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City of Austin v. Utility Associates, Inc.

Court of Appeals of Texas, Third District, Austin

March 24, 2017

The City of Austin and Elaine Hart, in her official capacity as City Manager of the City of Austin, Appellants
v.
Utility Associates, Inc.; and Mr. V. Bruce Evans, a resident of Austin, Texas, Individually, Appellees, The City of Austin; and Elaine Hart, in her official capacity as City Manager of the City of Austin, Utility Associates, Inc. and Mr. V. Bruce Evans, a Resident of Austin, Appellants// Cross-Appellants
v.
Utility Associates, Inc. and Mr. V. Bruce Evans, a Resident of Austin, The City of Austin; and Elaine Hart, in her official capacity as City Manager of the City of Austin, Appellees//Cross-Appellees

         FROM THE DISTRICT COURT OF TRAVIS COUNTY, 98TH JUDICIAL DISTRICT NO. D-1-GN-16-002931, HONORABLE ORLINDA NARANJO, JUDGE PRESIDING

          Before Justices Puryear, Pemberton, and Field

          OPINION

          Bob Pemberton, Justice

         These consolidated causes arise from a lawsuit seeking to challenge a municipal contract procurement. One cause presents competing interlocutory appeals from a district-court order that granted a plea to the jurisdiction in part, denied it in part, and dismissed some of the claims over which jurisdiction was challenged. The other cause presents an interlocutory appeal challenging portions of a temporary injunction. The net effect of our holdings below is that we dismiss additional claims for want of jurisdiction and vacate the challenged portions of the temporary injunction.

         BACKGROUND

         After requesting and evaluating proposals through what it represented to be an objective, competitive process, the City of Austin awarded and later executed a $12.2 million contract to Taser International, Inc., for the provision of body-worn cameras for use by the Austin Police Department (APD). One of the vendors that had submitted a competing proposal, Utility Associates, Inc., accused City staff of manipulating or corrupting the selection process to favor Taser. Utility protested the award unsuccessfully through the City's internal administrative processes, then sought judicial relief through suit against the City and, in her official capacity, the City Manager (collectively, the City Defendants).[1] Utility was later joined as a plaintiff by a resident City taxpayer, V. Bruce Evans (collectively, Plaintiffs). In their live pleadings, Plaintiffs asserted claims for injunctive relief, declaratory relief under the Uniform Declaratory Judgments Act (UDJA), [2] and the attorney's fees that the UDJA would authorize with the declaratory claims.[3]

         The substantive relief Plaintiffs sought fell into two basic categories:

(1) The first category of claims sought to establish that the contract award to Taser had been unlawful or void and, on that basis, prevent the City from performing the contract. Specifically, Plaintiffs sought declarations that the City Defendants had "engaged in an improper procurement unauthorized by law" and that "the award of the RFP [request for proposals] to Taser by the City Council . . . is void as unauthorized by law." Predicated on those same legal determinations, Plaintiffs sought an injunction barring the City Defendants from "performing any aspect of the Contract [with Taser]."
(2) The second category was calculated to secure the contract award for Utility upon the invalidation of the award originally made to Taser. Plaintiffs alleged (and would later present evidence) that City staff had utilized a scoring system in evaluating the competing proposals and that Utility had been assigned a score second only to Taser's assigned score. Premised on their allegations that Taser's scores and resultant award had been illegitimate, Plaintiffs sought an injunction "requiring the [City Defendants] to award the Contract to Utility as the highest scoring responsible Offeror, " and a corresponding declaration that "the Contract for the RFP be awarded to Utility as the highest scoring responsive Offeror for the RFP." Relatedly, Plaintiffs prayed for an additional injunction calculated to preserve Utility's runner-up status in the procurement and its claimed interest in obtaining the contract award in lieu of Taser, barring the City Defendants from "cancelling the procurement for, or awarding the Contract to, anyone other than the highest scoring responsible Offeror."

