The opinion
ACCEPTED
15-25-00012-cv
FIFTEENTH COURT OF APPEALS
AUSTIN, TEXAS
7/10/2025 4:56 PM
No. 15-25-00012-CV CHRISTOPHER A. PRINE
CLERK
In the Fifteenth Court of Appeals FILED IN
Austin, Texas 15th COURT OF APPEALS
AUSTIN, TEXAS
7/10/2025 4:56:39 PM
State of Texas, the Texas Facilities Commission, the Texas Health and Human
CHRISTOPHER A. PRINE
Services Commission, Mike Novak, in his Official Capacity as Executive
Clerk
Director of TFC, and Rolland Niles, in his Official Capacity as Deputy Executive
Commissioner for the System Support Services Division of the Texas Health and
Human Services Commission,
Appellants,
v.
8317 Cross Park LLC,
Appellee.
On Appeal from Cause No. D-1-GN-23-006445
In the 98th Judicial District of Travis County, Texas
REPLY BRIEF OF APPELLANTS
Ken Paxton Kimberly Gdula
Attorney General of Texas Division Chief
General Litigation Division
Brent Webster
First Assistant Attorney General Jennifer Cook
Assistant Attorney General
Ralph Molina Texas Bar No. 00789233
Deputy First Assistant Attorney P.O. Box 12548/Mail Stop 019-1
General Austin, Texas 78711-2548
Tel: (737) 230-4700
Austin Kinghorn Fax: (512) 302-0667
Deputy Attorney General for Civil jennifer.cook@oag.texas.gov
Litigation
Counsel for Appellants
TABLE OF CONTENTS
TABLE OF CONTENTS ........................................................................................... 2
INDEX OF AUTHORITIES...................................................................................... 3
SUMMARY ............................................................................................................... 4
REPLY TO APPELLEE’S STATEMENT OF FACTS ............................................ 5
ARGUMENT ...........................................................................................................12
I. Contrary to Appellee’s assertion, the breach of contract claim at issue
does not come within Chapter 114 of the Texas Civil Practices &
Remedies Code. ..............................................................................................13
A. The contract at issue falls within Chapter 2167 of the Government Code,
which expressly involves two state agencies and the State of Texas as lessee; in
contrast, Chapter 114 requires a contract for a single state agency. .................13
1. Contracts covered by Chapter 114 and the waiver of immunity. ............13
2. Leases in Chapter 2167, such as this Lease. ............................................14
3. A Chapter 2167 lease is not covered by the waiver in Chapter 114. .......15
B. The allegations show the Lease was complied with so there is no breach of
any express provision. .......................................................................................17
II. Appellants acted in accordance with their authority under the law;
there is no viable ultra vires cause of action. .................................................19
A. Niles was not required to certify funds were available to pay for the Lease.
……………………………………………………………………………19
B. Novak and TFC properly terminated the Lease. ........................................23
1. There is no legal requirement that TFC or Novak do an independent
determination regarding HHSC’s funding. ....................................................23
2. There was no reason or authority for TFC or Novak to question HHSC’s
funding determination. ...................................................................................25
C. Appellee’s ultra vires claim fails because Appellee seeks retroactive relief.
……………………………………………………………………………27
III. Appellee’s UDJA claim is an improper attempt to circumvent
sovereign immunity’s bar on Appellee’s breach of contract claim. ..............28
CONCLUSION ........................................................................................................29
CERTIFICATE OF COMPLIANCE .......................................................................30
2
INDEX OF AUTHORITIES
Cases
City of El Paso v. Heinrich,
284 S.W.3d 366 (Tex. 2009) .........................................................................27
City of Houston v. Houston Mun. Emps. Pension Sys.,
549 S.W.3d 566 (Tex. 2018) .................................................................. 21, 27
City of Lancaster v. Chambers,
883 S.W.2d 650 (Tex. 1994) .........................................................................21
Progressive Cnty. Mut. Ins. Co. v. Caltzonsing,
658 S.W.3d 384 (Tex. App.—Corpus Christi-Edinburg 2022,
no pet.) ...........................................................................................................26
Southwest Pharmacy Sols., Inc. v. Texas Health & Human Servs.
