State Farm Mut. Auto. Ins. Co. v. Williams

• Decision Date: 15 April 2014
• Docket Number: 12-15331,Nos. 12-11840,s. 12-11840
• Parties: State Farm Mutual Automobile Insurance Company, State Farm Fire and Casualty Company, Plaintiffs–Counter Defendants–Appellants, v. Reidy Williams, Earl Byers, Intervenor Defendants–Counter Claimants–Appellees, Jerlean Reed, Intervenor Defendant–Consol. Counter Claimant–Counter Claimant–Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

824 F.3d 1311

State Farm Mutual Automobile Insurance Company, State Farm Fire and Casualty Company, Plaintiffs–Counter Defendants–Appellants

v.Reidy Williams, Earl Byers, Intervenor Defendants–Counter Claimants–Appellees

Jerlean Reed, Intervenor Defendant–Consol. Counter Claimant–Counter Claimant–Appellee.

Nos. 12-11840

12-15331

United States Court of Appeals, Eleventh Circuit.

April 15, 2014

Charles Chejfec, Ross O. Silverman, Kathy P. Josephson, Katten Muchin Rosenman, LLP, Chicago, IL, Derin Bronson Dickerson, Alston & Bird, LLP, Atlanta, GA, Dale Truscott Gobel, Jr., Fisher & Phillips, LLP, Kenneth Paul Hazouri, deBeaubien Knight Simmons Mantzaris & Neal, LLP, Orlando, FL, Philip Joseph Landau, Shraiberg Ferrara & Landau, PA, Boca Raton, FL, Bart Valdes, deBeaubien Knight Simmons Mantzaris & Neal, LLP, Tampa, FL, for Plaintiffs–Appellants.

Eric Lee, Lee & Amtzis, PL, Boca Raton, FL, Kimberly P. Simoes, The Simoes Law Group PA, Deland, FL, Susan W. Tolbert, Morgan & Morgan, PA, Daytona Beach, FL, Chad Andrew Barr, Crystal L. Eiffert, Eiffert & Associates, PA, Orlando, FL, for Defendants–Appellees.

Before TJOFLAT, FAY, and ALARCÓN,^* Circuit Judges.

PER CURIAM:

This is the second appeal arising from a scheme by Physicians Injury Care Center, Inc. (“PICC”) to submit fraudulent insurance claims to State Farm Mutual Automobile Insurance Company and State Farm Fire and Casualty Company (collectively, “State Farm”). Reidy Williams, Earl Byers, and Jerlean Reed (collectively, “Intervenors”) intervened and alleged that, when State Farm stopped paying the fraudulent bills submitted by PICC, it did not comply with the statutory requirements to withdraw their Florida Personal Injury Protection (“PIP”) insurance benefits. An intervening change in controlling authority causes us to depart from our previous opinion and reinstate the jury verdict in its entirety.

I. BACKGROUND

A. PICC's Fraud

State Farm sued PICC in November 2006 and alleged it had “unlawfully obtained personal injury protection benefits ... from State Farm by push[ing] State Farm's insureds through a sham course of treatment and evaluation designed specifically to exhaust the patients' insurance benefits.” State Farm Mut. Auto. Ins. Co. v. Physicians Injury Care Ctr., Inc. (PICC ), 427 Fed.Appx. 714, 717 (11th Cir. 2011)

(internal quotation marks omitted). State Farm presented extensive evidence of pervasive billing fraud at trial. Car-accident victims were referred to PICC for treatment. Rather than basing diagnoses and treatments on the injuries of each patient, the doctors at PICC gave predetermined diagnoses and treatments that nearly exhausted the patients' $10,000 in PIP benefits.¹ After trial,² a jury found that PICC's conduct amounted to fraud and found PICC was liable for damages for the fraudulent claims submitted. The jury also found State Farm was entitled to a declaration it was not liable for any unpaid claims from treatment at PICC.

B. Intervenors' Claims Against State Farm

Intervenors were policy holders with State Farm that suffered injuries from car accidents in 2006. They received post-accident treatment at PICC and, as insureds commonly do, assigned their rights to receive PIP benefits to PICC in exchange for treatment. State Farm made initial payments, but the payments ceased once State Farm filed suit challenging PICC's fraudulent bills.

After it filed suit against PICC, State Farm sent letters to its insureds that had received treatment at PICC. The letters sent to Intervenors stated State Farm would “accept[ ] responsibility ... for liability ultimately determined to be ow[ed] for [PICC's] services provided to [Intervenors].” The letters further requested that Intervenors not assume more liabilities by receiving further treatment at PICC. Shortly after receiving the letters indemnifying them for PICC's claims, Intervenors each revoked their assignment of PIP benefits to PICC. The Intervenors also moved to intervene in the case against PICC to assert breach-of-contract counterclaims against State Farm for its improper withdrawal of their PIP benefits. The district court granted the motions. At trial, the jury found State Farm was not liable for the unpaid claims accrued by Intervenors.

