exhaustion is a jurisdictional prerequisite to judicial review that cannot be waived
How later courts described this case
- exhaustion is a jurisdictional prerequisite to judicial review that cannot be waived
Written by the judges who cited it.
The opinion
ACCEPTED
03-15-00349-CV
7614310
THIRD COURT OF APPEALS
AUSTIN, TEXAS
10/30/2015 10:49:24 AM
JEFFREY D. KYLE
CLERK
CASE NO. 03-15-00349-CV
_____________________________________________________________
IN THE COURT OF APPEALS FILED IN
3rd COURT OF APPEALS
FOR THE THIRD JUDICIAL DISTRICT AUSTIN, TEXAS
AT AUSTIN, TEXAS 10/30/2015 10:49:24 AM
_________________________________________________________
JEFFREY D. KYLE
Shamrock Psychiatric Clinic, P.S. Clerk
Appellant,
v.
Texas Department of Health and Human Services; Chris Traylor, Executive
Commissioner; and Stuart Bowen, Inspector General,
Appellees.
_____________________________________________________________
On Appeal from Cause No. D-1-GN-14-001833; 126th Judicial District
Court of Travis County, Texas, Honorable Judge Orlinda Naranjo Presiding.
______________________________________________________________
APPELLEES’ BRIEF
_____________________________________________________________
KEN PAXTON EUGENE A. CLAYBORN
Attorney General of Texas State Bar No. 00785767
Assistant Attorney General
CHARLES E. ROY Deputy Chief, Administrative Law Division
First Assistant Attorney General OFFICE OF THE TEXAS ATTORNEY GENERAL
P. O. Box 12548, Capitol Station
JAMES E. DAVIS Austin, Texas 78711-2548
Deputy Attorney General Telephone: (512) 475-3204
for Civil Litigation Facsimile: (512) 320-0167
DAVID A. TALBOT, JR. Attorneys for Appellees
Chief, Administrative Law Division
ORAL ARGUMENT REQUESTED October 30, 2015
IDENTITIES OF PARTIES AND COUNSEL
ATTORNEYS FOR APPELLANT, SHAMROCK PSYCHIATRIC CLINIC, P.S.:
Jason Ray
State Bar No.: 24000511
Jennifer S. Riggs
State Bar No. 16922300
Eugene Franklin Hopkins IV
State Bar No. 24059968
RIGGS ALESHIRE & RAY, P.C.
506 W. 14th St., Suite A
Austin, Texas 78701
Telephone: (512) 457-9806
Facsimile: (512) 457-9066
jray@r-alaw.com
jriggs@r-alaw.com
ATTORNEYS FOR APPELLEES, TEXAS DEPARTMENT OF HEALTH AND
HUMAN SERVICES; CHRIS TRAYLOR, EXECUTIVE
COMMISSIONER; AND STUART BOWEN, INSPECTOR GENERAL:
Eugene A. Clayborn
State Bar No.: 00785767
Assistant Attorney General
Deputy Chief, Administrative Law Division
OFFICE OF THE ATTORNEY GENERAL OF TEXAS
P.O. Box 12548, Capitol Station
Austin, Texas 78711-2548
Telephone: (512) 475-3204
Facsimile: (512) 320-0167
eugene.clayborn@texasattorneygeneral.gov
ii
TABLE OF CONTENTS
IDENTITIES OF PARTIES AND COUNSEL ..................................................... ii
TABLE OF CONTENTS ..................................................................................... iii
TABLE OF AUTHORITIES ..................................................................................v
RECORD AND PARTY REFERENCES .......................................................... viii
STATEMENT OF THE CASE .......................................................................... viii
REQUEST FOR ORAL ARGUMENT ................................................................ ix
ISSUES PRESENTED FOR REVIEW ................................................................ ix
I. BACKGROUND AND PROCEDURAL HISTORY.........................................1
II. SUMMARY OF THE ARGUMENT ................................................................6
III. ARGUMENT AND AUTHORITIES ..............................................................6
A. HHSC-OIG does not have a nondiscretionary duty to amend its
administrative pleading to assert an overpayment claim and the SOAH
ALJ does not have a nondiscretionary duty to reinstate the payment
hold case. ...............................................................................................6
1. Email communications and documents dated 10/2/13, 10/4/13,
10/7/13, and 10/9/13 do not create a nondiscretionary duty that
requires the “OIG to amend its pleading to assert an overpayment
claim” or that requires the SOAH ALJ to reinstate the payment hold
case. ......................................................................................................7
2. Tex. R. Civ. P. 306c and Tex. R. App. P. 27.2 do not create a
nondiscretionary duty requiring HHSC-OIG to reinstate the payment
hold case on the SOAH docket. ..........................................................8
3. TRCP 11 and/or 1 TAC § 155.415 do not create a nondiscretionary
duty for the SOAH ALJ to reinstate the payment hold case. ...........11
4. HHSC-OIG’s withdrawal of its payment hold claim did not create a
nondiscretionary duty to release funds that may have been withheld
and used to satisfy a portion of the debt owed the State of
Texas. ................................................................................................15
B. Appellant’s request for mandamus relief is an impermissible collateral
attack on a final unappealable agency order. .........................................19
1. SOAH ORDER NO. 11 dismissing the administrative contested case
hearing is final and unappealable. ....................................................19
iii
2. The overpayment sanction is not only final and unappealable but also
a delinquent debt owed the State of Texas. ......................................21
3. Appellant failed to exhaust its administrative remedies. ...................21
4. Appellant’s suit constitutes an impermissible collateral attack on final
agency actions. ..................................................................................24
CONCLUSION AND PRAYER ..........................................................................25
CERTIFICATE OF COMPLIANCE ...................................................................26
CERTIFICATE OF SERVICE .............................................................................27
iv
TABLE OF AUTHORITIES
Cases
Bandera Downs, Inc., v. Alvarez,
824 S.W.2d 319 (Tex. App.—San Antonio 1992, no writ)..................................22
Brighton v. Koss,
415 S.W.3d 864 (Tex. 2013) ................................................................................10
Castillo v. Tex. Bd. Prof’l Eng’rs,
No. 03-10-00124-CV, 2010 WL 5129127 at *2 (Tex. App.—Austin Dec. 14,
2010) (mem. op.) .......................................................................................... passim
Chocolate Bayou Water Co. & Sand Supply v. Tex. Natural Res. Conservation
Comm’n,
124 S.W.3d 844 (Tex. App.—Austin 2003, pet. denied) .............................. 21, 24
El Paso Elec. Co. v. Pub. Util. Comm’n of Tex.,
715 S.W.2d 734 (Tex. App.—Austin 1986, writ ref’d n.r.e.) ..............................10
