Ex Parte Healthsouth Corp.

• Citation: 974 So.2d 288
• Decision Date: 16 February 2007
• Docket Number: 1051366.
• Parties: Ex parte HEALTHSOUTH CORPORATION. (In re General Medicine, P.C. v. HealthSouth Corporation).
• Court: Alabama Supreme Court

974 So.2d 288

Ex parte HEALTHSOUTH CORPORATION.

(In re General Medicine, P.C. v. HealthSouth Corporation).

1051366.

Supreme Court of Alabama.

February 16, 2007.

As Modified on Denial of Rehearing June 15, 2007.

John P. Whittington, Joseph B. Mays, Jr., Patrick Darby, N. Christian Glenos, and Marc James Ayers of Bradley Arant Rose & White, LLP, Birmingham, for petitioner.

John M. Johnson, William H. Brooks, and Philip M. Bridwell of Lightfoot, Franklin & White, L.L.C., Birmingham, for respondent.

SEE, Justice.

HealthSouth Corporation petitions this Court for a writ of mandamus directing the Jefferson Circuit Court to enter a summary judgment in its favor on the ground that General Medicine, P.C., has no standing to bring the underlying action against it. Because HealthSouth has not demonstrated a clear legal right to the remedy it seeks, we deny the petition.

Factual and Procedural History

General Medicine is a Michigan-based professional corporation consisting of physicians and advanced nurse practitioners who specialize in geriatrics and subacute and long-term care. General Medicine entered into a contract with Horizon/CMS Healthcare Corporation ("Horizon") pursuant to which General Medicine was to provide medical services at Horizon's long-term care facilities. In 1996, General Medicine brought a breach-of-contract action against Horizon in the United States District Court for the Eastern District of Michigan. The district court stayed the action from 1998 until 2003.

In February 1997, HealthSouth, a Delaware corporation with its principal place of business located in Birmingham, Alabama, acquired Horizon, paying $1.25 billion to purchase Horizon's stock. From 1997 until 2001, Horizon was a wholly owned subsidiary of HealthSouth. In November 1997, HealthSouth sold Horizon's long-term care facilities to Integrated Health Services, Inc. ("IHS"), for $1.25 billion; as a result of the sale, Horizon received $1.15 billion in cash and IHS assumed $100 million of Horizon's debt. According to General Medicine, "HealthSouth accounted for the IHS sale on Horizon's books and records by recharacterizing $414 million of fictitious earnings from a previous transaction as an asset sold to IHS"; HealthSouth then transferred $500 million of the cash proceeds from the sale from Horizon to itself and "replac[ed] the cash on Horizon's balance sheet with a fictitious asset to offset the cash transfer." General Medicine's answer at 3-4. In November 2001, HealthSouth sold its shares of Horizon stock to Meadowbrook Healthcare, Inc., for $16.8 million. Thus, according to General Medicine, "HealthSouth fraudulently stripped more than $1 billion in assets from Horizon." General Medicine's answer at 4.

In April 2004, General Medicine entered into a settlement agreement in the federal litigation with Horizon and its owner, Meadowbrook. As part of the settlement, Meadowbrook and Horizon paid General Medicine $300,000 and consented to a judgment in the federal district court in which Horizon admitted liability in the amount of $376 million.¹ General Medicine reserved its right to receive any payment "awarded or returned, to Horizon or Meadowbrook as a result of any action brought by Gen[eral] Medicine] against HealthSouth Corporation to execute on the Consent Judgment." However, General Medicine covenanted not to execute on the consent judgment against Meadowbrook or Horizon beyond the $300,000 provided for in the agreement. General Medicine's answer, tab C at 6. The settlement agreement also provided that the settlement

"is not releasing Horizon and/or Meadowbrook from liability to Gen[eral] Med[icine] arising out of the Lawsuit or the Consent Judgment, and that this agreement does not affect Gen[eral] Med[icine]'s rights or claims against any other person or nonparty to this agreement."

General Medicine's answer at 7,

General Medicine filed the instant action in the Jefferson Circuit Court in August 2004, alleging that it was a creditor of Horizon and that assets had been fraudulently transferred from Horizon to HealthSouth. HealthSouth moved for a summary judgment, arguing that General Medicine had no standing to bring this action because it was not a "creditor" of Horizon under the Alabama Uniform Fraudulent Transfer Act ("AUFTA"), § 8-9A-1 et seq., Ala.Code 1975. The trial court denied the summary-judgment motion. HealthSouth then filed a motion for reconsideration and, alternatively, a motion for the trial court to certify its order for interlocutory appeal pursuant to Rule 5, Ala. R.App. P. The trial court denied both motions. HealthSouth now petitions for a writ of mandamus directing the trial court to enter a summary judgment in its favor. In July 2006, this Court ordered answer and briefs and stayed the proceeding in the trial court in order to consider the petition.

