### TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

ON MOTION FOR REHEARING

NO. 03

- 19

- 00070

- CV

Vergo Patio Gardens, Inc. , Appellant

v. Railroad Commission of Texas, Appellee

FROM THE 200TH DISTRICT COURT OF TRAVIS COUNTY NO. D -1- GN -17- 004723, THE HO NORABLE JAN SOIFER, JUD G E PRESIDING

M E M O R A N D U M O P I N I O N

After considering the motion for rehearing filed by t he Railroad Commission of
Texas , we deny the motion but withdraw our opinion and judgment issued on February 10, 202 1, and substitute the following opinion and judgment in their place. This appeal arises out of a suit for judicial review of an administrative order

. In the underlying administrative proceedings, Vergo Patio Gardens, Inc. , applied for the renewal of
its land farm p ermit , but t he Railroad Commission of Texas denied the application . Vergo requested a contested case hearing. A week before the hearing, Vergo and staff for the executive director of the Commission (Staff) filed a jo int motion to dismiss the hearing se tt ing pursuant to

a n attac hed Rule 11 agreement (the Rule 11 Agre ement), but the administrative law judge (ALJ)
denied the motion. Fol lowing the hearing, the ALJ recommended denying Vergo ’s ap plication ,2 and the Commission entered an order to that effect. T he distr i ct court affirm ed. W e conclude that the ALJ had a ministerial duty to enforce the Rule 11 Agreement that settled the parties ’ dispute and that proceedin g with the hearing and denying the joint motion to dismiss prejudiced
V ergo ’ s sub stantial righ ts . W e t herefore rever s e and remand

. See Tex. Gov ’ t Code § 2001.174(2) (F).

B ACKGROUND Vergo received its original permit to landfarm in 1986

. See 16 Tex. Admin. Code § 3.8 (a)(25) (2018) ( R.R. Comm ’ n of Tex. , Water Protection) (defining “ landfarm ing ” a s “ [ a ]

w aste ma n agement pract ice in which oil and gas wastes are mixed with or applied to the land

su rface in such a manner th at t he waste will not migrate off the landfarmed area ” )

. In 1998, a fter

a mendments a nd renewals to that permit , Ver go a pplied to rene w an d amend its p ermit
under t he 1996 version of section 3.8 of title 16 of the Texas Administrative Code (Rule 8)

. See 16 Tex. Admin. Code § 3.8 (1996) (R.R. Comm ’ n of Tex. , Wa ter Protection), repealed by
2 5 Tex. Reg. 6487 , 6488 (2000), a d opted by 38 Tex. Reg. 23 18 (2013). 1 Under Rule 8 , Staff reviews permit applications and makes the initial decision to appr ove or deny an unprotested application. See Rule 8(d)( 6) (D) (1996)

. Staff noti fied Vergo that its permit would not expire
until the Comm ission had made a f ina l deter m ination on Vergo ’ s application

. See Tex. Gov ’ t Code § 2001.054 (b)

. Staff did not ta ke final action on the application until October 2013, when
it denied Vergo ’ s application

. I n a letter , Staff claim ed that the infor mation s ub mitt ed with the

a

ppl icati on and gathered dur ing the review process d em onstrate d that V er go violated Rule 8,

1 Rule 8 has been amended and reorgani zed ove r the years. For con v en ience , we w ill
u se “ Rule 8 ” t o r efer to the 1 996 version and ci te to th is version as “ Rule 8 (1996). ”3 mismanaged oil and gas waste, an d may cause or allow pollution to surface and subsurface

waters at the landfarm property

. Vergo then requ ested a co ntes ted case hear ing

. T he Commission initi ally set the hearing for February 2014. Vergo filed a motion
fo r continuance, and then t he parties filed multiple agreed motions for conti nuances to conduct discovery , gat her samp les , a nd engage i n settleme n t negoti ations . Th e ALJ gran ted the requests
fo r continuance , ultimately setting the hearing for Oct ober 2016. In a letter to the pa rties, the
ALJ stated , “ [t]he continu ance granted by this ALJ on M ay 10, 2016 is the last that will be granted ” and “ [i]f the part ie s hav e no t rea ched a s ettlement by Sep tember of 2016, they should prepare to go to hea ring. ” I n September , V ergo filed an opposed motion for further continuance
and a motion to reconsider the co ntinua nce, but the ALJ den ied both

