The Austin Court of Appeals has ruled that an administrative law judge has a ministerial duty to enforce a valid Rule 11 settlement agreement submitted by the parties prior to an administrative hearing. Vergo Patio Gardens, Inc. v. Railroad Commission of Texas (No. 03-19-00070-CV) arose from a dispute over the renewal of a landfarming permit between Vergo and the RRC. The RRC denied Vergo’s renewal application, which Vergo took to a contested case hearing at SOAH. Originally scheduled for Feburary 2014, the hearing was continued multiple times and finally set for October 2016. A few days before the hearing, the parties filed a joint motion to dismiss the hearing setting on the basis of a Rule 11 agreement. The agreement allowed the parties to enter into a “60-day binding settlement period” to resolve the matter without a hearing. The ALJ declined to enforce the agreement, conducted the hearing, and issued a proposal for decision denying the application. The RRC adopted the ALJ’s PFD. Vergo duly filed a. motion for rehearing, which was denied, and sought judicial review. The district court affirmed.
In an opinion by Justice Goodwin, the court of appeals reversed and remanded. The court’s analysis turned on two questions: (1) did the parties have an enforceable Rule 11 agreement, and (2) did the ALJ have a duty to enforce it. Regarding the validity of the agreement, Rule 11, TRCP, requires agreements “to consist of ‘a written memorandum which is complete within itself in every material detail, and which contains all of the essential elements of the agreement’” (citations omitted). Here the agreement met the test because it bound Vergo to agree to a draft permit and produce additional documentation to the RRC to supplement and complete the draft permit by a specific date. If Vergo failed to comply, the permit would be denied on a date certain. Finally, the agreement obligated Vergo to give up its right to a hearing. The court of appeals thus held that the essential elements of an agreement were present.
Turning to the ALJ’s duty to enforce, the court of appeals relief on SCOTX’s per curiam opinion in Shamrock Psychiatric Clinic, P.A. v. Texas Dep’t of Health & Human Servs., 540 S.W.3d 553 (Tex. 2018), which held that ALJs generally have a duty to enforce Rule 11 agreements. The court of appeals waved aside the RRC’s arguments that the joint motion to dismiss did not ask the ALJ to dismiss the case, but only to remove it from the hearing. The court held that the joint motion did not constitute “a request to allow settlement negotiations,” but “a request to enforce the Rule 11 Agreement to resolve the dispute by settlement agreement, not by hearing.” By conducting the hearing anyway, the ALJ prejudiced Vergo’s “substantial rights.”
This case should be of interest to administrative law fans because it encourages settlement negotiations all the way up to hearing without fear that an ALJ (perhaps already annoyed by repeated continuances in the case) might tear up a Rule 11 agreement. In this case, unfortunately, the applicant had to go through the hearing, have the permit denied, seek judicial review in district court, and go to the court of appeals for a decision that merely sends the applicant back to complying with agreement. And even if the applicant and the RRC staff work something out, there is no guarantee that the RRC will approve the permit in any event. We can only admire the persistence and tenacity of Vergo in playing this out to an important decision upholding the public policy in favor of settlement without litigation.