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

ACCEPTED

03-15-00285-CV

5898687

THIRD COURT OF APPEALS

AUSTIN, TEXAS

7/1/2015 12:33:03 PM

NO. 03-15-00285-CV JEFFREY D. KYLE

CLERK

IN THE THIRD COURT OF APPEALS

AUSTIN, TEXAS

FILED IN

3rd COURT OF APPEALS

VOLKSWAGEN GROUP OF AMERICA, INC. AUSTIN, TEXAS

AND AUDI OF AMERICA, INC. 7/1/2015 12:33:03 PM

JEFFREY D. KYLE

Appellants

Clerk

vs.

JOHN WALKER III, IN HIS OFFICIAL CAPACITY AS CHAIRMAN OF

THE TEXAS DEPARTMENT OF MOTOR VEHICLES BOARD, AND

THE HONORABLE MICHAEL J. O'MALLEY AND THE HONORABLE

PENNY A. WILKOV, IN THEIR OFFICIAL CAPACITIES AS

ADMINISTRATIVE LAW JUDGES FOR THE STATE OFFICE OF

ADMINISTRATIVE HEARINGS

Appellees

On Appeal from the 201st Judicial District Court, Travis County, Texas

Trial Court Cause No. D-1-GN-15-001186

Honorable Amy Clark Meachum, Presiding Judge

APPELLANTS’ BRIEF

S. Shawn Stephens Billy M. Donley

Texas Bar No. 19160060 Texas Bar No. 05977085

James P. Sullivan Mark E. Smith

Texas Bar No. 24070702 Texas Bar No. 24070639

KING & SPALDING BAKER & HOSTETLER LLP

1100 Louisiana, Suite 4000 811 Main Street, Suite 1100

Houston, Texas 77002 Houston, Texas 77002

Telephone: (713) 751-3200 Telephone: (713) 751-1600

Facsimile: (713) 751-3290 Facsimile: (713) 751-1717

Counsel for Appellants Volkswagen Group of America, Inc. and

Audi of America, Inc.

ORAL ARGUMENT REQUESTED

IDENTITY OF PARTIES AND COUNSEL

Appellants and Defendants below:

Volkswagen Group of America, Inc. and Audi of America, Inc. (hereafter,

“Appellants”).

Lead Appellate counsel for Plaintiffs/Appellants:

S. Shawn Stephens

Texas Bar No. 19160060

James P. Sullivan

Texas Bar No. 24070702

KING & SPALDING

1100 Louisiana, Suite 4000

Houston, Texas 77002

Telephone: (713) 751-3200

Facsimile: (713) 751-3290

Trial and Appellate Counsel for Plaintiffs/Appellants:

Billy M. Donley

Texas Bar No. 05977085

Mark E. Smith

Texas Bar No. 24070639

BAKER & HOSTETLER LLP

811 Main Street, Suite 1100

Houston, Texas 77002

Telephone: (713) 751-1600

Facsimile: (713) 751-1717

i

Trial and Appellate Counsel for Defendants/Appellees:

William R. Crocker

807 Brazos, Ste. 1014

Austin, Texas 78701

Counsel for Appellees Ricardo M. Weitz; Hi Tech Imports North, LLC; Hi Tech

Imports, South, LLC; and Hi Tech Imports, LLC

Kimberly Fuchs

Assistant Attorney General

Texas Attorney General’s Office

P.O. Box 12548

Austin, Texas 78711-2548

Counsel for Appellees Michael J. O’Malley and Penny A. Wilkov

J. Bruce Bennett

Cardwell, Hart & Bennett, LLP

807 Brazos, Suite 1001

Austin, Texas 78701

Counsel for Appellees Ricardo M. Weitz; Hi Tech Imports North, LLC; Hi Tech

Imports, South, LLC; and Hi Tech Imports, LLC

Dennis McKinney

Assistant Attorney General

Texas Attorney General’s Office

P.O. Box 12548

Austin, Texas 78711-2548

Counsel for Appellee John Walker III

ii

Joseph W. Letzer

Dent M. Morton

Burr & Forman, LLP

420 20th Street N., Suite 3400

Birmingham, AL 35203

Counsel for Appellees Ricardo M. Weitz; Hi Tech Imports North, LLC; Hi Tech

Imports, South, LLC; and Hi Tech Imports, LLC

iii

ABBREVIATION TABLE

SOAH State Office Of Administrative Hearings

ALJ Administrative Law Judge

PFD Proposal for Decision

Contested Case The administrative contested case styled Budget Leasing,

Inc. d/b/a Audi North Austin and Audi South Austin v. Weitz,

et. al. v. Volkswagen Group of America, Inc., et. al., MVD

Docket No. 13-0008-LIC, SOAH Docket No. 608-13-

4599.LIC, before the Texas Department of Motor Vehicles,

Motor Vehicle Division

Audi Volkswagen Group of America, Inc. and Audi of

America, Inc. (Audi of America, Inc. is an operating

unit of Volkswagen Group of America, Inc.).

Board Texas Department of Motor Vehicles Board

Division Texas Department of Motor Vehicles, Motor Vehicle

Division

VWGoA Volkswagen Group of America

iv

TABLE OF CONTENTS

IDENTITY OF PARTIES AND COUNSEL ..........................................................i

ABBREVIATION TABLE ..................................................................................... iv

TABLE OF AUTHORITIES ................................................................................. vii

STATEMENT OF THE CASE ................................................................................x

ISSUES PRESENTED ............................................................................................ xi

STATEMENT REGARDING ORAL ARGUMENT ......................................... xii

STATEMENT OF FACTS ....................................................................................... 1

SUMMARY OF THE ARGUMENT ...................................................................... 8

ARGUMENT AND AUTHORITIES .................................................................. 15

A. THE DISMISSAL WAS ERRONEOUS BECAUSE APPELLEES’ ACTS WERE,

AND ARE, ULTRA VIRES; THEREFORE, APPELLEES WERE NOT ENTITLED

TO IMMUNITY AND AUDI WAS NOT REQUIRED TO EXHAUST

ADMINISTRATIVE REMEDIES........................................................................... 15

1. This Court must consider the merits of the case in order

to resolve the jurisdictional issues under a de novo

standard of review. .......................................................................... 17

2. Chairman Walker’s actions exceeded his power. ........................ 19

a. Walker’s Remand Order exceeded his authority

because Section 2001.058(e) of the APA does not

authorize a remand. ............................................................... 20

b. Additionally, Walker did not have the power to

order the ALJs to reopen the record after they

issued the PFD. ....................................................................... 24

c. Walker’s Remand Order Exceeds the Board’s

Authority under Section 2301.709(a) of the Code

because it considers untimely evidence. ............................ 25

d. Walker’s order also violates the rule prohibiting the

Board from attempting to influence the ALJs’

decision with improper facts. ............................................... 28

v

i. The Remand Order requires the ALJs’ to

consider improper evidence. ........................................... 28

ii. The Remand Order flows from improper ex

parte contact and the use of improper

procedures. ........................................................................ 29

iii. The Remand Order differs materially from

member Slovacek’s unanimously approved

motion. ............................................................................... 32

iv. General statutory provisions did not authorize

Walker to issue the Remand Order. ............................... 33

v. Statutes, rules and procedures must apply in all

contested cases or the process becomes unfair............. 36

3. The ALJs Committed, and Continue to Commit, Ultra

Vires Acts. .......................................................................................... 39

a. The ALJs do not have authority to conduct a

remand after issuing a PFD. ................................................. 41

b. The ALJs do not have authority to reopen evidence

after a PFD. .............................................................................. 42

PRAYER AND REQUEST FOR RELIEF ............................................................ 47

CERTIFICATE OF COMPLIANCE .................................................................... 49

CERTIFICATE OF FILING AND SERVICE ...................................................... 49

vi

TABLE OF AUTHORITIES

Page(s)

Cases

Appraisal Review Board of Harris County Appraisal District v.

O’Connor & Assocs.,

267 S.W.3d 413 (Tex. App.—Houston [14th Dist.] 2008, no

pet.) ..................................................................................................................... 16

Budget Leasing, Inc. d/b/a Audi North Austin and Audi South

Austin v. Weitz, et. al. v. Volkswagen Group of America, Inc., et.

al.,

MVD Docket No. 13-0008-LIC ......................................................................... 1

Butnaru v. Ford Motor Company,

84 S.W.3d 198 (Tex. 2002) .................................................................................. 4

Chon Tri v. J.T.T.,

162 S.W.3d 552 (Tex. 2005) .............................................................................. 20

City of Dallas v. Carbajal,

324 S.W.3d 537 (Tex. 2010) .............................................................................. 18

City of El Paso v. Heinrich,

284 S.W.3d 366 (Tex. 2009) .......................................................................passim

City of Houston v. Rhule,

417 S.W.3d 440 (Tex. 2013) ..........................................................................9, 18

City of Houston v. Williams,

99 S.W.3d 709 (Tex. App.—Houston [14th Dist.] 2003, no pet) ................ 16

City of Sherman v. Public Util. Comm’n,

643 S.W.2d 681 (Tex. 1983), CR 821-843 ....................................................6, 16

Gattis v. Duty,

349 S.W.3d 193 (Tex. App.—Austin 2011, no pet) ...................................... 17

vii

GMC Superior Trucks, Inc. v. Irving Bank & Trust Co.,

463 S.W.2d 274 (Tex. Civ. App.—Waco 1971, no writ) ........................35, 36

Hammond v. City of Dallas,

712 S.W.2d 496 (Tex. 1986) ............................................................35, 36, 46, 47

Hearts Bluff Game Ranch, Inc. v. State,

381 S.W.3d 468 (Tex. 2012) .............................................................................. 18

Mag-T, L.P. v. Travis Central App. Dist.,

161 S.W.3d 617 (Tex. App.—Austin, 2005, pet denied) .............................. 17

Montgomery I.S.D. v. Davis,

34 S.W.3d 559 (Tex. 2000) ................................................................................ 38

Petitioner v. Tax Division, Texas Comptroller of Public Accounts,

2014 WL 4694592, SOAH Docket No. XXX-XX-XXXX.26,

Comptroller’s Decision at *6, June 9, 2014 ................................................... 43

Petitioner v. Tax Division, Texas Comptroller of Public Accounts,

2014 WL 4694594, SOAH Docket No. XXX-XX-XXXX.26,

Comptroller’s Decision at *1, June 16, 2014 ................................................. 43

Rodriguez v. Serv. Lloyds Ins. Co.,

997 S.W.2d 248 (Texas. 1999) .......................................................................... 40

Sexton v. Mount Olivet Cemetery Assn,

720 S.W.2d, 137 (Tex. App.—Austin 1986, writ ref’d n.r.e.) .........10, 19, 40

Southwestern Bell Tel., L.P. v. Emmett,

_ S.W.3d _, 58 Tex. Sup. Ct. J. 567 ...........................................................passim

Tex. Dep’t of Parks & Wildlife v. Miranda,

133 S.W.3d 217 (Tex. 2004) ................................................................8, 9, 17, 18

Texas Dept. of Transp. v. Sefzik,

355 S.W.3d 618 (Tex. 2011) ................................................................................ 6

Texas Gen. Indem. v. Workers’ Comp. Com’n,

36 S.W.3d 635 (Tex. App.—Austin 2000) ..........................................35, 46, 47

viii

Westheimer Indep. Sch. Dist. v. Brockette,

567 S.W.2d 780 (Tex. 1978) .............................................................................. 16

Yamaha Motor Corp. v. Motor Vehicle Division,

860 S.W.2d 223 (Tex. App.—Austin 1993, writ denied) ............................. 16

Statutes

1 TEX. ADMIN CODE ANN. § 155.153 .............................................................passim

30 TEX. ADMIN. CODE ANN. § 80.265 ................................................................... 23

TEX. GOV’T. CODE ANN. § 2001.058 ...............................................................passim

TEX. GOV’T CODE ANN. § 2001.146(a) .................................................................. 27

TEX. GOV’T CODE § 2001.141(d) ............................................................................ 40

TEX. GOV’T CODE § 2001.143 ................................................................................. 39

TEX. OCC. CODE § 2301.360 ...............................................................................4, 34

TEX. OCC. CODE § 2301.709 ............................................................................passim

TEX. OCC. CODE § 2301.704 ................................................................................. 1, 2

Other Authorities

16 TEX. ADMIN. CODE § 22.262(c) ......................................................................... 23

2 Kenneth Culp Davis & Richard J. Pierce, Jr., Administrative

Law Treatise § 9.8 at 67 (3d ed. 1994) .............................................................. 37

Ron Beal, From Proposal for Decision to Final Decision: What

Happens in Between?, 15 Tex. Tech Admin. L.J. 113, (2013) .................passim

Pete Schenkkan, Texas Administrative Law: Trials, Triumphs and

New Challenges, 7 Tex. Tech Admin. L.J. 288 (2006) ............................. 37-38, 40

ix

STATEMENT OF THE CASE

Trial Judge: Honorable Amy Clark Meachum

Trial Court: 201st Judicial District Court, Travis County,

Texas; Trial Court Cause No. D-1-GN-15-

001186

Nature of the case: Audi sued three individuals (the chair of the

Texas Motor Vehicle Board and two ALJs) in

their official capacities seeking injunctive relief

preventing these individuals from exceeding

their statutory powers and from departing

from statutes, rules, and established

procedures by remanding/conducting a

remand in an administrative contested case

after a PFD had issued. CR 117-148.

