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
6748454
THIRD COURT OF APPEALS
AUSTIN, TEXAS
9/1/2015 3:02:44 PM
NO. 03-15-00285-CV JEFFREY D. KYLE
CLERK
IN THE THIRD COURT OF APPEALS
AUSTIN, TEXAS
FILED IN
VOLKSWAGEN GROUP OF AMERICA, INC.
3rd COURT OF APPEALS
AUSTIN, TEXAS
AND AUDI OF AMERICA, INC. 9/1/2015 3:02:44 PM
Appellants
JEFFREY D. KYLE
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’ REPLY 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
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. XXX-XX-XXXX.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
i
TABLE OF CONTENTS
ABBREVIATION TABLE ........................................................................................i
TABLE OF AUTHORITIES .................................................................................. iv
ISSUES PRESENTED ........................................................................................... vii
ARGUMENT AND AUTHORITIES .................................................................... 1
I.  THE ULTRA VIRES EXCEPTION TO THE EXHAUSTION OF
REMEDIES AND GOVERNMENTAL IMMUNITY DOCTRINES GAVE
THE DISTRICT COURT JURISDICTION OVER THIS CASE. .................................. 2
A.  The Uncontroverted Evidence Shows Appellees’ Actions
Were Not Authorized By the Code or By SOAH Rules. .............. 4
B.  Exhaustion Is Not Required Where, As Here, The Only
Question Is A Legal One. .................................................................. 5
C.  Purely Legal Questions Are More Appropriately
Addressed By The Courts. ................................................................ 8
D.  Exhaustion of Remedies Would Be Futile and Would
Actually Prevent Meaningful Review of Appellees’ Acts.......... 10
E.  SOAH Interprets the Plain Language of Rule 155.153 As A
Limitation On Remand/Reopening the Record, Just As
Audi Does. ......................................................................................... 12
1.  Appellees’ argument is contrary to the plain language
of the Code and Rule and would render the Rule
meaningless. ................................................................................. 13
2.  Appellees’ interpretation of Rule 155.153 conflicts with
SOAH’s interpretation. ............................................................... 15
3.  The District Court erred by allowing Appellees, who
are agency actors, to self-create new powers not given
to them by the legislature........................................................... 16
ii
II.  Audi Does Not Seek Improper Retroactive Relief Nor
Does It Seek Redundant Relief. ................................................................ 19
A.  Audi Does Not Seek Retroactive Relief. ....................................... 20
B.  The Relief Requested By Audi Is Not Redundant of Relief
It Could Obtain In An Appeal After A Final Order In The
Contested Case.................................................................................. 21
III.  STATUTES, RULES AND PROCEDURES MUST BE APPLIED
UNIFORMLY IN ALL CONTESTED CASES TO MAINTAIN A FAIR
PROCESS FOR ALL.......................................................................................... 25
PRAYER AND REQUEST FOR RELIEF ............................................................ 27
CERTIFICATE OF COMPLIANCE .................................................................... 30
CERTIFICATE OF FILING AND SERVICE ...................................................... 30
iii
TABLE OF AUTHORITIES
Page(s)
Cases
Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson,
209 S.W.3d 644 (Tex. 2006) .............................................................................. 14
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) ................................................................................ 3
City of Sherman v. Public Utility Comm’n of Texas,
643 S.W.2d 681 (Tex. 1983) ................................................................................ 3
Ellis v. Reliant Energy Retail Servs., L.L.C.,
418 S.W.3d 235 (Tex. App.—Houston [14th Dist.] 2013)............................ 15
Fleming Foods of Texas, Inc. v. Rylander,
6 S.W.3d 278 (Tex. 1999) .................................................................................. 15
Hous. Fed’n of Teachers, Local 2415 v. Hous. Indep. Sch. Dist.,
730 S.W.2d 644 (Tex. 1987) ........................................................................23, 24
Hous. Indep. Sch. Dist. v. Rose,
No. 01-13-00018-CV, 2013 WL 3354724 (Tex. App.—Houston [1st
Dist.] July 2, 2013, no pet.) (mem. op.) ......................................................9, 10
Larry Koch, Inc. v. Tex. Natural Res. Conservation Comm‘n,
52 S.W.3d 833 (Tex. App.—Austin 2001, pet. denied) .................................. 4
Madison v. Martinez,
42 S.W.2d 84 (Tex. Civ. App.—Dallas 1931, writ ref’d) ............................. 21
Meno v. Kitchens,
873 S.W.2d 789 (Tex. App.—Austin 1994, writ denied) ............................. 14
iv
Montgomery I.S.D. v. Davis,
34 S.W.3d 559 (Tex. 2000) ................................................................................ 26
In re Office of Attorney Gen.,
422 S.W.3d 623 (Tex. 2013) .............................................................................. 14
Patel v. Texas Department of Licensing and Regulation,
2015 WL 3982687 (Tex. 2015) ....................................................................22, 23
Pub. Util. Comm’n v. City Pub. Serv. Bd. Of San Antonio,
