the Texas Education Agency and Mike Morath, Commissioner of Education, in His Official Capacity v. Academy of Careers and Technologies, Inc. D/B/A Academy of Careers and Technologies Charter School

ACCEPTED

03-15-00528-CV

7458584

THIRD COURT OF APPEALS

AUSTIN, TEXAS

10/20/2015 3:01:39 PM

JEFFREY D. KYLE

CLERK

No. 03-15-00528-CV

_____________________________

FILED IN

3rd COURT OF APPEALS

IN THE COURT OF APPEALS AUSTIN, TEXAS

FOR THE THIRD JUDICIAL DISTRICT 10/20/2015 3:01:39 PM

_____________________________ JEFFREY D. KYLE

Clerk

TEXAS EDUCATION AGENCY AND MICHAEL WILLIAMS,

COMMISSIONER OF EDUCATION, IN HIS OFFICIAL CAPACITY,

Appellants,

VS.

ACADEMY OF CAREERS AND TECHNOLOGIES, INC. D/B/A

ACADEMY OF CAREERS AND TECHNOLOGIES CHARTER SCHOOL,

Appellee.

______________________________

On Appeal from the 200th Judicial District Court of Travis County, Texas

Cause No. D-1-GN-15-002879

______________________________

BRIEF OF APPELLANTS

______________________________

KEN PAXTON

Attorney General of Texas ERIKA M. LAREMONT

Texas Bar No. 24013003

CHARLES E. ROY Assistant Attorney General

First Assistant Attorney General General Litigation Division

P.O. Box 12548, Capitol Station

JAMES E. DAVIS Austin, Texas 78711-2548

Deputy Attorney General for Civil (512) 463-2120 (PHONE)

Litigation (512) 320-0667 (FAX)

ANGELA COLMENERO ATTORNEYS FOR APPELLANTS

Division Chief

ORAL ARGUMENT REQUESTED

October 20, 2015

IDENTITY OF PARTIES AND COUNSEL

Pursuant to Rule 38.1(a) of the Texas Rules of Appellate Procedure,

Appellants herein provides this Court with the following list of parties and the names

and addresses of all trial and appellate counsel:

Defendants-Appellants: Texas Education Agency (“TEA”) and

Michael L. Williams, in his Official Capacity

as the Commissioner of Education

Trial & Appellate Attorney for ERIKA M. LAREMONT

Defendants-Appellants: Texas Bar No. 24013003

Assistant Attorneys General

Office of the Attorney General

General Litigation Division

P.O. Box 12548, Capitol Station

Austin, TX 78711-2548

PHONE: (512) 463-2120

FAX: (512) 320-0667

Plaintiff-Appellee: Academy of Careers and Technology, Inc.,

d/b/a Academy of Careers and Technology

Charter School

Trial and Appellate Attorneys D. TODD SMITH

For Plaintiff-Appellee: Texas Bar No. 00797451

Smith Law Group LLLP

1250 Capital of Texas Highway South T

Three Cielo Center, Suite 601

Austin, Texas 78746

STEPHEN M. FOSTER

Texas Bar No. 00792511

9013 Magna Carta Loop

Austin, Texas 78754

PHONE: (512) 784-4367

ii

TABLE OF CONTENTS

IDENTITY OF PARTIES AND COUNSEL ........................................................ ii

TABLE OF CONTENTS ...................................................................................... iii

INDEX OF AUTHORITIES ................................................................................... v

STATEMENT OF THE CASE ............................................................................... 1

STATEMENT REGARDING ORAL ARGUMENT ........................................... 2

ISSUE PRESENTED ............................................................................................... 2

BRIEF OF APPELLANTS ..................................................................................... 3

STATEMENT OF FACTS ...................................................................................... 4

I. 2012 SUNSET ADVISORY COMMISSION AND CHANGES TO

TEXAS EDUCATION CODE. .................................................................... 4

II. THE TEXAS EDUCATION CODE PROVIDES FOR A LIMITED

APPEAL PROCESS. ................................................................................. 7

A. Appeal of academic and financial accountability

ratings. ......................................................................................... 7

B. Appeal of revocation decision. ................................................ 10

III. ACT FAILED TO MEET THE FINACIAL AND/OR

ACADEMIC ACCOUNTATIBLITY RATING FOR THREE

CONSECUTIVE YEARS. ........................................................................ 11

IV. THE TEXAS EDUCATION CODE MANDATES REVOCATION

OF ACT’S CHARTER SCHOOL .......................................................... 14

SUMMARY OF ARGUMENTS........................................................................... 16

ARGUMENT .......................................................................................................... 17

I. STANDARDS OF REVIEW...................................................................... 17

A. Plea to the Jurisdiction ............................................................ 17

B. Temporary Injunction ............................................................. 18

C. Statutory Construction ............................................................ 19

II. ACT HAS FAILED TO IDENTIFY THE VEHICLE IN WHICH

IT MAY SEEK JUDICIAL REVIEW........................................................ 19

A. ACT Failed to Identify a Statutory Basis for Judicial

Review of TEA’s Accountability Ratings or Decision

to Revoke ................................................................................... 21

iii

1. There is no statutory provision which allows

this court to review TEA’s rating decisions ................... 21

2. There Is No Statutory Provision Which

Allows This Court to Review TEA’s

Revocation Decision ....................................................... 21

B. ACT Failed to Demonstrate a Due Process Violation.

.................................................................................................... 23

1. ACT does not have a vested right in the

charter contract .............................................................. 23

2. ACT failed to alleged a viable procedural-

due-process claim ........................................................... 30

3. TEA applied the Texas Education Code

neither arbitrarily nor capriciously in

connection with ACT’s accountability ratings

or revocation ................................................................... 32

C. No Violation of Some Other Constitutional Right ................ 34

1. ACT failed to demonstrate a property interest

to substantiate its takings claim ..................................... 34

2. The Texas Education Code does not violate

the Open Courts Provision ............................................. 37

III. ACT’S ULTRA VIRES CLAIMS ARE MERITLESS, BARRED

BY SOVEREIGN IMMUNITY, AND DO NOT SUPPORT THE

DISTRICT COURT’S FINDING THAT ACT WOULD LIKELY

SUCCEED ON THE MERITS OF ITS CLAIMS ......................................... 38

A. ACT failed to allege that the Commissioner acted

without legal authority or failed to perform a

ministerial act ............................................................................. 38

B. ACT is seeking retroactive relief which is unavailable in

an ultra vires action .................................................................... 41

IV. ACT FAILED TO DEMONSTRATE THE TRIAL COURT’S

JURISDICTION AND, THEREFORE, THE TRIAL COURT

ERRED BY DENYING TEA’S PLEA. ..................................................... 43

PRAYER ................................................................................................................. 44

CERTIFICATE OF COMPLIANCE .................................................................. 46

CERTIFICATE OF SERVICE ............................................................................ 46

iv

INDEX OF AUTHORITIES

Cases

Adler v. Duval County School Bd., 112 F.3d 1475 (11th Cir. 1997) ........................41

Bacon v. Hist. Comm’n, 411 S.W.3d 161 (Tex. App.—Austin 2013,

no pet.) ..................................................................................................................20

Bd. of Regents v. Roth, 408 U.S. 564 (1972) .................................................... 23, 24

Byers v. Patterson, 219 S.W.3d 514 (Tex.App.—Tyler 2007, no pet.) ..................32

City of Beaumont v. Bouillion, 896 S.W.2d 143 (Tex. 1995) ..................................41

City of College Station v. Turtle Rock Corp., 680 S.W.2d 802 (Tex.

1984) .....................................................................................................................35

City of Dallas v. Trammel, 101 S.W.2d 1009 (Tex. 1937) ......................................26

City of El Paso v. Heinrich, 284 S.W.3d 366 (Tex. 2009) ................... 38, 39, 41, 42

City of El Paso v. Public Utility Comm'n of Tex., 883 S.W.2d 179

(Tex. 1994) ...........................................................................................................33

City of Elsa v. Gonzalez, 325 S.W.3d 622 (Tex. 2010) ...........................................18

City of Elsa v. M.A.L., 226 S.W.3d 390 (Tex. 2007) ...............................................41

City of Houston v. Carlson, 393 S.W.3d 350 (Tex. App.—Houston

[14th Dist.] 2012, no pet.)......................................................................................30

City of Houston v. Northwood Mun. Util. Dist. No. 1, 73 S.W.3d 304

(Tex.App.—Houston [1st Dist.] 2001, pet. denied) ..............................................23

City of Marshall v. City of Uncertain, 206 S.W.3d 97 (Tex. 2006) ........................19

City of Port Arthur v. Southwestern Bell Tel. Co., 13 S.W.3d 841

(Tex.App.—Austin 2000, no pet.)........................................................................37

City of San Antonio v. City of Boerne, 111 S.W.3d 22 (Tex. 2003) ........................19

Coastal Habit Alliance v. Pub. Util. Comm’n, 294 S.W.32d 276 (Tex.

App.—Austin 2009, no pet.) ................................................................................31

Combs v. City of Webster, 311 S.W.3d 85 (Tex.App.—Austin 2009,

pet. filed)........................................................................................................ 23, 38

Conn. Bd. of Pardons v. Dumschat, 452 U.S. 458 (1981) .......................................23

v

Creedmoor–Maha Water Supply Corp. v. Tex. Comm'n on Envtl.

Quality, 307 S.W.3d 505 (Tex.App.—Austin 2010, no pet.) ........... 20, 38, 39, 41

Creedmoor-Maha, 307 S.W.3d 505 (Tex. App.—Austin 2010, no

pet.) .......................................................................................................... 20, 37, 38

Employees Ret. Sys. v. Jones, 58 S.W.3d 148 (Tex. App.—Austin

2001, no pet.) ........................................................................................................19

Ex parte John M. Abell, 613 S.W.2d 255 (Tex. 1981) ..................................... 24, 27

Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401 (Tex. 1997) .................................. 37, 38

Gerst v. Nixon, 411 S.W.2d 350 n. 8 (Tex. 1966) ...................................................33

Graham Mortg. Corp. v. Hall, 307 S.W.3d 472 (Tex. App.—Dallas

2010, no pet.) ........................................................................................................18

Hawkins v. El Paso First Health Plans, Inc., 214 S.W.3d 709 (Tex.

App.—Austin 2007, no pet.) ................................................................................17

Hot Rod Hill Motor Park v. Triolo, 276 S.W.3d 565 (Tex. App.—

Waco 2008, no pet.)..............................................................................................18

Houston Belt & Terminal Ry. Co. v. City of Houston, 424 S.W.3d 663

(Tex.App.–Houston [14th Dist.] 2014, pet. filed) .................................................39

In re Gamble, 71 S.W.3d 313 (Tex. 2002) ..............................................................18

Indian Beach Prop. Owners’ Ass’n v. Linden, 222 S.W.3d 682 (Tex.

App.—Houston [1st Dist.] 2007, no pet.) .............................................................18

KEM Tex., Ltd. v. Texas Dep't of Transp., No. 03-08-00468-CV, 2009

Tex. App. LEXIS 4894 (Tex. App.—Austin 2009, no pet.) ................................20

Klumb v. Houston Mun. Emp. Pension Sys., 405 S.W.3d 204 (Tex.

App.—Houston [1st Dist.] 2013, pet. filed) ................................................... 25, 27

Lazarides v. Farris, 367 S.W.3d 788 (Tex.App.—Houston [14th Dist.]

2012, no pet.) ........................................................................................................42

Lee v. Tex. Workers’ Compensation Comm’n, 272 S.W.3d 806

(Tex.App.—Austin 2008).............................................................................. 24, 26

McAllen Hosps., L.P. v. Suehs, 426 S.W.3d 304 (Tex. App.—

Amarillo 2014, no pet.) ................................................................................. 25, 27

Mikeska v. City of Galveston, 451 F.3d 376 (5th Cir. 2006) ....................................32

vi

Olim v. Wakinekona, 461 U.S. 238 (1983) ..............................................................24

Paul v. Davis, 424 U.S. 693 (1976) .........................................................................23

Phillips v. Washington Legal Foundation, 524 U.S. 156 (1998) ............................23

Pinnacle Charter Sch. v. Bd. of Regents, 108 A.D.3d 1024, 969

N.Y.S.2d 318 (2013) ............................................................................................28

Pool v. River Bend Ranch, LLC, 346 S.W.3d 853 (Tex. App.—Tyler

2011, pet. denied) .................................................................................................18

Project Reflect, Inc. v. Metro Nashville Bd. of Pub. Educ., 947 F.

Supp. 2d 868 (M.D. Tenn. 2013) .................................................................. 28, 29

Project Sch. v. City of Indianapolis, 2012 WL 3114573 (S.D. Ind. July

31, 2012) ........................................................................................................ 28, 30

Railroad Comm’n v. Texas Citizens for a Safe Future & Clean Water,

336 S.W.3d 619 (Tex. 2011) ................................................................................19

Reach Academy for Boys & Girls, Inc. v. Delaware Dept. of Educ., 46

F.Supp.3d 455 (D.Del. 2014) ...............................................................................28

Reich v. Occupational Safety & Health Review Comm’n, 102 F.3d

1200 (11th Cir. 1997) ............................................................................................41

Sch. Dist. of Kansas City v. Williamson, 141 S.W.3d 418 (Mo. Ct.

App. 2004) ............................................................................................................28

Scott v. Alphonso Crutch LSC Charter Sch., Inc., 392 S.W.3d 165

(Tex. App.—Austin 2010, pet. denied) (mem. op.) .......................... 23, 25, 27, 28

Seguin v. Bexar Appraisal Dist., 373 S.W.3d 699 (Tex. App.—San

Antonio 2012, pet. denied) ............................................................................ 25, 27

Sheffield Devel. Co. v. City of Glenn Heights, 140 S.W.3d 660 (Tex.

2004) .....................................................................................................................35

Simi Inv. Co. v. Harris County, 236 F.3d 240 (5th Cir. 2000) .................................32

Society of Separationists, Inc. v. Herman, 959 F.2d 1283 (5th Cir.),

cert. denied, 506 U.S. 866 (1992).........................................................................42

Spring Branch Indep. Sch. Dist. v. Stamos, 695 S.W.2d 556

(Tex.1985) ............................................................................................................23

Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83 (1998) ...................................41

vii

Suryanto v. Att'y Gen. of U.S., 398 Fed.Appx. 830 (3rd Cir. 2010) .........................23

Sw. Pharmacy Solutions, Inc. v. Tex. Health & Human Servs.

Comm’n, 408 S.W.3d 549 (Tex. App.—Austin 2013, pet. denied) .............. 19, 40

Tarrant County v. Ashmore, 635 S.W.2d 417 (Tex. 1982) .....................................35

Tex. Dep’t of Protective & Regulatory Servs. v. Mega Child Care,

Inc., 145 S.W.3d 170 (Tex. 2004) ........................................................... 20, 23, 38

Texas Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217 (Tex.

