Eagle Air Med Corp. v. Sentinel Air Med. All., LLC

EAGLE AIR MED CORPORATION, a Utah corporation;and VALLEY MED FLIGHT INC., a North Dakota corporation, Plaintiffs, v. SENTINEL AIR MEDICAL ALLIANCE, LLC, a Wyoming limited liability company;JEFFREY FRAZIER, an individual; and DOES 1 through 10, Defendants.

Case No. 2:16-cv-00176-TC-EJF

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH CENTRAL DIVISION

December 17, 2019

ORDER AND MEMORANDUM DECISION

On August 30, 2019, the court granted in part and denied in part the motion for summary judgment brought by Defendants Sentinel Air Medical Alliance, LLC, and Jeffrey Frazier ("Sentinel"). Sentinel now asks the court to reconsider part of that order. (ECF No. 441.) Additionally, Plaintiffs Eagle Air Med Corporation and Valley Med Flight, Inc. ("Eagle") have asked the court to clarify a portion of its summary judgment order. (ECF No. 438.) For the reasons stated below, Sentinel's motion for reconsideration is granted, and Eagle's motion for clarification is denied.

ANALYSIS

I. Background

As discussed in more detail in the summary judgment order, Eagle provides emergency air ambulance services, and Sentinel is a consultant that provides recommendations to insurance companies regarding how much they should pay Eagle for its flights. Eagle Air Med Corp. v. Sentinel Air Med. All., LLC ("Eagle Air"), Case No. 16-cv-00176, 2019 WL 4140918 at *1 (D. Utah Aug. 30, 2019). Eagle's defamation cause of action primarily challenged statements Sentinel made in the letters it sent to the insurance providers. In a typical letter, Sentinel identified the amount Eagle billed, calculated an estimate of Eagle's costs for that flight, and then compared those costs to the amount Medicare would have paid for the flight, the amount a competing provider would have charged for the flight, and the amount Sentinel believed the insurer should pay for the flight. So, for example, in one letter, Sentinel made the following statements:

Billed charges for this transport amount to $29,659. . . .

In this case, an accurate estimate of [Eagle's] costs [is] $6,400. . . .

Reimbursement provided under Medicare for this transport would be $5,368. . . .

Sentinel has a contracted provider that would have performed this transport for $8,700. . . .

[Eagle's billed] charges represent 552 percent of the Medicare reimbursement rate, 340 percent of charges from a competing provider, and 463 percent of the cost of providing the service. . . .

A reasonable reimbursement for this transport would be $11,900. This represents 221 percent of the Medicare reimbursement rate and provides [Eagle] with an 86 percent margin.

Id. at *1-2. Sentinel's letters also noted that the transportations provided by Eagle were not medically necessary, that Eagle's charges were "egregious" or "among the most egregious in the industry," and, in one instance, that Eagle was possibly engaged in self-referrals. Id.

The court held that Sentinel's calculation of Eagle's estimated costs was not defamatory because it was "materially accurate." Id. at *7. It also concluded that the medical necessity statements carried no defamatory meaning and that identifying Eagle's charges as "egregious" was non-actionable opinion. Id. at *6, 9. Neither party challenges any of these conclusions.

But the court also ruled that there were triable issues of fact regarding whether Sentinel's self-referral statement and profit margin calculations were defamatory. Id. at *8-9. Sentinel now asks the court to reconsider that part of its decision.

Additionally, in a footnote, the court indicated that its order had addressed every defamatory statement at issue in the action, and accordingly, that the profit margin and self-referral statements were the only claims remaining for trial. Id. at *4 n.1. Eagle maintains that two other issues—whether Sentinel's cost calculations are implicitly defamatory and whether Sentinel made false comparisons to competing providers—should also be addressed at trial. Eagle asserts that Sentinel was aware of these statements but chose not to challenge them in its summary judgment motion. Eagle asks the court to clarify that these statements remain viable, notwithstanding the footnote in the order.

II. Appropriate Pleading Standard

Both the motion for reconsideration and the motion for clarification turn, in part, on the sufficiency of Eagle's pleadings. In its motion for reconsideration, Sentinel contends that neither the profit margin calculations nor the self-referral statement were included in the operative FirstAmended Complaint ("FAC"). (ECF No. 6.) Similarly, in its opposition to Eagle's motion for clarification, Sentinel argues that Eagle never alleged a defamation claim based on either the implications of Sentinel's cost calculations or the contract provider comparisons. Accordingly, Sentinel requests that Eagle be barred from proceeding to trial on any of these issues.

