DocketNumber: Supreme Court No. S-16930
Citation Numbers: 444 P.3d 187
Judges: Bolger, Carney, Maassen, Stowers, Winfree
Filed Date: 7/12/2019
Status: Precedential
Modified Date: 7/19/2022
I. INTRODUCTION
Maxim Healthcare Services and its Alaska office manager, Alaina Adkins, made misrepresentations while discharging Jesse Collens from Maxim's care, in violation of the company's own policies and procedures. Collens sued them for breach of contract, fraudulent misrepresentation, unfair and deceptive acts and practices under Alaska's Unfair Trade Practices and Consumer Protection Act (UTPA),
II. FACTS AND PROCEEDINGS
In May 2009 Jesse Collens, then 21 years old, was permanently injured in a bicycle accident that left him a C-1 quadriplegic, paralyzed from the neck down, and dependent on a ventilator to breathe. Collens was living in Anchorage when the accident occurred, and he chose to remain there after recuperating to be near friends and family.
Because long-term care facilities in Anchorage are not prepared to serve a ventilator-dependent individual such as Collens, he sought in-home care. In December 2009 he contracted with Maxim, a national healthcare corporation with a home healthcare division, to provide his nursing care. At the time Collens had a prescription for in-home nursing care that was refillable for life. Maxim was licensed as a home health agency in Alaska at all relevant times.
In late 2011 issues arose between Collens and Maxim over the company's management of his care. These issues escalated, and in early March 2012, Alaina Adkins, Maxim's Alaska office manager, met with Collens to discuss his main concerns with Maxim's services.
The following business day, Adkins emailed various members of Maxim's legal and administrative staff about one of the issues Collens had raised. Internal concerns surfaced about the legal compliance of the staff working with Collens. Maxim's Compliance Department produced a report on March 21 that suggested some issues with how Collens's nurses were supplying him insulin as well as other scheduling and dosage discrepancies. In an email responding to the report, Maxim's area vice president wrote, "We are in dangerous territory right now with the liability of this case and we are going to have to seriously consider discharge."
Collens's contract with Maxim included a form that told him of his rights as a patient. In this document Maxim affirmed that Collens had the right to:
Know that the home health plan of care/treatment will be developed by the physician, in cooperation with the appropriate Maxim professional staff member, and with the patient and family to the extent possible.
The document also affirmed that Collens had the right:
Not to be transferred or discharged unless:
a. The individual's medical needs require transfer;
b. The individual's health and safety or that of another person requires transfer or discharge; or
c. The individual fails to pay for services, except as such transfer or discharge is prohibited by law.
d. The individual does not meet any criteria for continued service set forth by Maxim, federal, state, or local statute or regulation.
In accordance with state regulations, Maxim had adopted policies and procedures to govern its provision of home healthcare services.
Collens's care plan was subject to routine recertification every 60 days. Maxim's Alaska Director of Clinical Services visited Collens's house to complete the review necessary for this recertification on March 23. Three days later she submitted the recertification paperwork, noting that "discharge is not warranted."
That same day Adkins requested that Maxim's legal department provide her a draft discharge letter for Collens. This draft letter stated that the discharge had been discussed with Collens's physician and care coordinator and that they agreed with the discharge decision. But in fact neither approved *194the discharge.
Collens filed suit against Maxim in early 2014, alleging breach of contract and fraudulent misrepresentation.
During a protracted pretrial period, multiple discovery disputes arose. Among other things, Collens moved to strike Maxim's expert witnesses, arguing that it had not submitted their reports before the relevant deadline. In April 2017 the superior court granted this motion and precluded Maxim's experts from testifying at trial.
After a six-day bench trial in June 2017, the superior court ruled for Collens on all counts. The court awarded him $4,315,007 in damages for his breach of contract claim. This was trebled under the UTPA's damages provision to total $12,945,021. The court also awarded Collens $400,000 in damages for IIED and $500,000 in punitive damages. The court later awarded Collens $5,676,668.17 in attorney's fees. Maxim appeals.
