Echo Health, Inc. v. NexPay, Inc.
| Decision Date | 06 November 2013 |
| Docket Number | CASE NO. 1:13-CV-1563 |
| Parties | ECHO HEALTH, INC. Plaintiff, v. NEXPAY, INC. Defendant. |
| Court | U.S. District Court — Northern District of Ohio |
This is a case about claims of breach of contract and misbehavior of a health care company with regard to the clients of another. Defendant NexPay, Inc. ("NexPay") has moved to dismiss Plaintiff's Second Amended Complaint. With its motion, NexPay says this Court does not have personal jurisdiction over NexPay and says this Court does not have subject matter jurisdiction because Plaintiff has not sufficiently pled damages. For the following reasons, the Court DENIES Defendant's motion to dismiss.
After third party administrators approve health care claims, Plaintiff ECHO Health, Inc. ("ECHO") consolidates health care claims approved for payment.1 It also facilitates payment of such claims to medical providers and, sometimes, to plan participants.2
Defendant NexPay acts to deliver electronic health care payments to medical providers.3 It also provides settlement, reconciliation and other services related to those payments.4 Defendant NexPay also provides customer support for persons making claims for payment.5
In early 2012, Defendant NexPay approached Plaintiff ECHO with proposals to provide payment services for ECHO.6 The parties negotiated a verbal service agreement. In that agreement, NexPay agreed to provide services to ECHO and its customers by: (1) faxing information for consolidated claims to certain providers; (2) transmitting card settlement, opt out, and reconciliation data; (3) issuing partial payment checks; and (4) rendering customer service.7 The parties never memorialized their service agreement in a written contract.8
Rather, in connection with the service agreement, Defendant NexPay signed a Business Associate Agreement.9 This written agreement required ECHO to protect the privacy and security of clients' health information.10 In addition, this contract included a choice of law provision that agreed Ohio law would control.11 The service agreement also contained a forum selection clause that said "[t]he county in which ECHO's principal business office is located [Westlake, Ohio] shall be the sole venue of any litigation or special proceedings between the parties.12
In its complaint, ECHO says it provided NexPay with protected health information for NexPay's use in carrying out its contractual obligations for ECHO.13 Beginning in March 2013, ECHO says that its relationship with NexPay began heading south. ECHO says that, beginning in March 2013, NexPay began breaching its obligations under the service agreement.14 For example, ECHO says that NexPay intentionally delayed the transmission of payment information; did not fax payment information to providers; refused to transmit timely and complete data to ECHO regarding settlements of cards, partial payments, and other data; and failed to provide the proper customer support needed to return funds that did not clear.15
ECHO also says that, around May 16, 2013, NexPay's president contacted two of ECHO's large customers, HealthSCOPE Benefits, Inc. and Meritain. ECHO claims that NexPay told these customers that ECHO had stopped sending new files to NexPay and told the customers that the protected health information in NexPay's possession had been left unprotected.16 According to ECHO, Defendant NexPay solicited these ECHO clients to contract directly with NexPay to avoid ECHO's leaving the information vulnerable.17
ECHO says that on May 28, 2013, NexPay's president told it on May 28, 2013 ECHO that he was sending protected health information to unidentified "Plans."18 ECHO says this actionviolated the Business Associate Agreement.19 On May 31, 2013, Plaintiff ECHO demanded NexPay return all protected health information and stop sending protected health information to unauthorized entities.20
ECHO says that NexPay ignored its requests.21 Plaintiff ECHO says that NexPay also circulated false statements and misrepresentations about ECHO to other customers to induce them to stop doing business with ECHO and to begin doing business directly with Defendant NexPay.22
Plaintiff ECHO makes the following claims: (1) breach of Business Associate Agreement; (2) breach of service agreement; (3) violation of Ohio's Deceptive Trade Practices Act;23 (4) tortious interference with contract and business relations; (5) conversion and misappropriation of funds; (6) action for accounting; (7) breach of contract to provide indemnity; and (8) promissory estoppel.24
Defendant NexPay moves to dismiss the Amended Complaint on two grounds.25 First, Defendant says that the Court should dismiss Plaintiff's Amended Complaint for lack of personal jurisdiction.26 Defendant says that Ohio's long arm statute does not subject it to personal jurisdiction and also says that the Court's exercise of personal jurisdiction would violate itsconstitutional due process rights.27 Second, Defendant NexPay says that the Court should dismiss the Amended Complaint for a lack of subject matter jurisdiction.28 With this argument, NexPay says Plaintiff did not adequately plead damages and therefore has no standing to bring its claims before the Court.29
Plaintiff disagrees.30 First, ECHO says that NexPay consented to personal jurisdiction in Ohio by signing the Business Associate Agreement that said Westlake, Ohio was the proper venue for any dispute.31 It also says that NexPay has waived its right to contest personal jurisdiction in Ohio.32 Second, it says that the Court has subject matter jurisdiction because Plaintiff has sufficiently alleged damages to give standing.33 Plaintiff says it has met its burden to survive a motion to dismiss.34
Where a court has not held an evidentiary hearing on a jurisdictional motion to dismiss, a plaintiff faces a "relatively light standard": a plaintiff need only make a prima facie showing of jurisdiction.35 In such circumstances, a court considers the pleading and documentary evidence in the light most favorable to the plaintiff without considering controverting assertions of thedefendant.36 At this stage, a prima facie showing is all that is required.
