State Bar of Texas Administrative and Public Law Section

Featured Article - December 1998

TABLE OF CONTENTS

1. Open Records/Public Information/Open Meetings
1. Drivers License/Accident Report Records
2. Judicial Records
1. General
2. Search and Arrest Warrants
3. Open Meetings Act/Staff Briefings
4. General Issues
2. Review of Agency Rules
3. Transfer PUC hearing functions back from SOAH to the PUC
4. Electric Deregulation
5. Regulation of Transactions between Electric Utilities and their Affiliates
6. Department of Health Sunset Legislation
7. Changing environmental permitting from a contested case process to a rulemaking process
8. Attorneys' Contingent Fees
9. FOOTNOTES

What's On The Legislative Agenda For 1999: A Forecast

There is an inherent difficulty in predicting what legislation will be considered in 1999 that affects administrative law. It is always dangerous to predict the future. Problems that seem so significant now that they can be addressed only by legislation may be solved by January 1999. New issues that no one currently expects will develop in the next few months. Many subjects that may be clearly earmarked for legislative action may not have been among the issues that the legislative staff, lobbyists, and lawyers who were consulted in the preparation of this list were focused on. Guessing what the 76^th Legislature will do is a particular problem as its members have not yet been elected.

Indeed, there is the possibility that the House of Representatives will have a Republican majority and that the Speaker or the Lieutenant Governor or both could be Republicans. This would be a different situation than has existed in any of our lifetimes, yet it is unclear what impact this will have on the process. In preparing this paper, I have relied on comments by persons who work in or are familiar with the legislative process. Some issues have been reported in the newspapers or arise out of a court case or administrative ruling. The goal is to identify issues and, where appropriate, to provide some background as to how the issue arose. In some cases, highly significant and complex issues--e.g., electric utility deregulation--are discussed in only a few sentences. The thought is that any legislation will be hotly debated and likely will be extensively revised in the process. Those of you who are directly affected by a specialized subject will have a level of familiarity with the issue that greatly exceeds what can be set out in a paper of this sort.

With these caveats, some of the administrative law issues that may come up in the 76^th Legislature are:

I. Open Records/Public Information/Open Meetings

It is almost always a good bet that the Open Records Act, the Open Meetings Act, or both will be amended in any regular session of the Legislature. The two Acts probably have a broader effect on more people than most matters of administrative law, and due to the special interest that the media have in the statutes, issues surrounding them receive wide attention. This year, the Open Records (or Public Information) Act is attracting the most attention. Some likely areas of legislative attention include:

A. Drivers License/Accident Report Records

In 1994, Congress enacted the Driver's Privacy Protection Act of 1994, 18 U.S.C. §§ 2721 et seq, which prohibited state departments of motor vehicles from releasing personal information in motor vehicle records except in accord with guidelines specified in the Act. States were required by 1997 to adopt waiver procedures that persons could check off when renewing their licenses. The Texas Legislature adopted broad implementing legislation in 1997 by enacting SB No. 1069. The legislation also prohibited dissemination of records from motor vehicle files on the internet. See Trans. Code, ch. 731. In an attempt to protect accident victims from barratry and other types of solicitation, a portion of the bill prohibited release of accident reports, 9-1-1 logs, and similar records except to persons who already knew the name of a person involved in the accident and who had some other specific knowledge about the accident such as its date or location.

The 1997 Texas legislation posed a problem for the news media, among others, who routinely used these records in their news gathering activities. Also, many large city papers were available on the internet, thus making those papers potentially liable if a story containing information obtained from drivers' records were included in an on-line version of the paper. Newspaper groups challenged the bill and obtained a temporary injunction against its enforcement. Texas Daily Newspaper Assoc. and Texas Press Assoc. v. Morales, No. 97-08930 (345^th Dist. Ct., Travis County, Oct. 24, 1997)(Second Amended Agreed Temporary Injunction). Also, at least two federal courts held the federal act to be unconstitutional. State of Oklahoma ex rel. Oklahoma Dept. of Public Safety v. U.S., 994 F. Supp. 1358 (W.D. Okla 1997); Condon v. Reno, 972 F. Supp. 977 (D. S.C. 1997), contra Pryor v. Reno, 998 F. Supp. 1317 (M.D. Ala. 1998).

