# 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 > Texas Court of Appeals, 3rd District (Austin) · August 14, 2015 URL: https://www.frixlaw.com/law-library/cases/4071991 ## Case - **Court:** Texas Court of Appeals, 3rd District (Austin) - **Decided:** August 14, 2015 - **Precedential status:** Published - **Opinion:** Opinion - **Cited by:** 0 later opinions in the Frix Law Library ## Citator (automated) - No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases. - Full citator and citing cases: https://www.frixlaw.com/law-library/cases/4071991 ## How later opinions describe it (automated extraction) - holding that Texas Natural Resource Conservation Commission was the "proper defendant" when plaintiff sought judicial review of agency’s order - noting that the administrative scheme in the Tex. Educ. Code is "different from" and "not subject" to the APA - holding that the Board has "exclusive jurisdiction over claims and issues the [Texas Occupations] Code governs." ## Opinion text ACCEPTED 03-15-00285-CV 6511633 THIRD COURT OF APPEALS AUSTIN, TEXAS 8/14/2015 4:55:21 PM JEFFREY D. KYLE CLERK NO. 03-15-00285-CV FILED IN 3rd COURT OF APPEALS IN THE THIRD COURT OF APPEALS AUSTIN, TEXAS AUSTIN, TEXAS 8/14/2015 4:55:21 PM JEFFREY D. KYLE Clerk VOLKSWAGEN GROUP OF AMERICA, INC. AND AUDI OF AMERICA, INC., Appellants, v. JOHN WALKER III, ET AL. Appellees. On Appeal from the 201st Judicial District Court, Travis County, Texas Honorable Amy Clark Meachum, Presiding Judge INTERVENORS' BRIEF ON APPEAL Wm. R. Crocker J. Bruce Bennett State Bar No. 05091000 State Bar No. 0214550 807 Brazos, Suite 1014 CARDWELL, HART & BENNETT, LLP Austin, Texas 78767 807 Brazos, Suite 1001 Telephone: (512) 478-5611 Austin, Texas 78701 Facsimile: (512) 474-2540 Telephone: (512) 322-0011 Email: crockerlaw@earthlink.net Facsimile: (512) 322-0808 Email: jbb.chblaw@sbcglobal.net ATTORNEY FOR ATTORNEY FOR INTERVENOR/APPELLEE INTERVENORS/APPELLEES BUDGET LEASING, INC. D/B/A RICARDO M. WEITZ, HI TECH AUDI NORTH AUSTIN AND AUDI IMPORTS NORTH, LLC, HI TECH SOUTH AUSTIN IMPORTS SOUTH, LLC, AND HI TECH IMPORTS, LLC IDENTITY OF PARTIES AND COUNSEL Appellants Volkswagen Group of America, Inc. and Audi of America, Inc. (hereinafter "Audi" Or "Appellants") Represented By: S. Shawn Stephens Texas Bar No. 19160060 James P. Sullivan Texas Bar No. 24070702 KING & SPALDING 1100 Louisiana, Suite 4000 Houston, Texas 77002 Tel: (713) 751-3200 Fax: (713) 751-3290 Lead Appellate Counsel 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 Tel: (713) 751-1600 Fax: (713) 751-1717 bdonley@bakerlaw.com mesmith@bakerlaw.com Trial and Appellate Counsel Appellees/Defendants The Honorable Michael J. O’Malley and Penny A. Wilkov (the "ALJs") Represented By: Kimberly Fuchs i Texas Bar No. 24044140 Chief, Open Records Litigation Administrative Law Division Office of the Attorney General of Texas P.O. Box 12548, Capitol Station Austin, Texas 78711-2548 Tel: (512) 475-4195 Fax: (512) 320-0167 kimberly.fuchs@texasattorneygeneral.gov Trial and Appellate Counsel Chairman John H. Walker, III (the "Chairman" or "Walker") Represented By: Dennis McKinney Texas Bar No. 13719300 Assistant Attorney General Office of the Attorney General of Texas Administrative Law Division P.O. Box 12548, Capitol Station Austin, Texas 78711-2548 Tel: (512) 475-4020 Fax: (512) 320-0167 dennis.mckinney@texasattorneygeneral.gov Trial and Appellate Counsel Appellees/Intervenors Budget Leasing, Inc. d/b/a Audi North Austin and Audi South Austin ("Budget") Represented By: Wm. R. Crocker Texas Bar No. 05091000 807 Brazos, Suite 1014 Austin, Texas 78767 Tel: (512) 478-5611 ii Fax: (512) 474-2540 crockerlaw@earthlink.net Trial and Appellate Counsel Ricardo M. Weitz ("Weitz"), Hi Tech Imports, LLC ("Imports"), Hi Tech Imports North, LLC ("North"), and Hi Tech Imports South, LLC ("South" and, together with Weitz, North, and South, the "Weitz Group") Represented By: J. Bruce Bennett Texas Bar No. 0214550 Leon V. Komkov Texas Bar No. 11670500 CARDWELL, HART & BENNETT, LLP 807 Brazos, Suite 1001 Austin, Texas 78701 Tel: (512) 322-0011 Fax: (512) 322-0808 jbb.chblaw@sbcglobal.net lvk@longroadllc.com Trial and Appellate Counsel Joseph W. Letzer Texas Bar No. 24030763 Dent M. Morton Texas Bar No. 24056645 BURR & FORMAN, LLP 420 20th Street N, Suite 3400 Birmingham, AL 35203-5210 Tel: (205) 251-3000 Fax: (205) 458-5100 jletzer@burr.com dmorton@burr.com Trial and Appellate Counsel iii TABLE OF CONTENTS IDENTITY OF PARTIES AND COUNSEL ........................................................ i TABLE OF CONTENTS ..................................................................................... iv INDEX OF AUTHORITIES................................................................................ vi STATEMENT OF THE CASE ............................................................................ xi STATEMENT REGARDING ORAL ARGUMENT ....................................... xiii ISSUES PRESENTED....................................................................................... xiv STATEMENT OF FACTS ....................................................................................1 I.  Preliminary Matter. ............................................................................1 II.  Parties. ................................................................................................1 III.  The Protest..........................................................................................3 IV.  Post-PFD Board Proceedings. ............................................................5 SUMMARY OF THE ARGUMENT ..................................................................11 ARGUMENT .......................................................................................................16 I.  This Court Should Affirm The District Court's Dismissal Because Of Audi’s Failure To Exhaust Administrative Remedies. .........................................................................................16 A.  The Board Has Exclusive Jurisdiction Over The Protest....................................................................................18 B.  The "Without Jurisdiction" Exception To The Exhaustion Requirement Is Inapplicable. .............................20 II.  This Court Should Affirm The District Court's Dismissal Because Defendants Did Not "Exceed Their Powers." ...................25 A.  The Legal Framework Applicable To The Protest. ..............25 B.  Chairman Walker. .................................................................27 iv i.  The Board had authority to remand the Protest to SOAH. ....................................................................28 ii.  The Board had the power and authority to order the ALJs to reopen the record. ....................................32 iii.  The Board did not authorize the consideration of "untimely" evidence....................................................34 iv.  Nothing about the Remand Order violates the rules against "influencing" the ALJs. .........................36 a.  The alleged "ex parte" communications issue has been waived by Audi and had no effect on the outcome of the remand vote. .......36 b.  The Remand Order does not differ from Member Slovacek’s motion. ............................38 c. The ALJs have remained fair and impartial. ....40 C.  The ALJs Have Not Acted Ultra Vires. ................................41 III.  This Court Should Affirm The District Court's Dismissal On The Basis Of Sovereign Immunity...................................................43 IV.  This Court Should Affirm The District Court's Dismissal Because Audi Failed To Join The Board And/Or The Other Board Members. ...............................................................................44 CONCLUSION ....................................................................................................47 v INDEX OF AUTHORITIES Cases Appraisal Review Bd. of Harris Cty. Appraisal Dist. v. O'Connor & Assocs, 267 S.W.3d 413 (Tex. App. – Houston [14th Dist.] 2008, no pet.) ........................ 17, 21, 46 Black v. City of Kileen, 78 S.W.3d 686 (Tex. App. – Austin 2002, pet. denied) ............................36 Buddy Gregg Motor Homes, Inc. v. Motor Vehicle Bd. of the Tex. Dept. of Transp., 179 S.W.3d 589 (Tex. App. – Austin 2005, pet. denied) ..........................19 City of El Paso v. Heinrich, 284 S.W.3d 366 (Tex. 2009) ........................................................ 23, 43, 46 City of Houston v. Rhule, 417 S.W.3d 440 (Tex. 2014) ........................................................ 16, 17, 46 City of Houston v. Williams, 99 S.W.3d 709 (Tex. App. – Houston [14th Dist.] 2003, no pet.) ........................ 17, 20, 46 City of Sherman v. Pub. Util. Comm’n of Tex., 643 S.W.2d 681 (Tex. 1983) ........................................................ 22, 24, 46 Coastal Habitat Alliance v. Pub. Util. Comm’n, 294 S.W.3d 276 (Tex. App. – Austin, 2009, no pet.) ................................44 Edwards v. City of Tomball, 343 S.W.3d 213 (Tex. App. – Houston [14th Dist.] 2011, no pet.) ..........22 Friends of Canyon Lake, Inc. v. Guadalupe-Blanco River Auth., 96 S.W.3d 519 (Tex. App. – Austin 2002, pet. denied) .................... 20, 22 Gonzalez v. Tex. Educ. Ag., 882 S.W.2d 526 (Tex. App. – Austin 1994, no pet.) .................... 20, 22, 24 vi Layton v. City of Fort Worth, No. 02-14-00084-CV, 2014 WL 6997350, at *6 (Tex. App. – Fort Worth Dec. 11, 2014, no pet.) ......................................44 Liberty Mut. Ins. Co. v. Griesing, 150 S.W.3d 640, 648 (Tex. App. – Austin 2004, pet. dism’d w.o.j.) .......31 Lim v. Hall, D.C., No. 03-96-00530-CV, 1997 WL 366803, at *1 (Tex. App. – Austin July 3, 1997, writ denied) .........................................34 Lone Starr Multi Theatres, Inc. v. State, 922 S.W.2d 295 (Tex. App. – Austin 1996, no writ) ................................45 Mag-T, L.P. v. Travis Cent. Appraisal Dist., 161 S.W.3d 617 (Tex. App. – Austin 2005, pet. denied) ............. 17, 46, 47 Montgomery Indep. Sch. Dist. v. Davis, 34 S.W.3d 559 (Tex. 2000) .......................................................................29 Moreno v. State, 409 S.W.3d 723 (Tex. App. – Houston [1st Dist.] 2013, pet. refused) .....36 N. Alamo Water Supply Corp. v. Tex. Dept. of Health, 839 S.W.2d 455 (Tex. App. – Austin 1992, writ denied) .........................20 Park v. Tex. Dept. of Health, No. 04-97-00338-CV, 1998 WL 412436, at *1 (Tex. App. – San Antonio July 22, 1998, no pet.)........................ 16, 17, 20 Pearce v. City of Round Rock, 992 S.W.2d 668 (Tex. App. – Austin 1999, pet. denied) .....................................................45 Reynolds v. Haws, 741 S.W.2d 582 (Tex. App. – Fort Worth 1987, writ denied) ..................45 Scott v. Graham, 292 S.W.2d 324 (Tex. 1956) .....................................................................45 Sw. Bell Tel., L.P. v. Emmett, vii 459 S.W.3d 578 (Tex. 2015) .............................................................. 43, 46 State v. Mid-South Pavers, Inc., 246 S.W.3d 711 (Tex. App. – Austin 2008, pet. denied) ..........................40 Subaru of Am., Inc. v. David McDavid Nissan, Inc., 84 S.W.3d 212 (Tex. 2002) .......................................................................19 Tarrant Appraisal Dist. v. Moore, 845 S.W.2d 820 (Tex. 1993) .....................................................................27 Tex. Nat. Res. Conservation Comm’n v. Sierra Club, 70 S.W.3d 809 (Tex. 2002) .......................................................................47 Tex. State Bd. of Pub. Accountancy v. Bass, 366 S.W.3d 751 (Tex. App. – Austin 2012, no pet.) .................................30 Westheimer Independent School District v. Brockette, 567 S.W.2d 780 (Tex. 1978) .....................................................................24 Administrative Decisions All Points Inspection Servs., Inc. v. Navistar, Inc., MVD No. 08-0432 CAF/WI 362638, 2011 WL 1341523, at *1 (Tex. St. Off. Admin. Hgs. Mar. 28, 2011) ...............................................30 Appeal of Paris A. Mims, Jr., 2004 WL 4172108, at *1 (Tex. St. Off. Admin. Hgs. Sept. 2004) .............................................. 30, 31 In re Belinda Quintero Molina, SOAH Docket No. XXX-XX-XXXX (Tex. St. Off. Admin. Hgs. Feb. 28, 2012) ................................................42 In re Taxpayer No.: *** (CPA Hearing No. 107,108), SOAH Docket No. XXX-XX-XXXX.26, 2014 WL 4694592, at *1 (Tex. St. Off. Admin. Hgs. June 9, 2014) .................................................42 In re Taxpayer No.: *** (CPA Hearing No. 108,005), SOAH Docket No. XXX-XX-XXXX.26, 2014 WL 4694594, at *1 viii (Tex. St. Off. Admin. Hgs. June 16, 2014) ...............................................42 In re Taxpayer No.: *** (Type: Motor Vehicle Gross Rental Receipts Tax/RDT), Hearing Nos. 30,505, 32,656, 1997 WL 617908, at *1 (Tex. Cptr. Pub. Acct. Sept. 23, 1997) ............................................... 34, 35 In re Taxpayer No.: *** (Type: Sales and Use Tax), Hearing No. 39,563, 2004 WL 3673564, at *1 (Tex. Cptr. Pub. Acct. 2004) .....................................................................35 Petitioner v. Tax Division, Texas Comptroller of Public Accounts, SOAH Dkt. XXX-XX-XXXX.26 (Tex. St. Off. Admin. Hgs. June 16, 2014) ...............................................33 Texas Comm’n on Law Enforcement v. Bush, SOAH Dkt. No. XXX-XX-XXXX (Tex. St. Off. Admin. Hgs. Feb. 27, 2013) ......................................... 32, 43 Texas Dept. of Ins. v. Mondragon, SOAH Docket No. XXX-XX-XXXX.C (Tex. St. Off. Admin. Hgs. Oct. 23, 2014) ................................................42 Tex. Dept. of Licensing and Regulation v. Drobot, SOAH Dkt. No. XXX-XX-XXXX (Tex. St. Off. Admin. Hgs. Apr. 11, 2014)................................................33 Texas Dept. of Licensing and Regulation v. Guerra, SOAH Dkt. No. XXX-XX-XXXX.ACR (Tex. St. Off. Admin. Hgs. June 5, 2013) .................................................33 Statutes Tex. Civ. Prac. & Rem. Code § 37.006(a) ...........................................................45 Tex. Gov’t Code § 2001.058......................................................................... 28, 29 Tex. Gov’t Code § 2001.174................................................................................21 Tex. Occ. Code § 2301.001 .......................................................................... 19, 25 ix Tex. Occ. Code § 2301.004 .......................................................................... 18, 25 Tex. Occ. Code § 2301.151 .................................................................... 18, 19, 28 Tex. Occ. Code § 2301.153 .............................................................. 