Marilyn Brown v. Gadsden Regional Medical Center LLC ( 2018 )

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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 17-14310
Non-Argument Calendar
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D.C. Docket No. 4:16-cv-01739-KOB
MARILYN BROWN,
AARON R. GRINDSTAFF,
Plaintiffs - Appellants,
versus
GADSDEN REGIONAL MEDICAL CENTER LLC,
a foreign limited liability company,
PROFESSIONAL ACCOUNT SERVICES INC,
a foreign corporation,
TRIAD HOLDINGS V LLC,
a foreign limited liability company,
TRIAD OF ALABAMA LLC,
a foreign limited liability company,
Defendants - Appellees,
COMMUNITY HEALTH SYSTEMS INC,
a foreign corporation,
Defendant.
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________________________
Appeal from the United States District Court
for the Northern District of Alabama
________________________
(September 5, 2018)
Before MARCUS, ROSENBAUM, and EDMONDSON, Circuit Judges.
PER CURIAM:
In this diversity action involving Alabama law, Plaintiffs Marilyn Brown
and Aaron Grindstaff appeal the district court’s final judgment in favor of
Defendants Gadsden Regional Medical Center, LLC (“GRMC”), Triad Holdings
V, LLC, Triad of Alabama, LLC, and Professional Account Services, Inc.1
Reversible error has been shown; we affirm in part, vacate in part, and remand for
further proceedings.
Briefly stated, Plaintiffs challenge Defendants’ billing practices following
GRMC’s treatment of patients involved in car accidents. Each Plaintiff had
personal health insurance through Alabama Blue Cross Blue Shield (“Blue
1
The parties filed in the district court a joint stipulation dismissing Defendant Community
Health Systems, Inc.; Community Health Systems, Inc. is no party to this appeal.
2
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Cross”). Plaintiffs assert that -- pursuant to a Participating Hospital Contract
(“Provider Agreement”) between GRMC and Blue Cross -- GRMC could seek
reimbursement only from Blue Cross. Instead, GRMC filed a hospital lien for the
costs of each Plaintiff’s medical treatment.
Plaintiffs filed in state court this putative class action against Defendants,
alleging state law claims for breach of express contract, conversion, and breach of
fiduciary duty. 2 The case was then removed to federal district court. The district
court dismissed without prejudice for lack of standing Plaintiffs’ claim for breach
of express contract. The district court dismissed for failure to state a claim
Plaintiffs’ conversion claim. The district court then entered judgment in favor of
GRMC on Plaintiffs’ claim for breach of fiduciary duty.
I.
Plaintiffs contend Defendants breached the Provider Agreement between
GRMC and Blue Cross by seeking reimbursement for Plaintiffs’ medical expenses
from sources other than Blue Cross and at a rate higher than the negotiated rate
permitted under the Provider Agreement. The district court concluded that,
2
Plaintiffs also alleged against Defendants a claim for breach of implied contract. On appeal,
Plaintiffs raise no challenge to the district court’s dismissal of that claim.
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because Plaintiffs were no third-party beneficiaries to the Provider Agreement,
they lacked standing to enforce its terms. Accordingly, the district court dismissed
without prejudice Plaintiffs’ claim for lack of subject matter jurisdiction, pursuant
to Fed. R. Civ. P. 12(b)(1).
When reviewing the district court’s dismissal of claims pursuant to Fed. R.
Civ. P. 12(b)(1), we review de novo the district court’s legal conclusions and
review the district court’s factual findings for clear error. Williams v. Poarch Band
of Creek Indians, 839 F.3d 1312, 1314 (11th Cir. 2016). When a document -- such
as the Provider Agreement involved in this appeal -- “is central to the plaintiff’s
claim, its contents are not in dispute, and the defendant attaches the document to its
motion to dismiss, this Court may consider that document as well.” See Allen v.
USAA Cas. Ins. Co., 790 F.3d 1274, 1278 (11th Cir. 2015).
Under Alabama law, “a third person has no rights under a contract between
others unless the contracting parties intend that the third person receive direct
benefit enforceable in court as opposed to an incidental benefit.” Fed. Mogul
Corp. v. Universal Constr. Co., 376 So. 2d 716, 723-24 (Ala. Civ. App. 1979)
(emphasis omitted). When the language of the contract is plain and unambiguous,
we look only to the contract itself to determine the intent of the contracting parties.
H.R.H. Metals, Inc. v. Miller, 833 So. 2d 18, 24 (Ala. 2002). When “two
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contracting parties expressly provide that a third party shall have no legally
enforceable rights in their agreement, a court must effectuate the expressed intent
by denying the third party any direct remedy.” Fed. Mogul Corp., 376 So. 2d at
724.