Comm'n,
No. 03-11-00802-CV, 2013 WL 3336868, at *2 (Tex. App.—
Austin June 27, 2013, no pet.) (mem. op.) ....................................................27
Sw. Bell Tel., L.P. v. Emmett,
459 S.W.3d 578 (Tex. 2015) .................................................................. 20, 21
Tex. Dep't of Transp. v. Sefzik,
355 S.W.3d 618 (Tex. 2011) .........................................................................28
Town of Shady Shores v. Swanson,
590 S.W.3d 544 (Tex. 2019) .........................................................................12
Statutes
Act of May 27, 2023, 88th Leg., R.S., ch. 1170 § 1, art. II sec. 1 ..................... 21, 28
Tex. Civ. Prac. & Rem. Code § 114.001 .................................................... 13, 14, 16
Tex. Civ. Prac. & Rem. Code § 114.002 .................................................................13
Tex. Civ. Prac. & Rem. Code § 114.003 .................................................... 13, 14, 16
Tex. Civ. Prac. & Rem. Code § 114.004 .................................................................16
Tex. Gov’t Code § 2167.002....................................................................................15
Tex. Gov’t Code § 2167.055....................................................................... 14, 16, 23
Tex. Gov’t Code § 2167.101................................................................. 15, 19, 23, 24
Rules
1 Tex. Admin. Code §§ 115.20-.22 .........................................................................26
Texas Rule of Appellate Procedure 9.4 ...................................................................30
3
SUMMARY
First, in Appellee’s brief (“Appellee’s Brief”), Appellee’s claim that the
waiver in chapter 114 of the Civil Practice & Remedies Code (“Chapter 114”)
applies to the lease at issue (“Lease”) is without merit. Contracts covered by Chapter
114 involve one state agency that enters into a contract, is bound by the terms of the
contract, and receives the goods/services provided for in the contract; that is not the
situation in this case. As a result, Appellee cannot rely on Chapter 114 to overcome
Appellants’ sovereign immunity.
Second, contrary to Appellee’s assertion, there is no viable ultra vires claim
against either Roland Niles (“Niles”) of the Texas Health and Human Services
Commission (“HHSC”) or Mike Novak (“Novak”) of the Texas Facilities
Commission (“TFC”). HHSC, within its authority, made prudent decisions to ensure
future costs were covered; such decisions involved complicated analysis of
numerous variables and unknown future contingencies. As part of that evaluation,
Niles, within HHSC’s discretion, did not certify funds were available for the Lease.
TFC did exactly as required when an agency, HHSC in this case, informs TFC funds
are not available and does not certify funds are available—it terminated the Lease
on behalf of the State.
Third, Appellee’s attempt to use the Uniform Declaratory Judgment Act
(“UDJA”) to circumvent sovereign immunity also fails. This is nothing more than a
4
breach of contract action which is barred by sovereign immunity; there is no basis
or jurisdiction for a private party to request a declaration that a general
appropriations bill, which does not mention that party at all, entitled that party to
funds—all in support of a barred breach of contract claim.
REPLY TO APPELLEE’S STATEMENT OF FACTS
Appellee claims there is no possible way HHSC could have determined it had
insufficient funds to fund the Lease. A review of undisputed facts ignored by
Appellee shows the complexity involved, the many variables involved and the
uncertainty involved due to unknown future contingencies.
As Appellee notes, in September 2022, HHSC provided an appropriations
request to the legislature for fiscal year 2024 (“FY24”) and fiscal year 2025
(“FY25”) (collectively the “Biennium”). Appellee’s Brief at 15. In making this
request, HHSC necessarily had to make projections based on unknown future
conditions and costs for FY 24 and FY 25 that were not yet fixed in 2023.
In HHSC’s base appropriations request for rent, HHSC asked for
$105,369,343 for FY24 and $105,245,466 for FY25. See 3 RR at 194.1 As part of its
requests for exceptional items, HHSC asked for additional amounts for rent:
$29,601,496 for FY24 and $41,826,148 for FY25. 3 RR 963.
1
References to the clerk’s record will be “CR at [page no(s).].” References to the reporter’s record
will be “[volume no.] RR at [page no(s).].”
5
HHSC’s comments regarding its exceptional item request for rent reflects the
complexities, the many variables, and the future uncertainties involved. For this
additional rent request, HHSC states:
The first component is for leases. HHS has experienced a steady
increase in lease costs from FY 2017 and costs increased significantly
from $93.9 million in FY 2021 to an estimated $102.2 million in FY
2022. The increase in lease costs has required HHSC to reduce support
costs including onsite security and monitoring, custodial services,
building maintenance, pest control, HVAC and plumbing services.
HHSC does not have the ability to absorb further cost increases without
closing public facing offices. This item includes an assumed 9.9% year-
over-year increase in the Consumer Price Index for the 2024-25
biennium.
Id. In this statement, HHSC explains lease costs have been increasing requiring
HHSC to reduce lease support costs. HHSC identified components of lease support
costs at issue to include:
Onsite security and monitoring
Custodial services
Building maintenance
Pest control
HVAC and plumbing services
Id. Significantly, Appellee ignores these lease support costs in its analysis. Appellee
tries to portray a simple math analysis. This is an example in which Appellee fails
to acknowledge there are multiple variables and the analysis can be complex. HHSC
explains it cannot absorb further support cost increases without shutting offices. Id.
As stated in the above quote, HHSC explains the calculation of its rent
exceptional item request includes an “assumed 9.9% year-over-year increase in the
6
Consumer Price Index for the 2024-25 biennium.” Id. This number is significant
because it reflects the financial environment at the time HHSC was evaluating its
funding. HHSC notes in its request that “Each Lease permits a Consumer Price
Index (CPI) escalation clause that will allow the lessor to request an increase
yearly.” Id. at 964. In fact, there were CPI escalation increases as part of this original
Lease. See, e.g., 3 RR 2019-21, 2028. These clauses allow for annual rent increases
based on the CPI, to be determined on each anniversary of the lease commencement,
which would be different for each lease. This is another example of a complex and
uncertain variable ignored by Appellee, that must be considered in HHSC’s analysis
when reviewing all leased properties occupied by HHSC and available funding.
