McCracken et al v. Verisma Systems, Inc. et al

Filing 151

ORDER granting 138 Motion to Stay consistent with this Decision and Order. Signed by Hon. Michael A. Telesca on 9/6/18. (JMC)-CLERK TO FOLLOW UP-

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
ANN McCRACKEN; JOAN FARRELL; SARAH
STILSON; KEVIN MCCLOSKEY;
CHRISTOPHER TRAPATSOS; and KIMBERLY
BAILEY, as individuals and as
representatives of the classes,
Plaintiffs,

No. 6:14-cv-06248(MAT)
DECISION AND ORDER

-vsVERISMA SYSTEMS, INC.; UNIVERSITY
OF ROCHESTER; STRONG MEMORIAL
HOSPITAL; and HIGHLAND HOSPITAL,
Defendants.

I.

Introduction
This is a class action by Ann McCracken, Joan Farrell, Sara

Stilson, Kevin

McCloskey,

Christopher

Trapatsos,

and

Kimberly

Bailey (collectively, “Plaintiffs”) against Verisma Systems, Inc.
(“Verisma”), Highland Hospital, Strong Memorial Hospital, and the
University of Rochester (collectively, “the Hospital Defendants”).
Plaintiffs

allege

that

Verisma

and

the

Hospital

Defendants

systematically overcharged patients who requested copies of their
medical records, in violation of New York Public Health Law (“PHL”)
§ 18.1 Presently the Hospital Defendants’ First Motion to Stay (ECF
#138) this matter pending the resolution of an appeal before the
Second Circuit in a similar case, Spiro, et al. v. HealthPort
1

The statute provides in relevant part that “[t]he provider may impose a
reasonable charge for all inspections and copies, not exceeding the costs
incurred by such provider. . . . However, the reasonable charge for paper copies
shall not exceed seventy-five cents per page.” N.Y. PUBLIC HEALTH L. § 18(2)(e).

Techs., LLC, et al., 18-1034 (2d Cir. Apr. 11, 2018).2 Plaintiffs
filed a Memorandum of Law in Opposition (“Pls.’ Mem.”) (ECF #134).
Verisam also filed a Memorandum of Law in Opposition (“Verisma’s
Mem.”) (ECF #141). The Hospital Defendants filed a Reply (ECF
#143). For the reasons discussed below, the Stay Motion is granted.
II.

Background Regarding the Relevance of the Ruzhinskaya Appeal
to This Case
A.

Ruzhinskaya v. HealthPort Techs., LLC, 311 F.R.D. 87
(S.D.N.Y. 2015) (“Ruzhinskaya I”)

In November 2016, Verisma moved for partial summary judgment
in this case, arguing that it is not subject to PHL § 18 because it
is not a health care “provider.” Plaintiffs opposed Verisma’s
motion, citing other court decisions interpreting PHL § 18 and
similar statutes to apply to a health care provider’s release-ofinformation (“ROI”) vendor, such as Verisma. This Court, in a
May 15, 2017 Decision and Order (ECF #100), held that Verisma,
although not a health care provider, is subject to PHL § 18. The
Court

relied

Ruzhinskaya

in

I.3

In

part

on

the

particular,

district
this

court’s

Court

cited

decision
the

in

district

2

Although the appeal is docketed with the lead appellant’s name being
“Spiro,” the Court and the parties will continue to refer to it as the
Ruzhinskaya case, since that is the name of the plaintiff whose case precipitated
the appeal.
3

HealthPort Technologies, LLC (“HealthPort”), like Verisma, is an ROI
provider. HealthPort contracted with Beth Israel Medical Center (“Beth Israel”)
to provide ROI services. The plaintiffs in Ruzhinskaya are qualified persons who
requested copies of their medical records from Beth Israel, who in turn gave the
medical records to HealthPort. HealthPort, per its contract with Beth Israel,

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court’s statement that “HealthPort derives its statutory duty
[under

PHL

§

18]

from

each

provider’s

statutory

obligation.

