Posts tagged "health"

Anne Gamble Ten Taxpayer Group, et al. v. Health Facilities Appeals Board, et al. (Lawyers Weekly No. 09-031-17)

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COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
SUCV2015-3545-BLS2
ANNE GAMBLE TEN TAXPAYER GROUP, consisting of
GUSTAVE H. MURBY, ANNE C. GAMBLE, WALTER J. GAMBLE, STEPHEN GELLIS, M.D., LORING CONANT M.D., JR., CONANT LOUISE, BRIAN GREENBERG, PEGGY GREENBERG, KAREN D’AMATO, CHRISTINE BARENSFELD, JOHN W. HAGERMAN, ROBERT GAMBLE, SHIRLEY C. DUFF, JAMES K. DUFF, JAMES M. SMITH, and ELLEN K. ANDERSSON,
Plaintiffs
vs.
HEALTH FACILITIES APPEALS BOARD, MONICA BHAREL, M.D., in her capacity as COMMISSIONER OF MASSACHUSETTS DEPARTMENT OF PUBLIC HEALTH, MARYLOU SUDDERS, in her capacity as SECRETARY OF MASSACHUSETTS EXECUTIVE OFFICE OF HEALTH AND HUMAN SERVICES, and CHILDREN’S HOSPITAL CORPORATION d/b/a CHILDREN’S HOSPITAL,
Defendants
MEMORANDUM OF DECISION AND ORDER
ON CROSS MOTIONS FOR JUDGMENT ON THE PLEADINGS
AND ON PLAINTIFFS’ MOTION TO AMEND COMPLAINT
This is one of several lawsuits filed by a group of plaintiffs unhappy with a decision by the defendant Boston Children’s Hospital (BCH) to eliminate the Prouty Garden as part of a modernization and expansion project. In the instant case, plaintiffs challenge the October 27, 2016 determination by the Commissioner of the Department of Public Health and the Public Health Council (collectively, the Department) to issue a Determination of Need in connection with that project. The Department’s decision is subject to judicial review pursuant to G.L.c. 30A §14 and G.L.c. 111 §25E. With the Administrative Record having been filed, this case is before this Court on Cross Motions for Judgment on the Pleadings, as required by Superior Court Standing Order 1-96. Plaintiffs also seek leave to amend their Complaint. This Court concludes
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that the plaintiffs’ motions must be DENIED and the defendants’ Cross Motion must be ALLOWED, for reasons set forth herein.
BACKGROUND
Section 25C of Chapter 111 of the Massachusetts General Laws states that a health care institution contemplating a construction project that requires a “substantial capital expenditure” must first obtain a determination of need or “DoN” from the Department of Public Health (DPH). The purpose of the statute is to “control unnecessary expansion by health care institutions of their patient care facilities,” Howe v. Health Facilities Appeals Bd., 20 Mass.App.Ct. 531, 532 (1985), and to encourage the appropriate allocation of resources for health care purposes. Shoolman v. Health Facilities Appeals Bd., 404 Mass. 33, 36 (1989). In order to obtain a DoN, the health care institution must file an Application, which is reviewed for completeness and then forwarded for to the Public Health Council (PHC) and the Commissioner of DPH for their consideration. 105 C.M.R. §510-100.530.1 The Application is also subject to comments and a public hearing. G.L.c. 111 §25C, 105 C.M.R. §§100.400-100.410. The DoN Program Director prepares a staff report (the Staff Summary). 105 C.M.R. §§100.420-100.421. Upon consideration of the Application, the Staff Summary and comments by “parties of record” and the general public, the Department makes a final Determination of Need approving or disapproving the Application, in whole or in part. 105. C.M.R. §100.530(A). Under G.L.c. 111 §25E, any person aggrieved by the determination may, within fourteen days, file an appeal with
1 This Court was informed by counsel at the hearing on these Motions that the DoN regulations have since been amended. As this Court understands it, any changes with regard to content have no bearing on this case. The amendment has changed the number references for those regulations, however. Because the parties agree that the earlier version of the regulations apply and because they have cited to that earlier version in their pleadings, this Court uses the citations to those older regulations, even though they have now been superseded.
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the Health Facilities Appeals Board. G.L.c. 111 §25E. Within sixty days of that filing, the Board is to issue a final decision either denying the appeal or remanding it for further action.
In the instant case, all these procedural steps were followed. On December 7, 2016, BCH filed an Application for a DoN in connection with a project to create new clinical space, including a neonatal intensive care unit and improved Heart Center at the hospital’s Longwood Avenue location (the Project) If approved, the Project would require the destruction of the Prouty Garden. The plaintiffs are a group of taxpayers who oppose destruction of the garden. They are duly registered with the Department as a “party of record” to the DoN proceedings and may file comments to the Application, which they did.
As required by statute, the DPH staff, held a public hearing on the Project and the plaintiffs were among those who provided their views. After a ten month review process, DPH issued a 37-page Staff Summary that recommended approval of the Application, with conditions. That Summary was later supplemented with an Addendum that addressed certain comments, including those submitted by the Health Policy Commission (HPC). On October 20, 2016, the PHC, chaired by DPH Commissioner Monica Bharel, held a hearing to determine whether to grant BCH’s DoN Application. Among those presenting testimony at the hearing were various individuals who opposed the destruction of Prouty Garden. The PHC ultimately voted to approve BCH’s Application, and the Commissioner and the PHC, acting together as the Department, issued a Notice of Final Action on October 27, 2016. That Notice states that the issuance of the DoN was based upon BCH’s “clear and convincing demonstration that the Project meets each of the governing factors, set forth in 105 C.M.R. 100.000 and Department guidelines.” The approval expressly included certain conditions. Although the statute is ordinarily reviewable by the Health Facilities Appeals Board, the Board had not yet been
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constituted so that the determination by the Department was considered final. 105 C.M.R. §100.970(B); 105 C.M.R. §100.551(A). This lawsuit ensued.
DISCUSSION
The Legislature has determined what standard that this Court applies in reviewing a Department decision to issue a DoN. That standard is set forth in G.L.c. 111 §25E, which states that the Department’s determination may be set aside only where there has been an “abuse of discretion” or where it is in violation of the procedural or substantive law. Contrary to the plaintiffs’ position, this Court does not apply the more rigorous “substantial evidence” standard. Howe v. Health Facilities Board, 20 Mass.App.Ct. 531, 534-537 (1985); see also Shoolman v. Health Facilities Appeals Board, 404 Mass. 33 (1989). Rather, the review is even more deferential. As explained by the SJC, the decision to issue the DoN can be overturned only if it was “arbitrary and capricious.” Shoolman, 404 Mass. at 36. If there is a rational basis for the decision and it is not otherwise unlawful, then it must be affirmed. Applying this standard, this Court concludes that the plaintiffs have not met their burden of demonstrating that the Department’ decision to issue a DoN to BCH should be overturned.
As stated in the October 27, 2016 Notice of Final Action, the Department reviewed BCH’s Application to determine whether it complied with certain mandatory terms and conditions of the applicable regulations. Specifically, it sought to determine whether the Project met each of nine factors set forth in 105 C.M.R. §100.533(B). In support of their Motion, plaintiffs focus on a couple of these factors and argue that the evidence does not support the Department’s decision. One of those factors (Factor One) requires BCH to demonstrate that the Project “will not duplicate existing resources in the applicable service area.” 105 C.M.R. §100.533(B) (1). A second factor (Factor Two) requires that the project must “satisfy in whole
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or in part health care requirements of the project population of the applicable services area, without any duplication of services and other adverse service consequences…” ” 105 C.M.R. §100.533(B) (2). Plaintiffs argues that the Project does not satisfy these requirements because it is based not on present needs but on BCH projections regarding future patient volume. Moreover, these projections (they argue) are not based on increased demand from Massachusetts patients but from international and out of state patients. Citing comments by the HPC, plaintiffs express concern that shifting patients from competing local pediatric care providers to BCH could have a destabilizing effect that would translate into higher health care costs overall. Plaintiffs argue that the Department ignored these concerns and that the Department’s decision that the regulatory factors were satisfied is wholly unsupported by the facts presented to it.
In fact, a review of the Administrative Record shows that the Department did consider the same arguments and criticisms plaintiffs now make to this Court. The HPC’s comments, for example, were specifically addressed both in the Staff Summary and the Addendum. The plaintiffs may disagree with how the Department resolved those concerns, but that is not a basis to overturn its decision. Moreover, the reasons offered in support of the decision are neither arbitrary nor capricious. Regarding the danger of duplication of services, the Staff Summary concluded that the “applicable services area” referenced in the regulations can – and, in the instant case, did — extend to an area beyond Massachusetts so that it was permissible to consider patients projected to come from out of state and internationally. The Department further determined that higher acuity patients from all regions, including the Boston area, are already coming to BCH for more complex procedures than are available at other local hospitals, decreasing the danger that services would be duplicated. As to the validity of BCH’s projections, the DPH Staff required from BCH an Independent Cost Analysis which (among
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other things) reviewed population projections, historical trends, and two patient projection scenarios. That analysis concluded that the success of the Project would not require taking patients away from other local providers and was also “consistent with the Commonwealth’s effort to meet the health care cost containment goals.” In short, in making the findings that it did, the Department did not abuse its discretion or exceed its legal authority. Indeed, even under the less deferential “substantial evidence” standard, the DoN determination passes muster.
Significantly, the Department did not simply determine that BCH’s Application satisfied the nine mandatory factors imposed by the regulations. Additionally, it imposed eight conditions on BCH, among them “Condition 8.” That condition imposed three requirements on BCH that directly addressed the concerns expressed above. First, BCH was prevented from passing on its incremental operating costs to government and nongovernment Massachusetts payors or patients “in excess of the Commonwealth’s costs containment goals.” Second, BCH had to maintain its commitment to serving Medicaid patients. Third, it is required to make an annual report to the Department that includes among other things information concerning the degree to which the out-of-state demand it anticipated was actually being realized. Plaintiffs argue that this condition is somehow invalid or at the very least unworkable. This Court disagrees.
The DoN regulations expressly permit the Department to impose conditions. See 105 C.M.R. §100.552(A) (Department “may prescribe…any other conditions reasonably related to the scope of the project…and consistent with the objective of making adequate health care services reasonably available to every person within Massachusetts”). Indeed, the regulations specifically contemplate the imposition of a condition in the event that the Project falls short of satisfying any of the nine regulatory factors. See 105 CM.R. §100.533(C). Plaintiffs argue that
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Condition 8 is not in accordance with 105 C.M.R. 100. §552, which requires that the condition be “within the control of the applicant.” But each of the three requirements that Condition 8 imposes are within BCH’s control and are matters for which the Department can hold BCH accountable. That Condition 8 by its terms gives to BCH an opportunity to argue that it is noncompliant with any of the requirements because of unexpected circumstances or events does not change the fact that the condition itself (including the submission of an annual report) concerns matters within BCH’s control. Nor does this so called “escape clause” render the Condition meaningless: a finding by the Department that BCH is not in compliance with Condition 8 permits the Department to require BCH to remove beds from service and to extract other payments. In short, this Court sees no legal grounds for overturning the Department’s decision.
At the same time that the plaintiffs filed their Cross Motion for Judgment on the Pleadings, they also filed a Motion to Amend the Complaint. This Motion seeks to add a count (Count 4) which alleges that since the issuance of the DoN, BCH is in violation of the conditions that the Department imposed and has otherwise not complied with applicable regulations. BCH argues that plaintiffs’ allegations are demonstrably false and that further amendment of the Complaint would futile. Although this Court must accept plaintiffs’ allegations as true, this Court does have some discretion to deny a request to amend a complaint, and does so here. See Rule 15(a), Mass.R.Civ.P.
Count 4 alleges among other things that the report that Condition 8 requires BCH to submit to the Department is inadequate; it also alleges that BCH has not complied with Condition 7 of the DoN that requires it to implement a plan to effectively communicate with community groups. Whether BCH is in violation of those conditions, however, is a matter that
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should first be addressed to the Department, which has both the expertise and the primary responsibility for enforcing its own regulations and orders. See Athol Mem’l Hospital v. Comm’r of Div. of Med. Assistance, 437 Mass. 417, 421-422 (2002). Other parts of Count 4 do not appear to belong in this case at all. For example, plaintiffs allege public records violations, but have already filed a separate public records action which this Court has already refused to consolidate with the instant one. See Murby v. Marylou Sudders, Civ. No., 17-1036H (Suffolk Superior Court). 2 A motion to amend may also be properly denied based on “undue delay, bad faith, or dilatory motive on the part of the movant.” Vakil v. Vakil, 450 Mass. 411, 417 (2008), quoting Castellucci v. United States Fid. & Gaur. Co., 372 Mass. 288, 290 (1977). BCH argues (not without basis) that the plaintiffs here are more interested in delay than in seeking redress for real (as opposed to illusory) legal violations. In short, taking into account both the procedural background of this case together with the violations that are alleged, there is ample basis for this Court to exercise its discretion to deny the motion.
CONCLUSION AND ORDER
For all the foregoing reasons together with reasons articulated in the Memoranda of BCH and the Department, the plaintiffs’ Motion to Amend the Complaint and their Motion for Judgment on the Pleadings are both DENIED. The defendants’ Cross Motion for Judgment on the Pleadings is ALLOWED and it is hereby ORDERED that judgment enter affirming the Department’s DoN determination. The parties shall submit a proposed form of judgment within 10 days of receiving this opinion.
_____________________________
Janet L. Sanders
Dated: October 13, 2017 Justice of the Superior Court
2 Based on plaintiffs’ Reply Memorandum, it appears that at least some of the information that plaintiffs sought was provided as of the date the Motion to Amend was filed, suggesting that at least some of the alleged violations are now moot or may soon become moot once the records are provided.
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Dated: October 13, 2017 read more

