Court Opinion

ID: 2869985
Source: CourtListenerOpinion
Date Created: 2015-09-06 03:11:47.990681+00
Date Added: 2024-06-11T08:40:03.771964
License: Public Domain

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

                                       NO. 03-04-00489-CV

                                   MedCost, L.L.C., Appellant

                                                  v.

    Robert Loiseau, Special Deputy Receiver of American Benefit Plans, et. al., Appellee

     FROM THE DISTRICT COURT OF TRAVIS COUNTY, 53RD JUDICIAL DISTRICT
        NO. GN304388, HONORABLE LORA J. LIVINGSTON, JUDGE PRESIDING

                               DISSENTING OPINION

               Because MedCost purposefully established ongoing relationships with fraudulent

Texas insurance entities and directed actions toward Texas that were foreseeably harmful to Texas

consumers, I would hold that the evidence in the record is legally and factually sufficient to support

the trial court’s denial of MedCost’s special appearance and would, therefore, affirm the order.

                                         BACKGROUND

               In 2002, the insurance commissioners of several states determined that Texas should

be designated with the primary responsibility of litigating the claims against a multistate insurance

scheme; Texas was considered the most appropriate forum because the primary actors in the

scheme—Robert David Neal, American Benefit Plans (ABP), National Association of Working
Americans (NAWA), and United Employers Voluntary Employees Beneficiary Association

(UEVEBA)—were all based in the Fort Worth area. Robert Loiseau was appointed as the special

deputy receiver for several of the companies accused of insurance fraud. After the trial court entered

a final judgment and permanent injunction against the receivership entities, finding that they had

engaged in the unauthorized business of insurance and enjoining them from any further unauthorized

practices, Loiseau brought suit against several insurance companies accused of facilitating the

scheme and profiting from their involvement with the receivership entities. Pursuant to article 21.28

of the Texas Insurance Code, Loiseau’s duties were to “take possession of the assets,” liquidate, and

distribute them among the claimants. See Tex. Ins. Code Ann. art. 21.28, §§ 2 (“General

Procedures”), 8 (“Distribution of Assets”) (West 1981 & Supp. 2004-05).

               As support for exercising personal jurisdiction over the named defendants, including

MedCost, Loiseau relied upon section 101.001 of the Texas Insurance Code, setting forth the state’s

policy and statute’s purpose:

       (a) It is a state concern that many residents of this state hold insurance policies
           issued by persons or insurers who are not authorized to do insurance business
           in this state and who are not qualified as eligible surplus lines insurers under
           Article 1.14-2. These residents face often insurmountable obstacles in asserting
           legal rights under the policies in foreign forums under unfamiliar laws and rules
           of practice.

       (b) It is the policy of this state to protect residents against acts by a person or insurer
           who is not authorized to do insurance business in this state by: (1) maintaining
           fair and honest insurance markets; (2) protecting the premium tax revenues of
           this state; (3) protecting authorized persons and insurers, who are subject to
           strict regulation, from unfair competition by unauthorized persons and insurers;
           and (4) protecting against evasion of the insurance regulatory laws of this state.

                                                   2
       (c) The purpose of this chapter is to subject certain insurers and persons to the
           jurisdiction of: (1) the commissioner and proceedings before the commissioner;
           and (2) the courts of this state in suits by or on behalf of the state or an insured
           or beneficiary under an insurance contract.

       (d) It is also a concern that this state not become a safe harbor for persons or
           insurers engaged in the unauthorized business of insurance in this state,
           regardless of whether the insureds or other persons affected by the unauthorized
           business of insurance are residents of this state.

Id. § 101.001 (West Supp. 2004-05).

               Loiseau further alleged that the defendants “committed torts in the State of Texas and

entered into contracts with one or more of the Receivership Defendants in the State of Texas.”

Loiseau alleged that the defendants profited from their involvement with ABP in the insurance

scheme to the detriment of Texas and its residents because the receivership entities collected money

(as premiums) from Texas residents and then passed those dollars along to the defendants, including

MedCost. Based on this, Loiseau claimed the defendants were liable for negligence, gross

negligence, breach of fiduciary duty, violation of Texas Insurance Code section 101.201, conspiracy,

and negligent misrepresentation. Specifically against the Network Leasor Defendants, which

included MedCost,1 Loiseau alleged liability based on an agreement to “market, sell, manage and

administer the unlicensed and unauthorized health insurance programs,” and the negligent failure

to use due diligence in determining whether ABP and NAWA were properly licensed and financially

sound and in discovering that Neal was the subject of several insurance complaints and indicted for

federal tax fraud.

