Tex. Educ. Agency v. Am. YouthWorks, Inc.

• Decision Date: 10 June 2016
• Docket Number: NO. 03–14–00360–CV,NO. 03–14–00283–CV,03–14–00283–CV
• Parties: Texas Education Agency and Mike Morath,Commissioner of Education, in his Official Capacity, Appellants v. American YouthWorks, Inc., d/b/a American YouthWorks Charter School; Honors Academy, Inc., d/b/a Honors Academy; and Azleway, Inc., d/b/a Azleway Charter School, Appellees
• Court: Texas Court of Appeals

496 S.W.3d 244

Texas Education Agency and Mike Morath,¹ Commissioner of Education, in his Official Capacity, Appellants

v.American YouthWorks, Inc., d/b/a American YouthWorks Charter School; Honors Academy, Inc., d/b/a Honors Academy; and Azleway, Inc., d/b/a Azleway Charter School, Appellees

NO. 03–14–00283–CV

NO. 03–14–00360–CV

Court of Appeals of Texas, Austin.

Filed: June 10, 2016

Shelley Nieto Dahlberg, Assistant Attorney General, Austin, TX, for Appellants.

Cris Feldman, The Feldman Firm, Houston, TX, Robert A. Schulman, Joseph Hoffer, Schulman, Lopez & Hoffer & Adelstein, L.L.P., San Antonio, TX, for Appellees.

Before Chief Justice Rose, Justices Pemberton and Field

OPINION

Jeff Rose, Chief Justice

The 2013 Texas Legislature passed legislation aimed, in part, at strengthening the Commissioner of Education's authority to revoke the charters of underperforming open-enrollment charter schools and at expediting that revocation process. American YouthWorks Charter School, Honors Academy, and Azleway Charter School (collectively, the Charter Schools) were among the first charter schools against which the Commissioner sought charter revocation under this new legislation. Their charter holders—appellees American YouthWorks, Inc., Honors Academy, Inc., and Azleway, Inc. (collectively, the Charter Holders)—sued appellants the Texas Education Agency (TEA) and Mike Morath, in his official capacity as Commissioner of Education, in Travis County District Court for declaratory and injunctive relief related to the administrative revocation process. The district court issued temporary injunctions enjoining further revocation actions regarding the Charter Schools. Our principal issue in these interlocutory appeals from those injunctions² is whether, under a statutory scheme that expressly precludes judicial review of the agency decisions being challenged in the underlying district-court proceeding, the Charter Holders' pleadings invoke the district court's inherent right to review those agency decisions. For the reasons explained below, we conclude that their pleadings do not and cannot invoke that inherent right to judicial review and, therefore, the Charter Holders' claims are barred by sovereign immunity.

I. BACKGROUND

Before describing the underlying administrative and judicial proceedings leading to this appeal, we will briefly review the legislative history of charter schools in Texas to provide some context for the legislation that is at issue in this case.

A. Charter schools in Texas

Facing a self-imposed deadline of September 1, 1995, that would result in the repeal of Titles 1 and 2 of the Education Code,³ and in the wake of a gubernatorial campaign in which then-candidate George W. Bush had emphasized education reform, the 74th Texas Legislature overhauled Texas's public-school system with extensive changes to the Education Code.⁴ To deregulate the education system, for example, the 74th Legislature stripped away several state-mandated rules; limited the role and rule-making powers of the State's administrative bodies that oversaw public education; gave the governor the power to appoint TEA's Commissioner; devolved substantial authority to the local level; and, particularly relevant here, authorized state-funded charter schools as an alternative to traditional public-school education.⁵

Charter schools are statutorily created public schools that operate under a written document called a charter.⁶ The Education Code recognizes three classes of charter schools—home-rule school-district charter schools; campus or campus-program charter schools; and, at issue here, open-enrollment charter schools.⁷ Stated generally, a charter explains the charter holder's and the charter school's obligations, including what the school will attempt to accomplish, how student performance will be measured, and what levels of achievement the school will attain.⁸ As state-funded public schools, charter schools must follow certain state guidelines, but they are afforded a level of regulatory freedom not available to traditional public schools in the name of affording them flexibility to “improve student learning”⁹ and “establish different and innovative learning methods”¹⁰ that best fit the needs of their students. For example, open-enrollment charter schools in Texas are, for the most part, exempt from the laws that require public schools to employ certified teachers, follow state-mandated curriculum, limit class size, or follow teacher-salary schedule and teacher-contract requirements.¹¹ Freed from these strictures, the charter schools are instead supposed to be carefully monitored for “fiscal and academic accountability,” although not in a way that “unduly regulates the instructional methods or pedagogical innovations of charter schools.”¹²

