SHANDS TEACHING HOSP. v. Beech St. Corp.

• Decision Date: 20 April 2005
• Docket Number: No. 1D04-0290.,1D04-0290.
• Citation: 899 So.2d 1222
• Parties: SHANDS TEACHING HOSPITAL AND CLINICS, INCORPORATED, Appellant, v. BEECH STREET CORPORATION and Unisys Corporation, Appellees.
• Court: Florida District Court of Appeals

899 So.2d 1222

SHANDS TEACHING HOSPITAL AND CLINICS, INCORPORATED, Appellant, v. BEECH STREET CORPORATION and Unisys Corporation, Appellees.

No. 1D04-0290.

District Court of Appeal of Florida, First District.

April 20, 2005.

Joel W. Walters, Esquire of Walters, Levine, Brown, Klingensmith & Thomison, P.A., Sarasota, for Appellant.

Jerome W. Hoffman, Esquire and Susan L. Kelsey, Esquire of Holland & Knight, LLP, Tallahassee, for Appellee Beech Street Corporation and David K. Miller, Esquire of Broad and Cassel, Tallahassee, for Appellee Unisys Corporation.

BENTON, J.

Shands Teaching Hospital and Clinics, Inc. (Shands) appeals the dismissal as to Unisys Corporation (Unisys) of its second supplemental and amended complaint, which alleges that Unisys failed to make adequate payment for medical services Shands had provided persons insured by the State of Florida; that Unisys was unjustly enriched to the extent of the inadequacy; and that Unisys tortiously interfered with the contractual business relationship Shands had enjoyed with Beech Street Corporation (Beech Street).¹ We have jurisdiction. See Fla. R.App. P. 9.110(k) (2005) ("If a partial final judgment totally disposes of an entire case as to any party, it must be appealed within 30 days of rendition.").

As to Unisys, we affirm the trial court's dismissal of Shands's first three counts; reverse the dismissal of the remaining counts; remand for further proceedings on the unjust enrichment and tortious interference claims; and vacate the partial final judgment in favor of Unisys in every other respect.

I.

Initially, when Shands filed against Unisys and Beech Street in federal district court, the United States District Court for the Northern District of Florida dismissed on Eleventh Amendment grounds, holding Unisys and Beech Street immune from suit. See Shands Teaching Hosp. & Clinics, Inc. v. Beech St. Corp. and Unisys Corp., No. GCA98cv87 MMP (N.D.Fla. Jan. 5, 1999) (unpublished order). Beech Street is a managed care company that negotiated preferential rates with a network of health care service providers, including Shands, but, unlike Unisys, did not contract directly with the State. Shands appealed the Northern District's dismissal, and the Eleventh Circuit affirmed. See Shands Teaching Hosp. & Clinics, Inc. v. Beech St. Corp. and Unisys Corp., 208 F.3d 1308 (11th Cir.2000)

.

Shands then filed against Unisys and Beech Street in state circuit court. In these proceedings, the Circuit Court for the Eighth Judicial Circuit granted both defendants final summary judgment on the theory that, Shands's claims having been (the circuit court erroneously concluded) adjudicated in federal court on their merits, the claims were, on that account, also barred in state court. See generally England v. La. State Bd. of Med. Exam'rs, 375 U.S. 411, 84 S.Ct. 461, 11 L.Ed.2d 440 (1964)

. On appeal, we reversed, holding that "[b]ecause the federal decisions were based on Eleventh Amendment immunity, Shands was not precluded from filing the action in state court." See Shands Teaching Hosp. & Clinics, Inc. v. Beech St. Corp. and Unisys Corp., 820 So.2d 979, 979 (Fla. 1st DCA 2002).

Proceedings on remand from our initial decision led to the second supplemental and amended complaint (the complaint), which the trial court dismissed as to Unisys,² giving rise to the present appeal. We now review the propriety of that dismissal.

For purposes of ruling on the motion to dismiss, the trial court was obliged to treat as true all of the amended complaint's well-pleaded allegations, including those that incorporate attachments, and to look no further than the amended complaint and its attachments. See Brewer v. Clerk of the Circuit Court, 720 So.2d 602, 603 (Fla. 1st DCA 1998)

; Sarkis [v. Pafford Oil Co.], 697 So.2d [524,] 526 [Fla. 1st DCA 1997]; Varnes v. Dawkins, 624 So.2d 349, 350 (Fla. 1st DCA 1993). "A reviewing court operates under the same constraints. See Rittman [v. Allstate Ins. Co.], 727 So.2d [391,] 393 [Fla. 1st DCA 1999]; McKinney-Green, Inc. v. Davis, 606 So.2d 393, 394 (Fla. 1st DCA 1992)." Andrews [v. Fla. Parole Comm'n], 768 So.2d [1257,] 1260 [Fla. 1st DCA 2000].

