Judges rule parts of Idaho Patient Act unconstitutional; Melaleuca calls foul - East Idaho News

Judges rule parts of Idaho Patient Act unconstitutional; Melaleuca calls foul

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IDAHO FALLS — Two judges have found parts of the Idaho Patient Act unconstitutional, and one of eastern Idaho’s largest companies is calling out a group of attorneys and a defendant for what they say is unethical and unprofessional behavior outside and inside the courtroom.

Wellness company Melaleuca issued a lengthy news release Thursday accusing the attorneys on both sides of a local medical debt recovery case of colluding in an attempt to have the Idaho Patient Act ruled unconstitutional.

The Idaho Patient Act is a law meant to protect Idahoans from predatory debt collection practices.

In its release, Melaleuca points out connections between the players involved and abnormal circumstances surrounding the case.

Meanwhile, Bonneville County Magistrate Judge Jason Walker has issued a written ruling declaring several provisions of the Idaho Patient Act are unconstitutional. The ruling came down in a case involving Ridgeline Medical and a Bonneville County man named David Lyon, who owed $777 to the Idaho Falls medical clinic.

And Walker isn’t alone. In a separate debt recovery case, Bonneville County District Judge Michael Whyte found a separate provision of the relatively new law to be unconstitutional as it applies to a specific case — Medical Recovery Services v. Christa Klein.

Melaleuca was the driving force and central advocate for the Idaho Patient Act, which took effect on Jan. 1, 2021. The legislation’s goal was to “ensure patients receive timely, accurate and understandable medical bills, and curb debt-collection abuses, including outrageous attorney fee awards for medical debt collection attorneys,” according to the news release from Melaleuca.

The company and Frank VanderSloot, its executive chairman, became interested in medical debt collection practices after an employee was sued by Medical Recovery Services (MRS) for an outstanding $294 bill she didn’t know she had. After several hearings, MRS attorney Bryan Smith requested nearly $6,000 in attorney fees.

EastIdahoNews.com ran a series of stories about Smith and the collection company. VanderSloot said he was shocked at the number of people who came forward with similar stories.

RELATED | Medical debt, collections and the fees you’ve likely never heard of

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Frank VanderSloot held up a stack of medical bills while introducing the Idaho Patient Act in February 2020. | Nate Sunderland, EastIdahoNews.com

While the Idaho Patient Act was being debated in the Legislature, Smith, an owner of Smith Driscoll & Associates, was heavily critical of the proposed legislation. One of his fellow attorneys at the law firm, Bryan Zollinger, who was also serving in the Idaho Legislature at the time, gave a lengthy presentation on the House floor claiming the bill was unconstitutional.

Despite the objections, the Idaho Patient Act overwhelmingly passed the Idaho Legislature in March 2020.

Now the law is being challenged in court by the same people the law was meant to safeguard against — medical debt collectors, such as Smith and Zollinger. So far, some of their arguments are gaining traction in local courts, as seen in Ridgeline Medical v. Lyon and Medical Recovery Services v. Klein.

The facts behind Ridgeline Medical v. Lyon

The majority of the constitutional argument against the Idaho Patient Act occurs in the Ridgeline Medical v. Lyon case. It appears this case isn’t typical. This one is significantly longer, the arguments are more complex, and the timeline for collection is shorter than in many cases.

The initial complaint centers around Lyon going to Ridgeline Medical for an unspecified medical treatment on March 2, 2021. Lyon didn’t make any sort of payment for the treatment and was assessed a charge of $777, according to court documents.

In accordance with Idaho Patient Act, documents say a final medical statement for $777 was sent to Lyon on April 2, 2021, at the address he gave the clinic. But according to statements agreed upon by both Ridgeline’s and Lyon’s attorneys, Lyon never received that final statement.

A little over one month later, and two months after treatment, Ridgeline Medical hired Smith Driscoll & Associates to collect the debt owed by Lyon.

EastIdahoNews.com contacted Ridgeline Medical for clarification on its policies. We wanted to know if it was normal for the clinic to hire a law firm directly for debt collection instead of first using a collection agency. We also wanted to know if it was normal for the clinic to hire a law firm to engage in legal proceedings just two months after a patient was treated.