53 S.W.3d 310 (Tex. 2001) ..........................................................................17, 19
Rodriguez v. Serv. Lloyds Ins. Co.,
997 S.W.2d 248 (Texas. 1999) ............................................................................ 6
Sexton v. Mount Olivet Cemetery Assn,
720 S.W.2d, 137 (Tex. App.—Austin 1986, writ ref’d n.r.e.) ...................... 16
In re Shields,
190 S.W.3d 717 (Tex. App.—Dallas 2005, orig. proceeding) ..................... 21
Southwest Royalties, Inc. v. Combs,
2014 WL 4058950 at *3 (Tex. App.—Austin 2014 pet. filed) ...................... 14
Southwestern Bell Tel., L.P. v. Emmett,
_ S.W.3d _, 58 Tex. Sup. Ct. J. 567 ...........................................................passim
Strayhorn v. Lexington Ins. Co.,
128 S.W.3d 772 (Tex. App. - Austin 2004), aff’d, 209 S.W.3d 83(Tex. 2006) .........................................................................................8, 10, 11, 12
Texas Commission on Environmental Quality v. Texas Farm Bureau,
460 S.W.3d 264 (Tex. App.—Corpus Christi 2015,
pet. filed)................................................................................................15, 17, 19
Texas Orthopaedic Ass’n. v. Texas State Bd.,
254 S.W.3d 714 (Tex. App.—Austin 2008, pet. denied) .............................. 15
Westheimer Indep. Sch. Dist. v. Brockette,
567 S.W.2d 780 (Tex. 1978) ................................................................................ 3
v
Statutes
1 TEX. ADMIN. CODE ANN. § 155.153 ............................................................passim
16 TEX. ADMIN. CODE ANN. § 22.262 (c) ........................................................ 17, 18
30 TEX. ADMIN. CODE ANN. § 80.265 ............................................................. 17, 18
TEX. GOV’T CODE ANN. § 22.221(a) ...................................................................... 21
TEX. GOV’T CODE ANN. § 2001.058(e) ..........................................................2, 6, 13
TEX. GOV’T CODE ANN. § 2003.047(m) ................................................................. 18
TEX. GOV’T CODE ANN. § 2001.171 ....................................................................... 22
TEX. OCC. CODE ANN. § 2301.709(a) (West 2014) ................................................. 2
Other Authorities
Emmy Edwards, Ancillary Powers of the Courts of Appeals,
10 APP. ADVOCATE 8 (1997) ............................................................................. 21
Ron Beal, From Proposal for Decision to Final Decision: What Happens in
Between? 15 TEX. TECH ADMIN. L.J. 288, 132-141 (2006) .............................. 18
2 Kenneth Culp Davis & Richard J. Pierce, Jr., Administrative Law
Treatise § 9.8 at 67 (3d ed. 1994) ...................................................................... 26
vi
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 (remanding the case, reopening
evidence and ordering/conducting a remand of the
administrative Contested Case after the 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?
vii
ARGUMENT AND AUTHORITIES
Audi is not seeking interlocutory review of an agency’s mere mistake
in the exercise of its discretion. Instead, in this unique and rare situation,
Audi seeks immediate declaratory and injunctive relief to prevent
Appellees, who are agency actors1, from exceeding and continuing to
exceed their statutory authority by conducting a remand of an
administrative contested case after a PFD had issued. Southwestern Bell Tel.,
L.P. v. Emmett, _ S.W.3d _, 58 Tex. Sup. Ct. J. 567; 2015 WL 1285326 at *7
(Tex. 2015).2 Neither the Government Code nor the SOAH Rules gave
Appellees the power to remand the Contested Case after a PFD has been
issued.3 Further, Appellees continue to exceed their authority by contining
1 Appellees have been sued in their individual capacities for their ultra vires acts pursuant
to the requirements of the Heinrich case. City of El Paso v. Heinrich, 284 S.W.3d 366, 369 (Tex.
2007).
2 In Emmett, the Supreme Court held that the commissioners’ actions “unequivocally
demonstrated their intent not to comply with the statute,” so AT&T’s “only viable option for
enforcement [of the statute]…was to bring suit seeking a declaratory judgment and prospective
relief as to the [Flood Control] District.)” 2015 WL 1285326 at *7.
3 Due to space limitations, in this reply brief Audi collectively refers to Appellees’ errors,
all of which relate to their ordering and conducting the remand/reopening of evidence.
Walker’s Remand Order is also an ultra vires act because it:
 considered and ordered the ALJs to consider various untimely materials offered at the
ultra vires remand hearing, despite the fact that the Code states: “the board or a person
delegated power from the board under Section 2301.154 may consider only materials
1
DMSLIBRARY01\97700\000000\26746883.V1-9/1/15
to conduct remand proceedings in the Contested Case which will result in
the ultra vires issuance of proposals, rulings and orders.
As a result, the district court erred as a matter of law when it
dismissed this case because the uncontroverted evidence shows that
Appellees’ ultra vires actions are not entitled to governmental immunity.
Therefore, Audi was not required to exhaust administrative remedies
before filing suit to stop these ultra vires actions. See e.g., City of El Paso v.
Heinrich, 284 S.W.3d 366, 369 (Tex. 2007). Consequently, the dismissal of
this lawsuit should be reversed. Id.
