Malouf v. State

694 S.W.3d 712

Richard J. MALOUF, D.D.S., Petitioner,

v.The STATE of Texas EX RELS. Christine ELLIS, D.D.S and Madelayne Castillo, Respondents

No. 22-1046

Supreme Court of Texas.

Argued January 31, 2024

OPINION DELIVERED: June 21, 2024

On Petition for Review from the Court of Appeals for the Eighth District of Texas

James Michael Tibbals, for Respondent Castillo, Madelayne.

Elizabeth J. Brown Fore, Philip A. Lionberger, Reynolds Brissenden IV, Angela V. Colmenero, Raymond C. Winter, Austin, Brent Webster, Houston, Judd Stone II, Atty. Gen. W. Kenneth Paxton Jr., for Respondent The State of Texas.

James R. Moriarty, Houston, Caitlyn Silhan, Charles S. Siegel, Dallas, for Respondent Ellis, Christine.

Jason Snell, Austin, William Lance Cawthon, for Petitioner.

Justice Boyd delivered the opinion of the Court, in which Chief Justice Hecht, Justice Devine, Justice Busby, Justice Bland, and Justice Huddle joined.

This case involves the regulation of health-care providers who participate in the federal Medicaid program. The State, acting through the Attorney General, seeks to enforce a statute that imposes substantial penalties against a provider who submits a claim for payment and knowingly fails to indicate the type of professional license "and" the identification number of the person who actually provided the service. The defendant—a dentist— contends the statute applies only if a claim fails to indicate both the license type "and" the identification number of the actual provider. The State contends it applies if a claim fails to indicate either the license type "or" the identification number. Considering the statute’s text, grammatical structure, context, and purpose, we agree with the dentist’s construction. And to the extent any ambiguity exists, we construe such penal statutes strictly in favor of the party against whom the State seeks to impose the penalties. We reverse the court of appeals’ judgment and render judgment in the dentist’s favor.

I. Background

Dr. Richard Malouf co-founded All Smiles Dental Center in 2002 and began providing orthodontic services to Medicaid patients in 2004. The practice soon grew to employ several dentists at locations around the Dallas-Fort Worth area. Malouf bought out his partner in 2007 and retained full control until he sold most of his interest in 2010.

During the period of Malouf’s ownership, the front-office staff at each of All Smiles’ locations relied on dentists’ chart notes to prepare bills for services rendered to Medicaid orthodontic patients and transmitted those bills to the company’s corporate office. The corporate-office staff reviewed the bills and submitted payment claims to the Medicaid office either electronically or on paper using a specific Medicaid-authorized form. A completed form must state the provider’s name and Texas Provider Identifier (TPI) number, which is a unique number assigned to each provider. The form need not separately state the provider’s type of professional license, license number, or other identification number. Instead, because providers must submit proof of their professional license to obtain a TPI number, a provider’s license type and license number are affiliated with the TPI number. As All Smiles’ owner, Malouf was responsible for ensuring the practice followed Medicaid’s requirements and policies. In that role, he periodically reviewed the Texas Medicaid Provider Procedures Manual and attended conferences and meetings to remain informed about Medicaid policies.

In 2012, two former employees filed qui tam actions alleging that Malouf and All Smiles committed numerous violations of (what was then called) the Texas Medicaid Fraud Prevention Act. See Tex. Hum. Res. Code §§ 36.001–.132 (amended 2023); see also id. § 36.101 (authorizing private persons to bring actions on behalf of themselves and the State).¹ The Attorney General, acting on the State’s behalf, intervened in both actions, which were then consolidated. See id. §§ 36.102 (authorizing State’s intervention), .107 (authorizing Attorney General to take "primary responsibility for prosecuting the action").

The State asserted several claims against Malouf and others, including a claim under Section 36.002(8), which provides that a person "commits an unlawful act if the person … makes a claim under the Medicaid program and knowingly fails to indicate the type of license and the identification number of the licensed health care provider who actually provided the service." Id. § 36.002(8).² The State alleged that, under Malouf’s direction, All Smiles submitted 1,842 claims that stated Malouf’s TPI number even though a dentist other than Malouf actually provided the billed-for services. Based on this claim, the State sought to recover the amount Medicaid paid for those services plus prejudgment interest, statutory penalties, attorney’s fees, and expenses. See id. §§ 36.007, .052(a) (authorizing such recoveries). The State filed a motion for partial summary judgment on only that claim.

