Responding to State Professional Licensing Board Complaints

In South Carolina, the Department of Labor, Licensing & Regulation (“LLR”) is responsible for 42 different professions, including accountants, chiropractors, dentists, real estate appraisers, real estate brokers and agents, and veterinarians.  A complete list of the professionals licensed and regulated by the LLR in South Carolina can be found here:  www.llr.sc.gov/professions.aspx.  Each profession has its own provisions in the South Carolina Code of Laws and the South Carolina Code of Regulations; however, the complaint process and procedures are the same across the different professions and their governing Boards. A complaint, regardless of merit, will be investigated by the LLR.  On the front page of the LLR’s website is a link to file a complaint.  A client, opposing party, fellow professional, or any member of the public can file a complaint against a professional in South Carolina.  It is easy to do and does not cost the complainant any money, but it has potentially devastating impacts on the professional and his or her ability to practice in the State of South Carolina.

The Complaint Investigation Process

Once a complaint is filed, the investigator assigned by the LLR will contact the licensed professional to notify them of the complaint.  The investigator typically also attempts to discuss the complaint with the professional at that time or sets up a time in to discuss the complaint with the professional. In my experience, the LLR investigators are professional and pleasant, but it is important for respondents to understand that the investigator’s job is to determine whether there is merit to the complaint such that it should go before the Investigative Review Committee (“IRC”) for each particular licensing Board.  I am frequently contacted by clients who have already spoken to the LLR investigator, and I recommend that any professional notified of a LLR complaint contact your lawyer prior to speaking with the LLR investigator.  In addition to the interview process, professionals are given the opportunity to submit a written response to the complaint in addition to any supporting documents from their file.  Again, it is wise to engage a lawyer to assist with this process.  In addition, many professionals do not realize their professional malpractice insurance policies may have coverage for a Board licensing or disciplinary complaint.  Upon receipt of notice of the complaint, I recommend you immediately contact your insurance broker and/or professional liability insurer to determine if you have coverage.  Often, the coverage is separate from the malpractice coverage and provides a specific dollar amount for defense costs associated with the complaint.  The policies rarely cover any penalties associated with the complaint, but the defense cost coverage can be a significant help in opposing the complaint.  Professionals may have the ability to select their own counsel, or the insurance carrier will select counsel for them, however, most insurance companies will entertain a counsel request if you have a specific lawyer you would like to represent you.

Once the investigation is complete, the LLR investigator presents his or her findings to the IRC, which is a committee comprised of former Board members, other professionals in the field, and possibly non-professionals who advise the licensing board as to the complaint.  The IRC is advisory only and does not have the authority to act on behalf of the Board; however, in practice, the licensing boards often follow the recommendations of the IRC as to proceeding with complaints.  The IRC presents its findings and recommendation to the Board, and the Board will make a final decision whether to proceed with the complaint, dismiss the complaint, or issue a letter of caution.  If the Board decides to proceed with prosecuting the complaint, counsel for the LLR will take over and typically prepare a Consent Agreement.

Resolution Options Once the Board Decides to Pursue Complaint

The Consent Agreement involves the professional admitting to certain violations and a designated resolution.  I have also had clients who contact me after receiving a Consent Agreement, and even after having already agreed to a Consent Agreement.  It is important to understand that a Consent Agreement becomes public record, as it is posted on the LLR website.  If there was a violation and the professional is comfortable with the outcome, it may be that agreeing to the Consent Agreement is the best course of action.  However, it is important for professionals to understand there are other options. A second option is entering a Memorandum of Agreement (“MOA”) with the LLR.  The MOA involves admitting to certain facts related to the complaint, but enables the professional to present its position before the Board for a determination on the outcome.  This helps expedite the process and can result in potentially lesser penalties than those initially proposed in a Consent Agreement.  A final option for professionals is to proceed with a formal complaint.  Similar to a lawsuit, the LLR counsel will prepare and serve the formal complaint, and the professional must respond and defend its position.  If a resolution cannot be reached while the formal complaint is pending, the Board will schedule a contested hearing to consider the complaint.  Although a formal hearing lacks some of the formalities of court, it has similarities to trial in that the parties may present witnesses, lawyers can cross-examine the witnesses, and the Board serves as the “judge”.  The Board members will often ask questions of the professional, the lawyers, and the witnesses, and the parties may present evidence, including expert testimony.  At the end of the contested hearing, the Board meets in executive session to make its decision on the outcome.  Board decisions are appealable to the administrative law court.  The outcomes from complaints can involve public and private reprimands, fines, suspension of privileges, and even revocation of the professional’s license.

If you have received notice of a complaint and would like assistance, please contact Doug MacKelcan at dmackelcan@cskl.law or 843-266-8228.  Likewise, if you have any questions in general about LLR complaints, I will be happy to speak with you.

