New Orleans Regional Physician Hospital Organization, Inc. v. United States
123 Fed. Cl. 637
Fed. Cl.2016Background
- PHN, a Medicare Advantage Organization (MAO) serving New Orleans, alleges CMS unilaterally modified their MA contracts after Hurricanes Katrina/Rita (2005), which reduced PHN’s payments and caused > $27 million in damages.
- PHN claims CMS orally promised reimbursement for higher costs from relocated enrollees but refused payment; PHN asserts contract breach and related theories (including implied covenant arguments raised later).
- The court granted limited discovery on April 16, 2013 aimed at PHN-specific allegations (metes and bounds of waivers, CMS promises to PHN, alleged oral modifications). The order did not expressly authorize discovery about other MAOs.
- PHN served RFPs seeking documents about CMS communications and reimbursements to other MAOs (Requests No. 11 and 27). CMS objected as beyond the April 2013 discovery scope.
- A November 2005 set of minutes concerning Humana (another MAO) was produced (government says inadvertent); PHN argued those minutes showed disparate treatment and sought broader discovery about other MAOs.
- The court denied PHN’s request for discovery about other MAOs in an August 21, 2015 opinion and, on reconsideration, reaffirmed that denial: discovery about other MAOs is not relevant to the pending summary judgment issues and is outside the April 16, 2013 discovery limits.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether discovery about CMS’s treatment of other MAOs is relevant to PHN’s breach claims and the government’s summary judgment motion | PHN: other-MAO treatment shows CMS orally modified identical contracts and/or treated MAOs differently (e.g., Humana minutes) — relevant to oral modification and implied covenant/good-faith issues | Gov: case concerns breach of contract between CMS and PHN; summary judgment raises legal questions about written-modification clauses and risk allocation, so discovery about other MAOs is irrelevant and beyond allowed discovery | Denied — discovery about other MAOs is not relevant to the pending summary judgment issues and falls outside the April 16, 2013 limited discovery scope |
| Whether the court should revisit its August 21, 2015 order under RCFC 54(b) | PHN: justice requires reconsideration given later deposition evidence and the Humana minutes that allegedly show disparate treatment | Gov: PHN has not met the burden to show reconsideration is warranted; PHN previously abandoned/failed to pursue this discovery | Denied — RCFC 54(b) reconsideration standard not met; PHN merely reasserts arguments and fails to show new circumstances warranting revision |
| Whether production of the Humana minutes opens the door to broader discovery about other MAOs | PHN: government’s production (and witness references) placed other-MAO treatment at issue and precludes selective production | Gov: production was inadvertent; citing one document does not authorize sweeping discovery beyond scope | Court accepts inadvertent production and finds it does not justify expanding discovery given lack of demonstrated relevance |
| Whether PHN waived the right to seek other-MAO discovery by not pursuing it earlier | PHN: relevance became clear only after June 2014 depositions | Gov: PHN abandoned the issue in its 2013 renewal and thus waived it | Court did not decide waiver (unnecessary) but denied reconsideration on other grounds |
Key Cases Cited
- Martin v. United States, 101 Fed. Cl. 664 (2011) (RCFC 54(b) reconsideration/authority to modify interlocutory orders)
- L-3 Commc’ns Integrated Sys., L.P. v. United States, 98 Fed. Cl. 45 (2011) (standard for reconsideration under RCFC 54(b))
- Cobell v. Norton, 224 F.R.D. 266 (D.D.C. 2004) (discussion of the discretion inherent in reconsideration standards)
- Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340 (1978) (broad standard for relevance in discovery)
- Bannum, Inc. v. United States, 59 Fed. Cl. 241 (2003) (motions for reconsideration are not for re-asserting previously considered arguments)
- Centex Corp. v. United States, 395 F.3d 1283 (Fed. Cir. 2005) (implied duty of good faith and fair dealing in government contracts)