I. THE ULTRA VIRES EXCEPTION TO THE EXHAUSTION OF REMEDIES AND
GOVERNMENTAL IMMUNITY DOCTRINES GAVE THE DISTRICT COURT
JURISDICTION OVER THIS CASE.
Contrary to Appellees’ arguments, simply because a dispute lies
that are submitted timely.” TEX. OCC. CODE ANN. § 2301.709(a) (West 2014) (emphasis
added); RR 165-167; CR 928-929; CR 1447.
 violates the rule which prohibits the Board from attempting to influence the neutral
ALJs through the use of untimely and improper evidence. TEX. GOV’T CODE ANN. §
2001.058(e); CR 928-29.
 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” because
the Remand Order materially differs from the unanimous vote of the Board by including
matters that were not in the motion. TEX. OCC. CODE ANN. § 2301.709(c) (West 2014)
(emphasis added); compare CR 928-929 to 159; 1908.
2
within an agency’s jurisdiction does not end the jurisdictional inquiry4;
rather, in cases like the present one, a court must also decide whether an
exception to governmental immunity and the exhaustion of remedies
doctrine applies. See, e. g., City of Sherman v. Public Utility Comm’n of Texas,
643 S.W.2d 681, 683 (Tex. 1983); Appellee/Intervenor’s brief at p. 16-25;
O’Malley and Wilkov brief at p. 9-11; Walker brief at p. 3-9 . An exception
applies where, as here, agency officials act beyond their statutorily
conferred powers, which allows a trial court to exercise jurisdiction
regardless of whether a party has exhausted its administrative remedies.
See, e.g., Emmett, 2015 WL 1285326 at *7; Heinrich, 284 S.W.3d at 369; City of
Sherman, 643 S.W.2d at 683, 685 (Tex. 1983); Westheimer Indep. Sch. Dist. v.
Brockette, 567 S.W.2d 780, 785 (Tex. 1978).
In fact, in April, the Texas Supreme Court reaffirmed the continued
vibrancy of this ultra vires exception to the exhaustion of remedies
requirement by stating, “… courts may intervene to provide an appropriate
remedy, such as an injunction to prevent [the agency] from continuing to
4 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. See, e.g., City of Houston v. Rhule, 417
S.W.3d 440, 442 (Tex. 2013).
3
exceed its limited statutory authority.” Tex. Student Hous. Auth., 2015 WL
1870013, at *6.
This Court explained that, in ultra vires cases, “the purposes
underlying the exhaustion rule are not applicable: judicial and
administrative efficiency are not served, and agency policies and expertise
are irrelevant, if the agency’s final action will be a nullity.” Larry Koch, Inc.
v. Tex. Natural Res. Conservation Comm‘n, 52 S.W.3d 833, 839-40 (Tex.
App.—Austin 2001, pet. denied).
That reasoning applies here. As is shown below, there are no facts in
dispute and no agency expertise is required to determine whether
Appellees’ remand was authorized by the plain language of the
Government Code or SOAH Rule 155.153 (“the Rule”). Thus, this lawsuit
is not subject to the exhaustion of remedies requirement. As a result, the
district court erred when it dismissed this lawsuit.
A. The Uncontroverted Evidence Shows Appellees’ Actions
Were Not Authorized By the Code or By SOAH Rules.
Here, the relevant facts are not controverted. No one disputes the
fact that the ALJs had issued a PFD in this case on July 16, 2014 or that
Walker remanded the case to the ALJs on February 13, 2015, seven months
4
after the PFD had been issued. CR 399-502; 928-929. Similarly, no one
disputes the fact that, based on Walker’s Remand Order, the ALJs
conducted the remand and reopened the evidence after the PFD had been
issued. See, e.g., CR 928-929; 1486; 1854-1867. No one disputes the fact that
the remand proceedings are underway and have resulted in a new post-
remand PFD. See, e.g., Appellee/Intervenor’s brief p. 10; O’Malley and
Wilkov brief p.vi. No one disputes the fact that the remand was, and
continues to be, conducted over Audi’s objections and over its request that
the remand proceedings be stayed to allow a court to determine whether
the remand was ultra vires. CR 47-54; CR 74-79; 1868-1877; 1943-1945.
Therefore, this lawsuit involves only a legal question, not a factual one.
B. Exhaustion Is Not Required Where, As Here, The Only
Question Is A Legal One.
Because the facts are not in dispute, the real issue here is a legal one:
whether the Code or a SOAH rule gave Appellees the power to
remand/reopen evidence after the PFD issued on July 16, 2014. As is
shown below and in Audi’s opening brief, Appellees were not given that
power by the legislature. Even Appellee Walker admits in his brief that
5
there is “no specific statute [which] specifically authorizes the Board to
issue a remand order such as the one in question.”5 Walker brief at p. 9.
The Government Code states that, after a PFD is issued, the Board is
only authorized to enter a final order on the PFD; or, in limited
circumstances which do not apply here6, change a SOAH finding of fact or
conclusion of law, not order a remand. TEX. GOV’T. CODE ANN. §
2001.058(e).