HealthPort effectively stands in the shoes of around 500 New York
providers

who

have

delegated

to

it

the

responsibility

for

responding to patient records requests.” 311 F.R.D. at 104.
B.

Ruzhinskaya v. HealthPort Techs., LLC, 291 F. Supp. 3d
484 (S.D.N.Y. 2018) (“Ruzhinskaya II”)

However, in Ruzhinskaya II, decided on March 14, 2018, the
district court essentially reversed course. HealthPort had moved
for summary judgment on the basis its 75-cent-per-page fee did not
exceed “the costs incurred by such provider” because that fee
should be treated as a cost incurred by Beth Israel Medical Center.
In

opposing

HealthPort’s

motion

and

cross-moving

for

summary

judgment, Ruzhinskaya reiterated her position that HealthPort—the
entity

that

imposes

a

charge

for

copies—assumed

the

responsibilities of the “provider” under PHL § 18 by virtue of its
contractual relationship with Beth Israel Medical Center. Although
the district court found “material disputes of fact as to what the
‘costs incurred’ by both Beth Israel and HealthPort were and how
these are properly tabulated,” it granted summary judgment in
HealthPort’s

favor,

based

on

an

argument

not

raised

by

HealthPort—namely, that even though HealthPort imposed a charge for
copies of medical records requests directed to a “provider” under

copied the records and then charged the plaintiffs the statutory maximum set
forth in PHL § 18 of 75¢ per page.

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PHL § 18(2)(d), it owed no duty “to limit its charges.” Thus, it
could not be held liable under PHL § 18(2)(e).
C.

The Ruzhinskaya Appeal

Ruzhinskaya

appealed

and

raised

nine

issues

for

review,

including whether the district court erred in granting summary
judgment in favor of HealthPort on the ground that HealthPort had
no duty to limit its fees to “the costs incurred by such provider”
under PHL § 18 because HealthPort is not a “health care provider”
as defined in the statute; whether the district court erred in
interpreting the “costs incurred” for copies under PHL § 18 to
include other, separate costs associated with the release of
information process; and whether the district court erred in
interpreting the “costs incurred” for copies under PHL § 18 to
include costs not incurred by the entity seeking reimbursement
under PHL § 18. See Plaintiffs’ Appellate Brief at 3-4 in Spiro, et
al. v. HealthPort Techs., LLC, et al., 18-1034 (2d Cir. Apr. 11,
2018). In addition, Ruzhinskaya requested that the Second Circuit
certify two questions to the New York Court of Appeals regarding
the scope and application of PHL § 18. Id. at 58.
III. The Standard for Granting a Stay
“[T]he power to stay proceedings is incidental to the power
inherent in every court to control the disposition of the causes on
its docket with economy of time and effort for itself, for counsel,
and for litigants.” Landis v. N. Am. Co., 299 U.S. 248, 254 (1936);
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accord Clinton v. Jones, 520 U.S. 681, 706–08 (1997). “It is within
the sound discretion of a district court to enter a stay pending
the outcome of independent proceedings that are likely to affect a
case on its calendar.” Trikona Advisors Ltd. v. Kai-Lin Chuang,
No. 12-CV-3886, 2013 WL 1182960, at *2 (E.D.N.Y. Mar. 20, 2013)
(citing Goldstein v. Time Warner N.Y. City Cable Grp., 3 F. Supp.2d
423, 437–38 (S.D.N.Y. 1998) (citing Leyba v. Certified Grocers of
Cal., Ltd., 593 F.2d 857, 864 (9th Cir.), cert. denied, 444 U.S.
827 (1979)).
“The [party] seeking a stay ‘bears the burden of establishing
its need.’” Louis Vuitton Malletier S.A. v. LY USA, Inc., 676 F.3d
83, 97 (2d Cir. 2012) (quoting Clinton, 520 U.S. at 708). When
deciding a motion to stay a civil action, courts in this Circuit
usually apply the following factors: “(1) the private interests of
the

