NO. 03- 15 -00252- CV
In the Third Court of Appeals Of Texas

DR. BEHZAD NAZARI, D.D.S., ET AL Appellants , V

. THE STATE OF TEXAS Appellees,

V

. ACS STATE HEALTHCARE, LLC Appellees.

On appeal from the 53 rd District Court, Travis County, Texas

Cause No. NO. D-1- GV

- 14 -005380
APPELLANTS’ REPLY BRIEF

Jason Ray State Bar No. 24000511 R IGGS & R AY , P.C. 506 West 14 th St., Suite A Austin, Texas 78701 Telephone: (512) 457

- 9806 Telecopier: (512) 457

- 9066 jray@r

- alaw.com E. Hart Green Texas Bar No. 08349290 W ELLER , G REEN , T OUPS & T ERRELL , L.L.P. Post Office Box 350 Beaumont, Texas 77704

- 0350 Telephone: (409) 838

- 0101 Telecopier: (409) 832

- 8577 hartgr@wgttlaw.com Attorney s for Appellants Dr. Behzad Nazari, D.D.S., et al

Oral Argument Requested ACCEPTED 03-15-00252-CV 7019858 THIRD COURT OF APPEALS

AUSTIN, TEXAS 9/21/2015 3:29:38 PM JEFFREY D. KYLE

CLERKAppellants’ Reply Brief

Page ii T ABLE OF C ONTENTS
T ABLE OF C ONTENTS

................................ ................................ ......................... ii
T ABLE OF A UTHORITIES

................................ ................................ ........................... iii
S UMMARY OF THE R EPLY

................................ ................................ ............................ 1
R EPLY A RGUMENT

................................ ................................ ................................ ...... 2
I. Reply to the State’s argument that it did not waive sovereign immunity when it brought affirmative claims against the Dental Group

. . ................................ ................................ ................................ 2
II. Response to State’s argument that the Dental Group’s Third Party claims against Xerox cannot be considered in this appeal.

................................ ................................ ................................ ..... 6 A. Judicial economy and consistency would be met if this Court opines on the propriety of third party claims, because this is the same issue presented in the similarly postured Xerox proceeding, 03

- 15

- 00401

- CV

. ................................ ............ 6 B. Xerox is correct; Chapter 33 applies to permit contribution claims.

................................ ................................ ............... 8

C ONCLUSION

................................ ................................ ................................ ............... 9
P RAYER

................................ ................................ ................................ ............... 9
C ERTIFICATE OF C OMPLIANCE

................................ ................................ ................. 12
C ERTIFICATE OF S ERVICE

................................ ................................ .......................... 13Appellants’ Reply Brief

Page iii T ABLE OF A UTHORITIES CASES Bates v. Republic of Texas , 2 Tex. 616 (1847)

................................ ................................ ............................ 4
Gabelli v. SEC , 133 S. Ct. 1216 (2013)

................................ ................................ ..................... 4 Guillory v. Port of Houston Auth. , 845 S.W.2d 812 (Tex. 1993)

................................ ................................ ........... 3 Reata Const. Corp. v. City of Dallas , 197 S.W.3d 371 (Tex. 2006)

................................ ................................ ........... 4 SEC v. City of Miami , 581 F. App’x 757 (11th Cir. 2014)

................................ ............................... 4,5 State v. Emeritus Corp. , No. 13

- 13

- 00529

- CV, 2015 WL 1456436, (Tex. App.

— Corpus Christi Mar. 26, 2015, pet. f iled )

................................ 4,5 State v. Precision Solar Controls, Inc. , 188 S.W.3d 364 (Tex. App.

— Austin 2006)

................................ .................... 4 State ex rel. Texas Dept. of Transp. v. Precision Solar Controls, Inc. , 220 S.W.3d 494 (Tex. 2007)

................................ ................................ ........ 2,4

STATUTES Texas Civil Practice and Remedies Code Chapter 33

................................ ............... 8Appellants’ Reply Brief

Page 1 S UMMARY OF THE R EPLY It is disturbing to imagine a government that has the power to seek damages
for civil wrongdoing, while also avoiding any investigation into its own part in that

same alleged wrongdoing. The idea that the State is immune from: 1) compulsory counterclaims, 2) counterclaims that would directly or inferentially rebut the facts upon which its claims are predicated, and/ or 3) counterclaims that share common or related core underlying facts is a breathtaking stance . Yet the State’s response brief fails to provid e any legal support for that position. This Court should not be misled by the State’s attempt to fabricate a self