Posted by Stephen Sandberg - November 3, 2017 at 2:37 pm

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Brown v. Woods Mullen Shelter/Boston Public Health Commission (Lawyers Weekly No. 09-001-17)

COMMONWEALTH OF MASSACHUSETTS

 

SUFFOLK, ss                                                                                                                                    SUPERIOR COURT

  1. 16-805-C

 

 

 

 

                                                                JASON BROWN

 

                                                                             v.

 

                                                   WOODS MULLEN SHELTER/

                                       BOSTON PUBLIC HEALTH COMMISSION

 

 

 

                                 MEMORANDUM OF DECISION AND ORDER ON read more

Posted by Stephen Sandberg - September 27, 2017 at 6:54 pm

Categories: News   Tags: , , , , , , , , ,

Therapy Resources Management LLC, et al. v. Whittier Health Network, Inc., et al. (Lawyers Weekly No. 12-120-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
CIVIL ACTION
No. 1784CV0942 BLS 1
THERAPY RESOURCES MANAGEMENT LLC, et al
vs.
WHITTIER HEALTH NETWORK, INC., et al
ORDER ON CROSS-MOTIONS FOR PARTIAL SUMMARY JUDGMENT
Count IV of the Amended Complaint seeks a declaratory judgment to the effect that
defendants (referred to collectively as “Whittier”) are barred from seeking indemnity from
plaintiffs (referred to collectively as “Therapy”). Whittier has not yet answered the amended
complaint or asserted a counterclaim, but the record is clear that Whittier believes it has the right
to be indemnified by Therapy for litigation costs and a settlement payment incurred by Whittier
in connection with an investigation and lawsuit under the False Claims Act (“FCA”), 31 U.S.C.
§3729.1 There is an actual controversy between the parties regarding whether, as a matter of law,
Whittier can obtain indemnification under its contracts with Therapy which state that “[Therapy] shall indemnify and hold [Whittier] harmless from and against all claims, demands, costs,
expenses, liabilities and losses (including reasonable attorney’s fees) which may result against
[Whittier] as a consequence of any malfeasance, negligence . . . caused . . . by [Therapy] . . . .”
1 Whittier has effectively obtained some indemnification by refusing to pay invoices for
services rendered by Therapy. Thus, Therapy is the plaintiff in this action seeking recovery for
non-payment of invoices. The claim for indemnification by Whittier is anticipated because such
claim is the stated basis for Whittier’s refusal to pay the invoices.
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Therapy’s argument for summary judgment on Count IV is based on the following
undisputed facts. The losses that Whittier wants indemnification for arise from the fact that
Whittier was sued, along with Therapy, for fraud under the FCA. The suit was brought by a
former employee of Therapy. There was also another suit by a different former employee of
Therapy against Therapy alone. The filing of the suits triggered an investigation by federal
officials. The gist of the FCA claims was that Whittier and Therapy knowingly presented false
claims for Medicare reimbursement. Both Whittier and Therapy denied the allegations.
At some point, the claims against Therapy were dismissed. It is unclear from the record
whether the dismissal was a result of a settlement or whether it was a dismissal without
prejudice. Sometime later, Whittier entered into a settlement with the FCA plaintiffs, including
the government, requiring, among other things, payment by Whittier of $ 2.5 million. Therapy
was not a party to the settlement. FCA claims against Therapy were not released in the Whittier
settlement.
The settlement agreement alleges that Whittier failed “to take sufficient steps to prevent
[Therapy] from engaging in a pattern and practice of fraudulently inflating the reported amounts
of therapy provided to Medicare Part A patients.” There is no admission of liability by Whittier
in the settlement agreement and there was no finding by a court or jury that Whittier engaged in
the fraudulent conduct alleged.
DISCUSSION
Therapy seeks a declaration that the indemnity provision, quoted above, is unenforceable
as against public policy and the FCA. In short, Therapy argues that indemnification of Whittier
would relieve it of liability for its own fraud. The parties concede that if Whittier had been found
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by a court to have committed fraud, or admitted to fraud, case law under the FCA would prohibit
Whittier from obtaining indemnification. Therapy argues that the FCA preempts state law claims,
based on contract or common law, for indemnification that would offset liability for fraud.
But Whittier asserts that it did not commit fraud. There has been no finding or admission
that it committed fraud. The issue presented is identical to what was presented to the United
States Court of Appeals for the Ninth Circuit in Cell Therapeutics, Inc. v. Lash Group, Inc., 586
F. 3d 1204, 1205 (2009)(“But what happens when a target defendant settles with the government
and the relator and then seeks recovery against a third party for contractual indemnity and
independent claims?”). The facts of Cell Therapeutics are closely aligned with the facts in the
present case.
The Court in Cell Therapeutics answered its rhetorical question by holding that a
defendant settling FCA claims with no admission of liability is free to seek indemnification from
a third party. Id. at 1212. “In resolving disputes under the FCA, we have recognized ‘the general
policy in favor of encouraging parties to settle disputes.’ Treating a qui tam settlement as a de
facto finding of liability would inevitably chill the settlement spirit.” Id. (Citation omitted). After
considering both the policy behind the FCA and principles of issue and claim preclusion, the
Court reversed a lower court’s dismissal of a settling defendant’s claim for indemnification. Id. at
1213.
I find the reasoning and conclusion in Cell Therapeutics to be thoroughly persuasive. The
cases cited by Therapy are all distinguishable from the facts of both Cell Therapeutics and the
present case. Whittier should not be precluded from making a claim for indemnification merely
because it settled the FCA case. Ultimately, whether Whittier can recover indemnification will
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depend on its ability to prove its contract claim (whether Whittier’s losses were “as a
consequence of any malfeasance” of Therapy). Therapy, however, will have the opportunity to
prove that Whittier’s conduct was fraudulent. If so, Whittier may be precluded from
indemnification. These issues are not ripe for determination on the present record.
CONCLUSION
The cross-motions for partial summary judgment on Count IV of the amended
complaint (Docket Nos. 20 and 21) are DENIED.
By the Court,
Edward P. Leibensperger
Justice of the Superior Court
Date: August 3, 2017
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Posted by Stephen Sandberg - September 6, 2017 at 6:26 pm

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G6 Hospitality Property LLC v. Town of Braintree Board of Health (Lawyers Weekly No. 12-107-17)

COMMONWEALTH OF MASSACHUSETTS

 

NORFOLK, ss.                                                                      SUPERIOR COURT

                                                                                                CIVIL ACTION

  1. 17-0882

 

 

G6 HOSPITALITY PROPERTY LLC

 

vs.

 

TOWN OF BRAINTREE BOARD OF HEALTH

 

MEMORANDUM OF DECISION AND ORDER
ON PLAINTIFF’S APPLICATION FOR A TEMPORARY RESTRAINING ORDER AND MOTION FOR A PRELIMINARY INJUNCTION

In its complaint in this action, Plaintiff G6 Hospitality Property LLC (“G6”), which operates a Motel 6 located at 125 Union Street, Braintree, Massachusetts (“the Motel”), seeks certiorari review under G.L. c. 249, § 4 of a decision made by the defendant, Town of Braintree Board of Health (“the Board”), to revoke G6’s license to operate the Motel under G.L. c. 140, §32B and c. 111, §122.[1]  At issue before the Court is G6’s application for a temporary restraining order and motion for a preliminary injunction, enjoining the Board from enforcing its July 13, 2017, decision to revoke G6’s license while this case is litigated. read more

Posted by Stephen Sandberg - August 18, 2017 at 5:46 am

Categories: News   Tags: , , , , , , , ,

Daley v. Secretary of the Executive Office of Health and Human Services, et al.; Nadeau v. Director of the Office of Medicaid (Lawyers Weekly No. 10-092-17)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us

SJC-12200

SJC-12205

MARY E. DALEY, personal representative,[1]  vs.  SECRETARY OF THE EXECUTIVE OFFICE OF HEALTH AND HUMAN SERVICES & another.[2]

LIONEL C. NADEAU  vs.  DIRECTOR OF THE OFFICE OF MEDICAID.

Worcester.     January 5, 2017. – May 30, 2017.

Present:  Gants, C.J., Lenk, Hines, Gaziano, Lowy, & Budd, JJ.

Medicaid.  Trust, Irrevocable trust.  Real Property, Life estate, Ownership.

