United States District Court, W.D. New York
ANN McCRACKEN, JOAN FERRELL, SARAH STILSON, KEVIN McCLOSKEY, CHRISTOPHER TRAPATSOS, and KIMBERLY BAILEY, as individuals and as representatives of the classes, Plaintiffs, and
VERISMA SYSTEMS, INC., STRONG HOSPITAL, HIGHLAND HOSPITAL, and UNIVERSITY OF ROCHESTER, Defendants.
DECISION ORDER MEMORIAL
MICHAEL A. TELESCA, District Judge.
Ann McCracken ("McCracken"), Joan Ferrell ("Ferrell"), Sarah Stilson ("Stilson"), Kevin McCloskey ("McCloskey"), Christopher Trapatsos ("Trapatsos"), and Kimberly Bailey ("Bailey") (collectively, "Plaintiffs"), bring this action on behalf of themselves and others against Verisma Systems, Inc. ("Verisma"), Strong Memorial Hospital ("Strong"), Highland Hospital ("Highland"), and the University of Rochester ("U of R") (collectively, "Defendants"), claiming that Defendants charged inflated prices for medical records in violation of New York State law. Verisma contracts with Strong, Highland and the U of R (collectively, the "Healthcare Defendants") to provide medical records to patients of those entities. Plaintiffs, all of whom are patients who received medical treatment at the Healthcare Defendants, claim that Defendants charged them excessively for copies of their medical records, in violation of New York Public Health Law ("NYPHL") § 18. Plaintiffs also assert causes of action for unjust enrichment and for a deceptive trade practices under New York General Business Law ("NYGBL") § 349.
The following factual summary is based on the allegations in the Amended Complaint, which are deemed to be true for purposes of deciding Defendants' motions to dismiss. Verisma is a private corporation that contracts with doctors and hospitals nationwide to provide medical records to patients, or other authorized entities, who request such records. Verisma entered into contracts with the Healthcare Defendants to provide copies of medical records generated by the Healthcare Defendants to patients who requested those records. Plaintiffs allege that Verisma obtained these contracts by offering financial and other types of incentives to the Healthcare Defendants. According to Plaintiffs, these incentives, which Plaintiffs characterize as "kickbacks", are a central component of Verisma's marketing strategy. Plaintiffs cite to information publicly available on Verisma's website and thirdparty websites on which Verisma maintains a business profile. See, e.g., Amended Complaint ("Am. Compl.") (Dkt #4) ¶ 27 & Exhibit ("Ex.") 4 (quoting website Indeed.com which states that Verisma helps health care providers "capture available revenue in their Release of Information processes").
All Plaintiffs reside in the Greater Rochester area and, through their attorneys, requested copies of their medical records from the Healthcare Defendants. Upon receiving a request for records from a Plaintiff, the Healthcare Defendants forwarded the request to Verisma, which fulfilled the request for records and sent an invoice to Plaintiffs' attorneys. Sometimes, rather than actually send Plaintiffs hard copies of the requested records, Verisma simply made the records available to Plaintiffs via an online portal. Regardless of how the copies of records were provided (in paper form or electronically), Verisma charged $0.75 per page without regard to, and without disclosing, the actual costs of producing copies of the records. Each Plaintiff paid the amount charged by Verisma through their counsel. Plaintiffs allege that the cost to produce each medical record was substantially less than $0.75 per page and that the amounts charged were inflated as a result of Defendants' alleged "kickback scheme."
Verisma has moved to dismiss the Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) ("Rule 12(b)(6)") on the basis that Plaintiffs have failed to state a claim upon which relief can be granted. According to Verisma, Plaintiffs have failed to establish any actual injury since the charges Verisma imposed on them for copies of medical records are expressly deemed reasonable under New York law. The Healthcare Defendants have moved to dismiss the Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(1) ("Rule 12(b)(1)") on the ground that Plaintiffs lack constitutional standing, and pursuant to Rule 12(b)(6) for failure to state claims for unjust enrichment and for violations of NYPHL § 18 and NYGBL § 349.
RULE 12(b)(1) STANDARD
"A case is properly dismissed for lack of subject matter jurisdiction... when the district court lacks the statutory or constitutional power to adjudicate it." Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000) (citing FED. R. CIV. P. 12(b)(1)). The party seeking to establish jurisdiction bears the burden of "showing by a preponderance of the evidence that [it] exists." Lunney v. United States, 319 F.3d 550, 554 (2d Cir. 2003) (citation omitted). In resolving subject matter jurisdiction under Rule 12(b)(1), a district court may refer to evidence outside the pleadings. Id. (citing Kamen v. American Telephone & Telegraph Co., 791 F.2d 1006, 1011 (2d Cir. 1986) ("[W]hen... subject matter jurisdiction is challenged under Rule 12(b)(1), evidentiary matter may be presented by affidavit or otherwise.") (citation omitted)).
I. Standing and the Rule 12(b)(1) Motion by the Healthcare Defendants
A. General Legal Principles
Because standing is jurisdictional, the Court first considers the Healthcare Defendants' motion pursuant to FRCP 12(b)(1) to dismiss based on Plaintiffs' lack of standing to bring this lawsuit. See Rhulen Agency, Inc. v. Alabama Ins. Guar. Ass'n, 896 F.2d 674, 678 (2d Cir. 1990) (stating that when a party moves for dismissal both for failure to state a claim and lack of jurisdiction, "the court should consider the Rule (12)(b)(1) challenge first since if it must dismiss the complaint ...