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Hearing Process

The Finance Commission of Texas: Background

The Finance Commission of Texas is a board of private citizens appointed by and responsible to the Governor. It oversees and directs the activities of the Texas Department of Banking, the Texas Savings and Loan Department, and the Office of Consumer Credit Commissioner of the State of Texas. Pursuant to Section 11.202 of the Texas Finance Code, the Finance Commission employs a full-time person to assist the Finance Commission, Department of Banking, Savings and Loan Department, and Office of Consumer Credit Commissioner in conducting administrative hearings and performing the duties of an administrative law judge for each of these agencies. By statute, the Administrative Law Judge reports directly to the Finance Commission and is not subject to control by the Texas Department of Banking, the Texas Savings and Loan Department, or the Office of Consumer Credit Commissioner.

Purpose of Hearings

The purpose of administrative hearings for the Department of Banking, Savings and Loan Department, Office of Consumer Credit Commissioner, and Finance Commission is to fairly, accurately, and promptly determine the true facts and applicable law in disputes arising under the statutes and laws administered by these agencies.

Duties of the Finance Commission Administrative Law Judge

It is the responsibility of the Finance Commission Administrative Law Judge to provide the three Finance Commission agencies and the public a prompt, efficient, and fair opportunity to be heard on disputed issues for which the law provides a hearing.

Frequently Asked Questions

What is an administrative hearing?
An administrative hearing provides the opportunity to appear before a judge who is independent of the agency to obtain an unbiased and objective review of the contemplated action or application in question. The judge is responsible for reviewing the facts relating to the application or to an agency action that has been taken or proposed and for making a determination as to whether it complies with existing law and regulations based upon evidence submitted at the hearing. The judge is also obliged to "make a record," so that any review, in court or elsewhere, may proceed with a full understanding of the basis for the judge's rulings and recommendations.

When is an administrative hearing needed?
Occasionally those subject to a Finance Commission agency's regulations will disagree with actions taken or proposed by the agency. In that event, under certain circumstances provided by law, they are entitled to a hearing to resolve such a disagreement.

Sometimes the hearing process begins with an application for a license. Competing applications are common in which case a hearing may be necessary to determine which applicant will receive the license. Even when there is no direct competitor for the new license, an applicant may face challenges from existing license holders, who claim that there is no public need for an additional license or that the applicant does not meet statutory licensing requirements. Review of the application may involve a hearing on its merits. Even where the case is not contested, the procedure may take on an adversary character, with the applicant bearing the burden of proof that it can satisfy policy or standards and the agency's staff taking what may appear to be the "other side."

All of the Finance Commission agencies possess authority to impose sanctions on regulated individuals, companies, or institutions that fail to comply with applicable laws and regulations. Sometimes the hearing process involves an agency attempt to impose such sanctions. Among the sanctions that may be imposed, depending upon the agency and statute involved, are:

Loss of license or permit, permanently or for a specified period.

Fines or other monetary assessments, perhaps including restitution to injured parties.

"Cease-and-desist orders," which are the regulatory equivalent of court-issued injunctions.

Direct orders requiring a change in the regulated entity's mode or manner of operation.

How does the administrative hearing process work?
Whenever one of the Finance Commission agencies is requested to grant, grants or denies, or proposes to grant or deny a license or takes a similar administrative action, affected citizens and businesses generally receive notice. This notice, if required by law to do so, contains a paragraph or section that explains the citizen's or business' right to request a hearing to contest the action in question. A citizen or business that decides to request a hearing must notify the agency within the time specified in the notice.

The agency then sends a copy of this request to the judge. The judge schedules a hearing, and notifies all parties of the hearing date, time, and location. At the hearing, each party presents his or her case to the judge. While a party is not absolutely required to hire an attorney, an attorney is strongly recommended. Generally speaking, these cases will be handled much as civil cases in court would be. Normal rules of evidence will be followed. The proceeding often will be an adversarial one, with two distinct sides seeking to "win." The Constitution's guarantee of "due process" is observed. This means that an agency may not take away or deny a privilege or impose a sanction without first giving the person or business involved notice of what may happen, and then an opportunity to offer reasons why it should not happen. Each party may bring in witnesses, and may ask that witnesses be subpoenaed. A written record of the hearing will be kept by a court reporter.

Among the differences between an administrative hearing and a court case, one in particular should be noted: rather than making a final decision, the judge hears evidence and then recommends a decision to the agency heads through what is called a "proposal for decision."

Once the hearing is concluded, the judge reviews all evidence and testimony, and issues a written proposed decision to justify the results that the judge recommends. The proposal for decision is based on the applicable law, the evidence, and testimony presented at the hearing. The citizen or business receives a copy of the proposal for decision, and information on how to file exceptions if they disagree with it. The agency head (or in the case of a hearing before the Finance Commission, the Commission itself) will review the proposal for decision and any exceptions to it. The agency head or the Finance Commission may accept the proposal for decision as written, modify it, or send it back to the judge for additional work, which may or may not involve taking additional evidence.

What about appeals?
A party who is dissatisfied with a final decision issued by an agency normally has an opportunity to appeal it within a certain number of days. If the decision is allowed to become final with no appeal, it is binding on all parties and the decision may prevent future administrative or court determinations of the same issues that were decided.

