Dennis G. Smith, Dr. v. Liberty Nursing,etc ( 2001 )

COURT OF APPEALS OF VIRGINIA
Present: Judges Bray, Frank and Humphreys
Argued at Chesapeake, Virginia
DENNIS G. SMITH, DIRECTOR,
VIRGINIA DEPARTMENT OF MEDICAL
ASSISTANCE SERVICES
MEMORANDUM OPINION * BY
v. Record No. 2942-00-3 JUDGE RICHARD S. BRAY
OCTOBER 2, 2001
LIBERTY NURSING HOME, INC.,
BEVERLY ENTERPRISES, INC. and
WILLIAM J. LEMON
FROM THE CIRCUIT COURT OF THE CITY OF ROANOKE
Robert P. Doherty Jr., Judge
Paige S. Fitzgerald, Assistant Attorney
General (Mark L. Earley, Attorney General;
Siran S. Faulders, Senior Assistant Attorney
General, on briefs), for appellant.
Robert T. Adams (McGuireWoods, LLP, on
briefs), for appellees.
The Department of Medical Assistance Services (DMAS), through
the Director, Dennis G. Smith (Director), appeals the decision of
the trial court awarding attorneys' fees and interest on the
judgment to Liberty Nursing Home, Inc. (Liberty). In challenging
the awards, DMAS contends the court erroneously concluded DMAS was
not "substantially justified in the position . . . it took" in the
subject proceedings and, further, maintains the court was without
authority to award interest to Liberty. In an "[a]dditional
* Pursuant to Code § 17.1-413, this opinion is not
designated for publication.
[q]uestion [p]resented," Liberty complains the trial court did not
commence the accrual of interest at an earlier date. Finding that
the court correctly granted attorneys' fees to Liberty but
erroneously awarded interest, we affirm in part and reverse in
part.
The parties are fully conversant with the record, and this
memorandum opinion recites only those facts necessary to a
disposition of the appeal.
I.
The instant appeal arises from a protracted dispute between
DMAS and Liberty related to Medicaid payments from DMAS to Liberty
in 1979 and 1986. Following such payments, which totaled
$968,875, the Director, pursuant to Code § 32.1-325.1, made
"initial determinations" that DMAS had overpaid Liberty. DMAS
subsequently affirmed the Director's decision, and Liberty
remitted the funds to DMAS. Review of the determination by a
"hearing officer," undertaken at the request of Liberty pursuant
to Code § 9-6.14:12 of the Administrative Process Act (APA),
resulted in a finding that DMAS was not entitled to the recovery.
Upon further review, however, the Director rejected the conclusion
of the hearing officer and refused return of the funds to Liberty.
Liberty appealed the Director's decision to the trial court
in accordance with the APA and, on June 9, 1998, the court
reversed the Director, finding he had "arbitrarily and
capriciously" rejected the findings of the hearing officer, and
- 2 -
remanded the proceedings to the Director for "findings of fact and
. . . application of the law" consistent with the decision. The
Director appealed to this Court and, on January 11, 2000, a panel
affirmed the trial court. See Smith v. Liberty Nursing Home,
Inc., 31 Va. App. 281, 522 S.E.2d 890 (2000) (hereinafter
Smith I).
In adjudicating the appeal, the panel determined that the
DMAS claim to funds paid Liberty in 1979 was barred by the statute
of limitations prescribed by Code § 32.1-325.1:1 and, with respect
to the 1986 monies, the Director had "arbitrarily and
capriciously" interpreted the "clear" and "plain" language of the
controlling regulation in ruling that DMAS was entitled to
reimbursement from Liberty. Id. at 296, 522 S.E.2d at 897. Thus,
Liberty clearly prevailed in each instance, and "we remand[ed] the
matter to the trial court for entry of final judgment in
accordance with the . . . opinion." Id. at 297, 522 S.E.2d at
898. The Director thereafter unsuccessfully petitioned for appeal
to the Supreme Court of Virginia. See Smith v. Liberty Nursing
Home, Inc., No. 000298 (Va. June 5, 2000).
Upon remand, Liberty moved the trial court for an award of
attorneys' fees and interest on the judgment amount and, on
November 17, 2000, the court awarded Liberty "attorneys' fees in
the amount of $25,000.00," and "interest . . . pursuant to Va.
- 3 -
Code § 6.1-330.54, 1 from January 11, 2000 to September 15, 2000,
the date of delivery of payment [from DMAS] to counsel for
[Liberty]." (Footnote added.) The Director and DMAS appeal such
awards, and Liberty seeks interest predating January 11, 2000.
II.
