ACCEPTED
03-15-00252-CV
7019858
THIRD COURT OF APPEALS
AUSTIN, TEXAS
9/21/2015 3:29:38 PM
JEFFREY D. KYLE
CLERK
NO. 03-15-00252-CV
In the FILED IN
3rd COURT OF APPEALS
Third Court of Appeals AUSTIN, TEXAS
Of Texas 9/21/2015 3:29:38 PM
JEFFREY D. KYLE
Clerk
DR. BEHZAD NAZARI, D.D.S., ET AL
Appellants,
V.
THE STATE OF TEXAS
Appellees,
V.
ACS STATE HEALTHCARE, LLC
Appellees.
On appeal from the 53rd District Court, Travis County, Texas
Cause No. NO. D-1-GV-14-005380
APPELLANTS’ REPLY BRIEF
Jason Ray E. Hart Green
State Bar No. 24000511 Texas Bar No. 08349290
RIGGS & RAY, P.C. WELLER, GREEN, TOUPS & TERRELL, L.L.P.
506 West 14th St., Suite A Post Office Box 350
Austin, Texas 78701 Beaumont, Texas 77704-0350
Telephone: (512) 457-9806 Telephone: (409) 838-0101
Telecopier: (512) 457-9066 Telecopier: (409) 832-8577
jray@r-alaw.com hartgr@wgttlaw.com
Attorneys for Appellants Dr. Behzad Nazari, D.D.S., et al
Oral Argument Requested
TABLE OF CONTENTS
TABLE OF CONTENTS ......................................................................................... ii
TABLE OF AUTHORITIES ........................................................................................... iii
SUMMARY OF THE REPLY ............................................................................................ 1
REPLY ARGUMENT ...................................................................................................... 2
I. Reply to the State’s argument that it did not waive sovereign
immunity when it brought affirmative claims against the
Dental Group. . ................................................................................................ 2
II. Response to State’s argument that the Dental Group’s
Third Party claims against Xerox cannot be considered in
this appeal. ..................................................................................................... 6
A. Judicial economy and consistency would be met if this
Court opines on the propriety of third party claims,
because this is the same issue presented in the similarly
postured Xerox proceeding, 03-15-00401-CV. ............................................ 6
B. Xerox is correct; Chapter 33 applies to permit
contribution claims. ............................................................................... 8
CONCLUSION ............................................................................................................... 9
PRAYER ............................................................................................................... 9
CERTIFICATE OF COMPLIANCE ................................................................................. 12
CERTIFICATE OF SERVICE .......................................................................................... 13
Appellants’ Reply Brief
Page ii
TABLE OF AUTHORITIES
CASES
Bates v. Republic of Texas,
2 Tex. 616 (1847) ............................................................................................ 4
Gabelli v. SEC,
133 S. Ct. 1216 (2013)..................................................................................... 4
Guillory v. Port of Houston Auth.,
845 S.W.2d 812 (Tex. 1993) ........................................................................... 3
Reata Const. Corp. v. City of Dallas,
197 S.W.3d 371 (Tex. 2006) ........................................................................... 4
SEC v. City of Miami,
581 F. App’x 757 (11th Cir. 2014) ............................................................... 4,5
State v. Emeritus Corp.,
No. 13-13-00529-CV, 2015 WL 1456436,
(Tex. App.—Corpus Christi Mar. 26, 2015, pet. filed) ................................ 4,5
State v. Precision Solar Controls, Inc.,
188 S.W.3d 364 (Tex. App.—Austin 2006).................................................... 4
State ex rel. Texas Dept. of Transp. v. Precision Solar Controls, Inc.,
220 S.W.3d 494 (Tex. 2007) ........................................................................ 2,4
STATUTES
Texas Civil Practice and Remedies Code Chapter 33 ............................................... 8
Appellants’ Reply Brief
Page iii
SUMMARY OF THE REPLY
It is disturbing to imagine a government that has the power to seek damages
for civil wrongdoing, while also avoiding any investigation into its own part in that
same alleged wrongdoing. The idea that the State is immune from: 1) compulsory
counterclaims, 2) counterclaims that would directly or inferentially rebut the facts
upon which its claims are predicated, and/or 3) counterclaims that share common
or related core underlying facts is a breathtaking stance. Yet the State’s response
brief fails to provide any legal support for that position. This Court should not be
misled by the State’s attempt to fabricate a self-serving “carve-out” that would
effectively create a TMFPA superstatute to override the Rules of Civil Procedure,
logic, precedent, and due process. This court need only follow Reata and the
federal analysis for False Claims Act counterclaims to resolve this case.
