Fung-Schwartz v. Cerner Corporation

Background

Jennifer Fung-Schwartz, D.P.M., and her wholly-owned podiatry practice, Jennifer Fung-Schwartz, D.P.M., LLC, sought reconsideration of parts of Judge Barbara Moses’s June 3, 2020 discovery order. The plaintiffs challenged the court’s refusal to compel Cerner Healthcare Solutions, Inc., and its affiliate Cerner Corporation, collectively referred to as Cerner, to provide additional documents responsive to two requests for production.

The first request, RFP No. 52, sought documents sufficient to identify Cerner’s costs for providing electronic medical-records services to the plaintiffs. The second, RFP No. 59, sought documents concerning other doctors, hospitals, or medical providers whose electronic health-records service had been cut off by Cerner. The plaintiffs also sought clarification of rulings concerning RFP Nos. 57 and 58 and a written order memorializing Cerner’s representation that it would not seek quantum meruit damages for services provided before 2015.

The plaintiffs alleged that Cerner made fraudulent representations about its billing services, improperly processed billing and insurance claims, and caused insurers to reject claims. They also alleged that Cerner cut off access to Dr. Fung-Schwartz’s electronic medical records after a billing dispute and failed to provide or fully migrate the records. Cerner Solutions asserted counterclaims for breach of contract and, alternatively, quantum meruit—the reasonable value of services provided—and sought approximately $56,000 in damages as of March 2020.

Standard for reconsideration

The court explained that reconsideration is an extraordinary remedy governed in this district by Local Civil Rule 6.3. The moving party must identify controlling decisions or material facts that the court overlooked and that could have affected the earlier ruling. Reconsideration is not a vehicle for repeating rejected arguments, presenting theories that could have been raised earlier, or obtaining a second opportunity to litigate an issue.

RFP No. 52: Cerner’s costs

The court upheld its refusal to compel production of Cerner’s cost information. Under New York law, quantum meruit damages are measured by the reasonable value of goods or services provided. The plaintiffs argued that the cost of providing the services could be one way to determine reasonable value and therefore should be discoverable.

Judge Moses concluded that the plaintiffs had not shown that Cerner’s internal costs bore a relationship to the amount for which comparable services could have been purchased in the relevant market. The record did not show that electronic-medical-records providers customarily price their services based on costs and profits. The court also noted that Cerner had not placed its actual costs at issue in the way the plaintiff had in a case cited by the plaintiffs.

The court further held that the request was not proportional to the needs of the case. The quantum meruit counterclaim was pleaded in the alternative and would matter only if the underlying contract were found invalid or unenforceable. The request also did not distinguish between direct and indirect costs and could require extensive company information or sophisticated accounting to allocate expenses to the plaintiffs’ practice. The court therefore concluded that it had acted within its discretion in declining to compel the cost documents.

RFP No. 59: Other customers’ service interruptions

The court also upheld its refusal to compel documents about other Cerner customers whose electronic-health-records access had been cut off. The plaintiffs argued that such information could show Cerner’s knowledge, intent, or routine practice and could support their claims for promissory fraud, tortious interference, negligence, conversion, and punitive damages.

The court found that the plaintiffs had not connected the requested information to their claims. The alleged 2016 cutoff of the plaintiffs’ electronic-medical-records access involved different services and circumstances from the alleged misrepresentations supporting the promissory-fraud claim. Evidence about other customers would not establish whether Cerner’s conduct toward the plaintiffs violated a criminal statute or constituted an independent tort, as required for the tortious-interference claim. The conversion and negligence claims likewise concerned Cerner’s handling of the plaintiffs’ records and access, not the records of other customers.

The request was also overly broad. It covered all doctors, hospitals, and other medical providers whose access was cut off, regardless of the reason for the cutoff, and sought all related documents. The court found that the request could lead to collateral disputes about other customers’ circumstances, impose disproportionate burdens, and expose confidential business arrangements and payment information of nonparties. The court also rejected the plaintiffs’ reliance on other-acts or routine-practice theories to justify the request.

Other requests and disposition

The court found no need to clarify the ruling on RFP Nos. 57 and 58 because the oral ruling remained part of the record and the plaintiffs had not shown that Cerner had violated or would violate it. The court likewise found no need for a separate written order concerning the limitation on quantum meruit damages because Cerner’s counsel had stated on the record that Cerner was not seeking damages for services provided before 2015, and the plaintiffs identified no live dispute requiring a confirmatory order.

Judge Moses concluded that the plaintiffs had not met the standard for reconsideration and that the challenged discovery rulings would remain unchanged even if reconsidered. The court’s conclusion states: “plaintiffs’ motion for reconsideration is DENIED.”