No. GV 204523 THE STATE OF TEXAS, v. AMCARE HEALTH

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No. GV 204523 THE STATE OF TEXAS, v. AMCARE HEALTH
Filed
07 February 28 P12:35
Amalia Rodriguez-Mendoza
District Clerk
Travis District
No. GV 204523 THE STATE OF TEXAS, v. AMCARE HEALTH PLANS OF TEXAS, INC. and AMCARE MANAGEMENT, INC. In The District Court In Travis County, Texas 200th Judicial District RESPONSE OF SPECIAL DEPUTY RECEIVER TO OBJECTION OF MEDIMPACT HEALTHCARE SYSTEMS, INC. TO THE RECOMMENDATION OF THE SPECIAL MASTER Jean Johnson, as Special Deputy Receiver of AmCare Health Plans of Texas, Inc. (the SDR), submits this response to the Objection of MedImpact Healthcare Systems, Inc. (MedImpact) to the recommendation of the Special Master with respect to MedImpact’s Amended Motion for Relief from the Permanent Injunction: Summary of Position 1.
In considering MedImpact’s objection, the Court need only ask 2 questions: (a) does MedImpact present any compelling argument that the Special Master made a mistake in his considered analysis of MedImpact’s Motion; and (b) does MedImpact cite a single case in support of its action. The answer to both questions is no. Because the Response of Special Deputy Receiver to Objection to Master’s Recommendation Page 1 of 21 answer to both questions is no, the Court should accept the recommendation of the Special Master. What Has Gone Before 2.
As the Court is aware, the SDR was appointed to liquidate the business of AmCare Health Plans of Texas, Inc. and AmCare Management, Inc. Receivers were also appointed by courts in Oklahoma and Louisiana for the liquidation of AmCare Health Plans of Oklahoma, Inc. and AmCare Health Plans of Louisiana, Inc., respectively. The liquidation process has been ongoing for some time. As part of the liquidation process, there was a period of time established by the Court in which parties could assert claims against AmCare Health Plans of Texas, Inc. Interested parties were given notice and proof of claim forms were received by the SDR. One such proof of claim form was submitted by MedImpact. The proof of claim submitted to the SDR by MedImpact was rejected. MedImpact objected to the rejection of the claim and asked for reconsideration. The SDR has been attempting to gather information to reconsider the proof of claim as requested by MedImpact. 3.
At the same time, the receivers for AmCare Health Plans of Oklahoma, Inc. and AmCare Health Plans of Louisiana, Inc. started a lawsuit against MedImpact in state court in Oklahoma, claiming that MedImpact owed those estates money because MedImpact allegedly failed to properly pay sums due those companies under a rebate Response of Special Deputy Receiver to Objection to Master’s Recommendation Page 2 of 21 program. The SDR is not part of those proceedings.1 MedImpact removed that lawsuit to a federal court in Oklahoma, and has filed a motion to refer the case to arbitration to take place in San Diego, California.2 The object of MedImpact’s litigation plan is to have before an arbitration panel in California the receivers of AmCare Health Plans of Texas, Inc., AmCare Health Plans of Oklahoma, Inc. and AmCare Health Plans of Louisiana, Inc. The problem with the plan is that the SDR has neither sued MedImpact nor asserted a claim against MedImpact. A further problem with the plan is that there is an injunction against taking legal action against the SDR. MedImpact wants the injunction modified so that it may sue the SDR in Oklahoma and attempt to shift its lawsuit to an arbitration panel in California.3 1
MedImpact makes the ill‐conceived and wrong statement on p. 4 of its Objection that “the SDR appears to have decided to let the Oklahoma Receiver for AmCare‐OK and the Louisiana Liquidator for AmCAre‐LA pull the laboring oar in the litigation against MedImpact based on the allegation that MedImpact overcharged under the Agreement.” MedImpact has no evidence of such an agreement among the various receivers, and none exists. Oklahoma sues MedImpact because MedImpact did not file a proof of claim in the Oklahoma receivership. MedImpact filed an incorrect and untimely proof of claim in the Louisiana receivership. MedImpact filed a claim for amounts allegedly due from each of the companies in receivership in the Texas receivership. As part of its reconsideration of the proof of claim submitted by MedImpact, the SDR has requested the results of the rebate audit as concerns AmCare Health Plans of Texas, Inc. Though the SDR has signed the Confidentiality Agreement requested and drafted by MedImpact, MedImpact has yet to authorize the release of information to the SDR notwithstanding repeated requests by the SDR. 2
The Federal District Court has determined that it will not remand the case to Oklahoma state court, but has not determined whether it will refer the case to arbitration. 3
MedImpact never set its original motion for hearing before the Special Master, and therefore, the SDR did not file a response to it. MedImpact subsequently abandoned that pleading, as it concedes, and set for hearing an amended motion. It is to that amended motion that the SDR filed a response and it is that amended motion that the Special Master recommended be denied. Response of Special Deputy Receiver to Objection to Master’s Recommendation Page 3 of 21 4.
Through the standing order, this Court referred the matter to Tom Collins, the special master for insurance receiverships. Mr. Collins has a distinguished career in serving the Court in the capacity as a master for issues arising in insurance receiverships. He allowed the parties to fully brief all of their arguments. He took time in evaluating the arguments and positions.4 His conclusion is that because MedImpact has filed a proof of claim in this receivership proceeding, triggering a statutory process that presently is being followed by the parties, such process should continue exclusively within the receivership proceeding. See Recommendation at p. 1. MedImpact says that Mr. Collins is mistaken. See Objection at p. 7, &18. MedImpact does not tell the Court specifically why Mr. Collins is wrong, so we must glean their reasons from the balance of their brief. Unfortunately, the brief contains no support for MedImpact’s assertion. Because the assertion is without foundation, and because Mr. Collins correctly notes that the MedImpact has taken advantage of the statutory claims procedure, the Objection should be overruled, and the recommendation of the Special Master accepted. What MedImpact Says Now The Role of Declaratory Relief 5.
MedImpact asserts that “the Special Master was mistaken in asserting that the SDR must first institute a formal proceeding before it would be appropriate to consider whether to allow MedImpact to join her in the Oklahoma Lawsuit as a 4
As noted in the Recommendation, which MedImpact attached to its Objection as Exhibit A, “The Special Master has studied at length and in depth the voluminous briefing filed by the parties.” Response of Special Deputy Receiver to Objection to Master’s Recommendation Page 4 of 21 counterclaim defendant.” See Objection, p. 8, &19. MedImpact wrongly contends that because it would assert a counterclaim against the SDR pursuant the Federal Declaratory Judgment Act, 28 U.S.C. ''2201‐2202 it is unimportant whether the SDR has asserted a claim. Id. 6.
MedImpact does not dispute that it initiated the claims procedure afforded by this Court, and that the claim process is still at work. Rather, it contends that by rejecting the proof of claim, the SDR is actually asserting a claim against MedImpact, and MedImpact is therefore, entitled under the Federal Declaratory Judgment Act to bring the SDR into the federal litigation. MedImpact does not cite to the Court to a single case that has held that upon the rejection of a proof of claim, the claimant may institute a declaratory judgment action in federal court to alter the result. There is ample authority, though, that the claim proceeding should be respected and the amended motion and objection denied. 7.
Initially, the Court should note the posture of the federal litigation. The receivers of AmCare Health Plans of Oklahoma, Inc. and AmCare Health Plans of Louisiana, Inc. filed a lawsuit against MedImpact, seeking affirmative relief. MedImpact says that it wants the Federal Court, by way of the Declaratory Judgment Act, to declare the rights of the parties, or to send the disputes to arbitration. Seeking declaratory relief in response to a claim for affirmative relief does not raise any issue. The Oklahoma and Louisiana receivers have already taken the position that MedImpact has breached the agreement. Therefore, the function of declaratory relief, of not having to Response of Special Deputy Receiver to Objection to Master’s Recommendation Page 5 of 21 wait for an adversary to file suit is not involved here. See Wilton v. Seven Falls Co., 515 U.S. 277, 288, 115 S.Ct. 2137, 2143 (1995). Since the legitimate purpose of a declaratory judgment action is not present, it is clear that what MedImpact wants to do is litigate the rejection of its proof of claim by the SDR, even though that proof of claim is still under consideration by the SDR and MedImpact will have access to further relief in this Court with respect to its proof of claim if it so chooses. 8.
Clearly, the Declaratory Judgment Act does not create an independent cause of action; instead, it provides a form of relief previously unavailable. Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240, 57 S.Ct. 461, 463 (1937). The law is equally well established that a declaratory judgment is usually not available to resolve state law issues that are already pending before a state court. See Brillhart v. Excess Ins. Co. of America, 316 U.S. 491, 495, 62 S.Ct. 1173, 1175‐76 (1942); Magnolia Mar. Transp. Co. v. LaPlace Towing Corp., 964 F.2d 1571, 1581 (5th Cir. 1992). "Federal courts will not seize litigation from state courts merely because one, normally a defendant, goes to federal court to begin his federal‐law defense before the state court begins the case under state law." Pub. Serv. Comm'n v. Wycoff Co., 344 U.S. 237, 248, 97 L. Ed. 291, 73 S. Ct. 236 (1952); see also Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 15‐16, 77 L. Ed. 2d 420, 103 S. Ct. 2841 (1983) (reaffirming rule of Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 94 L. Ed. 1194, 70 S. Ct. 876 (1950), that "if, but for the availability of the declaratory judgment procedure, the federal claim would arise only as a defense to a state created action, jurisdiction is lacking" (quoting 10A Charles Response of Special Deputy Receiver to Objection to Master’s Recommendation Page 6 of 21 Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure §2767 (2d ed. 1983)). 9.
The federal district court has substantial discretion whether to decide or dismiss a declaratory judgment suit when a case is pending in state court. 28 U.S.C. '2201(a); Wilton v. Seven Falls Co., 515 U.S. 277, 286‐87, 115 S.Ct. 2137, 2142 (1995). Curiously, MedImpact tells this Court that its approach here is sanctioned by the holding in AmSouth Bank v. Dale, 386 F.3d 763, 783 (6th Cir. 2004). Even a cursory reading of that case reveals that just the opposite is true. AmSouth arose out of the embezzlement and fraud activity of Martin Frankel on various insurance companies in the South. Frankel “laundered” the money he took from the insurance companies and had accounts at AmSouth Bank that were used to that effect. The various receivers engaged in discussions with the Bank with respect to resolving claims, and a tolling agreement was executed and extended on various occasions. In the latter part of the negotiations, the Bank secretly filed a declaratory judgment action in a federal court in Tennessee. Shortly thereafter, when the tolling agreement expired, the receivers filed a lawsuit in Mississippi state court. The Bank removed the case to federal court and then moved to dismiss the case on the basis that the claims were completely preempted by federal banking regulations. In the federal lawsuit in Tennessee, the Bank sought declaratory relief that it was not liable to the receivers and sought an injunction that the receivers could only assert counterclaims in the federal lawsuit, not claims in any state court. The federal court in Tennessee issued an injunction preventing the litigation of Response of Special Deputy Receiver to Objection to Master’s Recommendation Page 7 of 21 claims in state court by the receivers. The receivers appealed the injunction to the U.S. Court of Appeals.5 The Court of Appeals held that the District Court had abused its discretion in exercising jurisdiction of the declaratory judgment action and dismissed the case. So too, declaratory relief is improper here where (a) MedImpact has invoked the state court’s jurisdiction to resolve the claim; (b) the claim process is still underway; and (c) the SDR has not asserted any claim for affirmative relief against MedImpact. 10.
Contrary to the assertion of MedImpact, the 6th Circuit Court of Appeals in AmSouth did not hold that the Declaratory Judgment Act trumps the McCarran‐
Ferguson Act and the regulation of the business of insurance by states in the context of insurance receiverships. That such assertion by MedImpact is wrong is born out by the holding in Credit General Insurance Company v. Insurance Services Group, Inc., 2006 U.S. Dist. LEXIS 40459 (S.D. Ohio, June 19, 2006) in which the District Court accepted the recommendation of the Magistrate, who ruled that an action by the receiver of an insolvent insurance company should be remanded back to the state court where the receiver originally filed suit. The Court held specifically that the McCarran‐Ferguson 5
On appeal, the Banks attempted to limit the review to merely whether the injunction should have issued. The Court of Appeals stated that it also had the responsibility to determine whether the District Court should have assumed or exercised jurisdiction against the receivers. “The injunction is only proper as preventing duplicative litigation if the declaratory judgment action should have been allowed to proceed.” 386 F.3d at 774. Response of Special Deputy Receiver to Objection to Master’s Recommendation Page 8 of 21 Act did preempt the defendant’s attempt to remove the case to Federal Court even after the ruling in AmSouth.6 11.
