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

Filing 45

DECISION and ORDER denying 21 Motion to Dismiss for Failure to State a Claim; and denying 22 Motion to Dismiss for Failure to State a Claim. Signed by Hon. Michael A. Telesca on 9/16/15. (AFB)

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,

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

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

INTRODUCTION
Ann McCracken (“McCracken”), Joan Farrell (“Farrell”), Sara
Stilson (“Stilson”), Kevin McCloskey (“McCloskey”), Christopher
Trapatsos

(“Trapatsos”),

(collectively,

and

“Plaintiffs”),

Kimberly

bring

this

Bailey
action

(“Bailey”)

on

behalf

of

themselves and others similarly situated against Verisma Systems,
Inc. (“Verisma”), Strong Memorial Hospital (“Strong”), Highland
Hospital (“Highland”), and the University of Rochester (“U of R”)
(collectively,

“Defendants”).

Verisma contracts

with

Strong,

Highland and the U of R (collectively, the “Healthcare Defendants”)
to

provide

medical

records

to

patients

of

those

entities.

Plaintiffs, all of whom are patients who received medical treatment
at the Healthcare Defendants, claim that Defendants charged them
excessively for copies of their medical records, in violation of
-1-

New York Public Health Law (“PHL”) § 18(2)(e). Plaintiffs also
assert causes of action for unjust enrichment and for deceptive
trade practices under New York General Business Law (“GBL”) §
349(a).
FACTUAL BACKGROUND
The Court assumes the parties’ familiarity with the underlying
facts giving rise to the instant litigation, and incorporates by
reference the factual summary set forth in the Court’s May 18, 2015
Decision and Order ruling on Verisma’s motion to dismiss for lack
of jurisdiction. See Dkt #35, pp 2-3. The Court will discuss the
relevant factual allegations in further detail below, as necessary
to the resolution of the parties’ contentions.
PROCEDURAL STATUS
In a Decision and Order (Dkt #35) entered May 18, 2015, the
Court granted the motion to dismiss pursuant to Rule 12(b)(1) of
the

Federal

Rules

of

Civil

Procedure

filed

by

Verisma

and

dismissed, without prejudice, the Amended Complaint for lack of
subject matter jurisdiction. In brief, the Court found that the
Amended Complaint did not allege sufficient facts to show that
Plaintiffs had suffered cognizable injuries-in-fact for standing
purposes, because it was Plaintiffs’ law firm, and not Plaintiffs
themselves, which was charged, and which paid, for the copies of
the

medical

records

at

issue.

Therefore,

the

Court

found,

Plaintiffs had not established their standing to sue.
The Court accordingly dismissed the Amended Complaint without
prejudice and granted Plaintiffs leave to replead their allegations
-2-

regarding standing. The Court deferred ruling on the Healthcare
Defendants’ and Verisma’s respective motions to dismiss (Dkt ## 21,
22) pursuant Rule 12(b)(6) of the Federal Rules of Civil Procedure
(“Rule

12(b)(6)”)

until

after

Plaintiffs

filed

an

amended

complaint.
Plaintiffs timely filed their Second Amended Complaint (Dkt
#40), to which they attached a number of documents, including the
retainer

agreements

and

the

Health

Insurance

Portability

and

Accountability Act (“HIPAA”) authorizations signed by each of the
individual plaintiffs (Dkt ##40-5 to 40-16). Neither the Healthcare
Defendants nor Verisma have filed a renewed motion to dismiss for
lack of jurisdiction pursuant to Rule 12(b)(1). For the reasons
discussed below, the Court denies Verisma’s motion to dismiss (Dkt
#22) and the Healthcare Defendants’ motion to dismiss (Dkt #21) in
their entirety.
STANDING
The Second Amended Complaint contains allegations that each of
the individual plaintiffs signed retainer agreements with their law
firm, Faraci Lange LLP (“the Firm” or “Plaintiffs’ Counsel”).
Pursuant to the retainer agreements, Plaintiffs were obligated to
reimburse

the

Firm,

out

of

any

recovery

obtained

in

their

respective personal injury lawsuits, for all disbursements advanced
by the Firm in connection with representing Plaintiffs in those
lawsuits. See Second Amended Complaint (“SAC”) ¶ 33 & Ex. 5
(McCracken); id. ¶ 46 & Ex. 7 (Farrell); id. ¶ 54 & Ex. 9
(Stilson); id. ¶ 62 & Ex. 11 (McCloskey); id. ¶ 70 & Ex. 13
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(Trapatsos); id. ¶ 78 & Ex. 15 (Bailey). Each individual plaintiff
subsequently reimbursed the Firm for the full amounts charged to
the Firm by Verisma for copies of his or her medical records. See
SAC ¶¶ 36, 38, 44 (McCracken); id. ¶¶ 49, 53 (Farrell); id. ¶¶ 57,
61

(Stilson);

id.

¶¶

65,

69

(McCloskey);

id.

¶¶

73,

77

(Trapatsos); id. ¶¶ 81, 85 (Bailey).1
The Court concludes that Plaintiffs’ repleaded allegations
regarding their injuries-in-fact have remedied the jurisdictional
defects contained in the Amended Complaint. Plaintiffs have pleaded
facts, and attached documentary evidence indicating that, at the
time the Firm incurred the copying expenses, Plaintiffs were
legally obligated to reimburse the Firm for expenses incurred in
connection

with

representing

them.

