AMERICAN NATIONAL RED CROSS v. ASD SPECIALTY HEALTHCARE, INC., an incorporated division of Amerisource Bergen Corp. d/b/a Oncology Supply; Midwest Drug Supply, LLC; and Raymar Worldwide Sales, Inc.
1020446
Supreme Court of Alabama
October 3, 2003
Opinion Overruling Rehearing March 19, 2004
888 So. 2d 464
Dennis D. Murrell and Amy E. Shoemaker of Middleton Reutlinger, Louisville, Kentucky; and Benjamin M. Bowden, P.C., Andalusia, for plaintiff.
Sandy G. Robinson and Ian D. Rosenthal of Cabaniss, Johnston, Gardner, Dumas & O‘Neal, Mobile, for respondent ASD Specialty Healthcare, Inc.
PER CURIAM.
The United States District Court for the Southern District of Alabama has certified the following question to this Court pursuant to
To assist this Court in its determination, the district court provided the following
“Plaintiff Red Cross alleges that, during 1999, it entered into an arrangement with an individual named Peter Woolley and a company with which he was affiliated, LA Pharmaceutical, to sell blood products to LA Pharmaceutical, LLC (`LA Pharmaceutical‘). Plaintiff further alleges that LA Pharmaceutical, through one of its principals, Peter Woolley, then transferred the blood products to certain of the defendants in violation of the AUFTA [Alabama Uniform Fraudulent Transfer Act]. (A default judgment has previously been entered against LA Pharmaceutical and Peter Woolley, neither of which are defendants in this current action.)
“The defendants [ASD Specialty Healthcare, Inc.; Midwest Drug Supply, LLC; and Raymar Worldwide Sales, Inc.] deny any liability under the AUFTA. The defendants have also asserted that the AUFTA has no application in this case because the blood products in question are considered, for all purposes, to be a `service’ under
Ala.Code [1975,] \xc2\xa7 7-2-314(4) and, therefore, not `property’ under the AUFTA. All parties agree that the blood products in question are governed by\xc2\xa7 7-2-314(4) . Plaintiff asserts that the AUFTA is applicable because the definition of `property’ under the AUFTA includes the blood products in question; however, defendants assert that the AUFTA is not applicable because the definition of `property’ under the AUFTA does not include services.”
After conducting the appropriate hearings, the magistrate judge, drawing an analogy between goodwill and services, concluded that the Alabama Uniform Fraudulent Transfer Act,
The purpose of the AUFTA is to prohibit the fraudulent transfer of property by a debtor “who intends to defraud creditors by placing assets beyond their reach.” Thompson Props. v. Birmingham Hide & Tallow Co., 839 So. 2d 629, 632 (Ala.2002). Thus, the AUFTA defines “transfer” broadly, noting that it includes “[e]very mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money....”
“Property” is broadly defined in the AUFTA to encompass “real and personal property, whether tangible or intangible, and any interest in property whether legal or equitable and includes anything that may be the subject of ownership.”
Thus, it would appear that blood products qualify as “property” under the AUFTA. However, ASD Specialty Healthcare, Inc., an incorporated division
When a court construes a statute, “[w]ords used in [the] statute must be given their natural, plain, ordinary, and commonly understood meaning, and where plain language is used a court is bound to interpret that language to mean exactly what it says.” IMED Corp. v. Systems Eng‘g Assocs. Corp., 602 So. 2d 344, 346 (Ala.1992). With this standard in mind, we review the text of
“(4) Procuring, furnishing, donating, processing, distributing, or using human whole blood, plasma, blood products, blood derivatives, and other human tissues such as corneas, bones or organs for the purpose of injecting, transfusing, or transplanting any of them in the human body is declared for all purposes to be the rendition of a service by every person participating therein and whether any remuneration is paid therefor is declared not to be a sale of such whole blood, plasma, blood products, blood derivatives, or other human tissues.”
Here, the plain reading of
Thus, those “furnishing,” “distributing,” or “procuring” blood products provide a service, and that service does not constitute a sale.1 However,
CERTIFIED QUESTION ANSWERED.