Friends of Canyon Lake, Inc. v. Guadalupe-Blanco River Auth.,
96 S.W.3d 519 (Tex. App.—Austin, 2002 pet. denied) ................................ 22, 23
Gulf State Utils., Co. v. Coalition of Cities for Affordable Util. Rates,
883 S.W.2d 739 (Tex. App.—Austin 1994) (Powers, J., dissenting, rev’d on other
grounds, 947 S.W.2d 887 (Tex. 1997)) ................................................................24
Janek v. Harlingen Family Dentistry, P.C.,
451 S.W.3d 97FN. 3 (Tex. App.—Austin 2014, no pet.) ............................. 17, 18
Lesikar v. Rappeport,
33 S.W.3d 282 (Tex. App.—Texarkana 2000, pet. denied).................................24
Lindsay v. Sterling,
690 S.W.2d 560 (Tex. 1985) ................................................................................22
Lopez v. Pub. Util. Comm’n of Tex.,
816 S.W.2d 776 (Tex. App.—Austin 1991, writ denied) ............................. 23, 24
v
Stoner v. Massey,
586 S.W.2d 843 (Tex. 1979) ..................................................................................6
Tex. Ass’n of Bus. v. Tex. Air Control Bd.,
852 S.W.2d 440 (Tex. 1993) ................................................................................25
Wilmer-Hutchins Indep. Sch. Dist. v. Sullivan,
51 S.W.3d 293 (Tex. 2001) ..................................................................................22
Yamaha Motor Corp., U.S.A. v. Motor Vehicle Div., Tex. Dep’t of Transp.,
860 S.W.2d 223 (Tex. App.—Austin 1993, writ denied) ....................................23
Statutes
Tex. Gov’t Code
§ 311.034 (West 2013) .........................................................................................13
§ 531.120 ................................................................................................................8
§ 531.120(a) ............................................................................................................8
§ 531.1201 ..............................................................................................................7
§ 531.1201(a) (Vernon’s 2014) ....................................................... 7, 9, 13, 14, 21
§§ 2001.143, .146, .147 (West 2013) ...................................................................13
§ 2001.171 (West 2014) .......................................................................................22
§ 2001.176(a) ................................................................................................ viii, 20
Administrative Procedure Act (APA)
§ 2001.143 ............................................................................................... 11, 13, 19
§ 2001.146 ............................................................................................................13
§ 2001.147 ......................................................................................... 11, 12, 13, 19
§ 2001.176(a) .................................................................................... 11, 19, 20, viii
Rules
1 Tex. Admin. Code
§ 155.415 ....................................................................................................... vii, 11
§ 155.503(c)(1) (West 2014) ...................................................... viii, 12, 14, 19, 20
§ 371.1615(d)..........................................................................................................9
§ 371.1617(b) (2012) .................................................................................... viii, 16
§ 371.1617(e) ........................................................................................................17
§ 371.1711(d)(3) (West 2012) ................................................................. 13, 14, 21
vi
Tex. R. App. P.
Tex. R. App. P. 27.2........................................................................................... ix, 10
Tex. R. Civ. P.
Tex. R. Civ. P. 11 ............................................................................................... ix, 13
Tex. R. Civ. P. 306c ....................................................................................... ix, 8, 10
vii
RECORD AND PARTY REFERENCES
References to the Clerk’s Record will be “C.R. ___.”
Appellant Shamrock Psychiatric Clinic, P.S. will be referred to as “Shamrock.”
Appellees Texas Health and Human Services Commission, Chris Traylor, Executive
Commissioner, and Stuart Bowen, Inspector General will collectively be referred to
as “HHSC-OIG” or “Appellees.”
STATEMENT OF THE CASE
In this case, the trial court dismissed the underlying suit for lack of subject
matter jurisdiction and denied “all other claims,” including Appellants request for
mandamus relief because no ministerial duty exists and Appellant failed to exhaust
administrative remedies.
In the underlying suit, Shamrock received the Final Notice of Overpayment
on December 2, 2013. December 17, 2014 was the deadline to request an
administrative contested case hearing. On January 2, 2014, Shamrock submitted a
written request for an administrative contested case hearing appealing the Final
Notice of Overpayment. Since Shamrock’s request to appeal was untimely, the
overpayment sanction became a final and unappealable “debt in favor of the State of
Texas” pursuant to 1 TAC § 371.1617(b).
Shamrock also failed to properly invoke the trial court’s jurisdiction.
Specifically, in the underlying proceeding, the Administrative Law Judge (ALJ)
dismissed Shamrock’s administrative case from the SOAH docket pursuant to 1
TAC § 155.503(c)(1) (West 2014). Also, SOAH Order No. 11 (Reconsidering and
Granting Motion to Dismiss) was signed and served on March 3, 2013. Yet,
Shamrock failed to file a motion for rehearing on or before the March 24, 2014
deadline. As a result, the SOAH Order No. 11 became final and unappealable.
Even if the Court was to construe Shamrock’s Motion to Reconsider Order
No. 11 to be a motion for rehearing, the ALJ issued SOAH Order No. 12 that
overruled the alleged motion for rehearing on March 19, 2014. Yet, Shamrock
failed to satisfy the jurisdictional prerequisites of § 2001.176(a) because Shamrock
viii
filed suit in district court on June 12, 2014 seeking judicial review of the
administrative case well beyond the proper time limits.
REQUEST FOR ORAL ARGUMENT
Pursuant to Rule 39, Texas Rules of Appellate Procedure, Appellees request
oral argument in this case. Appellees believe that oral argument will be beneficial
to the court, given the complexity and novelty of the legal issues identified herein.
ISSUES PRESENTED FOR REVIEW
1. Whether certain email communications and documents, Tex. R. Civ. P. 306c,
Tex. R. App. P. 27.2, Tex. R. Civ. P. 11, 1 TAC § 155.415, or the OIG’s
withdrawal of payment hold claims create nondiscretionary duties such that
mandamus should lie.
