Pee Dee Health Care, P.A. v. Estate of Thompson

• Decision Date: 29 August 2018
• Docket Number: Opinion No. 27839,Appellate Case No. 2017-000681
• Citation: 818 S.E.2d 758,424 S.C. 520
• Court: South Carolina Supreme Court
• Parties: PEE DEE HEALTH CARE, P.A., Respondent, v. ESTATE OF Hugh S. THOMPSON, Petitioner.

424 S.C. 520

818 S.E.2d 758

PEE DEE HEALTH CARE, P.A., Respondent,

v.ESTATE OF Hugh S. THOMPSON, Petitioner.

Appellate Case No. 2017-000681

Opinion No. 27839

Supreme Court of South Carolina.

Heard June 14, 2018

Filed August 29, 2018

Jon Rene Josey, of Turner Padget Graham & Laney, P.A., of Florence, and John J. James II, of Paulling & James, L.L.P., of Darlington, for Petitioner.

James Mixon Griffin, of Griffin Davis Law Firm, and Ariail Elizabeth King, of Lewis Babcock L.L.P., both of Columbia, for Respondent.

JUSTICE FEW :

This is an appeal from the circuit court's decision to impose sanctions against Pee Dee Health Care, P.A., and its attorney ¹ for conduct that occurred before the circuit court entered summary judgment against it. The issue we address is whether a motion for sanctions filed nine days after remittitur from Pee Dee Health's unsuccessful appeal of the summary judgment order is untimely under the South Carolina Frivolous Civil Proceedings Sanctions Act (FCPSA) and Rule 11 of the South Carolina Rules of Civil Procedure. We find the motion was untimely under the FCPSA, but the circuit court did not abuse its discretion in finding the motion timely under Rule 11.

I. Facts and Procedural History

Pee Dee Health Care, P.A. is a medical clinic in Darlington. Doctor Hugh Thompson Jr.² worked there as a physician from 1998 through 2001. Pee Dee Health paid Dr. Thompson a salary to treat patients, and in exchange, Dr. Thompson assigned to Pee Dee Health the right to receive all payments from the Centers for Medicare and Medicaid Services (CMS) for services Dr. Thompson provided. In 1994, four years before Dr. Thompson began working for Pee Dee Health, his medical license was suspended and he was placed on the Medicare and Medicaid excluded providers list. Although Dr. Thompson's license was reinstated in 1998, he failed to seek removal of his name from the excluded providers list until 2002. Dr. Thompson was therefore on the excluded providers list during his entire tenure at Pee Dee Health.

In 2007, six years after Dr. Thompson left Pee Dee Health, CMS discovered Dr. Thompson had been on the excluded providers list while working for Pee Dee Health, and demanded Pee Dee Health reimburse CMS for all payments it made to Pee Dee Health in connection with Dr. Thompson's services. CMS estimated the total amount of these "overpayments" to be $208,821.03 plus interest. Pee Dee Health opposed this claim through multiple levels of federal administrative appeals. The federal administrative law court found Pee Dee Health "is reasonably expected to know and has an affirmative duty to know the exclusion status of its employees through due diligence prior to entering the employment relationship," and therefore found Pee Dee Health was "at fault regarding the overpayment."³ The Medicare Appeals Council upheld this decision, finding Pee Dee Health "failed to exercise due diligence in determining [Dr. Thompson's] exclusion status during the hiring process and when completing federal application forms."

In 2010, having exhausted its federal administrative appeals, Pee Dee Health brought an action in probate court against Thompson's estate⁴ seeking to recover the amount it was forced to pay to CMS. After Thompson's estate disallowed the claim, Pee Dee Health filed an amended complaint in probate court and removed the case to circuit court pursuant to subsection 62-1-302(d)(5) of the South Carolina Code (Supp. 2017). The amended complaint included twenty separate causes of action.⁵

Thompson's estate sought to disqualify Pee Dee Health's attorney Tony R. Megna—who also served as Pee Dee Health's chief executive officer—on the basis that he was a necessary fact witness in the case. See Rule 3.7(a), RPC; Rule 407, SCACR ("A lawyer shall not act as advocate at a trial in which the lawyer is likely to be a necessary witness ...."). The circuit court disqualified Megna.

Pee Dee Health and Thompson's estate then filed cross-motions for summary judgment. The circuit court granted summary judgment in favor of Thompson's estate, and made specific findings that there was no genuine issue of material fact regarding each of Pee Dee Health's twenty causes of action. The circuit court summed up its decision by stating,

The Court finds, as a matter of law and fact, that Pee Dee Health cannot prove an absence of fault in causing the existence of the debt being sued upon. Pee Dee Health's fault has been adjudicated with finality in federal administrative proceedings and Pee Dee Health is collaterally estopped from asserting that it is not at fault. Furthermore, under South Carolina substantive law ..., Pee Dee Health is now barred from asserting this claim—it could have easily discovered the truth of matters and it had a non-delegable duty imposed by federal law to do so.

