Sweeten Truck Center, L.C. v. Volvo Trucks North America, a Division of Volvo Group of North America, LLC Texas Department of Motor Vehicles Board of the Texas Department of Motor Vehicles Laura Ryan, in Her Official Capacity as Chair of the Board of the Texas Department ( 2016 )

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-16-00068-CV
Sweeten Truck Center, L.C., Appellant
v.
Volvo Trucks North America, a Division of Volvo Group of North America, LLC; Texas
Department of Motor Vehicles; Board of the Texas Department of Motor Vehicles; Laura
Ryan, in her Official Capacity as Chair of the Board of the Texas Department of Motor
Vehicles; Whitney Brewster, in her Official Capacity as Executive Director of the Texas
Department of Motor Vehicles; and Daniel A. Vitia, in his Official Capacity as Director of
the Motor Vehicle Division of the Texas Department of Motor Vehicles, Appellees
DIRECT APPEAL ON REMOVAL FROM THE DISTRICT COURT OF TRAVIS COUNTY
201ST JUDICIAL DISTRICT, NO. D-1-GN-16-000204
MEMORANDUM OPINION
Sweeten Truck Center, L.C. (Sweeten) sought judicial review in the district court of
a final order of appellee Board of the Texas Department of Motor Vehicles approving the decision
of appellee Volvo Trucks North America, a Division of Volvo Group of North America, LLC (Volvo
Trucks) to modify its franchise agreement with Sweeten. Before any proceedings occurred in the
district court, Volvo Trucks removed the case to this Court. See Tex. Occ. Code § 2301.751(b). In
three issues, Sweeten contends that the Board erred in failing to consider “all existing circumstances”
in determining whether “there is good cause” to modify Sweeten’s franchise agreement and in
refusing to consider the impact of a possible additional Volvo Trucks dealership on Sweeten and
the public. We will affirm the Board’s order.
BACKGROUND
Sweeten is a licensed Volvo Trucks dealer located in Houston. Pursuant to its
franchise agreement, Sweeten is assigned a geographic area of responsibility (AOR). Sweeten’s
AOR consisted of 24 counties.
In September 2013, Volvo Trucks gave Sweeten notice that it intended to modify
Sweeten’s AOR by removing eleven counties (which was later amended to ten counties). See id.
§ 2301.454(a)(1), (b). In November 2013, Sweeten filed a protest of the proposed modification with
the Texas Department of Motor Vehicles. See id. § 2301.454(c). The case was referred to the State
Office of Administrative Hearings for assignment of an administrative law judge (ALJ). After a
six-day contested hearing, the ALJ closed the evidentiary record in December 2014. The ALJ later
issued a proposal for decision (PFD), which included findings of fact and conclusions of law and
recommended that Volvo Trucks’s proposed modification be granted.
In November 2015, the Board issued a final order adopting the ALJ’s findings of fact
and conclusions of law and making additional findings and an additional conclusion. Among other
things, the Board found that good cause for modification of the franchise agreement had been
established based on: (1) “[Sweeten’s] sales in relation to the sales in the market”; (2) “[Sweeten’s]
investment and obligations”; and (3) “the adequacy of [Sweeten’s] service facilities, equipment, parts
and personnel in relation to those of other dealers of new motor vehicles of the same line-make.”
See id. § 2301.455(a) (listing factors the Board should consider in determining whether good cause
has been established). Accordingly, the Board approved Volvo Trucks’s proposed modification.
Sweeten now seeks review of the Board’s order in this Court. See id. § 2301.751(b).
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STANDARD OF REVIEW
Because this case was removed from the district court to this Court, we apply the
same standard of review that the district court would have applied—a substantial-evidence review.
