ACCEPTED 15-25-00013-CV FIFTEENTH COURT OF APPEALS AUSTIN, TEXAS 7/10/2025 4:53 PM No. 15-25-00013-CV CHRISTOPHER A. PRINE CLERK In the Fifteenth Court of Appeals FILED IN Austin, Texas 15th COURT OF APPEALS AUSTIN, TEXAS 7/10/2025 4:53:04 PM State of Texas, the Texas Facilities Commission, the Texas Health and CHRISTOPHER A. PRINE Human Services Commission, Mike Novak, in his Official Capacity asClerkExecutive Director of TFC, and Rolland Niles, in his Official Capacity as Deputy Executive Commissioner for the System Support Services Division of the Texas Health and Human Services Commission, Appellants, v.
Broadmoor Austin Associates, a Texas joint venture, Appellee.
On Appeal from Cause No. D-1-GN-23-007899 In the 455th Judicial District of Travis County, Texas
REPLY BRIEF OF APPELLANTS
Ken Paxton Kimberly Gdula Attorney General of Texas Division Chief General Litigation Division Brent Webster First Assistant Attorney General Jennifer Cook Assistant Attorney General Ralph Molina Texas Bar No. 00789233 Deputy First Assistant Attorney P.O. Box 12548/Mail Stop 019-1 General Austin, Texas 78711-2548 Tel: (737) 230-4700 Austin Kinghorn Fax: (512) 302-0667 Deputy Attorney General for Civil jennifer.cook@oag.texas.gov Litigation Counsel for Appellants
TABLE OF CONTENTS
INDEX OF AUTHORITIES ........................................................................... 3 SUMMARY ..................................................................................................... 5 REPLY TO APPELLEE’S STATEMENT OF FACTS.................................. 6 ARGUMENT .................................................................................................16 I. Contrary to Appellee’s assertion, the breach of contract claim at issue does not come within Chapter 114 of the Texas Civil Practices & Remedies Code. ..............................................................................................16 A. The contract at issue falls within Chapter 2167 of the Government Code, which expressly involves two state agencies and the State of Texas as lessee; in contrast, Chapter 114 requires a contract for a single state agency...16 1. Contracts covered by Chapter 114 and the waiver of immunity..17 2. Leases in Chapter 2167, such as this Lease. ................................18 3. A Chapter 2167 lease is not subject to the waiver of immunity in Chapter 114.....................................................................................................19 B. The allegations show the Lease was complied with so there is no breach of any express provision. .......................................................................21 II. Appellants acted in accordance with their authority under the law; there is no viable ultra vires cause of action. ..........................................................23 A. Niles was not required to certify funds were available to pay for the Lease. …………………………………………………………………….23 B. Novak and TFC properly terminated the Lease...............................27 1. There is no legal requirement that TFC or Novak do an independent determination regarding HHSC’s funding. ....................................................28 2. There was no authority or reason for TFC or Novak to question HHSC’s funding determination. .....................................................................29 C. Appellee’s ultra vires claim fails because Appellee seeks retroactive relief. …………………………………………………………………….32 III. Appellee’s UDJA claim is an improper attempt to circumvent sovereign immunity’s bar on Appellee’s breach of contract claim. ...............................33 CONCLUSION..............................................................................................34 CERTIFICATE OF COMPLIANCE ............................................................35
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INDEX OF AUTHORITIES
Cases
City of El Paso v. Heinrich, 284 S.W.3d 366 (Tex. 2009) .........................................................................33 City of Houston v. Houston Mun. Emps. Pension Sys., 549 S.W.3d 566 (Tex. 2018) .................................................................. 26, 33 City of Lancaster v. Chambers, 883 S.W.2d 650 (Tex. 1994) .........................................................................26 Progressive Cnty. Mut. Ins. Co. v. Caltzonsing, 658 S.W.3d 384 (Tex. App.—Corpus Christi-Edinburg 2022, no pet.) ...........................................................................................................32 Southwest Pharmacy Sols., Inc. v. Texas Health & Human Servs.
Comm'n, No. 03-11-00802-CV, 2013 WL 3336868, at *2 (Tex. App.— Austin June 27, 2013, no pet.) (mem. op.) ....................................................33 Sw. Bell Tel., L.P. v. Emmett, 459 S.W.3d 578 (Tex. 2015) .................................................................. 25, 26 Tex. Dep't of Transp. v. Sefzik, 355 S.W.3d 618 (Tex. 2011) .........................................................................34 Town of Shady Shores v. Swanson, 590 S.W.3d 544 (Tex. 2019) .........................................................................16
Statutes
Act of May 27, 2023, 88th Leg., R.S., ch. 1170 § 1, art. II sec. 1 ..................... 26, 34 Tex. Civ. Prac. & Rem. Code § 114.001 .......................................................... 17, 20 Tex. Civ. Prac. & Rem. Code § 114.002 .................................................................17 Tex. Civ. Prac. & Rem. Code § 114.003 .................................................... 17, 20, 21 Tex. Civ. Prac. & Rem. Code § 114.004 .................................................................20 Tex. Gov’t Code § 2167.002....................................................................................18 Tex. Gov’t Code § 2167.055....................................................................... 18, 19, 28 Tex. Gov’t Code § 2167.101................................................................. 19, 24, 29, 30
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Rules
1 Tex. Admin. Code §§ 115.20-.22 .........................................................................32 Texas Rule of Appellate Procedure 9.4 ...................................................................36
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SUMMARY
First, in Appellee’s brief (“Appellee’s Brief”), Appellee’s claim that the
waiver in chapter 114 of the Civil Practice & Remedies Code (“Chapter 114”)
applies to the lease at issue (“Lease”) is without merit. Contracts covered by Chapter
114 involve one state agency that enters into a contract, is bound by the terms of the
contract, and receives the goods/services provided for in the contract; that is not the
situation in this case. As a result, Appellee cannot rely on Chapter 114 to overcome
Appellants’ sovereign immunity.
