Metropolitan Property and Casualty Insurance Company, Appellant, vs. Full Circle Physical Therapy, Inc., et al., Respondents, Minnesota Institute of Neurology, P.A., et al., Respondents, Twin Cities Open MRI, Inc., et al., Defendants.

Metropolitan Property and Casualty Insurance Company, Appellant, vs. Full Circle Physical Therapy, Inc., et al., Respondents, Minnesota Institute of Neurology, P.A., et al., Respondents, Twin Cities Open MRI, Inc., et al., Defendants. A06-530, Court of Appeals Unpublished, December 19, 2006.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2004).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A06-530

 

Metropolitan Property and Casualty Insurance Company,

Appellant,

 

vs.

 

Full Circle Physical Therapy, Inc., et al.,

Respondents,

 

Minnesota Institute of Neurology, P.A., et al.,

Respondents,

 

Twin Cities Open MRI, Inc., et al.,

Defendants.

 

Filed ­­­December 19, 2006

Affirmed in part, reversed in part, and remanded

Dietzen, Judge

 

Hennepin County District Court

File No. MC 04-7118

 

Michael W. Lowden, The Lowden Law Firm, L.L.C., 5001 American Boulevard West, Suite 670, Bloomington, MN 55437 (for appellant)

 

Charles J. Lloyd, Livgard & Rabuse, P.L.L.P., 2520 University Avenue Southeast, Suite 202, Minneapolis, MN 55414 (for respondents Full Circle Physical Therapy, Inc., et al.)

 

John B. Wolfe, Jr., 406 Spruce Tree Center, 1600 University Avenue, St. Paul, MN 55104 (for respondents  Minnesota Institute of Neurology, P.A., et al.)

 

            Considered and decided by Kalitowski, Presiding Judge; Lansing, Judge; and Dietzen, Judge.

U N P U B L I S H E D   O P I N I O N

 

DIETZEN, Judge

 

            Appellant challenges the district court order (1) denying its claim that respondents provided physical therapy services in violation of the corporate-practice-of-medicine doctrine and the Minnesota Professional Firms Act, and, therefore, its services are not compensable under Minnesota's No-Fault Act; and (2) dismissing, sua sponte, its claims of no-fault fraud, civil theft-by-swindle, and conspiracy to commit fraud, arguing that the district court abused its discretion.  Because we conclude that the district court properly applied the law in denying appellant's first claim, we affirm in part.  But because we conclude that the district court abused its discretion in dismissing, sua sponte, appellant's other claims, we reverse in part and remand.

FACTS

Appellant Metropolitan Property & Casualty Insurance Co. (Metropolitan) sells auto insurance in Minnesota and provides no-fault medical expense benefits for policies of automobile insurance sold in the state pursuant to the Minnesota No-Fault Act, Minn. Stat. § 65B.41-.71 (2004).  Respondents are medical clinics (clinics) that provide, inter alia, MRI imaging, chiropractic, massage, physical therapy services, and neurology medicine.  The clinics are all located in the same building.

            Starting in 2002, Metropolitan investigated five insurance claims that involved treatment provided by the clinics.  All of the claims involved automobile accidents, many of which were low-velocity accidents.  Based on its investigation, Metropolitan concluded that the clinics self-referred patients to each other and ordered various types of medical treatment without justification. 

            In May 2004, Metropolitan brought suit against the clinics, asserting that the clinics provided medical services in violation of the corporate-practice-of-medicine doctrine and contrary to the Minnesota Professional Firm Act, Minn. Stat. § 319B.02, subd. 19 (2004).  Metropolitan further alleged that the clinics engaged in fraudulent conduct, theft-by-swindle, and conspiracy to commit fraud.  For its remedy, Metropolitan sought recovery of the no-fault benefits it paid to the clinics on the basis that the clinics' medical services were not compensable under Minnesota's No-Fault Act.  

            When the clinics failed to answer the complaint, Metropolitan moved for default judgment.  The district court denied the motion and issued a scheduling order.  Subsequently, Metropolitan brought a second motion for default judgment, arguing that the clinics had failed to answer the complaint or comply with the scheduling order.  The clinics argued that Metropolitan had abandoned the case and had not sought any discovery.  Following arguments, the district court granted a default judgment for Metropolitan and ordered that the determination of damages be postponed, pending the outcome of a case then pending in the Minnesota Supreme Court, Isles Wellness, Inc. v. Progressive N. Ins. Co.

            In September 2005, the supreme court filed its decision in Isles Wellness.  703 N.W.2d 513 (Minn. 2005).  Metropolitan then sent a letter to the district court acknowledging that the Isles Wellness decision was dispositive of its corporate-practice-of-medicine-doctrine claims against respondents Full Circle Physical Therapy, Inc. (Full Circle) and Midway Massage (Midway).  But Metropolitan argued that its fraud, theft-by-swindle, and conspiracy claims against the clinics remained viable. 

The district court, relying on Isles Wellness, held that the corporate-practice-of-medicine doctrine did not apply to two of the clinics, Full Circle and Midway, and, therefore, dismissed those claims.  The district court further held that the corporate-practice-of-medicine doctrine did not confer a private cause of action to recover no-fault insurance payments, and, therefore, Metropolitan was relieved of liability for outstanding claims but could not recover money previously paid to the two clinics.  Finally, the district court held that the remaining claims of fraud, theft-by-swindle, and conspiracy "do not allege with particularity the elements of fraud or theft by swindle as required by Minn. R. Civ. P. 9.02.  These claims must be dismissed."  But the district court awarded Metropolitan attorney fees of $5,000 and costs of $400. 

