Opinion ID: 6108934
Heading Depth: 2
Heading Rank: 2

Heading: Prologue: Klumb v. The Pension System

Text: Since its creation, the City's Convention and Entertainment Facilities Department has operated and maintained municipally owned properties such as theaters, convention centers, and parking lots. In May 2011, the City announced plans to transfer the Convention and Entertainment Facilities Department's 100 or so employees from the department into a local government corporation named the Houston First Corporation (HF Corporation). HF Corporation is city-controlled and tax-funded with a budget approved by the Houston City Council and a board appointed by the mayor. After the announcement, the Pension System's board adopted a resolution interpreting the definition of employee in article 6243h to include a full-time employee of a Texas local government corporation ... controlled by the City, upon a determination by the External Affairs Committee of the Board of Trustees that such [local government corporation's] employees are Employees for purposes of the [Pension System] Plan. The External Affairs Committee is a standing committee of the board. The pension plan documents were amended to incorporate this construction of the term employee. The City then formed a nonprofit entity, the Houston First Foundation (HF Foundation), and notified the board that HF Foundation was to employ those employees originally set to be transferred to HF Corporation. The board shortly adopted another resolution restating its definition of employee and additionally providing that employees of any entity controlled, directly or indirectly, by [the City] are considered Employees for purposes of membership in [the Pension System], unless the External Affairs Committee expressly determines otherwise. That resolution triggered action by the City to form a nonprofit corporation named Convention and Cultural Services, Inc. (CC Services), which was to operate in conjunction with the HF Foundation. HF Corporation was to provide convention and entertainment services to the City using CC Services employees, and who were in turn leased to HF Corporation. The City attorney explained  in a letter to the Pension System's executive director that following the transition of the convention department's employees to CC Services, the employees (1) would no longer be municipal employees or members of the Pension System, and (2) the City would not make contributions to the pension fund based on those employees' salaries. The External Affairs Committee of the board then adopted a resolution to the effect that these leased employees would be in a control group and would remain as members of the plan. The transfer of services and employees proceeded as planned by the City. A few employees who were eligible to retire did so and sought full retirement benefits from the Pension System on the basis that their employment with the City had ended upon their transition to CC Services. A few employees sought to defer their retirement, yet stop the Pension System from taking deductions from their paychecks, asserting that their being transferred to CC Services effected a termination of their employment with the City. Per its previous resolution, the External Affairs Committee determined that the transfer did not cause a separation from municipal service. These employees (the Klumb plaintiffs) sued the Pension System, challenging its board's authority to take such actions. The suit eventually reached this Court. See Klumb v. Hous. Mun. Emps. Pension Sys. , 458 S.W.3d 1 (Tex. 2015). In this Court, the Klumb plaintiffs alleged violations of the Texas Constitution and breach of contract as well as ultra vires claims against board members who voted in support of the resolution altering the definition of employee as set out in section 1(11) of the statute and authorizing the External Affairs Committee to determine who qualifies as an employee. Involved in that appeal was the provision of the MCA by which the parties had agreed the City could pay a lesser contribution rate (27.36%) than that required by article 6243h, section 8. The MCA contained the following provision: Except for meet and confer decisions and personnel decisions, no committee shall have authority to make final approvals, but shall only make recommendations to the full board. But the board's resolutions regarding the definition of employee provided that the External Affairs Committee had final authority to determine employee eligibility. And while section 3(k) of the statute permitted the board to delegate authority in the manner provided for in the resolutions, the Klumb plaintiffs contended that the MCA amended the statute and divested the board of the ability to delegate final decision-making authority to a committee. The Klumb plaintiffs sought monetary damages and a declaration that they were no longer City employees as defined in article 6243h. The Pension System countered with a plea to the jurisdiction, arguing that the trial court lacked subject matter jurisdiction because (1) the constitutional claims were facially invalid, (2) governmental immunity barred the breach of contract claims regarding the MCA and could not serve as the basis of an ultra vires claim, and (3) article 6243h precludes judicial review because the board's interpretations of the statute and determination of the facts at hand were final and binding. See TEX. REV. CIV. STAT. art. 6243h, § 2(y). The City joined as to the ultra vires claims, generally aligning itself with the Klumb plaintiffs and seeking similar injunctive and declaratory relief. The trial court granted the Pension System's plea to the jurisdiction and the court of appeals affirmed. Klumb v. Hous. Mun. Emps. Pension Sys. , 405 S.W.3d 204 , 228 (Tex. App.-Houston [1st Dist.] 2013), aff'd , 458 S.W.3d 1 (Tex. 2015).  On review, this Court affirmed the court of appeals' judgment on the basis that the Klumb plaintiffs and the City failed to plead actionable ultra vires and constitutional claims against the Pension System and the board members. Klumb , 458 S.W.3d at 17 . We concluded that the board did not act ultra vires when issuing its resolutions defining employee because the statute expressly authorized the board to construe the statute, add language it deems necessary for the administration of the pension fund, and determine all eligibility questions and all other legal and factual matters pertaining to the fund's administration. Id. at 10 . Further, we stated that [c]ourts may not review the board's actions in doing so absent a manifest conflict with express statutory terms. Id. As to the Klumb plaintiffs' assertion that the board acted ultra vires by delegating decision-making authority to the External Affairs Committee in violation of the MCA, we concluded that regardless of whether the MCA amended the statute, as the Klumb plaintiffs claimed, noncompliance with a contract, such as the MCA, does not give rise to an ultra vires claim. Id. at 12 (citing City of Houston v. Williams , 353 S.W.3d 128 , 149 (Tex. 2011) ; Tex. Nat. Res. Conservation Comm'n v. IT-Davy , 74 S.W.3d 849 , 855-57 (Tex. 2002) ). And so, any claim that the pension board violated the July 2011 [MCA] is a breach-of-contract claim that cannot be maintained absent a waiver of sovereign immunity. Id. Pursuant to this Court's judgment, the trial court dismissed the suit.