See id. § 2301.751(a)(2) (“A party to a proceeding affected by a final order, rule, or decision or other
final action of the board with respect to a matter arising under this chapter . . . may seek judicial
review of the action under the substantial evidence rule in . . . the court of appeals for the Third
Court of Appeals District.”); Buddy Gregg Motor Homes, Inc. v. Motor Vehicle Bd. of Tex. Dep’t
of Transp., 156 S.W.3d 91, 98 (Tex. App.—Austin 2004, pet. denied) (applying substantial-evidence
review in case removed from district court); see also Tex. Gov’t Code § 2001.174 (providing
standard of review “[i]f the law authorizes review of a decision in a contested case under the
substantial evidence rule”). Under this standard we may not, with respect to questions committed
to an agency’s discretion, substitute our judgment on the weight of the evidence for that of the
agency. Tex. Gov’t Code § 2001.174. We must, however, reverse an order if it prejudices substantial
rights because its findings, inferences, conclusions, or decisions (1) violate a constitutional or
statutory provision; (2) exceed statutory authority; (3) were made through unlawful procedure;
(4) were affected by other error of law; (5) are not reasonably supported by substantial evidence
considering the reliable and probative evidence in the record as a whole; or (6) are arbitrary or
capricious or characterized by an abuse of discretion or a clearly unwarranted exercise of discretion.
Id. An agency order is presumed to be valid and is supported by substantial evidence if the evidence
in its entirety is sufficient to allow reasonable minds to have reached the conclusion the agency
must have reached to justify the disputed action. Texas State Bd. of Dental Exam’rs v. Sizemore,
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759 S.W.2d 114, 116 (Tex. 1988). The party challenging the order has the burden of demonstrating
a lack of substantial evidence. Id.; CenterPoint Energy Entex v. Railroad Comm’n, 213 S.W.3d 364,
369 (Tex. App.—Austin 2006, no pet.).
In addition, this case requires us to interpret the Occupations Code. Our primary
objective in construing statutes is to give effect to the Legislature’s intent. Galbraith Eng’g
Consultants, Inc. v. Pochucha, 290 S.W.3d 863, 867 (Tex. 2009). The plain meaning of the text is
the best expression of legislative intent unless a different meaning is supplied by legislative
definition or is apparent from the context, or unless the plain meaning would lead to absurd
or nonsensical results that the Legislature could not have intended. City of Rockwall v. Hughes,
246 S.W.3d 621, 625–26 (Tex. 2008); see Tex. Gov’t Code § 311.011 (“Words and phrases shall
be read in context and construed according to the rules of grammar and common usage.”). The
proper construction of a statute is a question of law we review de novo. See First Am. Title Ins.
Co. v. Combs, 258 S.W.3d 627, 631 (Tex. 2008); Brown v. Nero, 477 S.W.3d 448, 450 (Tex.
App.—Austin 2015, pet. denied).
DISCUSSION
In its first and second issues, Sweeten contends that the Board misinterpreted the
Occupations Code and that this misinterpretation caused the Board to prejudice Sweeten’s substantial
rights. Sweeten first points out that the Occupations Code provides that the Board “shall determine
whether the manufacturer, distributor, or representative has established by a preponderance of the
evidence that there is good cause for the proposed modification or replacement,” see Tex. Occ.
Code § 2301.454(d) (emphasis added), and that, in making its determination, the Board “shall
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consider all existing circumstances,” see id. § 2301.455(a) (emphasis added). Sweeten argues that
the emphasized language mandates that the Board “focus on currently existing circumstances.”
Sweeten further argues that “[a]lthough the Board may consider the circumstances then existing
when Volvo Trucks made its decision to reduce Sweeten’s AOR, the Legislature requires the Board
to focus on the present situation.” Sweeten complains that “instead of carefully examining the 2014
data,” the most recent data available at the time of the ALJ hearing, the Board “concentrated on” data
from the years 2009–2013. Sweeten argues that this past data does not reflect “existing circumstances”
but rather “past or historical sales and service performance.” Sweeten notes that the Board refused
“to look at a very narrow snapshot in time”—the most recent data—looking instead “at the broader
time period, particularly the last five years.”
