Medical Associates Health Plan, Inc. v. Cigna
| Decision Date | 06 October 2005 |
| Docket Number | No. C04 1025 LRR.,C04 1025 LRR. |
| Citation | 393 F.Supp.2d 722 |
| Parties | MEDICAL ASSOCIATES HEALTH PLAN, INC., d/b/a MEDICAL ASSOCIATES HEALTH MAINTENANCE ORGANIZATION, Plaintiff, v. CIGNA CORPORATION, Defendant. |
| Court | U.S. District Court — Northern District of Iowa |
Kevin H. Collins, Sarah J. Gayer, Shuttleworth & Ingersoll, Cedar Rapids, IA, for Plaintiff.
William T. McCartan, Bradley & Riley, Cedar Rapids, IA, for Defendant.
TABLE OF CONTENTS
I. INTRODUCTION ...............................................................723
II. THE UNDISPUTED FACTS .......................................................724
A. The Contract ...........................................................724
B. The Lawsuit ............................................................724
III. PRINCIPLES OF REVIEW .......................................................725
IV. THE MERITS .................................................................725
A. Medical Associates' Motion for Partial Summary Judgment ................726
1. CIGNA is a Party to the Group Contract .............................726
2. The Group Contract Governs .........................................728
B. CIGNA's Motion for Summary Judgment ....................................730
V. CONCLUSION .................................................................730
There are two motions before the court in this breach-of-contract lawsuit. Plaintiff Medical Associates Health Plan, Inc., d/b/a Medical Associates Health Maintenance Organization ("Medical Associates"), filed a Motion for Partial Summary Judgment (docket no. 17). Defendant CIGNA Corporation ("CIGNA") filed a Motion for Summary Judgment (docket no. 18). Because the issues in the motions overlap, the court considers them together in this order.
The court concludes CIGNA breached the parties' contract. The court therefore grants Medical Associates' Motion for Partial Summary Judgment and denies CIGNA's Motion for Summary Judgment.
Medical Associates is an Iowa corporation with its principal place of business in Dubuque, Iowa. CIGNA is a Delaware corporation with its principal place of business in Pennsylvania. On December 19, 2003, Medical Associates and CIGNA entered into a written contract entitled "Group Contract for Cigna" ("Group Contract").
In the Group Contract, Medical Associates agreed to provide health maintenance benefits to eligible CIGNA employees who subscribed to Medical Associates' plan. In return, CIGNA agreed to make monthly premium payments to Medical Associates. The amount of each payment depended upon the number of eligible CIGNA employees who were subscribers to Medical Associates' plan.
An attachment to the Group Contract stated that any employee CIGNA deemed eligible was eligible to subscribe to Medical Associates' plan. The only persons who subscribed to Medical Associates' plan were Dubuque, Iowa, employees of Connecticut General Life Insurance Company ("CGLIC"), a CIGNA subsidiary.
The term of the Group Contract was from January 1, 2004 to December 31, 2004. The Group Contract automatically renewed each subsequent year, unless either party "at the end of any contract term" gave "written notice to the other at least sixty (60) days prior to the projected date of the termination."
A generic Group Subscriber Agreement ("Subscriber Agreement") was attached to the Group Contract. The Subscriber Agreement governed each subscribing CIGNA employee's medical coverage. The Subscriber Agreement was "continuable and renewable each month" so long as premiums were paid. The Group Subscriber Agreement included a termination provision. Any individual employee, or CIGNA on his or her behalf, could cancel medical coverage "at any time" by "giving written notice 31 days in advance."
On January 1, 2004, Medical Associates began providing CGLIC employees in Dubuque with health maintenance benefits. CGLIC, not CIGNA, paid the monthly premiums under the contract. It is unknown how many CGLIC employees subscribed to Medical Associates' plan, but CGLIC paid approximately $150,000 each month in premiums to Medical Associates.
This lawsuit was set in motion by events occurring weeks before the signing of the Group Contract. On November 17, 2003, CIGNA agreed to sell CGLIC to Prudential Financial, Inc. ("Prudential"), on March 31, 2004. On March 23, 2004, Medical Associates sent CIGNA a letter. Medical Associates stated it had recently learned of the fast-approaching sale. Medical Associates wrote:
This letter will serve to remind you that [CIGNA] remains contractually bound to the annual Medical Associates Group Contract dated January 2004 through its expiration on December 31, 2004.