To preserve the right to appeal, "a motion for rehearing" must usually be filed within 20 days of the final agency order. The motion for rehearing explains to the agency the errors that the dissatisfied person believes the agency committed so that the agency may be made aware of and have an opportunity to correct those errors. No motion for rehearing is needed if the agency has entered an immediately effective emergency order. If a motion for rehearing is filed, the agency order will not become final unless the agency overrules the motion for rehearing (or if the agency fails to act on the motion for rehearing before the end of 45 days from the date it was filed, it is overruled by operation of law and the agency order automatically becomes final at the end of the 45th day). Once the order is final, an appeal must be filed within 30 days or the right to appeal will be held to have been waived.

Appeals to the courts are heard either on a "trial de novo" or "substantial evidence basis" (depending on the particular action involved and the governing statute). If the standard of review is de novo, the case is tried a second time as if it had not been heard at the agency. The more common standard of review is known as review under the "substantial evidence rule." Under this standard of review, the agency's findings of facts will not be second-guessed by the reviewing court if supported by "substantial evidence," and the agency's applications of law and policy will not be overturned unless the court concludes that the agency acted in an "arbitrary" or "capricious" manner, erred in applying the law to the facts, or "abused its discretion." In an appeal under the substantial evidence rule, no new evidence will be heard by the reviewing court. Instead, the court will rely solely on the evidence introduced in the agency hearing. Thus, it is important that all legally significant information be introduced in the agency hearing as otherwise there normally will not be an opportunity to get it before the courts. Accordingly, while a dissatisfied person has the opportunity to appeal the agency ruling to the courts, it is often difficult for that person to prevail on the appeal if he or she has lost at the agency level. Therefore, it is always best to put forth a maximum effort to win the case at the agency instead of relying on the courts to correct rulings made at the agency hearing.

When a regulatory case is challenged in court, the contest will be one between the party that lost or was disappointed with the agency result, and the agency itself although other parties may provide support to the agency as intervenors.

Who pays the costs?
The expenses associated with the hearing will be billed to the parties.

Can I represent myself or do I need a lawyer?
Some people will want to represent themselves to save attorneys' fees. Although they are permitted to do this, professional representation is advisable and usually leads to better results than self representation. Many people mistakenly believe that state administrative hearings are informal. This used to be true in Texas, but no longer. In enacting the Administrative Procedure Act, the Legislature required most state administrative agencies (including the Finance Commission agencies) to conduct hearings under the same rules of evidence as a state district court. This has greatly increased the fairness of the hearings, but has also greatly increased their complexity and expense. Most legally untrained people hire a lawyer for representation in an administrative hearing for the same reasons that they would hire a lawyer for representation in a lawsuit in state district court. All other parties in your hearing are likely to be represented by a lawyer and, unless you have legal representation also, you are likely to be at a distinct disadvantage.

The agency's staff will try to answer your questions and be helpful. However, they cannot give you legal advice or present your case for you. The law prohibits the judge from speaking to you about the facts of your case except during a hearing, or unless the judge first notifies all parties to the case that the discussion is to take place and invites them to participate. The judge must be fair to all parties to the case. The judge can therefore only provide you limited help in getting the facts of your case in evidence.

Should you decide to represent yourself in the hearing, you may nonetheless want to consult a lawyer ahead of time to discuss what facts to present and how to get them into evidence.

Who has the burden of proof?
On an application for a new license or permit, or to modify an existing license or permit, the applicant has the burden of proof.

The agency has the burden of proof if the case involves disciplinary action against a licensee or permit holder, or if it involves disciplinary action against a party accused of failing to obtain a required license or permit.

In accordance with applicable legal precedents, the judge will assign the burden of proof on any matters that do not fit within these categories.

What kind of evidence is needed for the hearing?
Fact Witnesses and Documentation. Each side should bring fact witnesses with first hand knowledge of the facts that support their side of the case. Each side should also bring all pertinent documents such as contracts, business records, checks, photographs or other items that they wish to have the judge consider. The judge must give all other parties to the case an opportunity to cross-examine your witnesses. All evidence must be "competent" as defined by the Texas Rules of Evidence. The other parties will be given an opportunity to object to the admissibility of evidence in accordance with the Rules. The administrative law judge will rule on each piece of evidence and any objections as to admissibility. Therefore, the judge cannot admit letters, affidavits, or other written statements into evidence unless they meet an exception to the hearsay rule or unless they are agreed to by the other side.

Expert Witnesses on Issues of Public Necessity and Reasonable Probability of Success. In addition to fact witnesses, some cases require expert witnesses such as economists. An expert witness is a person who possesses greater knowledge and understanding of a subject than the average person possesses. In hearings on applications for new financial institutions, the applicant must frequently prove (among other things) a public need or necessity for the proposed new institution, a reasonable probability that it will be successful, and the size and configuration of the community from which it will draw most of its customers. Frequently, protestants try to prove the new institutions are not needed, will not be profitable, and will draw customers from a smaller community than alleged by the applicant. The parties usually make this proof through an economist testifying as an expert witness. The economist bases opinions on public records pertinent to the community in which the proposed new institution will be located. Among the records that economists usually consider in forming their opinions on these issues are federal census data reflecting growth or stagnation, state sales tax records showing whether business in the community is going up or down, information as to population density, traffic patterns, new housing and industry, etc. In cases in which economists have testified on both sides of the public need and likely profitability issues, the judge decides which testimony seems most reasonable and recommends that the license be granted or denied on the basis of that determination (assuming all other licensing criteria are properly satisfied).

