State ex rel. Slatery v. HRC Med. Ctrs., Inc.

• Decision Date: 23 August 2019
• Docket Number: No. M2017-02559-COA-R3-CV,M2017-02559-COA-R3-CV
• Parties: STATE of Tennessee EX REL. Herbert H. SLATERY, III, Attorney General and Reporter v. HRC MEDICAL CENTERS, INC., et al.
• Court: Tennessee Court of Appeals

603 S.W.3d 1

STATE of Tennessee EX REL. Herbert H. SLATERY, III, Attorney General and Reporter

v.HRC MEDICAL CENTERS, INC., et al.

No. M2017-02559-COA-R3-CV

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

October 3, 2018 Session

FILED August 23, 2019

William Kennerly Burger, Murfreesboro, Tennessee, and Wendel J. W. O'Reilly, Brentwood, Tennessee, for the appellants, HRC Medical Centers, Inc., Dan Hale, Don Hale, Bonnie Hale, and Dixie Hale.

Herbert H. Slatery, III, Attorney General and Reporter; Andrée S. Blumstein, Solicitor General; Brant Harrell, Senior Counsel; and Carolyn U. Smith, Senior Counsel, for the appellees, State of Tennessee.

Darryl G. Lowe, Knoxville, Tennessee, for the appellee, John C. McLemore.

Dana Renee Helton, Knoxville, Tennessee, Pro Se.

Richard H. Dinkins, J., delivered the opinion of the court, in which Frank G. Clement, Jr., P.J., M.S., and Andy D. Bennett, J., joined.

Richard H. Dinkins, J.

This is an action brought by the State of Tennessee pursuant to the Tennessee Consumer Protection Act, Tennessee Code Annotated section 47-18-101, et seq. , and seeking judicial dissolution, pursuant to Tennessee Code Annotated section 48-24-301, of HRC Medical Centers, Inc., a for-profit corporation operating approximately 50 hormone replacement therapy centers. The State alleged, inter alia , that the corporation's advertising for its hormone replacement therapy was deceptive, and sought restitution for consumers. Also sued were the owners of HRC and their spouses; it is alleged that those defendants, as recipients of some of the assets of HRC, are personally liable for violations of the Uniform Fraudulent Transfer Act, Tennessee Code Annotated sections 66-3-305(a) and 66-3-306(a). The defendants filed motions to dismiss, for summary judgment, and to remand the case to the Division of Health Related Boards of the Tennessee Department of Health; all of the motions were denied. The State moved for summary judgment on the issue of liability under the Consumer Protection Act and, after the motion was granted, on the issue of damages. In granting the second motion, the trial court entered an award of $18,141,750.00 based upon the median amount paid by consumers for the hormone therapy treatment. The defendants appeal, raising issues related to the trial court's denial of their motion for remand, motions to dismiss, and motions for summary judgment; they also appeal the grant of summary judgment to the State. Upon a thorough review of the record, we affirm the judgment.

FACTS AND PROCEDURAL HISTORY

HRC Medical Centers, Inc., ("HRC") is a for-profit corporation operating approximately 50 centers where it offers a treatment known as bio-identical hormone replacement treatment ("BHRT"). The State of Tennessee filed suit against HRC, Dan Hale, and Don Hale¹ on October 8, 2012, alleging that the defendants' advertisements and marketing for BHRT violated the Tennessee Consumer Protection Act ("TCPA"), Tennessee Code Annotated section 47-18-104(a) and (b) ; the State also moved for an ex parte temporary restraining order, which the trial court granted on October 10, a temporary injunction, and the appointment of a pendente lite receiver, both of which the court granted on December 27, appointing John C. McLemore as receiver "over [HRC] and all of the tangible and intangible assets and property, both personal and real of defendant HRC Medical."

On April 15, 2013, the State filed an amended complaint, adding numerous defendants, including Bonnie Hale and Dixie Hale,² and Dana Helton, in her capacity as Trustee of the Cardinal Revocable Trust, which had been formed by Dan Hale. On the same day, the State filed motions for a temporary restraining order and a temporary injunction, asking the trial court to freeze the assets of the added defendants, and a motion for appointment of a receiver, asking the trial court to appoint Mr. McLemore as receiver over the added defendants' assets. On April 26, the trial court issued the temporary restraining order and also appointed Mr. McLemore as receiver over the added defendants "and all of the tangible and intangible assets and property, both personal and real, of these defendants"; the court issued a temporary injunction against Bonnie Hale and Dixie Hale on August 20.

