LAYING DOWN THE LAW: THE ART, SCIENCE, AND LAW OF EFFECTIVE SANCTIONS · 2014-06-04 · LAYING DOWN...

LAYING DOWN THE LAW: THE ART, SCIENCE, AND LAW OF EFFECTIVE SANCTIONS

Speakers: LOU BRIGHT

Jack Martin & Associates

WILLIAM E. HOPKINS Husch Blackwell

DELLA LINDQUIST

Texas Department of Licensing & Regulation

DON E. WALDEN Attorney-at-Law

Author: SIMONE SALLOUM

Texas State Board of Dental Examiners 333 Guadalupe, Tower 3-800

Austin, Texas 78701

State Bar of Texas 26TH ANNUAL

ADVANCED ADMINISTRATIVE LAW COURSE June 12-13, 2014

Austin

CHAPTER 6

3345 Bee Cave Rd, Ste. 105 · Austin, Texas 78746 · 512-473-0300

Lou Bright512-473-0300

[email protected]

Click for vcard

Lou Bright joined our firm in 2010 after more than 15 years as the General Counsel of the Texas

Alcoholic Beverage Commission. This unmatched experience brings our firm unique insight into the

application and interpretation of Texas liquor law.

Lou began his legal career in 1981 in Waco, Texas where his practice focused on criminal defense

and general civil litigation. In 1985, he joined the Texas Attorney General’s office where he spent

seven years litigating constitutional, civil rights and employment law matters, attaining the position of

Deputy Chief for Civil Rights in the General Litigation Division.

In 1994, Lou became the General Counsel and ethics advisor for the Texas Alcoholic Beverage Commission and served in that capacity until his

retirement from public service in January, 2010. As General Counsel, Lou was responsible for the provision of all legal and ethical counsel to the

Commission and its employees, both personally and through oversight of the Commission’s staff of lawyers. Among other things, Lou’s duties involved

drafting statutes and regulations; managing both rulemaking and contested case practice at the agency; and counseling commission staff, legislators and

their staff, industry members and representatives of local governments and members of their communities across the state about the interpretation of,

application of, and policy underlying alcoholic beverage law and regulation.

Lou also served as General Counsel for Texas Wine and Grape Growers Association from 2010 – 2013.

Lou graduated magna cum laude from St. Mary’s University in San Antonio Texas in 1979 with a Bachelor of Arts degree in political science and from

Baylor University School of Law in 1981. From 1988 until 1995 Lou was certified by the Texas Board of Legal Specialization in both the Civil Trial and

Appellate Law specialties. Lou is admitted to practice before the federal courts for the Northern, Western and Southern districts and the Fifth Circuit Court

of Appeals.

Lou served on the Executive Committee of the National Conference of State Liquor Administrators from 2003 until 2008, holding the office of President of

that organization during the 2006–2007 term. Lou has served on advisory committees for the National Alcoholic Beverage Control Association, the Joint

Committee of the States, and the National Restaurant Association, as well as for the Governor’s Executive Development Program at the LBJ School of

Public Affairs and the Administrative and Public Law section of the State Bar of Texas.

Lou is a frequent speaker in both state and national forums, speaking to alcoholic beverage industry members, regulators and lawyers on topics related

to alcoholic beverage law and policy, regulatory and administrative law and practice and the joys, frustrations and challenges of ethical public service.

Lou has also provided training to law enforcement officers at the Alcoholic Beverage Commission, the Department of Public Safety, the University of

Texas System Police and police departments around the state on the subjects of civil rights litigation, alcoholic beverage law and enforcement

techniques, the Fourth Amendment and the principles of ethical law enforcement.

CONTACT INFOMartin Frost & Hill Telephone: (512)473-0300 Disclaimer & Privacy Policy3345 Bee Cave Road, Suite 105 Facsimile: (903)386-2714Austin,TX 78746

Austin, TXHouston, TXDirect: 512.703.5799 (Austin)Direct: 713.529.3110 (Houston)Fax: 512.479.1101 (Austin)[email protected]

IndustryHealthcare, Life Sciences &

Pharmaceuticals

Related ServicesAncillary Service ProvidersPhysicians & Other ProfessionalsPost-Acute Care Providers

William E. HopkinsPARTNER

A member of the firm’s Healthcare, Life Sciences & Pharmaceuticals team, Bill focuses his practice on administrative and regulatory defense and litigation within the healthcare industry. He advises both individual healthcare providers and institutional healthcare clients on state and federal licensure and compliance and enforcement matters, with an emphasis on proactive measures that ensure compliance and minimize litigation risk.

Bill’s experience comprises all aspects of healthcare professional licensure and practice, long-term care licensure, regulation and enforcement, medical staff issues,credentialing and compliance with rules of state and federal regulatory agencies,and allegations of fraud and abuse matters. He has litigated on behalf of his clients in state and federal administrative courts, as well as in numerous Texas district courts.

Bill’s work on behalf of clients has included:

- Assisting healthcare professionals in obtaining license reinstatement before the Texas Health Professions Licensure Boards after suspension orrevocation.

- Representing physicians and advanced practice nurses in peer review and credentialing matters with healthcare systems.

- Representing long-term care providers before state and federal regulatory agencies in compliance and enforcement matters, including litigating federal appeals.

- Serving as first-chair in administrative appeals and cases against federal, state and local government regulatory agencies on behalf of entities and healthcare professionals.

- Working with healthcare entities on compliance issues, including audits.

Before joining Husch Blackwell, Bill was a partner at Brown McCarroll.

Representative ExperienceAssisted multiple physicians in obtaining reinstatement of their licenses with the Texas Medical Board after suspension or revocation and achieved favorable results.

Represented physicians in peer review and credentialing matters with healthcare systems.

Served as first-chair in administrative cases against agencies of federal, stateand local government in areas such as healthcare regulation and licensure.

Negotiated favorable settlements with Centers for Medicare and Medicaid Services on behalf of nursing home clients based on imposition of civil money penalties.

First-chaired cases in initial licensure and disciplinary matters, defendingphysicians, physician assistants, registered nurses, licensed vocational nurses, dentists, psychologists, nursing facility administrators, speech therapists, emergency medical technicians/paramedics and respiratory care practitioners.

