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Whittier IPA, Inc. v. Steward Health Care Network, Inc.

Superior Court of Massachusetts, Suffolk, Business Litigation Session

January 18, 2017

Whittier IPA, Inc.
Steward Health Care Network, Inc. No. 136528

          Filed January 19, 2017


          Kenneth W. Salinger, Justice of the Superior Court.

         Steward Health Care Network, Inc. (" SHCN"), is a physician network. It negotiates and implements contracts with insurers and other entities that pay for SHCN's participating doctors to provide medical care to the payors' insureds or members. Whittier IPA, Inc., is an association of independent physicians. It joined the SHCN network in January 2012, but began exploring other options in 2013. After SHCN learned that Whittier had agreed to join a competing physician network run by the Beth Israel Deaconess Care Organization (" BIDCO"), SHCN terminated its agreements with Whittier effective August 31, 2014.

         Whittier claims that is still owed substantial sums by SHCN under the parties' contracts. The court (Kaplan, J.) granted partial summary judgment in Whittier's favor in June 2015, declaring that if SHCN received incentive payments from health insurers and other payors for periods during which Whittier was an SHCN member, then " SHCN breached its contract with Whittier by failing to pay Whittier its pro rata share of those payments." The amount that SHCN must pay Whittier is still in dispute. The current case schedule, which was jointly requested by both parties, requires the litigants to complete all fact discovery by February 10, 2017, and to complete the exchange of any expert reports by March 24, 2017.

         SHCN seeks leave to assert counterclaims against Whittier and third-party claims against Anna Jacques Hospital. The Court will DENY this motion. It would be futile to allow SHCN to assert its proposed counterclaims against Whittier for breach of contract because they could not survive a motion to dismiss. The proposed claims against Anna Jacques for intentional interference and allegedly violating G.L.c. 93A would also be futile. In any case, it would be unfairly prejudicial to Whittier and to Anna Jacques to allow permissive joinder of a new defendant-in-counterclaim under Mass.R.Civ.P. 20 just weeks before the completion of discovery in this case. SHCN has no right to join Anna Jacques as a defendant-in-counterclaim under Rule 19 and does not seek to assert third-party claims for indemnification or contribution as allowed under Rule 14.

         1. Proposed Counterclaims Against Whittier

         SHCN seeks leave to assert counterclaims against Whittier for allegedly breaching parts of its written contracts with SHCN. The Court will deny leave to assert these counterclaims because doing so would be futile, in that these counterclaims could not survive a motion under Mass.R.Civ.P. 12(b)(6) to dismiss for failure to state a claim upon which relief can be granted. See generally Johnston v. Box, 453 Mass. 569, 583, 903 N.E.2d 1115 (2009) (" Courts are not required to grant motions to amend prior [pleadings] where 'the proposed amendment . . . is futile.'" (quoting All Seasons Servs., Inc. v. Commissioner of Health & Hosps. of Boston, 416 Mass. 269, 272, 620 N.E.2d 778 (1993)); Thermo Electron Corp. v. Waste Mgmt. Holdings, Inc., 63 Mass.App.Ct. 195, 203, 825 N.E.2d 545 (2005) (affirming denial of motion for leave to assert counterclaim that would have been futile); Mancuso v. Kinchla, 60 Mass.App.Ct. 558, 572, 806 N.E.2d 427 (2004) (if amendment to add claim could not survive motion to dismiss, allowing amendment would be exercise in futility).

         1.1. Contract Provisions

         When Whittier agreed in October 2011 to join the SHCN network, the parties executed and entered into a written " Service Agreement" and a related " Letter Agreement." The following provisions of the parties' contracts are relevant.

         1.1.1. Exclusivity Provisions

         In the Service Agreement, Whittier granted SHCN exclusive authority to negotiate and enter into " Risk Contracts" on behalf of Whittier and its physicians, and gave SHCN " a limited right of first opportunity . . . to negotiate and enter into Risk Contracts" on behalf of all of Whittier's physicians, during the term of the contract. Whittier also agreed that its doctors who work as primary care physicians would not " participate in any Risk Contract with any Payor" other than through SHCN. The term " Risk Contract" was defined to mean an agreement with a " Payor" regarding the provision of and payment for medical services. The term " Payor" was defined to mean insurers and other private or governmental entities that pay for medical services provided to enrolled individuals.

         SHCN acknowledged in the Letter Agreement that, as of the time SHCN and Whittier entered into their contractual relationship, Whittier was contractually obligated to give a competitor of SHCN called the Lower Merrimack Valley Physician Hospital Organization, Inc. (or " LMVPHO") " a right of first opportunity to negotiate payor contracts on behalf of Whittier and Whittier Physicians." SHCN agreed that all the terms of its Service Agreement with Whittier, including the exclusive representation and right of first opportunity provisions, were subject to Whittier's pre-existing obligation to LMVPHO and thus would not have any effect until Whittier was able to terminate its obligations to LMVPHO.

         1.1.2. Termination Provisions

         The initial term of the Service Agreement was five years, beginning January 1, 2012. But SHCN and Whittier agreed that their contractual arrangements could " be terminated by either party, with or without cause, at any time upon ninety (90) days prior written notice to the other party." The Letter Agreement provided that if the Service Agreement were terminated by either party then Whittier would have the right to terminate its participation in any existing contract with a third-party payor and would not be obligated to participate in any contract with a third-party payor that SHCN entered into or renewed after the date of the termination notice.

         1.1.3. Confidentiality Provision

         The SHCN Service Agreement also contained a provision that addressed " proprietary information." This provision imposed a number of obligations, including that " [t]he parties shall . . . hold in strict confidence any information specified in writing by any party hereto as confidential information."

         This contract specifies in the first paragraph that it was " made and entered . . . by and between" SHCN and Whittier, which means that they are the " parties" referred to in the confidentiality provision. The contract expressly distinguishes between Whittier (which it calls the " IPA" because it is an independent physician association) and the physicians who are members ...

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