AGOSTINO et al v. QUEST DIAGNOSTICS,INC. et al
Filing
333
OPINION. Signed by Judge Stanley R. Chesler on 11/3/11. (dc, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
DENISE AGOSTINO, et al.,
:
:
Plaintiffs, :
:
v.
:
:
QUEST DIAGNOSTICS, INC., et al.,
:
:
Defendants. :
:
:
Civil Action No. 04-4362 (SRC)
OPINION
CHESLER, District Judge
This matter comes before the Court on four motions for summary judgment, pursuant to
FED . R. CIV . P. 56: 1) the motion by Plaintiffs Richard and Janet Grandalski (“Plaintiffs” or the
“Grandalskis”) [docket entry 267]; 2) the motion by Defendant Quest Diagnostics Inc. (“Quest”)
[docket entry 274]; 3) the motion by Defendant Quantum Collections, Inc. (“Quantum”) [docket
entry 325]; and 4) the motion by Defendant Credit Bureau Central (“CBC”) [docket entry 327].
The Court has opted to rule based on the papers submitted and without oral argument, pursuant
to Federal Rule of Civil Procedure 78. For the reasons stated below, the motions will be granted
in part and denied in part.
I.
BACKGROUND
A.
Procedural History
Eighteen plaintiffs filed this lawsuit in September of 2004 as a putative class against
Quest and the debt collectors Quest employed to pursue unpaid bills. The operative complaint is
the First Amended Class Action Complaint (“Amended Complaint”) which contains eight
counts, alleging claims for: (1) violations of the Racketeer Influenced and Corrupt Organizations
Act (“RICO”), (2) violations of the Fair Debt Collection Practices Act (“FDCPA”), (3) violations
of the Employee Retirement Income Security Act (“ERISA”), (4) violations of the New Jersey
Consumer Fraud Act, (5) violations of other states’ consumer fraud acts, (6) breach of contract,
(7) unjust enrichment, and (8) common law fraud. This Court denied plaintiffs’ two attempts to
certify the class on February 11, 2009 and December 22, 2010, respectively. Thereafter, fifteen
of the parties settled their claims, leaving only Denise Cassese, Richard Grandalski, and Janet
Grandalski with pending matters. Subsequently, plaintiff Cassese moved for summary judgment
on her consumer fraud claim against Quest, which this Court denied on October 6, 2011. As a
result, only five counts remain viable against Defendant Quest, and five counts against
Defendants CBC and Quantum (the “Debt Collector Defendants” or “DCDs”) (hereinafter, Quest
and the DCDs collectively, “Defendants”).1
This Court previously conducted an exhaustive choice-of-law analysis and concluded that
while New Jersey law should be applied to the plaintiffs’ unjust enrichment claims, the laws of
plaintiffs’ home states - New York for plaintiff Cassese and Nevada for the Grandalskis - should
be applied to their state law claims for consumer fraud, common law fraud, and breach of
1
The ERISA claim is not viable as to the Defendants because it was not brought on
behalf of any of the three remaining plaintiffs (see Amended Complaint ¶¶ 166, 169, 171-72); the
New Jersey Consumer Fraud Act claim is not viable against the Defendants because this Court
held that each plaintiff’s home state’s consumer fraud act applies, rather than the New Jersey Act
(see Agostino v. Quest Diagnostics, Inc., 256 F.R.D. 437, 461-63 (D.N.J. 2009)), and none of the
remaining plaintiffs reside in New Jersey; the FDCPA claim is not viable as to Quest because
Quest is a creditor, not a debt collector (see 15 U.S.C. § 1692a(6)); and the breach of contract
claim is not viable as to the DCDs because it has only been asserted against Quest. (See
Amended Complaint ¶ 182).
2
contract.
B.
