The opinion of the court was delivered by: PETER LEISURE, District Judge
This action, originally brought by plaintiff Commerce Funding
Corporation upon an alleged breach of a factoring agreement, has
been trimmed down by settlements and arbitration, such that only
cross-claims asserted by defendant Comprehensive Habilitation
Services ("CHS") against defendants St. Francis Hospital ("St.
Francis") and Staten Island University Hospital ("Staten Island")
remain unresolved. CHS brings a breach of contract claim against
St. Francis that will be tried without a jury, and a breach of
contract claim against Staten Island that will be tried before a
With respect to St. Francis, CHS alleges that St. Francis owes
it $215,270.10 plus interest for services it provided to St.
Francis pursuant to a Memorandum of Understanding between the two
parties dated February 19, 1999. St. Francis denies the
allegations. The Court has scheduled a bench trial on CHS's
claims against St. Francis to begin September 13, 2004. CHS now
makes two motions in limine to exclude from evidence several
documents that St. Francis intends to offer at trial. In its
first motion in limine dated July 30, 2004, CHS seeks to
exclude documents that predate the Memorandum of Understanding,
and documents related to a settlement between St. Francis and the
Attorney General's Office. In its second motion in limine
dated August 3, 2004, CHS seeks to exclude a plea agreement
reached in the case of People v. Comprehensive Clinical Center,
Inc. St. Francis opposes CHS's motions. For the reasons set
forth below, the Court grants in part and denies in part CHS's
first motion in limine, and reserves judgment until trial on
CHS's second motion in limine, so that the motion is placed
in the appropriate factual context. Background
The following background information is derived from the
submissions of the parties in association with the current
motions and does not constitute findings of fact.
During all relevant times, defendant St. Francis was a hospital
in Poughkeepsie, New York, that provided a full range of health
care services to the mentally retarded and the developmentally
disabled. Cross-claimant CHS provided consultation and
administrative services to health providers. On May 25, 1995, CHS
and St. Francis reached an agreement (the "Contract"), by which
CHS would provide services such as occupational therapy, physical
therapy, and social work for St. Francis and be compensated at a
rate of $50 per hour. (Contract (attached to CHS's July 30, 2004,
Notice of Motion as Exhibit 1) ¶ 5 and Addendum.) The Contract
includes several terms upon which the parties agreed, such as
that CHS's services "shall only be provided upon obtaining all
Federal, State, and local approvals including, without
limitation, approvals of the New York State Department of Health
and the New York State Department of Mental Hygiene." (Contract ¶
5.) After the commencement of the Contract CHS provided services
for St. Francis and issued invoices to St. Francis for payment.
At some time after 1995, the Office of the Attorney General,
Medicaid Fraud Control Unit ("Attorney General's Office")
"conducted an audit of [clinics operated by St. Francis] and
thereafter asserted, among other things, that: (a) the Clinics
were neither authorized under, nor operated in accordance with,
applicable New York State laws, rules and regulations; (b) [St.
Francis] submitted improper claims for payment to Medicaid during
the Service Period relating to the Clinics; and (c) [CHS's]
relationship with [St. Francis] violated applicable New York
State laws, rules and regulations." (February 6, 2002, Agreement
and Settlement between St. Francis and Attorney General's Office ("February 2002 Settlement"), at
1.) In February 2002 St. Francis entered a settlement with the
Attorney General's Office by which St. Francis expressly denied
the allegations of the Attorney General's Office, but "in order
to avoid the uncertainties, burdens and expenses of litigation,"
agreed to pay a $1 million settlement in the form of weekly
withholdings by the State Department of Health of future Medicaid
checks payable to St. Francis. (February 2002 Settlement, at
On February 19, 1999, apparently after the Attorney General's
Office had commenced its investigation into the parties'
performance under the Contract, and before St. Francis reached a
settlement with the Attorney General's Office, CHS and St.
Francis agreed to a Memorandum of Understanding. (Memorandum of
Understanding (attached as Exhibit 2 to CHS's August 3, 2004,
Notice of Motion).) In the Memorandum of Understanding the
parties agreed to, among other things, the following terms:
(1) The Contract is terminated, and the parties shall
have no further obligations under the Contract,
except as expressly outlined herein.
(2) Payment and Holdback. . . . [St. Francis] shall
pay certain invoices received by it from CHS for
services rendered in connection with the Contract on
the following schedule: $510,115 on or before
February 26, 1999. Invoices 149 and 150 will be
withheld as a holdback, and all other outstanding
invoices will be paid in accordance with [St.