That proceedings about claims should continue in the receivership court, rather than be appealed or litigated in other courts is not a new phenomenon. Analogizing to proceedings involving the FDIC and RTC as receiver of failed banks, Court have regularly held that the claims process must be pursued to its completion in the receivership proceeding rather than litigated outside that forum. See e,g, National Union Fire Insurance Co. of Pittsburgh, Pa. v. City Savings, F.S.B., 28 F.3d 376 (3rd Cir. 1994); Tri‐State Hotels, Inc. v. Federal Deposit Insurance Corporation, 79 F.3d 707 (8th Cir. 1996). Indeed, in the context of these bank insolvencies, federal law so required. MedImpact presents the Court with no sound reason for deviating from these fundamental concepts of receivership. The Special Master here recognized the importance of these concepts, holding that where MedImpact invokes the claim process, and the SDR is not pursuing a claim, it is appropriate that the claims process proceed to completion. 12.
Even in the context of a declaratory judgment action, federal courts have reasoned and concluded that when placed against insurance insolvency proceedings, 6
The Southern District of Ohio lies within the 6th Circuit Court of Appeals. Similarly, though not in the insurance receivership context, another Court in the 6th Circuit has determined that a Declaratory Judgment Action may not be used to obtain a procedural advantage over the natural plaintiff, where the matter is pending in a different forum. Ford Motor Company v. United States Department of Homeland Security, 2006 U.S. Dist. LEXIS 59465 (E.D. Mich., August 23, 2006). Response of Special Deputy Receiver to Objection to Master’s Recommendation Page 9 of 21 federal courts should not proceed with declaratory judgment actions where it is the natural defendant, not the receiver who is pursuing litigation. See e.g. Lac D’amiante Du Quebec v. American Home Assurance Company, 864 F.2d 1033 (3rd Cir. 1988). 13.
MedImpact seeks to alter the Court’s focus by claiming that all of the AmCare entities were really one and should be treated that way for purposes of its response to litigation instituted by the Receivers of AmCare of Oklahoma Health Plans, Inc. and AmCare of Louisiana Health Plans, Inc. Again, MedImpact is wrong both in its conceptualization of the relationship and the application of law. 14.
As this Court is aware, the SDR sued various defendants here in connection with the failure of AmCare Health Plans of Texas, Inc. The Court also allowed the SDR to intervene in litigation in Baton Rouge, Louisiana, in which the Receivers of AmCare of Louisiana Health Plans, Inc. and AmCare of Oklahoma Health Plans, Inc. were suing various entities on a variety of theories in connection with the failed operations of the companies in receivership. The SDR intervened solely to protect rights that might be lost if the litigation in Louisiana went to trial before the proceedings in Texas. MedImpact wants the Court to believe that the SDR pursued the Defendants and recovered a judgment on the theory that all AmCare entities were one and the same. This simply is not true and MedImpact gives the Court no evidence of this. What actually happened, as MedImpact’s counsel knows, is that the SDR’s claims against Health Net, Inc., a controlling shareholder of AmCare of Health Plans, Inc. were tried to a jury in Louisiana, and the SDR received a jury verdict and judgment on its claims Response of Special Deputy Receiver to Objection to Master’s Recommendation Page 10 of 21 against this controlling shareholder. A true and correct copy of the Judgment is attached as exhibit 1, and incorporated by reference. This judgment is currently on appeal and there is a supersedeas bond in place. The liability of Health Net, Inc. is not predicated upon a single business enterprise theory. There are no admissions by any party that there was a single business enterprise. That is a burden that MedImpact has to prove and as demonstrated by the SDR to the Special Master, MedImpact did not before the Special Master, and has not met before you its burden to prove that there is a basis to disregard the separate corporate form of the various companies against which MedImpact wants relief. See Response of SDR to Amended Motion of MedImpact at pp. 10 ‐ 13,which is attached as exhibit 2, and incorporated by reference; Further Response of SDR to Amended Motion of MedImpact, pp. 1 ‐2 , which is attached as exhibit 3, and incorporated by reference. 15.
MedImpact has no authority for the approach it wants this Court to approve. MedImpact has no evidentiary support for the allegations to warrant this Court adopting such an approach. Therefore, that MedImpact purports to seek a declaratory judgment against the SDR in federal court in Oklahoma does not warrant lifting the injunction against such activity. MedImpact is afforded sufficient relief in this Court on any disposition of its proof of claim. The Court should not allow MedImpact to forum shop in an effort to get a result it likes. Response of Special Deputy Receiver to Objection to Master’s Recommendation Page 11 of 21 The Nature of Indispensable Parties 16.
MedImpact begins arguing on page 15 of its Objection that even if the AmCare entities should not be treated as one for contractual purposes in understanding the Service Agreement in issue, then the Court should still lift the injunction so that litigation may proceed in Oklahoma or before an arbitration panel because the SDR is an indispensable party. The curious aspect of this argument, and its downfall, is that such a determination is not within the province of this Court. Why would MedImpact seek to have a Texas state court make a determination of joinder under the federal rules of civil procedure? This Court clearly has no obligation under the federal rules of civil procedure any more than the federal court in Oklahoma has an obligation to follow the Texas Rules of Civil Procedure.7 This Court, therefore, should ask, where is the determination by the federal court in Oklahoma that the SDR is indispensable to the resolution of that case? Before MedImpact asks this Court to subject its receiver to litigation in a distant forum, it should have a determination that the federal court views the SDR as indispensable. 17.
Further, in order to reach the conclusion that the SDR is indispensable to MedImpact’s claim for declaratory relief, this Court would need to resolve that the claim for affirmative relief sought by the receivers of AmCare of Oklahoma Health Plans, Inc. 7
Beginning with Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938) the Court determined the relationship between the federal and state courts in resolving claims arising from state law, resulting in the promulgation of the Federal Rules of Civil Procedure in 1948 which replaced the Field Codes. Procedure in federal courts is dictated by the Federal Rules of Civil Procedure. Response of Special Deputy Receiver to Objection to Master’s Recommendation Page 12 of 21 and AmCare of Louisiana Health Plans, Inc. require the presence of the SDR. Clearly MedImpact has not put forward such proof. More importantly, there is no such proof. The Court should note first that MedImpact filed no proof of claim with the receiver of AmCare of Oklahoma Health Plans, Inc. See Affidavit of Billy Bostick attached as exhibit 4, and incorporated by reference. The proof of claim which MedImpact filed with the receiver of AmCare of Louisiana Health Plans, Inc. was untimely. See Affidavit of Cara Girouard, attached as exhibit 5, and incorporated by reference. Therefore, the receivers of these 2 companies stand in stark contract to the SDR. In gathering assets of their respective estates, they have commenced litigation against MedImpact claiming that MedImpact did not perform according to the terms of operative agreements. Those receivers have the burden of proof to demonstrate their claims. In the Texas estate, however, MedImpact filed a timely proof of claim. The SDR has adjudicated that proof of claim and MedImpact disagrees with the adjudication. MedImpact bears the burden of proof on its claim. 18.
To avoid that burden, MedImpact seeks to disregard the statutory and judicial proceedings in 3 different states concerning 3 different companies. That is not the bargain it struck as noted by the SDR in her original response to the amended motion before the Special Master. See Response of SDR to Amended Motion of MedImpact at pp. 12 – 15, attached as exhibit 2, and incorporated by reference. MedImpact’s own billing records show that it kept records of claims by region (Texas, Louisiana or Oklahoma) and did not simply claim that money was owed by AmCare Response of Special Deputy Receiver to Objection to Master’s Recommendation Page 13 of 21 Health Plans of Texas, Inc. irrespective of which enrolled member had a claim. See Affidavit of Jean Johnson, attached as exhibit 6, and incorporated by reference. MedImpact believes that the SDR is responsible for the enrollees of all 3 companies. See Proof of Claim of MedImpact that is attached as exhibit 7, and incorporated by reference. The SDR did not find sufficient evidence of that liability in the proof of claim and rejected the claim. MedImpact has requested a review of that rejection, and the SDR has been in the process of attempting to gather additional information to review the claim as further requested by MedImpact. However, MedImpact has resisted the SDR’s effort to gather this information. See Affidavit of Harold B. Gold attached as exhibit 8, and incorporated by reference. This resistance is particularly perplexing in light of the cooperation that the SDR has given to MedImpact in its effort to gather more information. For example, on a voluntary basis, MedImpact asked to review and copy all records the SDR had on the relationship with MedImpact. The SDR provided that information. MedImpact requested that a confidentiality agreement be executed so that it could review information regarding AmCare Health Plans of Texas, Inc. filed with the Texas Department of Insurance. Again, the SDR cooperated and executed this Agreement. Yet, MedImpact will not provide any information to the SDR. See Affidavit of Harold B. Gold. 19.
Essentially, the question boils down to whether there is a reason to abandon the claims process set up by the Texas legislature. The answer is, no, there is no reason to abandon the claims procedure established for insolvent insurance companies. If Response of Special Deputy Receiver to Objection to Master’s Recommendation Page 14 of 21 MedImpact believes it has evidence that should be considered by this Court in the ultimate determination of its claim against the SDR, there is no barrier to its obtaining such evidence. It can seek to use evidence that it obtains in the federal proceeding from the Oklahoma and Louisiana receivers. Even if for some reason it could not acquire or use such information, the Texas Rules of Civil Procedure provide mechanisms to obtain such information. However, the claim by MedImpact would need such information is specious because it is litigating its claim with the SDR about what it claims the SDR owes MedImpact. That there may be information within the Oklahoma and Louisiana receivership estates militates against the validity of its argument that the 3 companies were 1 and the same. If MedImpact believes that AmCare of Texas Health Plans, Inc. bears the liability for the entire Service Agreement, then the support for that claim should lie within the records of that company. 20.
MedImpact next argues that the injunction should be modified for cause. One must assume that the cause is something different than MedImpact has argued. However, we are left to wonder because MedImpact does not articulate a single basis for modifying the injunction for cause. Instead, it says that it will brief the issue if the Court so desires. See Objection at p. 17. Apparently the issue was not important enough for MedImpact to brief in its Objection. Or, MedImpact was not interested in having the SDR respond to its argument. Since MedImpact did not brief the point, this Court should deal with it as a Court of Appeals would, and consider the argument waived. See Tex. R. App. P. . Response of Special Deputy Receiver to Objection to Master’s Recommendation Page 15 of 21 21.
To the extent that MedImpact has preserved any argument on this point, it is interesting that it would refer to In re Curtis, 40 B.R. 795 (B. D. Utah 1984). In that case, the Court held that a party who seeks to lift the stay imposed by the Bankruptcy Code in order to pursue a lawsuit filed after the commencement of the bankruptcy proceeding did not present cause. So too here. MedImpact wants to alter the claims process established by the Texas legislature, so that it can fight about the rejection of its claim by the SDR in a proceeding in federal court in Oklahoma, in which MedImpact wants all disputes referred to an arbitration panel in California. MedImpact is not even the plaintiff in the litigation. Rather, it wants to join the SDR to address claims raised by other parties; not MedImpact. Because MedImpact shows no reason why its claim against the SDR cannot be adequately resolved through the claims process established by the Texas legislature, which MedImpact has invoked, its argument fails. 22.
Apparently recognizing that its arguments are without merit, MedImpact falls back on the position that allowing it to proceed in the federal litigation in Oklahoma will not disrupt this Court’s jurisdiction or the regulatory process. See Objection at p. 19. Unfortunately, the argument MedImpact presents shows on its face that the argument is specious. 23.
It is important to remember that the whole basis MedImpact asserts for the right to proceed in federal court against the SDR is the federal court’s jurisdiction over requests for declaratory relief. However, to now justify this effort, MedImpact says that it is only seeking an in personam judgment against the SDR about the amount of Response of Special Deputy Receiver to Objection to Master’s Recommendation Page 16 of 21 compensation it should receive, not an in rem judgment. Indeed, MedImpact states that it seeks to have a final determination of its net claim made by the federal court (or an arbitration panel). See Objection at &47. It seeks this determination in the form of a personal judgment against the SDR. Id. The question thus becomes, if MedImpact is pursuing a declaratory judgment action against the SDR in federal court, how will it obtain an in personam judgment against the SDR? Clearly the Federal Court will not be able to issue a judgment that says MedImpact would be entitled to any monetary amount. Were that the case, it would not be a declaratory judgment and MedImpact would be able to execute on the money judgment. Clearly MedImpact is not entitled to that relief. Lac D’amiante Du Quebec v. American Home Assurance Company, 864 F.2d at 1043. So what are the rights that the Federal Court would declare and how would that be helpful to this Court? MedImpact does not say. 24.