19, 26, 28, 29 Tex. Occ. Code § 2301.359 .................................................................. 5, 7, 18, 35 Tex. Occ. Code § 2301.360 ......................................................................... passim Tex. Occ. Code § 2301.458 .................................................................................18 Tex. Occ. Code § 2301.571 .................................................................................27 Tex. Occ. Code § 2301.702 .......................................................................... 26, 29 Tex. Occ. Code § 2301.703 .................................................................................26 Tex. Occ. Code § 2301.704 .......................................................................... 26, 41 Tex. Occ. Code § 2301.709 ......................................................................... passim Tex. Transp. Code § 1001.021(a) ........................................................................45 Administrative Rules 1 Tex. Admin. Code § 155.153(a)(4)............................................................ 32, 42 43 Tex. Admin. Code § 215.22(b) .......................................................................37 43 Tex. Admin. Code § 215.23(d) .........................................................................4 Rules of Appellate Procedure Tex. R. App. P. 38.1(g) ..........................................................................................1 x STATEMENT OF THE CASE Audi filed a lawsuit in the Travis County district court on March 25, 2015, seeking temporary, preliminary, and permanent injunctive relief against the Chairman of the Texas Department of Motor Vehicles Board (the “Board”), John H. Walker, III (“Chairman Walker”), and two administrative law judges employed by the State Office of Administrative Hearings (“SOAH”), Judges Michael J. O’Malley and Penny A. Wilkov (the “ALJs”). (Clerk’s Record (“CR”) at 117-148.) Audi’s petition alleged that Chairman Walker acted ultra vires in authorizing, on behalf of the Board, the remand of a contested case proceeding to SOAH and that the ALJs were engaging in ultra vires acts by conducting the remand. (Id. at 136- 147.) Audi’s Application for Temporary Restraining Order was denied on March 26, 2015. (CR 713-714, 729-730.) On March 27, 2015, the parties adverse to Audi in the underlying contested case proceeding (the “Intervenors” in the district court) intervened in the lawsuit in support of Chairman Walker and the ALJs. (CR 665- 703.) In April 2015, Intervenors, Chairman Walker, and the ALJs each filed a plea to the jurisdiction, seeking dismissal of Audi’s claims against Chairman Walker and the ALJs for lack of subject matter jurisdiction. (CR 731-774, CR 821-829, CR 836-843.) xi On April 30, 2015, District Judge Meachum sustained Chairman Walker and the ALJs’ pleas to the jurisdiction and dismissed Audi’s case. (CR 2030-2031.) On May 8, 2015, Audi appealed to this Court. (CR 2030.) On June 15, 2015, Audi filed a Motion for Temporary Relief, which this Court denied on July 8, 2015. xii STATEMENT REGARDING ORAL ARGUMENT Intervenors do not request oral argument. If, however, the Court decides to hear oral argument, then Intervenors request the opportunity to participate. xiii ISSUES PRESENTED I. Whether Chairman Walker and/or the ALJs acted (or are acting) “without jurisdiction” or “wholly outside their jurisdiction” in authorizing and conducting, respectively, a limited remand of the contested case proceeding over which the Board has exclusive original jurisdiction such that Audi was excused from exhausting its administrative remedies. II. Whether Chairman Walker and/or the ALJs exceeded (or are exceeding) the powers or statutory authority provided to them by Chapter 2301 of the Transportation Code, Chapter 2001 of the Texas Government Code, and the administrative rules applicable to the Board and SOAH in authorizing and conducting, respectively, the limited remand of the contested case proceeding over which the Board has exclusive original jurisdiction. III. Whether Chairman Walker and/or the ALJs acted (or are acting) within their jurisdiction and within the scope of discretion afforded to them under the laws such that they are entitled to immunity from suit under well-recognized principles of governmental immunity. IV. Whether either the Board or the other Board members are indispensable parties to Audi’s lawsuit because Audi is challenging an order entered by the Board, not just Chairman Walker, and the order being challenged was agreed upon by seven of the Board’s members. xiv STATEMENT OF FACTS I. PRELIMINARY MATTER. Audi’s Statement of Facts, (Appellants’ Brief (hereinafter "Audi’s Br.") at pp. 1-7), is incomplete, argumentative, mischaracterizes events, and is otherwise not in compliance with the standards set forth in Tex. R. App. P. 38.1(g).1 Intervenors do not accept (and urge the Court not to accept) any statement in Audi’s factual statement as being true and correct unless corroborated by an accurate citation to admitted evidence. II. PARTIES. Audi of America, Inc. is a division of Volkswagen Group of America, Inc. (CR 119 at ¶ 6.) The plaintiff in the underlying lawsuit is Appellant Volkswagen Group of America, Inc. d/b/a Audi of America, Inc. ("Audi"). (Id.) Appellee/Intervenor Budget Leasing, Inc. d/b/a Audi North Austin and Audi South Austin ("Budget") is the owner of, inter alia, two Audi dealerships, a Porsche dealership, and a Maserati dealership in Austin, Texas. (CR 1276 at Finding of Fact (“FOF”) No. 11.) In December 2012, Appellee/Intervenor Ricardo M. Weitz ("Weitz"), on behalf of himself and his assigns, entered into a Dealership Purchase Contract to 1 (See, e.g., Audi's Br. at p. 4 n.4 (arguing that Intervenors are not proper parties to the contested case); 5 (arguing that the Board granted rehearing due to an ex parte communication); 7 (arguing that “[t]he court below erroneously dismissed the lawsuit….”).) 1 buy Budget’s Audi, Porsche, and Maserati dealerships. (CR 1276 at FOF Nos. 12, 13.) Weitz formed Appellees/Intervenors Hi Tech Imports, LLC ("Imports"), Hi Tech Imports North, LLC ("North"), and Hi Tech Imports South, LLC ("South") to own the Porsche, Audi North, and Audi South dealerships, respectively. (CR 1276 at FOF Nos. 26, 27.) (Weitz, Imports, North, and South are hereinafter referred to as the "Weitz Group.") After Audi rejected the Weitz Group’s initial applications to buy Budget’s Audi dealerships, Budget and the Weitz Group filed a statutorily authorized protest (the "Protest") with the Board.2 (Reporter’s Record (“RR”) at Pl.’s Ex. 3.) The Board docketed the Protest as a contested case and referred the case to SOAH and the ALJs conducted the contested case proceeding. (See generally CR 1275 at FOF Nos. 3-10.) Audi filed the lawsuit underlying this appeal on March 25, 2015, in response to a decision the Board made at its February 13, 2015 meeting. (CR 136-142.) Audi named Chairman Walker and the ALJs as defendants to the lawsuit. (CR 120 at ¶¶ 7-9.) Audi did not include as defendants any of the other Board members, 2 The Protest was filed pursuant to Section 2301.360(a) of the Texas Occupations Code (sometimes referred to hereinafter as the “Code”). 2 Budget, or any members of the Weitz Group. (Id.) Budget and the Weitz Group subsequently intervened in the lawsuit. (CR 665-703.) III. THE PROTEST. On December 20, 2012, Budget notified Audi that it had entered into a Dealership Purchase Contract with Mr. Weitz. (CR 487 at FOF No. 17.) Thereafter, Weitz and his business partners, either personally or through their representatives, submitted a host of information to Audi required by Audi as part of the transfer application process. (CR 487-489 at FOF Nos. 18-19, 22-23, 38.) On April 16, 2013, after stating that a "complete" application package had been received as of April 4, 2013, Audi rejected the Weitz Group’s applications to approve transfer of the Audi dealer agreements for Audi North Austin and Audi South Austin. (See generally CR 489 at FOF Nos. 39-40; CR 1886 at ¶ 2.) Audi included a list of its alleged "material reasons for rejection" of the proposed transfer. (Id.) Weitz sent a letter to Audi, dated April 30, 2013, stating that the proposed buyer agreed to be bound by the terms of the Audi franchise (hereinafter the "April 30th Letter"). (CR at 655.) On May 1, 2013, Weitz submitted two more packages of information to Audi (one from North and one from South). (CR 490 at FOF Nos. 41.) 3 On May 14, 2013, Budget and the Weitz Group filed a Protest of Rejection of Applications for Franchises, protesting the rejection of Budget’s transfer of its Audi and Porsche dealerships to Weitz. (RR at Pl.’s Ex. 3; CR 1884-1887.) The Board referred the matter to SOAH for a contested case hearing. (CR 1879-1883.) After Audi objected to the Weitz Group’s participation in the Protest as "protestants," the members of the Weitz Group were permitted to realign themselves as "Intervenors." (RR at Pl.’s Ex. 4; CR 371-385.)3 In late February and early March, 2014, Audi, Budget, and the Weitz Group participated in a nine day hearing before the ALJs. (CR 486 at FOF No. 9.) On July 16, 2014, the ALJs issued a proposal for decision (the "July 2014 PFD"). (RR at Pl.’s Ex. 8; CR 396-502.) In the July 2014 PFD, the ALJs found that Weitz, the buyer and intended manager of the dealerships, is "overly- qualified" to own Budget's Audi and Porsche dealerships, but that Weitz's primary business partner (anticipated to be the second largest owner of the dealerships' holding company) is "under-qualified." (CR 499.) Pursuant to Section 2301.360(d) 3 In one of the many legal arguments in its Statement of Facts, Audi contends that the members of the Weitz Group were not “proper parties” to the Protest. (Audi’s Br. at p. 4 n.4.) Judge O’Malley expressly found otherwise. (RR at Pl.’s Ex. 4.) In Order No. 3, noting that Weitz’s interest in the Protest, which involves the denial or approval of his multi-million dollar transaction, is “great,” Judge O’Malley held that the Weitz Group was entitled to intervene under Board Rule 215.23(d), which permits “any person” having an “interest in a proceeding” to “intervene and present any relevant and proper evidence, data, or argument bearing upon the issues involved in the particular proceeding.” (Id. at p. 12.) 4 of the Code, the ALJs recommended conditions that would render the prospective transferees qualified under Section 2301.359 of the Code. (Id.) The ALJs also found: 1) "[t]he DMV has jurisdiction...over the parties and the subject matter of this case"; and, 2) the Weitz Group had substantially complied with § 2301.359(c)(3) of the Code. (CR 413-415; CR 490 at FOF Nos. 43-46; CR 499 at Conclusion of Law (“COL”) No. 1; CR 501 at COL Nos. 22-23.) IV. POST-PFD BOARD PROCEEDINGS. After the July 2014 PFD was provided to the Board, the Weitz Group filed a Motion to Find the Prospective Transferees Qualified, asking the Board to determine that the Weitz Group had met the recommended conditions. (See generally RR at Pl.’s Ex. 16 (directing ALJs to consider said motion).) The Protest came before the Board on September 12, 2014. At that time, the Board, in a 3 to 2 vote, voted to dismiss the Protest for "want of jurisdiction." (RR at Pl.’s Ex. 9; CR 972-973.) The Board found that the Code’s notice provision, Tex. Occ. Code § 2301.359(c)(3), was "jurisdictional" and recommended dismissal because it could not find “the prospective transferee's written agreement to comply with the franchise” in the SOAH record. (Id.) On October 2, 2014, Budget and the Weitz Group filed a Motion for Rehearing. (RR at Pl.’s Ex. 10.) The Texas Automobile Dealers' Association filed 5 an amicus brief in support of the Motion for Rehearing. (RR at Pl.’s Ex. 15 (noting that TADA filed an amicus brief).) On October 13, 2014, Audi filed its opposition to the Motion for Rehearing. (RR at Pl.’s Ex. 11.) On October 15, 2014, Budget and the Weitz Group filed a response in support of their Motion for Rehearing. (RR at Pl.’s Ex. 12.) Budget and the Weitz Group attached to the response the April 30th Letter from Weitz to Audi wherein Weitz, on behalf of himself and in his capacity as manager of North and South, agreed in writing to be bound by the terms of the Audi franchise. (CR at 655.) While the rehearing briefing was ongoing, on October 10, 2014, Corbin Robertson III, a principal of one of Mr. Weitz’s silent partners,4 contacted a Board member, Laura Ryan, regarding the motion for rehearing. (RR at Pl.’s Ex. 13; CR 874.) On October 21, 2014, the Board’s General Counsel, David Duncan, sent a letter to counsel for all parties disclosing (and providing a copy of) the exchange between Mr. Robertson and Ms. Ryan. (Id.) On December 10, 2014, the Board voted to grant the Motion for Rehearing and entered an order stating: "[S]ubstantial controversies continue to exist and 4 (CR 497 at FOF 30-31, 33, 128.) 6 [those] controversies require further adjudication within the contested case process." (RR at Pl.’s Ex. 15; CR 1120-1121.)5 The Board considered the Protest again on February 13, 2015. (See generally CR 910-926.) The Board’s staff recommended that the Board remand the case to SOAH so that SOAH could make findings of fact and conclusions of law concerning Weitz’s April 30th Letter and its effect on the issue of compliance with Tex. Occ. Code § 2301.359(c)(3). (Id.) At the Board’s hearing, the Board’s general counsel, David Duncan, explained to the Board that, after it had dismissed the Protest, "the staff…received a copy of a document, [the April 30th Letter], that may satisfy the statutory requirement that was discussed in the September board meeting. Because that item is clearly missing from the SOAH record, it’s the staff’s position that the most appropriate outcome is to remand the matter to SOAH so that the document can be considered by the SOAH judges." (CR 914.) 6 After Mr. Duncan finished speaking, the following exchange occurred: Mr. Slovacek: What is the staff’s recommendation? Mr. Duncan: To remand to SOAH to consider the document that we received in the period between the board’s last action and today. 5 Laura Ryan, the Board member contacted by Mr. Robertson, abstained from voting on the Motion for Rehearing. 6 The Board acknowledged at the February 13th meeting that the Board has "always had jurisdiction over this matter." (RR at Pl.’s Ex. 18, p. 12; CR 913.) 