Opinion
NO. 01-21-00008-CV
04-26-2022
SEALY EMERGENCY ROOM, L.L.C. and Kannappan Krishnaswamy, M.D., Appellants v. FREE STANDING EMERGENCY ROOM MANAGERS OF AMERICA, L.L.C., Dr. Atul Dhingra, Dr. Swapan Dubey, and Dr. Sanjeev Dubey, Appellees
Robert M. (Randy) Roach, Jr., Daniel W. Davis, Roach Newton, L.L.P., 10777 Westheimer, Suite 1100, Houston, Texas 77042, for Appellant. Darren Braun, Ashish Mahendru, MAHENDRU, P.C., 639 Heights, Blvd., Houston, TX 77007, for Appellee.
Robert M. (Randy) Roach, Jr., Daniel W. Davis, Roach Newton, L.L.P., 10777 Westheimer, Suite 1100, Houston, Texas 77042, for Appellant.
Darren Braun, Ashish Mahendru, MAHENDRU, P.C., 639 Heights, Blvd., Houston, TX 77007, for Appellee.
Panel consists of Justices Goodman, Landau, and Countiss.
MEMORANDUM OPINION
Julie Countiss, Justice
Appellants, Sealy Emergency Room, L.L.C. ("Sealy ER") and Kannappan Krishnaswamy, M.D., challenge the trial court's rendition of summary judgment, in favor of appellees, Free Standing Emergency Room Managers of America, L.L.C. ("FERMA") and Dr. Atul Dhingra, Dr. Swapan Dubey, and Dr. Sanjeev Dubey (collectively, the "third-party doctors"), on Sealy ER's and Dr. Krishnaswamy's counterclaims and third-party claims for breach of contract, fraud, fraudulent inducement, and negligence. In three issues, Sealy ER and Dr. Krishnaswamy contend that the trial court erred in granting summary judgment.
We dismiss the appeal for lack of jurisdiction.
Background
FERMA, a company specializing in the management of free-standing emergency rooms, sued Sealy ER and Dr. Krishnaswamy after a dispute arose from a contractual relationship between FERMA, Sealy ER, and Dr. Krishnaswamy for the management of Sealy ER, an emergency room facility located in Sealy, Texas. In its first amended petition, FERMA brought claims for breach of contract and a declaratory judgment against Sealy ER and Dr. Krishnaswamy.
In their first amended answer and counterclaim, Sealy ER and Dr. Krishnaswamy generally denied the allegations in FERMA's petition and brought counterclaims against FERMA for breach of contract, fraud, fraudulent inducement, and negligence. Sealy ER and Dr. Krishnaswamy alleged that they had entered into a contract with FERMA, titled The Emergency Department Amended Management Agreement, in February 2015. As to their breach-of-contract counterclaim, according to Sealy ER and Dr. Krishnaswamy, FERMA breached its contractual duties to "educate and orient new physicians to the facility"; update the policies and procedures manual; "provide a billing liaison representative" and "enhance cash flow"; "train and educate ... staff"; engage in business development and marketing initiatives; adhere to the mandated laboratory compliance program; provide supervisory personnel; "produce copies of its employee[s’] workman compensation/personal/professional insurances"; "keep confidential proprietary information of Sealy ER"; "comply with HIPAA"; and make "changes in ... policies [and] procedures," including disaster preparation policies.
As to their counterclaims for fraud and fraudulent inducement, Sealy ER and Dr. Krishnaswamy alleged that FERMA committed fraud and fraudulently induced them to enter the contract by falsely representing that it was proficient in managing "billing issues"; able to provide various services, including business development, consulting, and risk management services, and the recruitment of "qualified and appropriate" physicians; and capable of complying with state regulatory and licensing requirements. Such representations were made with the intent that Sealy ER and Dr. Krishnaswamy would rely on them, FERMA knew the representations were false, and Sealy ER and Dr. Krishnaswamy relied on the representations. As a result, Sealy ER and Dr. Krishnaswamy suffered damages.
Finally, as to their negligence counterclaim, Sealy ER and Dr. Krishnaswamy alleged that FERMA owed them "a duty to accomplish its tasks consistent with standards in the industry" and by engaging in the aforementioned conduct FERMA breached its duty, proximately causing damages to Sealy ER and Dr. Krishnaswamy.
