Court Opinion

ID: 4074900
Source: CourtListenerOpinion
Date Created: 2016-09-30 05:29:54.94308+00
Date Added: 2024-06-11T14:32:16.604954
License: Public Domain

ACCEPTED
                                                                                       03-15-00285-CV
                                                                                               7691848
                                                                            THIRD COURT OF APPEALS
                                                                                       AUSTIN, TEXAS
                                                                                  11/5/2015 8:33:42 AM
                                                                                     JEFFREY D. KYLE
                                                                                                CLERK
                                 NO. 03-15-00285-CV

                                                                 FILED IN
                          IN THE THIRD COURT OF APPEALS 3rd COURT OF APPEALS
                                                            AUSTIN, TEXAS
                                   AUSTIN, TEXAS
                                                           11/5/2015 8:33:42 AM
                                                             JEFFREY D. KYLE
                                                                   Clerk
                   VOLKSWAGEN GROUP OF AMERICA, INC.
                       AND AUDI OF AMERICA, INC.

                                                                   Appellants
                                         v.

JOHN WALKER III, IN HIS OFFICIAL CAPACITY AS CHAIRMAN OF
 THE TEXAS DEPARTMENT OF MOTOR VEHICLES BOARD, AND
THE HONORABLE MICHAEL J. O’MALLEY AND THE HONORABLE
    PENNY A. WILKOV, IN THEIR OFFICIAL CAPACITIES AS
  ADMINISTRATIVE LAW JUDGES FOR THE STATE OFFICE OF
               ADMINISTRATIVE HEARINGS

                                                                     Appellees
   On Appeal from the 201st Judicial District Court, Travis County, Texas
                Trial Court Cause No. D-1-GN-15-001186
           Honorable Amy Clark Meachum, Presiding Judge

  APPELLANTS VOLKSWAGEN GROUP OF AMERICA, INC. AND
   AUDI OF AMERICA, INC.’S SECOND VERIFIED MOTION FOR
 TEMPORARY RELIEF TO PROTECT THE COURT’S JURISDICTION
                AND BRIEF IN SUPPORT THEREOF
__________________________________________________________________

        In light of the Texas Department of Motor Vehicles Board’s (“Board”)

imminent entry of a decision based on an ultra vires remand of an

underlying contested administrative case at its November 13, 2015 meeting,

Appellants are compelled to file this Verified Second Motion for

DMSLIBRARY01:27448620.2
Temporary Order to Protect the Court’s Jurisdiction and Brief in Support

Thereof, and show as follows:1

                                   A.     INTRODUCTION

        1.       An important part of the relief sought by Audi in this appeal is

prospective injunctive relief. Audi’s request for prospective injunctive relief

to bar government employees from engaging in ultra vires actions and the

1       The following terms are used in this Motion:
                “Contested Case” refers to Budget Leasing, Inc. d/b/a Audi North Austin and
                 Audi South Austin v. Weitz, et. al. v. Volkswagen Group of America, Inc. et. al.,
                 MVD Docket No. 13-0008-LIC, SOAH Docket No. XXX-XX-XXXX.LIC, before the Texas
                 Department of Motor Vehicles, Motor Vehicle Division.
                “District Court Case” refers to Volkswagen Group of America, Inc. and Audi of
                 America, Inc. v. John Walker, III, et. al., Cause No. D-1-GN-15-001186, in the 201st
                 Judicial District Court of Travis County, Texas.
                “Board” refers to the Texas Department of Motor Vehicles Board.
                “SOAH” refers to the State Office of Administrative Hearings, an independent state
                 agency that hears evidence in Contested Cases and prepares a proposal for decision
                 (“PFD”) for the Board’s consideration and final ruling.
                “Protestant” or “Budget” refers to Budget Leasing, Inc. d/b/a Audi North Austin
                 and Audi South Austin, protestant in the Contested Case.
                “Intervenors” refers to Ricardo M. Weitz, Hi Tech Imports North, LLC, Hi Tech
                 Imports, South, LLC, and Hi Tech Imports, LLC, Intervenors in the Contested Case
                 and in the District Court Case. Hi Tech Imports North, LLC, Hi Tech Imports, South,
                 LLC, and Hi Tech Imports, LLC are also part of the group of prospective transferees
                 of the dealerships that are the subject of the Contested Case.
                “Chairman Walker” refers to John Walker III, in his official capacity as the Former
                 Chairman of the Board, a defendant in the District Court Case.
                “ALJs” refers to the Honorable Michael J. O’Malley and Penny A. Wilkov,
                 Administrative Law Judges with SOAH, defendants in the District Court Case.
                “Appellants” include Volkswagen Group of America, Inc. and Audi of America,
                 Inc. (“Audi”), respondents in the Contested Case and plaintiffs in the District Court
                 Case.
                “Appellees” include Chairman Walker, the ALJs, and the Intervenors.

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filing of a direct lawsuit as a means to obtain that relief is specifically

authorized by the Texas Supreme Court in the Heinrich and Emmett cases.

City of El Paso v. Heinrich, 284 S.W.3d 366, 368 (Tex. 2009); Southwestern Bell

Tel., L.P. v. Emmett, 459 S.W.3d 578, 588 (Tex. 2015).

        2.      As will be discussed below in detail, here, Chairman Walker and

the ALJs committed, and continue to commit, multiple ultra vires acts in

connection with the unlawful remand of the Contested Case from the Board

back to the ALJs, after the ALJs had already issued a PFD finding the

proposed transferees unqualified to be Audi dealers. This remand came after

a principal of one of the prospective transferees made an improper ex parte

contact with the Board and gave the ALJs an unwarranted opportunity to re-

open the evidentiary record to reconsider their decision that Budget and the

Intervenors were not qualified to be Audi dealers. These steps were all taken

in direct contravention to the Board’s and Chairman Walker’s statutory

authority under Chapter 2301 of the Texas Occupations Code (the “Code”)

and Chapter 2001 of the Texas Government Code (the “Administrative

Procedure Act”),2 and the ALJs’ authority under the SOAH Rules of

2     The Administrative Procedure Act states that, after a PFD is issued, the Board and its
Chairman are only authorized to enter a final order on the PFD; or, in limited circumstances
which do not apply here, change a SOAH finding of fact or conclusion of law, not order a

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Procedure contained in the Texas Administrative Code (the “SOAH”

Rules”).3 Because Chairman Walker and the ALJs’ remand proceedings in the

Contested Case exceed the scope of their applicable statutory authority, they

constitute ultra vires acts.

        3.      Based on those acts, Audi filed the District Court Case, and now

this appeal, to obtain an injunction barring Chairman Walker and the ALJs4

from conducting any further ultra vires remand proceedings in the Contested

Case. Despite Audi’s efforts to compel Chairman Walker and the ALJs to

follow the law and to cease conducting ultra vires administrative remand

proceedings, and despite the fact that Appellees cannot point this Court to

any authority that specifically authorizes Chairman Walker and the ALJs’

ultra vires actions, Chairman Walker and the ALJs rejected Audi’s request for

a stay of the remand, so their ultra vires remand of the Contested Case

continues unabated to the present. In fact, during the pendency of this

remand. TEX. GOV’T. CODE ANN. § 2001.058(e).
3 Similarly, SOAH Rule 155.153(a)(4), which has the same legal force as a statute, does not

authorize the reopening of a record after a PFD has issued. Rodriguez v. Serv. Lloyds Ins. Co., 997
S.W.2d 248, 254 (Texas. 1999). CR 928-929. The rule is quite precise: an ALJ is only given the
power to reopen the evidence if the ALJ “has not issued a dismissal, proposal for decision, or
final decision.” 1 TEX. ADMIN CODE ANN. § 155.153(a)(4) (emphasis added). So, once a PFD has
issued, the evidence cannot be reopened.
4
        Audi sued these individuals in their official capacities in a direct lawsuit in a Travis
County district court. See Heinrich, 284 S.W.3d 366, 368, 373 (Tex. 2009) (holding that an action
“to determine or protect a private party’s rights against a state official who has acted without
legal or statutory authority is not a suit against the State that sovereign immunity bars,” and
therefore must be brought against the state actor in his or her official capacity).

