Univ. of Ky. v. Long

NOT TO BE PUBLISHED

APPEAL FROM FRANKLIN CIRCUIT COURT HONORABLE THOMAS D. WINGATE, JUDGE ACTION NO. 18-CI-00627

BRIEFS AND ORAL ARGUMENTS FOR APPELLANT COMMONWEALTH OF KENTUCKY DEPARTMENT OF REVENUE: R. Campbell Connell Frank L. Dempsey Austin T. Greene Frankfort, Kentucky

BRIEF AND ORAL ARGUMENTS FOR APPELLANT UNIVERSITY OF KENTUCKY AND PENNY COX IN HER OFFICIAL CAPACITY AS TREASURER OF THE UNIVERSITY OF KENTUCKY: Bryan Beauman Lexington, Kentucky

BRIEF AND ORAL ARGUMENTS FOR APPELLEES AMELIA LONG, KAREN DEVIN, RICHARD HARDY, II, SHERRIE TURNER, TABITHA MARCUM, AS REPRESENTATIVES OF A CLASS: E. Douglas Richards Lexington, Kentucky Brian C. Hicks Frankfort, Kentucky

BEFORE: ACREE, GOODWINE, AND JONES, JUDGES.

OPINION

ACREE, JUDGE:

Appellants, the University of Kentucky (UK), Penny Cox, in her official capacity as Treasurer of UK, and the Commonwealth of Kentucky, Department of Revenue (Department), challenge the Franklin Circuit Court's rulings on the issues of class certification and sovereign immunity. In an August

15, 2022 order granting partial judgment on the pleadings, the circuit court determined sovereign immunity did not apply to any of Appellees' claims. In a March 28, 2023 order, the circuit court granted Appellees' motion for class certification. We affirm in part, reverse in part, and remand.

BACKGROUND

Appellees Amelia Long, Karen Devin, Richard Hardy II, and Sherrie Turner are former patients of UK HealthCare; Appellee Tabitha Marcum is the parent of a minor child who was a patient at UK. Each Appellee was billed for the medical care they or their child received. Insurance or another payor did not cover at least a portion of each Appellee's amount owed. UK sent each Appellee statements for the unpaid balances.

At all times relevant to this appeal,^[1] UK took additional steps to pursue payment in the event a patient's balance remained unpaid. UK sent unpaid accounts to CKMS, an affiliated debt collection corporation, which would send additional notices to the patient. Should these efforts prove unsuccessful, CKMS would mail a final notice letter, a "Letter 8," to the patient. The Letter 8 would inform the patient as to his or her right to contest the amount owed and how to

initiate such contest. The contest procedure would include a hearing before a hearing officer.

The Letter 8 also informed the patient that, should he or she fail to contest the amount owed, the balance would be referred to the Department for collection.^[2] KRS 45.238 empowers executive branch agencies^[3] to "certify" debts, and, having done so, must refer their certified debts to the Department for collection. See KRS 45.238.

None of Appellees requested a hearing, and, therefore, each of their outstanding balances were referred to the Department for collection. The Department proceeded to collect the balances via wage garnishment, levies against bank accounts, and state income tax offsets. The Department imposed statutory interest and collection fees. All Appellees, except Marcum, entered voluntary payment plans with the Department. Pursuant to these agreements, the Department

would agree to cease collection in exchange for regular payments toward the patient's outstanding balance.

Appellees filed the underlying lawsuit on June 19, 2018, on behalf of themselves and "a class of others similarly situated" against UK, UK Treasurer Susan Krauss in her official capacity, the Department, and Allison Ball in her official capacity as Kentucky State Treasurer. Record (R.) at 1. Central to their lawsuit, Appellees (1) argue UK is not an "agency" as defined by KRS 45.237 for the purpose of debt certification and referral under KRS 45.238 and, therefore, unlawfully referred Appellees' medical debts to the Department; and (2) challenge these statutes and the Department's debt collection procedures as violative of their due process rights under both the United States and Kentucky Constitutions. Appellees also contest the Department's application of collection fees.