Second, contrary to Appellee’s assertion, there is no viable ultra vires claim
against either Roland Niles (“Niles”) of the Texas Health and Human Services
Commission (“HHSC”) or Mike Novak (“Novak”) of the Texas Facilities
Commission (“TFC”). HHSC, within its authority, made prudent decisions to ensure
future costs were covered; such decisions involved complicated analysis of
numerous variables and unknown future contingencies. As part of that evaluation,
Niles, within HHSC’s discretion, did not certify funds were available for the Lease.
TFC did exactly as required when an agency, HHSC in this case, informs TFC funds
are not available and does not certify funds are available—it terminated the Lease
on behalf of the State.
Third, Appellee’s attempt to use the Uniform Declaratory Judgment Act
(“UDJA”) to circumvent sovereign immunity also fails. This is nothing more than a
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breach of contract action which is barred by sovereign immunity; there is no basis
or jurisdiction for a private party to request a declaration that a general
appropriations bill, which does not mention that party at all, entitled that party to
funds—all in support of a barred breach of contract claim.
REPLY TO APPELLEE’S STATEMENT OF FACTS
Appellee claims this case is about simple math, but that is the furthest thing
from the truth. Appellee claims there is no possible way HHSC could have
determined it had insufficient funds to fund the Lease. A review of undisputed facts
ignored by Appellee shows the complexity, the variables and the uncertainty
involved due to unknown future contingencies.
As Appellee notes, in September 2022, HHSC provided an appropriations
request to the legislature for fiscal year 2024 (“FY24”) and fiscal year 2025
(“FY25”) (collectively the “Biennium”). Appellee’s Brief at 170-73 (Tab 6). In
making this request, HHSC necessarily had to make projections based on unknown
future conditions and costs for FY 24 and FY 25 that were not yet fixed.
In HHSC’s base appropriations request for rent, HHSC asked for
$105,369,343 for FY24 and $105,245,466 for FY25. See CR at 270.1 As part of its
1 References to the clerk’s record will be “CR at [page no(s).].” References to the reporter’s record will be “[volume no.] RR at [page no(s).].”
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requests for exceptional items, HHSC asked for additional amounts for rent:
$29,601,496 for FY24 and $41,826,148 for FY25. Appellee’s Brief at 171 (Tab 6).
HHSC’s comments regarding its exceptional item request for rent reflects the
complexities, the many variables, and the future uncertainties involved. For this
additional rent request, HHSC states:
The first component is for leases. HHS has experienced a steady increase in lease costs from FY 2017 and costs increased significantly from $93.9 million in FY 2021 to an estimated $102.2 million in FY 2022. The increase in lease costs has required HHSC to reduce support costs including onsite security and monitoring, custodial services, building maintenance, pest control, HVAC and plumbing services. HHSC does not have the ability to absorb further cost increases without closing public facing offices. This item includes an assumed 9.9% year- over-year increase in the Consumer Price Index for the 2024-25 biennium.
Id. In this statement, HHSC explains lease costs have been increasing requiring
HHSC to reduce lease support costs to absorb the increasing costs. HHSC identified
components of lease support costs at issue to include:
Onsite security and monitoring Custodial services Building maintenance Pest control HVAC and plumbing services Id. Significantly, Appellee ignores these lease support costs in its analysis. Appellee tries to portray a simple math analysis. This is an example in which Appellee fails
to acknowledge there are multiple variables that impact the certification for funding
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and the analysis can be complex. HHSC explains it cannot absorb further support cost increases without shutting offices. Id.
As stated in the above quote, HHSC explains the calculation of its rent exceptional item request includes an “assumed 9.9% year-over-year increase in the Consumer Price Index for the 2024-25 biennium.” Id. This number is significant
because it reflects the financial environment at the time HHSC was evaluating its funding. HHSC notes in its request that “Each Lease permits a Consumer Price Index (CPI) escalation clause that will allow the lessor to request an increase
yearly.” Id. at 172 (emphasis added). In fact, these CPI escalation clauses are in the State lease template, and there is one in the Lease. CR at 282-84. These clauses allow for annual rent increases based on the CPI, to be determined on each anniversary of
the lease commencement, which would be different for each lease. Here, the Lease CPI escalation amount was calculated in August of each year. Id. Below for
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reference is a copy of the CPI Escalation Clause in its entirety:
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Id. This is another example of a complex and uncertain variable ignored by Appellee,
that HHSC must consider in it’s analysis when reviewing all leased properties
occupied by HHSC and available funding.
