Phillips v. McNeill

• Decision Date: 03 December 2021
• Docket Number: No. 19-0831,19-0831
• Parties: Courtney N. PHILLIPS, Executive Commissioner; Sylvia Hernandez Kauffman, Inspector General; and Texas Health and Human Services Commission, Petitioners, v. John MCNEILL, Jr., R.Ph.; and Nichols Southside Pharmacy, Respondents
• Court: Texas Supreme Court

635 S.W.3d 620

Courtney N. PHILLIPS, Executive Commissioner; Sylvia Hernandez Kauffman, Inspector General; and Texas Health and Human Services Commission, Petitioners,

v.John MCNEILL, Jr., R.Ph.; and Nichols Southside Pharmacy, Respondents

No. 19-0831

Supreme Court of Texas.

Argued September 15, 2021

OPINION DELIVERED: December 3, 2021

Jennifer S. Riggs, Austin, for Respondents.

Kyle D. Hawkins, Houston, Eugene A. Clayborn, Austin, Lisa A. Bennett, Ryan Lee Bangert, Kristofer S. Monson, Jeffrey C. Mateer, Austin, Atty. Gen. W. Kenneth Paxton Jr., for Petitioners.

Justice Busby delivered the opinion of the Court.

This case concerns whether Corpus Christi pharmacist John McNeill, who participated in a Medicaid drug program run by the Texas Health and Human Services Commission, was entitled to an administrative contested-case hearing of his challenge to the results of a program audit by the Commission. We also consider whether McNeill's request that the trial court make findings of fact and conclusions of law extended the deadline to file his notice of appeal under Texas Rule of Appellate Procedure 26.1.

We hold that a request for findings and conclusions extends the appellate timetable if the trial court proceeding was the type where evidence could be considered and evidence was before the trial court. Under this rule, McNeill's appeal was timely.

We further hold that the Commission's Inspector General acted ultra vires in failing to perform her ministerial duty to provide McNeill a contested-case hearing under section 531.1201 of the Government Code, and that she is not entitled to sovereign immunity. Accordingly, we reverse the court of appeals’ judgment and render judgment requiring the Inspector General to docket a request for a contested-case hearing.

BACKGROUND

John McNeill is the pharmacist in charge and sole shareholder of Nichols Southside Pharmacy in Corpus Christi.¹ In 2005, McNeill contracted with the Health and Human Services Commission through its Vendor Drug Program (VDP) to provide pharmaceutical services for patients enrolled in Medicaid and other state health-care programs. McNeill's contract with the VDP incorporated the Commission's rules for administering the program, including an agreement to be subject to periodic audits overseen by the Commission's Office of Inspector General. See 1 TEX. ADMIN. CODE § 354.1891(a) – (b).

The Commission audited McNeill in 2012. The auditor reviewed McNeill's claims for reimbursement between 2007 and 2010 and determined that he had been overpaid by $70,266.36. In response to the audit, McNeill retained counsel to challenge the Commission's estimation methodology and provided additional documentation for the auditor to review. The Commission issued an updated audit report that reduced the overpayment to $69,911.48, and it informed McNeill that he had the right to an informal agency hearing. McNeill requested a hearing, which resulted in the Commission issuing a final notice that reduced the overpayment amount to $64,549.30. The Commission informed McNeill that a vendor hold would be placed on his account until he either paid the sum or entered into a payment plan.

A week after the Commission's final notice, McNeill requested a contested-case hearing before the State Office of Administrative Hearings (SOAH).² McNeill contended that the Recoupment-Appeal Statute—section 531.1201 of the Government Code —provided for such a hearing. The Commission denied the request. Two days later, McNeill made a second request. The Commission refused and placed a vendor hold on McNeill's account. McNeill again asserted his right to a contested-case hearing, this time under Chapter 2260 of the Texas Government Code governing claims against state agencies for breach of contract. The Commission denied the request once again, reiterating its belief that McNeill had already received the only hearing to which he and his pharmacy were entitled.

McNeill then sued the Commission, its Commissioner, and its Inspector General in their official and individual capacities in Travis County district court. McNeill's complaint sought, among other things, a declaration that he was entitled to a contested-case hearing under the Recoupment-Appeal Statute, certain administrative rules, and the Due Process Clause of the Texas and U.S. Constitutions. He also requested injunctive relief compelling the Commission and officials to provide him a contested-case hearing and a temporary restraining order against the Commission withholding more than the amount of the claimed overpayment. The Commission and McNeill entered into a Rule 11 agreement that the Commission would not continue to withhold more than the amount it had determined McNeill overpaid.

