Bergmoser v. Smart Document Solutions, LLC

NOT RECOMMENDED FOR PUBLICATION
File Name: 08a0133n.06
Filed: March 5, 2008
No. 07-3357
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FRANCINE BERGMOSER; TERRY KING;
LINDA L. HEIDL,
Plaintiffs-Appellants,
On appeal from the United States
v. District Court for the Northern
District of Ohio
SMART DOCUMENT SOLUTIONS, LLC;
SMART CORPORATION,
Defendants-Appellees.
/
BEFORE: RYAN, BATCHELDER, and GRIFFIN, Circuit Judges.
RYAN, Circuit Judge. The plaintiffs appeal the district court’s decision to grant
the defendants’ motion to dismiss their claims and to deny the plaintiffs’ motion for leave
to amend their complaint. Because we believe dismissal was warranted and that the
district court did not abuse its discretion in denying the plaintiffs leave to amend their
complaint, we affirm the district court’s judgment.
I.
The plaintiffs filed this putative class action suit against the defendants, Smart
Document Solutions, LLC, and Smart Corporation (collectively, Smart), alleging that
Smart’s practice of charging consumers more than the actual cost for shipping, and
assessing sales tax on the services they provide, violates the Ohio Consumer Sales
(No. 07-3357) -2-
Practice Act (OCSPA), as well as Ohio common law. The plaintiffs are requesting
compensatory damages and an order enjoining Smart from continuing this practice.
Smart is a medical records processing company that provides copies of medical
records to consumers upon request. Smart contracts with clinics, hospitals, and other
healthcare providers to process medical record requests made by patients. Through its
5,500 facilities nationwide, Smart processes approximately 20,000 medical document
requests and sends approximately 600,000 pages of documents through the United States
Postal Service (USPS) each day.
The individual plaintiffs in this suit are among those who have requested and
received copies of medical records from different healthcare providers having agreements
with Smart to fill their requests. Each of the plaintiffs received invoices detailing the various
fees that Smart charged in the transactions. The descriptive categories on the invoices
included a “Basic Fee,” “Retrieval Fee,” “Per Page Copy,” “Shipping/Handling,” and “Sales
Tax.” Upon receiving the invoices along with the medical records, the plaintiffs remitted
the amount indicated on the invoices and kept the copies of the medical records.
Under the line item “Shipping/Handling,” Smart charged the plaintiffs at a rate
identical to the rate of then-first class postage (approximately $.39), while Smart actually
paid approximately $.33, a discounted postage rate for shipping the documents through
the USPS. Smart also charged the plaintiffs sales tax on this service.
The plaintiffs filed suit in the Erie County Ohio Court of Common Pleas and the
defendants removed the case to the United States District Court for the Northern District
of Ohio. Smart moved to dismiss all the plaintiffs’ claims under Federal Rule of Civil
(No. 07-3357) -3-
Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. The
plaintiffs opposed the motion and filed a motion to amend their complaint to add a new
claim under the Deceptive Trade Practices Act (DTPA), a claim for unjust enrichment and
sought equitable accounting. The district court granted Smart’s motion to dismiss and
denied the plaintiffs’ motion to amend. The plaintiffs now appeal both decisions.
II.
Dismissal under Rule 12(b)(6) is appropriate when a court concludes the plaintiffs
could not prove any set of facts in support of their claims that would entitle them to relief.
Moon v. Harrison Piping Supply, 465 F.3d 719, 723 (6th Cir. 2006), cert. denied, 127 S. Ct.
1832 (2007). We review the district court’s decision to grant a motion to dismiss de novo.
Doe v. Bredesen, 507 F.3d 998, 1002 (6th Cir. 2007).
III.
The plaintiffs claim Smart violated the OCSPA by charging more than the actual cost
it paid for mailing the medical records to the consumers. Specifically, the plaintiffs argue
that the provisions of the OCSPA, Ohio Revised Code Ann. § 1345.01-1345.12, which
prohibit unfair or deceptive sales practices, preclude Smart from charging more than its
actual costs for shipping. Further, the plaintiffs contend that Smart is bound by the
schedule of charges set forth in the Medical Records Statute, Ohio Rev. Code Ann. §
3701.741, which specifically proscribes charging more than the actual cost of postage
incurred by the medical record processing company. See Ohio Rev. Code Ann. §
3701.741(B)(1)(c), (B)(2)(d) (West 2005).
(No. 07-3357) -4-
The OCSPA excludes from its scope, acts or practices that are “required or
specifically permitted . . . by or under other sections of the Revised Code.” Ohio Rev.
Code Ann. § 1345.12(A). Section 3701.741, subsection (E), is such an “other section[].”
It authorizes medical record companies to contract with patients, patients’ representatives,
and authorized individuals to provide these services and it does not place limitations on the
terms of these agreements. See Ohio Rev. Code Ann. § 3701.741(E)(1).
Here, the parties entered into contracts that were expressly authorized by the
Medical Records Statute. When each plaintiff requested medical records from Smart,
received and retained the records, and remitted payment in accordance with the terms of
the invoice, the result was a binding contract with Smart, as allowed in subsection (E).
