# Conduent State Healthcare, LLC v. M&M Orthodontics, PA Supreme Court of Texas, No. 24-0802 **Conduent State Healthcare, LLC v. M&M Orthodontics, PA, No. 24-0802 (Tex. Oct. 9, 2026). Holding: A private government contractor is not a "governmental unit" under Civil Practice and Remedies Code Section 51.014(a)(8) just because its plea to the jurisdiction invokes the State's immunity, and Section 51.014(a)(5) reaches immunity asserted by an "individual" officer or employee, not a company, so the court of appeals lacked jurisdiction over Conduent's interlocutory appeal.** Practice areas: governmental immunity, civil procedure ## Key issues - A private government contractor is not a "governmental unit" under Section 51.014(a)(8) merely because its plea invokes the State's immunity, so the court of appeals lacked jurisdiction over Conduent's interlocutory appeal. - Section 51.014(a)(5) does not help: it covers immunity asserted by an "individual" officer or employee, and a company is not an individual. ## Factual History In 2011 the State of Texas began enforcement actions against healthcare providers for Medicaid fraud, and the providers fought back by suing the State and its fiscal agent, but their claims against the State were barred by sovereign immunity and many providers, including M&M Orthodontics and Drs. Scott and Diana Malone, settled the State's claims (Brief on the Merits (Petitioner), PDF pp. 16, 22). Conduent State Healthcare (formerly ACS, and before that Xerox) administered Texas Medicaid under a State contract, including reviewing prior-authorization requests for orthodontia (Brief on the Merits (Petitioner), PDF p. 4; Opinion, PDF p. 2). The Malones say Conduent, as an independent contractor, was solely responsible for reviewing and approving their prior-authorization requests and incorrectly authorized services from 2004 to 2014, and that the State fired Conduent in 2014 (Response to Brief (Respondent), PDF p. 12). According to the briefs, Conduent settled the State's own fraud claims against it for $236 million, and the Malones and their practice paid $2 million to settle the State's claims against them (Opinion, PDF p. 3). ## Procedural History The Malones sued Conduent and the State, seeking damages on tort claims including fraud and negligence; the district court promptly granted the State's plea to the jurisdiction on sovereign-immunity grounds but denied Conduent's plea, which invoked the State's sovereign immunity and the Tort Claims Act's election-of-remedies provision (Opinion, PDF p. 3). The vehicle is a petition for review from an interlocutory appeal. Conduent appealed the denial, and a divided Third Court of Appeals (Austin) affirmed, 733 S.W.3d 43; Justice Theofanis dissented on the ground that the appeal should have been dismissed for want of jurisdiction, and the majority reached the merits without answering that concern (Opinion, PDF p. 4). The Court granted review on March 27, 2026, and called for supplemental briefing on the court of appeals' jurisdiction (Opinion, PDF p. 4). It heard argument on September 15, 2026, and decided the case on October 9, 2026 (Opinion, PDF p. 1). ## Issues Presented The Court decided only the first two questions below, which it raised by calling for supplemental briefing; it did not reach the third. 1. Whether the court of appeals had interlocutory jurisdiction over the denial of Conduent's plea to the jurisdiction under Civil Practice and Remedies Code Section 51.014(a)(8), which covers a plea "by a governmental unit" (Opinion, PDF pp. 4-5). 2. Whether it had jurisdiction under Section 51.014(a)(5), which covers denial of a summary-judgment motion based on immunity asserted by "an individual who is an officer or employee" of the State (Opinion, PDF p. 10). 3. The merits questions the parties briefed: whether the court of appeals wrongly treated jurisdiction as intertwined with the merits; whether Conduent is an "employee" under the Tort Claims Act so the election-of-remedies bar requires dismissal; and whether *Nettles v. GTECH* forecloses the claims because they would override the State's enforcement decisions (Brief on the Merits (Petitioner), PDF p. 19; Response to Brief (Respondent), PDF pp. 14, 43). ## Standard(s) of Review The Court did not state a standard of review. It treated appellate jurisdiction as a threshold question it must resolve itself, noting its "special obligation" to satisfy itself of a lower court's jurisdiction even when the parties are prepared to concede it (Opinion, PDF p. 4). On the merits the parties argued that orders on pleas to the jurisdiction are reviewed de novo, with the summary-judgment standard applying where the challenge relies on facts outside the pleadings (Brief on the Merits (Petitioner), PDF p. 37). ## Legal Arguments **Whether the court of appeals had interlocutory jurisdiction.