Pursuant

to

the

retainer

agreements signed by Plaintiffs, Verisma’s submission of copying
charges to the Firm, and the Firm’s payment of those charges would
have given rise to a contingent liability on the Plaintiffs’ part.
That liability to repay the Firm for the copying expenses has given
Plaintiffs standing to challenge the copying charges as excessive,
“because Plaintiffs . . . have suffered an injury-in-fact (a legal
duty to pay these excessive costs) traceable to the defendants
responsible for the charges.” Spiro v. Healthport Technologies,
LLC, 73 F. Supp.3d 259, 269 (S.D.N.Y. 2014) (citations omitted).
RULE 12(b)(6) STANDARD

1

McCracken also remains obligated under her retainer agreement to reimburse
the Firm for an additional amount expended for copies of medical records. See
SAC ¶ 45.

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In reviewing a motion to dismiss pursuant to Rule 12(b)(6),
the Court must accept “all factual allegations in the complaint and
draw . . . all reasonable inferences in the plaintiff’s favor.”
Ruotolo v. City of New York, 514 F.3d 184, 188 (2d Cir. 2008)
(internal quotation marks omitted). “While a complaint attacked by
a Rule 12(b)(6) motion to dismiss does not need detailed factual
allegations, a plaintiff’s obligation to provide the grounds of his
entitlement to relief requires more than labels and conclusions,
and a formulaic recitation of the elements of a cause of action
will not do[.]” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007) (citation omitted). In order to withstand dismissal, the
complaint must plead “enough facts to state a claim to relief that
is plausible on its face.” Id. at 570. Conclusory allegations are
not entitled to any assumption of truth and will not support a
finding that the plaintiff has stated a valid claim. Lundy v.
Catholic Health System of Long Island, Inc., 711 F.3d 106, 113 (2d
Cir. 2013) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678, 679
(2009)). As the Second Circuit has noted, “at a bare minimum, the
operative standard requires the ‘plaintiff [to] provide the grounds
upon which his claim rests through factual allegations sufficient
to raise a right to relief above the speculative level.’” ATSI
Communications, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir.
2007) (quoting Twombly, 550 U.S. at 555).
DISCUSSION
I.

Verisma’s Rule 12(b)(6) Motion to Dismiss
A.

Overview
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Verisma raises the following points in support of its motion
to dismiss: (I) PHL § 18 is inapplicable due to Plaintiffs’ failure
to comply with its express terms; (ii) Plaintiffs’ claims are
barred by the voluntary payment doctrine; (iii) Plaintiffs fail to
state a cause of action under GBL § 349(a); (iv) Plaintiffs fail to
state a cause of action under PHL § 18(2)(e); and (v) Plaintiffs
fail to state a cause of action for unjust enrichment.
B.

The PHL Claims
1.

The Relevant Statutory Language

Section 18(2) of the PHL deals with “[a]ccess by qualified
persons” to their medical records and provides in pertinent part
that
(a) . . . upon the written request of any subject, a
health care provider shall provide an opportunity, within
ten days, for such subject to inspect any patient
information concerning or relating to the examination or
treatment of such subject in the possession of such
health care provider.
. . .
(e) The 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. PUB. HEALTH L. § 18(2)(a), (e) (emphases supplied). A “qualified
person” includes “any properly identified subject; . . . or an
attorney representing a qualified person or the subject’s estate
who holds a power of attorney from the qualified person or the
subject’s estate explicitly authorizing the holder to execute a
written request for patient information under this section. . . .
.” N.Y. PUB. HEALTH L. § 18(1)(g). The statute in turn defines
-6-

“subject” as “an individual concerning whom patient information is
maintained or possessed by a health care provider.” N.Y. PUB. HEALTH
L. § 18(1)(g).
2.

Plaintiffs’ Failure to Supply Verisma with Powers
of Attorney

Verisma’s main argument, and one that is not raised by the
Healthcare Defendants, is that Plaintiffs are not entitled to PHL
§ 18’s protections because they did not comply with the statutory
requirements. Verisma points to PHL § 18(3), “Limitations on
access”, and in particular, subsection (h), which provides that
“[w]here

the written request for patient information under this

section is signed by the holder of a power of attorney, a copy of
the power of attorney shall be attached to the written request. .
. . .” N.Y. PUB. HEALTH L. § 18(3)(h). Verisma argues that since the
records requests were made by Plaintiffs’ Counsel, they were
required to submit powers of attorney signed by their clients
(Plaintiffs).

Verisma notes that Plaintiffs’ Counsel submitted

HIPAA authorizations only, and did not include powers of attorney.
Therefore, Verisma reasons, Plaintiffs’ medical records requests
were non-compliant with PHL § 18, and Plaintiffs have no basis to
claim any entitlement to the “reasonable charge” provision of PHL
§ 18(2)(e). Leaving aside the issue of whether Verisma waived this
argument by nevertheless fulfilling Plaintiffs’ allegedly unlawful
requests and charging them $0.75 per page, the Court finds that it
is without merit, as discussed below.
As an initial matter, it is true that when PHL was enacted,
attorneys

for plaintiff-patients
-7-

were

not

“qualified

persons”

entitled to the discounted statutory rate of not more than $0.75
per page in obtaining photocopies of their client’ medical records.
Boltja v. Southside Hosp., 186 A.D.2d 774, 775, 776,

589 N.Y.S.2d

341 (2d Dep’t 1992). However, PHL § 18(1)(g) was amended effective
July 30, 1992, to expand the definition of “qualified person” to
include “an attorney representing or acting on behalf of the
subject or the subject’s estate[.]” Boltja, 186 A.D.2d at 775; see
N.Y. PUB. HEALTH L. §

