The Leon | Alcala team obtained a significant ruling  on behalf of its client, Rankin ISD, this week when the Eighth Court of Appeals ruled in the District’s favor in a case involving state ethics rules. Chapter 176of the Texas Government Code requires individuals and organizations doing business with local governmental entities to disclose certain conflicts of interest.  The statute requires school trustees, superintendents and other school officials who exercise discretion with respect to the selection of vendors to disclose certain conflicts of interest. If the school official or their family members have an employment or business relationship with the vendor, or if they have received gifts with a cumulative value of more than $100 in the preceding 12-month period, the school official is required to disclose those facts on state ethics form CIS.

Similarly, vendors seeking to do business with a local governmental entity must file a completed Conflict of Interest Questionnaire (“CIQ”), when submitting a proposal or beginning negotiations for school district business if the vendor has business relationship with school officials or their family or has given certain gifts to school officials or their family.

Violations of Chapter 176 by a local official include possible adverse employment action, including termination of a public official who fails to make required disclosures, as well as possible criminal penalties. Vendor violations include enforcement actions such as the local governmental entity declaring the contract void, at its discretion, if the vendor failed to file a .

In this case, the school district was planning significant bond construction projects, and in the weeks and months preceding approval of a contractor to perform the work, the contractor made several gifts to school officials with a value that exceeding the statutory threshold of $100. But when responding to the request for proposals to perform the construction project, the vendor submitted a CIQ omitting the gifts.

After the Rankin ISD Board entered a construction contract with the vendor and work commenced, the Board learned about the undisclosed gifts, and after conducting an investigation, the Board declared the contract void. The vendor then sued the District claiming it was owed for over $1million in unpaid work.

The trial court ruled that because the vendor failed to disclose the gifts, the Board could declare the contract void, and no suit could be pursued against the District under the void contract. The Eighth Court of Appeals upheld the decision of the trial court dismissing the vendor’s claim for damages under the contract with prejudice, finding that the contract was void from its inception, and where there is no contract, there can be no contract damages.

This case serves as an important reminder to school trustees, administrators, and vendors that conflict of interest disclosures must be timely made under Chapter 176, and failure to strictly comply with those requirements can prove costly. 

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