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noting that because the defendant did not owe a fiduciary duty, the plaintiff could not establish a claim for constructive fraud
Summary of this case from Schroeder v. WildenthalOpinion
No. 01-09-00587-CV
Opinion issued April 21, 2011.
On Appeal from the 295th District Court Harris County, Texas, Trial Court Case No. 2007-52841.
Panel consists of Justices JENNINGS, ALCALA, and SHARP.
MEMORANDUM OPINION
Appellant, Humble Emergency Physicians, P.A. ("Humble"), challenges the trial court's rendition of summary judgment in favor of appellees, Memorial Hermann Healthcare System, Inc. ("Memorial"), TeamHealth, Inc. ("TeamHealth"), ACS Primary Care Physicians-Southwest, P.A. ("ACS"), and THW Emergency Management of Houston, Inc. ("TH West"), in Humble's suit against Memorial for breach of fiduciary duty, breach of the duty of good faith and fair dealing, fraud by omission, negligent misrepresentation, and constructive fraud, and in Humble's suit against Memorial, TeamHealth, TH West, and ACS for conspiracy. In two issues, Humble contends that the trial court erred in granting summary judgment in favor of Memorial, TeamHealth, TH West, and ACS and in denying Humble's motion to compel Memorial to produce certain documents.
Although Humble also asserted a claim against Memorial for negligent misrepresentation, Humble does not challenge the trial court's rendition of summary judgment on that claim.
We affirm.
Background
In November 2002, Humble, a Texas professional association composed of emergency physicians, entered into a contract with the Northeast Hospital Authority (the "Authority"), which ran Northeast Medical Center Hospital ("Northeast"), to provide emergency medical and administrative services at Northeast. This contract was set to expire on December 31, 2006. However, because Memorial was considering a purchase of Northeast, the Authority and Humble agreed to extend the contract for another six months until June 30, 2007. Memorial acquired Northeast on January 1, 2007, and it assumed by assignment the contract between the Authority and Humble, which continued to provide emergency medical services at Northeast until the contract expired on June 30, 2007.
After it had determined that it wanted only one emergency services operator for its eight hospitals, Memorial, in January 2007, formed an ad hoc committee (the "Committee") to select the single provider. The Committee implemented a competitive bid process and sent a request for proposal ("RFP") to Humble, TeamHealth, Emergency Consultant's, Inc., Greater Texas Emergency Consultants, P.A., and EmCare, all of which submitted bids and made presentations to the Committee. In April 2007, the Committee awarded the new contract to TeamHealth, which took over operation of Northeast's emergency services department on July 1, 2007.
Humble subsequently sued Memorial, TeamHealth, TH West, and ACS, alleging that ACS had contracted with doctors and, in turn, with TH West, a subsidiary of TeamHealth, to supply TeamHealth with its emergency medical physicians. Humble, in its second amended petition, the live pleading at the time that Memorial filed its summary judgment motion, asserted claims for breach of fiduciary duty, breach of the duty of good faith and fair dealing, fraud by omission, constructive fraud, tortious interference with contract, negligent misrepresentation, unfair business competition, and conspiracy. Humble alleged that it had had a "long-standing," "over two decades old," relationship with the Authority and it had placed its "complete" and utmost trust in Northeast regarding emergency medical staffing, emergency equipment, pharmacy facilities and personnel, and the provision of medications. Humble further alleged that its own physicians were subject to Northeast's "written Bylaws" for "Medical Staff" and had to be credentialed by Northeast's Credentialing Committee. According to Humble, although it could propose physicians to Northeast, it "had no control over the decision to admit physicians to the Medical Staff," which was "exclusively" managed by Northeast.
After Memorial filed its summary-judgment motion, Humble amended its petition to drop its tortious interference with contract claim. The trial court then rendered summary judgment in favor of Memorial, TeamHealth, TH West, and ACS on all of Humble's remaining claims, except for its unfair business competition claim. To make the trial court's order final and appealable, Humble again amended its petition to drop its unfair business competition claim.
Humble further alleged that "in late 2006," prior to the announcement of the RFP bid process, Memorial had "secretly approached" TeamHealth about managing Northeast's emergency department. "Knowing that it was illegal for TeamHealth (a for profit corporation composed of management that are not licensed physicians in the State of Texas) to practice medicine" and "a device or scheme" would be required "to circumvent the prohibitions on the corporate practice of medicine," TeamHealth, "with the full knowledge and/or consent of Memorial," set up two "dummy" corporations, ACS and TH West, "composed of physicians," to provide emergency medical doctors to Northeast.