Statement of Facts
Plaintiffs Richard and Janet Grandalski, who are insured by Anthem Blue Cross and Blue
Shield (“Anthem”), were billed six $30 invoices - each consisting of a $20 co-payment and a $10
collection fee - by the Debt Collector Defendants, on behalf of Quest, for two dates of service for
Mr. Grandalski and four dates of service for Mrs. Grandalski. Plaintiffs paid the DCDs $120 for
Mrs. Grandalski’s four dates of service, comprised of $80 in co-payments and $40 in service
charges.2 According to Plaintiffs, Quest wrongfully added, - in violation of the hold harmless
2
Quest moves for summary judgment on all claims brought by Mr. Grandalski, arguing
that since he did not pay any money for either of his two dates of service, he has not suffered any
injury. In support of its contention, Quest points to this Court’s prior decision in this case, where
it held that plaintiff Mark Smaller lacked standing to pursue claims for alleged improper bills
submitted to his minor daughter. However, under Nev. Rev. Stat. § 12.020, “[a] husband and
wife may sue jointly on all causes of action belonging to either or both of them.” While the
statute provides for two exceptions, neither of which are applicable here. Therefore, Quest’s
reliance on this Court’s previous holding is misplaced since Mr. Smaller’s claim did not
implicate the Nevada statute. As such, Mr. Grandalski may sue jointly on Mrs. Grandalski’s
claims against Quest that arise under Nevada law, which include her consumer fraud, common
law fraud, and breach of contract claims. However, the statute does not implicate Mrs.
Grandalski’s RICO and unjust enrichment claims since they arise under federal and New Jersey
law, respectively. As indicated by Quest, both RICO and unjust enrichment claims require proof
of actual injury. Maio v. Aetna, Inc., 221 F.3d 472, 483 (3d Cir. 2000) (“concrete financial loss”
required under RICO); VRG Corp. v. GKN Realty Corp., 135 N.J. 539, 554 (1994) (unjust
enrichment claim requires a showing that the plaintiff conferred a benefit on the defendant).
Because Mr. Grandalski has not demonstrated that he suffered any harm, Quest’s motion for
summary judgment on Mr. Grandalski’s RICO and unjust enrichment claims will be granted.
Quest alternatively contends that if the Grandalskis can jointly pursue claims, then the
alleged overpayment of $40 made by Mrs. Grandalski is offset by the $40 that Mr. Grandalski
still owes Quest for his two dates of service. However, Quest did not raise this issue as a
counterclaim or affirmative defense in its pleadings, but rather raised it for the first time in its
reply brief to Plaintiffs’ opposition motion. Therefore, the appropriateness of an offset will not
be considered by this Court.
Quest also moves for summary judgment on all claims brought by plaintiff Denise
Cassese. In this Court’s October 6, 2011 Opinion & Order, it denied plaintiff Cassese’s motion
for summary judgment on her consumer fraud claim since she failed to provide proof of actual
3
provision in the provider agreement between Quest and Anthem which precluded Quest from
billing Anthem insureds for charges in excess of the stated patient responsibility on an
Explanation of Benefits (“EOB”) or Electronic Remittance Advice (“ERA”) - and the DCDs
wrongfully demanded and collected these four $10 collection fees. Plaintiffs now move for
summary judgment on their consumer fraud and unjust enrichment claims against Defendants, on
their breach of contract claim against Quest, and on their FDCPA claim against the DCDs.3
Defendants Quest, Quantum, and CBC have also filed separate motions for summary judgment.
II.
LEGAL ANALYSIS
A.
Standard of Review
Summary judgment is appropriate under FED . R. CIV . P. 56(a) when the moving party
demonstrates that there is no genuine issue of material fact and the evidence establishes the
moving party’s entitlement to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S.
317, 322-23 (1986). A factual dispute is genuine if a reasonable jury could return a verdict for
injury, a requisite prong for her New York Consumer Protection Act claim. Because the
remainder of plaintiff Cassese’s claims against Quest require that she establish actual harm,
Quest’s motion for summary judgment on her remaining claims will be granted. See Maio, 221
F.3d at 483 (“concrete financial loss” required under RICO); Brualdi v. IBERIA, 79 A.D.3d 959,
960 (N.Y. App. Div. 2010) (plaintiff’s must establish “resulting damages” in order to maintain a
breach of contract claim); VRG Corp., 135 N.J. at 554 (unjust enrichment claim requires a
showing that the plaintiff conferred a benefit on the defendant); Mora v. RGB, Inc., 17 A.D.3d
849, 852 (N.Y. App. Div. 2005) (damages are an element of a fraud claim).