Awards & RecognitionsAustin Under 40, legal category, 2006

Texas Diversity Council, Individual DiversityFIRST Award, 2011

Texas Super Lawyers, Rising Star, Health Care, 2006

Professional Associations & MembershipsAmerican Bar Association, Commission on Law and Aging, 2013; Health Care Section, Long-Term Care Task Force, chair, 2013; Nursing and Allied Professionals Task Force, vice chair, 2013

American Health Lawyers Association

Austin Bar Association, Health Law Section

State Bar of Texas

Civic Involvement American Red Cross of Central Texas, Board of Directors, 2010-present

Austin Symphony Orchestra, Board of Directors, 2009-present

Austin Symphony, BATS Young Member Group, Board of Directors, 2002-present

Big Brothers Big Sisters of Central Texas, Board of Directors, 2002-2006; Foundation Board, 2006-present, chair, 2005-2007

Central Texas High School, Mock Trial Competition, administrator and regional coordinator, 1996-2005

Leadership Austin, Essential Class, 2008

National Black Graduate Students Association, Legal Affairs, associate director, 1996-2001; Advisory Committee to the Board of Directors, 1996-2001

Samaritan Center for Counseling, Board of Directors, 2005-2010; president, 2009-2010

Texas Appleseed Project, One-to-One Mentorship Program, Steering Committee, 1999-2004; mentor, 1999-2001

University of Texas at Austin Law School, Career Services Mentorship Program, mentor, 1999-present

Young Women’s Alliance, Advisory Council, 2013-present

AdmissionsTexas, 1995

EducationJ.D., University of Texas School of Law, 1995

B.A., High Point University, 1990

Publications & PresentationsAuthor, “The Wait is Over: The Patient Safety and Quality Improvement Act Final Rule is Published,” ABA Health eSource,American Bar Association Health Law Section, December 2008

Speaker, “Social Media, HIPAA Password Protection,” Texas Health Care Association, San Marcos, Texas, May 2013

Co-presenter, “Observation Status: Caught Between a Rock and a Hard Place?,” American Bar Association healthcare lawconference, Miami, Fla., February 2013

Panelist, “Executive Leadership Competencies,” “Mastering the Art of Leadership,” “Multicultural Leadership,” Texas Diversity& Leadership Conference, Dallas, Texas, April 2012

Co-presenter, “Trends in Outpatient Care Delivery,” CLE conference, Snowmass, Colo., January 2012

Co-presenter, “Fundamentals of Representing Hospitals and/or Physicians,” American Bar Association healthcareconference, New Orleans, La., February 2011

Speaker, “Legal Considerations for Mental Health Care Workers,” Samaritan Center workshop, Austin, Texas, May 2010

Panelist, “Judicial Review of Contested Cases,” Office of Attorney General law conference, Austin, Texas, October 2009

Moderator, “Identity Theft Red Flags Rule: What Healthcare Providers Need to Know Now,” American Bar Association Health Law Section, Austin, Texas, July 2009

Panelist, “The Obamazation of Texas: Effects on Black Culture,” Texas Diversity and Leadership Conference, Dallas, Texas, April 2009

Moderator, “Practice on the Edges: Coming to a Neighborhood Near You – Whether You Like It or Not,” American Bar Association healthcare law conference, Orlando, Fla., February 2009

Co-presenter, “The Fundamentals of Physician Representation,” American Bar Association health law teleconference, Austin, Texas, October 2009, October 2008, May 2008

Speaker, “What to Do if Your Administrator License Gets Referred,” Texas Association of Homes and Services for the Aging,Austin, Texas, May 2008

Speaker, “Legal Aspects of Nursing,” Texas Association of Homes and Services for the Aging, September 2008

Speaker, “The Practice of Nursing in Texas: Recent Changes You Need to Know to Protect Yourself and Ensure Compliance,” Texas Association of Homes and Services for the Aging, Arlington, Texas, May 2009

Speaker, “Overview of Nurse Peer Review in Texas,” Texas Association of Homes and Services for the Aging, Dallas, Texas, April 2008

Speaker, “Representing Doctors Before Disciplinary Boards,” University of Texas legal education program, March 2008

Speaker, “Legal Aspects of Social Work Practice: What You Don’t Know Might Hurt You,” Preston M. Dyer Ethics Workshop, Waco, Texas, November 2007

Della Lindquist

Della Lindquist is an Assistant General Counsel at the Texas Department of Licensing and Regulation. Previously, she was a staff attorney, and Director of Enforcement at the Texas Real Estate Commission. She also has worked as counsel for RE/MAX of Texas, and within the land title insurance industry throughout Texas.

Ms. Lindquist received her B.A. from Stephen F. Austin State University, and her J.D. from South Texas College of Law in 1989.

The Law Office of DON E. WALDEN

Practicing Board Certified Attorney for over 20 years

7200 North MoPac, Suite 300 Austin, Texas 78731

EDUCATION: Juris Doctor, The University of Utah College of Law Honors and Activities: William H Leary Scholar, 1984-85; Spring 1986 (GPA in top 20% of class) Utah Law Review, 1985-87 Associate Editor, 1986-87 Bachelor of Business Administration, The University of Texas at Austin PROFESSIONAL HONORS AND ACTIVITIES: Board Certified in Administrative Law since 1996, Texas Board of Legal Specialization (TBLS) Member, TBLS Administrative Law Examination Commission (2004-2007 term) Member, State Bar of Texas Administrative & Public Law Council (2005-2008) Volunteer probate/guardianship attorney, Family Eldercare, Inc. Volunteer guardianship attorney, Community Resources Intended for Special Persons (CRISP) HIGHLIGHTS OF ADMINISTRATIVE LAW EXPERIENCE: Represented clients in litigation before Supreme Court of Texas, Court of Appeals, District Courts, State Office of Administrative Hearings, and state agencies listed below. Accomplishments include published Court of Appeals opinions in favor of clients (Flores v Employees Retirement System of Texas 74 S.W. 3d (Tex. App-- Austin, pet. denied)); Langford v Employees Retirement System of Texas, 73 S.W. 3d 560 (Tex. App. -- Austin, pet. denied); Bavarian Properties v. Texas Alcoholic Beverage Commission, 870 S.W. 2d 686 (Tex. App. -- Fort Worth 1994, writ denied)). Represented clients before Texas State Agencies: *Texas Alcoholic Beverage Commission *Public Utility Commission of Texas *Employees Retirement System of Texas *Texas Appraiser Licensing and Certification Board *Texas State Board of Medical Examiners *Texas Board of Nurse Examiners *Texas State Board of Pharmacy *Texas Department of Protective and Regulatory Services *Texas Commission for the Blind *Texas Department of Insurance *Texas Department of Licensing and Regulation *Texas Real Estate Commission *Texas Department of Human Services *Texas Department of Public Safety Represented clients in rulemaking proceedings before state agencies. Represented clients in litigation under Texas Public Information Act. Accomplishments include judgment awarding attorney's fee to prevailing client.

