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Etransmedia Technology, Inc v. Nephrology Associates

August 16, 2012


The opinion of the court was delivered by: David N. Hurd United States District Judge



Etransmedia Technology, Inc. ("petitioner" or "Etransmedia") has filed a petition pursuant to the Federal Arbitration Act, 9 U.S.C. § 4 (2006) ("FAA"), seeking to compel arbitration of claims asserted in a separate action filed in Georgia by respondent Nephrology Associates, P.C.("respondent" or "NAPC"). NAPC opposes and requests that the petition be denied or stayed pending resolution of the arbitrability issue in Georgia.


Etransmedia, a New York corporation, provides information technology services to medical practices. NAPC, a Georgia corporation, provides care to patients with chronic kidney disease and related conditions. In 2009 Etransmedia agreed to provide NAPC with an integrated computer system to maintain its electronic medical records. Etransmedia also agreed to perform billing and claims processing services using data that NAPC entered into the computer system.

In late-December 2009 the parties executed two contracts: (1) the Services Agreement pertaining to the licensing, management, and use of the computer system; and (2) the Agreement for Billing and Claims Processing Services and Business Associate Agreement ("the Billing Agreement") relating to the billing and claims processing services provided by Etransmedia. Both documents contain a choice of law provision mandating that the contracts, and any disputes arising therefrom, are to be construed, interpreted, and governed by New York law.

A. The Services Agreement

The Services Agreement consists of seventeen paragraphs and an attached fee schedule. The first ten paragraphs define terms, establish a license permitting NAPC to use the electronic medical records software, and prohibit disclosure of confidential information. Paragraph eleven outlines NAPC's responsibilities, which include the duty to "properly save its financial and patient data on a daily basis" and "identify and provide a 'key' individual . . . to serve as a liaison between [the parties]." Pet. to Compel Arbitration, Ex. A, ¶ 11(a)--(b) ("Services Agreement"). Paragraphs twelve through sixteen regard data conversion, custom reporting, warranties, limitations of liability, and termination of the agreement.

Paragraph seventeen contains a merger clause, the choice of law clause, a provision regarding assignment, and an arbitration clause dictating that "[a]ny dispute or claim arising out of, or in connection with, this Agreement shall be finally settled by binding arbitration in Albany, New York, in accordance with the then-current rules and procedures of the American Arbitration Association by one (1) arbitrator appointed by the American Arbitration Association." Id. ¶ 17(j).

B. The Billing Agreement

The Billing Agreement contains five articles and an appendix. Article one concerns confidentiality and patient privacy. The second article sets out the parties' responsibilities. Etransmedia is required to submit claims to third party carriers, perform billing services, provide a monthly "Aging report" to NAPC for charges billed, submit claims with NAPC's address listed as the remittance address, and send out patient statements immediately once patient accounts are updated. Pet. to Compel Arbitration, Ex. B, ¶ 2.1 ("Billing Agreement").

NAPC is required "to provide Etransmedia with complete treatment and payment information for the processing and follow up of insurance and patient claims." Id. NAPC must also forward patient information forms to Etransmedia "by the end of business of the day services [are] rendered." Id. Through the Billing Agreement, NAPC accepts full responsibility for all information provided to petitioner, holds Etransmedia harmless for errors due to inaccurate, incomplete, or false information inputted by NAPC, and acknowledges that Etransmedia is not obligated to store or return any paper medical records.

The remaining articles in the Billing Agreement address limitation of liability, termination of the agreement, and miscellaneous provisions such as the choice of law and merger clauses. The Billing Agreement does not contain an arbitration clause.

C. The Georgia Action

Shortly after the parties entered into the agreements, NAPC's office manager, Wanda Schronce ("Schronce"), was designated as the liaison between the parties. According to petitioner, any concerns with the computer system were addressed satisfactorily. Schronce left NAPC, and Etransmedia asserts nobody replaced her as the designated liaison. Respondent maintains that the communications between the parties was always poor and that Schronce was replaced by another NAPC employee. The relationship between the parties quickly began to deteriorate.

On July 27, 2010, NAPC sent a notice to Etransmedia alleging that it had breached both the Billing and Services Agreements, and expressing NAPC's intent to terminate both contracts ("the July 2010 notice"). On June 7, 2011, NAPC sent Etransmedia another notice alleging breach of the Billing Agreement and providing formal notice of NAPC's intent to terminate the Billing Agreement ("the June 2011 notice"). This notice specifically indicated that NAPC did not intend to terminate the Services Agreement. NAPC asserts that Etransmedia refused to accept service of either notice.

On July 7, 2011, NAPC commenced an action in the Superior Court of Richmond County, Georgia ("the Georgia action"). In the Factual Background section of its complaint, NAPC alleges that Etransmedia breached both the Billing and Services Agreements . See Pet. to Compel Arbitration, Ex. C, ¶¶ 26--28 ("Georgia Compl."). However, in the actual breach of contract and declaratory relief causes of action, NAPC only discusses Etransmedia's alleged breach of the Billing Agreement. Id. ¶¶ 58--64. Specifically, NAPC claims that Etransmedia failed to provide an adequate number of properly trained billing personnel, made repeated billing errors, significantly decreased collections, provided ...

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