Case Number: 03-17-00080-CV

Judge: Jeff Rose

Court: TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

Plaintiff's Attorney: Linda B. Secord

Defendant's Attorney: Mr. Stephen Fenoglio

Description: Polk is licensed by the Commission to recycle nonhazardous oil and gas waste at a
facility in Karnes County, Texas. In late 2016, the Commission brought an enforcement proceeding
against Polk after Commission staff determined that Polk’s storage pits were inadequately lined and
over capacity.
During the course of the Commission proceedings, intervenor Evergreen
Underground Water Conservation District sought discovery regarding the identity of Polk’s
customers, Polk’s compensation arrangements, and Polk’s activities on property adjacent to its
recycling facility. Polk objected to the discovery requests on the grounds that, among other reasons, 1
the requests sought irrelevant information and information that Polk considers trade secrets.
Ultimately, after a hearing on the matter, an administrative law judge issued an order compelling
Polk to fully respond to the discovery requests; a protective order regarding the requested
information; and an order allowing Evergreen to enter and inspect Polk’s property.
Complying with Commission rules regarding appeals of interim rulings, Polk timely
filed a written appeal to the Commission challenging the ALJ’s discovery orders. See 16 Tex.
Admin. Code § 1.30(c) (Railroad Comm’n of Tex., Interim Rulings and Appeals of Interim Rulings)
(specifying that “any party aggrieved by an interim ruling may appeal that ruling to the commission
by filing a written appeal”) (current version at 16 Tex. Admin. Code § 1.38). Polk asked the
Commission to reverse the ALJ’s interim orders on the grounds that the discovery requests “are
clearly unreasonable,” “have no realistic bearing on any of the matters at issue in these proceedings,”
are “overbroad,” and “would be very useful in the hands of [Polk]’s competitor.” In its appeal to the
Commission, Polk also incorporated by reference, but added no additional argument or explanation,
According to Polk, Evergreen intervened in the matter “at the instance of Sprint Energy1 . . . . , a direct competitor of Polk.” 2
its written responses and objections to Evergreen’s discovery requests, which included Polk’s
assertion that the requested information constituted trade secrets. Finally, Polk asked the
Commission to fashion a more comprehensive protective order regarding the requested information,
complaining that the ALJ’s protective order lacked enforceability, accountability, and responsibility.
The Commission, which did not specifically address Polk’s request that the ALJ’s
orders be reversed, issued an order directing the ALJ to amend and supplement the protective order
as Polk had requested. The Commission also directed the ALJ to modify the inspection order to
specifically describe the persons who were authorized to enter onto and inspect Polk’s property. The
ALJ complied and issued the amended and supplemented protective order and amended inspection
order as directed by the Commission.
Seeking to have the Commission’s amended and supplemented discovery orders set
aside, Polk filed the underlying petitions for writ of mandamus and writ of injunction in the district
court. Polk argued that the Commission had abused its discretion in issuing the discovery orders
because Evergreen had failed to demonstrate that production of Polk’s trade secrets was “necessary
for a fair adjudication of the claim.” In re Continental Gen. Tire, Inc., 979 S.W.2d 609, 612 (Tex.
1998) (holding trial court abused discretion in ordering production of trade-secret information where
party requesting information failed to carry its burden of showing that requested information was
necessary to fair adjudication of claim).
The Commission challenged Polk’s original proceeding in a plea to the jurisdiction,
arguing that Polk failed to exhaust its administrative remedies at the agency level. See, e.g., Clint
Indep. Sch. Dist. v. Marquez, 487 S.W.3d 538, 544 (Tex. 2016) (noting that where Legislature has
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granted agency sole authority to make initial determination in disputes arising within agency’s
regulatory arena, party must exhaust its administrative remedies before seeking recourse through
judicial review). Specifically, the Commission asserted that because Polk’s appeal to the Commission
did not explicitly reference the ALJ’s failure to make a necessity finding regarding Polk’s trade
secret objections, Polk had failed to exhaust its administrative remedies on the necessity issue. The
Commission also asserted in its plea that Polk lacked standing to challenge the Commission’s
discovery orders because Polk’s appeal to the Commission was successful—i.e., the Commission
granted Polk the relief it had requested by ordering the ALJ to amend the challenged interim orders.
The district court denied the Commission’s plea, and this interlocutory appeal ensued. See Tex. Civ.
Prac. & Rem. Code § 51.014(a)(8) (allowing interlocutory appeal of denial of government’s plea to
jurisdiction).
Discussion
The Commission’s issues on appeal mirror the grounds asserted in its plea to the
jurisdiction: the district court lacks jurisdiction over Polk’s original proceeding, and thus erred in
denying the Commission’s plea to the jurisdiction, because (1) Polk failed to exhaust its
administrative remedies on the trade-secret issue by neglecting to explicitly raise that issue in its
appeal to the Commission; and (2) Polk lacks standing to challenge the discovery orders because it
was successful in its appeal to the Commission.
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Exhaustion of remedies
If an administrative agency has exclusive jurisdiction over a determination, a party