2004) .....................................................................................................................17

Texas Dep’t of Transp. v. Jones, 8 S.W.3d 636 (Tex. 1999)...................................20

Texas Health Care Info. Council v. Seton Health Plan, Inc., 94

S.W.3d 841 (Tex.App.—Austin 2002, no pet.)....................................................42

Town of Castle Rock v. Gonzales, 545 U.S. 748 (2005) ..........................................24

Triantaphyllis v. Gamble, 93 S.W.3d 398 (Tex. App.—Houston [14th

Dist.] 2002, pet. denied) .......................................................................................18

United States v. Or. State Med. Soc’y, 343 U.S. 326 (1952) ...................................41

Univ. of Tex. Med. Sch. v. Than, 901 S.W.2d 926 (Tex. 1995) ...............................31

Walker v. Packer, 827 S.W.2d 833 (Tex. 1992) ......................................................18

Walling v. Metcalfe, 863 S.W.2d 56 (Tex. 1993) ....................................................18

Statutes

19 TEX ADMIN. CODE §157.1183 (2015) .................................................................10

19 TEX. ADMIN. CODE §109.1001 (a)(4) ..................................................................12

19 TEX. ADMIN. CODE §109.1001(a)(1) (2015) .........................................................7

19 TEX. ADMIN. CODE §109.1001(d)(1) (2015) .........................................................8

19 TEX. ADMIN. CODE §109.1002(i)(2) ...................................................................31

19 TEX. ADMIN. CODE §97.101(b) ...........................................................................31

TEX. CIV. PRAC. & REM. CODE §51.014(a)(4).........................................................16

TEX. CIV. PRAC. & REM. CODE §51.014(a)(8) ........................................................16

TEX. CIV. PRAC. & REM. CODE §6.001 ....................................................................16

viii

TEX. CONST. ART. I, §13 ..........................................................................................36

TEX. CONST. ART. I, §17 ..........................................................................................34

TEX. EDUC. CODE §12.101 .......................................................................................26

TEX. EDUC. CODE §12.106 .......................................................................................34

TEX. EDUC. CODE §12.107 .......................................................................................35

TEX. EDUC. CODE §12.115 (c-1) ..........................................................................7, 10

TEX. EDUC. CODE §12.115(a) ............................................................................ 15, 26

TEX. EDUC. CODE §12.115(c) .................................................................. 6, 10, 13, 26

TEX. EDUC. CODE §12.115(c)(3) ..............................................................................14

TEX. EDUC. CODE §12.116(a) ...................................................................................13

TEX. EDUC. CODE §12.116(c) ...................................................................................22

TEX. EDUC. CODE §12.116(c)(2) ....................................................................... 14, 15

TEX. EDUC. CODE §12.1161 .............................................................................. 35, 36

TEX. EDUC. CODE §12.128 .......................................................................................34

TEX. EDUC. CODE §12.128(a)(2) ..............................................................................35

TEX. EDUC. CODE §12.128(c) ...................................................................................36

TEX. EDUC. CODE §39.053 .......................................................................................43

TEX. EDUC. CODE §39.054(b) ..................................................................................21

TEX. EDUC. CODE §39.082(g) ..............................................................................8, 31

TEX. EDUC. CODE §39.116(a) .....................................................................................7

TEX. EDUC. CODE §39.116(e) .....................................................................................7

TEX. EDUC. CODE §39.116(f) .....................................................................................7

TEX. EDUC. CODE §39.151 .......................................................................................31

TEX. EDUC. CODE §39.151(b) ....................................................................................9

TEX. EDUC. CODE §39.151(d) ..................................................................................21

TEX. EDUC. CODE §39.151(e) ...............................................................................9, 21

ix

TEX. EDUC. CODE §39.152(a) ...................................................................................10

TEX. EDUC. CODE §39.152(c)(3) ....................................................................... 10, 14

TEX. GOV’T CODE §311.021.....................................................................................19

Texas Civil Practive and Remedies Code §51.014(a)(4)...........................................1

Texas Civil Practive and Remedies Code §51.014(a)(8)...........................................1

Rules

TEX. R. APP. P. 29.1(b) .............................................................................................16

Tex. R. App. P. 9.4(i)(3) ..........................................................................................45

x

STATEMENT OF THE CASE

Nature of the Case: Appellee Academy of Careers and Technology, Inc., d/b/a

Academy of Careers and Technology Charter School

(“ACT”), is an open-enrollment charter school that sued

TEA and the Commissioner of Education

(“Commissioner”) challenging the revocation of its

charter. ACT alleges, inter alia, that TEA violated its

substantive and procedural due process rights, and that the

Commissioner acted ultra vires by revoking its charter.

Trial Court: 200th District Court, Travis County, Texas

The Honorable Gisela D. Triana

Trial Court The trial court denied Appellants’ plea to the

Disposition: jurisdiction and granted Appellee’s Request for

Temporary Injunction. CR at 440-41 (order).

Parties Below: Academy of Careers and eTechnologies, Inc., d/b/a

Academy of Careers and Technologies Charter School,

Plaintiff

Texas Education Agency (“TEA”) and Michael L.

Williams, in his Official Capacity as the Commissioner of

Education, Defendants

Jurisdiction: Following the trial court’s denial of TEA’s plea to the

jurisdiction and grant of ACT’s Request for Temporary

Injunction, Appellants bring this appeal pursuant to Texas

Civil Practive and Remedies Code §51.014(a)(4) and (8).

1

STATEMENT REGARDING ORAL ARGUMENT

This case is factually similar to Texas Education Agency and Michael

Williams, Commissioner of Education, in his Official Capacity, v. American

Youthworks, Inc., d/b/a American Youthworks Charter School, Honors Academy,

Inc., d/b/a Honors Academy, and Two Azleway, Inc. d/b/a/ Azleway Charter School

Nos. 03-14-00283-CV and 03-14-00360-CV, which are currently on appeal before

this Court. Oral Arguments were heard in these cases on September 24, 2015.

This case shares the same subject matter as In Re Academy of Careers and

Technology, Inc., d/b/a Academy of Careers and Technology Charter School, Case

No. 03-15-00570-CV, in which ACT filed a petition for writ of mandamus and

sought emergency relief, which this Court granted and remains in effect.

Because the isues presented to the Court in this case are similar to the issues

presented in the above-referenced cases, Appellants do not believe that oral

argument will materially assist the Court in disposing of this matter. However,

should Appellee request oral arguments which is then granted by this Court,

Appellants request equal time for argument.

ISSUE PRESENTED

1. Whether the district court erred when it denied the Commissioner’s and the

Texas Education Agency’s plea to the jurisdiction and when it found that ACT

demonstrated a probable right to the relief sought.

2

No. 03-15-00528-CV

_____________________________

IN THE COURT OF APPEALS

FOR THE THIRD JUDICIAL DISTRICT

_____________________________

TEXAS EDUCATION AGENCY AND MICHAEL WILLIAMS,

COMMISSIONER OF EDUCATION, IN HIS OFFICIAL CAPACITY,

Appellants,

VS.

ACADEMY OF CAREERS AND TECHNOLOGIES, INC. D/B/A

ACADEMY OF CAREERS AND TECHNOLOGIES CHARTER SCHOOL,

Appellee.

______________________________

On Appeal from the 200th Judicial District Court of Travis County, Texas

Cause No. D-1-GN-15-002879

______________________________

BRIEF OF APPELLANTS

______________________________

TO THE HONORABLE COURT OF APPEALS:

For the reasons that follow, Appellants Texas Eduction Agency (“TEA”) and

Commissioner Michael Williams (“Commissioner”, jointly referenced as “TEA” or

“Appellants”) respectfully show why this Court should reverse the trial court’s

September 4, 2015 order, and dismiss this case for lack of jurisdiction or dissolve

the temporary injunctions and remand this case for trial.

3

STATEMENT OF FACTS

I. 2012 SUNSET ADVISORY COMMISSION AND CHANGES TO TEXAS EDUCATION

CODE.

The Sunset Advisory Commission (“Sunset Commission”) reviewed the

Texas Education Agency in October 2012, preceding the commencement of the 83rd

Texas Legislature. The Sunset Commission noted that charter schools are public

schools that “operate under decreased state regulation in exchange of increased

accountability for results.” CR at 316. 1 In its review of charter schools, the Sunset

Commission identified the following issue: “TEA lacks a full range of tools to

effectively address poor academic performance and financial mismanagement at

low-performing charter schools.” Id. While many charter schools meet TEA

educational expectations, charter schools experience higher rate of “academically

unacceptable level than school districts.” CR at 317-18. Further, the Sunset

Commission noted that “[c]harter schools receive about 80 percent of their revenues

in state aid, as compared to 41 percent for traditional school districts,” and “[m]any

charter schools also have poor financial performance, underscoring the importance

of oversight of expenditure of state funds.” CR at 118. Significantly, the Sunset

Commission found, “Charter schools have far more accountability problems

requiring assignment of interventions and sanctions, and ultimately, revocation of

the charter. Charter schools represent more than two-thirds, 71 percent, of schools

1

For the convenience of the Court, the clerk’s record will be referenced as, “CR at __” and the

reporter’s record will be referenced as, “RR at __.”

4

assigned with sanctions, even though charter schools make up only 17 percent of the

total number of districts and charters.” CR at 318-19. The Sunset Commission

further observed that “TEA lacked authority to revoke a charter for a school that is

imminently insolvent and fails to plan for its student’s education,” leaving students

susceptible to a charter school possibly closing mid-year due to lack of funds. CR

at 320.

Although TEA had the authority to close a charter school and revoke the

charter, the Sunset Commission criticized the process as unworkable, leaving

students to be educated at underperforming charter schools. CR at 319. Of

particular concern was the issue of “protracted litigation” concerning TEA’s ability

to timely revoke a charter and close an underperforming charter school. The report

noted the two to three years it took to close a charter school prior to Sunset review,

leaving students to be educated by an underperforming school. Id.

Based on these findings, the Sunset Commission recommended a change in

statute that required the automatic revocation of a charter for failure to meet basic

academic or financial accountability standards for three years in a row. CR at 326.

It recommended that no appeal be permitted from the revocation determination. Id.

According to the Sunset Commission, such a change in the law would:

Allow the State to more quickly shut down the poorest

performing charters, without years of litigation during which time the

school remains open. The recommendation would also ensure students

do not continue to attend a school lacking a quality education or with

5

serious financial problems that could affect the school and, ultimately,

a student’s academic progress.

Id.

The findings of the Sunset Commission demonstrate that there is a compelling

state need to identify and close poor-performing charter schools in order to improve

the choices available to parents and students. Thus, based on the Sunset

Commission’s recommendation, in 2013 Texas Legislature amended section 12.115

of the Texas Education Code to make mandatory the revocation of any open-

enrollment charter school’s charter if the school fails to meet financial and/or

academic performance ratings in certain years. The Commissioner is now required

to revoke a school’s charter if one of three scenarios arises:

(1) the charter holder has been assigned an unacceptable

performance rating under Subchapter C, Chapter 39 [of the

Education Code] for the three preceding years;

(2) the charter holder has been assigned financial accountability

performance rating under Subchapter D, Chapter 39, indicating

financial performance lower than satisfactory for the three

preceding school years; or

(3) the charter holder has been assigned any combination of the

[unacceptable ratings under either subchapter].

TEX. EDUC. CODE §12.115(c).

Chapter 39, Subchapter C (academic performance) ratings allowed for 2009-

2010 and 2010-2011 to be retroactively considered but specifically excluded ratings

6

for 2011-2012.2 Id. §12.115(c-1); see also TEX. EDUC. CODE §39.116(a), (e), and

(f) (allowing Commissioner to suspend academic performance rating during

transition period, but authorizing sanctions during the 2011-12 school year based on

prior year performance ratings). The Subchapter D (financial accountability) ratings

to be considered are those assigned to the school for 2010-2011, 2011-2012, 2012-

2013 and all years subsequent to the 2013 amendment. TEX. EDUC. CODE §12.115

(c-1).

II. THE TEXAS EDUCATION CODE PROVIDES FOR A LIMITED APPEAL PROCESS.

A. Appeal of academic and financial accountability ratings.

Every public school or open-enrollment charter school is required to submit

an audited annual financial report (“AFR”) to TEA. 19 TEX. ADMIN. CODE

§109.1001(a)(1) (2015). This mandate is to ensure that “school districts and charter

schools are spending [taxpayer] money appropriately and within the guidelines

related to purchasing and required expenditures on programs and various other

regulatory matters.” RR at 106: 22-p. 107: 7. The AFR is required to be audited by

an independent certified public accountant (“CPA”). RR at 108: 2-5; RR at 110: 2-

4. The school should prepare the financial statements and the auditor should then

2

This provision was necessary because ratings were essentially “held over” during the 2011-12

school year, so a charter school that earned a failing rating in 2009-10 and 2010-11, could have

been treated as having three strikes in 2011-12, but for the express exclusion of ratings for that

year from 12.115(c). See TEX. EDUC. CODE §39.116(e) (authorizing the imposition of sanctions

during the 2011-12 school year for districts that had unacceptable performance during the prior

school year).

7

review that information to ensure its accuracy and “free of material misstatements.”

RR at 108: 6-19; RR, Def. Ex. 1, p. 1. TEA uses the information contained in the

AFR to calculate the school’s financial accountability thus it is crucial that the

information be true and correct. 19 TEX. ADMIN. CODE §109.1001(d)(1) (2015).

To further to goal of access to true and correct information, the Texas

Education Code §39.082(g) states:

Before assigning a final rating under the system, the commissioner shall

assign each district or open-enrollment charter school a preliminary

rating. A district or school may submit additional information to the

commissioner relating to any indicator on which performance was

considered unsatisfactory. The commissioner shall consider any

additional information submitted by a district or school before

assigning a final rating. If the commissioner determines that the

additional information negates the concern raised by the indicator on

which performance was considered unsatisfactory, the commissioner

may not penalize the district or school on the basis of the indicator.

An AFR also includes opinions of the auditor regarding compliance. RR, Def.

Ex. 1, p. 16-17. If the auditor makes comments that are negative or that the school

disputes, the charter school may submit an AFR that is disapproved by the charter

school board. RR at 110: 11-24. Furthermore, should a charter school submit the

data prior to the deadline, it has up until the deadline to make any corrections

necessary. RR at 38: 19-23; 114: 16-22. However, once the deadline passes, the

information submitted by the school becomes final. The appeal process is not

intended to correct mistakes made by the submitting school, but rather to correct

errors made by TEA. RR at 113: 23 - p. 114: 3. Indeed, by the deadline to submit

8

the financial data, the information contained in the AFR has been reviewed by an

independent CPA auditor and verified by the school. RR at 114: 8-10. TEA does

not and cannot second-guess the information provided by school districts and charter

schools. Id. at 114: 11-15.

After a school district or charter school receives its accountability or financial

ratings, it has an opportunity to appeal the ratings to the Commissioner. TEX. EDUC.

CODE § 39.151(a). Should a charter school seek to appeal a financial or academic

rating and notify the Commissioner of such, the Commissioner must appoint a

committee to make recommendations to the Commissioner on any challenge made

to an agency decision. TEX. EDUC. CODE §39.151(b). After considering the

committee’s recommendation, the Commissioner makes a final decision. TEX.

EDUC. CODE §39.151(d). The Commissioner’s decision following any appeal is

final, and the Legislature expressly prohibited any additional appeal from this final

determination in “any other proceeding” if the charter “has had an opportunity to

challenge the decision under [section 31.151]. TEX. EDUC. CODE §39.151(e).

An accountability rating becomes final if a school does not appeal or after

TEA considers the appeal. Once a rating is final, it is not subject to further appeal.

TEX. EDUC. CODE §39.151(e). TEA uses final accountability ratings to make

accreditation decisions. CR at 318 (“Continued poor performance on academic and

financial accountability ratings can lower a district’s or charter’s accreditation

status….”). A school is required to be accredited to operate, so once TEA has final

9

accountability ratings, it can determine which schools may or may not open the next

school year. RR at 114: 22- p. 115: 8.

B. Appeal of revocation decision.

If a charter school earns an unacceptable financial accountability rating or

lower than satisfactory academic accountability rating or any combination of the two

for three consecutive years, the Commissioner must begin proceedings to revoke the

school’s charter. TEX. EDUC. CODE §12.115(c), (c-1). This process begins when

TEA notifies the charter school of its intent to revoke, specifying the reasons for the

revocation decision and explaining that the “charter holder has the right to request

an informal review regarding the Commissioner’s intent to revoke the charter and

appoint a conservator.” CR at 61-64. The notice also states that if the charter school

requests an informal hearing but the Commissioner’s decision to revoke does not

change, that the charter school may appeal the Commissioner’s decision to close a

school to the State Office of Administrative Hearings (“SOAH”). TEX. EDUC. CODE

§39.152(a). The school must file a petition for review and meet certain requirements

for the petition to be granted. 19 TEX ADMIN. CODE §157.1183 (2015). The decision

of the administrative law judge is final and may not be appealed. TEX. EDUC. CODE

§39.152(c)(3).

10

III. ACT FAILED TO MEET THE FINACIAL AND/OR ACADEMIC

ACCOUNTATIBLITY RATING FOR THREE CONSECUTIVE YEARS.

Academy of Careers and Technologies Charter School (hereinafter “ACT”)

was originally issued a state charter in 1998. CR at 333-340. In 2012, 2013, and

2014 TEA found that ACT failed to meet the state’s financial accountability

standards. CR 342-349; see also CR 4-5. A passing financial accountability score

is 50. CR at 346-348. ACT scored a 47 in 2012 based on its financial data for the

2010-11 school year. CR at 346. It scored a 45 in 2013 related to financial

information for the 2011-12 school year. CR at 347. In 2014, ACT received a 0

score related to financial information for the 2013-14 school year. CR at 348.

