NO. 03-15-00349-CV

In the 

Third Court of Appeals 

Of Texas 

SHAMROCK PSYCHIATRIC, P.A. 

Appellant, 

V. 

TEXAS DEPARTMENT OF HEALTH AND HUMAN SERVICES,

KYLE JANEK, MD, EXECUTIVE COMM’R

AND DOUGLAS WILSON, INSPECTOR GENERAL

 Appellees,

On appeal from the 126th District Court, Travis County, Texas 

Cause NO. D-1-GV-14-001833 

APPELLANT’S REPLY BRIEF 

Jason Ray 

Texas Bar No. 24000511 

Jennifer S. Riggs 

Texas Bar No. 16922300 

RIGGS & RAY, P.C. 

506 West 14th Street, Suite A 

Austin, Texas 78701 

512 457-9806

512 457-9066 – Facsimile 

jray@r-alaw.com

 ATTORNEYS FOR APPELLANT 

ACCEPTED

03-15-00349-CV

8167970

THIRD COURT OF APPEALS

AUSTIN, TEXAS

12/9/2015 4:58:35 PM

JEFFREY D. KYLE

CLERK

 FILED IN 3rd COURT OF APPEALS AUSTIN, TEXAS 12/9/2015 4:58:35 PM JEFFREY D. KYLE Clerk
Appellant’s Reply Brief

Page ii

TABLE OF CONTENTS

TABLE OF CONTENTS.......................................................................................... ii

INDEX OF AUTHORITIES.................................................................................... iii

SUMMARY OF REPLY ARGUMENT ...................................................................1

REPLY ARGUMENT ...............................................................................................3

Issue: Did the trial court have jurisdiction over the SOAH ALJ’s dismissl of the

payment hold hearing?.....................................................................................4

I. The HHSC “non-suit” did not deprive the SOAH of jurisdiction over 

the payment hold matter

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

II. The payment hold matter and the trial court’s mandamus jurisdiction 

regarding same are governed by Janek v. Harlingen Family Dentistry, 

P.C., 451 S.W.3d 97, 99 (Tex. App.—Austin 2014, no pet.). ..............5

Issue: Did the trial court have jurisdiction to order the HHSC and the SOAH to

give Shamrock a hearing?...............................................................................7

I. The jurisdiction to order that the HHSC provide a hearing is

governed by Hawkins v. Community Health Choice, Inc.,

127 S.W.3d 322 (Tex. App.—Austin 2004, orig. proceeding)............7

II. The SOAH must resolve the fact questions ..........................................9

III. The exhaustion doctrine does not apply here......................................11

PRAYER .............................................................................................................12

CERTIFICATE OF COMPLIANCE.......................................................................12

CERTIFICATE OF SERVICE ...............................................................................13
Appellant’s Reply Brief

Page iii

INDEX OF AUTHORITIES

CASES

Hawkins v. Community Health Choice, Inc.,

127 S.W.3d 322 (Tex. App.—Austin 2004, orig.proceeding) ......2, 7, 8, 9 , 10

Janek v. Harlingen Family Dentistry, P.C.,

451 S.W.3d 97 (Tex. App.—Austin 2014, no pet.)...............................5, 6, 11

Lindsay v. Sterling, 690 S.W.2d 560 (Tex. 1985) ...................................................11

Texas Mut. Ins. v. Ledbetter, 251 S.W.3d 31 (Tex. 2008).........................................4

STATUTES

TEX GOV’T CODE CH. 2260..................................................................................8

TEX GOV’T CODE 531.1201(a)..........................................................................8, 9
Appellant’s Reply Brief

Page 1

SUMMARY OF REPLY ARGUMENT

At issue in this case is the trial court’s jurisdiction to decide the scope of 

jurisdiction of the State Office of Administrative Hearings (SOAH), who was 

acting as the HHSC’s fact finder. The trial court simply failed to address the 

jurisdictional issues, dismissing the case for lack of trial court jurisdiction. That 

was error. 

In addition, the underlying SOAH case presents two distinct jurisdictional 

issues: (1) whether the SOAH continued to have jurisdiction over the payment hold 

hearing (credible allegation of fraud) and (2) whether the SOAH had jurisdiction 

over the final notice of overpayment hearing (general recoupment). It is undisputed 

in this case that the payment hold hearing was timely requested. Even if the 

SOAH was correct that it lacked jurisdiction over the second matter, that does not 

mean the first matter was moot. 

The HHSC withheld money from Shamrock on the basis of specific statutory 

authority over credible allegations of fraud. The HHSC abandoned those 

allegations and, at that time, then had a mandatory and ministerial duty to return 

the money withheld. The HHSC cannot use the payment hold process to 

effectively get a “leg up” on the second hearing. 