SEE, BROWN, JOHNSTONE, HARWOOD, WOODALL, and STUART, JJ., concur.
HOUSTON and LYONS, JJ., dissent.
I concur with Justice Lyons‘s dissent. The answer to the certified question is that the definition of “property” under the AUFTA does not include blood products, as provided in
LYONS, Justice (dissenting).
The AUFTA condemns the act of ”disposing of or parting with an asset” for fraudulent purposes.
On Application for Rehearing
PER CURIAM.
APPLICATION OVERRULED.
SEE, BROWN, JOHNSTONE, HARWOOD, WOODALL, and STUART, JJ., concur.
HOUSTON and LYONS, JJ., dissent.
HOUSTON, Justice (dissenting).
I would grant the application for rehearing for the following reasons. In the majority opinion on original submission, this Court held that the blood products in question were “property.” The Court noted a distinction, with regard to the application of the Alabama Uniform Fraudulent Transfer Act,
In its rehearing application, ASD Specialty Healthcare, Inc., argues that there is a “logical absurdity” in this Court‘s opinion. ASD relies upon this Court‘s opinion in Wilson v. American Red Cross, 600 So. 2d 216 (Ala.1992), the only other case in which this Court has addressed the “for all purposes” language of
In Wilson, Wilson contracted hepatitis B after receiving blood during surgery at the University of Alabama Hospital in Birmingham. Wilson sued the Red Cross, including a claim alleging liability under the Alabama Extended Manufacturer‘s Liability Doctrine (“the AEMLD“). This Court in Wilson held that the words “for all purposes” in
In State v. Community Blood & Plasma Service, Inc., 48 Ala. App. 658, 661, 267 So. 2d 176, 179 (1972), another opinion interpreting
Red Cross argues that “[a]t no point in its analysis did the [Community Blood] Court contend that blood products are not property capable of transfer. Rather, the only question addressed was whether to treat the transfer of the blood products as a sale or a service.” (Red Cross‘s reply brief on application for rehearing, p. 6.) That, of course, is the problem. If blood products are of a “chattel nature,” then why did the Community Blood court not rule that the transaction involved in that case was a sale of blood products \xc2\x97 chattel \xc2\x97 subject to taxation? The Community Blood case involved the State‘s attempt to impose a sales tax upon the blood bank, which sold blood products to hospitals. The statute upon which the tax was based, Tit. 51, \xc2\xa7 786(3), Code of Alabama 1940 (now
However, if “services” can be included within the broad definition of property under the AUFTA, as the Red Cross argues, then perhaps the AUFTA would still apply to the transaction in question. The purpose of the AUFTA is to prohibit the fraudulent transfer of property by a debtor “who intends to defraud creditors by placing assets beyond their reach.” Thompson Props. v. Birmingham Hide & Tallow Co., 839 So. 2d 629, 632 (Ala.2002). To accomplish this purpose, the AUFTA defines “transfer” broadly, noting that it includes “[e]very mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money....”
“Property” is broadly defined in the AUFTA to encompass “real and personal property, whether tangible or intangible, and any interest in property whether legal or equitable and includes anything that may be the subject of ownership.”
The federal magistrate judge in this case explained in her “Report and Recommendation” that the goodwill of a business may contain a “service-related component,” and that, as such, “services” are capable of being sold and purchased. Specifically, she quoted from an Alabama Supreme Court case, Gilmore Ford, Inc. v. Turner, 599 So. 2d 29, 31 (Ala.1992):
“`“Goodwill” has been defined as the advantage or benefit acquired by a business beyond the mere value of the capital, stock, funds, or property employed therein, in consequence of the general public patronage and encouragement it receives from constant and habitual customers, on account of its local position, common celebrity, reputation for skill, affluence, or punctuality, or from other accidental circumstances or necessities, or even from ancient partialities or prejudices. See Collas v. Brown, 211 Ala. 443, 100 So. 769 (1924); see also, 38 Am.Jur.2d Goodwill \xc2\xa7 1 (1968). Goodwill is property of an intangible nature and constitutes a valuable asset of the business of which it is a part, unless in a particular instance it is too uncertain and contingent in nature to be appraised. 38 Am.Jur.2d, supra, \xc2\xa7 3. It is well settled that goodwill, being property, is transferable and may be bought and sold in connection with the sale of a business; it is not essential, however, that the contract for the sale of a business expressly mention the goodwill of the business. Covenants not to compete that are designed to protect the goodwill of a business being sold imply a sale of the goodwill. 38 Am.Jur.2d, supra, \xc2\xa7\xc2\xa7 9, 10; Yost v. Patrick, 245 Ala. 275, 17 So. 2d 240 (1944).‘”
(Emphasis added by magistrate judge.) The magistrate judge reasoned that “services” are present in the goodwill of a business, and because goodwill can be the subject of ownership, then the “rendering of services” can also be the subject of ownership.
