Peterson by Johnson v. Oakwood Healthcare, Inc.

336 Mich.App. 333

970 N.W.2d 389

Jeanette PETERSON, BY Guardian Donnell JOHNSON and Conservator Ella M. Bully-Cummings, and Payton Peterson, Jaxon Johnson, Hunter Johnson, Isaiah Johnson, by their Next Friend, Donnell Johnson, Plaintiffs-Appellees,andDepartment of Health and Human Services, Intervening Plaintiff-Appellant,

v.OAKWOOD HEALTHCARE, INC., doing business as Beaumont Hospital-Dearborn, Jonathan Leischner, D.O., and Heather Kathawa, PA-C, Defendants-Appellees.

Nos. 353314

353353

Court of Appeals of Michigan.

Submitted March 2, 2021, at Detroit.

Decided March 11, 2021, 9:10 a.m.

Meyers Law, PLLC, Dearborn (by Jeffrey T. Meyers and Timothy M. Takala ) and Mark Granzotto, PC, Royal Oak (by Mark Granzotto ) for plaintiffs.

Dana Nessel, Attorney General, Fadwa A. Hammoud, Solicitor General, and H. Daniel Beaton, Jr., Assistant Attorney General, for intervening plaintiff.

Before: Letica, P.J., and Cavanagh and Fort Hood, JJ.

Per Curiam.

These consolidated appeals¹ arise out of plaintiff Jeanette Peterson's medical malpractice claims against defendants. After plaintiffs and defendants² settled, the Department of Health and Human Services (DHHS) intervened and sought reimbursement for Medicaid expenses. In Docket No. 353314, the DHHS appeals as of right the trial court's order that denied the DHHS's motion for relief from judgment and granted plaintiffs’ motion for sanctions against the DHHS. In Docket No. 353353, the DHHS appeals by delayed leave granted³ the trial court's order approving the distribution of proceeds from plaintiffs’ and defendants’ settlement.

On appeal, the DHHS argues that the trial court erred when it (1) imposed sanctions against the DHHS for filing a frivolous motion, (2) did not allow the DHHS to recover from the portion of the settlement attributed to future medical expenses, (3) reduced the DHHS's share of the recovery by a pro rata amount, and (4) reduced the DHHS's share to offset or pay for some of plaintiffs’ attorney fees. We affirm.

I. PROCEDURAL HISTORY

On August 18, 2016, Jeanette went to the emergency room at Beaumont Hospital in Dearborn, complaining of a headache since the prior evening. Jeanette informed certified physician's assistant Heather Katahwa that she was also feeling central chest heaviness and shortness of breath. The supervising emergency room physician, Jonathan Leischner, obtained Jeanette's electrocardiogram (ECG), which showed an anteroseptal infarct, age-determined abnormal ECG. Laboratory results also showed Jeanette had a potassium level of 3.1 millimoles per liter. Later in the day, Jeanette informed the certified physician's assistant that her symptoms had improved, and she was discharged.

One month later, Jeanette experienced a full cardiac arrest and was unresponsive. She was taken to the emergency room at Henry Ford-Wyandotte Brownstown. At the hospital, she had a potassium level of 2.5 millimoles per liter, and potassium replacement therapy was initiated. As a result of the cardiac arrest, Jeanette suffered severe hypoxic or anoxic, or both, encephalopathy.

Thereafter, plaintiffs filed a complaint in the trial court that alleged the emergency room physician and the certified physician's assistant breached their respective standard of care. The DHHS then moved to intervene, asserting that it had a statutory right to recover the $146,285.12 it had paid thus far for medical services for Jeanette through Medicaid. The DHHS also asserted that it had a statutory right to be first in priority to recover any proceeds in the event of a settlement or judgment in Jeanette's favor. The trial court granted the DHHS's motion to intervene.

At some point, plaintiffs and defendants reached a confidential settlement agreement.⁴ Plaintiffs moved for an evidentiary hearing to determine the lienholders’ share of the settlement proceeds. Plaintiffs asserted that the settlement only represented a "minor portion" of Jeanette's overall damages, so the DHHS was entitled to a pro rata share of the settlement. The DHHS contended that it was entitled to recover the full amount of medical expenses up to the amount of the settlement that was properly allocated to medical expenses. According to the DHHS, the settlement amount was to be apportioned into two components, the amount attributable to medical expenses and the amount attributable to nonmedical expenses, and the DHHS was entitled to all of the medical expenses up to the amount of its lien.

