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A-Medical Advantage Healthcare Systems v. Shwarts

Court of Appeals of Texas, Tenth District

December 31, 2019


          From the 13th District Court Navarro County, Texas Trial Court No. D15-24567-CV

          Before Chief Justice Gray, Justice Davis, and Justice Neill



         Appellants A-Medical Advantage Healthcare Systems, Associated ("AHS"), Kevin Williams, M.D. ("Williams"), Advantage Medical Clinic, Inc. ("AMC"), John Zacharias ("Zacharias"), and Linda Riley ("Riley") (collectively "Appellants") bring this interlocutory appeal challenging the trial court's order appointing a receiver. We will affirm.


         Appellees initiated this suit as ancillary to an existing probate proceeding-In the Estate of Kalman J. Shwarts, Deceased, Cause No. P18036-filed in the Navarro County Court. In their Third Amended Petition, Appellees outline the events preceding the filing of their lawsuit. In 2003, Kalman Shwarts, M.D. started an urgent care clinic in Waxahachie, Texas known as Enviva Health Services ("Enviva"). The clinic was operated by Kal Shwarts, M.D., P.A., a Texas professional association formed by Dr. Shwarts in 1977 ("the PA"). Dr. Shwarts died unexpectedly on August 3, 2012. A probate proceeding styled In the Estate of Kalman Jay Shwarts, Deceased, was filed under Cause No. P18036 in Navarro County, Texas on August 9, 2012. Dr. Shwarts's heirs are his wife, Julia Shwarts ("Mrs. Shwarts"); his son, Adam Shwarts; and his daughter, Anastasia Israel (collectively "the Heirs"). Mrs. Shwarts is the step-mother of Mr. Shwarts and Ms. Israel. She is also an executor of Dr. Shwarts's estate ("the Estate").

         While Dr. Shwarts was alive, Riley, Zacharias, Pin Point Management, L.L.C. ("Pinpoint"), [1] and/or AHS provided management services to Enviva. From 2011 to the present, the sole member, director and officer of AHS has been Williams. Zacharias and Riley acted as agents of AHS both in communicating with the Estate and in managing the day-to-day operations of AHS. After Dr. Shwarts's death, AHS, Pinpoint, Riley and/or Zacharias agreed to continue to provide management services to Enviva. From August 2012 until February 2014, AHS, Pinpoint, Riley and/or Zacharias caused Enviva to issue distribution payments to the Heirs and to Pin Point and took the position that they owned 50 percent of Enviva.

         On March 11, 2014, AMC entered into a written agreement to purchase Enviva from the Estate. The officers of AMC are Zacharias and Riley. The closing of the sale was to take place on or before April 15, 2014. Because of the imminent closing, the Heirs agreed that Enviva could stop paying distributions to them. The sale of Enviva did not close in April 2014. Over the following months, Zacharias and Riley each communicated with the Estate about the status of the closing. As late as July 2014, Riley assured the Estate of AMC's intention to close. The closing never occurred, but the payment of distributions to the Heirs never resumed.

         The Estate made multiple requests to Appellants to be provided Enviva's clinic's financial records, but no records were provided. On March 18, 2015, Mrs. Shwarts sent a letter to counsel for Appellants requesting to inspect Enviva's books and records. On March 25, 2015, Appellants responded, stating that they could not comply with Mrs. Shwarts's request because they had ceased management of the clinic. Appellants also claimed that Enviva had stopped operating in April 2014 and that Appellants were holding Enviva's equipment "in trust." None of the Appellants had notified the Heirs, the Estate or the PA that they planned to stop managing Enviva, or that their management had ceased.

         On April 8, 2015, Mrs. Shwarts sent another letter requesting access to Enviva's records and equipment. Once again, Appellants failed to provide any information regarding Enviva's records or equipment. Mrs. Shwarts then discovered that Enviva's sign had been removed from its location and replaced with a sign reading "Advantage Medical Clinic," and that the phones were being answered as "Advantage" instead of "Enviva." Appellants subsequently moved the clinic to a new location without consulting with or notifying Appellees.

         Appellees filed suit seeking damages for breach of fiduciary duty, theft of trade secrets, breach of contract and additionally seeking declaratory relief, disgorgement, an accounting, and the appointment of a receiver.

         Pin Point filed counterclaims for breach of contract, promissory estoppel, and negligent misrepresentation. The trial court granted Appellees' motion for partial summary judgment as to these counterclaims. Appellees filed a motion for partial summary judgment based upon their claim for declaratory relief, requesting that the trial court find that AMC is actually Enviva and is an asset of the Estate. Appellees also filed a motion for partial summary judgment against the Appellants for breach of fiduciary duty. The trial court granted both of Appellees' motions for partial summary judgment. Appellees' motion for appointment of a receiver was also granted after an evidentiary hearing. As noted, Appellants' interlocutory appeal challenges the trial court's appointment of the receiver.

         After the appeal was filed, Appellants filed three motions to stay proceedings and an emergency motion to modify supersedeas ...

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