University of Houston v. Stephen Barth , 56 Tex. Sup. Ct. J. 661 ( 2013 )

IN THE SUPREME COURT OF TEXAS
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NO . 12-0358
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UNIVERSITY OF HOUSTON, PETITIONER,
V.
STEPHEN BARTH, RESPONDENT
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ON PETITION FOR REVIEW FROM THE
COURT OF APPEALS FOR THE FIRST DISTRICT OF TEXAS
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PER CURIAM
In this case, Stephen Barth, a professor at the University of Houston, sued the University
under the Texas Whistleblower Act for retaliation allegedly stemming from Barth’s reports that his
supervisor violated internal administrative policies located in the University’s System Administrative
Memorandum (SAM) and other state civil and criminal law. The court of appeals held that the trial
court had subject-matter jurisdiction over Barth’s claim because the SAM’s administrative policies
constitute “law” under the Whistleblower Act. 365 S.W.3d 438, 446. We disagree. Because there
is no evidence that the University’s Board of Regents enacted the SAM’s administrative rules
pursuant to authority granted to it in the Texas Education Code, we hold that the rules do not fall
within the definition of “law” under the Whistleblower Act. See TEX . GOV ’T CODE § 554.001(1).
Moreover, there is no evidence that Barth had an objectively reasonable belief that his reports of the
alleged violations of state civil and criminal law were made to an “appropriate law enforcement
authority.” See id. § 554.002. Accordingly, the University’s sovereign immunity is not waived, and
thus we reverse the court of appeals’ judgment and dismiss the case for lack of subject-matter
jurisdiction. See id. § 554.0035.
Barth is an attorney and tenured professor in the hotel management college at the University.
In March and April of 1999, Barth reported to the University’s chief financial officer, Randy Harris,
and general counsel, Dennis Duffy, that his college’s dean, Alan Stutts, allegedly engaged in
questionable accounting practices, mishandled funds, and entered into improper contracts relating
to the University. In May 1999, Barth also reported the alleged violations to the University’s internal
auditor, Don Guyton, and spoke with an associate provost, Elaine Charlson, about the alleged
violations. In June 1999, Stutts gave Barth a “marginal” rating in one area during Barth’s annual
evaluation, which affected his merit raise for that year. Barth was also denied travel funds in 1999,
and Barth’s annual legal symposium on hotel law was cancelled allegedly after Stutts and a sponsor
withdrew their support. Barth filed two administrative grievances against Stutts, claiming he was
subject to adverse personnel actions for reporting the alleged violations. However, the parties were
unable to successfully resolve Barth’s grievances.
In 2001, Harris requested that Guyton investigate Barth’s allegations regarding Stutts, which
included claims that Stutts violated state civil and criminal laws as well as University policy. In the
audit report, Guyton concluded that Stutts failed to comply with internal University procedures and
state regulations, including section 03.A.05 of the University’s SAM, which requires a contract
between the hotel management college and a public relations firm to be approved by the office of
general counsel and to be reported to the Board of Regents. Guyton also found that Stutts did not
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violate section 37.10 of the Texas Penal Code, which proscribes tampering with governmental
records. See TEX . PENAL CODE § 37.10. Shortly after the University published Guyton’s report,
Barth sued the University for retaliation under the Whistleblower Act.
At trial, Barth claimed liability under the Whistleblower Act based on his reporting of three
alleged violations of law, which included: (1) the Penal Code, (2) the University’s SAM, and (3)
state civil statutes on government contracting. The jury found the University liable, but the charge
did not specify on which of the three grounds. The trial court rendered judgment in favor of Barth,
awarding him $40,000 in actual damages and $245,000 in attorney’s fees. The University appealed.
