Court of Appeals of Texas, Third District, Austin
THE 201ST DISTRICT COURT OF TRAVIS COUNTY NO.
D-1-GN-17-005912, THE HONORABLE AMY CLARK MEACHUM, JUDGE
Justices Goodwin, Baker, and Triana
J. BAKER, JUSTICE
Motor America filed a petition for judicial review of a final
order of the Board of the Texas Department of Motor Vehicles
determining that Hyundai violated the Texas Occupations Code
in its transactions with its franchised dealers. Before any
proceedings occurred in the district court, several
defendants removed the case to this Court. See Tex.
Occ. Code § 2301.751(b). For the following reasons, we
reverse the Board's order and remand this cause to the
Board for further proceedings consistent with this opinion
is the wholesale distributor for Hyundai products and
services in the United States. New World Car Nissan, Inc. and
New World Car Imports San Antonio, Inc. (collectively New
World Car) are licensed, franchised Hyundai dealers in San
Antonio. In November 2013, New World Car filed a formal
complaint against Hyundai with the Department, alleging that
between 2010 and 2013 Hyundai violated several provisions of
Chapter 2301 of the Occupations Code. See id.
§§ 2301.202-.203 (providing for filing and
investigation of complaints of violations of Chapter 2301).
Specifically, New World Car's complaint alleged that
Hyundai violated the following provisions of the Occupations
Code: (1) section 2301.467(a)(1) by "requiring [New
World Car] to sell more vehicles than [Hyundai] actually
provided in order to be considered 100% sales
efficient"; (2) section 2301.468 by treating New World
Car "unfairly or inequitably in the application of a
standard or guideline" and by providing "unfair and
inequitable vehicle inventory allocations"; and (3)
section 2301.478(b) by providing "unfair allocations of
insufficient inventory" and "requiring [New World
Car] to sell more inventory than it was provided."
See id. §§ 2301.467(a)(1), .468,
Department referred the case to the State Office of
Administrative Hearings (SOAH) for a contested-case hearing
before an Administrative Law Judge (ALJ). See id.
§ 2301.704. After discovery and an evidentiary hearing,
the ALJ issued a proposal for decision (PFD) concluding that
New World Car had failed to prove that Hyundai violated the
Occupations Code. In November 2016, the Board rejected the
ALJ's analysis and the Director's recommendation and
issued a final order that "overturned" the
ALJ's "conclusion." The final order did not
include a supporting rationale, fact findings, or legal
February 2017, the Board granted Hyundai's motion for
rehearing. In August 2017, the Board amended the final order
with new and modified findings and conclusions to replace
those of the ALJ that the Board had rejected. The new
conclusions stated that Hyundai violated sections
2301.467(a)(1), 2301.468(2), and 2301.478(b) of the
review the Board's order under the "substantial
evidence" rule. See id. § 2301.751(a)(2)
("A party to a proceeding affected by a final order,
rule, or decision or other final action of the board with
respect to a matter arising under this chapter . . . may seek
judicial review of the action under the substantial evidence
rule in . . . the court of appeals for the Third Court of
Appeals District."); Buddy Gregg Motor Homes, Inc.
v. Motor Vehicle Bd. of Tex. Dep't of Transp., 156
S.W.3d 91, 98 (Tex. App.-Austin 2004, pet. denied) (applying
substantial-evidence review in case removed from district
court). This standard requires that we reverse or remand a
case for further proceedings in the following circumstances:
[I]f substantial rights of the appellant have been prejudiced
because the administrative findings, inferences, conclusions,
or decisions are:
(A) in violation of a constitutional or statutory provision;
(B) in excess of the agency's statutory authority;
(C) made through unlawful procedure;
(D) affected by other error of law;
(E) not reasonably supported by substantial evidence
considering the reliable and probative evidence in the record
as a whole; or
(F) arbitrary or capricious or characterized by abuse of
discretion or clearly unwarranted exercise of discretion.
