Entrust, Inc. v. Rice District Community Hospital D/B/A Rice Medical Center ( 2015 )

Reversed and Rendered and Memorandum Opinion filed September 17, 2015.
In The
Fourteenth Court of Appeals
NO. 14-14-00196-CV
ENTRUST, INC., Appellant
V.
RICE DISTRICT COMMUNITY HOSPITAL
D/B/A RICE MEDICAL CENTER, Appellee
On Appeal from the 25th District Court
Colorado County, Texas
Trial Court Cause No. 22,763
MEMORANDUM OPINION
Entrust, Inc. appeals from a money judgment against it and in favor of Rice
District Community Hospital d/b/a Rice Medical Center following a jury trial on
Rice’s claim under the Deceptive Trade Practices-Consumer Protection Act
(DTPA). See Tex. Bus. & Com. Code §§ 17.41-.63 (Vernon 2011 & Supp. 2014).
We reverse the trial court’s judgment and render a take-nothing judgment in favor
of Entrust because this record contains no evidence that Rice relied to its detriment
on the representations upon which Rice predicated its DTPA claim.
BACKGROUND
Entrust contracted with Rice in 2006 to administer Rice’s self-funded
employee health benefit plan for Rice’s employees. Under the plan, Rice funded a
designated trust account to pay health care claims up to $35,000 submitted by its
employees. Rice obtained stop-loss insurance from Pan American Life Insurance
to cover employee health care claims exceeding $35,000.
Entrust established and operated Rice’s health benefit plan, processed
claims, and submitted claims exceeding $35,000 to the stop-loss insurer. Entrust
and Rice renewed their contract in 2007, 2008, and 2009. Rice procured stop-loss
insurance from Pan American during this period.
Section 1(E) of the Entrust-Rice contract obligated Entrust to “receive and
review claims for benefits under the Plan and . . . use its best efforts, consistent
with industry standards to compute the benefits payable, if any, in accordance with
the terms and conditions of the Plan.” This provision also states: “Entrust will
complete its review of all claims after complete proof of claims is received by
Entrust in accordance with applicable laws and regulations.” It concludes: “On no
account can Entrust, or any employee or owner of Entrust, guarantee processing of
claims earlier than the 10th day after the date on which valid proof of loss is
received by Entrust.”
Section 1(H) addresses stop-loss insurance and states: “If the Client has
obtained stop loss insurance coverage for funding Plan benefits in excess of certain
specified individual and aggregate limits, Entrust shall assist the Client in the
submission of claims for benefits payable under such coverage.” This provision
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continues: “Entrust shall not be required to process claims for benefits under the
Plan other than in the ordinary course of claim processing duties and no priority
will be given to claims merely because the stop loss year is coming to a close.”
Section 9 of the Entrust-Rice contract states as follows: “Either party shall
have the right to renegotiate or terminate this Contract by giving to the other party
valid and timely notice clearly indicating intent to renegotiate or terminate the
terms of this Contract.”
While the contract was in effect, Entrust received from Methodist Hospital,
in May 2009, a one-page summary of medical expenses totaling $157,666.50
incurred for inpatient treatment of a Rice employee provided during April and May
2009. Entrust requested further information to establish a complete proof of claim;
among other things, Entrust asked Methodist to provide an itemized bill, invoices,
and medical records so that Entrust could process the claim. Entrust denied the
claim on August 4, 2009, after it failed to receive the requested proof of claim
information from Methodist.
In late October 2009, Entrust representatives met with Rice to discuss
renewing their contract. Rice initially indicated on October 19, 2009, that it would
renew its contract with Entrust and its stop-loss insurance policy with Pan
American.
Rice notified Entrust on November 25, 2009, that it was cancelling the
contract with Entrust. In its cancellation letter, Rice stated: “As you are aware, the
board of Rice Medical Center has agreed to turn over the operations of the hospital
to Critical Access Healthcare, and as such, the hospital district will no longer have
any employees. CAH has decided to use another insurance agency for their
healthcare needs.” The letter further states: “The effective date of the new health
insurance will be December 1.”