Ridgeline’s owners declined to comment and referred us to their billing agency, Amerimax RCM in Idaho Falls.

Its owner, Katie Davenport, said she could not discuss the details of specific cases due to privacy laws. However, in general, she said it is uncommon for her agency to directly send a patient to collections after only a short period of time. But it does happen occasionally, she said, particularly when a patient blatantly refuses to pay a bill.

It is their policy not to sue people directly. When a bill is sent to collections, the collection agency decides whether or not to sue the patient.

“We extend every courtesy and make every effort to appropriately communicate with patients,” she said. “We are huge patients advocates … but if there is a situation where we have no reason to believe they will pay, we have no reason to continue billing the person.”

In May and June, Smith Driscoll & Associates sent demand letters to the address provided by Lyon, threatening a lawsuit if the debt was unpaid. Documents say Lyon did not respond, and on Aug. 4, 2021, he was sued for the debt. The debt was also reported to a credit bureau.

Lyon hired Boise law firm Dindinger & Kohler to defend him. Using the Idaho Patient Act, they filed a counterclaim against Ridgeline, seeking to impose fines against the clinic for filing its lawsuit and reporting Lyon to a credit agency before he had received his final statement.

The Idaho Patient Act forbids a person from engaging in “extraordinary debt collection practices” unless the patient receives a final statement. It also forbids a person from trying to collect until 90 days have passed from receiving the statement. Those in violation may be subject to damages assigned by a court.

Read more about the Idaho Patient Act here.

Attorney Edward Dindinger’s entire nine-page answer to the lawsuit and counterclaim can be read here.

Zollinger, representing Ridgeline, then filed a 47-page motion for summary judgment. He argued the entirety of the Idaho Patient Act was unconstitutional on the grounds it violated the right to petition, the right to free speech, equal protection under the law, due process and the right against excessive fines.

Zollinger’s 47-page motion for summary judgment can be read here.

Several other actions occurred, including a motion for summary judgment from Lyon.

On Oct. 27, 2022, Bonneville County Magistrate Judge Jason Walker issued a 42-page response and decision in the case.

On Friday, Idaho Attorney General Lawrence Wasden filed a motion to intervene in the case. He says Ridgeline Medical failed to serve the attorney general’s office with written notice of its intent to challenge the constitution. He asserts the Idaho Patient Act is constitutional and does not infringe on Ridgeline’s rights. He wants to intervene to defend the act’s constitutionality. Read the motion here.

Judge Walker’s issues with parts of the Idaho Patient Act

In his decision, Walker upholds most of the Idaho Patient Act as constitutional, but he takes issue with three specific provisions.

  • Walker’s first issue focuses on the First Amendment right to petition the courts. Ridgeline argues healthcare facilities can be barred from their right to petition the government if they follow all the stipulations of the Idaho Patient Act, but the patient disputes receiving a final statement.

    Walker says that argument is unpersuasive, as healthcare facilities are free to communicate with patients to verify a final statement was received before they attempt to collect. If the patient doesn’t receive a final statement, the facility can simply issue a new statement, which, under the law, allows them to sue the patient if deemed necessary.

    But Walker said the same could not be said of individual healthcare providers such as doctors, anesthesiologists or radiologists who work at medical facilities. Walker asserts that if a healthcare facility fails to send a final notice to a patient, then providers — through no fault of their own — cannot pursue their debts through legal action due to the Idaho Patient Act.

    He says, as a result, the Idaho Patient Act unconstitutionally violates the rights of healthcare providers to petition the government.

  • Walker’s second issue with the Idaho Patient Act concerns the First Amendment right to free speech. The Idaho Patient Act includes a provision that prohibits reporting a debt to a credit bureau for a specific period of time.

    Walker believes this prohibition is a “content-based” restriction on medical providers’ speech rights. He says, “content-based laws — those that target speech based on communicative content — are presumptively unconstitutional and may be justified only if the government proves they are narrowly tailored to serve compelling state interests.”

    Walker believes the speech restriction doesn’t serve to further the stated goals of the Idaho Patient Act, which are (1) increasing visibility and transparency of medical billing; (2) minimizing excessive attorney fees resulting from medical debt collection; and (3) providing clear guidance to Idaho judges to help minimize medical debt collection abuses.

