Houghton v. Department of Health

Decision Date07 November 2005
Docket NumberNo. 20030931.,20030931.
Citation2005 UT 63,125 P.3d 860
PartiesPaul HOUGHTON and Billie Henderson, individually and each as representative of a class; and Damian Henderson, Wayne Rubens, Ron Roes, and Susan Roes, who are other members of these classes, similarly situated, Plaintiffs and Appellants, v. DEPARTMENT OF HEALTH; The Office of Recovery Services; The Department of Human Services; The State of Utah; Rod L. Betit, Director of the Department of Health and Director of Department of Human Services; Emma Chacone, Executive Director of the Office of Recovery Services; and John Does 1-50 and Jane Does 1-50, Defendants and Appellees.
CourtUtah Supreme Court

Robert B. Sykes, Alyson Carter, Robert J. Fuller, Salt Lake City, for plaintiffs.

Mark L. Shurtleff, Att'y Gen., Brent A. Burnett, Asst. Att'y Gen., Salt Lake City, for defendants.

PARRISH, Justice:

¶ 1 In 1995, plaintiffs filed suit against the Department of Health, the Office of Recovery Services, the State of Utah, and individual defendants (collectively, the "State"), seeking the return of monies paid to the State from settlements or judgments entered on plaintiffs' behalf. After several years of protracted motion practice and two appeals to this court, plaintiffs now appeal the district court's interlocutory order limiting the scope of discovery. The district court based its order on its interpretation of Utah case law. Because we conclude that the district court erred in its interpretation, we reverse and remand.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 2 As a result of injuries they sustained in separate accidents, plaintiffs Paul Houghton, Billie and Damien Henderson, and Wayne Rubens each received Medicaid assistance to pay their medical bills. After plaintiffs sought compensation for their injuries from potentially liable third parties, the State, pursuant to section 26-19-5 of the Utah Code (the "lien statute"),1 placed reimbursement liens on any settlement or judgment proceeds in order to recover the Medicaid assistance it had paid on plaintiffs' behalf.

¶ 3 Alleging that the lien statute violated federal law, plaintiffs filed a notice of claim with the State pursuant to the provisions of the Utah Governmental Immunity Act (the "Immunity Act").2 The notice stated that plaintiffs "intend[ed] to bring a class action" to recover "the money [the State] took illegally by liening their property ... plus any interest, costs and attorneys fees." Plaintiffs attached to their notice a draft complaint, which sought the return of all "monies ... illegally and unlawfully taken" and "attorneys fees as allowed by law."

¶ 4 On October 27, 1995, plaintiffs filed suit against the State, alleging that the lien statute was illegal because it violated federal law prohibiting the filing of liens against the property of living Medicaid recipients. On December 18, 1995, plaintiffs moved to certify their suit as a class action, and on January 29, 1996, the district court granted the motion, certifying two classes of plaintiffs. Class I consisted of Medicaid recipients with third-party liability claims who received settlements or judgments from liable third parties from which the State's reimbursement liens were paid. Class II plaintiffs were identical to Class I plaintiffs with the exception that Class II plaintiffs had "retained counsel and actually filed actions or made claims through attorneys[] against the liable third parties."

¶ 5 After plaintiffs filed a notice of deposition and request for document production, the State moved to disqualify plaintiffs' attorneys, asserting that their representation of plaintiffs gave rise to a conflict of interest in violation of rule 1.9 of the Utah Rules of Professional Conduct because plaintiffs' attorneys had previously represented the State in personal injury actions brought by Medicaid recipients. In addition, the State sought a protective order to delay discovery pending the resolution of its motion to disqualify. The district court granted both motions. Plaintiffs petitioned this court for permission to file an interlocutory appeal, which we granted. In that appeal, we reversed the district court, holding that plaintiffs' counsel did not violate rule 1.9 of the Utah Rules of Professional Conduct. Houghton v. Dep't of Health, 962 P.2d 58, 63 (Utah 1998) ("Houghton I"). On remand, the district court reinstated plaintiffs' counsel.

¶ 6 In late 1998, this court issued two opinions affirming the validity of the lien statute. See S.S. v. State, 972 P.2d 439, 442 (Utah 1998); Wallace v. Estate of Jackson, 972 P.2d 446, 448 (Utah 1998). Arguing that those opinions completely disposed of plaintiffs' claims, the State moved for judgment on the pleadings. While plaintiffs conceded that S.S. and Wallace gutted their challenge to the validity of the lien statute, they maintained the viability of their other claims. The district court granted the State's motion for judgment on the pleadings on all of plaintiffs' claims except their claim seeking the State's contribution to their attorney fees.