The evidence demonstrated that: (1) ACT, not some third-party, submitted

each of the financial reports at issue to TEA (RR at 37: 11-16); (2) ACT provided

the information that was reviewed by the auditor ACT hired (RR at 37: 7-10); (3)

ACT also was aware that the auditor it hired found deficiencies with ACT’s internal

controls (RR at 40: 5-19); (4) in 2013, prior to submitting the annual financial report

to TEA, ACT was aware that the auditor it hired found “that ACT was failing to

properly recognize fixed assets, loan proceeds and loan disbursements” (RR at 41:

7-13); (5) the auditor noted that ACT “failed to remit federal payroll taxes to the

Internal Revenue Service (IRS)” and that at the time of the 2014 audit, ACT owed

$308,628 (including penalties and interest) for taxes owned for the fourth quarter of

2011, all of 2012 and the first two quarters of 2013 (RR, Def. Ex. 3, p. 11); (6) prior

11

to the submission to TEA, ACT reviewed and approved the each of the disputed

annual financial and compliance reports (RR at 35: 5-17; RR at Def. Ex. 1,

Certification page; 44: 24-p. 45: 6 (“Correct.”)); and (7) ACT accepted responsibility

for the information contained in the annual financial reports once submitted to TEA.

RR at 36: 16- p. 37: 2.

According to Paula Applin, Chairman of the Governing Board of ACT, who

also holds a degree in finance (RR at 19: 3-4; 20:3-7), ACT received a failing score

on its financial accountability rating in 2010-11 due, in part, to ACT’s failure to

properly account for a property loan, an issue identified by the auditor prior to

submission to TEA. RR at 41: 14-20. Indicator 14 asks: Was the charter school’s

administrative cost ratio less than the threshold ratio? ACT received a “0” score on

this indicator in 2012 and 2013 because the administrative costs ACT reported

exceeded the Finaincial Integrity Rating System of Texas (“FIRST”)3 rating

threshold ratio for that indicator.

However, years later, in March 2015 ACT filed an appeal with TEA and for

the first time argued that it accidently included debt services as part of their

administrative costs rather than include it as “debt services” which is a separate

3

“FIRST” is the financial accountability rating system administered by the TEA in accordance

with Texas Education Code §39.082 and §39.085. The system provides additional transparency

to public education finance and meaningful financial oversight and improvement for school

districts (School FIRST) and open-enrollment charter schools (Charter FIRST). See 19 TEX.

ADMIN. CODE §109.1001 (a)(4).

12

indicator4 in its 2011 and 2012 AFR. RR at 47: 12-21. ACT believes that it should

be permitted to make the correction which would allow them to receive the full five

(5) points allotted to Indicator 14 which would give them a passing scores on the

2012 and 2013 financial accountability rating. CR at 77.

In 2014, ACT once again failed the financial accountability rating for failing

to disclose that it was in default on a debt, which resulted in an automatic failure.

The issue in 2014 was ACT failure to disclose payroll tax liability. RR, Def. Ex. 3,

p. 18; RR at 52: 20- 536. ACT timely appealed only to present evidence of the tax

liability. RR, Def. Ex. 4. Thus, its appeal was dismissed. However, ACT again

sought to appeal the issue regarding the tax liability with another, albeit untimely,

appeal in March 2015. CR at 112-117.

In 2014, ACT also received a failing academic performance rating. CR at

349. It failed to meet the “post-secondary readiness” index and received an

accountability rating of “Improvement Required.” Id. An “Improvement Required”

rating is “an unacceptable performance rating under the accountability system used

by the Texas Education Agency . . . .” CR at 358, ¶5.

Based on ACT’s failing accountability ratings, TEA issued a notice of

revocation in December 2014 pursuant to Texas Education Code, Section 12.115(c).

ACT requested an informal review of the revocation by TEA. RR at 63; 21-23; see

4

It should be noted that ACT included part of the January 2010 TEA Resource Guide as part of

its March 2015 appeal. That guide clearly stated that principal and interest on long-term debt

should be included as “debt service.”

13

also TEX. EDUC. CODE §12.116(a). However, TEA reaffirmed the revocation. CR

at 355.

ACT also appealed its revocation to SOAH. RR at 64: 3-5; CR at 361-376.

The Administrative Law Judge (“ALJ”) affirmed ACT’s revocation. CR at 362. The

ALJ’s determination is final and may not be appealed. TEX. EDUC. CODE

§12.116(c)(2).

IV. THE TEXAS EDUCATION CODE MANDATES REVOCATION OF ACT’S

CHARTER SCHOOL.

The Commissioner had no discretion but to revoke ACT’s charter, since its

failings in 2012, 2013 and 2014 represented three consecutive years of failure as

defined by Texas Education Code §12.115(c)(3). The Commissioner and TEA

notified ACT of this fact on December 8, 2014. CR at 342-349.

ACT sought an informal hearing regarding the revocation. CR at 5 (3rd full

paragraph). A review was conducted, but the decision to revoke ACT’s charter was

upheld. CR at 355-357. ACT also availed itself of an appeal before SOAH. CR at

5 (4th full paragraph). Because there were no material factual issues in dispute, TEA

filed a Motion for Summary Disposition, which provided the basis for a final

decision and order of SOAH upholding the Commissioner’s decision to revoke

ACT’s charter. CR at 361-376. This decision is not subject to appeal. TEX. EDUC.

CODE §39.152(c)(3).

14

Put simply, in December 2014, ACT failed to meet minimum financial and

academic accountability standards for three consecutive years, the Commissioner of

Education revoked its charter, an action he was required by law to take. See TEX.

EDUC. CODE §12.115(a). ACT availed itself of an informal review by the TEA and

then sought review before the SOAH. On May 21, 2015, the ALJ upheld the

revocation of ACT’s charter. By law, the ALJ’s decision may not be appealed.

Id. §12.116(c)(2).

More than two months after the revocation became final, and seven months

after it received notice of the revocation, ACT sued in district court asserting that

TEA and the Commissioner violated its rights to substantive and procedural due

process, takings, and violation of the open courts provision, in addition to seeking

declaratory relief and a temporary injunction prohibiting the Commissioner from

engaging in various alleged ultra vires actions. CR at 3-20. Specifically, ACT

sought judicial review of the appeals process only as it relates to the accountability

ratings. CR at 3-20. ACT did not challenge the process by which TEA revokes

charters; it only sought to have another chance to submit corrected financial data

related to its failing rating in 2012 and/or 2013.

TEA and the Commissioner (hereinafter “TEA” or “Appellants”) filed a Plea

to the Jurisdiction and an Amended Plea to the Jurisdiction and Repsonse to ACT’s

Request for Temporary Injunction. CR at 293-407. A court hearing on ACT’s

15

temporary injunction was heard on August 13, 2015 (RR at 3) and the court

considered TEA’s Plea by submission. RR at 134.

On August 21, 2015, the Friday before the start of the school year, the trial

court notified the parties of its intent to enter a temporary injunction effectively

prohibiting TEA from taking any action to wind up the failed charter school. CR at

421. The injunction was entered on September 4, 2015, two weeks after the start of

the school year. CR at 440-441. The injunction ordered ACT to remain open;

permits ACT to retain state-owned property for its own use; forces the State to fund

a financially and academically unsuccessful school; and keeps children in a school

that is not delivering a minimally accredited education. Id.

TEA filed an appeal of the temporary injunction and the denial of its Plea to

the Jurisdiction pursuant to TEX. CIV. PRAC. & REM. CODE §§51.014(a)(4) and (8).

The appeal automatically superseded the temporary injunction. TEX. R. APP. P.

29.1(b); TEX. CIV. PRAC. & REM. CODE §6.001.

SUMMARY OF ARGUMENTS

ACT failed to establish jurisdiction for its collateral attack of final

accountability ratings as the basis for revocation of its charter. ACT also failed to

establish a constitutionally-protected property interest which is required for its due

process and takings claims. Likewise, the evidence presented to the trial court

clearly demonstrated that the Commissioner acted pursuant to the statute, which

16

mandated a certain course of action and was, therefore, protected by sovereign

immunity. This defeats ACT’s ultra vires claims.

Like many charter schools before it, ACT’s suit simply seeks to attack final,

non-appealable administrative accountability ratings. This Court has repeatedly held

that such an attack is jurisdictionally barred, and the Uniform Declaratory Judgments

Act cannot be used to make an end-run around the jurisdictional bar. As a result,

ACT failed to show that the trial court had subject-matter jurisdiction to consider

any of its claims, and the trial court erred by denying Appellants’ Plea to the

Juridiction.

ARGUMENT

I. STANDARDS OF REVIEW.

A. Plea to the Jurisdiction.

A plea to the jurisdiction challenges the trial court’s authority to determine

the subject matter of a specific cause of action. Hawkins v. El Paso First Health

Plans, Inc., 214 S.W.3d 709, 716 (Tex. App.—Austin 2007, no pet.). Whether a

court has subject-matter jurisdiction and whether a plaintiff has affirmatively

demonstrated subject-matter jurisdiction are questions of law that are reviewed de

novo. Texas Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex.

2004).

In deciding a plea to the jurisdiction that challenges the pleadings, the

reviewing court determines whether the pleader has alleged facts that affirmatively

17

demonstrate the court's jurisdiction to hear the cause. Id. The pleadings are liberally

construed in the plaintiffs favor. Id. If a plea to the jurisdiction challenges the

existence of jurisdictional facts, the court considers relevant evidence submitted by

the parties when necessary to resolve the jurisdictional issues raised. Id. at 227.

A trial court’s order granting a temporary injunction is reviewed for abuse of

discretion. Walling v. Metcalfe, 863 S.W.2d 56, 57 (Tex. 1993). “A trial court has

no ‘discretion’ in determining what the law is or applying the law to the facts.” See

Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992) (orig. proceeding).

Accordingly, questions of law, including whether a trial court has subject matter

jurisdiction, are reviewed de novo. City of Elsa v. Gonzalez, 325 S.W.3d 622, 625

(Tex. 2010).

B. Temporary Injunction.

To obtain a temporary injunction, the applicant must plead and prove: (1) a

cause of action against the defendant; (2) a probable right to the relief sought; and

(3) a probable, imminent, and irreparable injury in the interim. Walling, 863 S.W.2d

at 57. Because an injunction is an equitable remedy, a court must balance the

competing equities at stake. See In re Gamble, 71 S.W.3d 313, 317 (Tex. 2002);

Indian Beach Prop. Owners’ Ass’n v. Linden, 222 S.W.3d 682, 690 (Tex. App.—

Houston [1st Dist.] 2007, no pet.); Pool v. River Bend Ranch, LLC, 346 S.W.3d 853,

860 (Tex. App.—Tyler 2011, pet. denied); Graham Mortg. Corp. v. Hall, 307

S.W.3d 472, 478 (Tex. App.—Dallas 2010, no pet.). Consideration of the equities

18

involves weighing the public interest against the injury to the parties from the grant

or denial of injunctive relief. See Hot Rod Hill Motor Park v. Triolo, 276 S.W.3d

565, 568 (Tex. App.—Waco 2008, no pet.); Triantaphyllis v. Gamble, 93 S.W.3d

398, 401–02 (Tex. App.—Houston [14th Dist.] 2002, pet. denied).

C. Statutory Construction.

An agency’s construction of a statute that it is charged with enforcing is

entitled to serious consideration by reviewing courts so long as that construction is

reasonable and does not contradict the statute’s plain language of the statute.

Railroad Comm’n v. Texas Citizens for a Safe Future & Clean Water, 336 S.W.3d

619 (Tex. 2011); Sw. Pharmacy Solutions, Inc. v. Tex. Health & Human Servs.

Comm’n, 408 S.W.3d 549, 560-62 (Tex. App.—Austin 2013, pet. denied);

Employees Ret. Sys. v. Jones, 58 S.W.3d 148, 151 (Tex. App.—Austin 2001, no

pet.). Additionally, when construing a statute, courts must consider the statute in its

entirety, assume the entire statute is effective, and avoid an absurd result. TEX.

GOV’T CODE §311.021; City of Marshall v. City of Uncertain, 206 S.W.3d 97, 105

(Tex. 2006) (citing City of San Antonio v. City of Boerne, 111 S.W.3d 22, 29 (Tex.

2003)).

II. ACT HAS FAILED TO IDENTIFY THE VEHICLE IN WHICH IT MAY SEEK

JUDICIAL REVIEW.

ACT does not believe the Commissioner and TEA should have revoked its

charter because two to three years after-the-fact, it uncovered purported clerical

19

errors to its 2012 and/or 2013 AFR that it attributes to either a third party and/or

TEA. It contends that these errors resulted in two of the four failing accountability

ratings it received from 2012-2014. TEA’s accountability ratings are considered

administrative decisions or action. See Creedmoor–Maha Water Supply Corp. v.

Tex. Comm'n on Envtl. Quality, 307 S.W.3d 505, 524 (Tex.App.—Austin 2010, no

pet.). In Texas there is no inherent right to judicial review of agency orders. Texas

Dep’t of Transp. v. Jones, 8 S.W.3d 636, 638 (Tex. 1999); Bacon v. Hist. Comm’n,

411 S.W.3d 161, 173-74 (Tex. App.—Austin 2013, no pet.) (“One implication of

these principles is that there is no general right to challenge or seek review of a state

agency order or decision in Texas state court; to the contrary, state agency decisions

generally cannot be challenged in court unless the Legislature has enacted a statute

expressly authorizing such review.”); Creedmoor-Maha, 307 S.W.3d 505, 515 (Tex.

App.—Austin 2010, no pet.) (UDJA actions “that seek declaratory or injunctive

relief against agency orders from which the legislature has not granted a right of

judicial review” are barred by state sovereign immunity); KEM Tex., Ltd. v. Texas

Dep't of Transp., No. 03-08-00468-CV, 2009 Tex. App. LEXIS 4894, at *8-18 (Tex.

App.—Austin 2009, no pet.) (challenge to non-appealable agency order barred by

sovereign immunity). A person may obtain judicial review of a final decision issued

after a contested case or if the action adversely affects a vested property right or

otherwise violates a constitutional right. Tex. Dep’t of Protective & Regulatory

Servs. v. Mega Child Care, Inc., 145 S.W.3d 170, 196-98 (Tex. 2004).

20

A. ACT Failed to Identify a Statutory Basis for Judicial Review of

TEA’s Accountability Ratings or Decision to Revoke.

1. There is no statutory provision which allows this court to review

TEA’s rating decisions.

Chapter 39 of the Texas Education Code, entitled “Public School System

Accountability,” governs the financial and academic performance system used to

review both traditional public schools and charter schools. See TEX. EDUC. CODE

§39.054(b). Section 39.151, however, limits the review of any accountability

determination to review by the Commissioner and expressly exempts the decision

from review by SOAH or a State District Court. See id., at §§39.151(d) & (e). Thus,

there is no statute affording ACT the right to judicial review of its accountability

ratings.

2. There Is No Statutory Provision Which Allows This Court to

Review TEA’s Revocation Decision.

Section 12.115(c) of the Texas Education Code provides:

The commissioner shall revoke the charter of an open-enrollment

charter school if:

(1) the charter holder has been assigned an unacceptable

performance rating under Subchapter C, Chapter 39, for the three

preceding years;

(2) the charter holder has been assigned an unacceptable financial

accountability rating under Subchapter D, Chapter 39, indicating

financial performance lower than satisfactory for the three preceding

school years; or

21

(3) the charter holder has been assigned any combination of the

ratings described by Subdivision (1) or (2) for the three preceding

school years.

TEX. EDUC. CODE §12.115(c).

The Legislature directed that the Commissioner’s decision to revoke a charter

can be reviewed only by SOAH, and that an ALJ’s review of that charter-revocation

decision is final and unappealable. Section 12.116(c) provides:

A decision by the commissioner to revoke a charter is subject to review

by the State Office of Administrative Hearings. Notwithstanding

Chapter 2001, Government Code:

(1) the administrative law judge shall uphold a decision by the

commissioner to revoke a charter unless the judge finds

the decision is arbitrary and capricious or clearly

erroneous; and

(2) a decision of the administrative law judge under this

subsection is final and may not be appealed.