7 Mr. Slovacek: Mr. Chairman, I make a motion that we remand to SOAH, for the reasons outlined by Mr. Duncan, this entire case, for all the reasons set forth, to determine whether the intervenors have, in fact, satisfied the conditions of the proposal for decision. Mr. Palacios: I second the motion. (CR 915.) Before the Board voted on the motion, the Board allowed counsel for the parties to the Protest to speak on the subject. (CR 915-923.) Audi’s counsel argued, inter alia, that it would be improper to remand the case to SOAH because SOAH could not reopen the record to consider the April 30th Letter and that the Board lacked the authority to consider the April 30th Letter because it was not "timely" submitted. (Id.) Audi’s counsel did not argue that the alleged ex parte communication had affected the vote on the Motion for Rehearing or was a reason not to remand the matter to SOAH. (Id.) The seven Board members present then voted,7 unanimously, to remand the Protest to SOAH. (RR at Pl.’s Ex. 16; CR 7-38.) The Board's "Interim Remand Order" stated: The Board remands this matter to [SOAH] 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 7 Laura Ryan was not present at the February 13th meeting and did not participate in the vote recommending the Remand. 8 with Texas Occupations Code § 2301.359 in light of the prior decision in Gordon Rountree Motors, Ltd. v. Mazda Motors of America, MVD Docket No. 07-0038 (May 4, 2010)? 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 Qualified, and Volkswagen Group of America, Inc. & Audi of America, Inc.'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 the prospective transferees either are qualified or are not qualified. (RR at Pl.’s Ex. 16.) On February 20, 2015, Audi filed a motion with the ALJs asking them to send the Protest back to the Board. (CR 172-182.) Audi challenged the Board's authority to remand the Protest to SOAH, the ALJs' authority to reopen the record, and the ALJs' authority to issue a proposal for decision on remand. (Id. See also RR at Pl.'s Ex. 19.) The ALJs denied that motion on March 4, 2015. (RR at Pl.'s Ex. 29.) On March 16, 2015, Audi filed an Emergency Motion to Vacate or Modify Statutory Stay and to Stay Further Proceedings (the "Emergency Motion to Stay") with the ALJs. (RR at Pl.'s Ex. 2; CR 1868-1878.) Audi reasserted its belief that the Board's remand and the reopening of the record were acts outside the Board's and the ALJs' statutory authority. (Id.) Audi sought a stay of the remand proceedings so that it could "expeditiously file a petition in the Travis County district court" to address the purported ultra vires acts of the Board and SOAH. 9 (Id.) Audi attached a draft of its district court petition as an exhibit to its Emergency Motion to Stay. (CR 1909-1939.) On March 19, 2015, the ALJs denied the Emergency Motion to Stay. (RR at Pl.'s Ex. 25; CR 1943-1945.) On March 25, 2015, Audi filed the lawsuit underlying this appeal. (CR 117- 151.) Chairman Walker, the ALJs, and Budget and the Weitz Group filed pleas to the jurisdiction, seeking dismissal of Audi’s claims for lack of subject matter jurisdiction. (CR 731-774.) On April 30, 2013, District Judge Meachum sustained Chairman Walker and the ALJs’ pleas to the jurisdiction and dismissed Audi’s case. (CR 2030-2031.) This appeal arises from that dismissal. (CR 2030.) In the meantime, beginning April 16, 2015, the ALJs held a two-day hearing on the remanded issues. (CR 1980.) Audi participated in the hearing, cross- examining the witnesses called by Budget and the Weitz Group, calling three witnesses of its own, introducing exhibits into evidence, and presenting argument on evidentiary and other legal issues. Audi subsequently filed both a post-hearing brief and a reply to the Weitz Group’s post-hearing brief. The ALJs closed the record on Remand on June 16, 2015 and, on August 13, 2015, issued their second proposal for decision.8 8 Pursuant to Tex. R. Evid. 201(b)(2), Intervenors request the Court to take judicial notice of the ALJs’ second proposal for decision, which is attached to Intervenors’ Appendix at Tab 1 and can be found on SOAH’s public website: https://cis.soah.state.tx.us/dmwebbasic?WCI=API&J3G0nF1LfcOS0QXdMTy6vhVx1B8nLm2+ FlDSScMeKoN0rZ3HrCVdArVTCR2G/AN8lX8Dn0GqhYoInSRd1k32Kg== (last accessed 10 SUMMARY OF THE ARGUMENT The essence of Audi’s lawsuit is that the Board did not have the authority to order a limited purpose remand of a contested case proceeding to SOAH and that the ALJs do not have the authority to conduct a limited purpose remand ordered by the Board. The Travis County District Court properly dismissed Audi’s lawsuit and its judgment is due to be affirmed for at least four reasons. First, the district court’s dismissal should be affirmed because Audi failed to exhaust its administrative remedies before the Board and, therefore, the district court lacked subject matter jurisdiction. The Board has exclusive original jurisdiction over protests filed pursuant to Tex. Occ. Code § 2301.360, which means that Audi was required to exhaust its administrative remedies before the Board prior to seeking relief from the state court. Because of the Board’s undisputed exclusive original jurisdiction over the underlying contested case proceeding and the undisputed fact that Audi has not exhausted its remedies before the Board, this case falls squarely within those cases that are dismissed due to lack of subject matter jurisdiction. Aug. 13, 2015). Judicial notice of another court’s records may properly be taken for the first time on appeal as long as the appellate court is provided with proof of the record. Office of Pub. Util. Counsel v. Pub. Util. Comm’n of Tex., 878 S.W.2d 598 (Tex. 1994) (holding appellate court erred in failing to take judicial notice of agency order relevant to appeal); Healthtronics, Inc. v. Lisa Laser USA, Inc., 382 S.W.3d 567, 576 n.2 (Tex. App. Austin 2012) (taking judicial notice of verdict form, final judgment, and post-trial order in related California case); In re Anthony Sheridan, 2014 WL 6140078, at *2 n.2 (Tex. App. – Austin Nov. 14, 2014) (taking judicial notice of record in prior, related appeal and drawing facts from that record where record in current proceeding “provide[d] a less-than-complete procedural background”). 11 Relying on a fundamental misconception of one of the exceptions to the exhaustion requirement, Audi tries to salvage its lawsuit by arguing that Chairman Walker and the ALJs are acting ultra vires and, therefore, Audi is excused from exhausting its administrative remedies before the Board. The exception that Audi seeks to take advantage of applies when an administrative agency acts “without jurisdiction,” not when a party to an administrative proceeding contends that the agency made a wrong decision about the law or failed to comply with the administrative process. If Audi’s interpretation of the narrow exception were correct, then every frustrated party to an administrative proceeding would be excused from exhausting its administrative remedies and the exception would swallow the rule. Because Audi has never disputed (and cannot dispute) that the Board has exclusive original jurisdiction over the underlying protest and the “without jurisdiction” exception is inapplicable, Audi is required to exhaust its administrative remedies before seeking judicial review and relief from the state courts. Audi’s lawsuit was properly dismissed. Second, although the first argument is dispositive of this appeal and the Court need go no further in analyzing the issues on appeal, the dismissal is also due to be affirmed because neither Chairman Walker nor either of the ALJs has exceeded his or her powers or authority. There are few, if any, administrative 12 agencies within the State of Texas that are given the broad powers, authority, and jurisdiction given to the Board. “Notwithstanding any other provision of the law,” the Board has “all powers necessary, incidental, or convenient to” the discharge of the duties given to it in Chapter 2301 of the Texas Occupations Code, including its duty to decide disputes between franchised dealers and manufacturers. Further, when reviewing cases arising under Chapter 2301, the Board is authorized to take “any further action” conducive to the issuance of a final order. Chapter 2301 bestows upon the ALJs all of the Board’s powers with the exception of the authority to issue a final order. Despite the Board’s extensive powers, Audi contends that the Board does not have authority to remand a case to SOAH for further fact finding and that the ALJs do not have the authority to issue an amended proposal for decision (even if ordered to do so by the referring agency). Significantly, Audi cites no case, statute or authoritative source for the general proposition that a remand is unauthorized in the absence of express “remand” language in an agency’s enabling statute or for the specific proposition that the Board cannot remand a case to SOAH for further fact finding. Audi also does not cite any cases, statutes, or authoritative sources for the contention that an ALJ cannot reopen evidence and issue a new proposal for decision if ordered to do so by a referring agency. In fact, ALJs frequently entertain remands from referring agencies. 13 Audi is incorrect that the Administrative Procedure Act is the “sole source” of the Board’s authority when reviewing a proposal for decision. The Texas Occupations Code plainly grants the Board the power to take “any further action” conducive to the issuance of a final order; that power, which does not appear in any other agency’s enabling statute, allows the Board to remand a contested case proceeding to SOAH for the consideration of new evidence and additional fact finding. The Texas Occupations Code also states that, in the event of a conflict between the APA and Chapter 2301 of the Code, Chapter 2301 controls. Audi’s “hail Mary” argument that Chairman Walker interfered with the neutral decision-making process in authorizing a limited remand is a scurrilous argument unsupported by any evidence. The argument is premised on an alleged ex parte communication (not made to Chairman Walker) that occurred four months before the Board voted on the rehearing. That communication was fully disclosed to all counsel of record which, under the applicable Board rule, cured any purported effect of the communication, and the Board member who received the communication was not even at the meeting where the Board authorized the remand. More importantly, there is no evidence that any Board member was influenced by the communication in any way. The argument is also based on the insupportable contention that the Board has tried to influence the ALJs. That contention is completely unsupported by the 14 record. There is no evidence that any of the Board members, including Chairman Walker, has communicated with either of the ALJs and the Board’s remand order contains no suggestive language or recommendations for how the Board thinks the ALJs should find. It merely asks the ALJs to consider and decide certain issues. Audi perceives the Board’s authorization of a remand to be unfavorable and, in an effort to halt it, Audi has concocted any argument it can conceive of to defeat actions taken in the proper exercise of the Board’s discretion. None of those arguments is persuasive or factually supported and this Court should affirm the district court’s dismissal. Third, the district court properly dismissed Audi’s lawsuit because Chairman Walker and the ALJs are protected by the doctrine of governmental immunity. Agency officials performing discretionary acts within the scope of their statutory or constitutional authority are immune from suit for those actions. Audi’s argument that Chairman Walker and the ALJs are acting ultra vires and are not immune from suit is unavailing. The Board has broad and extensive powers and the ALJs have all of the Board’s powers except the power to issue a final order. Nothing that the Board has done or is doing was ultra vires and, therefore, nothing that the ALJs have done or are doing is ultra vires. Fourth, the district court’s dismissal should be affirmed because of Audi’s failure to join the Board and/or the seven other Board members who voted in favor 15 of the remand. Chairman Walker is not the Board; he is one of nine members of the Board. Audi is seeking premature judicial review of an action of the Board and, therefore, the Board is a necessary and indispensable party to Audi’s lawsuit. Assuming, arguendo, that the Board is not an indispensable party because Audi has alleged that certain actions were taken ultra vires, then the other Board members who voted for the remand are indispensable parties. Either way, Audi’s lawsuit properly was dismissed. ARGUMENT I. THIS COURT SHOULD AFFIRM THE DISTRICT COURT'S DISMISSAL BECAUSE OF AUDI’S FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES. "When the Legislature grants an administrative agency sole authority to make an initial determination in a dispute, agency jurisdiction is exclusive. A party then must exhaust its administrative remedies before seeking recourse through judicial review." City of Houston v. Rhule, 417 S.W.3d 440, 442 (Tex. 2014). "[T]h[e exhaustion] doctrine prevents parties from seeking redress from courts before an administrative process runs its statutorily-created course." Park v. Tex. Dept. of Health, 1998 WL 412436, at *1 (Tex. App. – San Antonio 1998, no pet.). "Absent exhaustion of administrative remedies, a trial court must dismiss the case." Rhule, 417 S.W.3d at 443 (emphasis added) (dismissing case due to plaintiff’s failure to first exhaust administrative remedies). 