Allen v. Tex. Children's Health Plan
| Decision Date | 30 June 2022 |
| Docket Number | 01-21-00016-CV |
| Citation | 649 S.W.3d 830 |
| Parties | Ashley ALLEN, Individually and as Next Friend of Z.A. and A.A., Minors; Leah Alsadi, Individually and as Next Friend of G.A., a Minor; Mona Bradley, Individually and as Next Friend of A.W., a Minor; Christen Glazener, Individually and as Next Friend of C.G., a Minor; Shauna Stewart, Individually and as Next Friend of S.S., a Minor; Tammy Wolven, Individually and as Next Friend of T.W., a Minor, Appellants v. TEXAS CHILDREN'S HEALTH PLAN, Appellee |
| Court | Texas Court of Appeals |
Louis Williams, Houston, Jadd Fitzgerald Masso, Dallas, Gary J. Siller, Houston, for Appellant.
Darryl Wade Anderson, Houston, Dov Preminger, Austin, for Appellee.
Panel consists of Justices Kelly, Goodman, and Guerra.
The trial court granted Texas Children's Health Plan's plea to the jurisdiction and dismissed the appellants’ suit for lack of subject-matter jurisdiction. We affirm.
The Texas Health and Human Services Commission or HHSC created the STAR Kids Program, which is funded in part by the federal government, to provide healthcare for disabled and sick children eligible for Medicaid benefits. The HHSC has contracted with Texas Children's Health Plan, a managed care organization or MCO, to provide services under the STAR Kids Program. We will refer to this particular contract as the STAR Kids Contract or Contract.
Texas Children's Health Plan, in turn, contracts with healthcare providers to provide services to the children in the STAR Kids Program. Apple Homecare Medical Supply, Inc. used to be one of the providers within the Plan's network.
In 2018, Texas Children's Health Plan terminated Apple Homecare Medical Supply from the Plan's provider network. Apple Homecare Medical Supply challenged this decision. In the resulting arbitration, an arbitrator ruled that the Plan had lawfully terminated Apple Homecare Medical Supply from the provider network based on false statements Apple Homecare Medical Supply had made to parents of the children in the STAR Kids Program.
In 2020, a Harris County District Court confirmed the arbitration award. Apple Homecare Medical Supply did not appeal from that judgment.
But afterward, the appellants, seven children in the STAR Kids Program and their next friends, sued Texas Children's Health Plan to enjoin it from requiring them to switch to a provider other than Apple Homecare Medical Supply, from which they have obtained medical equipment, supplies, and services. The appellants allege that requiring them to switch providers is a breach of the STAR Kids Contract, which they are entitled to enforce as third-party beneficiaries.
Texas Children's Health Plan filed a plea to the jurisdiction, arguing that the trial court lacked subject-matter jurisdiction to hear the appellants’ suit because they are not third-party beneficiaries of the STAR Kids Contract and therefore lack standing to sue for an alleged breach of the Contract. The trial court granted the Plan's plea and dismissed the suit for lack of jurisdiction.
The appellants now appeal from the trial court's jurisdictional dismissal.
The appellants argue the trial court erred in dismissing their suit for lack of jurisdiction. They maintain they have standing as third-party beneficiaries to sue Texas Children's Health Plan for its alleged breach of the STAR Kids Contract.
Whether someone is a third-party beneficiary of a contract and can sue for the breach of its terms is a question of standing. See, e.g., S. Tex. Water Auth. v. Lomas , 223 S.W.3d 304, 306–08 (Tex. 2007) (per curiam) (). We review questions of standing de novo. Farmers Tex. Cty. Mut. Ins. Co. v. Beasley , 598 S.W.3d 237, 240 (Tex. 2020).
In general, the benefits and burdens of a contract belong solely to the contracting parties. First Bank v. Brumitt , 519 S.W.3d 95, 102 (Tex. 2017). Third-party beneficiaries are an exception to this general rule. Id. If noncontracting parties qualify as third-party beneficiaries, they may sue for breach of the contract. Id.
Unless a statute or other legal rule provides otherwise, a person's status as a third-party beneficiary depends solely on the contracting parties’ intent. Id. When, as here, a contract is unambiguous, we ascertain the contracting parties’ intent from the words of the contract, which we interpret as a matter of law. Id. at 102, 105–07. As with any other question concerning the meaning of a contract, we interpret it as a whole. Id. at 102. We consider the entire contract and give effect to all its provisions so none is made meaningless. Tawes v. Barnes , 340 S.W.3d 419, 425 (Tex. 2011). We cannot look to extrinsic evidence to add to or alter the terms of an unambiguous contract, including when deciding whether it confers third-party beneficiary status on noncontracting parties. First Bank , 519 S.W.3d at 109–10.
