Opinion
No. 10-15-00191-CV
06-06-2018
COLLEGE STATION MEDICAL CENTER, LLC, Appellant v. JUAUNE BURGESS, Appellee
From the 361st District Court Brazos County, Texas
Trial Court No. 13-000447-CV-361
MEMORANDUM OPINION
The sole issue in this interlocutory appeal is whether the trial court erred in denying Appellant College Station Medical Center, LLC's (CSMC) motion to compel arbitration of Appellee Juaune Burgess's breach-of-contract cause of action. We hold that it did and reverse the trial court's order.
Burgess was injured when the vehicle in which she was a passenger was involved in a single-car collision on March 10, 2012, in Sonora, Sutton County, Texas. Burgess was taken by ambulance to Lillian Hudspeth Hospital in Sonora and treated in its emergency room. Burgess was then transferred to Shannon Medical Center in San Angelo and treated in its emergency room before being released to go home the same day. Eleven days later, Burgess underwent surgery at CSMC to repair facial fractures that she had sustained in the collision. CSMC claims that the amount due for the medical services that it provided to Burgess totals $40,286.15.
Burgess notified CSMC that she was covered by a health insurance policy issued by Aetna. CSMC had a Hospital Services Agreement (HSA) with Aetna. Burgess contends that the HSA required CSMC to bill Aetna for the services that CSMC provided to her and to accept a reduced payment from Aetna as full payment for those services. CSMC, however, did not submit to Aetna its bill for the services that it provided to Burgess. Instead, CSMC filed a hospital lien against any damages that Burgess might recover from the auto liability insurer of the driver of the vehicle in the collision.
Burgess thereafter settled her negligence claim against the driver of the vehicle in the collision. The driver's auto liability insurer, Bristol West Specialty Insurance Company (Bristol), agreed to pay $50,000 to settle the claim. Bristol issued a settlement check, listing Burgess, her counsel, CSMC, and Aetna as payees, but the check expired. Bristol subsequently interpleaded the settlement funds into the registry of the court after Burgess filed the underlying suit against CSMC.
The relevant procedural history of the underlying suit is as follows:
• February 20, 2013 - Burgess filed her original petition against CSMC. Burgess sought a declaratory judgment that CSMC's hospital lien is invalid under Property Code Chapter 55 and that CSMC is barred by Civil Practice and Remedies Code Chapter 146 from collecting its charges from Burgess because CSMC failed to bill Burgess's health insurer, Aetna. Alternatively, Burgess requested a declaration that CSMC's charges are unreasonable. Burgess did not assert a breach-of-contract cause of action against CSMC, alleging that CSMC breached the HSA.
• April 1, 2013 - CSMC filed its original answer. The answer contained only a general denial of Burgess's claims and did not mention arbitration.
• April 22, 2013 - Burgess filed her first amended petition. As in her original petition, Burgess did not assert a breach-of-contract cause of action against CSMC, alleging that CSMC breached the HSA.
• August 13, 2013 - Burgess filed a traditional motion for summary judgment on her declaratory judgment action.
• August 19, 2013 - Burgess filed her second amended petition. As in her original and first amended petitions, Burgess did not assert a breach-of-contract cause of action against CSMC, alleging that CSMC breached the HSA.
• September 6, 2013 - CSMC filed its own traditional motion for summary judgment, seeking dismissal of Burgess's declaratory judgment action against it with prejudice. CSMC argued that it had not only complied with the applicable statutory requirements to attach and secure its hospital lien but that it had also conclusively shown that it has no duty to bill Aetna. In the factual background section of the motion, CSMC specifically stated:
5. . . . In January 2013, in complete disregard for CSMC's hospital lien, [Burgess's counsel] informed CSMC that Plaintiff would likely sue CSMC because it did not bill Plaintiff's health insurance, AETNA.
. . . .In the section of the motion where CSMC argued that it had not violated Civil Practice and Remedies Code Chapter 146 and that the trial court should therefore grant summary judgment dismissing Burgess's Chapter 146 claim, CSMC further stated:
7. In a subsequent conversation with [Burgess's counsel], CSMC informed him that, pursuant to the contract between CSMC and AETNA, CSMC could not bill AETNA without first receiving an explanation of benefits ("EOB") from Bristol. That was due, in part, to AETNA being the secondary payor, and Bristol the primary—as Bristol was the liable auto insurance carrier. [Emphasis added.]
27. As a threshold matter, CSMC was neither required nor authorized to directly bill Plaintiff's insurance—AETNA. . . . Plaintiff's admission to CSMC was authorized through Bristol, the liable auto insurance carrier; it was not authorized by AETNA. Thus, CSMC is not required or authorized to bill AETNA. . . .
28. More importantly though, the confidential and proprietary contract between CSMC and AETNA provides that, when AETNA is the secondary payor, CSMC has ninety-five (95) days after CSMC receives an explanation of benefits from the primary payor (i.e., Bristol) to submit its claim to AETNA. . . . To date, CSMC has not received an explanation of benefits from Bristol. CSMC explained the applicable contract provisions to Plaintiff's counsel before he sued CSMC. Accordingly, CSMC cannot, and is currently under no obligation to, submit its bill to AETNA and, therefore, has not violated Chapter 146 pursuant to its plain language. [Footnote omitted; emphasis added.]
