Atheer Ammanuel Hanna and Babylon Transportation, Inc. v. Medstar Funding, LLC ( 2015 )


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  •                                                                            ACCEPTED
    03-14-00732-CV
    5377959
    THIRD COURT OF APPEALS
    AUSTIN, TEXAS
    5/21/2015 12:18:35 PM
    JEFFREY D. KYLE
    CLERK
    NO. 03-L4-00732-CV
    IN THE COURT OF APPEALS                     FILED IN
    THIRD IUDICIAL DISTRICT             3rd COURT OF APPEALS
    AUSTIN, TEXAS
    AUSTIN, TEXAS                 5/21/2015 12:18:35 PM
    JEFFREY D. KYLE
    Clerk
    ATHEER HANNA,
    Appellant,
    VS
    MEDSTAR FUNDING, LP
    Appellee.
    On Appeal From The 345rH |udicial District Court for
    Travis County, Texas
    Trial Court Case No. D-1-GN-14-001432-CV
    APPELLANT'S REPLY BRIEF
    FRANK G. CAWLEY
    State Bar No. 24006978
    Whitehurst & Cawley, L.L.P.
    4560 Belt Line Rd., Suite 200
    Addisoru Texas 75001
    (e72) 503-5455
    (972) 503-6155   - Facsimile
    Email: fcawley@whitehurstlaw.com
    ATTORNEYS FOR APPELLANT
    ORAL ARGUMENT REQUESTED
    TABLE OF CONTENTS
    TABLE OF CONTENTS                                                           11,   111
    INDEX OF AUTHORITIES                                                     ... iv, v
    SUMMARY OF REPLY                                                                    1
    ARGUMENTS AND AUTHORITIES IN REPLY                                                .J-
    A.   Medstar's business model is not a true factor and is designed to
    circumvent Section 41.0105 and Haygood v. Escabedo .........3
    B    The plain language of Section 41.0105 precludes the recovery of
    Medstarts commission or business profït margin, which are
    clearly not "medical or healthcare expense.oo            .......5
    C.   Matte's contractual liability to Medstar does not make medical
    expenses that have not been and will not be paid to a medical
    provider recoverable..                                              .   ...6
    D.   Medstaros assignment of Mattets medical providers' claims does
    not transform Medstar into a medical provider          .........8
    E    The amounts Medstar paid Matte's providers and the contracts
    between Matte and those providers are relevant to determine the
    reasonable value of medical services                     .......9
    F'   Medstar's proposed stipulation that it paid a reduced rate does
    not negate the need for payment and contract information..........11
    G.   Denying Appellant access to the requested information would
    deprive him of his due process right to be heard and present
    evidence                                              ..................11
    CONCLUSION AND PRAYER                                                             13
    CERTIFICATE, OF SERVICE                                                           t5
    l1
    CERTIFICATE OF COMPLIANCE         l6
    lll
    INDEX OF AUTHORITIES
    Case Law:
    Dodd v. Cruz,
    223 CaI. App. 4th 933, 942 (Cal. App. 2d Dist. 2014).    ...                        .10
    Fuentes v. Shevin,
    407 U.S. 67,80,92 S. Ct. 1983, 32L.F,d.2d556,569 (t972).....                       .t2
    Galaviz v. C.R. Eng. Inc.,
    
    2012 U.S. Dist. LEXIS 53866
    , *8-9 (W.D. Tex. Apr.17,2012)                           10
    Haygood v. Escabedo,
    356 S.\M.3d 390, 391   (Tex.20ll)                                ......3    5   6 7 9
    In the Interest of BMN,
    570 S.W.2d 493,502 (Tex. Civ. App.      - Texarkana   1978, no writ).     ..........12
    Perry v. Del Rio,
    
    67 S.W.3d 85
    ,92(Tex.2001).                                                 ......12
    Ranger Ins. Co. v. Ward,
    1 07 S.W.3 d 820, 829 (Tex. App.-Texarkana 2003, pet. denied).        ..........    ...5
    Tex. Mut. Ins. Co. v. Apollo Enters.,
    2009 Tex. App. LEXIS 8315 (Tex.     App.Austin     Oct.29,2009).               ....8,9
    Turcotte v. Trevino,
    499 S.W.2d 705,723 (Tex. Civ. App.         -   Corpus Christi 1973, writ refd
    Statutes and Codes:
    Tsx. Crv. Pnec. & Rpvr. Coon $41.0105                                r, 2,3, 5, 6, 8,9