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Rice did not pay the invoices Entrust sent to Rice for November and
December stop-loss insurance premiums; therefore, Rice’s stop-loss coverage from
Pan American for claims exceeding $35,000 terminated on October 31, 2009.
Former Rice CEO Richard Hoeth testified that Rice was unaware of the
$157,666.50 Methodist bill when Rice allowed its stop-loss coverage to terminate,
and that Entrust had not alerted Rice to the bill’s existence before termination of
the stop-loss coverage.
Entrust received the requested billing detail, invoices, and medical records
from Methodist for the previously submitted $157,666.50 claim by November 6,
2009. Rice no longer had stop-loss coverage in place at this time for amounts
above $35,000. Entrust finished processing the Methodist bill on November 24,
2009; determined that $94,559.90 properly was payable to Methodist after certain
agreed discounts were applied to the charges; drafted a check payable to Methodist
in that amount drawn on Rice’s health plan trust account; and asked Rice to deposit
funds in the trust account sufficient to cover the Methodist check. Hoeth testified
that Rice paid $35,000 and some additional charges, leaving a remaining balance
owed to Methodist of $58,915.40.
Rice contended that Entrust was liable to Rice for the remaining $58,915.40
balance due to Methodist and sued Entrust for breach of contract, fraud, slander,
and various alleged violations of the Texas Insurance Code and DTPA. The case
proceeded to a jury trial on October 28, 2013.
The jury answered “yes” to Question No. 1 in the charge, which stated as
follows:
Did the party named below engage in any false, misleading, or
deceptive act or practice that Rice District Community Hospital, d/b/a
Rice Medical Center, a Political Subdivision of the State of Texas
relied on to its detriment and that was a producing cause of damages
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to Rice District Community Hospital, d/b/a Rice Medical Center, a
Political Subdivision of the State of Texas?
‘Producing cause’ means a cause that was a substantial factor in
bringing about the damages, if any, and without which the damages
would not have occurred. There may be more than one producing
ca[u]se.
‘False, misleading, or deceptive act or practice’ means any of
the following:
(a) Representing that services had or would have characteristics
that they did not have; or
(b) Representing that services are or will be of a particular
quality if they were of another; or
(c) Representing that an agreement confers or involves rights
that it did not have or involve.
Answer “yes” or “no” for the following:
Entrust, Inc. Yes
The charge’s subparts defining “false, misleading, or deceptive act or practice”
correspond to sections 17.46(b)(5), (7), and (12) of the DTPA.
In response to Question No. 6, which was predicated on a “yes” answer to
Question No. 1, the jury awarded $58,915.40 as damages to Rice representing
“[t]he amount Rice Medical Center is obligated to pay, and will pay, to settle the
Methodist Hospital claim.” The jury awarded $134,039.20 in attorney’s fees to
Rice in response to Question No. 8, which also was predicated on a “yes” answer
to Question No. 1.
The jury answered “no” to additional questions in the charge asking whether
Entrust engaged in any unconscionable action or course of action; acted
knowingly; committed fraud; and failed to comply with section 1(E) of the Entrust-
Rice contract.
The trial court signed a final judgment on December 3, 2013, awarding
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damages and attorney’s fees to Rice in conformity with the jury’s verdict. Entrust
filed a motion to disregard the adverse jury answers on January 2, 2014. Entrust
asked the trial court to disregard the jury’s answers to Questions Nos. 1 and 6 on
grounds that they are not supported by legally sufficient evidence; it also asked the
trial court to disregard the jury’s answer to Question No. 8 on grounds that
attorney’s fees cannot stand once the jury’s answers to Questions Nos. 1 and 6 are
disregarded. The trial court denied Entrust’s motion after a hearing on January 23,
2014. Entrust now challenges the trial court’s final judgment on appeal.
ANALYSIS
Entrust contends in two issues that the trial court erred in denying its motion
for directed verdict and its post-trial motion to disregard the jury’s answers to
Questions Nos. 1 and 6 because no legally sufficient evidence supports these
answers.
Before addressing Entrust’s issues, we first address Rice’s contention that
this court lacks subject matter jurisdiction because Entrust filed its notice of appeal
late.
