Volkswagen Group of America, Inc. And Audi of America, Inc. v. John Walker III, in His Official Capacity as Chairman of the Texas Department of Motor Vehicles Board The Honorable Michael J. O'Malley, the Honorable Penny A. Wilkov, in Their Official Capacities as Administrative Law Judges for the State Office ( 2015 )

ACCEPTED
03-15-00285-CV
5898687
THIRD COURT OF APPEALS
AUSTIN, TEXAS
7/1/2015 12:33:03 PM
NO. 03-15-00285-CV JEFFREY D. KYLE
CLERK
IN THE THIRD COURT OF APPEALS
AUSTIN, TEXAS
FILED IN
3rd COURT OF APPEALS
VOLKSWAGEN GROUP OF AMERICA, INC. AUSTIN, TEXAS
AND AUDI OF AMERICA, INC. 7/1/2015 12:33:03 PM
JEFFREY D. KYLE
Appellants
Clerk
vs.
JOHN WALKER III, IN HIS OFFICIAL CAPACITY AS CHAIRMAN OF
THE TEXAS DEPARTMENT OF MOTOR VEHICLES BOARD, AND
THE HONORABLE MICHAEL J. O'MALLEY AND THE HONORABLE
PENNY A. WILKOV, IN THEIR OFFICIAL CAPACITIES AS
ADMINISTRATIVE LAW JUDGES FOR THE STATE OFFICE OF
ADMINISTRATIVE HEARINGS
Appellees
On Appeal from the 201st Judicial District Court, Travis County, Texas
Trial Court Cause No. D-1-GN-15-001186
Honorable Amy Clark Meachum, Presiding Judge
APPELLANTS’ BRIEF
S. Shawn Stephens Billy M. Donley
Texas Bar No. 19160060 Texas Bar No. 05977085
James P. Sullivan Mark E. Smith
Texas Bar No. 24070702 Texas Bar No. 24070639
KING & SPALDING BAKER & HOSTETLER LLP
1100 Louisiana, Suite 4000 811 Main Street, Suite 1100
Houston, Texas 77002 Houston, Texas 77002
Telephone: (713) 751-3200 Telephone: (713) 751-1600
Facsimile: (713) 751-3290 Facsimile: (713) 751-1717
Counsel for Appellants Volkswagen Group of America, Inc. and
Audi of America, Inc.
ORAL ARGUMENT REQUESTED
IDENTITY OF PARTIES AND COUNSEL
Appellants and Defendants below:
Volkswagen Group of America, Inc. and Audi of America, Inc. (hereafter,
“Appellants”).
Lead Appellate counsel for Plaintiffs/Appellants:
S. Shawn Stephens
Texas Bar No. 19160060
James P. Sullivan
Texas Bar No. 24070702
KING & SPALDING
1100 Louisiana, Suite 4000
Houston, Texas 77002
Telephone: (713) 751-3200
Facsimile: (713) 751-3290
Trial and Appellate Counsel for Plaintiffs/Appellants:
Billy M. Donley
Texas Bar No. 05977085
Mark E. Smith
Texas Bar No. 24070639
BAKER & HOSTETLER LLP
811 Main Street, Suite 1100
Houston, Texas 77002
Telephone: (713) 751-1600
Facsimile: (713) 751-1717
i
Trial and Appellate Counsel for Defendants/Appellees:
William R. Crocker
807 Brazos, Ste. 1014
Austin, Texas 78701
Counsel for Appellees Ricardo M. Weitz; Hi Tech Imports North, LLC; Hi Tech
Imports, South, LLC; and Hi Tech Imports, LLC
Kimberly Fuchs
Assistant Attorney General
Texas Attorney General’s Office
P.O. Box 12548
Austin, Texas 78711-2548
Counsel for Appellees Michael J. O’Malley and Penny A. Wilkov
J. Bruce Bennett
Cardwell, Hart & Bennett, LLP
807 Brazos, Suite 1001
Austin, Texas 78701
Counsel for Appellees Ricardo M. Weitz; Hi Tech Imports North, LLC; Hi Tech
Imports, South, LLC; and Hi Tech Imports, LLC
Dennis McKinney
Assistant Attorney General
Texas Attorney General’s Office
P.O. Box 12548
Austin, Texas 78711-2548
Counsel for Appellee John Walker III
ii
Joseph W. Letzer
Dent M. Morton
Burr & Forman, LLP
420 20th Street N., Suite 3400
Birmingham, AL 35203
Counsel for Appellees Ricardo M. Weitz; Hi Tech Imports North, LLC; Hi Tech
Imports, South, LLC; and Hi Tech Imports, LLC
iii
ABBREVIATION TABLE
SOAH State Office Of Administrative Hearings
ALJ Administrative Law Judge
PFD Proposal for Decision
Contested Case The administrative contested case styled Budget Leasing,
Inc. d/b/a Audi North Austin and Audi South Austin v. Weitz,
et. al. v. Volkswagen Group of America, Inc., et. al., MVD
Docket No. 13-0008-LIC, SOAH Docket No. 608-13-
4599.LIC, before the Texas Department of Motor Vehicles,
Motor Vehicle Division
Audi Volkswagen Group of America, Inc. and Audi of
America, Inc. (Audi of America, Inc. is an operating
unit of Volkswagen Group of America, Inc.).
Board Texas Department of Motor Vehicles Board
Division Texas Department of Motor Vehicles, Motor Vehicle
Division
VWGoA Volkswagen Group of America
iv
TABLE OF CONTENTS
IDENTITY OF PARTIES AND COUNSEL ..........................................................i
ABBREVIATION TABLE ..................................................................................... iv
TABLE OF AUTHORITIES ................................................................................. vii
STATEMENT OF THE CASE ................................................................................x
ISSUES PRESENTED ............................................................................................ xi
STATEMENT REGARDING ORAL ARGUMENT ......................................... xii
STATEMENT OF FACTS ....................................................................................... 1
SUMMARY OF THE ARGUMENT ...................................................................... 8
ARGUMENT AND AUTHORITIES .................................................................. 15
A. THE DISMISSAL WAS ERRONEOUS BECAUSE APPELLEES’ ACTS WERE,
AND ARE, ULTRA VIRES; THEREFORE, APPELLEES WERE NOT ENTITLED
TO IMMUNITY AND AUDI WAS NOT REQUIRED TO EXHAUST
ADMINISTRATIVE REMEDIES........................................................................... 15
1. This Court must consider the merits of the case in order
to resolve the jurisdictional issues under a de novo
standard of review. .......................................................................... 17
2. Chairman Walker’s actions exceeded his power. ........................ 19
a. Walker’s Remand Order exceeded his authority
because Section 2001.058(e) of the APA does not
authorize a remand. ............................................................... 20
b. Additionally, Walker did not have the power to
order the ALJs to reopen the record after they
issued the PFD. ....................................................................... 24
c. Walker’s Remand Order Exceeds the Board’s
Authority under Section 2301.709(a) of the Code
because it considers untimely evidence. ............................ 25
d. Walker’s order also violates the rule prohibiting the
Board from attempting to influence the ALJs’
decision with improper facts. ............................................... 28
v
i. The Remand Order requires the ALJs’ to
consider improper evidence. ........................................... 28
ii. The Remand Order flows from improper ex
parte contact and the use of improper
procedures. ........................................................................ 29
iii. The Remand Order differs materially from
member Slovacek’s unanimously approved
motion. ............................................................................... 32
iv. General statutory provisions did not authorize
Walker to issue the Remand Order. ............................... 33
v. Statutes, rules and procedures must apply in all
contested cases or the process becomes unfair............. 36
3. The ALJs Committed, and Continue to Commit, Ultra
Vires Acts. .......................................................................................... 39
a. The ALJs do not have authority to conduct a
remand after issuing a PFD. ................................................. 41
b. The ALJs do not have authority to reopen evidence
after a PFD. .............................................................................. 42
PRAYER AND REQUEST FOR RELIEF ............................................................ 47
CERTIFICATE OF COMPLIANCE .................................................................... 49
CERTIFICATE OF FILING AND SERVICE ...................................................... 49
vi
TABLE OF AUTHORITIES
Page(s)
Cases
Appraisal Review Board of Harris County Appraisal District v.
O’Connor & Assocs.,
267 S.W.3d 413 (Tex. App.—Houston [14th Dist.] 2008, no
pet.) ..................................................................................................................... 16
Budget Leasing, Inc. d/b/a Audi North Austin and Audi South
Austin v. Weitz, et. al. v. Volkswagen Group of America, Inc., et.
al.,
MVD Docket No. 13-0008-LIC ......................................................................... 1
Butnaru v. Ford Motor Company,
84 S.W.3d 198 (Tex. 2002) .................................................................................. 4
Chon Tri v. J.T.T.,
162 S.W.3d 552 (Tex. 2005) .............................................................................. 20
City of Dallas v. Carbajal,
324 S.W.3d 537 (Tex. 2010) .............................................................................. 18
City of El Paso v. Heinrich,
284 S.W.3d 366 (Tex. 2009) .......................................................................passim
City of Houston v. Rhule,
417 S.W.3d 440 (Tex. 2013) ..........................................................................9, 18
City of Houston v. Williams,
99 S.W.3d 709 (Tex. App.—Houston [14th Dist.] 2003, no pet) ................ 16
City of Sherman v. Public Util. Comm’n,
643 S.W.2d 681 (Tex. 1983), CR 821-843 ....................................................6, 16
Gattis v. Duty,
349 S.W.3d 193 (Tex. App.—Austin 2011, no pet) ...................................... 17
vii
GMC Superior Trucks, Inc. v. Irving Bank & Trust Co.,
463 S.W.2d 274 (Tex. Civ. App.—Waco 1971, no writ) ........................35, 36
Hammond v. City of Dallas,
712 S.W.2d 496 (Tex. 1986) ............................................................35, 36, 46, 47
Hearts Bluff Game Ranch, Inc. v. State,
381 S.W.3d 468 (Tex. 2012) .............................................................................. 18
Mag-T, L.P. v. Travis Central App. Dist.,
161 S.W.3d 617 (Tex. App.—Austin, 2005, pet denied) .............................. 17
Montgomery I.S.D. v. Davis,
34 S.W.3d 559 (Tex. 2000) ................................................................................ 38
Petitioner v. Tax Division, Texas Comptroller of Public Accounts,
2014 WL 4694592, SOAH Docket No. XXX-XX-XXXX.26,
Comptroller’s Decision at *6, June 9, 2014 ................................................... 43
Petitioner v. Tax Division, Texas Comptroller of Public Accounts,
2014 WL 4694594, SOAH Docket No. XXX-XX-XXXX.26,
Comptroller’s Decision at *1, June 16, 2014 ................................................. 43
Rodriguez v. Serv. Lloyds Ins. Co.,
997 S.W.2d 248 (Texas. 1999) .......................................................................... 40
Sexton v. Mount Olivet Cemetery Assn,
720 S.W.2d, 137 (Tex. App.—Austin 1986, writ ref’d n.r.e.) .........10, 19, 40
Southwestern Bell Tel., L.P. v. Emmett,
_ S.W.3d _, 58 Tex. Sup. Ct. J. 567 ...........................................................passim
Tex. Dep’t of Parks & Wildlife v. Miranda,
133 S.W.3d 217 (Tex. 2004) ................................................................8, 9, 17, 18
Texas Dept. of Transp. v. Sefzik,
355 S.W.3d 618 (Tex. 2011) ................................................................................ 6
Texas Gen. Indem. v. Workers’ Comp. Com’n,
36 S.W.3d 635 (Tex. App.—Austin 2000) ..........................................35, 46, 47
viii
Westheimer Indep. Sch. Dist. v. Brockette,
567 S.W.2d 780 (Tex. 1978) .............................................................................. 16
Yamaha Motor Corp. v. Motor Vehicle Division,
860 S.W.2d 223 (Tex. App.—Austin 1993, writ denied) ............................. 16
Statutes
1 TEX. ADMIN CODE ANN. § 155.153 .............................................................passim
30 TEX. ADMIN. CODE ANN. § 80.265 ................................................................... 23
TEX. GOV’T. CODE ANN. § 2001.058 ...............................................................passim
TEX. GOV’T CODE ANN. § 2001.146(a) .................................................................. 27
TEX. GOV’T CODE § 2001.141(d) ............................................................................ 40
TEX. GOV’T CODE § 2001.143 ................................................................................. 39
TEX. OCC. CODE § 2301.360 ...............................................................................4, 34
TEX. OCC. CODE § 2301.709 ............................................................................passim
TEX. OCC. CODE § 2301.704 ................................................................................. 1, 2
Other Authorities
16 TEX. ADMIN. CODE § 22.262(c) ......................................................................... 23
2 Kenneth Culp Davis & Richard J. Pierce, Jr., Administrative
Law Treatise § 9.8 at 67 (3d ed. 1994) .............................................................. 37
Ron Beal, From Proposal for Decision to Final Decision: What
Happens in Between?, 15 Tex. Tech Admin. L.J. 113, (2013) .................passim
Pete Schenkkan, Texas Administrative Law: Trials, Triumphs and
New Challenges, 7 Tex. Tech Admin. L.J. 288 (2006) ............................. 37-38, 40
ix
STATEMENT OF THE CASE
Trial Judge: Honorable Amy Clark Meachum
Trial Court: 201st Judicial District Court, Travis County,
Texas; Trial Court Cause No. D-1-GN-15-
001186
Nature of the case: Audi sued three individuals (the chair of the
Texas Motor Vehicle Board and two ALJs) in
their official capacities seeking injunctive relief
preventing these individuals from exceeding
their statutory powers and from departing
from statutes, rules, and established
procedures by remanding/conducting a
remand in an administrative contested case
after a PFD had issued. CR 117-148.