In its appropriations request, HHSC noted as of August 2022, “CPI in Texas
increased by 9.9% over the previous year.” 3 RR at 964. During this timeframe, there
had been recent historically significant increases in the CPI. In 2021, 2022 and the
beginning of 2023, the CPI reflects significant increases compared to other times. In
2022 particularly, there were annual increases of up to 9.8%, which is much higher
compared to other times, such as 1.6% in January 2021; the graphic below shows
7
the historically high CPI annual percentage increases of 2022:
3 RR at 8 (a contractual provision referencing the CPI and www.bls.gov).2 HHSC’s
exceptional item request for additional rent based on a 9.9% annual CPI increase
reflected a real concern regarding these historically high increases and the
uncertainty of whether these increases would continue. This impacted virtually all
leases for properties occupied by HHSC.
2
The CPI-W, U.S. City Average, All Items index is used, which is the same index used in this
example lease.
https://www.bls.gov/regions/mid-atlantic/data/consumerpriceindexhistorical_us_table.htm.
8
Appellee ignores the fact that when making decisions about available funding,
the decisionmaker is trying to predict the future; actual amounts ultimately spent
years later is information unknown at the time of making the decision. In fact, in
order to prevail on any claims (breach of contract or ultra vires), one hurdle Appellee
fails to address is that Appellee would need to prove these state officials knew the
future financial situation when making decisions about future funding availability—
Appellee would have to prove the state actors knew the future. This, of course, is
impossible.
In its appropriations request, HHSC identified other uncertainties and
concerns about funding. HHSC anticipated having to request new leases to replace
older leases and anticipated “new facility costs will be higher per square foot.” 3 RR
at 964. HHSC further explained, “the probability of additional facility replacements
occurring in the future is high” because some locations are old, and HHSC’s business
processes change over time. Id. This is another potentially high-cost contingency
HHSC needed to be prepared for that Appellee ignores.
When the amounts of all HHSC requests for leases are viewed in total (by
adding the base rent request plus the exceptional item rent request), HHSC requested
$134,970,839 for FY24 and $147,071,614 for FY25.
On May 27, 2023, the legislature passed the appropriations bill and even
though it was not final, HHSC was going to receive less than its requested amounts.
See Appellee’s Brief at 17. HHSC received $118,826,243 for FY24 and
$119,751,160 for FY25. Id. The breakdown is as follows:
9
Source of funds FY 2024 FY 2025
Base rent request $105,369,343 $105,245,466
Exceptional item rent request $29,601,496 $41,826,148
Total requested $134,970,839 $147,071,614
Amount appropriated $118,826,243 $119,751,160
Difference between request and
-$16,144,596 -$27,320,454
appropriations
So, one of Appellee’s premises—that HHSC received more than it requested—is not
correct. HHSC received less. In its exceptional item request, HHSC informs the
legislature it may have to close offices. 3 RR 963. The request was based on actual
CPI increases at the time. This request cannot be disregarded.
Appellee asserts the Lease termination during this timeframe could not have
had any merit. Yet, decisions about funds available are made before the funds are
spent and with many considerations, such as the support costs and the need to
upgrade old leases to newer facilities discussed above. Again, in order for Appellee’s
theory to even hold water would require state decision-makers to know the future,
such as future CPIs; that is just not possible. It is clearly not a ministerial task; it
requires discretion because you are making complicated decisions about the future,
which is uncertain.
10
The funding decisions for FY24 leases in this case were being made in the
first half of 2023. Determining the adequacy of funding for future years is no
ministerial task—it takes judgement, and necessarily discretion.
Appellee claims HHSC was moving out of Appellee’s facility in January
2023. Appellee’s Brief at 16. Even taking Appellee’s claim as true, it is
unremarkable that HHSC would necessarily be evaluating leased properties and
making decisions about the future as needs arise.
TFC, consistent with its responsibility, sent Appellee a notice of termination
in a letter dated May 30, 2023, 2023 notifying Appellee that HHSC had directed
TFC to terminate the lease due to the unavailability of appropriated funds. 3 RR at
2074.
In July 2023, TFC, as part of its responsibility each biennium, requested
HHSC’s certification of current leases. 3 RR at 2270. Attached to TFC’s request is
a 5-page spreadsheet with a list of numerous leases all over the state totaling
approximately 3,365,355 square feet of leased space and for 13,629 full-time
employees. Id. at 2275.
HHSC responded by certifying all but five. 3 RR at 2276. Appellee does not
take into consideration that many leases in many locations all over the state were
considered and that five were not certified, not just Appellee’s Lease. Appellee’s
claim that its Lease was required to be funded ignores the complexities involved.