         Following an evidentiary hearing, Plaintiffs obtained a temporary injunction that purported to preserve the status quo pending trial with respect to each set of claims, barring the City Defendants from, respectively: (1) "performing any of their obligations arising under or in furtherance of the Contract" with Taser; or (2) "cancelling or otherwise terminating [the RFP] for body worn cameras." The City Defendants perfected an interlocutory appeal of this order, [4] which we docketed as Cause No. 03-16-00565-CV.

         The City Defendants also interposed pleas to the jurisdiction, principally asserting governmental immunity as a bar to suit. The parties' arguments in this regard centered largely on the extent to which Plaintiffs' claims were authorized under a provision of Chapter 252 of the Local Government Code. Chapter 252, titled, "Purchasing and Contracting Authority of Municipalities, " requires municipalities to use prescribed competitive processes when entering into certain contracts requiring expenditures of municipal funds.[5] Subchapter D of Chapter 252 authorizes enforcement of the chapter's requirements through criminal penalties, [6] removal and other professional sanctions against an offending municipal official or employee, [7] and also the following civil remedy found in Section 252.061:

If the contract is made without compliance with this chapter, it is void and the performance of the contract, including the payment of any money under the contract, may be enjoined by:
(1) any property tax paying resident of the municipality; or
(2) a person who submitted a bid for a contract for which the competitive sealed bidding requirement applies, regardless of residency, if the contract is for the construction of public works.[8]

Section 252.061, as this Court has recognized previously, effects a waiver of immunity to the extent of the claims it authorizes against the municipality whose actions are in question.[9]

         The City Defendants further contended that Plaintiffs' UDJA claims (to the extent not already barred by governmental immunity) were jurisdictionally barred as remedies redundant of the relief provided under Section 252.061 and serving merely as an impermissible vehicle for recovering otherwise-unauthorized attorney's fees. Following a hearing at which no additional evidence was presented, the district court granted the City Defendants' plea to the extent of dismissing all of Plaintiffs' claims under the UDJA, for both declarations and attorney's fees. However, the district court denied the plea "as to Plaintiffs' claim under Tex. Loc. Gov't Code § 252.061." The effect of these rulings was to maintain jurisdiction over all of Plaintiffs' claims for injunctive relief, but only those claims. The City Defendants perfected an appeal of the order denying their plea in part, and Plaintiffs cross-appealed the order granting the plea in part and dismissing their UDJA-based claims.[10] These appeals were docketed under Cause No. 03-16-00586-CV, and subsequently consolidated with Cause No. 03-16-00565-CV on the City Defendants' unopposed motion.

         Following completion of briefing, City staff placed on the Austin City Council agenda a request for authorization to negotiate and execute a smaller ($4 million) version of a body-camera-purchase contract with Taser through an alternative means-a non-competitive, "direct purchase" arrangement through a buying cooperative administered by the Texas Association of School Boards. Although apparently not disputing the legality of this contracting method or procedure in itself, Plaintiffs have urged that this effort "circumvents" the earlier temporary injunction barring the City Defendants from "cancelling or otherwise terminating [the RFP] for body worn cameras" (i.e., the portion aimed at preserving the status quo as to the second category of Plaintiffs' underlying claims). Plaintiffs obtained a February 15 temporary restraining order barring the City Defendants "from entering into any contract or agreement for the purchase[] of bodyworn cameras" pending a hearing to determine whether the order should be made a temporary injunction. This TRO has since expired, but in the interim Plaintiffs sought injunctive relief from this Court to the same effect. We issued a temporary stay in order to preserve our jurisdiction and the parties' claimed rights.[11]

         ANALYSIS

         The most pivotal considerations in our disposition of these appeals are the legal principles that define and limit the district court's subject-matter jurisdiction to adjudicate Plaintiffs' claims. We review questions of subject-matter jurisdiction de novo.[12] This inquiry is not necessarily confined to the precise jurisdictional challenges or arguments presented by the parties, because jurisdictional requirements may not be waived and "can be-and if in doubt, must be-raised by a court on its own at any time, " including on appeal.[13] Accordingly, the discussion that follows departs somewhat from the parties' own framing of the jurisdictional issues.[14]

         Plaintiffs had the burden of pleading or presenting evidence of facts that would demonstrate the district court's jurisdiction to entertain their claims.[15] To invoke the district court's subject-matter jurisdiction here, Plaintiffs' chief challenge is to avoid or overcome the City's governmental immunity.

