This season’s theme is Other People’s Problems “OPP”, and in this final episode, Michael and Brad share the story of a licensed vocational nurse (LVN) who lost her license for being non-compliant. Tune in as we break down the top 3 legal implications from this extreme story. We share key considerations for corporate structure, scope of practice, and marketing.
Listen to the full episode using the player below, or by visiting one of the links below. If you have any questions or would like to learn more, email us at info@byrdadatto.com.
Transcript
Intro: [00:00:00] Welcome to Legal 123s with ByrdAdatto. Legal issues simplified through real client stories and real world experiences, creating simplicity in 3, 2, 1.
Brad: Welcome back to another episode of the Legal 123s with ByrdAdatto. I’m your host, Brad Adatto with my co-host Michael Byrd.
Michael: Thanks Brad. As a business and healthcare law firm, we meet a lot of interesting people and learn their amazing stories. As you know, we’re keeping things fresh this season. We’re not here to talk about our own client problems. We’re here to talk about OPP, other people’s problems.
Brad: Now, for those listening for the first time this season, stop and go back to the beginning. This is the last episode of the season. No, I’m just kidding. Michael, tell them what are we doing with this season with OPP?
Michael: So we’re going to tell public stories in the news and then talk about some legal lessons that can be learned from these fascinating stories.
Brad: Yes. And Michael, do you have anything [00:01:00] fun to help close out the season before we discuss today’s OPP?
Michael: I think so. Were you a fan of Dippin’ Dots when you were a kid, Brad?
Brad: You know it’s not weird. Not really. Dippin’ Dots weren’t really in my vocabulary as a youth. I guess it never got down to the New Orleans area, and I only recently in the last 20 years plus have learned about it with my kids.
Michael: You know, it’s funny, they were in my vocabulary and I had kind of an image of them, but I would picture it with when we’d go to Six Flags or something like that. And so I associate it with fun events in my life.
Brad: That’s awesome.
Michael: Not necessarily have these cravings for Dippin’ Dots themselves.
Brad: Makes sense.
Michael: For those of you who don’t know, you would randomly find Dippin’ Dots in amusement parks and sometimes movie theaters and places like that. They created the ice cream through some sort of fancy cryogenics technology. And so they are basically like these little pellets of frozen ice cream.
Brad: Yeah. And everyone now I [00:02:00] think knows about Dippin’ Dots, but you don’t really actually see them all the time.
Michael: Yeah, I mean, because of the technology, I think they had to be stored in a special freezer. And so my understanding was that it was hard to get them in places because they had to have this special setup just so they wouldn’t melt. And so I imagine it was really hard for the business to scale based on that.
Brad: Gotcha. Well, tell us more about this business. Who was this guy who founded it?
Michael: So the technology was invented by a man named Kurt Jones. This is back again, in our childhood timeframe.
Brad: So the 1910s for you?
Michael: Well, I was more talking about you in the 1800s, Brad, but okay. Anyway, he seemed like the typical founder type person with a new invention. He apparently bet the farm that quoted, Dippin’ Dots would be the ice cream of the future.
Brad: Yeah, and I kind of, as we’ve been discussing, we’ve [00:03:00] definitely see them around, but I can hardly say that they became the ice cream of the future. It’s more of like a cool novelty thing that you get here and there.
Michael: Yeah. Novelty is a very good description, and unfortunately for Kurt Jones, you are exactly right with your description. People may have fond memories of Dippin’ Dots, but they hardly changed the world, Brad. And unfortunately, Dippin’ Dots went into bankruptcy many years ago.
Brad: Alright, so who bought them?
Michael: Well, not who you would think. Two oil men.
Brad: Well, that does sound like something oil men would have. I have a lot of money, dad, let’s go buy some Dippin’ Dots.
Michael: Well, you’re right, it’s a father and son in Oklahoma. So a man named Scott Fisher and Mark Fisher bought Dippin’ Dots out of bankruptcy in 2012 for 12.7 million.
Brad: Okay. Well, [00:04:00] did Kurt Jones do okay out of this bankruptcy?
Michael: More wha wha Brad.
Brad: Oh no.
Michael: Yeah. That was all going to the creditors. And so Kurt Jones basically was left with nothing.
Brad: Oh no.
