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Scott & White Memorial Hospital v. Aetna Health Holdings, LLC

United States District Court, W.D. Texas, Waco Division

March 27, 2018

SCOTT & WHITE MEMORIAL HOSPITAL, Plaintiff,
v.
AETNA HEALTH HOLDINGS, LLC, as successor by merger to COVENTRY HEALTH CARE, INC., et al., Defendants.

          ORDER

          ROBERT PITMAN, UNITED STATES DISTRICT JUDGE

         Before the Court is the report and recommendation of United States Magistrate Judge Jeffrey C. Manske, (Dkt. 96). Defendant ARM, Ltd. (“ARM”) filed a motion to dismiss for failure to state a claim upon which relief can be granted. (Dkt. 26). The motion was referred to Judge Manske for findings and recommendations pursuant to 28 U.S.C. § 636(b)(1)(B), Federal Rule of Civil Procedure 72, and Rule 1(d) of Appendix C of the Local Rules of the United States District Court for the Western District of Texas. Judge Manske entered a report and recommendation on February 28, 2018, (Dkt. 96), which recommends that the Court grant the motion. Plaintiff Scott & White Memorial Hospital (“Scott & White”) timely filed objections to the report and recommendation on March 14, 2018. (Dkt. 108). Scott & White is therefore entitled to de novo review of the portion of the report and recommendation to which it has objected. See 28 U.S.C. § 636(b)(1)(C) (“A judge of the court shall make a de novo determination of those portions of the report or specified findings or recommendations to which objection is made.”).

         I. BACKGROUND

         This case arises from a contract dispute. Scott & White, a health care provider, entered into a contract (the “Hospital Agreement”) with Coventry Health Care National Network, Inc. (“Coventry”), a preferred health care provider network. Coventry creates this network with a series of contracts: hospitals and physicians on one side, and insurance companies, employer health plans, managed care organizations, and third-party administrators on the other. (Am. Compl., Dkt. 18, ¶ 21). The subscribers to the network receive access to preferred health care providers at discounted rates. (Id.). Scott & White agreed via the Hospital Agreement to provide health care services to Coventry network subscribers. In exchange, Coventry agreed to list Scott & White in its national provider network and to bind the network subscribers to pay for health care services provided by Scott & White. (Id. ¶ 23). Two other contracts-the Third Party Administrator Agreement (“TPA Agreement”) and the Administrative Services Agreement-tie the remaining defendants into the network.

         Scott & White contends that Tanadgusix Corporation Health & Welfare Trust (the “Trust”) has underpaid at least thirty-nine health care claims arising from the care for a particular patient, totaling over $1.5 million. (Id. ¶ 6). Scott & White alleges that this failure to pay breached the contractual relationships between Scott & White and the various defendants. Scott & White brings claims for breach of contract against Coventry, and, in the alternative, ARM and the Trust. It also seeks a declaration that either Coventry, ARM, or the Trust is obligated to pay Scott & White for health care services provided to the patient at the rates set out in the Hospital Agreement.

         ARM has moved to dismiss all claims against it on the ground that it is not in privity with Scott & White because it is not a party to the contract Scott & White signed (the Hospital Agreement) and Scott & White is not a party to the contract ARM signed (the TPA Agreement). ARM contends that these circumstances preclude Scott & White from asserting a contractual claim against ARM. Scott & White points to cases applying Texas law finding that under certain circumstances, different documents signed at different times can be read together as one agreement. ARM has countered that (1) Illinois law applies to the question of whether a contractual relationship exists between Scott & White and ARM (because the TPA Agreement includes an Illinois choice-of-law provision), and under Illinois law multiple documents cannot be considered parts of the same agreement when they were entered into at different times; and (2) even if Texas law applied, the cases relied upon by Scott & White to support its contention that the series of contracts at issue give it the right to bring a breach-of-contract claim against ARM are distinguishable from the facts of this case. Judge Manske recommends granting the motion to dismiss.

         II. LEGAL STANDARD

         A. Federal Magistrates Act

         Under federal statute and the Federal Rules of Civil Procedure, magistrate judges may make findings and recommendations on dispositive motions. 28 U.S.C. § 636(b)(1)(B); Fed.R.Civ.P. 72(b)(1). Motions to dismiss under Federal Rule of Civil Procedure 12(b)(6) are dispositive motions under the Federal Magistrates Act. Davidson v. Georgia-Pac., L.L.C., 819 F.3d 758, 763 (5th Cir. 2016) (citing 28 U.S.C. § 636(b)(1)(A)). Parties are entitled to de novo review of any part of the magistrate judge's recommendation that has been properly objected to. Fed.R.Civ.P. 72(b)(3).

         B. Federal Rule of Civil Procedure 12(b)(6)

         Pursuant to Rule 12(b)(6), a court may dismiss a complaint for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). In deciding a motion to dismiss, the Court “accepts all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff.” In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (citation and internal quotation marks omitted). “To survive a Rule 12(b)(6) motion to dismiss, a complaint ‘does not need detailed factual allegations, ' but must provide the [plaintiff's] grounds for entitlement to relief-including factual allegations that when assumed to be true ‘raise a right to relief above the speculative level.'” Cuvillier v. Taylor, 503 F.3d 397, 401 (5th Cir. 2007) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). That is, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570); see also In re Katrina Canal Breaches Litig., 495 F.3d at 205 (“Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).”) (citation and internal quotation marks omitted). However, “[t]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678. “[A] motion to dismiss under 12(b)(6) ‘is viewed with disfavor and is rarely granted.'” Turner v. Pleasant, 663 F.3d 770, 775 (5th Cir. 2011) (quoting Harrington v. State Farm Fire & Cas. Co., 563 F.3d 141, 147 (5th Cir. 2009)).

         III. DISCUSSION

         After reviewing de novo the portions of the report and recommendation to which Scott & White has objected, the Court declines to adopt the report and recommendation. The choice-of-law analysis should consider both agreements Scott & White contends form one comprehensive contract with ARM. The Court also declines to adopt the report's analysis of the motion to dismiss under Texas law. Scott & White has pleaded sufficient facts to survive ARM's motion to dismiss.

         A. ...


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