Reynolds v. Behrman Capital IV L.P
| Decision Date | 28 July 2020 |
| Docket Number | 2:18-cv-01453-ACA |
| Parties | THOMAS E. REYNOLDS, as Trustee, Plaintiff, v. BEHRMAN CAPITAL IV L.P, et al., Defendants. |
| Court | U.S. District Court — Northern District of Alabama |
This matter comes before the court on Defendant Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.'s ("Mintz Levin") motion for summary judgment. (Doc. 40).
Mintz Levin is a law firm that represented Atherotech, Inc., a laboratory that conducted testing on blood cholesterol levels. (See Doc. 22 at 3 ¶ 9). Atherotech, Inc., and its holding company, Atherotech Holdings, Inc. (collectively, "Atherotech"), declared bankruptcy in March 2016. In re Atherotech, Inc., case no. 16-br-909-TOM7, Doc. 1 (N.D. Al. Bankr. March 4, 2016); In re Atherotech Holdings, Inc., case no. 16-br-910-TOM7, Doc. 1 (N.D. Al. Bankr. March 4, 2016). Mintz Levin filed a bankruptcy claim against Atherotech, Inc. for $181,397.99 in unpaid legal fees. In re Atherotech, Inc., case no. 16-br-909-TOM7, Doc. 116-2 (N.D. Al. Bankr. Sept. 26, 2017).
The bankruptcy court appointed Plaintiff Thomas Reynolds as the trustee of Atherotech's estates. See In re Atherotech, Inc., case no. 16-br-909-TOM7, Doc. 7 (N.D. Al. Bankr. March 7, 2016); In re Atherotech Holdings, Inc., case no. 16-br-910-TOM7, Doc. 40 (N.D. Al. Bankr. August 11, 2016). In March 2018, Mr. Reynolds, as trustee for Atherotech's estates, filed suit against a number of defendants, including Mintz Levin. (Doc. 2-1 at 9). Mr. Reynolds alleges that Mintz Levin's legal advice to Atherotech was (1) negligent ("Count One"); (2) a breach of the contract between Atherotech and Mintz Levin ("Count Three"); and (3) an unjust enrichment for Mintz Levin ("Count Four").1 (Doc. 22 at 11-15). He also objects to Mintz Levin's bankruptcy claim ("Count Two"). (Id. at 12-13).
The court GRANTS Mintz Levin's motion for summary judgment on all counts. Mr. Reynolds has not presented evidence creating a genuine dispute of fact about whether Mintz Levin's legal advice was unreasonable, so he cannot prevail on his negligence claim. Mr. Reynolds also has not presented any evidence that Mintz Levin failed to perform its duties under the contract, so he cannot prevail on his breach of contract claim. And because Mr. Reynolds has not presented any evidence that Mintz Levin's enrichment was unjust, he cannot prevail on his unjustenrichment claim. Finally, because all of Mr. Reynolds' substantive claims against Mintz Levin fail, he cannot prevail on his objection to its bankruptcy claim.
On a motion for summary judgment, the court "draw[s] all inferences and review[s] all evidence in the light most favorable to the non-moving party." Hamilton v. Southland Christian Sch., Inc., 680 F.3d 1316, 1318 (11th Cir. 2012) (quotation marks omitted).
Before the court can describe the facts, the court must address a dispute about what evidence the court may rely on at this stage. Mintz Levin's brief relies heavily on deposition testimony from Mr. Reynolds, who was testifying as the trustee for Atherotech's estates. (See, e.g., Doc. 43 at 15 ¶ 24, 16 ¶¶ 26-27, 17 ¶¶ 29-30, 18 ¶¶ 32-33, 19 ¶ 41, 21 ¶¶ 45-47, 22 ¶ 50). Mr. Reynolds argues that Mintz Levin cannot rely on his testimony because Mr. Reynolds was not testifying as Atherotech's corporate representative, nor does he have any personal knowledge of the events at issue in this case. (Doc. 44 at 6 & n.1; id. at 25-28). Mintz Levin responds that reliance on Mr. Reynolds' testimony is proper because the Federal Rules allow it to "use for any purpose the deposition of a party." Fed. R. Civ. P. 32(a)(3).
The court agrees with Mr. Reynolds that much of his deposition testimony is inadmissible because it is not based on Mr. Reynolds' personal knowledge. See Fed. R. Civ. P. 56(c)(2) (); Fed. R. Evid. 602 (). However, much of Mr. Reynolds' testimony is Mr. Reynolds reading or opining about other evidence that Mintz Levin has presented in its motion for summary judgment, such as deposition testimony from other witnesses. (See, e.g., Doc. 43 at 15 ¶ 24, 16 ¶ 27, 17 ¶¶ 29-30, 18 ¶ 32, 22 ¶ 50). Accordingly, even if Mr. Reynolds' testimony is not admissible, the underlying evidence about which he was testifying is admissible. The court's description of the facts will, therefore, rely on the admissible evidence.
