Date: 04-02-2015

Case Style: Richard J. Malouf, DDS; Richard J, Malouf, DDS, PC; and Richard J. Malouf, DDS, PA v. The State of Texas ex rel. Dr. Christine Ellis, DDS and Madelayne Castillo

Case Number: 03-14-00036-CV

Judge: Melissa Goodwin

Court: Texas Court of Appeals, Third Court of Appeal from 126th District Court of Travis County

Plaintiff's Attorney: Margaret M. Moore, Mark G. Einfalt, David Wright, Braden Civins, Matthew Miller, Raymond C. Winter, Damon T. Ong and Douglas D. Geyser for The State of Texas ex rel.

Ketan U. Kharod and Mr. Daniel L. Hargrove for Dr. Christine Ellis, DDS

Mike Tibbals for Madelayne Castillo

Defendant's Attorney: Tom Watkins, Elizabeth Bloch and Lorinda Holloway for Richard J. Malouf, DDS

Tony Canales for Richard J. Malouf, DDS, PA

Description: This interlocutory appeal presents the issue of whether claims brought by appellees
the State of Texas and relators Dr. Christine Ellis, DDS, and Madelayne Castillo under the Texas
Medicaid Fraud Prevention Act (TMFPA), see Tex. Hum. Res. Code §§ 36.001–.132, are subject
to the expert-report requirement of the Texas Medical Liability Act (TMLA), see Tex. Civ. Prac.
& Rem. Code § 74.351. Appellants Richard J. Malouf, DDS, Richard J. Malouf, DDS, PC, and
Richard J. Malouf, DDS, PA (collectively the Malouf Defendants) challenge the trial court’s order
denying their motion to dismiss for failure to provide an expert report under the TMLA. See id.
Because we conclude that the TMLA does not apply to appellees’ claims brought under the TMFPA,
we affirm the trial court’s order.
BACKGROUND
The Malouf Defendants, a dentist, his professional corporation, and his professional
association, are health care providers under the TMLA. See Tex. Civ. Prac. & Rem. Code § 74.001
(12)(A) (defining “health care provider” to mean “any person, partnership, professional association,
corporation, facility, or institution duly licensed, certified, registered, or chartered by the State of
Texas to provide health care”). They participate in the Texas Medicaid Program and seek payments
from the State under the program for dental and orthodontic services provided to Medicaid
beneficiaries. See 1 Tex. Admin. Code § 354.1131 (Texas Health & Human Servs. Comm’n,
Payments to Eligible Providers) (describing payments under Texas Medicaid Program).
This action is a consolidation of two cases originally filed by relators Ellis and
Castillo under seal against the Malouf Defendants for alleged “unlawful acts” in violation of the
TMFPA. See Tex. Hum. Res. Code §§ 36.002 (listing “unlawful acts”), .101 (authorizing person
to bring civil action in name of person and State for violation of section 36.002 ), .102 (requiring
person to file petition in camera, petition to remain under seal for 180 days or “date on which the
state elects to intervene,” and prohibiting service on defendant until court orders service). In
June 2012, the State intervened and assumed primary responsibility for prosecuting relators’ claims.
See id. §§ 36.102(c) (authorizing State to intervene), .107(a) (noting that, when State intervenes, it
has “primary responsibility” and “not bound by an act of the person bringing the action”).
The State and relators seek civil penalties and the amount of payments that the State
paid to the Malouf Defendants under the Medicaid program as a result of the Malouf Defendants’
alleged unlawful acts, including false statements, misrepresentations of material fact, and failure to
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disclose.1 See id. §§ 36.002 (listing “unlawful acts”), 36.052 (authorizing civil remedies including
amount of payments and civil penalties). The State also seeks injunctive relief. See id. § 36.051
(authorizing injunctive relief).
In October 2013, the Malouf Defendants moved to dismiss the suit and requested
attorney’s fees under section 74.351 of the TMLA on the ground that appellees had not provided an
expert report. See Tex. Civ. Prac. & Rem. Code § 74.351(a), (b). The Malouf Defendants contended
that appellees’ claims were “health care liability claims” under the TMLA and thus subject to the
expert report requirement. See id. § 74.001(a)(13) (defining “health care liability claim”). In
response, appellees urged that the TMLA did not apply to their claims. After a hearing, the trial
court denied the motion to dismiss, and this interlocutory appeal followed. See id. § 51.014(a)(9)
(authorizing interlocutory appeal from denial of motion brought under section 74.351(b)).
ANALYSIS
Resolution of this appeal turns on whether the expert report requirement of the TMLA
applies to appellees’ claims brought under the TMFPA. In two issues, the Malouf Defendants urge
