courts generally uphold agency’s interpretation of statute it is charged with enforcing so long as it is reasonable and does not contradict statute’s plain language
How later courts described this case
- courts generally uphold agency’s interpretation of statute it is charged with enforcing so long as it is reasonable and does not contradict statute’s plain language
- agency acts arbitrarily and capriciously if it “adopts new policy in the course of a contested-case hearing without giving the parties pre-hearing notice”
Written by the judges who cited it.
The opinion
TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-23-00415-CV
Subaru of America, Inc., Appellant
v.
Board of the Texas Department of Motor Vehicles; Daniel Avitia, in his Official Capacity
as Executive Director of the Texas Department of Motor Vehicles; and McAllen Jeep, Inc.
d/b/a Bert Ogden Subaru, Appellees
DIRECT APPEAL FROM THE MOTOR VEHICLE BOARD
OF THE TEXAS DEPARTMENT OF MOTOR VEHICLES
MEMORANDUM OPINION
A motor-vehicle distributor, Subaru of America, Inc. (Subaru) sought to terminate
its franchise agreement with a motor vehicle dealer, McAllen Jeep, Inc. d/b/a Bert Ogden Subaru
(Bert Ogden) under Section 2301.453 of the Occupations Code. See Tex. Occ. Code
§ 2301.453(a). After receiving Subaru’s notice of termination, Bert Ogden filed a protest with
the Board of the Texas Department of Motor Vehicles (the Board). After an administrative
hearing, the Board issued a final order, which concluded that Subaru failed to show good cause
for termination and therefore granted Bert Ogden’s protest.
On appeal, Subaru contends that the Board prejudiced its substantial rights by
(1) concluding that one of seven good-cause factors—injury or benefit to the public—weighs
strongly against termination, (2) concluding that another good-cause factor—the adequacy of
Bert Ogden’s service facilities, equipment, parts, and personnel—is neutral, and (3) ultimately
determining that Subaru failed to show good cause to terminate Bert Ogden’s franchise. We will
affirm the Board’s final order.
STATUTORY FRAMEWORK
We begin with the applicable statutory framework to provide the legal context for
understanding the relevant background facts and procedural history.
Chapter 2301 of the Occupations Code governs various aspects of the motor
vehicle industry in Texas, including the relationship between vehicle distributors and vehicle
dealers. See generally Tex. Occ. Code §§ 2301.001–.853. Section 2301.453 establishes the
procedure for a distributor to terminate its franchise with a dealer. Id. § 2301.453.CV
Before terminating its franchise, the distributor must provide notice to the dealer,
stating the specific grounds for the termination. Id. § 2301.453(a), (c). The dealer may then file
a protest with the Board. Id. § 2301.453(e). If the dealer files a protest, the Board refers the case
to the State Office of Administrative Hearings (SOAH) for an evidentiary hearing before an
administrative law judge (ALJ). Id. §§ 2301.453(f)(2), .703(a), .704(a).
At the evidentiary hearing, the distributor has the burden to show that good cause
exists to terminate the franchise. See id. § 2301.453(a)(3). To determine whether good
cause exists, the ALJ must consider “all existing circumstances,” including seven statutorily
specified factors:
(1) the dealer’s sales in relation to the sales in the market;
(2) the dealer’s investment and obligations;
(3) injury or benefit to the public;
2
(4) 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;
(5) whether warranties are being honored by the dealer;
(6) the parties’ compliance with the franchise, except to the extent that
the franchise conflicts with this chapter; and
(7) the enforceability of the franchise from a public policy standpoint,
including issues of the reasonableness of the franchise’s terms,
oppression, adhesion, and the parties’ relative bargaining power.
Id. § 2301.455(a). After the hearing, the ALJ issues a proposal for decision (PFD) supported
by proposed
• findings of basic facts, i.e., findings that answer the questions of “who did
what, when, how, why, and with what motive or intent,”
• findings of ultimate facts, i.e., findings based on inferences from basic
facts and that often involve a determination of a mixed question of law
and fact, and
• conclusions of law.
Hyundai Motor Am. v. New World Car Nissan, Inc., 581 S.W.3d 831, 838 (Tex. App.—Austin
2019, no pet.).
The Board then reviews the ALJ’s proposed findings and conclusions and makes
the ultimate decision of whether good cause exists. Tex. Occ. Code § 2301.453(g). The Board
has “exclusive jurisdiction to determine the issue of good cause,” including the weight to be
given each statutory factor. Austin Chevrolet, Inc. v. Motor Vehicle Bd. & Motor Vehicle Div. of
Tex. Dep’t of Transp., 212 S.W.3d 425, 432 (Tex. App.—Austin 2006, pet. denied). But in
making its decision, the Board’s discretion to change the ALJ’s findings or conclusions is
3
circumscribed by the Administrative Procedure Act (APA), which permits the Board to make
such a change only if it 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.
Tex. Gov’t Code § 2001.058(e). The APA further requires the Board to “state in writing the
specific reason and legal basis” for each change. Id.
While the Board may not reweigh the evidence to make new findings of basic
fact, it may reweigh the statutory factors to make new findings of ultimate fact and new
conclusions of law. See Hyundai Motor Am., 581 S.W.3d at 842 (board may not ignore or
make new basic fact findings); Grubbs Nissan Mid-Cities, Ltd. v. Nissan N. Am., Inc.,
No. 03-06-00357-CV, 2007 WL 1518115, at *4 (Tex. App.—Austin May 23, 2007, pet. denied)
(mem. op.) (in good-cause analysis, board determines “the weight to be given each statutory
factor”); Meier Infiniti Co. v. Motor Vehicle Bd., 918 S.W.2d 95, 100 (Tex. App.—Austin 1996,
writ denied) (in good-cause analysis, board “is responsible for determining which factors to
consider” and “how much weight each factor should receive”).
Having set forth the statutory framework, we now turn to the facts of the case.
