### TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03
- 20
- 00077
- CV

Molina Healthcare, Inc. and Molina Healthcare of Texas, Inc., Appellant s

v. The State of Texas ex rel. C hastiny Thurmond , Appellee

FROM THE 53RD DISTRICT COURT OF TRAVIS COUNTY N O. D
- 1
- GV
- 13
- 000451, THE HONORABLE KARIN CRUMP, JUDGE PRESIDING

M E M O R A N D U M O P I N I O N
This interlocutory appeal arises from a qui tam action brought under the Texas Medicaid Fraud Prevention Act (TMFPA) against appellants Molina Healt h care, In c. (Molina
He althcare) and Molina Healthcare of Texas, Inc

. (M olina Texas ) (collectively, Molina Ent iti es )

. On appeal, the M olina Entities challenge the district court ’ s order denying their motion to dismiss brought under the Texas Citizens Partic ipa tion Act (TCPA)

. Becau se the R e lator ’ s case is exempted from the TCPA , we affirm the district court ’ s order.

B ackground STAR +PL US is a Texas Medic aid managed

- care program for people who have disabilities or are age 65 or ol der

. I ndi viduals enrolled i n STAR +PLUS g et Medicaid health

- care and long

- term services and support t hat is coordinated by or through a single provider2

organization referred to as a managed

- care organization (M CO). See 1 Tex. Admin. Code § 353.2(60) (2020) (HHSC, General Prov isions )

. M olina Te xas is an MCO that p artic ipates in
STA R+PLU S under a contract with the Texas H ealth and Human Services Commission (HHSC)

.

Under its contract with HHSC , M olina Texas is obli gated to provide a defi ned set of covered health

- care and long

- term se rvices to el i gible STAR + PLUS members . In return , Moli na Texa s receives a monthly capitated p ayme nt

— i.e., a fixed, prede termined fee for each enrol led member that is not affected by the actual amount of covered services used by a n enrolled member. See i d. § 353.2(1) (defining “ capitat ion rat e ” ). M olina Te xas contracts with separate pr ovide rs to furnish the covered services and pays those prov iders for all covered services furnished to STAR+PLUS members

. Molina Texas ’ s contract with HHSC also obligates it to perform assess men ts of individ uals seeking to establis h el igibility fo r services , perform ann ual reassessments of those individuals a lready rec eiving se rvices , and to forward those assessments to HHSC

.

Relator C hast in y Thu rmo nd , a former employee of M olina Texas, filed the unde rly ing qui tam a ction on be h alf of the State of Texas to assert claims under the TMFPA

. 1
See Tex. Hum. Res. Code §§ 36.001

– .0132. Relator alleges in her petition that M olina
H ealthcare , through its wholly owned subsidiary M ol in a Texas , violate d the TMFPA by :

• F ailing to perform , in violation of its contract with HHSC, initial assessments of
STAR+PLUS membe rs to d etermine whether they require long

- term care and to what

1 After reviewing the petiti o n and relate d supporting evidence, the Attorney General declined to intervene in the case. See Tex. Health & Hum . Res. Code § § 36.102 (requi ring private person bringing action under TMFPA to serve copy of petition and evidence on attorney general), . 1 0 4 (authorizing attorney general to take o v er or decline to take o ver qui tam action).3

degree and by failing to perf orm , in violation of its cont ra ct , annual rea s ses sments of
t hose members who had been approved fo r long

- ter m care .

• C oncealing from HHSC that it had failed to properly assess members as r equired by its contract

.

• Falsely representing to HHSC that certain members qualified for contin ue d lo n g term care b ased on Mol ina ’ s assessments of those members , r esulting in HHSC pa ying Medicaid funds to providers f or unnecessary services.
See id. § § 36.002(1) (prohibiting false statements or misrepresentations of material fact relating to Medicaid pay m ents or benefits ) , ( 2) ( making it unlawful to conc eal or fai l to disclose information involving Medicaid benefits or payments) , (1 0) ( prohib iting MCOs from f ailing to provid e to individuals a service that it is required by contract to provide ; from f a ilin g to prov ide HHSC wi th information r equired to be provide d by law, rule, or contract ; and from engaging in fra ud ulent acti vity in connect ion with enrollment of individual or with marketing i ts serv ice).

