NO. 03

- 15

- 00309

- CV
CITY OF AUSTIN and THE UNITED HEALTHCARE CHOICE PLUS PLAN FOR CITY OF AUSTIN EMPLOYEES, Appellants, v. CHARLES LESNIAK, Appellee. § § § § § § § § § § IN THE THIRD

COURT OF APPEALS IN

AUSTIN, TEXAS

JOINT APPELLANTS’ BR IEF

ORAL ARGUMENT IS REQUESTED Andrew G. Jubinsky Texas Bar No. 11043000 andy.jubinsky@figdav.com Lance V. Clack Texas Bar No. 24040694 lance.clack@figdav.com
F IGARI + D AVENPORT , LLP 901 Main Street, Suite 3400 Dallas, Texas 75202 (214) 939

- 2000 (214) 939

- 2090 (Fax)
A TTORNEYS F OR A PPELLANT T HE U NITED H EALTHCARE C HOICE P LUS P LAN F OR C ITY O F A USTIN E MPLOYEES Andralee Cain Lloyd State Bar No. 24071577 andralee.lloyd@austintexas.gov Megan Mosby State Bar No. 24073392 megan.mosby@austintexas.gov
C ITY OF A USTIN

– L AW D EPARTMENT P. O. Box 1546 Austin, Texas 78767

- 1546 (512) 974

- 2918 (512) 974

- 1311 (Fax)
A TTORNEYS FOR A PPELLANT C ITY OF A USTIN ACCEPTED 03-15-00309-CV 5802501 THIRD COURT OF APPEALS

AUSTIN, TEXAS 6/24/2015 11:26:16 AM JEFFREY D. KYLE

CLERK- i
IDENTITY OF PARTIES AND COUNSEL Appellant
The United Health care Choice Plus Plan for City of Austin Employees Trial and Appellate Counsel Andrew G. Jubinsky Texas Bar No. 11043000 andy.jubinsky@figdav.com Lance V. Clack Texas Bar No. 24040694 lance.clack@figdav.com F IGARI + D AVENPORT , LLP 901 Main Street, Suite 3400 Dallas, Texas 75202 (214) 939

- 2000 Appellant The City of Austin Trial and Appellate Counsel Andralee Cain Lloyd State Bar No. 24071577 andralee.lloyd@austintexas.gov Megan Mosby State Bar No. 24073392 megan.mosby@austintexas.gov C ITY OF A USTIN

– L AW D EPARTMENT P. O. Box 1546 Aus tin, Texas 78767

- 1546 (512) 974

- 2918 Appellee
Charles Lesniak Trial and Appellate Counsel
Amar Raval araval@plummerlawyers.com James C. Plummer jplummer@plummerlawyers.com P LUMMER & K UYKENDALL 4203 Montrose Blvd., Suite 270 Houston, Texas 77006 (713) 522

- 2887- ii
TABLE OF CONTENTS TABLE OF CONTENTS

................................ ................................ .......................... ii

INDEX OF AUTHORITIES

................................ ................................ ..................... iv

STATEMENT OF THE CASE

................................ ................................ .................. 1

APPELLANTS’ STATEMENT REGARDING ORAL ARGUMENT

.................... 1

ISSUE PRESENTED

................................ ................................ ................................ . 1 1. Whether the Trial Court erred in denying Appellants’ plea to the jurisdiction.

................................ ................................ ................................ ...... 1
STATEMENT OF FACTS

................................ ................................ ........................ 2

A. The Plan.

................................ ................................ .......................... 2 B. Appellee’s Claims.

................................ ................................ ................ 3 SUMMARY OF ARGUMENT

................................ ................................ ................. 4

ARGUMENT

................................ ................................ ................................ ............. 5

A. Standard of Review on Appeal.

................................ ............................. 5
B. Governmental Immunity.

................................ ................................ ...... 5 C. The Plan is Immune From Suit and Liability.

................................ ....... 7 D. Appellee Has Not Pled a Valid Waiver of Immunity.

.......................... 8 1. The Proprietary/Governmental Function Distinction Does Not Apply.

................................ ................................ ................... 8 2. Appellee did not plead a valid waiver of immunity under Chapter 271.

