the City of Fort Worth v. Janet Anne Lane

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH

NO. 02-11-00048-CV

THE CITY OF FORT WORTH APPELLANT

V.

JANET ANNE LANE APPELLEE

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FROM THE 342ND DISTRICT COURT OF TARRANT COUNTY

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MEMORANDUM OPINION1

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Appellant the City of Fort Worth brings this interlocutory appeal from the

trial court’s order denying in part its plea to the jurisdiction on the whistleblower

claim filed by Appellee Janet Anne Lane. In one issue, Fort Worth argues that

Lane did not establish a waiver of immunity under the Texas Whistleblower Act

because she did not make a good faith report of a violation of law. Because we

1
See Tex. R. App. P. 47.4.
hold that Lane established a waiver of immunity under the Whistleblower Act, we

affirm the trial court’s order.

Background

Lane, a licensed attorney, worked as an audit manager for Fort Worth’s

internal audit department. The city auditor at that time was Costa Triantaphilides.

As part of her duties, Lane was assigned to draft a Request for Proposals

(RFP) to solicit competitive sealed proposals on a contract to perform a

healthcare claims audit. Before the RFP had been posted, Triantaphilides asked

Lane for a draft of the RFP. Triantaphilides told Lane that Garland Asher, a

member of Fort Worth’s Audit and Finance Advisory Committee, wanted to see

the draft because his friend wanted to bid on the project. Lane reported this

conversation to her immediate supervisor, Terry Holderman.

Fort Worth issued the RFP on September 6, 2007. Healthcare Data

Management, Inc. (HDM) was among the companies that submitted a bid.

Triantaphilides told Lane that Asher wanted to see the bid from HDM. Lane

objected to the request but ultimately complied. Lane reported the conversation

to Holderman.

In May 2008, Lane called Fort Worth’s fraud hotline to report

Triantaphilides’s request of the RFP draft and his statement that Asher wanted to

see HDM’s proposal because she believed these acts violated the Texas

2
competitive procurement laws and the Texas Public Information Act.2 This

complaint was investigated by Fort Worth’s police department. Lane also filed a

complaint with Fort Worth’s employee relations department. In April 2009, she

reported the same acts to the FBI.

The employee relations department denied her complaint, and Lane’s

appeal of that denial was unsuccessful. The city manager terminated the police

department’s investigation. On August 13, 2009, Fort Worth terminated Lane’s

employment.

Lane filed suit against Fort Worth asserting a violation of the Whistleblower

Act. She alleged that she had been fired in retaliation for her reports of

misconduct, that she had in good faith reasonably believed that the acts reported

had violated the law, that she reported the activity to the Fort Worth police

department and the FBI, and that Fort Worth retaliated against her for her report

of the activity.

Fort Worth filed a plea to the jurisdiction, alleging that a reasonably

prudent attorney would not have believed that the reported conduct violated

Texas’s competitive bidding laws or the Texas Public Information Act and that

because Lane is an attorney, her reports were therefore not made in good faith

2
See Tex. Loc. Gov’t Code Ann. § 252.049 (West 2005) (providing
confidentiality requirements for information in competitive bids or proposals); see
also Tex. Gov’t Code Ann. § 552.104 (West 2004) (providing that certain
information related to competitive bidding is exempted from disclosure under the
public information act).

3
under the Whistleblower Act. Fort Worth also alleged that its immunity had not

been waived by the Whistleblower Act for Lane’s report of an alleged violation of

the Public Information Act because the report had not been made to an

appropriate law-enforcement authority. Fort Worth alleged that a reasonably

prudent attorney would not have believed that either Fort Worth’s fraud hotline or

the FBI would have authority to enforce or investigate an alleged violation of the

Public Information Act.

The trial court granted Fort Worth’s plea as to the part of Lane’s claim that

was based on her report of a violation of the Public Information Act and as to any

part of Lane’s claim based on her report to the FBI. The trial court denied the

plea as to Lane’s report to Fort Worth’s fraud hotline of a violation of Texas’s

competitive procurement laws. Fort Worth now appeals.

Standard of Review

We review a trial court’s ruling on a plea to the jurisdiction de novo.3 A

plaintiff has the burden of alleging facts that affirmatively demonstrate that the

trial court has subject-matter jurisdiction.4 When a plea to the jurisdiction

challenges the pleadings, a court looks at the allegations in the plaintiff’s

3
City of Elsa v. Gonzalez, 325 S.W.3d 622, 625 (Tex. 2010).
4
Id.; City of Fort Worth v. Robinson, 300 S.W.3d 892, 895 (Tex. App.—Fort
Worth 2009, no pet.).

