ANN MCCRACKEN, JOAN FARRELL, SARA STILSON, KEVIN MCCLOSKEY, CHRISTOPHER TRAPATSOS, KIMBERLY BAILEY, Plaintiffs-Appellants, v. VERISMA SYSTEMS, INC., Defendant-Cross-Defendant-Appellee, STRONG MEMORIAL HOSPITAL, HIGHLAND HOSPITAL, UNIVERSITY OF ROCHESTER, Defendants-Cross-Claimants-Appellees. MARISSA CARTER, EVELYN GRYS, BRUCE CURRIER, SHARON KONING, SUE BEEHLER, MARSHA MANCUSO, BRAD S. TIEFEL, AS ADMINISTRATOR OF THE ESTATE OF JACLYN CUTHBERTSON, AS INDIVIDUALS AND AS REPRESENTATIVES OF THE CLASSES, Plaintiffs-Appellants, v. THE ROCHESTER GENERAL HOSPITAL, THE UNITY HOSPITAL OF ROCHESTER, Defendants-Appellees, F.F. THOMPSON HOSPITAL, INC., Cross-Claimant-Defendant-Appellee, CIOX HEALTH, LLC, F/K/A/ HEALTHPORT TECHNOLOGIES, LLC, Cross-Defendant-Defendant-Appellee.
No. 22-2928; No. 22-2036*
United States Court of Appeals For the Second Circuit
DECIDED: JANUARY 29, 2024
August Term, 2023. ARGUED: JANUARY 10, 2024. Before: KEARSE, LYNCH, and NARDINI, Circuit Judges.
* The Clerk of Court is directed to consolidate these appeals for purposes of decision.
Plaintiffs-Appellants, patients whose counsel requested their medical records from various hospitals, brought class action lawsuits against the hospitals and the vendors to whom the hospitals outsourced their medical record production, alleging that the hospitals and vendors were engaged in an unlawful kickback scheme. The lawsuits alleged three causes of action based on this scheme: (1) a violation of
STEPHEN G. SCHWARZ (Kathryn Lee Bruns, on the brief), Faraci Lange, LLP, Rochester, NY, for Plaintiffs-Appellants.
MEGHAN M. BROWN (Christopher J. Belter, James D. Macri, on the brief), Goldberg Segalla LLP, Buffalo, NY, for Defendant-Appellee Verisma Systems, Inc.
AMANDA B. BURNS (Eric J. Ward, Claire E. Wells, on the brief), Ward Greenberg Heller & Reidy LLP, Rochester, NY, for Defendants-Appellees Strоng Memorial Hospital, Highland Hospital, and University of Rochester.
JODYANN GALVIN (Cynthia Ludwig, Mohammed A. Alam, on the brief), Hodgson Russ, LLP, Buffalo, NY, for Defendants-Appellees Rochester General Hospital, Unity Hospital of Rochester, F.F. Thompson Hospital, Inc., and CIOX Health, LLC, f/k/a HealthPort Technologies, LLC.
WILLIAM J. NARDINI, Circuit Judge:
Try as they might to characterize the theories of wrongdoing underlying their
I. Background
The Plaintiffs-Appellants in both of these consolidated cases are patients whose counsel requested copies of their medical records from hospitals where they received treatment. Each group of plaintiffs sued two categories of defendants: the hospitals and the vendors with which each hospital contracted to produce the records. We consolidated these appeals for decision after oral argument due to their factual overlap and because they concern the same central legal issue. We refer to the plaintiffs in both cases collectively as the Patients and the defendants in both cases collectively as the Hospitals and the Vendors, distinguishing where necessary.
