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James v. United Medical LLC

Superior Court of Delaware

March 31, 2017

PHYLLIS P. JAMES and NEW CASTLE FAMILY CARE, P.A., Plaintiffs,
v.
UNITED MEDICAL LLC, UNITED MEDICAL OF DE, LLC, UNITED MEDICAL OF PA, LLC, and UNITED MEDICAL CLINIC, LLC, Defendants.

          Submitted: December 2, 2016

         Upon Defendants' Motion to Dismiss, Granted in part

          Leroy A. Tice, Esquire, of LEROY A. TICE, ESQUIRE, P.A., Wilmington, Delaware, and Perry F. Goldlust, of PERRY F. GOLDLUST, LLC, Wilmington, Delaware; Attorneys for Phyllis P. James and New Castle Family Care, P.A.

          Jennifer C. Jauffret, Esquire and Travis S. Hunter, Esquire, of RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware; Attorneys for United Medical Clinic, LLC, United Medical, LLC, United Medical Clinic of DE, LLC, and United Medical Clinic of PA, LLC.

          MEMORANDUM OPINION

          J. LeGROW

          This action involves a related series of agreements between the plaintiffs, who are a primary care physician and her medical practice, and the defendants, who are an affiliated group of medical management companies. Under the agreements, the plaintiff physician agreed to work for the defendants, who also agreed to undertake collection efforts on her behalf for the accounts receivable for her old practice. A second agreement at issue, at least according to the plaintiffs, arises from a letter of intent in which the defendants agreed to pay $120, 000 for the medical practice, particularly its good will and tangible property. The plaintiffs have asserted various breach of contract claims, along with alternative theories of recovery, arising from both the billing agreement and the letter of intent. The defendants have moved to dismiss the claims for a variety of reasons. The primary question presented is whether an integration clause in one of the parties' agreements unambiguously eliminated all other agreements between them, including the letter of intent that forms the basis for the plaintiffs' second breach of contract claim. I conclude the integration clause is ambiguous in its scope and therefore deny the defendants' motion on that, and most other, bases. My reasoning follows.

         FACTUAL BACKGROUND

         Except as otherwise noted, the following facts are drawn from the amended complaint and the documents it incorporates by reference, drawing all reasonable inferences in favor of the plaintiffs. At all relevant times, United Medical Clinic, LLC ("United Medical Clinic"), United Medical, LLC ("United Medical"), United Medical Clinic of DE, LLC (the "Clinic of DE"), and United Medical Clinic of PA, LLC (the "Clinic of PA, " and collectively with United Medical Clinic, United Medical, and the Clinic of DE, "Defendants") operated healthcare and billing services providers in Delaware and Pennsylvania. Kemal Erkan was the president of United Medical and an authorized representative of the Clinic of PA. Susan Andersen also worked for one or more of Defendants as chief operations officer.

         Dr. Phyllis P. James ("Dr. James") owned and operated New Castle Family Care, P.A. ("Family Care, " and jointly with Dr. James, "Plaintiffs"). In April 2013, Dr. James proposed to sell Family Care to Defendants. On or about July 5, 2013, Mr. Erkan issued a letter of intent (the "LOI") setting forth the terms under which Defendants would acquire Family Care and employ Dr. James.

         On July 9, 2013, the parties executed the LOI, which provided: "This document serves as our Letter of Intent and outlines our discussions. The details of this letter will be documented by [Defendants'] attorney in your Employment Agreement and Good Will Agreement pending execution of this letter."[1] In addition to specifying the salary and benefits Dr. James would receive under the employment agreement and the duties she would be expected to undertake, the LOI listed the following terms:

• Furniture, Computers, Office Equipment[, ] and Medical Equipment - $120, 000.00 to be paid over three years
• Lease for computers - Balance of payments to be assumed by UMC of DE (see computers above)[.] Lease follows letter.