Defendants/Appellees filed pleas to the
jurisdiction asserting governmental immunity
and failure to exhaust administrative
remedies. See, e.g., CR 731,821, 836.
The course of pleadings and Trial Court dismissed the case. CR 2030-2031.
trial court’s disposition of
the case:
x
ISSUES PRESENTED
1. Defendants/Appellees were sued in their official capacities for
ultra vires acts as required by the Supreme Court’s City of El
Paso v. Heinrich, 284 S.W.3d 366, 369-70, 73 (Tex. 2009) decision.
Did the trial court err by dismissing this case since the
Defendants/Appellees were not entitled to governmental
immunity because their actions (reopening evidence and
ordering/conducting a remand of the administrative Contested
Case after a PFD had issued) exceeded their statutory powers?
2. Did the trial court err by dismissing the case below since the
Texas Supreme Court has held that exhaustion of
administrative remedies is not required where, as here, a
government official’s actions exceed his or her powers?
xi
STATEMENT REGARDING ORAL ARGUMENT
Audi requests oral argument in this case because oral argument will
assist the Court in understanding the interplay between the various
provisions of the Texas Occupations Code, the Administrative Procedure
Act (“APA”), Chapter 2001 of the Texas Government Code and the
administrative rules which control the outcome of this lawsuit. It will also
assist the Court in understanding the complex procedural background of
this appeal.
xii
STATEMENT OF FACTS
Appellants are Volkswagen Group of America, Inc. and Audi of
America, Inc. (collectively “Audi”)1. Appellees are three individuals sued
by Audi in their official capacities, John Walker III, Michael J. O’Malley and
Penny A. Wilkov. Walker is Chair of the Texas Department of Motor
Vehicles Board (“Board”). O’Malley and Wilkov are Administrative Law
Judges for the State Office of Administrative Hearing (SOAH). CR 117-148.
Audi filed this suit in the 201st Judicial District Court in Travis County to
enjoin Appellees from conducting ultra vires proceedings in an underlying
administrative contested case (Contested Case)2 pending before the State
Office of Administrative Hearings (“SOAH”) on referral from the Texas
Department of Motor Vehicles, Motor Vehicle Division (“the Division”)
pursuant to Texas Occupations Code §2301.704. CR 117-148 and exhibits
thereto.
1 Appellants are Volkswagen Group of America, Inc. (“VWGoA”)and Audi of America,
Inc. (collectively, with VWGoA, “Audi”). VWGoA is engaged in the business of importing,
distributing, and advertising, new motor vehicles and related accessories and parts. VWGoA
distributes new Volkswagen vehicles to authorized dealers located throughout the United
States for sale to the public. Audi of America, Inc. is an operating unit of VWGoA that sells and
delivers authorized Audi products to Audi dealers.
2 The administrative contested case is styled Budget Leasing, Inc. d/b/a Audi North Austin
and Audi South Austin v. Weitz, et. al. v. Volkswagen Group of America, Inc., et. al., MVD Docket No.
13-0008-LIC, SOAH Docket No. 608-13-4599-LIC, before the Texas Department of Motor
Vehicles, Motor Vehicle Division.
1
DMSLIBRARY01\97700\000000\26073283.V1-7/1/15
1. Budget Protests Audi’s Rejection of The Proposed Transfer of
The Austin Dealerships.
In the Contested Case, Budget Leasing Inc. d/b/a Audi North Austin
and Audi South Austin (Budget), protested Audi’s rejection of Budget’s
proposed transfer of the only two Austin, Texas Audi dealerships to a
group of investors. CR 367-369. The original proposed buyer, Ricardo M.
Weitz, and several entities, Hi Tech Imports, LLC, Hi Tech Imports South
LLC and High Tech Imports North LLC (“Intervenors”), intervened in the
Contested Case.
2. Trial of The Contested Case; ALJs Issue PFD.
The Board referred Budget’s protest to SOAH for trial in accordance
with Texas Occupations Code §2301.704 (a). CR 399-502. The trial on the
merits of the Contested Case lasted nine days. Nineteen witnesses testified
and almost 300 exhibits were introduced. CR 138-39; 399-502.
Subsequently, SOAH Administrative Law Judges O’Malley and Wilkov
issued a Proposal for Decision (PFD) in which they agreed with many of
Audi’s concerns about the proposed transferees’ lack of qualifications and
recommended that the Board issue a final decision finding the prospective
transferees unqualified. CR 399-502; 485-86. The ALJs conditioned the
2
findings in their PFD by stating that the prospective transferees might be
qualified, if they met certain conditions set out in the PFD. CR 399-502;
485-86.
3. The Board Issued a Final Order Dismissing The Contested
Case Because Budget Failed to Comply With The
Requirements for Filing a Protest.
Typically, the Board would enter a final decision based on the
findings of fact and legal conclusions in the ALJs’ PFD.3 See, e.g., Ron Beal,
From Proposal for Decision to Final Decision: What Happens in Between?, 15
Tex. Tech Admin. L.J. 113, 128-31 (2013). However, in this Contested Case,
based on the recommendation of the Board’s general counsel, the Board
dismissed the protest because Budget had not complied with the
requirements of a dealer transfer application under the Texas Occupations
Code. CR 503-505.
3 The Board may also change an ALJ’s findings or conclusions, but only where the Board
states in writing that: 1) the ALJ misapplied the law, agency rules, policies or prior
administrative decisions; 2) the ALJ relied on an incorrect administrative decision or on a
decision that should be changed; or 3) there is a technical error in a fact finding. TEX. GOV’T.
CODE ANN. § 2001.058(e).
3
4. Budget/Intervenors Sought Rehearing of The Contested Case
and One Proposed Transferee makes Ex Parte Contact With
The Board’s Vice-Chair About The Rehearing.
After dismissal of their protest, Budget and the Intervenors (which
includes some of the prospective transferees and Weitz, who is admittedly
not a prospective transferee)4 filed motions for rehearing with the Board
pursuant to Section 2001.146 of the APA. CR 507-526. At some point after
the motions for rehearing were filed, Corbin Robertson III—a witness in
the Contested Case and the leader of a private equity group that was one of
the proposed transferees—sent a private, ex parte message via LinkedIn to
the Vice-Chair of the Board. CR 1941. In it, he asks the Vice-Chair to
consider his family’s prominence in the Houston community, including the
fact that his family’s name is on the stadium at the University of Houston,
and his family’s connections, when ruling on the motion for rehearing of
the dismissal of the Contested Case. RR 14-16; CR 1940-1941.
4 Intervenors are some of the prospective transferees, but were not protestants. Under the
Occupations Code, prospective transferees do not have standing to bring a protest action—only
the existing dealer has standing to protest a manufacturer’s refusal to approve a proposed
transfer, so Intervenors were not a proper party to the Contested Case and could never be a
protestant in a Contested Case under the Code. TEX. OCC. CODE § 2301.360(a) (“A dealer whose
application is rejected under Section 2301.359 may file a protest with the board.”); Butnaru v.
Ford Motor Company, 84 S.W.3d 198, 206 (Tex. 2002) (“The Code’s definition of ‘dealer’ includes
licensed dealers but not prospective transferees.”)
4
After receipt of that message, the Board granted rehearing and set it
for the Board’s February 13, 2015 meeting. CR 154-170. The Board’s Vice-
Chair did not participate in the February 13, 2015 rehearing. At that
meeting, suddenly no longer concerned about Budget/Intervenors’ failure
to properly follow the Code’s transfer application requirements, the Board
voted to remand the Contested Case back to SOAH for further
proceedings. CR 168-169. The Board did so despite Audi’s objections that
Board Chairman Walker did not have the statutory authority to order the
remand5 and that the ALJs did not have the statutory power, much less the
discretion, to conduct the remand or reopen evidence after the issuance of a
PFD.6 CR 162-167. The Board granted rehearing and the contested case
5 Audi argued that Chairman Walker was not authorized to issue a remand because:
remand is not a power given to an agency that is considering a PFD listed in § 2001.058(e) of the
Administrative Procedure Act; SOAH was not authorized to reopen the record under SOAH
Rule 155.153 because the PFD had been issued; the remand order materially differs from the
motion upon which it is based; the remand order requires the the Board and the ALJs to
consider “evidence” that was not timely filed despite the fact that the Code only permits the
board members and ALJs to consider “materials that are submitted timely.” CR 7-8, 1898; 1905-
06, 1908; TEX. OCC. CODE § 2301.709(a); 2301.154. This “evidence” was not presented for the
Board’s consideration until October 15, 2014 despite the fact that the evidence had closed on
May 28, 2014, the ALJs issued a PFD on July 16, 2014 and the Board issued a Final Order on
September 12, 2014. CR 502, 505. In fact, this “evidence” was not even mentioned in Budget’s
own Motion for Rehearing. See e.g., CR 139.
6 Audi argued that the ALJs are outside their authority because SOAH Rule 155.153 only
allows an ALJ to reopen evidence “if the judge has not issued a dismissal, proposal for decision,
or final decision.” Here, the remand attempts to reopen evidence long after the ALJs issued a
PFD. See e.g., CR 140.
5
was remanded on an expedited basis to the ALJs pursuant to a Remand
Order signed by Walker. CR 169; 928-29. As requested by the Chair, the
ALJs quickly created and began implementing an expedited schedule for
the remand. CR 133; RR 16-17.
Consequently, Audi filed this lawsuit in district court to prevent the
ultra vires remand of the contested case, the ultra vires reopening of
evidence after issuance of the PFD, and the resulting issuance of a new PFD
by the ALJs and issuance of a new post-remand final decision by the Board.
CR 117-148.
Despite the fact that the Texas Supreme Court approved of the use of
such lawsuits where an official has acted outside his or her power and has
held that these suits should be filed before a party exhausts administrative
remedies, Defendants/Appellees filed Pleas to the Jurisdiction in the
district court in which they asserted governmental immunity from suit and
the exhaustion of remedies doctrine. See, e.g., Emmett, 2015 WL 1285326 at
*3; See e.g., Texas Dept. of Transp. v. Sefzik, 355 S.W.3d 618, 621 (Tex. 2011);
City of Sherman v. Public Util. Comm’n, 643 S.W.2d 681, 683, 685 (Tex. 1983),
CR 821-843.
6
The court below erroneously dismissed the lawsuit, thereby allowing
the ultra vires remand of the Contested Case to go forward. CR 2030-31.
