the City of Fort Worth v. Janet Anne Lane

02-11-048-CV

COURT OF APPEALS

SECOND DISTRICT OF TEXAS

FORT WORTH

NO. 02-11-00048-CV

The City of Fort Worth

APPELLANT

V.

Janet Anne Lane

APPELLEE

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FROM THE 342nd

District Court OF Tarrant COUNTY

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MEMORANDUM

OPINION [1]

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Appellant

the City of Fort Worth brings this interlocutory appeal from the trial court’s

order denying in part its plea to the jurisdiction on the whistleblower claim

filed by Appellee Janet Anne Lane. In one issue, Fort Worth argues that Lane

did not establish a waiver of immunity under the Texas Whistleblower Act because

she did not make a good faith report of a violation of law. Because we hold that

Lane established a waiver of immunity under the Whistleblower Act, we affirm

the trial court’s order.

Background

Lane,

a licensed attorney, worked as an audit manager for Fort Worth’s internal audit

department. The city auditor at that time was Costa Triantaphilides.

As

part of her duties, Lane was assigned to draft a Request for Proposals (RFP) to

solicit competitive sealed proposals on a contract to perform a healthcare claims

audit. Before the RFP had been posted, Triantaphilides asked Lane for a draft

of the RFP. Triantaphilides told Lane that Garland Asher, a member of Fort

Worth’s Audit and Finance Advisory Committee, wanted to see the draft because

his friend wanted to bid on the project. Lane reported this conversation to

her immediate supervisor, Terry Holderman.

Fort

Worth issued the RFP on September 6, 2007. Healthcare Data Management, Inc. (HDM)

was among the companies that submitted a bid. Triantaphilides told Lane that

Asher wanted to see the bid from HDM. Lane objected to the request but

ultimately complied. Lane reported the conversation to Holderman.

In

May 2008, Lane called Fort Worth’s fraud hotline to report Triantaphilides’s

request of the RFP draft and his statement that Asher wanted to see HDM’s

proposal because she believed these acts violated the Texas competitive procurement

laws and the Texas Public Information Act. [2] This complaint was

investigated by Fort Worth’s police department. Lane also filed a complaint

with Fort Worth’s employee relations department. In April 2009, she reported the

same acts to the FBI.

The

employee relations department denied her complaint, and Lane’s appeal of that

denial was unsuccessful. The city manager terminated the police department’s

investigation. On August 13, 2009, Fort Worth terminated Lane’s employment.

Lane

filed suit against Fort Worth asserting a violation of the Whistleblower Act. She

alleged that she had been fired in retaliation for her reports of misconduct,

that she had in good faith reasonably believed that the acts reported had

violated the law, that she reported the activity to the Fort Worth police

department and the FBI, and that Fort Worth retaliated against her for her

report of the activity.

Fort

Worth filed a plea to the jurisdiction, alleging that a reasonably prudent

attorney would not have believed that the reported conduct violated Texas’s competitive

bidding laws or the Texas Public Information Act and that because Lane is an

attorney, her reports were therefore not made in good faith under the

Whistleblower Act. Fort Worth also alleged that its immunity had not been

waived by the Whistleblower Act for Lane’s report of an alleged violation of

the Public Information Act because the report had not been made to an appropriate

law-enforcement authority. Fort Worth alleged that a reasonably prudent

attorney would not have believed that either Fort Worth’s fraud hotline or the

FBI would have authority to enforce or investigate an alleged violation of the Public

Information Act.

The

trial court granted Fort Worth’s plea as to the part of Lane’s claim that was

based on her report of a violation of the Public Information Act and as to any

part of Lane’s claim based on her report to the FBI. The trial court denied

the plea as to Lane’s report to Fort Worth’s fraud hotline of a violation of

Texas’s competitive procurement laws. Fort Worth now appeals.