4
BACKGROUND 1
The Parties
Subaru is the authorized distributor of Subaru-brand vehicles and parts for the
United States, which it distributes through a network of Subaru dealers. Bert Ogden is a Subaru
dealer. Its franchise is governed by a Dealer Agreement with Subaru. Since 2009, Bert Ogden
has been the only Subaru dealer in the Rio Grande Valley. Its dealership is in Edinburg, Texas,
and shares facilities with two other dealerships in the Bert Ogden Auto Group.
The Pharr Area of Responsibility
Subaru divides its dealers into geographic areas called Regions, Zones, and
Districts. Bert Ogden is in Subaru’s Central Region, the DFW Zone, and District 3. The DFW
Zone includes forty-four Subaru dealers located in New Mexico, Texas, Louisiana, Mississippi,
Tennessee, Arkansas, and Oklahoma. District 3 includes eleven Subaru dealers in Houston,
San Antonio, Selma, Nederland, Bryan, and Corpus Christi.
Under the Dealer Agreement, Subaru assigned Bert Ogden a geographic area in
District 3 known as the Pharr Area of Responsibility (AOR), which is situated within the
Rio Grande Valley. In recent years, the Subaru brand has grown significantly, and so has the
population of the Pharr AOR. Both Subaru and Bert Ogden believe the Pharr AOR presents
opportunity for new vehicle sales and service business. But the Pharr AOR also poses
geographic challenges that other Subaru dealers do not face. The Pharr AOR borders Mexico to
the south and west, the Gulf of Mexico to the east, and a thinly populated desert to the north, so
1
Our recitation of the facts is adopted from the PFD unless otherwise indicated.
5
selling Subarus outside the Pharr AOR is more difficult than selling Subarus outside
other AORs.
Bert Ogden’s Sales, Customer Satisfaction, and Operations
In the years leading up to its proposed termination of Bert Ogden’s franchise,
Subaru voiced complaints about Bert Ogden’s sales, customer satisfaction rankings,
and operations.
Sales
For years, Bert Ogden had failed to meet its sales performance obligations under
the Dealer Agreement and had been the lowest-performing dealer in the DFW Zone. In 2017,
Subaru and Bert Ogden executed a Sales Performance Addendum, which gave Bert Ogden three
years to meet reduced sales targets. Over the following three years, Bert Ogden sold every new
vehicle Subaru allocated to it and increased sales for each successive year. But Bert Ogden
failed to meet its reduced sales targets and continued to be the lowest-performing Subaru dealer
in the DFW Zone.
Customer Satisfaction
During this same period, Bert Ogden ranked at or near the bottom of the
DFW Zone in customer satisfaction as measured by Bert Ogden’s Owner Loyalty Program
(OLP) survey responses. But while Bert Ogden’s OLP comparative rankings were low, its actual
OLP scores were high, with customers scoring their purchase and service experiences at Bert
Ogden as closer to “Extraordinary” than “Very Good” for each year.
6
Operations
Subaru’s complaints about Bert Ogden’s operations during this period focused on
perceived deficiencies in its inventory and personnel. Bert Ogden reported having less inventory
of parts, accessories, and service equipment per vehicle in operation (VIO) than other similar-
sized Subaru dealers. Bert Ogden’s parts and service departments had a high level of turnover
that was “very uncommon” for Subaru dealers. Unlike other Subaru dealers, Bert Ogden failed
to increase the number of service-department employees to keep up with rising demand for
vehicle services. And Bert Ogden failed to comply with its obligation under the Dealer
Agreement to provide exclusive personnel (personnel who worked only on Subarus) in key
positions, such as service manager and parts manager.
Subaru’s Notice of Termination
Subaru offered Bert Ogden various forms of assistance to improve its sales
metrics, customer satisfaction rankings, and perceived operational deficiencies. But
Bert Ogden’s performance did not improve to Subaru’s satisfaction.
In 2020, Subaru sent Bert Ogden a Notice of Termination, see Tex. Occ. Code
§ 2301.453(a), (c), which identified three grounds for termination:
• Bert Ogden’s failure to achieve Subaru’s minimum sales responsibility (MSR) and
the new vehicle-sales numbers under the Sales Performance Addendum,
• Bert Ogden’s failure to meet a “comparative” ranking requirement under the
Dealer Agreement for customer-satisfaction rankings, and
• other “operational deficiencies.”
In response, Bert Ogden acknowledged that it had not achieved the MSR set by
Subaru, but it also challenged the MSR’s appropriateness and how Subaru had calculated it for
7
the Pharr AOR. Bert Ogden further asserted that Subaru had failed to provide it sufficient
inventory to comply with the Sales Addendum. Bert Ogden denied that any
customer-satisfaction-ranking requirement existed under the Dealer Agreement.
The ALJs’ Proposal for Decision
Bert Ogden filed a protest with the Board. Id. § 2301.453(e). The Board then
referred the case to SOAH for an evidentiary hearing before two ALJs. Id. §§ 2301.453(f)(2),
.703(a), .704(a).
After the hearing, the ALJs issued a PFD, in which they concluded that Subaru
had shown good cause to terminate Bert Ogden’s franchise and therefore recommended that
Bert Ogden’s protest be denied. The ALJs concluded that four of the seven good-cause factors
favored termination. Id. § 2301.455(a).
The ALJs concluded that the first factor, Bert Ogden’s sales in relation to the
market, id. § 2301.455(a)(1), favored termination based on their finding that Bert Ogden had
consistently been the lowest-performing dealer in the DFW Zone.
The ALJs concluded that the third factor, the injury or benefit to the public, id.
§ 2301.455(a)(3), favored termination based on their findings that:
• when ranked against other dealers in the DFW Zone, Bert Ogden placed at or near
the bottom in purchase-satisfaction scores from 2017-2021,
• Subaru has indicated that it intends to quickly install a new dealer, so any
inconvenience will be brief and is outweighed by the benefit the public will
realize once a new dealer is established,
• there is little benefit to the public to continuing Bert Ogden’s dealership
agreement, considering the dealership’s consistently low purchase- and service-
satisfaction rankings, and
8
• the possibility of inconvenience to customers during the transition to a new dealer
and the lack of benefit of leaving Bert Ogden’s dealership agreement in place is
outweighed by the benefit to the public of a new Subaru dealer.