         On August 30, 2013, Dr. James and Ms. Andersen negotiated by email three outstanding contracts: a billing agreement, an employment agreement, and a good will agreement. In the last email exchange of record, Ms. Andersen stated:

The Billing Agreement . . . is attached. . . . [The] Employment Agreement . . . is attached. . . . The only Agreement we are waiting on is the Good Will Agreement.... However, the letter of intent which was signed by both parties does cover these items. The signed letter of intent is equivalent to a written contract.[2]

         On September 5, 2013, Dr. James entered into an employment agreement with the Clinic of DE, [3] whereby Dr. James agreed to provide medical care to Defendants' patients on a full-time basis beginning October 1, 2013 (the "Employment Agreement"). Also on September 5, 2013, Dr. James entered into an agreement with United Medical whereby United Medical agreed to provide billing services for Family Care's existing accounts receivable beginning October 1, 2013 (the "Billing Agreement").

         In the years that followed, the parties' relationship soured for reasons that are neither clear nor relevant for purposes of resolving the pending motion. In June 2016, Plaintiffs filed suit alleging claims for breach of contract, unjust enrichment, conversion and theft, and promissory estoppel based on the Billing Agreement and LOI. Defendants moved to dismiss Plaintiffs' amended complaint for failure to state a claim, and the parties briefed and argued that motion.

         THE PARTIES' CONTENTIONS

         Dr. James advances two breach of contract claims in her amended complaint: one arising from the Billing Agreement and one arising from the LOI. She alternatively asserts claims for unjust enrichment, promissory estoppel, and conversion and theft. In addition, Dr. James has brought a promissory estoppel claim based on the storage of patient files at a facility owned by a third party, Iron Mountain.

         1. The Billing Agreement

         Dr. James first alleges Defendants breached the Billing Agreement by failing to "make any payments to reduce plaintiffs' indebtedness."[4] Dr. James contends Defendants were "contractually obligated to actively pursue the collection of Family Care['s] [accounts receivable]" and "use the proceeds from the collection of the [accounts receivable] . . . to pay plaintiffs' [accounts payable]."[5] Dr. James requests judgment against Defendants "for the full amount of the [accounts receivable] plus accumulated interest and fees."[6]

         Alternatively, under a conversion and theft theory, Dr. James alleges Defendants (acting as Family Care's successor) collected money due to Plaintiffs and converted it for Defendants' own use without properly compensating Dr. James.[7] "The specific accounts and amount of funds collected are not presently known, although Dr. James believes that they are substantial."[8] In addition, Plaintiffs allege Defendants took Plaintiffs' tangible assets, such as Family Care's patient files and computers.[9]

         In response, Defendants contend Plaintiffs' claim for breach of the Billing Agreement is based on an agreement between Defendants and Family Care, rather than any agreement with Dr. James individually.[10] Defendants assert Family Care cannot maintain a cause of action because it had been void and inoperable for nine years at the time the complaint was filed.[11]

         As to Plaintiffs' conversion and theft claim, Defendants argue Plaintiffs' claim is governed by an express written contract, the Employment Agreement, and Plaintiffs therefore are limited to a breach of contract claim unless they can allege Defendants violated a legal duty independent of the contract.[12] Defendants also assert that a conversion action for money damages - such as a claim that "Defendants converted money in the form of accounts receivable" - is unavailable under Delaware law.[13]

         2. The Letter of Intent

         Dr. James also claims Defendants breached the terms of the LOI by failing to pay her $120, 000 in exchange for "her practice, " which included good will and other tangible property.[14] Dr. James avers that Defendants represented that the LOI was a binding agreement, which Dr. James alleges induced her to enter into the Employment Agreement and Billing Agreement with Defendants. [15]

         In the alternative, Dr. James argues that even if the Court concludes the LOI is not a binding agreement, Plaintiffs are entitled to judgment of $120, 000 because either (1) Defendants unjustly were enriched when Dr. James transferred all Family Care's patient files to Defendants and Defendants "announced to all of Dr. James' patients as well as its own subscribers that is was the successor to Dr. James' practice;"[16] or (2) under a promissory estoppel theory, Defendants induced Dr. James to dissolve her medical practice and took the assets Plaintiffs provided.[17]

