### T E X A S C O U R T O F A P P E A L S , T H I R D D I S T R I C T , A T A U S T I N

NO. 03-15-00309- CV

The United Healthcare C hoice P lus Plan f or City of Austin E m ployees and T he City of Austin , Appellan ts

v. Charles Lesniak, Ap pellee

F ROM TH E DISTRI CT COURT O F TRAVIS CO UNTY, 419 TH JUDICI AL DISTRICT NO. D-1 -GN-1 5-0 0006 7, H ONO RAB LE GARY H ARGER, JUDGE P RESIDING

M E M O R A N D U M O P I N I O N

I n this in te r lo c u to r y a p p e a l, a p p e ll a n ts the City of Austin and its self-f unded employ ee health-insuran ce p l an (t he United Hea lthcare Choice Plus Plan for City of Austin Employ ees) challeng e the trial court’s order deny ing their plea to t h e j u ri sdiction asser ting g overnme ntal immunit y . The underly ing controve rsy conce rns the Plan’s denial of health-c are benef its to City employ ee Charl es L es n i ak for trea tment rec eived by his daug hter, a depende nt cover ed under the Plan. L esniak sued the City and the Plan, alleg ing tha t they improperly

denied some of

his claims for his daug hter’s trea tment, and appellants filed a plea to the jurisdiction. Be cause we conclude that the City and the Plan have g overnme ntal immunit y from this suit, we reve rse the trial court’s order deny ing appellants’ plea to the jurisdiction and rende r judgme nt dismiss ing appellee ’s claims for lack of subject-matter

jurisdiction.BACK GR OUND The City established a self-f unded insurance plan (the Plan) to p ro v i de medical benef its to its elig ible employ ees and contra cted with United Hea lthCare S er v i ce s , I nc. (United H e a lt h Ca r e ) to a d mi n is te r th e Pl a

n . S e e T e x. G o v ’ t Co d e § 2 2 5 9

. 0 3 1 ( g o v e r n me n ta l u n it ma y e s ta b li s h self-insura

nce fund to p ro t ec t go vernme ntal unit and it s office rs, employ ees, and ag ents from any insurable risk or hazard). L esniak’s pleading s alleg ed that (1) he was a cover ed employ ee under th e P l an , (2) his daug hter was a cover ed depende nt under the Plan, and (3) he made require d contributions to the Plan in consideration of t he cove rag e that it provided. He further alleg ed that the Plan wrong fully denied benef its for a portion of his daug hter’s trea tment at an inpatient fac ility , deter mining that the trea tment was not medically nece ssary . He filed a lawsuit ag ainst the City and the Plan, alleg ing that they had there by brea ched the contra ct of cover ag e. The City and the Plan jointly filed a plea to the jurisdiction, asser ting that L esniak’s suit was barr ed b y g overnme ntal immunit y an d at t ac h ing to their plea copies of the “Summary Master Be nefit Plan Documents” (Plan Documents) that L esniak alleg ed they had brea ched. T he trial court denied the plea, and the City and t he Plan filed this interlocutory appea l of that denial. See Tex. Civ. Prac. & Rem. Code § 51.014 (a) (8) (per son may appea l from interlocutory order of district court that g rants or deni es plea to jurisdiction by

g overnme ntal unit).

DISCUSSIO N Appella n t s ar gue that they are immune from suit absent leg islative waiver

. See Ben Bolt-Palit o Blanco C onsol. Indep. Sc h. Dist. v. Texas Poli tical Subdivisions Prop./Cas. Joint Self-Ins. Fund , 212 S.W .3d 320, 325-26 (Tex. 2006) (political subdivisions of State, including cities

2and their self-insura nce funds, enjoy g overnme ntal immunit y from suit absent waiver ). L esni ak responds that appellants h ave no g overnme ntal immunit y beca use this case arises out of the City ’s proprieta

ry function, rathe r than its g overnme ntal function. See Bailey v. City of Austin , 972 S.W .2d 180, 192-93 (Te x . App.—Austin 1998, pet. denied) (municipality perf orming proprieta

ry , rathe r t han publi c function, does not have gove rnmental im munity ). Alt erna tively , he asserts that if the C ity has gover

n m en t al i m m u nity , that immunit y has been waived by statute. See Tex. L oc. Gov’ t Code § 271.152 (wa iving sovereig n immunit y for breac h-of- contra ct claims “subjec t to the

terms and condition s o f t h i s subchapte r”)

. Gover nmental immunit y from suit deprive s a court of

s u b ject-ma tter jurisdiction and there fore is proper ly asser ted in a plea to the jurisdiction. State v. Lueck , 290 S.W .3d 876, 880 (Tex. 2009). Whether a trial court has subject-matter jurisdiction is a question of l aw that we re view de novo, and i n doing so we will not look at t he merits of t he case but w ill construe the pleading s in favor of the plaintiff, ac cepting the fa ctual alleg ations there in a s true. Lukes v. Employe es Ret. Sys. of Tex. , 59 S.W .3d 838, 841 (Tex. App.—Austin 2001, no pet.). “Proprietary function” as bar to im m uni ty

