Chattanooga-Hamilton County Hospital Authority v. Xerox Corporation et al (TWP2)

Filing 29

MEMORANDUM OPINION. Signed by District Judge Thomas W Phillips on 6/19/17. (JBR)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT CHATTANOOGA
CHATTANOOGA-HAMILTON
)
COUNTY HOSPITAL AUTHORITY, )
d/b/a ERLANGER MEDICAL CENTER )
and ERLANGER HEALTH SYSTEM, )
)
Plaintiff,
)
)
v.
)
)
XEROX CORPORATION; XEROX
)
BUSINESS SERVICES, LLC, f/k/a
)
AFFILIATED COMPUTER
)
SERVICES, INC., d/b/a ACS,
)
)
Defendants.
)

No. 1:16-cv-496
Judge Phillips

MEMORANDUM OPINION
This civil action is before the Court on two pending motions to dismiss: the motion
to dismiss [Doc. 7] filed by defendant Xerox Business Services, LLC (“XBS”), f/k/a
Affiliated Computer Services, Inc., which owned ACS Consultant Company, Inc., d/b/a
ACS Healthcare Solutions (“ACS”); and the motion to dismiss [Doc. 9] filed by defendant
Xerox Corporation (“Xerox”). The parties have filed briefs in support of and in opposition
to the pending motions [Docs. 8, 10, 14, 18, 27, 28], which the Court has carefully
reviewed.
After considering the pending motions, defendant XBS’s motion to dismiss [Doc.
7] will be GRANTED in part and DENIED in part and defendant Xerox’s motion to
dismiss [Doc. 9] will be GRANTED.

I.

Relevant Facts 1
This case arises from a contract for services between plaintiff Chattanooga-

Hamilton County Hospital Authority, d/b/a Erlanger Medical Center and Erlanger Health
System (“Erlanger”) and ACS in 2005 and 2006 [Doc. 1 at ¶10]. Subsequent to the events
at issue, defendant Xerox acquired ACS [Id. at ¶ 4].
Following the settlement of a prior civil suit under the False Claims Act (“FCA”),
31 U.S.C. § 3729, et seq., Erlanger contracted with ACS to improve its billing and other
financial practices [Id. at ¶¶ 9—11]. In December 2005, Erlanger and ACS entered into a
Service Agreement and then into a Master Service Agreement (“MSA”) on January 25,
2006 (collectively the “Agreement”) [Id. at ¶ 10]. Under this Agreement, ACS agreed to
provide Erlanger with “consultants, managers, technical personnel, and other personnel to
furnish healthcare information technology, strategic, financial and operations management
consulting services, and computer program development services” who would work at
Erlanger [Id. at ¶ 13]. During the term of this Agreement, ACS and its employees had the
authority to assume almost complete control of specific areas of Erlanger’s operations and
ACS was authorized to appoint its own employees to leadership positions at Erlanger [Id.
at ¶ 14]. Thus, ACS employees essentially controlled or exerted significant influence upon
Erlanger’s financial operations, its revenue cycle, its employment and staffing, and its

1

For the purposes of a motion to dismiss, the Court takes the factual allegations in the complaint
[Doc. 1] as true. See Erickson v. Pardus, 551 U.S. 89, 94 (2007) (noting that, “when ruling on a
defendant’s motion to dismiss, a judge must accept as true all of the factual allegations contained
in the complaint”).

2

clinical resource management programs [Id. at ¶ 15]. However, all of the ACS consultants
working at Erlanger remained employees or subcontractors of ACS [Id. at ¶ 16].
In order to perform the services provided for under the Agreement, ACS and its
employees were given access to sensitive, confidential, and proprietary information,
including patient and financial information [Id. at ¶ 19]. Accordingly, the Agreement
required ACS to hold any proprietary information it received from Erlanger “in
confidence;” to “exercise reasonable care to protect it;” and to take affirmative actions to
guard against its disclosure and misappropriation [Id. at ¶ 20]. ACS agreed that its work
would “be performed in a workmanlike and professional manner consistent with the level
of care and skill ordinarily exercised by providing similar services under similar
conditions” [Id. at ¶ 21]. ACS further agreed that it would indemnify and hold Erlanger
harmless “from and against any third-party claims for loss, damage, expense (including
attorneys’ fees) liability … caused by the negligent acts or omissions of the indemnifying
party, its employees, agents or subcontractors …” [Id. at ¶ 22].
Erlanger and ACS entered into a Business Associate Addendum to the Agreement
which required ACS “to return to [Erlanger] or destroy all PHI [“Protected Health
Information”], in whatever form or medium” under ACS’s control “as promptly as
possible, but not later than 30 days after the effective date of the termination, cancellation,
expiration, or other conclusion” of the agreement [Id. at ¶ 23]. The Addendum also
imposed indemnification obligations upon ACS for “any claim, cause of action, liability,
damage, cost or expense, including attorneys’ fees and court or proceedings costs,” arising

3

out of or connection with any “breach of this Addendum by ACS or any subcontractor,
agent, person or entity under ACS’s control” [Id. at ¶ 24].
ACS’s work at Erlanger lasted from November 2005 through at least December
2006 [Id. at ¶ 25]. In December 2005, ACS hired Robert Whipple as a revenue cycle
consultant for the Erlanger contract [Id. at ¶ 26]. In February 2006, Whipple was named
Erlanger’s Director of Utilization Review/Case Management and he remained in this
position until he was removed in July 2006 [Id.]. Erlanger claims that Whipple and ACS
pressured Erlanger to bill fewer observation claims and more inpatient claims in order to
increase revenue [Id. at ¶ 28]. 2 ACS did this by directing the rebilling of a larger number
of observation claims from 2004-2005 as inpatient claims; altering patient status guidelines
for Erlanger’s utilization review staff; and changing the patient status in certain patient
records from observation to inpatient, regardless of whether the change was supported by
a physician order and in violation of Medicare billing requirements [Id. at ¶ 29].
Erlanger alleges the following specific incidents:
• In December 2005, Whipple requested billing data for all observation services and
short-stay inpatient admissions for May 2004 through October 2005 and he directed
that 143 claims previously billed as “observation” claims should be rebilled as
inpatient stays [Id. at ¶ 32].

2

Erlanger states that health insurance companies reimburse hospitals at different levels based on
patient status with inpatient services typically reimbursed at higher rates than outpatient or
observation services [Doc. 1 at ¶ 28, n.1].

