ARUP Labs. v. Pac. Med. Lab.

1

ARUP LABORATORIES, INC., a Utah corporation, Plaintiff, v. PACIFIC MEDICAL LABORATORY, INC., a California corporation, Defendant.

No. 2:20-cv-00186

United States District Court, D. Utah

August 3, 2022

Daphne A. Oberg, Magistrate Judge.

MEMORANDUM DECISION AND ORDER GRANTING [104] MOTION TO STRIKE AND GRANTING IN PART AND DENYING IN PART [72] MOTION FOR SUMMARY JUDGMENT

David Barlow, District Judge.

This case arises from a contractual dispute regarding the pricing of reference laboratory services. Plaintiff ARUP Laboratories, Inc. (ARUP), asserts that Defendant Pacific Medical Laboratory, Inc. (PML), has failed to pay four invoices for lab services it has rendered.^[1] PML denies ARUP's claims and has raised several counterclaims asserting, among other things, that ARUP has repeatedly overcharged it for the services rendered.^[2]

ARUP has now moved for summary judgment on all of its claims and most of PML's counterclaims.^[3] PML has filed a response opposing the motion,^[4] and ARUP has replied.^[5] ARUP has also filed a motion to strike two exhibits PML submitted with its response to ARUP's motion for summary judgment.^[6] PML has filed a response opposing that motion,^[7] and ARUP has replied.^[8] Having reviewed the briefing for both motions and relevant case law, the court concludes that oral argument is not necessary to resolve them.^[9] For the reasons that follow, ARUP's motion to strike is GRANTED and its motion for summary judgment is GRANTED IN PART and DENIED IN PART.

BACKGROUND

ARUP is a Utah-based nonprofit and academic reference laboratory that provides laboratory tests and services to clients across the country.^[10] PML is a full-service clinical laboratory that conducts tests for clinical practitioners.^[11] On April 1, 2014, ARUP began providing laboratory services for PML subject to a one-year agreement (the Agreement).^[12]ARUP and PML subsequently amended the Agreement to extend its term until May 31, 2018, leaving all other provisions of the Agreement the same.^[13] However, May 31, 2018, came and passed without any further discussion between ARUP and PML about amending, extending, or renewing the Agreement.^[14] Despite that, PML continued to order services from ARUP, and ARUP continued to bill and obtain payments from PML for the services provided.^[15] However, in October 2019, ARUP sent a letter to PML asserting that PML had been purchasing ARUP's services without an agreement in place and asking PML to sign a new agreement.^[16] PML declined to sign a new agreement because it believed the parties' Agreement was still in effect and because the new prices ARUP wished to charge were too high.^[17] PML subsequently began disputing what it had been charged over the course of the parties' business relationship and refused to pay ARUP's invoices.^[18] On January 16, 2022, ARUP sent a letter to PML noting the amounts due and purportedly terminating the Agreement.^[19] In all, PML has refused to pay four invoices.^[20]

On February 14, 2020, ARUP commenced an action against PML in Utah's Third Judicial District Court, asserting breach of contract, claim on account, and unjust enrichment.^[21]PML removed the action to this court soon thereafter and asserted counterclaims.^[22] PML amended its counterclaims on August 4, 2020,^[23] and ARUP amended its complaint on December 17, 2020.^[24] ARUP moved for summary judgment on February 7, 2022.^[25]

STANDARD

A party is entitled to summary judgment only if it is able to show there is no genuine dispute as to any material fact and that it is entitled to judgment as a matter of law.^[26] Material facts are ones that “might affect the outcome of the suit under the governing law.”^[27] And a dispute regarding a material fact is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.”^[28]

DISCUSSION

ARUP has asserted two alternative grounds for relief in this action: breach of contract and unjust enrichment.^[29] In response, PML has asserted five counterclaims: two for breach of contract, and one each for breach of the implied covenant of good faith and fair dealing, unjust enrichment, and declaratory relief.^[30] ARUP moves for summary judgment on both of its claims and most of PML's counterclaims.