The ALJs concluded that the fourth factor, the adequacy of Bert Ogden’s service
facilities, equipment, parts, and personnel in relation to other Subaru dealers, id.
§ 2301.455(a)(4), favored termination based on their findings that
• Bert Ogden reported having fewer service parts, accessories, and equipment than
other similarly sized Subaru dealers in the DFW Zone,
• Bert Ogden had higher turnover in its parts and service departments than other
dealers in District 3,
• Bert Ogden failed to employ Subaru-exclusive personnel in key positions, and
• unlike other Subaru dealers, as VIOs increased, Bert Ogden failed to increase its
number of service-department employees and dedicated personnel.
The ALJs concluded that the sixth factor, the parties’ compliance with the
franchise, id. § 2301.455(a)(6), favored termination based on their findings that Bert Ogden
breached its sales-performance and personnel obligations under the Dealer Agreement.
The ALJs concluded that the second factor, Bert Ogden’s investment and
obligations, id. § 2301.455(a)(2), was neutral.
The ALJs concluded that the fifth factor, whether Bert Ogden was honoring
warranties, id. § 2301.455(a)(5), did not favor termination based on their finding that Subaru
failed to show that Bert Ogden refuses to perform warranty work, including on older,
high-mileage Subaru vehicles covered under warranty extensions or extended
service agreements.
9
Regarding the seventh factor, the enforceability of the franchise, id.
§ 2301.455(a)(7), the ALJs found that the Dealer Agreement is enforceable and not an
unconscionable contract of adhesion.
The Board’s Final Order
The PFD was submitted to the Board. After hearing oral argument, the Board
issued its Final Order. In its order, the Board adopted the ALJs’ proposed findings of basic fact.
But on two good-cause factors, the Board drew different inferences from the basic facts than the
ALJs, rejected the ALJs’ conclusions of law, and adopted new conclusions in their place.
First, the Board rejected the ALJs’ conclusion that the third factor—injury or
benefit to the public, see id. § 2301.455(a)(3)—favored termination, and it adopted a new
conclusion that the factor weighs strongly against termination.
In doing so, the Board determined that the ALJs misinterpreted Section
2301.455(a)(3) by relying on Bert Ogden’s comparative OLP rankings in evaluating the injury or
benefit to the public. The Board explained that, unlike other good-cause factors, Section
2301.455(a)(3) does not require a relative comparison of Bert Ogden to other dealers. The Board
further explained that the relatively low OLP rankings do not accurately reflect the quality of
sales and vehicle service provided by Bert Ogden to the public and therefore do not support the
conclusion that Bert Ogden is injuring the public.
The Board further concluded that Bert Ogden has provided “significant benefits”
to the public in the Pharr AOR. The Board based its conclusion on the ALJs’ findings that Bert
Ogden has been in business since 2009, has adequate facilities, and performs warranty work for
Subaru owners in the Pharr AOR, including work on older, high-mileage Subarus.
10
Finally, the Board concluded that Subaru’s intention to quickly install a new
dealer is “speculative” and therefore “deserves little weight” and that the ALJs misinterpreted
Section 2301.455(a)(3) in finding that the injury to the public from terminating Bert Ogden’s
franchise would be outweighed by the “hypothetical” benefit of a new dealer. The Board
therefore further concluded that terminating the franchise would cause “significant harm” to the
public because there would no longer be a Subaru dealer in the Rio Grande Valley and residents
would have to drive at least 150 miles one way to Corpus Christi or San Antonio to buy a Subaru
or to receive warranty or recall work.
Second, the Board rejected the ALJs’ conclusion that the fourth factor—the
adequacy of Bert Ogden’s service facilities, equipment, parts, and personnel in relation to other
dealers, Tex. Occ. Code § 2301.455(a)(4)—favored termination, and it adopted a new conclusion
that the factor is neutral.
In doing so, that Board determined that the ALJs misinterpreted Section
2301.455(a)(4) in weighing the adequacy of Bert Ogden’s facilities against the inadequacy of
Bert Ogden’s equipment, parts, and personnel. The Board explained that the adequacy of the
facilities is “very important to the public’s experience of the dealership” whereas the inadequacy
of the parts inventory “carries less significance in the context of the modern motor vehicle
industry where there is fast shipping and delivery of parts from manufacturers to dealers that
allows dealers to get parts as needed.”
The Board further determined that the ALJs misinterpreted Section
2301.455(a)(4) “by focusing primarily on exclusive personnel, rather than on the total number of
Bert Ogden personnel available to assist and service vehicles for its customers.” The Board
explained that Section 2301.455(a)(4) does not impose an exclusivity requirement for personnel
11
and that the ALJs’ findings of fact show that Bert Ogden had personnel who were shared among
its other dealerships, including the two other dealerships that are in the same location as the
Subaru dealership. Thus, the Board further explained, while Bert Ogden did not have as many
Subaru-exclusive personnel as did other Subaru dealers, that does not show that its personnel
were inadequate to meet its customers’ needs since shared personnel served Subaru customers.
The Board therefore concluded that the inadequacy of Bert Ogden’s exclusive personnel is not a
significant factor and carries little weight. Based on these new conclusions, the Board
determined that this factor was neutral.
In making its ultimate decision, the Board explained that the two good-cause
factors most directly impacting the public—the injury or benefit to the public and the honoring
of warranties—weighed heavily against termination. The Board further explained that none of
the factors weighing in favor of termination “have an immediate impact on the public” or are
“significant enough to overcome the importance to the public of the factors that weigh heavily
against termination.” Thus, the Board determined that Subaru failed to show good cause to
terminate Bert Ogden’s franchise and therefore granted its protest.
Subaru appeals.
DISCUSSION
On appeal, Subaru raises a number of issues, which fall into three broad
categories: (1) issues concerning the Board’s conclusion that the third good-cause factor—injury
or benefit to the public—weighs strongly against termination, (2) issues concerning the Board’s
conclusion that the fourth good-cause factor—the adequacy of Bert Ogden’s service facilities,
equipment, parts, and personnel—does not weigh either in favor of or against termination, and
12
(3) issues concerning the Board’s ultimate determination that Subaru failed to demonstrate good
cause to terminate Bert Ogden’s franchise.
