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