4

• On December 21, 2005, Whipple met with Erlanger managers and stated that
Erlanger should not be putting any Medicare patients in observation status and that
“emergent” admissions and surgeries should always be billed as inpatient claims
[Id. at ¶ 33].
• In January and February 2006, ACS instituted changes to the patient status
guidelines to increase the amounts billed by Erlanger [Id. at ¶ 34].
• On February 1, 2006, ACS consultants directed Erlanger’s Patient Financial
Services (“PFS”) Department to rebill as inpatient claims the observation claims
previously identified by ACS [Id. at ¶ 36].
• In mid-February 2006, ACS advised the Erlanger Board of Trustees that rebilling
the 700-plus historical observation records as inpatient claims would produce $4.99
million in revenue for Erlanger and an additional $3.32 million moving forward
[Id. at ¶ 38].
• Erlanger then requested that ACS not rebill any more observation claims until ACS
had met with Erlanger’s fiscal intermediary to discuss the propriety of ACS’s billing
directives [Id. at ¶ 39].
• Starting in early February 2006, Whipple reviewed the observation charts daily and
personally changed numerous observation patient accounts to inpatient status
without physician authorization [Id. at ¶ 40].

5

• In March 2006, Erlanger staff began flagging the records reviewed by Whipple in
order to document the Health Information Management’s disagreement with the
ACS billing and patient status directives [Id. at ¶ 41].
• On May 1, 2006, an Erlanger employee called Erlanger’s internal compliance
hotline to complain about Whipple’s billing recommendations. From May to July
2006, Erlanger’s Chief Compliance Officer and staff met on multiple occasions to
review accounts where Whipple had changed the patient status from observation to
inpatient without a physician order [Id. at ¶ 43].
• In June 2006, Erlanger’s Chief Compliance Officer informed employees to call the
compliance hotline or notify Erlanger Leadership directly and immediately if they
saw accounts where Whipple made status changes [Id. at ¶ 44].
• On July 12 and 16, 2006, the internal compliance hotline received complaints that
Whipple had changed patient statuses without a physician order [Id. at ¶ 45].
• Whipple was removed from the Erlanger engagement in late July 2006, and he kept
PHI and confidential documents belonging to Erlanger [Id. at ¶¶ 49, 51].
On March 7, 2011, Whipple filed a qui tam complaint against Erlanger in the United
States District Court for the Middle District of Tennessee [Id. at ¶ 52]. Whipple alleged
that Erlanger violated the FCA by submitting fraudulent reimbursement claims to Medicare
and Medicaid for medically unnecessary inpatient and observation services during the
period he worked for ACS at Erlanger [Id.].

These allegations were based upon

confidential documents, data, and other information that Whipple obtained from Erlanger
[Id. at ¶ 53]. The United States and the states of Tennessee, Georgia, and North Carolina
6

declined to intervene in the lawsuit, but Whipple pursued the claims on his own [Id. at ¶¶
54—55]. The parties settled the lawsuit in July 2016 and the case was dismissed. As part
of the settlement, the parties signed a settlement agreement and release [Id. at ¶ 56; Doc.
7, Ex. 2].
Following a June 18, 2012 letter from Erlanger’s counsel to ACS’s counsel, the
parties negotiated and executed a Tolling Agreement [Doc. 1, Ex. C] relative to disputes
that had arisen between the parties, including alleged breaches of the service agreements
[Doc. 1 at ¶¶ 57—60]. Therein, the parties agreed to toll the statutes of limitations, statutes
of repose, and contractual periods of limitation and preserve any claims or defenses arising
from “disputes relating to Mr. Whipple’s conduct as part of the work performed for
Erlanger by ACS under the Agreements, and actions taken with respect to Erlanger by Mr.
Whipple” effective June 18, 2012 [Id. at ¶ 61, Ex. C]. Erlanger terminated the Tolling
Agreement on November 14, 2016 [Id. at ¶ 63] and this action followed. Erlanger asserts
claims for: (1) breach of contract; (2) breach of warranty; (3) breach of fiduciary duties;
(4) negligent misrepresentation; (5) negligence; and (6) indemnification [Id. at ¶¶ 64—
111].

II.

Standard of Review
Federal Rule of Civil Procedure 8(a)(2) sets out a liberal pleading standard, Smith

v. City of Salem, 378 F.3d 566, 576 n.1 (6th Cir. 2004), requiring only “‘a short and plain
statement of the claim showing that the pleader is entitled to relief,’ in order to ‘give the
[opposing party] fair notice of what the . . . claim is and the grounds upon which it rests,’”
7

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S.
41, 47 (1957)). Detailed factual allegations are not required, but a party’s “obligation to
provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and
conclusions.” Twombly, 550 U.S. at 555. “[A] formulaic recitation of the elements of a
cause of action will not do,” nor will “an unadorned, the-defendant-unlawfully-harmed-me
accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
In deciding a Rule 12(b)(6) motion to dismiss, a court must construe the complaint
in the light most favorable to the plaintiff, accept all factual allegations as true, draw all
reasonable inferences in favor of the plaintiff, and determine whether the complaint
contains “enough facts to state a claim to relief that is plausible on its face.” Twombly, 550
U.S. at 570; Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007) (citation omitted).
“A claim has facial plausibility when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Iqbal, 556 U.S. at 678. “Determining whether a complaint states a plausible
claim for relief will [ultimately] . . . be a context-specific task that requires th[is Court] to
draw on its judicial experience and common sense.” Id. at 679.

III.

Analysis
A.

Xerox’s Motion to Dismiss [Doc. 9]

Xerox is the parent corporation of XBS. Xerox has moved to dismiss the claims
against it because Erlanger fails to allege any facts by which Xerox can be liable for the

8

conduct alleged in the complaint. Indeed, the only allegations in the complaint against
Xerox are as follows:
• Xerox is a New York corporation with a principal place of business in Norwalk,
Connecticut and Xerox has done business within Hamilton County, Tennessee
[Doc. 1 at ¶ 2].
• Xerox is the sole member of XBS [Id. at ¶ 3].
• Xerox acquired ACS, which provided healthcare consulting services to Erlanger
prior to the acquisition by Xerox, and those services are the subject of this case [Id.
at ¶ 4].
The complaint contains no other allegations or even mention of Xerox, although plaintiff
refers collectively to “Defendants” in the prayer for relief [Doc. 1 at p. 21].
Xerox argues that it should be dismissed from this case because Erlanger has not
alleged any facts or claims directly against Xerox or any alter-ego basis for liability [Doc.
10 at p. 2—4]. Xerox also notes that it did not purchase ACS until February 2010, years
after the events alleged in the complaint [Id. at p. 4, n.2]. In response, plaintiff argues that
two of the factors to be considered in piercing the corporate veil are the “sole ownership of
stock by one individual” and the “use of the corporation as an instrumentality or business
conduit for an individual or another corporation” [Doc. 14 at p. 30]. 3 Plaintiff notes that it
has alleged that Xerox is the sole member of XBS, which acquired ACS, and that the details

3

Xerox has supplied the information related to its purchase of ACS by way of the Form 10-Q filed
with the United States Securities and Exchange Commission for the quarterly period ending
September 30, 2010. Erlanger concurs in Xerox’s request for the Court to take judicial notice of
this report.