TEX. EDUC. CODE §12.116(c). Accordingly, the Commissioner’s revocation

decision is final unless it is appealed to SOAH, and the SOAH ALJ’s decision either

upholding or reversing the Commissioner’s decision is unappealable. Thus, ACT

had no right to judicial review of the revocation decision, the district court lacked

jurisdiction over this claim, and the district court clearly erred in denying TEA’s

Plea to the Jurisdiction.

22

B. ACT Failed to Demonstrate a Due Process Violation.

1. ACT does not have a vested right in the charter contract.

ACT argues that the statutory procedures related to accountability ratings

employed by TEA violated their substantive and procedural due process rights. CR

at 11-14. ACT must be able to demonstrate that it possessed a vested property right

as the basis of its due process claim. See Combs v. City of Webster, 311 S.W.3d 85,

92 (Tex.App.—Austin 2009, pet. filed) (citing Spring Branch Indep. Sch. Dist. v.

Stamos, 695 S.W.2d 556, 560–62 (Tex.1985); Texas Department of Protective and

Regulatory Services v. Mega Child Care, Inc., 145 S.W.3d at 173; City of Houston

v. Northwood Mun. Util. Dist. No. 1, 73 S.W.3d 304, 311 (Tex.App.—Houston [1st

Dist.] 2001, pet. denied)). ACT cannot establish such an interest.

To have a property interest in a benefit, a person clearly must have more than

an abstract need or desire” and “more than a unilateral expectation of it. He must,

instead, have a legitimate claim of entitlement to” the continuation of the charter.

Bd. of Regents v. Roth, 408 U.S. 564, 577 (1972). Such entitlements are, “‘of course

. . . not created by the Constitution. Rather, they are created and their dimensions

are defined by existing rules or understandings that stem from an independent source

such as state law.’” Paul v. Davis, 424 U.S. 693, 709 (1976) (quoting Roth, supra,

at 577,); see also Phillips v. Washington Legal Foundation, 524 U.S. 156, 164

(1998).

23

Further, a right is “vested” when it has some definitive, rather than potential,

existence. Scott v. Alphonso Crutch LSC Charter Sch., Inc., 392 S.W.3d 165, 170-

71 (Tex. App.—Austin 2010, pet. denied) (mem. op.). As a general matter, “[w]hen

the decision to grant or withhold a benefit is entrusted to the discretion of a

government actor, one has no constitutional property interest in obtaining that

relief.” Suryanto v. Att'y Gen. of U.S., 398 Fed.Appx. 830, 834 (3rd Cir. 2010) (citing

Conn. Bd. of Pardons v. Dumschat, 452 U.S. 458, 464 (1981)). “If the

decisionmaker is not ‘required to base its decisions on objective and defined

criteria,’ but instead ‘can deny the requested relief for any constitutionally

permissible reason or for no reason at all,’ the State has not created a constitutionally

protected . . . interest.” Olim v. Wakinekona, 461 U.S. 238, 249 (1983) (finding no

legitimate claim of entitlement where there were “no standards governing the

administrator’s exercise of his discretion” to transfer an inmate) (citation omitted);

Lee v. Tex. Workers’ Compensation Comm’n, 272 S.W.3d 806, 817 (Tex.App.—

Austin 2008) (citing Olim, 461 U.S. at 249). In other words, there is no protected

property interest where the decision to remove a benefit is left to the “unfettered

discretion” of the government actor. See Roth, 408 U.S. at 566–67 (concluding a

nontenured university professor had no property interest in his position because

“State law . . . clearly leaves the decision whether to rehire a nontenured teacher for

another year to the unfettered discretion of university officials.”); Lee, 272 S.W.3d

817-18.

24

Thus, if the decision to grant the charter is left to the discretion of the

commissioner, no property interest is created by granting the charter. See Town of

Castle Rock v. Gonzales, 545 U.S. 748, 756 (2005) (“Our cases recognize that a

benefit is not a protected entitlement if government officials may grant or deny it in

their discretion.”); see also Ex parte John M. Abell, 613 S.W.2d 255, 262 (Tex. 1981)

(“When the authority granting the right has the power and discretion to take that

right away, it cannot be said to be a vested right”); Seguin v. Bexar Appraisal Dist.,

373 S.W.3d 699, 709 (Tex. App.—San Antonio 2012, pet. denied) (taxpayer did not

have vested property right in disabled-veteran tax exemption that was “legislatively

revocable”); Klumb v. Houston Mun. Emp. Pension Sys., 405 S.W.3d 204, 226 (Tex.

App.—Houston [1st Dist.] 2013, pet. filed) (“[A] pensioner in a statutory pension

plan does not have a vested right to his pension.”); McAllen Hosps., L.P., d/b/a

McAllen Medical Center and d/b/a Edinburg Regional Medical Center and d/b/a

Edinburg Children’s Hospital and d/b/a McAllen Heart Hospital and Fort Duncan

Medical Center, L.P., d/b/a Fort Duncan Regional Medical Center v. Thomas Suehs,

Executive Commissioner of the Texas Health and Human Services Commission,

Douglas Wilson, Inspector 2 General of the Health and Human Services

Commission; Texas Health and Human Services Commission, et al., 426 S.W.3d

304, 313 (Tex. App.—Amarillo 2014, no pet.) (hospitals lack vested property

right/interest in Medicaid reimbursement payments that were “contingent and

potential rather than definitive and unconditional” prior to utilization review);

25

Robert Scott, Commissioner of Education v. Alphonso Crutch LCS Charter Sch.,

Inc., 392 S.W.3d at 170-71 (concluding that, because allocation to which charter

school was entitled for a given time period was subject to change depending on

updated attendance figures during school year, the school’s “interest in a definite

amount” was not vested and “remain[ed] contingent rather than unconditional, and

potential rather than definitive”).

ACT’s mistakenly believes that its interest in the continuation of its charter

contact is sufficient to vest a property interest. CR at 4. However, the expectation

of continuing its charter is not a vested interest, but rather a “mere expectancy

created by the law and liable to be revoked or destroyed by the same authority.” City

of Dallas v. Trammel, 101 S.W.2d 1009, 1012 (Tex. 1937) (quoting John D. Dillon,

Municipal Corporations § 431 (5th Ed. 1911)); see Lee, 272 S.W.3d at 818 (“It is

well established that the legislature, ‘which creates the property interest in the first

place, may also take it away.’”).

The Legislature created charters, and the ability to grant a charter is left

entirely up to the discretion of the Commissioner. TEX. EDUC. CODE §12.101. Thus,

even if a charter school meets all of the statutory requirements, the Commissioner

may still deny the charter. Moreover, notwithstanding section 12.115(c), has

required the Commissioner to revoke a school’s charter when the school materially

violates the terms of the charter, fails fiscal or academic accountability standards,

fails to protect students enrolled in the school, or becomes imminently insolvent. Id.

26

§12.115(a)(1)-(6).5 Moreover, nothing in the statute or in ACT’s charter prohibits

the Legislature from changing those standards, and the Legislature could abolish the

charter-school system entirely if it chose to do so. See Ex parte John M. Abell, 613

S.W.2d at 262 (“When the authority granting the right has the power and discretion

to take that right away, it cannot be said to be a vested right.”); Seguin, 373 S.W.3d

at 709 (taxpayer did not have vested property right in disabled-veteran tax exemption

that was “legislatively revocable”); Klumb, 405 S.W.3d at 226 (“[A] pensioner in a

statutory pension plan does not have a vested right to his pension.”); McAllen Hosps.,

L.P. v. Suehs, 426 S.W.3d at 304 (hospitals lack vested property right/interest in

Medicaid reimbursement payments that were “contingent and potential rather than

definitive and unconditional” prior to utilization review); Robert Scott,

Commissioner of Education v. Alphonso Crutch LCS Charter Sch., Inc., 392 S.W.3d

at 170-71 (concluding that, because allocation to which charter school was entitled

for a given time period was subject to change depending on updated attendance

figures during school year, the school’s “interest in a definite amount” was not

5

ACT’s charter contract mirrors this statutory framework, expressly providing that: the

“commissioner in his sole discretion make take any action authorized by Section 39.131, TEC or

Chater 29, TEC relating to the charter contract.” See, e.g. CR at 189; and the “Board in its sole

discretion may modify, place on probation, revoke or deny timely renew of a charter for cause

(“adverse action.”). Id. “Adverse Actions” include (a) a material violation of the terms of the charter

listed in paragraphs 2 and 3, including accountability provisions; (b) failure to satisfy generally accepted

accounting standards of fiscal management; or (c) failure to comply with an applicable law or rule.”

Id. The charter holders agree to these terms, understand their obligations under the contract and the

law, and should know that any rights to the charter are conditioned upon the law and satisfaction of

the contractual terms.

27

vested and “remain[ed] contingent rather than unconditional, and potential rather

than definitive”).

At present, there is no Texas state case directly dealing with a charter school’s

right to its charter contract,6 but see Robert Scott, Commissioner of Education v.

Alphonso Crutch LCS Charter Sch., Inc., 392 S.W.3d at 170-71, other jurisdictions

have determined that a charter contract does not create a property interest. See Reach

Academy for Boys & Girls, Inc. v. Delaware Dept. of Educ., 46 F.Supp.3d 455, 457

(D.Del. 2014) (“[T]he renewal of Reach’s charter, is not an interest protected by the

Fourteenth Amendment’s Due Process Clause.”); Project Reflect, Inc. v. Metro

Nashville Bd. of Pub. Educ., 947 F. Supp. 2d 868, 878-79 (M.D. Tenn. 2013)

(concluding that a charter school did not have a constitutionally protected interest in

its charter under Tennessee law because the statutory provision governing charter

revocation “uses the language of discretion, not entitlement, and only minimally

conditions that exercise of discretion”); Project Sch. v. City of Indianapolis, 2012

WL 3114573, at *3 (S.D. Ind. July 31, 2012) (concluding that there was no protected

property interest in a charter under Indiana law because “the charter school statute

frames the decision to revoke a charter as a discretionary matter”); Pinnacle Charter

Sch. v. Bd. of Regents, 108 A.D.3d 1024, 969 N.Y.S.2d 318, 320 (2013) (“[T]he

6

Currently pending before this Court is Texas Education Agency and Michael Williams,

Commissioner of Education, in his Official Capacity, v. American Youthworks, Inc., d/b/a

American Youthworks Charter School, Honors Academy, Inc., d/b/a Honors Academy, and Two

Azleway, Inc. d/b/a/ Azleway Charter School Nos. 03-14-00283-CV and 03-14-00360-CV, in

which Appellees assert the same property interest in the charter.

28

New York Charter Schools Act . . . creates no constitutionally protected property

interest in the renewal of a charter. . . .”); State ex rel. Sch. Dist. of Kansas City v.

Williamson, 141 S.W.3d 418, 427 (Mo. Ct. App. 2004) (“[J]ust as a prospective

charter school has no protected property interest at stake regarding an initial charter

application, the school also has no protected property interest under the Charter

Schools Act with regard to renewal of its charter.”).

In Project Reflect, Inc. Smithson Craighead Middle School v. Metropolitan

Nashville Board of Public Education, 947 F.Supp.2d 868, (M.D. Tennessee, 2013),

the Tennessee district court considered whether a charter school sponsor (an entity

similar to a charter holder in Texas) had a protected property interest in continuation

of a charter school. In determining the charter lacked such an interest, the court

noted that:

[T]he statutory language and the charter agreement do not support

Plaintiff's claim of a property interest protected by state law. “[A] party

cannot possess a property interest in the receipt of a benefit when the

state’s decision to award or withhold the benefit is wholly

discretionary.” The charter agreement incorporates [the Tennessee

Public Charter Schools Act of 2002, recovation or renewal section],

which provides that “A public charter school agreement may be

revoked or denied renewal by the final chartering authority if the

chartering authority determines that the school . . . (2) Received

identification as a priority school, as defined by the state’s

accountability system.” “The word ‘may’ customarily connotes

discretion.”

Id. at 878 (citations omitted). It went on to state:

[T]he Tennessee charter school statute repeatedly declares its purpose

and intention to provide the state department of education and local

29

school systems with “options,” “alternative means,” and “flexibility”—

hardly the language of a statute creating a property interest. The law

constrains this discretion only by requiring the chartering authority to

state its reason(s) for revoking the charter. If, as in this case, the

revocation occurs because of the school's priority status, no appeal is

permitted—again emphasizing state discretion, not the charter holder’s

property rights.

Id. at 879 (citations omitted).

Similarly, in Project School v. City of Indianapolis, the district court held that

Indiana’s charter school statue and the facts in the case repudiated the plaintiff

charter school’s argument that it had a protected property interest in its continued

ability to operate a school. No. 1:12-cv-01028-SEB-DKL, 2012 WL 3114573, *3

(S.D. Indiana, July 31, 2012). Because the charter was subject to revocation if

certain conditions were met and because the sponsor was not required to grant a

charter to an organizer to operate a charter school in the first place, the court held

that the charter’s “argument that somehow its existence is a ‘property right’ for

purposes of the Fourteenth Amendment due process is a nonstarter.” Id. at *4. For

all of these same reasons, ACT has failed to identify a vested property interest that

did not receive procedural or substantive due process consideration.

2. ACT failed to alleged a viable procedural-due-process claim.

Even if ACT demonstrated a property interest in its charter, it received all the

process it was due regarding the accountability ratings and revocation. If an order

deprives a person of vested property rights without due process, the order may be

set aside even absent an express provision for judicial review. See City of Houston

30

v. Carlson, 393 S.W.3d 350, 361-62 (Tex. App.—Houston [14th Dist.] 2012, no pet.).

In this case, ACT received notice of its accountability ratings and the revocation

decision along with an opportunity to be heard, which is all that due process requires.

“Procedural due process requires notice and ‘an opportunity to be heard at a

meaningful time and in a meaningful manner.’” Coastal Habit Alliance v. Pub. Util.

Comm’n, 294 S.W.32d 276, 285 (Tex. App.—Austin 2009, no pet.) (quoting Univ.

of Tex. Med. Sch. v. Than, 901 S.W.2d 926, 930 (Tex. 1995)).

What process is due is measured by a flexible standard that depends on

the practical requirements of the circumstances. This flexible standard

includes three factors: (1) the private interest that will be affected by

the official action; (2) the risk of an erroneous deprivation of such

interest through the procedures used, and the probable value, if any, of

additional or substitute procedural safeguards; and (3) the

government’s interest, including the function involved and the fiscal

and administrative burdens that the additional or substitute procedural

requirement would entail.

University of Texas Medical School at Houston, John C. Ribble, M.D., and M. David

Low, M.D. v. Allan Than, 901 S.W.2d at 930-31 (citations omitted).

ACT was given notice and an opportunity to appeal each of the three financial

accountability ratings. CR at 350; see also TEX. EDUC. CODE §39.082(g); 19 TEX.

ADMIN. CODE § 109.1002(i)(2) (financial accountability rating appeals). It was also

provided notice and an opportunity to appeal its substandard academic

accountability rating. CR at 358; see also TEX. EDUC. CODE §39.151; 19 TEX.

ADMIN. CODE §97.101(b) (academic accountability rating appeals).

31

ACT was also given notice and an opportunity to appeal the decision to revoke

its charter. CR at 342-349. It requested an informal review which was conducted

by TEA. CR at 355-357. It filed a petition for review to SOAH which upheld TEA’s

decision to revoke. CR at 360-376.

3. TEA applied the Texas Education Code neither arbitrarily nor

capriciously in connection with ACT’s accountability ratings or

revocation.

A violation of substantive due process occurs only when the government

deprives individuals of constitutionally protected rights by an arbitrary use of its

power. Simi Inv. Co. v. Harris County, 236 F.3d 240, 249 (5th Cir. 2000), cert.

denied, 534 U.S. 1022 (2001). A claimant prevails on a substantive due process

claim by establishing it holds a constitutionally protected property right to which the

Fourteenth Amendment’s due process protection applies and by establishing that the

challenged governmental action is not rationally related to furthering a legitimate

state interest. Byers v. Patterson, 219 S.W.3d 514, 525 (Tex.App.—Tyler 2007, no

pet.) (citing Simi Inv., 236 F.3d at 249-50 and Mikeska v. City of Galveston, 451 F.3d

376, 379 (5th Cir. 2006)). The court must then review the government’s actions

against the deferential “rational basis” test that governs substantive due process

claims. Simi Inv., 236 F.3d at 249.

