Horizons Rehabilitation, Inc. v. Health Care and Retirement Corp.

• Citation: 810 So.2d 958
• Decision Date: 04 January 2002
• Docket Number: No. 5D00-2414.,5D00-2414.
• Parties: HORIZONS REHABILITATION, INC. etc., et al., Appellants, v. HEALTH CARE AND RETIREMENT CORPORATION, etc., Appellee.
• Court: Court of Appeal of Florida (US)

810 So.2d 958

HORIZONS REHABILITATION, INC. etc., et al., Appellants, v. HEALTH CARE AND RETIREMENT CORPORATION, etc., Appellee.

No. 5D00-2414.

District Court of Appeal of Florida, Fifth District.

January 4, 2002.

Opinion on Grant of Rehearing March 15, 2002.

John J. Sulik, of Dawson, Galant & Sulik, Jacksonville, and John M. Desmond, Mandeville, LA, for Appellants.

John A. DeVault III and R.H. Farnell, II of Bedell, Dittmar, DeVault, Pillans & Coxe, P.A., Jacksonville, and Kathleen H. McGuan and Tamara V. Scoville of Reed Smith LLP, Washington, DC, for Appellees.

SHARP, W., J.

Horizons Rehabilitation, Inc. (Horizons), et. al, appeals from a final summary judgment entered against it on all but one count of a fourteen-count first amended complaint. We affirm and remand to the trial court for further proceedings on Count XII, which was not dismissed in the summary judgment.

The facts of this case are not in dispute. In 1989, Ross Gault (Ross) formed Horizons, which provided holistic therapy services designed to help elderly disabled patients in nursing home facilities, one of which was Health Care & Retirement Corp. (Health Care).¹ Ross was the primary service provider, and it was he who had designed the program.

In 1992, Health Care agreed to lend Horizons $2 million dollars to expand its operations, and the parties entered into a series of contracts (the "agreements") which included, inter alia: a Credit Agreement, a Stock Purchase Agreement, a Sub-ordination Agreement, a series of therapy service contracts, and a Warrant Agreement. Later, a Forbearance Agreement was executed. These agreements were subject to one another. The Credit Agreement required Horizons, prior to closing the transaction, to fully disclose all material information concerning its business.

Pursuant to the agreements, Health Care paid $10,000 for a 10% equity interest in Horizons, and it received warrants to purchase an additional 39% of Horizons' stock. The transaction was structured in this way because Health Care's ownership of a therapy services provider who provided services in its own facilities implicated "related party" issues for Medicare purposes. However, if Horizons' business grew and a great majority of its contracts were with facilities not owned by Health Care, Health Care would then be able to exercise its warrants and own a greater percentage of Horizons.

The service contracts obligated Horizons to provide rehabilitation services at a number of nursing homes owned by Health Care. Horizons submitted monthly invoices to Health Care for these services and Health Care paid the invoices and received reimbursement from Medicare. The service contracts included termination provisions, whereby either party could cancel the contract without cause upon 30 to 90 day written notice.

Prior to executing the Letter of Intent with regard to the transaction, Horizons disclosed to Health Care on-going litigation between it, specifically Ross, and Paragon, a former nursing home in which Ross had provided therapy services. This litigation was commenced by Horizons' filing a declaratory action on a contract between Ross and Paragon. Paragon filed a counterclaim based on a non-compete agreement in the contract. Approximately four months after the parties closed the transaction, Horizons forwarded pleadings in the litigation to Health Care.

Health Care reviewed the pleadings and determined that the litigation was substantially more serious than it had been led to believe. It had known only that the lawsuit was an attempt to recover money damages on unpaid invoices. However, the pleadings revealed that the litigation involved the claim that Horizons' therapy services activities were limited by a non-compete agreement, and that the service contracts entered into by the parties were in violation of the non-compete covenant.

The disclosure of the extent of this litigation resulted in the execution of the Forbearance Agreement, in which Health Care agreed to refrain from exercising any of its remedies under the Credit Agreement, and to continue to make loans to Horizons. This agreement also terminated Horizons' therapy services in locations where the non-compete agreement was in effect, and gave Health Care certain controls over Horizons' business.

Both the Credit Agreement and the Forbearance Agreement contained a choice of law provision which provided that all disputes arising out of the agreements would be "governed by and construed and enforced in accordance with the laws of the State of Ohio." The Forbearance Agreement also provided that Horizons "expressly acknowledges and agrees that [it had] no defenses, setoffs, claims, counter-claims or causes of action of any kind or nature" against Health Care.