18(1)(g)

(“‘Qualified

person’

means

any

properly identified subject; . . . or an attorney representing a
qualified person or the subject’s estate who holds a power of
attorney

from

the

qualified

person

or

the

subject’s

estate

explicitly authorizing the holder to execute a written request for
patient information under this section. A qualified person shall be
deemed a ‘personal representative of the individual’ for purposes
of [HIPAA] . . . and its implementing regulations.”). Plaintiffs
always have been “[q]ualified person[s]” under PHL § 18(1)(g), and,
pursuant to the 1992 statutory amendment, their attorneys now are
as well. See, e.g., Boltja, 186 A.D.2d at 775-76.2
The Court has reviewed Davenport v. County of Nassau, 245
A.D.2d 331 (2d Dep’t 1997), the only case cited by Verisma in
support of this argument, and finds that it is inapposite. There,
the plaintiff brought an action to recover damages for medical
2

The main case relied on by Plaintiffs was decided on February 21, 1992,
prior to the amendment expanding the definition of qualified person. Matter of
Castillo v. St. John’s Episcopal Hosp., Smithtown, 151 Misc.2d 420, 580 N.Y.S.2d
992 (Sup. Ct. 1992). At the time Castillo was decided, attorneys were not
“qualified persons” for purposes of PHL § 18(1)(g), and authorized requests for
medical records to be produced to an attorney were governed provisions of the New
York Civil Practice Law and Rules.

-8-

malpractice against various doctors, the County of Nassau, and the
Nassau County Medical Center. The doctors filed a motion for a
subpoena duces tecum against the county and the medical center,
which had been ordered by the trial court to provide copies of the
injured plaintiff’s hospital record to the doctors at a charge of
$0.75 per page. The Appellate Division reversed the order because
the doctors were not “qualified person[s]” as defined in PHL §
18(1)(g), and the medical center was “not subject to the limit of
$.75 imposed by statute on the amount which may be charged to
qualified

persons

in

connection

with

the

photocopying

of

records[.]” Davenport, 245 A.D.2d at 332 (internal and other
citations omitted). Put differently, the doctors were not entitled
to the benefit of the $0.75 statutory cap on copying fees in PHL §
18(2)(e). The central issue in Davenport thus is not presented in
this case, since both Plaintiffs and Plaintiffs’ Counsel are
included within the definition of “qualified person.”
Plaintiffs argue that a power of attorney is only required to
be submitted with a request for medical records “[w]here the
written request for patient information . . . is signed by the
holder of a power of attorney.” N.Y. PUB. HEALTH L. § 18(3)(h)
(emphases supplied). The power of attorney referenced in PHL §
18(1)(h) must “explicitly authoriz[e] the holder to execute a
written request for patient information under this section[,]” N.Y.
PUB. HEALTH L. § 18(3)(g). Plaintiffs point out that Subdivision 3(h)
is analogous to Subdivision 3(g), which states that where the
patient has died and no estate representative has been appointed,
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a distributee of the deceased patient may request medical records,
but only upon providing a copy of the patient’s death certificate.
See N.Y. PUB. HEALTH L. § 18(3)(g). Subdivisions 3(g) and 3(h) thus
cover circumstances in which the actual patient is not able to
request the records personally, due to, e.g., death or incapacity.
Understandably, in such cases, the statute requires proof that the
party requesting a third-party’s medical records actually has the
legal authority to do so.
In the usual circumstance, such as the present case, the
records request is signed by the patient, and no power of attorney
is required. Plaintiffs note that here, the HIPAA authorizations
state in relevant part as follows, “I . . . request that health
information regarding my care and treatment be released. . . .”
E.g., Dkt #40-6, p. 2 of 2. The HIPAA authorizations, pursuant to
which Plaintiffs personally requested release of their medical
records, then were forwarded by Plaintiffs’ Counsel to Verisma.
Verisma apparently found these submissions sufficient to comply
with the statute, since it provided copies of Plaintiffs’ records
to

Plaintiffs’

Counsel.

Verisma’s

accusation

of

Plaintiffs’

noncompliance with the statute is unconvincing in light of this
fact.
3.

Verisma’s

Failure to State a Cause of Action Under PHL §
18(2)(e) Because Amount Charged Is Presumptively
Reasonable
second

argument,

which

is

also

raised

by the

Healthcare Defendants, centers on the interpretation of PHL §
18(2)(e). Plaintiffs argue that PHL § 18(2)(e) allows providers to
-10-

impose a “reasonable charge” for copies, provided that this charge
(1) does not exceed “the costs incurred by such provider” to make
the copies; and (2) does not exceed “seventy-five cents per page”
of records. Verisma, on the other hand, asserts that PHL § 18(2)(e)
sets $0.75 as a presumptively reasonable price, so that a health
care provider whose actual costs incurred were less than $0.75 per
page (say, $0.50 per page), is authorized to charge $0.75 per page.
Verisma’s argument, which is echoed by the Healthcare Defendants,
effectively allows healthcare providers to make a profit on copying
medical records if they can keep their actual copying costs under
$0.75 per page.
The Court agrees that the interpretation of PHL § 18(2)(e)
urged by Verisma and the Healthcare Defendants “misreads the
statute.” Spiro, 73 F. Supp.3d at 272; see also id. at 272-73 (“[A]
healthcare provider may not charge more than the actual ‘costs
incurred’ for copies—but that charge is capped at $0.75 per page.”)
(citing Zamdborg v. Goldin, 14 Misc.3d 1207(A), 831 N.Y.S.2d 363
(Table), 2004 WL 5138088, at *3 (Sup. Ct. 2004) (“[T]he court
grants costs to defendants in the amount actually incurred up to
the limit of 75 cents per page. Both parties will be permitted to
submit

