Court Opinion

ID: 4077068
Source: CourtListenerOpinion
Date Created: 2016-09-30 19:58:54.408312+00
Date Added: 2024-06-11T14:33:20.568815
License: Public Domain

ACCEPTED
                                                                                  03-15-00252-CV
                                                                                          7019858
                                                                       THIRD COURT OF APPEALS
                                                                                  AUSTIN, TEXAS
                                                                             9/21/2015 3:29:38 PM
                                                                                JEFFREY D. KYLE
                                                                                           CLERK
                          NO. 03-15-00252-CV

                                In the                           FILED IN
                                                          3rd COURT OF APPEALS
                        Third Court of Appeals                AUSTIN, TEXAS
                              Of Texas                    9/21/2015 3:29:38 PM
                                                            JEFFREY D. KYLE
                                                                  Clerk

                 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 53rd District Court, Travis County, Texas
                   Cause No. NO. D-1-GV-14-005380

                    APPELLANTS’ REPLY BRIEF

Jason Ray                          E. Hart Green
State Bar No. 24000511             Texas Bar No. 08349290
RIGGS & RAY, P.C.                  WELLER, GREEN, TOUPS & TERRELL, L.L.P.
506 West 14th St., Suite A         Post Office Box 350
Austin, Texas 78701                Beaumont, Texas 77704-0350
Telephone: (512) 457-9806          Telephone: (409) 838-0101
Telecopier: (512) 457-9066         Telecopier: (409) 832-8577
jray@r-alaw.com                    hartgr@wgttlaw.com

           Attorneys for Appellants Dr. Behzad Nazari, D.D.S., et al

                             Oral Argument Requested
                                               TABLE OF CONTENTS

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

TABLE OF AUTHORITIES ........................................................................................... iii

SUMMARY OF THE REPLY ............................................................................................ 1

REPLY ARGUMENT ...................................................................................................... 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

CONCLUSION ............................................................................................................... 9

PRAYER             ............................................................................................................... 9

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

CERTIFICATE OF SERVICE .......................................................................................... 13

Appellants’ Reply Brief
Page ii
                                         TABLE OF AUTHORITIES

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. filed) ................................ 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 ............................................... 8

Appellants’ Reply Brief
Page iii
                             SUMMARY OF THE REPLY

       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 provide 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 override the Rules of Civil Procedure,

logic, precedent, and due process. This 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 Chapter 33. The Dental Group

agrees with Xerox and adopts its briefing on the matter.

Appellants’ Reply Brief
Page 1
                                      REPLY ARGUMENT

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 response brief 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 Reata 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 brief 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 immunity 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 revocation 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
from 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 2
is the same: sovereign immunity is unavailable to the State as a jurisdictional bar

on the Dental Groups’ claims that are germane 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. Port 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 related

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 3
       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 consistent 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 proposition that the government is bound by the

statute of limitations when it seeks civil penalties; it does not even imply that there

Appellants’ Reply Brief
Page 4
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 SEC 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 immunity or a

defendant’s counterclaims.

       Simply put, the State wishes to ignore Reata.          The State 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 manufacture 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 related

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 5
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 this 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 prevent a defendant (either the Dental

Group in this case, or Xerox in that case) from bringing third party claims? In its

response brief, 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 working to prevent all of the parties from adjudicating these

overlapping, intertwined claims in a single proceeding.        All three “sides” are

claiming the others committed wrongdoing on the same facts:

Appellants’ Reply Brief
Page 6
                                        STATE
TMFPA fraud claims in
administrative court
(SOAH, HHSC);
subsequently dismissed and
replaced by this civil                               TMFPA civil fraud
TMFPA case (D-1-GV-14-                               claim (D-1-GV-14-
005380; appeal 03-15-                                00581) and the related
00252-CV)                                            appeal (03-15-00401-
                                                     CV)
           Counterclaims in this civil
           TMFPA case: Conspiracy,
           joint enterprise, breach of
           contract, conversion, fraud,
           breach of contract,             Third party claims in
           negligence, gross negligence    this case; the same
                                           claims are made in
                                           D-1-GV-15-002055;
                                           D-1-GN-14-000319,
                                           320, 321, and 322.
DENTISTS                                                                 XEROX
              Contribution
              (this case)
       Under the facts pleaded by the State in both of its fraud suits, the defendants’

justiciable interests are evident. Whether the defendant is the Dental Group in this

case or Xerox in the similarly situated original proceeding 03-15-00401-CV, the

defendants 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 prevent 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 separately. The Dental Group’s justiciable interests are obvious. The

Appellants’ Reply Brief
Page 7
relationship between the dentists, the State, and Xerox is a nearly perfect tripartite

arrangement. In 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 determined 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

because 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 permits a right 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 made 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 8
       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 for

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).

                                     CONCLUSION

       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 compulsory

and defensive counterclaims/third-party claims is abhorrent to the concepts of due

process and judicial economy.

