Act for Health, Inc. v. Case Management Associates, Inc. (TV3)

Filing 80

ORDER granting 61 Motion to Ratify, Join, or Substitute PCM of Tennessee. It is GRANTED to the extent that it is ORDERED that PCM of Tennessee be added as a party to this case. It is further ORDERED that defendant shall file any supplemental brief in support of its pending motion for summary judgment within seven (7) days of the entry of this Order, after which plaintiff will have seven (7) days for the filing of any supplemental response. Signed by Chief District Judge Thomas A Varlan on 2/14/14. (ABF, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT KNOXVILLE
ACT FOR HEALTH,
d/b/a PROFESSIONAL CASE MANAGEMENT,
Plaintiff,
v.
CASE MANAGEMENT ASSOCIATES, INC.,
d/b/a FREEDOM CARE,
Defendant.

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No.: 3:12-CV-442-TAV-HBG

MEMORANDUM OPINION AND ORDER
This civil action is before the Court on plaintiff Act for Health’s Motion to Ratify,
Join, or Substitute PCM of Tennessee [Doc. 61], in which plaintiff Act for Health, doing
business under the name Professional Case Management (“PCM”), requests leave to
substitute or join PCM of Tennessee pursuant to Rule 17 of the Federal Rules of Civil
Procedure. Defendant Case Management Associates, Inc., doing business as Freedom
Care (“Freedom Care”), submitted a response in opposition to the motion [Doc. 67], to
which Act for Health submitted a reply [Doc. 73].
I.

Relevant Background
This case arises from plaintiff’s provision of skilled and unskilled in-home care to

former weapons site workers under the Energy Employees Occupational Illness
Compensation Program Act (“EEOICPA”), 42 U.S.C. § 7384, et seq. [Doc. 1 ¶ 7].
Plaintiff, doing business under the name Professional Case Management (“PCM”), has

been providing in home health care to EEOICPA patients since 2002, including patients
in Tennessee [Id. ¶¶ 11-12]. PCM serves as an enrolled provider with the Department of
Labor, from which PCM receives a fee for the home health care services it provides,
while its wholly-owned subsidiary, PCM of Tennessee, serves as a licensed Home Care
Organization in the State of Tennessee [Id. ¶ 12]. Plaintiff alleges that all information
pertaining to its EEOICPA patients, and the methods for obtaining such patients, are
trade secrets, and that in order protect this and other proprietary information, PCM
requires its home healthcare providers to execute restrictive covenant agreements [Id. ¶
16]. PCM’s employees also agree that, for a period of one year following their separation
from PCM, they will not provide or attempt to provide home health services to PCM’s
patients or prospective patients with whom the employee previously had contact [Id. ¶
17], nor will they attempt to solicit or otherwise recruit any current PCM employee [Id.].
Plaintiff alleges that defendant, under the name Freedom Care, has been providing
similar in-home health services in Tennessee without the necessary Home Care
Organization licensure [Doc. 1 ¶ 22].

In providing this care, plaintiff alleges that

defendant has solicited or attempted to solicit several of PCM’s patients, specifically
offering monetary incentives as well as non-health care services in order to recruit those
patients away from PCM [Id. ¶¶ 23]. Defendant, plaintiff argues, also induced several of
PCM’s employees and former employees to breach their agreements with PCM, by hiring
PCM nurses or former nurses and providing monetary incentives for them to recruit
patients from PCM to defendant’s services [Id. ¶ 25].
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Plaintiff filed this action on August 22, 2012, alleging claims for tortious
interference with contractual relations and inducement to breach, unfair competition, as
well as violations of the Tennessee Consumer Protection Act, and Tenn. Code Ann. § 6811-229, which prohibits home care organizations from soliciting patients to change home
care organizations, seeking damages and injunctive relief. After discovery, defendant
filed a Motion for Summary Judgment [Doc. 34], in support of which defendant argues
that plaintiff is not the proper party as to several of its claims; rather, PCM of Tennessee
is the proper plaintiff [See Doc. 41 at 19; Doc. 58- at 10-12]. In response, plaintiff filed
the present motion pursuant to Rule 17 of the Federal Rules of Civil Procedure.1
II.