................................ ................................ .............. 10 PRAYER

................................ ................................ ................................ .................. 10- iii
CERT IFICATE OF COMPLIANCE

................................ ................................ ................ 12

CERTIFICATE OF SERVICE

................................ ................................ .......................... 12

APPENDIX- iv
INDEX OF AUTHORITIES Page(s) C ASES Anderson v. City of San Antonio , 120 S.W.3d 5 (Tex. App.

— San Antonio 2003, pet. denied)

................................ .. 5 Ben Bolt

- Palito Blanco Consol. Indep. Sch. Dist. v. Texas Political Subdivisions Prop./Cas. Joint Self

- Ins. Fund , 212 S.W.3d 320 (Tex. 2006)

................................ ................................ .................. 5 , 7 C ity of Georgetown v. Lower Colorado River Authority , 413 S.W.3d 803 (Tex. App.

— Austin 2013, pet. dism’d)

................................ ....... 9 Ci ty of San Antonio ex rel. City Pub. Serv. Bd. v. Wheelabrator Air Pollution Control, Inc. , 381 S.W.597 (Tex. App.

— San Antonio 2012, pet. denied)

................................ ... 8 Dallas County Mental Health and Mental Retardation v. Bossley, 968 S.W.2d 339 (Tex. 1998)

................................ ................................ ...................... 5 East Houston Estate Apartments, LLC v. City of Houston , 294 S.W.3d 723 (Tex. App.

— Houston [ 1st Dist.] 2009, no pet.)

....................... 10 Foster v. Teacher Ret. Sys. , 273 S.W.3d 883 (Tex. App.

— Austin 2008, no pet.)

................................ ............... 8 Gay v. City of Wichita Falls , 457 S.W.3d 499 (Tex. App.

— El Paso 2014, no pet.)

................................ ..... 7, 8 , 9 General Services Com’n v. Little

- Tex Insulation Co., Inc. , 39 S.W.3d 591 (Tex. 2001)

................................ ................................ ........................ 6 Gentilello v. University of Texas Southwestern Health Systems , 2014 WL 1225160 (Tex. App.

— Dallas, 2014)

................................ ........................ 6 Humana Ins. Co. v. Mueller , 2015 WL 1938657, No. 04

- 14

- 752

- CV (Tex. App.

— San Antonio, April 29, 2015, no pet. h.)

................................ ................................ ................................ ..... 9 Lubbock County Water Control & Imp. Dist. v. Church & Akin, L.L.C. , 442 S.W.3d 297 (Tex. 2014)

................................ ................................ .................... 10- v Mayhew v. Town of Sunnyvale, 964 S.W.2d 922 (Tex.1998)

................................ ................................ ....................... 5 R epublic Power Partners, L.P. v. City of Lubbock , 424 S.W.3d 184 (Tex. App.

— Amarillo 2014, no pet.)

................................ ....... 8 , 9 Richardson Hosp. Auth. v. Duru , 387 S.W.3d 109 (Tex. App.

— Dallas 2012, no pet.)

................................ ............... 7 State v. Lueck , 290 S.W.3d 876 (Tex. 2009)

................................ ................................ ...................... 5 Tex. Natural Res. Conservation Comm’n v. IT

- Davy , 74 S.W.3d 849 (Tex. 2002)

................................ ................................ ........................ 5 Texas Ass’n of Bus. v. Texas Air Control Bd. , 852 S.W.2d 440 (Tex. 1993)

................................ ................................ ...................... 6 Texas Dep’t of Parks and Wildlife v. Miranda, 133 S.W.3d 217 (Tex. 2004)

................................ ................................ .................. 5 , 6 Texas Dept. of Pub. Safety v. Int’l Capital Corp. , 40 S.W.3d 687 (Tex. App.

— Austin 2001, no pet.)