3
In their motion for summary judgment, Plaintiffs also move for prejudgment interest.
The award of prejudgment interest is a matter of discretion for the trial court that should be based
on considerations of fairness. Pignataro v. Port Auth., 593 F.3d 265, 274 (3d Cir. 2010).
Because Plaintiffs have not presented any argument as to why prejudgment interest would be fair
in the current matter, their request will be denied.
4
the non-movant, and it is material if, under the substantive law, it would affect the outcome of
the suit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “In considering a motion
for summary judgment, a district court may not make credibility determinations or engage in any
weighing of the evidence; instead, the non-moving party’s evidence ‘is to be believed and all
justifiable inferences are to be drawn in his favor.’” Marino v. Indus. Crating Co., 358 F.3d 241,
247 (3d Cir. 2004) (quoting Anderson, 477 U.S. at 255).
“When the moving party has the burden of proof at trial, that party must show
affirmatively the absence of a genuine issue of material fact: it must show that, on all the
essential elements of its case on which it bears the burden of proof at trial, no reasonable jury
could find for the non-moving party.” In re Bressman, 327 F.3d 229, 238 (3d Cir. 2003)
(quoting United States v. Four Parcels of Real Property, 941 F.2d 1428, 1438 (11th Cir. 1991)).
“[W]ith respect to an issue on which the nonmoving party bears the burden of proof . . . the
burden on the moving party may be discharged by ‘showing’ – that is, pointing out to the district
court – that there is an absence of evidence to support the nonmoving party’s case.” Celotex, 477
U.S. at 325.
Once the moving party has satisfied its initial burden, the party opposing the motion must
establish that a genuine issue as to a material fact exists. Jersey Cent. Power & Light Co. v.
Lacey Township, 772 F.2d 1103, 1109 (3d Cir. 1985). The party opposing the motion for
summary judgment cannot rest on mere allegations and instead must present actual evidence that
creates a genuine issue as to a material fact for trial. Anderson, 477 U.S. at 248; Siegel Transfer,
Inc. v. Carrier Express, Inc., 54 F.3d 1125, 1130-31 (3d Cir. 1995). “[U]nsupported allegations .
. . and pleadings are insufficient to repel summary judgment.” Schoch v. First Fid.
5
Bancorporation, 912 F.2d 654, 657 (3d Cir. 1990). “A nonmoving party has created a genuine
issue of material fact if it has provided sufficient evidence to allow a jury to find in its favor at
trial.” Gleason v. Norwest Mortg., Inc., 243 F.3d 130, 138 (3d Cir. 2001).
If the nonmoving party has failed “to make a showing sufficient to establish the existence
of an element essential to that party’s case, and on which that party will bear the burden of proof
at trial, . . . there can be ‘no genuine issue of material fact,’ since a complete failure of proof
concerning an essential element of the nonmoving party’s case necessarily renders all other facts
immaterial.” Katz v. Aetna Cas. & Sur. Co., 972 F.2d 53, 55 (3d Cir. 1992) (quoting Celotex,
477 U.S. at 322-23).
B.
Discussion
1.
Count I: RICO Claim
Defendants move for summary judgment on the First Count of the Amended Complaint,
arguing that the record does not support a claim for a RICO violation. The theory of the RICO
claim asserted by Mrs. Grandalski is that, by billing her in excess of the financial responsibility
listed on the EOB or ERA, Defendants defrauded her into paying more than she owed. The
predicate criminal acts of Mrs. Grandalski’s RICO claims are mail and wire fraud, in violation of
18 U.S.C. §§ 1341 and 1343, respectively. Proving the underlying acts of racketeering requires
Mrs. Grandalski to demonstrate that Defendants participated in a scheme with specific intent to
defraud. United States v. Coyle, 63 F.3d 1239, 1243 (3d Cir. 1995) (establishing mail fraud
violation requires proof of a participation in a scheme with specific intent to defraud); United
States v. Veksler, 62 F.3d 544 (3d Cir. 1995) (establishing a wire fraud violation requires proof of
a participation in a scheme with specific intent to defraud). Proof of specific intent “‘may be
6
found from a material misstatement of fact made with reckless disregard for the truth.’” Coyle,
63 F.3d at 1243 (quoting United States v. Hannigan, 27 F.3d 890, 892 n.1 3d Cir 1994)).
Defendants have satisfied their burden at summary judgment by pointing to the absence
of evidence to support Mrs. Grandalski’s claim. Nothing in the record indicates that Quest or the
DCDs knew or should have known that each of the billed amounts at issue was incorrect. The
mere allegation that Mrs. Grandalski received a bill for an amount above that which is allowable
under the provider agreement between Quest and Anthem is not sufficient to prove scienter.