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appeal, the ALJs issued a second PFD in the Contested Case which contains

their recommendations to the Board. These recommendations are based on

the evidence taken in the ultra vires remand proceedings.

        4.      The ALJs’ post-remand PFD has been referred to the Board for

decision and the Board has now scheduled5 the ALJs’ ultra vires remand PFD

for consideration at its upcoming November 13, 2015 meeting.                                  See

Verification of Mark E. Smith and exhibits thereto. The Board’s staff has

drafted a final order based on the ultra vires PFD, which it plans to present to

the Board for approval and entry at the November 13th meeting. Id.

5       Any decision made at the November 13 hearing is subject to a motion for rehearing.
TEX. GOV’T CODE ANN. §§ 2001.144, 2001.146. However, the Board’s actions, including
Chairman Walker’s statements, show that such a motion is likely to be futile. See, e.g.,
Verification of Mark E. Smith and exhibits thereto. Futility is an exception to the exhaustion of
remedies requirement. See, e.g., Strayhorn v. Lexington Ins. Co., 128 S.W.3d 772, 780-81 (Tex.
App.—2004), aff’d, 209 S.W.3d 83 (Tex. 2006). Futility exists here because Appellees were
repeatedly made aware of Audi’s position on this legal question, yet they resolutely carried out
the remand process over Audi’s objections. See, e.g., CR 928-929; 1486; 854-1867. In fact, based
on Chairman Walker’s order, the ALJs reopened the evidence in the remanded Contested Case,
held hearings in that matter, used an expedited schedule for hearings, and issued a post-
remand PFD. See, e.g., CR 133, 506-526; 152-153; 169, 928-29; Ritsema Affidavit submitted with
prior Motion for Temporary Relief. The issuance of the post-remand PFD telegraphs the fact
that the Board’s final order, which will be based on it, is a foregone conclusion. Further
evidence of this fact is that the Board’s staff has proposed an order that is based on the post-
remand PFD. See Verification and Exhibits thereto. Thus, Chairman Walker and the ALJs
continue to hold firmly to their legal position and have “unequivocally demonstrated their
intent not to comply” with the Code and the SOAH Rules. Emmett, 459 S.W.3d at 588. As
such, there is no point in forcing the parties to undergo an administrative remand process
before allowing Audi to challenge the ultra vires nature of that process. See, e.g., id.

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        5.      Unless this Court acts to enjoin the Board6 from considering and

issuing a final order on the ALJs’ ultra vires PFD during the November 13th

meeting, the Court will lose its power to grant Audi the prospective

injunctive relief needed to stop the ultra vires remand proceedings that it seeks

in this appeal because the remand actions will be fait accompli before this

Court ever considers the merits of this appeal. This Court will not have a

chance to hear the merits of this appeal prior to the Board’s November 13,

2015 meeting since the Court has not yet set this case for oral argument.

        6.      For these reasons and the reasons set out more fully below, the

Court should exercise its power to issue a writ of injunction or prohibition.

Such relief is needed to protect the Court’s subject matter jurisdiction and to

prohibit an inferior tribunal’s unlawful interference with the enforcement of

6 The Board may be enjoined even though it is not a party to this appeal or the District Court
Case because by considering and voting on the ultra vires PFD to conclude the ultra vires
remand proceedings in the Contested Case, the Board will be acting in concert with Chairman
Walker and the ALJs to deprive this Court of jurisdiction over the present appeal. See TEX. R.
CIV. P. 683 (providing that a court has power to enjoin not only the parties to the lawsuit, but
all non-parties “in active concert or participation with [the parties]” so long as the non-parties
“receive actual notice of the order by personal service or otherwise”); Ex parte Davis, 470
S.W.2d 647, 649 (Tex. 1971) (citing Regal Knitwear Co. v. Board, 324 U.S. 9, 14 (1944)) (“[T]he
inclusion of those in ‘active concert or participation with them’ is so that ‘defendants may not
nullify a decree by carrying out prohibited acts through aiders and abettors, although they
were not parties to the original proceeding.’ If a non-party does an act prohibited by the
injunction he must be in active concert or participation with the named party in order to be in
contempt for violation of the injunction.”).

                                                6
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this Court’s orders and judgments.7 Specifically, this Court should enjoin the

consideration of the ALJs’ post-remand PFD at the November 13, 2015 Board

hearing (or at any other hearing or meeting) and enjoin the entry of a final

order until this Court issues a final ruling on the merits of this appeal.

                                 B.      BACKGROUND

        7.      This case has a complex procedural history which is detailed

below. This appeal stems from a direct lawsuit Audi filed in the 201st

Judicial District Court of Travis County (the District Court Case) to stop

Chairman Walker and the ALJs from conducting ultra vires proceedings in

an administrative Contested Case pending before SOAH and the Texas

Department of Motor Vehicles, Motor Vehicle Division (the Contested

Case). CR 117-148 and exhibits thereto. The Contested Case began when

Budget filed a protest action with the Board over the manufacturer’s

rejection of Budget’s proposed transfer of two Audi dealerships to a large

group of unqualified prospective transferees.                   Some of the prospective

transferees (Hi Tech Imports North, LLC, Hi Tech Imports South, LLC and

7       Holloway v. Fifth Court of Appeals, 767 S.W.3d 680, 682-3 (Tex. 1989) (orig. proceeding);
see, In re Lewis, 223 S.W.3d at 761; McClelland v. Partida, 818 S.W.2d 453 (Tex. App.-Corpus
Christi 1991) ( orig. proceeding).

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Hi Tech Imports, LLC), along with Ricardo M. Weitz, intervened in the

Contested Case (the Intervenors). CR 367-369.

        8.      The Intervenors did not have standing to intervene in the

underlying Contested Case because none of them were an existing Audi

dealer. Under Chapter 2301 of the Code, proposed transferees do not have

standing to protest a manufacturer’s denial of a transfer—only the existing

dealer has standing to protest a manufacturer’s refusal to approve a

proposed transfer of a dealership. TEX. OCC. CODE § 2301.360(a) (“A dealer

whose application is rejected under Section 2301.359 may file a protest with

the board.”); Butnaru v. Ford Motor Company, 84 S.W.3d 198, 206 (Tex. 2002)

(“The Code’s definition of ‘dealer’ includes licensed dealers but not

prospective transferees”).

        9.      In addition to the Intervenors’ lack of standing to intervene in

the Contested Case, Audi complained that Budget and the Intervenors did

not satisfy the statutory requirements for establishing the Board’s subject

matter jurisdiction over the attempted protest/Contested Case because

they had not provided to Audi a “written agreement to comply with the

franchise” for each prospective transferee, as is required by Section

2301.359 of the Code.

                                         8
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        10.     Nevertheless, SOAH, on referral from the Board, opted to allow

the Contested Case to proceed forward. The trial on the merits before the

two SOAH ALJs lasted nine days. Nineteen witnesses testified at the trial

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

        11.     After the trial, the SOAH ALJs issued a PFD in which they

agreed with many of Audi’s concerns about the proposed transfer,

ultimately recommending that the Board issue a final decision finding the

prospective transferees unqualified. CR 399-502; 485-86. The ALJs also

stated in the PFD that the prospective transferees would be qualified if they

met certain conditions. CR 399-502; 485-86.

        12.     Even after the case was tried to the ALJs and they issued their

PFD, there still was no evidence to satisfy all of the Section 2301.359

jurisdictional requirements. CR 139; 183-84; 503-05. Specifically, there was

no evidence that any of the proposed transferees had agreed in writing to

comply with the franchise agreement governing the relationship between

the manufacturer and a dealer8.                      Consequently, the Board’s staff

8       In fact, Budget and the Intervenors never introduced evidence of compliance with
Section 2301.359 during the nine-day trial of the Contested Case because no such evidence
existed. See, e.g., CR 123-125; 138-139; 163-167; 179-180. Instead, the ALJs closed the evidentiary
record on May 28, 2014, and, at the time the record was closed, no evidence had been
submitted showing that Intervenors met the prerequisites of Code Section 2301.359. The first

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recommended, and the Board correctly entered, a Final Order on

September 12, 2014 dismissing the protest for want of jurisdiction. CR 183-

84; 503-505.