Although Memorial, in March 2007, represented to Humble that the RFP process would be "fair and equal" and Humble would have an "equal or fair chance to secure the contract," TeamHealth, through its "alter egos" ACS and TH West, and Memorial "entered into agreements whereby a phony and fraudulent bidding scheme would be employed which would 'select' TeamHealth as the winner." This "secret understanding" was "intentionally kept hidden from all other potential bidders" so that "no matter what [Humble's] bid was, there was never any chance that [it] would be awarded the contract."
Humble asserted that Northeast had a fiduciary duty "to act in the best interests" of Humble along with a duty of good faith and fair dealing and Memorial, when it "assumed the Northeast/Humble contract" and "stepped into the shoes of Northeast," "owed [Humble] the same duties." According to Humble, Memorial violated and conspired with TeamHealth to violate those duties by not "fully disclos[ing] the true state of affairs concerning the business arrangements" between TeamHealth and Memorial. TeamHealth and Memorial also conspired to induce Northeast to breach its duties to Humble.
Humble alleged that Memorial committed fraud by violating a duty to disclose "the true relationship it had with TeamHealth," Memorial had preselected TeamHealth prior to the bidding process, and Memorial committed constructive fraud and "violated Texas law and . . . public policy" when it "conspired" with TeamHealth in "a predetermined agreement" to defraud Humble. Humble complained that if it had known of the "secret understanding," it would not have incurred the expense of bidding on the contract.
After Memorial, TeamHealth, and ACS answered, generally denying Humble's claims, Memorial, in its summary-judgment motion, contended that neither it nor Northeast had a "formal fiduciary" or an "informal confidential relationship" with Humble; it did not owe Humble a duty of good faith and fair dealing; there was no conspiracy to defraud Humble; and any alleged misrepresentations or failures to disclose information did not "rise to the level of actionable fraud." Memorial asserted that the summary-judgment evidence conclusively established that Northeast's contractual obligations to Humble did not create a fiduciary duty; Humble and Northeast had no prior relationship on which a fiduciary duty could rest; and the contract between the Authority and Humble was an "ordinary commercial" transaction that did not create a "special relationship." Memorial also asserted that it could not have committed fraud by omission because there was no "secret understanding" between it and TeamHealth and, regardless, it had no confidential or fiduciary relationship with Humble that created a duty to disclose such an understanding. Memorial argued that it, as a matter of law, could not have conspired with TeamHealth against Humble because it had negated at least one element of each of Humble's underlying tort claims.
Memorial attached to its motion the affidavit of Sarah Sinclair, its Chief Patient Care Officer, who testified that in January 2007, Memorial had decided to use a competitive bid process to select its new emergency services provider and it had "no obligation, legal or otherwise, to conduct the bid process." She noted that Memorial invited Humble to participate in the RFP process, but Memorial would have proceeded as it did even if Humble had opted not to participate in the process. Sinclair explained that other than the statements made in the RFP package, Memorial had made no representations to Humble "before or during the bid process, about how the process would be conducted" and it had no "agreement" with TeamHealth to award TeamHealth the contract. In the RFP documents, Memorial explained that it wanted one provider of emergency services at its eight hospitals for "strategic and operational efficiencies." Memorial reserved the "right to negotiate with one or more of the vendors in order to arrive at a final selection."
In its response to Memorial's summary-judgment motion, Humble asserted that fact issues existed as to whether Northeast and Memorial had a fiduciary relationship with Humble and whether Memorial had made actionable misrepresentations or omissions, assumed duties, or had a "secret and undisclosed arrangement" with TeamHealth to select TeamHealth as the new emergency services provider "months before the bid" such that they had "conspired together to arrive at [that] predestined result."