documentary

evidence

of

actual

costs

incurred3

in

3

The Kings County Supreme Court’s ruling in Zamdborg, supra, is instructive.
If, as Verisma argues, $0.75 per page were the “presumptively reasonable” fee
that healthcare providers could charge, regardless of their actual costs in
producing the copies, there would have been no need for the court in Zamdborg to
state that “[b]oth parties will be permitted to submit documentary evidence of
actual costs incurred in photocopying the medical records in question.” Zamdborg,
2004 WL 5138088, at *3.

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photocopying the medical records in question.”) (emphases added)
(citation omitted). The Court declines to adopt the interpretation
of the statute urged by Defendants, and it rejects this argument as
a basis for dismissing Plaintiffs’ PHL § 18 claims.
C.

The GBL § 349 Claims
1.

Elements of a Prima Face Case

Section 349(a) of the GBL provides that “[d]eceptive acts or
practices in the conduct of any business, trade or commerce or in
the furnishing of any service in this state are . . . unlawful.”
N.Y. GEN. BUS. L. § 349(a). “To make out a prima facie case under
Section 349, a plaintiff must demonstrate that (1) the defendant’s
deceptive

acts were

directed

at

consumers,

(2)

the

acts are

misleading in a material way, and (3) the plaintiff has been
injured as a result.” Maurizio v. Goldsmith, 230 F.3d 518, 521 (2d
Cir. 2000) (per curiam) (citing Oswego Laborers’ Local 214 Pension
Fund v. Marine Midland Bank, 85 N.Y.2d 20, 25 (1995)). “[A]n action
under § 349 is not subject to the pleading-with-particularity
requirements of Rule 9(b), Fed. R. Civ. P., but need only meet the
bare-bones notice-pleading requirements of Rule 8(a) . . . .”
Pelman ex rel. Pelman v. McDonald’s Corp., 396 F.3d 508, 511 (2d
Cir. 2005); see also Ng v. HSBC Mortg. Corp., No. 07–CV–5434, 2010
WL 889256, at *14 (E.D.N.Y. Mar. 10, 2010) (“Deceptive conduct that
does not rise to the level of actionable fraud, may nevertheless
form the basis of a claim under New York’s Deceptive Practices

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Act,4 which was created to protect consumers from conduct that
might not be fraudulent as a matter of law, and also relaxes the
heightened standards required for a fraud claim.”). A GBL § 349
claim brought by a private plaintiff “does not require proof of
actual reliance.” Pelman, 396 F.3d at 511 (citing Stutman v.
Chemical Bank, 95 N.Y.2d 24, 29 (2000); footnote omitted).
2.

Failure to Allege a “Consumer Transaction”

Verisma argues that Plaintiffs have failed to allege “conduct
that is consumer oriented[,]” New York Univ. v. Continental Ins.
Co., 87 N.Y.2d 308, 320 (1995), and thus their claim does not
fulfill a threshold pleading requirement of GBL § 349(a). See id.
Under New York law, “the term ‘consumer’ is consistently
associated with an individual or natural person who purchases
goods, services or property primarily for ‘personal, family or
household purposes[.]’” Cruz v. NYNEX Information Resources, 263
A.D.2d 285, 289-90, 703 N.Y.S.2d 103 (1st Dep’t 2000) (citing,
inter alia, N.Y. GEN. BUS. L. §§ 399–c; 399–p(1)(c); N.Y. GEN.
OBLIGATIONS L. § 5–327(1)(a)). Notably, “[t]he statute’s consumer
orientation does not preclude its application to disputes between
businesses per se,” although “it does severely limit it.” Id. at
290.
Verisma relies heavily on an out-of-Circuit case, Slobin v.
Henry Ford Health Care, 666 N.W.2d 632 (Mich. 2003), which rejected

4

GBL § 349 is also referred to as the New York Consumer Protection Act,
e.g., Leonard v. Abbott Laboratories, Inc., No. 10–CV–4676(ADS)(WDW), 2012 WL
764199, at *16 (E.D.N.Y. Mar. 5, 2012), and the New York Deceptive Practices
Act, e.g., Ng v. HSBC Mortg. Corp., 2010 WL 889256, at *14.

-13-

a similar claim brought under the Michigan Consumer Protection Act
(“MCPA”), which applies to the conduct of a business providing
goods, property, or service primarily for personal, family, or
household purposes. The majority in Slobin held that a claim for
damages based upon a law firm’s request for the medical records of
a client it is representing in litigation cannot be sustained under
the MCPA because “obtaining medical records for the purpose of
litigation is not “primarily for personal, family, or household
use,” as required by the Michigan act. Slobin, 666 N.W.2d at 635
(reasoning that the “medical records were sought principally so
that the law firm itself could engage in its own business or
commercial enterprise, namely, the evaluation and pursuit of legal
avenues to procure financial rewards and other relief for its
client”). However, “the analysis of the Slobin majority has not
commended

itself

to

courts

in

other

jurisdictions.”

Ford

v.

Chartone, Inc., 908 A.2d 72, 82 & n. 11 (D.C. 2006) (collecting
cases; citing, inter alia, Mermer v. Medical Correspondence Servs.,
686

N.E.2d

296,

299–300

(Ohio

Ct.

