Wheeling Hosp., Inc. v. Health Plan of the Upper Ohio Valley, Inc.

• Decision Date: 27 June 2012
• Docket Number: No. 11–1694.,11–1694.
• Citation: 683 F.3d 577
• Parties: WHEELING HOSPITAL, INCORPORATED, a West Virginia not for profit corporation; Belmont Community Hospital, Incorporated, an Ohio not for profit corporation, Plaintiffs–Appellees, and Wheeling Pediatrics, LLC, an Ohio limited liability company; Women's Health Specialists of Wheeling Hospital, LLC, a West Virginia limited liability company, on behalf of themselves and all others similarly situated; Medical Park Anesthesiologists, Incorporated, a West Virginia corporation; Kenneth C. Nanners, M.D.; Kenneth S. Allen, M.D.; William H. Wright, M.D.; Judith T. Romano, M.D.; Wayt Health Care PLLC, a West Virginia professional limited liability company, on behalf of themselves and all others similarly situated, Plaintiffs, v. The HEALTH PLAN OF THE UPPER OHIO VALLEY, INCORPORATED, a federally qualified and state-certified not for profit health maintenance organization, Defendant–Appellant, and Ohio Valley Health Services and Education Corporation, a West Virginia not for profit corporation; Ohio Valley Medical Center, a West Virginia not for profit corporation; East Ohio Regional Hospital, an Ohio not for profit corporation, Defendants.
• Court: U.S. Court of Appeals — Fourth Circuit

683 F.3d 577

WHEELING HOSPITAL, INCORPORATED, a West Virginia not for profit corporation; Belmont Community Hospital, Incorporated, an Ohio not for profit corporation, Plaintiffs–Appellees,

and

Wheeling Pediatrics, LLC, an Ohio limited liability company; Women's Health Specialists of Wheeling Hospital, LLC, a West Virginia limited liability company, on behalf of themselves and all others similarly situated; Medical Park Anesthesiologists, Incorporated, a West Virginia corporation; Kenneth C. Nanners, M.D.; Kenneth S. Allen, M.D.; William H. Wright, M.D.; Judith T. Romano, M.D.; Wayt Health Care PLLC, a West Virginia professional limited liability company, on behalf of themselves and all others similarly situated, Plaintiffs,

v.The HEALTH PLAN OF THE UPPER OHIO VALLEY, INCORPORATED, a federally qualified and state-certified not for profit health maintenance organization, Defendant–Appellant,andOhio Valley Health Services and Education Corporation, a West Virginia not for profit corporation; Ohio Valley Medical Center, a West Virginia not for profit corporation; East Ohio Regional Hospital, an Ohio not for profit corporation, Defendants.

No. 11–1694.

United States Court of Appeals,Fourth Circuit.

Argued: May 15, 2012.

Decided: June 27, 2012.

ARGUED:Allen M. Lopus, Thorp, Reed & Armstrong, LLP, Pittsburgh, Pennsylvania, for Appellant.

Mark A. Colantonio, Frankovitch, Anetakis, Colantonio & Simon, Weirton, West Virginia, for Appellees. ON BRIEF:Carl N. Frankovitch, Michael G. Simon, Frankovitch, Anetakis, Colantonio & Simon, Weirton, West Virginia; Anthony Cillo, Cohen & Grigsby PC, Pittsburgh, Pennsylvania, for Appellees.

Before GREGORY, DUNCAN, and DIAZ, Circuit Judges.

Reversed by published opinion. Judge DUNCAN wrote the opinion, in which Judge GREGORY and Judge DIAZ joined.

OPINION

DUNCAN, Circuit Judge:

Appellees Wheeling Hospital and Belmont Hospital (collectively “the hospital plaintiffs”), along with other medical providers, commenced this putative class action in West Virginia state court on May 19, 2010, against the Ohio Valley Health Services and Education Corporation, Ohio Valley Medical Center and East Ohio Regional Hospital, (collectively, the “OV Health System Parties”), and appellant The Health Plan of the Upper Ohio Valley, Inc. (“The Health Plan”). The plaintiffs sued in order to collect amounts allegedly owed to them by employee benefit plans established by the OV Health System Parties, for which The Health Plan acted as administrator.

After pretrial activity described in detail below, The Health Plan moved to dismiss the claims brought against it by the hospital plaintiffs pursuant to an arbitration agreement between the parties. The district court denied this motion, holding that The Health Plan had defaulted on its right to arbitrate. This appeal ensued. After assuring ourselves of appellate jurisdiction, we conclude that the district court erred in its determination that The Health Plan defaulted on its right to arbitrate. We therefore reverse the district court's denial of The Health Plan's motion to dismiss.

I.

Because this appeal turns on the procedural history of the case in the district court, we begin there. Counts I and II of the Complaint set forth breach of contract claims against the OV Health System Parties. Count III sets forth a separate breach of contract claim against The Health Plan premised on its alleged unconditional obligation to pay plaintiffs for the health care services provided to persons covered by the relevant employee benefit plans.

On June 18, 2010, the defendants removed the case to federal court. On June 21, 2010, the district court issued an order and notice regarding discovery and scheduling pursuant to Rules 16(b) and 26(f) of the Federal Rules of Civil Procedure. On June 23, 2010, The Health Plan filed an answer to the Complaint.

