Sorensen v. BlueSky TelePsych, LLC

Background

BlueSky TelePsych, LLC, a telemedicine mental-health provider, employed Kelsey Sorensen, a board-certified physician assistant specializing in psychiatry. The parties entered a one-year employment agreement in February 2022. The agreement required Sorensen to maintain medical licenses in Illinois, Minnesota, and North Carolina, and provided for specified clinical and administrative work and an annual salary of $127,500.

Sorensen alleged that she spent $564 obtaining licenses in Illinois and Michigan after BlueSky’s owner, Dr. Richelle Strauss, said she would be reimbursed. When Sorensen began working with patients, she objected that documents needed for Illinois licensing—including a collaboration agreement and prescription-related forms—had been completed and signed in her name without her knowledge or permission. Sorensen alleged that BlueSky fired her two days after she raised these concerns, stating that the termination was due to “medical ethics violations.”

Sorensen asserted seven claims: violation of the Fair Labor Standards Act, declaratory judgment, violation of the Minnesota Payment of Wages Act, retaliation under the Minnesota Whistleblower Act, breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment. BlueSky moved to dismiss the action under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint contains enough factual allegations to state a legally plausible claim.

Choice of Law

The employment agreement contained a provision selecting Illinois law for questions concerning the agreement’s validity, enforceability, or construction. The court concluded that Sorensen’s claims did not fall within that provision and applied Minnesota law, because the parties appeared to agree that Minnesota law governed and the opinion identified no actual conflict requiring further analysis.

Claims Dismissed

Sorensen voluntarily dismissed her Fair Labor Standards Act claim, and the court granted BlueSky’s motion to dismiss that claim with prejudice.

The court dismissed the declaratory-judgment claim because it was wholly duplicative of Sorensen’s breach-of-contract claim. The order states that this claim was dismissed with prejudice.

The court also dismissed Sorensen’s Minnesota Payment of Wages Act claim with prejudice. Under that statute, an employee must demand unpaid wages after discharge or resignation and before filing suit. Because Sorensen did not make the required demand before commencing the action, the court dismissed the claim.

Claims Allowed to Proceed

The court denied BlueSky’s motion to dismiss Sorensen’s Minnesota Whistleblower Act retaliation claim. Sorensen alleged that she reported conduct that plausibly implicated forgery and violations of Illinois requirements governing physician-assistant collaboration agreements and licensing documents. The court concluded that she did not need to identify a specific statute when making her report and that the complaint plausibly alleged a legally protected report and retaliatory termination at the pleading stage.

The court denied dismissal of the breach-of-contract claim. Sorensen alleged that BlueSky failed to reimburse licensing expenses, failed to pay her for all hours worked, and terminated her without just cause. The court concluded that the agreement’s provision allowing BlueSky to determine in its sole discretion whether an ethical violation occurred still required the termination to relate to the rules and principles of medical ethics. The court also noted that the agreement did not require Michigan licensure and that the scope of any agreement concerning Illinois licensing fees would likely be addressed later.

The court denied dismissal of the implied-covenant claim. It treated that claim as distinct from the breach-of-contract claim because Sorensen alleged, alternatively, that BlueSky used its contractual discretion dishonestly, maliciously, or in subjective bad faith.

The court also denied dismissal of the unjust-enrichment claim. Although a party generally cannot recover twice under both contract and unjust-enrichment theories, the court allowed Sorensen to pursue the alternative theory while it remained unclear whether an enforceable contract covered all of the disputed compensation and licensing expenses.

Disposition

Judge Donovan W. Frank granted in part and denied in part BlueSky’s motion to dismiss. The order granted dismissal of the Fair Labor Standards Act, declaratory-judgment, and Minnesota Payment of Wages Act claims, stating that each was dismissed with prejudice. The order denied dismissal of the Minnesota Whistleblower Act retaliation, breach-of-contract, implied-covenant, and unjust-enrichment claims.