Cassidy v. TeamHealth, Inc. (Tex.App.- Houston [1st Dist.] Jul. 23, 2009)(Jennings)(no
standing to pursue declaratory judgment claim, plea to the jurisdiction, opportunity to amend not
exercised)
AFFIRM TC JUDGMENT: Opinion by Justice Jennings
Before Justices Jennings, Keyes and Higley
01-08-00324-CV Crystal Cassidy v. The American Academy of Emergency Medicine, The Texas
Academy of Emergency Medicine and Richard J. Ybarra v. TeamHealth, Inc., TeamHealth, P.A.,
Memorial Hermann Healthcare System, ACS Primary Care Physcians Southwest, P.A., and Teamhealth
West
Appeal from 80th District Court of Harris County
Trial Court Judge: Hon. Lynn Bradshaw-Hull
MEMORANDUM OPINION
Appellants, Dr. Crystal Cassidy, The American Academy of Emergency Medicine (“AAEM”), The Texas
Academy of Emergency Medicine (“TAEM”), and Dr. Richard J. Ybarra, challenge the trial court’s order
granting the pleas to the jurisdiction of appellees, TeamHealth, Inc. (“TeamHealth”), TeamHealth, P.A.,
Memorial Hermann Healthcare System (“Memorial”), ACS Primary Care Physicians Southwest, P.A.
(“ACS”), and TeamHealth West, in appellants’ suit for declaratory judgment. In four issues, appellants
contend that the trial court erred in granting appellees’ pleas to the jurisdiction, not giving appellants an
opportunity to cure any pleading deficiencies by amending their petition, denying appellants an
opportunity to present testimony from four witnesses, and admitting affidavits offered by appellees as
evidence that appellants lack standing.
We affirm.
Factual and Procedural Background
Cassidy and Ybarra both practice emergency medicine in emergency rooms in Memorial hospitals
located in Harris County. AAEM is a “national professional society representing over 5,000 specialists in
emergency medicine throughout the country, including in Texas.” TAEM “is the Texas Chapter of
AAEM.” In this suit, appellants allege that appellees “have engaged in and continue to engage in the
unlawful corporate practice of medicine in violation of the Medical Practice Act.” [Footnote] Appellants
assert that they have “standing and a strong justiciable interest in” this declaratory judgment action
because of their “duty to protect the patient-physician relationship” and because “all contractual
relationships [are] tainted by” appellees’ “unlawful corporate practice of medicine in violation of the
Medical Practice Act.”
In their petition, appellants seek a declaration that three particular agreements are “void because they
violate the corporate practice of medicine doctrine.” First, appellants complain about an alleged
agreement between TeamHealth and Memorial “that allowed TeamHealth to provide emergency
department staffing and management services to eight” of Memorial’s hospitals. [Footnote] Second,
appellants complain of a “proposed contract between Cassidy and ACS,” alleging that Cassidy “currently
has privileges to provide care as an emergency department physician with Memorial” and had been
“asked to sign a contract with” ACS; however, “ACS withdrew their contract offer” after Cassidy “filed this
lawsuit seeking a declaration” regarding her proposed contract. Third, appellants complain of a “fully
executed contract between [Ybarra] and ACS to provide services at one or more of the facilities
associated with Memorial.” Appellants allege that ACS “is no more than a shell professional association
being used by TeamHealth to disguise the ‘for-profit’ nature of the venture” and that TeamHealth has
violated the Medical Practice Act by engaging in “such issues as peer review activities, hiring and
termination of physicians and physician duties.”
In its plea to the jurisdiction, TeamHealth contends that Cassidy, AAEM, and TAEM are not “parties to
any contract or agreement with” any of appellees and “have no justiciable interest or standing to bring
this suit against” appellees. TeamHealth also asserts that there “is no private, civil cause of action” to
enforce the Medical Practice Act and that the Texas Legislature has provided for enforcement “through
criminal penalties and administrative regulation.” In its supplemental plea to the jurisdiction, TeamHealth
further asserts that Ybarra does not have standing to pursue a declaratory suit for any contract “beyond
his own contract with ACS” and he “lacks standing to assert any claim against [appellees] for the alleged
‘corporate practice of medicine.’” Memorial also filed a plea to the jurisdiction in which it contends that
appellants “have no standing to pursue their cause of action for declaratory judgment” and “also failed
to show that a justiciable controversy exists.”
