Paul HOUGHTON and Billie Henderson, individually and each as representative of a class; and Damian Henderson, Wayne Rubens, Ron Roes, and Susan Roes, who are other members of these classes, similarly situated, Plaintiffs and Appellants, v. DEPARTMENT OF HEALTH; The Office of Recovery Services; The Department of Human Services; The State of Utah; Rod L. Betit, Director of the Department of Health and Director of Department of Human Services; Emma Chacone, Executive Director of the Office of Recovery Services; and John Does 1-50 and Jane Does 1-50, Defendants and Appellees.
No. 20070197.
Supreme Court of Utah.
Dec. 16, 2008.
Rehearing Denied April 23, 2009.
2008 UT 86
See also 962 P.2d 58, 57 P.3d 1067, 125 P.3d 860.
Mark L. Shurtleff, Att‘y Gen., Philip S. Lott, Peggy E. Stone, Debra J. Moore, Asst. Att‘ys Gen., Salt Lake City, for appellees.
PARRISH, Justice:
INTRODUCTION
¶ 1 This interlocutory appeal presents two issues. The first concerns the timeliness of the petition for interlocutory review. We hold that the petition was timely. The second concerns the district court‘s decertification of a class of plaintiffs suing the State to recover attorney fees pursuant to State v. McCoy.1 We hold that the district court erroneously interpreted the law when it concluded that no common issues of fact predominated because calculating reasonable attorney fees involved a fact-intensive inquiry. In the context of a McCoy claim, reasonable attorney fees are calculated according to the plaintiff‘s attorney fee agreement, subject to the statutorily mandated thirty-three percent cap.
BACKGROUND
¶ 2 This is the fourth time this case has arrived at our court on an interlocutory appeal during its thirteen years of litigation,2 and the parties have yet to finish discovery. Because we have set out the facts in our prior opinions, we will limit our factual recitation to what is necessary to provide context and to address the issues in this interlocutory appeal.
¶ 3 The Medicaid Benefits Recovery Act3 authorizes the State to place a priority lien on settlements or awards received by Medicaid recipients from third parties.4 This provides a means for the State to reimburse itself for medical services provided to the recipient when the recipient later receives compensation from a third party. In State v. McCoy, we held that if the State satisfies its
¶ 4 The plaintiffs in this case are Medicaid recipients who obtained recoveries through the efforts of private attorneys and later had those recoveries reduced by the State‘s priority lien. The plaintiffs are seeking reimbursement from the State for “reasonable attorney fees”6 under McCoy (“McCoy claims“).
¶ 5 In our most recent interlocutory review of this case, we clarified that McCoy was not limited to its facts.7 We held that the State must pay its “proportionate share of attorney fees” in “all cases where the State satisfie[d] its lien” through a recovery obtained by a private attorney and where the attorney requested consent from the State pursuant to
¶ 6 On remand, the district court first considered a motion to decertify filed by the State before the Houghton III interlocutory appeal. Finding “no common issue that would justify the case continuing as a class action,” the district court ordered limited discovery on fifty claims and additional briefing on whether the class should be decertified. On December 22, 2006, the district court issued an order decertifying the class (the “Decertification Order“). The district court concluded that no common issues of fact predominated because the plaintiffs could only prevail under McCoy by proving that the State did not pay reasonable attorney fees and the reasonableness of the attorney fees paid by the State was a fact-specific inquiry based on the totality of the circumstances. For cases in which the plaintiffs alleged that the State underpaid attorney fees, the district court concluded that issues of waiver, estoppel, or accord also precluded class certification.
¶ 7 Recognizing that its decision to decertify the class would impact other pending motions, the district court requested additional briefs from the parties addressing the impact of the Decertification Order. On January 9, 2007, the plaintiffs sent the district judge a letter expressing uncertainty regarding the correct time to appeal, in response to which the district court issued a minute entry on January 12, 2007, indicating that the Decertification Order was “provisional.” On January 23, 2007, the parties argued the remaining motions to the district court. Following oral argument, the district court directed the State‘s counsel to prepare the court‘s order on the motions. The district court signed the prepared order on February 15, 2007. The new order did not substantively change or modify the December 22 order other than stating that it was now “final.” The plaintiffs filed a petition for interlocutory review on March 7, 2007.
¶ 8 We provisionally granted permission for this interlocutory appeal on May 29, 2007. Our grant of review was limited to two questions:
- Whether this Court has jurisdiction, pursuant to
rule 5 of the Rules of Appellate Procedure , to review the December 22, 2006 “order on motion for decertification“, in light of the district court‘s subsequent minute entry, dated January 12, 2007, designating the December 22 order “provisional“, and its February 15, 2007 order designating the December 22 order as “final” without making any modifications to it. - If so, whether the district court‘s December 22, 2006 decision and order decertifying the class was erroneous.