App.

1996)

(holding

that

attorneys are agents of their clients and that the purchase of
medical records by an attorney is actually a purchase by client
himself and thus subject to state’s consumer protection laws)).
The

Court

does

not

find

the

Slobin

majority’s

analysis

persuasive. First, it ignores that the fact that the nature of
Plaintiffs’ relationship with their attorneys was one of agency.
See, e.g., Schwab v. Philip Morris USA, Inc., No. CV 04–1945(JBW).
2005 WL 2467766, at *3 (E.D.N.Y. Oct. 6, 2005) (“‘The relationship
-14-

between an attorney and the client he or she represents in a
lawsuit is one of agent and principal.’”) (quoting Veal v. Geraci,
23 F.3d 722, 725 (2d Cir. 1994); citing RESTATEMENT (THIRD) OF THE LAW
GOVERNING LAWYERS ch. 2, intro. note (2000) (the attorney-client
relationship is, “from one point of view, derived from the law of
agency”)); Slobin, 666 N.W.2d at 636 (dissenting opn.) (citing
Friedman v. Dozorc, 312 N.W.2d 585, 615 (Mich. 1981) (“Attorneys
are the agents who provide the necessary expertise for clients who
wish to litigate their rightful claims.”)). Without Plaintiffs as
clients presenting potential legal claims, Plaintiffs’ medical
records were of no use to their attorneys’ “business or commercial
enterprise.”

Second, Plaintiffs did not bring these personal

injury lawsuits as part of a commercial dispute; rather, through
these

lawsuits,

Plaintiffs

sought

to

restore

themselves,

personally, to their respective pre-injury statuses. See Slobin,
666 N.W.2d at 636 (dissenting opn.). As the District of Columbia
Court of Appeals in Ford noted, “[u]sing medical records to secure
compensation for injuries in a lawsuit is no less ‘personal’ than
is using them to secure insurance coverage or, for that matter, a
second

medical

personal

opinion,

benefits.

A

employment,

motive

may

be

medical

leave,

pecuniary

and

and

other

still

be

personal.” Ford, 908 A.2d at 83. The Court accordingly finds that
Plaintiffs have pleaded conduct that is consumer-oriented for
purposes of their GBL § 349 claim.
3.

Failure to Allege Materially Misleading Conduct

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Verisma contends that, as a matter of law, Plaintiffs cannot
show that they were materially mislead, because Verisma’s invoices
fully disclosed the costs of obtaining copies of the medical
records before payment was made.
The New York Court of Appeals has adopted “an objective
definition of deceptive acts and practices, whether representations
or omissions,” by “limit[ing] [them] to those likely to mislead a
reasonable consumer acting reasonably under the circumstances.”
Oswego Laborers’ Local 214 Pension Fund, 85 N.Y.2d at 26. In the
case of omissions, such as those at issue in this case, GBL §
349(a)

“does

not

require

businesses

to

ascertain

consumers’

individual needs and guarantee that each consumer has all relevant
information specific to its situation[.]” Id.
With those principles in mind, the Court turns to the
allegations in the Second Amended Complaint. Plaintiffs allege that
(1) the fees they were charged “exceeded the cost to produce the
medical records,” (2) “[t]he cost to produce the medical records
was substantially less than seventy-five cents per page,” and (3)
the charges “include[d] built-in kickbacks” from Verisma to the
Health Provider Defendants. Plaintiffs also cited materials from
Verisma’s website and other websites advertising that Verisma’s
clients “keep more of the [record] release revenue,” “improve cash
flow,” and improve financial return” by contracting with Verisma.
See, e.g., SAC ¶¶ 3, 24-29. Taking these allegations as true,
Plaintiffs have stated a plausible claim with respect to Verisma’s
alleged omission in failing to disclose that its actual cost of
-16-

photocopying was less than $0.75 per page. Indeed, “[w]ithout
disclosure of . . . a cost differential, a fact known only to
[Verisma], a reasonable consumer, appreciating that the statute
permitted healthcare providers to charge up to $0.75 cents per page
to recoup their actual costs, could be misled to believe that
[Verisma’s] actual cost was $0.75 per page (or more).” Spiro, 73 F.
Supp.3d

at

274

(finding

adequate

allegations

of

materially

misleading conduct where complaint stated simply that the fees
charged to the plaintiffs exceeded the defendant’s cost to produce
the medical records, and the cost to produce the medical records
was

substantially

less

than

$0.75

per

page)

(citing

In

re

Coordinated Title Ins. Cases, 2 Misc.3d 1007(A), 784 N.Y.S.2d 919
(Table), 2004 WL 690380 (Sup. Ct. 2004) (granting motion for class
certification of a GBL § 349(a) claim where the “question raised in
the complaint involve[d] the conduct of the defendants in allegedly
overcharging or failing to notify the members of the putative class
of the availability of the mandated discounts”)). Indeed, the New
York Court of Appeals has recognized that where, as here, “the
business alone possesses material information that is relevant to
the consumer and fails to provide this information[,]” Oswego
Laborers’ Local 214 Pension Fund, 85 N.Y.2d at 26, the “scenario is
quite different[.]”

Id.

At

this

stage,

the Court

finds

that

Plaintiffs have adequately alleged materially misleading conduct
for purposes of stating a GBL § 349 claim.
4.