** **Conduent (Petitioner):** Section 51.014(a)(8) covers any plea that invokes the State's sovereign immunity, because under *Koseoglu* and *Guevara* "what matters is whose immunity is being invoked, not which party is doing the invoking," and Conduent's plea asserted the State's immunity (Supplemental Brief (Petitioner), PDF pp. 5, 11). After argument, Conduent added that it never claimed to be a governmental unit, only that its plea functions as one because it invokes the State's immunity, and that the Court's cases on a charter school, a university police department, and ERCOT did not decide that question (Post submission brief (Petitioner), PDF p. 3). In the alternative, if the Court overruled *Koseoglu*, it should abate for certification of the issues to it under Section 51.014(d), or treat the petition for review as a petition for writ of mandamus and conditionally grant it (Post submission brief (Petitioner), PDF pp. 4-5). **The Malones (Respondents):** Section 51.014(a)(5) does not apply because Conduent's plea was not a motion for summary judgment, and Conduent, a private for-profit business, is not a "governmental unit" (Supplemental Brief (Respondent), PDF pp. 6, 8). They described Section 51.014(a)(8) as the route by which the trial court had to examine Conduent's claimed immunities, and asked the Court to find that Conduent has no immunity and is not a governmental unit and then to dismiss the appeal for lack of interlocutory jurisdiction (Supplemental Brief (Respondent), PDF pp. 6-10). **Whether the Tort Claims Act election of remedies bars the suit (not reached).** **Conduent (Petitioner):** The Act requires an irrevocable early election between suing the government or its "employee," and the Malones sued and settled with the State on the same subject matter, so they cannot sue Conduent, which is the State's agent as a matter of law because the contract confirms the State's right to control the prior-authorization work, federal Medicaid law requires the State to keep control, and the Malones judicially admitted Conduent was the State's agent (Brief on the Merits (Petitioner), PDF p. 35). The court of appeals manufactured a fact issue, and jurisdiction should be decided by the court where it turns on contract interpretation and judicial admissions (Brief on the Merits (Petitioner), PDF p. 36). In reply, Conduent says the parties agree the right-to-control test governs and that the contract should be read in its Medicaid context (Reply Brief (Petitioner), PDF p. 2). **The Malones (Respondents):** Subject-matter jurisdiction here turns on fact questions that implicate the merits, so the court of appeals properly found a fact issue (Response to Brief (Respondent), PDF p. 14). Conduent, as an independent contractor that created its own prior-authorization process, is not an employee or agent under the Act, because the contract calls it only a "contractor" and never an agent (Response to Brief (Respondent), PDF pp. 12-15). **Whether sovereign immunity bars the claims (not reached).** **Conduent (Petitioner):** Even if the Act does not compel dismissal, the claims seek to reallocate costs of the Attorney General's discretionary Medicaid-fraud enforcement, which *Nettles* bars because it would override the substance of an executive decision (Brief on the Merits (Petitioner), PDF p. 36). **The Malones (Respondents):** *Nettles* defeats derivative immunity because their claims rest on Conduent's own acts, which Conduent concealed from them and from the State, and because Conduent ran a prior-authorization process outside the contract, with its dental director exercising discretion (Response to Brief (Respondent), PDF pp. 43-45). ## Stated Reasons the Court Should Take the Case Conduent argued the case presents important questions about "employee" status under the election-of-remedies provision and the reach of the State's immunity, that multiple other suits raising the same claims are pending in Travis County awaiting this appeal, and that the court of appeals' holding that a jury could find a Medicaid fiscal agent to be an independent contractor conflicts with the requirement that states control Medicaid processes (Brief on the Merits (Petitioner), PDF p. 17). The Malones argued Conduent was an independent contractor that does not fall under the Act or meet the standard for immunity (Response to Petition (Respondent), PDF p. 6). ## Oral Argument - **Can Conduent appeal at all?** Asked how a non-governmental vendor may appeal under section 51.014(a)(8), counsel said the plea implicates sovereign immunity and the Court's cases look to substance. (Oral Argument, 1:08:02; 1:09:19) - **What law gives it governmental status?** Asked what law makes Conduent an organ of government for immunity, counsel pointed to the Tort Claims Act: as the State's employee or agent it may invoke election of remedies. (Oral Argument, 1:12:51) - **Is an entity an "individual employee"?