. On Sept embe r 28, t he parties f iled a joi nt mo tion to di s miss th e hearing setting, explain ing that they “ have entered into a Rule 11 Agreement allow ing the parties to enter a
60

- day binding settlement period” a nd “request that the hearing setting be rem oved to allow t he parties to resol ve this ma tter without the nece ssity of a hearing.” The parties attached to the dismissal motion their signed Rule 11 Agreement

— including exhibits

— w hich p rovid ed :

1. A joint motion to di smis s the h earing date of October 3, 20 16 shall be filed on o r no later than Se pte mber 3 0, 2016.
2. Eithe r party shall file a motion to dismiss with preju dice the hearing request to consider de nial of permit no. LF

- 0032 with prejudice against refilling [si c] on Decembe r 2, 2016.
3. Vergo waives an y an d all claims, deman ds , rights or inte res ts, w h ether existing or alleged to exist now or at a ny time in the fu t ure, at either the administrative or di strict court level, relating to the propo sed renew al of perm it no. LF

- 0032, or any action of the RRC [th e C ommission] relating t o such permit.
4. Ver go sh a ll agree to the terms of the May 5, 2016 Set tl ement Agreement ( “ Draft Permit ” ) attached hereto as Exhib it “ A

. ”4 5. Vergo shall, within 45 days of O ctob er 3, 2016 (i.e., on or before November 17, 2016), provi de ite ms 1

– 8 of Exhibit “B” to counsel for the RRC . Any items comp leted prior to this 45

- day deadline should be submitted as soon as possible. A recommen ded submission schedule for items 1-8 is attached hereto as Exhibit “C.”
6. Ve rgo understand s that afte r r evi ew and approval by th e RRC , items 1 -8 of Exhib it “B” will be used to supplement and complete the “ Draft Permit .” Vergo further understands and agree s that such document s must be submitted i n form and substance that me ets reg ulatory requirements of t he RRC , and failure to subm it documents tha t m eet re quirements will result in non- renewal of permi t no. LF-0032.
7. Ve rgo shall work diligently and cooperati vely with RRC Staff to timely submit
a st ormwater management plan, as re fere nced in Exhibit “ B, ” with in 45 days of October 3, 2016 (i.e., on or before N ovember 17, 2016 ).
8. Vergo shall implement a me t hod for stormwater management consistent with RRC methods approved b y Staff as summarized and atta ched hereto as Exhibit “ D. ”
9. The re view and approval period for it ems 1 –8 , described in Exhibit “ B, ” sh all end 6 0 days from October 3, 2016 (i.e., on December 2, 2016). All submissions received after 45 days fro m O ctober 3, 2016 (i.e., after November 17, 2016) are deemed late and sh all not be accepted for review o f t he permit renewal appl ic ation.
10. The curr ent perm i t no. LF -0032, attached hereto as Exhibit “ E, ” shall expire on December 2, 2016 (i.e., 60 days fr om Oc tober 3, 2016).
11. After December 2, 2016, Vergo shall not continue ope rations at the subject site unle ss the RRC issues a renewa l landfarm permit.
12. T he 45 and 60 day d ead li nes shall begin simultaneously on October 3, 2016. The 45

- day deadli ne shall end on November 17, 2016 and the 60

- day deadline shall end on December 2, 2016.

In a September 2 9 letter to th e pa rties , however, the AL J s tated , “ I am n ot incl i ned to continue the current hearing dates

. . . over a hastily dr afte d Rule 11 Agreement that may be
unenfor ceable. I will contin ue the current hearing dates if presente d with a Rule 11 Agreement
with tee th i n it. ” 2 The ALJ then den ie d the joint motion t o dismiss.

2 In the Se ptem ber 29 letter, t he AL J stated two reasons why the Rule 11 Agreement might be unenforceable. First, the ALJ asser t ed th at the s econd parag raph discus sed a hearing5 Af ter the hearing, the ALJ issued its proposal for decision (PFD) , recommending that Vergo ’ s application be denied and conclud ing that Vergo failed to prov e t hat renewal of the permit wou ld prev ent the pollution o f gro undwater and su r face wat e r resources, as required by
Rule 8. T he Commission adop te d the findings o f fact and conclusions of law

— substitut ing one finding of fac t to correct a date

— and ordered V ergo ’ s application denied. Verg o f iled a motion
for rehea ring challenging Sta f f

’ s expe r ts and e vidence submitted to support th e PFD ’ s findings

o f fact , the ALJ ’ s and Commission ’ s application of Rule 8 , and the ALJ ’ s denia l of the Rule 11 Agreement settlin g the c ase
. The Commission deni ed the motion. Ve rgo soug ht ju dici al review
i n distric t court , and the district court affirmed

. Vergo now appeals to this Court.

