Galveston Independent School District v. Clear Lake Rehabilitation Hospital, LLC

Reversed and Remanded in Part and

Reversed and Rendered in Part and Opinion filed September 21, 2010.

In The

Fourteenth Court of

Appeals

NO. 14-09-00950-CV

GALVESTON INDEPENDENT SCHOOL DISTRICT, Appellant

V.

CLEAR LAKE REHABILITATION

HOSPITAL, L.L.C. , Appellee

On Appeal from the 55th District

Court

Harris County, Texas

Trial Court Cause No. 2008-14504

OPINION

Clear

Lake Rehabilitation Hospital, L.L.C. (“Clear Lake”) filed suit against

Galveston Independent School District (“GISD”), alleging breach of contract and

violation of the federal Public Health Service Act (“PHSA”). GISD filed a plea

to the trial court’s subject-matter jurisdiction over these claims, which was

denied.

In four

issues, GISD contends the trial court erred (1) to the extent it determined

GISD’s act of providing medical coverage was a proprietary, instead of a

governmental, function, (2) by implicitly finding a waiver of governmental

immunity relative to Clear Lake’s breach-of-contract claim under Chapter 271 of

the Local Government Code, (3) by implicitly finding GISD waived its governmental

immunity by conduct, and (4) by failing to dismiss Clear Lake’s claim under the

PHSA.

We

reverse that portion of the trial court’s order denying GISD’s plea relative to

Clear Lake’s breach-of-contract claim and remand for further proceedings consistent

with this opinion. We also reverse that portion of the trial court’s order

denying the jurisdictional challenge to Clear Lake’s PHSA claim and render

judgment dismissing that claim for want of jurisdiction.

I. Background

In

October 2006, Carlos Urroz, an employee with GISD, was placed on sick-leave

pursuant to the Family and Medical Leave Act. On January 24, 2007, GISD sent

Urroz a letter notifying him of the requirement to pay premiums “in order to

keep coverage current.” GISD sent a second letter on February 6, warning Urroz

that his medical benefits would cease unless his premiums were received. The

same day, GISD instructed its third-party administrator, Houston TPA, Ltd.

d/b/a/ Trisurant (“Trisurant”), “to pend claims effective 2/1/07 until premium

is received.”

On

February 8 and 9, Clear Lake contacted Trisurant to verify Urroz’s coverage.

Trisurant verified Urroz’s coverage without advising that GISD had instructed

it to pend Urroz’s claims. Thereafter, Urroz was admitted to Clear Lake and

received treatment for six weeks.

On

February 22, GISD sent Urroz another warning letter. On March 13, GISD

informed Urroz that his medical coverage had been cancelled, effective February

1, and that he must contact GISD “by April 2, 2007, in order to enroll in

COBRA[.]” When Clear Lake did not receive payment for Urroz’s medical

treatment, it demanded payment from GISD. GISD rejected Clear Lake’s demand,

explaining that it had complied with COBRA requirements. Clear Lake alleges

that GISD considered Urroz an active employee until April 13, 2007.

Clear

Lake filed suit against GISD, Trisurant, and Urroz, alleging a variety of tort

claims. GISD filed a plea to the jurisdiction asserting governmental

immunity. Clear Lake amended its petition to allege only claims for breach of contract

and violations of the PHSA against GISD. Thereafter, GISD supplemented its

plea, and Clear Lake filed a response. The trial court denied GISD’s plea, and

GISD timely filed this interlocutory appeal.

II. Interlocutory Appeal and Standard of Review

We have

statutorily-conferred authority to review the trial court’s interlocutory order

denying GISD’s plea to the jurisdiction. See Tex. Civ. Prac. & Rem.

Code Ann. § 51.014 (a)(8) (West 2008) (providing that a party may appeal an

interlocutory order that “grants or denies a plea to the jurisdiction by a

governmental unit . . . .”). An appellate court must consider challenges to

the trial court’s subject-matter jurisdiction on interlocutory appeal,

regardless of whether such challenges were presented to or determined by the

trial court. Tex. Dep’t of Transp. v. Olivares , 316 S.W.3d 89, 95

(Tex. App.—Houston [14th Dist.] 2010, no pet.) (citing Waco Indep. Sch.

Dist. v. Gibson , 22 S.W.3d 849 , 850–51 (Tex. 2000)).

We

review de novo the trial court’s ruling on a plea to the jurisdiction. Tex.

