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Pee Dee Health Care, P.A. v. Estate of Thompson

Court of Appeals of South Carolina

November 2, 2016

Pee Dee Health Care, P.A., Appellant-Respondent,
Estate of Hugh S. Thompson, III, Respondent-Appellant. Appellate Case No. 2014-001275

          Submitted March 24, 2016

         Appeal From Darlington County J. Michael Baxley, Circuit Court Judge


          James M. Griffin, of Griffin & Davis, LLC, and Ariail King, of Lewis Babcock LLP, both of Columbia, for Appellant-Respondent.

          J. René Josey, of Turner Padget Graham & Laney, P.A., of Florence, and John Jay James, II, of Darlington, for Respondent-Appellant.

          WILLIAMS, J.

         In this civil matter, Pee Dee Health Care, PA. (PDHC) appeals the circuit court's award of sanctions to the estate of Hugh S. Thompson, III (the Estate) pursuant to Rule 11, SCRCP. PDHC argues the court erred in failing to dismiss the Estate's motion for sanctions as untimely, granting Rule 11 sanctions when PDHC's filings and arguments to the court were not frivolous, awarding sanctions for the thirty hours the Estate's counsel spent responding to discovery requests served upon third parties, not reducing the award for the time the Estate's counsel spent preparing the sanctions motion, and ignoring the Estate's inequitable conduct when deciding to grant sanctions. The Estate cross-appeals, arguing the court erred in concluding its claim for sanctions under the South Carolina Frivolous Civil Proceedings Sanctions Act[1] (the FCPSA) was untimely and not awarding additional sanctions. We vacate in part and affirm in part.


         Although this case has a long procedural history, the instant appeal arises out of a sanctions order the circuit court entered against PDHC after this court issued a remittitur in the case. PDHC, a professional medical association doing business in Darlington, South Carolina, formerly employed Thompson as a medical doctor in its clinic from late 1998 to 2000. In exchange for his salary, Dr. Thompson assigned PDHC the rights to his Medicare payments, and PDHC billed Medicare for his services.

         Several years before Dr. Thompson began working for PDHC, the South Carolina Board of Medical Examiners (the Board) suspended his medical license and, as a regulatory requirement, he was excluded from the Medicare program by the Medicare Office of the Inspector General (OIG). Although the Board later reinstated Dr. Thompson's medical license in 1998, he failed to seek removal of his name from OIG's list of excluded providers until 2002. In 2007, the Centers for Medicare and Medicaid demanded that PDHC return over $200, 000 in benefits it collected while Dr. Thompson was on the excluded provider list.

         Following an unsuccessful federal administrative appeal, PDHC filed an action in probate court against the Estate in 2010, seeking reimbursement for the money it was required to pay back to Medicare. The Estate disallowed the claim, and PDHC removed the action to circuit court. Subsequently, the Estate sought to disqualify PDHC's attorney, Tony R. Megna, on the ground that-as PDHC's chief executive officer-he was a necessary fact witness in the case. The court agreed and disqualified Megna in an order dated April 15, 2011. PDHC filed a motion to alter or amend the disqualification order on May 2, 2011.

         The Estate and PDHC then filed cross-motions for summary judgment. To avoid any potential prejudice to PDHC, the circuit court allowed Megna to appear for the limited purpose of arguing the pending summary judgment motions at the July 19, 2011 hearing before it ruled upon PDHC's motion to alter or amend the disqualification order. The court subsequently denied PDHC's motion to alter or amend its disqualification order on August 15, 2011. In its order, the court quashed all motions, subpoenas, and filings made subsequent to June 17, 2011, that contained only Megna's signature.

         On September 1, 2011, the circuit court issued an order granting summary judgment in favor of the Estate, finding PDHC's fault for not satisfying its nondelegable duty to ensure the proper credentialing of its employee was dispositive as to all causes of action. The court later dismissed PDHC's motion to alter or amend the summary judgment order as void ab initio because Megna's signature was the only one to appear on the motion in violation of the court's disqualification order.

         PDHC filed various appeals with this court regarding the circuit court's summary judgment order, disqualification order, and order dismissing PDHC's appeal from the probate court. This court consolidated the appeals and issued an unpublished opinion on July 3, 2013, in which it dismissed PDHC's appeal of the summary judgment order as untimely, found the disqualification issue was moot, and affirmed the circuit court's dismissal of PDHC's appeal of the probate court's order. See Pee Dee Health Care, P.A. v. Thompson, 2013-UP-311 (S.C. Ct. App. filed July 3, 2013). This court denied PDHC's petition for rehearing, and our supreme court later denied its petition for a writ of certiorari. The court of appeals issued a remittitur in the case on January 7, 2014.

         Nine days after the remittitur was issued, on January 16, 2014, the Estate filed a motion in circuit court for sanctions-pursuant to Rule 11, SCRCP, and the FCPSA-against PDHC, Megna, Benjamin R. Matthews, and Matthews & Megna, LLC. In its motion, the Estate claimed it expended at least $96, 580 in attorney's fees defending against PDHC's allegedly meritless lawsuit as well as Megna's violation of the circuit court's disqualification order. PDHC filed a motion to strike the Estate's motion for sanctions under the FCPSA, arguing the circuit court no longer had subject matter jurisdiction over the matter because the motion was untimely.

         At the conclusion of a hearing on the motions, the circuit court announced it would award sanctions. The court, however, directed the Estate to submit a supplemental fee affidavit segregating the amount of time spent addressing Megna's violations of the disqualification order and filing the motion for sanctions. After the Estate submitted a fee affidavit listing $60, 300 for these expenses, the court awarded it $34, 150 in sanctions against PDHC, Megna, and his law firm pursuant to Rule 11. Nevertheless, the court declined to award sanctions pursuant to the FCPSA. PDHC filed a motion to alter or amend the award of sanctions, and the court denied its motion. This cross-appeal followed.


         The decision of whether to award attorney's fees pursuant to Rule 11 or the FCPSA is treated as one in equity. Se. Site Prep, LLC v. Atl. Coast Builders & Contractors, LLC, 394 S.C. 97, 104, 713 S.E.2d 650, 653 (Ct. App. 2011). "In an action in equity tried by a judge alone, the appellate court has jurisdiction to find facts in accordance with its own view of the preponderance of the evidence." In re Beard, 359 S.C. 351, 357, 597 S.E.2d 835, 838 (Ct. App. 2004). "However, the abuse of discretion standard plays a role in the appellate review of a sanctions award." Ex parte Gregory, 378 S.C. 430, 437, 663 S.E.2d 46, 50 (2008). When the appellate court agrees with the circuit court's factual findings, it reviews the award of sanctions under an abuse of discretion standard. Atl. Coast Builders, 394 S.C. at 104, 713 S.E.2d at 654. "Under the abuse of discretion standard, the imposition of sanctions will not be disturbed on appeal unless the decision is controlled by an error of law or is based on unsupported factual contentions." Id.; see also Russell v. Wachovia Bank, N.A., 370 S.C. 5, 19, 633 S.E.2d 722, 729 (2006) ("An abuse of discretion may be found if the conclusions reached by the court are without reasonable factual support." (quoting Runyon v. Wright, 322 S.C. 15, 19, 471 S.E.2d 160, 162 (1996))).

         LA ...

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