11
Appellee asserts Appellants breached the Lease and acted ultra vires relying
on simple math, based on what was requested, what was approved and what was
spent. Appellee treats rent costs as fixed, but they were not. Appellee ignores
variables—like CPI escalation clauses, lease support services, and the future need
for newer facility leases. Additionally, Appellee assumes HHSC can predict the
future when making decisions; Appellee claims by seeing how much was spent on
“rent” in FY24, HHSC should have certified funds available for the Lease back in
2023. Of course, when HHSC has to make fiscal decisions that impact future years,
it does not have the ability to know the future.
ARGUMENT
Appellee bears the burden of establishing a valid waiver of sovereign
immunity. See Town of Shady Shores v. Swanson, 590 S.W.3d 544, 550 (Tex. 2019).
Appellee puts forth three arguments as to why sovereign immunity has been waived:
the Lease falls within Chapter 114’s waiver of sovereign immunity; Niles and
Novack acted ultra vires, for which there is no sovereign immunity bar; and the
claims fall within the UDJA’s waiver of sovereign immunity. As described below
and in Appellants’ Brief, each of these arguments fails, and the trial court erred in
denying-in-part the plea to the jurisdiction.
12
I. Contrary to Appellee’s assertion, the breach of contract claim at issue
does not come within Chapter 114 of the Texas Civil Practices &
Remedies Code.
This Lease does not fit within Chapter 114 and according to the allegations,
all lease provisions were complied with so there is no express provision alleged to
be breached.
A. The contract at issue falls within Chapter 2167 of the Government
Code, which expressly involves two state agencies and the State of
Texas as lessee; in contrast, Chapter 114 requires a contract for a
single state agency.
Reading the plain and express language of the statutes involved shows a lease
under Chapter 2167 is incompatible and does not fit within a contract under Chapter
114.
1. Contracts covered by Chapter 114 and the waiver of
immunity.
Contracts subject to a Chapter 114 challenge must state “the essential terms
of the agreement for providing goods or services to the state agency” and be executed
by a state agency for that state agency. See Tex. Civ. Prac. & Rem. Code §§ 114.001,
114.002, 114.003. In Chapter 114 claims, only one state agency is involved in
executing the contract and obtaining the goods and services under the contract. The
waiver of immunity in Chapter 114 states:
WAIVER OF IMMUNITY TO SUIT FOR CERTAIN CLAIMS. A
state agency that is authorized by statute or the constitution to
enter into a contract and that enters into a contract subject to this
chapter waives sovereign immunity to suit for the purpose of
adjudicating a claim for breach of an express provision of the contract,
subject to the terms and conditions of this chapter.
13
Tex. Civ. Prac. & Rem. Code § 114.003 (emphasis added). In Chapter 114, the
waiver of immunity is only by a state agency that enters into the contract.
Chapter 114 involves a contract with one state agency. The definition of
“contract subject to this chapter” is:
a written contract stating the essential terms of the agreement for
providing goods or services to the state agency that is properly
executed on behalf of the state agency.
Id. § 114.001(2) (emphasis added). According to this provision, the state agency that
executes the contract is also provided the goods and services of the contract. A
Chapter 2167 contract does not fit within these parameters. A contract under Chapter
2167, involves two different state agencies and the State as lessee.
2. Leases in Chapter 2167, such as this Lease.
Chapter 2167 states the State is the lessee—not a state agency. Section
2167.055 states:
CONTRACT FOR LEASE OF SPACE. (a) In a contract by the
commission [TFC] for the lease of space under this chapter, the state,
acting through the commission [TFC], is the lessee.
Tex. Gov’t Code § 2167.055(a) (emphasis added). In a Chapter 2167 lease, the State
is the lessee and a party to the lease while TFC acts as an agent for the State. While
the State is the lessee and TFC executes the contract on behalf of the State as lessee,
TFC does not occupy the leased premises or pay for the leased premises. Pursuant
to Section 2167.002, the state agency occupying the leased space pays the lease.
Section 2167.002 states:
14
PREREQUISITES FOR LEASING SPACE. (a) The commission may
lease space for a state agency in accordance with this chapter and the
agency's specifications if: (1) state-owned space is not otherwise
available to the agency; and (2) the agency has verified it has money
available to pay for the lease.
Tex. Gov’t Code § 2167.002. Additionally, Section 2167.101 provides:
CERTIFICATION OF AVAILABLE MONEY. A state agency
occupying space leased under this chapter shall certify to the
commission [TFC], at least 60 days before the beginning of each fiscal
biennium during the lease term, that money is available to pay for the
lease until the end of the next fiscal biennium.
Tex. Gov’t Code § 2167.101. According to these provisions, it is the occupying
agency who pays for the lease and is required to certify if money is available before
each fiscal biennium. In this case, HHSC is the occupying agency. While HHSC
pays for the lease from its budget, HHSC is not a party to the lease contract. Under
the scheme in Chapter 2167, the legislature chose to make the State of Texas the
lessee (not a state agency), have one state agency (TFC) execute and oversee the
lease contracts on behalf of the State lessee, and inure to the benefit of a second
occupying state agency (HHSC), which is not a party to the lease. Such a statutory
scheme and type of contract is inconsistent with the waiver of sovereign immunity
in Chapter 114.