Dep’t of Parks & Wildlife v. Miranda , 133 S.W.3d 217, 228 (Tex. 2004).

In a plea to the jurisdiction, a party may challenge either the pleadings or

existence of jurisdictional facts. Id. at 226–27;

see also Rebecca Simmons & Suzette Kinder Patton, Plea to the

Jurisdiction: Defining the Undefined , 40 St. Mary’s L.J. 627, 651–52

(2009).

When a

defendant challenges the plaintiff’s pleadings, the court’s determination turns

on whether the pleader has alleged facts sufficient to demonstrate subject-matter

jurisdiction. Miranda , 133 S.W.3d at 226 . To make

this determination, courts should glean the pleader’s intent and construe the

pleadings liberally in favor of jurisdiction. Id. If the pleadings do

not contain facts sufficient to affirmatively demonstrate the trial court’s

jurisdiction, but do not affirmatively demonstrate incurable defects in

jurisdiction, the issue is one of pleading sufficiency and plaintiffs should be

afforded an opportunity to amend. Id. at 226–27. If the

pleadings affirmatively negate jurisdiction, a plea may be granted without

allowing plaintiffs an opportunity to amend. Id. at 227 . The

opportunity to amend pleadings that are insufficient to establish, but do not

affirmatively negate, jurisdiction arises after a court determines the

pleadings are insufficient. White v. Robinson , 260 S.W.3d 463 ,

475–76 (Tex. App.—Houston [14th Dist.] 2008, pet. granted) (citing Tex.

A & M Univ. Sys. v. Koseoglu , 233 S.W.3d 835 , 839–40 (Tex. 2007)).

When a

defendant challenges the existence of jurisdictional facts, we consider

relevant evidence submitted by the parties. Miranda , 133 S.W.3d at

227 . We take as true all evidence favorable to the nonmovant and indulge every

reasonable inference and resolve any doubts arising from such evidence in the

nonmovant’s favor. Id. at 228 . If the relevant evidence is undisputed

or a fact question is not raised relative to the jurisdictional issue, the

trial court rules on the plea to the jurisdiction as a matter of law. Id.

If the evidence creates a fact question regarding jurisdiction, the trial court

cannot grant the plea, and the issue will be resolved by the fact finder. Id.

at 227–28.

When

resolution of an issue requires interpretation of a statute, we review under a de novo standard. Mokkala v. Mead , 178 S.W.3d 66,

70 (Tex. App.—Houston [14th Dist.] 2005, pet. denied). In construing a statute, our objective is to

determine and give effect to the legislature’s intent. See Nat’l Liab.

& Fire Ins. Co. v. Allen , 15 S.W.3d 525, 527 (Tex. 2000). If possible,

we must ascertain that intent from the language the legislature selected and

should not refer to extraneous matters for intent not expressed in the statute. Id. If the meaning of the statutory

language is unambiguous, we adopt the interpretation

supported by the plain meaning of the words. St. Luke’s Episcopal Hosp. v.

Agbor , 952 S.W.2d 503, 505 (Tex. 1997).

III. Governmental and Proprietary Functions

We begin

with GISD’s first issue in which it contends the trial court erred to the

extent it determined GISD’s provision of health insurance was not a

governmental function.

Under

our common law, governmental immunity defeats a trial court’s subject-matter

jurisdiction. See Harris County v. Sykes , 136 S.W.3d 635, 638 (Tex.

2004). The proprietary/governmental dichotomy is generally used in determining

a municipality’s governmental immunity from suit for tortious conduct. Tooke

v. City of Mexia , 197 S.W.3d 325, 343 (Tex. 2006). “The

distinction has not been a clear one, but generally speaking, a municipality’s

proprietary functions are those conducted ‘in its private capacity, for the

benefit only of those within its corporate limits, and not as an arm of the

government,’ while its

governmental functions are ‘in the performance of purely governmental matters

solely for the public benefit.’” Id. (footnotes

omitted). “A municipality is not immune from suit

for torts committed in the performance of its proprietary functions, as it is

for torts committed in the performance of its governmental functions.” Id.

Clear

Lake contends that GISD’s provision of health insurance to Urroz was a

proprietary function for which GISD is not immune from a breach-of-contract

claim. Clear Lake cites several cases in which courts held that a

municipality’s provision of insurance to its employees was a proprietary

function. See Gates v. City of Dallas , 704 S.W.2d 737 ,

738–39 (Tex. 1986) (holding that city “acted in its proprietary role” when

it entered into a health-insurance contract with employee); Temple v. City

of Houston , 189 S.W.3d 816, 821 (Tex. App.—Houston [1st Dist.]