Michael: And so you fast forward, what do these oil guys do trying to resurrect, you know, a novelty that’s clearly not the ice cream of the future?
Brad: Right.
Michael: Well, guess how much did Dippin’ Dots made in 2018 under the tutelage of the son, Scott Fisher as the CEO?
Brad: Okay, so in 2012, they bought it for 12 million-ish, so I don’t know, a hundred million dollars a few years later?
Michael: That’s not a bad, that’s not a bad guess. I think you’re knowing that I set you up and it’s going to be a big number because…
Brad: I thought that was a big number.
Michael: Yeah. Well you said a big number and so I think your guess because probably most would be thrilled to make a hundred million. No, Brad, it made [00:05:00] $330 million.
Brad: Yeah, Riley cut that. I did say $330 million. Yeah. Sorry. Ask the question again and $330 million would be my answer, Michael. Is that exact?
Michael: Oh, wow, Brad, I’m so impressed. Yeah, it’s crazy because it’s not like you see Dippin’ Dots around all the time. It is kind of the same as when we were kids. I mean, you do see them sometimes. They figured out how to get ’em in grocery stores, but it’s still not the ice cream of the future.
Brad: Okay. So without thinking of Breaking Bad here, so how did they do it?
Michael: Yeah, they didn’t. As far as we know, there was no money laundering.
Brad: Good.
Michael: Or meth lab. Yeah. So it turns out, Brad, that there are some very profitable uses of this cryogenics technology that our oil men discovered after they had it. So you go back to Kurt Jones has this technology, makes the ice cream of the future. [00:06:00] If you just kind of turned and looked at it a little bit differently, our oilmen discovered that the plant based meat companies, you know, like Beyond Meat and all that, that’s the craze right now. They use this technology all the time to produce simulated fats.
Brad: So we’re going from ice cream talk to cryogenetic technology talk?
Michael: Yes, Brad. Unfortunately, if Kurt Jones would’ve done that too, it could have turned out differently, but yeah, you pretty much just captured the first board meetings from the oilman where they’re like, okay, how do we take this ice cream and turn it into something. And they turned it from ice cream to cryogenics. And then they discovered that pharmaceutical companies and probiotic companies can also use this process to increase the shelf life of their product so that created another revenue stream. [00:07:00]
Brad: That’s pretty amazing and poor Kurt Jones. He’s this inventor of this product that he tried to figure out a way to make ice cream and the end result was he had to figure out a way to freeze it, but didn’t realize the process he got there, the application that he built actually had more value than the actual ice cream itself. And lucky for the fishermen, they bought Dippin’ Dots and took it out bankruptcy and realized they could do more with it.
Michael: Yeah, and to be fair, they increased revenues on the novelty side of the equation as well. They acquired a popcorn company called Doc Popcorn that paired really nicely with Dippin’ Dots so, you know, they could sell double the product to these amusement parks and apparently figured out a way to expand the reach of Dippin’ Dots. So they actually made that revenue stream more profitable as well.
Brad: Gotcha. Well, we’re pretty deep into this last episode. I’m [00:08:00] assuming the plight of Kurt Jones is not our OPP story today so great lessons learned, but where are we going today?
Michael: Yeah, it actually could have been a decent OPP if we wanted to go into bankruptcy law.
Brad: Nope.
Michael: For the discussion.
Brad: No, thank you.
Michael: You’re right, Brad. We are shifting to a different story today. We’re going to go healthcare.
Brad: Oh, that sounds interesting.
Michael: In particular, we’re going to talk about a story in California where someone exceeded her scope of practice. There are a ton of lessons to be learned from today’s unfortunate story.
Brad: Let’s go.
Michael: So today’s story is another where we’re going to go ahead and change the names because this is not a public figure. This is a nurse who is punished by the nursing board and the case is actually published on the website for the California Board of Vocational Nursing if anyone cares to kind of find the story behind the story that [00:09:00] we’ll talk about today.
Brad: Yeah, that’s fair enough, Michael. So today, do I get to make up a name and call you something else during the show?
Michael: Well, I think the audience already knows who I am, Brad, so that would miss the point other than just you getting to make fun of me somehow.
Brad: Alright. Yeah.
Michael: And I’m not really part of the story.
Brad: Okay.