that appellees’ claims are “health care liability claims” under the TMLA and thus subject to the
TMLA’s expert report requirement and that appellees’ claims are not otherwise exempt from the
expert report requirement.
1 Appellees’ allegations of “unlawful acts” by the Malouf Defendants include that: (i) the
Malouf Defendants misrepresented or concealed that they provided services that were not medically
necessary or that failed to meet the appropriate Medicaid standards, (ii) they failed to properly
document services, (iii) they allowed unqualified persons to perform services, (iv) they billed for
services that were not provided, (v) they over-billed for services that were provided, (vi) they used
kickbacks to recruit Medicaid clients, and (vii) they failed to follow applicable state and federal law.
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Standard of Review
The Malouf Defendants’ issues address the scope of claims that the TMLA reaches.
“The nature of the claims the Legislature intended to include under the TMLA’s umbrella is a
matter of statutory construction, a legal question we review de novo.” Texas W. Oaks Hosp., LP
v. Williams, 371 S.W.3d 171, 177 (Tex. 2012).
Our primary concern in construing a statute is the express statutory language. See
Galbraith Eng’g Consultants, Inc. v. Pochucha, 290 S.W.3d 863, 867 (Tex. 2009). “We thus
construe the text according to its plain and common meaning unless a contrary intention is apparent
from the context or unless such a construction leads to absurd results.” Presidio Indep. Sch. Dist.
v. Scott, 309 S.W.3d 927, 930 (Tex. 2010) (citing City of Rockwall v. Hughes, 246 S.W.3d 621,
625–26 (Tex. 2008)). We consider the entire act, not isolated portions. 20801, Inc. v. Parker,
249 S.W.3d 392, 396 (Tex. 2008).
Does the State fall within the definition of a “claimant” under the TMLA?
The Malouf Defendants urge that the State’s claims fall within the definition of a
“health care liability claim” because the Malouf Defendants are health care providers and the claims
allege a departure from the accepted standards of medical or health care for which expert testimony
is required. See Tex. Civ. Prac. & Rem. Code § 74.001(a)(13) (defining “health care liability
claim”)2; Psychiatric Solutions, Inc. v. Palit, 414 S.W.3d 724, 726 (Tex. 2013) (noting prior holding
2 A “health care liability claim” is defined as a “cause of action against a health care provider
or physician for treatment, lack of treatment, or other claimed departure from accepted standards of
medical care, or health care, or safety or professional or administrative services directly related to
health care, which proximately results in injury to or death of a claimant, whether the claimant’s
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“‘that if expert medical or health care testimony is necessary to prove or refute the merits of a claim
against a physician or health care provider, the claim is a health care liability claim’” (citation
omitted)); see also PM Management-Trinity NC v. Kumets, 404 S.W.3d 550, 552 (Tex. 2013)
(noting that TMLA does not allow parties to avoid procedural requirements “by claim-splitting or
any form of artful pleading”); Loaisiga v. Cerda, 379 S.W.3d 248, 255 (Tex. 2012) (listing elements
of health care liability claim); Yamada v. Friend, 335 S.W.3d 192, 196 (Tex. 2010) (noting that
“[w]hether a claim is a health care liability claim depends on the underlying nature of the claim being
made” and that “[a]rtful pleading does not alter that nature” (citation omitted)).
Among other arguments, appellees counter that the State’s claims are not subject to
the TMLA’s expert report requirement because the State does not fall within the definition of a
“claimant” under the TMLA. Under the TMLA,“[o]nly claimants are obligated to serve expert
reports on physicians or health care providers.” See Texas W. Oaks Hosp., 371 S.W.3d at 178 (citing
Tex. Civ. Prac. & Rem. Code § 74.351(a), (b)). Because it is dispositive, we limit our analysis of
the State’s claims to this argument. See Tex. R. App. P. 47.1.
The TMLA defines a “claimant” as “a person, including a decedent’s estate, seeking
or who has sought recovery of damages in a health care liability claim. All persons claiming to have
sustained damages as the result of the bodily injury or death of a single person are considered a
single claimant.” Tex. Civ. Prac. & Rem. Code § 74.001(a)(2). Thus, for the State to fall within the
definition of a “claimant” subject to the expert report requirement, it must fall within the definition