Sweeten’s interpretation of the statute to require the Board to look only at a “narrow
snapshot in time” and ignore or downplay any historical data is belied by the statute’s own terms.1
The Code requires the Board to consider several factors in determining whether good cause exists
to modify a franchise, and several of these factors require a compilation and examination of
historical data, including:
• the dealer’s sales in relation to the sales in the market;
• the dealer’s investment and obligations;
1
In its reply brief, Sweeten states that it “does not argue that [the statute] prevents the
Board from considering the recent past.” However, in its opening brief, Sweeten argued that “the
Legislature intends for the Board’s focus to be on the currently existing circumstances and to treat
those circumstances as predominant, if not controlling” and that “the Legislature requires the Board
to focus on the present situation.” Sweeten also complained that “the PFD is replete with references
to Sweeten’s past or historical sales and service performance.” In any event, as discussed below, the
Board did consider the most recent 2014 data as well as data from the several preceding years.
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• injury or benefit to the public;
• the adequacy of the dealer’s service facilities, equipment, parts, and personnel
in relation to those of other dealers of new motor vehicles of the same
line-make;
• whether warranties are being honored by the dealer; and
• the parties’ compliance with the franchise.
See id. § 2301.455(a). For example, “the dealer’s sales in relation to sales in the market” will
necessarily require a compilation of sales data from the dealership and sales data from the market
generally over a period of time, presumably years. Likewise, “the dealer’s investment and obligations”
will necessarily include all investments a dealer has made in the franchise; to do otherwise would
cut against a long-time dealer like Sweeten’s ability to demonstrate the full force and effect of his
investments in the dealership over time. The weight to be given the historical data—whether the
most recent data or data from five years ago—is an issue relative to the weight to be given evidence,
a matter solely within the province of the Board. See Tex. Gov’t Code § 2001.174 (providing that
“a court may not substitute its judgment for the judgment of the state agency on the weight of the
evidence on questions committed to agency discretion”).
In addition, even if we were to accept Sweeten’s statutory construction, Sweeten has
not shown that the Board failed to consider the recent data, only that the Board did not view the most
recent data as conclusive or give the recent data as much weight as Sweeten may have desired. For
example, the Board acknowledged that Sweeten “improved its sales process in the past year” and
noted that Sweeten’s dealer operating standards and customer service index scores improved during
2014. The Board also acknowledged that “Sweeten has undoubtedly made significant strides in the
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past year to improve both its sales and service performance.” Sweeten has not pointed to a single
instance when it offered evidence that the ALJ refused to admit. The mere fact that the Board did
not find the evidence of Sweeten’s improvement to be dispositive is not reversible error. See id.2
In its brief, Sweeten states, “The ALJ and the Board treated Sweeten’s recent
investments in expanding and modifying its facilities and its significant improvements in sales and
service performance as ‘irrelevant under the statutory analysis’ and ‘not relevant to the outcome of
this case.’” This statement is not borne out by the record before us as viewed under our standard of
2
Having concluded that the Board did not err in considering data from the past several years,
including the most recent data available, we also conclude that there is substantial evidence in the
record to support the Board’s decision. For example, the ALJ made the following findings, which
were adopted by the Board and not challenged by Sweeten on appeal:
• Sweeten’s earned market share across its AOR for the years 2010–2013 was
3.1%, 1.2%, 5.8%, and 3.5%, while Volvo Trucks’s national market share for
the same years was 10.92%, 14.08%, 12.37%, and 13.18%. For the same
years, Sweeten’s earned market share in the counties that Volvo Trucks
proposed to remove from Sweeten’s AOR was 1.5%, 0.9%, 0.3%, and 1.9%.
• From January 2009 through July 2013, Sweeten made no truck sales at all in
eight of the counties Volvo Trucks proposed for removal and made only one
sale in an additional county.
• From 2010 through 2013, only 2.2% of Sweeten’s service business and only
1.5% of its parts business was derived from the counties proposed for removal.
• Sweeten’s DOS scores (which measure “best practices across the dealer
network in categories such as customer service, parts, leasing and staffing
and operation of the dealership”) for 2011–2014 were 57, 73, 58, and 66.
Volvo Trucks dealers in large markets generally maintain DOS scores of 90
or higher.
• Sweeten’s customer-service scores for 2011–2013 were all below Volvo
Trucks’s expected standard.
