Health Mgmt. Associates Inc. v. Yerby

• Decision Date: 16 August 2011
• Docket Number: No. COA10–577.,COA10–577.
• Citation: 715 S.E.2d 513
• Parties: HEALTH MANAGEMENT ASSOCIATES, INC., and Louisburg H.M.A., Inc. d/b/a Franklin Regional Medical Center, Plaintiffs,v.Lemuel G. YERBY, III, M.D., Triangle Surgical Associates, P.A., Medical Mutual Insurance Company of North Carolina a/k/a Medical Mutual Insurance Company of North Carolina, Inc., Medical Mutual Services, LLC, and Steven Schwam, M.D., Defendants.
• Court: North Carolina Court of Appeals

715 S.E.2d 513

HEALTH MANAGEMENT ASSOCIATES, INC., and Louisburg H.M.A., Inc. d/b/a Franklin Regional Medical Center, Plaintiffs,

v.Lemuel G. YERBY, III, M.D., Triangle Surgical Associates, P.A., Medical Mutual Insurance Company of North Carolina a/k/a Medical Mutual Insurance Company of North Carolina, Inc., Medical Mutual Services, LLC, and Steven Schwam, M.D., Defendants.

No. COA10–577.

Court of Appeals of North Carolina.

Aug. 16, 2011.

Appeal by plaintiffs from orders entered 1 June and 23 July 2009 by Judge John R. Jolly, Jr. in the Special Superior Court for Complex Business Cases. Heard in the Court of Appeals 17 November 2010.

The Mitchell Law Group, by Ronnie M. Mitchell, Fayetteville and Grant S. Mitchell, for plaintiff-appellants.

Young Moore and Henderson P.A., by Kelly E. Street, William P. Daniell, Raleigh, and Robert D. Walker, Jr., Goldsboro, for defendant-appellees.

STEELMAN, Judge.

Where HMA was judicially estopped from asserting that the corporate veil should be pierced between HMA and Louisburg HMA, HMA was not licensed as an insurance carrier in North Carolina, and Louisburg HMA paid no monies to settle the Faulkner lawsuit, the trial court did not err in finding that neither HMA nor Louisburg HMA had standing to recover contribution from defendants. Where there was no factual issue that Dr. Yerby and Triangle Surgical Associates were independent contractors rather than employees of Louisburg HMA, the trial court properly granted summary judgment on plaintiffs' indemnity claim. Where defendants did not consciously accept the benefit of a settlement, there was no claim for unjust enrichment.

I. Factual and Procedural Background

On 25 June 2002, Joan M. Faulkner (Faulkner) visited Franklin Regional Medical Center for an excisional biopsy of her left cervical lymph node. Dr. Lemuel Yerby, III (Dr. Yerby) performed the operation. During the operation, supplemental oxygen was administered through a nasal cannula and face mask. Dr. Steven Schwam (Dr. Schwam) managed and supervised the administration of anesthesia. Dr. Yerby used an electrosurgical unit while performing the operation. The electrosurgical unit came into contact with the oxygen and ignited a fire. Faulkner was severely burned on her face, neck, and chest.

In 2003, Faulkner and her husband filed a complaint seeking recovery for medical negligence against Health Management Associates, Inc. (HMA); Louisburg H.M.A., Inc., d/b/a Franklin Regional Medical Center (Louisburg HMA); Dr. Yerby; Triangle Surgical Associates, P.A.; and Dr. Schwam in Franklin County case 03 CVS 271. On 20 September 2004, Dr. Schwam entered into a settlement agreement with the Faulkners and was released from all claims. On 24 August 2005, five days before the scheduled trial, the Faulkners signed a settlement agreement with HMA and its professional liability insurance carrier, The Doctor's Company, and agreed to release HMA, Louisburg HMA, Dr. Yerby, and Triangle Surgical Associates, P.A. from any and all claims arising from the 25 June 2002 incident. Dr. Yerby and Triangle Surgical Associates, P.A. had not authorized HMA to act on their behalf and had refused to participate in the settlement negotiations. Pursuant to the settlement agreement, The Doctor's Company paid to the Faulkners its liability policy limits and HMA paid an additional amount.¹ On 5 June 2006, the Faulkners dismissed their complaint with prejudice.

On 24 August 2006, HMA and Louisburg HMA (collectively, plaintiffs) filed this action against Dr. Yerby, Triangle Surgical Associates, P.A., Medical Mutual Insurance Company of North Carolina a/k/a Medical Mutual Insurance Company of North Carolina, Inc., Medical Mutual Services, LLC, and Dr. Schwam, for contribution, indemnity, and unjust enrichment. Subsequently, all defendants were voluntarily dismissed with the exception of Dr. Yerby and Triangle Surgical Associates, P.A. (collectively, defendants). On 27 October 2006, defendants filed an answer and denied the material allegations of plaintiffs' complaint. On 24 July 2007, the Chief Justice of North Carolina designated this case as a complex business case and assigned it for hearing. On 26 January 2009, defendants filed a motion for summary judgment.