It is possible the HHSC might ultimately prevail on some of its final 

overpayment allegations, but the HHSC must seek relief in district court to reduce 
Appellant’s Reply Brief

Page 2

the debt to judgment. That kind of adjudication is a matter within the exclusive 

jurisdiction of the judicial branch. The HHSC must use proper legal process to 

pursue that alleged debt; it cannot use the statutory temporary hold process to 

circumvent proper legal process. 

With respect to the second hearing (the overpayment hearing), the decision 

in Hawkins v. Community Health Choice, Inc., 127 S.W.3d 322 (Tex. App.—

Austin 2004, orig. proceeding), controls here. As in that case, the HHSC may have 

had a defense about the timeliness of Shamrock’s request for a hearing, but the 

issue was whether there should be a hearing and, more important, whether the trial 

court had jurisdiction to order that a hearing be provided. 

The SOAH ALJ should not have simply dismissed the second hearing (the 

final overpayment hearing) simply because the HHSC attempted to “dismiss” the 

payment hold hearing. The question is not only whether the ALJ should have 

“ordered” the HHSC to amend its pleadings, but also whether the final 

overpayment was already at issue in the various filings by the HHSC. Fact 

questions also existed about waiver and/or consent to jurisdiction. Those questions 

were never resolved by the SOAH ALJ, or if they were resolved, were resolved in 

Shamrock’s favor. 
Appellant’s Reply Brief

Page 3

Finally, the exhaustion doctrine does not apply because the HHSC never 

entered an agency order on the SOAH ALJ’s Order No. 11. There was no final 

agency order for Shamrock to appeal.
Appellant’s Reply Brief

Page 4

REPLY ARGUMENT

Issue: Did the trial court have jurisdiction over the payment hold hearing?

I. The HHSC “non-suit” did not deprive the SOAH of jurisdiction

over the payment hold matter.

Shamrock’s request for a payment hold hearing was, practically speaking, a 

request for affirmative relief from the HHSC’s payment hold. The HHSC had no 

right to dismiss Shamrock’s appeal of the payment hold. The only way the HHSC

could deprive the SOAH Administrative Law Judge of jurisdiction over 

Shamrock’s appeal was to make the appeal moot by returning all of Shamrock’s 

money that the HHSC had withheld as a result of the payment hold.

This situation is analogous to the parties’ rights to non-suit under Texas 

Rules of Civil Procedure Rule 162. A party can non-suit its claims, but such 

nonsuit will not affect pending claims for affirmative relief. Texas Mut. Ins. v. 

Ledbetter, 251 S.W.3d 31, 37 (Tex. 2008). Here, Shamrock had appealed the 

HHSC payment hold and sought return of its money. Without the HHSC sua 

sponte releasing Shamrock’s money or a final agency indicating that Shamrock 

should not be subject to the payment hold, the HHSC could not deprive the SOAH 

of jurisdiction over Shamrock’s request for relief from the payment hold. 

That payment hold appeal stands alone. The HHSC cannot argue both that 

the payment hold hearing was somehow combined with the final overpayment 
Appellant’s Reply Brief

Page 5

hearing, and at the same time argue that the HHSC never put the final overpayment 

at issue. The SOAH ALJ should have proceeded with the payment hold hearing. 

II. The payment hold matter and the trial court’s mandamus jurisdiction 

regarding same are governed by Janek v. Harlingen Family Dentistry, 

P.C., 451 S.W.3d 97, 99 (Tex. App.—Austin 2014, no pet.)

The relief that could have and should have been granted to Shamrock when 

the HHSC abandoned its allegations of a credible allegation of fraud was that the 

money that had been withheld by the HHSC would be returned to Shamrock. See 

Janek v. Harlingen Family Dentistry, P.C., 451 S.W.3d 97, 99 (Tex. App.—Austin 

2014, no pet.). When the HHSC abandoned its payment hold claim against 

Shamrock, it did not return Shamrock’s money.

The purpose of a temporary payment hold is to secure the HHSC’s financial 

position pending the overpayment hearing, for which the OIG shoulders its burden 

of showing that the money in fact constituted an “overpayment.” The HHSC has 

effectively taken money due to Shamrock without ever reducing that alleged final 

overpayment to a judgment or order. By abandoning its payment hold claim but 

keeping the money, the HHSC prevented Shamrock from getting any relief. The 

HHSC has circumvented Shamrock’s statutory right to a payment hold hearing and 

abused the statutory temporary payment hold process. 

This part of the underlying case is governed by this Court’s decision in 

Janek v. Harlingen Family Dentistry, P.C., 451 S.W.3d 97. In that case, this Court 
Appellant’s Reply Brief

Page 6

determined that the trial court had jurisdiction to order that the HHSC return 

money withheld on a temporary payment hold when the SOAH judge determined 

that the HHSC had no credible evidence of fraud, and the HHSC did not appeal 

that decision. Similar considerations apply here, especially since there has been no 

finding that Shamrock committed fraud. 

