The Everett Clinic, PLLC v. Premera

• Decision Date: 03 January 2023
• Docket Number: 82687-5-I
• Parties: THE EVERETT CLINIC, PLLC, a Washington limited liability company Appellant, v. PREMERA, a Washington corporation, and PREMERAFIRST, INC., a Washington corporation Respondent.
• Court: Washington Court of Appeals

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THE EVERETT CLINIC, PLLC, a Washington limited liability company Appellant, v. PREMERA, a Washington corporation, and PREMERAFIRST, INC., a Washington corporation Respondent.

No. 82687-5-I

Court of Appeals of Washington, Division 1

January 3, 2023

UNPUBLISHED OPINION

CHUNG J.

Premera a health care insurer, had separate contractual agreements with the Everett Clinic (TEC) and Eastside Family Medical Clinic (EFMC) for health care services provided to Premera enrollees. In 2018, TEC purchased certain assets of EFMC and began charging Premera the reimbursement rate under the TEC-Premera contract for the services at that location. Premera continued to reimburse at the lower rate set out in the EFMC-Premera contract. TEC sued for breach of contract and declaratory judgment. Premera counterclaimed for breach of contract, tortious interference, and violation of the Consumer Protection Act (CPA), ch. 19.86 RCW. The trial court granted Premera's motion for summary judgment on TEC's claims for breach of contract and declaratory relief and on Premera's CPA claim. The trial court also awarded Premera attorney fees and costs.

We conclude that the TEC-Premera contract allows TEC to charge the higher reimbursement rate at the newly acquired location and that TEC is not bound by the EFMC-Premera Agreement under principles of successor liability. Additionally, Premera has failed to establish that TEC engaged in unlawful tying in violation of the CPA. Therefore, we reverse the grant of summary judgment for Premera on both the contract and CPA claims, reverse the awards to Premera of attorney fees and costs, and remand for entry of summary judgment for TEC on its breach of contract and declaratory judgment claims.

FACTS

Premera is a not-for-profit company that provides health insurance plans to more than two million people in Washington State. Premera has contracts for standard reimbursement rates with many health care providers. Some health care providers can command much higher reimbursement rates due to their market power. Premera negotiates directly with these providers to establish their rates. The Everett Clinic (TEC) is one such provider.

TEC is a large physician group operating multiple clinics that provide health care services in Washington. As of May 2019 TEC had 550 clinicians serving 320,000 patients in 30 locations. TEC is the dominant health care provider in Snohomish County. In 2009, TEC and Premera entered into a contract for TEC (TEC Agreement) to provide services to Premera enrollees at an agreed rate. Premera pays TEC among the highest rates in Washington due to TEC's market power in Snohomish County.

TEC was well-known and respected in Snohomish County but had little presence in King County. TEC wanted to grow and acquire medical groups in King County in order to increase its brand presence. To that end, TEC became interested in purchasing Eastside Family Medical Clinic (EFMC), a small Bellevue medical practice owned by three physicians. On December 1 2018, TEC finalized an asset purchase agreement of certain assets of EFMC, and the clinic became part of TEC.

Prior to the purchase by TEC, EFMC had its own contract with Premera (EFMC Agreement) that had a much lower reimbursement rate. The TEC purchase agreement did not list the EFMC Agreement as a purchased asset or assigned contract. Because it was not an assigned contract, TEC considered the EFMC Agreement to be an excluded asset for the purpose of its purchase agreement. In November 2018, before the asset purchase agreement closed, TEC requested that Premera begin to pay TEC's rates from the TEC Agreement (TEC rate) at the Bellevue clinic^[1] as of January 1, 2019. Premera refused and offered instead to pay a "blended rate," which TEC did not accept.

When it assumed operations at EFMC, TEC began charging the TEC rate at the Bellevue clinic. Premera instead continued to reimburse for services provided at the Bellevue clinic at the rate established by the EFMC Agreement. The TEC Agreement expired at the end of 2020. In October 2020, Premera sent a proposal for 2021 rates, to which TEC did not respond.

In September 2019, TEC filed a complaint for breach of contract against Premera, requesting damages and a declaration of rights under the TEC Agreement. Premera answered with counterclaims for breach of the TEC Agreement by TEC, breach of the EFMC Agreement by EFMC, tortious interference with the EFMC Agreement by TEC and the prior physician owners of EFMC and a violation of the Consumer Protection Act (CPA) through an unlawful tying arrangement. Premera also asserted as an affirmative defense that TEC is bound by the EFMC Agreement under the doctrine of successor liability. EFMC moved to dismiss Premera's counterclaims for tortious interference and breach of contract. The trial court granted EFMC's motion and dismissed EFMC and its prior physician owners from the case.

