United Healthcare of Texas, Inc. Optum Health Care Solutions, LLC D/B/A Optum Healthcare Solutions, Inc. United Healthcare, Inc. D/B/A United Healthcare Insurance Company United Healthcare Community Plan of Texas, L.L.C. Evercare of Texas, L.L.C. United Healthcare Benefits of Texas, Inc. United Healthcare Services, Inc. And UnitedHealth Group, Inc. v. Low-T Physicians Service, P.L.L.C. Low-T Physicians Professional Association And Low-T Physicians Group, P.L.L.C. ( 2021 )

In the
Court of Appeals
Second Appellate District of Texas
at Fort Worth
___________________________
No. 02-20-00033-CV
___________________________
UNITED HEALTHCARE OF TEXAS, INC.; OPTUM HEALTH CARE SOLUTIONS, LLC
D/B/A OPTUM HEALTHCARE SOLUTIONS, INC.; UNITED HEALTHCARE, INC. D/B/A
UNITED HEALTHCARE INSURANCE COMPANY; UNITED HEALTHCARE COMMUNITY
PLAN OF TEXAS, L.L.C.; EVERCARE OF TEXAS, L.L.C.; UNITED HEALTHCARE
BENEFITS OF TEXAS, INC.; UNITED HEALTHCARE SERVICES, INC.; AND
UNITEDHEALTH GROUP, INC., Appellants
V.
LOW-T PHYSICIANS SERVICE, P.L.L.C.; LOW-T PHYSICIANS PROFESSIONAL
ASSOCIATION; AND LOW-T PHYSICIANS GROUP, P.L.L.C., Appellees
On Appeal from the 342nd District Court
Tarrant County, Texas
Trial Court No. 342-303717-18
Before Sudderth, C.J.; Womack and Wallach, JJ.
Memorandum Opinion by Justice Wallach
MEMORANDUM OPINION
This is an appeal from the trial court’s denial of the motion to compel
arbitration filed by Appellants United Healthcare of Texas, Inc.; Optum Health Care
Solutions, LLC d/b/a Optum Healthcare Solutions, Inc.; United Healthcare, Inc.
d/b/a United Healthcare Insurance Company; United Healthcare Community Plan of
Texas, L.L.C.; Evercare Of Texas, L.L.C.; United Healthcare Benefits of Texas, Inc.;
United Healthcare Services, Inc.; and UnitedHealth Group, Inc. (collectively United
or Appellants). Appellants are in the business of issuing health insurance policies or
processing claims under those policies. Appellees Low-T Physicians Service, P.L.L.C.;
Low-T Physicians Professional Association; and Low-T Physicians Group, P.L.L.C.
(collectively Appellees or Low-T) are medical service providers who benefit from
several medical provider contracts with Appellants in geographically diverse areas
across the country. Appellants demanded a large refund from Appellees for alleged
overpayments of claims proceeds. Appellees rejected the demand and made a
counteroffer which they contend Appellants accepted, forming a settlement
agreement that Appellants later breached. Appellees then sued Appellants for
declaratory judgment in state court seeking a declaration that the breached settlement
should be enforced and declarations of the rights of the parties under the various
provider agreements and Texas law regarding processing and payment of claims.
Appellants counterclaimed for recovery of the amounts previously demanded as
overpayments and sought declaratory relief regarding the rights and duties of the
2
parties under the provider agreements and applicable law regarding processing and
payment of claims. Both sides sought recovery of attorney’s fees.
Appellants moved to compel arbitration of all claims by all parties because all
the medical provider agreements between the parties had broad arbitration
agreements. Appellees contended that each provider agreement––and included
arbitration agreement––was a separate agreement for each practice location and that
Appellants failed to establish that the claims being asserted in the case fell within the
scope of any specific provider agreements. The trial court denied the motion to
compel as to all claims.
We affirm in part and reverse and remand in part. We affirm the trial court’s
denial of arbitration on Appellants’ claim for overpayment and on Appellees’ claim
regarding the alleged breach of the settlement of that overpayment claim, and related
costs and attorney’s fees (Count One of Appellees’ Original Petition and paragraphs
11, 17 and 18 of Appellants’ Second Amended Answer and Amended Counterclaim),
because Appellants failed to establish that those claims fall within the scope of any
arbitration agreement between the parties. We reverse the trial court’s denial of
arbitration as to both sides’ other requests for declaratory relief regarding their rights
and duties under the several provider agreements and applicable state laws concerning
the payment and processing of claims as well as their related claims for attorney’s fees
and costs (Counts Two and Three of Appellees’ Original Petition and paragraphs 17–
19 of Appellant’s Second Amended Answer and Counterclaim) and remand this case
3
to the trial court to refer each of those general declaratory relief disputes for
arbitration according to the terms of each provider agreement and to also decide
whether to stay the nonarbitrable claims pending resolution of arbitration.
