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Ohio River Valley Associates, LLC v. PST Services, Inc.

United States District Court, W.D. Kentucky, Louisville Division

February 6, 2018



          Greg N. Stivers, Judge United States District Court

         This matter is before the Court on Plaintiff's Motion for Preliminary Injunction (DN 4) and Defendant's Motion to Conduct Limited Discovery (DN 7). For the reasons set forth below, Plaintiff's motion is GRANTED, and Defendant's motion is DENIED.

         I. BACKGROUND

         This action centers on the efforts of Plaintiff Ohio River Valley Associates, LLC (“ORVA”) to preliminarily enjoin Defendant PST Services, Inc. (“PST”) from arbitrating the issue whether ORVA breached the “Master Services Agreement” (“Agreement”)-a contract that PST entered into with One Management Services Corporation, LLC (“One Management”). (Pl.'s Mot. Prelim. Inj. 1-2, DN 4). By way of background, ORVA is an organization that provides management services to healthcare providers. (Arbitration Demand ¶ 7, DN 1-3). ORVA then delegated certain of its duties to One Management, an organization that some of ORVA's members allegedly own. (Verified Compl. ¶ 7, DN 1; Arbitration Demand ¶ 6, DN 1-3). One Management, in turn, entered into the Agreement with PST. (Verified Compl. ¶ 8).

         Under the Agreement, PST agreed to provide services to management services organizations (“MSOs”), such as practice management and billing for medical practices, as a subcontractor of One Management-i.e., as a sub-subcontractor of ORVA. Additional medical practices were added to the Agreement through addenda. The Agreement states that “each MSO shall have the rights and obligations of [One Management] under its respective MSO Addendum, as well as with respect to provisions [in the MSA] that expressly relate to the MSOs.” (MSA 1 (emphasis added)). The Agreement further provides, however, “[n]otwithstanding the foregoing, [PST] [] shall exercise its rights vis-à-vis MSOs solely through [One Management] and, conversely, the MSOs shall exercise their rights vis-à-vis [PST] [] solely through [One Management].” (MSA 1). The Agreement also contains an arbitration clause, providing that “[i]f a dispute, controversy or claim concerning this [MSA] cannot be satisfactorily resolved by the parties, such dispute will be settled by binding arbitration . . . .” (MSA § 4.1.6).

         Addendum #1 modifies the Agreement between One Management and PST by adding the medical practice of ONE Anesthesia, PLLC to the Agreement. (MSO Addendum #1, at 1, DN 1-2). This addendum lists ORVA's name between the document title “MSO ADDENDUM #1” and the caption and appears to have been signed on behalf of One Management by Dr. Thomas Neff (“Dr. Neff”). (MSO Addendum #1, at 2). Below Dr. Neff's signature, in the blank for “Title” is printed “Chairman, ORVA.” (MSO Addendum #1, at 2).

         Nearly two years after One Management and PST finalized the Agreement, ORVA- apparently dissatisfied with PST's services-provided notice that PST had breached the Agreement. (Arbitration Demand ¶ 40). ORVA then purported to terminate its relationship with PST. (Arbitration Demand ¶ 47). As a result, PST filed an arbitration demand with the American Arbitration Association, naming One Management and ORVA as respondents.[1] (Arbitration Demand ¶ 1). In its demand, PST alleged, inter alia, that ORVA breached the Agreement (and Addendum #1) when it terminated PST without following the termination procedures set forth in the Agreement and allegedly incorporated into Addendum #1. (Arbitration Demand ¶¶ 40-49; MSA § 4.2; MSO Addendum #1, § 1). Thereafter, ORVA filed the Verified Complaint seeking a declaratory judgment stating that it is neither a party to the Agreement nor bound by the Agreement's arbitration clause. (Verified Compl. 4). ORVA also asked this Court to permanently enjoin PST from pursuing any arbitration proceedings against it. (Verified Compl. 5).

         Presently, ORVA moves the Court to preliminarily enjoin the arbitration proceedings that PST has initiated against it. (Pl.'s Mot. Prelim. Inj. 1). In its motion, ORVA argues, inter alia, that it is entitled to an order enjoining the arbitration proceedings because it is neither a party nor signatory to any agreement with PST that contains an arbitration clause. (Pl.'s Mot. Prelim. Inj. 5-14). In response, PST asserts that no preliminary injunction is warranted because: (1) ORVA “expressly adopted the terms of the [Agreement]”-including its arbitration clause-when Dr. Neff signed the addendum in his capacity as ORVA's Chairman, and (2) even if ORVA never agreed to the Agreement's arbitration clause, ORVA should nonetheless be estopped from denying that it is subject to that clause because it has received substantial benefits under the Agreement. (Def.'s Opp'n Prelim. Inj. 7-11, 14-15). PST also moves the Court to permit it to engage in discovery regarding the circumstances under which Dr. Neff signed Addendum #1. (Def.'s Mot. Conduct Limited Disc. 1-2, DN 7). Both motions are ripe for adjudication.


         A. PST's Motion to Conduct Limited Discovery

         PST argues that it is entitled to discovery on the issue whether Dr. Neff, ORVA's Chairman, signed Addendum #1. (Def.'s Mot. Conduct Limited Disc. 1-2). PST claims that, if evidence shows that Dr. Neff signed the addendum in his capacity as ORVA's Chairman, then ORVA will be bound to Addendum #1 and the Agreement's provisions incorporated therein- including its arbitration clause. (Def.'s Br. Supp. Mot. Conduct Limited Disc. 1-3, DN 7-2). Thus, PST concludes, such evidence could help PST support its contention that ORVA is bound by the arbitration clause and, therefore, unlikely to succeed on the merits of its declaratory judgment action.

         PST believes that it is at a disadvantage in this proceeding because it cannot confirm the capacity in which Dr. Neff signed Addendum #1. For the purpose of ORVA's present motion, the Court will assume that Dr. Neff signed Addendum #1 on behalf of ORVA and that ORVA is bound to the terms thereof. Given that the Court will address ORVA's motion under this assumption, the Court sees no justification for permitting PST to engage in discovery at this point. Therefore, PST's motion to conduct discovery is denied.

         B. ORVA's Motion for Preliminary Injunction

         ORVA seeks an order preliminarily enjoining PST from submitting its claims against OVRA to arbitration. Under Sixth Circuit precedent, the Court must balance four factors in determining whether ORVA is entitled to the relief it seeks: “(1) whether the movant has a strong likelihood of success on the merits; (2) whether the movant would suffer irreparable injury absent the injunction; (3) whether the injunction would cause substantial harm to others; and (4) whether the public interest would be served by the issuance of an injunction.” Bays v. City of Fairborn, 668 F.3d 814, 818-19 (6th Cir. 2012) (citing Certified Restoration Dry Cleaning Network, LLC v. Tenke Corp.,511 F.3d 535, 542 (6th Cir. 2007)). Though the first inquiry will ...

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