Metropolitan Life Ins. Co. v. Ditmore, s. 83-1655

• Decision Date: 24 February 1984
• Docket Number: Nos. 83-1655,83-1673,s. 83-1655
• Citation: 729 F.2d 1
• Parties: METROPOLITAN LIFE INSURANCE COMPANY, Plaintiff, Appellant, v. Dan A. DITMORE, M.D., and Sea Island, P.C., Defendants, Appellees. METROPOLITAN LIFE INSURANCE COMPANY, Plaintiff, Appellee, v. Dan A. DITMORE, M.D., et al., Defendants, Appellants.
• Court: U.S. Court of Appeals — First Circuit

Page 1

729 F.2d 1

METROPOLITAN LIFE INSURANCE COMPANY, Plaintiff, Appellant, v. Dan A. DITMORE, M.D., and Sea Island, P.C., Defendants, Appellees.

METROPOLITAN LIFE INSURANCE COMPANY, Plaintiff, Appellee, v. Dan A. DITMORE, M.D., et al., Defendants, Appellants.

Nos. 83-1655, 83-1673.

United States Court of Appeals, First Circuit.

Argued Jan. 4, 1984.

Decided Feb. 24, 1984.

Will J. Bangs, Boston, Mass., with whom Mitchell H. Kaplan, and Choate, Hall & Stewart, Boston, Mass., were on brief, for Metropolitan Life Ins. Co.

Kenneth A. Behar, Boston, Mass., with whom Edward D. Kalman, and O'Leary, Behar & Kalman, Boston, Mass., were on brief, for Dan A. Ditmore, M.D., et al.

Before COFFIN, BOWNES and BREYER, Circuit Judges.

BOWNES, Circuit Judge.

This diversity action involves overpayments of health insurance benefits alleged to have been caused by false and misleading statements in claim forms submitted by the defendants. Plaintiff, Metropolitan Life Insurance Company (Metropolitan), is a New York corporation with its principal place of business in New York; defendant Dr. Dan Ditmore is a Massachusetts citizen, and codefendant Sea Island is Dr. Ditmore's wholly-owned Massachusetts professional corporation with its principal place of business in Massachusetts. Metropolitan brought suit in the United States District Court for the District of Massachusetts, seeking relief on four counts: (1) damages for overpayments resulting from fraudulent claims made from January 1980 through November 1982; (2) declaratory relief determining Metropolitan's liability on claims submitted after November 1982, but not yet paid; (3) restitution of money paid by mistake since January 1980; and (4) treble damages and attorney's fees for unfair or deceptive acts or practices under Mass.Gen.Laws Ann. ch. 93A, Sec. 2. The district court granted summary judgment for defendants on Counts I and IV, and dismissed Counts II and III for failure to join necessary parties. Plaintiffs appeal, and defendants cross-appeal.

The facts are largely undisputed. Under a group health insurance policy (the Plan) issued to the General Electric Company by Metropolitan, Metropolitan has agreed to pay benefits to eligible General Electric employees and their dependents for medical care, including treatment and consultation for nervous or mental conditions. The benefits amount to 50% on the first $1000 (and 100% thereafter) of reasonable, necessary, and customary expenses, and are subject to a $50 deductible per claimant per year. Excluded from coverage are charges for services performed by a "psychologist" not licensed in Massachusetts.

Since at least January 1980 General Electric employees and their dependents covered by the Plan have sought treatment from Dr. Ditmore and Sea Island. Psychotherapeutic sessions, on a group as well as an individual basis, have been conducted by Dr. Ditmore and his staff. The staff consists of one psychologist licensed in Massachusetts, one psychologist licensed in other states only, five unlicensed psychologists, and one registered nurse. The charge for a psychotherapeutic session is $100, regardless of how long the session actually lasts and whether it involves group or individual therapy; patients are also notified that they will be charged the full amount for appointments which they fail to keep. The patients supplied Dr. Ditmore with claim forms which he filled out and submitted to Metropolitan. The claim forms all require in substantially identical terms an "attending physician's statement" setting forth "dates of treatment," "description of services and diagnosis," "charge," and "physician's name." A separate instruction sheet, entitled "How to Complete This Claim Form," includes a "sample attending physician's bill" and reminds the person filling out the form to provide a "complete description of the service rendered," "date and charge for the service," and "diagnosis." At the bottom of the claim form appears the following statement, signed by the patient: "I hereby authorize payment directly to [Dr. Ditmore] of any benefits otherwise payable to me as determined by [Metropolitan] on account of expenses for indicated services.... I understand that I am financially responsible to [Dr. Ditmore] for charges not covered by this authorization."

