Peter G. Milne, P.C. v. Ryan

• Decision Date: 15 October 2015
• Docket Number: No. 06–14–00106–CV,06–14–00106–CV
• Citation: 477 S.W.3d 888
• Parties: Peter G. Milne, P.C., Peter G. Milne, individually, and Healy, Milne & Associates, P.C., Appellants v. Val Ryan and Joy Ryan, Appellees
• Court: Texas Court of Appeals

477 S.W.3d 888

Peter G. Milne, P.C., Peter G. Milne, individually, and Healy, Milne & Associates, P.C., Appellants

v.Val Ryan and Joy Ryan, Appellees

No. 06–14–00106–CV

Court of Appeals of Texas, Texarkana.

Submitted: July 29, 2015

Decided: October 15, 2015

Forrest Mays, J. Chad Parker, The Parker Firm, PC, Tyler, TX, for Peter G. Milne, P.C., and Peter G. Milne.

Peter G. Milne, Peter G. Milne, PC, Tyler, TX, for Healy, Milne & Associates, P.C.

John R. Mercy, Mercy *Carter* Tidwell, LLP, Texarkana, TX, James A. Holmes, Law Offices of James Holmes, PC, Henderson, TX, for appellee.

Before Morriss, C.J., Moseley and Burgess, JJ.

OPINION

Opinion by Justice Burgess

In this accelerated appeal,¹ Peter G. Milne (Milne), Peter G. Milne, P.C. (the PC), and Healy, Milne & Associates, P.C. (Healy), (collectively referred to as the Milne Defendants) challenge the trial court's decision to certify class-action claims brought by Val and Joy Ryan. The Ryans' claims arose from the unauthorized practice of law by Richard Hicks and his businesses, Elder Advisory Services, Elder Tax Advisory Group, LLC, and Elder Tax Advisory Services, LLC, (collectively referred to as the Hicks Defendants) and their alleged affiliation with the Milne Defendants. This appeal concerns the portion of the certification order that defined the class, certified breach of fiduciary duty and unconscionability claims against the Hicks Defendants, and certified class claims for declaratory relief against both the Hicks and Milne Defendants.

We affirm the trial court's certification of class claims of breach of fiduciary duty against the Hicks Defendants. However, we find that the Ryans failed to meet the commonality and predominance requirements with respect to the unconscionability claims and that the trial court erred in certifying claims for declaratory relief. Accordingly, we reverse the portion of the trial court's order that certified these claims.

I. Factual and Procedural Background

"At the initial certification stage, the trial court is not required to try the merits of ... the cause of action." St. Louis Sw. Ry. Co. v. Voluntary Purchasing Grps., Inc., 929 S.W.2d 25, 30 (Tex.App.–Texarkana 1996, no writ). However, class representatives "must at least show some facts to support certification." Id. Here, the events that gave rise to the Ryans' claims, which span a decade, are critical to the parties' arguments and are, therefore, recited below.

A. Medicaid Eligibility Planning and Application Services

The issues in this case arose out of the business arrangement between the Hicks Defendants and the Milne Defendants to provide Medicaid eligibility and planning services. To fully understand the issues in this case, it is necessary to briefly review the law concerning Medicaid eligibility.

Title XIX of the Social Security Act of 1965 created the federal Medicaid program. Medicaid Act, Pub.L. No. 89–97, 79 Stat. 343 (1965) (codified as amended at 42 U.S.C. §§ 1396 –1396w–5 (West, Westlaw through P.L. 114–49 approved Aug. 7, 2015)); see Miller v. State Dep't of Soc. & Rehab. Servs., 275 Kan. 349, 64 P.3d 395, 399 (2003). Medicaid is a "federal-state program designed to provide health care to the neediest individuals." Miller, 64 P.3d at 399 (citing Williams v. Kansas Dep't of Soc. & Rehab. Servs., 258 Kan. 161, 899 P.2d 452, 455 (1995) ). Thus, state Medicaid programs have income eligibility limits which vary depending on the applicant's marital status and other factors. 51 Molly Dear Abshire et al., Texas Practice Series: Elder Law § 8:56 (2015–2016 ed.).

"Because Medicaid only covers categorically needy persons, individuals do not become eligible for Medicaid assistance until they 'spend down' their private assets below a[n] income ceiling set by state statute." Leocata ex rel. Gilbride v. Wilson–Coker, 343 F.Supp.2d 144, 149 (D.Conn.2004) (citing Schweiker v. Gray Panthers, 453 U.S. 34, 37–40, 101 S.Ct. 2633, 69 L.Ed.2d 460 (1981) ).

