Klumb v. Houston Mun. Emps. Pension Sys.

405 S.W.3d 204

John KLUMB, Veronica McClelland, Vivian Montejano, John Gonzalez, Anita Robles, Charmaine Pilgrim, and the City of Houston, Appellants

v.HOUSTON MUNICIPAL EMPLOYEES PENSION SYSTEM, Barbara Chellette, David L. Long, Leonard Polk, Roy Sanchez, and Lonnie Vara, Appellees.

No. 01–12–00511–CV.

Court of Appeals of Texas, Houston (1st Dist.).

May 23, 2013.

Katherine D. MacKillop, Reagan M. Brown, Fulbright & Jaworski L.L.P., David M. Feldman, Judith L. Ramsey, Fernando De Leon, City of Houston Legal Department, Houston, TX, for Appellants.

Thomas R. Phillips, Baker Botts L.L.P., Austin, TX, Travis J. Sales, Adam A. Milasincic, Baker Botts L.L.P., Houston, TX, for Appellees.

Panel consists of Chief Justice RADACK and Justices HIGLEY and BROWN.

OPINION

LAURA CARTER HIGLEY, Justice.

This appeal concerns whether the trial court lacks subject-matter jurisdiction over a suit brought by John Klumb and five other plaintiffs against the Houston Municipal Employees Pension System (“HMEPS”) and five members of its board of trustees. The trial court granted HMEPS's and the trustees' plea to the jurisdiction, dismissing the plaintiffs' claims and the claims of the City of Houston, which had intervened in the suit. On appeal, the plaintiffs and the City of Houston contend that the trial court erred by granting the plea. They assert that the suit is not barred because it arises from the trustees' ultra vires acts of violating Article 6243h of the Texas Revised Civil Statutes. Plaintiffs also argue that the trial court has jurisdiction over the constitutional claims they have raised.

Because we agree with HMEPS and the trustees that the trial court lacks subject-matter jurisdiction over the pleaded claims, we affirm the trial court's judgment.

Background

As a defined benefit pension plan, HMEPS provides retirement, disability, and survivor benefits for eligible City of Houston employees. Article 6243h of the Texas Revised Civil Statutes established HMEPS. SeeTex.Rev.Civ. Stat. Ann.. art. 6243h, §§ 1–28 (Vernon 2010).¹ Pursuant to Article 6243h, an eleven member Board of Trustees, or pension board, has broad authority to administer, manage, and operate HMEPS. See id. art. 6243h, § 2(a).

With respect to the pension board's authority, relevant text of Article 6243h, section 2, provides as follows:

(x) The pension board shall manage the pension fund under this Act and under the Internal Revenue Code of 1986, as amended, and may:

(1) adopt, for the administration of the pension fund, written rules and guidelines;

(2) interpret and construe this Act and any summary plan, descriptions, or benefits procedures, except that each construction must meet any qualification requirements established under Section 401, Internal Revenue Code of 1986, as amended;

(3) correct any defect, supply any omission, and reconcile any inconsistency that appears in this Act in a manner and to the extent that the pension board considers expedient to administer this Act for the greatest benefit of all members;

(4) determine all questions, whether legal or factual, relating to eligibility for membership, service, or benefits or relating to the administration of the pension fund to promote the uniform administration of the pension fund for the benefit of all members and retirees; and

(5) establish and maintain records necessary or appropriate for the proper administration of the pension fund.

(y) The determination of any fact by the pension board and the pension board's interpretation of this Act are final and binding on any interested party, including members, deferred participants, retirees, eligible survivors, beneficiaries, and the city.

Id. art. 6243h, § 2(x)-(y).

Article 6243h also provides that the City of Houston (“the City”) must make periodic payments to HMEPS based on a percentage of the combined salaries of the pension system members, who are active municipal employees. See id. art. 6243h § 8(d); see also id. art. 6243h, § 1(13).

In July 2011, the City and HMEPS entered into a contract called a “meet and confer agreement.” The July 2001 meet and confer agreement (hereinafter, “the Meet and Confer Agreement”) addressed, inter alia, the amount of contribution the City was required to pay HMEPS for the upcoming fiscal year. Over the years, the City and HMEPS have entered into a number of meet and confer agreements regarding various issues. Such agreements are authorized by Article 6243h, section 3(n). Id. art. 6243h, § 3(n).

