Court of Appeals of Texas, Third District, Austin
Cardon Healthcare Network, Inc.; and Seton Healthcare Services of Austin d/b/a Seton Medical Center, Appellants
Susan Goldberg, Appellee
THE COUNTY COURT AT LAW NO. 1 OF TRAVIS COUNTY NO.
C-1-CV-11-011434, HONORABLE ERIC SHEPPERD, JUDGE PRESIDING
Chief Justice Rose, Justices Goodwin and Field.
Melissa Goodwin, Justice
interlocutory appeal, Cardon Healthcare Network, Inc.
(Cardon) and Seton Healthcare Services of Austin d/b/a Seton
Medical Center (Seton) complain of the trial court's
order denying their motion to compel arbitration.
See Tex. Civ. Prac. & Rem. Code §§
51.016, 171.098(a)(1) (authorizing appeal from order denying
application to compel arbitration under Federal Arbitration
Act and appeal from order denying application to compel
arbitration under Texas Arbitration Act, respectively). Susan
Goldberg brought suit against Cardon and Seton asserting
claims for fraudulent lien and other statutory and common law
causes of action. Cardon and Seton sought to compel mediation
based on an arbitration provision in Seton's agreement
with Blue Cross Blue Shield of Texas (BCBS), Goldberg's
health insurer. For the reasons that follow, we affirm the
trial court's order.
2008, Goldberg was injured in an automobile accident and was
treated at the Seton emergency room, incurring approximately
$7, 800 in charges. Seton sent Goldberg's heath insurer,
BCBS, a bill that included a contractual reduction or
adjustment pursuant to an agreement between Seton and BCBS
(the Agreement). BCBS paid the bill, which was for
approximately $4, 600. Seton then billed Goldberg for $1,
903.24. Goldberg sought payment for personal
injury protection (PIP) from her automobile insurer,
Nationwide Mutual Insurance Company (Nationwide), which
agreed to pay policy limits of $5, 000. According to
Goldberg, she directed Nationwide to pay Seton the $1, 903.24
for which she had been billed using her PIP coverage.
Instead, Nationwide paid the entire $5, 000 to Seton. Cardon
and Seton contend that Nationwide did so by mistake or for
some other unknown reason. According to Goldberg, Cardon,
acting as collection agent for Seton, sought payment of $5,
000 from Nationwide and informed Seton once Cardon had
received the payment. After Seton received payment of $5, 000
from Nationwide, BCBS requested that Cardon and Seton return
the $4, 600 it had previously paid for Goldberg's
treatment. Goldberg contends that Seton asked BCBS to request
the return of its payment. Seton refunded BCBS's payment,
reversed the contractual reduction, and sent Goldberg a new
bill for $2, 762, the remaining balance on the full charges
after the $5, 000 payment by Nationwide. In October 2009,
Cardon, acting as agent for Seton, filed a hospital lien for
this unpaid balance of $2, 762. See Tex. Prop. Code
§§ 55.002 (providing that hospital has lien on
claim of individual who receives hospital services for
injuries caused by accident attributed to negligence of
another person), .003(b)(2) (providing that lien does not
attach to proceeds of insurance policy in favor of injured
individual except liability insurance).
October 2011, Goldberg filed suit against Cardon and Seton,
alleging fraudulent lien, see generally Tex. Civ.
Prac. & Rem. Code §§ 12.001-.007 (providing in
relevant part for limited liability for fraudulent lien
against personal property); untimely billing, see
generally id. §§ 146.001-.004 (requiring in
relevant part that health care service providers bill patient
for services by date specified in provider's contract
with health insurer); and violations of the Texas Deceptive
Trade Practice Act (DTPA), see Tex. Bus. & Comm.
Code § 17.46 (2), (5), (12) (14), &
(24). In April 2017, as the trial date of April
24 approached, Goldberg filed several amended petitions. In
her third amended petition, she asserted additional statutory
claims, including a claim for violations of the Texas Finance
Code. See Tex. Fin. Code §§ 392.304(a) (8)
(prohibiting debt collector from misrepresenting character,
extent, or amount of debt), (19) (prohibiting debt collector
from using false representation or deceptive means), .404
(making violation of chapter 392 a violation of DTPA).
fifth amended petition, filed on April 14, 2017, ten days
before the trial date, Goldberg added a paragraph alleging
that she was a third-party beneficiary under the Agreement
between Seton and BCBS and that they had violated the
Agreement. She repeated those allegations in her sixth and
seventh amended petitions, both filed on April
On April 19, Cardon and Seton filed a motion to compel
arbitration, arguing that Goldberg was bound by the
arbitration provision in the Agreement based on her status as
a third-party beneficiary. Upon Cardon's and Seton's
filing their motion to compel arbitration, the trial court
continued the trial setting and set the motion for hearing at
2:00 p.m. on May 22, 2017. On May 18, Goldberg filed her
eighth amended petition, omitting the paragraph containing
the third-party beneficiary allegation. On the morning of the
hearing, Cardon and Seton filed a supplement to their motion
to compel arbitration, arguing that although Goldberg had
removed the express reference to "third-party
beneficiary, " she continued to seek the benefit of the
Agreement by "implicitly referencing the terms of the
Agreement." At the hearing on the motion, the trial
court granted Goldberg permission to file a post-hearing
response to Cardon's and Seton's supplement to their
motion, which she did, and Cardon and Seton filed a reply.
The trial court denied the motion to compel arbitration
without stating a basis. This interlocutory appeal followed.