Contracts often benefit noncontracting parties. Id. at 104. Likewise, the contracting parties are often aware that their contractual performance will benefit noncontracting parties. Id. But these circumstances—benefit and awareness of the benefit—do not make the noncontracting parties third-party beneficiaries. Id. Even if noncontracting parties are directly affected by the contracting parties’ performance or have a substantial interest in the contract's enforcement, these circumstances do not make these noncontracting parties third-party beneficiaries of the contract. Sharyland Water Supply Corp. v. City of Alton , 354 S.W.3d 407, 421 (Tex. 2011).
To confer third-party beneficiary status, a contract must show that the contracting parties intended to secure a benefit to the third party and entered the contract directly for the third party's benefit. First Bank , 519 S.W.3d at 102. Moreover, the contract must show that the contracting parties intended to grant the third party the right to enforce the contract in the event of a breach. Id. at 102, 105.
A contract can expressly disclaim the intent to create third-party beneficiaries. Id. at 103. But the absence of an express disclaimer is not dispositive. Id. A contract's failure to expressly name noncontracting parties as third-party beneficiaries is also not dispositive. City of Houston v. Williams , 353 S.W.3d 128, 145 (Tex. 2011).
We presume a contract does not confer third-party beneficiary status on noncontracting parties. First Bank , 519 S.W.3d at 103. To overcome this presumption, the contract must express an intent to make a noncontracting party a third-party beneficiary in clear and unequivocal language. Id. Because clear and unequivocal language is required, third-party beneficiary status cannot be implied. Id. If the contract's language leaves any doubt about the parties’ intent, this doubt must be resolved against the recognition of would-be third-party beneficiaries. Id.
A noncontracting party suing for breach of contract as a third-party beneficiary bears the burden of demonstrating this status. Id. at 102. He cannot carry this burden based on a mere description of the contract's purpose or intended use. Jody James Farms v. Altman Grp. , 547 S.W.3d 624, 635 (Tex. 2018). To qualify as a third-party beneficiary, he must benefit from the contract more than incidentally. Lomas , 223 S.W.3d at 306. He must be either a donee or creditor beneficiary. Id. One is a donee beneficiary if the performance promised to him will come as a pure donation. Id. One is a creditor beneficiary if the promised performance will come to satisfy a duty or enforceable commitment owed to him by the promisee. Id.
The appellants initially suggest that it is debatable whether the issue of third-party beneficiary status implicates standing and subject-matter jurisdiction or is merely a potential defense on the merits. However, our Supreme Court has held that when a person is not a third-party beneficiary of a contract, he lacks standing to sue under the contract and the trial court lacks subject-matter jurisdiction to hear his suit. Lomas , 223 S.W.3d at 306–08 ; see also Data Foundry v. City of Austin , 620 S.W.3d 692, 697 (Tex. 2021) (); Williams , 353 S.W.3d at 145–49 ().
We acknowledge that our court's decisions on this subject are not consistent. For example, in Schlein v. Griffin , we stated that third-party beneficiary status goes to capacity, not standing. No. 01-14-00799-CV, 2016 WL 1456193, at *5 (Tex. App.—Houston [1st Dist.] Apr. 12, 2016, pet. denied) (mem. op.). But some of our earlier decisions are to the contrary. E.g., City of Houston v. Guthrie , 332 S.W.3d 578, 595, 599–600 (Tex. App.—Houston [1st Dist.] 2009, pet. denied) (); Cassidy v. TeamHealth , No. 01-08-00324-CV, 2009 WL 2231217, at *3 (Tex. App.—Houston [1st Dist.] July 23, 2009, pet. denied) (mem. op.) ( parties who were neither signatories nor third-party beneficiaries lacked standing to sue under contract and affirming trial court's order granting plea to jurisdiction).
Notably, our decision in Schlein did not reference the Supreme Court's decisions in Lomas or Williams. Whatever the correct approach may be, we are bound to apply the Supreme Court's most recent decisions on this matter. See Lubbock Cty. v. Trammel's Lubbock Bail Bonds , 80 S.W.3d 580, 585 (Tex. 2002) (...
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