III. DISCUSSION
Maxim asks us to vacate the superior court's judgment and remand for a new trial on contract and tort damages, with instructions that Maxim was not liable under the UTPA. It also asks us to vacate the fee award as unreasonable. We agree that the superior court's attorney's fee award was unreasonable, but in all other respects we affirm the superior court's judgment. Maxim is liable under the UTPA; its conduct is clearly subject to sanctions under the Act. The superior court's decision to preclude Maxim from presenting expert testimony on damages was not an abuse of discretion. And the court's damages assessment was not excessive.
A. Maxim Is Liable Under The UTPA.
On appeal Maxim makes two main arguments for why the UTPA does not apply to its conduct.
*1951. Maxim preserved both UTPA defenses.
Whether a particular claim has been waived is a question of law reviewed de novo.
Although it is a closer question, Maxim also preserved the healthcare exemption defense. Maxim repeatedly argued that its decision to discharge Collens had nothing to do with the sale or advertisement of goods and services and thus was not covered by the UTPA. The basic premise behind the healthcare exemption defense Maxim asserts on appeal is that the UTPA is intended to apply to a circumscribed set of commercial transactions, not disputes involving the provision of healthcare. Since this defense is fairly characterized as an "expansion or refinement" of arguments Maxim made before the superior court, we also consider it preserved for our review.
2. Collens's UTPA claim was not exempt under AS 45.50.481(a)(1).
Both of Maxim's exemption defenses involve arguments about how to interpret the UTPA. Reviewing these legal questions de novo,
Maxim's statutory exemption defense relies on AS 45.50.481(a)(1). This subsection provides that the UTPA does not apply to:
an act or transaction regulated by a statute or regulation administered by the state, including a state regulatory board or commission, unless the statute or regulation does not prohibit the practices declared unlawful in AS 45.50.471.
Put another way, if acts declared unlawful under the UTPA are prohibited by some other state law or regulation, then they are exempt from the UTPA.
We have previously noted that AS 45.50.481(a)(1) "exempts only those acts or transactions which are the subject of 'ongoing, careful regulation.' "
*196Maxim has not met this burden. Alaska Statute 47.32.010 - .900, the chapter governing "Centralized Licensing and Related Administrative Procedures" for a range of social service providers, establishes a regulatory scheme that governs Maxim's conduct as a home health agency.
It is also ambiguous whether the regulations promulgated under AS 47.32.010 - .900 prohibit Maxim's misrepresentation to Collens about the reason for his discharge. The regulations state that "[a] patient receiving home health services has the right to ... be informed of the reason for impending discharge."
3. We decline to adopt the "entrepreneurial aspect" rule on the facts of this case; regardless, it would not exempt Maxim's conduct.
Maxim also argues that there is a general healthcare exemption from the UTPA. It contends that health professionals should be subject to the UTPA only for conduct related to the business or "entrepreneurial" aspects of the health profession - not conduct involving the provision of medical care. But we are not convinced that we should adopt this proposed common law exclusion on the facts of this case.
*197Other jurisdictions have limited the scope of consumer protection laws as applied to the so-called "learned professions," such as law and medicine.
We have previously applied the UTPA to professional misconduct in the legal profession and to claims involving the medical industry.
B. The Superior Court's Attorney's Fee Award Was Unreasonable.
The superior court awarded Collens attorney's fees in accordance with Alaska Civil Rule 82(b)(1) for his successful IIED and punitive damage claims. It then determined attorney's fees for Collens's UTPA claim per AS 45.50.537(a), which states that a prevailing private plaintiff in an UTPA action "shall be awarded costs as provided by court rule and full reasonable attorney fees at the prevailing reasonable rate." The superior court noted that we have not yet decided whether "full reasonable attorney fees" under this provision can mean attorney's fees as defined by the prevailing party's contingency fee agreement. The court concluded that defining attorney's fees in this way was consistent with the statute, so long as the contingency fee agreement in question was reasonable.
