Lead Opinion
MAJORITY OPINION ON REHEARING EN BANC
The City of Houston appeals from a judgment awarding $250,000 plus attorney’s fees to its former employee, Gerald Kallina, under the Texas Whistleblower Act. On February 14, 2002, a panel of this Court modified the judgment by adding to it $65,000 in back pay, and otherwise affirmed.
On May 9, 2002, the Supreme Court of Texas issued its opinion in Texas Department of Transportation v. Needham,
Jurisdiction
As an initial matter, the City argues the trial court lacked subject-matter jurisdiction because Kallina did not initiate a grievance with the City as required. See Tex. Gov’t Code § 554.006(a). Assuming this requirement is jurisdictional,
On January 19, 1998, Kallina sent a letter to Mayor Lee Brown claiming wrongful dismissal and requesting a hearing. The City’s response on February 16, 1998 stated Kallina “had no civil-service protеction or other internal review procedure,” pointing to a city document in which he acknowledged that he was an executive-level employee and therefore exempt from all civil-service protections and procedures.
A governmental entity may not frustrate an employee’s efforts to initiate a grievance and then challenge subject-matter jurisdiction on that basis. See Fort Bend I.S.D. v. Rivera,
Theft
On the merits, we address whether Kallina’s supervisor was a repre
Kallina worked as division manager in the fixed-asset department of the City of Houston. In the course of his duties, he conducted an inventory audit at a City warehouse where both abandoned and City-owned assets were stored. It was his opinion that 800 items worth at least $400,000 were missing, and he concluded they must have been stolen.
According to Kallina, he initially made an oral reрort of his findings to his supervisor, Lathenia Harris. He believed City policy required missing assets to be reported as stolen if not located after a thirty-day search, and eventually reported to the Mayor, the Controller, and perhaps City Council. Shortly after Kallina put his final report on Harris’s desk, she abruptly informed him he had two days to resign or he would be fired. He complied, but later sued.
The Whistleblower Act prohibits termination of a government employee “who in good faith reports a violation of law by the employing governmental entity or another public employee to an appropriate law enforcement authority.” Tex. Gov’t Code § 554.002(a). The Act defines the latter as a “governmental entity ... that the employee in good faith believes is authorized to regulate under or enforce the law alleged to be violated in the report; or investigate or prosecute a violation of criminal law.” Tex. Gov’t Code § 554.002(b). Although the City and Kalli-na raised a number of other issuеs, we address only the City’s assertion that Kal-lina’s report to Harris did not fall within the scope of this definition.
In Needham, an employee of the Texas Department of Transportation (“TxDOT”) reported a co-worker’s drunk driving to his supervisors at the department. He argued TxDOT was included in the statutory definition because the department could investigate allegations about criminal acts by employees, discipline them for such acts, and forward information to other agencies for prosecution. The supreme court rejected this interpretation of the statute, holding the focus must be on enforcement of the particular law reportedly violated:
In other words, the particular law the public employee reported violated is critical to the determination ... TxDOT has no authority to regulate under or enforce the Texas’s driving while intoxicated laws. Nor does it have authority to investigate or prosecute these criminal laws. At most, TxDOT has authority to regulate and investigate its employees’ conduct only to carry out its internal disciplinary process procedures. But construing the statutory terms to include a public employer’s internal disciplinary power would mean all public employers with a disciplinary policy for handling employees’ alleged illegal conduct are “appropriate law enforcement authorities” for purposes of reporting any alleged violation. We reject such an interpretation.
Needham,
Here, the reрorted violation concerned theft. There was no evidence Harris or anyone else in the City’s asset management department had (or that Kallina believed they had) any authority to investigate, enforce, or prosecute a violation of the state’s penal laws regarding property theft. At most, the evidence showed Harris had administrative responsibility for assets in the warehouse, regulated and enforced departmental rules for protecting
Inventories
In one sentence in his appellate brief, Kallina argues alternatively that he was terminated fоr reporting violations of the City’s inventory procedures. The Whistleblower Act protects employees who report violations not only of statutes, but also of ordinances or “a rule adopted under a statute or ordinance.” See Tex. Gov’t Code § 554.001(1). Kallina points to no City ordinances that were violated, but argues his report was based on violations of two City manuals — the City’s Fixed Asset Accounting Procedures and Fixed Asset Accounting Policies — which he says contain “rules adopted under an ordinance.”