Civil action commenced in the Superior Court Department on February 11, 2015. read more

Posted by Stephen Sandberg - May 30, 2017 at 3:13 pm

Categories: News   Tags: , , , , , , , , , , , ,

Whittier IPA, Inc. v. Steward Health Care Network, Inc. (Lawyers Weekly No. 12-005-17)

ΔCOMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
1484CV03029-BLS2
____________________
WHITTIER IPA, INC.
v.
STEWARD HEALTH CARE NETWORK, INC.
____________________
MEMORANDUM AND ORDER DENYING DEFENDANT’S MOTION FOR LEAVE TO ASSERT COUNTERCLAIMS AGAINST WHITTIER IPA, INC., AND THIRD-PARTY CLAIMS AGAINST ANNA JACQUES HOSPITAL
Steward Health Care Network, Inc., (“SHCN”) is a physician network. It negotiates and implements contracts with insurers and other entities that pay for SHCN’s participating doctors to provide medical care to the payors’ insureds or members. Whittier IPA, Inc., is an association of independent physicians. It joined the SHCN network in January 2012, but began exploring other options in 2013. After SHCN learned that Whittier had agreed to join a competing physician network run by the Beth Israel Deaconess Care Organization (“BIDCO”), SHCN terminated its agreements with Whittier effective August 31, 2014.
Whittier claims that is still owed substantial sums by SHCN under the parties’ contracts. The court (Kaplan, J.) granted partial summary judgment in Whittier’s favor in June 2015, declaring that if SHCN received incentive payments from health insurers and other payors for periods during which Whittier was an SHCN member, then “SHCN breached its contract with Whittier by failing to pay Whittier its pro rata share of those payments.” The amount that SHCN must pay Whittier is still in dispute. The current case schedule, which was jointly requested by both parties, requires the litigants to complete all fact discovery by February 10, 2017, and to complete the exchange of any expert reports by March 24, 2017.
SHCN seeks leave to assert counterclaims against Whittier and third-party claims against Anna Jacques Hospital. The Court will DENY this motion. It would be futile to allow SHCN to assert its proposed counterclaims against Whittier for breach of contract because they could not survive a motion to dismiss. The proposed claims against Anna Jacques for intentional interference and allegedly violating G.L. c. 93A would also be futile. In any case, it would be unfairly prejudicial to
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Whittier and to Anna Jacques to allow permissive joinder of a new defendant-in-counterclaim under Mass. R. Civ. P. 20 just weeks before the completion of discovery in this case. SHCN has no right to join Anna Jacques as a defendant-in-counterclaim under Rule 19 and does not seek to assert third-party claims for indemnification or contribution as allowed under Rule 14.
1. Proposed Counterclaims Against Whittier. SHCN seeks leave to assert counterclaims against Whittier for allegedly breaching parts of its written contracts with SHCN. The Court will deny leave to assert these counterclaims because doing so would be futile, in that these counterclaims could not survive a motion under Mass. R. Civ. P. 12(b)(6) to dismiss for failure to state a claim upon which relief can be granted. See generally Johnston v. Box, 453 Mass. 569, 583 (2009) (“Courts are not required to grant motions to amend prior [pleadings] where ‘the proposed amendment … is futile.’ ” (quoting All Seasons Servs., Inc. v. Commissioner of Health & Hosps. of Boston, 416 Mass. 269, 272 (1993)); Thermo Electron Corp. v. Waste Mgmt. Holdings, Inc., 63 Mass. App. Ct. 194, 203 (2005) (affirming denial of motion for leave to assert counterclaim that would have been futile); Mancuso v. Kinchla, 60 Mass. App. Ct. 558, 572 (2004) (if amendment to add claim could not survive motion to dismiss, allowing amendment would be exercise in futility).
1.1. Contract Provisions. When Whittier agreed in October 2011 to join the SHCN network, the parties executed and entered into a written “Service Agreement” and a related “Letter Agreement.” The following provisions of the parties’ contracts are relevant.
1.1.1. Exclusivity Provisions. In the Service Agreement, Whittier granted SHCN exclusive authority to negotiate and enter into “Risk Contracts” on behalf of Whittier and its physicians, and gave SHCN “a limited right of first opportunity … to negotiate and enter into Risk Contracts” on behalf of all of Whittier’s physicians, during the term of the contract. Whittier also agreed that its doctors who work as primary care physicians would not “participate in any Risk Contract with any Payor” other than through SHCN. The term “Risk Contract” was defined to mean an agreement with a “Payor” regarding the provision of and payment for medical services. The term “Payor” was defined to mean insurers and
– 3 –
other private or governmental entities that pay for medical services provided to enrolled individuals.
SHCN acknowledged in the Letter Agreement that, as of the time SHCN and Whittier entered into their contractual relationship, Whittier was contractually obligated to give a competitor of SHCN called the Lower Merrimack Valley Physician Hospital Organization, Inc. (or “LMVPHO”) “a right of first opportunity to negotiate payor contracts on behalf of Whittier and Whittier Physicians.” SHCN agreed that all the terms of its Service Agreement with Whittier, including the exclusive representation and right of first opportunity provisions, were subject to Whittier’s pre-existing obligation to LMVPHO and thus would not have any effect until Whittier was able to terminate its obligations to LMVPHO.
1.1.2. Termination Provisions. The initial term of the Service Agreement was five years, beginning January 1, 2012. But SHCN and Whittier agreed that their contractual arrangements could “be terminated by either party, with or without cause, at any time upon ninety (90) days prior written notice to the other party.” The Letter Agreement provided that if the Service Agreement were terminated by either party then Whittier would have the right to terminate its participation in any existing contract with a third-party payor and would not be obligated to participate in any contract with a third-party payor that SHCN entered into or renewed after the date of the termination notice.
1.1.3. Confidentiality Provision. The SHCN Service Agreement also contained a provision that addressed “proprietary information.” This provision imposed a number of obligations, including that “[t]he parties shall … hold in strict confidence any information specified in writing by any party hereto as confidential information.”
This contract specifies in the first paragraph that it was “made and entered … by and between” SHCN and Whittier, which means that they are the “parties” referred to in the confidentiality provision. The contract expressly distinguishes between Whittier (which it calls the “IPA” because it is an independent physician association) and the physicians who are members of Whittier (which it calls the “IPA Participating Providers”).
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1.2. Claim for Breach of Exclusivity Provisions. Count I of SHCN’s proposed counterclaim would assert a claim that Whittier violated the exclusivity and right of first opportunity provisions of the SHCN Service Agreement by negotiating and then entering into a contract with BIDCO. In late 2013 Whittier negotiated an agreement to join BIDCO’s network of participating physicians. Whittier and BIDCO executed a letter agreement to that effect on December 6, 2013. This written contract specifies that its effective date would be the date on which the physician members of Whittier “become participating providers in the Risk Contracts” between BIDCO and three specified health insurers.1 The same paragraph obligates BIDCO to “use it reasonable best efforts” to have the Whittier physicians begin participating in those Risk Contract “as of January 1, 2014.” At the time that Whittier entered into this contract with BIDCO it was still part of the SHCN network and still bound by the SHCN Service Agreement.
Count I could not survive a motion to dismiss because the proposed counterclaim does not allege facts plausibly suggesting that Whittier breached the exclusivity and first opportunity provisions of its contract with SHCN by negotiating a possible move to BIDCO and then agreeing to do so. To determine whether a party has stated a legally viable claim, a court must “look beyond the conclusory allegations in the complaint and focus on whether the factual allegations plausibly suggest an entitlement to relief.” Maling v. Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, 473 Mass. 336, 339 (2015), quoting Curtis v. Herb Chambers I-95, Inc., 458 Mass. 674, 676 (2011); accord Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008).
The exclusivity and first opportunity provisions of the SHCN Service Agreement do not apply to the new contract that Whittier entered into with BIDCO. To the contrary, they only apply to “Risk Contracts” with health insurers and other “Payors.” The term “Risk Contract” is defined as “[a]n agreement between SHCN or [Whittier] and a Payor” under which SHCN or Whittier “agrees to arrange for and coordinate the provision of” health care services to individuals enrolled in a health
1 Blue Cross and Blue Shield of Massachusetts, Inc.; Harvard Pilgrim Health Care; and Tufts Health Plans, Inc.
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benefit plan of some kind, “and the Payor agrees to pay for” such services. The term “Payor” is defined to mean “[a] health maintenance organization, preferred provider arrangement, insurance company or carrier, employer, employer self-insured health benefit plan or trust, or governmental entity” that is obligated to pay for medical care covered by a health insurance policy or other health benefit plan. Networks of health care providers such as BIDCO or SHCN are not “Payors” as that term is defined in the Service Agreement. They negotiate with Payors, and manage and implement contracts under which Payors agree to compensate health care providers who participate in that network, but they do not insure or provide analogous benefits to individuals and thus are not “Payors.” The contract that Whittier entered into with BIDCO is therefore not a “Risk Contract” as SHCN defined that term in the Service Agreement.