On 1 June 2009, the trial court entered a lengthy order, granting defendants' motion for summary judgment, and dismissing plaintiffs' complaint. On 23 July 2009, the trial court denied plaintiffs' motions to reconsider, amend, alter, or otherwise grant relief from the 1 June 2009 order pursuant to Rules 59 and 60 of the North Carolina Rules of Civil Procedure.

Plaintiffs appeal.

II. Summary Judgment Order

In their first argument, plaintiffs contend that the trial court erred in granting defendants' motion for summary judgment. We disagree.

A. Standard of Review

The standard of review on a trial court's ruling on a motion for summary judgment is de novo. Forbis v. Neal, 361 N.C. 519, 524, 649 S.E.2d 382, 385 (2007). Summary judgment is appropriate where “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law.” N.C. Gen.Stat. § 1A–1, Rule 56(c) (2009). “All inferences of fact from the proofs offered at the hearing must be drawn against the movant and in favor of the party opposing the motion.” Collingwood v. G.E. Real Estate Equities, 324 N.C. 63, 66, 376 S.E.2d 425, 427 (1989) (citation omitted).

B. Analysis

1. Claims for Contribution

N.C. Gen.Stat. § 1B–1 provides: “Except as otherwise provided in this Article, where two or more persons become jointly or severally liable in tort for the same injury to person or property or for the same wrongful death, there is a right of contribution among them even though judgment has not been recovered against all or any of them.” N.C. Gen.Stat. § 1B–1(a) (2009). However, “[t]he right of contribution exists only in favor of a tort-feasor who has paid more than his pro rata share of the common liability, and his total recovery is limited to the amount paid by him in excess of his pro rata share.” N.C. Gen.Stat. § 1B–1(b) (2009). The right of contribution is statutory and only applies to joint tort-feasors. Roseboro Ford, Inc. v. Bass, 77 N.C.App. 363, 367, 335 S.E.2d 214, 217 (1985).

Two or more parties are joint tort-feasors when their negligent or wrongful acts are united in time or circumstance such that the two acts constitute one transaction or when two separate acts concur in point of time and place to cause a single injury. The burden is on the tortfeasor seeking contribution to show that the right exists, and to allege facts which show liability to the injured party as well as a right to contribution.

State Farm Mut. Ins. Co. v. Holland, 324 N.C. 466, 470, 380 S.E.2d 100, 102–03 (1989) (internal citations omitted) (emphasis added). It was incumbent upon HMA and Louisburg HMA to demonstrate a right to contribution against defendants.

The trial court entered its order upon uncontroverted facts. As to HMA, it held that there was no admissible evidence that HMA was independently negligent in causing injuries to the Faulkners. There was thus no basis for a contribution claim by HMA against defendants. The trial court rejected HMA's contention that Louisburg HMA was the “mere instrumentality” of HMA based upon two grounds: (1) there was no evidence to support that theory; and (2) HMA, by taking a contrary position in the prior litigation, was judicially estopped from asserting that theory. Finally, the trial court rejected HMA's contention that it was a subrogated insurance carrier for Louisburg HMA because it was not licensed as an insurance company in North Carolina. As to Louisburg HMA, it held that because it had made no settlement payments to the Faulkners, it did not have independent standing to pursue a contribution claim against defendants.

a. HMA

With regard to HMA, plaintiffs' main contention was that the corporate veil between Louisburg HMA and HMA should be deemed pierced under the instrumentality rule. Thus, HMA was liable for the acts of Louisburg HMA, and payment made on behalf of Louisburg HMA entitles HMA to contribution from defendants.

Plaintiffs contend that they should be permitted to disregard the corporate structure which they themselves created, i.e., reverse piercing of the corporate veil. “Occasionally the owners of the corporation themselves will urge a court to disregard a separate corporate entity for their own benefit (‘insider reverse pierce’). This argument is rarely sustained, but may be accepted in special circumstances.” Russell M. Robinson, II, Robinson on North Carolina Corporation Law, § 2.10[1], at 2–26 (7th ed.2010) (footnote omitted); see also Board of Transportation v. Martin, 296 N.C. 20, 29, 249 S.E.2d 390, 396 (1978) (“Where persons have deliberately adopted the corporate form to secure its advantages, they will not be allowed to disregard the existence of the corporate entity when it is to their benefit to do so.” (citations omitted)); Department of Transp. v. Airlie Park, Inc., 156 N.C.App. 63, 68, 576 S.E.2d 341, 345 (citing Robinson), appeal dismissed, 357 N.C. 504, 587 S.E.2d 417 (2003); Terry v. Yancey, 344 F.2d 789, 790 (4th Cir.1965) ( “[W]here an individual creates a corporation as a means of carrying out his business purposes he may not ignore the existence of the corporation in order to avoid its disadvantages.” (citations omitted)).

Even assuming arguendo that plaintiffs could show genuine issues of material fact as to whether the corporate veil should have been pierced based upon the instrumentality rule, plaintiffs are barred from making such an argument under the doctrine of judicial estoppel.

“[J]udicial estoppel forbids a party from asserting a legal position inconsistent with one taken earlier in the same or related litigation.” Price v. Price, ...