Cunningham v. Air Evac EMS, Inc.

902 S.E.2d 532

Brian CUNNINGHAM, in his capacity as Director of the Public Employees Insurance Agency and Mark D. Scott, Geoff S. Christian, Amanda D. Meadows, Jared Robertson, Damita Johnson, Jason Myers, Michael Cook, William Milam, and Michael T. Smith, in their capacities as Members of the Public Employees Insurance Agency Finance Board, Respondents Below, Petitioners

v.AIR EVAC EMS, INC., Petitioner Below, Respondent

Air Evac Ems, Inc., Petitioner Below, Petitioner

v.Brian Cunningham, in his capacity as Director of the Public Employees Insurance Agency and Mark D. Scott, Geoff S. Christian, Amanda D. Meadows, Jared Robertson, Damita Johnson, Jason Myers, Michael Cook, William Milam, and Michael T. Smith, in their capacities as Members of the Public Employees Insurance Agency Finance Board, Respondents Below, Respondents

Nos. 23-ICA-127 & 23-ICA-135

West Virginia Intermediate Court of Appeals.

Submitted: February 6, 2024

Filed: June 13, 2024

Appeal from the Circuit Court of Kanawha County, Honorable Carrie L. Webster, Judge, Civil Action No. 19-AA-169

Michael R. Williams, Esq., Deputy Solicitor General, Sean M. Whelan, Esq., Deputy Attorney General, Charleston, West Virginia, Counsel for Petitioners Carte P. Goodwin, Esq., Alex J. Zurbuch, Esq., Mary Claire Davis, Esq., Frost Brown Todd LLP, Charleston, West Virginia, Counsel for Respondent

LORENSEN, JUDGE:

This consolidated matter arises from Air Evac EMS, Inc.’s ("Air Evac") attempts to collect additional payment for providing air ambulance transports to individuals insured by the West Virginia Public Employees Insurance Agency ("PEIA")¹ over three years.² Both parties appeal the December 16, 2022, order of the Circuit Court of Kanawha County, which held that: (1) PEIA is not entitled to sovereign immunity against Air Evac’s claims; (2) the payment dispute between Air Evac and PEIA was subject to the Administrative Procedures Act ("APA") and Contested Case Rules ("CCR"); (3) pursuant to the CCR, Air Evac is entitled to a contested hearing on the merits of its demand for additional payments from PEIA; and (4) on remand, PEIA and Air Evac were ordered to negotiate a fair price before pursuing further administrative proceedings, concluding it was improper to set reimbursement at either the Medicare Rural Rate or Air Evac’s "full billed" charges.

On review, we hold that the circuit court erred in concluding that sovereign immunity did not bar Air Evac’s claim for damages against PEIA. Therefore, we reverse the circuit court’s December 16, 2022, Final Order Granting, in Part and Denying, in Part Air Evac EMS, Inc.’s Petition for Appeal and remand this matter to be dismissed with prejudice.

I. FACTUAL AND PROCEDURAL BACKGROUND

This action follow’s extensive federal litigation that resulted in PEIA’s air ambulance reimbursement rate caps being found to be preempted by federal law.³ As relevant context, we provide a brief overview of the federal litigation. On June 9, 2016, Air Evac initiated an action in the United States District Court for the Southern District of West Virginia, seeking a declaratory judgment that PEIA’s reimbursement rate caps⁴ were preempted by the federal Airline Deregulation Act ("ADA"). See Cheatham II, 2017 WL 4765966, at *1, 10. The rate cap provisions limited PEIA’s reimbursement rates for air ambulance providers to either the Medicare Rural Rate or the annual cost of an air ambulance provider’s membership program—both being rates below Air Evac’s "full-billed" charges. See id. at *1. At summary judgment, the district court found that the ADA preempted the provisions, and enjoined PEIA from enforcing the reimbursement caps. Id.

During PEIA’s appeal of the district court’s decision, Air Evac sent written demands to PEIA, asserting that, in light of the injunction, PEIA was now obligated to pay its "full billed" charges for air transports it had provided since initiating the federal litigation. PEIA refused, arguing that it was not mandated to "unquestionably pay whatever amount Air Evac unilaterally establishes as its charge" and maintaining that it had discretion to negotiate. Instead, PEIA offered to pay a portion of Air Evac’s billed charges at the Medicare Rural Rate, which Air Evac accepted, considering it partial compensation.⁵

Before the United States Court of Appeals for the Fourth Circuit, the district court’s decision was affirmed in full, and the Fourth Circuit agreed that PEIA’s rate capping provisions were preempted by the ADA. See Cheatham III, 910 F.3d 751, 755. Once the Fourth Circuit had issued its ruling, a second exchange of demands and refusals began. Over the summer of 2019, the parties continued to dispute whether PEIA had an obligation to further compensate Air Evac. Eventually, the parties reached an impasse, and on October 24, 2019, Air Evac demanded a contested case hearing before the PEIA Board regarding the disputed charges. In response, on November 13, 2019, PEIA declined to schedule a hearing, asserting that Air Evac’s demand was exempt from APA procedures, and therefore not subject to the CCR.⁶