Audi then filed this appeal and sought temporary relief from this Court to
protect this Court’s jurisdiction to decide this dispute. The ALJs continue
to carry out the Remand Order. In fact, they have conducted a remand
hearing, have closed the evidence in it, and are preparing a new, post-
remand PFD to submit to the Board. See, e.g., CR 47-54; 74-79. Audi has
sought temporary relief from this Court to prevent further actions in the
remand proceeding.
7
SUMMARY OF THE ARGUMENT
The district court erred when it dismissed this lawsuit. Appellees’
actions, upon which this lawsuit is based, exceed their authority.
Consequently, these acts are not entitled to governmental immunity and
Audi is not required to exhaust its administrative remedies. Since
immunity and the alleged failure to exhaust administrative remedies were
the grounds on which Appellees’ based their pleas to the jurisdiction, the
district court’s decision to dismiss the case must be reversed.
Ordinarily, courts begin their analysis of whether a trial court’s
dismissal was proper by considering the jurisdictional issues. However, in
this case, the Court must examine the merits of the appeal in order to be
able to determine the jurisdictional issues, because jurisdiction turns on
whether Appellees’ actions were authorized by law. Emmett, 2015
_S.W.3d_, 2015 WL 1285326 at *3 (Tex. 2015) (court required to interpret
Water Code to determine whether Harris County Commissioners’ conduct
was ultra vires and therefore not entitled to immunity); see, e.g., Tex. Dep’t of
Parks & Wildlife v. Miranda, 133 S.W.3d 217, 227-28 (Tex. 2004). Because
Appellees’ actions were, and are, ultra vires, Appellees were not entitled to
8
immunity, the exhaustion of administrative remedies doctrine did not
apply, and the district court should not have dismissed the case.
Whether a court has jurisdiction over a dispute is a question of law
that is reviewed de novo. City of Houston v. Rhule, 417 S.W.3d 440, 442 (Tex.
2013). When examining a plea to the jurisdiction, a district court is
required to consider the evidence introduced in opposition to the plea. See,
e., g., Heinrich, 284 S.W.3d at 378; Miranda, 133 S.W.3d at 227-28. And when
considering the evidence, the district court is required to indulge every
inference and resolve every doubt in favor of the party opposing the plea.
Heinrich, 284 S.W.3d at 378. Where, as here, evidence shows as a matter of
law that the actions were ultra vires, governmental immunity and the
exhaustion of remedies doctrine do not apply and the court should deny
the pleas. Heinrich at 376; see Emmett, 2015 WL 1265326 at *3. Where the
evidence raises a fact issue, the court must send the dispute to the fact
finder. Heinrich, 284 S.W.3d at 378. Either way, the case should not be
dismissed. Here, the evidence shows that Appellee’s actions violated
statutes and rules, so the pleas should have been denied. But even if
9
Audi’s evidence merely created a fact issue on whether Appellees’ actions
were ultra vires, the district court should not have granted the pleas. Id.
For example, Audi’s evidence showed that Chairman Walker’s
actions exceeded his power when he erroneously signed a Remand Order,
which sent the Contested Case back to SOAH for further proceedings. CR
928-929. Walker did not have the authority7 to sign the Remand Order
because the APA does not authorize the Board to remand a case back to
SOAH after an ALJ has issued a PFD. TEX. GOV’T CODE ANN. § 2001.058.
In fact, this section of the Government Code, which is the only source
of the Board’s power when considering a PFD, lists the specific options
available to the Board. It does not include remand as an option. Id. After a
PFD is issued, the Board is only authorized to enter a final decision on the
PFD; or, in limited circumstances, change a SOAH finding of fact or
conclusion of law, not order a remand. Id. Thus, Section 2001.058(e) of the
APA, by its express terms, did not authorize the Board to remand the
contested case or to alter the ALJs’ original findings and conclusions. Id.
7 Appellees do not have inherent powers. Instead, they are creatures of statute and have
only the authority provided to them by the legislature. See e.g., Sexton v. Mount Olivet Cemetery
Assn, 720 S.W.2d, 137 (Tex. App.—Austin 1986, writ ref’d n.r.e.).
10
Since the Board does not have a specific grant of remand authority, Walker
exceeded his authority in remanding the case after issuance of a PFD.
Walker’s Remand Order also exceeded his authority because it
required the ALJs to exceed their statutory power by reopening the record
to consider untimely new evidence long after the ALJs had issued their
PFD. CR 928-929. SOAH Rule 155.153(a)(4) specifically prevents an ALJ
from reopening a record after a PFD has issued. 1 TEX. ADMIN CODE ANN. §
155.153(a)(4). It is uncontroverted that the ALJs had already issued a PFD
in the Contested Case. CR 399-502. Therefore, as a matter of law, this was
an ultra vires act that was not entitled to protection from suit. See, e.g.,
Heinrich, 284 S.W.3d at 378.
Further, Walker’s issuance of the Remand Order is an ultra vires act
because it considers, and orders the ALJs to consider, evidence which was
not submitted in a timely manner. RR 165-167; CR 928-929; CR 1447.
Section 2301.709 of the Code states that “the board or a person delegated
power from the board under Section 2301.154 may consider only materials
that are submitted timely.” TEX. OCC. CODE ANN. § 2301.709(a) (West 2014)
(emphasis added).
11
The Remand Order also violates Section 2301.709(c) of the Code
which provides that “[a] majority vote of a quorum of the board is required
to adopt a final decision or order of the board.” TEX. OCC. CODE ANN. §
2301.709(c) (West 2014) (emphasis added). Therefore, the orders Walker
signs as Chair of the Board must comply with the majority votes of the
Board. See id.
Here, Walker’s Remand Order was considerably broader than the
motion on which it was supposedly based. For example, the order
commanded the ALJs to reopen evidence to consider whether Audi
received the April 30 Letter, to determine the effect of that letter, and to
determine whether the conditions set out in the PDF are met. See, e.g. CR
1908. But the motion only called for a remand to determine one issue:
whether the PFD’s conditions had been met. CR 1908.
Walker’s order, calling for serious departures from the statutory
framework for dealing with contested cases, was issued after improper ex
parte communication from a witness in the Contested Case. As such,
reversal is required because the relevant statutes, rules and procedures
need to be equally applied and the decision should be free from undue
12
influence, or the contested case process becomes unfair and the
legislature’s reasons for implementing the neutral hearing process under
SOAH are negated. See Mid-South Pavers, 246 S.W.3d at 723.
Like Walker, the ALJs also committed ultra vires acts by : 1) reopening
the evidence after issuing a PFD; 2) considering untimely evidence; 3)
conducting a remand hearing and continuing to entertain the remand
process by issuing orders and engaging in actions to issue a new post-
remand PFD; and, 4) creating and implementing a compressed remand
schedule. Importantly, they continue to commit ultra vires acts by carrying
out the remand process.
These actions exceeded the ALJs’ authority because, as discussed
above, § 2001.058(e) of the APA does not authorize the Board to remand a
contested case back to SOAH after the issuance of a PFD.
The ALJs also exceeded their authority by re-opening the evidence in
the remand of the Contested Case. This act contravenes SOAH Rule
155.153(a)(4) which expressly prohibits the reopening of the record in a
contested case once a PFD has been issued. 1 Tex. Admin. Code Ann. §
155.153(a)(4) (West 2014).
13
For the foregoing reasons, the Appellees’ actions exceeded their
powers and were not entitled to immunity. Likewise, under these
circumstances, exhaustion of remedies was not required. Therefore, the
district court committed reversible error when it dismissed this lawsuit.
14
ARGUMENT AND AUTHORITIES
A. THE DISMISSAL WAS ERRONEOUS BECAUSE APPELLEES’ ACTS WERE, AND
ARE, ULTRA VIRES; THEREFORE, APPELLEES WERE NOT ENTITLED TO
IMMUNITY AND AUDI WAS NOT REQUIRED TO EXHAUST ADMINISTRATIVE
REMEDIES.
As a matter of law, the district court erred when it dismissed this case
because Appellees’ actions exceeded their authority and were not entitled
to governmental immunity. And, under these circumstances, Audi was not
required to exhaust administrative remedies prior to filing suit in district
court. In fact, in Heinrich, the Texas Supreme Court authorized the use of
lawsuits, like this one, requesting prospective injunctive relief to prevent
harm when individual state actors exceed their statutorily authorized
powers in an underlying administrative proceeding. See e.g., Heinrich, 284
S.W.3d at 369. The Texas Supreme Court also held in Heinrich that an
action to “determine or protect a private party’s rights against a state
official who has acted without legal or statutory authority is not a suit
against the State that sovereign immunity bars.” Id. at 368. Therefore, as
Audi did here, suit must be brought against the state actor in his or her
official capacity, not against the agency. Id. at 369; Southwestern Bell Tel.,
15
L.P. v. Emmett, _ S.W.3d _, 58 Tex. Sup. Ct. J. 567; 2015 WL 1285326 (Tex.
2015).
Similarly, where, as here, a state agency official acts beyond his or her
statutorily conferred powers, a trial court may intervene in a contested case
regardless of whether a party has exhausted its administrative remedies.
See, e.g., City of Sherman v. Public Util. Comm’n, 643 S.W.2d 681, 683, 685
(Tex. 1983); Westheimer Indep. Sch. Dist. v. Brockette, 567 S.W.2d 780, 785
(Tex. 1978); Yamaha Motor Corp. v. Motor Vehicle Division, 860 S.W.2d 223,
229 (Tex. App.—Austin 1993, writ denied); Appraisal Review Board of Harris
County Appraisal District v. O’Connor & Assocs., 267 S.W.3d 413, 419 (Tex.
App.—Houston [14th Dist.] 2008, no pet.).
This exception to the exhaustion of administrative remedies doctrine
allows a trial court to intercede in an agency matter before administrative
remedies are exhausted because, in these ultra vires cases, the reasons for
the exhaustion of remedies requirement do not apply; judicial and
administrative efficacy are not served by requiring exhaustion; and, agency
policies and expertise are irrelevant if the agency’s final action will be a
nullity. See City of Houston v. Williams, 99 S.W.3d 709, 717 (Tex. App.—
16
Houston [14th Dist.] 2003, no pet); Mag-T, L.P. v. Travis Central App. Dist.,
161 S.W.3d 617, 625 (Tex. App.—Austin, 2005, pet denied).
As is shown below in detail, Appellees exceeded their statutory
powers as a matter of law when they ordered the remand of the contested
case; ordered the reopening of evidence; and/or, began to carry out the
Remand Order; thus, the decision of the court below should be reversed
because neither governmental immunity nor the exhaustion of
administrative remedies doctrine applies to this case.
1. This Court must consider the merits of the case in order to
resolve the jurisdictional issues under a de novo standard of
review.
Ordinarily, this Court would start its analysis of whether the trial
court’s dismissal of this case was proper by considering the jurisdictional
issues. However, in this case, the Court must examine the merits of the
appeal to be able to determine whether jurisdiction exsists. Emmett, 2015
_S.W.3d_, 2015 WL 1285326 at *3 (Tex. 2015) (court required to interpret
Water Code to determine whether Harris County Commissioners’ conduct
was ultra vires and therefore not entitled to immunity); see Tex. Dep’t of
Parks & Wildlife v. Miranda, 133 S.W.3d 217, 227-28 (Tex. 2004); Gattis v.
Duty, 349 S.W.3d 193, 206 (Tex. App.—Austin 2011, no pet). Here, an
17
examination of the merits will show that Appellees’ actions were ultra vires;
therefore, Appellees were not entitled to immunity, the exhaustion of
administrative remedies doctrine did not apply and the case should not
have been dismissed.
Whether a court has jurisdiction over a dispute is a question of law
that is reviewed de novo and without deference to the trial court’s decision.