- serving “carve

- out” that would effectively create a TMFPA superstatute to overri de the Rules of Civil Procedure,
l ogic, precedent, and due pro cess . Th is court need only follow Reata and the federal analysis for False Claims Act counterclaims to resolve this case

. The Dental Group’s third

- party claims against Xerox include a claim for contribution, but under a pure Federal False Claims Act analysis those claims would not be permitted. The Dental Group’s original brief did not address that category of relief. However, Xerox’s response brief accurately speaks to the applicability of Civil Practice and Remedies Code Cha pter 33. The Dental Group agrees with Xerox and adopts its briefing on the matter.Appellants’ Reply Brief

Page 2 R EPLY A RGUMENT Reply to the State’s argument that it did not waive sovereign immunity when it brought affirmative claims against the Dental Group.
The State’s r esponse b rief is rooted in two assertions. First, the State claims
that it can invoke sovereign immunity as a defensive maneuver to the Dental Groups’ counterclaims , while simultaneously asserting affirmative claims for relief on the exact same facts, despite Rea ta and 75 years of case law to the contrary

. Second, because its affirmative claims were brought only under the TMFPA , the
State claims it retains its immunity “shield” while at the same time wielding the
TMFPA “sword” against the Dental Group. Both of these arguments are contrary to precedent. The State begins its response b rief by arguing that Reata is not a case that
involves a waiver of sovereign immunity; the State claims that Reata instead
relates to the judicial abrogation of sovereign im munity that occurs as a result of the State bringing its own claims for relief. That position is a distinction without a difference. Whether this Court categorizes the State’s claims as creating “waiver of immunity by conduct,” 1 or producing judicial revoc ation of the common law
doctrine , or forming a bubble of facts upon which immunity cannot exist , the result

1 State ex rel. Texas Dept. of Transp. v. Precision Solar Controls, Inc. , 220 S.W.3d 494 (Tex. 2007) (“[In Reata ,] [w] e held that a governmental entity that brings an action waives immunity fr om suit for claims that are germane to, connected with, and properly defensive to its action, to the extent of an offset. ”)Appellants’ Reply Brief

Page 3 is the same: sovereign immunity is unavailable to the State as a jurisdictional bar

on the Dental Groups’ claims that are germa ne to, connected with, and properly
defensive to the state’s claims

. The State stretches case law to find any statement that, taken in a vacuum, might appear to support its position. None of the cases cited by the State support its argument . The State cites Guillory v. Po rt of Houston Auth. , 845 S.W.2d 812, 814 (Tex. 1993) for its proposition that the Texas Supreme Court has refused to judicially abrogate a government entity’s immunity in a proprietary activity vs.

non
- proprietary activity setting. (State’s Br. at 19

- 20). But the State ignores the overriding fact that Guillory was about a conflict between relief available under the
Texas Tort Claims Act and federal Maritime law. Guillory did not involve the interaction of affirmative claims asserted by the government and re lated counterclaims asserted by Guillory ; Guillory was about the scope of a statutory waiver of immunity. Guillory was a straight tort action brought against a governmental entity by Guillory. In addition, the Texas Supreme Court’s decision
in Guillory only reformed and limited Guillory’s monetary recovery; it did not completely deprive Guillory of his claims and recovery. Guillory’s facts are so different than the facts here, its usefulness on any relevant legal question is negligible.Appellants’ Reply Brief

Page 4 Next, the State reaches back 150 years to cite Bates v. Republic of Texas , 2 Tex. 616 (1847) for the idea that a right to set

- off damages through a crossclaim is barred by immunity. (State’s Br. at 20

- 21 , 24 ). However, in 2006 this Court expressly acknowledged that Bates had been abrogated for over 100 years, and that
Anderson and Reata were the controlling cases with regard to counterclaims raised against the State. See State v. Precision Solar Controls, Inc. , 188 S.W.3d 364, 367 (Tex. App.

