Eagle Air Med et al v. Sentinel Air Medical Alliance et al

Filing 165

ORDER AND MEMORANDUM DECISION denying 105 Motion for Judgment on the Pleadings. Signed by Judge Tena Campbell on 1/25/18 (alt)

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION

EAGLE AIR MED CORPORATION; and
VALLEY MED FLIGHT, INC.,
Plaintiffs,

ORDER
AND
MEMORANDUM DECISION

vs.

SENTINEL AIR MEDICAL ALLIANCE,
LLC, and JEFFREY FRAZIER,

Case No. 2:16-cv-176-TC-EJF

Defendants.

Plaintiffs Eagle Air Med Corporation (Eagle) and Valley Med Flight, Inc. (Valley)
(collectively “Plaintiffs”) operate air ambulance services. According to the Plaintiffs,
Defendants Sentinel Air Medical Alliance, LLC, and Jeffrey Frazier, who review bills submitted
by medical air transport companies to health care insurers, injured Eagle when they
recommended that insurers pay only some, or none, of the Plaintiffs’ bills. Those statements,
according to Plaintiffs, were defamatory.
The Defendants have filed a motion for partial judgment on the pleadings asking the court
to dismiss claims for general and presumed damages associated with the Plaintiffs’s defamation
cause of action1 because the allegations do not support an award of such damages. For the
reasons set forth below, the motion is denied.

1

Plaintiffs also bring claims for false light and tortious interference with existing
contractual and prospective economic relations. These claims are not at issue in the motion.

STANDARD OF REVIEW
Under the Federal Rules of Civil Procedure, a Rule 12(c) motion for judgment on the
pleadings is reviewed under the standard applicable to Rule 12(b)(6) motions to dismiss.
Atlantic Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1160 (10th Cir. 2000).
The court must accept all well-pleaded factual allegations as true and view them in a light most
favorable to the non-movant, while giving no weight to labels and legal conclusions. Sanchez v.
United States Dep’t of Energy, 870 F.3d 1185, 1199 (10th Cir. 2017). To survive the motion, the
Plaintiffs must allege a claim for relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is
plausible on its face if the facts alleged allow the court to reasonably infer that the defendant is
liable for the misconduct described in the complaint. Id.
FACTUAL ALLEGATIONS2
Eagle and Valley, who provide air ambulance services, specialize in emergency care and
transport of patients in need of such transportation from small rural area hospitals to larger care
facilities in metropolitan areas. They provide care and transport to a patient only after the
treating physician has determined that such transport is medically necessary and has summoned
Eagle and Valley for that purpose.
Eagle and Valley submit their bills to the patient’s insurance company, which then
reviews the claim through an insurance adjuster or ERISA3 plan administrator. In some

2

The court’s statement of facts is taken directly from the Plaintiffs’ First Amended
Complaint (ECF No. 6).
3

ERISA stands for the Employee Retirement Income Security Act of 1974.
2

instances, the plan administrator4 hires a consultant to review the provider’s bill and opine on
whether the billed services are “Usual, Customary, and Reasonable” (a term of art in ERISA).
Defendant Sentinel Air Medical Alliance (Sentinel) provides such consulting services to plan
administrators who review air ambulance bills like those submitted by the Plaintiffs.
In this case, Sentinel reviewed a series of Eagle’s and Valley’s bills and strongly
recommended that the plan administrators either not pay the bills or reduce payment significantly
because the charges were not reasonable or necessary. According to Eagle and Valley, plan
administrators “have failed to pay a total of at least $816,716.38 towards invoices for air
transport services rendered by Eagle and Valley on behalf of patients covered by the Plans based
on similar determinations and recommendations made by Sentinel and Frazier.” (First Am.
Compl. ¶ 33.) They allege that the plan administrators’ “refusal to pay in full for Eagle’s and
Valley’s services is based upon Sentinel’s and Frazier’s multiple material misrepresentations of
Eagle’s and Valley’s operational costs and the medical necessity of Eagle’s and Valley’s
services.” (Id. ¶ 36.) These representations “falsely stated or implied that Eagle and Valley are
dishonest, unethical, and fraudulent in their billing and other business practices.” (Id. ¶ 36.)
In their defamation claim, the Plaintiffs allege approximately $689,000 in special
damages. (Id. ¶ 82.) But they also claim presumed damages (available under a “defamation per
se” theory) and general damages (i.e., “damage to their reputations and loss of goodwill and
competitive position in the air ambulance industry as a result of Sentinel’s and Frazier’s

