Health Care Service Corporation, an Unincorporated Division of Which is Blue Cross and Blue Shield of Texas v. East Texas Medical Center

ACCEPTED
12-15-00287-CV
TWELFTH COURT OF APPEALS
TYLER, TEXAS
12/29/2015 5:44:05 PM
Pam Estes
CLERK

No. 12-15-00287-CV
______________
FILED IN
12th COURT OF APPEALS
In the Twelfth Court of Appeals TYLER, TEXAS
12/29/2015 5:44:05 PM
Tyler, Texas PAM ESTES
______________ Clerk

BLUE CROSS & BLUE SHIELD OF TEXAS,
a Division of HEALTH CARE SERVICE CORPORATION,
Appellant,
v.
EAST TEXAS MEDICAL CENTER,
Appellee.
______________
Accelerated Appeal
from the 241st Judicial Court Smith County, Texas, No. 15-1165-C
______________
BRIEF OF APPELLANT
______________

GREGORY D. SMITH MARTIN J. BISHOP
State Bar No. 18600600 State Bar No. 24086915
STEPHEN M. SPITZER REED SMITH, LLP
State Bar No. 18954850 811 Main Street, Suite 1700
RAMEY & FLOCK, P.C. Houston, Texas 77002-6110
100 E. Ferguson St., Suite 500 713-469-3800
Tyler, Texas 75702 mbishop@reedsmith.com
903-597-3301
gregs@rameyflock.com
sspitzer@rameyflock.com
Attorneys for Appellant

ORAL ARGUMENT REQUESTED
 THE PARTIES AND THEIR COUNSEL
I. Appellant:

Health Care Service Corporation, an unincorporated division of which
is Blue Cross and Blue Shield of Texas

II. Counsel for Appellant:

Greg Smith
State Bar No. 18600600
Stephen M. Spitzer
State Bar No. 18954850
Ramey & Flock, P.C.
100 East Ferguson, Suite 500
Tyler, TX 75702
Telephone: (903) 597-3301
Facsimile: (903) 597-2413
gsmith@rameyflock.com
sspitzer@rameyflock.com

Martin J. Bishop
State Bar No. 24086915
Reed Smith, LLP
811 Main Street, Suite 1700
Houston, TX 77002-6110
Telephone: (713) 469-3800
mbishop@reedsmith.com

III. Appellee:

East Texas Medical Center

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IV. Counsel for Appellee:

Deborah Race
State Bar No. 16448700
Otis W. Carroll, Jr.
State Bar No. 03895700
Collin M. Maloney
State Bar No. 00794219
Ireland, Carroll & Kelley, P.C.
6010 South Broadway Ave, Suite 500
Tyler, TX 75703
Telephone: (903) 561-1600
Facsimile: (903) 581-1071
otiscarroll@icklaw.com
cmaloney@icklaw.com
drace@icklaw.com

T. John Ward
State Bar No. 20848000
Claire Abernathy Henry
State Bar No. 24053063
Ward, Smith & Hill, PLLC
1127 Judson Road, Suite 220
Longview, Texas 75601
Telephone: (903) 757-6400
Facsimile: (903) 757-2323
tjw@wsfirm.com
claire@wsfirm.com

Michael C. Coker
State Bar No. 04527100
Adams & Coker, P.C.
4540 Kinsey Drive
Tyler, Texas 75703
Telephone: (903) 581-1196
Facsimile: (903)
mikecoker@adams-coker.com

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 David C. Frederick
Eduardo F. Bruera
Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C.
1615 M Street, Suite 400
Washington, D.C. 20036
Telephone: (202) 326-7900
dfrederick@khhte.com
ebuera@khhte.com

Adam N. Bitter
Assistant Attorney General
State Bar No. 24085070
Financial Litigation, Tax, & Charitable Trusts Division
P.O. Box 12548
Austin, TX 78711-2548
Telephone: (512) 936-2422
Facsimile: (512) 477-2348
adam.bitter@texasattorneygeneral.gov

V. Other Parties (Co-Defendants) in the Trial Court:

Aetna Health, Inc.
Aetna Life Insurance Company

Cigna Healthcare of Texas, Inc.
Cigna Health and Life Insurance Company

VI. Counsel for Other Parties:

1. Counsel for the Aetna Defendants:

John B. Shely
State Bar No. 18215300
Dimitri D. Zgourides
State Bar No. 00785309
Mitchell A. Reid
State Bar No. 24037346
Andrews Kurth LLP
600 Travis St., Suite 4200
Houston, TX 77002
Telephone: (713) 220-4200
Facsimile: (713) 220-4285
jshely@andrewskurth.com

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 dzgourides@andrewskurth.com
mitchreid@andrewskurth.com

Jerry Beane
State Bar No. 01966000
Andrews Kurth LLP
1717 Main Street, Suite 3700
Dallas, TX 75201
Telephone: (214) 659-4400
Facsimile: (214) 659-4401
jerrybeane@andrewskurth.com

Clay M. White
State Bar No. 21292220
White Shaver
205 West Locust Street
Tyler, TX 75702
Telephone: (903) 533-9447
Facsimile: (903) 595-3766
cwhite@whiteshaverlaw.com

2. Counsel for the Cigna Defendants:

Eliot T. Burriss
State Bar No. 24040611
Nicole Figueroa
State Bar No. 24069716
Colleen Deal
State Bar No. 24082909
DLA Piper LLP
1717 Main Street, Suite 4600
Dallas, TX 75201
Telephone: (214) 743-4500
Facsimile: (214) 743-4545
eli.burriss@dlapiper.com
nicole.figueroa@dlapiper.com
colleen.deal@dlapiper.com

/s/ Greg Smith
Gregory D. Smith

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 TABLE OF CONTENTS

Page
THE PARTIES AND THEIR COUNSEL ...................................................... i

TABLE OF AUTHORITIES ....................................................................... viii

KEY TO RECORD CITATIONS ................................................................. xi
STATEMENT OF THE CASE .......................................................................1

ISSUE ..............................................................................................................3

INTRODUCTION AND STATUTORY BACKGROUND ...........................4

FACTS AND PROCEDURAL HISTORY .....................................................8
A. Factual Background ....................................................................8

1. BCBSTX Provides Insurance To Its Members In
Tyler, Texas ......................................................................8
2. ETMC Is A Large Hospital In Tyler, Texas .................. 12
3. The Long History Of Contracts And Negotiations
Between BCBSTX And ETMC ..................................... 13
4. The Status Of The Relationship Between BCBSTX
And ETMC Before The Injunction ................................ 16
B. Procedural History ................................................................... 18
1. ETMC Sues BCBSTX, Alleging A Right To Be
Part Of BCBSTX’s PPO Network—Initially
Seeking Damages Only.................................................. 18
2. ETMC Later Requests A Mandatory Temporary
Injunction, Claiming That It Would Go Out Of
Business Before Trial Without One ............................... 19
3. At The Injunction Hearing, ETMC Argues That,
Without An Injunction, It Will Lose Money And
Be Forced To Cut Services Before Trial ....................... 20
C. The Trial Court’s Mandatory Injunction Requiring
BCBSTX To Contract With ETMC ......................................... 23

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SUMMARY OF ARGUMENT .................................................................... 25 

STANDARD OF REVIEW .......................................................................... 28 

ARGUMENT ................................................................................................ 28 

I.  The Mandatory Injunction Should Be Vacated Because The
Trial Court, At ETMC’s Urging, Applied The Wrong Legal
Standard .............................................................................................. 28 

II.  The Mandatory Injunction Should Be Vacated Because It
Violates Settled Law Governing Injunctions In Two
Fundamental Ways ............................................................................. 32 

A.  The Mandatory Injunction Impermissibly Alters The
Decades-Long Lawful Status Quo ........................................... 32 

B.  ETMC Did Not Prove The Core Element Of Probable,
Imminent, Irreparable Injury .................................................... 34 

III.  The Mandatory Injunction Should Be Vacated Because, As A
Matter Of Law, ETMC Does Not Have A Cause Of Action
Against ETMC And Because ETMC Did Not Prove A Probable
Right To Relief ................................................................................... 46 

A.  ETMC Has No Viable Cause of Action Because It
Cannot Bring A Private Lawsuit To Enforce The Texas
Insurance Code ......................................................................... 46 

B.  ETMC Did Not Prove A Probable Right To Relief
Because It Did Not Show A Violation Of The Texas
Insurance Code ......................................................................... 50 

CONCLUSION ............................................................................................. 54 

CERTIFICATE OF SERVICE ..................................................................... 55 

CERTIFICATE OF COMPLIANCE ............................................................ 56 

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APPENDICES:

A. Temporary Injunction And Order Setting Final Trial On The
Merits, dated November 10, 2015 (CR 305-309)

B. TEX. INS. CODE § 1301.051

C. TEX. INS. CODE § 1301.006

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 TABLE OF AUTHORITIES
CASES Pages
Ballenger v. Ballenger,
694 S.W. 2d 72 (Tex. App.–Corpus Christi 1985, no writ) .............................. 37
Banks v. Collins,
257 S.W. 2d 97 (Tex. 1953) ............................................................................... 39

Brazoria County Appraisal Dist. v. Notlef, Inc.,
721 S.W. 2d 391 (Tex. App.–Corpus Christi 1986, no writ) ...................... 35, 41

Butnaru v. Ford Motor Co.,
84 S.W. 3d 198 (Tex. 2002) ....................................................................... passim
Calvary Baptist Church at Tyler v. Adams,
570 S.W. 2d 469 (Tex. Civ. App.–Tyler 1978, no writ) ................................... 35
Canteen Corp. v. Republic of Tex. Props., Ins.,
773 S.W. 2d 398 (Tex. App.–Dallas 1989, no writ) .......................................... 36
Cernosek Enters., Inc. v. City of Mont Belvieu,
338 S.W. 3d 655 (Tex. App.–Houston [1st Dist.] 2011, no pet.) ...................... 48

City of Irving v. Dallas County Flood Control Dist.,
383 S.W. 2d 571 (Tex. 1964) ............................................................................ 33

El Tacaso, Inc. v. Jireh Star, Inc.,
356 S.W. 3d 740 (Tex. App.–Dallas 2011, no pet.) .......................................... 36

Grubaugh v. Texas Employers Ins. Ass’n,
677 S.W. 2d 812 (Tex. App.–Fort Worth 1984),
dismissed (Mar. 20, 1985) ................................................................................. 28

Gym-N-I Playgrounds, Inc. v. Snider,
220 S.W. 3d 905 (Tex. 2007) ............................................................................ 50

Iranian Muslim Org. v. City of San Antonio,
615 S.W. 2d 202 (Tex. 1981) ...................................................................... 29, 32
Kolbo v. Blair,
379 S.W.2d 125 (Tex. App.‒Corpus Christ 1964, writ ref’d n.r.e.) .................. 39

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Landry’s Seafood Inn & Oyster Bar-Kemah, Inc. v. Wiggins,
919 S.W. 2d 924 (Tex. App.–Houston [14th Dist.] 1996, no writ) ................... 35

Lifeguard Benefit Svcs. v. Direct Med. Net.,
308 S.W. 3d 102 (Tex. App.–Fort Worth [2nd Dist.] 2010, no pet.) .......... 29, 35

Lively v. Carpet Services, Inc.,
904 S.W. 2d 868 (Tex. App.–Houston [1st Dist.] 1995),
writ denied (Feb. 9, 1996).................................................................................. 48
Markel v. World Flight, Inc.,
938 S.W. 2d 74 (Tex. App.–San Antonio 1996, no writ) .................................. 30

Merrell Dow Pharmaceuticals, Inc. v. Havner,
953 S.W. 2d 706 (Tex. 1997) ....................................................................... 39, 42
Morris v. Collins,
881 S.W. 2d 138 (Tex. App.–Houston [1st Dist.] 1994),
writ denied (Oct. 13, 1994) .............................................................. 29, 30, 31, 35
Mother and Unborn Baby Care v. Doe,
689 S.W. 2d 336 (Tex. App.–Fort Worth 1985, writ dism’d) ............... 28, 29, 35
M P I, Inc. v. Dupre,
596 S.W. 2d 251 (Tex. App.–Fort Worth 1980, writ ref’d n.r.e.) ..................... 36
Nixon v. Mr. Property Management Co.,
690 S.W. 2d 546 (Tex. 1985) ............................................................................ 48
NMTC CORP. v. Conarroe,
99 S.W. 3d 865 (Tex. App.–Beaumont 2003, no pet.) ...................................... 43