On June 25, 2010, the OV Health System Parties, but not The Health Plan, filed a motion to dismiss the claims asserted against them, or in the alternative for summary judgment. They advanced three arguments. First, they argued that the claims should be dismissed pursuant to Rule 12(b)(7) of the Federal Rules of Civil Procedure because the OVHS & E Health Benefit Plan, a purported indispensable party, had not been joined in the action. Second, the OV Health System Parties argued that they did not owe a payment obligation to plaintiffs under the contracts at issue and, as a result, the claims should be dismissed pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Finally, the OV Health System Parties argued that plaintiffs' claims should be dismissed for a purported failure to exhaust administrative remedies set forth in the OVHS & E Health Benefit Plan. Plaintiffs opposed the motion to dismiss.

While the motion to dismiss was pending, plaintiffs filed a motion for remand. ¹ On July 12, 2010, The Health Plan filed an amended answer that asserted the affirmative defense of arbitration.

That same day, The Health Plan filed a pleading titled “Response to ... Motion to Dismiss, or in the Alternative, Motion to Join in Result.” J.A. 141–42. The Health Plan argued that “[t]o the extent this Court is inclined to grant the [OV Health System Parties' motion to dismiss],” The Health Plan “will be entitled to a dismissal of all claims against it as well.” J.A. 141. If the district court concluded that the OVHS & E Health Benefit Plan was an indispensable party, The Health Plan contended, “the Court will have necessarily determined that the Court cannot accord complete relief among the existing parties to the action. As a consequence, dismissal would be appropriate and in fact required as to all defendants, including The Health Plan.” Id. “Similarly,” the motion continued,

if the Court is inclined to grant the [OV Health System Parties' motion] on the basis that Plaintiffs failed to exhaust [ ] administrative remedies ... the Court will have determined that plaintiffs' claim for payments cannot proceed at this time. This determination would likewise extend to the Plaintiffs' claims against the Health Plan since their claims are for these same payments. As a consequence, The Health Plan should likewise be dismissed pending Plaintiffs' exhaustion of the aforementioned administrative remedies.

Id. at 141–42. Notably, The Health Plan did not seek a dismissal on the merits under Rule 12(b)(6).

On July 26, 2010, plaintiffs filed a motion to strike The Health Plan's response to the motion to dismiss, and an opposition to its alternative motion to join in result. They argued that The Health Plan's pleading was a “belated and unsupported motion to dismiss and a premature and unsupported motion for summary judgment.” J.A. 177. Plaintiffs further contended that The Health Plan's motion should be denied on the merits because, even if the district court were to grant the OV Health System Parties' motion to dismiss, that grant would not preclude or limit plaintiffs' breach of contract claim against The Health Plan.

On July 30, 2010, the parties filed their Report of Planning Conference, in which they were required to consider, inter alia, alternative dispute resolution processes. The Report did not mention The Health Plan's intent to compel arbitration of any of the claims asserted against it. The Report contained proposed scheduling deadlines, including a proposed November 5, 2011 trial date. On August 2, 2010, the district court entered a scheduling order setting dates for, among other things, the close of discovery (August 1, 2011), a pretrial conference (October 17, 2011) and trial (November 1, 2011).

Also on August 2, 2010, The Health Plan filed a response to plaintiffs' motion to strike. Therein, it disputed the plaintiffs' characterization of its motion, and argued that its motion constituted a “timely response to the Ohio Valley Health System Defendants' Motion.” J.A. 194.

On September 8, 2010, plaintiffs noticed the deposition of two Health Plan witnesses. On September 14, 2010, plaintiffs served discovery on The Health Plan in the form of interrogatories and requests for production. They also noticed a 30(b)(6) deposition of The Health Plan.

On December 2, 2010, the district court entered a memorandum opinion and order on outstanding motions. The district court denied the motion for remand. It granted the OV Health System Parties' motion to dismiss under Rule 12(b)(6): “Because the plaintiffs cannot state a breach of contract action against the OV Health System Parties either directly or as third-party beneficiaries, this Court must dismiss Count I and II of the plaintiffs' complaint for failure to state a claim.” J.A. 429. The district court denied the OV Health System Parties' motion to dismiss under Rule 12(b)(7), however, concluding that complete relief could be provided without joining the employee benefit plans because “[t]he plaintiffs contracted for payment in the [Hospital Service Agreements] with the Health Plan. It is The Health Plan's responsibility under the [contract] to pay the plaintiffs for any health care services provided to participants in the employee benefit plans.” J.A. 430. Turning to The Health Plan's response to the OV Health System Parties' motion, the district court first denied the plaintiffs' motion to strike. It then denied The Health Plan's alternative motion to join in result for the same reason it had denied the OV Health System Parties' 12(b)(7) motion, holding that under the facts alleged, The Health Plan was contractually obliged to make payments to the plaintiffs. Thus, after the district court's ruling, The Health Plan was the only remaining defendant in the suit.

On January 10, 2011, plaintiffs filed a motion for leave to amend their complaint to add additional plaintiffs, which the district court granted. On January 27, 2011, The Health Plan filed a motion to dismiss the amended complaint with prejudice. The Health Plan's memorandum in support of this motion divides the named p...