I. Appellate Jurisdiction
The trial court signed its final judgment on December 3, 2013, awarding
damages to Rice. Entrust timely filed a motion to disregard certain of the jury’s
answers under Texas Rule of Civil Procedure 301 on January 2, 2014; among other
things, Entrust asked the trial court to modify the December 3, 2013 money
judgment in Rice’s favor by signing a take-nothing judgment in Entrust’s favor
after disregarding the jury’s answers to Questions Nos. 1 and 6. This motion
operated as a motion to modify, correct or reform the judgment under Texas Rule
of Civil Procedure 329b and extended the deadline for Entrust to file its notice of
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appeal until March 3, 2014. See Ryland Enter., Inc. v. Weatherspoon, 355 S.W.3d
664, 666-67 (Tex. 2011) (per curiam); see also Tex. R. App. P. 26.1(a)(2).
Entrust’s notice of appeal is file-stamped March 5, 2014; the certificate of service
is dated March 4, 2014.
Rice asserts that Entrust did not perfect its appeal within 90 days of the date
on which the trial court signed its judgment because Entrust’s notice of appeal
“reflects that it was first created by Entrust on March 4, 2014, making it impossible
to argue that it was mailed prior to March 3, 2014, the final due date.” Entrust
contends that the notice of appeal was timely filed by mail on March 3, 2014.
Texas Rule of Appellate Procedure 26.3 allows an extension for a notice of
appeal filed in the trial court within 15 days of the deadline. A motion for
extension of time is “necessarily implied” when the perfecting instrument is filed
within 15 days of its due date. Verburgt v. Dorner, 959 S.W.2d 615, 617 (Tex.
1997). Even when a motion for extension is implied under Verburgt, the appellant
still must proffer a reasonable explanation of the need for an extension. See Jones
v. City of Houston, 976 S.W.2d 676, 677 (Tex. 1998); Miller v. Greenpark Surgery
Ctr. Assocs., Ltd., 974 S.W.2d 805, 808 (Tex. App.—Houston [14th Dist.] 1998,
no pet.).
Based on the March 5 file stamp, Entrust’s notice of appeal was filed within
15 days of the March 3 deadline so that a motion for extension is implied under
Verburgt. Entrust filed a brief in support of its implied motion for extension of
time in this court supported by an affidavit signed by Entrust’s counsel. According
to this affidavit, counsel deposited the notice of appeal in the United States Mail
with proper postage on March 3 and faxed a copy of the notice to Rice’s counsel
on the same day. The affidavit states: “The certificate of service attached to the
Notice of Appeal erroneously states that the Notice of Appeal was served to
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counsel for Rice Medical Center on March 4, 2014. This was a typographical
error.” This filing suffices as a reasonable explanation of the need for an
extension. See Ryland Enter., Inc., 335 S.W.3d at 665 (“This Court has
consistently treated minor procedural mishaps with leniency, preserving the right
to appeal. . . . We summed up this principle of leniency in Verburgt with the rule
that ‘appellate courts should not dismiss an appeal for a procedural defect
whenever any arguable interpretation of the Rules of Appellate Procedure would
preserve the appeal.’”) (quoting Verburgt, 959 S.W.2d at 616).
The notice of appeal is effective and this court has appellate jurisdiction.
Accordingly, we overrule Rice’s jurisdictional challenge.
II. Legal-Sufficiency Analysis
A. Standard of Review
Entrust argues that the trial court should have granted a directed verdict,
granted its post-trial motion, and signed a take-nothing judgment because there is
no evidence to support the jury’s “Yes” answer to Question No. 1 submitting three
specific types of representations under DTPA section 17.46(b).
A directed verdict is proper when no evidence of probative force raises a fact
issue on a material element of the plaintiff’s claim, or when the evidence
conclusively establishes a defense to the plaintiff’s cause of action. Prudential Ins.
Co. of Am. v. Fin. Review Servs., Inc., 29 S.W.3d 74, 77 (Tex. 2000). A trial court
may disregard a jury verdict and render judgment notwithstanding the verdict when
no evidence supports the jury finding on an issue necessary to liability, or when a
directed verdict would have been proper. Tiller v. McLure, 121 S.W.3d 709, 713
(Tex. 2003); see Tex. R. Civ. P. 301.