Allowing the Federal Court or an arbitration panel to determine the amount of the MedImpact claim is disruptive of this Court’s jurisdiction. This Court is not simply an ATM that merely dispenses receivership money. The Court determines through a uniform set of procedures who the creditors are, what the amount of claims are, and how the assets of the receivership estate are distributed. The claims should be determined according to a uniform approach so that one creditor does not receive favorable treatment over another. Favorable treatment results when a party dissatisfied with the handling of its proof of claim, takes the adjudication process outside the receivership estate to a different forum. The SDR addressed this same issue Response of Special Deputy Receiver to Objection to Master’s Recommendation Page 17 of 21 earlier with the Special Master, and there is no reason to belief after the long tenure of service in matters of these types that the Special Master does not understand the receivership process. What MedImpact Does Not Say 25.
Key to the Master’s determination was the fact that the SDR has asserted no claim against MedImpact. Subsumed within that determination is the fact that where there is a claim, the agreement between MedImpact and AmCare Health Plans of Texas, Inc. calls for a dispute resolution process that Medimpact has chosen not to follow. MedImpact remains quiet on this point. 26.
The Service Agreement between the parties clearly states that if there is a dispute among the parties there must be direct negotiation before litigation. MedImpact told the Special Master that it was fanciful to believe that the parties really meant what they put in the agreement. However, the Court need only look to the Insurance Code to see that such provisions are not fanciful. See 28 TAC § 1.1809 (2006). MedImpact has not engaged in direct negotiation with the SDR about its proof of claim and the matters it now desires to pursue either in the federal court in Oklahoma or before an arbitration panel. Because MedImpact has not followed the dispute resolution provision of its own agreement, it has no standing to seek the relief stated. Response of Special Deputy Receiver to Objection to Master’s Recommendation Page 18 of 21 Conclusion 27.
Though MedImpact attempts to couch its position in several different forms, the position is the same. MedImpact does not like the adjudication of its proof of claim by the SDR. Though it has asked for reconsideration of the adjudication, and has rights after that in the receivership court, MedImpact wants to escape from this Court so that it can litigate its claim elsewhere. This type of approach is clearly contrary to the provisions of the Insurance Code. Having filed its claim in the receivership, MedImpact subjected itself to the jurisdiction of this court and the provisions in place for the adjudication of claims. That receivers of companies in other states have sued MedImpact is of no consequence to the sole question before this Court – whether it should alter the claims adjudication process for MedImpact. There should be no special treatment for MedImpact. The provisions of the insurance code and the orders of this Court provide MedImpact with due process of law with respect to its claim. This Court is the final arbiter of the evidence of MedImpact’s claim. Altering that approach gives MedImpact rights not possessed by creditors who have followed the claims procedure and had their claims processed by the SDR. Owing to the fact that MedImpact has no basis for such special treatment, its objection to the recommendation of the Special Master should be overruled. Request 28.
The SDR requests that the objection of MedImpact to the recommendation of the Special Master be overruled, that the recommendation of the Special Master be Response of Special Deputy Receiver to Objection to Master’s Recommendation Page 19 of 21 accepted by this Court, and that the SDDR receive such other and further relief to which she is entitled. Respectfully submitted, Wisener Õ Nunnally Õ Gold, L.L.P. By: _______________________________ Harold B. Gold Bar No. 08069600 625 W. Centerville Road, Suite 110 Garland, Texas 75041 T: 972.840.9080 F: 972.840.6575 Attorneys for Special Deputy Receiver Response of Special Deputy Receiver to Objection to Master’s Recommendation Page 20 of 21 Certificate of Service One copy of the foregoing document was served on MedImpact through its counsel by fax on February 28, 2007 prior to 5:00 p.m. addressed as follows: Douglas D. Dodds McGinnis, Lochridge & Kilgore, LLP 1300 Capitol Center 919 Congress Avenue Austin, Texas 78701 512.495.6093 One copy of the foregoing document was served on the following persons by first class mail, deposited with the United States Postal Service on February 28, 2007, postage prepaid, addressed as follows: Tom Collins 708 Rio Grande, Suite 200 Austin TX 78701 Jean Sustaita 333 Guadalupe, Tower III, 5th Floor MC‐305‐1D Austin TX 78701 James Kennedy Leanne Foster Texas Department of Insurance 333 Guadalupe, Tower I, 8th Floor MC‐110‐1A Austin TX 78701 Joan Lackhorn Texas Department of Insurance 333 Guadalupe, Tower III, 5th Floor MC‐305‐1C Austin TX 78701 ____________________________________ Harold B. Gold Response of Special Deputy Receiver to Objection to Master’s Recommendation Page 21 of 21 No. GV 204534
THE STATE OF TEXAS,
In The District Court
In Travis County, Texas
200th Judicial District
v.
AMCARE HEALTH PLANS OF TEXAS, INC.
and AMCARE MANAGEMENT, INC.
RESPONSE OF SPECIAL DEPUTY RECEIVER
TO MOTION OF MEDIMPACT HEALTHCARE SYSTEMS, INC.
FOR RELIEF FROM STAY, MODIFICATION OF INJUNCTION, AND ORDER COMPELLING
ARBITRATION AND AMENDMENT
Contents
Introduction
3
Summary of Response
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Argument
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1. Neither the Motion Nor Amendment Is Ripe for Decision
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2. The Texas Statute Precludes The Relief Sought
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b. To Create A Dispute, MedImpact Has To Disregard The Corporate Veil
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(1) MedImpact Invoked The Texas Claims Process As To Separateness
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(2) Texas Disfavors Disregard of Corporate Separateness
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(a) MedImpact Is Legally Wrong
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(b) MedImpact Is Factually Wrong
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c. The Texas Claims Proceeding Governs Resolution
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d. The Texas Claims Process Is Not Supplanted By Federal Court Jurisdiction
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(1) Federal Case Law Does Not Establish The Result Sought By MedImpact
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(2) Texas Case Law Does Not Establish The Result Sought By MedImpact
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3. The Analysis of MedImpact on Arbitration is Flawed
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Page 1 of 36
a. The SDR Is Not The Same As AmCare Texas In The Resolution of Claims
24
b. The Provisions Of The Federal Arbitration Act Are Subject To Reverse Preemption From The McCarran-Ferguson Act
25
c. MedImpact Wrongly Seeks To Litigate Issues
29
d. Arbitration Does Not Present A More Just Or Equitable Process
30
e. MedImpact Has Waived Its Right To Arbitration
32
Conclusion
34
Request
35
Certificate of Service
36
Executive Summary
MedImpact seeks to enforce rights under an agreement that are not yet ripe as a result of its
own failure to perform. Having invoked the claims adjudication process in this receivership, MedImpact
now seeks to avoid a result it does not like by attempting to rely on a right to arbitration. In addition to
the right to arbitration not being ripe, it is precluded by Texas law as set forth in the claim review
process, and as a result of MedImpact having waived that right. Though in certain instances a claimant
does have a right to litigate a claim in federal court, to then be presented to the receivership court to be
processed as that court determines, this is not such a case. Having sought relief from this Court through
the claims process, MedImpact in essence collaterally attacks the authority of the court, and the
adjudication of the SDR. This is an impermissible attack.
The most efficient use of assets and judicial time is spent completing the claim adjudication
process that MedImpact itself initiated. Using the process advocated by MedImpact adds layers of
courts to the process, inserts a costly claims resolution process, and introduces into the process an
uncertainty as to timing and conclusiveness that impairs the ability of the SDR to timely and efficiently
administer the assets of the estate. Accordingly, the Motion should be denied.
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Page 2 of 36
No. GV 204534
THE STATE OF TEXAS,
In The District Court
In Travis County, Texas
200th Judicial District
v.
AMCARE HEALTH PLANS OF TEXAS, INC.
and AMCARE MANAGEMENT, INC.
RESPONSE OF SPECIAL DEPUTY RECEIVER
TO MOTION OF MEDIMPACT HEALTHCARE SYSTEMS, INC.
FOR RELIEF FROM STAY, MODIFICATION OF INJUNCTION, AND ORDER COMPELLING
ARBITRATION AND AMENDMENT
Jean Johnson, as Special Deputy Receiver of AmCare Health Plans of Texas, Inc., and
AmCare Management, Inc. (the SDR) submits this response to the Motion for Relief from
Stay, Modification of Injunction and Order Compelling Arbitration (the Motion) and the
amendment thereto (the Amendment) submitted by MedImpact Healthcare Systems, Inc.
(MedImpact):
Introduction
The Motion and Amendment by MedImpact are ill-conceived and are, in a word –
wrong. In an effort to shift the receivership proceedings to California (or even Oklahoma)
S
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Page 3 of 36
so that it can attempt to recover on a debt it has written off, MedImpact attempts to create
the illusion of legitimacy for its position.1 Even a cursory review of its arguments, though,
reveals that the premise for its position is wrong, and thus, so is its conclusion. Owing to
the fact that the Motion and Amendment present no basis to alter the specific language of
the receivership statute and long established Texas law on the resolution of claims within
an insurance insolvency proceeding, the Motion and Amendment should be denied.
Summary of Argument
The result sought by MedImpact is specifically foreclosed by the very agreement
upon which it relies. It has not met conditions precedent to the relief sought, and thus the
effort must be rejected.
MedImpact originally wanted an order of the Court allowing it to force the SDR to
a
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b
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t
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o
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h
a
t
MedImpact
overcharged the SDR (sic) under a pharmacy benefits agreeme
n
t
.
“
[See &1 of
Amendment]. 2 What MedImpact now wants is a free conscience to sue the SDR in
Oklahoma so that it can get a co
u
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this receivership rather than follow the statutory guideline. Though characterizing its
1
See Declaration of David Wheeler, attached as exhibit B-1
t
o
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e
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.
(
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liquidation and ceased operation
s
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s
.
”
2
The SDR did not have any agreement with MedImpact. MedImpact had an agreement with AmCare Health Plans
of Texas, Inc. MedImpact is not seeking to recover for services that could be regarded as class 1 administrative
claims.
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recent
p
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a
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l
p
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t
h
.
”
[
See Amendment &2]. Indeed, instead of asking this
Court to send the SDR to an arbitration panel to resolve claims that have not even been
articulated by the SDR (or MedImpact for that matter), MedImpact wants this Court to lift
the stay so that MedImpact can add the SDR to a lawsuit that the Oklahoma and Louisiana
receivers have that is now pending in federal court in Oklahoma so that court can decide
whether to send the matter to arbitration. 3 [See Amendment at &2]. As if that thinking
were not confused enough, MedImpact states that it reserves its right to seek arbitration
directly from this Court if the SDR is not joined in the lawsuit in Oklahoma. [See
Amendment at &2]. It is a creative system that MedImpact postures –
one in which it gets
multiple bites at the apple to get what it wants. While MedImpact attempts to call the apple
different things; an apple it remains.
No matter the route to get there, MedImpact wants the SDR ordered to participate in
a
n
a
r
b
i
t
r
a
t
i
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f
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e
“
d
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p
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b
e
t
w
e
e
n
i
t
a
n
d
t
h
e
S
D
R
.
[See introductory paragraph of
Motion at p. 1]. The “
dispute”
, as demonstrated later, is actually the disagreement that
MedImpact has with the way the SDR has adjudicated the claim submitted by MedImpact
against the assets of the estates, as part of the receivership process. This is not an in
3
The posture of the litigation in Oklahoma also presents a complication to the pending MedImpact request. The
Oklahoma and Louisiana Deputy Receivers sued MedImpact in Oklahoma state court. MedImpact removed the
c
a
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o
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.
Therefore, this Court does not even have certainty that if it lifts the stay that the federal court will make a decision
on arbitration. MedImpact leaves this Court in the position of abandoning the Texas SDR to an Oklahoma state
court to determine receivership assets. See Amendment at p. 2, fn. 2. And &7.
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Page 5 of 36
personam claim against the SDR as MedImpact suggests, but rather an attempt to gather
assets from the estate. Such actions are in rem or quasi in rem and within the province of
the Texas courts as part of the comprehensive scheme of regulating the business of
insurance. Texas law is clear as to how the claims process works, and that process is the
exclusive means to recover on a claim. As will be seen, it is also clear that MedImpact has
no basis to alter the process.
Not only does MedImpact attempt to blur what it attempts to do here by referring to
the denial of i
t
s
c
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a
i
m
a
s
a
“
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s
.
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[See Motion at p.2, &2]. This is a
wrongful effort by MedImpact to litigate in this Court the dispute it hopes to have
arbitrated. To the extent that the issue can be considered here, it demonstrates that it dealt
with separate entities.
Finally, MedImpact attempts to obtain the result it wants by suggesting that the
Court is really dealing with a bankruptcy matter and should be guided by the law it sees
applicable in that context. In attempting to blur the distinction between insurance
insolvency law and bankruptcy law, MedImpact disregards an established body of law that
rejects the application of arbitration to insurance insolvency proceedings. It is no wonder
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Page 6 of 36
t
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i
t
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the subject area of the dispute, or to shift
consideration away from this Court entirely.
