Russell J. Verney v. Gregg Abbott, Individually and as Attorney General of the State of Texas and Reagan E. Greer, Individually and as Executive Director of the Texas Lottery Commission

Citation: Not availableDocket: 03-05-00064-CV

Court: Court of Appeals of Texas; July 28, 2006; Texas; State Appellate Court

Original Court Document: View Document

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In the case Russell J. Verney v. Greg Abbott and Reagan E. Greer, the Texas Court of Appeals addresses a taxpayer's challenge regarding the use of public funds for legal services contracts. Appellant Russell Verney sought a declaratory judgment asserting that appellees, Texas Attorney General Greg Abbott and Texas Lottery Commission Executive Director Reagan Greer, overstepped their authority in these contracts. He also requested injunctive relief to prevent payments under these contracts. The trial court granted the appellees' plea to the jurisdiction, leading to the appeal, which the court affirmed due to lack of jurisdiction.

The context involves legislative activities concerning video lottery terminals (VLTs) and Indian gaming during the 2003 and 2004 Texas legislative sessions. The excerpt provides an overview of Texas gambling law, noting the historical prohibition of lotteries in Texas from 1845 until a constitutional amendment in 1991, which allowed for state-operated lotteries under certain conditions. The text also discusses a 1994 Attorney General opinion that clarified that slot machines were not permitted under the amended constitutional provision regarding lotteries. The relevant legal definitions and constitutional stipulations concerning lotteries and gambling in Texas are highlighted, emphasizing the legislative authority in regulating such activities.

The operation of slot machines in Texas is deemed an unlawful lottery under article III, section 47 of the Texas Constitution, which requires a constitutional amendment for such authorization. Subsection (e) of this article does not empower the legislature to permit either the state or private entities to operate slot machines. Changes to the definition of 'bet' in section 47.01(l) of the Penal Code cannot legalize slot machine operations. Attorney General opinions from 1994 and 2003 reaffirm that video lottery terminals (VLTs) are not permissible under section 47(e), indicating that the 1991 voter intent was to approve a narrow definition of 'lottery' consistent with common understanding at the time. Legislative attempts to authorize VLTs, including various bills and proposals from 2003 to 2005, were unsuccessful, and the issues surrounding the 1991 amendment remain unresolved, continuing to be debated in the legislature and through attorney general opinions.

Gambling on Indian reservations has involved litigation managed by the Attorney General, as seen in cases such as Ysleta del Sur Pueblo v. State of Texas and State v. Ysleta Del Sur Pueblo. On December 16, 2003, First Assistant Attorney General Barry McBee executed two contracts: an 'Outside Counsel Contract' with the law firm Lionel Sawyer Collins for legal assistance on gaming issues, and an 'Interagency Cooperation Contract' with the Commission for comprehensive legal services. The Outside Counsel Contract specified that Lionel Sawyer would provide legal analysis, contract negotiation, legal advice, and litigation support regarding Indian gaming. The Interagency Cooperation Contract outlined the legal services the Office of the Attorney General (OAG) would offer to the Commission, including the ability to employ subcontractors, with the stipulation of obtaining the Commission's consent for subcontracting and sharing work product. The reimbursement from the Commission for these services was initially capped at $100,000, later amended to $250,000 in April 2004. The contract was set to expire on August 31, 2005, but could be terminated by either party with ten days' notice. Following the expiration of the Outside Counsel Contract, a lawsuit was filed on December 14, 2004, against multiple defendants, including Abbott and Greer in both individual and official capacities, as well as Carole Keeton Strayhorn, the Texas Comptroller.

Verney sought declaratory and injunctive relief against the Commission and the Attorney General (OAG), claiming that the interagency cooperation and outside counsel contracts were void due to violations of section 556.006 of the Texas government code, which prohibits state agencies from using appropriated funds to influence legislation. He argued that these contracts were illegal ultra vires activities and that all associated public fund expenditures were unlawful. Verney requested an injunction against future expenditures related to these contracts, including specific amounts owed for services rendered.

Strayhorn, representing the Commission, indicated she would comply with the court's decision and not disburse any state funds related to the contracts pending resolution. The Attorney General and the Commission filed pleas to the jurisdiction, arguing Verney lacked standing as a taxpayer under established rules and that the contracts had already been fulfilled. The Commission asserted it does not collect taxes, negating taxpayer standing. The Attorney General contended that the Uniform Declaratory Judgments Act did not grant the trial court jurisdiction and that Verney failed to present sufficient facts for jurisdiction.

On January 10, 2005, shortly after Verney filed his suit, the Attorney General terminated the contract with the Commission, stating no payments had been made or would be owed in the future. The Commission acknowledged this termination. The trial court ultimately granted the pleas to the jurisdiction, denied other relief, and dismissed the case with prejudice, prompting Verney to appeal.

Verney argues that the trial court erred in concluding it lacked subject matter jurisdiction, asserting he has standing as a taxpayer and under the Uniform Declaratory Judgments Act (UDJA) to challenge contracts and associated payments. He contests the Attorney General's and Commission's capacity to undermine the court's jurisdiction through actions taken after the lawsuit commenced. 

A plea to the jurisdiction seeks to dismiss a case for lack of subject matter jurisdiction, which is a legal question subject to de novo review. The court assesses whether the pleadings contain sufficient facts to affirmatively demonstrate jurisdiction. If the pleadings don't affirmatively negate jurisdiction and contain insufficient facts, the plaintiff should be allowed to amend. If a plea negates jurisdiction, it may be granted without allowing amendments.

When jurisdictional facts are disputed and relate to the merits of the case, the finder of fact must resolve these issues. If evidence is undisputed, the trial court may rule on the plea as a matter of law. 