Standard

of Review

We

review a trial court’s ruling on a plea to the jurisdiction de novo. [3]

A plaintiff has the burden of alleging facts that affirmatively demonstrate

that the trial court has subject-matter jurisdiction. [4]

When a plea to the jurisdiction challenges the pleadings, a court looks at the

allegations in the plaintiff’s pleadings and accepts them as true. [5]

If, however, the plea to the jurisdiction challenges the existence of

jurisdictional facts, a court must also consider the relevant evidence

necessary to resolve the jurisdictional issues raised. [6]

When a jurisdictional challenge also implicates the merits of the plaintiff’s

claim, then the trial court considers the evidence submitted by the parties to

determine if a fact question exists. [7] If the evidence creates

a fact question about the jurisdictional issue, then the trial court cannot

grant the plea to the jurisdiction; instead, the trial court must leave the

fact issue for determination by the factfinder. [8] But if the evidence is

undisputed, or if the evidence does not raise a fact question on the

jurisdictional issue, the trial court rules on the plea to the jurisdiction as

a matter of law. [9]

The

Whistleblower Act

Texas’s

Whistleblower Act provides that a governmental entity may not terminate the

employment of a person who in good faith reports a violation of the law by the

government entity or another public employee to an appropriate law enforcement

authority. [10] The governmental

entity’s immunity is waived for a claim by the public employee alleging a

violation under the Whistleblower Act. [11]

The

Whistleblower Act requires the report to have been made “in good faith.” [12]

“Good faith” has both a subjective and objective component and is shown when “(1)

the employee believed that the conduct reported was a violation of law and (2)

the employee’s belief was reasonable in light of the employee’s training and

experience,” meaning that a reasonably prudent employee in similar

circumstances would have believed that the reported facts constituted a

violation of the law. [13]

Procurement

of Goods and Services by Municipalities

The

local government code imposes competitive requirements for certain purchases by

municipalities. [14] Chapter 252 provides

that before a municipality may enter into a contract that would require

spending more than $50,000 from municipal funds, the municipality must follow

one of the competitive procurement methods specified in the chapter. [15]

Section 252.022 states that the chapter does not apply to “a procurement for . . .

professional . . . services.” [16] Nothing in that section,

however, prohibits municipalities from using competitive bidding to procure

professional services. Chapter 252 does not define the term “professional

services.” [17]

Municipality

purchases are also governed by section 2254.003 of the government code. That

section provides that “[a] governmental entity may not select a provider

of professional services . . . or award a contract for the

services on the basis of competitive bids submitted for the contract or for the

services.” [18] Instead, the government

entity “shall make the selection and award . . . on the basis of

demonstrated competence and qualifications to perform the services; and . . .

for a fair and reasonable price.” [19] That chapter defines “professional

services,” and that definition includes services within the scope of the

practice of accounting as that practice is defined by state law. [20]

In

summary, for services defined as professional services under the government

code, municipalities may not use competitive methods to purchase those services

but instead must use the procedure set out in the government code. For

services that may be considered “professional services” as that term is used in

chapter 252 of the local government code but that do not fall within the

definition of professional services in the government code, a municipality is

not required to follow competitive methods to procure the services, but it is

not prohibited from using such procedures. [21]

Analysis

In

one issue, Fort Worth argues that because Lane did not have a good faith belief

that the conduct she reported violated the competitive procurement law,

immunity has not been waived. Fort Worth makes two main arguments under this

issue. First, it argues that professional services are exempt from competitive

procurement laws, that a city has discretion to treat some services as

professional services and thereby exclude their purchase from competitive

procurement procedures, and that because the evidence shows that Fort Worth

chose to treat the services here as professional services, their purchase was

exempt from competitive procurement laws.

In

support of its argument that it treated these services as professional services,

Fort Worth points out that the RFP in this case required the awardee to have

professional liability insurance, which indicated these were professional

services, and that the contract described the work as professional services. Fort

Worth argues that because the competitive procurement laws do not apply to the

procurement of professional services, Lane’s report that Fort Worth violated

these laws was not made in good faith.