The Court is left with the fundamental question whether the SDR should be
compelled to arbitrate the rejection of the proof of claim with MedImpact. The secondary
issue is whether there is a compelling reason this Court should abandon that decision to a
federal court in Oklahoma. None of the positions advocated by MedImpact merit the relief
sought, and therefore, the Motion and Amendment should be denied.
Argument
1. Neither The Motion Nor Amendment Is Ripe For Decision.
Assuming for the moment that the underlying service agreement is applicable to the
SDR, that agreement means that the motion to compel arbitration is not ripe. MedImpact
notes and admits that a condition precedent to arbitration is that MedImpact attempt to
resolve any dispute by direct negotiation. [See Motion p. 2, &3]. As shown in the affidavit
of Jean Johnson, which is attached as exhibit 1 and incorporated by reference, there has not
been any direct negotiation with the SDR. MedImpact does not demonstrate that it
engaged in direct negotiation with the SDR.4 Rather, MedImpact only says that it filed a
4
As shown in the affidavit of Harold B. Gold, which is attached as exhibit 2, and incorporated by reference, the SDR
has attempted to gather information from MedImpact in order to conduct direct negotiation and evaluate
M
e
d
I
m
p
a
c
t
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s
a
p
p
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e
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t
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o
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t
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e
p
r
o
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f
o
f
c
l
a
i
m
.
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e
r
e
s
p
o
n
s
e
o
f
M
e
d
I
m
p
a
c
t
w
a
s
n
ot to provide the
information, or even to say that it would not provide the information, but rather to inform this Court that it
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Page 7 of 36
claim in the Texas receivership for all sums due under the service agreement, irrespective
of which member in which state was involved. [See Motion p. 3, &4).5
MedImpact does not even demonstrate that it engaged in direct negotiation with the
other states.6 First, there would appear to be no reason that it would do so since it seeks all
the money from the Texas estate, and not from the other 2 companies in receivership,
though most of the money it seeks relates to members of the Oklahoma and Louisiana
HMOs. Second, all MedImpact does say is that it has moved for arbitration against the other
2 states in the proceeding in Oklahoma. There is no evidence from MedImpact that it has
conducted direct negotiation with the other receivers about the claim now before this
Court, or that the motion for arbitration against the receivers of the Oklahoma and
Louisiana companies has been granted. Because MedImpact has not satisfied the condition
precedent to arbitration contained within the agreement it seeks to enforce, its motion for
arbitration is not ripe.
2. The Texas Statute Precludes The Result Sought.
M
e
d
I
m
p
a
c
t
a
r
g
u
e
s
t
h
a
t
i
t
h
a
s
a
“
d
i
s
p
u
t
e
”
t
o
r
e
s
o
l
v
e
with the SDR. What MedImpact
really means to say is that it wants its claim in the receivership resolved some other way
wanted to proceed with a hearing. Perhaps in California setting matters for hearing is considered direct
negotiation, here it is referred to as litigation.
5
In fact, most of the money that is the subject of the proof of claim is on members of the Oklahoma and Louisiana
organizations, not Texas.
6
Exhibit C to the Motion is the Motion for Order Compelling Plaintiff to Proceed to Arbitration, Staying This Action,
and Transferring Venue filed in the lawsuit by the Oklahoma and Louisiana Receivers against MedImpact. It does
not reveal any direct negotiation.
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Page 8 of 36
and in some other place. Texas law does not allow that. MedImpact asserts that Federal
law allows such a result, but it is wrong.
a. The
O
n
l
y
“
D
i
s
p
u
t
e
”
I
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p
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’
s
Claim By The SDR
Fundamental to the argument of MedImpact is its assertion that the SDR claims that
MedImpact has overcharged AmCare Health Plans of Texas, Inc. What is the source of that
assertion? MedImpact does not say. The absurdity of this situation is borne out in the
Amendment where MedImpact states that after joining the SDR in the Oklahoma litigation
“
s
h
o
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l
d
t
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e
S
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p
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k
l
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a
Lawsuit, t
h
e
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a
t
a
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c
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n
t
i
o
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f
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r
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g
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.
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f
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t
MedImpact is overcharging, what claim is MedImpact prosecuting about overcharging?
[See &11 and &12 of the Amendment where MedImpact concedes that the Oklahoma and
Louisiana receivers have articulated a claim against MedImpact and have pursued it in
court, but the SDR has not.] If MedImpact obtains an affirmative finding that it was not
overcharging, what impact does that have on the rejection of its claim by the SDR? The fact
remains that MedImpact submitted a claim to the SDR, the claim was rejected. MedImpact
then exercised its rights under Texas law to have the rejection reconsidered, and it was
shortly after seeking reconsideration, which the SDR has not yet acted upon, that
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Page 9 of 36
MedImpact sought to have the matter decided in arbitration. [See exhibit 1]. MedImpact
clearly wants to collaterally attach the claims adjudication process.
The only interaction between MedImpact and the SDR has been the filing of a claim by
MedImpact, pursuant to the order of the receivership court and the Insurance Code, its
rejection by the SDR,
a
n
d
t
h
e
n
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a
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j
e
c
t
i
o
n
. Clearly, MedImpact
wants to change the result of the claim process. Remarkably, MedImpact takes the position
that it is a court in Oklahoma (federal or state) that should decide about changing the Texas
claim review process either by deciding that the SDR should go to arbitration to be forced
t
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o
f
t
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e
claim decision. According to MedImpact, under no circumstance should this Court decide
the claim resolution by the SDR. Why that is so MedImpact does not say. MedImpact
presents no authority sanctioning such an approach.
b. To Create A Dispute, MedImpact Has To Disregard The Corporate Veil
In order to bring any legitimacy to its argument that the claim adjudication process
should be shifted to some other forum, MedImpact has to have a determination that all the
AmCare entities should be treated as one. However, that is the fundamental issue that
MedImpact has to litigate. It cannot do so as a predicate to obtaining arbitration, and to the
extent it can, it ha
s
f
a
i
l
e
d
t
o
d
o
s
o
.
M
e
d
I
m
p
a
c
t
’
s
position is neither factually nor legally
correct.
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Page 10 of 36
(1) MedImpact Invoked The Texas Claims Process As To Separateness
MedImpact filed its claim in the Texas receivership proceeding. It sought recovery of
money it claimed was owed by AmCare Health Plans of Texas, Inc. regardless of the plan
that provided coverage to a member for which a prescription had been processed by
MedImpact. In order to prevail on that claim, it had to present information in support of its
position. The claim was rejected by the SDR. MedImpact asked that the rejection be
reviewed, as allowed by Texas law, and the SDR has been evaluating the additional
information from MedImpact and has attempted to obtain additional information from
MedImpact to evaluate the claim. [See Exhibit 1]. Rather than supply the information to
the SDR, and proceed as required by Texas law in the event it does not like the action taken
on its proof of claim, MedImpact now wants to litigate elsewhere its proof of claim –
that
AmCare Health Plans of Texas owed all the money irrespective of the sponsoring plan (e.g.,
the Oklahoma, Louisiana or Texas company). Having invoked the claim process, it cannot
now seek the authority of this Court to alter the result somewhere else. The claim review
process is the exclusive means of having a claim resolve against the estate. This is
especially so where a party has invoked the process and obtained a ruling. See e.g. Daewoo
Motor America, Inc. v. General Motors Corp., 459 F.3d 1249 (11th Cir. 2006)(claimant not
allowed to challenge foreign bankruptcy proceeding where it participated in proceeding
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p
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p
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Page 11 of 36
and filed claim). The receivership court has conferred on the SDR the obligation to receive
and evaluate claims. That power cannot be challenged in another court. Cadle v. Baker, 20
Wall. 650, 22, L.Ed. 448; M
u
t
u
a
l
R
e
s
e
r
v
e
F
u
n
d
L
i
f
e
A
s
s
’
n
v
.
P
h
e
l
p
s
, 190 U.S. 147, 159, 23
S.Ct. 707, 47 L.Ed. 987; Attorney-General v. The Guardian Mutual Life Ins. Company, 77 N.Y.
272, 276 (1879).
(2) Texas Disfavors Disregard Of Corporate Separateness
(a) MedImpact Is Legally Wrong
MedImpact had the burden to demonstrate the basis for its claim. The SDR
determined that MedImpact did not do so. MedImpact has requested further review by the
SDR, as allowed by the claims process and the SDR is reviewing the additional information
from MedImpact, and has requested further information that MedImpact has refused to
supply. Bald assertions do not give rise to a basis to hold one corporation liable for the
debt of another. See e.g. Tex. Bus. Corp. Act art. 2.21; Valero South Texas Processing Co. v.
Starr County Appraisal Dist., 954 S.W.2d 863, 866 (Tex. App. –
San Antonio 1997, pet.
denied)(for the purpose of legal proceedings, subsidiary corporation and parent
corporations ar
e
s
e
p
a
r
a
t
e
a
n
d
d
i
s
t
i
n
c
t
“
p
e
r
s
o
n
s
”
a
s
a
m
a
t
t
e
r
o
f
l
a
w
a
n
d
t
h
e
s
e
p
a
r
a
t
e
e
n
t
i
t
y
of corporations will be observed by the courts even where one company may dominate or
control, or even treat another company as a mere department, instrumentality or agency.)
S
p
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c
i
a
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e
p
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Page 12 of 36
MedImpact attempts to rely on a Louisiana judgment obtained by the SDR against
HealthNet, Inc. as a basis for MedImpact obtaining a right to litigate in another forum its
claims against all 3 receivers. MedImpact is wrong. First, MedImpact is not part of the
proceeding to which it makes reference and therefore, it has no binding effect on the SDR.
Second, MedImpact does not even demonstrate that the issue it seeks to raise here was an
issue in the proceeding in Louisiana. Third, and most important, as MedImpact admits, the
judgment in Louisiana is on appeal. Because the matter is on appeal the judgment to which
it makes reference has no res judicata or collateral estoppel effect. Under La. Rev. Stat. Ann.
'13:4231 a valid and final judgment is conclusive between the same parties, except on
appeal or other direct review and under La. Code Civ. Proc. Ann. Art. 2166(B) an appeal
c
o
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r
t
’
s
j
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d
g
m
e
n
t
b
e
c
o
m
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s
f
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a
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d
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f
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n
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w
h
e
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p
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m
e
c
o
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t
d
e
n
i
e
s
a
n
application for certiorari. Martin v. Comm-Care Corp., La. App. 38577, 880 So. 2d 1020,
2004 La. App. Lexis 2025 (La. App. 2 Cir., Aug. 30, 2004). Therefore, as a matter of law,
there is no alter ego finding to automatically allow MedImpact to say that the 3 separate
receiverships should be treated as one, each bearing the liabilities of the other.
(b) MedImpact Is Factually Wrong
Factually, on the face of the record, MedImpact is wrong as well. MedImpact had an
agreement with 3 corporate entities, each domiciled in a different state. One is in
receivership in Oklahoma, one is in receivership in Louisiana, and one is in receivership in
S
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
Page 13 of 36
T
e
x
a
s
.
M
e
d
I
m
p
a
c
t
c
o
n
c
e
d
e
s
t
h
a
t
t
h
e
“
t
h
r
e
e
H
e
a
l
t
h
P
l
a
n
s
p
r
o
v
i
d
e
d
h
e
a
l
t
h
c
a
r
e
b
e
n
e
f
i
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s
i
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t
h
e
i
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s
p
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t
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s
o
f
i
n
c
o
r
p
o
r
a
t
i
o
n
.
”
[See Motion at p.2, &2]. By its own statements,
MedImpact admits that it is dealt with legal entities domiciled in 3 different states, each of
which are now administered by courts in those states, each sovereign of the acts of the
others. [See &1 of the Amendment; see also &1
1
(
“
a
l
l
t
h
r
e
e
A
m
C
a
r
e
Entities are now
insolvent and have been placed in receivership or liquidation proceedings in their
r
e
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p
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t
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t
a
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s
o
f
i
n
c
o
r
p
o
r
a
t
i
o
n
.
.
.
.
”
)
]
Notwithstanding this understanding, MedImpact tries to combine the obligations of
each of the health maintenance organizations for their respective members. It merely
a
s
s
e
r
t
s
t
h
a
t
“
t
h
e
r
i
g
h
t
s
a
n
d
o
b
l
i
g
a
t
i
o
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s
o
f
t
h
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3
H
e
a
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t
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P
l
a
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s
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j
o
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t
,
n
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d
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v
i
d
u
a
l
o
r
s
e
p
a
r
a
t
e
.
”
[See Motion at p. 2, &2]. MedImpact fails to cite any provision in the Agreement
it relies upon for this proposition. Its own statement belies its doubt of the assertion –
each
organization had respective members. MedImpact understood that it was always dealing
with insureds in different states who were members of a health plan incorporated in a
specific state.
