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Healthnow New York Inc. v. APS Healthcare Bethesda

March 10, 2006

HEALTHNOW NEW YORK INC. D/B/A/ BLUECROSS AND BLUESHIELD OF WESTERN NEW YORK AND BLUESHIELD OF NORTHEASTERN NEW YORK, PLAINTIFF,
v.
APS HEALTHCARE BETHESDA, INC. AND METROPOLITAN IPA, INC., DEFENDANTS.



The opinion of the court was delivered by: Scullin, Chief Judge

MEMORANDUM-DECISION AND ORDER

I. INTRODUCTION*fn1

Plaintiff HealthNow, New York, Inc. ("HealthNow"), commenced this action against Defendants APS Healthcare Besthesda, Inc. and Metropolitan IPA, Inc. (collectively "APS") asserting (1) a breach of contract claim and (2) a claim for a declaratory judgment and specific performance. Defendant APS asserts counterclaims against Plaintiff HealthNow for (1) negligent misrepresentation, (2) fraud, and (3) promissory estoppel.*fn2

Currently before the Court is HealthNow's motion to dismiss APS's counterclaims for (1) negligent misrepresentation, (2) fraud, and (3) promissory estoppel, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.

II. BACKGROUND*fn3

HealthNow is a New York corporation that is licensed in New York as a not-for-profit health insurer and a health maintenance organization. Defendant APS Healthcare Bethesda, Inc. is an Iowa corporation with its principal place of business in Silver Spring, Maryland. APS is registered in New York to perform utilization review on behalf of HMOs and insurers. Defendant Metropolitan IPA, Inc. ("IPA"), a corporate affiliate of APS, is a Maryland corporation with its principal place of business in Silver Spring, Maryland. IPA arranges for mental health and chemical dependency services to persons with third-party health care coverage plans through service providers.

Toward the end of summer 2001, HealthNow needed to replace its third-party mental health and chemical dependency service provider, Integra. On August 24, 2001, HealthNow provided APS with data so that APS could formulate its price proposals as a possible replacement for Integra. HealthNow then provided APS with additional information, specifically, its former pricing fee schedule with its previous mental health service provider, Integra.

On May 31, 2002, HealthNow and APS entered into an IPA Agreement ("the Agreement") that set forth the terms under which APS was to arrange for the provision of mental health and chemical dependency services to HealthNow's members and the manner in which HealthNow was to pay for those services.

Sometime after the Agreement was executed, APS noticed that HealthNow's data and representations were inaccurate.*fn4 HealthNow acknowledged that some of the information that it had provided was inaccurate or misclassifed. Sometime thereafter, HealthNow drafted a Revised and Restated IPA Agreement ("Revised Agreement") to reflect changes made to the original Agreement.*fn5

APS's President of Behavioral Health Services, Roderick Hafer, signed the Revised Agreement on June 16, 2004, but stated, under separate cover, that he was only doing so based on his understanding that an amendment would be prepared memorializing the Revised Agreement's terms as currently negotiated. On July 9, 2004, however, after HealthNow and APS were still unable to resolve certain issues that were integral to the parties' Revised Agreement, APS sent HealthNow a letter containing its final proposal to resolve damages that APS incurred as a result of HealthNow's inaccurate information. The letter informed HealthNow that, if it did not respond by July 14, 2004, APS would terminate their contractual relationship. HealthNow never responded. APS terminated the relationship on October 15, 2004. As a result, HealthNow brought this action against APS for (1) breach of contract and (2) declaratory judgment and specificperformance. In a separate answer and counterclaim, APS asserted claims against HealthNow for (1) negligent misrepresentation, (2) fraud, and (3) promissory estoppel.

III. DISCUSSION

A. Standard of Review

As a threshold matter, Rule 12(b)(6) applies to both claims and counterclaims with equal force; therefore, courts review counterclaims under the same standard as claims in a plaintiff's complaint. See Pyke v. Laughing, No. 92-CV-555, 1996 WL 252660, *2 (N.D.N.Y May 9, 1996) (citing Cohen v. Stephen Wise Free Synagogue, 95 Civ. 1659, 1996 WL 159096, at *1 (S.D.N.Y. April 4, 1996)). Under Rule 12(b)(6), "a court must accept the material facts alleged in the complaint as true" and consider those facts in the light most favorable to the plaintiff. Solutia Inc. v. FMC Corp., 385 F. Supp. 2d 324, 330 (S.D.N.Y. 2005) (citing Grandon v. Merrill Lynch & Co., 147 F.3d 184, 188 (2d Cir. 1998)) (other citation omitted). "[U]nless 'it appears beyond doubt that the plaintiff can prove no set of facts in support of [its] claim which would entitle [it] to relief,'" a court should not dismiss a complaint for failure to state a claim. Id. (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed. 2d 80 (1957)).

Applying this standard, the Court will address each of APS's counterclaims in turn.

B. Negligent Misrepresentation

Under New York law, to state a claim for negligent misrepresentation, a plaintiff must prove that: (1) defendant, as a result of a special relationship, failed to give correct information; (2) defendant should have known that the false representation was incorrect; (3) defendant knew the information was to be used by plaintiff for a serious purpose; (4) plaintiff intended to rely and act upon it; and (5) plaintiff reasonably relied on the information to his or her detriment.

Calcutti v. SBU., Inc., 223 F. Supp. 2d 517, 522 (S.D.N.Y. 2002) (citing Hydro Investors, Inc. v. Trafalgar Power, Inc., ...


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