ST ANDARD OF REVIEW

“ Final orders of the Commission are ‘ deemed to be prima facie valid and [are]

s ubject to review under th e s ubst a ntial evidence rul e. ’ ” Westlake Ethyl e ne Pipel i ne Corp.

v. R ai lroad Comm ’ n , 506 S.W.3d 676, 681 (Tex. App.

— Austin 2016, pet. denied) ( quoting H.G. Sledge, Inc. v. Prospective Inv. & Trading Co. , 36 S.W.3d 597, 602 ( Tex. Ap p.

— Austin 2000, pet. deni ed) ) (a lteration in origin al)

. The sub stantia l ev idenc e rule, as codif ied in the Administrative Procedure Act ( APA ), requires reversal or rem and if the appellant ’ s substantial rights have been preju diced because the adminis trative findings, inferences, co ncl usio ns, or
decisio ns : (1) v iolate a consti t utional o r statutory pro vision, (2) exceed the agen cy’s statuto ry authority, (3) were made through unlawful procedure, (4) ar e affected by other error of law,

requ est to consider den ial of the p e rm it , but the hearin g request i s to consider the renewal of the p ermit. Second, the ALJ c laimed that the third paragraph is va gue and implies that Vergo wai ves its right of ap peal, bu t there is a “ loopho le ” bec ause som e iss ues “ may be fa st

- tr ac ked straig h t in to the co urt of appeals, s k ipping the di strict court level. ” T he Commission neither r aise s no r defend s the ALJ ’ s stated reason s in its briefing to this Court.6 (5) a re not reason ably supp orted by substantial evid enc e, or (6) are arbitra r y or capricious or

c haracter i zed by abuse of discretion or clearly unwarran ted exercise of discretion. T ex. Gov’t Code § 2001.174(2). “We apply this analysis without deference to the district cou rt’s judg ment.” Jenkins v. Crosby In de p. Sch. Dist. , 537 S .W.3 d 142, 149 (Tex

. App.

— Au s tin 2017, no pe t.) (citing Texas Dep’t of Pub. Safety v. A lford , 209 S.W.3d 101, 103 (Tex. 2006) (per curiam)).

DISCUSSION On appeal, Vergo raises three issues : (1) wh et her the A LJ erred by breaching its
mi ni steria l duty to ent e r an order dism i ssing th e case when pres ented with the Rule 11 Agreement and joint moti on to dismiss , (2) whether Ve r go met its burd en to demonstrate that there was no potential for polluting subsurfac e waters , and (3) whether the Commissi on me t its
b u rden of goo d cause t o termin a te Vergo ’ s perm it. Be cause we conclude that the first issue is dispos itive of this appeal, we do not address Vergo ’ s other issues. S ee Tex. R. App. P. 4 7.1, .4.
Te xas Rule of Civil Procedure 11 a pp li e s only to agreements made
d

uring pending li tigat ion , which we have held does not include the co urse of an
administrative proceeding. See Castillo v. Texas Bd. of Prof ’ l Eng ’rs , No

. 03

- 10

- 00124

- CV,
2010 WL 5129127, at * 4 (Tex. App.

— Austin Dec . 14, 2010, no p et.) (mem. op.) ( “ B ecause the parties ent ere d int o the agreement during the course of the a dministrative proceeding, it was governed by the provisions of the APA, not by the rules of civil procedure

. ” ); see also Tex. R. Civ. P. 11 ( “ Unle ss otherw ise provid ed in these rules, n o agr eement betwee n a ttorneys or parties

touc hing any suit pending will be enforced unless it be in writing, signed and filed with the

pa pers as part of the record, or unless it be made in ope n cou rt and ent ered of re cor d. ” (emphasis
ad ded))

. N everth ele s s, the APA provides th at parti e s to a conteste d case may informa lly dispose7 of the matter by agreed settlement , unless precluded by law

