Volkswagen Group of America, Inc. And Audi of America, Inc. v. John Walker III, in His Official Capacity as Chairman of the Texas Department of Motor Vehicles Board The Honorable Michael J. O'Malley, the Honorable Penny A. Wilkov, in Their Official Capacities as Administrative Law Judges for the State Office
03-15-00285-CV
Tex. App.Nov 5, 2015Background
- Budget protested Audi’s rejection of a proposed transfer of two Audi dealerships; several prospective transferees (the Intervenors) joined the protest though they were not existing dealers.
- SOAH ALJs held a nine-day hearing, closed the record, and issued an initial Proposal for Decision (PFD) recommending the prospective transferees were unqualified; the Board dismissed the protest for lack of jurisdiction because required written agreements were missing.
- After an ex parte contact from a principal of a prospective transferee, the Board (via Chairman Walker) granted rehearing and ordered a remand to SOAH to reopen the record and consider new materials; SOAH ALJs reopened the record and issued a post-remand PFD finding the Intervenors qualified.
- Audi sued Chairman Walker and the ALJs in district court seeking declaratory and injunctive relief, arguing the remand and reopening after issuance of a PFD were ultra vires acts not authorized by statute, APA, or SOAH rules; the district court dismissed the suit and Audi appealed to the Third Court of Appeals and sought emergency relief to prevent the Board from adopting a final order based on the remand PFD.
- Audi’s core legal contention: the Board and ALJs lacked statutory authority to remand/reopen evidence after a PFD issued (Gov’t Code §2001.058(e) and SOAH Rule 155.153), so their actions were ultra vires and fall within the exception to exhaustion and sovereign immunity recognized in Heinrich and related cases.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Board/Chairman could remand/reopen evidence after SOAH issued a PFD | Audi: No statutory or rule authority; reopening after a PFD is prohibited by Gov’t Code §2001.058(e) and SOAH Rule 155.153 | Board/ALJs: Remand was permissible and within their procedural discretion | Court must decide on the merits whether remand was ultra vires to determine jurisdiction; Audi argues remand was unauthorized |
| Whether ex parte contact and expedited remand violated process neutrality and warranted equitable relief | Audi: Ex parte contact plus unusual remand undermined impartial adjudication and due process; relief necessary to prevent irreparable harm | Appellees: Process was proper; district court lacks jurisdiction; administrative remedies suffice | Audi contends process defects support equitable intervention; court to evaluate futility of administrative remedies |
| Whether district court suit was barred by exhaustion or sovereign immunity | Audi: Ultra vires acts create exception to exhaustion and immunity (Heinrich/Emmett) so district court jurisdiction is proper | Appellees: Audi should await final agency decision and appeal; suit is redundant/ barred | Audi relies on Texas precedent allowing direct suits against officials for ultra vires acts; appellate court must review to determine if exception applies |
| Whether appellate court should issue interim injunction/prohibition to preserve jurisdiction | Audi: Immediate relief needed to prevent Board adoption of order (mooting appellate relief) | Appellees: No basis for emergency relief; Board may proceed | Audi requests stay/injunction/prohibition to preserve appellate jurisdiction pending merits review |
Key Cases Cited
- City of El Paso v. Heinrich, 284 S.W.3d 366 (Tex. 2009) (allows declaratory/prospective relief against state officials who act without statutory authority)
- Southwestern Bell Tel., L.P. v. Emmett, 459 S.W.3d 578 (Tex. 2015) (ultra vires actions by officials can justify prospective relief and an exception to exhaustion/immunity)
- Rodriguez v. Service Lloyds Ins. Co., 997 S.W.2d 248 (Tex. 1999) (administrative rules have the force of statute for purposes of jurisdictional analysis)
- City of Sherman v. Public Util. Comm’n, 643 S.W.2d 681 (Tex. App.—Austin 1982) (trial court may intervene when agency actors exceed authority; exhaustion not required in ultra vires situations)