In

response to Fort Worth’s plea to the jurisdiction, Lane produced a copy of Fort

Worth’s administrative regulations governing the procurement of goods and

services. Fort Worth appears to have three primary methods of procuring goods

and services. The first, “Invitations To Bid” (ITBs), are for items

“specifically defined and identified with specifications and that have a total

anticipated cost in excess of $50,000.” ITBs must comply with the competitive

bidding statutes. For procuring certain professional services “that are

expressly exempt from competitive bidding by State law,” Fort Worth uses a

“Request for Qualifications (RFQ).”

The

third method—RFPs—is used for “the procurement of high technology systems,

software, telecommunications equipment, insurance[,] and services not otherwise

suitable to the Invitation to Bid method.” This method, then, is for items

that do not fit clearly within the category of goods and services suitable to

ITBs or that are clearly required to be procured by RFQs. Fort Worth therefore

makes a distinction between services that should be solicited by RFPs and

services that are explicitly professional services under state law and should therefore

be solicited by way of RFQs.

When

describing RFPs in more detail, the administrative regulations say that “a

municipality may use the competitive sealed proposal procedure for the purchase

of goods and services.” The regulations go on to describe these procedures for

RFPs. The procedures set out for RFPs are different from those for RFQs, in

which an award is “based on demonstrated competence and qualifications to

perform the services,” and under which Fort Worth “shall first select the most

highly qualified provider, and then attempt to negotiate with that provider for

a contract at a fair and reasonable price.”

In

contrast, when using the competitive sealed bid process for an RFP, Fort Worth

is required to take price into consideration in selecting the provider. The

sealed bids or proposals that are submitted are not opened until the stated

date and time for opening. The regulations specify eight criteria for

evaluating proposals, including price, [22] unlike RFQs, which

require selection of the most highly qualified provider.

The

services at issue in this case were solicited by way of RFP. Although not

identical to the procedures for an ITB, the competitive sealed bid procedures

for RFPs are clearly not the same as the procedures for RFQs, which are specifically

exempt from competitive bidding laws. The fact that Fort Worth chose to

solicit competitive sealed bids by way of RFP rather than an RFQ is some

evidence that Fort Worth did not consider these services to fit within the

category of services that are expressly exempt from competitive bidding. It is

therefore some evidence that could lead a reasonable person to conclude that

Fort Worth was required to follow the procedures in chapter 252.

In

other words, if these services were included within the definition of

“professional services” in government code section 2254.002, then Fort Worth

should not have used the RFP to procure the services by way of competitive

sealed proposals and should have used an RFQ. Using competitive procurement

procedures in that case would render the contract void. [23]

On the other hand, if the services did not clearly fit within that definition,

then Fort Worth could choose to follow competitive procurement laws, although

it was not required to do so. Fort Worth does not deny that the services in

this contract were solicited by a procedure set out in chapter 252—competitive

sealed proposals. It argues, however, that it was not required to use this

procedure because the services in this case were professional services. But Fort

Worth did use the competitive procedure, even if not required to. Fort

Worth appears to be implicitly arguing that because it was not required to use

competitive procedures, then if it did use competitive procedures, it was free

to do so in a manner that may have violated chapter 252. We do not read the

statutes in that way. There is no exemption in chapter 252 that would allow a

municipality to use the methods provided in chapter 252 but yet only apply the

regulations of that chapter that it chooses. If these services could be

purchased using one of the competitive methods set out in chapter 252, and Fort

Worth chose to do so, then it was required to do so in accordance with the laws

governing those procedures. [24]

Fort

Worth’s second main argument is, essentially, that this court has said that

auditing services are accounting services, and because accounting services are

professional services under the law, the auditing services here were

professional services exempt from competitive procurement laws. Fort Worth

relies on this court’s opinion in City of Denton , in which we held that

the auditing services contracted for in that case fell within the practice of

accounting. [25]