Billing mistakes happen for any number of reasons, some of which are not attributable to
malfeasance on the part of the Defendants. Indeed, an analysis by Quest’s medical billing expert
of 51 of the patient billing disputes at issue concluded that, where inappropriate billing was
alleged, errors causing patient bills to issue could have been attributable to Quest, but also to
patients, referring physicians, payers or to a combination of errors by any multiple of the parties
involved. (Dyckman Report at 52.) Because Mrs. Grandalski has not presented actual evidence
that creates a genuine issue as to this material fact, Defendants’ motions for summary judgment
on the RICO claim will be granted.
2.
Count II: FDCPA Claim
Plaintiffs move for summary judgment on their FDCPA claim, alleging that Defendants
Quantum and CBC violated 15 U.S.C.S. §§ 1692e and 1692f by “demanding collection fees in
excess of the original debt.”4 (Pls.’ Summ. J. Mot. at 29.) Under the FDCPA, a debt collector is
4
The DCDs also argue that Mr. Grandalski lacks standing to assert his motion for
summary judgment since he has not suffered any injury. As aforementioned, Mr. Grandalski has
standing to assert the common law and consumer fraud claims since they both implicate the
Nevada statute permitting a husband and wife to sue jointly on all causes of action belonging to
either or both of them. See Nev. Rev. Stat. § 12.020. However, the DCDs’ motions for summary
7
prohibited from:
Collecti[ing] any amount (including any interest, fee, charge, or expense
incidental to the principal obligation) unless such amount is expressly authorized
by the agreement creating the debt or permitted by law.
15 U.S.C.S. § 1692f(1). In addition, a “debt collector may not use any false, deceptive, or
misleading representation or means in connection with the collection of a debt,” which includes
the “false representation of . . . the character, amount, or legal status of any debt.” Id. at §
1692e(2). In their opposition brief, Defendants Quantum and CBC do not claim that they were
authorized by agreement or law to seek and collect the $10 administrative fees. Instead, they
argue that they did not knowingly violate the FDCPA since Quest added the collection fees to
Plaintiffs’ accounts before transmitting the bills to the DCDs to collect. While the DCDs aver
that they simply sought and collected what they believed to be valid bills, the FDCPA is a strict
liability statute and a consumer need not show intentional violation of the Act by a debt collector
to be entitled to damages. Allen v. LaSalle Bank, 629 F.3d 364, 368 (3d Cir. 2011); Gryzbowski
v. I.C. System, Inc., 691 F. Supp. 2d 618, 622 (M.D. Pa. 2010). Thus, regardless of their intent,
judgment on Mr. Grandalski’s RICO and unjust enrichment claims will be granted since those
claims do not arise under Nevada law and since Mr. Grandalski has not demonstrated that he
suffered any harm. See Maio v. Aetna, Inc., 221 F.3d at 483; VRG Corp., 135 N.J. at 554.
Regarding the FDCPA claim, actual damages are not required in order for a party to have
standing. See Alston v. Countrywide Fin. Corp., 585 F.3d 753, 763 (3d Cir. 2009); Robey v.
Shapiro, Marianos & Cejda, 434 F.3d 1208, 1212 (10th Cir. 2006). Therefore, Mr. Grandalski
can pursue his claim under the Act.
In its opposition brief, Quantum alternatively contends that its dunning of Mr. Grandalski
for his April 18, 2002 and May 12, 2003 dates of service is time barred since an action under the
FDCPA must be brought “within one year from the date on which the violation occurs.” 15
U.S.C. § 1692k(d). However, as Plaintiffs point out in their reply brief, the record, which is
undisputed by Quantum, indicates that Quantum dunned Mr. Grandalski for his April 18, 2002
date of service on April 6, 2004 (Tusa Decl., Ex. 30 at 147), and for his May 12, 2003 date of
service on April 5, 2004 (Tusa Decl., Ex. 33 at 126). As such, both of these collection efforts fall
within one year of the filing of this action and are not time barred. See 15 U.S.C.S. § 1692d.