City of Houston v. Rhule, 417 S.W.3d 440, 442 (Tex. 2013); Hearts Bluff Game
Ranch, Inc. v. State, 381 S.W.3d 468, 476 (Tex. 2012); City of Dallas v. Carbajal,
324 S.W.3d 537, 538 (Tex. 2010). The district court was required to consider
the evidence introduced by Audi in opposition to the pleas when it ruled
on the pleas to the jurisdiction. See, e.,g., Heinrich, 284 S.W.3d at 378;
Miranda, 133 S.W.3d at 227-28. When considering such evidence, the
district court is required to indulge every inference and resolve every
doubt in favor of the party filing suit. Heinrich, 284 S.W.3d at 378. Where,
as here, that evidence shows, as a matter of law, that Appellees’ actions
were ultra vires, so that governmental immunity and the exhaustion of
remedies doctrine do not apply, the court should deny the pleas. Heinrich
at 376; see Emmett, 2015 WL 1265326 at *3. Where the evidence raises a fact
18
issue, the court must send the dispute to the fact finder. Heinrich, 284
S.W.3d at 378.
As will be shown below, Appellee’s actions in this case were ultra
vires as a matter of law and Audi’s requested injunctive relief should have
been granted. However, at minimum, Audi’s evidence created a fact issue
on whether Appellees’ actions were ultra vires, so the district court could
not grant the pleas and should have sent the dispute to the fact finder. Id.
As a result, the decision below must be reversed.
2. Chairman Walker’s actions exceeded his power.
On February 13, 2015, Board Chairman Walker erroneously signed a
Remand Order, which sent the Contested Case back to SOAH for further
proceedings. CR 928-929. When reviewing these actions, it is important for
this Court to remember that the Board does not have inherent powers.
Instead, it is a statutory creature which has only the authority provided to
it by the Legislature. See e.g., Sexton v. Mount Olivet Cemetery Assn, 720
S.W.2d, 137 (Tex. App.—Austin 1986, writ ref’d n.r.e.) (“agencies are creatures
of statute and have no inherent authority,” therefore, agencies can
“exercise only those powers conferred upon them by law in clear and
express language, and no additional authority will be implied by judicial
19
construction.”) Since a board is a corporate body, it must act through
individuals; thus, Chairman Walker was required to work within the
limited power granted to the Board. See Chon Tri v. J.T.T., 162 S.W.3d 552,
562 (Tex. 2005). There are several reasons Chairman Walker’s order
exceeded his statutory grant of power and his excesses are detailed below.
a. Walker’s Remand Order exceeded his authority because
Section 2001.058(e) of the APA does not authorize a
remand.
Walker did not have the authority to sign the Remand Order because
the APA does not authorize the Board to remand a case back to SOAH
after an ALJ has issued a PFD. TEX. GOV’T CODE ANN. § 2001.058 . In fact,
this section of the APA, which is the sole source of the Board’s power when
considering a PFD, lists the specific options available to the Board and does
not include remand as an option. Id. Instead, after a PFD is issued, the
Board is only authorized to enter a final decision on the PFD; or, in limited
circumstances, change a SOAH finding of fact or conclusion of law, not
order a remand. Id. Even then, a finding or conclusion can only be
changed by the Board under very restrictive circumstances,8 none of which
8 Here, the Board did not make a determination, much less a written one, that any of the
three specified reasons for changing the ALJs’ findings and conclusions existed. CR 928-929.
20
exists here:
A state agency may change a finding of fact or conclusion of
law made by an administrative law judge, or may vacate or modify an
order issued by the administrative law judge, only if the agency
determines:
(1) that the administrative law judge did not
properly apply or interpret applicable law,
agency rules, written policies provided under
Subsection (c), or prior administrative
decisions;
(2) that a prior administrative decision on which
the administrative law judge relied is
incorrect or should be changed; or
(3) that a technical error in a finding of fact
should be changed.
The agency shall state in writing the specific reason and legal basis
for a change made under this subsection.
TEX. GOV’T CODE ANN. § 2001.058(e); 15 Tex. Tech Admin. L.J. at 126-133.
And the fact that the Board is not authorized to remand a case back to
SOAH after issuance of a PFD is consistent with SOAH’s procedural rules,
which do not allow an ALJ to reopen a record once a PFD is issued and has
been submitted to the Board for consideration. 1 Texas. Admin. Code Ann.
§ 155.153. Thus, Section 2001.058(e) of the APA, by its express terms, did
not authorize the Board to remand the contested case or to alter the ALJs’
original findings and conclusions. Id.
21
While it is true that some agency cases can be remanded to an ALJ,
that remand can only occur where agencies have been given statutory
authority to remand a contested case back to SOAH. See 15 Texas Tech
Admin. L.J. at 132-141. Here, Appellees ignored the fact that the Texas
Motor Vehicle Board was not given that remand power by the legislature.
In fact, the statutes cited below point out this distinction and show
that, where the legislature wishes to grant remand power to an agency, it
knows how to do so; yet, it has not done so for the Motor Vehicle Board.
For example, in Chapter 2003 of the Government Code, the
legislature expressly provides for remand in cases heard by the Natural
Resources Conservation Division of SOAH.9 TEX. GOV’T CODE §
2003.047(m). SOAH’s Natural Resources Conservation Division was
established to hear contested cases brought before the Texas Commission
on Environmental Quality (“TCEQ,” formerly the Texas Natural Resource
9 The Natural Resource Conservation Division hears contested cases referred by the Texas
Commission on Environmental Quality (formerly the Texas Natural Resources Conservation
Commission). The Texas Natural Resource Conservation Commission (“TNRCC”) was
renamed Texas Commission on Environmental Quality (“TCEQ”) in 2002, three years after
Section 2003.047 was last amended. Therefore references to TNRCC in Chapter 2003 of the
Texas Government Code refer to TCEQ. Government Code Section 2003.047(m) provides:
[T]he [Texas Natural Resource Conservation Commission] may also refer the
matter back to the administrative law judge to reconsider any findings and
conclusions set forth in the proposal for decision or take additional evidence or
to make additional findings of fact or conclusions of law.
22
Conservation Commission). Consistent with this provision of the
Government Code, TCEQ’s procedural rules expressly provide that the
record may be reopened for further proceedings. 30 TEX. ADMIN. CODE
ANN. § 80.265 (“The commission . . . may order the judge to reopen the
record for further proceedings on specific issues in dispute.”).
Similarly, the Texas Public Utility Commission’s (“PUC”) rules also
expressly provide that the “commission may remand the proceeding for
further consideration. . . . with or without reopening the hearing.” 16 TEX.
ADMIN. CODE § 22.262(c). Likewise, SOAH’s procedural rules also
recognize the unique authority of the PUC and TCEQ to remand contested
cases and expressly provide that PUC and TCEQ rules control these
situations.10 1 TEX. ADMIN. CODE ANN. § 155.3. No such provision is made
for the Texas Department of Motor Vehicles.
Absent this special grant of remand power, here, Appellees were
bound by § 2001.058(c) and SOAH Rule 155.153. Since these provisions did
10 SOAH Rule 155.3 provides that:
(d) If there is any conflict between SOAH’s rules [such as Rule 155.153] and the procedural
rules of the TCEQ adopted in § 155.1 of this title (relating to Purpose), the TCEQ rules will
control.
(e) If there is any conflict between SOAH’s rules [such as Rule 155.153] and the procedural
rules of the PUC adopted in § 155.1 of this title (relating to Purpose), the PUC rules will control.
1 TEX. ADMIN. CODE ANN. § 155.3.
23
not authorize the Board to remand the contested case back to the ALJs, the
Remand Order, as a matter of law, was an ultra vires act outside Chairman
Walker’s statutory authority. Heinrich, 284 S.W.3d at 370. This act alone
requires reversal of the district court’s decision.
b. Additionally, Walker did not have the power to order the
ALJs to reopen the record after they issued the PFD.
Walker’s Remand Order is also ultra vires because it commanded the
ALJs to commit an act that exceeded their statutory power by ordering the
ALJs to reopen the record to consider untimely new evidence long after the
ALJs had issued their PFD. CR 928-929. SOAH Rule 155.153(a)(4)
specifically prevents an ALJ from reopening a record after a PFD has
issued:
(a) Judge’s authority and duties. The judge shall have the
authority and duty to:
(4) reopen the record when justice requires, if the judge
has not issued a dismissal, proposal for decision, or
final decision.11
1 TEX. ADMIN CODE ANN. § 155.153(a)(4).
11 The Board, and not the ALJs, issues the final order in most contested cases heard by
ALJs under SOAH, including the Contested Case. As a result, the PFD issued by the ALJs
represented the end of their involvement in the Contested Case and was their final authorized
act in that case. See 15 Tex. Tech L. Rev. at 127-28.
24
As such, SOAH Rule 155.153(a)(4) did not grant Appellees the power
to reopen the record in the Contested Case since it is undisputed that the
ALJs had already issued the PFD in it. CR 399-502. Nevertheless, Walker’s
Remand Order specifically required the ALJs to reopen the record in excess
of the power granted by SOAH Rule 155.153. CR 928-929. As a matter of
law, this was an ultra vires act that was not entitled to protection from suit.
See Heinrich, 284 S.W.3d at 378. Again, this act alone requires reversal.
c. Walker’s Remand Order Exceeds the Board’s Authority
under Section 2301.709(a) of the Code because it considers
untimely evidence.
Further, the Remand Order is also an ultra vires act because it
considers the April 30 Letter, which was not submitted in a timely manner
and orders the ALJs to consider the letter and various other untimely
materials offered at the ultra vires remand hearing. RR 165-167; CR 928-929;
CR 1447. Section 2301.709 of the Code states that “the board or a person
delegated power from the board under Section 2301.154 may consider only
materials that are submitted timely.” TEX. OCC. CODE ANN. § 2301.709(a)
(West 2014) (emphasis added).
The attempt to introduce the April 30 letter is important because the
Motor Vehicle Code requires that all proposed transferees agree in writing
25
to be bound by all manufacturer’s dealer agreements. Here, the protestant
failed to provide this as part of its transfer application and the Board
correctly dismissed the Contested Case for this reason. CR 504-505.
However, well after the time for offering evidence, Budget/Intervenors
attempted to insert the April 30 Letter into the case in an effort to cure this
error. CR 1447. While that effort would be in vain under all circumstances
because it does not even attempt to cure the defect for the proposed
transferees12, the attempt, at any rate, simply came much too late. CR 1447.
For example, neither the protestant nor the proposed transferees ever
introduced the letter as an exhibit during the trial of the Contested Case,
which took place over the course of nine days, during which the parties
solicited testimony from nineteen witnesses and introduced almost 300
exhibits into evidence. See, e.g., CR 123-125; 138-139; 163-167; 179-180. It is
also undisputed that the ALJs closed the record on May 28, 2014, yet the
April 30 Letter was not submitted by Budget/Intervenors until October 15,
2014, almost five months after the record was closed, and almost three
12 Even if timely, the April 30 letter does not cure the defect for the prospective transferees
(it is only signed by Weitz, who is not a prospective transferee), so a remand for consideration
of this untimely letter cannot change the fact that Budget failed to meet the statutory application
requirements. CR 1447. Thus, remand not only violates the Code, it is also a waste of agency,
judicial and party resources.
26
months after the ALJs issued their PFD and more than a month after the
Contested Case had been dismissed. CR 1447.
In addition, the April 30 Letter was not even timely for consideration
in conjunction with Budget/Intervenors’ motion for rehearing.
Budget/Intervenors had an October 2, 2014 deadline for filing a motion for
rehearing of the Board’s September 12 Final Order.13 While
Budget/Intervenors did file a timely motion for rehearing, they still did not
attach, or even reference, the April 30 Letter in their motion for rehearing;
instead, they attempted to submit the April 30 Letter on October 15, 2014,
thirteen days after the deadline for the motion for rehearing. CR 179; 366-36-;
390. Further, in the remand, the ALJs received a wide variety of untimely
materials on other issues that had never previously or timely produced in
the Contested Case.
As stated above, Section 2301.709(a) of the Code only allows
consideration of “materials that are submitted timely.” TEX. OCC. CODE
ANN. § 2301.709(a) (emphasis added). As a matter of law, the April 30
letter was not timely, so Chairman Walker failed to follow the restriction
13 The deadline for filing a motion for rehearing is twenty days from receipt of the Board's
decision. TEX. GOV’T CODE ANN. § 2001.146(a).