    TBx. CoNsr. art I, $ 19                                                                   l1
    U.S. Constitution...                                                                      1l
    lv
    Miscellaneous:
    Letter dated May 20,2015 from the Honorable Andrew Bench, 196th Judicial
    District Court for Hunt County, Texas.                       ..Exhibit A
    v
    SUMMARY OF REPLY
    The issue in this appeal is whether evidence of the amounts Medstar
    paid to Adrian Matte's medical providers and the contracts between
    Medstar and his providers is discoverable. The issue is not whether Civil
    Practice & Remedies Code Section 41.0105 applies to limit Matte's recovery
    or whether the amounts paid to Matte's medical providers represents the
    reasonable value of the services. Those issues are for the trial court in Hunt
    County to decide. This evidence is necessary for the fair adjudication of
    Defendant's defenses because without it, Defendant would be deprived of
    his constitutional due process right to be heard on the issues and present
    evidence in his defense.
    The discussion regarding whether Section 41.0105 applies and the
    reasonable value    of   medical expenses    is solely for the purpose of
    establishing that these issues are undecided, are the subject       of sharp
    debate, and strong arguments exist that Texas law does not allow for the
    recovery   of medical expenses in     excess   of the amount the medical
    providers accepted. These factors militate      in favor of requiring the
    production of the requested information so as to allow the Hunt County
    trial court to decide the issues thus paving the way for appellate court
    I
    review of this important issue of first impression. In fact, because it lacks
    the ability to compel production of this informatiory the Hunt County trial
    court has postponed the trial of the case until this appeal has been
    completed. This strongly suggests that the Hunt County trial court wants
    this information in order to determine the admissibility of evidence of
    medical care expenses.
    Boiled down to its essence, Medstar's goal is to prevent any Texas
    courts from deciding whether a plaintiff may recover more than the
    amounts Medstar pays      to medical providers in full       satisfaction   of a
    plaintiffs debt. By concealing the amounts it pays to and its contracts with
    providers, Medstar effectively deprives Appellant of the right to be heard
    on the issue of whether Section 41.0105 applies to Medstar's business
    model or whether the amount Medstar and medical providers agree upon
    represents the reasonable value of the services. Concealing this information
    also deprives the trial court in Hunt County from deciding these issues and
    appellate courts from reviewing the trial courls decision.
    Conspicuously absent     from Appellee's Brief is any argument
    regarding any alleged harm associated with producing information to
    Appellant subject to a protective order. Neither Appellant nor his counsel
    2
    are competitors of Medstar, and thus, there is no danger that the
    information will be used to Medstar's competitive disadvantage. In fact,
    Medstar has produced this information subject to a protective order in the
    past. (RR 464-469). And given the importance of the information, the lack of
    harm to Medstar militates in favor of requiring the production of the
    information.
    ARGUMENT AND AUTHORITIES
    A. Medsta{s business model is not a true factor and is designed to
    circumvent Section 4L.0105 and Høygood a. Escøbedo.
    Medstar attempts cloak its business model into the broader "medical
    factoring industry"      in an effort to conceal its true purpose. While         the
    factoring industry in general is legitimate, Medstar's business is not a true
    factoring arrangement.        It is a carefully designed scheme to circumvent
    Section 41.0105 and the Texas Supreme Courfs decision                 in   Høygood a
    Escabedo.   If successful,   Escabedo and Section 41.0105   will become nullities.
