Blue Cross Blue Shield of Texas v. Juneau

• Decision Date: 24 July 2003
• Docket Number: No. 03-02-00545-CV.,03-02-00545-CV.
• Citation: 114 S.W.3d 126
• Parties: BLUE CROSS BLUE SHIELD OF TEXAS, Appellant, v. James J. JUNEAU, Appellee.
• Court: Texas Court of Appeals

114 S.W.3d 126

BLUE CROSS BLUE SHIELD OF TEXAS, Appellant, v. James J. JUNEAU, Appellee.

No. 03-02-00545-CV.

Court of Appeals of Texas, Austin.

July 24, 2003.

Andrew F. MacRae, Michael S. Hull, Hull Henricks & MacRae, L.L.P., Austin, for appellant.

James J. Juneau, Addison, for appellee.

Before Chief Justice LAW, Justices B.A. SMITH and YEAKEL.

OPINION

LEE YEAKEL, Justice.

This appeal arises from a suit by appellant Blue Cross Blue Shield of Texas ("Blue Cross") against appellee James J. Juneau, an arbitrator who, as a member of an arbitration panel, rendered an award in favor of HealthCor Liquidation Trust ("HealthCor") and against Blue Cross. Blue Cross brought suit to vacate the award, naming HealthCor and the individual arbitrators, including Juneau, as defendants. HealthCor removed the action to federal district court, which severed the cause of action against HealthCor and remanded the suit against the arbitrators to the state district court. Blue Cross nonsuited the other arbitrators and supplemented its original petition, alleging that Juneau failed to disclose a previous relationship that Blue Cross contends affected the arbitration process. Juneau, the only remaining defendant, filed a plea to the jurisdiction, which the district court granted. We will affirm the district court's order of dismissal.

BACKGROUND

Juneau and two other arbitrators associated with the American Arbitration Association ("AAA") were appointed to arbitrate a dispute between Blue Cross and Health-Cor. In 1999 HealthCor had declared bankruptcy, and the various entities comprising HealthCor were consolidated into the liquidation trust. HealthCor then filed an adversary proceeding in bankruptcy court against Blue Cross, alleging that Blue Cross had failed to pay for contracted medical services and supplies rendered to patients insured by Blue Cross. After the bankruptcy court dismissed the case, HealthCor moved for arbitration against Blue Cross before an AAA panel, as provided by the Blue Cross-HealthCor contract. The arbitration panel conducted a full evidentiary hearing and unanimously awarded HealthCor damages against Blue Cross.

Blue Cross filed this suit against Health-Cor and the arbitrators in district court, seeking to vacate or modify the award. Blue Cross alleged that the award was the result of "gross mistake" committed by the arbitration panel. HealthCor removed the case to federal district court, where HealthCor's claim to modify or vacate the award was severed and transferred to bankruptcy court. The federal district court remanded Blue Cross's claims against the individual arbitrators, citing no federal jurisdiction. Blue Cross Blue Shield v. HealthCor Liquidation Trust, No. A-01-CA-849-SS (W.D.Tex. Feb. 12, 2002) (final order of transfer and remand). The bankruptcy court initially upheld the arbitration award. See Herzog v. Blue Cross Blue Shield of Tex., Inc. (In re HealthCor Holdings, Inc.), No. 01-3685 (Bankr.N.D.Tex. Mar. 13, 2002) (opinion on motions for summary judgment). However, after deposing Juneau on April 3, 2002, Blue Cross petitioned the bankruptcy court to alter its judgment; the court granted a hearing "solely on [Blue Cross's] defensive issue of possible evident partiality of the arbitrator." Id., No. 01-3685 (Bankr.N.D.Tex. May 10, 2002) (order on Blue Cross's motion to alter judgment, granting new trial on issue of arbitrator partiality); see also Tex. Civ. Prac. & Rem.Code Ann. § 171.088(a)(2)(A) (West Supp.2003). Before any hearing, Health-Cor and Blue Cross settled their dispute. Blue Cross then nonsuited two arbitrators in the state-court action, leaving only Juneau. By a supplemental petition, Blue Cross alleged that Juneau had failed to disclose a prior relationship with a Health-Cor attorney involved in the arbitration process. Blue Cross argued that, had it known of the relationship before arbitration began, Blue Cross would have sought Juneau's disqualification.

Blue Cross's allegations against Juneau stem from his prior relationship with Jeffrey Seckel, an attorney employed by HealthCor. The parties dispute the facts surrounding Blue Cross's discovery of the relationship. As part of Juneau's acceptance of appointment to arbitrate, Juneau indicated in writing, before the arbitration process began, that he had nothing to disclose that might hinder his impartiality.¹ After the arbitration panel rendered its decision and Blue Cross's attempts to vacate the panel's award failed, Blue Cross deposed Juneau. Juneau testified that apart from working at the same Dallas firm as Seckel for a period during the 1980s, Juneau had no association with Seckel. Juneau stated that while at the firm the two were associates in different sections, located on different floors, and did not work together. Juneau testified that he could not recall whether Seckel was in the same associate class, but that he did not have regular contact with Seckel. This relationship, Juneau argues, was not something that required disclosure because it would not affect his impartiality.