ACT claims that TEA has created a system of rating review and revocation

that is devoid of a meaningful opportunity for review. CR at 7. It further claims that

the accountability ratings TEA assigned in 2012-2104 were arbitrary because ACT

32

identified the errors it submitted and was not permitted to submit corrected data. Id.

ACT argues, with no supporting evidence, that TEA did this specifically and

arbitrarily to ACT. Id. ACT further claims that the current “mechanism for

evaluating charter schools . . . allows TEA and Commissioner to change standards

after the fact without any regard for a connection with a legitimate government

purpose or rational relationship on a consistent basis.” CR at 14. Again, ACT relied

on the erroneous assumption that the renewal of its charter was automatic or vested

which it is not. Id.

An agency’s decision is arbitrary or results from an abuse of discretion (i.e is

capricious) if the agency: (1) failed to consider a factor the legislature directs it to

consider; (2) considers an irrelevant factor; or (3) weighs only relevant factors that

the legislature directs it to consider but still reaches a completely unreasonable

result. City of El Paso v. Public Utility Comm'n of Tex., 883 S.W.2d 179, 184 (Tex.

1994) (citing Gerst v. Nixon, 411 S.W.2d 350, 360 n. 8 (Tex. 1966)). Though ACT

clearly opposed the results of the accountability ratings it received, it never argued

that the ratings, based on the evidence actually received by TEA, were erroneous. It

simply believes that it should be afforded an opportunity to correct incorrect data

that it supplied years before, in an effort to avoid revocation now.

ACT presented the trial court with no evidence that TEA considered factors

beyond those the legislature directed it to consider: ACT’s financial and academic

performance ratings. ACT presented no evidence that TEA considered a factor that

33

was irrelevant which led to the failing ratings. Finally, ACT failed to present any

evidence that TEA considered the appropriate factors but reached a completely

unreasonable result. In short, there is no evidence that TEA acted arbitrarily or

capriciously when it reviewed the information ACT presented to it to reach the result

that ACT did not meet its financial or academic benchmark for 2012-2014. There is

no evidence that the Commissioner considered anything but the criteria found in the

Texas Education Code when he issued the notice of intent to revoke.

Indeed, a charter school is given numerous opportunities to provide correct

information at or near the time the AFR is due. What ACT seeks to do is appeal

ratings that are 2-3 years old, disrupting the finality of those accountability ratings

as well as the accreditation process. Allowing a charter school to submit untimely

appeals of years-old accountability ratings (specifically at the point of revocation)

frustrates one of the purposes of the 2013 statutory amendments which was to close

down underperforming charter schools efficiently. CR at 319.

C. No Violation of Some Other Constitutional Right.

1. ACT failed to demonstrate a property interest to substantiate its

takings claim.

Notwithstanding the fact that ACT failed to demonstrate a property interest in

the continuation of its charter, ACT also claimed a property interest in the property

and funds that it has in its possession which are subject to seizure by TEA as a result

of the charter revocation. CR at 15. Article I, section 17 of the Texas Constitution

34

provides that “[n]o person’s property shall be taken, damaged or destroyed or

applied to public use without adequate compensation being made . . . .” TEX. CONST.,

ART. I, §17. Absent a cognizable property interest, a claimant is not entitled to

compensation under article I, section 17. See Tarrant County v. Ashmore, 635

S.W.2d 417, 422 (Tex. 1982). The takings provision of the Texas Constitution is

comparable to the federal takings clause. See Sheffield Devel. Co. v. City of Glenn

Heights, 140 S.W.3d 660, 669 (Tex. 2004). Both provisions recognize that, while

“all property is held subject to the valid exercise of the police power,” a regulation

may, under some circumstances, constitute a taking requiring compensation. Id. at

670 (quoting City of College Station v. Turtle Rock Corp., 680 S.W.2d 802, 804

(Tex. 1984)).

Texas Education Code §12.128 states that all property purchased or leased

with funds received by the charter holder under TEX. EDUC. CODE §12.106 is

considered to be public property for all purposes under state law and is held in trust

for the students of the open-enrollment charter school. ACT’s contract for its charter

has been revoked, and, by law, a revoked charter school may not continue to operate

under Subchapter D of Texas Education Code Chapter 12 (providing for the

operation of an open-enrollment charter school) and may not continue to receive

funds. See TEX. EDUC. CODE §12.1161

ACT’s year ending August 31, 2011 AFR, ACT clearly listed as state

property: all of its cash, land, buildings and improvements, vehicles and

35

approximately 92% of its furniture and equipment. RR, Def. exh. 1, p. 12; RR at 38:

24 – p. 39: 16. For the year ending August 31, 2012, ACT again listed as state

property: all of its cash, land, buildings and improvements, vehicles and

approximately 92% of its furniture and equipment. RR, Def. exh. 2, p. 12; RR at 46:

23 – p. 47: 11. Again, in the year ending on August 31, 2013, ACT listed all of its

cash, land, buildings and improvements, vehicles and approximately 90% of its

furniture and equipment as being state owned. RR, Def. exh. 3, p. 14. Moreover,

ACT’s 2014 AFR acknowledged that 100% of its land and improvements, building

improvements, vehicles, furniture and equipment were state or federally owned. CR

at 395.

The law is clear: public property may only be used in the operation of a public

school. TEX. EDUC. CODE §12.128(a)(2). Additionally, section 12.107 of the

Education Code clearly provides that funds received by a charter holder pursuant to

section 12.106 are public funds held in trust by the charter holder for the benefits of

students of the open-enrollment charter school. TEX. EDUC. CODE §12.107. Since

ACT may not continue to operate a public school after revocation, pursuant to TEX.

EDUC. CODE §12.1161, ACT must return this state property as directed by the

Commissioner. TEX. EDUC. CODE §12.128(c). In this case, the only property subject

to return to TEA would be the property identified by ACT as being owned by the

state, and any state funds held in trust by the former charter holder that no longer

operates an open-enrollment charter.

36

2. The Texas Education Code does not violate the Open Courts

Provision.

ACT claims that the regulations regarding individual ratings violate the Open

Courts provision of the Texas Constitution by not allowing charter schools the

opportunity to seek redress from the courts. CR at 15. The Open Courts Provision

provides that “all courts shall be open, and every person for any injury done him, in

his lands, goods, person or reputation, shall have remedy by due course of law.”

Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401, 410 (Tex. 1997) (quoting TEX. CONST.

ART. I, §13). The Open Courts provision affords three distinct protections. First,

courts must be open and operating. Id. Second, citizens must have access to the

courts unimpeded by unreasonable financial barriers. Id. Finally, the law must

afford meaningful legal remedies to Texas citizens, so the Texas legislature may not

abrogate the right to assert a well-established common-law cause of action. Id. The

Open Courts provision applies only to statutory restrictions of a cognizable common

law cause of action. Id.

However, “there is no common-law cause of action for judicial review of an

agency’s administrative act.” Creedmoor–Maha, 307 S.W.3d at 524 (quoting City

of Port Arthur v. Southwestern Bell Tel. Co., 13 S.W.3d 841, 845 (Tex.App.—Austin

2000, no pet.)). Further, ACT only cites a violation of the Open Courts Provision

with regard to its non-existent property interest in its charter. CR at 15. Finally, and

most importantly, ACT has demonstrated no right to judicial review of TEA’s

37

accountability ratings appeals or revocation decision. Thus, ACT failed to plead a

violation of the Open Courts Provision.

III. ACT’S ULTRA V IRES CLAIMS ARE MERITLESS, BARRED BY SOVEREIGN

IMMUNITY, AND DO NOT SUPPORT THE DISTRICT COURT’S FINDING THAT

ACT WOULD LIKELY SUCCEED ON THE MERITS OF ITS CLAIMS.

A. ACT failed to allege that the Commissioner acted without legal

authority or failed to perform a ministerial act.

To proceed in a suit against State entities and officials, the plaintiff must either

plead and prove a waiver of sovereign immunity or allege that the State official acted

without legal authority, or ultra vires, which is a suit where sovereign immunity is

not implicated because a State official’s illegal or unauthorized actions are not

considered acts of the State. City of El Paso v. Heinrich, 284 S.W.3d 366, 370-72

(Tex. 2009) (citing Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401, 404 (Tex. 1997);

Creedmoor–Maha, 307 S.W.3d at 514; Combs v. City of Webster, 311 S.W.3d 85,

94 (Tex.App.—Austin 2009, pet. denied).

The law distinguishes between suits that implicate sovereign immunity and

those that do not. “[A] suit challenging a specific administrative order implicates

sovereign immunity because it seeks to control state action — it seeks to restrain the

State or its officials in the exercise of discretionary statutory or constitutional

authority.” Creedmoor–Maha, 307 S.W.3d at 515 (citing Texas Dept. of Protective

and Regulatory Services v. Mega Child Care, Inc., 145 S.W. 3d at 198). Conversely,

38

an ultra vires suit must allege that a state actor acted without legal authority.

Heinrich, 284 S.W.3d at 372-73.

“A suit asserting that a government officer acted without legal authority or

seeking to compel him to comply with statutory or constitutional provisions is an

ultra vires suit and is not subject to pleas of governmental immunity. Such a suit, in

effect, does not seek to alter government policy; it seeks to reassert the control of

and enforce existing policy of the governmental entity.” Houston Belt & Terminal

Ry. Co. v. City of Houston, 424 S.W.3d 663, 668 (Tex.App.–Houston [14th Dist.]

2014, pet. filed) (citing Heinrich, 284 S.W.3d at 371–72).

A suit that does not allege that a state actor acted without legal authority,

“implicates sovereign immunity because it seeks to ‘control state action,’ to dictate

the manner in which officers exercise their delegated authority.’” See Heinrich, 284

S.W.3d at 372; Creedmoor–Maha, 307 S.W.3d at 515–16. In other words, unless a

suit alleges that a state official acted without legal authority or failed to perform a

ministerial duty, then the assumption is that the state official acted with

discretionary, legal authority and the suit seeks to control this lawful conduct. See

Creedmoor–Maha, 307 S.W.3d at 515–16.

ACT requested that the trial court enter declarations specifically (i) reversing

the administrative decision of the Commissioner to revoke its charter; and (ii)

challenging TEA’s use of what it considered was incorrect data to calculate ACT’s

39

financial and academic accountability ratings without giving ACT the opportunity

to submit correct information well after the deadline to do so.

The Commissioner did not act ultra vires in revoking ACT charter or by

considering the data originally submitted by ACT to determine ACT’s accountability

ratings considering the plain language of the Texas Education Code and the facts of

this case. The information provided by ACT was reviewed by ACT’s auditor who

specifically noted ACT’s deficiencies. RR at 40: 5-19; RR, Def. Ex. 3, p. 11.

However, instead of addressing those deficiencies, ACT simply reviewed the AFR

and affirmed that the information was true and correct prior to submitting it to TEA.

RR at 35: 5-17; RR at Def. Ex. 1, Certification page; 44: 24-p. 45: 6 (“Correct.”);

RR at 36: 16- p. 37: 2.

Based on this information, TEA determined that ACT was underperforming

financially for three years in a row and also found that ACT needed substantial

improvement of its academic accountability based on its 2013 information. CR at

358, ¶5.

Because ACT had four failing accountability ratings in the last three years,

the Commissioner was mandated to revoke its charter, and the Commissioner,

therefore, acted under such statutory authority in revoking ACT’s charter. See, e.g.

Sw. Pharmacy Solutions, Inc. v. Tex. Health & Human Servs. Comm’n, 408 S.W.3d

549, 561-62 (Tex. App.—Austin 2013, pet. denied) (rejecting ultra vires claim

where agency’s construction of statute was reasonable); see also supra, Statement

40

of Facts, Part I, (Sunset Commission recommending statute be amended to “ensure

students do not continue to attend a school lacking a quality education or with serious

financial problems that could affect the school and, ultimately, a student’s academic

progress.”).

B. ACT is seeking retroactive relief which is unavailable in an ultra

vires action.

Sovereign immunity does not generally shield governmental agencies from

suits for equitable relief for a violation of constitutional rights. See Heinrich, 284

S.W.3d at 373 n. 6; City of Elsa v. M.A.L., 226 S.W.3d 390, 392 (Tex. 2007); City

of Beaumont v. Bouillion, 896 S.W.2d 143, 149 (Tex. 1995) (determining that no

private right for damages was permitted for violations of state constitutional rights

and vacating jury award of damages). However, ACT seeks an injunction that

addresses past decisions. CR at 18-20. If the relief sought by ACT effectively seeks

to control the TEA’s or the Commissioner’s lawful, discretionary actions, then

sovereign immunity is still implicated and the trial court erred in denying TEA’s

Plea to the Jurisdiction based on sovereign immunity. Heinrich, 284 S.W.3d at 370-

72; Creedmoor–Maha, 307 S.W.3d at 515.

“Equitable relief is a prospective remedy, intended to prevent future injuries,”

Adler v. Duval County School Bd., 112 F.3d 1475, 1477 (11th Cir. 1997), and for that

reason “[t]he sole function of an action for injunction is to forestall future

violations.” United States v. Or. State Med. Soc’y, 343 U.S. 326, 333 (1952); see

41

also Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 109 (1998) (“Because

respondent alleges only past infractions . . . and not a continuing violation or the

likelihood of a future violation, injunctive relief will not redress its injury.”); Reich

v. Occupational Safety & Health Review Comm’n, 102 F.3d 1200, 1202 (11th Cir.

1997) (“injunctive relief . . . addresses only ongoing or future violations”); Heinrich,

284 S.W.3d at 376 “[A] claimant who successfully proves an ultra vires claim is

entitled to prospective injunctive relief, as measured from the date of injunction.”).

Generally, the purpose of injunctive relief is to halt wrongful acts that are

threatened or in the course of accomplishment, rather than to grant relief against past

actionable wrongs or to prevent the commission of wrongs not imminently

threatened. See Texas Health Care Info. Council v. Seton Health Plan, Inc., 94

S.W.3d 841, 853 (Tex.App.—Austin 2002, no pet.); see also Webb v. Glenbrook

Owners Ass’n, 298 S.W.3d 374, 384 (Tex.App.—Dallas 2009, no pet.) (injunction

not available to “prevent commission of wrongs not imminently threatened.”). A

party seeking injunctive relief preventing alleged ultra vires acts must plead and

prove, among other things, existence of imminent harm, irreparable injury, and

absence of adequate remedy at law. See Lazarides v. Farris, 367 S.W.3d 788, 803

(Tex.App.—Houston [14th Dist.] 2012, no pet.); Texas Health Care Info. Council,

94 S.W.3d at 853. “To obtain equitable relief for past wrongs, a plaintiff must

demonstrate either continuing harm or a real and immediate threat of repeated injury

42

in the future.” Society of Separationists, Inc. v. Herman, 959 F.2d 1283, 1285 (5th

Cir.), cert. denied, 506 U.S. 866 (1992).

ACT specifically sought a declaration regarding factors the Commissioner

used in his accountability assessment which led to the revocation of ACT’s charter.

CR at 18. It sought to have the trial court declare certain factors in ACT’s favor and

then reapply those factors to its final accountability ratings for years prior to suit.

Id. ACT did not request prospective (future-seeking) relief, but rather retrospective

relief, seeking to remedy past harm it alleged that TEA committed against it by not

allowing alleged corrected data to be considered for the 2011, 2012, and 2013

accountability ratings. These forms of requested relief are solely to remedy past

alleged harm, which cannot be granted through an injunction.

IV. ACT FAILED TO DEMONSTRATE THE TRIAL COURT’S JURISDICTION AND,

THEREFORE, THE TRIAL COURT ERRED BY DENYING TEA’S PLEA.

The Commissioner revoked ACT’s charter because of academic or financial

substandard performance, or a combination of the two. Substandard academic

performance ratings are issued only when a critical mass of a charter school’s

students are not meeting standards on assessment instruments or are dropping out or

not completing high school. TEX. EDUC. CODE §39.053. Similarly, the Texas

Education Code requires that charter schools be assigned the lowest financial

accountability ratings when they show signs of financial stress or insolvency. Id.