27
on consideration of untimely evidence. TEX. OCC. CODE ANN. §
2301.709(a). Consequently, even if the remand had been authorized,
Walker still committed an ultra vires act by ordering the ALJs to consider
the untimely April 30 Letter and other untimely materials as part of the
remand. As a result, the Court should reverse the decision below.
Heinrich, 284 S.W.3d at 370.
d. Walker’s order also violates the rule prohibiting the Board
from attempting to influence the ALJs’ decision with
improper facts.
Walker’s order is also ultra vires because it violates the rule which
prohibits the Board from attempting to influence the neutral ALJs
through the use of improper evidence.
i. The Remand Order requires the ALJs’ to consider
improper evidence.
Specifically, the Government Code states that: “(a) state agency
may not attempt to influence the finding of facts or the administrative
law judge’s application of the law in a contested case except by proper
evidence and legal argument.” TEX. GOV’T CODE § 2001.058(e). But here,
Appellee Walker required the ALJ Appellees to reopen the record to
examine untimely, and therefore, improper evidence. CR 928-29.
28
ii. The Remand Order flows from improper ex parte
contact and the use of improper procedures.
Walker’s order is the result of the Board’s departure from regular
procedures which seems to have been prompted by improper ex parte
contact by a prospective transferee’s principal. In fact, during the
pendency of the motions for rehearing, Audi was notified that the head
of one of the proposed transferees, Corbin J. Robertson III, sought to
influence the outcome of the rehearing in the contested case by improper
ex parte contact with the Board Vice-Chair. CR 1940-1941. This contact
occurred via the social media site LinkedIn on October 10, 2014. CR
1941. This ex parte communication was provided to Audi only in
redacted form. Nevertheless, even the unredacted content of this ex parte
communication is disturbing because it reveals a bald and overt attempt
to influence the Board’s decision on the rehearing motions by way of
something other than “proper evidence and legal argument” by
highlighting Robertson’s family’s substantial influence and wealth. CR
1941.
More specifically, after invoking the name (redacted) of a friend of
the Robertson family, Robertson then addresses the rehearing of the
29
contested case and asks the Board’s Vice-Chair to consider those factors
when voting on his groups’ motion for rehearing:
I am not sure you were aware of this connection at
the last [Board] meeting you attended and I would
appreciate that you take this relationship into
consideration as you think about how you are
voting should we be successful in getting a
rehearing which I understand will be up for a vote
soon.
CR 1941.
After receiving the ex parte communication and considering Budget
and Intervenors’ motion for rehearing, the Board granted Budget and
Intervenors’ motion for rehearing on December 10, 2014. CR 332 Later,
when the Board again met to reconsider the disposition of the contested case,
Chairman Walker asked David Duncan, General Counsel for the Division, to
make a recommendation on the disposition of the contested case. Retreating
from his prior recommendation upon which the Board had previously
dismissed Budget/Intervenors’ protest action (for failure to comply with the
application requirements), the Board’s counsel recommended remand of the
case to SOAH for consideration of the untimely April 30 Letter. CR 156;
158-159. Thereafter, Board Member Slovacek made a motion to remand the
case back to the ALJs; but, unlike Duncan’s recommendation, his motion
30
only asked that the ALJs consider whether Budget/Intervenors met the
conditions14 of the PFD and did not mention consideration of the April 30
letter. CR 158-159. (A side-by-side comparison of the motion and the
Remand Order are found at CR 1908).
Before calling for a vote on Slovacek’s motion, Walker called for
comments to it, subject to a three-minute time limit. CR 155. As best as he
could, given the three minute time constraint, Audi’s lawyer addressed the
untimely April 30 letter, and responded to the substance of the rehearing
motions15. The Board rejected Audi’s arguments and voted to approve the
motion. CR 168. Walker signed and issued the Remand Order on that
same day. CR 928-929.
14 Slovacek’s motion went beyond counsel’s recommendation by asking the ALJs to
determine whether “intervenors have in fact, satisfied the conditions of the proposal for
decision.” CR 159. These conditions are set out in Findings of Fact 154-158 of the ALJ’s PFD.
The findings state that some of the prospective transferees did not have the necessary
operational acumen, that the debt-to-equity ratio of the loan structure was not satisfactory, and,
that there was not cross-collateralization See, e.g., CR 159; CR 499; CR 928. These conditions
have nothing to do with the April 30 letter or whether Budget met the requirements of a transfer
application.
15 Audi’s lawyer argued that: (1) the Board lacked authority under § 2001.058 of the APA
to remand the contested case to SOAH; (2) SOAH Rule 155.153(a)(4) prohibits the ALJs from
reopening the evidentiary record to consider any new evidence, including the April 30 Letter,
because a PFD had already been issued; and (3) the Board lacked authority to consider untimely
materials, such as the April 30 Letter, pursuant to § 2301.709 of the Code. CR 160-167.
31
iii. The Remand Order differs materially from member
Slovacek’s unanimously approved motion.
The Remand Order violates Section 2301.709(c) of the Code which
provides that “[a] majority vote of a quorum of the board is required to adopt
a final decision or order of the board.” Tex. Occ. Code Ann. § 2301.709(c)
(West 2014) (emphasis added). Walker has a ministerial duty to ensure that
the orders he signs as Chair of the Board comply with the majority votes of
the Board and does not have the discretion to issue orders that fail to
comply with the majority vote of the Board. See id. Here, the Remand Order
materially differs from the unanimous vote of the Board by including
matters that were not in the motion. Compare CR 928-929 to 159; 1908.
For example, the actual motion does not mention consideration of the
April 30 letter; instead, it moves to remand the Contested Case to the ALJs
to determine the single issue of whether the Intervenors “satisfied the
conditions of the PFD.” RR 159: 6-12. These conditions16 have nothing to do
with the April 30 Letter. CR 499. A careful review of the motion shows that
the comments of the Board’s general counsel regarding the April 30 Letter
which preceded the motion were not part of the motion. RR 159:6-12.
16 The conditions in the PFD deal with operational control and the debt structure of the
proposed transaction. CR 499.
32
Neither Walker, nor any other member of the Board or the Board’s staff,
may add terms to an order as they see fit. Otherwise, a single person could
subvert the action of the Board. These actions also violate the Open
Meetings Act and Texas Occupations Code § 2301.709(c).
For these reasons, Walker’s Remand order was an ultra vires act which
exceeded his statutory authority. CR 1908. As such, this Court should
reverse the decision below because Walker’s ultra vires acts are not protected
from suit. Heinrich, 284 S.W.3d at 370.
iv. General statutory provisions did not authorize
Walker to issue the Remand Order.
Below, based on general provisions in the Texas Occupations Code,
Defendants/Appellees, Budget and Intervenors argued that Walker was
authorized to issue the Remand Order. Specifically, they erroneously
argued that Sections 2301.151, 2301.153(a), 2301.360(a), 2301.702 and
2301.709(c) of the Code authorize Walker to issue the Remand Order and
reopen the evidence in the contested case. See, e.g., CR 670-673. As is
shown below, these arguments are in error.
33
These provisions17 merely set out the general powers of the Board,
and simply do not conflict with, or apply to, the specific matters at issue
here, i.e., whether the Board was authorized to remand the Contested
Case/reopen evidence after the PFD, which are addressed in more specific
sections of the Code.
Texas statutory interpretation requires that “where there is a broad
and restrictive clause within a statute, the broad clause is limited or
17 Section 2301.151
GENERAL JURISDICTION OF BOARD. (a) The board as the exclusive original
jurisdiction to regulate those aspects of the distribution, sale, or lease of motor vehicles
that are governed by this chapter, including the original jurisdiction to determine its
own jurisdiction.
(b) The board may take any action that is specifically designated or implied under
this chapter or that is necessary or convenient to the exercise of the power and
jurisdiction granted under Subsection (a).
Section 2301.153(a)
GENERAL POWERS OF BOARD. (a) Notwithstanding any other provision of law, the
board has all powers necessary, incidental, or convenient to perform a power or duty
expressly granted under this chapter . . . .
Section 2301.360(a)
REVIEW BY BOARD FOLLOWING DENIAL OF TRANSFER. (a) A dealer whose
application is rejected under Section 2301.359 may file a protest with the board. A
protest filed under this section is a contested case . . . .
Section 2301.709(c)
REVIEW BY BOARD . . .
(c) The board or a person delegated power from the board under Section 2301.154
shall take any further action conducive to the issuance of a final order and shall issue a
written final decision or order . . . .
TEX. OCC. CODE ANN. §§ 2301.151, 2301.153(a), 2301.360(a), 2301.709(c).
34
controlled by the restrictive one.” Hammond v. City of Dallas, 712 S.W.2d 496,
498 (Tex. 1986) (emphasis added); Texas Gen. Indem. v. Workers’ Comp.
Com’n, 36 S.W.3d 635, 641 (Tex. App.—Austin 2000) (citing GMC Superior
Trucks, Inc. v. Irving Bank & Trust Co., 463 S.W.2d 274, 276 (Tex. Civ. App.—
Waco 1971, no writ) and City of Dallas v. Mitchell, 870 S.W.2d 21, 23 (Tex.
1994)) (providing that specific provision limits scope of general provision
on same subject matter); see also GMC Superior Trucks, 463 S.W.2d at 276
(citing cases) (“[I]n case of conflict between a general statutory provision
and a special provision dealing with the same subject, the general
provision is controlled or limited by the special provision, whether they are
contained in the same act, or in different enactments.”).
Thus, while the Legislature has given the Board power to take actions
“conducive” to issuing a final order in Section 2301.709(c) of the Code, such
as conducting meetings to discuss such orders, those actions are limited by,
and cannot violate, other more specific provisions contained in the statutes
or administrative regulations. Hammond, 712 S.W.2d at 498.
35
As discussed at length above, the APA, the Code, and SOAH’s
procedural rules contain multiple specific and restrictive provisions18
which do not authorize remand of the contested case, the reopening of
evidence after issuance of a PFD or consideration of untimely evidence.
None of these specific provisions can be ignored in order to justify the
Remand Order.
v. Statutes, rules and procedures must apply in all
contested cases or the process becomes unfair.
As described above, the Board, acting through Walker, changed its
statutorily mandated procedures to order the remand and the reopening of
evidence after the PFD had been issued. It did so based on improper
evidence and at the improper ex parte urging of a witness to the Contested
Case. The relevant statutes, rules and procedures must apply to all Texans
equally or the contested case process becomes an unfair one. In fact, SOAH
was put in place to guarantee neutral, independent fact finders in contested
administrative hearings. Mid-South Pavers, 246 S.W.3d at 723; 15 Tex. Tech
18 For example, the Board’s general powers are limited by, and cannot violate, the specific
prohibitions on: (1) considering untimely evidence [Section 2301.709(a) of the Code]; (2) issuing
an order that does not comply with a majority vote of the Board [Section 2301.709(c) of the
Code]; or (3) remanding a contested case [Section 2001.058(e) of the APA]. Hammond, 712
S.W.2d at 498; GMC Superior Trucks, 463 S.W.2d at 276.
36
Admin. L.J. at 127-33; 2 Kenneth Culp Davis & Richard J. Pierce, Jr.,
Administrative Law Treatise § 9.8 at 67 (3d ed. 1994).
Walker’s actions violate the relevant statutes and rules and also
subvert the policy behind the implementation of SOAH. For example, in
Mid-South Pavers, where the Texas Department of Transportation’s
executive director’s actions (changing ALJ findings and conclusions
without written reasons and legal bases for changes) “suggest[ed]” that the
“executive director was acting as Texas Department of Transportation’s
own fact-finder despite the legislature having delegated that duty to the
ALJ,” his actions violated SOAH’s neutral fact finding structure. Mid-South
Pavers, 246 S.W.3d at 722-23.
In Mid-South Pavers, the Supreme Court held that agencies, like the
Motor Vehicle Board, must respect the due process rights of those who
appear before it in contested cases. Id at 722. In fact, it stated that a
“neutral decision maker is crucial” to a fair administrative hearing. Id at
723. SOAH was created to make ALJs independent from agency political
pressure and Code § 2001.058(d) was designed to prevent fact-finders from
“cutting the cloth to fit the pattern in order to please agency heads.” Pete
37
Schenkkan, Texas Administrative Law: Trials, Triumphs and New Challenges, 7
Tex. Tech Admin. L.J. 288, 323 (2006).