 

The Georgia Court of Appeals holds Apportionment of Fault to Non-Parties Does Not Permit Apportionment of Damages

            On May 21, 2020, the Georgia Court of Appeals issued an opinion in the closely watched legal malpractice case of Alston & Bird, LLP v. Hatcher Management Holdings, LLC (“Hatcher II”).  The Court of Appeals’ construction of Georgia’s apportionment statute, O.C.G.A. § 51-12-33, may have important implications in tort litigation when defendants analyze joinder of non-parties and consider the utility of filing a notice of non-party fault.      

The Underlying Dispute

            In 2000 Maury Hatcher hired Jack Sawyer, then an Alston & Bird, LLP (“Alston”) partner, to form and represent a holding company that was intended to manage the Hatcher family real estate fortune, Hatcher Management Holdings, LLC (“HMH”).  Beginning in 2005, Maury embezzled money from HMH, taking more than $876,000 in compensation and $218,000 in distributions.  In 2008, suspecting that something was wrong, Maury’s family members asked for access to HMH’s books and records. Sawyer advised them that they had no right to any of HMH’s books and records despite clear provisions in the operating agreement stating otherwise, and he never advised them that Maury was required to make annual reports of all distributions.  On October 31, 2008, Maury redeemed his and his immediate family’s interests, paying himself $397,000 more than they were worth. In January 2009, Maury resigned as HMH’s manager, and he moved to Florida telling his family that he was effectively judgment proof.[1]

HMH’s Case Against Maury

            HMH and its members sued Maury in a separate action in 2009 alleging he breached his fiduciary duties.  In 2011, the trial court granted partial summary judgment in favor HMH finding Maury liable for breaches of his fiduciary and contractual duties under the operating agreement.  The trial court’s order was upheld on appeal.  Following a damages trial, in which Maury failed to participate, the trial court awarded over $4 million in damages.  HMH was unable to collect on that judgment. 

HMH’S Legal Malpractice Case Against Alston

            In 2012, after HMH prevailed on summary judgment against Maury, but before the Court of Appeals affirmed the trial court, HMH sued Alston for: (1) legal malpractice; (2) breach of fiduciary duty; (3) pre-judgment interest under O.C.G.A. § 13-6-13; and (4) attorney’s fees and litigation expenses under O.C.G.A. § 13-6-11.[2]  Alston filed a notice of non-party fault under O.C.G.A. § 51-12-33 (“apportionment notice”), and in an earlier interlocutory appeal, Hatcher I, the Court of Appeals reversed the trial court’s order striking Alston’s apportionment notice.

            At trial, the jury awarded HMH $697,614 in compensatory damages, $341,831 in prejudgment interest under O.C.G.A. § 13-6-13, and $1,096,561.48 in attorney’s fees and costs under O.C.G.A. § 13-6-11, for a total award of $2,136,006.48.  The jury apportioned 60% of the fault to Maury, a non-party, 32% to Alston, and 8% to HMH.  The trial court then reduced HMH’s award to $683,522.07, 32% of the total.

Alston’s Appeal

            In Hatcher II, Alston contended that the trial court erred by denying its motion for directed verdict and motion for judgment notwithstanding the verdict on the issue of proximate cause.  Notably, Sawyer admitted at trial that if he had he advised the members of their rights in 2008, before Maury redeemed his interests under the operating agreement, the non-managing members could have detected the fraud and mitigated their damages by stopping or claiming set-offs against Maury’s October 31, 2008 redemption.  The Court of Appeals affirmed the trial court’s denial of Alston’s motions, finding that there was sufficient evidence that Sawyer’s actions were the proximate cause of HMH’s loss.

            Alston also argued that the trial court erred by allowing the jury to consider pre-judgment interest under O.C.G.A. § 13-6-13.  The Court of Appeals agreed, finding that O.C.G.A. § 13-6-13 only applies in breach of contract actions. Because HMH only asserted tort claims, breach of fiduciary duty and legal malpractice, the panel reversed the trial court’s award of pre-judgment interest.

HMH’s Cross Appeal as to Apportionment of Damages

            In its cross-appeal, HMH argued that the trial court erred by reducing all of its damages by 68%.  The Court of Appeals agreed with HMH, finding that O.C.G.A. § 51-12-33 only permitted the trial court to reduce HMH’s compensatory damages by 8% and that it did not allow any reduction in HMH’s damages for attorney’s fees and costs under O.C.G.A. § 13-6-11.

            The Court of Appeals concluded that apportionment under O.C.G.A. § 51-12-33 did not apply to a fee and cost award under O.C.G.A. § 13-6-11 because those damages were wholly attributable to Alston, and claims under O.C.G.A. § 13-6-11 stand apart from the claims on which they are dependent.  By eliminating any apportionment against the fee recovery, the Court of Appeals reinstated the entire award of litigation fees and expenses totaling $1,096,561.48. 

            Further, when considering HMH’s compensatory damages, the Court of Appeals reasoned that:

  1.  O.C.G.A. § 51-12-33(a) only allows the trial court to apportion damages in a single defendant case against a plaintiff when a plaintiff is partially at fault;
  2. O.C.G.A. § 51-12-33(b) only permits the apportionment of damages among co-defendants; and
  3.  although O.C.G.A. § 51-12-33(f) permits the apportionment of fault against non-parties (as supported by Hatcher I), it does not permit the apportionment of damages to non-parties.