................................ ................. 5 Texas Dept. of Transportation v. Jones , 8 S.W.3d 636 (Tex. 1999)

................................ ................................ .......................... 7 Tooke v. City of Mexia, 197 S.W.3d 325 (Tex. 2006)

................................ ................................ .................. 5 , 7 University of Tex. Med. Branch v. York , 871 S.W.2d 175 (Tex.1994)

................................ ................................ ....................... 6

S TATUTES Tex. Civ. Prac. & Rem. Code § 51.014

................................ ................................ .......... 1 Texas Loc. Gov’t Code § 271.151

................................ ................................ ............ 2 , 10 Texas Lo c. Gov’t Code § 271.152

................................ ................................ .............. 4 , 8 Texas Gov’t Code § 2259.001

................................ ................................ ................. 4, 7, 9- vi
Texas Gov’t Code § 2259.002

................................ ................................ ................. 4 , 7 , 9 Texas Gov’t Code § 2259.031

................................ ................................ ..................... 2 , 7JOINT APPELLANTS’ BR IEF
- Page 1 STATEMENT OF THE CAS E Thi s is a suit for benefits under a self

- funded health plan established by the City of Austin for its eligible employees. [C.R. 29

- 30.] Appellants The United Healthcare Choice Plus Plan for the City of Austin (the “Plan”) and the City of Austin (the “City”) f iled a joint plea to the jurisdiction based on sovereign immunity, inasmuch as the City and the Plan are governmental entities. [C.R. 29.] The Trial Court denied the plea, and Appellants appealed pursuant to Tex. Civ. Prac. & Rem. Code § 51.014. [C.R. 206

- 208, 210.]
APPELLANTS ’ STATEMENT REGARDING ORAL ARGUMENT

Appellants believe that, given the importance of the issues presented by this appeal, oral argument would aid the Court’s decision making process.
ISSUE PRESENTED 1. Whether the Trial Court erred in denying Appellants’ plea to the jurisdiction.JOINT APPELLANTS’ BR IEF
- Page 2 STATEMENT OF FACTS A. The Plan . The City of Austin is a local governmental entity as defined by the Local Gov’t Code § 271.151. The Plan is a self

- funded plan solely funded by the City of Austin and created pursuant to Texas Gov’t Code § 2259.031. [C.R. 30.] The
terms of the Plan are set forth in the “Summary Master Benefit Plan Documents” (the “SPDs”), effective January 1, 2013, and January 1, 2014. [C.R. 30.] The Plan provides: 1.1 Purpose The City has contracted with United HealthCare Services, Inc. (UnitedHealthcare) , a private healthcare claims administrator, to administer this Plan and p rocess the payment or reimbursement of specified expenses incurred by eligible Covered Persons.

*** 1.13 Interpretation of Benefits The Plan Administrator has the sole and exclusive discretion to do all of the following: 1. Interpret Benefits under the Plan. 2. Interpret the other terms, conditions, limitations, and exclusions set out in the Plan Document. 3. Make factual determinations related to the Plan and its Benefits. 4. The Plan Administrator may, in certain circums tances, for purposes of overall cost savings or efficiency, in its sole discretion, offer BenefitsJOINT APPELLANTS’ BR IEF
- Page 3 for services that would otherwise not be Covered Services. The fact that the Plan Administrator does this in any particular case shall not in any way be dee med to require the Plan Administrator to do so in similar cases. [C.R. 93

- 94.] Further, the Plan sets forth a remedy in the event a claim for benefits is denied, namely, a member has two levels of appeal: an internal appeal to the Plan Administrator and, if the first appeal is denied, a second, external appeal to an Independent Review Organization unaffiliated with the Plan or the City. [C.R. 89

- 93.]
B. Appellee’s Claims. Appellee is an employee of the City of Austin and a qualified member of the Plan. [C .R. 30.] Appellee’s daughter underwent treatment in 2013 and 2014, and submitted claims to the Plan related to this treatment. [C.R. 30

- 31.] The Plan Administrator denied some of the claims because the services in question were not medically necessary. [ Id.] Appellee appealed through each level provided by the Plan, and the original denial was upheld. [C.R. 3