2006, no pet.) (“We hold that when a City provides to its employees insurance

benefits that are not required by statute, the City is performing a proprietary

function . . . .”); Bailey v. City of Austin , 972 S.W.2d 180,

193 (Tex. App.—Austin 1998, no pet.) (“[T]he City’s function of offering,

administering, and overseeing health care plans for its own employees are

proprietary functions.”). The rationale underlying these decisions is that a

municipality acts “primarily for the benefit of those within the corporate

limits of the municipality” by providing insurance coverage for its employees.

Gates , 704 S.W.2d at 739 .

GISD

responds that the foregoing cases apply only to municipalities, not school

districts. GISD cites Braun v. Trustees of Victoria Independent School

District , in which the court of appeals explained,

Cities and

towns exercise a dual function, to wit, governmental and proprietary, while a school

district is purely a governmental agency and exercises only such powers as are

delegated to it by the state. It performs no proprietary functions which are

separate and independent of its governmental powers.

114 S.W.2d 947, 950 (Tex.

Civ. App.—San Antonio 1938, writ ref’d). Because application for writ of error

was refused, Braun has the same precedential value as an opinion of the

Texas Supreme Court [1]

and has been relied upon numerous times for the proposition that school

districts engage only in governmental functions. See, e.g. , Fowler

v. Tyler Indep. Sch. Dist. , 232 S.W.3d 335, 339 (Tex. App.—Tyler

2007, pet. denied) (determining that a school district could not act “in a

sufficiently proprietary capacity to shed its . . . immunity at the time of

[an] injury); Dillard v. Austin Indep. Sch. Dist. , 806 S.W.2d 589,

594 (Tex. App.—Austin 1991, writ denied) (“An independent school district

is an agency of the state which carries out only governmental functions, and,

consequently, is entitled to governmental immunity.”), overruled on other

grounds by Fed. Sign v. Tex. S. Univ. , 951 S.W.2d 401 (Tex. 1997), and

superseded by statute on other grounds as stated in Gen. Servs. Comm’n v.

Little-Tex Insulation Co. , 39 S.W.3d 591, 598 (Tex. 2001); Gravely v. Lewisville

Indep. Sch. Dist. , 701 S.W.2d 956, 957 (Tex. App.—Fort Worth

1986, writ ref’d n.r.e.) (“No Texas appellate court, so far as we know, has

ever held that a school district has served in a non-governmental capacity.”).

In Murray v. San Jacinto Agency, Inc. , the El Paso Court of Appeals

addressed a comparable situation in which a school-district employee sued the

school district for denying her coverage under a group healthcare plan. 759

S.W.2d 778 (Tex. App.—El Paso 1988), rev’d on other grounds , 800 S.W.2d

826 (Tex. 1990). Referencing Braun , the court held “that the

establishment of the self funded group medical insurance program by [the school

district] is a governmental function and that governmental immunity applies.” Id.

at 779–80.

Clear Lake

contends these cases are distinguishable because they involve tort claims for

injuries that occurred while school districts were engaged in the governmental

function of furthering education, whereas the underlying case arises from a

breach of contract between a school district and hospital. Clear Lake avers

its case is more akin to Teague v. Independent School District , where

the court held that a school district was estopped from denying liability to an

attorney who provided legal services to the school district. 233 S.W.2d 176,

180 (Tex. Civ. App.—Waco 1950, writ ref’d n.r.e.). We do not find the

breach-of-contract versus tort claim distinction pivotal because governmental

entities regularly execute contracts for governmental purposes. Furthermore,

as discussed in more detail in the following section, our legislature allows

certain breach-of-contract claims against public school districts. See

Tex. Loc. Gov’t Code Ann. §§ 271.151–.160 (West 2005 & Supp. 2009).

Clear

Lake also argues several courts have implied that school districts may engage

in both governmental and proprietary functions. In Barr v. Bernhard ,

the supreme court explained, “The law is well settled in this state that an

independent school district is an agency of the state and, while exercising

governmental functions , is not answerable for its negligence in a suit

sounding in tort.” 562 S.W.2d 844, 846 (Tex. 1978) (emphasis added); see

also, e.g. , Bell v. Love , 923 S.W.2d 229, 231 (Tex.

