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Stevens v. Anesthesiology Consultants of Cheyenne, LLC

Supreme Court of Wyoming

May 1, 2018

RONALD E. STEVENS, M.D., and HIGH PLAINS ANESTHESIA, P.C., a Wyoming Professional Corporation, Appellants (Defendants),
v.
ANESTHESIOLOGY CONSULTANTS OF CHEYENNE, LLC, Appellee (Plaintiff), and MICHAEL B. DORROUGH, M.D., RONALD W. LeBEAUMONT, M.D., BRUCE M. milmont, M.D., DAVID M. SKOLNICK, D.O., and DANTE RODRIGUEZ-MORVELLI, M.D., Appellees Additional Counterclaim Defendants.

          Appeal from the District Court of Laramie County The Honorable Thomas T.C Campbell, Judge.

          Representing Appellants: Anna M. Reeves Olson and Weston W. Reeves, Park Street Law Office, Casper, Wyoming. Argument by Ms. Reeves Olson.

          Representing Appellees: Henry F. Bailey, Jr. and Douglas W. Bailey, Bailey Stock Harmon Cottam P.C., Cheyenne, Wyoming. Argument by Mr. Douglas Bailey.

          Before BURKE, C.J., and HILL [*] , DAVIS, and KAUTZ, J J, and FENN, D.J.

          OPINION

          FENN, DISTRICT JUDGE.

         [¶1] Appellants, Ronald Stevens and High Plains Anesthesia, P.C., appeal from the Judgment on Jury Verdict, Order on Summary Judgment, and Order Denying Stay and Motion for Judgment as a Matter of Law. Appellants assert that the district court improperly granted summary judgment, erred in refusing to admit certain evidence at trial, and erred in refusing to grant their post-trial motion for judgment as a matter of law. We affirm in part, reverse in part, and remand for further proceedings.

         ISSUES

         [¶2] Appellants phrase the issues as follows:

1. Did the District Court err in granting summary judgment to ACC on the breach of fiduciary duty claims because there were issues of material fact as to whether the Eye Surgery Center amounted to a protectable and continuing "corporate opportunity" for ACC?
2. In the alternative, did the District Court err by granting summary judgment to ACC on the breach of fiduciary duty claims because Dr. Stevens had given notice to ACC and ACC ratified Dr. Stevens' actions and/or rejected the opportunity?
3. Regardless of whether the Eye Surgery Center amounted to a "corporate opportunity, " was the arrangement between Cassandra Rivers and ACC a violation of the Federal Anti-Kickback law, and is thus illegal and unenforceable as a matter of law?
4. Did the District Court err in granting summary judgment to ACC on Dr. Stevens' Defamation claim because there were issues of material fact regarding whether Dr. Dorrough abused the conditional privilege and spoke with malice?
5. Did the District Court abuse its discretion and commit prejudicial error at trial when it refused to admit Dr. Stevens' December 11, 2013 email and the July 17, 2014 email between Drs. Dorrough and Skolnick?

         Appellees phrase the issues as follows:

1. The manager of a limited liability company owes a duty of loyalty to the company that includes a duty not to compete with, or appropriate an opportunity from, the company. While a manager of ACC, Dr. Stevens both competed with ACC and appropriated a company opportunity. Did Dr. Stevens breach his duty of loyalty to ACC?
2. A company opportunity exists when the company has an actual or expected interest in, and ability to acquire, the property or asset. ACC had a longstanding business-relationship with the Cheyenne Eye Surgery Center as well as an established history of revenue from the relationship. Does ACC's longstanding business-relationship constitute a company opportunity?
3. A manager's duty of loyalty requires him to fully disclose all material facts relating to company opportunities he intends to appropriate. Dr. Stevens sent an email to ACC's billing provider, copying ACC's other managers, stating he intended to "carve out" certain of his services from ACC. Did this email referencing a carve-out constitute full disclosure of all material facts relating to the appropriation of the company opportunity?
4. A company can only approve, reject, or ratify a manager's appropriation of a company opportunity if that opportunity has been fully disclosed to the members of the company. Dr. Stevens' email to ACC's billing provider (copied to two managers) did not disclose any material facts relating to the company opportunity he appropriated. Did ACC ratify Dr. Stevens' appropriation of the company opportunity?
5. Privileged or substantially true communications do not constitute defamation. Dr. Dorrough's statement to his colleagues that Dr. Stevens had diverted income from ACC was both privileged and true. Did Dr. Dorrough defame Dr. Stevens?
6. Irrelevant evidence is inadmissible and evidence that will confuse or distract the jury can be excluded. The December 11, 2013 Copied-To-Email and the July 17, 2014 Post-Discovery Emails were irrelevant and would have confused or distracted the jury. Did the District Court abuse its discretion in excluding the emails?
7. The failure to raise an issue before the District Court precludes this Court from considering it on appeal. The Appellants failed to raise the issue of whether an agreement between Cassandra Rivers and ACC violated federal anti-kickback law before the District Court. Should this Court consider the issue for the first time on appeal?
8. Is the Appellants' argument that an agreement between Cassandra Rivers and ACC violates federal anti-kickback law applicable to the facts of this case?