Malouf did not dispute that All Smiles submitted 1,842 claim forms stating his TPI number for services a different dentist actually provided. He insisted, however, that he did not "knowingly" fail to indicate the actual provider’s information. Specifically, he testified he believed based on information provided to him by Medicaid that he was supposed to use his TPI number whenever (1) he personally supervised the dentist who provided the service or (2) Medicaid’s system suffered a "glitch" that prevented his staff from properly submitting a claim. He asserted that, except for those two circumstances, he had no knowledge that his staff submitted claims using his TPI number for services another dentist provided. This testimony, he argued, created fact issues as to which, if any, of the 1,842 claims actually constituted an "unlawful act."

In addition, Malouf argued that none of the 1,842 claims constituted an unlawful act under Section 36.002(8) because they all correctly indicated the license type of the provider who actually provided the billed-for services. In each case, Malouf explained, the services were actually provided by someone who—like Malouf—-was a licensed dentist, so a form bearing Malouf’s TPI number in fact indicated the type of license held by the person who actually provided the service. And because all the claim forms indicated the actual provider’s license type, Malouf argued, none of them constituted an unlawful act under Section 36.002(8) because they did not fail to "indicate the type of license and the identification number of the licensed health care provider who actually provided the service." Id. § 36.002(8) (emphasis added). Based on these arguments, Malouf filed a no-evidence-summary-judgment motion.

The trial court denied Malouf’s motion and granted the State’s motion for partial summary judgment. The State then nonsuited its remaining claims and moved for entry of a final judgment. The trial court rendered a final judgment awarding the State more than $16,500,000, consisting of about $538,000 for the amount Medicaid paid on the 1,842 claims, twice that amount (almost $1.1 million) as a civil penalty, a little over $9.2 million as an additional penalty of $5,000 for each of the 1,842 unlawful acts, and about $5.7 million for attorney’s fees and expenses the State and private plaintiffs incurred. The trial court denied Malouf’s new-trial motion, and Malouf appealed.

[1–3] The court of appeals disagreed with the amount of attorney’s fees and expenses but otherwise affirmed the trial court’s judgment. 656 S.W.3d 402, 418 (Tex. App.—El Paso 2022). We granted Malouf’s petition for review. We review the trial court’s summary judgment de novo. Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). Summary judgment is appropriate when there is no genuine issue of material fact and judgment should be granted in the movant’s favor as a matter of law. Diversicare Gen. Partner, Inc. v. Rubio, 185 S.W.3d 842, 846 (Tex. 2005). We take as true all evidence favorable to the nonmovant, indulging every reasonable inference and resolving any doubts in the nonmovant’s favor. Knott, 128 S.W.3d at 215.

II. Construing Penal Statutes

[4–8] This case requires us to construe Section 36.002(8). A statute’s meaning presents a question of law that we review de novo. Tex. Health Presbyterian Hosp, of Denton v. D.A., 569 S.W.3d 126, 131 (Tex. 2018). Any time we endeavor to construe statutory language, well-established rules guide our analysis. Fundamentally, we look to the statute’s text—to the words it actually uses—and apply the common, ordinary meaning of those words "unless the text supplies a different meaning or the common meaning leads to absurd results." Id. We construe the words in light of their statutory context, considering the statute as a whole. Silguero v. CSL Plasma, Inc., 579 S.W.3d 53, 59 (Tex. 2019). If the text’s meaning is unambiguous, we do not resort to extrinsic aids or special rules of construction. Crosstex Energy Servs., L.P. v. Pro Plus, Inc., 430 S.W.3d 384, 389 (Tex. 2014). When possible, we construe the language in a way that does not render any of it meaningless. Whole Woman’s Health v. Jackson, 642 S.W.3d 569, 581 (Tex. 2022).

In some cases, however, special rules of construction may apply. Malouf contends this is such a case. Specifically, he asserts that Section 36.002(8) is a penal statute, and we must construe penal statutes strictly against the State and in his favor. We thus begin by addressing this special rule of construction before turning to the statutory language.

[9–13] "All political power" in Texas "is inherent in the people." Tex. Const. art. I, § 2. Exercising that power, the people have established a republican form of government, granting all "Legislative power" to their elected representatives in the Senate and the House of Representatives. Id.; see also id. art. Ill, § 1. The people thus permit the Legislature to regulate the...