Grant v. Trinity Health-Michigan, 04-CV-72734-DT.

• Decision Date: 30 September 2005
• Docket Number: No. 04-CV-72734-DT.,04-CV-72734-DT.
• Citation: 390 F.Supp.2d 643
• Parties: April GRANT, Velisia Legrand and Robert Houle, on Behalf of Themselves and All Others Similarly Situated, Plaintiffs, v. TRINITY HEALTH-MICHIGAN, Trinity Health Corporation, and John Does 1 thru 10, Defendants.
• Court: U.S. District Court — Eastern District of Michigan

390 F.Supp.2d 643

April GRANT, Velisia Legrand and Robert Houle, on Behalf of Themselves and All Others Similarly Situated, Plaintiffs, v. TRINITY HEALTH-MICHIGAN, Trinity Health Corporation, and John Does 1 thru 10, Defendants.

No. 04-CV-72734-DT.

United States District Court, E.D. Michigan, Southern Division.

September 30, 2005.

COPYRIGHT MATERIAL OMITTED

Frank J. Kelley, Steven D. Weyhing, Kelly Cawthorne, Lansing, MI, for Plaintiffs.

Mark A. Stern, Honigman, Miller, Bingham Farms, MI, Raymond W. Henney, Robert M. Jackson, Honigman, Miller, Detroit, MI, Catherine E. Stetson, Mitchell E. Zamoff, Ty Cobb, Hogan & Hartson, Washington, DC, Gordon J. Walker, Butzel Long, Bloomfield Hills, MI, Leonard M. Niehoff, Ann Arbor, MI, for Defendants.

OPINION AND ORDER GRANTING DEFENDANTS' MOTION TO DISMISS

ROSEN, District Judge.

I. INTRODUCTION

Plaintiffs April Grant, Velisia Legrand and Robert Houle filed the instant action as a class action complaint against Trinity Health-Michigan and Trinity Health Corporation (collectively "Trinity Health"), the American Hospital Association (the "AHA"),¹ and ten "John Doe" defendants. At the heart of Plaintiffs' Complaint are allegations that the Trinity Health, a "charitable organization" as defined in 26 U.S.C. § 501(c)(3), charges uninsured patients significantly more for medical services than it charges insured patients and engages in "aggressive, abusive and humiliating collection practices" to recover medical debts. In their Complaint, Plaintiffs allege ten claims against the Trinity Health Defendants: (1) a third-party beneficiary claim for breach of contract between Trinity Health and the federal government under 26 U.S.C. § 501(c)(3); (2) breach of contract; (3) breach of duty of good faith and fair dealing; (4) breach of charitable trust; (5) violation of the Michigan Consumer Protection Act, M.C.L. § 445.901, et seq.; (6) violation of the Emergency Medical Treatment and Active Labor Act, 42 U.S.C. § 1395dd ("EMTALA"); (7) unjust enrichment/constructive trust; (8) a claim for injunctive/declaratory relief; (9) violation of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692a ("FDCPA"); and (10) a claim under 42 U.S.C. § 1983 for violation of the Plaintiffs' constitutional rights under the Fifth and Fourteenth Amendment.²

This matter is presently before the Court on the Trinity Health Defendants' Motion to Dismiss Counts 1, 3, 4, and 7 which are all predicated upon Defendants' alleged violation of 26 U.S.C. § 501(c)(3); and Plaintiffs other federal claims in Count 6 (violation of the EMTALA); Count 9 (violation of the FDCPA); and Count 10 (Section 1983 claims). Defendants also urge the Court to decline to exercise supplemental jurisdiction over Plaintiffs' state law claims. Plaintiffs have responded to Defendants' Motion and Defendants have replied.

Having reviewed and considered the parties' various briefs and notices of supplemental authority, the Court has determined that oral argument is not necessary. Therefore, pursuant to Local Rule 7.1(e)(2), this matter will be decided on the briefs. This Opinion and Order sets forth the Court's ruling.

II. FACTUAL BACKGROUND³

Trinity Health Corporation operates thirty hospitals in seven states, including seven hospitals in the State of Michigan. St. Joseph Mercy Hospital is among the seven Trinity Health hospital facilities in Michigan.

According to Plaintiffs' Complaint, at some unspecified point in time, Plaintiff April Grant was admitted for treatment at St. Joseph Mercy Hospital through the Emergency Room.⁴ At that time, Ms. Grant was unemployed and had no health insurance. She alleges that as a condition of her treatment, she was required to sign forms upon admission which guaranteed payment of any medical fees incurred. She claims that Defendants billed her excessive and inflated rates for her medical care and after numerous allegedly harassing collection letters and phone calls, Trinity Health sued her and obtained a judgment for unpaid medical bills in the amount of $4,596.00. [See Complaint, ¶¶ 50-52.]

Plaintiff Velisia Legrand also alleges that she was admitted through the Emergency Room at St. Joseph Mercy Hospital and that after her treatment Trinity Health "aggressively pursued collection of inflated charges" from her and ultimately obtained a judgment against her in the amount of $1,177.00. Her checking account was then garnished. [Id. ¶ 53.]

Plaintiff Robert Houle states that he was admitted to St. Joseph Mercy Hospital when he did not have health insurance. Like Plaintiffs Grant and Legrand, Mr. Houle alleges that Defendants billed him inflated charges, sued him, obtained a judgment against him in the amount of $6,667.00, and then garnished his wages. [Id. ¶ 54.]