• September 30, 2013 - The trial court conducted a hearing on Burgess's August 13, 2013 motion for summary judgment and CSMC's September 6, 2013 motion for summary judgment but did not rule on the motions at that time.
• November 19, 2013 - CSMC filed its first amended answer. As in its original answer, CSMC repeated the general denial of Burgess's claims and did not mention arbitration. In addition to the general denial, however, CSMC asserted several counterclaims against Burgess.
In the factual background section of the counterpleading, which was incorporated into each of the counterclaims, CSMC stated:
8. On or about June 13, 2012, Burgess's attorney . . . sent a letter to CSMC requesting that it bill Burgess's health insurance, AETNA, rather than pursue its valid hospital lien. . . .In its first counterclaim, CSMC then sought a declaratory judgment that it has a valid and enforceable hospital lien under Property Code Chapter 55, that Civil Practice and Remedies Code Chapter 146 "does not prevent, affect in any way, or otherwise apply to CSMC's right to file and/or pursue a hospital lien in accordance with Chapter 55," and that CSMC has not violated Chapter 146. To support this counterclaim, CSMC noted that Chapter 146
9. In a subsequent conversation with [Burgess's counsel], CSMC informed him that pursuant to the contract between CSMC and AETNA, CSMC could not bill AETNA without first receiving an explanation of benefits from Bristol. That was due, in part, to AETNA being the secondary payor, and Bristol the primary—as Bristol was the liable auto insurance carrier. [Emphasis added.]
says "[i]f the health care service provider is required or authorized to directly bill the issuer of a health benefit plan for services provided to a patient, the health care service provider shall bill the issuer of the plan not later than: (1) the date required under any contract between the health care service provider and the issuer of the health benefit plan . . . ." Tex. Civ. Prac. & Rem. Code Ann. § 146.002(b).
CSMC then alleged in its second and third counterclaims, respectively, that Burgess breached the agreement that she entered into with it as a condition to her admission to CSMC and that Burgess breached the settlement agreement that she entered into with Bristol as a full and final release of Bristol's liability for the injuries she sustained in the collision. Regarding the latter, CSMC claimed that it was an intended third-party beneficiary of the settlement agreement that Burgess entered into with Bristol. Finally, CSMC alleged that the doctrine of quasi-estoppel precludes Burgess from maintaining that CSMC's lien is invalid and from refusing to satisfy CSMC's lien because such a position is inconsistent with the position Burgess took when she entered into the settlement agreement with Bristol and agreed to satisfy any and all hospital liens.
• March 18, 2014 - CSMC served Burgess with requests for disclosure, interrogatories, requests for production, and requests for admissions.
• April 21, 2014 - Burgess filed her third amended petition. As in the preceding petitions, Burgess did not include a breach-of-contract cause of action that CSMC breached the HSA, but she did include a cause of action under Civil Practice and Remedies Code Chapter 12 that CSMC's hospital lien is fraudulent. Burgess stated:
Even though Defendant was fully aware of the existence of Plaintiff's health insurance and had all information necessary to submit its bill to Plaintiff's health insurance, Defendant failed and refused to do so[,] choosing instead to try to skirt the contractual limitations to its charges imposed by its own contract with Plaintiff's health insurance by filing a hospital lien that seeks to impose its full rate for such services . . . . [Emphasis added.]CSMC did not amend its answer in response to Burgess's third amended petition.
• May 12, 2014 - The trial court conducted a second hearing on Burgess's August 13, 2013 motion for summary judgment and CSMC's September 6, 2013 motion for summary judgment. The trial court did not rule on the motions at that time, but it subsequently denied both motions.
• May 13, 2014 - CSMC filed a motion to compel Burgess's deposition.
• May 21, 2014 - CSMC served Burgess a second set of requests for production.
• July 28, 2014 - The trial court signed an agreed scheduling order, designating the pleadings deadline as September 5, 2014 (with responsive pleadings to be filed by September 12, 2014), the discovery deadline as October 17, 2014, and the trial date as November 17, 2014.
• August 13, 2014 - CSMC filed a motion for a protective order, seeking to avoid responding to some of Burgess's discovery requests that it contended were harassing, overbroad, and irrelevant.
• August 15, 2014 - CSMC filed a "supplemental motion for summary judgment," in which it moved for traditional summary judgment on its own declaratory judgment action asserting that its hospital lien is valid and on Burgess's declaratory judgment action asserting that the lien is invalid. CSMC incorporated by reference "all prior summary judgment motions, briefing and evidence previously filed and submitted to the Court by CSMC."
• September 3, 2014 - Burgess filed a response to CSMC's August 15, 2014 "supplemental motion for summary judgment." Burgess argued in part that the charges that CSMC seeks to collect from her are unreasonable because they exceed the charges that CSMC agreed to accept from Aetna, under the terms of the HSA, as payment in full for the medical services that it provided to her.
