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Berrey v. Plaintiff Inv. Funding, LLC

United States District Court, D. Arizona

March 30, 2015

Andrew Berrey, Stakeholder,
Plaintiff Investment Funding, LLC; Dignity Healthcare, Inc. d/b/a Mercy Gilbert Hospital; Scottsdale Healthcare Corp.; and Injury Assistance, LLC, Claimants

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[Copyrighted Material Omitted]

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For Andrew Berrey, Plaintiff, Counter Defendant, Cross Defendant: Michael Spencer Love, LEAD ATTORNEY, Ridenour Hienton & Lewis PLLC, Phoenix, AZ.

For Plaintiff Investment Funding LLC, Defendant: James Michael Cool, LEAD ATTORNEY, Aiken Schenk Hawkins & Ricciardi PC, Phoenix, AZ.

For Scottsdale Healthcare Corporation, Defendant: Elizabeth Jean Farhart, LEAD ATTORNEY, Scottsdale Lincoln Health Network, Scottsdale, AZ.

For Injury Assistance LLC, Defendant, Counter Claimant: George Everett Griffeth, LEAD ATTORNEY, Injury Assistance LLC, Chandler, AZ.

For Electric Insurance Company, Movant: Amanda Elizabeth Nelson, John Albert Elardo, LEAD ATTORNEYS, Elardo Bragg Appel & Rossi PC, Phoenix, AZ.

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Bridget S. Bade, United States Magistrate Judge.

In this interpleader action, Stakeholder Andrew Berrey has filed a motion for summary judgment on an affirmative defense and counter claim that Claimant Injury Assistance, LLC has asserted. (Doc. 66.) In the affirmative defense, Injury Assistance asserts that it has health care provider lien rights, and in the counter claim it alleges breach of contract. (Docs. 16 and 28.)[1] Injury Assistance has filed a response in opposition to Berrey's motion and a cross-motion for summary judgment on its asserted lien and contract claim. (Doc. 72.)

As set forth below, the Court orders additional briefing on Injury Assistance's affirmative defense that it has lien rights as an assignee or agent of a health care provider. The Court enters summary judgment in Berrey's favor on Injury Assistance's counter claim that its contract with Berrey created additional lien rights. Specifically, the Court finds that the lien provisions in the contract are unenforceable as an assignment of the proceeds of Berrey's underlying personal injury claim. However, the Court finds that Injury Assistance may have a contract claim against Berrey for payment of medical expenses and therefore denies Berrey's motion for summary judgment on Injury Assistance's counter claim for breach of contract. The Court also denies Injury Assistance's cross motion for summary judgment on its contract claim.

Based on the parties' additional briefing on Injury Assistance's affirmative defense asserting lien rights, the Court may find that Injury Assistance does not have an interpleader claim, but only a contract claim. Therefore, because only the breach of contract claim may remain, the Court orders additional briefing on whether it should exercise supplemental jurisdiction over the counter claim.

Finally, although Berrey has not filed a motion challenging Claimant Plaintiff Investment Funding, LLC's (PIF) claim to the settlement proceeds, the Court orders Berrey and PIF to file briefing addressing the nature of PIF's claim, including whether that claim may be an unenforceable assignment of a personal injury claim or the proceeds of a personal injury claim, and the identity and citizenship of PIF's members. The Court raises these issues sua sponte because PIF is the only claimant alleged to have diverse citizenship. (Doc. 16 at ¶ ¶ 1-6.) If PIF does not have diverse citizenship, or does not have an interpleader claim, the Court may not have jurisdiction over this matter under 28 U.S.C. § 1335.

I. Background

This is an interpleader action in which the parties assert conflicting claims to settlement proceeds Berrey received in a personal injury action. (Doc. 15.) In September 2010, Berrey was in a car accident that " caused cervical strain (whiplash) and headaches." (Doc. 15 at ¶ 10.) On January

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24, 2011, Berrey went to chiropractor Dr. Scott Strattman at Total Care Chiropractic and Injury Services (Total Care). (Doc. 67, Ex. 2.) At that time, Strattman had an ownership interest in Total Care and Injury Assistance. (Doc. 72 at 3.) That same day, Berrey and his attorney executed a " Contract for Medical Services" with Injury Assistance, which provided that Injury Assistance's contract providers would provide medical care to Berrey on a " lien basis." (Doc. 67, Ex. 3.)[2] The contract further provided that Injury Assistance would wait for payment for these medical services until Berrey received a settlement or judgment against a third party.[3] In addition, the contract clarified that it was intended to provide additional guarantees for payment beyond current lien laws:

This contract for providing medical services on a lien basis is additional security and guarantee for payment by the undersigned patient and patient's attorney beyond that protection provided by the current codified lien laws. The protection afforded to Injury Assistance by way of this agreement is in addition to and not in lieu of the current lien laws. It is understood that Injury Assistance and its contract providers would not be providing the reasonable and necessary medical services desired by the undersigned patient should all the terms of this agreement not be strictly adhered to.

( Id.)