4

For convenience, the court uses the term “plan administrator” in the more generic sense
to mean a health insurance company representative reviewing Plaintiffs’ bills, whether the review
takes place under an ERISA plan or other type of insurance coverage.
3

defamation statements and implications” (id.).)
The Plaintiffs focus on Sentinel’s comments to several plan administrators as well as
statements to others in the air ambulance industry, including “patients, hospitals, doctors and
other health care providers.” (Id. ¶ 85.) They specifically allege the following:
•

Defendants accused them of significantly over-billing patients and submitting charges to
the insurers that “are among the most egregious in the industry.” (Id. ¶ 48.) Allegedly the
Defendants grossly understated Plaintiffs’ operating costs to the plan administrators,
quoting an amount approximately ten times less than the Plaintiffs’ actual costs. (Id.
¶ 43.) For example, a plan administrator, who hired the Defendants to determine whether
Valley’s charges were reasonable, said the Defendants’ “‘analysis revealed that [Valley’s]
charges amount to over 560 percent of the Medicare reimbursement rate’” and “‘over 500
percent of the cost of providing the service[.]’” (Id. ¶ 32 (emphasis added).) Another plan
administrator, similarly citing to a report from the Defendants, determined that Eagle’s
charges were unreasonable and egregious because they “‘represent almost 1100 percent of
the Medicare reimbursement rate and almost 1600 percent of the cost of providing the
service.’” (Id. ¶ 31 (emphasis added).)

•

Defendants falsely represented that the Plaintiffs transport patients when it is not
medically necessary, bill for the unnecessary service, and then try to explain the medical
necessity of their transports and defend the charges by using “a bunch of smoke” and “a
lot of bluster.” (Id. ¶ 48.)

•

Defendants told plan administrators that the Plaintiffs “‘notify the beneficiary and let
them know they are on the hook for the [balance], in the hopes they will be scared into
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coercing their employer into paying the claim.’” (Id. ¶ 48 (alteration in original).)
* * *
The Defendants argue that above-listed statements are not defamatory, much less
defamatory per se (a requirement to obtain presumed damages). In their motion, they ask the
court to throw out all of the Plaintiffs’ defamation damage claims other than the claim for special
damages. They contend that the Plaintiffs are not entitled to presumed damages because none of
the statements fall within the narrow “defamation per se” categories. They also assert that the
Plaintiffs’ pleading of general damages is too conclusory to satisfy the threshold pleading
standard set forth in Twombly and Iqbal.
ANALYSIS
Defamation Per Se
Typically, the issue of whether defamation per se has been pleaded sufficiently arises only
when the plaintiff has not alleged special damages. See, e.g., Baum v. Gillman, 667 P.2d 41, 42
(Utah 1983) (“Inasmuch as the complaint contains no allegations of special damages, in order to
state a claim upon which relief can be granted the statements attributed to [the defendant] must
constitute defamation per se.”) Defamation per se is not a separate cause of action. “In a case of
defamation per se, presumed damage . . . is a procedural mechanism that relieves a plaintiff of its
burden of proving damages as an element of its prima facie case.” Westmont Mirador, LLC v.
Miller, 362 P.3d 919, 921 (Utah Ct. App. 2014).
The Defendants’ motion is unusual because they ask for “dismissal” of the defamation
per se claim even though they do not dispute that the Plaintiffs have sufficiently pleaded special
damages. In other words, the Plaintiffs’ defamation claim survives the motion regardless of the
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court’s ruling.5 Nevertheless, the court finds that a ruling is appropriate to clarify the scope of
the defamation claim.
In Utah, “[l]ibel is classified per se if it contains defamatory words specifically directed at
the person claiming injury, which words must, on their face, and without the aid of intrinsic
proof, be unmistakably recognized as injurious.” Seegmiller v. KSL, Inc., 626 P.2d 968, 977 n.7
(Utah 1981) (internal quotation marks and citation omitted). The courts have defined four
categories of defamation per se.6 “Traditionally, statements that are defamation per se have been
required to be false and ‘allege criminal conduct on the part of the plaintiff or impute the
contracting of some loathsome disease, unchaste behavior (on the part of a woman) or conduct
which is incongruous with the exercise of a lawful business, trade, profession, or office.’” Jacob
v. Bezzant, 212 P.3d 535, 545 (Utah 2009) (quoting Larson v. SYSCO Corp., 767 P.2d 557
(Utah 1989)) (emphasis added).
Eagle and Valley rely on the category of statements regarding conduct that is
“incongruous” with the exercise of their business. Under this category, courts focus on whether
5