NexPay says that the forum selection clause only applies to Plaintiff ECHO's first claim and personal jurisdiction does not exist in Ohio.37 This argument fails.38
Recall that NexPay does not dispute that its Business Associate Agreement with ECHO contains a forum selection clause identifying Westlake, Ohio as "the sole venue of any litigation or special proceedings between the parties."39 Forum selection clauses that have been freely bargained for are prima facie valid and enforceable.40 By consenting to venue in Ohio, Defendant NexPay consented to personal jurisdiction here.41
NexPay also loses its argument that the clause only covers Plaintiff's claim involving breach of the Business Associate Agreement. "A forum selection clause . . . is part of a contract, and principles of contract interpretation apply."42 In interpreting disputed contract provisions, the Courtmust try to discern the intent of the parties.43 "Another cardinal principle of contract interpretation is that the language being interpreted should be given its ordinary meaning."44
Moreover, the language of the forum selection clause is clear; it contains no restrictions as to what types of litigation it covers - that is, it is broad enough to cover all litigation between the two parties.
Both ECHO and NexPay are sophisticated business entities, capable of negotiating the language in a contract.45 The Business Associate Agreement's forum selection clause is broad and seemingly applies to all disputes between the parties. The use of the phrase "any litigation" thus reflects the parties' belief that this clause will govern all actions involving their relationship.46
Because the forum selection clause gives this Court jurisdiction over Count I, the Court can exercise pendent jurisdiction over the other claims in this case. Courts have consistently held that claims involving the "same operative facts as a parallel claim for breach of contract should be heard in the forum selected by the contracting parties."47
Here, all eight of Plaintiff ECHO's claims arise from the business relationship between it and NexPay. And, each of Plaintiff's claims arise from the same relationship underlying the Business Associate Agreement and Count I. Pendent jurisdiction gives the Court sufficient jurisdiction over Defendant NexPay for the remainder of Plaintiff's claims.48 By signing the Business Associate Agreement, NexPay was on notice that it could be haled into court in Ohio.
Plaintiff has made a prima facie showing that Defendant NexPay is subject to personal jurisdiction in this Court. The Court denies Defendant NexPay's Rule 12(b)(2) motion to dismiss.
As a threshold issue, the Court notes that Plaintiff filed the Second Amended Complaint after Defendant filed its motion, thereby curing some of Defendant's concerns.49 Defendant, in its reply, requests the Court dismiss the Second Amended Complaint for lack of personal jurisdiction and withdraws its motion to dismiss under Rule 12(b)(6).50
Nevertheless, Defendant failed to withdraw its motion based on Rule 12(b)(1). The Court therefore considers Defendant's arguments asserted as its Rule 12(b)(1) motion with regard to the sufficiency of Plaintiff's standing for the claims in its Second Amended Complaint.
"Standing must exist at each stage of litigation, and . . . [a]t the initial pleading stage, 'general factual allegations of injury resulting from the defendant's conduct may suffice . . . .'"51 For the reasons described below, the Court finds that Plaintiff has pled sufficient factual allegations of injuryto give it standing to...
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