Failure to Plead Intent to Defraud

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Verisma contends that Plaintiffs have failed to plead knowing
misconduct or intent to defraud or mislead on Verisma’s part. As a
matter

of

New

York

law,

Plaintiffs

need

not

“establish

the

defendant’s intent to defraud or mislead,” Oswego Laborers’ Local
214 Pension Fund, 85 N.Y.2d at 26 (quoted in Spiro, 73 F. Supp.3d
at 274), in order to prevail under GBL § 349(a). Therefore,
Plaintiffs’ alleged failure to plead intent does not provide a
basis for dismissal of their GBL § 349 claim.
5.

Inapplicability of GBL § 349(a) Because Plaintiffs’
Attorneys Were Sophisticated Intermediaries

Verisma contends that Plaintiffs’ attorneys were sophisticated
intermediaries and, thus, there was no risk of consumer confusion,
making GBL § 349(a) inapplicable. The Court finds the cases relied
upon by Verisma to be inapposite, as discussed further below.
In In re Rezulin Prods. Liab. Litig., 392 F. Supp. 2d 597, 614
(S.D.N.Y. 2005) (“Rezulin”), the district court had to determine
whether Warner–Lambert’s marketing efforts to persuade Medco to
include the drug Rezulin in its formularies constituted consumeroriented conduct for purposes of GBL § 349(a). See 392 F. Supp.2d
at

613.

The

district

ultimately

would

Lambert’s

conduct

be

court

found

purchased
was

by

directed

that

even

diabetes
at

Medco,

though

Rezulin

patients,

Warner-

another

large,

sophisticated business entity—not at the diabetes patients. Id.;
see also id. at 614 (“The representations that [Warner-Lambert
Company] made to Medco were not intended for diabetes patients, the
ultimate

consumers.”).

Because

“[a]

sophisticated

business

entity—Medco—acted in an intermediary role,” this “reduc[ed] the
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potential that parties in an inferior bargaining position . . .
would be deceived.” Id. at 614. Therefore, the district court
found, Warner-Lambert’s conduct did not fall within the ambit of
GBL § 349(a).
Verisma also relies on Weiss v. Polymer Plastics Corp., 21
A.D.3d 1095, 802 N.Y.S.2d 174 (1st Dep’t 2005), which involved the
question of whether a manufacturer’s sale of a stucco product to
the installer of the stucco product constituted consumer-oriented
conduct with regard to the homeowners who had hired the installer.
The Appellate Division found that the homeowners had failed to show
consumer-oriented conduct, noting that the transaction in that case
was between two companies in the building construction and supply
industry, and it did not involve any direct solicitation of the
homeowners by the manufacturer. Further, the installer who acted in
an

intermediary

business entity.

role

in

Weiss,

the
21

transaction

A.D.3d

at

was

1097,

a
802

sophisticated
N.Y.S.2d

174

(citations omitted).
In Rezulin and Weiss, the courts found that the parties
standing in between the allegedly culpable defendant and the
plaintiff

were

“sophisticated

intermediaries”

because

they

possessed specialized knowledge about the products at issue. Here,
in contrast, Plaintiffs’ attorneys cannot be said to have been
“sophisticated intermediaries” regarding Verisma’s medical records
business and its contract with the Healthcare Defendants. As
discussed above, the cost differential (if any) was not disclosed
to Plaintiffs or their attorneys; nor did Plaintiffs or their
-19-

attorneys have access to Verisma’s contract with the Healthcare
Defendants. Thus, neither Rezulin and Weiss reflect the situation
in the present case, where Plaintiffs have alleged that their
attorneys were in the same inferior position as their clients
because no one had access to Verisma’s true cost of copying the
medical records or to Verisma’s contract with the Healthcare
Defendants. The Court accordingly rejects Verisma’s “sophisticated
intermediary” argument as a basis for dismissing Plaintiffs’ GBL §
349(a) claim.
6.

Failure to Allege Actual Injury

Verisma argues that the GBL § 349(a) claim fails because
Plaintiffs did not actually pay the copying costs, and therefore
they did not sustain any actual injuries. As discussed above,
Plaintiffs’ Second Amended Complaint has remedied the deficiencies
with regard to the element of actual injury. Because Plaintiffs
have sufficiently alleged actual injuries, the Court declines to
dismiss Plaintiffs’ GBL § 349(a) claim on this basis.
D.

Voluntary Payment Doctrine

Verisma asserts that all of Plaintiffs’ claims are barred
because Plaintiffs voluntarily paid the $0.75-per-page copying fee.
The voluntary payment doctrine is a creature of common-law which
“bars recovery of payments voluntarily made with full knowledge of
the facts, and in the absence of fraud or mistake of material fact
or law.” Dillon v. U–A Columbia Cablevision of Westchester, Inc.,
100

N.Y.2d

declined

to

525,

526

apply

(2003)

the

(emphases

voluntary
-20-

supplied).

payment

doctrine

Courts
when,

have
for

instance, “a plaintiff’s claim is predicated on a lack of full
disclosure by defendant.” Fink v. Time Warner Cable, 810 F. Supp.2d
633, 649 (S.D.N.Y. 2011) (citing Spagnola v. Chubb Corp., 574 F.3d
64, 73 (2d Cir. 2009) (issue of when insured knew or should have
known that insurer’s increase in amount of renewal premiums for
homeowner’s policy exceeded amount permitted by contract involved
fact question that could not be resolved on motion to dismiss
insured’s breach of contract claim against insurer pursuant to
voluntary payment doctrine) (citing Samuel v. Time Warner, Inc., 10
Misc.3d 537, 809 N.Y.S.2d 408, 418 (Sup. Ct. 2005) (finding that
voluntary payment doctrine did not apply to claims “predicated on
the absence of full disclosure at the time of installation”)).
Here, Plaintiffs allege that they lacked full knowledge of the
facts regarding the actual costs to Verisma of copying their
medical records. They further allege that they were materially
misled by Verisma’s omissions in failing to disclose it was going
to charge them an amount greater than its actual costs incurred in
copying their records. In similar cases, courts have found that the
voluntary payment doctrine does not bar a plaintiff’s GBL § 349(a)
claim. See