Verney's standing to challenge the contracts is central, with standing being a constitutional requirement assessed at the time the suit is filed.

Subsequent events do not affect a court's subject matter jurisdiction, except in cases of mootness. Generally, a plaintiff must demonstrate a distinct interest in a conflict, showing that the defendant's actions have caused a specific injury, unless standing is conferred by statute. Taxpayers have a limited exception to this rule, allowing them to challenge illegal expenditures of public funds without proving particularized injury, provided they are taxpayers and the funds in question are public. Taxpayers may only seek to enjoin proposed illegal expenditures, not recover previously spent funds or contest expenditures deemed unwise. This limitation is based on the principle that governments cannot function if every citizen can challenge official actions. Standing is reviewed de novo as part of subject matter jurisdiction. In the case of Verney, the standing to challenge past and future payments related to the outside counsel contract is examined, alongside the dispute over whether the Bland case applies. In Bland, a school district's contract to finance a high school was challenged by taxpayers who claimed the agreement was illegal due to non-compliance with statutory provisions. The district argued that the taxpayers lacked standing since the construction was complete, and only state funds were used. The court ruled that when addressing a plea to the jurisdiction, the trial court may consider evidence beyond the pleadings to resolve jurisdictional issues.

The court determined that the Blues did not possess taxpayer standing to pursue their claim, as the justification for taxpayer suits—minimizing interference with government operations while protecting taxpayers—diminishes once a government entity has received its contracted goods or services. The repayment of a loan for completed work significantly disrupts government functions if challenged by a taxpayer not suffering a specific injury. The analysis in Bland was found to be controlling, indicating that since the Attorney General received all contracted legal services from Lionel Sawyer, the Attorney General is merely obligated to pay for those services. The outside counsel contract had expired before Verney's suit was filed, and the interagency contract's performance was linked to the outside counsel contract; thus, there were no outstanding services to challenge. A suit to halt a contract’s performance becomes moot once the contract is fully executed. Verney's argument regarding the void nature of illegal contracts was rejected, with the court stating that even if the contract was illegal, the trial court's jurisdiction remains limited to justiciable controversies, allowing consideration of the contract's terms to assess the controversy's status. Verney's assertion that the trial court should have jurisdiction over his claims regarding illegal public fund expenditures was also addressed but not upheld.

Verney argues that the Texas Supreme Court's ruling in *Williams v. Huff* supports his claim that the trial court had jurisdiction due to extensive state employee involvement in defending his lawsuit. However, this reliance is deemed misplaced because Article IV, Section 22 of the Texas Constitution mandates that the Attorney General represent the State in all relevant legal matters. The legislature has extended this authority to representation in district courts, particularly in cases like Verney's, as outlined in the Texas Government Code. The current case differs from *Huff*, where state employees operated a religious program, as here, employees are acting within their statutory and constitutional duties. Consequently, the Attorney General's expenditure of employee time on Verney's defense does not grant jurisdiction to the trial court, leading to the overruling of Verney's fourth issue.

In regard to his standing under the Uniform Declaratory Judgments Act (UDJA), Verney claims the trial court mistakenly found he lacked standing to challenge actions by Abbott and Greer as ultra vires. The UDJA does not expand a trial court's jurisdiction, and requests for declaratory relief do not alter the nature of a suit. Private parties can seek declaratory relief against state officials acting beyond their authority, but such a judgment only addresses rights and duties in a justiciable controversy. Although Verney’s suit sought valid declaratory relief, the trial court's dismissal was justified because his claims were moot, particularly since the contract at issue had expired before he filed suit. A dismissal for mootness is not a merits ruling; a case is considered moot if the controversy between the parties ceases to exist at any point in the proceedings.

In the case of Verney's challenge to an interagency contract, the court determined that the challenge became moot upon the contract's termination without any payments, as no future payments were expected. Verney argued that the case fell under the "capable of repetition, yet evading review" exception to the mootness doctrine, but the court disagreed, stating that this exception applies only in rare cases. To qualify, a plaintiff must demonstrate that the challenged action was too brief to litigate fully and that there is a reasonable expectation of being subjected to the same action again. The court noted that the interagency contract was effective for approximately thirteen months, during which time Verney could have raised objections but did not do so until shortly before termination. The court concluded that the contract's duration was sufficient for judicial review, thus failing to meet the criteria for the exception. Additionally, the court stated that Verney's claims regarding the time spent by state employees on the contracts did not present a justiciable controversy. As a result, the court held that Verney's challenge to the interagency contract was moot and overruled his first and second issues. Verney requested a reversal and remand for discovery and amendments to his pleadings if the court disagreed with his standing arguments.

Pleadings that conclusively negate jurisdiction allow for a plea to the jurisdiction to be granted without giving the plaintiff a chance to amend. In this case, the pleadings affirmatively negate jurisdiction, preventing Verney from remanding to amend or conduct discovery. The trial court's dismissal for lack of subject-matter jurisdiction is upheld. Verney's notice of partial nonsuit clarifies his suit against Strayhorn is solely in her official capacity, as she remains a necessary party. He also sought costs and attorney’s fees under Texas law. Strayhorn reaffirmed her position in correspondence with the court. The trial court determined that all relevant material facts regarding jurisdiction were undisputed. The discussion references prior case law, distinguishing this case from Kordus v. City of Garland, emphasizing that the agreement in Bland was fully executed except for payment. Verney's claims regarding the Attorney General and the Commission's performance under their contracts are dismissed, as the Attorney General received the legal services contracted for, and the contracts in question are no longer active. Verney's arguments attempting to differentiate his case from Bland are found unpersuasive, as they do not affect his standing as a taxpayer and do not alter the principle that prohibiting payment for completed work would interfere with government operations.