What if I am charged with a violation and don't come to the hearing?
The judge will probably hold the hearing without you. It may be beneficial to appear even if you committed the violation so that you can make any mitigating facts or explanations known to the judge. Also, if you do not appear or make settlement arrangements before the hearing, the judge will not order a time pay-out schedule. If you do not appear, the judge may also enter a heavier penalty than would have been entered if you or an attorney had been there to explain your side of the case.

The attorney general will collect any unpaid penalties or restitution by bringing suit against you. The suit will be to collect the judgment amount of the administrative penalty and restitution order. You will not have another chance to present your side of the case after the administrative order becomes final, so taking advantage of your opportunity to appear and tell your story at the hearing is usually advisable.

What if an interpreter is needed?
If a sign or language interpreter is needed, the party needing such an interpreter should immediately notify the agency so that the judge can arrange for a qualified interpreter in advance of the hearing.

Bringing a friend or relative to interpret is not sufficient unless all parties agree to that person acting as an interpreter.

Will the hearing location be accessible to people with disabilities?
Yes. The Finance Commission agencies comply with the Americans with Disabilities Act. People who need special arrangements should notify agency staff sufficiently ahead of the hearing date so that any necessary and appropriate special arrangements can be made.

Is there a way to settle cases without a hearing?
Cases often settle without going to hearing. A party who thinks this might be to their advantage should contact the agency attorney and any opposing parties to see if a settlement agreement can be worked out.

What if my attorney or I still have questions after reading this pamphlet carefully?
First, make sure you have carefully read all of the other documents sent to you by the agency or sent to you by any other parties to the case. Those documents should explain fully the issues involved or the charges brought against you, what deadlines you must meet, and what rights you have.

If either you or your attorney have further questions after carefully reading all of this information, call the agency and explain your questions or the assistance you need. You may also write your questions to the judge with copies to all parties in the case, or you may set up a conference call between yourself, the judge, and the other parties to the case.

Are transcripts of past hearings and copies of decisions in similar cases available for review?
Yes, if your case is similar to one that the agency has handled before, and the agency still has the records. They are available for review on payment of agency expenses for copying and mailing or they may be inspected at the agency's office. In some cases, transcripts or copies of past decisions will be redacted to protect "confidential information" as defined under the Texas Open Records Act. In some cases, it may be necessary to allow a few days to retrieve documents from agency files or storage or to allow time for material to be redacted.

Rules of Procedure

The Finance Commission has promulgated Rules of Procedure which govern the conduct of hearings. Included are rules regulating discovery, requests for postponements, and requests for subpoenas. These rules follow.

CHAPTER 9. RULES OF PROCEDURE FOR CONTESTED CASE HEARINGS, APPEALS

SUBCHAPTER A. GENERAL

§9.1. Definitions and Interpretation; Severability. (a) The same rules of construction that apply to interpretation of Texas statutes and codes, the definitions in Government Code, §2001.003, and the definitions in subsection (b) of this section govern the interpretation of this chapter. If any section of this chapter is found to conflict with an applicable and controlling provision of other state or federal law, the section involved shall be void to the extent of the conflict without affecting the validity of the rest of this chapter.

(b) The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:

(1) Administrative law judge—The hearings officer employed by the finance commission to conduct administrative hearings for the finance commission, the department of banking, the savings and loan department, and the office of consumer credit commissioner.

(2) Agency—The finance commission, the department of banking, the savings and loan department, or the office of consumer credit commissioner.

(3) Agency head(s)—Finance commission members, the banking commissioner, the savings and loan commissioner, or the consumer credit commissioner, or a designee if authorized by law.

(4) Applicant—A party seeking a license, permit, or other action from an agency.

(5) Protestant—A party opposing an application for a license, permit, or other action filed with an agency who has paid any filing fees required by an applicable law.

(6) Respondent—A permittee, licensee, or other party against whom a disciplinary proceeding is directed by an agency.

§9.2. Procedure. (a) Insofar as practicable and except as otherwise provided in this chapter, procedure in contested case hearings will be in accordance with the Texas Rules of Civil Procedure. References in the Texas Rules of Civil Procedure to the "court" or the "judge" will be construed as references to the administrative law judge as the context may require. All documents required by the Texas Rules of Civil Procedure to be filed with the clerk must be filed with the administrative law judge or with a person designated by the administrative law judge.

(b) The agency with jurisdiction over a particular case is a party to that case through its attorney of record. The agency attorney must be served with copies of all notices, orders, pleadings, motions, and correspondence, notified of all hearings and conferences, and has full rights to participate at all stages of the case.

§9.3. Ex Parte Communications. A person may not conduct oral or written communications with the administrative law judge regarding an issue of law or fact in a contested case other than on notice to all parties with an opportunity to participate or as otherwise authorized by law. Letters to the administrative law judge must show that copies have been sent to all parties (through counsel if a party is represented by counsel).

SUBCHAPTER B. CONTESTED CASE HEARINGS

§9.11. Notice and Initiation of Proceedings. (a) An action subject to this chapter is initiated by the publication or service of such documents or notices as are required to be published or served under the substantive law governing the particular proceeding. Unless other law authorizing a different notice period is applicable to the particular proceeding, all hearings in contested cases must be preceded by at least 10 days notice, as required by Government Code, §2001.051. Licensees and permittees and applicants for licenses and permits shall keep the agency informed as to their correct current mailing addresses and may be served with initial process by registered or certified mail, return receipt requested, to the address furnished the agency. Service of initial process on parties other than licensees, permittees, or applicants (unless applicable law provides otherwise), must be made in the manner provided in the Texas Rules of Civil Procedure for initiating a civil suit.

