Wright Therapy Equipment v. Blue Cross, 1061074.

• Decision Date: 11 April 2008
• Docket Number: 1061074.
• Citation: 991 So.2d 701
• Parties: WRIGHT THERAPY EQUIPMENT, LLC, et al. v. BLUE CROSS AND BLUE SHIELD OF ALABAMA.
• Court: Alabama Supreme Court

991 So.2d 701

WRIGHT THERAPY EQUIPMENT, LLC, et al. v. BLUE CROSS AND BLUE SHIELD OF ALABAMA.

1061074.

Supreme Court of Alabama.

April 11, 2008.

J. Bentley Owens III, Sybil V. Newton, and H. Thomas Wells III of Starnes & Atchison, LLP, Birmingham, for appellants Wright Therapy Equipment, LLC, Sheri NeSmith, and Julie Akin.

John E. Medaris, Pelham, for appellant Universal DME, LLC.

Teresa G. Minor, Ed T. Haden, and M. Todd Lowther of Balch & Bingham, LLP, Birmingham, for appellee.

SEE, Justice.

Wright Therapy Equipment, LLC ("Wright Therapy"), Sheri NeSmith, Julie Akin, and Universal DME, LLC ("Universal DME"), appeal the trial court's partial summary judgment and trial judgment in favor of Blue Cross and Blue Shield of Alabama ("Blue Cross"). We hold that the trial court did not err in entering a partial summary judgment in favor of Blue Cross. However, because the trial court exceeded its discretion in denying Akin, NeSmith, and Universal DME a continuance at trial, we reverse the judgment entered following the trial and remand the case for a new trial.

Facts and Procedural History

Akin and NeSmith were the owners of Wright Therapy, which was engaged in the business of supplying physician-prescribed durable medical equipment ("DME"). Wright Therapy billed Blue Cross according to Blue Cross's DME fee schedule for DME and other supplies Wright Therapy provided to patients insured by Blue Cross. After conducting audits of the major DME businesses in its network, including Wright Therapy, Blue Cross determined that it had been overbilled for DME and that it had paid many of the claims for DME in error. In March 2004, Blue Cross notified Wright Therapy that it had overbilled Blue Cross for DME in the amount of $759,401.62, that Blue Cross had paid those bills in error, and that Blue Cross, as permitted by the DME supplier agreement between Blue Cross and Wright Therapy, would begin withholding further payments to Wright Therapy until Blue Cross recouped the amount of the payments that had been made in error.

In April 2004, Blue Cross and Wright Therapy entered into a written agreement by which Wright Therapy agreed to make monthly payments of $40,000 to Blue Cross for a period of 10 months and to pay the remaining balance in one payment at the end of those 10 months in order to reimburse Blue Cross for the alleged overbilling. In return, Blue Cross agreed not to withhold future payments for services billed by Wright Therapy to Blue Cross. In May 2004, after Wright Therapy had remitted the first of the agreed payments, Blue Cross announced changes to the DME fee schedule for certain items of DME from which Wright Therapy had previously derived a substantial portion of its profits. Faced with diminished cash flow under the new reimbursement schedule, Wright Therapy made no further payments to Blue Cross under the agreement and ceased operations. That same month, NeSmith, Akin, and two former employees of Wright Therapy established Universal DME, LLC, in Georgia, to conduct the same type of DME business that Wright Therapy had conducted.

In July 2004, Blue Cross sued Wright Therapy alleging breach of contract, money paid by mistake, unjust enrichment, conversion, fraud, and conspiracy to commit fraud. Over the next two years, Blue Cross amended its complaint five times to add Akin, NeSmith, and Universal DME as defendants and, among other things, seeking to pierce the corporate veil and to impose successor liability on Universal DME for the claims against Wright Therapy. During this time, the trial court continued the trial five times at the joint request of the parties or the sole request of Blue Cross to allow these amendments and to allow additional discovery. In March 2006, Blue Cross and Wright Therapy each moved for a summary judgment. Blue Cross amended its complaint for the last time in July 2006 and then renewed its previously filed motion for a summary judgment. The trial court held a hearing on that motion on October 4, 2006, at which the court entered a summary judgment against Wright Therapy on the breach-of-contract claim in the amount of $630,196.38. The summary judgment disposed of the claims against Wright Therapy; however, several claims remained pending against Akin, NeSmith, and Universal DME. At the conclusion of the hearing on the summary-judgment motion, counsel for the remaining defendants moved in open court to withdraw. He simultaneously requested a continuance of the November 6, 2006, trial date to allow Akin, NeSmith, and Universal DME to retain new counsel. The trial court granted counsel's motion to withdraw but denied the motion to continue the trial date, stating that "Ms. NeSmith, Ms. Akin, Wright Therapy, Universal DME, whoever, have adequate time to obtain other counsel." When Blue Cross urged the trial court to push the trial date up even earlier, the trial court denied this request in "fairness" to the defendants. Despite contacting at least two firms, Akin, NeSmith, and Universal DME were unable to obtain counsel willing to represent them with less than one month to prepare for a trial of a complex lawsuit that had been in litigation for over two years. On October 30, 2006, Akin, NeSmith, and Universal DME again moved the trial court for a one-month continuance and supported that motion with affidavits from the attorneys they had contacted stating that it would be a violation of the Alabama Rules of Professional Conduct for the attorneys to agree to represent the defendants without a continuance because they would not be able to adequately prepare for a trial of this complexity in less than one month's time. Blue Cross opposed the continuance, and the trial court denied the motion.

