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Central Indiana Podiatry, P.C. v. Barnes & Thornburg, LLP

Court of Appeals of Indiana

October 19, 2016

Central Indiana Podiatry, P.C., Northwest Surgery Center, LLC, d/b/a Foot & Ankle Surgery Center, f/k/a Foot & Ankle Surgery Center, LLC and Anthony E. Miller, D.P.M., Appellants-Plaintiffs,
Barnes & Thornburg, LLP, Appellee-Defendant.

         Appeal from the Marion Superior Court The Honorable Cynthia J. Ayers, Judge Trial Court Cause No. 49D04-1210-PL-41939

          ATTORNEYS FOR APPELLANT James A. Knauer Steven E. Runyan Kroger, Gardis & Regas, LLP Indianapolis, Indiana.

          ATTORNEYS FOR APPELLEE Forrest Bowman, Jr. Jennifer K. Bowman Bowman & Bowman Mark Crandley Barnes & Thornburg, LLP Indianapolis, Indiana.


          May, Judge.

         [¶1] Central Indiana Podiatry, P.C. ("CIP"), Northwest Surgery Center, LLC d/b/a Foot & Ankle Surgery Center f/k/a Foot & Ankle Surgery Center, LLC ("FASC"), [1] and Anthony Miller, D.P.M. ("Miller") (collectively "the Miller Parties") appeal summary judgment for Barnes & Thornburg, LLP ("B&T"). The Miller Parties present multiple issues for our review, which we consolidate and restate as:

1. Whether the Miller Parties' allegations of fraud preclude B&T from relying on the Release Agreement; and
2. Whether the terms of the Release Agreement preclude the Miller Parties from suing B&T for the alleged acts of malpractice.

         We affirm.

         Facts and Procedural History

         [¶2] B&T had provided legal services to Miller, as owner and sole shareholder of CIP and FASC, since the early 1990's. The current case stems from a disagreement regarding legal fees.

         1. The Vogel Federal Litigation

         [¶3] On November 7, 2005, Thomas Vogel, D.P.M., a former employee of CIP and FASC, filed a federal claim ("Vogel Federal Litigation") against the Miller Parties alleging, among other things, "anti-kickback violations, mail, wire, and healthcare fraud, money laundering, racketeering activity, breach of contract, back wages, conversion, and offenses against property." (Br. of Appellee at 6.)

         [¶4] On December 28, 2005, B&T, on behalf of the Miller Parties, filed an answer to the complaint, a counterclaim, and a request for an injunction. B&T partner William Pope was the billing attorney for the work involved in the action, but three other B&T partners, J. Michael Grubbs, Thomas Shea, and John Koenig, also entered appearances.

         [¶5] Vogel filed three motions for summary judgment in the Vogel Federal Litigation between February 8 and March 8, 2006, causing B&T to spend extra time on the case. On May 17, the court consolidated the Vogel Federal Litigation with a claim brought by another former Miller employee, Yong Chae, D.P.M., which included similar allegations. B&T also represented the Miller Parties in the Chae claim. The court set a hearing for May 25, 2006, to consider arguments regarding the Miller Parties' motions for injunction in both cases.

         [¶6] During the pendency of the Vogel Federal Litigation and the Chae claim, Miller complained several times to Pope about the legal fees B&T was charging him. In response, Pope proposed an agreement that indicated Miller had been billed, as of March 31, 2006, attorney fees of $138, 008.50 in the Vogel Federal Litigation and $4, 082.00 in the Chae claim, for a total of $142, 090.50. As of the date of the proposed agreement, Miller had paid $23, 886.12. The proposed agreement contained provisions regarding payment and a cap on Miller's legal fees. Pope advised Miller to retain independent counsel to review the agreement. On May 16, 2006, Miller rejected Pope's proposed agreement.

         [¶7] At the hearing on May 25, the judge in the Vogel Federal Litigation advised Miller and Vogel to try to reach a settlement. During the negotiations, Miller expressed an interest in maintaining a professional relationship with Vogel because Vogel would produce additional revenue for FASC by performing surgeries at FASC. Koenig advised Miller against continuing the relationship because Vogel had previously sued Miller, accused Miller of dishonesty, and allegedly operated on patients while he was impaired. After many hours of negotiation, Miller reached settlement agreements with both Vogel and Chae.

         [¶8] The Vogel settlement required multiple agreements among the parties to be entered into within thirty days of the agreement:

1. The parties agree to simultaneously enter into the following agreements within 30 days after the date of this Agreement:
a) A Mutual Release from the Restrictive Covenant in the Employment Agreement between CIP and Dr. Vogel.
b) An Option Agreement between FASC and Dr. Vogel permitting Dr. Vogel to purchase up to 2% of the ownership of FASC.
c) A Subscription Agreement for the purchase of at least one share of FASC containing a provision requiring the shareholder to exclusively perform all surgeries at FASC unless the patient's condition or patient's choice requires that the surgery be performed elsewhere.
d) A Mutual Waiver and Release of all claims raised in or that could have been raised in the lawsuit.
e) A Dismissal of the lawsuit with prejudice via a stipulation that includes all allegations of fraud.
f) A Mutual Non-disparagement Agreement.

(App. at 350.)

         [¶9] Because of the agreement to transfer a portion of FASC ownership to Vogel, Pope advised Miller he would need to change FASC's status as an "S" subsidiary of CIP for federal income tax purposes. To do so, Pope proposed the creation of a new limited liability company ("LLC") in which FASC and Vogel would have ownership interests, thus preserving the "S" subchapter election. Pope spoke with Miller on May 30 and June 1, 2006, regarding this plan. Pope prepared documentation to create the new LLC around that time as well. Pope sent the documentation regarding the proposed LLC creation to Vogel's attorney, Paul Black, on June 19, 2006.

         [¶10] Also in early June 2006, Miller and Pope had multiple telephone conversations regarding legal fees Miller owed B&T. Around this time, Miller and Pope reached an oral agreement about the fees. On June 19, 2006, Pope sent Miller the written expression of that oral agreement, entitled the Settlement and Release Agreement ("Release Agreement"). Pope told Miller that B&T would require Miller to consult independent counsel before executing the Release Agreement. The Release Agreement also provided Miller was required to consult independent counsel before executing the Release Agreement.

         [¶11] Miller consulted Jim Knauer, who had represented the Miller Parties in other matters in the past. Pope spoke with Knauer via telephone on June 20, 2006, and Knauer indicated he had reviewed the Release Agreement. On June 22, 2006, at 5:00 p.m., Pope met with Miller to discuss the LLC Documentation and the Release Agreement. Miller confirmed he had discussed the Release Agreement with Knauer and "said Knauer told him the terms proposed were standard and he would have to accept them to get the fee reductions." (Id. at 123.) By the time Miller reviewed the Release Agreement, he had incurred legal fees in the Vogel Federal Litigation and the Chae case in excess of $190, 000.00. Miller signed the Release Agreement. The meeting lasted approximately ninety minutes.

         [¶12] The terms of the Release Agreement provided, in relevant part:

1. The Miller Parties shall pay to B&T the total sum of One Hundred Forty-Five Thousand Dollars and No Cents ($145, 000.00) by check, made payable to Barnes & Thornburg, LLP, which check shall be delivered to B&T on or before June 30, 2006.
2. Upon payment of the amount set forth in paragraph 1 hereof, the Miller Parties are released and forever discharged by B&T from the payment of any further amounts to B&T for costs or services performed on the Lawsuits.[2] The Miller Parties are expressly not released or discharged from the payment for any costs or fees associated with any services performed by ...

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