Court Opinion

ID: 5116919
Source: CourtListenerOpinion
Date Created: 2021-10-07 19:00:42.862876+00
Date Added: 2024-06-11T08:21:59.410194
License: Public Domain

USCA11 Case: 20-13581     Date Filed: 10/07/2021    Page: 1 of 13

                                        [DO NOT PUBLISH]
                            In the
         United States Court of Appeals
                 For the Eleventh Circuit

                   ____________________

                         No. 20-13581
                   ____________________

THOMAS E. REYNOLDS,
As Trustee,
                                              Plaintiff-Appellant,
versus

MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPEO,
P.C.,
                                            Defendant-Appellee.
                   ____________________

          Appeal from the United States District Court
             for the Northern District of Alabama
             D.C. Docket No. 2:18-cv-01453-ACA
                   ____________________
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2                          Opinion of the Court                      20-13581

Before JILL PRYOR, LUCK, and BRASHER, Circuit Judges.
PER CURIAM:
        Thomas Reynolds, the bankruptcy trustee for Atherotech,
Inc., and Atherotech Holdings, Inc. (collectively, “Atherotech”),
filed this lawsuit against Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C. (“Mintz Levin”), a law firm that previously repre-
sented Atherotech. Mintz Levin provided legal advice to Athero-
tech related to the company’s practice of paying processing and
handling fees (“P&H fees”) to physicians who, after drawing
blood from patients, prepared the specimens for testing and
shipped them to Atherotech’s laboratory for analysis. Reynolds
alleged that Mintz Levin was negligent because it failed to direct
the company to stop paying P&H fees. The district court granted
summary judgment to Mintz Levin, ruling that the law firm had
no duty to provide such advice and thus had not breached the
standard of care. After careful consideration and with the benefit
of argument, we affirm the district court’s judgment.

                    I.      FACTUAL BACKGROUND 1

1 Because we write only for the parties, we assume their familiarity with the
facts. We do not restate the facts, except as necessary to explain our decision.
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20-13581               Opinion of the Court                         3

        Atherotech operated a clinical laboratory where it analyzed
blood specimens to determine patients’ cholesterol levels. When a
physician ordered an Atherotech blood test for a patient, blood
would need to be drawn from the patient. The blood specimen
would then need to be processed and shipped to Atherotech for
testing. Atherotech generally relied on physicians’ offices to draw
blood from patients, prepare the specimens for testing, and ship
them to Atherotech’s laboratory. During the relevant time frame,
Atherotech paid physicians a three-dollar fee for drawing a pa-
tient’s blood and a seven-dollar fee for processing and handling
the specimen.
       In 2011, Atherotech retained Mintz Levin to provide legal
and regulatory advice. One of the issues on which Atherotech
sought advice was the payment of P&H fees. Atherotech had
learned that a competitor was paying physicians higher P&H fees
of at least $20 per specimen. Atherotech believed that it was los-
ing business to this competitor and that the competitor’s conduct
was illegal. It asked Mintz Levin partner Hope Foster for advice
about how to address the situation.
       Foster provided legal advice to the company’s board about
the practice of paying physicians P&H fees. She warned the board
of the legal risks associated with paying any P&H fees, telling the
board that “[p]ayment to physicians of amounts associated with
specimen handling . . . is a growing issue,” and as to the legality of
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4                            Opinion of the Court                      20-13581

such payments, “[t]he picture is murky.” Doc. 41-24 at 5. 2 Con-
cerning the competitor’s higher payments, Foster suggested sev-
eral options, including: reporting the competitor to federal or
state authorities, filing a whistleblower case, or seeking an adviso-
ry opinion from the Office of Inspector General for the Depart-
ment of Health and Human Services (“OIG”). Foster reviewed
each option with the board, describing its pros and cons. She
warned the board that reporting the competitor’s conduct to the
government was risky because Atherotech was itself paying P&H
fees, albeit it at a lower rate. Ultimately, Atherotech made a busi-
ness decision to report the competitor to the Department of Jus-
tice (“DOJ”).
       Around this time, relators filed sealed qui tam actions
against other laboratory companies relating to their P&H fee ar-
rangements. The next year, a relator filed a sealed qui tam action
against Atherotech based on its payment of P&H fees to physi-
cians.
       The DOJ later opened an investigation into clinical labora-
tories’ practice of paying physicians P&H fees. The government
requested information from Atherotech and other laboratories
about their practices. 3 Atherotech, which retained Mintz Levin for