The M o lina Entities filed a m otion to dismiss Re l ato r ’ s claims , argui ng that Molina Texas ’ s com municati ons to HHSC were an “ exercise of the ri ght of free speech , ” which the TCPA defines as “ a communication made in connection with a matter of publ ic concern. ”
Tex. Civ. Prac. & Rem. Co de § 27.00 1(3) ; see id. § 27.005 ( b ) (1) ( pr oviding for dismissal of legal ac tion that is based on movan t ’ s exercise of the right of free speech). 2 T h e communications

were matters of pub lic con cern , the Molina Entities asserted, because they were related to “ he alth or safety , ” “ co m mu nity well

- being , ” and a “ service in the market place. ” I d. § 27

. 001 ( 7)

2 The Legisl ature amended the TCPA i n 2019, but those cha nges do not apply here because this actio n was filed before the effective date of the amendments. See Act of May 1 7 , 2019, 86t h Leg., R.S., ch. 378, §§ 1 1

– 12, 2019 Tex. Sess. Law S erv. 684, 687 (speci fying that TCPA amendments apply o nly to action filed o n or after September 1, 2019). All citat ions to the TCPA in this opinion are to the version that applies to this d i spute.4

(defining “ matter of public co ncern ” )

. Relator opposed the motion to dismiss , arguing that the conduct at issue was not governed by the TCPA and, even if it were , the TCPA enfo rceme n t

action , commercia l

- speech, and in surance - contract exemptions applied to her claims. See id. § 27.010 (TCPA exemptions). The district court denied the motion . O n appeal, the Molina Entities argue that the district court erred i n denying the motio n to d ismiss because (1) the TC PA applies to Relator ’ s claims; (2) no TCPA e xemptions ap ply to Relator ’ s claims; and (3) Relator failed to establish a prima facie case for her claims.

A nalysis The TCPA provides a three

- step decisional process to determ ine whe t her a lawsuit or claim s hould be dismissed under the statute. Creative Oil & Gas, LLC v. Lona Hills Ranch, LLC , 591 S.W.3d 127, 132 (Tex. 2019) ; see Tex. Civ. Prac. & Rem. Code §§ 27.003 (“Motion to Dismiss”), .005 (“Ruling”). However, a non

- mova nt can a void the burden

- s hifting requirements by showing that one of the TCPA ’ s several exemptions applies. S e e S tate ex rel. Best v. Harper , 562 S.W.3d 1, 11 (Tex. 2018) (noting tha t if TCPA exemption applies, a movant “c annot invoke TCPA ’ s protections”)

. For e xample, th e “commercial speech” exemption removes certain commerc e - related legal actions from the TCPA’s protections :

T h [ e TCPA ] does not apply to a legal action brought against a person primarily engaged in the business of selling or leasing go ods or s e rvice s, if t he statement or conduct arises out of the sale or lease of goods, services, or an insurance product, insurance services, or a c ommercial transaction in which the intended audience is an actual or potential buyer or customer.

Tex. C iv. Prac. & R em. Cod e § 2 7.010(d)

. Relator argues on appeal, and we agree, that the district court properly denied the motion to dismiss because Relator established that her TMFPA5

action falls within the commercial

- speech exemption

. See G rant v. Pivot Te ch. Sols. , Ltd. , 556
S .W.3d 865, 887 (T ex. App.

— Austin 2018, pet. denied) ( “ The burden to establish the commercial

- speech exemption is on the party relying on it ” ) ; see also Tex. Civ. Prac. & Rem. Code § 27.006(a ) ( “ In determining whether a legal act ion is subject t o or should be dismissed under this chapter, the court shall consider the pleadings, evidence a court could consider under Rule 166a, Texas Rules of Civil Procedure , and supporting and opposing affidavits stating the facts on which the liab ility or defens e is based. ” ).