The Commission filed a plea to the jurisdiction based on sovereign immunity. The trial court held a bench trial, after which it granted the plea and dismissed McNeill's claims for declaratory relief. It also denied McNeill's petition for a writ of mandamus. After the trial court signed its judgment, McNeill requested findings of fact and conclusions of law, which the court made. Eighty-seven days after the final judgment was signed, McNeill filed his notice of appeal.

The court of appeals reversed and remanded. 585 S.W.3d 109, 123 (Tex. App.—Houston [14th Dist.] 2019). The court concluded unanimously that it had appellate jurisdiction because the request for findings and conclusions made McNeill's notice of appeal timely. Id. at 115. The panel then split. The majority determined that McNeill had a right to a contested-case hearing on federal due-process grounds. Id. at 116–23. The majority did not reach the question whether McNeill had a non-constitutional right to a hearing. In her dissent, then-Justice Christopher contended that the majority had reached the constitutional question improperly and resolved it incorrectly. Id. at 124–27 (Christopher, J., dissenting).

In this Court, the Commission challenges the court of appeals’ jurisdiction, arguing that McNeill's appeal was untimely. The Commission also contends that the court of appeals failed to consider the Commission's assertion of sovereign immunity. Finally, the Commission asserts that it was not required by regulation, statute, or the U.S. or Texas Constitutions to provide McNeill a contested-case hearing. We address each of these issues in turn.

ANALYSIS

I. The request for findings and conclusions extended McNeill's deadline to file his notice of appeal.

Texas Rule of Appellate Procedure 26.1 provides that a notice of appeal must be filed within thirty days after judgment unless "any party timely files ... a request for findings of fact and conclusions of law if findings and conclusions either are required by the Rules of Civil Procedure or ... could properly be considered by the appellate court." TEX. R. APP. P. 26.1(a)(4). When one party files a request for findings and conclusions that could properly be considered on appeal, any party that wishes to appeal has ninety days after judgment to file its notice. Id. 26.1(d).

We have addressed the relationship between requests for findings and conclusions and the appellate timetable before, most instructively in IKB Industries (Nigeria) Ltd. v. Pro-Line Corp. , 938 S.W.2d 440 (Tex. 1997), and Gene Duke Builders, Inc. v. Abilene Housing Authority , 138 S.W.3d 907 (Tex. 2004) (per curiam). Both cases support the conclusion that McNeill benefitted from the extended filing deadline and his notice of appeal was therefore timely.

The sole question in IKB Industries was whether a request for findings and conclusions following dismissal of a case as a sanction for discovery abuse extended the time for perfecting an appeal.³ We held that although a request for findings and conclusions does not extend the deadline "where findings and conclusions can have no purpose and should not be requested," a timely request for findings and conclusions extends the timetable where they are "not without purpose—that is, they could properly be considered by the appellate court." IKB Indus. , 938 S.W.2d at 443. As examples, we mentioned the following categories of non-jury proceedings in which findings could properly be considered: judgments after a conventional bench trial, default judgments on claims for unliquidated damages, judgments rendered as sanctions, and judgments "based in any part on an evidentiary hearing." Id.

We expanded IKB Industries ’ holding a few years later in Gene Duke Builders. The issue there was whether Gene Duke Builders extended its time for filing a notice of appeal under Rule 26.1 by requesting findings and conclusions after the trial court granted defendant Pro-Line's plea to the jurisdiction. The court of appeals concluded that the appeal was untimely because the trial court had held no evidentiary hearing, but we disagreed. "Although Duke made no formal offer of evidence at the hearing on the plea to the jurisdiction, it submitted a deposition, affidavits, and exhibits attached to its pleadings." Gene Duke Builders , 138 S.W.3d at 908. We held that the trial court did not have to hold an evidentiary hearing based on formal offers of evidence; rather, any taking of evidence could trigger the filing extension.

Drawing on IKB Industries and Gene Duke Builders , we adopt the following two-step inquiry for determining when requests for findings and conclusions that are not required by the rules will trigger the extended ninety-day filing deadline. First, was the non-jury proceeding a type in which the trial court could consider evidence? See IKB Indus. , 938 S.W.2d at 443. Second, if so, was there evidence before the court? See Gene Duke Builders , 138 S.W.3d at 908. When the answer to both questions is yes and a party requests findings and conclusions, all parties benefit from the extended appellate timetable.

The first question is categorical, not case-specific. For example, it will be answered yes for a judgment following a bench trial, a default judgment on a...