8
as a matter of law, the DCDs violated the FDCPA when they falsely represented the amount of
money the Plaintiffs owed and when they collected amounts in excess of what the Plaintiffs were
legally obligated to pay.
In their opposition motion, the DCDs raise the affirmative defense of bona fide error.
Under 15 U.S.C.S. § 1692k(c), a debt collector will not be held liable for a FDCPA violation if it
can establish that the violation was not intentional and that it maintained procedures reasonably
adapted to avoid such errors. See 15 U.S.C.S. § 1692k(c); Beck v. Maximus, Inc., 457 F.3d 291,
297-98 (3rd Cir. 2006). Accordingly, to avail itself of the defense, the DCDs will have to
establish: (1) the alleged violation was unintentional, (2) the alleged violation resulted from a
bona fide error, and (3) the bona fide error occurred despite procedures designed to avoid such
errors. Id. The first prong of this defense is a subjective test that requires a credibility
determination concerning the debt collector’s assertions that the ensuing FDCPA violation was
unintentional. Johnson v. Riddle, 443 F.3d 723, 728-29 (10th Cir. 2006). The second and third
prongs of the defense are objective and require an inquiry into whether any precautions were
actually implemented, and whether such precautions “were reasonably adapted to avoid the
specific error at issue.” Id. at 729.
Plaintiffs do not dispute the DCDs’ contention that Quest independently added the
collection fees to the principal amount owed and then transmitted the data to them as valid and
collectible bills. Furthermore, Plaintiffs do not controvert the DCDs’ assertion that they were
unaware that Quest was prohibited by contract from adding the administrative fees. Therefore,
the first prong of the defense has been satisfied. However, Plaintiffs have satisfied their burden
at summary judgment by pointing to an absence of evidence to support the second and third
9
prongs of the bona fide error defense. In response, the DCDs offer the bare assertion that they
have “reasonable and industry accepted procedures for debtor validation” (DCDs’ Repl. Br. at
21); a contention that is wholly conclusory and devoid of any specificity regarding what those
industry accepted procedures actually are, or how they are reasonably adapted to avoid the
specific error at issue of collecting unlawful fees. Accordingly, the DCDs have not established a
genuine issue as to this material fact. Therefore, Plaintiffs’ motion for summary judgment on the
FDCPA claim will be granted and the DCDs’ motions on this claim will be denied.
3.
Count V: Consumer Fraud Claim
Plaintiffs move for summary judgment on the Fifth Count of their Amended Complaint,
alleging that Defendants violated the Nevada consumer fraud statute, Nevada Revised Statute
(NRS) 41.600, et seq. NRS 41.600 provides that “[a]n action may be brought by any person who
is a victim of consumer fraud.” Nev. Rev. Stat. § 41.600(1). The statute then goes on to define
consumer fraud as, inter alia, “a deceptive trade practice as defined in NRS 598.0915 to
598.0925, inclusive.” Id. at § 41.600(2)(e).5
5
Plaintiffs allege that Defendants violated the following provisions of Nev. Rev. Stat. §§
598.0915 and 598.0923:
598.0915. A person engages in a “deceptive trade practice” if, in the course of his
or her business or occupation, he or she:
13. Makes false or misleading statements of fact concerning the price of goods or
services for sale or lease, or the reasons for, existence of or amounts of price
reductions.
