Judge reverses course and rules Idaho Patient Act constitutional; Melaleuca calls origin of lawsuit ‘egregious’

IDAHO FALLS — The Idaho Patient Act has been ruled to be constitutional under state and federal law after a judge reversed his earlier decision.

Magistrate Judge Jason Walker issued a 37-page brief Friday overturning a previous ruling he issued in October where he had declared certain provisions of the Idaho Patient Act unconstitutional.

The ruling is the latest development in the Ridgeline Medical v. David Lyon case, which was being used as a platform to challenge the constitutional validity of the Idaho Patient Act.

This law governs when and how medical providers can collect money from patients. Supporters say it protects Idahoans from predatory debt collection practices. The act was passed overwhelmingly by the Idaho Legislature in March 2020 but has recently been challenged in court by medical debt collectors.

Meanwhile, Melaleuca and its Executive Chairman Frank VanderSloot continue to criticize the Ridgeline case as a conspiracy cooked up to challenge the legislation. Melaleuca and VanderSloot were heavily involved in the creation and advocacy of the Idaho Patient Act.

In December, Melaleuca issued a statement claiming the attorneys on both sides, Bryan Smith and Bryan Zollinger of Smith Driscoll & Associates in Idaho Falls, and Edward Dindinger with Dindinger & Kohler in Boise, colluded to bring a “sham case” before the magistrate court. Smith and Zollinger represented the plaintiff in the case — Ridgeline Medical, a medical clinic in Idaho Falls. Dindinger represented the patient, David Lyon.

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

On Tuesday, Melaleuca doubled down on its criticism of the case in a public statement.

“As we have stated before, we continue to believe that the above-referenced lawsuit was collusive, meaning the attorneys on both sides of the lawsuit appear to have designed the case specifically with the intent to challenge the constitutionality of the Idaho Patient Act. It is unbelievable that the attorneys in the case, for both the plaintiff and the defendant, fought to keep the Idaho Attorney General’s Office out of the case. We were particularly baffled as to why defense counsel would try to prevent the Attorney General’s Office from making arguments that supported the defendant. We can see only one explanation for doing that. Apparently, the defense wanted to lose the case! There appears to be no other reasonable explanation. Fortunately for the citizens of Idaho, this apparent collusion was unsuccessful.”

Melaleuca representatives say they have filed a complaint with the Idaho State Bar regarding the alleged collusion.

Smith did not directly respond to the allegation but in December released a statement calling the Idaho Patient Act a “constitutional abomination” and attacked VanderSloot for his role in its creation. Smith is also an owner of Medical Recovery Services, a local medical debt recovery agency, which has had conflict with VanderSloot in the past, and partially led to the creation of the Idaho Patient Act.

Dindinger previously called Melaleuca’s allegations “scurrilous and factually inaccurate.” In a statement Tuesday, he referred to “disingenuous and uninformed third parties (trying) to politicize the matter.”

The judge’s latest decision substitutes his previous ruling, and according to court documents, the October opinion was “withdrawn and vacated in its entirety.”

The case and issues of constitutionality

The new ruling revolves around an unsettled medical debt between Ridgeline Medical and Lyon. In March 2021, Lyon received unspecified medical treatment from the clinic and was assessed a charge of $777, according to court documents.

A central part of the case is the clinic says it sent a final medical statement to Lyon on April 2, 2021, as required by the Idaho Patient Act. But attorneys for both sides agree he never received that statement. A little over two months after treatment, Ridgeline hired Smith Driscoll & Associates to collect the debt owed by Lyon. They sent demand letters to the address provided by Lyon, threatening a lawsuit if the debt went 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.

The Idaho Patient Act forbids a person or entity 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.

Lyon hired Boise law firm Dindinger & Kohler to defend him. Using the Idaho Patient Act, his attorney 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.

Ridgeline initially argued that 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.

For a more detailed accounting of the events of this case, click here.

Both sides filed motions for summary judgement, or a ruling made without a trial.

In October 2022, Walker issued a 42-page response and decision in the case where he tackled the issue of constitutionality in the case. Walker upheld most of the Idaho Patient Act as constitutional, but he did find some merit to Zollinger’s arguments in relation to the First and Eighth Amendments. The judge believed in certain scenarios, such as the one presented in this case, the Idaho Patient Act barred health care agencies from their right to petition the government and violates medical providers rights to freedom of speech. He also agreed that the act violates the Eighth Amendment’s prohibition on excessive fines.

That might have been the end of the case — except Melaleuca brought it to the attention of the Idaho attorney general.

Attorney general weighs in

“We contacted (then-Idaho attorney general) Lawrence Wasden and told him what our suspicions were … that this was a collusive act between the plaintiff and defendant,” VanderSloot told EastIdahoNews.com. “We alerted the Attorney General’s Office, and they assured us that they can’t declare something unconstitutional without their involvement.”

Directly afterward, Wasden filed a motion to intervene in the case. He said Ridgeline Medical failed to serve the Attorney General’s Office with written notice of its intent to challenge the constitution. Wasden told the court he wanted to defend the act’s constitutionality.

