Phi Air Med., LLC v. Corizon, Inc.

• Decision Date: 05 March 2021
• Docket Number: No. M2020-00800-COA-R3-CV,M2020-00800-COA-R3-CV
• Citation: 628 S.W.3d 460
• Court: Tennessee Court of Appeals
• Parties: PHI AIR MEDICAL, LLC v. CORIZON, INC.

628 S.W.3d 460

PHI AIR MEDICAL, LLC

v.CORIZON, INC.

No. M2020-00800-COA-R3-CV

Court of Appeals of Tennessee, Middle Section, AT NASHVILLE.

January 28, 2021 Session

FILED March 5, 2021

No Rule 11 Application for Permission to Appeal filed. Mandate issued May 26, 2021

Erika R. Barnes, Nashville, Tennessee, and Chrisandrea L. Turner, Lexington, Kentucky, for the appellant, PHI Air Medical, LLC.

E. Todd Presnell, Junaid A. Odubeko, and Edmund S. Sauer, Nashville, Tennessee, for the appellee, Corizon, Inc.

John W. McClarty, J., delivered the opinion of the court, in which Thomas R. Frierson, II, and Kristi M. Davis, JJ., joined.

John W. McClarty, J.

PHI Air Medical brought suit based on unjust enrichment and action on sworn account against Corizon for air ambulance services it provided without a contract after Corizon paid only a portion of the billed amount, citing its practice of paying according to statutory caps and Medicare rates. The trial court granted summary judgment, finding that the preemption clause of the Airline Deregulation Act, 49 U.S.C. § 41713, which provides that a state "may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of an air carrier that may provide air transportation," preempts PHI's claims. We affirm the trial court's finding that PHI's claims are preempted and that summary judgment was proper. We reverse the trial court's grant of PHI's voluntary nonsuit of a claim that PHI did not plead.

I. FACTUAL AND PROCEDURAL HISTORY

Corizon, Inc. of Brentwood, Tennessee, is a provider of healthcare services that contracts with government entities across the country to provide healthcare to individuals in state custody. PHI Air, LLC ("PHI") is an Arizona company that has provided air-ambulance services to inmates at Corizon-serviced correctional facilities.

PHI filed a complaint in Williamson County Chancery Court in August 2016, alleging that it had provided emergency air ambulance service in Arizona, Indiana, New Mexico, and Maryland to correctional facilities that had contracted with Corizon for medical services; that it billed Corizon its "customary and usual" rates; and that Corizon refused to pay the full amount. Both parties initially agreed that there was no contract between the parties PHI and Corizon governing the dispute.¹ PHI sought relief based on theories of unjust enrichment and action on sworn account, and asked the court for damages in the amount of $3,307,345.47, plus any additional amount that may accrue prior to the resolution of the case, pre-judgment interest, and attorney's fees.²

In its answer, Corizon denied that PHI was entitled to the damages sought and asserted that the rates applicable to some of PHI's claims were governed by Arizona and Indiana law and that the remaining claims were barred by the doctrines of laches and waiver. According to Corizon, when rates are not set by a contract or capped by a state law that regulates taxpayer-funded correctional healthcare expenses, Corizon reimburses providers a "default rate" based on the Medicare reimbursement rate. Arizona law statutorily limits provider reimbursement, and Corizon also has a contract with the State of Arizona containing the statutory limitation. See Ariz. Rev. Stat. § 41-1608(2). In Indiana, Corizon paid PHI according to the statutory correctional-healthcare rates, which are 104 percent of Medicare reimbursement rates. See Ind. Code § 11-10-3-6(c).

In October of 2017, the parties filed cross-motions for partial summary judgment on the Arizona and Indiana claims to determine whether the Airline Deregulation Act of 1978 ("ADA"), codified in scattered sections of 49 U.S.C., preempted the state statutes capping reimbursement for correctional-healthcare services. Corizon asserted that it was entitled to summary judgment on PHI's claims related to Arizona and Indiana invoices because it paid pursuant to state statutes which cap reimbursement for third-party healthcare providers. PHI argued that the ADA preempted the state statutory caps as applied to their air ambulance services because those statutes "relate to" air carrier prices. The Court granted PHI's motion and denied Corizon's, agreeing that the ADA preempts the state correctional-healthcare statutes on which Corizon had relied.³

In October 2019, PHI filed another Motion for Summary Judgment seeking an award on both the unjust enrichment and action on sworn account claims. Corizon filed a cross-motion for summary judgment arguing that the ADA preempts PHI's causes of action because they "relate to" air-carrier prices and seek to impose implied-in-law payment obligations. In its March 5, 2020, Memorandum and Order, the trial court denied PHI's motion, and granted in part and denied in part Corizon's motion. The trial court held that the ADA preempts all unjust enrichment claims involving air carriers, as a matter of law, but that a genuine issue of material fact existed as to whether the alleged Indiana contract was enforceable. PHI filed a motion to nonsuit, pursuant to Tenn. R. Civ. P. 41.01, any claim it may have asserted as to an Indiana contract, and on May 4, 2020, the trial court entered an Order of Nonsuit of Certain Claim and Entry of Final Judgment dismissing without prejudice any contractual claim PHI may have had arising from an Indiana contract and ordering that its March 5 Memorandum and Order was a final and appealable judgment as a matter of right. PHI timely appealed.