SHCN cannot create a viable claim for breach of contract merely by making the conclusory and incorrect assertion that the Whittier/BIDCO letter agreement is a “risk contract.” See generally Maling, 473 Mass. at 339. The interpretation of the parties’ unambiguous written contracts “is a question of law” that the court may resolve when deciding whether a party has asserted a viable contract claim. See, e.g., Eigerman v. Putnam Investments, Inc., 450 Mass. 281, 287 (2007) (affirming dismissal of complaint for failure to state a viable claim for breach of contract). Similarly, whether language used in a contract “is ambiguous is also a question of law for the court.” Berkowitz v. President & Fellows of Harvard College, 58 Mass. App. Ct. 262, 270, rev. denied, 440 Mass. 1101 (2003) (ordering dismissal of complaint for failure to state a viable claim for breach of contract). Where the material provisions of a contract are unambiguous, as they are here, a court “cannot accept the bare assertion in the plaintiff’s complaint” that the opposing party violated the contract, when that assertion is based on a misreading of the contract. Eigerman, supra; accord Flomenbaum v. Commonwealth, 451 Mass. 740, 751-752 & n.12 (2008) (granting motion to dismiss contract claim because plain language of contract made clear that Commonwealth could terminate chief medical examiner before completion of full five year term).
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Whittier had the absolute contractual right to terminate its contracts with SHCN on ninety days’ notice, without needing to show good cause or provide any reason for doing so. And it retained the right to negotiate a successor agreement with a different network like BIDCO before giving SHCN any notice of termination. Doing so did not violate BIDCO’s “first opportunity” rights any more than SHCN’s prior negotiations to bring Whittier into its network violated the “first opportunity” rights that Whittier had previously granted to LVMPHO, which is yet another competing network of providers. SHCN’s assertion in its reply memorandum that BIDCO was negotiating risk contracts with an insurance payor while Whittier was still affiliated with SHCN, and was doing so with the expectation that Whittier’s physicians would participate in those risk contracts if Whittier left SHCN and joined BIDCO, is beside the point. The documents provided by SHCN show that BIDCO was negotiating with Tufts Health Plan on behalf of whatever physicians may affiliate themselves with BIDCO, but was not committing Whittier physicians to anything. That did not violate Whittier’s obligations to SHCN.
It would be improper to construe the exclusivity and first opportunity provisions in the SHCN Service Agreement “in isolation,” without considering Whittier’s right to terminate the contract and join a different provider network; instead, the Court must consider the meaning of the provisions that SHCN claims were breached “in the context of the entire contract.” General Convention of the New Jerusalem in the United States of Am., Inc. v. MacKenzie, 449 Mass. 832, 835 (2007). The Court must construe the Service Agreement as a whole in a manner that will “give it effect as a rational business instrument and in a manner which will carry out the intent of the parties.” Robert and Ardis James Foundation v. Meyers, 474 Mass. 181, 188 (2016), quoting Starr v. Fordham, 420 Mass. 178, 192 (1995). And “the parties’ intent ‘must be gathered from a fair construction of the contract as a whole and not by special emphasis upon any one part.’ ” Kingstown Corp. v. Black Cat Cranberry Corp., 65 Mass. App. Ct. 154, 158 (2005), quoting Ucello v. Cosentino, 354 Mass. 48, 51 (1968), and Crimmins & Peirce Co. v. Kidder Peabody Acceptance Corp., 282 Mass. 367, 375 (1933).
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Whittier’s contractual right to terminate its relationship with SHCN would have little practical meaning if the exclusivity and first opportunity provisions were construed to bar Whittier from negotiating a new contractual arrangement with a successor network, and from making sure that the new network had the necessary relationships with health insurers so that Whittier physicians could continue to treat their current patients, before terminating its contract with SHCN.
1.3. Claim for Breach of Confidentiality Provisions. Count II of SHCN’s proposed counterclaim would assert a claim that Whittier violated the confidentiality provision of the SHCN Service Agreement “by disclosing to Anna Jacques SHCN’s confidential and proprietary business information.” The counterclaim alleges that Whittier “disclosed to Anna Jacques confidential information concerning annual payments SHCN made to Whittier.” It also asserts, “[o]n information and belief, [that] Whittier disclosed other confidential SHCN information to Anna Jacques or BIDCO.”2
It would be futile to assert this counterclaim because the disclosure of confidential information, without more, would not violate the Service Agreement. The relevant contract provision only required Whittier to “hold in strict confidence any information specified in writing by any party hereto as confidential information.” Thus, Whittier would not have breached the contract by disclosing arguably confidential information if SHCN never “specified in writing” that this was the kind of information that SHCN considered to be confidential. But the proposed counterclaim does not allege any facts plausibly suggesting that Whittier disclosed any information that SHCN “specified in writing” was confidential.
In its reply memorandum, SHCN argues in effect that it could amend its proposed counterclaim to allege that in May 2013 SHCN issued written policies to its participating providers (including, presumably, Whittier’s physicians) stating in part that “[a]ll materials distributed from SHCN to provider and provider’s staff are
2 “For purposes of surviving a motion to dismiss, … a party may allege facts based on ‘information and belief’ ” and the court must “assume the truth of such allegations.” Polay v. McMahon, 468 Mass. 379, 383 n.5 (2014) (partially reversing Rule 12(b)(6) dismissal).
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confidential and proprietary and shall not be disclosed to any party without the express written consent from SHCN.” This would also be futile.
Adding this new allegation would still not plausibly suggest that Whittier was ever put on written notice that SHCN considered any of the information that it sent to Whittier to be confidential. Whittier is not a “provider” within the meaning of that policy, or under the Service Agreement. The policy makes clear that the “providers” it covers are individual physicians; that is why the policy requires all SHCN providers to “be in good standing on the medical staff at a Steward affiliated hospital.” Similarly, the Service Agreement distinguishes between Whittier (which it calls the “IPA,” or independent physician association) and the individual physician “providers.” Assuming that the May 2013 police provided sufficient notice to individual physicians that anything and everything they received from SHCN was confidential, even if in fact it was purely public information, such a notice to physician providers does not constitute written notice that information received by Whittier regarding payments made to it by SHCN—or any other information conveyed by SHCN—had to be treated as confidential information.
1.4. Claim for Breach of Implied Covenant. Count III of SHCN’s proposed counterclaim would assert a claim that Whittier violated the implied covenant of good faith and fair dealing that is part of the contracts between SHCN and Whittier. More specifically, SHCN alleges that Whittier violated the implied covenant by disclosing SHCN’s confidential business information to Anna Jacques, and by negotiating with SHCN to revise its payment obligations to Whittier without disclosing that Whittier had been negotiating with BIDCO.
It would be futile for SHCN to assert a counterclaim that Whittier breached the implied covenant by disclosing confidential information. As discussed above, SHCN has not alleged facts plausibly suggesting that Whittier violated the confidentiality provision of the Service Agreement. Invoking the implied covenant adds nothing to the proposed claim under the express confidentiality provision, because the implied covenant “does not create rights or duties beyond those the parties agreed to when they entered into the contract.” Boston Med. Ctr. Corp. v.
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Secretary of Executive Office of Health & Human Servs., 463 Mass. 447, 460 (2012) (affirming dismissal of claim), quoting Curtis, 458 Mass. at 680.
It would similarly be futile to assert that Whittier breached the implied covenant by negotiating contract revisions with SHCN before disclosing its agreement with BIDCO. An alleged misrepresentation in the course of negotiating a contract or a contract amendment does not implicate this implied covenant, because “this covenant pertains to bad faith in the performance of a contract, not in its execution.” Sheehy v. Lipton Indus., Inc., 24 Mass. App. Ct. 188, 194 n.6 (1987) (affirming grant of summary judgment dismissing claim). Thus, Whittier’s alleged failure to disclose that it was planning to leave the SHCN network before negotiating revised payment terms for the remainder of the contract term would not give rise to a viable claim for breach of the implied covenant.
1.5. Claim for Declaratory Relief. Count IV of SHCN’s proposed counterclaim would seek a declaration that Whittier committed a material breach of its contractual obligations to SHCN. This claim for declaratory relief would be futile because, as discussed above, SHCN alleges no facts plausibly suggesting there is any actual controversy between the parties regarding whether Whittier breached any of its contractual obligations. See Manufacturing Imp. Corp. v. Georgia Pacific Corp., 362 Mass 398, 400-401 (1972) (affirming dismissal of declaratory judgment claim regarding rights under contract, because plaintiff alleged no facts under which it would be entitled to recover from defendant for breach of contract); see generally Alliance, AFSME/SEUI, AFL-CIO, v. Commonwealth, 425 Mass. 534, 537-539 (1997) (in absence of actual controversy between the parties, claim for declaratory relief under G.L. c. 231A must be dismissed).