Analysis
In support of its motion, plaintiff argues that adding PCM of Tennessee as a party

to this case is appropriate under Rule 17, and would not alter in any way the factual
allegations involved in the litigation [Doc. 61 at 3].

Plaintiff notes that plaintiff’s

president, who is also the president of PCM of Tennessee, has ratified the action, and that
PCM of Tennessee agrees to be bound by the rulings and orders in this action [Id.].2
Joining PCM of Tennessee as a party, plaintiff contends, would also not prejudice
defendant and would promote judicial efficiency. Defendant opposes the motion, arguing
1

Plaintiff has also filed a Motion for Partial Summary Judgment [Doc. 31], which does
not address the issues raised in the present motion.
2

Given PCM of Tennessee’s willingness to be joined in this action, and the party’s
agreement that PCM of Tennessee may properly assert plaintiff’s tortious interference and unfair
competition claims, the Court will assume for the purpose of this motion that PCM of Tennessee
is the real party in interest as to these claims.
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first that plaintiff lacks standing in this case, thereby precluding it from being able to
raise any such motion for substitution or joinder, as standing to sue is a jurisdictional
requirement [Doc. 67 at 5]. In addition, defendant argues that plaintiff’s request is
untimely and would result in prejudice to defendant [Id. at 5-6].
Rule 17 of the Federal Rules of Civil Procedure, in relevant part, states as follows:
The court may not dismiss an action for failure to prosecute in the name of
the real party in interest until, after an objection, a reasonable time has been
allowed for the real party in interest to ratify, join, or be substituted into the
action. After ratification, joinder, or substitution, the action proceeds as if
it had been originally commenced by the real party in interest.
Fed. R. Civ. P. 17(a)(3). Generally, a case should not be dismissed when substitution of
the real party in interest is necessary to avoid injustice, and “‘[a] Rule 17(a) substitution
should be liberally allowed when the change is merely formal and in no way alters the
original complaint’s factual allegations as to the events or participants.’” Zurich Ins. Co.
v. Logitrans, Inc., 297 F.3d 528, 534 (6th Cir. 2004) (Gilman, J., concurring) (quoting
Advanced Magnetics, Inc. v. Bayfront Partners, Inc., 106 F.3d 11, 20 (2d Cir. 1997)).
The Zurich Court noted, however, that the relief afforded by Rule 17 “must be read with
the limitation that a federal district court must, at a minimum arguably have subject
matter jurisdiction over the original claims.” Id. at 531. “Article III standing is a
jurisdictional requirement that cannot be waived, and such may be brought up at any time
in the proceeding.” Id. (citing Fed. R. Civ. P. 12(h)(3)). There are several elements to
establish Article III standing: first, the plaintiff must have suffered “an injury in fact”
which is concrete and particularized; second, there must be a causal connection between
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the injury and the conduct complained of; and third, it must be likely that the injury can
be redressed by a favorable decision. Kardules v. City of Columbus, 95 F.3d 1335, 1346
(6th Cir. 1996) (quotations omitted).
Defendant, in opposing plaintiff’s Rule 17 motion, argues that plaintiff does not
have standing to bring this suit because it has not sustained any damages, and thus has
not suffered an injury in fact. The Court disagrees. In addition to plaintiff’s claims of
interference with contractual relationships, unfair competition, and violations of the
Tennessee Consumer Protection Act, Tenn. Code Ann. § 47-18-101, et seq., and Tenn.
Code Ann. § 68-11-229, claims for which PCM of Tennessee is likely the real party in
interest, plaintiff’s complaint also asserts a claim for defendant’s tortious inducement of
plaintiff’s employees to breach their restrictive covenant agreements [Doc. 1 ¶¶ 66-73].
In reviewing the briefs submitted in relation defendant’s pending summary judgment
motion, the Court notes that the parties do not appear to dispute that the nurses in
question were hired by plaintiff, and that their employment agreements were with
plaintiff itself, rather than PCM of Tennessee.