App.—Houston [14th Dist.] 1996, no writ). Notably, the Braun opinion

includes the same language: “There can be no question but that an independent

school district is an agency of the state, and, while exercising

governmental functions , is not answerable for its negligence in a suit

sounding in tort.” 114 S.W.2d at 949 (emphasis added). Clear Lake argues that

courts would not have included the qualifying language “while exercising

governmental functions” unless school districts had the capacity to engage in non-governmental

functions. The same argument was presented to the First Court of Appeals. See

McManus v. Anahuac Indep. Sch. Dist. , 667 S.W.2d 275, 278 (Tex.

App.—Houston [1st Dist.] 1984, no writ). Our sister court described the argument

as “well reasoned” but resolved the issue on other grounds. Id.

Like the

court in McManus , we need not address the precedential effect of the Braun

opinion. Presuming that school districts can participate in

non-governmental functions, we conclude that providing health insurance to

employees is a governmental function of a school district. Under the Texas

Education Code, school districts are required to offer medical coverage

to all employees, whether by self-insuring or some other means. See Tex.

Educ. Code Ann. §§ 22.004 (a)–(b) (West Supp. 2009). A city engages in

governmental functions when it “‘performs functions mandated by the state.’” See

Temple , 189 S.W.3d at 820 ( quoting Truong v. City of Houston , 99

S.W.3d 204, 210 (Tex. App.—Houston [1st Dist.] 2002)). This rule should

likewise apply to school districts. Furthermore, that GISD had a choice

regarding how it provided coverage does not mean its exercise of that choice

was a non-governmental function. See Wallace v. City of Midland , 836

S.W.2d 641, 643 (Tex. App.—El Paso 1992, writ denied) (“The furnishing of

workers’ compensation coverage by one means or another by a municipality to its

employees is mandated by law and as such, the means by which the municipality

complies remains a governmental function.”). Finally, we note that provision

of group healthcare furthers the state’s educational goals because school

districts are able to attract more-qualified employees. Cf. Braun , 114

S.W.2d at 950 (concluding that beautifying school grounds furthers education).

Accordingly, we hold that GISD did not exercise a proprietary function by

providing health insurance to Urroz. GISD’s first issue is sustained.

IV. Section 271.152 of the Local Government Code

In its second

issue, GISD contends the trial court erred by concluding that GISD is not immune

from suit relative to Clear Lake’s breach-of-contract claim. Clear Lake contends

that GISD’s immunity from suit has been waived pursuant to subchapter I,

chapter 271 of the Local Government Code.

Under

subchapter I, “A local governmental entity that is authorized by statute or the

constitution to enter into a contract and that enters into a contract subject

to this subchapter waives sovereign immunity to suit for the purpose of

adjudicating a claim for breach of the contract . . . .” Tex. Loc. Gov’t Code

Ann. § 271.152 (West 2005). “‘Contract subject to this subchapter’ means a

written contract stating the essential terms of the agreement for providing

goods or services to the local governmental entity that is properly executed on

behalf of the local governmental entity.” Id. § 271.151(2). “Local

governmental entity” under subchapter I includes public school districts such

as GISD. Id. § 271.151(3)(B).

GISD argues

that “Clear Lake has not identified, and cannot identify, any written contract

between it and GISD wherein Clear Lake was obligated to provide goods or

services to [GISD]. Since no such contract exists, Chapter 271 . . . does not

apply and Clear Lake’s claims must be dismissed . . . .” Furthermore, GISD

argues that even if a written contract between GISD and Urroz existed, Clear

Lake cannot establish “it was an intended third-party beneficiary to such a

contract.”

As an

initial matter, we note the parties assume section 271.152 permits a

third-party beneficiary to sue a local governmental entity for breach of

contract. A third party has standing to enforce a contract when contracting

parties explicitly intend to benefit the third party. S. Tex. Water Auth. v. Lomas , 223 S.W.3d 304, 306 (Tex.

2007) (per curiam). Under section 271.152, governmental immunity is waived

relative to claims for breach of contract subject to subchapter I. See Tex.

Loc. Gov’t Code Ann. § 271.152 (“A local government entity that is authorized

by statute or the constitution to enter into a contract and that enters into a

contract subject to this subchapter waives sovereign immunity to the suit for the

purpose of adjudicating a claim for breach of the contract , subject to the

terms and conditions of this subchapter.”). Accordingly, when a governmental

entity and a contracting party enter into a contract subject to subchapter I

and denominate a third-party beneficiary of that contract, the third-party

beneficiary’s claim for breach of contract falls within the waiver of immunity

authorized under section 271.152. See Ben Bolt-Palito Blanco Consol.