- 5.] Appellee filed suit against Appellants seeking benefits under the Plan. [C.R. 3.] Appellants fil ed a joint plea to the jurisdiction, which the Trial Court denied. [C.R. 29, 206.]JOINT APPELLANTS’ BR IEF
- Page 4 SUMMARY OF ARGUMENT Appellants have governmental immunity from Appellee’s claims. Absent legislative waiver, governmental immunity deprives the trial court of jurisdictio n to hear Appellee’s claims, and no such waiver exists. Appellee bears the burden of pleading a valid waiver of immunity, and he has not done so. Specifically, Appellee pled that the City was engaged in a proprietary function, however, the
distinction be tween proprietary and governmental functions on which Appellee relies has been abolished by Tex. Local Gov’t Code § 271.152, and the legislature has stated expressly that a municipality does not waive immunity by establishing a self funded plan. See Tex. Gov’t Code §§ 2259.001, 2259.002. Appellee also pled, in the alternative, that Appellants waived immunity pursuant to Section 271.152. This argument fails because Appellee is not suing under a contract that provided services to a governmental entity. This Court should reverse the order of
the Trial Cour t and dismiss Appellee’s claims with prejudice.JOINT APPELLANTS’ BR IEF
- Page 5 ARGUMENT A. Standard of Review on Appeal
. A trial court's ruling on a plea to the jurisdiction is reviewed under a de novo
standard of review. Anderson v. City of San Antonio , 120 S.W.3d 5, 7 (Tex. App.

— San Antonio 2003, pet. denied); Texas Dept. of Pub. Safety v. Int’l Capital Corp. , 40 S.W.3d 687, 688 (Tex. App.

— Austin 2001, no pet.); Mayhew v. Town of Sunnyvale, 964 S.W.2d 922, 928 (Tex.1998).
B. Governmental Immunity
. Absent legislative waiver, governmental immunity shields governmental entities, including municipalities, fr om suit for common law and statutory claims. See, e.g., Tooke v. City of Mexia, 197 S.W.3d 325, 332 (Tex. 2006); Ben Bolt

Palito Blanco Consol. Indep. Sch. Dist. v. Texas Political Subdivisions Prop./Cas. Joint Self

- Ins. Fund , 212 S.W.3d 320, 327 (Tex. 2006) (holding that immunity
extended to self

- funded plans or cooperative insurance entities created by governmental entities); Tex. Natural Res. Conservation Comm’n v. IT

- Davy , 74 S.W.3d 849, 853

- 55 (Tex. 2002); Dallas County Mental Health and Mental Retardation v. Bossley, 968 S.W.2d 339, 341

- 42 (Tex. 1998); see also State v.
Lueck , 290 S.W.3d 876, 880 (Tex. 2009). Governmental immunity from suit deprives the trial court of subject matter jurisdiction and, thus, is properly asserted in a plea to the jurisdiction. Texas Dep’t of Parks and Wildlife v. Miranda, 133JOINT APPELLANTS’ BR IEF
- Page 6 S.W.3d 217, 225

- 226 (Tex. 2004). When subject matter jurisdiction is contested, “[t]he trial court must determine at its earliest opportunity whether it has the constitutional or statutory authority to decide the case before allowing the litigation to proceed.” Id. at 226. Whether the tr ial court has subject matter jurisdiction is a question of law subject to de novo appeal. Id. Appellee bears the burden to allege facts that affirmatively demonstrate the trial court’s jurisdiction to hear a case. Texas Ass’n of Bus. v. Texas Air Control
Bd. , 852 S.W.2d 440, 443 (Tex. 1993). If the pleadings affirmatively negate th e existence of jurisdiction, the plea to the jurisdiction may be granted without allowing the plaintiff an opportunity to amend. Texas Dept. of Parks and Wildlife
v. Miranda , 133 S.W.3d 217, 226, 227 (Tex. 2004). The State’s consent may be alleged either by reference to a statute or by pleading express legislative permission. General Services Com’n v. Little

- Tex Insulation Co., Inc. , 39 S.W.3d 591, 594 (Tex. 2001). Texas does not recognize the doctrine of waiver of governmental immunity by conduct. Gentilello v. University of Texas Southwestern Health Systems , 2014 WL 1225160, at *5 (Tex. App.

