Alabama Psychiatric Services, P.C. v. A Center for Eating Disorders, L.L.C.

Citations: 148 So. 3d 708; 2014 WL 272338; 2014 Ala. LEXIS 9Docket: 1110703

Court: Supreme Court of Alabama; January 23, 2014; Alabama; State Supreme Court

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Alabama Psychiatric Services, P.C. (APS) and Managed Health Care Administration, Inc. (MHCA) appeal from a trial court's denial of their motions for judgment as a matter of law (JML) following a jury verdict in their favor. Despite this verdict, they contend that two claims should not have been submitted to the jury. Additionally, they challenge the trial court's decision to grant a new trial for the plaintiff, A Center for Eating Disorders, L.L.C. (ACED), which overturned the prior jury decision.

The factual background indicates that ACED, established on February 23, 2009, provides partial hospitalization treatment for eating disorders and is accredited by the Joint Commission. Blue Cross Blue Shield of Alabama (BCBS) operates without a preferred provider network for individual mental health providers and utilizes MHCA to manage behavioral health networks. MHCA, primarily owned by physicians from APS, is managed by individuals also employed by APS, raising concerns about overlapping ownership, which BCBS claimed not to be aware of.

BCBS contracts with MHCA for mental health services, compensating it $3.10 per member monthly. BCBS members can access mental health services through various benefit designs, but ACED is not recognized as an MHCA provider, resulting in claims from ACED being processed as out-of-network benefits. This situation places ACED at a competitive disadvantage, as 90-95% of BCBS members with Expanded Psychiatric Services (EPS) benefits must seek treatment at APS's Eating Disorders Center of Alabama (EDCA) to receive coverage, effectively limiting their options for care.

ACED sought Individual Case Management agreements from BCBS prior to its opening, which are discretionary contracts for services not covered by health plans. BCBS frequently declined these agreements. The contract between Blue Cross and MHCA mandates that any subcontracting must be authorized by BCBS and that MHCA must have agreements with 'in-network' providers, with APS being the sole provider recognized as such. Following ACED's establishment as the Alabama Center for Eating Disorders, APS filed a trademark infringement lawsuit against ACED, claiming ACED’s name infringed on APS’s trademark. ACED changed its name to A Center for Eating Disorders to resolve the issue, leading to the dismissal of the lawsuit. Subsequently, MHCA denied ACED's application to become a service provider for BCBS's mental health network, prompting ACED to file a seven-count lawsuit against APS, MHCA, and Blue Cross, alleging various claims including intentional interference, defamation, fraud, breach of contract, and civil conspiracy. The trial court initially denied motions to dismiss, allowing all counts except for fraud, which required a more definite statement. When ACED did not comply, the court dismissed that count with prejudice. Following this, summary judgment motions were filed, and after extensive oral arguments, the court granted summary judgment in favor of APS and MHCA on the defamation claim and in favor of Blue Cross on all counts except for the declaratory relief claim. Summary judgment was also granted to APS and MHCA on breach of contract and interference claims, while the court denied motions for summary judgment on intentional interference and conspiracy counts, leaving the declaratory relief claim undecided.

On October 13, 2011, the trial court ruled that there was no justiciable controversy warranting declaratory relief for ACED, determining that a judgment would not affect ACED’s legal position or provide them relief, and concluded that ACED lacked standing. The court granted summary judgment to APS and MHCA regarding count VII and also to Blue Cross, dismissing Blue Cross with prejudice since no other claims remained. The trial proceeded against APS and MHCA on counts I and VI, with both parties filing motions in limine before the trial commenced on November 14, 2011. The trial concluded on November 18, 2011, with a jury verdict in favor of APS and MHCA, despite their motions for judgment as a matter of law (JML) being denied. Following the verdict, ACED filed a motion for a new trial, claiming the exclusion of evidence hindered their ability to demonstrate manipulations within a network and false statements in contracts. On January 26, 2012, the trial court granted ACED’s motion for a new trial and reinstated count IV (breach of contract). APS and MHCA appealed the decision. 

Regarding the standards of review, for JML motions, the court assesses whether the nonmovant has provided enough evidence for jury consideration, viewing it favorably for the nonmovant. In contrast, for legal questions, the court does not presume correctness of the trial court’s ruling. For new trial motions, the court’s review is limited and respects the trial judge's discretion unless a legal right was abused, which must be plainly evident in the record.

The claim for intentional interference with business relations requires five elements: (1) a protectable business relationship, (2) awareness of this relationship by APS and MHCA, (3) their status as strangers to the relationship, (4) intentional interference by them, and (5) resulting damage to ACED. APS and MHCA contended that the trial court erred in denying their motions for judgment as a matter of law (JML), asserting that ACED did not provide substantial evidence for each element of the claim. They argued that ACED's conspiracy claim also fails if the interference claim is invalid.

The key issue on appeal is whether ACED presented substantial evidence of intentional interference by APS or MHCA. APS and MHCA claimed they did not manipulate the market but made a business decision to limit their network to one eating disorder partial hospitalization provider for Blue Cross insureds. They cited that a mere refusal to deal does not constitute intentional interference, supported by case law affirming the right to choose business partners.

APS and MHCA maintained that ACED failed to demonstrate any obligation for MHCA to include it in their provider network and that ACED’s claims stemmed from a perception of unfairness rather than legal grounds. They highlighted that ACED’s clinical director acknowledged that MHCA had no obligation to partner with ACED and was aware of its standing with Blue Cross prior to forming ACED. Furthermore, they noted that Alabama law allows exclusive-provider networks, contradicting ACED’s claims.

Additionally, APS and MHCA argued there was no evidence showing they directed patients away from ACED, and the clinical director’s belief in collusion was unsubstantiated by patient testimony. Ultimately, the review of the record found insufficient evidence to support claims of intentional interference by APS or MHCA with ACED’s business relationships.

Miller's cross-examination revealed she lacked evidence that APS and MHCA interfered with ACED's business by directing patients to leave ACED for APS. She acknowledged that MHCA had no obligation to contract with ACED. The court concluded that ACED’s claim of intentional interference was unfounded since it merely expressed dissatisfaction over APS and MHCA's decision not to contract for in-network services. APS and MHCA had no legal duty to engage with ACED, and thus the claim should not have been presented to the jury. Additionally, because conspiracy claims require a viable underlying cause of action, and ACED failed to prove its intentional interference claim, the conspiracy claim was also invalid. The trial court erred in denying APS and MHCA's motion for a judgment as a matter of law (JML) regarding both claims, and the order granting ACED a new trial on its breach-of-contract claim was also reversed. The court remanded the case with instructions to enter a JML in favor of APS and MHCA, bypassing further arguments from the parties. The decision was supported by a majority of justices, with one dissenting and one recusal.