        13.     After the Contested Case was dismissed, Budget and the

Intervenors filed a motion for rehearing, which the Board, after receiving

an improper ex parte communication from one of the prospective

transferees’ principals, granted. CR 154-170, 1940-41. Chairman Walker

then ordered that the case be remanded to the ALJs for the reopening of

evidence and reconsideration of their conclusion that prospective

transferees were not qualified to be Audi dealers. CR 168-69.

        14.     But Chairman Walker did not have the power to remand the

Contested Case to the ALJs because the Board lacked jurisdiction over the

protest, the Intervenors did not have standing to assert the protest, and

Chairman Walker was not given the authority by the legislature to order

time that supposed evidence was offered that Budget and the prospective transferees had met
the prerequisites of Code Section 2301.359 was on October 15, 2014, when Budget and the
Intervenors filed their untimely and improper reply in support of their motion for rehearing,
almost five months after the record was closed, almost three months after the ALJs issued their
PFD, and more than a month after the Contested Case had been dismissed. CR 1447. This
supposed evidence consisted of a letter, in which only Weitz purported to agree to comply
with the franchise agreement. CR 330, CR 1447. As a result, this letter did not even cure the
jurisdictional problem for the large group of prospective transferees. Moreover, the letter was
also ineffective to cure the jurisdictional problem because it was created after Audi rejected the
proposed transfer. CR 1447.

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the remand9 after the ALJs had issued their original PFD. CR 152-53; 169;

928-29.       Likewise, the legislature did not give the ALJs the power to

conduct a remand or to reopen evidence after previously issuing a PFD.10

Nevertheless, Chairman Walker remanded the Contested Case on an

expedited basis to the ALJs and the ALJs scheduled, and heard, the remand

on an expedited basis, reopening the evidentiary record in the process. CR

28; 133; 152-53; 169; 506-526; 928-29.

        15.     Based on Chairman Walker’s remand order and the ALJs’

reopening of the Contested Case record in the remand, Audi filed the

District Court Case, in which Intervenors again intervened, to prevent,

among other things, the ultra vires: 1) remand of the protest

action/Contested Case; 2) reopening of evidence after issuance of the PFD;
9
         Appellees do not have inherent powers. Instead, as state agency actors, they only have
the powers specifically given to them by the legislature. See e.g., Sexton v. Mount Olivet Cemetery
Assn, 720 S.W.2d, 137 (Tex. App.—Austin 1986, writ ref’d n.r.e.). Chairman Walker was not
authorized to issue a remand because remand is not a power listed in § 2001.058(e) of the
Administrative Procedure Act. Further, the remand order materially differs from a board
member’s motion. CR 7-8, 1898, 1905-06, 1908. Moreover, the remand was designed to consider
new “evidence” that was not timely filed despite the fact that the Code only permits the board
members and ALJs to consider “materials that are submitted timely.” TEX. OCC. CODE ANN. §
2301.709(a); 2301.154. This “evidence” was not presented for the Board’s consideration until
October 15, 2014 despite the fact that the evidence had closed on May 28, 2014, the ALJs issued
a PFD on July 16, 2014 and the Board issued a Final Order on September 12, 2014. CR 502, 505.
In fact, this “evidence” was not even mentioned in Budget’s Motion for Rehearing. See, e.g., CR
139.
10
         The ALJs operated outside their authority because SOAH Rule 155.153 only allows an
ALJ to reopen evidence “if the judge has not issued a dismissal, proposal for decision, or final
decision.” Here, the remand attempts to reopen evidence long after the ALJs issued a PFD. See,
e.g., CR 140.

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3) issuance of a new PFD by the ALJs; 4) consideration of the post-remand

PFD by the Board; and, 5) issuance of a new final decision. The last two of

the events enumerated above are now set to occur on November 13, 2015.

        16.     Audi properly filed the District Court Case to prevent these

things from occurring.         In fact, the Supreme Court has specifically

approved of the use of a district court lawsuit for assessing whether

individual state actors exceeded their statutory powers in an underlying

administrative proceeding because ultra vires actions create an exception to

the exhaustion of remedies doctrine. See, e.g., Heinrich, 284 S.W.3d at 369.

        17.     The Texas Supreme Court has repeatedly held that a trial court

is permitted to intervene in a Contested Case pending before an agency,

regardless of whether a party has exhausted its administrative remedies,

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

conferred powers. City of Sherman v. Public Util. Comm’n, 643 S.W.2d 681,

683, 685 (Tex. 1983); Westheimer Indep. Sch. Dist. v. Brockete, 567 S.W.2d 780,

785 (Tex. 1978); Yamaha Motor Corp. v. Motor Vehicle Division, 860 S.W.2d
223, 229 (Tex. App.—Austin 1993, writ denied); Appraisal Review Board of

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

(Tex. App.—Houston [14th Dist.] 2008, no pet.) (citing cases).

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        18.     In ultra vires cases, the rationale behind the exhaustion of

remedies rule is not applicable, judicial and administrative efficacy are not

served by requiring exhaustion, and agency policies and expertise are

irrelevant if the agency’s final action will be a nullity. See City of Houston v.

Williams, 99 S.W.3d 709, 717 (Tex. App.—Houston [14th Dist.] 2003, no pet;

Mag-T, L.P., 161 S.W.3d at 625.

        19.     Despite   this   body   of    case   law,   Defendants/Appellees

(Chairman Walker, the ALJs, and the Intervenors) filed pleas to the

jurisdiction in the District Court Case in which they argued that

governmental immunity from suit and the exhaustion of remedies

doctrines prevented Audi from filing the District Court Case to halt and

prevent the ultra vires remand in the Contested Case. CR 821-843.

        20.     The 201st Judicial District Court erroneously dismissed the

District Court Case, thereby allowing the ultra vires remand of the

Contested Case to go forward in the administrative setting. CR 2030-31.

        21.     Audi then filed this appeal from the dismissal of the District

Court Case and sought temporary relief to prevent Chairman Walker and

the ALJs from conducting further remand proceedings. This Court denied

Audi’s original request for temporary relief without explanation.

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        22.     Since that time, the ALJs issued the second PFD, which, as

discussed in the introduction, is the product of the improper remand

process. The Board has scheduled consideration of that second PFD on

November 13, 2015 and the Board’s staff has proposed that the Board enter

a final decision based on that PFD at the end of the hearing.              See

Verification and exhibits thereto. Thus, Audi is now compelled to renew

its request for emergency relief, since this is the final opportunity for this

Court to give Audi meaningful prospective injunctive relief.               See

Verification and exhibits thereto.

        23.     This Court will not have the chance to hear the merits of this

appeal prior to the Board’s November 13, 2015 meeting—given that the

Court has not yet set this case for oral argument—so it should issue a stay,

injunction, or writ of prohibition preventing consideration of the ALJs’

post-remand PFD at the November 13, 2015 Board hearing (or at any other

hearing or meeting) and preventing entry of a final order until this Court

issues a final ruling on the merits of this appeal.

        24.     An analysis of the substance of this appeal is necessary to

determine the fundamental appellate jurisdictional issue of whether

Chairman Walker and the ALJs’ ultra vires actions established an exception

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to the exhaustion of remedies and governmental immunity doctrines which

permitted Audi to file the district court case and permits this Court to hear

the appeal from it now.                 The Texas Supreme Court wrote in Heinrich,

consideration of the merits is required in these types of ultra vires cases in

order      to     determine          whether          an     exception          to     exhaustion        of

remedies/governmental immunity applies.11 See, e.g., Heinrich, 284 S.W.3d

at 369.