The Provider Agreement says expressly that “[n]othing herein contained
shall be construed to confer any claim, right, action, or cause of action upon any
Member or other person . . . other than the Parties signing this Contract.” This
contract provision establishes unambiguously that the contracting parties intended
no third party to have a legally enforceable right under the contract. The district
court, thus, concluded properly that -- as a matter of Alabama law -- Plaintiffs were
no third-party beneficiaries to the Provider Agreement. Because Plaintiffs had no
legally protected interest in the Provider Agreement, Plaintiffs lacked standing to
pursue a claim based on an alleged breach of that contract. The district court
committed no error in dismissing without prejudice Plaintiffs’ breach of express
contract claim pursuant to Rule 12(b)(1).
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II.
In their claim for conversion, Plaintiffs’ complaint alleged in pertinent part
that Defendants “knowingly and wrongfully filed hospital liens against Plaintiffs . .
. and pursued collection of inflated hospital bills from said patients’ own auto
insurance policy such as med pay, PIP and uninsured/underinsured motorist claims
. . . rather than file with said patients’ health insurance carrier.” Plaintiffs also
alleged that Defendants “wrongfully exercised dominion over Plaintiffs[’] . . .
personal property in exclusion or defiance of their rights by unlawfully refusing to
submit the patients’ hospital bills to their health insurance carriers . . . .”
The district court dismissed Plaintiffs’ conversion claim under Rule 12(b)(6)
for failure to state a claim. In doing so, the district court construed Plaintiffs’
complaint as purporting to assert a conversion claim based on several possible
theories. On appeal, Plaintiffs challenge the district court’s dismissal of their
conversion claim based only on the theory that GRMC’s hospital liens interfered
unlawfully with Plaintiffs’ rights to their med-pay insurance benefits.
We review de novo a district court’s dismissal for failure to state a claim,
accepting all properly alleged facts as true and construing them in the light most
favorable to the plaintiff. Butler v. Sheriff of Palm Beach Cnty., 685 F.3d 1261,
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1265 (11th Cir. 2012). To survive a motion to dismiss for failure to state a claim,
“a complaint must contain sufficient factual matter, accepted as true, to state a
claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 129 S. Ct. 1937,
1949 (2009) (quotation omitted). To state a plausible claim for relief, plaintiffs
must go beyond merely pleading the “sheer possibility” of unlawful activity by a
defendant; plaintiffs must offer “factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Id.
“[A] plaintiff’s obligation to provide the grounds of his entitlement to relief
requires more than labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 127 S. Ct.
1955, 1964-65 (2007) (quotations omitted).
To state a claim for conversion under Alabama law, a plaintiff must allege
“a wrongful taking, an illegal assumption of ownership, an illegal use or misuse of
another’s property, or a wrongful detention or interference with another’s
property.” See Huntsville Golf Dev. v. Ratcliff, Inc., 646 So. 2d 1334, 1336 (Ala.
1994). “Conversion requires a wrongful exercise of dominion over property in
exclusion or defiance of a plaintiff’s rights, where said plaintiff has the immediate
right of possession.” Covington v. Exxon Co., U.S.A., 551 So. 2d 935, 938 (Ala.
1989) (quotations and alterations omitted).
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A “plaintiff must establish that the defendant converted specific personal
property to the defendant’s own use and beneficial enjoyment.” Huntsville Golf
Dev., 646 So. 2d at 1336 (emphasis added). To assert a claim for conversion of
money, the money must be “specific and capable of identification.” Newson v.
Protective Indus. Ins. Co., 890 So. 2d 81, 88 (Ala. 2003).
As an initial matter, Plaintiffs’ complaint alleges no facts about Brown’s
med-pay benefits. Plaintiffs assert no allegations that Brown sought or was denied
med-pay benefits, or that her med-pay benefits were issued directly or indirectly to
GRMC. Given the complete absence of factual support for a claim for conversion
of Brown’s med-pay benefits, Plaintiffs can state no plausible claim for relief on
that basis.
About Grindstaff’s med-pay benefits, the complaint alleges only that
Grindstaff requested med-pay coverage and that, “[u]pon information and belief,
GRMC’s illegal filing of the lien against Plaintiff’s automobile insurance carrier
caused said carrier to refuse to pay Plaintiff’s med-pay coverage of [$5,000] to the
Plaintiff.” The complaint contains no factual allegations that GRMC was in
possession or in control of Grindstaff’s med-pay benefits: the payments simply
were not issued. That GRMC’s lien might have contributed to the insurance
company’s decision to deny payment is no evidence that GRMC exercised
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dominion over the unpaid funds. Plaintiffs allege no facts from which we can infer
reasonably that GRMC wrongfully took, assumed ownership of, used, misused,
detained, or interfered with Grindstaff’s med-pay benefits such that GRMC would
be liable for conversion under Alabama law.
