Watson, E. v. Corizon Health Services

CourtSuperior Court of Pennsylvania
DecidedMarch 4, 2016
Docket339 WDA 2015
StatusUnpublished

This text of Watson, E. v. Corizon Health Services (Watson, E. v. Corizon Health Services) is published on Counsel Stack Legal Research, covering Superior Court of Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Watson, E. v. Corizon Health Services, (Pa. Ct. App. 2016).

Opinion

J-S04012-16

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

EUGENE WATSON, IN THE SUPERIOR COURT OF PENNSYLVANIA Appellant

v.

CORIZON HEALTH SERVICES, INC., F/K/A PRISON HEALTH SERVICE,

Appellee No. 339 WDA 2015

Appeal from the Order Entered January 27, 2015 In the Court of Common Pleas of Somerset County Civil Division at No(s): 399 CIVIL 2008

BEFORE: BOWES, OLSON, and STRASSBURGER,* JJ.

MEMORANDUM BY BOWES, J.: FILED MARCH 04, 2016

Eugene Watson appeals from the trial court’s January 27, 2015 order

granting summary judgment in favor of Corizon Health Services, Inc.,

formerly known as Prison Health Services, Inc. (“PHS”), a wholly owned

subsidiary of America Services Group, Inc. (“ASG”), and dismissing this

action, which was based upon successor liability. After careful review, we

affirm.

On March 29, 2000, Correctional Physician Services, Inc. (“CPS”)

executed an asset purchase agreement by which it sold a portion of its

assets to PHS. PHS had contracts with the Pennsylvania Department of

Corrections to provide healthcare for its correctional facilities in the western

district, as well as contracts with the New York State Department of * Retired Senior Judge assigned to the Superior Court. J-S04012-16

Corrections for several facilities located in that state. CPS was a closely-held

corporation engaged in providing healthcare services to Pennsylvania

correctional facilities in the eastern district, as well as facilities in New York,

Virginia, and Florida. By virtue of the asset purchase agreement, PHS

acquired only CPS’s Pennsylvania and New York contracts.

Prior to the execution of the asset purchase agreement, ASG and its

attorneys performed a due diligence review of CPS, which culminated in a

memorandum that was submitted to ASG officers and counsel. ASG

engaged Ernst & Young LLP to audit CPS and report to its board of directors.

It also hired Morgan Keegan to perform a fairness opinion analysis of the

asset purchase, and to determine the equity value of CPS’s assets. That

firm concluded that the equity value of the assets to be purchased ranged

from $13 million to $19 million. A schedule appended to that memorandum

set forth CPS’s disclosures regarding pending and threatened litigation and

noted therein that CPS maintained professional liability insurance. Based on

the aforementioned due diligence review, PHS negotiated a purchase price of

$14 million for the CPS assets. ASG’s legal counsel, King and Spalding,

supplied a written opinion letter regarding the transaction.

Following the closing, some of the funds were distributed to meet

CPS’s obligations to major creditors and vendors. Approximately $1.5

million dollars was placed in an escrow account for an anticipated payment

to the New York Department of Corrections. Almost $8 million was placed

-2- J-S04012-16

into an oversight account at PNC Bank. An Oversight Agreement between

PHS and CPS created a committee that would take control of these funds

and pay each of the two shareholders $500,000, pay outstanding obligations

and creditors, and distribute any amounts remaining as directed by the

shareholders of CPS. While PHS assumed certain enumerated liabilities

under the Agreement, it specifically did not assume insurance-related

liabilities for medical malpractice claims arising from CPS’s administration of

healthcare services prior to the closing date or any EEOC claims.

Agreement, ¶3.3.

Almost six months after the execution of the Agreement, on

September 18, 2000, Mr. Watson filed a medical malpractice action against

CPS in the Court of Common Pleas of Montgomery County. He alleged that

CPS had provided him with negligent medical care while he was an inmate at

SCI-Graterford from 1989 to 1999. CPS did not file an answer and in

February 2001, Appellant obtained a default judgment in the amount of

$210,000 against CPS.1 After Appellant garnished a CPS bank account in an

attempt to satisfy his judgment, CPS filed a petition to strike and/or open

____________________________________________

1 In his praecipe for judgment, Mr. Watson inserted the sum of $210,000 as damages, and certified therein that the “assessment of damages is for specified amounts alleged to be due in the complaint and is calculable as a sum certain from the complaint,” a representation that cannot be confirmed by the record. See Defendant Corizon’s Second Motion for Summary Judgment, 1/3/12, at Exhibit E.

-3- J-S04012-16

the default judgment. In it, CPS represented that it had terminated

operations and that PHS had purchased some of its contracts in 2000. The

petition was not ruled upon.2

Seven years later, on April 24, 2008, Appellant commenced the within

action against the Pennsylvania Department of Corrections and PHS alleging

that both parties were liable for CPS’s judgment based on the Pennsylvania

Uniform Fraudulent Transfer Act (“PUFTA”), 12 Pa.C.S. §§ 5105-5110. In

addition, he asserted liability against PHS based upon a theory of successor

liability. The Department of Corrections filed preliminary objections that

were sustained. PHS filed a motion for judgment on the pleadings premised

on the statute of limitations under PUFTA and the contract provision that

PHS was not assuming liability for medical negligence claims, which the trial

court granted.

Mr. Watson appealed to this Court. On November 13, 2009, we

affirmed the dismissal of the PUFTA claim as time barred, agreeing that Mr.

Watson should have known about the sale of assets to PHS in 2001 when

CPS moved to strike and/or open the judgment. Watson v. Prison Health

Servs., 988 A.2d 739 (Pa.Super. 2009) (unpublished memorandum)

(“Watson I”). However, we reversed the grant of judgment on the ____________________________________________

2 According to PHS, the court did not rule on the petition because CPS withdrew it. See Answer of Defendant Prison Health Services, Inc. to Plaintiff Eugene Watson’s Amended Complaint, 7/28/08, at ¶14.

-4- J-S04012-16

pleadings as to the successor liability claim, finding the pleadings insufficient

to determine as a matter of law whether adequate consideration had been

paid for the transfer.

Following remand, and before the trial court addressed the issue of

consideration, PHS filed a motion for summary judgment. PHS argued that

the successor liability action was barred by the statute of limitations. The

trial court agreed and granted summary judgment. Mr. Watson appealed

and this Court reversed, holding that Mr. Watson’s “successor liability action

against PHS to recover CPS’s debt reduced to judgment is an equitable

action” and that the trial court erred in applying the statute of limitations

rather than the doctrine of laches. Watson v. Prison Health, 26 A.3d

1207 (Pa.Super. 2011) (unpublished memorandum at 15) (“Watson II”).

We concluded further that Mr. Watson had not been duly diligent as he filed

suit seven years after he was placed on reasonable notice that PHS

purchased at least some of the assets. However, since laches would only

bar the claim if PHS was prejudiced by the delay, we remanded for “the trial

court to determine preliminarily, whether laches barred [Mr. Watson’s]

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Watson, E. v. Corizon Health Services, Counsel Stack Legal Research, https://law.counselstack.com/opinion/watson-e-v-corizon-health-services-pasuperct-2016.