                                       PRAYER

       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,

          and

Appellants’ Reply Brief
Page 9
       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
                                 RIGGS & RAY, P.C.
                                 504 W. 14th Street, Suite A
                                 Austin, Texas 78701
                                 Telephone: (512) 457-9806
                                 Facsimile: (512) 457-9866
                                 jray@r-alaw.com

                                 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
                                 Telecopier: (409) 832-8577
                                 hartgr@wgttlaw.com
                                 matoups@wgttlaw.com
                                 ATTORNEYS FOR DR. BEHZAD NAZARI,
                                 D.D.S. D/B/A ANTOINE DENTAL CENTER,
                                 DR. BEHZAD NAZARI, HARLINGEN
                                 FAMILY         DENTISTRY,    P.C.      A/K/A
                                 PRACTICAL          BUSINESS   SOLUTIONS,
                                 SERIES LLC, JUAN D. VILLARREAL D.D.S.,
Appellants’ Reply Brief
Page 10
                          SERIES PLLC D/B/A HARLINGEN FAMILY
                          DENTISTRY       GROUP,    DR.   JUAN
                          VILLARREAL, RICHARD F. HERRSCHER,
                          D.D.S., M.S.D., P.C., DR. RICHARD F.
                          HERRSCHER, M & M ORTHODONTICS,
                          PA, DR. SCOTT MALONE, DR. DIANA
                          MALONE, MICHELLE SMITH, NATIONAL
                          ORTHODONTIX, MGMT., PLLC, DR. JOHN
                          VONDRAK, RGV SMILES BY ROCKY
                          SALINAS, D.D.S. PA, AND DR. ROCKY
                          SALINAS.

Appellants’ Reply Brief
Page 11
                          CERTIFICATE OF COMPLIANCE

       I certify that this Brief complies with TRAP Rule 9.4 and contains 2,062

words in Times New Roman typeface of 14-point.

                                         Jason Ray

Appellants’ Reply Brief
Page 12
                             CERTIFICATE OF SERVICE
       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                               Eric J. R. Nichols
Gibson, Dunn, & Crutcher, LLP                   Christopher R. Cowan
2100 McKinney Avenue, Suite 1100                Beck Redden, LLP
Dallas, Texas 75201                             515 Congress Avenue, Suite 1750
Telephone: (214) 698-3100                       Austin, Texas 78701
Facsimile: (214) 571-2900                       Telephone: (512) 708-1000
E-mail: RWalters@gibsondunn.com                 Facsimile: (512) 708-1002
                                                E-mail: enichols@beckredden.com
W. Curt Webb                                    E-mail: ccowan@beckredden.com
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

Appellants’ Reply Brief
Page 13
                          Counsel for Defendants/Third-Party Plaintiffs
E. Hart Green                                       J.A. “Tony” Canales
Mitchell A. Toups                                   CANALES & SIMONSON, P.C.
WELLER, GREEN, TOUPS & TERRELL,                     2601 Morgan Ave.
L.L.P.                                              P.O. Box 5624
Post Office Box 350                                 Corpus Christi, Texas 78465-5624
Beaumont, Texas 77704-0350                          Telephone: (361) 883-0601
Telephone: (409) 838-0101                           Facsimile: (361) 884-7023
Facsimile: (409) 832-8577                           E-mail:
E-mail: hartgr@wgttlaw.com                          tonycanales@canalessimonson.com
E-mail: matoups@wgttlaw.com                         Counsel for M&M Orthodontics, P.A.,
Counsel for Defendants                              Dr. Scott Malone, Dr. Diana Malone,
                                                    Michelle Smith, National Orthodontix
Richard B. Pecore                                   Mgmt., PLLC and Dr. John Vondrak
LILES PARKER, PLLC
3400 N. McColl Rd., Suite F-35                      Oscar X. Garcia
McAllen, Texas 78501                                Law Offices of Oscar X. Garcia
Telephone: (202) 298-9750                           302 Kings Highway, Suite 112
Facsimile: (202) 337-5804                           Brownsville, Texas 78521
E-mail: rpecore@lilesparker.com                     Telephone: (956) 554-3000
Counsel for RGV Smiles by Rocky Salinas,            Facsimile: (956) 554-3248
DDS PA,                                             E-mail: oxgarcia@aol.com
and Dr. Rocky Salinas                               Counsel for Dr. Vivian Teegardin

Robert M. Anderton                                  Philip H. Hilder
Law Offices of Hanna & Anderton                     William B. Graham
900 Congress Avenue, Suite 250                      Hilder & Associates, PC
Austin, Texas 78701                                 819 Lovett Boulevard
Telephone: (512) 477-6200                           Houston, Texas 77006
Facsimile: (512) 477-1188                           Telephone: (713) 234-1416
E-mail: andertonr@msn.com                           Facsimile: (713) 655-9112
Counsel for Richard F. Herrscher, DDS,              E-mail: philip@hilderlaw.com
MMSC, PC and Dr. Richard F. Herrscher               E-mail: will@hilderlaw.com
                                                    Counsel for Dr. Wael Kanaan

                                                ____________________________
                                                Jason Ray

Appellants’ Reply Brief
Page 14