MANAGED CARE SOLUTIONS v. ESSENT HEALTHCARE, INC.

• Decision Date: 25 January 2010
• Docket Number: Case No. 09-60351-PAS.
• Parties: MANAGED CARE SOLUTIONS, INC., Plaintiff, v. ESSENT HEALTHCARE, INC., Defendant.
• Court: U.S. District Court — Southern District of Florida

694 F. Supp.2d 1275

MANAGED CARE SOLUTIONS, INC., Plaintiff, v. ESSENT HEALTHCARE, INC., Defendant.

Case No. 09-60351-PAS.

United States District Court, S.D. Florida.

January 25, 2010.

Robert Ingham, Ingham & Associates PA, Fort Lauderdale, FL, for Plaintiff.

Rene Devlin Harrod, Berger Singerman, Fort Lauderdale, FL, Frances Fenelon, Joseph A. Woodruff, Lea Carol Owen, Sarah C. McBride, Waller Lansden Dortch & Davis, Nashville, TN, for Defendant.

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS COUNT TWO OF PLAINTIFF'S AMENDED COMPLAINT

PATRICIA A. SEITZ, District Judge.

THIS MATTER is before the Court on Defendant's Motion to Dismiss Count Two of Plaintiffs Amended Complaint DE-32. Plaintiff, Managed Care Solutions, Inc. ("MCS") brings this action for breach of contract and equitable accounting against Defendant, Essent Healthcare, Inc. ("Essent"), alleging that Essent breached a contract with MCS granting MCS exclusive rights to perform collection and appeal services on third-party payor accounts for each of Essent's five hospitals. Through its claim for an equitable accounting, MCS essentially requests that the Court ascertain the amount of MCS' damages rather than a jury. Essent moves to dismiss MCS' claim for equitable accounting, arguing that MCS has an adequate remedy at law such that it is not entitled to an equitable accounting. Because the facts alleged in MCS' Complaint do not indicate that the complexity of the accounts at issue would prevent a jury from competently ascertaining MCS' damages and prevent MCS from having an adequate remedy at law, Essent's Motion to Dismiss will be granted.

1. Background Facts

MCS alleges as follows. Essent is a corporation that provides healthcare services through five hospital facilities that Essent owns and operates. (DE-28, Amended Complaint ("Complaint") at ¶ 5). At all times relevant to this action, these five hospital facilities were Merrimack Valley Hospital, Sharon Hospital, Nashoba Valley Medical Center, Southwest Regional Medical Center and Paris Regional Medical Center ("Paris Regional") (collectively "Essent Facilities"). (Id.). Like other hospitals, after the delivery or arrangement of health care services, these five hospitals generate patient receivables that reflect the amounts due from the patient or a designated third-party payor. (Id. at ¶ 6). MCS is a corporation with a principal place of business in Florida that is engaged in the business of collecting for health care providers the amounts due on patient receivables when those accounts go unpaid in whole or in part due to a third-party payors' denial or failure to pay part or all of an outstanding bill. (Id. at ¶ 7).

On February 20, 2006, Essent entered into a three-year Professional Services Agreement ("Agreement") with MCS, providing for MCS to manage and collect payments from third party payors on receivables generated by all Essent Facilities, which included appealing and recovering on Essent's behalf claims for hospital services denied or underpaid by health insurance companies, health maintenance organizations, preferred provider organizations, governmental payors, and any other managed care organizations. (Id. at ¶ 8). Critically, under the Agreement, MCS was to have sole and exclusive rights to perform these collection services for all receivables on third party denials or underpayments worth more than $100. (Id. at ¶¶ 9, 11(a)).¹ Pursuant to this exclusive right, Essent was to transfer all such receivables to MCS within 72 hours after receiving a denial on the claim. (Agreement at ¶ 6.1.1). Essent also was responsible for providing MCS with access to Essent's receivables system and managed care contracting system to enable MCS to have account information necessary for collection. (Agreement at ¶ 6.2.2).

The Agreement prescribed for MCS to be compensated according to the amounts it was able to collect. Specifically, it stated that MCS would receive 22% of any amount Essent recovered on receivables assigned to MCS. (Id. at ¶ 10). MCS was to receive this fee regardless of whether Essent or one of the Hospital Facilities had worked on recovering on the assigned receivable at any time. (Agreement at ¶ 7). An addendum to the Agreement effective April 1, 2006 slightly modified the Agreement such that MCS was to recover 27.88% on any amount recovered on a receivable from Paris Regional. (Complaint at ¶ 10; DE-28-2, Addendum to Contract). The Agreement does not provide for an accounting if there is a dispute as to the amount of outstanding fees upon termination.