The State amended the complaint a second time on October 31, 2013 (the "Complaint"); this complaint governs this appeal.³ In count one of the Complaint, the State alleged that the Defendants had violated the TCPA, specifically Tennessee Code Annotated sections 47-18-104(a), (b)(5), (22), and (27). In count two, the State sought judicial dissolution of HRC pursuant to sections 48-24-301, et seq. , of the Tennessee Business Corporation Act. In count three, the State alleged that Defendants had violated the Uniform Fraudulent Transfer Act, specifically Tennessee Code Annotated sections 66-3-305(a) and -306(a). The Complaint sought the following relief:

3. That this Court adjudge and decree that TCPA Defendants^[4] have engaged in the aforementioned acts or practices which violate the Tennessee Consumer Protection Act of 1977.

4. That pursuant to Tenn. Code Ann. § 47-18-108(a)(1), (a)(4), and (a)(5), this Court temporarily and permanently enjoin and restrain TCPA Defendants from engaging in the aforementioned acts or practices which violate the Tennessee Consumer Protection Act of 1977.

5. That pursuant to Tenn. Code Ann. § 47-18-108(b)(1), this Court make such orders or render such judgments as may be necessary to restore to any person who has suffered any ascertainable loss as defined in Tenn. Code Ann. § 47-18-102(1) including statutory interest and requiring that TCPA Defendants pay all costs of distributing and administering the same, including through the use of a receiver or third-party restitution administrator.

6. Excluding any amounts refunded to consumers, that this Court make such orders or render such judgments as may be necessary to disgorge the profits and ill-gotten gains TCPA Defendants realized by reason of the alleged violations of the TCPA.

7. That this Court adjudge and decree that TCPA Defendants pay civil penalties of not more than one thousand dollars ($1,000.00) for each and every violation of the Tennessee Consumer Protection Act of 1977 to the State of Tennessee as provided by Tenn. Code Ann. § 47-18-108(b)(3).

8. That this Court enter judgment against TCPA Defendants and in favor of the State for the reasonable costs and expenses of the investigation and prosecution of Defendants' actions, including attorneys' fees and costs, expert and other witness fees, as provided by Tenn. Code Ann. § 47-18-108(a)(5) and (b)(4), and other state law.

9. That all of Defendant HRC Medical's, Defendant HRC Management Midwest's, and Defendant Bella Vita's contracts with consumers in Tennessee for BHRT and all of Midwest Restorative's, Bella Vita's, Legacy's, and BioLifecycle's renewal contracts with consumers in Tennessee be held void, unenforceable, and uncollectable.

10. That, pursuant to Tenn. Code Ann. § 47-18-108(b)(2), the court permanently revoke Defendant HRC Medical's incorporated status, Defendant HRC Management Midwest's ability to do business as a foreign limited liability company in Tennessee, and revoke Defendant Dan Hale's license to practice medicine as a doctor of osteopathy in the State of Tennessee.

11. That, pursuant to Tenn. Code Ann. § 48-24-301, the court judicially dissolve Defendant HRC Medical as a corporation, issue a decree of dissolution pursuant to Tenn. Code Ann. § 48-24-304(a), and then direct the winding up and liquidation of the corporation's business in accordance with state law.

12. That a receiver continue to be placed temporarily and permanently over Defendants HRC Medical, HRC Management Midwest, HRC Management, HRC Holdings, and the Cardinal Revocable Trust, to identify and marshal its assets and liabilities, to assume legal control over the entities, and to perform other tasks as set forth in the accompanying motion and proposed receivership order.

13. That a receiver continue to be placed temporarily over the personal assets of Defendants Don Hale, Dixie Hale individually and doing business as Southern Belle Consulting, Dan Hale, and Bonnie Hale to prevent asset dissipation, to identify and marshal their assets and liabilities, to perform other tasks as set forth in the accompanying motion and proposed receivership order, and to apply receivership assets towards any monetary judgment awarded to the State consistent with state law, including applicable personal exemptions.

14. That the transfers or obligations referenced above in paragraphs 814 to 1067 be voided under Term. Code Ann. § 66-3-308(a)(1).

15. That the Court continue its temporary injunction against Defendants Don Hale, Dan Hale, Dixie Hale, Bonnie Hale, HRC Medical, HRC Management Midwest, HRC Management, HRC Holdings, and the Cardinal Revocable Trust that prohibits further disposition of an asset transferred or other property and other relief as set forth in the accompanying motions and proposed receivership orders pursuant to Tenn. Code Ann. § 66-3-308(a)(3)(A),(B), and (C).

16. That the monetary, other assets, or other property that are found to have been transferred in violation of the UFTA be deemed to have been held in constructive trust for its rightful owner, including the HRC Medical receivership estate.

17. That a judgment be entered for the monetary, other assets, or other property that are found to have been transferred in violation of the UFTA with up to 10% prejudgment interest under Tenn. Code Ann. §§ 47-14-123 and 66-3-308(a)(3)(C).

18. That the monetary, other assets, or other property that are found to have been transferred in violation of the UFTA be returned to the HRC Medical receivership estate.

19. That, aside from any individual liability stemming from an individual's direct participation or control, the corporate statuses or statuses as limited liability companies for Defendants

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