3. A Chapter 2167 lease is not covered by the waiver in Chapter
114.
HHSC never entered into the Lease and thus by the express terms of the
statutory waiver, it does not apply to HHSC. It also does not apply to TFC because
15
TFC executes the contract not as a party to the contract because Chapter 2167 makes
clear the State is the lessee and thus the party to the contract—not TFC.
Under Chapter 2167, the legislature expressly chose to make the State, not a
state agency, the lessee. Tex. Gov’t Code § 2167.055. TFC acts on behalf of the
State, as lessee. TFC does not execute the contract for itself and does not receive any
goods or services provided in the contract. Id. TFC’s actions in signing the contract
are for the benefit of the State, as lessee. So, the waiver in Chapter 114 does not
apply to TFC.
This also makes sense as TFC does not budget for the Chapter 2167 leases
and does not have funds allocated to pay for any goods and services provided under
these lease contracts; it is the occupying agency who pays rent in Chapter 2167 lease
contracts. Were TFC held liable under Chapter 114, one of the main components
that could be recovered is “the balance due and owed by the state agency under the
contract.” Tex. Civ. Prac. & Rem. Code § 114.004(a)(1). As a result, if Chapter 114
were held applicable to TFC for lease contracts, TFC could be responsible for
amounts owed by the occupying agency, which was clearly not the intent of the
legislature.
Chapter 114 also does not apply to entities who are not a party to the contract,
such as TFC and HHSC. The legislature chose in Chapter 2167 to make the State,
not one of its agencies, the lessee and party to the contract. In Chapter 114, the
waiver of immunity only applies when a state agency enters into a contract. Tex.
Civ. Prac. & Rem. Code §§ 114.001(3), .003. There is no provision waiving
sovereign immunity when the State of Texas is the party to the contract. There is
16
similarly no provision waiving sovereign immunity for an agency that is not a party
to the contract. The legislature used express language in making the State the lessee
in Chapter 2167 and waiving sovereign immunity for only state agencies in Chapter
114. Because the State is not a state agency, and neither HHSC nor TFC are parties
to the contract, the waiver of immunity in Chapter 114 does not apply to them. While
Appellee attempts to minimize these distinctions by creating terms to collectively
refer to the State, HHSC and TFC, these distinctions are real and meaningful.
B. The allegations show the Lease was complied with so there is no
breach of any express provision.
Additionally, Chapter 114 does not apply because there was no breach of any
express provision as required. Tex. Civ. Prac. & Rem Code § 114.003. According to
the allegations and the record, Appellants complied with the Lease. Appellee’s assert
a breach of contract claim. The Lease provisions required monthly rent and provided
for termination if appropriated funds were unavailable. 3 RR at 2015. While there is
a provision that requires monthly rent, no rent is due if the lease is terminated. Id.
Appellee acknowledges the steps that were taken to terminate in accordance with the
Texas Government Code and terms of the Lease. Appellee’s Brief at 16-18. HHSC
evaluated its appropriated funds, determined it did not have the continuation of funds
from the legislature to pay for the Lease, and did not certify that funds were
available. 3 RR at 2074, 2276. TFC notified Appellee of termination due to the lack
of appropriated funds. Id. at 2074. To the extent Appellee is relying on what it deems
an invalid termination, all steps under the contract and statutes for termination
occurred. Id. at 2015, 2074, 2276. However, in Appellee’s opinion, HHSC was
17
incorrect in exercising its business judgment and should have certified the funds for
Appellee’s Lease because there was no justification for HHSC not to certify. But
Appellee does not get to substitute its business judgment for that of the agency. As
discussed, there are many variables and complexities involved.
Importantly, HHSC’s decision involved assessing what may happen in the
future, factoring in items such as the number of leases involved, lease support costs,
and CPI rent increases, for example—it would be impossible in this complex
scenario to find HHSC was required to certify funds were available to pay for this
particular Lease. Because there could be no showing the termination was invalid,
and all the steps required for termination occurred, there is no express provision that
could have been breached. To the extent Appellee relies on the breach of the rental
payment obligation provision, Appellee’s argument fails because the lease did not
require rental payments after the termination.
Further, there is no express provision HHSC or TFC could have breached
because they were not parties to the contract. TFC did not breach any express
provision of the lease; it acted to terminate the lease ono behalf of the State once the
occupying agency notified it that funds were not available and did not certify funds
were available. This is exactly what TFC was supposed to do. Because there is no
express provision that was breached according to the allegations, for this additional
reason, this Lease does not come within Chapter 114.
18
II. Appellants acted in accordance with their authority under the law; there
is no viable ultra vires cause of action.