— Dallas, 2014) (“In summary, the Texas Supreme Court has never ruled that a doctrine of waiver of governmental immunity by conduct exists.”). Legislative

consent to sue must be made in “clear and unambiguous language.” University of
Tex. Med. Branch v. York , 871 S.W.2d 175, 177 (Tex.1994). Absent this consent,JOINT APPELLANTS’ BR IEF
- Page 7 the trial court lacks a jurisdictional basis to hear the claim. Texas Dept. of Transportation v. Jo nes , 8 S.W.3d 636, 638

- 39 (Tex. 1999). Here, Appellee failed to allege a valid waiver of immunity, and the Trial Court therefore erred in denying Appellants’ plea to the jurisdiction.
C. The Plan is Immune From Suit and Liability
. The City is a governmental entity immune from suit, absent legislative
waiver. See, e.g., Ben Bolt

- Palito Blanco Consol. Indep. Sch. Dist. v. Texas Political Subdivisions Prop./Cas. Joint Self

- Ins. Fund , 212 S.W.3d 320, 327 (Tex. 2006). The Plan, as an entity created by the City pursuant to authority granted by Texas Gov’t Code § 2259.031, is likewise immune. Id. A mu nicipality does not waive immunity by providing benefits to its employees, whether through as self

funded plan or otherwise. See Tex. Gov’t Code §§ 2259.001, 2259.002 (stating that a municipality does not waiv e immunity by establishing a self

- funded plan);
see also Gay v. City of Wichita Falls , 457 S.W.3d 4 99, 505 (Tex. App.

— El Paso Aug. 13, 2014, no pet.) (holding that a city was immune from suit when it provided benefits to its employees, citing Texas Gov’t Code Chap ter 271 and Tooke v. City of Mexia , 197 S.W.3d 325, 332 (Tex. 2006). Appellants did not waive immunity by offering benefits to eligible employees of the City and their dependents. Richardson Hosp. Auth. v. Duru , 387 S.W.3d 109, 113 (Tex. App.

— Dallas 2012, no pet.) (holding that a municipalit y did not waive immunity by offering insuranceJOINT APPELLANTS’ BR IEF
- Page 8 to employees, because such contracts did not fall within the waiver of immunity in
Tex. Local Gov’t Code § 271.152); Foster v. Teacher Ret. Sys. , 273 S.W.3d 883, 886 (Tex. App.

— Austin 2008, no pet.) (holding that a state agency did not waive immunity by provid ing benefits via a self

- funded plan). Accordingly, Appellants are immune from suit, and this Court should reverse the Trial Court’s ruling and enter judgment dismissing Appellee’s claims.
D. Appellee Has Not Pled a Valid Waiver of Immunity
. In his amended pe tition, Appellee asserts that (1) Appellants were not entitled to immunity because they were performing a proprietary function, and (2) in the alternative, Appellants waived their immunity pursuant to Section 2 71.152, because the documents establishing the Plan constitute a contract under which services were provided to the City. Appellee has failed to plead a valid waiver of immunity, and this Court should reverse the Trial Court and dismiss his claims.
1. The Pr oprietary/Governmental Function Distinction Does Not Apply

. The legislature, in enacting Texas Local Government Code Chapter 271, refused to apply the distinction between proprietary and governmental functions to claims for breach of contract, and it therefore has no application here. See Republ ic Power Partners, L.P. v. City of Lubbock , 424 S.W.3d 184, 190

- 191 (Tex. App.

— Amarillo 2014, no pet.); Gay v . City of Wichita Falls , 457 S.W.3d 499, 505 (Tex. App.

— El Paso 2014, no pet.); City of San Antonio ex rel. City Pub. Serv. Bd.JOINT APPELLANTS’ BR IEF
- Page 9 v. Wheelabrator Air Pollution Control, Inc. , 381 S.W.597, 605 (Tex. App.

— San Antonio 2012, pet. denied). Further, the legislature has expressly stated that the establishment of a self

funded plan does not waive Appellants’ immunity. See Tex. Gov’t Code §§ 2259.001, 2259.002 (stating that a municipality does not w aive immunity by establishing a self

- funded plan); see also Humana Ins. C o. v. Mueller , 2015 WL 1938657, No. 04

- 14

- 752

- CV (Tex. App.

