Adkins v. Collens

          Appeal from the Superior Court No. 3AN-14-05961 CI of the State of Alaska, Third Judicial District, Anchorage, Frank A. Pfiffner, Judge.

          Gregory S. Fisher, Nicholas I. Bajwa, and Kristal L. Leonard, Davis Wright Tremaine LLP, Anchorage, for Appellants.

          Susan Orlansky, Reeves Amodio LLC; Jeffrey M. Feldman, Summit Law Group; and Michael T. Stehle, Law Office of Michael Stehle, PC, Anchorage, for Appellee.

          Roger F. Holmes, Biss & Holmes, Anchorage, for Amicus Curiae Alaska State Medical Association. John J. Tiemessen, Clapp, Peterson, Tiemessen, Thorsness & Johnson, Fairbanks, for Amicus Curiae Alaska Dental Society.

          Before: Bolger, Chief Justice, Winfree, Stowers, Maassen, and Carney, Justices.

          OPINION

          BOLGER, CHIEF JUSTICE.

         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), ^[1] and intentional infliction of emotional distress (IIED). The superior court ruled for Collens on all his claims and entered a $20, 379, 727.96 judgment against Adkins and Maxim, which included attorney's fees. Maxim and Adkins now appeal, arguing that (1) they were not liable under the UTPA; (2) the superior court erred in precluding their expert witnesses from testifying at trial; (3) the court's damages award was excessive; and (4) the court's attorney's fee award was unreasonable. We agree that the superior court's attorney's fee award was unreasonable, but on all other issues we affirm the superior court's decision.

         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.^[2] Those policies and procedures stated that a patient could not be discharged from Maxim's home healthcare program without a physician's order.

         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 the discharge.^[3] The draft discharge letter also included a space for names of other entities that could provide the care needed by the patient. Although Adkins emailed the legal department saying, "We already know that there are no providers in our area that provide this type of service," the discharge letter she eventually delivered to Collens filled in the blank with four agency names. Adkins delivered and read aloud the discharge letter at Collens's home on March 30.

         Collens filed suit against Maxim in early 2014, alleging breach of contract and fraudulent misrepresentation.^[4] Maxim moved for summary judgment on these claims. Collens opposed and cross-moved for partial summary judgment on the contract claim. In the memorandum supporting that motion, Collens asserted claims under the UTPA for the first time. The superior court denied all motions, finding the existence of disputed facts relevant to the fraud and contract claims. Its order did not address the UTPA claims.

         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 sur>erior court's iudmnent 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.^[5] First Maxim argues that Collens's UTPA claim was exempt from the Act's coverage because it involved conduct already prohibited by statute or regulation.^[6] We refer to this argument as Maxim's "statutory exemption defense." Second Maxim argues that the conduct at issue was a healthcare, not business, decision that should be exempt from UTPA liability.^[7] We refer to this as Maxim's "healthcare exemption defense." In response Collens argues that these defenses have been waived as issues for appeal because Maxim failed to develop them sufficiently before the superior court. If they are preserved, he contends that neither exempts Maxim from UTPA liability.

         1. Maxim preserved both UTPA defenses.

         Whether a particular claim has been waived is a question of law reviewed de novo.^[8] Arguments raised for the first time on appeal are generally waived, ^[9] but those explicitly raised in the trial court may be expanded or refined in appellate argument.^[10]Collens contends that Maxim waived the statutory exemption defense by failing to develop it at trial after mentioning it in summary judgment briefing. But Collens's complaint did not include an express claim based on the UTPA. And Maxim later raised the defense in objections to Collens's proposed findings of fact and conclusions of law on this claim. In those objections Maxim cited the statutory exemption and argued that certain statutes and regulations of the nurse licensing board prohibited its disputed conduct. This was adequate to preserve the defense.

         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, ^[11] we find neither argument persuasive.

         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.' "^[12] And we have emphasized that such regulation must prohibit the specific act in question: "Mere regulation under a separate and distinct statutory scheme, however, satisfies only one prong of [the UTPA's exemption provision]; unfair acts and practices are exempt from the purview of the Act only where the business is both regulated elsewhere and the unfair acts and practices are therein prohibited."^[13] To qualify for the statutory exemption, Maxim must show both that its conduct is subject to ongoing, careful regulation and that such regulation prohibits the conduct the superior court identified as violating the UTPA - Maxim's failure to follow its own policies and procedures and its misrepresentations to Collens about his discharge.^[14]

         Maxim 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.^[15] But Maxim has not established the exemption provision's second prong, that the regulations governing home health agencies prohibit the specific conduct at issue. Although the regulations require home health agencies to adopt a set of policies and procedures, they do not explicitly require home health agencies to comply with these policies and procedures.^[16] And Maxim provided no evidence at trial or in briefing to show that the Department of Health and Social Services interprets or enforces the regulations as if they impose such an obligation. As a result Maxim has not established that the regulations governing home health agencies prohibit noncompliance with a home health agency's own procedures.^[17]

         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."^[18] Admittedly a right to information is not worth much if the information is not accurate. But it is not clear that the regulations' statement of this right translates, in practice, to a prohibition on misrepresentations such as Maxim's. The regulations' emphasis on the existence of policies and procedures, rather than compliance with them, suggests that the Department focuses enforcement on home health agencies' adoption of procedures and policies that are generally protective of patients' rights. Whether the Department devotes enforcement resources to policing individual acts of misrepresentation is uncertain. Absent evidence that the Department does so, Maxim has not met its burden of proving the statutory exemption provision's second prong. Maxim's conduct is not exempt from UTPA liability under AS 45.50.481(a)(1).

         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.

         Other jurisdictions have limited the scope of consumer protection laws as applied to the so-called "learned professions," such as law and medicine.^[19] Such jurisdictions generally conclude that state consumer protection laws may apply to medical and legal professionals when the "entrepreneurial" or "business" aspects of these professionals' services are implicated.^[20] But if a claim raises questions about a professional's competence, the professional is exempt from liability under the state consumer protection law.^[21] Courts that adopt such an "entrepreneurial aspect" rule reason that "[t]o hold otherwise would transform every claim for... malpractice into a [consumer protection act] claim."^[22]

         We have previously applied the UTPA to professional misconduct in the legal profession and to claims involving the medical industry.^[23] In those cases we saw no need to apply or delineate the scope of a professional services exemption to the UTPA. Under the right circumstances, it may be appropriate to exempt some conduct of the learned professions from UTPA liability. But those circumstances are not present here. The only medical professional involved in the decision to discharge Collens advised Maxim that the discharge was not warranted for medical reasons - Collens's discharge was unquestionably a business decision. Thus even if we were to adopt an "entrepreneurial aspect" exception for the UTPA's application to certain professional services, Maxim would still be liable under the Act. The superior court did not err by concluding that Maxim could be liable under the facts of this case.

         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 UTP A 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, ^[24] but concluded that the award was reasonable given the case's complexity and the effort and quality of Collens's counsel's work.

         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 agreement, 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, ^[25] considering the statute's language, ...