In its appropriations request, HHSC noted as of August 2022, “CPI in Texas
increased by 9.9% over the previous year.” Appellee’s Brief at 172 (Tab 6). During
this timeframe, there had been recent historically significant increases in the CPI. In
2021, 2022 and the beginning of 2023, the CPI reflects substantial increases
compared to other times. In 2022 particularly, there were annual increases of up to
9.8% for the Lease CPI which is much higher compared to other times, such as 1.6%
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in January 2021; the graphic below shows the historically high CPI annual
percentage increases of 2022:
Appellee’s Brief at 80 (Tab 1) (contractual provision referencing the CPI and www.bls.gov).2 HHSC’s exceptional item request for additional rent based on a
2 The CPI-W, U.S. City Average, All Items index is used, which is the same index used in the Lease at issue in this case. https://www.bls.gov/regions/mid-atlantic/data/consumerpriceindexhistorical_us_table.htm.
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9.9% annual CPI increase reflected a real concern regarding these historically high increases and the uncertainty of whether these increases would continue. This
impacted virtually all leases for properties occupied by HHSC.
Appellee ignores the fact that when making decisions about available funding, the decisionmaker is trying to predict the future; actual amounts ultimately spent
years later is information unknown at the time of making the decision. In fact, in order to prevail on any claims (breach of contract or ultra vires), one hurdle Appellee fails to address is that Appellee would need to prove these state officials knew the
future financial situation when making decisions about future funding availability— Appellee would have to prove the state actors knew the future. This, of course, is impossible.
In its appropriations request, HHSC identified other uncertainties and concerns about funding. HHSC anticipated having to request new leases to replace older leases and anticipated “new facility costs will be higher per square foot.”
Appellee’s Brief at 172 (Tab 6). HHSC further explained, “the probability of additional facility replacements occurring in the future is high” because some locations are old, and HHSC’s business processes change over time. Id. This is
another potentially high-cost contingency HHSC needed to be prepared for that Appellee ignores.
When the amounts of all HHSC requests for leases are viewed in total (by
adding the base rent request plus the exceptional item rent request), HHSC requested $134,970,839 for FY24 and $147,071,614 for FY25.
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On May 27, 2023, the legislature passed the appropriations bill and even though it was not final, HHSC was going to receive less than its requested amounts.
See Appellee’s Brief at 13. HHSC received $118,826,243 for FY24 and $119,751,160 for FY25. Id. The breakdown is as follows:
Source of funds FY 2024 FY 2025 Base rent request $105,369,343 $105,245,466 Exceptional item rent request $29,601,496 $41,826,148 Total requested $134,970,839 $147,071,614 Amount appropriated $118,826,243 $119,751,160 Difference between request and appropriations -$16,144,596 -$27,320,454
So, one of Appellee’s premises—that HHSC received more than it
requested—is not correct. HHSC received less. Appellee claims the exceptional
items are “wish list” items; Appellee relies on a guidance document from a state
political subdivision not involved in this case, which is not in evidence and not law.
Appellee’s Brief at 11-12. Yet, in the request, HHSC informs the legislature it may
have to close offices as a result of funding issues; this does not read like a wish list.
Appellee’s Brief at 171 (Tab 6). The request was based on actual CPI increases at
the time. This request cannot be disregarded.
Appellee asserts the Lease termination during this timeframe could not have
had any merit. Yet, decisions about funds available are made before the funds are
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spent and with many considerations, such as the support costs and the need to
upgrade old leases to newer facilities discussed above. Again, in order for Appellee’s
theory to hold water would require state decision-makers to know the future, such
as future CPIs; that is just not possible.
The funding decisions for FY24 leases in this case were being made in the
first half of 2023. Determining the adequacy of funding for future years is no
ministerial task—it takes judgement, and necessarily discretion.
In a request to TFC dated May 31, 2023, after the appropriations bill was
passed, HHSC requested to terminate the Lease and stated it was moving all staff
from Appellee’s facility. CR at 316-18. In HHSC’s explanation for the request,
HHSC stated it was “due to the non-availability of money” appropriated. Id. at 317.
Appellee claims HHSC was moving out of Appellee’s facility in January
2023. Appellee’s Brief at 10. Even taking Appellee’s claim as true, it is
unremarkable that HHSC would necessarily be evaluating leased properties and
making decisions about the future before May 2023.
After receiving information from HHSC that there was not going to be funding
for the Lease, TFC, consistent with its responsibility, sent Appellee a notice of
termination in a letter dated June 1, 2023. CR at 320-21.
In July 2023, TFC, as part of its responsibility each biennium, requested
HHSC’s certification of current leases. CR at 323-328. Attached to TFC’s request is
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a 5-page spreadsheet with a list of numerous leases all over the state totaling
approximately 3,365,355 square feet of leased space and for 13,629 full-time
employees. Id. at 328.
HHSC responded by certifying all but five. Appellee’s simple math
calculation does not take into consideration that many leases in locations all over the
state were considered and that five were not certified, not just Appellee’s Lease.
Appellee’s claim that its Lease was required to be funded ignores the complexities
involved.
Appellee asserts Appellants breached the Lease and acted ultra vires relying
on simple math, based on what was requested, what was approved and what was
spent. Appellee treats rent costs as fixed, but they were not. Appellee ignores
variables—like CPI escalation clauses, lease support services, and the future need
for newer facility leases. Additionally, Appellee assumes HHSC can predict the
future when making decisions; Appellee claims by seeing how much was spent on
“rent” in FY24, HHSC should have certified funds available for the Lease back in
2023. Of course, when HHSC has to make fiscal decisions that impact future years,
it does not have the ability to know the future.
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ARGUMENT
Appellee bears the burden of establishing a valid waiver of sovereign
immunity. See Town of Shady Shores v. Swanson, 590 S.W.3d 544, 550 (Tex. 2019).
