Flores v. Employees Retirement System

Decision Date18 April 2002
Docket NumberNo. 03-01-00074-CV.,03-01-00074-CV.
Citation74 S.W.3d 532
PartiesHenrietta FLORES, Appellant, v. EMPLOYEES RETIREMENT SYSTEM OF TEXAS, Appellee.
CourtTexas Court of Appeals

Don E. Walden, Law Office of Don E. Walden, Austin, for appellant.

Raymond C. Winter, Assistant Attorney General, Administrative Law Division, Austin, for appellee.

Before Justices KIDD, B.A. SMITH and PATTERSON.


Appellant Henrietta Flores appeals the district court's order affirming a final order by the Board of Trustees for the Employees Retirement System of Texas (the Board) denying her application for occupational disability benefits.1 She raises two issues in her appeal, alleging (1) that the Board's action was arbitrary and capricious or that it abused its discretion because the Board applied a new policy in the course of Ms. Flores's contested case without giving her notice of its intent to do so; and (2) that the Board's interpretation of the statutory definition of occupational disability is inconsistent with the plain language of the statute. As we sustain both of Ms. Flores's issues, we will reverse the judgment of the trial court and the order of the Board.


Ms. Flores worked for almost fifteen years as an aide to social workers, first at the county level and later for the Texas Department of Protective and Regulatory Services (the Department). As an aide, her primary job function was to transport the children who had been removed from their homes by the Department to court hearings, doctors' appointments, and to their homes for visits. She provided transportation mostly in the Austin and central Texas area, but occasionally drove as far as Dallas and Houston. Ms. Flores drove roughly seventy-five percent of the day and spent between seven to twelve hours each day in the car.

While driving two small children from their home to the Department, she was severely injured in a car accident. A mattress suddenly fell off a truck in front of her, causing her to swerve and brake; unfortunately she could not avoid the mattress, which lodged under her car. Ms. Flores believed her knee hit the steering wheel upon impact, and within a few hours she experienced extreme pain in her back that radiated down her leg. Several days later she also began to suffer pain in her knee. After a few days, Ms. Flores returned to work but experienced increasing pain. Although she underwent two surgical operations and physical therapy, she could not resume her duties at the Department. Doctor Albert Molnar specifically evaluated her disability in the context of her job as a social services aide and found that she could no longer drive as before, lift pediatric clients, or move quickly enough to restrain the children. The Board concedes that Ms. Flores is permanently disabled. Ms. Flores, who had consistently received excellent evaluations by her supervisors at the Department and had had no difficulty in the performance of her job duties before the accident, was dismissed.

After her dismissal, Ms. Flores applied for occupational disability retirement benefits from the Employees Retirement System (ERS),2 which was created by the legislature for the purpose of providing a retirement system for aged and incapacitated state employees. See Act of May 27, 1947, 50th Leg., R.S., ch. 352, 1947 Gen. Laws 697, 697 (statement of purpose).3 Ms. Flores's claim was denied on the ground that her disability did not meet the statutory definition of an occupational disability.

Ms. Flores's application for retirement benefits is governed by section 811.001(12) of the Government Code, which defines occupational disability to mean a disability "from an injury or disease that directly results from a specific act or occurrence determinable by a definite time and place, and directly results from a risk or a hazard peculiar to and inherent in a duty that arises from and in the course of state employment." Tex. Gov't Code Ann. § 811.001(12) (West Supp.2002).4 ERS denied Ms. Flores's claim, finding that her disability failed to satisfy either statutory prong. She appealed, and after an administrative hearing, the administrative law judge (ALJ) found that Ms. Flores's application satisfied both requirements and recommended that occupational disability benefits be awarded. The Board reversed the ALJ's findings of fact and conclusions of law5 as to both statutory prongs and denied benefits. This appeal hinges on our review of the Board's interpretation of section 811.001(12).6 Ms. Flores, however, has also challenged the manner in which the Board decided her appeal: Ms. Flores contends that the manner in which the Board decided her case is "an affront to the decision-making process prescribed by [the Administrative Procedure Act (APA)]." We turn first to Ms. Flores's argument that the Board acted arbitrarily and capriciously in denying her appeal.


