STATE, AGENCY FOR HEALTH CARE ADMIN. v. Mied, Inc.
| Decision Date | 27 February 2004 |
| Docket Number | No. 1D02-4110.,1D02-4110. |
| Citation | 869 So.2d 13 |
| Parties | STATE of Florida, AGENCY FOR HEALTH CARE ADMINISTRATION, Appellant, v. MIED, INC., a Florida corporation and John E. Carter, individually, Appellees. |
| Court | Florida District Court of Appeals |
Charles J. Crist, Jr., Attorney General, and Christopher M. Kise, Solicitor General, and Louis F. Hubener, Deputy Solicitor General, Tallahassee, for Appellant.
James C. Rinaman, Jr., and Sonya H. Hoener of Marks Gray, P.A., Jacksonville, for Appellees.
The Florida Agency for Health Care Administration (AHCA) appeals from a $20 million jury award in favor of appellee, MIED, Inc. The jury found that AHCA had breached its Medicaid Provider Agreement with MIED and further found against AHCA on a claim of "equitable estoppel." Because we find that MIED's breach of contract theories fail as a matter of law and that equitable estoppel is not available as a cause of action on the facts here, we reverse.
In 1980, John Carter and his business partner, Joe Cowart, constructed what is now the Southlake Nursing and Rehabilitation Center, a nursing home in Jacksonville. Carter and Cowart served on the board of directors of Southlake, Inc. (Southlake), the corporate owner of the nursing home. Between 1980 and 1997, several different firms were employed to manage the nursing home as it transitioned from a for-profit facility to a non-profit facility. Over the years, Southlake accumulated substantial debts resulting from its ownership of the nursing home.
Early in 1998, Carter decided to purchase Southlake's assets through MIED, Inc., a corporation in which Carter was the sole shareholder. Carter felt he was the only person who could realistically afford to purchase Southlake because a large portion of its debts were owed to him. Upon his purchase of Southlake, Carter intended to return the nursing home to a for-profit status thereby obviating the need for outside management as required under tax rules regulating non-profit entities. Carter believed that eliminating the cost of outside management would aid the nursing home in achieving a profit, a goal not previously attained.
Critical to Carter's plan was an anticipated rate step-up in Medicaid reimbursements of $10 per patient, per day. To be eligible for a rate step-up, MIED would have to be deemed an unrelated purchaser by AHCA, the Florida agency responsible for Medicaid administration. In late January 1998, after consulting with his attorney, Carter spoke with Frank Hughes, an AHCA administrator, about the possibility of a rate step-up. According to Carter, Hughes said that MIED would be an unrelated party and therefore eligible for a rate step-up if Carter resigned from his position at Southlake as president and board member and exercised no further control of Southlake.
Carter resigned on February 20, 1998, and Cowart took over as Southlake's president. At Cowart's request, Carter, through MIED, continued day-to-day management of the nursing home. In early December 1998, Carter, aided by Clara Corcoran, the nursing home's administrator, and Karen Hoyt, the nursing home's office manager, developed a business plan for MIED which assumed, among other things, a rate step-up. MIED's purchase of Southlake closed on December 21, 1998.
Soon after the sale, in February 1999, several AHCA officials met and concluded that the nursing home should be placed in receivership. Underlying justifications for the decision included: 1) several instances of delinquent debts; 2) a site visit resulting in a substandard grade due to maintenance and repair issues; 3) Southlake's inability to produce financial records for the years 1995 and 1996 in response to a random audit; and 4) an ongoing investigation by the Attorney General's Medicaid Fraud Unit. Moving forward with its plan to institute receivership proceedings, AHCA conducted a site visit at the nursing home and subpoenaed its financial records in March 1999.
In April and May, MIED made several unavailing requests to AHCA for implementation of a rate step-up. At that time, AHCA had yet to make a formal determination of whether MIED and Southlake were related parties. To make matters worse from MIED's perspective, AHCA withheld Medicaid reimbursements of $423,765.57 for the month of April in anticipation of the pending receivership proceeding. AHCA filed its petition for receivership on May 19, 1999. After a two-day hearing, the circuit court entered an order granting the petition on May 26, 1999. The next day, AHCA paid $155,168.23 of the April reimbursements to cover the nursing home's payroll. AHCA paid the remainder of the April reimbursements on June 9, 1999, two days after appointment of a receiver.
