The opinion
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION
ANTHOLOGY, INC.,
Plaintiff,
v. No. 4:24-cv-00279-P
TARRANT COUNTY COLLEGE DISTRICT,
Defendant.
MEMORANDUM OPINION & ORDER
Before the Court is Defendant Tarrant County College District’s
(“TCCD”) Motion to Dismiss Plaintiff’s Complaint for Lack of Subject
Matter Jurisdiction and Failure to State a Claim. ECF No. 20. For the
following reasons, the Court will GRANT TCCD’s Motion to Dismiss.
BACKGROUND
Plaintiff Anthology, Inc. is a notable provider of higher education
software solutions, established through the merger of several prominent
education technology companies. TCCD, a public community college
system in Tarrant County, Texas, offers academic and technical
education services to over 100,000 students annually through six
campuses and various online programs.
On June 1, 2022, Anthology and TCCD entered into a 10-year Master
Agreement under which Anthology was to provide TCCD with
Enterprise Resource Planning (ERP) products and services,
encompassing the design, building, and implementation of the ERP
project. The agreement projected revenue generation in the tens of
millions for Anthology over its term, with TCCD agreeing to remunerate
Anthology approximately $42 million for the ERP project, plus an
annual fee for certain services.
In October 2023, TCCD exercised its contractual right under Section
8.2 of the Master Agreement to terminate the contract without cause.
TCCD further asserted that it would not pay the early termination fee,
contending that such a fee contravened Texas law and the intent of the
parties as embodied in the Master Agreement. Attempts at informal
dispute resolution were unsuccessful.
Consequently, on March 27, 2024, Anthology initiated this action,
seeking a judicial determination regarding the early termination fee and
damages for breach of contract. Anthology alleges that TCCD breached
the Master Agreement by terminating the contract without cause and
failing to pay the remaining compensation due under the contract, which
amounts to approximately $22,923,192.64. Anthology contends that the
termination fee is owed under the contract’s terms and seeks damages
for the full remaining amount of the contract.
In response, TCCD moved to dismiss the lawsuit in May 2024,
invoking sovereign immunity and other grounds. That Motion is now
ripe for the Court’s review.
LEGAL STANDARD
“Federal courts are courts of limited jurisdiction” that “possess only
that power authorized by the Constitution and statute, which is not to
be expanded by judicial decree.” Kokkonen v. Guardian Life Ins. Co. of
Am., 511 U.S. 375, 377 (1994). “A court must have the power to decide
the claim before it (subject-matter jurisdiction) and power of the parties
before it (personal jurisdiction) before it can resolve a case.” Lightfoot v.
Cendant Mortg. Corp., 580 U.S. 82, 95 (2017). Where the former is
absent, defendants may move to dismiss under Rule 12(b)(1). See FED.
R. CIV. P. 12(b)(1). “When a Rule 12(b)(1) motion is filed with other Rule
12 motions, the court first considers its jurisdiction.” McLin v. Twenty-
First Jud. Dist., 79 F.4th 411, 415 (5th Cir. 2023).
When evaluating subject-matter jurisdiction, the Court may consider
“(1) the complaint alone; (2) the complaint supplemented by undisputed
facts evidenced in the record; or (3) the complaint supplemented by
undisputed facts plus the court’s resolution of disputed facts.” Ramming
v. United States, 281 F.3d 158, 161 (5th Cir. 2001). In doing so, the Court
“accept[s] all well-pleaded factual allegations in the complaint as true
and view[s] them in the light most favorable to the plaintiff.” Abdullah
v. Paxton, 65 F.4th 204, 208 (5th Cir. 2023). Still, “the burden of proof
[is] on the party asserting jurisdiction.” McLin, 79 F.4th at 415 (citing
Ramming, 281 F.3d at 161).
Rule 12(b)(6) allows a defendant to move to dismiss an action if the
plaintiff fails to state a claim upon which relief can be granted. See FED.
