Scripps Health v. nThrive Revenue Sys.
| Decision Date | 18 May 2021 |
| Docket Number | Case No.: 19-cv-00760-H-DEB |
| Court | U.S. District Court — Southern District of California |
| Parties | SCRIPPS HEALTH, a California corporation, Plaintiff, v. NTHRIVE REVENUE SYSTEMS, LLC, formerly known as Medassets Analytical Systems, LLC, a Delaware limited liability company; NTHRIVE, INC., doing business as nThrive Revenue Systems, LLC, a Delaware corporation; and FORMATIV HEALTH, a Delaware limited liability company, Defendants. |
(1) GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR SUMMARY JUDGMENT; AND
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/// On March 18, 2021, Defendants nThrive Revenue Systems, LLC and nThrive, Inc. (collectively "nThrive") filed a motion for summary judgment. (Doc. No. 95.) On March 18, 2021, Defendant Formativ Health filed a notice of joinder in nThrive's motion for summary judgment.1 (Doc. No. 98.) On March 19, 2021, Plaintiff Scripps Health filed a motion for summary judgment. (Doc. No. 107.) On April 9, 2021, the parties each filed their respective responses in opposition to the motions for summary judgment. (Doc. Nos. 134, 137, 139.) On April 16, 2021, the parties each filed their respective replies. (Doc. Nos. 140, 144, 149.)
The Court held a hearing on the matter on May 17, 2021. Jeffrey D. Cawdrey and Kimberly D. Howatt appeared for Plaintiff Scripps Health. John Shaeffer and Joshua A. Bornstein appeared for Defendant nThrive. Marty B. Ready appeared for Defendant Formativ. For the reasons below, the Court grants in part and denies in part Defendants' motion for summary judgment, and the Court denies Plaintiff Scripps Health's motion for summary judgment.
Background
Plaintiff Scripps Health is a nonprofit health care system with four hospitals and twenty-eight outpatient facilities. (Doc. No. 124-2 at 1 ¶¶ 1-2; Doc. No. 132-1, Thomas Decl. ¶ 2.) Defendant nThrive is a Revenue Cycle Management ("RCM") vendor.2 (Doc. No. 124-2 at 1-2 ¶ 3.) RCM services include coding, billing, and collections of accounts receivables for health care organizations. (Id.)
On December 22, 2011, Scripps Health and nThrive entered into an agreement entitled "Master Agreement Between Scripps Health and MedAssets Net RevenueSystems, LLC."3 (Doc. No. 124-4, Ex. 4.) On September 25, 2017, Scripps Health and nThrive entered into a further agreement entitled "Third Amendment to the Master Agreement Between Scripps Health and nThrive Revenue Systems, LLC." (Doc. No. 124-4, Ex. 3.)
On April 24, 2019, Scripps Health filed a complaint against nThrive and Formativ, alleging claims for: (1) fraud and deceit; (2) negligent misrepresentation; (3) aiding and abetting fraud; (4) conspiracy to commit fraud; (5) intentional interference with contractual relations; (6) intentional interference with prospective economic advantage; (7) breach of contract; (8) breach of the covenant of good faith and fair dealing; (9) negligence; (10) unjust enrichment; (11) demand for accounting; and (12) unfair business practices in violation of California Business and Professions Code § 17200 et seq. (Doc. No. 1, Compl.) Scripps Health alleges that nThrive did not perform the services required under the agreement in accordance with contractual or industry standards. (Id. ¶ 39.) Scripps Health further alleges, among other things, that nThrive "secretly and surreptitiously assigned, subcontracted, and/or delegated" some or all of its obligations under the agreement to third-party Formativ, despite the inclusion of an anti-assignment clause in the agreement. (Id. ¶¶ 42-44.)
On June 28, 2019, Formativ filed an answer to the complaint. (Doc. No. 8.) On July 1, 2019, nThrive filed an answer to the complaint and counterclaims against Scripps Health, alleging counterclaims for: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) negligent misrepresentation; and (4) unjust enrichment. (Doc. Nos. 11, 12.) On July 22, 2019, Scripps Health filed a partial motion to dismiss nThrive's counterclaims. (Doc. No. 23.) On September 3, 2019, the Court granted in part and denied in part Scripps Health's motion to dismiss. (Doc. No. 35.)Specifically, the Court dismissed nThrive's counterclaim for negligent misrepresentation without prejudice and with leave to amend, and the Court denied the remainder of Scripps Health's motion to dismiss. (Id. at 9.)
On October 3, 2019, nThrive filed first amended counterclaims, alleging the same four counterclaims. (Doc. No. 40.) On November 13, 2019, the Court granted Scripps Health's partial motion to dismiss, and the Court dismissed nThrive's counterclaim for negligent misrepresentation with prejudice. (Doc. No. 50 at 7.) On May 10, 2021, the Court denied the parties' Daubert motions without prejudice. (Doc. No. 162.)