         Do Plaintiffs' claims implicate governmental immunity?

         Governmental immunity protects political subdivisions of the State, including municipalities, and generally their agents, when performing "governmental" as opposed to "proprietary" functions.[16] There is no question that the City's contracting to provide equipment to its police force falls into the "governmental" category.[17] Governmental immunity is an extension or application of the State's sovereign immunity, the age-old, common-law doctrine that shields the State, its agencies, and generally its officials from suit[18]-and thereby correspondingly implicates the judiciary's subject-matter jurisdiction to entertain that suit[19]-unless and to the extent waived by the Legislature.[20]

         Sovereign and governmental immunity effectively shield a wide range of "improvident" governmental acts from the civil remedies that would be available if the same acts were committed by private persons instead.[21] Consequently, the Judiciary's adherence to the doctrine can yield case outcomes perceived to depart from subjective understandings of "justice" as viewed within the context of the court system. Plaintiffs stress such themes here, insisting that the judicial remedies they seek (including attorney's fees, as they pointedly emphasize) are essential weapons against "public corruption, " further equating the City's contract award to Taser with various municipal bribery and kickback schemes that have made the news lately.[22] But the "contemporary rationale" for sovereign and governmental immunity, the Texas Supreme Court has explained, is that "the Legislature, not the Judiciary, is best suited to make the policy-laden judgments" as to whether the resources of Texas governmental units should be expended in defending lawsuits and complying with judgments, versus other priorities.[23] The controlling consideration, in other words, is not the perceived justness of Plaintiffs' professed cause as self-styled "corruption fighters, " but the extent to which broader State policy prioritizes pursuit of that cause through the private civil remedies Plaintiffs seek.

         In their cross-appeal, Plaintiffs insist that they asserted, via the UDJA, claims that fall within the ultra vires doctrine and thereby do not implicate the City Defendants' governmental immunity. Under the ultra vires doctrine, immunity does not bar a suit against a government officer to restrain acts that are beyond the officer's lawful authority (hence the "ultra vires" label).[24] There are four important requirements for such a suit. First, the suit must formally be pleaded against a governmental official, in his or her official capacity, not the government principal, a procedure conforming to an underlying concept that ultra vires suits do not seek to judicially control the government, but merely to reassert the control of the government.[25] Second, the "suit must not complain of a government officer's exercise of discretion, but rather must allege, and ultimately prove, that the officer acted without legal authority or failed to perform a purely ministerial act."[26]The third limitation relates to the nature and effect of the remedy sought. The remedy must be prospective in nature-i.e., compelling legal compliance going forward, as opposed to awarding retrospective relief to remedy past violations.[27] The fourth limitation, closely related to the third, is that an ultra vires claim otherwise within the trial court's jurisdiction may independently implicate immunity if it would have the effect of establishing a right to relief against the government for which the Legislature has not waived immunity.[28]

         Plaintiffs complied with the first ultra vires requirement by naming the City Manager, in her official capacity, as a defendant. But the remaining requirements are more problematic for Plaintiffs. As the source of the legal authority or ministerial duties that the City Defendants are allegedly transgressing, Plaintiffs point to Chapter 252 of the Local Government Code, the municipal-contracting statute noted previously.