The Dental Group’s third-party claims against Xerox include a claim for
contribution, but under a pure Federal False Claims Act analysis those claims
would not be permitted. The Dental Group’s original brief did not address that
category of relief. However, Xerox’s response brief accurately speaks to the
applicability of Civil Practice and Remedies Code Chapter 33. The Dental Group
agrees with Xerox and adopts its briefing on the matter.
Appellants’ Reply Brief
Page 1
REPLY ARGUMENT
Reply to the State’s argument that it did not waive sovereign immunity when
it brought affirmative claims against the Dental Group.
The State’s response brief is rooted in two assertions. First, the State claims
that it can invoke sovereign immunity as a defensive maneuver to the Dental
Groups’ counterclaims, while simultaneously asserting affirmative claims for relief
on the exact same facts, despite Reata and 75 years of case law to the contrary.
Second, because its affirmative claims were brought only under the TMFPA, the
State claims it retains its immunity “shield” while at the same time wielding the
TMFPA “sword” against the Dental Group. Both of these arguments are contrary
to precedent.
The State begins its response brief by arguing that Reata is not a case that
involves a waiver of sovereign immunity; the State claims that Reata instead
relates to the judicial abrogation of sovereign immunity that occurs as a result of
the State bringing its own claims for relief. That position is a distinction without a
difference. Whether this Court categorizes the State’s claims as creating “waiver of
immunity by conduct,”1 or producing judicial revocation of the common law
doctrine, or forming a bubble of facts upon which immunity cannot exist, the result
1
State ex rel. Texas Dept. of Transp. v. Precision Solar Controls, Inc., 220 S.W.3d 494 (Tex.
2007) (“[In Reata,] [w]e held that a governmental entity that brings an action waives immunity
from suit for claims that are germane to, connected with, and properly defensive to its action, to
the extent of an offset.”)
Appellants’ Reply Brief
Page 2
is the same: sovereign immunity is unavailable to the State as a jurisdictional bar
on the Dental Groups’ claims that are germane to, connected with, and properly
defensive to the state’s claims.
The State stretches case law to find any statement that, taken in a vacuum,
might appear to support its position. None of the cases cited by the State support its
argument. The State cites Guillory v. Port of Houston Auth., 845 S.W.2d 812, 814
(Tex. 1993) for its proposition that the Texas Supreme Court has refused to
judicially abrogate a government entity’s immunity in a proprietary activity vs.
non-proprietary activity setting. (State’s Br. at 19-20). But the State ignores the
overriding fact that Guillory was about a conflict between relief available under the
Texas Tort Claims Act and federal Maritime law. Guillory did not involve the
interaction of affirmative claims asserted by the government and related
counterclaims asserted by Guillory; Guillory was about the scope of a statutory
waiver of immunity. Guillory was a straight tort action brought against a
governmental entity by Guillory. In addition, the Texas Supreme Court’s decision
in Guillory only reformed and limited Guillory’s monetary recovery; it did not
completely deprive Guillory of his claims and recovery. Guillory’s facts are so
different than the facts here, its usefulness on any relevant legal question is
negligible.
Appellants’ Reply Brief
Page 3
Next, the State reaches back 150 years to cite Bates v. Republic of Texas, 2
Tex. 616 (1847) for the idea that a right to set-off damages through a crossclaim is
barred by immunity. (State’s Br. at 20-21, 24). However, in 2006 this Court
expressly acknowledged that Bates had been abrogated for over 100 years, and that
Anderson and Reata were the controlling cases with regard to counterclaims raised
against the State. See State v. Precision Solar Controls, Inc., 188 S.W.3d 364, 367
(Tex. App.—Austin 2006), order withdrawn (Apr. 5, 2007), review granted,
judgment vacated sub nom. on other grounds State ex rel. Texas Dept. of Transp. v.
Precision Solar Controls, Inc., 220 S.W.3d 494 (Tex. 2007) (Supreme Court
remanded the case to the trial court for further consideration consistent with
Reata); see also Reata Const. Corp. v. City of Dallas, 197 S.W.3d 371, 376 fn 2
(Tex. 2006) (stating that Bates was not in conflict with Anderson or Reata because
Bates “involved claims by the defendants for set-offs unrelated to the
governmental entities' claims.”). The claims at issue here are far from “unrelated.”
