Fairview Health Servs. v. Armed Forces Office of Royal Embassy of Saudi Arabia

679 F.Supp.3d 811

FAIRVIEW HEALTH SERVICES,d/b/a University of Minnesota Medical Center, Plaintiff, v. ARMED FORCES OFFICE OF the ROYAL EMBASSY OF SAUDI ARABIA, Defendant.

File No. 21-cv-2666 (ECT/TNL)

United States District Court, D. Minnesota

Signed June 27, 2023

David P. Bunde, Pari McGarraugh, Jacob Patsch Harris, and William Thomas Wheeler, Fredrikson & Byron, P.A., Minneapolis, MN, for Plaintiff Fairview Health Services, d/b/a University of Minnesota Medical Center.

Aaron B. Chapin, Husch Blackwell LLP, Chicago, IL, and Cormac Connor and George Edward Stewart, III, Husch Blackwell LLP, Washington, DC, for Defendant Armed Forces Office of the Royal Embassy of Saudi Arabia.

OPINION AND ORDER

Eric C. Tostrud, United States District Judge

Plaintiff Fairview Health Services brought this case seeking to recover more than $1.3 million in medical bills from Defendant Armed Forces Office of the Royal Embassy of Saudi Arabia. The Armed Forces Office seeks dismissal on three alternative grounds. It argues: (1) that the Foreign Sovereign Immunities Act deprives the court of subject-matter jurisdiction over Fairview's claims; (2) that Fairview has failed to allege facts plausibly supporting its contractual and equitable claims; and (3) that Fairview failed to join a required party under Federal Rule of Civil Procedure 19. The Armed Forces Office's motion will be denied. The better answer is that the conduct underlying Fairview's claims was commercial activity, an exception to foreign sovereign immunity. Fairview plausibly alleges its claims. And no unnamed party is required in the Rule 19 sense.

I¹

From June 2018 through December 2019, Fairview, doing business as the University of Minnesota Medical Center, treated two children whose father is a current or former member of the Saudi Arabia armed forces. Compl. [ECF No. 1] ¶¶ 7-8. The treatment ultimately generated more than $1,301,272.85 in negotiated charges, "a discount from Fairview/UMMC's billed charges." Id. ¶ 13.

Fairview does not typically bill a foreign patient or entity directly for services rendered to foreign citizens. Rather, such bills are funneled through an intermediary, which bills the patient or entity responsible for payment and collects the payment. Id. ¶ 5. Before the spring of 2018, the intermediary Fairview used was Minnesota International Medicine, or "MIM." Id. In May 2018, however, another company purchased MIM, and Fairview did not renew its agreement for foreign intermediary billing services with the new company. Id. ¶ 6. Fairview does not specify how it billed foreign patients after its relationship with MIM ended. The Complaint quotes a third party as saying that MIM filed for bankruptcy protection, but neither party has filed any information regarding MIM's status. Id. ¶ 22.

According to Fairview, in 2019, a corporation—Medical Cost Advocate, Inc.—telephoned Fairview's billing department to say that the Armed Forces Office had been trying to pay its Fairview bills with MIM but had been unable to reach MIM. Id. ¶¶ 9-10. Fairview and Medical Cost Advocate, acting as the Armed Forces Office's agent, then negotiated a series of contracts with Fairview called "Preferred Rate Agreements," reflecting a "Charged Amount," a "Negotiated Reduction," and an "Agreed Upon Amount," to settle the bills. Id. Ex. A [ECF Nos. 1-1, 1-2]. With a single exception, the Preferred Rate Agreements provided that they were "the full understanding between Fairview Health Services and Medical Cost Advocate, Inc., (acting as agent on behalf of Armed Forces Office of the Royal Embassy of Saudi Arabia)." Id. The exception is the second agreement appended to the Complaint, which provides that it is between "Minnesota Medicine-Fairview Hosp and Medical Cost Advocate, Inc. (acting as agent on behalf of Armed Forces Office of the Royal Embassy of Saudi Arabia)." Id., Ex. A [ECF No. 1-1] at 2.² The Preferred Rate Agreements are dated June 20, 2019; although the Agreements contain a date-of-services field and an invoice-number field, those fields are redacted in Fairview's exhibits to the Complaint, and Fairview did not include the underlying invoices in the exhibits to the Complaint.