. Tex. Gov ’t Cod e § 2001.056

. And

a t the time of th e hearing, t he Commission ’ s rule s provide d , “ No s tipulation o r agr e e ment s hall
be cons i de r ed unles s it is in writi ng and signed by the pa rties or their authorized re presenta tives,
or dictated into the recor d during the course of the proceeding. ” 16 Tex. Admin. Code § 1.123 ( 2016) (R.R. Comm ’ n of Tex. , Stipulati ons) , repeal ed by 4 2 Te x. Reg. 1214 , 1 21 4 (2017), adopted by 42 T e x. Reg. 4131 , 4131 (20 17)

. B ecause the language of former R ule 1.123 is substantially similar to that of Texas Rule of Civil Procedure 11 and given the lack of case law interpreting former Rule 1.12 3 , we lo ok to cas e law discussin g R ule 11 a g reements in our
inte rpr etation of former R ule 1.123

. See Shamrock Psychiatric Clinic, P.A. v. Texas Dep ’ t of
Health & Human Servs. , 540 S.W.3d 553, 560 (T ex. 2018) (per curiam) (concluding that because
State Of f i ce of A dminis trativ e H earing ’ s R ule 155.415 an d Rule 11 “ are nearl y iden tic al in language , ” “ we agree that cases discussing Rule 11 agreements may guide our interpretation of

. . . Rule 155.415 ” ).

“ Rule 11 agreements are contracts rela ting to li tigatio n ” and “ [ t] o be effec tiv e, a
Rul e 11 agreement m u st consi st of ‘a written mem orandum which is complete within itself in every material det ail, and which conta ins all of the essential elements of the agreement. ’ ” Id. at
56 0

– 61 ( quoting P adilla v. LaFrance , 9 07 S.W. 2d 4 54, 460 (Te x. 1995) )

. In c o nstruin g a Rule 11 agreement, we apply “ the same rules a s a c ontract. ” Id. at 5 60 (citing Trudy ’s Tex. Star, Inc. v. City of Austin , 307 S.W.3d 894, 914 (Tex. Ap p.

— Austin 2010, n o pet.) )

. Thus , construing the

a gre e men t as a co ntract, we consider whether the Rul e 11 Ag reement contained the es sential
elements t o informally dispose of the matter

. H ere, t here is no dis pute that the Rule 11 Agreement was in writing , signed by the
part ies , and filed in the administr ati v e procee ding

. See i d. at 561 ( n oting that agre ement was in8 writing, signed , and filed with court as required by rules). The Commission describes the Rule 11 Agreement as “ an agreement

- t o - at tempt

- to

- ag ree to settle ” a nd argues tha t “ the Rule 11

ag reeme nt wa s not i tself a set tle ment of t he issues ” b ut “ merely provided for the possibility of
settlement if certa in underlying conditions were met. ” We disagree. The Rule 11 Agreeme nt provides tha t Vergo “ shall ” agre e to the term s of the a tt ached draft permi t ; th at Ver go “ shall ”

p rov ide nece s s ary items and “ shall ” take certain actions for the Com mission to supplement and complete the draft permit; that Vergo ’ s failure to prov ide the documents “ will re sult in non

renewal of perm it ” ; that the atta ched permit to t he Rule 1 1 Agreement “ sh all ” exp i re on
Decem ber 2; an d that Vergo “ shall not ” continue operations after December 2 without receiving

a renewa l land farm permit. Under th e Rule 11 Agreeme nt , nothing is left for Vergo to a gree to ;
the essential el em ents of t he agreem ent are in p lac e. I f V e rgo failed to p erform , it would result
in a non renewal of the permit ; if Vergo did perform , the Commission would supplement and

co mp lete the permit. See L esikar v. M oon , 237 S.W.3 d 361, 367 (Tex. App.

— Hou ston [14th Dist.] 200 7, pet . denied) ( “ The word ‘ s h all ’ a s used in contracts is generally mandatory, operating to impose a duty. ” (citing Roberts v. Clark , 188 S.W.3d 204, 210 ( Tex. A pp.

