Holbrook v. Healthport, Inc.

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SUPREME COURT OF ARKANSAS
No. CV-13-828
THERESA HOLBROOK, individually Opinion Delivered April 3, 2014
and on behalf of a class of all other
ARKANSANS SIMILARLY SITUATED APPEAL FROM THE POPE COUNTY
APPELLANT CIRCUIT COURT
[NO. CV-2010-588]
V.
HONORABLE KEN D. COKER, JR.,
JUDGE
HEALTHPORT, INC.; HEALTHPORT
TECHNOLOGIES, LLC f/k/a SMART AFFIRMED.
DOCUMENT SOLUTIONS, LLC;
HEALTHPORT INCORPORATED
f/k/a COMPANION TECHNOLOGIES
CORPORATION; and RICHARD
WEISS, in his OFFICIAL CAPACITY AS
Director, ARKANSAS DEPARTMENT
OF FINANCE AND
ADMINISTRATION
APPELLEES
CLIFF HOOFMAN, Associate Justice
Appellant Theresa Holbrook, individually and on behalf of a class of all other
Arkansans similarly situated, appeals from the Pope County Circuit Court’s July 17, 2013
amended order granting defendants’ and third-party defendant’s motion for partial summary
judgement and denying plaintiff’s motion for partial summary judgment in favor of appellees
Healthport, Inc.; Healthport Technologies, LLC f/k/a Smart Document Solutions, LLC;
Healthport Incorporated f/k/a Companion Technologies Corporation (collectively
“Healthport”); and Richard Weiss, in his official capacity as director of the Arkansas
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Department of Finance and Administration (“DF & A”). This court has jurisdiction pursuant
to Arkansas Supreme Court Rule 1-2(a)(7) (2013), as this case is a subsequent appeal
following an appeal that has been decided in the supreme court. On appeal, Holbrook
contends that (1) the gross-receipts tax does not apply to a patient’s attempt to obtain a
patient’s own medical information and (2) the Arkansas Access to Medical Records Act
exempts a patient’s attempt to obtain a patient’s medical information from any otherwise
applicable tax or charge. We affirm.
This case arose after Holbrook requested her medical records from Millard Henry
Clinic located in Russellville, Arkansas. Healthport, a private company that has a contract
with Millard Henry Clinic to fulfill such requests, obtained and sold to Holbrook copies of
her requested medical records. Healthport sent Holbrook two invoices for the two sets of
records, including sales tax, and Holbrook remitted two money orders to Healthport, paying
both invoices in full.
Holbrook, both individually and on behalf of all other Arkansans similarly situated,
filed a class-action complaint on October 12, 2010, seeking damages and requesting the court
(1) to find that Healthport violated the Arkansas Deceptive Trade Practices Act; (2) to declare
that Healthport illegally collected sales tax on charges for retrieving and copying her medical
records; and (3) to find that Healthport was unjustly enriched. Subsequently, Healthport
impleaded DF & A by filing a counterclaim and third-party complaint seeking declaratory
judgment as to whether any person, entity, or organization is required to collect a sales tax
on charges associated with the production of copies of medical records pursuant to Ark. Code
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Ann. § 16-46-106 (Supp. 2013). On May 24, 2011, Holbrook filed an amended complaint,
including an alternative count for illegal exaction and alternative class-action allegations
against DF & A. Holbrook’s illegal-exaction claim was dismissed without prejudice on her
motion on August 10, 2011.
All parties filed cross-motions for partial summary judgment on the declaratory-
judgment claims. The parties also filed a stipulation that allowed the class-certification
proceedings to follow the circuit court’s adjudication of the cross-motions for partial summary
judgment. After a hearing, the circuit court entered an order granting defendants’ and third-
party defendant’s motion for partial summary judgment and attached a Rule 54(b) certificate.
Holbrook appealed; however, this court dismissed the appeal, holding that this court lacked
jurisdiction to review the nonfinal order when the attached Rule 54(b) certificate failed to
comply with the rule. Holbrook v. Healthport, Inc., 2013 Ark. 87.
