Boateng v. Trailblazer Health Enterprises

• Decision Date: 26 July 2005
• Docket Number: No. 14-03-01442-CV.,14-03-01442-CV.
• Citation: 171 S.W.3d 481
• Parties: Afuah BOATENG, Johnell Sanders Fernandez, Sharon Long Gay, Joel S. Hochman, Rosalind Hull, Gloria Ann Tucker, and Missy L. Walker, Appellants v. TRAILBLAZER HEALTH ENTERPRISES, L.L.C. and United States of America, Appellees.
• Court: Texas Supreme Court

171 S.W.3d 481

Afuah BOATENG, Johnell Sanders Fernandez, Sharon Long Gay, Joel S. Hochman, Rosalind Hull, Gloria Ann Tucker, and Missy L. Walker, Appellants v. TRAILBLAZER HEALTH ENTERPRISES, L.L.C. and United States of America, Appellees.

No. 14-03-01442-CV.

Court of Appeals of Texas, Houston, Fourteenth District.

July 26, 2005.

Harry Herzog and David A. Carp, Houston, TX, for appellants.

David J. Schenck, David Lawrence Horan, John H. McDowell, Jr., Matthew Griffith Nielsen, Dallas, Larry Ludka, John A. Smith III, Corpus Christi, TX, for appellees.

Panel consists of Justices ANDERSON, HUDSON, and FROST.

MAJORITY OPINION

KEM THOMPSON FROST, Justice.

At issue in this case is the propriety of the trial court's granting of a bill of review and dismissal of the underlying case for lack of jurisdiction at the preliminary hearing stage of the bill-of-review proceeding. Appellants, a group of judgment creditors, filed a garnishment suit and obtained a default judgment against a privately owned Texas limited liability company. Though not apparent from the face of the garnishment judgment, the garnishee is a fiscal intermediary of the federal government with respect to certain Medicare funds in its possession. More than a year after the garnishment judgment was signed, the United States and the garnishee sought a bill of review, asserting sovereign immunity. The trial court held a preliminary hearing under Baker v. Goldsmith, 582 S.W.2d 404 (Tex.1979), to determine whether the United States and the garnishee had presented prima facie proof of a meritorious defense. After completing the preliminary hearing and taking the matter under consideration, the trial court, without notice, summarily granted the bill of review, declared the garnishment judgment void based on sovereign immunity, and dismissed the underlying garnishment action for lack of jurisdiction. We reverse and remand.

I. FACTUAL AND PROCEDURAL BACKGROUND

On December 21, 2001, appellants Afuah Boateng, Johnell Sanders Fernandez, Sharon Long Gay, Joel S. Hochman, Rosalind Hull, Gloria Ann Tucker, and Missy L. Walker (collectively the "Boateng Parties") obtained a judgment in the amount of $838,466.63 against Rosa Alsobrooks and three of her entities, J & L Community Center, Inc., Houston Southwest Health Services, Inc., and Houston Northeast Health Services, Inc., (collectively the "Alsobrooks Entities") for failure to pay wages and independent contractor fees. Realizing that Alsobrooks and the Alsobrooks Entities could not pay the judgment, on that same day, the Boateng Parties, as judgment creditors, filed a garnishment action against appellee TrailBlazer Health Enterprise, L.L.C. ("TrailBlazer"), alleging that it "is indebted or has in hand effects belonging to one or more of the above described Defendant debtors or the parties named above." On December 21, 2001, the Boateng Parties also sent a fax to TrailBlazer stating that they had filed a garnishment action against TrailBlazer.

The garnishee, TrailBlazer, is a privately owned limited liability company that serves as a fiscal intermediary for the Medicare program. In the simplest terms, a fiscal intermediary acts as a conduit between the government and Medicare providers by determining the amounts to be paid on Medicare claims and disbursing funds provided by the government. Although the Secretary of the United States Department of Health and Human Services ("HHS") is officially charged with the administration of the Medicare Act, the Secretary delegates that task to the Centers for Medicare and Medicaid Services ("CMS"). Marsaw v. Trailblazer Health Enters., L.L.C., 192 F.Supp.2d 737, 740 (S.D.Tex.2002). The Secretary authorizes CMS to contract with private insurance companies to act as fiscal intermediaries or "carriers" by administering certain Medicare reimbursements. Id. (citing 42 C.F.R. § 421.5); see also Matranga v. Travelers Ins. Co., 563 F.2d 677 (5th Cir.1977). CMS contracted with TrailBlazer to administer the Medicare program. At the time of the garnishment, the United States was TrailBlazer's primary customer and most of the funds TrailBlazer handled were Medicare funds. According to the record, however, TrailBlazer also maintained bank accounts containing other funds and held assets owned exclusively by TrailBlazer.