Moreover, we are unpersuaded that Grindstaff’s unpaid med-pay benefits
constitute money that is sufficiently “specific and capable of identification” for
purposes of supporting a conversion claim. We reject Plaintiffs’ contention that
this issue is controlled by the Alabama Supreme Court’s decision in Hill v. Kraft,
Inc., 496 So. 2d 768 (Ala. 1986), which also involved the alleged conversion of
money due a plaintiff under an insurance contract. First, in reversing the dismissal
of plaintiff’s conversion claim in Hill, the Alabama Supreme Court applied the
state pleading standard: a standard more lenient than the federal pleading standard
applicable in this case. Compare Hill, 496 So. 2d at 769 (“dismissal is proper only
when it appears beyond doubt that the plaintiff can prove no set of facts in support
of the claim which would entitle the plaintiff to relief”), with Iqbal, 129 S. Ct. at
1949 (“a complaint must contain sufficient factual matter, accepted as true, to state
a claim to relief that is plausible on its face.” (quotations omitted)).
Second -- contrary to Plaintiffs’ assertion -- nothing in Hill decided that
money due under an insurance contract is “property” capable of conversion.
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Instead -- applying the state’s liberal pleading standard -- the Alabama Supreme
Court determined only that it could not say as a matter of law whether the money
at issue constituted property specific enough to support a claim for conversion
“under any conceivable set of facts which plaintiff might prove.” Hill, 496 So. 2d
at 770. In particular, the Court noted it was “entirely conceivable that the plaintiff
can prove a set of facts entitling him to relief, particularly if he can prove that the
insurance company paid money to [Defendant] for plaintiff’s benefit . . . , and that
[Defendant] placed those proceeds in a special account.” Id. at 771.
Here, Plaintiffs made no allegations that GRMC received payment on
Grindstaff’s behalf or that GRMC placed Grindstaff’s med-pay proceeds in a
separate account. We cannot infer reasonably that the unpaid med-pay benefits
constitute specific property that would support a claim for conversion under
Alabama law. Thus -- under the federal pleading standard -- Plaintiffs have
alleged no plausible claim for relief. We affirm the district court’s dismissal of
Plaintiffs’ conversion claim for failure to state a claim.
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III.
Plaintiffs next challenge the district court’s entry of judgment in favor of
GRMC on Plaintiffs’ claim for breach of fiduciary duty. Plaintiffs contend that,
because GRMC never moved for summary judgment on Plaintiffs’ breach-of-
fiduciary-duty claim, the district court erred in sua sponte entering judgment on
that issue.
We review de novo a district court’s grant of summary judgment. Hegel v.
First Liberty Ins. Corp., 778 F.3d 1214, 1219 (11th Cir. 2015). Summary
judgment is appropriate when there exists “no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.” Id.; Fed. R. Civ. P.
56(a). The movant “bears the initial responsibility of informing the district court
of the basis for its motion, and identifying those portions of the pleadings,
depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, which it believes demonstrate the absence of a genuine issue of
material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quotations
omitted). The burden then “shifts to the non-moving party to rebut that showing
by producing affidavits or other relevant and admissible evidence beyond the
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pleadings.” Josendis v. Wall to Wall Residence Repairs, Inc., 662 F.3d 1292, 1315
(11th Cir. 2011).
In their “Motion to Dismiss, or in the Alternative, Motion for Summary
Judgment,” Defendants sought dismissal of Plaintiffs’ complaint for lack of
standing and for failure to state a claim. In the alternative, Defendants moved the
district court “to render judgment in their favor as there exists no genuine issue of
material fact as to the issues raised below.” Defendants then set forth their
arguments in favor of dismissal and summary judgment. Defendants, however,
presented no basis for a summary judgment motion on and presented no argument
about Plaintiffs’ breach-of-fiduciary-duty claim. Defendants thus failed to move
adequately and failed to satisfy their initial burden of demonstrating an absence of
a genuine issue of material fact on that claim for purposes of summary judgment.
That Defendants, in effect, never moved for summary judgment on
Plaintiffs’ breach-of-fiduciary-duty claim does not end our inquiry. We have said
that “a court may sua sponte grant summary judgment on a claim not presented in a
summary judgment motion.” Byars v. Coca-Cola Co., 517 F.3d 1256, 1264 (11th
Cir. 2008). When the district court does so, however, “the court is required to give
notice to the parties that it intends to address the claim on summary judgment.” Id.
We “have strictly enforced the requirement that a party threatened by summary
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judgment must receive notice and an opportunity to respond.” Massey v. Congress
Life Ins. Co., 116 F.3d 1414, 1417 (11th Cir. 1997). This “requirement guarantees
that the nonmoving party will have an opportunity to marshal its resources and
focus its attention on rebutting the motion for summary judgment with every
factual and legal argument available.” Milburn v. United States, 734 F.2d 762, 766
(11th Cir. 1984).
Here, the district court provided no notice to Plaintiffs that the court --
notwithstanding Defendants’ omissions -- intended to rule regarding Plaintiffs’
breach-of-fiduciary-duty claim, as a matter for summary judgment. On this record,
we conclude that the district court committed error in granting summary judgment
sua sponte without first giving Plaintiffs a full and fair opportunity to present legal
argument and evidence in support of their claim. We vacate the district court’s
entry of judgment in favor of GRMC on Plaintiffs’ breach-of-fiduciary-duty claim
and remand for further proceedings.
AFFIRMED IN PART, VACATED IN PART AND REMANDED.
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