. . . .
Medical Associates objects to any unilateral and premature termination of the contract without cause. The governing document is the Group Contract executed by both parties on December 19, 2003. [CIGNA] does not have the right to unilaterally terminate the agreement prior to December 31, 2004. Medical Associates' contract with [CIGNA] was a key element in our strategic planning.... [W]e have made a preliminary calculation and Medical Associates conservatively estimates it will sustain damages of at least $366,000 if [CIGNA] breaches the agreement by early termination.
. . . .
Medical Associates does not consent to early termination.
. . . .
Please contact [Medical Associates] as soon as possible to confirm that [CIGNA] will honor the agreement through the December 31, 2004 term.
On April 9, 2004, CIGNA responded in a letter. CIGNA stated:
On April 1, 2004, employees of CIGNA Companies in Dubuque joined Prudential.... Now that the sale is completed, we no longer have an employee population in your area and are canceling our medical contract with you.
CGLIC stopped making premium payments, and CIGNA did not make any either. Medical Associates terminated coverage for all CGLIC employees retroactive to March 31, 2004.
On May 27, 2004, Medical Associates sued CIGNA in a one-count complaint for breach of contract. On July 9, 2004, CIGNA filed an Answer in which it denied it breached the contract. Medical Associates filed the instant Motion for Partial Summary Judgment on July 8, 2005. CIGNA filed the instant Motion for Summary Judgment on the same date.
Summary judgment is appropriate if the record shows "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). "An issue of fact is genuine when `a reasonable jury could return a verdict for the nonmoving party' on the question." Woods v. DaimlerChrysler Corp., 409 F.3d 984, 990 (8th Cir.2005) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). A fact is material when it is a fact that "might affect the outcome of the suit under the governing law." Anderson, 477 U.S. at 248, 106 S.Ct. 2505. The court must view the record in the light most favorable to the nonmoving party and afford it all reasonable inferences. See McCoy v. City of Monticello, 411 F.3d 920, 922 (8th Cir.2005); Woods, 409 F.3d at 990.
Procedurally, the moving party bears "the initial responsibility of informing the district court of the basis for its motion and identifying those portions of the record which show a lack of a genuine issue." Hartnagel v. Norman, 953 F.2d 394, 395 (8th Cir.1992) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). Once the moving party has successfully carried its burden under Rule 56(c), the nonmoving party has an affirmative burden to go beyond the pleadings and by depositions, affidavits, or otherwise, designate "specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e); see, e.g., Anderson, 477 U.S. at 248, 106 S.Ct. 2505. The nonmoving party must offer proof "such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248, 106 S.Ct. 2505.
Summary judgment "may be rendered on the issue of liability alone although there is a genuine issue as to the amount of damages." Fed.R.Civ.P. 56(c).
The parties' summary judgment motions overlap. The motions urge competing constructions of the same provisions of the Group Contract and the Subscriber Agreement. In deciding Medical Associates' Motion for Partial Summary Judgment, the court therefore necessarily resolves CIGNA's Motion for Summary Judgment. Thus, the court first considers Medical Associates' Motion for Partial Summary Judgment.
In its Motion for Partial Summary Judgment, Medical Associates asks the court to rule as a matter of law that CIGNA is liable under the parties' Group Contract. That is, Medical Associates claims the court can rule as a matter of law that it has established all the elements of a breach of contract claim. The only issue that the jury must determine is the amount of damages.
To prove a breach-of-contract claim, a plaintiff must prove:
(1) the existence of a contract; (2) the terms and conditions of the contract; (3) that it has performed all the terms and conditions required under the contract; (4) the defendant's breach of the contract in some particular way; and (5) that plaintiff has suffered damages as a result of the breach.
Molo Oil Co. v. River City Ford Truck Sales, Inc., 578 N.W.2d 222, 224-25 (Iowa 1998) (citing Iowa-Illinois Gas & Elec. Co. v. Black & Veatch, 497 N.W.2d 821, 825 (Iowa 1993)).1 In this case, Medical Associates claims (1) the Group Contract is the relevant agreement between the parties; (2) according to the plain language of the Group Contract, CIGNA could not terminate the relationship until December 31, 2004; (3) Medical Associates fully performed its end...
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