(b) Notice of a disciplinary proceeding that is required to be preceded by a hearing must be signed by the agency head or administrative law judge and must contain:

(1) an order to appear at a specified time, date, and place;

(2) a statement of the nature of the administrative action to be commenced and the authority under which the administrative action is conducted;

(3) a description in plain language of the specific act(s) or omission(s) asserted as grounds for the contemplated administrative action;

(4) a description of the remedies sought, including the penalties or consequences sought to be imposed;

(5) a disclosure that the respondent is entitled to:

(A) be represented by an attorney of respondent's choice;

(B) directly or through an attorney contest the admissibility of evidence and cross-examine the witnesses against the respondent; and

(C) respond and present evidence and argument in respondent's behalf pursuant to Government Code §2001.051(b) and §2001.087;

(6) a disclosure that the failure of respondent to appear at the hearing will be considered a waiver of respondent's rights under paragraph (5) of this subsection (b);

(7) a copy of this chapter included as an attachment;

(8) the name, title, address, and phone number of the person handling the administrative action for the agency and to whom the respondent or the respondent's attorney should direct inquiries regarding additional information, detail, or further discussion or negotiation in connection with the administrative action; and

(9) such other information as may be required under the substantive law governing the particular proceeding.

(c) Notice of an action that is not required to be preceded by a hearing, but that requires a party to be advised of a right to hearing before the action becomes final, must contain a notice that a written request for a hearing under the Administrative Procedure Act must be delivered to the agency by a specific date certain or the administrative action will become final. The notice must explain fully how a hearing may be requested and contain such other information as may be required under the substantive law governing the particular proceeding.

(d) In a case in which restitution is sought, the notice of hearing (or an amended or supplemental notice or pleading served a sufficient time before the hearing to provide respondent with fair notice of the claim and a reasonable opportunity to defend) shall contain, in plain language, pertinent information regarding why the agency seeks restitution, for whom it is sought, the aggregate amount of restitution anticipated, and a citation to the specific statutory provision under which the restitution claim is made. A claim for restitution, like any other notice or pleading under these rules, is subject to a motion for more definite statement.

§9.12. Default. If, after served with notice in compliance with §9.11 of this subchapter (relating to Notice and Initiation of Proceedings), a party fails to attend a hearing, the administrative law judge may proceed in that party's absence and, where appropriate, may issue a proposal for decision against that party. The proposal for decision shall be served upon the defaulting party and the party will be afforded the opportunity to contest the law as stated in the proposal for decision, but shall be deemed to have waived the right to contest the evidence, cross-examine the witnesses, and present an affirmative case or defense.

§9.13. Appearances and Representation. Since contested case procedures are closely modeled upon those used in a court of law, the agency strongly urges but does not require parties to employ attorneys to represent them. A private individual may appear pro se. An officer, partner, or full time employee may represent a corporation, partnership, association, or firm in a hearing before the administrative law judge even if that person is not a licensed attorney, if that person observes proper decorum and the instructions of the administrative law judge. Attorneys who are licensed in other states but not in Texas may represent a client in a contested case hearing with the permission of the administrative law judge.

§9.14. Protests. Protests shall be allowed to the extent authorized by law applicable to each agency and type of proceeding. A protestant must include a certificate of service on any protest showing that a copy has been served on the applicant. Every protest must be accompanied by any filing fees required by law.

§9.15. Party Status; Participation by General Public. (a) Every person or entity named or admitted as a party to a contested case has an equal right to participate fully in all stages of the proceeding.

(b) Party status is limited to persons or entities with a legal right, duty, privilege, power, or economic interest that may be directly affected by the outcome of the proceeding or who are entitled to be parties pursuant to a statute or regulation governing the particular proceeding.

(c) Party status will not be conferred on persons or entities that (1) only have an interest in the outcome of the proceeding that is common to members of the general public; (2) seek to litigate issues that are not by statute or regulation made part of the administrative proceeding in which party status is sought; or (3) are not among the persons or entities described by statute or regulation as eligible to participate in the particular type of administrative proceeding in which party status is sought.

(d) The administrative law judge has discretion to allow a member of the general public who has not been admitted as a party to testify under oath or affirmation in a contested case. The administrative law judge may set fair and reasonable conditions on such an appearance, and the testimony shall be subject to cross-examination, challenge and rebuttal. After affording all parties a reasonable opportunity to be heard on this issue, the administrative law judge shall determine the extent, if any, to which a member of the general public who is not a party will be allowed to participate in a contested case.

§9.16. Pleadings. (a) Required pleadings in agency hearings consist of such applications, protests, notices, or requests for hearing as are required under the substantive law governing each particular type of proceeding.

(b) In addition, a party may file such other pleadings as the party considers appropriate to fully explain and present the party's side of the case.

(c) If a pleading is so vague or ambiguous that a party is unable to fully understand what is intended to be placed in issue, the party may move for a more definite statement and the administrative law judge shall grant the motion if it is well taken and direct that a more definite statement be made.

§9.17. Motions, Pleas and Other Written Requests for an Order or Ruling. (a) A party applying to the administrative law judge for an order or ruling shall do so by written motion, plea, or other form of written request unless an oral motion, plea, or request is made during a hearing, conference, or telephone conference call of which all parties had advance notice with a reasonable opportunity to participate. The parties shall send copies of all pleadings and responses subject to this section to one another (through their attorneys if represented by counsel), and shall include a certificate of service on such documents attesting they have done so. Each pleading subject to this section shall specify the grounds on which the relief or order is sought and the legal basis for the relief or order.