Moreover, MedImpact knows that its assertion is contentious because it later
a
c
k
n
o
w
l
e
d
g
e
s
t
h
a
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t
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e
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D
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a
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t
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y
and severally liable with the Oklahoma and Louisiana estates”
.
.
.
. Even if it were unaware
of these facts, the fact that each of the companies is in a receivership, in a separate state,
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Page 14 of 36
precludes the result it seeks to justify arbitration. Upon the commencement of each
receivership, the rights of all parties were fixed.7 As the rights and property of each estate
were fixed on the date of receivership, the property belonging to each company became
property of each respective receivership court as part of its in rem jurisdiction. United
States v. Bank of New York & Trust Company, 296 U.S. 463 (1935); accord Tex. Ins. Code
'21.005(c). Nevertheless, MedImpact seeks to recover from the Texas SDR all of the money
it claims is owed, no matter from what entity. It filed a proof of claim to that effect and now
wants to avoid the rejection of its claim, and the subsequent review it has requested of the
SDR by obtaining an order allowing the arbitration of t
h
e
S
D
R
’
s
initial rejection of its claim
before a panel compiled by the American Arbitration Association in California, contrary to
the provisions of Texas law.
c. The Texas Claims Proceeding Governs Resolution
S
e
c
t
i
o
n
2
1
A
.
0
0
5
(
c
)
o
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,
a
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f
the commencement of a delinquency proceeding under this chapter, has exclusive
jurisdiction of all property of the insurer, wherever located, including property located
outside the territorial limits of the state. This same statute provides in part (e) that
“
[
e
]
x
c
e
p
t
a
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a
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7
Tex. Ins. Code 21A.151 provides: (b) Upon issuance of the order of liquidation, the rights and liabilities of the
insurer and of its creditors, policyholders, shareholders, members, and all other persons interested in its estate
become fixed as of the date of entry of the order of liquidation, except as provided by Sections 21A.152 and
21A.255, unless otherwise fixed by the court.
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Page 15 of 36
a
n
y
c
o
n
t
r
a
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u
a
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i
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h
t
s
t
o
p
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s
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a
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b
i
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a
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.
”
[emphasis added] Finally, part (i) states
that “
[
t
]
h
e
c
l
a
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m
s
p
r
o
c
e
d
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f
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e
x
c
l
u
s
i
v
e
m
e
a
n
s
for obtaining payment of claims from the receivership estate. [emphasis added]. By its
very clear language, the insurance code provides that claims may not be resolved by
arbitration. Claims may only be resolved in the manner provided in the insurance code.
The proof of claim process is set forth at '21A.252.
MedImpact concedes that it has filed a proof of claim in the receivership process,
and did so before attempting to seek arbitration.8 Section 21A.253 the Insurance Code sets
out provisions for the allowance of a claim. MedImpact has requested reconsideration of
its claim, and the SDR has been endeavoring to review the information provided by
MedImpact and gather additional information from MedImpact about the claim. Where a
claimant objects to the ultimate disposition of a claim by the SDR, a procedure is set forth in
'21A.257 for the resolution of the disputed claim. Specifically, the Insurance Code provides
t
h
a
t
i
n
t
h
i
s
i
n
s
t
a
n
c
e
t
h
a
t
“
t
h
e
l
i
q
u
i
d
a
t
o
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s
h
a
l
l
a
s
k
t
h
e
r
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c
e
i
v
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s
h
i
p
c
o
u
r
t
f
o
r
a
h
e
a
r
i
n
g
pursuant to Section 21A.007. [See '21A.257(a)]. Where there is a hearing,
“
[
t
]
h
e
f
i
n
a
l
disposition by the receivership court of a dispute claim is deemed a final judgment for
p
u
r
p
o
s
e
s
o
f
a
p
p
e
a
l
.
”
[
See '21A.257(c)]. Accordingly, Texas law sets out a specific process
8
MedImpact voluntarily submitted its proof of claim in the Texas receivership on or about October 1, 2003. The
SDR denied the proof of claim in total on or about March 3, 2006. On or about April 14, 2006, MedImpact objected
to the rejection of its proof of claim by the SDR. On or about May 15, 2006, MedImpact started an arbitration
proceeding with the American Arbitration Association regarding this matter. [ See Affidavit of Jean Johnson,
attached as exhibit 1, and incorporated by reference.]
S
p
e
c
i
a
l
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e
p
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Page 16 of 36
for receiving, hearing, and resolving claims against an insolvent insurance company. The
Insurance Code specifically states that such claims may not be resolved through
arbitration, and must be ultimately resolved by the receivership court. It is the exclusive
means for resolving claims. [Tex. Ins. Code '21A.005(i)]. MedImpact cannot alter the
result by saying it has a dispute. Owing to the fact that the law specifically disallows the
process now sought by MedImpact, its request must be denied.
When MedImpact contracted with AmCare Health Plans of Texas, Inc. it understood
that it was dealing with a Texas insurance company, and was on notice that Texas had a
comprehensive scheme for dealing with the assets of an insurance company should it
become insolvent. In granting a charter to AmCare Health Plans of Texas, Inc., Texas has
the right to reserve the power to determine how claims against the assets of the insolvent
estate can be determined. This has been the law for almost 200 years. Dartmouth College
v. Woodward, 17 U.S. (4 Wheat.) 518, 606 (1819). The power of the states to regulate the
business of insurance has been repeatedly acknowledged by the courts of the United States
and is embodied in the McCarran-Ferguson Act. MedImpact is seeking to recover assets of
an insolvent insurance company chartered by the State of Texas, and, therefore, it is bound
to the provisions of Texas law with respect to the administration of claims against such
assets.
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Page 17 of 36
d. The Texas Claims Process Is Not Supplanted By Federal Court Jurisdiction
(1) Federal Case Law Does Not Establish The Result Sought By MedImpact
In an effort to avoid the very clear rule of subject matter jurisdiction over claims
against the assets of an insolvent insurance company, MedImpact spends quite a bit of
effort in the Amendment attempting to persuade the Court that it has a federal right to sue
the SDR in federal court to establish its claim. Under the facts of this case, MedImpact has
no federal right to alter the Texas claims process.
While MedImpact asserts that it has a federal right to have its dispute resolved in
federal court, citing an 1857 case, MedImpact surely understands that those statutory
rights were abrogated by Congress9 with the passage of the McCarran-Ferguson Act to the
extent of resolving claims to the assets of an estate and by its own actions here. Indeed, the
states in their regulation of the business of insurance do have the right to alter the claim
resolution rights of entities such as MedImpact. Such rights exist even against the federal
government. See United States Department of the Treasury v. Fabe, 508 U.S. 491, 113 S. Ct.
2202, 2210 (1993)(In holding that the Federal Priority Statute was subordinated to the
s
t
a
t
e
’
s
s
c
h
e
m
e
f
o
r
t
h
e
p
a
y
m
e
n
t
o
f
c
l
a
i
m
s
i
n
a
n
i
n
s
u
r
a
n
c
e
r
e
c
e
i
v
e
r
s
h
i
p
t
h
e
C
o
u
r
t
s
t
a
t
e
d
t
h
a
t
“
t
h
e
p
r
i
m
a
r
y
p
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p
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o
f
a
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9
Congress has the power to alter the jurisdiction of Article III Courts.
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Page 18 of 36
policyholders in preference to other creditors is identical to the primary purpose of the
i
n
s
u
r
a
n
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c
o
m
p
a
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y
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f
:
t
h
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p
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m
e
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m
a
d
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a
g
a
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s
t
p
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l
i
c
i
e
s
.
”
)
If MedImpact were right, why has it not sued the SDR directly in the federal
proceeding? Why did it not have an arbitration panel determine its own jurisdiction? If all
the authority MedImpact cites about its rights are correct, why is it here? Obviously the
federal court has already considered this and rejected the MedImpact analysis. This is
conceded by MedImpact i
n
p
a
r
a
g
r
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e
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t
.
(
“
A
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o
t
i
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r
compelling arbitration is presently pending in the Oklahoma Federal Court, but that court
has agreed to stay its consideration of that motion until MedImpact exhausts its efforts to
h
a
v
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e
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)
.
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t
to arbitration in the federal court be conditioned on the availability of the SDR? MedImpact
either has a right, or it does not. If as it contends the entities are one in the same, then
there should be no hesitation on the part of the federal court to order arbitration if in fact
there is a right to arbitration. This Court must ask why the federal court in Oklahoma
would leave to a Texas court the resolution of a matter of federal law. It is beyond question
that each Court has the power to determine its own jurisdiction. The answer is obvious.
MedImpact is wrong, and the authority upon which it relies is not supportive of the result it
seeks. While MedImpact in certain cases may have the right to pursue an in personam
claim against a statutory receiver in federal court, it does not have the right to pursue an in
S
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
Page 19 of 36
rem or quasi in rem action in order to change the result of a state mandated claims
r
e
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o
n
- which is what MedImpact
is trying to do. Further, MedImpact is not attempting to vindicate a right in federal court, it
is seeking to join the SDR so that it can then obtain a complete referral of the case to
arbitration. MedImpact has no intent of litigating claims in federal court by its own
admission.
MedImpact relies primarily on the decision in Gross v. Weingarten, 217 F.3d 208,
220-21 (4th Cir. 2000) and the cases cited therein. This case is not helpful to MedImpact.
Gross was the Virginia Insurance Commissioner who had been appointed the receiver of
Fidelity Bankers Life Insurance Company. Gross sued the officers, directors and primary
shareholder of Fidelity Banker (an affiliate of American Express: Shearson Lehman
Brothers) in federal court on a variety of theories in connection with the failure of the
insurance company. In the interim, Shearson settled a federal class action on behalf of
policyholders in California (in which Gross had appeared to file an objection to the
settlement). Back in the Virginia federal action, Shearson then sought to invoke rights
against the estate arising from the settlement by way of counterclaim., including an
exclusively federal claim arising under section 10b(5) of the federal securities laws. The
trial court found that Shearson could not assert the counterclaim without going through
the receivership process. Shearson appealed that ruling.
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
Page 20 of 36
In part, the Court of Appeals held that it had exclusive federal jurisdiction over the
securities claim and diversity and supplemental jurisdiction over the common law claims
a
n
d
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e
q
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against Fidelity Bankers was entitled to full faith and credit and divested the federal court
o
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2
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7
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2
0
.
T
h
e Court of
Appeals determined that under the circumstances of that case, the order of the state court
could not divest the federal court of its exclusive federal jurisdiction over the securities
claim, and that the district court could then determine whether it should abstain from
exercising that jurisdiction in light of the comprehensive plan of regulation of the insurance
company.
In dicta, the Court held that under the facts of the case, it saw no reason that the
Court should abstain from exercising its jurisdiction. The claim of Shearson could be
determined and then presented to the Receivership Court. That is not this case. Gross did
not involve the situation, such as here, where a claimant had already made a claim in the
receivership court and had the claim rejected.10 Rather, the claimant was presenting a new
claim that was within the exclusive jurisdiction of the federal court, in a case in which it
was already being sued in that federal court by the Receiver.
10
th
In a case in the 4 circuit that is directly on point, and involving the same estate as in Gross the Court held that
the receiver of an insolvent insurance company did not have to go to arbitration to adjudicate a claim. Eden
Financial Group, Inc. v. Fidelity Bankers Life Ins. Co., 778 F.Supp. 278 (E.D. Va. 1991)
S
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Page 21 of 36
The Court in Gross made clear that
i
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o
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a
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s
:
“
W
e
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e
that in some limited circumstances, the exercise of federal diversity jurisdiction might in
fact impair state laws establishing exclusive claims proceedings for insurance
i
n
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e
n
c
i
e
s
.
”
3
1
7
F
.
3
d
a
t
2
21. The present case is that exception. The SDR has not sued
MedImpact in any court, much less federal court. MedImpact is not attempting to establish
a claim against the Receiver. What MedImpact wants to do is challenge a finding of the SDR
in the claims process established by the receivership, outside of that court, in order to
obtain a right to assets from the estate. Those assets are within the exclusive jurisdiction of
this Court a
n
d
t
h
e
S
D
R
i
s
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e
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o
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. To allow MedImpact to institute litigation or
arbitration proceedings to challenge the statutory and court ordered claim review process
i
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companies. What MedImpact seeks to do is collaterally attack the finding of the SDR in the
statutory and court ordered claims resolution process. Not only does the context of this
issue preclude the result sought by MedImpact on federal jurisdiction grounds, but as
discussed further below, it also constitutes a waiver of the arbitration rights it seeks to
impose.
(2) Texas Case Law Does Not Establish The Result Sought By MedImpact
MedImpact suggests to the Court that Texas law supports the result it seeks. It is
wrong. MedImpact relies on the decision in Bodine v. Webb 992 SW2d 67 (Tex. App. –
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Page 22 of 36
Austin 1999, pet. denied) for the proposition that a state court injunction cannot prevent a
party from resorting to a federal court. [See &25 of the Amendment]. That is not the
holding of the case.