In their response to appellees’ pleas, appellants contend that they all have standing to bring suit and
their pleadings demonstrate that a real controversy exists “that will be resolved by the judicial relief
sought, specifically a declaratory judgment from [the trial court].” First, they assert that Cassidy has
standing even though she had “not entered into a contract with any of the [appellees]” as she “could
unwittingly be involved in the corporate practice of medicine” and be “exposed to a claim by the Texas
Disciplinary Board [or a patient] for aiding and abetting the corporate practice of medicine.” Thus, her
“distinct interest in this matter” is that “she needs to be able to practice medicine without fear of violating
the corporate practice of medicine doctrine.” Second, appellants assert that AAEM has associational
standing to “sue on behalf of its members.” Third, appellants assert that Ybarra “has standing to bring
suit against [appellees]” as he had “entered into a contract with ACS.” Finally, appellants assert that
they have standing because “the 14th Court of Appeals also confirmed that Cassidy had standing” to
take pre-suit depositions. [Footnote]
The trial court granted appellees’ pleas to the jurisdiction and dismissed appellants’ claims.
Subject Matter Jurisdiction
In their first issue, appellants argue that the trial court erred in granting appellees’ pleas to the
jurisdiction because appellants alleged sufficient facts in their petition to demonstrate that they have
standing sufficient to confer jurisdiction on the trial court. They assert that “there is a real controversy
between the parties and as a result thereof, [each appellant has] suffered a distinct injury.”
Standard of Review
A plea to the jurisdiction seeks dismissal of a case for lack of subject-matter jurisdiction. Tex. Dep’t of
Transp. v. Jones, 8 S.W.3d 636, 638 (Tex. 1999). When reviewing a trial court’s ruling on a plea to the
jurisdiction, we construe the pleadings in favor of the plaintiff. See Tex. Dep’t of Parks & Wildlife v.
Miranda, 133 S.W.3d 217, 226 (Tex. 2004); Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440,
446 (Tex. 1993). We review de novo whether, as a matter of law, the pleader’s alleged facts, or
undisputed evidence of jurisdictional facts, affirmatively demonstrate that a trial court has subject matter
jurisdiction. See Tex. Dep’t of Parks & Wildlife, 133 S.W.3d at 226. If the existence of jurisdictional facts
is challenged, a court must consider relevant evidence submitted by the parties when necessary to
resolve the jurisdictional issues raised. Id. at 227. If the relevant evidence is undisputed or fails to raise
a fact question on the jurisdictional issue, the court considers the plea as a matter of law. Id. at 228. If
the evidence creates a fact question regarding the jurisdictional issue, then the plea cannot be
sustained. Id. at 227–28.
Standing
In an action for declaratory relief, a plaintiff must allege facts that affirmatively demonstrate that the trial
court has subject matter jurisdiction. Tex. Ass’n of Bus., 852 S.W.2d at 446; City of Pasadena v. Smith,
263 S.W.3d 80, 86 (Tex. App.—Houston [1st Dist.] 2006, pet. denied). Both standing and ripeness are
components of subject matter jurisdiction. E.g. Waco Indep. Sch. Dist. v. Gibson, 22 S.W.3d 849, 850
(Tex. 2000). In regard to standing, the focus is on who may bring an action, and, in regard to ripeness,
the focus is on when that action may be brought. Id.
Standing “requires that the controversy adversely affect the party seeking review.” McAllen Med. Ctr.,
Inc. v. Cortez, 66 S.W.3d 227, 234 (Tex. 2001). In a standing analysis we focus on whether the “party
has a sufficient relationship with the lawsuit so as to have a ‘justiciable interest’ in its outcome.” Austin
Nursing Ctr. v. Lovato, 171 S.W.3d 845, 848 (Tex. 2005). A party seeking declaratory relief has a
justiciable interest in the subject matter if there is “a real controversy between the parties” that will
“actually be determined by the judicial declaration sought.” Tex. Ass’n of Bus., 852 S.W.2d at 446. When
determining standing, we “construe the pleadings in favor of the plaintiff and look at the pleader’s
intent.” Id.
