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King v. Pharmerica

Court of Appeals of Texas, Fifth District, Dallas
Jan 23, 2006
No. 05-05-00296-CV (Tex. App. Jan. 23, 2006)

Opinion

No. 05-05-00296-CV

Opinion Filed January 23, 2006.

On Appeal from the 162nd Judicial District Court, Dallas County, Texas, Trial Court Cause No. 03-13191.

Affirmed.

Before Justices MORRIS, MOSELEY, and RICHTER.


MEMORANDUM OPINION


This is a "traditional" summary judgment case. See Tex. R. Civ. P. 166a(c). Appellants Don King and Carolyn Goodman assert that the trial court erred in granting appellee's motion for summary judgment. We affirm the trial court's judgment.

FACTS

Appellants were the owners of capital stock of Sensitive Care, Inc., which operated a number of nursing home facilities. Pursuant to a written contract, PharMerica, Inc. provided infusion therapy services as well as skilled nursing labor to patients at Sensitive Care facilities.

After Sensitive Care was placed into involuntary Chapter 7 bankruptcy, the United States sued Sensitive Care in an adversary proceeding for the alleged submission of false claims under the federal Medicare program and for its alleged conspiracy with PharMerica to submit false reports. The bankruptcy trustee thereafter filed a counterclaim against the government for unpaid reimbursements from Medicare. He also filed a third-party complaint against PharMerica based on its contractual agreement to indemnify Sensitive Care from Medicare denials and other liability to the United States for false claims or denials of cost reimbursements by Medicare. PharMerica subsequently filed a counterclaim against the trustee in the adversary proceeding.

The United States, the trustee, and PharMerica ultimately reached a compromise in the adversary proceeding. The trustee filed a motion seeking the bankruptcy court's approval of the agreed settlement, which provided that (1) the United States would withdraw its claims for damages and civil penalties and dismiss the complaint with prejudice; (2) the trustee would waive his claim for reimbursement under the Medicare program and dismiss with prejudice his counterclaim against the United States; (3) PharMerica would dismiss without prejudice its counterclaim against the trustee; and (4) the trustee would dismiss with prejudice as "moot" his third-party complaint against PharMerica. In May of 2002, the bankruptcy court entered its order approving the compromise and memorializing the terms of the negotiated settlement. The bankruptcy court ordered the trustee to file stipulations for dismissal consistent with the May 2002 order. The trustee subsequently dismissed the claim against the United States, but he failed to dismiss the third-party complaint against PharMerica.

In December of 2002, as part of a settlement with appellants in another proceeding, the trustee assigned to appellants the bankruptcy estate's remaining claims, "if any," against PharMerica. The assignment specifically excluded the indemnity claim that had been compromised in the adversary proceeding discussed above.

In October of 2003, the trustee filed a motion to allow appellants' attorney to become attorney of record in the adversary proceeding and to amend the third-party complaint against PharMerica to add claims that had been assigned to appellants. After a hearing on the trustee's motions, the bankruptcy court dismissed the adversary proceeding pursuant to the terms of the May 2002 order.

The trustee contested the December 2003 order, and the bankruptcy court entered a clarifying order that modified the December 2003 dismissal order to include the following language: "The motions to substitute counsel and for leave to file an amended complaint are denied as unnecessary and untimely, respectively." The court reasoned that there was no need to substitute counsel in an adversary proceeding that must be dismissed pursuant to "a binding and final court order."

The trustee subsequently appealed to the U.S. District Court for the Northern District of Texas. The court concluded that, because the trustee had failed to comply with the May 2002 order with respect to the claims against PharMerica, the bankruptcy court had the discretion to dismiss the adversary proceeding. The court affirmed the bankruptcy court's clarifying order and thus its dismissal of the adversary proceeding pursuant to the terms of the May 2002 order.

Appellants subsequently filed a state court lawsuit against PharMerica. They claimed that, without Sensitive Care's knowledge, PharMerica had been charging and invoicing excessive prices for its infusion therapy services and that Sensitive Care unwittingly passed these excessive costs on to the Medicare program. Appellants cited negligent misrepresentation, negligence, fraud, breach of contract, and breach of fiduciary duty as their causes of action.

