Prudential v. Financial Review Services

• Citation: 29 S.W.3d 74
• Parties: (Tex. 1999) THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, PETITIONER v. FINANCIAL REVIEW SERVICES, INC., RESPONDENT NO. 98-1053
• Decision Date: 09 November 2000
• Court: Supreme Court of Texas

Page 74

29 S.W.3d 74 (Tex. 1999)

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, PETITIONER v. FINANCIAL REVIEW SERVICES, INC., RESPONDENT

NO. 98-1053

IN THE SUPREME COURT OF TEXAS

Argued October 6, 1999

Decided June 29, 2000

Rehearing Overruled November 9, 2000.

ON PETITION FOR REVIEW FROM THE COURT OF APPEALS FOR THE FOURTEENTH DISTRICT OF TEXAS

[Copyrighted Material Omitted] JUSTICE GONZALES delivered the opinion of the Court, in which CHIEF JUSTICE PHILLIPS, JUSTICE ABBOTT, JUSTICE HANKINSON, and JUSTICE O'NEILL joined.

The principal issue we consider is whether the defendant, The Prudential Insurance Company of America, conclusively established its justification defense in this tortious interference case. The trial court granted Prudential a partial summary judgment on some issues and directed a verdict on the remaining issues after the plaintiff rested its case. The court of appeals reversed the judgment and remanded to the trial court, holding that fact issues remained for the factfinder to resolve. __S.W.3d__. We conclude that Prudential did not conclusively establish that its interference with the plaintiff's contracts and future business relations was justified. Accordingly, we affirm the judgment of the court of appeals.

Background

Financial Review Services, Inc. (FRS) audits hospital bills, looking for uncharged services and supplies omitted from patients' hospital bills. FRS provides its services to hospitals for an equal share of the otherwise-lost charges it collects. Two of FRS's early audit contracts were with hospitals affiliated with Hospital Corporation of America (HCA), one of the major healthcare corporations in the United States. In June 1991, FRS obtained contracts with two HCA hospitals in Houston, HCA Women's Hospital of Texas and HCA Medical Center Hospital. These two Houston hospitals together are known as the HCA Center for Health Excellence (CHE). Each CHE hospital gave FRS a six-month contract to discover and collect their unbilled medical services, and the parties renewed both contracts for another six months at the end of the initial terms. Meanwhile, FRS began negotiating a similar contract with an HCA hospital in another city, HCA Rio Grande.

After it audited CHE, FRS sent out an initial group of about 2000 bills for previously unbilled services. Approximately 100 of the bills went to Prudential for hospital services rendered to its policyholders. Prudential responded with a letter to John Gilbert, CHE's chief financial officer, stating that Prudential would not consider the claims unless CHE first billed the patients and provided their complete medical records to Prudential for review. CHE complied with this request. Prudential then conducted its own audit and denied all the claims as unsupported by CHE records. Meanwhile, Prudential sent letters to its policyholders about the status of these claims. A significant number of Prudential policyholders, other patients, doctors, and the Better Business Bureau complained to CHE about the back-billing. Eventually, CHE terminated its contracts with FRS. Also, FRS lost the contract it had obtained with HCA Rio Grande.

FRS sued Prudential, claiming that it tortiously interfered with FRS's "business and contractual relationships with HCA and its hospitals," in particular, FRS's existing contracts with CHE and HCA Rio Grande, and that Prudential breached an oral agreement with FRS to abide by the results of Prudential's audit of FRS's bills. FRS contended that Prudential tortiously interfered in five ways: (1) Prudential refused to pay FRS's bills and other bills from HCA hospitals, (2) Prudential "maligned" FRS to CHE and the patients, (3) Prudential harassed HCA officials with "sham" audits, pressure tactics, and unreasonable, bad faith demands, (4) Prudential stirred up the insureds to make patient complaints to CHE, and (5) Prudential started false rumors about FRS, intending that they reach HCA management.

Prudential moved for summary judgment on all claims. The trial court granted a partial summary judgment resolving some of the tortious interference issues against FRS. The court decided that FRS had no cause of action for Prudential's handling of bills audited by FRS, because Prudential owed FRS no duty to pay CHE's bills in the first place. The court also determined Prudential had an absolute right to object to, question, and investigate the bills, and had the right to complain about the practice of late billing in general and FRS's procedures in particular. Finally, the court decided that Prudential had an absolute right to communicate with its insureds about the billing. However, it denied summary judgment on FRS's complaints about Prudential's communications to the insureds and CHE because, the trial court concluded, the communications could be tortious depending on their content.