Construing PEIA’s response as a summary denial, on December 13, 2019, Air Evac appealed PEIA’s decision to the Circuit Court of Kanawha County. There, Air Evac sought a declaration that it was entitled to a contested hearing under the APA, and further, sought the circuit court to order PEIA to pay the remaining balance of $4,018,046 for the 115 transports it provided to PEIA members between June 9, 2016, and June 4, 2019. In support, Air Evac claimed that, in light of the federal injunction modifying the reimbursement statutes,⁷ severability principles now mandated PEIA to pay Air Evac’s "full billed" charges. Further, Air Evac contended that PEIA’s refusal to budge from the Medicare Rural Rate—the same rate PEIA would have previously paid under the now-enjoined rate caps—amounted to ignoring the federal injunction.

In response, PEIA, citing its own regulations, maintained that the APA was inapplicable because this matter constituted a provider payment dispute, and as such, it was exempt from APA procedures.⁸ Further, addressing severability, PEIA contended that the remaining statutory language would not amount to a mandate for PEIA to pay whatever price Air Evac demanded. PEIA also raised an issue of its own challenging the circuit court’s jurisdiction by invoking sovereign immunity as a defense.

On December 16, 2022, the circuit court issued its Final Order Granting, in Part and Denying, in Part Air Evac EMS, Inc.’s Petition for Appeal. The circuit court concluded that PEIA was not entitled to sovereign immunity, as Air Evac was seeking recovery from legislatively appropriated funds. Specifically, the funds sought were, in part, appropriated to PEIA for the purpose of satisfying payments like the medical transports at issue, placing Air Evac’s claim within an exception to PEIA’s sovereign immunity. Further, the circuit court determined that this matter was subject to APA procedures and PEIA’s Contested Case Rules. Regarding the disputed payments, the circuit court reasoned that PEIA’s decision to reimburse Air Evac at the Medicare Rural Rate failed to comply with the Fourth Circuit’s mandate in Cheatham III; however, the circuit court also rejected Air Evac’s assertions that it was entitled to payment of its "fully billed" charges. Instead, the circuit court ordered the parties to engage in good faith negotiations regarding the disputed charges, and if no resolution materialized, for further proceedings pursuant to the APA and CCR.⁹ It is from this order both parties appeal.

II. STANDARD OF REVIEW

[1] When reviewing a question of sovereign immunity, our standard of review¹⁰ is as follows:

[The Supreme Court of Appeals of West Virginia] has held that "[w]here the issue on an appeal from the circuit court is clearly a question of law or involving an interpretation of a statute, we apply a de novo standard of review." Further, "[a]s jurisdictional issues are questions of law, our review is de novo."

Holley v. Feagley, 242 W. Va. 240, 242, 834 S.E.2d 536, 538 (2019) (footnotes omitted) (first quoting Syl. Pt. 1, Chrystal R.M. v. Charlie A.L., 194 W. Va. 138, 459 S.E.2d 415 (1995); and then quoting State ex rel. Universal Underwriters Ins. Co. v. Wilson, 239 W. Va. 338, 343, 801 S.E.2d 216, 221 (2017)).

III. DISCUSSION

[2, 3] At the outset, we address our jurisdiction. Our jurisdiction stems from the circuit court’s denial of PEIA’s sovereign immunity defense. We consider the circuit court’s order to be an appealable order on the issue of sovereign immunity:

"[A] circuit court’s denial of a motion to dismiss that is predicated on qualified immunity is an interlocutory ruling which is subject to immediate appeal under the ‘collateral order’ doctrine." Likewise, when the issue relates to sovereign immunity, it is well-settled that "the denial of a substantial claim of absolute immunity is an order appealable before final judgment[.]"

W. Virginia Lottery v. A-1 Amusement, Inc., 240 W. Va. 89, 94, 807 S.E.2d 760, 765 (2017) (second alteration in original) (first quoting W. Virginia Bd. of Educ. v. Marple, 236 W. Va. 654, 660, 783 S.E.2d 75, 81 (2015); and then quoting Mitchell v. Forsyth, 472 U.S. 511, 525, 105 S.Ct. 2806, 86 L.Ed.2d 411 (1985)).¹¹ With our jurisdiction to review the circuit court’s order established, we proceed to consider the principles of our sovereign immunity jurisprudence.

A. Sovereign Immunity

[4] The State’s sovereign immunity against suit is enshrined within Article VI, § 35 ("Section 35") of the West Virginia Constitution, which provides that: "The state of West Virginia shall never be made defendant in any court of law or equity …." Accordingly, if applicable, sovereign immunity deprives a court of jurisdiction to hear the case.¹² This immunity is "facially absolute[,]"¹³ unwaivable,¹⁴ and extends to agencies of the State.¹⁵ The underlying purpose of sovereign immunity is "designed to protect the...