Tex. Gov't Code § 2001.174(2).
over State appellees other than the Board
we reach the merits of Hyundai's issues, we address the
Board's contention that the Court does not have
subject-matter jurisdiction over any of the State appellees
except the Board. The Board contends that because Hyundai
seeks only judicial review of an order of the Board and
asserts no other claim against any of the State defendants,
those other defendant-appellees-the Department, the Chair of
the Board, and the Department's Executive Director-should
be dismissed from the case with prejudice.
Occupations Code authorizes judicial review of "final
action[s] of the [Department's] board" in matters
arising under Chapter 2301. Tex. Occ. Code §
2301.751(a); Keystone RV Co. v. Texas Dep't of Motor
Vehicles, 507 S.W.3d 829, 831 (Tex. App.-Austin 2016, no
pet.). Chapter 2301's use of the term "board"
refers to the nine-member governing board of the Department.
Keystone RV, 507 S.W.3d at 834-35 & n.22 (citing
Tex. Transp. Code § 1001.021, which creates
Department's nine-member board). The Department, a
statutorily created state agency responsible for
administering and enforcing various statutory provisions,
including Chapter 2301, see Tex. Transp. Code §
1001.002(a), (b)(3), "is composed of an executive
director appointed by the board and other employees required
to efficiently implement" applicable laws, id.
Board "has the exclusive original jurisdiction to
regulate those aspects of the distribution, sale, or lease of
motor vehicles that are governed by" Chapter 2301. Tex.
Occ. Code § 2301.151(a). Among other duties, the Board
"shall" "administer th[e] chapter; . . .
ensure that the distribution, sale, and lease of motor
vehicles is conducted as required by th[e] chapter and board
rules; . . . [and] prevent fraud, unfair practices,
discrimination, impositions, and other abuses in connection
with the distribution and sale of motor vehicles."
Id. § 2301.152(a); see also id. §
2301.153(a) (listing powers and duties of Board). The Board
is the entity charged with receiving, investigating, and
resolving complaints of alleged violations of Chapter 2301,
as it did here with respect to New World Car's complaint.
See generally id. §§ 2301.201-.205
(providing for Board's receipt, investigation, and
resolution of complaints).
does not cite any authority supporting our jurisdiction over
any of the State appellees other than the Board, and the only
authority we have found leads us to conclude that besides the
Board only the Executive Director is a proper State
defendant. See id. § 2301.752(b)
("Citation for an appeal [of an order of the Board] must
be served on the executive director or the executive
director's designee and each party of record in the
matter."); see Texas Nat. Res. Conservation
Comm'n v. Sierra Club, 70 S.W.3d 809, 813-14 (Tex.
2002) (holding that in suit for judicial review, only agency
"whose ruling is to be appealed" was "proper
defendant to the district court proceeding" when neither
APA nor enabling statute required service of citation on any
other party). Accordingly, we conclude that we do not have
subject-matter jurisdiction over the Department or the Chair
of the Board, and we dismiss those parties from this suit.
issues on appeal
several issues, Hyundai raises three basic contentions: (1)
the Board "usurped the ALJ's role in the contested
case process by acting as the finder of basic and
adjudicative facts"; (2) the Board "failed to
articulate a rational connection between an underlying agency
policy and [its] altered findings of fact and conclusions of
law"; and (3) the Board "engaged in improper,
retroactive ad hoc rule-making." Hyundai
specifically takes issue with the Board's following
findings and conclusions that modified or reversed the
ALJ's findings and conclusions:
• The Board's Findings of Fact 30 and 30A and
Conclusion of Law 8 (the allocation findings and conclusion),
which pertain to whether Hyundai's discretionary
allocationof vehicles to its San Antonio dealers
during the relevant time period constituted
"unreasonable discrimination," see Act of
May 22, 2001, 77th Leg., R.S., ch. 1421, §5, 2001 Tex.
Gen. Laws 4920, 4952 (codified at Tex. Occ. Code §
2301.468) (Former Section 2301.468);
• The Board's Finding of Fact 52 and Conclusion of
Law 6 (the sales-standard finding and conclusion), which
pertain to whether Hyundai's use of a particular
sales-efficiency metric "required adherence to an
unreasonable sales ...