Humble attached to its response the affidavits of Dr. David Olson, President of Humble, and Dr. Mark Filley, Vice President of Humble. Dr. Olson testified that Humble's relationship with Northeast "was always a close relationship of the utmost trust and confidence" and Humble "reposed its utmost trust in Northeast" for the provision of "medical supplies and medicine," the correct types, dosages, and labeling of medicine, "proper equipment and tools of the trade for diagnosis," and equipment maintenance and repair in the emergency department. He stated that Humble's emergency department doctors were "Medical Staff" of Northeast and subject to its "Bylaws," which required them "to be credentialed" by Northeast's Credentialing Committee. Dr. Olson, himself a member of the Credentialing Committee and other Northeast committees, stated that Humble "reposed complete trust" in the Credentialing Committee to "insure that [Humble employed] only the most qualified [emergency department] doctors." He explained that Humble had "no control over the decision to admit physicians to the Medical Staff, and it relied exclusively and totally on Northeast to perform its function properly." Also, Northeast provided and enforced "the on-call schedule" for non-emergency physicians and specialists and "hire[d] and train[ed] the nurses" for the emergency department. Dr. Olson explained that neither Northeast nor Memorial had disclosed to Humble that Memorial "had been in negotiations with TeamHealth in October 2006"; the "true arrangement between Northeast and Memorial"; "any plans to change the emergency department"; Memorial's intention "to accept bids from present service providers"; or that Memorial was not seriously considering [Humble's] bid."
In his affidavit, Dr. Filley testified that "[i]n late summer or early fall of 2006, [he] witnessed several persons on [Northeast's] premises who were not familiar to [him]." When he asked the then Chief Executive Officer of Northeast "who the people were," she identified them "as representatives of TeamHealth."
After a hearing on their motions, the trial court entered summary judgment in favor of Memorial, TeamHealth, TH West, and ACS.
Summary Judgment
In its first issue, Humble argues that the trial court erred in granting summary judgment in favor of Memorial on its claims because the nature of the relationship between Humble and Northeast imposed fiduciary duties, which were "assumed by Memorial," and Memorial withheld from Humble material facts. Humble further argues that the trial court erred in granting summary judgment on its conspiracy claims because Memorial, TeamHealth, TH West, and ACS did not "conclusively negate one or more of the elements of conspiracy."
Standard of Review
To prevail on a summary-judgment motion, a movant has the burden of proving that it is entitled to judgment as a matter of law and there is no genuine issue of material fact. TEX. R. CIV. P. 166a(c); Cathey v. Booth, 900 S.W.2d 339, 341 (Tex. 1995). When a defendant moves for summary judgment, it must either (1) disprove at least one essential element of the plaintiff's cause of action or (2) plead and conclusively establish each essential element of its affirmative defense, thereby defeating the plaintiff's cause of action. Cathey, 900 S.W.2d at 341; Yazdchi v. Bank One, Tex., N.A., 177 S.W.3d 399, 404 (Tex. App.-Houston [1st Dist.] 2005, pet. denied). When deciding whether there is a disputed, material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true. Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985). Every reasonable inference must be indulged in favor of the non-movant and any doubts must be resolved in its favor. Id. at 549.
Breach of Fiduciary Duty
Humble asserts that Memorial owed it fiduciary duties based on Humble's "long and confidential relationship" with Northeast, which Memorial "assumed." Humble argues that Memorial breached its duties by failing to disclose that it had, before sending the RFP to Humble, pre-selected TeamHealth as its emergency services provider.
A fiduciary relationship exists when one is "under a duty to act for or give advice for the benefit of another upon matters within the scope of the relation." Tex. Bank and Trust Co. v. Moore, 595 S.W.2d 502, 507 (Tex. 1980) (quoting RESTATEMENT (SECOND) OF TORTS § 874 cmt. a (1979)). A fiduciary duty typically requires one party to place the interests of another party ahead of his own. Crim Truck Tractor Co. v. Navistar Int'l Transp. Corp., 823 S.W.2d 591, 594 (Tex. 1992). Texas courts have acknowledged that certain "formal" relationships create fiduciary duties as a matter of law. Id. Such relationships include attorney to client; trustee to beneficiary of a trust; executor to beneficiary of an estate; spouse to spouse; partner to partner; officer and director to corporation; agent to principal, including insurer to insured; and, in some instances, employee to employer. See Johnson v. Brewer Pritchard. P.C., 73 S.W.3d 193, 199-200 (Tex. 2002); Burrow v. Arce, 997 S.W.2d 229, 240 (Tex. 1999); Huie v. DeShazo, 922 S.W.2d 920, 923 (Tex. 1999); Schlueter v. Schlueter, 975 S.W.2d 584, 589 (Tex. 1998); Bohatch v. Butler Binion, 977 S.W.2d 543, 545 (Tex. 1998); Int'l Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567, 576 (Tex. 1963).
