Kuchenmeister v. Healthport Techs., LLC

Citation: 309 F. Supp. 3d 1342Docket: CIVIL ACTION NO. 1:17–CV–1001–RWS

Court: District Court, N.D. Georgia; January 8, 2018; Federal District Court

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Defendants Ciox Health, LLC have filed motions to dismiss the claims against them citing Rules 12(b)(6), 9(b), and 12(b)(1). Ciox processes medical records requests for healthcare providers and is required to comply with various regulations, including HIPAA and HITECH. Named Plaintiffs allege that Ciox charged fees for medical records that exceeded permissible amounts under these regulations. They filed a Class Action Complaint asserting six claims: breach of contract, unjust enrichment, money had and received, fraud, negligent misrepresentation, and violations of the Fair Business Practices Act, along with requests for punitive damages and attorneys' fees.

In regards to the breach of contract claim, Plaintiffs argue they are intended beneficiaries of the contracts between their healthcare providers and Ciox, which Ciox breached by violating HIPAA and DHHS guidelines. However, Defendants contend that Plaintiffs lack standing as they were not intended third-party beneficiaries. The Court agrees with Defendants, noting the necessity to apply state law for contract interpretation. A choice of law provision in Ciox's contract with one Plaintiff requires Minnesota law, while the contracts for the other Plaintiffs could involve either Georgia or Minnesota law. Both jurisdictions require clear intent from the contracting parties for a third party to be considered a beneficiary; mere incidental benefit is insufficient for standing. The Court will analyze the claims under both states' laws, which align on this principle.

Courts assess the intent of contracting parties regarding third-party beneficiaries by examining the contract's language. For a third party to be considered a beneficiary, there must be a clear expression of intent within the contract. In this case, three contracts explicitly state that no third party is intended to benefit and that no legal rights or remedies are conferred upon any third party. The contracts include clauses indicating they are solely for the benefit of the parties involved, thus precluding the plaintiffs’ breach of contract claims. The plaintiffs are deemed incidental beneficiaries, who lack standing to enforce the contracts. The referenced Minnesota duty-owed test does not apply, as the parties have expressly agreed that there are no third-party beneficiaries. Consequently, the court concludes that the plaintiffs do not have standing for their breach of contract claims.

Regarding unjust enrichment and money had and received, the defendants assert these claims are barred by the voluntary payments doctrine, which states that payments made voluntarily, with full knowledge of the circumstances and without fraud or deception, cannot be recovered. The plaintiffs contend their payments were made under duress due to fraud, which they argue should exempt them from this rule. However, according to the doctrine, voluntary payments are non-recoverable, regardless of the payer's legal obligation to make such payments.

Plaintiffs acknowledged knowledge of the facts and law regarding the charges from Ciox but made payments they considered incorrect. Under the voluntary payments doctrine, recovery is barred if a plaintiff pays an invoice knowing of an overcharge or having the ability to discover it. In Georgia, even paying "under protest" does not affect this doctrine, as stated in O.C.G.A. § 13-1-13. Minnesota law is similar, requiring that payments made under duress are the only exception to this rule. Plaintiffs did not allege payments under duress; their claim of paying to avoid collection attempts does not meet the legal standard for duress in either Georgia or Minnesota. Consequently, their claims of unjust enrichment and money had and received fail as a matter of law.

Regarding fraud and negligent misrepresentation claims, Defendants argue these fail due to the absence of false statements and a lack of justifiable reliance. For a fraud claim, essential elements include a false representation, intent, inducement, reliance, and resulting injury. Similarly, negligent misrepresentation requires the negligent supply of false information and reasonable reliance. Defendants contend that Plaintiffs did not identify any false representations, while Plaintiffs argue that systemic overcharging on invoices constitutes misrepresentation. The Court finds that Plaintiffs sufficiently pled their claims, pointing to allegations of inflated charges exceeding $6.50 and detailed invoice descriptions attached to the Complaint, thus meeting the heightened pleading standards of Federal Rule of Civil Procedure 9.

Plaintiffs' claims are dismissed as they failed to justifiably rely on invoices containing acknowledged incorrect charges, which they paid "under protest." This lack of justifiable reliance undermines their fraud and negligent misrepresentation claims. Additionally, Plaintiffs' claim under the Georgia Fair Business Practices Act (FBPA) is also dismissed. The FBPA prohibits unfair practices in consumer transactions but does not apply to actions regulated by state or federal agencies. Plaintiffs' reliance on DHHS guidance regarding patient rates for electronic records is insufficient, as this guidance is non-regulatory and does not establish a binding rule. Furthermore, Plaintiffs lack standing as third-party beneficiaries to assert claims based on Business Associate Agreements. Consequently, all claims except one breach of contract claim are dismissed. The motion to dismiss is granted for the remaining claims, and the case is ordered closed. Defendants Healthport Technologies, LLC and IOD Incorporated merged in 2015, with Healthport changing its name to Ciox Health, LLC.