Merrell v. City of Sealy

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LLOYD MERRELL, Appellant v. CITY OF SEALY, TEXAS AND CAROLYN BILSKI, MAYOR, Appellees

No. 01-21-00347-CV

Court of Appeals of Texas, First District

September 1, 2022

On Appeal from the 155th District Court Austin County, Texas Trial Court Case No. 2021V-0027

Panel consists of Justices Landau, Hightower, and Rivas-Molloy.

MEMORANDUM OPINION

Veronica Rivas-Molloy Justice

Appellant Lloyd Merrell ("Merrell") formerly served as the City Manager for the City of Sealy. After a dispute arose between Merrell and Appellees, the City of Sealy ("City") and Mayor Carolyn Bilski ("Mayor Bilski"), concerning the terms of Merrell's employment agreement, Merrell filed suit against Appellees asserting numerous claims and seeking damages. Appellees filed a Plea to the Jurisdiction and a Rule 91 Motion to Dismiss, which the trial court granted. This appeal ensued. In three issues, Merrell contends the trial court erred because (1) Texas Local Government Code Chapter 271 waives governmental immunity for his breach of contract claim, (2) his declaratory judgment action sounds in contract thereby invoking the waiver of immunity under Chapter 271, and (3) his ultra vires claim against Mayor Bilski concerns her failures to address violations of the City's Charter and efforts to secure his resignation as City Manager, which actions exceeded her authority and conflicted with applicable law. We affirm.

Background

On February 1, 2018, Merrell began a one-year term of employment as City Manager for the City of Sealy. Merrell and former Mayor Janice Whitehead ("Mayor Whitehead") executed a Compensation Agreement setting forth the terms and conditions of Merrell's compensation and employment benefits. Pursuant to the City Charter and as reflected in the Compensation Agreement, the City Manager serves as the chief administrative officer of the City and is responsible for running the day-to-day operations of city government. In this role the City Manager has authority over a wide range of decisions including the appointment and removal of department heads and the management of the City's financial and operational stability.

In 2019, Merrell and Mayor Whitehead executed an amendment to the Compensation Agreement, effective February 1, 2019 increasing Merrell's salary and extending his employment term for two additional years. Following Mayor Whitehead's resignation,^[1] Carolyn Bilski was elected as the City's Mayor in the November 2020 election.

A dispute arose soon thereafter between Appellees and Merrell concerning Merrell's role as City Manager and the actions of several City councilmembers. In December 2020, Merrell tendered his resignation during a City Council meeting. The City Council accepted Merrell's resignation and asked that he sign a Separation Agreement and General Release ("Separation Agreement").^[2] Merrell did not sign the Separation Agreement. Instead, his counsel demanded severance pay, unpaid compensation, unused sick leave, and vacation pay through the end of his contract term of January 31, 2021, arguing that Appellees' recent actions constituted a termination of his employment as City Manager. The City declined Merrell's demand and accelerated his last day of employment to January 5, 2021.

On March 4, 2021, Merrell sued the City and Mayor Bilski asserting claims for breach of contract, fraud, fraudulent inducement, fraud by non-disclosure, negligent misrepresentation, unjust enrichment, civil theft, conversion, and declaratory judgment. Merrell also asserted an ultra vires claim against Mayor Bilski claiming that her failures to address certain councilmembers' violations of the City's Charter and her efforts to secure his resignation as City Manager exceeded her authority and conflicted with applicable law. Merrell attached to his original petition copies of his Compensation Agreement, the Amendment to the Agreement, an article from the Sealy News dated December 3, 2020, the proposed Separation Agreement, the Minutes from the Sealy City Council Meeting on January 5, 2021, and his unsworn declaration.