    In a true factoring         arrangement, the factor purchases a business'
    accounts receivable and proceeds to attempt to collect on the account from
    the debtor with whom the factor has no pre-existing relationship. That is
    inherently an adversarial, debtor-collector relationship. Flere, Medstar
    J
    interacted with Matte before purchasing his accounts. (Appellee's Brief at
    10). This involves an agreement                     with Matte to seek repayment from third
    parties      - the tort defendants. Unlike a true factoring arrangement, this is a
    collusive arrangement with the purpose of entrepreneurial profit.
    Further distinguishing Medstar's business from true factoring
    arrangements is that Medstar and Matte's medical providers agreed to
    rates for services before those services were performed or any account
    existed. (CR 162). The medical providers then aver that the full list charges
    remain owed to the providers.l In other words, the medical providers
    know the amount they have accepted, but execute affidavits swearing that
    they are owed a larger amount. This is pure fiction writing. Most likely,
    this is because Medstar collaborates with medical providers in crafting the
    affidavits. (CR 331). This adds another layer of collusion. In addition to the
    collusion between Matte and Medstar, now the medical providers are
    complicit even though they no longer have any financial interest in Matte's
    recovery.
    The tripartite collusion inherent in Medstar's business model and
    manipulation of evidence makes it clear that the object is to circumvent the
    '   cR 78,   81., 84, 9'J., 99, 1.06, 113, 120, 1.27,   130
    4
    limitations set forth in Section 41.0105 and the Texas Supreme Courfs
    holding in   Escnbedo.   Collusive attempts to circumvent the law violate
    public policy. Ranger Ins. Co. a. Wørd, 
    107 S.W.3d 820
    , 829 (Tex. App.-
    Texarkana 2003, pet. denied)
    B. The plain language of Section 41.0L05 precludes the recovery of
    Medstar's commission or business profit margin, which are clearly
    not "medical or healthcar"
    "*p"or".7
    In order to be recoverable, expenses must be "medical or healthcare
    expenses.    Tex.Crv.Pnec.Rsir¿.   Coos    S41.0105. Medical    or   healthcare
    expenses are those that are paid or   will be paid to a medical or healthcare
    provider. lnEscabedo, the Texas Supreme Court held:
    "We agree with the court of appeals that this statute limits recovery,
    and consequently the evidence at trial, to expenses that the proaider
    has a legal right to be paid....Thus, "actually paid and incuïted"
    means expenses that have been or will be paid, and excludes the
    difference between such amount and char ges the seraice proaider bills
    but has no right to be pøid."
    Hay good a. D e Escøbedo, 
    356 S.W.3d 390
    , 391 (Tex. 2011) (emphasis added).
    Here, the difference between the amount Medstar paid Matte's
    providers and the list charges does not constitute "medical or healthcare
    expenses" because this amount is not and never     will   be paid to a medical
    provider. Rather, this amount constitutes Medstar's commission or
    5
    business   profit margirç not "medical or healthcare expenses." It            is
    undisputed that Matte's medical providers have no right to any additional
    payments. Thus, according to the plain language of Section 41.0105 and the
    holding   inË,scnbedo, this amount is not recoverable.
    Medstar contends that Section 41.0105 does not apply           to   their
    business model because Medstar does not pay the medical providers on
    Matte's behalf. Flowever, Medstar admits that it reached agreements with
    Matte's medical providers to pay a reduced rate for services before any
    treatment was provided. (CR 162). This arrangement can only be described
    as paying Matte's medical providers for his benefit, or in other words, on
    his behalf. At the very least, the Hunt County trial court could interpret
    this arrangement as payment on Matte's behalf and only submit evidence
    of actual payments to the jrry. Thus, evidence of the contracts and actual
    payments is necessary for a decision on this issue.
    liability to Medstar does not make medical
    C. Matte's contractual
    expenses that have not been and will not be paid to a medical
    provider recoverable.