of “person.” The Malouf Defendants argue that the State is a “person” under the TMLA because it
claim or cause of action sounds in tort or contract.” Tex. Civ. Prac. & Rem. Code § 74.001(a)(13).
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falls within the definition of a “person” under the Code Construction Act. See Tex. Gov’t Code
§ 311.005(2) (defining “person” to include the “government or governmental subdivision or agency”
“unless the statute or context in which the word or phrase is used requires a different definition”);
see also Tex. Civ. Prac. & Rem. Code § 1.002 (“The Code Construction Act (Chapter 311,
Government Code) applies to the construction of each provision in this code, except as otherwise
expressly provided by this code.”).
Under the plain language of subsection 74.001(b), however, the legislature makes
clear that the definition of the term “person” provided in the Code Construction Act does not apply
to the term’s uses in the TMLA. See Tex. Civ. Prac. & Rem. Code § 74.001(b). Subsection
74.001(b) expressly requires that “[a]ny legal term or word of art used in this chapter, not otherwise
defined in this chapter, shall have such meaning as is consistent with the common law.” Id.; see also
Crosstex Energy Servs., L.P. v. Pro Plus, Inc., 430 S.W.3d 384, 392 (Tex. 2014) (“use of ‘shall’
normally imposes a mandatory requirement” (citing Tex. Gov’t Code § 311.016(c)). The term
“person” is not defined in the TMLA. See Texas W. Oaks Hosp., 371 S.W.3d at 179 (observing that
“person” not defined in TMLA and concluding “therefore [‘person’] possesses such meaning as is
consistent with the common law” (citing Tex. Civ. Prac. & Rem. Code § 74.001(b)); see also Zanchi
v. Lane, 408 S.W.3d 373, 377–79 (Tex. 2013) (interpreting undefined term “party” in TMLA
consistent with its common law meaning (citing Tex. Civ. Prac. & Rem. Code § 74.001(b)). Thus,
we conclude that the definition of “person” in the Code Construction Act does not apply and apply
the term’s common law meaning.
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Under the common law, there is a “longstanding interpretive presumption that
‘person’ does not include the sovereign,” which “may be disregarded only upon some affirmative
showing of statutory intent to the contrary.” See Vermont Agency of Natural Res. v. United States
ex rel. Stevens, 529 U.S. 765, 780–81 (2000) (applying “our longstanding interpretive presumption
that ‘person’ does not include the sovereign” to term “person” in federal False Claims Act and noting
that presumption “may be disregarded only upon some affirmative showing of statutory intent to the
contrary”); United States v. United Mine Workers of Am., 330 U.S. 258, 275 (1947) (“In common
usage [‘person’] does not include the sovereign, and statutes employing it will ordinarily not be
construed to do so.”); see also Railroad Comm’n v. United States, 290 S.W.2d 699, 702 (Tex. Civ.
App.—Austin 1956), aff’d, 317 S.W.2d 927 (Tex. 1958) (stating common-law rule that the sovereign
“shall not be bound unless the statute is made by express words to extend to [the sovereign]” and
noting that “ordinary legislation is intended merely to regulate the acts and rights of individuals”
(citation and internal quotation marks omitted)). We assume that the legislature was aware of the
common law meaning of the term “person” at the time the TMLA was enacted. See Vermont Agency
of Natural Res., 529 U.S. at 780–81; Acker v. Texas Water Comm’n, 790 S.W.2d 299, 301 (Tex.
1990) (“A statute is presumed to have been enacted by the legislature with complete knowledge of
the existing law and with reference to it.”).
Further, other uses of the term “person” in the TMLA support that the legislature did
not intend for the term in the definition of “claimant” to include the State. See Tex. Civ. Prac.
& Rem. Code § 74.001(a)(2); Scott, 309 S.W.3d at 931 (“Disregarding twenty-one uses of ‘party’
in the surrounding context, all of which do not include the Commissioner, in favor of the single use
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that does is precisely the sort of ‘exaggerated, forced, or constrained meaning’ that we eschew.”);
see, e.g., Tex. Civ. Prac. & Rem. Code §§ 74.001(a)(11)(I) (referring to “persons with mental
retardation”), .001(a)(12)(A) (defining “health care provider” to mean “any person, partnership,
professional association, corporation, facility, or institution duly licensed, certified, registered, or
chartered by the State of Texas to provide health care”), .101 (referring to “reasonable person in
making decision to give or withhold consent”), .102(a) (referring to “patients or persons authorized