First, we doubt switching from statutes to rules changes the definition of “law enforcement authority.” Although the court in Needham addressed only a penal statute, it expressly rejected (in the quotation noted above) any interpretation of the Act that would extend “law enforcement” to supervisors carrying out internal disciplinary procedures. This is not new— several years before Needham, the court ruled that the Whistleblower Act does not protect reports of violations of a department’s intеrnal policies. See Harris County Precinct Four Constable Dept. v. Grabowski,
But even if “law enforcement” expands when considering “rules adopted under an ordinance,” nothing reported by Kallina fell in that category. Of the two manuals upon which he relies, Kallina admits thе Procedures manual was adopted under the authority of the Policies manual, not any statute or ordinance. But he asserts the Policies manual was “derived from the Code of Ordinances,” though he leaves us to guess what ordinances he has in mind.
Our dissenting colleagues helpfully suggest that the Policies manual was adopted under City ordinances 2-51(6) and 2-52(19). But the former merely designates the director of the department of finance and administration as the chief custodian of all City property;
Our colleagues also point to language giving the director “responsibility for developing and implementing operating policies and procedures covering the management and security of all City-owned property.” Athough it is difficult to tell from their opinion, this directive appears not in any City ordinance, but in the Policies manual itself. Obviously, any rule adopted under this authority would be adopted under an internal policy not under an ordinance.
The Policies manual here was issued by the City Controller and the Mayor; the Procedures manual was issued by the director of the finance department. Neither was adopted by the Houston City Council. It is quite clear that these manuals (and the hundreds of pages they contain) reflect internal policies rather than rules promulgated pursuant to an ordinance. That is not enough. See Needham,
Conclusion
Without question, Kallina had a duty to report possible theft or violations of department procedures to his supervisor. That was his job. The legislature might have drafted the Whistleblower Act to provide immunity for all reports governmental employees make to their supervisors, but it did not. Instead, it protected only reports made to appropriate law enforcement authorities.
Accordingly, the judgment of the trial court is reversed, and judgment is rendered that Gerald Kallinа take nothing.
Notes
. See Fort Bend I.S.D. v. Rivera,
. "... the director of finance and administration, subject to the direction and supervision of the mayor, shall:
(6) Be the chief custodian of all city property, both real and personal, except property that is assigned by law or by directive of the mayоr to the custody of another city officer or department. Following the conclusion of each city fiscal year, the director shall provide the mayor with a full annual inventory of all property within his custody.”*175 Houston, Tex, Code of Ordinances ch. 2, art. Ill, div. 1, § 2-51.
. “The department of finance and administration and such employees of the department as are assigned to it shall be charged with the following duties:
(19) Manage the city's real and personal property within the custody of the director, including surplus city personal property, and maintain a perpetual inventory thereof; provided, however, that any surplus personal property that has a fair market value of not more than $15.00 may, at the discretion of the city purchasing agent, be destroyed or disposed of in any lawful manner.”
Houston, Tex., Code of Ordinances ch. 2, art. Ill, div. t, § 2-52.
Dissenting Opinion
dissenting.
The en banc majority reverses and renders judgment against Kallina based on two conclusions: (1) the City’s fixed-asset policies were not adopted under any statute or ordinance; and (2) thеre was no evidence Kallina believed in good faith that Lathenia Harris was an appropriate law enforcement authority to which he could report theft. However, there was legally sufficient evidence that the fixed-asset policies were adopted under city ordinances, and there was legally sufficient evidence Kallina believed in good faith that Harris was an appropriate law enforcement authority. Therefore, I respectfully dissent.
The Texas Whistleblower Act does not apply only to reports of criminal violations; rather it also applies to reports of violations of rules adopted under a statute or ordinance. See Tex. Gov’t Code § 554.001(1)(C); Jones v. City of Stephenville,
Although the majority relies on the recent Needham case, Needham does not apply to Kallina’s theory of recovery under the fixed-asset policies. See Texas Dept. of Transp. v. Needham,
The jury found in Kallina’s favor, and, on appeal, Kallina has asserted his theory based on the fixed-asset policies. The City of Houston Fixed Asset Accounting Policies were admitted in evidence at trial. These policies indicate that they were adopted under City of Houston ordinances (emphasis added):
The responsibilities of the Director of Finanсe and Administration for fixed assets are described in the Code of Ordinances. Chapter 2, Sections 2-51(6), and 2-52(19), and relate to the physical custody, security and inventory control thereof on behalf of the Citizens. The Code of Ordinances states that:
“... the Director of Finance and Administration, subject to the direction and supervision of the Mayor, shall.... Be the chief custodian of all city property, both real and personal, except property that is assigned by law or directive of the mayor to the custody of another city officer or department. Following the conclusion of each city fiscal year, the director shall provide the mayor with a full annual inventory of all property within his custody.”
