Franklin Parish Hospital Service District No 1 et al v. Fox Everett

Filing 27

MEMORANDUM RULING re 22 MOTION for Summary Judgment filed by Fox Everett. Signed by Judge Terry A Doughty on 5/24/2018. (crt,Crawford, A)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
MONROE DIVISION

FRANKLIN PARISH HOSPITAL
SERVICE DISTRICT NO. 1 and
FRANKLIN MEDICAL CENTER
EMPLOYEE BENEFIT PLAN AND
TRUST

CIVIL ACTION NO. 3:16-01061

JUDGE TERRY A. DOUGHTY

VERSUS
FOX-EVERETT A DIVISION OF
HUB INTERNATIONAL SOLUTIONS,
LLC

MAG. JUDGE KAREN L. HAYES

RULING
Plaintiffs Franklin Parish Hospital Service District No. 1 and Franklin Medical Center
Employee Benefit Plan and Trust, (hereinafter collectively “Franklin Medical Center”) brought
this lawsuit against the medical plan’s third-party administrator Fox-Everett A Division of HUB
International Solutions, LLC (hereinafter “Fox-Everett”) alleging discrepancies in claims
handling. Pending before the Court is a Motion for Summary Judgment filed by Defendant FoxEverett [Doc. No. 22] on the issue of attorney’s fees. Plaintiff Franklin Medical Center has filed
an Opposition [Doc. No. 25]. For the following reasons, the Motion for Summary Judgment is
DENIED.
I.

FACTS:
Plaintiff Franklin Medical Center entered into an agreement with Defendant Fox-Everett

to administer Franklin Medical Center’s self-insured employee benefit Plan. During the term of
the agreement, Franklin Medical Center became concerned that duplicate payments to healthcare
providers for employee healthcare claims were being directed by Fox-Everett. These concerns

were based, in part, by providers returning payments for claims which had previously been
remitted through Fox-Everett, and by Fox-Everett’s website portal data.
Upon discovery of the apparent discrepancies, Franklin Medical Center requested an
explanation and a comprehensive accounting of payments from Fox-Everett, a performance
objective required of Fox-Everett pursuant to the terms of the agreement. Franklin Medical Center
contends that Fox-Everett failed to provide the explanation or the comprehensive accounting
requested. Prior to initiating the instant proceeding, Franklin Medical Center contends it again
requested that Fox-Everett fulfill its duties under the terms of the agreement, to no avail.
Franklin Medical Center asserts that, as the result of meaningful responses from counsel
for Fox-Everett through the discovery process after the lawsuit was filed, the concerns which
initially drove Franklin Medical Center to initiate the instant matter were finally addressed.
Therefore, the claims asserted against Fox-Everett regarding discrepancies in claims handling are
not being pursued by Franklin Medical Center. Nevertheless, Franklin Medical Center is seeking
attorney’s fees, contending that the utter lack of response from Fox-Everett, which was required
of it by the agreement, necessitated Franklin Medical Center’s filing this lawsuit. Franklin Medical
Center states that, in the face of completely failing to respond to reasonable requests from Franklin
Medical Center, Fox-Everett now responds by stating “you had everything you needed to figure it
out”, and that is insufficient. Franklin Medical Center asserts that Fox-Everett owed a duty
imposed by the agreement, it failed to fulfill that duty, and that failure led to this point.
Because Franklin Medical Center’s claim against Fox-Everett is based on Fox-Everett’s
breach of the agreement due to its nonperformance under the terms of the agreement, Franklin
Medical Center argues that the plain language of the agreement requires indemnification to
Franklin Medical Center for its expenses, including reasonable attorney’s fees.