“No evidence” or legal-insufficiency challenges may be sustained only when
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the record discloses one of the following situations: (a) a complete absence of
evidence of a vital fact; (b) the court is barred by rules of law or of evidence from
giving weight to the only evidence offered to prove a vital fact; (c) the evidence
offered to prove a vital fact is no more than a mere scintilla; or (d) the evidence
establishes conclusively the opposite of the vital fact. City of Keller v. Wilson, 168
S.W.3d 802, 810 (Tex. 2005) (citing Robert W. Calvert, “No Evidence” and
“Insufficient Evidence” Points of Error, 38 Tex. L. Rev. 361, 362-63 (1960)).
We must consider evidence in the light most favorable to the verdict and
indulge every reasonable inference that would support it. Id. at 822. If the
evidence allows only one inference, neither jurors nor the reviewing court may
disregard that evidence. Id. If the evidence at trial would enable reasonable and
fair-minded people to differ in their conclusions, then jurors must be allowed to do
so. Id. The reviewing court cannot substitute its judgment for that of the trier of
fact if the evidence falls within this zone of reasonable disagreement. Id.
B. Application of Standard of Review
Rice initially asserted claims under several DTPA provisions. By the time
the jury was charged, however, the scope of Rice’s DTPA claims had been
narrowed so that Question No. 1 limited the definition of “false, misleading, or
deceptive act or practice” to representations by Entrust that
 “services had or would have characteristics they did not have;”
 “services are or will be of a particular quality if they were of another;”
or
 “an agreement confers or involves rights that it did not have or
involve.”
See Tex. Bus. & Com. Code §§ 17.46(b)(5), (7), (12). Based on Question No. 1 as
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submitted and DTPA section 17.50(a)(1)(B), Rice had to establish detrimental
reliance on at least one of these representations to recover under section 17.46.
See, e.g., Cruz v. Andrews Restoration, Inc., 364 S.W.3d 817, 823 (Tex. 2012).
Entrust argues that the jury’s “Yes” answer to Question No. 1 should be
disregarded because Rice failed to proffer legally sufficient evidence of a
representation by Entrust that was a precise, extra-contractual, false statement of
fact made before Rice’s alleged injury and upon which Rice relied to its detriment.
Rice contends that it presented legally sufficient evidence because Entrust
made numerous representations to Rice before execution of the Entrust-Rice
contract, after execution, while the contract was in full force and effect, and shortly
after the contract was terminated. Rice contends that DTPA sections 17.46(b)(5),
(7), and (12) “apply where there is evidence of a representation outside a contract
that expresses to the customer that an agreement confers or involves rights,
remedies, or obligations which it does not have or involve or which are prohibited
by law.”
Rice argues that Entrust made representations (1) “to the effect that Entrust
would ‘take care of’ and be intimately involved in the role that the stop loss carrier
would play in payment of losses above $35,000;” and (2) on Entrust’s website
holding Entrust out to be an expert in the areas of selection, placement and
operation of the right type of stop-loss coverage for each of its customers.
According to Rice, trial testimony from Rice CEO Hoeth and DTPA expert Roy
Phillips “provided the jury with evidence that the misrepresentations were of
material facts, that they were false and were made prior to the date in November,
2009 when Rice was informed that it had lost its stop loss coverage with Panama
[sic] Insurance Company leaving it responsible—after payment of its self-insured
retention—for a $58,915 medical bill owed to Methodist Hospital.” Rice further
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contends that Phillips and Hoeth “established that Rice relied on those
representations to their [sic] detriment.”
The only assertedly false representations identified at trial pertaining to the
characteristics and quality of Entrust’s services, or to rights conferred by the
Entrust-Rice contract, came from Entrust’s website. During his testimony, Rice’s
expert Phillips read aloud and at length from Entrust’s website.
 “‘Our mission at the Entrust family of companies is to achieve
customer satisfaction with exceptional people to require performance
that inspires, to demand even higher standards of care, to build a
culture where aspirations, dreams, and visions are of free range, and
where quality is the universal language. We are committed to
excellence as consultants and administrators and the benefits in risk
management business. We pledge to stay at the forefront of a
constantly changing industry, these trends in order to provide the most
flexible, cost effective solutions.’”