In City

of Denton , this court had to determine whether the auditing services were

professional services in order to determine whether the services contract was

void because it did not comply with government code chapter 2254. [26]

In this case, however, the question is not whether the auditing services were

professional services, but whether Lane would have reasonably believed that

they were not and that Fort Worth was therefore required to follow competitive

procurement procedures to solicit and award the auditing services contract. This

court did not hold in City of Denton that auditing services always fall

within the practice of accounting, and the fact the auditing services in City

of Denton fit within the definition of accounting services does not

necessarily mean that auditing services are always accounting services. [27] Our holding in City

of Denton was based on the specific facts of that case.

Fort

Worth argues that in City of Denton , this court held “that an auditing

and consulting agreement was a professional-services agreement not subject to

the competitive-bid process.” This statement, though correct with regard to

our view of the auditing services solicited in that case, does not reflect the

significance of that case to Fort Worth’s argument here. We held in that case

that because the services in that case were professional services, not only was

Denton not required to use competitive bidding, but competitive bidding could

not be used by law. [28] Because competitive

bidding was used, the contract was void. [29] Fort Worth does not

argue that it was prohibited from using the procedures in chapter 252 and

required to use the rules in the government code. To make such an argument

would be to implicitly argue that it violated that law and that this contract

is void.

Further,

Fort Worth’s arguments appear to conflict with each other. As we pointed out,

if under City of Denton , auditing services are always within the practice

of accounting, then Fort Worth would have been required to issue an RFQ and

follow the rules in government code chapter 2254 for the procurement of

professional services. But Fort Worth also argues that it had the discretion

to decide that these were professional services—which is true only if City

of Denton does not stand for the proposition that auditing services are

always accounting services. If Fort Worth had discretion to decide that these

services were professional services, then it also had the discretion to decide

that the services were not professional services and to apply the

regulations for competitive bidding. It appears to have done so in this case.

Rather

than help Fort Worth, City of Denton actually demonstrates the

reasonableness of Lane’s belief. After this court handed down its opinion in

that case, Fort Worth was on notice that if the auditing services it solicited

were professional services, then it could not use the competitive procurement

procedures in chapter 252 to select the provider and instead was required to

use the procedure for the procurement of professional services. Here, Fort

Worth did not use its RFQ procedure for soliciting professional services.

Instead, it used an RFP calling for competitive sealed proposals. It would not

be unreasonable for an employee in Lane’s situation to believe that Fort Worth had

determined that the solicited services were not professional services based on

its use of the competitive procurement process. That is, Lane could reasonably

have believed that Fort Worth would not have used a process that would result

in it entering into a contract that it knew or should have known was void. This

view could be reconciled with City of Denton by the language we used in

that case, noting that we determined whether government code section 2254.002

covered the contract in that case by looking at the terms of that contract. [30]

In other words, we determined that auditing services fell within the definition

of accounting based on the facts of that case and did not hold that auditing

services are always accounting services.

The

question in this case is not whether the contract was for professional services

that were exempt from the competitive procurement laws, and we do not decide

that question here. The question is whether a reasonably prudent employee in

Lane’s situation would have believed that Fort Worth was required to comply

with the competitive procurement laws. We answer that question in the

affirmative and hold that under the circumstances, Lane’s report was made in

good faith. [31] We consequently hold

that the trial court did not err by denying Fort Worth’s plea to the

jurisdiction on this part of Lane’s claim, and we therefore overrule Fort

Worth’s sole issue.

Conclusion

Having

overruled Fort Worth’s sole issue, we affirm the trial court’s order denying in

part Fort Worth’s plea to the jurisdiction.

LEE ANN DAUPHINOT

JUSTICE

PANEL:

LIVINGSTON,

C.J.; DAUPHINOT, J.; and WILLIAM BRIGHAM (Senior Justice, Retired, Sitting by

Assignment).

