Jason Snell and the Snell Law Firm obtained a final judgment from the Texas Supreme Court in favor of their client, who was awarded more than $16 million under the Texas Medicaid Fraud Prevention Act.
Justice Boyd delivered the opinion of the Court, joined by Justices Hecht, Devine, Busby, Bland, and Huddle. Justice Young filed a dissenting opinion, which Justice Lehrmann joined. Justice Blacklock did not participate in the decision.
Dr. Richard Malouf, a dentist in the Dallas-Fort Worth area, co-founded All Smiles Dental Center in 2002. In 2004, he started providing orthodontic services to Medicaid patients. In 2007, Malouf bought out his partner and retained full control of the business until he sold most of his interest in 2010.
In the six years that All Smiles provided services to Medicaid patients under Malouf’s ownership, office staff at each location used dentists’ charts to prepare bills to be submitted to the Medicaid office. These bills were first transferred to the company’s corporate office, which then sent the bills to Medicaid either electronically or on paper using a Medicaid-authorized form.
A completed form must state the provider’s name and Texas Provider Identifier (TPI) number, which is a unique number assigned to each provider. The form does not require the provider’s license type, number, or any other identification number. This is redundant information, as to obtain a TPI, a provider must submit proof of their professional license.
In 2012, two former employees of All Smiles Dental filed qui tam actions alleging that Malouf and All Smiles committed numerous violations of the Texas Medicaid Fraud Prevention Act (renamed by the legislature in 2023 to the Texas Health Care Program Fraud Prevention Act1). The Texas Attorney General intervened and consolidated the actions.
Under Section 36.002(8) of the Texas Human Resources Code, the State then claimed Malouf committed an unlawful act by filing claims to the Medicaid program that knowing failed “to indicate the type of license and identification number of the provider who provided the service.”
The State alleged that Malouf directed his company to submit 1,842 claims that listed Malouf’s TPI number, even though dentists other than Malouf actually provided the services that were billed.
Based on this allegation, the State sought to recover the amount Medicaid paid for those services, plus prejudgment interest, statutory penalties, attorney fees, and expenses. The State filed a motion for partial summary judgment on only that claim.
Malouf primarily argued that none of the 1,842 claims were unlawful because they all correctly indicated the license type of the provider who provided the billed services. According to Malouf, a claim is lawful under Section 36.002(8) as long as it provides either the proper license type or an identification number.
The State argued that the section states that claim forms are unlawful unless they state both the proper license type and identification number.
Malouf filed a no-evidence summary-judgment motion, but the trial court denied it, instead granting the State’s motion for partial summary judgment.
The State then nonsuited its remaining claims and moved for entry of final judgment. The trial court awarded the State more than $16.5 million—approximately $538,000 for the amount Medicaid paid on the 1,842 claims; approximately $1.1 million as a civil penalty; a $5,000 penalty per unlawful act (1,842, for a total of about $9.2 million); and approximately $5.7 million for attorney fees and expenses incurred.
The trial court denied Malouf’s motion for new trial, and Malouf appealed.
The Eighth Court of Appeals affirmed the trial court’s judgment, aside from disagreeing with the amount of attorney fees and expenses.2
The Texas Supreme Court’s opinion primarily relied on guidance from the U.S. Supreme Court’s recent decision in Pulsifer v. United States.3 The defendant in that case, Mark Pulsifer, pleaded guilty to distributing methamphetamine and faced a mandatory minimum sentence of 15 years in prison.
Pulsifer contended he met the requirements for safety valve relief, which states that federal courts must use the Federal Sentencing Guidelines if a defendant does not have:
A) more than four criminal history points, excluding any criminal history points resulting from a 1-point offense, as determined under the sentencing guidelines;
B) a prior three-point offense, as determined under the sentencing guidelines; and
C) a prior two-point violent offense, as determined under the sentencing guidelines.
Pulsifer’s prior criminal history triggered subsections A) and B), but not C). Therefore, Pulsifer argued, he was eligible for safety valve relief because his prior criminal history did not trigger all three subsections. The State argued that the section should be interpreted as providing that a defendant is not eligible for safety valve relief if his prior criminal history triggers any of the three subsections.
Pulsifer urged the U.S. Supreme Court to apply the rule of lenity and construe the section in his favor.
“The Court declined, however, because it did not view the statute as ‘genuinely ambiguous,’” as the Texas Supreme Court’s opinion notes.
As with Malouf’s case, the U.S. Supreme Court found in Pulsifer “two grammatically permissible readings of the statute when viewed in the abstract.” However, when read in the statutory context, Pulsifer’s proposed reading was eliminated.
In Malouf’s case, “The provision’s language, grammatical structure, statutory context, and general purpose leave Malouf’s construction of ‘and’ in the distributive sense the only permissible reading.”
The Texas Supreme Court reversed the Eighth Court of Appeals’ judgment and rendered in Malouf’s favor.
In a press release,4 Snell Law stated it was not hired until six months before the case was set for trial “and had to immediately engage in summary judgment proceedings.”
The firm also never got the chance to defend its client at trial because of the summary judgment issued by the trial court.
“While greatly outmatched in manpower and resources, the team at Snell Law persevered and fought against the Texas Attorney General’s Office through adverse rulings in the trial court and lower appellate court to finally prevail on behalf of its client.”
ENDNOTES
1 See Act of May 29, 2023, 88th Leg., R. S., ch. 273, §§ 2–11, 2023 Tex. Sess. Law Serv. 585, 587 (codified at TEX. HUM. RES. CODE §§ 36.001–.132).
2 656 S.W.3d 402, 418 (Tex. App.—El Paso 2022).
3 144 S. Ct. 718 (2024).
4 https://www.snellfirm.com/snell-law-triumphs-at-supreme-court-of-texas/.
FRONT ROW (L-R): Avi Martinez, Brittany Kellogg, and Gabriella Villegas.
BACK ROW (L-R): Lance Cawthon, Emily Casey, AnneMarie McComb, and Jason Snell.