At the evidentiary hearing, the parties stipulated to the total value of plaintiffs’ case and the amount of Jeanette's medical expenses. The DHHS argued that because the amount of the medical expenses was 65% of the total value, then 65% of the settlement amount should be allocated toward the medical expenses. Accordingly, the DHHS asserted that it could recover all of its $268,357.33 lien because 65% of the settlement greatly exceeded its lien. Plaintiffs argued that Jeanette's future medical expenses encompassed nearly all of the total medical expenses, while the DHHS's lien for past medical expenses represented only 1% of the total medical expenses. Accordingly, plaintiffs asserted, the DHHS was only entitled to 1% of the medical portion of the settlement.

The trial court determined that because the settlement was 21.25% of the total value of plaintiffs’ case, the DHHS was only entitled to 21.25% of its lien, or $57,025.93.⁵ Although plaintiffs suggested that the amount to which the DHHS was entitled might have to be reduced because of costs and attorney fees, the trial court declined to do so and noted that the amount awarded was "more than reasonable[.]" Following a hearing in which plaintiffs approved the settlement distributions, the trial court stated that it would grant the final distribution once the final order was presented to it.

Three days later, on December 16, 2019, the trial court signed the order distributing the settlement. On February 11, 2020, the DHHS moved for relief from the judgment under MCR 2.612(C)(1)(a) and (f). Counsel for the DHHS argued that he had never received notice that the final order had been entered on December 16, 2019. Counsel averred that he had checked the online status at least four times between December 17, 2019 and January 15, 2020, but did not see that the order had been entered. Counsel only learned that the order had been entered when he called the court's clerk to check the status on January 15, 2020. The DHHS argued it was entitled to relief from judgment because (1) a recently published decision of this Court, Byrnes v. Martinez , 331 Mich. App. 342, 952 N.W.2d 607 (2020), vacated in part 506 Mich. 948, 949 N.W.2d 723 (2020), showed that the trial court had erred and (2) the DHHS never received notice of the order's entry, which deprived the DHHS of an opportunity to appeal as of right.

Plaintiffs responded that the court's e-filing system clearly showed that counsel for the DHHS was notified of the order and that the copy of the register of actions the DHHS attached to its motion also showed that the order was signed and filed on December 16, 2019. Plaintiffs argued that counsel for the DHHS merely failed to act, which was not a proper ground for relief from judgment. Plaintiffs also asserted that the DHHS's motion was frivolous and requested the imposition of sanctions. Furthermore, plaintiffs argued, the DHHS could not obtain relief on the basis of Byrnes because the case was not available at the time of the order.

The trial court determined that the DHHS could not rely on Byrnes because the case was not approved for publication until February 4, 2020, nearly two months after the trial court entered the order approving the distributions. Moreover, the order "appeared in the e-Filing system" and the register of actions. Therefore, the trial court found no reason to grant the DHHS's motion for relief from judgment. Additionally, the trial court found that the motion was frivolous and ordered the DHHS to pay sanctions in the amount of $4,000 to plaintiffs and $2,000 to defendants. These appeals followed.

II. SANCTIONS

In Docket No. 353314, the DHHS argues that the trial court erred when it found that the DHHS's motion for relief from judgment was frivolous and granted sanctions to the opposing parties. We disagree.

This Court reviews for an abuse of discretion a trial court's decision to award sanctions for a frivolous filing. Sprenger v. Bickle , 307 Mich. App. 411, 422-423, 861 N.W.2d 52 (2014). A trial court abuses its discretion when the decision to sanction a party is outside the range of principled outcomes. Hardrick v. Auto Club Ins. Ass'n , 294 Mich. App. 651, 659-660, 819 N.W.2d 28 (2011). But any of the trial court's factual findings, including a finding of frivolousness, are reviewed for clear error. Sprenger , 307 Mich. App. at 423, 861 N.W.2d 52. A finding is clearly erroneous when the reviewing court is left with a definite and firm conviction that a mistake was made. American Alternative Ins. Co., Inc. v. York , 252 Mich. App. 76, 80, 650 N.W.2d 729 (2002), aff'd on other grounds 470 Mich. 28, 679 N.W.2d 306 (2004).

The DHHS's motion for relief from judgment relied on MCR 2.612(C)(1), which provides, in relevant part:

On motion and on just terms, the court may relieve a party or the legal representative of a party from a final judgment, order, or proceeding on the following grounds:

(a) Mistake, inadvertence, surprise, or excusable neglect.

* * *

(f) Any other reason justifying relief from the operation of the judgment.

The DHHS's motion was predicated on two theories: (1) a recently published decision of this Court showed that the trial court had erred and (2) the DHHS never received timely notice of the entry of the December 16, 2019 final order, which deprived it of an opportunity to appeal in this Court as of right.

Regarding the newly published case, because it was not in existence at the time the trial court made its decision,⁶ the purported failure to follow it cannot be...