The Baileyopinion on which L esniak re lies to support his arg ument that the City ’s self-insura

nce plan is a proprieta

ry function and there fore defe ats the City ’s entitlement to immunit y preda tes amendments to the Gover nment Code specific ally stating that “[t] he establishment and maintenanc e of a self-insura nce pr og ram by

a g overnme ntal unit is not a wai ver of immunity or of

a defe nse o f t h e go v er n mental unit or its employ ees,” Tex. Gov’t Code § 2259.002 (empha sis added) , and that “[t] he issuance of a public secur ity or the use of available money for a self-insura nce fund under t h i s subchapte r is a public purpose of the g overnme ntal unit,” id. § 2259.032; see

3Ben Bolt-Palito , 212 S.W .3d at 3 2 7 (noting Chapter 2259 amendments and concluding that

self-insura

nce fund composed of local political subdivisions was perf orming g overnme ntal function and entitled to asser

t immuni ty

ag ainst fund member sc hool district’s cover ag e cla im and enjoy ed

same g overnme ntal immunit y as other political s u b d i visions, absent waiver ); Humana Ins. Co. v. Mueller , No. 04-14-00752- CV, 2015 WL 1938657, at *3 (Tex. App.—San Antonio Apr. 29, 2015, pet. filed) (mem. op.) (Chapter 2259 applies to g overnme ntal unit’s establishment of self-insura nce fund, including provision there under th at such establishment “is not a waiver of immunit y ”). I n light of Gover

nment Code Chapter 2259’s pronounce ment that the provision of self-insura nce funds is a g overnme ntal fu n ct i on that does not waive immunit y and the Ben Bolt-Palito holding, we conclude that th e p ro p ri et ary –public dichotomy is no longe r dispositi ve in the context of selfinsurance plans offe red by municipalities and that appellants ar e immune from L esniak’s lawsuit absent leg islative waiver

. Waiver of imm uni ty under Local Gove rnm ent Code

We there fore consider L esniak’s second arg ument: that the City waived its immunit y under L ocal Gover

nment Code Chapter 271 by enter ing into a contra ct for the provision of service s. See Tex. L oc. Gov’t Code § 271.151 (“c ontrac t subject to this subchapte r” means “a written contra ct stating the essential terms of the ag ree ment for providing g oods or service s to the local g overnme ntal entity that is proper ly executed on behalf o f t h e l o ca l g overnme ntal entity ”), .152 (“A local g overnme ntal entity that is authorized by statute or the constitution to enter into a contra ct and that

enter s into a contrac t subject to this subchapter wa ives sovere ign immunity to suit for the purpose of adjudicating a claim for brea ch of the contra ct, subject to t h e t er m s and conditions of this

4subchapte r.”) ; see Ben Bolt-Palito , 212 S.W .3d at 327 (“While the mere act of self-insuring does not

itself constitute a waiver of immunit y . . . enter ing into ‘a written contra ct stating the essential terms of [an] ag ree ment for providing g oods or [i nsuranc e] service s to [a] local g overnme ntal entity ’ clea rly does.”)

. Appellants respond that the waiv er for Chapter 271 contra cts does not apply here beca use L esniak does not provide any service s to the City direc tl y p u rs u an t to the Plan. L esniak

coun t er s that (1) he provides service s to the City in the form of his employ ment, (2) the Plan provides service s to the City in the form of the medical be nefits it provides to City employ ees and their depende nts, and (3) United Hea lthCare provides service s to the City i n t h e form of its administration of the Plan, including i t s m ak i ng of benef it-elig ibilit y deter

minations. We ag ree with L esniak that all of these may well qualify as “s er v i ces” under the supreme court’s broad interpre tation of t hat t erm with respe ct t o co n t ra ct s subject t o Chapter 271. See Kirby Lake Dev., Ltd. v. Clear Lake City W ater Auth. , 320 S.W .3d 829, 839 (Tex. 2010) (term “ser vices” in Chapter 271 is “broa d enoug h to encompa ss a wide arr ay of activiti es , ” and services provided need not be primary purp o s e o f ag ree ment); Ben Bolt-Palito , 212 S.W .3d at 327 (holding that self-insura nce fu n d ’s members provide service s to fund by virtue of fac t that they elec t fund’s g overning board, which appoints subcommittee that re solves claims disputes).