— Tyle r 2002, pet. de nied) ) )

. Moreover , u nder either scenario, Verg o ha s waive d its “ cla ims , dema nds, rights or interest ” rel ating to th e renewal of the permit or to any action taken by the Comm ission
related t o the permit under the Rule 11 Agreement

. A nd Exhib it B of the Ru le 11 Agreement expressly s tate s , “ B y participat ing in the Rule 11 A gre ement, Vergo Patio Ga rdens re l inquishes
all r ights to a hearing regarding the renewal of P ermit no. LF

- 0032. ”
The Commission ’ s only explanation for why the Rul e 11 Agree ment did not s ettle
all the is sues related to the per mi t renew al is that “ the Rule 11 agree ment specifi cal ly refer e nces a separate set tlement agreement that was yet to be signed by Vergo. ” But the referenced9 “ sep arate settleme nt agreement ”

— Exhib it A of th e Rule 11 Agre ement

— is a draft permit title d

“ PERMIT TO LANDF ARM CERTAIN NONHA ZARD OUS OIL A ND GAS WASTE S

. ”
Exhibi t A does not req uire Vergo ’ s signature : the only sign ature block was for a Commission

manager , and above the signature bloc k it sta te s , “ Th is authoriza tion is granted sub ject to review
and cancellation should inves tigation sho w that suc h author iza tion is b eing abused

. ” Vergo ’ s sig natur e was not req uired for the refer enc ed “ separate settle ment agre ement ”

— i.e., the renewal permit

— to be issued

. S ee Rule 8(d)( 6) (A) (1996) ( providing that pe rmit s are issued by
Comm iss ion ). Accordingly , w e conclu d e that the Rule 11 Agree ment contained the essential
el ement s to informally dispose of the matter

. 3 The Texas Supreme Cou rt recen tly exp lained t hat admin istrative law judges generally have a ministerial duty to enforce a val id Rule 11 agreeme n t. See Sh a mr ock Psychiatr ic Clinic , 540 S.W.3d at 562. The relev ant backg round facts of Shamrock Psychiat ric
Clinic are as follows

. Shamroc k and t he Texas Health and Human Services Commission ’ s
Office of Ins pector Gene ral correspon ded regarding consoli d at ing a “ p a yment

- hold case with the

soon - t o - be

- filed overpayment

- recoupment case , ” w hich was memorialized in the I nspecto r
General ’ s status report and in the admi nistrative law judge ’ s or der relyin g on th at rep ort to

cont inue the hear ing s. Id. at 556

– 57 , 56 1

. Neve r theless , the In spector Ge neral later sent
Shamrock a final notice of overpayment , which included notice of a 15

- day appeal requ ire ment , but Sh a m rock did not timely appeal

. Id. at 557. T he In s pector Gener al “ n ot ified Shamr ock of
the State ’ s in t en t to dis m iss the over pay ment and p ayment

- hold cases due to Shamrock ’ s failur e ”
to tim ely appeal , and S hamrock respond ed with a letter referenc ing their agreement to

3 Fo r the se rea sons , we also d isagree wit h the state d rat io nale of the ALJ i n de scribing t h e Ru le 11 Agr eemen t as pot enti a lly unenf orceable.10 consolidate the cases

. Id. “ Disrega rd ing the letter, ” the Insp ect or G eneral filed a mo t io n to
dis m iss the pending case. I d

. The administrative law judge in itial ly denied the motion , findi ng that the par ties had e ntered into an “ a greeme nt that the payment hold and final notice of

ov erpayme nt cases would be heard togeth er
. ” Id. But the In s pe ctor Gen e ral then withdr ew its

“ pa yme nt

- hold case ” and argue d that the administrative law ju dg e no longer h ad jurisdi ction to enforce the ag reement because no contested case was pending on either issue. I d. at 558. Th e
administrat ive law judge then di s mi ssed the case. Id. Sha mrock sued in district cour t for “ a writ
of mandamus directing the ad ministrative la w judge to enforce the alleged R ule 11 agreement between the parties , ” alleg ing that th e admin istrative law jud ge “ had a min ist erial duty to enfo r ce
or abid e by the Rule 11 agreement created by the p arties ’ c ommunications. ” Id. at 558

– 59

. T he Texas Supreme Court , i nter preting the Rule 1 1 agreement as a contract , concluded that a valid R ule 11 agreement existed and that it wa s complete within i tse lf and

con t ain ed the essen tial ele ments of the agreement

. Id. at 5 61

. The Court then noted , “ [t] he power to conduct adjudicative pro ceedings nec essarily includes

