Fairview Health Services v. Armed Forces Office of the Royal Embassy of Saudi…

Background

Fairview Health Services, doing business as University of Minnesota Medical Center, sought more than $1.3 million from the Armed Forces Office of the Royal Embassy of Saudi Arabia for medical services provided to two Saudi children, identified as R.A. and L.A. The parties used intermediaries to arrange treatment, negotiate charges, and process payment. The Armed Forces Office sent fourteen checks totaling $1,301,272.95 to Fairview, but made the checks payable to Minnesota International Medicine, an earlier intermediary. Fairview received the checks and forwarded them to Minnesota International Medicine, which deposited them.

After the Armed Forces Office’s earlier motion to dismiss Fairview’s claims was denied, the Armed Forces Office asserted four counterclaims against Fairview: breach of contract, negligence, declaratory judgment, and tortious interference with contract. It also asserted six third-party claims against Medical Cost Advocate, Inc. (MCA): tortious interference with contract, breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, contribution, and indemnification. Fairview and MCA moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a pleading does not allege enough facts to state a legally plausible claim.

Claims Against Fairview

The court dismissed the breach-of-contract claim because the Armed Forces Office did not plausibly allege damages. The court rejected theories based on nominal damages, payments to MCA for locating the checks, attorneys’ fees and litigation costs, and the possibility that the Armed Forces Office might have to pay Fairview the same $1.3 million. The court also noted that these damages theories were not actually pleaded in the counterclaims and could not be added through briefing.

The negligence claim was also insufficient. The Armed Forces Office alleged that Fairview had a duty to handle the payments properly, but its own allegations treated that duty as arising from the parties’ alleged contracts. Under the law applied by the court, a contractual duty alone generally cannot support a negligence claim.

The court dismissed the declaratory-judgment claim because it duplicated the breach-of-contract claim. The requested declaration about the parties’ rights, responsibilities, and liability under the Preferred Rate Agreements involved the same issues that would be decided in the contract claim.

The tortious-interference claim failed because the Armed Forces Office did not plausibly allege that Fairview or MCA induced a breach of the Financial Guarantees. It also relied on the same damages theories the court found insufficient for the breach-of-contract claim.

Claims Against Medical Cost Advocate

The court dismissed the breach-of-contract claim against MCA because the Armed Forces Office did not plausibly allege damages. The court applied the same reasoning to the claimed repeated payment, attorneys’ fees and litigation costs, and costs allegedly associated with locating the checks.

The court dismissed the implied-covenant claim because the allegations that MCA disclosed confidential information and negotiated agreements that were not in the Armed Forces Office’s best interest were sparse and conclusory. The pleading did not identify the nature or approximate dates of the allegedly disclosed information or explain why the negotiated agreements were not in the Armed Forces Office’s interest.

The court concluded that the Armed Forces Office plausibly alleged that MCA had a fiduciary relationship with it based on MCA’s alleged role as an agent and its claimed superior knowledge and expertise. But the claim still failed because the Armed Forces Office did not plausibly allege damages.

The indemnification claim failed because the MCA agreement required the Armed Forces Office to indemnify MCA, not the other way around. The contribution claim failed because the Armed Forces Office and MCA did not plausibly share liability to Fairview for the same damages.

Disposition

The court granted Fairview’s motion to dismiss the counterclaims and granted MCA’s motion to dismiss the third-party claims. The Armed Forces Office’s counterclaims against Fairview and third-party claims against MCA were dismissed without prejudice. The court did not grant the Armed Forces Office’s request to amend as part of this order because the Armed Forces Office had not described its proposed amendments or submitted a proposed amended pleading. The dismissal was without prejudice to seeking leave to amend in the ordinary course before Magistrate Judge Tony N. Leung; the scheduling order set December 29, 2023, as the deadline for motions seeking leave to amend pleadings.