Emil N. v. Healy B.-N., 20-0396

Decision Date20 May 2021
Docket NumberNo. 20-0396,20-0396
CourtWest Virginia Supreme Court
PartiesEmil N., Respondent Below, Petitioner v. Healy B.-N., Petitioner Below, Respondent
MEMORANDUM DECISION

Petitioner Emil N., by counsel Robert G. McCoid, appeals the Circuit Court of Ohio County's May 15, 2020, order denying his appeal and respondent's cross-petition for appeal from the family court's order addressing equitable distribution, petitioner's contempt, and petitioner's abuse of the discovery process.1 Respondent Healy B.-N., by counsel Mike Kelly and H. Truman Chafin, filed a response, which includes cross-assignments of error. Petitioner filed a reply.

This Court has considered the parties' briefs and the record on appeal. The facts and legal arguments are adequately presented, and the decisional process would not be significantly aided by oral argument. Upon consideration of the standard of review, the briefs, and the record presented, the Court finds no substantial question of law and no prejudicial error. For these reasons, a memorandum decision affirming the circuit court's order is appropriate under Rule 21 of the Rules of Appellate Procedure.

The parties married on May 8, 2010, separated on March 26, 2016, and were divorced by bifurcated order entered on February 19, 2019. No children were born of their marriage.

Before and during the majority of the parties' marriage, petitioner was employed as a chiropractor and owned a clinic (the "Clinic"). While employed as a chiropractor, petitioner became the subject of a federal investigation concerning alleged fraudulent medical billing and tax fraud. Petitioner was served with a federal grand jury subpoena in December of 2012. Soon after, he and respondent retained the legal services of Paul Harris.

Petitioner, represented by Mr. Harris, filed suit on January 29, 2013, in Marshall County, West Virginia, against The Health Plan of the Upper Ohio Valley, Inc., ("The Health Plan") and a key accounts manager within that organization, alleging that, since September of 2011, The Health Plan improperly withheld reimbursements for services petitioner had rendered. Petitioner asserted claims for declaratory judgment, breach of contract, tortious interference with business relations, defamation, and violation of the Prompt Pay Act.2 Petitioner's claimed damages included $453,879.30 in outstanding payment obligations for services he had rendered.

The Marshall County civil litigation proceeded to trial but settled two days in, on May 17, 2016. The confidential settlement reached in that litigation provided that The Health Plan would pay $2,000,000 to petitioner, $80,000 of which was to "constitute full and final payment for [petitioner's] alleged losses for billings." It further provided that the remaining $1,920,000 was "attributable to [petitioner's] alleged damages for his personal injury claim."

At a minimum, $80,000 of the settlement was subj ect to equitable distribution; accordingly, the family court directed petitioner to deposit $40,000 into his attorney's IOLTA account on October 24, 2017. The family court also directed petitioner to provide a full written accounting of 50% of the settlement proceeds. Later, in June of 2017, the family court ordered petitioner to deposit into escrow 50% of his settlement proceeds until the family court could determine the appropriate division of those proceeds. Petitioner failed to comply with these orders, so respondent filed a petition for contempt and for an award of fees and costs on November 28, 2018.

In response, petitioner asserted that the order directing him to escrow 50% of the settlement proceeds "was entered upon the mistaken representation that [respondent] had no funds." Petitioner further stated that "$600,000 representing approximately 50% of the [settlement] proceeds, is represented in a note secured by a first deed of trust on property located within Ohio County, West Virginia. The principal of the note has not been invaded. . . . [Petitioner] has therefore complied with the [c]ourt's Order." Petitioner provided this same argument in defense of his failure to provide a full accounting of the settlement proceeds. Although petitioner represented that he would deposit $40,000 into his counsel's IOLTA account within "thirty days of January 18, 2019," he failed to do so.

The family court held a final hearing over four days—April 2, 2019, April 3, 2019, April 10, 2019, and August 14, 2019—during which it heard evidence related to whether the settlement proceeds, or any particular amounts, were marital property; petitioner's continued failure to comply with court orders regarding those proceeds; and whether petitioner had abused the discovery process. The family court heard testimony from Mr. Harris and the parties.