Thus, where, as here, a board departs from the statutes and rules
governing the contested case process, it makes the neutral SOAH structure
meaningless. Id.; see Montgomery I.S.D. v. Davis, 34 S.W.3d 559, 564 (Tex.
2000). The Supreme Court rejects attempts, like those exhibited here, to
work around the neutral and has held that “[a]n independent fact finder is
integral to the structure of the hearing-examiner process.” Mid-South
Pavers, 246 S.W.3d at 723 (citing Montgomery I.S.D. v. Davis, 34 S.W.3d at
564).
Allowing the Board to manipulate the process by disregarding the
rules limiting the Board’s options after issuance of a PFD and prohibiting
the reopening of evidence after issuance of a PFD in order to reach a
specific result is not what the legislature envisioned when it enacted
SOAH. See Mid-South Pavers, 246 S.W.3d at 726. As such, this Court
should reverse the decision below.
As a result, as the Texas Supreme Court did in Mid-South, this Court
should also limit the record in the Contested Case to the evidence
38
presented to the ALJs in the original trial. Id. at 733.
For any one of, or for all of, the reasons discussed above, Walker’s
Remand Order was ultra vires. Therefore, this Court should reverse the
district court’s dismissal of the lawsuit.
3. The ALJs Committed, and Continue to Commit, Ultra Vires
Acts.
Like Walker, the ALJs also committed ultra vires acts. Importantly,
they continue to do so, as demonstrated by the fact that the ALJs recently
held a two-day evidentiary hearing and then closed19 the evidence in the
remand proceeding (while Audi’s Motion For Temporary Relief is pending
in this Court). The ALJs’ specific ultra vires acts include: 1) reopening the
evidence after issuing a PFD; 2) considering untimely evidence; 3)
conducting a remand hearing and continuing to entertain the remand
process by issuing orders and engaging in actions to issue a new post-
remand PFD; and, 4) creating and implementing a compressed remand
schedule. See, e.g., CR 130-134 and exhibits thereto; CR 47-54; CR 74-79; CR
19 Closure of the evidence in the Contested Case made it even more likely that this dispute
will be mooted before this Court reaches the merits of this appeal unless temporary relief is
granted. The closure of evidence in a contested case triggers the deadline for issuing a PFD.
TEX. GOV’T CODE § 2001.143.
39
82. Because these acts are ultra vires, the case should not have been
dismissed by the court below.
The ALJs work for SOAH, an administrative agency, so the ALJs’
powers are limited to only those granted to them by the legislature through
applicable statutes and rules. TEX. GOV’T CODE § 2001.141(d); Sexton, 720
S.W.2d at 137; see also, 15 Tex. Tech Admin. L.J. at 126-27; Pete Schenkkan,
Texas Administrative Law: Trials, Triumphs and New Challenges, 7 Tex. Tech
Admin. L.J. 288, 323 (2006). In fact, the ALJs are required to follow the
SOAH Rules and, by law, “shall not” contravene applicable statutes. See 1
TEX. ADMIN. CODE ANN. § 155.320 (West 2014). SOAH’s administrative rules
have the same legal force as statutes. Rodriguez v. Serv. Lloyds Ins. Co., 997
S.W.2d 248, 254 (Texas. 1999). As will be shown, the applicable statutes
and rules do not authorize the reopening of evidence after the issuance of a
20 “SOAH proceedings shall be conducted in accordance with the APA, when applicable,
and this chapter. The judge may modify and supplement the requirements of this chapter to
promote the fair and efficient handling of the case and to facilitate resolution of issues, if doing
so will not unduly prejudice the rights of any person or contravene applicable statutes.” This
rule contemplates actions such as extending deadlines or other similar measures. The only
Texas cases citing Rule 155.3 have done so in the context of allowing late filing of discovery or
the substantial compliance with a procedural rule. See, e.g., In the Matter of Disciplinary Action
Against a Certain Certificate Holder for Failure to Renew, SOAH Docket No. XXX-XX-XXXX.C, 2004
WL 4172027, before the Texas State Board of Public Accountancy (September 2004) (citing Rule
155.3 in passing to allow for substantial compliance with service of notice of hearing rule even
though party served notice by mail, rather than by certified mail); State of Texas, SOAH Docket
No. XXX-XX-XXXX.26, 2014 WL 4694555, before the Comptroller of Public Accounts (May 19, 2014)
(same).
40
PFD and do not authorize consideration of untimely evidence. Therefore,
the ALJs’ conduct of the remand and reopening of the evidence, made
pursuant to Walker’s ultra vires Remand Order, were outside their grant of
authority.
a. The ALJs do not have authority to conduct a remand
after issuing a PFD.
The ALJs exceeded their authority by entertaining and continuing to
entertain the remand of the contested case despite the fact that §
2001.058(e) of the APA does not authorize the Board to remand a contested
case back to SOAH after the issuance of a PFD. Audi brought this point to
the attention of the ALJs before the remand began. CR 47-54; CR 74-79.
Although they would not refrain from entertaining the remand of the
Contested Case, the ALJs did encourage21 Audi to seek relief from a district
court to determine whether they had the power to carry out Walker’s
Remand Order. CR 77-78. Unfortunately, the district court erroneously
dismissed the case when Audi sought that relief, even though § 2001.058(e)
21 JUDGE O’MALLEY: . . . You know that if you really want something to stop, then you
have a - - you can go to district court and get a stay. And if you - - we have had that happen
before where we’ve had a remand or a case and, for whatever reason, a party believes that we
don’t have authority to move forward, then they get a stay in district court. And, of course, then
we are stayed . . . . So I think that would be your best option if you truly believed they lacked
authority or we need to stop in our tracks, if we got some sort of district court stay order, then
that would be the process we would work with. CR 77-78.
41
only authorizes the Board to “change a finding of fact or conclusion of law
made by the administrative law judge,” not remand a case after issuance of
a PFD. As recipients of the erroneous remand, the ALJs should have
honored this statute and should have refrained from entertaining the
remand of the Contested Case. Their combined failure to abide by the APA
and their collective decision to carry out the remand process were ultra
vires acts which warrant reversal of the decision below.
b. The ALJs do not have authority to reopen evidence after a
PFD.
The ALJs also exceeded their authority by re-opening the evidence in
the remand of the Contested Case. This act contravenes SOAH Rule
155.153(a)(4)22 which expressly prohibits the reopening of the record in a
contested case once a PFD has been issued. 1 TEX. ADMIN. CODE ANN. §
155.153(a)(4) (West 2014).
As is illustrated by the following SOAH matters, SOAH ALJs are
aware of this limitation on their powers. See, e.g., Texas Department of
Insurance v. Maria D. Mondragon, SOAH Docket No. XXX-XX-XXXX.C, ALJ’s
22 Section 155.153(a)(4) states: (“The judge shall have the authority and duty to . . . reopen
the record when justice requires, if the judge has not issued a dismissal, proposal for decision,
or final decision.”) (emphasis added).
42
Response to Exceptions at 2, Oct. 23, 2014 (CR 1492-1493); Petitioner v. Tax
Division, Texas Comptroller of Public Accounts, 2014 WL 4694594, SOAH
Docket No. XXX-XX-XXXX.26, Comptroller’s Decision at *1, June 16, 2014 (CR
1496-1501); see also, Petitioner v. Tax Division, Texas Comptroller of Public
Accounts, 2014 WL 4694592, SOAH Docket No. XXX-XX-XXXX.26,
Comptroller’s Decision at *6, June 9, 2014 (stating that “once the ALJ issues
the PFD, he is not authorized to reopen the record to admit additional
evidence . . . ”.) (CR 1502-1514); In the Matter of Licensed Vocational Nurse
License Number 199025 Issued to Belinda Quintero Molina, SOAH Docket No.
XXX-XX-XXXX, Exceptions Letter by ALJ, Feb, 28, 2012 ( The ALJ responded to a
request to reopen the record by stating that “an administrative law judge
(ALJ) has no authority to rule on motions that are filed after the ALJ has
issued a proposal for decision (PFD) except as provided by law. The
authority the Staff has requested that I exercise in this matter does not exist in
the procedural rules of the State Office of Administrative Hearings (SOAH), 1
Tex. Admin. Code ch. 155, the Administrative Procedure Act (APA), Tex
Gov’t Code ch. 2001, SOAH’s enabling act, [or] Tex. Gov’t Code ch. 2003 . . .).”
(CR 1517-1518).
43
Before the remand of the Contested Case began, Audi raised its
concerns with the ALJs that reopening the record exceeded their power
and asked them to refuse to do so and to refuse to consider the remand.
The ALJs rejected Audi’s position. CR 77-78. In fact, ALJ O’Malley stated
on the record that SOAH routinely considers remands23 from
administrative agencies. CR 78.
But ALJ O’Malley failed to recognize that, as discussed in section A 2
above, some agency cases can be remanded to an ALJ, but that remand can
only occur where agencies have been given statutory authority to remand a
contested case back to SOAH. See 15 Texas Tech Admin. L.J. at 132-141.
Here, the ALJs ignored the fact that the Texas Motor Vehicle Board was not
given that remand power by the legislature. The fact that some agencies
have remand power, but the Motor Vehicle Board does not, illustrates the
fact that, where the legislature wishes to grant remand power to an agency,
it knows how to do so; yet, it has not done so for the Motor Vehicle Board.
23 JUDGE O’MALLEY: [W]e believe that at this time we don’t - - we don’t have authority,
Mr. Donley, to send it back to the Commission, though the motion and reply were very
thorough . . . We all - - Judge Wilkov and I have both many times issued PFDs where the parties
want to open the record after we’ve issued the PFD. That’s somewhat different than - - and I
know you may disagree with us on this - - but we’re not going to go around and around about
that. I just issued a PFD on - - I don’t know - - Thursday or last week on a remand hearing. We
take remands almost weekly from agencies. That’s a common thing. We do have the authority . .
. CR 77-78.
44
So, absent that special grant of remand power, Appellees were bound by §
2001.058(c) and SOAH Rule 155.153. As such, they committed ultra vires
acts by reopening evidence and entertaining a remand after issuing a PFD.
Below, Defendants/Appellees never cited any specific authority
granting the ALJs power to reopen the record in the Contested Case after
the issuance of a PFD. Instead, they insinuated that SOAH Rule 155.3(a)24
may provide the ALJs with general authority to reopen the record. But the
plain language of Rule 155.3(a) simply does not speak to, or authorize, the
ALJs’ reopening the record after the issuance of a PFD.
Moreover, the terms of Rule 155.3(a) prevent a party from using it to
cause undue prejudice or contravention of applicable statutes. Here, Audi’s
rights were unduly prejudiced by the ALJs’ decision to reopen the record in
the Contested Case after the issuance of a PFD to consider untimely
evidence. And, by reopening the record, the ALJs contravene Section
24 SOAH Rule 155.3(a) provides in relevant part:
Application and Construction of this Chapter
(a) SOAH proceedings shall be conducted in accordance with the APA, when applicable,
and with this chapter. The judge may modify and supplement the requirements of this chapter
to promote the fair and efficient handling of the case and to facilitate resolution of issues, if
doing so will not unduly prejudice the rights of any person or contravene applicable statutes.
1 TEXAS ADMIN. CODE ANN. § 155.3(a) (emphasis added).
45
2001.058(e) of the APA since it does not authorize remands after PFDs are
issued.
Likewise, Section 2301.709 of the Code does not allow the Board to
consider untimely evidence, yet by reopening the record, the ALJs
contravene Section 2301.709 by considering untimely evidence in the
remand proceedings. Courts may not interpret statutes in a way that
“renders any part of the statute meaningless or superfluous.” Crosstex, 430
S.W.3d at 390 (quoting Columbia Med Ctr. of Las Colinas, Inc. v. Hogue, 271
S.W.3d 238, 256 (Tex. 2008)). Interpreting Rule 155.3(a) to allow the ALJs to
completely disregard the express prohibition on reopening the record after
issuance of a PFD renders that rule meaningless and superfluous.