In any civil case brought under Article
4 (§ 9-6.14:15 et seq.) and Chapter 1.1:1 of
Title 9 and § 9-6.14:4.1, in which any
person contests any agency action . . . such
person shall be entitled to recover from
that agency . . . reasonable costs and
attorney fees if such person substantially
prevails on the merits of the case and the
agency is found to have acted unreasonably,
unless special circumstances would make an
award unjust. The award of attorney fees
shall not exceed $25,000.
Code § 9-6.14:21.
Thus, an aggrieved party is entitled to
recover reasonable costs and fees when he
satisfies three conditions: (1) he
substantially prevails on the merits of the
case; (2) the agency is found to have acted
unreasonably; and (3) there are no special
circumstances which would make an award
unjust.
Commonwealth, Dep't of Mines, Minerals & Energy v. May Bros.,
Inc., 11 Va. App. 115, 120, 396 S.E.2d 695, 698 (1990). We find
all three conditions are satisfied on the instant record.
Firstly, Liberty "substantially prevailed on the merits of
the case." Secondly, we have previously determined the Director
1
Code § 6.1-330.54 fixes the "judgment rate of interest" at
"an annual rate of nine percent," subject to certain
inapplicable exceptions.
- 4 -
acted arbitrarily and capriciously in pursuing recovery from
Liberty, conduct defined as "'willful and unreasonable . . .,
without consideration or in disregard of facts or law or without
determining principle,'" by the Supreme Court of Virginia, and
clearly not "substantially justified" as contemplated by Code
§ 9-6.14:21. Sch. Bd. of City of Norfolk v. Wescott, 254 Va.
218, 224, 492 S.E.2d 146, 150 (1997) (quoting Black's Law
Dictionary 105 (6th ed. 1990)); see May Bros., 11 Va. App. at
120, 396 S.E.2d at 698. Thirdly, the record reflects no
"special circumstances" that would render unjust the award of
attorneys' fees. Accordingly, the court properly granted
Liberty the disputed attorneys' fees from DMAS.
DMAS next challenges an award of interest to Liberty on the
principal sum from January 11, 2000, the date of decision by
this Court in Smith I, to September 15, 2000, the date DMAS
actually refunded the monies previously returned by Liberty.
DMAS contends that "final judgment," a necessary predicate to an
award of interest, was not entered in the trial court until
November 17, 2000, after Liberty had already received the
disputed funds from DMAS. Liberty counters that the award
constituted "prejudgment interest" in accordance with Code
§ 8.01-382. 2
2
Code § 8.01-382 provides, in pertinent part: "In any
action at law or suit in equity . . . the judgment or decree of
the court[] may provide for interest on any principal sum
- 5 -
Assuming, without deciding, that the statute permitted an
award to Liberty of prejudgment interest under the instant
circumstances, the record, contrary to Liberty's insistence,
reflects an award of post-judgment interest only. The opinion
letter of the court, in addressing Liberty's claim to interest,
expressly characterizes Smith I, dated January 11, 2000, as
"resolv[ing] all outstanding issues in this case," after which
DMAS "owed restitution to [Liberty]." Accordingly, the
attendant order granted Liberty interest on the award from the
date of our decision in Smith I, thereby treating January 11,
2000, as the day of judgment pursuant to Code § 8.01-382.
However, the mandate of Smith I expressly remanded the
cause to the trial court "for entry of final judgment in
accordance with the . . . opinion." Thus, post-judgment
interest could not begin to accrue until entry of such order by
the trial court, November 17, 2000. However, because DMAS had
previously remitted the disputed monies to Liberty, no
"principal sum awarded" remained unpaid at the time of final
judgment and, hence, provided no basis for post-judgment
interest.
Liberty's claim to prejudgment interest "earlier than
January 11, 2000," is also without merit. As Liberty
acknowledges on brief, an "award of prejudgment interest is
awarded . . . and fix the period at which the interest shall
commence."
- 6 -
discretionary, a matter committed to the trier of fact."
Ragsdale v. Ragsdale, 30 Va. App. 283, 292, 516 S.E.2d 698, 702
(1999) (citation omitted). "A reviewing court, in considering
the propriety of a discretionary action of a lower body, must
not supplant its discretion for that rendered below. The
discretionary act should only be reversed where there is clear
evidence that the act was not judicially sound." National Linen
Serv. v. Parker, 21 Va. App. 8, 19, 461 S.E.2d 404, 410 (1995).
Guided by such well established principles granting deference to
the trial court, we are unable to conclude that the decision not
to award prejudgment interest to Liberty was judicially unsound.
Accordingly, we affirm the disputed attorneys' fees granted
Liberty but reverse the award of interest on the judgment.
Affirmed in part, reversed in part,
and final judgment.
- 7 -