Rhodia, Inc. v. Harris County,
470 S.W. 2d 415 (Tex. App.–Houston [1st Dist.] 1971, no writ) ......... 29-30, 31

RP&R, Inc. v. Territo,
32 S.W. 3d 396 (Tex. App.–Houston [14th Dist.] 2000, no pet.) ......... 29, 30, 32

State Dept. of Highways & Public Transp. v. Elkins Lake Municipal Utility
Dist.,
593 S.W. 2d 401 (Tex. App.–Houston [14th Dist.] 1980) .......................... 33-34

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Sun Oil Co. v. Whitaker,
424 S.W. 2d 216 (Tex. 1968) ............................................................................ 29

Sw. Research Inst. v. Keraplast Techs., Ltd.,
103 S.W. 3d 478 (Tex. App.–San Antonio 2003, no pet.) ................................ 34

Tuma v. Kerr Cnty.,
336 S.W. 3d 277 (Tex. App.–San Antonio 2010, no pet.) ................................ 48

Walker v. Packer,
827 S.W. 2d 833 (Tex. 1992) ............................................................................ 28

Walling v. Metcalfe,
863 S.W. 2d 56 (Tex. 1993) .............................................................................. 29

OTHER AUTHORITIES
28 TEX. ADMIN. CODE § 3.4 ..................................................................................... 48
28 TEX. ADMIN. CODE § 3.3701 ........................................................................... 5, 49

28 TEX. ADMIN. CODE § 3.3704 ........................................................................... 6, 48
TEX. INS. CODE § 1301.005 .................................................................................. 6, 17

TEX. INS. CODE § 1301.006 .................................................................................. 5, 47

TEX. INS. CODE § 1301.007 ............................................................................ 5, 47, 48
TEX. INS. CODE § 1301.009 ...................................................................................... 47

TEX. INS. CODE § 1301.051 ...................................................................... 6, 33, 47, 50
TEX. INS. CODE § 1301.0055 .......................................................................... 5, 47, 49

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 KEY TO RECORD CITATIONS

CR __ ................. Clerk’s Record.
RR __ ................. November 10, 2015 Injunction Hearing Transcript,
reproduced in Volume 1 of the Reporter’s Record.

PX __ ................. Plaintiff’s Exhibits from the November 10, 2015
Injunction Hearing, reproduced in Volume 2 of the
Reporter’s Record. If required, the Bates number is used
to cite a specific page.
DX __ ................. Defendant’s Exhibits from the November 10, 2015
Injunction Hearing, reproduced in Volumes 2 and 3 of the
Reporter’s Record. If required, the Bates number is used
to cite a specific page.
8/19 Tr __ .......... August 19, 2015 Motions Hearing Transcript, reproduced
in its own volume of the Reporter’s Record.

Supp RR __ ....... Supplemental Record, reproduced in its own volume of the
Reporter’s Record.

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 STATEMENT OF THE CASE
Nature of the Case This is an appeal from a mandatory temporary
injunction. Plaintiff East Texas Medical Center
(“ETMC”), a hospital in Tyler, Texas, filed this
lawsuit against Defendant Blue Cross and Blue
Shield of Texas (“BCBSTX”), a division of
Health Care Service Corporation, and other
insurers asserting tort claims (negligence and
interference with prospective business relations)
and statutory claims, all arising from ETMC’s
allegation that the insurers owe duties to ETMC
under Texas Insurance Code, Chapter 1301.
According to ETMC, the Insurance Code entitles
it to a global preferred provider (“PPO”) contract
with BCBSTX even though the parties never had
such a contract during their decades-long
relationship, BCBSTX has complied with the
Insurance Code, and the Texas Department of
Insurance has approved BCBSTX’s PPO network.

Trial Court The Honorable Jack Skeen, Jr., 241st Judicial
District, Smith County

Proceedings Below ETMC initially filed a Petition alleging that
BCBSTX and other insurers acted wrongfully by
not contracting with ETMC as a preferred
provider in their PPO networks, asserting tort
claims and seeking monetary damages only.
Months later, ETMC amended its Petition, adding
a claim for violation of the Texas Insurance Code
and a demand for punitive damages. ETMC also
added an Application for Temporary Injunctive
Relief, demanding that BCBSTX (but not the
other defendants) immediately add ETMC to its
PPO network pending resolution of this case.
After abbreviated discovery and over BCBSTX’s
objections, the trial court held a time-constrained,
one-day temporary injunction hearing.
Disposition At the end of the November 10, 2015 hearing, the
trial court issued a mandatory temporary
injunction requiring BCBSTX to enter into a
preferred provider contract with ETMC.

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 ISSUE
Under the heightened burden that applies when a mandatory
injunction is sought, did the trial court err in issuing a
mandatory temporary injunction requiring BCBSTX to contract
with ETMC where (1) the injunction alters the lawful status
quo; (2) Texas common and statutory law do not require such a
contract; and (3) ETMC failed to meet its burden to show that it
(a) has a viable cause of action, (b) has a probable right to
relief, and (c) will suffer a probable, imminent, and irreparable
injury absent the injunction?

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 INTRODUCTION AND STATUTORY BACKGROUND

The trial court’s mandatory injunction alters the decades-long lawful

status quo by compelling BCBSTX into a preferred provider (“PPO”)
contract with ETMC even though the parties have never had such a contract,
the Texas Insurance Code does not impose upon BCBSTX a duty to enter

into such a contract, and ETMC did not prove that it would suffer imminent,
irreparable injury without such a contract.
BCBSTX provides insurance coverage and services to its members in
Texas through a variety of plans, including PPO plans. BCBSTX covers
medical services for its members at ETMC through traditional indemnity
insurance and its HMO plan. Although BCBSTX and ETMC have had
discussions about ETMC joining BCBSTX’s PPO networks over the past
three decades, BCBSTX and ETMC have never entered into a contract for
ETMC to be a preferred provider in BCBSTX’s general PPO networks
because those networks are adequate without ETMC. Indeed, the Texas
Department of Insurance (“TDI”)—which has exclusive jurisdiction to
enforce the Texas Insurance Code provisions ETMC invokes—has approved

BCBSTX’s PPO networks because they are adequate.
This lawsuit arises out of ETMC’s contention that it is entitled to a
PPO contract with BCBSTX. ETMC’s bases that contention on its view that

certain provisions of Chapter 1301 of the Texas Insurance Code impose
upon BCBSTX a duty to designate ETMC as a preferred provider in its PPO

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networks. An examination of Chapter 1301 reveals the flaws in ETMC’s
position.

The Texas Legislature enacted Chapter 1301 to regulate PPOs. The
statute’s primary goal is to ensure reasonable health care coverage for Texas
residents, not to protect providers like ETMC. TEX. INS. CODE § 1301.006

(requiring insurers to ensure the “availability of and accessibility to adequate
personnel, specialty care, and facilities” in their PPO networks). TDI, which
oversees the adequacy of an insurance plan’s coverage, will approve a PPO

plan only if it provides adequate coverage. See TEX. INS. CODE § 1301.0055
(directing TDI to “adopt network adequacy standards to “ensure availability
of, and accessibility to, a full range of contracted physicians and health care

providers to provide health care services to insureds”); see also TEX. INS.
CODE § 1301.007 (directing TDI to adopt rules to “ensure reasonable
accessibility and availability of preferred provider services to residents of
this state”). In keeping with TDI’s role in the statutory scheme (and the goal
of a uniform statewide regulatory framework), the Texas Legislature did not
provide for private enforcement of the Code provisions ETMC invokes.
Consistent with this, TDI’s regulations expressly state that their
requirements do not “create … a basis for a private cause of action.”
28 TEX. ADMIN. CODE § 3.3701(d).
Nothing in Chapter 1301 suggests that it was enacted to create
privately-enforceable duties flowing to healthcare providers. Chapter 1301
does not require an insurer to contract with every provider or to designate

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any particular provider as preferred provider in a PPO network. Instead,
Chapter 1301 only requires insurers to provide “a fair, reasonable, and

equivalent opportunity [for providers] to apply to be and to be designated as
a preferred provider,” and not to “unreasonably withhold a designation as a
preferred provider.” TEX. INS. CODE § 1301.051(a), (b). Chapter 1301

specifies that, aside from the requirements to act fairly and reasonably, the
Code “does not prohibit an insurer from rejecting a physician’s or health
care provider’s application for designation based on a determination that the

preferred provider benefit plan has sufficient qualified providers.” TEX. INS.
CODE § 1301.051(d). The Code thus contemplates that there will be out-of-
network providers and mandates how they are to be compensated

“[i]f services are not available through a preferred provider.” TEX. INS.
CODE § 1301.005; see also 28 TEX. ADMIN. CODE § 3.3704(a)(12) (PPO plan
is not unjust or unfairly discriminatory if “insureds have the right to receive
care from a nonpreferred provider” when “medically necessary covered
services are not reasonably available through preferred providers”).
The trial court nonetheless entered a mandatory injunction requiring
BCBSTX to do what Chapter 1301 does not require it to do—enter into a
PPO contract with ETMC. There are several problems with the trial court’s
order—each of which provides an independent ground for reversal.
First, the trial court followed ETMC’s lead and used the wrong legal
standard—focusing on a “balance of harms” inquiry almost to the exclusion

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of the other required injunction elements and minimizing ETMC’s
evidentiary burden.

Second, the mandatory injunction violates foundational injunction law
because it destroys, not preserves, the lawful status quo by compelling
BCBSTX to enter into a general preferred provider contractual relationship

with ETMC even though the parties have never had such a contract and the
Insurance Code does not require such a contract.
Third, ETMC did not carry its burden to prove that it would suffer

imminent, irreparable injury without an injunction. ETMC asserts that it is
losing money and will be compelled to cut services before this litigation is
completed if it is not designated as a preferred provider—but it presented no

objective evidence to support that assertion. Indeed, the evidence showed
the opposite: ETMC’s financial losses will not force it to cut any services
before trial (if at all).
Fourth, ETMC did not meet its burden to show that it has a cause of
action and a probable right to relief. As a matter of law, ETMC has no
private right of action to enforce the Code provisions it invokes. And, in any
event, Chapter 1301 does not impose a duty on BCBSTX to contract with
ETMC. The Code only requires BCBSTX to give ETMC a fair, reasonable
and equivalent opportunity to be part of BCBSTX’s preferred provider
networks—and the objective evidence shows that BCBSTX has done just
that. BCBSTX’s decision not to designate ETMC as a preferred provider in

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its PPO networks was reasonable because its PPO networks provide
adequate coverage to BCBSTX members (as found by TDI).

FACTS AND PROCEDURAL HISTORY

A. Factual Background

1. BCBSTX Provides Insurance To Its Members In
Tyler, Texas
BCBSTX is a division of Health Care Service Corporation,
a customer-owned insurance company. RR 186, 200, 218. BCBSTX offers
its services to both employers and individuals. RR 228, 267-268. BCBSTX

offers both “fully insured” plans (i.e., the employer or individual member
pays a premium to BCBSTX and BCBSTX pays for covered health care
expenses) and “self-funded” plans (i.e., an employer uses BCBSTX to

administer its health benefit plan, but uses its own money to pay its
employees’ covered health care expenses). RR 267-268. Approximately
one third of BCBSTX’s business consists of fully insured plans, and
approximately two thirds consist of self-funded plans. RR 267-268.
BCBSTX provides healthcare coverage to its members by negotiating
contracts with various medical providers to create “networks” of providers

that are willing provide medical services to BCBSTX members at pre-
established contracted rates. RR 218-219. BCBSTX designs and
customizes its provider networks—and elects with which providers to

contract and for which network—to meet the different needs of its members

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and be able to offer its members a variety health plan products with different
levels of coverage. Id.

BCBSTX offers HMO and PPO network plans in Tyler. RR 218-221.
In an HMO plan, benefits for covered services are provided only when
members use providers in the HMO network, meaning the provider has an

HMO contract with BCBSTX.1 RR 220.
In a PPO plan, members have a greater choice of providers. RR 219.
First, PPO networks are generally more robust. Second, unlike in an HMO

plan, in a PPO plan a member will still have some level of benefit if they
elect to obtain services from a provider that is not in the PPO network.
However, a member who chooses to use a provider “in” the PPO network

generally incurs less out-of-pocket expense (in deductibles and co-pays) than
if the member obtains the same services from a provider who is not in (or
“out of”) the PPO network. RR 219. In this way, members enrolled in a
PPO plan are economically incentivized to use “in-network” providers
(referred to as “preferred providers”) versus “out-of-network” providers.
RR 219 (the “benefits [to members] provide the incentive” to members to
use preferred providers).

