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October 2016

Dallas Team Scores Rare Fraud Summary Judgment in Oklahoma

It wasn’t exactly the Red River Rivalry, but Gordon & Rees Dallas partner Bob Bragalone and senior counsel Soña Garcia faced off against a pair of persistent and sometimes difficult Oklahoma lawyers in a case for the firm’s client, one of the largest independent healthcare management companies in the country.

The plaintiff was a major Oklahoma regional hospital; the firm's client was the third party administrator (“TPA”) for an employer’s self-funded employee health plan. A participant in that plan incurred almost a million dollars in charges with the hospital for which it billed the employer through our client as the TPA. Our client’s job was to evaluate and attempt to negotiate a reduction in the hospital’s claim. The client achieved an extremely favorable settlement of the hospital’s claim for services, and it was memorialized in a brief writing in which the hospital agreed to accept the settlement as the full amount of its claim. 

However, in its 2011 lawsuit filed in Oklahoma state court in Norman, the hospital claimed it was fraudulently induced to settle the claim for an artificially low amount because the client’s employee represented to her counterpart at the hospital that the benefit available to the employee was only half of what it actually was.  It sought fraud damages against the client TPA in the full amount of its claim for medical services.

In moving for summary judgment (with Dallas partner Steve Lawson assisting on the papers), the Dallas team argued that despite the usual summary judgment inferences and the permissibility of establishing fraud circumstantially, the hospital was not entitled to get to a jury on each of its elements under the clear-and-convincing standard of proof.  They also argued that the hospital’s failure to seek rescission of the written agreement settling the claim meant that it was affirming that agreement – including its agreement to treat the claim as paid in full, having the effect of a release. 

At a lively oral argument in Norman in which Bragalone cited critical admissions elicited in the depositions of the hospital’s witnesses, the court agreed that the hospital could not establish each element of fraudulent inducement by clear and convincing evidence and rendered judgment for Gordon & Rees's TPA client.  As this was the client’s oldest litigation matter, it was ecstatic to get it off the books for no liability.

Robert A. Bragalone
Soña J. Garcia