Similarly, SOAH Rule7 155.153(a)(4) does not authorize the reopening
of a record after a PFD has issued.8 CR 928-929. The rule is quite precise:
5 Instead, Walker relies on the powers generally granted to the Board. But because a PFD
had been issued in the Contested Case, those general powers are irrelevant to the inquiry.
Instead, the specific Code section and Rule(addressing the activities that can occur after a PFD
has issued) control this situation. TEX. GOV’T. CODE ANN. § 2001.058(e); 1 TEX. ADMIN. CODE
ANN. § 155.153(a)(4).
6 A change or modification to a PFD or order can occur only if the agency determines in
writing:
(1) that the ALJ did not properly apply or interpret applicable law, agency rules,
written policies provided, or prior administrative decisions;
(2) that a prior administrative decision on which the ALJ relied is incorrect or should
be changed; or
(3) that a technical error in a finding of fact should be changed.
TEX. GOV’T. CODE ANN. § 2001.058(e). Here, the Board did not make a determination that any
of these three specified reasons for changing the ALJs’ findings and conclusions existed. CR
928-929.
7 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).
8 (a) Judge’s authority and duties. The judge shall have the authority and duty to:
6
an ALJ is only given the power to reopen the evidence if the ALJ “has not
issued a dismissal, proposal for decision, or final decision”. 1 TEX. ADMIN
CODE ANN. § 155.153(a)(4) (emphasis added). So, once a PFD has issued,
the evidence cannot be reopened.
Thus, Walker exceeded the power given to him by the legislature by
remanding the matter to the ALJs after the issuance of the July 16, 2014
PFD, rather than entering a final order on the original PFD as required by
the Code and Rule 155.153. For the same reasons, the ALJs exceeded their
power when they accepted the remand and reopened the evidence after
having issued a PFD. 1 TEX. ADMIN CODE ANN. § 155.153(a)(4).
In ordering and conducting the remand, Appellees were not
exercising their discretion—in fact, they had none to exercise regarding the
next procedural step in the Contested Case—entry of a final order. Instead,
they intentionally exceeded their authority by ordering and conducting the
remand/reopening of evidence after the PFD had been issued. See, e. g.,
( 4) reopen the record when justice requires, if the judge has not issued a dismissal,
proposal for decision, or final decision.
1 TEX. ADMIN. CODE ANN. § 155.153(a)(4).
7
Emmett, 58 Tex. Sup. Ct. J. 567; 2015 WL 1285326 at *7-8. And they continue
to exceed their authority by continuing the remand process.
Appellees’ acts are very similar to the commissioner’s anticipatory
refusal to comply with the statute at issue in the Emmett case, which the
Texas Supreme Court held to be ultra vires acts warranting declaratory and
injunctive relief. Emmett, 58 Tex. Sup. Ct. J. 567; 2015 WL 1285326 at *7-8;
see Heinrich, 284 S.W.3d at 378.
C. Purely Legal Questions Are More Appropriately Addressed
By The Courts.
This Court has repeatedly held that the exhaustion of remedies
doctrine is inapplicable when a case presents a purely legal question
because these questions are more appropriately addressed by the courts
than by an administrative agency. See Mag-T, 161 S.W.3d at 625; Strayhorn
v. Lexington Ins. Co., 128 S.W.3d 772, 780 (Tex. App. - Austin 2004), aff’d,
209 S.W.3d 83 (Tex. 2006); Friends of Canyon Lake, 96 S.W.3d at 527 (“[T]he
requirement of exhaustion of administrative remedies generally has been
held inapplicable to questions of law.”).
Even Appellees O’Malley and Wilkov agree that this lawsuit presents
a purely legal question—“[t]he issue is purely one of legal interpretation.”
8
O’Malley and Wilkov brief at p. 8. Moreover, Appellee O’Malley
previously recognized that this legal question is best addressed by the
courts. In fact, in March of this year, O’Malley denied Audi’s request for a
stay of the administrative remand and actually suggested that Audi pursue
declaratory relief in a district court:
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.
Ironically, it was only after Audi followed his suggestion that
O’Malley and the other Appellees began to claim that the district court did
not have jurisdiction over this declaratory judgment lawsuit.
This lawsuit presents a purely legal question; therefore, the district
court should not have dismissed the case because the “legal question”
exception to the exhaustion of remedies doctrine applies in this case. Hous.
Indep. Sch. Dist. v. Rose, No. 01-13-00018-CV, 2013 WL 3354724, at *3 (Tex.
9
App.—Houston [1st Dist.] July 2, 2013, no pet.) (mem. op.) (“the
administrative exhaustion requirement does not apply,” so a party can
“seek relief in the courts without overcoming that hurdle . . . if the issues
presented involve a pure question of law, such as when the uncontroverted
facts show that the board lacked authority to take the action that caused the
harm . . .”).
D. Exhaustion of Remedies Would Be Futile and Would Actually
Prevent Meaningful Review of Appellees’ Acts.
Similarly, an exception to the exhaustion of administrative remedies
doctrine applies when, as here, pursuit of administrative remedies would
be futile. Strayhorn, 128 S.W.3d at 780-81; Hous. Indep. Sch. Dist., 2013 WL
3354724, at *4.