I. Factual Background
Appellant UnitedHealth Group, Inc. is a publicly traded corporation with
approximately 185 affiliated entities. Appellant Optum is an affiliate of UnitedHealth
Group that processes payments and performs other administrative work on behalf of
the UnitedHealth Group entities. The remaining Appellants are also affiliates of
UnitedHealth Group that are insurers or administrators of health insurance plans.
Appellants (except Optum) sign provider agreements with physicians and group
practices to provide healthcare services to Appellants’ insureds.
Appellees are three affiliates, each of which is a professional entity employing
medical staff who treat patients for hypogonadism, or low testosterone. Physicians
associated with Appellees provide medical and wellness services to men at various
locations throughout the United States. Low-T’s staff provide medical services for the
treatment of hypogonadism with testosterone injections. United contracts with
medical groups like Appellees (known generally as “preferred providers”) to offer
medical services to individuals either insured by United or insured by plans
administered by United.
Beginning in August 2011, United and Low-T entered into an agreement
whereby Low-T became a preferred provider for United. In addition to lengthy
4
portions of the agreement dealing with service and payment responsibilities of the
parties, the portions of the agreement pertinent to this dispute provided,
[A.] UnitedHealthcare Insurance Company is entering into this
agreement with you. It is doing so on behalf of itself,
UnitedHealthcare of Texas, Inc., UnitedHealthcare Beneifts [sic]
of Texas, Inc., Evercare of Texas, L.L.C. and its other affiliates
for certain products and services we offer our customers, all of
which we describe in the attached Appendix 2.
This agreement applies to you and to your professional staff (the physicians
and other professionals who are your employees, or your independent
contractors providing services to your patients, and who are subject to
credentialing by us) and the services you provide at the locations in the
attached Appendix 4. When this agreement refers to “you”, it also
refers to your professional staff. Your professional staff is bound
to the same requirements of this agreement as you are. You
represent to us that you have the authority to bind your
professional staff to this agreement.
....
[B.] This agreement applies to your practice locations identified in Appendix 4.
....
[C.] What if we do not agree[?]
We will resolve all disputes between us by following the dispute
procedures set out in our Administrative Guide. If either of us
wishes to pursue the dispute beyond those procedures, they will
submit the dispute to binding arbitration in accordance with the
Commercial Dispute Procedures of the American Arbitration
Association [(AAA)] (see http://www.adr.org) within one year.
We both expressly intend that any dispute between us be resolved
on an individual basis so that no other dispute with any third
party(ies) may be consolidated or joined with our dispute. We
both agree that any arbitration ruling by an arbitrator allowing
class action arbitration or requiring consolidated arbitration
involving any third party(ies) would be contrary to our intent and
would require immediate judicial review of such ruling. The
arbitrator will not vary the terms of this agreement and will be
5
bound by governing law. We both acknowledge that this
agreement involves interstate commerce, and is governed by the
Federal Arbitration Act, 9 U.S.C. § 1 et seq. The arbitrator will not
have the authority to award punitive or exemplary damages
against either of us, except in connection with a statutory claim
that explicitly provides for such relief. Arbitration will be conducted in
Dallas County, TX.
If a court allows any litigation of a dispute to go forward, we both
waive rights to a trial by jury with respect to that litigation, and the
judge will be the finder of fact. Any provision of this agreement
that is invalid or unenforceable shall not affect the validity or
enforceability of the remaining provisions of this agreement or
the validity or enforceability of the offending provision in any
other situation or in any other jurisdiction. This section of the
agreement shall survive and govern any termination of this
agreement.
....
[D.] This is it[.]
This contract, the appendices and the items referenced in the
attached Appendix 1, constitute our entire understanding. It
replaces any other agreements or understandings with regard to
the same subject matter—oral or written—that you have with us
or any of our affiliates.
Federal law and the applicable law of the jurisdiction where you
provide health care services govern our agreement. Such laws and the rules and
regulations promulgated under them, when they are applicable, control and
supersede our agreement. The Regulatory Appendix referenced in
Appendix 1, and any attachment to it, is expressly incorporated to
govern our agreement and is binding on both of us. In the event
of any inconsistent or contrary language between the Regulatory
Appendix (when it applies) and any other part of our agreement,
including but not limited to appendices, amendments and
exhibits, the Regulatory Appendix will control. [Emphasis added.]
6
The signatory on the August 2, 2011 agreement is “Low T Center” with an address in
Plano, Texas; and Appendix 4 shows provider locations in Indianapolis, Indiana; and
Fort Worth, Texas.
Over the next several years, Low-T related entities in Nashville, Tennessee;
Southlake, Texas; Conway, Arkansas; Warrenville, Illinois; Arapahoe County,
Colorado; Mooresville, North Carolina; Leawood, Kansas; Independence, Missouri;
and Knoxville, Tennessee entered into additional preferred provider agreements with
UnitedHealthcare Insurance Company and its affiliates. Each agreement specifically
stated that it applied to the professionals and their services at each practice location
identified in each agreement and that each provider agreement constituted the entire
agreement between the parties and their affiliates relevant to the subject matter of the
agreement.
