Univ. of Houston v. Barth

• Decision Date: 23 August 2013
• Docket Number: No. 12–0358.,12–0358.
• Citation: 56 Tex. Sup. Ct. J. 661,403 S.W.3d 851
• Parties: UNIVERSITY OF HOUSTON, Petitioner, v. Stephen BARTH, Respondent.
• Court: Texas Supreme Court

403 S.W.3d 851

56 Tex. Sup. Ct. J. 661

UNIVERSITY OF HOUSTON, Petitioner,

v.Stephen BARTH, Respondent.

No. 12–0358.

Supreme Court of Texas.

June 14, 2013.

Rehearing Denied Aug. 23, 2013.

Daniel T. Hodge, First Asst. Attorney General, David C. Mattax, Director of Defense Litigation, Office of the Attorney General, Greg W. Abbott, Attorney General of Texas, James “Beau” Eccles, Peter B. Plotts III, Susan Marie Watson, Office of Attorney General of Texas, Robert B. O'Keefe, General Litigation Division, Shelley Dahlberg, Office of the Attorney General, General Litigation Division, Austin, TX, for Petitioner University of Houston.

J.W. Beverly, Dow Golub Remels & Beverly, LLP, Richard A. Battaglia, Richard A. Battaglia, P.C., Houston TX, for Respondent Stephen Barth.

PER CURIAM.

In this case, Stephen Barth, a professor at the University of Houston, sued the University under the Texas Whistleblower Act for retaliation allegedly stemming from Barth's reports that his supervisor violated internal administrative policies located in the University's System Administrative Memorandum (SAM) and other state civil and criminal law. The court of appeals held that the trial court had subject-matter jurisdiction over Barth's claim because the SAM's administrative policies constitute “law” under the Whistleblower Act. 365 S.W.3d 438, 446. We disagree. Because there is no evidence that the University's Board of Regents enacted the SAM's administrative rules pursuant to authority granted to it in the Texas Education Code, we hold that the rules do not fall within the definition of “law” under the Whistleblower Act. SeeTex. Gov'T Code § 554.001(1). Moreover, there is no evidence that Barth had an objectively reasonable belief that his reports of the alleged violations of state civil and criminal law were made to an “appropriate law enforcement authority.” See id.§ 554.002. Accordingly, the University's sovereign immunity is not waived, and thus we reverse the court of appeals' judgment and dismiss the case for lack of subject-matter jurisdiction. See id. § 554.0035.

Barth is an attorney and tenured professor in the hotel management college at the University. In March and April of 1999, Barth reported to the University's chief financial officer, Randy Harris, and general counsel, Dennis Duffy, that his college's dean, Alan Stutts, allegedly engaged in questionable accounting practices, mishandled funds, and entered into improper contracts relating to the University. In May 1999, Barth also reported the alleged violations to the University's internal auditor, Don Guyton, and spoke with an associate provost, Elaine Charlson, about the alleged violations. In June 1999, Stutts gave Barth a “marginal” rating in one area during Barth's annual evaluation, which affected his merit raise for that year. Barth was also denied travel funds in 1999, and Barth's annual legal symposium on hotel law was cancelled allegedly after Stutts and a sponsor withdrew their support. Barth filed two administrative grievances against Stutts, claiming he was subject to adverse personnel actions for reporting the alleged violations. However, the parties were unable to successfully resolve Barth's grievances.

In 2001, Harris requested that Guyton investigate Barth's allegations regarding Stutts, which included claims that Stutts violated state civil and criminal laws as well as University policy. In the audit report, Guyton concluded that Stutts failed to comply with internal University procedures and state regulations, including section 03.A.05 of the University's SAM, which requires a contract between the hotel management college and a public relations firm to be approved by the office of general counsel and to be reported to the Board of Regents. Guyton also found that Stutts did not violate section 37.10 of the Texas Penal Code, which proscribes tampering with governmental records. SeeTex. Penal Code § 37.10. Shortly after the University published Guyton's report, Barth sued the University for retaliation under the Whistleblower Act.

At trial, Barth claimed liability under the Whistleblower Act based on his reporting of three alleged violations of law, which included: (1) the Penal Code, (2) the University's SAM, and (3) state civil statutes on government contracting. The jury found the University liable, but the charge did not specify on which of the three grounds. The trial court rendered judgment in favor of Barth, awarding him $40,000 in actual damages and $245,000 in attorney's fees. The University appealed.