For example, when, as here, the parties are locked into adversarial
positions and the agency is fully aware of the plaintiff’s legal position, but
simply holds an opposing view of the law, this Court has held that there is
no point in forcing the plaintiff to go through an administrative process
before challenging the agency’s view of the law. Strayhorn, 128 S.W.3d at
781. In fact, this Court has said that doing so would be “an exercise in
10
futility” because the outcome of the administrative case is already obvious.
Id.
This “futility” exception to the exhaustion rule also applies to this
case. As shown above, Appellees were repeatedly made aware of Audi’s
position on this legal question, yet they simply disagree with Audi’s legal
position and have resolutely begun the remand process over Audi’s
objections. See, e.g., CR 928-929; 1486; 854-1867.
In fact, at Chairman Walker’s instruction, the ALJs reopened the
evidence in the remanded Contested Case, have held hearings in that
matter, have used an expedited schedule for hearings, and have now
issued a post-remand PFD9. See, e.g., CR 133, 506-526; 152-153; 169, 928-29;
Ritsema Affidavit submitted with Motion for Temporary Relief. The
issuance of their new post-remand PFD telegraphs the fact that the Board’s
final order, which will be based on it, is a foregone conclusion. The post-
remand PFD also triggers future actions. For example, the Board will now
place the PFD on its agenda at a future meeting and plans to use this as a
basis for a final order. See, e.g., CR 169; Ritsema Affidavit. Appellees’
9 Appellees have asked this court to take judicial notice of this post-remand PFD. See, e.g.,
Appellee/Intervenor’s brief p. 10; O’Malley & Wilkov brief p.vi.
11
actions therefore show that they continue to hold firmly to their legal
position and have “unequivocally demonstrated their intent not to
comply” with the Code and the Rule. Emmett, 2015 WL 1285326 at *7. As
such, there is no point in forcing the parties to undergo an administrative
remand process before allowing Audi to challenge the ultra vires nature of
that process. See, e.g., Emmett, 2015 WL 1285326 at *7 (Tex. 2015); Strayhorn,
128 S.W.3d at 781.
Moreover, as will be shown below, if this remand is allowed to reach
its ultimate conclusion, it will moot the relief Audi seeks in this lawsuit.
Therefore exhaustion of remedies is not required, so the district court erred
in dismissing this case. Id.
E. SOAH Interprets the Plain Language of Rule 155.153 As A
Limitation On Remand/Reopening the Record, Just As Audi
Does.
Appellees next argue that, despite the plain language of the
Government Code and Rule 155.153, the Court should defer to their belief
that the ALJs were authorized to remand/reopen the evidence after issuing
a PFD. O’Malley & Wilkov Brief p. 5-7; Appellee/Intervenor’s brief at p.
32-34; Walker brief p. 9-10. It is important to note that Appellees do not
argue that the Code and the Rule are ambiguous; instead, they ask this
12
Court to ignore the plain language of the Code and the Rule and to adopt
their self-serving argument that agencies often remand administrative
cases to ALJs for further fact findings. See, O’Malley & Wilkov Brief p. 5-7;
Appellee/Intervenor’s brief at p. 32-34; Walker brief p. 9-10.
Appellees’ circular argument ignores at least four things: 1) their
argument conflicts with the plain and unambiguous terms of SOAH Rule
155.153 and the Government Code; 2) the fact that SOAH previously
agreed with Audi that the Rule does not permit remand after a PFD has
been issued; 3) agency actors cannot exercise powers, such as remand
power, that has not been granted to them by the legislature; and, 4)
different administrative schemes may allow for remand, but the scheme at
issue here does not.
1. Appellees’ argument is contrary to the plain language of
the Code and Rule and would render the Rule
meaningless.
Appellees’ argument ignores the actual language of the Government
Code and SOAH Rule 155.153 because, as discussed previously, the
relevant Code section simply does not list remand/reopening evidence as
an authorized action after a PFD has been issued. TEX. GOV’T. CODE ANN. §
2001.058(e). Similarly, Rule 155.153 only authorizes an ALJ to reopen the
13
evidence in an administrative matter when a PFD has not already issued.10
1 TEX. ADMIN CODE ANN. § 155.153(a)(4). This unambiguous language
shows that Appellees were not granted authority to remand/reopen
evidence after a PFD. “[U]nambiguous text equals determinative text”
and, “[at] this point, the judge’s inquiry [into the meaning of a statute or
rule] is at an end.” In re Office of Attorney Gen., 422 S.W.3d 623, 629 (Tex.
2013); Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson, 209 S.W.3d 644, 652 (Tex.
2006). Therefore, it is inappropriate for Appellees to resort to extra-textual
information (such as their own interpretation of the rule) because deference
to an agency’s interpretation is only permitted when the language of a rule
or statute is not clear. See, e.g., In re Office of Attorney Gen., 422 S.W.3d at
629; Southwest Royalties, Inc. v. Combs, 2014 WL 4058950 at *3 (Tex. App.—
Austin 2014 pet. filed); Meno v. Kitchens, 873 S.W.2d 789, 792 (Tex. App.—
Austin 1994, writ denied).
