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Houghton v. Dep't of Health9/27/2005
In 1995, plaintiffs filed suit against the Department of Health, the Office of Recovery Services, the State of Utah, and individual defendants (collectively, the "State"), seeking the return of monies paid to the State from settlements or judgments entered on plaintiffs' behalf. After several years of protracted motion practice and two appeals to this court, plaintiffs now appeal the district court's interlocutory order limiting the scope of discovery. The district court based its order on its interpretation of Utah case law. Because we conclude that the district court erred in its interpretation, we reverse and remand.
FACTUAL AND PROCEDURAL BACKGROUND
As a result of injuries they sustained in separate accidents, plaintiffs Paul Houghton, Billie and Damien Henderson, and Wayne Rubens each received Medicaid assistance to pay their medical bills. After plaintiffs sought compensation for their injuries from potentially liable third parties, the State, pursuant to section 26-19-5 of the Utah Code (the "lien statute"), placed reimbursement liens on any settlement or judgment proceeds in order to recover the Medicaid assistance it had paid on plaintiffs' behalf.
Alleging that the lien statute violated federal law, plaintiffs filed a notice of claim with the State pursuant to the provisions of the Utah Governmental Immunity Act (the "Immunity Act"). The notice stated that plaintiffs "intend to bring a class action" to recover "the money [the State] took illegally by liening their property . . . plus any interest, costs and attorneys fees." Plaintiffs attached to their notice a draft complaint, which sought the return of all "monies . . . illegally and unlawfully taken" and "attorneys fees as allowed by law."
On October 27, 1995, plaintiffs filed suit against the State, alleging that the lien statute was illegal because it violated federal law prohibiting the filing of liens against the property of living Medicaid recipients. On December 18, 1995, plaintiffs moved to certify their suit as a class action, and on January 29, 1996, the district court granted the motion, certifying two classes of plaintiffs. Class I consisted of Medicaid recipients with third-party liability claims who received settlements or judgments from liable third parties from which the State's reimbursement liens were paid. Class II plaintiffs were identical to Class I plaintiffs with the exception that Class II plaintiffs had "retained counsel and actually filed actions or made claims through attorneys against the liable third parties."
After plaintiffs filed a notice of deposition and request for document production, the State moved to disqualify plaintiffs' attorneys, asserting that their representation of plaintiffs gave rise to a conflict of interest in violation of rule 1.9 of the Utah Rules of Professional Conduct because plaintiffs' attorneys had previously represented the State in personal injury actions brought by Medicaid recipients. In addition, the State sought a protective order to delay discovery pending the resolution of its motion to disqualify. The district court granted both motions. Plaintiffs petitioned this court for permission to file an interlocutory appeal, which we granted. In that appeal, we reversed the district court, holding that plaintiffs' counsel did not violate rule 1.9 of the Utah Rules of Professional Conduct. Houghton v. Dep't of Health, 962 P.2d 58, 63 (Utah 1998) ("Houghton I"). On remand, the district court reinstated plaintiffs' counsel.
In late 1998, this court issued two opinions affirming the validity of the lien statute. See S.S. v. State, 972 P.2d 439, 442 (Utah 1998); Wallace v. Estate of Jackson, 972 P.2d 446, 448
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