PROBATE, GUARDIANSHIP, TRUST & ESTATE PLANNING LAW EXPERIENCE: Represented large bank trust departments in judicial proceedings related to trust administration. Represented clients serving as executor or administrator of estates, including taxable estates. Represented clients as trustee of credit shelter/bypass rust, support trust, special needs, Section 867 trust. Represented clients serving as guardian of the estate and person of incapacitated wards. Represented clients in probate court litigation, including will contests, will construction suits, suits alleging breach of fiduciary duty, suits involving conflicting claims to estate property, and suits to interpret buy-sell agreement. Represented numerous beneficiaries of estates. Served as independent executor of $1.4 million estate as well as modest estates.

Prepared estate plans for clients with modest to estates worth up to $10 million, including plans with QTIP trusts, credit shelter/bypass trusts, specials needs trusts, and life insurance trusts.

Simone Marie Salloum [email protected]

333 Guadalupe, Tower 3, Suite 800 Austin, Texas 78701

(512) 475-0977

LICENSES Admitted to practice law in the State of Texas, November 2009. EDUCATION The University of Texas School of Law, Austin, TX J.D. with honors, May 2009.

University of Southern California, Los Angeles, CA B.A. cum laude, International Relations and French, May 2005 LEGAL EXPERIENCE Texas State Board of Dental Examiners, Austin, TX Assistant General Counsel, March 2014 – the present Staff Attorney, April 2013 – February 2014 Office of Consumer Credit Commissioner, Austin, TX Assistant General Counsel, June 2010 – March 2013 Dobrowski LLP, Houston, TX Associate, October 2009 – May 2010 PUBLICATIONS & MEMBERSHIP Authored under supervision The Renewable Fuel Standard (RFS) Program, Recent Developments, TEX. ENVTL. L.J., Vol. 38, No. 4, June 2009 and Austin City Council Amendment to SOS Ordinance, Recent Developments, TEX. ENVTL. L.J., Vol. 38, No. 2, Winter 2008. Member of the Austin Bar Association, Administrative Law Section.

Laying Down the Law: The Art Science, and Law of Effective Sanctions Chapter 6

i

TABLE OF CONTENTS

I. INTRODUCTION ................................................................................................................................................... 1

II. AUTHORITY TO SANCTION .............................................................................................................................. 1

III. REVIEW OF SANCTIONS BY HIGHER COURTS ............................................................................................ 2 A. Sanctions Set Out By Statute ........................................................................................................................... 3 B. Rules or Guidelines? ....................................................................................................................................... 4 C. Findings of Arbitrary and Capricious Sanctions ............................................................................................. 4 D. Properly Applying Penalty Guidelines ............................................................................................................ 7 E. Consideration of Consistent Sanctions that Support Public Policy ................................................................. 7

IV. SANCTION DETERMINATIONS: OPEN OR CLOSED SESSION? .................................................................. 8

V. CONCLUSION ....................................................................................................................................................... 9


1

LAYING DOWN THE LAW: THE ART, SCIENCE, AND LAW OF EFFECTIVE SANCTIONS I. INTRODUCTION

The legislature tasks governmental agencies with regulating various types of industries. As part of this regulatory authority, the legislature grants agencies with the authority to sanction when the entities or people they regulate violate the law. The legislature rarely lays out in statutes what specific sanctions are appropriate for specific violations or what types of sanctions agencies should consider. Instead, the agencies are given monumental discretion to determine how to effectively sanction in order to protect the public and prevent repeat offenses. The purpose of this paper is to give the legal framework for agency sanctioning authority.

This paper will address the following questions:

(1) What is the body of law concerning an agency’s ability to sanction?

(2) How are sanctions reviewed by higher courts?

(3) Should sanction determinations occur in open or closed sessions?

The speakers will address the underlying issue concerning the sanction authority given to agencies – do agencies have too much discretion to issue sanctions or not enough discretion? As this paper will illustrate, agency discretion regarding sanctions is very broad and rarely curtailed by the courts. Does this broad discretion result in agency sanctions based on the wrong motives, such as personal biases or consideration of behavior and factors that are irrelevant under the statute? Does this broad discretion result in inconsistent sanctions with little connection between the sanction and the violation? On the other side of the coin, are the agencies given enough discretion to issue sanction or are agencies limited by statute, rules, or penalty matrices or guidelines that fail to give the agencies flexibility in taking into consideration particular case-by-case circumstances when assessing a sanction? While the speakers do not have the answer to the question of how to best assess and determine sanctions, the speakers will provide insight as to how sanctioning authority can be improved through consistency, transparency, and effectiveness of the sanction in deterring future violations. II. AUTHORITY TO SANCTION Sanctioning authority is vested in the agencies and not in the courts. Sears v. Tex. State Bd. of Dental Examiners, 759 S.W.2d 748, 751 (Tex. App. – Austin,

1988, pet. denied). Agencies have broad oversight in determining which sanctions best serve statutory policies committed to the agencies’ oversight. Allen-Burch, Inc. v. Texas Alcoholic Beverage Commission, 104 S.W. 3d 345, 352 (Tex. App. – Dallas, 2003, no pet. hist.). However, agency discretion may be abused if the agency fails to consider a factor that the legislature directed it to consider, considered an irrelevant factor, or reached an unreasonable result. Id. Agency sanctioning authority may be found in three different places: (1) statutes committed to the agency’s oversight; (2) rules promulgated by the agency; or (3) written guidelines developed internally by agency staff. Agencies must look first to the statutes committed to their oversight to determine what factors, if any, they are required to consider. Agencies may also promulgate rules concerning which sanctions the agency will assess for specific violations. Finally, agencies may have internal policy guidelines (hopefully written and available to the public) that provide a matrix or calculations used by the agency to determine sanctions and penalty amounts.