          Defendants contend the parties did not intend for the LOI to serve as a binding agreement, but merely as an outline of the parties' discussions, the details of which were to be documented in a good will agreement authored by Defendants' attorney. Defendants also contend that the Employment Agreement, containing an integration clause, superseded the LOI.[18] As to Plaintiffs' unjust enrichment and promissory estoppel claims, Defendants assert both claims fail because the subject of those claims "are the subject of an express contract" - either the Employment Agreement or the LOI - and therefore any claim must be brought under contract law.[19]

         3. Iron Mountain

         Finally, Plaintiffs seek "the total amount of fees due to Iron Mountain for the storage fees of patient records."[20] Plaintiffs allege Defendants assumed custody and control of Plaintiffs' records and "undertook the responsibility for the storage" of those records.[21] Plaintiffs argue Defendants "engaged, for their own account, the services of Iron Mountain for the safe storage of [P]laintiffs' patient records."[22]According to Dr. James, "Iron Mountain has not been paid storage charges . . . from August 31, 2013 through and including May 30, 2015."[23]

         Defendants assert any claim based on Plaintiffs' allegations belongs to Iron Mountain.[24] Defendants argue Plaintiffs have not alleged that Plaintiffs paid Iron Mountain on Defendants' behalf, and therefore Plaintiffs have suffered no injury that arguably would confer standing.[25] Defendants further argue that Plaintiffs have failed to allege: (1) a promise between Plaintiffs and Defendants related to the Iron Mountain storage fees, (2) that Defendants reasonably expected to induce Plaintiffs' action or forbearance, or (3) that Plaintiffs reasonably relied on a promise and acted to their detriment.

         STANDARD

         On a motion to dismiss, the Court must determine whether the "plaintiff may recover under any reasonably conceivable set of circumstances susceptible of proof."[26] "If [the plaintiff] may recover, the motion must be denied."[27] A court may grant the motion if "it appears to a reasonable certainty that under no state of facts which could be proved to support the claim asserted would plaintiff be entitled to relief."[28] When applying this standard, the Court will accept as true all non-conclusory, well-pleaded allegations. [29] In addition, "a trial court must draw all reasonable factual inferences in favor of the party opposing the motion."[30]

         ANALYSIS

         A. The breach of contract claim based on the Billing Agreement is dismissed only as to Family Care.

         Defendants move to dismiss Count I of the amended complaint on the basis that Family Care, who was party to the contract, is a void entity without standing to bring suit.[31] To establish standing, a plaintiff must show that he or she sustained an injury-in-fact and the interest that he or she seeks to protect is within the zone of interests to be protected.[32] Under Delaware law, if a corporation is declared void under 8 Del. C. § 510, "all powers conferred by law upon the corporation are declared inoperative."[33] Because the record establishes Family Care was "void" as of March 1, 2007, [34] any statutory period allowing Family Care to bring a suit has expired, [35] and there is no allegation that Family Care received an extension of that period, Count I is dismissed, without prejudice, as to Family Care.[36]

         That conclusion does not end the Court's inquiry as to Count I because Dr. James also is named as a party to that claim. The breach of contract claim based on the Billing Agreement sufficiently is pleaded both on behalf of Family Care, as the signatory, and Dr. James, as a third-party beneficiary.[37] Accordingly, Defendants' motion to dismiss Count I as to Dr. James is denied.

          B. The integration clause in the Employment Agreement does not unambiguously supersede the LOI.

         Defendants' motion to dismiss Count II largely depends on whether the Employment Agreement supersedes and subsumes the LOI. Defendants argue the integration clause in the Employment Agreement unambiguously supersedes all other agreements between the parties. The integration clause in the Employment Agreement reads, in pertinent part:

This Agreement, between the parties, constitutes the entire agreement between the parties hereto with respect to all matters; provided, however, that the terms of employment set forth in any Employment Handbook or other policy of Employer shall remain in effect and be in addition to the terms of this Agreement except to the extent inconsistent herewith ...

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