Employees Retirement Sys. Texas v. Duenez

• Citation: 288 S.W.3d 905
• Decision Date: 03 July 2009
• Docket Number: No. 07-0410.,07-0410.
• Parties: EMPLOYEES RETIREMENT SYSTEM OF TEXAS, Petitioner, v. Xavier DUENEZ and Irene Duenez, Respondents.
• Court: Texas Supreme Court

288 S.W.3d 905

EMPLOYEES RETIREMENT SYSTEM OF TEXAS, Petitioner, v. Xavier DUENEZ and Irene Duenez, Respondents.

No. 07-0410.

Supreme Court of Texas.

July 3, 2009.

Greg W. Abbott, Attorney General of Texas, Kent C. Sullivan, First Asst. Atty. Gen., David S. Morales, Rafael Edward Cruz, Office of Atty. Gen., Kristofer S. Monson, Asst. Solicitor Gen., Austin, TX, for Petitioner.

Cynthia T. Sheppard, Cuero, TX, David C. Griffin, John W. Griffin Jr., Marek, Griffin & Knaupp L.L.P., Victoria, TX, Ruth A. Kollman, Corpus Christi, TX, for Respondents.

Justice BRISTER delivered the opinion of the Court, in which Chief Justice JEFFERSON, Justice O'NEILL, Justice MEDINA, Justice GREEN, and Justice WILLETT joined.

The curious question in this case is whether a state agency can demand dismissal of its own claim in court because it failed to exhaust administrative remedies in front of itself. The Employees Retirement System of Texas ("ERS") asserts a subrogation claim against former member Xavier Duenez and his family, seeking reimbursement of funds it paid their health-care providers. After the claim was filed in court, ERS sought to dismiss it because it had exclusive jurisdiction of its own claim.

The Legislature granted ERS exclusive jurisdiction of questions relating to "payment of a claim," but ERS's subrogation suit seeks collection of a claim. When it pays claims, ERS holds the money and can require claimants to come and get it through the agency's administrative processes. But when ERS collects claims, someone else holds the money and has no reason to join ERS's administrative processes. That is why the first thing ERS's agent had to do was file suit in court.

Exhaustion of administrative remedies cannot be a prerequisite to filing suit when filing suit is itself a prerequisite to exhausting those administrative remedies. Because ERS does not have exclusive jurisdiction of this claim, the court of appeals' opinion does not conflict with any of our own, so we dismiss the petition for want of jurisdiction.

I. Background

These parties are not new to this Court. When the Duenezes were injured in a collision caused by a drunk driver, ERS paid benefits of more than $400,000 through its agent and administrator, Blue Cross Blue Shield of Texas.¹ But Blue Cross refused to pay for in-home nursing care for Ashley Duenez (deeming it custodial rather than medical), so the Duenezes filed suit in court without exhausting ERS's administrative remedies. We held in Duenez I that ERS had exclusive jurisdiction of claims for benefits, and thus dismissed the suit until the Duenezes complied with those administrative procedures.²

In the meantime, the Duenezes sued and obtained a judgment for $44 million against the convenience store that sold beer to the drunk driver. On appeal, three of the Duenezes settled their claims with the convenience store for $35 million. In Duenez II, we reversed the judgment as to the remaining two and remanded for a new trial to include apportionment of liability.³ Neither Blue Cross nor ERS were parties in that case, but they hope to be reimbursed from the proceeds of the settlement.

Before we decided either Duenez I or Duenez II, ERS filed this suit for subrogation against the Duenezes. By then, the Duenezes were no longer participants in ERS: Xavier Duenez had left his employment with the state, obtained coverage from a new insurer, and dropped all claims for benefits from ERS.⁴

Blue Cross filed this suit on ERS's behalf, specifically alleging that the funds it sought were for ERS's benefit. Oddly, Blue Cross nevertheless named ERS as a defendant. And paradoxically, the suit sought both a court judgment and a declaration that no court had jurisdiction because ERS had exclusive jurisdiction.

