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Advanced Lifeline Services, Inc. v. Central Hospital Services, Inc.

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

February 12, 2019




         Plaintiff Advanced Lifeline Services, Inc. (“ALS”) brings this action against Defendant Central Hospital Services, Inc., d/b/a Champs Healthcare Management Programs (“Champs”), alleging fraudulent inducement (Count I), intentional or negligent misrepresentation (Count II), and breach of the implied duties of good faith and fair dealing (Count III). [DE 1-2, Compl. at ¶ 1]. Champs now moves to dismiss Counts I and II under Federal Rule of Civil Procedure 9(b) and all Counts under Rule 12(b)(6). [DE 4, Mot. Dismiss]. The matter is fully briefed and ripe for judgment. [See DE 8, ALS Resp.; DE 9, Champs Reply]. Having considered the parties' filings and the applicable law, the Court GRANTS Champs's Motion to Dismiss.


         The following facts are set out in the Complaint and accepted as true for purposes of Champs's Motion. See Davis v. Prison Health Servs., 679 F.3d 433, 440 (6th Cir. 2012).

         ALS provides ventilator and respiratory care services to skilled nursing facilities in the United States. [DE 1-2 at ¶¶ 5, 7]. Part of its business is to furnish and administer the application of medical gases to patients in those facilities. Id. Champs, through Premier Group Purchasing (“Premier”), facilitates a group purchasing plan for medical supplies that offers its members the opportunity to buy products from participating vendors at discounted prices. Id. at ¶ 8-9.

         In 2009, Champs accepted ALS's application to join the group purchasing plan. Id. at ¶ 10. As part of the process, ALS executed Champs's “Continuation of Care Membership Application” (the “Membership Application”). In October 2010, ALS contracted with Airgas NorPac, Inc. (“Airgas”) for Airgas to supply medical gases to ALS for seven years. [DE 1-2 at ¶ 12]. The contract resulted from ALS's membership in Premier, with Champs acting as ALS's purported agent. Id. When ALS entered into the Airgas contract, a Champs employee represented to ALS that ALS was obtaining the best price offered for the Airgas medical gases. Id. at ¶ 13. Other Champs employees reiterated this claim in response to ALS's later inquiries. Id.

         Champs did not inform ALS that Airgas offered eight pricing tiers. If ALS were designated as an acute-care provider, it would be entitled to the more cost-effective Tier 5 pricing. Id. at ¶ 15. Champs employee Timothy Andrejcak represented to Airgas that ALS provided non-acute care services and was thus entitled only to Tier 2 pricing. Id. at ¶ 22. Champs also purported to sign on ALS's behalf in designating ALS as a non-acute care provider. Id. ALS never authorized Champs to make that representation or to sign on its behalf in making the designation. Id. ALS had no knowledge that Champs made these representations to and designations with Airgas until September 2016-approximately six years after ALS first contracted with Airgas. Id. at ¶ 23.

         On December 4, 2017, ALS filed suit against Champs in Jefferson County Circuit Court. [DE 1-2]. In its Complaint, ALS alleges that Champs, among other things, made intentional or negligent misrepresentations, fraudulently induced ALS to enter into a contract with a non-party for the purchase of oxygen for seven years and overpay for that oxygen, and breached the implied duties of good faith and fair dealing. Id. at ¶¶ 1, 7-23. On January 16, 2018, Champs filed a timely notice to remove the action to this Court pursuant to 28 U.S.C. § 1441. Id. Champs now moves to dismiss Counts I and II under Rule 9(b) and all Counts under Rule 12(b)(6). [DE 4].


         A. Fraudulent Inducement (Count I) and Misrepresentation (Count II)

         1. Applicable Law and Legal Standard

         Champs argues that ALS's claims for fraudulent inducement (Count I) and misrepresentation (Count II) are not pled with particularity under Federal Rule of Civil Procedure 9. [DE 4-1 at 35-38]. This action is in federal court based on diversity jurisdiction pursuant to 28 U.S.C. § 1332. Federal procedural law governs this action and establishes the appropriate pleading standard for inducement and misrepresentation. Minger v. Green, 239 F.3d 793, 799 (6th Cir. 2001); Tucker v. Heaton, No. 5:14-CV-00183-TBR, 2015 WL 1884384, at *3 (W.D. Ky. Apr. 24, 2015); Fed.R.Civ.P. 81(c)(1). If ALS satisfies federal pleading requirements for fraudulent inducement and misrepresentation, Kentucky's substantive law will apply to those claims. Rawe v. Liberty Mut. Fire Ins. Co., 462 F.3d 521, 526 (6th Cir. 2006).

         Rule 9(b) requires plaintiffs to plead fraudulent inducement and misrepresentation allegations with particularity. Republic Bank & Tr. Co. v. Bear Stearns & Co., 683 F.3d 239, 247 (6th Cir. 2012). At a minimum, plaintiffs must allege: (1) the time, place, and content of any allegedly false representations; (2) the fraudulent scheme; (3) the defendant's fraudulent intent; and (4) the resulting injury. U.S. ex rel. Bledsoe v. Cmty. Health Sys., Inc., 342 F.3d 634, 643 (6th Cir. 2003) (internal citations and quotation marks omitted); see also Frank v. Dana Corp.,547 F.3d 564, 570 (6th Cir. 2008) (internal citations and quotations omitted). General allegations of fraud are insufficient. VanDenBroeck v. CommonPoint Mortgage Co., 210 F.3d 696, 701 (6th Cir. 2000). For allegations against a corporation, the plaintiff must also identify the representatives who made the statements from which the plaintiff's claims arise. William Beaumont Hosp. Sys. v. Morgan Stanley & Co., LLC, 677 Fed.Appx. 979, 984 (6th Cir. 2017). Thus, a plaintiff must identify the speaker of the alleged statements instead of “referring vaguely only to ‘defendants.'” Cataldo v. U.S. Steel Corp.,676 F.3d 542, 551 (6th Cir. 2012). Such ...

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