Capital Health System, Inc. v. Horizon Healthcare
140 A.3d 598
N.J. Super. Ct. App. Div.2016Background
- Horizon Health Services launched OMNIA, a two-tiered in-network plan (Tier 1 with selected "Alliance" partners receiving concessions in exchange for anticipated volume) after consulting McKinsey; seven hospitals (including St. Peter's and six collectively called "Capital") were designated Tier 2 and sued.
- The hospitals sued claiming breach of standard Network Agreements (Sections 2.7/2.8 and related provisions), breach of implied covenant, tortious interference, and related theories based on alleged failure to disclose selection criteria, notice, and opportunity to attain Tier 1.
- Trial courts ordered Horizon to produce six categories of documents (McKinsey report, Alliance Agreements, Alliance Agreement template, RWJ LOI, RWJ rate agreement, and communications) subject to confidentiality orders; some orders allowed limited redactions or counsel-only access.
- Horizon sought redactions and protective treatment, arguing contested material was proprietary, competitively sensitive, and largely irrelevant to the contract-based claims; hospitals argued the materials were relevant to proving ambiguity, bad faith, or other non-contract claims.
- The Appellate Division conducted in camera review and reversed, holding much of the requested material was either not relevant to the contract disputes or was outweighed by Horizon's need to protect confidential/proprietary information; court ordered specific permitted redactions and limited disclosure (or non-disclosure) for each document.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether McKinsey consultant report must be produced unredacted | Report relevant to selection criteria, ranking, intent, and bad-faith conduct | Report contains competitively sensitive proprietary scores, financial projections, assumptions and is not necessary to interpret the agreements | Much of report not relevant and is protectable; specific pages identified may be redacted before production |
| Whether Alliance Agreements (executed) must be produced | Agreements relevant to incentives, exclusivity, and whether Horizon favored certain hospitals | Agreements are hospital-specific, post-selection, contain confidential financial terms and not necessary to interpret Network Agreements | Reversed: produce only limited information (exclusivity provisions); otherwise protected from disclosure |
| Whether template Alliance Agreement and related LOI must be produced | Template/LOI reveal selection criteria and Horizon strategy relevant to breach claims | Template/LOI include proprietary operational, financial, utilization-management and quality-metric provisions not relevant to breach issues | Reversed: specified sections of template and LOI may be redacted prior to production |
| Whether RWJ rate agreement must be disclosed | Hospital seeks competitor rates as relevant to claims about favoritism and incentives | Rate schedules are proprietary, competitively sensitive, and irrelevant to contract interpretation | Reversed: specific rate information may be redacted; unredacted rate agreement not required |
Key Cases Cited
- Pomerantz Paper Corp. v. New Cmty. Corp., 207 N.J. 344 (discovery decisions reviewed for abuse of discretion)
- Payton v. New Jersey Turnpike Auth., 148 N.J. 524 (relevance governs discoverability)
- Lamorte Burns & Co. v. Walters, 167 N.J. 285 (competitive business information may be protected)
- Kampf v. Franklin Life Ins. Co., 33 N.J. 36 (courts generally enforce contracts as written)
- In re Liquidation of Integrity Ins. Co., 165 N.J. 75 (balancing need for disclosure against confidentiality)
- Dixon v. Rutgers, 110 N.J. 432 (complaint alone does not entitle plaintiff to proprietary materials)
- Trump's Castle Assocs. v. Tallone, 275 N.J. Super. 159 (protective measures and balancing in discovery)