Lessons On What Not To Do When Prosecuting a Claim

It was hard for me not to grin when reading the comedy of errors in Harris dba Angel Team Home Care, LLC v. Cochise Health Systems. In my view, it is a recipe legal malpractice.

The suit arises from a dispute between a home health care company (Angel Team) and a division of the Cochise County Health and Social Services (CHS), and a CHS employee, Denise Pederson. Although the Court does not say what CHS’s relationship is to AHCCCS, CHS apparently gets AHCCCS funds to pay for the services provided by Angel Team. Anyway, CHS allegedly failed to pay Angel Team and, from the sounds of it, did whatever they could to destroy Angel Team’s business and ultimately terminated its contract with Angel Team.

So Angel Team filed suit.

The original complaint was for breach of contract, defamation and tortuous interference with contract. That suit was dismissed because Angel Team, contrary to its contention, did not follow the “grievance procedure mandated by the relevant statute, regulations and its contract with CHS.” The trial court also dismissed Pederson as a defendant because Angel Team had failed to serve her with an individualized notice of claim, as required by A.R.S. § 12-821.01(A). In particular, the court found that, because AHCCCS had primary jurisdiction over the breach of contract claim between the parties as well as any torts “inextricably intertwined” with contract claims, dismissal was required due to Angel Team’s failure to satisfy the grievance procedure set forth by statute and in the AHCCCS Rules and Regulations (and, apparently, mandated by the CHS contract) prior to filing suit. Nevertheless, the trial court also granted Angel Team leave to amend its complaint to set forth “tort claims that are not related to the performance of the contract,” or to clarify how those claims were not intertwined and dependent on the contract issues.

Does this sound like the Court was giving Angel Team “another chance to get it right”? Yeah, me too.

So Angel Team filed a First Amended Complaint, removing the breach of contract claim entirely and inserting a new tort claim for intentional/negligent infliction of emotional distress. CHS again moved to dismiss, arguing the amended complaint made “clear that all allegations of tortious conduct arise out of [CHS’s] alleged decisions to withhold contract payments and/or to terminate the contract.” The trial court again dismissed the claims with leave to amend, ordering Angel Team to “address with specificity, in separate counts, the claims of the individuals versus the claims of the entity.”

Does this sound like the Court was giving Angel Team yet “another chance to get it right”? Yeah, me too.

So Angel Team filed a Second Amended Complaint. Reading between the lines, it is clear that this version of the complaint alleged negligent infliction of emotional distress, defamation and tortuous interference with contract. CHS moved to dismiss yet again. This time, however, the trial court only granted one-third of CHS’s motion “as to the portion of the complaint alleging negligent infliction of emotional distress, denying the remainder of the motion” which left the defamation and tortuous interference with contract claims.

Anyway, in a very risky legal maneuver, Angel Team agreed to dismiss with prejudice all of the remaining claims. Then they appealed the trial court’s dismissal of the original and second amended complaints.

At the outset, the Court of Appeals addressed, sua sponte, its lack of jurisdiction. After reviewing some divergent authority on the issue, the Court held that Angel Team could contest only those portions of the trial court’s order that were “decided adverse to them,” which does not include “any matters that were voluntarily dismissed.” The Court held that Angel Team’s decision to voluntarily dismiss its defamation and tortuous interference with contract claims (in exchange for the right to immediately appeal) resulted in their losing the opportunity to appeal any matters that were voluntarily dismissed.

Ouch.

So the only remaining issues that Angel Team was allowed to appeal was the trial court’s dismissal of its contract claim and its claims against Pederson; however, Angel Team’s troubles were far from over.

On appeal, Angel Team argued that it was not required to follow the grievance procedure mandated by the relevant statute, regulations and its contract with CHS. Instead, Angel Team argued the procedure was permissive and, therefore, the Court incorrectly dismissed the contract claim. The trouble was that “Angel Team expressly conceded to the trial court that the grievance procedure was mandatory,” and so the Court of Appeals held that Angel Team had waived its arguments concerning the breach of contract appeal.

Doh!

So the only issue that remained was whether Angel Team gave proper notice to Pederson, the CHS employee, under the Notice of Claim statute. Angel Team claimed that it gave proper notice because she was named in notice as a “statutory agent” for CHS. CHS pointed out that the notice of claim did not refer “to her in the body of the Notice of Claim, and . . . [did not make] demand for money or settlement upon her.”

Can you guess what happens next? Yep, the Court affirmed the trial court’s dismissal of Pederson.

Oooo!

So are you keeping score? The case was botched from the trial court all the way to the Court of Appeals. Can things get worse? Yes, they can.

CHS was awarded its attorneys’ fees.

Oops.