2. Whether Appellant’s request for mandamus relief is an impermissible
collateral attack on a final unappealable agency order.
ix
CASE NO. 03-15-00349-CV
_____________________________________________________________
IN THE COURT OF APPEALS
FOR THE THIRD JUDICIAL DISTRICT
AT AUSTIN, TEXAS
_________________________________________________________
Shamrock Psychiatric Clinic, P.S.
Appellants,
v.
Texas Department of Health and Human Services; Chris Traylor, Executive
Commissioner; and Stuart Bowen, Inspector General,
Appellees.
_____________________________________________________________
On Appeal from Cause No. D-1-GN-14-001833; 126th Judicial District
Court of Travis County, Texas, Honorable Judge Orlinda Naranjo Presiding.
______________________________________________________________
APPELLEES’ BRIEF
_____________________________________________________________
TO THE HONORABLE JUSTICES OF THE THIRD COURT OF APPEALS:
COMES NOW Texas Health and Human Services Commission, Chris
Traylor, Executive Commissioner, and Stuart Bowen, Inspector General
(collectively referred to as “HHSC” or “Appellees”), in this cause, by and through
their attorneys of record the Texas Attorney General Ken Paxton and the
undersigned Assistant Attorney General, and file Appellees’ Brief.
I. BACKGROUND AND PROCEDURAL HISTORY
Health and Human Services Commission-Office of Inspector General
(HHSC-OIG) served its “Notice of Prepayment Review” on January 16, 2013. C.R.
1
92. HHSC-OIG served its “Notice of Payment Hold” on January 24, 2013. C.R.
93. On February 4, 2013, Shamrock served its request for an expedited informal
review and an expedited administrative contested case hearing regarding the “Notice
of Payment Hold.” C.R. 95. On February 7, 2013, HHSC-OIG served its “Notice
of Informal Review.” C.R. 97. The informal review was held on February 15,
2013.
On February 14, 2013, HHSC-OIG served it “Notice of Potential
Overpayment” in the amount of $2,603,315.00. C.R. 102. The payment hold was
docketed with SOAH on February 19, 2013. The HHSC-OIG filed its “Complaint”
with SOAH on February 26, 2014, alleging that HHSC-OIG is required to suspend
all payments to the provider based on Shamrock’s alleged violations. C.R. 105.
On June 18, 2013, the SOAH ALJ issued “Order No. 3, Continuing Hearing,
Changing Venue to Austin, and Ordering Parties to Submit Scheduling Order.”
C.R. 113.
On September 17, 2013, Enrique Varela sent an email to Son Tran, which
reads, “We have the payment hold case coming up pretty fast … Here is what I
propose. We send you the final notice of overpayment and we set the overpayment
case at SOAH, which won’t have a hearing date until Spring 2014, then we now can
consolidate both case. Since the new legislation came down, providers are now
entitled to have the overpayment hearing at SOAH as opposed to HHSC appeals.”
2
C.R. 116. On September 20, 2013, Son Tran sent an email to Enrique Varela, which
reads, “Sorry for the late response. Let me talk with the client and I will let you
know next week…” C.R. 117. On October, 2, 2013, Enrique Varela sent an email
to Son Tran, which reads, “I wanted to reach out to see if you are able to determine
whether your client would prefer to go directly to the overpayment hearing.” C.R.
117. October 3, 2013, Son Tran sent an email to Enrique Varela, cc: to Windi
Pastorini and Steve Johnson, which reads, “I am still waiting on a decision by
Dr. Ravichandran.” C.R. 117. On October 4, 2013, Son Tran sent an email to
Enrique Varela, cc: to Windi Pastorini and Steve Johnson, which reads, “I have
discussed your proposal with my client and he has agreed. Let’s go ahead with the
notice of overpayment, set it at SOAH, and consolidate both cases. Let me know
when you receive this email and if I need to do anything.” C.R. 117.
On October 7, 2013, Steve Johnson sent an email to Son Tran and Enrique
Varela, cc: Windi Pastorini and Karen Pettigrew, which reads, “I will check with
SOAH to see whether they want us to docket a separate case then consolidate or just
file the overpayment case in the same case number as the payment hold (my
preference). I believe we could be ready for a hearing on the overpayment issue in
about 90 days. Do you have an idea of when you and your client would want to
have that hearing? We have several open dates in January, 2014.” C.R. 118. On
October 7, 2013, Son Tran sent an email to Steve Johnson, cc: Enrique Varela, Windi
3
Pastorini, and Karen Pettigrew, which reads, “[W]e may need more than 90 days for
the hearing. Ms. Pastorini and I will call you later this week to discuss the case.”
C.R. 118.
On October 9, 2013, HHSC-OIG filed “Respondent’s Status Report,” in the
SOAH payment hold appeal which reads, “[T]he purpose of the hearing is to
determine whether a program violations exists to warrant the suspension of payment
(payment hold) to Shamrock Psychiatric Clinic…In addition to the payment hold,
Respondent is seeking recoupment of payments, which HHSC-OIG alleges
Petitioner was not entitled to receive….Counsels for Respondent and Petitioner have
agreed to consolidate both the payment hold and the overpayment into one
proceeding…Shamrock has opted to proceed to the overpayment hearing there at
SOAH. At this point, without the court’s objection, HHSC-OIG would like to
simply file an amended pleading reflecting the consolidated issues…The parties
would like input from the court on how to proceed.” C.R. 120-121.
On October 21, 2013, SOAH Order No. 5 was entered, which reads, “[T]he
parties requested a prehearing conference to consider how to proceed with discovery
pertaining to the overpayment issues in light of the fact that the parties have agreed
to consolidate the payment hold and overpayment issues into one proceeding.”
C.R. 125.
4
On November 25, 2013, HHSC-OIG served its Final Notice of Overpayment
("FNOP"). Final overpayment amount is $1,611,709.00. C.R. 128. On
December 2, 2013, Shamrock, via its attorney of record, received HHSC-OIG’s
FNOP. December 17, 2013 was the deadline for Shamrock to request an appeal of
the FNOP. C.R. 128.