    As set forth above, according to the Texas Supreme Court, Section
    41.0105 limits recovery    to   expenses that are paid   or will be paid to   a
    medical or healthcare provider. Medstar argues that Section 4L.0105 does
    6
    not apply here because the rationale underlying the Texas Supreme Court's
    holding in   Escøbedo was   to prevent the plaintiff from obtaining a windfall
    Flere, the argument goes, Matte    will not obtain a windfall   because he owes
    the medical providers' full list charges to Medstar. And semantically,
    Medstar contends that it    will not receive a windfall   because   it expected to
    earn a profit all along. So according to Medstar, the identity of the
    beneficiary of the amount in excess of what the medical providers accepted
    (whether called a windfall or a profit) is the distinguishing factor.
    However, Matte's obligation to repay Medstar has no connection to
    the amount he can recover in a tort lawsuit. As an example, if a jury finds
    that a plaintiff's medical expenses are urueasonably high and awards             a
    lesser amount, that plaintiff is still obligated to pay his medical providers
    for their full charges. That plaintiff's separate contractual obligation to pay
    his providers does not compel an award for the full amount of the charges
    The same result applies here. The fact that Matte obligated himself to pay
    Medstar an amount in excess of what his providers agreed to accept does
    not render that amount recoverable
    In additiory Medstar's argument is essentially that the legislature and
    the Texas Supreme Court prohibit a plaintiff from obtaining a windfall by
    7
    recovering an amount in excess of the amount paid or owed to medical
    providers, but allow such a recovery if the windfall is transferred to a third
    par$ in the form of business profit. Whether characterized     as a   windfall or
    profit, the amount in excess of what the providers accepted is not
    recoverable. If it were, juries   will not be determining medical expenses,brt
    instead, they   will be deciding profits for a non-party lurking in           the
    shadows.
    D. Medstar's assignment of Matte's medical providers' claims does
    not transform Medstar into a medical provider.
    Medstar acknowledges that the Texas Supreme Court held that
    Section 41.0105 limits     a claimant's recovery to medical expenses the
    provider has a legal right to be paid. (Appellee's Brief at 20). Flowever,
    Medstar appears to contend that by virtue of the assignments from Matte's
    medical providers, Medstar is transformed into a medical provider for
    purposes of interpreting Section 41.0105. However, although an assignee
    stands   in the shoes of an assignor, an assignee of a healthcare provider
    does not become a healthcare provider. Tex. MuL Ins. Co. u. ApoIIo Enters,,
    2009 Tex.   App. LEXIS 8315 (Tex. App.Austin Oct.29,2009)(not designated
    for publication). Further, the common law principle that an assignee stands
    I
    in the shoes of an assignor     does not apply where       it would frustrate    the
    legislature's intent as reflected in statutes. Id.
    With respect to Section 41.0105, the Texas Supreme Court has held
    that a claimanfs recovery is limited to medical expenses that have been or
    will be paid to a medical or healthcare              provider. Because Medstar's
    assignments do not transform        it into a medical     provider, Matte cannot
    recover amounts owed to Medstar. Further, the common law principle that
    an assignee stands in the shoes of an assignor does not apply here because
    it would frustrate the legislature's intent to limit recovery to amounts paid
    or owed to medical providers, not entrepreneurial financiers.
    E. The amounts Medstar paid Matte's providers and the contracts
    between Medstar and those providers are relevant to determine the
    reasonable value of medical services.
    The rule the Texas Supreme Court set out              in   Escnbedo   is that a
    plaintiff is entitled to recover the lesser of the reasonable value of medical
    services or the amount actually paid or the amount the medical provider is
    legally entitled to recover. Thus, even if Section 41.0105 does not apply to a
    factoring arrangement, the evidence reflecting the amount Matte's medical
    providers agreed to accept is necessary for the fair adjudication of the
    reasonable value of the services provided
    9
    Medstar contends that Matte's medical providers' acceptance of a
    reduced rate has no bearing on the reasonable value of the services. Rather,
    Medstar argues that the reduced rate simply reflects the amount the
    providers are willing to accept     to avoid the uncertainties and risk
    associated   with   collections. Ffowever, the timing   of the transactions
    undermines this argument.