Juneau alleges that at the time he made the written statement indicating that he had nothing to disclose, Seckel was not representing HealthCor, and none of the arbitrators knew of Seckel's participation. Juneau states that after he discovered that Seckel was involved with the case, he made an "immediate verbal disclosure [of the relationship] ... to counsel for all parties" during a prearbitration teleconference. Juneau alleges that after the disclosure, Blue Cross offered no objection to his remaining as an arbitrator. Blue Cross rejoins that Juneau breached his duty to disclose "before he became an arbitrator for HealthCor" and that no disclosure occurred during the teleconference. Juneau filed a plea to the jurisdiction, alleging that Blue Cross's claims were barred by the doctrine of "judicial immunity." The district court agreed and dismissed Blue Cross's claims against Juneau for want of subject-matter jurisdiction. Blue Cross appeals.

STANDARD OF REVIEW

Subject-matter jurisdiction is essential to the authority of a court to decide a case. Rylander v. Caldwell, 23 S.W.3d 132, 135 (Tex.App.-Austin 2000, no pet.) (citing Texas Ass'n of Bus. v. Texas Air Control Bd., 852 S.W.2d 440, 443 (Tex. 1993)). "A plea to the jurisdiction challenges the trial court's authority to determine the subject matter of a specific cause of action." Id. (citing Texas State Employees Union/CWA Local 6184 v. Texas Workforce Comm'n, 16 S.W.3d 61, 65 (Tex. App.-Austin 2000, no pet.)). In order to prevail, the party asserting the plea to the jurisdiction must show that even if all the allegations in the plaintiff's pleadings are taken as true, there is an incurable jurisdictional defect apparent from the face of the pleadings, rendering it impossible for the plaintiff's petition to confer jurisdiction on the trial court. See id.

Because subject-matter jurisdiction presents a question of law, we review the district court's decision de novo. Id. In reviewing a trial court's ruling on a plea to the jurisdiction, we do not look at the merits of the case; rather, we "construe the pleadings in favor of the plaintiff," look to the pleader's intent, and accept the pleadings' factual allegations as true. Id. "The truth of the plaintiff's allegations is at issue only if the defendant pleads and proves that the allegations were fraudulently made to confer jurisdiction on the court." Id. Further, "a court deciding a plea to the jurisdiction is not required to look solely to the pleadings but may consider evidence and must do so when necessary to resolve the jurisdictional issues raised." Bland ISD v. Blue, 34 S.W.3d 547, 555 (Tex.2000).

DISCUSSION

By its only issue, Blue Cross argues that the district court erred in sustaining Juneau's plea to the jurisdiction and dismissing the case. Specifically, Blue Cross argues that if there is arbitral immunity, an issue not yet decided by Texas courts, then this Court should adopt a functional approach instead of granting arbitrators absolute immunity. Blue Cross posits that under a functional approach, Juneau would not be immune from this cause of action. Juneau contends that the district court lacked subject-matter jurisdiction because: (1) there existed no justiciable case or controversy between Blue Cross and the individual arbitrators and (2) the doctrine of arbitral immunity barred Blue Cross's claims.

Arbitral Immunity

The district court granted Juneau's plea to the jurisdiction based on arbitral immunity, which is a form of immunity yet to be recognized by Texas courts. This immunity, Juneau argues, protects arbitrators from suit for actions taken during the course and scope of an arbitration, and therefore the district court lacked subject-matter jurisdiction to hear the case. Blue Cross argues that although there may be immunity for arbitrators, a functional approach instead of an absolute approach to immunity should be followed. By applying the functional approach, Blue Cross contends that Juneau would not be immune for his failure to disclose his relationship with Seckel.

Arbitral immunity is derived from judicial immunity, which establishes that judges are absolutely immune from personal liability for judicial acts that are not performed in clear absence of all jurisdiction, regardless of how erroneous the act, or how evil the motive. Stump v. Sparkman, 435 U.S. 349, 355-56, 98 S.Ct. 1099, 55 L.Ed.2d 331 (1978). Persons whose responsibilities are "functionally comparable" to those of a judge are likewise immune from liability. Butz v. Economou, 438 U.S. 478, 510-13, 98 S.Ct. 2894, 57 L.Ed.2d 895 (1978) (immunity extended to executive-branch officials). In Butz, the Court identified a nonexhaustive list of factors to determine whether an agency and its members performed "quasi-judicial" functions entitling them to immunity:

1. the need to assure that the individual can perform his functions without...