In her first issue, Ms. Flores argues that the Board's action was arbitrary and capricious or constituted an abuse of discretion under section 2001.174(2)(F) of the APA. See Tex. Gov't Code Ann. § 2001.174(2)(F) (West 2000).7 Ms. Flores argues that in denying her claim, the Board ignored its own precedent holding that a preexisting condition that is caused solely by the natural aging process and is asymptomatic until aggravated by a traumatic incident does not prevent one from receiving occupational disability benefits. She also contends that the Board applied a new policy in the course of her contested case hearing without providing her notice, before the hearing, of its intent to do so. See Texas State Bd. of Pharmacy v. Seely, 764 S.W.2d 806, 815 (Tex.App.—Austin 1988, writ denied). Madden v. Texas Bd. of Chiropractic Exam'rs, 663 S.W.2d 622, 625-27 (Tex.App.—Austin 1983, writ ref'd n.r.e.). The Board disagrees, asserting that the previous decisions on which Ms. Flores relies do not constitute binding precedent.

The issues raised by Ms. Flores implicate a broader question as to the manner in which the Board decided her appeal. After hearing all of the evidence at the contested-case hearing, the ALJ decided in Ms. Flores's favor. The minutes of the Board's meeting, of which we take judicial notice, reflect that immediately after hearing from both sides and without any deliberation, the Board declined to adopt the ALJ's recommendation and unanimously voted to deny Ms. Flores's appeal. After announcing its decision, the Board also ordered its general counsel to make new findings of fact and conclusions of law. The general counsel's findings of fact and conclusions of law, which made systematic and widespread changes and additions to the ALJ's findings of fact and conclusions of law, were later adopted by the Board. The Board's changes to particular facts suggest that the Board was acting as its own fact-finder despite having delegated that duty to the ALJ. See Montgomery Indep. Sch. Dist. v. Davis, 34 S.W.3d 559, 564 (Tex.2000) ("having chosen to delegate the fact-finding role to the hearing examiner, a board cannot then ignore those findings with which it disagrees and substitute its own additional findings."). In addition, the Board failed to comply with its statutory authorization and administrative rules, which enable the Board to make changes but also place limits on its ability to do so. See Tex. Gov't Code Ann. § 815.511(a) (West Supp.2002); 34 Tex. Admin. Code § 67.91(b) (2001) ("Rule 67.91(b)").

These aspects of the Board's manner of deciding Ms. Flores's appeal raise serious due process concerns. We recognize that an agency does not operate under the same rules as a court of law, nor is it subject to the same restrictions. An agency must, however, respect the due-process rights of applicants who appear before it in contested cases. See Seely, 764 S.W.2d at 815 (holding that an agency denied a party a meaningful hearing required by due process); Madden, 663 S.W.2d at 625-27 (holding that an agency violated procedural due-process rights of a party by failing to give him notice of new statutory interpretation that agency applied for first time in the course of claimant's hearing). Because of the seriousness of the issues raised by the Board's treatment of Ms. Flores's appeal, we will address each issue separately.

Board as Fact-Finder

Procedural due process does not apply to every action the government or an administrative agency takes, but it does apply when "government deprives an individual of `life, liberty, or property' based on resolution of contested factual issues concerning that individual." 2 Kenneth Culp Davis & Richard J. Pierce, Jr., Administrative Law Treatise § 9.2 at 3 (3d ed. 1994). When the agency's decision has such an individualized effect, the agency is obligated to provide some type of adjudicative hearing. Professor Davis has explained that such a hearing requires the resolution of two different types of facts: adjudicative and legislative:

Adjudicative facts usually answer the questions of who did what, where, when, how, why, with what motive or intent; adjudicative facts are roughly the kind of facts that go to a jury in a jury case. Legislative facts do not usually concern the immediate parties but are the general facts that help the tribunal decide questions of law and policy and discretion.

Id. § 9.5 at 55.

The litigants may offer conflicting evidence as to adjudicative facts, which the decision-maker resolves by determining how much weight to give each side's evidence. See F. Scott McCown & Monica Leo, When Can an Agency Change the Findings or Conclusions of an Administrative Law Judge? 50 Baylor L.Rev. 65, 74 (1998). The resolution of adjudicative facts often requires making credibility determinations. Id. at 76. The hearing examiner is better suited to make such determinations than is an agency head or board reviewing the hearing examiner's proposed decision because the hearing examiner has heard the evidence and has observed...

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