Even though the authority to determine sanctions lies with the agency, the Administrative Law Judge (ALJ) often recommends a sanction as a conclusion of law in the Proposal for Decision (PFD). If the ALJ recommends a sanction that the agency disagrees with, the agency may decide to modify that conclusion of law in order to assess a different sanction. Even though the legislature vests the agency with sanctioning authority, the agency must still follow the proper procedures to modify the PFD. Pursuant to Tex. Govt. Code §2001.058(e) agencies may change a finding of fact or conclusion of law made by an ALJ, or may vacate or modify an order issued by an ALJ, only if the agency determines: (1) that the ALJ 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 ALJ relied is incorrect or should be changed; or (3) that a technical error in a finding of fact should be changed. The agency must state in writing the specific reason and legal basis for the change made. If the agency does not provide sufficient written justification for changing the sanction and the case is appealed to the district court, the district court may reverse the agency decision and remand the matter back to the agency. In Tex. State Bd. of Dental Examiners v. Brown, the Board assessed sanctions against Dr. Brown in 2002 in a board order. 281 S.W.3d 692 (Tex. App. – Corpus Christi-Edinburg, 2009, pet. denied). Dr. Brown failed to comply with the terms of the board order and the agency attempted to sanction Dr. Brown a second time. The ALJ recommended in the PFD that Dr. Brown receive no additional sanctions other than the sanctions currently outlined in the 2002 board order. The Board


2

disagreed and modified the current board order to assess a fifteen year probated suspension of Dr. Brown’s license, a $20,000 administrative penalty, and restitution. While the court stated that the labeling of a sanction as a finding of fact or conclusion of law does not change the effect of the ALJ’s recommendation, the Board must comply with Tex. Govt. Code §2001.058(e). Id. at 697-98. In this case, the Board did comply and stated in writing that the ALJ improperly applied the applicable law, that the sanctions were supported by the findings of fact and conclusions of law in the PFD, and that the Board has the ultimate authority to determine the sanction. Similarly, in Froemming v. Tex. State Bd. of Dental Examiners, the Board sought to revoke Dr. Froemming’s dental license in a SOAH proceeding. 380 S.W.3d 787 (Tex. App. –Austin, 2012, no pet. hist.). The ALJ recommended a 5 year probated suspension in a conclusion of law. The Board filed exceptions to the PFD arguing that the conclusion of law should be reclassified as a recommendation. The ALJ also issued a letter opinion agreeing with the agency that the conclusion of law should be reclassified. The Board issued an order revoking Dr. Froemming’s license and explained in the order that the Board considered Dr. Froemming’s past disciplinary history when deciding to revoke the license. The Board had sanctioned Dr. Froemming four times in the past and Dr. Froemming was currently on a probated suspension for similar violations. The Board also stated that the ALJ failed to properly apply or interpret applicable law, agency rules, and written policies regarding sanctions. Specifically, the ALJ failed to consider the aggravating and mitigating circumstances that must be considered by the Board. On appeal, the court held that the agency complied with Tex. Govt. Code §2001.058(e) by providing a specific reason and legal basis for changing the sanction to revocation. The court also held that substantial evidence supported the sanction as the Board has introduced prior orders against Dr. Froemming into evidence. The lesson to take from Froemming and Brown is that whenever an agency changes the ALJ’s recommended sanction, the agency must provide the basis for that change – the specific reason and legal basis for changing a conclusion of law. The record must also support the agency modification of the sanction. In the case of Froemming, if agencies are changing the sanction based on aggravating conditions, the agency must ensure that the record includes evidence of those aggravating conditions. III. REVIEW OF SANCTIONS BY HIGHER

COURTS Courts have very limited oversight over the sanctioning authority of agencies. Pursuant to Tex.

Govt. Code §2001.174, a court may not substitute its judgment for the judgment of the state agency on the weight of the evidence on questions committed to agency discretion but may either:

(1) affirm the agency decision in whole or in part;

or (2) reverse and remand for further proceedings if

the 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 and capricious or characterized by an abuse of discretion or a clearly unwarranted exercise of discretion.

In determining whether to reverse the sanction determination and remand the matter back to the agency, district courts most often look to (F) and (E) of §2001.174. When analyzing whether or not a sanction is reasonably supported by substantial evidence, courts consider substantial evidence as “more than a scintilla.” The court must uphold an agency decision (including the sanction) if reasonable minds could have reached the conclusion of the agency. This means that the evidence in the record may preponderate against the decision of the agency but nonetheless amount to substantial evidence. An agency decision that is not supported by substantial evidence is considered arbitrary and capricious. When analyzing whether or not the sanction is arbitrary and capricious or characterized by an abuse of discretion or a clearly unwarranted exercise of discretion, courts look to whether an agency failed to consider a factor the legislature directed it to consider, considered an irrelevant factor, or reached an unreasonable result. An agency decision can be supported by substantial evidence but still be considered arbitrary and capricious in this case. Courts look to whether the agency made a decision without regard to the facts, relied on facts not supported by the evidence, or no rational connection exists between the facts and the decision.


3

A. Sanctions Set Out By Statute Sanctions for specific violations can be found in statute, making it difficult for courts to determine that the sanction is arbitrary and capricious. In Fay Ray Corp. v. Tex. Alcoholic Beverage Comm’n, the TABC sought to cancel the alcohol permits of Fay Ray Corp. for a violation of the Dram Shop Act. 959 S.W.2d 362 (Tex. App. – Austin, 1998, no pet. hist.). Fay Ray had sold alcohol to an individual who had then gotten into a fatal car wreck. The ALJ recommended cancellation of the permits and the TABC adopted the findings of fact and conclusions of law in the PFD. Fay Ray appealed the decision and argued that the sanction was arbitrary and capricious because Fay Ray had no prior violations of the law during ten years of operation and the ALJ did not consider the comparative fault of the second driver in the fatal car wreck. The court held that the sanction was not arbitrary and capricious because revocation of the alcohol permits was the only sanction contemplated in section 2.02 of the Alcoholic Beverage Code. The court also considered the severity of the fatality resulting from Fay Ray’s negligence in its determination that the sanction was not arbitrary and capricious. In Tex. Alcoholic Beverage Com’n v. Gutierrez, a similar case involving the same statute, the ALJ recommended cancellation of Gutierrez’s alcohol permits and the TABC followed the ALJ’s recommendation, cancelling the permits in a final order. 2012 WL 3205432 (Tex. App. – San Antonio, 2012, no pet. hist.). Gutierrez appealed and the district court overturned the TABC’s final order, finding that revocation of the permits was “an unreasonable result implicating an abuse of discretion” and remanded the case back to the TABC. Id. at *1. The district court stated that while the violations were supported by substantial evidence, the sanction was unreasonable given the totality of the circumstances, implicating an abuse of discretion. The TABC appealed and the court of appeals reversed the district court, stating that the sanction was not arbitrary and capricious. The court of appeals held that the sanction was reasonable given the pattern of violations extending over two years and the refusal or inability of Gutierrez to operate the bar according to the statute. The court of appeals stated that the record reflected that the TABC engaged in reasonable decision-making when deciding on revocation. The court also cited to the statute which states that a permit is subject to revocation if the permittee violates a provision of the Code or rule. Because the possible sanction of revocation is laid out in the statute, the court held that Gutierrez was on notice that a violation could result in revocation. In a third TABC case, Tex. Alcoholic Beverage Com’n v. Top of the Strip, the court of appeals again

upheld the TABC’s decision to cancel the permits of Top of the Strip. 993 S.W.2d 242 (Tex. App. – San Antonio, 1999, pet. denied). Once again, the TABC cancelled permits following the recommendation of the ALJ. On appeal, the district court held that the sanction was arbitrary and capricious and not supported by substantial evidence. TABC appealed this decision. Top of the Strip essentially argued that the sanction was arbitrary and capricious because the TABC did not provide substantial evidence of the violations. Top of the Strip stated that the presentation of narcotics evidence during the SOAH hearing was arbitrary and capricious because the substance was never tested. In addition, Top of the Strip argued that the TABC offered no proof of the age of an alleged underage drinker and offered no proof of the age or identity of an underage dancer. TABC only offered witness testimony about the ages of both individuals. Further, Top of the Strip argued that the TABC was claiming strict liability but did not offer any evidence that the owners or agents of Top of the Strip were either aware of the violations, could have known of the violations, or were negligent in failing to discover the violations.