1
If an HMO plan member chooses to use a provider outside the HMO
network for elective services, the insurer does not cover the services.
RR 220. Because HMO plans restrict members’ choice of providers, they
generally cost members less than other types of plans. RR 224.

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 As explained, to achieve this range of coverage options, insurers like
BCBSTX negotiate contracts with health care providers. RR 219-221, 224.

Generally, providers agree to accept lower reimbursement rates in exchange
for higher expected patient volume. RR 219-221, 224. Therefore, a
provider who wants to contract with BCBSTX to be in a PPO network

typically will agree to accept lower rates than that providers’ billed charges
(i.e., off the shelf prices) because it can expect more PPO members to
choose it, since members will incur less out of pocket expense to see the

provider (as compared with a provider who is out of network). RR 219.2
A provider that does not have an HMO or PPO contract with
BCBSTX and is therefore not in any BCBSTX network may still want to

enter into a contractual arrangement with BCBSTX to provide both parties
certainty with respect to the price and administration of services provided to
a member of BCBSTX. In such instance, BCBSTX may enter into a
“traditional indemnity” contract with the provider whereby the parties agree
on specific rates and terms and conditions for payments.3 See RR 227.
2
HMO network providers typically will accept even lower rates, because
they expect that the HMO plan will require many patients to choose them for
medical services. RR 224.
3
It is not unusual for a provider who is in an HMO or PPO network to also
enter into a traditional indemnity agreement. Indeed, providers often have
multiple contracts with BCBSTX which correspond to different products
offered by BCBSTX. RR 221. For instance, a provider might not have a
PPO contract with BCBSTX, but may have an HMO contract and a
traditional indemnity agreement that would set reimbursement rate for
services rendered to PPO members.

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 While contracted rates may vary from provider to provider, as might
be expected, reimbursement rates under a traditional indemnity contract are

generally higher than PPO or HMO reimbursement rates because the
provider has less incentive to offer discounted rates. See RR 225-27. Given
the direct relationship between patient volume and price, different products

offered by BCBSTX to its members come at different prices points, all of
which are impacted by a variety of factors including the mix of providers in
the network and negotiated rates. Therefore, an insurer like BCBSTX tries

to balance how it designs and builds its network with the scope of coverage
(the number of providers) against the overall cost to members.4 See RR 223-
224.

In Tyler, BCBSTX operates a PPO plan covering about 30,000 of the
210,000 people in Smith County. RR 194. BCBSTX structures its PPO
network to provide adequate and sufficient coverage for its members, while
keeping their costs down. RR 217-218. The Texas Department of Insurance
has approved BCBSTX’s PPO network as providing adequate coverage.
RR 251-252; DX 4 at BCBSTX3842, BCBSTX3875 (TDI responses
approving BCBSTX’s 2014 and 2015 network adequacy filings).

4
Depending on the specific market, offering greater coverage in a PPO
(i.e. offering more preferred providers) can increase the overall cost to
customers. RR 225. For example, if a network is broadened to include more
preferred providers, then each existing preferred provider may expect a
lower volume of patients and may demand a higher rate. RR 225.

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 In Tyler, BCBSTX has PPO contracts with Trinity Mother Frances
Hospital and the University of Texas Health Center, as well as hospitals in

the East Texas Medical Center Regional Healthcare System outside of Tyler.
RR 66, 88; PX 1 at ETMC0001722. As discussed below, ETMC is not, and
has never been, designated as a preferred provider in BCBSTX’s general

PPO network—but it has an HMO contract, a single-employer PPO contract,
and a traditional indemnity contract with BCBSTX. RR 89-90, 218.

2. ETMC Is A Large Hospital In Tyler, Texas
ETMC is one of three large hospitals in Smith County. CR 222-223.
ETMC is financially stable and has operated successfully for decades
without a PPO contract with BCBSTX. ETMC’s annual revenues are
approximately $800 million. RR 99. ETMC has approximately $300
million in cash and cash-equivalents on-hand, more today than it has ever
had before. RR 99-101. Notably, that is more cash on hand than
approximately 80% of the hospitals in the country. RR 297-298. In 2015,
ETMC’s patient admissions increased, and ETMC’s patient volume has
remained steady over the past six years. RR 101. For fiscal year 2016,
ETMC expects a “steady improvement” in net income and “positive results.”

DX 8 at ETMC0001577.
In the past, ETMC has borrowed money by issuing bonds. RR 77.
It owes “a little over $400 million” on its bonds, three-quarters of which can

be covered with its $300 million in cash on hand. RR 176. In 2015, two
bond-rating agencies downgraded ETMC’s bonds. RR 74-76; DX 5, 6. But

- 12 -
those bonds remain investment grade. RR 76. Moreover, the latest financial
information available indicates that ETMC is not even close to violating any

of its bond obligations and will not be close to doing so any time before trial.
 While the bonds require ETMC to have approximately
$125 million in cash on hand, ETMC has nearly $300
million. RR 304.
 While the bonds require ETMC to maintain a debt
service coverage ratio of at least 1.1, ETMC’s is 1.65.
RR 301-308.
 While the bonds require ETMC to maintain a debt
capitalization ratio of less than 70%, ETMC’s is 49.3%.
RR 301-308.
What’s more, because ETMC’s bonds have favorable notice and cure
provisions, if ETMC were to violate a bond obligation in the near future, it
would not default before March 2018 at the earliest. RR 318-320.5

3. The Long History Of Contracts And Negotiations
Between BCBSTX And ETMC
In 1993, after issuing an RFP for the PPO network and inviting
hospitals in the Tyler area to submit bids, BCBSTX engaged in discussions
with ETMC and the other hospitals in an effort to establish the best and most

cost-effective PPO network for its members. RR 196-197, 242. BCBSTX
reviewed the bids and put together a PPO network that ensured availability

5
Specifically, the bonds provide that if ETMC were to violate a bond
obligation before October 2016, it would not need to report that violation
before March 2017, which would trigger a 165 day cure period to engage a
management consultant—if that effort failed then ETMC would not have to
report a second violation, putting it in default, until March 2018. RR 318-
320 (testimony of BCBSTX’s expert Jeffrey Benton).

- 13 -
and accessibility to providers to provide health care services to its
customers. RR 249. That network did not (and still does not) include

ETMC. RR 249.6
Since then, BCBSTX and ETMC have had ongoing discussions
“nearly every year” regarding ETMC’s desire to be in the PPO network,

including “many meetings, many discussions, many emails, many letters.”
RR 198, 241-42; see RR 94 (ETMC CFO testifying that BCBSTX has had
discussions with ETMC every year since at least 1998). However, BCBSTX

and ETMC could not come to terms, so ETMC is not an in-network
preferred provider in BCBSTX’s PPO network. RR 90. BCBSTX has
explained to ETMC that it decided not to enter into a PPO contract with

ETMC because the BCBSTX network is adequate and a good value for
customers without ETMC as a preferred provider. RR 249.
In 2000, for example, ETMC proposed rates for a preferred provider
contract. RR 95. BCBSTX declined the offer, telling ETMC that it “would
have to increase rates on other hospitals [in the PPO network] in an amount
that would lead to costs to [BCBSTX] in order to accept [ETMC] into their
network.” RR 95 (testimony of ETMC’s CFO). BCBSTX’s decision was
based on its evaluation of its network’s sufficiency and its determination that
its current network provided the best pricing option for BCBSTX members.

6
But, as noted, ETMC and BCBSTX have other contractual relationships
that set various reimbursement rates under the traditional and HMO products
offered by BCBSTX. See pp. 16-18, supra.

- 14 -
RR 209-211. BCBSTX explained its decision and reasoning to ETMC in
writing. RR 244; DX 2 (explaining BCBSTX’s position and reasoning and

identifying “impact on price” as a major concern); RR 243-246 (BCBSTX
told ETMC that adding it to PPO network would raise BCBSTX members’
total cost for medical coverage by at least 10%, potentially causing some

members to drop coverage entirely). Specifically, BCBSTX told ETMC
that:

[t]he analysis by our actuaries indicated that, based upon the
proposals received, the impact on price would be significant for
a three-hospital network. The Tyler market is primarily
comprised of small businesses which are very price sensitive.
The anticipated double-digit increase would not be well-
received and may contribute to some businesses dropping
coverage, particularly adding to the already high uninsured rate
in Texas.
RR 245-246 (quoting DX 2).
The talks continued during the following year, and BCBSTX wrote to
ETMC in December 2001, once again explaining its reasoning. RR 247-
248; DX 3. During these discussions with ETMC, BCBSTX offered to

create a separate PPO network that included ETMC and all the facilities in
Tyler. RR 216, 247-248. ETMC rejected the offer. RR 248.
And, more recently, in December 2014, BCBSTX’s new Divisional

Senior Vice-President of Health Care Delivery (Jack Towsley) together with
other BCBSTX employees met with ETMC’s CFO (Byron Hale) and CEO
(Elmer Ellis) to discuss ETMC’s services and its desire to be a preferred
provider in the BCBSTX PPO network. RR 64, 193, 237-238. After the

- 15 -
meeting, BCBSTX reviewed “the pricing, the volumes, the services and
looking at what would be the best expected value equation for [BCBSTX]

customers” and determined, “for the foreseeable future, that the inclusion of
ETMC did not make sense as improving … the value [BCBSTX]
provide[s]” because the “existing PPO network of providers in the Tyler area

was what would best serve [BCBSTX] customers.” RR 240-41. The
hearing testimony made clear that these were only a few representative
examples of the robust ongoing discussions between ETMC and BCBSTX

over the years. RR 248 (the letters admitted into evidence “capture the
nature of the communications between the parties over the course of time”).

4. The Status Of The Relationship Between BCBSTX
And ETMC Before The Injunction
ETMC is not, and has never been, a preferred provider in BCBSTX’s
general PPO network. RR 90. ETMC and BCBSTX are, however, parties to
a number of contracts. RR 89-90, 218. Specifically, ETMC and BCBSTX
have HMO contracts setting ETMC’s reimbursement rates for services
provided to BCBSTX HMO members. RR 201. They also have a separate
traditional indemnity contract. RR 65-66, 89, 225-228. In addition, they

have a limited PPO contract that applies to only one of BCBSTX’s employer
group customers (i.e., Brookshire Grocery, which is discussed below).
RR 78-79. In their 30-year relationship, BCBSTX and ETMC have never
had a PPO contract under which ETMC provides services as a preferred
provider to members in BCBSTX’s broader PPO plans. RR 90.

- 16 -
 BCBSTX PPO members can still receive treatment at ETMC,
however. BCBSTX PPO members currently account for 8% of ETMC’s

revenues. RR 83, 96. In terms of coverage or payment, if a BCBSTX PPO
member chooses to go to ETMC, then ETMC is paid at the rates in the
BCBSTX-ETMC traditional indemnity contract. RR 65, 89, 227, 232; PX 3.

Doing so does not cost the member any more, however, because, as a matter
of policy, ETMC adjusts the prices it charges such patients to ensure that it
charges them no more than they would pay if seeing a preferred provider.

RR 90-91, 123, 125, 138. If a BCBSTX PPO member must go to ETMC—
i.e. if ETMC provides one of a few services not reasonably available at the
other hospitals in BCBSTX’s PPO network—then BCBSTX makes

arrangements to pay in-network benefits, and the member does not incur the
additional expense of going out-of-network. RR 230-231, 253; see TEX. INS.
CODE § 1301.005(b).
BCBSTX does have a PPO contract with ETMC for one particular
local health plan, Brookshire Grocery (an employer that wanted its
employees to have access to ETMC at in-network rates). RR 78-79, 89. For
the Brookshire PPO plan, the BCBSTX-ETMC Brookshire PPO contract
specifies the rates paid to ETMC. RR 89. The Brookshire PPO rates are
significantly lower than the rates in the BCBSTX-ETMC traditional
indemnity contract. RR 232 (the traditional indemnity rates are
approximately 90% higher than Brookshire PPO rates).

- 17 -
 Although BCBSTX’s PPO network is adequate and it is not required
to add ETMC, BCBSTX remains willing to negotiate in good faith with

ETMC. RR 31, 43, 254-255, 344, 349, 352. At the hearing, BCBSTX
offered repeatedly to negotiate in good faith, and even suggested court-
supervised mediation. Id. ETMC chose instead to press for a mandatory

injunction allowing it into the PPO network at the rates set forth in ETMC’s
traditional indemnity agreement with ETMC.