The superior court found that the 45% contingency fee in the agreement between Collens and his counsel was not a prevailing reasonable rate. The court adjusted this down to a 40% contingency rate and used that to calculate the attorney's fees for Collens's UTPA damages award. The court acknowledged that the resulting award was nearly four times the award under Rule 82 proposed by Maxim,
Maxim challenges the superior court's construction of AS 45.50.537(a), namely its conclusion that "full reasonable attorney fees" can be based on a contingency fee *198agreement, rather than a calculation of the reasonable hours worked multiplied by a reasonable hourly rate. We review the superior court's statutory construction de novo,
The UTPA's current attorney's fee language was adopted through a 1998 amendment.
The fee-shifting provision's legislative history indicates the intent to encourage private lawsuits by providing more generous attorney's fee awards than those available under Rule 82. But the legislative history does not indicate how legislators intended courts to calculate "full reasonable attorney fees" under the statute. For guidance we look to federal interpretation of the fee-shifting provisions in the Clayton Act and civil rights statutes. The Clayton Act, like the UTPA, is a consumer protection act providing a private right of action, and its fee-shifting provision's language is similar to the UTPA's.
Courts calculating reasonable attorney's fees under similar fee-shifting provisions generally employ what we have called the "modified lodestar" method.
(1) The time and labor required. ...
(2) The novelty and difficulty of the questions involved. ...
(3) The skill requisite to perform the legal service properly. ...
(4) The preclusion of other employment by the attorney due to acceptance of the case. ...
(5) The customary fee. ...
(6) Whether the fee is fixed or contingent. ...
(7) Time limitations imposed by the client or the circumstances. ...
(8) The amount involved and the results obtained. ...
(9) The experience, reputation, and ability of the attorneys. ...
(10) The "undesirability" of the case. ...
(11) The nature and length of the professional relationship with the client. ...
(12) Awards in similar cases.[36 ]
Unlike the superior court's approach, the modified lodestar method does not invite a situation in which fees could vary widely depending on the plaintiff's recovery. We are convinced that Alaska courts should employ it when determining "full reasonable attorney fees" under the UTPA's fee-shifting provision. We note, however, that the modified lodestar approach we adopt today differs from that favored by the United States Supreme Court. The U.S. Supreme Court has "held that an enhancement [in the second step of the modified lodestar calculation] may not be awarded based on a factor that is subsumed in the lodestar calculation."
But the U.S. Supreme Court's interpretation of fee-shifting provisions in federal statutes is not binding on our interpretation of the UTPA's fee-shifting provision. And like other jurisdictions that have sought guidance in federal jurisprudence when interpreting fee-shifting provisions in their own state statutes, we are not entirely persuaded by the Court's reasoning in this area.
Here the superior court erred in its assessment of full reasonable attorney's fees. It did not complete the first step in a modified lodestar determination: calculating a baseline award based on an approximation of hours reasonably worked multiplied by a reasonable hourly rate. We reverse the superior court's attorney's fee award and remand for an award based on a reasonable rate for the services, as calculated using the modified lodestar method outlined above. We note that the Johnson - Kerr factors are similar to the factors we apply to determine reasonable attorney's fees in other situations using Alaska Rule of Professional Conduct 1.5(a) and Alaska Bar Rule 35(a).
C. We Affirm The Superior Court's Decision In All Other Respects.
1. It was not an abuse of discretion to preclude Maxim from presenting expert testimony on damages at trial, and Maxim failed to preserve this as an issue for appeal.
Maxim retained two expert witnesses - one to testify about Collens's "claimed economic damages" and another to testify about his "medical treatment and costs" - but did not disclose their reports before the deadline set by the superior court. The court eventually issued an order precluding Maxim's experts from testifying at trial. Maxim claims this was an abuse of discretion, but we do not agree.
As a threshold matter, Maxim did not preserve this issue because it never filed the expert reports. Under Alaska Evidence Rule 103, error may not be predicated on a ruling that excludes evidence unless "the substance of the evidence was made known to the court by offer or was apparent from the context within which questions were asked."