16 This Court routinely affirms or orders the dismissal of cases in which it is apparent from the face of the pleadings that a plaintiff has not exhausted his or her administrative remedies. See, e.g., Mag-T, L.P. v. Travis Cent. Appraisal Dist., 161 S.W.3d 617 (Tex. App. – Austin 2005, pet. denied) (affirming dismissal for lack of jurisdiction). See also Rhule, 417 S.W.3d 440 (reversing judgment for claimant and rendering dismissal for city where claimant failed to exhaust administrative remedies); Appraisal Review Bd. of Harris Cty. Appraisal Dist. v. O'Connor & Assocs., 267 S.W.3d 413 (Tex. App. – Houston [14th Dist.] 2008, no pet.) (reversing denial of plea to the jurisdiction where taxpayers failed to exhaust administrative remedies); City of Houston v. Williams, 99 S.W.3d 709 (Tex. App. – Houston [14th Dist.] 2003, no pet.) (reversing denial of City of Houston’s plea to the jurisdiction and holding that firefighter was required to exhaust administrative remedies prior to judicial review); Park, 1998 WL 412436, at *1 (affirming trial court’s dismissal). The Board’s jurisdiction over the underlying Protest is "exclusive." None of the narrow exceptions to the exhaustion requirement applies in this case. Audi’s failure to exhaust its administrative remedies before seeking judicial review of an interlocutory order with the district court required the district court to dismiss Audi’s case. 17 A. The Board Has Exclusive Jurisdiction Over The Protest. Tex. Occ. Code § 2301.151 sets forth the jurisdiction and the authority of the Board: (a) The board has 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). (emphasis added). One matter falling squarely within that grant of exclusive original jurisdiction is the regulation of a franchised dealer’s right and ability to sell its dealerships to a person or persons of its own choosing. See Tex. Occ. Code §§ 2301.004, 2301.359, 2301.360, 2301.458. If a manufacturer or distributor rejects a selling dealer’s proposed buyer, the dealer may "protest" the rejection with the Board. Id. at § 2301.360. In the event of a protest, Tex. Occ. Code § 2301.360(b) charges the Board with determining “whether the rejection was reasonable” under criteria described in Tex. Occ. Code § 2301.359. Not only does the Board have "exclusive original jurisdiction" over such matters, but the legislature also provided the Board with the power to determine its own jurisdiction in the first instance and the power to take any action – specifically designated, implied, necessary, or convenient – to the Board’s exercise 18 of its jurisdiction. Tex. Occ. Code § 2301.151(b). Where, as here, the Board is discharging a duty expressly set forth in Chapter 2301, the legislature went further, giving the Board “all powers necessary, incidental, or convenient to” the discharge of that duty, “[n]otwithstanding any other provision of law.” Id. at § 2301.153(a). The clear language of Chapter 2301, especially when coupled with the legislative mandate that the Chapter "shall be liberally construed," id. at § 2301.001, shows the legislature’s intent for the Board’s jurisdiction over motor vehicle issues to be plenary and broad. This Court has so held, stating that "the Board has broad and exclusive jurisdiction to regulate the distribution, sale, or lease of motor vehicles." Buddy Gregg Motor Homes, Inc. v. Motor Vehicle Bd. of the Tex. Dept. of Transp., 179 S.W.3d 589 (Tex. App. – Austin 2005, pet. denied). The Supreme Court agrees. See Subaru of Am., Inc. v. David McDavid Nissan, Inc., 84 S.W.3d 212, 223 (Tex. 2002) (holding that the Board has "exclusive jurisdiction over claims and issues the [Texas Occupations] Code governs."). Audi does not (and cannot) contend that the Board lacks exclusive original jurisdiction over the Protest. Nor does Audi argue it has exhausted its administrative remedies with the Board. Instead, Audi argues, incorrectly, that it should be exempted from exhausting its remedies because of the "without jurisdiction" or ultra vires exception to the exhaustion doctrine. 19 B. The "Without Jurisdiction" Exception To The Exhaustion Requirement Is Inapplicable. One recognized exception to the exhaustion requirement is when an administrative agency acts "without jurisdiction." Park, 1998 WL 412436, at *2. However, "the mere claim that an administrative agency acted ‘ultra vires’ does not authorize litigation before administrative remedies are exhausted…." Park at *2. See also Williams, 99 S.W.3d at 717. Instead, a litigant seeking to avoid the exhaustion requirement must allege that the administrative agency "acted wholly outside its jurisdiction." Friends of Canyon Lake, Inc. v. Guadalupe-Blanco River Auth., 96 S.W.3d 519, 528 (Tex. App. – Austin 2002, pet. denied) (emphasis added) (litigant’s contention that the administrative agency "exercised authority beyond that conferred by the legislature" was insufficient to avoid exhaustion doctrine). A litigant is not excused from exhausting administrative remedies merely because an agency "may have made an incorrect decision about the law" or "exceeded its statutory authority by acting wrongfully in some fashion." Gonzalez v. Tex. Educ. Ag., 882 S.W.2d 526 (Tex. App. – Austin 1994, no pet.). See N. Alamo Water Supply Corp. v. Tex. Dept. of Health, 839 S.W.2d 455, 459 (Tex. App. – Austin 1992, writ denied) ("The fact that the [agency] may decide ‘wrongly’ in the eyes of an opposing party does not vitiate the agency’s decision to make an initial decision."). Further, a claim that an administrative agency or actor 20 "fail[ed] to perfectly comply with all of the intricacies of the administrative process [does not] necessarily constitute extra-judicial action by an agency." O’Connor & Assocs., 267 S.W.3d at 419. The Administrative Procedure Act ("APA") specifically provides that, on judicial review, a court "shall reverse or remand a case" if the appellant’s rights are prejudiced by "findings, inferences, conclusions, or decisions" of an administrative agency that are "in violation of a constitutional or statutory provision; (B) in excess of the agency’s statutory authority; (C) made through unlawful procedure; (D) affected by other error of law;…or (F) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion." Tex. Gov’t Code § 2001.174. That language demonstrates that claims that an agency exceeded its authority or discretion or did not follow proper procedures are to be heard during the statutorily authorized judicial review process - not during the pendency of an ongoing contested case proceeding. Here, Audi is not complaining that Chairman Walker and the ALJs acted "without" or "wholly outside" their jurisdiction. Audi never has disputed the Board’s subject matter jurisdiction over the Protest. Instead, Audi contends only that Chairman Walker and the ALJs "exceeded their authority," (Audi’s Br. at p. 15), and acted "beyond [their] statutorily conferred powers." (Id. at p. 16.) Those allegations are insufficient, as a matter of law, to permit Audi to avoid exhausting 21 its administrative remedies with the Board before seeking judicial review. Compare City of Sherman v. Pub. Util. Comm’n of Tex., 643 S.W.2d 681, 685 (Tex. 1983) (municipally-owned utility not required to exhaust remedies before the Public Utilities Commission because agency "ha[d] no statutory authority to regulate the operations or services of ‘municipally-owned utilities’") with Friends of Canyon Lake, Inc., 96 S.W.3d at 528 (contention that the administrative agency "exercised authority beyond that conferred by the legislature" was insufficient to avoid exhaustion doctrine). See also Edwards v. City of Tomball, 343 S.W.3d 213 (Tex. App. – Houston [14th Dist.] 2011, no pet.) (agency’s actions allegedly taken in violation of statute did not excuse plaintiff from exhausting administrative remedies). If a litigant could avoid the exhaustion doctrine to seek immediate judicial review of an interlocutory agency ruling, order, or decision every time the litigant contended that the agency exceeded its authority, acted wrongfully, or violated a statutory provision, "the exception would swallow the rule because the legislature has never statutorily authorized state agencies to act inconsistent[ly] with the law." Gonzalez, 882 S.W.2d at 528. Every error (or alleged error) committed by an agency in interpreting the scope of its statutory authority – even those errors committed in dealing with a matter clearly within its jurisdiction – would result in a void act. Agency members and administrative law judges would be exposed to 22 individual and official liability and agency orders would be subject to immediate judicial review without awaiting the issuance of a final order and exhaustion of administrative remedies. Texas courts and Travis County district courts would be swamped with declaratory judgment and injunction actions against state agency officials and SOAH judges. Audi relies upon City of El Paso v. Heinrich, 284 S.W.3d 366 (Tex. 2009). Audi cites Heinrich for the proposition that the exhaustion of remedies doctrine does not apply when government officials’ actions are "ultra vires," (Audi’s Br. at p. 9), and for the proposition that, in Heinrich, the Texas Supreme Court authorized the use of lawsuits such as this one "to prevent harm when individual actors exceed their statutorily authorized powers in an underlying administrative proceeding." (Id. at p. 15.)9 Heinrich does not support either of those propositions. In Heinrich, a policeman’s widow filed a state court lawsuit against the City of El Paso and other state agencies and officials. The case did not involve an underlying administrative proceeding, the doctrine of exhaustion of remedies, or 9 Audi also cites Heinrich for the principle that, “[w]here the evidence raises a fact issue, the court must send the dispute to the fact finder.” (Audi’s Br. at p. 9.) In Heinrich, however, there was a factual dispute – created by affidavits and documentary evidence – regarding whether or not the plaintiff was entitled to 100% of her husband’s pension or a lesser amount. 284 S.W.3d at 379-380. The plaintiff contended that the pension board had voted to award her 100% of the pension notwithstanding the board’s bylaws (as the board was allowed to do in certain circumstances). In support of that contention, the plaintiff submitted affidavit and documentary evidence. The court could not resolve the plaintiff’s ultra vires claims as a matter of law because the resolution of those claims depended on which version of the facts was true. In this case, there are no disputed factual issues (and Audi has not pointed the Court to any). 23 any exceptions to the exhaustion doctrine. The entire case centered on sovereign immunity and the "ultra vires" exception to the immunity doctrine. Case law regarding the "ultra vires" exception to the doctrine of sovereign immunity does not support Audi’s plea to be excused from exhausting its administrative remedies in this case. None of the courts in the myriad of cases Audi cites held that a litigant was excused from exhausting its administrative remedies because an agency or agency official "exceeded its authority" or "acted beyond its statutory powers."10 The undersigned has not found a single Texas case so holding. Audi’s lawsuit properly was dismissed because, as in Gonzalez, "[t]his . . . is not a case in which the agency is acting wholly outside its jurisdiction, but rather a case in which [Audi] seeks to prove the [agency] may have made an incorrect decision about the law." 882 S.W.2d 526. Audi’s only recourse is judicial review 10 Audi cites only two cases in which the plaintiff was not required to exhaust its administrative remedies before filing a state court lawsuit; both cases turned on the fact that the administrative agency at issue was “without jurisdiction” to preside over the dispute in question. In City of Sherman, 643 S.W.2d at 685, the Texas Supreme Court held that the Public Utilities Commission had “no statutory authority” over a municipally-owned public utility and, as such, the utility was not required to exhaust its remedies before the PUC. In Westheimer Independent School District v. Brockette, 567 S.W.2d 780, 786-787 (Tex. 1978), the Supreme Court held that the Commissioner of Education had “no jurisdiction to review a valid and final order” of the State Board of Education and “no jurisdiction to rescind, countermand or change” a final order of the Board of Education even if the order was void ab initio. Accordingly, the independent school district was not required to await the Commissioner’s review of the order before seeking judicial relief. Obviously, those cases are distinguishable from this case because the Protest is indisputably within the Board’s exclusive original jurisdiction. 24 following completion of the administrative process, and the district court properly dismissed Audi’s premature lawsuit seeking to interrupt that process. II. THIS COURT SHOULD AFFIRM THE DISTRICT COURT'S DISMISSAL BECAUSE DEFENDANTS DID NOT "EXCEED THEIR POWERS." Because the Board and the ALJs acted (and are acting) within their "jurisdiction," the inquiry into the propriety of this appeal should end, and the district court’s dismissal should be affirmed. Nonetheless, Intervenors respond to the various ways in which Audi contends that Chairman Walker and the ALJs allegedly "exceeded their powers." First, however, the challenged actions must be considered in light of the law applicable to the Protest. A. The Legal Framework Applicable To The Protest. Chapter 2301 of the Texas Occupations Code concerns the distribution, sale, and lease of motor vehicles. See generally Tex. Occ. Code §§ 2301.001-2301.853. The provisions of Chapter 2301 are "liberally construed" and they exclusively govern "all aspects of the distribution and sale of motor vehicles" (unless otherwise specifically provided by law not in conflict with Chapter 2301). Id. at § 2301.004. As discussed above, (see supra § I.A.), the Board’s powers to regulate the distribution, sale, and lease of motor vehicles are extensive. "Notwithstanding any other provision of law, the board has all powers necessary, incidental, or 25 convenient to perform a power or duty expressly granted under [Chapter 2301]." Id. at § 2301.153(a) (emphasis added). Those powers include, but are by no means limited to, the power to "initiate and conduct proceedings, investigations, or hearings; . . . (3) receive evidence and pleadings; . . . (6) make findings of fact on all factual issues arising out of a proceeding initiated under [Chapter 2301]; [and] (7) specify and govern appearance, practice, and procedures before the board . . . " Id. A franchised dealer whose sale to a proposed transferee is rejected by the manufacturer may file a protest with the board. Tex. Occ. Code § 2301.360(a). "A protest filed under [Section 2301.360] is a contested case." Id. Subchapter O of Chapter 2301 governs "HEARING PROCEDURES." Hearings arising under Chapter 2301 "must be conducted in accordance with [Chapter 2301], any order, decision, or rule of the board, and Chapter 2001, Government Code." Tex. Occ. Code § 2301.703. However, "[t]o the extent of a conflict between [Chapter 2301] and Chapter 2001, Government Code, [Chapter 2301] controls." Id. at § 2301.702 (emphasis added). Chapter 2301 provides that an administrative law judge of SOAH must hold contested case hearings. Id. at § 2301.704(a). SOAH’s administrative law judges have "all" of the Board’s power and authority provided under Chapter 2301, id. at (b) (emphasis added), except the power to issue a final order. 