• September 5, 2014 - Burgess filed her fourth amended petition, adding the breach-of-contract cause of action against CSMC that alleges that CSMC breached the HSA. Specifically, Burgess pleaded:
At the time of the events described herein, Defendant had in force a "Hospital Services Agreement" (the Contract) with Aetna Health, Inc. . . .CSMC did not amend its answer in response to Burgess's fourth amended petition.
Despite the terms of the Contract requiring Defendant to submit its bills for medical services provided to Plaintiff to Aetna Health, Inc., Defendant breached the contract by failing and refusing (and continuing to fail and refuse) to submit the bill for Plaintiff's medical services to Plaintiff's health insurer. Instead, on May 10, 2012, CSMC filed a hospital lien with the Brazos County Clerk seeking to collect its master rate (non-discounted rate) of $40,286.15 for the medical services Defendant provided to Plaintiff.
• September 8, 2014 - Burgess served CSMC with her notice of intent to take the deposition of Aetna's corporate representative. Burgess also responded to CSMC's August 13, 2014 motion for protective order and further explained her claims as follows:
On May 1, 2005, Defendant entered into a Hospital Services Contract with Aetna Health, Inc. (the "Contract") . . . . Pursuant to the terms of the Contract, Aetna Health (hereinafter "Aetna") is obligated to pay for covered medical services that are determined to be medically necessary for Aetna's plan members. Plaintiff is an Aetna plan member, and the Contract between CSMC and Aetna was in effect at the time Plaintiff was treated at CSMC on March 21, 2012. Further, pursuant to the terms of the Contract, Aetna agreed to pay, and Defendant CSMC agreed to accept, sixty-five percent (65%) of the hospital's billed charges for outpatient services. Plaintiff was treated at Defendant CSMC for outpatient day surgery to repair Plaintiff's facial fractures.
In this case, Defendant CSMC refused to bill Plaintiff's health insurer, Aetna, as it was contractually obligated to do by the Contract CSMC has with Aetna, and instead filed a hospital lien that seeks to collect 100% of the bill (the "list" or "full" rate) from Plaintiff's third party recovery. CSMC's bill, though, exceeds the Aetna rate of 65% of billed charges for outpatient services, and as such exceeds the "reasonable and
regular rate for the services" in violation of section 55.004(d)(1) of the Texas Property Code. The hospital's Contract with Aetna in this case is an admission by CSMC that 65% (not 100%) of its billed charges is the "reasonable and regular rate" for outpatient medical services, at least with respect to its patients with Aetna health insurance like Plaintiff. [Citations omitted.]
• September 11, 2014 - The trial court conducted a hearing on CSMC's August 13, 2014 motion for protective order and CSMC's August 15, 2014 "supplemental motion for summary judgment," but the trial court did not rule on the motions at that time. The trial court later denied CSMC's August 15, 2014 "supplemental motion for summary judgment."
• September 12, 2014 - Burgess filed her fifth amended petition. Burgess's counsel, however, later acknowledged that the fifth amended petition was not timely filed and stated that he has "no problem with abandoning and/or withdrawing it and relying on the Fourth Amended Petition."
On September 12, CSMC moved the trial court to quash the deposition of Aetna's corporate representative. In addition to objecting to the time and place of the deposition, CSMC argued:
Plaintiff's intention to take the oral deposition of an AETNA HEALTH, INC. Corporate Representative is neither relevant nor likely to lead to the discovery of admissible evidence. Specifically, Plaintiff brought this declaratory-judgment action seeking to invalidate CSMC's Hospital Lien that was filed pursuant to Chapter 55 of the Texas Property Code (the Texas Hospital Lien Statute). Plaintiff is now seeking to depose a corporate representative from Plaintiff's health insurer, AETNA HEALTH, INC., to elicit an interpretation of the Hospital Services Agreement between AETNA and CSMC. In particular, Plaintiff contends that CSMC's Hospital Lien is invalid because CSMC was required to submit its bill to AETNA for reimbursement. However, Chapter 55's legislative history and the
applicable case law interpreting Chapter 55 make clear that a hospital lien applies "without regard to [Plaintiff's] ability to pay."
• October 16, 2014 - Burgess served CSMC with an amended notice of intent to take the deposition of Aetna's corporate representative.
• October 17, 2014 - CSMC again moved the trial court to quash the deposition of Aetna's corporate representative. CSMC also filed a motion to compel Burgess to obtain and produce to CSMC a copy of her Aetna health insurance policy. At that point, Burgess had only produced her insurance card. CSMC additionally filed a combined motion to strike and traditional and no-evidence motion for summary judgment. CSMC moved for traditional summary judgment on Burgess's breach-of-contract cause of action, arguing that Burgess is neither a party to nor a third-party beneficiary of the HSA and that CSMC had conclusively established that it did not breach the HSA. CSMC moved for no-evidence summary judgment on Burgess's breach-of-contract cause of action, arguing that Burgess had produced no legally sufficient evidence that she had a valid contract with CSMC, that she had tendered performance under any contract, that CSMC had breached any contract, or that she had suffered damages as a result of any breach by CSMC. CSMC set its combined motion to strike and traditional and no-evidence motion for summary judgment for a hearing on November 11, 2014.
On October 17, Burgess further filed her own motion for protective order and to file under seal the billing and medical records of certain third-party CSMC patients. That same day, CSMC filed a motion to exclude the billing and medical records of the third-party CSMC patients.
