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Vidstone, LLC v. Carnival Corp.

United States District Court, D. Colorado

September 7, 2017

VIDSTONE, LLC d/b/a ATSHORE SERVICES, Plaintiff,
v.
CARNIVAL CORPORATION, Defendant.

          FINAL ORDER

          DAVID M. EBEL U.S. CIRCUIT COURT JUDGE DISTRICT OF COLORADO

         This case arises out of a billing dispute between Atshore Services (Atshore) and Carnival Corporation (Carnival). Carnival is a prominent international cruise line that retained Atshore to assist with coordination of medical services for ship employees and one passenger. Atshore is a small company that provides concierge-type services to cruise lines seeking to provide medical care for their employees at a first-class facility called Hospital Bendana in San Pedro Sula, Honduras. For almost a year, Carnival paid Atshore's invoices in full, but then it began withholding payment on the ground that Atshore's supporting documentation was inadequate. Nevertheless, Carnival continued to request Atshore's services, including on one occasion asking Atshore to coordinate the emergency medical treatment of an injured passenger. Atshore provided those services, but there remains an outstanding balance on some of Atshore's invoices.

         Atshore now brings this lawsuit to recover on a contract for Carnival's employees, as well as a contract for the injured passenger. After a three-day bench trial, the Court determines the following:

1. There existed a contract wherein Atshore would charge Carnival for Hospital Bendana's charges, as well as other direct expenses incurred by Atshore in coordinating the medical treatment;

2. Under the contract to assist Carnival's employees, Carnival's outstanding balance is measured by the cost of medical care at Hospital Bendana, offset by excess payments already rendered on the disputed accounts, so it owes an outstanding balance of $ 19, 342.40.

3. Under the agreement to assist Carnival's injured passenger, Carnival owes an outstanding balance of $ 61, 588.90

         I. FACTUAL BACKGROUND

         A. Agreement to Coordinate Healthcare Services for Carnival Employees

         Carnival finances and coordinates the medical treatment of its own ship employees. Most of these employees, however, are not U.S. nationals. That means sending these employees to the United States for medical treatment would necessarily require getting approval from U.S. immigration authorities, which often proved to be unpredictable or unworkable. Moreover, the cost of healthcare in the United States is more expensive than the cost of the same care in other countries, in part because of U.S. providers' costly malpractice insurance which gets passed on to healthcare consumers. For these reasons, Dr. John Bradberry, Carnival's medical director, was interested in alternatives to sending Carnival's employees to the United States for treatment.

         Along came Sergio Aguirre, director and principal member of Atshore Services. Dr. Bradberry met Aguirre sometime in 2010 and learned that Aguirre's family operated a first-class medical facility called Hospital Bendaña in San Pedro Sula, Honduras. This was an appealing opportunity for Carnival because, instead of sending its employees to Miami, Florida or Houston, Texas for medical treatment, it could save money on lower-cost care at Hospital Bendaña and could avoid the difficulties of American immigration rules.

         On March 8, 2011, Dr. Bradberry sent an e-mail outlining what Carnival was looking for in a potential arrangement with Atshore. The e-mail provided:

What would be of potential interest to us is a comprehensive cost saving package that includes local transportation service such as airport pick up, budget rate lodging for when the crew members are not an impatient [sic], meals for both when in patient [sic] and outpatient and assistance with immigration issues. . . . Our new approach is to streamline by preferably using a hospital affiliated billing service that submits to us one itemized comprehensive invoice per month whether one crew member or ten crew members were treated that month and that includes incidental charges such as lodging and ot [sic] of hospital meals. We would in turn issue one check to the billing service to cover all charges that were reviewed and approved from our end.

Pl. Ex. 111 (emphasis added). Both parties understood from this emerging arrangement that Atshore would, in addition to the actual medical care of Carnival's employees, coordinate related services designed to facilitate the patient's treatment while in Honduras, e.g., assist with travel arrangements and visa requirements, coordinate any air ambulance to the hospital if necessary, language translation services, etc.