Standard of review
We review the Board’s final order under the substantial-evidence rule. Tex. Occ.
Code § 2301.751(a); Tex. Gov’t Code § 2001.174. “This is a limited standard of review that
gives significant deference to the [Board] in its field of expertise.” Railroad Comm’n v. Torch
Operating Co., 912 S.W.2d 790, 792 (Tex. 1995).
Under this “highly deferential” standard, Continental Imports, Inc.
v. Mercedes-Benz USA, LLC, No. 03-21-00377-CV, 2023 WL 114876, at *2 (Tex. App.—Austin
Jan. 6, 2023, pet. denied) (mem. op.), the issue “is not whether the [Board]’s decision was
correct, but whether the record demonstrates some reasonable basis for the [Board]’s action.”
Austin Chevrolet, Inc., 212 S.W.3d at 431.
We presume that the Board’s decision should be affirmed under the
substantial-evidence rule. Id. at 430. The burden is on Subaru to show that the Board’s findings,
inferences, conclusions, or decision prejudiced its substantial rights. Id.; see Tex. Gov’t Code
§ 2001.174(2) (stating grounds for reversal under substantial-evidence rule). As relevant here,
the Board’s final order prejudices Subaru’s substantial rights if:
• it is not reasonably supported by substantial evidence,
• it exceeds its statutory authority because it ignores the ALJs’ basic fact findings,
reweighs the evidence to make new basic fact findings, and otherwise changes
findings of fact or conclusions of law made by the ALJ in a manner inconsistent
with the APA, Hyundai Motor Am., 581 S.W.3d at 838, 842; Flores v. Employees
Ret. Sys. of Texas, 74 S.W.3d 532, 551 (Tex. App.—Austin 2002, pet. denied), or
13
• it is arbitrary and capricious because it fails to adequately explain the Board’s
reasons for departing from precedent and makes ad hoc policy shifts. Oncor Elec.
Delivery Co. v. Public Util. Comm’n, 406 S.W.3d 253, 267 (Tex. App.—Austin
2013, no pet.) (agency must “explain its reasoning when it appears to have
departed from its earlier administrative policy or to be inconsistent in its
determinations”); Flores, 74 S.W.3d at 545 (agency acts arbitrarily and
capriciously if it “adopts new policy in the course of a contested-case hearing
without giving the parties pre-hearing notice”).
Tex. Gov’t Code § 2001.174(2)(B), (E)–(F).
Injury or benefit to the public
We begin by considering Subaru’s issues concerning the Board’s conclusion that
the third factor, the “injury or benefit to the public,” Tex. Occ. Code § 2301.455(a)(3), “weighs
strongly against termination.” In concluding that the third factor weighs strongly against
termination, the Board rejected the ALJs’ contrary conclusion, determining that it rested on two
misinterpretations of law. First, the Board determined that the ALJs erroneously based their
conclusion in part on Bert Ogden’s comparative customer-satisfaction rankings while ignoring
Bert Ogden’s actual customer-satisfaction scores. Second, the Board determined that the ALJs
erroneously based their conclusion in part on their “speculative” finding that any injury to the
public from terminating Bert Ogden would be outweighed by the “hypothetical” benefit of a new
dealer. Subaru contends that the ALJs committed neither error and that the Board’s corrections
are themselves erroneous and prejudice Subaru’s substantial rights for various reasons. We
consider each correction in turn.
Comparative rankings
The Board determined that the ALJs misinterpreted Section 2301.455(a)(3) by
assessing injury based on comparative rankings while ignoring Bert Ogden’s actual customer-
14
satisfaction scores of “closer to extraordinary than very good.” The Board concluded that the
ALJs’ reliance on comparative customer-satisfaction rankings is unsupported by the language of
Section 2301.455(a)(3). In its final order, the Board explained that, when the legislature intends
for the Board to compare the performance of different dealers, that requirement is set out
explicitly. Thus, the first good-cause factor expressly requires a comparative analysis by stating
that the dealer’s sales must be considered “in relation to the sales in the market.” Id.
§ 2301.455(a)(1) (emphasis added). Likewise, the fourth good-cause factor expressly requires a
comparative analysis by stating that the adequacy of the dealer’s facilities, inventory, and
personnel must be considered “in relation to those of other dealers of new motor vehicles of the
same line-make.” Id. § 2301.455(a)(4) (emphasis added). But the text of the other good-cause
factors contains no such comparative language. Id. § 2301.455(a)(2)–(3), (5)–(7).
The Board’s interpretation of Section 2301.455(a)(3) is reasonable and accords
with the statute’s plain language. Therefore, we defer to it here. See Railroad Comm’n v. Texas
Citizens for a Safe Future & Clean Water, 336 S.W.3d 619, 625 (Tex. 2011) (courts generally
uphold agency’s interpretation of statute it is charged with enforcing so long as it is reasonable
and does not contradict statute’s plain language).
Because the ALJs relied on Bert Ogden’s comparative OLP rankings, they gave
little weight to Bert Ogden’s actual customer-satisfaction scores, which the ALJs themselves
found “tend[ed] to be closer to extraordinary than very good.” The Board reasonably concluded
that a comparative-ranking analysis is nonprobative of injury to the public under the facts of this
case. Such an analysis renders dealers with low rankings subject to termination even when, as
here, their actual customer-satisfaction scores reflect a very good or even extraordinary degree
of satisfaction.
15
Despite its reasonableness, Subaru contends that the Board’s correction is
arbitrary and capricious because it inexplicably departs from Board precedent established by
Cecil Atkission Orange, LLC v. FCA US LLC, MVD Docket No. 15-0015.LIC, SOAH Docket
No. XXX-XX-XXXX.LIC, 2016 WL 3457922 (State Office of Admin. Hearings, June 17, 2016).
We disagree.