• October 23, 2014 - CSMC filed its response to Burgess's October 17, 2014 motion for protective order and to file under seal the billing and medical records of the certain third-party CSMC patients. CSMC also filed a motion to compel Burgess to produce HIPAA authorizations from the eleven patients whose medical records Burgess had filed and to compel the depositions of those patients. CSMC set the motion to compel, as well as its October 17, 2014 motion to exclude the billing and medical records of the third-party CSMC patients, for a hearing on November 5, 2014.
• November 4, 2014 - Burgess filed her response to CSMC's October 17, 2014 combined motion to strike and traditional and no-evidence motion for summary judgment.
• November 5, 2014 - Burgess filed her response to CSMC's October 17, 2014 motion to exclude the billing and medical records of the third-party CSMC patients. The trial court then conducted a hearing on Burgess's October 17, 2014 motion for protective order and to file under seal the billing and medical records of the certain third-party CSMC patients; CSMC's October 17, 2014 motion to exclude the billing and medical records of the third-party CSMC patients; and CSMC's October 23, 2014 motion to compel Burgess to produce HIPAA authorizations from the eleven patients whose medical records Burgess had filed and to compel the depositions of those patients. The trial court ultimately refused CSMC's motion to exclude the billing and medical records of the third-party CSMC patients from evidence at trial, but it did not go so far as to rule that it would admit them. The trial court ruled that it would give Burgess until the pretrial hearing to produce authorizations from the patients to use the records in the case. The trial court also temporarily sealed the records, pending a formal hearing under Rule of Civil Procedure 76(a), and it denied CSMC's request to compel the deposition of the patients, at least at that time.
At the end of the hearing, CSMC began to argue the merits of its October 17, 2014 combined motion to strike and traditional and no-evidence motion for summary judgment, which was set for a hearing on November 11, 2014. Likewise, Burgess began to argue the merits of the case. Burgess then suggested that, because the case is inevitably headed for an appeal by whichever party loses, the trial court give the parties sixty days to file new cross-motions for summary judgment addressing all the issues in the case so that the case can be finally resolved and appealed. The trial court held an off-the-record discussion with the attorneys and then announced on the record:
Okay. We're back on the record. As I understand it, first of all, the attorneys and the Court had a discussion about the most efficient way to proceed, and what the Court is going to ask the parties to do is to submit what I will refer to as their final summary judgment and submit that to the Court on or before January the 9th, 2015. That's two months and four days. And then the Court will give the parties until January the 19th to file objections to the motion in the context of objections to summary judgment evidence, things like that. I don't have a problem with you filing a reply as well, I guess.
And then after the filing of those replies, if there is an objection to summary judgment evidence, the Court will set a hearing where it can make rulings. If there is no objection to the summary judgment evidence, the Court will make a decision based on the motions. If there is an objection, the Court will make its rulings, and then we'll rule on the motions.
• January 9, 2015 - Burgess filed a consolidated amended motion for summary judgment and amended response to CSMC's motion for summary judgment. Burgess did not move for summary judgment on her breach-of-contract cause of action against CSMC, alleging that CSMC breached the HSA, but she presented argument and evidence in opposition to CSMC's motion for summary judgment on the breach-of-contract cause of action. That same day, CSMC also filed a new combined traditional and no-evidence motion for summary judgment on all claims in the case.
• January 19, 2015 - CSMC filed its response to Burgess's January 9, 2015 consolidated amended motion for summary judgment and amended response to CSMC's motion for summary judgment. CSMC also filed extensive objections to Burgess's summary-judgment evidence and moved the trial court to exclude the objected-to evidence from its consideration.
• January 23, 2015 - Burgess requested leave to file a supplemental consolidated amended motion for summary judgment and amended response to CSMC's motion for summary judgment in order to move for summary judgment on her breach-of-contract cause of action against CSMC and to also file additional responsive briefing. Burgess contemporaneously filed the supplemental consolidated amended motion for summary judgment and amended response to CSMC's motion for summary judgment, as well as her objections to CSMC's summary-judgment evidence and response to CSMC's objections to her summary-judgment evidence. That same day, CSMC filed a letter objecting to Burgess's request to file an additional motion for summary judgment and additional responsive briefing.
• January 26, 2015 - CSMC then filed a motion to strike and objections to Burgess's January 23, 2015 supplemental consolidated amended motion for summary judgment and amended response to CSMC's motion for summary judgment and to Burgess's January 23, 2015 objections to CSMC's summary-judgment evidence and response to CSMC's objections to Burgess's summary-judgment evidence.
• February 4, 2015 - Burgess requested that the parties' cross-motions for summary judgment be set for a hearing on March 2, 2015.
• February 11, 2015 - CSMC requested that its January 19, 2015 and January 26, 2015 objections and motions also be set for the hearing on March 2, 2015.
• February 16, 2015 - CSMC filed objections to the evidence Burgess filed in support of her January 23, 2015 supplemental consolidated amended motion for summary judgment and amended response to CSMC's motion for summary judgment and moved the trial court to exclude the objected-to evidence from its consideration. CSMC also requested that these objections and motion additionally be set for the hearing on March 2, 2015.