         Subject to certain exceptions, Chapter 252 requires a municipality to comply with prescribed procedures for either "competitive sealed bidding" or "competitive sealed proposals" when entering into a contract to purchase goods or services requiring an expenditure of more than $50, 000 in municipal funds.[29] Plaintiffs assert that Chapter 252 applied to the City's contract for purchase of body-worn cameras that was ultimately awarded to Taser and that the City opted to utilize the competitive-sealed-proposals procedures. Assuming so, [30] Chapter 252 in material part required that the City issue, and give notice of, a request for proposals that "solicit[ed] quotations" and "specif[ied] the relative importance of price and other [statutorily permitted] evaluation factors" that the City had deemed material to achieving "the best value for the municipality."[31] The chapter further authorized the City to conduct "discussions, " "in accordance with the terms of a request for proposals and with regulations adopted by the governing body of the municipality, " with "offerors" (i.e., vendors who submit proposals) "who are determined to be reasonably qualified for the award of the contract."[32] In that event, Chapter 252 mandated that "[o]fferors shall be treated fairly and equally with respect to any opportunity for discussion and revision of proposals."[33] And where "the competitive sealed proposals requirement applies to the contract" under Chapter 252, the statute required that "the contract must be awarded to the responsible offeror whose proposal is determined to be the most advantageous to the municipality considering the relative importance of price and the other evaluation factors included in the request for proposals."[34]

         As for conduct that would be ultra vires of Chapter 252's requirements, Plaintiffs complain that the City Defendants ultimately failed to award the contract, as Chapter 252 states they "must" do, "to the responsible offeror whose proposal is determined to be the most advantageous to the municipality considering the relative importance of price and the other evaluation factors included in the request for proposals."[35] This is so, Plaintiffs insist, because Taser was not a "responsible offeror" in their view, and should thereby have been disqualified from consideration. In support of that conclusion, Plaintiffs allege chiefly that Taser's proposal failed to comply with numerous "mandatory technical requirements" set forth in the City's RFP. In support, Plaintiffs cite such perceived deficiencies as "[t]he Taser Offer did not include a mobile viewing device (Technical Requirement 1.1); . . . was not capable of being managed with a single management console (Technical Requirement 1.9); . . . was not capable of encrypting data from end-to-end in a manner which prohibits the service provider from accessing the video (Technical Requirement 1.10); [and] . . . could not identify which user was wearing a given camera (Technical Requirement 2.2)." Plaintiffs additionally complain that Taser's offer or proposal "did not contain complete pricing as required by the RFP, " citing an alleged failure by Taser to "comply with Section 2, Part IV of Section 0600 of the RFP."

         Where, as here, a governmental body has been delegated authority to make some sort of decision or determination, immunity jurisprudence has long emphasized a critical distinction between alleged acts of that body that are truly ultra vires of its decision-maker authority, and are therefore not shielded by immunity, and complaints that the body merely "got it wrong" while acting within this authority, which are shielded.[36] "Indeed, " as the Texas Supreme Court recently observed, "an ultra vires doctrine that requires nothing more than an identifiable mistake would . . . swallow immunity."[37] The above allegations by Plaintiffs, without more, amount only to disagreements with the outcome of determinations by the City Defendants that were well within their discretion to reach. It is true, as Plaintiffs emphasize, that Chapter 252 requires that "the contract must be awarded to the responsible offeror . . ."[38] and that "must" typically denotes a requirement rather than a choice.[39] But Plaintiffs overlook that the identity of the "responsible offeror" to whom "the contract must be awarded" turns on multiple underlying determinations that the City Defendants were necessarily empowered to make-it is the offeror "whose proposal is determined to be the most advantageous to the municipality considering the relative importance of price and the other evaluation factors included in the request for proposals."[40] While Chapter 252 may require that the City Defendants weigh these specified considerations and factors, [41] it does not limit their discretion in the outcome of these judgment calls.[42] The above allegations of Plaintiffs would implicate the outcome of the City Defendants' determinations, not their legal authority to reach that outcome.