         FACTS

         [¶3] In 1999, a group of anesthesiologists in Cheyenne formed Anesthesiology Consultants of Cheyenne, LLC ("ACC"). The members of ACC typically provided anesthesiology services at Cheyenne Regional Medical Center ("CRMC") and High Plains Surgery Center. ACC also provided services to a group of Cheyenne ophthalmologists, who generally performed surgery on their patients at either CRMC or High Plains Surgery Center. Some of the members of ACC had performed anesthesiology services for the ophthalmologists even before 1999.

         [¶4] Appellant, Dr. Ronald Stevens, joined ACC in 2001. Dr. Stevens had previously been an anesthesiologist in Denver, Colorado, and he had been a manager of a much larger group of anesthesiologists in that state before relocating his practice to Cheyenne. Shortly after moving to Cheyenne, Dr. Stevens met Cassandra Rivers. Ms. Rivers is a certified registered nurse anesthetist ("CRNA"). Ms. Rivers often performed work for ACC at CRMC, but she did not have a written contract with the company. Dr. Stevens and Ms. Rivers married in 2005.

         [¶5] In 2007, several of Cheyenne's ophthalmologists decided to open their own eye surgery center. Dr. Stevens, Ms. Rivers, and possibly other members of ACC assisted the eye surgeons in selecting the proper equipment and setting up their surgery center. The Cheyenne Eye Surgery Center (the "Eye Center") opened in 2008. ACC initially provided anesthesia services at the Eye Center after it opened. However, ACC also had a contract with CRMC that required it to provide a certain number of physicians and/or CRNAs who would be available to cover the hospital's anesthesiology cases. Thus, it was sometimes difficult to have enough anesthesiologists to provide coverage for CRMC, High Plains Surgery Center, and the Eye Center. This meant that some cases at the Eye Center were missed. Around the time the Eye Center opened, Ms. Rivers was looking for a position that would give her shorter hours. Dr. Stevens suggested to the members of ACC that Ms. Rivers provide services at the Eye Center when needed, and continue to work at CRMC a couple of days each week. ACC would bill for her work there, pay her an hourly rate, and keep the rest of the income. ACC accepted this arrangement, and Ms. Rivers started providing services at the Eye Center in April of 2008. Ms. Rivers was scheduled to be at the Eye Center three days a week and at the hospital the other two days. There was no written agreement either between ACC and the Eye Center or between ACC and Ms. Rivers. However, for the next several years, ACC billed for Ms. Rivers' services at the Eye Center, paid her an hourly rate, and kept the rest of the income. On average, ACC kept slightly more than half of the income that was generated at the Eye Center.

         [¶6] ACC gave Ms. Rivers minimal, if any benefits, other than providing billing services. Ms. Rivers' work was directly supervised by the ophthalmologists at the Eye Center. In May 2009, Ms. Rivers became an employee of Dr. Stevens' company, High Plains Anesthesia, P.C. When this change occurred, ACC paid Ms. Rivers' hourly wage to High Plains Anesthesia instead of directly to Ms. Rivers. High Plains Anesthesia then paid Ms. Rivers an hourly rate. High Plains Anesthesia paid Ms. Rivers' worker's compensation and unemployment premiums and it issued her a W-2 for the income she received. ACC continued to retain roughly half of the income from the services Ms. Rivers provided at the Eye Center.

         [¶7] In 2013, the members of ACC executed the Restated Operating Agreement of Anesthesiology Consultants of Cheyenne, LLC ("Operating Agreement") and a Distribution Agreement. At the time these documents were executed, Dr. Stevens was a manager of ACC, along with Dr. Skolnick and Dr. Wallace. These documents provided that patients would be assigned to a member of ACC on a random, rotating basis. The physicians would then pool all of the money they collected from their cases, and after adjustments were made for group expenses, the physician members would be paid $25 for every one "unit of work." The Distribution Agreement set out how many units of work a physician would be paid for a certain type of procedure. This system was designed to allow the physicians to share in the available revenue and eliminated any incentive to avoid patients in low-paying categories or to seek out only the best paying cases.

         [¶8] Some anesthesiologists, like Dr. Stevens, receive training in pain management. Dr. Stevens' practice with ACC included traditional anesthesia services, as well as pain management. Most of Dr. Stevens' pain patients were Medicare patients or patients who were on disability, and ACC was not able to collect full payments for many of these cases. This meant that pain management cases were not very profitable for ACC and did not generate as much income as other types of procedures. In November of 2013, one of the members of ACC suggested that the pain management practice should be divorced from or "carved out" of ACC's shared income pool.

         [¶9] A meeting to discuss this "carve out" was held on November 25, 2013. Prior to the meeting, Dr. Stevens told Dr. Dorrough that he did not want to carve out the pain practice, and that he did not believe the members could vote to change the Distribution Agreement to carve out a specific class of procedures. Dr. Stevens also expressed this opinion to the group at the meeting. He proposed that another option would be for the group to limit the shared revenue to that received from procedures done at CRMC and High Plains Surgery Center. He may have also said that Ms. Rivers was "leaving a lot of money on the table." No official vote was taken at this meeting, but it was clear that several of the members believed that the pain practice should be carved out.