Further, Appellees’ interpretation would render Rule 155.153 (the
rule outlining the powers of the ALJs) meaningless because it would allow
10 Here, there is no question that the ALJs had previously issued a PFD in this case before
Walker ordered the remand and the remand was accepted by the ALJs. See, e.g., CR 928-929;
1486; 1854-1867.
14
the ALJs to define their own powers. Texas Commission on Environmental
Quality v. Texas Farm Bureau, 460 S.W.3d 264, 270 (Tex. App.—Corpus
Christi 2015, pet. filed). Any construction,11 including that suggested by an
agency, which renders a part of a statute meaningless or absurd is not
proper. Fleming Foods of Texas, Inc. v. Rylander, 6 S.W.3d 278, 284 (Tex.
1999); Texas Orthopaedic Ass’n. v. Texas State Bd., 254 S.W.3d 714, 719-20
(Tex. App.—Austin 2008, pet. denied). Here, allowing the ALJs to construe
their power after a PFD has been issued would render Rule 155.153
meaningless.
2. Appellees’ interpretation of Rule 155.153 conflicts with
SOAH’s interpretation.
However, even if the Court were to look to extra-textual information,
Appellees’ argument fails because SOAH previously agreed with Audi’s
interpretation of Rule 155.15312 by publicly stating that evidence in a
contested case can only be reopened if a PFD had not previously issued.
11 Administrative rules have the same legal force as statutes and are interpreted in the
same manner as statutes. See, e.g., Ellis v. Reliant Energy Retail Servs., L.L.C., 418 S.W.3d 235, 248
(Tex. App.—Houston [14th Dist.] 2013).
12 SOAH Rule 155.153 was previously numbered Rule 155.15. The prohibition on
reopening the evidence in an administrative matter after a PFD has been issued remains intact
in the current version of the Rule. Compare CR 1471 with 1 TEX. ADMIN. CODE ANN.
§155.153(a)(4).
15
CR 1468, 1470.
More specifically, when this rule was amended in 2004, SOAH stated
in the Texas Register that the amendment was designed to “clarify” the fact
that an ALJ may only reopen the evidence when “a dismissal, proposal for
decision, or final order has not been issued.” CR 1468, 1471. At that time,
SOAH also stated in the Texas Register that it had adopted the 2004
amendments to “update, streamline, and improve the uniform procedural
rules” to “further enhance SOAH’s ability to provide for an efficient, just,
fair, and impartial adjudication of the rights of the parties under a
consistent set of procedures.” CR 1468. As such, Appellees should not
now be allowed to take a position that is inconsistent with SOAH’s prior
interpretation of this rule.
3. The District Court erred by allowing Appellees, who are
agency actors, to self-create new powers not given to
them by the legislature.
Appellees’ interpretation of the Rule would effectively give
Appellees a new power—the power to remand/reopen evidence after a
PFD has issued—that was not conferred on 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.) (“agencies are creatures of statute and have
16
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 construction.”). As such,
agency employees cannot self-create new powers, only the legislature can
create them. Pub. Util. Comm’n v. City Pub. Serv. Bd. Of San Antonio, 53
S.W.3d 310, 316 (Tex. 2001); see Texas Farm Bureau, 460 S.W.3d at 272.
Had the legislature intended to give Appellees the power to order or
conduct a remand after the issuance of a PFD in these types of disputes, it
would have granted the Board that specific power, as it has done with a
limited number of other agencies (such as the Texas Commission on
Environmental Quality and the Public Utility Commission). 30 TEX.
ADMIN. CODE ANN. § 80.265; 16 TEX. ADMIN. CODE ANN. § 22.262 (c).
Appellees cite no authority specifically granting them that power. In fact,
Appellee Walker admits that, here, there is “no specific statute [which]
specifically authorizes the Board to issue a remand order such as the one in
question. ” Walker brief p. 5.
Tellingly, Appellees do not cite a single case directly assessing Rule
155.153 in support of their argument that a remand is allowed after a PFD
17
has been issued. See e.g., O’Malley & Wilkov Brief p. 5; Walker brief p. 9-
10; Appellee/Intervenor brief p. 32-34. Nor do they cite a single case in
which a remand was authorized after a PFD issued in a contested case
before the Texas Department of Motor Vehicles Motor Vehicle Division.
See e.g., O’Malley & Wilkov Brief p. 5; Walker brief p. 9-10;
Appellee/Intervenor brief p. 32-34.
While it is true that some administrative 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 Ron Beal, From
Proposal for Decision to Final Decision: What Happens in Between?, 15 TEX.
TECH ADMIN. L.J. 288, 132-141 (2006); TEX. GOV’T CODE ANN. § 2003.047(m)
(remand legislatively granted for cases heard by the Natural Resources
Conservation Division of SOAH); 30 TEX. ADMIN. CODE ANN. § 80.265)
(remand specifically granted for TCEQ cases); 16 TEX. ADMIN. CODE ANN. §
22.262(c)(remand power granted for PUC cases); 1 TEX. ADMIN. CODE ANN.
§ 155.3 (SOAH’s procedural rules also recognize the unique authority of
the PUC and TCEQ to remand contested cases and provide that PUC and
TCEQ rules control these situations).