On January 2, 2014, Pastorini faxed correspondence to SOAH & Kevin
Heyburn which reads, “On February 4, 2013, we filed and submitted for an appeal
of the allegations regarding the payment hold and the overpayment…please let this
letter serve as our second formal written request for an appeal of this matter.” C.R.
135.
On January 3, 2014, HHSC-OIG filed its motion to dismiss the payment hold
appeal without prejudice. C.R. 140. On January 14, 2014, SOAH issued “Order
No. 8, Denying Motion to Dismiss.” C.R. 150. On March 3, 2014, SOAH issued
“Order No. 11, Reconsidering and Granting Motion to Dismiss.” C.R. 155. On
March 5, 2014, Shamrock filed “Petitioner’s Motion to Reconsider Order No. 11 and
Request for a Hearing.” C.R. 164.
“Respondent’s Reply to Petitioner’s Motion to Reconsider Order No. 11 and
Request for a Hearing” was filed on March 10, 2014. C.R. 178. “Petitioner’s
Motion to Strike OIG’s Letter Response and Reply to Same” was filed on March 11,
2014. C.R. 187. “Respondent’s Reply to Petitioner’s Motion to Strike OIG’s
5
Letter Response and Reply to Same” was filed on March 11, 2014. C.R. 192. On
March 19, 2014, SOAH issued “Order No. 12, Denying Motion to Reconsider Order
No. 11.” C.R. 196. March 24, 2014 was the deadline for Shamrock to file its
Motion for Rehearing on Order No. 12. C.R. at 3-22.
On June 12, 2014, Plaintiff’s Original Petition was filed in district court. On
May 6, 2015, the trial court dismissed the suit for lack of subject matter jurisdiction
and denied “all other claims.” C.R. at 205.
II. SUMMARY OF THE ARGUMENT
The trial court correctly dismissed the suit and denied Appellant’s request for
mandamus relief because no ministerial duty exists and Appellant failed to exhaust
administrative remedies.
III. ARGUMENT AND AUTHORITIES
A. HHSC-OIG does not have a nondiscretionary duty to amend its
administrative pleading to assert an overpayment claim and the SOAH
ALJ does not have a nondiscretionary duty to reinstate the payment hold
case.
In this case, Appellant asked the trial court to issue a writ of mandamus
compelling HHSC-OIG to perform an act which the agency does not have a legal
duty to perform. A common law mandamus action has three requisites: a legal duty
to perform a nondiscretionary act, a demand for performance, and a refusal. Stoner
v. Massey, 586 S.W.2d 843, 846 (Tex. 1979). Appellant’s request for mandamus
6
relief failed to meet this standard because it cannot establish that HHSC-OIG had a
legal duty to perform a nondiscretionary act. Essentially, Appellant asserts that the
trial court, SOAH, and HHSC have nondiscretionary duties to enforce an alleged
rule eleven agreement even though Appellant has failed to exhaust its administrative
remedies. Since, applicable rules and statutes do not provide for appeal of the
SOAH order dismissing the administrative claims, Appellant’s suit was properly
dismissed for lack of subject matter jurisdiction and “all other claims,” including
Appellant’s mandamus claims, were properly denied.
1. Email communications and documents dated 10/2/13, 10/4/13, 10/7/13,
and 10/9/13 do not create a nondiscretionary duty that requires the
“OIG to amend its pleading to assert an overpayment claim” or that
requires the SOAH ALJ to reinstate the payment hold case.
Shamrock alleges that, pursuant to Texas Government Code § 531.1201(a),
HHSC-OIG had a ministerial duty to docket the “Final Notice of Overpayment” case
at SOAH based on several email communications and documents dated 10/2/13,
10/4/13, 10/7/13, and 10/9/13. Appellant’s Brief, p. 10. The foundation of
Shamrock’s argument rests on the erroneous assertion that the 10/2/13 email
communication satisfies the requirements of Tex. Gov’t Code § 531.1201. The
10/2/13 email states, “I wanted to reach out to see if you are able to determine
whether your client would prefer to go directly to the overpayment hearing.” C.R.
7
117. This email does not meet the requirements of Tex. Gov’t Code § 531.120(a).
Specifically, the 10/2/13 email does not include:
(1) the specific basis for the overpayment or debt;
(2) a description of facts and supporting evidence;
(3) a representative sample of any documents that form the basis for the
overpayment or debt;
(4) the extrapolation methodology;
(5) the calculation of the overpayment or debt amount;
(6) the amount of damages and penalties, if applicable; and
(7) a description of administrative and judicial due process remedies,
including the provider’s right to seek informal resolution, a formal
administrative appeal hearing, or both.
Tex. Gov’t Code § 531.120. In stark contrast, the November 25, 2013 “Final Notice
of Overpayment” satisfies the requirements of Tex. Gov’t Code § 531.120. C.R.
128. As a result, Shamrock’s inferences and conclusions based on the email
communications and documents dated 10/2/13, 10/4/13, 10/7/13, and 10/9/13 do not
amount to a ministerial duty and have no merit because Shamrock failed to request
an appeal of the final notice of overpayment timely.
2. Tex. R. Civ. P. 306c and Tex. R. App. P. 27.2 do not create a
nondiscretionary duty requiring HHSC- OIG to reinstate the payment
hold case on the SOAH docket.
Shamrock alleges that its “three appeal/hearing requests made in October
2013 appeal effectively put the OIG on notice of Shamrock’s request for a hearing,
and under Tex. R. Civ. P. 306c and Tex. R. App. P. 27.2, were effective.”
Appellant’s Brief, Page 15. However, Shamrock’s assertion that the alleged “three
8
appeal/hearing requests made in October 2013” conflicts with the assertion it made
in the January 2, 2014 letter. Specifically, the January 2, 2014 letter states that “[o]n
February 4, 2013, we filed and submitted an appeal of the allegations regarding the
payment hold and the overpayment. … Pursuant to 1 Tex. Admin. Code §
371.1615(d), please let this letter serve as our second formal written request for
an appeal of this matter.” Clearly, the January 2, 2014 letter makes no mention
of the alleged “three appeal/hearing requests made in October 2013.” Needless to
say, the test for ministerial duty is not met under such circumstances since there is a
fact dispute as to whether Shamrock intended that the “three appeal/hearing requests
made in October 2013” constitute notices of appeal before the fact even though the
applicable statute provides that “[a] provider must request an appeal under this
section not later than the 15th day after the date the provider is notified …”.
