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Wilson v. MRO Corp.

United States District Court, S.D. West Virginia, Charleston

June 15, 2017

THOMAS M. WILSON SR., and DANIEL HALSEY as ADMINISRATOR of the ESTATE OF TAMARA HALSEY, and JASON GRAZUTIES, and SANDRA SHEPPARD, and ROBERT BRADLEY, and ARVADA MARTIN, Individually and on behalf of all others similarly situated, Plaintiffs,
v.
MRO CORPORATION, a Pennsylvania Corporation, and CIOX HEALTH, LLC, a Georgia Corporation, and MEDI-COPY SERVICES, INC., a Tennessee Corporation, Defendants.

          MEMORANDUM OPINION AND ORDER

          John T. Copenhaver, Jr. United States District Judge

         I. Introduction

         Pending is a motionto dismiss the amended complaint and compel arbitration, filedby defendant MRO Corporation (“MRO”) on November 21, 2016. This opinion and order addresses the motion only insofar as itrelates to standing and seeks to compel arbitration.

         Plaintiffs Thomas M. Wilson, Sr., Daniel Halsey as Administrator of the Estate of Tamara Halsey, and Jason Grazuties, individually and on behalf of all others similarly situated, instituted this action against MRO, Medi-Copy Services, Inc. (“Medi-Copy”) and CIOX Health, LLC (“CIOX”) by filing a complaint in the Circuit Court of Kanawha County, West Virginia on April 28, 2016. With the consent of CIOX and MRO, Medi-Copy removed the action on June 10, 2016 on the basis of diversity jurisdiction and the Class Action Fairness Act of 2005.

         Plaintiffs filed a motion to amend the complaint to add Sandra Sheppard, Robert Bradley, and Arvada Martin as additional class representatives on September 23, 2016, which the court granted on October 7, 2016. MRO thereafter filed the pending motion.

         The amended complaint alleges that defendants, who are providers of patient health care records, charge patients more for their heath care records than is permitted under West Virginia law. Amended Compl. at ¶¶ 1-3. Specifically, plaintiffs allege that defendants improperly billed and produced paper copies of their medical records when the records were stored electronically and when plaintiffs requested copies of the records in electronic form and that they charge far in excess of “the actual cost of labor, supplies, and postage involved in providing copies of medical records to patients, including Plaintiffs and others.” Id. at ¶¶ 3, 26.

         This case arises under the Health Care Records Statute, contained in W.Va. Code §§ 16-29-1 and 16-29-2, which prescribes that “[a]ny licensed . . . health care provider . . . shall, upon the written request of a patient, his or her authorized agent or authorized representative, within a reasonable time, furnish a copy . . . of all or a portion of the patient's record to the patient, his or her authorized agent or authorized representative. . . .” W.Va. Code § 16-29-1(a). Section 16-29-1(d) states that [t]he provisions of this article may be enforced by a patient, authorized agent or authorized representative. . . .” W.Va. Code § 16-29-1(d).

         Plaintiffs state that hospitals and other health care providers have “executed associate business agreements” with MRO, Medi-Copy and CIOX “to produce patient medical records” on behalf of the hospitals and health care providers. Amended Compl. at ¶ 52; see also Amended Compl. at ¶ 14. Pertaining to MRO, the amended complaint alleges that on “February 3, 2016, Thomas Wilson, Sr. through his representatives requested a copy of his medical records in electronic form from Cabell Huntington Hospital.” Id. at ¶ 27. His counsel “received an invoice from MRO dated March 7, 2016, ” which included charges that exceeded those permitted by law. Id. On April 26, 2016, Sandra Sheppard, “through her representatives requested her medical records in electronic form from Cabell Huntington Hospital.” Id. at ¶ 28. Her counsel received an invoice from MRO dated May 23, 2016, which included charges that exceeded those permitted by law. Id. Plaintiffs allege that MRO failed to comply with requests for electronic records. Id. at ¶ 27.[1] The amended complaint further alleges that MRO has overcharged other patients as well. Id. at ¶ 35.

         Plaintiffs bring this case as a class action on behalf of those “who are patients of health care providers, or designated representatives of patients of health care providers, who Defendants charged an amount in excess of that allowed by law for copies of medical records when they requested electronic medical records be produced on electronic media, individually or through another person acting on their behalf, from West Virginia hospitals and other health care providers that contract with Defendants to produce medical records.” Id. Plaintiffs allege that the class may consist of thousands of people, making joinder impracticable, and that there are common questions of law and fact applicable to all class members. Id. at ¶ 37. They further allege that their claims are typical and that they are adequate representatives of the class. Id. at ¶¶ 38-39.