ERS filed a plea to the jurisdiction demanding dismissal for the Duenezes to pursue their claims administratively even though they had no affirmative claims to pursue. The trial court denied ERS's plea to the jurisdiction, and the court of appeals affirmed.⁵ ERS petitioned for review, asserting that the denial of its plea to the jurisdiction here conflicts with our opinion granting its plea to the jurisdiction in Duenez I.⁶

II. Does ERS Have Exclusive Jurisdiction of Subrogation?

The Legislature created ERS to attract and retain state employees by providing health, insurance, and retirement benefits.⁷ The powers granted ERS appear in the Texas Employees Group Benefits Act.⁸ The Act authorizes ERS to adopt a plan "reasonably necessary to implement this chapter and its purposes."⁹ ERS adopted a 70-page "Employee Benefit Plan" that included a subrogation provision on its penultimate page:

Subrogation/Right of Recovery

To the extent of such services provided, the Plan is subrogated to all rights of recovery the Participant has and the Plan may assert such rights independent of the Participant. Also, if the Participant has obtained or obtains a court judgment, settlement, arbitration, award, or other monetary recovery from another party, because of the injury or sickness, the Plan is entitled to reimbursement from the proceeds of recovery to the extent of benefits provided. If a recovery is made, the Plan shall have first priority over the Participant or any other party to receive from said recovery reimbursement of the benefits the Plan has provided....

In the event that the Participant fails to cooperate with the Plan or prejudices its subrogation rights, the Plan may deduct from any pending or subsequent claim made under the Plan any amounts the Participant owes the Plan until such time as cooperation is provided or the prejudice ceases.

The Duenezes argue ERS had no authority to adopt this provision because the Act says nothing about subrogation. But the Act also says nothing about what services are covered or excluded, when preapproval is required, what range of charges are allowed, or how fast benefits must be paid—all important parts of a health benefits plan. Instead, the Act authorized ERS to specify these details in a plan that would "implement this chapter and its purposes."¹⁰ The Act also expressly authorized ERS to "contain costs,"¹¹ and to provide benefits "at least equal to those commonly provided in private industry."¹² As subrogation reduces costs,¹³ and private plans commonly include subrogation,¹⁴ we disagree that ERS was not authorized to include subrogation in the plan it adopted.

But allowing subrogation is not the same thing as granting exclusive jurisdiction of it. When an agency has exclusive jurisdiction of a dispute, the courts have no jurisdiction until administrative procedures are exhausted.¹⁵ In deciding whether an agency has exclusive jurisdiction we look to its authorizing legislation for an express grant of exclusive jurisdiction,¹⁶ or for "a pervasive regulatory scheme" indicating that was the Legislature's intention.¹⁷ Exclusive jurisdiction is a question of law we review de novo.¹⁸

The Act here expressly grants ERS exclusive jurisdiction of disputes relating to payment of a claim:

The executive director has exclusive authority to determine all questions relating to enrollment in or payment of a claim arising from group coverages or benefits provided under this chapter other than questions relating to payment of a claim by a health maintenance organization.¹⁹

While the Act does not define "claim," it uses the term only in connection with demands for benefits.²⁰ Thus, we held in Duenez I that this provision granted ERS exclusive jurisdiction of claims "for payment of ERS-derived benefits."²¹ But there is no claim for benefits in this suit. The Duenezes past medical bills have already been paid, and their future bills are the responsibility of a new insurer. The question here is not a member's claim for payment of benefits (as it was in Duenez I), but ERS's claim for reimbursement of benefits it has already paid.²²

Nor does the Act provide a detailed regulatory scheme suggesting ERS must have exclusive jurisdiction of its own subrogation claims. The Act provides many details about eligibility,²³ dependents,²⁴ coverage plans,²⁵ and contributions,²⁶ but there are no details suggesting a regulatory scheme for pursuing subrogation against third parties. To the contrary, the Act states that its administrative remedies "are the exclusive remedies available to an employee, participant, annuitant, or dependent,"²⁷ but does not include ERS as a potential administrative claimant in that list. The Act also authorizes ERS to file suit (not an administrative claim) to resolve questions that might expose it to double liability.²⁸ Viewing the Act as a whole, it appears the Legislature intended ERS's administrative procedures to handle claims for benefits by employees, not claims against third parties by ERS.

Support for this conclusion also arises from ERS's own plan.²⁹ Of course exclusive jurisdiction must be granted by the Legislature; an agency cannot grant exclusive jurisdiction to itself.³⁰ But when ERS adopted a plan providing for subrogation, it specified no administrative remedies except that "the Plan may deduct from any pending or subsequent claim made under the Plan any amounts the Participant owes the Plan." Deducting subrogation from a benefits payment falls within ERS's exclusive jurisdiction; pursuing money damages to reimburse benefits already paid is a different matter.

Moreover, ERS's plan allowed it to assert subrogation against third parties "independent of the Participant." So rather than suing the Duenezes after their settlement, ERS could have sued the convenience store independently or intervened in Duenez II.³¹ If ERS has exclusive jurisdiction of subrogation, then it could have demanded that the Dram Shop claim in Duenez II be dismissed for exhaustion of administrative remedies. We do not think the Legislature intended ERS to handle administratively every tort suit involving injured state employees.

Finally, we must avoid constitutionally...