§39.082(f).

43

The Legislature clearly chose to automatically revoke the charters of schools

that fail to meet accountability standards for three years in a row. The Commissioner

complied with the statute, and ACT’s revocation should have been effective on June

30, 2015. CR at 355. ACT sought the temporary injunction to delay the revocations

citing meritless constitutional and ultra vires claims, none of which demonstrated

that the trial court possessed jurisdiction to consider.

PRAYER

For the foregoing reasons, Commissioner Williams and the Texas Education

Agency respectfully request the Court reverse the trial court’s denial of their Plea to

the Jurisdiction and dismiss this case for lack of subject-matter jurisdiction.

Alternatively, Commissioner Williams and the TEA request the Court hold the trial

court’s September 4, 2015 temporary injunction order is void, to dissolve it, and

remand the case to the district court for further proceedings.

44

Respectfully submitted,

KEN PAXTON

Attorney General of Texas

CHARLES E. ROY

First Assistant Attorney General

JAMES E. DAVIS

Deputy Attorney General for Civil

Litigation

ANGELA COLMENERO

Division Chief

/s/ Erika M. Laremont

ERIKA M. LAREMONT

Attorney in Charge

Texas Bar No. 24013003

Office of the Attorney General

General Litigation Division

P.O. Box 12548, Capitol Station

Austin, TX 78711-2548

PHONE: (512) 475-4196;

FAX: (512) 320-0667

Erika.Laremont@texasattorneygeneral.gov

ATTORNEYS FOR APPELLANTS

45

CERTIFICATE OF COMPLIANCE

Pursuant to Tex. R. App. P. 9.4(i)(3), I certify that this brief contains 12,478

words, exclusive of the exempted portions in Tex. R. App. P. 9.4(i)(1).

/s/ Erika M. Laremont

ERIKA M. LAREMONT

Assistant Attorney General

CERTIFICATE OF SERVICE

I certify that a copy of the above Brief of Appellants was served by certified

mail, return receipt requested, on October 20, 2015 upon the following individuals

at the listed address:

D. Todd Smith

State Bar No. 00797451

SMITH LAW GROUP LLLP

1250 Capital of Texas Highway South

Three Cielo Center, Suite 601

Austin, Texas 78746

Stephen M. Foster

9013 Magna Carta Loop

Austin, Texas 78754

(512) 784-4367

/s/ Erika M. Laremont

ERIKA M. LAREMONT

Assistant Attorney General

46

No. 03-15-00528-CV

_____________________________

IN THE COURT OF APPEALS

FOR THE THIRD JUDICIAL DISTRICT

_____________________________

TEXAS EDUCATION AGENCY AND MICHAEL WILLIAMS,

COMMISSIONER OF EDUCATION, IN HIS OFFICIAL CAPACITY,

Appellants,

VS.

ACADEMY OF CAREERS AND TECHNOLOGIES, INC. D/B/A

ACADEMY OF CAREERS AND TECHNOLOGIES CHARTER SCHOOL,

Appellee.

______________________________

On Appeal from the 200th Judicial District Court of Travis County, Texas

Cause No. D-1-GN-15-002879

______________________________

APPENDIX OF APPELLANT

______________________________

APPENDIX

Tab A Amended Defendants’ Plea to the Jurisdiction and Response to

Plaintiff’s Request for Temporary Injunction and Exhibits

Tab B Plaintiff’s Response to Defendants’ Plea to the Jurisdiction

Tab C Defendants’ Reply to Plaintiff’s Response to Defendants’ Plea to the

Jurisdiction and Response to Plaintiff’s Request for Temporary

Injunction

Tab D Order Granting Temporary Injunction and Denying Defendant’s

Amended Plea to the Jurisdiction

Tab E-1 Adler v. Duval County School Bd., 112 F.3d 1475, 1477 (11th Cir. 1997)

Tab E-2 Bd. of Regents v. Roth, 408 U.S. 564, 577 (1972)

Tab E-3 Conn. Bd. of Pardons v. Dumschat, 452 U.S. 458, 464 (1981)

Tab E-4 Mikeska v. City of Galveston, 451 F.3d 376, 379 (5th Cir. 2006)

Tab E-5 Olim v. Wakinekona, 461 U.S. 238, 249 (1983)

Tab E-6 Paul v. Davis, 424 U.S. 693, 709 (1976) (quoting Roth, supra, at 577,)

Tab E-7 Phillips v. Washington Legal Foundation, 524 U.S. 156, 164 (1998)

Tab E-8 Pinnacle Charter Sch. v. Bd. of Regents, 108 A.D.3d 1024, 969

N.Y.S.2d 318, 320 (2013)

Tab E-9 Project Reflect, Inc. v. Metro Nashville Bd. of Pub. Educ., 947 F. Supp.

2d 868, 878-79 (M.D. Tenn. 2013)

Tab E-10 Project School v. City of Indianapolis, 2012 WL 3114573, *3 (S.D.

Indiana, July 31, 2012)

Tab E-11 Reach Academy for Boys & Girls, Inc. v. Delaware Dept. of Educ., 46

F.Supp.3d 455, 457 (D.Del. 2014)

Tab E-12 Reich v. Occupational Safety & Health Review Comm’n, 102 F.3d

1200, 1202 (11th Cir. 1997)

Tab E-13 Simi Inv. Co. v. Harris County, 236 F.3d 240, 249 (5th Cir. 2000), cert.

denied, 534 U.S. 1022 (2001).

Tab E-14 Society of Separationists, Inc. v. Herman, 959 F.2d 1283, 1285 (5th

Cir.), cert. denied, 506 U.S. 866 (1992).

Tab E-15 Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 109 (1998)

Tab E-16 Suryanto v. Att'y Gen. of U.S., 398 Fed.Appx. 830, 834 (3rd Cir. 2010)

Tab E-17 Town of Castle Rock v. Gonzales, 545 U.S. 748, 756 (2005)

Tab E-18 United States v. Or. State Med. Soc’y, 343 U.S. 326, 333 (1952)

Tab F Tex. Educ. Code § 12.115

Tab G Tex. Educ. Code, Subchapter C

Tab H Tex. Educ. Code, Subchapter D

Tab I Tex. Admin. Code § 97.1001 Amended 8-7-13 (2)

Tab J 19 TEX. ADMIN. CODE §109.1002, amended 10-18-11

Tab K 19 TEX. ADMIN. CODE §109.1002, amended 10-3-13

8/12/2015 3:38:21 PM

Velva L. Price

District Clerk

Travis County

CAUSE NO. D-1-GN-15-002879 D-1-GN-15-002879

Jessica Arzola

ACDEMY OF CAREERS AND § IN THE DISTRICT COURT

TECHNOLOGIES INC. d/b/a ACADEMY §

OF CAREERS AND §

TECHNOLOGIES CHARTER SCHOOL, §

Plaintiffs, §

§

v. § 98TH JUDICIAL DISTRICT

§

TEXAS EDUCATION AGENCY and §

MICHAEL WILLIAMS in his Official §

Capacity as the Commissioner of §

Education, § TRAVIS COUNTY, TEXAS

Defendants. §

AMENDED DEFENDANTS' PLEA TO THE JURISDICTION AND RESPONSE TO

PLANTIFF'S REQUEST FOR TEMPORARY INJUNCTION

TO THE HONORABLE JUDGE OF THE COURT:

COME NOW Defendants, Texas Education Agency ("TEA") and Michael L. Williams, in

his Official Capacity as the Commissioner ofEducation (individually "Williams" and, collectively

with TEA, the "Defendants"), and file this Amended Plea to the Jurisdiction.

I.

BACKGROUND

A. 2012 Sunset Advisory Commission and Changes to Texas Education Code.

The Sunset Advisory Commission ("Commission") reviewed the Texas Education Agency

in October 2012, preceding the commencement of the 83rd Texas Legislature. In its review, the

Commission identified the following issue: "TEA lacks a full range of tools to effectively address

poor academic performance and financial mismanagement at low-performing charter schools."

Ex. 1. In identifying this issue, the Commission noted that "a higher rate of charter schools

performed at an academically unacceptable level than school districts," and that "[ m ]any charter

schools also have poor financial performance, underscoring the importance of oversight of

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expenditure of state funds." !d. at 70-71. Significantly, the Commission found:

Charter schools have far more accountability problems requiring assignment of

interventions and sanctions, and ultimately, revocation of the charter. Charter

schools represent more than two-thirds, 71 percent, of schools assigned with

sanctions, even though charter schools make up only 17 percent of the total number

of districts and charters.

!d. at 71-72. Although TEA had the authority to close a charter school and revoke the charter, the

Commission criticized the process as unworkable, leaving students to be educated at

underperforming charter schools. !d. at 72.

Based on these findings, the Commission recommended a change in statute that required

the automatic revocation of a charter for failure to meet basic academic or financial accountability

standards for three years in a row. !d. at 79. It recommended that no appeal be permitted from the

revocation determination. According to the Commission, such a change in the law would "allow

the State to more quickly shut down the poorest performing charters, without years of litigation

during which time the school remains open. The recommendation would also ensure students do

not continue to attend a school lacking a quality education or with serious financial problems that

could affect the school and, ultimately, a student's academic progress." !d. at 79.

Thus, based on the Commission's recommendation, the 83rd Texas Legislature amended

section 12.115 of the Texas Education Code to make mandatory the revocation of any open-

enrollment charter school's charter if the school fails to meet financial and/or academic

performance ratings in certain years. The Commissioner of Education ("Commissioner") is now

required to revoke a school's charter if one of three scenarios arises:

(1) the charter holder has been assigned an unacceptable performance rating under

Subchapter C, Chapter 39 [of the Education Code] for the three preceding years;

(2) the charter holder has been assigned financial accountability performance rating

under Subchapter D, Chapter 39, indicating financial performance lower than

satisfactory for the three preceding school years; or

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(3) the charter holder has been assigned any combination of the [unacceptable ratings

under either subchapter].

TEX. EDUC. CODE§ 12.115(c).

Chapter 39, Subchapter C (academic performance) ratings to be considered are those

assigned to the school for 2009-2010, 2010-2011, and 2012-2013 rating years. !d. § 112.115(c-

1). However, "[f]or the purposes of revocation under Subsection (c)(1), performance during the

2011-2012 school year may not be considered." !d.; see also TEX. EDUC. CODE § 39.116(a) and

(f) (allowing commissioner of education to suspend academic performance rating during transition

period). The Subchapter D ratings to be considered are those assigned to the school for the 2010-

2011, 2011-2012, and 2012-2013 rating years. TEX. EDUC. CODE§ 12.115(c-1).

The findings of the Sunset Advisory Commission demonstrate that there is a compelling

state need to identify and close poor-performing charter schools in order to improve the choices

available to parents and students.

B. The Appeal Process as Defined in the Texas Education Code.

After a school district or charter school receives its accountability or financial ratings, it

has an opportunity to appeal the ratings to the Commissioner of Education. TEX. EDUC. CODE §

39.151(a). Should a charter school seek to appeal a financial or academic rating and notifies the

commissioner of such, the Commissioner must appoint a committee to make recommendations to

the commissioner on any challenge made to an agency decision. TEX. EDUC. CODE §39.151(b).

After considering the committee's recommendation, the Commissioner makes a final decision.

TEX. EDUC. CODE §39.151(d). The commissioner's decision following any appeal is final, and the

Legislature expressly prohibited any additional appeal from this final determination in "any other

proceeding" if the charter "has had an opportunity to challenge the decision under [section 31.151].

TEX. EDUC. CODE §39.151(e).

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A school district or charter school may also seek redress of the Commissioner's decision

to close a school to the State Office of Administrative Hearings ("SOAH"). TEX. EDUC. CODE§

39.152(a). The school must file a petition for review and include certain requirements for the

petition to be granted. 19 TAC § 156.1183. The decision of the administrative law judge is final

and may not be appealed. TEX. EDUC. CODE §39.152(c)(3). Strikingly absent is any mention of

judicial review of TEA's ratings or decision to revoke a charter.

C. The Texas Education Code Mandates Revocation of Plaintiff's Charter School.

Plaintiff Academy of Careers and Technology, Inc., d/b/a Academy of Careers and

Technology Charter School ("ACT") was originally issued a state charter in 1998. Ex. 2. In 2012,

2013, and 2014 TEA found that ACT failed to meet the state's financial accountability standards.

Ex. 3; Ex. 4; see also Pl. Orig. Petition, pp. 2-3. ACT did not file an appeal to these ratings until

2015. The committee recommended that the appeals be dismissed, and the Commissioner

followed the committee's recommendations. Ex. 5. ACT also failed to meet academic

accountability standards in 2014 and appealed the 2014 academic accountability rating to the

outside appeal committee. Ex. 6. The committee recommended that the appeal be dismissed, and

the Commissioner followed the committee's recommendation. Ex. 6. Under the Texas Education

Code, these decisions are not appealable. TEX. EDUC. CODE §39.151(e).

Commissioner Williams had no discretion but to revoke ACT's charter, since its failings

in 2012, 2013 and 2014 represented three consecutive years of failure as defined by Texas

Education Code§§ 12.115(c)(3) & 12.115(c-1). The TEA notified ACT of this fact on December

8, 2014. Ex. 3.

ACT sought an informal hearing regarding the revocation. Pl. Orig. Petition, p. 3. A

review was conducted, but the decision to revoke ACT's charter was sustained. Ex. 5. It is

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undisputed that ACT filed a petition for review seeking review of the revocation decision before

the State Office of Administrative Hearings ("SOAH"). Pl. Orig. Petition, p. 3. Because there

were no material factual issues in dispute, TEA filed a Motion for Summary Disposition, which

provided the basis for a final decision and order of SOAH upholding the Commissioner's decision

to revoke ACT's charter. Ex. 7. This decision is not subject to appeal. TEX. EDUC. CODE

§39.152(c)(3).

D. This Court Lacks Jurisdiction to Consider ACT's Claims.

In its Original Petition for Declaratory Action and For Temporary Restraining Order and

Temporary & Permanent Injunction, ACT's challenge fails to invoke the jurisdiction of this Court.

The Legislature has broad latitude to shape and define the public school system in Texas. As a

part of this discretion, the Legislature is free to have a stringent accountability system, and to even

eliminate the charter system altogether. To this end, the Legislature has designated SOAH as the

sole avenue for any administrative recourse a charter holder may seek in the event it disagrees with

TEA's assessment of its performance in connection with an action to revoke the charter holder's

charter. And, importantly, unlike many other administrative processes before SOAH, the

Legislature has specifically exempted these SOAH proceedings from further review in the State

District Courts, leaving SOAH as the ultimate arbiter of any charter holder's dispute with TEA on

all issues relevant to the instant claims.

II.

ARGUMENTS AND AUTHORITIES

A. Plea to the Jurisdiction- The Legal Standard

The Texas Supreme Court has long recognized that sovereign immunity, unless waived,

protects the State of Texas ("State"), its agencies, and its officials from lawsuits for damages,

absent legislative consent to sue the State. Tex. A & M Univ. Sys. v. Koseoglu, 233 S.W.3d 835,

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844 (Tex. 2007); Tex. Dep 't ofTransp. v. Jones, 8 S.W.3d 636, 638 (Tex. 1999) (per curiam); Fed.

Sign v. Tex. S. Univ., 951 S.W.2d 401, 405 (Tex. 1997). Sovereign immunity embraces two

principles: immunity from suit and immunity from liability. Fed. Sign, 951 S.W.2d at 638 (citing

Missouri Pac. R.R. Co. v. Brownsville Navigation Dist., 453 S.W.2d 812, 813 (Tex.1970)).

Immunity from suit prevents the State from being sued without legislative consent, even if the

States' liability is not disputed. !d. (citing Brownsville Navigation Dist., 453 S.W.2d at 813).

"Immunity from liability protects the State from judgments even if the Legislature has expressly

given consent to the suit." !d. (citing Brownsville Navigation Dist., 453 S.W.2d at 813) (emphasis

omitted).

A party may challenge the trial court's subject matter jurisdiction by filing a plea to the

jurisdiction. See Tex. Dep'tofParks & Wildlifev. Miranda, 133 S.W.3d217, 225-26 (Tex. 2004).

