Opinion ID: 895305
Heading Depth: 2
Heading Rank: 6

Heading: The Agreements as Contracts for Purposes of Local Government Code Section 271.152’s Waiver of Governmental Immunity

Text: As a final basis for waiver of immunity under Local Government Code section 271.152, the Firefighters’ cross-petition also attacks the court of appeals’ holding that those Firefighters whose employment fell within the scope of the MCAs and the CBA lacked standing to sue under those Agreements. 290 S.W.3d at 271. Finding a lack of standing, the court of appeals did not reach the issue of whether the Agreements qualify under section 271.152’s waiver of immunity. See id. We first address the issue of standing, then determine whether the Agreements fall within the scope of section 271.151(2)’s definition of a “contract subject to this subchapter.” Standing is a constitutional prerequisite to suit. Williams v. Lara , 52 S.W.3d 171, 178 (Tex. 2001). It is founded in the separation-of-powers doctrine, and in the Texas open-courts provision. Tex. Ass’n of Bus. v. Tex. Air Control Bd. , 852 S.W.2d 440, 447 (Tex. 1993). The separation-of-powers doctrine precludes courts from issuing advisory opinions on abstract questions of law that do not bind actual parties. See Tex. Const. art. II, § 1; Brown v. Todd , 53 S.W.3d 297, 302 (Tex. 2001). In complementary fashion, the open-courts provision guarantees access to the courts, but the purpose is to make whole those who have suffered actual injury, not to provide a forum for general injuries or hypothetical complaints. Tex. Air Control Bd. , 852 S.W.2d at 444. “Thus, as a general rule, to have standing an individual must demonstrate a particularized interest . . . distinct from . . . the public at large.” S. Tex. Water Auth. v. Lomas , 223 S.W.3d 304, 307 (Tex. 2007) (per curiam).
In holding the Firefighters had no standing to sue for alleged breaches of the MCAs, the court of appeals invoked the doctrine of inclusio unius est exclusio alterius , 290 S.W.3d at 271, which is the presumption that purposeful inclusion of specific terms in a writing implies the purposeful exclusion of terms that do not appear. See Newman v. Blum , 9 S.W. 178, 178 (Tex. 1888). Both MCAs state they were negotiated “by and between the Houston Professional Fire Fighters Association and the City of Houston, Texas.” Both provide that grievances may be resolved either through the statutory grievance procedures of Local Government Code sections 143.127–.134, or by judicial resolution under section 143.206 upon “application by either party.” Section 143.206 (which the MCAs incorporate by reference) likewise speaks in terms of “either party” and “other party.” Tex. Loc. Gov’t Code § 143.206(b). “The state district court of the judicial district in which the municipality is located has full authority and jurisdiction on the application of either party aggrieved by an action or omission of the other party . . . .” Id. (emphasis added). From this language, applying the inclusio unius doctrine, the court of appeals concluded that only the Union and the City had standing to sue for breach of the MCAs. 290 S.W.3d at 271. Although inclusio unius is a sound maxim of construction, judicial review cannot start and end on such a narrow basis when, as here, there is another valid ground to confer standing—the Firefighters’ status as third-party beneficiaries under the MCAs. Texas law recognizes that third parties have standing to recover under a contract that is clearly intended for their direct benefit. Stine v. Stewart , 80 S.W.3d 586, 589 (Tex. 2002) (per curiam). In determining whether there is intent to benefit a third party, we look to the entire agreement, giving effect to all its provisions. Id. at 590. The contract need not have been executed solely to benefit the noncontracting party. Id. at 591. We do not create a third-party benefit by implication; the presumption is the parties contracted only for themselves, absent a clear showing of intent otherwise. MCI Telecomms. Corp. v. Tex. Utils. Elec. Co. , 995 S.W.2d 647, 651–52 (Tex. 1999). However, the agreement need not state “third-party beneficiary” or any similar magic words. See Stine , 80 S.W.3d at 590–91. Finally, a third party cannot enforce a contract if the third party benefits only incidentally from it. MCI , 995 S.W.2d at 651–52. The MCAs reflect an intent to benefit the Firefighters as third parties to the agreements—indeed, the Union was required by its duty of representation to seek benefits for the Firefighters in the agreements. Both agreements make this purpose plain in their preambles by stating that one purpose is to provide certain wages, hours, and conditions of employment. 1 7 Both agreements directly guarantee benefits to the Firefighters, in particular in terms of salary and termination payments, 1 8 overtime pay, 1 9 and vacation leave. 2 0 These benefits are not offered to the world at large as a general beneficence, but are limited to the Firefighters through the definition of “employee” 2 1 included in the agreements. These guarantees of compensation are not promised to the City or to the Union, but to the Firefighters. As such, the City and the Union expressed a clear intent to benefit the Firefighters when they contracted through the MCAs. 2 2 Accordingly, the Firefighters have standing to enforce the agreements. 2 3