Additionally, certain "informal" relationships may give rise to certain fiduciary duties. Crim, 823 S.W.2d at 594. Such an informal relationship may arise when one reposes a special confidence in another who, in equity and good conscience, is bound to act in good faith and with due regard for the interest of the one. Tex. Bank and Trust Co., 595 S.W.2d at 507. Not every relationship involving a high degree of trust and confidence, however, rises to the level of a fiduciary relationship. Meyer v. Cathey, 167 S.W.3d 327, 330 (Tex. 2005) (quoting Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 176-177 (Tex. 1997)). There must be more than mere "subjective feelings" of trust and confidence to create fiduciary duties. Ins. Co. of N. Am. v. Morris, 981 S.W.2d 667, 674 (Tex. 1998); Thigpen v. Locke, 363 S.W.2d 247, 253 (Tex. 1962).
Informal fiduciary relationships, often termed "confidential relationships," may arise "where one person trusts in and relies upon another, whether the relation is a moral, social, domestic, or merely personal one." Crim, 823 S.W.2d at 594. Because not every relationship involving a high degree of trust and confidence rises to the stature of a formal fiduciary relationship, the existence of a confidential relationship is determined by the actual facts regarding the relationship. Thigpen, 363 S.W.2d at 253. The law recognizes the existence of confidential relationships in those situations where "influence has been acquired and abused, in which confidence has been reposed and betrayed." Crim, 823 S.W.2d at 594 (quoting Tex. Bank and Trust Co., 595 S.W.2d at 507).
Generally, the fact that one party to a business transaction trusts another and relies upon the other party's promise to perform a contract does not give rise to a confidential relationship. Id. "[T]o give full force to contracts," courts do not recognize fiduciary relationships in business transactions "lightly." Meyer, 167 S.W.3d at 331. In every contract there is an "element of confidence" that each party will perform his obligations under the contract. Crim, 823 S.W.2d at 595. However, the mere fact that parties have a long-term relationship is no evidence of a confidential relationship. Id.; Thigpen, 353 S.W.2d at 253. To impose an informal fiduciary duty in a business transaction, the special relationship of trust and confidence "must exist prior to, and apart from, the agreement made the basis of the suit." Schlumberger Tech. Corp., 959 S.W.2d at 177.
Here, Dr. Olson testified that Humble had a "long-standing trust" in Northeast to provide medical supplies, medicines, equipment, tools, credentialing, and training — essentially for all "matters critical to patient care and well-being." From this, Humble concludes that Humble and Northeast had "the type of relationship that rises to the level of a fiduciary relationship."
The contract between the Authority and Humble provided that Humble would provide "the services of physicians, physician assistants, and/or nurse practitioners to provide necessary medical care to patients presenting to [Northeast's] Emergency Department . . . for diagnosis and treatment." Humble would "retain[] duly licensed physicians" to provide emergency medical services under the contract and these physicians had to be credentialed by the Authority, join Northeast's Medical Staff, and agree to be bound by the Bylaws applying to Medical Staff. Humble was required to designate one of its physicians to the Credentialing Committee. The Authority was required to "provide such facilities, equipment, supplies, utilities, janitorial, laundry, and other support services necessary for the emergency department," but it had "no right of control or direction with respect to such means, methods, or judgments [of Humble's physicians in performing their duties], or with respect to the details of professional services involving clinical judgment."
Taking as true the testimony of Dr. Olson that Humble had placed its trust and confidence in Northeast to supply medicines, equipment, maintenance, nursing staff, and credentialing, there are no facts to indicate that any such trust and confidence went beyond that of parties in a mutually beneficial contractual relationship. Humble presented no evidence that it had a "special relationship" with Northeast that existed apart from their contractual agreement. See id. Specifically, Humble presented no evidence to show that Northeast was ever required to put the interests of Humble ahead of its own in regard to their relationship. See Crim, 823 S.W.2d at 594. In fact, it was in Northeast's own self-interest to ensure that its emergency department was competently staffed and maintained. Moreover, although Humble "trusted" Northeast to credential the emergency physicians, Humble proposed its own physicians for credentialing and participated in the credentialing process. It does not logically follow that any specific contractual duties that Northeast had in regard to credentialing and supplying medicine, staff, and equipment served to create fiduciary duties in regard to Memorial's RFP process.
The Texas Supreme Court has refused to recognize fiduciary duties in business relationships even when the evidence reveals the existence of a prior, long-term personal relationship. In Meyer, the plaintiff and defendant were friends who had "worked together on other projects for three years" prior to the projects at issue. 167 S.W.3d at 330. The plaintiff had "relied on and trusted [the defendant] to treat him fairly and keep accurate financial records." Id. The defendant "was in charge of all aspects of the projects" and "controlled the financing and the books." Id. In holding that the defendant did not owe the plaintiff any fiduciary duties, the supreme court found no evidence of a "special relationship of trust and confidence" between the parties "prior to and apart from" the agreements made the basis of the suit. Id. at 331. The bottom line is that the existence of a long-term friendship between individuals, or a long-standing business relationship between entities, standing alone, will not transform an arms-length business transaction into one in which fiduciary duties exist. See id.; Crim, 823 S.W.2d at 595.