In his original petition, Merrell alleged that newly elected Mayor Bilski had seized upon the City's economic downturn caused by the global pandemic as an opportunity to criticize the City's recent shift toward economic growth and investments which Merrell had initiated. According to Merrell, Mayor Bilski blamed the shift for the City's recent economic woes. Merrell alleged that Mayor Bilski and various councilmembers fixated on the City's shrinking General Fund and the significant shortfalls in the City's sales tax receipts, both of which were the direct result of the City prioritizing public health policies designed to curb the spread of COVID-19, and pressed Merrell for answers to supply a quick fix. Merrell alleged that he provided detailed information and supporting data to explain the shortfall to Mayor Bilski and the councilmembers but that his explanations fell on deaf ears. Merrell alleged that Mayor Bilski and the councilmembers had made it clear they were targeting him as the sole reason for the City's shortfall without providing him a meaningful opportunity to respond to the assertions.

On November 30, 2020, the City Council held a special meeting to consider the method and form of evaluating the City Manager's performance. Near the conclusion of the meeting, and before City Council went into executive session, Merrell read a prepared statement into the record. He voiced his opposition to a number of recent actions taken by various councilmembers and led and encouraged by the Mayor. Merrell expressed concern that several councilmembers had directly contacted employees or department heads, without first notifying or consulting with him, for the purpose of instructing those individuals to implement or heed certain policy changes or directives. In concluding his remarks, Merrell stated:

My contract expires on February 1, 2021 . . . I can't accept the current situation, and from questions at the last council meeting apparently the council has a problem with my administration. . . . I will honor the contract I signed with the city and expect the city to honor the contract they signed with me. If you are not content to let me do my job, then terminate me.

On December 1, 2020, the City Council conducted its regularly scheduled meeting. Merrell alleged that one of the councilmembers asked that her budget amendments be placed on the next meeting's agenda despite not having obtained any input from him. He alleged that this was the latest attempt to delegitimize his role as City Manager rendering his authority as City Manager functionally and effectively nonexistent. Merrell alleged that he was forced to make a choice: either (1) continue as City Manager through the end of his term during which time he would be serving in name only while subjecting himself to public humiliation and baseless challenges to his integrity, or (2) resign thereby preserving at least some measure of dignity and self-respect. Merrell asked the City Council to go into executive session and indicated his willingness to resign. In response, Mayor Bilski scheduled a meeting for December 14, 2020.

During the December 14th meeting, Merrell read a short statement into the record, resigning effective February 1, 2021. Merrell alleged that the City Council confirmed it would accept his resignation effective February 1, 2021, and that he would be paid his remaining salary, unused vacation, and sick time through January 31, 2021, the end of his contract term. Merrell alleged that City Council then produced a Separation Agreement and General Release ("Separation Agreement") and instructed him to sign it immediately. Merrell alleged that when he expressed reluctance to sign it without first having an opportunity to review it, City Council gave him seven days to sign after which the proposed terms would be rescinded.

Merrell alleged that, on January 5, 2021, his attorney sent a letter to the City Council and Mayor Bilski advising them that their recent actions had constituted a termination of his employment as City Manager before the December 14, 2020 meeting at which he had tendered his resignation. Merrell demanded severance pay in an amount equal to sixteen weeks' compensation as well as all unpaid compensation, unused sick leave, and vacation pay through the end of his contract term of January 31, 2021, pursuant to Section 16 of the Amendment to the Compensation Agreement.

The City declined Merrell's demand for full severance pay as reflected in the minutes of the City's Council's January 5, 2021 meeting:

Councilman Noack stated, "On December 14, 2020 the council received and accepted the resignation of City Manager Lloyd Merrell and moved that he be placed on paid administrative leave and provided with a separation agreement. As Mr. Merrell has not signed and returned the agreement which was provided to him through our attorney, I now move that the City rejects the proposal that was received today by Mr. Merrell's attorney, waives any notice period owed to him under his employment agreement, that his resignation having been previously accepted now be accelerated, and that his last date of employment be today, January 5, 2021." Councilwoman Sullivan seconded the motion. Mayor Bilski called for the vote:

AYES: Bilski, Lerma, Noack, Vrablec, Sullivan, Koy, Burttschell

NOES: None

The motion carried.

On April 20, 2021, the City and Mayor Bilski filed a Plea to the Jurisdiction arguing that, under the Compensation Agreement Merrell was entitled to severance pay and compensation for unused sick and vacation pay through the end of his contact term only if the City fired him or if Merrell served as City Manager through January 31, 2021, the...