         Count One alleges that defendants violated the West Virginia Consumer Credit and Protection Act (“WVCCPA”), W.Va. Code § 46A-6-101 et seq., by charging fees in excess of a reasonable fee for the production of medical records in electronic form. Id. at ¶¶ 42-44. Specifically, it states that defendants' policies and practices of charging “per page rates and other charges for copies of medical records [that] exceed the labor and supply cost of responding to requests for copies violates the WVCCPA as an unfair or deceptive act or practice pursuant to W.Va. Code §§ 46A-6-104 and 46A-6-102.” Id. at ¶ 45. In addition, plaintiffs allege that defendants' policy of charging some people higher amounts for copies of medical records than they may charge others is an unfair or deceptive act or practice. Id. at ¶ 46. Plaintiffs also allege that defendants' failure to inform consumers that they are entitled to receive electronic medical records at a lower cost constitutes “a failure to state a material fact that misleads the public.” Id. at ¶ 47. Plaintiffs claim that “[t]he charges posed by the Defendants violate the WVCCPA and, further, violate the limitations on charges for medical records as set forth in HIPPA, the HITECH Act, West Virginia statute and related state and federal regulations.” Id. at ¶ 48. Notwithstanding the references in the amended complaint to violations of federal law, plaintiffs' claims are made only pursuant to West Virginia law.

         Count Two alleges that defendants violated the Health Care Records Statute, W.Va. Code § 16-29-2, by charging plaintiffs and others in excess of their labor and supply costs for their electronic medical records, resulting in fees that are not reasonable. Id. at ¶¶ 50, 53. In addition, defendants did not inform consumers or their representatives that they are entitled to an electronic copy of their medical records at a lower cost, which plaintiffs allege constitutes “a failure to state a material fact that intends to mislead and violates West Virginia statute.” Id. at ¶ 54.

         Plaintiffs ask for this matter to be certified as a class action, award judgment in their favor, including injunctive relief that prohibits excessive and unlawful charges, equitable relief that includes restitution and disgorgement of moneys obtained from overcharges, recovery of excess charges, civil penalties for violations of the WVCCPA, pre-judgment and post-judgment interest, costs, attorneys fees, statutory interest, punitive damages, and all other relief the court deems appropriate. Id. at p. 12.

         In its motion to dismiss the amended complaint, MRO concedes that it “provides release of information services to health care providers, which includes providing copies of medical records upon a proper request to the health care provider.” MRO's Memo. in Supp. of Mot. to Compel Arbitration and Dismiss Amended Compl. at 2. Despite this, MRO argues that plaintiffs have failed to plead a cognizable injury in fact and additionally contends that the WVCCPA and Health Care Records Statute do not cover plaintiffs' claims in part because their requests were made by their attorney, so that they therefore lack standing to bring their claims, pursuant to Fed.R.Civ.P. 12(b)(1). Id. MRO also argues that there is a valid, binding arbitration provision that covers the dispute so that the court must compel arbitration of this matter.[2] Id.

         II. Rule 12(b)(1) Lack of Subject Matter Jurisdiction

         A. Governing Standard

         Federal district courts are courts of limited subject matter jurisdiction, possessing “only the jurisdiction authorized them by the United States Constitution and by federal statute.” United States ex. rel. Vuyyuru v. Jadhav, 555 F.3d 337, 347 (4th Cir. 2008). As such, “there is no presumption that the court has jurisdiction.” Pinkley, Inc. v. City of Frederick, 191 F.3d 394, 399 (4th Cir. 1999) (citing Lehigh Mining & Mfg. Co. v. Kelly, 160 U.S. 327, 327 (1895)). Indeed, when the existence of subject matter jurisdiction is challenged under Rule 12(b)(1), “[t]he plaintiff has the burden of proving that subject matter jurisdiction exists.” Evans v. B.F. Perkins Co., 166 F.3d 642, 647 (4th Cir. 1999); see also Richmond, Fredericksburg, & Potomac R .R. Co. v. United States, 945 F.2d 765, 768 (4th Cir. 1991). If subject matter jurisdiction is lacking, the claim must be dismissed. See Arbaugh v. Y & H Corp., 546 U.S. 500, 506 (2006).

         Subject matter jurisdiction may be attacked by a arguments will be addressed in a separate memorandum opinion and order. defendant with either a facial or a factual challenge. Kerns v. United States, 585 F.3d 188, 192 (4th Cir. 2009). In a facial challenge, the defendant is asserting that the allegations contained in the complaint fail to sufficiently establish the existence of subject matter jurisdiction. Id. In a facial attack, the plaintiff is “afforded the same procedural protection as she would receive under a Rule 12(b)(6) consideration, ” so that “facts alleged in the complaint are taken as true, ” and the defendant's motion “must be denied if the complaint alleges sufficient facts to invoke subject matter jurisdiction.” Id. In a factual challenge, a defendant may argue “that the jurisdictional allegations of the complaint [are] not true.” Id. This permits a trial court to consider extrinsic evidence or hold an evidentiary hearing to “determine if there are facts to support the jurisdictional allegations.” Id.