26 Review of a proposal for decision by the Board is governed by Section 2301.709. In reviewing a contested case, "the board…shall take any further action conducive to the issuance of a final order and shall issue a written final decision or order." Id. at (c) (emphasis added). A party to a contested case proceeding affected by a Board’s final order may seek judicial review in the district court of Travis County or this Court. Id. at § 2301.571(a). Judicial review is governed by Chapter 2001 of the APA. Chapter 2301’s plain language makes it clear that the legislature intends for the Board to have extensive power and jurisdiction over contested cases arising under Chapter 2301. Those powers are applicable to the Protest currently pending before SOAH on remand from the Board. Furthermore, the Board’s construction of its powers under Chapter 2301 "is entitled to serious consideration, as long as the construction is reasonable and does not contradict the plain language of the statute itself." Tarrant Appraisal Dist. v. Moore, 845 S.W.2d 820, 823 (Tex. 1993). Any doubts concerning the extent of the Board’s power are to be resolved in the Board’s favor if its construction is reasonable and consistent with the language of Chapter 2301. B. Chairman Walker. Audi contends that Chairman Walker exceeded his powers or authority in the following ways: 1) signing the Remand Order which remanded the case back to 27 SOAH after the ALJs issued the first proposal for decision (Audi’s Br. at pp. 20- 24); 2) "commanding" the ALJs to commit an act that exceeded their statutory power by ordering them to reopen the record after issuance of a proposal for decision (id. at p. 24-25); 3) ordering the ALJs to consider alleged "untimely" evidence (id. at pp. 25-28); and 4) "attempting to influence the neutral ALJs through the use of improper evidence." (Id. at pp. 28-39.) i. The Board had authority to remand the Protest to SOAH. Section 2301.709 of Subchapter O of Chapter 2301 gives the Board the power to take "any further action conducive to the issuance of a final order." Id. at (c) (emphasis added). Nothing in Chapter 2301 or Subchapter O limits what the Board may or may not do when reviewing a proposal for decision and "any further action" certainly includes the authority to enter an interim order remanding a case to SOAH to consider matters that the Board believes will assist it in rendering a final decision. That is especially true in light of the enormously broad powers granted the Board in Tex. Occ. Code §§ 2301.151 & 2301.153. Audi argues that Section 2001.058 of the APA is "the sole source of the Board’s power when considering a PFD.” (Audi’s Br. at p. 20-21 (emphasis added).)11 Audi is wrong. The legislature has the power to modify the applicability of the APA to certain agency cases (or to exempt contested cases from the 11 Audi cites no law in support of that statement other than Tex. Gov’t Code § 2001.058. Nothing about that Code section supports Audi’s broad statement. 28 provisions of the APA altogether). See, e.g., Montgomery Indep. Sch. Dist. v. Davis, 34 S.W.3d 559, 565 (Tex. 2000) (noting that the administrative scheme in the Tex. Educ. Code is "different from" and "not subject" to the APA). Here, the Legislature has specifically supplemented the Board’s power to consider a proposal for decision under § 2001.058 of the APA with § 2301.709(c) of the Code.12 Moreover, in remanding the Protest to SOAH, the Board exercised its power under Section 2301.709(c) of the Code without violating Section 2001.058 of the APA. The Board did not reject any of the ALJs’ proposed findings of fact or conclusions of law, but remanded for further analysis and findings. Finally, if one assumes for purposes of argument that a conflict exists between Section 2301.709(c) of the Code and Section 2001.058 of the APA, Section 2301.709(c) controls. Tex. Occ. Code § 2301.702. Audi then argues that an agency can remand a contested case to an administrative law judge only if the agency has been given "statutory authority" to do so and, Audi contends, the Board has not been given such authority. (Audi’s Br. at p. 22.) That argument is incorrect and ignores Tex. Occ. Code § 2301.709(c), which authorizes the Board, in reviewing a contested case, to take "any further action conducive to the issuance of a final order," and Tex. Occ. Code § 2301.153, 12 That is in addition to the powers the legislature granted to the Board under Tex. Occ. Code § 2301.153(a), which apply “[n]otwithstanding any other provision of law.” 29 which grants the Board “all powers necessary, incidental, or convenient to” performing its duty to decide protests, “[n]otwithstanding any other provision of law….” Those sections plainly provide the Board with the power and ability to remand a contested case to SOAH for clarification or further findings before taking final action on a proposal for decision. Audi cites no case, statute, or other authoritative source in support of its argument.13 In fact, state agencies – including the Texas Department of Motor Vehicles, the Employees Retirement System of Texas, and the Texas State Board of Public Accountancy – all have remanded contested cases to SOAH despite the word "remand" not appearing in their enabling statutes. See Tex. State Bd. of Pub. Accountancy v. Bass, 366 S.W.3d 751, 763 n.11 (Tex. App. – Austin 2012, no pet.) (referencing that the agency remanded the case to SOAH for consideration of new evidence after issuance of the PFD); All Points Inspection Servs., Inc. v. Navistar, Inc., 2011 WL 1341523, at *1 (Tex. St. Off. Admin. Hgs. Mar. 28, 2011) ("On February 8, 2011, the Texas Department of Motor Vehicles (TxDMV) issued an order rejecting the PFD [issued by the ALJ the prior year] and remanding the case back to the ALJ for further consideration."); Appeal of Paris A. Mims, Jr., 2004 13 Audi cites as authority eight pages of a Texas Tech Administrative Law Journal article entitled “From Proposal For Decision To Final Decision: What Happens In Between?” (Id.) The word “remand” does not appear in those eight pages and they offer no support for the proposition that a remand can “only” occur if an agency has been given specific statutory authority to do so. 30 WL 4172108, at *1 (Tex. St. Off. Admin. Hgs. Sept. 2004) (noting that ERS Board "remanded the matter back [to] SOAH" for consideration of additional records). Audi’s citations to specific rules governing the Texas Commission on Environmental Quality and the Texas Public Utility Commission’s ability to remand cases to SOAH are inapposite. The Board’s review power – to take "any further action conducive to issuance of a final order" (derived from a statute and not an administrative rule) – is broader than those entities' review power and certainly broad enough to encompass the remand such as the one ordered here.14 Audi’s effort to "explain away" § 2301.709 by arguing that it is a "general provision" that must give way to the more "specific provisions" contained in the APA, (Audi’s Br. at pp. 33-36), fails.15 First, Section 2301.709’s title – "Review by Board" – and its placement in Subchapter O, "HEARING PROCEDURES" – after "Conduct of Hearing" and before "Rehearing" – belies any contention that this section was not meant to specifically apply to the Board’s review of proposals for decision issued by SOAH 14 A Westlaw search of the Texas statutes shows that the Legislature has not given any other administrative agency the power to take “any further action” conducive to issuance of a final order. 15 Audi suggests that SOAH’s procedural rules trump Section 2301.709. (Audi’s Br. at p. 36.) That suggestion is frivolous, since it is well-settled that rules of administrative agencies are void if they conflict with statutes. Liberty Mut. Ins. Co. v. Griesing, 150 S.W.3d 640, 648 (Tex. App. – Austin 2004, pet. dism’d w.o.j.) (citing Employees Ret. Sys. of Tex. v. Jones, 58 S.W.3d 148, 154 (Tex. App. – Austin 2001, no pet.)). 31 judges. Further, Chapter 2301 specifically provides that, if there is a conflict with the APA, Chapter 2301 controls. The legislature has crafted for the Board a specific provision applicable to the review of contested cases that supplements the Board’s powers under Section 2001.058 of the APA. Here, without acting on the PFD or on any proposed findings of fact and conclusions of law, the Board properly used its power under Tex. Occ. Code § 2301.709(c) to seek further findings from the SOAH ALJs. ii. The Board had the power and authority to order the ALJs to reopen the record. Audi argues that SOAH Rule 155.153(a)(4) prohibits an ALJ from reopening a record after issuance of a proposal for decision, even if ordered to do so by the referring agency. (Audi’s Br. at pp. 24-25.) Audi cites no cases for that proposition (and the undersigned has found none). However, numerous decisions exist in which ALJs expressly recognize that they can reopen the record in a contested case if directed to do so in a remand order from the agency in question. For example, in Texas Commission on Law Enforcement v. Bush, SOAH Dkt. No. XXX-XX-XXXX (Feb. 27, 2013),16 Appellee Judge Wilkov, presented with the Respondent's attempt to submit additional evidence after she had issued a PFD and submitted it to the Commission, stated 16 For the Court’s convenience, the SOAH decisions cited by Intervenors are attached to Intervenors’ Appendix at Tab 2. 32 that "[t]he Commission may remand the case for consideration of new evidence, but without such order, the record established at the hearing is the sole basis for the recommendations found in the PFD." (emphasis added). See also Tex. Dept. of Licensing and Regulation v. Drobot, SOAH Dkt. No. XXX-XX-XXXX (April 11, 2014) (emphasis added) ("SOAH’s rules do not contemplate that a judge re- open the evidentiary record of a case after the PFD has issued, in the absence of an order by the governing body of the referring agency remanding the case to SOAH for further fact finding."). The ALJ in Petitioner v. Tax Division, Texas Comptroller of Public Accounts, SOAH Dkt. XXX-XX-XXXX.26 (June 16, 2014), recognized that "[i]f Petitioner has additional evidence that can fill in the evidentiary gaps, then it can consider including the additional evidence with a Motion for Remand or a Motion for Rehearing filed with the Comptroller’s office.").17 Read properly and in context, the rule is intended to clarify that, in the absence of further orders from the referring agency, an ALJ’s authority over a contested case ends with the ALJ’s issuance of a dismissal, a proposal for decision, or a final decision. Its purpose is obvious: to avoid having an agency working 17 ALJs sometimes urge referring agencies to remand cases for further proceedings when a perceived need to reopen the record exists. See, e.g., Texas Dept. of Licensing and Regulation v. Guerra, SOAH Dkt. No. XXX-XX-XXXX.ACR (June 5, 2013), (“[T]he Department has the discretion to remand this case for additional evidence consistent with Respondent’s exceptions . . . I urge the Department to adopt this course.”). 33 with one version of a proposal for decision while, unbeknownst to the agency, the ALJ is generating another proposal for decision. That purpose is not served by preventing the agency from remanding the case for further proceedings, and nothing in the rule prevents an agency from doing so. Neither SOAH nor any court has ever given the rule a contrary interpretation. iii. The Board did not authorize the consideration of "untimely" evidence. Audi argues that Chairman Walker lacked the authority to order the ALJs to consider the April 30th Letter because it was not submitted in a timely manner, citing § 2301.709(a) of Chapter 2301. (Audi’s Br. at pp. 25-27.) That statute states that the Board "may consider only materials that are submitted timely." Without citing to any legislative history, case law, canon of statutory construction, or other authority concerning the meaning of the word "timely," Audi summarily concludes that the April 30th Letter was not "timely." Audi’s argues that the April 30th Letter was untimely because it was submitted with an "improperly filed" response brief. Nothing in Chapter 2301, the APA, SOAH’s rules, or the Board’s rules makes the filing of a response to a reply to a motion for rehearing improper. See, e.g., Lim v. Hall, D.C., 1997 WL 366803, at *1 (Tex. App. – Austin 1997, writ denied) (ruling on motion for rehearing, noting the filing of the motion, a reply, and a response to the reply); In re Taxpayer No.: *** (Type: Motor Vehicle Gross Rental Receipts Tax/RDT), Hearing Nos. 34 30,505, 32,656, 1997 WL 617908, at *1 (Tex. Cptr. Pub. Acct. Sept. 23, 1997) (setting deadline for petitioners to file response to reply to supplemental motion for rehearing); In re Taxpayer No.: *** (Type: Sales and Use Tax), Hearing No. 39,563, 2004 WL 3673564, at *1 (Tex. Cptr. Pub. Acct. 2004) (noting petitioner's filing of a reply to the Comptroller's response to petitioner's motion for rehearing). While the undersigned has not located any cases or materials discussing or construing the meaning of "timely," as used in § 2301.709(a), the logical meaning of "timely" in the context of the statute is that material is "timely" when it becomes relevant18 and as long as the Board receives the material with sufficient opportunity for the Board and the parties to the contested case to study the material and to consider how it may affect the Board's final order or decision. Moreover, the Board did not consider the April 30th Letter in deciding whether or not to adopt the PFD. Rather, it remanded the case to the ALJs to determine whether the document should be considered and, if so, what effect it would have, in an evidentiary hearing in which Audi participated. Surely a document admitted in such a proceeding is “timely.” 18 The April 30th Letter did not become relevant until after the July 2014 PFD issued and the Board decided that strict compliance with Tex. Occ. Code § 2301.359(c) would be required (rather than substantial compliance, which is what the ALJs decided). 35 iv. Nothing about the Remand Order violates the rules against "influencing" the ALJs. a. The alleged "ex parte" communications issue has been waived by Audi and had no effect on the outcome of the remand vote. Audi suggests that an alleged ex parte communication from Mr. Robertson (a principal of one of the entities involved in the buy/sell) in early October 2014 somehow tainted the Board’s February 13, 2015 vote on the Remand Order, rendering the entire remand "unauthorized." The Court should disregard that contention. First, Audi did not allege in its petition in the district court and never argued to the district court that the Remand was unauthorized because it was "influenced by" an ex parte communication.19 Arguments not asserted below are waived on appeal. Black v. City of Kileen, 78 S.W.3d 686, 691 n.4 (Tex. App. – Austin 2002, pet. denied). See also Moreno v. State, 409 S.W.3d 723, 728-29 (Tex. App. – Houston [1st Dist.] 2013, pet. refused) (arguments not asserted before the trial court are not preserved for review). Second, Audi acknowledged to the Board that neither the Board nor its staff acted “improperly” or “w[ould] be influenced by” the alleged communication.20 In its 19 In its brief in support of its motion for a preliminary injunction, Audi argued that Mr. Robertson “very clear[ly] attempt[ed] to improperly influence” a Board member prior to the Motion for Rehearing vote. However, Audi never argued that the Remand Order was influenced or that Mr. Robertson “attempted to” influence the Board regarding the remand. 