The Texas Supreme Court has interpreted th e commercial

- speech exemption to apply whe n (1) the defendant (here, the Molina Entities ) was primarily engaged in the business of selling or leasing goods or services, (2) the defend ant made the st a tement or engaged in the conduct on which the claim is based in the defendant ’ s capacity as a selle r or lessor of those goods or services, (3) the statement or conduct at issue arose out o f a commercial transaction involving the kind of goo ds or services t he defendant provides, and (4) the intended audience of the statement or conduct was actual or pote ntial customers of the defendant for the kind of goods or services the d efendant provides

. Castleman v. Internet Money Ltd. , 546 S.W.3d 684, 688 (Tex. 2018 )

. The Mol ina Entities do not dispute that they are primarily engaged in th e business of selling or leasing goods or services , and the ple adings and the ev idence establ ish that the Molina Enti ties ’ business is selling Medicaid

- related healt h

- care services to the State of Texas th rough HHSC

. 3 Speci fically , HHSC pays Molina Texas to provide cove r ed Medicaid

- related health

- care services to e l igib le STAR+PLUS mem bers

.

Regarding the second Cast leman element, t he statement s at issue here are the allegedly fals e reports Molina Texas made to HHSC regarding whether certain members

3 Molina Healthcare also sell s M edicaid

- related health

- care services to other states.6

qualified for or continued to qualify for the STAR+PLUS services tha t Molina Texas provided under its contract with HHSC

. The pleadings and the evidence establi sh that Mo lina Texas made these statements as part of its con tract with HHSC to provide hea lth

- care serv ices

. Specifically, the cont ra ct required that Molin a Texa s conduct assessments of certain individuals to determine need and eligibility for Medicaid

- related ser vices and to su b mit reports of those asses sment s to HHSC. Therefore, we conclude that Relator established that Molin a Texas made the assessment reports in its capac ity as a seller of hea lth care - rela ted services

. See Novosad v. LSG Vodka LLC , No. 03

- 18

- 0 0804

- CV, 2020 W L 4726599, at *6 (Tex. App.

— Austin July 31, 2020, no pet.) (mem. op.) (ho lding that defendant met second Cast leman elem ent because he eng a ged in conduct a t direction of person who engaged his services ).

The third Cast leman element requires that “ the state m ent or conduct at issue arose out of a commercial transaction involving the kind of goods or services the defendant provides

. ”
546 S.W.3d at 688

. Because the “sale

. . . of

. . . services” is a type of “commercial transaction” contemplate d by the exempti o n , this element can be restated as asking, relevant here, whether the statement or conduct at issue arose out of the sal e of services t hat the defendant provi des

. S ee id

. at 690 (explaining that “ ‘commercial transaction’ is a catch

- all fo r othe r commerci a l transactions not specifically listed” in section 27.010(b) ) ; see also Tex. Civ. Prac. & Rem. Code § 27.010(b) (requiring tha t the “ stat ement or conduct ari se[ ] out of the sale or lease of goods , services , or an insurance product , insuran ce services, or a commercial transact ion ” ). As noted above, Molina
Texas made the statement s at is sue here

— i.e ., the allegedly false asses sment reports t o HHSC

— in connection wi th its provision of Medicaid

- related service s under its contract with HHSC and
to comply with t h e require ments of that s ame contrac t.7 The Molina Entities argue that Relator has not met the third Cas tleman element b ecause the state ments at issue in this case were not made in the context of “ a proposed commercial transaction ” invol v ing Molina Texas ’ s services

. Relatedly, the y argue that Relator has not shown tha t Molina Texas submitted the reports for the p urpose of “ securing a sale of their services

. ” But t here is no thing in the text of the exemption or in the Cas tleman element s
t hat limits the ex e mption ’ s applicability only to speech or con duct intended to secure future transactions

. Instead, the TC PA simply requires that the stateme nt “ arose out of the sale .