B. Procedural History
1. ETMC Sues BCBSTX, Alleging A Right To Be Part
Of BCBSTX’s PPO Network—Initially Seeking
Damages Only
On June 2, 2015, ETMC filed a Petition alleging that BCBSTX
improperly excluded ETMC from its broad PPO network. CR 5. ETMC’s
original Petition asserted two claims: negligence, and interference with
prospective business relations and economic advantage. CR 10-14.7
Although styled as tort claims, these claims were based on alleged violations
of Chapter 1301 of the Texas Insurance Code. CR 4-5. ETMC’s Petition

sought money damages only and did not reference a threat of imminent,
irreparable harm. CR 14. On August 19, the trial court held a scheduling
conference and—based on the parties’ representations about the schedule,

7
ETMC levels similar allegations against co-defendants Aetna Health Inc.,
Aetna Life Insurance Company, Cigna Healthcare of Texas, Inc., and Cigna
Health and Life Insurance Company, but it has not sought injunctive relief
against them. CR 217-249.

- 18 -
discovery needs, and agreement—set the matter for trial on November 7,
2016. See 8/19 Tr. 9, 51.

2. ETMC Later Requests A Mandatory Temporary
Injunction, Claiming That It Would Go Out Of
Business Before Trial Without One
Barely a month later, on September 25, 2015, ETMC filed an
Amended Petition requesting temporary injunctive relief. CR 217-249. The

Amended Petition alleges that “[w]ithout immediate access to privately-
insured patients such as insureds under [BCBSTX’s PPO], ETMC has now
begun to lose money on its hospital operations,” and that “unless those
losses are reversed and ETMC is able to make a profit, it will be unable to
remain in business.” CR 235-236. Based on these bare assertions about the
profitability of ETMC’s operations, ETMC sought a temporary injunction

“allowing ETMC’s immediate and full participation in [BCBSTX’s] PPO
network.” CR 237. Although ETMC asked the court to order BCBSTX to
pay the rates set forth in the existing BCBSTX-ETMC traditional indemnity
contract “until new PPO agreements are negotiated and signed” (CR 237), it
did not explain why a preferred provider under a PPO contract would merit
the higher reimbursement rates ETMC had been paid under the traditional

indemnity contract.
ETMC unilaterally noticed an injunction hearing for November 10,
just a few weeks from the date its Amended Petition was filed. CR 250.

BCBSTX objected to ETMC’s demand to have its injunction request heard

- 19 -
on a truncated schedule. CR 252-266. BCBSTX explained that it would be
deprived of due process if it were forced to defend an injunction request that

would address a key issue in this case without sufficient time for discovery.
CR 256-257. The trial court denied the motion (CR 297-298), and the
parties conducted abbreviated discovery.

3. At The Injunction Hearing, ETMC Argues That,
Without An Injunction, It Will Lose Money And Be
Forced To Cut Services Before Trial
At the November 10 injunction hearing and over BCBSTX’s
objections, the trial court limited each party to only three hours to put on its
case, cross-examine opposing witnesses, and present argument. RR 11-12,
33. As a consequence, BCBSTX could not fully examine one of its experts
and was unable to even call another expert to the stand.

To show a cause of action and probable right to relief, ETMC argued
that BCBSTX had unreasonably and unfairly declined to designate ETMC as
a preferred provider in the BCBSTX PPO network, without informing it of
the reasons. RR 71. In response, BCBSTX argued that ETMC had no cause
of action because it could not enforce the Insurance Code provisions on
which it relied, which were designed to benefit the public, not health care

providers. See § III.A, infra (citing evidence and law). BCBSTX also
presented evidence showing ETMC had no probable right to relief because
BCBSTX had not unreasonably excluded ETMC from its PPO networks

(which were adequate) and had engaged in years of discussions informing

- 20 -
ETMC of its reasons for not designating ETMC as a preferred provider. See
§ III.B, infra (citing evidence and law).

On the all-important imminent, irreparable injury requirement, ETMC
did not argue or present evidence to prove the assertion it made about injury
in its Amended Petition—namely, that it would go out of business if it did

not have a PPO contract with BCBSTX. See CR 236 (asserting that ETMC
“will not survive through trial of this matter”). Instead, ETMC changed its
injury theory and declared that, if it was not designated as a preferred

provider, it would lose money and be forced to cut services which, it argued,
would harm it, doctors and the community. See, e.g., RR 99, 140.
To show that it was losing money, ETMC pointed to the bond-rating

agencies’ recent downgrade of ETMC’s bonds, and to the testimony of its
CFO (Hale) that in recent months ETMC had begun to experience losses,
which were relative modest (about $1 million per month). RR 72-76.
To support its new, at-the-hearing theory that it would be forced to cut
services as result of those losses, ETMC again relied primarily on Hale’s
testimony, which ETMC called “the best evidence we know of the threat of
imminent harm.” RR 339. Hale declared generally that, absent its inclusion
in BCBSTX’s PPO network, ETMC would be “forced” to and will “have to”
cut services, and testified specifically that ETMC was “looking at” cutting
certain services. RR 71-73.
In addition, an ETMC board member and physician testified that the
board (relying on Hale’s financial reports) has “had discussions about

- 21 -
eliminating Level 1 trauma” services. RR 179, 184. ETMC also presented
the testimony of three other physicians who testified that their practices and

patients would be harmed if ETMC made the threatened cuts to services.
RR 120, 134, 148, 178. Each of these witnesses acknowledged, however,
that he had no independent knowledge of ETMC’s financial status or plans

to cut services. RR 123-124, 139, 149.
For its part, BCBSTX argued, first, that ETMC was not at risk of
going out of business or defaulting on its bonds. In fact, ETMC’s CFO Hale

admitted, and other uncontroverted evidence showed, that ETMC had no
plans to close and there was no chance that it would fail (if was at risk of
failing, which it was not) before the end of April 2016. See RR 99. Second,

in response to ETMC’s new harm theory, BCBSTX showed that ETMC
could not prove an imminent, irreparable injury because ETMC’s financial
condition would not force it to cut services before trial, even accepting
ETMC’s own financial guesses. See RR 26-27. BCBSTX also argued that
any financial losses could be compensated by monetary damages. See
RR 34. Nor, as BCBSTX explained, were any financial losses caused by
BCBSTX, since ETMC’s evidence showed that the impact of not
participating in the PPO network was minimal relative to ETMC’s overall
budget. See RR 322-323.

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 C. The Trial Court’s Mandatory Injunction Requiring
BCBSTX To Contract With ETMC

At the close of the hearing, the trial court granted ETMC’s application
for a mandatory temporary injunction (RR 356)—issuing the order ETMC
provided the court near the end of the hearing (RR 334). CR 305-309.

While the order cites no evidence or case law, it makes purported “findings”
on each of the elements for issuing a temporary injunction: (1) a cause of
action against the defendant; (2) a probable right to the relief sought; and
(3) a probable, imminent, and irreparable injury in the interim.
First, the order finds “that (at least) ETMC’s negligence claim pleads
a cause against [BCBSTX]” for “breaching the duties imposed on insurers

under TEX. INS. CODE §§ 1301.051(a) and 1301.0151(b).” CR 305. The
order, however, contains no legal analysis or explanation why those Code
provisions impose on BCBSTX a duty owed to ETMC.
Second, the order finds that “ETMC has proved a probable right of
relief on (at least) its negligence claim” because:

ETMC has presented some evidence tending to sustain the
allegations that [BCBSTX] (i) has failed to give it a fair,
reasonable, and equivalent opportunity to be designated as a
preferred provider in [BCBSTX’s PPOs]; (ii) has unreasonably
excluded ETMC from [BCBSTX’s PPOs], and (iii) will likely
continue to unreasonably exclude ETMC from [BCBSTX’s
PPOs] pending trial on the merits. That evidence is sufficient
to show that a bona fide issue exists as to ETMC’s right to
ultimate relief on its negligence claim against [BCBSTX].
CR 305-306. The order, however, does not identify or describe the “some
evidence” on which these conclusions are based.

- 23 -
 Third, the order finds that “ETMC has proved that, absent the
requested relief, it will suffer a probable, imminent, and irreparable injury in

the interim before trial.” CR 305. Adopting ETMC’s contentions, the order
concludes that ETMC and East Texas patients will be injured absent a
mandatory injunction—reciting twice the Amended Petition’s allegation that,

without injunctive relief, ETMC will not be able to “fulfill its mission of
continuously striving to bring an unmatched spirit of excellence to the art
and science of healthcare” and to improve “the quality of life for the people

and communities [of] East Texas.” CR 306-307. The order then states that
ETMC’s injuries are not compensable by money damages and that BCBSTX
“will suffer no harm of any significance if the requested relief is granted.”

CR 306-307.
Based on these “findings,” the trial court ordered BCBSTX into a
contractual relationship with ETMC (i.e., one where BCBSTX is required to
pay ETMC fixed, non-negotiated rates for covered services performed for
BCBSTX members)—putting the parties in the same position as if they had
entered into a PPO contract at terms dictated by ETMC. Specifically, the
court ordered BCBSTX to “desist and refrain from breaching [its] duties to
ETMC by taking the following actions until the Court enters a final
judgment in this case:” “allowing ETMC’s immediate and full participation
in [BCBSTX’s] PPO networks at rates identical to those in [the traditional
indemnity contract] in effect between ETMC and Blue Cross … until new
PPO agreements are negotiated and signed;” listing ETMC as an in-network

- 24 -
provider in BCBSTX’s directories; and allowing ETMC to “market itself as
an in-network preferred provider in [the BCBSTX] PPO networks.” CR308.

BCBSTX moved the trial court to stay enforcement of the injunction
pending its appeal under Texas Rule of Appellate Procedure 24.2(a)(3).
RR 361. The trial court denied the motion and permitted ETMC to enforce

the injunction with the posting of a $10,000 bond, which ETMC posted.
RR 363; CR 310. BCBSTX filed a notice of accelerated appeal on
November 30, 2015. CR 323-324.

SUMMARY OF ARGUMENT

The trial court’s mandatory injunction alters the decades-long lawful
status quo by compelling BCBSTX into a PPO contract with ETMC. There
was no legal or equitable basis to compel that contract. Indeed, the fact—

which is uncontroverted—that the injunction alters the status quo is reason
enough to vacate the trial court’s order. But the trial court erred in several
other ways, any one of which also is an independent ground for reversal.
A mandatory injunction should not be issued unless the movant makes
a clear and convincing showing that an injunction is needed to avoid
extreme hardship. A failure to establish any one of the three prerequisites

for injunctive relief—a cause of action, a probable right to relief, and an
imminent, irreparable injury—means that an injunction is not justified.
Here, ETMC failed on all three—yet, the trial court issued an injunction.

- 25 -
 An examination of ETMC’s arguments reveals the root of the trial
court’s error. ETMC argued—and its proposed order, which the trial court

signed, reflected—that the injunction inquiry turns almost exclusively on a
balancing of the harms and that ETMC needed only to raise a genuine issue
fact to prove its injunction case. ETMC’s approach, which the trial court

adopted, is wrong for two reasons. First, ETMC’s focus on the harm
element does not give the required equal weight to whether ETMC proved
that it had a cause of action and a probable right to relief. Second, on the

harm element, the approach violates the settled rule that a party seeking a
mandatory injunction must prove—with clear and convincing evidence—
that it will suffer extreme hardship without an injunction.

Most notably, ETMC’s injunction case faltered on the fundamental
injury requirement. Without proof of an imminent, irreparable injury, no
injunction may be entered as a matter of law. ETMC offered no objective
evidence showing that it would be imminently and irreparably injured
without an injunction—much less evidence of the type of injury sufficient to
justify changing the decades-long status quo. To the contrary, all objective
evidence showed that ETMC would not be forced to cut any services prior to
trial (and thus ETMC was not at risk of imminent injury). And any financial
injury ETMC might sustain (assuming it even could link those injuries to
BCBSTX) could be compensated by money damages (and thus ETMC was
not at risk of irreparable injury).