¶ 9 We have jurisdiction to hear interlocutory appeals pursuant to
I. WE HAVE JURISDICTION TO HEAR THIS INTERLOCUTORY APPEAL BECAUSE THE PLAINTIFFS APPEALED WITHIN TWENTY DAYS OF THE DATE THAT THE COURT‘S ORDER WAS SUBMITTED AND SIGNED IN COMPLIANCE WITH RULE 7(f)(2)
¶ 10 The State argues that we do not have jurisdiction over this appeal because the petition for interlocutory review was untimely. Specifically, the State argues that the Decertification Order constituted the entry of an order under
¶ 11 The State‘s argument fails because
¶ 12 In this case, the Decertification Order was a memorandum decision that Judge Quinn did not intend to be final for the purposes of interlocutory appeal. It was not a judgment. Judge Quinn did not request the State to prepare an order, nor did he explicitly state that no order was required. Furthermore, the memorandum decision itself contemplated further action by requesting additional briefing from the parties regarding the remaining motions. The minute entry on January 12, 2007, in response to the plaintiffs’ confusion regarding the time for appeal, further clarified Judge Quinn‘s intent by stating that the Decertification Order was “not intended as a final order” because the additional motions before the court “may result in modification of the Order.” Furthermore, following oral argument on the remaining issues, Judge Quinn directed the State to submit an order, and the final order explicitly stated that “the December 22, 2006 Order was not intended to be a final order until after consideration of the additional motions addressed herein.” If the State intended that the time for an interlocutory appeal begin to run on December 22, the State should have submitted an order in compliance with
¶ 14 Having concluded that the petition is timely, we turn to the merits. The decision to grant a petition for interlocutory appeal is discretionary.20 “The purpose [of] an interlocutory appeal is to get directly at and dispose of the issues as quickly as possible consistent with thoroughness and efficiency in the administration of justice.”21 We will grant interlocutory review “if it appears essential to adjudicate principles of law or procedure in advance as a necessary foundation upon which the trial may proceed; or if there is a high likelihood that the litigation can be finally disposed of on such an appeal.”22 In this case, the district court‘s decision to decertify the class is intimately related to its interpretation of the elements of a McCoy claim as articulated in Houghton III.23 Proper interpretation of Houghton III is “a necessary foundation upon which the trial may proceed.”24 Accordingly, accepting interlocutory review promotes “the desired objective of efficiency in procedure.”25 Thus, we exercise our discretion to review the Decertification Order pursuant to
II. THE DISTRICT COURT‘S DECERTIFICATION ORDER WAS BASED ON AN ERRONEOUS INTERPRETATION OF MCCOY AND HOUGHTON III
¶ 15 The decision to allow a case to proceed as a class action is “within the sound discretion of the district court.”26 In this case, however, the district court decertified the class based on an interpretation of the law. “Interpreting case law presents a question of law. Accordingly, we review the district court‘s interpretation of our ruling in McCoy [and Houghton III] for correctness.”27
A. The District Court‘s Conclusion That Calculating “Reasonable” Attorney Fees Required a Fact-Specific Inquiry Was Erroneous
¶ 16 In the Decertification Order, the district court properly laid out the elements for establishing a prima facie case under McCoy. The plaintiffs must demonstrate the following:
(1) the Plaintiff was represented by counsel in a third party liability claim, (2) the Plaintiff requested consent from the State to represent the State‘s Medicaid claim, (3) the State satisfied its Medicaid lien from proceeds recovered through the efforts of the Plaintiff, and (4) the State did not pay the reasonable attorney fees it was obligated to pay the Plaintiff.
¶ 17 The district court erred in interpreting the fourth element, which requires proof that the State did not pay the reasonable attorney fees it owed to the plaintiffs. The district court held that reasonable attorney fees could only be calculated within the context of the State‘s assumed authority to negotiate attorney fees with the attorney when (and if) it granted consent. Thus, the court concluded that in order to determine whether the fees paid by the State were reasonable, the court must place itself in the shoes of the
If the recipient requests consent near the beginning of the case when the status is the same as when the fee percentage was set, the percentage of attorney fees owed by the State would likely be the same. However, if the recipient requests consent after investigations have been completed and the merits of the case are more clear, the State‘s attorney fees may be lower if in fact the risk of non recovery is less. For example, as was often the case, if the recipient requested consent from the State after the recipient received an acceptable settlement offer from the third party, the State‘s attorney fees would be less because there was little risk of not recovering. (footnotes omitted).
This approach ignores the plain language of our earlier cases, which hold that the State must pay its “proportionate share”28 or its “fair share”29 of attorney fees “incurred in procuring”30 the State‘s share of the proceeds.
¶ 18 In McCoy, we held that “the State must pay the attorney fees incurred in procuring the State‘s share of the settlement proceeds.”31 According to
¶ 19 We have also referred to the State‘s obligation to pay “its proportionate share of attorney fees” and a “fair share of attorney fees.” These are the same terms used in our subrogation case law, which imposed an equitable requirement for parties to pay their “fair share” of attorney fees when exercising a right of subrogation. Before Utah passed the Utah Automobile No-Fault Insurance Act in 1973, the standard practice was for the insurer to compensate the insured for economic losses after an accident. Then, if the insured obtained recovery from a third party, the insurer would seek reimbursement from the insured‘s third-party recovery.34 Although this practice became virtually obsolete in Utah with the passage of the No-Fault Insurance Act,35 it provides a useful analogy for the case before us because the State‘s lien for recovering Medicaid funds mimics the right of subrogation.