Spiro,

2014

WL

4277608,

at

*11

(“That

defendants

disclosed in advance their intention to charge $0.75 per page, or
that plaintiffs ‘voluntarily agreed’ to pay this figure, does not
preclude a claim under Section 349(a), where defendants allegedly
failed

to

disclose

that

their

actual

costs

were

below

that

figure.”) (citations omitted); Fink, 810 F. Supp.2d at 649 (denying
summary judgment to internet provider and finding voluntary payment
-21-

doctrine inapplicable where “[i]ssues of disclosure, notice, and
authorization

[we]re

very

much

contested”,

customers

alleged

defendant made misrepresentations about its high-speed internet
service

to

increase

its

profits,

and

customers

alleged

that

defendant’s policy was to misrepresent to customers the reasons for
slow service).

At this juncture, the Court finds that application

of the voluntary payment doctrine to dismiss Plaintiffs’ claims
would be premature. See Spagnola, 574 F.3d at 73 (stating that
although the voluntary payment doctrine may ultimately bar the
plaintiff’s claims, “it is too early in this case to conclusively
answer that question”).
E.

Unjust Enrichment Claim

A cause of action for unjust enrichment “is available only in
unusual situations when, though the defendant has not breached a
contract nor committed a recognized tort, circumstances create an
equitable obligation running from the defendant to the plaintiff.”
Corsello v. Verizon N.Y., Inc., 18 N.Y.3d 777, 790 (2012).

To

state such a claim in New York, a plaintiff must establish (1) that
the defendant benefitted; (2) at plaintiff’s expense; and (3) that
“equity and good conscience require restitution.” Kaye v. Grossman,
202 F.3d 611, 616 (2d Cir. 2000) (citation omitted).
Verisma first contends that Plaintiff’s claim for unjust
enrichment should be dismissed because Plaintiffs’ counsel had an
“actual agreement” with Verisma to obtain the medical records at
$0.75 per page. “The existence of a valid and enforceable written
contract governing a particular subject matter ordinarily precludes
-22-

recovery in quasi contract for events arising out of the same
subject matter.” Clark–Fitzpatrick, Inc. v. Long Island R.R. Co.,
70

N.Y.2d

382,

388

(1987).

contractual

relationship,

Plaintiffs’

counsel

To

establish

Verisma

requested

points

medical

the
to

existence
allegations

records,

Verisma

of

a

that
sent

Plaintiffs’ Counsel an invoice of the amount to be charged, and
Plaintiffs’ Counsel paid the invoice. Verisma does not cite any
legal authority in support of its argument that payment of an
invoice, without more, creates an express or implied contract.
Because Verisma has not established the existence of a valid and
enforceable written contract governing the purchase of Plaintiffs’
medical records, the Court will not dismiss Plaintiffs’ unjust
enrichment claim on this basis.
Verisma next argues that Plaintiffs’ unjust enrichment claim
fails

because

they

had

no

direct

dealing

or

substantive

relationship with Verisma. “New York law does not require an unjust
enrichment plaintiff to plead ‘direct dealing,’ or an ‘actual,
substantive relationship’ with the defendant.” Waldman v. New
Chapter, Inc., 714 F. Supp.2d 398, 403 (E.D.N.Y. 2010) (quoting
Sperry v. Crompton Corp., 8 N.Y.3d 204, 215-16 (2007)).5 Indeed,
the plaintiff “need not be in privity with the defendant to state
a claim for unjust enrichment.” Sperry, 8 N.Y.3d at 215. All that

5

In Waldman, the district court observed that the case upon which Verisma
relies here, Redtail Leasing, Inc. v. Bellezza, 95–CV–5191, 1997 WL 603496, at
*8 (S.D.N.Y. 1997), “accurately describe[d] New York law in 1997, . . . [b]ut
[it] is not the law today, as promulgated by New York’s own courts.” 714 F.
Supp.2d at 403 (citation omitted).

-23-

is required is that the plaintiff’s relationship with a defendant
“not [be] too attenuated.” Id. 216. Here, Plaintiffs’ Counsel, who
dealt directly with Verisma, were acting as their agents. “[C]ourts
have found privity to exist in relationships such as . . .
fiduciary . . . [and] agent[.]” Liao v. Holder, 691 F. Supp.2d 344,
354

&

n.

12

(E.D.N.Y.

2010)

(citations

omitted).

Plaintiffs

therefore have adequately pled the existence of a relationship with
Verisma that is not “too attenuated” for purposes of stating a
plausible unjust enrichment claim.
II.

The Healthcare Defendants’ Motion to Dismiss
A.

Overview

The Healthcare Defendants’ Rule 12(b)(6) motion to dismiss
asserts that

Plaintiffs

have

failed

to

plead the

element

of

causation with regard to Count I, as well as the element of actual
injury

with

regard

to

Count

IV

(GBL

§

349(a)).

However,

as

discussed above, the Court has found that the Second Amended
Complaint adequately pleads cognizable injuries-in-fact. Further,
in its previous Decision and Order, the Court found that the
Amended

Complaint

sufficiently

alleged

causation.