The Defendants also object to the complaint on the basis that it did not specify a claim
for defamation per se. They do not point to any case law requiring a plaintiff to use the term
“defamation per se” in order to avoid dismissal under Rule 8 of the Federal Rules of Civil
Procedure. Moreover, the complaint does contain words that courts universally use to indicate a
category of defamation per se. Eagle and Valley allege that “Sentinel’s and Frazier’s statements
and implications are defamatory because they allege and imply that Eagle’s and Valley’s services
were not necessary, that Eagle and Valley overbilled for those services, and that Eagle and Valley
are dishonest, unethical, and fraudulent—conduct which is incongruous with the exercise of a
lawful business . . . .” (First Am. Compl. ¶ 78 (emphasis added).) To the extent it was
necessary, that language flagged a claim of defamation per se.
6

The Supreme Court of Utah recognized that the general definition of “libel per se” in
Seegmiller is further defined by the specific categories set forth in its 1989 decision in Larson v.
SYSCO Corporation, 767 P.2d 557 (Utah 1987). See Jacob v. Bezzant, 212 P.3d 535, 545 (Utah
2009).
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the disparaging words
affect the plaintiff in some way that is peculiarly harmful to one engaged in [the
plaintiff’s] trade or profession. Disparagement of a general character, equally
discreditable to all persons, is not enough unless the particular quality disparaged
is of such a character that it is peculiarly valuable in the plaintiff’s business or
profession.
Restatement (Second) of Torts § 573 comment (e) (emphasis added), quoted in Proctor &
Gamble Co. v. Haugen, 222 F.3d 1262, 1277 (10th Cir. 2000).
Accordingly, the key question is whether the statements would be “peculiarly harmful” to
Eagle and Valley in the air ambulance business. At the pleading stage, the simple answer is
“yes.” As counsel for the Plaintiffs noted at the motion hearing,
I can’t think of anything more harmful to someone in our business to tell the
payors, the people that pay the bills, that you’re overbilling, you’re engaged in
fraudulent billing practices, they’re going to threaten and coerce you, they’re
transporting people when it’s not medically necessary. That is what we do, that is
the heart of our business.
(Tr. of Dec. 7, 2017 Hr’g on Mot. for Partial J. on the Pleadings at p. 37 ll. 9–15, ECF No. 161.)
Taking the allegations as true and drawing all reasonable inferences in favor of Eagle and Valley,
the court finds that the Defendants are not entitled to dismissal of a claim for presumed damages.
General Damages
The Defendants do not dispute that the Plaintiffs have alleged special damages. But they
question the adequacy of the Plaintiffs’ allegations of general damages.
General damages “cover ‘loss of reputation, shame, mortification, injury to the feelings
and the like and need not be alleged in detail . . . .’” FAA v. Cooper, 566 U.S. 284, 295 (2012)
(citing Doe v. Chao, 540 U.S. 614, 625 (2004)) (emphasis added); see also Restatement
(Second) of Torts § 621 cmt. a (“At common law general damages have traditionally been
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awarded not only for harm to reputation that is proved to have occurred, but also, in the absence
of this proof, for harm to reputation that would normally be assumed to flow from a defamatory
publication of the nature involved.”) (emphasis added).
In Paragraph 82 of the Plaintiffs’ First Amended Complaint, they allege that they have
suffered “damage to their reputations and loss of goodwill and competitive position in the air
ambulance industry as a result of Sentinel’s and Frazier’s defamation statements and
implications.” (First Am. Compl. ¶ 82.) The Defendants contend that the statement is too
conclusory and is so devoid of concrete facts that the Plaintiffs have not satisfied the plausibility
standard set forth in Iqbal and Twombly.
The court disagrees. First, as noted in FAA v. Cooper, the standard for pleading general
damages, which include unquantifiable non-economic losses, is very lenient. Second, when the
court reads Paragraph 82’s general allegation in the context of the complaint’s more specific
allegations, the plausibility of that statement becomes more apparent. For example, given the
plan administrators’ strident responses to Plaintiffs’ bills (which were made based on the
Defendants’ representations), it is reasonable to infer that Plaintiffs’ reputation in the field—a
field that includes those whose opinions directly affect the Plaintiffs’ livelihood (i.e., plan
administrators and treating physicians)—was harmed as a consequence of the Defendants’
statements. In short, taking Plaintiffs’ complaint as a whole, the court finds that the Defendants
are not entitled to dismissal of the Plaintiffs’ general damages claim.

8

ORDER
For the reasons set forth above, the Defendants’ Motion for Partial Judgment on the
Pleadings (ECF No. 105) is DENIED.
DATED this 25th day of January, 2018.
BY THE COURT:

TENA CAMPBELL
U.S. District Court Judge

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