plaintiffs

in

proceeding

expeditiously

with

the

civil

litigation as balanced against the prejudice to the plaintiffs if
delayed; (2) the private interests of and burden on the defendants;
(3) the interests of the courts; (4) the interests of persons not
parties to the civil litigation; and (5) the public interest.”
United States v. Town of Oyster Bay, 66 F. Supp.3d 285, 289
(E.D.N.Y. 2014) (quoting Kappel v. Comfort, 914 F. Supp. 1056, 1058
(S.D.N.Y. 1996) (citing Volmar Distribs. v. New York Post Co., 152
F.R.D. 36, 39 (S.D.N.Y. 1993)). Although Kappel involved a stay
pending resolution of concurrent criminal matters, the five-factor
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test articulated in that case is widely applied within this Circuit
for determining whether or not to grant a stay pending an appeal in
a civil proceeding. Estate of Heiser v. Deutsche Bank Tr. Co.
Americas, No. 11 CIV. 1608 AJN MHD, 2012 WL 2865485, at *3 & n. 1
(S.D.N.Y. July 10, 2012) (citing, inter alia, SST Global Tech., LLC
v. Chapman, 270 F. Supp.2d 444, 445 (S.D.N.Y. 2003) (“The test used
in Kappel has been applied to stay a federal action in light of a
concurrently pending federal action (either because the claim
arises from the same nucleus of facts or because the pending action
would resolve a controlling point of law. . . .”) (emphasis
omitted) (collecting cases)), R&R adopted, No. 11 CIV. 1608 AJN
MHD, 2012 WL 5039065 (S.D.N.Y. Oct. 17, 2012). “Balancing these
factors is a case-by-case determination, with the basic goal being
to avoid prejudice.” Volmar Distributors v. New York Post Co., 152
F.R.D. 36, 39 (S.D.N.Y. 1993); accord, e.g., Kappel, 914 F. Supp.
at 1058. The Supreme Court’s seminal case on stays pendente lite
“makes it clear that ‘the suppliant for a stay must make out a
clear case of hardship or inequity in being required to go forward’
with litigation (i.e., a ‘strong showing’ of need for a stay) only
where ‘there is . . . a fair possibility that the stay . . . will
work damage to some one else.” An Giang Agric. & Food Imp. Exp. Co.
v. United States, 28 C.I.T. 1671, 350 F. Supp.2d 1162, 1164 (U.S.
Ct. Int’l Trade 2004) (quoting Landis, 299 U.S. at 255) (ellipses
in original)).
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Here, none of the parties dispute the appropriateness of the
Kappel test in this context. Therefore, the Court will apply it.
IV.

Application of the Five-Factor Kappel Test
1.

Prejudice to the Non-Movants

Plaintiffs argue that the delay created by a stay whose enddate is dependent on the actions of another court will cause them
undue prejudice. However, the fact delay will result from a stay
does not, in and of itself, warrant denial of their motion.
“Because delay results inherently from the issuance of a stay,
courts have found that ‘“mere”’ delay does not, without more,
necessitate

a

finding

of

undue

prejudice

and

clear

tactical

disadvantage.” Nussbaum v. Diversified Consultants, Inc., No. CIV.
15-600, 2015 WL 5707147, at *2 (D. N.J. Sept. 28, 2015) (quoting
Akishev v. Kapustin, 23 F. Supp.3d 440, 447 (D. N.J. 2014); other
citation omitted).
Plaintiffs also suggest that a stay will dilute the quality of
the evidence. This concern is unfounded. As the Hospital Defendants
note,

the

parties

have

exchanged

all

relevant

discovery

and

numerous party depositions have been conducted in connection with
Plaintiffs’ claim. Thus, all necessary evidence is preserved and
will not be diluted during the stay. See Reynolds v. Time Warner
Cable, Inc., No. 16-CV-6165W, 2017 WL 362025, at *2 (W.D.N.Y.
Jan. 25, 2017) (“The expected delay is not likely to adversely
affect witness memories (indeed, plaintiff himself is likely the
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most important witness in support of his claims) or risk loss or
destruction of records (presumably, TWC has placed a litigation
hold

on

records

of

debt

collection

communications

with

plaintiff).”) (citation omitted).
For its part, Verisma asserts that it will be prejudiced by a
stay because it is entitled to a prompt resolution of this matter.
This argument appears to have been premised on Verisma’s belief
that its motion for reconsideration would be granted. However, the
Court recently

decided

Verisma’s

Therefore,

Court’s

current

the

request
ruling

for

on

reconsideration.

