32nd Street Surgery Center, LLC v. Right Choice Managed Care
2016 U.S. App. LEXIS 7500
8th Cir.2016Background
- 32nd Street Surgery Center sued insurers for quantum meruit, unjust enrichment, vexatious refusal to pay, and injunctive relief over reimbursement for services to insureds.
- District court granted summary judgment for insurers and denied discovery requests by 32nd Street; 32nd Street appealed.
- Before May 22, 2011, 32nd Street was a non-network provider; after signing an ancillary-provider agreement it became designated as a network provider in Blue Traditional.
- The ancillary-provider agreement includes an Out of Network Compensation provision (Section 2.33) and specifies Blue Traditional reimbursement for ancillary services; it also attaches an Ambulatory Surgical Center Network Participation provision.
- The district court held that express contracts governed the reimbursement rates at issue, barring quasi-contract and vexatious-refusal claims; it also held discovery requests irrelevant or privilege-protected.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Contract interpretation controls rates. | 32nd Street reads the agreement as limited to Blue Traditional only. | Agreement, read with attachments, covers compensation for all networks via Section 2.33. | Agreement controls; Section 2.33 applies to non-Blue-Traditional networks. |
| Quantum meruit and unjust enrichment barred by contracts. | Contracts do not govern pre-ancillary agreement reimbursements; thus quasi-contract applies. | Pre- and post-agreement contracts govern payment; no room for quasi-contract recovery. | No recovery under quantum meruit or unjust enrichment due to governing express contracts. |
| Vexatious-refusal claim lacks reasonable cause. | Insurers’ payments to insureds and low rates constitute refusal to pay a loss. | Payments were pursuant to contracts; not without reasonable cause or excuse. | Claim fails under § 375.420 because payments complied with contract terms. |
| Discovery rulings were proper. | Documents from 2003–2012 are relevant to methodologies for rates. | Once contracts govern, requested documents are irrelevant; privilege applies to the 2005 memorandum. | District court did not abuse discretion; discovery denial affirmed. |
Key Cases Cited
- Gohagan v. Cincinnati Ins. Co., 809 F.3d 1012 (8th Cir. 2016) (insurance contract interpretation governs disputes in diversity/federal questions cases)
- Progressive N. Ins. Co. v. McDonough, 608 F.3d 388 (8th Cir. 2010) (contract interpretation and choice of law principles in insurance disputes)
- Nodaway Valley Bank v. E.L. Crawford Constr., Inc., 126 S.W.3d 820 (Mo. Ct. App. 2004) (avoidance of meaningless provisions in contract interpretation)
- Comp & Soft, Inc. v. AT&T Corp., 252 S.W.3d 189 (Mo. Ct. App. 2008) (interpretation to give effect to contracts and avoid redundancy)
- Lowe v. Hill, 430 S.W.3d 346 (Mo. Ct. App. 2014) (no quantum meruit where express contract governs subject matter)
- Burrus v. HBE Corp., 211 S.W.3d 613 (Mo. Ct. App. 2006) (recovery limited to contract when contract governs)
- R & R Land Dev., L.L.C. v. Am. Freightways, Inc., 389 S.W.3d 234 (Mo. Ct. App. 2012) (unjust enrichment barred where agreements read to govern payment rights)
- State Farm Mut. Auto. Ins. Co. v. Shahan, 141 F.3d 819 (8th Cir. 1998) (vexatious-refusal requires payment refusal under policy terms)