Defendants/Appellees filed pleas to the

jurisdiction asserting governmental immunity

and failure to exhaust administrative

remedies. See, e.g., CR 731,821, 836.

The course of pleadings and Trial Court dismissed the case. CR 2030-2031.

trial court’s disposition of

the case:

x

ISSUES PRESENTED

1. Defendants/Appellees were sued in their official capacities for

ultra vires acts as required by the Supreme Court’s City of El

Paso v. Heinrich, 284 S.W.3d 366, 369-70, 73 (Tex. 2009) decision.

Did the trial court err by dismissing this case since the

Defendants/Appellees were not entitled to governmental

immunity because their actions (reopening evidence and

ordering/conducting a remand of the administrative Contested

Case after a PFD had issued) exceeded their statutory powers?

2. Did the trial court err by dismissing the case below since the

Texas Supreme Court has held that exhaustion of

administrative remedies is not required where, as here, a

government official’s actions exceed his or her powers?

xi

STATEMENT REGARDING ORAL ARGUMENT

Audi requests oral argument in this case because oral argument will

assist the Court in understanding the interplay between the various

provisions of the Texas Occupations Code, the Administrative Procedure

Act (“APA”), Chapter 2001 of the Texas Government Code and the

administrative rules which control the outcome of this lawsuit. It will also

assist the Court in understanding the complex procedural background of

this appeal.

xii

STATEMENT OF FACTS

Appellants are Volkswagen Group of America, Inc. and Audi of

America, Inc. (collectively “Audi”)1. Appellees are three individuals sued

by Audi in their official capacities, John Walker III, Michael J. O’Malley and

Penny A. Wilkov. Walker is Chair of the Texas Department of Motor

Vehicles Board (“Board”). O’Malley and Wilkov are Administrative Law

Judges for the State Office of Administrative Hearing (SOAH). CR 117-148.

Audi filed this suit in the 201st Judicial District Court in Travis County to

enjoin Appellees from conducting ultra vires proceedings in an underlying

administrative contested case (Contested Case)2 pending before the State

Office of Administrative Hearings (“SOAH”) on referral from the Texas

Department of Motor Vehicles, Motor Vehicle Division (“the Division”)

pursuant to Texas Occupations Code §2301.704. CR 117-148 and exhibits

thereto.

1 Appellants are Volkswagen Group of America, Inc. (“VWGoA”)and Audi of America,

Inc. (collectively, with VWGoA, “Audi”). VWGoA is engaged in the business of importing,

distributing, and advertising, new motor vehicles and related accessories and parts. VWGoA

distributes new Volkswagen vehicles to authorized dealers located throughout the United

States for sale to the public. Audi of America, Inc. is an operating unit of VWGoA that sells and

delivers authorized Audi products to Audi dealers.

2 The administrative contested case is styled Budget Leasing, Inc. d/b/a Audi North Austin

and Audi South Austin v. Weitz, et. al. v. Volkswagen Group of America, Inc., et. al., MVD Docket No.

13-0008-LIC, SOAH Docket No. 608-13-4599-LIC, before the Texas Department of Motor

Vehicles, Motor Vehicle Division.

1

DMSLIBRARY01\97700\000000\26073283.V1-7/1/15

1. Budget Protests Audi’s Rejection of The Proposed Transfer of

The Austin Dealerships.

In the Contested Case, Budget Leasing Inc. d/b/a Audi North Austin

and Audi South Austin (Budget), protested Audi’s rejection of Budget’s

proposed transfer of the only two Austin, Texas Audi dealerships to a

group of investors. CR 367-369. The original proposed buyer, Ricardo M.

Weitz, and several entities, Hi Tech Imports, LLC, Hi Tech Imports South

LLC and High Tech Imports North LLC (“Intervenors”), intervened in the

Contested Case.

2. Trial of The Contested Case; ALJs Issue PFD.

The Board referred Budget’s protest to SOAH for trial in accordance

with Texas Occupations Code §2301.704 (a). CR 399-502. The trial on the

merits of the Contested Case lasted nine days. Nineteen witnesses testified

and almost 300 exhibits were introduced. CR 138-39; 399-502.

Subsequently, SOAH Administrative Law Judges O’Malley and Wilkov

issued a Proposal for Decision (PFD) in which they agreed with many of

Audi’s concerns about the proposed transferees’ lack of qualifications and

recommended that the Board issue a final decision finding the prospective

transferees unqualified. CR 399-502; 485-86. The ALJs conditioned the

2

findings in their PFD by stating that the prospective transferees might be

qualified, if they met certain conditions set out in the PFD. CR 399-502;

485-86.

3. The Board Issued a Final Order Dismissing The Contested

Case Because Budget Failed to Comply With The

Requirements for Filing a Protest.

Typically, the Board would enter a final decision based on the

findings of fact and legal conclusions in the ALJs’ PFD.3 See, e.g., Ron Beal,

From Proposal for Decision to Final Decision: What Happens in Between?, 15

Tex. Tech Admin. L.J. 113, 128-31 (2013). However, in this Contested Case,

based on the recommendation of the Board’s general counsel, the Board

dismissed the protest because Budget had not complied with the

requirements of a dealer transfer application under the Texas Occupations

Code. CR 503-505.

3 The Board may also change an ALJ’s findings or conclusions, but only where the Board

states in writing that: 1) the ALJ misapplied the law, agency rules, policies or prior

administrative decisions; 2) the ALJ relied on an incorrect administrative decision or on a

decision that should be changed; or 3) there is a technical error in a fact finding. TEX. GOV’T.

CODE ANN. § 2001.058(e).

3

4. Budget/Intervenors Sought Rehearing of The Contested Case

and One Proposed Transferee makes Ex Parte Contact With

The Board’s Vice-Chair About The Rehearing.

After dismissal of their protest, Budget and the Intervenors (which

includes some of the prospective transferees and Weitz, who is admittedly

not a prospective transferee)4 filed motions for rehearing with the Board

pursuant to Section 2001.146 of the APA. CR 507-526. At some point after

the motions for rehearing were filed, Corbin Robertson III—a witness in

the Contested Case and the leader of a private equity group that was one of

the proposed transferees—sent a private, ex parte message via LinkedIn to

the Vice-Chair of the Board. CR 1941. In it, he asks the Vice-Chair to

consider his family’s prominence in the Houston community, including the

fact that his family’s name is on the stadium at the University of Houston,

and his family’s connections, when ruling on the motion for rehearing of

the dismissal of the Contested Case. RR 14-16; CR 1940-1941.

4 Intervenors are some of the prospective transferees, but were not protestants. Under the

Occupations Code, prospective transferees do not have standing to bring a protest action—only

the existing dealer has standing to protest a manufacturer’s refusal to approve a proposed

transfer, so Intervenors were not a proper party to the Contested Case and could never be a

protestant in a Contested Case under the Code. TEX. OCC. CODE § 2301.360(a) (“A dealer whose

application is rejected under Section 2301.359 may file a protest with the board.”); Butnaru v.

Ford Motor Company, 84 S.W.3d 198, 206 (Tex. 2002) (“The Code’s definition of ‘dealer’ includes

licensed dealers but not prospective transferees.”)

4

After receipt of that message, the Board granted rehearing and set it

for the Board’s February 13, 2015 meeting. CR 154-170. The Board’s Vice-

Chair did not participate in the February 13, 2015 rehearing. At that

meeting, suddenly no longer concerned about Budget/Intervenors’ failure

to properly follow the Code’s transfer application requirements, the Board

voted to remand the Contested Case back to SOAH for further

proceedings. CR 168-169. The Board did so despite Audi’s objections that

Board Chairman Walker did not have the statutory authority to order the

remand5 and that the ALJs did not have the statutory power, much less the

discretion, to conduct the remand or reopen evidence after the issuance of a

PFD.6 CR 162-167. The Board granted rehearing and the contested case

5 Audi argued that Chairman Walker was not authorized to issue a remand because:

remand is not a power given to an agency that is considering a PFD listed in § 2001.058(e) of the

Administrative Procedure Act; SOAH was not authorized to reopen the record under SOAH

Rule 155.153 because the PFD had been issued; the remand order materially differs from the

motion upon which it is based; the remand order requires the the Board and the ALJs to

consider “evidence” that was not timely filed despite the fact that the Code only permits the

board members and ALJs to consider “materials that are submitted timely.” CR 7-8, 1898; 1905-

06, 1908; TEX. OCC. CODE § 2301.709(a); 2301.154. This “evidence” was not presented for the

Board’s consideration until October 15, 2014 despite the fact that the evidence had closed on

May 28, 2014, the ALJs issued a PFD on July 16, 2014 and the Board issued a Final Order on

September 12, 2014. CR 502, 505. In fact, this “evidence” was not even mentioned in Budget’s

own Motion for Rehearing. See e.g., CR 139.

6 Audi argued that the ALJs are outside their authority because SOAH Rule 155.153 only

allows an ALJ to reopen evidence “if the judge has not issued a dismissal, proposal for decision,

or final decision.” Here, the remand attempts to reopen evidence long after the ALJs issued a

PFD. See e.g., CR 140.

5

was remanded on an expedited basis to the ALJs pursuant to a Remand

Order signed by Walker. CR 169; 928-29. As requested by the Chair, the

ALJs quickly created and began implementing an expedited schedule for

the remand. CR 133; RR 16-17.

Consequently, Audi filed this lawsuit in district court to prevent the

ultra vires remand of the contested case, the ultra vires reopening of

evidence after issuance of the PFD, and the resulting issuance of a new PFD

by the ALJs and issuance of a new post-remand final decision by the Board.

CR 117-148.

Despite the fact that the Texas Supreme Court approved of the use of

such lawsuits where an official has acted outside his or her power and has

held that these suits should be filed before a party exhausts administrative

remedies, Defendants/Appellees filed Pleas to the Jurisdiction in the

district court in which they asserted governmental immunity from suit and

the exhaustion of remedies doctrine. See, e.g., Emmett, 2015 WL 1285326 at

*3; See e.g., Texas Dept. of Transp. v. Sefzik, 355 S.W.3d 618, 621 (Tex. 2011);

City of Sherman v. Public Util. Comm’n, 643 S.W.2d 681, 683, 685 (Tex. 1983),

CR 821-843.

6

The court below erroneously dismissed the lawsuit, thereby allowing

the ultra vires remand of the Contested Case to go forward. CR 2030-31.

Audi then filed this appeal and sought temporary relief from this Court to

protect this Court’s jurisdiction to decide this dispute. The ALJs continue

to carry out the Remand Order. In fact, they have conducted a remand

hearing, have closed the evidence in it, and are preparing a new, post-

remand PFD to submit to the Board. See, e.g., CR 47-54; 74-79. Audi has

sought temporary relief from this Court to prevent further actions in the

remand proceeding.