D E C I S I O N

 I.

            On appeal, Metropolitan argues that Full Circle, which is owned by non-licensed professionals and provides physical therapy services, operates in violation of the corporate-practice-of-medicine doctrine and contrary to the Minnesota Professional Firms Act,[1] and, therefore, its services are not reimbursable under Minnesota's No-Fault Act.  We review questions of law de novo.  Anderson v. McOskar Enterprises, Inc., 712 N.W.2d 796, 800 (Minn. App. 2006) (citing Frost-Benco Elec. Ass'n v. Minnesota Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn. 1984)).

            Metropolitan acknowledges that the recent case of Isles Wellness is directly on point.  In Isles Wellness, a massage therapy clinic, a physical therapy clinic, and a chiropractic clinic, all of which were owned by a non-licensed professional, filed complaints against two insurance companies alleging breach of contract and unfair claims practices in connection with unpaid bills for treatment provided by the clinics.  Isles Wellness, Inc. v. Progressive N. Ins. Co., 703 N.W.2d 513, 515 (Minn. 2005).  The insurance companies denied liability, arguing that the clinics were owned by a non-licensed professional in violation of the corporate-practice-of-medicine doctrine, and, therefore, the services were not reimbursable under Minnesota's No-Fault Act.  Id.at 515, 522-24. The supreme court agreed and held, inter alia, that the corporate practice of physical therapy and massage therapy are not prohibited by the corporate-practice-of-medicine doctrine. Id. at 523-24.  Thus, massage and physical therapy clinics may be owned by non-licensed individuals without violating the corporate-practice-of-medicine doctrine.

Metropolitan nonetheless argues that as a matter of public policy, this court should apply the corporate-practice-of-medicine doctrine to physical therapists.  Metropolitan contends that because physical therapists are members of a state-licensed and regulated profession, they should be governed by the corporate-practice-of-medicine doctrine.  Also, both the American Physical Therapy Association (APTA), a national physical therapy organization, and the Minnesota Board of Physical Therapy (MBPT), the state licensing agency for physical therapists, have adopted guidelines indicating that physical therapy clinics should be exclusively owned and operated by licensed physical therapists.  Metropolitan argues that this court should follow the guidelines adopted by the APTA and the MBPT and apply the corporate-practice-of-medicine doctrine to physical therapists.  

But we conclude that the decision in Isles Wellness is dispositive of this issue and binding on this court.  Thus, we reject appellant's invitation that as a matter of public policy, we apply the corporate-practice-of-medicine to physical therapists.  See Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988) ("The function of the court of appeals is limited to identifying errors and then correcting them.").

II.

Metropolitan argues that the district court erred by dismissing, sua sponte, and without notice to either party, the fraud and theft-by-swindle claims for failure to plead them with particularity.  Minn. R. Civ. P. 9.02 states that "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity."  "Malice, intent, knowledge, and other conditions of mind of a person may be averred generally."  Id.  Here, the clinics did not move for an order requiring that the claims be pleaded with more particularity, and the district court dismissed the claims without notice to either party.  Consequently, we analyze this case as an involuntary dismissal under Minn. R. Civ. P. 41.02(a).

Rule 41.02(a) states that "[t]he court may upon its own initiative, or upon motion of a party, and upon such notice as it may prescribe, dismiss an action or claim for failure to prosecute or to comply with these rules or any order of the court."  Rule 41.02 "is designed to let the [district] court manage its docket and eliminate delays and obstructionist tactics by use of the sanction of dismissal . . . .  In other words, Rule 41.02(a) permits dismissal for trial management reasons, not for lack of substantive merits of a claim."  Lampert Lumber Co. v. Joyce, 405 N.W.2d 423, 425 (Minn. 1987).  In Lampert Lumber, a defendant's cross-claim was dismissed involuntarily for failure to state a claim upon which relief could be granted under Minn. R. Civ. P. 12.02.  But the supreme court held that failure to plead or prove a claim goes to the substantive legitimacy of the claim itself and should not be confused with the kind of procedural problem that can be resolved by involuntary dismissal under rule 41.02.  Lampert Lumber, 405 N.W.2dat 426-27.

The clinics argue that Alho v. Sterling, 266 Minn. 71, 122 N.W.2d 869 (1963) supports the conclusion that a dismissal under rule 41.02 is permitted if a party violates rule 9.02.  In Alho, the supreme court held that an order under Minn. R. Civ. P. 9.02, which requires fraud to be pleaded with particularity, is not independently appealable unless the case is dismissed for failure to comply with an order to plead with particularity.  Id. at 72, 122 N.W.2d at 870.  In this case, there was no prior order directing Metropolitan to plead fraud with particularity.  And the issue before us is the propriety of the dismissal, not the appealability of an order requiring a party to plead with particularity, or provide a more definite statement.  

Thus, the dismissal in this case was not based on Metropolitan's failure to comply with an order for a more definite statement.  In the absence of a motion by the clinics or a procedural violation that implicates the court's power to supervise and manage its docket, the district court's dismissal was unauthorized.  Therefore, we reverse in part and remand.

            Affirmed in part, reversed in part, and remanded.     

[1] For ease of reference we will refer to Metropolitan's claims that the clinics provided medical services in violation of the corporate-practice-of-medicine doctrine and contrary to the Minnesota Professional Firms Act collectively as its corporate-practice-of-medicine claim.