15. Knowingly makes any other false representation in a transaction.
598.0923. A person engages in a “deceptive trade practice” when in the course of
his or her business or occupation he or she knowingly:
10
Plaintiffs assert that Quest engaged in consumer fraud by directing the DCDs to bill the
Plaintiffs amounts in excess of their co-payments, in violation of its provider agreement with
Anthem. In its opposition brief, Quest claims that its conduct is not covered under the statute
since it made no direct misrepresentations to the Plaintiffs; rather, it was the DCDs who charged
the Plaintiffs six $30 bills. However, Quest does not suggest, in its moving papers or opposition
brief, that it had anything in its documentation authorizing it to tack on a service charge for
delinquent bills. Quest added on the administrative fees with no legal basis for doing so and then
directed the DCDs to collect them under the pretense that they were valid bills. This is, at the
very least, implicit misrepresentation, falling within the parameters of Nevada’s consumer fraud
statute. Therefore, Plaintiffs have satisfied their summary judgment burden by showing the
absence of a genuine issue of material fact regarding this claim. Accordingly, their motion for
summary judgment on their consumer fraud claim against Quest will be granted and Quest’s
summary judgment motion on the claim will be denied.
Plaintiffs also assert a consumer fraud claim against the DCDs.6 However, Plaintiffs do
2. Fails to disclose a material fact in connection with the sale or lease of goods or
services.
4. Uses coercion, duress or intimidation in a transaction.
Nev. Rev. Stat. §§ 598.0915(13), 598.0915(15), 598.0923(2), 598.0923(4).
6
In their summary judgment motion, Plaintiffs aver that because the DCDs violated the
FDCPA, they necessarily violated the Nevada consumer fraud statute. Plaintiffs cite to Jerman v.
Carlisle, McNellie, Rini, Kramer & Ulrich LPA, for its holding that “violations of the FDCPA
are deemed to be unfair or deceptive acts or practices,” and argue that unfair and deceptive
practices constitute consumer fraud under the Nevada statute. See Jerman v. Carlisle, McNellie,
Rini, Kramer & Ulrich LPA, 130 S. Ct. 1605, 1606 (2010). However, Plaintiffs conveniently
omit the latter part of the Supreme Court holding, which states that “violations of the FDCPA
11
not contend, nor provide any evidence, that the DCDs knowingly made a false representation or
failed to disclose a material fact. While Plaintiffs have provided some evidence that the DCDs
had actual knowledge that Quest was adding $10 collection fees to patient bills, nothing in the
record indicates that the DCDs knew that this violated the agreement between Quest and
Anthem. Furthermore, Plaintiffs have not demonstrated that the DCDs made a false or
misleading statement of fact since the DCDs made it clear that they were charging Plaintiffs an
administrative fee in addition to the co-payment. Additionally, while Plaintiffs assert that the
DCDs used intimidation and coercion in their collection efforts by threatening to report
Plaintiffs’ delinquency to credit reporting bureaus, Plaintiffs do not controvert the fact that it is
the DCDs’ common practice, as debt collectors, to advise a debtor that failure to pay legally
incurred debts may be reported to credit reporting agencies or result in a lawsuit. See, cf., Wilson
v. Quadramed Corp., 225 F.3d 350, 353 (3d Cir. 2000); Spira v. Ashwood Fin., Inc., 358 F.
Supp. 2d 150, 160 (E.D.N.Y. 2005). Accordingly, Plaintiffs have not satisfied their burden at
summary judgment of showing that no reasonable jury could find for the DCDs on this issue. As
such, Plaintiffs’ motion for summary judgment on the consumer fraud claim against the DCDs
will be denied and Quantum’s and CBC’s motions for summary judgment on the claim will be
granted.
are deemed to be unfair or deceptive acts or practices under the Federal Trade Commission
Act.” Id. (emphasis added). As such, any violation of the FDCPA by the DCDs does not
automatically amount to a deceptive trade practice in violation of the Nevada consumer fraud
statute.
12
4.
Count VI: Breach of Contract Claim
Plaintiffs move for summary judgment on their breach of contract claim against Quest,
alleging that they are third-party beneficiaries of the provider agreement (the “Agreement”)
between Quest and Anthem, permitted to sue for Quest’s breach of the hold harmless provision.
The parties do not dispute the facts relating to this claim. Quest simply contends that Plaintiffs
are not third party beneficiaries as a matter of law.
Issues of contractual construction, in the absence of ambiguity or other factual
complexities, present questions of law for the courts and are suitable for determination by
summary judgment. See Ellison v. C.S.A.A., 106 Nev. 601, 603 (Nev. 1990). Under Nevada law,
an individual may sue as a third-party beneficiary of a contract only if “the contracting parties
demonstrated a clear intent to benefit the third party.” Ideal Elec. Co. v. Flowserve Corp., No.
