Alabama Litigation Review : North Alabama Personal Injury Lawyer & Attorney : Jeff Blackwell : Hornsby, Watson, Hornsby, Blackwell & McKown Law Firm : Commercial Litigation, Workers' Compensation : Huntsville, Decatur, Athens

Kenneth Livesay will probably never forget the 3rd time his case reached the 11th Circuit. In U.S. V LIVESAY (PDF), the Court's opinion can be summed up with the clear instruction that the trial judge send Mr. Livesay to jail.

And when an appellate court  makes the following statement in its opinion; you can guess the court is about to send a strong statement:

Whoever said “third time's a charm” was apparently unfamiliar with the history of this case.

But what makes this criminal case so special? It's the first sentence of the opinion that answers this question:

The charges filed against Defendant-Appellee Kenneth Livesay (“Livesay”) arose out of a massive accounting fraud conspiracy at HealthSouth Corporation (“HealthSouth”), headquartered in Birmingham, Alabama. This massive fraud has been described in many of our previous decisions.

The Court continued by saying Livesay's participation was at the heart of the fraud. To some people, HealthSouth may simply represent another corporate scandal. However, in the Birmingham area, this is a long saga with a great impact on the local economy.  Many people worked for HealthSouth and invested in the company.

Here, we have a person described as a primary participant in a massive fraud. Yet, the trial judge apparently sentences him to only probation.

Does Livesay deserve some leniency for cooperating with prosecutors after his participation in the fraud was discovered?

I think most people understand that cooperating with prosecutors should result in some leniency. However, based on the scope of this fraud, and the role attributed to Mr. Livesay, a sentence of no jail time clearly sends the wrong message.

It is time that participants in such massive frauds be held to some standard of accountability. I applaud the 11th Circuit for sending the clear message that such conduct must be truly punished with time in prison.

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In a previous post, Beware of Fraudulent Health Plans, I mentioned a prior client who had been left with thousands of dollars in unpaid medical bills after his health plan wrongly refused to cover his cancer treatment.

With the current debate in Congress over health coverage, this is an issue that may change greatly.  However, at present, many people are searching for affordable coverage. Here is a good list from The Coalition Against Insurance Fraud of 10 warning signs that offered health insurance may be a fraud:

1. The coverage costs 25 percent or more below the norm, yet promises generous benefits and a large provider network.

2. The plan readily accepts people with serious illnesses and other medical conditions that other plans normally reject.

3. The insurance has few or no underwriting guidelines – the agent or rep appears almost too eager to sign you up.

4. You’re approached by an insurance agent, phone call or direct mail. Honest group plans are sold this way, but so are dishonest ones. Unless the plan is sponsored by your employer, verify that plans solicited by outsiders are licensed and legitimate.

5. The plan isn’t licensed in your state, and the agent (falsely) assures you the federal ERISA law exempts the plan from state licensing.

6. The plan seems like insurance, but the agent or rep avoids calling “insurance,” and instead uses evasive terms such as “benefits.”

7. The agent or rep doesn’t have clear answers to your questions, seems ill-informed, or avoids sharing information.

8. You’ve never heard of that health insurance company — and nobody else has, either.

9. You have to join an “association” or “union” to obtain the health coverage. But you get no voting rights, receive no bylaws or other material, and aren’t involved in the group’s activities.

10. Your hospital keeps calling you to complain that your health plan isn’t paying your medical bills. Often the plan’s reps keep making flimsy excuses, or stop returning phone calls altogether.

We've all heard the warning about things that sound "too good to be true." When it comes to health insurance, ignoring that warning can lead to devastating health and financial consequences.

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It's not an Alabama decision. However, I think it provides valuable insight and analysis into an important subject. On November 3, 2009, the Tennessee Supreme Court issued the decision of Goff v. Elmo Greer & Sons. This case involved the appeal of a verdict that assessed only a small amount of compensatory damages with a much larger punitive assessment. 

Our appellate courts employ a review of punitive damage verdicts based upon a number of factors largely established in prior U.S. Supreme Court decisions. One of these factors -- one very frequently cited by The Alabama Supreme Court in reducing assessments of punitive damages -- is the ratio of the punitive damage assessment to the compensatory damage assessment.

However, I have long believed that employing a strict ratio in cases where the actual harm was small but the potential harm could have been catastrophic or the defendant's conduct was especially egregious, is unjust. This recent Tennessee decision provides a review of just such a factual scenario.

The Nashville firm of Leader, Bulso, Nolan & Burnstein has an excellent summary of this new decision on its blog, Tennessee Business Litigation Report. I would urge the Alabama attorney who might have a similar case on appeal to our Supreme Court to review this new decision and incorporate its helpful analysis.

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This week the U.S. Supreme Court heard oral argument in Hertz Corporation v. Friend. The case presents a significant issue of conflict between the various Federal Circuits. At issue -- Where is a corporation's principal place of business for purposes of establishing diversity jurisdiction in Federal Court.

For purposes of diversity jurisdiction, corporations are considered citizens of both the state of their incorporation and the state of their "principal place of business."  Since Federal Courts can generally have diversity jurisdiction of typical state law claims where:

(1) the amount in controversy exceeds $75,000

(2) the parties are completely diverse in their citizenship, the attorney who handles claims involving significant damages should thoroughly understand the basis and procedures related to this jurisdiction.