The court of appeals overturned the district court’s decision, holding that substantial evidence existed to support the TABC Order and therefore, the revocation of permits was not arbitrary and capricious. The court found more than a scintilla of evidence in support of the sanction and found that reasonable minds could have reached the same conclusion as the TABC. The court also looked to the statute which gave the TABC discretion to sanction a permittee even for unknowing violations of the Code. See Alcoholic Beverage Code §11.64. The statute permitted the TABC to seek a lesser sanction if the permittee did not knowingly violate the Code, however, the TABC was not required to seek a lesser sanction than revocation. The court stated that the TABC did not: (1) fail to consider a factor contained within the statute; (2) consider an irrelevant factor; or (3) reach an unreasonable result. Gutierrez, Fay Ray Corp., and Top of the Strip illustrate the reticence of the court of appeals to overturn an agency sanction when the sanction is contained within the statute. However, just because the sanction may be in the statute does not mean the agency is home free in assessing that sanction. In both Gutierrez and Fay Ray Corp., the court of appeals looked to the record to determine whether the agency had weighed additional factors in considering whether to revoke the alcohol permits. Agencies should document the “reasonable decision-making” process when assessing sanctions. Agencies should also put on testimony or other evidence of this decision-making process at the SOAH hearing in order to create a complete record that indicates what factors were considered by the agency when assessing the sanction. Top of the Strip illustrates how courts determine


4

whether substantial evidence supports an agency order. Regulated persons or entities should take note that courts can find that substantial evidence exists as long as the agency can show more than a scintilla of evidence, even if the evidence in the record preponderates against the decision of the agency. The courts are not determining the “correctness” of the sanction but only the reasonableness of the sanction. B. Rules or Guidelines? A recent case, State Board of Pharmacy v. Witcher, highlights the importance of assessing whether to promulgate rules that specify sanctions for specific violations or to maintain an internal sanction matrix or guideline. 2013 WL 1876467 (Tex. App. – Austin, May 13, 2013, no pet. hist.). In Witcher, the Board sought to suspend Witcher’s license until the North Carolina pharmacy board lifted a suspension on Witcher’s license in North Carolina. This sanction was based on an unwritten internal policy of the Board to assess “reciprocal sanctions” when a licensee receives sanctions in another state. After the conclusion of the hearing, the ALJ recommended a five-year probated suspension instead of an enforced suspension of Witcher’s license. The Board adopted the ALJ’s findings of fact and conclusions of law but modified the sanction to reflect an enforced suspension. Witcher filed suit for judicial review. The district court held that the enforced suspension sanction was arbitrary and capricious in light of the facts. More importantly, the court held that the sanction was arbitrary and capricious because the unwritten policy (of reciprocal sanctions) resulted from improper rulemaking and was in violation of the Administrative Procedures Act as the Board had never followed the proper avenues laid out in the Administrative Procedures Act to propose and adopt the internal policy as a rule. The Board appealed this decision. The court of appeals upheld the lower court’s decision that the sanction imposed by the Board was based on an invalid rule. The court stated that this policy was a “bright line” rule because it dictated specific results without regard to individual circumstances. The court based its finding on this concept that the Board’s unwritten policy was, in fact, an invalid rule. However, the court did take note of Witcher’s argument that the sanction bore no rational relationship to the findings of fact and therefore, was arbitrary and capricious. In fact, the Board had assessed lesser sanctions against pharmacists who had committed the same underlying violations that formed the basis of the North Carolina suspension but had not received a sanction in another state. In a footnote, the court also noted that even if the policy was not considered a rule, the sanction would still be considered arbitrary and capricious because it was

impossible for Witcher to comply with the requirements in North Carolina to lift the suspension, thereby lifting the suspension against Witcher’s Texas license.

This issue was addressed in Slay v. Texas Comm’n on Environmental Quality, 351 S.W.3d 532 (Tex. App. – Austin, 2011, pet. denied). The details of this case are addressed in more detail below. Essentially, Slay argued that the TCEQ’s Penalty Policy should be invalidated on the basis that it was a rule that had been adopted without complying with the APA’s notice and comment requirements. The district court held that the Penalty Policy was not a rule and that the TCEQ order was supported by substantial evidence.

The court of appeals first analyzed whether the Penalty Policy was a rule. A rule under the APA means a state agency statement of general applicability that: (1) implements, interprets, or prescribes law or policy; or (2) describes the procedure or practice requirements of a state agency; and (3) includes amendment or repeal of a prior rule; and (4) does not include a statement regarding only the internal management or organization of a state agency and not affecting private rights or procedures. The court looked to whether an agency statement has a binding effect on private parties and whether or not the TCEQ commissioners were bound to follow the Penalty Policy methodology. The court found that the introductory section of the Penalty Policy provided that the policy is not a rule that the public is required to obey, but rather announces the manner in which the agency expects to exercise its discretion in future proceedings. The court upheld the distinction made by the district court between internal agency matters governed by the Penalty Policy and the TCEQ commissioners’ ultimate exercise of their statutory discretion. The Witcher and Slay decisions provide several important lessons to agencies. First, consider promulgating rules for any bright line sanctioning policies (policies that apply consistent sanctions without taking into consideration individual circumstances). Second, if your sanctioning guidelines are not promulgated as rules, ensure that your guidelines take into consideration aggravating and mitigating circumstances. Third, be consistent in applying the same or similar sanctions to similar violations of the law. C. Findings of Arbitrary and Capricious Sanctions There are few Texas cases in which the court of appeals has specifically found that an agency sanction was arbitrary and capricious. In Granek v. Texas State Bd. of Medical Examiners, the court found that a portion of the order explaining the sanction was arbitrary and capricious even though the sanction, itself, was not arbitrary and capricious. Granek v. Texas State Bd. of Medical Examiners, 172 S.W.3d 761 (Tex. App. – Austin, 2005,


5

no pet. hist.) After a contested case hearing, the ALJ recommended a three year probated suspension. The Board issued an order revoking Granek’s license and provided an explanation for the modification in a four paragraph insert, stating that Respondent’s conduct of fondling and molesting patients was not a problem that would be corrected with continuing medical education as suggested by the ALJ. The Board stated that Dr. Granek had engaged in this behavior over a period of many years and had sought no treatment. “There was no evidence that Respondent has sought any treatment for his inability to control his prurient desires, nor in fact was any evidence admitted that Respondent’s defects in character can be treated.” Id. at 768.