Pee Dee Health filed a motion to alter or amend the summary judgment order, but the motion was "dismissed as improper" because the motion was filed by Megna, whom the circuit court had previously disqualified.

Pee Dee Health appealed to the court of appeals, bringing its total of pending appeals in this case to three. One of the other appeals focused on whether the circuit court erred in dismissing an appeal from the probate court before the case was removed, and the other focused on whether the circuit court erred in disqualifying Megna. The court of appeals consolidated the three appeals and issued an unpublished decision affirming in part and dismissing in part. See Pee Dee Health Care, P.A. v. Thompson , 2013-UP-311, 2013 WL 8538755 (S.C. Ct. App. filed July 3, 2013). The court of appeals denied Pee Dee Health's petition for rehearing, and this Court denied its petition for a writ of certiorari. The court of appeals issued the remittitur on January 7, 2014.

Nine days later, on January 16, 2014, Thompson's estate filed a motion for sanctions against Pee Dee Health, Megna, and Megna's law firm pursuant to the FCPSA⁶ and Rule 11 of the South Carolina Rules of Civil Procedure. The estate alleged Pee Dee Health pursued litigation it knew was meritless in probate court and circuit court, and alleged Megna engaged in a pattern of "abusive, manipulative, and disrespectful" conduct, much of which the estate alleged was improper because it occurred after—and in violation of—the circuit court's disqualification order. All of the alleged misconduct occurred before Pee Dee Health filed its appeal from the summary judgment order.

Pee Dee Health filed a motion to strike the estate's motion on the ground the circuit court no longer had jurisdiction, and the motion was otherwise untimely. After a hearing, the circuit court found the motion was timely under Rule 11 and issued an order imposing $34,150 in sanctions against Pee Dee Health, Megna, and Megna's law firm. In explaining its decision to impose sanctions, the circuit court stated,

This Court does not take the imposition of sanctions under Rule 11 lightly, but finds it appropriate here due to Megna's conduct in this case—specifically, his refusal to accept this Court's order disqualifying him as counsel and his unwarranted and meritless attempts to entangle uninvolved third-party attorneys in this case through inappropriate discovery requests. ... Megna's conduct has caused [Thompson's estate] to incur substantial and unnecessary legal bills, which have diminished the size of the estate, not to mention the inordinate delay in closing the estate. This conduct has also required the Court to spend significant time addressing these matters through hearings and phone conferences.

Although the court did not explicitly deny sanctions under the FCPSA, the court's order is clear the sanctions were imposed pursuant to Rule 11 only.

Pee Dee Health and Thompson's estate appealed. Pee Dee Health argued the circuit court erred in finding the motion was timely under Rule 11, and challenged the sanctions order on the merits. The estate argued the motion was also timely under the FCPSA. The court of appeals affirmed the circuit court's decision to deny sanctions under the FCPSA, finding the estate's motion untimely. Pee Dee Health Care, P.A. v. Estate of Thompson , 418 S.C. 557, 572, 795 S.E.2d 40, 48 (Ct. App. 2016) (citing Russell v. Wachovia Bank, N.A. , 370 S.C. 5, 20, 633 S.E.2d 722, 730 (2006) (stating "a motion for sanctions [under the FCPSA] must be filed within ten days of the notice of entry of judgment") ). As to Rule 11, the court of appeals reversed the circuit court's decision to impose sanctions, but only on the question of timeliness. 418 S.C. at 571, 795 S.E.2d at 48. The court of appeals explained that although Rule 11 did not contain a time limit, the purpose behind the Rule would be best served by a time limit that required the party seeking sanctions to file its motion "within a reasonable time of discovering the alleged improprieties." 418 S.C. at 570, 795 S.E.2d at 47 (citing Griffin v. Sweet , 136 N.C.App. 762, 525 S.E.2d 504, 506 (2000) ). Thompson's estate filed a petition for a writ of certiorari, which we granted.

II. The FCPSA

The FCPSA provides an attorney or party "shall be sanctioned for a frivolous claim or defense" if certain conditions are met. See S.C. Code Ann. § 15-36-10(C)(1)(a), (b), (c) (Supp. 2017) (listing conditions that give rise to sanctions). As to when a motion for sanctions must be filed, subsection 15-36-10(C)(1) provides,

At the conclusion of a trial and after a verdict for or a verdict against damages has been rendered or a case has been dismissed by a directed verdict, summary judgment, or judgment notwithstanding the verdict, upon motion of the prevailing party, the court shall proceed to determine if the claim or defense was frivolous.

Id. South Carolina appellate courts have interpreted this subsection to require a party to file its motion for sanctions under the FCPSA within ten days of the entry of judgment. See, e.g. , Russell , 370 S.C. at 20, 633 S.E.2d at 730 (stating "a motion for sanctions [under the...