The contract provided that Berrey's attorneys were authorized to pay Injury Assistance directly from any settlement proceeds for the medical care provided, to list Injury Assistance on any settlement check, and provided Injury Assistance with a " durable power of attorney" so that it could endorse any check without Berrey's signature.[4] The contract authorized Injury Assistance

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" to deal directly with any applicable insurance, so as to satisfy said lien obligation." [5] The contract also provided that Injury Assistance's rights under this " lien" could be sold or reassigned:

The undersigned patient agrees and acknowledges that this lien and all rights for collection of payment arising out of the same, can and may be sold and reassigned and recognize[s] that the purchaser of said lien will be entitled to all rights, as expressed herein.

( Id.) Finally, the contract provided that Berrey was responsible for all amounts the providers charged and that payment was not contingent on his recovery on his claim:

The undersigned patient understands that the patient is directly and fully responsible to Injury Assistance and its contract providers for all amounts due and owing, and that this lien is being provided solely as additional protection to Injury Assistance and its contract providers. The undersigned patient provides this lien in consideration of Injury Assistance and its contract providers waiting upon payment. The undersigned patient further recognizes that payment to Injury Assistance and its contract providers is not contingent upon any settlement, judgment or verdict that I may or may not eventually obtain as reimbursement of said fee.

( Id.)

Strattman referred Berrey to several health care providers and Injury Assistance advanced some funding for that care. (Doc. 67 at 21-31; Doc. 72 at 4.) Strattman referred Berrey to Dr. Grant Padley at The Orthopedic Clinic Association and Dr. Mark J. Rubin at Arizona Center for Pain Relief. Dr. Rubin referred Plaintiff to Western Arizona Radiology for imaging.[6] (Doc. 72 at 4; Doc. 67 at 21-31.) Injury Assistance and Berrey agree that the referred providers' bills total $43,901.59. (Doc. 15 at ¶ 32; Doc. 16 at 2.)

On February 24, 2011, the Maricopa County Recorder's Office recorded a " Notice and Claim of Injury Assistance Lien." (Doc. 16, Ex. 1.) In its affirmative defense, Injury Assistance asserts that it filed this lien and thus was " assigned health care provider liens as defined by A.R.S. § 33-931." (Doc. 16 at ¶ 16.) The Injury Assistance lien identifies Injury Assistance as the " claimant." (Doc. 16, Ex. 1.) It does not list any health care providers or amounts subject to the lien, but instead states " providers and totals to be supplemented at the close of treatment." ( Id.) Injury Assistance is not identified as an " agent" or " assignee" on the lien. ( See id.) Instead, the lien identifies R. Monique Heaton as Injury Assistance's agent and includes her avowal that " she is the agent of [Injury Assistance] and makes this Notice and Claim of Lien for and on behalf of said hospital [sic]." ( Id.) There is nothing in the record to suggest that Injury Assistance filed any supplement with the names of the providers or the amounts subject to the lien.

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The record before the Court does not include any health care provider liens recorded by any of the referred providers. However, on March 28, 2011, approximately a month after Injury Assistance filed its lien, Western Arizona Radiology, through its agent Cyndee Caesar, signed a " Notice of Sale and Assignment." (Doc. 77, Ex. B.) This notice states that Western Arizona Radiology " has sold and assigned to Injury Assistance, all its rights, title, and interest for the above described account [amount due $2,700.00 for Berrey] and supported by the attached duly executed lien." ( Id.) There is no lien attached to the copy of this notice submitted to the Court, but it appears that the notice may be referring to the February 24, 2011 Injury Assistance lien.

On April 11, 2011, approximately six weeks after Injury Assistance filed its lien, Arizona Center for Pain Relief (Dr. Rubin), through its agent Ava Rogut, also signed a " Notice of Sale and Assignment." (Doc. 77, Ex. B.) The wording of this notice is identical to the notice that Western Arizona Radiology signed and also identifies an account for Berrey, but with $2,754.60 as the amount due. The copy of this notice also does not include " an attached duly executed lien," but the Court again notes that it appears the notice may refer to the February 24, 2011 Injury Assistance lien. The record does not contain a similar agreement from Dr. Padley or The Orthopedic Clinic Association or any of the additional providers that Injury Assistance identified as providing services under its lien.

After settling his personal injury action, Berrey filed this interpleader action under 28 U.S.C. § 1335 and Rule 22 of the Federal Rules of Civil Procedure. (Doc. 16.) Berrey asserted that the claimants/defendants, including Injury Assistance, have conflicting claims to the settlement proceeds from his personal injury action. (Doc. 16 at ¶ ¶ 8, 46-50, 52.) Berrey deposited the settlement proceeds into the Court's registry. (Doc. 25.)

In his motion for summary judgment, Berrey argues that Injury Assistance does not have an enforceable health care provider lien on the settlement proceeds and cannot assert such lien rights by contract. (Doc. 66 at 4.) In its response and cross-motion for summary judgment, Injury Assistance argues that it has a claim against the settlement proceeds because it holds a valid health care provider lien under Arizona law as the agent or assignee of the referred providers, and that it has an enforceable contract with Berrey for payment of medical services. (Doc. 72.)

II. Summary Judgment Standard

A party seeking summary judgment " bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Summary judgment is appropriate if the evidence, viewed in the light most favorable to the nonmoving party, shows " that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). Only disputes over facts that might affect the outcome of the suit will preclude the entry of summary judgment, and the disputed evidence must be " such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

The parties agree that this interpleader action is governed by Arizona substantive law. See Erie R. Co. v. Tompkins, 304 U.S. 64, ...

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