| Encompass Health Corporation, formerly known as HealthSouth Corporation ("HealthSouth"), petitioned the Alabama Supreme Court for a writ of mandamus to direct the the trial court to vacate an order entered June 17, 2020, which amended a February 26, 2016 dismissing with prejudice several defendants in the underlying action, to dismiss those defendants without prejudice. The underlying action was initiated in March 2003 by Steven Nichols, a former employee of HealthSouth and a holder of HealthSouth stock; Nichols initially sued HealthSouth, Richard Scrushy, Weston Smith, William Owens, and the accounting firm Ernst & Young, alleging fraud and negligence. The action was delayed for eleven years "for a variety of reasons," during which Nichols filed several amended complaints. By his eighth amended complaint, only HealthSouth was named as a defendant. At the same time, Nichols filed a "motion to dismiss [the] individual defendants without prejudice." In that motion, Nichols "specifically reserve[d] all claims against HealthSouth ... based upon respondeat superior and vicarious liability theories." The trial court entered an order providing that the eighth amended complaint controlled, that HealthSouth was the only remaining defendant in the action, and that there were now no claims asserted against any of the other defendants named in the previously filed complaints. HealthSouth then moved to dismiss the eighth amended complaint, arguing, among other things, that "the claims asserted in that complaint were derivative in nature rather than direct and were therefore due to be dismissed" based on Nichols's failure to comply with the demand-pleading requirements of Rule 23.1, Ala. R. Civ. On this case's first trip to the Alabama Supreme Court, the Court held the claims in the eighth complaint related back to the original, and thus, were not barred by the statute of limitations. After remand and further discovery, HealthSouth again moved to dismiss, arguing that Nichols' claims were based on representations made by a former agent, and that agent was dismissed with prejudice earlier in these proceedings. In response, Nichols asked the trial court to amend its order to reflect he had specifically reserved his right to proceed against HealthSouth. HealthSouth's motion was ultimately denied, and it petitioned the Supreme Court for mandamus relief. The Supreme Court determined the trial court violated the Supreme Court's mandate when it amended a February 2016 order that dismissed the individual defendants with prejudice. Therefore, the Court concluded HealthSouth demonstrated a clear legal right to mandamus relief. |