City of Gainesville v. State, Dep't of Transp., 778 So.2d 519, 522 (Fla. 1st DCA 2001). The factual recitation that follows reflects the rule that Shands's well-pleaded allegations must be assumed true at this stage of the proceedings.

II.

By providing specialized hospital care ever since Shands and Beech Street entered into a Hospital Provider Agreement (HPA), Shands has played a key role in the Beech Street preferred provider organization (PPO). The HPA specifies the terms under which Shands agreed to participate in the Beech Street PPO network and to offer reduced rates to third parties contracting with Beech Street.³ In entering into the HPA, Beech Street warranted that any payor agreement, i.e., any agreement between Beech Street and a third party for access to Beech Street's PPO network, would obligate the third-party payor to pay Shands in a timely manner in accordance with the terms of the HPA;⁴ and that Beech Street would perform the utilization review for all covered services itself.⁵ The HPA forbids modification except by subsequent writing,⁶ and also provides that Beech Street cannot assign its rights, duties or obligations under the HPA to a third party without the written consent of Shands.⁷

The HPA had been in place between Shands and Beech Street for some six years when the State of Florida first contracted with Unisys. Before Unisys, Blue Cross and Blue Shield of Florida, Inc., had served as third-party administrator of the Florida State Group Health Insurance Program (the Program). Established for the benefit of state officers, employees, retirees and their eligible dependents, in accordance with section 110.123, Florida Statutes, the Program is funded by annual appropriations from the Legislature and premium payments by enrollees. Unisys took over as third-party administrator in 1995. See generally Shands Teaching Hosp. & Clinics, Inc., 208 F.3d at 1309-10.

When the State contracted with Unisys for third-party administration services, it also contracted with Unisys for a preferred provider network, utilization review, and case management services. See Blue Cross & Blue Shield of Fla. v. Agency for Healthcare Admin., Fla. Admin. Order No. 95-3635BID (Oct. 18, 1995) (on file with Clerk, Div. of Admin. Hearings) (finding that proposed award was not fraudulent, dishonest, arbitrary, or illegal). The parties refer to this contract between Unisys and the State (both as originally entered into and as renewed) as the "Prime Contract," and we adopt their nomenclature.

Under the Prime Contract, Unisys was responsible for employee enrollment, premium collection, payment of health care providers for healthcare services, and other administrative functions as third-party administrator of the Program. Under the Prime Contract, Unisys was also responsible for making PPO services available to those covered by the Program. To fulfill the PPO component of the Prime Contract, Unisys subcontracted with Beech Street.

Unisys's offer to subcontract with Beech Street was an integral part of Unisys's proposal to the State, and Unisys relied on its subcontract with Beech Street to perform the resulting Prime Contract. In its response to the State's request for proposals, Unisys had included a document entitled "Sample PPO Agreement," which Unisys had represented to the State as the form Beech Street used in contracting with network providers. Although Unisys knew that Shands would be one of the largest providers of services to Program beneficiaries, it did not inform the State that the terms of the Shands-Beech Street HPA differed materially from the terms of the "Sample PPO Agreement."

Under Unisys's subcontract with Beech Street, Shands became a covered hospital for State enrollees in the Program, and Unisys became a payor, by virtue of the preexisting HPA between Shands and Beech Street. Despite clear provisions on payment rates and procedures in the HPA, the subcontract between Unisys and Beech Street contained no requirement that Unisys make payment to Shands in accordance with the terms of the HPA, or even in a timely manner. The subcontract's failure to require payment as contemplated by the HPA, Shands alleges, constituted a breach of the HPA.

Beech Street was obligated to Shands under the HPA to perform all utilization review itself (unless Shands agreed otherwise in writing). Shands was obligated under the HPA to accept discounted payment for services "except with respect to such claims as to which [Shands] has not received payment within thirty (30) days after the date the claim is approved in writing by Beech Street." Again breaching the HPA, Shands alleges, Beech Street assigned its claims processing and utilization review responsibilities to Unisys without Shands's written consent, and Unisys agreed to assume these responsibilities, despite having a copy of, and knowing the specific terms of, the Shands-Beech Street HPA.

Before Beech Street and Unisys altered the procedures prescribed by the HPA, Shands submitted claim forms directly to Beech Street, and payors (such as Unisys later became) paid Shands, once Beech Street notified them it had approved Shands's claims.⁸ After Beech Street required that claims go directly to Unisys for approval and payment (purportedly absolving itself of any responsibility for approving Shands's claims by assigning that responsibility to Unisys instead), Unisys fell behind in making payments to Shands. But Unisys argued that it had not and could not fail to meet the conditions of the HPA that entitle payors to make discounted payments. No matter how late a payment was made, Unisys maintained, no payment could ever be made more than "thirty (30) days after the date the claim is approved . . . by Beech Street," since Beech Street had stopped approving...