Standard of Review

Mandamus review is available where the petitioner challenges the subject-matter jurisdiction of the trial court based on the plaintiffs alleged lack of standing to bring the lawsuit.

"`"`Mandamus is a drastic and extraordinary writ, to be issued only where there is (1) a clear legal right in the petitioner to the order sought; (2) an imperative duty upon the respondent to perform, accompanied by a refusal to do so; (3) the lack of another adequate remedy; and (4) properly invoked jurisdiction of the court.' Ex parte Integon Corp., 672 So.2d 497, 499 (Ala.1995). The question of subject-matter jurisdiction is reviewable by a petition for a writ of mandamus. Ex parte Flint Constr. Co., 775 So.2d 805 (Ala.2000)."

"`Ex parte Liberty Nat'l Life Ins. Co., 888 So.2d 478, 480 (Ala.2003) (emphasis added). "When a party without standing purports to commence an action, the trial court acquires no subject-matter jurisdiction." State v. Property at 2018 Rainbow Drive, 740 So.2d 1025, 1028 (Ala.1999). Under such a circumstance, the trial court has "no alternative but to dismiss the action." 740 So.2d at 1029:'"

Ex parte Richardson, 957 So.2d 1119, 1124 (Ala.2006) (quoting Ex parte Chemical Waste Mgmt., Inc., 929 So.2d 1007, 1010 (Ala.2005)).

This petition follows the denial of a motion for a summary judgment. To grant a motion for a summary judgment, the trial court must determine that there is no genuine issue of material fact and that the movant is entitled to a judgment as a matter of law. Rule 56(c)(3), Ala. R. Civ. P. When the movant makes a prima facie showing that those two conditions are satisfied, the burden then shifts to the nonmovant to present "substantial evidence" creating a genuine issue of material fact. Ex parte CSX Transp., Inc., 938 So.2d 959, 961 (Ala.2006). Evidence is "substantial" if it is of "such weight and quality that fair-minded persons in the exercise of impartial judgment can reasonably infer the existence of the fact sought to be proved." West v. Founders Life Assurance Co. of Florida, 547 So.2d 870, 871 (Ala.1989); § 12-21-12(d), Ala.Code 1975.

In our review of a ruling on a motion for a summary judgment, we apply as to factual issues the same standard as does the trial court. Ex parte Lumpkin, 702 So.2d 462, 465 (Ala.1997). We must review the record in the light most favorable to the nonmovant and must resolve all reasonable doubts against the movant. Ex parte CSX Transp., 938 So.2d at 962. The trial court's ruling on a question of law carries no presumption of correctness. Ex parte Graham, 702 So.2d 1215, 1221 (Ala. 1997).

Analysis

HealthSouth argues that General Medicine lacked standing to bring its claim under the AUFTA. According to HealthSouth, General Medicine's covenant not to sue released Horizon from liability, thereby extinguishing the debt and divesting General Medicine of its status as a creditor and, therefore, of standing under the AUFTA. General Medicine argues that it is, as a matter of law, a creditor as that term is defined by the AUFTA, and that, at a minimum, the settlement agreement creates disputed questions of fact.

To demonstrate standing, General Medicine must show "(1) an actual concrete and particularized `injury in fact'—`an invasion of a legally protected interest'; (2) a `causal connection between the injury and the conduct complained of; and (3) a likelihood that the injury will be `redressed by a favorable decision.'" Stiff v. Alabama Alcoholic Beverage Control Bd., 878 So.2d 1138, 1141 (Ala.2003) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)). It must allege "specific concrete facts demonstrating that the challenged practices harm [it], and that [it] personally would benefit in a tangible way from the court's intervention." Warth v. Seldin, 422 U.S. 490, 508, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975) (footnote omitted).

The AUFTA provides a remedy for a creditor who alleges that a debtor has fraudulently transferred assets in order to avoid satisfying the debt. § 8-9A-1 et seq., Ala.Code 1975. "[F]raudulent conveyances may be attacked only by a party who is injured or damaged by the conveyance, and a stranger to the transaction who is neither a creditor [n]or a purchaser or otherwise affected has no standing to maintain the action.'" Woodard v. Funderburk, 846 So.2d 363, 366 (Ala.Civ.App. 2002) (quoting Jesse P. Evans, Alabama Property Rights and Remedies § 31.7(a) at 543 (2d ed.1998)).

The AUFTA defines a "creditor" as one who has a "claim." § 8-9A-1(4), Ala.Code 1975. The statute defines a "claim" as "[a] right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured...." § 8-9A-1(3), Ala.Code 1975. A "debtor" is "[a] person who is liable on a claim," § 8-9A-1(6), Ala.Code 1975, and a "debt" is defined as "[l]iability on a claim." § 8-9A-1(5), Ala.Code 1975. If General. Medicine does not fit within the definition of a creditor in the statute, then it lacks standing to bring an action...