R. CIV. P. 12(b)(6). In evaluating a Rule 12(b)(6) motion, the court must
accept all well-pleaded facts as true and view them in the light most
favorable to the plaintiff. See Inclusive Cmtys. Project, Inc. v. Lincoln
Prop. Co., 920 F.3d 890, 899 (5th Cir. 2019) (quoting Campbell v. Wells
Fargo Bank, N.A., 781 F.2d 440, 442 (5th Cir. 1986)). “Further, ‘all
questions of fact and any ambiguities in the controlling substantive law
must be resolved in the plaintiff’s favor.’” Id. (quoting Lewis v. Fresne,
252 F.3d 352, 357 (5th Cir. 2001)). However, courts are not bound to
accept legal conclusions couched as factual allegations as true. See In re
Ondova Ltd., 914 F.3d 990, 993 (5th Cir. 2019) (quoting Papasan v.
Allain, 478 U.S. 265, 286 (1986)). The well-pleaded facts must permit
the court to infer more than the mere possibility of misconduct. See Hale
v. King, 642 F.3d 492, 499 (5th Cir. 2011) (quoting Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009)). That is, the complaint must allege enough facts to
move the claim across the line from conceivable to plausible. See Turner
v. Pleasant, 663 F.3d 770, 775 (5th Cir. 2011) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). Determining whether the
plausibility standard has been met is a “context-specific task that
requires the reviewing court to draw on its judicial experience and
common sense.” Id. (quoting Iqbal, 556 U.S. at 663–64).
ANALYSIS
TCCD asserts that as an institution of higher education and a unit
of state government, it enjoys sovereign immunity, shielding it from
being sued without its consent. See ECF No. 20 at 11–12. TCCD
contends that Texas Government Code Chapter 2260 provides the
exclusive and required prerequisites for breach of contract claims
against units of state government. Id. Chapter 2260 mandates a specific
administrative process that must be followed before a contractor can
seek judicial redress. TEX. GOV’T CODE § 2260. This process includes: (a)
providing written notice of the claim; (2) engaging in a 270-day
negotiation period, filing a request for a contested case hearing before
an administrative law judge if the dispute is not resolved through
negotiation; and (3) requesting formal permission from the Texas
Legislature to sue if the damages exceed $250,000. Id. at § 2260, §§
2260.051(b), 2260.052, 2260.055, 2260.104, 2260.007, 2260.1.055.
Only after exhausting these administrative remedies can a party
seek legislative permission to sue a unit of state government. Id. at §§
2260.007, 2260.1055; TEX. CIV. PRAC. & REM. CODE § 107.001. TCCD
argues it qualifies as a unit of state government because it is an
institution of higher education. See TEX. EDUC. CODE § 61.003.08
(“‘Institution of higher education’ means any public technical institute,
public junior college, public senior college or university, medical or
dental unit, public state college, or other agency of higher education as
defined in this section.”); see also ECF No. 20 at 11. Anthology’s
agreement, as an independent contractor who entered into a contract
with TCCD—an institution of higher education—for goods and services,
thus falls within the scope of Chapter 2260. See ECF No. 22 at 2. TCCD
maintains that, since Anthology has not exhausted its administrative
remedies, it cannot be sued. See ECF No. 20 at 13–14.
On the other hand, Anthology contends that TCCD is subject to
Texas Local Government Code Chapter 271, which supersedes Chapter
2260 and explicitly waives sovereign immunity for breach of contract
claims involving local governmental entities. See ECF No. 18 at 19–21.
Anthology argues that TCCD should be classified as a local
governmental entity under this chapter, thus making it susceptible to
suit for breach of contract. Id. at 15. Anthology also asserts that Texas
Government Code Chapter 2260 does not apply to this dispute, arguing
instead that Chapter 2260 is intended for specific types of state
contracts and should not govern the current breach of contract claim. Id.
at 19–21. Anthology contends that their contract with TCCD does not
fall within the scope of Chapter 2260 as intended by the Texas state
legislature, see id. at 21, and that TCCD’s reliance on Chapter 2260
misinterprets the legislative framework intended to govern such
disputes, see id. at 20.