         Yet Plaintiffs also rely on some further facts that present closer questions in the ultra vires analysis. These facts are to the effect that the City Defendants did not only "get it wrong" in determining the winning "responsible offeror, " but deliberately rigged the process in Taser's favor. Among these facts, Plaintiffs presented as evidence scoring sheets City staff had used when evaluating the competing proposals. Utility's scoring sheet reflects that staff made alterations so as to lower scores initially credited to Utility's proposal. This evidence, Plaintiffs suggest, supports a reasonable inference that City staff manipulated the scoring to help achieve a predetermined outcome in favor of Taser. While the City Defendants presented controverting testimony to the effect that staff made alterations in the course of innocuous good-faith deliberations, such assertions would fall short of negating any fact issue in that regard.[43]

         But even if Plaintiffs have asserted any facts that would constitute conduct ultra vires of the City Defendants' decision-making authority and not merely "getting it wrong" under Chapter 252, they would still face an additional jurisdictional hurdle. As perhaps already highlighted by the preceding discussion, Plaintiffs complain of alleged past ultra vires conduct and assert claims for, or that must be preceded by, relief that is retrospective in nature-they seek effectively to undo a contract award previously approved by the Austin City Council, invalidate an already-executed contract between the City and Taser, reopen the previously concluded procurement process, and compel the City Defendants to re-award the contract to Utility instead. In similar circumstances, this Court held that a suit to compel governmental compliance with a procurement statute, even if otherwise alleging conduct ultra vires of that statute, implicated immunity where the remedy had the purpose or effect of nullifying a contract with the government that had already been executed.[44]Distilling pertinent Texas Supreme Court guidance, we explained:

It is well-established that a claim-including one under the UDJA-"seeking to establish a contract's validity, to enforce performance under a contract, or to impose contractual liabilities are suits against the State." IT-Davy, 74 S.W.3d at 855-56 (characterizing such claims as a form of "controlling state action"); see W.D. Haden Co. v. Dodgen, 158 Tex. 74, 308 S.W.2d 838, 840 (1958) ("A suit against officers of a state, to require them to perform acts which constitute a performance of a contract by the state, is in effect a suit against the state itself. A suit against officers of a state, the purpose or effect of which is to establish the validity of a contract of the state, or to enforce through them the performance of a contract of the state, or to require acts to be performed by them which would impose contractual liabilities upon the state, is a suit against the state.") (quoting Herring v. Houston Nat'l Exch. Bank, 113 Tex. 264, 253 S.W. 813, 814 (Tex.1923)). The Texas Supreme Court has historically regarded these immunity principles as also barring suits to cancel or nullify a contract made for the benefit of the state. See W.D. Haden Co., 308 S.W.2d at 841 ("'There is a clear distinction between a suit against an officer for a wrong committed by him in the name of the state, and suits brought against an officer to prevent the exercise by the state through such officer of some act of sovereignty, or suits against an officer or agent of the state to enforce specific performance of a contract made for the state, or to enjoin the breach of such contract, or to recover damages for such breach, or to cancel or nullify a contract made for the benefit of the state.'") (emphasis added) (quoting Imperial Sugar Co. v. Cabell, 179 S.W. 83, 89 (Tex. Civ. App.-Galveston 1915, no writ).[45]

         Plaintiffs suggest that we should disregard the City's execution of the contract with Taser-in effect, view matters prospectively from a point in time preceding that event-in light of accompanying conduct by the City and its legal department that Plaintiffs condemn as further indicia of "corruption." Plaintiffs explain that after Utility filed its original petition, it gave notice to the City of its impending request for a temporary restraining order "and sought to cooperatively schedule a hearing date, as required by the Trial Court." But before the hearing could be held, according to Plaintiffs, the City or its lawyers took extraordinary measures to "hurriedly" execute the contract through a "midnight signing" in an effort to moot the case and thwart judicial jurisdiction and remedy.[46] We are not unsympathetic to Plaintiffs' frustration, but we are unpersuaded that any such conduct affects application of immunity doctrine under the controlling jurisprudence. The Texas Supreme Court has instructed us that the prospective-versus-retrospective distinction is "measured from the date of injunction, "[47] and it is undisputed that the City-Taser contract came earlier, whatever one thinks of the City Defendants' actions to bring about that result. Nor has the high court recognized (or at least not yet) any exception or limitation to immunity based on this or similar "bad conduct."[48] And even if we were to disregard the contract's execution for the reasons Plaintiffs cite, no such rationale would alter the retrospective nature of their challenges to the underlying Council vote to award the contract to Taser.