02-1092, 2006 U.S. Dist. LEXIS 86923 at *29 (D. Nev. Nov. 22, 2006). In cases where the
contract lacks an express declaration of that intent, there is a strong presumption that the third
party is not a beneficiary and that the parties contracted to benefit only themselves. Delta Mech.,
Inc. v. Garden City Group, Inc., 345 Fed. Appx. 232, 233 (9th Cir. 2009). “Where parties
expressly deny any intention of conferring rights upon a third party . . . , the critical question of
whether they intended to benefit the third party is resolved.” 9-44 Corbin on Contracts, § 44.4;
see, e.g., Seifer v. PHE, Inc., 196 F. Supp. 2d 622, 634 (S.D. Ohio 2002) (holding that the parties
did not intend to confer third-party beneficiary status upon Plaintiff where the agreement stated
“[n]othing in this Agreement, whether express or implied, is intended to confer any rights or
remedies under or by reason of this agreement on any parties other than the parties to it and their
respective successors and assigns . . .”).
13
According to Plaintiffs, because the hold harmless provision of the Agreement states that
it “shall be construed to be for the benefit of the Member” (Tusa Decl., Ex. 8 at 1073), they, as
members, are intended beneficiaries. Quest, however, points to a latter clause of the contract
which states that “[t]his Agreement shall not create any right or cause of action in or on behalf of
any person other than HMO or laboratory” (Tusa Decl., Ex.8 at 1073, 1080), and argues that this
provision unequivocally rejects the notion that the parties intended to create a third party
beneficiary. While Plaintiffs acknowledge that this language expressly denies any intention of
conferring rights upon them, they contend that a case from an intermediate Wisconsin court,
Dorr v. Sacred Heart Hospital, warrants a different result. In Dorr, a patient sought to sue a
hospital as a third-party beneficiary of the provider agreement between the hospital and the
patient’s HMO. In that case, the court held that the HMO subscribers were third party
beneficiaries of the contract which had an identical hold harmless provision, even in the face of a
subsequent clause which stated that “except as otherwise specifically provided herein, this
Agreement shall not create or be construed to create any rights in any matter whatsoever in an
other person or entity as a third party beneficiary.” Dorr v. Sacred Heart Hospital, 597 N.W. 2d
462, 250 (Wisc. App. 1999) (emphasis added). However, Plaintiffs ignore a critical difference
between the provider contract in Dorr and the Agreement here. As the Wisconsin court noted,
the provider agreement in Dorr specifically contemplated that there would be exceptions to the
general prohibition on third-party beneficiary status. The Agreement here, does not. Because
this Agreement unambiguously states that it “shall not create any right or cause of action in or
on behalf of any such person other than HMO or Laboratory” (Tusa Decl., Ex.8 at 1080), it is
clear that Quest and Anthem did not intend to benefit third parties. (Emphasis added).
14
Accordingly, summary judgment will be granted in favor of Quest because of Plaintiffs’
inability, on record before the Court, to prove the requisite intent to confer third party beneficiary
status. Therefore, Plaintiffs’ motion for summary judgment on their breach of contract claim will
be denied and Quest’s motion for summary judgment on the claim will be granted.
5.
Count VII: Unjust Enrichment Claim
Mrs. Grandalski moves for summary judgment on her unjust enrichment claim,
contending that the Defendants were unjustly enriched by their wrongful collection and retention
of $40 in collection fees. There is no dispute about any material fact here. The question before
the Court is whether these facts support a claim for unjust enrichment as a matter of law.
Restitution for unjust enrichment is an equitable remedy, available only when there is no
adequate remedy at law.7 Dovale v. Marketsource, Inc., No. 05-2872, 2006 U.S. Dist. LEXIS
57679 at *22 (D.N.J. Aug. 17, 2006). To establish a claim for unjust enrichment, a plaintiff must
prove that the defendant received a benefit and that retention of that benefit without payment
would be unjust. VRG Corp. v. GKN Realty Corp., 641 A.2d 519, 541 (N.J. 1994). The unjust
enrichment doctrine “requires that plaintiff show that it expected remuneration from the
defendant at the time it performed or conferred a benefit on defendant and that the failure of
remuneration enriched defendant beyond its contractual rights.” Id. Furthermore, it is
considered unjust enrichment “to permit the recipient of money paid under mistake of fact to
keep it, unless the circumstances are such that it would be inequitable to require its return.”
