Image Api, LLC v. Cecile Young, Executive Commissioner of the Texas Health and Human Services Commission, 691 S.W.3d 831

Image API, LLC provided document processing services to the Texas Health and Human Services Commission (HHSC) from 2009–2015, under a contract supporting Medicaid and other benefits programs.
HHSC’s contract with Image permitted retrospective cost settlements, including annual and monthly audits to reconcile payments based on Image’s actual allowable costs.
The Texas Human Resources Code § 32.0705 requires HHSC to contract for independent, annual audits of Medicaid contractors, with audits to be completed by the end of the fiscal year following the audit year.
In 2016, HHSC audited Image’s 2010–2011 performance and found overpayments; Image cooperated with the untimely audit but disputed HHSC’s authority due to the statutory deadline.
Image sued, seeking to enjoin HHSC from using audit results from untimely audits; the court of appeals dismissed Image's entire suit, holding the audit deadline was directory, not mandatory; Image sought Supreme Court review.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Image is a Medicaid contractor under § 32.0705	Image provides administrative services related to Medicaid eligibility, so qualifies as a contractor.	Image's services are not sufficiently managerial to be a "Medicaid contractor."	Image is a Medicaid contractor under § 32.0705.
Whether § 32.0705(d)'s audit deadline is mandatory or directory	"Must be completed" is mandatory; late audits are ultra vires and not allowed.	Deadline is directory due to lack of enforcement penalty; agency needs flexibility.	Deadline is mandatory, not merely directory.
Consequence of missing the audit deadline	Untimely audits are void; HHSC cannot recoup overpayments found in late audits.	No specific penalty, so HHSC can still use audit results and recover overpayments.	No textual or necessary consequence; HHSC can use the result and recoup.
Prospect for future untimely audits	HHSC should be enjoined from future untimely audits.	NA (not yet adjudicated)	Remanded to trial court to address Image’s prospective relief claims.

Hall v. McRaven, 508 S.W.3d 232 (Tex. 2017) (describing ultra vires actions by state officials as exception to immunity)
City of El Paso v. Heinrich, 284 S.W.3d 366 (Tex. 2009) (allowing suits against state officials for ultra vires acts)
Chem. Lime, Ltd. v. Edwards Aquifer Auth., 291 S.W.3d 392 (Tex. 2009) (distinguishing mandatory vs. directory statutory language and consequences)
AC Interests, L.P. v. Texas Commission on Environmental Quality, 543 S.W.3d 703 (Tex. 2018) (describing statutory deadlines as mandatory absent explicit/necessary consequences for violations)
Chisholm v. Bewley Mills, 287 S.W.2d 943 (Tex. 1956) (guidance on distinguishing directory vs. mandatory statutory language)