The Contracts
Here, appellants seek declarations related to three agreements: the alleged contract between
TeamHealth and Memorial, the proposed contract between Cassidy and ACS, and the executed contract
between Ybarra and ACS.
Memorial TeamHealth Contract
In regard to appellants’ claims for declarations related to the alleged contract between TeamHealth and
Memorial, appellants would be non-contracting third parties to any such contract.
Generally, Texas courts presume that a non-contracting, third party has no justiciable interest in a
contract. S. Tex. Water Auth. v. Lomas, 223 S.W.3d 304, 306 (Tex. 2007); El Paso Cmty. Partners v.
B&G/Sunrise Joint Venture, 24 S.W.3d 620, 626 (Tex. App.—Austin 2000, no pet.); Imco Oil & Gas v.
Mitchell Energy Corp., 911 S.W.2d 916, 920 (Tex. App.—Fort Worth 1995, no writ). A third party may
have an interest in a contract made between other parties only if the parties intended to secure some
benefit to that third party, and only if the parties entered into the contract directly for the third party’s
benefit. Lomas, 223 S.W.3d at 306. The intent to confer a direct benefit upon a third party must be
clearly and fully indicated in the contract, and courts presume that a non-contracting party is not a third-
party beneficiary. Id.
Here, regarding Cassidy and Ybarra, appellants allege that their direct interest in the case arises from
their concern that the Memorial Teamhealth contract violates the Medical Practice Act. However,
appellants do not allege that either Cassidy or Ybarra is a party to the Memorial TeamHealth contract.
Nor do appellants allege that the parties to the Memorial TeamHealth contract intended to confer a
direct benefit on either Cassidy or Ybarra. See id. Thus, we conclude that Cassidy and Ybarra do not
have standing to seek a declaratory judgment regarding the Memorial TeamHealth contract.
In regard to AAEM and TAEM, we note that an association claiming to have associational standing to
seek declaratory relief as a third party to a contract must show that: (1) its members have standing to
sue on their own behalf, (2) the interests the organization seeks to protect are germane to the
organization’s purpose, and (3) neither the claim nor the relief requested requires the participation of
individual members in the lawsuit. Id. at 308; Tex. Ass’n of Bus., 852 S.W.2d at 447–48; Am. Acad. of
Emergency Med. v. Memorial Hermann Healthcare, No. 01-08-00096-CV, 2009 WL 214507, at *4 (Tex.
App.—Houston [1st Dist.] Jan. 29, 2009, no pet.); Wilchester W. Concerned Homeowners LDEF, Inc. v.
Wilchester W. Fund, Inc., 177 S.W.3d 552, 561 (Tex. App.—Houston [1st Dist.] 2005, pet. denied).
Here, appellants do not allege that any party to the Memorial TeamHealth contract is a member of AAEM
or TAEM. See Am. Acad. of Emergency Med., 2009 WL 214507, at *5 (involving complaint by AAEM that
agreement between TeamHealth and Memorial violated Medical Practice Act). Additionally, appellants do
not allege that the parties to the Memorial TeamHealth contract intended to confer a direct benefit on
any members of AAEM or TAEM. Even if we were to assume, as appellants allege, that the Memorial
TeamHealth contract violates the Medical Practice Act, nothing in appellants’ pleadings indicates that
any member of AAEM or TAEM is identified in the Memorial TeamHealth contract or that the Memorial
TeamHealth contract requires the employment of any AAEM member. See id.
Accordingly, we hold that appellants do not have standing to seek a declaratory judgment on the
Memorial TeamHealth contract.
Cassidy’s Proposed Contract
In regard to the “proposed contract between Cassidy and ACS,” appellants argue that Cassidy “clearly
meets the standards for demonstrating standing” and that AAEM has standing to seek declaratory relief
because Cassidy is a member of AAEM. [Footnote]
The Uniform Declaratory Judgment Act (“DJA”) provides that a person who is “interested under” a written
contract may seek a determination of “any questions of construction or validity arising under” the written
contract. Tex. Civ. Prac. & Rem. Code Ann. § 37.004 (Vernon 2008). However, a valid, written contract
does not exist unless there is an offer and an acceptance. Beverick v. Koch Power, Inc., 186 S.W.3d
145, 150 (Tex. App.—Houston [1st Dist.] 2005, pet. denied).