¶ 7 Undeterred, the State filed another motion directed at plaintiffs' claim for attorney fees. The State argued that it was entitled to summary judgment on that claim because the named plaintiffs either never incurred attorney fees or already had been compensated by the State for its share of fees. Plaintiffs opposed the State's motion and also sought reconsideration of the district court's ruling disposing of their other claims. Plaintiffs argued that, in addition to their claim for attorney fees, they should be allowed to proceed with their claim seeking to invalidate the priority status of the State's lien.

¶ 8 The district court disposed of both motions in an order dated November 13, 2000. It denied plaintiffs' motion for reconsideration, citing this court's decision in State ex rel. Office of Recovery Services v. McCoy, 2000 UT 39, 999 P.2d 572, and it granted the State's motion for summary judgment, declaring that "no issues related to a named plaintiff or class representative remain unresolved."

¶ 9 Plaintiffs again appealed to this court, arguing that the district court erred in (1) granting the State's motion for judgment on the pleadings with respect to their claim challenging the validity of the lien's priority status, and (2) granting the State's motion for summary judgment on the Class II plaintiffs' claims for attorney fees.

¶ 10 In Houghton v. Department of Health, 2002 UT 101, 57 P.3d 1067 ("Houghton II"), we affirmed the district court's grant of judgment on the pleadings, holding that "the priority lien on Medicaid recipients' third-party settlement proceeds did not violate federal law." Id. at ¶ 9. However, we reversed the summary judgment on the Class II plaintiffs' claim for attorney fees and remanded the case to the district court for further proceedings on that claim. Id. at ¶ 10.

¶ 11 On remand, the Class II plaintiffs moved to compel discovery. Again, the State fired up its motion machine. It moved to dismiss without prejudice the Class II plaintiffs' remaining claim for attorney fees, arguing that the district court lacked subject matter jurisdiction over that claim because plaintiffs had failed to comply with the Immunity Act. In the alternative, the State argued that the district court should compel plaintiffs to add a new Class II representative because none of the named representatives could assert a valid claim for attorney fees. The State also moved to stay all discovery pending the district court's resolution of its motion to dismiss, which the district court denied. Thereafter, plaintiffs moved to add additional Class II representatives, and the State responded by filing an additional motion to dismiss. The State asserted that the district court lacked jurisdiction over those additional plaintiffs sought to be named as Class II representatives, as well as all other unnamed Class II plaintiffs, because the notice of claim filed with the State had not specifically listed them. Additionally, the State moved for a protective order, arguing that plaintiffs' discovery requests were overly broad and unduly burdensome, and sought protected information. The district court granted plaintiffs' motion to add Class II representatives and denied the State's motions to dismiss. The State then moved to decertify the class.

¶ 12 On November 3, 2003, in an order disposing of the remaining motions before it, the district court (1) denied plaintiffs' motion to compel discovery, (2) granted the State's motion for a protective order, limiting the discovery that plaintiffs could seek, and (3) delayed a decision on the State's motion for decertification of the class until after the parties completed the discovery allowed under the terms of the protective order.

¶ 13 The district court based its November 3, 2003 order on the holding of McCoy, which, it declared, "is found in the last sentence of paragraph 18 of that case." That sentence reads:

We therefore conclude that under subsection (4), when the State elects to recover directly from a recipient who has expressly excluded the State's claim from any attempt to recover from a third party, the State must pay the attorney fees incurred in procuring the State's share of the settlement proceeds.

McCoy, 2000 UT 39, ¶ 18, 999 P.2d 572. The district court accordingly limited the scope of discovery to that which was necessary to identify Medicaid recipients falling within its interpretation of the holding of McCoy. On November 21, 2003, plaintiffs petitioned for permission to appeal the district court's interlocutory discovery order, arguing that the district court's interpretation of McCoy was erroneous. We granted plaintiffs' petition on January 15, 2004, and have jurisdiction pursuant to Utah Code section 78-2-2(3)(j) (2002).

ANALYSIS

¶ 14 Plaintiffs argue that the district court erred in interpreting the...

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