The City's pension obligation relates generally to the amount of its employees' salaries. The City devised a plan to reduce such budgetary obligation by having non-City employees perform services previously performed by City employees. To this end, the City merged its Convention and Entertainment Facilities Department with an existing local government corporation, the Houston Convention Center Hotel Corporation. Effective July 1, 2011, the City entered into an Interlocal Agreement and Lease Agreement with the Houston Convention Center Hotel Corporation to manage various City-owned facilities, such as theaters, convention centers, and parking lots.

Houston Convention Center Hotel Corporation then changed its name to Houston First Corporation, which assumed the obligations under the agreement with the City. The City planned to transition all but 39 of its employees from its Convention and Entertainment Facilities Department to Houston First Foundation, a newly created non-profit corporation. The City planned for the employee transfer to reduce its total amount of pension obligation based on its position that the transferred employees would no longer be HMEPS “members.”

Article 6243h, section 1(13) defines “member” as follows: “each active employee included in the pension system, except for an employee who is ineligible under Section 4 of this Act.” Id. art. 6243h, § 1(13). Article 6243h, section 1(11) provides:

“Employee” means any person, including an elected official during the official's service to the city, who is eligible under this Act and:

(A) who holds a municipal position or a position with the pension system;

(B) whose name appears on a regular full-time payroll of a city or of the pension fund; and

(C) who is paid a regular salary for services.

Id. art. 6243h, § 1(11).

On August 25, 2011, HMEPS's pension board had a meeting. The minutes from the meeting reflect that the board passed “a [m]otion to approve the amendments to the HMEPS Pension Plan Document.” The minutes reflect that five trustees voted to approve the motion: (1) Barbara Chellette, (2) David L. Long, (3) Leonard Polk, (4) Roy Sanchez, and (5) Lonnie Vara. Trustee Craig Mason and another board member voted to deny the motion. Two other trustees were absent.

Also on August 25, 2011, the board chair signed the Pension Plan Document “As Amended and Restated Effective July 1, 2011.” The Pension Plan Document contains a number of definitions, including the definition of “employee.” That definition restates the definition of “employee” found in Article 6243h:

A person who is eligible under the Act and (a) who holds a municipal position or a position with the Pension System; (b) whose name appears on a regular full-time payroll of the City or of the Pension System; and (c) who is paid a regular salary for services. “Employee” includes an elected official during the official's service to the City, if he is eligible to participate under the terms of the Pension System as it relates to elected officials.

See id.

The pension plan definition, as set out in the Pension Plan Document, further provides:

“Employee” also includes a full-time employee of a Texas local government corporation (“LGC”) controlled by the City, upon a determination by the External Affairs Committee of the Board of Trustees that such LGC's employees are Employees for purposes of the Plan.

Before the Convention and Entertainment Facilities Department transferred any employees to Houston First Foundation, the Board passed and adopted a resolution on October 6, 2011 (“the Resolution”). The Resolution provides, “[T]he requirements for membership in HMEPS are provided under the terms of Article 6243h ... and the ... Meet and Confer Agreement dated as of July 2011.” The Resolution further provides, in part, as follows:

Whereas, the Board of Trustees has previously determined that an “Employee” for purposes of HMEPS includes a full-time employee of Texas local government corporation controlled by the City of Houston (“City”), upon determination by committee of the Board of Trustees consisting of the elected trustees and the trustee appointed by the elected trustees (the “External Affairs Committee”) that such entity's employees are Employees for purposes of membership in HMEPS;

Whereas, under the interpretations previously adopted by the Board of Trustees, Houston First Corporation and its wholly owned and controlled subsidiary, Houston First Foundation, are controlled by the City, and thus the employees on the payroll of either the Houston First Corporation or the Houston First Foundation are considered Employees for purposes of membership in HMEPS;

Now Therefore Be It Resolved, employees of any entity controlled, directly or indirectly, by the City are considered Employees for purposes of membership in HMEPS, unless the External Affairs Committee expressly determines otherwise; provided, however that nothing in this resolution would apply to an individual covered by the Houston Firefighters Relief Retirement Fund or the Houston Police Officers Pension System or any otherwise ineligible employee as determined by the External Affairs Committee....

On October 24, 2011, Convention and Cultural Services, Inc. (“CCSI”), a Texas nonprofit corporation, was incorporated. Its articles of incorporation state that CCSI was organized for certain purposes, such as supporting “the operation and maintenance of public assembly facilities and theaters owned by the City of Houston.”

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