- 26 -
 ETMC also failed to establish the existence of a cause of action
against BCBSTX. As a matter of law, ETMC cannot enforce Chapter 1301

of the Texas Insurance Code against BCBSTX. The Texas Legislature
clearly expressed its intention that these Insurance Code provisions benefit
individual insureds and members, and be enforced by TDI only, not through

private lawsuits brought by providers. ETMC cannot sidestep that
legislative decision by wrapping its claims (based on supposed duties in the
Insurance Code) in tort causes of action. In any event, ETMC also failed to

show a probable right to relief on its claims—all of which are based on
Chapter 1301—largely as a matter of law because the Texas Insurance Code
does not create the duties ETMC seeks to impose on BCBSTX. The

Insurance Code simply does not entitle ETMC to a preferred provider
contract with BCBSTX, as even ETMC concedes (RR 95). Moreover,
ETMC also failed to show that BCBSTX has violated the Insurance Code—
in fact, the evidence showed the opposite. TDI has repeatedly approved the
adequacy of BCBSTX’s PPO network, and BCBSTX has engaged in good
faith negotiations with ETMC that have provided ETMC with a fair,
reasonable and equivalent opportunity to join BCBSTX’s network as a
preferred provider. That is all the Code requires.
In the end, although BCBSTX’s decision not to enter into a PPO
contract with ETMC is neither an Insurance Code violation nor a tort,
ETMC filed this lawsuit asking the trial court to mandate such a contract on
ETMC’s chosen terms. That is an impermissible use of an injunction—

- 27 -
particularly in light of Texas’s strong law and public policy protecting
freedom of contact. This Court should vacate the injunction and put things

back on track.

STANDARD OF REVIEW

This Court reviews the issuance of a temporary injunction for abuse of
discretion. Butnaru v. Ford Motor Co., 84 S.W. 3d 198, 204 (Tex. 2002).

A ruling based on a legal error, or an incorrect application of law to the
facts, is necessarily an abuse of discretion. Walker v. Packer, 827 S.W. 2d
833, 840 (Tex. 1992) (“A trial court has no ‘discretion’ in determining what
the law is or applying the law to the facts.”). It is also an abuse of discretion
to issue a mandatory injunction based on insufficient factual evidence.
Mother and Unborn Baby Care v. Doe, 689 S.W. 2d 336, 338

(Tex. App.‒Fort Worth 1985, writ dism’d); Grubaugh v. Texas Employers
Ins. Ass’n, 677 S.W. 2d 812 (Tex. App.‒Fort Worth 1984), dismissed (Mar.
20, 1985) (“An abuse of discretion in granting an injunction arises when
trial court findings are not supported by some evidence of substantial and
probative character.”).

ARGUMENT

I. The Mandatory Injunction Should Be Vacated Because The Trial
Court, At ETMC’s Urging, Applied The Wrong Legal Standard

A temporary injunction does not issue routinely, let alone as a matter
of right. Butnaru, 84 S.W. 3d at 204. To obtain a temporary injunction,

- 28 -
ETMC needed to prove each of three elements: (1) a cause of action;
(2) a probable right to relief; and (3) a probable, imminent, and irreparable

injury in the interim. Id. (citing Walling v. Metcalfe, 863 S.W. 2d 56, 57
(Tex. 1993); Sun Oil Co. v. Whitaker, 424 S.W. 2d 216, 218 (Tex. 1968)).
Indeed, “[t]he law is well settled that a trial court abuses its discretion in

granting a temporary injunction unless it is clearly established by the facts
that one seeking such relief is threatened with an actual irreparable injury if
the injunction is not granted.” Morris v. Collins, 881 S.W. 2d 138, 140

(Tex. App.‒Houston [1st Dist.] 1994), writ denied (Oct. 13, 1994) (citing
Mother and Unborn Baby Care, 689 S.W. 2d at 338 (emphasis added).
Because ETMC sought a mandatory temporary injunction (i.e., an

order compelling affirmative action), it had heightened burdens.8
A mandatory injunction may be imposed only in the rare “case of extreme
hardship” and only where there is clear and compelling evidence
supporting it. Iranian Muslim Org. v. City of San Antonio, 615 S.W. 2d 202,
208 (Tex. 1981) (emphasis added); RP&R, Inc. v. Territo, 32 S.W. 3d 396,
401 (Tex. App.‒Houston [14th Dist.] 2000, no pet.) (requiring “clear and
compelling presentation of extreme necessity or hardship”); Rhodia, Inc. v.

8
Even though the trial court couched its directive in “cease and desist”
language (CR 308), its order is a mandatory injunction because it requires
BCBSTX to undertake action—that is, to enter a contractual relationship
with ETMC, add ETMC to its PPO network, and list ETMC on its
directories. See e.g. Lifeguard Benefit Svcs. v. Direct Med. Net., 308 S.W.
3d 102 (Tex. App.—Fort Worth [2nd Dist.] 2010) (“A prohibitive injunction
forbids conduct, and a mandatory injunction requires it.”) (citation omitted).

- 29 -
Harris County, 470 S.W. 2d 415, 419-20 (Tex. App.‒Houston [1st Dist.]
1971, no writ) (same) (citing 31 Tex. Jur. 2d 85, Injunction, § 32). To meet

that heightened burden, a movant seeking a mandatory injunction must
present “substantial and probative evidence” showing that it is entitled to
such extraordinary relief. Morris, 881 S.W. 2d at 140; RP&R, 32 S.W. 3d at

401 (citing Markel v. World Flight, Inc. 938 S.W. 2d 74, 79 (Tex. App.‒San
Antonio 1996, no writ).
ETMC did not attempt to make these essential showings, but rather

urged the trial court to simply balance the equities and grant ETMC’s
request for injunctive relief so long as ETMC’s potential harm outweighed
BCBSTX’s and if ETMC merely presented some evidence to raise a material

question of fact as to its probable right to relief. CR 290-292. ETMC told
the trial court that this was a “pretty low evidentiary burden,” going so far as
to liken it to the “standard for avoiding a summary judgment.” RR 337-338.
Unsurprisingly, since ETMC wrote it, the trial court’s injunction order
applies that legally erroneous standard—one that is erroneous under both the
prohibitory and mandatory injunction standards. See e.g. CR 305-306
(“ETMC has presented some evidence tending to sustain [its] allegations,”
which the court considered “sufficient to show that a bona fide issue exists
as to ETMC’s right to ultimate relief on its negligence claim.”) (emphasis
added). For that reason alone, the injunction should be vacated.
First, ETMC’s assertion that a temporary injunction could issue based
solely on a balancing of the harms simply is wrong. While a movant must

- 30 -
prove that it will suffer an imminent, irreparable injury, it must also prove it
has a cause of action and a probable right to relief. Yet, ETMC relegated the

cause of action and probable right to relief elements to mere formalities to be
given lip service and then brushed aside. But they are real elements that
must be proved and, thus, an injunction based on only a balancing of

harms—without proof that the movant has a cause of action and a probable
right to relief—cannot withstand scrutiny. See Butnaru, 84 S.W. 3d at 204
(movant “must plead and prove three specific elements”). The injunction

order’s cursory attention to the first two requirements suggests that the trial
court followed ETMC’s lead and did not consider whether ETMC had
proved that it had a cause of action and a probable right to relief. As

discussed in Section III below, ETMC failed to prove either.
Second, the trial court committed legal error by focusing on a
balancing of the harms—rather than determining whether ETMC had proved
imminent, irreparable injury—and adopting and applying ETMC’s lowered
standard to the “probable, imminent, irreparable injury” element. That was
wrong in several respects. As a threshold matter, it was insufficient, as a
matter of law, for ETMC to present only “some evidence” or evidence
“tending to sustain” the conclusion that it would suffer such an injury. See
CR 305-306. And, because ETMC sought a mandatory injunction, it needed
to present “substantial and probative evidence” to make the “clear and
convincing” or “clear and compelling” showing that it would suffer
“extreme hardship” without an injunction. Morris, 881 S.W. 2d at 140;

- 31 -
Iranian Muslim Org., 615 S.W. 2d at 208; RP&R, 32 S.W. 3d at 401;
Rhodia, 470 S.W. 2d at 419-20. As discussed below, ETMC did not prove

imminent, irreparable injury—let alone extreme hardship—but convinced
the trial court to apply a watered-down “some evidence” standard to paper
over this failure.

The combination of these two foundational problems with the
standard the trial court employed resulted in the issuance of a mandatory
injunction even though, as shown below, ETMC did not meet its burden on

any of the well-settled elements that must be established to warrant an
injunction.

II. The Mandatory Injunction Should Be Vacated Because It Violates
Settled Law Governing Injunctions In Two Fundamental Ways

A. The Mandatory Injunction Impermissibly Alters The
Decades-Long Lawful Status Quo

The purpose and function of a temporary injunction is to preserve the
status quo pending a trial on the merits. Butnaru, 84 S.W. 3d at 204
(citations omitted). The status quo is the “the last, actual, peaceable, non-

contested status which preceded the pending controversy.” Id. As noted,
during their decades-long relationship, BCBSTX and ETMC have never had
a broad PPO contract. Thus, plainly, the status quo is that the parties have

no PPO contract and ETMC is not a preferred provider in BCBSTX’s PPO
network.

- 32 -
 This status quo is lawful and the court should not have altered it. The
Texas Insurance Code does not require insurers to enter into additional

preferred provider contracts under such circumstances, let alone enter into
contracts designating every local provider as a preferred provider. Even
ETMC admits this. RR 95 (ETMC CFO acknowledging that the Code is not

an “any willing provider” statute). Instead, what the Code does require is
that insurers (1) build networks that are adequate for their members and
(2) give providers a fair, reasonable, and equivalent opportunity to be

designated as preferred providers. TEX. INS. CODE § 1301.051. That is all
the Code requires—and, as the uncontroverted evidence shows, that is
exactly what BCBSTX did when it comes to ETMC. ETMC did not argue

that BCBSTX’s PPO network is inadequate—and it is uncontested that TDI
has repeatedly found otherwise. RR 251-252; DX 4 at BCBSTX3842,
BCBSTX3875. And, as discussed in more detail below, ETMC did not
prove that it was deprived of an opportunity to be designated a preferred
provider given that BCBSTX and ETMC have had decades of discussions
and negotiations. See § III.B, infra.
The trial court’s mandatory injunction, therefore, overreaches by
destroying the lawful status quo—and that alone is reason enough to vacate
the injunction. City of Irving v. Dallas County Flood Control Dist.,
383 S.W. 2d 571 (Tex. 1964) (A temporary injunction is not proper if “it
would destroy rather than preserve the status quo.”); State Dept. of
Highways & Public Transp. v. Elkins Lake Municipal Utility Dist., 593 S.W.

- 33 -
2d 401 (Tex. App.‒Houston [14th Dist.] 1980) (vacating mandatory
injunction because it “impermissibly changed the status quo”).

Moreover, even if the trial court took issue with the status quo
because it believed BCBSTX had not offered ETMC a fair, reasonable, and
equivalent opportunity to be designated a preferred provider, the mandatory

injunction was still not the appropriate remedy. If the court believed
BCBSTX had not afforded ETMC the proper opportunity to be designated as
a preferred provider, compelling BCBSTX to give ETMC that opportunity

would have been the appropriate remedy. The court could have—as
BCBSTX proposed—ordered the parties to mediation, which the court could
have overseen to ensure fairness, reasonableness, and equivalency.

See RR 344, 349; see also RR 31, 43, 254-255 (BCBSTX offering to
negotiate in good faith). Instead, the court ordered far more than the
Insurance Code requires—it ordered the parties into a contract that had never
before existed, on terms dictated by ETMC. This is yet another reason why
this Court should vacate the trial court’s order. See Sw. Research Inst. v.
Keraplast Techs., Ltd., 103 S.W. 3d 478, 482 (Tex. App.–San Antonio 2003,
no pet.) (“injunction must also be narrowly tailored to address the” illegality
being enjoined).

B. ETMC Did Not Prove The Core Element Of Probable,
Imminent, Irreparable Injury

A party seeking a preliminary injunction must prove that it will suffer
probable, imminent, and irreparable harm before trial without injunctive

- 34 -
relief. See Butnaru, 84 S.W. 3d at 204. Indeed, the harm element must be
kept center stage because no injunction should issue without proof that it is

essential to prevent imminent, irreparable harm. See Lifeguard Benefit
Servs., Inc. v. Direct Med. Network Sols., Inc., 308 S.W. 3d 102, 115
(Tex. App.–Fort Worth [2nd Dist.] 2010, no pet.) (no injunction when

movant “did not demonstrate irreparable harm, an essential element of
injunctive relief”) (emphasis added); Landry’s Seafood Inn & Oyster Bar-
Kemah, Inc. v. Wiggins, 919 S.W 2d 924, 927 (Tex. App.–Houston

[14th Dist.] 1996, no writ) (injunction “should only issue where [it] is
essential in order to effectively protect … against injuries otherwise
irremediable”) (emphasis added, citation and quotation marks omitted).