7

SUMMARY OF THE ARGUMENT

The district court erred when it dismissed this lawsuit. Appellees’

actions, upon which this lawsuit is based, exceed their authority.

Consequently, these acts are not entitled to governmental immunity and

Audi is not required to exhaust its administrative remedies. Since

immunity and the alleged failure to exhaust administrative remedies were

the grounds on which Appellees’ based their pleas to the jurisdiction, the

district court’s decision to dismiss the case must be reversed.

Ordinarily, courts begin their analysis of whether a trial court’s

dismissal was proper by considering the jurisdictional issues. However, in

this case, the Court must examine the merits of the appeal in order to be

able to determine the jurisdictional issues, because jurisdiction turns on

whether Appellees’ actions were authorized by law. Emmett, 2015

_S.W.3d_, 2015 WL 1285326 at *3 (Tex. 2015) (court required to interpret

Water Code to determine whether Harris County Commissioners’ conduct

was ultra vires and therefore not entitled to immunity); see, e.g., Tex. Dep’t of

Parks & Wildlife v. Miranda, 133 S.W.3d 217, 227-28 (Tex. 2004). Because

Appellees’ actions were, and are, ultra vires, Appellees were not entitled to

8

immunity, the exhaustion of administrative remedies doctrine did not

apply, and the district court should not have dismissed the case.

Whether a court has jurisdiction over a dispute is a question of law

that is reviewed de novo. City of Houston v. Rhule, 417 S.W.3d 440, 442 (Tex.

2013). When examining a plea to the jurisdiction, a district court is

required to consider the evidence introduced in opposition to the plea. See,

e., g., Heinrich, 284 S.W.3d at 378; Miranda, 133 S.W.3d at 227-28. And when

considering the evidence, the district court is required to indulge every

inference and resolve every doubt in favor of the party opposing the plea.

Heinrich, 284 S.W.3d at 378. Where, as here, evidence shows as a matter of

law that the actions were ultra vires, governmental immunity and the

exhaustion of remedies doctrine do not apply and the court should deny

the pleas. Heinrich at 376; see Emmett, 2015 WL 1265326 at *3. Where the

evidence raises a fact issue, the court must send the dispute to the fact

finder. Heinrich, 284 S.W.3d at 378. Either way, the case should not be

dismissed. Here, the evidence shows that Appellee’s actions violated

statutes and rules, so the pleas should have been denied. But even if

9

Audi’s evidence merely created a fact issue on whether Appellees’ actions

were ultra vires, the district court should not have granted the pleas. Id.

For example, Audi’s evidence showed that Chairman Walker’s

actions exceeded his power when he erroneously signed a Remand Order,

which sent the Contested Case back to SOAH for further proceedings. CR

928-929. Walker did not have the authority7 to sign the Remand Order

because the APA does not authorize the Board to remand a case back to

SOAH after an ALJ has issued a PFD. TEX. GOV’T CODE ANN. § 2001.058.

In fact, this section of the Government Code, which is the only source

of the Board’s power when considering a PFD, lists the specific options

available to the Board. It does not include remand as an option. Id. After a

PFD is issued, the Board is only authorized to enter a final decision on the

PFD; or, in limited circumstances, change a SOAH finding of fact or

conclusion of law, not order a remand. Id. Thus, Section 2001.058(e) of the

APA, by its express terms, did not authorize the Board to remand the

contested case or to alter the ALJs’ original findings and conclusions. Id.

7 Appellees do not have inherent powers. Instead, they are creatures of statute and have

only the authority provided to them by the legislature. See e.g., Sexton v. Mount Olivet Cemetery

Assn, 720 S.W.2d, 137 (Tex. App.—Austin 1986, writ ref’d n.r.e.).

10

Since the Board does not have a specific grant of remand authority, Walker

exceeded his authority in remanding the case after issuance of a PFD.

Walker’s Remand Order also exceeded his authority because it

required the ALJs to exceed their statutory power by reopening the record

to consider untimely new evidence long after the ALJs had issued their

PFD. CR 928-929. SOAH Rule 155.153(a)(4) specifically prevents an ALJ

from reopening a record after a PFD has issued. 1 TEX. ADMIN CODE ANN. §

155.153(a)(4). It is uncontroverted that the ALJs had already issued a PFD

in the Contested Case. CR 399-502. Therefore, as a matter of law, this was

an ultra vires act that was not entitled to protection from suit. See, e.g.,

Heinrich, 284 S.W.3d at 378.

Further, Walker’s issuance of the Remand Order is an ultra vires act

because it considers, and orders the ALJs to consider, evidence which was

not submitted in a timely manner. RR 165-167; CR 928-929; CR 1447.

Section 2301.709 of the Code states that “the board or a person delegated

power from the board under Section 2301.154 may consider only materials

that are submitted timely.” TEX. OCC. CODE ANN. § 2301.709(a) (West 2014)

(emphasis added).

11

The Remand Order also violates Section 2301.709(c) of the Code

which provides that “[a] majority vote of a quorum of the board is required

to adopt a final decision or order of the board.” TEX. OCC. CODE ANN. §

2301.709(c) (West 2014) (emphasis added). Therefore, the orders Walker

signs as Chair of the Board must comply with the majority votes of the

Board. See id.

Here, Walker’s Remand Order was considerably broader than the

motion on which it was supposedly based. For example, the order

commanded the ALJs to reopen evidence to consider whether Audi

received the April 30 Letter, to determine the effect of that letter, and to

determine whether the conditions set out in the PDF are met. See, e.g. CR

1908. But the motion only called for a remand to determine one issue:

whether the PFD’s conditions had been met. CR 1908.

Walker’s order, calling for serious departures from the statutory

framework for dealing with contested cases, was issued after improper ex

parte communication from a witness in the Contested Case. As such,

reversal is required because the relevant statutes, rules and procedures

need to be equally applied and the decision should be free from undue

12

influence, or the contested case process becomes unfair and the

legislature’s reasons for implementing the neutral hearing process under

SOAH are negated. See Mid-South Pavers, 246 S.W.3d at 723.

Like Walker, the ALJs also committed ultra vires acts by : 1) reopening

the evidence after issuing a PFD; 2) considering untimely evidence; 3)

conducting a remand hearing and continuing to entertain the remand

process by issuing orders and engaging in actions to issue a new post-

remand PFD; and, 4) creating and implementing a compressed remand

schedule. Importantly, they continue to commit ultra vires acts by carrying

out the remand process.

These actions exceeded the ALJs’ authority because, as discussed

above, § 2001.058(e) of the APA does not authorize the Board to remand a

contested case back to SOAH after the issuance of a PFD.

The ALJs also exceeded their authority by re-opening the evidence in

the remand of the Contested Case. This act contravenes SOAH Rule

155.153(a)(4) which expressly prohibits the reopening of the record in a

contested case once a PFD has been issued. 1 Tex. Admin. Code Ann. §

155.153(a)(4) (West 2014).

13

For the foregoing reasons, the Appellees’ actions exceeded their

powers and were not entitled to immunity. Likewise, under these

circumstances, exhaustion of remedies was not required. Therefore, the

district court committed reversible error when it dismissed this lawsuit.

14

ARGUMENT AND AUTHORITIES

A. THE DISMISSAL WAS ERRONEOUS BECAUSE APPELLEES’ ACTS WERE, AND

ARE, ULTRA VIRES; THEREFORE, APPELLEES WERE NOT ENTITLED TO

IMMUNITY AND AUDI WAS NOT REQUIRED TO EXHAUST ADMINISTRATIVE

REMEDIES.

As a matter of law, the district court erred when it dismissed this case

because Appellees’ actions exceeded their authority and were not entitled

to governmental immunity. And, under these circumstances, Audi was not

required to exhaust administrative remedies prior to filing suit in district

court. In fact, in Heinrich, the Texas Supreme Court authorized the use of

lawsuits, like this one, requesting prospective injunctive relief to prevent

harm when individual state actors exceed their statutorily authorized

powers in an underlying administrative proceeding. See e.g., Heinrich, 284

S.W.3d at 369. The Texas Supreme Court also held in Heinrich that an

action to “determine or protect a private party’s rights against a state

official who has acted without legal or statutory authority is not a suit

against the State that sovereign immunity bars.” Id. at 368. Therefore, as

Audi did here, suit must be brought against the state actor in his or her

official capacity, not against the agency. Id. at 369; Southwestern Bell Tel.,

15

L.P. v. Emmett, _ S.W.3d _, 58 Tex. Sup. Ct. J. 567; 2015 WL 1285326 (Tex.

2015).

Similarly, where, as here, a state agency official acts beyond his or her

statutorily conferred powers, a trial court may intervene in a contested case

regardless of whether a party has exhausted its administrative remedies.

See, e.g., City of Sherman v. Public Util. Comm’n, 643 S.W.2d 681, 683, 685

(Tex. 1983); Westheimer Indep. Sch. Dist. v. Brockette, 567 S.W.2d 780, 785

(Tex. 1978); Yamaha Motor Corp. v. Motor Vehicle Division, 860 S.W.2d 223,

229 (Tex. App.—Austin 1993, writ denied); Appraisal Review Board of Harris

County Appraisal District v. O’Connor & Assocs., 267 S.W.3d 413, 419 (Tex.

App.—Houston [14th Dist.] 2008, no pet.).

This exception to the exhaustion of administrative remedies doctrine

allows a trial court to intercede in an agency matter before administrative

remedies are exhausted because, in these ultra vires cases, the reasons for

the exhaustion of remedies requirement do not apply; judicial and

administrative efficacy are not served by requiring exhaustion; and, agency

policies and expertise are irrelevant if the agency’s final action will be a

nullity. See City of Houston v. Williams, 99 S.W.3d 709, 717 (Tex. App.—

16

Houston [14th Dist.] 2003, no pet); Mag-T, L.P. v. Travis Central App. Dist.,

161 S.W.3d 617, 625 (Tex. App.—Austin, 2005, pet denied).

As is shown below in detail, Appellees exceeded their statutory

powers as a matter of law when they ordered the remand of the contested

case; ordered the reopening of evidence; and/or, began to carry out the

Remand Order; thus, the decision of the court below should be reversed

because neither governmental immunity nor the exhaustion of

administrative remedies doctrine applies to this case.

1. This Court must consider the merits of the case in order to

resolve the jurisdictional issues under a de novo standard of

review.

Ordinarily, this Court would start its analysis of whether the trial

court’s dismissal of this case was proper by considering the jurisdictional

issues. However, in this case, the Court must examine the merits of the

appeal to be able to determine whether jurisdiction exsists. Emmett, 2015

_S.W.3d_, 2015 WL 1285326 at *3 (Tex. 2015) (court required to interpret

Water Code to determine whether Harris County Commissioners’ conduct

was ultra vires and therefore not entitled to immunity); see Tex. Dep’t of

Parks & Wildlife v. Miranda, 133 S.W.3d 217, 227-28 (Tex. 2004); Gattis v.

Duty, 349 S.W.3d 193, 206 (Tex. App.—Austin 2011, no pet). Here, an

17

examination of the merits will show that Appellees’ actions were ultra vires;

therefore, Appellees were not entitled to immunity, the exhaustion of

administrative remedies doctrine did not apply and the case should not

have been dismissed.

Whether a court has jurisdiction over a dispute is a question of law

that is reviewed de novo and without deference to the trial court’s decision.

City of Houston v. Rhule, 417 S.W.3d 440, 442 (Tex. 2013); Hearts Bluff Game

Ranch, Inc. v. State, 381 S.W.3d 468, 476 (Tex. 2012); City of Dallas v. Carbajal,

324 S.W.3d 537, 538 (Tex. 2010). The district court was required to consider

the evidence introduced by Audi in opposition to the pleas when it ruled

on the pleas to the jurisdiction. See, e.,g., Heinrich, 284 S.W.3d at 378;

Miranda, 133 S.W.3d at 227-28. When considering such evidence, the

district court is required to indulge every inference and resolve every

doubt in favor of the party filing suit. Heinrich, 284 S.W.3d at 378. Where,

as here, that evidence shows, as a matter of law, that Appellees’ actions

were ultra vires, so that governmental immunity and the exhaustion of

remedies doctrine do not apply, the court should deny the pleas. Heinrich

at 376; see Emmett, 2015 WL 1265326 at *3. Where the evidence raises a fact

18

issue, the court must send the dispute to the fact finder. Heinrich, 284

S.W.3d at 378.