• February 17, 2015 - CSMC filed a motion to compel arbitration. In the motion, CSMC moved to compel Burgess to arbitrate not only her breach-of-contract cause of action that had been asserted in her fourth amended petition on September 5, 2014, but also her Civil Practice and Remedies Code Chapter 146 declaratory judgment claim. This latter claim was asserted in Burgess's original petition, filed on February 20, 2013, and had been included in every subsequent amended petition that Burgess had filed. CSMC requested that its motion to compel arbitration also be set for the hearing on March 2, 2015.
• February 27, 2015 - Burgess responded to CSMC's February 17, 2015 motion to compel arbitration, arguing that CSMC had waived its right to arbitrate by substantially invoking the litigation process, that the HSA's arbitration clause did not permit the arbitrator to render a declaratory judgment, and that the HSA's arbitration clause specified that it applied only to disputes between CSMC and Aetna.
• March 2, 2015 - The trial court conducted a hearing. CSMC requested that the trial court first consider its February 17, 2015 motion to compel arbitration "in regards to plaintiff's breach of contract claim that was just asserted for the first time this past September." Burgess responded that she had no objection to the trial court hearing the motion to compel arbitration first but stated, "We obviously object to it in its entirety, and we claim any right that existed to arbitrate, which we don't agree applies here, but to the extent they claim a right applies, we claim that they've waived it by substantially engaging in litigation."
The trial court was skeptical of CSMC's delay in moving for arbitration, stating, "[W]e're down the road several years and we're just now -- I'm just now hearing the word arbitration." CSMC replied:
. . . The motion to compel arbitration did not come into play until plaintiff for the first time on September 5, 2014 -- so just a couple of months ago -- for the first time alleged a breach of contract claim against my client in regards to the contract Aetna has with College Station Medical Center.
In the previous almost two years of the litigation[,] that was never a cause of action asserted, alleged, or brought forth by plaintiff, so obviously we couldn't bring a motion to compel arbitration to a cause of action that wasn't even filed.
September 5, if the Court will remember, was the pleadings deadline set by this Court. That is when plaintiff filed their fourth amended petition and again for the first time alleged a breach of contract as to that particular contract.
The trial court's skepticism was not allayed by CSMC's argument, and the following transpired:
THE COURT: Well, hang on just a second and let me back up here. You said that the contract claim was filed in September?
[CSMC's Counsel]: September 5, Your Honor, with the fourth amended petition.
THE COURT: When did you file your motion to compel arbitration?
[CSMC's Counsel]: We filed it two to three weeks ago, Your Honor.
THE COURT: Just asking, how many times have you seen me between now and then?
[CSMC's Counsel]: None -- well, we were here for pretrial -- for a pretrial motion to interplead funds into the court, so one time.
[Burgess's Counsel]: Well, that's not the only reason we were here. We were here on -- I think we were here for pretrial when you told us that we weren't going to be reached for trial because somebody else was ahead of us.
But we also agreed standing right up there at the Bench -- and this is after they had filed their motion for summary judgment on the breach of contract claim, which the cases suggest that filing a dispositive motion is substantially engaging in litigation.
But you add that, the agreement of Counsel in open court, and I believe we were on the record at that point, that we were both going to file these competing motions for summary judgment and we both agreed in open court that the Court would rule on one of them, such that the case would be ripe for appeal, which would occur inevitably.
THE COURT: I recall that as well.
[Burgess's Counsel]: So I would again assert, as we set forth in our response, that College Station waived its right to arbitrate.
Burgess also noted that CSMC's motion to compel claimed that she had to arbitrate her Chapter 146 claim and asserted her disagreement with that contention. Burgess further asserted that the arbitration agreement limited the arbitrator's authority to award damages and that, because most of her case was requesting a declaratory judgment, "arbitration gets us nothing." Finally, Burgess explained that the arbitration agreement between Aetna and CSMC expressly stated that it only applied to disputes between the parties to the HSA.
CSMC responded, repeating its argument that "this cause of action has been on file less than five months in the trial court." Burgess's Chapter 146 claim had been on file for over two years; therefore, CSMC was presumably speaking only of Burgess's breach-of-contract claim. CSMC also stated that "we never moved affirmatively until we're here today, Your Honor, on plaintiff's breach of contract claim as it applies to our summary judgment action."
The trial court stated, "I believe the motion to compel arbitration must be granted on the contract claim" and then proceeded to address the summary-judgment issues. The trial court first stated that it would "allow" Burgess's January 26, 2015 supplemental consolidated amended motion for summary judgment and amended response to CSMC's motion for summary judgment and her January 26, 2015 objections to CSMC's summary-judgment evidence and response to CSMC's objections to her summary-judgment evidence. The trial court then concurred with CSMC's suggestion that, because the trial court was going to compel arbitration of Burgess's breach-of-contract cause of action, it would not consider the motions for summary judgment on that cause of action.