to consent for their patients”), .151 (referring to “person” multiple times including “person who in
good faith administers emergency care”), .152 (referring to “[p]ersons not licensed or certified in the
healing arts”), .351(5) (defining expert “with respect to a person giving opinion testimony”).
Moreover, the overall schemes of the TMLA and TMFPA support that the legislature
did not intend for the term “person” in the TMLA’s definition of “claimant” to include the State.
See Tex. Civ. Prac. & Rem. Code § 74.001(a)(2); Parker, 249 S.W.3d at 396; compare Tex. Hum.
Res. Code § 36.102 (addressing initiation of action by filing in camera petition and serving attorney
general with petition to remain under seal for 180 days or until State intervenes and prohibiting
service of petition on defendant until the court orders service) with Tex. Civ. Prac. & Rem. Code
§ 74.051 (requiring “any person” to give written notice of claim with authorization form for release
of protected health information to health care provider at least 60 days before filing suit); compare
Tex. Hum. Res. Code § 36.052 (referring to “person who commits unlawful act” and addressing
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available remedies to State, including amount of payment and civil penalties) with Tex. Civ. Prac.
& Rem. Code §§ 74.301–.303 (addressing liability limits for health care liability claims).3
Considering the common law meaning of the term “person,” other uses of the term
in the TMLA, and the overall schemes of the TMLA and TMFPA, we conclude that the State when
bringing suit under the TMFPA is not a “person” within the definition of “claimant” under the
TMLA and, thus, not subject to the expert report requirement. See Tex. Civ. Prac. & Rem. Code
§ 74.001(a)(2); see, e.g., Shanti v. Allstate Ins. Co., 356 S.W.3d 705, 714 (Tex. App.—Houston
[14th Dist.] 2011, pet. denied) (noting that insurance company “does not fit neatly” into definition
of “claimant” and concluding insurance company not “claimant” under TMLA).
Are relators subject to the TMLA’s expert report requirement?
We also conclude that relators Ellis and Castillo are not subject to the TMLA’s expert
report requirement. The relators’ claims concern payments made by the State and were brought in
the name of the State. See Tex. Hum. Res. Code §§ 36.101 (authorizing person to bring action for
the State), .110 (describing available awards to private plaintiffs depending on whether State
We 3 also note that concluding otherwise would potentially create conflicts between the
schemes of the TMLA and TMFPA. Compare Tex. Hum. Res. Code § 36.112 (allowing award to
defendant for frivolous actions under chapter 105 of Civil Practice and Remedies Code) with Tex.
Civ. Prac. & Rem. Code § 74.351(b) (awarding attorney’s fees and costs when expert report not
served); compare Tex. Hum. Res. Code §§ 36.002 (requiring unlawful act to be committed
“knowingly”), .0011 (defining “knowingly”) with Tex. Civ. Prac. & Rem. Code § 74.303(e)(2)
(requiring jury instruction on “finding of negligence”); compare Tex. Civ. Prac. & Rem. Code
§ 41.002 (stating that chapter 41 does not apply to action brought under chapter 36 of Human
Resources Code) with Tex. Civ. Prac. & Rem. Code §§ 74.001(a)(6) (defining economic damages
as “meaning assigned by Section 41.001”), .002(a) (stating that chapter 74 controls to extent of
conflict with another law).
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proceeds with action and, in context of State’s intervention, basing amount of award on “extent to
which the person substantially contributed to the prosecution of the action”). Relators also do not
seek to recover for an injury that they sustained as a proximate result of conduct by the Malouf
Defendants. See Tex. Civ. Prac. & Rem. Code § 74.001(a)(13) (defining “health care liability claim”
as cause of action for injury or death to claimant proximately caused by health care provider); Scott,
309 S.W.3d at 931 (“Courts must not give the words used by the Legislature an ‘exaggerated, forced,
or constrained meaning.’” (citation omitted)); see also Shanti, 356 S.W.3d at 714 (concluding that
insurance company that alleged damage based on false material representations “does not fit neatly”
into definition of “claimant” under TMLA). Thus, we conclude that relators’ claims brought under
the TMFPA are not subject to the expert report requirement in the TMLA.

Outcome: For these reasons, we overrule the Malouf Defendants’ issues and affirm the trial
court’s order denying their motion to dismiss.

Plaintiff's Experts:

Defendant's Experts:

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