Calvary Baptist Church at Tyler v. Adams, 570 S.W. 2d 469, 474 (Tex. Civ.
App.–Tyler 1978, no writ) (same).
ETMC’s injunction case failed on this core element because it simply
did not prove that ETMC would suffer a probable, imminent, and irreparable
injury absent an injunction—much less present “substantial and probative
evidence” to make the “clear and convincing” or “clear and compelling”
showing of “extreme hardship” necessary to justify a mandatory injunction.
See, e.g., Morris, 881 S.W. 2d at 140.
To be probable, an injury must be more than “speculative,”
“conjectural,” or “merely ‘possible.’” Mother and Unborn Baby Care,
689 S.W. 2d at 338; Brazoria County Appraisal Dist. v. Notlef, Inc.,
721 S.W. 2d 391, 394 (Tex. App.‒Corpus Christi 1986, no writ). To be

- 35 -
imminent, an injury must be likely to actually occur before trial.
See Butnaru, 84 S.W. 3d at 204 (injury must be likely “in the interim”

“pending trial on the merits”). To be irreparable, an injury must not be
adequately compensable by monetary damages. Id. (citing Canteen Corp. v.
Republic of Tex. Props., Inc., 773 S.W. 2d 398, 401 (Tex. App.‒Dallas 1989,

no writ)).
The trial court’s injury conclusion turned on its finding that because
ETMC is “now losing money on its hospital operations each month,” it will

“be unable to maintain its current level of comprehensive medical care”
pending trial. CR 307.9 Neither the law nor the evidence supports that
conclusion.

Purely financial harm is not irreparable injury because it can be
adequately compensated by monetary damages. Butnaru, 84 S.W. 3d at
204; Canteen Corp., 773 S.W. 2d at 401. ETMC seeks monetary damages
which are capable of calculation. See CR 238; RR 83 (ETMC estimating at
hearing that the anticipated difference in its revenues from being in-network
is approximately $14 million per year). This alone confirms that injunctive

9
ETMC could not premise the injunction on its speculation about potential
harm to third parties. Harm to the public not only was unproven (because,
as explained, ETMC did not prove that it would be forced to cut services),
but, in any event, would not be sufficient to justify an injunction as a matter
of law. See e.g., El Tacaso, Inc. v. Jireh Star, Inc., 356 S.W. 3d 740
(Tex. App.‒Dallas 2011, no pet.); M P I, Inc. v. Dupre, 596 S.W. 2d 251,
255 (Tex. App.‒Fort Worth 1980, writ ref’d n.r.e.) (no injunction without
injury or threat of injury to movant).

- 36 -
relief was not necessary or appropriate. See Ballenger v. Ballenger,
694 S.W. 2d 72, 76 (Tex. App.‒Corpus Christi 1985, no writ) (holding there

was an adequate remedy at law where damages were capable of calculation
and where appellants were solvent and capable of paying damages).
ETMC did not show imminent, irreparable injury. In an effort to

prove the type of injury that would warrant an injunction, ETMC alleged
that its financial difficulties would force it to cut services. But ETMC failed
to prove it would be forced to cut services at all, much less that it would

need to during the time period that matters—the months before the specially-
set November 2016 trial. In fact, the uncontroverted objective evidence
showed the opposite—namely, that ETMC will not be forced to cut services

before trial.
ETMC’s only evidence of financial difficulties consisted of its
downgraded bond ratings and its CFO’s testimony that ETMC had begun to
lose money. But neither established that ETMC would be forced to cut
services before trial in this matter.
In an attempt to tie the bond downgrades to its claims against
BCBSTX, ETMC pointed to statements by bond-rating agencies that
ETMC’s out-of-network status was one of several factors in the decision to
downgrade ETMC’s bonds. RR 77. But neither the rating downgrades—on
bonds that remain investment grade—nor the financial facts on which they
were based—proved a threat of imminent, irreparable harm. BCBSTX’s
expert offered unrebutted testimony that ETMC is in no danger of defaulting

- 37 -
on its bond obligations before March 2018, at the earliest. RR 318-320.10
BCBSTX’s expert also explained that the bond-rating agencies’ statements

regarding ETMC’s non-preferred provider status did not show a causal
connection between that status and the downgrade, since there are a
“myriad” of “complex” factors that go into bond ratings. RR 322.11

ETMC’s other so-called “evidence” of imminent, irreparable harm
fared no better. ETMC leaned heavily on the testimony of its CFO (Hale),
which ETMC called “the best evidence we know of the threat of imminent

harm. RR 339. Hale testified that ETMC was “losing this year about $16
million,” or “over a million a month.” RR 72, 76. Yet, Hale said exactly the
opposite to a bond-rating agency just two months earlier—saying that

ETMC would be profitable in 2016. DX 8 at ETMC0001577 (predicting,
for fiscal year 2016, a “steady improvement” in net income and “positive
results”).
Hale’s further assertion at the hearing—that if ETMC keeps losing
money, it will be forced to cut services at some time in the future—

10
ETMC’s attempt to paint its financial condition as dire because it had
approximately $300 million in cash and approximately $400 million in debt
should have been unavailing. RR 176. ETMC’s cash on hand far exceeded
the bond requirement (approximately $125 million). RR 304.
11
ETMC’s CFO noted that BCBSTX’s expert witness’s report opined only
that ETMC would not close, without opining that ETMC would not cut
services. RR 86. As explained above, ETMC changed its theory of harm for
the hearing, so the expert report prepared in advance could not address that
issue.

- 38 -
amounted to only conjecture and a conclusory declaration, not objective
evidence that ETMC’s financial state would in fact compel it to cut services.

His testimony, therefore, is insufficient as a matter of law to carry ETMC’s
evidentiary burden. See e.g. Merrell Dow Pharmaceuticals, Inc. v. Havner,
953 S.W. 2d 706, 712 (Tex. 1997) (witness testimony, without supporting

objective evidence, insufficient to establish causation); Kolbo v. Blair,
379 S.W.2d 125, 130 (Tex. App.‒Corpus Christ 1964, writ ref’d n.r.e.)
(explaining that trial court’s fact findings may be overruled “when they are

without any evidence of probative force to support them, or where they are
so against the great weight and preponderance of the evidence as to be
manifestly wrong” and reversing where trial court’s findings were based

only on “uncertain, indefinite and qualified testimony”) (citing Banks v.
Collins, 257 S.W. 2d 97 (Tex. 1953)).
Although Hale declared that ETMC would be “forced” to and will
“have to” cut services to remedy its financial losses (RR 73), ETMC
presented no objective evidence that cuts to services were imminent or
would occur before trial. Indeed, a close look what Hale actually said
reveals that he did not testify that ETMC had actual plans to cut services, or
that it would be forced to do so before trial absent an injunction. He testified
only that ETMC needed to be a preferred provider in BCBSTX’s PPO
network to be “viable long-term” and that that ETMC was “looking at
changing our complement of services in a dramatic way” including
“comprehensive reduction in services.” RR 64, 72, 73; see also RR 179, 184

- 39 -
(ETMC board member and physician testifying only that board has “had
discussions about eliminating Level 1 trauma”) (emphasis added). That is

insufficient to establish the threat of imminent harm. And other evidence
from Hale pointed in the other direction. Hale admitted that ETMC had not
told regulators, doctors, vendors, or the community that it had plans to close.

RR. 99. And when not influenced by ETMC’s litigation position, Hale
recently told the bond-rating agencies that ETMC expects to return to its
prior profitability this year, making no mention of any plans to cut services.

See DX 8; id. at ETMC0001577.
Apart from the testimony of Hale and a board member, ETMC offered
only the testimony of three physicians who said they and their patients

would be harmed if ETMC went out of business or was forced to cut
services. RR 119, 134, 148-149, 178. But, the premise underlying the
physicians’ concerns was not proven because ETMC did not pursue its “risk
of closing” theory at the hearing and also did not introduce objective
evidence showing that it would be forced to cut services if it were not a
preferred provider in BCBSTX’s network. See RR 124, 139, 150-151, 184.
Indeed, a number of the physicians—including department heads—testified
that they had heard of no plans to cut services or any details about financial
difficulties before the hearing. See RR 123-124, 139, 149.12 Thus, ETMC

12
Indeed, the head of the renal transplant department at ETMC—a service
that Hale said might be cut (RR 73)—testified, contrary to what Hale had to
say, that the department is profitable. RR 140-141.

- 40 -
did not meet its burden. It made no showing that it would be forced to
discontinue services (much less that it would have to do so before trial).

Moreover, far from showing that ETMC would be forced to cut
services before trial, the uncontradicted, objective evidence confirmed that
ETMC has sufficient resources not to cut services in the near future. ETMC,

is well positioned to cover any losses in the next year before trial—including
the $16 million loss that Hale asserted, without support, ETMC might suffer.
ETMC has on-hand cash and cash equivalents of nearly $300 million.

RR 99-101. Hale did not explain why that cash cannot be drawn to cover
that estimated loss, thereby preventing any alleged need to cut services
before trial on the merits. RR 99. While ETMC threatened to cut services

if it did not get its way, it will not be forced to do so—and a threat to inflict
harm on oneself is not probable, imminent, irreparable injury. Brazoria
County Appraisal, 721 S.W. 2d at 394 (injunction not warranted to forestall
injury that is “merely possible”); see also Petro Franchise Sys. LLC v. All
American Properties, Inc. 607 F. Supp.2d 781, 796, 797 (W.D. Tex. 2009)
(movant’s contention that “it is likely that [it] will [not] be able to continue
as a going concern” does not justify injunction, especially where “the harm
… allege[d] is at least partially self-inflicted”).
ETMC failed to show that its troubled financial condition was
caused by the lack of a preferred provider contract with BCBSTX. Hale
also testified conclusorily that ETMC’s financial difficulties were caused by
its exclusion from BCBSTX’s preferred provider network. RR 60. But

- 41 -
there was, once again, no evidence of that alleged causal connection. The
evidence that does exist points the opposite way. First, other Tyler-area

hospitals that were designated preferred providers with BCBSTX have
recently closed (RR 96, 171, 182), so broader changes in the health care
market are likely responsible for ETMC’s difficulties (see RR 182-183).

Second, ETMC is not a preferred provider in the PPO networks of the Aetna
and Cigna co-defendants (RR 89)—so any financial harm from not being a
preferred provider would, under ETMC’s theory, also be attributable to

them, but ETMC has not sought an injunction against them (CR 217-249).
Third, Hale’s assertion that ETMC needed to be in BCBSTX’s PPO network
to be “viable long term” (RR 64) does not prove that the lack of in-network

status has caused ETMC’s financial problems.
Hale offered a “back of the napkin” estimate of how much ETMC’s
revenues would increase if it were permitted to participate in the PPO
network. RR 98. But that guesstimate, unsupported by any objective
financial evidence, is insufficient to make the required evidentiary showing
on causation. In fact, it is non-probative ipse dixit. See Havner, 953 S.W.
2d at 712.
And, even on its own terms, Hale’s estimate shows that any financial
gain from being in the PPO network would be modest. Hale estimated the
number of BCBSTX members seen daily at ETMC would increase by
approximately 30% (from 40 to 52). See RR 83, 96. He estimated that
uptick in patient volume would increase ETMC’s revenues by about $14

- 42 -
million per year. RR 83. Because BCBSTX members currently account for
only 8% of ETMC’s revenues (RR 96), that estimated patient volume uptick

amounts to only about a 2.4% change in ETMC’s overall revenue. And,
because ETMC’s profit margin on new business is approximately 5%
(i.e. ETMC expends 95% of revenue in costs to provide services), that

revenue increase amounts to a profit increase of only $700,000 per year,
which is minor compared to ETMC’s overall revenues and its $300 million
in cash on hand. RR 322-323. A difference in profits of $700,000 cannot, as

a matter of law, constitute either an imminent, irreparable harm or an
extreme hardship to an $800 million revenue hospital with $300 million
available on hand.

The trial court’s order does not account for the injury to BCBSTX
and the public that would result from the injunction. ETMC’s failure to
show that it would suffer an imminent, irreparable injury without an
injunction is reason enough to vacate the trial court’s order. But the trial
court’s injury analysis is even more problematic when the injuries the
injunction would cause to BCBSTX and the public are considered.
As ETMC concedes (CR 293), a trial court must look at the injury the non-
movant and public would suffer if an injunction were entered and to balance
those injuries with the injury the movant would suffer without an injunction.
See NMTC CORP. v. Conarroe, 99 S.W. 3d 865, 869 (Tex. App.‒Beaumont
2003, no pet.).