PharMerica moved for summary judgment based on res judicata and judicial estoppel. The trial court granted the motion without explanation. Appellants now argue that neither basis could support summary judgment and that the trial court erred in granting PharMerica's motion.

STANDARD OF REVIEW

We review a summary judgment de novo to determine whether a party's right to prevail is established as a matter of law. Dickey v. Club Corp. of Am., 12 S.W.3d 172, 175 (Tex.App.-Dallas 2000, pet. denied). The standards for reviewing a "traditional" summary judgment under rule 166a(c) are well established. Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985); Orozco v. Dallas Morning News, Inc., 975 S.W.2d 392, 394 (Tex.App.-Dallas 1998, no pet.). When a defendant moves for summary judgment on its affirmative defenses, it must conclusively prove all the essential elements of its defense as a matter of law, leaving no genuine issues of material fact. Seagraves v. City of McKinney, 45 S.W.3d 779, 782 (Tex.App.-Dallas 2001, no pet.). A matter is conclusively established if ordinary minds could not differ as to the conclusion to be drawn from the evidence. Triton Oil Gas Corp. v. Marine Contractors Supply, Inc., 644 S.W.2d 443, 446 (Tex. 1982). Once the defendant establishes its right to summary judgment as a matter of law, the burden shifts to the plaintiff to present evidence raising a genuine issue of material fact, thereby precluding summary judgment. Muckelroy v. Richardson Indep. Sch. Dist., 884 S.W.2d 825, 828 (Tex.App.-Dallas 1994, writ denied) (citing City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979)). In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the nonmovant will be taken as true. Nixon, 690 S.W.2d at 548-49. Every reasonable inference must be indulged in favor of the nonmovant and any doubts resolved in its favor. Id.

ISSUE ONE: RES JUDICATA

In their first issue, appellants argue that the trial court erred in granting PharMerica's motion for summary judgment based on the affirmative defense of res judicata. According to appellants, the dismissal of the trustee's third-party action in the adversary proceeding did not bar them from filing the state court lawsuit as Sensitive Care's assignees. We disagree.

The preclusive effect of a prior federal court judgment is controlled by federal res judicata rules. Ellis v. Amex Life Ins. Co., 211 F.3d 935, 937 (5th Cir. 2000); see also, John G. and Marie Stella Kenedy Memorial Foundation v. Dewhurst, 90 S.W.3d 268, 287 (Tex. 2002). The federal doctrine of res judicata bars a second suit when (1) the parties to both actions are identical or are in privity; (2) the judgment in the first action is rendered by a court of competent jurisdiction; (3) the first action concluded with a final judgment on the merits; and (4) the same claim or cause of action is involved in both suits. Ellis, 211 F.3d at 937.

PharMerica's proof of res judicata

Appellants do not dispute that they are in privity with Sensitive Care and that the bankruptcy court was a court of competent jurisdiction. Therefore, we must determine whether PharMerica proved the remaining two elements of its affirmative defense.

First, PharMerica's summary judgment evidence shows that the bankruptcy court dismissed the adversary proceeding pursuant to the terms of the May 2002 order. The relevant portion of the May 2002 order reads: "The Trustee will dismiss with prejudice as moot his third party Complaint against PharMerica." We must determine if this dismissal was a final judgment on the merits.