. . o f services

. . . or a commercial transaction

. ” Tex. Civ. Prac. & Rem. Code § 27.0 1 0(b) ; s ee Round Table Physicians Gr

p. , PLLC v. Kilgore , 607 S.W.3d 878, 886 (Tex. App.

— Houston [14th Dist.] 2020, pet. denied) ( holding that Castleman does not limit commercial

- speech exemption ’ s applicability only to sp e ech or conduct in tended to secure f uture transactions (citing N orth Cypress Med. Ctr. Operating Co. GP, LLC v. Norvil , 580 S.W.3d 280, 286 (Tex. App.

— Houston [1st Dist.] 2019, pet. denied ) ) ). Further, the text of the exemption contemplates both existing and future tran sac tion s by allow ing th at a statement be directed at “ an actu al or potential buyer or

c ustomer

. ” Tex. Civ. Prac. & Rem. Code § 27.010(b) ; see Round Table , 607 S.W.3d at 886 ( noting that statutory language “ encompasses statements or conduct arising out of the sale of services in which the intended audience is an ‘ actual ’ customer, which includes customers who have already consummated a commercial transaction with the defendant ” )

. Accordingly, we hold that Relator established that the stateme n ts at issue here arose out of the s ale o f services that the Molina Entities provide.

The final Ca st leman element requires that the intended audience of the statement be actual or potential customers of the def endant for the kind of good s or services that the defendant pro vides. S ee 5 46 S

. W.3d at 688

. Because Molina Texas ’ s contract required that it8

submit the assessment reports to HHSC, the intended audi ence o f those reports was HHSC . And given th e existenc e of the hea lth care - services contr a ct between Molina Texas and HHSC , HHSC

was a n “ actual customer ” of Molina Texas for the health

- care - related services that it provides. The Molina Entities agree that HHSC was the inte nded au di ence of the assessment reports but they argue that Molina T exas ’ s “ actual or p otential cust omers ” for purpose s of th e commercial

speech exemption were el igible Medicaid recipients , not the HHSC

. But a “ cust omer ” is someone who “ buys goods or services, ” Custom er , American Heritage Dictionary of the English Langua g e (5th ed. 2 011) (emphasis added ) ; see also Custom e r , Black ’ s Law Dictionary (1 1 th ed

. 2019) ( “ A b uyer or purchaser of goods or ser vices. ” ) , a nd the record here establishes that HHSC paid for Molina Texas ’s hea lth

- care - related services , not the individual Medic a id recip ients

. And even i f the Medicaid rec i pients had paid, the fact that Molina Texas ’ s contract with HHSC required it to perform and t rans mit assessmen t reports to HHSC means that , at the very leas t, HHSC was among the intended recipients of those rep o rts

. Accordingly, we hold that Relat or sati s fied the fourth Cast leman element

.

B a se d on the ple adings and evidence , we hold that R e lat or met her burden of
esta blishing that her TMFPA action fal ls within the comme rcial

- speech exemption and, therefore , t he TCPA does not ap ply to this case . See Tex

. Civ. Prac. & Rem. Code § 27.010(b)

. Because the TCPA does not apply, we need not address t he Molina Entities ’ remaining issues, which address whether the parties met their respective burdens under the TCPA ’ s d i smissal procedure

. See Tex. R. App. P. 47.1 ; s ee also Harper , 562 S.W.3d at 11 (noting that if TCPA exemption applies, movant cannot invoke TC PA ’ s protections)

.9 Conclusion B eca use Relator established that her cause of action is exempt ed from the TCPA ’ s appli c ation, the distric t court did not err i n denying the Molina Entities ’ motion to dismiss

. Therefore , we affirm the district cour t ’ s order.

___________________ _______________________ Jeff Rose, Chief Justi ce

Before Chief Justice Rose, Justice s Baker and Ke lly Affirmed Filed: December 9 , 2020