2   “Doc.” numbers refer to the district court’s docket entries.
3 The record does not reveal whether the government opened this investiga-
tion in response to complaints from Atherotech and other laboratories about
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20-13581                   Opinion of the Court                               5

the investigation, agreed to cooperate with the government.
While the investigation was ongoing, Atherotech continued to
pay P&H fees.
        In March 2014, the government notified Atherotech that it
was a target of the investigation. The government alleged that
Atherotech had violated the law by paying P&H fees because it
“essentially [was] sharing a portion of the clinical laboratory fee,
providing an incentive for the referring physician to order more
tests[,] and increasing the risk of overutilization.” Doc. 41-37 at 2.
Shortly afterward, the OIG issued a special fraud alert regarding
laboratories’ practice of paying physicians P&H fees. The alert
warned that it was a violation of the Anti-Kickback Statute,
42 U.S.C. § 1320a-7b, for laboratories to pay a physician a P&H
fee when “one purpose of the payment [was] to induce or reward
referrals of Federal health care program business,” even if the
payment amount was at “fair market value.” Doc. 41-39 at 5. Af-
ter the OIG issued the alert, Atherotech stopped paying P&H
fees.
      About two years later, Atherotech filed for Chapter 7 bank-
ruptcy. The bankruptcy court appointed Reynolds as trustee of
the bankruptcy estate. He sued Mintz Levin, alleging that the law
firm had been negligent in failing to “advise[] Atherotech to stop

their competitor’s practices, as a result of the pending qui tam actions, or for
other reasons.
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6                          Opinion of the Court                  20-13581

paying P&H fees.” 4 Doc. 22 at 11. Mintz Levin moved for sum-
mary judgment. The district court granted the motion, conclud-
ing there was no genuine issue of material fact “about whether
Mintz Levin’s legal advice was unreasonable.” Doc. 49 at 2.
       This is the trustee’s appeal.
                    II.      STANDARD OF REVIEW
       “We review de novo the district court’s grant of summary
judgment, construing the facts and drawing all reasonable infer-
ences in favor of the nonmoving party.” Smelter v. S. Home Care
Servs., Inc., 904 F.3d 1276, 1284 (11th Cir. 2018). Summary judg-
ment is appropriate if the record gives rise to “no genuine dispute
as to any material fact,” such that “the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a). A genuine dis-
pute of material fact exists when “the evidence is such that a rea-
sonable jury could return a verdict for the nonmoving par-
ty.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
                          III.   LEGAL ANALYSIS

4 In the complaint, the trustee also alleged that Mintz Levin was liable for
breach of contract and unjust enrichment and objected to a claim that Mintz
Levin had filed in the bankruptcy proceeding for unpaid legal fees. On ap-
peal, the trustee acknowledges that all of his claims turn on whether Mintz
Levin committed legal malpractice by breaching the applicable standard of
care. We thus concentrate our analysis on the trustee’s legal malpractice
claim.
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20-13581                   Opinion of the Court                                7

       Under Alabama common law,5 a plaintiff bringing a legal
malpractice claim must establish “the same elements that must be
proven in an ordinary negligence suit.” Indep. Stave Co. v. Bell,
Richardson & Sparkman, P.A., 678 So. 2d 770, 772 (Ala. 1996).
The elements of a legal malpractice action are “basically” the
same as the elements for an ordinary negligence claim: “the plain-
tiff must prove a duty, a breach of the duty, that the breach was
the proximate cause of the injury, and damages.” Moseley v. Lew-
is & Brackin, 533 So. 2d 513, 515 (Ala. 1988).
        The existence of a duty of care is “[f]undamental to the
maintenance of a negligence action.” Pugh v. Butler Tel. Co., 512
So. 2d 1317, 1319 (Ala. 1987). “In Alabama, the existence of a duty
is a strictly legal question to be determined by the court.” Taylor
v. Smith, 892 So. 2d 887, 891 (Ala. 2004). This appeal turns on the
legal question of whether Mintz Levin had a duty to direct Ather-
otech to stop paying P&H fees. 6 Because Mintz Levin owed no

