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. 1 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 […]