Reversed and Remanded and Majority and Dissenting Opinions filed July 26, 2005

Reversed and Remanded and Majority and Dissenting Opinions filed July 26, 2005.

In The

Fourteenth Court of Appeals

____________

NO. 14-03-01442-CV

____________

AFUAH BOATENG, JOHNELL SANDERS FERNANDEZ,

SHARON LONG GAY, JOEL S. HOCHMAN, ROSALIND HULL,

GLORIA ANN TUCKER, and MISSY L. WALKER, Appellants

V.

TRAILBLAZER HEALTH ENTERPRISES, L.L.C. and

UNITED STATES OF AMERICA, Appellees

___________________________________________________________

On Appeal from the 280th District Court

Harris County, Texas

Trial Court Cause No. 03-49088

___________________________________________________________

D I S S E N T I N G   O P I N I O N

The majority reverses the judgment of the court below on the theory that the court did not give Areasonable notice@ to appellants of its intention to dismiss the cause of action for want of subject matter jurisdiction at a preliminary hearing. Because I believe the trial court (1) lacked subject matter jurisdiction, (2) had the authority to sua sponte raise and decide the issue of its subject matter jurisdiction, and (3) afforded Areasonable notice@ to the parties that its subject matter jurisdiction was at the heart of the issue to be decided at the preliminary hearing, I respectfully dissent.

Appellants obtained a default judgment on a writ of garnishment against TrailBlazer Health Enterprises, LLC. TrailBlazer is a wholly‑owned subsidiary of Blue Cross Blue Shield created solely for the purpose of processing Medicare claims on behalf of the federal government.  Because any recovery would come from the federal treasury, the United States is the real party in interest when a suit is brought against a Medicare carrier.  Anderson v. Occidental Life Ins. Co. of Cal., 727 F.2d 855, 856 (9th Cir. 1984); see also Dugan v. Rank, 372 U.S.609, 620 (1963) (holding a suit is considered to be against the sovereign if the judgment sought would expend itself on the public treasury or domain); Matranga v. Travelers Ins. Co., 563 F.2d 677 (5th Cir. 1977) (per curiam).

Sovereign immunity, however, is a jurisdictional bar to suits brought against the United States.  Federal Deposit Ins. Corp. v. Meyer, 510 U.S. 471, 475 (1994); United States v. Mitchell, 463 U.S. 206, 212 (1983).^[1]  The doctrine protects the United States from being sued unless Congress has expressly waived the government=s immunity.  Kaffenberger v. United States, 314 F.3d 944, 950 (8th Cir. 2003). Therefore, any waiver of the federal government=s sovereign immunity cannot be implied, but must be unequivocally expressed in statutory text.  Lane v. Pena, 518 U.S. 187, 192 (1996).  Such is the case even if the United States is not named as a party in the original action. Bank One, Tex., N.A. v. Taylor, 970 F.2d 16, 33 (5th Cir. 1992).  Accordingly, federal sovereign immunity is not waived simply by an appearance in a forum because officers of the United States possess no power through their actions to waive immunity of the United States or to confer jurisdiction on a court in the absence of some express provision of Congress.  Department of Army v. Federal Labor Relations Auth., 56 F.3d 273, 275 (D.C. Cir. 1995).  Even when Congress has expressly waived sovereign immunity, such waiver must be strictly construed, in terms of its scope, in favor of the sovereign.  Lane, 518 U.S. at 192.

Appellants contend, however, that the trial court violated fundamental principles of procedural due process and Texas Rule of Civil Procedure 245 when it rendered a final judgment at what was supposed to be a preliminary evidentiary hearing.  Rule 245 provides that a court may schedule a trial in contested cases with reasonable notice of not less than forty-five days unless the parties agree.  Tex. R. Civ. P. 245.  Thus, appellants claim the trial court erred when it entered a final judgment of dismissal with prejudice for want of jurisdiction without providing reasonable notice that the case would be tried Aon the merits.@^[2]

The record reflects the order of dismissal was entered after a preliminary hearing regarding the propriety of appellees= bill of review.^[3]  The purpose of the hearing was to determine whether the United States could show Asufficient cause@ that it had (1) a meritorious defense to the cause of action alleged to support the judgment, (2) which it was prevented from making by the fraud, accident or wrongful act of the opposite party, (3) unmixed with any fault or negligence of its own.  Baker v. Goldsmith, 582 S.W.2d 404, 406B07 (Tex. 1979).  The Ameritorious defense@ at issue was whether sovereign immunity denied the trial court of any subject matter jurisdiction.  Thus, subject matter jurisdiction was at the heart of the issue to be decided at the hearing.