    As set forth above, Medstar and Matte's providers agreed upon         a
    reduced rate before any treatment was provided. (CR 162). The providers
    were under no compulsion to treat Matte      if   they thought the proposed
    rates were urueasonable. In other words,   it is safe to presume that a for-
    profit concern will only provide goods and services if the compensation is
    sufficient to cover costs plus a reasonable profit. Otherwise, there is no
    reason to provide the goods and services. The fact that Matte's medical
    providers provided treatment knowing the amount they would be paid is
    at least some evidence that the agreed upon rates were reasonable. Galaaiz
    u. C.R. Erg. lnc.,2012U.S. Dist. LEXIS 53866, *8-9 (W.D. Tex. Apt. 17,2012);
    Dodd u. Cruz, 
    223 Cal. App. 4th 933
    , 942 (CaL App. 2d Dist. 2014)(not
    designated for publication).
    t0
    F. Medstar's proposed stipulation that it paid a reduced rate does not
    negate the need for payment and contract information.
    Medstar argues that                it will stipulate that it paid a reduced rate for
    Matte's medical accounts, and thus, the issue is preserved for appellate
    review. This argument ignores the other reasons payment and contract
    information is necessary. For example, if the Hunt County trial court agrees
    with Appellanfs arguments that only the paid amount is admissible, there
    is no evidence to submit to the jury without this information.2 Second, if
    the trial court decides that both the full amount of the providers' charges
    and the amount actually paid should be submitted to the jury to determine
    the reasonable value of the services, payment and contract information is
    obviously necessary. Thus, Medstar's proposed stipulation does not negate
    the need for this information.
    G.   Denying Appellant access to the requested information would
    deprive him of his due process right to be heard and present
    evidence.
    Both the fourteenth amendment to the U.S. Constitution and article 1,
    section 19 of the Texas Constitution provide that a person shall not be
    deprived         of life, liberty, or property without due process of law
    2
    This is a scenario that Medstar has apparently not anticipated. If the trial court takes this approach, it could result in
    no recovery ofmedical expenses at all.
    1l
    Fundamental to the concept of due process is the right to be heard. Fuentes
    a. Sheain, 407 U.S. 67,80,92 S. Ct. 1983,32L. Ed. 2d 556,569 (1972).The
    right to be heard assures a full hearing before a court having jurisdiction
    of the matter, the right to introduce evidence at a meaningful time and in a
    meaningful manner, and         to have judicial findings    based upon that
    evidence. Perry u. DeI Rio, 
    67 S.W.3d 85
    , 92 (Tex. 2001); Turcotte a. Treaino,
    499   5.W.2d705,723 (Tex. Civ. App. -- Corpus Christi 1973, writ ref'd n.r.e.).
    It includes also an opportunity to cross-examine witnesses, to produce
    witnesses, and to be heard on questions of law.In the Interest of BMN,570
    S.W.2d 493,502 (Tex. Civ. App. -- Texarkana 1978, no writ).
    If Appellant is denied access to the information requested, he will   be
    deprived of his right to present evidence to the Hunt County trial court in
    support of the argument that Matte is not entitled to recover amounts in
    excess of the amount paid to the providers. Appellant    will   also be deprived
    of the right to present evidence of the reasonable value of medical services
    performed on Matte. Muted by the absence of evidence, Appellant will not
    be heard. And Appellant       will be deprived of the right to have judicial
    findings based upon the evidence. Accordingly, Appellant is entitled to the
    requested as a matter of fundamental due process.
    T2
    In fact, because it lacks the ability to compel production of this
    information, the Hunt County trial court has postponed the trial of the case
    until this appeal has been completed. (Exhibit A). This strongly    suggests
    that the Hunt County trial court wants this information in order to
    determine the admissibility of evidence of medical care expenses.