Even if Maxim had not waived the issue, we would affirm the superior court's preclusion orders, for they were not an abuse of discretion. Alaska Civil Rule 26(a)(2) mandates timely disclosure of expert witness reports. Alaska Civil Rules 16(f) and 37(c)(1) authorize the imposition of sanctions if a party fails to disclose required information or fails to obey a pretrial order. Rule 37(c)(1) makes exclusion of testimony the presumptive rule when evidence is not disclosed as required:
A party that without substantial justification fails to disclose information required by Rule[ ] 26(a) ... shall not, unless such failure is harmless, be permitted to use as evidence at a trial ... any witness or information not so disclosed. In addition to or in lieu of this sanction, the court, on motion and after affording an opportunity to be heard, may impose other appropriate sanctions.
Trial courts generally have discretion to determine the appropriate sanction for the violation of a discovery order, but this discretion is limited when the sanction's effect "is to impose liability on the offending party, establish the outcome of or preclude evidence on a central issue, or end the litigation entirely."
Under Civil Rule 37(c)(1), the trial court must generally exclude undisclosed evidence unless there is substantial justification for the party's failure to make timely disclosure and this failure is harmless. Here, Maxim's justification for the delay was disputed by Collens, and weighing the parties' conflicting accounts against one another, the court reasonably determined that Maxim's delay was unjustified. Maxim's failure to produce expert reports was not harmless since, absent the sanction, it would have unacceptably delayed an already oft-postponed trial. The superior court's application of Rule 37(c)(1) was not an abuse of discretion.
2. The damages award was not excessive.
Maxim raises multiple objections to the damages award. We address only those arguments that merit discussion and affirm the superior court's award on all counts.
First the court's compensatory damages for breach of contract were not excessive. Trial evidence established that Collens's medical condition is permanent and that he will need full-time nursing care for his lifetime. The superior court calculated Collens's breach of contract damages as the value of nursing care Maxim promised but failed to provide; the past and future value of services Collens lost when he was discharged from Maxim and forced to move to Washington state, where he was not eligible for these services; and Collens's past and future out-of-pocket costs resulting from his discharge and subsequent move to Washington.
We review a trial court's assessment of compensatory damages for clear error,
Second damages for Collens's IIED claim were appropriate. Maxim challenges the $400,000 in IIED damages, apparently on grounds that it was error for the superior court to find that Collens suffered severe distress.
Third the superior court's award of punitive damages was not erroneous. To recover punitive damages, a plaintiff must establish that
the wrongdoer's conduct was outrageous, such as acts done with malice or bad motives or a reckless indifference to the interests of another. Actual malice need not be proved. Rather, [r]eckless indifference to the rights of others, and conscious action in deliberate disregard of them ... may provide the necessary state of mind to justify punitive damages.[54 ]
A trial court's determination that punitive damages are warranted must be supported by clear and convincing evidence.
The record provides ample support for the superior court's finding that Maxim committed outrageous conduct demonstrating reckless indifference to Collens's health and safety. Adkins admitted that she delivered Collens's discharge letter without first speaking to his physician, that at the time of delivery she knew his care coordinator did not consent to discharge, and that she knew of no alternative care providers for Collens. Given these admissions, Collens's discharge demonstrated disregard for critical health professionals' care assessments and recklessness as to Collens's future health. We affirm the punitive damages award.
Finally Collens was not required to elect his remedies as between punitive and treble damages. "[E]lection of remedies is the choice by a party to an action of one of two or more coexisting remedies or rights or theories of recovery[ ] arising out of the same facts."
Some jurisdictions implement election of remedies as a common law doctrine and require plaintiffs to choose one of multiple potential remedies when those remedies are "so inconsistent or repugnant that pursuit of one necessarily involves negation of the other."
*204We have not previously applied the election of remedies doctrine in a context such as this one. But in Kenai Chrysler Center, Inc. v. Denison , we were asked to determine whether UTPA treble damages are a form of punitive damages such that a plaintiff waiving his claim for punitive damages also waives his right to treble damages under the Act.