Granek appealed this order and the Board requested a limited remand so the Board could reconsider the revocation sanction. The Board then issued another order which changed the sanction from revocation to a three-year probated suspension subject to certain terms and conditions, including that Granek should not examine or treat female patients and required Granek to provide a copy of the board order to all health care facilities where he sought privileges. The order also assessed a $25,000 administrative penalty even though the order contained a conclusion of law that there was insufficient evidence to determine an appropriate administrative penalty against Granek.

The district court affirmed the order except for the $25,000 administrative penalty, finding that there was no evidence to support the penalty. Granek appealed the order stating that the Board improperly modified the ALJ’s order by adding in the four paragraph insert as it contains factual assertions unsupported by the evidence and inconsistent with the Board’s adopted findings.

The court held that the representations in the four paragraph insert were not supported by the Board’s findings and that several were contradictory to Board findings. The court stated that there was no evidence that Granek engaged in the alleged conduct over a period of years and that the Board’s own findings stated that Granek had changed his behavior and was not shown to constitute a continuing threat to the public. The court held that, because the four paragraph insert was included in a board order, it gave the statements the “imprimatur of legitimate adjudicative determination.” Because the Board was no longer seeking revocation, the court stated that it could see no reason why the statements explaining the basis for revocation should still be in the order. The court held that the four paragraph insert violated §2001.058(e) and was arbitrary and capricious.

Courts may find that substantial evidence does not support the sanction if there is no evidence that the agencies considered all the factors required by statute

or rule. In Park Haven, Inc. v. Texas Dept. of Human Services, TDHS assessed a $98,400 administrative penalty against Park Haven nursing home for violations of TDHS rules. Park Haven, Inc. v. Texas Dept. of Human Services, 80 S.W.3d 211 (Tex. App. – Austin, 2002, no pet. hist.). Park Haven appealed asserting that the agency order was not supported by substantial evidence indicating that the agency followed its own regulations governing determination of administrative penalties and that the agency’s failure to follow a statutory mandate rendered the agency rule invalid. The district court upheld TDHS’s penalties.

The court of appeals looked at TDHS’s process for determining administrative penalties. First, TDHS applies criteria found in its rules to determine whether to assess a penalty for a particular violation. According to TDHS’s rules, TDHS considers the facility’s history of compliance when determining whether to assess an administrative penalty. Then, TDHS applies statutory criteria to determine the amount of the penalty assessed. TDHS argued that it had presented evidence supporting that TDHS considered Park Haven’s history of compliance. This evidence consisted of “non-specific testimony” from an employee involved in the Park Haven investigation of the general description of the assessment process. The court held that the administrative record contained no testimony or evidence that could have enabled the ALJ to determine that TDHS considered Park Haven’s history of compliance when determining whether to assess administrative penalties. The court held that there was no substantial evidence on the issue of Park Haven’s history of compliance and therefore, the order was arbitrary and capricious.

In Starr County v. Starr Indus. Services, Inc., the Texas Water Quality Board denied the application for a Class I industrial solid waste permit for a landfill based on public opposition. Starr County v. Starr Indus. Services, Inc., 584 S.W.2d 352 (Tex. App. – Austin, 1979, writ refused n.r.e.). Starr Industrial Services appealed the decision after a hearing. The record reflected that a county judge of Starr County, the Rio Grande City Chamber of Commerce, and a state senator, opposed the permit because they opposed toxic waste dump in Starr County.

Explaining the distinction between the arbitrary and capricious standard and the substantial evidence standard, the court cited to Gerst v. Nixon, 411 S.W.2d 350, 354 (Tex. 1966), “…an arbitrary action cannot stand and the test generally applied by the courts in determining the issue of arbitrariness is whether or not the administrative order is reasonably supported by substantial evidence.” The court stated that the major factor in arbitrary-capricious review cases is that the parties must be able to know what is expected of them in the administrative process. No law or rule mentioned local opposition as a consideration for denial of an


6

application yet the Board considered this as part of their decision to deny the permit application. The court held that, because Starr Industrial Services, Inc.’s rights were prejudiced by this permit denial, the denial was arbitrary and capricious.

Courts appear to be more likely to make an arbitrary and capricious finding when the regulated entity or person was denied a substantial right, such as due process. The issue of whether or not one had notice of the administrative process was discussed in a more recent case, Flores v. Employees Retirement System of Texas, 74 S.W.3d 532 (Tex. App. – Austin, 2002, pet. denied). In this case, Ms. Flores was injured in a car accident while performing her job duties for the Texas Department of Protective and Regulatory Services. Ms. Flores was deemed permanently disabled and she applied for occupational disability retirement benefits from ERS. ERS denied Ms. Flores’ claim for benefits on the grounds that her disability did not meet the statutory definition of “occupational disability.” Flores appealed and the ALJ recommended that occupational disability benefits be awarded. ERS reversed the ALJ’s findings of fact and conclusions of law and denied benefits. Flores appealed arguing that ERS acted arbitrarily and capriciously in denying her benefits because ERS applied a new policy in the course of the contested case hearing without giving her any notice.

The court held that ERS abused its discretion in making findings that were not supported by any evidence. The court also held that ERS failed to provide sufficient explanations for its modifications of the findings of fact and instead, stated that certain facts were not relevant, gave no reason at all for deleting other findings, and added facts for “clarification.” ERS failed to follow its own rule that permitted modifications of the findings of fact only under certain circumstances that mirror the requirements in §2001.058(e). The court stated that ERS’s inadequate explanations “gives the appearance of the Board’s arriving at a predetermined result, irrespective of the facts as determined by the ALJ, and then shaping new findings of fact to support its decision.” Id. at 542. ERS’s modifications of the conclusions of law were not supported by the facts in the record and were therefore, arbitrary and capricious.