       1
          The defendants were categorized into five classes, depending on their alleged role in the
scheme, as follows: (1) Neal Defendants, (2) Third Party Administrators and PEOs, (3) Network
Leasors, (4) Tim Tierney, and (5) General Agents and Managing General Agents.

                                                  3
               At the special appearance hearing, Loiseau testified and MedCost presented

deposition testimony from its Vice President of Administration, Joel Groce, concerning this complex

series of insurance relationships, transactions, and practices. Groce described MedCost as a

preferred provider organization that contracts with a network of doctors and healthcare facilities in

North and South Carolina to provide services at discounted rates to persons who present

identification cards showing that they are entitled to the benefits of MedCost’s network. He testified

that MedCost leases this network to various insurance carriers—several of which are located in

Texas—and, pursuant to that arrangement, the carriers provide their insureds with the necessary

identification cards. In relation to each carrier, MedCost is responsible for approving the card’s

language before the cards can be distributed to the insureds. In determining whether to approve each

card, as part of its due diligence MedCost considers an enumerated list of items: the checklist

includes such concerns as making sure the payor (insurance carrier) is on MedCost’s system and

checking for any “red flags” regarding the payor.

               Groce further testified that these insurance carriers become payors, or clients, of

MedCost through a contract that MedCost has with American Healthcare Alliance (AHA), a

Missouri company. The carriers pay a fee to AHA, and AHA pays a percentage of that fee to

MedCost, on behalf of the carriers. After AHA brings the carriers to MedCost, MedCost leases its

network to the carriers, and the carriers provide their insureds with cards allowing them to receive

healthcare services at discounted rates from the providers in MedCost’s network. Thus, MedCost

acts as a “gatekeeper,” determining which carriers it will form “strategic alliances” with by allowing

them to take advantage of MedCost’s network in exchange for a profit. Groce acknowledged that,

                                                  4
when AHA brings a new carrier to MedCost, MedCost does not make further inquiry into that

carrier’s background before opening the gate, but instead takes as true AHA’s representation that the

carrier satisfies its requirements.

                The majority accepts MedCost’s contention that the only relationship we should

consider in determining whether personal jurisdiction is proper is MedCost’s contract with AHA.

Loiseau argued, however—and the trial court concluded—that the profit-based relationships

MedCost established with fraudulent Texas insurers through the AHA leasing arrangement should

also be considered in the jurisdictional inquiry.

                Groce testified that one carrier MedCost leased its network to, via the AHA contract,

was UltraMed Choice Health Plan a/k/a National Benefits Alliance, an Oklahoma company.

UltraMed in turn contracted with Texas-based ABP and its principal, Robert Neal, to handle paying

the various networks it leased, including MedCost. As with all carriers with which MedCost had

a payor arrangement, MedCost used its enumerated checklist to approve the identification card that

UltraMed issued to its insureds. An exhibit showed that all of the boxes were checked on

UltraMed’s form, demonstrating that MedCost had conducted a due-diligence review and determined

there were no “red flags” concerning UltraMed. MedCost then approved UltraMed’s card with

MedCost’s logo on it, “MedCost Preferred” printed at the bottom, and “UltraMed Choice Health

Plan, Sponsored by the National Association of Working Americans [NAWA]” printed at the top.

Groce claimed that MedCost had “no knowledge” of who NAWA was, but he admitted that

MedCost determined “everything checked out” and approved the card for use.

                                                    5
               After activating UltraMed as a payor in September 2001 and approving the

UltraMed/NAWA card in October 2001, MedCost terminated UltraMed’s access to its network in

December 2002 because UltraMed had not paid its monthly leasing fees from September through

December. UltraMed then paid its balance, and MedCost reactivated UltraMed in January 2002,

using the same UltraMed/NAWA card as previously approved. UltraMed again failed to pay its fees

for January through March, and on March 15, 2002, MedCost sent an e-mail to AHA stating that it

was terminating its relations with UltraMed. The e-mail discussed UltraMed’s connection with ABP

and Neal, stating that Neal had been “indicted by the state of TX for selling insurance without a

license and some other offenses,” and that UltraMed is “a coalition of employers and that should

have been our first red flag!” Groce testified that “a coalition of employers are very suspect.