The court of appeals reversed the trial court's judgment, holding that the trial court lacked jurisdiction over some of Barth's claims due to the untimely filing of his first grievance and remanded for a new trial. 265 S.W.3d 607, 614. The court of appeals also held that the University had waived its legal sufficiency challenge as to the elements of Barth's whistleblower claim. Id. at 616. Both parties appealed. We reversed and remanded the case back to the court of appeals to consider whether the trial court had jurisdiction in light of our decision in State v. Lueck, 290 S.W.3d 876, 881 (Tex.2009), where we held the elements of a claim under the Whistleblower Act are jurisdictional and may not be waived. 313 S.W.3d 817, 818 (Tex.2010) (per curiam).

On remand, the court of appeals held that the trial court had subject-matter jurisdiction and affirmed the trial court's judgment. 365 S.W.3d 438, 441. The court of appeals concluded that Barth's allegation that the University retaliated against him for reporting that Stutts violated the SAM's internal policies was sufficient for purposes of establishing jurisdiction under the Whistleblower Act.¹Id. at 448. The University again petitions this Court for review, arguing that (1) the SAM's administrative policies are not “law” under the Whistleblower Act, and (2) Barth failed to show that his alternative reports of violations of law were made to an appropriate law enforcement authority as required by the Whistleblower Act. SeeTex. Gov't Code §§ 554.001–.002.

The issue is one of subject-matter jurisdiction, which we review de novo. Tex. Dep't of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex.2004); see also Tex. Ass'n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 443–44 (Tex.1993) (providing that subject-matter jurisdiction is never presumed and cannot be waived). Section 554.0035 of the Texas Government Code waives sovereign immunity when a public employee alleges a violation of the Whistleblower Act. Tex. Gov't Code § 554.0035. A violation “occurs when a governmental entity retaliates against a public employee for making a good-faith report of a violation of law to an appropriate law enforcement authority.” Lueck, 290 S.W.3d at 878. The Whistleblower Act defines “law” as a state or federal statute, an ordinance of a local governmental entity, or “a rule adopted under a statute or ordinance.” Tex. Gov't Code § 554.001(1). The first issue presented here requires us to determine whether the administrative policies in the University's SAM are “rule [s] adopted under a statute or ordinance.”

We have never construed the phrase “a rule adopted under a statute or ordinance,” but we have noted that a constable department's internal policies are not “law” as the term is defined under the Whistleblower Act. See, e.g., Harris Cnty. Precinct Four Constable Dep't v. Grabowski, 922 S.W.2d 954, 956 (Tex.1996) (“Grabowski presented no evidence of a law he believed Constable Moore violated other than his department's internal policies.”); accord Mullins v. Dallas Indep. Sch. Dist., 357 S.W.3d 182, 188 (Tex.App.–Dallas 2012, pet. denied) (“Other complaints and grievances, including alleged violations of an agency's internal procedures and policies, will not support a [whistleblower] claim.”); City of Houston v. Kallina, 97 S.W.3d 170, 174–75 (Tex.App.–Houston [14th Dist.] 2002, pet. denied) (“[T]he Whistleblower Act does not protect reports of violations of a department's internal policies.”); Ruiz v. City of San Antonio, 966 S.W.2d 128, 130 (Tex.App.–Austin 1998, no pet.) (same). In Grabowski, we held that a peace officer's report that a constable allegedly failed to comply with departmental policies when conducting an investigation did not satisfy the good-faith element of a whistleblower claim because there was no evidence in the record showing that his belief that a law had been violated was reasonable in light of his experience as a peace officer. Grabowski, 922 S.W.2d at 956. In contrast to the department's policies in Grabowski, we have held that rules enacted by the University of Texas's Board of Regents under the University of Texas's predecessor enabling statute “are of the same force as would be a like enactment of the Legislature.” See Foley v. Benedict, 122 Tex. 193, 55 S.W.2d 805, 808 (1932). Our inquiry here focuses on whether the SAM's policies were adopted under the University's enabling statute.

We disagree with the court of appeals that the SAM's administrative policies are “law” under the Whistleblower Act because there is no evidence that the policies were enacted by the Board of Regents as required by the University's enabling statute. SeeTex. Educ.Code § 111.35. The court of appeals relied on Guyton's testimony that the SAM's policies “are established for the University of Houston System as a whole” as sufficient evidence “that the administrative policies in the SAM are rules or regulations adopted by the Board of Regents.” Id. A rule is only a “law” under the Whistleblower Act, however, if the rule is “adopted under a statute.” Tex. Gov't Code § 554.001(1)(C). We agree that the applicable statute in this case is section 111.35 of the Education Code, which grants the University's Board of Regents authority to “ enact bylaws, rules, and regulations necessary for the successful management and government of the university.” Tex. Educ.Code § 111.35 (emphasis added). Thus,...