9

of the acquisition of ACS, as disclosed in Xerox’s Form 10-Q, show that there are questions
as to whether XBS was “an instrumentality or business conduit” for Xerox [Id. at p. 31].
In reply, Xerox notes that its assumption of certain liabilities in the acquisition of ACS
does not establish that Xerox assumed liability for the contracts at issue in this case [Doc.
18 at pp. 22—25]. Further, Xerox notes that the complaint contains no allegations of
Xerox’s control of ACS, its involvement in the negotiation or performance of the contracts
at issue, or any other factors related to piercing the corporate veil [Id.].
It is well settled that a corporation is treated as a separate entity, unless there is a
“showing that the corporation is a mere sham or dummy.” McConkey v. McGhan Med.
Corp., 144 F. Supp. 2d 958, 962 (E.D. Tenn. 2000) (citing Post Sign Co. v. Jemc’s, Inc.,
342 S.W.2d 385, 390 (Tenn. Ct. App. 1960)).

The Tennessee Supreme Court has

articulated a three-part test to determine whether a corporation was a mere instrumentality
of another corporation and therefore whether piercing the corporate veil is warranted, as
follows:
1. The parent corporation, at the time of the transaction complained of,
exercises complete dominion over its subsidiary, not only of finances, but of
policy and business practice in respect to the transaction under attack, so that
the corporate entity, as to that transaction, has no separate mind, will or
existence of its own.
2. Such control must have been used to commit fraud or wrong, to perpetuate
the violation of a statutory or other positive legal duty, or a dishonest and
unjust act in contravention of third parties’ rights.
3. The aforesaid control and breach of duty must proximately cause the injury
or unjust loss complained of.

10

Continental Bankers Life Ins. Co. of the South v. Bank of Alamo, 578 S.W.2d 625, 632
(Tenn. 1979) (emphasis added). There are also additional factors to be considered in
whether to pierce the corporate veil, as noted in plaintiff’s brief [Doc. 14 at p. 30], Smith
v. Music City Homes, LLC, No. 3:12-cv-0681, 2012 WL 4849896, at *5 (M.D. Tenn. Oct.
11, 2012), and Fed. Deposit Ins. Corp. v. Allen, 584 F. Supp. 386, 397 (E.D. Tenn. 1984).
“The party wishing to negate the existence of separate legal entities has the burden of
proving facts sufficient to justify piercing the corporate veil.” McConkey, 144 F. Supp. 2d
at 963; JLC Beechtree, Inc. v. A&E Healthcare of Tenn., LLC, No. 3:10-CV-523, 2012 WL
1890359, at *4 (E.D. Tenn. May 23, 2012).
Accepting the facts alleged in the complaint as true, plaintiff has alleged nothing
more than that Xerox is the parent corporation of XBS, which previously did business as
ACS. Plaintiff has alleged no facts regarding any actions that Xerox took or failed to take
regarding the events described in the complaint; thus, plaintiff has not alleged any type of
direct liability by Xerox. Further, plaintiff has alleged no facts to show that Xerox is the
alter ego of ACS such that their activities are intertwined. Indeed, it is unclear how Xerox
could have exercised dominion over ACS “at the time of the transaction complained of”
inasmuch as Xerox did not acquire ACS until years after the events at issue. In short, there
are simply no facts in the complaint that would give rise to some potential liability of
Xerox. In the absence of such facts, the Court cannot assume that Xerox may be liable
simply because of its current corporate affiliation with XBS. Accordingly, the Court finds
that plaintiff has failed to assert a plausible claim for relief against Xerox and Xerox should
be dismissed from this case.
11

B.

ACS’s Motion to Dismiss [Doc. 7]
1.

Whether Erlanger Has Released All Claims Against ACS

ACS first argues that Erlanger released all potential claims against ACS when it
settled all claims by and against Whipple. In support of this argument, ACS notes that, per
the settlement agreement, Erlanger released all claims against Whipple for the same
conduct for which Erlanger now sues ACS and Whipple is the only ACS consultant named
in the complaint. ACS contends that Erlanger’s settlement of claims against ACS’s agent,
Whipple, extinguished any claims against ACS [Doc. 8 at pp. 8—10].
In response, Erlanger contends that its claims against ACS are based on direct
liability and are independent of any claims Erlanger had against Whipple [Doc. 14 at pp.
4—8]. Erlanger correctly notes that Whipple was not a party to the Agreement between
Erlanger and ACS and therefore he did not owe the same contractual duties to Erlanger as
ACS did. Erlanger distinguishes the cases relied upon by ACS as involving claims based
“solely on vicarious liability,” unlike the instant case [Id.].
In reply, ACS reiterates that allegations of the complaint show that Whipple was the
“sole source of the conduct” and all allegations trace back him [Doc. 18 at pp. 3—4].
Regarding Erlanger’s position that the claims are “direct” and not “vicarious,” ACS argues
that a corporation can function only through its agents and employees [Id. at p. 5]. Further,
ACS argues that Whipple is the only person who allegedly failed to protect confidential
information and PHI and the only alleged harm from this theft is that it formed the basis of
Whipple’s qui tam action [Id. at p. 5—6].

12

ACS relies on Lavoie v. Franklin Cty. Pub. Co., No. M2010-02335-COA-R9-CV,
2011 WL 1884562 (Tenn. Ct. App. May 17, 2011) for the proposition that Erlanger’s
release of all claims against Whipple, as an agent of ACS, also released any claims against
ACS for the same conduct. Lavoie states the blackletter law principle that “a plaintiff is
not permitted to pursue a claim against a principal based solely on vicarious liability when
the plaintiff has settled with the agent and thereby released the agent from liability.” Id. at
*3. The settlement agreement between Erlanger and Whipple released Whipple from any
claims “that arise from or are related to: (a) the Covered Conduct; (b) the Litigation; or (c)
[Whipple’s] tenure at Erlanger” [Doc. 7-2 at ¶ 10]. 4
Certainly, much of the complaint alleges misconduct by Whipple individually [see,
e.g., Doc. 1 at ¶¶ 31—33, 40, 45]. However, Erlanger has also alleged misconduct by ACS
and ACS consultants [see, e.g., Id. at ¶¶ 29—30, 34, 36—37, 39]. Although ACS
complains bitterly that the complaint does not identify any individual other than Whipple,
this deficiency does not necessarily make the complaint implausible because these
unknown individuals are not named as defendants. Cf. Joslin v. Metro Nashville/Davidson
Cty., No. 3:12-cv-1284, 2013 WL 2250712, at *6 (M.D. Tenn. May 21, 2013) (plaintiffs
must clarify allegations against police officers named as defendants). Thus, whether
Erlanger can support its claims against ACS based on facts other than Whipple’s released
conduct remains to be seen. Construing the complaint in the light most favorable to the

4

The settlement agreement defines “Covered Conduct” as “[a]ll conduct and claims alleged” in the
original complaint and amended complaint in the FCA litigation [Doc. 7-2 at p. 2].