        25.     Consequently, this Court must reach the substance of this

appeal, dealing with the requirements of the Code and its interplay with

the Administrative Procedure Act and the Government Code, to be able to

determine whether Chairman Walker and the ALJs’ actions were ultra vires

acts that constitute an exception to immunity from suit and provide

jurisdiction for this case. Southwestern Bell, 2015 WL 1285326 at *3; See e.g.,
11
       It is important to note that Appellee/ALJ O’Malley originally agreed with Audi’s
procedural approach by actually suggesting that Audi pursue declaratory relief in a district
court:

        JUDGE O’MALLEY: . . . You know that if you really want something to stop, then you
        have a - - you can go to district court and get a stay. And if you - - we have had that
        happen before where we’ve had a remand or a case and, for whatever reason, a party
        believes that we don’t have authority to move forward, then they get a stay in district
        court. And, of course, then we are stayed . . . . So I think that would be your best option if
        you truly believed they lacked authority or we need to stop in our tracks, if we got some
        sort of district court stay order, then that would be the process we would work with.

CR 77-78. Ironically, it was only after Audi followed his suggestion that O’Malley and the other
Appellees began to claim that the district court did not have jurisdiction over this declaratory
judgment lawsuit.

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Texas Dept. of Transp. v. Sefzik, 355 S.W.3d 618, 621 (Tex. 2011) (state official

who acts outside his statutory authority commits ultra vires act that is an

exception       to    governmental   immunity     and   to   the   exhaustion   of

administrative remedies doctrines).          Therefore, this Court should issue

interim relief to allow it to reach these issues before the prospective

injunctive relief requested by Audi in this appeal becomes moot.

                          C.   ARGUMENT AND AUTHORITIES

1.      This Court has the Power to Issue a Temporary Order to Protect its
        Jurisdiction to Render a Decision or Provide Requested Relief on
        Appeal.

        26.     This Court has the power to issue a temporary order (halting

Chairman Walker and the ALJs—and any person acting in concert with

them—from conducting further remand proceedings and from issuing a

final decision or other ruling based on the post-remand PFD) to protect its

jurisdiction and to prevent the prospective injunctive relief which Audi

seeks in this appeal from becoming moot.

        27.     Specifically, this Court has the power to issue a writ of

injunction or prohibition to protect its subject matter jurisdiction or to

prohibit an inferior tribunal’s unlawful interference with the enforcement

of its orders and judgments. Holloway v. Fifth Court of Appeals, 767 S.W.3d
16
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680, 682-3 (Tex. 1989) (orig. proceeding); see, In re Lewis, 223 S.W.3d at 761;

McClelland v. Partida, 818 S.W.2d 453 (Tex. App.—Corpus Christi 1991)

(orig. proceeding).

        28.     This Court uses injunctive relief to prevent administrative

bodies from destroying its appellate jurisdiction in appeals dealing with

administrative matters. See, e.g., Mote Resources, Inc. v. Railroad Commission

of Texas, 618 S.W.2d 877, 879 (injunction issued by Third Court of Appeals

against the Railroad Commission to preserve natural gas production, the

subject matter of the dispute).

        29.     Injunctive relief is needed to preserve the Court’s ability to rule

on the merits of this appeal and to protect Audi’s rights. If the post-

remand PFD is considered in the Board’s November 13, 2015 meeting and

the proposed order is signed in that meeting, as is currently scheduled, the

Court’s ability to enjoin those unauthorized remand proceedings will be

lost forever.

2.      The Relief Sought by Audi in this Appeal is not Redundant of the
        Relief Available in an Appeal from a Final Decision in the
        Contested Case.

        30.     Appellees previously and erroneously argued that the relief

Audi now seeks is redundant of the relief available in an appeal from a

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final decision in the Contested Case. See, e.g., O’Malley and Wilkov brief p.

9-11. But Appellees’ argument is not accurate. In reality, Audi seeks,

consistent with Heinrich and Emmett, to: 1) obtain a decision that the

improper remand process exceeds Appellees’ authority and, 2) halt the

ultra vires remand process (to stop the harm to Audi’s rights and prevent

the unnecessary waste of time and expense related to it) before a final

decision, resulting from the ultra vires remand process, is entered. By its

very nature, this type of prospective injunctive relief will not be available

in an appeal after a final agency decision—the ultra vires acts will be fait

accompli.

        31.     Appellees’ argument is identical to the argument rejected by

the Texas Supreme Court last summer in the Patel case. Patel v. Texas

Department of Licensing and Regulation, 2015 WL 3982687, at **6-7 (Tex.

2015).        There, the Texas Supreme Court held that neither sovereign

immunity nor the redundant remedies doctrine barred the separate suit for

declaratory relief filed by a group of commercial eyebrow threaders against

the Department of Licensing and Regulation. There, the threaders sought a

declaration that the cosmetology licensing scheme violated their

constitutional rights. 2015 WL 3982687 at **6-7. The State sought to dismiss

                                       18
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the threaders’ claims by arguing that their declaratory judgment action was

redundant of other available remedies such as a direct appeal from a final

agency order in the underlying administrative case.

        32.     The Texas Supreme Court rejected the State’s argument because

an appeal from an administrative finding is limited to reversing the final

order issued by the agency and therefore does not provide the declaratory

or prospective injunctive relief that is available through a declaratory

judgment action. Id. at *7. As a result, the Court held that the threaders’

district court claims were not redundant of an appeal from an

administrative decision. Id.

        33.     Likewise, here, Audi seeks a ruling that Chairman Walker and

the ALJs’ remand procedure exceeds their authority, a ruling that any final

decision resulting from the remand is ultra vires, and an injunction

preventing the unauthorized remand process from reaching a conclusion.

This relief cannot be granted effectively after the administrative process is

complete. Therefore, Audi’s lawsuit to stop the unlawful remand process

and to prevent an improper final decision that is tainted by that process is

properly asserted in this action. Id.

                                        19
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3.      An Appeal from the Contested Case Cannot Provide Audi with
        Complete Relief.

        34.     Moreover, the exhaustion of remedies doctrine does not apply

when the administrative process would cause or permit harm to the

plaintiff that the administrative process itself cannot remedy. Hous. Fed’n of

Teachers, Local 2415 v. Hous. Indep. Sch. Dist., 730 S.W.2d 644, 646 (Tex.

1987). As the Texas Supreme Court has explained, irreparable harm will be

suffered and, if the agency is unable to provide relief, the courts may

properly exercise their jurisdiction in order to provide an adequate

remedy. Id. at 646.

        35.     In Houston Fed’n of Teachers, the Supreme Court held that a

group of teachers were not required to exhaust their administrative

remedies in order to challenge the school district’s lengthening of their

workday because implementation of the new workday would create

“immediate and irreparable harm” that would “affect their child care

arrangements, transportation arrangements, and second jobs, while

pursuing an administrative remedy.”         Id. at 645-46.   And, because the

administrative process itself could not provide any remedy for that harm,

                                       20
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the trial court was not barred by the exhaustion doctrine from adjudicating

the dispute. Id. at 646.

        36.     Likewise, here, once the ultra vires remand reaches its

conclusion, no appeal from the Contested Case can remedy the fact that an

improper administrative proceeding has taken place.          No court can

compensate Audi for the loss of its rights caused by having to participate in

an improper administrative remand proceeding or for the loss of time

devoted to that participation. Audi’s right to be free from an ultra vires

process cannot be retrieved. Thus, the relief sought in this lawsuit is not

redundant of relief available after exhaustion of administrative remedies.

4.      Audi Does Not Seek an Interlocutory Review of Chairman Walker
        and the ALJs’ Mere Mistakes in the Exercise of their Discretion.