The distinction lost upon both the Red Cross and the district court \xc2\x97 and indeed this Court \xc2\x97 is the difference between a service contract and the actual rendition of a service. The former is property that can be the subject of ownership, while the latter is not. Therefore, while agreeing that the goodwill of a business, including a contract obligating a party to perform a service, is an asset that can be transferred, the defendants contend that the rendition of a service, in and of itself, is not something capable of being transferred or of being the subject of ownership.
The defendants cite Most Worshipful Grand Lodge v. Allen, 208 Ala. 292, 94 So. 343 (1922), in support of their argument that services cannot be considered property the transfer of which can be a violation of the AUFTA. In that case, the Lodge obtained a judgment against Clarence Allen for an existing debt. Allen, for the purpose of avoiding payment on the judgment, donated his services to a corporation in which his wife owned a majority of the stock. Instead of a salary, the wife accrued dividends that the corporation paid her. She then supported her husband with those increased dividends. This Court stated:
“The law does not give to a creditor the right to appropriate the labor or personal services of a debtor for the satisfaction of his debt....
“....
“Manifestly, such a donation of labor or services presents no analogy to a
donation of property which is subject to the claims of creditors, and the rules of law that govern fraudulent conveyances can have no application.”
208 Ala. at 293, 94 So. at 344.
The blood-shield statute defines the “[p]rocuring, furnishing, donating, processing, distributing, or using [of] human whole blood, plasma, blood products,” etc., as “the rendition of a service,” not as a contract for service.
The past existence of the services in this case calls into doubt another aspect of the argument advanced by the Red Cross \xc2\x97 that in defining the word “property” in the AUFTA, the Legislature “use[d] language similar to the Alabama Probate Code.”
I cannot agree with the recommendation of the federal magistrate judge in this case because if the “service” rendered, as defined by
If, in fact, the clear language of the blood-shield statute has in this case allowed a putative wrongdoer to find a way to accomplish a fraudulent transfer without being liable under the AUFTA, it is not this Court‘s duty to amend that language.2 Alabama is one of a small number of states that include the “for all purposes” language in its blood-shield statute. As of 1994, 48 states had enacted blood-shield statutes. Rachel B. Adler, Device Dilemma: Should Hospitals Be Strictly Liable for Retailing Defective Surgical Devices?, 5 Alb. L.J. Sci. & Tech. 95, 123 (1994). Only 14 states, besides Alabama, use the phrase “for all purposes” in their statutes: California, Kansas, Kentucky, Maine, Michigan, Mississippi, Missouri, Nebraska, North Carolina, Ohio, Rhode Island, Vermont, Washington, and West Virginia.3
Any attempt, however well-meaning, on this Court‘s part to create an exception to the blood-shield statute is an attempt to avoid the plain meaning of the words of the statute and creates dangerous precedent. With respect to
According to
Therefore, I respectfully dissent.
LYONS, J., concurs.
Notes
“When drafting \xc2\xa7 7-2-314, our legislature specifically used the language `for all purposes.’ Applying our rules of statutory construction, this Court holds that the legislature intended \xc2\xa7 7-2-314(4) to be applicable for all purposes, including negligence actions, breach of contract actions, and actions brought under the AEMLD.”