The Alsobrooks Entities, as Medicare providers, regularly presented claims and sought remuneration from TrailBlazer, which processed those claims for payment. Believing that TrailBlazer owed the Alsobrooks Entities funds or had other effects belonging to them in its possession, the Boateng Parties, as judgment creditors, sought to garnish funds owed by TrailBlazer, together with any effects in TrailBlazer's possession belonging to Alsobrooks or the Alsobrooks Entities.

TrailBlazer's Failure to Answer the Writ of Garnishment

TrailBlazer was formally served with process in the garnishment action on January 7, 2002, and its answer date was January 28, 2002. Nonetheless, TrailBlazer did not file an answer to the garnishment action nor did it file any motions with the trial court in response to the writ of garnishment. Instead, TrailBlazer forwarded the garnishment papers to Kendall Walker, Assistant General Counsel at Blue Cross and Blue Shield of South Carolina, TrailBlazer's parent corporation. Because of TrailBlazer's status as a fiscal intermediary with respect to Medicare funds, Walker, in turn, forwarded the garnishment application to Mark Forcier, Assistant Regional Counsel in the Office of the General Counsel of the HHS. Walker informed the Boateng Parties' counsel, Harry Herzog, that he had referred the matter to the United States, and that the United States would be providing TrailBlazer's defense. The United States, however, did not file an answer to the garnishment action nor did it file any motions with the trial court in response to the garnishment suit.

In late January 2002, Forcier spoke to Herzog. According to Forcier, Herzog informed him that his clients, the Boateng Parties, as garnishors, were seeking all receivables that would normally flow from Medicare to Alsobrooks or to the Alsobrooks Entities, the judgment debtors. Forcier shared with Herzog his belief that garnishment was not the correct method by which to obtain Medicare receivables from a Medicare contractor such as TrailBlazer. Forcier described the process, statutes, and regulations that he deemed applicable and appropriate and explained that the United States was the real party in interest in any action involving the administration of the Medicare program. On that same day, Forcier sent an e-mail to Herzog, stating that not only had no money been going to the Alsobrooks Entities "for some time," but that the Alsobrooks Entities owed CMS in excess of three million dollars for overpayments. The e-mail also stated there was an ongoing investigation regarding the extent of possible fraud in prior claims that led to the "huge overpayment." Forcier made no mention of any non-Medicare funds, administrative monies, or effects of Alsobrooks or the Alsobrooks Entities that might be in TrailBlazer's possession.

In the trial court below, Forcier and Herzog proffered different accounts of what transpired as a result of their dialogue about the garnishment action. Forcier understood that the Boateng Parties would use the process set forth in federal regulations rather than the writ of garnishment. Herzog disputes this account and emphasizes that even if Forcier's advice as to the proper procedure to seek Medicare payments were correct, the Boateng Parties were also seeking to obtain other funds and effects in the garnishment action, including administrative funds that allegedly were not payments from Medicare.

Default Judgment Against TrailBlazer

Neither TrailBlazer nor anyone acting or purporting to act on its behalf moved to dismiss or dissolve the garnishment action, obtained any written agreement concerning filing an answer to the suit, or took any other action vis-à-vis the garnishment proceeding. In late June 2002, the Boateng Parties moved for a default judgment against TrailBlazer, and in mid-July 2002, the trial court granted the default judgment.

The default judgment against TrailBlazer makes no mention of TrailBlazer's status as a Medicare fiscal intermediary or that the United States is a real party in interest. The judgment does not mention the United States at all. Instead, the judgment merely sets forth the amounts the Boateng Parties are entitled to recover from TrailBlazer.

After their discussion in late January 2002, Forcier and Herzog had no further communication until October 2002, when Forcier, who apparently was not aware that a default judgment had been taken against TrailBlazer, attempted to contact Herzog about the dismissal of the garnishment action. Herzog responded to Forcier that it was "never [his] intent, understanding, or agreement" that the garnishment action would be dismissed. During October and November 2002, Forcier and Herzog communicated several more times concerning TrailBlazer's status as a Medicare fiscal intermediary, the United States's status as the purported real party in interest in the garnishment action, and the application of sovereign immunity as an alleged bar to the Boateng Parties' action. Herzog, however, made no mention of the default judgment to Forcier or to anyone at TrailBlazer, and, again, neither Forcier nor anyone else acting for TrailBlazer or the United States took any action in the garnishment proceeding.

In early August 2003, an attempt was made to execute on TrailBlazer's property to satisfy the Boateng Parties' judgment against TrailBlazer. According to TrailBlazer, this was the first time that either TrailBlazer or the United States learned that a default judgment had been entered against TrailBlazer based on its failure to answer in the garnishment action.

The Bill-of-Review Proceeding

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