. . . ‘ the power to accept an d act

upo n an agreem ent be tween the parti e s that removes fro m d is pute and lit igation a subsidiary
issue of fact or la w ’ ” and “ [w] i e l ding th is power is n ot only a judg e ’ s rig ht, but a judg e ’ s responsibility , ” g iven the “ ‘ ministerial duty to enforce a valid Ru le 11 a greement. ’ ” I d

. at 561

– 62 (quot i ng Fortis Benefit s v. C antu , 23 4 S.W.3d 64 2, 65 1 (Tex. 2007) ; Cities of Abil ene

v. Public U til. Comm ’ n , 146 S.W.3d 742, 7 47 (Tex. App.

— Austin 2 004, no pet.) ). Accordi ngly,

t he Court concluded that “ the administrativ e law j udge faile d to pe r form a purely m inisterial act ”

to en fo rce the R ule 11 agreemen t

. Id. at 5 62. Following Shamrock Psychiatric Clinic , we conclu de here that the ALJ like wise
failed to act in accorda nce with this responsibility and abused its discr etion b y failing to comp ly11 with its min i sterial duty. T he Co m m ission a r gues that the j oint mot ion to dismiss did n ot reques t
that the ALJ dismiss the ca se ; instead , the joint mo tion “ merely asked the ALJ to ‘remove ’ the hearing settin g to allow the partie s to en ter settl ement ne gotiations. ” B u t the j oint motion
de sc ribed th e Rule 11 Agreem ent as “ allowing the par ties to enter a 60

- day binding settlement period ” for t he provision of additi onal information to “ supplement ” and “ complete ” the renewal permit a nd requ ested tha t the he aring setting b e r emoved “to allow th e parties t o resolve this

matter w ithout the ne cessit y of a hea ring

. ” (Emphasis added .) Ac cordingly, w e construe th e joint motion not a s a reque st to allow se ttlement negotiations , but as a req ues t to enforce th e
Rule 11 Agreement t o resolve the d ispu te by settlem e nt agreement , n ot by he aring.
The Com missi on also c laims t hat “[r]egard less , Ver go waived its complaint b y failing to adequately state it in its motion for rehearing. ” “ The motion fo r rehea ring is a statuto ry prerequisit e to an appeal in a co nt ested ca s e and mus t be s ufficien tly definite t o notif y the age ncy
of the error claimed so t hat the agency can either correct or prepare to defend the error. ” Scally
v. Texas State B d. of Med. E xam ’ rs , 351 S.W. 3d 434, 444

– 45 (Tex. A p p.

— Austin 2011, pe t.
de nied) (i n ternal citation s omitte d ); s ee Tex. Gov ’ t Co de § 2001 .145 ( prov iding that “ [a] tim ely motion for rehearing is a prerequisite to an appea l in a contested case ” ). “ The standard is one of
fair n otice ” and d oes n ot require “ a b riefing of the law or f acts. ” S cally , 351 S.W. 3d at 44 5. The
Commission as serts tha t Vergo did not me ntion in its rehearing motion “ the legal basis that Vergo now raises: that the ALJ had [a] ‘ ministerial duty to e nforce ’ the Rul e 11 agre ement to
dismi s s the case. ” But Ver g o ’ s rehea r ing motion had a sectio n titl ed “ Denial of S ettlement Agreement ” and expres sly stat ed that “the parties entered into a Rule 11 Agreement settl ing this

case ”; “the [ALJ] refu sed to enter the ag reement ” ; the par ties were “ for c ed ” “ to ut ili ze th eir

r esources trying th is cas e ” and “ to att end a three

- day hearing ” ; and “the ALJ wrongfully deni ed12 the settlement agreement. ” We conclude that Vergo ’ s rehearing motion m et the standard of fair
noti ce o n t he legal issue of whether the A L J should have enfo rce d the Rule 11 Agreement

. Compare , e.g. , Burke v. Cent r al Educ. Agency , 725 S.W.2d 393, 398 ( Tex. App.

— Austin 1987,
writ ref ’ d n.r.e.) (finding waiver) , with Morgan v. Employees ’ Ret. Sys. , 872 S. W.2d 81 9, 821 (Tex. App.

