Appalachian Regional Healthcare, Inc. v. U.S. Nursing Corporation

Filing 314

OPINION AND ORDER: the objections (DE 178 ) are OVERRULED. Signed by Judge Karen K. Caldwell on 5/25/2018. (RCB)cc: COR

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
SOUTHERN DIVISION -- PIKEVILLE
APPALCHIAN REGIONAL
HEALTHCARE, INC.,

CIVIL ACTION NO. 7:14-122-KKC-EBA

Plaintiff,
V.

OPINION AND ORDER

U.S. NURSING CORPORATION,
Defendant.

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This matter is before the Court on U.S. Nursing’s objections (DE 181, Am. Obj.) to a
September 1, 2017 order (DE 173) by Magistrate Judge Edward Atkins. For the following
reasons, the objections are overruled.
I.

Background

With this action, plaintiff Appalachian Regional Healthcare, Inc. primarily seeks
reimbursement for the costs it incurred in defending and settling an action against it in
Letcher Circuit Court.
The state-court action was brought in 2008 by Ralph Profitt and his wife after Ralph
suffered a severe spinal-cord injury while he was working at a sawmill in Whitesburg,
Kentucky. (DE 189, Statement at 1.) At the time of the injury, Profitt was attempting to
repair a piece of sawmill equipment. After the injury, Profitt’s co-employees drove him in a
pickup truck to a hospital in Whitesburg operated by Appalachian where he was treated.
Profitt is now paralyzed from the waist down. (DE 189, Statement at 1-2.)
At the time, certain members of Appalachian’s nursing staff were on strike. (DE 52,
Compl., ¶ 9, Ex. A.) To replace its striking staff, Appalachian entered into a staffing

