State v. Ellis

681 S.W.3d 501

The STATE of Texas, Appellant

v.Christine ELLIS, D.D.S.; Alexandra Alvarez; and Joshua LaFountain, Appellees

NO. 03-22-00236-CV

Court of Appeals of Texas, Austin.

Filed: November 15, 2023

FROM THE 459TH DISTRICT COURT OF TRAVIS COUNTY, NO. D-1-GN-19-004849, THE HONORABLE MAYA GUERRA GAMBLE, JUDGE PRESIDING

Reynolds B. Brissenden, Philip A. Lionberger, Austin, Noah Reinstein, for Appellant.

James R. Moriarty, Houston, Charles S. Siegel, Caitlyn Silhan, Dallas, Daniel L. Hargrove, for Appellee Ellis, Christine.

James R. Tucker, Dallas, for Appellees Alvarez, Alexandra, LaFountain, Joshua.

Before Chief Justice Byrne, Justices Baker and Theofanis

OPINION

Rosa Lopez Theofanis, Justice

The question before us in this interlocutory appeal is the trial court’s subject matter jurisdiction under the Texas Medicaid Fraud Prevention Act (TMFPA) to adjudicate the merits of the joint motion of Christine Ellis, D.D.S. and Joshua La-Fountain that they filed in the State of Texas’s suit against Xerox Corporation and its affiliated corporate entities (collectively, Xerox). Based on their previously filed qui tam actions against Xerox, Ellis and LaFountain jointly moved for the trial court to determine their share of the proceeds from the State’s settlement with Xerox. See Tex. Hum. Res. Code § 36.110 (entitling private party, who files petition for government under TMFPA, to receive varying percentage of proceeds from prosecution of action).¹

Appealing from the trial court’s order denying its plea to the jurisdiction, see Tex. Civ. Prac. & Rem. Code § 51.014(a)(8), the State contends that it enjoys sovereign immunity and that the TMFPA’s first-to-file provision deprived the trial court of jurisdiction over appellees’ joint motion,² see Tex. Hum. Res. Code § 36.106. Because we conclude that the trial court has subject matter jurisdiction to adjudicate the merits of appellees’ joint motion, we affirm the trial court’s order denying the State’s plea to the jurisdiction.

BACKGROUND

Texas Medicaid Fraud Prevention Act

We begin with a brief overview of the TMFPA and its relevant provisions. The TMFPA targets fraud against the Texas Medicaid program, which in conjunction with the federal government "provides medical coverage to eligible Texans in need." In re Xerox Corp., 555 S.W.3d 518, 524–25 (Tex. 2018); see Tex. Hum. Res. Code § 32.001 (implementing Texas Medicaid Program "to provide medical assistance on behalf of needy individuals and to enable the state to obtain all benefits for those persons authorized" by federal law); Bell v. Low Income Women of Tex., 95 S.W.3d 253, 255 (Tex. 2002) (stating that "[s]ince 1965, the federal government’s Medicaid program has offered matching funds to states that provide health services to the indigent"); see generally 42 U.S.C. §§ 1396 to 1396w-5 (addressing grants to states for medical assistance programs and providing for each state to administer its own Medicaid program).

The TMFPA authorizes the attorney general to investigate and enforce its provisions "and—via qui tam provisions—deputizes private citizens to pursue a TMFPA action on the government’s behalf." In re Xerox, 555 S.W.3d at 525 (citing Tex. Hum. Res. Code §§ 36.051–.055, .101); see Tex. Hum. Res. Code 36.101– .117 (authorizing and addressing actions by private persons). Private persons, known as relators, must file their petition under seal and serve a copy of it and additional information on the attorney general. See Tex. Hum. Res. Code § 36.102. The State then either elects to intervene in the case and take over the action or declines to do so. Id. §§ 36.102(c), .104; see also id. § 36.107 (addressing qui tam relator’s rights and State’s options when State proceeds with action). Although the percentage varies, a relator generally is entitled to a percentage "of the proceeds of the action," which "includes proceeds of a settlement of the action." Id. § 36.110. A payment to a person under this provision "shall be made from the proceeds of the action" and the person who receives a payment "is also entitled to receive from the defendant an amount for reasonable expenses, reasonable attorney’s fees, and costs." Id. § 36.110(c). The court deter mines the amount of expenses, fees, and costs to be awarded "only after the defendant has been found liable in the action or the claim is settled." Id. Further, "the state may elect to pursue the state’s claim through any alternate remedy available to the state," and when the state does so, "the person bringing the action has the same rights in the other proceeding as the person would have had if the action had continued under [the qui tam provisions]." Id. § 36.109(a).