Indep. Sch. Dist. v. Tex. Political Subdivisions Prop./Cas. Joint Self-Ins.

Fund , 212 S.W.3d 320, 327 (Tex. 2006) (“[B]y enacting section 271.152, the

Legislature intended to loosen the immunity bar so ‘that all local government

entities that have been given or are given the statutory authority to enter

into contracts shall not be immune from suits arising from those contracts.’” (quoting

House Comm. on Civil Practices, Bill Analysis, Tex. H.B. 2039, 79th Leg., R.S.

(2005))); First-Citizens Bank & Trust Co. v. Greater Austin Area

Telecomm. Network , --- S.W.3d ---, Nos. 03-09-00461-CV, 03-09-00462-CV,

2010 WL 3059304 , at *5–6 (Tex. App.—Austin Aug. 6, 2010, no pet. h.) (explaining

that “section 271.152’s waiver is not limited only to suits brought by

signatory parties . . . [but applies to] a class of suits —suits for the

purpose of adjudicating a claim for breach of a contract subject to subchapter

I—without restricting which parties can bring the suit.”).

In its

live pleadings, Clear Lake alleges Urroz “was covered by GISD’s health

insurance plan,” which entitled him “to coverage while he was an active

employee.” Clear Lake further alleges that Urroz was employed by GISD until

April 13, 2007. Clear Lake argues that GISD’s health-insurance contract with

Urroz was a written contract “providing goods or services to the local

governmental entity” because Urroz received coverage in exchange for the

services he provided GISD as an active employee. Interpreting the pleadings

liberally in favor of jurisdiction, we agree with Clear Lake’s argument. Thus,

Clear Lake has sufficiently alleged that GISD and Urroz were parties to a

written contract in which they agreed to exchange services (medical coverage

for employment services) while Urroz was an active employee.

However,

Clear Lake’s allegation, “Pursuant to Clear Lake’s financial agreement with

[Urroz], and by operation of law, Clear Lake is a third party beneficiary of

[Urroz’s] insurance contract with GISD,” does not sufficiently demonstrate that

Clear Lake is a third-party beneficiary of the alleged contract between Urroz

and GISD. There is a general presumption against third-party beneficiaries to

a contract, and the facts alleged do not support the contention that GISD and

Urroz intended to confer a direct benefit on Clear Lake. See Lomas , 223

S.W.3d at 306 ; MCI Telecomms. Corp. v. Tex. Utils. Elec. Co ., 995 S.W.2d

647, 652 (Tex. 1999) (expressing that absent clear indication in written

contract that parties intended to confer direct benefit to third party, third

party cannot maintain breach-of-contract action); see also H & H

Sand and Gravel, Inc. v. City of Corpus Christi , No. 13-06-00677-CV,

2007 WL 3293628 , at *4 (Tex. App.—Corpus Christi Nov. 8, 2007, pet. denied)

(mem. op.) (“We do not see how H & H Sand’s allegation of unilateral

modification establishes a waiver of governmental immunity under [section

271.152’s] requirement that a contract be ‘properly executed on behalf of the

local governmental entity.’”). Further, Clear Lake’s bare assertion that it is

a third-party beneficiary “by operation of law” does not support such standing. [2]

Accordingly, Clear Lake’s breach-of-contract claim under section 271.152 does

not affirmatively demonstrate a waiver of GISD’s governmental immunity.

Finally, GISD presents two evidentiary arguments. First,

GISD contends dismissal is required because (1) the record does not include the

alleged health-insurance contract between GISD and Urroz and (2) even if a

written contract between GISD and Urroz existed, Clear Lake cannot establish it

was a third-party beneficiary to the contract. See Vantage Sys.

Design, Inc. v. Raymondville Indep. Sch. Dist. , 290 S.W.3d 312, 316 (Tex.

App.—Corpus Christi 2009, pet. filed) (holding that plaintiff failed to prove

waiver of immunity pursuant to section 271.152 because it failed to produce

written contract). However, GISD did not present an evidentiary challenge in

its plea. Therefore, Clear Lake was not required to produce the written

contract or prove that Clear Lake was a third-party beneficiary to the

contract. Moreover, even if GISD presented a “no-evidence” challenge regarding

the existence of the contract and Clear Lake’s third-party beneficiary status,

Clear Lake would not have had a burden to present evidence raising a fact issue

regarding such matters; under Miranda , a governmental entity’s challenge

to jurisdictional facts implicating the merits of the plaintiff’s lawsuit

mirrors traditional summary-judgment practice, not no-evidence summary-judgment

practice. See Miranda , 133 S.W.3d at 228 ; see also Olivares , 316

S.W.3d at 95 .

