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Catholic Health Initiatives Physician Services, LLC v. Medsynergies, LLC

United States District Court, D. Colorado

April 10, 2018

CATHOLIC HEALTH INITIATIVES PHYSICIAN SERVICES, LLC, Plaintiff/Counter Defendant,
v.
MEDSYNERGIES, LLC, Defendant/Counter Claimant/Third-Party Plaintiff,
v.
CATHOLIC HEALTH INITIATIVES, Third-Party Defendant.

          ORDER

          Michael E. Hegarty, United States Magistrate Judge.

         Plaintiff Catholic Health Initiatives Physician Services, LLC (“Plaintiff”) initiated this action in District Court, County of Denver, Colorado, on August 18, 2017. MedSynergies, LLC (“Defendant”) removed the action to this Court on January 19, 2018, pursuant to 28 U.S.C. §§ 1332(a), 1441, and 1446(b)(3). Defendant now files the present Partial Motion to Dismiss two of the three claims Plaintiff asserts against it in the operative Complaint. Following review of the motion and briefing, the Court finds Plaintiff has plausibly stated a claim for breach of the implied covenant of good faith and fair dealing but fails to do so for its unjust enrichment claim. Therefore, the motion is granted in part and denied in part.

         BACKGROUND

         I. Facts

         The following are factual allegations made by Plaintiff in the operative Complaint, which are taken as true for analysis under Fed.R.Civ.P. 12(b)(6) pursuant to Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         Catholic Health Initiatives[1] (“CHI”) is a Colorado faith-based nonprofit corporation that operates 104 healthcare facilities in seventeen states. Compl. ¶¶ 4, 10, ECF No. 5. It has over 90, 000 employees, of whom approximately 4, 300 are physicians. Id. ¶ 10. Prior to 2012, CHI invested significant resources seeking to increase efficiency and decrease costs by standardizing the process CHI's physician groups used to manage their revenue cycles. Id. ¶¶ 11-12, 17. After some exploratory period, CHI retained Defendant to conduct financial and operational assessments of five of its physician groups. Id. ¶ 13. After the assessment, Defendant reported that it could increase cash collections by $50 million annually in those five locations. Id. ¶ 17. Based on this assessment, CHI and Defendant entered into a joint venture in which those parties formed Plaintiff, [2] and Plaintiff and Defendant entered into a contractual relationship (a Master Service Agreement (“MSA”) and Statement of Work (“SOW”)) in which Plaintiff agreed that Defendant would be the exclusive provider of revenue cycle services to each of CHI's physician enterprises. Id. ¶¶ 1, 17-19.

         Under the terms of the MSA, Plaintiff would pay Defendant an implementation fee of up to $8 million as well as 11.94% of the proceeds Plaintiff received from the physician enterprises. Id. ¶ 22. For its end, Defendant agreed to a performance guarantee of a $100 million increase in revenue after three years, measured against a pre-agreement baseline, and Defendant's fee could increase or decrease based on the revenue cycle performance in relation to that guarantee. Id. ¶¶ 24-27; Ex. B at 97, ECF No. 3. While the MSA tied Defendant's fee to revenue performance in relation to the guarantee, the MSA did not always specify the “Service Level” standards to monitor Defendant's performance. Compl. ¶¶ 26-27, 58.

         The parties then began implementing Defendant's services at CHI providers. Defendant's revenue cycle operations began going “live” in CHI facilities in January 2014 and continued to reach additional markets in 2015. Id. ¶¶ 29-30. However, the parties eventually discovered that CHI revenue decreased under Defendant's services as compared to the baseline. Id. ¶ 31. Defendant's performance did not improve in 2015. Id. ¶ 33. In late 2015, Defendant stopped reporting its collection performance against the contractual baseline. Id.

         In early 2016, both parties' management met to discuss revised performance metrics and updated goals. Id. ¶ 34. Subsequent meetings failed to produce an agreement. Id. ¶¶ 34-37. On June 8, 2017, Plaintiff notified Defendant that it was terminating the agreement on the grounds of Defendant's material breaches of its duties. Id. ¶ 49. As of April 2017, Plaintiff had paid Defendant over $325 million in fees and expected to pay approximately $90 million more by the end of 2017. Id. ¶ 50. This suit followed.

         II. Procedural History

         Plaintiff filed its Complaint in Colorado state court on August 18, 2017. Compl. 1, ECF No. 5. Defendant removed the suit to this Court on January 19, 2017. Notice of Removal, ECF No. 1. In its Complaint, Plaintiff brought three claims for relief: (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, and (3) unjust enrichment. Defendant now asks the court to dismiss Claims Two and Three, because Plaintiff has failed to plausibly state a claim for relief for those claims. Mot., ECF No. 23.

         LEGAL STANDARD

         “To survive a motion to dismiss, 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 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Plausibility, in the context of a motion to dismiss, means that the plaintiff pled facts which allow “the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. Twombly requires a two-prong analysis. First, a court must identify “the allegations in the complaint that are not entitled to the assumption of truth, ” that is, those allegations which are legal conclusions, bare assertions, or merely conclusory. Id. at 678-80. Second, the Court must consider the factual allegations “to determine if they plausibly suggest an entitlement to relief.” Id. at 681. If the allegations state a plausible claim for relief, such claim survives the motion to dismiss. Id. at 680.

         Plausibility refers “to the scope of the allegations in a complaint: if they are so general that they encompass a wide swath of conduct, much of it innocent, then the plaintiffs ‘have not nudged their claims across the line from conceivable to plausible.'” Khalik v. United Air Lines, 671 F.3d 1188, 1191 (10th Cir. 2012) (quoting Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008)). “The nature and specificity of the allegations required to state a plausible claim will vary based on context.” Kan. Penn Gaming, LLC v. Collins, 656 F.3d 1210, 1215 (10th Cir. 2011). Thus, while the Rule 12(b)(6) standard does not require that a plaintiff establish ...


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