[emphasis added]. Tex. Gov’t Code § 531.1201(a).
Besides, the relevance of these email communications and documents was
fully adjudicated in SOAH Order No. 11. C.R. 155-161. Specifically, SOAH
Order No. 11 reflects that the SOAH Judge reconsidered and dismissed the case for
the following reasons:
9
Based on the facts listed in the chronology, the ALJ recognizes that
OIG asked Shamrock to consolidate the payment hold and recoupment
issues, represented to SOAH that the parties had agreed to consolidate
both issues into one proceeding in the interest of judicial economy,
represented that it preferred to amend its payment hold pleading
without getting another docket number, and asked for a continuance so
that both issues could be heard together. Some months later, OIG sent
formal notice of the recoupment to Shamrock. Shamrock did not file
an appeal because it had relied on OIG’s commitment to amend its
pleadings and the ALJ had already set the hearing on both issues.
However, even though Shamrock relied on OIG’s representation to
its detriment, the ALJ cannot proceed to a hearing. OIG has
withdrawn the payment hold issue, and it has neither separately
referred an overpayment claim to SOAH regarding Shamrock nor
amended its pleadings to assert an overpayment claim. The ALJ
does not have the authority to require OIG to amend its pleading
to assert an overpayment claim in this case. As a result, there is
no pending case for which the ALJ could receive and issue a
Proposal for Decision. [Emphasis added].
C.R. 160-161.
Additionally, Shamrock’s reliance on the Brighton v. Koss, 415 S.W.3d 864
(Tex. 2013) and El Paso Elec. Co. v. Pub. Util. Comm’n of Tex., 715 S.W.2d 734
(Tex. App.—Austin 1986, writ ref’d n.r.e.) is misplaced. Specifically, the “Final
Notice of Overpayment” is not an order or judgment rendered in a trial court.
Moreover, Shamrock did not file a motion for rehearing after the administrative case
was dismissed from the SOAH docket. Therefore, the legal reasoning and analysis
of Brighton and El Paso Elec. relating to TRCP 306c and TRAP 27.2 are not
applicable to the present case.
10
3. TRCP 11 and/or 1 TAC § 155.415 do not create a nondiscretionary
duty for the SOAH ALJ to reinstate the payment hold case.
Based on convoluted and conflated reasoning relating to an alleged Rule 11
agreement, Shamrock asserts that “this court should reverse the district court
dismissing the case for want of jurisdiction and instruct the district court to order the
OIG to set Shamrock’s overpayment case for a hearing at the SOAH.” Appellant’s
Brief, p. 21. In a recent memorandum opinion, however, the Austin Third Court of
Appeals asked whether noncompliance with an Administrative Procedure Act
(APA) § 2001.147 agreement to modify the APA § 2001.143 (60-day) time limit for
rendering a decision voided the agency’s final order, thereby modifying the APA §
2001.176(a) (30-day) time limit to file suit seeking judicial review. Castillo v. Tex.
Bd. Prof’l Eng’rs, No. 03-10-00124-CV, 2010 WL 5129127 at *2 (Tex. App.—
Austin Dec. 14, 2010) (mem. op.). One significant fact was that at the time the APA
§ 2001.147 agreement was entered into there was no related case pending before the
district court. Another important fact was that the § 2001.147 agreement was
intended to modify the APA § 2001.143 (60-day) time limit. Based on its
construction of applicable law, the Castillo Court opined that “[t]he directory time
limit in section 2001.143(a) … affects only the administrative process within the
agency, and modifying it does not alter that.” Castillo at *5.
11
The applicability of this aspect of the Castillo analysis requires this Court to
look beyond jurisdictional facts and examine the merits underlying SOAH Order
No. 11 which recites the following observations regarding the alleged “consolidation
agreement”:
Based on the facts listed in the chronology, the ALJ recognizes that
OIG asked Shamrock to consolidate the payment hold and recoupment
issues, represented to SOAH that the parties had agreed to consolidate
both issues into one proceeding in the interest of judicial economy,
represented that it preferred to amend its payment hold pleading
without getting another docket number, and asked for a continuance so
that both issues could be heard together. Some months later, OIG sent
formal notice of the recoupment to Shamrock. Shamrock did not file
an appeal because it had relied on OIG's commitment to amend its
pleading and the ALJ had already set the hearing on both issues.
However, even though Shamrock relied on OIG's representations to its
detriment, the ALJ cannot proceed to a hearing. OIG has withdrawn the
payment hold issue and it has neither separately left an overpayment
claim to SOAH regarding Shamrock nor amended its pleadings to assert
an overpayment claim. The ALJ does not have authority to require
OIG to amend its pleading to assert an overpayment claim in this case.
As a result, there is no pending case for which the ALJ could receive
evidence and issue a Proposal for Decision. Therefore, the ALJ
dismisses this case from SOAH's docket pursuant to 1 TAC §
155.503(c)(1).
C.R. 160-161. Under the Court’s reasoning in Castillo, the alleged agreement to
consolidate hearings in this case does not constitute an enforceable Rule 11
agreement or an enforceable APA § 2001.147 agreement “[b]ecause the parties
entered into the agreement during the course of the administrative proceeding, it was
governed by the provisions of the APA, not by the rules of civil procedure.” Id. at
12
*4. Shamrock’s alleged consolidation agreement is not governed by the Texas
Rules of Civil Procedure because there was no case pending before the district court.
See Tex. R. Civ. P. 11. Nor does APA § 2001.147 apply because the alleged
“consolidation agreement” was not intended to modify the time limits set forth APA
§ 2001.143 or § 2001.146. Tex. Gov’t Code §§ 2001.143, .146, .147 (West 2013).
In the final analysis, there was no evidence before the trial court that can be
construed to be a Rule 11 agreement that waives the requirement of a written appeal
under Tex. Gov’t Code § 531.1201(a) (Vernon’s 2014) and 1 TAC § 371.1711(d)(3)
(West 2012). In other words, even if it could be argued that the status report
amounts to an enforceable Rule 11 agreement, it still does not contain any reference
to a waiver of the statutory appeal requirements. The Texas Government Code
provides that “… a statute shall not be construed as a waiver of sovereign immunity
unless the waiver is effected by clear and unambiguous language.” See Tex. Gov’t
Code § 311.034 (West 2013). Further, the same provision states that “[s]tatutory
prerequisites to a suit, including the provision of notice, are jurisdictional
requirements in all suits against a governmental entity.” See Tex. Gov’t Code §
311.034 (West 2013). In this case, Appellant has failed to demonstrate a valid
waiver of sovereign immunity to sue Appellee.