In deciding a plea to the jurisdiction, a court may not weigh the claims' merits, but must consider

only the plaintiff's pleadings and the evidence pertinent to the jurisdictional inquiry. County of

Cameron v. Brown, 80 S.W.3d 549, 555 (Tex. 2002); see also Miranda, 133 S.W.3d at 227. If a

defendant demonstrates that the trial court lacks jurisdiction, the burden shifts to the plaintiff to

establish a fact question on the issue of jurisdiction. Mission Consol. Indep. Sch. Dist. v. Garcia,

372 S.W.3d 629, 635 (Tex. 2012). If the relevant evidence is undisputed and fails to present a fact

question, the trial court should rule on the plea as a matter of law. !d.

Texas courts defer to the legislature to waive immunity from suit because this allows the

legislature to protect its policymaking function. Tex. Natural Res. Conservation Comm 'n v. IT-

Davy, 74 S.W.3d 849, 854 (Tex.2002). Any waiver of immunity must be expressed by clear and

unambiguous language. TEX. Gov'T CODE § 311.034.

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B. The District Court Lacks Subject Matter Jurisdiction to Review Defendants' Final

Decisions Regarding ACT's Financial and Academic Accountability Ratings and

SOAH's Final Decision and Order Regarding Revocation.

Through its Original Petition, ACT seeks judicial review of financial and academic ratings

issued by the Commissioner in 2012, 2013, and 2014 as well as SOAR's final decision and order

revoking the Plaintiff's contract for charter. Unless, the Texas Legislature has waived sovereign

immunity, either by statute or legislative resolution, this Court does not have jurisdiction to

consider Plaintiff's claims. Indeed, "[a] person may obtain judicial review of an administrative

action only if a statute provides that right, or the action adversely affects a vested property right or

otherwise violates a constitutional right." Tex. Dep 't of Protective & Regulatory Servs. v. Mega

Child Care, Inc., 145 S.W.3d 170, 173 (Tex. 2004). Such a right must be articulated by the

legislature through "clear and unambiguous language." !d. at 197.

1. There is no statutory provision which allows this Court to review TEA's rating

decisions.

Chapter 39 of the Texas Education Code, entitled "Public School System Accountability,"

governs the financial and academic performance system used to review both traditional public

schools and charter schools. See TEX. EDUC. CODE§ 39.054(b). Section 39.151, however, limits

the review of any accountability determination to the Commissioner and expressly exempts the

decision from review by SOAH or a State District Court. See id., at§§ 39.151(d) & (e).

Here, ACT has failed to point to any provision in the Texas Education Code or any other

statutory provision that provides for judicial review of TEA's financial and academic ratings that

form the basis of the decision to revoke. See Burkhalter v. Tx. State Bd. Of Med. Exam 'r, 918

S.W.3d 1, 3 (Tex. App.-Austin 1996)("The right to appeal from an administrative order to the

courts is not a natural or inherent one but is one that may be granted or withheld at the discretion

of the Legislature.").

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ACT claims that it failed the 2012 and 2013 financial accountability ratings due to "third

party" errors in its annual financial reports. See Pl. Orig. Petition, p. 2. The "third party" in

question is the independent auditor that ACT hired to prepare its annual financial report (AFR).

Ex. 8; see also TEC §44.008. In addition to preparing the report, ACT's Board of Trustees

approved the reports in question, as well as the report that led to the 2014 failed accountability

rating. TEC §44.008(d). While ACT characterizes the failures as "mutual" mistakes, the Agency

relied on the financial information submitted by ACT, who was responsible for submitting correct

data. Id at pp. 2-3.

ACT claims that the TEA rules impermissibly limited the appeal to errors made by TEA

and argues that the statute requires TEA to allow ACT to correct its allegedly erroneous data. Id

at pp. 3-4. However, the statute clearly allows the Commissioner to adopt rules for the review of

the accountability ratings. See TEC §39.151(a) " ... The Commissioner by rule shall provide a

process for a ... open enrollment charter school to challenge an agency decision made under this

chapter relating to an academic or financial accountability rating that affect the ... school."). The

Commissioner reasonably interpreted the term "appeal" to mean an opportunity to challenge the

Agency's rationale and methodology for issuing the rating, rather than an opportunity for ACT to

re-submit data. An appeal is typically limited to the facts under which a decision was made, and

frequently will not allow for additional evidence to be submitted. ACT, therefore, has no

procedural or substantive due process right to re-submit its data.

Finally, while ACT complains that the appeal was limited, ACT cannot and does not allege

that it provided "corrected" financial information in its appeals. ACT did file appeals for all the

accountability ratings at issue. Exs. 4 and 6. However, ACT does not allege that it provided new

financial information in its appeals that the Agency rejected. Moreover, while ACT claims that

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the audited financial statements it submitted were incorrect, it has not provided new audited

financial statements to substantiate this claim.

2. There is no statutory provision which allows this Court to review TEA's

revocation decision.

Section 12.115(c) of the Texas Education Code provides:

The commissioner shall revoke the charter of an open-enrollment charter school if:

(1) the charter holder has been assigned an unacceptable performance rating

under Subchapter C, Chapter 39, for the three preceding years;

(2) the charter holder has been assigned an unacceptable financial

accountability rating under Subchapter D, Chapter 39, indicating financial

performance lower than satisfactory for the three preceding school years; or

(3) the charter holder has been assigned any combination of the ratings

described by Subdivision (1) or (2) for the three preceding school years.

TEX. EDUC. CODE §12.115(c).

The Legislature has mandated that the Commissioner's decision to revoke a charter can be

reviewed only by SOAH, and that an ALJ's review of that charter-revocation decision is final and

not subject to appeal. Section 12.116(c) provides:

A decision by the commissioner to revoke a charter is subject to review by the State

Office of Administrative Hearings. Notwithstanding Chapter 2001, Government

Code:

(1) the administrative law judge shall uphold a decision by the

commissioner to revoke a charter unless the judge finds the decision

is arbitrary and capricious or clearly erroneous; and

(2) a decision of the administrative law judge under this subsection is

final and may not be appealed.

TEX. EDUC. CODE § 12.116(c). Accordingly, the Commissioner's revocation decision is final

unless it is appealed to SOAH, and the SOAH ALJ's decision either upholding or reversing the

Commissioner's decision is not subject to appeal. Because ACT has no right to judicial review of

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the revocation decision, the district court lacks jurisdiction over this suit. See Texas Dep 't of

Transp. v. Jones, 8 S.W.3d 636, 638 (Tex. 1999); Bacon v. Hist. Comm 'n, 411 S.W.3d 161, 173-

74 (Tex. App.-Austin 2013, no pet.) ("One implication of these principles is that there is no

general right to challenge or seek review of a state agency order or decision in Texas state court;

to the contrary, state agency decisions generally cannot be challenged in court unless the

Legislature has enacted a statute expressly authorizing such review."); Creedmoor-Maha Water

Supply Corp, 307 S.W.3d 505, 515 (Tex. App.-Austin 2010, no pet.) (UDJA actions "that seek

declaratory or injunctive relief against agency orders from which the legislature has not granted a

right of judicial review" are barred by state sovereign immunity.); KEM Tex., Ltd. v. Texas Dep't

of Transp., No. 03-08-00468-CV, 2009 Tex. App. LEXIS 4894, at *8-18 (Tex. App.-Austin

2009, no pet.) (challenge to non-appealable agency order barred by sovereign immunity).

C. ACT Has No Property Interest that Implicates a Due Process Violation.

ACT complains that it did not receive all the process it was due regarding the accountability

ratings. See Pl. Orig. Petition, p. 4. "Due process is implicated when the state or its agents deprive

a person of a protected liberty or property interest." Bd. of Regents v. Roth, 408 U.S. 564, 569

(1972). At issue is whether ACT has a constitutionally-protected property interest in its charter or

its accountability ratings. If a constitutionally-protected property interest is at stake, then the Court

determines what process is sufficient to protect that interest. "To have a property interest in a

benefit, a person clearly must have more than an abstract need or desire" and "more than a

unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to it." !d. at

577. Such entitlements are, "'of course ... not created by the Constitution. Rather, they are created

and their dimensions are defined by existing rules or understandings that stem from an independent

source such as state law.'" Paul v. Davis, 424 U.S. 693, 709 (1976) (quoting Roth, supra, at 577,);

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see also Phillips v. Washington Legal Foundation, 524 U.S. 156, 164 (1998).

Here, ACT asserts its property interest in its charter through the implication that such an

interest was created in 1998 when ACT was granted its charter by the TEA. See Pl. Orig. Pet. at

2. Indeed, the ability to grant a charter is left entirely up to the discretion of the Commissioner.!

The Texas Education Code §12.101 provides, "[T]he commissioner may grant a charter on the

application of an eligible entity for an open-enrollment charter school to operate in a facility of a

commercial or nonprofit entity, an eligible entity or a school district, including a home-rule school

district." (emphasis added). Thus, even if a charter school meets all of the statutory requirements,

the Commissioner may still deny the charter.

However, the statute that granted ACT's charter does not create a constitutionally-

protected property interest. "To determine whether a particular statute creates a constitutionally-

protected property interest, we ask whether the statute or implementing regulations place

'substantive limitations on official discretion."' Lee v. Tex. Workers' Compensation Comm 'n, 272

S.W.3d 806, 817 (Tex.App.-Austin 2008) (citing Olim v. Wakinekona, 461 U.S. 238, 249

( 1983)). If "the legislature leaves final determination of which eligible individuals receive benefits

to the unfettered discretion of administrators, no constitutionally-protected property interests

exists." !d. at 817-18 (citing Roth, 408 U.S. at 567). Thus, if the decision to grant the charter is

left to the discretion of the commissioner, no property interest is, therefore, created by granting the

charter. See Town of Castle Rock v. Gonzales, 545 U.S. 748, 756 (2005) ("Our cases recognize

that a benefit is not a protected entitlement if government officials may grant or deny it in their

discretion."); see also Ex parte Abell, 613 S.W.2d 255, 262 (Tex. 1981) ("When the authority

granting the right has the power and discretion to take that right away, it cannot be said to be a

1 This power was formerly held by the State Board of Education. This authority was transferred to the

Commissioner by Senate Bill2 in 2013. Acts 2013, 83rd Leg., ch. 1140 (S.B. 2), §9, effective September 1, 2013.

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vested right"); Seguin v. Bexar Appraisal Dist., 373 S.W.3d 699, 709 (Tex. App.-San Antonio

2012, pet. denied) (taxpayer did not have vested property right in disabled-veteran tax exemption

that was "legislatively revocable"); Klumb v. Houston Mun. Emp. Pension Sys., 405 S.W.3d 204,

226 (Tex. App.-Houston [1st Dist.] 2013, pet. filed) ("[A] pensioner in a statutory pension plan

does not have a vested right to his pension."); McAllen Hasps., L.P. v. Suehs, 426 S.W.3d 304, 313

(Tex. App.-Amarillo 2014, no pet.) (hospitals lack vested property right/interest in Medicaid

reimbursement payments that were "contingent and potential rather than definitive and

unconditional" prior to utilization review); Scott v. Alphonso Crutch LCS Charter Sch., Inc., 392

S.W.3d 165, 170-71 (Tex. App.-Austin 2010, pet. denied) (concluding that, because allocation

to which charter school was entitled for a given time period was subject to change depending on

updated attendance figures during school year, the school's "interest in a definite amount" was not

vested and "remain[ ed] contingent rather than unconditional, and potential rather than definitive").

Additionally, although there is no Texas case directly dealing with a charter school's right

to its charter contract, there are two out-of-state federal district court cases that directly address

the issue. See University of Tex. Med. Sch. v. Than, 901 S.W.2d 926, 929 (Tex.1995) (citing

Mellinger v. City of Houston, 68 Tex. 37, 3 S.W. 249, 252-53 (1887) (following contemporary

federal due process interpretations of procedural due process issues). In Project Reflect, Inc.

Smithson Craighead Middle School v. Metropolitan Nashville Board of Public Education, the

Tennessee district court considered whether a charter school sponsor (an entity similar to a charter

holder in Texas) had a protected property interest in continuation of a charter school. 947

F.Supp.2d 868, (M.D. Tennessee, 2013). In determining the charter lacked such an interest, the

court noted that:

the statutory language and the charter agreement do not support Plaintiffs claim of

a property interest protected by state law. "[A] party cannot possess a property

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interest in the receipt of a benefit when the state's decision to award or withhold the

benefit is wholly discretionary." The charter agreement incorporates Tenn. Code

Ann. § 49-13-122(a), which provides that "A public charter school agreement may

be revoked or denied renewal by the final chartering authority if the chartering

authority determines that the school ... (2) Received identification as a priority

school, as defined by the state's accountability system." "The word 'may'

customarily connotes discretion."

!d. at 878 (citations omitted). It went on to state:

the Tennessee charter school statute repeatedly declares its purpose and intention

to provide the state department of education and local school systems with

"options," "alternative means," and "flexibility"-hardly the language of a statute

creating a property interest. The law constrains this discretion only by requiring

the chartering authority to state its reason( s) for revoking the charter. If, as in this

case, the revocation occurs because of the school's priority status, no appeal is

permitted-again emphasizing state discretion, not the charter holder's property

rights.

!d. at 879 (citations omitted).

Similarly, in Project School v. City of Indianapolis, the district court held that Indiana's

charter school statue and the facts in the case repudiated the plaintiff charter school's argument

that it had a protected property interest in its continued ability to operate a school. No. 1: 12-cv-

01028-SEB-DKL, 2012 WL 3114573, *3 (S.D. Indiana, July 31, 2012). Because the charter was

subject to revocation if certain conditions were met and because the sponsor was not required to

grant a charter to an organizer to operate a charter school in the first place, the court held that the

charter's "argument that somehow its existence is a 'property right' for purposes of the Fourteenth

Amendment due process is a nonstarter." !d. at *4.

ACT has, therefore, failed to identify a property interest that did not receive procedural or

substantive due process consideration.

D. ACT's Takings Claim Fails Because it Only Possesses State and Federal Property.

ACT claims that it has a property interest in the property and funds that it has in its

possesswn. See Pl. Orig. Pet. at 8. TEX. EDUC. CODE § 12.128 states that all property purchased or

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leased with funds received by the charter holder under TEX. EDUC. CODE§ 12.106 are considered

to be public property for all purposes under state law and is held in trust for the students of the

open-enrollment charter school. ACT's contract for charter has been revoked, and TEX. EDUC.

CODE §12.1161 states that a revoked charter school may not continue to operate under Subchapter

D of Texas Education Code Chapter 12 (providing for the operation of an open-enrollment charter

school) and may not continue to receive funds.

ACT's last Annual Financial Report acknowledges that all of the assets held by ACT are

either state property or federal property. Ex. 8. This public property may only be used in the

operation of a public school. TEX. EDUC. CODE§ 12.128(a)(2). Since ACT may not continue to

operate a public school after revocation, pursuant to TEX. EDUC. CODE §12.1161, ACT must

return this state property as directed by the Commissioner. TEX. EDUC. CODE§ 12.128(c).

E. The Commissioner's Discretion in not Overbroad.

ACT argues that the entire statutory scheme is overbroad. While the statutory scheme

grants the Commissioner discretion in the issuance of ratings and making a revocation decision,

the statute provides safeguards. For accountability determinations, there is a right to challenge

before a committee composed entirely of non-TEA employees. TEC §39.151(b). For revocation

decisions, there is a right to challenge such decisions through a SOAH substantial evidence review.

TEC §12.116(c).

F. ACT Failed to Properly Plead a Violation of the Open Courts Provision.

The Open Courts provision of the Texas Constitution provides that "all courts shall be

open, and every person for any injury done him, in his lands, goods, person or reputation, shall

have remedy by due course oflaw." Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401,410 (Tex. 1997)

(quoting TEX. CONST. ART. I,§ 13). The Open Courts provision affords three distinct protections.

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First, courts must be open and operating. !d. Second, citizens must have access to the courts

unimpeded by unreasonable financial barriers. !d. Finally, the law must afford meaningful legal

remedies to Texas citizens, so the Texas legislature may not abrogate the right to assert a well-

established common law cause of action. !d. The Open Courts provision applies only to statutory

restrictions of a cognizable common law cause of action. !d.

