City of Houston v. Hous. Firefighters' Relief & Ret. Fund

• Decision Date: 30 August 2022
• Docket Number: 01-20-00710-CV
• Parties: CITY OF HOUSTON, SYLVESTER TURNER, TANTRI EMO, CHRIS BROWN AND COUNCIL MEMBERS TARSHA JACKSON, DAVE MARTIN, MARY NAN HUFFMAN, KARLA CISNEROS, ROBERT GALLEGOS, MARTHA CASTEX-TATUM, MIKE KNOX, DAVID ROBINSON, MICHAEL KUBOSH, AMY PECK, ABBIE KAMIN, CAROLYN EVANS-SHABAZZ, TIFFANY THOMAS, EDWARD POLLARD, LETITIA PLUMMER, SALLIE ALCORN, AND THE STATE OF TEXAS, Appellants v. HOUSTON FIREFIGHTERS' RELIEF AND RETIREMENT FUND, Appellee
• Court: Texas Court of Appeals

CITY OF HOUSTON, SYLVESTER TURNER, TANTRI EMO, CHRIS BROWN AND COUNCIL MEMBERS TARSHA JACKSON, DAVE MARTIN, MARY NAN HUFFMAN, KARLA CISNEROS, ROBERT GALLEGOS, MARTHA CASTEX-TATUM, MIKE KNOX, DAVID ROBINSON, MICHAEL KUBOSH, AMY PECK, ABBIE KAMIN, CAROLYN EVANS-SHABAZZ, TIFFANY THOMAS, EDWARD POLLARD, LETITIA PLUMMER, SALLIE ALCORN, AND THE STATE OF TEXAS, Appellants v. HOUSTON FIREFIGHTERS' RELIEF AND RETIREMENT FUND, Appellee

No. 01-20-00710-CV

Court of Appeals of Texas, First District

August 30, 2022

On Appeal from the 190th District Court Harris County, Texas Trial Court Case No. 2019-51405

Panel consists of Chief Justice Radack and Justices Landau and Hightower.

OPINION

RICHARD HIGHTOWER, JUSTICE

Article XVI, Section 67(a) of the Texas Constitution authorizes the Texas Legislature "[to] enact general laws establishing systems and programs of retirement and related disability and death benefits for public employees and officers." Tex Const. art. XVI, § 67(a)(1). The financing of those benefits must "be based on sound actuarial principles." Id. Pursuant to Section 67(a), the Legislature enacted article 6243e.2(1) of the Revised Civil Statutes, which governs the operation of the Houston Firefighters' Relief and Retirement Fund-the system providing pension benefits to City of Houston firefighters. See Tex. Rev. Civ. Stat. art. 6243e.2(1). The dispute in this case arises from the 2017 legislative amendments to article 6243e.2(1), which were part of Senate Bill 2190.^[1] See Act of May 24, 2017, 85th Leg., R.S., ch. 320, 2017 Tex. Sess. Law. Serv. 738, 738-60 (effective July 1, 2017). The disputed amendments relate to the procedure for determining the City of Houston's contribution rate-the rate used to establish the amount of money the City must contribute to the Fund each year. See id. Among the amendments, the Legislature established four actuarial assumptions that must be employed by both the Fund's and the City's actuaries in determining the City's contribution rate. The amendments also established a process for setting the contribution rate when the difference between the Fund's and the City's proposed contribution rates exceeds two percentage points. The process requires the parties to try to reconcile the difference and, if unsuccessful, sets the contribution rate as the average of the Fund's and City's proposed rates. See id.

The Fund sued the City of Houston and 19 of its City Officials,^[2] asserting that S.B. 2190 was unconstitutional because, as applied to the Fund, the amendments relating to the contribution rate violated Article XVI, Section 67(f) of the Texas Constitution. Section 67(f) provides, in part, that the board of trustees for a pension system like the Fund "shall . . . select . . . an actuary and adopt sound actuarial assumptions to be used by the system or program." Tex. Const. art. XVI, § 67(f)(3). The Fund asserted that this provision gave the Fund's Board of Trustees the "exclusive authority" to adopt-that is, to choose-all the sound actuarial assumptions used by the Fund in preparing its proposed contribution rate.

The City and the City Officials (collectively, City Defendants) filed pleas to the jurisdiction, asserting that the trial court lacked subject-matter jurisdiction because the Fund had "failed to plead a viable and valid" as-applied constitutional claim, as required to waive their immunity from suit. They asserted that the plain and literal language of Section 67(f) does not give the Fund the "exclusive authority" to select the actuarial assumptions used to determine the contribution rate nor does it prohibit the Legislature from enacting laws relating to the oversight of the Fund. The City Defendants asserted that Section 67(a) not only gives the Legislature the authority to enact legislation like S.B. 2190, but it requires the Legislature to ensure that the financing of the Fund is "based on sound actuarial principles."