As a result, the Court of Appeals remanded with instructions to re-calculate the reduction of HMH’s $697,614 compensatory damages award by 8% rather than 68%.

Strategic Implications

            Given the potential impact of this ruling, further review or challenge is expected.  The Court’s analysis nullifies what many assumed was the legislature’s intent: allow apportionment of fault to non-parties, thus reducing potential damages awarded against party defendants.  While the opinion fully recognizes fault can be apportioned to non-parties, there is no discussion or analysis of how apportionment of fault will serve to defer the liability alleged against the defendant if such apportionment cannot reduce damages.  Will trials now be bifurcated with liability only phases where fault of all is considered before any damages are presented?  And even then, what calculus is used if not against damages awarded? 

         Should the holding stand, defendants now must rethink their assumptions about apportionment of damages.  In a case with only one defendant, filing a notice of apportionment will not result in any damages being apportioned, except in cases where the plaintiff is found partially at fault. Decisions not to add parties, instead hoping to rely on apportionment, may now need revisited. 

          This closely watched and long-awaited opinion is sure to cause much more discussion and analysis in the weeks to come.  Stay tuned for further updates. To read the Court of Appeals decision, please click here.


[1] The Court of Appeals did not address these statements or give a detailed procedural history of the separate suit between HMH and Maury, but additional facts are set out in the Final Order and Judgment in that case, Hatcher Management Holdings LLC et al. v. Hatcher et al. 2009CV179145, Fulton County Superior Court (March 5, 2013), and Hatcher I.  

[2] HMH also sought punitive damages, but those were not awarded and they were not germane to the Court of Appeals’ decision in Hatcher II.

5 Takeaways from CLM 2018 Annual Conference, March 14-16, 2018 in Houston, TX

I was fortunate to attend and speak on a panel at the CLM Annual Conference in Houston last week. I thought I would pass along a few takeaways from the professional liability sessions I attended.

  1. The increase in autonomy for “Physician Extenders” (CRNA, NP, PA, midwives) likely comes with increased liability risk to them. Analyzing contracts with the supervising physician, actual supervision of the physician extender, whether the extender’s liability insurance coverage matches the realities of their practice, and whether the extender will be held to the physician standard of care are all important considerations in advising and defending a physician extender.
  2. Lawyers must embrace Artificial Intelligence in analyzing cases and use it to their advantage. They must be prepared to discuss why the data is or is not accurate and how it can be applied to a specific case.
  3. Don’t forget about paper and unsaved emails in the “high-stakes” insurance broker case. The tendency may be to focus on ESI due to the vast amount of documentation in a multi-million dollar claim. But a hand-written note documenting a meeting or phone call, or an email that was not saved to the client file could be the key piece of evidence to support the broker’s position that a coverage was refused or a particular risk was discussed.
  4. High exposure does not necessarily translate to the existence of a special relationship with an insurance broker. Key factors to address in opposing a special relationship finding are:
    • Other brokers involved/seeking competing bids
    • Criticism or questioning of the broker by the client
    • The sophistication of the client and autonomy in decision-making
  5. Cyber-attacks and data breaches pose an increasing risk to professionals such as lawyers, accountants, insurance agents, and medical professionals, who possess a significant amount of potentially valuable data.
    • As the sophistication of the attacks has increased, so has the variety in available insurance coverages.
    • Make sure that your firm and your clients have adequate coverages to address the wide range of cyber risk to you and your clients.
    • The sooner you respond to a cyber-attack, the better, starting with reporting it to your insurance carrier who likely has the resources to assist with addressing the issue.

I Don’t Have Much Elevation Left On My Jump Shot But That’s OK

Last Saturday I was, once again, Player Coach for the Lawyers in the Jawbones v. Sawbones Charity Basketball Game.  This is the 6th year of the Event and I have played, and Carlock Copeland has been a sponsor, every year. The event usually raises about $80,000 for the Side By Side Brain Injury Clubhouse and this year the Lawyers won again in a relatively close game.  While our team was once again stacked with some pretty good ex-college talent, that was not what I thought about while leaving the Mercer University gym.  The game started when a young woman was given a microphone in the middle of the Court and welcomed us all to the event.  She only spoke about 20 brave but halting words to the assembled multitude.  She had worked at the Clubhouse for five years trying to regain the powers of speech following a stroke. Her welcome was just a step along the way of recovery.  Other brain damage victims happily passed out towels or worked the concession stand.  After six years I have seen many of the same family members again and again.

Many of us are blessed to practice law or medicine or accounting.  The joy of counseling clients and handling sophisticated work is something that we hopefully grow to value more and more over the years.  I was reminded on Saturday night that many are not so blessed and we should appreciate all that we have.  Link to learn more or support The Clubhouse:  http://www.sidebysideclubhouse.org/giving-volunteering/donate/.