On September 29, 2006, Steven Wylie ("Wylie"), Vice President of Financial Operations for Essent, notified MCS in a letter that Essent was terminating the Agreement without cause. (Complaint at ¶ 13). Pursuant to a clause in the Agreement allowing for either party to terminate without cause upon 180 days' prior written notice, Wylie's letter resulted in termination of the Agreement on March 29, 2007. (Id.). During the term of the Agreement, Essent only provided MCS with access to receivables from Paris Regional, from which MCS ultimately recovered in excess of $2,000,000 on Essent's behalf. (Id. at ¶ 14).

According to MCS, Essent breached the Agreement in a number of ways, chiefly by failing to provide MCS with exclusive rights for collecting on third party denials and underpayments during the term of the Agreement. Besides claiming that Essent only provided MCS access to the receivables for one hospital, Paris Regional, MCS also alleges that Essent assigned to other companies certain receivables that should have been transferred to MCS. (Id. at ¶¶ 14, 19-21). Furthermore, MCS claims Essent failed to uphold a host of other ancillary responsibilities the Agreement placed on Essent to assist MCS in identifying and collecting on denied claims, including duties to become fully operational within 60 days of the start of the agreement, to transfer to MCS denials on all accounts worth more than $100, to provide MCS at least 220 days to work on any assigned claim, and to provide MCS with copies of all contracts Essent entered into with third party payors. (Id. at ¶ 15).

Moreover, MCS claims that Essent breached the contract after termination by failing to comply with the post-termination obligations imposed on Essent under Paragraph 9.2 of the Agreement. (Id. at ¶ 28). This provision requires Essent to (1) continue for 90 days after termination to pay MCS a professional fee on all monies recovered on receivables assigned to MCS (27.88% on Paris Regional receivables and 22% on receivables from all other Essent Facilities) and (2) make a lump sum payment to compensate MCS for software licensing fees MCS expended to a third party in order for MCS to have a system to manage and service Essent's receivables. (Agreement at ¶ 9.2). MCS claims that Essent failed to pay MCS these required professional fees or, despite MCS' expenditure of over $1,150,000 for the software necessary to implement a management system, for software licensing fees. (Complaint at ¶¶ 28-30).

MCS' Complaint asserts causes of action for both breach of contract and an equitable accounting and demands a jury trial. Its cause of action for breach of contract is straightforward, asserting that Essent breached various contractual provisions, causing MCS to incur lost revenue and lost profits, resulting in liquidated, compensatory and actual damages. MCS' cause of action for an equitable accounting asks the Court to enter judgment for "an accounting by Essent of all information related to each and every account that should have been directed to MCS under the PSA and each and every account that MCS alleges should have been directed to it under the PSA." (Complaint at page 11). MCS further alleges that the Agreement's "demands between the parties involve extensive and complicated accounts" and that "because of the volume of the receivable accounts at issue and Essent's lack of cooperation, MCS' remedy at law is inadequate and will not be as expeditious as it is in equity." (Id. at ¶¶ 39, 43).

Essent moves to dismiss MCS' claim for an equitable accounting under Federal Rule of Civil Procedure 12(b)(6), asserting that MCS cannot maintain an action for the equitable remedy of accounting when it can obtain an adequate remedy at law through a judgment on its breach of contract action. MCS responds that it can bring an action for an equitable accounting to determine the extent of the damages resulting from the breach of the Agreement because the obligations of the Parties under the Agreement involve extensive or complicated accounts such that it is not clear that a remedy at law is as adequate or expeditious as it is in equity.

2. Motion to Dismiss Standard

The purpose of a motion brought pursuant to Fed.R.Civ.P. 12(b)(6) is to test the facial sufficiency of a complaint. To survive a 12(b)(6) motion to dismiss, a complaint need not be detailed, but the factual allegations contained therein "must be enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A formulaic recitation of the elements will not do." Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252, 1261 (11th Cir.2009) (quotation omitted). In other words, a plaintiffs pleading obligations require "more than mere labels and conclusions." Id.

On a motion to dismiss, the Court must accept all allegations in the complaint as true, and view them in the light most favorable to plaintiff. Watts v. Florida Int'l Univ., 495 F.3d 1289, 1295 (11th Cir.2007). A well-pled complaint can proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely. Ranee v. D.R. Horton, Inc., 316 Fed.Appx. 860, 862 (11th Cir.2008). However, taking the facts as true, a court may grant a motion to dismiss if no reasonable construction of the factual allegations will support a cause...