18
Absent a legislative grant of remand power, Appellees could not
grant themselves that power. See Pub. Util. Comm’n v. City Pub. Serv. Bd. Of
San Antonio, 53 S.W.3d 310, 316 (Tex. 2001); Texas Farm Bureau, 460 S.W.3d
at 272. Therefore, Appellees were bound by § 2001.058(c) and SOAH Rule
155.153 which do not authorize remand/reopening of evidence after a PFD
has been issued.
For one, or all, of these reasons, Appellees’ argument must be
rejected and the Court should hold that they exceeded their authority by
ordering and conducting the remand and that any action or decision
resulting from that improper process is also ultra vires. See Emmett, 58 TEX.
SUP. CT. J. 567; 2015 WL 1285326 at *7-8.
II. AUDI DOES NOT SEEK IMPROPER RETROACTIVE RELIEF NOR DOES IT
SEEK REDUNDANT RELIEF.
Appellees next seek to shield their ultra vires actions from judicial
review by erroneously arguing that: 1) the harm in this case cannot be
remedied because the remand occurred in the past; and 2) the relief Audi
seeks is redundant of relief available after the exhaustion of administrative
remedies. These arguments are factually and legally erroneous.
19
A. Audi Does Not Seek Retroactive Relief.
Appellees’ first argument is simply wrong. While the ultra vires
remand process has begun and a new post-remand PFD has issued, the
remand has not progressed beyond that state and a final order has not been
entered. Even if the post-remand PFD was a valid PFD, to become final, a
PFD must still be sent to the Board, placed on its agenda, a final order
rendered, and all rehearing motions addressed. None of those actions have
yet occurred, although Appellees are rapidly moving toward those goals.
See, e.g., CR 169. And, given the fact that the post-remand PFD has been
issued, the Board has stated an intent to enter a final order soon. See, e.g.,
CR 169. Thus, Appellees’ ultra vires actions continue to occur and are like
the ultra vires actions in the Emmett case, which the Texas Supreme Court
enjoined. Emmett, 58 Tex. Sup. Ct. J. 567; 2015 WL 1285326 at *7-8.
As a result, declaratory and prospective injunctive relief is still
available to prevent the issuance of final order infected by Appellees’ ultra
vires remand process.
Appellees’ “retroactive relief” argument is also ironic, given the fact
that Appellees opposed Audi’s request for emergency interim relief from
this Court—which would have prevented some of their conduct, such as
20
the issuance of a post-remand PFD, from becoming past conduct.
Nevertheless, the relief Audi seeks via this lawsuit is not retroactive, but is
needed immediately to protect this Court’s jurisdiction over this appeal
and to prevent this appeal from becoming moot. TEX. GOV’T CODE ANN. §
22.221(a); Madison v. Martinez, 42 S.W.2d 84, 86 (Tex. Civ. App.—Dallas
1931, writ ref’d) (court of appeals enjoined writ of execution to prevent
Appellees from being ousted from their home before court could determine
the appeal); In re Shields, 190 S.W.3d 717, 719 (Tex. App.—Dallas 2005, orig.
proceeding) (“A court of appeals may issue such a writ to prevent an
appeal from becoming moot”). Emmy Edwards, Ancillary Powers of the
Courts of Appeals, 10 APP. ADVOCATE 8, 9-10 (1997).
B. The Relief Requested By Audi Is Not Redundant of Relief It
Could Obtain In An Appeal After A Final Order In The
Contested Case.
In another attempt to shield their ultra vires acts from meaningful
review, Appellees argue that the relief Audi seeks in this declaratory action
is redundant of the relief available in an appeal from a final decision in the
Contested Case. See, e.g., O’Malley and Wilkov brief p. 9-11. Again, that is
not true. In this case, Audi actually seeks to: 1) obtain a declaration that the
improper remand process exceeds Appellees’ authority; and, 2) halt that
21
ultra vires remand process (to stop the harm to Audi’s rights and prevent
the unnecessary waste of time and expense related to it) before a final
decision, resulting from the ultra vires remand process, is entered. By its
very nature, this type of prospective and declaratory relief will not be
available in an appeal after a final agency decision—the acts will be fait
accompli.
Appellees’ argument is identical to the argument rejected by the
Texas Supreme Court in June in the Patel case. Patel v. Texas Department of
Licensing and Regulation, 2015 WL 3982687 (Tex. 2015). There, the Texas
Supreme Court held that neither sovereign immunity nor the redundant
remedies doctrine barred a lawsuit brought by a group of commercial
eyebrow threaders against the Department of Licensing and Regulation in
which the threaders sought a declaration that the cosmetology licensing
scheme violated their constitutional rights. 2015 WL at *6-7. There, the
State sought to dismiss the threaders’ claims by arguing that their
declaratory judgment action was redundant of other available remedies
such as a direct appeal from a final agency order under TEXAS GOV’T CODE
ANN. § 2001.171-2001.174.