The topic was a major source of testimony to the Senate Interim Committee on Public Information, and it is likely that legislation will be introduced making it easier for the media and others to obtain access to driver and motor vehicle records.

B. Judicial Records

1. General

Shortly after the Legislature adjourned in 1997, an issue arose regarding the application of the Public Information Act to records of the courts. On July 24, 1997, the Attorney General issued ORD No. 657 (1997) which held that administrative records of the courts, such as telephone billing records, were covered by the Act and were potentially subject to being required to be released. Earlier opinions had relied on the fact that "the judiciary" was excluded from the definition of "governmental body" in the Act to hold that this type of record was simply not covered by the Act.

The Supreme Court responded with the rare step of issuing an "Order and Opinion Denying Request Under Open Records Act," Misc. Docket No. 97-8141, 1997 WL 583726 (Aug. 21, 1997). The per curiam order held that the Attorney General opinion was incorrect and was inconsistent with all prior opinions on the issue and with the express terms of the statute. It ordered that the request for records be denied and that court personnel not comply with the provisions of the Act for challenging Attorney General decisions.

In the opinion, the Court noted:

The propriety and advisability of disclosing records relating to judicial administration, the burdens and advantages of it, the reasonable limits upon it, all are issues for the Legislature, subject to the limits of the Constitution and the inherent power of the Judicial Department to control its own functions. The Legislature has determined that the judiciary should not be subject to the Open Records Act at all, not only to relieve it from the additional burdens that Act imposes and to preserve a means of construing and enforcing disputes between people and the other Departments of Government, but to preserve the independence of the judiciary.

It is certainly possible that the Legislature will consider amending the Act to bring some of the courts' records under the Act. If such legislation is pursued, it is likely that it will be limited to records relating to administration--e.g., financial records--rather than those relating to the decision-making process. In the passage quoted above, the Court recognized that these issues are appropriate ones for the Legislature to consider within its discretion; however, it also very clearly warned that legislative discretion was limited by separation of powers and similar issues. Obviously, if the Legislature writes in this area, it will be dealing with very delicate constitutional issues.

Although there was testimony before the Senate Committee urging action on judicial records, as a practical matter, the issue may be handled internally by the Court rather than by the Legislature. The Supreme Court has appointed a committee under the chairmanship of District Judge Mike Wood of Houston to study the issue of public access to judicial records. A report is scheduled for September 1998. It may be that the rules and procedures adopted by the Court will address the issue and will relieve any pressure for a legislative solution. If so, this will avoid the potential for a constitutional dispute over the relative power of the Legislature and the courts.

2. Search and Arrest Warrants

In two instances in 1997, district judges declined to release copies of affidavits supporting search warrants even though the warrants had been executed. Article 18.01(b) of the Code of Criminal Procedure expressly provides that the affidavit is public information if executed. In the two cases, both of which were capital murder cases, the district judges found that release of the affidavit would interfere with the integrity of an on-going investigation or would interfere with the defendant's ability to obtain a fair trial. In both cases, the court of appeals conditionally granted a writ of mandamus compelling the release of the affidavits. Houston Publishing Co. v. Edwards, 956 S.W.2d 813 (Tex. App.--Beaumont 1997); Houston Chronicle Publishing Co. v. Woods, 949 S.W.2d 492 (Tex. App.--Beaumont 1997).

Although the cases present interesting issues of how the public's right to know should be balanced against a defendant's right to a fair trial on one hand and against the public's interest in an efficient investigative process in the other, the court essentially determined that the Legislature had resolved the issue through passage of the statute providing that the affidavits were open. From a policy perspective, though, the issues are difficult ones--especially since both involved capital cases.

At least one of the judges was quoted as saying he planned to pursue the matter with the Legislature and that the existing law should be changed. "Document Shows Failed Polygraph," Houston Chronicle, Jan. 15, 1998. Any effort to change the law, however, is likely to meet with intense media opposition. See e.g., Editorial, "Keep Warrants Open," Austin American-Statesman, March 19, 1998 (protesting draft of a report of the Texas Judicial Council recommending a rule to permit courts to seal search and arrest warrants⁽¹⁾). If proposals are offered to amend the Code of Criminal Procedure to permit these affidavits to be closed, they may be difficult to enact over the strong media opposition that is almost certain.

