Texas Department of Agriculture v. Be a Champion, Inc.; James Hong; Kevin Klotz; George Moon; And Jaron Barganier, 15-25-00089-CV

Background

Be a Champion, Inc. (BAC) contracted with the Texas Department of Agriculture (TDA) to administer federal Child and Adult Care Food Program (CACFP) and Summer Food Service Program (SFSP) benefits; BAC expanded operations relying on federal reimbursements.
In 2022–2023 TDA audits, certain officials (notably Carey Spence Lenss and others) pushed for “serious deficiency” findings against BAC based on minor or disputed recordkeeping issues; BAC had no prior serious-deficiency history.
BAC submitted multiple, increasingly detailed corrective action documents (CADs) totaling hundreds of pages; TDA did not specify required corrective actions as regulations require and later rejected the CADs while only identifying expectations after termination.
TDA terminated BAC’s participation, disqualified BAC and four individual principals on the National Disqualification List (barring federal program participation for at least seven years), and BAC lost substantial funding and most employees; an administrative review officer reversed the SFSP termination but the disqualification remained.
Plaintiffs sued TDA and multiple officials (official and individual capacities) alleging ultra vires acts, violations of procedural and substantive due course of law (Texas Constitution), equal protection, takings, APA claims, and § 1983 claims; the trial court denied defendants’ plea to the jurisdiction and the defendants appealed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
1. Ultra vires claims & UDJA waiver of immunity	Appellees: they pleaded officials acted beyond authority (failed to provide required notice/required CAD guidance), seek prospective equitable relief; UDJA waiver not relied on.	Appellants: sovereign immunity bars ultra vires and UDJA-based relief; agency officials had broad discretion.	District court denied plea; Appellees argue denial correct because regulations and agency rules constrained official discretion, supporting ultra vires and prospective relief.
2. Standing to sue (agency and officials)	Appellees: alleged concrete injury (termination, lost funds, disqualification, reputational harm) fairly traceable to TDA/officials and redressable by reinstatement/relief.	Appellants: challenge traceability / personal involvement for some officials and claim speculative relief.	District court denied plea; Appellees maintain pleaded injuries satisfy standing (injury-in-fact, traceability, redressability) and challenges largely waived or insufficient.
3. Applicability of Ex parte Young to § 1983 claims	Appellees: seek prospective relief for ongoing federal-law violations (reinstatement/name-clearing), so Ex parte Young removes immunity for official-capacity defendants.	Appellants: officials lack sufficient enforcement connection or no ongoing violation exists.	District court denied plea; Appellees argue officials have requisite connection and harms are ongoing (disqualification continues), so Ex parte Young applies.
4. Facial validity of Texas constitutional claims (procedural/substantive due course, equal protection, takings)	Appellees: plead protected property and liberty interests, inadequate process (notice/CAD guidance, no name-clearing hearing), arbitrary conduct, disparate treatment, and Penn Central-style economic-interference facts for takings.	Appellants: claim plaintiffs had no protected interest, process adequate, actions rationally related to program goals, redundant remedies bar, and takings theory improper.	District court denied plea; Appellees contend pleadings, construed favorably, state facially valid claims—procedural and substantive due-course, stigma-plus liberty, equal protection, ultra vires, and a plausible takings claim warranting jurisdiction.

Key Cases Cited

Ex parte Young, 209 U.S. 123 (1908) (official-capacity suits for prospective relief may proceed despite state sovereign immunity)
City of El Paso v. Heinrich, 284 S.W.3d 366 (Tex. 2009) (ultra vires claims must be brought against officers in their official capacity and target acts beyond legal authority)
Heckman v. Williamson County, 369 S.W.3d 137 (Tex. 2012) (standing to sue officials in their official capacities can be satisfied by traceability to the office)
Texas Tel. Ass'n v. Public Utility Comm'n of Texas, 653 S.W.3d 227 (Tex. App.—Austin 2022) (agency officials acting contrary to their own rules may be sued as acting ultra vires)
Image API, LLC v. Young, 691 S.W.3d 831 (Tex. 2024) (remedy must be "logically necessary" to give effect to statutory/regulatory requirements)
Hartzell v. S.O., 672 S.W.3d 304 (Tex. 2023) (reinstatement and prospective relief can remedy past constitutional deprivations and fall under Ex parte Young-type reasoning)
Mathews v. Eldridge, 424 U.S. 319 (1976) (due-process balancing test: private interest, government interest, risk of erroneous deprivation)
Tahoe-Sierra Pres. Council v. Tahoe Reg'l Planning Agency, 535 U.S. 302 (2002) (Penn Central framework and ad hoc takings inquiry)