While each agreement contained an arbitration clause for resolving “all disputes
between us,” the clauses varied in their terms. Common to all the agreements was
language that if the parties were unable to resolve disputes according to their
applicable administrative procedures, they would submit such disputes to binding
arbitration. Also common to all the agreements was language to the effect that “any
dispute between us [would] be resolved on an individual basis so that no other dispute
with any third party(ies)[could] be consolidated or joined with our dispute.” Several of
the agreements provided that any arbitration ruling that allowed class or consolidated
7
arbitration involving any third parties would be contrary to the terms of the
agreement and would require immediate judicial review.
While several of the agreements also provided for arbitration pursuant to the
rules of the Commercial Dispute Procedures of the AAA, others were more complex.
For example, in three of the agreements, claims under $1,000,000 were to be
arbitrated before the AAA using the AAA Healthcare Payor Provider Arbitration
Rules while claims for $1,000,000 or more, or for termination of the agreement,
required a panel of three arbitrators selected from the AAA’s National Healthcare
Roster or its National Roster of Arbitrators. Each agreement provided for a different
location for arbitration: Dallas County, Texas; Pulaski County, Arkansas; Arapahoe
County, Colorado; Cook County, Illinois; Davidson County, Tennessee; Guilford
County, North Carolina; and Johnson County, Kansas. None of the agreements
addressed handling or arbitration of claims arising outside of each respective
agreement.
In December 2017, Optum, on behalf of Appellants, sent Low T Center, LLC
a letter demanding that it pay Appellants approximately $2.4 million, which Appellants
alleged was the total amount of overpayments for healthcare services provided
between May 2014 and May 2017. According to Appellants’ discovery response,
although United had paid over 40,000 individual health insurance claims to Appellees
during that time, the demand had not been based upon an audit of each of those
healthcare claims. Instead, Optum contended it had identified coding “errors” totaling
8
less than $10,000.00 during the three-year period from “[a] sample of
11 UnitedHealthcare Employer and Individual records comprising 482 claim lines
paid.” Optum then “extrapolated” an amount due across a “paid claims universe” to
come up with the $2.4 million amount demanded. Nothing in this demand correlated
the “claims universe” or the amount claimed to any particular preferred provider
agreement between the parties.
Appellees contended that Appellants’ audit and demand for repayment violated
Texas state law. According to Appellees, Texas law permits an insurer to audit a claim
only within 180 days after the claim is received by the insurer. If an insurer follows
that and other audit procedures—none of which allegedly permit a broad
“extrapolation” of claims—the insurer may demand a repayment only within 180 days
after the claim is paid. Except for a relatively small number of claims paid in early
2017, Appellants’ demand for repayment of claims dating back to 2014 allegedly
violated these requirements. Thus, on December 29, 2017, Appellees sent Appellants
a letter disputing Optum’s audit and demand. That letter triggered an internal dispute
resolution process allegedly required under Texas law.
Appellees used Appellants’ internal dispute resolution procedure described in
Optum’s December 2017 letter to challenge Appellants’ right to recoupment.
Appellees also retained an independent auditor to review the coding of the healthcare
claims. The auditor agreed that the vast majority of claims had been properly coded
and that Appellants’ repayment demand was not justified. On February 26, 2018,
9
Appellants sent Appellees’ internal counsel a letter stating Appellants had considered
Appellees’ dispute but had nevertheless determined Appellants’ position “remain[ed]
valid.” Appellants titled the letter “RESOLUTION OF DISPUTE—Overpayment Is
Valid” and renewed their demand for payment.
Appellees then sent Appellants a written settlement proposal to resolve the
dispute. Accompanying the settlement proposal was a check in the amount of
$24,665.21 in proposed satisfaction of the overpayment claim. Appellants cashed the
settlement check but then repudiated the settlement on September 12, 2018, stating
that the matter was being “referred for litigation” and warning Appellees to be
“guided accordingly.” Appellants said nothing about arbitration.
In October 2018, Appellees sued Appellants for declaratory relief in the state
district court (1) seeking declarations that the overpayment “settlement agreement”
was valid and enforceable and that Appellants’ audit and demand violated the
provider agreements and state law and (2) seeking declaratory relief of the rights and
obligations of the parties to “certain provider agreements” without identifying the
agreements. One agreement was attached as an exemplar. Appellants answered Low-
T’s suit and moved to dismiss the case or transfer it to Travis County, Texas.
Appellants then reasserted their motion to dismiss or transfer to Travis County but
also added counterclaims under unidentified provider agreements that Appellants
alleged govern the healthcare claims covered by their demand for overpayment.
Appellants also sought declaratory relief regarding the rights and obligations of the
10
parties under the unidentified provider agreements as well as other affirmative relief.
Appellants removed the suit to federal court. Appellees moved to remand the case to
the state district court, and the federal court granted that motion.
Appellants participated in mediation with Low-T in June 2019. After the
mediation proved unsuccessful, Appellants moved to compel arbitration. In doing so,
they asked the court to order arbitration “in accordance with the provider agreements
that are the subject of this dispute.” [Emphasis added.] After Appellants filed their
motion to compel arbitration, the parties engaged in limited discovery, with each side
producing copies of the provider agreements that are at issue in this case. However,
despite being requested to do so, Appellants never identified the underlying healthcare
claims made the subject of the repayment demand or correlated them to any specific
provider agreement.