In its amended third-party petition, Sealy ER brought third-party claims for fraud, fraudulent inducement, and negligence against the third-party doctors. As to its third-party claims for fraud and fraudulent inducement, Sealy ER alleged the same conduct that served as the basis for its counterclaims against FERMA. As to its third-party negligence claim, Sealy ER alleged that the third-party doctors had a "duty to accomplish [their] tasks with standards in the industry." According to Sealy ER, the third-party doctors "had personal knowledge of the need to have the Sealy ER [l]aboratory in compliance with state laboratory requirements," yet "Texas compliance authorities ... failed Sealy ER" "on two separate occasions." And although the third-party doctors were "aware of state and federal[ ] ... HIPAA requirements," they "failed to obtain proper administrative HIPAA consent to avoid impermissible use or disclosure of clinical information that compromise[d] the security [and] privacy of ... patients’ health information." That breach "placed in jeopardy" Sealy ER's ability to operate. As a result of the third-party doctors’ negligence, Sealy ER suffered damages.
FERMA and the third-party doctors filed a motion for partial summary judgment on Sealy ER's and Dr. Krishnaswamy's counterclaims and third-party claims against them for breach of contract, fraud, fraudulent inducement, and negligence, asserting that they were entitled to judgment as a matter of law. According to FERMA and the thirty-party doctors, in 2014, FERMA and Sealy ER entered into a contract "in which FERMA agreed to manage Sealy ER in exchange for a monthly payment of $40,000." In February 2015, "due to Sealy ER's worsening financial condition, the parties negotiated" an amended contract, in which "FERMA agreed to reduce its monthly fee." The parties performed under that contract until 2018. In spring 2018, Dr. Krishnaswamy approached FERMA "and asked if FERMA would mutually agree to terminate" the contract. FERMA declined to do so. Then, Dr. Krishnaswamy "wrongfully terminated" the contract, which led FERMA to file suit against Sealy ER for breach of contract and a declaratory judgment. Sealy ER and Dr. Krishnaswamy then filed counterclaims and thirty-party claims against FERMA and the third-party doctors.
As to Sealy ER's and Dr. Krishnaswamy's counterclaim and third-party claim for negligence, FERMA and the third-party doctors argued that they were entitled to judgment as a matter of law because Texas law does not recognize a claim for negligence arising from a breach of contract. They also argued that the negligence claims failed because "[Sealy ER] admitted that no harm actually occurred as a result of FERMA's and the [third-party doctors’] alleged negligent actions."
As to Sealy ER's and Dr. Krishnaswamy's fraud and fraudulent-inducement counterclaim and third-party claim, FERMA and the third-party doctors argued that they were entitled to judgment as a matter of law because the economic loss doctrine barred such claims; the claims were "based on alleged promises of future performance, which are generally non-actionable"; Sealy ER could not recall any "specific representations from FERMA that pre-dated the execution of the [contract]"; and the claims "were based in part on promises allegedly made years after [Sealy ER had] entered into the contract[ ]." FERMA and the third-party doctors also argued that they were entitled to judgment as a matter of law on Sealy ER's and Dr. Krishnaswamy's fraud and fraudulent inducement claims because Sealy ER had "admitted that it suffered no ‘quantifiable specific amount’ of damages" as required to support such claims. And as to the fraud and fraudulent inducement thirty-party claims against Dr. Swapan Dubey and Dr. Sanjeev Dubey specifically, the third-party doctors argued that those claims failed because Sealy ER "admitted that it ‘c[ould not] remember’ if it had communications" with either Dr. Swapan Dubey or Dr. Sanjeev Dubey.
Finally, as to Sealy ER's and Dr. Krishnaswamy's breach-of-contract counterclaim against FERMA, FERMA argued that it was entitled to judgment as a matter of law because the contract did not create the obligations alleged by Sealy ER and Dr. Krishnaswamy. FERMA and the third-party doctors attached various exhibits to their partial-summary-judgment motion.
In their response to the partial-summary-judgment motion, Sealy ER and Dr. Krishnaswamy argued that FERMA and the third-party doctors were not entitled to judgment as a matter of law on the counterclaims and third-party claims because genuine issues of material fact existed. According to Sealy ER and Dr. Krishnaswamy, their fraud and fraudulent inducement claims were not barred by the economic loss rule and Sealy ER's and Dr. Krishnaswamy's claims are based on "fraud outside of [the] contract." Further, Sealy ER and Dr. Krishnaswamy asserted that the damages they sought in their counterclaims and third-party claims for negligence, fraud, and fraudulent inducement against FERMA and the third-party doctors were not limited to contractual expectancy damages. And FERMA and the third-party doctors breached the contract. Sealy ER and Dr. Krishnaswamy attached various exhibits to their response.