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Fox-Everett, on the other hand, contends that Franklin Medical Center is not entitled to
attorney’s fees under the indemnification agreement. Fox-Everett contends that, after it provided
Franklin Medical Center with a new copy of information that had been previously provided
throughout the relationship and that was at all times already in Plaintiffs’ possession, Franklin
Medical Center agreed to dismiss their substantive claims because they concluded there were no
factual basis for them. Fox-Everett asserts that the reason for Franklin Medical Center’s confusion
about alleged overpayments was apparently a misunderstanding of information in a web portal
provided by Fox-Everett that allowed Franklin Medical Center to access medical claim
information. Fox-Everett states that Franklin Medical Center nevertheless blames Fox-Everett for
their own misimpression, and now, even though they have admitted they had no claim, based on
information that has always been in their possession, they seek attorney’s fees from Fox-Everett.
Fox-Everett contends that the only potential source for an award of attorney’s fees is the
service agreement, and that the indemnity provision of the service agreement does not apply to
direct claims between the parties.
Fox-Everett has now moved for summary judgement. The motion is fully briefed, and the
Court is prepared to rule.
II.

LAW AND ANALYSIS
A.

Standard of Review

Under Federal Rule of Civil Procedure 56(a), A[a] party may move for summary judgment,
identifying each claim or defense--or the part of each claim or defense--on which summary
judgment is sought. The court shall grant summary judgment if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.@
The moving party bears the initial burden of informing the court of the basis for its motion by

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identifying portions of the record which highlight the absence of genuine issues of material fact.
Topalian v. Ehrmann, 954 F.2d 1125, 1132 (5th Cir. 1992); see also FED. R. CIV. P. 56(c)(1) (AA
party asserting that a fact cannot be . . . disputed must support the assertion by . . . citing to
particular parts of materials in the record . . . ). A fact is Amaterial@ if proof of its existence or
nonexistence would affect the outcome of the lawsuit under applicable law in the case. Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute about a material fact is Agenuine@ if
the evidence is such that a reasonable fact finder could render a verdict for the nonmoving party.
Id.
If the moving party can meet the initial burden, the burden then shifts to the nonmoving
party to establish the existence of a genuine issue of material fact for trial. Norman v. Apache
Corp., 19 F.3d 1017, 1023 (5th Cir. 1994). In evaluating the evidence tendered by the parties, the
Court must accept the evidence of the non-movant as credible and draw all justifiable inferences
in its favor. Anderson, 477 U.S. at 255.
B.

Attorney’s Fees under the Indemnity Agreement

The relationship between the parties was governed by a contract. The contract contains
two provisions related to attorney’s fees.

The first is found in a paragraph concerning

indemnification. It reads:
The Third Party Claims Administrator will indemnify and save
harmless Employer from any penalties, claims, liabilities, losses,
costs, damages or expenses (including reasonable attorneys’ fees)
resulting by reason of the Third Party Claims Administrator’s
negligence, dishonesty, fraud, or criminal actions in the
performance or nonperformance of its duties hereunder, its failure
to comply with any applicable laws, or its breach of this Agreement.
The indemnification clause further provides:
The indemnifying Party shall have the foregoing obligation only if
the indemnified Party provides the indemnifying Party with: (i) a
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prompt written notice of a claim subject to indemnification; (ii)
sole control and authority over the defense or settlement thereof;
and (iii) all available information, assistance, and authority
reasonably necessary to settle and/or defend any such claim or
action.
The second is found in conjunction with a paragraph allowing for the prevailing party
to obtain attorney’s fees should a claim be brought in arbitration:
In the event any dispute arises between the Parties in connection
with this Agreement and such dispute cannot be resolved by the
Parties, the Parties agree to submit the dispute to binding
arbitration before a single arbitrator administered by JAMS. Either
Party may submit the dispute to arbitration by providing the other
Party with written notice of its election to do same. The dispute
shall be heard at a mutually agreed location in the Jackson, MS
metropolitan areas. The arbitrator shall award the prevailing Party
its arbitration fees and its reasonable attorneys’ fees.
Franklin Medical Center did not bring a claim in arbitration. Instead, a suit was filed against FoxEverett alleging breach of fiduciary duty under ERISA, breach of contract, breach of common law
fiduciary, conversion, and silent fraud. Franklin Medical Center subsequently voluntarily agreed
to dismiss all these claims against Fox-Everett.
Fox-Everett asserts that the indemnity provision of the service agreement does not apply
to direct claims between the parties. It argues that the indemnity provision at issue provides that
the indemnity obligation on its part is enforceable “only if the indemnified Party provides the
indemnifying Party with: (i) a prompt written notice of a claim subject to indemnification; (ii)
sole control and authority over the defense or settlement thereof.” It states that Franklin Medical
Center has not alleged and there is no proof that they complied with this obligation, and, moreover,
the inclusion of this language makes unequivocal that the entirety of the indemnity clause was not
intended to apply to actions between the parties to the contract. It further argues this straight
forward interpretation of the indemnity clause is further buttressed by the fact the Agreement

