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Brookewood, Limited Partnership v. DeQueen Physical Therapy and Occupational Therapy, Inc.

Court of Appeals of Arkansas, Division II

March 14, 2018

BROOKEWOOD, LIMITED PARTNERSHIP APPELLANT/CROSS-APPELLEE
v.
DEQUEEN PHYSICAL THERAPY AND OCCUPATIONAL THERAPY, INC. APPELLEE/CROSS-APPELLANT

         APPEAL FROM THE SEVIER COUNTY CIRCUIT COURT [NO. 67CV-12-60] HONORABLE TOM COOPER, JUDGE

          Watts, Donovan & Tilley, P.A., by: David M. Donovan and Staci Dumas Carson, for appellant.

          Arnold, Batson, Turner & Turner, PA, by: Dan Turner and Todd Turner, for appellee.

          DAVID M. GLOVER, Judge.

         This appeal arises out of a business contract between DeQueen Physical Therapy and Occupational Therapy, Inc. (DeQueen), and Brookewood, Limited Partnership (Brookewood). DeQueen is a corporation formed by Kim and Darin Tollett, both therapists, that provides therapy services in and around DeQueen, Arkansas. Brookewood is a long-term-care facility in DeQueen, Arkansas. The parties had a twenty-year contract prescribing that DeQueen would provide therapy services to Brookewood to the exclusion of all other long-term-care facilities in the area. Brookewood terminated the contract early, and the termination served as the impetus for this litigation initiated by DeQueen. Following a jury trial, a Sevier County jury awarded DeQueen $6 million in compensatory and punitive damages from Brookewood.

         Brookewood appeals, and DeQueen cross-appeals. Counsel for both parties, through clear and concise oral arguments, directed our focus to the primary issues in this appeal. Those arguments are whether (1) the circuit court erred by allowing DeQueen's claim for damages relating to the early termination of the contract to go to the jury; (2) the circuit court erred by allowing DeQueen's claim for civil conspiracy to go to the jury; (3) a remittitur of the compensatory and punitive-damages verdicts should be ordered; and (4) the award of attorney's fees to DeQueen was proper. We affirm in part and reverse in part on direct appeal and grant a remittitur of the compensatory-damages award. We reverse and remand on cross-appeal.

         I. Background

         In 2006, Stephen Marinick, the CEO of Brookewood, solicited DeQueen to provide therapy services to Brookewood. On August 7, 2006, Brookewood and DeQueen entered into a twenty-year contract requiring DeQueen to provide therapy services to Brookewood to the exclusion of all other long-term-care facilities in the area. In exchange, Brookewood agreed to hire only DeQueen for its therapy services "provided DeQueen is capable of fully performing such services."

         Before the execution of this contract, DeQueen also provided therapy services to Crystal Falls, the only other long-term-care facility in the area. In 2010, Brookewood's owners purchased Crystal Falls and closed it, making Brookewood the only long-term-care facility in Sevier County.

         Issues arose between Brookewood and DeQueen. There are emails indicating Brookewood sought to increase DeQueen's Medicare and Medicaid billing. DeQueen contends that, essentially, Brookewood wanted it to fraudulently bill Medicare and Medicaid. Brookewood denies this allegation. Another point of contention between the parties concerned payment to DeQueen. In 2011, Brookewood ceased paying DeQueen for its services. Brookewood claims this was because DeQueen consistently failed to timely submit invoices.

         In 2012, Brookewood entered into discussions for the provision of therapy services with another company, Realization Rehab, PLLC (Realization). During those negotiations, Brookewood hired Sarah Bishop, who was employed by Realization, to audit DeQueen's files. Following the audit, Brookewood notified DeQueen that it was terminating their contract because DeQueen was incapable of providing therapy services comparable to other companies in its business. DeQueen claimed its contract was terminated because it was unwilling to engage in fraudulent billing practices with regard to Medicaid and Medicare. One week after the contract was terminated, Brookewood entered into a contract for therapy services with Realization.

         DeQueen and its owners, the Tolletts, sued Brookewood for breach of contract and promissory estoppel alleging Brookewood owed them money for prematurely terminating their contract without cause and for unpaid services rendered. DeQueen and the Tolletts later amended their complaint, adding a civil-conspiracy claim against Brookewood. They also added Realization as a party, suing it for civil conspiracy and tortious interference, and they sought punitive damages from both Brookewood and Realization.[1]

         The case eventually proceeded to a three-day jury trial. At the trial, DeQueen presented evidence of $80, 849.66 in unpaid invoices and $3, 833, 210.49 in lost gross revenue from the early termination of the contract. DeQueen also presented evidence on its claims for tortious interference and civil conspiracy. When DeQueen rested its case-in-chief, Brookewood moved for a directed verdict on DeQueen's claims for early termination of the contract and civil conspiracy. These motions were renewed at the close of trial. The circuit court denied the motions for directed verdict.

         Ultimately, the jury rendered a verdict awarding DeQueen $4 million in compensatory damages and $2 million in punitive damages against Brookewood on its breach-of-contract and civil-conspiracy claims. The jury also awarded DeQueen $500, 000 in compensatory damages from Realization on its tortious-interference and civil-conspiracy claims; it declined to assess punitive damages against Realization. The circuit court entered a final judgment, and later, an amended and substituted final judgment.[2] Brookewood filed motions for JNOV, for new trial, or for remittitur. These posttrial motions were denied, and Brookewood appealed.

         After the trial, DeQueen requested attorney's fees pursuant to Arkansas Code Annotated section 16-22-308 (Repl. 1999) and its contract with Brookewood-each of which allowed a prevailing party to recover a reasonable attorney's fee. DeQueen sought attorney's fees in the range of $197, 939 to $2, 145, 000. DeQueen and its counsel had a 30 percent contingency-fee agreement, and the $2, 145, 000 figure is 30 percent of the judgment. DeQueen's motion also provided that its attorneys expended 565.54 hours on the case, and its attorneys requested an hourly rate of $350, which would total an award of $197, 939. Instead, the circuit court awarded $178, 845 in attorney's fees and costs to DeQueen in an order entered on August 28, 2014. In making the award, the circuit court assessed a $350 hourly rate and reduced the amount of time spent by 10 percent to account for time not devoted to the breach-of-contract claim. DeQueen later filed an additional motion for attorney's fees incurred during posttrial litigation. DeQueen argued that because the circuit court awarded fees on an hourly basis, it was entitled to fees incurred on posttrial matters; this request was denied. Thereafter, DeQueen cross-appealed issues relating to the award of attorney's fees.

         Our court previously dismissed two related appeals for lack of a final order. See Brookewood, Ltd. P'ship v. DeQueen Physical Therapy & Occupational Therapy, Inc., 2016 Ark.App. 159; Brookewood, Ltd. P'ship v. DeQueen Physical Therapy & Occupational Therapy, Inc., 2017 Ark.App. 84. Following our court's second dismissal, the circuit court entered a final order on July 20, 2017. Additionally, the circuit court considered DeQueen's petition for reconsideration of the attorney's-fee award and its petition for additional attorney's fees and costs for time and expenses incurred in posttrial matters. The circuit court denied DeQueen's motions relating to fees in orders entered on August 15, 2017. Brookewood filed a timely notice of appeal from the July 20, 2017 order and all previous orders. DeQueen timely cross-appealed the circuit court's August 28, 2014 order for fees and costs and the August 15, 2017 order denying reconsideration of the August 28, 2014 ruling.

         II. Brookewood&#39 ...


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