The Patients in each case appeal from a judgment of the United States District Court for the Western District of New York (Frank P. Geraci, Jr., District Judge), entered on August 19, 2022 (Carter) and October 11, 2022 (McCracken), granting judgment pursuant to
Thе Patients filed class action complaints against the Hospitals and Vendors in 2014 (twice amended in McCracken, once amended in Carter) claiming three causes of action arising from the Defendants’ alleged kickback scheme related to the production of the Patients’ medical records: (1) a violation of
The district court granted thе defendants’ Rule 12(c) motion for judgment on the pleadings as to all of the Patients’ claims in both cases. McCracken v. Verisma Sys., Inc., No. 6:14-CV-6248-FPG-MJP, 2022 WL 3566682, at *3–6 (W.D.N.Y. Aug. 18, 2022); Carter v. CIOX Health, LLC, No. 6:14-CV-6275-FPG-MWP, 2022 WL 3499683, at *3–6 (W.D.N.Y. Aug. 18, 2022).1 In both cases, the parties stipulated to
judgment in favor of the defendants as to the claim for a violation of
The district court concluded that the defendants are also entitled to judgment in their favor as to the
II. Discussion
We review a grant of a Rule 12(c) motion for judgment on the pleadings de novo under the same standard as the grаnt of a motion to dismiss for failure to state a claim under
A. New York General Business Law § 349 Claim
As we have already held in the unjust enrichment context, to the extent the Patients’
The Patients unsuccessfully attempt to save their claim by framing the misrepresentation instead as leading to unknowingly financing the production of other patients’ medical records. McCracken Appellants’ Br. at 42; accord Carter Appellants’ Br. at 29 (framing the misrepresentation as leading to unknowingly paying for the ‘courtesy’ pages under the guise of paying per page for just their own records). That theory boils down to an untenable complaint that the Vendors did not disclose to the Patients that the profits generated from producing their medical records wеre being used to offset the Hospitals’ costs for producing other medical records. Profit-making is not, in itself, a deceptive business act. See Zuckerman v. BMG Direct Mktg., Inc., 737 N.Y.S.2d 14, 15–16 (1st Dep‘t 2002) ([W]here there is no coercion involved, the focus is whether the amount of the charge is disclosed. If so, the question of whether the amount charged is unreasonable or excessive is not an issue for the courts to address. (internal quotation mаrks omitted)). Here, [the Patients‘] claim is not based on a failure to disclose charges for [medical records], but rather on allegedly deceptive [omissions] that caused [patients] to believe that the disclosed charges were not . . . a profit center. Id. at 16 (internal quotation marks omitted). But [a]ny reasonable consumer would understand that businesses are in business to make a profit, Chiste v. Hotels.com L.P., 756 F. Supp. 2d 382, 405 (S.D.N.Y. 2010), and any notion to the contrary here is based solely on
The Pаtients also fail to plead how any such misleading omission was material, i.e., would have caused them to make a different initial choice about ordering their records, see N. State Autobahn, Inc. v. Progressive Ins. Grp. Co., 953 N.Y.S.2d 96, 102 (2d Dep‘t 2012) (holding that consumer-oriented conduct is materially misleading only where the deception pertains to an issue that may bear on a consumer‘s decision to participate in a particular transaction). Rather, common sense dictates that, absent an affirmative representation about the use or existence of profits, reasonable consumers are primarily concerned with the end price they pay and the value they expect to receive rather than the business‘s profit margin, let alone how any profits are used.2 See Blessing v. Sirius XM Radio Inc., 775 F. Supp. 2d 650, 656 (S.D.N.Y. 2011).
We hold that a plaintiff‘s claim under
B. Unjust Enrichment Claim
The Patients also bring a claim for unjust enrichment based on the same theory as their
For substantially the same reasons we have already recited, the unjust enrichment claims also fail. The Patients point to nothing inherently unjust about
C. Cross-Motion for Summary Judgment
The McCracken Patients also challenge the district court‘s failure to convert the defendants’ motion for judgment on the pleadings into a motion for summary judgment and its ultimate denial of the Patients’ cross-motion for summary judgment as moot. Under
The district court here did not consider matters outside of the pleadings in deciding the Rule 12(c) motion (and, to the extent it mentioned them, it did so only to clearly articulate and give all due credit to the Patients’ allegations as is required under the Rule 12(c) standard), see McCracken, 2022 WL 3566682, at *2, so it was not required to convert the motion into one for summary judgment. Seе Hayden v. County of Nassau, 180 F.3d 42, 54 (2d Cir. 1999) (Where . . . the court simply refers to supplementary materials, but does not rely on them or use them as a basis for its decision, the 12(b)(6) motion is not converted into a motion for summary judgment.).