The State’s invocation of Gabelli v. SEC, 133 S. Ct. 1216, 1223 (2013), SEC
v. City of Miami, 581 F. App’x 757, 760 (11th Cir. 2014) and State v. Emeritus
Corp., No. 13-13-00529-CV, 2015 WL 1456436, at *10–11 (Tex. App.—Corpus
Christi Mar. 26, 2015, pet. filed), also fail to support the State’s position in any
way. Gabelli stands only for the proposition that the government is bound by the
statute of limitations when it seeks civil penalties; it does not even imply that there
Appellants’ Reply Brief
Page 4
is a different standard for applying immunity for different sorts of governmental
actions. The court in SEC v. City of Miami expressly denied official immunity to
Miami’s budget director when the SEC sought penalties for federal securities
fraud; it is difficult to see how a case denying official immunity from Federal
claims acts as a bar here, where the State is attempting to assert sovereign
immunity to counterclaims. Finally, State v. Emeritus Corp. is a decision that
turned entirely on the applicability of the Texas Medical Liability Act to a State
action under the Deceptive Trade Practices and Assisted Living Facilities Act. The
dispute in Emeritus Corp. did not in any way involve sovereign immunity or a
defendant’s counterclaims.
Simply put, the State wishes to ignore Reata. The State presents no
authority, express or implied, direct or indirect, for its position that the TMFPA is a
unilateral weapon. Thus, the State asks that this Court manufacture a completely
new standard for determining whether the State can assert sovereign immunity in
response to offsetting counterclaims from a defendant. Allowing the State to
pursue a civil action without fear of having to address compulsory or related
counterclaims from defendants that might provide an offset to the State’s claims is
a breathtaking departure from precedent and the rules of civil procedure.
Appellants’ Reply Brief
Page 5
Response to State’s argument that the Dental Group’s Third Party claims
against Xerox cannot be considered in this appeal.
A. Judicial economy and consistency would be met if this Court
opines on the propriety of third party claims, because this is the
same issue presented in the similarly postured Xerox proceeding,
03-15-00401-CV.
The Dental Group agrees with Xerox that this Court should decide Xerox’s
original proceeding in Cause 03-15-00401-CV in conjunction with this appeal. The
Dental Group’s second issue is generally the same as Xerox’s issue in its original
proceeding: namely, does the TMFPA prevent a defendant (either the Dental
Group in this case, or Xerox in that case) from bringing third party claims? In its
response brief, the State avoids any argument on the merits of this issue. Instead, it
argues only that this Court lacks jurisdiction to consider whether the dismissal of
the Dental Groups’ third party claims was proper.
In considering both this appeal and Xerox’s original action, this Court
should note the strange procedural posture that the State’s actions have created.
The State is working to prevent all of the parties from adjudicating these
overlapping, intertwined claims in a single proceeding. All three “sides” are
claiming the others committed wrongdoing on the same facts:
Appellants’ Reply Brief
Page 6
STATE
TMFPA fraud claims in
administrative court
(SOAH, HHSC);
subsequently dismissed and
replaced by this civil TMFPA civil fraud
TMFPA case (D-1-GV-14- claim (D-1-GV-14-
005380; appeal 03-15- 00581) and the related
00252-CV) appeal (03-15-00401-
CV)
Counterclaims in this civil
TMFPA case: Conspiracy,
joint enterprise, breach of
contract, conversion, fraud,
breach of contract, Third party claims in
negligence, gross negligence this case; the same
claims are made in
D-1-GV-15-002055;
D-1-GN-14-000319,
320, 321, and 322.
DENTISTS XEROX
Contribution
(this case)
Under the facts pleaded by the State in both of its fraud suits, the defendants’
justiciable interests are evident. Whether the defendant is the Dental Group in this
case or Xerox in the similarly situated original proceeding 03-15-00401-CV, the
defendants seek to reveal all of the interrelated facts and relationships in each of
their respective cases so that the culpable party(s) can be held accountable. The
defendants also seek to prevent the State from taking inconsistent positions against
the defendants.