After the parties entered into these Preferred Rate Agreements, Fairview instructed Medical Cost Advocate that all checks should be sent to Fairview's mailing address, to the attention of Maureen Ring, a Fairview billing manager. Compl. ¶ 15. When Fairview did not receive any payments, Medical Cost Advocate reminded the Armed Forces Office that payments were to be made to Fairview and sent to Ms. Ring's attention. Id. ¶ 16. The Armed Forces Office repeatedly insisted that it had made the payments as requested. Id. ¶¶ 17, 21, 22. In fact, however, although the Armed Forces Office sent checks to Fairview at the address provided, the checks were payable to "Minnesota Medicine" and the payments did not reference Ms. Ring. Id. ¶ 23. It appears that someone in the Fairview mailroom redirected the checks to Minnesota Medicine, which presumably cashed them. Id. ¶¶ 23-24. Fairview thus has not received any payment for the services rendered. Id. ¶ 25.

The Armed Forces Office has attached to its motion the relevant invoices and bills related to each Preferred Rate Agreement attached to the complaint, along with the accompanying Agreements with the date and invoice fields unredacted. The invoices were issued by "Minnesota Medicine"—on dates months after the Fairview/MIM agreement ostensibly ended—with a stamp on the bottom of the document reflecting that "Minnesota Medicine" is "Minnesota International Medicine," Fairview's former foreign-citizen billing partner. Compare Connor Decl. [ECF No. 27] Ex. A (Minnesota Medicine invoice #5989 dated Sept. 1, 2018, for services from 8/1/2018 to 8/30/2018 with accompanying Preferred Rate Agreement referencing same dates of service and invoice number 5989, providing for "Agreed Upon Amount" of $7741.22, and copy of a check in that amount made out to Minnesota Medicine) with Compl. Ex. A [ECF No. 1-2] at 5 (Preferred Rate Agreement with "Agreed Upon Amount" of $7741.22 with invoice number and dates of service redacted).³

Fairview filed suit in December 2021, claiming breach of contract, quantum meruit, and breach of the implied covenant of good faith and fair dealing. Because of delays in effecting service, Defendant did not enter an appearance until February 2023. This motion to dismiss followed.

II

A

The first issue is whether the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1602 et seq., deprives the court of subject-matter jurisdiction over the Armed Forces Office, making dismissal necessary under Rule 12(b)(1). "A court deciding a motion under Rule 12(b)(1) must distinguish between a 'facial attack' and a 'factual attack.' " Osborn v. United States, 918 F.2d 724, 729 n.6 (8th Cir. 1990) (quoting Menchaca v. Chrysler Credit Corp., 613 F.2d 507, 511 (5th Cir. 1980)). In a facial attack, review is restricted to the pleadings. Id. "[T]he non-moving party receives the same protections as it would defending against a motion brought under Rule 12(b)(6)." Id. A factual attack, on the other hand, allows consideration of matters outside the pleadings and the Rule 12(b)(6) safeguards do not apply. Id.

Here, the Armed Forces Office's Rule 12(b)(1) motion represents a facial attack. The motion is based on the Complaint's allegations and materials embraced by the Complaint. Therefore, the familiar Rule 12(b)(6) standards apply. In reviewing a motion to dismiss for failure to state a claim under Rule 12(b)(6), a court must accept as true all of the factual allegations in the complaint and draw all reasonable inferences in the plaintiff's favor. Gorog v. Best Buy Co., 760 F.3d 787, 792 (8th Cir. 2014) (citation omitted). Although the factual allegations need not be detailed, they must be sufficient "to raise a right to relief above the speculative level . . . ." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citation omitted). The complaint must "state a claim to relief that is plausible on its face." Id. at 570, 127 S.Ct. 1955. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

Under the FSIA, a foreign state is generally immune from liability in United States courts. 28 U.S.C. § 1602. The FSIA sets out several exceptions to a foreign sovereign's immunity, however. Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 493, 103 S.Ct. 1962, 76 L.Ed.2d 81 (1983) ("subject matter jurisdiction in any . . . action [against a foreign sovereign] depends on the existence of one of the specified exceptions to foreign sovereign immunity"). Relevant here, the FSIA provides that a foreign state's immunity does not extend to a lawsuit "based upon" the foreign state's "commercial activity carried on in the United States." 28 U.S.C. § 1605(a)(2).

Begin with whether the conduct giving rise to Fairview's claims constitutes "commercial activity." The FSIA defines "commercial activity" as "either a regular course of commercial conduct or a particular commercial transaction or act." Id. § 1603(d). To determine whether a particular activity is commercial activity, the statute instructs courts to examine "the nature of the course of conduct or particular transaction or act, rather than . . . its purpose." Id.; see also Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 614, 112 S.Ct. 2160, 119 L.Ed.2d 394 (1992).⁴ "To be considered 'commercial,' an activity must be the type of activity by which a private party engages in trade or commerce." Jam v. Int'l Fin. Corp., 586 U.S. 199, 139 S. Ct. 759, 772, 203 L.Ed.2d 53 (2019) (quotations omitted). "Put differently, a foreign sovereign's acts are 'commercial' within the meaning of the FSIA...