The Court must therefore determine whether Texas Government
Code Chapter 2260 or Chapter 271 of the Texas Local Government Code
applies to this contract.
The Court concludes that TCCD must be recognized as a “unit of
state government” under Chapter 2260. This classification mandates
strict adherence to the administrative processes prescribed by Chapter
2260 as a prerequisite to any judicial relief. See TEX. GOV’T CODE § 2260;
see also infra. The Texas Supreme Court, in In re City of Galveston,
reaffirmed that Chapter 2260 delineates the “exclusive and required
prerequisites to suit” against state entities, thereby precluding judicial
action absent full compliance. 622 S.W.3d 851, 855-56 (Tex. 2021).
Moreover, Galveston elucidates that Chapter 2260 encompasses “an
independent contractor who has entered into a contract directly” with a
unit of state government. Id. University systems, by statutory
definition, qualify as units of state government. See TEX. GOV’T CODE §
2260.001(3)–(4). Because Anthology is an independent contractor for
goods and services with a contractual relationship with a university
system—a unit of state government— it falls squarely within the ambit
of Chapter 2260. Therefore, the Master Agreement between the Parties
is governed by Chapter 2260, and Anthology must satisfy the procedural
requisites delineated therein before bringing suit.
Anthology’s assertions, suggesting that TCCD should be governed by
Texas Local Government Code Chapter 271, are unconvincing. The
cases cited by Anthology present facts that are not aligned with those of
the current case. See ECF No. 18 at 7–8. Anthology posits that TCCD is
susceptible to suit under Chapter 271, citing its status as a junior college
district allegedly in breach of contract, and references cases such as
Tercero v. Texas Southmost College District, 989 F.3d 291 (5th Cir.
2021), which are inapposite here. The Tercero case is distinguishable as
it concerned an employment dispute involving a former employee of the
university district, which explicitly falls outside the purview of Chapter
2260. Id. at 295. Whereas Anthology is an independent contractor—a
circumstance more alike the facts in Galveston which fall under Chapter
2260.
Although Anthology correctly notes that Chapter 271 was enacted to
permit suits against entities like TCCD in some situations, it overlooks
that Chapter 271 specifies that such entities must be “subject to this
subchapter.” Id. at 297. Texas courts have explicitly held that
“institutions of higher education” do not fall within the scope intended
by Chapter 271 in situations such as here. See Prairie View A&M Univ.
v. Dickens, 243 S.W.3d 732, 735 (Tex. App.—Houston [14th Dist.] 2007,
no pet.). In particular, the court in Dickens determined that the waiver
of sovereign immunity in Chapter 271 applies solely to “a local
governmental entity” and explicitly excludes “a unit of state
government,” such as TCCD. Id. Thus, the arguments advanced by
Anthology do not suffice to override the statutory framework set forth in
Chapter 2260.
The exclusive and required prerequisites under Chapter 2260, as
emphasized in Galveston and Dickens, precludes Anthology from
bypassing these procedural mandates, thereby necessitating the
dismissal of Anthology’s claims.
CONCLUSION
In light of the foregoing analysis, the Court concludes that Texas
Government Code Chapter 2260 governs the dispute between Anthology
and TCCD. The administrative remedies delineated in Chapter 2260 are
not merely procedural formalities but constitute essential prerequisites
to initiating a suit. Anthology’s failure to comply with these mandatory
steps, including the exhaustion of administrative remedies and the
potential necessity for legislative consent, precludes this Court from
exercising jurisdiction over its claims.
Accordingly, the Motion to Dismiss is GRANTED and this suit is
DISMISSED for lack of jurisdiction, as Anthology has not exhausted
the statutory prerequisites necessary to proceed with its breach of
contract action against TCCD.
SO ORDERED on this 14th day of June 2024.