IV. CONCLUSION
We REVERSE the superior court's attorney's fee award and REMAND for an award consistent with this opinion. We AFFIRM the superior court's judgment on all other issues.
The UTPA is codified at AS 45.50.471 -.561.
See 7 Alaska Administrative Code (AAC) 12.507(b)(3) (2015) (requiring home health agencies to adopt written policies and procedures).
Maxim spoke with Collens's care coordinator prior to delivering the discharge letter but did not speak to his physician. Both sent letters to Maxim several days after Collens's discharge disagreeing with the decision.
Collens also sued Adkins individually. For convenience, we refer to the two defendants collectively as "Maxim."
Maxim also briefly argues that Collens failed to prove his claim under AS 45.50.471(b)(12), the particular subsection of the UTPA cited in his trial brief. But the superior court concluded that Maxim was liable under different provisions of the Act - AS 45.50.471(a) and AS 45.50.471(b)(14) - and Maxim does not challenge that conclusion. Thus we do not address Maxim's liability under AS 45.50.471(b)(12).
AS 45.50.481(a)(1) provides that the UTPA does not apply to "an act or transaction regulated by a statute or regulation administered by the state."
The Alaska State Medical Association joined in this argument as amicus curiae.
Mitchell v. Mitchell ,
See Wells v. Barile ,
See Zeman v. Lufthansa German Airlines ,
See Kenai Chrysler Ctr., Inc. v. Denison ,
Matanuska Maid, Inc. v. State ,
State v. O'Neill Investigations, Inc. ,
See Alaska Interstate Constr., LLC v. Pac. Diversified Invs., Inc. ,
See also 7 AAC 12.500 -.590 (regulations governing home health agencies). Amicus curiae Alaska State Medical Association argues that Maxim's conduct is regulated by AS 09.55.530 -.560, the Article governing medical malpractice actions. But these statutory provisions do not provide for the sort of ongoing, careful regulation this court has held is necessary to satisfy prong one of the statutory exemption. See Matanuska Maid ,
See 7 AAC 12.507(b)(3) (requiring home health agencies to "adopt written by-laws, policies, and procedures"); 7 AAC 12.531(a) ("A home health agency shall establish, implement, and make available to all personnel, written policies and procedures appropriate to the services offered by the agency. These policies and procedures must be reviewed at least annually and revised as necessary."); 7 AAC 12.531(b)(2) ("A home health agency shall establish policies and procedures covering ... conditions for acceptance, transfer, discharge, and continuing care of patients."); 7 AAC 12.600(f) ("A home health agency must comply with 7 AAC 12.5007 AAC 12.590.").
See Alaska Interstate ,
7 AAC 12.534(b)(10).
See, e.g. , Haynes v. Yale-New Haven Hosp. ,
See, e.g. , Haynes ,
See, e.g. ,
See
See Jones v. Westbrook ,
$5,676,668.17 compared to $1,492,950.40.
Michael W. v. Brown ,
City of Valdez v. State ,
Ch. 96, § 5, SLA 1998.
See Minutes, H. Labor & Commerce Standing Comm. Hearing on H.B. 203, 20th Leg., 1st Sess. No. 1513 (Apr. 23, 1997) (comments of Rep. Dyson);
For committee testimony comparing Rule 82 awards to the more generous award expected under the amended attorney's fee provision's new language, see Minutes, H. Labor & Commerce Standing Comm. Hearing on H.B. 203, 20th Leg., 1st Sess. No. 2146 (Apr. 23, 1997) (testimony of Daveed Schwartz, Assistant Att'y Gen.) and Minutes, H. Judiciary Standing Comm. Hearing on H.B. 203, 20th Leg., 2d Sess., No. 0006 (Feb. 9, 1998) (comments of Rep. Croft).