After this court’s dismissal, the circuit court filed an amended order granting
defendants’ and third-party defendant’s motion for partial summary judgment and attached
a proper Rule 54(b) certificate on July 17, 2013. The circuit court specifically granted the
motions for partial summary judgment filed by Healthport and DF & A and denied
Holbrook’s motion for partial summary judgment. The circuit court further found (1) “[t]hat
there [were] no genuine issues of material fact”; (2) “[t]hat providing paper copies of medical
records pursuant to Ark. Code Ann. § 16-46-106 constitute[d] a sale of tangible personal
property and as such [was] subject to the Arkansas Gross Receipts Tax Act under Ark. Code
Ann. § 26-52-103”; and (3) “[t]hat HealthPort Inc.’s providing paper copies of medical
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records to the Plaintiff in exchange for payment of the costs stated in Ark. Code Ann. § 16-
46-106 constitute[d] a transfer of the possession of tangible personal property for a valuable
consideration and [was] therefore a ‘sale’ as defined in Ark. Code Ann. § 26-52-103(19)(A).”
Finally, the circuit court entered the following declaratory judgment:
Any person, entity or organization providing copies of medical records pursuant to
Ark. Code Ann. § 16-46-106 is required to collect a sales tax on the charges for the
production of copies of medical records requested pursuant to Ark. Code Ann. § 16-
46-106.
This appeal followed.
Holbrook contends in her first point on appeal that the circuit court erred when it
determined that the gross-receipts-tax statute imposed a sales tax on a patient’s ability to
obtain a copy of his or her own medical records for three independent reasons. First,
Holbrook contends that the circuit court’s finding leads to “a legislative absurdity.” She
argues that the legislative intent of Ark. Code Ann. § 16-46-106 was to ensure that she would
be charged nothing more than the actual cost of reproducing her medical information, and
this intent was further demonstrated by the “isolated sale exemption” pursuant to Ark. Code
Ann. § 26-52-401(17), which exempts “gross receipts or gross proceeds derived from isolated
sales not made by an established business” from tax. Therefore, she alleges that the circuit
court’s decision leads to the absurd result that if her healthcare provider directly fulfills her
request for medical records, then no sales tax will be imposed pursuant to Ark. Code Ann. §
26-52-401(17) (Supp. 2013); however, if her healthcare provider contracts with a third-party
vender to fulfill her request, then a sales tax will be imposed. We disagree.
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This case involves the interpretation and construction of the Arkansas Gross Receipts
Act of 1941 (“Gross Receipts Act”), Ark. Code Ann. §§ 26-52-101 to -914 (Repl. 2008 &
Supp. 2013), and Ark. Code Ann. § 16-46-106. This court’s rules regarding statutory
construction are clear and well established. This court reviews issues of statutory
interpretation de novo and is not bound by the circuit court’s determination. Brock v.
Townsell, 2009 Ark. 224, 309 S.W.3d 179. However, this court will accept a circuit court’s
interpretation of the law unless it is shown that the court’s interpretation was in error. Cockrell
v. Union Planters Bank, 359 Ark. 8, 194 S.W.3d 178 (2004). The basic rule of statutory
construction is to give effect to the intent of the legislature. Calaway v. Practice Mgmt. Servs.,
Inc., 2010 Ark. 432. Where the language of a statute is plain and unambiguous, this court
determines legislative intent from the ordinary meaning of the language used. Id. In
considering the meaning of a statute, this court construes it just as it reads, giving the words
their ordinary and usually accepted meaning in common language. Id. This court construes
the statute so that no word is left void, superfluous, or insignificant, and this court gives
meaning and effect to every word in the statute, if possible. Id. If the language of a statute
is clear and unambiguous and conveys a clear and definite meaning, it is unnecessary to resort
to the rules of statutory interpretation. Brown v. State, 375 Ark. 499, 292 S.W.3d 288 (2009).
However, this court will not give statutes a literal interpretation if it leads to absurd
consequences that are contrary to legislative intent. Brock, supra.
A statute is considered ambiguous if it is open to more than one construction. Pulaski
Cnty. v. Ark. Democrat-Gazette, Inc., 370 Ark. 435, 260 S.W.3d 718 (2007). When a statute
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is ambiguous, this court must interpret it according to legislative intent and our review
becomes an examination of the whole act. Helena-W. Helena Sch. Dist. v. Fluker, 371 Ark.
574, 580, 268 S.W.3d 879, 884 (2007). In reviewing the act in its entirety, this court will
reconcile provisions to make them consistent, harmonious, and sensible in an effort to give
effect to every part. Williams v. Little Rock Sch. Dist., 347 Ark. 637, 66 S.W.3d 590 (2002).
In addition, this court must look at the legislative history, the language, and the subject matter
involved. Id. However, when a statute is clear, it is given its plain meaning and this court
will not search for legislative intent. Cave City Nursing Home, Inc. v. Ark. Dep’t of Human
Servs., 351 Ark. 13, 89 S.W.3d 884 (2002). This court is very hesitant to interpret a legislative
act in a manner that is contrary to its express language, unless it is clear that a drafting error
or omission has circumvented legislative intent. Id.