    As such, he finds the speech restriction to be unconstitutional.

  • Walker’s final issue with the Idaho Patient Act deals with the Eighth Amendment’s prohibition on excessive fines. Walker found that despite Lyon not receiving a final statement, both sides agree that Ridgeline did send one. As such, the judge says the clinic did what the law required, and it would a violation of the Eighth Amendment to punish it with a fine.

Walker concludes his decision by dismissing Lyon’s counterclaim. He also found the unconstitutional provisions of the Idaho Patient Act were severable from the rest of the act, and the remaining provisions of the law were valid.

As a result, Walker says Ridgeline’s complaint against Lyon should be dismissed because he did not receive a final statement within the timelines required by the Idaho Patient Act.

A status conference on the case is scheduled for Tuesday.

Melaleuca says Ridgeline Medical v. Lyon was engineered in secret to challenge Idaho Patient Act

“Are we to believe that Zollinger is now suing his political ally and personal friend?”

Melaleuca isn’t involved in the Ridgeline Medical v. Lyon case; however, given its central advocacy for the Idaho Patient Act, the company weighed in on Thursday.

A strongly worded news release accused attorneys Smith, Zollinger and Dindinger, along with defendant Lyon, of unethically conspiring to bring a sham case before a magistrate court in an effort to deem the Idaho Patient Act unconstitutional.

The company suggests “the plaintiff’s attorneys, the defendant, and the defendant’s attorney are longtime, close, personal friends and political allies and have a history of teaming up in political and legal situations.”

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Attorney Bryan Smith points at EastIdahoNews.com reporters during a House committee hearing for the Idaho Patient Act in March 2020. | EastIdahoNews.com file photo

One of the key points of the release is the relationship between Lyon, Smith and Zollinger. The release references a 2019 EastIdahoNews.com article where Lyon defends Smith’s debt collection practices, and mentions he was offered a job working for Smith.

Lyon is also a precinct committeeman in the Bonneville County Republican Central Committee, where he associates with the attorneys. The release contains a 2018 social media post by then-Rep. Zollinger praising Lyon’s political acumen and encouraging people to vote for him.

“Are we to believe that Zollinger is now suing his political ally and personal friend?” the release asks.

EastIdahoNews.com reached out to Lyon for comment about the case and his relationship with Smith and Zollinger. He referred us to Dindinger, who did not respond to phone or email messages.

The release claims that Lyon’s attorneys agreed to certain facts that appear to negatively impact his case.

“It is difficult to imagine that any actual defense attorney would agree to these kinds of ‘facts’ against their client unless they intended to jeopardize their client’s case or, in essence, assist the other side,” the release states.

Finally, the release addresses details about Ridgeline Medical — namely that it is not a normal practice for the clinic to directly sue a patient to collect a medical debt, according to Bonneville County court records.

It also states that Ridgeline’s typical collection practices do not reflect what happened in this case. Amerimax RCM, which bills on behalf of Ridgeline Medical, said they could not comment specifically on collection practices related to this case due to privacy laws. They did say it is not their policy to sue patients directly.

Read the entire Melaleuca news release here.

When asked for comment about the specific allegations in the release, Smith said his office does not comment on pending litigation.

Smith issues statement about Frank VanderSloot and Idaho Patient Act

“The Idaho Patient Act is an unconstitutional abomination.”

Smith did issue a statement in response to Melaleuca’s news release, saying EastIdahoNews.com could publish it in its entirety or not at all. It says:

The Idaho Patient Act is an unconstitutional abomination. It violates long-established constitutional rights and is the brainchild of Frank van der Sloot (sic) who uses Melaleuca as a front to shield his personal involvement and obsession for legislation that specifically tramples underfoot sacred First Amendment rights that brave Americans have bled for. The Idaho Freedom Foundation gave Frank’s legislation a failing score because it was unconstitutional. As a legislator, Attorney Bryan Zollinger told the entire legislature that Frank’s legislation was unconstitutional. Others said Frank’s legislation was unconstitutional. Now, not one, but two judges have found provisions of Frank’s legislation unconstitutional on its face, which means no set of facts exist in the universe in which those provisions would be constitutional. People should be concerned about influential billionaires who exalt their public perception and private agendas over safeguarding sacred constitutional rights and attack those who seek to uphold the Constitution. Predictably, rather than express concern that two separate judges have found provisions of his centerpiece legislation unconstitutional, Frank continues to attack me and Bryan Zollinger personally while we proudly protect the Constitution like others who in our Nation’s history have done so for over 200 years.