Atherotech operated a laboratory that tested blood cholesterol levels. (Doc. 43 at 9 ¶ 1; Doc. 44 at 6 ¶ 1). Physicians ordering blood cholesterol tests had several options for getting blood samples to Atherotech, from having their own staff drawing the blood at the physician's expense, to hosting a laboratory's phlebotomist in-office, to referring patients to a hospital's draw site. (See Doc. 41-3 at 41). This case involves one of those options—paying a physician to conduct the blood draw and to process and ship the blood sample to Atherotech for testing.
In 2005, a different laboratory requested an advisory opinion from the U.S. Department of Human and Health Services, Office of Inspector General ("OIG") about the propriety of providing referring physicians with free blood drawing supplies and payments of between $3 and $6 per blood draw. (Doc. 41-13 at 3). The OIG's advisory opinion concluded that such an arrangement "would clearly implicate" the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b, and might violate the False Claims Act, 31 U.S.C. § 3729, because Medicare paid only $3 per patient encounter for specimen collection fees, plus the cost of any blood drawing supplies. (Id. at 5).
After the OIG issued its 2005 advisory opinion, Atherotech stopped paying fees for blood specimen collection and handling. (Doc. 41-6 at 9). In 2008, Atherotech asked attorney Gregory Root for a legal opinion about paying draw fees and processing and handling ("P&H") fees. (Doc. 41-14). Mr. Root opined that although specimen collection arrangements presented some risk, those arrangements could be structured to minimize the risk by separating compensation for specimen collection (i.e., the blood draw) from compensation for specimen processing and handling (i.e., the P&H fee). (Id. at 2-4). He specifically recommended limiting the blood draw fee to $3 and conducting studies to determine the fair market value of any P&H fee payments. (Id. at 4). In 2009, Mr. Root provided another memorandum making the same recommendations. (Doc. 41-15).
According to a 2009 email sent by Atherotech's Chief Compliance Officer, Les Hric (see doc. 41-9 at 1 ¶ 2), after Atherotech received Mr. Root's legal opinion, it "started to pay [draw fees] once again in order to remain competitive in the market place." (Doc. 41-6 at 9). Atherotech conducted "time and motion studies" to determine the fair market value of processing and handling the specimens, and determined that $7 was appropriate. (Doc. 41-9 at 3 ¶ 5). It therefore began offering a $3 draw fee and a $7 P&H fee when a physician's office did the blood draw and sent it to Atherotech for testing. (Doc. 41-9 at 2-3 ¶¶ 3-4). Mr. Hric's email noted that "[b]y following the guidelines of [Mr. Root's] memorandum we hope it has allowed us to limit our risk of violating civil, criminal, and administrative provisions." (Doc. 41-6 at 9). But he emphasized that although Atherotech had "taken the necessary steps to minimize our exposure to risk . . . that does not mean our program is risk free to us or our physician customers as far as the OIG is concerned." (Id.) (emphasis in original).
In 2010, Atherotech learned that some of its competitors were engaging in what Atherotech viewed as illegal activity to induce physicians to pick those laboratories for blood testing. (Doc. 41-8 at 3 ¶ 5; see also Doc. 41-3 at 24-25, 40). Among other problematic practices, Atherotech believed that its competitor Health Diagnostics Laboratory ("HDL") and several related entities were paying "above-market P&H Fees" of up to $20. (Doc. 41-8 at 3 ¶ 5; Doc. 41-21 at 2-3 ¶ 4; see alsoDoc. 41-3 at 24-25, 40). In January 2011, Atherotech retained Mintz Levin to explore options for how to address the threat HDL represented. (Doc. 41-8 at 4 ¶ 9; see Doc. 41-3 at 24-25; Doc. 41-4 at 43; Doc. 41-9 at 4 ¶ 7). Mintz Levin's engagement letter stated that "[a]s legal counsel for Atherotech, the Firm will provide such legal and regulatory advice as you request." (Doc. 44-9 at 1).
The Mintz Levin attorney who did most of Mintz Levin's work for Atherotech was Hope Foster. She testified that Atherotech had reported "substantial difficulty in competing with" HDL and two related entities because of their marketing practices. (Doc. 41-4 at 43). About a month after Atherotech retained Mintz Levin, Ms. Foster prepared an outline of issues to discuss at an Atherotech board meeting. (Doc. 41-24). That outline stated that "[p]ayment to physicians of amounts associated with specimen handling and draw fees is a growing issue," and that "[t]he picture is murky." (Id. at 5). Ms. Foster suggested a variety of possible avenues to explore, including reporting "the conduct" to federal authorities, state authorities, filing a whistleblower case, seeking an advisory opinion from the OIG, and petitioning the OIG to issue a fraud alert. (Id. at 7). When Ms. Foster presented these options to Atherotech's Board, she discussed "the pros and cons of each option." (Doc. 41-21 at 3 ¶ 8; Doc. 41-9 at 4 ¶ 9).
One of the options that Ms. Foster discussed with Atherotech's Board was reporting its competitors' conduct to the Department of Justice ("DOJ"). (Doc. 41-21 at 4 ¶ 9). She told them that "this involved risks, especially because Atherotech itself paid P&H Fees, although Atherotech's P&H Fees were...
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