Here, there is simply no evidence of any formal fiduciary relationship or informal confidential relationship between Humble and Northeast or of any trust reposed by Humble in Northeast beyond the ordinary trust between parties in an arms-length business transaction. See Crim, 823 S.W.2d at 594-95. And, even if Humble had previously reposed a "high degree of trust and confidence" in Northeast in performing its contractual duties, nothing about those specific contractual obligations transformed their arms-length business relationship into a fiduciary one in which Memorial owed Humble any fiduciary duties in regard to the RFP process. See Meyer, 167 S.W.3d at 331; Crim, 823 S.W.2d at 594-95. We hold that neither Northeast nor Memorial had a fiduciary relationship with Humble. Accordingly, we further hold that the trial court did not err in rendering summary judgment in favor of Memorial on Humble's claim against it for breach of fiduciary duties.
Breach of the Duty of Good Faith and Fair Dealing
Humble's argument that Memorial owed it a duty to treat it "fairly and in good faith" is predicated on its assertion that Memorial owed Humble fiduciary duties.
A duty of good faith and fair dealing requires parties to deal fairly with one another. Crim, 823 S.W.2d at 594; Bank One, Tex. N.A. v. Stewart, 967 S.W.2d 419, 442 (Tex. App.-Houston [14th Dist.] 1998, pet. denied). There is, however, "no general duty of good faith and fair dealing in ordinary, arms-length commercial transactions." Formosa Plastics Corp. USA v. Presidio Engs. Contractors, Inc., 960 S.W.2d 41, 52 (Tex. 1998). The duty may be imposed where a special relationship exists between the parties to a contract that arises from "an element of trust necessary to accomplish the goals of the undertaking" or an "imbalance of bargaining power." Nance v. Resolution Trust Corp., 803 S.W.2d 323, 332-33 (Tex. App.-San Antonio 1990, writ denied); see Fed. Dep. Ins. Corp. v. Coleman, 795 S.W.2d 706, 708-09 (Tex. 1990). For example, a long-standing personal or social relationship can support the imposition of a duty of good faith and fair dealing. Nance, 803 S.W.2d at 333. But, the mere fact that one entity trusts and relies upon another to perform a contract or the entities have had a long and cordial business relationship does not give rise to a confidential relationship that would support a duty of good faith and fair dealing. Farah v. Mafrige Kormanik, 927 S.W.2d 663, 675-76 (Tex. App.-Houston [1st Dist.] 1996, no writ).
Having already held that neither Northeast nor Memorial had a fiduciary relationship with Humble, and given the fact there is no evidence of a "special relationship" between either Northeast or Memorial and Humble, we further hold that the trial court did not err in rendering summary judgment in favor of Memorial on Humble's claims for breach of the duty of good faith and fair dealing.
Fraud
Humble argues that "because of the existence of a fiduciary relationship," Memorial had a duty to fully disclose all material facts to it regarding the RFP process. Humble asserts that Memorial committed fraud by omission when "Northeast, acting at Memorial's behest, refused to disclose material facts and when, by its own admission, Memorial 'assumed' the contract with [Humble,] it continued the deception." In its summary-judgment motion, Memorial asserted that it made "no representations to [Humble] either before or during the bid process apart from the information contained within the RFP"; any representations made that were later determined to be false did "not amount to actionable fraud"; and Memorial and Humble "did not have a confidential or fiduciary relationship" that created in Memorial a duty to disclose to Humble any information.
To the extent that Humble asserts that Memorial committed "fraud in the inducement," we note that it offered no argument in its summary-judgment response or in its briefing to this Court regarding fraudulent inducement. Therefore, it has waived this claim. See TEX. R. APP. P. 38.1.
To establish a claim for fraud, a plaintiff must prove that the defendant made a material misrepresentation, which the defendant knew was false or made recklessly without any knowledge of its truth, with the intent that it should be acted upon by the plaintiff, and the plaintiff actually relied on the misrepresentation and suffered injury. In re FirstMerit Bank, N.A., 52 S.W.3d 749, 758 (Tex. 2001).