Finally, where two sections of a statute address the same subject
matter “the general provision is controlled or limited by the special
provision.” Texas Gen. Indem., 36 S.W.3d at 641 (citing cases); see also
Hammond, 712 S.W.2d at 498. The specific provision limits the scope of the
general provision. Texas Gen. Indem., 36 S.W.3d at 641 (citing Trinity
Universal Ins. Co. v. McLaughlin, 373 S.W.2d 66, 69 (Tex. Civ. App.—Austin
1963, writ ref’d n.r.e.)). Here, Rule 155.153 specifically addresses the power
46
of ALJs to reopen the record, limiting it to cases where a PDF has not been
issued, among other requirements. By contrast, Rule 155.3 is a general rule.
Thus, Rule 155.153, the more specific provision, controls. Hammond, 712
S.W.2d at 498; Texas Gen. Indem., 36 S.W.3d at 641.
For the foregoing reasons, the ALJs’ actions exceeded their powers
and were not entitled to immunity. Likewise, under these circumstances,
exhaustion of remedies was not required. Therefore, the district court
committed reversible error when it dismissed this lawsuit.
PRAYER AND REQUEST FOR RELIEF
For all, or any of the reasons stated above, Audi asks this Court to
reverse the decision below, render a decision in Audi’s favor and grant
injunctive relief preventing the Appellees from taking any actions to
further the ultra vires remand in the Contested Case. Audi also requests
that this Court limit the record in the Contested Case to its pre-remand
state. Audi further asks the Court to grant it all other relief to which it is
entitled.
47
Respectfully submitted,
King & Spalding LLP
By: /s/ S. Shawn Stephens
S. Shawn Stephens
Texas Bar No. 19160060
sstephens@kslaw.com
James P. Sullivan
Texas Bar No. 24070702
jsullivan@kslaw.com
KING & SPALDING
1100 Louisiana, Suite 4000
Houston, Texas 77002
Telephone: (713) 751-3200
Facsimile: (713) 751-3290
Billy M. Donley
Texas Bar No. 05977085
BDonley@Bakerlaw.com
Mark E. Smith
Texas Bar No. 24070639
mesmith@bakerlaw.com
BAKER & HOSTETLER LLP
811 Main Street, Suite 1100
Houston, Texas 77002
Telephone: (713) 751-1600
Facsimile: (713) 751-1717
Attorneys for Appellants
Volkswagen Group of America, Inc. and
Audi of America, Inc.
48
CERTIFICATE OF COMPLIANCE
I certify that on July 1, 2015, that this Appellants’ Brief was produced
on a computer and contains 10,335 words, excluding the caption, identity
of parties and counsel, statement regarding oral argument, table of
contents, index of authorities, statement of the case, and statement of the
issues presented, and thus does not exceed the 15,000 word limit provided
for by Tex. R. App. P. 9.4(i).
/s/ S. Shawn Stephens
S. Shawn Stephens
CERTIFICATE OF FILING AND SERVICE
I certify that on July 1, 2015, I used the Court’s electronic case filing
system to file this Appellants’ Brief and to serve this document on counsel
for appellees as follows:
William R. Crocker Kimberly Fuchs
crockerlaw@earthlink.net kimberly.fuchs@texasattorneygeneral.gov
807 Brazos, Ste. 1014 Assistant Attorney General
Austin, Texas 78701 Texas Attorney General’s Office
P.O. Box 12548
Counsel for Appellees Ricardo Austin, Texas 78711-2548
M. Weitz; Hi Tech Imports
North, LLC; Hi Tech Imports, Counsel for Appellees Michael J. O’Malley and
South, LLC; and Hi Tech Penny A. Wilkov
Imports, LLC
49
J. Bruce Bennett Dennis McKinney
jbb.chblaw@sbcglobal.net dennis.mckinney@texasattorneygeneral.gov
Cardwell, Hart & Bennett, Assistant Attorney General
LLP Texas Attorney General’s Office
807 Brazos, Suite 1001 P.O. Box 12548
Austin, Texas 78701 Austin, Texas 78711-2548
Counsel for Appellees Ricardo Counsel for Appellee John Walker III
M. Weitz; Hi Tech Imports
North, LLC; Hi Tech Imports,
South, LLC; and Hi Tech
Imports, LLC
Joseph W. Letzer
jletzer@burr.com
Dent M. Morton
dmorton@burr.com
Burr & Forman, LLP
420 20th Street N., Suite 3400
Birmingham, AL 35203
Counsel for Appellees Ricardo
M. Weitz; Hi Tech Imports
North, LLC; Hi Tech Imports,
South, LLC; and Hi Tech
Imports, LLC
/s/ S. Shawn Stephens
S. Shawn Stephens
50
NO. 03-15-00285-CV
IN THE THIRD COURT OF APPEALS
AUSTIN, TEXAS
VOLKSWAGEN GROUP OF AMERICA, INC.
AND AUDI OF AMERICA, INC.
Appellants
vs.
JOHN WALKER III, IN HIS OFFICIAL CAPACITY AS CHAIRMAN OF
THE TEXAS DEPARTMENT OF MOTOR VEHICLES BOARD, AND
THE HONORABLE MICHAEL J. O'MALLEY AND THE HONORABLE
PENNY A. WILKOV, IN THEIR OFFICIAL CAPACITIES AS
ADMINISTRATIVE LAW JUDGES FOR THE STATE OFFICE OF
ADMINISTRATIVE HEARINGS
Appellees
On Appeal from the 201st Judicial District Court, Travis County, Texas
Trial Court Cause No. D-1-GN-15-001186
Honorable Amy Clark Meachum, Presiding Judge
APPENDIX TO APPELLANTS’ BRIEF
TAB DESCRIPTION
1. District Court Orders on Defendants’ O’Malley, Wilkov, and
Walker’s Pleas to the Jurisdiction (CR 2030-2031)
2. Texas Government Code § 2001.058
3. State Office of Administrative Hearings Rule 155.153
4. Texas Occupations Code § 2301.709
5. Chair Walker’s Remand Order (CR 928-929)
DMSLIBRARY01:26055324.1
TAB DESCRIPTION
6. Comparison of Slovacek Motion and Remand Order (CR
1908)
7. Ex Parte Contact (CR 1941)
DMSLIBRARY01:26055324.1
APPENDIX TAB 1
DC BK15125 PG14
Filed in The District Court
of Travis County, Texas
CAUSE NO. D-1-GN-15-001186
APR 30 2015
VOLKSWAGEN GROUP OF § IN THE DISTRICT CQWRT OF lf ;·26 PM.1vs
AMERICA, INC. AND AUDI OF § Velva L. Price, District Clerk
AMERICA, INC., §
§
Plaintiffs, §
§
v. §
§
JOHN WALKER III, IN HIS OFFICIAL § TRAVIS COUNTY, TEXAS
CAPACITY AS CHAIRMAN OF THE §
TEXAS DEPARTMENT OF MOTOR §
VEHICLES BOARD, AND THE §
HONORABLE MICHAEL J. §
O'MALLEY AND THE HONORABLE §
PENNY A. WILKOV, IN THEIR §
OFFICIAL CAPACITIES AS §
ADMINISTRATIVE LAW JUDGES §
FOR THE STATE OFFICE OF §
ADMINISTRATIVE HEARINGS, §
§
Defendants. § 353RD JUDICIAL DISTRICT
ORDER ON DEFENDANTS O'MALLEY AND WILKOV'S PLEA TO THE JURISDICTION
On April 30, 2015 a hearing on Defendants O'Malley and Wilkov's (SOAH defendants) Plea
to the Jurisdiction was held. All parties appeared through counsel. After considering the pleadings, b..;(."'~J
evidence and argument, this Court finds that Defendants O'Malley and Wilkov's Plea to the {(!t>
Jurisdiction should be granted.
IT IS THEREFORE ORDERED AND DECLARED that Defendants O'Malley and Wilkov' s
Plea to the Jurisdiction is GRANTED and Plaintiffs claims against these Defendants are dismissed
from the case.
Signedthisthe ~yof_~--~_ .._l_,2J5 f?JIJ /I
)
The ~m
Case # D-1-GN-15-001186
Illllll lllll lllll lllll 111111111111111111111111111111111
004006831
2030
DC BK15125 PG15
CAUSE NO. D-1-GN-15-001186
VOLKSWAGEN GROUP OF § IN THE DISTRICT COURT OF
AMERICA, INC. and AUDI OF §
AMERICA, INC. §
Plaintiffs, §
§
v. § TRAVIS COUNTY, TEXAS
§
JOHN WALKER III, in his Official §
Capacity as Chairman of the Texas §
Department of Motor Vehicles Board; §
THE HONORABLE MICHAEL J. §
O'MALLEY, and THE §
HONORABLE PENNY A. WILKOV, §
in their official Capacities as §
Administrative Law Judges for the §
State Office of Administrative §
Hearings §
Defendants. § 353rd JUDICIAL DISTRICT
ORDER ON DEFENDANT WALKER'S PLEA TO THE JURISDICTION
Be it remembered that on this day came on to be heard the Plea to the Jurisdiction
filed by Defendant, John Walker III, in his Official Capacity as Chairman of the 'J:exas
cot\S"J..u·" ~ i>ll~a,·~s, io"',.e``s, ~
Department of Motor Vehicles Board. After hearisg a.rgnment nl'crnmsil the Court is of ~
~u\!..t(\lL ~t\. ``u.Mlflf°' k\A:~ C:;,i....(l:" ~·N'.ls
-..:uw~HHE~ that such motion should be Granted;
It is hereby ORDERED, ADJUDGED AND DECREED that Defendant Walker's
Plea to the Jurisdiction is GRANTED and all claims against Defendant Walker are hereby
dismissed.
Case# D-1-GN-15-001186
Signed this ~y of April, 2015.
\004006796
\11\\l lllll lllll lllll lllll lllll lllll lllll lllll llll llll
Filed in The District Court
of Travis County, Texas
APR 30 2015 N~
Ju~
\.\ '. z:?;> ? M.
,. . t.. Price, District Clerk
2031
APPENDIX TAB 2
§ 2001.058. Hearing Conducted by State Office of..., TX GOVT § 2001.058
Vernon’s Texas Statutes and Codes Annotated
Government Code (Refs & Annos)
Title 10. General Government (Refs & Annos)
Subtitle A. Administrative Procedure and Practice
Chapter 2001. Administrative Procedure (Refs & Annos)
Subchapter C. Contested Cases: General Rights and Procedures
V.T.C.A., Government Code § 2001.058
§ 2001.058. Hearing Conducted by State Office of Administrative Hearings
Currentness
(a) This section applies only to an administrative law judge employed by the State Office of Administrative Hearings.
(b) An administrative law judge who conducts a contested case hearing shall consider applicable agency rules or policies in
conducting the hearing, but the state agency deciding the case may not supervise the administrative law judge.
(c) A state agency shall provide the administrative law judge with a written statement of applicable rules or policies.
(d) A state agency may not attempt to influence the finding of facts or the administrative law judge’s application of the law in
a contested case except by proper evidence and legal argument.
(e) A state agency may change a finding of fact or conclusion of law made by the administrative law judge, or may vacate or
modify an order issued by the administrative judge, only if the agency determines:
(1) that the administrative law judge did not properly apply or interpret applicable law, agency rules, written policies
provided under Subsection (c), or prior administrative decisions;
(2) that a prior administrative decision on which the administrative law judge relied is incorrect or should be changed; or
(3) that a technical error in a finding of fact should be changed.
The agency shall state in writing the specific reason and legal basis for a change made under this subsection.
