NextCare Ex-CEO Malpractice Case Against Baker Donelson Revived

John Shufeldt’s allegations that attorneys at Baker Donelson bungled his stock-drop case against the company he ran, health clinic giant NextCare Holdings Inc., the Sixth Circuit ruled Friday.

At issue is judicial estoppel, a doctrine aimed at maintaining judicial integrity. It avoids “convincing two different courts of contradictory positions, which would mean that one of those two courts was deceived,” the appeals court said.

Shufeldt argued in his suit against NextCare that the case was timely, then argued it wasn’t in his suit against Baker, Donelson, Bearman, Caldwell & Berkowitz PC, Judge Eric L. Clay said in an unpublished opinion for the U.S. Court of Appeals for the Sixth Circuit.

But the Arizona trial court hearing the NextCare suit didn’t actually accept Shufeldt’s argument when it denied a motion to dismiss on timeliness grounds, leaving that question to be resolved later, Clay said. NextCare settled with Shufeldt for $2 million soon after the ruling, and the court never definitively said the suit was timely.

Thus, Shufeldt may proceed with his legal malpractice claims against Baker Donelson in federal court in Tennessee, alleging that his suit against NextCare was untimely because the firm had failed to tell him about the applicable statute of limitations, the Sixth Circuit said.

Shufeldt alleged NextCare’s controlling stockholder and others took actions to make his stock in the company worthless after he resigned his positions as CEO and chaiman while the company was under investigation for unnecessary medical testing at its urgent care clinics.

He allegedly hired Baker Donelson to investigate the situation and retrieve corporate documents. But the firm dropped the ball by failing to send a letter it drafted in response to NextCare’s stonewalling, he alleged. And it didn’t begin researching the statute of limitations early enough, he said.

Judge Eric E. Murphy joined the opinion. Judge Chad A. Readler concurred in part and in the judgment. “Whether John Shufeldt took a position in the Arizona litigation inconsistent with his approach here is not entirely clear, in my mind,” he said. But he agreed with the majority “that the Arizona court did not ‘accept’ any purported inconsistent statement by Shufeldt,” and said the executive’s participation in the Arizona case didn’t give him an unfair advantage in suing Baker Donelson.

August C. Winter, who practices in Brentwood, Tenn., represented Shufeldt. Sims Funk PLC represented Baker Donelson.

The case is Shufeldt v. Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C., 6th Cir., No. 20-5877, unpublished 4/2/21.