Of relevance to petitioner's failure to escrow 50% of the settlement proceeds, the evidence revealed that petitioner had invested $600,000 of the settlement proceeds into an entity (99% of which was owned by petitioner), which had then loaned the money to another corporation. Petitioner received interest-only payments on that loan of $8,500 per month, and the principal amount of $600,000 was to be repaid in a balloon payment in July of 2019. By order entered on April 25, 2019, the family court found petitioner in indirect civil contempt and ordered that theprincipal amount of $600,000 be frozen until further order of the court. The family court also directed that the principal amount be deposited with the Circuit Clerk of Ohio County upon repayment, and it imposed a constructive trust upon the $600,000 for respondent's benefit.

The family court entered a separate order on August 16, 2019, addressing the $40,000 payment it previously directed be deposited into petitioner's counsel's IOLTA account. In that order, the court detailed that petitioner had orally represented that he would make the required deposit, and he later represented that he had made the deposit. Petitioner's counsel, however, denied that any such deposit had been made. The court also documented petitioner's $8,500 monthly interest payments from his investment of the settlement proceeds, which proceeds, as the court further detailed, had been "ordered . . . to be placed in escrow but the [petitioner] ignored that order and invested the funds"; that petitioner had traveled to Europe twice in the preceding year; that he leased a luxury automobile for his personal transportation; and that, in sum, petitioner had the financial ability to obtain the required funds for deposit but had failed to do so. The court found petitioner in contempt and ordered that he be incarcerated for ten days; however, the court provided that petitioner could purge himself of the contempt by depositing $40,000 with the Circuit Court of Ohio County. Petitioner did purge himself of this contempt.

On January 22, 2020, the family court issued its "Final Order." Beginning with its findings relative to its allocation of the settlement proceeds, the family court noted that, based upon Mr. Harris's testimony, the Marshall County litigation against The Health Plan "was filed as collateral civil litigation ancillary to the federal investigation to have a vehicle for discovery and build a defense." As a result, the court found, much of the work performed by Mr. Harris and his law firm was applicable to his representation during both the federal investigation and the civil litigation, and Mr. Harris testified that he planned to seek reimbursement of the attorney's fees and investigative costs expended in both the federal investigation and civil litigation from The Health Plan under the fee-shifting provision of the Prompt Pay Act.3 Between January of 2013 and November of 2015, the parties paid more than $700,000 in attorney's fees and more than $50,000 in investigative costs related to the federal investigation and civil litigation.

In addition to the attorney's fees and costs petitioner sought to recover from The Health Plan, discovery produced in that litigation showed that petitioner claimed damages totaling $22,000,000 for the loss of his business practice and $453,879.30 in unpaid billings, plus interest in the amount of $141,063.99 on those unpaid billings. Ultimately, petitioner intended to ask the jury for a verdict in the range of $80 to $100 million.

Concerning the unpaid billings, the family court recounted Mr. Harris's testimony that the $453,879.30 figure represented "gross" billings that did not account for the contractual discount, that a third-party audit undertaken to calculate that figure was inaccurate, and that he believed $80,000 was the most accurate calculation of unpaid medical billings. Petitioner, on the other hand, testified that the lawsuit was filed because The Health Plan owed the Clinic $300,000 for unpaid bills.

Bearing these facts in mind, the family court found that the designation of $1,920,000 in the settlement agreement as petitioner's "personal injury" damages did not "accurately reflect reimbursement for economic losses suffered by the Clinic and the expenditures of over $700,000.00 in marital funds for attorney['s] fees and investigative costs, recoupment of both of which would have been considered a marital asset subject to equitable distribution." The court noted that petitioner produced "no documentary evidence whatsoever" to support his claim that $80,000 in economic damages was more accurate than the over $450,000 claimed in his complaint, which was based on a third-party audit, or the $300,000 he claimed The Health Plan owed when he testified before the family court. Petitioner likewise failed to produce any evidence to support his assertion that his personal injury was of such magnitude to constitute 96% of the settlement proceeds. Since settling, petitioner attended and graduated law school, traveled extensively, and was preparing to take the bar exam. He did not testify to any mental or physical impairment that had...

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