22
The Texas Supreme Court rejected the State’s argument because an
appeal from an administrative finding is limited to reversing the final order
issued by the agency and therefore does not provide the declaratory or
prospective injunctive relief that is available through a declaratory
judgment action. Id. at *7. Since an appeal could not address the
constitutionality of the statutes, the Court held that the threaders’ claims
were not redundant of an appeal from an administrative decision. Id.
Likewise, here, Audi seeks a declaration that Appellees’ remand
procedure exceeds their authority and any final decision resulting from it is
ultra vires, as well as an injunction preventing that process from reaching a
conclusion. This relief cannot be granted after the administrative process is
complete. Therefore, Audi seeks to stop the unlawful remand process and
to prevent an improper final decision that is tainted by that process from
being rendered in it. As such, the Patel case controls the outcome of this
dispute and shows that it was error to dismiss this case. Id.
Moreover, the exhaustion of remedies doctrine does not apply when
the administrative process would cause or permit harm to the plaintiff that
the administrative process itself cannot remedy. Hous. Fed’n of Teachers,
23
Local 2415 v. Hous. Indep. Sch. Dist., 730 S.W.2d 644, 646 (Tex. 1987). As the
Texas Supreme Court has explained, irreparable harm will be suffered and
if the agency is unable to provide relief, the courts may properly exercise
their jurisdiction in order to provide an adequate remedy. Id. at 646. In
Houston Fed’n of Teachers, the Supreme Court held that a group of teachers
were not required to exhaust their administrative remedies in order to
challenge the school district’s lengthening of their workday because
implementation of the new workday would “affect their child care
arrangements, transportation arrangements, and second jobs.” Id. at 645-
46. The Court reasoned that because the teachers would thereby suffer
“immediate and irreparable harm” if the plan were implemented while
they first pursued an administrative remedy, and because the
administrative process itself could not provide any remedy for that harm,
the trial court was not barred by the exhaustion doctrine from adjudicating
the dispute. Id. at 646.
Likewise, here, once the ultra vires remand reaches its conclusion, no
court can remedy the fact that an improper proceeding has taken place. No
court can compensate Audi for having to participate in an improper
24
proceeding or for the loss of time devoted to that participation. Thus, the
relief sought in this lawsuit is not redundant of relief available after
exhaustion of administrative remedies.
III. STATUTES, RULES AND PROCEDURES MUST BE APPLIED UNIFORMLY IN
ALL CONTESTED CASES TO MAINTAIN A FAIR PROCESS FOR ALL.
Appellees departed from their regular procedures after a witness13 to
the Contested Case made ex parte contact with the Board about the
Contested Case. CR 1940-1941. At best, this contact, coupled with the
resulting highly unique remand process, gives the appearance of
impropriety and brings into doubt the fairness of the administrative
adjudication. Such concerns were behind the creation of SOAH. 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
13 More specifically, after invoking the name (redacted) of a friend of the Robertson family,
Robertson then addresses the rehearing of the 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.
25
TEX. TECH ADMIN. L.J. at 127-33; 2 Kenneth Culp Davis & Richard J. Pierce,
Jr., Administrative Law Treatise § 9.8 at 67 (3d ed. 1994).
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
Schenkkan, Texas Administrative Law: Trials, Triumphs and New Challenges, 7
TEX. TECH ADMIN. L.J. 288, 323 (2006). This is precisely the reason the
legislature failed to give the Board and the ALJs remand power after a PFD
has issued.
Thus, where, as here, an agency actor makes a major departure from
the statutes and rules governing the contested case process and “cuts the
cloth to fit the pattern,” it undermines this neutral SOAH structure, and, at
the very least, casts a shadow over the perceived fairness of the proceeding.
Id.; see Montgomery I.S.D. v. Davis, 34 S.W.3d 559, 564 (Tex. 2000). The
26
Supreme Court 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 Appellees to disregard the rules limiting their options and
prohibiting the reopening of evidence after issuance of a PFD is not what
the legislature envisioned when it enacted SOAH. See Mid-South Pavers,
246 S.W.3d at 726. At a minimum, Appellees’ actions look suspicious and,
at its worst, their actions impact the due process rights of Audi. As such,
this Court should reverse the decision below.
PRAYER AND REQUEST FOR RELIEF
For all, or any of the reasons stated above, Audi asks this Court to
reverse the decision below and to enter an order: declaring that the
remand/reopening of evidence exceeded Appellees’ power and that any
action, order or ruling emanating from that remand is also ultra vires; 2)
declaring that any post-remand PFD or final order that is based on
evidence entered during the remand is ultra vires and that any attempt to
issue, act on or otherwise enforce such proposals or rulings is ultra vires; 3)
27
declaring that the pre-remand Final Order14 issued by the Board on
September 12, 2004 (which dismissed the contested case) was the last valid
and authorized action by any of the Appellees in the contested case and
that anything other than enforcing that order would be ultra vires. Audi
also ask the Court to 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.
14 CR 504-505.
28
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.
29
CERTIFICATE OF COMPLIANCE
I certify that on September 1 , 2015, that this Appellants’ Reply Brief
was produced on a computer and contains 5,969 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 7,500 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 September 1, 2015, I used the Court’s electronic case
filing system to file this Appellants’ Reply 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
30
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
31