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United Health Alliance, LLC v. United Medical, LLC

Court of Chancery of Delaware

November 20, 2014

UNITED HEALTH ALLIANCE, LLC, a Delaware limited liability company, Plaintiff/ Counterclaim Defendant,
UNITED MEDICAL, LLC, a Delaware limited liability company, Defendant/ Counterclaim Plaintiff.

Submitted: August 13, 2014

Jeffrey M. Weiner, Esq., LAW OFFICES OF JEFFREY M. WEINER, Wilmington, Delaware; James S. Green, Sr., Esq., SEITZ, VAN OGTROP & GREEN, P.A., Wilmington, Delaware; Attorneys for Plaintiff/Counterclaim Defendant United Health Alliance, LLC.

Adam L. Balick, Esq., Melony R. Anderson, Esq., BALICK & BALICK, LLC, Wilmington, Delaware; Attorneys for Defendant/Counterclaim Plaintiff United Medical, LLC.


PARSONS, Vice Chancellor.

This is primarily a breach of contract action seeking damages and injunctive relief for loss of access to medical billing and records management software. The plaintiff who filed the initial complaint claims to have entered into a contract with the defendant. The complaint was amended later to add two more plaintiffs who allegedly are third-party beneficiaries of that contract. The defendant has moved to dismiss the latter two plaintiffs for failure to state a claim upon which relief can be granted. Those plaintiffs allege, in the alternative, legal theories of quasi-contract, unjust enrichment, and third-party beneficiary status.

For the reasons that follow, I conclude that it is reasonably conceivable that the two additional plaintiffs could prove facts at trial that would entitle them to recover on a third-party beneficiary theory. The plaintiffs' claims based on theories of quasi-contract and unjust enrichment, however, fail to meet the pleading requirements to survive a Rule 12(b)(6) motion. Therefore, I grant in part and deny in part the defendant's motion to dismiss.


A. The Parties

Plaintiff United Health Alliance, LLC (“UHA”) is a Delaware limited liability company that provides administrative, management, and billing support for the medical services rendered by its affiliates, Christiana Medical Group, P.A. (“CMG”), Bayhealth Hospitalists, LLC (“BHH, ” and, together with CMG, the “Affiliates”), and St. Francis Hospitalists, LLC. UHA, CMG, and BHH comprise the “Plaintiffs” in this case.

Defendant, United Medical, LLC (“UM”), is a Delaware limited liability company and an authorized distributor of PowerWorks Practice Management (“PowerWorks”), a software application for the healthcare services industry. UM distributes PowerWorks pursuant to an agreement with Cerner Healthcare Solutions, Inc. (“Cerner”).

B. Facts

Plaintiffs aver that prior to January 2011, when UM began providing access to PowerWorks, UHA was party to a Software License, Hardware Purchase, Services and Support Agreement with Cerner, through which it had access to Cerner's PowerWorks software. UHA entered into the agreement with Cerner on or about January 27, 2009, and the agreement had a term of five years. Beginning in January 2011, UHA began accessing PowerWorks from UM, in its role as an authorized Cerner distributor, rather than from Cerner directly. At or around that time, UHA and Cerner formally terminated the contract between them. UM allegedly assumed its responsibility for UHA pursuant to an agreement between UM and Cerner. Specifically, UM and Cerner had entered into an Amended and Restated Cerner System Schedule No. 1 on February 4, 2011, which was effective retroactively as of December 31, 2010. After signing the agreement with Cerner, UM, not Cerner, provided PowerWorks to UHA.

UM and UHA never signed a written contract for this service. UM provided its standard service agreement to UHA, which UHA revised and returned to UM. Though the parties attempted to resolve their differences, their negotiation was unsuccessful. No written agreement was ever finalized and executed. During these negotiations, UHA paid UM for access to PowerWorks, and UM continued to provide software and support services. Plaintiffs allege that, despite the disagreement as to certain terms, there was an unwritten contract between UHA and UM, based on the continued payments by UHA and the provision of service by UM. The Affiliates are alleged to have been third-party beneficiaries of that contract.

On or before May 1, 2012, Defendant UM prepared and sent an invoice to UHA for the entire month of May 2012. UHA paid by check indicating clearly thereon that the payment was for the entire month of May; UM deposited UHA's check on May 7, 2012. UM, therefore, accepted payment for the entire month of May.

Although the parties disagree regarding the cause, on May 7, 2012, UM blocked UHA's access to PowerWorks. UM restored UHA's access to that software from around 6:00 p.m. on May 14 until June 1, 2012. Thereafter, UHA demanded eight more days of access, which it alleges were necessary to close out the electronic billing and payment information from before June 1, 2012. UM never restored this access. UHA also demanded the return, in an electronic format, of ―its confidential information provided for storage and processing of data for billing-[2] that had been maintained by the PowerWorks system.

Plaintiffs contend UM's actions breached its agreement with UHA. As a result of this breach, Plaintiffs allege that they have been precluded from seeking payment “from insurers and/or their insureds/patients.”[3] According to UHA and its Affiliates, they have been unable, due to UM's breach, to bill their insureds and certain patients and have incurred: (1) financial damages of $286, 395; and (2) expenses of $48, 601 as of November 2013. The Complaint further alleges that “Plaintiff UHA has no adequate remedy at law or otherwise for the harm done, ” and that “Plaintiff UHA will suffer irreparable harm, damage and injury, ” unless UM is enjoined.[4] The Affiliates claim that they were third-party beneficiaries to the contract between UHA and UM. In addition, all Plaintiffs have asserted a quasi-contract claim and an unjust enrichment claim against UM for the above actions, as alternate theories of relief.

In their prayer for relief as to the claims subject to UM's motion to dismiss, Plaintiffs seek: (1) a temporary restraining order (“TRO”) against UM preventing it from destroying or interfering with Plaintiffs' confidential information in electronic format; (2) a TRO and preliminary injunction requiring UM to surrender to UHA all confidential information which UHA provided to UM in connection with patient billing and other management services performed by UHA; (3) eventually, a permanent injunction to the ...

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