They’re legal in some states and not legal in others. . . . [T]his is a danger zone and this one went

bad.”

               Groce also affirmed that MedCost’s relationships in the insurance industry are not

confined to North and South Carolina. According to Groce, there are “multiple groups that use our

network across the United States.” MedCost has payor agreements with several Texas carriers, so

that those carriers can benefit from MedCost’s network for a monthly lease fee. This allows the

insureds of the Texas carriers to receive services from MedCost’s network of providers in the

Carolinas.

               At the hearing, Loiseau contended that MedCost’s relations with the fraudulent

insurance network established minimum contacts with Texas. The majority mischaracterizes

Loiseau’s position by claiming that Loiseau based his jurisdictional argument on the fact that

                                                 6
MedCost allowed Texas entities to harm Carolina residents. While MedCost may have done so,

these are not the actions that Loiseau focused on as a basis for bringing MedCost into a Texas court.

               Instead, Loiseau emphasized MedCost’s connection with the Texas-based NAWA,

Neal, and ABP—via the UltraMed account—as support for the exercise of personal jurisdiction over

MedCost. Loiseau explained that the Texas-based NAWA used PPOs, including MedCost, “as a

marketing device” to offer discounted rates, “entic[ing] people to buy this . . . relatively cheap

insurance. That’s how they got the working people, who bear the brunt of the fraud perpetrated by

the participants in this program.” In turn, MedCost profited from its dealings with NAWA, and

MedCost was “paid ultimately from commingled funds, some of which came out of Texas.” Loiseau

testified that MedCost’s approval of UltraMed’s identification card, which contained MedCost’s

name and logo along with NAWA’s, evidences a relationship between MedCost and NAWA:

pursuant to this arrangement, NAWA collected money from Texas residents and passed it along to

MedCost through the UltraMed account. Hence, MedCost “either knew they were doing business

with NAWA, which was a Texas-based company, or they deliberately closed their eyes to it.”

Loiseau offered proof that MedCost knew it was dealing with a Texas company based on the facts

that (1) at the time MedCost approved the UltraMed/NAWA card, NAWA was a Texas company,

NAWA was operating without a license, and Neal had been indicted for tax and insurance fraud, all

of which were documented in public records, and (2) MedCost terminated its relationship with

UltraMed and NAWA when the State of Texas took action to shut down the scheme.

               Loiseau also testified that MedCost had connections with UEVEBA, another Texas-

based receivership entity. As support, he entered into evidence a contract displaying UEVEBA’s

                                                 7
name at the top and showing that MedCost leased its network of providers to an employer in

UEVEBA’s group, Ideal Solutions, Inc.

               Ultimately, Loiseau argued, MedCost’s participation in this scheme allowed Neal,

NAWA, ABP, and UEVEBA to perpetrate fraud on Texas consumers because it was “a significant

selling point” for these Texas entities to be able to market themselves as having “nationwide” PPO

coverage. Thus—contrary to the majority’s assertion that Loiseau’s argument was simply “because

MedCost’s contracts facilitated the Texas-based entities’ providing illegal health insurance to users

of MedCost’s network in the Carolinas”—Loiseau demonstrated that MedCost purposefully

established ongoing relations with Texas entities and that MedCost knew or should have known that

the activities it engaged in with those entities were fraudulent. Based on this, the trial court denied

MedCost’s special appearance.

                                            ANALYSIS

               By determining that jurisdiction does not exist over MedCost because its approval

of the UltraMed card was not “an act taken in Texas,” the majority overlooks the well-established

principle that personal jurisdiction exists when a nonresident defendant’s activities are “purposefully

directed at” the forum, regardless of where they physically occurred. See, e.g., Asahi Metal Indus.