Howeve r, the waiver in Chapter 271 is n o t applicable any time a person makes a claim related t o the provisi on of any service s by any party to a local g overnme ntal entity

. Rather, the waiver of immunit y from suit e x plicitly applies only when a plaintiff with sta nding claims that

a party has brea ched a particula r kind of contra ct: o n e that “stat[es] the essential terms of [an]

5ag ree ment for providing g oods or service s to the local g overnme ntal entity that is proper ly executed

on behalf of the local g overnme ntal entity .” See Lubbock Cnty

. W ater Control & Imp. Dist. v. Church & Akin, L.L.C

. , 442 S.W .3d 297, 301-02 (Tex. 2014) (c o u rt s must look bey ond title of written contra ct to deter

mine whether it (1) contains ag ree ment to provide service s to g overnme ntal entity and (2) states essential terms of ag ree ment for pr ovision of such services). The “contrac ts” under which L esniak sues the City and P l an fo r brea ch are the 2013 and 2014 Plan Documents, which outline the cover ag e that the Plan provides. The Plan Documents state their purpose: “to set forth provisions of the Plan that provide and/or aff ect pay ment or reimburse ment.” They also rec ite that (1) the “City has contra cted with [Unit ed Hea lthCare], a private healthca re claims administrator,

to administer this Plan and proce ss the pay ment or reimburse ment of specifie d expenses incurre d by elig ible Covered Persons” and (2) th e “P l an [Documents] and the applications of the Covered Persons, if any , constitute the entire contra ct of Coverag e under t h e P l an betwee n the City , the Plan Administ rator, a

nd the Covere d Persons.” Nonethele ss, the Plan D ocuments cannot rea sonably be construed as (1) containing

an ag ree m en t b y any party to provide service s to the City and (2) stating the “esse ntial terms” of such ag ree ment. See id. , 442 S.W .3d at 302 (holding that beca use marina lease under which lessee sued lessor water district for brea ch of contra ct neither require d lessee to provide marina- opera tion service s to lessor nor lessor to pay for such service s, Chapter 271 did not waive lessor’s immunit y ). To beg in with, the Plan Documents do not rec ite any consideration on the C ity ’s part in exchang e for the administrative service s t h at United Hea lthCare is to provide—a n essential term of any ag ree ment for service s. See J.M. Davidson, Inc. v. W ebs t er , 1 2 8 S .W.3d 223, 235 (Tex. 2003)

6(consider ation is essential element for valid, enfor cea ble contra ct); Roark v. Stallw orth Oil & Gas, Inc. , 813 S.W .2d 492, 496 (Tex. 1991) (consider ation is barg ained- for exchang e o f p ro m ises);

see also Kirby Lake Dev

. , 320 S.W .3d at 838-39 (esse ntial terms of contra ct ty pically include time of perf ormanc e, price to be paid, and service to be rende red) ; Fort W orth Indep. Sch. Dist. v. City of Fort W orth , 22 S.W .3d 831, 846 (Tex. 2000) (contra ct is leg ally binding “if its terms are sufficie ntly definite to enable a court to understand the parties’ obliga tions”). The Plan Documents also do not provide any details of Hea lthCare’s obliga tions as Plan Administrator, except to note that it has the “sole and exclusive d iscretion” to interpre t benef its, terms, conditions, and exclusions under the Plan; make fac tual deter

minations re lated to the Plan; and offe r benef its for service s not othe rwise

cover ed by

the Plan. Nor can the Plan Documents be rea sonably construed as (1) containing an ag ree ment by L esniak to provide employ ment or other se rvice s to the C ity or (2) a unil ater al contract on the 1 part of the City or Plan beca use they do not identify any perf ormanc e that cover ed persons must complete to be entit l ed t o b en efits. Cf. City of Houston v. W illiams , 353 S.W .3d 128, 135 (Tex. 2 2011) (holding that city ordinanc es cre ated unilatera l contra ct subject to Chapter 271 by promising city firef ighte r-e mploy ees cer

tain benef its in exchang e for actua l perf ormanc e of duties, wher e such benef its and duties were specific ally outlined in ordinance s). Fur thermore , the re cord c ontains no other contra cts stating the essential terms of any service s to be provided by any party , and L esniak’s

I n fac t, the Plan Docum en t s rec ite that “[t] he Plan does not constitute a contra ct of 1 employ ment.” Additionally , the Pla n Do cu m en t s rec ite that the City Manag er reta ins the authority to 2 am en d , ca ncel, or discontinue the Plan at any time without the consent of or prior notice to any cover ed per son. 7pleading s do not alleg e the exis tence of any other contra ct that the City and the Plan have brea ched

except for these Plan Documents.

On this rec ord, we conclude that the con t ra ct s under which L esniak sues the City and the Plan for brea ch of contra ct do not fall wi t h i n the limit ed waiver of immunit y in L ocal Go v er n m en t C ode S ections 271.151 and 271.152. Acc ording ly , we hold that the t rial court err ed in deny ing the plea to the jurisdiction.

CONCLUSION

The City and the Pla n have g overnme ntal immunit y from suit, absent waiver , of which ther e is no evidenc e on thi s rec ord. Ac cording ly , we r ever se the trial c ourt’s orde r deny ing the City and the Plan’s plea to the jurisdiction and rende r judgme nt dismiss ing L esniak’s claims for lack of jurisdiction.

__________________________________________ David Pury ear , J ustice Be fore J ustices Pury ear , Goodwin, and B ourland Reverse d and Rende red Filed: De cembe r 1, 2015

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