The parties agree that, under Utah law, defamation must be pled specifically. Dennett v. Smith, 445 P.2d 983, 984 (Utah 1968) ("[T]he language complained of must be set forth in words or words to that effect . . . . [T]he defendant should not be required to resort to the ofttimes expensive discovery process to drag from a litigant what he really intends to do to his adversary."). But they dispute whether a complaint in federal court is required to satisfy this same standard. Upon reviewing the cases submitted by the parties, the court concludes that generally—and certainly in this district—a heightened pleading standard applies.

As one recent District of Utah case stated, "[t]his specificity requirement is not only a Utah construct: federal courts have consistently interpreted Fed. R. Civ. P. 8(a) as requiring that defamation claims be pleaded with particularity to provide a defendant with fair notice." Rowe v. DPI Specialty Foods, Inc., Case No. 2:13-cv-00708-DN-DJF, 2015 WL 13047675 at *4 (D. Utah Aug. 20, 2015) (citing Bushnell Corp. v. ITT Corp., 973 F. Supp. 1276, 1287 (D. Kan. 1997); McGeorge v. Cont'l Airlines, Inc., 871 F.2d 952, 955 (10th Cir. 1989); Nogle v. Sand Canyon Corp., Case No. 12-CV-23-S, 2012 WL 4857772 at *6 (D. Wy. Oct. 11, 2012); 5 Charles Wright & Arthur Miller et al., Federal Practice and Procedure §§ 1245, 1357 (3d ed.)).

Other cases from the District of Utah agree. For example, in Boisjoly v. Morton Thiokol, Inc., 706 F. Supp. 795 (D. Utah 1988), the court explicitly applied Utah's pleading standard to a complaint in federal court:

The Court holds that the conclusory allegations in paragraph seventy-one do not meet the particularity requirements with which a defamation claim must be alleged. Utah law requires that a claim must identify the defamatory statement either by its "words or words to that effect;" general conclusory statements are inadequate. . . . Paragraph seventy-one clearly fails to allege, in "words or words to that effect," a single specific defamatory statement by defendant MTI.

Id. at 799-800.

Another case, Celli v. Shoell, 995 F. Supp. 1337 (D. Utah 1998), did not go quite as far. It noted that "the court applies federal pleading standards rather than looking to . . . Utah law." Id. at 1346. But it nevertheless still agreed that some level of heightened pleading was required even under the federal standards: "In the case of a defamation claim, the allegations in the complaint must afford the defendant sufficient notice of the allegedly defamatory communications to allow him to defend himself. . . . [F]ederal pleading standards generally require the complaint to state the specific words of the allegedly defamatory statement in order to allow the defendant to frame a responsive pleading." Id. (citing Goldstein v. Kinney Shoe Corp., 931 F. Supp. 595, 597 (N.D. Ill. 1996)).

Other cases submitted by Sentinel reinforce this conclusion. See, e.g., Pike v. City of Mission, Kan., 731 F2d 655, 661 (10th Cir. 1984) (a "broad conclusory allegation" is insufficient to plead defamation if it includes "insufficient facts concerning time, place, actors, or conduct to enable defendants to respond") (rev'd on other grounds, Canfield v. Douglas County, 619 F. App'x 774 (10th Cir. 2015)); Phantom Touring, Inc. v. Affiliated Publ'ns, 953 F.2d 724, 728 n.6 (1st Cir. 1992) ("In our view, a defendant is entitled to knowledge of the precise language challenged as defamatory, and the plaintiff therefore is limited to its complaint in defining the scope of the alleged defamation. If plaintiff wished to enlarge its case beyond the six articles originally challenged, it should have sought to amend the complaint."); Royal Pac. Ltd. v. FaithElec. Mfr. Co., Ltd., 322 F. Supp. 3d 1178, 1185 (D.N.M. 2018) ("Federal courts relying on a Rule 8 standard have held that some specificity about the allegedly defamatory communication is required in order to give the defendant adequate notice.").

Eagle has identified no District of Utah or Tenth Circuit cases that support a less stringent pleading standard. But during oral argument, it did cite two federal cases from New York for the proposition that such specific pleading is not necessary. In one, the Second Circuit held that under the federal pleading rules, "[t]he central concern is that the complaint 'afford defendant sufficient notice of the communications complained of to enable him to defend himself.'" Kelly v. Schmidberger, 806 F.2d 44, 46 (2d Cir. 1986) (quoting Liguori v. Alexander, 495 F. Supp. 641, 647 (S.D.N.Y. 1980)). Similarly, in Griffin-Nolan v. Providence Washington Insurance Co., No. 504CV1453FJSGJD, 2005 WL 1460424 (N.D.N.Y. June 20, 2005), the court ruled that "[s]ince federal law governs the procedural issues in this case, . . . the heightened pleading requirement of New York Civil Practice Law and Rules § 3016(a) does not apply to this action." Id. at *12.

These cases do not support departing from the standard articulated in the District of Utah cases. After all, "sufficient notice of the communications complained of to enable [a defendant] to...