5 Both the trustee and the law firm maintain that Alabama common law
governs the trustee’s legal malpractice claim. For the reasons given by the
district court, we agree.
6 When the trustee originally filed this lawsuit, he also brought claims against
Atherotech’s investors, seeking to void dividends paid to the investors as
fraudulent transfers, as well as various tort and breach of contract claims
against the company’s financial advisor. The district court decided sua sponte
to sever the case into three separate lawsuits: one against Mintz Levin, one
against the investors, one against the financial advisor. In his appellate brief,
the trustee asserts that the district court “incorrectly” severed the action into
three separate cases. Appellant’s Br. at 7–8. But the trustee “makes only pass-
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8                        Opinion of the Court                    20-13581

such duty, the district court properly granted summary judgment
to the law firm.
       Under Alabama law, an attorney owes his client a duty to
“exercise an ordinary and reasonable level of skill, knowledge,
care, attention, and prudence common to members of the legal
profession in the community.” Mylar v. Wilkinson, 435 So. 2d
1237, 1239 (Ala. 1983). In the context of this case, the parties agree
that when a client requests legal advice about a practice, the at-
torney’s duty in that context is to carefully examine the practice,
assess the risk associated with it, and advise the client of the at-
torney’s judgment so that the client can make an informed deci-
sion. See Ala. R. Pro. Conduct 1.4(b) (stating that an attorney’s
duty is to provide a sufficient explanation to allow “the client to
make informed decisions”).
          The trustee concedes that when a client seeks legal advice
on an area of law that “is unsettled with respect to the client’s par-
ticular situation,” then “[t]he bar for providing reasonable advice
. . . is lowered.” Appellant’s Br. at 26. Indeed, it is well-established
under Alabama law that an “attorney is not answerable for error
in judgment upon points of new occurrence, or of nice and doubt-
ful construction.” Herston v. Whitesell, 348 So. 2d 1054, 1057

ing references to” this issue and thus has abandoned any argument challeng-
ing the district court’s severance order. Sapuppo v. Allstate Floridian Ins.
Co., 739 F.3d 678, 681 (11th Cir. 2014).
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20-13581               Opinion of the Court                       9

(Ala. 1977). As a result, when an attorney advises a client on an
area where the law is “open,” the attorney is not negligent simply
because it later turns out that the attorney’s advice was incom-
plete or incorrect. See Buchanan v. Young, 534 So. 2d 263, 265
(Ala. 1988) (affirming grant of summary judgment to attorney on
malpractice claim alleging that attorney was negligent in failing to
timely file a notice of appeal because, even though the attorney
missed the filing deadline, at the time he acted there was an “ab-
sence of authority” on the deadline for the notice of appeal, mean-
ing the law was not “settled”).
        Viewing the evidence in the light most favorable to the
trustee, we nonetheless cannot say that Mintz Levin breached any
duty. The evidence in the summary judgment record reflects that
Atherotech requested legal advice from Mintz Levin about the
payment of P&H fees and what it could do to address a competi-
tor’s practice of paying much higher fees. In response to the re-
quest, Mintz Levin advised Atherotech so that the company could
make informed judgments about its own payment of P&H fees
and whether to report its competitor. Regarding the propriety of
paying P&H fees, Foster explained to the company’s board that
“[i]t remain[ed] an open question” whether the company could
pay the fees, describing the picture as “murky.” Doc. 41-24 at 5.
She warned the board that “there was always a risk in making
payments to providers and the only way to eliminate such risk
would be to stop paying P&H [f]ees.” Doc. 41-8 at 5. Addressing
the issue of the competitor’s higher payments, Foster presented
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10                       Opinion of the Court                    20-13581

the board with several options for steps it could take, including
reporting the competitor to state or federal officials, bringing a
whistleblower case, or petitioning the OIG to issue a special fraud
alert about the payments. She reviewed with the board the pros
and cons of each approach, including warning the board that re-
porting the competitor to the government was risky given that
Atherotech was itself paying P&H fees. After receiving Foster’s
advice, the board decided that the company would continue to
pay P&H fees and complain to the DOJ about the competitor
who was paying higher fees.
       Reynolds contends that the standard of care required Mintz
Levin to do more when advising the company, arguing that the
law firm was obliged to “advise Atherotech that it should stop
paying P&H fees.” Appellant’s Br. at 42. According to the trustee,
the law firm had a duty to provide such advice because, at the
time Mintz Levin advised Atherotech, the law was settled that it
was illegal to pay P&H fees. 7
       We reject the trustee’s argument. We cannot say that at
the time Mintz Levin advised Atherotech it was “settled law,” for
purposes of a legal malpractice claim, that laboratories could not
legally pay P&H fees when those fees were equal to the fair mar-