(b) The administrative law judge shall allow all parties a reasonable amount of time to be heard before ruling on a pleading subject to this section unless the pleading is for:

(1) a continuance or an extension of time due to an emergency and reasonable attempts to reach opposing counsel have been unsuccessful;

(2) an order to which all parties have agreed; or

(3) a temporary emergency order until a hearing can be held.

(c) The administrative law judge has discretion to order oral or written argument or an evidentiary hearing on a pleading subject to this section as needed to clarify the issues and decide them properly.

(d) An application for a subpoena may be requested and issued ex parte and is not subject to this section.

§9.18. Issuance, Service, and Return of Subpoenas. (a) Sua sponte or on the written request of a party, the administrative law judge may issue a subpoena addressed to anyone authorized to serve a subpoena under the Texas Rules of Civil Procedure for the attendance of any witness.

(b) The style of the subpoena must be "The State of Texas" and the subpoena must be signed by the administrative law judge. The subpoena must state the name of the proceeding, that the proceeding is pending before the agency, the time and place at which the witness is required to appear, the person or agency at whose instance the witness is summoned, and the date of its issuance, and may be addressed to anyone authorized to serve a subpoena under the Texas Rules of Civil Procedure.

(c) A subpoena may also command the person to whom it is directed to produce the books, papers, documents or tangible things designated in the subpoena.

(d) Subpoenas may be executed and returned at any time, and shall be served by delivering a copy of such subpoena to the witness. The person serving the subpoena shall make due return thereof; showing the time and manner of service, or showing that service was accepted by the witness by a written memorandum, signed by such witness attached to the subpoena.

(e) The administrative law judge, in the exercise of discretion, may require a showing of good cause before issuing a subpoena or may require a deposit guaranteeing payment of the costs of service and the expenses of the witness in complying with the subpoena.

(f) A subpoena may be quashed or modified by the administrative law judge on the filing of a proper motion and a showing of good cause.

(g) Subpoena powers of the agency head(s) are unaffected by this section.

§9.19. Continuances. Motions for continuance must be in writing and filed not less than five calendar days prior to the hearing, except for good cause shown. Motions must set forth the specific grounds upon which the moving party seeks continuance, make reference to all similar motions filed in the case, and state whether all parties agree with the continuance. The administrative law judge may not grant a continuance without consultation with all parties except in the event of an emergency after a bona fide effort to reach other parties to the case has been unsuccessful.

§9.20. Prehearing Conferences. (a) Sua sponte or on the motion of any party, the administrative law judge may direct that the parties or their authorized representatives appear at a prehearing conference to consider any of the matters specified in Rule 166, Texas Rules of Civil Procedure (other than those matters having to do with trial by jury).

(b) In the administrative law judge's discretion, the prehearing conference may be formal or informal, may be conducted in person or by telephone, and may be conducted with or without a court reporter. In the event that no court reporter is used, the administrative law judge shall prepare or may direct the parties to prepare a memorandum encompassing any agreements reached and decisions made.

§9.21. Discovery. (a) Parties may use all permissible forms of discovery authorized in the Texas Rules of Civil Procedure in accordance with and subject to the limitations provided therein. A party may apply to the administrative law judge for issuance of a commission to take a deposition only if the parties disagree on its scheduling or scope. Procedures for obtaining a ruling on objections or on a motion to compel compliance with discovery must comply with the Rule of Civil Procedure that relates to the particular form of discovery on which a ruling is sought.

(b) A motion regarding discovery must contain a certificate that efforts to resolve the discovery dispute without intervention by the administrative law judge have been attempted and failed.

(c) Notwithstanding a requirement of the Texas Rules of Civil Procedure to the contrary, a party may not file a discovery request, a response to a discovery request, or a discovery deposition with the administrative law judge unless the party introduces such as evidence or unless the administrative law judge requests that the party do so.

§9.22. Protective Orders; Motions to Compel. All exemptions and privileges recognized under Texas law are recognized in agency hearings to the same extent as they are recognized in civil cases in the courts of this state. If a party or witness is asked to reveal privileged material or conversations, the party may make a motion with the administrative law judge for such protective orders as are reasonable and necessary or may refuse to provide the information and assert the privilege in response to a motion to compel. The administrative law judge shall hold such hearings and issue such orders on motions to compel or requests for protective orders as are required by the law applicable to the facts and circumstances of the case.

§9.23. Summary Judgment. A party may file a motion for summary judgment in the manner provided in Rule 166a, Texas Rules of Civil Procedure, at any time after a contested case has been filed. The party shall serve the motion for summary judgment on opposing parties at least 21 days before it may be acted upon by the administrative law judge. Opposing parties shall serve any responses, counter motions, affidavits, or other materials at least seven days before the administrative law judge hears the original motion for summary judgment. If, after hearing the motion, the administrative law judge does not render summary judgment upon the whole case or for all the relief asked, the administrative law judge shall ascertain what material facts exist without substantial controversy and what material facts are actually and in good faith controverted. The administrative law judge shall then enter findings on the uncontroverted facts and shall direct such additional proceedings as are necessary to fully dispose of the case. The administrative law judge may impose sanctions if the administrative law judge finds that a party has presented an affidavit in bad faith or solely for the purpose of delay. In the event a summary judgment is appropriate on all issues, the administrative law judge shall expeditiously prepare a proposal for decision and proposed order for circulation to the parties for exceptions and then to the agency head for approval as in other cases. If the administrative law judge does not render summary judgment upon the whole case, the proposal for decision and proposed order will not be issued with regard to the uncontested issues until the contested issues have also been decided.

