OptumHealth Care Solutions, LLC v. Sports Concussion Institute Global, Inc.

Background

This contract dispute concerns two agreements between OptumHealth Care Solutions, LLC (Optum) and Sports Concussion Institute Global, Inc. (SCIG). The first, a March 15, 2016, Letter of Agreement, concerned developing a behavioral-health network for young people with post-concussion syndrome. It stated that the parties contemplated a future joint venture but did not describe how that venture would be structured.

The second agreement, effective October 20, 2016, concerned providing concussion services to members of a class-action settlement arising from litigation involving National Football League players. Optum agreed to create and carry out a marketing plan and pay SCIG a marketing fee. SCIG agreed to promote Optum’s services and use Optum’s marketing materials. The agreement had a three-year initial term and allowed either party to terminate it with 90 days’ written notice. If terminated before the initial term ended, SCIG was required to pay an early-termination fee of $2.5 million, less certain margin payments received by Optum.

Optum notified SCIG on June 20, 2017, that it was terminating the agreement effective September 21, 2017. After SCIG did not substantively respond to requests for payment, Optum sued for breach of contract based on SCIG’s failure to pay the termination fee. SCIG filed counterclaims, later amended, for breach of fiduciary duty, breach of contract, breach of the implied covenant of good faith and fair dealing, quantum meruit, and fraudulent inducement.

Motion and legal standard

Optum filed a partial motion under Rule 12(b)(6), which permits dismissal for failure to state a legally sufficient claim. The court accepted well-pleaded factual allegations as true and considered whether the claims were plausible. The parties agreed that Minnesota law applied. The court considered the two agreements because they were materials embraced by the pleadings.

Breach of fiduciary duty

SCIG alleged that Optum owed it a fiduciary duty because the parties were co-joint venturers under the Letter of Agreement and because that agreement was incorporated into the later agreement. SCIG alleged that Optum breached the duty by failing to provide a marketing plan.

The court held that SCIG had not adequately pleaded a joint venture and therefore had not adequately pleaded the fiduciary relationship required for its claim. Under Minnesota law, a joint venture requires contributions by each party, joint ownership and control, an agreement to share profits, and an express or implied contract. SCIG’s allegations that a joint venture existed were conclusory. The Letter of Agreement described a “contemplated” joint venture but did not provide for the required contributions, mutual control, or profit sharing. The later agreement identified the parties as independent contractors and expressly stated that it did not create a joint venture or agency relationship. The court also concluded that the later agreement did not incorporate the Letter of Agreement. The court therefore dismissed the breach-of-fiduciary-duty counterclaim.

Quantum meruit

Quantum meruit is a theory allowing recovery for a benefit provided and knowingly accepted when it would be unfair to keep the benefit without paying for it. SCIG alleged that it performed its obligations without reasonable compensation. Optum argued that the express contract barred the claim.

The court allowed SCIG to proceed on quantum meruit in the alternative. Although quantum meruit generally is unavailable when a valid express contract governs, SCIG had challenged the agreement’s existence and enforceability by asserting lack of consideration and failure of consideration as affirmative defenses.

Fraudulent inducement

Fraudulent inducement is a claim that a party entered an agreement because of a material false statement made to obtain that agreement. SCIG alleged that Optum falsely represented that it had the present ability to create and operate the required provider network and that such a network already existed. SCIG specifically alleged reliance when entering the Letter of Agreement but did not make the same allegation regarding the later agreement.

The court dismissed this counterclaim. Even assuming the statements were false, SCIG did not allege that Optum knew they were false or made them without knowing whether they were true or false. The court also noted that the statements SCIG allegedly relied on were made after the parties entered the Letter of Agreement, undermining reliance and causation as to that agreement. SCIG did not even generally allege that it relied on the representations when signing the later agreement.

Disposition

The court granted Optum’s partial motion to dismiss in part. It dismissed SCIG’s breach-of-fiduciary-duty and fraudulent-inducement counterclaims and allowed the quantum-meruit counterclaim to proceed in the alternative. The court declined to allow SCIG to replead the counterclaims because SCIG had already amended them once.