 “The web site [sic] holds Entrust out as a premier and employee
benefit management group, and here’s their statement from their own
web site [sic]. ‘Your benefits are our business. Located in Houston,
Texas, with a full service office in Corpus, the Entrust family of
companies is a premier employee benefit management group, and a
proven plan administrator with the reputation of being one of the most
innovative benefit designers in the business. The Company enjoys a
rich history, and [is] well respected by its clients and competitors
alike. Entrust has the experience system and resources to develop
solutions for business challenges.’”
 “And then there’s another statement on the web site [sic]. ‘Let us help
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you. Our administration of your benefit plans frees you from
paperwork so you can focus on your business. From plan enrollment,
to claims processing, employee communication to billing and
reporting, Entrust can provide all of the services you need.’”
 “Paragraph; ‘Our systems and highly professional staff are capable of
administering even the most challenging programs, such as COBRA,
and your compliance with the new health care and reform regulations.
We can customize our level of service to your needs.’”
 “And then they went on to talk about stop-gap coverage. ‘Stop-loss
negotiations. Entrust partners with several preferred stop-loss carriers
that understand how the Entrust sweep [sic] of signature products will
positively affect the financial performance of the plan. By providing
competitive rates and plan design considerations, Entrust is able to
supplement claims, control costs with the added protection of stop-
loss coverage in the event that catastrophic care is necessary for a
member. When developing customized solutions for our client,
Entrust will leverage our preferred relationships to obtain the most
competitive rates available based on our experience. Our in-house
underwriting experts model spending and plan design to best suit the
needs and cost planning strategy for our client.’”
In a follow up question, Phillips was asked: “[W]hat representation did Entrust
make in its web site [sic] that it would take care of?” Phillips responded: “Well, I
read them to the Jury and the Judge, and I think it’s pretty clear that they said that
they were the best and the brightest and that they would do a good job for you as
long as you pay them.”
According to Rice’s appellate brief, Phillips “established that Rice relied on
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those representations” appearing on Entrust’s website. Rice cites globally to the
entirety of Phillips’s 95-page direct and cross-examination at trial to support this
assertion. A review of the cited testimony reveals no discussion by Phillips of
Rice’s reliance on statements on the Entrust website.
Former Rice CEO Hoeth also testified. He was asked, “What, in your
opinion, is the real issue, what is the guts of this lawsuit against Entrust about?”
Hoeth answered: “Well, as far as I’m concerned, the main issue here is the fact
that one claim didn’t get processed, and because of the transition, we were left
without coverage there. So we were kind of twisting in the wind with that
particular claim.” A further question asked, “In general, what were you really
relying on Entrust to do to take care of you and this self-insured program?” Hoeth
said: “Well, basically we contracted with them to administer the program. We
aren’t insurance specialists, as you know insurance is a very complex business and
so that’s what we paid them to the tune of $20,000 a month for.” Counsel later
asked Hoeth: “Have you ever looked at . . . Entrust’s web site?” Hoeth answered:
“Na, not really. I think I might have glanced at it, just cursorily. I didn’t really
look at it in detail.”
Even if it is assumed solely for argument’s sake that all or some of the
website content quoted by Phillips is actionable under DTPA sections 17.46(b)(5),
(7), and (12), this record contains no evidence of Rice’s detrimental reliance upon
the asserted website representations as required under the jury charge and section
17.50(a)(1)(B). See Garza v. Garza, No. 04-11-00310-CV, 2013 WL 749727, at
*7 (Tex. App.—San Antonio Feb. 27, 2013, no pet.) (mem. op.); Baysystems N.
Am. LLC v. Rosebud-Lott Indep. Sch. Dist., No. 10-08-00260-CV, 2011 WL
6989898, at *4 (Tex. App.—Waco Dec. 21, 2011, pet. denied) (mem. op.).
Rice highlights other portions of the record in an effort to demonstrate
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evidence supporting the jury’s “yes” answer to Question No. 1.