The TMFPA’s first-to-file and public-disclosure provisions place restrictions on private parties’ qui tam actions. The first-to-file provision provides that "[a] person other than the state may not intervene or bring a related action based on the facts underlying a pending action brought under [the qui tam provisions]." Id. § 36.106; In re Gilead Scis., Inc., No. 06-21-00030-CV, 2021 WL 4466006, 2021 Tex. App. LEXIS 8003 (Tex. App.—Texarkana Sept. 30, 2021, orig. proceeding) (mem. op.) (describing TMFPA’s "first-to-file bar"). "If the newly filed complaint ‘alleges the same material or essential elements of fraud described in a pending qui tarn action,’ the first-to-file bar applies." In re Gilead Scis., Inc., 2021 WL 4466006, at *2, 2021 Tex. App. LEXIS 8003, at *4 (quoting United States ex rel. Branch Consultants v. Allstate Ins., 560 F.3d 371, 378 (5th Cir. 2009)); see also United States ex rel. McGuire v. Millenium Labs., Inc., 923 F.3d 240, 252–53 (1st Cir. 2019) (discussing first-to-file provision in federal false claims act (FCA) and " ‘essential facts’ standard" for determining when it applies and explaining that courts proceed claim by claim in making determination); Branch Consultants, 560 F.3d at 377–78 (discussing FCA’s first-to-file rule and explaining that courts determine whether first-to-file provision applies based on " ‘essential facts’ or ‘material elements’ standard").³

The TMFPA’s public-disclosure provision generally requires a court, unless opposed by the attorney general, to dismiss a relator’s qui tam action or claim if substantially the same allegations in the action or claim were already publicly disclosed and the relator is not the "original source of the information." See Tex. Hum. Res. Code § 36.113(b). Federal courts appear to agree that the FCA’s analogous public-disclosure provision is not jurisdictional. See 31 U.S.C. § 3730(e)(4) (requiring court generally to dismiss relator’s action or claim, unless opposed by the government, if substantially same allegations in relator’s action or claim were already publicly disclosed unless relator was "original source of the information"); see, e.g., Abbott v. BP Exploration & Prod. Inc., 851 F.3d 384, 387 n.2 (5th Cir. 2017) (in context of FCA, agreeing with "sister circuits that the public disclosure bar is no longer jurisdictional").

In contrast to the federal courts’ apparent agreement that the FCA’s public-disclosure provision is no longer jurisdictional, a split exists among the federal courts as to whether the FCA’s counterpart provision to the TMFPA’s first-to-file provision is jurisdictional. See 31 U.S.C. § 3730(b)(5) ("When a person brings an action under this subsection, no person other than the Government may intervene or bring a related action based on the facts underlying the pending action."); see, e.g., United States ex rel. JKJ P’ship 2011 LP v. Sanofi-Aventis U.S. L.L.C. (In re Plavix Mktg.), 974 F.3d 228, 232 (3d Cir. 2020) (recognizing split in federal sister circuits on question of whether FCA’s first-to-file bar is jurisdictional and collecting federal cases treating it as jurisdictional and not jurisdictional).

Appellees’ Qui Tam Suits against Xerox

In 2012, appellees filed qui tam petitions under seal against Xerox and dental and orthodontist service providers (Providers),⁴ alleging that Xerox and the Providers had violated the TMFPA concerning Medicaid payments to the Providers for certain types of services. See Tex. Hum. Res. Code § 36.102(b) (requiring petition to be filed under seal); Nazari v. State, 561 S.W.3d 495, 497–98 (Tex. 2018) (describing Providers’ services and State’s allegations against Providers and Xerox as to those services and explaining that "Xerox administered the prior-authorization program under a contract with the state" for those services); Nazari v. State, 497 S.W.3d 169, 171–72 (Tex. App.—Austin 2016), aff’d, 561 S.W.3d 495 (Tex. 2018) (providing overview of relevant statutes and regulations pertaining to the orthodontic services at issue). Alvarez filed her petition in February 2012, LaFountain in March 2012, and Ellis in April 2012. The State elected to intervene in their respective cases. See Tex. Hum. Res. Code § 36.102(b).

The State’s TMFPA suit against Xerox

In May 2014, the State filed its own suit against Xerox seeking civil remedies under the TMFPA, alleging that:

Xerox fraudulently operated the review process while serving as the Medicaid program administrator. Among other complaints, the State alleges Xerox misrepresented, concealed, or failed to disclose that it was not processing orthodontic prior-authorization requests in accordance with Medicaid policy, was not substantively reviewing the evaluative documentation, and was approving vast numbers of prior-authorization requests for ineligible services. The State claims that rather than conducting a rigorous review, Xerox actively concealed the fact that unqualified and inadequately supervised clerical employees routinely "rubber stamped" orthodontic prior-authorization requests. According to the State, Xerox’s actions were unlawful, compromised the Medicaid program’s integrity, and directly or indirectly caused the State to pay millions of dollars for unauthorized orthodontic services to Medicaid patients.

In re Xerox, 555...