I ARUP's Evidentiary Objections

Before reaching the substance of ARUP's motion for summary judgment, the court must first address ARUP's motion to strike.^[31] ARUP argues that two exhibits submitted in support of PML's opposition (Exhibits 20 and 21), and the damages claims derived therefrom, should be stricken for two reasons.^[32] First, ARUP argues that this evidence should be stricken under Federal Rule of Civil Procedure 37(c) because PML failed to satisfy Rule 26's disclosure requirements regarding damages, and PML's failure was not harmless or substantially justified.^[33]

Second, ARUP argues that even if striking the evidence under Rule 37(c) is unwarranted, the evidence is inadmissible because it has not been properly authenticated.^[34]

Rule 37(c) provides that “[i]f a party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless.”^[35] Under Rule 26(a), a party must provide in their initial disclosures, among other things, “a computation of each category of damages claimed” and “the documents or other evidentiary material . . . on which each computation is based.”^[36]

In its initial disclosures, PML stated the following:

Pacific Medical is seeking as damages: (1) amounts ARUP charged to and collected from Pacific Medical in excess of the amounts agreed upon by the parties and (2) amounts for which Pacific Medical was unable to obtain reimbursement as a result of ARUP's billing for services in a manner that did not comply with appropriate CPT coding for such services. The total amount of such damages is still being calculated, but is presently believed to be in excess of $226,704.03-not counting interest, attorneys' fees, and costs. The documents or other evidentiary material, unless privileged or protected from disclosure, on which this computation is based is available for inspection and copying as under Rule 34.

Now, in opposing ARUP's motion for summary judgment, PML presents two alternative damages computations based on two alternative theories as to how ARUP charged PML “in excess of the amounts [they] agreed upon.”

First, PML claims that it suffered $579,383 in damages because the Agreement required ARUP's prices to match or fall below reimbursement rates set by Medi-Cal, California's Medicaid health care program.^[37] To support this calculation, PML has provided Exhibit 20, which appears to calculate, on a month-to-month basis and in total, how much PML would have paid for ARUP's services had ARUP priced its services at Medi-Cal's reimbursement rates.^[38]

In the alternative, PML claims that it suffered $11,154 in damages because ARUP charged prices for some services that were higher than prices listed in the fee schedules it provided to PML from time to time.^[39] To support this calculation, PML has provided Exhibit 21, which appears to calculate, on a month-to-month basis and in total, how much PML would have paid for ARUP's services had ARUP's prices matched those in the fee schedules then in place.^[40]

Although ARUP has identified various factors that suggest PML failed to satisfy its disclosure obligations under Rule 26(a) or (e) with regard to the damages it seeks,^[41] there is no need to address them at length because any such failure by PML was ultimately harmless under the factors the court must consider in such circumstances.^[42]

PML's disclosure shortcomings appear to have caused little if any prejudice or surprise to ARUP.^[43] Although Exhibits 20 and 21 and the damages claims PML derived from them are undoubtedly new, the theories on which those claims are based are not. PML has asserted since its original counterclaims, which were filed before PML made its initial disclosures, that the Agreement set the prices for ARUP's services at Medi-Cal reimbursement rates and that the prices ARUP charged for some services exceeded those listed in its fee schedules.^[44]Additionally, the information provided by Exhibits 20 and 21 is not truly new, as they were allegedly derived from documents and records to which ARUP has always had access, such as its invoices and fee schedules.^[45] The only resource PML appeared to use, but did not disclose in initial or supplemental disclosures, was its source for month-to-month Medi-Cal reimbursement rates used in creating Exhibit 20. However, those rates have always been publicly available through Medi-Cal's website.^[46] And while that alone is not an excuse to disregard Rule 26's requirements, the fact remains that PML did identify and produce “California Medi-Cal Reimbursement Rates”^[47] as “[e]vidence that supports [its] Counterclaim for damages” in response to an interrogatory from ARUP only two months after failing to do so in its initial disclosures.^[48] Finally, perhaps the clearest indication that ARUP has suffered no undue prejudice or surprise due to PML's disclosure failings is the fact that ARUP knew enough about both of the breach theories underlying PML's new damages claims to address them in its motion for summary judgment.^[49]

The factors of whether PML is able to cure any prejudice it has caused, and the extent to which its new damages claims and exhibits would disrupt trial, also weigh in favor of finding PML's disclosure shortcomings harmless.^[50] The new damages claims are derived from Exhibits 20 and 21, and Exhibits 20...