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review. Although the PFD and final order do contain the quoted language, the context shows that
the ALJ and the Board were not refusing to consider Sweeten’s recent improvements for any
reason as Sweeten’s brief suggests. As discussed above, the Board explicitly references those
improvements. Instead, the context surrounding the quoted language makes it clear that the ALJ and
Board were merely rejecting Sweeten’s attempt to use data concerning its recent improvements to
argue that the proposed modification was an inappropriate “penalty.” The Board concluded that “the
overall statutory good cause analysis is not predicated on a concept of wrongdoing by the dealer.”
We conclude that the Board did not misinterpret or misapply the Occupations Code’s
command to consider “all existing circumstances.” The Board did consider the most recent data
but also properly examined data from recent years. Were we to adopt Sweeten’s interpretation, a
dealership could nearly always avoid a franchise modification by making improvements only after
receiving notice of a proposed modification. Such a reading is not mandated by the statute’s plain
language. Because Sweeten has failed to show that the Board’s findings or decision were arbitrary
or capricious or otherwise reversibly erroneous, see id. § 2001.174(2), we overrule Sweeten’s first
and second issues.
In its third issue, Sweeten contends that the Board erred in failing to consider the
impact of an additional Volvo Trucks dealership, which Sweeten alleged that Volvo Trucks intended
to establish after modifying Sweeten’s AOR. According to Sweeten, “[t]he reliable and probative
evidence in the record as a whole shows that the new Volvo Trucks dealership will take sales and
service business from Sweeten in both the removed and retained counties, thus materially
diminishing the value of the substantial investment made in the Sweeten dealership.” Sweeten also
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notes that, “[b]ecause the new dealership will be located more than 15 miles from Sweeten and
outside of Harris County, Sweeten will be unable to protest its establishment.” See Tex. Occ. Code
§ 2301.652(b).
However, the Board considered Sweeten’s arguments about the possible dealership
but concluded that they were mere speculation:
Sweeten’s primary argument is that its existing investment will be adversely affected
in the future by a new dealership being opened in the removed counties. However,
there is no evidence of any specific plan by Volvo Trucks to immediately open
another dealership in the removed counties. Moreover, that is not a part of this
proceeding. This modification does not propose to add a new dealership. It simply
proposes to reduce Sweeten’s AOR. While this may be a precursor to Volvo Trucks
allowing another dealership to open later in the removed counties, that is too
speculative to weigh into the analysis in this case. There is no evidence regarding
where or when such a dealership might open, or what the market for trucks might be
at the specific time that any additional dealership might be opened. The only issue
to be considered in this case is the known impact of the proposed modification—i.e.,
the removal of the 10 counties from Sweeten’s AOR.
Although Sweeten argues that “[t]his statement can be supported only if one suspends common
sense and ignores the only rational inferences from the evidence,” Sweeten has not pointed us to
any evidence in the record that Volvo Trucks actually plans to establish a new dealership, nor has
Sweeten pointed us to any evidence concerning the details of the hypothetical dealership or empirical
data about the impact the dealership would have on Sweeten or the public. In addition, we note that
while Sweeten argues in its first two issues that the Board should only consider the “existing
circumstances,” which Sweeten interprets to mean the most recent data representing a snapshot of
the time just before the ALJ hearing, its third issue asks this Court to speculate concerning future
possibilities that do not yet exist. As the ALJ concluded,
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While the Code does require that “all existing circumstances” be considered,
the mere potential for a second dealership at some point in the future is not an
“existing circumstance.” The possibility that Volvo Trucks might franchise a second
dealership—while logically likely—is not practically imminent nor specifically
planned such that its impact could be properly estimated and determined at this time,
nor is it an “existing circumstance.”
We conclude that Sweeten has not demonstrated that the Board’s decision was arbitrary, capricious,
or otherwise reversible. Accordingly, we overrule Sweeten’s third issue.
Having rejected each of Sweeten’s challenges to the Board’s order, we conclude that
Sweeten has failed to meet its burden of demonstrating that its rights were prejudiced because of an
unlawful or arbitrary action of the Board.
CONCLUSION
We affirm the Board’s order. See Tex. Gov’t Code § 2001.174(1).
__________________________________________
Scott K. Field, Justice
Before Justices Puryear, Pemberton, and Field
Affirmed
Filed: September 13, 2016
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