must exhaust all administrative remedies before seeking judicial review of the agency’s decision.
See Thomas v. Long, 207 S.W.3d 334, 340 (Tex. 2006). The failure to exhaust administrative
remedies deprives a trial court of subject-matter jurisdiction. Id. Whether a court has subject-matter
jurisdiction is a question of law that we review de novo. See Texas Dep’t of Parks & Wildlife v.
Miranda, 133 S.W.3d 217, 226 (Tex. 2004).
As the Commission acknowledges, exhaustion-of-remedies issues usually arise when
a party fails to file a motion for rehearing with the agency after its final decision in a contested-case
hearing. See Tex. Gov’t Code §§ 2001.145 (timely motion for rehearing is prerequisite to appeal in
contested-case hearing), .171 (“A person who has exhausted all administrative remedies available
within a state agency and who is aggrieved by a final decision in a contested case is entitled to
judicial review under this chapter.”). But the Commission, citing our decision in City of Austin v.
Travis Central Appraisal District, urges us to expand the exhaustion requirement beyond the
motion-for-rehearing context to the procedural context of this case. See 506 S.W.3d 607, 617 (Tex.
App.—Austin 2016, no pet.) (holding that party seeking judicial review of property appraisal had
failed to exhaust its administrative remedies by merely appearing at the administrative hearing—i.e.,
without presenting its case on the merits—and by asking the agency to deny its challenge).
Specifically, the Commission suggests that we treat the Commission’s procedure for appealing an
ALJ’s interim order as the equivalent of the jurisdictional requirement of the filing of a motion for
rehearing. See Tex. Gov’t Code § 2001.145 (motion for rehearing is prerequisite to appeal in
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contested-case hearing). Thus, the Commission’s argument continues, because Polk’s appeal from
the interim order failed to explicitly reference the ALJ’s failure to make the necessity finding, Polk
failed to exhaust its administrative remedies as to that issue.
But even if we assume without deciding that the exhaustion-of-remedies requirement
is applicable to the situation before us—i.e., that the interim appeal to the Commission is the
procedural equivalent to a motion for rehearing—and further assume without deciding that Polk’s
interim appeal to the Commission failed to properly invoke the trade-secret necessity issue, such a
failure would constitute a waiver of the necessity issue, not a failure of jurisdiction. As we have
previously held, the mere sufficiency or adequacy of a motion for rehearing filed with the
agency—versus the failure to file one—does not deprive the trial court of jurisdiction, it only
determines whether error has been preserved for judicial review:
Applying the rule in Dubai, we conclude that the timely filing of a motion for rehearing is jurisdictional because the filing of the motion for rehearing defines and restricts the kind of case a district court may hear—those in which the plaintiff has exhausted its administrative remedies and completed the administrative process. . . However, further applying Dubai, we believe that the mere sufficiency or adequacy of a motion for rehearing does not deprive the trial court of jurisdiction. The contents of a motion for rehearing, we believe determine whether error has been preserved for judicial review.
Hill v. Board of Trustees of Ret. Sys., 40 S.W.3d 676, 679 (Tex. App.—Austin 2001, no pet.) (citing
Dubai Petroleum Co. v. Kazi, 12 S.W.3d 71 (Tex. 2000)); see B.F.I. Waste Sys. of N. Am., Inc. v.
Martinez Envtl. Grp., 93 S.W.3d 570, 578 (Tex. App.—Austin 2002, pet. denied) (“The timely filing
of a motion for rehearing is jurisdictional, but the sufficiency of the motion’s content goes solely to
the issue of preservation of error.” (citing Hill, 40 S.W.3d at 678–79)). Thus, the adequacy or
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sufficiency of Polk’s appeal of the interim orders to the Commission does not affect the district
court’s jurisdiction here.
We overrule the Commission’s first issue.
Standing
In its second issue, the Commission asserts that Polk lacks standing to challenge the
discovery orders because the Commission granted the relief that Polk had requested in its appeal of
the interim order. See Tex. Gov’t Code § 2001.171 (providing that person “who is aggrieved by a
final decision in a contested case” is entitled to judicial review); City of Galveston v. Flagship Hotel,
Ltd., 319 S.W.3d 948, 952 (Tex. App.—Austin 2010, pet. denied) (holding that party lacked standing
under APA section 2001.171 because agency’s final decision granted “the very relief it had
requested”); see also Torrington Co. v. Stutzman, 46 S.W.3d 829, 843 (Tex. 2000) (“Texas courts
have long held that an appealing party may not complain of errors that do not injuriously affect it or
that merely affect the right of others.”). Assuming again without deciding that the APA requirements
would apply here, we disagree that the Commission granted Polk all the relief it had requested. In
its appeal of the interim orders, Polk specifically asked the Commission to reverse the ALJ’s
discovery orders and deny Evergreen’s motion to compel discovery. The Commission, although it
did strengthen the protective order as requested by Polk, did not reverse the discovery orders that
required Polk to produce in the first place. Thus, Polk did not receive all of its requested relief.
We overrule the Commission’s second issue.

Outcome: Having overruled both of the Commission’s issues, we affirm the district court’s
order denying the Commission’s plea to the jurisdiction.

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Defendant's Experts:

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