The trial court conducted a summary hearing of the Motion to Compel
Arbitration and the responses and replies on file and signed an order denying the
motion on January 17, 2020. This interlocutory appeal ensued. See Tex. Civ. Prac. &
Rem. Code Ann. § 51.016.
II. Standard of Review
We review a trial court’s order denying a motion to compel arbitration for an
abuse of discretion. Henry v. Cash Biz, LP, 551 S.W.3d 111, 115 (Tex. 2018), cert. denied,
139 S. Ct. 184 (2018); In re Labatt Food Serv., L.P., 279 S.W.3d 640, 642–43 (Tex. 2009)
(orig. proceeding). We defer to the trial court’s factual determinations if they are
11
supported by evidence but review its legal determinations de novo. Henry, 551 S.W.3d
at 115. Whether the claims in dispute fall within the scope of a valid arbitration
agreement is reviewed de novo. Id.; Perry Homes v. Cull, 258 S.W.3d 580, 598 &
n.102 (Tex. 2008). The evidentiary standards applicable to Appellants’ motion to
compel arbitration are the same as those that apply to a motion for summary
judgment. See Doe v. Columbia N. Hills Hosp. Subsidiary, L.P., 521 S.W.3d 76, 81 (Tex.
App.—Fort Worth 2017, pet. denied). Appellate courts are not required to search a
voluminous record with no guidance to identify evidence supporting a claim for
arbitration. See Hall v. Stephenson, 919 S.W.2d 454, 467 (Tex. App.—Fort Worth 1996,
writ denied).
III. Analysis
A. The Law
A party seeking to compel arbitration must establish that there is a valid
agreement to arbitrate, that the claims raised are within the scope of the agreement,
and that the claims are arbitrable; the third element is not an issue here. Henry,
551 S.W.3d at 115; Haddock v. Quinn, 287 S.W.3d 158, 169 (Tex. App.—Fort Worth
2009, pet. denied). The first question to be answered then is whether there is a valid
arbitration agreement between the parties. G.T. Leach Builders, LLC v. Sapphire V.P.,
LP, 458 S.W.3d 502, 525 (Tex. 2015). This step is a question of contract formation:
i.e., did the parties have a valid agreement to arbitrate some set of claims? IQ Prod. Co.
v. WD-40 Co., 871 F.3d 344, 348 (5th Cir. 2017).
12
The second issue is whether the claims in question are subject to the arbitration
agreement proved. In re FirstMerit Bank, N.A., 52 S.W.3d 749, 754 (Tex. 2001) (orig.
proceeding). Once the party seeking to compel arbitration has established the
existence of an enforceable arbitration agreement, both Texas and federal law
recognize a strong presumption favoring arbitration. G.T. Leach Builders, 458 S.W.3d at
521. However, despite this strong presumption in favor of arbitration, that policy
“cannot serve to stretch a contractual clause beyond the scope intended by the parties
or allow modification of the plain and unambiguous provisions of an agreement.”
Belmont Constructors, Inc. v. Lyondell Petrochemical Co., 896 S.W.2d 352, 356 (Tex. App.—
Houston [1st Dist.] 1995, no writ); see also Branch Law Firm, L.L.P. v. Osborn,
447 S.W.3d 390, 397 (Tex. App.—Houston [14th Dist.] 2014, no pet.); Osornia v.
AmeriMex Motor & Controls, Inc., 367 S.W.3d 707, 712 (Tex. App.—Houston [14th
Dist.] 2012, no pet.). “Even the exceptionally strong policy favoring arbitration cannot
justify requiring litigants to forego a judicial remedy when they have not agreed to do
so.” Carr v. Main Carr Dev., LLC, 337 S.W.3d 489, 496 (Tex. App.—Dallas 2011, pet.
denied); Daniel K. Hagood, P.C. v. Kapai, No. 05-18-01485-CV, 2019 WL 4010778, at
*3 (Tex. App.—Dallas Aug. 26, 2019, pet. denied) (mem. op.). Additionally, even
though an arbitration clause might appear to encompass the claims in question,
the court cannot confine its analysis to the construction of that clause
alone. The court must examine the entire agreement. Although the
parties broadly may agree to arbitrate in one part of the agreement, they
also may place limits on the agreement to arbitrate in another part of the
agreement. Katz v. Feinberg, 167 F. Supp. 2d 556, 566 (S.D.N.Y. 2001)
13
[aff’d, 290 F.3d 95 (2nd Cir. 2002)]; see J.M. Davidson[ Inc. v. Webster],
128 S.W.3d [223, 229 (Tex. 2003)] (stating that, in construing an
agreement to arbitrate contained in a written contract, courts must
examine the entire writing in an effort to harmonize and give effect to all
the provisions of the contract). In determining whether a given dispute
must be arbitrated, a court looks to all terms of the parties’ agreement
bearing on arbitration. See J.M. Davidson, 128 S.W.3d at 229. Even though
the wording of an arbitration clause may be broad, its scope may be
limited by language elsewhere in the agreement in which the parties
unambiguously negate or limit the arbitration clause with respect to a
given matter in dispute. Woodcrest Nursing Home v. Local 144, Hotel, Hosp.,
Nursing Home [&] Allied Servs. Union, 788 F.2d 894, 898 (2d Cir. 1986);
Katz, 167 F. Supp. 2d at 566; see J.M. Davidson, 128 S.W.3d at 229.