In arguing that Atkission establishes a policy in favor of comparative rankings,
Subaru cites no finding or conclusion from the decision but rather invokes a summary of one of
the party’s arguments:
FCA also points to consumer dissatisfaction with the Atkission Chrysler
dealership as further evidence of public harm that is being caused by the
status quo. In customer satisfaction rankings for 2015, Atkission Chrysler
was ranked among the worst in Texas.
Id. at *17. But the decision itself does not rely on comparative customer-satisfaction rankings.
Instead, it relies on actual customer behavior evidencing dissatisfaction with the dealer:
Regardless of whether Atkission Chrysler is the worst ranked dealership
or an average ranked dealership in terms of customer satisfaction,
customers are choosing to avoid the dealership altogether and instead
travel between 20-40 miles, one way, to visit other Chrysler dealerships in
lieu of purchasing from Atkission Chrysler.
Id. at *18 (emphasis added). Thus, Atkission is not precedent supporting the use of comparative
rankings to show injury to the public. And at least one other Board decision, Red Bird Ford, Inc.
v. Ford Motor Co., MVD Docket No. 93-095 (Tex. Dep’t Motor Vehicles July 31, 1996),
expressly disfavors their use:
The examiner does not believe that QCP ranking is a reliable measurement
of how a dealer is truly performing. The raw QCP scores indicate that Red
16
Bird has increased customer satisfaction and that overall customers are
‘very satisfied’ with Red Bird’s service.
Id. at 16–17.
Atkission and Red Bird are consistent with the plain language of Section
2301.455(a)(3), which does not contemplate, much less require, a comparative analysis in
assessing public injury or benefit. The Board’s decision to give weight to Bert Ogden’s actual
customer-satisfaction scores rather than comparative rankings is consistent with Section
2301.455(a)(3) and does not depart from prior Board policy or precedent.
Subaru further contends that, in rejecting comparative rankings as evidence of
injury to the public, the Board erroneously interpreted Section 2301.455(a)(3) as requiring proof
that the dealership is affirmatively harming the public. Again, we disagree. The Board’s
conclusion that the comparative rankings failed to prove injury to the public did not impose an
obligation on Subaru to prove that Bert Ogden was injuring the public; it was a recognition that
Subaru had tried to do so, but with incorrect focus. See Tex. Occ. Code § 2301.453(a)(3)
(establishing that dealer bears burden to show good cause exists to terminate franchise).
We hold that the Board, which has expertise in this industry, properly
exercised its discretion in rejecting the ALJs’ assessment of injury based on Bert Ogden’s
low comparative rankings when those rankings were inconsistent with Bert Ogden’s actual
customer-satisfaction scores.
Benefits of replacement dealer
The Board determined that the ALJs misinterpreted Section 2301.455(a)(3) in
finding that the injury to the public from terminating Bert Ogden “would be outweighed by the
hypothetical benefit of having a new dealer.” In their PFD, the ALJs found that:
17
[Subaru] has indicated that it intends to quickly install a new dealer, so
any inconvenience will be brief and is outweighed by the benefit the
public will realize once a new dealer is established.
In its Final Order, the Board amended the ALJs’ finding to read:
[Subaru] has indicated that it intends to quickly install a new dealer, so
any inconvenience will be brief.
Thus, the Board adopted the ALJs’ findings that Subaru intends to quickly install
a new dealer and that any inconvenience from having no dealer in the Pharr AOR will be brief.
But the Board rejected the ALJs’ conclusion that the public would be better served by a new
dealer for three principal reasons.
First, the Board concluded that Bert Ogden had provided “significant benefits” to
the public in the Pharr AOR. In making its conclusion, the Board considered the ALJs’ basic
fact findings showing that Bert Ogden has been a “stable and consistent” Subaru dealer for the
Pharr AOR since 2009. These findings show that before Bert Ogden began operating, Subaru
had struggled to maintain a dealership in the Rio Grande Valley. Between 1976 and 2009, there
were eight successive Subaru dealers in the Rio Grande Valley. The average tenure of these
prior dealers was just over five years. Bert Ogden has been operating for over fifteen years. Its
customer-satisfaction scores are consistently high. Its facilities are adequate, and it
performs warranty work for Subaru owners in the Pharr AOR, including work on older,
high-mileage Subarus.
Second, the Board concluded that the public would be harmed from Bert Ogden’s
termination. In making its conclusion, the Board adopted the ALJs’ basic fact finding that “[i]f
the dealership agreement is terminated, there will be a transition period before a new dealer is in
18
place during which there will be no Subaru dealership in the Rio Grande Valley.” Although the
Board also adopted the ALJs’ finding that the transition period would be “brief,” it is nonetheless
undisputed that there will be some indefinite period during which no Subaru dealership exists in
the Rio Grande Valley. During this period, Subaru owners will have to drive at least to
Corpus Christi or San Antonio for warranty and recall work.
Third, the Board concluded that any benefit from a new dealer is hypothetical. In
making its conclusion, the Board considered the ALJs’ basic fact findings showing that eight
Subaru dealerships had operated unsuccessfully in the Rio Grande Valley before Bert Ogden was
appointed a franchisee. The Board also considered the ALJs’ finding that Subaru “did not
present evidence that another dealer would perform at a higher level” than Bert Ogden.
Thus, in exercising its discretion to weigh injury or benefit to the public, the
Board concluded that the nonspeculative harm from terminating Bert Ogden would outweigh any
speculative benefits from Subaru’s indicated intent to find a replacement.
Subaru raises a number of complaints about the Board’s conclusion. Subaru first
complains that “the Board erred in finding that [Subaru]’s intention to quickly install a
replacement dealer is ‘speculative.’” But the Board did not find that Subaru’s intent was
speculative. The Board’s amended finding adopts the ALJs’ proposed finding that Subaru “has
indicated that it intends to quickly install a new dealer, so any inconvenience will be brief.”