DELIVERED: December 22,

2011

[1] See Tex. R. App. P. 47.4.

[2] See

Tex. Loc. Gov’t Code Ann. § 252.049 (West 2005) (providing confidentiality

requirements for information in competitive bids or proposals); see also Tex.

Gov’t Code Ann. § 552.104 (West 2004) (providing that certain information

related to competitive bidding is exempted from disclosure under the public

information act).

[3] City of Elsa v. Gonzalez , 325 S.W.3d

622, 625 (Tex. 2010).

[4] Id. ; City of Fort Worth v. Robinson ,

300 S.W.3d 892, 895 (Tex. App. — Fort Worth 2009, no pet.).

[5] Tex. Dep’t of Parks & Wildlife v. Miranda , 133 S.W.3d 217, 226 (Tex. 2004).

[6] Id. at 227; see also City of Elsa ,

325 S.W.3d at 625 (“[W]e consider the plaintiff ’ s

pleadings and factual assertions, as well as any evidence in the record that is

relevant to the jurisdictional issue.”).

[7] Miranda , 133 S.W.3d at 227 .

[8] Id. at 227 – 28.

[9] Id. at 228.

[10] Tex. Gov’t Code Ann. § 554.002(a) (West 2004).

[11] Id. § 554.0035 (West 2004).

[12] Id. § 554.002(a); City of Elsa ,

325 S.W.3d at 626 .

[13] Wichita Cnty . , Tex. v. Hart , 917 S.W.2d 779, 784 (Tex. 1996); see also City of Elsa ,

325 S.W.3d at 626 .

[14] See

Tex. Loc. Gov’t Code Ann. § 252.021 (West Supp. 2011 ).

[15] Id .

[16] Id.

§ 252.022(a)(4) (West Supp. 2011).

[17] See

id . § 252.0 0 1

(West 2005) (providing definitions applicable to that chapter).

[18] Tex. Gov’t Code Ann. § 2254.003(a) (West 2008) (emphasis

added) .

[19] Id.

[20] Id. § 2254.002(2)(A)(i) (West 2008).

[21] See id . §§ 2254.002(2)(A)(i), 2254.003(a); Tex. Loc. Gov’t Code Ann. § 252.022; Tex. Att’y Gen. Op. No. DM-106 (1992) (stating that

municipalities may exempt professional services from the competitive bidding

process but are not required to do so unless the services are for professional

services set out in the professional services procurement act, government code

sections 2254.001 – 2254.007).

[22] See

Tex. Loc. Gov’t Code Ann. § 252.043(b) (West 2005) (setting out eight factors a

municipality may consider in determining which bid provides the best value for

the municipality).

[23] See

Tex. Loc. Gov’t Code Ann. § 252.061 (West 2005); see also City of Denton v.

Mun. Admin. Servs., Inc. , 59 S.W.3d 764, 769 (Tex. App.—Fort Worth 2001, no

pet.).

[24] See

Tex. Loc. Gov’t Code Ann. § 252.062 (West 2005) (providing that a municipal

officer or employee who intentionally or knowingly violates section 252.021

commits a criminal offense); see also Tex. Loc. Gov’t Code Ann.

§ 252.043(a) (providing that “[i]f the competitive sealed bidding

requirement applies to the contract for goods or services, the contract must be

awarded to the lowest responsible bidder or to the bidder who provides goods or

services at the best value for the municipality”).

[25] City

of Denton , 59 S.W.3d at 769 .

[26] Id.

[27] See Tex. Att’y Gen. Op. No. JM-1038 (1989) (stating that “[w]hether the services of a

third party administrator are professional services . . . is a

question of fact, and depends on the particular services to be provided under a

specific contract”).

[28] City

of Denton , 59 S.W.3d at 769 .

[29] Id.

[30] See

City of Denton , 59 S.W.3d at 768 .

[31] See

Tex. Loc. Gov’t Code Ann. § 252.062.