Fadely v. Encompass Health Valley of the Sun Rehab. Hosp.

73 Arizona Cases Digest 16

515 P.3d 701

Terrell P. FADELY, Plaintiff/Appellee,

v.ENCOMPASS HEALTH VALLEY OF the SUN REHABILITATION HOSPITAL, Defendant/Appellant.

No. 1 CA-CV 21-0478

Court of Appeals of Arizona, Division 1.

FILED June 28, 2022

Beus Gilbert McGroder, PLLC, Phoenix, By Timothy J. Casey, Co-Counsel for Plaintiff/Appellee

Law Office of Thomas M. Ryan, Chandler, By Thomas M. Ryan, Sara K. Ryan, Co-Counsel for Plaintiff/Appellee

Ahwatukee Legal Office, PC, Phoenix, By David L. Abney, Co-Counsel for Plaintiff/Appellee

Gust Rosenfeld, PLC, Phoenix, By James W. Kaucher, Charles W. Wirken, Melissa S. San Angelo, Counsel for Defendant/Appellant

The Checkett Law Firm, PLLC, Phoenix, By John J. Checkett, Co-Counsel for Amicus Curiae Arizona Hospital and Healthcare Association

Coppersmith Brockelman, PLC, Phoenix, By Roopali H. Desai, Kristen M. Yost, Co-Counsel for Amicus Curiae Arizona Hospital and Healthcare Association

Mick Levin, PLC, Phoenix, By Mick Levin, Counsel for Amicus Curiae Arizona Association for Justice

Presiding Judge David D. Weinzweig delivered the opinion of the Court, in which Judge Brian Y. Furuya and Judge Jennifer M. Perkins joined.

WEINZWEIG, Judge:

¶1 At issue here is the Adult Protective Services Act ("APSA"), adopted by our legislature to protect vulnerable adults from the growing evil of abuse, neglect and exploitation. APSA recognizes a private right of action for vulnerable adults to pursue civil damages for abuse, neglect and exploitation against an "enterprise that has been employed to provide [them] care." After a bench trial, the superior court determined that a hospital defendant and two non-employee physicians formed an "enterprise" to care for a vulnerable adult. The hospital defendant argues this was legal error, insisting it could not form an enterprise with the doctors because APSA exempts the doctors from "civil liability for damages." We are not persuaded. APSA's plain language includes this enterprise. We affirm the court's finding of a three-member enterprise, but reverse its apparent agency finding and remand for it to recalculate damages.

FACTS AND PROCEDURAL BACKGROUND

¶2 On appeal from a judgment issued after a bench trial, we recount the evidence in the light most favorable to upholding that judgment. See Town of Florence v. Florence Copper Inc. , 251 Ariz. 464, 468, ¶ 20, 493 P.3d 891, 895 (App. 2021).

¶3 Plaintiff Terrell Fadely had her sixth back surgery in March 2016. She was 73 years old. Dr. Michael Chang performed a spinal fusion at HonorHealth Scottsdale Hospital, inserting a titanium rod to permanently connect two of her vertebrae and stabilize her spine. Plaintiff spent a week at HonorHealth to recover and was discharged with "full strength" in her legs, even able to walk with a walker.

¶4 Plaintiff was transported from HonorHealth to defendant Encompass, then called HealthSouth, an in-patient recovery and rehabilitation hospital, down the road from HonorHealth. She picked Encompass because of its location and she had recovered there from an earlier spinal surgery.

¶5 Because Plaintiff did not identify a particular doctor to care for her, Encompass designated Dr. Christopher Barnes to be her primary attending physician. Dr. Barnes had medical staff privileges and leased space at Encompass. As the primary attending physician, Dr. Barnes testified, "he was required to personally monitor [the patient's] rehabilitation progress and prevent hospital complications."

¶6 Dr. Barnes examined Plaintiff the day after her admission and found her stable. A few days later, Plaintiff complained of "sharp" and "throbbing" back pain. She also displayed "significant" neurological decline. But Dr. Barnes was unavailable, so a nurse alerted Dr. Atul Patel, his on-call replacement. Dr. Patel responded to Plaintiff's hospital room, where he found a "mostly non-verbal" patient "unable to answer questions unless prodded." He performed a minimal physical exam of the patient, which revealed symptoms "consistent with a spinal cord injury," including leg numbness and weakness and precipitous neurological decline. Dr. Patel noted that "close monitoring of neurological status will be needed." He did not, however, perform a neurological exam or order a spine x-ray.

¶7 From there, nothing. Plaintiff had to wait two days before Dr. Barnes examined her. Her mind had continued to decline, and she had developed a pressure ulcer and urinary tract infection. Like his colleague, Dr. Barnes did not perform a neurological exam or order a spine x-ray. Nor did he call the surgeon, Dr. Chang, who Plaintiff would see for an appointment the next day.