The trial court then attempted to move on to the motions for summary judgment on Burgess's Chapter 146 claim, but CSMC claimed that Burgess's Chapter 146 claim also had to await the results of the arbitration. Burgess voiced her disagreement, noting that she had asserted her Chapter 146 claim in her original petition two years earlier. CSMC replied:
Our position, Your Honor, in regards to the motion to compel arbitration is that the dec[laratory judgment] action as to [Chapter] 146 is so intertwined because the Court has to go pursuant to the statute and look at the contract, interpret it, make a determination of timeliness, that it's so intertwined with the breach of contract that that has to be part and parcel of what's going to arbitration.
The trial court then asked if Burgess had just raised the Chapter 146 claim in September 2014, and Burgess responded that she had raised that claim in her original petition in February 2013. Burgess also reiterated her argument that CSMC had waived its right to arbitrate when, at the November 5, 2014 hearing (two months after Burgess had pleaded her breach-of-contract cause of action), CSMC "agreed" to resolve the case by submitting cross-motions for summary judgment. At that point, the trial court stated that before finally deciding the arbitration question, it wanted to review the record of the November 5, 2014 hearing.
That same day, the trial court also signed a written order denying CSMC's January 26, 2015 motion to strike and objections to Burgess's January 23, 2015 supplemental consolidated amended motion for summary judgment and amended response to CSMC's motion for summary judgment and to Burgess's January 23, 2015 objections to CSMC's summary-judgment evidence and response to CSMC's objections to Burgess's summary- judgment evidence. The trial court also signed two other written orders overruling CSMC's objections to Burgess's summary-judgment evidence.
• March 3, 2015 - The trial court signed an order overruling Burgess's objections to CSMC's summary-judgment evidence.
• May 8, 2015 - The trial court signed an order denying CSMC's February 17, 2015 motion to compel arbitration after "[h]aving considered Defendant's motion, Plaintiff's response, evidence presented by the parties, the Court's records and the arguments of counsel."
• May 27, 2015 - CSMC filed its notice of appeal from the trial court's May 8, 2015 interlocutory order. As stated above, the sole issue in this appeal is whether the trial court erred in denying CSMC's motion to compel arbitration of Burgess's breach-of-contract cause of action.
Although CSMC also moved to compel arbitration of Burgess's Chapter 146 declaratory judgment claim, CSMC made no such argument at the March 2, 2015 hearing, and CSMC does not argue in this appeal that the trial court erred in denying its motion to compel arbitration of Burgess's Chapter 146 declaratory judgment claim.
We review a trial court's order denying a motion to compel arbitration for an abuse of discretion. Henry v. Cash Biz, LP, 61 Tex. Sup. Ct. J. 401, 2018 WL 1022838, at *3 (Feb. 23, 2018); Brand FX, LLC v. Rhine, 458 S.W.3d 195, 203 (Tex. App.—Fort Worth 2015, no pet.). In this review, we defer to a trial court's factual findings if they are supported by the evidence but review the trial court's legal determinations de novo. Henry, 2018 WL 1022838, at *3; Perry Homes v. Cull, 258 S.W.3d 580, 598 (Tex. 2008); Brand FX, LLC, 458 S.W.3d at 203.
A party seeking to compel arbitration bears the initial burden to establish the existence of an arbitration agreement and to show that the claims raised fall within the scope of the agreement. Henry, 2018 WL 1022838, at *2; In re Kellogg Brown & Root, 80 S.W.3d 611, 615 (Tex. App.—Houston [1st Dist.] 2002, orig. proceeding). Whether there is a valid and enforceable arbitration agreement and whether the claims in dispute fall within the scope of the agreement are legal questions subject to de novo review. Henry, 2018 WL 1022838, at *3; J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003); Brand FX, LLC, 458 S.W.3d at 203. Once a party seeking to compel arbitration proves that a valid arbitration agreement exists and that the claims raised fall within the scope of the agreement, a strong presumption in favor of arbitration arises, and the burden shifts to the party resisting arbitration to establish a defense to enforcing arbitration, such as waiver. Henry, 2018 WL 1022838, at *2; J.M. Davidson, Inc., 128 S.W.3d at 227; Brand FX, LLC, 458 S.W.3d at 203-04. Whether the party resisting arbitration has established a defense to arbitration is a legal issue also subject to de novo review. Brand FX, LLC, 458 S.W.3d at 204; see Perry Homes, 258 S.W.3d at 598. The determination of any facts relevant to a defense, however, is a question of fact for the trial court, which we review deferentially for record support. Brand FX, LLC, 458 S.W.3d at 204; Delfingen US-Tex., L.P. v. Valenzuela, 407 S.W.3d 791, 798 (Tex. App.—El Paso 2013, no pet.). In the end, if an arbitration agreement is present, the claims are encompassed by the agreement, and the party opposing arbitration failed to prove any defense to enforcement, then the trial court has no discretion but to compel arbitration. In re FirstMerit Bank, N.A., 52 S.W.3d 749, 753-54 (Tex. 2001) (orig. proceeding).
We begin with whether CSMC satisfied its initial burden of establishing the existence of an arbitration agreement and of showing that Burgess's breach-of-contract cause of action falls within the scope of the agreement. CSMC contends, and Burgess's appellee's brief does not dispute, that CSMC satisfied this initial burden.