Fraud by omission is a subcategory of fraud because an omission or non-disclosure may be as misleading as a positive misrepresentation of fact when a party has a duty to disclose. Mañon v. Solis, 142 S.W.3d 380, 387 (Tex. App.-Houston [14th Dist.] 2004, pet. denied). A failure to disclose does not constitute fraud unless there is a duty to disclose the information. See Morris, 981 S.W.2d at 674; Hoggett v. Brown, 971 S.W.2d 472, 487 (Tex. App.-Houston [14th Dist.] 1997, pet. denied). A duty to disclose may arise not only when there is a confidential or fiduciary relationship, but also in the three following situations: (1) when one voluntarily discloses information, he has a duty to disclose the whole truth; (2) when one makes a representation, he has a duty to disclose new information when he is aware that the new information makes the earlier representation misleading or untrue; and (3) when one makes a partial disclosure and conveys a false impression, he has a duty to speak. Anderson, Greenwood Co. v. Martin, 44 S.W.3d 200, 212-13 (Tex. App.-Houston [14th Dist.] 2001, pet. denied).
Constructive fraud "is the breach of a legal or equitable duty that the law declares fraudulent because it violates a fiduciary relationship." Brewer Pritchard, P.C. v. Johnson, 7 S.W.3d 862, 869 (Tex. App.-Houston [1st Dist.] 1999), aff'd on other grounds, 73 S.W.3d 193 (Tex. 2002) (citing Stephanz v. Laird, 846 S.W.2d 895, 903 (Tex. App.-Houston [1st Dist.] 1993, writ denied)).
In its response to Memorial's summary-judgment motion, Humble first asserted that Memorial owed it a fiduciary duty and a duty of good faith and fair dealing to disclose details about Memorial's acquisition of Northeast, Memorial's "discussions with TeamHealth in October 2006," the fact that Memorial "would accept bids from other entities proposing to violate the law in Texas," TeamHealth had been "sued for attempting to violate the corporate practice of medicine [prohibition]," and that "monies would be paid to TeamHealth under the bid in order to secure TeamHealth's business." However, as we have already held, Memorial did not owe a fiduciary duty or a duty of good faith and fair dealing to Humble. Thus, Memorial had no duty to disclose the above information to Humble and Humble cannot, as a matter of law, establish a claim against Memorial for constructive fraud.
Humble also asserted in its response that Memorial had a duty to correct any false impression conveyed to Humble in a partial disclosure of information. See Bradford v. Vento, 48 S.W.3d 749, 755 (Tex. 2001). However, Humble, in its appellate briefing, agrees with Memorial that Memorial "disclosed nothing" to Humble prior to the RFP bidding process. Moreover, Humble simply does not refer us to any specific disclosure of information by Memorial that would constitute such a partial disclosure regarding the correction of a false impression. Humble has, thus, waived any argument on this theory. See TEX. R. APP. P. 38.1.
Although Humble, in its fourth amended petition, asserted that "[i]t was represented to [Humble], either expressly or impliedly, that this was to be a fair and equal bidding process and it was understood by [Humble] that it had an equal or fair chance to secure the contract as every other bidder would have," Humble offers no argument that this assertion was a "partial disclosure," which created a false impression that created a duty on Memorial to disclose that it had, as alleged, already selected TeamHealth as its emergency services provider prior to the RFP bidding process. Moreover, pleadings do not constitute competent summary judgment evidence. Laidlaw Waste Sys. (Dallas), Inc. v. City of Wilmer, 904 S.W.2d 656, 660 (Tex. 1995).
The summary-judgment evidence conclusively establishes that Memorial had no duty to disclose the complained of information to Humble regarding the RFP bid process. Accordingly, we hold that the trial court did not err in granting Memorial summary judgment on Humble's claims against it for fraud, fraud by omission, and constructive fraud.
Conspiracy
Humble argues that the trial court erred in granting summary judgment in favor of Memorial, TeamHealth, TH West, and ACS on Humble's claim against them for conspiracy because the trial court erred in granting summary judgment on Humble's other claims and it presented circumstantial evidence of a civil conspiracy.
To establish a civil conspiracy, one must prove the following: (1) a combination of two or more persons; (2) an object to be accomplished (either an unlawful purpose or a lawful purpose by unlawful means); (3) a meeting of the minds on the object or course of action; (4) one or more unlawful, overt acts; and (5) damages as the proximate result. Morris, 981 S.W.2d at 675. Civil conspiracy is considered a derivative tort because a defendant's liability depends upon its participation in some underlying tort for which the plaintiff seeks to hold the defendant liable. Tilton v. Marshall, 925 S.W.2d 672, 681 (Tex. 1996); Miller v. Raytheon Aircraft Co., 229 S.W.3d 358, 381 (Tex. App.-Houston [1st Dist.] 2007, no pet.).