First, "there is no common-law cause of action for judicial rev1ew of an agency's

administrative act." Creedmoor-Maha Water Supply Corp. v. Tex. Comm'n on Envtl. Quality, 307

S.W.3d 505, 524 (Tex.App.-Austin 2010, no pet.) (quoting City of Port Arthur v. Southwestern

Bell Tel. Co., 13 S.W.3d 841, 845 (Tex.App.-Austin 2000, no pet.)). Second, ACT only cites a

violation of the Open Courts Provision with regard to its non-existent property interest in its

charter. Pl. Orig. Petition, pp. 13. Finally, and most importantly, ACT has demonstrated no right

to judicial review of Defendants' accountability ratings appeals or revocation decision. Thus, ACT

failed to plead a violation of the Open Courts Provision.

G. Commissioner Williams Did Not Act Ultra Vires, and is, Therefore, Entitled To

Sovereign Immunity.

1. ACT failed to allege that Commissioner Williams acted without legal authority

or failed to perform a ministerial act.

To proceed in a suit against State entities and officials, the plaintiff must either plead and

prove a waiver of sovereign immunity or allege that the State official acted without legal authority,

or ultra vires, which is a suit where sovereign immunity is not implicated because a State official's

illegal or unauthorized actions are not considered acts of the State. City of El Paso v. Heinrich,

284 S.W.3d 366,370-72 (Tex. 2009) (citing Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401,404 (Tex.

1997); Creedmoor-Maha Water Supply Corp. v. Tex. Comm'n on Envtl. Quality, 307 S.W.3d 505,

514 (Tex.App.-Austin 2010, no pet.); Combs v. City ofWebster, 311 S.W.3d 85,94 (Tex.App.-

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307

Austin 2009, pet. denied).

The law distinguishes between suits that implicate sovereign immunity and those that do

not. "[A] suit challenging a specific administrative order implicates sovereign immunity because

it seeks to control state action - it seeks to restrain the State or its officials in the exercise of

discretionary statutory or constitutional authority. " Creedmoor-Maha, 307 S. W .3d at 515 (citing

Tex. Dep 't of Protective & Regulatory Servs. v. Maga Child Care, Inc., 145 S.W. 3d 170, 198

(Tex. 2004)). Conversely, an ultra vires suit must allege that a state actor acted without legal

authority. Heinrich, 284 S.W.3d at 372-73. "A suit asserting that a government officer acted

without legal authority or seeking to compel him to comply with statutory or constitutional

provisions is an ultra vires suit and is not subject to pleas of governmental immunity. Such a suit,

in effect, does not seek to alter government policy; it seeks to reassert the control of and enforce

existing policy of the governmental entity." Houston Belt & Terminal Ry. Co. v. City ofHouston,

424 S.W.3d 663, 668 (Tex.App.-Houston [141h Dist.] 2014, pet. filed) (citing Heinrich, 284

S.W.3d at 371-72). A suit that does not allege that a state actor acted without legal authority,

"implicates sovereign immunity because it seeks to 'control state action,' to dictate the manner in

which officers exercise their delegated authority."' See Heinrich, 284 S.W.3d at 372; Creedmoor-

Maha, 307 S.W.3d at 515-16. In other words, unless a suit alleges that a state official acted

without legal authority or failed to perform a ministerial duty, then the assumption is that the state

official acted with discretionary, legal authority and the suit seeks to control this lawful conduct.

See Creedmoor-Maha, 307 S.W.3d at 515-16.

ACT's seeks this Court to enter declarations specifically challenging the administrative

decision of Commissioner Williams to use prior-year data for calculation of the following year's

accountability ratings. See Pl. Orig. Petition, p. 9. The Commissioner did not act ultra vires in

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using prior-year data for the following year's accountability because to do otherwise would yield

the absurd result of requiring consideration of a school-year rating for revocation purposes while

simultaneously prohibiting it. See, e.g., Jose Carreas, MD., P.A. v. Marroquin, 339 S.W.3d 68,

73 (Tex. 2011) ("We ... interpret statutes to avoid an absurd result."). ACT's claim is particularly

weak in light of the judicial deference given to an agency's reasonable interpretation of a statute it

is charged with enforcing. See, e.g. Sw. Pharmacy Solutions, Inc. v. Tex. Health & Human Servs.

Comm 'n, 408 S.W.3d 549, 561-62 (Tex. App.-Austin 2013, pet. denied) (rejecting ultra vires

claim where agency's construction of statute was reasonable). Finally, ACT's interpretation would

frustrate the legislative intent behind section 12.115(c-1) by delaying another year the issuance of

performance ratings. See Hunter v. Fort Worth Capital Corp., 620 S.W.2d 547, 552 (Tex.1981)

(courts should not insert words in a statute except to give effect to clear legislative intent); see

supra, Statement of Facts, Part I, (Sunset Commission recommending statute be amended to

"ensure students do not continue to attend a school lacking a quality education or with serious

financial problems that could affect the school and, ultimately, a student's academic progress.");

l.CR.343.

2. ACT is seeking retroactive relief which is unavailable in an ultra vires action.

Sovereign immunity does not generally shield governmental agencies from suits for

equitable relieffor a violation of constitutional rights. See Heinrich, 284 S.W.3d at 373 n. 6; City

of Elsa v. MA.L., 226 S.W.3d 390, 392 (Tex. 2007); City of Beaumont v. Bouillion, 896 S.W.2d

143, 149 (Tex. 1995) (determining that no private right for damages was permitted for violations

of state constitutional rights and vacating jury award of damages). However, ACT seeks an

injunction that addresses past decisions. Pl. Orig. Petition, pp. 13-15. If the relief sought by ACT

effectively seeks to control the TEA's or Commissioner Williams' lawful, discretionary actions,

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then sovereign immunity is still implicated. Heinrich, 284 S.W.3d at 370-72; Creedmoor-Maha,

307 S.W.3d at 515.

"Equitable relief is a prospective remedy, intended to prevent future injuries," Adler v.

Duval County School Bd., 112 F.3d 1475, 1477 (11th Cir. 1997), and for that reason "[t]he sole

function of an action for injunction is to forestall future violations." United States v. Or. State

Med. Soc y, 343 U.S. 326, 333 (1952); see also Steel Co. v. Citizens for a Better Env 't, 523 U.S.

83, 109 (1998) ("Because respondent alleges only past infractions ... and not a continuing

violation or the likelihood of a future violation, injunctive relief will not redress its injury."); Reich

v. Occupational Safety & Health Review Comm 'n, 102 F.3d 1200, 1202 (11th Cir. 1997)

("injunctive relief ... addresses only ongoing or future violations"); Heinrich, 284 S.W.3d at 376

"[A] claimant who successfully proves an ultra vires claim is entitled to prospective injunctive

relief, as measured from the date of injunction.").

Generally, the purpose of injunctive relief is to halt wrongful acts that are threatened or in

the course of accomplishment, rather than to grant relief against past actionable wrongs or to

prevent the commission of wrongs not imminently threatened. See Texas Health Care Info.

Council v. Seton Health Plan, Inc., 94 S.W.3d 841, 853 (Tex.App.-Austin 2002, no pet.); see

also Webb v. Glenbrook Owners Ass 'n, 298 S.W.3d 374, 384 (Tex.App.-Dallas 2009, no pet.)

(injunction not available to "prevent commission of wrongs not imminently threatened."). A party

seeking injunctive relief preventing alleged ultra vires acts must plead and prove, among other

things, existence of imminent harm, irreparable injury, and absence of adequate remedy at law.

See Lazarides v. Farris, 367 S.W.3d 788, 803 (Tex.App.-Houston [14th Dist.] 2012, no pet.);

Texas Health Care Info. Council, 94 S.W.3d at 853. "To obtain equitable relief for past wrongs,

a plaintiff must demonstrate either continuing harm or a real and immediate threat of repeated

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injury in the future." Society of Separationists, Inc. v. Herman, 959 F.2d 1283, 1285 (5th Cir.),

cert. denied, 506 U.S. 866 (1992).

ACT specifically seeks a declaration regarding factors Commissioner Williams used to in

his accountability assessment which led to the revocation of ACT's charter. Pl. Orig Pet. p. 16. It

seeks to have the Court declare certain factors in ACT's favor and then reapply those factors to its

accountability ratings. !d. ACT's requests are not prospective (future-seeking) in nature, but

rather, are retrospective, seeking to remedy past harm. These forms of requested relief are solely

to remedy past alleged harm, which cannot be sought through an injunction.

H. This Court Lacks Jurisdiction to Hear Any of ACT's Claims

1. ACT has no appeal as of right to a state district court.

For the reasons outlined above, ACT is limited in any challenge to the decisions raised in

this case to, at most, a proceeding before SOAH. This is the extent of ACT's right to appeal. In

fact, ACT did seek appeal of many of the granular complaints listed in its Original Petition. For

those issues, ACT's appellate rights began and ended with the appeals committee, and there is no

further right to appeal to this Court or elsewhere. ACT had a right to appeal the revocation decision

to SOAH, an appeal that it pursued and lost, and it, was therefore, provided with all of the

procedural due process to which it was entitled.

2. ACT has no constitutional interest beyond those defined by the

contractual and statutory scheme for charter schools.

ACT wishes to collaterally attack many decisions of TEA, up to and including the

revocation decision in this Court. However, as outlined above, ACT has no constitutionally

protected interest that would warrant review by a District Court. The Legislature has broad

discretion to require charter schools to meet any set of performance criteria it wishes to set. It is

entirely up to a charter school to either comply with those requirements or forfeit its charter. There

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is no third option to ask a Court to forgive any charter school from the obligations imposed upon

the charter school by the state. Indeed, the Texas statutory scheme that governs charter schools is

subject to amendment and could be replaced or deleted entirely.

3. The appointment of a conservator is not ripe/no legal injury.

ACT argues that the appointment of a conservator constitutes a taking of ACT's property

without due process. Pl. Orig. Petition, p. 16. ACT also argues the TEC §12.128 is

unconstitutional. Pl. Orig. Petition, p. 17. However, ACT's own financial report acknowledges

that all the property in the possession of ACT is either state or federal property, therefore there is

no takings issue for the court to adjudicate. Ex. 8.

4. Charter schools, as governmental entities, cannot sue the state for constitutional

violations.

That ACT is considered a governmental entity, which cannot acquire vested rights against

the State, further precludes its arguments. Accordingly ACT cannot bypass the statutory bar on

judicial review of revocation decisions by claiming a constitutional violation. LTTS Charter

School v. C2 Construction, 342 S.W.3d 73, 76 (Tex. 2011).

5. The "high risk" designation of ACT by TEA is not a subject for relief in state

court.

ACT has requested that the court prohibit TEA from continuing to apply a "high risk"

designation to ACT's federal grant reimbursement requests. See Pl. Orig. Petition, p. 15. This

requests fails for two reasons: 1) the designation has already been made and, is therefore, not

subject to prohibitory injunctive relief; and 2) ACT has not been denied federal funds, which would

entail offering procedural due process; instead, ACT must simply meet additional requirements to

receive federal grant fund reimbursements. Ex. 9. ACT, is not, therefore, entitled to any relief

regarding the "high risk" designation.

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PRAYER

WHEREFORE, PREMISES CONSIDERED, Defendants pray that Plaintiff take nothing

by its suit that all costs be taxed and adjudged against Plaintiff, and that Defendants be granted

such other and further relief to which they may be justly entitled.

Respectfully submitted,

KEN PAXTON

Attorney General of Texas

CHARLES E. ROY

First Assistant Attorney General

JAMES E. DAVIS

Deputy Attorney General for Civil Litigation

ANGELA V. COLMENERO

Division Chief- General Litigation

/s/ EvlM;;vlvl. L(MI'~

ERIKA M. LAREMONT

State Bar No. 24013003

Assistant Attorney General

General Litigation Division

Post Office Box 12548, Capitol Station

Austin, Texas 78711-2548

512-463-2120 (Telephone)

512-320-0667 (Facsimile)

erika.l aremont(fi{texasattomeygencral. gov

ATTORNEYS FOR DEFENDANTS

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CERTIFICATE OF SERVICE

I hereby certify that on August 12, 2015, the foregoing document was delivered by

telephonic document transfer to the following:

Stephen M. Foster

90 13 Magna Carta Loop

Austin, Texas 78754

(512) 784-4367

Attorneys for Plaintiff

/s/ EvlM;;vlvl. L(MI'~

ERIKA M. LAREMONT

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SuNSET ADVISORY

COMMISSION

STAFF REPORT

Texas Education

Agency

OcTOBER 2 0 12

ACT Ex. 1-Su nset 315

Sunset Advisory Commission October 2012

ISSUE 7

TEA Lacks a Full Range of Tools to Effectively Address Poor Academic

Performance and Financial Mismanagement at Low-Performing

Charter Schools.

Background

Charter schools are public schools meant to improve student learning, allow for teacher innovation, and

increase the number of quality education choices for families. Charters operate under decreased state

regulation in exchange for increased accountability for results. While charter schools do not have a

local tax base, they receive state funding for operations, just like traditional school districts, but not for

facilities. In the 2011-2012 school year, charter schools educated about 155,000 students, or roughly 3

percent ofTexas students, and expended state funds totaling approximately $938 million.

Statute provides for four types of charter schools: open-enrollment charters, campus charters, home-

rule school district charters, and college, university, or junior college charters. 1 This issue focuses solely

on open-enrollment charters, because they are regulated byTEA. 2

Statute authorizes the State Board of Education (SBOE) to grant an open-enrollment charter to an

applicant that meets financial, governance, and operational standards adopted by the Commissioner. 3

TEA just adopted these standards, effective for the next group - or generation - of charters, in

2013. Most open-enrollment charters are self-governed 501(c)(3) nonprofit organizations with an

appointed board to oversee operations of the charter school. State law caps the number of charters at

215, but existing charter holders may expand the number of campuses they operate without getting a

new charter and affecting this cap. 4 As of September 2012,201 charters are in effect, representing 549

campuses.

• State oversight. After SBOE grants a charter, TEA regulates charter schools, including a charter

renewal process, amendment and expansion process, and monitoring financial and academic

performance through accountability ratings. TEA may apply interventions and sanctions to those

charters that fail to meet academic or financial accountability standards, or that violate certain

provisions oflaw or rule through two enforcement processes in separate chapters of the Education

Code. Chapter 12 governs charter schools and requirements for charter contracts, and Chapter

39 governs TEA's academic and financial accountability requirements, including intervention and

sanction authority, for both districts and charters.

• Sanction authority. The charter school statute, Chapter 12, authorizes TEA to revoke a charter,

after a process for a full contested case hearing at the State Office of Administrative Hearings

(SOAH), if the charter holder:

commits a material violation of the charter, including failure to satisfY accountability provisions

prescribed by the charter;

fails to satisfY generally accepted accounting standards of fiscal management;

Texas Education Agency Staff Report

Issue 7 69

316

October 2012 Sunset Advisory Commission

fails to protect the health, safety, or welfare of the students enrolled at the school; or

fails to comply with a law or rule. 5

The accountability statute, Chapter 39, provides TEA with a range of interventions and sanctions for

application to both districts and charters, including appointment of a monitor, conservator, or board of

managers. 6 A charter holder can challenge certain decisions of the Commissioner, including closure,

under the accountability statute through a formal record review process at the agency, which is subject

to review by SOAH, under a substantial evidence standard of review. 7 If the Commissioner orders the

charter closed under the accountability statute, the charter is automatically revoked. 8 Neither chapter's

enforcement process provides for a judicial appeal of the Commissioner's final decision.

Findings

Statute frees charter schools from certain state restrictions

in exchange for an expectation of higher, more innovative,

performance.

The Legislature has an expectation that charter schools will satisf}r performance

standards, particularly academic performance, and that expanded autonomy

through freedom from certain state restrictions that apply to traditional

school districts will enable charter schools to achieve high performance in

innovative ways. Because charter contracts are subject to certain limitations,

such as compliance with academic and financial accountability standards,

charter schools essentially operate on performance contracts. Appendix C

Charter schools

provides more detail on which state restrictions apply to charter schools and

essentially

which do not.

operate on

performance The Legislature's performance expectation is reflected in TEA's approach to

contracts. school closure. The Legislature created charter schools to be vehicles for

innovation and to offer families choices in educatio

This text is long and has been trimmed here. Open the source document for the complete record.