the

scope

of

PHL

§ 18(2)(e), which is unfavorable to Verisma’s position, remains in
place. It would seem that, given the Court’s denial of Verisma’s
motion for reconsideration, Verisma will not be prejudiced by
delaying this case until the appeal in Ruzhinskaya is resolved.
In sum, the Court finds that neither Plaintiffs nor Verisma
have persuasively articulated how they would be prejudiced by
holding this proceeding in abeyance, apart from citing the delay
inherent

in

all

party-plaintiff,

stays.

“‘[I]t

defendant,

or

does

not

otherwise-to

suffice
assert

for
.

.

any
.

an

inherent right [to proceed in litigation] and rest its case on that
bald, abstract proposition, without articulating in concrete terms
the practical, real life effects of the potential deprivation of
that right under the circumstances of the particular case at bar.’”

-8-

LaSala v. Needham & Co., 399 F. Supp.2d 421, 430 & n. 58 (S.D.N.Y.
2005) (quoting An Giang Agric., 350 F. Supp.2d at 1164 n. 3).
2.
The

Hardship to the Movants

Hospital

Defendants

argue

that

they

will

suffer

considerable hardship and inequity if the proceedings advance prior
to

the

appeal

in

Ruzhinskaya

being

decided.

The

Hospital

Defendants’ argument on this point, however, essentially repeats
its argument concerning the Kappel test’s judicial economy and
public interest factors. As discussed in the subsequent sections,
these factors weigh in favor of a stay.
3.

The Court’s Interests

The Hospital Defendants argue that it is in the Court’s
interests, as well as the public interest and the interests of nonparties, to stay this action. Without a stay, and with the Second
Circuit’s view of the proper application of PHL § 18(2)(e) in
question,

the

parties

will

expend

significant

resources

in

proceedings with expert discovery and trial preparation based on
this Court’s
§

18(2)(e).

current
See

holding

Hosp.

Defs.’

that

Verisma

Reply

at

3.

is
The

subject

to

appellants

PHL
in

Ruzhinskaya have requested that the Second Circuit certify to the
New York Court of Appeals the question of whether PHL § 18 applies
to

an

entity

to

which

a

health

care

provider

delegates

responsibility, such as Verisma, and assigns the right to charge
for responding to requests for medical records. If this question is
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answered in the negative, then the controlling authority will be as
stated in Ruzhinskaya II, and PHL § 18(2)(e) does not apply to
Verisma. On the other hand, it is possible that the Second Circuit
will reverse Ruhzinskaya II and hold that vendors are subject to
PHL § 18 (2)(e). In that circumstance, the defendants would have to
address whether both a vendor’s and the provider’s costs are
considered in determining “costs incurred” under PHL § 18 (2)(e).
This is the subject of the other question requested to be certified
to the New York Court of Appeals, namely, whether “a reasonable
charge for . . . copies” under PHL § 18 is limited to “the costs
incurred” for the copies. Indeed, this issue stands out to the
Court

after

reviewing

the

opening

brief

in

Ruzhinskaya.