Appellee claims Niles from HHSC acted ultra vires by failing to certify there
were funds available to pay the Lease and that Novak of TFC acted ultra vires
because he had no authority to terminate the lease. However, as discussed below and
in Appellants’ Brief, the ultra vires claims against Niles and Novak are without
merit.
A. Niles was not required to certify funds were available to pay for the
Lease.
Chapter 2167 requires a state agency occupying leased space to certify
whether money is available to pay leases before the next fiscal biennium. Tex. Gov’t.
Code § 2167.101. Specifically, this provision states:
CERTIFICATION OF AVAILABLE MONEY. A state agency
occupying space leased under this chapter shall certify to the
commission [TFC], at least 60 days before the beginning of each fiscal
biennium during the lease term, that money is available to pay for the
lease until the end of the next fiscal biennium.
Id. Implicit within this provision is a requirement that the state agency determine
whether money is, in fact, available to pay for the lease through the end of the next
fiscal bienniumobviously, if the funds were not available to the occupying agency,
then the agency would not certify and would not be required to certify. Certainly,
the legislature would not want an agency to certify available funding knowing the
appropriations received would not be sufficient to cover all expenses. Nevertheless,
Appellee argues the funds were available and Niles “refused to perform the
19
ministerial duty” to certify that money was available for the Lease. Appellee’s Brief
at 42. Appellee appears to misunderstand how state agencies receive appropriations
from the legislature and mischaracterizes this determination as “ministerial.”
Appellee fails to account for other leasing expenses (lease support costs, future
needs, etc.) and variables that necessarily required deliberation and discretion by the
agency.
Appellee relies on faulty premises such as HHSC received more than it
requested for lease rent. That is incorrect. HHSC received $16 million less than it
requested for FY24 and $27 million less than it requested for FY25.
Additionally, the monthly lease costs were not fixedlease support costs
fluctuate over time. Monthly rent for each lease is evaluated annually for increases
based on the CPI increase at the time. Despite Appellee’s belief to the contrary,
certifying whether funding was available for any particular lease did not involve a
line-by-line comparison and was more complex than simply adding up the total
leases to see if funding would cover rent.
For the same reasons that it was not readily apparent whether funding would
or would not be available for any given lease, determining whether to certify funds
for Appellee’s lease was not a purely ministerial act. To constitute a purely
ministerial act, the law must “prescribe[] and define[] the duties to be performed
with such precision and certainty as to leave nothing to the exercise of discretion or
20
judgment.” Sw. Bell Tel., L.P. v. Emmett, 459 S.W.3d 578, 587 (Tex. 2015) (quoting
City of Lancaster v. Chambers, 883 S.W.2d 650, 654 (Tex. 1994)). “Conversely,
‘discretionary acts’ are those that ‘require the exercise of judgment and personal
deliberation.’” City of Houston v. Houston Mun. Emps. Pension Sys., 549 S.W.3d
566, 576 (Tex. 2018) (quoting Sw. Bell, 459 S.W.3d at 587).
The General Appropriations Act does not list out each individual lease
wherein HHSC occupies space, nor does it provide a detailed mandate for how
appropriated funds should be spent. See Act of May 27, 2023, 88th Leg., R.S., ch.
1170 § 1, art. II sec. 1 at II-42. Instead, funds are earmarked for general areas such
as “salaries and wages,” “utilities,” “travel,” and “rent – building,” to name a few.
Id. And for good reason. Over a biennium, circumstances may change. For example,
employees were returning to the office from the pandemic, particularly in client-
facing programs; utilities for those offices were likely to be higher than other offices
and HHSC needed the flexibility and discretion to appropriate funds for utilities to
those offices with higher usage. The legislature didn’t intend to micromanage how
funds earmarked for utilities would be spent at any particular office just like it didn’t
mandate spending of “rent-building” funds for any one particular lease. The
legislature understood that some level of discretion would be necessary for HHSC
to efficiently operate as a steward of taxpayer money. Because the determination as
to whether the appropriated funds were sufficient to cover all lease expenses is not
21
prescribed with such precision as to leave nothing to the exercise of discretion and
judgment by HHSC, the certification of available funds cannot be a purely
ministerial act and thus, does not give rise to an ultra vires action.
Appellee relies on a false premise that HHSC knew what future lease costs
were going to be when it notified TFC it was terminating the lease. Practically all
leases had CPI escalations clauses, so this premise is false. Appellee claims HHSC
was appropriated more than it requested and more than it could have estimated. This
is false. 3 RR at 194, 963; Appellee’s Brief at 17 (showing the difference between
what was requested and what was appropriated was $16 million less than requested
for FY24 and $27 million less than requested for FY25). The CPI was increasing
significantly during the time period before these decisions were made. Given the
increasing costs, some would say it was prudent for HHSC to start planning on how
to address the sky-rocketing lease costs and possibility that these costs would keep
increasing.