Co. v. Superior Ct. of Cal., 480 U.S. 102, 112 (connection between defendant and forum “must come

about by an action of the defendant purposefully directed toward the forum State”) (emphasis

omitted); Zac Smith & Co. v. Otis Elevator Co., 734 S.W.2d 662, 665-66 (Tex. 1987) (although

defendant had “no physical ties to Texas,” and contract was executed in Florida and Louisiana,

specific jurisdiction existed over defendant because he purposefully directed actions at Texas by

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entering contract that contemplated profits from Texas). The Supreme Court has expressly rejected

the notion that a defendant is required to have some physical presence in the forum state to establish

minimum contacts, especially given that “it is an inescapable fact of modern commercial life that

a substantial amount of business is transacted solely by mail and wire communications across state

lines.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985).

                Rather, the inquiry turns on whether the nonresident defendant purposefully availed

itself of the privileges and benefits of conducting business in this state, such that the defendant could

reasonably foresee being called into a Texas court to litigate. Id. at 474. This requirement is

satisfied if the contacts are not random or fortuitous but the defendant “has created ‘continuing

obligations’ between [it]self and residents of the forum.” Id. at 475-76.

                MedCost purposefully availed itself of the benefits and privileges of conducting

business in Texas by establishing “continuing obligations” between itself and the Texas entities that

played primary roles in the insurance scheme, such as NAWA, ABP, Neal, and UEVEBA. See id.

at 474, 476 (jurisdiction appropriate when nonresident defendant creates continuing obligations with

forum residents and “purposefully derive[s] benefit” from its interstate activities). MedCost acted

as a gatekeeper by making the affirmative decision to permit these Texas entities—which MedCost

knew or should have known2 were selling fraudulent insurance policies to Texas consumers—to

        2
          Having weighed the credibility of both parties, the trial court found that MedCost failed
to act with due diligence concerning the legitimacy of the Texas entities, including ABP and NAWA.
This finding should not be disturbed because it is supported by sufficient evidence, including
Groce’s testimony that MedCost relied solely on AHA’s representations and the public records
demonstrating that Neal had been investigated and indicted for insurance fraud. MedCost either had
affirmative knowledge of the fraud involved, or turned a blind eye to it by failing to act with due
diligence.

                                                   9
access its provider network. This network leasing arrangement benefited the Texas entities by

enhancing their marketability and, in turn, benefited MedCost by participating in the network and

allowing it to collect monthly fees from every entity that leased its network. MedCost’s affirmative,

checklist-based approval of the UltraMed identification card, which displayed MedCost’s logo and

stated that the plan was sponsored by NAWA, further demonstrates that MedCost’s contacts were

not random or fortuitous, but were instead purposefully directed toward Texas. Additionally,

MedCost’s actions satisfy the “purposeful” requirement because it was foreseeable that MedCost’s

ongoing involvement with these Texas entities would cause harm in Texas.3

               Even if the nonresident defendant had no physical presence in Texas, it is generally

appropriate to exercise specific jurisdiction over a nonresident who directs foreseeably harmful

actions at the forum state—such as participating in a fraudulent scheme detrimental to Texas

consumers—because the defendant has purposefully availed itself and, therefore, should anticipate

being called to Texas to answer for those actions. See, e.g., Calder v. Jones, 465 U.S.783, 789

(1984) (tort committed in Florida that caused harm in California supported California’s jurisdiction

over Florida defendant); Siskind v. Villa Found. for Educ., Inc., 642 S.W.2d 434, 437 (Tex. 1982)

       3
          A reviewing court should be mindful that a special appearance is not the appropriate stage
to make a determination on liability; issues of ultimate liability are separate inquiries and are
properly reserved for trial on the merits. Walker Ins. Servs. v. Bottle Rock Power Corp., 108 S.W.3d
538, 549 (Tex. App.—Houston [14th Dist.] 2003, no pet.); French v. Glorioso, 94 S.W.3d 739, 746
(Tex. App.—San Antonio 2002, no pet.); Ross F. Meriwether & Assoc., Inc. v. Aulbach, 686 S.W.2d
730, 732 (Tex. App.—San Antonio 1985, no writ). Facts suggesting the nonresident defendant
engaged in tortious activity that foreseeably caused harm in Texas must be considered, however, in
order to determine whether the defendant should have anticipated being haled into a Texas court.
See Siskind v. Villa Found. for Educ., Inc., 642 S.W.2d 434, 437 (Tex. 1982) (facts supporting
allegations of defendant’s deceptive trade practices were relevant to jurisdictional inquiry); French,
94 S.W.3d at 743-44 (jurisdictional determination only requires sufficient evidence to support
implied findings that suggest, but do not ultimately prove, liability).