Instead, the Board rejected the portion of the proposed finding that included an assumption that
the public would necessarily benefit from Subaru’s termination of Bert Ogden and installation of
a new, unnamed, unproven Subaru dealer. The Board specifically referred to the “benefit of
having a new dealer” as “hypothetical.” It is true that the Board’s explanation of its change
includes the statement that Subaru’s “intention to quickly install a new dealer . . . is speculative
19
and therefore deserves little weight.” But when read in context with its adoption of the ALJs’
finding that “any inconvenience will be brief,” the Board’s explanation is best understood to
mean that the benefit of a new dealer is speculative, not that Subaru’s intent to install a
replacement is.
Subaru next argues that the Board’s “new finding that Bert Ogden’s termination
would cause significant harm to consumers constitutes reversible error” because the Board
identified no findings of fact or evidence that supports it and because the Board neglected to
provide a rational basis for the change. Again, we disagree.
As the Board explained, the ALJs’ findings show that Bert Ogden’s termination
would result in there being no Subaru dealership in the Rio Grande Valley for some period and,
as a result, the public would be inconvenienced. The ALJs’ findings further show that the
nearest Subaru dealerships the public would visit for warranty or recall work during this
transition period would be in San Antonio or Corpus Christi. Thus, the Board reasonably
concluded that during this transition period, Subaru owners in the Rio Grande Valley needing
warranty or recall work would be harmed.
Citing Atkission and Mr. Yamaha, Inc. v. American Suzuki Motor Corp.,
MVD Docket No. 09-0043LIC, SOAH Docket No. XXX-XX-XXXX.LIC, 2011 WL 577104
(State Office of Admin. Hearings Feb. 8, 2011), Subaru contends that the Board’s conclusion
departs from precedent in which the Board “previously accepted as credible and relied on a
distributor’s intent to quickly install a new dealer as a circumstance that weighs in favor of
termination.” These decisions are distinguishable.
In Atkission, the evidence showed that local customers were bypassing the local
dealer and travelling to dealerships twenty to forty miles away. 2016 WL 3457922 at *17.
20
Because the customers were already bypassing the existing dealer, termination of the existing
dealer would cause no additional inconvenience.
In Mr. Yamaha, the evidence showed that there existed some sort of dispute
between the two co-owners of the protesting dealership and that one of the co-owners had carried
weapons onto the premises and threatened to shoot the other co-owner. 2011 WL 577104, at
*15. In her analysis, the ALJ explained that the dispute between the two owners “took on
dangerous qualities that could have endangered the public, including threats of violence at the
dealership.” Id. at *16. The ALJ further explained that during the transition period between the
termination of the existing dealership and the installation of a new one, customers would be able
to visit another dealership that was just a “short drive” away. Id.
So unlike here, in both Atkission and Mr. Yamaha, there existed reasonably close
alternative dealerships that consumers could visit during any transition period between the
closing of the protesting dealership and the opening of its replacement. And unlike here, in
Mr. Yamaha, keeping the protesting dealership open could have resulted in actual violence being
done to the public.
Evaluating “injury or benefit to the public” necessarily requires the Board to
weigh the benefits a dealership provides the public and the detrimental impacts on the public
from termination. In Atkission and Mr. Yamaha, the Board did not establish a policy of always
weighing a distributor’s intent to quickly establish a new dealership in favor of termination.
Instead, the Board followed the directive of Section 2301.455: it considered “all existing
circumstances” in deciding whether the “public injury or benefit” factor weighed in favor
of termination.
21
The status quo evidence showed a stable, long-term Subaru dealership with a
record superior to that of its eight predecessors—as compared to hypothetical benefits from
Subaru’s “indicated” intent to install some unknown replacement that no evidence showed would
outperform Bert Ogden. The Board reasonably afforded more weight to the non-speculative
benefits of the status quo and to the non-speculative injury that termination would cause to
consumers in the Rio Grande Valley—leaving them with no Subaru dealership providing
convenient access to warranty, recall, and repair services for at least some amount of time. We
conclude that the Board did not err in rejecting the ALJs’ conclusions, and Subaru’s substantial
rights were not prejudiced by the Board’s change to the conclusions.
Adequacy of dealer’s facilities, equipment, parts, and personnel
We now consider Subaru’s complaints about the Board’s conclusion that the
fourth factor, “the adequacy of [Bert Ogden]’s service facilities, equipment, parts, and personnel
in relation to those of other dealers of new motor vehicles of the same line-make,” Tex. Occ.
Code § 2301.455(a)(4), is neutral.
Inventory
In its Final Order, the Board explained that “the inadequacy of the parts inventory
in this case carries less significance in the context of the modern motor vehicle industry where
there is fast shipping and delivery of parts from manufacturers to dealers that allows dealers to
get parts as needed.” Subaru characterizes the Board’s explanation as “an additional finding of
basic fact.” Subaru contends that the Board exceeded its statutory authority by making this new
“finding.” We disagree with Subaru’s characterization.
22
Basic facts “answer the questions of who did what, when, how, why, with what
motive or intent.” Hyundai Motor Am., 581 S.W.3d at 838. The Board’s explanation does not
say anything about what Bert Ogden did or why. The Board’s explanation is not a basic fact
finding but a conclusion reasonably drawn from its evaluation of the basic facts based on its
industry expertise.
The members of the Board include two franchised dealers, one independent (or
used vehicle) dealer, and one representative of a manufacturer or distributor. Tex. Transp. Code
§ 1001.021(b). In a contested case, “[t]he special skills or knowledge of the state agency and its
staff may be used in evaluating the evidence.” Tex. Gov’t Code § 2001.090(d). Thus, we afford
the Board members’ “expertise substantial deference in interpreting the facts . . . .” Centerpoint
Energy Houston Elec., LLC v. Public Util. Comm’n, 212 S.W.3d 389, 399 (Tex. App.—Austin
2006, pet. granted, judgm’t vacated, w.r.m.).
Here, in determining that the comparative inadequacy of Bert Ogden’s parts
inventory carried less weight than did its service facilities, the Board reasonably drew upon its
special knowledge of how parts are distributed in the motor-vehicle industry. But it did not use
its expertise as a substitute for evidence or as the basis for new basic fact findings. It did not
revisit the basic fact that Bert Ogden’s parts inventory was comparatively inadequate to that of
other Subaru dealers. Instead, the Board weighed the significance of different components of the
adequacy factor in light of existing circumstances in the industry. In weighing the components in
this manner, the Board did not make a basic fact finding; it made a prudential judgment within its
expertise and discretion when interpreting the facts.