Having already held that the trial court did not err in granting summary judgment against Humble on its underlying tort claims, Humble's derivative civil conspiracy claim against Memorial, TeamHealth, TH West, and ACS fails as a matter of law. See Tilton, 925 S.W.2d at 681. Accordingly, we hold that the trial court did not err in granting summary judgment in favor of Memorial, TeamHealth, TH West, and ACS on Humble's conspiracy claim.
We overrule Humble's first issue.
Motion to Compel
In its second issue, Humble argues that the trial court erred in not ordering the production of the RFP bid submissions and the contracts between Memorial and TeamHealth on the ground that they are "privileged" because the "medical peer review committee privilege" is not applicable to these documents. Humble asserts that the documents are "clearly relevant" to its claim that "it was induced into a fraudulent bidding process, [and] expended tens of thousands of dollars to submit a bid, only to have the bid awarded to a company that was engaged in an illegal scheme to avoid the corporate practice of medicine."
See TEX. OCC. CODE. ANN. § 160.007 (Vernon 2004).
We review a trial court's discovery rulings for an abuse of discretion. In re Colonial Pipeline Co., 968 S.W.2d 938, 941 (Tex. 1998) (orig. proceeding); Austin v. Countrywide Homes Loans, 261 S.W.3d 68, 75 (Tex. App.-Houston [1st Dist.] 2008, pet. denied). A trial court abuses its discretion if it "issues a discovery order that is arbitrary and unreasonable, or without reference to guiding rules and principles." In re BP Prods. N. Am., Inc., 263 S.W.3d 106, 111 (Tex. App.-Houston [1st Dist.] 2006, orig. proceeding). To reverse a trial court's ruling on a motion to compel, an appellant must demonstrate not only that the trial court abused its discretion, but also that the erroneous discovery order probably caused the rendition of an improper judgment. See TEX. R. APP. P. 44.1(a); Austin, 261 S.W.3d at 75.
In its second motion to compel, Humble asserted that the "medical peer review committee privilege" was inapplicable to its requests for the RFP bid submissions and the contracts between Memorial and TeamHealth. See TEX. OCC. CODE. ANN. § 160.007 (Vernon 2004). Humble claimed that these documents were relevant or would lead to the discovery of information relevant to its allegations that "a prior relationship existed between [Memorial and TeamHealth]," "Memorial was aware that TeamHealth was going to violate Texas law" and that the bid process "was a fait complete."
Memorial responded that it was asserting the "medical committee privilege," not the "medical peer review committee privilege," regarding Humble's request for the other bid submissions. See TEX. HEALTH SAFETY CODE ANN. §§ 161.031, 161.032 (Vernon 2010). Memorial attached to its response the affidavit of Sarah Sinclair, the Chief Patient Officer for Memorial, who testified that Memorial formed the Committee in January 2007 to "evaluat[e] and choos[e] a single entity to manage [its] eight area emergency departments." The Committee chose to "conduct a bid process, using [the RFP]" and identified "five different entities" to participate in the bid process. The Committee "met several times . . . to discuss the process, the bids received, the presentation of bids, and other issues related to the evaluation of the bidders and the eventual selection of TeamHealth." The Committee created or collected the RFP bid submissions and "supplemental information related thereto," the "bids received [from] each of the five prospective bidders," and "evaluations and notes related to bids and presentations." All of these documents "were prepared by, or requested by the [C]ommittee in the exercise of proper committee functions and were only used by the [C]ommittee to further those functions." The documents "were not created or maintained in the regular course of business" but "for the express purpose of assisting the [C]ommittee in its endeavors related to the evaluation and choice of a new management entity" for its eight emergency departments.
Although Memorial asserted that the contracts between itself and TeamHealth were not relevant to whether the RFP bidding process was fraudulent, Sinclair, in her affidavit, did not address this assertion. And Memorial produced no other evidence to support its assertion. However, it did submit the contract, along with the other RFP bid submissions, for an in camera inspection by the trial court.