         [¶10] On December 10, 2013, Amy Hayes of the Office Assistant, ACC's billing provider, sent an email to the managers of ACC, Drs. Stevens, Dorrough, and Skolnick, asking whether the pain practice was going to be carved out and, if so, what date that was to begin. She recommended a transition date of January 1, 2014. Dr. Stevens replied to Ms. Hayes and copied Drs. Dorrough and Skolnick. He wrote:

In light of the consistent and persistently expressed wishes of the rest of the group members, and for the purpose of expressing this to you clearly, I have decided to implement the "carveout" as follows: I will continue to personally provide services, through my PC, to the group. This will encompass all work done at the hospital under the contract, as well as "traditional" anesthesiology services at High Plains Surgery Center. All other practice areas, including "the pain practice", and provision of services done by myself or employees elsewhere, will be billed and collected directly through my long-standing corporation, High Plains Anesthesia, PC, which will make its own arrangements for contracting, billing, and collecting. January 1, 2014 will mark the beginning of this separation.

         It appears that neither Dr. Dorrough nor Dr. Skolnick read this email when it was initially sent. Dr. Stevens later asked them if they had received his email and had any questions about it. They told him that they had received it, and that everything was okay. Drs. Dorrough and Skolnick later testified that they believed this email only involved the voluntary carve out of the pain practice, and they were amenable to that being carved out as of January 1, 2014.

         [¶11] On January 1, 2014, ACC stopped receiving the income from the Eye Center, and it was deposited into High Plains Anesthesia's account. Ms. Rivers continued to work at CRMC on Mondays and Fridays, and she submitted her invoices to ACC for this work. These invoices no longer showed her work at the Eye Center on Tuesdays, Wednesdays, and Thursdays. The invoices were submitted as they had been in the past, and they were signed either by Drs. Stevens, Dorrough, or Skolnick.

         [¶12] On June 20, 2014, Dr. Dorrough noticed that ACC was no longer receiving the income from the Eye Center. He approached Dr. Stevens to ask why Ms. Rivers had stopped sending her invoices for this work to ACC. In response, Dr. Stevens reminded Dr. Dorrough about his December 11, 2013 email. Dr. Stevens printed this email for Dr. Dorrough and underlined the section where he had told them that he would be carving out all work done by his employees. Dr. Dorrough then admitted that he had not read the email when it was originally sent. Dr. Dorrough told Dr. Stevens that he was going to schedule a meeting so that the situation could be discussed with all of the members of ACC.

         [¶13] After speaking with Dr. Stevens, Dr. Dorrough went to some of the members and told them that Dr. Stevens had diverted the money from the Eye Center to his personal PC without notice. After speaking with Dr. Dorrough, some of the members believed that Dr. Stevens had committed a criminal act. The members held a meeting on July 8, 2014, to discuss the situation, and they voted 9-3 to expel Dr. Stevens from ACC.

         [¶14] After Dr. Stevens had been expelled from ACC, he informed Dr. Dorrough that he and Ms. Rivers would like to keep the business from the Eye Center. Dr. Dorrough wrote an email to Dr. Skolnick which read in relevant part:

3) Eye Center- [Dr. Stevens] and Cassie would like to keep the eye center and are wondering what our intentions are? I see this as not a major deal because in order to make the eye center profitable for us, we would have to recruit another CRNA. If we have to bring in more locums in order to keep the eye center staffed, it may not be much of a benefit to us, and would certainly generate more friction. (Locums might be $2, 000/day and the eye center is worth about $1300/day).

         Dr. Skolnick responded as follows:

I think it's okay to give [Dr. Stevens] the Eye Center, but I think we still need to keep our hat in the rink. I will give them a call and clearly state that we don't want to take over, but if they ever need help or [are] unhappy with [their] current arrangement that we would maybe be able to work something out. Thoughts?

         [¶15] In August of 2014, ACC sent Ms. Rivers a letter that her services were no longer needed at CRMC. After her work with ACC ceased, Ms. Rivers continued to provide services at the Eye Center. High Plains Anesthesia continued to bill for her work, paid her an hourly wage, and kept the rest of the income. ACC did not actively pursue the Eye Center's business after expelling Dr. Stevens from the group. One or more members of ACC did contact the Eye Center to let them know that ACC was willing to provide anesthesiology services. However, these communications were characterized as "advertisements" by Dr. Dorrough, and no one from ACC ever contacted the Eye Center to inform them that ACC thought it had an exclusive arrangement with the Eye Center, and that it was a violation of this agreement to use Ms. Rivers' services. In addition, ACC did not attempt to replace Ms. Rivers with another CRNA who could have covered the Eye Center.

         [¶16] After Dr. Stevens was expelled from ACC, he was no longer placed on the rotation at CRMC, and he was only allowed to perform services there if a patient or physician expressly requested him. In addition, some of the members of ACC actively discouraged other physicians from requesting Dr. ...


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