— Austin 2006), order withdrawn ( Apr. 5, 2007), review granted, judgment vacated sub nom. on other grounds State ex rel. Texas Dept. of Transp. v. Precision Solar Controls, Inc. , 220 S.W.3d 494 (Tex. 2007) (Supreme Court
remanded the case to the trial court for further consideration consi stent with
Reata ); see also Reata Const. Corp. v. City of Dallas , 197 S.W.3d 371, 376 fn 2 (Tex. 2006) (stating that Bates was not in conflict with Anderson or Reata because
Bates “ involved claims by the defendants for set

- offs unrelated to the governmental entities' claims .”). The claims at issue here are far from “unrelated

. ”
The State’s invocation of Gabelli v. SEC , 133 S. Ct. 1216, 1223 (2013), SEC v. City of Miami , 581 F. App’x 757, 760 (11th Cir. 2014) and State v. Emeritus Corp. , No. 13

- 13

- 00529

- CV, 2015 WL 1456436, at *10

– 11 (Tex. App.

— Corpus Christi Mar. 26, 2015, pet. filed) , also fail to support the State’s position in any
way. Gabelli stands only for the pro position that the government is bound by the
statute of limitations when i t seeks civil penalties; it does not even imply that thereAppellants’ Reply Brief

Page 5 is a different standard for applying immunity for different sorts of governmental
actions. The court in SEC v. City of Miami expressly denied official immunity to Miami’s budget director when the S EC sought penalties for federal securities fraud; it is difficult to see how a case denying official immunity from Federal
claims acts as a bar here, where the State is attempting to assert sovereign immunity to counterclaims. Finally, State v. Emeritus Corp. is a decision that turned entirely on the applicability of the Texas Medical Liability Act to a State action under the Deceptive Trade Practices and Assisted Living Facilities Act. The dispute in Emeritus Corp. did not in any way involve sovereign im munity or a
defendant’s counterclaims. Simply put, the State wishes to ignore Reata . The S tate presents no authority, express or implied, direct or indirect, for its position that the TMFPA is a unilateral weapon. Thus, the State asks that this Court ma nufacture a completely new standard for determining whether the State can assert sovereign immunity in response to offsetting counterclaims from a defendant. Allowing the State to pursue a civil action without fear of having to address compulsory or relat ed
counterclaims from defendants that might provide an offset to the State’s claims is a breathtaking departure from precedent and the rules of civil procedure.Appellants’ Reply Brief

Page 6 Response to State’s argument that the Dental Group’s Third Party claims against Xerox cannot be considered in this appeal
. A. Judicial economy and consistency would be met if this Court opines on the propriety of third party claims, because this is the same issue presented in the similarly postured Xerox proceeding, 03
- 15
- 00401
- CV. The Dental Group agrees with Xerox that th is Court should decide Xerox’s original proceeding in Cause 03

- 15

- 00401

- CV in conjunction with this appeal. The Dental Group’s second issue is generally the same as Xerox’s issue in its original proceeding: namely, does the TMFPA p revent a defendant (either the Dental Group in this case, or Xer ox in that case) from bringing third party claims? In its response b rief, the State avoids any argument on the merits of this issue. Instead, it argues only that this Court lacks jurisdiction to consider whether the dismissal of the Dental Groups’ third party claims was proper. In considering both this appeal and Xerox’s original action, this Court should note the strange procedural posture that the State’s actions have created.
The State is w orking to prevent all of the parties from adju dicating these overlapping, intertwined claims in a single proceeding. A ll three “sides” are claiming the others committed wrongdoing on the same facts :Appellants’ Reply Brief

Page 7 STATE

DENTISTS XEROX

Under the facts pleaded by the State in both of its fraud suit s , the d efendants’ justiciable interests are evident. Whether the d efendant is the Dental Group in this
case or Xerox in the similarly situated original proceeding 03

- 15

- 00401

- CV, the
d efendants seek to reveal all of the interrelated facts and relationships in each of their respective cases so that the culpable party(s) can be held accountable. The defendants also seek to prev ent the State from taking inconsistent positions against
the defendants. The State is pursuing recovery of the same “tens of millions of dollars” from
both the Dental Group and the defendant Xerox , even as the State demands that the cases be tried separat ely

. T he Dental Group’s justiciable interests are obvious. T he TMFPA civil fraud claim (D

- 1 - GV
- 14 - 00581) and the related appeal (03

- 15 - 00401 - CV) TMFPA fraud claims in administrative court (SOAH, HHSC); subsequently dismissed and replaced by this civil TMFPA case ( D
- 1 - GV
- 14 - 005380 ; appeal 03 - 15 - 00252 - CV)