Moreover, eligibility can be denied if an applicant improperly transfers assets for less than fair market value within three to five years prior to applying for Medicaid services. 42 U.S.C. § 1396p(c) (West, Westlaw through P.L. 114–49 Aug. 7, 2015). If this were not so, then applicants with assets sufficient to provide their own medical care could become eligible by simply transferring those assets to family members. Abshire, supra p.3, § 8:116. Yet, certain transfers can be made without running afoul of the Medicaid eligibility requirements,² and "[a]ny discussion of asset protection in long-term care planning logically requires an understanding of the [Medicaid] transfer rules." Laura Zdychnec, The Perilous Path to Long–Term Care: It's Not Really about Asset Protection, BENCH & B. MINN. (Jun. 5, 2013), http://mnbenchbar.com/2013/06/the-perilous-path-to-long-term-care-its-not-really-about-asset-protection/.³ However, the transfer rules are complicated.⁴ For this reason, many attorneys provide estate planning services to those persons who have an immediate family member requiring long-term care who have too many assets to meet the Medicaid eligibility requirements.⁵

At all times relevant to this case, Hicks operated a Medicaid planning and application service. As part of that operation, Hicks, who is a layman, not an attorney, helped his clients determine how to become eligible for Medicaid benefits and then assisted them with the application process. The fact that Hicks is not an attorney is at the heart of the parties' dispute in this case.

B. Hicks Is Enjoined from the Unauthorized Practice of Law in 2001

In 2001, the Unauthorized Practice of Law Committee of the Supreme Court of Texas discovered Hicks' actions and sued him along with his associated businesses, Elder Advisory Services and Elder Advisory Services, Inc.⁶ As a result of that lawsuit, Hicks was permanently enjoined from the unauthorized practice of law by the 114th Judicial District Court of Smith County, Texas. The September 2001 agreed permanent injunction provided:

1. Defendants, Richard Hicks and Advisory Services for Mature Americans, Inc., and their officers, agents, servants, employees, and attorneys, and those persons in active concert of participation with them who receive actual notice of this Order, are hereby permanently enjoined from engaging in, or aiding or abetting any person in engaging in, the following acts, unless they are at the time of such acts: (i) an attorney duly licensed by the State of Texas, or (ii) employees of an attorney duly licensed by the State of Texas and working under the direct and active supervision of an attorney duly licensed by the State of Texas:

(a) preparing a qualified income trust (otherwise known as a Miller [T]rust) (referred to herein as a "Miller Trust");

(b) preparing Powers of Attorney;

(c) advising persons regarding the creation of a Miller Income Trust, or a Power of Attorney, provided that this restraint shall not prohibit an[y] person enjoined by this judgment from referring a person to an attorney licensed to practice law in Texas for the purpose of obtaining advice from such attorney regarding the creation of a Miller Income Trust or a Power of Attorney;

(d) selling, advertising, mailing representations concerning, or recommending the purchase of, a Miller Trust;

(e) preparing for any person other than Defendants documents for the creation of a Miller Trust;

(f) providing advice to any person other than Defendants concerning a Miller Trust;

(g) providing advice for a fee to any person other than Defendants regarding how that person, or a relative (by marriage or consanguinity) or a principal under a power of attorney, may become qualified for Medicaid benefits;

(h) providing advice for a fee to any person other than Defendants regarding how that person, or a relative (by marriage or consanguinity) or a principal under a power of attorney, may become qualified for benefits available under any program administered by the Social Security Administration or the Texas Department of Human Services;

(i) making case-specific recommendations for a fee to any person regarding how that person, or a relative (by marriage or consanguinity) or a principal under a power of attorney, may become eligible for Medicaid benefits;

(j) making case-specific recommendations for a fee to any person regarding how that person, or a relative (by marriage or consanguinity) or a principal under a power of attorney, may become eligible for benefits available under any program administered by the Social Security Administration or the Texas Department of Human Services;

(k) aiding, assisting or representing applicants and recipients in procuring Medicaid benefits from the Texas Department of Human Services for a fee; and

(l) advertising assistance in procuring Medicaid benefits for a fee by any form of media, including, but not limited to, mail, fax, internet, seminars, radio, television, newspaper, email, or by solicitation by spoken word .... ^[7]

C. Hicks Associates with the Milne Defendants

1. The Nature of the Service

In order to continue providing Medicaid advisory and planning services, Hicks decided to associate himself with an attorney licensed by the State of Texas. Hicks testified that in 2005, he met with Milne, provided him a copy of the injunction, and "asked [Milne] multiple times [if he could] be an employee" so he could continue providing enjoined services to clients without violating the injunction. The Milne Defendants declined to hire Hicks as an employee.⁸ Instead, they negotiated an oral agreement whereby (1) the Hicks Defendants, acting as independent contractors, would provide "Medicaid pre-planning and qualification services to clients" of the Milne Defendants, (2) the Milne Defendants would provide the necessary legal services, and (3) the Hicks Defendants would market the combined services. According to discovery responses provided by the Milne Defendants, Hicks operated as a "satellite office ... for the purpose of Medicaid...