Ultramed, Inc. v. Beiersdorf-Jobst, Inc.

Citations: 98 F. Supp. 2d 609; 1998 U.S. Dist. LEXIS 22952; 1998 WL 1543562Docket: 96-1555

Court: District Court, M.D. Pennsylvania; June 24, 1998; Federal District Court

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Ultramed, Inc. has filed a complaint against Beiersdorf-Jobst, Inc. in a diversity action, alleging breach of contract, express and implied warranties, fraud in the inducement, and indemnification, seeking $2.1 million in damages for overbilling Medicare based on misleading representations from Jobst regarding the reimbursement eligibility of Jobst Extremity System 7500 pumps. Specifically, Ultramed claims it was led to believe the pumps qualified for a higher reimbursement rate of $4,500 under Code EO 652, while they actually qualified for a lower rate of $1,500 under EO 651. The Health Care Financing Administration ruled in November 1992 that the pumps should be billed under EO 651. Subsequently, Ultramed faced a Qui Tam lawsuit for improper billing and settled by paying the government $2.1 million in 1994.

In support of its motion for summary judgment, Jobst argues that Ultramed waived its indemnity claims by not notifying Jobst before settling with the government, by including unrelated claims in the settlement agreement, and by failing to secure a joint tortfeasor release from the government. Jobst also contends that Ultramed's complaint does not state a valid cause of action. The court cites the Celotex Corp. v. Catrett standard for summary judgment, affirming that summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law, especially when the nonmoving party cannot establish an essential element of their case.

The moving party is entitled to judgment as a matter of law due to the nonmoving party's inability to meet the burden of proof on an essential case element. Credible contradictory evidence can defeat a summary judgment motion. A factual dispute exists regarding the notice Jobst received from Ultramed about the lawsuit and settlement, with Ultramed claiming notice was sent and Jobst denying receipt. Under Pennsylvania law, failure to provide notice does not waive Ultramed's right to indemnity. The Pennsylvania Superior Court has established that an indemnitee must justify damages in a subsequent action if the indemnitor received no notice of the first action or settlement, allowing the indemnitor to challenge the settlement's necessity and amount.

Defendant claims judgment is warranted because a release between the government and Ultramed involved unrelated claims, which they argue prevents contribution from the defendant. However, the plaintiff asserts they are not seeking contribution but full payment due to the defendant's misrepresentations. The plaintiff argues that references to other products in the Release are unnecessary and that the primary product involved was the Jobst pump, indicating a factual dispute regarding the intent behind the Release's execution. Additionally, the defendant contests the plaintiff's right to contribution based on the assertion that the joint tortfeasors' release does not comply with the Uniform Contribution Among Tortfeasors Act.

Plaintiff does not categorize the defendant as a joint tortfeasor and does not seek contribution, which undermines the defendant's argument. The defendant asserts that communications from Jobst to Ultramed do not support the submission of invoices for reimbursement under Code EO 652 and instead act as disclaimers. Conversely, the plaintiff claims that a letter from Angelo R. Periera, the Director of Quality Assurance and Regulatory Affairs for the defendant, explicitly stated that the Extremity Pump System 7500 was reimbursable under EO 652, and that employees of the defendant encouraged filing for reimbursement. The plaintiff further alleges that the defendant was notified on November 15, 1992, that the pump was ineligible for EO 652 reimbursement but did not inform the plaintiff until March 4, 1993, after the pumps had been sold. The plaintiff's indemnity claim is based on the Restatement (Second) of Torts 886B(2)(c), which allows for indemnity when a party is unjustly enriched after another discharges liability due to misrepresentation. The plaintiff asserts reliance on the defendant's misrepresentation when submitting invoices and states that the decision to purchase the pumps was influenced by expected higher reimbursement. The letter from Periera does not conclusively represent a disclaimer and allows for multiple interpretations, as do the oral statements by the defendant's employees, indicating factual disputes that require resolution by a jury. Additionally, the implications of a 1989 letter from a Medicare intermediary and the verification by Ultramed in submitting HCFA 1500 Forms are also factual questions. Consequently, the motion for summary judgment by the defendant is denied.