20 Before the Board’s vote on the Motion for Rehearing, Audi filed a written opposition to the staff’s recommendation that the Motion be granted. In that pleading, Audi argued that, 36 desperation to keep alive this action, Audi now contends the communication corrupted state officials. Audi’s efforts are transparent and completely unsupported by any evidence. Audi’s attempt to "poison the well" also leaves out critical points. The alleged ex parte communication occurred two months before the Board voted on the Motion for Rehearing and four months before the Board voted to remand the case to SOAH.21 Further, pursuant to Board Rule 215.22(b), which provides that, in the event of an alleged ex parte communication, “a copy or summary thereof shall be filed with the record of such proceeding and a copy forwarded to all parties of record….”, the Board’s general counsel disclosed the existence and substance of the alleged ex parte communication to all parties shortly after it occurred. That disclosure – which “cured” any effect of the communication22 – occurred a month and a half before the Board voted on the Motion for Rehearing and almost four months before the Board voted for the Remand. Finally, the Board “[a]lthough Audi is not suggesting that the Board or its Staff acted improperly or will be influenced by these inappropriate actions, the efforts by Robertson to impermissibly taint the Board proceedings are grounds to deny the motion for rehearing.” (Audi’s Response to Staff’s Executive Summary and Proposed Order at p. 2.) Intervenors request the Court to take judicial notice of that pleading, which is attached to Intervenors’ Appendix at Tab 3. (See supra n.8.) 21 Audi also improperly suggests that the alleged ex parte communication related to the remand. It did not; the communication occurred during the Motion for Rehearing briefing. 22 The legislative history of Board Rule 215.22 states that it “allows the Board to cure an ex parte communication by reporting it and providing the communication or a summary to all parties to a proceeding.” 35 Tex. Reg. 884. 37 member who received alleged the ex parte communication, Laura Ryan, abstained from voting on the Motion for Rehearing and did not participate in the meeting during which the Board voted to remand the case to SOAH. The alleged ex parte communication was disclosed and cured per the Board’s own rules, and had no effect on the Board’s vote. Audi’s overt suggestion that the communication caused the Board’s general counsel to “retreat[] from his prior recommendation” (Audi’s Br. at p. 30), and that the remand occurred "at the improper ex parte urging of a witness" (id. at p. 36), is unsupported and absurd. b. The Remand Order does not differ from Member Slovacek’s motion. Audi’s argument that the remand was unauthorized because the language of the Remand Order did not match exactly the language of Member Slovacek’s motion to remand the Protest is specious. To begin with, Audi cites to no statute, rule, or other authority providing that an agency’s oral motion to take an action must match, verbatim, the agency’s later written order. Second, Audi is wrong that Member Slovacek’s motion did not encompass the April 30th Letter. Before the meeting, the Board received the agency staff’s written recommendation of a remand so that SOAH could consider the admissibility and effect of the April 30th Letter. During the hearing, the Board’s general counsel reiterated that recommendation. 38 After the Board’s general counsel finished speaking, the following exchange occurred: Mr. Slovacek: What is the staff’s recommendation? Mr. Duncan: To remand to SOAH to consider the document, [the April 30th Letter], that we received in the period between the board’s last action and today. Mr. Slovacek: Mr. Chairman, I make a motion that we remand to SOAH, for the reasons outlined by Mr. Duncan, this entire case, for all the reasons set forth, to determine whether the intervenors have, in fact, satisfied the conditions of the proposal for decision. Mr. Palacios: I second the motion. Before the Board voted on the motion, it allowed counsel to speak on the subject. Audi’s counsel, aware that the staff was recommending a remand to consider the admissibility and effect of the April 30th Letter, argued, inter alia, that it would be improper to remand the case because SOAH could not reopen the record to consider the April 30th Letter and that the Board lacked the authority to consider the April 30th Letter because it was not "timely" submitted. Audi itself interpreted the motion to include consideration of the April 30th letter and vociferously argued against such consideration.23 Audi’s post-hoc effort 23 Audi did not, however, argue that a remand to consider whether the Weitz Group met the conditions in the July 2014 PFD was improper, or even mention the conditions. Consequently, Audi is now arguing for a construction of Member Slovacek’s motion that is diametrically opposed to what its counsel understood the motion to mean when it was made at the Board meeting. 39 to argue that the Board did not know that it was voting to remand the case for consideration of the April 30th Letter is meritless. c. The ALJs have remained fair and impartial. Audi argues that Chairman Walker has subverted the neutral fact finding process and rendered the contested case proceeding unfair. (Audi's Br. at pp. 36- 42.) That argument is frivolous. First, it is based on the faulty legal assumptions that the Board has "disregarded the rules" and does not have the right to remand cases to SOAH for further fact finding. As shown above, Audi is wrong. The Board has remanded cases to SOAH in the past and has the clear power to do so. See, e.g., All Points Inspection Servs., Inc., 2011 WL 1341523, at *1 (noting that the TxDMV rejected the ALJ’s PFD and remanded the case back to the ALJ for further consideration). Audi’s "neutrality" argument is also based on assumptions that are unsupported by evidence. No evidence exists of any inappropriate interaction between Chairman Walker and/or the Board and the ALJs. No evidence exists that Chairman Walker tried to usurp the ALJs' fact finding duties or tried to influence the ALJs' neutrality.24 Nothing about the Remand Order directs the ALJs to find 24 State v. Mid-South Pavers, Inc., 246 S.W.3d 711, 722-23 (Tex. App. – Austin 2008, pet. denied), cited by Audi, is distinguishable. There, the court found that the executive director’s changes to findings and conclusions suggested that he was "acting as TxDOT’s own factfinder"; the changes were not supported by substantial evidence and not explained with a written statement. 40 one way or another (or implies or suggests that they should). Rather, it directs them to determine if Audi received the April 30th Letter, if the letter should be received into evidence, and, if so, “what affect, if any,” it had on compliance with the Code, and to determine whether or not the Weitz Group had met the conditions in the July 2014 PFD. Audi’s assertion that the Remand rendered the Protest "unfair" is another unfounded, specious argument. C. The ALJs Have Not Acted Ultra Vires. For the reasons discussed above, (see supra §§ II.A. and II.B.), Audi's arguments that the ALJs acted "ultra vires" in reopening the record and receiving additional evidence after being ordered to do so by the Board are meritless.25 Section 2301.704(b) of the Code gives the ALJs "all of the board's power and authority as provided in [Chapter 2301] to conduct hearings…." The ALJs powers are coextensive with the Board's powers. Because the Board has not exceeded its authority in ordering the remand, the ALJs are not exceeding their authority in executing that order. 25 Audi's contention that Judge O'Malley "encouraged" Audi to seek relief from the district court, (Audi's Br. at p. 41), is silly. Judge O'Malley merely stated to Audi that, as a matter of procedure, the ALJs would halt the Remand if ordered to do so by a district court. He also clearly stated that the ALJs did have the authority to entertain the Remand. (Id.) And, in the proposal for decision on remand, (see Intervenors’ Appx. at Tab 1, p. 48), the ALJs included conclusions of law stating that “[t]he Department properly referred this case to SOAH, (id. at COL 3), and “SOAH has jurisdiction over all matters relating to the conduct of the hearing in this matter.” (Id. at COL 4.) 41 Audi cites several cases for the proposition that SOAH ALJs are aware of the limitations imposed by Rule 155.153(a)(4). Those cases are distinguishable from this case because in none of those cases did the referring agency remand the contested case to SOAH or ask it to reopen the agency record. In Texas Department of Insurance v. Mondragon, SOAH Docket No. XXX-XX-XXXX.C (Tex. St. Off. Admin. Hgs. Oct. 23, 2014), the Department of Insurance's staff – not the Commissioner of Insurance – sought to have the ALJ reopen the record after issuance of the proposal for decision and in the absence of a remand order from the Department of Insurance. See also In re Taxpayer No.: *** (CPA Hearing No. 108,005), SOAH Docket No. XXX-XX-XXXX.26, 2014 WL 4694594, (Tex. St. Off. Admin. Hgs. June 16, 2014) (recognizing, on consideration of the parties' exceptions to the PFD, that ALJ could not reopen the record to receive new evidence to modify the PFD; not speaking to reopening of record if ordered to do so); In re Taxpayer No.: *** (CPA Hearing No. 107,108), SOAH Docket No. 304- 13-5388.26, 2014 WL 4694592, at *1 (Tex. St. Off. Admin. Hgs. June 9, 2014) (same); In re Belinda Quintero Molina, SOAH Docket No. XXX-XX-XXXX (Tex. St. Off. Admin. Hgs. Feb. 28, 2012) (recognizing that ALJ could not rule on motion filed after issuance of the proposal for decision; not speaking to ability to rule on motion if ordered to do so by referring agency). 42 These cases stand in stark contrast to the cases discussed above in which the referring agencies remanded contested cases to SOAH for further proceedings, including the taking of new or additional evidence. See e.g., Bush, 2013 WL 1087536, at *1 (in which Judge Wilkov stated: "Respondent's communications indicate that he may have new evidence that was not offered or admitted at the hearing. New evidence cannot be offered through any exception, and the consideration of new evidence is relief that I cannot grant. The Commission may remand the case for consideration of new evidence…." (emphasis added). III. THIS COURT SHOULD AFFIRM THE DISTRICT COURT'S DISMISSAL ON THE BASIS OF SOVEREIGN IMMUNITY. "Governmental immunity implicates a court’s jurisdiction and serves to protect political subdivisions of the state from both suit and liability." Sw. Bell Tel., L.P. v. Emmett, 459 S.W.3d 578, 587 (Tex. 2015). "To fall within th[e] ultra vires exception [to the immunity doctrine], a suit must not complain of a government officer’s exercise of discretion, but rather must allege, and ultimately prove, that the officer acted without legal authority or failed to perform a purely ministerial act." Heinrich, 284 S.W.3d at 372. "Ministerial acts are those where the law prescribes and defines the duties to be performed with such precision and certainty as to leave nothing to the exercise of discretion or judgment." Emmett, 459 S.W.3d at 587 (citation omitted). "Discretionary acts on the other hand require the exercise of judgment and personal deliberation." Id. 43 "[A] suit that seeks to control a state official's exercise of discretion within his legal authority is a suit to control state action" and is barred by sovereign immunity. Coastal Habitat Alliance v. Pub. Util. Comm’n, 294 S.W.3d 276, 285 (Tex. App. – Austin, 2009, no pet.). An official is not acting ultra vires if that official is performing a discretionary act that is within his statutory or constitutional authority. See, e.g., Layton v. City of Fort Worth, 2014 WL 6997350, at *6 (Tex. App. – Fort Worth 2014, no pet.) (affirming dismissal of claim against government officials based on lack of subject matter jurisdiction, stating: "[C]laims that seek to control the State or its officials in the exercise of discretionary statutory or constitutional authority are barred by sovereign immunity."). As shown above, (see supra §§ II.B & II.C.), all of the actions taken by Chairman Walker and the ALJs were within their jurisdiction and did not exceed their powers or authority. The fact that Audi disagrees with the Board and the ALJs’ decisions or with the way the Board interprets statutes it is charged with enforcing does not mean that any of the Board or ALJs’ actions were ultra vires acts. IV. THIS COURT SHOULD AFFIRM THE DISTRICT COURT'S DISMISSAL BECAUSE AUDI FAILED TO JOIN THE BOARD AND/OR THE OTHER BOARD MEMBERS. Audi’s lawsuit asked the district court to declare the Board’s remand order void and sought injunctive relief barring enforcement of that order. The Board was 44 a necessary and indispensable party to that lawsuit. See Tex. Civ. Prac. & Rem. Code § 37.006(a) ("When declaratory relief is sought, all persons who have or claim any interest that would be affected by the declaration must be made parties."); Reynolds v. Haws, 741 S.W.2d 582, 587-588 (Tex. App. – Fort Worth 1987, writ denied) (affirming dismissal of case for failure to join board of adjustment when the validity of the board’s action was the suit’s focus).26 See also Scott v. Graham, 292 S.W.2d 324, 327 (Tex. 1956) (those whose rights will be directly affected by the writ of injunction are indispensable parties to the injunction proceeding); Lone Starr Multi Theatres, Inc. v. State, 922 S.W.2d 295, 298 (Tex. App. – Austin 1996, no writ) ("[A]ll parties against whom an injunction must run in order to be effective should be named in a suit for injunctive relief."). Audi sued only Chairman Walker and did not include the Board or any of the other six Board members who voted in favor of the Remand Order.27 Chairman Walker alone is not the Board. See Pearce v. City of Round Rock, 992 S.W.2d 668, 671 (Tex. App. – Austin 1999, pet. denied) ("A county is more than its commissioners; a city is more than its mayor."). Audi’s failure to join the Board as a party is fatal to its claims. 26 “[I]t is not proper for a court to render a decision affecting the action of the Board, without the Board as a party to the lawsuit.” Id. at 588. 27 The Board is comprised of 9 members. See Tex. Transp. Code § 1001.021(a). 