A party seeking to compel arbitration can meet its burden to establish that a valid arbitration agreement covers the claims at issue by producing a signed agreement covering the claims. Courtland Bldg. Co. v. Jalal Family P'ship, Ltd, 403 S.W.3d 265, 270 (Tex. App.—Houston [14th Dist.] 2012, no pet.). The record in this case contains the signed HSA between CSMC and Aetna. Section 8.3.1 of the HSA is entitled "Submission of Claim or Controversy to Arbitration" and states in pertinent part:
Any controversy or claim arising out of or relating to this Agreement including the breach, or validity of this Agreement, but not including the termination of this Agreement, shall be settled by binding arbitration administered by the American Arbitration Association ("AAA") and conducted by a sole Arbitrator ("Arbitrator") in accordance with then prevailing AAA's Commercial Arbitration Rules ("Rules"). Except as modified by this Section 8.3, the arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16, to the exclusion of state laws inconsistent with the Federal Arbitration Act, 9 U.S.C. §§ 1-16 or that would produce a different result . . . . [Emphasis added.]Although Burgess is a non-signatory to the HSA, her breach-of contract cause of action is based on the HSA; therefore, she has subjected herself to the HSA's terms. See In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 739-40 (Tex. 2005) (orig. proceeding); FirstMerit Bank, N.A., 52 S.W.3d at 755 ("[A] litigant who sues based on a contract subjects him or herself to the contract's terms."). Accordingly, we conclude that CSMC satisfied its initial burden of establishing the existence of an arbitration agreement and of showing that Burgess's breach-of-contract cause of action falls within the scope of the agreement.
We next turn to whether Burgess satisfied her burden of establishing a defense to enforcing arbitration. Burgess argued in the trial court and argues again in her appellee's brief in this appeal that CSMC waived its right to arbitrate by substantially invoking the judicial process to her prejudice. To establish such implied waiver, Burgess had the burden of proving that (1) CSMC substantially invoked the judicial process in a manner inconsistent with its claimed right to compel arbitration, and (2) Burgess suffered actual prejudice as a result of the inconsistent conduct. See Henry, 2018 WL 1022838, at *4 (citing G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 511-12 (Tex. 2015), and Perry Homes, 258 S.W.3d at 589-90). As explained below, we conclude that even if Burgess proved that CSMC substantially invoked the judicial process in a manner inconsistent with its claimed right to compel arbitration, Burgess did not carry her heavy burden of showing that she was prejudiced as a result of CSMC's inconsistent conduct.
Detriment or prejudice, in this context, refers to an "inherent unfairness caused by a 'party's attempt to have it both ways by switching between litigation and arbitration to its own advantage.'" G.T. Leach Builders, LLC, 458 S.W.3d at 515 (quoting In re Citigroup Global Mkts., Inc., 258 S.W.3d 623, 625 (Tex. 2008) (orig. proceeding) (per curiam) (quoting Perry Homes, 258 S.W.3d at 597)). Prejudice may therefore result when the movant first seeks to use the judicial process to gain access to information that is not discoverable in arbitration and/or when the nonmovant incurs costs and fees due to the movant's actions or delay. Williams Indus., Inc. v. Earth Dev. Sys. Corp., 110 S.W.3d 131, 135 (Tex. App.— Houston [1st Dist.] 2003, no pet.). Propounding discovery, however, will not, in and of itself, result in waiver of a right to compel arbitration. G.T. Leach Builders, LLC, 458 S.W.3d at 515. Similarly, while delay may be a factor both in terms of whether the movant has substantially invoked the judicial process and whether the nonmovant has suffered prejudice, mere delay is not ordinarily enough, even if it is substantial. Id.
In her attempt to establish that she suffered actual prejudice, Burgess first asserts that the underlying case had been pending for about two years when CSMC finally moved to compel arbitration and that, during that time, her counsel had performed "thousands of dollars' worth of legal services." But Burgess cannot attribute all of the time that the case had been pending before CSMC moved to compel arbitration and all of the legal services performed during that time to CSMC's conduct regarding Burgess's breach-of-contract cause of action.
Burgess filed her original petition about two years before CSMC filed its motion to compel arbitration, but Burgess chose not to assert her breach-of-contract cause of action against CSMC in her original petition. Instead, Burgess waited over one-and-one-half years to add the cause of action in her fourth amended petition. Consequently, until that point, CSMC could not have moved to compel arbitration of the claim or acted inconsistently regarding the claim such that it caused Burgess prejudice. See In re Serv. Corp. Int'l, 85 S.W.3d 171, 175 (Tex. 2002) (orig. proceeding) ("The Fifth Circuit has held that 'a party only invokes the judicial process to the extent it litigates a specific claim it subsequently seeks to arbitrate.'"). The only time during which Burgess could have suffered prejudice as a result of CSMC acting inconsistently regarding her breach-of- contract cause of action was during the five-and-one-half months between the time Burgess filed her fourth amended petition and the time CSMC filed its motion to compel arbitration of the breach-of-contract cause of action.
