City of Hous. v. Hous. Mun. Emps. Pension Sys.

549 S.W.3d 566
CourtTexas Supreme Court
DecidedJune 8, 2018
DocketNO. 17–0242
StatusPublished
Cited by100 cases

This text of 549 S.W.3d 566 (City of Hous. v. Hous. Mun. Emps. Pension Sys.) is published on Counsel Stack Legal Research, covering Texas Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
City of Hous. v. Hous. Mun. Emps. Pension Sys., 549 S.W.3d 566 (Tex. 2018).

Opinion

Justice Johnson delivered the opinion of the Court.

In this case, the City of Houston maintains that it has governmental immunity from a suit by the Houston Municipal Employees Pension System. The trial court denied the City's plea to the jurisdiction, and the court of appeals affirmed in part and reversed in part. We agree with the trial court that the City's plea should be denied in full. Accordingly, we affirm the judgment of the court of appeals in part and reverse it in part.

I. Background

The appeal before us involves a relationship that is not working out well. The controversy concerns the City of Houston's creation of local government corporations to which it transferred some of its employees. Specifically at issue is the adoption of resolutions by the Houston Municipal Employees Pension System's Board of Trustees (the board) related to those employees, their status regarding the City's pension fund, and interpretation of the governing statute; and the Houston Municipal Employees Pension System's (the Pension System or System) attempts to enforce what it views as the City's obligation to make contributions to the pension fund. We begin with a brief review of the statute involved and a partial history of the conflict.

A. The Pension Statute

The Pension System was organized and operates under article 6243h of the Texas Revised Civil Statutes. It is a defined-benefit pension plan that provides retirement, survivor, and disability benefits for employees of the City. See TEX. REV. CIV. STAT. art. 6243h. Article 6243h applies only to cities with a population of greater than 2 million, id. § 1(4), and currently, Houston is the only city in Texas to which it *571applies. The statute defines a "member" of the pension fund as an "active employee included in the pension system," except for statutorily ineligible employees. Id. § 1(13). An "employee" is "any [eligible] person ... who holds a municipal position[,] ... whose name appears on a regular full-time payroll of a city[,] ... and who is paid a regular salary for services." Id. § 1(11). Under the statute, the City must make contributions to the pension fund and pick up payments on behalf of employees. See id. §§ 8(a), (c), 8A. Pick up payments are contributions to the pension fund made by the City in lieu of direct contributions by the members; the City may "pick up" those contributions via a deduction from each member's salary. Id. § 8(c).

Article 6243h requires the City to provide information to the board so that it may administer the fund and provide benefits properly. See id. § 2(u). The board is granted broad authority to "interpret and construe" article 6243h. See id. § 2(x)(2). The statute includes an express mandate that "[t]he determination of any fact by the pension board's interpretation of this Act [is] final and binding on any interested party, including members, deferred participants, retirees, eligible survivors, beneficiaries, and the city." Id. § 2(y). The statute specifically allows the City and the Pension System to enter into a written meet-and-confer agreement (MCA) regarding pension issues and benefits. See id. § 3(n). The City and the Pension System entered into an MCA on July 1, 2011.

B. Prologue: Klumb v. The Pension System

Since its creation, the City's Convention and Entertainment Facilities Department has operated and maintained municipally owned properties such as theaters, convention centers, and parking lots. In May 2011, the City announced plans to transfer the Convention and Entertainment Facilities Department's 100 or so employees from the department into a local government corporation named the Houston First Corporation (HF Corporation). HF Corporation is city-controlled and tax-funded with a budget approved by the Houston City Council and a board appointed by the mayor. After the announcement, the Pension System's board adopted a resolution interpreting the definition of "employee" in article 6243h to include "a full-time employee of a Texas local government corporation ... controlled by the City, upon a determination by the External Affairs Committee of the Board of Trustees that such [local government corporation's] employees are Employees for purposes of the [Pension System] Plan." The External Affairs Committee is a standing committee of the board. The pension plan documents were amended to incorporate this construction of the term "employee."

The City then formed a nonprofit entity, the Houston First Foundation (HF Foundation), and notified the board that HF Foundation was to employ those employees originally set to be transferred to HF Corporation. The board shortly adopted another resolution restating its definition of "employee" and additionally providing that "employees of any entity controlled, directly or indirectly, by [the City] are considered Employees for purposes of membership in [the Pension System], unless the External Affairs Committee expressly determines otherwise." That resolution triggered action by the City to form a nonprofit corporation named Convention and Cultural Services, Inc. (CC Services), which was to operate in conjunction with the HF Foundation. HF Corporation was to provide convention and entertainment services to the City using CC Services employees, and who were in turn leased to HF Corporation. The City attorney explained *572in a letter to the Pension System's executive director that following the transition of the convention department's employees to CC Services, the employees (1) would no longer be municipal employees or members of the Pension System, and (2) the City would not make contributions to the pension fund based on those employees' salaries. The External Affairs Committee of the board then adopted a resolution to the effect that these leased employees "would be in a control group and would remain as members of the plan."

The transfer of services and employees proceeded as planned by the City. A few employees who were eligible to retire did so and sought full retirement benefits from the Pension System on the basis that their employment with the City had ended upon their transition to CC Services. A few employees sought to defer their retirement, yet stop the Pension System from taking deductions from their paychecks, asserting that their being transferred to CC Services effected a termination of their employment with the City. Per its previous resolution, the External Affairs Committee determined that the transfer did not cause a separation from municipal service. These employees (the Klumb plaintiffs) sued the Pension System, challenging its board's authority to take such actions. The suit eventually reached this Court. See Klumb v. Hous. Mun. Emps. Pension Sys. , 458 S.W.3d 1 (Tex. 2015).

In this Court, the Klumb plaintiffs alleged violations of the Texas Constitution and breach of contract as well as ultra vires

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Bluebook (online)
549 S.W.3d 566, Counsel Stack Legal Research, https://law.counselstack.com/opinion/city-of-hous-v-hous-mun-emps-pension-sys-tex-2018.