Branch Law Firm, 447 S.W.3d at 395.
Arbitration agreements are contracts and are subject to the rules of contract
construction. AT & T Mobility LLC v. Concepcion, 563 U.S. 333, 339, 131 S. Ct. 1740,
1745 (2011); IHS Acquisition No. 131, INC. v. Iturralde, 387 S.W.3d 785, 791 (Tex.
App.—El Paso 2012, no pet.) (“An agreement to arbitrate is a contract, the
relation[ship] of the parties is contractual, and the rights and liabilities of the parties
are controlled by the law of contracts.”). As noted by the El Paso court in Iturralde,
In construing an arbitration agreement, the court should attempt to give
effect to the parties’ intentions, in light of the usual and ordinary
meaning of the contractual language and the circumstances under which
the agreement was made. See In re Kaplan Higher Educ. Corp., 235 S.W.3d
206, 210 (Tex. 2007) (“Arbitration agreements are enforced according to
their terms and according to the intentions of the parties.”) (internal
quotations and citations omitted).
387 S.W.3d at 794. Under traditional contract principles, the primary concern is to
ascertain the true intent of the parties as expressed in the instrument. R & P Enters. v.
LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d 517, 518 (Tex. 1980). Courts should
14
consider the entire writing in an effort to harmonize and give effect to all the
provisions of the contract so that none will be rendered meaningless. Universal C.I.T.
Credit Corp. v. Daniel, 243 S.W.2d 154, 158 (Tex. 1951). No single provision alone will
be given controlling effect; all the provisions must be considered with reference to the
whole instrument. Myers v. Gulf Coast Minerals Mgmt. Corp., 361 S.W.2d 193, 196 (Tex.
1962). Contracts are construed from a utilitarian standpoint, bearing in mind the
particular business activity sought to be served. Reilly v. Rangers Mgmt., Inc., 727 S.W.2d
527, 530 (Tex. 1987). In this regard, it has been noted that
the nature of the parties’ relationship is critical. If their sole relationship
is established and governed by an agreement with an arbitration
provision, their disputes are more likely to fall within the scope of the
arbitration provision. But when the relationship extends beyond the
agreement or is governed by separate and independent agreements,
arbitration is less likely.
In re Great W. Drilling, LTD, 211 S.W.3d 828, 838 (Tex. App.—Eastland 2006, orig.
proceeding) (footnote omitted), mand. granted sub nom., In re Gulf Expl., LLC,
289 S.W.3d 836 (Tex. 2009).
The court may look to extrinsic evidence of the facts and circumstances
surrounding a contract’s execution to aid in the construction of the contract’s
language, “but the evidence may only ‘give the words of a contract a meaning
consistent with that to which they are reasonably susceptible, i.e., to “interpret’
contractual terms.’” URI, Inc. v. Kleberg Cty., 543 S.W.3d 755, 765 (Tex. 2018) (quoting
15
Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. CBI Indus., Inc., 907 S.W.2d 517, 521 (1995)).
As further explained by the Supreme Court in URI,
[T]he parol evidence rule prohibits extrinsic evidence of subjective intent
that alters a contract’s terms but “does not prohibit consideration of
surrounding circumstances that inform, rather than vary from or
contradict, the contract text.” Thus, extrinsic evidence may be consulted
to give meaning to the phrase “the green house on Pecan Street,” but
“cannot be used to show the parties’ motives or intentions apart from”
the language employed in the contract.
....
What “facts and circumstances” may be consulted will naturally
vary from case to case, but reasonably well-defined contours can be
mined from our jurisprudence. Because objective intent controls the
inquiry, only circumstantial evidence that is objective in nature may be
consulted. We have accordingly described surrounding circumstances as
including “‘the commercial or other setting in which the contract was
negotiated and other objectively determinable factors that give a context to
the transaction between the parties.’” Setting can be critical to
understanding contract language, as we found in cases
involving . . . construction of an arbitration agreement. We have also cited trade
custom as bearing on the parties’ objective intent when provisions were
stricken from a form insurance contract. Similarly, trade usage can
illuminate the meaning of contract language because “the meaning to
which a certain term or phrase is most reasonably susceptible is the one
which [is] so regularly observed in place, vocation, trade or industry so
‘as to justify an expectation that it will be observed with respect to a
particular agreement.’” Facts attending the execution may or may not
shed light on contract meaning and may or may not cross the parol-
evidence line. In deciding what facts and circumstances are informative,
rather than transformative, ascertaining objective meaning is the
touchstone.