                                                 10
(Arizona defendant’s misrepresentations and deceptive trade practices that harmed Texas residents

supported specific jurisdiction in Texas); Ennis v. Loiseau, No. 03-04-00748-CV, 2005 Tex. App.

LEXIS 3412, at *30 (Tex. App.—Austin May 5, 2005, no pet. h.) (nonresident’s participation in

fraudulent insurance scheme that harmed Texas consumers supported specific jurisdiction); LeBlanc

v. Kyle, 28 S.W.3d 99, 104 (Tex. App.—Texarkana 2000, pet. denied) (specific jurisdiction in Texas

appropriate over French manufacturer based on contract with Vermont company to distribute faulty

water heaters to “the fifty states,” which included Texas); Memorial Hosp. Sys. v. Fisher Ins.

Agency, Inc., 835 S.W.2d 645, 650 (Tex. App.—Houston [14th Dist.] 1992, no writ) (nonresident

defendant’s single misrepresentation, made to Texas entity over telephone from out-of-state,

supported specific jurisdiction in Texas); General Elec. v. Brown & Ross Int’l, 804 S.W.2d 527, 532-

33 (Tex. App.—Houston [1st Dist.] 1990, writ denied) (New York defendant’s participation in

conspiracy that would foreseeably defraud Texas consumers supported Texas’s specific jurisdiction,

even though defendant had never been present in Texas).

               Although the majority notes that foreseeability is an important component of the

jurisdictional inquiry, it overlooks the fact that MedCost’s actions were foreseeably harmful to Texas

residents, asserting instead that MedCost’s actions “jeopardized only residents and consumers of the

Carolinas.” To reach this conclusion, the majority views MedCost’s involvement with the Texas-

based entities as a one-way street. But MedCost operated as the gatekeeper. Not only did MedCost

open the gate and allow the fraudulent Texas insurers into its network, MedCost in turn profited

from this arrangement. Moreover, this arrangement was detrimental to Texas consumers; by

advertising themselves as “nationwide,” the fraudulent Texas insurers were able to defraud many

                                                 11
Texas consumers into purchasing the “bogus” insurance products, and the money collected from

these Texas victims was used to pay MedCost. Because MedCost’s actions facilitated the fraud

perpetrated on Texas residents, and MedCost profited from that fraud, MedCost is subject to the

jurisdiction of Texas courts.     MedCost should have anticipated this when it approved the

identification card, which was a specific, purposeful action taken by MedCost with knowledge that

it was establishing an ongoing relationship with a fraudulent Texas insurer (NAWA).

                The Texas Legislature has articulated a state policy to protect its residents from the

harm caused by unauthorized insurance practices and to prevent Texas from becoming a “safe harbor

for persons or insurers engaged in the unauthorized business of insurance in this state, regardless of

whether the insureds or other persons affected by the unauthorized business of insurance are

residents of this state.” Tex. Ins. Code Ann. § 101.001. This state policy, along with the well-

established jurisprudence that a nonresident defendant should anticipate being haled into Texas when

it participates in activities that are foreseeably harmful to Texas residents, supports the exercise of

specific jurisdiction over MedCost. MedCost could reasonably foresee that it would have to defend

its actions in Texas based on section 101.201 of the insurance code, which states that a “person who

in any manner assisted directly or indirectly in the procurement of [an unauthorized insurance]

contract is liable to the insured for the full amount of a claim or loss under the terms of the contract

if the unauthorized insurer fails to pay the claim or loss.” Id. § 101.201(a) (West Supp. 2004-05).