Appellee puts forth three arguments as to why sovereign immunity has been waived:
the Lease falls within Chapter 114’s waiver of sovereign immunity; Niles and
Novack acted ultra vires, for which there is no sovereign immunity bar; and the
claims fall within the UDJA’s waiver of sovereign immunity. As described below
and in Appellants’ Brief, each of these arguments fails, and the trial court erred in
denying-in-part the plea to the jurisdiction.
I. Contrary to Appellee’s assertion, the breach of contract claim at issue does not come within Chapter 114 of the Texas Civil Practices & Remedies Code. This Lease does not fit within Chapter 114 and according to the allegations, all lease provisions were complied with so there is no express provision alleged to be breached.
A. The contract at issue falls within Chapter 2167 of the Government Code, which expressly involves two state agencies and the State of Texas as lessee; in contrast, Chapter 114 requires a contract for a single state agency.
While Appellee relies on dictionary definitions, principal/agency concepts, and landlord/tenant tenets, among other things, reading the plain and express language of the statutes involved shows a lease under Chapter 2167 is incompatible
and does not fit within a contract under Chapter 114.
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1. Contracts covered by Chapter 114 and the waiver of immunity.
Contracts subject to a Chapter 114 challenge must state “the essential terms
of the agreement for providing goods or services to the state agency” and be executed
by a state agency for that state agency. See Tex. Civ. Prac. & Rem. Code §§ 114.001,
114.002, and 114.003. In Chapter 114 claims, only one state agency is involved in
executing the contract and obtaining the goods and services under the contract. The
waiver of immunity in Chapter 114 states:
WAIVER OF IMMUNITY TO SUIT FOR CERTAIN CLAIMS. A state agency that is authorized by statute or the constitution to enter into a contract and that enters into a contract subject to this chapter waives sovereign immunity to suit for the purpose of adjudicating a claim for breach of an express provision of the contract, subject to the terms and conditions of this chapter.
Tex. Civ. Prac. & Rem. Code § 114.003 (emphasis added). In Chapter 114, the
waiver of immunity is only by a state agency that enters into the contract.
Chapter 114 involves a contract with one state agency. The definition of “contract subject to this chapter” is:
a written contract stating the essential terms of the agreement for providing goods or services to the state agency that is properly executed on behalf of the state agency.
Id. § 114.001(2) (emphasis added). According to this provision, the state agency that
executes the contract is also provided the goods and services of the contract. A
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Chapter 2167 contract does not fit within these parameters. A contract under Chapter 2167, involves two different state agencies and the State as lessee.
2. Leases in Chapter 2167, such as this Lease.
Chapter 2167 states the State is the lessee—not a state agency. Section 2167.055 states:
CONTRACT FOR LEASE OF SPACE. (a) In a contract by the commission [TFC] for the lease of space under this chapter, the state, acting through the commission [TFC], is the lessee.
Tex. Gov’t Code § 2167.055(a) (emphasis added). In a Chapter 2167 lease, the State
is the lessee and a party to the lease while TFC acts as an agent for the State. While the State is the lessee and TFC executes the contract on behalf of the State as lessee, TFC does not occupy the leased premises or pay for the leased premises. Pursuant
to Section 2167.002, the state agency occupying the leased space pays the lease. Section 2167.002 states:
PREREQUISITES FOR LEASING SPACE. (a) The commission may lease space for a state agency in accordance with this chapter and the agency's specifications if: (1) state-owned space is not otherwise available to the agency; and (2) the agency has verified it has money available to pay for the lease.
Tex. Gov’t Code § 2167.002. Additionally, Section 2167.101 provides:
CERTIFICATION OF AVAILABLE MONEY. A state agency occupying space leased under this chapter shall certify to the commission [TFC], at least 60 days before the beginning of each fiscal biennium during the lease term, that money is available to pay for the lease until the end of the next fiscal biennium.
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Tex. Gov’t Code § 2167.101. According to these provisions, it is the occupying agency who pays for the lease and is required to certify if money is available before
each fiscal biennium. In this case, HHSC is the occupying agency. While HHSC pays for the lease from its budget, HHSC is not a party to the lease contract. Under the scheme in Chapter 2167, the legislature chose to make the State of Texas the
lessee (not a state agency), have one state agency (TFC) execute and oversee the lease contracts on behalf of the State lessee, and inure to the benefit of a second occupying state agency (HHSC), which is not a party to the lease. Such a statutory
scheme and type of contract is inconsistent with the waiver of sovereign immunity in Chapter 114.
3. A Chapter 2167 lease is not subject to the waiver of immunity in Chapter 114.
HHSC never entered into the Lease and thus by the express terms of the statutory waiver, it does not apply to HHSC. It also does not apply to TFC because TFC executes the contract not as a party to the contract because Chapter 2167 makes
clear the State is the lessee and thus the party to the contract—not TFC.
Under Chapter 2167, the legislature expressly chose to make the State, not a state agency, the lessee. Tex. Gov’t Code § 2167.055. TFC acts on behalf of the
State, as lessee. TFC does not execute the contract for itself and does not receive any goods or services provided in the contract. Id. TFC’s actions in signing the contract are for the benefit of the State, as lessee. So, the waiver in Chapter 114 does not
apply to TFC.
