2022 Ohio 2160
Ohio Ct. App.2022Background:
- Beginning in 2011 Blue Sky (therapy provider) contracted separately with six nursing facilities managed by HCMG to provide therapy services under materially similar written agreements.
- Schedule A required monthly invoices to include therapist name and time spent (a condition precedent) and be submitted within six months; from 2011–July 2018 Blue Sky’s invoices omitted that data but the facilities paid them and the parties had a direct data link that transmitted the missing information.
- In 2017 a qui tam complaint triggered a government investigation; in August 2018 HCMG advised facilities to stop paying future invoices (they nevertheless recorded past invoices as paid on tax/Medicare forms).
- Blue Sky continued providing services through early 2019, sought payment for unpaid invoices (~$2.29M), and refused facilities’ later demand that Blue Sky indemnify them for investigation-related costs.
- Blue Sky sued for breach of contract and declaratory relief; facilities counterclaimed for contractual indemnification; the trial court granted summary judgment to Blue Sky on breach and to the facilities on indemnification but left indemnity damages unresolved and denied Blue Sky’s tortious-interference claim as to HCMG.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did defendants breach by refusing to pay invoices? | Blue Sky: performed services; invoice condition was effectively waived by defendants’ conduct and the data link; defendants’ nonpayment breached. | Facilities: Blue Sky failed a condition precedent (invoice contents); anti-waiver clause lets them enforce the requirement and stop payment. | Invoice condition was waived by seven years of payments and access to data; anti-waiver clause not triggered (condition precedent, not a breach); defendants breached by nonpayment. |
| Are defendants entitled to contractual indemnification for investigation/qui tam costs? | Blue Sky: defendants breached before indemnity vested, so indemnity is barred. | Facilities: indemnity clause broadly covers losses "arising out of" therapist services and applies to investigation costs. | Indemnity applies: defendants’ losses from the qui tam/ investigation arose before their breach, so indemnity vested. |
| Could the amount of indemnity damages be decided on summary judgment? | Blue Sky: disputed reasonableness of claimed fees; some claimed items (employee salaries) not recoverable; factual disputes require trial. | Facilities: fees and costs are related and reasonable; summary judgment appropriate. | Trial court erred resolving the amount on summary judgment; employee salaries improper; reasonableness of fees disputed — remand for trial on damages. |
| Is HCMG liable for tortious interference by advising nonpayment? | Blue Sky: HCMG improperly interfered with contractual relations by directing nonpayment. | HCMG: acted as agent/manager within scope of duties; agent cannot be liable for interfering with principal’s contracts. | HCMG not liable for tortious interference as it acted within its managerial role for the facilities. |
Key Cases Cited
- Travelers Indem. Co. v. Trowbridge, 41 Ohio St.2d 11 (Ohio 1975) (defines indemnification as right to reimbursement when one pays what another should pay)
- Transtar Elec., Inc. v. A.E.M. Elec. Servs. Corp., 140 Ohio St.3d 193 (Ohio 2014) (unsatisfied condition precedent can excuse contractual performance)
- White v. Pitman, 156 N.E.3d 1026 (Ohio 2020) (elements required to prove breach of contract)
- Baumgardner v. Bimbo Food Bakeries Distrib., Inc., 697 F. Supp.2d 801 (N.D. Ohio 2010) (failure to satisfy a condition precedent is not itself a breach of contract)
- World Metals Inc. v. AGA Gas, Inc., 142 Ohio App.3d 283 (Ohio Ct. App. 2001) (disputed damages facts require trial)
- West v. Visteon Corp., 367 F. Supp.2d 1160 (N.D. Ohio 2005) (agent/supervisor acting within scope of duties cannot be sued for tortious interference)
- Pannozzo v. Anthem Blue Cross and Blue Shield, 152 Ohio App.3d 235 (Ohio Ct. App. 2003) (agent/principal relationship bars interference claim against agent)