    CONCLUSION AND PRAYER
    Evidence of the amounts Medstar paid to and contracts with Matte's
    medical providers is relevant and necessary       to a fair adjudication of
    Appellant's defenses against Matte's damage claims in the Hunt County
    Action. If Appellant is denied access to this evidence, he will be deprived
    of the ability to present it to the trial court and jury in the Hunt County
    Action and consequently, to the court of appeals if necessary in violation of
    fundamental due process rights. This evidence is unavailable from any
    other source. Accordingly, the trial court abused its discretion in granting
    Medstar's Objections, Motion To Quash and Motion For Protective Order.
    13
    Respectfully submitted,
    . Erank
    ,      G. Cawley
    FRANK G. CAWLEY
    State Bar No. 24006978
    Whitehurst & Cawley, L.L.P.
    4560 Belt Line Road, Suite 200
    Addison, Texas 75001
    972 / 503-5455 Telephone
    972 / 503-6155 Facsimile
    Email: fcaw         hitehurstlaw.com
    Attorneys for Appellant
    t4
    CERTIFICATE OF SERVICE
    The undersigned hereby certifies that a true and correct copy of the
    foregoing document was forwarded to all counsel of record pursuant to the
    Texas Rule of Appellate Procedure 9.5 on the 2L"t day of May, 2015.
    Kirk L. Pittard
    KEnY, DuRuev & PrrrenD, L.L.P.
    1005 Heights Boulevard
    Houston, Texas 77008
    Email: kpittard@texasappeals.com
    joe K. Crews
    Cn¡ws Lew Fmv PC
    70'l.Brazos, Suite 900
    Austin, Texas 7870'/.,
    Donald L. Crook, ]r.
    WRyNg WnIGHT, L.L.P.
    5707 Interstate Ten West
    Antonio, Texa s 7820'I',
    San
    Email: dcrook@waynewright.com
    /s/ Frank G. Cawlev
    Frank G. Cawley
    15
    CERTIFICATE OF COMPLIANCE
    As required by Texas Rule of Appellate Procedure 9.a(i)(3), I certify
    that there is a total of 3240 words in the foregoing computer-generated
    document.
    / s/Frank G. Cawley
    Frank G. Cawley
    t6
    T96TH      JTII}ICIAL I}ISTRICT COURT
    F.O. BOX 1097 . GREDNVTLLE? TEXAS 754t13-r097
    (903) 408.419û . FAx: (903) 40E-4189
    J. ANDRTWSENÇH
    ruNGE
    JULIE DEARY
    ÇOURT COORDIN.ÀTOR
    May 20,2015
    Vin Fac¡imile {9721 503-df55
    Mr. Frank G. Cnwley
    4560 Belt Line Road, Suite 200
    Addiso¡t, Texas 75001
    llia Facei¡üile (210) 734-996_5.
    M¡. Donald L. Cook, Jr.
    5707 Intersmæ Tsn lVest
    San Antonio, Texa$ 78201
    Re:   cnuse No, 78573; Adricn Matte v. Atheer Am¡nuel Hanna, Edmor¡d Amanuel
    H&nna, nnd Bcbyton Transportrtion, Inc"; In the lg6th Di*trict court, Hunt
    Çountyo Texae
    Dear Gentlemgn,
    AftE¡ considering the argument and authorities of counsel, the Cou¡t has decided to continue the trial
    of this oEse until suc]r !ìme as the Appeal of the Protective Order issued in Travis County, and
    curently before the Third Court of Appeals, has been fully resolved. Due t0 t¡e unique t*otuut
    çirçumstanoes of this case, and the Çou¡t's inability to compel the production of d.ocuments relevant
    to the alleged dnmages in this Êase, a jury trial wixhout an opinion on thg relevance of the Medstar
    Contracts would be a waste ofjudioial rËsources. Ouce the issue has been finally resolved, the Court
    will immediately set the case for kial. Counsel for the Defendant is directed to prepare an ordçr
    c'oneistent with this letter.
    J. AndrewBench
    Judge, 196ù Judicial Disuict Court
    J,A_B/jd
    EXHIBIT
    It
    *0
    a        ft
    

Document Info

Docket Number: 03-14-00732-CV

Filed Date: 5/21/2015

Precedential Status: Precedential

Modified Date: 9/29/2016