— Austin 1994, n o writ) ( c oncludin g e rr or prese r v ed).
In sum , the par ties e nt ered into a v oluntary s et tlement agreement , 4 but the AL J
refused to enforce the agreement by proceeding with the contested case hearing

. Vergo preserved error a nd prese nted the ALJ ’ s error to t he Commission in its r ehearin g moti on , but the
Commiss ion entered an order denying the permit application based on the hearing and resultin g
PFD

. In so doing, Ver go ’ s substantial rights

— including those created by th e Rule 11 Agree ment

— were prejudiced be c ause Vergo was “ fo rce d ” “ to att e nd a th ree - day hearing ” and

“ ut ili ze [its] resources trying th is case ” when the dispute ha d alrea dy been settled by the Rule 11 Agreement

. We ther efore hold that t he administrative decis ion was “ arbitrary and c apricious or
ch aracteri ze d by an a bu se of disc r etion o r clea rl y unwarr an ted exercise of discretion , ” and the
APA requires that we reverse and rem and this case

. See Tex. Gov ’ t Code § 2001.174 (2) (F)

.

THE COMMISSION ’ S MOTION FOR REHEARING
I n its motion for rehearing, t he Commission argues th at this Court ’ s decision “realig n[s] the balance of power be tw een the parties and the [ALJ] in an administrative

4 “ I t is the policy of this state to en courage the peaceable r esolution of dis putes[.] ” Tex

. Civ. Prac. & Rem. Code § 154.002 ; see T ransp ort I n s

. v. Fairc loth , 898 S .W.2d 2 6 9, 280 (Tex. 199 5) (noting tha t “ [p ] ublic po licy favors the a m icable settlement of con trov e rsies ” because settlement “ avo id [s] the uncertainties regarding the outcome of litigation, and the often
exor bita nt amou nts of time and money t o p rosec ute or defend claims at tr ial ” ) ; Schlumberge r T

ec h. Corp. v. Sw anson , 959 S

. W.2d 171, 178 (Tex. 1997 ) ( “ Texas law favors and encourages voluntary settlements and orderly dispute resolution. ” )

.13 proceeding” and that “[u]ntil now, ALJs

— like all tribunals

— had the power to manage their dockets and grant or deny cont inuances in the sound ex ercise of their discreti on.” Bu t the
Commission reads our o pi nion too broadly. T his opinion is limited to a narrow and unusual set
of facts and does not generally impinge on the power and discretion of ALJs to grant or deny
contin uances. Here, the mo ti on to dismiss the hearin g was a j oint motion with the Rule 11
A greement attached , the motion expressly stated that the parties “have entered in to a Rule 11 Agreement allowing the parties to enter a 60

- day binding settlement period” and “request[ed]
that th e hearing setting be rem oved to a llow the parties to resolve th is matter without the necessity of a hearing , ” and the attached Rule 11 A greement removed from dispute and litigation
the issues of fact and law. Contrary to the Commis sion ’ s assertion, the jo int motion is n ot “ a
thi n ly dis gu ised seventh motion for continuance reliant upon the Agreement as evid ence. ” 5 And

t he ALJ’s power includes “‘the power to accept and act upon an agreement between the parties
that removes f ro m dispu te and litigation a su bs idiary issue of fact or law,’” a nd “[w]ielding this power i s not only a judge’s right, but a judge’s responsibility .” Shamrock Psychiatric Clinic , 540 S.W.3d at 562 (quoting Cities of Abilene , 146 S.W.3d at 747 ) (emphasis ad ded).

5 The Commission argues that “ [n]o unambiguous request to enfo rce [the Rule 11 Agreement ] occurred here , ” t hat “ the term ‘ enf orce ’ does not appear in the Motion , ” and that

“ the ALJ construed the Motion differently f rom the Court. ” But there was no need to request th e AL J to “ enf orce ” the R ule 11 Ag re ement again st on e of the part ies because the motion was a joi nt motion

. A nd the ALJ ’ s September 29, 2016 letter to the parti es demonstrates that the ALJ construed the joint motion as “ based upon a Rule 11 Agreement entered into by the parties ” a nd
as a re quest to en force that agreeme nt , as evidenced by the ALJ decl ining that request beca use the Rule 11 A greement “ appear s to be unenforceable ” and because the parties needed to present the ALJ “ with a Rule 11 Agreement with teeth in it. ” W e do not agree with the Commis sion that