The court of appeals reversed the trial court’s judgment, holding that the trial court lacked
jurisdiction over some of Barth’s claims due to the untimely filing of his first grievance and
remanded for a new trial. 265 S.W.3d 607, 614. The court of appeals also held that the University
had waived its legal sufficiency challenge as to the elements of Barth’s whistleblower claim. Id. at
616. Both parties appealed. We reversed and remanded the case back to the court of appeals to
consider whether the trial court had jurisdiction in light of our decision in State v. Lueck, 290 S.W.3d
876, 881 (Tex. 2009), where we held the elements of a claim under the Whistleblower Act are
jurisdictional and may not be waived. 313 S.W.3d 817, 818 (Tex. 2010) (per curiam).
On remand, the court of appeals held that the trial court had subject-matter jurisdiction and
affirmed the trial court’s judgment. 365 S.W.3d 438, 441. The court of appeals concluded that
Barth’s allegation that the University retaliated against him for reporting that Stutts violated the
SAM’s internal policies was sufficient for purposes of establishing jurisdiction under the
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Whistleblower Act.1 Id. at 448. The University again petitions this Court for review, arguing that
(1) the SAM’s administrative policies are not “law” under the Whistleblower Act, and (2) Barth
failed to show that his alternative reports of violations of law were made to an appropriate law
enforcement authority as required by the Whistleblower Act. See TEX . GOV ’T CODE
§§ 554.001–.002.
The issue is one of subject-matter jurisdiction, which we review de novo. Tex. Dep’t of
Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004); see also Tex. Ass’n of Bus. v. Tex.
Air Control Bd., 852 S.W.2d 440, 443–44 (Tex. 1993) (providing that subject-matter jurisdiction is
never presumed and cannot be waived). Section 554.0035 of the Texas Government Code waives
sovereign immunity when a public employee alleges a violation of the Whistleblower Act. TEX .
GOV ’T CODE § 554.0035. A violation “occurs when a governmental entity retaliates against a public
employee for making a good-faith report of a violation of law to an appropriate law enforcement
authority.” Lueck, 290 S.W.3d at 878. The Whistleblower Act defines “law” as a state or federal
statute, an ordinance of a local governmental entity, or “a rule adopted under a statute or ordinance.”
TEX . GOV ’T CODE § 554.001(1). The first issue presented here requires us to determine whether the
administrative policies in the University’s SAM are “rule[s] adopted under a statute or ordinance.”
We have never construed the phrase “a rule adopted under a statute or ordinance,” but we
have noted that a constable department’s internal policies are not “law” as the term is defined under
the Whistleblower Act. See, e.g., Harris Cnty. Precinct Four Constable Dep’t v. Grabowski, 922
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Because the court of appeals held that Barth’s report related to Stutts’s alleged violation of the SAM’s
administrative policies imbued the trial court with jurisdiction, the court of appeals did not address the University’s
challenges to the other two alleged violations of law. 365 S.W .3d at 448 n.9.
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S.W.2d 954, 956 (Tex. 1996) (“Grabowski presented no evidence of a law he believed Constable
Moore violated other than his department’s internal policies.”); accord Mullins v. Dallas Indep. Sch.
Dist., 357 S.W.3d 182, 188 (Tex. App.—Dallas 2012, pet. denied) (“Other complaints and
grievances, including alleged violations of an agency’s internal procedures and policies, will not
support a [whistleblower] claim.”); City of Houston v. Kallina, 97 S.W.3d 170, 174–75 (Tex.
App.—Houston [14th Dist.] 2002, pet. denied) (“[T]he Whistleblower Act does not protect reports
of violations of a department’s internal policies.”); Ruiz v. City of San Antonio, 966 S.W.2d 128, 130
(Tex. App.—Austin 1998, no pet.) (same). In Grabowski, we held that a peace officer’s report that
a constable allegedly failed to comply with departmental policies when conducting an investigation
did not satisfy the good-faith element of a whistleblower claim because there was no evidence in the
record showing that his belief that a law had been violated was reasonable in light of his experience
as a peace officer. Grabowski, 922 S.W.2d at 956. In contrast to the department’s policies in
Grabowski, we have held that rules enacted by the University of Texas’s Board of Regents under the
University of Texas’s predecessor enabling statute “are of the same force as would be a like
enactment of the Legislature.” See Foley v. Benedict, 55 S.W.2d 805, 808 (Tex. 1932). Our inquiry
here focuses on whether the SAM’s policies were adopted under the University’s enabling statute.