C. Open Meetings Act/Staff Briefings

An issue for many years has been whether staff briefings should be covered by the Open Meetings Act. The statute and case law, Dallas Morning News Co. v. Board of Trustees of Dallas Ind. Sch. Dist., 861 S.W.2d 532 (Tex. App.--Dallas 1993)(finding Act does not apply even where briefer is not an employee), now specifically permit such briefings so long as all that is involved is a staff member providing information and answering questions and there is no deliberation among members of the governmental body. Tex. Govt Code, § 551.075. Many people have argued that this is a large loophole in the Act that should be eliminated. Legislation to limit such briefing sessions in closed meetings has been considered in the past, see e.g.,S.B. No. 308 (75^th Legis.), and is likely to be considered again.

D. General Issues

Other issues and suggestions are likely to come up during the session. Indeed, in the 75^th Legislative session in 1997, the Administrative Law Section tracked 50 bills relating to open records or open meetings. Among the issues that might show up are:

• Establishment of a Freedom of Information Commission to handle open records opinion and enforcement functions.
• Sealing of court records and settlements.
• Refinement of costs that can be charged for public records.

II. Review of Agency Rules

A rider in the current general appropriations act (found at article IX, § 167) requires state agencies to review their rules and determine if the reason for adopting the rule continues to exist. Each rule that became final prior to September 1, 1997, must be reviewed prior to August 31, 2001. Rules that became final after September 1, 1997, must be reviewed within four years of their adoption or re-adoption. The reviews are to be conducted in accordance with the Administrative Procedure Act in the same manner as proposed rules are considered.

There are problems inherent in having this type of process set out in the Appropriations Act. First, there is always an issue of whether a rider conforms to constitutional limitations relating to what can be in a general appropriations bill. In particular, does the rider go beyond merely limiting or directing the expenditure of funds. If it does, it may be prohibited by the Constitution. Second, the general appropriations bill expires by its own terms, as well as by constitutional direction, at the end of two years. Thus, a rider is not an appropriate vehicle for establishing multi-year programs. For example, the first deadline for actual review of rules under article V, section 167, of the current appropriations act is August 31, 2001, which is exactly two years after the bill will expire. Although the Legislature may re-enact and update riders biennium after biennium, it is difficult to create long term, continuing obligations through appropriations riders.

Accordingly, it is likely that the Legislature will consider enacting a state agency mandatory rule review process through general law. The Comptroller is likely to offer specific recommendations on this subject as part of its Texas Performance Review program.

III. Transfer PUC hearing functions back from SOAH to the PUC

In 1995, the Legislature created the utility division of SOAH and transferred PUC hearings examiners to the employ of SOAH. There have been suggestions that the Legislature consider transferring the function back to the PUC. The decision in Southwestern Public Service v. Public Utility Commission, 962 S.W.2d 207 (Tex. App.--Austin 1998) may lessen some of the rationale for the potential switch. In that case, the court ruled that the PUC retained the authority to perform an original fact finding role and to determine if the findings of fact of the SOAH ALJ are supported by a preponderance of the evidence. While this may not eliminate suggestions for a transfer of the hearing examiner responsibility back to the PUC, it may eliminate or lessen some of the arguments in favor of a change.

IV. Electric Deregulation

One of the dominant issues in the coming legislative session will be electric deregulation. Obviously, any legislation on this subject will have a major impact on administrative practice in the electric utility field.

There is no effort in this paper to outline the details of any potential legislation. The issue will be hotly debated and minutely scrutinized as minor changes in the language of any bill on the topic can have huge economic impacts.

V. Regulation of Transactions between Electric Utilities and their Affiliates

Earlier this year the Public Utility Commission published proposed rules to govern the relationship between electric utilities and their affiliates. The Commission noted that its goal was

• to foster fair competition for all competitors in the marketplace
• to prevent anticompetitive behavior and utilities' circumvention of their regulatory obligations.