As will be shown below, Appellee’s actions in this case were ultra

vires as a matter of law and Audi’s requested injunctive relief should have

been granted. However, at minimum, Audi’s evidence created a fact issue

on whether Appellees’ actions were ultra vires, so the district court could

not grant the pleas and should have sent the dispute to the fact finder. Id.

As a result, the decision below must be reversed.

2. Chairman Walker’s actions exceeded his power.

On February 13, 2015, Board Chairman Walker erroneously signed a

Remand Order, which sent the Contested Case back to SOAH for further

proceedings. CR 928-929. When reviewing these actions, it is important for

this Court to remember that the Board does not have inherent powers.

Instead, it is a statutory creature which has only the authority provided to

it by the Legislature. See e.g., Sexton v. Mount Olivet Cemetery Assn, 720

S.W.2d, 137 (Tex. App.—Austin 1986, writ ref’d n.r.e.) (“agencies are creatures

of statute and have no inherent authority,” therefore, agencies can

“exercise only those powers conferred upon them by law in clear and

express language, and no additional authority will be implied by judicial

19

construction.”) Since a board is a corporate body, it must act through

individuals; thus, Chairman Walker was required to work within the

limited power granted to the Board. See Chon Tri v. J.T.T., 162 S.W.3d 552,

562 (Tex. 2005). There are several reasons Chairman Walker’s order

exceeded his statutory grant of power and his excesses are detailed below.

a. Walker’s Remand Order exceeded his authority because

Section 2001.058(e) of the APA does not authorize a

remand.

Walker did not have the authority to sign the Remand Order because

the APA does not authorize the Board to remand a case back to SOAH

after an ALJ has issued a PFD. TEX. GOV’T CODE ANN. § 2001.058 . In fact,

this section of the APA, which is the sole source of the Board’s power when

considering a PFD, lists the specific options available to the Board and does

not include remand as an option. Id. Instead, after a PFD is issued, the

Board is only authorized to enter a final decision on the PFD; or, in limited

circumstances, change a SOAH finding of fact or conclusion of law, not

order a remand. Id. Even then, a finding or conclusion can only be

changed by the Board under very restrictive circumstances,8 none of which

8 Here, the Board did not make a determination, much less a written one, that any of the

three specified reasons for changing the ALJs’ findings and conclusions existed. CR 928-929.

20

exists here:

A state agency may change a finding of fact or conclusion of

law made by an administrative law judge, or may vacate or modify an

order issued by the administrative law judge, only if the agency

determines:

(1) that the administrative law judge did not

properly apply or interpret applicable law,

agency rules, written policies provided under

Subsection (c), or prior administrative

decisions;

(2) that a prior administrative decision on which

the administrative law judge relied is

incorrect or should be changed; or

(3) that a technical error in a finding of fact

should be changed.

The agency shall state in writing the specific reason and legal basis

for a change made under this subsection.

TEX. GOV’T CODE ANN. § 2001.058(e); 15 Tex. Tech Admin. L.J. at 126-133.

And the fact that the Board is not authorized to remand a case back to

SOAH after issuance of a PFD is consistent with SOAH’s procedural rules,

which do not allow an ALJ to reopen a record once a PFD is issued and has

been submitted to the Board for consideration. 1 Texas. Admin. Code Ann.

§ 155.153. Thus, Section 2001.058(e) of the APA, by its express terms, did

not authorize the Board to remand the contested case or to alter the ALJs’

original findings and conclusions. Id.

21

While it is true that some agency cases can be remanded to an ALJ,

that remand can only occur where agencies have been given statutory

authority to remand a contested case back to SOAH. See 15 Texas Tech

Admin. L.J. at 132-141. Here, Appellees ignored the fact that the Texas

Motor Vehicle Board was not given that remand power by the legislature.

In fact, the statutes cited below point out this distinction and show

that, where the legislature wishes to grant remand power to an agency, it

knows how to do so; yet, it has not done so for the Motor Vehicle Board.

For example, in Chapter 2003 of the Government Code, the

legislature expressly provides for remand in cases heard by the Natural

Resources Conservation Division of SOAH.9 TEX. GOV’T CODE §

2003.047(m). SOAH’s Natural Resources Conservation Division was

established to hear contested cases brought before the Texas Commission

on Environmental Quality (“TCEQ,” formerly the Texas Natural Resource

9 The Natural Resource Conservation Division hears contested cases referred by the Texas

Commission on Environmental Quality (formerly the Texas Natural Resources Conservation

Commission). The Texas Natural Resource Conservation Commission (“TNRCC”) was

renamed Texas Commission on Environmental Quality (“TCEQ”) in 2002, three years after

Section 2003.047 was last amended. Therefore references to TNRCC in Chapter 2003 of the

Texas Government Code refer to TCEQ. Government Code Section 2003.047(m) provides:

[T]he [Texas Natural Resource Conservation Commission] may also refer the

matter back to the administrative law judge to reconsider any findings and

conclusions set forth in the proposal for decision or take additional evidence or

to make additional findings of fact or conclusions of law.

22

Conservation Commission). Consistent with this provision of the

Government Code, TCEQ’s procedural rules expressly provide that the

record may be reopened for further proceedings. 30 TEX. ADMIN. CODE

ANN. § 80.265 (“The commission . . . may order the judge to reopen the

record for further proceedings on specific issues in dispute.”).

Similarly, the Texas Public Utility Commission’s (“PUC”) rules also

expressly provide that the “commission may remand the proceeding for

further consideration. . . . with or without reopening the hearing.” 16 TEX.

ADMIN. CODE § 22.262(c). Likewise, SOAH’s procedural rules also

recognize the unique authority of the PUC and TCEQ to remand contested

cases and expressly provide that PUC and TCEQ rules control these

situations.10 1 TEX. ADMIN. CODE ANN. § 155.3. No such provision is made

for the Texas Department of Motor Vehicles.

Absent this special grant of remand power, here, Appellees were

bound by § 2001.058(c) and SOAH Rule 155.153. Since these provisions did

10 SOAH Rule 155.3 provides that:

(d) If there is any conflict between SOAH’s rules [such as Rule 155.153] and the procedural

rules of the TCEQ adopted in § 155.1 of this title (relating to Purpose), the TCEQ rules will

control.

(e) If there is any conflict between SOAH’s rules [such as Rule 155.153] and the procedural

rules of the PUC adopted in § 155.1 of this title (relating to Purpose), the PUC rules will control.

1 TEX. ADMIN. CODE ANN. § 155.3.

23

not authorize the Board to remand the contested case back to the ALJs, the

Remand Order, as a matter of law, was an ultra vires act outside Chairman

Walker’s statutory authority. Heinrich, 284 S.W.3d at 370. This act alone

requires reversal of the district court’s decision.

b. Additionally, Walker did not have the power to order the

ALJs to reopen the record after they issued the PFD.

Walker’s Remand Order is also ultra vires because it commanded the

ALJs to commit an act that exceeded their statutory power by ordering the

ALJs to reopen the record to consider untimely new evidence long after the

ALJs had issued their PFD. CR 928-929. SOAH Rule 155.153(a)(4)

specifically prevents an ALJ from reopening a record after a PFD has

issued:

(a) Judge’s authority and duties. The judge shall have the

authority and duty to:

(4) reopen the record when justice requires, if the judge

has not issued a dismissal, proposal for decision, or

final decision.11

1 TEX. ADMIN CODE ANN. § 155.153(a)(4).

11 The Board, and not the ALJs, issues the final order in most contested cases heard by

ALJs under SOAH, including the Contested Case. As a result, the PFD issued by the ALJs

represented the end of their involvement in the Contested Case and was their final authorized

act in that case. See 15 Tex. Tech L. Rev. at 127-28.

24

As such, SOAH Rule 155.153(a)(4) did not grant Appellees the power

to reopen the record in the Contested Case since it is undisputed that the

ALJs had already issued the PFD in it. CR 399-502. Nevertheless, Walker’s

Remand Order specifically required the ALJs to reopen the record in excess

of the power granted by SOAH Rule 155.153. CR 928-929. As a matter of

law, this was an ultra vires act that was not entitled to protection from suit.

See Heinrich, 284 S.W.3d at 378. Again, this act alone requires reversal.

c. Walker’s Remand Order Exceeds the Board’s Authority

under Section 2301.709(a) of the Code because it considers

untimely evidence.

Further, the Remand Order is also an ultra vires act because it

considers the April 30 Letter, which was not submitted in a timely manner

and orders the ALJs to consider the letter and various other untimely

materials offered at the ultra vires remand hearing. RR 165-167; CR 928-929;

CR 1447. Section 2301.709 of the Code states that “the board or a person

delegated power from the board under Section 2301.154 may consider only

materials that are submitted timely.” TEX. OCC. CODE ANN. § 2301.709(a)

(West 2014) (emphasis added).

The attempt to introduce the April 30 letter is important because the

Motor Vehicle Code requires that all proposed transferees agree in writing

25

to be bound by all manufacturer’s dealer agreements. Here, the protestant

failed to provide this as part of its transfer application and the Board

correctly dismissed the Contested Case for this reason. CR 504-505.

However, well after the time for offering evidence, Budget/Intervenors

attempted to insert the April 30 Letter into the case in an effort to cure this

error. CR 1447. While that effort would be in vain under all circumstances

because it does not even attempt to cure the defect for the proposed

transferees12, the attempt, at any rate, simply came much too late. CR 1447.

For example, neither the protestant nor the proposed transferees ever

introduced the letter as an exhibit during the trial of the Contested Case,

which took place over the course of nine days, during which the parties

solicited testimony from nineteen witnesses and introduced almost 300

exhibits into evidence. See, e.g., CR 123-125; 138-139; 163-167; 179-180. It is

also undisputed that the ALJs closed the record on May 28, 2014, yet the

April 30 Letter was not submitted by Budget/Intervenors until October 15,

2014, almost five months after the record was closed, and almost three

12 Even if timely, the April 30 letter does not cure the defect for the prospective transferees

(it is only signed by Weitz, who is not a prospective transferee), so a remand for consideration

of this untimely letter cannot change the fact that Budget failed to meet the statutory application

requirements. CR 1447. Thus, remand not only violates the Code, it is also a waste of agency,

judicial and party resources.

26

months after the ALJs issued their PFD and more than a month after the

Contested Case had been dismissed. CR 1447.

In addition, the April 30 Letter was not even timely for consideration

in conjunction with Budget/Intervenors’ motion for rehearing.

Budget/Intervenors had an October 2, 2014 deadline for filing a motion for

rehearing of the Board’s September 12 Final Order.13 While

Budget/Intervenors did file a timely motion for rehearing, they still did not

attach, or even reference, the April 30 Letter in their motion for rehearing;

instead, they attempted to submit the April 30 Letter on October 15, 2014,

thirteen days after the deadline for the motion for rehearing. CR 179; 366-36-;

390. Further, in the remand, the ALJs received a wide variety of untimely

materials on other issues that had never previously or timely produced in

the Contested Case.

As stated above, Section 2301.709(a) of the Code only allows

consideration of “materials that are submitted timely.” TEX. OCC. CODE

ANN. § 2301.709(a) (emphasis added). As a matter of law, the April 30

letter was not timely, so Chairman Walker failed to follow the restriction

13 The deadline for filing a motion for rehearing is twenty days from receipt of the Board's

decision. TEX. GOV’T CODE ANN. § 2001.146(a).

27

on consideration of untimely evidence. TEX. OCC. CODE ANN. §

2301.709(a). Consequently, even if the remand had been authorized,

Walker still committed an ultra vires act by ordering the ALJs to consider

the untimely April 30 Letter and other untimely materials as part of the

remand. As a result, the Court should reverse the decision below.

