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Progenyhealth, Inc. v. Caresource Management Group, Co.

United States District Court, S.D. Ohio, Western Division, Dayton

June 15, 2017

PROGENYHEALTH, INC., Plaintiff,
v.
CARESOURCE MANAGEMENT GROUP, CO., Defendant.

          ENTRY AND ORDER GRANTING MOTION TO DISMISS (DOC. 10) BY DEFENDANT CARESOURCE MANAGEMENT GROUP, CO.

          THOMAS M. ROSE UNITED STATES DISTRICT JUDGE.

         This case is before the Court on the Motion to Dismiss (Doc. 10) filed by Defendant CareSource Management Group, Co. (“CareSource”). Plaintiff Progeny Health (“Progeny”) provides neonatal case management and coordination services for newborn infants. CareSource is a managed care company that contracts with state agencies to provide managed care health plans to the public and, particularly, to individuals who receive Medicaid or equivalent state-supported healthcare. In June 2015, CareSource entered into a three-year agreement with Progeny for its services. In December 2016, CareSource decided that it would no longer refer newborns to Progeny, although it expected Progeny to continue managing newborns who had already been referred. Progeny alleges that CareSource's decision to stop referring newborns is a breach of their agreement and brought this lawsuit for declaratory judgment and breach of contract against it.

         CareSource moves to dismiss Progeny's Complaint under Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief may be granted. CareSource argues that it does not have any obligation to continue referring newborns to Progeny and, therefore, its decision to stop doing so was not a breach of their agreement.

         As discussed below, the Court may construe the parties' agreement as a matter of law on CareSource's Motion to Dismiss because its terms are clear and unambiguous. Those terms do not place any duty on CareSource to refer any number of eligible newborns to Progeny during the term of the agreement. Consequently, Progeny has not alleged a breach of the agreement and CareSource is entitled to dismissal of the Complaint. The Court therefore GRANTS the Motion to Dismiss (Doc. 10).[1]

         I. THE COMPLAINT'S ALLEGATIONS

         Progeny has provided neonatal case management and coordination services to more than 1, 000 hospitals and 6, 000 healthcare providers across the country. (Doc. 1 at ¶ 5.) CareSource is an Ohio-based, non-profit company that contracts with state agencies to provide managed health care to the public, including to Medicaid and other state-supported healthcare recipients. (Id. at ¶ 8.) In 2015, for example, CareSource contracted with the Ohio Department of Medicaid to provide managed care plans to eligible residents in the State of Ohio. (Id. at ¶9.)

         On June 11, 2015, Progeny and CareSource entered into a Delegated Services Agreement (the “Agreement”). (Doc. 1 at ¶ 11.) Under the Agreement, Progeny agreed, upon referral by CareSource, to coordinate continuing care for newborns who are admitted to a hospital's special care unit or Neonatal Intensive Care Unit (“NICU”) at any time from birth through their first year of life. (Id. at ¶¶ 12-3; Doc. 1-2, Ex. A.) In return, CareSource agreed to pay Progeny a one-time fee of $150, 000 to implement the program and an additional $2, 150 for each newborn that it referred. (Doc. 1-2, Ex. A-1.)

         The Agreement provides for a phased implementation of Progeny's services, beginning with a 120-day pilot program in Northeast Ohio. (Id., Ex. A.) After the successful completion of the pilot, the parties could agree to extend the program beyond Northeast Ohio. (Id.) The Agreement provides for a three-year term, unless otherwise terminated by the parties. (Doc. 1-2 at ¶ 6.1.) From October 1, 2015 through December 31, 2016, Progeny provided services to over 1, 900 newborns referred by CareSource pursuant to the Agreement. (Id. at ¶¶ 15-16.)

         By letter dated December 8, 2016, CareSource told Progeny that, effective January 1, 2017, it would no longer refer newborns to Progeny for services. (Doc. 1-4.) CareSource has not referred any newborns to Progeny in 2017. (Doc. 1 at ¶ 37.)

         Progeny contends that CareSource's refusal to refer newborns is a breach of the Agreement. On February 24, 2017, Progeny filed this lawsuit against CareSource for declaratory judgment and breach of contract. (Doc. 1.) Progeny seeks a declaratory judgment holding that the Agreement does not permit CareSource “to unilaterally and prematurely cease referring eligible newborns” to Progeny and, therefore, CareSource is in breach of the Agreement. Under the breach-of-contract claim, Progeny alleges that it is entitled to damages for CareSource's breach of the Agreement based on the same conduct. (Id. at ¶¶ 50-57.)

         On April 14, 2017, CareSource filed its Motion to Dismiss the Complaint. (Doc. 10.) Progeny filed a memorandum in opposition (Doc. 11), in response to which CareSource filed a reply (Doc. 12). The Motion to Dismiss is therefore fully briefed and ripe for review. The Court has diversity jurisdiction over this case under 28 U.S.C. § 1332 because there is complete diversity between the parties and the amount in controversy exceeds $75, 000. (Doc. 1 at ¶¶ 1-2 (Progeny is a PA corporation with its headquarters in PA; CareSource is an OH corporation with its headquarters in OH).)

         II. LEGAL STANDARD

         When considering a motion to dismiss under Rule 12(b)(6), courts must construe the complaint in the light most favorable to the plaintiff and accept as true all “well-pleaded allegations” in the complaint. Republic Bank & Trust Co. v. Bear Stearns & Co., 683 F.3d 239, 246 (6th Cir. 2012). The court need not accept, however, “a legal conclusion couched as a factual allegation.” Id. (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)) (internal quotation marks omitted). “[A] plaintiff's obligation to provide the ‘grounds' of his ‘entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal alterations omitted). “To survive a motion to dismiss, a ...


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