The HHSC attempts to distinguish Harlingen on the basis that Harlingen

involved a final proposal for decision and an agency order based on that proposal 

for decision, whereas this case does not. (Appellees’ Brief, pp. 17-18) The HHSC 

also maintains that this case is different because SOAH Order No. 11 did not order 

any funds subject to the payment hold be released to Shamrock. (Appellees’ Brief, 

p. 18). Although Order No. 11 did not purport to resolve the validity of the 

payment hold or the credibility of the allegation of fraud the HHSC used to support 

it, the practical legal effect of the order was the same as that in the Harlingen case, 

because there is no finding that the HHSC possessed a credible allegation of fraud 

against Shamrock. 

When it abandoned its allegations of fraud against Shamrock, the payment 

hold simply ceased. Assuming that the HHSC could abandon its claims while 

Shamrock’s appeal was not withdrawn, the HHSC’s action was the equivalent of 

an admission that it had insufficient evidence of fraud to sustain the payment hold. 

The limited nature of Order No. 11 and its lack of any findings of fact or 
Appellant’s Reply Brief

Page 7

conclusions of law cannot change the legal effect of the HHSC abandoning its 

payment hold or the statutory limits on payment holds. 

SOAH Order No. 11 is procedurally significant only in this sense: it was not 

a proposal for decision on which the HHSC could base a final agency order. Thus,

Order No. 11 did not trigger the Administrative Procedure Act requirements 

applicable to final agency orders (i.e. motions for rehearing). The HHSC cannot 

allege both that there was no final agency order and that a “final order” was not 

followed by a timely motion for rehearing and subsequent lawsuit. (Appellees’ 

brief, p. 19)

Mandamus was the proper remedy. It was the only remedy available to 

Shamrock. 

Issue: Did the trial court have jurisdiction to order the HHSC and the SOAH

to give Shamrock a hearing?

I. The jurisdiction to order that the HHSC provide a hearing is governed 

by Hawkins v. Community Health Choice, Inc., 127 S.W.3d 322 (Tex. 

App.—Austin 2004, orig. proceeding)

The trial court also erred in concluding that it lacked jurisdiction to consider 

an application for writ of mandamus to compel the agency to provide a hearing on 

the final overpayment hearing. In that regard, this part of the case is governed by 

the decision in Hawkins v. Community Health Choice, Inc., 127 S.W.3d 322 (Tex. 

App.—Austin 2004, orig. proceeding).
Appellant’s Reply Brief

Page 8

The Community Health case involved disputed payments in the Texas 

Medicaid Managed Care program. Community Health filed a lawsuit seeking a 

writ of mandamus to compel the HHSC to submit a disputed payment matter to the 

SOAH for a contested case hearing. The HHSC filed a plea to the jurisdiction, 

contending that Community Health’s failure to provide timely pre-suit notice 

deprived the trial court of jurisdiction. The trial court denied the plea to the 

jurisdiction and granted Community Health’s writ of mandamus compelling the 

HHSC to refer the dispute to SOAH for resolution pursuant to the provisions of 

Chapter 2260 of the Texas Government Code. This Court determined that the trial 

court had not erred in granting the relief requested.

The Community Health court found as follows: 

While we agree that proper notice is a prerequisite to suit under chapter 

2260, the issue here is whether appellee has in fact complied with the notice 

provisions of chapter 2260. This is a disputed question of fact that should be 

presented to SOAH. Appellants would have us read Little–Tex to mean that 

the referring agency has the exclusive authority to decide whether and to 

what extent an adverse party is in compliance with chapter 2260. . . . Were

the agency charged with making the referral the ultimate finder of fact, then 

conceivably no issues of fact would make it past the agency determination. 

Such a reading would essentially eliminate the need for a referral to SOAH 

altogether and frustrate the legislature’s intent to provide an alternate 

procedure of resolving contractual disputes with government agencies.

Community Health, 127 S.W.3d at 325. 

Similar considerations apply here. Both Chapter 531 and Chapter 2260 of 

the Texas Government Code confer the right to a contested case hearing. The 
Appellant’s Reply Brief

Page 9

version of section 531.1201 applicable prior to September 1, 2015 provided as 

follows: 

(a) A provider must request an appeal under this section not later than the 

15th day after the date the provider is notified that the commission or the 

commission's office of inspector general will seek to recover an 

overpayment or debt from the provider. On receipt of a timely written 

request by a provider who is the subject of a recoupment of overpayment or 

recoupment of debt arising out of a fraud or abuse investigation, the office 

of inspector general shall file a docketing request with the State Office of 

Administrative Hearings or the Health and Human Services Commission 

appeals division, as requested by the provider, for an administrative hearing 

regarding the proposed recoupment amount and any associated damages or 

penalties. The office shall file the docketing request under this section not 

later than the 60th day after the date of the provider's request for an 

administrative hearing or not later than the 60th day after the completion of 

the informal resolution process, if applicable.