Heinrich, 284 S.W.3d at 370.

d. Walker’s order also violates the rule prohibiting the Board

from attempting to influence the ALJs’ decision with

improper facts.

Walker’s order is also ultra vires because it violates the rule which

prohibits the Board from attempting to influence the neutral ALJs

through the use of improper evidence.

i. The Remand Order requires the ALJs’ to consider

improper evidence.

Specifically, the Government Code states that: “(a) state agency

may not attempt to influence the finding of facts or the administrative

law judge’s application of the law in a contested case except by proper

evidence and legal argument.” TEX. GOV’T CODE § 2001.058(e). But here,

Appellee Walker required the ALJ Appellees to reopen the record to

examine untimely, and therefore, improper evidence. CR 928-29.

28

ii. The Remand Order flows from improper ex parte

contact and the use of improper procedures.

Walker’s order is the result of the Board’s departure from regular

procedures which seems to have been prompted by improper ex parte

contact by a prospective transferee’s principal. In fact, during the

pendency of the motions for rehearing, Audi was notified that the head

of one of the proposed transferees, Corbin J. Robertson III, sought to

influence the outcome of the rehearing in the contested case by improper

ex parte contact with the Board Vice-Chair. CR 1940-1941. This contact

occurred via the social media site LinkedIn on October 10, 2014. CR

1941. This ex parte communication was provided to Audi only in

redacted form. Nevertheless, even the unredacted content of this ex parte

communication is disturbing because it reveals a bald and overt attempt

to influence the Board’s decision on the rehearing motions by way of

something other than “proper evidence and legal argument” by

highlighting Robertson’s family’s substantial influence and wealth. CR

1941.

More specifically, after invoking the name (redacted) of a friend of

the Robertson family, Robertson then addresses the rehearing of the

29

contested case and asks the Board’s Vice-Chair to consider those factors

when voting on his groups’ motion for rehearing:

I am not sure you were aware of this connection at

the last [Board] meeting you attended and I would

appreciate that you take this relationship into

consideration as you think about how you are

voting should we be successful in getting a

rehearing which I understand will be up for a vote

soon.

CR 1941.

After receiving the ex parte communication and considering Budget

and Intervenors’ motion for rehearing, the Board granted Budget and

Intervenors’ motion for rehearing on December 10, 2014. CR 332 Later,

when the Board again met to reconsider the disposition of the contested case,

Chairman Walker asked David Duncan, General Counsel for the Division, to

make a recommendation on the disposition of the contested case. Retreating

from his prior recommendation upon which the Board had previously

dismissed Budget/Intervenors’ protest action (for failure to comply with the

application requirements), the Board’s counsel recommended remand of the

case to SOAH for consideration of the untimely April 30 Letter. CR 156;

158-159. Thereafter, Board Member Slovacek made a motion to remand the

case back to the ALJs; but, unlike Duncan’s recommendation, his motion

30

only asked that the ALJs consider whether Budget/Intervenors met the

conditions14 of the PFD and did not mention consideration of the April 30

letter. CR 158-159. (A side-by-side comparison of the motion and the

Remand Order are found at CR 1908).

Before calling for a vote on Slovacek’s motion, Walker called for

comments to it, subject to a three-minute time limit. CR 155. As best as he

could, given the three minute time constraint, Audi’s lawyer addressed the

untimely April 30 letter, and responded to the substance of the rehearing

motions15. The Board rejected Audi’s arguments and voted to approve the

motion. CR 168. Walker signed and issued the Remand Order on that

same day. CR 928-929.

14 Slovacek’s motion went beyond counsel’s recommendation by asking the ALJs to

determine whether “intervenors have in fact, satisfied the conditions of the proposal for

decision.” CR 159. These conditions are set out in Findings of Fact 154-158 of the ALJ’s PFD.

The findings state that some of the prospective transferees did not have the necessary

operational acumen, that the debt-to-equity ratio of the loan structure was not satisfactory, and,

that there was not cross-collateralization See, e.g., CR 159; CR 499; CR 928. These conditions

have nothing to do with the April 30 letter or whether Budget met the requirements of a transfer

application.

15 Audi’s lawyer argued that: (1) the Board lacked authority under § 2001.058 of the APA

to remand the contested case to SOAH; (2) SOAH Rule 155.153(a)(4) prohibits the ALJs from

reopening the evidentiary record to consider any new evidence, including the April 30 Letter,

because a PFD had already been issued; and (3) the Board lacked authority to consider untimely

materials, such as the April 30 Letter, pursuant to § 2301.709 of the Code. CR 160-167.

31

iii. The Remand Order differs materially from member

Slovacek’s unanimously approved motion.

The Remand Order violates Section 2301.709(c) of the Code which

provides that “[a] majority vote of a quorum of the board is required to adopt

a final decision or order of the board.” Tex. Occ. Code Ann. § 2301.709(c)

(West 2014) (emphasis added). Walker has a ministerial duty to ensure that

the orders he signs as Chair of the Board comply with the majority votes of

the Board and does not have the discretion to issue orders that fail to

comply with the majority vote of the Board. See id. Here, the Remand Order

materially differs from the unanimous vote of the Board by including

matters that were not in the motion. Compare CR 928-929 to 159; 1908.

For example, the actual motion does not mention consideration of the

April 30 letter; instead, it moves to remand the Contested Case to the ALJs

to determine the single issue of whether the Intervenors “satisfied the

conditions of the PFD.” RR 159: 6-12. These conditions16 have nothing to do

with the April 30 Letter. CR 499. A careful review of the motion shows that

the comments of the Board’s general counsel regarding the April 30 Letter

which preceded the motion were not part of the motion. RR 159:6-12.

16 The conditions in the PFD deal with operational control and the debt structure of the

proposed transaction. CR 499.

32

Neither Walker, nor any other member of the Board or the Board’s staff,

may add terms to an order as they see fit. Otherwise, a single person could

subvert the action of the Board. These actions also violate the Open

Meetings Act and Texas Occupations Code § 2301.709(c).

For these reasons, Walker’s Remand order was an ultra vires act which

exceeded his statutory authority. CR 1908. As such, this Court should

reverse the decision below because Walker’s ultra vires acts are not protected

from suit. Heinrich, 284 S.W.3d at 370.

iv. General statutory provisions did not authorize

Walker to issue the Remand Order.

Below, based on general provisions in the Texas Occupations Code,

Defendants/Appellees, Budget and Intervenors argued that Walker was

authorized to issue the Remand Order. Specifically, they erroneously

argued that Sections 2301.151, 2301.153(a), 2301.360(a), 2301.702 and

2301.709(c) of the Code authorize Walker to issue the Remand Order and

reopen the evidence in the contested case. See, e.g., CR 670-673. As is

shown below, these arguments are in error.

33

These provisions17 merely set out the general powers of the Board,

and simply do not conflict with, or apply to, the specific matters at issue

here, i.e., whether the Board was authorized to remand the Contested

Case/reopen evidence after the PFD, which are addressed in more specific

sections of the Code.

Texas statutory interpretation requires that “where there is a broad

and restrictive clause within a statute, the broad clause is limited or

17 Section 2301.151

GENERAL JURISDICTION OF BOARD. (a) The board as the exclusive original

jurisdiction to regulate those aspects of the distribution, sale, or lease of motor vehicles

that are governed by this chapter, including the original jurisdiction to determine its

own jurisdiction.

(b) The board may take any action that is specifically designated or implied under

this chapter or that is necessary or convenient to the exercise of the power and

jurisdiction granted under Subsection (a).

Section 2301.153(a)

GENERAL POWERS OF BOARD. (a) Notwithstanding any other provision of law, the

board has all powers necessary, incidental, or convenient to perform a power or duty

expressly granted under this chapter . . . .

Section 2301.360(a)

REVIEW BY BOARD FOLLOWING DENIAL OF TRANSFER. (a) A dealer whose

application is rejected under Section 2301.359 may file a protest with the board. A

protest filed under this section is a contested case . . . .

Section 2301.709(c)

REVIEW BY BOARD . . .

(c) The board or a person delegated power from the board under Section 2301.154

shall take any further action conducive to the issuance of a final order and shall issue a

written final decision or order . . . .

TEX. OCC. CODE ANN. §§ 2301.151, 2301.153(a), 2301.360(a), 2301.709(c).

34

controlled by the restrictive one.” Hammond v. City of Dallas, 712 S.W.2d 496,

498 (Tex. 1986) (emphasis added); Texas Gen. Indem. v. Workers’ Comp.

Com’n, 36 S.W.3d 635, 641 (Tex. App.—Austin 2000) (citing GMC Superior

Trucks, Inc. v. Irving Bank & Trust Co., 463 S.W.2d 274, 276 (Tex. Civ. App.—

Waco 1971, no writ) and City of Dallas v. Mitchell, 870 S.W.2d 21, 23 (Tex.

1994)) (providing that specific provision limits scope of general provision

on same subject matter); see also GMC Superior Trucks, 463 S.W.2d at 276

(citing cases) (“[I]n case of conflict between a general statutory provision

and a special provision dealing with the same subject, the general

provision is controlled or limited by the special provision, whether they are

contained in the same act, or in different enactments.”).

Thus, while the Legislature has given the Board power to take actions

“conducive” to issuing a final order in Section 2301.709(c) of the Code, such

as conducting meetings to discuss such orders, those actions are limited by,

and cannot violate, other more specific provisions contained in the statutes

or administrative regulations. Hammond, 712 S.W.2d at 498.

35

As discussed at length above, the APA, the Code, and SOAH’s

procedural rules contain multiple specific and restrictive provisions18

which do not authorize remand of the contested case, the reopening of

evidence after issuance of a PFD or consideration of untimely evidence.

None of these specific provisions can be ignored in order to justify the

Remand Order.

v. Statutes, rules and procedures must apply in all

contested cases or the process becomes unfair.

As described above, the Board, acting through Walker, changed its

statutorily mandated procedures to order the remand and the reopening of

evidence after the PFD had been issued. It did so based on improper

evidence and at the improper ex parte urging of a witness to the Contested

Case. The relevant statutes, rules and procedures must apply to all Texans

equally or the contested case process becomes an unfair one. In fact, SOAH

was put in place to guarantee neutral, independent fact finders in contested

administrative hearings. Mid-South Pavers, 246 S.W.3d at 723; 15 Tex. Tech

18 For example, the Board’s general powers are limited by, and cannot violate, the specific

prohibitions on: (1) considering untimely evidence [Section 2301.709(a) of the Code]; (2) issuing

an order that does not comply with a majority vote of the Board [Section 2301.709(c) of the

Code]; or (3) remanding a contested case [Section 2001.058(e) of the APA]. Hammond, 712

S.W.2d at 498; GMC Superior Trucks, 463 S.W.2d at 276.

36

Admin. L.J. at 127-33; 2 Kenneth Culp Davis & Richard J. Pierce, Jr.,

Administrative Law Treatise § 9.8 at 67 (3d ed. 1994).

Walker’s actions violate the relevant statutes and rules and also

subvert the policy behind the implementation of SOAH. For example, in

Mid-South Pavers, where the Texas Department of Transportation’s

executive director’s actions (changing ALJ findings and conclusions

without written reasons and legal bases for changes) “suggest[ed]” that the

“executive director was acting as Texas Department of Transportation’s

own fact-finder despite the legislature having delegated that duty to the

ALJ,” his actions violated SOAH’s neutral fact finding structure. Mid-South

Pavers, 246 S.W.3d at 722-23.

In Mid-South Pavers, the Supreme Court held that agencies, like the

Motor Vehicle Board, must respect the due process rights of those who

appear before it in contested cases. Id at 722. In fact, it stated that a

“neutral decision maker is crucial” to a fair administrative hearing. Id at

723. SOAH was created to make ALJs independent from agency political

pressure and Code § 2001.058(d) was designed to prevent fact-finders from

“cutting the cloth to fit the pattern in order to please agency heads.” Pete

37

Schenkkan, Texas Administrative Law: Trials, Triumphs and New Challenges, 7

Tex. Tech Admin. L.J. 288, 323 (2006).

