North Shore-Long Island Jewish Health Systems, Inc. v. MultiPlan, Inc. et al

Filing 150

ORDER ADOPTING REPORT AND RECOMMENDATIONS. For the reasons set forth in the attached Order, Judge Tomlinson's report and recommendation is adopted in its entirety. Local 812 Health Fund's motion to sever and stay MultiPlan, Inc.'s thi rd-party claim is denied. Crossroads Healthcare Management LLC ("Crossroads")'s motion to intervene pursuant to Federal Rule of Civil Procedure 24(a) is denied. However, Crossroads' motion to intervene under Federal Rule of Civil Procedure 24(b) for the limited purpose of engaging in discovery is granted. Ordered by Judge Joan M. Azrack on 3/25/2015. (Petilla, Charlotte)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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NORTH SHORE-LONG ISLAND JEWISH
HEALTH SYSTEMS, INC.,
Plaintiff,

ORDER ADOPTING
REPORT AND
RECOMMENDATION
12–CV–1633 (JMA) (AKT)

v.
MULTIPLAN, INC., TEAMSTERS LOCAL
210 AFFILIATED HEALTH & INSURANCE
FUND and LOCAL 812 HEALTH FUND,
Defendants.
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MULTIPLAN, INC.,
Third-Party Plaintiff,
v.

TEAMSTERS LOCAL 210 AFFILIATED
HEALTH & INSURANCE FUND and
LOCAL 812 HEALTH FUND,
Third-Party Defendants.
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AZRACK, District Judge:
In an effort to extricate itself from a complicated billing dispute, at least temporarily,
third-party defendant Local 812 Health Fund (“Local 812”) moved to sever and stay the breach
of contract claim asserted by third-party plaintiff MultiPlan, Inc. (“MultiPlan”). And to protect
its purported interest in this litigation, nonparty Crossroads Healthcare Management, LLC
(“Crossroads”), moved to intervene. Both motions were referred to Magistrate Judge Tomlinson
for a report and recommendation (“R&R”). In her R&R, Judge Tomlinson recommended: (1)
denying Local 812’s motion to sever and stay MultiPlan’s breach of contract claim; and (2)

denying Crossroads’ motion to intervene as of right, but granting Crossroads’ motion to
intervene permissively. (See generally R&R, ECF No. 145.)
Local 812 objects to the R&R on grounds that the R&R “incorrectly recites certain
positions taken by Local 812 in the instant action that are directly relevant to the conclusions
reached in the R&R, and additionally could potentially have a broader impact on this
litigation…if adopted by this Court.” (Def. Local 812’s Objections to R&R at 1, ECF No. 147.)
Familiarity with the allegations set forth in the parties’ pleadings, the parties’ briefs, and
prior decisions in this case is assumed. For the reasons discussed below, Local 812’s objections
are overruled and the R&R is adopted in its entirety.
I.

STANDARD OF REVIEW

A district court judge may “accept, reject, or modify, in whole or in part, the findings or
recommendations made by the magistrate. The judge may also receive further evidence or
recommit the matter to the magistrate with instructions.” Grassia v. Scully, 892 F.2d 16, 19 (2d
Cir. 1989) (quoting 28 U.S.C. § 636(b)(1)). If either party objects to the magistrate judge’s
recommendations, the district court must “make a de novo determination of those portions of the
report or specified proposed findings or recommendations to which objection is made.” Id.
II.

DISCUSSION

A. Local 812’s Motion to Sever and Stay MultiPlan’s Breach of Contract Claim
Local 812 asks the Court to grant its motion to sever and stay MultiPlan’s breach of
contract claim. Local 812 asserts that Judge Tomlinson’s recommendation that the Court deny
its motion: (1) improperly relied on claims against Local 812 that plaintiff North Shore-Long
Island Jewish Health Systems, Inc. (“North Shore”) voluntarily dismissed; and (2)
mischaracterized Local 812’s positions concerning (a) MultiPlan’s right to indemnification from
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Local 812, and (b) MultiPlan’s right to attorneys’ fees from Local 812.
The “court may [] sever any claim against a party.” Fed. R. Civ. P. 21. “The decision
whether to grant a severance motion is committed to the sound discretion of the trial court.”
State of N.Y. v. Hendrickson Bros., 840 F.2d 1065, 1082 (2d Cir. 1988). In exercising that
discretion, the court considers: “(1) whether the claims arise out of the same transaction or
occurrence; (2) whether the claims present some common questions of law or fact; (3) whether
settlement of the claims or judicial economy would be facilitated; (4) whether prejudice would
be avoided if severance were granted; and (5) whether different witnesses and documentary
proof are required for the separate claims.” Morris v. Northrop Grumman Corp., 37 F. Supp. 2d
556, 580 (E.D.N.Y. 1999).
The Court will not sever MultiPlan’s breach of contract claim against Local 812.
Although the R&R references claims that North Shore has since voluntarily dismissed without
prejudice against Local 812, Local 812 misses the bigger picture: North Shore’s claims against
MultiPlan arise—at least in part—from Local 812’s alleged failure (through Crossroads) to
timely and completely pay North Shore. Furthermore, although North Shore’s damages theories
are unclear, especially in light of its confidential settlement with Local 812,1 MultiPlan premises
its defense against North Shore’s claims, in part, on Local 812’s alleged wrongdoing, and
MultiPlan seeks damages attributable to Local 812’s failure to remit timely and complete

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  According to Local 812:
“The claims for nonpayment or for untimely payment under the MultiPlan/Local
812 agreement were resolved last year between Local 812 and [North Shore],
which in turn relieves MultiPlan of any liability to pay [North Shore] on such
claims because [North Shore] could not recover twice on those same claims.”