TEX. GOV’T CODE 531.1201. 

Section 531.1201 merges the notice for a payment hold hearing and a 

general recoupment hearing. As a result, a timely request for a payment hold 

hearing satisfies the requirement for a hearing on a general recoupment hearing. 

The HHSC effort to require two (or more) notices is simply not supported by the 

language of the statute. 

And even if the request for a hearing on the payment hold is not deemed 

sufficient to trigger section 531.1201 with respect to the general recoupment 

hearing, the Community Health decision rationale applies here. If the HHSC is the 

ultimate finder of fact on the timeliness and sufficiency of a request for a hearing, 
Appellant’s Reply Brief

Page 10

then conceivably no issues of fact would ever make it past the HHSC

determination. “Such a reading would essentially eliminate the need for a referral 

to SOAH altogether and frustrate the legislature’s intent” to provide a remedy 

under section 531.1201. See Community Health, 127 S.W.3d at 325.

II. The SOAH must resolve fact questions.

Here, the SOAH judge apparently viewed this matter as if the sole disputed 

issue with respect to the second hearing (the final overpayment hearing), was

whether the administrative law judge had the authority “to require OIG to amend 

its pleadings to assert an overpayment claim in this case.” (App. Ex. 2) Although 

Shamrock does not contend that the SOAH judge has the authority to issue a writ 

of mandamus to compel the HHSC to “do” anything, as indicated in Shamrock’s 

initial brief, certainly the judge has the authority to enforce the parties’ agreement. 

The consequence of doing so may not be an order to replead, but it could include 

what amount to “death penalty” sanctions that have the same effect. 

Applying the Community Health decision, even assuming that the ALJ’s 

stated legal reasoning was correct, it was an incomplete analysis of the facts and 

law applicable in this case. As indicated in Shamrock’s initial brief, the HHSC’s 

allegation regarding the final overpayment claim was already a matter of record. 

(Appellant’s Brief, pp. 15-16) Was that sufficient? The pleadings in administrative 

proceedings are not tested by the technical niceties of pleading and practice 
Appellant’s Reply Brief

Page 11

applicable in court trials. In addition, by entering into the agreement, did the 

HHSC waive more formal notice? Did the HHSC effectively consent to hearing 

over the final overpayment claims? The SOAH judge did not address these issues. 

The trial court had jurisdiction to order that the HHSC provide a contested case at 

which these factual issues could be resolved. 

III. The exhaustion doctrine does not control here

Shamrock does not dispute that a party seeking to appeal a final agency 

decision ordinarily must exhaust administrative remedies. But that requirement 

applies to an appeal of a final agency order. Here, the HHSC admits that Order No. 

11 was not a final agency order such as that at issue in the Harlingen case. (See

Appellees’ Brief, pp. 17-18) The HHSC never acted on or adopted the Order No. 

11. As a result, the remedies allegedly not exhausted were not available. For that 

reason, cases such as Lindsay v. Sterling, 690 S.W.2d 560 (Tex. 1985) and its 

progeny are inapplicable. 
Appellant’s Reply Brief

Page 12

PRAYER

For these reasons, Shamrock prays that this Court reverse the trial court 

order dismissing the case for want of jurisdiction and instruct the trial court to 

issue a Writ of Mandamus requiring that the OIG release the funds withheld under 

the payment hold, and to docket its general overpayment claims at the SOAH, as 

requested by Shamrock.

Respectfully submitted,

____________________________________

Jason Ray

State Bar No. 24000511

Jennifer S. Riggs

State Bar No. 16922300

RIGGS & RAY, P.C. 

506 West 14th Street, Suite A

Austin, Texas 78701

512 457-9806

512 457-9066 – Facsimile 

CERTIFICATE OF COMPLIANCE

I certify that this Brief complies with TRAP Rule 9.4 and contains 2,479

words in Times New Roman typeface of 14-point.

______________________________

Jason Ray
Appellant’s Reply Brief

Page 13

CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing document was 

served by eservice on December 9, 2015 to the following: 

Eugene A. Clayborn

Assistant Attorney General

Deputy Chief, Administrative Law Division

Office of the Attorney General of Texas

P.O. Box 12548, Capitol Station

Austin, Texas 78711-2548

Eugene.clayborn@texasattorneygeneral.gov

______________________________

Jason Ray