Thus, where, as here, a board departs from the statutes and rules

governing the contested case process, it makes the neutral SOAH structure

meaningless. Id.; see Montgomery I.S.D. v. Davis, 34 S.W.3d 559, 564 (Tex.

2000). The Supreme Court rejects attempts, like those exhibited here, to

work around the neutral and has held that “[a]n independent fact finder is

integral to the structure of the hearing-examiner process.” Mid-South

Pavers, 246 S.W.3d at 723 (citing Montgomery I.S.D. v. Davis, 34 S.W.3d at

564).

Allowing the Board to manipulate the process by disregarding the

rules limiting the Board’s options after issuance of a PFD and prohibiting

the reopening of evidence after issuance of a PFD in order to reach a

specific result is not what the legislature envisioned when it enacted

SOAH. See Mid-South Pavers, 246 S.W.3d at 726. As such, this Court

should reverse the decision below.

As a result, as the Texas Supreme Court did in Mid-South, this Court

should also limit the record in the Contested Case to the evidence

38

presented to the ALJs in the original trial. Id. at 733.

For any one of, or for all of, the reasons discussed above, Walker’s

Remand Order was ultra vires. Therefore, this Court should reverse the

district court’s dismissal of the lawsuit.

3. The ALJs Committed, and Continue to Commit, Ultra Vires

Acts.

Like Walker, the ALJs also committed ultra vires acts. Importantly,

they continue to do so, as demonstrated by the fact that the ALJs recently

held a two-day evidentiary hearing and then closed19 the evidence in the

remand proceeding (while Audi’s Motion For Temporary Relief is pending

in this Court). The ALJs’ specific ultra vires acts include: 1) reopening the

evidence after issuing a PFD; 2) considering untimely evidence; 3)

conducting a remand hearing and continuing to entertain the remand

process by issuing orders and engaging in actions to issue a new post-

remand PFD; and, 4) creating and implementing a compressed remand

schedule. See, e.g., CR 130-134 and exhibits thereto; CR 47-54; CR 74-79; CR

19 Closure of the evidence in the Contested Case made it even more likely that this dispute

will be mooted before this Court reaches the merits of this appeal unless temporary relief is

granted. The closure of evidence in a contested case triggers the deadline for issuing a PFD.

TEX. GOV’T CODE § 2001.143.

39

82. Because these acts are ultra vires, the case should not have been

dismissed by the court below.

The ALJs work for SOAH, an administrative agency, so the ALJs’

powers are limited to only those granted to them by the legislature through

applicable statutes and rules. TEX. GOV’T CODE § 2001.141(d); Sexton, 720

S.W.2d at 137; see also, 15 Tex. Tech Admin. L.J. at 126-27; Pete Schenkkan,

Texas Administrative Law: Trials, Triumphs and New Challenges, 7 Tex. Tech

Admin. L.J. 288, 323 (2006). In fact, the ALJs are required to follow the

SOAH Rules and, by law, “shall not” contravene applicable statutes. See 1

TEX. ADMIN. CODE ANN. § 155.320 (West 2014). SOAH’s administrative rules

have the same legal force as statutes. Rodriguez v. Serv. Lloyds Ins. Co., 997

S.W.2d 248, 254 (Texas. 1999). As will be shown, the applicable statutes

and rules do not authorize the reopening of evidence after the issuance of a

20 “SOAH proceedings shall be conducted in accordance with the APA, when applicable,

and this chapter. The judge may modify and supplement the requirements of this chapter to

promote the fair and efficient handling of the case and to facilitate resolution of issues, if doing

so will not unduly prejudice the rights of any person or contravene applicable statutes.” This

rule contemplates actions such as extending deadlines or other similar measures. The only

Texas cases citing Rule 155.3 have done so in the context of allowing late filing of discovery or

the substantial compliance with a procedural rule. See, e.g., In the Matter of Disciplinary Action

Against a Certain Certificate Holder for Failure to Renew, SOAH Docket No. XXX-XX-XXXX.C, 2004

WL 4172027, before the Texas State Board of Public Accountancy (September 2004) (citing Rule

155.3 in passing to allow for substantial compliance with service of notice of hearing rule even

though party served notice by mail, rather than by certified mail); State of Texas, SOAH Docket

No. XXX-XX-XXXX.26, 2014 WL 4694555, before the Comptroller of Public Accounts (May 19, 2014)

(same).

40

PFD and do not authorize consideration of untimely evidence. Therefore,

the ALJs’ conduct of the remand and reopening of the evidence, made

pursuant to Walker’s ultra vires Remand Order, were outside their grant of

authority.

a. The ALJs do not have authority to conduct a remand

after issuing a PFD.

The ALJs exceeded their authority by entertaining and continuing to

entertain the remand of the contested case despite the fact that §

2001.058(e) of the APA does not authorize the Board to remand a contested

case back to SOAH after the issuance of a PFD. Audi brought this point to

the attention of the ALJs before the remand began. CR 47-54; CR 74-79.

Although they would not refrain from entertaining the remand of the

Contested Case, the ALJs did encourage21 Audi to seek relief from a district

court to determine whether they had the power to carry out Walker’s

Remand Order. CR 77-78. Unfortunately, the district court erroneously

dismissed the case when Audi sought that relief, even though § 2001.058(e)

21 JUDGE O’MALLEY: . . . You know that if you really want something to stop, then you

have a - - you can go to district court and get a stay. And if you - - we have had that happen

before where we’ve had a remand or a case and, for whatever reason, a party believes that we

don’t have authority to move forward, then they get a stay in district court. And, of course, then

we are stayed . . . . So I think that would be your best option if you truly believed they lacked

authority or we need to stop in our tracks, if we got some sort of district court stay order, then

that would be the process we would work with. CR 77-78.

41

only authorizes the Board to “change a finding of fact or conclusion of law

made by the administrative law judge,” not remand a case after issuance of

a PFD. As recipients of the erroneous remand, the ALJs should have

honored this statute and should have refrained from entertaining the

remand of the Contested Case. Their combined failure to abide by the APA

and their collective decision to carry out the remand process were ultra

vires acts which warrant reversal of the decision below.

b. The ALJs do not have authority to reopen evidence after a

PFD.

The ALJs also exceeded their authority by re-opening the evidence in

the remand of the Contested Case. This act contravenes SOAH Rule

155.153(a)(4)22 which expressly prohibits the reopening of the record in a

contested case once a PFD has been issued. 1 TEX. ADMIN. CODE ANN. §

155.153(a)(4) (West 2014).

As is illustrated by the following SOAH matters, SOAH ALJs are

aware of this limitation on their powers. See, e.g., Texas Department of

Insurance v. Maria D. Mondragon, SOAH Docket No. XXX-XX-XXXX.C, ALJ’s

22 Section 155.153(a)(4) states: (“The judge shall have the authority and duty to . . . reopen

the record when justice requires, if the judge has not issued a dismissal, proposal for decision,

or final decision.”) (emphasis added).

42

Response to Exceptions at 2, Oct. 23, 2014 (CR 1492-1493); Petitioner v. Tax

Division, Texas Comptroller of Public Accounts, 2014 WL 4694594, SOAH

Docket No. XXX-XX-XXXX.26, Comptroller’s Decision at *1, June 16, 2014 (CR

1496-1501); see also, Petitioner v. Tax Division, Texas Comptroller of Public

Accounts, 2014 WL 4694592, SOAH Docket No. XXX-XX-XXXX.26,

Comptroller’s Decision at *6, June 9, 2014 (stating that “once the ALJ issues

the PFD, he is not authorized to reopen the record to admit additional

evidence . . . ”.) (CR 1502-1514); In the Matter of Licensed Vocational Nurse

License Number 199025 Issued to Belinda Quintero Molina, SOAH Docket No.

XXX-XX-XXXX, Exceptions Letter by ALJ, Feb, 28, 2012 ( The ALJ responded to a

request to reopen the record by stating that “an administrative law judge

(ALJ) has no authority to rule on motions that are filed after the ALJ has

issued a proposal for decision (PFD) except as provided by law. The

authority the Staff has requested that I exercise in this matter does not exist in

the procedural rules of the State Office of Administrative Hearings (SOAH), 1

Tex. Admin. Code ch. 155, the Administrative Procedure Act (APA), Tex

Gov’t Code ch. 2001, SOAH’s enabling act, [or] Tex. Gov’t Code ch. 2003 . . .).”

(CR 1517-1518).

43

Before the remand of the Contested Case began, Audi raised its

concerns with the ALJs that reopening the record exceeded their power

and asked them to refuse to do so and to refuse to consider the remand.

The ALJs rejected Audi’s position. CR 77-78. In fact, ALJ O’Malley stated

on the record that SOAH routinely considers remands23 from

administrative agencies. CR 78.

But ALJ O’Malley failed to recognize that, as discussed in section A 2

above, some agency cases can be remanded to an ALJ, but that remand can

only occur where agencies have been given statutory authority to remand a

contested case back to SOAH. See 15 Texas Tech Admin. L.J. at 132-141.

Here, the ALJs ignored the fact that the Texas Motor Vehicle Board was not

given that remand power by the legislature. The fact that some agencies

have remand power, but the Motor Vehicle Board does not, illustrates the

fact that, where the legislature wishes to grant remand power to an agency,

it knows how to do so; yet, it has not done so for the Motor Vehicle Board.

23 JUDGE O’MALLEY: [W]e believe that at this time we don’t - - we don’t have authority,

Mr. Donley, to send it back to the Commission, though the motion and reply were very

thorough . . . We all - - Judge Wilkov and I have both many times issued PFDs where the parties

want to open the record after we’ve issued the PFD. That’s somewhat different than - - and I

know you may disagree with us on this - - but we’re not going to go around and around about

that. I just issued a PFD on - - I don’t know - - Thursday or last week on a remand hearing. We

take remands almost weekly from agencies. That’s a common thing. We do have the authority . .

. CR 77-78.

44

So, absent that special grant of remand power, Appellees were bound by §

2001.058(c) and SOAH Rule 155.153. As such, they committed ultra vires

acts by reopening evidence and entertaining a remand after issuing a PFD.

Below, Defendants/Appellees never cited any specific authority

granting the ALJs power to reopen the record in the Contested Case after

the issuance of a PFD. Instead, they insinuated that SOAH Rule 155.3(a)24

may provide the ALJs with general authority to reopen the record. But the

plain language of Rule 155.3(a) simply does not speak to, or authorize, the

ALJs’ reopening the record after the issuance of a PFD.

Moreover, the terms of Rule 155.3(a) prevent a party from using it to

cause undue prejudice or contravention of applicable statutes. Here, Audi’s

rights were unduly prejudiced by the ALJs’ decision to reopen the record in

the Contested Case after the issuance of a PFD to consider untimely

evidence. And, by reopening the record, the ALJs contravene Section

24 SOAH Rule 155.3(a) provides in relevant part:

Application and Construction of this Chapter

(a) SOAH proceedings shall be conducted in accordance with the APA, when applicable,

and with this chapter. The judge may modify and supplement the requirements of this chapter

to promote the fair and efficient handling of the case and to facilitate resolution of issues, if

doing so will not unduly prejudice the rights of any person or contravene applicable statutes.

1 TEXAS ADMIN. CODE ANN. § 155.3(a) (emphasis added).

45

2001.058(e) of the APA since it does not authorize remands after PFDs are

issued.

Likewise, Section 2301.709 of the Code does not allow the Board to

consider untimely evidence, yet by reopening the record, the ALJs

contravene Section 2301.709 by considering untimely evidence in the

remand proceedings. Courts may not interpret statutes in a way that

“renders any part of the statute meaningless or superfluous.” Crosstex, 430

S.W.3d at 390 (quoting Columbia Med Ctr. of Las Colinas, Inc. v. Hogue, 271

S.W.3d 238, 256 (Tex. 2008)). Interpreting Rule 155.3(a) to allow the ALJs to

completely disregard the express prohibition on reopening the record after

issuance of a PFD renders that rule meaningless and superfluous.