        37.     To be clear, Audi is not seeking interlocutory review of an

agency’s mere mistake in the exercise of its discretion. Instead, in this

unique and rare situation, Audi brought a separate lawsuit seeking to

prevent Chairman Walker and the ALJs from exceeding and continuing to

exceed their statutory authority by conducting the improper remand. The

acts taken by Chairman Walker and the ALJs in furtherance of the

                                       21
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improper remand12 are ultra vires and unequivocally demonstrate an intent

not to comply with the law. Their acts show an intentional disregard for

the fact that issuance of the ALJs’ original PFD cut off Chairman Walker’s

and the ALJs’ abilities to remand the Contested Case or reopen evidence in

that remand, since the Code, the APA, and the SOAH Rules fail to give

Chairman Walker and the ALJs the power to remand/reopen the record in

a Contested Case after a PFD has been issued.13

        38.     The Government Code states that, after a PFD is issued, the

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

circumstances which do not apply here,14 change a SOAH finding of fact or

12       In Emmett, the Supreme Court held that the commissioners’ actions “unequivocally
demonstrated their intent not to comply with the statute,” so AT&T’s “only viable option for
enforcement [of the statute]…was to bring suit seeking a declaratory judgment and prospective
relief as to the [Flood Control] District.)” 459 S.W.3d at 588.
13
         Due to space limitations, Audi collectively refers to Chairman Walker and the ALJs’
errors, all of which relate to their ordering and conducting the remand/reopening of evidence.
Chairman Walker’s Remand Order is also an ultra vires act because it:
      considered and ordered the ALJs to consider various untimely materials offered at the
          ultra vires remand hearing, despite the fact that the Code states: “the board or a person
          delegated power from the board under Section 2301.154 may consider only materials
          that are submitted timely.” TEX. OCC. CODE ANN. § 2301.709(a) (West 2014) (emphasis
          added); RR 165-167; CR 928-929; CR 1447.
      violates the rule which prohibits the Board from attempting to influence the neutral
          ALJs through the use of untimely and improper evidence. TEX. GOV’T CODE ANN. §
          2001.058(e); CR 928-29.
      violates Section 2301.709(c) of the Code which provides that “[a] majority vote of a
          quorum of the board is required to adopt a final decision or order of the board”
          because the Remand Order materially differs from the unanimous vote of the Board by
          including matters that were not in the motion. TEX. OCC. CODE ANN. § 2301.709(c)
          (West 2014) (emphasis added); compare CR 928-929 to 159; 1908.
14
         A change or modification to a PFD or order can occur only if the agency determines in

                                                22
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conclusion of law, not order a remand. TEX. GOV’T. CODE ANN. §

2001.058(e).

        39.     Similarly, SOAH Rule 155.153(a)(4), which has the same legal

force as a statute, does not authorize the reopening of a record after a PFD

has issued.15 Rodriguez v. Serv. Lloyds Ins. Co., 997 S.W.2d 248, 254 (Texas.

1999). CR 928-929. The rule is quite precise: an ALJ is only given the

power to reopen the evidence if the ALJ “has not issued a dismissal,

proposal for decision, or final decision”.                1 TEX. ADMIN CODE ANN. §

155.153(a)(4) (emphasis added). So, once a PFD has issued, the evidence

cannot be reopened.

        40.     Another fact that completely undermines the current position

of the ALJs is that SOAH agrees with Audi’s interpretation of Rule 155.153,

writing:
(1)     that the ALJ did not properly apply or interpret applicable law, agency rules, written
policies provided, or prior administrative decisions;
(2)     that a prior administrative decision on which the ALJ relied is incorrect or should be
changed; or
(3)     that a technical error in a finding of fact should be changed.
TEX. GOV’T. CODE ANN. § 2001.058(e). Here, the Board did not make a determination that any
of these three specified reasons for changing the ALJs’ findings and conclusions existed. CR
928-929.
15
        (a)     Judge’s authority and duties. The judge shall have the authority and duty to:(4)
        reopen the record when justice requires, if the judge has not issued a dismissal,
proposal for decision, or final decision.
1 Tex. Admin. Code Ann. § 155.153(a)(4).

                                               23
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not the ALJs’.16 In fact, SOAH wrote in the Texas Register that evidence in

a Contested Case can only be reopened if a PFD has not previously issued.

CR 1468, 1470.

        41.     As SOAH employees, the ALJs should not now be allowed to

take a position that is inconsistent with SOAH’s official interpretation of

this rule.

        42.     As the foregoing arguments and authorities prove, in ordering

and conducting the remand, Chairman Walker and the ALJs were not

exercising their discretion—in fact, they had none to exercise regarding the

next procedural step in the Contested Case—entry of a final order by the

Board. Instead, they intentionally exceeded their authority by ordering

and conducting the remand/reopening of evidence after the original PFD

had been issued over Audi’s objections. See, e. g., Emmett, 459 S.W.3d at

588. Chairman Walker and the ALJs continue to exceed their authority by

continuing the remand process, issuing the post-remand PFD, and by

placing this matter on the November 13, 2015 agenda for issuance of a final

order.

16
       SOAH Rule 155.153 was previously numbered Rule 155.15. The prohibition on
reopening the evidence in an administrative matter after a PFD has been issued remains intact
in the current version of the Rule. Compare CR 1471 with 1 TEX. ADMIN. CODE ANN.
§155.153(a)(4).

                                             24
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        43.     Chairman Walker and the ALJs’ acts are very similar to the

commissioner’s anticipatory refusal to comply with the statute at issue in

the Emmett case, which the Texas Supreme Court held to be ultra vires acts

warranting declaratory and injunctive relief and acts that established an

exception to the exhaustion/immunity rules. Emmett, 459 S.W.3d at 588;

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

        44.     Appellees’ interpretation of Rule 153.153 would effectively give

Chairman         Walker   and   the   ALJs    a   new   power—the    power    to

remand/reopen evidence after a PFD has issued—that was not conferred

on them by the legislature. See e.g., Sexton v. Mount Olivet Cemetery Assn,

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

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

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

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

construction.”). Only the legislature can create powers for agencies and

agency actors. Pub. Util. Comm’n v. City Pub. Serv. Bd. Of San Antonio, 53
S.W.3d 310, 316 (Tex. 2001); see Texas Farm Bureau, 460 S.W.3d at 272.

        45.     Had the legislature intended to give Chairman Walker and the

ALJs the power to order or conduct a remand after the issuance of a PFD in

                                         25
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these types of disputes, it would have granted the Board that specific

power, as it has done with a limited number of other agencies such as the

Texas Commission on Environmental Quality and the Public Utility

Commission. 30 Tex. Admin. Code Ann. § 80.265; 16 Tex. Admin. Code

Ann. § 22.262 (c).

        46.     Appellees cite no authority specifically granting Chairman

Walker or the ALJs that power. In fact, Chairman Walker admits that there

is “no specific statute [which] specifically authorizes the Board to issue a

remand order such as the one in question.” Walker brief p. 5.

        47.     Consistent with that admission, Appellees do not cite a single

case directly assessing Rule 155.153 in support of their argument that a

remand is allowed after a PFD has been issued17. See, e.g., O’Malley &

Wilkov Brief p. 5; Walker brief p. 9-10; Intervenor brief p. 32-34. Nor do

they cite a single case in which a remand was authorized after a PFD issued

17
        While it is true that some administrative cases can be remanded to an ALJ, that remand
can only occur where agencies have been given statutory authority to remand a Contested
Case back to SOAH. See Ron Beal, From Proposal for Decision to Final Decision: What Happens in
Between?, 15 TEX. TECH ADMIN. L.J. 288, 132-141 (2006); Tex. Gov’t Code Ann. § 2003.047(m)
(remand legislatively granted for cases heard by the Natural Resources Conservation Division
of SOAH); 30 TEX. ADMIN. CODE ANN. § 80.265) (remand specifically granted for TCEQ cases);
16 Tex. Admin. Code Ann. § 22.262(c)(remand power granted for PUC cases); 1 Tex. Admin.
Code Ann. § 155.3 (SOAH’s procedural rules also recognize the unique authority of the PUC
and TCEQ to remand Contested Cases and provide that PUC and TCEQ rules control these
situations).

                                              26
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in a Contested Case before the Texas Department of Motor Vehicles Motor

Vehicle Division. See, e.g., O’Malley & Wilkov Brief p. 5; Walker brief p. 9-

10; Appellee/Intervenor brief p. 32-34.

        48.     Absent a legislative grant, Chairman Walker and the ALJs do

not have remand power after a PFD has issued. See Pub. Util. Comm’n v.