23 Tex. Reg. 5297 (May 22, 1998). The proposed rules would have provided a fairly comprehensive regulatory system, but the general standard was that transactions between a utility and its affiliates would be at arms length.

The Commission withdrew the proposed rules on August 12, 1998. It is anticipated that the issue may instead be addressed by legislation in the 1999 session of the Legislature.

VI. Department of Health Sunset Legislation

The Department of Health has undergone Sunset review during the interim, and legislation to re-authorize the Department will be introduced in the 1999 session. Among the recommendations of the Sunset Commission that are relevant to administrative law are:

• Require TDH, with the assistance of the State Auditor, to conduct a one-time comprehensive evaluation of the Department's regulatory functions. One theme of the Commission's recommendations appears to be its view that there are fewer enforcement actions and violations than would be expected for programs of that size. It is likely that the Department will be given additional regulatory tools (e.g., authority to issue letters of reprimand and administrative penalties for certain programs) and will be encouraged to take a more aggressive enforcement stance.
• Require TDH to establish a system for soliciting stakeholder input when developing rules. It is likely that legislation will be proposed that requires the Department to offer notice beyond that required by the APA when it promulgates rules.
• Transfer the Department's administrative hearings process to SOAH.

VII. Changing environmental permitting from a contested case process to a rulemaking process

One of the controversial bills in the 1997 Legislature that related to the administrative process was H.B. No. 2444 by Rep. Robert Talton (R-Pasadena). This bill, which was backed by the Texas Chemical Council and was opposed by environmental groups, would have generally ended the contested case process by which environmental permits are issued and would have replaced it with a process by which permits were issued through a rule-making process. Basically, an application for a permit would be submitted, and the executive director of the Texas Natural Resources Conservation Commission would either issue a draft permit or notice of an intent to deny. He would also file a proposed decision. Then there would be a period of at least 30 days for public review, comments, and requests for a public hearing. There would be an opportunity for a non-APA public hearing at which comments could be presented. The executive director would issue a final decision after the public hearing but would be precluded from considering prior adjudications of violations unless they were less than five years old and both involved harm to the public health and environment and a subsequent lack of a substantial effort to correct the noncompliance. There would be an opportunity for appeal to the commission and to the district court.

The bill came out of the House Committee in 1997 but proceeded no further in the legislative process. It is likely that similar legislation will be introduced and considered in the 1999 Legislature.

VIII. Attorneys' Contingent Fees

Although more common in other areas of the law, contingent fees may be used in administrative law type cases. See e.g., Tex. Govt. Code, § 305.022 (prohibiting fees contingent on the outcome of administrative action but providing an exception for fees for legal representation before state administrative agencies in contested hearings or similar adversarial proceedings). Part of the "tort reform" agenda that did not pass in earlier sessions involves limitations on the use of contingent fees. In 1997, these bills died in committee and members were not required to vote on them. The political controversy surrounding the contingent fees in the tobacco litigation suggests that regulation of contingent fees is likely to be a topic in the coming legislative session. The Texas Civil Justice League, the major "tort reform" group, has suggested

• Codifying the Disciplinary Rules of Professional Conduct with respect to contingent fees while modifying the current unconscionability standard to require a "reasonable person" test.
• Allowing clients aggrieved by a contingent fee agreement to file a motion for judicial review of the fee and providing penalties against the attorney if the fee is found to be unconscionable.
• Limiting contingent fees on settlement offers that are tendered promptly.
• Keying contingent fees to the portion of recovery above any rejected early settlement offer.

Texas Civil Justice League position paper (February 16, 1998).

The type of legislation that is likely to be introduced will probably be directed toward fees in tort cases. It is certainly possible, though, that any legislation might have broader effects and could have an impact on fees in administrative cases. Also, this is a topic that could be affected by which party controls the leadership.

FOOTNOTES

1. Although the editorial vigorously opposes the potential rule, it also quotes Chief Justice Phillips as offering assurances that the proposal would go through substantial changes and saying that the Supreme Court will not adopt any rule that "further restricts open records."

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