Appellee also asserts HHSC began moving out of the Lease facilities in March
2023. See, e.g., Appellee’s brief at 16. This is nothing more than a red herring.
Importantly, decisions ensuring allocated funds are available for leases are only
made once every two years, prior to each legislative biennium. It makes sense HHSC
would be planning and evaluating all contingencies and making necessary
determinations as needs arise. In early 2023, the CPI had been skyrocketing in
22
historic proportions. HHSC’s appropriation request shows HHSC had serious
concerns about the increasing lease and lease support costs.
Niles and HHSC did exactly what it was required to do within its discretion
under the law. While Appellee does not like what HHSC did and does not agree with
the decision, it was within Niles and HHSC’s discretion. Appellee’s allegations do
not rise to a viable ultra vires claim against Niles.
B. Novak and TFC properly terminated the Lease.
Appellee asserts Novak was not authorized to terminate the lease and doing
so was ultra vires. Appellee’s Brief at 37-41. However, Novak, acting on behalf of
the State through his position at TFC, did have authority as well as the obligation to
terminate the Lease, and he properly did so.
1. There is no legal requirement that TFC or Novak do an
independent determination regarding HHSC’s funding.
Chapter 2167 provides that, “A lease contract is contingent on the availability
of money appropriated by the legislature to pay for the lease.” Tex. Gov’t Code
§ 2167.055(e). Because the Texas legislature appropriates funds every two years, it
is unknown if the legislature will appropriate funds to cover the lease beyond the
current funding biennium. In order to address the fact funds are appropriated every
biennium, Chapter 2167 requires occupying state agencies to certify funds are
available during the lease terms and before each biennium. Tex. Gov’t Code
§ 2167.101. Specifically, section 2167.101 states:
CERTIFICATION OF AVAILABLE MONEY. A state agency
occupying space leased under this chapter shall certify to the
23
commission, at least 60 days before the beginning of each fiscal
biennium during the lease term, that money is available to pay for the
lease until the end of the next fiscal biennium.
Id. Pursuant to this section, a state agency is required to certify during the lease term
for each biennium. According to Chapter 2167, a lease contract is contingent on the
availability of funds to pay for the lease and a certification that funds are available
is required by the occupying agency for every biennium after the lease is executed
during the term of the lease. These statutes reflect an intent that the State not enter
into a lease or continue in a lease unless the occupying state agency determines and
certifies funds are available.
Novak actually had an obligation under the statute to terminate the Lease on
behalf of the State. Appellee claims it proved there was funds appropriated for the
Lease and suggests Novak was aware of this. Appellee’s Brief at 38-39. There is no
statutory or regulatory requirement that TFC make an independent determination
regarding the occupying agency’s available funds. Novak was not required to
familiarize himself with the occupying agency’s funding concerns and analysis nor
was he required to conduct his own independent analysis. There is no requirement
in the law for TFC to do this. What is clear under the law is that it is the occupying
agency that is responsible for determining whether funding is available to that
occupying agency. See Tex. Gov’t Code § 2167.101. Contrary to Appellee’s
assertion to the contrary, the legislature chose not to require TFC to conduct an
independent and duplicate determination. When funding is not certified by the
occupying agency, there are no funds to continue the lease and TFC has an obligation
under the statute and the lease to terminate for a lack of funding. Thus, Novak’s
24
action does not amount to a viable claim that he was acting ultra vires when he did
not second guess HHSC’s determination.
2. There was no reason or authority for TFC or Novak to
question HHSC’s funding determination.
Putting aside that Novak had no obligation under the law to complete his own
independent analysis, for the same reasons Niles was within his authority in not
certifying funds were available, Novak had no authority or reason to second guess
HHSC or intervene and deny HHSC’s request to terminate.
Appellee relies on the idea Niles certified “$93 million in annual lease
obligations for the next biennium” and terminated the Lease even though HHSC was
appropriated $118 million for FY 2024. Appellee’s Brief at 18. Yet, an actual review
of the information available at the time these decisions were made shows it was not
that simple.
Appellee’s claim that Niles certified $93 million in lease obligations
misconstrues what the record reveals that number actually reflected. Specifically,
this $93 million figure comes from a July 27, 2023 letter HHSC wrote in response
to a letter request from TFC to certify current leases. 3 RR at 2276. TFC’s letter
attached a spreadsheet of all leases HHSC had. Id. at 2270-75. In HHSC’s response
letter, Niles reported five leases will no longer be active. Id. at 2276. Niles attached
a spreadsheet to the letter, without the five leases that were not being certified, and
estimated that the annual amount of those remaining leases for FY24 was $93.7
million. Id. at 2276-2299. However, this was only an estimate. First, the leases,
included CPI escalation clauses. Id. at 964 (HHSC appropriations request says all
25
leases had these clauses). As discussed above, these clauses allow for annual rent
increases based on the CPI. The amount in this letter does not include anticipated
lease support costs or potential new lease needs due to old facilities. Since a
certification is committing that amounts will be available in the future, taking into
account potential unknown contingencies, it is prudent to leave room for
contingencies when predicting and committing to future funds. HHSC knew it had
to deal with many variables and future contingencies, so it was not ultra vires to
exercise discretion, after consideration of relevant factors, to certify less than the
total amount appropriated. Neither TFC nor Novak had responsibility to do its own
evaluation of HHSC’s funding.
