Summit Health, Inc. v. Aps Healthcare Bethesda, Inc.

• Decision Date: 24 January 2014
• Docket Number: No. 11–cv–9718 (ER)(LMS).,11–cv–9718 (ER)(LMS).
• Citation: 993 F.Supp.2d 379
• Parties: SUMMIT HEALTH, INC., Plaintiff, v. APS HEALTHCARE BETHESDA, INC., Defendant.
• Court: U.S. District Court — Southern District of New York

993 F.Supp.2d 379

SUMMIT HEALTH, INC., Plaintiff,

v.APS HEALTHCARE BETHESDA, INC., Defendant.

No. 11–cv–9718 (ER)(LMS).

United States District Court, S.D. New York.

Jan. 24, 2014.

Jeff Edward Butler, New York, NY, for Plaintiff.

Howard S. Wolfson, Morrison Cohen Singer & Weinstein, LLP, New York, NY, Gayle Elise Pollack, New York, NY, for Defendant.

OPINION AND ORDER

RAMOS, District Judge.

Summit Health, Inc. (“Plaintiff” or “Summit”) brought this breach of contract action against APS Healthcare Bethesda, Inc. (“Defendant” or “APS”), alleging that APS failed to pay the full amount due under their service contract. Doc. 1. Summitalleges that APS has wrongfully withheld payment of almost two-and-a-quarter million dollars' worth of minimum fees. See Compl. ¶¶ 35–36. The underlying controversy revolves around the meaning of the phrase “Customer projection,” which appears in one of the contract's minimum fee provisions. APS disputes Summit's reading of the contract and points out that, if awarded, the minimum fees alone would more than double the amount Summit earned for services actually performed. See Def.'s Mem. of Law in Supp. (Amend) at 31.¹

Plaintiff moves for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. Doc. 38. In addition to opposing the summary judgment motion, Defendant has filed a motion for leave to file an amended answer and counterclaim, pursuant to Federal Rules of Civil Procedure 15 and 16. Doc. 42.

For the reasons discussed below, Plaintiff's motion for summary judgment is GRANTED IN PART and DENIED IN PART, and Defendant's motion for leave to file an amended answer and counterclaim is DENIED.

I. Factual Background

The following facts are undisputed except where otherwise noted.

Summit is a Michigan corporation that develops healthcare programs for businesses and health plans. Compl. ¶ 3. Its programs offer preventative care services, including health screenings, at employees' and plan members' worksites. Id. Its chief executive officer is Richard Pennington, and its chief operating officer is Douglas Finch. Decl. of Richard Penington (MSJ) ¶ 1; Decl. of Douglas C. Finch (MSJ) ¶ 1. Jason Moczul, the national account manager assigned to the program at issue in this case, was APS's primary contact at Summit with respect to operational matters. Decl. of Jason Moczul (MSJ) ¶¶ 1–2.

APS, an Iowa corporation with its principal place of business in White Plains, New York, administers state and local government health plans and provides healthcare services to government employees. Compl. ¶ 4; Answer ¶ 4. During the time period at issue in this case, its president and chief operating officer was Jerome Vaccaro, its chief financial officer was John McDonough, and the in-house attorney who served as the “point man” in negotiations with Summit was Paul Dominianni. Decl. of Jeff E. Butler (MSJ) Ex. 27, at 6:5–6, 71:18–72:14; id. Ex. 29, at 19:12–15. David Glazer, a senior vice president in White Plains who was responsible for operations in the eastern United States, oversaw a team of employees based in Tennessee. Id. Ex. 26, at 6:21–7:2, 12:7–12; id. Ex. 27, at 10:13–15, 11:3–5. That team included an executive director, Jim Shulman, who reported to Glazer; a director of operations, Bob Hines, who reported to Shulman; and a clinical supervisor, Troy Watson, who reported to Hines. Id. Ex. 26, at 11:20–12:12.

Summit and APS were parties to the Summit Health Services Agreement (the “Agreement”), which was effective as of January 1, 2011. Pl.'s 56.1 Stmt. ¶ 3; Def.'s 56.1 Stmt. ¶ 3.² The Agreement was a subcontract. APS was also party to a general contract with the State of Tennessee, wherein APS agreed to provide health care services to state employees who had enrolled in the state's “ParTNers for Health” program. Pl.'s 56.1 Stmt. ¶ 12; Def.'s 56.1 Stmt. ¶ 12. This contract paid APS a fixed fee per screening performed, and it exposed APS to liquidated damages based on various performance metrics, including maintenance of a fully operational website. Decl. of Jeff E. Butler (MSJ) Ex. 1, at APS 14994, 15009–15012.

Under the Agreement, Summit agreed to provide staffing and supplies for health screening clinics at Tennessee worksites during the first six months of 2011. Pl.'s 56.1 Stmt. ¶ 4; Def.'s 56.1 Stmt. ¶ 4. Summit's contractual duties included registering participants, scheduling appointments, and setting up the clinics. Agreement at 11.³ Participating state employees could sign up online or by phone in advance of each clinic. Id. Summit maintained an online appointment system that state employees could use for this purpose. Pl.'s 56.1 Stmt. ¶ 15; Def.'s 56.1 Stmt. ¶ 15. In addition, Summit was required to accept “walk-in appointments” to the extent it could accommodate them and subject to an agreed-upon policy. Agreement at 11.