543 S.W.3d at 767–68 (second emphasis added) (footnotes omitted).
B. Application of Law to Facts
Appellants’ arguments can be summarized as follows:
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1) Appellees judicially admitted in their petition that their claims must be
submitted to arbitration because all the provider agreements contained a
broadly worded arbitration agreement.
2) Regardless of whether the parties to every agreement were identical, they
were all either affiliates of signatories who were bound to the agreements
or were bound under the direct benefits estoppel theory.
3) In response to Appellees’ claim that Appellants entered into a settlement
of the overpayment claim, any such claims should be submitted to
arbitration since the purported settlement arises from the underlying
contractual dispute, which is subject to arbitration.
4) To the extent that any claims of any Low-T entities are not subject to
arbitration, their claims should be stayed pending conclusion of
arbitration of the arbitrable claims.
Appellees deny that they have judicially admitted that their claims should be
subject to arbitration. Further, Appellees deny that Appellants met their burden of
proving that the claims in question fall within the scope of any arbitration agreement
between the parties. Appellees also deny that the direct benefits estoppel theory is
applicable and contend that Appellants entered into a settlement and release of the
underlying claims and that Appellants’ breach of that settlement agreement is not
subject to the alleged arbitration agreement.1
1
Appellees also contend that Appellants’ request to arbitrate is not arbitrable
because it was untimely, coming more than one year after the date the dispute arose,
in violation of the arbitration provisions in the provider agreements. We need not
decide this issue. Whether a party complied with contractual time deadlines for
initiation of arbitration is for the arbitrator to decide, not the court. G.T. Leach
Builders, 458 S.W.3d at 521.
17
Appellees’ live pleading was their Plaintiffs’ Original Petition for Declaratory
Relief. Appellees sought declaratory relief regarding the rights and obligations of the
parties under certain Texas statutes, the preferred provider contracts, and the alleged
settlement agreement. One provider agreement was attached as Exhibit A as an
exemplar. Count One of Appellees’ petition sought declaratory relief that the amounts
Appellants had claimed to be due from the “paid claims universe” calculated from the
smaller, unidentified claims audit had been the subject of a full and final accord and
satisfaction. Count Two requested a declaration of the parties’ rights under the
provider agreements and Texas law:
(a) UHG [(United excluding Optum)] is prohibited from conducting
post-payment audits not in conformance with the provisions of the
Provider Agreements and Texas law;
(b) UHG is prohibited from making claims for refunds or recoupment
from Low T beyond the time limits set by Texas law; and
(c) UHG is prohibited from demanding refunds or making recoupments
based on statistical extrapolations beyond the actual claims audited.
Count Three sought declaratory relief regarding the proper methods of coding
insurance claims under the provider agreements. Appellees sought attorney’s fees for
each count and court costs.
Appellants’ live pleading was their Second Amended Answer and Amended
Counterclaim. In addition to attorney’s fees, costs, and interest, Appellants sought a
declaration of the parties’ rights and obligations under the provider agreements,
including their alleged right to recovery of the alleged overpayments, as well as the
18
proper method of recouping such overpayments by allocating them to future claims.
Appellants also sought damages for breach of contract for Appellees’ failure to refund
the overpayments and for Appellees’ failure to abide by the dispute resolution
provisions of the contracts. Finally, Appellants sought “statutory refunds” under
“Chapters 1301 and/or 843.”
The first question in the arbitration analysis is whether there is an enforceable
arbitration agreement between the parties. The answer is yes, several in fact. All the
provider agreements were executed by United Healthcare Insurance Company on
behalf of itself and its named and unnamed affiliates. Neither side has contested the
“affiliate” relationship of the various United entities nor United Healthcare Insurance
Company’s authority to enter into the agreements on behalf of the affiliated
companies. Therefore, we hold that all Appellants should be treated as parties to each
of the provider agreements. As for Appellees, they pleaded that collectively they do
business as “Low T Center.” Appellees further pleaded that they contract with UHG
as a preferred provider, that Appellees are beneficiaries of the UHG preferred
provider agreements, and that this lawsuit concerns the payments due under those
provider agreements. Appellants therefore established that there are multiple valid and
enforceable arbitration agreements, as set forth in each respective provider agreement.
See Hous. First Am. Sav. v. Musick, 650 S.W.2d 764, 769 (Tex. 1983) (stating assertions
of fact in the live pleadings of a party are judicial admissions and are binding on the
party making them); see also FirstMerit Bank, 52 S.W.3d at 755–56 (holding signatories
19
to contracts with arbitration clauses, and nonsignatories who sue based on such
contracts, are bound to the contracts’ arbitration clauses); Powell v. Grijalva, No. 14-19-
00080-CV, 2020 WL 4097274, at *4 (Tex. App.—Houston [14th Dist.] July 21, 2020,
no pet.) (mem. op.); Gen. Fin. Servs., Inc. v. Practice Place, Inc., 897 S.W.2d 516, 521 (Tex.