** Asked how subsection (a)(5) applies when Conduent is not an individual, counsel said the term is undefined and need not mean a human, and also pressed election of remedies. (Oral Argument, 1:16:40; 1:17:45) - **Mixed contract language.** Asked whether the contract's agency and independent-contractor wording calls for a remand, counsel said no, because the independent-contractor language appears only in a tax and benefits provision. (Oral Argument, 1:18:50) - **Nettles and negligent work.** Asked whether negligent or fraudulent work within delegated powers survives *Nettles*, counsel said that goes to control; under the Act the question is whether the employee was doing its job. (Oral Argument, 1:20:33) - **A permissive appeal?** Asked whether he would agree to seek a permissive interlocutory appeal from the district court, the Malones' counsel said yes, and that it would go to the Fifteenth Court. (Oral Argument, 1:28:06; 1:39:46) - **The State's right to control.** Asked what undercuts the State's right to control, the Malones' counsel said the State set standards but gave Conduent its own schedule, with no state worker directing its work. (Oral Argument, 1:30:01; 1:32:36) - **The federal Medicaid overlay.** Asked whether federal rules requiring state control matter, the Malones' counsel said they do not dictate the contract's meaning, and the State's contract may not have complied with federal law. (Oral Argument, 1:37:36; 1:38:40) ## Practice Area Tags governmental-immunity, civil-procedure ## Procedural Posture/Vehicle Petition for review from the Third Court of Appeals (Austin), an interlocutory appeal from the denial of a plea to the jurisdiction; granted March 27, 2026. Argued September 15, 2026; decided October 9, 2026. ## Amicus Involvement None noted ## Holding A private government contractor is not a "governmental unit" under Civil Practice and Remedies Code Section 51.014(a)(8) just because its plea to the jurisdiction invokes the State's immunity, and Section 51.014(a)(5) reaches immunity asserted by an "individual" officer or employee, not a company, so the court of appeals lacked jurisdiction over Conduent's interlocutory appeal (Opinion, PDF pp. 1, 8, 12-13). ## Standard of Review The Court did not state a standard of review. It decided its own and the court of appeals' jurisdiction as a threshold matter, stating that it has a duty to do so even when the parties would concede it (Opinion, PDF pp. 1, 4). ## Court's Reasoning Section 51.014(a)(8) authorizes an appeal from a plea to the jurisdiction "by a governmental unit," and Conduent, a private company, could qualify only under the catch-all in Section 101.001(3)(D) for an "organ of government" whose "status and authority" derive from the Constitution or a statute (Opinion, PDF pp. 5-6). The Court had treated an open-enrollment charter school, a private university running a campus police department, and ERCOT as governmental units only after pointing to statutes giving each its status and authority, and it found no comparable statute for Conduent (Opinion, PDF pp. 6-7). Conduent's best point, that it is a "fiscal agent" under the Human Resources Code, is a definition that confers no power and does not treat Conduent as the government, and any status or authority it has comes from its contract with the State's health agency, not a statute (Opinion, PDF pp. 7-8). The Court rejected Conduent's reading of *Koseoglu*, under which any party that claims immunity in a plea could invoke Section 51.014(a)(8), because in each of the private-entity cases the Court first assured itself that a "governmental unit" was involved, and those opinions "would've been shorter" if *Koseoglu* meant what Conduent says (Opinion, PDF pp. 8-9). On the alternative ground, Section 51.014(a)(5) uses both "person" and "individual," and "individual" is the narrower word, usually meaning a natural person, so a company's assertion of immunity does not qualify; the Court did not decide whether Conduent is an employee of the State (Opinion, PDF pp. 10-12). *Guevara* does not help because Conduent invoked only derivative sovereign immunity, not the official immunity of an individual who works for the government (Opinion, PDF p. 12). Because "jurisdiction always comes first," the Court did not reach the merits (Opinion, PDF p. 13). ## Disposition Vacated the court of appeals' opinion and judgment and remanded to the district court for further proceedings; the Court suggested the district court may wish to allow a permissive interlocutory appeal under Section 51.014(d) on Conduent's sovereign-immunity and election-of-remedies arguments (Opinion, PDF p. 13). ## Vote Breakdown Opinion of the Court by Justice Sullivan, with no separate writings (Opinion, PDF p. 1). --- Source: The SCOTX Report, https://scotxreport.com/cases/24-0802. AI-generated summary of the Court's opinion, orders and the parties' briefs, with pin cites to the page of each document; verify against the Court's own documents at search.txcourts.gov.