Michael: I’m the storyteller. That’s kind of what we’re here to do. But seriously, the story today has some egregious actions involved. By all accounts in the published opinion, the nurse in today’s story is actually a good person. She was not originally from the United States and was naive to say the least about compliance, and so she’s more relatable than you might think when we start talking about the story. And it’s important because it’ll be very easy because of the degree of poor decisions that were made for us to be like, well, I’m not them, and so I’m okay. And so it is really easy to kind of slip into non-compliance, but because we [00:10:00] had kind of this naive, ignorant compliance person, we’re going to call this person Nurse Brick.
Brad: You’re going to have to explain why Nurse Brick.
Michael: Okay, well I’ll probably need to go a little deeper with some context. You’ve heard the phrase in law school, ignorance is no defense to the law.
Brad: Yeah, of course. You can’t just say, well, I didn’t know and that’s your defense. The end, walk away and you can break the law and you’re non-compliant.
Michael: Exactly. And so I decided to name today’s character after Brick Tamlin, the weatherman from Anchorman. The legend of Ron Burgundy. He said outrageous quotes, the entire movie including yelling, I love Lamp, I love Lamp.
Brad: Classic movie with a ton of great quotes. For our audience who has seen this movie and they know without anything else about this nurse, kind of like you were describing this character, Brick is, you know, he’s a good anchorman. He’s not the [00:11:00] sharpest tool in the shed, but he seems like he’s a good guy. I mean if you’ve seen the whole movie, he has some moments, so you might already start feeling bad for this nurse knowing that she might be a really nice person.
Michael: Yeah, yeah. I mean, Brick, played by Steve Carrol, had a dark side too.
Brad: Yes, he did.
Michael: But he also had a sweet and definitely ignorant heart.
Brad: I really want to do a whole increment of quotes right now, but I’m not going to do that.
Michael: We could definitely get derailed fast.
Brad: Yes.
Michael: Alright. Let’s start by talking about Nurse Brick’s credentials. Nurse Brick was a licensed vocational nurse and Nurse Brick also received her esthetician’s license.
Brad: Okay, we got some vocabulary words there. Obviously esthetician is typically a license that’s issued by the cosmetology board, but really I would like to dive deeper into when some people hear your vocational nurse, and let’s really kind of get into what does that mean when you hear licensed or even a licensed practitioner nurse, or [00:12:00] sometimes you might hear the term LVN or LPN, and a lot of people don’t understand that in the nursing world, that’s an entry-level nursing position. This is a scope or practice that’s not that similar to an RN. It’s actually lower than an RN. In fact, an RN can actually delegate to an LVN. In a lot of states, those LVNs and LPNs are more on the administrative side of the medical world and in some states like California, cause that’s where the story is from, the LVNs are really regulated by their own board and they’re not even regulated by the actual nursing board. So I’m sorry for the little sidebar, but I think some context, and I know you love it.
Michael: I love it.
Brad: Alright.
Michael: You know I’ll never interrupt you during context talk. So, Nurse Brick, initially established a salon license, which is required by the board of cosmetology to offer esthetician services. And the services she provided initially did include micro-needling and some radio frequency treatments.
Brad: Yeah, and according to what we read in the [00:13:00] complaint, she was actually just using the equipment she purchased at some trade show for estheticians.
Michael: Yes. And little did she know she was already starting to be led slightly down the, or down the wrong track, not slightly, but this kind of became almost a footnote because of what happened next. Nurse Break decided to expand her business and she wanted to open a medical spa, Brad. She somehow discover, so in her naivety about compliance, she did discover that she could not own a medical practice, but she took some shortcuts to set it up.
Brad: Shortcuts and compliance usually do not mix well, especially in states like California, which has the corporate practice of medicine and very aggressive boards, attorney general office, and they really, really enjoy enforcing state laws.
Michael: Yes, so we’re going to kind of break her story down into a series of three big [00:14:00] problems that led to an unfortunate conclusion. Yes.
Brad: Oh, unfortunate.
Michael: So problem number one deals with corporate structure. Nurse Brick got a family member to own the medical practice with the doctor. Now this family member was an actual nurse and so the setup was on the surface compliant 51/49, owned by this family member and the doctor. Nurse Brick, then listed herself as the president of the business. And through the corporate documents, stripped away all the rights of basically both of the owners, including the nurse, family member. Nurse Brick’s husband, who’s an accountant and did all the setup on legal Zoom listed himself as the CFO.