Bodine involved the receivership of Employers Insurance Company. Rather than file a
claim in the receivership (as MedImpact did here), certain members of a defined benefit
plan offered by Employers sued various defendants, including the receiver, for
mismanagement of the Plan. They did so under ERISA. The Receiver went to the state
court to enjoin the lawsuit, and the district court granted that injunction. The Court of
appeals dissolved the injunction. The Court of Appeals dissolved the injunction because it
found that the case was one in personam and not against the assets of the estate. The
plaintiffs were suing the Receiver and others for mismanagement. The Court also
observed, that had the action been in rem, or quasi in rem, a different result would obtain.
Further, it found that the subject matter of the lawsuit was exclusively in the federal court
pursuant to the ERISA provisions, which is a federal law that specifically addresses the
business of insurance and falls within the exception of reverse preemption established in
the McCarran Ferguson Act. The case does not stand for the proposition that where a party
pursues a claim in a receivership and then does not like the result, it can sue the receiver in
personam in federal court in an effort to get a different result and then use that in personam
judgment to get assets of the estate.
S
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
Page 23 of 36
The authority on which MedImpact relies for a right to be in federal court is not
applicable to this situation. This is not an original claim by MedImpact, but a challenge to
the claim review process by the SDR. There is no allegation of exclusive federal
jurisdiction. Indeed, MedImpact cannot even provide assurance to this Court that the
ultimate decision will be made by a federal court. The matter pending in federal court in
Oklahoma may be remanded to the Oklahoma state court. MedImpact certainly presents no
authority that an Oklahoma state court should take control of a review of the claims review
process of a company in receivership in Texas. Again, we are left with the proposition that
MedImpact wants to be in arbitration, and the law is clear that under these circumstances it
has no such right.
3. The Analysis Of MedImpact On Arbitration Is Flawed.
MedImpact attempts to demonstrate through a 4 part analysis why arbitration is
appropriate. Assuming that the motion is ripe, and is not precluded by the specific
provisions of Texas insurance receivership law, MedImpact is still wrong.
a. The SDR Is Not The Same As AmCare Texas In The Resolution Of Claims.
MedImpact suggests that in the bankruptcy context, if the SDR were the same as
AmCare Texas, then arbitration could be compelled. It concludes that the SDR is the same
as AmCare Texas in this respect and therefore, arbitration is appropriate. The analysis is
wrong on its face.
S
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
Page 24 of 36
MedImpact c
o
n
c
e
d
e
s
t
h
a
t
“
i
f
[
t
h
e
S
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]
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e
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c
i
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n
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r
i
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h
t
s created uniquely by
Chapter 21A that AmCare Texas itself could not have asserted, then it would be difficult to
argue that she would be bound by Article IX of the Agreement and could not be compelled
to ar
b
i
t
r
a
t
e
.
”
[See Motion, p. 5, &11]. That is exactly the case and, therefore, by its own
analysis, the Motion and Amendment must fail.
As demonstrated above, Section 21A of the Texas Insurance Code creates a unique role
for the SDR to receive an adjudicate claims that are then subject to objection, to be
reviewed by the SDR and then to be heard by the receivership court. This chapter
specifically excludes the arbitration of claims and makes the claims process the exclusive
means of recovery on a claim. In that the SDR is exercising rights “
c
r
e
a
t
e
d
u
n
i
q
u
e
l
y
b
y
Chapter 21A, that AmCare T
e
x
a
s
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l
f
c
o
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o
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”
t
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e
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n
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t
b
o
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n
d
b
y
Article IX of the Agreement and cannot be compelled to arbitrate. [See Motion, p. 8, &19].
b. The Provisions of the Federal Arbitration Act are Subject to Reverse Preemption from the McCarran-Ferguson Act.
The power to regulate insurance lies primarily within the province of the states.
This allocation of power originally developed in the courts and was later codified by
Congress in the McCarran-Ferguson Act. 15 USC 1011-1015. The legislative intent
underlying the Act was to preserve state regulation and taxation of insurance. See Wilburn
B
o
a
t
C
o
.
v
.
F
i
r
e
m
a
n
’
s
F
u
n
d
I
n
s
.
C
o
.
, 348 U.S. 310, 319 (1955); Prudential Ins. Co. v.
Benjamin, 328 U.S. 408, 429 (1946). The Act provided that the states could regulate the
S
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
Page 25 of 36
“
b
u
s
i
n
e
s
s
o
f
i
n
s
u
r
a
n
c
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”
w
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o
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e
d
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p
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i
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y
legislate in that field.11
Over the past few decades, arbitration has become a significant method of contract
dispute resolution. However, the Federal Arbitration Act is not a law that specifically
relates to the business of insurance and thus the right of the states to regulate the business
of insurance takes precedence. There is little question that the resolving of claims and
marshaling of assets of an insolvent insurance company is part of the business of insurance.
United States Department of the Treasury v. Fabe, 508 U.S. 491, 113 S. Ct. 2202, 2210
(1993)(
“
T
h
e
p
r
i
m
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r
y
p
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r
p
o
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o
f
a
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i
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t
i
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s
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r
’
s
a
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s
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t
s
t
o
policyholders in preference to other creditors is identical to the primary purpose of the
i
n
s
u
r
a
n
c
e
c
o
m
p
a
n
y
i
t
s
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l
f
:
t
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e
p
a
y
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n
t
o
f
c
l
a
i
m
s
m
a
d
e
a
g
a
i
n
s
t
p
o
l
i
c
i
e
s
.
”
)
While MedImpact
chooses not to discuss them with the Court, there are several cases within the context of
insurance company insolvencies (as opposed to cases under the Bankruptcy Code) that
address the interplay of the Federal Arbitration Act with state schemes of insurance
insolvency regulation. Not surprisingly, for almost 50 years at least the Courts have been
11
The McCarran-Ferguson Act provides, in relevant part:
(a) The business of insurance . . . shall be subject to the laws of the several States which relate to the
regulation or taxation of such business.
(b) No Act of Congress shall be construed to invalidate, impair or supersede any law enacted by any
State for the purpose of regulating the business of insurance . . . unless such Act specifically relates to
the business of insurance . . ..
15 U.S.C. '1012.
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
Page 26 of 36
holding that a receiver is not bound to arbitrate. See In The Matter of the Arbitration
Between Knickerbocker Agency, Inc. and Holz, 4 N.Y.2d 245, 149 N.E.2d 885 (N.Y. 1958);
Bernstein v. Centaur Insurance Company, 606 F.Supp. 98 (S.D.N.Y. 1984)12; Washburn v.
Corcoran, 643 F.Supp. 554 (S.D.N.Y. 1984); Corcoran v. Ardra Insurance Company, Ltd., 77
N.Y.2d 235 (1990); Eden Financial Group, Inc. v. Fidelity Bankers Life Ins. Co., 778 F.Supp.
278 (E.D. Va. 1991)13; Benjamin v. Pipoly, 155 Ohio App. 3d 171 (Ohio Ct. App. 2003)14
R
e
m
a
r
k
a
b
l
y
,
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p
a
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t
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p
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h
a
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r
2
1
A
.
”
The statement is remarkable because
notwithstanding the very clear prohibition of arbitration in the claims process, that is what
MedImpact hopes to impose.
12
H
e
r
e
,
t
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o
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“
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e
w
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o
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h
a
s
a
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a
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involving the
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,
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I
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1
0
2
13
“
T
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e
M
c
C
a
r
r
a
n
-Ferguson Act bars interference with state laws regulating the business of insurance, unless such
laws specifically relate to insurance. Because the FAA does not specifically relate to the business of insurance, an
insurance company in state rehabilitation and conservation proceedings, such as FBL finds itself, is excepted from
the provisions of the FAA where a party attempts to invoke arbitration against the company
o
r
i
t
s
r
e
c
e
i
v
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r
.
”
I
d
.
a
t
th
282. Interestingly, this is still good law in the 4 Circuit. As opposed to Gross this decision is directly on point. A
party may not seek relief in federal court through the Federal Arbitration Act to avoid a state mandated claim
review process of an insolvent insurer.
14
th
Citing in part Blackhawk Heating & Plumbing Co. v. Geeslin, 530 F.2d 154, 159 (7 Cir. 1976 which stated:
The states have a paramount interest in seeing that liquidation proceedings conducted by courtappointed liquidators and overseen by their courts are free from the interference of outside agencies.
This interest is of even greater importance when the company undergoing liquidation is a domestic
insurance company or other financial institution. The inter
e
s
t
s
o
f
t
h
e
c
o
m
p
a
n
y
’
s
o
w
n
e
r
s
,
p
o
l
i
c
y
h
o
l
d
e
r
s
,
and creditors, as well as the public, are best served and protected by an orderly and efficient process of
liquidation. The liquidation of an insolvent insurance company is best left to a proceeding which will
settle all of its affairs and dispose of all of its property.
Id. at 183.
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Page 27 of 36
As noted previously, Chapter 21A clearly precludes arbitration of claims.
MedImpact goes so far as to quote the specific language of the statute that bars the result it
wants. [See Motion, p. 10, &25]. Yet MedImpact then convolutes the clear language out of
e
x
i
s
t
e
n
c
e
u
n
d
e
r
t
h
e
g
u
i
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e
o
f
c
o
n
d
u
c
t
i
n
g
t
h
e
e
x
e
r
c
i
s
e
t
h
a
t
“
[
a
]
l
l
p
r
o
v
i
s
i
o
n
s
o
f
a
s
t
a
t
u
t
e
should be read in c
o
n
t
e
x
t
,
a
n
d
f
u
l
l
e
f
f
e
c
t
s
h
o
u
l
d
b
e
g
i
v
e
n
t
o
e
a
c
h
p
a
r
t
.
”
[See Motion, p. 11, &
26].
M
e
d
I
m
p
a
c
t
c
o
n
c
l
u
d
e
s
t
h
a
t
“
a
p
a
r
t
y
h
a
s
a
r
i
g
h
t
t
o
p
u
r
s
u
e
a
c
l
a
i
m
o
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c
o
u
n
t
e
r
c
l
a
i
m
against the insolvent insurer in arbitration; but (d) the claim or counterclaim must be
subject to '2
1
A
.
2
0
9
,
t
h
e
s
t
a
t
u
t
e
g
o
v
e
r
n
i
n
g
s
e
t
o
f
f
r
i
g
h
t
s
.
”
[See Motion, id.]. Of course, if this
is what the Legislature intended to say, it could have said that. It did not. Rather, the
Legislature said that nothing in Chapter 21A deprives a party of any contractual right to
pursue arbitration, except as to claims against the Estate. Claims have to be pursued
exclusively in the receivership through the process provided. If a party has an unfettered
right to pursue arbitration, that is all the Legislature needed to say; but it did not. It said
claims are not subject to arbitration. If a party is otherwise in arbitration, and presents a
claim against the estate, it is subject to set off. 15 If MedImpact is going to give meaning to
all the terms in the section, then that is what it needs to do. Using the construction offered
by MedImpact, the limitation of arbitration of claims is removed. The exclusivity of the
15
The more likely interpretation of the statute is that it was intended to alter the result in Bard v. Charles R. Myers
Insurance Agency, Inc., 839 S.W.2d 791 (Tex. 1992) in which the Court held that an agent could not assert a
counterclaim against the Receiver suing him, but rather had to present the claim in the receivership proceeding.
Such a result would be consistent with the rationale in Gross that if the receiver is suing a defendant in a particular
court, the defendant should have the right to present its claims in the same forum, to be decided at the same time.
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Page 28 of 36
claims process is ignored. T
h
a
t
i
s
h
a
r
d
l
y
t
h
e
“
m
o
s
t
s
t
r
a
i
g
h
t
f
o
r
w
a
r
d
a
n
d
g
r
a
m
m
a
t
i
c
a
l
reading o
f
t
h
e
s
t
a
t
u
t
e
,
w
h
i
c
h
i
s
t
h
e
o
n
e
t
h
a
t
c
o
u
r
t
s
s
h
o
u
l
d
r
e
f
e
r
.
”
[See Motion, p. 11, &26,
citing Fleming Foods of Texas, Inc. v. Rylander, 6 S.W.3d 278, 284 (Tex. 1999)].
Further, contrary to the assertion of MedImpact, its construction of the statute
eviscerates the provisions of the Insurance Code with respect to handling claims. [See
Motion, p. 11, &27]. The Insurance Code provides a unified approach for resolving claims
a
g
a
i
n
s
t
t
h
e
e
s
t
a
t
e
.