2. Proposed Claims Against Anna Jacques. SHCN also seeks leave to add claims against a new defendant, Anna Jacques Hospital, either by asserting third-party claims under Mass. R. Civ. P. 14 or by joining Anna Jacques as a counterclaim defendant under Rule 19 or 20. The Court will deny this request as well for two, independent reasons. It would be futile to add these claims against Anna Jacques because they could not survive a Rule 12(b)(6) motion to dismiss. In any case, SHCN has no right to add Anna Jacques as a party and it would be
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unfair, both to Anna Jacques and to Whittier, to allow SHCN to do so at this late stage of the case.
2.1. Futility. In its proposed third-party complaint, SHCN alleges that “Anna Jacques launched an effort to disrupt the Whittier-SHCN contracts and lure the Whittier physicians to instead join Anna Jacques in an affiliation with Beth Israel’s care network, known as the Beth Israel Deaconess Care Organization or ‘BIDCO.’ ” It also alleges that these “efforts resulted in Whittier breaching its contract with SHCN [and] withdrawing from” SHCN’s physician network. SHCN seeks leave to assert claims against Anna Jacques for tortiously interfering with the contractual relationship between SHCN and Whittier, tortiously interfering with advantageous business relationships that SHCN had with Whittier and several health insurers, and for allegedly violating G.L. c. 93A by engaging in such tortious interference.
The Court concludes that it would be futile for SHCN to amend its pleadings to assert these claims against Anna Jacques.
The proposed claim for tortious interference with the contractual relationship between Whittier and SHCN would be futile because SHCN alleges no facts plausibly suggesting that Whittier was ever induced to breach its contracts with SHCN. To state a claim for intentional interference with contractual relations, a party must allege facts plausibly suggesting that: “(1) [it] had a contract with a third party; (2) the defendant knowingly induced the third party to break that contract; (3) the defendant’s interference, in addition to being intentional, was improper in motive or means; and (4) the plaintiff was harmed by the defendant’s actions.” Weiler v. PortfolioScope, Inc., 469 Mass. 75, 84 (2014), quoting G.S. Enters., Inc. v. Falmouth Marine, Inc., 410 Mass. 262, 272 (1991). SHCN cannot make out the second element of this claim because it has not alleged facts that, if proven, would show that Whittier violated its SHCN contracts. The “bare assertion” that Whittier breached its contracts is not enough. Eigerman, 450 Mass. at 287. As discussed above, Whittier was free to terminate its contractual relationship with SHCN, to negotiate a successor arrangement with BIDCO before doing so, and to disclose information that SHCN had not specified in writing was
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confidential. Thus, even if SHCN could prove that Anna Jacques induced Whittier to leave the SHCN network or to share information regarding SHCN’s payments to Whittier, it cannot show that doing so resulted in Whittier breaking its contracts with SHCN. Therefore, Anna Jacques cannot be liable for tortiously interfering with the contractual relationship between Whittier and SHCN. See JNM Hospitality, Inc. v. McDaid, 90 Mass. App. Ct. 352, 354-355 & 357 (2016) (where landlord did not breach lease by failing to make nonexclusive parking spaces available to customers of restaurant lessee, third party that executed license to use some of those spaces could not be liable for intentional interference with contract); Cavicchi v. Koski, 67 Mass. App. Ct. 654, 661 (2006) (where clients did not breach contingent fee agreements when they discharged their attorney, new lawyer who convinced them to do so could not be liable for intentional interference with contract).
SHCN cannot avoid this problem by claiming in the alternative that Anna Jacques interfered with an advantageous business relationship between Whittier and SHCN, rather than with a contractual relationship. The only business relationship that SHCN alleges it had with Whittier was defined by contract; as a result any claim for intentional interference must be for tortiously inducing a breach of contract, not for tortious interference with a non-contractual advantageous business relationship. Cachopa v. Town of Stoughton, 72 Mass. App. Ct. 657, 658 n.3 (2008).
Nor has SHCN alleged any facts plausibly suggesting that Anna Jacques tortiously interfered with any advantageous business relationship between SHCN and various health insurers. All that SHCN claims with respect to the insurers is that Whittier’s decision to join BIDCO, rather than remain in the SHCN network for the full five-year term of the Service Agreement, “deprived SHCN of substantial revenue that would have flowed to its network.” But if Anna Jacques did nothing unlawful in convincing Whittier to leave the SHCN network, the mere fact than one effect of that move is that SHCN will collect less money from health insurers—because Whittier physicians will no longer be providing compensable medical care through the SHCN network—cannot give rise to a tortious interference claim with respect to the health insurers.
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Finally, since SHCN’s claim against Anna Jacques under c. 93A is based solely on and thus “is wholly derivative of” its claims for tortious interference, and SHCN has not alleged facts plausibly suggesting that Anna Jacques unlawfully interfered with the contracts between SHCN and Whittier, the proposed claim against Anna Jacques under c. 93A would necessarily be futile as well. See Pembroke Country Club, Inc. v. Regency Savings Bank, F.S.B., 62 Mass. App. Ct. 34, 40-41 (2004) (ordering judgment in favor of defendant); accord, e.g., Macoviak v. Chase Home Mortgage Corp., 40 Mass. App. Ct. 755, 760, rev. denied, 423 Mass. 1109 (1996) (c. 93A claim “necessarily fail[s]” where it “is solely based upon … underlying claim for common law” tort, and that tort claim fails as a matter of law). The allegations that Anna Jacques put some pressure on Whittier to change networks does not state a claim for an unfair trade practice in violation of c. 93A, even though it cause a large number of physicians to leave SHCN’s network and join a competitor. Cf. Buster v. George W. Moore, Inc., 438 Mass. 635, 650-651 (2003) (“the market is a rough and tumble place where a competitor’s lack of courtesy, generosity, or respect is neither uncommon nor in itself unlawful” under c. 93A). “Hard bargaining is not unlawful; it is ‘not only acceptable, but indeed, desirable, in our economic system, and should not be discouraged by the courts.’ ”Cabot Corp. v. AVX Corp., 448 Mass. 629, 639 (2007), quoting 13 S. Williston, Contracts § 71.7, at 450 (3d ed. 1970).
2.2. Timing. Even if SHCN had stated viable claims against Anna Jacques, which it has not, it is far too late in this proceeding to add Anna Jacques as a defendant.
SHCN has no right to assert claims against Anna Jacques in this action. It cannot assert a third-party claim under Mass. R. Civ. P. 14 because it does not allege that Anna Jacques is liable to SHCN for Whittier’s “alleged injuries through indemnity, contribution, or otherwise.” Gabbidon v. King, 414 Mass. 685, 687 (1993) (affirming dismissal of third-party complaint). Nor is Anna Jacques subject to compulsory joinder under Rule 19, because complete relief can be accorded between Whittier and SHCN without Anna Jacques being a party, and Anna Jacques claims no interest in any subject of the action. Cf. Mass. R. Civ. P. 19(a).
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The Court has the discretion to join Anna Jacques as a counterclaim defendant under Mass. R. Civ. P. 13(h) and 20(a), because the putative claims by SHCN against Anna Jacques arise out of the same series of transactions or occurrences as do the claims by Whittier against SHCN, and both sets of claims will involve common questions of fact and law. “Rule 20 gives courts wide discretion concerning the permissive joinder of parties, and “should be construed in light of its purpose, which ‘is to promote trial convenience and expedite the final determination of disputes, thereby preventing multiple lawsuits.’ ” Aleman v. Chugach Support Servs., Inc., 485 F.3d 206, 218 (4th Cir. 2007), quoting Mosley v. General Motors Corp., 497 F.2d 1330, 1332 (8th Cir.1974).
But the Court concludes, in the exercise of its discretion, that it would be unfair to allow SHCN to join Anna Jacques as a counterclaim defendant barely a month before the deadline for completing discovery. “[T]he court has discretion to deny joinder if it determines that the addition of the party under Rule 20 will not foster the objectives of the rule, but will result in prejudice, expense, or delay.” Id., quoting 7 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1652 (3d ed.2001); cf. Smaland Beach Ass’n, Inc. v. Genova, 461 Mass. 214, 228 (2012) (judicial construction of federal rules of civil procedure generally applies to parallel state rules). It would be unfair to Anna Jacques to join it as a counterclaim defendant but not give it sufficient time to conduct discovery. Conversely, Whittier would be unfairly prejudiced if Anna Jacques were added to the case and as a result the discovery deadline was extended and resolution of Whittier’s claims against SHCN was therefore delayed.
SHCN has known of and threatened to assert its claims against Anna Jacques at least since September 2014. At that time SHCN wrote to Whittier’s lawyer and asserted “that SHCN has viable claims … against the entities that improperly induced Whittier to leave SHCN, including …. Anna Jacques Hospital.” SHCN could have sought to assert claims against Anna Jacques at that time. Or it could have promptly conducted discovery against Anna Jacques to determine whether it had an adequate factual basis for asserting such claims. Instead SHCN waited two years to obtain discovery from Anna Jacques and then seek to assert
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claims for tortious interference and violation of G.L. c. 93A. In other words, SHCN has no one to blame but itself for the fact that it is now too late to add any claims against Anna Jacques to this civil action.
ORDER
Defendant’s motion for leave to assert counterclaims and to file a third-party complaint is DENIED.
January 18, 2017
___________________________
Kenneth W. Salinger
Justice of the Superior Court read more