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This also makes sense as TFC does not budget for the Chapter 2167 leases and does not have funds allocated to pay for any goods and services provided under
these lease contracts; it is the occupying agency who pays rent in Chapter 2167 lease contracts. Were TFC held liable under Chapter 114, one of the main components that could be recovered is “the balance due and owed by the state agency under the
contract.” Tex. Civ. Prac. & Rem. Code § 114.004(a)(1). As a result, if Chapter 114 were held applicable to TFC for lease contracts, TFC could be responsible for amounts owed by the occupying agency, which was clearly not the intent of the
legislature.
Chapter 114 also does not apply to entities who are not a party to the contract, such as TFC and HHSC. The legislature chose in Chapter 2167 to make the State,
not one of its agencies, the lessee and party to the contract. In Chapter 114, the waiver of immunity only applies when a state agency enters into a contract. Tex. Civ. Prac. & Rem. Code §§ 114.001(3), .003. There is no provision waiving
sovereign immunity when the State is the party to the contract. There is similarly no provision waiving sovereign immunity for an agency that is not a party to the contract. The legislature used express language in making the State the lessee in
Chapter 2167 and waiving sovereign immunity for only state agencies in Chapter 114. Because the State is not a state agency, and neither HHSC nor TFC are parties to the contract, the waiver of immunity in Chapter 114 does not apply to them. While
Appellee attempts to minimize these distinctions by creating terms to collectively refer to the State, HHSC and TFC, these distinctions are real and meaningful.
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As Appellee notes in its brief, when an agent (TFC) signs a contract on behalf of a principal (State lessee), the agent is not liable under the contract. Appellee’s
Brief at 24. That is exactly what Appellee is asking the Court to do. While Chapter 2167 makes clear the State, and not TFC, is the lessee, Appellee asks this Court to defy agency/principal issues—as well as express statutory language and Lease
language—and find TFC, who does not pay for the Lease and HHSC, who is not a party to the Lease, liable under this Lease.
B. The allegations show the Lease was complied with so there is no breach of any express provision.
Additionally, Chapter 114 does not apply because there was no breach of any express provision as required. Tex. Civ. Prac. & Rem Code § 114.003. According to the allegations and the record, Appellants complied with the Lease. Appellee’s assert
a breach of contract claim. The provision relied on states:
CR at 23. This provision requires monthly rent. However, no rent is due if the lease is terminated. Appellee acknowledges the steps that were taken to terminate in
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accordance with the Texas Government Code and terms of the Lease. Appellee’s Brief at 8-9. HHSC evaluated its appropriated funds, determined it did not have the
continuation of funds from the legislature to pay for the Lease, and did not certify that funds were available. CR at 316-318; 330-337. TFC notified Appellee of termination due to the lack of appropriated funds. CR at 320-21. To the extent
Appellee is relying on what it deems an invalid termination, all steps under the contract and statutes for termination occurred. CR at 23. However, in Appellee’s opinion, HHSC was incorrect in exercising its business judgment and should have
certified the funds for Appellee’s Lease because there was no justification for HHSC not to certify. But Appellee does not get to substitute its business judgment for that of the agency. As discussed, there are many variables and complexities involved.
Importantly, HHSC’s decision involved assessing what may happen in the future, factoring in items such as the number of leases involved, lease support costs, and CPI rent increases, for example—it would be impossible in this complex
scenario to find HHSC was required to certify funds were available to pay for this particular Lease. Because there could be no showing the termination was invalid, and all the steps required for termination occurred, there is no express provision that
could have been breached. To the extent Appellee relies on the breach of the rental payment obligation provision, Appellee’s argument fails because the lease did not require rental payments after the termination.
Notably absent from the record is any documentation Appellee treated the Lease as anything but terminated. For example, there are no CPI rent increase
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calculations. There is no letter from Appellee telling Appellants not to vacate and vacating would be a breach. Further, there is no express provision HHSC or TFC
could have breached because they were not parties to the contract. TFC did not breach any express provision of the lease; it acted to terminate the lease ono behalf of the State once the occupying agency notified it that funds were not available and
did not certify funds were available. This is exactly what TFC was supposed to do. Because there is no express provision that was breached according to the allegations, for this additional reason, this Lease does not come within Chapter 114.
II. Appellants acted in accordance with their authority under the law; there is no viable ultra vires cause of action. Appellee claims Niles from HHSC acted ultra vires by failing to certify there were funds available to pay the Lease and that Novak of TFC acted ultra vires
because he had no authority to terminate the lease. However, as discussed below and in Appellants’ Brief, the ultra vires claims against Niles and Novak are without merit.
A. Niles was not required to certify funds were available to pay for the Lease.
Chapter 2167 requires a state agency occupying leased space to certify
whether money is available to pay leases before the next fiscal biennium. Tex. Gov’t. Code § 2167.101. Specifically, this provision states:
CERTIFICATION OF AVAILABLE MONEY. A state agency occupying space leased under this chapter shall certify to the commission [TFC], at least 60 days before the beginning of each fiscal biennium during the lease term, that money is available to pay for the
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lease until the end of the next fiscal biennium.
Id. Implicit within this provision is a requirement that the state agency determine
whether money is, in fact, available to pay for the lease through the end of the next
fiscal bienniumobviously, if the funds were not available to the occupying agency,
then the agency would not certify and would not be required to certify. Certainly,
the legislature would not want an agency to certify available funding knowing the
appropriations received would not be sufficient to cover all expenses. Nevertheless,
Appellee argues the funds were available and “Niles failed to perform his ministerial
duty to certify that money was available for the Broadmoor Lease.” Appellee’s Brief
at 58. Appellee appears to misunderstand how state agencies receive appropriations
from the legislature and mischaracterizes this determination as “ministerial.”