These transactions are expressly authorized by the Medical Records Statute and are
outside the scope of the OCSPA.
IV.
The plaintiffs also claim the defendants improperly collected sales tax on these
transactions. The defendants argue, and we agree, that the plaintiffs have not stated a
claim upon which the district court could grant relief. Even if the taxes were improperly
assessed, the Ohio Administrative Code does not authorize private suits against vendors,
seeking recovery of collected taxes. The Ohio Administrative Code § 5703-9-07(B) sets
forth the proper method of pursuing a tax refund. The consumer may either file an
application directly with the tax commissioner or request a refund from the vendor. Ohio
Admin. Code § 5703-9-07(B) (2004). The plaintiffs argue that they should be allowed to
pursue their claim for wrongfully assessed taxes because § 5703-9-07 permits consumers
(No. 07-3357) -5-
to “[r]equest a refund from the vendor.” Id. at § (B)(1)(b). But, this section concludes, “[i]f
a vendor or seller denies a consumer’s refund request, the consumer may file an
application for refund with the tax commissioner . . . . That is the consumer’s sole remedy
to claim refund of the tax.” Id. at § (B)(2). We conclude that the Administrative Code does
not authorize private actions to recover sales taxes and the plaintiffs have not stated a
claim upon which relief can be granted.
V.
The plaintiffs also claim common law fraud. The elements of common law fraud in
Ohio are:
(a) a representation or, where there is a duty to disclose, concealment of a
fact, (b) which is material to the transaction at hand, (c) made falsely, with
knowledge of its falsity, or with such utter disregard and recklessness as to
whether it is true or false . . . , (d) with the intent of misleading another into
relying upon it, (e) justifiable reliance upon the representation or
concealment, and (f) a resulting injury proximately caused by the reliance.
Gaines v. Preterm-Cleveland, Inc., 514 N.E.2d 709, 712 (Ohio 1987).
The plaintiffs’ claim fails this test for two reasons. First, they do not allege that
Smart expressly represented to the plaintiffs that Smart charged its actual postage cost
under its “Shipping/Handling” charge. The plaintiffs assumed that this charge reflected the
actual cost Smart paid. However, in the absence of facts indicating that Smart affirmatively
misrepresented the nature of the charge, an essential element of common law fraud is
missing. Second, the plaintiffs’ claim, that Smart fraudulently charged non-actual postage
costs, amounts to a misrepresentation of law. A legal misrepresentation cannot form the
basis of a fraud or intentional misrepresentation claim, as a matter of law. See Equal
(No. 07-3357) -6-
Justice Found. v. Deutsche Bank Trust Co. Ams., 412 F. Supp. 2d 790, 795 (S.D. Ohio
2005). Therefore, the plaintiffs have not stated an actionable common law fraud claim.
VI.
The plaintiffs also appeal the district court’s decision denying their motion to amend
their complaint to add claims rising under the Deceptive Trade Practices Act, Ohio Rev.
Code Ann. § 4165.02(A)(2) and (3), and the equitable theories of unjust enrichment and
accounting. When, as in this case, a district court bases its decision to deny leave to
amend a complaint on the legal conclusion that the amended claims could not withstand
a motion to dismiss, we review the decision de novo. PR Diamonds, Inc. v. Chandler, 364
F.3d 671, 680 (6th Cir. 2004).
The district court denied the plaintiffs’ motion to amend the complaint primarily on
the ground that the proposed amendment would be “futile.” The court determined that the
DTPA did not apply to the facts of this case and that the plaintiffs’ claim under this statute
would not state a claim upon which relief can be granted. The court concluded that
plaintiffs’ equitable claims likewise failed.
A motion to amend is “futile” if it would not withstand a Rule 12(b)(6) motion to
dismiss. Rose v. Hartford Underwriters Ins. Co., 203 F.3d 417, 420-21 (6th Cir. 2000).
The DTPA deals with misrepresentations regarding corporate affiliations and does not
pertain to other types of misrepresentation claims. See Leventhal & Assoc., Inc. v.
Thomson Cent. Ohio, 714 N.E.2d 418, 424-25 (Ohio Ct. App. 1998). Therefore, since the
plaintiffs are not alleging any corporate affiliation misrepresentation, they are unable to
recover under this theory.
(No. 07-3357) -7-
A party cannot prevail on a theory of unjust enrichment when an express contract
has been formed. See Delicom Sweet Goods of Ohio, Inc. v. Mt. Perry Foods, Inc., No.
04 CA 4, 2005 WL 525185, at *4 (Ohio Ct. App. Mar. 2, 2005). The plaintiffs agree that
they entered into express contracts with Smart to provide the medical records copying
service; and their claims address the legal implications of these contracts. It follows that
the plaintiffs have not stated a valid claim for unjust enrichment and equitable accounting
upon which relief can be granted.
VII.
One of the plaintiffs is a law firm and argues that it has standing to sue Smart. The
district court did not address this issue when it granted Smart’s motion to dismiss and it is
not necessary that we do so.
VIII.
For the reasons set forth above, we AFFIRM the district court’s judgment.