Posted by Stephen Sandberg - February 8, 2017 at 8:56 pm

Categories: News   Tags: , , , , , , , ,

Whittier IPA, Inc. v. Steward Health Care Network, Inc. (Lawyers Weekly No. 12-005-17)

ΔCOMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
1484CV03029-BLS2
____________________
WHITTIER IPA, INC.
v.
STEWARD HEALTH CARE NETWORK, INC.
____________________
MEMORANDUM AND ORDER DENYING DEFENDANT’S MOTION FOR LEAVE TO ASSERT COUNTERCLAIMS AGAINST WHITTIER IPA, INC., AND THIRD-PARTY CLAIMS AGAINST ANNA JACQUES HOSPITAL
Steward Health Care Network, Inc., (“SHCN”) is a physician network. It negotiates and implements contracts with insurers and other entities that pay for SHCN’s participating doctors to provide medical care to the payors’ insureds or members. Whittier IPA, Inc., is an association of independent physicians. It joined the SHCN network in January 2012, but began exploring other options in 2013. After SHCN learned that Whittier had agreed to join a competing physician network run by the Beth Israel Deaconess Care Organization (“BIDCO”), SHCN terminated its agreements with Whittier effective August 31, 2014.
Whittier claims that is still owed substantial sums by SHCN under the parties’ contracts. The court (Kaplan, J.) granted partial summary judgment in Whittier’s favor in June 2015, declaring that if SHCN received incentive payments from health insurers and other payors for periods during which Whittier was an SHCN member, then “SHCN breached its contract with Whittier by failing to pay Whittier its pro rata share of those payments.” The amount that SHCN must pay Whittier is still in dispute. The current case schedule, which was jointly requested by both parties, requires the litigants to complete all fact discovery by February 10, 2017, and to complete the exchange of any expert reports by March 24, 2017.
SHCN seeks leave to assert counterclaims against Whittier and third-party claims against Anna Jacques Hospital. The Court will DENY this motion. It would be futile to allow SHCN to assert its proposed counterclaims against Whittier for breach of contract because they could not survive a motion to dismiss. The proposed claims against Anna Jacques for intentional interference and allegedly violating G.L. c. 93A would also be futile. In any case, it would be unfairly prejudicial to
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Whittier and to Anna Jacques to allow permissive joinder of a new defendant-in-counterclaim under Mass. R. Civ. P. 20 just weeks before the completion of discovery in this case. SHCN has no right to join Anna Jacques as a defendant-in-counterclaim under Rule 19 and does not seek to assert third-party claims for indemnification or contribution as allowed under Rule 14.
1. Proposed Counterclaims Against Whittier. SHCN seeks leave to assert counterclaims against Whittier for allegedly breaching parts of its written contracts with SHCN. The Court will deny leave to assert these counterclaims because doing so would be futile, in that these counterclaims could not survive a motion under Mass. R. Civ. P. 12(b)(6) to dismiss for failure to state a claim upon which relief can be granted. See generally Johnston v. Box, 453 Mass. 569, 583 (2009) (“Courts are not required to grant motions to amend prior [pleadings] where ‘the proposed amendment … is futile.’ ” (quoting All Seasons Servs., Inc. v. Commissioner of Health & Hosps. of Boston, 416 Mass. 269, 272 (1993)); Thermo Electron Corp. v. Waste Mgmt. Holdings, Inc., 63 Mass. App. Ct. 194, 203 (2005) (affirming denial of motion for leave to assert counterclaim that would have been futile); Mancuso v. Kinchla, 60 Mass. App. Ct. 558, 572 (2004) (if amendment to add claim could not survive motion to dismiss, allowing amendment would be exercise in futility).
1.1. Contract Provisions. When Whittier agreed in October 2011 to join the SHCN network, the parties executed and entered into a written “Service Agreement” and a related “Letter Agreement.” The following provisions of the parties’ contracts are relevant.
1.1.1. Exclusivity Provisions. In the Service Agreement, Whittier granted SHCN exclusive authority to negotiate and enter into “Risk Contracts” on behalf of Whittier and its physicians, and gave SHCN “a limited right of first opportunity … to negotiate and enter into Risk Contracts” on behalf of all of Whittier’s physicians, during the term of the contract. Whittier also agreed that its doctors who work as primary care physicians would not “participate in any Risk Contract with any Payor” other than through SHCN. The term “Risk Contract” was defined to mean an agreement with a “Payor” regarding the provision of and payment for medical services. The term “Payor” was defined to mean insurers and
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other private or governmental entities that pay for medical services provided to enrolled individuals.
SHCN acknowledged in the Letter Agreement that, as of the time SHCN and Whittier entered into their contractual relationship, Whittier was contractually obligated to give a competitor of SHCN called the Lower Merrimack Valley Physician Hospital Organization, Inc. (or “LMVPHO”) “a right of first opportunity to negotiate payor contracts on behalf of Whittier and Whittier Physicians.” SHCN agreed that all the terms of its Service Agreement with Whittier, including the exclusive representation and right of first opportunity provisions, were subject to Whittier’s pre-existing obligation to LMVPHO and thus would not have any effect until Whittier was able to terminate its obligations to LMVPHO.
1.1.2. Termination Provisions. The initial term of the Service Agreement was five years, beginning January 1, 2012. But SHCN and Whittier agreed that their contractual arrangements could “be terminated by either party, with or without cause, at any time upon ninety (90) days prior written notice to the other party.” The Letter Agreement provided that if the Service Agreement were terminated by either party then Whittier would have the right to terminate its participation in any existing contract with a third-party payor and would not be obligated to participate in any contract with a third-party payor that SHCN entered into or renewed after the date of the termination notice.
1.1.3. Confidentiality Provision. The SHCN Service Agreement also contained a provision that addressed “proprietary information.” This provision imposed a number of obligations, including that “[t]he parties shall … hold in strict confidence any information specified in writing by any party hereto as confidential information.”
This contract specifies in the first paragraph that it was “made and entered … by and between” SHCN and Whittier, which means that they are the “parties” referred to in the confidentiality provision. The contract expressly distinguishes between Whittier (which it calls the “IPA” because it is an independent physician association) and the physicians who are members of Whittier (which it calls the “IPA Participating Providers”).
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1.2. Claim for Breach of Exclusivity Provisions. Count I of SHCN’s proposed counterclaim would assert a claim that Whittier violated the exclusivity and right of first opportunity provisions of the SHCN Service Agreement by negotiating and then entering into a contract with BIDCO. In late 2013 Whittier negotiated an agreement to join BIDCO’s network of participating physicians. Whittier and BIDCO executed a letter agreement to that effect on December 6, 2013. This written contract specifies that its effective date would be the date on which the physician members of Whittier “become participating providers in the Risk Contracts” between BIDCO and three specified health insurers.1 The same paragraph obligates BIDCO to “use it reasonable best efforts” to have the Whittier physicians begin participating in those Risk Contract “as of January 1, 2014.” At the time that Whittier entered into this contract with BIDCO it was still part of the SHCN network and still bound by the SHCN Service Agreement.
Count I could not survive a motion to dismiss because the proposed counterclaim does not allege facts plausibly suggesting that Whittier breached the exclusivity and first opportunity provisions of its contract with SHCN by negotiating a possible move to BIDCO and then agreeing to do so. To determine whether a party has stated a legally viable claim, a court must “look beyond the conclusory allegations in the complaint and focus on whether the factual allegations plausibly suggest an entitlement to relief.” Maling v. Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, 473 Mass. 336, 339 (2015), quoting Curtis v. Herb Chambers I-95, Inc., 458 Mass. 674, 676 (2011); accord Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008).
The exclusivity and first opportunity provisions of the SHCN Service Agreement do not apply to the new contract that Whittier entered into with BIDCO. To the contrary, they only apply to “Risk Contracts” with health insurers and other “Payors.” The term “Risk Contract” is defined as “[a]n agreement between SHCN or [Whittier] and a Payor” under which SHCN or Whittier “agrees to arrange for and coordinate the provision of” health care services to individuals enrolled in a health
1 Blue Cross and Blue Shield of Massachusetts, Inc.; Harvard Pilgrim Health Care; and Tufts Health Plans, Inc.
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benefit plan of some kind, “and the Payor agrees to pay for” such services. The term “Payor” is defined to mean “[a] health maintenance organization, preferred provider arrangement, insurance company or carrier, employer, employer self-insured health benefit plan or trust, or governmental entity” that is obligated to pay for medical care covered by a health insurance policy or other health benefit plan. Networks of health care providers such as BIDCO or SHCN are not “Payors” as that term is defined in the Service Agreement. They negotiate with Payors, and manage and implement contracts under which Payors agree to compensate health care providers who participate in that network, but they do not insure or provide analogous benefits to individuals and thus are not “Payors.” The contract that Whittier entered into with BIDCO is therefore not a “Risk Contract” as SHCN defined that term in the Service Agreement.
SHCN cannot create a viable claim for breach of contract merely by making the conclusory and incorrect assertion that the Whittier/BIDCO letter agreement is a “risk contract.” See generally Maling, 473 Mass. at 339. The interpretation of the parties’ unambiguous written contracts “is a question of law” that the court may resolve when deciding whether a party has asserted a viable contract claim. See, e.g., Eigerman v. Putnam Investments, Inc., 450 Mass. 281, 287 (2007) (affirming dismissal of complaint for failure to state a viable claim for breach of contract). Similarly, whether language used in a contract “is ambiguous is also a question of law for the court.” Berkowitz v. President & Fellows of Harvard College, 58 Mass. App. Ct. 262, 270, rev. denied, 440 Mass. 1101 (2003) (ordering dismissal of complaint for failure to state a viable claim for breach of contract). Where the material provisions of a contract are unambiguous, as they are here, a court “cannot accept the bare assertion in the plaintiff’s complaint” that the opposing party violated the contract, when that assertion is based on a misreading of the contract. Eigerman, supra; accord Flomenbaum v. Commonwealth, 451 Mass. 740, 751-752 & n.12 (2008) (granting motion to dismiss contract claim because plain language of contract made clear that Commonwealth could terminate chief medical examiner before completion of full five year term).
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Whittier had the absolute contractual right to terminate its contracts with SHCN on ninety days’ notice, without needing to show good cause or provide any reason for doing so. And it retained the right to negotiate a successor agreement with a different network like BIDCO before giving SHCN any notice of termination. Doing so did not violate BIDCO’s “first opportunity” rights any more than SHCN’s prior negotiations to bring Whittier into its network violated the “first opportunity” rights that Whittier had previously granted to LVMPHO, which is yet another competing network of providers. SHCN’s assertion in its reply memorandum that BIDCO was negotiating risk contracts with an insurance payor while Whittier was still affiliated with SHCN, and was doing so with the expectation that Whittier’s physicians would participate in those risk contracts if Whittier left SHCN and joined BIDCO, is beside the point. The documents provided by SHCN show that BIDCO was negotiating with Tufts Health Plan on behalf of whatever physicians may affiliate themselves with BIDCO, but was not committing Whittier physicians to anything. That did not violate Whittier’s obligations to SHCN.
It would be improper to construe the exclusivity and first opportunity provisions in the SHCN Service Agreement “in isolation,” without considering Whittier’s right to terminate the contract and join a different provider network; instead, the Court must consider the meaning of the provisions that SHCN claims were breached “in the context of the entire contract.” General Convention of the New Jerusalem in the United States of Am., Inc. v. MacKenzie, 449 Mass. 832, 835 (2007). The Court must construe the Service Agreement as a whole in a manner that will “give it effect as a rational business instrument and in a manner which will carry out the intent of the parties.” Robert and Ardis James Foundation v. Meyers, 474 Mass. 181, 188 (2016), quoting Starr v. Fordham, 420 Mass. 178, 192 (1995). And “the parties’ intent ‘must be gathered from a fair construction of the contract as a whole and not by special emphasis upon any one part.’ ” Kingstown Corp. v. Black Cat Cranberry Corp., 65 Mass. App. Ct. 154, 158 (2005), quoting Ucello v. Cosentino, 354 Mass. 48, 51 (1968), and Crimmins & Peirce Co. v. Kidder Peabody Acceptance Corp., 282 Mass. 367, 375 (1933).
– 7 –
Whittier’s contractual right to terminate its relationship with SHCN would have little practical meaning if the exclusivity and first opportunity provisions were construed to bar Whittier from negotiating a new contractual arrangement with a successor network, and from making sure that the new network had the necessary relationships with health insurers so that Whittier physicians could continue to treat their current patients, before terminating its contract with SHCN.
1.3. Claim for Breach of Confidentiality Provisions. Count II of SHCN’s proposed counterclaim would assert a claim that Whittier violated the confidentiality provision of the SHCN Service Agreement “by disclosing to Anna Jacques SHCN’s confidential and proprietary business information.” The counterclaim alleges that Whittier “disclosed to Anna Jacques confidential information concerning annual payments SHCN made to Whittier.” It also asserts, “[o]n information and belief, [that] Whittier disclosed other confidential SHCN information to Anna Jacques or BIDCO.”2