                MedCost’s actions were not confined to the Carolinas. Rather, MedCost established,

through its many network leases, ongoing relationships with a web of entities involved in a

multistate insurance scheme. The majority notes that no finding of fact stated that MedCost had a

                                                  12
direct contract with any Texas entity. In findings of fact 10, 14-15, and 26, the trial judge found that,

pursuant to its contract with AHA, MedCost was “involved in the ABP scheme” and sold the

UltraMed plan, which was an ABP product, and that MedCost profited from this plan, which was

administered by PAR and sponsored by NAWA. MedCost had purposeful, ongoing relationships

with the fraudulent Texas insurers, and it should not be permitted to benefit from clever structuring,

given its participation in and knowledge of the network that operated to the detriment of Texas

consumers. That MedCost’s relationships with the Texas entities were established through third-

party entities does not provide it immunity from suit in Texas, where hundreds of thousands of

dollars have been lost. “[A] truly interstate business may not shield itself from suit by a careful, but

formalistic structuring of its business dealings.”        Siskind, 642 S.W.2d at 437. MedCost’s

participation in the insurance scheme, therefore, amounts to “minimum contacts” purposefully

directed at Texas.

                If a nonresident defendant has purposely established minimum contacts with the

forum state, then the second prong of the specific jurisdiction inquiry asks whether those specific

contacts gave rise to, or are connected with, the underlying claims. Schlobohm v. Schapiro, 784
S.W.2d 355, 358 (Tex. 1990). Here, the claims that were assigned to the receiver in the underlying

suit are substantially connected to the purposeful contacts MedCost established with Texas through

its relationships with NAWA, ABP, Neal, and UEVEBA, thereby satisfying the second prong of the

specific jurisdiction inquiry.

                Botter v. American Dental Association, the case primarily relied on by MedCost, is

distinguishable. See 124 S.W.3d 856 (Tex. App.—Austin 2003, no pet.). Contrary to the facts of

                                                   13
Botter, here there was a substantial connection between MedCost’s actions, the State of Texas, and

the claims at issue in the underlying suit, based on MedCost’s continuing obligations to and its

participation with the regulated Texas entities in the networked scheme that facilitated the

perpetration of fraud on Texas consumers, from which MedCost profited. Botter, therefore, does

not support MedCost’s claim that Texas lacks specific jurisdiction over it.

               “Once it has been decided that a defendant purposefully established minimum

contacts within the forum state, these contacts may be considered in light of other factors to

determine whether the assertion of personal jurisdiction would comport with ‘fair play and

substantial justice.’” Burger King Corp., 471 U.S. at 476. These factors include: (1) the burden on

the defendant, (2) the interests of the forum state in adjudicating the dispute, (3) the plaintiff’s

interest in obtaining convenient and effective relief, (4) the interstate judicial system’s interest in

obtaining the most efficient resolution of controversies, and (5) the shared interest of the several

states in furthering fundamental substantive social policies. Guardian Royal Exch. Assurance, Ltd.

v. English China Clays, P.L.C., 815 S.W.2d 223, 228 (Tex. 1991) (citations omitted); see also Asahi

Metal Indus., 480 U.S. at 113 (discussing factors to consider).

               A nonresident defendant who has established minimum contacts with the forum, yet

seeks to avoid jurisdiction based on these factors, must present a “compelling case” that the

traditional notions of fair play and substantial justice would be violated by subjecting him to

litigation in the forum; “the Due Process Clause may not readily be wielded as a territorial shield to

avoid interstate obligations that have been voluntarily assumed.” Burger King Corp., 471 U.S. at

474, 477. Moreover, “[b]ecause the minimum contacts analysis now encompasses so many

                                                  14
considerations of fairness, it has become less likely that the exercise of jurisdiction will fail a fair

play analysis.” Schlobohm, 784 S.W.2d at 357-58.

               MedCost claims that, even if minimum contacts are established, it should not be

subjected to jurisdiction because it and the witnesses with relevant knowledge are located in North

and South Carolina, the claims against MedCost originally belonged to citizens of the Carolinas, and

Texas has no greater interest in litigating these claims than do North and South Carolina. MedCost

does not present any evidence beyond the conclusory statement in Groce’s affidavit that litigating

in Texas would be an “extreme burden.” This is not a “compelling case” against the reasonableness

of exercising personal jurisdiction over MedCost.

               Travel required by a corporate defendant and its employee witnesses to the forum

does not constitute a substantial burden or undue hardship as to violate the Due Process Clause if

the defendant has purposefully availed itself of that forum. Distance alone is not sufficient to defeat

jurisdiction, given that “modern transportation and communications have made it much less

burdensome for a party sued to defend himself in a State where he engages in economic activity.”