Here, it is undisputed that Cassidy never accepted ACS’s offer, so there is no existing written contract
upon which a court may render a declaratory judgment. See Tex. Civ. Prac. & Rem. Code Ann. §
37.004; Beverick, 186 S.W.3d at 150. Because Cassidy’s controversy in regard to her proposed
contract cannot be determined by a judicial declaration, she does not have standing to seek a
declaratory judgment. [Footnote] See Tex. Ass’n of Bus., 852 S.W.2d at 446–47 (reciting general test of
standing as including requirement that controversy “will be actually determined by the judicial
declaration sought”).
Because Cassidy has no standing to seek declaratory relief based on the proposed contract, AAEM also
lacks associational standing to seek declaratory relief on the proposed contract. See Lomas, 223 S.W.
3d at 308 (requiring that association’s members have standing to sue on their own behalf for association
to have standing).
Accordingly, we hold that appellants do not have standing to seek a declaratory judgment on Cassidy’s
proposed contract.
Ybarra’s Contract
In regard to Ybarra’s contract with ACS, appellants argue that Ybarra has standing because he has
entered into a contractual relationship with ACS and is uncertain as to how to resolve “conflicts between
what the [a]ppellees require him to do contractually and what the applicable standard of care requires
him to do professionally” and that AAEM has standing to seek declaratory relief because Ybarra is a
member of AAEM. [Footnote]
Unlike Cassidy, Ybarra entered into a written contract with ACS, and therefore has an interest under the
contract. See Tex. Civ. Prac. & Rem. Code Ann. § 37.004. However, the existence of a contract between
a plaintiff and defendant in a declaratory judgment action does not guarantee that the plaintiff will have
standing to seek declaratory relief. See Paulsen v. Tex. Equal Access to Justice Found., 23 S.W.3d 42,
47–48 (Tex. App.—Austin 1999, pet. denied) (holding that plaintiff did not have standing to seek
declaratory judgment on contracts with defendant when dispute alleged was “secondary to their desire
to have” appellate court rule on constitutionality of IOLTA program).
Here, appellants’ controversy with appellees, i.e., appellees’ alleged violation of the Medical Practice Act
by allowing TeamHealth to be involved in the “peer review activities, hiring and termination of
physicians,” would not be resolved by judicial declarations related to Ybarra’s contract with ACS. See
Tex. Ass’n of Bus., 852 S.W.2d at 446 (reciting general test of standing as including requirement that
controversy “will be actually determined by the judicial declaration sought”). Any controversy about
Ybarra’s contract is secondary to appellants’ desire to have a court declare that appellees’ conduct
violates the Medical Practice Act. See Paulsen, 23 S.W.3d at 47.
Although appellants argue that Ybarra’s contract is “void because [it] violate[s] the corporate practice of
medicine,” they have not alleged any facts that support their contention that Ybarra’s contract violates
the Medical Practice Act. Instead, appellees attempt to use Ybarra’s contract as a means to seek a
judicial declaration on whether appellees have violated the Medical Practice Act. In their briefing,
appellants admit that “the real thrust” of their allegations is an attempt to determine “whether the illegal
corporate practice of medicine renders these contracts illegal and/or exposes these physicians to the
charge of aiding and abetting illegal conduct.” Appellants argument shows that they are actually seeking
a judicial declaration that appellees’ conduct violates the Medical Practice Act, not that Ybarra’s contract
violates the Medical Practice Act. [Footnote]
In support of their argument that they may bring a declaratory judgment action to determine whether
appellees’ conduct violates the Medical Practice Act and renders Ybarra’s contract void, appellants rely
on Penny v. Orthalliance, Inc., 255 F. Supp. 2d 579 (N.D. Tex. 2003). In Penny, several orthodontists
sought a declaration that several contracts that they had entered violated the Texas Dental Practices
Act. [Footnote] Id. at 580. The district court held that the contracts themselves were invalid because the
contracts themselves allowed the defendant corporation “to practice dentistry without a license.” Id. at
581–83. However, unlike the Penny plaintiffs, appellants have not alleged that Ybarra’s contract itself
violates the Medical Practice Act, instead they seek a declaration that appellees’ conduct violates the
Medical Practice Act. [Footnote] Although appellants could seek a declaration that Ybarra’s contract is
void because something in the contract violates the Medical Practice Act, they cannot use Ybarra’s
contract as a pretext to obtain an otherwise unavailable judicial declaration that appellees’ conduct
violates the Medical Practices Act. See Cole v. Huntsville Mem’l Hosp., 920 S.W.2d 364, 372–73 (Tex.