(Local 812’s Opp. to Crossroads’ Mot. to Intervene at 17, ECF No. 136.) The implication of Local 812’s
representation is that the settlement agreement between North Shore and Local 812, which is not before the Court,
extinguished all claims against MultiPlan arising from Local 812’s alleged wrongdoing. At this juncture, the Court
cannot draw that conclusion.

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payment to North Shore for services rendered to Local 812 members. (See MultiPlan’s Opp. to
Mot. to Sever at 6–7, ECF No. 106.) For all of these reasons, MultiPlan’s third-party complaint
against Local 812 presents common questions of law or fact.
Local 812’s arguments concerning Judge Tomlinson’s supposed mischaracterizations of
Local 812’s positions in this litigation also lack merit. With respect to MultiPlan’s right to
indemnification, the Court agrees that Local 812 has not conceded that MultiPlan has a right to
indemnification for MultiPlan’s allegedly fraudulent acts. But the Court disagrees with Local
812 that Judge Tomlinson found that Local 812 conceded that it must indemnify MultiPlan “for
its own alleged misdeeds.” (R&R at 21.) Judge Tomlinson found that Local 812 did not dispute
that MultiPlan could seek indemnification if MultiPlan is held liable for Local 812’s
wrongdoing. In its briefing, Local 812 did not argue otherwise.
The Court also disagrees that Judge Tomlinson’s recommendation rested on a finding that
Local 812 conceded responsibility for all of MultiPlan’s attorneys’ fees and costs.2 As Local 812
itself acknowledges, Judge Tomlinson recognized Local 812’s disavowal of any obligation to
pay attorneys’ fees or costs resulting from MultiPlan’s alleged misdeeds. (R&R at 25.) And
even if Judge Tomlinson misunderstood Local 812’s position, see supra note 2, the Court
nonetheless concludes that severance now would impede both judicial economy and the
possibility of settlement given: (1) MultiPlan’s defense based on Local 812’s alleged
wrongdoing; and (2) Local 812’s potential liability to MultiPlan for Local 812’s alleged
wrongdoing.
Having conducted a de novo review of the record and found no error in Judge

2

The mischaracterization to which Local 812 objects appears to come directly from Local 812’s own brief: “The
only other relief sought in MultiPlan’s third-party complaint, however, is for attorneys’ fees and costs and
disbursements, which MultiPlan is entitled to recoup in connection with the indemnification clause of its agreement
with Local 812.” (Local 812 Reply Br. at 2, ECF No. 114.) (emphasis added).

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Tomlinson’s R&R, the Court adopts Judge Tomlinson’s recommendation and denies Local 812’s
motion to sever and stay MultiPlan’s breach of contract claim against Local 812.
B. Crossroads’ Motion to Intervene
Although Local 812 does not challenge Judge Tomlinson’s recommendation that
Crossroads be permitted to intervene pursuant to Federal Rule of Civil Procedure 24(b) for the
limited purpose of engaging in discovery, Local 812 nevertheless objects to Judge Tomlinson’s
finding that “[t]he voluntary discontinuance of [Local 812’s] fourth-party action, by Local 812’s
own admission, appeared to be strategic and not indicative of a lack of potential liability to
Crossroads.” (R&R at 35.) (emphasis added.) Local 812 argues that that finding is erroneous
because: (1) Crossroads has not asserted any claims in this litigation; and (2) Local 812
dismissed the fourth-party complaint because Local 812 believed that the complaint’s sole claim
for breach of contract should be arbitrated under the contract between Local 812 and Crossroads.
The Court finds no error. The fact that Local 812 brought a fourth-party complaint
against Crossroads demonstrates that Crossroads has some interest in this litigation. That interest
was not extinguished merely because Local 812 dismissed that complaint without prejudice to
pursue arbitration of Local 812’s claim. Furthermore, Local 812’s decision to arbitrate that
claim was based on strategic and business considerations—i.e., “that (i) the parties were better
served by having the dispute between them resolved through arbitration, and (ii) litigation
between Local 812 and Crossroads could potentially cause a disruption of the business
relationship between the parties.” (Local 812’s Opp. to Crossroads’ Mot. to Intervene at 11,
ECF No. 136.)
Having reviewed the record and found no error in Judge Tomlinson’s recommendation
concerning Crossroads’ motion to intervene, the Court adopts Judge Tomlinson’s
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recommendation in its entirety.
III.

CONCLUSION

For the reasons set forth above, Judge Tomlinson’s R&R is adopted in its entirety. Local
812’s motion to sever and stay MultiPlan’s third-party claim is denied. Crossroads’ motion to
intervene pursuant to Federal Rule of Civil Procedure 24(a) is denied. However, Crossroads’
motion to intervene under Federal Rule of Civil Procedure 24(b) for the limited purpose of
engaging in discovery is granted.
SO ORDERED.
Dated: March 25, 2015
Central Islip, New York
/s/ (JMA)
JOAN M. AZRACK
UNITED STATES DISTRICT JUDGE

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