The State is pursuing recovery of the same “tens of millions of dollars” from
both the Dental Group and the defendant Xerox, even as the State demands that the
cases be tried separately. The Dental Group’s justiciable interests are obvious. The
Appellants’ Reply Brief
Page 7
relationship between the dentists, the State, and Xerox is a nearly perfect tripartite
arrangement. In the interest of judicial economy, consistency (especially relating to
disparate rulings on discovery and dispositive motions) and overall justice, all of
the parties’ claims regarding medical necessity and proportionate party
responsibility should be determined with an acknowledgement that rulings with
regard to any one party’s claims affect all of the parties.
B. Xerox is correct; Chapter 33 applies to permit contribution
claims.
Xerox’s response brief correctly states that the Dental Group assumed that
because contribution claims are not permitted under the Federal False Claims Act,
such claims were also unavailable under Texas law. Upon further research and
review, the Dental Group agrees that Texas Civil Practice and Remedies Code
Chapter 33 permits a right to contribution or indemnity under the facts of this case.
Rather than copy that argument in this reply brief, the Dental Group adopts and
incorporates Xerox’s briefing on the law under Tab F of Xerox’s response brief.
Xerox is incorrect when it claims that none of the Dental Group’s claims
sound in contribution. The Dental Group expressly made a claim for contribution
in paragraph 31 of its answer (CR 40). Therefore, Xerox’s claim for contribution
from the Dental Group in 03-15-00401-CV is mirrored by the Dental Group’s
contribution claim in this case.
Appellants’ Reply Brief
Page 8
In sum, the Dental Group adopts Xerox’s legal analysis regarding Chapter
33’s application to this case. The Dental Group made, inter alia, a contribution
claim against Xerox, so that argument is relevant and applicable to this appeal. But
whether Chapter 33 applies to permit contribution claims does not prevent, and
will not change, an application of the federal False Claims Act framework for
permitting third party claims. All of the Dental Group’s third party claims against
Xerox are expressly permitted under the federal analysis (fraud, conspiracy, breach
of contract, negligence, gross negligence) and/or Chapter 33 (contribution).
CONCLUSION
The Dental Group and Xerox simply want judicial consistency and
economy, and the opportunity to present all of the facts that relate to the State’s
claims. The idea that the Dental Group can be barred from bringing compulsory
and defensive counterclaims/third-party claims is abhorrent to the concepts of due
process and judicial economy.
PRAYER
Appellants pray this court:
1) reverse the trial court order granting the State’s Plea to the Jurisdiction so
that the Appellants’ claims against the State may proceed in this case,
and
Appellants’ Reply Brief
Page 9
2) reverse the trial court order granting the State’s Motion to Dismiss so that
the Appellants’ claims against the third party Xerox may proceed in this
case, or
3) in the alternative, reverse the trial court’s grant of the Motion to Dismiss
the Appellants’ third party claims, and instruct the court to sever the
Appellants’ third party claims against Xerox into a different cause.
___________________________________
Jason Ray
RIGGS & RAY, P.C.
504 W. 14th Street, Suite A
Austin, Texas 78701
Telephone: (512) 457-9806
Facsimile: (512) 457-9866
jray@r-alaw.com
E. Hart Green
Mitchell A. Toups
WELLER, GREEN, TOUPS & TERRELL, L.L.P.
Post Office Box 350
Beaumont, Texas 77704-0350
Telephone: (409) 838-0101
Telecopier: (409) 832-8577
hartgr@wgttlaw.com
matoups@wgttlaw.com
ATTORNEYS FOR DR. BEHZAD NAZARI,
D.D.S. D/B/A ANTOINE DENTAL CENTER,
DR. BEHZAD NAZARI, HARLINGEN
FAMILY DENTISTRY, P.C. A/K/A
PRACTICAL BUSINESS SOLUTIONS,
SERIES LLC, JUAN D. VILLARREAL D.D.S.,
Appellants’ Reply Brief
Page 10
SERIES PLLC D/B/A HARLINGEN FAMILY
DENTISTRY GROUP, DR. JUAN
VILLARREAL, RICHARD F. HERRSCHER,
D.D.S., M.S.D., P.C., DR. RICHARD F.
HERRSCHER, M & M ORTHODONTICS,
PA, DR. SCOTT MALONE, DR. DIANA
MALONE, MICHELLE SMITH, NATIONAL
ORTHODONTIX, MGMT., PLLC, DR. JOHN
VONDRAK, RGV SMILES BY ROCKY
SALINAS, D.D.S. PA, AND DR. ROCKY
SALINAS.
Appellants’ Reply Brief
Page 11
CERTIFICATE OF COMPLIANCE
I certify that this Brief complies with TRAP Rule 9.4 and contains 2,062
words in Times New Roman typeface of 14-point.