Dindinger issues statement about Frank VanderSloot and Idaho Patient Act

A full week after a request for comment, Dindinger, representing Lyon, issued the following statement. Like Smith, he also said EastIdahoNews.com could publish the statement in its entirety or not at all. It says:

Melaleuca’s self-serving press release of December 15, 2022 accusing me of “unethical behavior” in my representation of Mr. David Lyon is both scurrilous and factually inaccurate. I normally elect not to respond to such utterances. However, lest silence be deemed as some sort of admission, I will counter these false allegations with the following relevant facts:

Rule 1.2(a) of the Idaho Rules of Professional Conduct requires that, “a lawyer shall abide by a client’s decisions concerning the objectives of representation and, as required by Rule 1.4, shall consult with the client as to means by which they are pursued.” Accordingly, I have diligently and zealously represented Mr. Lyon in this action, in the outcome of which he has a genuine, palpable interest. In this case, actual medical services were rendered, an actual bill was generated, and Ridgeline has indicated that it fully intends to recover damages from Mr. Lyon if it prevails. While Ridgeline has contended that the Idaho Patient Act is unconstitutional, we have counterclaimed that Ridgeline failed to meet the requirements of the Idaho Patient Act. The stipulated statement of facts jointly filed in this case forms the very basis of our counterclaim, which Melaleuca would be aware of if it had only had a legally competent person review the same. Indeed, all of my filings and arguments in the case reflect a defense of the constitutionality of the Idaho Patient Act.

Melaleuca is a multi-level marketing company headed by the wealthiest man in Idaho, billionaire Frank VanderSloot, and describes itself in its press release as, “the driving force and advocate for the Idaho Patient Act.” It is worth noting here that Melaleuca has received warning letters from the Federal Trade Commission regarding potential unsubstantiated earnings claims to consumers (https://www.ftc.gov/system/files/warning-letters/covid-19-letter_to_melaleuca.pdf). Its baseless accusations of “unethical behavior” by others amount to nothing more than a screed from an enriched special interest group, not from an actual party to the litigation. Fortunately, to those of us in the legal profession, such extraneous commentary is simply irrelevant.

The facts and constitutional issue behind Medical Recovery Services v. Klein

The other case involving the Idaho Patient Act and issues of constitutionality is Medical Recovery Services v. Klein. This case is much shorter than the other, and its outcome is narrower in scope.

Medical Recovery Services, represented by Zollinger, is suing Christa Klein for $15,575 and seeking $6,211.99 in prejudgement interest and attorney’s fees of $7,189.70. Klein never showed up to court, and a default judgment was entered against her.

In this case, MRS admits it did not comply with the notice requirements of the current version of the Idaho Patient Act. Under the current version, Medical Recovery Services would not be entitled to any prejudgement interest, reimbursements or attorneys fees.

MRS asks the judge to rule on the constitutionality of the retroactivity clause of the Idaho Patient Act and whether it should apply in this case. If it is declared unconstitutional, then fees should be awarded.

Judge Michael Whyte’s nine-page decision covers a variety of arguments, including that the medical services Klein received occurred between 2017 and 2020 – before the Idaho Patient Act was a law.

MRS argues that because the services were enacted before the law, it was impossible for the medical provider to comply with the notice requirements of the Idaho Patient Act.

Ultimately, Whyte agreed.

“It is unlikely that any medical provider was sufficiently forward thinking in 2017, 2018 and 2019 to have included and planned for all the provisions necessary for collection under the (Idaho Patient Act) prior to its creation,” Whyte wrote.

He found that the retroactive application of the law would “unfairly penalize the appellant for failure to comply with a statute of which it had no notice.”

The judge found the retroactive clause unconstitutional as it applies to this case.

Whyte also found that that the request for $7,189.70 in attorneys fees was unreasonable. Instead, he awarded $2,000. MRS was awarded a total judgment of $24,015.73.

To read the entire ruling, click here.