Houston and pensioneers without jurisdiction to challenge pension board’s decisions.

City of Houston v. Houston Municipal Employees Pension System, NO. 01-12-00511-CV (Tex. App. – Houston [1st Dist.], May 23, 2013).

The City of Houston and five individuals sued Houston Municipal Employees Pension System (“HMEPS”) and five members of its board of trustees for the ultra-vires acts of violating Article 6243h of the Texas Revised Civil Statutes which created HMEPS.  HMEPS and the trustees filed a plea to the jurisdiction which the trial court granted and the plaintiffs appealed. The First Court of Appeals affirmed the dismissal in this forty-six page opinion.

In July 2011 the City and HMEPS entered into a meet and confer agreement regarding the amount of contribution the City was required to pay for the upcoming fiscal year pursuant to Art. 6243h. The City devised a plan to reduce such budgetary obligation by having non-City employees from a city non-profit perform services previously performed by City employees. The remaining plaintiffs were “former” City employees who requested retirement deferral from HMEPS, even though they transitioned to the non-profit.   HMEPS passed a resolution holding that the definition of “employee” under Art. 6243h included employees of the non-profit. The employees and City filed a declaratory judgment suit, and brought breach of contract and constitutional claims.

HMEPS argued that its Board decisions are final, no judicial review is permitted via statute and the constitutional claims are barred by immunity. The Board Trustees assert their plea does not seek dismissal of the ultra-vires claims because of immunity, but because the Board is the sole and exclusive body to interpret Art. 6243h and no judicial review is proper.  The court held that exclusive authority does not insulate officials from ultra-vires claims of acting outside of their authority. However, in this case, plaintiffs are recasting a challenge to statutory authority as ultra-vires claims, over which the exclusivity controls and the trial court lacks subject matter jurisdiction.  HMEPS had statutory authority to act as it did and no review of its actions is permitted.

The individual plaintiffs brought equal protection claims against HMEPS. However, the court held when, as in this case, neither a suspect classification nor a fundamental right is involved, the alleged disparate treatment between similarly situated persons survives constitutional scrutiny if it is rationally related to a legitimate governmental purpose. Here HMEPS has a legitimate interest in preserving all sources of pension funding by assuring that the City meets its full obligations to HMEPS. Further, since no vested property right exists for a statutory pensioner, their due-course-of-law claims must also fail.

The HMEPS statute only applies to the City of Houston, so the specific statutory wording here will not be helpful to attorneys outside of Houston.  However, the reasoning behind many of the court’s holdings can be overlaid to other meet and confer, civil service, and collective bargaining matters. The constitutional standards utilize are also standard ones and can be used in defending municipal actions in many circumstances.

If you would like to read this very long opinion click here.