The pricing terms were set forth in Exhibit B to the Agreement. Id. at 3, 17–20. The terms included a $37 fee for each screening Summit performed. Id. at 17. That price was the product of negotiations between the parties. See Decl. of Richard Penington (MSJ) ¶ 10. Exhibit B also included various fees, including a “standard minimum” for “health screening clinics” that was described as follows: “40 screenings, or 90% of Customer projection, whichever is greater.” Agreement at 17. This per-clinic minimum fee provision is the subject of the present dispute. The provision appeared in all drafts of Exhibit B that the parties exchanged. Pl.'s 56.1 Stmt. ¶ 8; Def.'s 56.1 Stmt. ¶ 8.

On December 21, 2010, Dominianni sent Finch an email in which he referenced the parties' earlier agreement to reduce the per-screening rate to $37 and informed Finch that all other provisions of Exhibit B were “acceptable to APS.” Decl. of Douglas C. Finch (MSJ) Ex. 5. Summit began performing under the Agreement in January 2011, although the Agreement was not actually signed until March 15, 2011. Pl.'s 56.1 Stmt. ¶¶ 20, 23; Def.'s 56.1 Stmt. ¶¶ 20, 23.

At Summit's request, Watson and his team began providing Summit with clinic-by-clinic participation estimates (the “Watson estimates”). See Decl. of Troy Watson (MSJ) ¶¶ 5, 10; id. Ex. C. Glazer testified at his deposition that he knew the Watson estimates were being provided but that he believed they would be used solely for staffing (and not for billing) purposes. Decl. of Jeff Butler (MSJ) Ex. 26, at 114:19–116:2, 117:2–117:6. Watson testified that he typically tried to provide an estimate at least two weeks prior to a given clinic. Id. Ex. 30, at 115:20–116:10. He expected that Summit would staff and supply the clinics based on those estimates. Id. Ex. 30, at 78:25–79:4, 169:7–9. Both he and Glazer provided deposition testimony indicating that Watson's figures represented good-faith estimates of expected clinic participation. Decl. of Jeff Butler (MSJ) Ex. 26, at 130:23–131:15, 170:23–171:6; id. Ex. 30, at 76:9–15. However, Watson repeatedly indicated to Summit that the numbers he was providing were “guesses.” See, e.g., Decl. of Troy Watson (MSJ) Ex. E–F.

The accuracy of the Watson estimates, as that issue pertained to the minimum fee provision, arose in a January 18, 2011 internal Summit email exchange between Finch and Moczul. Decl. of Howard S. Wolfson (MSJ) Ex. P, at SUM 10973–74. Penington was copied on the emails. Id. In the process of deciding that Summit would absorb the cost of providing additional privacy screens, Finch pointed out that “the clinic minimums are attractive (40 and 90%).” Id. Moczul responded as follows:

I will go ahead and order another 30 [privacy screens]. That will be awesome to get 90%. We may have to talk about a gameplan of ensuring that the APS crew we talk to each week is aware of this because I wouldn't want them to be surprised with that first invoice. Just to give you an idea, the average estimate over the first two weeks has been 320 and our average screen/clinic is more like 70.

Id. Ex. P at SUM 10973. At his deposition, Moczul testified that he did not recall having any follow-up discussions about the issues raised in these emails, nor did he recall informing Watson that the estimates would be used for billing purposes. Id. Ex. D, at 33:7–12, 211:19–212:3. Penington and Finch similarly could not recall subsequent discussions concerning Moczul's email. Decl. of Howard S. Wolfson (Amend) Ex. M, at 207:5–208:23; id. Ex. T, at 296:10–17. Moczul prepared an initial invoice for January 2011 in February of that year, but he informed Penington and Finch that he would hold off on sending it until the Agreement was signed. Decl. of Howard S. Wolfson (MSJ) Ex. R, S.

The parties dispute whether—and to what extent—Summit actually relied on the Watson estimates in preparing for clinics. The record contains emails from Moczul that suggest that, at a minimum, Summit relied on the online appointment system in making last-minute staffing adjustments for some of the clinics. See id. Ex. L. Moczul concedes that, when inputting participation estimates into Summit's proprietary “APEX” computer system, it was “common practice” for Summit to use numbers lower than those provided by their customers. Decl. of Jason Moczul (MSJ) ¶¶ 19–21.

In early 2011, still prior to the execution of the Agreement, there were a number of performance issues with the online appointment system, including a glitch that allowed a limited number of participants to see other participants' appointments. Decl. of Richard Penington (MSJ) ¶¶ 13–14. To remedy the privacy issue, the system had to be shut down for over two weeks in March. Id. ¶ 14. On March 8, Vaccaro alerted Penington to additional complaints about Summit's performance. Id. ¶ 15. These complaints included issues with the level of staffing being provided, allegations that staff members were inadequately trained, and reports of equipment malfunctions. Id.

Also around that time, Summit realized that screening results, which included confidential patient...