In the last couple of years, our 11th Circuit has decided a number of cases in an effort to define and determine the issues surrounding the amount in controversy element.  The implications of those decisions should be considered by the attorney from his very first act of representation. However, the amount in controversy element was not an issue in Hertz.

The Hertz case arises out of an appeal from a 9th Circuit decision determining a party's "principal place of business."  How divided are the various Federal Circuit Courts on this issue? In general, the following tests are employed by each Circuit:

• NERVE CENTER TEST.  This test, used by the 7th Circuit, generally finds a corporation's principal place of business to be located where the corporation has its executive headquarters.
• CENTER OF CORPORATE ACTIVITIES TEST.  This test, used by the 3rd Circuit, looks for the corporation's "headquarters of day-to-day corporate activity and management."  Kelly v. U.S. Steel Corp., 284 F.2d 850, 854 (3rd Cir. 1960).
• PLACE OF OPERATIONS TEST.  This test is used by the 9th Circuit.  It involves a focus on the corporation's business operations such as plants, employees, and assets.  Under this test, the court generally does not consider the corporate nerve center or headquarters unless no single state contains a predominance of business activities.
• TOTAL ACTIVITIES TEST.  This test is employed by the 5th, 6th, 8th, 10th, and 11th Circuits.  Here, the court considers the total activity of the company as a whole.  Although more comprehensive, this test can also be more subjective and lead to varying opinions.

Why is this issue important? First, the ultimate issue of corporate citizenship is important in determining whether a controversy should be heard in Federal Court pursuant to diversity jurisdiction or in a local state court. Second, the conflict in analysis between the various Federal Circuits can lead to different conclusions and applications as to corporate citizenship in different courts.

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This morning as I read the Sunday Huntsville Times before getting ready for church, I came across an article that reminded me of a prior case.  I could not download the article from The Times website.  However, a quick Google search of the listed author gave me the online access I needed. In Maura Lerner's Star Tribune article, "Health Coverage Plan Was No Insurance at All", she detailed the sad story of a retiree left with over $50,000 in unpaid medical bills when his "health plan" would not pay for his medical care.

Most of us work for traditional employers who provide health insurance through well known companies or plans. However, many people, especially the self-employed and unemployed, cannot gain affordable access to standard plans. This leads them to seek alternative coverage.

For me, this article brought back the memory of a self-employed gentleman who sought affordable insurance coverage for himself and his wife.  In his search, he saw an ad from a local insurance broker. The ad said to call for affordable health insurance. He did. The broker supplied him with a "health plan" sponsored by an "employee group" or union out of California. To obtain the coverage, he was required to join this union. He did so. After faithfully paying his premiums for a long period of time, he became ill with cancer. His bills exceeded $100,000 and the plan would not pay.

Later, I interviewed one of his physicians who related that he had actually called the plan administrator about his unpaid bill and was simply informed that he had not been paid because the plan had not expected their participant to get sick.

Faced with these huge medical bills, he sought legal counsel. Several attorneys declined to help him because of the potential implications of ERISA, a Federal law which governs legitimate employer and union benefit plans.  As most attorneys will tell you, ERISA places significant limitations on the potential recovery in these cases.  However, ERISA does not apply to all health coverage and I knew it did not apply to his case.

Eventually, after lengthy litigation, we were able to resolve successfully this case.

Any person considering health insurance through some form of non-traditional coverage should by very careful in exploring their options. The financial impact of unpaid medical bills is far too devastating for the consumer to take this choice lightly.

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Within the last few weeks, several articles and commentaries have highlighted the slow pace in filling numerous vacancies in our Federal Courts.  A recent article in Slate titled "The Bench in Purgatory" as well as a piece in the Wall Street Journal Law Blog titled "Blame Game:  On Obama's Judicial and U.S. Attorney Nominees" have addressed the crisis presented by having too few Judges on a Federal level.

Here, at home in Alabama, Madison County faces a similar crisis. We simply have far too few Judges for a metropolitan area with our growing population. In her 2009 State of The Judiciary Address, Alabama Chief Justice Sue Bell Cobb noted this significant problem in outlining her requests to the Alabama Legislature:

Madison County currently has the highest caseload per judge in the state. With the upcoming base re-alignment and closure the county is expected to continue to grow. Forty-two active judges and 26 retired judges have been assigned to take cases to help alleviate the state's largest caseload in our fourth largest county. Madison has not had an additional judgeship added in over twenty-five years.

Our Chief Justice should be applauded for working tirelessly to keep our local courts running.  Also, many excellent Judges from other counties in Alabama have volunteered their time to help by handling cases filed in Madison County. Earlier this year, I tried a week-long jury trial in front of a Birmingham Judge who sat aside her own busy docket in Jefferson County to spend the week in Huntsville.

It is difficult to explain to your client that he will most likely not receive a trial date any time in the near future because Alabama has not provided Madison County with a sufficient number of Judges. Those Judges from other counties who have volunteered to help at the request of Alabama's Chief Justice must balance their own busy dockets with the extra needs of Madison County. 

This crisis should be a legislative priority. It is time for the Alabama legislature to act and provide the support needed to administer justice in one of the most populous and fastest growing counties in Alabama.

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