Phillips faulted Entrust for failing to alert Rice during contract renewal
discussions – or at any other time before November 2009 – about the Methodist
bill, which exceeded Rice’s $35,000 threshold for seeking payment from the stop-
loss insurer. He also faulted Entrust for not following up with Methodist more
quickly and aggressively between May and November 2009 to obtain the
additional information necessary to complete a proof of claim that would allow the
bill to be processed for payment. According to Hoeth, Rice had been unaware of
this bill and already had allowed its stop-loss insurance to terminate by the time
Entrust forwarded the bill to Rice for payment in November 2009.
Additionally, Rice points to testimony from Hoeth and Brian Davidson,
Entrust’s former vice president of sales. This testimony focused on discussions
between Hoeth and Davidson that occurred after Rice had terminated the Entrust-
Rice contract and its stop-loss insurance, and after the Methodist bill had come to
light. Hoeth testified that Davidson was “gloating over our misfortune” and
hoping to use it as “leverage for saving” the Entrust-Rice contract by encouraging
Rice to “reconsider our coverage.” During his testimony, Davidson was asked:
“Did you do a little arm twisting and say to them, ‘[H]ey, you’ve got a problem
here, sorry, but if you change your mind, I probably can fix it.’ Did you ever say
anything like that to them?” Davidson answered: “I may have in order to keep the
business with us.” Another question asked: “And you don’t think it would be a
sharp business practice to say to Rice, ‘[S]tay with me, and I can go to that stop-
loss carrier and make this all well?” Davidson answered: First of all, I could never
make a promise like that. Second of all, I very well may have. I wanted to keep
Rice’s business.”
Finally, Rice points to a letter dated December 15, 2009, from Entrust’s
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general counsel to Hoeth in which Entrust acknowledged receipt of Rice’s
November 25 letter terminating the Entrust-Rice contract. According to Rice,
Entrust improperly used this “demand letter” to punish Rice for terminating the
Entrust-Rice contract by making “threats of termination fees, penalties, and
interest.” Rice characterizes the letter as “part of the global scheme that Entrust
put together to pressure Rice to keep its business at Entrust.” Rice also argues,
“An examination of the letter reflects the inconsistency between what is being said
in the letter and what the contract provides for if and when a customer makes a
decision to terminate its relationship with Entrust.”
Phillips described the totality of Entrust’s “business behavior” in his
testimony as “totally unfair,” “unethical,” “illegal,” and a “violation of the Texas
Insurance Code . . . [and] the Texas Business and Commerce Code . . . .”
Insofar as this evidence addresses post-loss representations by Davidson and
Entrust relating to coverage, it neither supports the jury’s “yes” answer to Question
No. 1 nor establishes reliance. See Royal Globe Ins. Co. v. Bar Consultants, 577
S.W.2d 688, 694-95 (Tex. 1979) (representations made after loss occurred did not
constitute a deceptive trade act or practice; “there is no evidence that [the insured] .
. . took any action based on the post-loss representation to its injury or damage”).
Additionally, even if this evidence arguably demonstrates sharp practices germane
to the charge questions on unconscionability, fraud, or breach of contract, the jury
answered “no” to those questions and these unchallenged “no” answers provide no
alternative basis for the judgment in Rice’s favor awarding damages against
Entrust. The only basis for an award of damages was the jury’s “yes” answer to
Question No. 1, which was confined to representations regarding the
characteristics and quality of Entrust’s services and the rights conferred under the
Entrust-Rice contract. The non-website evidence highlighted by Rice does not
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pertain to such representations and is legally insufficient to support the jury’s “yes”
answer to Question No. 1.
We sustain Entrust’s first issue because no evidence supports the jury’s
“yes” answer to Question No. 1. Reversal of the judgment on this basis also
requires reversal as to the damage award in response to Question No. 6 and the
attorney’s fee award in response to Question No. 8, both of which were predicated
on a “yes” answer to Question No. 1.
CONCLUSION
We reverse the trial court’s judgment and render judgment that Rice District
Community Hospital d/b/a Rice Medical Center take nothing on its claims against
Entrust, Inc.
/s/ William J. Boyce
Justice
Panel consists of Chief Justice Frost and Justices Boyce and McCally.
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