Shelby Cnty. Health Care Corp. v. S. Farm Bureau Cas. Ins. Co.

• Decision Date: 28 April 2017
• Docket Number: No. 15-3765,15-3765
• Citation: 855 F.3d 836
• Parties: SHELBY COUNTY HEALTH CARE CORPORATION, doing business as Regional Medical Center, Plaintiff–Appellant, v. SOUTHERN FARM BUREAU CASUALTY INSURANCE COMPANY; Medford Farm Partnership; Aaron Medford; Barbara Ford, as Special Administratrix of the Estate of John Dallas Smiley, Defendants–Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

855 F.3d 836

SHELBY COUNTY HEALTH CARE CORPORATION, doing business as Regional Medical Center, Plaintiff–Appellant,

v.SOUTHERN FARM BUREAU CASUALTY INSURANCE COMPANY; Medford Farm Partnership; Aaron Medford; Barbara Ford, as Special Administratrix of the Estate of John Dallas Smiley, Defendants–Appellees.

No. 15-3765

United States Court of Appeals, Eighth Circuit.

Submitted: September 20, 2016

Filed: April 28, 2017

Rehearing and Rehearing En Banc Denied June 16, 2017^*

Counsel who presented argument on behalf of the appellant was Curtis Henry Goetsch, of Germantown, TN.

Counsel who presented argument on behalf of appellees Southern Farm Bureau Casualty Insurance Company; Medford Farm Partnership; and Mr. Aaron Medford was Ben C. Hall, of Cabot, AR.

Counsel who presented argument on behalf of appellee Ms. Barbara Ford was Brandon W. Lacy, of Jonesboro, AR.

Before COLLOTON, MELLOY, and SHEPHERD, Circuit Judges.

COLLOTON, Circuit Judge.

Shelby County Health Care Corporation, doing business as Regional Medical Center ("The Med," for short), seeks relief for alleged impairment of a hospital lien. The district court dismissed The Med's claim on the ground that it was barred by the Rooker– Feldman doctrine and, alternatively, that it failed under Arkansas law. We conclude that the claim is not barred by Rooker– Feldman , and that Tennessee law should apply, so we vacate the district court's order and remand for further proceedings.

I.

The hospital lien in question arose from treatment that John Smiley received at The Med in Memphis, Tennessee, from February 18, 2009, when he was involved in an automobile accident, until March 6, 2009, when he died of his injuries. The Med promptly filed a hospital lien for Smiley's medical bills pursuant to the Tennessee Hospital Lien Act in the Shelby County Circuit Court in Tennessee. Tenn. Code Ann. § 29–22–101. The Med mailed a copy of the hospital lien to the attorneys for Smiley's estate.

Barbara Ford was appointed administrator of Smiley's estate by an Arkansas circuit court. Ford negotiated a settlement with the tortfeasor's insurer, Southern Farm Bureau Casualty Insurance Company. As part of the settlement negotiations, Ford sent to the insurer Smiley's hospital bill and records from The Med documenting Smiley's pain and suffering. The insurer, along with its insured Aaron Medford, and Medford's employer Medford Farm Partnership, settled with Ford for $700,000. The administrator of the estate allocated the entire $700,000 to recovery for wrongful death and none to the recovery of compensatory damages for medical services and other expenses.

In September 2010, the settling parties (which did not include The Med) memorialized the agreement in an Arkansas probate court judgment that purported to extinguish any outstanding liens. The Med learned of the probate court judgment by April 2011, but did not seek to intervene in the proceedings. The probate court closed Smiley's estate on September 16, 2011.

The Med sued the settling parties to recover $355,364.16 in damages for the impairment of its hospital lien. The district court granted summary judgment for the defendants on the ground that The Med failed to enforce its lien by neglecting to file it in the Arkansas probate court. The Med appealed, and this court reversed, concluding that the district court misconstrued The Med's claim as one for lien enforcement rather than lien impairment. Shelby Cty. Health Care Corp. v. S. Farm Bureau Cas. Ins. Co. , 798 F.3d 686, 689 (8th Cir. 2015). We remanded for the district court to address, among other questions, whether Arkansas law or Tennessee law applied to The Med's lien impairment claim. Id. at 689–90.

On remand, the district court again granted summary judgment for the settling parties. The court first ruled that the Rooker– Feldman doctrine barred The Med's claims. See D.C. Court of Appeals v. Feldman , 460 U.S. 462, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983) ; Rooker v. Fid. Tr. Co. , 263 U.S. 413, 44 S.Ct. 149, 68 L.Ed. 362 (1923). Alternatively, the court reasoned that Arkansas's choice-of-law rules called for the application of Arkansas law, and that The Med's claim failed under Arkansas law. The court concluded that The Med did not properly perfect its lien under Arkansas law, and that even if the lien were perfected, it would be unenforceable because Arkansas law prevents a hospital lien from attaching to a wrongful death recovery.

II.