Plaintiffs do not challenge the quality of the medical care they received. Rather, they claim that because the Internal Revenue Service has granted Trinity Health tax-exempt status under 26 U.S.C. § 501(c)(3), Defendants have a duty to provide free or discounted medical care to the uninsured and that Plaintiffs have a right to enforce this duty.

III. PROCEDURAL BACKGROUND

This action is one of dozens of similar lawsuits filed in courts across the country on behalf of uninsured and/or indigent patients.⁵ To date, in at least 29 such actions, the district courts have granted the defendants' motions to dismiss.⁶ Several other cases have been voluntarily dismissed prior to a ruling on a motion to dismiss.⁷ No court has yet to find in favor of the plaintiffs on any substantive legal issue. Although the Court will decide this specific case on its own merits, it finds the legal analysis from the other dismissals persuasive.

IV. DISCUSSION

A. STANDARDS APPLICABLE TO MOTIONS TO DISMISS PURSUANT TO FED. R. CIV. P. 12(b)(6)

Fed.R.Civ.P. 12(b)(6) allows the court to determine the legal sufficiency of a plaintiff's claims. See Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir.1993). Courts considering a Rule 12(b)(6) motion must accept the well-pled factual allegations of the complaint as true and construe all reasonable inferences in favor of the plaintiff. See Miller v. Currie, 50 F.3d 373, 377 (6th Cir.1995). However, the court is not required to accept conclusions of law or unwarranted inferences of fact cast in the form of factual allegations. Blackburn v. Fisk University, 443 F.2d 121, 123 (6th Cir.1971). Accordingly, a court must determine "whether the plaintiff undoubtedly can prove no set of facts in support of his claims that would entitle him to relief" under a viable legal theory advanced in the complaint. Columbia Natural Resources, Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir.1995), cert. denied, 516 U.S. 1158, 116 S.Ct. 1041, 134 L.Ed.2d 189 (1996).

B. SECTION 501(c)(3) DOES NOT CREATE A CONTRACT

Counts 1, 3, 4, and 7 of Plaintiffs' Complaint are all predicated upon Plaintiffs' assumption that Trinity Health's acceptance of tax exempt status under Section 501(c)(3) of the Internal Revenue Code, 26 U.S.C. § 501(c)(3),⁸ creates a contract between Trinity Health and the U.S. Government.

1. THIRD-PARTY BREACH OF CONTRACT

In Count 1, Plaintiffs claim that they are third-party beneficiaries of an express or implied contract between Trinity Health and the United States Government under which the Government granted Trinity Health status as a tax exempt "charitable" institution pursuant to 26 U.S.C. § 501(c)(3) in exchange for Trinity Health agreeing to operate for charitable purposes and to provide mutually affordable medical care to uninsured patients without regard to their ability to pay for such care. Claiming that Trinity Health breached its contract with the United States, Plaintiffs contend that they did not receive the benefit of that agreement.

No court, however, has ever held that 501(c)(3) creates a binding contract, and the numerous courts which have considered this issue in the context of virtually identical allegations to those made by Plaintiffs in this case have uniformly rejected this notion. See e.g., Burton v. William Beaumont Hospital, 347 F.Supp.2d 486, 492-94 (E.D.Mich.2004); Lorens v. Catholic Health Care Partners, 356 F.Supp.2d 827, 831-34 (N.D.Ohio 2005); Kolari v. New York-Presbyterian Hosp., 382 F.Supp.2d 562, 570-71 (S.D.N.Y.2005); Amato v. UPMC, 371 F.Supp.2d 752, 755-756 (W.D.Pa.2005); North Mississippi Health Serv., Inc., 2005 WL 1312753 at **2-3 (N.D.Miss.2005); Peterson v. Fairview Health Services, 2005 WL 226168 at ** 3-7 (D.Minn.2005); Darr v. Sutter Health, 2004 WL 2873068 at **3-5 (N.D.Cal.2004); Ferguson v. Centura Health Corp., 358 F.Supp.2d 1014, 1016-19 (D.Colo.2004); Gardner v. McCoy v. East Texas Medical Ctr., 388 F.Supp.2d, 760, 764-68, 2005 WL 2105966 at **3-6 (E.D.Tex.2005). See also, McLaughlin v. Commissioner of IRS, 832 F.2d 986, 987 (7th Cir.1987) ("the notion that the Federal Income Tax is contractual or otherwise consensual in nature is not only utterly without foundation but ... has been repeatedly rejected by the courts.") As the various courts addressing not-for-profit/uninsured patient complaints have reasoned, without language in the tax-exempt statute indicating Congressional intent to create a contract, the presumption is that statutes are not, and do not create, contracts. See Nat'l R.R. Passenger Corp. v. Atchison, Topeka & Santa Fe Ry. Co., 470 U.S. 451, 465-66, 105 S.Ct. 1441, 1451-52, 84 L.Ed.2d 432 (1985):

[A]bsent some clear indication that the legislature intends to bind itself contractually, the presumption is that a law is not intended to create private contractual or vested rights but merely declares a policy to be pursued until the legislature shall ordain otherwise.... This well-established presumption is grounded in the elementary proposition that the principal function of a legislature is not to make contracts, but to make laws that establish the policy of the state. Policies, unlike contracts, are inherently subject to revision and repeal, and so to construe...