Subaru complains that “not a single finding of fact in the PFD . . . addresses the
shipping time for parts or finds that parts inventory is insignificant.” But the absence of such
23
findings did not prevent the Board from using its industry expertise to evaluate the significance of
basic facts. Industry expertise and the authority to make the final decision are vested in the
Board, not in SOAH. See 43 Tex. Admin. Code § 215.63(c); see also Tex. Gov’t Code
§ 2001.090(d).
Next, Subaru contends that the Board’s explanation for assigning less weight to
the inadequacy of Bert Ogden’s parts inventory is a “finding” unsupported by substantial
evidence and in violation of Section 2001.141 of the Government Code. Tex. Gov’t Code
§ 2001.141(c) (“Findings of fact may be based only on the evidence and on matters that are
officially noticed.”). Subaru’s argument lacks merit because the significance—the weight—the
Board gave the parts inventory subfactor is not a basic fact finding but the Board’s conclusion
based on its evaluation of the basic facts and its industry expertise.
Subaru cites the PFD in asserting that the ALJs “found” that a dealer’s parts
inventory is relevant to customer service, that repair or service can be performed more quickly
than if the parts must be ordered, and that other Subaru dealers were increasing their
parts-inventory levels. But none of these “findings” contradict the Board’s evaluation of the
parts-inventory component. The Board did not say that having a larger parts inventory was not
desirable. The Board recognized from the basic facts that demand for service and repair in
Bert Ogden’s market area could be handled with a lower-than-average parts inventory because of
modern shipping and delivery service.
Subaru’s final complaint about the parts-inventory assessment is that it was
arbitrary and capricious. Subaru contends that the Board’s conclusion “that parts inventory
carries less significance in the modern motor vehicle industry” constitutes a “new statement of
24
policy” making parts inventory “no longer a significant consideration.” Subaru mischaracterizes
what the Board decided.
The Board neither said nor implied that parts inventory is no longer “a significant
consideration” in a termination case. The significance of the comparative adequacy or
inadequacy of a dealer’s parts inventory depends on the particular facts and circumstances of
each termination case. Here, the Board made no policy statement applicable to all
termination cases. It stated its reasons for giving lesser weight to one component of the
adequacy factor in light of this case’s particular facts and circumstances.
Subaru criticizes the Board for not giving pre-hearing notice of the weight the
Board would assign to the parts-inventory component, but the proper weight of any factor, or its
components, cannot be known until the Board evaluates the facts and circumstances of each case.
Personnel
In its Final Order, the Board determined that the ALJs had misinterpreted Section
2301.455(a)(4) “by focusing primarily on exclusive personnel, rather than on the total number of
Bert Ogden personnel available to assist and service vehicles for its customers.” The Board
explained that Section 2301.455(a)(4) “does not impose an exclusivity requirement” on
personnel. Nevertheless, the Board continued, five of the ALJs’ six findings on personnel
focused on Bert Ogden’s lack of exclusive personnel. But the lack of Subaru-exclusive
personnel does not show that Bert Ogden’s “personnel were inadequate to meet its customers’
needs since shared personnel served Subaru customers” as well. Thus, the Board adopted the
ALJs’ finding that Bert Ogden had inadequate personnel, but it determined that this inadequacy
is “not a significant factor and carries little weight” under the facts of this case.
25
The Board gave less weight to the comparative inadequacy of Bert Ogden’s
service personnel because the ALJs focused their attention on the number of Bert Ogden’s
parts-and-service personnel dedicated exclusively to serving the Subaru brand rather than on the
number of Subaru personnel available to service Bert Ogden’s customers. It is undisputed that
Bert Ogden’s multiple franchises share some service personnel.
Subaru contends that it is “simply untrue” that the ALJs focused primarily on
exclusive personnel and that exclusivity is nevertheless a “highly relevant and mandatory
consideration” under Section 2301.455(a)(4). We disagree.
As just recounted, five of the ALJs’ six basic fact findings concerning personnel
deal with Bert Ogden’s comparative lack of “Subaru-exclusive” personnel. The ALJs did, in
fact, focus primarily on exclusive personnel.
The lack of relevance of “exclusivity” to the personnel component is
evident from the fact that the legislature did not include it in Section 2301.455(a)(4).
That statute requires the Board to consider “personnel in relation to those of other dealers of new
motor vehicles of the same line-make.” The Board reasonably construed Section 2301.455(a)(4)
as requiring consideration of all personnel serving the dealership’s customers, not just personnel
who work only on a single line-make. We decline to construe Section 2301.455(a)(4) as
requiring the Board to focus on dealership personnel dedicated exclusively to one line-make.
The Board assigned little significance to Bert Ogden’s comparative lack of
“Subaru-exclusive” personnel because that fact did not establish that Bert Ogden’s personnel
failed to mee the needs of its Subaru customers. Subaru argues the Board’s reasoning violates
Section 2301.455(a)(4) because the statute requires a comparison of Bert Ogden’s personnel to
the personnel of other Subaru dealers and that the Board, inexplicably, ignored fact findings that
26
Bert Ogden had comparatively higher turnover in its service and parts departments, had not
increased the number of service employees and dedicated service and parts managers, and had
lower service-satisfaction scores than other dealers. Subaru’s argument mischaracterizes the
Board’s actions.
The Board did not revisit whether Bert Ogden’s personnel were adequate in
relation to other Subaru dealers. It adopted the basic findings showing Bert Ogden’s personnel to
be comparatively inadequate. But in assigning relative weight to that component the Board
considered all existing circumstances.
The distribution and sale of motor vehicles vitally affects the public interest.
Tex. Occ. Code § 2301.001. Bert Ogden has been a stable Subaru dealership serving the
Rio Grande Valley for fifteen years and6 has been providing convenient access to Subaru sales,
warranty, and recall service to consumers in the Valley. The Board reasonably concluded this to
be highly relevant to the ultimate question whether good cause exists for terminating the
dealership. The Board properly exercised its discretion in evaluating the relative weight to be
given the personnel component in light of these circumstances.
