Carter v. HealthPort Technologies, LLC
2016 U.S. App. LEXIS 8565
| 2d Cir. | 2016Background
- Seven named plaintiffs (former patients of three New York hospitals) sued hospitals and HealthPort alleging overcharges for copies of medical records in violation of N.Y. Pub. Health Law §§ 18(2)(d),(e) and N.Y. Gen. Bus. Law §§ 349(a),(h).
- Plaintiffs alleged HealthPort, under contract with the hospitals, billed up to $0.75/page plus delivery fees and that those amounts exceeded actual production costs and included kickbacks to hospitals.
- Each plaintiff alleged they requested records "through [her or his] counsel," HealthPort sent invoices, and the fees were paid "through" counsel, but that "the ultimate expense" was borne by the plaintiffs.
- Defendants moved to dismiss under Fed. R. Civ. P. 12(b)(1) for lack of Article III standing (arguing attorneys, not plaintiffs, paid the fees) and under 12(b)(6) for failure to state a claim.
- The district court dismissed with prejudice for lack of standing, finding the complaint failed to allege that plaintiffs (not their attorneys) suffered injury; plaintiffs appealed.
- The Second Circuit vacated and remanded, holding the complaint plausibly alleged injury-in-fact under ordinary agency principles and raising a separate open question about CAFA diversity allegations for remand.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Article III injury-in-fact | Plaintiffs alleged they paid (through counsel) and ultimately bore the expense, so they suffered a monetary injury. | Payments made by attorneys show plaintiffs incurred no injury and thus lack standing. | Plaintiffs plausibly alleged injury-in-fact: principal-agent relationship supports that plaintiffs (as principals) were injured. |
| Causation / traceability to hospitals (e.g., Thompson) | Overcharge by HealthPort acting on hospitals' behalf is traceable to hospitals that contracted with HealthPort. | Injury was caused by HealthPort, not the hospitals; Thompson never received payments from HealthPort. | Injury was "fairly traceable" to hospitals because HealthPort acted as their agent; factual disputes about payments go to the merits. |
| Appropriate procedural standard on 12(b)(1) | At pleading stage, pleadings' factual allegations should be accepted and plausibly construed in plaintiffs' favor. | Court may consider extrinsic evidence showing attorneys requested and paid, undermining standing. | On a facial 12(b)(1) challenge, accept complaint allegations as true; extrinsic evidence here did not contradict those allegations. |
| Dismissal with prejudice for lack of standing | If standing absent, dismissal should be without prejudice; plaintiffs sought reversal. | District court entered dismissal with prejudice. | Court held dismissal for lack of Article III jurisdiction must be without prejudice; vacated and remanded. |
Key Cases Cited
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (standing requires injury-in-fact, causation, redressability)
- Davis v. Federal Election Comm'n, 554 U.S. 724 (standing must exist at commencement of suit)
- Steel Co. v. Citizens for a Better Environment, 523 U.S. 83 (jurisdictional dismissals and inability to adjudicate merits without jurisdiction)
- Arbaugh v. Y & H Corp., 546 U.S. 500 (standing/subject-matter jurisdiction may be raised at any stage)
- Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567 (jurisdictional facts may be tested post-pleading; discussion of minimal diversity)
- In re Artha Management, Inc., 91 F.3d 326 (2d Cir.) (attorney-client relationship as principal-agent)
- Warth v. Seldin, 422 U.S. 490 (courts accept as true material allegations when ruling on standing at motion to dismiss)