In 2001, after charter schools had been part of the public-school system for a few years, the Legislature promulgated laws modifying the structure and operation of open-enrollment charter schools by strengthening regulations regarding their governance and financial oversight and increasing their accountability to the State.¹³ This legislation also added provisions regarding charter revision, probation, revocation, denial of renewal, and audits, including making the Commissioner, rather than the State Board of Education, the State official responsible for those actions.¹⁴ It further specified that Chapter 2001 of the Administrative Procedure Act—which establishes, among other things, procedural rules for contested-case hearings and the scope of judicial review of agency action¹⁵ —did not apply to TEA hearings addressing modification, probation, revocation, and renewal of charters.¹⁶

In 2004, following TEA's scheduled Sunset review,¹⁷ the Sunset Advisory Commission issued a report faulting TEA for its oversight of the charter-school program and recommending that the Legislature address the following problems:

• Without adequate, periodic assessment, some charter schools have gone bankrupt and may have inappropriately used State funds.

• Without recent accountability ratings, TEA cannot evaluate the quality of education at charter schools.¹⁸

The report concluded that children in some charter schools “may be at risk of receiving an inadequate education,” and “without effective ways to measure student success, parents and school officials are ill-informed as to instructional quality.”¹⁹ And emphasizing some “notable financial failures of charter schools,” the report expressed serious concerns about TEA's lack of real ability “to hold charter schools accountable for expending State funds.”²⁰ The 2004 Sunset report recommended legislation requiring TEA to implement an accountability rating system for charter schools and to closely monitor charter schools that do not receive accountability ratings.²¹

In a bill principally devoted to revising the State's tax system for school-finance purposes, the 79th Texas Legislature included an amendment to the Education Code that, among other things, made Chapter 39's public-school accountability system applicable to open-enrollment charter schools and, relatedly, required the Commissioner to adopt rules implementing the accountability system for charter schools, including rules providing a process for rating challenges.²² Significantly, these changes to Chapter 39 specified that the Commissioner's decision on an accountability rating “may not be appealed under Section 7.057 or other law,” and that the charter school may not appeal the rating “in another proceeding” if the school had the opportunity to challenge the rating as provided by the Commissioner-promulgated rules.²³

The next statutorily scheduled Sunset report on TEA, which issued in 2013 after the 2012–2013 review cycle,²⁴ included a comprehensive review of TEA's difficulties and failures in addressing the poor academic performance and financial mismanagement at low-performing charter schools.²⁵ The 2013 TEA Sunset report emphasized that, despite failing to meet required academic performance standards, poor-performing charter schools remain open, subjecting students to inadequate education, because “TEA cannot act quickly, particularly in circumstances warranting revocation.”²⁶ The report further noted, “Revocation of a charter under the charter school statute typically takes two to three years, on top of several years of poor performance, during which time a charter school remains open”; and “A long revocation process leaves students to be educated at underperforming charter schools.”²⁷ The report acknowledged TEA's lack of statutory authority to address and effectively deal with charter schools' financial accountability problems,²⁸ and its ultimate recommendation in this regard was legislation requiring the Commissioner to revoke the charter, without an agency hearing or any right of appeal, of any charter school that failed to meet basic academic or financial accountability standards for three years in a row.²⁹

In the following legislative session, proponents of reforming the charter-school system invoked the 2013 Sunset review as having revealed “serious regulatory flaws” in TEA's governing ability and cited it in support of modifying the State's “outdated and ineffective laws governing charters” that have “created a situation where a cap [on the number of charters] prevents new high-quality schools from forming while poor performing schools are allowed to remain open.”³⁰ Professing concern that “outdated laws and policies” governed charter schools, proponents introduced and ultimately persuaded the Legislature to enact Senate Bill 2—“a comprehensive bill to overhaul the laws relating to authorizing, governing, and establishing charter schools in Texas.”³¹ To address the specific problem of “many poor performing existing charters that have been able to remain open because of ineffective laws governing public charters,”³² Senate Bill 2 included provisions, as were specifically recommended in the 2013 Sunset...