Brad: Yeah. Well, they’re not really helping improve themselves with these shortcuts so far.
Michael: Yeah. They had an agreement that Nurse Brick and her [00:15:00] husband would provide a hundred percent of the investment into the medical practice and that all the net income or net loss would be allocated to nurse Brick and her husband on the tax return.
Brad: Okay. So in other words, Nurse Brick and her husband filed taxes as if they were the actually owners through paperwork which actually had the doctors and the RN who were the owners.
Michael: Yes. Yeah. And that’s problem one. Yes.
Brad: Okay. Got it.
Michael: Problem number two, Brad, deals with scope of practice. So Nurse Brick decided that she wanted to start performing medical swab procedures. Nurse Brick even took a class to learn to inject Botox and fillers.
Brad: Yeah. And taking a class seems like a good thing. And I know that the story, she was even performing these procedures under supervision from a physician. Let’s just put a tag in that and we can get to it a little bit later.
Michael: Yes. Yeah. And the problem is that an LVN cannot be delegated medical services in [00:16:00] California. It does not matter how much training she received or whether supervision even existed. She just didn’t have the right license to do it.
Brad: Yeah. And we know from the story, she performed other services outside that same scope of her practice. Again, remember she’s an LVN and including micro-needling, laser hair, fat freezing, platelet-rich plasm treatments, IV vitamin drips and skin growth removals.
Michael: Yeah. So these are some serious mounting problems. And these problems directly affect patient care. So we will kind of see a little bit of this later. Problem number three, Brad, is marketing.
Brad: This is the last one though, right? At least for her?
Michael: It is.
Brad: Okay.
Michael: It is, yes, Brad. Nurse Brick held herself to the public to be something she is not. She allegedly held herself out to be a registered nurse.
Brad: Ooh. Yeah. This is important cause as an LVN as we noted earlier, she has a lesser scope of practice than an RN. [00:17:00] They actually, as we said earlier, they, they have different licensing boards.
Michael: Yeah. I guess she must have felt a little bad about the outright lying saying she was a nurse because she started to evolve her title.
Brad: Oh, nice.
Michael: And this is actually in the opinion where the investigator saw this and then all of a sudden the website shifted a little bit. So I’m going to give you a quiz, Brad. What’s the most popular fake title we see in the medical spa world?
Brad: Ooh, well, I’m going to go with Medical Esthetician.
Michael: Classic.
Brad: Okay.
Michael: That’s a classic, Brad. In fact, we did an episode during the red flag season called Red Flags Medical Estheticians.
Brad: We did.
Michael: And do you know why we did that?
Brad: Because it’s really popular.
Michael: And it’s a red flag.
Brad: It’s a red flag.
Michael: Yes. Nurse Brick decided to actually put a little special twist on her title. Because remember, she’s an esthetician and a nurse.
Brad: Yes. [00:18:00]
Michael: And so we had to spice it up, I guess. So she combined her LVN license and her esthetician license to call herself a medical nurse esthetician.
Brad: Oh.
Michael: But Brad, I think she wanted to throw the regulators off the trail because she’s spelled esthetician differently.
Brad: Oh.
Michael: She spelled it with an A. She was a medical nurse esthetician, A-E-S-T-E-D.
Brad: Oh, yeah. The combination audience members of taking these different words and putting together, that makes true compliance otherwise. And the A helps, I’m making this up by the way. Do not believe that.
Michael: Yes. Yeah. And I felt somewhat validated when I’m reading this opinion cause I could see them writing the opinion and just hammering home on this.
Brad: Yeah.
Michael: You know, it was a beacon to them of non-compliance. Like, the investigator found this on the website and used that against us.
Brad: [00:19:00] Never good people.
Michael: So, as we said earlier, because of her name Nurse Brick, she essentially took the honest mistake defense, and she actually admitted to most of the allegations.
Brad: Okay. So she took the I love lamp defense then?
Michael: Yes.
Brad: Okay.
Michael: Yes, Brad. It did. And it did not end well.
Brad: Oh, no.
Michael: I’ve alluded to that.
Brad: Yeah.
Michael: Nurse Brick’s license was revoked. She’s no longer an LVN.
Brad: I’m sorry.
Michael: And she received a fine of $33,000 on top of that.
Brad: Wow. That’s no good.