The

appellants devote a substantial portion of their brief arguing that
the district court erred in implicitly broadening the term “copies”
to include indirect costs involved in the whole ROI process (e.g.,
overhead and supervisory labor costs, as well as the work of
retrieving a patient’s medical records from within a hospital,
database, or outside storage facility). The answer to this question
will be of substantial importance to the instant matter. The Second
Circuit’s

opinion

in

Ruzhinskaya

certainly

will

provide

clarification on key issues in this case, which weighs in favor of
a stay. See, e.g., Catskill Mountains Chapter of Trout Unlimited,
Inc. v. U.S. E.P.A., 630 F. Supp.2d 295, 304-05 (S.D.N.Y. 2009)
(stay was warranted in actions of various environmental groups,

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states, and Canadian province for judicial review of National
Pollutant

Discharge

regulating

Elimination

activities

involving

System
transfer

Water
of

Transfers
waters

Rule

from

one

location to another, as promulgated by EPA under Clean Water Act,
pending another circuit’s resolution of similar issues pending
before it; although other circuit’s rulings were not necessarily
controlling, they could have provided guidance, thus promoting
judicial efficiency and minimizing possibility of conflicts between
different courts, and neither plaintiffs nor EPA were prejudiced by
any delay resulting from stay); An Giang Agri. & Food Imp. Exp.
Co., 350 F. Supp.2d at 1172 (staying action pending outcome of
other litigation was warranted, where opinion in other case “will
likely

streamline

and

clarify

the

issues

in

this

case”;

“[p]articularly in light of the absence of any showing of real harm
associated with it, entry of the requested stay will serve both the
interests of judicial economy and the interests of the parties”).
4.

The Public Interest

“[C]onsiderations of judicial economy are frequently viewed as
relevant to the public interest, and, as noted, they weigh against
the investment of court resources that may prove to have been
unnecessary.” Readick v. Avis Budget Grp., Inc., No. 12 CIV. 3988
PGG, 2014 WL 1683799, at *6 (S.D.N.Y. Apr. 28, 2014) (quotation
omitted). As discussed above, the Court’s interests are served by
a stay because stay will promote judicial efficiency and “minimize

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the possibility of conflicts between different courts.” N.Y. Power
Auth. v. United States, 42 Fed. Cl. 795, 799 (Fed. Cir. 1999)
(quoted in Catskill Mountains Chapter of Trout Unlimited, Inc., 630
F. Supp.2d at 304); see also Nuccio v. Duve, No. 7:13-CV-1556
MAD/TWD,

2015

(“Permitting
elswhere

are

WL

this

1189617,
action

already

at

to

devoted

*5

proceed
to

(N.D.N.Y.
while

Mar.

16,

judicial

determining

the

2015)

resources

exact

legal

questions at issue here would be an inefficient use of judicial
time and resources.”).
5.

The Interests of Non-Parties

Plaintiffs argue that the interests of persons not parties to
the civil litigation also “weigh heavily” against a stay because
“thousands of class members” will be prejudiced if the proceedings
are delayed. by delaying the proceedings. As discussed above, delay
does not, without more, necessitate a finding of undue prejudice.
E.g., Nussbaum, at 2015 WL 5707147, at *2. Plaintiffs here have not
identified any particularized harm to potential class members if a
stay is entered in this case. Rather, the interests of any possible
nonparties to this litigation would be better served by awaiting a
decision in Ruzhinskaya, which will provide invaluable guidance to
the Court on key trial issues in this case. See, e.g., Jones v.
Credit Acceptance Corp., No. CV 15-13165, 2016 WL 7320919, at *3
(E.D. Mich. Oct. 31, 2016) (proceeding on motions for summary

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judgment or to trial with uncertain standards would unnecessarily
invite potential prejudicial and reversible error).
V. Conclusion
For the foregoing reasons, the Court grants the Motion to Stay
by Highland Hospital, Strong Memorial Hospital, and the University
of Rochester. Accordingly, this action is stayed pending the
resolution of the appeal in Spiro, et al. v. HealthPort Techs.,
LLC, et al., 18-1034 (2d Cir. Apr. 11, 2018).
SO ORDERED.
S/Michael A. Telesca
HONORABLE MICHAEL A. TELESCA
United States District Judge
DATED:

September 6, 2018
Rochester, New York

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