§9.25. The Hearing. (a) The administrative law judge has authority analogous to that of a district judge sitting without a jury in a civil case and may make such rulings and issue such orders as may be required to provide a fair, just, expeditious, orderly, and proper hearing. Hearings are open to the public, except that matters made confidential by law must be considered in executive session if requested. If an executive session is not requested before confidential evidence is introduced, the confidentiality of such evidence is considered to have been waived.

(b) At the time and place set for hearing, the administrative law judge shall proceed with the hearing as nearly as may be according to the rules of procedure governing the trial of civil cases in the courts of this state. The party with the burden of proof shall present such party's case, followed by other parties in the sequence assigned by the administrative law judge. Each party shall have the opportunity to present such party's case, by calling and examining witnesses, offering documentary evidence, and making legal arguments. Each party shall have the opportunity to contest the admissibility of evidence and cross-examine opposing witnesses on any matter relevant to the issues even if the matter was not covered in direct examination. A party must make an objection to testimony or an evidentiary offer in a timely manner, stating the basis for the objection, or the objection is waived.

(c) The burden of proof is on the applicant in a case involving an application and on the agency in a case involving an order to cease and desist or to impose penalties or collect restitution for violations of law.

(d) In a hearing on an application, the applicant must prove each of the statutory requirements for approval of the application by a preponderance of the evidence.

(e) In a hearing on an action by the agency to enjoin or to impose penalties or collect restitution for violations of law, the agency must prove the violations alleged in the notice of hearing by a preponderance of the evidence. Failure of a respondent to file an answer or to appear at the hearing is not considered to admit the truth of the facts alleged to constitute grounds for a cease and desist or penalty or restitution order so as to excuse the need for other evidence. The hearing will proceed to permit the attorney for the agency to present the evidence in support of the agency case. Failure of the respondent to answer or to appear and contest the agency case may be considered as some evidence supporting an adverse inference that respondent could not defend or rebut the agency case.

§9.26. Applicability of Texas Rules of Civil Evidence. The Texas Rules of Civil Evidence, as applied in non-jury civil cases in the courts of Texas, apply in contested cases under this subchapter. The administrative law judge shall exclude irrelevant, immaterial, or unduly repetitious evidence. When necessary to ascertain facts not reasonably susceptible of proof under those rules, the administrative law judge may admit evidence not admissible under those rules, except where precluded by law, if of a type commonly relied upon by reasonably prudent persons in the conduct of their affairs. Public comments in the form of letters and affidavits are not admissible into evidence in contested case hearings unless they satisfy an exception to the hearsay rule or come into evidence without objection.

§9.27. Facts Not Reasonably Susceptible of Proof Under Rules of Evidence. The administrative law judge will treat the Texas Administrative Procedure Act exception under Government Code, §2001.081 (providing for the admission of evidence "not admissible under the Texas Rules of Civil Evidence if of a type commonly relied upon by reasonably prudent persons in the conduct of their affairs"), as identical to Federal Rule of Evidence 803(24), i.e., the administrative law judge will admit evidence pursuant to this exception only if the administrative law judge finds that:

(1) although not covered by any of the exceptions listed in Rule 803, Texas Rules of Civil Evidence, the statement has equivalent circumstantial guarantees of trustworthiness to the exceptions listed in the rule;

(2) the fact the statement is offered to prove is material;

(3) the statement is more probative on the point for which it is offered than any other evidence that the proponent can procure through reasonable efforts;

(4) the interests of justice will be served by the statement's admission into evidence; and

(5) a reasonable time before the hearing, the statement's proponent furnished opposing parties with a copy of the statement and the name and address of the declarant (or information regarding where the statement was published) and of the intent of the statement's proponent to introduce the statement into evidence at the hearing so that opposing parties had a fair opportunity to anticipate the statement and rebut, explain, or contest it.

§9.28. Prefiled Testimony. Sua sponte or on motion of any party, the administrative law judge may omit oral presentation of the direct testimony of any witness and may allow prefiled written testimony to be presented in its place. The written testimony carries the same force and effect as though stated orally by the witness; provided that the witness must be present at the hearing at which such testimony is offered and adopt such testimony under oath, and must be made available for cross-examination. Written reports of agency investigations on fact issues, if offered into evidence in a hearing in which the facts covered by the report are directly at issue, will be treated as prefiled testimony and the investigator must be made available for cross-examination.

§9.29. Stipulations. Parties may by written stipulation agree upon the facts or any portion thereof and their stipulation may be regarded and used as evidence at the hearing. The administrative law judge in such cases may require any additional evidence necessary to establish the facts to the administrative law judge's satisfaction.

§9.30. Official Notice. The administrative law judge may take official notice of judicially cognizable facts, and of generally recognized facts within the area of the agency's specialized knowledge. A party that desires the administrative law judge to take official notice of particular facts must make a motion that the administrative law judge do so, stating with specificity the facts, material, records, or documents encompassed in the motion. A party who opposes the motion will have the opportunity to contest the requested action. The administrative law judge may also sua sponte take official notice of facts, material, records, or documents on giving the parties an opportunity to contest the facts, material, records, or documents to be officially noticed.

