Brown v. Gadsden Regional Medical Center LLC
4:16-cv-01739
N.D. Ala.Sep 18, 2017Background
- Marilyn Brown and Aaron Grindstaff sued Gadsden Regional Medical Center (GRMC) and affiliated entities, alleging breach of contract (express and implied), conversion, and breach of fiduciary duty, after GRMC filed hospital liens and insurers issued med-pay checks payable to both patient and hospital.
- Blue Cross and GRMC had a written Provider Agreement requiring GRMC to submit member bills to Blue Cross and expressly disclaiming third-party beneficiary rights to Blue Cross members.
- Brown was treated after a 2012 auto accident; GRMC initially filed a lien, later submitted a later bill to Blue Cross which paid; her auto insurer nevertheless issued a two-payee med-pay check to Brown and GRMC.
- Grindstaff informed GRMC of his Blue Cross coverage; GRMC filed a lien and his auto insurer issued a two-payee med-pay check despite Blue Cross payment.
- Defendants removed the case to federal court and moved to dismiss or for summary judgment; the court evaluated standing, pleading sufficiency, and summary judgment standards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to enforce express Provider Agreement | Brown/Grindstaff: they are intended beneficiaries because GRMC’s breach harmed their contractual expectations with Blue Cross | GRMC/Blue Cross: Provider Agreement disclaims any third-party beneficiary rights | Held: Plaintiffs lack standing; Agreement expressly disclaims third-party beneficiaries — dismiss count one for lack of jurisdiction |
| Breach of implied contract | Plaintiffs: alternatively, an implied contract required GRMC to bill Blue Cross | Defendants: express contract governs; where express contract exists, no implied contract on same subject | Held: Dismissed — express Provider Agreement precludes implied-contract claim (count three) |
| Conversion of med-pay/settlement proceeds | Plaintiffs: GRMC’s lien interfered with possession/use of med-pay checks and settlements, constituting conversion | Defendants: Plaintiffs have no specific, identifiable personal property taken; GRMC never received or wrongfully detained funds; no demand/refusal alleged | Held: Dismissed with prejudice — plaintiffs failed to plead convertible, identifiable property or demand/refusal element (count two) |
| Breach of fiduciary duty | Plaintiffs: GRMC owed a special duty to bill patients’ health insurers instead of pursuing med-pay checks | Defendants: No authority that such a fiduciary duty exists; even if it did, GRMC did not breach it (did not know Brown’s insurer; billed Blue Cross for Grindstaff and was paid) | Held: Judgment for GRMC — no breach or damages shown (count four) |
Key Cases Cited
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (standing requires injury in fact, causation, and redressability)
- Ashcroft v. Iqbal, 556 U.S. 662 (complaint must state a plausible claim to survive Rule 12(b)(6))
- Fed. Mogul Corp. v. Universal Const. Co., 376 So. 2d 716 (Ala. Civ. App.) (courts must effectuate contracting parties’ expressed intent to exclude third-party rights)
- Ex parte Cintas Corp., 958 So. 2d 330 (Ala.) (enforcing contractual disclaimers of third-party beneficiary status)
- H.R.H. Metals, Inc. v. Miller, 833 So. 2d 18 (Ala.) (third-party beneficiary requires intent to bestow a direct benefit at contract formation)
- Vardaman v. Florence City Bd. of Educ., 544 So. 2d 962 (Ala.) (an express contract generally excludes an implied contract on the same subject)
- Coffee Gen. Hosp. v. Henderson, 338 So. 2d 1022 (Ala. Civ. App.) (conversion where hospital wrongly obtained funds directly payable to patient)
- Lewis v. Fowler, 479 So. 2d 725 (Ala.) (money is subject to conversion only where specific funds are identified and an obligation to keep them intact exists)