We disagree with the court of appeals that the SAM’s administrative policies are “law” under
the Whistleblower Act because there is no evidence that the policies were enacted by the Board of
Regents as required by the University’s enabling statute. See TEX . EDUC. CODE § 111.35. The court
of appeals relied on Guyton’s testimony that the SAM’s policies “are established for the University
of Houston System as a whole” as sufficient evidence “that the administrative policies in the SAM
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are rules or regulations adopted by the Board of Regents.” Id. A rule is only a “law” under the
Whistleblower Act, however, if the rule is “adopted under a statute.” TEX . GOV ’T CODE
§ 554.001(1)(C). We agree that the applicable statute in this case is section 111.35 of the Education
Code, which grants the University’s Board of Regents authority to “enact bylaws, rules, and
regulations necessary for the successful management and government of the university.” TEX. EDUC.
CODE § 111.35 (emphasis added). Thus, for the SAM’s administrative policies to be “rule[s]
adopted under a statute,” the Board of Regents must have enacted the policies as required by that
section. See BLACK’S LAW DICTIONARY (9th ed. 2009) (defining “enact” as “[t]o make into law by
authoritative act” or “to pass”). Neither Guyton’s testimony nor any other evidence presented at trial
provides evidence that the Board of Regents enacted or passed the SAM’s administrative policies.
In fact, the record is unclear as to which party enacts the SAM’s administrative policies. The
record demonstrates that three levels of internal policies govern the University: (1) the Board of
Regents’ policies; (2) the system-level policies, known as the SAM; and (3) the campus-level
policies, known as the Manual of Administrative Policies and Procedures (MAPP). The record is
clear that the Board of Regents passes their own policies. However, Guyton’s testimony regarding
the party responsible for enacting the SAM and MAPP is less clear:
Q: [Barth’s Counsel:] Does the Board of Regents of the University of Houston
System have the authority to establish policies and rules regarding the
administration of the University System and the University of Houston?
A: [Guyton:] Yes.
Q: And those policies and procedures—some of those policies and procedures
are in various memoranda that are issued, correct?
A: Not the Board’s policies, no. The Board establishes their own policies.
Q: The Board has their own policies?
A: Right.
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Q. But pursuant to those policies, they are policies that are established for the
University of Houston System as a whole, correct?
A. That’s correct.
Q. And there are also policies that, pursuant to the Board’s authority, that are
policies and rules that are issued for each component of the University of
Houston System?
A: That’s correct.
...
Q: [The MAPP policies]—those are enacted pursuant to the authority of the
Board of Regents?
A: No, that’s the campus policies.
While Guyton’s testimony suggests that the SAM’s policies are issued “pursuant to [the Board of
Regents’ policies],” his testimony provides no evidence that the Board of Regents actually enacted
the SAM.
Further, the portions of the SAM in the record make no mention of enactment by the Board
of Regents. Instead, section 01.C.04 of the SAM designates the vice chancellor for administration
as the “responsible party” and provides that the chancellor “approved” this particular
memorandum—not the Board of Regents. Moreover, the Board of Regents’ policies support the
conclusion that the chancellor provides the authoritative act that makes the internal policies in the
SAM effective and not the Board of Regents. Taking judicial notice of section 01.01.4 of the Board
of Regents’ policies, we note that “[t]he Chancellor is responsible for the development and adoption
of the System Administrative Memoranda,” which is consistent with section 01.C.04 of the SAM
in the record. See TEX . R. EVID . 201; see also Freedom Comm’cs, Inc. v. Coronado, 372 S.W.3d
621, 623–24 (Tex. 2012) (taking judicial notice of facts outside the record to aid a determination of
jurisdiction).