App.—Houston [1st Dist.] 1996, writ denied).
We conclude that appellants may not use the DJA to obtain indirectly what they cannot legally obtain
directly. Tex. Ass’n of Bus., 852 S.W.2d at 446–47 (reciting general test of standing as including
requirement that controversy “will be actually determined by the judicial declaration sought”). The
Medical Practice Act does not create a private cause of action, and appellants may not use the DJA to
create a quasi cause of action to enforce the Medical Practice Act. See Cole, 920 S.W.2d at 373.
Rather, violations of the Medical Practice Act may be punished with administrative penalties and
injunctive relief imposed by the Texas State Board of Medical Examiners, civil penalties sought by the
Texas Attorney General, or criminal penalties sought by the State. See Tex. Occ. Code Ann. §§
165.001–.160.
Because the controversy alleged in appellants’ pleadings cannot be determined by a judicial declaration
on Ybarra’s contract, he does not have standing to seek a declaratory judgment. See Tex. Ass’n of
Bus., 852 S.W.2d at 446–47 (reciting general test of standing as including requirement that controversy
“will be actually determined by the judicial declaration sought”). Because Ybarra has no standing to seek
this declaratory judgment on his contract, AAEM also lacks standing. See Lomas, 223 S.W.3d at 308.
Accordingly, we hold that appellants do not have standing to seek a declaratory judgment on Ybarra’s
contract.
We overrule appellants’ first issue.
Opportunity to Cure Pleadings
In their second issue, appellants argue that they “were wrongfully denied an opportunity to replead”
because their “pleadings do not affirmatively demonstrate incurable defects in jurisdiction.” Appellants
contend that “before dismissing this case” the trial court “should have permitted [appellants] to amend
their pleadings.”
If the pleadings do not contain sufficient facts to affirmatively demonstrate the trial court’s jurisdiction,
but do not affirmatively demonstrate incurable defects in jurisdiction, the issue is one of pleading
sufficiency and the plaintiffs should be afforded the opportunity to amend. Tex. Dep’t of Parks & Wildlife,
133 S.W.3d at 226–27. If the pleadings affirmatively negate the existence of jurisdiction, then a plea to
the jurisdiction may be granted without allowing the plaintiff’s an opportunity to amend. Id. Although
plaintiffs should generally be allowed amend totheir pleadings while their case is pending before a trial
court, they may forfeit this opportunity through inaction. See Kassen v. Hatley, 887 S.W.2d 4, 13–14 n.
10 (Tex. 1994) (stating that plaintiffs waived complaint by not requesting opportunity to amend their
pleadings after challenged by opposing party); Haddix v. Am. Zurich Ins. Co., 253 S.W.3d 339, 347 (Tex.
App.—Eastland, 2008, no pet.) (same); Dahl ex rel. Dahl v. State, 92 S.W.3d 856, 862 n.6 (Tex. App.—
Houston [14th Dist.] 2002, no pet.) (noting that by not seeking leave to amend pleadings plaintiffs had
arguably “waived the claim the trial court erred in not allowing them time to amend”).
In April 2008, after the trial court had granted appellees’ pleas to the jurisdiction, appellants filed a
motion for new trial contending, in part, that the trial court “should have permitted [appellants] to amend
their pleadings.” However, nothing in the record indicates that appellants attempted to amend their
pleadings or requested that they be allowed to amend their pleadings. Nor does the record show that
the trial court denied appellants such an opportunity. Appellants did amend their petition in October
2007, adding Ybarra as a plaintiff. In the following five months, before the trial court granted appellees’
pleas to the jurisdiction, appellants did not amend or attempt to amend their pleadings. Additionally,
although appellants complained in their motion for new trial that they should be allowed to amend their
pleadings, they did not present the trial court with any proposed amendments. Likewise, on appeal,
appellants have not described any proposed amendments that would affect their standing. Accordingly,
we hold that appellants have waived the opportunity to amend their pleadings by not attempting to
amend their pleadings at the trial court when they had the opportunity to do so.