Over the repeated objections of the defendants, the trial court proceeded with a bench trial on November 6, 2006. None of the defendants was represented by counsel. During the bench trial, Akin and NeSmith informed the trial court that they had counsel willing to represent them, but that counsel were unable to attend the trial on that date. They told the trial court that they were uncertain as to how to proceed, how to put on evidence, or how to question witnesses during the trial. The trial proceeded, and the trial court ultimately ruled in favor of Blue Cross, finding Akin and NeSmith personally liable for $182,900 and $198,000, respectively, for the improper transfer and depletion of the assets of Wright Therapy. It also found Universal DME liable as a successor corporation for the full amount of the summary judgment on the breach-of-contract claim previously entered against Wright Therapy. At the end of the trial, the trial court said to the defendants: "You have the right to appeal. In order to do that, you have to buy a transcript and appeal to Montgomery on the record. I would suggest — no offense to either of you. You have done a better job than most pro ses I have seen but I would never suggest that anyone is competent to represent themselves."

In December 2006, Akin, NeSmith, and Universal DME, then represented by counsel, moved to vacate the partial summary judgment, the judgment entered at trial, and for a new trial. At the hearing on this motion, the trial court noted that mistakes had been made during the litigation process by concluding, "I don't say this to disrespect counsel or prior rulings but I am confident that this matter is heading to Montgomery one way or the other and I will say that I'm not as confident that it won't come back." The trial court denied the defendants' motions after holding a hearing. Wright Therapy, Akin, NeSmith, and Universal DME now appeal.

Issues

Wright Therapy, Akin, NeSmith, and Universal DME present several issues on appeal. First, they argue that the trial court erred in entering a summary judgment in favor of Blue Cross on the breach-of-contract claim because, they say, a genuine issue of material fact exists as to whether Wright Therapy executed the April 2004 agreement under economic duress and whether that agreement is otherwise unconscionable. Second, they argue that the trial court exceeded its discretion "by allowing Defendants' previous counsel to withdraw 33 days prior to trial and refusing to grant a trial continuance to allow the Defendants time to retain counsel to represent them at trial." Appellants' brief at 3.¹

Standards of Review

"On appeal, this Court reviews a summary judgment de novo. Ex parte Essary, [Ms. 1060458, Nov. 2, 2007] ___ So.2d ___, ___ (Ala.2007). In doing so, we apply the same standard of review as did the trial court. Ex parte Lumpkin, 702 So.2d 462, 465 (Ala.1997). `"`Our review is subject to the caveat that we must review the record in the light most favorable to the nonmovant and must resolve all reasonable doubts against the movant.'"' Ex parte CSX Transp.[, Inc.], 938 So.2d [959] at 962 [(Ala.2006)] (quoting Payton v. Monsanto Co., 801 So.2d 829, 833 (Ala.2001), quoting in turn Ex parte Alfa Mut. Gen. Ins. Co., 742 So.2d 182, 184 (Ala.1999)); Hanners v. Balfour Guthrie, Inc., 564 So.2d 412, 413 (Ala.1990). Finally, this Court does not afford any presumption of correctness to the trial court's ruling on questions of law or its conclusion as to the appropriate legal standard to be applied. Ex parte CSX Transp., 938 So.2d at 962 (citing Ex parte Graham, 702 So.2d 1215, 1221 (Ala.1997))."

DiBiasi v. Joe Wheeler Elec. Membership Corp., 988 So.2d 454, 459 (Ala.2008).

We review a trial court's denial of a motion for a continuance by asking whether in denying the motion the trial court exceeded its discretion. See Cheminova America Corp. v. Corker, 779 So.2d 1175, 1183 (Ala.2000); Copeland v. Samford Univ., 686 So.2d 190 (Ala.1996).

"A court exceeds its discretion when its ruling is based on an erroneous conclusion of law or when it has acted arbitrarily without employing conscientious judgment, has exceeded the bounds of reason in view of all circumstances, or has so far ignored recognized...