C. Resolution of the First Appeal

In the first appeal, we affirmed the judgment of the district court with the exception of Intervenors' breach-of-contract counterclaims and the declaratory judgment against them. PICC , 427 Fed.Appx. at 725–26

. We determined that Intervenors were entitled to recover damages, because State Farm violated section 627.736(7)(a) of the Florida Statutes, when it withdrew payment to PICC without first obtaining consent or an independent medical report showing that Intervenors were not receiving appropriate treatment. Id. at 723–25. The case was remanded for a computation of damages. Id. at 725. The district court awarded $15,741, plus interest, in damages, based upon unpaid bills attributed to Intervenors, and determined that $11,000 in attorneys' fees was appropriate. This appeal followed.

II. DISCUSSION

State Farm asks us to revisit our decision in the first appeal that they violated subsection 7(a),³ when they withdrew payment to PICC without first obtaining a proper medical report. State Farm also argues (1) Intervenors lack standing, (2) the computation of damages was erroneous, and (3) the damages awarded to Intervenors should be offset from those awarded to State Farm from PICC. Intervenors reply that the law-of-the-case doctrine prohibits reconsideration of the issues raised by State Farm that previously were decided by this court. They cross-appeal and seek at least $2.4 million in attorneys' fees.

A. Law of the Case

We initially address the effect of our first decision on this appeal. State Farm's arguments that they did not violate subsection 7(a) and that Intervenors lack standing both were decided previously and implicate the law-of-the-case doctrine. Under the law-of-the-case doctrine, when a court decides an issue of law, that decision is generally binding in subsequent proceedings. See Schiavo ex rel. Schindler v. Schiavo , 403 F.3d 1289, 1291 (11th Cir. 2005)

. The doctrine applies to issues decided both expressly and by necessary implication. Id. “The doctrine, however, does not limit the court's power to revisit previously decided issues when (1) new and substantially different evidence emerges at a subsequent trial; (2) controlling authority has been rendered that is contrary to the previous decision; or (3) the earlier ruling was clearly erroneous and would work a manifest injustice if implemented.” Klay v. All Defendants , 389 F.3d 1191, 1197–98 (11th Cir. 2004).

Regarding State Farm's assertion that Intervenors lack standing, State Farm raised this argument in the first appeal. We decided otherwise by necessary implication.⁴ Because State Farm has not explained which, if any, of the exceptions to the law of the case apply to this issue, we decline to revisit it.

We based our decision that State Farm violated subsection 7(a) primarily on our reading of the report requirement of the statute. The decision also was based on our interpretation that Florida law required mechanical compliance with the No-Fault Law's provisions for withdrawing payment, even when there is billing fraud. See United Auto. Ins. Co. v. Viles , 726 So.2d 320 (Fla. 3d Dist. Ct. App. 1998)

. Since our previous opinion, a Florida appellate court has issued a decision that places our ruling on this issue in doubt. Chiropractic One, Inc. v. State Farm Mut. Auto. , 92 So.3d 871 (Fla. 5th Dist. Ct. App. 2012). As a federal court sitting in diversity, the decisions of Florida's District Courts of Appeal control our application of Florida law, absent persuasive authority the Florida Supreme Court would decide otherwise. Allstate Life Ins. Co. v. Miller , 424 F.3d 1113, 1116 (11th Cir. 2005). This intervening change in controlling authority merits an exception to the law-of-the-case doctrine. Consequently, we again must evaluate whether State Farm was required to obtain a medical report prior to withholding payment for PICC's fraudulent claims.

B. Application of Subsection 7(a)'s Report Requirement

We review the denial of a motion for judgment as a matter of law de novo and apply the same standard as the district court. Chaney v. City of Orlando , 483 F.3d 1221, 1227 (11th Cir. 2007)

. The interpretation of a statutory provision is a purely legal issue that is resolved by the court. Cox Enters., Inc. v. Pension Benefit Guar. Corp. , 666 F.3d 697, 701 (11th Cir. 2012).

Florida's No-Fault Law places certain restrictions on both the claims process and on the ability of insurers to refuse to pay benefits. This appeal turns on the distinction between the insurer's ability to deny benefits and its ability to withdraw benefits. In a usual case, the essential difference between a withdrawal of benefits and denial of benefits is that, in a withdrawal, the insurer first has made a payment but refused to make more payments. State Farm Mut. Auto. Ins. Co. v. Hyma Med. Ctr., Inc. , 22 So.3d 699, 701 (Fla. 3d Dist. Ct. App. 2009)

; see also

United Auto. Ins. Co. v. Santa Fe Med. Ctr. , 21 So.3d 60, 65 (Fla. 3d Dist. Ct. App. 2009) (en banc); State Farm Mut. Auto. Ins. Co. v. Rhodes & Anderson, D.C., P.A. , 18 So.3d 1059, 1063–64 (Fla. 2d Dist. Ct. App. 2008). And, an outright denial would involve no payment before the refusal. Hyma Med. Ctr. , 22 So.3d at 700.

The withdrawal of PIP benefits is governed by subsection 7(a). Subsection 7(a) provides:

(7) MENTAL AND PHYSICAL EXAMINATION OF INJURED PERSON; REPORTS.

(a) Whenever the mental or physical condition of an injured person covered by personal injury protection is material to any claim that has been or may be made for past or future personal injury protection insurance benefits, such person shall, upon the request of an insurer, submit to mental or physical examination by a physician or physicians.... An insurer may not wi

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