§9.31. Reporters and Transcripts. In all proceedings when requested by the administrative law judge, the agency, or by any party, a court reporter shall make a stenographic record of the hearing.

§9.32 Telephone Hearings. (a) Sua sponte or on motion of any party and a showing of good cause, after reasonable notice to all parties to allow them to object and argue against the procedure, the administrative law judge may conduct all or part of a hearing by telephone or other electronic means. In determining whether to allow testimony by telephone or other electronic means, the administrative law judge shall consider all relevant factors including whether the motion is opposed, the cost and feasibility of the witness being present at the hearing instead of appearing by telephone or other electronic means, the nature and duration of the expected testimony, the nature of any exhibits expected to be introduced through the witness, whether there is a good reason that the witness is unavailable to testify in person, and the extent to which the demeanor and credibility of the witness are likely to be significant factors in weighing the witness' testimony. In deciding a motion under this section, the administrative law judge shall insure that substantive and procedural rights of all parties are respected.

(b) Documentary evidence to be offered during a telephone hearing must be delivered by the proponent to all parties and to the administrative law judge prior to hearing.

(c) In a telephone hearing, the administrative law judge may consider the following as a failure to appear if the conditions exist for more than 20 minutes after the scheduled time for hearing:

(1) failure to answer the telephone;

(2) failure to free the telephone for a hearing; or

(3) failure to be ready to proceed with the hearing as scheduled.

§9.33. Mediation. The administrative law judge may arrange for the services of a qualified mediator to work with the parties and attempt to bring about a settlement. The administrative law judge may assess costs of the mediator's services against the parties in the same manner as other costs or may require advance payment. The mediation ends when successful or when a party decides that such party no longer wishes to participate in the mediation. The parties shall immediately inform the administrative law judge when the mediation ends. An offer to compromise or a statement made during mediation may not be admitted into evidence or considered for any purpose in the hearing of a case in which mediation was attempted.

§9.34. Post Hearing Proceedings. (a) Following the hearing the administrative law judge upon request shall give the parties an opportunity to file written briefs and proposed findings of fact and conclusions of law. Pursuant to Government Code, §2001.062, the administrative law judge shall review these materials and all evidence and testimony, and prepare a proposal for decision containing a statement of the reasons for the proposed decision and of each finding of fact and conclusion of law necessary to the proposed decision. The administrative law judge shall also prepare a proposed final order for the agency head to sign adopting the proposed decision. Upon completion, the administrative law judge shall serve copies of the proposal for decision and proposed final order on all parties and give each adversely affected party an opportunity to file exceptions and present briefs. If a party files exceptions or presents briefs, the administrative law judge shall give an opportunity to other parties to file replies to the exceptions or briefs. The parties shall send these materials to the administrative law judge who may amend the proposal for decision and proposed final order in response to the exceptions, replies, or briefs submitted. If the administrative law judge makes substantive revisions, the administrative law judge shall circulate the amended proposal for decision and proposed final order to the parties for additional exceptions and briefs before submitting the proposal for decision and the proposed final order based thereon to the agency head(s) for approval.

(b) After the administrative law judge has circulated the proposal for decision and proposed order to the parties and the parties have had an opportunity to file exceptions and briefs in the manner provided in subsection (a) of this section, the administrative law judge shall submit the proposal for decision and proposed order together with all materials listed in Government Code, §2001.060, to the agency head(s) for review. The agency head(s) may:

(1) adopt the proposal for decision and proposed final order, in whole or in part;

(2) modify and adopt the proposal for decision and proposed final order, in whole or in part;

(3) decline to adopt the proposal for decision and proposed final order, in whole or in part;

(4) remand the proceeding for further examination by the administrative law judge; or

(5) direct the administrative law judge to give further consideration to the proceeding with or without reopening the hearing.

(c) If on remand additional evidence is received which results in a substantial revision of the administrative law judge's recommendation for final action, the administrative law judge shall prepare a new proposal for decision and proposed final order and serve them on the parties and give the parties an opportunity to file exceptions and make replies to the new proposal for decision and proposed final order in the manner provided by subsection (a) of this section.

§9.35. Dismissal. Following notice to all affected parties and the opportunity for hearing, the administrative law judge with the consent of the agency head may dismiss any contested case, with or without prejudice, under such conditions and for such reasons as are found just and reasonable, including the following:

(1) failure to prosecute;

(2) unnecessary duplication of proceedings or res judicata;

(3) withdrawal;

(4) moot questions or obsolete petitions;

(5) lack of jurisdiction;

(6) abuse of discovery;

(7) refusal to observe proper decorum or obey orders of the administrative law judge made within the scope of authority; or

(8) if necessary in the interest of justice.

§9.36. Disruption of Hearing. To preserve decorum and ensure the orderly administration of hearings conducted on behalf of the finance commission agencies, the administrative law judge may expel a person from a contested case hearing and impose appropriate sanctions if that person engages in conduct that disrupts the hearing.

§9.37. Sanctions. (a) Sua sponte or on motion of a party and after notice and an opportunity for a hearing and subject to approval by the agency head on behalf of which the hearing is being conducted, the administrative law judge may impose appropriate sanctions as provided by Subsection (b) against a party or its representative for:

(1) filing a motion or pleading that is groundless and brought:

(A) in bad faith;

(B) for the purpose of harassment; or

(C) for any other improper purpose, such as to cause unnecessary delay or needless increase in the cost of the proceeding;

(2) abuse of the discovery process in seeking, making, or resisting discovery; or

(3) failure to obey an order of the administrative law judge.

