Texas SC rules hospital tax districts have sovereign immunity from liability suits

By Steve Korris | May 13, 2009

Texas Supreme Court

AUSTIN – Texas Supreme Court justices split five to four in shielding a hospital tax district from a liability lawsuit like a city or a county, and they twisted the knot the same day by allowing a suit to proceed against city officials in El Paso.

They held on May 1 that sovereign immunity keeps Tomball Regional Hospital from suing Harris County Hospital District for payment of bills for indigent patients, but doesn't keep widow Lilli Heinrich from suing El Paso's mayor and pension board.

Sovereign immunity shields state and local governments from suits for money damages, but courts and legislators have allowed exceptions.

The justices unanimously granted Heinrich an exception because she raised an issue of fact over whether the city illegally reduced her pension.

Heinrich emerged as winner and loser, however, for the justices held that Texans can sue the state to collect future payments but can't sue to recover money from the past.

Tomball Hospital Authority, owner of the regional hospital, emerged strictly as a loser.

Five justices ignored the hospital's warnings of tax battles and bankruptcies.

They held that when Texas legislators authorized creation of hospital districts to pay bills for indigent patients, they didn't clearly waive immunity.

"The judiciary's task is not to refine legislative choices about how to most effectively provide for indigent care and collect and distribute taxes to pay for it," Justice Phil Johnson wrote.

"The judiciary's task is to interpret legislation as it is written," he wrote.

The law followed a 1954 amendment to the Texas Constitution allowing counties with more than 190,000 residents to create hospital districts responsible for needy residents.

Johnson wrote, "The amendment was meant to address the issue of city residents being taxed by both cities and counties to support the hospitals, while non-city residents paid only county taxes."

Tomball Regional Hospital tried to point the justices to an inescapable conclusion that the Legislature intended to waive immunity.

Otherwise, the hospital reasoned, hospital districts could collect taxes yet deny requests for payment with impunity.

The hospital predicted that cities would withhold the taxes they collect for hospital districts in order to pay bills the districts wouldn't pay.

The hospital predicted that costs of indigent care would bankrupt cities and their hospital authorities.

Johnson wrote that the warnings didn't justify reading a waiver into the law.

"If the Legislature intends to waive hospital districts' immunity from suit, we have confidence it will do so clearly and unambiguously, not by implication as THA in effect urges has been done," he wrote.

Justices Nathan Hecht, Dale Wainwright, David Medina and Paul Green agreed.

Four justices disagreed, but they didn't endorse a waiver.

Chief Justice Wallace Jefferson wrote that the hospital should have had a chance to replead its case as a petition for injunctive relief under the constitution.

Justices Harriet O'Neill, Scott Brister and Don Willett joined the dissent.

Johnson then added to his opinion a comment that the hospital didn't ask the justices for remand so it could replead.

He wrote that the hospital amended its petition twice but never requested relief other than monetary damages.

Sandra Hachem, Michael Stafford and Glen Van Slyke represented the hospital district. Margaret Pollard and Randal Payne represented Tomball Regional Hospital.

In the El Paso case, Heinrich's husband, policeman Charles Heinrich, died in 1985 from wounds he sustained on duty.

Trustees of the El Paso Firemen and Policemen's Pension Fund began paying survivor benefits equal to 100 percent of the pension her husband had earned.

In 2002, after her son turned 23, the trustees cut her benefits by a third.

She challenged the reduction, and the trustees answered that all along the fund had paid two thirds to her and one third on behalf of her son.

She sued the city, the pension fund, the board trustees and each trustee. She sought declaratory and injunctive relief.

The city and the trustees filed pleas to the jurisdiction. The city asserted immunity and the trustees claimed it extended to them.

El Paso County District Judge Angelica Juarez Barill denied the pleas and the Eighth District appeals court in El Paso affirmed the decision.

Eighth District judges held that "a party may bring a suit seeking declaratory relief against state officials who allegedly act without legal or statutory authority and such suit is not a suit against the state."

They ruled that Heinrich claimed a vested right rather than money damages.

At the Supreme Court, Chief Justice Wallace Jefferson wrote that "suits to require state officials to comply with statutory or constitutional provisions are not prohibited by sovereign immunity, even if a declaration to that effect compels the payment of money."

Such a suit must allege and prove that the officer acted without legal authority or failed to perform a purely ministerial act, Jefferson wrote.

Such a suit seeks to enforce policy rather than alter it, he wrote.

The state nevertheless retains immunity, he wrote, so anyone bringing such a suit must bring it against individuals in their official capacities.

If a suit prevails, he wrote, a claimant is entitled to prospective injunctive relief measured from the date of injunction.

"There are cases in which prospective relief is inadequate to make the plaintiff whole, but the contours of the appropriate remedy must be determined by the Legislature," he wrote.

Although he cleared the city and the fund of liability, he noted that Heinrich may seek liability from the city through the mayor and from the fund through the trustees.

Stewart Forbes represented Heinrich. Jennifer Callan, Laura Gordon, Michelle Locke and John Anderson represented El Paso. Eric Calhoun, Richard Pradarits, Robert Klausner and Stuart Kaufman represented the pension fund.

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