         In sum, Plaintiffs can establish the district court's subject-matter jurisdiction to adjudicate their claims only through reliance on some legislative waiver of immunity.

         To what extent do Plaintiffs' claims come within a legislative waiver of immunity?

         It is the Legislature's sole prerogative to decide whether, to what extent, or with what conditions or procedures immunity should be waived, and we are to defer to those judgments.[49]Likewise, we are to discern legislative intent to waive immunity only when "expressed in 'clear and unambiguous language'"[50] and accordingly must read statutory immunity waivers narrowly.[51] The meaning and scope of statutory immunity waivers, as with other statutes, are questions of law that we consider de novo.[52]

         The sole legislative immunity waiver on which Plaintiffs rely, aside from the UDJA's limited waiver that would permit recovery of attorney's fees incident to a substantive claim under that statute, [53] is Section 252.061 of the Local Government Code.[54] As previously indicated, Section 252.061 creates a right of action that is made subject to three important requirements and limitations. First, Section 252.061 authorizes a claim for relief on grounds that "the contract [was] made without compliance with this chapter."[55] Second, Section 252.061 authorizes the action to be brought only by two categories of potential plaintiffs: (1) "any property tax paying resident of the municipality, " or (2) "a person who submitted a bid for a contract for which the competitive sealed bidding requirement applies, regardless of residency, if the contract is for the construction of public works."[56]Third, assuming an eligible plaintiff can prove that "the contract [was] made without compliance with this chapter, " Section 252.061 prescribes that said contract is "void" and authorizes the following remedy: "the performance of the contract, including the payment of any money under the contract, may be enjoined."[57]

         Plaintiffs meet Section 252.061's first requirement, as their claims are founded on alleged violations of Chapter 252 in the City Defendants' contract award to Taser. But the vast majority of their claims fail to comport with either or both of the other two requirements.

         Only a single one of Plaintiffs' claims for relief seeks a remedy that Section 252.061 actually authorizes-their claim seeking an injunction barring the City Defendants from "performing any aspect of the Contract [with Taser]." In fact, the injunctive relief authorized by Section 252.061 does not extend even to the subject matter of the relief Plaintiffs seek in their second category of claims, which is calculated to secure the contract award for Utility upon the invalidation of the award originally made to Taser.[58] The injunctive relief authorized by Section 252.061 extends only to barring performance of an improperly procured contract and makes no mention of a further remedy of re-awarding the contract to any other vendor.

         We are to presume that the Legislature made such omissions deliberately, and we are bound to give effect to the policy judgments they reflect.[59] Nor can we conclude that this plain-language reading of Section 252.061 yields an "absurd result" the Legislature could not have intended.[60] Rather, it is consistent with a primary legislative focus on protecting municipal taxpayers from the costs, inefficiencies, or other evils that may flow from non-compliant procurement procedures-a goal that does not necessarily require or imply the provision of redress for aggrieved competing vendors.

         Section 252.061's remaining requirement is also consistent with this legislative focus-aside from a narrow class of aggrieved vendors seeking contracts for "construction of public works, " only resident municipal taxpayers are authorized to seek the injunctive relief authorized by the statute. And this requirement (which both sides have termed a "standing" requirement) independently presents further jurisdictional problems for Plaintiffs. Evans satisfies this "standing" requirement because he alleges (apparently without dispute) that he is a resident taxpayer of the City.[61] But Utility cannot ...


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