Jason Ray
Appellants’ Reply Brief
Page 12
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the Response to Request for
Disclosure was served via e-mail and e-service on the 21st day of September, 2015
on the following:
Counsel for Plaintiff State of Texas
Raymond C. Winter
Chief, Civil Medicaid Fraud Division
Reynolds B. Brissenden
Assistant Attorneys General
Office of the Attorney General
P.O. Box 12548
Austin, Texas 78711-2548
Telephone: (512) 936-1709
Facsimile: (512) 936-0674
E-mail: raymond.winter@texasattorneygeneral.gov
E-mail: reynolds.brissenden@texasattorneygeneral.gov
Counsel for Xerox Corporation, et al.
Robert C. Walters Eric J. R. Nichols
Gibson, Dunn, & Crutcher, LLP Christopher R. Cowan
2100 McKinney Avenue, Suite 1100 Beck Redden, LLP
Dallas, Texas 75201 515 Congress Avenue, Suite 1750
Telephone: (214) 698-3100 Austin, Texas 78701
Facsimile: (214) 571-2900 Telephone: (512) 708-1000
E-mail: RWalters@gibsondunn.com Facsimile: (512) 708-1002
E-mail: enichols@beckredden.com
W. Curt Webb E-mail: ccowan@beckredden.com
Constance H. Pfeiffer
Beck Redden, LLP
1221 McKinney Street, Suite 4500
Houston, Texas 77010
Telephone: (713) 951-3700
Facsimile: (713) 951-3720
E-mail: cwebb@beckredden.com
E-mail: cpfeiffer@beckredden.com
Appellants’ Reply Brief
Page 13
Counsel for Defendants/Third-Party Plaintiffs
E. Hart Green J.A. “Tony” Canales
Mitchell A. Toups CANALES & SIMONSON, P.C.
WELLER, GREEN, TOUPS & TERRELL, 2601 Morgan Ave.
L.L.P. P.O. Box 5624
Post Office Box 350 Corpus Christi, Texas 78465-5624
Beaumont, Texas 77704-0350 Telephone: (361) 883-0601
Telephone: (409) 838-0101 Facsimile: (361) 884-7023
Facsimile: (409) 832-8577 E-mail:
E-mail: hartgr@wgttlaw.com tonycanales@canalessimonson.com
E-mail: matoups@wgttlaw.com Counsel for M&M Orthodontics, P.A.,
Counsel for Defendants Dr. Scott Malone, Dr. Diana Malone,
Michelle Smith, National Orthodontix
Richard B. Pecore Mgmt., PLLC and Dr. John Vondrak
LILES PARKER, PLLC
3400 N. McColl Rd., Suite F-35 Oscar X. Garcia
McAllen, Texas 78501 Law Offices of Oscar X. Garcia
Telephone: (202) 298-9750 302 Kings Highway, Suite 112
Facsimile: (202) 337-5804 Brownsville, Texas 78521
E-mail: rpecore@lilesparker.com Telephone: (956) 554-3000
Counsel for RGV Smiles by Rocky Salinas, Facsimile: (956) 554-3248
DDS PA, E-mail: oxgarcia@aol.com
and Dr. Rocky Salinas Counsel for Dr. Vivian Teegardin
Robert M. Anderton Philip H. Hilder
Law Offices of Hanna & Anderton William B. Graham
900 Congress Avenue, Suite 250 Hilder & Associates, PC
Austin, Texas 78701 819 Lovett Boulevard
Telephone: (512) 477-6200 Houston, Texas 77006
Facsimile: (512) 477-1188 Telephone: (713) 234-1416
E-mail: andertonr@msn.com Facsimile: (713) 655-9112
Counsel for Richard F. Herrscher, DDS, E-mail: philip@hilderlaw.com
MMSC, PC and Dr. Richard F. Herrscher E-mail: will@hilderlaw.com
Counsel for Dr. Wael Kanaan
____________________________
Jason Ray
Appellants’ Reply Brief
Page 14
Dr. Behzad Nazari, D.D.S. D/B/A Antoine Dental Center Dr. Behzad Nazari Harlingen Family Dentistry, P.C. A/K/A Practical Business Solutions, Series LLC Juan D. Villarreal D.D.S., Series PLLC D/B/A Harlingen Family Dentistry Group v. State
Combined Opinion