The court also found that ERS’s application of a new policy when determining whether to grant Flores benefits was arbitrary and capricious. ERS adopted this new policy several months after the contested case hearing and one day before the ALJ issued a PFD. ERS also failed to provide a reasoned explanation for the policy change. The court held that when an agency adopts a new policy in the course of a contested case hearing without giving the parties pre-hearing notice, the parties may be deprived of

procedural due process. The court held that the denial of Flores’ benefits was arbitrary and capricious because ERS decided to deny benefits before determining the findings of fact and conclusions of law, changed findings of fact and conclusions of law for unauthorized and unexplained reasons, making findings of fact and conclusions of law without adequate support in the record, and failing to give notice of the new policy before the hearing and failing to adequately explain the reasoning for the new policy.

In Lewis v. Metropolitan Sav. and Loan Ass’n, the Savings and Loan Commissioner approved a charter for an additional savings and loan association in Longview, Texas. 550 S.W.2d 11 (Tex. 1977). The application was opposed by three existing savings and loan associations (including Metropolitan Savings and Loan Association).

In determining whether the approval order was arbitrary and capricious, the court stated: “Broadly speaking, the substantial evidence rule is a court review device to keep the courts out of the business of administering regulatory statutes enacted by the Legislature; but it remains the business of the courts to see that justice is administered to competing parties by governmental agencies.” Id. at 13. The court went on to explain “If there is evidence in an administrative record that can be said to qualify as substantial, the parties may yet have been denied due process and the rudiments of fair play in the conduct of the administrative hearing that produced the record upon which the agency acted.” Id. The court held that the parties opposing the charter application were denied due process by rulings of the hearing examiner that excluded competent and material evidence from the administrative record.

The evidence in question was offered to impeach the testimony of the applicant’s expert witness who had testified about the need for an additional savings and loan association. The court contemplated that this evidence, had it been included in the record, could have influenced the Commissioner who made the final decision concerning the application. “The requirement that proper evidence be received is a necessary counterpart of the rule that the agency must give due weight to all the evidence before it; refusal to consider proper evidence which has been duly proffered falls within the condemnation that voids arbitrary administrative action.” Id. at 15. The court held that the granting of the application was arbitrary and capricious and remanded the proceeding back to the Savings and Loan Commissioner.

Starr County, Lewis, and Flores reflect the courts’ analysis of whether or not any of the parties involved in a contested case hearing were deprived of due process when determining whether an order is arbitrary and capricious. Agencies can prevent arbitrary and capricious rulings by ensuring that the parties involved in a contested case hearing have notice of the policies


7

being applied by the agency. Agencies should not adopt new policies after contested case hearings and then apply those policies to final orders. In addition, agencies must ensure that the administrative record supports any modifications of the findings of fact and that the conclusions of law apply only the findings of fact that are supported by the record. Again, agencies must be sure to analyze each factor required by statute or rule when determining a sanction and the administrative record must contain evidence of the required analysis.

D. Properly Applying Penalty Guidelines

Many agencies create policy guidelines or matrices that are not in statute or rule to determine the appropriate sanction for different violations. As part of these guidelines, agencies may develop calculations to determine administrative penalty amounts. Slay v. Texas Comm’n on Environmental Quality illustrates the importance of ensuring that these guidelines provide broad language reflecting the discretion of the agency to determine penalty amounts. 351 S.W.3d 532 (Tex. App. – Austin, 2011, pet. denied).

Slay owned a seventeen-acre tract of land that previously had been used for barge and marine vessel servicing and maintenance. The TCEQ found benzene, a carcinogen, on the property and issued a preliminary report alleging regulatory violations by Slay, as an “operator” of the site. After a contested case hearing, the ALJ determined that Slay had committed five sets of regulatory violations.

The Texas Water Code sets out the factors that the TCEQ must consider when determining administrative penalties. TCEQ created a Penalty Policy that sets forth the methodology for applying the statutory factors. Based on this Penalty Policy, the TCEQ determined a penalty amount of $596,625. The ALJ, however, applied the same Penalty Policy and recommended a penalty of only $1,500. The ALJ found that the penalty calculation worksheets submitted by the TCEQ contained errors, unproven assumptions, and unproven bases. The ALJ concluded that the five violations should be considered on a “facility-wide basis” instead of finding that the violations occurred at more than one location within the site. The ALJ also concluded that each violation should be considered a single violation and not continuing monthly violations. The ALJ also rejected the TCEQ’s upward adjustment of the penalty based on the facts and circumstances peculiar to the case.

The TCEQ modified the ALJ’s conclusions concerning: (1) “facility wide” violations explaining that there were separate and discrete areas at the site; (2) the single violation, explaining that five months of monthly penalties should be imposed; and (3) the upwards adjustment of the penalty based on the facts

and circumstances peculiar to the case. According to the TCEQ’s calculation, the penalty amount was now $177,500.

Slay asserted in the appeal that the TCEQ arbitrarily modified the ALJ’s findings of fact and conclusions of law involving the calculations of penalties. The court held that the TCEQ’s modification of the ALJ’s PFD was not arbitrary or capricious. The court found that the record contained evidence that reflected the number of violations that occurred on the site and their duration and evidence of TCEQ’s conclusion that the site should be treated as separate and distinct sites instead of on a facility-wide basis. The court also stated that TCEQ has broad discretion to interpret its own internal guidelines and given the broad language of the Penalty Policy, the court could not find that the penalty calculations were arbitrary.

While it may seem arbitrary that the TCEQ could come up with two vastly different penalty amounts using the same Penalty Policy calculations, the broad language in the Penalty Policy concerning the policy’s use as a guideline and the ultimate discretion of the commissioner prevented the court from finding that the penalty amount was arbitrary and capricious.

E. Consideration of Consistent Sanctions that

Support Public Policy In addition to determining that the agency follows

its statute and rules when assessing sanctions and does not deprive a party of due process, the court in Pierce v.Texas Racing Commission looked to whether the agency was consistently applying sanctions for similar violations and the policy implications of the sanctions. 212 S.W.3d 745 (Tex. App. – Austin, 2006, pet. denied).

In Pierce, a thoroughbred that had placed second in a race tested positive for a Class 3 prohibited drug. The stewards of the Racing Commission issued a formal ruling that assessed a $500 fine against the trainer, suspended the trainer’s license for 15 days, disqualified and declared the horse unplaced, and ordered that the purse be redistributed.

Pierce appealed the portion of the ruling that disqualified and unplaced the horse and redistributed the purse. The ALJ issued a PFD recommending that the penalty be decreased based on evidence that the veterinarian administered ipratropium for a legitimate medical purpose that did not affect the horse’s performance in the race and that the horse should be placed second and the purse distributed accordingly. The Racing Commission modified this PFD to uphold the initial formal ruling by the stewards. Pierce appealed asserting that the modification to the PFD was arbitrary and capricious and not supported by substantial evidence.