It is irrelevant in this appeal that when CSMC moved to compel arbitration of Burgess's breach-of-contract cause of action, it also moved to compel arbitration of Burgess's Chapter 146 declaratory judgment claim, which was asserted in her original petition. Burgess's Chapter 146 declaratory judgment claim is a separate claim. CSMC is not contending in this appeal that the trial court erred in denying its motion to compel arbitration of Burgess's Chapter 146 declaratory judgment claim, and Burgess has never contended that CSMC could have been entitled to arbitration of the claim.
Burgess argues that she also suffered actual prejudice because CSMC engaged in discovery under the "liberal Texas discovery rules" before moving to compel arbitration at the last minute. Burgess asserts that much of the discovery in this case might not have been permitted in arbitration. But, again, Burgess cannot attribute this alleged prejudice to inconsistent conduct by CSMC regarding her breach-of-contract cause of action.
Burgess cites the AAA Commercial Rules to support this proposition, but it does not appear that the AAA Commercial Rules were introduced into evidence in this case or that the trial court was asked to take judicial notice of them.
As stated above, the only time during which Burgess could have suffered prejudice as a result of CSMC acting inconsistently regarding her breach-of-contract cause of action was during the five-and-one-half months between the time Burgess filed her fourth amended petition and the time CSMC filed its motion to compel arbitration of the breach-of-contract cause of action. Here, however, Burgess admits in her appellee's brief that all "the written discovery was propounded before [she] filed her fourth amended petition." The record further indicates that no depositions were taken after Burgess filed her fourth amended petition. Consequently, Burgess cannot establish that CSMC first sought to use the judicial process to gain access to information regarding her breach-of-contract cause of action that is not discoverable in arbitration. In fact, Burgess acknowledges in her appellee's brief, "If the breach of contract claim were sent to arbitration, much of the discovery would certainly be useful in the arbitration."
Burgess argues that even if the inquiry is limited to the time period after she filed her fourth amended petition containing her breach-of-contract cause of action, she has still established that she suffered actual prejudice because there is still evidence that her counsel performed substantial work during those five-and-one-half months before CSMC filed its motion to compel arbitration of the breach-of-contract cause of action. But the record indicates that the work Burgess's counsel performed after the filing of her fourth amended petition was largely self-inflicted and/or arose out of prosecuting her other claims. See Price v. Drexel Burnham Lambert, Inc., 791 F.2d 1156, 1159 (5th Cir. 1986) ("[W]e agree that pretrial discovery relating to nonarbitrable subject matter cannot prejudice a party opposing arbitration."); In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 763 (Tex. 2006) (orig. proceeding) (per curiam) (in holding that party had not demonstrated sufficient prejudice to overcome strong presumption against waiver, supreme court noted that party's pre-trial costs were largely self-inflicted in that he sent far more discovery requests than he received and amended his petition multiple times).
The only exception might have been the documents that Burgess filed after the November 5, 2014 hearing. Burgess argues that CSMC agreed at the November 5, 2014 hearing to resolve the underlying case by the parties submitting comprehensive cross-motions for summary judgment on the entire case and that the parties thereafter filed such motions. CSMC did not, however, obtain a ruling on the cross-motions for summary judgment before urging its motion to compel arbitration. And there is no evidence that the work that Burgess's counsel performed after the November 5, 2014 hearing regarding her breach-of-contract cause of action resulted in costs or fees to Burgess that rose to the level of inherent unfairness caused by CSMC's attempt to have it both ways by switching between litigation and arbitration to its own advantage. See G.T. Leach Builders, LLC, 458 S.W.3d at 515.
As stated above, Burgess had the burden to prove that she suffered actual prejudice as a result of CSMC's inconsistent conduct. See Henry, 2018 WL 1022838, at *4. On this record and considering the totality of the circumstances, we conclude that Burgess has not met her heavy burden of establishing that she was actually prejudiced as a result of CSMC's conduct regarding her breach-of-contract cause of action. Accordingly, we conclude that Burgess has not met her burden to prove that CSMC waived its right to arbitrate her breach-of-contract cause of action. See id.
Burgess asserts that much of the work performed during litigation would likely be duplicated in arbitration, that other work performed during litigation might be useless in arbitration, and that CSMC's attempt to compel arbitration is simply delaying the disposition of the case and thereby undermining the primary benefit of arbitration. However, "[o]n motion of a party to an arbitration agreement[,] the trial court must order arbitration even though the order might result in less efficient, separate proceedings." RSL Funding, LLC v. Pippins, 499 S.W.3d 423, 430 (Tex. 2016) (citing Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 217, 105 S.Ct. 1238, 1241, 84 L.Ed.2d 158 (1985)). We therefore sustain CSMC's sole issue and hold that the trial court abused its discretion in denying CSMC's motion to compel arbitration of Burgess's breach-of-contract cause of action. See Henry, 2018 WL 1022838, at *3.
Our holding is limited to the specific issue raised by CSMC in this appeal. Nothing herein should be viewed as a comment on the proper scope of any arbitrator's determination of the issues subject to arbitration.
We reverse the trial court's order denying CSMC's motion to compel arbitration of Burgess's breach-of-contract cause of action and remand this cause to the trial court for further proceedings consistent with this opinion.
REX D. DAVIS
Justice Before Chief Justice Gray, Justice Davis, and Justice Scoggins
Reversed and remanded
Opinion delivered and filed June 6, 2018
[CV06]