Second,

GISD argues that even if Clear Lake were a third-party beneficiary of an

insurance contract between GISD and Urroz, Clear Lake has no greater right to

enforce the contract than Urroz, who has no right to enforce the contract

because of his failure to pay the required premiums. Because these issues

involve questions of fact not conclusively answered in the record, we must

disagree. See Miranda , 133 S.W.3d at 227–28. Thus, we reject GISD’s

evidentiary challenges.

Accordingly,

Clear Lake’s pleadings do not affirmatively demonstrate the trial court’s

jurisdiction over its breach-of-contract claim, but do not affirmatively negate

jurisdiction. Therefore, we reverse the trial court’s order denying GISD’s

plea relative to Clear Lake’s breach-of-contract claim and remand for the trial

court to allow Clear Lake a reasonable opportunity to amend its pleadings. See

Miranda , 133 S.W.3d at 226–27; see also Koseoglu , 233 S.W.3d at

839–40.

V. Public Health Service Act

In its

fourth and final issue, GISD contends the trial court erred by concluding that

Clear Lake has standing to assert a claim under subchapter XX of the federal

Public Health Service Act (“PHSA”). See 42 U.S.C.A. §§ 300bb-1–300bb-8 (West 2003 & Supp. 2010).

When the

United States Congress enacted the Consolidated Omnibus Budget Reconciliation

Act of 1985 (“COBRA”), it amended the PHSA by adding subchapter XX. See

Mehmen v. Collin County, Tex. , 558 F. Supp. 2d 711, 714 (E.D.

Tex. 2007). Under subchapter XX, certain governmental entities that maintain group

healthcare plans must provide qualified beneficiaries who would otherwise lose

coverage under the plan due to a qualifying event the right to elect

continuation of their coverage. 42 U.S.C.A. § 300bb-1(a) (West 2003). The

term “qualifying event” includes “[t]he termination . . . of the covered

employee’s employment.” Id. § 300bb-3(2) (West 2003). The employer

“must notify the plan administrator of a qualifying event . . . within 30 days

of the . . . event,” and the plan administrator must notify any qualified

beneficiaries of the event. Id. § 300bb-6(2), (4) (West 2003).

Importantly, “[a]ny individual who is aggrieved by the failure of a

[governmental entity] to comply with the requirements of the subchapter may bring

an action for appropriate equitable relief.” Id. § 300bb-7 (West 2003)

(emphasis added). The term “individual” is not defined in subchapter XX or in

the general definitions section of the PHSA.

GISD

contends Clear Lake lacks independent standing to seek equitable relief under

section 300bb-7 because it is a limited liability corporation and, therefore,

not an “individual.” Clear Lake argues that any natural person or organization

aggrieved by a governmental entity’s failure to comply with subchapter XX may

seek relief pursuant to section 300bb-7. In support of this argument, Clear

Lake cites federal authority in which the term “individual” has been

interpreted to include corporations.

In Clinton

v. City of New York , 524 U.S. 417 (1998), the United States Supreme Court

considered whether the term “individual” in a section of the former Line Item

Veto Act included corporations: “‘Any member of Congress or any individual

adversely affected’ by the Act” may bring an action contesting the

constitutionality of the Act. Id. at 428 (quoting former 2 U.S.C. §

692 (a)(1)). The Court determined “that in the context of the entire section

Congress undoubtedly intended the word ‘individual’ to be construed as

synonymous with the word ‘person,’” a word that includes “corporations.” Id.

at 428–29 & n.13. The Court explained that the purpose of the section was

to authorize “prompt and authoritative judicial determination of the

constitutionality of the Act” and reasoned “[t]here is no plausible reason why

Congress would have intended to provide for such special treatment of actions

filed by natural persons and . . . [not] corporate persons.” Id. at 42 .

Thus, the Court interpreted the term “individual” from its context within the

Line Item Veto Act.

Other opinions

cited by Clear Lake were authored by courts interpreting the term “individual”

as prescribed in the Bankruptcy Code and Torture Victim Protection Act.

Several courts have held that section 362 of the Bankruptcy Code, which

requires redress for “[a]n individual injured by any willful violation of a

stay,” to apply to both natural persons and corporations. See In re Atl.

Bus. & Cmty. Corp. , 901 F.2d 325 , 329 (3d Cir. 1990); Budget

Serv. Co. v. Better Homes of Va. , 804 F.2d 289 , 292 (4th Cir. 1986); In

re Tel-A-Commc’ns Consultants, Inc. , 50 B.R. 250 , 253–54 (Bankr. D. Conn.

1985). The courts derived this interpretation by considering section 362(h) in

light of the whole section, which they concluded clearly applies to all

bankruptcy debtors. See Budget Serv. , 804 F.2d at 292; In re

Tel-A-Commc’ns Consultants , 50 B.R. at 254 . Similarly, courts have held

that the section of the Torture Victim Protection Act establishing a right to

civil action against “[a]n individual who . . . subjects an individual to torture

[or] . . . to extrajudicial killing . . . ,” applies to both natural persons

and corporations that perpetrate such acts. See Romero v. Drummond Co. , 552

F.3d 1303, 1315 (11th Cir. 2008) (“[T]he Torture Act allows suits against

corporate defendants.”); Sinaltrainal v. Coca-Cola Co. , 256 F. Supp. 2d

1345, 1358 (S.D. Fla. 2003) (relying on legislative history to determine

that term “individual” used in Torture Victim Protection Act includes

corporations). [3]

Therefore, Clear Lake’s exposition of caselaw illustrates that federal courts

have construed the term “individual” to include corporations in the context of

other statutes. However, our research reveals no case addressing whether

“individual” as used in section 300bb-7 includes corporate entities, and we

must examine the statute to determine that issue.

Reading

subchapter XX as a whole, it is clear Congress intended to protect government

employees and their beneficiaries from sudden loss of healthcare coverage

following a qualifying event such as a termination. The terms “covered

employees” and “qualified beneficiaries” are used frequently throughout the

subchapter. “Covered employee” is defined as “an individual who is (or

was) provided coverage under a group health plan by virtue of the performance

of services by the individual for 1 or more persons [4]

maintaining the plan[.]” See 42 U.S.C.A. § 300bb-8(2) (emphasis

added). “Qualified beneficiary” is defined in the subchapter as, “with respect

to a covered employee under a group health plan, any other individual

who, on the day before the qualifying event for that employee, is a beneficiary

under the plan--(i) as the spouse of the covered employee, or (ii) as the

dependent child of the employee.” See 42 U.S.C.A. § 300bb-8(3)

(emphasis added). Thus, those whom the subchapter was designed to assist are

defined as “individuals” in a manner applicable only to natural persons. Other

sections of the subchapter refer to “individuals” in a similar sense.

“Individual” in section 300bb-2(3) references disabled qualified

beneficiaries. See 42 U.S.C.A. § 300bb-2(3). There are several

references to the term “TAA-eligible individuals,” which is defined in the

Internal Revenue Code in a manner only appropriate to natural persons. See 42

U.S.C.A. § 300bb-5(b)(4); 26 U.S.C.A. § 35 (a), (c) (West Supp. 2010).

Moreover, the language in section 300bb-6(4) expresses, “[N]otification to an individual

who is a qualified beneficiary as the spouse of the covered employee shall be

treated as notification to all other qualified beneficiaries residing with such

spouse at the time such notification is made.” See 42 U.S.C.A. §

300bb-6(4). Therefore, whenever “individual” appears in subchapter XX, it

refers to a natural person. In this context, we conclude that the term “individual”

as used in section 300bb-7 refers to natural persons and not to corporate

entities.

Clear

Lake further argues, “[I]f GISD’s interpretation was correct, individual

providers, like physicians, could seek recourse under the PHSA’s enforcement

provisions while hospitals could not.” This argument is belied by the language

and purpose of subchapter XX. Had Congress been concerned about hospitals and

doctors providing medical care without payment, it simply could have included

“healthcare providers” in section 300bb-7. Instead, the purpose of section

300bb-7 is to afford those employees and beneficiaries injured by an employer’s

noncompliance with the subchapter a means of seeking equitable relief.

Finally,

Clear Lake appeals to the legislative history of COBRA. However, we do not

consider the legislative history because we conclude the statute is

unambiguous. See Fleming Foods of Texas, Inc. v. Rylander , 6 S.W.3d

278 , 283–84 (Tex. 1999); St. Luke’s Episcopal Hosp. v. Agbor , 952 S.W.2d 503, 505 (Tex. 1997); see

also Exxon Mobil Corp. v. Allapattah Servs., Inc. , 545 U.S. 546 ,

567–69 (2005).

Accordingly,

we hold Clear Lake is not an “individual” under section 300bb-7 and thus, lacks

independent standing to pursue a claim for equitable relief under that

section. Therefore, the trial court erred by denying GISD’s plea relative to

the PHSA claim. We sustain its fourth issue. [5]

Based on

our resolution of the first, second, and fourth issues, we need not address

GISD’s third issue regarding waiver of immunity by conduct.

VII. Conclusion

In sum,

we hold as follows: (1) GISD’s act of providing medical coverage was a governmental

function, (2) Clear Lake’s pleadings in support of its breach-of-contract claim

do not affirmatively demonstrate the trial court’s jurisdiction but do not

affirmatively negate jurisdiction, and (3) Clear Lake lacks independent

standing to bring its claim under the PHSA. Accordingly, we reverse the trial

court’s denial of the jurisdictional challenge to Clear Lake’s

breach-of-contract claim and remand for further proceedings consistent with

this opinion, and we reverse the trial court’s denial of the challenge to Clear

Lake’s PHSA claim which we dismiss without prejudice for want of jurisdiction.

/s/ Charles

W. Seymore

Justice

Panel consists of Justices Anderson,

Frost, and Seymore.

[1]

See Yancy v. United Surgical Partners Int’l, Inc. , 236 S.W.3d

778 , 786 n.6 (Tex. 2007) (explaining “writ refused” denotes that an opinion has the same precedential value as an opinion of the Texas Supreme

Court).

[2]

We have found no support for the proposition that healthcare providers such as

Clear Lake are ipso facto third-party beneficiaries of their patients’

health-insurance contracts with standing to enforce such contracts. See

Hermann Hosp. v. Liberty Life Assur. Co. of Boston , 696 S.W.2d 37, 41 (Tex.

App.—Houston [14th Dist.] 1985, writ ref’d n.r.e.) (holding that mere fact

hospital would be ultimate recipient of health-insurance policy funds does not

make it third-party beneficiary of policy).

[3]

We note, however, that these decisions are not without detractors; several

courts have concluded that the term “individual” in the same statutes does

not include corporations. See, e.g. , In re Chateaugay Corp. , 920

F.2d 183 , 186–87 (2d Cir. 1990) (disagreeing that section 362 of the

Bankruptcy Code provides redress for corporate debtors); In re First RepublicBank

Corp. , 113 B.R. 277 , 278–79 (N.D. Tex. 1989) (same); Mujica v.

Occidental Petroleum Corp. , 381 F. Supp. 2d 1164, 1176 (C.D. Cal.

2005) (disagreeing that the Torture Victim Protection Act authorizes a cause of

action against corporations); see also David Swarthout, When Is an

Individual a Corporation?—When the Court Misinterprets a Statute, That’s When! ,

8 Am. Bankr. Inst. L. Rev. 151 , 152 (2000).

[4]

Congress sensibly chose the term “persons” in section 300b-8 to describe those

that maintain the group health plan which includes corporate employers. See

1 U.S.C.A. § 1 (“[T]he word[] ‘person’ . . . include[s] corporations,

companies, associations, firms, partnerships, societies, and joint stock

companies, as well as individuals[.]”).

[5]

As stated above, under Miranda , unless the pleadings affirmatively

negate jurisdiction, plaintiffs should be afforded an opportunity to amend. See

Miranda , 133 S.W.3d at 227 ; see also Koseoglu , 233 S.W.3d at 840 .

Thus, when the addition of factual allegations could bring the claim asserted

within the trial court’s jurisdiction, we remand for the trial court to allow

the plaintiff a reasonable opportunity to amend its pleadings. See Olivares ,

316 S.W.3d at 95 (affording plaintiff an opportunity to amend when it was

unclear from the facts alleged whether the failure to install certain traffic

devices was the result of the State’s discretion or negligent implementation).

Because we can conceive of no facts that might be alleged to support Clear

Lake’s independent standing to bring a PHSA claim, we dismiss the claim without

affording an opportunity to amend. However, a dismissal due to lack of independent

standing is not a disposition on the merits and, thus, does not prevent Clear

Lake from bringing a PHSA claim on some other theory of standing. See DaimlerChrysler

Corp. v. Inman , 252 S.W.3d 299, 307 (Tex. 2008) (explaining that

dismissal for lack of jurisdiction is not a final judgment on the merits).