While the trial court could have been clearer in announcing its intentions, the court stated it was considering whether its original order was Aabsolutely void,@ i.e., rendered without the benefit of subject matter jurisdiction.  It should have come as no surprise to appellants that if the trial court discovered it lacked subject matter jurisdiction, the only order it could then issue would be to dismiss the case.  See Duncan v. Texas Dept. of Pub. Safety, 6 S.W.3d 756, 758 (Tex. App.CTyler 1999, no pet.).

Undoubtedly, a fundamental requirement of due process is an opportunity to be heard upon such notice and proceedings as are adequate to safeguard the right for which the constitutional protection is invoked.  Anderson Nat=l Bank v. Luckett, 321 U.S. 233, 246 (1944).  But this does not mean that every order entered without notice and a preliminary adversary hearing offends due process.  Link v. Wabash R.R. Co., 370 U.S. 626, 632 (1962).  While a party is entitled to notice and an opportunity to respond when a court contemplates dismissing a claim on the merits, it is not so when the dismissal is for lack of subject matter jurisdiction.  Scholastic Entm=t, Inc. v. Fox Entm=t Group, Inc., 336 F.3d 982, 985 (9th Cir. 2003).

Once a trial court learns that it lacks jurisdiction, it becomes the duty of the court to dismiss the cause, and when a suit is barred by sovereign immunity the cause should ordinarily be dismissed with prejudice.  See Martin v. Texas Bd. of Criminal Justice, 60 S.W.3d 226, 231 (Tex. App.CCorpus Christi 2001, no pet.) (holding when a lawsuit is barred by sovereign immunity, dismissal with prejudice is proper); City of Cleburne v. Trussell, 10 S.W.3d 407, 409 (Tex. App.CWaco 2000, no pet.) (same); City of Houston v. Rushing, 7 S.W.3d 909, 914 (Tex. App.CHouston [1st Dist.] 1999, pet. denied) (same); University of Tex. Med. Branch at Galveston v. Hohman, 6 S.W.3d 767, 771 (Tex. App.CHouston [1st Dist.] 1999, pet. dism=d w.o.j.) (same); Lamar Univ. v. Doe, 971 S.W.2d 191, 196 (Tex. App.CBeaumont 1998, no pet.) (same); Liberty Mut. Ins. Co. v. Sharp, 874 S.W.2d 736, 739 (Tex. App.CAustin 1994, writ denied) (same).^[4]

The United States is not subject to Texas statutes, executive orders, or judicial decisions.  Absent a Congressional waiver of sovereign immunity, Texas courts do not have even potential jurisdiction.  Here, the appellants have not cited, and we have not found, any waiver of sovereign immunity by Congress that would authorize a Texas court to garnish Medicare funds.  When, as here, a Texas court has no potential jurisdiction over a defendant, the defendant may collaterally attack the court=s judgment with extrinsic evidence.  Ponsart v. Citicorp Vendor Fin., Inc., 89 S.W.3d 285, 290 (Tex. App.CTexarkana 2002, no pet.) (citing Dispensa v. Univ. State Bank, 987 S.W.2d 923, 930 (Tex. App.CHouston [14th Dist.] 1999, no pet.)); 5 Roy W. McDonald & Elaine A. Carlson, Texas Civil Practice ' 29:27 (2004).^[5]  Likewise, when, as here, there has been no waiver of sovereign immunity, the trial court lacks subject matter jurisdiction, and dismissal with prejudice is proper.  Sepulveda v. County of El Paso, No. 08-03-00514-CV, 2005 WL 850416, at *2 (Tex. App.CEl Paso Apr. 12, 2005, no pet. h.).