¶8 Dr. Chang's physician's assistant ("PA") examined Plaintiff and feared a spinal cord compression. Time was of the essence. After a spinal cord compression, a rapid response is needed to prevent paralysis. The PA had an ambulance rush Plaintiff to HonorHealth, where she was diagnosed with a spinal compression. Dr. Chang operated, but it was too late. Plaintiff has never walked again. She needed a tracheotomy tube for months and spent nearly two years in long-term care facilities.

¶9 Plaintiff sued Encompass in 2017, alleging abuse and neglect under the Adult Protective Services Act. She also alleged, but later dropped, a negligence claim. She never sued Dr. Barnes or Dr. Patel, individually.

¶10 After a 12-day bench trial, the superior court ruled for Plaintiff. The court found that Drs. Barnes and Patel had abused or neglected Plaintiff under APSA, awarding her $1.7 million in compensatory damages. The court did not find "Encompass directly caused Plaintiff's spinal cord injuries," but it found Encompass liable for the "actions and inactions" of Drs. Barnes and Patel because either (1) the doctors were the "apparent agents of Encompass," making Encompass "vicariously liable for [their] acts and omissions," or (2) Drs. Barnes and Patel were "part of Encompass’[s] ‘enterprise’ for providing [Plaintiff]’s care." After several unsuccessful post-trial motions, Encompass timely appealed. We have jurisdiction. See A.R.S. § 12-2101(A)(1).

DISCUSSION

¶11 Encompass argues the superior court erred on multiple grounds, including its finding of secondary liability, inclusion and exclusion of evidence, and award of post-judgment interest.

I. Secondary Liability

¶12 The superior court recognized two grounds to hold Encompass liable for the "actions and inactions" of Drs. Barnes and Patel. We address each ground in turn.

A. Apparent Agency

¶13 The superior court found that Encompass was liable under the doctrine of apparent agency. The court found an apparent agency "in a hospital setting" because Plaintiff looked to Encompass for treatment, not a specific physician, and Plaintiff had no choice of treating physicians. That was legal error because the superior court applied an incorrect legal standard, and Plaintiff had no evidence to meet the correct legal standard.

1. Incorrect legal standard

¶14 The superior court confused two distinct forms of derivative liability: apparent agency and respondeat superior. See Martin C. McWilliams, Jr. & Hamilton E. Russell, III, Hospital Liability for Torts of Independent Contractor Physicians , 47 S.C. L. Rev. 431, 452 (1996) (recognizing that the doctrines of apparent agency and respondeat superior have similar appearance and effect, but their "doctrinal underpinning" is "fundamentally different"). That is, the court found an apparent agency under the law of respondeat superior. Compare Reed v. Gershweir , 160 Ariz. 203, 205, 772 P.2d 26, 28 (App. 1989) (apparent agency), with Beeck v. Tucson Gen. Hosp. , 18 Ariz. App. 165, 170, 500 P.2d 1153 (1972) ("[W]e hold that an employee-employer relationship existed between [the physician] and the hospital."), and Barrett v. Samaritan Health Servs. Inc. , 153 Ariz. 138, 146, 735 P.2d 460, 468 (1987) (applying "well-entrenched principles of respondeat superior"). But Encompass did not employ Dr. Barnes or Dr. Patel, and Plaintiff never argued for respondeat superior liability.

2. Correct legal standard and failure of proof

¶15 Applying the correct legal standard, Plaintiff did not and cannot prove an apparent agency, which hinges on principles of estoppel. An apparent agency is created only when (1) a principal "intentionally or inadvertently" leads one party "to believe an agency exists," and (2) the party justifiably relies on the principal's representations. See Brown v. Ariz. Dep't of Real Estate , 181 Ariz. 320, 326, 890 P.2d 615, 621 (App. 1995) (citing Gershweir , 160 Ariz. at 205, 772 P.2d at 28 ); see also Restatement (Second) of Agency § 267 (1958) (justifiable reliance).

¶16 Here, Encompass never led or misled Plaintiff to think that Drs. Barnes and Patel were Encompass agents or employees. On admission, she was provided a two-page form, titled "Consent to Treat and Conditions of Admission" ("Consent"), which was "designed to make sure [that Plaintiff had] the information [she] need[ed] to make an informed decision about being admitted to [Encompass]." And she signed the Consent, which advised her that Encompass did not control the "medical services" of independent practitioners who "practice independently under their state license and privileges granted by the hospital," "maintain sole responsibility for their medical judgment and professionalism," and "bill and collect for their services independently from the hospital."

¶17 As shown by this screenshot, the Consent also drew a proverbial line between the employees and independent practitioners who treated patients at Encompass:

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¶18 Because Encompass did not represent Drs. Barnes and Patel as its employees or agents to Plaintiff, instead informing her of the independent relationship between them, Plaintiff cannot show either the representation or justifiable reliance needed for an apparent agency.

3. Not ambiguous

¶19 Even so, Plaintiff argues the Consent is ambiguous and thus unenforceable because the document never includes the words "agent,...