— San Antonio, April 29, 2015, no pet. h.) (holding that establishing a self

- funded plan did not waive immunity of a governmental entity). Appellee’s reliance, in his pleadings in the Trial Court, o n City of Georgetown v. Lower Colorado River Authority , 413 S.W.3d 803 (Tex. App.

— Austin 2013, pet. dism’d) is misplaced. First, City of Georgetown involved a contract between a city and its electrical supplier. Id. This case, in contrast
involves a sui t against a self

- funded plan established by the City for its employees, and the legislature has stated expressly that a municipality does not waive immunity by establishing a self

- funded plan. See Gov’t Code § 2259.002. Second, the distinction between proprietary and governmental functions relied on in City of Georgetown has been rejected by numerous courts since, and is no longer valid. See, e.g., Republic Power , 424 S.W.3d at 184; Gay , 457 S.W.3d at 505.JOINT APPELLANTS’ BR IEF
- Page 10 2. Appellee did not plead a valid waiver of immunity under Chapter 271

. In order to plead a valid waiver of immunity under Chapter 271, Appellee must show that the contract provides for the provision of goods and services to the local govern mental entity. Tex. Loc. Gov’t Code § 271.151. The contract at issue in this case does not provide for services to a local governmental entity, and Appellants did not allege or show that any services were pro vided to the City pursuant to the Plan. Accordingly, Appellants did not waive immunity. See, e.g., Lubbock County Water Control & Imp. Dist. v. Church & Akin, L.L.C. , 442 S.W.3d 297, 303 (Tex. 2014) (holding that the provision of services to a water district’s constituents did not constitute the provision of services to the water district, and t herefore immunity was not waived under Chapter 271); East Houston Estate Apartments, LLC v. City of Houston , 294 S.W.3d 723, 726 (Tex. App.

— Houston [ 1st Dist.] 2009, no pet.). Inasmuch as Appellee was not providing services to the City under the contract sued on, the Plan is not a contract subject to
section 271.151. Id.
PRAYER For the foregoing reasons, Appellants request that this Court reverse the Trial Court’s order denying Appellants’ pl ea to the jurisdiction and render judgment dismissing Appellee’s claims.JOINT APPELLANTS’ BR IEF
- Page 11 Respectfully submitted,

By: /s/ Lance V. Clack Andrew G. Jubinsky Texas Bar No. 11043000 andy.jubinsky@figdav.com Lance V. Clack Texas Bar No. 24040694 lance.clack@figdav.com
F IGARI & D AVENPORT , L.L.P. 901 Main Street, Suite 3400 Dallas, Texas 75202 Tel: (214) 939

- 2000 Fax: (214) 939

- 2090
A TTORNEYS FOR THE U NITED H EALTHCARE C HOICE P LUS P LAN FOR C ITY OF A USTIN E MPLOYEES

KAREN M. KENNARD, CITY ATTORNEY MEGHAN L. RILEY, CHIEF LITIGATION By: /s/ Megan Mosby Andralee Cain Lloyd State Bar No. 24071577 andralee.lloyd@austintexas.gov Megan Mosby State Bar No. 24073392 megan.mosby@austintexas.gov City of Austin

– Law Department P. O. Box 1546 Austin, Texas 78767

- 1546 Tel: (512) 974

- 2918 Fax: (512) 974

- 1311
A TTORNEYS FOR C ITY OF A USTINJOINT APPELLANTS’ BR IEF
- Page 12 CERTIFICATE OF COMPL IANCE This document complies the word

- count limitations of Rule 9.4(i)(3) because it contains 1,922 words as calculated per the word processing program used for its preparation, excluding any parts exempted by Rule 9.4(i)(1).

/s/ Lance V. Clack Lance V. Clack

CERTIFICATE OF SERVI CE On the 24th day of June, 2015, a true and correct copy of the foregoing document was served on counsel as follows: Via E
- Service Amar Raval araval@plummerlawyers.com James C. Plummer jplummer@plummerlawyers.com P LUMMER & K UYKENDALL 4203 Montrose Blvd., Suite 270 Houston, Texas 77006 Attorney for Plaintiff /s/ Lance V. Clack Lance V. ClackAPPENDIX