These nurses were then leased or

otherwise loaned to PCM of Tennessee to provide services to clients registered with PCM
of Tennessee [Doc. 41 at 7]. Thus, in inducing plaintiff’s employees to violate their
agreements with plaintiff, as plaintiff alleges, defendant caused harm to plaintiff. While
defendant relies upon the fact that plaintiff has not presented any calculated damages in
support of its argument that there is no injury, defendant does not cite any case law for
the idea that such a calculation is necessary, and the Court finds that plaintiff has shown
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harm for Article III standing purposes. The Court similarly concludes that such harm
could be redressed by a final decision of the Court, either in the form of damages or
injunctive relief, as requested by plaintiff [See Doc. 1]. In addition, the Court finds that
the cases relied upon by defendant in support of its position are inapposite to the facts of
this case. The first case to which defendant cites, Woodall v .Underwriters at Lloyd’s,
London, Case No. 4:06-cv-71; 2007 U.S. Dist. LEXIS 31071 (E.D. Tenn. Apr. 26, 2007)
(Mattice, J.), involved a representative of a trust attempting to amend the complaint to
add the trust, wherein the representative herself had suffered no injury, unlike plaintiff in
this case. Similarly, MSS, Inc. v. Maser Corporation, Case No. 3:09-cv-00601, 2011
U.S. Dist. LEXIS 79261 (M.D. Tenn. July 18, 2011), involved the question of whether,
under Tennessee law, a corporation could sue for the injuries suffered by its subsidiary,
whereas here, plaintiff, the parent corporation, has alleged harm that is separate and
distinct from the harms suffered by its subsidiary, PCM of Tennessee.
Turning to defendant’s arguments with respect to the timeliness of plaintiff’s
invocation of Rule 17, courts have noted that “[w]hat constitutes a reasonable time is
within the Court’s discretion,” Lowren Dow v. Rheem Mfg. Co., Case Number 09-13697BC, 11-10647-BC, 2011 U.S. Dist. LEXIS 58346, at *6 (E.D. Mich. June 1, 2011)
(collecting cases), taking into consideration “the specific facts of each case.” Id. In this
case, defendant first raised the issue of whether plaintiff was the real party in interest in
its summary judgment filings [Doc. 41 at 19]. Plaintiff indicated in its response brief that
it would be filing a motion under Rule 17 to address this issue [Doc. 51 at 11, n.5], giving
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notice to defendant that plaintiff would seek to add PCM of Tennessee as a party. This is
evidenced by the fact that defendant addressed plaintiff’s position in its reply brief [Doc.
58]. Although plaintiff did not file its formal motion until after briefing on the pending
motion for summary judgment was completed, the Court concludes that plaintiff’s motion
was timely under the circumstances and facts of this case. While the Court notes that any
prejudice to defendant from plaintiff’s delayed filing appears to be minimal, given that
the underlying facts and allegations of this case would not change by adding PCM of
Tennessee as a party to this matter, the Court finds that any such prejudice will be
mitigated by permitting defendant to submit supplemental briefing in support of the
pending summary judgment motion [Doc. 34].
III.

Conclusion
For the reasons previously discussed, plaintiff’s Motion to Ratify, Join, or

Substitute PCM of Tennessee [Doc. 61] is hereby GRANTED to the extent that it is
ORDERED that PCM of Tennessee be added as a party to this case. It is further
ORDERED that defendant shall file any supplemental brief in support of its pending
motion for summary judgment within seven (7) days of the entry of this Order, after
which plaintiff will have seven (7) days for the filing of any supplemental response.
IT IS SO ORDERED.

s/ Thomas A. Varlan
CHIEF UNITED STATES DISTRICT JUDGE

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