4
pleadings and accepts them as true.5 If, however, the plea to the jurisdiction

challenges the existence of jurisdictional facts, a court must also consider the

relevant evidence necessary to resolve the jurisdictional issues raised.6 When a

jurisdictional challenge also implicates the merits of the plaintiff’s claim, then the

trial court considers the evidence submitted by the parties to determine if a fact

question exists.7 If the evidence creates a fact question about the jurisdictional

issue, then the trial court cannot grant the plea to the jurisdiction; instead, the trial

court must leave the fact issue for determination by the factfinder.8 But if the

evidence is undisputed, or if the evidence does not raise a fact question on the

jurisdictional issue, the trial court rules on the plea to the jurisdiction as a matter

of law.9

The Whistleblower Act

Texas’s Whistleblower Act provides that a governmental entity may not

terminate the employment of a person who in good faith reports a violation of the

law by the government entity or another public employee to an appropriate law

5
Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex.
2004).
6
Id. at 227; see also City of Elsa, 325 S.W.3d at 625 (―[W]e consider the
plaintiff’s pleadings and factual assertions, as well as any evidence in the record
that is relevant to the jurisdictional issue.‖).
7
Miranda, 133 S.W.3d at 227.
8
Id. at 227–28.
9
Id. at 228.

5
enforcement authority.10 The governmental entity’s immunity is waived for a

claim by the public employee alleging a violation under the Whistleblower Act.11

The Whistleblower Act requires the report to have been made ―in good

faith.‖12 ―Good faith‖ has both a subjective and objective component and is

shown when ―(1) the employee believed that the conduct reported was a violation

of law and (2) the employee’s belief was reasonable in light of the employee’s

training and experience,‖ meaning that a reasonably prudent employee in similar

circumstances would have believed that the reported facts constituted a violation

of the law.13

Procurement of Goods and Services by Municipalities

The local government code imposes competitive requirements for certain

purchases by municipalities.14 Chapter 252 provides that before a municipality

may enter into a contract that would require spending more than $50,000 from

municipal funds, the municipality must follow one of the competitive procurement

methods specified in the chapter.15 Section 252.022 states that the chapter does

10
Tex. Gov’t Code Ann. § 554.002(a) (West 2004).
11
Id. § 554.0035 (West 2004).
12
Id. § 554.002(a); City of Elsa, 325 S.W.3d at 626.
13
Wichita Cnty., Tex. v. Hart, 917 S.W.2d 779, 784 (Tex. 1996); see also
City of Elsa, 325 S.W.3d at 626.
14
See Tex. Loc. Gov’t Code Ann. § 252.021 (West Supp. 2011).
15
Id.

6
not apply to ―a procurement for . . . professional . . . services.‖16 Nothing in that

section, however, prohibits municipalities from using competitive bidding to

procure professional services. Chapter 252 does not define the term

―professional services.‖17

Municipality purchases are also governed by section 2254.003 of the

government code. That section provides that ―[a] governmental entity may not

select a provider of professional services . . . or award a contract for the services

on the basis of competitive bids submitted for the contract or for the services.‖18

Instead, the government entity ―shall make the selection and award . . . on the

basis of demonstrated competence and qualifications to perform the services;

and . . . for a fair and reasonable price.‖19 That chapter defines ―professional

services,‖ and that definition includes services within the scope of the practice of

accounting as that practice is defined by state law.20

In summary, for services defined as professional services under the

government code, municipalities may not use competitive methods to purchase

those services but instead must use the procedure set out in the government

16
Id. § 252.022(a)(4) (West Supp. 2011).
17
See id. § 252.001 (West 2005) (providing definitions applicable to that
chapter).
18
Tex. Gov’t Code Ann. § 2254.003(a) (West 2008) (emphasis added).
19
Id.
20
Id. § 2254.002(2)(A)(i) (West 2008).

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code. For services that may be considered ―professional services‖ as that term is

used in chapter 252 of the local government code but that do not fall within the

definition of professional services in the government code, a municipality is not

required to follow competitive methods to procure the services, but it is not

prohibited from using such procedures.21

Analysis

In one issue, Fort Worth argues that because Lane did not have a good

faith belief that the conduct she reported violated the competitive procurement

law, immunity has not been waived. Fort Worth makes two main arguments

under this issue. First, it argues that professional services are exempt from

competitive procurement laws, that a city has discretion to treat some services as

professional services and thereby exclude their purchase from competitive

procurement procedures, and that because the evidence shows that Fort Worth

chose to treat the services here as professional services, their purchase was

exempt from competitive procurement laws.

In support of its argument that it treated these services as professional

services, Fort Worth points out that the RFP in this case required the awardee to

have professional liability insurance, which indicated these were professional

21
See id. §§ 2254.002(2)(A)(i), 2254.003(a); Tex. Loc. Gov’t Code Ann.
§ 252.022; Tex. Att’y Gen. Op. No. DM-106 (1992) (stating that municipalities
may exempt professional services from the competitive bidding process but are
not required to do so unless the services are for professional services set out in
the professional services procurement act, government code sections 2254.001–
2254.007).