Counterclaims in this civil TMFPA case : Conspiracy, joint enterprise, breach of contract, conversion, fraud, breach of contract, negligence, gross negligence Third party claims in this case ; the same claims are made in D
- 1 - GV
- 1 5 - 00 2055; D
- 1 - GN
- 14 - 000319, 320, 321, and 322.
Contribution (this case)Appellants’ Reply Brief

Page 8 relationship between the dentists, the State, and Xerox is a nearly perfect tripartite arrangement . I n the interest of judicial economy, consistency (especially relating to disparate rulings on discovery and dispositive motions) and overall justice, all of the parties’ claims regarding medical necessity and proportionate party responsibility should be det ermined with an acknowledgement that rulings with regard to any one party’s claims affect all of the parties.
B. Xerox is correct ; Chapter 33 applies to permit contribution claims. Xerox’s response brief correctly states that the Dental Group assumed that
bec ause contribution claims are not permitted under the Federal False Claims Act , such claims were also unavailable under Texas law. Upon further research and review, the Dental Group agrees that Texas Civil Practice and Remedies Code Chapter 33 permit s a rig ht to contribution or indemnity under the facts of this case. Rather than copy that argument in this reply brief, the Dental Group adopts and incorporates Xerox’s briefing on the law under Tab F of Xerox’s response brief.
Xerox is incorrect when it claims that none of the Dental Group’s claims sound in contribution. The Dental Group expressly ma d e a claim for contribution in paragraph 31 of its answer (CR 40). Therefore, Xerox’s claim for contribution from the Dental Group in 03

- 15

- 00401

- CV is mirrored by the Dental Group’s
contribution claim in this case.Appellants’ Reply Brief

Page 9 In sum, the Dental Group adopts Xerox’s legal analysis regarding Chapter 33’s application to this case. The Dental Group made , inter alia, a contribution claim against Xerox, so that argument is relevant and applicable to this appeal. But whether Chapter 33 applies to permit contribution claims does not prevent, and will not change, an application of the federal False Claims Act framework fo r permitting third party claims. All of the Dental Group’s third party claims against Xerox are expressly permitted under the federal analysis (fraud, conspiracy, breach of contract, negligence, gross negligence) and/or Chapter 33 (contribution).
C ONCLUS ION The Dental Group and Xerox simply want judicial consistency and
economy , and the opportunity to present all of the facts that relate to the State’s claims. The idea that the Dental Group can be barred from bringing compulso ry and defensive countercla ims/ third

- party claims is abhorrent to the concepts of due process and judicial economy.
P RAYER Appellants pray this court: 1) reverse the trial court order granting the State’s Plea to the Jurisdiction so that the Appellants’ claims against the State may proceed in this case , andAppellants’ Reply Brief

Page 10 2) reverse the trial court order granting the State’s Motion to Dismiss so that the Appellants’ claims against the third party Xerox may proceed in this

case , or 3) in the alternative , reverse the trial court’s grant of the Motion to Dismiss the Appellants’ third party claims, and instruct the court to sever the Appellants’ third party claims against Xerox into a different cause

.

___________________________________ Jason Ray R IGGS & R AY , P.C. 504 W. 14 th Street, Suite A Austin, Texas 78701 Telephone: (512) 457

- 9806 Facsimile: (512) 457

- 9866 jray@r

- alaw.com
E. Hart Green Mitchell A. Toups W ELLER , G REEN , T OUPS & T ERRELL , L.L.P. Post Office Box 350 Beaumont, Texas 77704

- 0350 Telephone: (409) 838

- 0101 Telecopier: (409) 832

- 8577 hartgr@wgttlaw.com matoups@wgttlaw.com ATTORNEYS FOR DR. BE HZAD NAZARI, D.D.S. D/B/A ANTOINE DENTAL CENTER, DR. BEHZAD NAZARI, H ARLINGEN FAMILY DENTISTRY, P. C. A/K/A PRACTICAL BUSINESS S OLUTIONS, SERIES LLC, JUAN D. VILLARREAL D.D.S.,Appellants’ Reply Brief

Page 11 SERIES PLLC D/B/A HA RLINGEN FAMILY DENTISTRY GROUP, DR. JUAN VILLARREAL, RICHARD F. HERRSCHER, D.D.S., M.S.D., P.C. , DR. RICHARD F. HERRSCHER, M & M ORT HODONTICS, PA, DR. SCOTT MALONE , DR. DIANA MALONE, MICHELLE SMI TH, NATIONAL ORTHODONTIX, MGMT., PLLC, DR. JOHN VONDRAK, RGV SMILES BY ROCKY SALINAS, D.D.S. PA, AND DR. ROCKY SALINAS.Appellants’ Reply Brief

Page 12 C ERTIFICATE OF C OMPLIANCE I certify that this Brief complies with T RAP Rule 9.4 and contains 2,062 words in Times New Roman typeface of 14

- point.