The language in the statutes relevant to this case is clear and unambiguous, and
furthermore, the provisions can be read in a consistent, harmonious, and sensible manner,
giving effect to every part. Arkansas Code Annotated § 16-46-106(a)(1) provides that, in
“contemplation of, preparation for, or use in any legal proceeding,” a patient may obtain
copies of his or her medical records “upon the tender of the expense of such copy or copies.”
Furthermore, in pertinent part, the statute specifically sets the maximum fee for the cost of
each photocopy, sets the maximum fee for labor charges, and allows the actual cost of any
required postage to be charged. Ark. Code Ann. § 16-46-106(a)(2). Ark. Code Ann. § 16-
46-106 does not, however, mention taxation or contain any language to indicate that the
specified charges are to exclude any other fees, charges, assessments, or taxes that may be
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required by a different statute.
In fact, the Gross Receipts Act generally levies an excise or sales tax on “the gross
proceeds or gross receipts derived from all sales to any person of . . . tangible personal
property.” Ark. Code Ann. § 26-52-301. A “sale” is defined as the “transfer of either the
title or possession except in the case of a lease or rental for a valuable consideration of tangible
personal property regardless of the manner, method, instrumentality, or device by which the
transfer is accomplished.” Ark. Code Ann. § 26-52-103(19)(A). “Tangible personal
property” is defined as “personal property that can be seen, weighed, measured, felt, or
touched or that is in any other manner perceptible to the senses.” Ark. Code Ann. § 26-52-
103(21)(A). Therefore, based on our reading of the clear and unambiguous language of the
statutes in a consistent, harmonious, and sensible manner, and giving effect to every part, we
conclude that the circuit court did not err in finding that Healthport’s transfer of the paper
copies of Holbrook’s medical records for money was a sale of tangible personal property and
subject to sales tax.
As recognized by appellant, there are several expressed exemptions from the taxes
levied under the Gross Receipts Act, and the “isolated sales exemption” pursuant to Ark.
Code Ann. § 26-52-401(17) exempts “[g]ross receipts or gross proceeds derived from isolated
sales not made by an established business.” However, Holbrook’s conclusory argument that
the application of the isolated sales exemption to the sale of copies of medical records leads
to “a legislative absurdity” and that no tax should be levied at all, despite the clear language
of the statutes, lacks merit. The legislature’s expressed isolated sales exemption applies to all
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sales and not just sales of copies of medical records. Id. When a statute is clear, it is given its
plain meaning and this court will not search for legislative intent. Cave City Nursing Home,
351 Ark. 13, 89 S.W.3d 884. Furthermore, as noted earlier, this court is very hesitant to
interpret a legislative act in a manner that is contrary to its express language, unless it is clear
that a drafting error or omission has circumvented legislative intent.
Second, Holbrook contends that the tax does not apply because reasonable minds have
differed as to whether the gross-receipts tax applies to a patient’s medical-information
request.1 Holbrook cites to this court’s holding in Gaddy v. DLM, Inc., 271 Ark. 311, 609
S.W.2d 6 (1980), as support for the proposition that the intent of the legislature to impose a
tax “must be so clear that no reasonable mind should conclude that the intent was otherwise.”
Id. at 318, 609 S.W.2d at 10. Therefore, she argues that a tax should not be imposed under
these circumstances because reasonable minds have differed as to this issue, namely the
Arkansas Attorney General and DF & A.
We disagree. Holbrook cites to an attorney-general opinion, issued on October 11,
2010, as support for her argument. See Op. Ark. Att’y Gen. No. 095 (2010)
1
The Arkansas Department of Finance and Administration, in its brief, alleges that
Holbrook has failed to sufficiently develop this argument, citing to this court’s case precedent
that we will not consider an argument when appellant has failed to provide sufficient citation
to authority and this court cannot determine whether an argument is well taken absent
further research. See Hollis v. State, 346 Ark. 175, 55 S.W.3d 756 (2001); Omni Holding &
Dev. Corp. v. 3D.S.A., Inc., 356 Ark. 440, 156 S.W.3d 228 (2004). However, we find that
the DF & A’s assertion lacks merit. Holbrook cited to two attorney-general opinions and
one case for support. While we agree that Holbrook’s argument is not meritorious, we think
Holbrook has sufficiently developed her argument for this court to address it.