Michael: So very painful. Lot of lessons to be learned. Let’s go into commercial and on the other side let’s break down the legal implications of these three big problems.
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Brad: Welcome back to the Legal 123s with ByrdAdatto. I’m your host Brad Adatto with my co-host Michael Byrd. Now Michael, this season with our last episode, we’re still concentrating on OPP and really a big enforcement action here with someone who actually lost their license. And I know from our perspective, that’s the worst case. Well, I guess going to jail is the worst case, but generally in front of one of your boards, getting your license revoked probably is the worst thing that could happen.
Michael: Yeah, for sure. And kind of as a recap, let’s reset to we have a good person.
Brad: Yes.
Michael: Who is from another country. Moved to California. Got [00:21:00] education. Got two different licenses with the board of cosmetology. And got her LVN license, vocational nursing license and didn’t really deal with compliance along the way. And she had to be somewhat aware of it because we learned about her understanding the ownership rules, but essentially took the I don’t know this kind of ignorance defense, and she went and got training and started expanding her services and trying to grow her business, and it didn’t turn out well. The board focused on three big kind of problems with her choices she made along the way. The first was her corporate structure. The second was her scope of practice exceeding things that she shouldn’t be doing. And then finally the marketing element on how she marketed herself.
Brad: Yeah. [00:22:00]
Michael: So let’s circle back and talk specifically about the corporate structure. Nurse Brick involved her family to own the medical entity and then kind of made herself and her husband an officer of the entity. They even documented that because they were the ones taking on the risk that they would be allocated the profits and losses on their tax returns. So talk a little bit, Brad, about, you know, what are the ownership rules in California and why this was a problem.
Brad: Yeah. And, you know, understanding that, we’ve talked about this on a ton of episodes, that they’re in a state, that they have something called the Corporate Practice of Medicine, a state doctrine that basically limits who can actually own a medical facility, meaning they don’t want corporations to own it. And in this case, in California, they have a unique aspect that 51% of the entity can be owned by a physician, while 49% of it can be owned by other, their, term, [00:23:00] allied professionals, allied health professionals, excuse me. And these allied health professionals is a defined term in the state statute and it lists of a bunch of different licenses if you actually go through it. But unfortunately, on this co-ownership, LVNs and estheticians are not listed as under that 49%. And because of that, they were trying to find this friendly physician, or I guess friendly RN too that could kind of co-own with them. And, you know, I guess before we get into the medical nursing aesthetician aspect of it, Michael, let’s just take an even bigger step back and really talk about the allocations here of the profit and losses.
Michael: Yeah, I mean, and I’m just going to be clear, Brad, you said allied health professionals was a really long list. Was medical nurse esthetician on the list?
Brad: You know, I heard they’re going to add it.
Michael: Oh.
Brad: Yeah.
Michael: Okay.
Brad: It’s in the secondary committee. That’s [00:24:00] a little bit further out.
Michael: Okay. Okay. Well, let’s talk about some of the things they did to kind of, you know, work around the fact that they weren’t owners. They technically had proper ownership and they made themselves officers that would give them some control, right? But then they took that next step and the board hung their hat on this when they were going through it, they reached an agreement with the doctor and their family member who was the nurse owner that all profits and losses would be allocated to Nurse Brick and her husband Mr. Brick for the tax returns. Essentially what they’re telling the IRS when they do that is that they’re the owners of the medical entity and so you have so many issues with that. You have a state filing that says two people own it and then you have a filing with the IRS that basically is saying two other people own it. And [00:25:00] so that was a corporate practice of medicine violation.
Brad: Yeah. And you know, and audience members, you’ve heard us use this term before a lot, but it’s the foreman substance argument. Concept being that they may have everything structured correctly. Like on paper, this doctor owned it and this RN and that would look great. And maybe they had some type of arrangement where they were helping manage it with some type of MSA or whatever it was, but ultimately, if a hundred percent of the funds are being pulled out from the tax side, you’re really just saying, well, oh, well only in the certificate of formation do they actually own it, after that we’re the actual owners, and that flow of cash right back to their pocket is going to be a giant red flag for most states.
Michael: Right.
Brad: So let’s shift to that second problem, Michael. The scope of practice piece here again, as we established earlier, we have two licenses in play, the LVN license and the esthetician license.