13

plaintiff, the Court cannot conclude at this juncture that all of Erlanger’s claims are “based
solely on vicarious liability.”
Moreover, the settlement agreement states that the parties [Erlanger and Whipple]
“are not releasing ACS or any related entities; nor do any of the released claims contained
in this Agreement include any claims that any Party to this Agreement may wish to assert
against ACS or any related entities” [Id. at ¶ 12]. Further on, the settlement agreement
provides that “[t]his section shall not limit Erlanger’s ability to assert claims against ACS
or any related entities” [Id. at ¶ 19]. Although ACS suggests that these provisions are
“legally irrelevant” and “ineffective” [Doc. 8 at p. 10], the Court disagrees. In the Court’s
view, these provisions settle the issue and the Court does not find, on the present record,
that Erlanger has released its claims against ACS.
2.

Whether Erlanger Has Pled a Viable Basis for Damages

The Court next considers the parties’ opposing arguments as to the effect of a trilogy
of cases from the Ninth Circuit Court of Appeals on an issue that the parties acknowledge
the Sixth Circuit has not addressed. In Mortgages, Inc. v. United States Dist. Ct. for Dist.
of Nev., 934 F.2d 209 (9th Cir. 1991), the Ninth Circuit concluded that “Congress did not
intend to create a right of action for contribution or indemnification under the FCA” and
no such right was found in federal common law. Id. at 213—214. Thus, the court
concluded there was no right to assert state law counterclaims that would have the same
effect of contribution or indemnification. Id. at 214. Relying primarily on Mortgages,
ACS argues that Erlanger, as a former FCA defendant, cannot seek contribution or
indemnification from ACS for costs incurred in defending and settling the qui tam action
14

[Doc. 8 at pp. 10—13]. Because the instant complaint only alleges harm arising from
Whipple’s FCA action, ACS argues that Erlanger’s claims are not cognizable.
In United States ex rel. Madden v. General Dynamics Corp., 4 F.3d 827 (9th Cir.
1993), the Ninth Circuit refined the rule from Mortgages and explained it as follows:
The decision in Mortgages is designed to prevent qui tam defendants from
offsetting their liability. Counterclaims for indemnification or contribution
by definition only have the effect of offsetting liability. Counterclaims for
independent damages are distinguishable, however, because they are not
dependent on a qui tam defendant’s liability.
Id. at 830—31 (emphasis in original).

In allowing qui tam defendants to bring

counterclaims for independent damages, the court suggested that resolving the issue of the
qui tam defendant’s liability before reaching the counterclaims would prevent parties from
doing “an end run around Mortgages.” Id. at 831. “If a qui tam defendant is found liable,
the counterclaims can then be dismissed on the ground that they will have the effect of
providing for indemnification or contribution. On the other hand, if a qui tam defendant is
found not liable, the counterclaims can be addressed on the merits.” Id.
Erlanger argues that the most analogous authority is Cell Therapeutics, Inc. v. Lash
Group, Inc., 586 F.3d 1204 (9th Cir. 2010), in which a qui tam defendant settled with the
government and the relator and then pursued claims against a third party. After reviewing
Mortgages and Madden, the Ninth Circuit concluded, “a settlement agreement under the
FCA should not, absent specific and clearly identified intent to the contrary, be viewed as
an admission of liability that precludes non-FCA claims against third parties.” Id. at 1212.
Further, the court emphasized that “[i]t is incumbent on the district court to separate those
claims for damages which “only have the effect of offsetting liability” from those that are
15

not dependent on a qui tam defendant’s liability under the FCA.” Id. at 1209. Although
rulings from the Ninth Circuit are not binding on this Court, Erlanger suggests that the Cell
Therapeutics holding “governs” this case because it is based on contractual claims that predate the qui tam action and because the qui tam settlement agreement contains no finding
of liability [Doc. 14 at pp. 8—14].
In reply, ACS contends that the opinion in The Heart Doctors, P.S.C. v. Layne, No.
6:05-636, 2006 WL 2692694 (E.D. Ky. Sept. 13, 2006), is most analogous to the present
situation because it similarly involved claims by a former qui tam defendant against a third
party after the qui tam defendant settled with the government and the relator. Notably, the
plaintiff expressly sought reimbursement of the amounts paid to the government and the
amount paid in attorney’s fees in the FCA action. Id. at *1. Following the reasoning of
Mortgages, the Eastern District of Kentucky held that “having been found liable under the
FCA, the Company may not now bring any claim against any party seeking to offset their
FCA liability including any state law claims that, if prevailed on, would end in the same
result.” Id. at *3. 5

5

Erlanger and ACS make much of the court’s statement that the qui tam defendant was “found
liable under the FCA” when The Heart Doctors parties had entered into a settlement agreement.
Erlanger notes that the settlement agreement with Whipple contains an express statement denying
Erlanger’s liability [Doc. 14 at p. 13], while ACS notes that a similar provision in The Heart
Doctors settlement did not prevent the court from considering the context of settlement where the
third-party claim will have the effect of offsetting FCA liability [Doc. 18 at p. 17]. This Court
further observes that The Heart Doctors was decided prior to the Ninth Circuit’s decision in Cell
Therapeutics. It is unclear why The Heart Doctors opinion notes that the settling qui tam
defendant had “been found liable under the FCA,” however, this Court need not resolve that issue
for the reasons set forth below.