A dismissal with prejudice is a judgment on the merits for res judicata purposes. See Brooks v. Raymond Dugat Co., L.C., 336 F.3d 360, 362 (5th Cir. 2003). Appellants argue, however, that the words "as moot" render the phrase "with prejudice" meaningless. We disagree. A federal action may become moot when (1) the controversy is no longer live or (2) the parties lack a personal stake in its outcome. Rocky v. King, 900 F.2d 864, 867 (5th Cir. 1990). Our review of federal case law indicates that, when a claim is moot only under the current circumstances, federal courts will dismiss without prejudice to preserve the claim for future disputes. See, e.g., Chatanooga Mfg., Inc. v. Nike, Inc., 301 F.3d 789, 795-96 (7th Cir. 2002). However, to prevent regeneration of the controversy and to avoid waste of judicial resources in light of res judicata, federal courts will dismiss a moot claim with prejudice. See, e.g., Deakins v. Monaghan, 484 U.S. 193, 200 (1988) (because the issue was rendered moot by respondents' willingness to permanently withdraw their claims from the federal action, the court concluded that dismissal with prejudice was indicated); In re Arbitration Between Trans Chem. Ltd. v. China Nat'l. Mach. Import and Export Corp., 978 F.Supp. 266, 313 (S.D. Tex. 1997), aff'd per curium 161 F.3d 314 (5th Cir. 1998). Thus, it is the "with prejudice" or "without prejudice" language that determines a claimant's right to reassert the claim and the applicability of res judicata. The addition of the term "as moot" is merely conclusory.

Therefore, because the summary judgment evidence reflects that the claim was dismissed "with prejudice," PharMerica has demonstrated that the trustee's third-party action for indemnity against PharMerica concluded with a final judgment on the merits.

Second, we must determine if PharMerica's summary judgment evidence established that appellants' lawsuit and the adversary proceeding involve the same claim or cause of action. To determine whether two cases involve the same causes of action for res judicata purposes, the Fifth Circuit utilizes a "transactional" test. See Blum v. Restland of Dallas, Inc., 971 S.W.2d 546, 551 (Tex.App.-Dallas 1997, pet. denied) (citing In re Baudoin, 981 F.2d 736, 743 (5th Cir. 1993)). Under this approach, the critical issue is not the relief requested or the theory asserted, but whether the plaintiff bases the two actions on the same nucleus of operative facts. See Agrilectric Power Partners, Ltd. v. General Electric Co., 20 F.3d 663, 665 (5th Cir. 1994). If the factual scenario of the two actions parallel, the same cause of action is involved in both. Id. The substantive theories advanced, forms of relief requested, types of rights asserted, and variations in evidence needed do not impact this inquiry. Id. Applying this test to this case, we conclude that PharMerica did conclusively establish that the two actions are based on the "same nucleus of operative facts." The evidence shows that both cases arose directly from Sensitive Care's alleged submission to the government of false claims for reimbursement for infusion therapy and related services in its Medicare cost reports. Both cases claim that PharMerica is responsible for the liabilities that Sensitive Care incurred to the government as a result of the alleged Medicare fraud. In the state court lawsuit, appellants were merely asserting new legal theories stemming from the same facts-theories that could have been timely asserted by the bankruptcy trustee in the adversary proceeding. See United Home Rentals, Inc. v. Texas Real Estate Comm'n., 716 F.2d 324, 328 (5th Cir. 1983) (the effect of the judgment in the first suit extends to the litigation of all issues relevant to the same claims, whether or not raised in the first action). Therefore, PharMerica's summary judgment evidence demonstrates that the same claim was involved in both suits.

Our review of the record determines that appellants did not raise a genuine issue of material fact in response. Therefore, we conclude that PharMerica proved that it was entitled to the affirmative defense of res judicata.

Accordingly, we overrule appellants' first issue.

CONCLUSION

Because the trial court could have granted summary judgment based on PharMerica's affirmative defense of res judicata, we need not review appellants' second issue regarding judicial estoppel. See Harwell v. State Farm Mut. Auto. Ins. Co., 896 S.W.2d 170, 173 (Tex. 1995) (when a trial court's order granting summary judgment is silent as to the reasoning upon which the ruling is based, the appellate court should affirm if any ground advanced in the motion is meritorious). Accordingly, we affirm the judgment of the trial court.


Summaries of

King v. Pharmerica

Court of Appeals of Texas, Fifth District, Dallas
Jan 23, 2006
No. 05-05-00296-CV (Tex. App. Jan. 23, 2006)
Case details for

King v. Pharmerica

Case Details

Full title:DON KING AND CAROLYN GOODMAN, Appellants, v. PHARMERICA, INC., Appellee

Court:Court of Appeals of Texas, Fifth District, Dallas

Date published: Jan 23, 2006

Citations

No. 05-05-00296-CV (Tex. App. Jan. 23, 2006)