City Pub. Serv. Bd. Of San Antonio, 53 S.W.3d 310, 316 (Tex. 2001); Texas

Farm Bureau, 460 S.W.3d at 272. Therefore, Chairman Walker and the ALJs

were bound by Section 2001.058(c) of the APA and SOAH Rule 155.153

which do not authorize remand/reopening of evidence after a PFD has

been issued.

5.      Audi’s Process Rights Are At Issue and Require Protection.

        49.     It is important to remember that Chairman Walker and the

ALJs departed from their regular Contested Case procedures after a

witness,18 who is also a principal for one of the prospective transferees in

the Contested Case, made ex parte contact with the Board about the

18
        More specifically, after invoking the name (redacted) of a friend of the Robertson
family, Robertson then addresses the rehearing of the Contested Case and asks the Board’s
Vice-Chair to consider those factors when voting on his groups’ motion for rehearing:
        I am not sure you were aware of this connection at the last [Board] meeting you
attended and I would appreciate that you take this relationship into consideration as you think
about how you are voting should we be successful in getting a rehearing which I understand
will be up for a vote soon.
CR 1941.

                                              27
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Contested Case. CR 1940-1941. At best, this contact, coupled with the

resulting highly unique remand process (designed to give the ALJs the

opportunity to reconsider their finding that the proposed transferees were

not qualified), gives the appearance of impropriety and brings into doubt

the fairness of the administrative adjudication. SOAH was put in place to

prevent these types of machinations and to guarantee neutral, independent

fact finders in contested administrative hearings. Mid-South Pavers, 246
S.W.3d at 723; 15 TEX. TECH ADMIN. L.J. at 127-33; 2 Kenneth Culp Davis &

Richard J. Pierce, Jr., Administrative Law Treatise § 9.8 at 67 (3d ed. 1994).

        50.     For example, in Mid-South Pavers, the Supreme Court held that

agencies, like the Motor Vehicle Board, must respect the due process rights

of those who appear before it in Contested Cases. Id at 722. In fact, a

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

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

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

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

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

Tex. Tech Admin. L.J. 288, 323 (2006). This is precisely the reason the

                                        28
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legislature failed to give the Board and the ALJs remand power/reopen the

evidentiary record after a PFD has issued.

        51.     Thus, where, as here, an agency actor makes a major departure

from the statutes and rules governing the Contested Case process and “cuts

the cloth to fit the pattern,” it undermines this neutral SOAH structure,

and, at the very least, casts a shadow over the perceived fairness of the

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

2000). The Supreme Court has held that “[a]n independent fact finder is

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

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

564).

        52.     At a minimum, Chairman Walker and the ALJs’ actions look

suspicious. Further, their disregard of the rules and usual procedures,

especially after the ex parte contact, impacts the due process rights of Audi.

               D.         CONCLUSION AND REQUEST FOR RELIEF

        53.     For the reasons stated above, the temporary emergency relief

Audi seeks is needed to protect this Court’s jurisdiction over this appeal, to

prevent the injunctive relief sought in this appeal from becoming moot,

and to protect Audi’s due process rights.         TEX. GOV’T CODE ANN. §

                                        29
DMSLIBRARY01:27448620.2
22.221(a); Madison v. Martinez, 42 S.W.2d 84, 86 (Tex. Civ. App.—Dallas

1931, writ ref’d) (court of appeals enjoined writ of execution to prevent

Appellees from being ousted from their home before court could determine

the appeal); In re Shields, 190 S.W.3d 717, 719 (Tex. App.—Dallas 2005, orig.

proceeding) (“A court of appeals may issue such a writ to prevent an

appeal from becoming moot”); Emmy Edwards, Ancillary Powers of the Courts

of Appeals, 10 App. Advocate 8, 9-10 (1997).

        WHEREFORE, premises considered, Appellants Volkswagen Group

of America, Inc. and Audi of America, Inc. respectfully request that this

Court grant temporary relief preventing Appellees, and those in active

concert or participation with them, from conducting further remand

proceedings in the Contested Case and from issuing, signing or entering

new rulings or final order based on the remand or the resulting PFD until

this Court rules on the merits of Audi’s appeal. Audi also requests such

other and further relief, both general and specific, at law and in equity, to

which it may be entitled.

                                     30
DMSLIBRARY01:27448620.2
                               Respectfully submitted,

                               KING & SPALDING LLP

                               By: /s/ S. Shawn Stephens
                               S. Shawn Stephens
                               Texas Bar No. 19160060
                               sstephens@kslaw.com
                               James P. Sullivan
                               Texas Bar No. 24070702
                               jsullivan@kslaw.com
                               1100 Louisiana, Suite 4000
                               Houston, Texas 77002
                               Telephone: (713) 751-3200
                               Facsimile: (713) 751-3290

                               Billy M. Donley
                               Texas Bar No. 05977085
                               Mark E. Smith
                               Texas Bar No. 24070639
                               BAKER & HOSTETLER LLP
                               811 Main Street, Suite 1100
                               Houston, Texas 77002
                               Telephone: (713) 751-1600
                               Facsimile: (713) 751-1717

                               Attorneys for Appellants
                               Volkswagen Group of America,
                               Inc. and Audi of America, Inc.

                          31
DMSLIBRARY01:27448620.2
                          CERTIFICATE OF CONFERENCE

     As required by TEX. R. APP. P. 10.1, I conferred with Mr. Letzer, Mr.
McKinney, Mr. Bennett, Mr. Crocker, and Ms. Fuchs on the merits of
Appellants’ Second Verified Motion for Temporary Relief to Protect the
Court’s Jurisdiction and Brief in Support Thereof, and they oppose the
motion.

                                            /s/ S. Shawn Stephens
                                            S. Shawn Stephens

                            CERTIFICATE OF SERVICE

       I certify that on November 5, 2015, I used the Court’s electronic case
filing system to file this Second Verified Motion for Temporary Order to
Protect the Court’s Jurisdiction and Brief in Support Thereof, and to serve
this document on counsel for appellees as follows:

William R. Crocker                Kimberly Fuchs
crockerlaw@earthlink.net          kimberly.fuchs@texasattorneygeneral.gov
807 Brazos, Ste. 1014             Assistant Attorney General
Austin, Texas 78701               Texas Attorney General’s Office
                                  P.O. Box 12548
Counsel for Appellees Ricardo     Austin, Texas 78711-2548
M. Weitz; Hi Tech Imports
North, LLC; Hi Tech Imports,      Counsel for Appellees Michael J. O’Malley and
South, LLC; and Hi Tech           Penny A. Wilkov
Imports, LLC

J. Bruce Bennett                  Dennis McKinney
jbb.chblaw@sbcglobal.net          dennis.mckinney@texasattorneygeneral.gov
Cardwell, Hart & Bennett,         Assistant Attorney General
LLP                               Texas Attorney General’s Office
807 Brazos, Suite 1001            P.O. Box 12548

                                       32
DMSLIBRARY01:27448620.2
Austin, Texas 78701              Austin, Texas 78711-2548

Counsel for Appellees Ricardo    Counsel for Appellee John Walker III
M. Weitz; Hi Tech Imports
North, LLC; Hi Tech Imports,
South, LLC; and Hi Tech
Imports, LLC

Joseph W. Letzer
jletzer@burr.com
Dent M. Morton
dmorton@burr.com
Burr & Forman, LLP
420 20th Street N., Suite 3400
Birmingham, AL 35203

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

                                           /s/ S. Shawn Stephens
                                           S. Shawn Stephens

                                      33
DMSLIBRARY01:27448620.2
                                   VERIFICATION

STATE OF TEXAS                     §

COUNTY OF HARRIS                   §

         BEFORE ME, the undersigned authority, on this day personally

appeared Mark E. Smith, known to me to be the person whose name is

subscribed to the foregoing instrument and who upon his oath stated as

follows:

         1.       My name is Mark E. Smith. I am capable of making this

affidavit. The facts in this verification are within my personal knowledge

and are true and correct.