It would be futile to assert this counterclaim because the disclosure of confidential information, without more, would not violate the Service Agreement. The relevant contract provision only required Whittier to “hold in strict confidence any information specified in writing by any party hereto as confidential information.” Thus, Whittier would not have breached the contract by disclosing arguably confidential information if SHCN never “specified in writing” that this was the kind of information that SHCN considered to be confidential. But the proposed counterclaim does not allege any facts plausibly suggesting that Whittier disclosed any information that SHCN “specified in writing” was confidential.
In its reply memorandum, SHCN argues in effect that it could amend its proposed counterclaim to allege that in May 2013 SHCN issued written policies to its participating providers (including, presumably, Whittier’s physicians) stating in part that “[a]ll materials distributed from SHCN to provider and provider’s staff are
2 “For purposes of surviving a motion to dismiss, … a party may allege facts based on ‘information and belief’ ” and the court must “assume the truth of such allegations.” Polay v. McMahon, 468 Mass. 379, 383 n.5 (2014) (partially reversing Rule 12(b)(6) dismissal).
– 8 –
confidential and proprietary and shall not be disclosed to any party without the express written consent from SHCN.” This would also be futile.
Adding this new allegation would still not plausibly suggest that Whittier was ever put on written notice that SHCN considered any of the information that it sent to Whittier to be confidential. Whittier is not a “provider” within the meaning of that policy, or under the Service Agreement. The policy makes clear that the “providers” it covers are individual physicians; that is why the policy requires all SHCN providers to “be in good standing on the medical staff at a Steward affiliated hospital.” Similarly, the Service Agreement distinguishes between Whittier (which it calls the “IPA,” or independent physician association) and the individual physician “providers.” Assuming that the May 2013 police provided sufficient notice to individual physicians that anything and everything they received from SHCN was confidential, even if in fact it was purely public information, such a notice to physician providers does not constitute written notice that information received by Whittier regarding payments made to it by SHCN—or any other information conveyed by SHCN—had to be treated as confidential information.
1.4. Claim for Breach of Implied Covenant. Count III of SHCN’s proposed counterclaim would assert a claim that Whittier violated the implied covenant of good faith and fair dealing that is part of the contracts between SHCN and Whittier. More specifically, SHCN alleges that Whittier violated the implied covenant by disclosing SHCN’s confidential business information to Anna Jacques, and by negotiating with SHCN to revise its payment obligations to Whittier without disclosing that Whittier had been negotiating with BIDCO.
It would be futile for SHCN to assert a counterclaim that Whittier breached the implied covenant by disclosing confidential information. As discussed above, SHCN has not alleged facts plausibly suggesting that Whittier violated the confidentiality provision of the Service Agreement. Invoking the implied covenant adds nothing to the proposed claim under the express confidentiality provision, because the implied covenant “does not create rights or duties beyond those the parties agreed to when they entered into the contract.” Boston Med. Ctr. Corp. v.
– 9 –
Secretary of Executive Office of Health & Human Servs., 463 Mass. 447, 460 (2012) (affirming dismissal of claim), quoting Curtis, 458 Mass. at 680.
It would similarly be futile to assert that Whittier breached the implied covenant by negotiating contract revisions with SHCN before disclosing its agreement with BIDCO. An alleged misrepresentation in the course of negotiating a contract or a contract amendment does not implicate this implied covenant, because “this covenant pertains to bad faith in the performance of a contract, not in its execution.” Sheehy v. Lipton Indus., Inc., 24 Mass. App. Ct. 188, 194 n.6 (1987) (affirming grant of summary judgment dismissing claim). Thus, Whittier’s alleged failure to disclose that it was planning to leave the SHCN network before negotiating revised payment terms for the remainder of the contract term would not give rise to a viable claim for breach of the implied covenant.
1.5. Claim for Declaratory Relief. Count IV of SHCN’s proposed counterclaim would seek a declaration that Whittier committed a material breach of its contractual obligations to SHCN. This claim for declaratory relief would be futile because, as discussed above, SHCN alleges no facts plausibly suggesting there is any actual controversy between the parties regarding whether Whittier breached any of its contractual obligations. See Manufacturing Imp. Corp. v. Georgia Pacific Corp., 362 Mass 398, 400-401 (1972) (affirming dismissal of declaratory judgment claim regarding rights under contract, because plaintiff alleged no facts under which it would be entitled to recover from defendant for breach of contract); see generally Alliance, AFSME/SEUI, AFL-CIO, v. Commonwealth, 425 Mass. 534, 537-539 (1997) (in absence of actual controversy between the parties, claim for declaratory relief under G.L. c. 231A must be dismissed).
2. Proposed Claims Against Anna Jacques. SHCN also seeks leave to add claims against a new defendant, Anna Jacques Hospital, either by asserting third-party claims under Mass. R. Civ. P. 14 or by joining Anna Jacques as a counterclaim defendant under Rule 19 or 20. The Court will deny this request as well for two, independent reasons. It would be futile to add these claims against Anna Jacques because they could not survive a Rule 12(b)(6) motion to dismiss. In any case, SHCN has no right to add Anna Jacques as a party and it would be
– 10 –
unfair, both to Anna Jacques and to Whittier, to allow SHCN to do so at this late stage of the case.
2.1. Futility. In its proposed third-party complaint, SHCN alleges that “Anna Jacques launched an effort to disrupt the Whittier-SHCN contracts and lure the Whittier physicians to instead join Anna Jacques in an affiliation with Beth Israel’s care network, known as the Beth Israel Deaconess Care Organization or ‘BIDCO.’ ” It also alleges that these “efforts resulted in Whittier breaching its contract with SHCN [and] withdrawing from” SHCN’s physician network. SHCN seeks leave to assert claims against Anna Jacques for tortiously interfering with the contractual relationship between SHCN and Whittier, tortiously interfering with advantageous business relationships that SHCN had with Whittier and several health insurers, and for allegedly violating G.L. c. 93A by engaging in such tortious interference.
The Court concludes that it would be futile for SHCN to amend its pleadings to assert these claims against Anna Jacques.
The proposed claim for tortious interference with the contractual relationship between Whittier and SHCN would be futile because SHCN alleges no facts plausibly suggesting that Whittier was ever induced to breach its contracts with SHCN. To state a claim for intentional interference with contractual relations, a party must allege facts plausibly suggesting that: “(1) [it] had a contract with a third party; (2) the defendant knowingly induced the third party to break that contract; (3) the defendant’s interference, in addition to being intentional, was improper in motive or means; and (4) the plaintiff was harmed by the defendant’s actions.” Weiler v. PortfolioScope, Inc., 469 Mass. 75, 84 (2014), quoting G.S. Enters., Inc. v. Falmouth Marine, Inc., 410 Mass. 262, 272 (1991). SHCN cannot make out the second element of this claim because it has not alleged facts that, if proven, would show that Whittier violated its SHCN contracts. The “bare assertion” that Whittier breached its contracts is not enough. Eigerman, 450 Mass. at 287. As discussed above, Whittier was free to terminate its contractual relationship with SHCN, to negotiate a successor arrangement with BIDCO before doing so, and to disclose information that SHCN had not specified in writing was
– 11 –
confidential. Thus, even if SHCN could prove that Anna Jacques induced Whittier to leave the SHCN network or to share information regarding SHCN’s payments to Whittier, it cannot show that doing so resulted in Whittier breaking its contracts with SHCN. Therefore, Anna Jacques cannot be liable for tortiously interfering with the contractual relationship between Whittier and SHCN. See JNM Hospitality, Inc. v. McDaid, 90 Mass. App. Ct. 352, 354-355 & 357 (2016) (where landlord did not breach lease by failing to make nonexclusive parking spaces available to customers of restaurant lessee, third party that executed license to use some of those spaces could not be liable for intentional interference with contract); Cavicchi v. Koski, 67 Mass. App. Ct. 654, 661 (2006) (where clients did not breach contingent fee agreements when they discharged their attorney, new lawyer who convinced them to do so could not be liable for intentional interference with contract).
SHCN cannot avoid this problem by claiming in the alternative that Anna Jacques interfered with an advantageous business relationship between Whittier and SHCN, rather than with a contractual relationship. The only business relationship that SHCN alleges it had with Whittier was defined by contract; as a result any claim for intentional interference must be for tortiously inducing a breach of contract, not for tortious interference with a non-contractual advantageous business relationship. Cachopa v. Town of Stoughton, 72 Mass. App. Ct. 657, 658 n.3 (2008).
Nor has SHCN alleged any facts plausibly suggesting that Anna Jacques tortiously interfered with any advantageous business relationship between SHCN and various health insurers. All that SHCN claims with respect to the insurers is that Whittier’s decision to join BIDCO, rather than remain in the SHCN network for the full five-year term of the Service Agreement, “deprived SHCN of substantial revenue that would have flowed to its network.” But if Anna Jacques did nothing unlawful in convincing Whittier to leave the SHCN network, the mere fact than one effect of that move is that SHCN will collect less money from health insurers—because Whittier physicians will no longer be providing compensable medical care through the SHCN network—cannot give rise to a tortious interference claim with respect to the health insurers.
– 12 –
Finally, since SHCN’s claim against Anna Jacques under c. 93A is based solely on and thus “is wholly derivative of” its claims for tortious interference, and SHCN has not alleged facts plausibly suggesting that Anna Jacques unlawfully interfered with the contracts between SHCN and Whittier, the proposed claim against Anna Jacques under c. 93A would necessarily be futile as well. See Pembroke Country Club, Inc. v. Regency Savings Bank, F.S.B., 62 Mass. App. Ct. 34, 40-41 (2004) (ordering judgment in favor of defendant); accord, e.g., Macoviak v. Chase Home Mortgage Corp., 40 Mass. App. Ct. 755, 760, rev. denied, 423 Mass. 1109 (1996) (c. 93A claim “necessarily fail[s]” where it “is solely based upon … underlying claim for common law” tort, and that tort claim fails as a matter of law). The allegations that Anna Jacques put some pressure on Whittier to change networks does not state a claim for an unfair trade practice in violation of c. 93A, even though it cause a large number of physicians to leave SHCN’s network and join a competitor. Cf. Buster v. George W. Moore, Inc., 438 Mass. 635, 650-651 (2003) (“the market is a rough and tumble place where a competitor’s lack of courtesy, generosity, or respect is neither uncommon nor in itself unlawful” under c. 93A). “Hard bargaining is not unlawful; it is ‘not only acceptable, but indeed, desirable, in our economic system, and should not be discouraged by the courts.’ ”Cabot Corp. v. AVX Corp., 448 Mass. 629, 639 (2007), quoting 13 S. Williston, Contracts § 71.7, at 450 (3d ed. 1970).
2.2. Timing. Even if SHCN had stated viable claims against Anna Jacques, which it has not, it is far too late in this proceeding to add Anna Jacques as a defendant.
SHCN has no right to assert claims against Anna Jacques in this action. It cannot assert a third-party claim under Mass. R. Civ. P. 14 because it does not allege that Anna Jacques is liable to SHCN for Whittier’s “alleged injuries through indemnity, contribution, or otherwise.” Gabbidon v. King, 414 Mass. 685, 687 (1993) (affirming dismissal of third-party complaint). Nor is Anna Jacques subject to compulsory joinder under Rule 19, because complete relief can be accorded between Whittier and SHCN without Anna Jacques being a party, and Anna Jacques claims no interest in any subject of the action. Cf. Mass. R. Civ. P. 19(a).
– 13 –
The Court has the discretion to join Anna Jacques as a counterclaim defendant under Mass. R. Civ. P. 13(h) and 20(a), because the putative claims by SHCN against Anna Jacques arise out of the same series of transactions or occurrences as do the claims by Whittier against SHCN, and both sets of claims will involve common questions of fact and law. “Rule 20 gives courts wide discretion concerning the permissive joinder of parties, and “should be construed in light of its purpose, which ‘is to promote trial convenience and expedite the final determination of disputes, thereby preventing multiple lawsuits.’ ” Aleman v. Chugach Support Servs., Inc., 485 F.3d 206, 218 (4th Cir. 2007), quoting Mosley v. General Motors Corp., 497 F.2d 1330, 1332 (8th Cir.1974).
But the Court concludes, in the exercise of its discretion, that it would be unfair to allow SHCN to join Anna Jacques as a counterclaim defendant barely a month before the deadline for completing discovery. “[T]he court has discretion to deny joinder if it determines that the addition of the party under Rule 20 will not foster the objectives of the rule, but will result in prejudice, expense, or delay.” Id., quoting 7 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1652 (3d ed.2001); cf. Smaland Beach Ass’n, Inc. v. Genova, 461 Mass. 214, 228 (2012) (judicial construction of federal rules of civil procedure generally applies to parallel state rules). It would be unfair to Anna Jacques to join it as a counterclaim defendant but not give it sufficient time to conduct discovery. Conversely, Whittier would be unfairly prejudiced if Anna Jacques were added to the case and as a result the discovery deadline was extended and resolution of Whittier’s claims against SHCN was therefore delayed.
SHCN has known of and threatened to assert its claims against Anna Jacques at least since September 2014. At that time SHCN wrote to Whittier’s lawyer and asserted “that SHCN has viable claims … against the entities that improperly induced Whittier to leave SHCN, including …. Anna Jacques Hospital.” SHCN could have sought to assert claims against Anna Jacques at that time. Or it could have promptly conducted discovery against Anna Jacques to determine whether it had an adequate factual basis for asserting such claims. Instead SHCN waited two years to obtain discovery from Anna Jacques and then seek to assert
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claims for tortious interference and violation of G.L. c. 93A. In other words, SHCN has no one to blame but itself for the fact that it is now too late to add any claims against Anna Jacques to this civil action.
ORDER
Defendant’s motion for leave to assert counterclaims and to file a third-party complaint is DENIED.
January 18, 2017
___________________________
Kenneth W. Salinger
Justice of the Superior Court read more