The

Court

accordingly declines to dismiss Counts I and IV on these grounds.
The Healthcare Defendants also argue that Counts II (unjust
enrichment) and IV fail as a matter of law, and that Plaintiffs’
claim for treble damages under GBL § 349(a) should be dismissed.6
B.

Failure to Allege Improper Benefit

6

Plaintiffs’ Third Cause of Action is asserted against Verisma only.
See SAC, p. 20.

-24-

The Healthcare Defendants assert that Plaintiffs allege only
that their counsel paid Verisma, not them, for handling their
medical records requests. Therefore, the Healthcare Defendants
contend, Plaintiffs have not alleged a required element of an
unjust enrichment claim, i.e., that Healthcare Defendants received
money to which they are not entitled. In support of this argument,
the Healthcare Defendants have submitted an affidavit from Donna
Barnard (“Barnard”), Director of Information Management at the U of
R. Although Barnard admits that the U of R’s contract with Verisma
allows Verisma to pass along any surplus revenue earned from
processing records requests to the Healthcare Defendants, see
Affidavit of Donna Barnard (“Barnard Aff.”) (Dkt #21-1), ¶ 14, the
Healthcare Defendants “have never been compensated or received any
revenue

for

the

handling

of

[records]

requests,

either

from

patients themselves or from Verisma.” Id. ¶¶ 3, 15-17.
As it is generally improper to consider factual averments on
a Rule 12(b)(6) motion, the Court will not consider the Barnard
affidavit for the purposes of resolving the Healthcare Defendants’
motion to dismiss. See, e.g., Wachtel v. National R.R. Passenger
Corp., No. 11–CV–613, 2012 WL 292352, at *2 (S.D.N.Y. Jan. 30,
2012) (“While Plaintiff attached an affidavit to his opposition
brief in an attempt to support his argument, the Court cannot
consider affidavits in ruling on a motion to dismiss.”) (citing
Cyril v. Neighborhood P’ship II Housing Dev. Fund, Inc., 124 F.
App’x 26, 27 n. 2 (2d Cir. 2005) (unpublished opn.) (stating that
in ruling on motion to dismiss, it “would have been improper” for
-25-

district court to consider affidavits presented by defendant)
(citing Blue Tree Hotels Inv. (Canada), Ltd. v. Starwood Hotels &
Resorts Worldwide, Inc., 369 F.3d 212, 217 (2d Cir. 2004) (review
of motion to dismiss “is generally limited to the facts and
allegations

that

are

contained

in

the

complaint

and

in

any

documents that are either incorporated into the complaint by
reference or attached to the complaint as exhibits”) (citations
omitted)).

Because the Court declines to consider any of the

factual averments in Barnard’s affidavit, it is not necessary to
strike the affidavit or convert the Healthcare Defendants’ motion
to one for summary judgment.
C.

Failure to Allege Material Misrepresentations

The Healthcare Defendants argue that Plaintiffs cannot sustain
a GBL § 349 claim because they have not “provide[d] evidence to
show” that the Healthcare Defendants engaged in deceptive acts or
practices.

In

opposing

a

Rule

12(b)(6)

motion,

it

is

not

Plaintiffs’ burden to “[p]rovide evidence” in support of their
claims. Furthermore, as discussed above in connection with its
resolution of a similar argument raised by Verisma, the Court has
found that Plaintiffs have sufficiently alleged the element of
“material misrepresentation” for purposes of stating a GBL § 349
claim.
D.

Failure to Plead a Claim for Treble Damages

The Healthcare Defendants also urge dismissal of Plaintiffs’
claim for treble damages under GBL § 349, which allows for treble

-26-

damages7 up to $1,000 per violation in the event that a defendant
willfully or knowingly violated the provision. Koch v. Greenberg,
14 F. Supp.3d 247, 262 (S.D.N.Y. 2014) (upholding jury’s award of
treble damages since there was sufficient trial evidence from which
jury

could

knowingly”)

infer

that

(citing

defendant

N.Y.

GEN.

BUS.

“made
L.

§

misrepresentations
349(h)

(providing,

inter alia, that “[t]he court may, in its discretion, increase the
award of damages to an amount not to exceed three times the actual
damages

up

to

one

thousand

dollars,

if

the

court

finds

the

defendant willfully or knowingly violated this section”)). At this
early stage of the proceedings, the Court denies the Healthcare
Defendants’ request to foreclose Plaintiffs from seeking treble
damages.
CONCLUSION
For the reasons set forth above, the Court denies Verisma’s
Motion

to

Dismiss

(Dkt

#22)

in

its

entirety

and

denies

the

Healthcare Defendants’ Motion to Dismiss (Dkt #21) in its entirety.

7

“[E]ven though the statutory language [of GBL § 349] only expressly
provides for actual or treble damages, ‘limited’ punitive damages are also
permitted, as recognized by the New York Court of Appeals.” Cohen v. Narragansett
Bay Ins. Co., No. 14-CV-3623 PKC, 2014 WL 4701167, at *3 (E.D.N.Y. Sept. 23,
2014) (citing Karlin v. IVF Am., Inc., 93 N.Y.2d 282, 291 (1999); other citations
omitted).

-27-

Plaintiffs may proceed on their Second Amended Complaint (Dkt #40).
SO ORDERED.

S/ Michael A. Telesca
HON. MICHAEL A. TELESCA
United States District Judge
Dated:

September 16, 2015
Rochester, New York

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