App.—-Fort Worth 1995, no writ) (op. on reh’g). As a result, we need not address the
issue of direct benefits estoppel. See Tex. R. App. P. 47.1.
The second question we ask in the arbitration analysis is whether the claims in
question fall within the scope of the arbitration clauses. We hold that Appellants did
not establish that their overpayment claim and Appellees’ claim about the alleged
settlement thereof (Count One of Appellees’ Original Petition and paragraphs 11, 17,
and 18 of Appellants’ Second Amended Answer and Amended Counterclaim) are
within the scope of the arbitration agreements, and we therefore also hold that the
trial court did not abuse its discretion in denying arbitration of those matters.
However, the other, more general claims for declaratory relief by both sides regarding
their mutual rights and obligations under the provider agreements (Counts Two and
Three of Appellees’ Original Petition and paragraphs 17–19 of Appellants’ Second
Amended Answer and Counterclaim) are within the scope of the arbitration
agreements and should be remanded to the trial court for referral to arbitration under
the terms of each respective provider agreement.
The provider agreements all contain language to the effect that all disputes
“between us” will be resolved through United’s Administrative Guide and, if no
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resolution is obtained, through binding arbitration. Appellants contend, and we agree,
that this is broad arbitration language. Appellants contend that this language invokes
the presumption in favor of arbitration of all disputes between the parties. See Neal v.
Hardee’s Food Sys., Inc., 918 F.2d 34, 38 (5th Cir. 1990). According to Appellants, since
all the agreements contain this language, the overpayment claim should be arbitrated.
We find this to be an overly simplistic analysis that fails to implement the intent of the
parties. As will be explained below, no provider agreement in the record covers the
overpayment demand actually made. Absent an applicable provider agreement, the
overpayment demand fails to fall within the scope of any arbitration agreement
between the parties.
As with any contract, the court seeks to ascertain and enforce the intent of the
parties. The court should look to the wording of the agreement to determine the
intent of the parties. Kaplan Higher Educ. Corp., 235 S.W.2d at 210; Iturralde, 387 S.W.3d
at 794. However, the court should also look to the entire agreement in light of the
circumstances surrounding the making of the contract to give meaning to the wording
of the agreement. Universal C.I.T. Credit Corp., 243 S.W.2d at 158. Courts construe
contracts from a utilitarian standpoint, bearing in mind the particular business activity
sought to be served, Reilly, 727 S.W.2d at 530, and may consider extrinsic evidence of
the facts and circumstances surrounding a contract’s execution to aid in the
construction of the contract’s written language. URI, Inc., 543 S.W.3d at 765.
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With these principles in mind, we start by noting that these provider
agreements cover two areas of commerce that are heavily regulated at the state level:
health insurance claims payments and provision of medical care. Regarding health
insurance claims regulations, it has been noted,
As a result of complaints by aggrieved health care providers and insureds
with regard to dilatory practices of some insurers in making payments or
reimbursements for health care claims, most states now require insurers
to disburse payments in a timely fashion once the claims are deemed
clean. Statutes mandating prompt payment are ordinarily found among
the general requirements for insurers, provisions addressing accident and
health insurance specifically, or material describing unfair and prohibited
trade practices. Although prompt-pay requirements also exist for some
other lines of insurance, this survey focuses exclusively on those
applicable to health insurance.
Thomson Reuters, Prompt Payment Requirements for Health Insurance Claims, 50 State
Statutory Surveys: Insurance: Health, 0110 SURVEYS 26, Westlaw (Dec. 2020). Likewise,
the practice of medicine is heavily regulated at the state level. 2
Given this background, the wording of each provider agreement clearly
demonstrates that the parties intended to create a decentralized system of separate
contracts governing their regional relationships. Each agreement expressly applies
only to the identified medical practice, its professional staff, and services provided at
that particular practice location. The rationale is obvious; i.e., the services provided at
2
An index of the statutes governing the practice of medicine in the various
states can be found at Thomson Reuters, State Licensure: Physicians, 50 State Statutory
Surveys: Health Care: Health Care Providers, 0100 SURVEYS 24, Westlaw (Sept. 2020). As
would be expected, the areas involved in governing the practice of medicine are
extensive.
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each location, and the billing and payment for those services, were intended to be
subject to the state regulatory authority of those practice locations. For example,
Texas locations would be governed by Texas law while Tennessee locations would be
governed by Tennessee law. Those laws could well be different, and the agreements
acknowledge that regulatory reality. In fact, the Regulatory Appendix for each
agreement, where attached, reflects the respective state insurance-claim-processing
requirements.
Additionally, the fact that the parties executed provider agreements with
arbitration clauses with different rules and different arbitration locations clearly
demonstrates that the parties viewed each agreement to be an independent contractual
document pertaining to the practice locations in that agreement and to the obligations
of the parties in each document. Finally, each provider agreement has a clause entitled
“This is it,” which clearly says that the agreement, along with the appendices,
constitutes the entire understanding of the parties, including either side’s affiliates,
regarding the subject matter of the agreement.