See Tex. Civ. Prac. & Rem. Code §§
OF REVIEW AND APPLICABLE LAW
review an order denying a motion to compel arbitration for
abuse of discretion. D.R. Horton-Emerald, Ltd. v.
Mitchell, No. 01-17-00426-CV, 2018 Tex.App. LEXIS 731,
at *5-6 (Tex. App.-Houston [1st Dist.] Jan. 25, 2018, no pet.
h.) (mem. op.); Santander Consumer USA, Inc. v.
Mata, No. 03-14-00782-CV, 2017 Tex.App. LEXIS 2631, at
*3 (Tex. App.-Austin Mar. 29, 2017, no pet.) (mem. op.).
"'Under this standard, we defer to a trial
court's factual determinations if they are supported by
evidence, but we review a trial court's legal
determinations de novo.'" Mitchell, 2018
Tex.App. LEXIS 731, at *6; (quoting Rocha v. Marks
Transport, Inc., 512 S.W.3d 529, 535 (Tex. App.-Houston
[1st Dist.] 2016, no pet.) (citing In re Labatt Food
Serv., L.P., 279 S.W.3d 640, 643 (Tex. 2009) (orig.
proceeding))); accord Mata, 2017 Tex.App. LEXIS
2631, at *3-4; SEB, Inc. v. Campbell, No.
03-10-00375-CV, 2011 Tex.App. LEXIS 1588, at *4-5 (Tex.
App.-Austin Mar. 2, 2011, no pet.) (mem. op.).
matters, " such as the validity of the arbitration
agreement, are decided by the court rather than the
arbitrator. In re Weekley Homes, L.P., 180 S.W.3d
127, 130 (Tex. 2005) (orig. proceeding). A trial court's
determination of the arbitration agreement's validity is
a legal question subject to de novo review.
Mitchell, 2018 Tex.App. LEXIS 731, at *7. Whether an
agreement to arbitrate binds a nonsignatory is a gateway
matter involving validity that must be decided by the court.
Labatt, 279 S.W.3d at 643; Mitchell, 2018
Tex.App. LEXIS 731, at *6-7; Mata, 2017 Tex.App.
LEXIS 2631, at *5. The party moving to compel arbitration has
the burden to show a valid agreement to arbitrate.
Mitchell, 2018 Tex.App. LEXIS 731, at *7;
Campbell, 2011 Tex.App. LEXIS 1588, at *7 (citing
In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571,
573 (Tex. 1999) (orig. proceeding) (per curiam)). Thus,
"[t]he party seeking arbitration bears the burden of
establishing that the arbitration agreement binds a
nonsignatory." Mata, 2017 Tex.App. LEXIS 2631,
at *5; Glassell Producing Co. v. Jared Res., Ltd.,
422 S.W.3d 68, 81 (Tex. App.-Texarkana 2014, no pet.).
to an arbitration agreement may be bound when rules of law or
equity would bind them to the contract generally.
Labatt, 279 S.W.3d at 643. According to principles
of contract and agency law, arbitration agreements may bind
non-signatories under any of six theories: (1) incorporation
by reference, (2) assumption, (3) agency, (4) alter ego, (5)
equitable estoppel, and (6) third-party beneficiary. In
re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 739
(Tex. 2005) (orig. proceeding) (citing Bridas S.A.P.I.C.
v. Government of Turkm., 345 F.3d 347, 356 (5th Cir.
2003)). Direct benefits estoppel is a type of equitable
estoppel. Rachal v. Reitz, 403 S.W.3d 840, 845-46
& n.5 (Tex. 2013) (explaining that Texas Supreme Court
expressly adopted federal doctrine of direct benefits
estoppel in Kellogg, 166 S.W.3d at 739). Here,
Cardon and Seton raise two of the theories-direct benefits
estoppel and third-party beneficiary.
their first issue, Cardon and Seton argue that the trial
court erred in refusing to compel arbitration because
Goldberg is a third-party beneficiary under the Agreement and
seeks to benefit from it. They point to Goldberg's
allegation that she was a third-party beneficiary under the
Agreement and the breach of contract claims asserted in her
fifth and sixth amended petitions,  contending that these claims
"necessarily arise out of, relate to, or involve the
Agreement" and thus fall within the scope of the
arbitration provision. "A third-party beneficiary may
enforce a contract to which it is not a party if the parties
to the contract intended to secure a benefit to that third
party and entered into the contract directly for the third
party's benefit." In re Palm Harbor Homes,
Inc., 195 S.W.3d 672, 677 (Tex. 2006) (orig.
proceeding). In asserting that Goldberg is a third-party
beneficiary, Cardon and Seton rely solely on the allegations
in her fifth, sixth, and seventh amended petitions that she
was a third-party beneficiary. However, Goldberg omitted
those allegations in a subsequent eighth amended petition,
the live petition at the time of the trial court's
ruling. An amended pleading takes the place of the original
pleading, and all prior pleadings are superseded and are no
longer a part of the live pleadings. Tex.R.Civ.P. 65
(explaining that previous pleadings, once subsequent pleading
is filed, "shall no longer be regarded as a part of the
pleading in the record of the cause"). Thus, the live
pleading at the time of the hearing and the one on which the
trial court ruled contained no allegation of Goldberg's
status as a third-party beneficiary, and that claim was not
before the trial court. See id.; Wilson v.
Woodland Hills Apts., No. 05-16-01093-CV, ...