Rule 82 establishes several context-dependent schedules for attorney's fees. In cases where the prevailing party recovers no money judgment, the Rule requires the court to award a certain percentage of the prevailing party's "reasonable actual attorney's fees" depending on whether the case went to trial. Alaska R. Civ. P. 82(b)(2). We have held that since "[t]he purpose of Civil Rule 82 is to compensate partially a prevailing party[,] ... full attorney's fees are never awarded absent 'justification' and consideration of the 'good faith' nature of the unsuccessful party's claim or defense." Heritage v. Pioneer Brokerage &Sales, Inc. ,
Representative Dyson, for example, noted that the proposed legislation "follows a practice learned during the civil rights era, when most people realized that state attorney general's offices didn't have the resources, or perhaps the inclination, to file ... civil rights actions .... So, they allowed for, if you were successful in an action, that you could recover your attorney['] s fees and, therefore, the cost of bringing the action." Minutes, H. Judiciary Standing Comm. Hearing on H.B. 203, 20th Leg., 2d Sess. No. 0577 (Feb. 9, 1998).
See
See, e.g. , Copper Liquor, Inc. v. Adolph Coors Co. ,
See State, Dep't of Health & Soc. Servs. v. Okuley ,
See, e.g. , Hensley ,
See Okuley ,
Johnson ,
Perdue v. Kenny A. ex rel. Winn ,
See City of Burlington v. Dague ,
See, e.g. , Schefke v. Reliable Collection Agency, Ltd. ,
See Del. Valley ,
As for the other factor, the U.S. Supreme Court has indicated may be subsumed in the lodestar calculation, we need not determine at this time whether they must always be incorporated in the first step of the modified lodestar approach. However, we note our agreement with the statement in Hensley that trial courts considering the Johnson - Kerr factors "should note that many of these factors usually are subsumed within the initial calculation of hours reasonably expended at a reasonable hourly rate."
The factors are:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
(2) the likelihood[ ] that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
(8) whether the fee is fixed or contingent.
Alaska R. Prof. Conduct 1.5(a); see also Nautilus Marine Enters., Inc. v. Exxon Mobil Corp. ,
Alaska R. Evid. 103(a)(2).
Mueller v. Buscemi ,
Alaska R. Evid. 103 cmt. (quoting Fed. R. Evid. 103(b), Advisory Committee's Notes to 1972 proposed rules).
Khalsa v. Chose ,
See Cartee v. Cartee ,
See Burton v. Fountainhead Dev., Inc. ,
Pluid v. B.K. ,
To prevail on an IIED claim, the plaintiff must show "(1) that the defendant's conduct was extreme and outrageous, (2) that the conduct was intentional or reckless, (3) that this conduct caused the plaintiff emotional distress, and (4) that the distress was severe." Cameron v. Beard ,
State v. Carpenter ,
Chizmar v. Mackie ,
"We review the superior court's factual findings for clear error, which occurs when a review of the entire record leaves us with a definite and firm conviction that a mistake has been made." See Offshore Sys.-Kenai v. State, Dep't of Transp. & Pub. Facilities ,
Cummings v. Sea Lion Corp. ,
Brandner v. Hudson ,
Maxim also argues that the superior court's punitive damages award should be reversed because the court never held a separate proceeding to determine the punitive damages amount, as required by AS 09.17.020. But Maxim failed to object to this error in either of its post-trial motions responsive to the superior court's findings of fact and conclusions of law. Failing to contemporaneously object to the superior court's procedural error waives the issue for appeal. See Berry v. Berry ,
28A C.J.S. Election of Remedies § 1, Westlaw (database updated Mar. 2019).
E.g. , Miller v. United Automax ,
Id. at 697.
See Mat-Su Valley Med. Ctr., LLC v. Advanced Pain Ctrs. of Alaska, Inc. ,
Collens argues that the damages awards were for different conduct. But the superior court identified Maxim's UTPA violations as the false promises made in their Patients' Rights document and their deceptive discharge of Collens. The discharge was the basis for Maxim's IIED liability, and the false promises are the conduct the court identified as misrepresentation. Even though the punitive damages flow from the IIED and misrepresentation claims, they were awarded for the same conduct as the UTPA treble damages, contrary to the superior court's statement otherwise.