Francis'] 90-day cycle.
. . . .
(4) Continuity of Services. CHS agrees . . . that
CHS will continue to provide and coordinate
continuity of therapy services until (i) sufficient
CHS therapists agree to become employed by [St.
Francis] or (ii) [St. Francis] shall engage
replacement services by other therapists no later
than March 30, 1999. During this transition period
CHS shall bill [St. Francis] in the ordinary course
of business at the current rates.
. . . .
(10) Holdback of Monies Attorney General
Department of Health Investigation. CHS, and [St.
Francis] acknowledge that there is an ongoing inquiry
concerning the parties' performance under the
Contract, and related issues. . . . In the event
there is an immediate repayment required [by the Attorney
General's Office], any outstanding invoices would be
used as part of such a repayment plan.
(Memorandum of Understanding ¶¶ 1, 2, 10 and attached Exhibit.)
After the parties agreed upon this Memorandum of Understanding,
CHS continued to provide services and submit invoices to St.
Francis. St. Francis received the services provided by CHS, but
stopped making payments on the invoices.
II. Procedural Background
CHS brings the current cross-claim against St. Francis for
breach of contract. CHS claims that St. Francis owes payment on
seven invoices CHS issued for payment for services it rendered:
Invoice Nos. 149, 150, 151, 152, 153, 154 and 155. Invoices 149
and 150 were issued for services rendered in January and February
1999, and are referenced in the Memorandum of Understanding.
Invoices 151-155 were issued for services rendered in February,
March, April, and May 1999, and are not explicitly referenced in
the Memorandum of Understanding. The parties agree that the claim
to be resolved at the bench trial is a simple breach of contract
claim for failure to pay these invoices. (See Affidavit of John
W. Clarke in support of CHS's Motion In Limine To Exclude
Various St. Francis Trial Exhibits ("Clarke Aff.") ¶ 2 ("In
short, this is a garden variety collection case in which a debtor
profited from the services of contractor and then defaulted on
its contractual obligation of payment."); Memorandum of Law of
St. Francis Opposing CHS's 8/3/04 Motion In Limine, at 1
("This lawsuit is fundamentally a non-payment action.").)
CHS's position is that the Memorandum of Understanding governs
all of the invoices, Nos. 149-155, and that payment is due on
these invoices under the terms of the Memorandum of
Understanding. With respect to Invoices 149 and 150 which are
subject to "holdback" in the Memorandum of Understanding, CHS argues that monies owed by St.
Francis to CHS for these invoices should not be applied to the
settlement with the Attorney General because the "settlement was
entered into without consultation with or agreement by CHS.
Nothing in the [Settlement] alleges that CHS engaged in any
impropriety or had responsibility for the alleged violations. In
short, there is no link to any acts of CHS in connection with its
performance of the Agreement with [St. Francis], and [St.
Francis'] settlement with [the Attorney General's Office]."
(Joint Pre-Trial Order, at 5.) CHS thus argues that payment for
Invoices 149 and 150 is due. With respect to Invoices 151-155,
CHS argues that paragraph four of the Memorandum of
Understanding, titled "Continuity of Services," governs these
invoices. CHS thus argues that payment for Invoices 151-155,
issued for services rendered after the parties signed the
Memorandum of Understanding, is due.
St. Francis denies CHS's allegations of breach of contract. St.
Francis' position is that the Memorandum of Understanding governs
Invoices 149 and 150, and the Contract governs Invoices 151-155.
With respect to Invoices 149 and 150, St. Francis argues that the
Memorandum of Understanding provides that St. Francis may hold
back payment on these invoices and apply it to its Settlement
with the Attorney General's Office. As the Settlement amount
exceeds the amount of Invoices 149 and 150, St. Francis contends
that under the terms of the Memorandum of Understanding it owes
nothing to CHS for Invoices 149 and 150. With respect to Invoices
151-155, St. Francis argues that "those invoices are expressly
not subject to the Memorandum of Understanding and, accordingly,
are governed by the terms of the parties' original [Contract]."
(Joint Pre-Trial Order, at 3.) St. Francis argues that CHS failed
to perform its obligations under the Contract "to ensure
compliance with all rules and regulations pertaining to the
operation of the [St. Francis] Clinics; to market, implement and
provide administrative services at Hospital operated Clinics; to obtain all Federal,
State and local approvals of the New York State Department of
Health and the New York State Department of Mental Hygiene
relating to the ...