CHRISTUS Health D/B/A Uniform Services Family Health Plan v. Quality Infusion Care, Inc.

Opinion issued June 16, 2011

In The

Court of

Appeals

For The

First District

of Texas

————————————

NO. 01-09-00591-CV

———————————

Christus Health d/b/a Uniform Services Family Health Plan , Appellant

V.

Quality

Infusion Care, Inc. , Appellee

On Appeal from the 215th District Court

Harris County, Texas

Trial Court Case No. 2005-65623

O P I N I O N

Christus

Health Services, d/b/a Uniform Services Family Health Plan (Christus) manages a

network of medical and healthcare providers in east Texas and western Louisiana. The health plan is for active and retired

members of the Armed Services, their families, and survivors. Quality Infusion Services (Quality) provided

medical services to several Christus members referred to it by a specialist in Christus’s

network. Quality itself, however, was

not part of the network. Christus paid

some of Quality’s invoices, but denied others on the basis that Quality had not

complied with the terms of the medical plan.

Quality sued Christus to collect the unpaid invoices, claiming that Christus

breached its duty to pay or, alternatively, owed it an equitable recovery on a

quantum meruit theory.

A jury trial culminated in findings

that Christus failed to comply with the medical plan by denying Quality payment,

but that the failure to comply was excused.

The jury also awarded Quality quantum meruit recovery in the amount of

$225,000. The trial court entered

judgment on the jury’s quantum meruit findings.

Christus appeals, seeking reversal on the grounds that: (1) the

existence of an express contract covering the medical treatments at issue precludes

quantum meruit recovery; (2) the evidence does not support findings that Christus

“accepted,” “used,” or “enjoyed” the services and pharmaceutical drugs provided

by Quality required for quantum meruit recovery; and (3) federal law preempts

Quality’s quantum meruit claim. We hold

that the express contract rule bars Quality from a quantum meruit recovery and

reverse.

Background

Christus manages a health benefits

network for military families and survivors covered under TRICARE, a DoD healthcare

program. “TRICARE was established to

operate the Military Health Service, and has evolved into a partnering

structure that is unique to both Government and civilian healthcare sectors.” Axiom

Res. Mgmt., Inc. v. United States , 78 Fed. Cl. 576 , 578 n.3 (2007)

(internal quotation omitted). TRICARE in

the United States is divided into the North, South, and West Regions. Most of Texas comes within the purview of the

South Region contractor, Humana Healthnet. The DoD designates and contracts with health

benefits providers within each region, like Christus, who compete to enroll TRICARE

members. The DoD pays each provider a

fixed rate for each enrolled member per month for their managed healthcare.

Dr. Paul Proffitt, a specialist in

the Christus network, referred several of his patients to Quality for infusion therapy

services. Quality is a pharmacy licensed

to provide infusion therapy services, such as chemotherapy, to individuals in

their homes.

Under the TRICARE operations manual

Quality is classified as a “non-network participating provider.” Unlike a “participating network provider,” which

has contracted with Christus to become part of its healthcare network,

“non-network participating providers” have not contracted with Christus. Christus’s contract with the DoD requires Christus

to bear the cost of treatment by a non-network provider if a network specialist

refers a patient to the provider.

Quality, however, in some instances

provided the medication and services to Dr. Proffit’s patients before it received

authorization to do so from Christus. Christus

later authorized and paid some claims but denied others.

Quality

then sued Christus to recover the amount of unpaid charges it billed to Christus

for the infusion of drugs and related nursing services Quality provided to Christus

members. After hearing the evidence, the

jury affirmatively answered the question, “Did [Christus] fail to comply with

the medical plan by denying payment to [Quality]?” [1] The jury decided, however, that Christus’s

failure to comply with the medical plan was excused because Quality did not comply

with the terms and requirements of the medical plan by failing to obtain proper

authorization before it provided services to the patients.

In

addressing the quantum meruit issue, the jury answered “yes” to the following:

Did [Quality] perform

compensable work for [Christus]?

One party performs compensable work if

valuable services are rendered or materials furnished for another party who

knowingly accepts and uses them if the party accepting them should know that

the performing party expects to be paid for the work.

The jury found that the reasonable value of Quality’s

compensable work was $225,000. The trial

court entered judgment on the verdict, adding prejudgment interest and

attorney’s fees for a total of $339,082.19.

The judgment dismissed Quality’s claims under the Texas “Any Willing

Provider” statute and the Texas Insurance Code, as well as its claim for

negligent misrepresentation, and Quality does not appeal those dismissals.

Christus

timely appealed.