Each side also filed a motion for summary judgment regarding the constitutionality of S.B. 2190. In its final judgment, the trial court denied the City Defendants' pleas to the jurisdiction, granted the Fund's motion for summary judgment, and denied the City Defendants' summary-judgment motion. The trial court rendered a declaratory judgment in the Funds' favor, declaring that S.B. 2190 was unconstitutional as applied to the Fund "because it impermissibly infringe[d] on the Board's exclusive authority to select an actuary and determine sound actuarial assumptions under Texas Constitution Article XVI, Section 67(f)." The trial court also granted the Fund's requested mandamus and injunctive relief.

Because we hold that the Fund's as-applied constitutional claim is facially invalid, the City Defendants' immunity from suit was not waived, and the trial court lacked subject-matter jurisdiction over the City Defendants. Accordingly, we reverse the trial court's judgment and render judgment granting the City Defendants' jurisdictional pleas and dismissing the Fund's claims against them.

Background

A. The 2017 Suit

The instant suit, filed in 2019, is not the first suit filed by the Fund against the City and its officials asserting that S.B. 2190 violated Article XVI, Section 67(f) of the Texas Constitution. Rather, this is the second suit in which the Fund claimed that S.B. 2190 was unconstitutional under Section 67(f). The Fund filed its first suit against the City and its officials challenging S.B. 2190's constitutionality in May 2017 (the 2017 Suit), before S.B. 2190 became effective on July 1, 2017. The details of the 2017 Suit and the later appeal of the judgment in that case are reported in Houston Firefighters' Relief & Retirement Fund v. City of Houston, 579 S.W.3d 792 (Tex. App.-Houston [14th Dist.] 2019, pet. denied) (HFRRF I).

In the 2017 Suit, the Fund asserted that S.B. 2190 was facially unconstitutional because it "impermissibly infringe[d]" on what it termed the "exclusive authority" of the Fund's Board of Trustees under Article XVI, Section 67(f) of the Texas Constitution "to 'select . . . an actuary and adopt sound actuarial assumptions to be used by the system or program.'" Id. at 796 (quoting Tex. Const. art. XVI, § 67(f)). To support its claims, the Fund made the following allegations in its 2017 pleading:

(1) Article 6243e.2(1) of the Revised Statutes governs the Fund's and the City's rights, duties, and obligations to and for the Fund. The Board of Trustees of the Fund ("Board") manages and administers the Fund.

(2) Article 6243e.2(1) [in its pre-amendment form] requires each member of the Fund to contribute a set percentage of the member's salary and requires the City to make contributions based on a "contribution rate certified by the [B]oard," which must be at least twice the amount contributed by Fund members and sufficient to ensure the long-term financial well-being of the Fund.

(3) Article XVI, Section 67(a) of the Texas Constitution ("Section 67(a)") expressly authorizes the Texas Legislature to enact general laws establishing non-statewide pension systems for public employees and officers, such as article 6243e.2(1).

(4) Section 67(f) "vests the Board with exclusive authority to 'administer the system or program of benefits,' 'hold the assets of the system or program for the exclusive purposes of providing benefits to participants and their beneficiaries and defraying reasonable expenses of administering the system or program,' and 'select legal counsel and an actuary and adopt sound actuarial assumptions to be used by the system or program.'"

(5) [sic] The version of article 6243e.2(1) in effect up until July 1, 2017 complied with this constitutional provision by leaving to the Board the exclusive authority to appoint an actuary and to determine the actuarial assumptions to be used by the Fund.

(6) In 2017, the Texas Legislature passed and the Governor signed S.B. 2190, which substantively changed article 6243e.2(1) in ways that violate Section 67(f).

(7) By fixing [that is, codifying] certain actuarial assumptions that must be used by the Fund's actuary including an initial assumed rate of return of seven percent, S.B. 2190 violates Section 67(f).

(8) S.B. 2190 violates Section 67(f) by imposing a new "Risk Sharing Valuation Study" . . . procedure for use in setting the City's contribution rate to the Fund. Under this procedure, the City's contribution rate may be determined by using the average of the Fund's estimate of the City's contribution rate and the City's estimate of that contribution. The Fund asserts that this averaging violates Section 67(f).

(9) S.B. 2190 violates Section 67(f) by allowing the City to use actuarial assumptions different from the Fund actuary's assumptions if an independent actuary recommends the assumptions.

(10) On May 30, 2017, the Board adopted an actuarial valuation report prepared by the Fund's appointed actuaries. Under this report, the City's actuarial contribution rate is 48.5% which equals approximately $148,255,000 and anticipates a return on investment on the Fund's assets of 7.25%.

(11) On May 31, 2017, the City Council passed a budget which used S.B. 2190's assumed seven percent rate of return. According to the Fund, because S.B. 2190 is unconstitutional, the City's Budget is statutorily required to employ the 7.25% rate of return certified by the Board under article 6243e.2(1) without any amendment by S.B. 2190, and a City contribution rate of 48.5%.

(12) Nonetheless[,] the City Council passed the Budget allegedly allocating less than half of the amount that should be contributed under article 6243e.2(1) without any amendment by the allegedly unconstitutional S.B. 2190. The Fund claims that this action forced the Fund to file suit.

(13) Mayor Turner and the defendants who are City

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