Jackie Abbott v. Banner Health Network
372 P.3d 933, 2016 Ariz. LEXIS 149, 239 Ariz. 409 (2016)
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Rule of Law:
An accord and satisfaction agreement is valid and enforceable if it resolves a bona fide, good-faith dispute over a claim, even if the underlying claim is later determined to be invalid or unenforceable.
Facts:
- Patients received medical treatment from Hospitals after being injured by third parties.
- The Patients' insurer, the Arizona Health Care Cost Containment System (AHCCCS), paid the Hospitals for the services at negotiated, reduced rates.
- Citing Arizona statutes, the Hospitals then recorded liens against the Patients for the difference between the customary charges for treatment and the amount paid by AHCCCS.
- The Patients subsequently obtained personal injury settlements from the third parties who had caused their injuries.
- In order to receive their settlement proceeds, the Patients entered into agreements with the Hospitals, paying negotiated amounts to have the liens released.
Procedural Posture:
- The Patients sued the Hospitals in an Arizona trial court, seeking to set aside the settlement agreements and recover the amounts paid.
- The Hospitals filed a motion to dismiss for failure to state a claim, arguing the disputes were resolved by a valid accord and satisfaction.
- The trial court granted the Hospitals' motion to dismiss.
- The Patients, as appellants, appealed to the Arizona Court of Appeals.
- The Court of Appeals reversed the trial court's decision, holding that the settlement agreements were void because the underlying liens were preempted by federal law.
- The Hospitals, as petitioners, were granted review by the Supreme Court of Arizona.
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Issue:
Is an accord and satisfaction agreement, entered into to release a hospital's statutory lien, valid and enforceable if it resolves a bona fide dispute over the lien's enforceability, even if the underlying state lien statutes are potentially preempted by federal law?
Opinions:
Majority - Justice Brutinel
Yes, the accord and satisfaction agreement is valid and enforceable. The settlement of a bona fide controversy provides sufficient consideration and proper subject matter for a binding agreement, regardless of the underlying claim's ultimate validity. At the time the parties entered into the agreements, Arizona statutes explicitly authorized the liens, and no binding Arizona appellate court had found them to be preempted by federal law. Although federal courts in other jurisdictions had ruled against similar 'balance billing' practices, the issue was unsettled in Arizona. This uncertainty created a bona fide dispute. The court reasoned, citing Brecht v. Hammons, that a settlement is valid not because the claim was valid, but because it was the settlement of a genuine controversy. Therefore, the agreements to release the liens were supported by consideration (the resolution of the dispute) and had a proper subject matter (a claim authorized by presumptively valid state law), making them enforceable.
Analysis:
This decision reinforces the strong public policy favoring the finality of settlement agreements. It establishes that a contract to settle a legal dispute (an accord and satisfaction) will be upheld as long as a good-faith controversy existed at the time of the agreement. The ruling insulates settlements from being unwound later, even if a subsequent court decision clarifies the law in favor of one of the parties. This provides certainty in dispute resolution but means that parties who settle potentially invalid claims cannot later rely on the claim's invalidity to void the settlement.