Moreover, TFC acting as an agent of the State could not continue the Lease if
the occupying agency does not certify funds were available. TFC does not have
funding to pay for the Lease and has no control over HHSC regarding payment for
the Lease. Termination by TFC via Novak was certainly in compliance with the law.
Appellee’s reference to TFC’s rules at 1 Tex. Admin. Code §§ 115.20-.22 are
irrelevant because these 2016 regulations were not in existence at the time the 2001
Lease was entered into so these regulations do not apply to this Lease. See
Progressive Cnty. Mut. Ins. Co. v. Caltzonsing, 658 S.W.3d 384, 393 (Tex. App.—
Corpus Christi-Edinburg 2022, no pet.).
26
C. Appellee’s ultra vires claim fails because Appellee seeks retroactive
relief.
Appellee claims it seeks prospective relief only but in a practical sense, that
is clearly not the case. Appellee requests an injunction that, if granted, necessarily
requires retroactive relief.
Appellee wants to “retract the wrongful termination of the Lease”in other
words, Appellee seeks to undo an alleged wrongful act in the past. Appellee’s Brief
at 52. This is a request to undo an action that has already occurred. Texas courts have
consistently held that “[i]f the injury has already occurred and the only plausible
remedy is monetary damages, an ultra vires claim will not lie.” City of Houston v.
Houston Mun. Emps. Pension Sys., 549 S.W.3d 566, 576 (citing City of El Paso v.
Heinrich, 284 S.W.3d 366, 374 (Tex. 2009)). The termination of the Lease happened
in the past.
HHSC vacated the premises, and Appellee has had the use of its facility since
September 1, 2023. There is no allegation Appellants are continuing to terminate
Appellee’s leases without authorization. There is no allegation Appellants continue
to fail to certify funds when they are so required. This entire lawsuit concerns one
instance and one lease from the past; it is not an ongoing violation. Appellee seeks
to improperly “undo” prior acts. See Southwest Pharmacy Sols., Inc. v. Texas Health
& Human Servs. Comm'n, No. 03-11-00802-CV, 2013 WL 3336868, at *2 (Tex.
App.—Austin June 27, 2013, no pet.) (mem. op.). For these reasons, Appellee’s ultra
vires claims against Niles and Novak fail and must be dismissed for lack of
jurisdiction.
27
III. Appellee’s UDJA claim is an improper attempt to circumvent sovereign
immunity’s bar on Appellee’s breach of contract claim.
This is a breach of contract case, pure and simple, which is barred by
sovereign immunity. Appellee, aware of this bar, seeks to circumvent sovereign
immunity with a UDJA claim asking this Court to declare what the legislature did
notthat funds were specifically allocated for Appellee’s Lease.
Appellee fails to identify precedent showing a private party can sue a state
agency for a declaration to establish that the private party was specifically allocated
funds in a general allocation bill.3 In fact, the allocation bill does not mention
Appellee at all. Act of May 27, 2023, 88th Leg., R.S., ch. 1170 § 1, art. II sec. 1 at
II-42. Appellee is impermissibly attempting to get a judicial interpretation of a
provision in the Legislature’s allocation of funds to state agencies.
Additionally, the UDJA does not enlarge the trial court’s jurisdiction and
cannot be used to circumvent sovereign immunity in a breach of contract claim. See
Tex. Dep't of Transp. v. Sefzik, 355 S.W.3d 618, 622-23 (Tex. 2011). Here, the UDJA
request is solely in support of Appellee’s breach of contract claim. Appellee seeks
the declaration in an attempt to show Appellants breached the Lease. Since there is
no waiver of sovereign immunity for Appellee’s breach of contract claim, the UDJA
cannot be used to establish a waiver of sovereign immunity as to Appellee’s claims.
3
Appellants acknowledge that the General Appropriations Act does allocate funds to specific
individuals for settlements and judgments, but such appropriations are not applicable or relevant
here.
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CONCLUSION
For these reasons, Appellants respectfully request that this Court reverse the
partial denial of Appellants’ plea to the jurisdiction and dismiss with prejudice
Appellee’s claims against all Appellants.
Respectfully submitted,
KEN PAXTON
Attorney General of Texas
BRENT WEBSTER
First Assistant Attorney General
RALPH MOLINA
Deputy First Assistant Attorney General
AUSTIN KINGHORN
Deputy Attorney General for Civil Litigation
KIMBERLY GDULA
Chief, General Litigation Division
/s/ Jennifer Cook
JENNIFER COOK
Texas Bar No. 00789233
Assistant Attorney General
P.O. Box 12548/Mail Stop 019-1
Austin, Texas 78711-2548
Tel: (737) 230-4700
Fax: (512) 302-0667
jennifer.cook@oag.texas.gov
Counsel for Appellants
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/s/ Jennifer Cook
Jennifer Cook
Assistant Attorney General
30
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