agreement with defendant U.S. Nursing Corporation, which agreed to provide temporary
personnel to fill the vacant nursing positions. (DE 52, Compl., Ex. A, Agreement.) One of
the nurses who U.S. Nursing provided was Constance Foote. She was on duty at
Appalachian’s emergency room when Proffitt arrived at the hospital.
After being treated at the hospital, Profitt and his wife brought suit in state court,
initially asserting claims against the manufacturer and installer of the equipment and
Appalachian. (DE 197-1, Original Compl.) Later, the Profitts amended the complaint to add
as defendants U.S. Nursing and three nurses: Nurses Foote, Sheila Hurt, and Roxanna
Parsons. (DE 65-2, First Am. State Ct. Compl.) The Profitts alleged that the three nurses
“failed to stabilize and immobilize” Ralph when moving him from the pickup to the
emergency room, which worsened his injuries. (DE 65-2, First Am. State Court Compl.,
¶16.) Nurses Hurt and Parsons are regularly employed by Appalachian.
The Profitts asserted in the state-court action that Appalachian was vicariously liable
for the actions of Hurt, Parsons, and Foote and that U.S. Nursing was vicariously liable for
Foote’s actions. (DE 25-1, Second Am. State Ct. Complaint, ¶¶ 27-28.) The Profitts also
asserted that Appalachian was directly liable for Profitt’s injuries because it negligently
staffed the hospital and negligently trained the hospital staff. (DE 25-1, State Ct. Compl.
¶¶ 30-31.) According to Appalachian, the Profitts sought compensatory damages of $23.5
million and additional punitive damages. (DE 208, Statement at 2.)
The state court eventually granted Appalachian summary judgment on all claims
against it except for the claim of vicarious liability for the negligent actions of Nurse Foote.
(DE 197-16, Nov. 13, 2015 Order (summ. j. on negligent training and staffing claims); DE
206-8 Jan. 10, 2014 Order (summ. j. for all acts inside the emergency room.))
Likewise, the court entered summary judgment in favor of Appalachian’s nurses Hurt
and Parsons. (DE 208-13, Aug. 23, 2012 Order.) The trial judge also entered an order
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prohibiting any party from arguing or introducing evidence that Nurse Hurt or Parsons was
the individual who came out of the emergency room to assist Profitt with entering the
hospital. The trial judge determined that all parties had an opportunity to respond to the
motions for summary judgment filed by Nurses Hurt and Parsons and that U.S. Nursing
filed no response. Accordingly, the trial judge found that the liability of the two nurses had
been litigated and resolved and was no longer an issue for the jury to decide. (DE 208-11,
Mar. 26, 2016 Order.)
The manufacturer and installer of the equipment settled with the Profitts for around
$3 million. (DE 189, Statement at 10; DE 208, Statement at 5.) That left as defendants
Appalachian, U.S. Nursing, and Nurse Foote.
On April 1, 2016 – the last business day before trial was scheduled to begin –
Appalachian settled with the Profitts for $2 million. At this point, it had incurred legal fees
of $1 million defending the claims against it. (DE 208, Statement at 3.) Appalachian asserts
that, at that time, the “only conceivable basis” for its liability was its vicarious liability for
Nurse Foote’s actions. (DE 208, Statement at 8.) On the same day, U.S. Nursing separately
settled with the Profitts for $1.1 million. (DE 208, Statement at 3.)
In the staffing agreement, U.S. Nursing agreed to indemnify and defend Appalachian
from “any and all liability or damage that arises from . . . the negligent or intentional act or
omission” of any U.S. Nursing employee assigned to Appalachian. (DE 52-1, Staffing
Agreement § D(15).) There is no dispute that U.S. Nursing did not defend Appalachian in
the state-court action. Nor is there any dispute that U.S. Nursing has not indemnified
Appalachian for any costs it incurred in settling or defending the Profitts’ action against it.
That is what brings Appalachian to this Court.
In its complaint, Appalachian asserts four claims: 1) a claim that U.S. Nursing breached
the staffing agreement by failing to defend it in the Profitt litigation (Count I); 2) a claim
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that U.S. Nursing breached the staffing agreement by failing to indemnify it for the costs it
incurred in defending and settling the Profitt litigation (Count II); 3) a claim that U.S.
Nursing breached the implied covenant of good faith and fair dealing that applied to its
“contractual obligation to maintain and provide proof of insurance coverage for malpractice
claims for the acts of [U.S. Nursing] employees supplied to” Appalachian (Count III); and 4)
a claim for “common law indemnity” (Count IV).
Appalachian voluntarily dismissed its common-law indemnity claim. By prior opinion,
the Court dismissed Appalachian’s claim for breach of the covenant of good faith and fair
dealing. This matter is now set for trial on Appalachian’s remaining claims for breach of the
duties to indemnify and defend.
II. Analysis
The order by Judge Atkins at issue denied U.S. Nursing’s motion to compel Appalachian
to produce two kinds of documents: 1) certain assessments of the Profitt litigation and 2) all
of Appalachian’s agreements with other staffing agencies and the Request for Proposal
(“RFP”) that led to the staffing agreement at issue in this case.
As to the case assessments, U.S. Nursing argued that they fell under a request it made
on November 18, 2016 for “[a]ll documents, photographs and tangible things that support
[Appalachian’s] claim that its $2.0 million settlement with the Profitt Plaintiffs was
reasonable.” In response to that request, Appalachian produced no assessments of the
Profitt litigation. On May 12, 2017, U.S. Nursing more specifically requested all documents
containing case assessments or risks assessments of the Profitt litigation. Appalachian still
produced no assessments. Then, on May 23, 2017, Appalachian General Counsel Rick King
testified in his deposition that he had “some recollection of a correspondence from Baird
Collier – that summarized those issues [relating to case assessment], also an internal