¶ 20 In subrogation cases, “[t]he general rule [was] that a subrogated insurance carrier must pay its fair share of attorney‘s fees and costs if it [did] nothing to assist in the prosecution of the claim.”36 Thus, we required the insurer to pay the “fair share of an attorney‘s fee and costs which [had] been incurred in protecting its interests.”37 This
¶ 21 Contrary to the district court‘s conclusion, the term “reasonable attorney fees,”41 as used toward the end of the McCoy opinion, does not impose an additional fact-specific inquiry in order to calculate reasonable fees. Instead, the term “reasonable” refers to the statutorily mandated ceiling on attorney fees set out in
¶ 22 Because we hold that McCoy requires the State to pay the same percentage of fees that the recipient paid, subject to the thirty-three percent ceiling, determining the amount of money owed by the State in each case should be a simple mathematical calculation. This is so even in the cases where the State allegedly underpaid the recipients because in those cases the plaintiffs need only show a difference between the percentage that they paid their attorney and the percentage that the State paid for its recovery. Thus, on remand, we do not anticipate the same fact intensive inquiry that convinced the district court that class certification was inappropriate.
B. The District Court Erred in Concluding That Issues of Waiver, Estoppel, or Accord Precluded Class Certification in Cases Where the Attorneys Entered into Retainer Agreements with the State
¶ 23 The district court found an additional problem with certifying the group of plaintiffs represented by attorneys who had entered into retainer agreements with the State. Because the retainer agreements expressly set out the fee that the State would pay, the district court concluded that “[i]n every case where the State paid an attorney fee or discounted its lien, there will be issues involving estoppel, waiver, or accord.” We believe that our prior cases address this issue. Most importantly, in Houghton I, we recognized that the representation agreements signed by the attorneys were “merely pro forma.”43 They were not bargained for agreements. “Notwithstanding the language implying a voluntary contractual relationship ... [the attorneys] were legally obligated under section 26-19-7(3) to sign agreements if they wished to represent Medicaid recipients in actions against third parties.”44
¶ 25 An amendment to
If the recipient‘s attorney enters into a written collection agreement with the department, or includes the department‘s claim in the recipient‘s claim or action pursuant to Subsection (4) [i.e., the department fails to respond to the consent request], the department shall pay attorney‘s fees at the rate of 33.3% of the department‘s total recovery and shall pay a proportionate share of the litigation expenses directly related to the action.48
Under the amended statute, the State‘s obligation to pay attorney fees is always the same as long as the attorney complied with the statutory requirements. According to the Office of Recovery Services itself, this amendment merely clarifies what the law has always been. On January 27, 2005, before the Senate Health and Human Services Committee, Emma Chacon, director of the Office of Recovery Services, explained that the amendment “doesn‘t change any of the underlying legal concepts that have been in State law since ... the 1980s.”49 She further explained, “What this bill really does is carve out the protocol and the procedures that the recipient, their legal counsel, and the State will follow to work together on this issue to make sure we‘re in compliance with the law.”50
¶ 26 To summarize, we hold that the State‘s proportionate share of attorney fees is based on the percentage rate paid by the plaintiffs to their attorneys, subject to the thirty-three percent ceiling. Because the district court erroneously applied the stan
III. WE DO NOT ADDRESS THE TWO ADDITIONAL “RELATED QUESTIONS” BECAUSE THEY ARE BEYOND THE SCOPE OF OUR INTERLOCUTORY REVIEW
¶ 27 The plaintiffs also ask us to address two additional legal issues. First, they ask us to articulate the appropriate class criteria under Houghton III. We believe that this issue has been addressed in the above holding, which clarifies the requirements for establishing a McCoy cause of action. Second, they ask us to address whether they are entitled to full discovery on remand. We did not grant interlocutory review on this issue, so we decline to address it.
CONCLUSION
¶ 28 The petition for interlocutory review was timely because it was submitted within twenty days of an order prepared by the State at the request of the court in compliance with
¶ 29 Chief Justice DURHAM, Associate Chief Justice DURRANT, and Judge GREENWOOD concur in Justice PARRISH‘s opinion.
¶ 30 Having disqualified himself, Justice NEHRING does not participate here; Court of Appeals Judge PAMELA T. GREENWOOD sat.
WILKINS, Justice, dissenting:
¶ 31 I respectfully dissent. Notwithstanding the clarification of how the district court is to apply the McCoy mandate of this court, the determination of attorney fees payable to each of the plaintiffs is an individual and fact intensive question for the district court. Even with the clear mandate of my colleagues as to how much the State is required to pay and to disregard any written agreement between the parties on the presumption that it must surely provide for more than the statutorily capped amount, I believe the district court was well within its discretionary boundaries to decertify the overall class action for purposes of calculating the individual attorney fee awards due each plaintiff given the different claims and factors at issue in each individual case. I would affirm the district court‘s decision, and remand for the calculations mandated by McCoy.