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(http://ag.arkansas.gov/opinions/docs/2010-095.pdf). In the opinion, the attorney general
opines that a health care facility or entity may not charge sales tax to a patient or a patient’s
attorney who requests copies of a patient’s medical records pursuant to Ark. Code Ann. § 16-
46-106. Op. Ark. Att’y Gen. No. 095, at 1. However, seven days later, the attorney general
supplemented his opinion, in pertinent part, with the following paragraph:
It has since come to my attention that the Arkansas Department of Finance and
Administration (“DF&A”) has taken a different approach to this issue in nonpublic
letter opinions, deeming the provisions of such records subject to sales taxation.
Although I still subscribe to the reasoning set forth in my previous opinion, I must
acknowledge that DF&A in administering the tax laws is not subject to my opinion on
this matter. This office has often noted that the power to determine issues relating to
imposition of taxes is vested in the Revenue Division of the Department of Finance
and Administration. See Gross Receipts Tax Rules, GR-75(E) (2008) (“Opinions
issued by any other agency, whether formal or informal, are not binding on the
Department of Finance and Administration, Revenue Division”). I therefore suggest
that any individual or entity with questions relating to this issue submit its concerns to
the [Arkansas Department of Finance and Administration.]
Id. No. 095A (http://ag.arkansas.gov/opinions/docs/2010-095A.html). Therefore, the
attorney general in essence retracted his previous opinion and referred the addressee to DF &
A for any questions.
This court has held that while a statutory interpretation by the agency responsible for
its execution is not conclusive, it is highly persuasive and should not be reversed unless it is
clearly wrong. Citifinancial Retail Servs. Div. of Citicorp Trust Bank, FSB v. Weiss, 372 Ark.
128, 271 S.W.3d 494 (2008). Pursuant to Ark. Code Ann. § 26-52-105(b) (Repl. 2008), the
Director of the Department of Finance and Administration is directed to promulgate rules and
regulations for the proper enforcement of the Gross Receipts Act. In this case, the DF & A’s
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statutory interpretation regarding copies of the medical records is consistent with the
unambiguous language of the relevant statutes, and the circuit court did not err in its
interpretation of the statutes in finding that a sales tax was properly levied.
Third, Holbrook contends that a sales tax does not apply because there was no
exchange of “valuable consideration” as required in the legislature’s definition of “sale.” Ark.
Code Ann. § 26-52-401(17). We disagree. While Ark. Code Ann. § 26-52-401 does not
specifically define “valuable consideration,” BLACK’S LAW DICTIONARY defines it as
“[c]onsideration that is valid under the law; consideration that either confers a pecuniarily
measurable benefit on one party or imposes a pecuniarily measurable detriment on the other.”
BLACK’S LAW DICTIONARY 326 (8th ed. 2004). Here, there should be no question that
Holbrook’s payment by two money orders constituted valuable consideration. Therefore, we
affirm the circuit court on this point on appeal, as the Gross Receipts Act clearly applies to
requests for copies of medical records pursuant to Ark. Code Ann. § 16-46-106.
Holbrook contends in her second point on appeal that Ark. Code Ann. § 16-46-106
exempted her request for copies of her medical information from any sales tax because the
statute does not specifically authorize the imposition of a sales tax. Arkansas Code Annotated
§ 26-18-313 (Repl. 2012) provides that “[t]he standard of proof for a taxpayer to establish
facts to support a claim for a tax exemption, tax deduction, or tax credit is clear and
convincing evidence.” Furthermore, there is a presumption in favor of the taxing power of
the state, and all tax-exemption provisions must be strictly construed against the exemption.
Ark. Teacher Ret. Sys. v. Short, 2011 Ark. 263, 381 S.W.3d 834. Taxation is the rule, and
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exemption is the exception; therefore, any doubts should be resolved to deny the exemption.
Id. Holbrook failed to demonstrate that her request for copies of medical records was
exempted from taxation under the Gross Receipts Act, when Ark. Code Ann. § 16-46-106
does not specifically provide for an exemption or even generally address the issue of any form
of taxation. Therefore, we affirm the circuit court on this point on appeal, as Ark. Code Ann.
§ 16-46-106 does not exempt Holbrook’s request from the Gross Receipts Act.
Affirmed.
Streett Law Firm, P.A., by: James A. Streett and Alex G. Streett; and Price, Waicukauski
& Riley, by: Joseph N. Williams, for appellants.
Rose Law Firm, by: Kathryn Bennett Perkins, Byron J. Walker, and Betsy Turner-Fry; and
Joel DiPippa, Revenue Legal Counsel, for appellees.
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