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contains a provision providing for an award of attorney’s fees in a direct action between the parties
to the contract. The arbitration clause expressly states, “The arbitrator shall award the prevailing
Party its arbitration fees and its reasonable attorneys’ fees.” Fox-Everett contends Franklin
Medical Center eschewed arbitration by filing suit in court, thereby giving up their right to seek
an award of attorneys’ fees.
Franklin Medical Center responds that the indemnity provision of the service agreement
does apply to direct claims between the parties. In Wal-Mart Stores, Inc. v Qore, Inc., 647 F. 3d
237 (5th Cir. 2011), Wal-Mart had an indemnification agreement with three firms it had hired to
design and build a new store. After finding a defect in the structure, Wal-Mart sued each of the
firms for breach of contract and negligence. Once the jury rendered its verdict, finding that Qore
was negligent, Wal-Mart sought attorney fees pursuant to an indemnification agreement that
stated:
The Testing and Inspection Firm [Qore] further agrees to indemnify
and hold Wal-Mart free and harmless from any claim, demand, loss,
damage, or injury (including Attorney’s fees) caused by any negligent
act or omission by the Testing and Inspection Firm, its agents, servants,
or employees.
Id. at p. 243.
Before the Fifth Circuit was Qore’s contention that the foregoing indemnity provision only
applied to actions brought by third parties against Wal-Mart and did not authorize an award of
attorney’s fees in first-party disputes between Qore and Wal-Mart. In response, Wal-Mart argued
that the plain language of the agreement authorized attorney’s fees in any case, including cases
involving the contracting parties. Following Mississippi law, the district court applied a plain
reading of the contractual language and found attorney’s fees were allowed. In affirming the
district court’s finding, the Fifth Circuit also relied on the plain language of the contract.

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Additionally, the Fifth Circuit noted the district court’s explanation that “there [had been] a jury
finding that Qore was negligent, that negligence caused ‘loss, damage, or injury’ to Wal-Mart, and
that Wal-Mart was forced to sue Qore to recover.” Id. at p. 243.
This Court finds that the language in the Fox-Everett agreement mirrors the language of
the indemnity agreement at issue in Qore, and, therefore, does apply to a first-party dispute
between Franklin Medical Center and Fox-Everett. There are genuine issues of material fact which
preclude Fox-Everett from being entitled to judgment as matter of law. Franklin Medical Center
should have the opportunity at trial to establish Fox-Everett’s breach of contract and negligence in
the nonperformance of its duties mandated by the agreement, and the damages, if any, including
reasonable attorney’s fees, which were a consequence of the breach of contract and negligence in
the nonperformance of its duties.
III.

CONCLUSION
For the reasons set forth above, Defendant Fox-Everett’s Motion for Summary Judgment

[Doc. No. 22] is DENIED.
MONROE, LOUISIANA, this 24th day of May, 2018.

____________________________________
TERRY A. DOUGHTY
UNITED STATES DISTRICT JUDGE

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