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Barth contends that even if the SAM’s policies are not enacted by the Board of Regents, they
are still “law” under the Whistleblower Act because they were adopted pursuant to the Board of
Regents’ authority. In other words, Barth argues that it is irrelevant who adopts the rule or regulation
so long as it is “adopted under a statute.” We refuse to adopt such a broad construction. Barth’s
proposed construction ignores the interplay between the definition of “law” in the Whistleblower Act
and the required reference to section 111.35 of the Education Code, which expressly authorizes only
the Board of Regents to enact rules. See TEX . EDUC. CODE § 111.35. While the Board of Regents
can certainly delegate its authority to establish rules, the interaction between the definition of “law”
in the Whistleblower Act and section 111.35 demonstrates that the Legislature did not intend for
whistleblower protection to extend to reports of violations of the SAM’s rules. Accordingly, we
conclude that the SAM cannot form the basis for a report of a violation of “law” because the SAM’s
administrative policies are not “rule[s] adopted under a statute” as required by the Whistleblower
Act. See TEX . GOV ’T CODE § 554.001(1).
Barth argues that, even if the SAM’s administrative policies are not “law,” the University’s
sovereign immunity is waived as to his claim because he believed in “good faith” that he was
reporting a violation of law. The good-faith inquiry under the Whistleblower Act has both subjective
and objective components, which require that Barth “must have believed he was reporting conduct
that constituted a violation of law and his belief must have been reasonable based on his training and
experience.” See City of Elsa v. Gonzales, 325 S.W.3d 622, 626 (Tex. 2010). Barth provided
undisputed testimony that he believed that violations of “contracting guidelines at the University”
were violations of law. While Barth’s belief satisfies the subjective prong, we hold that Barth failed
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to satisfy the objective prong given his legal training, experience as a former practicing attorney, and
familiarity with the University’s rules from serving on the faculty senate. See Grabowski, 922
S.W.2d at 956. Therefore, we hold that the trial court lacked jurisdiction over this portion of Barth’s
claim.
Turning next to Barth’s alternative reports of purported violations of state civil and criminal
law, the University contends that none of Barth’s reports were made to an appropriate law
enforcement authority under the Act. We agree. The Whistleblower Act requires a claimant to show
that he in “good faith” reported a violation of law to an “appropriate law enforcement authority.”
TEX . GOV ’T CODE § 554.002; see also Tex. Dep’t of Transp. v. Needham, 82 S.W.3d 314, 321 (Tex.
2002) (providing that the good-faith inquiry requires both a subjective and objective good-faith belief
by the employee). An appropriate law enforcement authority is a part of a state entity that the
employee in good faith believes is authorized (1) to regulate under or to enforce the allegedly
violated law, or (2) to investigate or prosecute a violation of criminal law. TEX . GOV ’T CODE
§ 554.002(b). We recently held that “purely internal reports untethered to the Act’s undeniable focus
on law enforcement—those who either make the law or pursue those who break the law—fall short.”
Univ. of Tex. Sw. Med. Ctr. at Dallas v. Gentilello ___ S.W.3d ___, ___ (Tex. 2013). We noted
that:
[F]or an entity to constitute an appropriate law-enforcement authority under the
[Whistleblower] Act, it must have authority to enforce, investigate, or prosecute
violations of law against third parties outside of the entity itself, or it must have
authority to promulgate regulations governing the conduct of such third parties.
Authority of the entity to enforce legal requirements or regulate conduct within the
entity itself is insufficient to confer law-enforcement authority status.
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Id. at ___. Accordingly, Barth was required to have an objective good-faith belief that he was
reporting violations of law involving (1) section 37.10 of the Penal Code or (2) state law pertaining
to the administration of government contracts to an entity that could have enforced, investigated, or
prosecuted similar violations against third parties—not just an entity that can internally discipline
its own employees for an alleged violation. See id. at ___.