We consider first the district court's ruling that it lacked jurisdiction. In concluding that The Med's claim "appears to be barred by the Rooker– Feldman doctrine," the district court reasoned that "[t]o now find that there was a valid, enforceable lien would effectively reverse the decision made by the Arkansas probate court." The court explained that the probate court found that The Med's lien was void and not enforceable in Arkansas, while The Med now alleges that the defendants impaired a valid lien.

The Rooker– Feldman doctrine is confined to "cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments." Exxon Mobil Corp. v. Saudi Basic Indus. Corp. , 544 U.S. 280, 284, 125 S.Ct. 1517, 161 L.Ed.2d 454 (2005). The doctrine does not apply here, because The Med was not a "state-court loser." The Med was not a party to the state-court probate proceedings. Whatever narrow application the Rooker– Feldman doctrine might have to de facto appeals by non-parties is not germane here, where The Med has no relationship to the parties in probate court. Cf. Lance v. Dennis , 546 U.S. 459, 466 n.2, 126 S.Ct. 1198, 163 L.Ed.2d 1059 (2006) (per curiam) (reserving judgment on whether Rooker– Feldman applies where an estate takes a de facto appeal in a district court of an earlier state decision involving the decedent).

The district court relied on Lemonds v. St. Louis County , 222 F.3d 488 (8th Cir. 2000), which stated a broader view of the Rooker– Feldman rule: "The Rooker– Feldman doctrine forecloses not only straightforward appeals but also more indirect attempts by federal plaintiffs to undermine state court decisions." Id . at 492. Starting from that premise, Lemonds said the fact that federal-court plaintiffs were not parties to an earlier state-court lawsuit "does not automatically preclude a Rooker– Feldman bar." Id . at 495. The court ruled that non-parties who could have pursued a claim in state court were barred by Rooker– Feldman from proceeding in federal court when "the entire upshot of a favorable decision" would have been "to unwind the decision of the state court." Id . at 496.

Lemonds , however, has been superseded by the Supreme Court's clarification of the Rooker– Feldman doctrine. In Exxon Mobil , the Court observed that "the doctrine has sometimes been construed to extend far beyond the contours of the Rooker and Feldman cases." 544 U.S. at 283, 125 S.Ct. 1517. The Court emphasized that the doctrine applies only to claims brought by "state-court losers" and "does not otherwise override or supplant preclusion doctrine or augment the circumscribed doctrines that allow federal courts to stay or dismiss proceedings in deference to state-court actions." Id . at 284, 125 S.Ct. 1517. In Lance , the Court explained that "[t]he Rooker– Feldman doctrine does not bar actions by nonparties to the earlier state-court judgment simply because, for purposes of preclusion law, they could be considered in privity with a party to the judgment." 546 U.S. at 466, 126 S.Ct. 1198. To apply Rooker– Feldman here to a non-party who had an opportunity to intervene in state-court proceedings would echo the pre-Exxon Mobil lower-court rulings that expanded the doctrine too far.

In this case, moreover, The Med does not seek to reverse the order of the Arkansas probate court. The Med acknowledges that it could not seek a judgment directly against the proceeds of the personal injury settlement; those proceeds were awarded to Ford. In this case, The Med asserts that the probate court's order is evidence that the settling parties impaired The Med's hospital lien, and The Med seeks a judgment against Ford and the other settling parties. The Rooker– Feldman doctrine thus does not bar The Med's claim.

III.

The district court ruled alternatively that Arkansas law applies to the dispute between the parties, and that The Med's claim fails under Arkansas law. On appeal, the parties debate whether Arkansas law or Tennessee law should apply.

Federal jurisdiction over this case is based on diversity of citizenship, so we apply the choice-of-law rules of Arkansas, the forum State, to determine which law governs the dispute. Klaxon Co. v. Stentor Elec. Mfg. Co. , 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Under Arkansas law, the framework for deciding the choice-of-law question depends on the type of claim involved. A contract claim triggers different analysis than a tort claim.

The Med argues that the case raises an issue in contract, because hospital liens arise from an express or implied contract that is formed when the hospital provides emergency medical services. See Midwest Neurosurgery, P.C. v. State Farm Ins. Cos ., 268 Neb. 642, 686 N.W.2d 572, 578 (2004). But the Arkansas Supreme Court, in considering its own State's hospital lien statute, has not accepted that characterization. In Stuttgart Regional Medical Center v. Cox , 343 Ark. 209, 33 S.W.3d 142 (2000), the court rejected a patient's argument that a hospital enforcing its lien brought an action that "sounded in contract" based on agreements with a hospital; instead, the hospital's "sole cause of action was to enforce its lien." Id. at 145.

Here, of course, the action is not to enforce a lien, but to seek relief for impairment of a lien. Ford, citing Lane v. Celadon Trucking, Inc. , 543 F.3d 1005 (8th Cir. 2008), argues that the action raises an issue in tort. Lane...