D
e
s
p
i
t
e
w
h
a
t
M
e
d
I
m
p
a
c
t
b
e
l
i
e
v
e
s
,
“
T
e
x
a
s
r
e
c
o
g
n
i
z
e
s
a
c
o
m
p
e
l
l
i
n
g
p
o
l
i
c
y
i
n
t
e
r
e
s
t
i
n
h
a
v
i
n
g
c
l
a
i
m
s
a
g
a
i
n
s
t
a
n
i
n
s
o
l
v
e
n
t
i
n
s
u
r
e
r
’
s
e
s
t
a
t
e
r
e
s
o
l
v
e
d
i
n
a
s
i
n
g
l
e
p
r
o
c
e
e
d
i
n
g
.
”
Bryant v. United Shortline Inc. Assurance Services, N.A., 972 S.W.2d 26, 29
(Tex. 1998). B
y
s
e
e
k
i
n
g
t
o
r
e
l
i
t
i
g
a
t
e
i
n
a
n
o
t
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e
r
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o
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u
m
t
h
e
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’
s
r
e
s
o
l
u
t
i
on of MedImpact's
proof of claim, it disrupts the claims process.
c. MedImpact Wrongly Seeks To Litigate Issues
MedImpact seeks to avoid the compelling policy Texas has by suggesting that it is
only fair to have all three estates in one arbitration because their obligations are joint, and
thus, assumedly, the SDR would be responsible for all of the debt, including that incurred
by members of other HMO operations in Oklahoma and Louisiana. MedImpact does not
cite any authority for that proposition. Rather it wrongly attempts to litigate the liability
issue as noted above. That is not for this Court to decide. If there is an arbitration clause,
the Court can only determine whether it is applicable. It cannot partly litigate the dispute.
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Page 29 of 36
In determining generally whether a matter should be referred to arbitration, the court is to
consider only evidence that a written agreement to arbitrate exists, and that the claims
raised are within the scope of the agreement, and then whether there is a bar to arbitration.
Capital Income Props. v. Blackman, 843 S.W.2d 22, 23 (Tex. 1992). It is not for the Court to
delay a determination for discovery to determine whether the agreement meets the
requirement. In re MHI Partnership, Ltd., 7 S.W.3d 918, 923 (Tex. App. –
Houston [1st Dist.]
1999, orig. proceeding). Accordingly, it is not for this Court to determine whether the
Texas company has any responsibility for the other estates, or vice versa.16 The extent of
the evidentiary offer can only be that there is an agreement by AmCare Texas to arbitrate,
and that the matter in issue falls within the scope of the arbitration agreement. Capital
Income Props. v. Blackman, supra. Here, there cannot be an arbitration agreement because
the Insurance Code expressly prevents it and even if it did not, the right to arbitration has
been waived or is not yet ripe.
d. Arbitration Does Not Present A More Just Or Equitable Process
There is an additional compelling reason that the Motion and Amendment should be
denied. MedImpact has filed a proof of claim in the Texas proceeding. The claim is for the
full amount sought by MedImpact from all 3 companies. The claim was denied, and
MedImpact has gone to the 2nd level of claims adjudication, seeking review of the
16
That is, unless the Court wants to deny the Motion and leave the parties to the claims process; which ultimately
in a hearing before the receivership court will deal with the issue of joint liability, if any.
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Page 30 of 36
determination. If it further objects to the disposition of its claim, there will be a hearing
before the receivership court, as provided by the claim resolution provisions. There is no
risk that MedImpact will not have a forum for its claim. It chose the forum and now it is
trying to escape it because (a) it does not like the result so far in Texas, and (b) it got sued
by someone other than the Texas SDR. MedImpact has sought affirmative relief in this
proceeding, and the SDR is prejudiced not only with respect to the time and expense
incurred in adjudicating the claim, but also in that MedImpact seeks to have the SDR incur
prohibitive expense to determine a claim that she would not otherwise have to incur.
MedImpact wants a 3 person panel convened in San Diego to resolve the claim.
Each of the panel members will have to be paid. Presently, the SDR incurs no expense to
have the claim of MedImpact adjudicated in the receivership proceeding. She also incurs
no administrative expense. The Agreement in issue calls for the arbitration to be
administered by the American Arbitration Association. A recent case out of the San
Antonio Court of Appeals demonstrates that the low cost of arbitration is a fallacy. In that
case, a claim of approximately $22,000 for a damaged foundation resulted in a demand
from the American Arbitration Association for an upfront fee of $63,670.00 (divided
equally between the 2 parties) to arbitrate the dispute. The Court of Appeals found this
approach to be ridiculous and refused to send the parties to arbitration. Olshan
Foundation Repair Company v. Ayala, 180 S.W.3d 212 (Tex. App. –
San Antonio 2005, pet.
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Page 31 of 36
filed). Further, the SDR and the estate will incur the expense of litigating the claim of
MedImpact in California, presumably with 2 other parties, the receivers of the HMO estates
in Oklahoma and Louisiana. This is not an expense that the SDR would incur at all in the
present forum under the Texas receivership statutes. At most, there will be the expense of
a hearing before the receivership court if MedImpact remains dissatisfied with the
adjudication of its claim by the SDR. This expense in an estate that cannot pay claims in full
is unwarranted. Further, convening a panel of 3 arbitrators, and then litigating the dispute
will be far more time consuming that utilizing the claims process established by the Texas
Insurance Code. That delay will only further delay the final determination of assets and
prevent a complete distribution of assets to persons in need.
e. MedImpact Has Waived Its Right to Arbitration
With the action that MedImpact has taken in the proceeding, it is not unfair to
conclude that MedImpact has waived its right to seek arbitration. Waiver is the intentional
relinquishment of a known right or conduct inconsistent with claiming that right. Jernigan
v. Langley, 111 S.W.3d 153, 156 (Tex. 2003)(per curiam). Like any other contract right, the
right to arbitrate can be waived. Miller Brewing Co. v. Fort Worth Distributing Co., 781 F.2d
494, 497 (5th Cir. 1986). Waiver may be express or implied. A party may waive its right to
arbitration by expressly indicating that it wishes to resolve the case in a judicial forum. In
re Currency Conversion Fee Antitrust Litigation, 361 F.Supp.2d 237, 257 (S.D.N.Y. 2005).
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Page 32 of 36
Alternatively, a party may waive its right to arbitrate by taking an action inconsistent with
that right to the opposing party's prejudice. Miller Brewing Co., 781 F.2d at 497. “
A
p
a
r
t
y
to arbitration does not have a right to the pre-trial discovery procedures that are used in a
c
a
s
e
a
t
l
a
w
.
”
Miller Brewing Co. v. Fort Worth Distributing Co., 781 F.2d at 498. An attempt
to go to the merits and still retain the right to arbitrate is clearly impermissible. Id.; Graig
Shipping Co. v. Midland Overseas Shipping Corp., 259 F.Supp. 929, 931 (S.D.N.Y. 1966).
Here, MedImpact has violated the Agreement upon which it relies by not seeking direct
negotiation with the SDR. Then it filed a claim, which was adjudicated by the SDR.
MedImpact thereby learned o
f
t
h
e
S
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R
’
s
a
n
a
l
y
s
i
s
a
n
d
o
p
i
n
i
o
n
o
f
t
h
e
m
e
r
i
t
s
of the claim.
MedImpact then filed an objection with the SDR presenting additional evidence in support
of its cause. That matter is still pending. MedImpact does not have the right to develop the
case and take a shot at having its claim adjudicated in a fashion it likes, only then to seek
arbitration when things do not turn out as it likes. Had the receivers of the Oklahoma and
Louisiana HMO estates not filed suit against MedImpact, the record demonstrates that it
would not have pursued arbitration against the Texas SDR. At this stage in the
receivership, the Estate is prejudiced in incurring the substantial expense that would be
involved in moving the claim resolution process to California. Such an approach is contrary
to the specific language of the Texas Insurance Code and should be rejected.
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Conclusion
In seeking arbitration, MedImpact relies on an agreement with which it has not
complied. It must first enter into direct negotiation with the SDR and have those
negotiations fail before it may seek arbitration. Even then, however, it is without recourse
because the provisions of the Texas Insurance Code make the claims process articulated
there the exclusive means to resolve claims. Arbitration is specifically excluded. Also,
because the claims p
r
o
c
e
s
s
i
s
p
a
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t
o
f
t
h
e
s
t
a
t
e
’
s
c
o
m
p
r
e
h
e
n
s
i
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e
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e
m
e
f
o
r
t
h
e
r
e
g
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l
a
t
i
o
n
of the business of insurance, its provisions take precedence over the provisions of the
Federal Arbitration Act. MedImpact concedes that if there is a unique process created by
the statute, which is the case, then the SDR is not bound to arbitrate.
MedImpact has a forum for the resolution of its claim, which not only is the
exclusive means provided by Texas law, but is a process that minimizes expense to the
estate, while affording an organized and consistent approach to resolving claims. The
arbitration approach suggested by MedImpact only increases the time and expense
involved. Because it has sought to invoke its rights in this process, and only now in the face
of disappointment seeks to change the rules, its motion should be denied. Altering the
forum at this point would prejudice the SDR because of the time and expense involved.
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Request
The SDR requests that the relief sought by MedImpact be denied, and that she have
such other and further relief, at law and equity, to which she is entitled.
Respectfully submitted,
Wisener  Nunnally  Gold, L.L.P.
By:
________________________
Harold B. Gold
Bar No. 08069600
Robert H. Nunnally, Jr.
Bar No.
625 W. Centerville Road, Suite 110
Garland, Texas 75041
T: 972.840.9080
F: 972.840.6575
Attorneys for Jean Johnson, Special Deputy
Receiver of AmCare Health Plans of Texas, Inc. and
AmCare Management, Inc.
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Certificate of Service
This document was served by email on the service list on October 16, 2006.
Harold B. Gold
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Page 36 of 36
No. GV 204523
THE STATE OF TEXAS,
In The District Court
In Travis County, Texas
200th Judicial District
v.
AMCARE HEALTH PLANS OF TEXAS, INC.
and AMCARE MANAGEMENT, INC.
FURTHER RESPONSE OF THE SPECIAL DEPUTY RECEIVER
TO AMENDED MOTION OF MEDIMPACT HEALTHCARE SYSTEMS, INC.
Jean Johnson, as Special Deputy Receiver of AmCare Health Plans of Texas, Inc. and
AmCare Management, Inc. (the SDR) submits this further response to the Amended Motion
of MedImpact HealthCare Systems, Inc. (MedImpact). This further response is directed to
the Reply MedImpact filed on Friday, October 20, 2006, but served on the SDR on October
23, 2006 (the Reply). This Response is filed with permission of the Special Master, granted
on October 23, 2006.
1. What Are Facts And What Are Assertions?
MedImpact wrongly states as a fact that it is undisputed that the 3 companies now in
receivership in Texas, Oklahoma and Louisiana entered into an agreement as a unitary
health plan. [See p. 1 of the Reply]. MedImpact does not attempt to explain to the Court
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Page 1 of 11
w
h
a
t
a
“
u
n
i
t
a
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y
h
e
a
l
t
h
p
l
a
n
”
c
o
u
l
d
b
e
or what it means by that phrase. Clearly, the health
plans offered by the AmCare entities were each regulated by the 3 respective states in
which the companies offering them were incorporated. In its initial reply, the SDR pointed
out the corporate uniqueness of each company and the regulatory control expended by the
respective states over each company. The SDR also pointed out that MedImpact clearly
contracted with distinct corporate entities and that this was set out in the agreement upon
which it relies. The SDR further pointed out that MedImpact may not litigate here whether
there was commonality in order to secure the relief it seeks in its motion. MedImpact
ignores entirely this analysis in its Reply, choosing instead to merely restate that all 3
companies are one. MedImpact made that same claim in the proof of claim it presented to
the SDR. That claim was rejected when the proof of claim was rejected. MedImpact has
sought review of the action by the SDR as allowed by the Texas Insurance Code. It also
seeks to wrongly hedge its position by filing suit in another state, away from this Court, and
ultimately to shift the analysis away from a judge by placing it in arbitration.
MedImpact also wrongly states what has happened with other litigation brought by the
SDR. As this Court well knows, the SDR sued a number of people and entities in this Court
in connection with the failure of AmCare Health Plans of Texas, Inc., and AmCare
Management, Inc., in an effort to recover assets to pay Texas claimants. The Louisiana
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receiver had filed a lawsuit against some of those same persons and entities i
n
t
h
a
t
e
s
t
a
t
e
’
s
receivership court in Baton Rouge. When it appeared that the Louisiana case would
proceed to trial first, and that the resolution of issues there could preclude the litigation of
claims in Texas, the SDR received permission to and did intervene in the proceeding in
Baton Rouge in order to assert her claims against Defendants to recover for Texas
claimants. The SDR tried her claims to a jury, receiving a verdict and a judgment (which is
n
o
w
b
e
i
n
g
a
p
p
e
a
l
e
d
)
.