The City asserts two arguments to defeat the Firefighters’ claim to standing under the CBA: failure to establish a breach of the duty of fair representation by the Firefighters’ Union, and failure to exhaust the CBA’s grievance procedures. We reject both objections, and conclude the Firefighters have standing as third-party beneficiaries to sue for breach of the CBA. The court of appeals held the Firefighters lack standing under the CBA because they failed to establish that their Union breached its duty of fair representation. The court of appeals reasoned that showing such a breach “is an ‘indispensable predicate’ to an employee’s action against the City for violation of the collective bargaining agreement.” 290 S.W.3d at 271 (quoting Metro. Transit Auth. v. Burks , 79 S.W.3d 254, 257 (Tex. App.—Houston [14th Dist.] 2002, no pet.)). However, that “predicate” only applies to “hybrid” suits—cases in which the employee alleges both breach of the collective bargaining agreement by the employer, and breach of the duty of fair representation by the union, as when the union has mishandled grievance and arbitration proceedings. See Reed v. United Transp. Union , 488 U.S. 319, 328 (1989). It typically is an issue in suits under federal labor law, such as when an employee who is covered by a collective bargaining agreement sues for wrongful termination after losing under grievance and binding arbitration procedures. See United Parcel Serv., Inc. v. Mitchell , 451 U.S. 56, 62 (1981). Here, no grievance or arbitration occurred at all, so whether the Union breached its duty is not an issue. See id. As such, the Firefighters are not required to establish the predicate of any breach of duty. In short, the rule invoked by the court of appeals does not apply to this case. The City argues in the alternative the Firefighters have no standing under the CBA because they have not exhausted the administrative remedies required by it. 2 4 This argument ignores the undisputed fact that the Firefighters are no longer active employees or members of the bargaining unit, but are retirees. As retirees, the CBA’s grievance procedures by their own plain language no longer apply to the Firefighters. Once employees retire, they cease to be employees and become retirees. See Allied Chem. & Alkali Workers, Local Union No. 1 v. Pittsburgh Plate Glass Co. , 404 U.S. 157, 168 (1971). “The ordinary meaning of ‘employee’ does not include retired workers; retired employees have ceased to work for another for hire.” Id. Indeed, such retirees are no longer even a part of the collective bargaining unit. Id. at 175–76. This is so not only because they are no longer employees, but because their interests are no longer adequately aligned with that of active employees so as to be jointly represented as a unit. Id. at 172–73. The CBA’s plain language does not include retired firefighters in the class of persons who are bound by the Agreement. 2 5 Article 14 of the CBA makes the grievance procedure available only to the Union and active firefighters: “The Association or any bargaining unit Firefighter may file a grievance under the terms of this Agreement.” (Emphasis added.) Article 1 of the CBA defines both “Member of the Bargaining Unit” and “Firefighter” as “any full time, permanent paid employee” of the Fire Department. As retirees, the Firefighters do not meet that definition: they are no longer full-time employees, nor are they paid employees. See id. at 168. Therefore they do not fall within the class of persons to whom the grievance procedure is made available. Moreover, the terms of the grievance procedures confirm that they do not logically apply to retirees like the Firefighters. Article 14, section 2, of the CBA encourages an aggrieved firefighter to “verbally inform his/her immediate supervisor of the grievance.” As retirees, the Firefighters have no immediate supervisors to inform. Further, because the Firefighters’ cause of action only accrued when they received their allegedly deficient termination payments, which was after they retired, they had no grievance to assert during the time period when they were employees governed by the CBA’s grievance procedures. Accordingly, we conclude the Firefighters’ failure to exhaust the CBA’s administrative remedies is not a bar to their standing to sue. Finally, as with the MCAs, the Firefighters have standing as third-party beneficiaries under the CBA. Like the MCAs, it was negotiated by the Union with the clear intent to benefit the Firefighters. Significantly, collective bargaining agreements are recognized as a type of third-party beneficiary contract. See Restatement (Second) of Contracts § 302 cmt. d, illus. 14 (“A, a labor union, enters into a collective bargaining agreement with B, an employer, in which B promises not to discriminate against any employee because of his membership in A. All B’s employees who are members of A are intended beneficiaries of the promise.”). The CBA states: It is the intent and purpose of this Agreement to achieve and maintain harmonious relations between the parties, adjust and to establish the rates of pay, hours of work, and other conditions of employment for all Bargaining Unit Members and provide for the equitable and orderly adjustment of grievances which may arise during the term of this Agreement. In its references to rates of pay, hours of work, and conditions of employment, this is a clear statement of an intent to benefit parties other than the Union and the City. As former Bargaining Unit Members, the Firefighters became entitled to rights under the agreement by performing in accordance with it. Like the MCAs, the CBA made specific promises to the Firefighters when they were active employees. In particular, these included terms concerning salary, 2 6 overtime pay, 2 7 sick leave, 2 8 and vacation leave. 2 9 All these provisions in the CBA demonstrate a manifest intent to benefit the Firefighters by guaranteeing certain terms of compensation to them. As such, we conclude the Firefighters have standing as third-party beneficiaries to enforce the CBA.
The MCAs and CBA, like the Ordinances, constitute contracts subject to section 271.152’s waiver of immunity, because they also meet the five definitional elements in section 271.151(2). First, they are indisputably written contracts. Second, they each state the essential terms of the agreement, such as salary, overtime compensation, vacation leave, and work conditions. Third, like the Ordinances, they provide for services, namely the provision of fire protection services to the City. Fourth, the services are provided to a local governmental entity—the City. Finally, all three Agreements are signed by the mayor of the City, who appears to have been duly authorized to do so, thus constituting execution of the Agreements.