Discussion

I. Standard

of Review

Both the existence of an express

contract and federal preemption are affirmative defenses to Quality’s state law

quantum meruit claim. See Tricon Tool & Supply, Inc. v.

Thumann , 226 S.W.3d 494, 500 (Tex. App.—Houston [1st Dist.] 2006, pet.

denied) (noting that express contract is affirmative defense to quantum meruit

claim); Harrill v. A.J.’s Wrecker Serv.,

Inc. , 27 S.W.3d 191, 194 (Tex. App.—Dallas 2000, pet. dism’d w.o.j.) (observing

that preemption is affirmative defense (citing Kiefer v. Cont’l Airlines, Inc. , 882 S.W.2d 496 , 497–98 (Tex. App.—Houston

[1st Dist.] 1994), aff’d , 920 S.W.2d

274 (Tex. 1996))). A party that asserts

an affirmative defense bears the burden of proving it. Tricon

Tool & Supply , 226 S.W.3d at 501 .

In the absence of specific jury findings on these affirmative defenses,

we consider whether Christus has established each element of its defense

conclusively and whether reasonable minds could not differ as to the truth of

the controlling facts. See Brown v. Zimmerman , 160 S.W.3d 695,

702 (Tex. App.—Dallas 2005, no pet.); Brown

v. Shores , 77 S.W.3d 884 , 885 n.2 (Tex. App.—Houston [14th Dist.] 2002, no

pet.). In reviewing the express contract

issue, we note the jury’s findings that Christus failed to pay for medical

services under the plan but was excused from doing so.

II. Quantum

meruit

Quantum meruit “is founded [on] the

principle of unjust enrichment.” Bashara v. Baptist Mem’l Hosp. Sys. , 685

S.W.2d 307, 310 (Tex. 1985). Unjust

enrichment is an implied-contract theory stating one should make restitution

when it would be unjust to retain benefits received. Walker

v. Cotter Props., Inc. , 181 S.W.3d 895, 900 (Tex. App.—Dallas 2006, no

pet.). Unjust enrichment allows recovery “when one person has obtained a

benefit from another by fraud, duress, or the taking of an undue advantage.” Heldenfels

Bros., Inc. v. Corpus Christi , 832 S.W.2d 39, 41 (Tex. 1992). It is “based upon the promise implied by law

to pay for beneficial services rendered and knowingly accepted.” In re

Kellogg Brown & Root, Inc. , 166 S.W.3d 732, 740 (Tex. 2005) (internal

quotation marks omitted).

But an express contract between the

parties precludes a plaintiff from recovering for services rendered in quantum

meruit if the contract covers those services or materials and if no exception

to the general rule applies. See Fortune Prod. Co. v. Conoco, Inc. ,

52 S.W.3d 671 , 683–84 (Tex. 2000); Pepi

v. Galliford , 254 S.W.3d 457, 462 (Tex. App.—Houston [1st Dist.] 2007, pet.

denied); see also Woodard v. Sw. States,

Inc. , 384 S.W.2d 674, 675 (Tex. 1964) (“Recovery on an express contract and

on quantum meruit are inconsistent.”). The

equitable remedy of quantum meruit is therefore unavailable when an express

contract covers the subject matter at issue—the party seeking compensation has

a legal remedy under the contract. See id. (citing Heldenfels Bros. , 832 S.W.2d at 41 ); see also Hester v. Friedkin Cos., Inc. , 132 S.W.3d 100, 106 (Tex.

App.—Houston [14th Dist.] 2004, pet. denied) (holding that express contract bar

applies not just when plaintiff is seeking to recover in quantum meruit from

party with whom it expressly contracted, but also when plaintiff is seeking to

recover “from a third party foreign to the original contract but who benefitted

from its performance”) (quoting Iron

Mountain Bison Ranch Inc. v. Easley Trailer Mfg., Inc. , 42 S.W.3d 149, 160

(Tex. App.—Amarillo 2000, no pet.)).

Christus contends that an express

contract bars Quality from recovering in quantum meruit. Quality first responds that Christus waived

the express contract defense by failing to plead it or cite it as a ground for

summary judgment, motion for directed verdict, or motion for judgment

notwithstanding the verdict. See Tricon Tool & Supply, Inc. , 226

S.W.3d at 500 (“The defendant must plead and prove the affirmative defense of

an express contract or the defendant waives it.” (citing Fortune Prod. Co. v. Conoco, Inc. , 52 S.W.3d 671, 685 (Tex. 2000)). It was Quality, however, that invoked rights

under the contract. In its live

pleadings at the time of trial, Quality asserted claims for breach of contract

as both assignee and third-party beneficiary of the Christus members to whom it

provided prescribed medication and services.

