The Arizona Court of Appeals has ruled that a nearly $110,000 wage dispute involving the company that owns Northwest Medical Center (NWMC) could result in a triple payout to a Tucson-based doctor.
Gary Wood MD is a board certified diagnostic radiology specialist who had a contract to work exclusively with NWMC during 2015 to 2018. His base compensation of $424,800 assumed a preset level of productivity and the contract contained an “annual compensation cap” of $587,000.
Court records show Wood’s contract allowed NWMC to recoup some of Wood’s wages if productivity fell below the level and Wood would be owed “a settlement payment” if he outperformed the productivity level, up to the cap.
However, for the 2015-2016 fiscal year Wood was paid more than $55,300 above the cap. He also received more than $124,400 above the cap the next contract year.
(The record did not establish whether the overpayments were inadvertent or intentional, but that question did not affect the analysis of the case, according to the court of appeals.)
Then in January 2018, NWMC and Wood agreed he was owed a $108,673 settlement payment for work in excess of his base compensation for part of the 2017-2018 fiscal year. It was then, NWMC claimed, that the earlier overpayments were “uncovered” or “realized.”
The hospital held back Wood’s $108,673 as repayment toward the $124,400. The problem was they didn’t tell Wood for three months why he wasn’t getting paid.
In June 2018, Wood initiated legal action for the return of his withheld wages and treble (triple) damages for wages not been paid on time. In response, NWMC filed a counterclaim alleging Wood committed breach of contract for accepting and then failing to return all of the overpayments minus the wages already withheld.
In August 2019, Judge Leslie Miller of the Pima County Superior Court ruled in favor of Wood’s wage claim and later issued a judgment in favor of Wood for the $108,673 withheld as well as more than $54,000 in attorney’s fees and court costs.
The judge cited Arizona’s voluntary payment doctrine, which holds that “a party cannot by direct action or by way of set-off or counterclaim recover money voluntarily paid with a full knowledge of all the facts, and without any fraud, duress, or extortion, although no obligation to make such payment existed.”
However, Miller the judge denied Wood’s request for triple damages, finding that NWMC had “a legitimate basis” to believe it was entitled to recoup the payments over the cap. Triple damages, the judge noted, are not possible in matters where there is a good-faith dispute.
The hospital filed a notice of appeal on Oct. 16, 2019 challenging the wage judgment. The next day Wood filed his own notice of appeal, arguing that Miller’s reasoning on his triple damages claim “contradicts well-established Arizona law regarding the voluntary payment doctrine.”
On Aug. 28, the Arizona Court of Appeals – Division Two denied NWMC’s appeal and affirmed the judgment in favor of Wood. It also overturned Miller’s finding of that a good-faith wage dispute prevented consideration of triple damages.
“We therefore vacate the court’s judgments regarding the treble damages claim and remand to allow the court to exercise its discretion in considering Dr. Wood’s request,” the appellate opinion reads.
The parties have until Sept. 14 to file a motion for reconsideration with the court of appeals. The deadline for one or both parties to petition for review to the Arizona Supreme Court is Sept. 28.
If the appellate decision stands, then the matter of the triple damages will be taken up again by the Pima County judge later this year.