(b) A sanction imposed under Subsection (a) may include, as appropriate and justified, issuance of an order:

(1) disallowing further discovery of any kind or of a particular kind by the offending party;

(2) charging all or any part of the expenses of discovery against the offending party or its representatives;

(3) holding that designated facts be considered admitted for purposes of the proceeding;

(4) refusing to allow the offending party to support or oppose a designated claim or defense or prohibiting the party from introducing designated matters in evidence;

(5) disallowing in whole or in part requests for relief by the offending party and excluding evidence in support of those requests;

(6) striking pleadings or testimony, or both, in whole or in part; or

(7) imposing any other sanction that the agency head with jurisdiction in the case could have imposed if the agency head had personally presided in hearing the case.

§9.38. Recovery of Agency Costs. The administrative law judge may allocate costs incurred by the agency among the parties in accordance with applicable law. Notwithstanding any other provision of agency rules, the administrative law judge may impose costs that are solely or primarily attributable to a particular party against that party.

SUBCHAPTER C. APPEALS TO FINANCE COMMISSION

§9.51. Time Deadlines for Appeal to the Finance Commission Mandatory. The administrative law judge does not have authority to grant an extension of the time periods provided for perfecting an appeal to the finance commission.

§9.52. Motion For Rehearing. A motion for rehearing in the manner and within the time required in Government Code, §2001.145, is a prerequisite to an appeal to the finance commission in a contested case, except that a motion for rehearing is not a prerequisite to an appeal of a decision or order that is final and effective on the date rendered. A motion for rehearing must state the claimed error with specificity. Responses to the motion must be filed and the motion must be ruled upon by the agency within the time periods specified in Government Code, §2001.146.

§9.54. Application for Review. (a) The application for review must be filed within 30 days of notification that the motion for rehearing has been overruled, or within 30 days of the date that it is overruled by operation of law, or within 30 days of a decision or order that is final and effective on the date rendered.

(b) The application must state the identities of the parties, the action complained of, the interests of the parties, specific objections, the action sought from the finance commission, and also contain any other information and be accompanied by any fees required by statute or administrative regulation.

§9.55. Scope of Review. The finance commission shall consider the questions raised by the application for review and may also consider such additional matters pertinent to the appeal as it may determine, whether or not included in the application. Decisions by the finance commission must be based on testimony and other evidence in the record. The finance commission may adopt or decline to adopt the agency head's decision and the underlying findings of fact and conclusions of law in whole or in part. The finance commission may remand the proceeding for further consideration by the agency head with or without reopening the hearing. The finance commission may take any other action it considers to be just and reasonable, as permitted by law.

§9.56. Oral Argument before the Finance Commission. A party may request oral argument to the finance commission by separate pleading or include a request for oral argument in its review application. The finance commission, in its discretion, may grant or deny the request. If granted, the amount of time allotted and the issues on which oral argument is allowed are within the finance commission's discretion. The finance commission may deny the request for oral argument but request that the parties be present at the meeting at which the case is to be considered to address any questions that finance commission members may have.

§9.57. Interim Appeals. A party may not make an interim appeal to the finance commission except as specifically provided for by statute or by rule adopted by the finance commission.

SUBCHAPTER D. COURT APPEALS

§9.71. Appeals to the Courts. Appeals to the courts shall be as provided by statute and applicable case law.

§9.72. Administrative Record. The party appealing an agency order to the courts must pay the agency the cost of preparing the copy of the record that is to be transmitted to the reviewing court at rates approved by the State Purchasing and General Services Commission. If more than one party appeals the agency's order, the cost of the preparation of the record may be divided equally among the appealing parties or as agreed by the parties. The administrative law judge shall prepare and certify the record on behalf of the agency and is responsible for filing it in the reviewing court.

Frequently Cited References in Finance Commission of Texas Hearings

Other Rules:

Title 7, Texas Administrative Code (substantive rules pertaining to all subjects regulated by the Finance Commission Agencies)

Statutes and Codes:

Case Law:

For definitions used in Finance Commission hearings to determine public need or public necessity, and reasonable probability of success for banks, savings institutions, and pawn shops, see Gerst v. Nixon, 411 S.W.2d 350, 358 (Tex.1966); Gerst v. Goldsbury, 434 S.W.2d 665 (Tex.1968); State Banking Bd. v. First State Bank of Gainesville, 618 S.W.2d 905, 908 (Tex.Civ.App.—Austin 1981, no writ); Mineola State Bank v. First National Bank of Mineola, 574 S.W.2d 246, 247 (Tex.Civ.App.—Austin 1978, ref. n.r.e.); and State Banking Bd. v. Airline Nat. Bank, 398 S.W.2d 805 (Tex.Civ.App.—Austin 1966, ref. n.r.e.).

Texts, Treatises, & Course Materials:

Administrative Law Section, Travis County Bar Association, Seminar Materials (these come out two or three times a year)

Cooper, State Administrative Law, two volume treatise, 1965

Dorsaneo, Texas Litigation Guide, Volume 25, Administrative Proceedings

Powers, Agency Adjudication, Texas A&M Extension Service, 1990

State Bar of Texas, Advanced Administrative Law Course Materials, annual 1989 - current.

Texas Administrative Law Journal, published twice yearly since 1992 by the Administrative and Public Law Section, State Bar of Texas

University of Texas Extension Service, Hearing Examiner Certificate Program Course Manual, 1990

 

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