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services, and that the contract described the work as professional services. Fort

Worth argues that because the competitive procurement laws do not apply to the

procurement of professional services, Lane’s report that Fort Worth violated

these laws was not made in good faith.

In response to Fort Worth’s plea to the jurisdiction, Lane produced a copy

of Fort Worth’s administrative regulations governing the procurement of goods

and services. Fort Worth appears to have three primary methods of procuring

goods and services. The first, ―Invitations To Bid‖ (ITBs), are for items

―specifically defined and identified with specifications and that have a total

anticipated cost in excess of $50,000.‖ ITBs must comply with the competitive

bidding statutes. For procuring certain professional services ―that are expressly

exempt from competitive bidding by State law,‖ Fort Worth uses a ―Request for

Qualifications (RFQ).‖

The third method—RFPs—is used for ―the procurement of high technology

systems, software, telecommunications equipment, insurance[,] and services not

otherwise suitable to the Invitation to Bid method.‖ This method, then, is for

items that do not fit clearly within the category of goods and services suitable to

ITBs or that are clearly required to be procured by RFQs. Fort Worth therefore

makes a distinction between services that should be solicited by RFPs and

services that are explicitly professional services under state law and should

therefore be solicited by way of RFQs.

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 When describing RFPs in more detail, the administrative regulations say

that ―a municipality may use the competitive sealed proposal procedure for the

purchase of goods and services.‖ The regulations go on to describe these

procedures for RFPs. The procedures set out for RFPs are different from those

for RFQs, in which an award is ―based on demonstrated competence and

qualifications to perform the services,‖ and under which Fort Worth ―shall first

select the most highly qualified provider, and then attempt to negotiate with that

provider for a contract at a fair and reasonable price.‖

In contrast, when using the competitive sealed bid process for an RFP,

Fort Worth is required to take price into consideration in selecting the provider.

The sealed bids or proposals that are submitted are not opened until the stated

date and time for opening. The regulations specify eight criteria for evaluating

proposals, including price,22 unlike RFQs, which require selection of the most

highly qualified provider.

The services at issue in this case were solicited by way of RFP. Although

not identical to the procedures for an ITB, the competitive sealed bid procedures

for RFPs are clearly not the same as the procedures for RFQs, which are

specifically exempt from competitive bidding laws. The fact that Fort Worth

chose to solicit competitive sealed bids by way of RFP rather than an RFQ is

22
See Tex. Loc. Gov’t Code Ann. § 252.043(b) (West 2005) (setting out
eight factors a municipality may consider in determining which bid provides the
best value for the municipality).

10
some evidence that Fort Worth did not consider these services to fit within the

category of services that are expressly exempt from competitive bidding. It is

therefore some evidence that could lead a reasonable person to conclude that

Fort Worth was required to follow the procedures in chapter 252.

In other words, if these services were included within the definition of

―professional services‖ in government code section 2254.002, then Fort Worth

should not have used the RFP to procure the services by way of competitive

sealed proposals and should have used an RFQ. Using competitive

procurement procedures in that case would render the contract void.23 On the

other hand, if the services did not clearly fit within that definition, then Fort Worth

could choose to follow competitive procurement laws, although it was not

required to do so. Fort Worth does not deny that the services in this contract

were solicited by a procedure set out in chapter 252—competitive sealed

proposals. It argues, however, that it was not required to use this procedure

because the services in this case were professional services. But Fort Worth did

use the competitive procedure, even if not required to. Fort Worth appears to be

implicitly arguing that because it was not required to use competitive procedures,

then if it did use competitive procedures, it was free to do so in a manner that

may have violated chapter 252. We do not read the statutes in that way. There

23
See Tex. Loc. Gov’t Code Ann. § 252.061 (West 2005); see also City of
Denton v. Mun. Admin. Servs., Inc., 59 S.W.3d 764, 769 (Tex. App.—Fort Worth
2001, no pet.).

11
is no exemption in chapter 252 that would allow a municipality to use the

methods provided in chapter 252 but yet only apply the regulations of that

chapter that it chooses. If these services could be purchased using one of the

competitive methods set out in chapter 252, and Fort Worth chose to do so, then

it was required to do so in accordance with the laws governing those

procedures.24

Fort Worth’s second main argument is, essentially, that this court has said

that auditing services are accounting services, and because accounting services

are professional services under the law, the auditing services here were

professional services exempt from competitive procurement laws. Fort Worth

relies on this court’s opinion in City of Denton, in which we held that the auditing

services contracted for in that case fell within the practice of accounting. 25

In City of Denton, this court had to determine whether the auditing services

were professional services in order to determine whether the services contract

was void because it did not comply with government code chapter 2254.26 In this

24
See Tex. Loc. Gov’t Code Ann. § 252.062 (West 2005) (providing that a
municipal officer or employee who intentionally or knowingly violates section
252.021 commits a criminal offense); see also Tex. Loc. Gov’t Code Ann.
§ 252.043(a) (providing that ―[i]f the competitive sealed bidding requirement
applies to the contract for goods or services, the contract must be awarded to the
lowest responsible bidder or to the bidder who provides goods or services at the
best value for the municipality‖).
25
City of Denton, 59 S.W.3d at 769.
26
Id.