16

Assuming, without deciding, that the Sixth Circuit would follow similar lines of
reasoning as those in the Ninth Circuit’s opinions, the Court agrees that Erlanger’s
settlement agreement is not an admission or finding of liability for the reasons set forth in
Cell Therapeutics. 586 F.3d at 1210—11 (“First, settlements generally do not bar claims
against non-parties or have issue-preclusive effect … on the subsequent litigation of issues
not expressly resolved in the settlement. …Second, the district court’s presumption that a
settlement with the government is equivalent to a finding of liability would chill the
settlement process, signaling to future qui tam defendants that the only way to preserve
potentially legitimate claims would be to secure a litigated judgment in court.”). The Court
also agrees that a qui tam defendant, even one who settles with the government and/or the
relator, cannot pursue claims that have the effect of contribution or indemnification of the
FCA claims, as this would undermine the intended framework of the FCA to encourage
relators to disclose fraudulent activity and punish wrongdoers. See United States ex rel.
Miller v. Bill Harbert Int’l Constr., Inc., 505 F. Supp. 2d 20, 28—29 (D.D.C. 2007) (“FCA
defendants should not be able to seek the equivalent of indemnification, even when they
wrap their claim in the garb of another cause of action”).
Thus, the question in this case is whether Erlanger’s claims are independent or
claims which “only have the effect of offsetting liability.” See Miller, 505 F. Supp. 2d at
26—27 (“not all counterclaims in FCA cases will be contrary to the statute’s interests, and
… there would be real due process concerns if all counterclaims were to be barred,
particularly compulsory ones, which would be lost forever.”) (emphasis in original).
Courts have described independent claims as falling within two categories:
17

The first … is where the conduct at issue is distinct from the conduct
underlying the FCA case. This can be so even where there is a close nexus
between the facts… These causes of action are truly independent of the FCA
claims because none of them require as an essential element that the FCA
defendant was liable – or not liable – in the FCA case. … The second
category of permissible claims by an FCA defendant is where the defendant’s
claim, though bound up in the facts of the FCA case, can only prevail if the
defendant is found not liable in the FCA case. …claims that succeed upon a
finding that the relator’s accusations were untrue.
Id. at 27—28; United States ex rel. Wildhirt v. AARS Forever, Inc., No. 09 C 1215, 2013
WL 5304092, at *5 (N.D. Ill. Sept. 19, 2013) (quoting Miller).
Erlanger argues that its claims arise from the express contractual provisions of the
MSA and Addendum and therefore those claims are not dependent on a finding of FCA
liability [Doc. 14 at p. 13]. See, e.g., United States ex rel. Salvatore v. Fleming, No. 111157, 2015 WL 1326330, at *4 (W.D. Pa. Feb. 24, 2015) (breach of management
agreement may “potentially provid[e] an independent basis for … liability aside from
violation of the FCA”); United States ex rel. Notorfransesco v. Surgical Monitoring Ass’n,
Inc., No. 09-1703, 2014 WL 7008561, at *5 (E.D. Pa. Dec. 12, 2014) (breach of contract
claim is a claim for independent damages because its success does not rely on a finding
that qui tam defendant is liable under the FCA). ACS argues that the only harm alleged by
Erlanger is the cost of defending and settling the qui tam action and that the 10-year delay
in pursuing these claims demonstrates that they are dependent on the qui tam action [Doc.
18 at pp. 18—19].
The Court first observes that all of Erlanger’s claims seek unspecified “damages”
or “financial losses” that will “be proven at the trial of this cause” [Doc. 1 at ¶¶ 70, 78, 88,
99, 106, 111]. Thus, with the exception of Count VI, Indemnification, Erlanger has not
18

explicitly sought damages for contribution and indemnification, perhaps through careful
pleading. 6 The Court next observes that this case is procedurally different from many of
the cases relied upon by the parties: this is not a qui tam case involving counterclaims or
third party claims. Rather, like the Cell Therapeutics case, the present case is a separate
action following the conclusion of the FCA case and concerns claims by a former qui tam
defendant against a third party, not a relator. See Cell Therapeutics, Inc. v. The Lash
Group, Inc., No. C07-0310JLR, 2010 WL 3064424, at *4 (W.D. Wash. Aug. 3, 2010).
Thus, the case does not present the due process concerns of a qui tam defendant with
compulsory counterclaims. Madden, 4 F.3d at 831. Further, since ACS was not the relator
in the FCA case, this case does not present the public policy concerns of chilling potential
relators from revealing evidence of fraud against the government. See Miller, 505 F. Supp.
2d at 28. The Court also notes that none of the claims require proof that Erlanger was or
was not liable in the FCA action. Without question, there is a close nexus between the
facts alleged in this case and the FCA case. However, construing the complaint in the light
most favorable to the plaintiff, the Court cannot conclude at this time that Erlanger’s claims
“only have the effect of offsetting liability.”
In sum, the Court does not find, on the present record, that Erlanger’s claims have
the effect of contribution or indemnification and are thus precluded by the reasons set forth
in Mortgages or Madden.

6

Count VI is based on the indemnification provisions in the MSA and Addendum [Doc. 1 at ¶¶
108—109].

19

3.

Whether Counts I through V are Time-Barred

ACS argues that Counts I through V are barred by the applicable statutes of
limitations [Doc. 8 at pp. 13—17]. Noting the six-year statute of limitations for breach of
contract claims, ACS argues that the conduct complained of occurred six years before this
case was filed and that no discovery rule applies. ACS also suggests that Counts II through
V are “repackaged breach of contract claims” to which the six-year statute of limitations
also applies. Finally, ACS argues that even if Counts II through V were distinct from the
breach of contract claim, those claims are still barred by the applicable statutes of
limitations.
In response [Doc. 14 at pp. 18—24], Erlanger argues that the discovery rule does
apply to breach of contract claims and that whether Erlanger knew or should have known
of the breach is a question of fact inappropriate for resolution by a motion to dismiss.
Erlanger also argues that Counts II through V are not “subsumed by the breach of contract
claim” because they are supported by independent facts. Erlanger further contends that the
parties’ Tolling Agreement preserved all claims that Erlanger had against the defendants
arising on or after June 18, 2006.
ACS notes in reply that Erlanger has alleged in detail the misconduct by Whipple
and ACS during the first six months of 2006 of which Erlanger was aware at the time.
Thus, with the possible exception of Whipple’s alleged theft of confidential information
and PHI, ACS argues that Erlanger cannot claim that it did not discover the allegedly
wrongful conduct until later [Doc. 18 at pp. 6—12]. ACS also argues that the Tolling
Agreement does not preserve claims that were already time-barred at the time it was signed
20

or claims that were not based on Whipple’s activities [Doc. 18 at pp. 12—13]. 7 Erlanger’s
supplemental brief contends that ACS misinterprets the scope of the Tolling Agreement
and, in any event, the claims relating to the failure to protect confidential information and
PHI are viable [Doc. 27].
In Count I, Erlanger alleges that ACS breached the Agreement by “failing to
perform in the manner expressly and/or impliedly required” [Doc. 1 at ¶ 66], by providing
Erlanger “with misguided advice and direction, and imposed a billing initiative … that was
in contravention of applicable law” [Id. at ¶ 67], and by failing to fulfill the non-disclosure
provisions in the Agreement [Id. at ¶¶ 68—69]. This case was filed on December 16, 2016,
and the parties agree that the breach of contract claims, asserted in Count I, are subject to
a six-year statute of limitations, Tenn. Code Ann. § 28-3-109(a)(3). The parties entered
into a Tolling Agreement, effective June 18, 2012, which tolled “[a]ll statutes of
limitations, statutes of repose, and contractual periods of limitation which are or may be
applicable to any Disputes” [Doc. 1-3 at p. 3]. The Tolling Agreement defines “Disputes”
as “disputes relating to Mr. Whipple’s conduct as part of the work performed for Erlanger
by ACS under the Agreements, and actions taken with respect to Erlanger by Mr. Whipple,
whether based in contract or tort, that either Party may assert against the other” [Id. at p.
2].
ACS correctly notes that a breach of contract claim generally “accrues when the
breach occurs rather than the time that actual damages are sustained as a consequence of