45 In the district court, Audi contended that it was not required to name the Board as a party to the suit because it was asserting claims for ultra vires acts and, therefore, needed to name only the agency officials who allegedly were acting without authority. Audi cited, among other cases, Emmett, 459 S.W.3d 578, and Heinrich, 284 S.W.3d 366. The problem with that argument is two-fold. First, the case law cited by Audi is inapplicable to this case. Emmett and Heinrich involved lawsuits filed directly against officials who were allegedly acting unlawfully.28 They did not involve underlying administrative proceedings or efforts to enjoin ongoing administrative proceedings. By contrast, in every case that Audi cites concerning an underlying and ongoing administrative action, the state agencies in question were named parties to the lawsuit. See Davis, 34 S.W.3d 559 (naming school district as defendant); O’Connor & Assocs., 267 S.W.3d 413 (naming county appraisal district, chief appraiser, appraisal review board, and board’s former chairman); Rhule, 417 S.W.3d 440 (naming City of Houston as defendant); Williams, 99 S.W.3d 709 (naming City of Houston as defendant); City of Sherman, 643 S.W.2d 681 (naming Public Utility Commission of Texas as defendant); Mag-T, L.P., 161 S.W.3d 617 (naming appraisal district, appraisal review board, and tax assessor-collector as 28 Again, Audi confuses the “ultra vires” exception to the exhaustion of administrative remedies doctrine with the “ultra vires” exception to the governmental immunity doctrine. 46 defendants). That is because, when seeking judicial review of an administrative agency’s ruling, decision, or order, the agency itself (and not any of its members), is the proper defendant. See, e.g., Tex. Nat. Res. Conservation Comm’n v. Sierra Club, 70 S.W.3d 809, 813 (Tex. 2002) (holding that Texas Natural Resource Conservation Commission was the "proper defendant" when plaintiff sought judicial review of agency’s order). Second, even if Audi was correct that it did not need to name the Board, Audi’s claims still must be dismissed because Audi failed to join any of the other six Board members who allegedly committed the ultra vires acts. Chairman Walker did not act alone; nor is he the Board. Moreover, Audi sought to enjoin "all persons acting in concert" with Chairman Walker, which would include the other Board members. Enjoining Walker alone would not prevent the other Board members from considering the supplemental proposal for decision that the ALJs have issued. CONCLUSION WHEREFORE, Budget and the Weitz Group pray that the Court affirm the Travis County District Court’s dismissal of Audi’s lawsuit for lack of subject matter jurisdiction. They also pray for such other, further, and different relief that may be just and proper. 47 Respectfully submitted, /s/ Wm. R. Crocker Wm. R. Crocker State Bar No. 05091000 807 Brazos, Suite 1014 Austin, Texas 78767 Telephone: (512) 478-5611 Facsimile: (512) 474-2540 Email: crockerlaw@earthlink.net Attorney for Intervenor/Appellee Budget Leasing, Inc. d/b/a Audi North Austin and Audi South Austin /s/ J. Bruce Bennett J. Bruce Bennett State Bar No. 0214550 Leon V. Komkov State Bar No.11670500 CARDWELL, HART & BENNETT, LLP 807 Brazos, Suite 1001 Austin, Texas 78701 Telephone: (512) 322-0011 Facsimile: (512) 322-0808 Email: jbb.chblaw@sbcglobal.net Email: lvk@longroadllc.com /s/ Joseph W. Letzer Joseph W. Letzer Tx. State Bar No. 24030763 Dent M. Morton Tx. State Bar No. 24056645 BURR & FORMAN, LLP 420 20th Street N, Suite 3400 Birmingham, AL 35203-5210 Telephone: (205) 251-3000 Facsimile: (205) 458-5100 Email: jletzer@burr.com 48 Email: dmorton@burr.com Attorneys for Intervenors/Appellees Ricardo M. Weitz, Hi Tech Imports, LLC, Hi Tech Imports North, LLC, and Hi Tech Imports South, LLC CERTIFICATE OF COMPLIANCE WITH RULE 9.4 Pursuant to Tex. R. App. P. 9.4(i)(2)(B), the undersigned certifies this response complies with the type-volume limitations of Tex. R. App. P. 9.4. The brief was prepared using Microsoft Word 2011. According to that program's word count, the brief contains 11,810 words, exclusive of the exempted portions in Tex. R. App. P. 9.4(i)(1). s/ Joseph W. Letzer Joseph W. Letzer CERTIFICATE OF SERVICE I hereby certify that on August 14, 2015, I used the Court's electronic case filing system to file the foregoing document and to serve this document on the following persons: Billy M. Donley Mark E. Smith BAKER & HOSTETLER, LLP 1000 Louisiana, Suite 2000 Houston, Texas 77002 Tel: (713) 646-1382 Fax: (713) 751-1717 bdonley@bakerlaw.com mesmith@bakerlaw.com 49 S. Shawn Stephens James P. Sullivan KING & SPALDING, LLP 1100 Louisiana, Suite 4000 Houston, Texas 77002 Tel: (713) 751-3200 Fax: (713) 751-3290 Attorneys for Volkswagen Group of America, Inc. and Audi of America, Inc. Kimberly Fuchs Texas Attorney General's Office P.O. Box 12548 Austin, Texas 78711 Tel: (512) 475-4195 Fax: (512) 320-0167 kimberly.fuchs@texasattorneygeneral.gov Attorney for the Honorable Michael J. O'Malley and Penny A. Wilkov Dennis McKinney Texas Attorney General's Office P.O. Box 12548 Austin, Texas 78711 Tel: (512) 475-4020 Fax: (512) 320-0167 dennis.mckinney@texasattorneygenreal.gov Attorney for Chairman John H. Walker This the 14th day of August, 2015. s/ Joseph W. Letzer Joseph W. Letzer 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, v. JOHN WALKER III, ET AL. Appellees. On Appeal from the 201st Judicial District Court, Travis County, Texas Honorable Amy Clark Meachum, Presiding Judge INTERVENORS' APPENDIX Wm. R. Crocker J. Bruce Bennett State Bar No. 05091000 State Bar No. 0214550 807 Brazos, Suite 1014 CARDWELL, HART & BENNETT, LLP Austin, Texas 78767 807 Brazos, Suite 1001 Telephone: (512) 478-5611 Austin, Texas 78701 Facsimile: (512) 474-2540 Telephone: (512) 322-0011 Email: crockerlaw@earthlink.net Facsimile: (512) 322-0808 Email: jbb.chblaw@sbcglobal.net ATTORNEY FOR ATTORNEY FOR INTERVENOR/APPELLEE INTERVENORS/APPELLEES BUDGET LEASING, INC. D/B/A RICARDO M. WEITZ, HI TECH AUDI NORTH AUSTIN AND AUDI IMPORTS NORTH, LLC, HI TECH SOUTH AUSTIN IMPORTS SOUTH, LLC, AND HI TECH IMPORTS, LLC INTERVENORS’ APPENDIX TAB 1 Cathleen Parsley Chief Administrative Law Judge August 13, 2015 Daniel Avitia, Director VIA INTERAGENCY MAIL Motor Vehicle Division Texas Department of Motor Vehicles 4000 Jackson Avenue Austin, TX 78731 RE: Docket No. XXX-XX-XXXX.LIC; Budget Leasing Inc., dlbla Audi North Austin and Audi South Austin and Ricardo M. Weitz, Hi Tech Imports North, LLC, Hi Tech Imports South, LLC, Hi Tech Imports, LLC v. Volkswagen Group of America, Inc. and Porsche Cars North America, Inc. Dear Mr. Avitia: Please find enclosed a Remand Proposal for Decision in this case. It contains our recommendation and underlying rationale. Exceptions and replies may be filed by any party in accordance with 1 Tex. Admin. Code§ 155.507(c). a SOAH rule which may be found at ~mVw.soab.state.tx.us. Sincerely, 1UVAd, / Michael J. O'Malley Administrative Law Judge ~nyA eikffJWt-l Admi · trative Law Judge MJO/PAW/ap Enclosure cc: Per attached service list- VIA REGULAR MAIL Alice Carmona, Docket Clerk, Texas Department of Motor Vehicles, 4000 Jackson Avenue, Austin, Texas 78731 -VIA INTERAGENCY MAIL 300 W. J5t11 Street Suite 502, Austin, Texas 78701/ P.O. Box 13025, Austin, Texas 78711-3025 512.475.4993 (Main) 512.475.3445 (Docketing) 512.322.2061 (Fax) www.soah.state.tx. us STATE OFFICE OF ADMINISTRATIVE HEARINGS AUSTIN OFFICE 300 West 15th Street Suite 502 Austin, Texas 78701 Phone: (512) 475-4993 Fax: (512) 322-2061 SERVICE LIST AGENCY: Motor Vehicles, Texas Department of(TDMV) STYLE/CASE: Hi TECH IMPORTS NORTH, LLC SOAH DOCKET NUMBER: XXX-XX-XXXX.LI C REFERRING AGENCY CASE: 13-0008 LIC STATE OFFICE OF ADMINISTRATIVE ADMINISTRATIVE LAW JUDGE HEARINGS ALJ MICHAEL J. OMALLEY REPRESENTATIVE I ADDRESS PARTIES J. BRUCE BENNETT CARDWELL, HART & BENNETT, L.L.P. 807 BRAZOS, STE 1001 AUSTIN, TX 7870 I (512) 322-0011 (PH) (512) J22-D808 (FAX) jbb.chblaw@sbcglobal.net WEITZ GROUP HI TECH IMPORTS, LLC BILLY M. DONLEY ATTORNEY BAKER & HOSTETLER, LLP 811 MAIN STREET, SUITE 1100 HOUSTON, TX 77002-5009 (713) 751-1600 (PH) (713) 751-1717 (FAX) bdonley@bakerlaw .com VOLKSWAGEN GROUP OF AMERJCA. INC. BUDDY FERGUSON ATTORNEY AT LAW STRASBURGER & PRICE LLP 720 BRAZOS ST., STE. 700 AUSTIN, TX 78701-3251 (512) 499-3641 (PH) (512) 536-5705 (FAX) buddy.ferguson@strasburger.com PORSCHE CARS NORTH AMERICA, INC. Page 1 of3 ALICE S. CARMONA LEGAL ASSIST ANT TEXAS DEPARTMENT OF MOTOR VEHICLES MOTOR VEHICLE DIVISION 4000 JACKSON AVENUE AUSTIN, TX 7873I (512) 465-7354 (PH) (512) 465-3666 (FAX) Alice.Cannona@txdmv.gov MOTOR VEHICLE DIVISION WILLIAM R. CROCKER ATTORNEY AT LAW 807 BRAZOS, SUITE 1014 P.O. BOX 1418 AUSTIN, TX 78767 (512)478-5611 (PH) (512) 474-2540 (FAX) crockerlaw@earthlink.net BUDGET LEASING, INC JOSEPH LETZER BURR & FORMAN, LLP 420 20TH ST. N. BIRMINGHAM, AL 35203-5210 (205) 251-3000 (PH) (205) 244-5671 (FAX) HJTECHIMPORTS,LLC ELIZABETH A. MCNELLIE BAKER & HOSTETLER 65 EAST STATE STREET, STE. 2100 COLUMBUS, OH 432 I 5 (614) 462-2651 (PH) (614) 462-2616 (FAX) emcnellie@bakerlaw.com VOLKSWAGEN GROUP OF AMERICA, INC. ELIZABETH B. SHIRLEY BURR & FORMAN, LLP 420 20TH ST. N. BIRMINGHAM, AL 35203-5210 (205) 251-3000 (PH) (205) 244-5671 (FAX) HI TECH IMPORTS, LLC WEITZ GROUP Page2of3 ELLEN T. MATHEWS BURR & FORMAN, LLP 420 20TH ST. N. BIRMINGHAM, AL 3 5203-5210 (205) 458-5410 (PH) emathews@burr.com HI TECH IMPORTS, LLC WEITZ GROUP xc: Docket Clerk, State Office of Administrative Hearings Docket Clerk TDMV, Fax No. 512-465-3666 Page 3 of3 SOAH DOCKET NO. XXX-XX-XXXX.LIC BUDGET LEASING INC. D/B/A AUDI § BEFORE THE STATE OFFICE NORTH AUSTIN AND AUDI SOUTH § AUSTIN § Protestant § § RICARDO M. WEITZ, HI TECH § IMPORTS NORTH, LLC, HI TECH § IMPORTSSOUTH,LLC,HITECH § IMPORTS, LLC § OF Intervenors § § v. § § VOLKSWAGEN GROUP OF § AMERICA, INC. AND PORSCHE CARS § NORTH AMERICA, INC. § Respondents § ADMINISTRATIVE HEARINGS TABLE OF CONTENTS I. INTRODUCTION .................................................................................................................... 1 II. PROCEDURAL HISTORY ................................................................................................... 3 Ill. REMAND NOTICE ISSUE ................................................................................................. 4 A. Applicable Law .......................................................................................................... 4 B. Background During the Application Process .......................................................... 5 C. Background of the Notice Issue While the Case was at SOAH ............................. 7 IV. ANALYSIS OF REMAND NOTICE ISSUE ...................................................................... 8 A. Did Audi Receive the Letter Dated April30, 2013? ............................................... 8 B. Should the Apri130, 2013 Letter be Added to the Record? ................................... 8 C. If the Apri130, 2013 Letter is Admitted, 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 Prior Decision in Gordon Rountree, Ltd. v. Mazda Motors Cars of America, MVD Docket No. 07-0038.LIC? ............................................................. 10 SOAH DOCKET NO. XXX-XX-XXXX.LIC TABLE OF CONTENTS PAGE2 V. REVIEW OF QUALIFYING CONDITIONS IN FINDINGS OF FACT ......................• IS A. The Remand Order.................................................................................................. 15 B. Review ofFOF Nos. 155 and 156: Operational Acumen Requirements ........... 15 1. Background ................................................................................................ 16 2. The Post-PFD Revised Company Agreement.......................................... 18 3. ALJs Analysis of FOF Nos. !55 and 156 .................................................. 21 C. Review of FOF No. 1.57: Bridge Loan ................................................................... 23 D. Review of FOF No. 1.58: Cross-Collateralization Requirement ......................... 25 1. Background ................................................................................................ 25 2. The Post-PFD Loan Documents ............................................................... 27 3. AWs' Analysis ............................................................................................ 32 VI. CONCLUSION .................................................................................................................... 36 VII. :FINDINGS OF FACT ....................................................................................................... 37 VIII. CONCLUSIONS OF LAW •............................................................................................ 48 SOAR DOCKET NO. XXX-XX-XXXX.LIC BUDGET LEASING INC. D/BIA AUDI § BEFORE THE STATE OFFICE NORTH AUSTIN AND AUDI SOUTH § AUSTIN § Protestant § § RICARDO M. WEITZ, HI TECH § IMPORTS NORTH, LLC, HI TECH § IMPORTSSOUTH,LLC,HITECH § IMPORTS, LLC § OF Intervenors § § v. § § VOLKSWAGEN GROUP OF § AMERICA, INC. AND PORSCHE CARS § NORTH AMERICA, INC. § Respondents § ADMINISTRATIVE HEARINGS REMAND PROPOSAL FOR DECISION I. INTRODUCTION This is a turndown case in which Respondents Volkswagen Group of America, Inc. and Audi of America, Inc. (collectively, Audi 1 or Respondents) rejected the proposed transfer of the only two Audi dealerships in Austin, Texas, from Budget Leasing, Inc. d/b/a Audi North Austin and Audi South Austin (collectively, Budget or Protestant) to Ricardo M. Weitz? Mr. Weitz was not the sole prospective transferee. Mr. Weitz partnered with a private equity ftmd to purchase and operate the dealerships. After the Administrative Law Judges (ALJs) issued their proposal for decision (PFD) on July 16, 2014, and the Board (Board) of the Texas Department of Motor Vehicles (the Department or DMV) considered the PFD and motions for rehearing, the Board issued an 1 Although Volkswagen Group of America and Porsche were named parties, Audi was the active participant at the bearing and the ALJs will refer to the collective parties as Audi. 2 The transaction also involved the proposed sale of Budget's Porsche and Maserati dealerships. SOAH DOCKET NO. 60S..I3-4599.LIC REMAND PROPOSAL FOR DECISION PAGE2 Interim Order Remanding the Case (Remand Order) to the State Office of Administrative Hearings (SOAH) to consider three questions regarding Mr. Weitz's April30, 2013 letter to Sally Grimes, Audi's network improvement manager for its southern region. First, did Audi receive the letter? Second, should the letter be added to the record? Finally, if the letter is admitted in evidence, what effect does the letter have on Intervenors' 3 compliance with Texas Occupations Code (Code) § 230l.359(c)(3)? Specifically, the Board directed the ALJs to consider Intervenors' compliance in light of the Executive Director's decision in Gordon Rountree Motors, Ltd. v. Mazda Motors of America, Docket No. 07-0038.LIC (May 4, 2010). 