48 F.4th 350
5th Cir.2022Background
- Merit Health Biloxi charged every ER patient a fixed, non-service-specific "surcharge" (facility fee) at one of several preset levels and did not disclose it to patients before treatment.
- Henly sought ER care on May 19, 2018; her gross bill was $17,752.47 including a $2,201.75 surcharge (reduced after a self-pay discount to $770.61); she alleges she was unaware of the surcharge and would have sought care elsewhere if told beforehand.
- Henly filed a putative class action seeking a declaratory judgment that Mississippi law imposes a duty to disclose the surcharge prior to treatment.
- Merit Health moved to dismiss under Rule 12(b)(6); the district court granted dismissal, relying on Restatement (Second) of Torts § 551(2)(e) and comment j, finding the surcharge was not a "fact basic to the transaction."
- The Fifth Circuit reversed and remanded, holding Henly plausibly alleged the three elements of Mississippi duty-to-disclose law (material fact; defendant's knowledge of plaintiff’s mistake; plaintiff’s reasonable expectation of disclosure) and that the district court erred in rigidly applying comment j’s "basic" vs. "material" distinction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Merit Health had a duty under Mississippi law to disclose the ER surcharge before treatment | Henly: surcharge was a material fact; Merit knew patients were unaware; patients reasonably expected disclosure from a "caring" hospital; disclosure would affect choice of provider | Merit: surcharge is not "basic" to an emergency-care transaction (patient’s need for treatment is the essence); no duty to disclose; impractical and no limiting principle; chargemaster available | Reversed: complaint plausibly alleges a duty to disclose because Henly pleaded materiality, Merit’s knowledge of patients’ mistake, and a reasonable expectation of disclosure; district court misapplied §551 comment j |
| Whether the district court properly applied Restatement §551(2)(e) comment j at the 12(b)(6) stage | Henly: Mississippi precedent uses a materiality-based duty analysis; comment j should not be read to defeat plausible claims at pleading stage | Merit: district court correctly applied comment j’s "basic fact" test to bar the claim | Reversed: Fifth Circuit concluded Mississippi caselaw does not treat comment j as dispositive or distinguish "basic" from "material" in the narrow way the district court did; the complaint survives plausibility review |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading standard for plausibility under Rule 12(b)(6))
- Alexander v. Verizon Wireless Servs., L.L.C., 875 F.3d 243 (5th Cir. 2017) (standard of review for Rule 12(b)(6))
- Guastella v. Wardell, 198 So. 2d 227 (Miss. 1967) (early Mississippi decision referencing draft of Restatement §551 on nondisclosure)
- Holman v. Howard Wilson Chrysler Jeep, Inc., 972 So. 2d 564 (Miss. 2008) (Mississippi Supreme Court applied §551 principles and held duty to disclose may exist where knowledge of facts would be material to purchaser)
- Green Realty Mgmt. Corp. v. Mississippi Transp. Comm'n, 4 So. 3d 347 (Miss. 2009) (agency’s silence about material facts held to be actionable; Court cited §551 and related authorities)
- Mabus v. St. James Episcopal Church, 13 So. 3d 260 (Miss. 2009) (to be liable for nondisclosure, party must have a legal duty to communicate a known material fact)
- Welsh v. Mounger, 883 So. 2d 46 (Miss. 2004) (discusses suppression of material fact in fraud/nondisclosure context)