Appellee claims it was simple math, but fails to account for other leasing expenses
(lease support costs, future needs, etc.) and variables that necessarily required
deliberation and discretion by the agency.
Appellee relies on faulty premises such as HHSC received more than it
requested for lease rent. That is incorrect. HHSC received $16 million less than it
requested for FY24 and $27 million less than it requested for FY25.
Additionally, the monthly lease costs were not fixedlease support costs
fluctuate over time. Monthly rent for each lease is evaluated annually for increases
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based on the CPI increase at the time. Despite Appellee’s belief to the contrary, cer-
tifying whether funding was available for any particular lease did not involve a line-
by-line comparison and was more complex than simply adding up the total leases to
see if funding would cover rent.
For the same reasons that it was not readily apparent whether funding would
or would not be available for any given lease, determining whether to certify funds
for Appellee’s lease was not a purely ministerial act. To constitute a purely ministe-
rial act, the law must “prescribe[] and define[] the duties to be performed with such
precision and certainty as to leave nothing to the exercise of discretion or judgment.”
Sw. Bell Tel., L.P. v. Emmett, 459 S.W.3d 578, 587 (Tex. 2015) (quoting City of
Lancaster v. Chambers, 883 S.W.2d 650, 654 (Tex. 1994)). “Conversely, ‘discre-
tionary acts’ are those that ‘require the exercise of judgment and personal delibera-
tion.’” City of Houston v. Houston Mun. Emps. Pension Sys., 549 S.W.3d 566, 576
(Tex. 2018) (quoting Sw. Bell, 459 S.W.3d at 587).
The General Appropriations Act does not list out each individual lease
wherein HHSC occupies space, nor does it provide a detailed mandate for how ap-
propriated funds should be spent. See Act of May 27, 2023, 88th Leg., R.S., ch. 1170
§ 1, art. II sec. 1 at II-42. Instead, funds are earmarked for general areas such as
“salaries and wages,” “utilities,” “travel,” and “rent – building,” to name a few. Id
Over a biennium, circumstances may change. For example, employees were
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returning to the office from the pandemic, particularly in client-facing programs;
utilities for those offices were likely to be higher than other offices and HHSC
needed the flexibility and discretion to appropriate funds for utilities to those offices
with higher usage. The legislature didn’t intend to micromanage how funds ear-
marked for utilities would be spent at any particular office just like it didn’t mandate
spending of “rent-building” funds for any one particular lease. The legislature un-
derstood that some level of discretion would be necessary for HHSC to efficiently
operate as a steward of taxpayer money. Because the determination as to whether
the appropriated funds were sufficient to cover all lease expenses is not prescribed
with such precision as to leave nothing to the exercise of discretion and judgment by
HHSC, the certification of available funds cannot be a purely ministerial act and
thus, does not give rise to an ultra vires action.
Appellee relies on a false premise that HHSC knew what future lease costs
were going to be when it notified TFC it was terminating the lease. Practically all
leases had CPI escalations clauses, so this premise is false. Appellee claims HHSC
was appropriated more than it requested and more than it could have estimated. This
is false. CR at 270; Appellee’s Brief at 13, 171 (Tab 6) (showing the difference
between what was requested and what was appropriated was $16 million less than
requested for FY24 and $27 million less than requested for FY25). The CPI was
increasing significantly during the time period before these decisions were made.
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Given the increasing costs, some would say it was prudent for HHSC to start
planning on how to address the sky-rocketing lease costs and possibility that these
costs would keep increasing.
Appellee also asserts HHSC began moving out of the Lease facilities in Jan-
uary 2023. See, e.g., Appellee’s brief at 10 (referring to CR 317) (CR 317 is a noti-
fication from May 2023). This is nothing more than a red herring. Importantly, de-
cisions ensuring allocated funds are available for leases are only made once every
two years, prior to each legislative biennium. It makes sense HHSC would be plan-
ning and evaluating all contingencies and making necessary determinations as needs
arise. In early 2023, the CPI had been skyrocketing in historic proportions. HHSC’s
appropriation request shows HHSC had serious concerns about the increasing lease
and lease support costs.
Niles and HHSC did exactly what it was required to do within its discretion
under the law. While Appellee does not like what HHSC did and does not agree with
the decision, it was within Niles and HHSC’s discretion. Appellee’s allegations do
not rise to a viable ultra vires claim against Niles.
B. Novak and TFC properly terminated the Lease. Appellee asserts Novak was not authorized to terminate the lease and doing so was ultra vires. Appellee’s Brief at 49-60. However, Novak, acting on behalf of
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the State through his position at TFC, did have authority and the obligation to terminate the Lease and properly did so.
1. There is no legal requirement that TFC or Novak do an independent determination regarding HHSC’s funding.
Chapter 2167 provides that, “A lease contract is contingent on the availability of money appropriated by the legislature to pay for the lease.” Tex. Gov’t Code
§ 2167.055(e). Because the Texas legislature appropriates funds every two years, it is unknown if the legislature will appropriate funds to cover the lease beyond the current funding biennium. In order to address the fact funds are appropriated every
biennium, Chapter 2167 requires occupying state agencies to certify funds are available during the lease terms and before each biennium. Tex. Gov’t Code § 2167.101. Specifically, section 2167.101 states:
CERTIFICATION OF AVAILABLE MONEY. A state agency occupying space leased under this chapter shall certify to the commission, at least 60 days before the beginning of each fiscal biennium during the lease term, that money is available to pay for the lease until the end of the next fiscal biennium.