Posted by Stephen Sandberg - February 2, 2017 at 7:32 am

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Middlesex Integrative Medicine, Inc. v. Massachusetts Department of Public Health (Lawyers Weekly No. 12-180-16)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
CIVIL ACTION
NO. 2014-2727-BLS1
MIDDLESEX INTEGRATIVE MEDICINE, INC.
vs.
MASSACHUSETTS DEPARTMENT OF PUBLIC HEALTH
MEMORANDUM OF DECISION AND ORDER ON
PARTIES’ CROSS-MOTIONS FOR JUDGMENT ON THE PLEADINGS
The plaintiff, Middlesex Integrative Medicine, Inc. (MIM), filed this action in the nature
of certiorari under G. L. c. 249, § 4 against the defendant, the Massachusetts Department of
Public Health (Department), after the Department denied each of MIM’s three applications to
operate Registered Marijuana Dispensaries (RMDs) in Massachusetts. MIM and the Department
have each moved for judgment on the pleadings pursuant to Mass. R. Civ. P. 12(c). On
November 21, 2016, this court held a hearing on the motions. For the reasons stated below,
MIM’s motion for judgment on the pleadings is DENIED and the Department’s motion for
judgment on the pleadings is ALLOWED.
BACKGROUND
In November, 2012, Massachusetts voters approved a ballot initiative allowing for the
medical use of marijuana for qualifying patients. Thereafter, the Legislature enacted Chapter 369
of the Acts of 2012, known as “An Act for the Humanitarian Medical Use of Marijuana” (Act).
St. 2012, c. 369. The Act authorized the Department to register at least one, and up to five,
RMDs in each Massachusetts county, up to a total of 35 statewide, during the first year after the
law’s effective date (January 1, 2013). G. L. c. 94C, App. § 1-9.
Pursuant to the Act, the Department promulgated regulations (105 Code Mass. Regs. §
725.001 et seq.) which established, among other things, a two phase application process. In
Phase 1, the applicant paid a non-refundable fee and submitted basic information that was
reviewed by the Department. See 105 Code Mass. Regs. § 725.100(B)(1). If the applicant
submitted all of the required information in a timely fashion, the applicant was notified that it
could proceed to Phase 2. See id. at § 725.100(B)(2). In this phase, the applicant paid a nonrefundable
$ 30,000 fee and submitted an application containing much more detailed information
about its proposed dispensary, after which the Department evaluated and scored the application.
See id. at § 725.100(B)(3)-(5).
MIM sought to operate three RMDs – one in Middlesex County (Everett), one in Norfolk
County (Norwood), and one in Worcester County (Shrewsbury). In August 2013, MIM filed a a
Phase 1 application for each location and, along with other applicants, MIM was invited by the
Department to submit Phase 2 applications. On November 21, 2013, MIM paid the Department
$ 90,000 and filed three Phase 2 applications. Out of a possible 163 points, MIM received scores
of 118, 127, and 118 on its three applications.
On January 31, 2014, the Department announced the selection of 20 applicants to receive
a Provisional Certificate of Registration. On the same day, the Department notified MIM by
letter that its Phase 2 applications had been denied and it was therefore not one of the selected
applicants.
2
On March 7, 2014, MIM participated in an informational briefing with the Department to
discuss the scoring of its applications and the reasons why the applications did not sufficiently
satisfy the Department’s criteria for an award of a Provisional Registration Certificate. During
the meeting, MIM asked to and was allowed to submit additional materials which sought to
address the alleged deficiencies in its applications. Several months later, by letters dated June
27, 2014, the Department informed MIM that its “status has not changed and you have not been
selected for a [dispensary] registration.”
The Department’s regulations specify that an applicant receiving a notice of non-selection
may seek judicial review in the Superior Court under G. L. c. 249, § 4, the certiorari statute. 105
Code Mass. Regs. § 725.500(D). MIM invoked this procedure and filed this suit in August 2014.
MIM maintains that the Department’s denials of its 2013 Phase 2 applications were arbitrary and
capricious because: the Department improperly delegated its authority to approve or deny the
Phase 2 applications to a contractor; scored its applications unfairly; and failed to consider the
additional materials it submitted at the March 2014 informal briefing.
In June 2015, the Department began accepting additional applications for RMDs using a
new application process. Applications are now reviewed on a rolling basis as they are received.
The applications are no longer scored. Instead, they are reviewed for compliance with the Act
and the applicants are notified of necessary updates or clarifications.1
Under the revised application process, the applicant first submits an “Application of
Intent” along with an application fee. After reviewing the application, the Department invites
successful applicants to move on and submit the more comprehensive “Management and
1 The Department apparently is no longer limiting the number of RMDs that will be approved, as long as the
applicants demonstrate compliance with the Act and the Department’s regulations.
3
Operations Profile” (MOP) along with another fee. After submission of the MOP, the
Department reviews the information and contacts the applicant if clarifications/updates to the
submitted application materials are needed. When the Department is satisfied with what it has
recieved, the applicant is invited by the Department to submit a Siting Profile. Once submitted,
the Department reviews the information in the Siting Profile and, as with the MOP, contacts the
applicant if clarifications/updates to the submitted materials are needed. After this process is
complete, the Department notifies the applicant whether it has met the standards necessary to
receive a Provisional Certificate of Registration.
In June 2015, as this lawsuit remained pending, MIM decided to participate in this new
process and filed Applications of Intent for three dispensaries. It paid a $ 1,500 fee for each
Application. In September 2015, the Department invited MIM to submit a MOP for all three
Applications. MIM, however, only elected to submit a MOP for one proposed facility. In
connection with this MOP, MIM paid an application fee of $ 30,000. MIM’s application remains
pending. It will be expected to pay a $ 50,000 fee if awarded a Provisional Certificate of
Registration and to pay an annual $ 50,000 registration fee if finally approved to operate a RMD.
DISCUSSION
In moving for judgment on the pleadings, MIM asserts that “[t]here is little point to
remanding the consideration of MIM’s 2013 Applications for further review or rescoring by [the
Department]” given that “[the Department] has already changed its application process” and
“MIM has also moved on . . . [and] is now focused on different opportunities and locations.” Pl.
Brief at 26. Accordingly, MIM now seeks only monetary relief rather than reversal or remand to
4
the Department for further proceedings.2 Specifically, MIM seeks an order that the Department
must credit the $ 90,000 it paid in connection with its 2013 applications towards the fees it will
pay should its 2015 application continue successfully to proceed through the new application
process.3
The relief MIM seeks is not appropriately granted because nothing in the Act or its
implementing regulations allows for this type of remedy. See, e.g., Commonwealth v. Martin,
476 Mass. 72, 77 (2016) (defendant who filed successful motion to withdraw a guilty plea not
entitled to return of probation supervision fees where no statutory basis for recoupment of such
fees existed); Associated Indus. of Mass. Mut. Ins. Co. v. Hough, 84 Mass. App. Ct. 531, 532-
536 (2013) (employee who successfully defended against action brought by insurer to recoup
excess workers’ compensation benefits not entitled to attorneys fees because no provision of
Chapter 152 authorized such an award). See also Chin v. Merriot, 470 Mass. 527, 537 (2015)
(“We will not ‘read into the statute a provision which the Legislature did not see fit to put
there.’”). Indeed, the Department’s regulations specify that the fees paid in connection with
Phases 1 and 2 are “non-refundable.” See 105 Code Mass. Regs. § 725.100(B)(1)(i) and
(B)(3)(a). The only remedy for a disappointed applicant under the Department’s regulations is
“judicial review in Superior Court in an action for certiorari relief.” 105 Code Mass. Regs. §
2 In its reply brief, MIM suggests a complicated remand procedure if the Court denies its request for monetary relief.
See Pl. Reply Brief at 5. As MIM itself indicated in its initial brief, because it filed three new applications before the
resolution of this lawsuit, remand of the matter now makes little sense and is waived by MIM.
3 In arguing it is entitled to monetary relief, MIM references a line of cases allowing low bidders wrongfully
deprived of a contract to recover bid preparation costs and lost profits. See, e.g., Paul Sardella Constr. Co. v.
Braintree Hous. Authy., 3 Mass. App. Ct. 326 (1975). None of these cases is applicable as they all arose under
statutes different from the Act and did not involve a discretionary certification decision, as was the case here. See
Mello Constr. v. Division of Capital Asset Mgmt., 84 Mass. App. Ct. 625, 630 n.10 (2013) (rejecting similar
argument made by contractor whose application for certification of eligibility to bid on public construction contracts
was denied by agency).
5
725.500(D). Certiorari review, however, is not intended to serve as a vehicle for recovering
monetary damages.
“It is the function of a writ of certiorari . . . to correct substantive errors of law by a
judicial or quasi judicial tribunal which are not otherwise reviewable by a court.” ” Gifford v.
Commissioner of Pub. Health, 328 Mass. 608, 619 (1952); see also School Comm. of Hudson v.
Board of Educ., 448 Mass. 565, 575-576 (2007) (“Certiorari is a limited procedure reserved for
correction of substantial errors of law apparent on the record created before a judicial or
quasi-judicial tribunal.”) Accordingly, remedies under the certiorari statute are restricted to the
modification or annulment of an unlawful government action, or a remand order for
reconsideration and/or further proceedings. See Mello Constr. v. Division of Capital Asset
Mgmt., 84 Mass. App. Ct. 625, 630 (2013). This is particularly true where, as is the case here, a
plaintiff is seeking relief for the denial of an application submitted to an administrative agency.
Cf. id. at 629-631 (finding that contractor whose application for certification of eligibility to bid
on public construction contracts was denied by agency could not sue agency for money damages
but could only seek judicial review through an action in the nature of certiorari).
In support of its position, MIM points to Haverhill Bridge Proprietors v. County Comm’rs
of Essex, a nineteenth century decision on a petition for a writ of certiorari. 103 Mass. 120
(1869). In the case, Essex county officials ruled, pursuant to a statute that required monetary
payment for a taking by eminent domain, that the county was not required to render full payment
for the taking of the plaintiffs’ bridge; the plaintiffs would have to secure a substantial portion of
its compensation directly from the towns in the county. The Court held that the county officials
had incorrectly interpreted the statute and concluded that the plaintiffs were entitled to full
6
payment from the county treasury. In so ruling, the Court awarded interest to the plaintiffs,
noting that “if interest should not be allowed them they would not receive the full indemnity
intended in the original award.” Id. 128. MIM argues that the award of interest in Haverhill
Bridge Proprietors shows that the award of monetary relief is appropriate here. The decision,
however, is inapposite. The recovery of interest was implied by the eminent domain statute at
issue. This case, in contrast, concerns the denial of applications pursuant to a statute that does
not contemplate monetary compensation of any sort. Moreover, the Court’s ruling, including the
award of interest, was consistent with the traditional function of certiorari review; it modified an
otherwise unlawful government action. In this case, the relief MIM seeks would go well beyond
the modification of the challenged action, i.e., the decision to deny its applications. Significantly,
MIM points to no other case, and certainly no recent case, involving the award of monetary relief
under the certiorari statute.4
Accordingly, because MIM now seeks relief the Court cannot grant, MIM cannot succeed
on its motion for judgment on the pleadings.
4 Alternatively, MIM suggest that the applications fees it paid in 2013 were an unconstitutional tax and that
therefore the Court has the authority to order the Department to reduce or refund the fees charged. This argument is
without merit. None of the cases MIM cites in support of its contention involved application fees or anything
analogous, and each was brought under G. L. c. 231, not the certiorari statute. See, e.g., Emerson Coll. v. Boston,
391 Mass. 415, 423-426 (1984) (finding fee imposed on certain property owners an unconstitutional tax); Boston
Gas Co. v. Newton, 425 Mass. 697 (1997) (city ordinance assessing a fee on public utilities unconstitutional tax).
Even setting those considerations aside, the cases do not otherwise suggest that the fees imposed by the Department
were unconstitutional.
7
CONCLUSION
For the reason stated above, Middlesex Integrative Medicine, Inc.’s motion for judgment
on the pleadings is DENIED and the Massachusetts Department of Public Health’s motion for
judgment on the pleadings is ALLOWED.
By the Court,
________________________
Edward P. Leibensperger
Justice of the Superior Court
December 19, 2016
8 read more

Posted by Stephen Sandberg - January 5, 2017 at 10:28 am

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Service Employees International Union, Local 509 v. Department of Mental Health, et al. (Lawyers Weekly No. 11-180-16)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us

SJC-12035

SERVICE EMPLOYEES INTERNATIONAL UNION, LOCAL 509  vs.  DEPARTMENT OF MENTAL HEALTH & others.[1]

Suffolk.     September 6, 2016. – November 22, 2016.

Present:  Gants, C.J., Botsford, Lenk, Hines, Gaziano, Lowy, & Budd, JJ.

Privatization Act.  Commissioner of Mental Health.  Commonwealth, Contracts.  Contract, Validity.  Public Employment.  Laches.  Practice, Civil, Judgment on the pleadings.

Civil action commenced in the Superior Court Department on February 15, 2012. read more

Posted by Stephen Sandberg - November 22, 2016 at 9:45 pm

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Service Employees International Union, Local 509 v. Department of Mental Health (Lawyers Weekly No. 10-138-14)

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SJC-11544

SERVICE EMPLOYEES INTERNATIONAL UNION, LOCAL 509  vs.  DEPARTMENT OF MENTAL HEALTH.

Suffolk.     April 7, 2014. – August 15, 2014.

Present:  Ireland, C.J., Spina, Cordy, Botsford, Gants, Duffly, & Lenk, JJ.[1]

Privatization Act.  Commissioner of Mental Health.  Auditor. Declaratory Relief.  Practice, Civil, Declaratory proceeding, Standing, Parties, Failure to join party.

Civil action commenced in the Superior Court Department on February 15, 2012.

The case was heard by Merita A. Hopkins, J., on a motion for judgment on the pleadings. read more

Posted by Stephen Sandberg - August 15, 2014 at 8:41 pm

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