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Cardon Healthcare Network, Inc. v. Goldberg

Court of Appeals of Texas, Third District, Austin

March 2, 2018

Cardon Healthcare Network, Inc.; and Seton Healthcare Services of Austin d/b/a Seton Medical Center, Appellants
v.
Susan Goldberg, Appellee

         FROM THE COUNTY COURT AT LAW NO. 1 OF TRAVIS COUNTY NO. C-1-CV-11-011434, HONORABLE ERIC SHEPPERD, JUDGE PRESIDING

          Before Chief Justice Rose, Justices Goodwin and Field.

          MEMORANDUM OPINION

          Melissa Goodwin, Justice

         In this 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.

         BACKGROUND

         In June 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.[1] 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).

         In 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).[2] 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).

         In her 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 17.[3] 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.[4] This interlocutory appeal followed. See Tex. Civ. Prac. & Rem. Code §§ 51.016, 171.098(a)(1).

         STANDARD OF REVIEW AND APPLICABLE LAW

         We 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.).

         "Gateway 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.).

         Nonsignatories 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.

         DISCUSSION

         In 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, [5] 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, ...


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