Burger King Corp., 471 U.S. at 474; see also Guardian Royal, 815 S.W.2d at 231. In a receivership

action involving multistate transactions and relationships such as this, where parties and witnesses

from across the country are involved in the same suit, it is unavoidable that some will have to travel.

MedCost, therefore, has not satisfied its threshold burden of showing that it would be unfairly

burdensome to require it to litigate in Texas.

               While it is true that the specific claims against MedCost belonged to residents of

North and South Carolina before they were assigned to the Special Receiver, this does not support

                                                  15
MedCost’s argument. First, it is significant that many Texas consumers were harmed by the fraud

that MedCost knowingly facilitated through its involvement with the Texas-based entities. Although

these Texas consumers did not name MedCost in their underlying claims, MedCost played a role in

the fraud perpetrated by the defendants that were named by the Texas victims; MedCost must answer

for the harm it caused in this state.

                Moreover, all of the underlying claims—including those brought by Carolina

residents against MedCost—have been assigned to Loiseau and are being litigated in Texas. A factor

to be considered in the due process analysis is the plaintiffs’ interest in obtaining effective relief.

Here, the victims determined that their most effective method of obtaining relief was to assign their

claims to the receiver in Texas, rather than to bring individual suits against MedCost elsewhere. It

would not be practical or efficient—from an individual or a judicial perspective—for the hundreds

of plaintiffs to litigate these claims separately across the country. Loiseau testified at the special

appearance hearing that it was not economically feasible for the receiver to sue each of the

defendants in their respective home states. Hence, the plaintiffs’ interests are served by maintaining

this suit in Texas.

                Further, the nature of the underlying litigation supports jurisdiction in Texas because

it involves insurance, a highly regulated industry. See Burstein v. State Bar of Cal., 693 F.2d 511,

522 (5th Cir. 1982 ) (fact that insurance is highly regulated industry was factor to consider in denying

special appearance); Guardian Royal, 815 S.W.2d at 229 & n.8 (“[A] state’s regulatory interest in

a certain area or activity such as insurance is an important consideration in deciding whether the

exercise of jurisdiction is reasonable and [] a state’s regulatory interest may establish the

                                                  16
reasonableness of jurisdiction upon a lesser showing of minimum contacts than would otherwise be

required.”). Insurance fraud is a nationwide problem that all states have a shared interest in

efficiently resolving, which is why the multistate group of commissioners took collective action in

this case. These considerations distinguish the instant case from the majority of special appearance

cases, which typically concern the private business dealings or sales transactions between individual

companies and, unlike the insurance industry, do not impact the general public. It therefore serves

the interest of the interstate judicial system in protecting the state’s citizens, as well as the shared

interest of the several states, to bring the claims against MedCost in Texas.

                Finally, Texas’s interest in litigating here is substantial. Several of the primary actors

in this insurance scheme were based in Texas, including NAWA, ABP, Neal, and UEVEBA.

MedCost established connections with these entities and facilitated their ability to defraud Texas

consumers. As MedCost’s vice president testified, MedCost formed “strategic alliances” with

insurance carriers in many states, including several Texas companies. Texas has statutorily

recognized that, when the unauthorized practice of insurance has occurred, its “residents face often

insurmountable obstacles in asserting legal rights under the policies in foreign forums under

unfamiliar laws and rules of practice.” Tex. Ins. Code Ann. § 101.001(a). Based on MedCost’s

acknowledged connections with the insurance industry in Texas, no due process violation results

from recognizing Texas’s interest in subjecting MedCost to jurisdiction in this state.

                Because it is not unduly burdensome to subject MedCost to the jurisdiction of a Texas

court, and because the interests of Texas, the plaintiffs, and the several states are all served by doing

                                                   17
so, the exercise of personal jurisdiction over MedCost comports with the traditional notions of fair

play and substantial justice.

               Because the evidence supports the exercise of specific jurisdiction over MedCost, I

would affirm the trial court’s order.

                                              Jan P. Patterson, Justice

Before Chief Justice Law, Justices Patterson and Puryear

Filed: May 26, 2005

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