         MRO argues that plaintiffs lack standing to bring their claims for two reasons. First, it contends that because the law firm Tiano O'Dell PLLC requested and paid for plaintiffs' medical records, it is Tiano O'Dell, not plaintiffs themselves, who suffered an injury from any alleged overbilling by them. MRO's Memo. in Supp. of Mot. to Compel Arbitration and Dismiss Amended Compl. at 8-9. Second, MRO states that the West Virginia Consumer Credit and Protection Act (“WVCCPA”) and the Health Care Records Statute do not govern the transactions alleged in the amended complaint. Id. at 9-11. As these are facial and not factual challenges to plaintiffs' standing, the court will accept all allegations in the amended complaint as true and determine whether plaintiffs have sufficiently established a basis for subject matter jurisdiction. See Kerns, 585 F.3d at 192.

         B. Applicable Law

         Standing is generally addressed at the motion to dismiss stage under Fed.R.Civ.P. 12(b)(1) because “Article III gives federal courts jurisdiction only over cases and controversies and standing is a integral component of the case or controversy requirement.” CGM, LLC v. BellSouth Telecommunications, Inc., 664 F.3d 46, 52 (4th Cir. 2011) (internal citations and quotations omitted). “To satisfy the constitutional standing requirement, a plaintiff must provide evidence to support the conclusion that: (1) ‘the plaintiff ... suffered an injury in fact - an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical'; (2) ‘there [is] a causal connection between the injury and the conduct complained of'; and (3) ‘it [is] likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.'” White Tail Park, Inc. v. Stroube, 413 F.3d 451, 458 (4th Cir. 2005) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-62 (1992).

         At the motion to dismiss stage, “general factual allegations of injury resulting from the defendant's conduct may suffice, for on a motion to dismiss we presume that general allegations embrace those specific facts that are necessary to support the claim.” Lujan, 504 U.S. at 561. The court may accept as true allegations that are supported by adequate “‘factual matter' to render them ‘plausible on [their] face.'” Beck v. McDonald, 848 F.3d 262, 270 (4th Cir. 2017) (citing Ashcroft, 556 U.S. 662, 678 (2009). “The same presumption of truth” does not apply to “conclusory statements and legal conclusions” contained in the complaint. Id.

         C. Injury In Fact

         MRO contends that because the amended complaint alleges that plaintiffs requested their medical records “through [their] representatives” and because Tiano O'Dell, not plaintiffs, paid for plaintiffs' medical records, they have not suffered an injury in fact by their alleged overbilling. MRO's Memo. in Supp. of Mot. to Compel Arbitration and Dismiss Amended Compl. at 8-9. In support of the position that the amended complaint does not adequately allege an injury in fact, MRO cites to Spiro v. Healthport Technologies, LLC. 73 F.Supp.3d 259 (S.D.N.Y. 2014). In Spiro, the court found that plaintiffs, who were individuals alleging that defendants overcharged them for their medical records under New York law, did not have standing to pursue their claims because as written, the complaint did not allege that plaintiffs were obligated to reimburse their attorney, who originally requested and paid for the records. Id. at 268. The court dismissed the case for lack of jurisdiction, expressly permitting plaintiffs to amend the complaint to state that under the fee agreement executed by plaintiffs with their attorney, they were obligated to reimburse the medical record fees charged by defendants. Id. at 269.

         Plaintiffs argue that the subsequent Second Circuit case of Carter v. HealthPort Technologies, LLC, is more relevant to this case. 822 F.3d 47 (2d Cir. 2016). In Carter, plaintiffs similarly sued defendants, who they alleged overbilled them for their medical records in violation of state law. Id. at 52. The complaint alleged that each plaintiff, “through [her or his] counsel, . . . requested medical records from” the treating hospital. Id. at 52 (internal quotations omitted). The complaint further alleged that each plaintiff paid the charge provided by defendants “though [his or her] counsel.” Id.

         The Second Circuit determined that the district court erred in finding that the plaintiffs lacked standing based on the allegations contained in the complaint. Id. at 58. The court found that the allegations that the plaintiffs requested and paid for their medical records through his or her counsel “are detailed factual allegations that the plaintiffs were the principals, who acted through their agents in requesting and paying for the records.” Id. Combined with the factual allegation that “the ultimate expense” for the records was borne by “Plaintiffs and other Class members, ” the court found that the complaint described the agency relationships between the plaintiffs and their attorney so that each plaintiff acted “through [his or her] counsel” in requesting and paying the fees demanded in exchange for providing the medical ...


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