On June 11, 1999, MIED filed a Petition for Formal Administrative Hearing seeking a determination that MIED was not a related party purchaser and would therefore qualify for a rate step-up. Over the course of the next several weeks, events began to unfold rapidly. On June 22, MIED's lender, Principal Commercial Acceptance (PCA), declared MIED in default and stated its intent to foreclose on MIED's mortgage. The same day, AHCA issued its final agency action determining that MIED was a related party purchaser and thus not entitled to a rate step-up.
On June 29, MIED filed a motion for an expedited hearing on its petition for administrative hearing regarding the rate step-up. On June 30, AHCA informed Carter that he must either find an unrelated purchaser for the nursing home or begin efforts to relocate the residents within thirty days. On July 8, AHCA issued a thirty-day Medicaid provider termination letter. The following day, residents of the nursing home were informed they had thirty days to relocate to another facility. On July 13, 1999, MIED and AHCA agreed that AHCA would allow the receivership to continue an additional thirty days in order for PCA to conduct a foreclosure sale of the nursing home to an unrelated third party.
On July 30, AHCA approved and joined what appeared to be a global settlement among MIED, PCA, and Carter. The four-way settlement (including AHCA) allowed the receivership to continue during PCA's foreclosure, provided for PCA's payment of $15,000 per month to Carter for twelve months, and excused Carter's personal guarantee of the $9.3 million mortgage. Moreover, in return for AHCA's approval of the settlement, MIED immediately dismissed with prejudice its petition for formal administrative hearing on the rate step-up issue on August 2.
On September 12, 2000, MIED and Carter filed an eight-count complaint against AHCA alleging: 1) unlawful taking without just compensation; 2) unlawful taking without due process of law; 3) inverse condemnation; 4) breach of contract; 5) equitable estoppel; 6) misrepresentation; 7) interference with business relationships; and 8) intentional infliction of emotional distress. On June 18, 2002, MIED and Carter amended the complaint, leaving four counts: 1) inverse condemnation; 2) breach of contract; 3) equitable estoppel; and 4) misrepresentation. The trial court eventually granted AHCA's motion for directed verdict on MIED's inverse condemnation claim and Carter was dropped as a plaintiff. A Jacksonville jury returned a $20 million verdict in favor of MIED finding that AHCA had breached the Medicaid Provider Agreement and had made material misrepresentations upon which MIED reasonably relied to its detriment.
AHCA raises a number of issues on appeal. Dispositive of the case, however, are the issues concerning whether MIED has a claim for breach of contract or has a cause of action based upon "equitable estoppel." Accordingly, we address each of these issues in turn.
MIED argued below that AHCA's refusal to grant it a rate step-up constituted a breach of contract. We find that MIED conclusively waived any challenge to denial of a rate step-up by entering into a settlement that has never been set aside. To hold otherwise would deprive AHCA of the benefit of its bargain and would allow MIED and its owner, Carter, to retain the benefits of the settlement and to sue as if no settlement took place. MIED's Notice of Voluntary Dismissal provided:
The Petitioner, MIED, Inc. d/b/a Southlake Nursing and Rehabilitation Center, through its undersigned counsel, hereby voluntarily dismisses, with prejudice, its Petition for Formal Administrative Hearing filed in this matter. For and in consideration of this voluntary dismissal by Petitioner, the Respondent has agreed to (1) Rescind the letter terminating the Petitioner's Medicaid provider number, and (2) Allow for the appointment of a Receiver to operate the facility pending the sale.
(Emphasis added.) By this language AHCA agreed to conditions, beneficial to MIED, allowing the facility to operate until a sale, in exchange for MIED's promise to abandon the rate step-up issue. The trial court should have honored this agreement by granting AHCA's motion for summary judgment on the issue of whether the denial of the rate increase constituted a breach of contract.
AHCA also argues that by voluntarily dismissing its petition with prejudice, MIED abandoned, short of any conclusion, any remaining opportunity for administrative relief. Thus, AHCA urges that the doctrine of exhaustion of administrative remedies bars MIED from seeking relief in the circuit court on the rate step-up issue. We agree.
To avoid the requirement for exhaustion of administrative remedies, a party must satisfy one of the tests established by our case law:
(1) the complaint must demonstrate some compelling reason why the APA (Chapter 120, Florida Statutes) does not avail the complainants in their grievance against the agency; or (2) the complaint must allege a lack of general authority in the agency and, if it is shown, that the APA has no...
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