We note that the parties filed additional replies and responses.
The trial court granted FERMA's and the third-party doctors’ partial-summary-judgment motion on Sealy ER's and Dr. Krishnaswamy's counterclaims and thirty-party claims for breach of contract, fraud, fraudulent inducement, and negligence. FERMA and the third-party doctors then moved for severance of the partial summary judgment on Sealy ER's and Dr. Krishnaswamy's counterclaims and third-party claims, and Sealy ER and Dr. Krishnaswamy moved the trial court to reconsider its partial-summary-judgment ruling.
At the hearing on the motion to reconsider the partial-summary-judgment ruling, Sealy ER and Dr. Krishnaswamy informed the trial court that if it was "going to rule against [Sealy ER and Dr. Krishnaswamy] on the[ir] [m]otion for [r]econsideration," Sealy ER and Dr. Krishnaswamy "agree[d]" that the claims disposed of by the partial-summary-judgment ruling "should be severed," but that they "also believe[d] strongly that if [those claims were] going to be severed" and appealed, "the underlying case should be abated pending the outcome of [that] appeal." And Sealy ER and Dr. Krishnaswamy "urge[d]" the trial court to abate the case.
The trial court granted FERMA and the third-party doctors’ motion for severance, and severed Sealy ER's and Dr. Krishnaswamy's counterclaims and third-party claims for breach of contract, fraud, fraudulent inducement, and negligence.
Appellate Jurisdiction
As an initial matter, FERMA and the third-party doctors argue that we lack jurisdiction over this appeal because FERMA still has affirmative claims, arising out of the same operative facts, against Sealy ER and Dr. Krishnaswamy pending in the trial court and thus, there is no final, appealable order with respect to Sealy's and Dr. Krishnaswamy's counterclaims against FERMA. See Heckman v. Williamson Cty. , 369 S.W.3d 137, 146 n.14 (Tex. 2012) ("[C]ourts always have jurisdiction to determine their own jurisdiction." (internal quotations omitted)); M.O. Dental Lab v. Rape , 139 S.W.3d 671, 673 (Tex. 2004) (reviewing court must ensure that it has subject-matter jurisdiction before addressing merits of appeal). Because jurisdiction is never presumed, whether we have jurisdiction is a question of law, which we review de novo. Tex. Dep't of Parks & Wildlife v. Miranda , 133 S.W.3d 217, 228 (Tex. 2004) ; Alaniz v. O'Quinn Law Firm , No. 01-14-00027-CV, 2015 WL 6755614, at *3 (Tex. App.—Houston [1st Dist.] Nov. 5, 2015, no pet.) (mem. op.). If this is an appeal over which we have no jurisdiction, it must be dismissed. See Alaniz , 2015 WL 6755614, at *3 ; Royal Indep. Sch. Dist. v. Ragsdale , 273 S.W.3d 759, 763 (Tex. App.—Houston [14th Dist.] 2008, no pet.) (jurisdiction fundamental in nature and cannot be ignored).
Even if FERMA and the third-party doctors had not raised the issue of our jurisdiction, we may consider our jurisdiction over Sealy ER's and Dr. Krishnaswamy's appeal sua sponte, and we are not limited by the arguments made by FERMA and the third-party doctors in their appellees’ brief. See Saudi v. Brieven , 176 S.W.3d 108, 113 (Tex. App.—Houston [1st Dist.] 2004, pet. denied) (lack of jurisdiction may be recognize by appellate court sua sponte); see also Alaniz v. O'Quinn Law Firm , No. 01-14-00027-CV, 2015 WL 6755614, at *3 (Tex. App.—Houston [1st Dist.] Nov. 5, 2015, no pet.) (mem. op.) (appellate court must determine its jurisdiction to hear appeal and are not limited by parties’ briefing).
Generally, appeals may be taken only from final judgments. Lehmann v. Har-Con Corp. , 39 S.W.3d 191, 195 (Tex. 2001). Interlocutory orders may be appealed if permitted by statute. See Tex. A & M Univ. Sys. v. Koseoglu , 235 S.W.3d 835, 840 (Tex. 2007) ; see, e.g. , TEX. CIV. PRAC. & REM. CODE ANN. § 51.014 (authorizing appeal from certain interlocutory orders). A judgment is final for purposes of appeal if it either (1) actually disposes of all claims and parties then before the court, regardless of its language or (2) states with "unmistakable clarity" that it is intended as a final judgment as to all claims and all parties. Farm Bureau Cty. Mut. Ins. Co. v. Rogers , 455 S.W.3d 161, 163 (Tex. 2015) (internal quotations omitted); Lehmann , 39 S.W.3d at 192–93 ; Alaniz , 2015 WL 6755614, at *3.