Finally, where two sections of a statute address the same subject

matter “the general provision is controlled or limited by the special

provision.” Texas Gen. Indem., 36 S.W.3d at 641 (citing cases); see also

Hammond, 712 S.W.2d at 498. The specific provision limits the scope of the

general provision. Texas Gen. Indem., 36 S.W.3d at 641 (citing Trinity

Universal Ins. Co. v. McLaughlin, 373 S.W.2d 66, 69 (Tex. Civ. App.—Austin

1963, writ ref’d n.r.e.)). Here, Rule 155.153 specifically addresses the power

46

of ALJs to reopen the record, limiting it to cases where a PDF has not been

issued, among other requirements. By contrast, Rule 155.3 is a general rule.

Thus, Rule 155.153, the more specific provision, controls. Hammond, 712

S.W.2d at 498; Texas Gen. Indem., 36 S.W.3d at 641.

For the foregoing reasons, the ALJs’ actions exceeded their powers

and were not entitled to immunity. Likewise, under these circumstances,

exhaustion of remedies was not required. Therefore, the district court

committed reversible error when it dismissed this lawsuit.

PRAYER AND REQUEST FOR RELIEF

For all, or any of the reasons stated above, Audi asks this Court to

reverse the decision below, render a decision in Audi’s favor and grant

injunctive relief preventing the Appellees from taking any actions to

further the ultra vires remand in the Contested Case. Audi also requests

that this Court limit the record in the Contested Case to its pre-remand

state. Audi further asks the Court to grant it all other relief to which it is

entitled.

47

Respectfully submitted,

King & Spalding LLP

By: /s/ S. Shawn Stephens

S. Shawn Stephens

Texas Bar No. 19160060

sstephens@kslaw.com

James P. Sullivan

Texas Bar No. 24070702

jsullivan@kslaw.com

KING & SPALDING

1100 Louisiana, Suite 4000

Houston, Texas 77002

Telephone: (713) 751-3200

Facsimile: (713) 751-3290

Billy M. Donley

Texas Bar No. 05977085

BDonley@Bakerlaw.com

Mark E. Smith

Texas Bar No. 24070639

mesmith@bakerlaw.com

BAKER & HOSTETLER LLP

811 Main Street, Suite 1100

Houston, Texas 77002

Telephone: (713) 751-1600

Facsimile: (713) 751-1717

Attorneys for Appellants

Volkswagen Group of America, Inc. and

Audi of America, Inc.

48

CERTIFICATE OF COMPLIANCE

I certify that on July 1, 2015, that this Appellants’ Brief was produced

on a computer and contains 10,335 words, excluding the caption, identity

of parties and counsel, statement regarding oral argument, table of

contents, index of authorities, statement of the case, and statement of the

issues presented, and thus does not exceed the 15,000 word limit provided

for by Tex. R. App. P. 9.4(i).

/s/ S. Shawn Stephens

S. Shawn Stephens

CERTIFICATE OF FILING AND SERVICE

I certify that on July 1, 2015, I used the Court’s electronic case filing

system to file this Appellants’ Brief and to serve this document on counsel

for appellees as follows:

William R. Crocker Kimberly Fuchs

crockerlaw@earthlink.net kimberly.fuchs@texasattorneygeneral.gov

807 Brazos, Ste. 1014 Assistant Attorney General

Austin, Texas 78701 Texas Attorney General’s Office

P.O. Box 12548

Counsel for Appellees Ricardo Austin, Texas 78711-2548

M. Weitz; Hi Tech Imports

North, LLC; Hi Tech Imports, Counsel for Appellees Michael J. O’Malley and

South, LLC; and Hi Tech Penny A. Wilkov

Imports, LLC

49

J. Bruce Bennett Dennis McKinney

jbb.chblaw@sbcglobal.net dennis.mckinney@texasattorneygeneral.gov

Cardwell, Hart & Bennett, Assistant Attorney General

LLP Texas Attorney General’s Office

807 Brazos, Suite 1001 P.O. Box 12548

Austin, Texas 78701 Austin, Texas 78711-2548

Counsel for Appellees Ricardo Counsel for Appellee John Walker III

M. Weitz; Hi Tech Imports

North, LLC; Hi Tech Imports,

South, LLC; and Hi Tech

Imports, LLC

Joseph W. Letzer

jletzer@burr.com

Dent M. Morton

dmorton@burr.com

Burr & Forman, LLP

420 20th Street N., Suite 3400

Birmingham, AL 35203

Counsel for Appellees Ricardo

M. Weitz; Hi Tech Imports

North, LLC; Hi Tech Imports,

South, LLC; and Hi Tech

Imports, LLC

/s/ S. Shawn Stephens

S. Shawn Stephens

50

NO. 03-15-00285-CV

IN THE THIRD COURT OF APPEALS

AUSTIN, TEXAS

VOLKSWAGEN GROUP OF AMERICA, INC.

AND AUDI OF AMERICA, INC.

Appellants

vs.

JOHN WALKER III, IN HIS OFFICIAL CAPACITY AS CHAIRMAN OF

THE TEXAS DEPARTMENT OF MOTOR VEHICLES BOARD, AND

THE HONORABLE MICHAEL J. O'MALLEY AND THE HONORABLE

PENNY A. WILKOV, IN THEIR OFFICIAL CAPACITIES AS

ADMINISTRATIVE LAW JUDGES FOR THE STATE OFFICE OF

ADMINISTRATIVE HEARINGS

Appellees

On Appeal from the 201st Judicial District Court, Travis County, Texas

Trial Court Cause No. D-1-GN-15-001186

Honorable Amy Clark Meachum, Presiding Judge

APPENDIX TO APPELLANTS’ BRIEF

TAB DESCRIPTION

1. District Court Orders on Defendants’ O’Malley, Wilkov, and

Walker’s Pleas to the Jurisdiction (CR 2030-2031)

2. Texas Government Code § 2001.058

3. State Office of Administrative Hearings Rule 155.153

4. Texas Occupations Code § 2301.709

5. Chair Walker’s Remand Order (CR 928-929)

DMSLIBRARY01:26055324.1

TAB DESCRIPTION

6. Comparison of Slovacek Motion and Remand Order (CR

1908)

7. Ex Parte Contact (CR 1941)

DMSLIBRARY01:26055324.1

APPENDIX TAB 1

DC BK15125 PG14

Filed in The District Court

of Travis County, Texas

CAUSE NO. D-1-GN-15-001186

APR 30 2015

VOLKSWAGEN GROUP OF § IN THE DISTRICT CQWRT OF lf ;·26 PM.1vs

AMERICA, INC. AND AUDI OF § Velva L. Price, District Clerk

AMERICA, INC., §

§

Plaintiffs, §

§

v. §

§

JOHN WALKER III, IN HIS OFFICIAL § TRAVIS COUNTY, TEXAS

CAPACITY AS CHAIRMAN OF THE §

TEXAS DEPARTMENT OF MOTOR §

VEHICLES BOARD, AND THE §

HONORABLE MICHAEL J. §

O'MALLEY AND THE HONORABLE §

PENNY A. WILKOV, IN THEIR §

OFFICIAL CAPACITIES AS §

ADMINISTRATIVE LAW JUDGES §

FOR THE STATE OFFICE OF §

ADMINISTRATIVE HEARINGS, §

§

Defendants. § 353RD JUDICIAL DISTRICT

ORDER ON DEFENDANTS O'MALLEY AND WILKOV'S PLEA TO THE JURISDICTION

On April 30, 2015 a hearing on Defendants O'Malley and Wilkov's (SOAH defendants) Plea

to the Jurisdiction was held. All parties appeared through counsel. After considering the pleadings, b..;(."'~J

evidence and argument, this Court finds that Defendants O'Malley and Wilkov's Plea to the {(!t>

Jurisdiction should be granted.

IT IS THEREFORE ORDERED AND DECLARED that Defendants O'Malley and Wilkov' s

Plea to the Jurisdiction is GRANTED and Plaintiffs claims against these Defendants are dismissed

from the case.

Signedthisthe ~yof_~--~_ .._l_,2J5 f?JIJ /I

)

The ~m

Case # D-1-GN-15-001186

Illllll lllll lllll lllll 111111111111111111111111111111111

004006831

2030

DC BK15125 PG15

CAUSE NO. D-1-GN-15-001186

VOLKSWAGEN GROUP OF § IN THE DISTRICT COURT OF

AMERICA, INC. and AUDI OF §

AMERICA, INC. §

Plaintiffs, §

§

v. § TRAVIS COUNTY, TEXAS

§

JOHN WALKER III, in his Official §

Capacity as Chairman of the Texas §

Department of Motor Vehicles Board; §

THE HONORABLE MICHAEL J. §

O'MALLEY, and THE §

HONORABLE PENNY A. WILKOV, §

in their official Capacities as §

Administrative Law Judges for the §

State Office of Administrative §

Hearings §

Defendants. § 353rd JUDICIAL DISTRICT

ORDER ON DEFENDANT WALKER'S PLEA TO THE JURISDICTION

Be it remembered that on this day came on to be heard the Plea to the Jurisdiction

filed by Defendant, John Walker III, in his Official Capacity as Chairman of the 'J:exas

cot\S"J..u·" ~ i>ll~a,·~s, io"',.e~~s, ~

Department of Motor Vehicles Board. After hearisg a.rgnment nl'crnmsil the Court is of ~

~u\!..t(\lL ~t\. ~~u.Mlflf°' k\A:~ C:;,i....(l:\" ~·N'.ls

-..:uw~HHE~ that such motion should be Granted;

It is hereby ORDERED, ADJUDGED AND DECREED that Defendant Walker's

Plea to the Jurisdiction is GRANTED and all claims against Defendant Walker are hereby

dismissed.

Case# D-1-GN-15-001186

Signed this ~y of April, 2015.

\004006796

\11\\l lllll lllll lllll lllll lllll lllll lllll lllll llll llll

Filed in The District Court

of Travis County, Texas

APR 30 2015 N~

Ju~

\.\ '. z:?;> ? M.

,. . t.. Price, District Clerk

2031

APPENDIX TAB 2

§ 2001.058. Hearing Conducted by State Office of..., TX GOVT § 2001.058

Vernon’s Texas Statutes and Codes Annotated

Government Code (Refs & Annos)

Title 10. General Government (Refs & Annos)

Subtitle A. Administrative Procedure and Practice

Chapter 2001. Administrative Procedure (Refs & Annos)

Subchapter C. Contested Cases: General Rights and Procedures

V.T.C.A., Government Code § 2001.058

§ 2001.058. Hearing Conducted by State Office of Administrative Hearings

Currentness

(a) This section applies only to an administrative law judge employed by the State Office of Administrative Hearings.

(b) An administrative law judge who conducts a contested case hearing shall consider applicable agency rules or policies in

conducting the hearing, but the state agency deciding the case may not supervise the administrative law judge.

(c) A state agency shall provide the administrative law judge with a written statement of applicable rules or policies.

(d) A state agency may not attempt to influence the finding of facts or the administrative law judge’s application of the law in

a contested case except by proper evidence and legal argument.

(e) A state agency may change a finding of fact or conclusion of law made by the administrative law judge, or may vacate or

modify an order issued by the administrative judge, only if the agency determines:

(1) that the administrative law judge did not properly apply or interpret applicable law, agency rules, written policies

provided under Subsection (c), or prior administrative decisions;

(2) that a prior administrative decision on which the administrative law judge relied is incorrect or should be changed; or

(3) that a technical error in a finding of fact should be changed.