Michael: Yeah. [00:26:00] And so there were a ton of services provided by Nurse Brick and so if just as a recap, she was doing injectables or this business was doing injectables, and she was doing ‘em. IV therapy, body sculpting, some of the common ones are cool sculpting, you hear that, freeze the fat, micro-needling. They use the term in the opinion they call it collagen therapy. Radio frequency facials and skin growth removal. And these are all outside the scope of practice for an LVN and an aesthetician, and it’s important. The board of cosmetology, typically, in their license tells estheticians that they are not allowed to practice medicine. And so, this was an investigation by the nursing board, actually the vocational nursing board. And so it was interesting to me that they actually brought someone as an expert [00:27:00] witness from the board of barbering and cosmetology to testify that yes, in addition to the fact that she couldn’t do these things as an LVN, she was not allowed to do these things as an esthetician.
Brad: Yeah. And now, you know, now that we are establishing that Nurse Brick was doing these things she couldn’t do, these services are all obviously considered outside of her scope of practice. And in California medical services really can only be delegated to someone who is an RN or higher so basically your nursing board with your RNs, NPs, or medical board PA and physicians. And unfortunately, there’s a ton of practices in California that do allow estheticians to do cool sculpting and micro-needling. And this case highlights these risks. And I’m sure our audience is yelling at us, shut up, you don’t know who you’re talking about. Everyone does it. Sure, the everyone does it defense. It doesn’t work. And the other part is this, they said, well, [00:28:00] Michael, Brad, earlier y’all said that she was trained on these medical services and she owned it, so it must have been okay. And this is extremely important to note. There’s a gulf of difference between attending a training or being certified by a company that you can do something versus actually having the state license allowing you to provide those in this case medical services. And so having the skills to provide these medical services is essential to be able to do it, but that really doesn’t trump the state’s licenses as to who can actually do it.
Michael: Yeah, well said. And so let’s kind of wrap up with the final issue. The final issue is the marketing problems that Nurse Brick had and remember at first she said she was an RN and I think we all know how that ends. You can’t say something flat out that you’re not, but there was also a problem with her self-title as medical nurse esthetician.
Brad: Yeah. And as you can imagine, [00:29:00] you know, lying about your license does not go over well with the board. And the board spent some time talking about the fact that she called herself a medical nurse esthetician. Now, even though this is a made up title, as we’ve said earlier, and we’ve seen other made up title, it’s clear that these boards also feel like by doing this, you’re committing a fraud or you’re misleading the public on what truly is your scope of practice. And so as you get creative with marketing terms, understand if it’s not actually a board issued name, you’re outside that scope. So Michael, I know we’re near the end of today’s episode. Bring it on in for the closing of the season. What are some of your final thoughts on this episode?
Michael: Well, Brad, I’m going to really stretch my creative creativity and I’m going to connect Nurse Brick and Kurt Jones.
Brad: Okay.
Michael: They had a similar problem.
Brad: Yes.
Michael: One ended in bankruptcy, the other loss of license, but they both kind of suffered from the head in the sand syndrome, and that cost him their [00:30:00] businesses. For Kurt Jones, you know, he was stuck on ice cream of the future and didn’t unlock from that to take a step back and see what other possibilities were out there. And for Nurse Brick she kind of ignored the compliance issues and she clearly had some awareness that they were out there, but decided that ignorance was bliss and it did not end well.
Brad: Well, Michael, that closes out the 2022 podcast season and it also ends this OPP season. Wow. But do not panic audience members, we will actually be back next week with a preview for next year’s opening episode and opening season, more importantly. And until next week, enjoy your Hanukkah still and have a very Merry Christmas.
Michael: Merry Christmas.
Outro: Thanks again for joining [00:31:00] us today, and remember, if you like this episode, please subscribe. Make sure to give us a five star rating and share with your friends. You can also sign up for the ByrdAdatto newsletter by going to our website at ByrdAdatto.com. ByrdAdatto is providing this podcast as a public service. This podcast is for educational purposes only. This podcast does not constitute legal advice, nor does it establish an attorney-client relationship. Reference to any specific product or entity does not constitute an endorsement or recommendation by ByrdAdatto. The views expressed by guests are their own and their appearance on the program does not imply an endorsement of them or any entity they represent. Please consult with an attorney on your legal issues.