7 The trustee also argues that the standard of care required Mintz Levin to
quantify the risk associated with continuing to pay P&H fees and to provide
its legal advice in writing. We reject those arguments because we agree with
the district court’s treatment of them in its well-reasoned order.
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20-13581                 Opinion of the Court                          11

ket value of the services provided. When Mintz Levin advised
Atherotech in 2011, the OIG had not yet issued the 2014 Special
Fraud Alert, which directly addressed the payment of P&H fees.8
It is true that at the time of the advice the OIG had issued some
guidance, a 1994 Special Fraud Alert and a 2005 Advisory Opin-
ion. But neither the 1994 Special Fraud Alert nor the 2005 Adviso-
ry Opinion directly addressed whether a laboratory was permitted
to pay a P&H fee set at fair market value.
        With regard to clinical lab services, the 1994 Special Fraud
Alert warned only that “[w]henever a laboratory offers or gives to
a source of referrals anything of value not paid for at fair market
value,” it gives rise to an “inference . . . that the thing of value is
offered to induce the referral of business.” Doc. 41-12 at 11 (em-
phasis added). But the alert stopped short of saying that a labora-
tory could not give a referral source something of value paid for
at fair market value; thus, it left open the possibility that a labora-
tory could pay physicians up to the fair market value for the ser-
vices of processing and shipping specimens.
       The OIG’s 2005 Advisory Opinion addressed a different is-
sue—whether a laboratory could pay physicians a fee of up to six
dollars for each blood draw. The OIG explained that Medicare al-
ready reimbursed physicians three dollars for each blood draw.

8Because the question is not before us, we do not decide whether the OIG’s
2014 Special Fraud Alert settled the question.
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12                        Opinion of the Court                     20-13581

The OIG advised that a laboratory paying a physician up to twice
Medicare’s reimbursement rate would give rise to an inference
that the higher fee was being paid to induce the physician to refer
patients to the laboratory, which would violate the law. The opin-
ion did not address whether a laboratory was allowed to pay a
physician a separate P&H fee set at the fair market value of pro-
cessing and handling the specimen.
       Because at the time of Mintz Levin’s advice to Atherotech
the law was “unsettled” whether laboratories could pay physi-
cians P&H fees that were equal to fair market value for the physi-
cian’s services, Mintz Levin had no duty to advise Atherotech to
stop paying P&H fees. 9 The law firm’s duty with respect to the
payment of P&H fees and how to address the competitor’s pay-
ment of higher P&H fees was to advise Atherotech of the risks of
various options and leave to the company the decision of what to

9 The trustee argues that because his expert witness opined the law was set-
tled that laboratories could not pay P&H fees, there was a disputed issue of
material fact about whether Mintz Levin owed a duty to advise Atherotech
not to pay the fees. The trustee’s argument misses the mark for two reasons.
First, the trustee’s expert did not actually opine that the law regarding P&H
fees was settled at the time Mintz Levin advised Atherotech. Rather, the ex-
pert opined that Mintz Levin should have anticipated the OIG’s 2014 Special
Fraud Alert, implicitly conceding that the law was not settled until the alert
was issued. Doc. 41-44 at 15. Second, the trustee’s argument treats the ques-
tion of the scope of Mintz Levin’s duty as a question of fact, ignoring that
under Alabama law questions of duty are “legal question[s] to be determined
by the court.” Taylor, 892 So.2d at 891.
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20-13581              Opinion of the Court                       13

do. Mintz Levin fulfilled that duty. The district court therefore
properly granted summary judgment to the law firm on the trus-
tee’s claims. See Buchanan, 534 So. 2d at 265 (concluding attorney
was entitled to summary judgment on malpractice claim when, at
the time the attorney provided advice, the relevant legal question
was “open”); Herston, 348 So. 2d at 1057.
                       IV.     CONCLUSION
      For the reasons above, we affirm the district court’s grant
of summary judgment.
      AFFIRMED.