Appellees seek a variety of relief. In their second amended complaint, they request declarations that (1) UK may not legally refer debts to the Department for collection and that the Department may not engage in collection efforts; (2) that KRS 45.237 to 45.241 are unconstitutional, both facially and as applied; (3) that the Department was not entitled to impose its collection fees; (4) that Appellees and class members are entitled to an order and judgment directing the return of all unlawfully collected funds; and (5) that Appellees are entitled to "the equitable remedy of restitution of their moneys from the Defendants." R. at 657-58. They

also seek an order directing the Kentucky State Treasurer and the UK Treasurer to return Appellees' and other class members' funds, as well as prejudgment interest, and costs and attorneys' fees. R. at 658.

On August 15, 2022, the circuit court entered an order granting partial judgment on the pleadings to Appellees. Therein, the circuit court ruled on three threshold issues in the case, including rulings on the merits of Appellees' suit regarding the meaning and application of KRS 45.237, 45.238, and 45.241. Relevant to this appeal, the circuit court determined UK and the Department were not entitled to sovereign immunity for any of Appellees' claims.

On March 28, 2023, the circuit court entered an order granting Appellees' motion for class certification. In their motion, Appellees requested certification of the following class:

All persons who, within ten (10) years preceding the filing of the Complaint herein, were subjected to actions taken or threatened by Defendants to collect UK HealthCare accounts pursuant to KRS 45.237 to KRS 45.238 and KRS 45.241, or any other statutory authority, and who had money seized or collected from them by the Department of Revenue as a result or consequence of such actions, including through payment plans which the class members entered into under threat of Department of Revenue collection activities.

R. at 1500.^[4]

UK and the Department now appeal.

ANALYSIS

"[T]he general rule in appellate procedure is that only a trial court's final orders are appealable." Hensley v. Haynes Trucking, LLC, 549 S.W.3d 430, 436 (Ky. 2018) (citing Breathitt Cnty. Bd. of Educ. v. Prater, 292 S.W.3d 883, 886 (Ky. 2009)). However, "select issues" may be appealed in the absence of a final order. Id. (citing Prater, 292 S.W.3d at 886; Baker v. Fields, 543 S.W.3d 575 (Ky. 2018)). Class certification is one such issue. CR 23.06 ("An order granting or denying class action certification is appealable within 10 days after the order is entered."). Sovereign immunity is another, because immunity "entitles its possessor to be free 'from the burdens of defending the action, not merely . . . from liability.'" Prater, 292 S.W.3d at 886 (citing Rowan Cnty. v. Sloas, 201 S.W.3d 469, 474 (Ky. 2006); Lexington-Fayette Urb. Cnty. Gov't v. Smolcic, 142 S.W.3d 128, 135 (Ky. 2004)) (modification original).

Appellees argue the sovereign immunity issue is not properly before this Court for our review. We disagree. The circuit court plainly ruled on sovereign immunity as a threshold issue in this dispute in its August 15, 2022 order. The Department indicated it would raise the immunity issue in its notice of appeal. And, analysis of both the interlocutory issues of class certification and sovereign immunity will promote efficient and economic resolution of this matter.

Because the circuit court has not entered a final judgment, our review in this interlocutory appeal is limited to the issues of class certification and sovereign immunity. This requires us to proceed with caution. "We must focus our analysis on th[ese] limited issue[s] and in so doing scrupulously respect the limitations of the crossover between" an analysis on the merits of Appellees' case and the issues raised on this interlocutory appeal. Hensley, 549 S.W.3d at 436. While we note the circuit court has made partial rulings on the merits of Appellees' case, those issues are beyond the scope of our review. We will discuss the issues of class certification and sovereign immunity in turn.

I. Class Certification

Standard of Review

Appellate courts review class action certifications for abuse of discretion. Sowers v. Atkins, 646 S.W.2d 344, 346 (Ky. 1983). A circuit court has abused its discretion when its "decision is arbitrary, unreasonable, unfair, or

unsupported by [sound] legal principles." Lawson v. Lawson, 290 S.W.3d 691, 694 (Ky. App. 2009) (citing Goodyear Tire & Rubber Co. v. Thompson, 11 S.W.3d 575, 581 (Ky. 2000)). "Under this standard, we review the record and the ruling while giving deference to the trial court's factual findings and rulings because the trial court is in the best position to evaluate the evidence before it." Nebraska All. Realty...