Jason RayAppellants’ Reply Brief

Page 13 C ERTIFICATE OF S ERVICE I hereby certify that a true and correct copy of the Response to Request for Disclosure was served via e

- mail and e

- service on the 21st day of September , 2015 on the following: Counsel for Plaintiff State of Texas Raymond C. Winter Chief, Civil Medicaid Fraud Division Reynolds B. Brissenden Assistant Attorneys General Office of the Attorney General P.O. Box 12548 Austin, Texas 78711

- 2548 Telephone: (512) 936

- 1709 Facsimile: (512) 936

- 0674 E

- mail: raymond.winter@texasattorneygeneral.gov E

- mail: reynolds.brissenden@texasattorneygeneral.gov
Counsel for Xerox Corporation, et al. Robert C. Walters Gibson, Dunn, & Crutcher, LLP 2100 McKinney Avenue, Suite 1100 Dallas, Texas 75201 Telephone: (214) 698

- 3100 Facsimile: (214) 571

- 2900 E

- mail: RWalters@gibsondunn.com
W. Curt Webb Constance H. Pfeiffer Beck Redden, LLP 1221 McKinney Street, Suite 4500 Houston, Texas 77010 Telephone: (713) 951

- 3700 Facsimile: (713) 951

- 3720 E

- mail: cwebb@beckredden.com E

- mail: cpfeiffer@beckredden.com Eric J. R. Nichols Christopher R. Cowan Beck Redden, LLP 515 Congress Avenue, Suite 1750 Austin, Texas 78701 Telephone: (512) 708

- 1000 Facsimile: (512) 708

- 1002 E

- mail: enichols@beckredden.com E

- mail: ccowan@beckredden.comAppellants’ Reply Brief

Page 14 Counsel for Defendant s/Third
- Party Plaintiffs E. Hart Green Mitchell A. Toups WELLER, GREEN, TOUPS & TERRELL, L.L.P. Post Office Box 350 Beaumont, Texas 77704

- 0350 Telephone: (409) 838

- 0101 Facsimile: (409) 832

- 8577 E

- mail: hartgr@wgttlaw.com E

- mail: matoups@wgttlaw.com Counsel for Defendant

s Richard B. Pecore LILES PARKER, PLLC 3400 N. McColl Rd., Suite F

- 35 McAllen, Texas 78501 Telephone: (202) 298

- 9750 Facsimile: (202) 337

- 5804 E

- mail: rpecore@lilesparker.com Counsel for RGV Smiles by Rocky Salinas, DDS PA, and Dr. Rocky Salinas
Robert M. Anderton Law Offices of Hanna & Anderton 900 Congress Avenue, Suite 250 Austin, Texas 78701 Telephone: (512) 477

- 6200 Facsimile: (512) 477

- 1188 E

- mail: andertonr@msn.com Counsel for Richard F. Herrscher, DDS, MMSC, PC and Dr. Richard F. Herrscher J.A. “Tony” Canales CANALES & SIMONSON, P.C. 2601 Morgan Ave. P.O. Box 5624 Corpus Christi, Texas 78465

- 5624 Telephone: (361) 883

- 0601 Facsimile: (361) 884

- 7023 E

- mail: tonycanales@canalessimonson.com Counsel for M&M Orthodontics, P.A., Dr. Scott Malone, Dr. Diana Malone, Michelle Smith, National Orthodontix Mgmt., PLLC and Dr. John Vondrak
Oscar X. Garcia Law Offices of Oscar X. Garcia 302 Kings Highway, Suite 112 Brownsville, Texas 78521 Telephone: (956) 554

- 3000 Facsimile: (956) 554

- 3248 E

- mail: oxgarcia@aol.com Counsel for Dr. Vivian Teegardin Philip H. Hilder William B. Graham Hilder & Associates, PC 819 Lovett Boulevard Houston, Texas 77006 Telephone: (713) 234

- 1416 Facsimile: (713) 655

- 9112 E

- mail: philip@hilderlaw.com E

- mail: will@hilderlaw.com Counsel for Dr. Wael Kanaan

____________________________ Jason Ray