In 1993, Horizons wanted to extend the Credit Agreement with Health Care. However, upon learning that Health Care wanted a 75% ownership/equity interest in Horizons, Horizons rejected that proposition and entered into a factoring arrangement. It also sought a purchaser or partner to merge with, and located TheraTx.

TheraTx presented several proposals for the purchase of Horizons which contemplated the continuation of services with Health Care. These services were governed by the service contracts, and under those agreements, Health Care had no obligation to modify the contracts and, in fact, could cancel them without cause upon 30 to 90 days written notice. TheraTx also wanted Health Care's attorney to provide a legal opinion that after the transaction was completed, there would be no conflict with federal or state law. Health Care's counsel refused to provide such an opinion because it feared there would be a conflict under the related party rule. Ultimately, TheraTx decided not to consummate the deal and withdrew its offer.

Also in 1993, the Department of Health and Human Services issued a memorandum which outlined inappropriate billing and payment practices for therapy services. As a result of this memorandum, Health Care increased its scrutiny of all invoices presented to it, including Horizons'. It discovered problems with Horizons' billing practices that were inconsistent with Health Care's policies and violated Medicare guidelines. This jeopardized Medicare's payment to Health Care of Horizons' invoices, both prospectively and retroactively. On March 31, 1994, Health Care gave notice that it was terminating all of its service contracts with Horizons.

During this same time, Horizons attempted to negotiate a management contract with Health Care for therapy services because it thought Health Care would need Horizons' management and therapists. In April of 1994, the parties met at Horizons' request. Health Care stated it wanted to review Horizons business operations, including billing information, accounting information, employee data, and asset data, and Horizons supplied this information to it. On June 9, 1994, Health Care broke off negotiations with Horizons and informed Horizons that it intended to replace it. By June 30, 1994, all of the service contract terminations were effective and Horizons ceased doing business with Health Care.

Due to the potential liability Health Care faced if Medicare refused to pay Horizons' invoices, Health Care did not immediately pay Horizons' June invoices. Instead, it created a fund to indemnify itself, based on Horizons' obligation to indemnify Health Care if Medicare denied payment of any invoices. Over the following months, Health Care paid Horizons' invoices. By a letter dated August 25, 1994, Horizons accepted payment of $535,000, and the parties mutually released each other from all liability for claims arising from late payment of the invoices. The final amount was paid by Health Care on November 7, 1994.

Horizons then sued Health Care. Its first amended complaint consists of fourteen counts.² Health Care then moved for summary judgment, which the trial court granted on counts I through XI, XIII and XIV, leaving only count XII (action to set aside a stock purchase agreement) pending below.

In reviewing a summary judgment, every possible inference must be drawn from the record in a light most favorable to the nonmoving party, in this case Horizons. Greene v. Kolpac Builders, Inc., 549 So.2d 1150, 1151 (Fla. 3d DCA 1989). If there is any dispute as to the material facts summary judgment is precluded. Holl v. Talcott, 191 So.2d 40 (Fla.1966); Greene. The standard of review is de novo. Major League Baseball v. Morsani, 790 So.2d 1071 (Fla.2001)

; Rollins v. Alvarez, 792 So.2d 695 (Fla. 5th DCA 2001). The burden of establishing the absence of any material fact is on the moving party. Holl. Where there is no material fact in dispute and the court has applied the correct law, the summary judgment should be affirmed. See Strama v. Union Fidelity Life Ins. Co., 793 So.2d 1129 (Fla. 1st DCA 2001); Physicians Health Care Plans, Inc. v. Cook, 714 So.2d 566 (Fla. 1st DCA 1998),

Evans v. Bell, 677 So.2d 306 (Fla. 1st DCA 1996). For the following reasons, we find there was no genuine issue of material fact in dispute, and that the trial court applied the correct law.

Horizons characterizes the release in this case as an anticipatory release, and argues that Florida law will not enforce anticipatory releases, i.e., releases for uncommitted intentional torts. In determining whether summary judgment was properly granted, we must first address whether and to what extent the choice of law and release provisions are valid under Florida law. We find the release is valid in Florida, although it would not bar claims for intentional torts.³ The only claims in the complaint which pertain to intentional torts, are Counts VII (intentional interference with economic advantage); IX (fraud); and XIII (outrageous conduct). With respect to the remaining claims, the trial court determined that the plain meaning of the language in the release⁴ barred the counts because Horizons released Health Care from any...