First, none of the four people that Barth reported to regarding alleged violations of the Penal
Code—the University’s general counsel, CFO, internal auditor, and associate provost—could have
investigated or prosecuted criminal law violations against third parties outside of the University. See
id. at ___ (“[T]he [Whistleblower] Act protects those who report to authorities that issue legal
directives, not authorities that follow them.”). While Barth made a report to the University’s police
regarding the alleged criminal violation, the report was not made until June 2000, after the alleged
retaliatory acts occurred. Barth argues that his compliance with section 01.C.04 of the SAM, which
provides that suspected criminal activity should be reported to either the campus police, the
University’s system director, the director of internal auditing, the University’s counsel, or the
University’s CFO, supports the proposition that he reported the violations to an “appropriate law
enforcement authority.” In addition, Barth contends that section 01.C.04 obligated any one of those
people to report the alleged violations to the University’s police. However, complying with an
internal obligation is insufficient in this case. See id. (holding that “lodging an internal complaint
to an authority whom one understands to be only charged with internal compliance, even including
investigating and punishing noncompliance, is jurisdictionally insufficient under the Whistleblower
Act”); Tex. A&M Univ.–Kingsville v. Moreno, ___ S.W.3d ___, ___ (Tex. 2013) (per curiam)
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(holding that evidence by an employee at a state university showing that she reported an alleged
violation of law to an authority that only oversaw internal university compliance was jurisdictionally
insufficient under the Whistleblower Act); Needham, 82 S.W.3d at 321 (providing that evidence that
an employee believed his report would be forwarded on to another entity that could prosecute the
alleged violation was no evidence to support the objective prong of the good-faith test under the
Whistleblower Act). The Whistleblower Act requires that the public employee report the alleged
violation to an appropriate law enforcement authority. TEX . GOV ’T CODE § 554.002(a). None of the
people that Barth reported to could have investigated or prosecuted the alleged violations of criminal
law.
Second, Barth never specifically cites to which state laws pertaining to government contracts
that he believed Stutts violated, but nevertheless argues that the Government Code authorizes
Guyton, as the University’s internal auditor, to conduct audits and investigations. See TEX . GOV ’T
CODE §§ 2102.003, .007. Section 321.0136 defines “investigation” as “an inquiry into specified acts
or allegations of impropriety, malfeasance, or nonfeasance in the obligation, expenditure, receipt,
or use of state funds, or into specified financial transactions or practices that may involve such
impropriety, malfeasance, or nonfeasance.” Id. § 321.0136. However, the fact that Guyton can
“inquire” into allegations of malfeasance does not mean that he can “regulate or enforce” the law,
as required by subsection 554.002(b)(1) of the Whistleblower Act. Further, Barth provided no
evidence that Guyton could have enforced state law or regulations regarding government contracts
against any third party outside of the University.
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In sum, given Barth’s legal training and experience as a practicing attorney, Barth failed to
meet the objective component of the good-faith test for reporting a violation of law to an appropriate
law enforcement authority. See Gentilello, ___ S.W.3d at ___. Barth could not have believed in
good faith that a violation of the SAM’s administrative policies were violations of “law” under the
Whistleblower Act, or that the University’s general counsel, CFO, internal auditor, or associate
provost possessed the power to either (1) regulate or enforce state civil law relating to the
University’s contracting with third parties or (2) prosecute or investigate the alleged criminal law
violations. See TEX . GOV ’T CODE § 554.002(b). Accordingly, the trial court lacked a basis for
subject-matter jurisdiction over the entirety of Barth’s claim.
Because the University’s immunity from suit was not waived under the Whistleblower Act,
the trial court lacked subject-matter jurisdiction over Barth’s cause of action. Accordingly, we grant
the petition for review and, without hearing oral argument, we reverse the judgment of the court of
appeals and dismiss Barth’s suit against the University. TEX . R. APP . P. 59.1.
OPINION DELIVERED: June 14, 2013
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