7

Erlanger does not dispute that the Tolling Agreement would not resurrect claims that were already
time-barred, such as breach of contract claims arising prior to June 18, 2006 [Doc. 27 at p. 4, n.2].

21

the breach.” Dean Witter Reynolds, Inc. v. McCoy, 853 F. Supp. 1023, 1036 (E.D. Tenn.
1994); Kinnard v. Shoney’s, Inc., 39 F. App’x 313, 317 (6th Cir. 2002). In addition,
Erlanger is correct that Tennessee does recognize a discovery rule in cases “where the
breach of contract is inherently undiscoverable.” Goot v. Metropolitan Gov’t of Nashville
& Davidson Cty., No. M2003-02013-COA-R3-CV, 2005 WL 3031638, at *11 (Tenn. Ct.
App. Nov. 9, 2005). While Erlanger contends that it is a question of fact whether it knew
or should have known that a breach of contract occurred [Doc. 14 at pp. 19—20], the Court
disagrees.
As ACS notes, the complaint sets forth extensive allegations of actions by ACS and
Whipple of which Erlanger was aware at the time and expressed concern. See, e.g., Doc.
1 at ¶¶ 32—39, 41—44. Specifically, Erlanger alleges a meeting in February 2006 in which
staff “expressed concerns that what ACS’s consultants were asking them to do would
violate applicable law” [Id. at ¶ 37]. At an unspecified time after mid-February 2006,
“Erlanger employees grew increasingly concerned about ACS’s observation rebilling
initiative” [Id. at ¶ 39]. Similarly, “[i]n March 2006, Erlanger staff met with Whipple to
discuss Erlanger’s concerns regarding records where patient status had been changed from
observation to inpatient” [Id. at ¶ 41]. On May 1, 2006, Erlanger received a complaint
through its internal compliance hotline regarding Whipple’s request that “billing status be
changed from outpatient to inpatient in certain medical records without physician’s orders”
[Id. at ¶ 43]. “From May to July 2006, Erlanger’s Chief Compliance Officer and certain
staff met on multiple occasions to review accounts where Whipple had changed the patient
status from observation to inpatient without a physician order” [Id.]. Finally, “[i]n June
22

2006, Erlanger’s Chief Compliance Officer informed Erlanger employees that if they saw
any more accounts where Whipple made status changes, they needed to call the compliance
hotline or notify Erlanger leadership directly and immediately” [Id. at ¶ 44].
All of these allegations describe events that occurred prior to June 18, 2006, and of
which Erlanger has acknowledged awareness as they occurred. Thus, while Erlanger may
not have known all of the alleged misconduct by Whipple and ACS at the time or the
repercussions of such acts, Erlanger cannot rely on the discovery rule to save claims of
which it had actual or constructive knowledge. See Robinson v. Baptist Mem’l Hosp., 464
S.W.3d 599, 608 (Tenn. Ct. App. 2014) (“the discovery rule does not allow the plaintiff to
delay filing suit until he knows the full extent of his damages, or the specific type of legal
claim he has”). Therefore, to the extent that Erlanger’s breach of contract claim is based
on events prior to June 18, 2006, the claim is time-barred. To the extent that Erlanger’s
breach of contract claim is based on events occurring after June 18, 2006, the claim is not
time barred.
ACS correctly notes that Erlanger’s breach of warranty claim (Count II) arises from
the Agreement and ACS’s alleged failure to “perform work under the MSA in a
workmanlike and professional manner consistent with the level of care and skill ordinarily
exercised in its business and professional field” [Doc. 1 at ¶ 72]. However, the Agreement
did not involve a sale of goods, but rather an agreement for the provision of services.
Accordingly, Erlanger is correct that the statute of limitations for the sale of goods, Tenn.
Code Ann. § 47-2-725, does not apply and this claim is governed by the six-year limitations

23

period of Tenn. Code Ann. § 28-3-109(a)(3). As with Count I, to the extent that this claim
is based on events that occurred prior to June 18, 2006, the claim is time-barred.
With respect to the breach of fiduciary duties claim (Count III), the complaint
alleges that the parties “were in a principal-agent relationship” by virtue of the Agreement
and that ACS owed Erlanger fiduciary duties as a result of this agency relationship [Doc.
1 at ¶¶ 80—83]. Thus, this claim is quasi-contractual in nature and the applicable statute
of limitations is six years pursuant to Tenn. Code Ann. § 28-3-109(a)(3). 8 Kinnard, 39 F.
App’x at 317; Dean Witter Reynolds, Inc., 853 F. Supp. at 1035. As with Count I, to the
extent that this claim is based on events that occurred prior to June 18, 2006, the claim is
time-barred.
Counts IV and V assert claims of negligent misrepresentation and negligence,
respectively [Doc. 1 at ¶¶ 89—106]. ACS contends that these claims are based on the
purported breach of the Agreement and ACS owed no duties to Erlanger independent of
the Agreement. Thus, ACS argues these claims are subject to dismissal as time-barred for
the same reason as the contract claim [Doc. 8 at p. 16]. Although Erlanger argues that
these are independent claims and subject to the discovery rule [Doc. 14 at p. 24], the
language of the complaint suggests otherwise.

8

Erlanger argues that the proper statute of limitations for breach of fiduciary duty claim is the
three-year limitations period in Tenn. Code Ann. § 28-3-105 [Doc. 14 at p. 23]. However, the
three-year limitations period appears to apply when the breach of fiduciary duty claim sounds in
tort for injury to personal property. See Tenn. Code Ann. § 28-3-105; Smith v. Hilliard, 578 F.
App’x 556, 563 (6th Cir. 2014).