         2.       I am one of the lawyers representing Appellants Volkswagen

Group of America, Inc. and Audi of America, Inc. in the administrative

action and the district court trial proceeding below.       I have reviewed this

Second Verified Motion for Temporary Relief to Protect the Court's

Jurisdiction and Brief in Support There. All the factual statements made in

the Motion are within my personal knowledge and are true and correct.

         3.       Attached hereto as Exhibit "1" is a true and correct copy of an

October 20, 2015 letter with attached Executive Summary and Draft Order

DMSLIBRAR YO! :27437699.1
from David D. Duncan, General Counsel for the Texas Department of

Motor Vehicles to counsel for Audi and other counsel concerning the

underlying contested case styled Budget Leasing, Inc. djb/a Audi North Austin

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

al., MVD Docket No. 13-0008-LIC, SOAH Docket No. XXX-XX-XXXX.LIC

pending before the Texas Department of Motor Vehicles, Motor Vehicle

Division.

       SljBSCRIBED AND SWORN TO BEFORE ME by Mark E. Smith on
this~ day of November 2015, to certify which witness my hand of seal
of office.

                                           Commission Expires        Niil/.   I'} UJ/7
EXHIBIT 1
....,.k
 , ,. ,
             Texas Department of Motor Vehicles
              HELPIN(:i TEXANS GO. HELPING TEXAS GROW.

October 20, 2015

VIA EMAIL

Billy M. Donley                                                                    Lloyd E. "Buddy" Ferguson
BAKER & HOSTETLER, LLP                                                             STRASBURGER & PRICE, LLP
811 Main, Suite 1100                                                               720 Brazos Street, Suite 700
Houston; Texas 77002-6111                                                          Austin, Texas 78701-3251
Email: bdonley@bakerlaw.com                                                        Email: buddy.ferguson@strasburger.com

William R. Crocker                                                                 J. Bruce Bennett
ATTORNEY AT LAW                                                                    CARDWELL, HART& BENNETT, LLP
807 Brazos, Suite 1014                                                             807 Brazos, Suite 1001
Austin, Texas 78701                                                                Austin, Texas 78701
Email: crockerlaw@earthlink.net                                                    Email: jbb.chblaw@sbcglobal.net

Re: Budget Leasing, Inc. et al. v. Volkswagen Group ofAmerica, Inc. and Porsche Cars North America,
Inc., SOAH Docket No. XXX-XX-XXXX.LIC

Messrs. Donley, Crocker, Ferguson and Bennett:

Enclosed please find the TxDMV staff Executive Summary and Draft Order for the referenced matter. The
Executive summary contains the staff's recommendation regarding the disposition of the case, which is
reflected in the draft order.

The Office of General Counsel invites each party to submit a single response to these materials no later
than the close of business on Tuesday October 27, 2015 . These responses will be provided to the Board
members along with the enclosed staff documents and attachments. Any other written correspondence or
argument later submitted by a party will not be provided to the TxDMV Board by the staff prior to or at the
Board's consideration of this matter at their scheduled meeting on Friday November 13, 2015.

Please contact me if you have questions.

Cc: · Daniel Avitia, Director, Motor Vehicle Division
      David Richards, Associate General Counsel

          4000 JACKSON AVENUE, AUSTIN, TEXAS 78731       I 0   512.465.3000   * 888.368.4689 {888-DMVGOTX) * F 512.465.3098   I   www.TxDMV.gov
BUDGET LEASING, INC., DIB/A AUDI NORTH AUSTIN AND AUDI SOUTH AUSTIN,
Protestants; RICARDO M. WEITZ; HI TECH IMPORTS NORTH, LLC; HI TECH IMPORTS
SOUTH, LLC; AND HI TECH IMPORTS LLC, Intervenors v. VOLKSWAGEN GROUP OF
AMERICA, INC. AND PORSCHE CARS NORTH AMERICA, INC., Respondents;
             l\1VD Docket No.13-0008.LIC; SOAH Docket No. XXX-XX-XXXX.LIC

                                    EXECUTIVE SUMMARY

Background
On December 14, 2012, Budget Leasing, Inc. d/b/a Audi North Austin and Audi South Austin
(Budget or Protestants) entered into a Dealer Purchase Contract with Ricardo M. Weitz and his
co-buyers (collectively referred to as Intervenors) to purchase the assets of two Audi dealerships,
a Porsche dealership, and a Maserati dealership.
On April 16, 2013, Volkswagen Group of America, which includes Audi of America, Inc. (Audi)
rejected the proposed transfer. Budget filed a protest to Audi's rejection. Mr. Weitz and the other
rejected buyers joined the protest as Intervenors.
The original hearing on the merits before the State Office of Administrative Hearings (SOAH)
convened on February 26, 2014, and lasted nine days. The Administrative Law Judges (ALJs)
closed the administrative record on May 28, 2014.
The ALJs issued the proposal for decision on July 16, 2014 (original PFD). The ALJs' findings
of fact and conclusions of law determined that Intervenors were not qualified and that Audi had
valid reasons for rejecting the buy-sell agreement. The ALJs' recommendation further states that
Intervenors would be qualified if they meet four conditions. 1
After all parties filed exceptions to the PFD and replies to the Exceptions,2 the ALJs filed letter
responses to the parties' exceptions (exceptions letters) on August 29, 2014, and September 3,
2014. 3

September 12, 2014 Board Consideration
On September 12, 2014, the Board voted to dismiss the case for want of jurisdiction because the
applicant dealer failed to invoke the statutory protections of Occ. Code §§2301.359-360.
Specifically, the Board found that its jurisdiction had not been invoked because Protestant failed

1 See Attachment A, SOAH's July 16, 2014 Proposal for Decision. Specifically, see Finding of Fact Nos. 154-158.
2 See Attachment B, all parties' exceptions and replies to exceptions to the original PFD.
3 See Attachment C, the SOAR ALJ's exception letters to the parties' exceptions and replies to exceptions to the
 original PFD.
                                                              Executive Summaty: Budget Leasing v. Volkswagen
                                                                                MVD Docket No. 13-0008.LIC
                                                                            SOAH Docket No. XXX-XX-XXXX.LIC
                                                                                                 Page 1 of5
to provide a ". .. written agreement to comply with the franchise . . .>' as required by
§2301.3 59(c)(3).
In response to the Board's order, Protestants and Intervenors filed a motion for rehearing. After
due consideration of the motion for rehearing and related documents, the Board issued an order
granting the motion for rehearing on December 10, 2014.4

February 13, 2015, Board Consideration
On February 13, 2015, the Board remanded the case back to SOAH for supplemental proceedings.
The following excerpts from the Board's order exclude the original footnotes:
              The Board remands this matter .. .for supplemental proceedings
              limited to the following:
              Did Audi receive the letter dated April 30, 2013, from Ricardo Weitz
              to Sally Grimes, and should this letter be added to the record? If so,
              what effect, if any, does the letter have on the issue of compliance
              with Tex. Occ. Code §2301.359 in light of the agency's prior
              decision in Gordon Rountree Motors, Ltd v. Mazda Motors of
              America, MVD Docket No. 07-003 8 LIC?

              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. and Audi of America Inc.' s Response to Intervenors'
              Motion to Find the Prospective Transferees Qualified . ... SOAH is
              directed to provide a specific finding that prospective transferees are
              or are not qualified. 5
SOAH conducted the remand hearing on April 16 and 17, 2015, and issued the Remand
Proposal for Decision (remand PFD)6 on August 13, 2015.
       •   ALJs admitted the April 30, 2013, Ricardo Weitz letter to Audi into evidence,
           determined that Intervenors substantially complied with the notice provisions of
           Occ. Code §2301.3 59(c)(3), and that the Rountree decision and other case law
           do not require strict compliance with Occ. Code §2301.3 59 notice requirements.