Perceiving no error in the trial court=s dismissal, I respectfully dissent.

/s/        J. Harvey Hudson

Justice

Judgment rendered and Majority and Dissenting Opinions filed July 26, 2005.

Panel consists of Justices Anderson, Hudson, and Frost. (Frost, J., majority).

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^[1]  The doctrine of sovereign immunity has been extended to garnishment proceedings brought against the United States where there has been no consent to be sued. Federal Hous. Admin. v. Burr, 309 U.S. 242, 244 (1940); Buchanan v. Alexander, 45 U.S. (4 How.) 20, 20B21 (1846); see also Veterans Admin. v. Kee, 706 S.W.2d 101 (Tex. 1986) (AAs a general rule, government entities are immune from garnishment.@).  Sovereign immunity from garnishment proceedings also applies to federal funds disbursed by non‑governmental entities to the extent that those funds have not been spent for their federally authorized purpose. Palmiter v. Action, Inc., 733 F.2d 1244, 1247B48 (7th Cir. 1984).

^[2]  A dismissal with prejudice functions as a final disposition on the merits.  Mossler v. Shields, 818 S.W.2d 752, 754 (Tex. 1991). 

^[3]  A bill of review is an equitable, independent action to set aside a judgment that is not void on the face of the record, but is no longer appealable or subject to challenge by a motion for new trial.  King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 751 (Tex. 2003), cert. denied, 541 U.S. 1030 (2004); Wembly Inv. Co. v. Herrera, 11 S.W.3d 924, 926B27 (Tex. 1999).

^[4]  Some exceptions exist, however.  For example, in Mullins v. Estelle High Sec. Unit , a prison inmate sued the Institutional Division of the Texas Department of Criminal Justice for injuries allegedly sustained when prison officials denied him needed medical supplies.  111 S.W.3d 268, 270 (Tex. App.CTexarkana 2003, no pet.).  While the court found the suit did not fall within the parameters of the Texas Tort Claims Act and, thus, was barred by sovereign immunity, it was reluctant to hold that the inmate had Ano other possible cause of action against [TDCJ] arising out of the same facts.@  Id. at 274.  Accordingly, the court held the trial court erred in dismissing the suit with prejudice.

Likewise, in Li v. University of Tex. Health Sci. Ctr., 984 S.W.2d 647 (Tex. App.CHouston [14th Dist.] 1998, pet. denied), the plaintiff=s breach of contract suit was barred by sovereign immunity, and the trial court dismissed with prejudice.  However, the legislature subsequently granted the plaintiff express permission to sue the state on her breach of contract claim by a resolution that passed both legislative bodies and was signed by the governor.  Id. at 653.  Thus, this court modified the trial court=s judgment by deleting from it the words Awith prejudice@ and substituting therefor the words Awithout prejudice.@  Id. at 654.

Thus, if there is no possibility that any Texas court will acquire jurisdiction or that appellants will ever prevail in a Texas court, the proper remedy is to dismiss with prejudice.  See Dahl ex rel. Dahl v. State, 92 S.W.3d 856, 862 (Tex. App.CHouston [14th Dist.] 2002, no pet.).

^[5]  For example, Apublic policy concerns allow inquiry into the larger record when the judgment is entered against a foreign defendant,@ and, therefore, the court is not bound by the recitations in the judgment in a collateral attack, but may consider the entire record to determine the existence of jurisdiction.  Pellow v. Cade, 990 S.W.2d 307, 312 (Tex. App.CTexarkana 1999, no pet.) (citing Hicks v. Sias, 102 S.W.2d 460, 464 (Tex. Civ. App.CBeaumont 1937, writ ref=d)).  Also, a Texas court that is asked to enforce the judgment of a court of another state may collaterally inquire into matters concerning the jurisdiction of the other state=s court when the party attacking the judgment did not appear in the prior proceeding.  Kellogg v. Kellogg, 559 S.W.2d 126, 128 (Tex. Civ. App.CTexarkana 1977, no writ); Layton v. Layton, 538 S.W.2d 642, 647 (Tex. Civ. App.CSan Antonio 1976, writ ref=d n.r.e.).