How does the demand for overpayment fit into any of the provider
agreements? In short, on this record, it does not. The demand letter did not identify
specific billings originating from any identifiable practice location, and Appellants
have not established any particular provider agreements to which the claim might
apply. Optum allegedly took a limited number of unidentified claims, found what it
believed to be a certain rate of improper coding of claims by Low-T, and then applied
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that rate to the “audited paid claims universe” to extrapolate a calculated overpayment
total. This methodology did not even attempt to correlate the “overpayment” to
claims from actual provider agreements. Appellants never showed that they utilized
any agreement between the parties to justify this methodology. Appellants simply
argue that this is a dispute between the parties and that all disputes between the
parties are to be arbitrated. However, this argument fails to recognize that the parties
likely have different rights, duties, and remedies depending on which state law and
which agreement apply to a claim. By basing their claim on Optum’s methodology,
Appellants have made it virtually impossible to ascertain which state law and which
provider agreement or agreements are applicable to the overpayment claim. There is
certainly no evidence of an overarching agreement that authorizes this method of
determining claim overpayments across multiple provider agreements that also
includes an arbitration agreement to address disputes regarding such calculations.
Seeking compelled arbitration of the overpayment claim can best be described as an
effort to force a proverbial square peg into a round hole, which we decline to do. We
hold that Appellants failed to demonstrate that the overpayment claim falls within the
scope of any arbitration agreement. Therefore, the trial court did not abuse its
discretion in denying arbitration of the claim for overpayment. We overrule this part
of Appellants’ first issue.
Appellants contend that because the overpayment claim should be arbitrated,
the alleged settlement of the claim should be arbitrated. Niro v. Fearn Int’l, Inc.,
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827 F.2d 173, 175 (7th Cir. 1987); Valero Energy Corp. v. Teco Pipeline Co., 2 S.W.3d 576,
587 (Tex. App.—Houston [14th Dist.] 1999, no pet.). However, since we have held
that Appellants did not satisfy their burden to show that the overpayment claim fell
within the scope of any arbitration agreement, the trial court did not abuse its
discretion in denying arbitration of the alleged settlement of that claim. We overrule
this portion of Appellants’ first issue.
In their remaining claims, both parties asked the trial court to declare the rights
and obligations of the parties regarding various aspects of billing and claims payment
procedures under the “provider agreements.” These requests clearly fall within the
scope of each respective provider agreement and the arbitration provisions governing
each agreement. Because we agree that the arbitration language in each provider
agreement is broad in scope, an arbitrator may declare the rights and obligations of
the parties to the contracts if the contracts do not preclude the arbitrator from
awarding such relief. See 950 Corbindale, L.P. v. Kotts Capital Holdings, Ltd. P’ship,
316 S.W.3d 191, 196–97 (Tex. App.—Houston [14th Dist.] 2010, no pet.). These
contracts do not contain any such prohibition; therefore, these declaratory-judgment
claims of the parties should be referred for arbitration according to the terms of each
agreement. The trial court’s refusal to do so was an abuse of discretion. See id. at 197.
We sustain this remaining portion of Appellants’ first issue.3
In their second alternative issue, Appellants contend that this court should
3
order that any claims not subject to arbitration be stayed pending the outcome of
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IV. Conclusion
Having overruled Appellants’ first issue in part and having sustained it in part,
we affirm the trial court’s order in part and reverse it in part. That portion of the
order denying arbitration on Appellants’ claims for alleged overpayment and
Appellees’ claim of settlement of the overpayment (Count One of Appellees’ Original
Petition and paragraphs 11, 17, and 18 of Appellants’ Second Amended Answer and
Amended Counterclaim) and related attorney’s fees and costs is affirmed.
However, that portion of the order denying arbitration on all parties’ other,
general claims for declaratory relief of the parties’ rights and obligations under the
provider agreements and applicable state law, attorney fees, and costs (Counts Two
and Three of Appellees’ Original Petition and paragraphs 17–19 of Appellants’
Second Amended Answer and Counterclaim) is reversed. We remand this case to the
trial court (1) to refer those claims for declaratory relief to arbitration pursuant to the
terms of each provider agreement4 and (2) to address whether to stay claims not
subject to arbitration pending the arbitration.
arbitration. This issue was not addressed by the trial court. In light of this court’s
rulings herein, we believe that this matter should be addressed by the trial court on
remand. See Bonded Builders Home Warranty Ass’n of Tex., Inc. v. Smith, 488 S.W.3d 468,
485 n.7 (Tex. App.—Dallas 2016, no pet.); see also Tex. R. App. P. 47.1.
4
Appellees contend that Appellants asked for arbitration of all claims in Dallas,
Texas, under one agreement, the exemplar attached to the Original Petition. This is
incorrect. Appellants’ Motion to Compel Arbitration sought an order “compelling
Plaintiffs to proceed to arbitration in accordance with the provider agreements that are
the subject of this dispute.” [Emphasis added.]
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/s/ Mike Wallach
Mike Wallach
Justice
Delivered: January 21, 2021
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