13
Shamrock also argues that “[t]he ALJ was incorrect in her conclusion that she
did not have the authority to require the OIG to amend its pleading to assert an
overpayment claim in this case or to simply proceed on matters already before her.”
Appellant’s Brief, p. 21. However, the undisputed facts are that the payment hold
claims were withdrawn and that the overpayment claims were never filed. As a
result, the SOAH ALJ dismissed the case pursuant to 1 TAC § 155.503(c)(1). This
provision provides, in pertinent part, that “[a] judge may dismiss a matter from
SOAH’s docket with or without prejudice if a moving party withdraws its entire
claim…” [emphasis added]. In this instance, HHSC-OIG was the “moving party”
that withdrew its payment hold claim.
Regardless, the SOAH ALJ considered Shamrock’s allegations and did not
determine that there was an enforceable agreement pursuant to SOAH’s pleadings,
rules, and procedures. In fact, the record is devoid of any written document
executed by HHSC-OIG that waives, forgives, or otherwise bypasses the
requirements of a written request for appeal under Texas Government Code §
531.1201(a) (Vernon’s 2014) and 1 Texas Administrative Code (TAC) §
371.1711(d)(3) (West 2012). Instead, the SOAH ALJ dismissed the administrative
case because HHSC-OIG could not be ordered to amend its administrative pleadings
and there was no overpayment claim pending before SOAH. In the final analysis,
the SOAH ALJ’s dismissal of the case pursuant to 1 TAC § 155.503(c)(1) is correct.
14
4. HHSC-OIG’s withdrawal of its payment hold claim did not create a
nondiscretionary duty to release funds that may have been withheld
and used to satisfy a portion of the debt owed the State of Texas.
Shamrock alleges that the “OIG kept money withheld under the temporary
payment hold, and used it in partial satisfaction of the alleged overpayment.”
Appellant’s Brief, p. 22. However, there is no evidence in the record that supports
this statement.
The record does show that HHSC-OIG served its “Notice of Prepayment
Review” on January 16, 2013. C.R. 92. This notice states that “[t]his
administrative action is being taken to prevent future program violations and/or
verify compliance with Texas Medicaid program requirements.” C.R. 92.
HHSC-OIG served its “Notice of Payment Hold” on January 24, 2013. C.R.
93. This notice states that “HHSC-OIG has determined that prima facie evidence
exists to support this payment hold.” C.R. 93.
HHSC-OIG served its “Notice of Potential Overpayment” on February 14,
2013. C.R. 102. This notice states that “[a]s of the date of this notice, HHSC-
OIG finds that you received a potential overpayment in the amount of
$2,603,315.00.” C.R. 102. This notice also states that “HHSC-OIG will provide
separate notice of any final determined overpayment amount.” C.R. 103.
15
HHSC-OIG served its “Final Notice of Overpayment” on November 25, 2013.
C.R. 128. This notice states that “[p]ursuant to 1 Tex. Admin. Code § 371.171(c)
(2) (2012), HHSC-OIG hereby determines that you received an overpayment in the
amount of $1,611,709.00.” C.R. 128. This notice also states that “you will have
30 days after this notice becomes final to pay the amount of the overpayment,
negotiate a payment plan, or file a petition for judicial review. 1 Tex. Admin. Code
§ 371.1617(b) (2012).” C.R. 130.
None of the aforementioned notices show the amount of funds, if any, that
may have been withheld pursuant to the payment hold. None of the aforementioned
notices show the amount of withheld funds, if any, that may have been used to satisfy
part of the delinquent debt owed the State of Texas. Hence, Shamrocks assertion is
not based on any facts from the record. But assuming arguendo that some funds
were withheld and offset against the final debt, it does not follow that this result is
beyond HHSC’s authority. In fact, this remedy is contemplated under applicable
law and case law.
As stated previously, the “Final Notice of Overpayment” stated that “you will
have 30 days after this notice becomes final to pay the amount of the overpayment,
negotiate a payment plan, or file a petition for judicial review. 1 Tex. Admin. Code
§ 371.1617(b) (2012).” C.R. 130. Since, Shamrock did not settle the debt or seek
16
judicial review of the debt timely, then HHSC-OIG is authorized to “collect funds
owed” pursuant to 1 TAC § 371.1617(e).
HHSC-OIG’s broad authority to collect on delinquent debt is supported by the
Court’s analysis in the Janek opinion. In Janek, the Court recognized (1) “that the
relief sought … would not determine any final rights of the parties,” (2) that “Texas
and federal law permit the temporary hold of Medicaid payments while allegations
of fraud are being investigated and litigated,” and (3) that the “outcome of this case
will not determine any final rights of the parties but only which party will maintain
temporary possession of the funds in question while the final rights to them are being
adjudicated in a separate proceedings.” Janek v. Harlingen Family Dentistry, P.C.,
451 S.W.3d 97, 103 FN. 3 (Tex. App.—Austin 2014, no pet.). In this case,
Shamrock’s final rights were determined when it failed to request a hearing timely
and HHSC-OIG’s right to collect fully ripened when the debt became delinquent.
However, Appellant’s reliance on Janek v Harlingen Family Dentistry is
misplaced. This case can be distinguished because during a fraud investigation,
HHSC-OIG instituted a payment hold against the Harlingen Family Dentistry, a
SOAH ALJ determined that there was credible evidence to support a portion of the
funds subject to the payment hold, the SOAH ALJ issued a Proposal For Decision
including findings and conclusions, and HHSC-OIG adopted the SOAH ALJ’s
findings and conclusions into a final order. Id. at 100. In the instant case, the
17
SOAH ALJ did not issue a Proposal For Decision regarding the payment hold nor
did HHSC-OIG adopt a Proposal For Decision regarding the payment hold.