24

The negligent misrepresentation claim specifies that ACS was “acting within the
course and scope of its business, professional, and/or contractual relationship with
Erlanger” and “negligently supplied false information to Erlanger by failing to exercise
reasonable care and/or competence in obtaining information surrounding the Agreement”
[Doc. 1 at ¶¶ 90—91]. Further, the complaint alleges that ACS’s representations were
“intended … to induce Erlanger to enter into the Agreement with ACS” and then “ACS
failed to fulfill these obligations under the Agreement” [Doc. 1 at ¶¶ 94—95]. As to the
negligence claim, Erlanger alleges that “ACS assumed a duty of care to perform work
under the MSA in a workmanlike and professional manner” and “[p]ursuant to the MSA,
ACS also expressly assumed a duty to hold any proprietary information it received from
Erlanger ‘in confidence’” [Doc. 1 at ¶¶ 101—102]. Thus, the plain language of the
complaint describes these duties as arising from the parties’ Agreement. ACS correctly
cites the well settled law that a tort cannot be predicated on a breach of contract and can
only exist if a party breaches a duty owed independently of the contract. Calipari v.
Powertel, Inc., 231 F. Supp. 2d 734, 736 (W.D. Tenn. 2002) (citing Palmer v. Nationwide
Mut. Ins. Co., 945 F.2d 1371, 1375 (6th Cir. 1991)). Accordingly, for the same reasons as
stated for the breach of contract claim, to the extent that the negligent misrepresentation
and negligence claims are based on events occurring before June 18, 2006, those claims
are time-barred. 9

9

Assuming that Counts IV and V were not contract-based claims, the statute of limitations for
claims of negligence and negligent misrepresentation is three years. Tenn. Code Ann. § 28-3-105
(injury to personal property); Med. Educ. Assistance Corp. v. State ex rel. East Tenn. State Univ.
Quillen College of Med., 19 S.W.3d 803, 817 (Tenn. Ct. App. 1999) (negligent misrepresentation).

25

4.

Whether Erlanger Waived Any Indemnification Claim

The next issue is the parties’ competing positions on whether Erlanger waived its
claim for indemnification (Count VI) by settling the FCA suit without ACS’s knowledge
and approval [Doc. 8 at pp. 21—23]. While acknowledging that Erlanger provided notice
of the FCA suit via a June 18, 2012 letter from its counsel [Doc. 7-3], 10 ACS points out
that the letter does not demand indemnification from ACS and only requests information
regarding PHI and other confidential information.
Erlanger first argues that it did not waive its right to indemnity because the FCA
settlement was made voluntarily and in good faith [Doc. 14 at pp. 14—15], which ACS
does not dispute. Erlanger argues that it provided timely notice of the lawsuit and that it
was not required to provide notice of the settlement. Further, Erlanger points to the
indemnification provisions of the MSA and Addendum which only require notice “of any
such claim” and the letter from counsel provided ample notice of ACS’s indemnification
obligations [Id. at pp. 16—17]. In reply, ACS contends that Erlanger’s notification of the
FCA suit, without offering ACS a full opportunity to defend and participate in the FCA
action, was not sufficient to save the indemnification claim [Doc. 18 at pp. 20—22].

Thus, they would be time-barred well before the parties signed the Tolling Agreement.
Accordingly, the Court need not address whether Erlanger has pled a plausible claim of negligent
misrepresentation or negligence [Doc. 8 at pp. 18—21].
10
ACS attached a copy of the June 18, 2012 letter to its motion to dismiss [Doc. 7-3] and urges the
Court to consider it, along with the FCA case settlement agreement, in reviewing the motion to
dismiss [Doc. 8 at p. 7]. ACS also cites the Sixth Circuit authority that the Court may consider
“exhibits attached to defendant’s motion to dismiss so long as they are referred to in the Complaint
and are central to the claims contained therein” [Id. citing Bassett v. Nat’l Collegiate Athletic Ass’n,
528 F.3d 426, 430 (6th Cir. 2008)]. The Court notes that the June 18, 2012 letter is specifically
referenced in the Complaint [Doc. 1 at ¶¶ 57—60] and that Erlanger has not objected to
consideration of the letter in conjunction with the motion to dismiss.

26

The MSA provides that the parties “shall each indemnify, defend, and hold harmless
the other from and against any third-party claims for loss, damage, expense (including
attorneys’ fees) liability … caused by the negligent acts or omissions of the indemnifying
party, its employees, agents or subcontractors” [Doc. 1 at ¶ 22; Doc. 1-2 at p. 14]. The
MSA further provides that “[e]ach party shall promptly, and in writing, notify the other
party of any such claim made against it by any third party, and shall take action as may be
necessary to avoid default or other adverse consequences until such time as the other party
has a reasonable opportunity to assume the defense of the claim” [Doc. 1-2 at p. 14]. The
Addendum to the MSA also provides that ACS will indemnify Erlanger for “any claim,
cause of action, liability, damage, cost or expense, including attorneys’ fees and court or
proceeding costs” resulting from a breach of the Addendum by ACS [Doc. 1 at ¶ 24; Doc.
1-2 at p. 9]. Erlanger agreed to “(i) promptly notify ACS HCS of any such claim or suit
by a third party; (ii) permit ACS HCS to assume sole authority to conduct the trial or settle
such claim at the indemnifying party’s own expense; and (iii) provide information and
assistance at its own expense reasonably requested by ACS HCS” [Doc. 1-2 at p. 9].
As set forth in the complaint, the FCA suit was unsealed on May 1, 2012 and the
letter from Erlanger’s counsel to ACS was sent June 18, 2012, approximately six weeks
later [Doc. 1 at ¶¶ 54, 57]. The letter unquestionably notified ACS of the qui tam suit
pending against Erlanger. Thus, the Court finds that Erlanger “promptly” gave ACS notice
of the pending claim within the meaning of the MSA and Addendum indemnity clauses.
See, e.g., Fulton Bellows, LLC v. Fed. Ins. Co., 662 F. Supp. 2d 976, 990 (E.D. Tenn. 2009)
(“prompt” notice “generally means that the notice must be given within a reasonable time
27