4   See Attachment D, the Board's December 10, 2014, Decision and Order Granting Rehearing.
5 See Attachment E, the Board's interim Order Remanding the Case to the State Office of Administrative Hearings
for Further Proceedings, dated February 13, 2015 .
6 See   Attachment F, the Remand Proposal for Decision, dated August. 13, 20 15.
                                                                 Executive Summaty : Budget Leasing v. Volkswagen
                                                                                    MVD Docket No. 13-0008.LIC
                                                                               SOAH Docket No. XXX-XX-XXXX.LIC
                                                                                                     Page 2 of5
    •   The ALJs determined in the remand PFD that Intervenors have met the
        conditions ofFindings ofFact 154-157 (of the original PFD).
    •   Regarding Finding of Fact No. 15 8, the ALJs recommended that Intervenors will
        have met the condition ofFinding of Fact No. 158 (of the original PFD) "Once
        the dealership guaranty of other dealerships provision has been removed."
All parties filed exceptions and replies to exceptions. Protestants and Intervenors
argued among other things that the direction to delete the cross guaranty from the
transaction amounted to an additional condition to those included in the original PFD
and, therefore, is outside of the scope of the remand order. Protestants and Intervenors
also argued with the ALJs' findings that the April 30, 2013, letter did not constitute
strict compliance with the notice requirements of Occ. Code §2301.359. Regardless of
the exception against the ALJs' direction to remove the cross guaranty agreement from
the transaction, Protestants and Intervenors also included with their exceptions an
affidavit entitled "Declaration of David Rowe,'' that states that if the Board requires
Intervenors to remove the guaranty agreement from the loan documents, "[t]he Guaranty
Agreement will be eliminated from the transaction." 7
Respondents' exceptions included arguments stating that the April 30, 2013, letter did
not meet the requirements of Occ. Code §2301.359(c)(3); that the letter was too late;
that the ALJs erred by proposing to find Intervenor's qualified before the Intervenors
take actions to meet the conditions; and that it is improper for the ALJs to give
Intervenors an opportunity to present additional evidence after the hearing record was
closed and the remand PFD was issued.
After the parties filed exceptions and replies to exceptions (including Respondent's
Motion to Strike the Rowe Affidavit), the i\LJs filed their exceptions letter. 8 The A.LIs'
response to the exceptions recommends the Board overrule all parties' exceptions and
states that, after reviewing the Declaration of David Rowe on behalf of Ally Bank, the
ALJs are satisfied that Finding of Fact 158 of the original PFD is satisfied. Finally, the
ALJs recommend revisions to Findings of Fact 90 and 114 of the remand PFD to reflect
their recommendations.

7 See Declaration of David Rowe, an attachment to Protestant and Intervenors' Exceptions to the Administrative Law
Judges' Remand Proposal for Decision, Attachment G.
8 See Attachment H, the SOAH ALJ's exceptions letter responding to the parties exceptions and replies to

exceptions to the remand PFD.
                                                               Executive Summaty: Budget Leasing v. Volkswagen
                                                                                 MVD Docket No. 13-0008.LIC
                                                                             SOAH Docket No. XXX-XX-XXXX.LIC
                                                                                                   Page 3 of5
Board's Review of a Proposal for Decision
The Board may change a finding of fact or conclusion oflaw made by the SOAR ALJ,
or may vacate or modify an order issued by the SOAR ALJ, only under the specific
restrictions of Tex. Gov. Code §2001.058(e). Section 2001.058(e) reads as follows:
            (e) A state agency may change a finding of fact or conclusion of law
               made by the administrative law judge, or may vacate or modify an
               order issued by the administrative judge, only if the agency
               determines:
                       (1) that the administrative law judge did not properly apply
               or interpret applicable law, agency rules, written policies provided
               under Subsection (c), or prior administrative decisions;
                      (2) that a prior administrative decision on which the
               administrative lavvjudge relied is incorrect or should be changed;
               or
                      (3) that a technical error in a finding of fact should be
               changed.
            The agency shall state in writing the specific reason and legal basis for
            a change made under this subsection. (emphasis added)

Staff Recommendation 9
Staff has reviewed both PFDs, all parties' exceptions and replies, and the ALJs' responses to the
exceptions and replies.
The PFDs and the parties' briefing is extensive and numerous contested issues were considered in
detail by the SOAR ALJs. Staff believes the ALJs' analyses to be thorough and thoughtful and
their recommendations to be reasonable in light of the evidence presented and the applicable law.
Additionally, the Staff finds that Tex. Gov. Code §2001. 05 8(e) modification justifications are not
present in this case.
Staff recommends the Board issue an order that incorporates the original PFD and the remand
PFD, including the Findings of Fact and Conclusions of Law and the associated exceptions
letters, and finds the Intervenors qualified. 10

9 This Executive Summary and the attached Order were shared with all parties on October 20, 2015. The parties were
invited to file responses to the staff s recommendation no later than October 27, 2015. All parties' responses are
provided in Attachment I.
10   See attachment J, Staffs recommended Final Order.
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                                                                                 MVD Docket No. 13-0008.LIC
                                                                             SOAH Docket No. XXX-XX-XXXX.LIC
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Documents
The following documents are attached to this executive summary for consideration by the Board:

   •   Attachment A: The original Proposal for Decision, dated July 16, 2014
   •   Attachment B: All parties exceptions and replies to exceptions to the Original PFD
   •   Attachment C: The SOAH ALJ's exception letters to the parties' exceptions and replies
       to exceptions to the Original PFD
   •   Attachment D: The TxDMV Board' s Decision and Order Granting Rehearing, dated
       December 10, 2014
   •   Attachment E: The TxDMV Board's Interim Order Remanding the Case to the State
       Office of Administrative Hearings for Further Proceedings, dated February 13, 2015
   •   Attachment F: The Remand Proposal for Decision, dated August 13, 2015
   •   Attachment G: All parties exceptions and replies to exceptions to the remand PFD
   •   Attachment H: The SOAH A.LJ' s exception letter to the parties exceptions and replies to
       exceptions to the remand PFD
   •   Attachment I: All parties' responses to the Staffs Executive Summary and draft order
   •   Attachment J: Staffs recommended Final Order

                                                     Executive Summaty: Budget Leasing v. Volkswagen
                                                                       MVD Docket No. 13-0008.LIC
                                                                   SOAH Docket No. XXX-XX-XXXX.LIC
                                                                                        Page 5 of5
                 BOARD OF THE TEXAS DEPARTMENT OF MOTOR VEIDCLES

 Budget Leasing, Inc., d/b/a Audi                         §
 North Austin and Audi South Austin,                      §
 Protestants, and Ricardo M. Weitz, Hi Tech               §
 Imports North, LLC, Hi Tech Imports South,               §
 LLC, Hi Tech Imports LLC, Intervenors                    §
                                                          §
                                                          §
                                                          § MVD DOCKET NO. 13-0008.LIC
 v.                                                       § SOAH DOCKET NO. XXX-XX-XXXX.LIC
                                                          §
 Volkswagen Group of America, Inc. and                    §
 Porsche Cars North America, Inc.,                        §
 Respondents                                             ,§

                       FINAL ORDER FINDING INTERVENORS QUALIFED

The above referenced matter came before the Board of the Texas Department of Niotor Vehicles in the form
of a Proposal for Decision (PFD) and a Remand Proposaf for Decision (RPFD) froin the State Office of
Administrative Hearings (SOAH). The ~oard, ~aving consid~ecl the evidence; arguments; Findings of Fact
and Conclusions of Law presented in the PFD and RPFD; the parties' Exceptions and Replies; and the
SOAH Judges' response to the parties' Exceptions.and Replies, enters this Final Order:

IT IS ORDERED:

         1. that the PFE>, RPFD, and the SOAH Judges' response to the parties' Exceptions and Replies filed
            in this proceeding, includihg the Findings of Fact and Conclusions of Law are incorporated
            herein;
         2. that the prospective transferees are'qual:ified in all regards;
        3;  that Motor Vehfole Division staff resume processing the underlying application;
         4. that the Protestant's franchise a~eements are amended to reflect a change in franchisee from
            Protestant to Intervenors; and
         5. that Re~ondents shall accept the transfer for all purposes.

      Date: - - - - - - - -

                                                      Laura Ryan, Board Chairman
                                                      Texas Department of Motor Vehicles

ATTESTED:

Daniel Avitia, Director
Motor Vehicle Division
Texas Department of Motor Vehicles