Moreover, the Janek opinion recites that “[t]he dispositive issue in this appeal
is whether the administrative order adopted and issued by HHSC, read in
conjunction with applicable statutes and regulations, unambiguously required that
funds sequestered and held pursuant to the temporary payment hold be released to
the Dental Group.” Id. at 101. In the instant case, SOAH Order No. 11 does not
require any “funds sequestered and held pursuant to the temporary payment hold be
released” to Shamrock.
Furthermore, the Janek Court concluded that “[t]he Dental Group sought only
to enforce the agency’s existing order that imposed on Janek and Wilson the
ministerial duty to release a portion of the funds subject to the payment hold.” Id.
at 103. In the instant case, SOAH Order No. 11 does not impose on HHSC-OIG
“the ministerial duty to release a portion of the funds subject to the payment hold.”
In the final analysis, the Janek Court determined that “[b]ecause the State
officials have refused to perform this ministerial duty at the Dental Group’s request,
the district court correctly issued a writ of mandamus directing them to comply with
the final order and take all necessary action to release to the Dental Group the sum
of $1,255,195.20.” Id. at 104. In the instant case, the trial court denied
18
Shamrock’s request for mandamus relief in total because no such ministerial duty
exists and because Shamrock failed exhaust available remedies.
B. Appellant’s request for mandamus relief is an impermissible collateral
attack on a final unappealable agency order.
1. SOAH ORDER NO. 11 dismissing the administrative contested case
hearing is final and unappealable.
In the underlying proceeding, the Administrative Law Judge dismissed
Appellant’s administrative case from the SOAH docket pursuant to 1 TAC §
155.503(c)(1) (West 2014). The order was signed and served on March 3, 2013.
However, Appellant failed to file a timely motion for rehearing, hence, Order No.
11 became final and unappealable.
The Castillo opinion also holds that noncompliance with an Administrative
Procedure Act (APA) § 2001.147 agreement to modify the APA § 2001.143 (60-
day) time limit for rendering an agency decision does not void the Board’s final
order and does not modify the APA § 2001.176(a) (30-day) time limit to file suit
seeking judicial review. Castillo v. Tex. Bd. Prof’l Eng’rs, at *2. The Castillo
Court asked whether Castillo’s petition for judicial review was timely under APA §
2001.176(a). Castillo v. Tex. Bd. Prof’l Eng’rs, at *2. One significant
jurisdictional fact from the case is that when the Board overruled the second motion
for rehearing, the Board’s order became final and appealable. Another important
jurisdictional fact is that Castillo failed to file his petition for review within 30 days
19
of the board’s order becoming final and appealable. Based on its construction of
applicable law, the Castillo Court opined that “[i]n suits against governmental
entities, a timely filed petition for judicial review is a statutory prerequisite to suit,
so that failure to comply deprives the district court of jurisdiction to review the
agency decision.” Id. at *3. Applying the law to the key jurisdictional facts, the
Castillo Court concluded that Castillo failed to file his petition timely, therefore the
trial court had no jurisdiction to hear the appeal.
As was the case in Castillo, Shamrock also failed to properly invoke the trial
court’s jurisdiction. Specifically, in the underlying proceeding, the Administrative
Law Judge (ALJ) dismissed Shamrock’s administrative case from the SOAH docket
pursuant to 1 TAC § 155.503(c)(1) (West 2014). Also, SOAH Order No. 11
(Reconsidering and Granting Motion to Dismiss) was signed and served on March
3, 2013. Yet, Shamrock failed to file a motion for rehearing on or before the March
24, 2014 deadline. As a result, the SOAH Order No. 11 became final and
unappealable.
Even if the Court construes Shamrock’s Motion to Reconsider Order No. 11
to be a motion for rehearing, the ALJ issued SOAH Order No. 12 that overruled the
alleged motion for rehearing on March 19, 2014. Yet, Shamrock failed to satisfy
the jurisdictional prerequisites of § 2001.176(a) because Plaintiff filed suit in district
20
court on June 12, 2014 seeking judicial review of the administrative case well
beyond the applicable time limitations.
2. The overpayment sanction is not only final and unappealable but also
a delinquent debt owed the State of Texas.
Shamrock received the “Final Notice of Overpayment” on December 2, 2013.
December 17, 2014 was the deadline to request an administrative contested case
hearing. The record is devoid of any written document executed by HHSC-OIG
that waives, forgives, or otherwise bypasses the requirements of a written request
for appeal under Texas Government Code § 531.1201(a) (Vernon’s 2014) and 1
Texas Administrative Code (TAC) § 371.1711(d)(3)(West 2012). Nevertheless, on
January 2, 2014, Shamrock submitted a written request for an administrative
contested case hearing appealing the “Final Notice of Overpayment.” Since
Shamrock’s request to appeal was untimely, the overpayment sanction became final
and unappealable. Furthermore, since Shamrock failed to settle the debt or seek
judicial review of the debt, the debt became delinquent and subject to the collections
process.
3. Appellant failed to exhaust its administrative remedies.
“It is well settled that a party must exhaust its administrative remedies before
seeking judicial review of an agency decision.” Chocolate Bayou Water Co. &
Sand Supply v. Tex. Natural Res. Conservation Comm’n, 124 S.W.3d 844, 852 (Tex.
21
App.—Austin 2003, pet. denied), citing Tex. Gov’t Code Ann. § 2001.171 (West
2014) and Wilmer-Hutchins Indep. Sch. Dist. v. Sullivan, 51 S.W.3d 293, 294–95
(Tex. 2001). “Unless exhaustion is excused, a trial court has no jurisdiction to act
when administrative remedies have not been exhausted. See Bandera Downs, Inc.,
v. Alvarez, 824 S.W.2d 319, 321 (Tex. App.—San Antonio 1992, no writ) citing
Lindsay v. Sterling, 690 S.W.2d 560, 563–64 (Tex. 1985) (exhaustion is a
jurisdictional prerequisite to judicial review that cannot be waived). In fact, the
Bandera Downs court held “that because Alvarez did not exhaust his administrative
remedies before the racing commission, the trial court had no jurisdiction to grant
the temporary restraining order enjoining holding the race or the temporary
injunction enjoining paying the winners.” See Bandera Downs at 321. Likewise,
the trial court is without subject matter jurisdiction to hear this case.