7
Because unjust enrichment is an equitable remedy only available when there is no
adequate remedy at law, it provides an alternate basis to the statutory relief that Plaintiff is
seeking. If Plaintiff opts for statutory damages against Quest under the Nevada consumer fraud
statute, or against the DCDs under the FDCPA, those damages would necessarily encompass any
restitutionary damages Mrs. Grandalski would be awarded for her unjust enrichment claim.
15
Transamerica Occidental Life Ins. Co. v. Total Sys., No. 08-1323, 2011 U.S. Dist. LEXIS 35440
at *10 (D.N.J. Mar. 31, 2011); Winslow, Cohu & Stetson, Inc. v. Skowronek, 344 A.2d 350, 354
(N.J. Super. Ct. Law Div. 1975).
Quest arrogated $10 collection fees without any arguable basis for doing so under
contract or otherwise. When Mrs. Grandalski made the four $10 dollar payments, she operated
under the mistaken belief of fact that Defendants had a legal basis to charge those fees.
Accordingly, this Court concludes that Mrs. Grandalski has satisfied her burden of showing that
she has an unjust enrichment claim against Quest for the $40 in collection fees paid for her four
dates of service. See Winslow, 344 A.3d at 354. In addition, to the extent that the DCDs retained
any portion of the administrative fees for their successful collection, Mrs. Grandalski has an
unjust enrichment claim against them as well.
In their opposition briefs, Defendants cite to case law which stands for the proposition
that voluntary overpayment need not be refunded. However, as those cases explain, “fraud,
duress, extortion or mistake of fact” vitiate the “volunteer rule.” See New Jersey Builders Assoc.
v. Borough of Mendham, 621 A.2d 985, 988 (N.J. Super. Ct. App. Div. 1993). Plaintiffs have
satisfied their burden at summary judgment by pointing to the absence of evidence to support the
Defendants’ defense. Here, Mrs. Grandalski erroneously believed she was required to pay the
entirety of the invoices she received, and operated under the threat that refusal to pay could show
up on a credit report. Thus, Defendants have not demonstrated that the paid administrative fees
were truly voluntary. Therefore, Mrs. Grandalski’s motion for summary judgment on her unjust
enrichment claim will be granted and Defendants’ motions will be denied.
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6.
Count VIII: Common Law Fraud Claim
Defendants move for summary judgment on the Eighth Count of the Amended Complaint
for common law fraud. A plaintiff has the burden of proving each element of a fraud claim by
clear and convincing evidence. Lubbe v. Barba, 540 P.2d 115 (1975). These elements are:
1. A false representation made by the defendant;
2. Defendant’s knowledge or belief that the representation is false (or insufficient
basis for making the representation);
3. Defendant’s intention to induce the plaintiff to act or to refrain from acting in
reliance upon the misrepresentation;
4. Plaintiff’s justifiable reliance upon the misrepresentation; and
5. Damage to the plaintiff resulting from such reliance.
Bulbman, Inc. v. Nevada Bell, 825 P.2d 588, 592 (1992). Defendants have satisfied their burden
at summary judgment by pointing to the absence of evidence to support the third prong of this
claim. As discussed in the RICO section of this Opinion, supra, nothing in the record indicates
that Quest or the DCDs knew or should have known that each of the billed amounts at issue was
incorrect. The mere allegation that Mrs. Grandalski received a bill for an amount above that
which is allowable under Quest’s Agreement with Anthem is not sufficient to prove that
Defendants intended to induce the Plaintiffs to act. Because Mrs. Grandalski has not presented
actual evidence that creates a genuine issue as to this material fact, Defendants’ motion for
summary judgment on the common law fraud claim will be granted.
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III.
CONCLUSION
For the foregoing reasons, this Court will grant in part and deny in part the motions for
summary judgment. An appropriate form of order will be filed together with this Opinion.
s/Stanley R. Chesler
STANLEY R. CHESLER
United States District Judge
DATED: November 3, 2011
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