under the circumstances of the case”) (quoting Allstate Ins. Co. v. Wilson, 856 s.W.2d 706,
707—09 (Tenn. Ct. App. 1992)); Tenn. Farmers Mut. Ins. Co. v. McNabb, 1991 WL
213763, at *2 (Tenn. Ct. App. Oct. 24, 1991) (“we interpret the policy provision in the
instant case requiring prompt notice to mean reasonable notice under the circumstances”).
The Court has carefully reviewed the authorities relied upon by the parties,
including In re Pro Page Partners, LLC, No. 03-2042, 2007 WL 1557207 (Bankr. E.D.
Tenn. May 25, 2007), and Jones v. Bozeman, 321 S.W.2d 832 (Tenn. Ct. App. 1958).
Bozeman states the general rule that an indemnitor must be given notice of the prior claim
and an opportunity to defend it before the indemnitor may be held liable. 321 S.W.2d at
838; see Clinchfield RR. Co. v. U.S. Fid. & Guar. Co., 160 F. Supp. 337, 340 (E.D. Tenn.
1958) (“Notice and an opportunity to defend the action against the indemnitee are
necessary to render the judgment against the indemnitee conclusive of the indemnitor”).
In considering when an indemnitor is bound by a previous judgment, the Pro Page Partners
court carefully reviewed the Bozeman decision, noting the focus on whether the indemnitor
had a “full opportunity … to defend the action.” 2007 WL 1557207, at *7 (quoting
Bozeman, 321 S.W.2d at 838). Concluding that no “magic words” are required to provide
adequate notice, the Pro Page Partners court held that a “full opportunity to defend” must
include “that the indemnitor be advised in some fashion that the indemnitee seeks to hold
him liable under the indemnity agreement such that the indemnitor is placed on
constructive notice that the failure to offer a full and complete defense may result in the
finding of liability against him.” Id. at *8.

28

Whether Erlanger’s notice was sufficient to trigger ACS’s indemnification
obligations cannot be determined on the present record. The indemnification provisions of
both the MSA and the Addendum contain obligations in addition to the provision of prompt
notice and of which there is a complete absence of evidence. The MSA indemnity
provision requires Erlanger to “take action as may be necessary to avoid default or other
adverse consequences until such time as [ACS] has a reasonable opportunity to assume the
defense of the claim.” There is no evidence on the present record as to what actions
Erlanger did or did not take, or what efforts ACS made to “assume the defense” of the qui
tam case. Additionally, the Addendum requires Erlanger to “permit ACS HCS to assume
sole authority to conduct the trial or settle such claim” and “provide information and
assistance at its own expense reasonably requested by ACS.” Again, there is no evidence
on the present record of ACS’s efforts to “assume sole authority” of the qui tam trial,
whether any such efforts were rebuffed by Erlanger, or whether Erlanger provided any
requested information and assistance to ACS. In short, the Court simply cannot determine
at this time whether the parties satisfied their mutual obligations under the indemnity
agreements, and thus, whether Erlanger waived its indemnification claim or not.
C.

ACS’s Alternative Motion for a More Definite Statement [Doc. 7]

ACS alternatively argues that Erlanger should be required to provide a more definite
statement as to the unnamed “ACS consultants” engaged in the alleged wrongful conduct
and also a more definite statement as to damages beyond those incurred as a result of the
FCA action [Doc. 8 at pp. 23—25]. Erlanger responds that the complaint gives ACS fair

29

notice of the claims as required by Fed. R. Civ. P. 8(a) and that more detailed information
is more properly sought through discovery [Doc. 14 at pp. 31—35]
Rule 12(e) of the Federal Rules of Civil Procedure provides, “[a] party may move
for a more definite statement of a pleading to which a responsive pleading is allowed but
which is so vague or ambiguous that the party cannot reasonably prepare a response.” Fed.
R. Civ. P. 12(e). The granting of these motions is generally disfavored by district courts,
given the liberal notice pleading standards of federal civil procedure and the accompanying
nature of pretrial discovery. See, e.g., Fed. Ins. Co. v. Webne, 513 F. Supp. 2d 921, 924
(N.D. Ohio 2007) (“Federal courts generally disfavor motions for more definite statements.
In view of the notice pleading standards of Rule 8(a)(2) and the opportunity for extensive
pretrial discovery, courts rarely grant such motions.”). A motion under Rule 12(e) should
not be granted unless the complaint is “‘so excessively vague and ambiguous as to be
unintelligible and as to prejudice the defendant seriously in attempting to answer it.’” Shirk
v. Fifth Third Bancorp, No. 05-cv-049, 2008 WL 4449024, *8 (S.D. Ohio Sept. 26, 2008)
(quoting Kok v. First Unum Life Ins. Co., 154 F. Supp. 2d 777, 781–82 (S.D.N.Y. 2001)).
Accordingly, if the complaint meets the notice pleading requirements of Rule 8(a)(2) of
the Federal Rules of Civil Procedure, the motion should be denied. Shirk, 2008 WL
4449024, at *8.
The Court does not find that the instant complaint is so vague and ambiguous as to
be unintelligible or to seriously prejudice ACS in responding to it. While ACS’s desire to
identify its own unnamed consultants who may have engaged in the alleged conduct is
understandable, those details will surely be revealed during discovery. As Erlanger notes,
30

the consultants are not named as parties, contrary to the authority relied upon by ACS. See
Joslin, 2013 WL 2250712, at *6 (Rule 12(e) motion granted as to police officers named as
defendants but not alleged to have had any role in misconduct); D&M Mill Work, Inc. v.
Elite Trimworks, Corp., 2008 WL 5272471, at *2 (M.D. Tenn. Dec. 18, 2008) (“the motion
is even less well received when the movant simply seeks particularization of facts already
known to it”) (quoting Moore’s Federal Practice 3d § 12.36). Further, while Erlanger has
generally alleged damages, discovery is the more appropriate vehicle for obtaining more
detailed information as to the types and amounts of such damages. Accordingly, ACS’s
motion for a more definite statement will be denied.

IV.

Conclusion
For the reasons set forth herein, defendant Xerox Corporation’s motion to dismiss

[Doc. 9] will be GRANTED; defendant Xerox Business Services, LLC’s motion to dismiss
[Doc. 7] will be GRANTED in part and DENIED in part; and the motion for more
definite statement [Doc. 7] will be DENIED. 11
An appropriate order will be entered.
s/ Thomas W. Phillips
SENIOR UNITED STATES DISTRICT JUDGE
11

In a footnote request, Erlanger suggests that if any of its claims are subject to dismissal that they
be dismissed without prejudice and Erlanger be given the opportunity to amend the complaint
[Doc. 14 at p. 35, n.10]. Should Erlanger wish to amend its complaint, the Court will consider
such a request upon the filing of a properly supported motion in compliance with Fed. R. Civ. P.
15 and E.D. Tenn. L.R. 15.1. See Kuyat v. BioMimetic Therapeutics, Inc., 747 F.3d 435, 444 (6th
Cir. 2014) (“A ‘request for leave to amend almost as an aside, to the district court in a
memorandum in opposition to the defendant’s motion to dismiss is … not a motion to amend.’”)
(quoting La. Sch. Emps.’ Ret. Sys. v. Ernst & Young, LLP, 622 F.3d 471, 486 (6th Cir. 2010)).

31