Moreover, it was not error, but rather an exercise of efficiency, to first decide the motion for judgment on the pleadings, because if the court concluded (as it did) that the Patients’ allegations, taken as truе, did not state a claim, there would be no value in assessing the evidence on a summary judgment motion. And based on our foregoing conclusion that the Patients failed to state a claim, the district court also did not err in denying their cross-motion for summary judgment as moot.
D. Leave to Amend
The Carter Patients additionally challenge the district court‘s denial of their motion for leave to amend their complaint a second time.
III. Conclusion
In sum, we hold as follows:
- A claim under
New York General Business Law § 349 or for unjust enrichment is not cognizable if the alleged deceptive act is deceptive only because it violatesNew York Public Health Law § 18(2)(e) ; - Here, the Patients hаve not adequately pled a theory of harm independent from a violation of
PHL § 18(2)(e) for either theirGBL § 349 or unjust enrichment claims, and thus the district court did not err by granting the defendants’ motions for judgment on the pleadings as to those claims; - The district court did not err by failing to convert the McCracken defendants’ motion for judgment on the pleadings into a motion for summary judgment because it did not rely on materials outside the pleadings in resolving the motion, nor did it err by denying the McCracken Patients’ cross-motion for summary judgment as moot given that it properly granted defendants’ judgment as to both claims based on the pleadings; and
- The district court did not err by denying the Carter Patients leave to file a second amended complaint because the proposed amendments were futile.
We therefore AFFIRM the district court‘s judgments in both cases.
Notes
The Patients’ amended complaints never describe what form the improper kickbacks took. In its decisions granting defendants’ motions for judgment on the pleadings, the district court cited the parties’ motion papers to explain the details of the scheme, noting that in their briefs, Plaintiffs further describe[d] the scheme with citation not to the Amended Complaint but to a deposition of [the vendor]‘s representative. Plaintiffs have not argued that the deposition is integral to the Amended Complaint suсh that the Court may consider it without converting the motion to one of summary judgment. Carter, 2022 WL 3499683, at *3 & n.5 (citation omitted); see McCracken, 2022 WL 3566682, at *4.
In describing the contours of the scheme in their briefs to this Court, the Carter Patients cite the services agreements between the vendor and the Hospitals, which are attached to a declaration in support of their opposition to defendants’ motion for judgment on the pleadings, as well as a deposition attаched to their opposition, Carter Appellants’ Br. at 7–8 (citing Carter Confidential App‘x 1, 4, 45–46, 57, 60–61), and portions of their proposed second amended complaint that the district court denied them leave to file, id. at 5–9 (citing Carter Confidential App‘x 64–69, 76–82), and the McCracken Patients cite the agreement between the vendor and the Hospitals, which is attached to the declaration of Plaintiffs to cеrtify a class, McCracken Appellants’ Br. at 5–6, 8–9 (citing McCracken J.A. 161–67), and the statement of service summary between the vendor and the Hospitals, which is attached as an exhibit to the Patients’ motion for class certification, id. at 5, 7–9 (citing McCracken Confidential J.A. 45–55).
While it is unclear whether we may take into account this material outside the amended complaints, see Glob. Network Commc‘ns, Inc. v. City of New York, 458 F.3d 150, 156 (2d Cir. 2006) (explaining that a court may consider extrinsic materials on a motion to dismiss if they are integral to the complaint), in reviewing the district court‘s rulings, that question does not affect the outcome of either appeal. Even taking into account these additional details of the alleged kickback scheme, for the reasons explained below, the Patients still fail to state a claim.