Based on the claim forms prepared and submitted by Dr. Ditmore, Metropolitan routinely paid defendants the full amount of their charges, which totalled over $1,200,000 from January 1980 through November 1982. Following an audit of these claims, Metropolitan concluded that it had been making substantial overpayments, and began in November 1982 to withhold further payments.

We turn first to Metropolitan's allegations of deceit and unfair or deceptive acts or practices in Counts I and IV respectively. To make out a cause of action for deceit under Massachusetts law, a plaintiff must show

that the defendant made a false representation of a material fact with knowledge of its falsity for the purpose of inducing the plaintiff to act thereon, and that the plaintiff relied upon the representation as true and acted upon it to his damage.

Barrett Associates, Inc. v. Aronson, 346 Mass. 150, 190 N.E.2d 867, 868 (1963) (citations omitted). Metropolitan's complaint lists three statements made by Dr. Ditmore on the claim forms which are alleged to amount to misrepresentations of material facts. First, Dr. Ditmore consistently listed himself as the "attending physician," even when the therapy in question was actually conducted by one of his staff who might or might not have been a licensed psychologist. Second, Dr. Ditmore described the services rendered merely as "psychotherapeutic sessions," without indicating whether they consisted of individual or group therapy. Finally, Dr. Ditmore listed a uniform charge of $100 per session, without respect to the kind or duration of the sessions. The complaint also alleged the other elements of deceit, viz., fraudulent intent, reliance, and damages.

The defendants moved for summary judgment. In his supporting affidavit, Dr. Ditmore admitted the allegations in Metropolitan's complaint concerning his treatment and billing practices, as well as his method of filling out the claim forms; he denied, however, that any of his statements on the claim forms constituted a misrepresentation, and advanced his own innocent construction of each of the statements in question. He did not specifically deny that the statements were made with the intent to mislead Metropolitan, nor did he controvert Metropolitan's allegations of reliance and damage. The district court granted summary judgment "on the strength of Dr. Ditmore's affidavit."

Summary judgment is appropriate only when the pleadings and other submissions show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(c). In reviewing a grant of summary judgment, we must view the record in the light most favorable to the party opposing the motion, and indulge all inferences favorable to that party. Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir.1975), cert. denied, 425 U.S. 904, 96 S.Ct. 1495, 47 L.Ed.2d 754 (1976).

Applying this standard, we think that Dr. Ditmore failed to meet his burden with respect to two questions of material fact. First, he did not show that no misrepresentations were made. The affidavit, it is true, sets forth various facts in support of defendants' contention that Dr. Ditmore's statements on the claim forms were susceptible of an interpretation consistent with the objective facts they represented. For example, Dr. Ditmore relies on a Massachusetts statute permitting delegation of medical services for the proposition that he remained the "attending physician" even when he did not personally conduct psychotherapeutic sessions. He also points out that the claim forms were drafted in general terms, and did not call for more specific information than he provided. Defendants' argument is colorable and articulately propounded, but by no means sufficient to show that no misrepresentations were made. At best, the affidavit shows that Dr. Ditmore's statements could have lent themselves to either of two interpretations, making them ambiguous. There is no showing that the innocent interpretation advanced by defendants is more reasonable than the deceptive one adopted by Metropolitan, or that the latter is unreasonable. The conflict between the parties' interpretations of disputed language is in itself sufficient to defeat the motion for summary judgment. See Schering Corp. v. Home Ins. Co., 712 F.2d 4, 9-10 (2d Cir.1983).

In the present posture of the case, defendants may not avail themselves of the maxim that language in insurance contracts is to be construed strictly against the insurer, for Metropolitan is entitled to have inferences drawn in its favor as the party opposing summary judgment. Nor are we persuaded that this case involves only failures to disclose information, which are not actionable under Massachusetts law absent a duty to disclose. We note that partial disclosures and half truths are under some circumstances tantamount to misrepresentations of fact, see Kannavos v. Annino, 356 Mass. 42, 247 N.E.2d 708, 711-12 (1969); Restatement 2d of Torts Secs. 27 & 29, and hold that there exists a genuine issue of material fact as to whether Dr. Ditmore's statements amounted to misrepresentations. See Catalina Yachts v. Old Colony Bank & Trust Co., 497 F.Supp. 1227, 1236 (D.Mass.1980).

The second factual question which precludes summary judgment at this stage involves Dr. Ditmore's state of mind. Under Massachusetts law, "an intentional misrepresentation is not a prerequisite to recovery for deceit," Snyder v. Sperry & Hutchinson Co., 368 Mass. 433, 333 N.E.2d 421, 428 (1975); rather, the element of fraudulent intent may be proved by showing that a defendant made a statement "as of [his] own knowledge"...