We overrule appellants’ second issue.
Unconsidered Evidence of Jurisdictional Facts
In their third issue, appellants argue that the trial court erred in granting appellees’ pleas to the
jurisdiction because it did not first giving each appellant “an opportunity to present evidence from four
(4) live witnesses on the subject of certain disputed jurisdictional facts.” [Footnote]
On February 29, 2008, the trial court held a hearing on appellees’ pleas to the jurisdiction and allowed
appellants to offer evidence relevant to whether the trial court had subject matter jurisdiction over
appellants’ claims for declaratory relief. At the hearing, appellants requested that the trial court consider
live testimony in the following exchange:
[Appellants’ Counsel]:I would like to call to the witness stand Dr. Crystal Cassidy and after we are done
with Dr. Cassidy I would like to call Dr. Tom Scaletta, and when we are done with Dr. Scaletta I would like
to call Dr. Larry Wise, and those three witnesses are the live witnesses that I would offer for today’s
testimony.
[TeamHealth’s Counsel]:I view that as a matter of Your Honor’s discretion. I don’t think it requires any
input from us.
[Trial Court]:True?
[Memorial’s Counsel]:True.
[Trial Court]:Okay. And I don’t see it as necessary for purposes of proceeding that I can do it fully from
the exhibits that have been admitted as well as the very extensive motions and exhibits attached thereto
and responses replies. Alright, what else?
[Appellants’ Counsel]:That concludes our evidentiary presentation.
Although appellants contend in their briefing that the trial court erred in not allowing them to present four
witnesses, appellants only asked the trial court to consider testimony from three witnesses: Cassidy,
Tom Scaletta, [Footnote] and Larry Wise. [Footnote] Appellants assert that the testimony of these
witnesses would have supported appellants’ “opposition to the [a]ppellees’ [p]leas” to the jurisdiction.
Although appellants do not clearly explain how this testimony would have undermined appellees’ pleas
to the jurisdiction, they imply that the testimony would have been relevant to refute “an affidavit [that]
was submitted denying that [a]ppellants Cassidy and AAEM had any contractual or business relationship
with [a]ppellees ACS or TeamHealth.”
When a plea to the jurisdiction challenges a plaintiff’s pleadings, we determine whether the pleader has
alleged facts that affirmatively demonstrate the trial court’s subject matter jurisdiction. Tex. Dep’t of
Parks & Wildlife, 133 S.W.3d at 226. We construe the pleadings liberally in favor of the pleader. Id. If a
plea to the jurisdiction challenges the existence of jurisdictional facts, the trial court is required to
consider relevant evidence submitted by the parties. Id. at 227.
Here, appellees, in their pleas to the jurisdiction, did not challenge the existence of jurisdictional facts
pleaded by appellants. Instead, appellees contend that the facts alleged by appellants in their pleadings
affirmatively demonstrate that they do not have standing to seek declaratory relief. Having already
concluded that the facts alleged in appellants’ pleadings do not establish that they have standing, we
further conclude that the trial court was not required to consider testimony from appellants’ three
witnesses. Accordingly, we hold that the trial court did not err in denying appellants’ request to consider
the testimony of Cassidy, Scaletta, and Wise.
We overrule appellants’ third issue.
Admitted Affidavits
In their fourth issue, appellants’ argument, in its entirety, is that “the [t]rial [c]ourt erred in admitting
hearsay affidavits of [a]ppellees over the hearsay objection of counsel for [a]ppellants, and the [t]rial [c]
ourt compounded that error by refusing [a]ppellants to offer [sic] sworn affidavits and/or live testimony to
rebut the hearsay contained in the affidavits.”
Appellants’ briefing on this issue is devoid of any citations to the record or to appropriate legal
authorities. See Tex. R. App. P. 38.1(h) (“The brief must contain clear and concise argument for the
contentions made, with appropriate citations to authorities and to the record.”). Accordingly, we hold that
appellants have inadequately briefed this issue and, thus, have waived their issue for our review. See id.
We overrule appellants’ fourth issue.
Conclusion
We affirm the order of the trial court.
Terry Jennings
Justice
Panel consists of Justices Jennings, Keyes, and Higley.