- 43 -
 The trial court’s injunction forces BCBSTX into a PPO contract with
ETMC—but with BCBSTX paying ETMC traditional indemnity contract

rates, not PPO rates. As explained, traditional indemnity rates are typically
higher than PPO preferred provider rates (in the case of the Brookshire PPO,
90% higher on average). See pp. 9-11, supra. Thus the contract the trial

court compelled requires BCBSTX to pay ETMC rates that are higher than
the rates BCBSTX would expect to negotiate with ETMC for such a PPO
contract.13

ETMC argued that BCBSTX’s representative (Towsley, BCBSTX
Divisional Senior Vice-President of Health Care Delivery) admitted
BCBSTX would suffer no injury as a result of an injunction. RR 337, 362.

But Towsley did not say that. Towsley testified that an injunction
compelling it into a PPO contract with ETMC would injure BCBSTX in two
concrete ways (which, in turn, might harm BCBSTX members). RR 234-
237. First, Towsley testified that the injunction would increase the costs
BCBSTX had to pay for services at ETMC because it would compel

13
ETMC acknowledged the impropriety of using the out-of-network,
traditional indemnity rates when it stated that it would be willing to revise
the proposed mandatory injunction to use the in-network rates from
BCBSTX’s confidential PPO contract with Trinity Mother Frances Hospital,
ETMC’s competitor. RR 334-335. BCBSTX proposed using the rates from
ETMC’s existing Brookshire PPO contract (which, unlike the Trinity
Mother Frances contract, is not confidential from ETMC, and covers all the
services provided at ETMC). RR 344, 360. ETMC insisted on the
traditional indemnity rates instead. RR 360-361.

- 44 -
BCBSTX to pay higher traditional indemnity contract rates to ETMC, when
it would otherwise pay lower in-network PPO rates. RR 237, 265. Second,

Towsley explained that compelling BCBSTX to put ETMC into the PPO
network would draw patients away from existing preferred providers in
Tyler and alter the pricing dynamic of the PPO network. RR 234-237, 265.

The trial court’s order simply does not account for these unchallenged
injuries.
Moreover, the injunction will create confusion and cause hardship for

doctors and patients—the very constituencies the injunction purports to
protect. The injunction changes the status quo by inducing doctors and
patients to make treatment decisions relying on the promise of in-network

status for ETMC. But if BCBSTX prevails in the underlying litigation and
is not required to enter into a PPO contract with ETMC, it will be difficult to
revert to the pre-injunction status quo without undoing the promise the
injunction compelled BCBSTX to make and disrupting courses of treatment
than began in reliance on the injunction’s grant of in-network status. The
trial court’s order does not account for this harm either.
* * *
In sum, ETMC failed to prove an injury that was probable, imminent,
and irreparable. It was legal error and an abuse of discretion for the trial
court to enter a mandatory temporary injunction based on ETMC’s
unsupported speculation that it would suffer irreparable injury during the
time it takes to adjudicate this case—particularly in the face of objective

- 45 -
evidence to the contrary. That error is a sufficient reason to vacate the
mandatory injunction against BCBSTX. But, as shown below, there is more.

III. The Mandatory Injunction Should Be Vacated Because, As A
Matter Of Law, ETMC Does Not Have A Cause Of Action Against
ETMC And Because ETMC Did Not Prove A Probable Right To
Relief

A. ETMC Has No Viable Cause of Action Because It Cannot
Bring A Private Lawsuit To Enforce The Texas Insurance
Code

There are fundamental legal problems with the very premise of

ETMC’s claims. Contrary to the trial court’s finding, ETMC does not have a
cause of action premised on the requirements of Texas Insurance Code
Chapter 1301. As a matter of law, Chapter 1301 creates no private right of

action to enforce the provisions ETMC invokes, so ETMC cannot state a
claim for violations of them. Moreover, those provisions create no duties to
ETMC, so ETMC cannot premise a negligence claim on alleged violations

of such duties.
All of ETMC’s claims are premised on alleged violations of Texas
Insurance Code Chapter 1301. Chapter 1301 of the Texas Insurance Code

governs PPO plans. ETMC bases all of its claims on the requirements of
Sections 1301.006, and 1301.051(a) and (b), which it referenced in its
Amended Petition and repeatedly at the hearing. E.g., CR 218, 220-222;

RR 38-39, 338. The former provision, which is not cited in the court’s
injunction order, requires insurers to ensure the “availability of and

- 46 -
accessibility to adequate personnel, specialty care, and facilities.” TEX. INS.
CODE § 1301.006. The latter provision, which the court does cite, requires

insurers to provide “a fair, reasonable, and equivalent opportunity to apply to
be and to be designated as a preferred provider,” and not to “unreasonably
withhold a designation as a preferred provider.” TEX. INS. CODE

§ 1301.051(a), (b).
The trial court expressly based the injunction on its finding that
BCBSTX owed duties to ETMC arising out of the Insurance Code. CR 305

(stating that “ETMC has brought claims … for … negligence in breaching
the duties imposed on insurers under [the Texas Insurance Code]” and
“find[ing] that (at least) ETMC’s negligence claim pleads a cause against

[BCBSTX]” and that “ETMC has proved a probable right to relief on
(at least) its negligence claim”); id. (citing “the duties imposed on insurers
under TEX. INS. CODE §§ 1301.051(a) and 1301.051(b)”).
There is no private right of action under the Code provisions ETMC
invokes. The Texas Insurance Code creates no private cause of action to
enforce the relevant provisions of Chapter 1301. To the contrary, the Code
specifies that Chapter 1301 is enforced by the Commissioner of the Texas
Department of Insurance (“TDI”), which is tasked with adopting rules to
“implement [Chapter 1301]” and adopting “network adequacy standards.”
TEX. INS. CODE §§ 1301.007, 1301.055. The Code and TDI’s implementing
regulations require insurers to submit annual reports, which TDI assesses to
determine the adequacy of the PPO network. TEX. INS. CODE § 1301.009;

- 47 -
28 TEX. ADMIN. CODE §§ 3.4, 3.3704.14 In short, the Legislature decided the
relevant provisions of Chapter 1301 should be enforced by TDI, and did not

provide for the enforcement through private lawsuits.
Nor does Chapter 1301 create a private right of action by implication.
Statutes do not create an implied private right of action “unless the drafters’

intent is clear from the language.” Cernosek Enters., Inc. v. City of Mont
Belvieu, 338 S.W. 3d 655, 663 (Tex. App.‒Houston [1st Dist.] 2011, no pet.);
see also Tuma v. Kerr Cnty., 336 S.W. 3d 277, 281 (Tex. App.‒San Antonio

2010, no pet.) (voiding temporary injunction because applicants lacked
standing under the Texas Health and Safety Code). There is no such
expression of intent in Chapter 1301.

Moreover, if Chapter 1301 did create an implied private right of
action, it would be only on behalf of members, not providers like ETMC.
A statute can create an implied private right of action only “on behalf of the
injured person (or group of persons) for whose benefit the statute was
enacted.” Lively v. Carpet Services, Inc., 904 S.W. 2d 868, 871 (Tex.
App.‒Houston [1st Dist.] 1995), writ denied (Feb. 9, 1996); Nixon v. Mr.
Property Management Co., 690 S.W. 2d 546, 549 (Tex. 1985) (same).
Chapter 1301 was enacted for the benefit of network members (not
providers). See TEX. INS. CODE §§ 1301.007 (directing TDI to adopt rules to

14
BCBSTX presented evidence of its annual report and TDI’s approval of
its network’s adequacy at the hearing. DX 4 at BCBSTX3842,
BCBSTX3875.

- 48 -
“ensure reasonable accessibility and availability of preferred provider
services to residents of this state.”); § 1301.0055 (directing TDI to adopt

network adequacy standards to “ensure availability of, and accessibility to, a
full range of contracted physicians and health care providers to provide
health care services to insureds”). Thus, Chapter 1301 does not create an

implied private right of action for providers like ETMC.
The Code creates no duty that could form the basis of a negligence
claim. ETMC cannot circumvent the Legislature’s decision not to authorize

private enforcement of Chapter 1301 by premising a negligence claim on
supposed violations of duties created by the statute, for two basic reasons.
First, as explained above, Chapter 1301 was enacted to benefit PPO

members, not providers, and thus it creates no duty to providers. Second,
TDI regulations state expressly that Chapter 1301’s requirements do not
“create a standard of care, obligation, or duty that provides a basis for a
private cause of action.” 28 TEX. ADMIN. CODE § 3.3701(d). Therefore,
negligence and other torts claims cannot be based on an alleged violation of
a duty supposedly imposed by Chapter 1301.
Because ETMC has no viable cause of action against BCBSTX for
violating Chapter 1301, it was legal error for the trial court to find that
“ETMC’s negligence claim pleads a cause of action against” BCBSTX.
CR 305. This is reason enough to vacate the mandatory injunction.

- 49 -
 B. ETMC Did Not Prove A Probable Right To Relief Because It
Did Not Show A Violation Of The Texas Insurance Code

Even if the Texas Insurance Code did authorize ETMC to assert a
claim for purported violations of Chapter 1301, ETMC failed to present
evidence of any such violations and thus failed to show it has a probable

right to relief. As explained, ETMC alleged that BCBSTX violated Sections
1301.006 and 1301.051 by unreasonably excluding ETMC from BCBSTX’s
PPO network and not giving ETMC a fair, reasonable, and equivalent
opportunity to be in-network. But ETMC produced no evidence to support
those allegations or show any violation of the Insurance Code.
Nothing in Chapter 1301 requires BCBSTX to contract with a

particular provider for its PPO network. Indeed, the Code expressly permits
BCBSTX to “reject” a provider’s application if its network is adequate.
TEX. INS. CODE § 1301.051(d). Thus, ETMC has no statutory right to be
included in BCBSTX’s PPO network. In this regard, the Insurance Code
aligns with Texas’s “paramount public policy” of protecting the freedom to
contract. Gym-N-I Playgrounds, Inc. v. Snider, 220 S.W. 3d 905, 912
(Tex. 2007) (freedom to contract provides parties “the utmost liberty of
contracting,” and when such contracts are “entered into freely and
voluntarily [they] shall be held sacred and shall be enforced by Courts of
justice”) (emphasis added). Courts may not “lightly [] interfere” with the
freedom to contract. Id. And, here, the Texas Insurance Code provides no
basis for doing so.

- 50 -
 ETMC argues that, even if the Code does not entitle it to a PPO
contract, it still could premise a probable right to relief on a purported

violation of other Code provisions—specifically, Section 1301.006
(requiring adequate networks), Section 1301.051(a) (requiring insurers to
give providers fair, reasonable, and equivalent opportunity to be designated

as a preferred provider), and Section 1301.051(b) (requiring insurers to “not
unreasonably” exclude insurers from network). That contention does not get
ETMC any farther as a matter of fact or law.

Section 1301.006 requires BCBSTX to maintain an adequate PPO
network, but ETMC presented no evidence to show that BCBSTX’s network
was inadequate. Instead, the undisputed evidence showed that TDI has

repeatedly found that BCBSTX’s PPO network is adequate. See RR 215,
251-252.
There also was no evidence that BCBSTX violated Sections
1301.051(a) and 1301.051(b) by failing to afford ETMC a fair, reasonable,
and equivalent opportunity to be designated as a preferred provider or
unreasonably excluding ETMC. To the contrary, the evidence showed
that—since 1993 when BCBSTX first sought bids from providers—
BCBSTX had considered ETMC’s applications and proposals and negotiated
with ETMC, but has not chosen to contract with ETMC for the PPO network
because the network is adequate. See, e.g., RR 94-95, 210-211, 223, 242-
243.

- 51 -
 ETMC did not offer objective evidence contradicting BCBSTX’s
reasons for its decision not to enter into a PPO contract with ETMC.