In Friends of Canyon Lake, for example, appellants argued that “it should not
be required to exhaust when its challenge of agency action is based upon allegations
that the Authority and TNRCC ‘exceeded its statutory authority or jurisdiction’ or
violated a statute. See Friends of Canyon Lake, Inc. v. Guadalupe-Blanco River
Auth., 96 S.W.3d 519, 527 (Tex. App.—Austin, 2002 pet. denied). However, the
Third Court of Appeals agreed “that, notwithstanding these exceptions, FOCL’s
suits (which have been consolidated in this action) were filed after the TNRCC’s
issuance of the Amendment, which constitutes a final order, and therefore these
22
exceptions do not control.” Id. at 527. Similarly, the trial court properly dismissed
this case for failure to exhaust administrative remedies.
In the Yamaha case, the plaintiff sought judicial review by direct appeal of a
final order issued by the Motor Vehicle Division of the Texas Department of
Transportation alleging that the Commission had exceeded its statutory authority.
See Yamaha Motor Corp., U.S.A. v. Motor Vehicle Div., Tex. Dep’t of Transp., 860
S.W.2d 223 (Tex. App.—Austin 1993, writ denied). In Yamaha, the Third Court
of Appeals opined that “We recognize that in certain limited circumstances, e.g.,
when an agency acts outside its constitutional or statutory authority, a party may
challenge the agency’s action independent of the procedural requirements imposed
by APTRA in a statutory suit for judicial review . . . This exception, however, allows
a party to challenge the agency’s actions prior to the rendition of a final order.” Id.
at 229 (emphasis in original) (citations omitted). In this case, Appellant failed to
raise its ultra vires claim in a timely filed motion for rehearing “prior to the rendition
of a final order.” Hence, the ultra vires exception to the exhaustion doctrine does
not apply in this case.
In Lopez v. Public Utility Commission, the plaintiffs prayed for declaratory
relief under the Administrative Procedures Act (APA) and the Uniform Declaratory
Judgments Act (UDJA) as well as for temporary and permanent injunctive relief
against the Texas Public Utility Commission. See Lopez v. Pub. Util. Comm’n of
23
Tex., 816 S.W.2d 776, 780 (Tex. App.—Austin 1991, writ denied). In the Lopez
case, the Third Court of Appeals held that the district court lacked jurisdiction under
the doctrine of governmental immunity because the plaintiff failed to file a motion
for rehearing with the Commission pursuant to Commission rules. Id. at 781– 782.
On the same grounds, the trial court properly dismissed this case for lack of subject
matter jurisdiction.
4. Appellant’s suit constitutes an impermissible collateral attack on final
agency actions.
Appellant’s suit constitutes an impermissible collateral attack on a final and
unappealable dismissal order and an overpayment sanction. “Collateral attacks
upon an agency order may be maintained successfully on one ground alone-that the
order is void.” See Chocolate Bayou Water Co. & Sand Supply at 853, citing
Lesikar v. Rappeport, 33 S.W.3d 282, 316 (Tex. App.—Texarkana 2000, pet.
denied) (citing Gulf State Utils., Co. v. Coalition of Cities for Affordable Util. Rates,
883 S.W.2d 739, 758 (Tex. App.—Austin 1994) (Powers, J., dissenting, rev’d on
other grounds, 947 S.W.2d 887 (Tex. 1997)). “An agency order may be void in the
requisite sense on either of two grounds: 1) the order shows on its face that the
agency exceeded its authority, or 2) a complainant shows that the order was procured
by extrinsic fraud.” See Gulf States Utils. at 758.
24
In this case, neither of these conditions apply to the dismissal order or the
overpayment sanction. In this suit, for example, Appellant is seeking judicial
review of a final and unappealable agency order, an injunction to avoid the effect of
the final and unappealable agency order, and a declaration that the agency action
exceeded its authority. Appellant’s allegations merely challenge the voidableness
or erroneousness of the agency order. In fact, HHSC-OIG has statutory, regulatory,
and contractual authority to calculate and recover overpayments. Hence,
Appellant’s request for declaratory relief would yield “an impermissible advisory
opinion, because, rather than remedying actual harm, it would address only a
hypothetical injury.” Id., citing Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852
S.W.2d 440, 444 (Tex. 1993).
CONCLUSION AND PRAYER
WHEREFORE, PREMISES CONSIDERED, Appellees respectfully pray that
this Court affirm the trial court’s order dismissing this suit of subject matter
jurisdiction; and that this Court affirm the trial court’s denial of Appellant’s request
for mandamus relief; and for all such other relief as Appellees shall be entitled to in
law or in equity.
25
Respectfully Submitted,
KEN PAXTON
Attorney General of Texas
CHARLES E. ROY
First Assistant Attorney General
JAMES E. DAVIS
Deputy Attorney General for Civil Litigation
DAVID A. TALBOT, JR.
Chief, Administrative Law Division
/s/ Eugene A. Clayborn
EUGENE A. CLAYBORN
State Bar No.: 00785767
Assistant Attorney General
Deputy Chief, Administrative Law Division
OFFICE OF THE ATTORNEY GENERAL OF TEXAS
P.O. Box 12548, Capitol Station
Austin, Texas 78711-2548
Telephone: (512) 475-3204
Facsimile: (512) 320-0167
eugene.clayborn@ texasattorneygeneral.gov
Attorneys for Appellee
CERTIFICATE OF COMPLIANCE
I hereby certify compliance with Texas Rules of Appellate Procedure 9 and
that there are 5,809 words in this document. Microsoft Word was used to prepare
this filing and calculate the number of words in it.
/s/ Eugene A. Clayborn
EUGENE A. CLAYBORN, AAG
26
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing document has
been served on this the 30th day of October, 2015 on the following:
Jason Ray Via: Electronic Service
State Bar No.: 24000511
Jennifer S. Riggs
State Bar No. 16922300
Eugene Franklin Hopkins IV
State Bar No. 24059968
RIGGS ALESHIRE & RAY, P.C.
506 W. 14th St., Suite A
Austin, Texas 78701
Telephone: (512) 457-9806
Facsimile: (512) 457-9066
jray@r-alaw.com
jriggs@r-alaw.com
Attorneys for Appellant
/s/ Eugene A. Clayborn
EUGENE A. CLAYBORN, AAG
27