Attorneys for both Ridgeline Medical and Lyon opposed the inclusion of the attorney general into the case. EastIdahoNews.com asked Dindinger, the defense attorney, why he would oppose a motion, which would have supported his arguments in the case.

“I think we can all appreciate that the office of the attorney general has a natural, understandable and inherent interest in having the power to intervene in the broadest spectrum of cases as possible. That makes sense,” Dindinger said in a February court hearing. “But there is value in our system, in allowing private parties litigate their own disputes without the outside interference of state government.”

RELATED | Judge rules Idaho Attorney General can intervene in medical debt lawsuit

The new ruling

Despite the opposition, the judge allowed the intervention, and it appears to have played a significant role in Walker’s change of opinion in the case.

Walker’s new ruling references the state’s arguments throughout his discussion of the case law surrounding the issues of constitutionality of this case.

The new ruling reverses his previous interpretation of the law in reference to the First Amendment and Eighth Amendment. Walker found that “Ridgeline has failed to meet its burden that the (Idaho Patient Act) is unconstitutional. The (Idaho Patient Act) does not violate any of Ridgeline’s rights.”

Walker issued a summary judgement on behalf of Lyon and dismissed Ridgeline’s claim for the medical debt.

“There is no dispute that $777 is the amount billed for those services. However, because Lyon has not received the final statement, under this court’s interpretation of the (Idaho Patient Act), the debt it not yet due and owning. … Ridgeline willing and knowingly violated the (Idaho Patient Act) by authorizing (Smith Driscoll & Associates) to collect a medical debt before the requirements for commencing an extraordinary collection action had been met.”

He also found that under the Idaho Patient Act, Ridgeline is liable to Lyon for damages due to its collection efforts. A trial will be scheduled on the issue of damages.

After a request from EastIdahoNews.com, Dindinger issued this statement about Lyon’s victory in the case:

“Mr. Lyon is pleased that that the magistrate court recognized the constitutionality of the Idaho Patient Act and his rights pursuant to the same. He is thankful to have had the opportunity to freely and fairly litigate this dispute in spite of attempts by disingenuous and uninformed third parties to politicize the matter. The right of private parties to present their arguments to a court and have the merits of those arguments decided free of outside interference is a fundamental liberty of all Americans. Again, Mr. Lyon is pleased that the magistrate court agreed with the merits of the arguments presented within his motion for summary judgment and subsequent briefing, and granted summary judgment in his favor on all counts. We look forward to proceeding to the damages and attorney fee portion of the case.”

Smith says he will appeal.

“The magistrate court has now issued two opinions in one case. In one opinion, the magistrate court found several portions of the Idaho Patient Act unconstitutional,” Smith said in an emailed statement. “In another opinion, the magistrate court disagreed with itself and found no portions of the Idaho Patient Act unconstitutional. In any event, this matter is working its way through the court system, where we are confident the Idaho Supreme Court ultimately will make the determination that the Idaho Patient Act is unconstitutional.”

Melaleuca says case is suspicious

Melaleuca also says this isn’t over.

Although the company wasn’t a part of Ridgeline Medical v. Lyon lawsuit, it has issued public statements on the matter and recently filed a complaint with the Idaho State Bar about the attorneys involved.

“The whole thing was designed to create a situation where the act could be declared unconstitutional without a good defense. That’s my opinion,” VanderSloot said. “We hope the bar takes this complaint seriously … because we think what’s happening is egregious.”

Melaleuca 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.”

Melaleuca and VanderSloot say Smith, Ridgeline Medical, Lyon and Dindinger worked together in a conspiracy to challenge the constitutionality of the medical billing law.

One of the key points of the release is the relationship between Lyon, Smith and Zollinger. The December 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 on the other side. 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?” Melaleuca release asks.

Lyon did not respond to EastIdahoNews.com’s requests for comment about the case or his relationship with Smith and Zollinger.

Melaleuca claims Lyon’s attorney agreed to certain facts that appear to negatively impact his case. They also state Dindinger’s opposition to the attorney general’s inclusion is contrary to good legal practices.

“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 December release states.

The Wellness Company suggests Ridgeline’s billing practices in this case were atypical of what is normally done in medical debt collection cases. Specifically, Melaleuca took issue with the fact the clinic sued the patient directly, as opposed to handing it off to a collection agency and letting it sue the client for the debt. The timeline of the collection action is also not normal.

EastIdahoNews.com reached out to Ridgeline Medical, but Ridgeline spokesman Craig Sorensen said he could not comment on the case due to HIPPA privacy laws. He referred all questions to Smith.

EastIdahoNews.com also contacted Amerimax RCM, which bills patients on behalf of Ridgeline Medical. In December, the company said it could not comment specifically on collection practices related to this case due to privacy laws but said its policy is to not sue patients directly.

When asked for comment at different times about the specific allegations in Melaleuca’s releases, Smith either didn’t respond or said his office did not comment on ongoing litigation.