The agency shall state in writing the specific reason and legal basis for a change made under this subsection.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1

§ 2001.058. Hearing Conducted by State Office of..., TX GOVT § 2001.058

(f) A state agency by rule may provide that, in a contested case before the agency that concerns licensing in relation to an

occupational license and that is not disposed of by stipulation, agreed settlement, or consent order, the administrative law

judge shall render the final decision in the contested case. If a state agency adopts such a rule, the following provisions apply

to contested cases covered by the rule:

(1) the administrative law judge shall render the decision that may become final under Section 2001.144 not later than the

60th day after the latter of the date on which the hearing is finally closed or the date by which the judge has ordered all

briefs, reply briefs, and other posthearing documents to be filed, and the 60-day period may be extended only with the

consent of all parties, including the occupational licensing agency;

(2) the administrative law judge shall include in the findings of fact and conclusions of law a determination whether the

license at issue is primarily a license to engage in an occupation;

(3) the State Office of Administrative Hearings is the state agency with which a motion for rehearing or a reply to a motion

for rehearing is filed under Section 2001.146 and is the state agency that acts on the motion or extends a time period under

Section 2001.146;

(4) the State Office of Administrative Hearings is the state agency responsible for sending a copy of the decision that may

become final under Section 2001.144 or an order ruling on a motion for rehearing to the parties, including the occupational

licensing agency, in accordance with Section 2001.142; and

(5) the occupational licensing agency and any other party to the contested case is entitled to obtain judicial review of the

final decision in accordance with this chapter.

Credits

Added by Acts 1993, 73rd Leg., ch. 268, § 1, eff. Sept. 1, 1993. Amended by Acts 1997, 75th Leg., ch. 1167, § 1, eff. Sept. 1,

1997.

Notes of Decisions (33)

V. T. C. A., Government Code § 2001.058, TX GOVT § 2001.058

Current through Chapters effective immediately through Chapter 46 of the 2015 Regular Session of the 84th Legislature

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 2

APPENDIX TAB 3

&'3012015 Texas Administrative Code

<<PrevRule Next Rule>>

Texas Administrative Code

TI1LE 1 ADMINISTRATION

PART7 STATE OFFICE OF ADMINISTRATIVE HEARINGS

CHAPTER 155 RULES OF PROCEDURE

SIJBCHAPTER D RIDGES

RULE §155.153 Powers and Duties

(a) Judge's authority and duties. The judge shall have the authority and duty to:

( 1) conduct a full, fair, and efficient hearing;

(2) take action to avoid wmecessary delay in the disposition ofthe proceeding;

(3) maintain order; and

(4) reopen the record when justice requires, if the judge has not issued a dismissal, proposal for

decision, or final decision.

(b) Judge's powers. The judge shall have the power to regulate prehearing matters, the hearing, and the

conduct of the parties and authorized representatives, including the power to:

( 1) administer oaths;

(2) take testimony, including the power to question witnesses and to request the presence of a witness

from a state agency, as contemplated by APA §2001.090(d);

(3) rule on questions of evidence;

(4) rule on discovery issues;

( 5) issue orders relating to hearing and prehearing matters, including orders imposing sanctions;

(6) admit or deny party status;

(7) designate the party with the burden of proof pursuant to §155.427 of this title (relating to Burden of

Proof);

(8) exclude irrelevant, immaterial, and unduly repetitious testimony and reasonably limit the time for

presentations of evidence or argument;

(9) order parties to submit legal memoranda and proposed fmdings of fact and conclusions oflaw;

( 10) issue proposals for decision pursuant to APA §2001.062, and when authorized, final decisions;

and

( 11) rule on motions for rehearing,. when authorized.

http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=9&p_dir=&p_rloc=&p_tloc=&p_ploc=&pg=1&p_tac=&ti=1&pt=7&ch=155&rl=153 1/2

&'3012015 Texas Administrative Code

Source Note: The provisions of this §155.153 adopted to be effective November 26, 2008> 33 TexReg

9451

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- TEXAS REGISTER TEXAS ADMINISTRATIVE CODE OPEN MEETINGS

http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=9&p_dir=&p_rloc=&p_tloc=&p_ploc=&pg=1&p_tac=&ti=1&pt=7&ch=155&rl=153 212

APPENDIX TAB 4

§ 2301.709. Review by Board, TX OCC § 2301.709

Vernon’s Texas Statutes and Codes Annotated

Occupations Code (Refs & Annos)

Title 14. Regulation of Motor Vehicles and Transportation (Refs & Annos)

Subtitle A. Regulations Related to Motor Vehicles

Chapter 2301. Sale or Lease of Motor Vehicles (Refs & Annos)

Subchapter O. Hearings Procedures

V.T.C.A., Occupations Code § 2301.709

§ 2301.709. Review by Board

Effective: September 1, 2013

Currentness

(a) In reviewing a case under this subchapter, the board or a person delegated power from the board under Section 2301.154

may consider only materials that are submitted timely.

(b) The board or a person delegated power from the board under Section 2301.154 may hear such oral argument from any

party as the board may allow.

(c) The board or a person delegated power from the board under Section 2301.154 shall take any further action conducive to

the issuance of a final order and shall issue a written final decision or order. A majority vote of a quorum of the board is

required to adopt a final decision or order of the board.

Credits

Added by Acts 2001, 77th Leg., ch. 1421, § 5, eff. June 1, 2003. Amended by Acts 2007, 80th Leg., ch. 1403, § 3, eff. Sept.

1, 2007; Acts 2013, 83rd Leg., ch. 1135 (H.B. 2741), § 26, eff. Sept. 1, 2013.

Notes of Decisions (7)

V. T. C. A., Occupations Code § 2301.709, TX OCC § 2301.709

Current through Chapters effective immediately through Chapter 46 of the 2015 Regular Session of the 84th Legislature

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1

APPENDIX TAB 5

BOARD OF THE TEXAS DEPARTMENT OF MOTOR VEffiCLES

Budget Leasing, Inc., d/b/a Audi §

North Austin and Audi South Austin, §

Protestants. and Ricardo M. Weitz, Hi Tech §

Imports North, LLC, Hi Tech Imports § 0

)>

0

South, LLC, Hi Tech Imports LLC, § 0

c

Intervenors § a

z

c

§ MVD DOCKET N0.13-0008.LIC 3

<:r

v. § SOAH DOCKET NO. XXX-XX-XXXX.LIC (I)

:'!

§ ~

~

Volkswagen Group of America, Inc. and § "'

Porsche Cars North America, Inc., §

Respondent., § .,,c:

0

Q)

a.

0

(I)

"'

0

:~.

INTERIM ORDER REMANDING THE CASE TO THE STATE OFFICE OF 'S.

. ,, c;·

ADMINISTRATIVE HEARINGS FOR .FURTHER PRQCEEDINGS ~

0

0

On December 10, 2014, the Board of the Texas Department of Motor Vehicles granted · ,..

0

rehearing in this matter. The Board finds that substantial controversies tontinue to exist and that

;

0"'

these controversies require further adjudication at the State Office of I.Administrative Hearings 0.

en

m

through the contested case process. · .' ><

::T

.,:....

::i

Q.

The Board remands this matter to the State Office of Administrative Hearings (SOAR) "'

for supplemental proceedings, limited to the following: ·

Did Audi receive the letter' dated April 30, 2013, from Ricardo M. Weitz to Sally

Grimes, and should this letter be added to the record? If so, what effect, if any, does the letter

have on the issue of compliance with Tex. Occ. Code, §2301.359 in light of the agency's pridr

decision in Gordon Rountree Motors, Ltd. v. Mazda Motors of America, MVD DocketNo. 07.:

0038 LIC 2?

While adjudicating this case on remand, SOAH is also directed to review the qualifying

conditions set forth in Findings of Fact Nos. 154-158, Intervenors' Motion to Find the

Prospective Transferees Qualified3, and Volkswagen Group of America, Inc. & Audi of America

4

fuc.'s Response to Intervenors' Motion to Find the Prospective Transferees Qualified. At the

conclusion of this review, SOAH is directed to provide a specific finding that prospective

transferees either are qualified or are not qualified.

' A copy of which is attached hereto as Exhibit 1

2

A copy of which is attached hereto as Exhibit 2.

~ A copy of which is attached hereto as Exhibit 3.

4

A copy of which is attached hereto as Exhibit 4.

Exhibit L - Brief ISO Motion for Temporary Injunction 928

Accordingly, the Board requests SOAH conduct supplemental proceedings limited to the

taking of evidence and providing the Board with supplemental findings on the foregoing issues.

Regarding these supplemental proceedings, the Board holds that SOAH's opinion on retention of

jurisdiction is not properly a finding of fact or a conclusion of law. Under Occupations Code,

§2301.360(e), the decision to retain jurisdiction after the issuance of the Board's order is at the

sole discretion of the Board.

Given the complicated and lengthy nature of the proceedings already conducted by

SOAH in this matter, the Board requests that the same administrative law judges who conducted

the initial proceedings be assigned to this matter on remand.

The Board strongly urges SOAR to address this matter as expeditiously as possible. To

that end, the Board recognizes that accommodations regarding other Board cases may need to be

made and the Board authorizes SOAH to do whatever is necessary to fulfill the Board's request

to accelerate the adjudication of this matter.

Date: February 13, 2015

. Waker, III, Board Chairman,

as Department of Motor Vehicles

Motor Vehicle Division

Texas Department of Motor Vehicles

Exhibit L - Brief ISO Motion for Temporary Injunction 929

APPENDIX TAB 6

Transcript- February 13, 2015 Board Meeting Board's Remand Order

p14 The Board remands this matter to the State Office of Administrative Hearings (SOAH)

MR. SLOVACEK: What is the staff's for suppl.emental proceedings~ limited to the following:

recommendation? Did Audi receive the letter1 dated April 30, 2013, from Riwdo M. Weitz to Sally

Grimes, and.should this.letter be added to therecord? If soi what effect, if any, does the letter

5 MR. DUNCAN: To remand to SOll.H to consider the have on the issue of compliance with Tex. Occ, Code, ~2301.359 lnlight of the agencyts prior

decisiort in Gordmi Rountree Motors, Ltd. v. Mazda Motors of America, MVD Docket No. 07-

document that we received in the between the

0038 LIC2?

While adjudicating this case on remand, SOAH is also directed to review the qualif~ng

conditions set forth in Pin.dings·· of Fact. Nos. 154~158, fotetvenors 1 .Motion to Find ·the

Prospective Transferees QuaUfled3, andVolkswagen Group of Americ~Jnc. &Audi of America

Inc/s ·Response to ·hltervenors' ·Motion to Find the· Prospective Transferees Qualified.4.At the

10 conclusion of this review, SOAH is directed to provide a specific finding that pro&pe<:tive

transferees eitherare qualified or are not qualified.

·11

u

Accotdin~Y~ theBoatd·requests•SOAH c-0.nduct supplemental proceedings limited.to the

tug.of evidence and providing the Board with supplemental findings on the foregoing issues.

Regarding these suppletnental proctedings, the Board holds that SOAH's opinion <>n retention of

jurisdiction is not properly. afinding of fact or a conclusion of law. Under Occupations Code,

§230 L360(e), the docL~ion to retain jurisdiction afterthe is$uance of the Board's 0,rdeds atthe

MR. We have a motion by Member sole discretion of the Board.

15 Slovacek and we have as second by Palacios. Do we

Given tl1e complicated and lengthy nature of the proceedings already conducted by

any of the board SOAH in this matter, the Board requests that the same administrative law judges who conducted

the initial pro4-eedlngs be assigned tothis matter on remand.

17 members?

The Board strongly urges SOAH to address tliis matter as expe~itiously as possible. To

p27, 28 that end, the Board recognizes that accommodations regarding other Board cases may need to be

17 MR. WALKER: I'm sorry. made and the Board authorizes SOAHtodo whateverisnecessaryto·folfillthe Board's r~quest

to accelerate the adiudicatkm oftl1is matter.

18 we have a motion and we have a second. Do

19 we have any further comments from the board? Date: Febmary Bi 2015

20 (No response.)

MR. WALKER: All in favor the recommended o .Walker, III, Board Chairman,

as Department of Motor Vehicles

it back by

(A chorus of ayes.)

24 MR. WALKER:

Daniel Avitia, Direc or

25 (No response.) Motor Vehicle, Division

MR. WALKER: The motion carries. Texas Department of Motor Vehicles

Exhibit 5

1908

APPENDIX TAB 7

lnMail: You have a new message

Date: 10/15/2014

Subject: RE: Introduction

Exhibit 7 1941