T
h
e
L
o
u
i
s
i
a
n
a
a
n
d
O
k
l
a
h
o
m
a
r
e
c
e
i
v
e
r
’
s
t
r
i
e
d
t
h
e
i
r
c
l
a
i
m
s
t
o
t
h
e
bench. Had the SDR sued MedImpact there as well, the briefs now filed by MedImpact
might have merit. However, the SDR did not sue MedImpact in Louisiana. Indeed, the SDR
has not sued MedImpact anywhere. This absence of litigation is a major pitfall to
M
e
d
I
m
p
a
c
t
’
s
a
n
a
l
y
s
i
s
.
2. T
h
e
O
n
l
y
F
a
l
s
e
C
o
n
t
e
n
t
i
o
n
H
e
r
e
I
s
M
e
d
I
m
p
a
c
t
’
s
C
laim That It Has Engaged In
Direct Negotiation
MedImpact is correct when it says that a Court cannot rewrite a contract. [See Reply at
p. 2, fn. 2]. Yet, that is exactly what it asks this Court to do. The Service Agreement upon
which MedImpact relies is very specific about Direct Negotiation. The introductory
sentence of the grievance procedure (par. 9.1 of the Service Agreement) states:
MedImpact and Health Plan hereby agree to handle a dispute,
claim or grievance between the parties hereto, exclusively in
the following manner: Should said direct negotiation, as
S
D
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F
u
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t
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e
s
p
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n
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e
t
o
M
e
d
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m
p
a
c
t
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o
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o
M
o
d
i
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y
S
t
a
y
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Page 3 of 11
described elsewhere herein, fail to reach agreement with
respect to any dispute, . . ..
The grievance procedure paragraph goes on to state that:
Controversies or claims between MedImpact and Health Plan
arising out of or relating to the interpretation or application of
this Agreement, or breach thereof, must first be addressed and
attempt to be resolved by direct negotiation.
Counsel for MedImpact says that he tried direct negotiation and therefore, the parties
can move on to arbitration. He is wrong, but MedImpact then attempts to have the Court
re-write the agreement when it states:
It would, however, be a nonsensical, Alice in Wonderland
construction of the dispute resolution clause to precondition a
p
a
r
t
y
’
s
r
i
g
h
t
t
o
d
e
m
a
n
d
a
r
b
i
t
r
a
t
i
o
n
o
f
a
d
i
s
p
u
t
e
o
n
t
h
e
p
r
i
o
r
successful negotiation of a settlement of the dispute.
Perhaps MedImpact does not understand its own agreement. The agreement called for
direct negotiation of disputes prior to the time that a party may seek arbitration. The
evidence from the SDR is that she has attempted to gather from MedImpact further
information from MedImpact with respect to the proof of claim it filed, the rejection of
which it has appealed. MedImpact has not attempted to provide that further information
or even to respond to the request.
It is true, counsel for MedImpact did send a settlement offer to the SDR after filing the
motion now pending. The SDR would be pleased to share it with the Court if MedImpact
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h
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p
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n
s
e
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M
e
d
I
m
p
a
c
t
M
o
t
i
o
n
t
o
M
o
d
i
f
y
S
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a
y

Page 4 of 11
will waive the protection of Tex. R. Ev. 408. The Court can then evaluate for itself whether
MedImpact has engaged in direct negotiation as it is required to do under its agreement.
There is no doubt that MedImpact did not.
The SDR has attempted to gain from MedImpact more information about its claim.
MedImpact has refused to provide it. The SDR has attempted to involve a third party
neutral to assist the parties i
n
n
e
g
o
t
i
a
t
i
n
g
M
e
d
I
m
p
a
c
t
’
s
c
l
a
i
m
.
M
e
d
I
m
p
a
c
t
h
a
s
r
e
f
u
s
e
d
.
T
h
e
agreement specifically provide
s
,
m
u
c
h
t
o
M
e
d
I
m
p
a
c
t
’
s
a
n
g
u
i
s
h
,
t
h
a
t
M
e
d
I
m
p
a
c
t
m
u
s
t
directly negotiate as a condition precedent to seeking arbitration. Whether it views that as
b
e
i
n
g
i
n
A
l
i
c
e
i
n
W
o
n
d
e
r
l
a
n
d
o
r
n
o
t
,
i
t
i
s
a
w
o
r
l
d
l
a
r
g
e
l
y
o
f
M
e
d
I
m
p
a
c
t
’
s
o
w
n
m
a
k
i
n
g
.
MedImpact has failed to engage in direct negotiation with the SDR and therefore, it should
not be allowed to circumvent that obligation by seeking from this Court permission to sue
the SDR in Oklahoma federal court so that it can then seek to have arbitration enforced in
San Diego.
3. Where Is The Claim?
While MedImpact has used a lot of words over a lot of pages, none of them can be
organized in a way to reflect a coherent statement of what claim the SDR is allegedly
pursuing against MedImpact that needs to be resolved in some forum outside this Court.
MedImpact filed a claim with the SDR in this Court. The SDR rejected the Claim.
S
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’
s
F
u
r
t
h
e
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R
e
s
p
o
n
s
e
t
o
M
e
d
I
m
p
a
c
t
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o
n
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o
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i
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y
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Page 5 of 11
MedImpact has sought further review by the SDR and the SDR has been attempting to
conduct that further review. The proof of claim is premised on the right to recover from
the Texas receivership estate money allegedly due MedImpact for the claims of member of
health plans based in Oklahoma and Louisiana that are in receivership.1 MedImpact does
not like the disposition of its claim to date by the SDR and wants to litigate elsewhere the
legitimacy of its c
l
a
i
m
.
A
s
t
h
e
e
n
t
i
r
e
t
y
o
f
M
e
d
I
m
p
a
c
t
’
s
p
r
e
s
e
n
t
a
t
i
o
n
i
s
p
r
e
m
i
s
e
d
w
r
o
n
g
l
y
o
n
the conclusion that the SDR is seeking relief against MedImpact, its Motion must fail.
4. I
t
’
s
N
o
t
P
e
r
s
o
n
a
l
,
I
t
’
s
T
h
e
M
o
n
e
y
In the Reply Medimpact presents a thorough, but inconsequential presentation on the
various forms of jurisdiction. The important point MedImpact seeks to make is that it is
seeking a personal judgment against the SDR, so it can do that where it pleases. That is
ridiculous. What is the personal claim that MedImpact has against the SDR? In the
multitude of pages that MedImpact has submitted on this matter, the Court will not find
any. MedImpact is not claiming that the SDR has done anything wrong since her
appointment. MedImpact is not seeking damages against her. MedImpact is not seeking to
liquidate and otherwise unliquidated claim. MedImpact did not have on file anywhere a
1
MedImpact concedes in the Reply:
“
N
o
d
o
u
b
t
,
M
e
d
I
m
p
a
c
t
a
s
s
e
r
t
s
a
s
u
b
s
t
a
n
t
i
a
l
c
l
a
i
m
a
g
a
i
n
s
t
t
h
e
r
e
c
e
i
v
e
r
s
h
i
p
estate for pharmacy benefits that its participating pharmacies dispensed to enrollees during the few months
i
m
m
e
d
i
a
t
e
l
y
p
r
e
c
e
d
i
n
g
t
h
e
i
n
s
o
l
v
e
n
c
y
o
f
t
h
e
A
m
C
a
r
e
e
n
t
i
t
i
e
s
.
.
.
.
”
S
D
R
’
s
F
u
r
t
h
e
r
R
e
s
p
o
n
s
e
t
o
M
e
d
I
m
p
a
c
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y

Page 6 of 11
lawsuit that was interrupted by the receivership of a defendant. This is simply a case in
which MedImpact wants to establish its right to any money that may be distributed by this
Court i
n
r
e
s
p
o
n
s
e
t
o
t
h
e
S
D
R
’
s
r
e
j
e
c
t
i
o
n
o
f
t
h
e
c
l
a
i
m
f
i
l
e
d
i
n
t
h
e
r
e
c
e
i
v
e
r
s
h
i
p
. The SDR says
that under the circumstances of this case, this Court gets to decide whether MedImpact has
a claim, and if so, to what extent.
Missing from the analysis MedImpact presents is attention to the role the SDR plays in
the liquidation process of the Texas AmCare entities. The SDR is merely an officer of the
Court; the Court holding the assets of the companies in custodia legis. Farm & Home Saving
& Loan Association v. Breeding, 115 S.W.2d 615 (Tex. 1938); Ex Parte: Griffitts, 711 S.W.2d
225 (Tex. 1986). The SDR acts for the Court with respect to the assets. Therefore, MedImpact is
actually attempting to direct the Court what to do with assets as concerns MedImpact. Yet,
MedImpact states that it is not seeking to establish the liability of the assets on its claim,
but rather that it is seeking to enforce a personal obligation or right, that is a judgment,
against the SDR rather than adjudication of rights to or in particular property. [See Reply at
p. 9, &16]. What does that really mean? The SDR has no personal liability to MedImpact.
That is why the Court has ordered persons to file claims against the assets of the estate.
The SDR merely conducts the adjudication of those claims. Having seen what the SDR
thinks of its claim, MedImpact now wants a judicial determination somewhere else of the
S
D
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F
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p
a
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Page 7 of 11
amount it should receive when a plan of distribution is approved. That adjudication,
however, is a process articulated by this Court, which MedImpact has already invoked.
5. I
t
’
s
A
r
b
i
t
r
a
t
i
o
n
S
o
T
h
e
R
u
l
e
s
D
o
N
o
t
M
a
t
t
e
r
Finally, MedImpact argues that it has not waived its right to arbitration because all it
has done is file a proof of claim. If this were the situation described in the cases to which
MedImpact makes reference in its Reply, it might have an arguable position. This is not
those cases, though.
MedImpact disregards Texas law with respect to waiver of a right to arbitration. That is
understandable; that law is not helpful to MedImpact. Instead, MedImpact chooses to look
to bankruptcy law. Obviously, MedImpact is more comfortable in forums outside this Court
and relies on the law of those forums whenever possible. Yet, that law is not helpful either.
The bankruptcy law cited by MedImpact relates solely to the filing of a claim. That is not
the situation here. MedImpact responded to an order of this Court by filing a claim
asserting a right to assets of the estates. The SDR processed that claim and rejected it.
MedImpact then invoked further rights and sought a reassessment of that claim. The SDR
then undertook to reassess that claim only to be then confronted with a demand by
MedImpact for arbitration. Then MedImpact, by its own admission, decided to change
gears to get the same result and now seeks to bring the SDR into a lawsuit in Oklahoma
S
D
R
’
s
F
u
r
t
h
e
r
R
e
s
p
o
n
s
e
t
o
M
e
d
I
m
p
a
c
t
M
o
t
i
o
n
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o
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o
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i
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y
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Page 8 of 11
either to have her sent to arbitration, or to litigate its right to the assets that the SDR has
rejected. As noted by the SDR in her initial response, Texas law provides that under these
facts, MedImpact has waived its right to arbitration because it is seeking to obtain a hearing
by a different forum on a rejection of its claim. Since MedImpact likes federal law, it should
know that waiver is dictated by federal law as well. See Kramer v. Hammond, 943 F.2d 176,
179 (2nd C
i
r
.
1
9
9
1
)
(
“
Prejudice can be substantive, such as when a party loses a motion on the
merits and then attempts, i
n
e
f
f
e
c
t
,
t
o
r
e
l
i
t
i
g
a
t
e
t
h
e
i
s
s
u
e
b
y
i
n
v
o
k
i
n
g
a
r
b
i
t
r
a
t
i
o
n
,
.
.
.
.
”
Conclusion
MedImpact initiated the claims process in this Court. It received a rejection from
the SDR, which it did not like. It has pursued in this Court the re-evaluation of that
rejection, but at the same time is trying both a resort to arbitration, and to parallel federal
litigation in another state in an effort to avoid the result obtained in this Court. MedImpact
can re-characterize the situation all it wants, but essential to any re-characterization are
the actions it has taken here. Those actions preclude the relief sought by MedImpact, and
therefore, its Motion should be denied.
Request
The SDR requests that the relief sought by MedImpact be denied, and that she have such
other and further relief to which she is entitled.
S
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’
s
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p
a
c
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M
o
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y
S
t
a
y

Page 9 of 11
Respectfully submitted,
Wisener  Nunnally  Gold, L.L.P.
By:
________________________
Harold B. Gold
Bar No. 08069600
Robert H. Nunnally, Jr.
Bar No. 15141600
625 W. Centerville Road, Suite 110
Garland, Texas 75041
T: 972.840.9080
F: 972.840.6575
Attorneys for Jean Johnson, Special Deputy
Receiver of AmCare Health Plans of Texas, Inc. and
AmCare Management, Inc.
S
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p
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d
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Page 10 of 11
Certificate of Service
This document was served by email on the service list on October 24, 2006.
Harold B. Gold
S
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p
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Page 11 of 11

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