4 The Board also directed the ALJs to review the conditions set forth in the July 16, 2014 PFD, specifically Findings of Fact (FOF) Nos. 154-158, and to determine whether Intervenors had met the conditions such that they are now qualified to become Audi dealers. Audi received the letter dated April 30, 2013, and the ALJs admitted it into evidence. The ALJs also find that Intervenors substantially complied with the notice provision und~r Code § 2301.359(c)(3), and that the Rountree decision and other case law do not require strict compliance with Code § 2301.359(c)(3). In addition, Intervenors have met the conditions of FOF Nos. 154-157 and are qualified on these FOFs to become Audi dealers. 5 On FOF 158, however, the ALJs recommend that the Intervenors provide proof to the ALJs and the Board that the dealership guaranty of other dealerships provision has been removed to meet the requirement of FOF 158. Once the dealership guaranty of other dealerships provision has been removed, Intervenors have met the condition ofFOF 158 and are qualified to become Audi dealers. 3 Intervenors include Mr. Weitz, Hi Tech Imports North, LLC, Hi Tech Imports South, LLC, and Hi Tech Imports, LLC. 4 When Rountree was decided, the Director of the Motor Vehicle Division, rather than the Board, issued final orders on protests tiled under Tex. Occ. Code§ 2301.360. The ALJ in the Rountree case issued a PFD on July 14, 2009. On February 1, 2010, the Director issued a Final Order, adopting the Rountree PFD except for certain parts rejected in an accompanying letter opinion. On May 3, 20 !0, the Director entered a Decision and Order of Division Director Denying Respondent's Motion for Rehearing and Denying Protestant's Motion for Rehearing. On May 4, 2010, the Director entered a Nunc Pro Tunc Decision and Order of Division Director Denying Respondent's Motion for Rehearing and Denying Protestant's Motion for Rehearing. 5 The ALJs have reviewed all documents, evidence, and relevant testimony, as well as the closing arguments and briefs advanced by the parties, in reaching their decisions on notice and the financial structure issues as set forth in the Board's remand order. SOAH DOCKET NO. 608~13~4599.LIC REMAND PROPOSAL FOR DECISION PAGE3 II. PROCEDURAL HISTORY' On May 14, 2013, Mr. Weitz, Hi Tech Imports North, LLC (Hi Tech North), Hi Tech Imports South, LLC (Hi Tech South), Hi Tech Imports, LLC (Hi Tech Imports) (collectively, Intervenors), and Budget protested Audi's and Porsche's buy-sell turndown to Department. Audi filed its reply on June 14,2013. In Audi's reply to the protest, Audi admitted that Budget and Mr. Weitz submitted notice and an application "in accordance with the provisions of Tex. Occ. Code, Title 14, 2301.359."7 After the first hearing, the ALJs issued their PFD on July 16, 2014. After the ALJs issued their PFD, the Board assumed jurisdiction of the case and, on August 28,2014, Audi filed a motion to dismiss with the Board. On August 29, 2014, Intervenors filed a Motion to Find the Prospective Transferees Qualified. On September 12,2014, with 4 Board members absent, the Board voted 3 to 2 to dismiss the Protest for lack of subject matter jurisdiction. On October 2, 2014, Protestant and Intervenors filed a Motion for Rehearing. On October 13, 2014, Audi filed a response in opposition to the Motion for Rehearing and, on October 15, 2014, Protestant and Intervenors filed a reply in support of their Motion for Rehearing. The Board's staff recommended that the Motion for Rehearing be granted. On December 10,2014, the Board voted to grant the Motion for Rehearing. On February 13, 2015, the Board voted to remand the Protest to SOAH. On February 20,2015, Audi filed a motion to send this case back to the Board, challenging the Board's authority to remand this contested case to SOAH. Protestant and Intervenors responded to that motion on February 27, 2015, and Audi filed a reply in support of that motion on March 2, 2015. The ALJs denied Audi's motion. 8 6 To avoid repetition and to focus on the remand issues, the ALJs incorporate the procedural history and background from the July 16,2014 PFD into the Remand PFD, although certain facts are repeated as background for the remand issues. 7 Audi's June 14,2013 Reply to Protest~ 2. s Although Audi challenged the Board's remand to SOAH, the AUs denied any relief to dismiss the remand case at SOAH based on jurisdictional grounds. The ALJs proceeded as directed by the Board, and this PFD will not address the issue of whether the Board has the authority to remand cases to SO AH. SOAH DOCKET NO. 608·13·4599.LIC REMAND PROPOSAL FOR DECISION PAGE4 The hearing on the merits began on April 16, 2015, and concluded on April 17, 2015. The ALJs closed the record on June 16,2015, after the parties filed post-hearing briefs. III. REMAND NOTICE ISSUE A. Applicable Law Subsections (a). (b), and (c) of § 2301.359 of the Code relate to notice to the manufacturer of the proposed transfer and provide as follows: (a) A dealer must notify the manufacturer or distributor of a vehicle the dealer is franchised to sell of the dealer's decision to assign, sell, or otherwise transfer a franchise or a controlling interest in the dealership to another person. The notice is the application by the dealer for approval by the manufacturer or distributor of the transfer. (b) Notice under Subsection (a) must: (l) be in writing and include the prospective transferee's name, address, financial qualifications, and business experience; and (2) be sent by certified mail, return receipt requested. (c) The notice must be accompanied by: (1) a copy of pertinent agreements regarding the proposed assignment, sale, or transfer; (2) completed application forms and related information generally used by the manufacturer or distributor in reviewing prospective dealers, if the forms are on file with the board; and (3) the prospective transferee's written agreement to comply with the franchise to the extent that the franchise is not in conflict with this chapter. SOAH DOCKET NO. 608-l3-4599.LIC REMAND PROPOSAL FOR DECISION PAGES B. Background During the Application Process Budget and Mr. Weitz submitted the Dealership Purchase Contract (DPC) to Audi on December 20, 2012. Thereafter, Mr. Weitz, primarily through Candido Pagan, and Mr. Weitz's business partners Corbin Robertson, K. Rick Turner, C. Ross Bartley, either personally or through their representatives, submitted an array of documentation and information to Audi. The majority of that documentation and information was sent to Ms. Grimes, who was Mr. Weitz and Mr. Pagan's primary contact at Audi. In early April2013, Ms. Grimes informed Mr. Weitz that Audi had received all materials needed to evaluate the transfer proposal and that no additional information was being requested 9 by Audi. In a letter dated April 16, 2013, Audi rejected the applications to be granted Audi dealer agreements for Audi North Austin and Audi South Austin. 10 Audi stated that it was not approving Budget's proposed transfer and included a list of material reasons for rejection of the proposed transfer. 11 The rejection letter did not reference non-compliance with Code § 2301.359(c)(3) or any notice violations. On April 18, 2013, Mr. Weitz sought to provide clarification of the ownership and capital structure involved in the proposed transaction because that appeared to be Audi's primary concernY In a response letter to Mr. Weitz dated April25, 2013, Audi stated that its "primary concern with the buy-sell was the ownership and capitalization structure of the purported buyer. While your letter provides some additional details, we are still of the opinion that the paperwork as submitted does not meet our requirements." 13 Audi's April 16th letter and its April 25th letter mentioned nothing about the prospective transferees' purported non-compliance with § 2301.359(c)(3) of the Code, nor did Audi indicate its concern that Mr. Weitz would not comply with the terms of the franchise agreement. 9 Intervenors Ex. No. 35. 10 Respondents Ex. No. 186. 11 Respondents Ex. No. 186. 12 Respondents Ex. No. 189. 13 Respondents Ex. No. 197. SOAJ-1 DOCKET NO. 608¥13~4599.LIC REMAND PROPOSAL FOR DECISION PAGE6 After April25, 2013, Mr. Weitz, on behalf of Hi Tech Partners, LLC (Hi Tech Partners), and the other members of Hi Tech Motorcars, LLC (Motorcars) - Headwater, Turner, and Bartley- renegotiated the Motorcars' company agreement. The renegotiation culminated in the Hi Tech Motorcars, LLC, Amended & Restated Company Agreement (Revised Motorcars Agreement). 14 The Revised Motorcars Agreement was signed by every member of Motorcars. 15 On May 1, 2013, Mr. Weitz submitted two more application packages, replacing the initial Motorcars company agreement with the Revised Motorcars Agreement. 16 The submissions were accompanied by two cover letters, one on Hi Tech North letterhead and one on Hi Tech South Jetterhead. 17 In the May I, 2013 packages from Hi Tech North and Hi Tech South, Mr. Weitz included two letters dated April 30, 2013 (April 30th Letters) 18 One letter was from David Stein (principal of Budget) to Ms. Grimes, notifying Audi of the proposed transfer. The other letter was from Mr. Weitz to Ms. Grimes. 19 Audi received the April 30th Letters on approximately May 2, 2013. 20 There is no dispute that Audi received the April 30th Letters. On May 8, 2013, Brian Pellock sent a letter to Mr. Stein. In the letter, Audi took the position that the materials submitted by Mr. Weitz on May 1 (including the April 30th Letters) and received by Ms. Grimes on May 2nd were part of the DPC (submitted on December 14, 2012, and amended on February 9, 2013) that Audi had 14 Intervenors Ex. No.9. 15 Intervenors Ex. No.9 at 021 (executed signature page for Hi Tech Partners; Headwater; Charles Ross Bartley IRA; K. Rick Tumer, as trustee; C. Ross Bartley, individually; and Tumer Family Partnership). 16 Intervenors Ex. Nos. 275, 276. Respondents Ex. Nos. 202, 203. 11 Intervenors Ex. Nos. 275, 276. Respondents Ex. Nos. 202, 203. 18 Intervenors Ex. No. 242. Tr. at 42·44. 19 Intervenors Ex. No. 242. 20 Intervenors Ex. No. 274 at274-002, 003. SOAH DOCKET NO. XXX-XX-XXXX.LIC REMAND PROPOSAL FOR DECISION PAGE7 rejected on April 16, 2013. Therefore, Audi did not consider the DPC or the materials received by Audi on May 2nd. 21 C. Background of the Notice Issue While the Case was at SOAH Budget filed its protest on May 14,2013. Tn the protest, Budget and Mr. Weitz indicated that they submitted the applications for the franchises in accordance with Code § 2301.359. Audi replied to the protest on June 14, 2013, and admitted that the applications had been submitted in accordance with Code § 2301.359. In its reply to the protest, Audi only raised the affirmative defense that Intervenors lacked standing to participate in the protest proceeding. Audi followed its reply with a motion to dismiss for lack of standing. The ALJs denied Audi's motion to dismiss. Audi, therefore, did not raise lack of notice issues in its reply to the protest, in its initial motion to dismiss, or in its initial responses to Intervenors' request for disclosures. Audi raised the notice issue for the first time on January 3, 2014, in its response to Intervenors' motion for summary disposition. The ALJs denied the motions for summary disposition. Following the hearing on the merits, Audi addressed the notice issue in its post- hearing briefs. In their PFD, the ALJs rejected Audi's arguments and found that fntervenors had substantially complied with the notice provisions of Code § 2301.359(c)(3). In summary, the ALJs foW1d that Mr. Weitz signed and submitted an application for an Audi dealership, which strongly suggested an agreement to comply with the franchise. On April 18, 2013, Mr. Weitz notified Audi, in writing that he intended to comply with Audi's requirements. 22 Given Mr. Weitz's clear intent to purchase the Audi dealerships and his willingness to adhere to any of Audi's requirements necessary to obtain the dealerships, the ALJs found that Mr. Weitz satisfied the requirement of Code § 2301.359(c)(3). Audi did not file any exceptions to the ALJs' 21 Intervenors Ex. No. 277. 22 Respondents Ex. 189. SOAH DOCKET NO. XXX-XX-XXXX.LIC REMAND PROPOSAL FOR DECISION PAGES findings that Mr. Weitz had substantially complied with the notice provisions of Code § 2301.359(c)(3) 23 IV. ANALYSIS OF REMAND NOTICE ISSUE A. Did Audi Receive the Letter Dated Apri130, 2013? The Board's first question asks whether Audi received the letter dated April 30, 2013, from Mr. Weitz to Ms. Grimes? The answer is yes. Audi admits that it received that letter. 24 This issue is not in dispute; therefore, no further discussion is necessary. B. Should the April 30, 2013 Letter be Added to the Record? The Board's second question asks whether the letter should be added to the record, which the ALJs assume means admitted into evidence? The answer is yes. Intervenors contend that the April 30th letter should be admitted into evidence because the Rountree and other decisions require substantial compliance with Code§ 2301.359(c)(3), and the letter is one other document that shows Intervenors substantially complied with Code § 2301.359(c)(3). Respondents argue that the Rountree decision requires strict compliance; therefore, the April 30th letter is irrelevant and cannot be admitted into evidence because the letter was sent two weeks after Audi rejected the dealership applications and not all prospective transferees signed the letter. 23 The ALJs emphasize that Audi barely addressed the notice issue during the 14 months this case was pending at SOAH. If notice was a primary, preliminary reason for Audi's rejection of the dealership agreements or basis for objecting to the protest, it seems very likely that Audi would have raised this issue early on in the proceeding. It did not. Furthermore, once the ALJs fully analyzed the notice issue in their PFD and made findings on substantial compliance, Audi did not file exceptions. The notice issue appears to have become a concern for Audi only after the Board assumed jurisdiction of this case. 24 Intervenors Ex. No. 274 at 274~002, 003. SOAH DOCKET NO. 608·13·4599.LIC REMAND PROPOSAL FOR DECISION PAGE9 The ALJs admitted the April 30th letter into evidence during the remand hearing on the merits? 5 Given that the ALJs find that the appropriate standard is substantial compliance (as further discussed below), the letter is one other document showing Intervenors substantially complied with the notice provisions of Code§ 2301.359(c)(3). More [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/4071991. Public record. Not legal advice.