Id. Pursuant to this section, a state agency is required to certify during the lease term for each biennium. According to Chapter 2167, a lease contract is contingent on the availability of funds to pay for the lease and a certification that funds are available
is required by the occupying agency for every biennium after the lease is executed during the term of the lease. These statutes reflect an intent that the State not enter into a lease or continue in a lease unless the occupying state agency determines and
certifies funds are available.
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Appellee claims Novak lacked authority to terminate the lease because Novak could not conclude money was not available. To the contrary, Novak actually had
an obligation under the statute to terminate the Lease on behalf of the State. There is no statutory or regulatory requirement that TFC make an independent determination regarding the occupying agency’s available funds. Novak was not required to
familiarize himself with the occupying agency’s funding concerns and analysis nor was he required to conduct his own independent analysis. There is no requirement in the law for TFC to do this. What is clear under the law is that it is the occupying
agency that is responsible for determining whether funding is available to that occupying agency. See Tex. Gov’t Code § 2167.101. Contrary to Appellee’s assertion to the contrary, the legislature chose not to require TFC to conduct an independent and
duplicate determination. When funding is not certified by the occupying agency, there are no funds to continue the lease and TFC has an obligation under the statute and the lease to terminate for a lack of funding. Thus, Novak’s action does not
amount to a viable claim that he was acting ultra vires when he did not second guess HHSC’s determination.
2. There was no authority or reason for TFC or Novak to question HHSC’s funding determination.
Similar to the allegations against Niles, Appellee argues if Novak did his own independent analysis, Novak would have necessarily concluded funding is available. Appellee’s brief at 52. Putting aside that Novak had no obligation under the law to
complete his own independent analysis, for the same reasons Niles was within his
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authority in not certifying funds were available, Novak had no authority or reason to second guess HHSC or intervene and deny HHSC’s request to terminate.
Appellee relies heavily on the idea Niles certified “$93 million in annual lease obligations for the next biennium” and terminated the Lease even though HHSC was appropriated $118 million for FY 2024. Appellee’s Brief at 52. Appellee claims it
was “easy math” and Novak was required to dispute HHSC’s failure to certify. See, e.g., Appellee’s Brief at 56. Yet, an actual review of the information available at the time these decisions were made shows it was not that simple.
Appellee’s claim that Niles certified $93 million in lease obligations misconstrues what the record reveals that number actually reflected. Specifically, this $93 million figure comes from a July 27, 2023 letter HHSC wrote in response
to a letter request from TFC to certify current leases. CR at 330. TFC’s letter attached a spreadsheet of all leases HHSC had. CR at 323-28. In HHSC’s response letter, Niles reported five leases will no longer be active. CR at 330. Niles attached a
spreadsheet to the letter, without the five leases that were not being certified, and estimated that the annual amount of those remaining leases for FY24 was $93.7 million. CR at 330, 333-37. However, this was only an estimate. First, the leases,
including the Lease at issue in this case, included CPI escalation clauses. Appellee’s brief at 172 (Tab 6) (HHSC appropriations request says all leases had these clauses); Appellee’s Brief at 79-81 (Tab 1) (showing Lease is on the State lease template and
contains the CPI escalation clause). As discussed above, these clauses allow for annual rent increases based on the CPI. Even Appellee acknowledges that Niles was
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providing an estimate, commending him for being “almost spot on” when HHSC actually spent $95 million for FY24. Appellee’s Brief at n.72. Since a certification
is committing that amounts will be available in the future, taking into account potential unknown contingencies, it is prudent to leave room for contingencies when predicting and committing to future funds. HHSC knew it had to deal with many
variables and future contingencies, so it was not ultra vires to exercise discretion, after consideration of relevant factors, to certify less than the total amount appropriated. Neither TFC nor Novak had responsibility to do its own evaluation of
HHSC’s funding.
Moreover, TFC acting as an agent of the State could not continue the Lease if the occupying agency does not certify funds were available. TFC does not have
funding to pay for the Lease and has no control over HHSC regarding payment for the Lease. Termination by TFC via Novak was certainly in compliance with the law.
Appellee’s reference to TFC’s rules at 1 Tex. Admin. Code §§ 115.20-.22 are
irrelevant because these 2016 regulations were not in existence at the time the 2014 Lease was entered into so these regulations do not apply to this Lease. See Progressive Cnty. Mut. Ins. Co. v. Caltzonsing, 658 S.W.3d 384, 393 (Tex. App.—
Corpus Christi-Edinburg 2022, no pet.).
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C. Appellee’s ultra vires claim fails because Appellee seeks retroactive relief.
Appellee claims it seeks prospective relief only but in a practical sense, that
is clearly not the case. Appellee requests an injunction that, if granted, necessarily requires retroactive relief.
Appellee mischaracterizes its request as a prospective injunction that would
seek to undo the 2023 decision and mandate a certification that funds were available for rent for the 2024-2025 Biennium. Appellee’s Brief at 61. Appellee also wants to retract the termination of the Leasein other words, Appellee seeks to undo an al-
leged wrongful act in the past. Id. Both of these provisions seek to undo an action that has already occurred. Texas courts have consistently held that “[i]f the injury has already occurred and the only plausible remedy is monetary damages, an ultra
vires claim will not lie.” City of Houston v. Houston Mun. Emps. Pension Sys., 549 S.W.3d 566, 576 (citing City of El Paso v. Heinrich, 284 S.W.3d 366, 374 (Tex. 2009)). The certification of funds as well as the termination of the Lease, happened
in the past.
