Lab. Corp. v. Fusion Diagnostics Labs., LLC

LABORATORY CORPORATION OF AMERICA d/b/a LABCORP, Plaintiff-Respondent, v. FUSION DIAGNOSTICS LABORATORIES, LLCt/a FUSION DIAGNOSTIC LABORATORIES LIMITED LIABILITY COMPANY,also t/a FUSION DIAGNOSTICS LAB, Defendant-Appellant.

DOCKET NO. A-1100-18T4

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION

Submitted January 6, 2020

January 30, 2020

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

Before Judges Sabatino and Geiger.

On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-1952-15.

Robert A. Skoblar, attorney for appellant.

Scarinci & Hollenbeck, LLC, attorneys for respondent (Joel N. Kreizman, on the brief).

PER CURIAM

Defendant Fusion Diagnostic Laboratories (Fusion) appeals from: (1) an order granting summary judgment dismissing counts III through X of its counterclaims; (2) a judgment entered in favor of plaintiff Laboratory Corporation of America (LabCorp) for $135,226.32 (including pre-judgment interest) following a non-jury trial; and (3) an order denying its post-judgment motion for reconsideration or a new trial. We affirm.

I.

In February 2013, Moataz Abdalla and Dr. Amir Ahmed partnered to acquire the indebted, year-old Fusion lab from its prior owner/members. Fusion analyzed blood samples, depended on physician referrals, and billed the patient's insurance company. The insurer then issued an explanation of benefits to indicate what portion of Fusion's invoice was covered.

In 2014, Abdalla and Dr. Ahmed built an account base, updated their technology, and trained qualified staff. Fusion's customer-base growth, however, soon overtook the lab equipment's capacity to analyze samples. To serve clients even when it was unable to perform the work, