ALAINA ADKINS and MAXIM HEALTHCARE SERVICES, INC. Appellants,
v.
JESSE MICHAEL COLLENS, Appellee.
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,
...