HHSC vacated the premises, and Appellee has had the use of its facility since September 1, 2023. There is no allegation Appellants are continuing to terminate
Appellee’s leases without authorization. There is no allegation Appellants continue to fail to certify funds when they are so required. This entire lawsuit concerns one instance and one lease from the past; it is not an ongoing violation. Appellee seeks
to improperly “undo” prior acts. See Southwest Pharmacy Sols., Inc. v. Texas Health & Human Servs. Comm'n, No. 03-11-00802-CV, 2013 WL 3336868, at *2 (Tex.
33
App.—Austin June 27, 2013, no pet.) (mem. op.). For these reasons, Appellee’s ultra vires claims against Niles and Novak fail and must be dismissed for lack of
jurisdiction.
III. Appellee’s UDJA claim is an improper attempt to circumvent sovereign immunity’s bar on Appellee’s breach of contract claim. This is a breach of contract case, pure and simple, which is barred by
sovereign immunity. Appellee, aware of this bar, seeks to circumvent sovereign immunity with a UDJA claim asking this Court to declare what the legislature did notthat funds were specifically allocated for Appellee’s Lease.
Appellee fails to identify precedent showing a private party can sue a state agency for a declaration to establish that the private party was specifically allocated funds in a general allocation bill.3 In fact, the allocation bill does not mention
Appellee at all. Act of May 27, 2023, 88th Leg., R.S., ch. 1170 § 1, art. II sec. 1 at II-42. Appellee is impermissibly attempting to get a judicial interpretation of a provision in the Legislature’s allocation of funds to state agencies.
Additionally, the UDJA does not enlarge the trial court’s jurisdiction and cannot be used to circumvent sovereign immunity in a breach of contract claim. See Tex. Dep't of Transp. v. Sefzik, 355 S.W.3d 618, 622-23 (Tex. 2011). Here, the UDJA
request is solely in support of Appellee’s breach of contract claim. Appellee seeks
3 Appellants acknowledge that the General Appropriations Act does allocate funds to specific individuals for settlements and judgments, but such appropriations are not applicable or relevant here.
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the declaration in an attempt to show Appellants breached the Lease. Since there is no waiver of sovereign immunity for Appellee’s breach of contract claim, the UDJA
cannot be used to establish a waiver of sovereign immunity as to Appellee’s claims.
CONCLUSION For these reasons, Appellants respectfully request that this Court reverse the
partial denial of Appellants’ plea to the jurisdiction and dismiss with prejudice Appellee’s claims against all Appellants.
Respectfully submitted,
KEN PAXTON Attorney General of Texas
BRENT WEBSTER First Assistant Attorney General
RALPH MOLINA Deputy First Assistant Attorney General
AUSTIN KINGHORN Deputy Attorney General for Civil Litigation
KIMBERLY GDULA Chief, General Litigation Division
/s/ Jennifer Cook JENNIFER COOK Texas Bar No. 00789233 Assistant Attorney General P.O. Box 12548/Mail Stop 019-1 Austin, Texas 78711-2548 Tel: (737) 230-4700 Fax: (512) 302-0667
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jennifer.cook@oag.texas.gov
Counsel for Appellants
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In compliance with Texas Rule of Appellate Procedure 9.4(i)(2), this reply brief contains 6688 words, excluding the portions of the brief exempted by Rule 9.4(i)(1), as calculated by Microsoft Office 360.
/s/ Jennifer Cook Jennifer Cook Assistant Attorney General
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Envelope ID: 102999349 Filing Code Description: Other Brief Filing Description: 20250710_Appellants Reply Brief Status as of 7/11/2025 7:16 AM CST
Case Contacts
Name BarNumber Email TimestampSubmitted Status
Michaelle Peters mpeters@scottdoug.com 7/10/2025 4:53:04 PM SENT
Angela Goldberg agoldberg@scottdoug.com 7/10/2025 4:53:04 PM SENT
Susie Smith ssmith@scottdoug.com 7/10/2025 4:53:04 PM SENT
Jason R.LaFond jlafond@scottdoug.com 7/10/2025 4:53:04 PM SENT
Kemp Kasling kkasling@kaslinglaw.com 7/10/2025 4:53:04 PM SENT
Angie Espinoza aespinoza@scottdoug.com 7/10/2025 4:53:04 PM SENT
Carla Matheson cmatheson@scottdoug.com 7/10/2025 4:53:04 PM SENT
Associated Case Party: State of Texas
Name BarNumber Email TimestampSubmitted Status
Victoria Gomez victoria.gomez@oag.texas.gov 7/10/2025 4:53:04 PM SENT
Jennifer Cook Jennifer.Cook@oag.texas.gov 7/10/2025 4:53:04 PM SENT
Associated Case Party: Broadmoor Austin Associates, a Texas Joint Venture
Name BarNumber Email TimestampSubmitted Status
Sara W.Clark sclark@scottdoug.com 7/10/2025 4:53:04 PM SENT
Casey Dobson cdobson@scottdoug.com 7/10/2025 4:53:04 PM SENT