In April 2020, Premera filed its own lawsuit against TEC and EFMC requesting a declaratory judgment that the EFMC Agreement continues in full effect and that TEC has breached the TEC and EFMC Agreements. The trial court consolidated the two lawsuits, but they retained their separate identities.

TEC filed a motion to dismiss Premera's claims in the second suit. The trial court granted the motion and awarded attorney fees and costs after finding that Premera initiated the lawsuit in bad faith. Premera appealed, and this court reversed the dismissal and the award of attorney fees.^[2] That case is now stayed pending resolution of this appeal.

In this case, in January 2021, TEC filed a motion for partial summary judgment on Premera's counterclaims, which the court denied. In March 2021, Premera moved for summary judgment on its CPA claim and TEC's claims for breach of contract and declaratory relief. Also in March 2021, TEC filed a second summary judgment motion on its claims for breach of contract and declaratory relief. The trial court granted Premera's summary judgment motion and denied TEC's second summary judgment motion. The trial court also denied TEC's motion for reconsideration and entered an award and a supplemental award of attorney fees and costs for Premera.

TEC appeals.

ANALYSIS

We review orders on summary judgment de novo. Kim v Lakeside Adult Family Home, 185 Wn.2d 532, 547, 374 P.3d 121 (2016). Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Folsom v. Burger King, 135 Wn.2d 658, 663, 958 P.2d 301 (1998) (citing CR 56(c)). We consider the evidence and reasonable inferences in the light most favorable to the nonmoving party. Kim, 185 Wn.2d at 547. To defeat summary judgment, the opposing party must set forth specific facts showing a genuine issue of material fact and may not rely on allegations or self-serving statements. Newton Ins. Agency & Brokerage, Inc. v. Caledonian Ins. Grp., Inc., 114 Wn.App. 151, 157, 52 P.3d 30 (2002).

I. Contract Claims

Premera's relationships with both TEC and EFMC are governed by contract. Washington follows the objective manifestation theory of contracts where "we attempt to determine the parties' intent by focusing on the objective manifestations of the agreement, rather than the unexpressed subjective intent of the parties." Hearst Commc'ns, Inc. v. Seattle Times Co., 154 Wn.2d 493, 503, 115 P.3d 262 (2005). Therefore, "[m]utual assent of the parties must be gleaned from their outward manifestations." Saluteen-Maschersky, 105 Wn.App. 846, 854, 22 P.3d 804 (2001). Subjective intent lacks relevance if intent can be determined from the actual words used. Hearst, 154 Wn.2d at 503-04. The court must examine the reasonable meaning of the words used, giving effect to their ordinary, usual, and popular meaning unless the entirety of the agreement clearly demonstrates a contrary intent. Id. at 504. "Courts will not revise a clear and unambiguous agreement or contract for parties or impose obligations that the parties did not assume for themselves." Condon v. Condon, 177 Wn.2d 150, 163, 298 P.3d 86 (2013).

A trial court may examine extrinsic evidence "for the limited purpose of construing the otherwise clear and unambiguous language of a contract in order to determine the intent of the parties." Go2Net, Inc. v. C I Host, Inc., 115 Wn.App. 73, 84, 60 P.3d 1245 (2003). Thus, extrinsic evidence relating to the context of the agreement may be examined to determine the meaning of specific words and terms used, but cannot show "intention independent of the instrument" or "vary, contradict or modify the written word." Hollis v. Garwall, Inc., 137 Wn.2d 683, 695-96, 974 P.2d 836 (1999). "The court considers the relevant evidence of the situation and relations of the parties, the subject matter of the transaction, preliminary negotiations and statements made in those negotiations, trade usage, and the course of dealing between the parties." Diamond B Constructors, Inc. v. Granite Falls Sch. Dist., 117 Wn.App. 157, 161, 70 P.3d 966, 968 (2003).

Both the TEC and EFMC Agreements include the same provisions on assignment or transfer and on change in ownership or control. Section 9.02 of both agreements reads:

A. Assignment or Transfer. Provider shall not assign or transfer, or attempt to assign or transfer, the rights duties or obligations of this Agreement, in whole or in part, including but not limited to assignment or transfer by operation of law, to another Provider, Practitioner, person or entity, or apply or attempt to apply the terms of this Agreement, in whole or in part, to Covered Services provided to Enrollees by another Provider, Practitioner, person or entity, without Plan's prior written consent.

B. Change in Ownership or Control. Any change

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