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memorandum from David [Caudill] to me giving me his assessment as well as the
assessment of counsel.”
Appalachian argued that neither the Collier nor the Caudill case assessments fell under
the November 2016 request for “all documents, photographs and tangible things that
support [Appalachian’s] claim that its $2.0 million settlement with the Profitt Plaintiffs
was reasonable.” It argued that the assessments were privileged and that it did not intend
to rely on the documents at trial and, thus, they could not be considered documents that
support its claim that the settlement was reasonable. In fact, Appalachian argued, it would
not be permitted to rely on the Collier or Caudill assessments to support its claim at trial
because the Court has ruled that Appalachian’s subjective beliefs about the reasonableness
of the settlement are not relevant; reasonableness of the settlement is an objective inquiry.
As to the May 12, 2017 specific request for all case and risk assessments, in addition to
the objections discussed above, Appalachian argued the request was untimely. The request
was made three days before the discovery deadline but Appalachian would have 30 days to
respond to it. That meant that Appalachian would not have to produce the assessments
until June 11, 2017, which would be after the May 15, 2017 fact discovery deadline.
Further, Appalachian argued, the July 25, 2017 motion to compel was itself untimely
because it was filed after the May 15, 2017 discovery deadline.
For the same reasons, Appalachian refused to produce its agreements with other
staffing agencies or the RFP that led to the staffing agreement at issue in this case. U.S.
Nursing also made the request for those documents on May 12, 2017, the day after a
deposition by Appalachian representative Trina Hall, in which she referred to the RFP.
Appalachian refused to produce the requested documents, again arguing that they would
not be due until after the deadline for fact discovery. Appalachian recognized that Hall had
referenced the RFP only the day before U.S. Nursing requested it but it argued that U.S.
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Nursing could have deposed Hall months earlier and not waited until days before the
discovery deadline. Moreover, Appalachian argued, there was no reason why U.S. Nursing
did not ask for Appalachian’s agreements with other staffing agencies or the RFP before the
Hall deposition. Finally, Appalachian argued that neither its agreements with other
staffing agencies nor the RFP that led to the staffing agreement at issue here are even
relevant; what is relevant is the language of the staffing agreement that the parties
ultimately signed.
Judge Atkins denied U.S. Nursing’s motion to compel, agreeing with Appalachian that
the motion itself was untimely because it was filed on July 25, 2017, well after the May 15,
2017 discovery deadline. Judge Atkins noted that any extension of that deadline had been
made only for depositions of four particular witnesses. Further, Judge Atkins agreed with
Appalachian that the May 12, 2017 specific request for the documents at issue was
untimely because Appalachian’s deadline to respond would have been after the May 15
discovery deadline.
U.S. Nursing argued that it had “good cause” for requesting at least the RFP so late
because it only learned of the RFP’s existence in Trena Hall’s May 11, 2017 deposition. But
Judge Atkins found that U.S. Nursing did not have to wait until days before the discovery
deadline to take Hall’s deposition.
U.S. Nursing now argues that, in finding its July 25, 2017 motion to compel untimely,
Judge Atkins did not take certain “special circumstances” into account. It argues that it did
not learn that the assessments existed until Appalachian General Counsel King’s May 23,
2017 deposition. And it did not learn that the RFP existed until Trena Hall’s May 11, 2017
deposition. Regardless, Appalachian offers no reason why it waited more than two months
after these depositions to file the July 25, 2017 motion to compel.

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Further, the documents do not seem particularly significant to the material facts in
dispute here. Appalachian’s subjective beliefs, including its internal assessments, are
irrelevant to the reasonableness of the settlement. U.S. Nursing argues that Appalachian’s
RFP and agreements with other staffing agencies are relevant to the interpretation of the
staffing agreement. But it does not point to any ambiguity in the staffing agreement that
requires extrinsic evidence of the parties’ intent. Indeed, the delay in filing the motion to
compel points to the relative unimportance of the requested documents. Finally, this case
was filed in 2014. The parties had more than ample time for discovery.
For all these reasons, the objections (DE 178) are OVERRULED.
Dated May 25, 2018.

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