         But the parties were not on the same page with regard to other details of the arrangement. Based on Aguirre's representations, Dr. Bradberry believed that Aguirre and Hospital Bendaña were a “unified joint operation, ” and that the two were “synonymous” with each other. In fact, that was essential to Dr. Bradberry's willingness to deal with Atshore, testifying that he would not have entered the arrangement with Atshore if it were some “anonymous third party administrator.” Moreover, Atshore continued to represent that it was synonymous with Hospital Bendaña throughout its business dealings with Carnival. For example, on one occasion, Aguirre referred to Hospital Bendaña as “our facility, ” Pl. Ex. 174, and in another instance he stated that “we always are open for treating your patients!” Pl. Ex. 1711. Moreover, Atshore's invoices sent to Carnival throughout the relationship confirmed Dr. Bradberry's initial impression. Each of Atshore's invoices resembled actual hospital bills, itemized for different medical services or costs, and were not accompanied by any separate underlying invoices from Hospital Bendaña itself.[1] Because Carnival received only the Atshore invoices, with no underlying bills from Hospital Bendaña, Carnival assumed that Atshore's invoices merely passed along the Hospital's charges with no price adjustment.

         While Aguirre was connected to the Hospital by way of his family relationships, the reality was quite different from what Carnival understood. Rather than operate as the hospital's billing service, Atshore paid Hospital Bendaña up front for all medical services rendered to Carnival employees, and then turned around and charged Carnival for those expenses, plus a substantial premium to cover Atshore's overhead and direct expenses. At no time did Carnival know that this was how Atshore was running its operation.

         Because Carnival believed that Atshore was merely a hospital-affiliated billing entity that performed related coordinating services to facilitate medical care at Hospital Bendaña, Carnival expected that Atshore's invoices reflected the actual cost of medical care and other direct expenses. In Carnival's mind, Atshore would either be compensated by the Hospital because it was a unified operation with the Hospital, or it was recovering a profit on the margin between the actual cost billed to Carnival and a discounted rate charged by the Hospital to Atshore because of the volume that Atshore was bringing to the Hospital.

         Atshore, on the other hand, operated under a fundamentally different assumption about how it would bill for services. Atshore assumed that the parameters of its agreement with Carnival enabled it to charge Carnival any amount that was reasonable and substantially cheaper than the cost of care in Miami. Throughout the relationship Aguirre maintained internally a master list of services, pharmaceuticals, and medical devices provided by Hospital Bendaña with a price he would charge Carnival for each item. When Hospital Benaña provided him a spreadsheet of services rendered for a particular Carnival patient, Aguirre would plug those items into his master list and generate his own charge, which he would then bill to Carnival. In general, this fee was substantially higher than the actual cost charged by the Hospital to Atshore, but the markup was designed to cover Atshore's own overhead expenses along with other direct expenses for coordination services, with an additional surplus to ensure an overall profit margin. Under this model, Atshore generally did not itemize its direct expenses in the invoices sent to Carnival, but rather attempted to cover those expenses by inflating the medical charges from Hospital Bendaña.

         For almost a year, Atshore billed Carnival under this model and received payment in full on each invoice. Each time a Carnival employee needed treatment at Hospital Bendaña, Carnival would send an authorization letter to Atshore requesting its services. On almost all of these letters, Carnival directed Atshore to provide all medical reports to ensure that Carnival had a complete medical file for each treated employee, and to “forward all medical bills with supporting receipts” to Carnival. Pl. Ex. 151-3, 6-11, 12-13, 16-18. When Carnival concluded that Atshore was not sending complete records of medical reports, it began only partially paying on some invoices, and denying all payment on others.

         Atshore has now brought a breach-of-contract claim against Carnival to compel payment of the outstanding balances for twenty-one Carnival employees and one Carnival passenger, discussed next.

         B. Agreement to Coordinate Emergency Medical Services for ...


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