12
case, however, the question is not whether the auditing services were

professional services, but whether Lane would have reasonably believed that

they were not and that Fort Worth was therefore required to follow competitive

procurement procedures to solicit and award the auditing services contract. This

court did not hold in City of Denton that auditing services always fall within the

practice of accounting, and the fact the auditing services in City of Denton fit

within the definition of accounting services does not necessarily mean that

auditing services are always accounting services.27 Our holding in City of Denton

was based on the specific facts of that case.

Fort Worth argues that in City of Denton, this court held ―that an auditing

and consulting agreement was a professional-services agreement not subject to

the competitive-bid process.‖ This statement, though correct with regard to our

view of the auditing services solicited in that case, does not reflect the

significance of that case to Fort Worth’s argument here. We held in that case

that because the services in that case were professional services, not only was

Denton not required to use competitive bidding, but competitive bidding could not

be used by law.28 Because competitive bidding was used, the contract was

27
See Tex. Att’y Gen. Op. No. JM-1038 (1989) (stating that ―[w]hether the
services of a third party administrator are professional services . . . is a question
of fact, and depends on the particular services to be provided under a specific
contract‖).
28
City of Denton, 59 S.W.3d at 769.

13
void.29 Fort Worth does not argue that it was prohibited from using the

procedures in chapter 252 and required to use the rules in the government code.

To make such an argument would be to implicitly argue that it violated that law

and that this contract is void.

Further, Fort Worth’s arguments appear to conflict with each other. As we

pointed out, if under City of Denton, auditing services are always within the

practice of accounting, then Fort Worth would have been required to issue an

RFQ and follow the rules in government code chapter 2254 for the procurement

of professional services. But Fort Worth also argues that it had the discretion to

decide that these were professional services—which is true only if City of Denton

does not stand for the proposition that auditing services are always accounting

services. If Fort Worth had discretion to decide that these services were

professional services, then it also had the discretion to decide that the services

were not professional services and to apply the regulations for competitive

bidding. It appears to have done so in this case.

Rather than help Fort Worth, City of Denton actually demonstrates the

reasonableness of Lane’s belief. After this court handed down its opinion in that

case, Fort Worth was on notice that if the auditing services it solicited were

professional services, then it could not use the competitive procurement

procedures in chapter 252 to select the provider and instead was required to use

29
Id.

14
the procedure for the procurement of professional services. Here, Fort Worth did

not use its RFQ procedure for soliciting professional services. Instead, it used an

RFP calling for competitive sealed proposals. It would not be unreasonable for

an employee in Lane’s situation to believe that Fort Worth had determined that

the solicited services were not professional services based on its use of the

competitive procurement process. That is, Lane could reasonably have believed

that Fort Worth would not have used a process that would result in it entering into

a contract that it knew or should have known was void. This view could be

reconciled with City of Denton by the language we used in that case, noting that

we determined whether government code section 2254.002 covered the contract

in that case by looking at the terms of that contract. 30 In other words, we

determined that auditing services fell within the definition of accounting based on

the facts of that case and did not hold that auditing services are always

accounting services.

The question in this case is not whether the contract was for professional

services that were exempt from the competitive procurement laws, and we do not

decide that question here. The question is whether a reasonably prudent

employee in Lane’s situation would have believed that Fort Worth was required

to comply with the competitive procurement laws. We answer that question in

the affirmative and hold that under the circumstances, Lane’s report was made in

30
See City of Denton, 59 S.W.3d at 768.

15
good faith.31 We consequently hold that the trial court did not err by denying Fort

Worth’s plea to the jurisdiction on this part of Lane’s claim, and we therefore

overrule Fort Worth’s sole issue.

Conclusion

Having overruled Fort Worth’s sole issue, we affirm the trial court’s order

denying in part Fort Worth’s plea to the jurisdiction.

LEE ANN DAUPHINOT
JUSTICE

PANEL: LIVINGSTON, C.J.; DAUPHINOT, J.; and WILLIAM BRIGHAM (Senior
Justice, Retired, Sitting by Assignment).

DELIVERED: December 22, 2011

31
See Tex. Loc. Gov’t Code Ann. § 252.062.

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