By the present motions for summary judgment: (1) Defendant nThrive moves for summary judgment of all ten of the claims in Scripps Health's complaint asserted against nThrive; (2) Defendant Formativ joins in nThrive's motion and separately moves for summary judgment of the claims in Scripps Health's complaint that are asserted against Formativ only; and (3) Scripps Health moves for summary judgment of all three of nThrive's remaining counterclaims. (Doc. No. 116 at 1-2; Doc. No. 98 at 4-5; Doc. No. 107-1 at 1-2.)
DISCUSSION
Summary judgment is appropriate under Rule 56 of the Federal Rules of Civil Procedure if the moving party demonstrates that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A fact is material when, under the governing substantive law, it could affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Fortune Dynamic, Inc. v. Victoria's Secret Stores Brand Mgmt., Inc., 618 F.3d 1025, 1031 (9th Cir. 2010). "A genuine issue of material fact exists when the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Fortune Dynamic, 618 F.3d at 1031 (internal quotation marks and citations omitted); accord Anderson, 477 U.S. at 248. "Disputes over irrelevant or unnecessary facts will not preclude a grant of summary judgment." T.W. Elec. Serv., Inc. v. Pac. Elec. ContractorsAss'n, 809 F.2d 626, 630 (9th Cir. 1987).
A party seeking summary judgment always bears the initial burden of establishing the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. The moving party can satisfy this burden in two ways: (1) by presenting evidence that negates an essential element of the nonmoving party's case; or (2) by demonstrating that the nonmoving party failed to establish an essential element of the nonmoving party's case that the nonmoving party bears the burden of proving at trial. Id. at 322-23; Jones v. Williams, 791 F.3d 1023, 1030 (9th Cir. 2015). Once the moving party establishes the absence of a genuine issue of material fact, the burden shifts to the nonmoving party to "set forth, by affidavit or as otherwise provided in Rule 56, 'specific facts showing that there is a genuine issue for trial.'" T.W. Elec. Serv., 809 F.2d at 630 (quoting former Fed. R. Civ. P. 56(e)); accord Horphag Research Ltd. v. Garcia, 475 F.3d 1029, 1035 (9th Cir. 2007). To carry this burden, the non-moving party "may not rest upon mere allegation or denials of his pleadings." Anderson, 477 U.S. at 256; see also Behrens v. Pelletier, 516 U.S. 299, 309 (1996) (). Rather, the nonmoving party "must present affirmative evidence . . . from which a jury might return a verdict in his favor." Anderson, 477 U.S. at 256.
When ruling on a summary judgment motion, the court must view the facts and draw all reasonable inferences in the light most favorable to the non-moving party. Scott v. Harris, 550 U.S. 372, 378 (2007). The court should not weigh the evidence or make credibility determinations. See Anderson, 477 U.S. at 255. "The evidence of the non-movant is to be believed." Id. Further, the Court may consider other materials in the record not cited to by the parties, but it is not required to do so. See Fed. R. Civ. P. 56(c)(3); Simmons v. Navajo Cnty., 609 F.3d 1011, 1017 (9th Cir. 2010).
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By the present motions for summary judgment, Defendants move for summary judgment of all of Scripps Health's claims in its complaint, and Scripps Health moves for summary judgment of all of nThrive's remaining counterclaims. Specifically, Defendant nThrive moves for summary judgment of Scripps Health's claims for: (1) fraud and deceit; (2) negligent misrepresentation; (3) conspiracy to commit fraud; (4) intentional interference with prospective economic advantage; (5) breach of contract; (6) breach of the covenant of good faith and fair dealing; (7) negligence; (8) unjust enrichment; (9) demand for accounting; and (10) unfair business practices in violation of California's UCL. (Doc. No. 116 at 1-2.) Formativ joins nThrive's motion for summary judgment and also separately moves for summary judgment of Scripps Health's claims for aiding and abetting fraud and intentional interference with contractual relations. (Doc. No. 98 at 4.) Scripps Health specifically moves for summary judgment of nThrive's counterclaims for: (1) breach of contract; (2) breach of the covenant of good faith and fair dealing; and (3) unjust enrichment. (Doc. No. 107-1 at 1-2.) The Court addresses the parties' arguments regarding each of these claims in turn below.
As an initial matter, nThrive argues that it is entitled to summary judgment of Scripps Health's claims for breach of contract and breach of the covenant of good faith and fair dealing and all of its tort claims because Scripps Health is unable to establish damages as a matter of law. (Doc. No. 116 at 16-18.) Under California law,...
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