“The Department of Finance and Administration shall be charged with the following duties ... (19) Manage the city’s real and personal property within the custody of the director, including surplus city personal property, and maintain a perpetual inventory thereof.”
The Director of Finance and Administration shall have responsibility for developing and implementing operating policies and procedures covering the management and security of all City-owned property. ... In carrying out these duties, the Director shall be responsible for:
h) Establishing a Fixed Asset Management program within Finance and Administration to coordinate the development and dissemination of fixed asset policies and procedures....
The majority states that these policies do not indicate they were adopted under the authority of any ordinance and that the ordinances do not delegate any rule-making authority to Director of Finance and Administration. While there is no Texas Supreme Court authority on point, the majority’s holding is too narrow, and it conflicts with a decision of the Eastland Court of Appeals. See City of Stephenville,
The Grabowski and Ruiz cases cited by the majority are not on point. See Harris Cty. Precinct Four Constable Dept. v. Grabowski,
The Texas Whistleblower Act does not require that the policies explicitly state that they are adopted under an ordinance, and it does not require that the ordinance explicitly give rule-making authority to the entity that made the rule. See Tex. Gov’t Code § 554.001(1)(C); City of Stephenville,
Policy # 1 requires city employees to exercise the utmost care and diligence in protecting the city property placed under their control:
City employees, regardless of classification or function, shall exercise the utmost care and diligence in the use, maintenance and protection of all public assets placed under their control or custody.
Policy # 14 requires that departments maintain current and accurate fixed-asset-inventory records:
The departments shall maintain accountability for their equipment and current and accurate fixed asset physical inventory records by conducting physical inventories under the coordination of the Finance & Administration Department (F & A).
The evidence strongly supports the jury’s finding that Kallina believed in good faith that Harris was an appropriate law enforcement authority as to the fixed-asset policies. As the majority correctly states, the evidence showed that Harris had administrative responsibility for the assets in the Broad Street Warehouse and that she regulated and enforced departmentаl rules for protecting those assets. Harris testified that she enforces the rules regarding inventory and that if somebody has a problem with these rules he can come to her about it. Kallina and Harris both testified that Harris had the authority to enforce these policies regarding the inventory at the Broad Street Warehouse. Considering the evidence in a light that tends to support the jury’s findings and disregarding all evidence and inferences to the contrary, there was legally sufficient evidence to support the jury’s finding that Kallina believed in good faith Harris was authorized to regulate under or enforce the fixed-asset policies and that this belief was reasonable in light of Kallina’s training and experience. See Needham,
There was also legally sufficient evidence that Kallina was terminated for reporting in good faith violations of Policies # 1 and # 14 to Harris. Kallina testified he determined that there were approximately 800 assets listed on the inventory records that were not in the Broad Street Warеhouse and that these assets were worth in excess of $400,000. Kallina testified that Jerry Ferguson, the manager of the Broad Street Warehouse, was not responsive and that he was stalling in response to Kallina’s requests that he take steps to maintain current and accurate inventory records at the Broad Street Warehouse. There was evidence that, both orally and by his memorandum of December 8,1997, Kallina informed Harris of this discrepancy and failure to maintain accurate inventory records. There was evidence that Kallina reported Ferguson’s failure to exercise the utmost care and diligence in the use and protection of all public assets placed under his control or custody. There was also evidence that Kallina reported the failure to maintain current and accurate physical inventory records by conducting physical inventories under the coordination of the Finance & Administration Department. Considering the evidence in а light that tends to support the jury’s findings and disregarding all evidence and inferences to the contrary, there was legally sufficient evidence to
Alternatively, the majority holds there was no evidence Kallina believed in good faith that Harris was an appropriate law enforcement authority to which he could report theft. For this holding, the majority relies on the Needham case. See Needham,