II. ISSUES

PHI states three issues for our review, which can be combined into a single issue: whether PHI's unjust enrichment and action on sworn account claims are preempted by the ADA.

Corizon states the following additional issues for review:

1. Did the Chancery Court mistakenly allow PHI to nonsuit a breach of contract claim relating to Indiana services that PHI did not plead, seek leave to plead, or otherwise assert in this litigation?

2. Does the ADA preempt state statutes capping the reimbursable amount for correctional-healthcare services?

3. Is PHI entitled to recover its unilaterally set "usual and customary" prices or the reasonable value of the services provided?

4. Do PHI's claims seeking additional compensation for Indiana services fail on the merits because a contract governs those services?

5. Does PHI's action on sworn account fail on the merits because Corizon disputes the alleged debt?

III. STANDARD OF REVIEW

A trial court's decision of whether to grant or deny a motion for summary judgment is a question of law; thus, our review is de novo with no presumption of correctness afforded to the trial court's determination. TWB Architects, Inc. v. Braxton, LLC , 578 S.W.3d 879, 887 (Tenn. 2019). Summary judgment is appropriate if no genuine issues of material fact exist, and the movant meets its burden of proving that it is entitled to a judgment as a matter of law. Id. ; Tenn. R. Civ. P. 56.04. As there are no material facts in dispute underlying the trial court's grant of summary judgment, we are tasked with resolving only issues of law.

IV. ANALYSIS

The outcome of this controversy hinges on the scope of the pre-emption clause of the ADA, which provides that "a State ... may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of an air carrier...." 49 U.S.C. § 41713(b)(1). PHI argues that the trial court erred in finding that its claims based on unjust enrichment and action on sworn account are pre-empted by the ADA because

(1) an award of PHI's usual, customary, and reasonable rates under Tennessee's general unjust enrichment common law or action on sworn account statute does not have the requisite "forbidden significant effect" on air carrier prices, routes, or services to trigger preemption; [ ] (2) ADA preemption is a defense unique to air carriers and which cannot be asserted by non-air carriers, as it was by Corizon in the case below[; and (3) ...] holding that the ADA preempts all unjust enrichment and action on account claims involving air carriers precludes an air carrier's ability to collect from the beneficiaries of its Services in all instances where no contract exists, in contravention of the ADA's intent.

Conversely, Corizon asserts that PHI's causes of action "fall squarely within the ADA's broad preemptive reach[, as] [b]oth causes of action seek to use the coercive powers of the State to impose an implied-in-law payment obligation that the parties did not voluntarily undertake."

The expressed purpose of the ADA is " ‘to encourage, develop, and attain an air transportation system which relies on competitive market forces to determine the quality, variety, and price of air services[,]’ " a goal that "would ... be[ ] frustrated if state regulations were substituted for ... federal regulations[.]" Morales v. Trans World Airlines, Inc. , 504 U.S. 374, 422–423, 112 S.Ct. 2031, 119 L.Ed.2d 157 (1992) (Stevens, J., dissenting) (quoting H.R. Conf. Rep. No. 95–1779, p. 53 (1978), U.S. Code Cong. & Admin. News 1978, 3737). Hence, Congress included an express preemption clause in the ADA.⁴ Federal preemption of state law is grounded in the Supremacy Clause of the United States Constitution, which provides that the "Constitution, and the Laws of the United States ... shall be the supreme Law of the Land...." U.S. Const. art. VI, cl. 2. Generally, the States govern "within their particular spheres concurrent with the federal government subject only to the power of the Congress under the Supremacy Clause of the United States Constitution to preempt state law." Pendleton v. Mills , 73 S.W.3d 115, 126 (Tenn. Ct. App. 2001) (citing Tafflin v. Levitt , 493 U.S. 455, 458, 110 S.Ct. 792, 107 L.Ed.2d 887 (1990) ; BellSouth Telecomm., Inc. v. Greer , 972 S.W.2d 663, 670 (Tenn. Ct. App. 1997) ). Consistent with this principle, a federal law or regulation may preempt a state claim. See Lake v. Memphis Landsmen, LLC , 405...