substantial evidence . Whit ehaw k does not argue in her brief that the Commi ssioner denie d her due11

proce ss of law or f

ailed to demonst rate a conne ction betwee n his decision and the f actor s releva

nt to that decision. I n revie wing the evidenc e and the law that formed the basis for the Commissioner’s finding s of fa ct and c onclusions of l aw , we can find nothing arbitra ry or ca pricious about the Commi ssioner’s de cision.

The de cision of the Commissi oner w as supported by s u b s t an t ial evidenc e and w as not arbitrar

y and ca pricious. We sustain UI SD’s fourth issue on appe al and the Commiss ioner’s third issue on appea l. Be cause this resolution controls our dispositi on of the a ppeal, we nee d not addre ss UI SD and the Commissi oner’ s remainingissues. See Tex. R. App. P . 47.1.
CO NC LU SION The Commissioner’s dec ision was supported by substantial evidence and was not arbitra ry and ca pricious. We reve rse the judg ment of the distri ct court a nd rende r judg ment aff irming the Commi ssioner’s orde r.

Bob Pembe rton, J ustice Be fore Chief J ustice L aw, Justi ces B . A. Smith and Pemberton Reverse d and Rende red Filed: Mar ch 17, 2006