Quality sued under the medical plan directly, based on its treatment of

patients who were referred to Quality by their Christus-designated primary care

physician, and indirectly, based on the written assignments of rights it

obtained from the members it had treated.

Quality characterized its quantum meruit claim as an alternative ground

for relief. At trial, Quality continued

to proceed under both theories, submitting both breach of contract and quantum

meruit issues in the jury charge. In its

answer, Christus invoked the contract defenses of failure to meet a condition

precedent, anticipatory repudiation, prior material breach, and failure to

mitigate. The jury heard evidence on

these issues and made affirmative findings on the questions of breach and

excuse. These findings necessarily refer

to the existence of a contract. See Tex.

R. Civ. P . 279; Valero Mktg. &

Supply Co. v. Kalama Int’l , 51 S.W.3d 345, 351 (Tex. App.—Houston [1st

Dist.] 2001, no pet.) (reciting that existence of contract is essential element

of action for breach of contract).

The court decides the legal

question of whether an express contract covers the services at issue. Gulf

Liquids New River Project, LLC v. Gulsby Eng’g, Inc. , No. 01–08–00311–CV, 2011

WL 662672, at *12 (Tex. App.—Houston [1st Dist.]. Feb. 17, 2011, no pet. h.). “When the evidence shows that no contract

covers the service at issue, then the

question of whether a party may recover in quantum meruit is for the trier of

fact.” Id. (emphasis in original). Here,

the medical plan covers the same medication and services to its members as

those provided by Quality, albeit through an approved network provider—not

through Quality. But, Quality cannot

avoid the express contract bar to its quantum meruit claim on the ground that Christus

did not designate Quality as an approved network provider or otherwise treat

Quality as a party to the medical plan for purposes of providing those

services. The express contract bar

applies not only when the plaintiff seeks to recover in quantum meruit from the

party with whom he expressly contracted, but also when the plaintiff seeks

recovery from a third party foreign to the original contract but who benefitted

from its performance. W&W Oil Co. v. Capps , 784 S.W.2d

536, 537 (Tex. App.—Tyler 1990, no writ) (citing Black Lake Pipe Line Co. v. Union Constr. Co. , 538 S.W.2d 80 (Tex. 1976),

overruled on other grounds , 767

S.W.2d 686, 690 (Tex.1985)); see also San

Antonio Masonry & Tool Supply, Inc. v. Epstein & Sons Int’l, Inc. ,

281 S.W.3d 441 , 445–46 (Tex. App.—San Antonio) (holding that express contract

between supplier and subcontractor for masonry materials barred supplier’s

quantum meruit claim against general contractor for value of materials

provided), judgment vacated pursuant to

settlement , No. 04-04-00032-CV, 2005 WL 1458065 (Tex. App.—San Antonio Jun.

22, 2005). We hold that the trial court

erred in awarding judgment in favor of Quality on the jury’s quantum meruit

finding because the express contract rule bars a quantum meruit recovery here as

a matter of law, given the jury’s implied findings that a contract existed, and

express finding that Christus’s failure to comply was excused — coupled with evidence that Quality failed to

seek pre-authorization for treatment, as the agreement required. See Pepi

Corp. , 254 S.W.3d at 462–63; see also

Bado Equip. Co., Inc. v. Bethlehem Steel Corp. , 814 S.W.2d 464, 473 (Tex. App.—Houston

[14th Dist.] 1991, no writ) (holding that summary judgment was proper on unjust

enrichment claim brought by seller of cranes [against purchaser, constructor of

rig, corporation that subsequently purchased rig, and second corporation which,

along with constructor, was joint owner of corporation that purchased rig]

because of express contract covering goods); Econ. Forms Corp. v. Willams Bros. Constr. Co., Inc. , 754 S.W.2d

451 , 458–59 (Tex. App.—Houston [14th Dist.] 1988, no writ) (holding general

contractor not liable in quantum meruit for unpaid party who had lease

agreement with subcontractor covering materials provided by party because

express contract covered materials).

Conclusion

We

hold that the trial court erred in awarding judgment in favor of Quality on the

jury’s quantum meruit finding. We

therefore reverse the judgment of the trial court and render judgment that

Quality take nothing from this suit. All

other pending motions are dismissed as moot.

Jane

Bland

Justice

Panel

consists of Justices Keyes, Higley, and Bland.

[1]

T he term “medical plan” refers to the “US Family Health Plan Resource

Directory,” which contains information for members and prospective members

about enrollment requirements, benefits, claims processing, the scope of coverage,

and procedures for obtaining treatment and services.