Facilities
In its Final Order, the Board determined that the ALJs misinterpreted Section
2301.455(a)(4) in weighing the adequacy of Bert Ogden’s facilities against the inadequacy of its
equipment, parts, and personnel. The Board explained that “[t]he adequacy of the facilities is
very important to the public’s experience in the dealership.” Thus, the Board concluded,
“[w]hen the adequacy of the facilities is weighted appropriately against the inadequacy in
27
equipment, parts, and exclusive personnel, the facilities offset the less-significant factors of
equipment, parts and personnel.”
Subaru argues that the Board’s determination is arbitrary and capricious because
it establishes a new policy that adequate service facilities offset inadequate equipment, parts, and
personnel. Subaru contends that this alleged new policy departs from precedent established by
Mr. Yamaha, 2011 WL 577104, and All Star Imports v. Mazda Motor of N. Am., MVD Docket
No. 19-0015-LIC, SOAH Docket No. XXX-XX-XXXX.LIC, 2022 WL 22902800 (State Office
Admin. Hearings Jan. 9, 2022). Subaru emphasizes that in these prior decisions, the Board did
not conclude that adequate service facilities were “very important” or otherwise offset the
inadequacy of the other components. In fact, in both decisions, the dealer’s inadequate personnel
alone were found to be sufficient for the factor to weigh in favor of termination.
In Mr. Yamaha, the ALJ found that the dealer had failed to train its service
technicians. And in All Star, the ALJ found that the one of the dealer’s service technicians
fraudulently reported replacing defective airbags when he had failed to do so. Here, the ALJs
made no findings that Bert Ogden’s service personnel were inadequately trained or performed
inadequate, much less fraudulent, work. The serious personnel issues in Mr. Yamaha and
All Star are absent from this case.
Thus, those decisions are not inconsistent with the Board’s final order here. The
Board used its industry expertise to weigh and balance the various components of the adequacy
factor and to conclude that the comparative adequacy of Bert Ogden’s facilities carried greater
weight than the comparative inadequacy of its equipment, parts, and personnel.
Subaru’s argument fails to appreciate that the assignment of weight to the various
Section 2301.455(a) factors—as well as to each of the (a)(4) subfactors—is heavily dependent on
28
the facts of each particular case. It is not the case that the weight assigned to one factor (or
subfactor) in one case will always be the same in other cases or will always bear the same
relation to each other factor (or subfactor) in every case. The weight to be accorded to each
subfactor and factor is a product of the circumstances of each case.
Subaru argues that it is “nonsensical” for the Board to conclude that Bert Ogden’s
facilities have a greater impact on the public than “consistently inadequate service personnel,
parts inventory, and equipment.” But the evidence before the Board was that Bert Ogden’s
customer satisfaction scores verged on “extraordinary” and that Bert Ogden honors Subaru
warranties. Dealer compliance with warranties is one of Chapter 2301’s primary purposes and an
enumerated “good cause” factor. Tex. Occ. Code § 2301.001(2). Given these circumstances, the
Board reasonably concluded that the comparative adequacy of the facilities of the only Subaru
dealership in the Rio Grande Valley outweighed any comparative inadequacy in parts,
personnel, and equipment.
Ultimate determination of failure to show good cause
In the Final Order, in addition to explaining its evaluation of the ALJs’ analysis,
findings, and conclusions, the Board made additional conclusions of law to assign appropriate
weight to the various factors it was required to consider and to set out its ultimate conclusions.
Subaru contends that (1) these conclusions improperly changed agency policy after the hearing,
and (2) the Board did not adequately explain its reasons for drawing a different conclusion than
the ALJs did.
As previously discussed, the Board’s decision in this case established no new
policies about the assignment of weight to any of the good-cause factors. Although Subaru
29
contends that the Board’s explanation of its good-cause determination is deficient, the Board
explained its changes to the ALJs’ findings and conclusions it changed, and explained that, in
light of those changes, the three factors that weigh in favor of termination—because they
affected only Bert Ogden and Subaru—were outweighed by the two factors that weighed heavily
against termination, which affected the public.
Chapter 2301 and the APA give the Board, not SOAH, the exclusive authority to
make the ultimate findings and conclusions of law in franchise-termination cases. The Board’s
rejection of the ALJs’ conclusions on the weight of several good-cause factors and the Board’s
adoption of revised conclusions of law were not arbitrary, capricious, or “policy shifts.” The
Board explained the factual bases and legal rationale for its changes, as required by the APA and
the precedents of this Court. In evaluating the “injury or benefit to the public” good-cause
factor, the Board considered actual, nonspeculative harm to the public that would ensue if
Bert Ogden’s franchise were terminated and reasonably assigned it more weight than the other
good-cause factors. The Board cited the following specific basic fact findings supporting its
assignment of relative weight:
• Bert Ogden has been a stable and consistent Subaru dealer for the Pharr AOR
since 2009;
• Bert Ogden’s facilities are adequate in relation to those of other dealers;
• Bert Ogden has been performing warranty work for other Subaru owners in the
AOR, including on older high-mileage Subarus;
• Bert Ogden’s termination would result in a transition period during which there
would be no Subaru dealer in the Rio Grande Valley to sell new Subaru vehicles
and perform service work, including warranty and recall work;
30
• during this transition period, Bert Ogden’s termination would require the public to
travel to Corpus Christi, San Antonio, or farther to buy a Subaru or to get
warranty and recall work; and
• there is no evidence—and therefore no reason to believe—that a replacement
dealer would perform at a higher level than Bert Ogden.
The inferences the Board drew from these facts were reasonable and the weight
the Board gave each good-cause factor was within its authority.
CONCLUSION
We hold that Subaru has failed to show the Board’s final order prejudiced its
substantial rights. Therefore, we affirm.
__________________________________________
Maggie Ellis, Justice
Before Chief Justice Byrne, Justices Theofanis, and Ellis
Affirmed
Filed: July 18, 2025
31