Here, neither the order granting FERMA and the third-party doctors partial summary judgment nor the severance order contain finality language or any other clear indication that the trial court intended the order to completely dispose of the entire case. See Rogers , 455 S.W.3d at 163. Sealy ER, Dr. Krishnaswamy, and FERMA all agree that claims arising from their contractual relationship remain pending in the trial court, and Sealy ER and Dr. Krishnaswamy have petitioned for mandamus relief asking this Court to prevent the trial court from proceeding to trial on those remaining claims.
See In re Sealy Emergency Room LLC , No. 01-21-00391-CV, slip op. at 1-2, 2022 WL 1216178 (Tex. App.—Houston [1st Dist.] Apr. 26, 2022, no pet. h.) (mem. op.). We take judicial notice of the records filed in Sealy ER's and Dr. Krishnaswamy's mandamus proceeding in determining the jurisdictional issue in this appeal. See Tex. Gov't Code Ann. § 22.220(c) ; In re Chaumette , 456 S.W.3d 299, 303 n.2 (Tex. App.—Houston [1st Dist.] 2014, orig. proceeding) ; see also Douglas v. Am. Title Co. , 196 S.W.3d 876, 878 n.1 (Tex. App.—Houston [1st Dist.] 2006, no pet.) ("We may take judicial notice of our own records between the same parties involving the same subject matter.").
Severance does not make an interlocutory judgment final and appealable if the judgment disposes of only a subset of the claims among the severed parties. See Blomstrom v. Altered Images Hair Studio , 01-19-00456-CV, 2020 WL 6065437, at *1 (Tex. App.—Houston [1st Dist.] Oct. 15, 2020, no pet.) (mem. op.) ; see also Harris Cty. Flood Control Dist. v. Adam , 66 S.W.3d 265, 266 (Tex. 2001) (judgment in severed cause that disposed of all claims between parties to appeal was final and appealable). If a party appeals from a partial summary judgment that disposes of some but not all claims between the parties, we must dismiss the appeal for lack of jurisdiction, even if the trial court severed the disposed-of claims from those that remain pending. Blomstrom , 2020 WL 6065437 at *1 ; Duke v. Am. W. Steel , 526 S.W.3d 814, 816 (Tex. App.—Houston [1st Dist.] 2017, no pet.). Here, because claims between the parties arising out of the same transaction remain pending in the trial court, we hold that there is no final appealable order, and Sealy ER and Dr. Krishnaswamy have not identified a statute that would authorize an interlocutory appeal from the trial court's partial-summary-judgment ruling. See V.I.P. Royal Palace, LLC v. Hobby Event Ctr. LLC , No. 01-18-00621-CV, 2020 WL 3579563, at *6 (Tex. App.—Houston [1st Dist.] July 2, 2020, no pet.) (mem. op.). As a result, we dismiss the appeal for lack jurisdiction.
The Texas Rules of Civil Procedure grant a trial court broad discretion in deciding whether to sever causes of action. See Tex. R. Civ. P. 41 ; Cherokee Water Co. v. Forderhause , 641 S.W.2d 522, 525 (Tex. 1982) ; Ryland Grp., Inc. v. White , 723 S.W.2d 160, 161 (Tex. App.—Houston [1st Dist.] 1986, no writ). This discretion does not extend to the severance of compulsory counterclaims. See Rucker v. Bank One Tex., N.A. , 36 S.W.3d 649, 651 (Tex. App.—Waco 2000, pet. denied) ; Ryland , 723 S.W.2d at 161 ; see also Sample v. First Nat'l Bank of Bryan , No. 01-00-01394-CV, 2002 WL 1585911, at *1 (Tex. App.—Houston [1st Dist.] 2001, no pet.) (not designated for publication) ; but see Trebesch v. Morris , 118 S.W.3d 822, 828 (Tex. App.—Fort Worth 2003, pet. denied) (noting disagreement among Texas courts of appeals about whether order severing compulsory counterclaim automatically constitutes abuse of discretion).
To the extent that no claims brought by or against the third-party doctors remain pending in the trial court, we express no opinion as to whether the trial court has the discretion to decide to sign a final order severing its partial-summary-judgment ruling on the third-party claims against the third-party doctors from the remainder of the case.
Conclusion
We dismiss the appeal for lack of jurisdiction.