At trial on these remaining issues, FRS presented its case for breach of contract and tortious interference and then rested. Prudential orally moved for directed verdict on all issues. Prudential argued that the trial court's partial summary judgment reduced the issues to whether Prudential breached a contract with FRS and whether Prudential's communications concerning FRS tortiously interfered with FRS's auditing contracts. Prudential urged that it was entitled to judgment because (1) there was no evidence of a contract and (2) all of Prudential's communications and conduct were justified and did not cause FRS to lose its contracts. The court granted the motion, rendering a final take-nothing judgment on all of FRS's claims.

On appeal, FRS challenged both the partial summary judgment and the directed verdict. The court of appeals affirmed the partial summary judgment and the breach of contract portion of the directed verdict. __S.W.3d__. But the court of appeals reversed and remanded the remainder of the directed verdict. The court held that there were fact questions about whether some of Prudential's conduct and communications tortiously interfered with FRS's contracts and business relationships. __S.W.3d__. Prudential has petitioned this Court for review.

Standard of Review

A court may instruct a verdict if no evidence of probative force raises a fact issue on the material questions in the suit. See Szczepanik v. First S. Trust Co., 883 S.W.2d 648, 649 (Tex. 1994). A directed verdict for a defendant may be proper in two situations. First, a court may direct a verdict when a plaintiff fails to present evidence raising a fact issue essential to the plaintiff's right of recovery. See Latham v. Castillo, 972 S.W.2d 66, 67-68, 70-71 (Tex. 1998). Second, as other courts have held, a trial court may direct a verdict for the defendant if the plaintiff admits or the evidence conclusively establishes a defense to the plaintiff's cause of action. See, e.g., Villegas v. Griffin Indus., 975 S.W.2d 745, 748-49 (Tex. App.-Corpus Christi 1998, pet. denied); Davis v. Mathis, 846 S.W.2d 84, 86 (Tex. App.-Dallas 1992, no writ); see generally Elliot, Jury Trial: General, in 4 MCDONALD TEXAS CIVIL PRACTICE 21:52 (Allen et al. eds., 1992 ed.).

We have identified the elements of tortious interference with an existing contract as: (1) an existing contract subject to interference, (2) a willful and intentional act of interference with the contract, (3) that proximately caused the plaintiff's injury, and (4) caused actual damages or loss. See ACS Investors, Inc. v. McLaughlin, 943 S.W.2d 426, 430 (Tex. 1997). Also, as an affirmative defense, a defendant may negate liability on the ground that its conduct was privileged or justified. See id. at 431. Under a directed verdict standard, then, a judgment for Prudential could be proper if (1) FRS failed to present evidence about one of the elements of the tort, (2) Prudential conclusively negated one of those elements, or (3) Prudential conclusively established its justification defense.

In addition to FRS's claim of tortious interference with its existing contracts with CHE and HCA Rio Grande, FRS's pleadings claimed Prudential's conduct caused FRS to lose its "business and contractual relationship with HCA and its hospitals." After the CHE contracts were terminated, FRS had no existing contracts with HCA. Therefore, FRS's pleadings seem to seek damages for the lost opportunity to obtain contracts in the future with other HCA affiliated hospitals. In other words, FRS appears to be asserting a claim for tortious interference with prospective contracts with other HCA affiliated hospitals. We have never enumerated the elements of a cause of action for tortious interference with prospective contracts, although we have concluded that justification is an affirmative defense to tortious interference with prospective business relations as well as to tortious interference with an existing contract. See Calvillo v. Gonzalez, 922 S.W.2d 928, 929 (Tex. 1996). Neither the courts below nor the parties in their briefing here have distinguished between the two torts. But we may address Prudential's specific arguments without deciding what all of the elements of proof for tortious interference with prospective business relations might be.

Prudential contends that the trial court correctly directed a verdict because FRS's status as CHE's and HCA Rio Grande's agent precludes FRS's tortious interference claim, and nothing Prudential did caused FRS to lose its contracts and relationships. Additionally, Prudential claims that the evidence conclusively established its justification defense. We consider first Prudential's agency arguments.

Tortious Interference with an Agent's Contract

Prudential argues that because FRS is CHE's and HCA Rio Grande's agent for collecting payment, FRS cannot bring a claim for tortious interference with contract. Prudential's arguments are based on the proposition that, for many purposes, an agent and principal are treated as one, and one cannot interfere with one's own contract. From these...