The Racing Commission’s rules establish a zero-tolerance policy if a horse tests positive for a prohibited


8

drug. The rules also provide that if a horse tests positive, the stewards may disqualify the animal and order the purse redistributed and impose penalties on the trainer. The penalty recommended for a Class 3 violation is 60 days to a 6 month suspension, up to a $1,500 fine and loss of purse. The court also considered testimony by the Racing Commission’s deputy director that the Commission consistently enforces loss of purse as part of the penalty for a Class 3 violation. The court held that the Racing Commission did not act arbitrarily or capriciously in concluding that the ALJ failed to properly apply or interpret applicable law, agency rules, written policies, or prior administrative decisions.

The court also looked to the policy reasons for consistently imposing loss of purse as a penalty in order to achieve deterrence. The court stated that if the only penalty was a fine, racing participants would probably incur that risk for the possibility of winning a large purse by a drug-enhanced horse. “Policy considerations such as this are the reason why the Commission is granted discretion over what penalties should be imposed for racing violations.” Id. at 754.

When determining whether a sanction is arbitrary or capricious, courts will look to the agency to explain why the sanction assessed effectively deters future violations. Agencies should also present evidence of the consistent application of sanctions to specific violations to avoid arbitrary and capricious rulings. IV. SANCTION DETERMINATIONS: OPEN

OR CLOSED SESSION? In many cases, an agency will make a sanction

determination which will then be appealed and an ALJ will recommend a sanction. At that point, the agency may decide to modify or reject the ALJ’s sanction recommendation. The determination of whether to modify the PFD often occurs at the agency’s board meeting. A recent case, Texas State Board of Public Accountancy v. Bass, discusses whether sanction determinations should be made in open or closed session. 366 S.W.3d 751 (Tex. App. – Austin, 2012, no pet. hist.).

Three accountants participated in the 1997 and 1998 audits of Enron, which led to disciplinary action by the Texas State Board of Public Accountancy. The ALJ found that the accountants had committed several violations but recommended that two of the accountants should be allowed to continue practicing public accountancy. The ALJ recommended that the accountants pay an administrative penalty and costs. The ALJ recommended that the charges against the third accountant be dismissed.

The Board’s rules required that all final decisions and orders shall be made during a public meeting duly noticed (22 Tex. Admin. Code §519.72(a)). Any party to the contested case hearing may request oral

argument before the Board makes its final determination. 22 Tex. Admin. Code §519.71(d). Pursuant to Tex. Govt. Code §551.071, government agencies may consult privately with their counsel about matters related to specific pending or contemplated legal proceedings or matters, however, the communication must be related to an opinion on law or legal services or assistance in some legal proceeding. This exception to the principle that meetings of governmental bodies must generally be open incorporates the attorney-client privilege. “A governmental body may not engage in a general discussion of policy unrelated to legal matters in a closed session merely because its counsel is present[.]” Id. at 759. Further, “a final action, decision, or vote on a matter upon which the governmental body deliberates in a closed meeting may only be made in an open meeting that complies with the Open Meeting Act’s notice provisions.” Id. at 760.

At each of the public meetings concerning the accountants’ final orders, the accountants and the Board presented oral argument. The Board then went into executive session to seek advice from the Board’s counsel on matters subject to attorney-client privilege. The Board publicly considered the PFDs during the last two public meetings and debated what type of sanctions to impose on the accountants. The Board voted publicly to revoke the two accountants’ licenses and to suspend the third accountant’s license for three years. At the final public meeting in which the Board discussed the accountants’ final orders, the Board heard oral argument again and discussed the proposed orders. The Board had a final executive session to receive legal advice from counsel. The Board then returned to public session and discussed final revisions to the draft orders and voted to accept the revised orders.

The accountants’ filed a suit for judicial review of the Board’s final order and alleged that the Board violated the Texas Open Meetings Act by deliberating on the merits of the PFDs in lengthy closed sessions and immediately voting during the open session. The accountants’ alleged that the improper decisions rendered the Board’s final orders void pursuant to Tex. Govt. Code §§ 551.002, 551.141, and 551.142.

The trial court held that the Board violated the Open Meetings Act and declared the three orders sanctioning the accountants void. The Board appealed this decision.

The court of appeals stated that the accountants’ must not only prove that the Board met in a closed session, but must also conclusively prove that Board’s final orders were actions that violated the Open Meetings Act in order to find that orders are voidable.

The court also stated that the Texas Open Meetings Act does not prohibit board members from expressing in a closed session their opinions on an issue or announcing how they expect to vote on the issue in the


9

open meeting so long as the actual vote is made in open session. In addition, allegations of improper closed deliberations alone do not provide a sufficient basis for voiding all subsequent related actions.

The court held that the substantive and extensive debate among the Board members during open session is conclusive evidence showing that the Board members had not already come to final decisions as a result of the closed session. Unable to rely upon speculation about communications in closed session and because the vote concerning the final orders occurred in open session, the court held that the orders were not voidable. The Bass case makes clear the difficult evidentiary burden to prove that the communications about sanctions in a closed session violated the Texas Open Meetings Act. As long as the board votes in open session on the matters and conducts substantive discussion about the matter in open session, courts will be unlikely to find a violation of the Texas Open Meetings Act.

V. CONCLUSION

Overall, Texas courts continue to uphold agency sanctions and defer to agency expertise in determining appropriate sanctions to deter future violations. However, agencies should make sure to create a complete record during contested case hearings of the agency’s process and analysis when determining what sanction to assess and to be sure to include evidence that the agency considered all of the factors required by rule or statute when assessing sanctions.

Further, agencies should look to creating clear guidelines or matricies that provide agency flexibility in determining the sanction. As the Witcher case illustrates, courts may analyze whether a guideline, written or unwritten, is essentially a bright line rule. Agencies must decide to either publish policies as rules or to ensure that the policies take into consideration case-by-case circumstances. Courts will look most favorably upon consistent sanctions that are supported by public policy considerations to deter future violations. However, as indicated by the Slay case, courts grant wide discretion to the agencies to determine the sanctions, including the penalty amounts.

LAYING DOWN THE LAW: THE ART, SCIENCE, AND LAW OF EFFECTIVE SANCTIONS · 2014-06-04 · LAYING DOWN...

Documents

Transcript of LAYING DOWN THE LAW: THE ART, SCIENCE, AND LAW OF EFFECTIVE SANCTIONS · 2014-06-04 · LAYING DOWN...