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1
§ 2001.058. Hearing Conducted by State Office of..., TX GOVT § 2001.058
(f) A state agency by rule may provide that, in a contested case before the agency that concerns licensing in relation to an
occupational license and that is not disposed of by stipulation, agreed settlement, or consent order, the administrative law
judge shall render the final decision in the contested case. If a state agency adopts such a rule, the following provisions apply
to contested cases covered by the rule:
(1) the administrative law judge shall render the decision that may become final under Section 2001.144 not later than the
60th day after the latter of the date on which the hearing is finally closed or the date by which the judge has ordered all
briefs, reply briefs, and other posthearing documents to be filed, and the 60-day period may be extended only with the
consent of all parties, including the occupational licensing agency;
(2) the administrative law judge shall include in the findings of fact and conclusions of law a determination whether the
license at issue is primarily a license to engage in an occupation;
(3) the State Office of Administrative Hearings is the state agency with which a motion for rehearing or a reply to a motion
for rehearing is filed under Section 2001.146 and is the state agency that acts on the motion or extends a time period under
Section 2001.146;
(4) the State Office of Administrative Hearings is the state agency responsible for sending a copy of the decision that may
become final under Section 2001.144 or an order ruling on a motion for rehearing to the parties, including the occupational
licensing agency, in accordance with Section 2001.142; and
(5) the occupational licensing agency and any other party to the contested case is entitled to obtain judicial review of the
final decision in accordance with this chapter.
Credits
Added by Acts 1993, 73rd Leg., ch. 268, § 1, eff. Sept. 1, 1993. Amended by Acts 1997, 75th Leg., ch. 1167, § 1, eff. Sept. 1,
1997.
Notes of Decisions (33)
V. T. C. A., Government Code § 2001.058, TX GOVT § 2001.058
Current through Chapters effective immediately through Chapter 46 of the 2015 Regular Session of the 84th Legislature
End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 2
APPENDIX TAB 3
&'3012015 Texas Administrative Code
<>
Texas Administrative Code
TI1LE 1 ADMINISTRATION
PART7 STATE OFFICE OF ADMINISTRATIVE HEARINGS
CHAPTER 155 RULES OF PROCEDURE
SIJBCHAPTER D RIDGES
RULE §155.153 Powers and Duties
(a) Judge's authority and duties. The judge shall have the authority and duty to:
( 1) conduct a full, fair, and efficient hearing;
(2) take action to avoid wmecessary delay in the disposition ofthe proceeding;
(3) maintain order; and
(4) reopen the record when justice requires, if the judge has not issued a dismissal, proposal for
decision, or final decision.
(b) Judge's powers. The judge shall have the power to regulate prehearing matters, the hearing, and the
conduct of the parties and authorized representatives, including the power to:
( 1) administer oaths;
(2) take testimony, including the power to question witnesses and to request the presence of a witness
from a state agency, as contemplated by APA §2001.090(d);
(3) rule on questions of evidence;
(4) rule on discovery issues;
( 5) issue orders relating to hearing and prehearing matters, including orders imposing sanctions;
(6) admit or deny party status;
(7) designate the party with the burden of proof pursuant to §155.427 of this title (relating to Burden of
Proof);
(8) exclude irrelevant, immaterial, and unduly repetitious testimony and reasonably limit the time for
presentations of evidence or argument;
(9) order parties to submit legal memoranda and proposed fmdings of fact and conclusions oflaw;
( 10) issue proposals for decision pursuant to APA §2001.062, and when authorized, final decisions;
and
( 11) rule on motions for rehearing,. when authorized.
http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=9&p_dir=&p_rloc=&p_tloc=&p_ploc=&pg=1&p_tac=&ti=1&pt=7&ch=155&rl=153 1/2
&'3012015 Texas Administrative Code
Source Note: The provisions of this §155.153 adopted to be effective November 26, 2008> 33 TexReg
9451
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- TEXAS REGISTER TEXAS ADMINISTRATIVE CODE OPEN MEETINGS
http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=9&p_dir=&p_rloc=&p_tloc=&p_ploc=&pg=1&p_tac=&ti=1&pt=7&ch=155&rl=153 212
APPENDIX TAB 4
§ 2301.709. Review by Board, TX OCC § 2301.709
Vernon’s Texas Statutes and Codes Annotated
Occupations Code (Refs & Annos)
Title 14. Regulation of Motor Vehicles and Transportation (Refs & Annos)
Subtitle A. Regulations Related to Motor Vehicles
Chapter 2301. Sale or Lease of Motor Vehicles (Refs & Annos)
Subchapter O. Hearings Procedures
V.T.C.A., Occupations Code § 2301.709
§ 2301.709. Review by Board
Effective: September 1, 2013
Currentness
(a) In reviewing a case under this subchapter, the board or a person delegated power from the board under Section 2301.154
may consider only materials that are submitted timely.
(b) The board or a person delegated power from the board under Section 2301.154 may hear such oral argument from any
party as the board may allow.
(c) The board or a person delegated power from the board under Section 2301.154 shall take any further action conducive to
the issuance of a final order and shall issue a written final decision or order. A majority vote of a quorum of the board is
required to adopt a final decision or order of the board.
Credits
Added by Acts 2001, 77th Leg., ch. 1421, § 5, eff. June 1, 2003. Amended by Acts 2007, 80th Leg., ch. 1403, § 3, eff. Sept.
1, 2007; Acts 2013, 83rd Leg., ch. 1135 (H.B. 2741), § 26, eff. Sept. 1, 2013.
Notes of Decisions (7)
V. T. C. A., Occupations Code § 2301.709, TX OCC § 2301.709
Current through Chapters effective immediately through Chapter 46 of the 2015 Regular Session of the 84th Legislature
End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.
© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1
APPENDIX TAB 5
BOARD OF THE TEXAS DEPARTMENT OF MOTOR VEffiCLES
Budget Leasing, Inc., d/b/a Audi §
North Austin and Audi South Austin, §
Protestants. and Ricardo M. Weitz, Hi Tech §
Imports North, LLC, Hi Tech Imports § 0
)>
0
South, LLC, Hi Tech Imports LLC, § 0
c
Intervenors § a
z
c
§ MVD DOCKET N0.13-0008.LIC 3
<:r
v. § SOAH DOCKET NO. XXX-XX-XXXX.LIC (I)
:'!
§ ~
~
Volkswagen Group of America, Inc. and § "'
Porsche Cars North America, Inc., §
Respondent., § .,,c:
0
Q)
a.
0
(I)
"'
0
:~.
INTERIM ORDER REMANDING THE CASE TO THE STATE OFFICE OF 'S.
. ,, c;·
ADMINISTRATIVE HEARINGS FOR .FURTHER PRQCEEDINGS ~
0
0
On December 10, 2014, the Board of the Texas Department of Motor Vehicles granted · ,..
0
rehearing in this matter. The Board finds that substantial controversies tontinue to exist and that
;
0"'
these controversies require further adjudication at the State Office of I.Administrative Hearings 0.
en
m
through the contested case process. · .' ><
::T
.,:....
::i
Q.
The Board remands this matter to the State Office of Administrative Hearings (SOAR) "'
for supplemental proceedings, limited to the following: ·
Did Audi receive the letter' dated April 30, 2013, from Ricardo M. Weitz to Sally
Grimes, and should this letter be added to the record? If so, what effect, if any, does the letter
have on the issue of compliance with Tex. Occ. Code, §2301.359 in light of the agency's pridr
decision in Gordon Rountree Motors, Ltd. v. Mazda Motors of America, MVD DocketNo. 07.:
0038 LIC 2?
While adjudicating this case on remand, SOAH is also directed to review the qualifying
conditions set forth in Findings of Fact Nos. 154-158, Intervenors' Motion to Find the
Prospective Transferees Qualified3, and Volkswagen Group of America, Inc. & Audi of America
4
fuc.'s Response to Intervenors' Motion to Find the Prospective Transferees Qualified. At the
conclusion of this review, SOAH is directed to provide a specific finding that prospective
transferees either are qualified or are not qualified.
' A copy of which is attached hereto as Exhibit 1
2
A copy of which is attached hereto as Exhibit 2.
~ A copy of which is attached hereto as Exhibit 3.
4
A copy of which is attached hereto as Exhibit 4.
Exhibit L - Brief ISO Motion for Temporary Injunction 928
Accordingly, the Board requests SOAH conduct supplemental proceedings limited to the
taking of evidence and providing the Board with supplemental findings on the foregoing issues.
Regarding these supplemental proceedings, the Board holds that SOAH's opinion on retention of
jurisdiction is not properly a finding of fact or a conclusion of law. Under Occupations Code,
§2301.360(e), the decision to retain jurisdiction after the issuance of the Board's order is at the
sole discretion of the Board.
Given the complicated and lengthy nature of the proceedings already conducted by
SOAH in this matter, the Board requests that the same administrative law judges who conducted
the initial proceedings be assigned to this matter on remand.
The Board strongly urges SOAR to address this matter as expeditiously as possible. To
that end, the Board recognizes that accommodations regarding other Board cases may need to be
made and the Board authorizes SOAH to do whatever is necessary to fulfill the Board's request
to accelerate the adjudication of this matter.
Date: February 13, 2015
. Waker, III, Board Chairman,
as Department of Motor Vehicles
Motor Vehicle Division
Texas Department of Motor Vehicles
Exhibit L - Brief ISO Motion for Temporary Injunction 929
APPENDIX TAB 6
Transcript- February 13, 2015 Board Meeting Board's Remand Order
p14 The Board remands this matter to the State Office of Administrative Hearings (SOAH)
MR. SLOVACEK: What is the staff's for suppl.emental proceedings~ limited to the following:
recommendation? Did Audi receive the letter1 dated April 30, 2013, from Riwdo M. Weitz to Sally
Grimes, and.should this.letter be added to therecord? If soi what effect, if any, does the letter
5 MR. DUNCAN: To remand to SOll.H to consider the have on the issue of compliance with Tex. Occ, Code, ~2301.359 lnlight of the agencyts prior
decisiort in Gordmi Rountree Motors, Ltd. v. Mazda Motors of America, MVD Docket No. 07-
document that we received in the between the
0038 LIC2?
While adjudicating this case on remand, SOAH is also directed to review the qualif~ng
conditions set forth in Pin.dings·· of Fact. Nos. 154~158, fotetvenors 1 .Motion to Find ·the
Prospective Transferees QuaUfled3, andVolkswagen Group of Americ~Jnc. &Audi of America
Inc/s ·Response to ·hltervenors' ·Motion to Find the· Prospective Transferees Qualified.4.At the
10 conclusion of this review, SOAH is directed to provide a specific finding that pro&pe<:tive
transferees eitherare qualified or are not qualified.
·11
u
Accotdin~Y~ theBoatd·requests•SOAH c-0.nduct supplemental proceedings limited.to the
tug.of evidence and providing the Board with supplemental findings on the foregoing issues.
Regarding these suppletnental proctedings, the Board holds that SOAH's opinion <>n retention of
jurisdiction is not properly. afinding of fact or a conclusion of law. Under Occupations Code,
§230 L360(e), the docL~ion to retain jurisdiction afterthe is$uance of the Board's 0,rdeds atthe
MR. We have a motion by Member sole discretion of the Board.
15 Slovacek and we have as second by Palacios. Do we
Given tl1e complicated and lengthy nature of the proceedings already conducted by
any of the board SOAH in this matter, the Board requests that the same administrative law judges who conducted
the initial pro4-eedlngs be assigned tothis matter on remand.
17 members?
The Board strongly urges SOAH to address tliis matter as expe~itiously as possible. To
p27, 28 that end, the Board recognizes that accommodations regarding other Board cases may need to be
17 MR. WALKER: I'm sorry. made and the Board authorizes SOAHtodo whateverisnecessaryto·folfillthe Board's r~quest
to accelerate the adiudicatkm oftl1is matter.
18 we have a motion and we have a second. Do
19 we have any further comments from the board? Date: Febmary Bi 2015
20 (No response.)
MR. WALKER: All in favor the recommended o .Walker, III, Board Chairman,
as Department of Motor Vehicles
it back by
(A chorus of ayes.)
24 MR. WALKER:
Daniel Avitia, Direc or
25 (No response.) Motor Vehicle, Division
MR. WALKER: The motion carries. Texas Department of Motor Vehicles
Exhibit 5
1908
APPENDIX TAB 7
lnMail: You have a new message
Date: 10/15/2014
Subject: RE: Introduction
Exhibit 7 1941