The RFP Bid Submissions
The "medical committee privilege" protects the "records and proceedings of a medical committee," including those of an ad hoc committee of a hospital formed to "conduct a specific investigation." See id. The privilege extends to "records, information, or reports" of a medical committee and those provided to a medical committee if "used in the exercise of proper committee functions," but it does not extend to "records made or maintained in the regular course of business by a hospital" or that are available from other sources. Id. § 161.031(c), (d), (f); In re Living Ctrs. of Tex., Inc., 175 S.W.3d 253, 260 (Tex. 2005) (citing Mem'l Hosp.-The Woodlands v. McCown, 927 S.W.2d 1, 10 (Tex. 1996)). The privilege covers documents "generated" by a committee or "prepared by or at the direction of the committee for committee purposes," including the "minutes and recommendations" of the committee and "any communication made to the committee." In re Living Ctrs., 175 S.W.3d at 257 (citing McCown, 927 S.W.2d at 10-11). Balancing the right to evidence against the policy favoring promoting free discussion in the evaluation of health services, we strictly construe the medical committee privilege. Id. at 258.
The party seeking to limit discovery by asserting the medical committee privilege has the burden of proof. In re E.I. DuPont de Nemours Co., 136 S.W.3d 218, 223 (Tex. 2004). A privilege log and accompanying affidavit, which describe the records and aver that the records were prepared for the committee and not kept with patient or financial records, are generally sufficient to prove the application of the privilege. In re Living Ctrs., 175 S.W.3d at 261. When the party asserting a privilege makes a prima facie showing of privilege and tenders documents to the trial court, the trial court, upon request, must conduct an in camera inspection of those documents before deciding to compel production. TEX. R. CIV. P. 193.4(a); In re E.I. Dupont, 136 S.W.3d at 223.
Here, Sinclair testified that Memorial created the ad hoc Committee for the purpose of selecting an emergency services provider for its eight hospitals and Humble made no objection to Sinclair's testimony. Therefore, we conclude that Sinclair's affidavit testimony was sufficient to establish a prima facie showing that the RFP bid submissions were entitled to protection under the medical committee privilege because they were received by the Committee in furtherance of the Committee's sole function to select an emergency services provider. See TEX. HEALTH SAFETY CODE ANN. §§ 161.031-.032; In re Living Ctrs., 175 S.W.3d at 261. Accordingly, we hold that the trial court did not err in denying Humble's motion to compel production of the RFP bid submissions.
The Memorial/TeamHealth Contract
In regard to the contract between Memorial and TeamHealth, we note that a party may obtain discovery "regarding any matter that is not privileged and is relevant to the subject matter of the pending action" or that "appears reasonably calculated to lead to the discovery of admissible evidence." TEX. R. CIV. P. 192.3(a). The party seeking to deny production of evidence based on relevancy, materiality, or privilege bears the burden of asserting the specific protection against production and producing evidence to support its assertion. Weisel Enters., Inc. v. Curry, 718 S.W.2d 56, 58 (Tex. 1986); Peeples v. Fourth Court of Appeals, 701 S.W.2d 635, 637 (Tex. 1985) (orig. proceeding). If, however, after an in-camera review, the trial court determines that the document is clearly irrelevant, no additional proof of its nonrelevance would be required. Curry, 718 S.W.2d at 58 ("the documents themselves may constitute the only evidence substantiating the claim of privilege"); Valley Forge Ins. Co. v. Jones, 733 S.W.2d 319, 321 (Tex. App.-Texarkana 1987, no writ) ("there may be instances in which the documents sought are so clearly irrelevant that no proof would be required of their nonrelevancy").
In its response to Humble's motion to compel, Memorial asserted that the contract and any agreements it entered with TeamHealth were "wholly irrelevant" to Humble's proving a prior relationship between Memorial and TeamHealth, an unlawful business arrangement, or a "fraudulent" bidding process. To support its assertion, Memorial produced the contract for an in camera inspection by the trial court.
Although Humble asserts that the contract is relevant to its "unfair competition" claim, it amended its petition to drop that claim before this appeal. Humble offers no explanation as to how the contract, signed by Memorial and TeamHealth after the close of the bidding process, is relevant to its claim that it was induced into spending "tens of thousands of dollars" to submit a bid in a "fraudulent bidding process."
The trial court reviewed the contract before denying Humble's motion to compel. After our own review, we conclude that the contract is not relevant and would not likely lead to the discovery of relevant information. Accordingly, we hold that the trial court did not err in denying Humble's motion to compel production of the contract between Memorial and TeamHealth.
We overrule Humble's second issue.
Conclusion
We affirm the judgment of the trial court.