Instead, ETMC’s CFO Hale simply declared that he did not “believe” that
network adequacy and impact on price are the real reasons BCBSTX has not
done so (RR 95, 103) and ETMC called those reasons “gobbeldy goop”

(RR 342).
BCBSTX, however, presented evidence showing that its stated
reasons for not contracting with ETMC were its real reasons, as well as

testimony establishing the reasonableness of BCBSTX’s decision.
As BCBSTX’s Vice-President Towsley explained, BCBSTX provides
different types of health care coverage to its members. BCBSTX achieves

that variety of coverage and the best value for its members by entering into
different kinds of contracts with different health care providers. And, as
BCBSTX’s representative explained, entering a PPO contract with ETMC
could undermine those goals. Against this backdrop, Towsley explained that
BCBSTX has chosen not to contract with ETMC because BCBSTX’s
existing PPO network is adequate and meets the needs of its members, and
adding ETMC could upset the balance in Tyler created by BCBSTX’s
contracts with other providers. RR 242-249. ETMC presented no evidence
of any other reason and no evidence that BCBSTX’s network was
inadequate.
In another effort to undermine BCBSTX’s decision-making, ETMC
complained that BCBSTX had not proposed a PPO contract with specific

- 52 -
rates to ETMC. RR 64. But ETMC pointed to no Code provision requiring
BCBSTX do so—and there is none. Moreover, Towsley testified that the

reason BCBSTX has not made an offer to ETMC is that BCBSTX’s PPO
network is adequate. RR 240-241.
ETMC also argued that BCBSTX had not told ETMC why it rejected

ETMC’s proposals for the PPO network. RR 178, 203. But the evidence
showed the opposite. BCBSTX told ETMC repeatedly why it would not
contract with ETMC—BCBSTX’s network was adequate without ETMC,

and adding ETMC to the network could adversely affect the price point of
the network. RR 209-211, 243-246; DX 2. ETMC just did not believe the
reason.

Finally, ETMC intimated that BCBSTX had not contracted with
ETMC in order to protect BCBSTX’s profits. RR 343. That implication
gets ETMC no further. First, ETMC presented no evidence that BCBSTX
was acting only to maximize profits. To the contrary, as explained, the
evidence showed that BCBSTX’s decisions took into consideration the
interests of its customers, including self-funded customers paying for their
employees’ health coverage. See RR 242-249. Second, the Insurance Code
does not bar insurers from making reasonable decisions—it bars them from
unreasonably refusing to designate a preferred provider and from
maintaining inadequate networks. As discussed above, ETMC failed to
show that BCBSTX did either.
* * *

- 53 -
 In sum, ETMC’s temporary injunction case failed for another
independent reason—the Insurance Code does not authorize private lawsuits

for alleged violations of Chapter 1301 and ETMC did not show a probable
right to relief based on any such statutory violations in any event.

CONCLUSION

The trial court’s mandatory injunction destroying the lawful status

quo and compelling BCBSTX into a contract with ETMC is missing both a
legal and factual basis. A mandatory injunction is justified only if the
movant makes a clear and compelling case on each of the three required
elements. ETMC failed to make even one of those required showings. This
Court, accordingly, should vacate the injunction.

Respectfully submitted,

/s/ Martin J. Bishop /s/ Greg Smith
Martin J. Bishop Greg Smith
State Bar No. 24086915 State Bar No. 18600600
REED SMITH, LLP Stephen M. Spitzer
811 Main Street, Suite 1700 Texas Bar No. 18954850
Houston, TX 77002-6110 RAMEY & FLOCK, P.C.
Telephone: (713) 469-3800 100 East Ferguson, Suite 500
mbishop@reedsmith.com Tyler, TX 75702
Telephone: (903) 597-3301
Facsimile: (903) 597-2413
COUNSEL FOR APPELLANT
gsmith@rameyflock.com
sspitzer@rameyflock.com

COUNSEL FOR APPELLANT

- 54 -
 CERTIFICATE OF SERVICE
In accordance with the Texas Rules of Appellate Procedure, I certify
that a true copy of this Appellant’s Brief was served on the following
counsel of record on this 29th day of December 2015:

Deborah Race Eliot T. Burriss
Otis W. Carroll, Jr. DLA Piper LLP
Collin M. Maloney 1717 Main Street, Suite 4600
Ireland, Carroll & Kelley, P.C. Dallas, Texas 75201
6010 South Broadway Ave, Suite 500 Attorneys for Defendant Cigna
Tyler Texas 75703
John B. Shely
T. John Ward Dimitri D. Zgourides
Claire Abernathy Henry Andrews Kurth LLP
Ward, Smith & Hill, PLLC 600 Travis St., Suite 4200
1127 Judson Road, Suite 220 Houston, Texas 77002
Longview, Texas 75601 Attorneys for Defendant Aetna

Michael C. Coker Clay M. White
Adams & Coker, P.C. White Shaver
4540 Kinsey Drive 205 West Locust Street
Tyler, Texas 75703 Tyler, Texas 75702
Attorneys for Plaintiff East Texas Attorneys for Defendant Aetna
Medical Center
Adam N. Bitter
Asst. Attorney General
Financial Litigation, Tax, & Charitable
Trusts Division
P.O. Box 12548
Austin, Texas 78711
Attorney General of Texas

/s/ Greg Smith
Gregory D. Smith

- 55 -
 CERTIFICATE OF COMPLIANCE
1. This brief complies with the type-volume limitation of TEX. R. APP. P.
9.4 because it contains 12,600 words, excluding the parts of the brief
exempted by TEX. R. APP. P. 9.4(i)(2)(B).

2. This brief complies with the typeface requirements of TEX. R. APP. P.
9.4(e) because it has been prepared in a proportionally spaced
typeface using MS Word in 14-point Times New Roman font.

Dated: December 29, 2015.

/s/ Greg Smith
GREG SMITH

- 56 -
 No. 12-15-00287-CV
______________

In the Twelfth Court of Appeals
Tyler, Texas
______________
BLUE CROSS & BLUE SHIELD OF TEXAS,
a Division of HEALTH CARE SERVICE CORPORATION,
Appellant,
v.
EAST TEXAS MEDICAL CENTER,
Appellee.
______________
Accelerated Appeal
from the 241st Judicial Court Smith County, Texas, No. 15-1165-C
______________
APPENDICES
______________

A. Temporary Injunction And Order Setting Final Trial On The
Merits, dated November 10, 2015 (CR 305-309)

B. TEX. INS. CODE § 1301.051

C. TEX. INS. CODE § 1301.006
Appendix Tab A
 CAUSE NO. 15-1165-C

EAST TEXAS MEDICAL CENTER, § IN THE DISTRICT COURT
§
Plaintiff, §
§
v. §
§
BLUE CROSS & BLUE SHIELD OF TEXAS, §
a Division of HEALTH CARE SERVICE §
CORPORATION, AETNA HEALTH, INC., §
AETNA LIFE INSURANCE COMPANY, §
CIGNA HEAL THCARE OF TEXAS, INC., §
and CIGNA HEALTH AND LIFE §
INSURANCE COMPANY, §
§
Defendants. §

TEMPORARY INJUNCTION AND ORDER SETTING
FINAL TRIAL ON THE MERITS

On this the 10th day of November, 2015, the Court heard the application for temporary

injunction filed by plaintiff East Texas Medical Center ("ETMC"). ETMC and defendant Blue

Cross & Blue Shield of Texas ("Blue Cross") appeared in person and through their respective

attorneys ofrecord. After considering the application, the pleadings, the testimony of witnesses,

the evidence admitted, and the arguments of counsel, the Court finds that the application should

be GRANTED, and Blue Cross should be ENJOINED as requested.

ETMC has brought claims against Blue Cross (and others) for, inter alia, negligence in

breaching the duties imposed on insurers under Tex. Ins. Code §§ 1301.05 1(a) and 1301.05 1(b).

The Court finds that (at least) ETMC's negligence claim pleads a cause against Blue Cross.

The Court further finds that ETMC has proved a probable right of relief on (at least) its

negligence claim against Blue Cross. Specifically, ETMC has presented some evidence tending to

sustain the allegations that Blue Cross (i) has failed to give it a fair, reasonable, and equivalent

opportunity to be designated as a preferred provider in Blue Cross's preferred provider benefit

@
. ;.-.-.'._- _.'
plans ("Blue Cross PPOs"); (ii) has unreasonably excluded ETMC from the Blue Cross PPOs, and

r:-'VJ/
. . ",
;. ..,
. .

...
Page 305
(iii) will likely continue to unreasonably exclude ETMC from the Blue Cross PPOs pending trial

on the merits. That evidence is sufficient to show that a bona fide issue exists as to ETMC's right

to ultimate relief on its negligence claim against.Blue Cross.

The Court further finds that ETMC has proved that, absent the requested relief, it will suffer

a probable, imminent, and irreparable injury in the interim before trial. Specifically, unless

enjoined, Blue Cross will likely continue to exclude ETMC from the Blue Cross PPOs, resulting

in irreparable harm and extreme hardship to ETMC and members of the public. Unless admitted

immediately to the Blue Cross PPOs, ETMC will not be financially able to maintain its current

level of comprehensive medical care to the community pending trial on the merits. In this regard,

it will likely be forced to slash the medical services it provides, thereby resulting in either

destruction, or significant disruption, of its operations. Either result would necessarily disenable

ETMC's ability to fulfill its mission of continuously striving to bring an unmatched spirit of

excellence to the art and science of healthcare in East Texas and improving the quality of life for
I

the people and communities of East Texas. Those injuries would be measured by the disruption or

destruction ofETMC's ability to provide quality care to the people of East Texas. Such injuries

cannot be measured by any certain pecuniary standard, and therefore cannot be compensated by

money damages. ETMC has therefore proved probable, imminent, and irreparable injury to itself

absent the requested injunctive relief.

In addition, ETMC's inability to continue providing the current level of medical care-will

result inimminent irreparable harm and extreme hardship to the public at large. The loss of not

only ETMC's unique services, but also its hospital capacity, will detrimental1y affect the healthcare

needs of the citizens of East Texas through, inter alia, a decrease in treatment options, less

continuity of care for East Texas patients, unreasonable interference with the doctor-patient

2

Page 306
 '..--/

relationship, the loss of services provided only by ETMC in the area, and the lost capacity of one

of the two large hospitals in Smith County.

The evidence shows that ETMC's exclusion from the Blue Cross PPOs leaves it out-of-

network for the vast majority of privately-insured patients in Smith County and East Texas.

Because of the increase in the differential between payments for in-network services and out-of-

network services, the evidence shows that fewer and fewer patients can and will chose out-of

network providers such as ETMC. This means that physicians often cannot use ETMC as a

treatment option for their patients--even when those physicians believe that ETMC would provide

the best care of their patients and the optimum integration of clinical services and continuity of

care--resulting in fewer practical treatment options, unreasonable interference with the doctor-

patient relationship, and less continuity of care for East Texas patients. This situation has skewed

ETMC's patient make-up to such a degree that ETMC is now losing money on its hospital

operations each month. Without immediate access to privately-insured patients under the Blue

Cross PPOs, ETMC will be unable to maintain its current level of comprehensive medical care

services to the community before a trial on the merits. Thus, without injunctive relief, ETMC will

be unable to fulfill its mission of continuously striving to bring an unmatched spirit of excellence

to the art and science of healthcare, the success of which is measured by ETMC's impact on the

quality of life for the people and communities in East Texas. ETMC's closure, or significant

reduction in the services it provides, would result in irreparable injury and extreme hardship to

East Texas patients who would have fewer health care options and no access to the services which

only ETMC provides in the area. Accordingly, the evidence demonstrates and the Court finds that

this temporary injunction is necessary to prevent irreparable harm and extreme hardship to ETMC

and members of the public. The Court also finds that Blue Cross will suffer no harm of any

significance if the requested relief is granted. The equities therefore weigh overwhelmingly in

3

Page 307
favor ofETMC and the residents ofEast Texas--and overwhelmingly against Blue Cross--because

the total or partial loss of ETMC's services would constitute an extreme hardship and result in

injuries not compensable by money damages.'

ACCORDINGLY, IT IS ORDERED that the application is GRANTED. Blue Cross and

its agents, employees, independent contractors, attorneys, representatives and persons or entities

in active concert or participation with Blue Cross who receive actual notice of this order by

personal service or otherwise, are ordered to desist and refrain from breaching Blue Cross' duties

to ETMC by taking the following actions until the Court enters a final judgment in this case:

1. Cease and desist from excluding ETMC from the Blue Cross PPOs by allowing
ETMC's immediate and full participation in Blue Cross's Blue Options and Blue
Choice PPO networks at rates identical to those in force in the Hospital Agreement
for Traditional Indemnity Business in effect between ETMC and Blue Cross
(effective August 15,2012, as amended effective September 15,2015), attached as
Exhibit A to this Order, until new PPO agreements are negotiated and signed;

2. Cease and desist from excluding ETMC from its electronic preferred provider
directories by listing ETMC as an in-network provider; and

3. Cease and desist from restricting ETMC's right and ability to market itself as an in-
network preferred provider in Blue Cross's Blue Options and Blue Choice PPO
networks.

IT IS FURTHER ORDERED that a trial on the merits ofthis case is set before this Court
f1-' r. en i~ A'('rjl, aC£b, tt t-'4
D.{fI'«cJ O'\A 1:J.e;Ir,J-4AJI;,. {Ja#"rJre