“ by usin g the template blessed by th[is] opinion, partie s are in control of the docket ” and that

“ nothing in th [is] opinion prevents the parties in any case entering into a “ Rule 11 agreement ’ and obtaining their preferred s chedule bec ause the AL J has a ministeria l duty to g rant the motion

. ” Ou r opinion is limited to the filing of a joint motion that attaches a binding Rule 11 agre ement that removes the disputed issues from litigation

.14 The Commission also a rg ues that Vergo ’ s complai nt is mo ot because “ [ t ] he Rule 11 Agre ement required Vergo to submit several outstanding permitting documents, which it failed to do by the agreed

- upon deadline of November 17, 2016, or at any time s in ce , ” an d
therefore “ Vergo fai le d to perform und er the A greement

. ” 6 Vergo responds that “ the Rule 11 Agreement was erroneously nullified, ” “ the [Commission] cannot hold Vergo t o the dates specified in the Agreement when the Examiner struck it down , ” and “ Vergo ’ s allot ted time to produ c e the material documents should start upon completion of this Appeal, when the Rule 11 Agreement is enf orced. ” But to th e e xtent th e se question s regarding failure to perform , agreement nullification , or deadlines for submi tted docum ents are relevant and ca n be raised, they should be addre ssed on remand, not here ; in a suit for judicial review of an agency action,

we are “ empowered to issue only a general remand when [we] find[] error that prejudices an appellant ’ s substantial rights. ” Freightliner Corp. v. Motor Vehicle Bd. of Te x. Dep ’ t of Transp. , 255 S.W.3d 356, 361 (Tex. App.

— Austin 2008, pet. denied) (quoting Ford Mo tor Co.

v. Butnaru , 157 S.W.3d 142, 149 ( Tex. App.

— Austin 2005, no pet.) ) ; see id. at 362 ( noting

courts generally are not authorized “ t o dictate how an agency conducts i ts review of rem anded
issues or decides them ” ) ; see also Tex. Gov ’ t Code § 2001.174(2)

. Our c onclusion here is that the September 29, 201 6 ad mi nistrative decision to deny the parties ’ joint motion to dismiss the hearin g set ting when the parties had re move d

6 The Commission al so argues that Ver go “ could ha ve sought recon sideration, ” “ file[d]
an interlocutory appeal of the AL J ’ s ruling on the Motion to the Commission, ” or “ even sought mandamus relief directing the ALJ to enforce the Rule 11 to prevent Vergo from suffering the expense and time of a wholly unn ecessary h earin g. ” Although the Commission may be correct t hat these paths were available to Vergo and perha ps th e s e path s would have been a more prudent and efficient approach , the Commission has not cited any authority supporting the p roposi tion that th e failure to se ek reconsider ation, interlocutory appellate r elief, o r mandamus relief waives Vergo ’ s right to raise this issue on appeal when it has rais ed the issue in its motion for rehearing before the Commission

.15 from dispute an d litigation the issues of fact and law and to proceed with the scheduled
Oct ober 3, 2016 hearing

— just four days after the ad mi nistrative decision

— prejudiced Vergo ’ s
substantial ri ghts

. Any subsequent fa ilu re to comp ly with the Rule 11 Ag reement does not moot the question of whether Vergo ’ s substantial rights we re prejudiced by being “ fo rced ” “ to att e nd a
th ree - day hearing ” and “ ut ili ze [its] resources trying th is case ” when the di spute ha d alrea dy
been s ett led by the R ule 11 Agreement

. A decision to the contrary will disincentiv ize settlement in the administrative process : it will inject uncertainty into settl ement negotiation s as to whether
AL J s wil l dismiss schedule d hearing se tting s

— unquestionably an im portant s e tt lement factor given the costs ass ociated with hearings

— when the parties submit a joint motion and a Rule 11 agreement that removes f rom dispute and litigat ion the issues of fact and law to be addressed at that hearing

.

CON CLUSION
For th ese r e asons, w e reverse and remand f o r fu r ther pro cee dings consisten t w ith this opin i on
.

__________________ _______________ ____ _____ Meliss a G oo d win , Ju s tice
Be fore Justices G o o d wi n , Baker, an d Kelly
Reverse d a nd Re manded on Rehearing
Filed: April 22, 2022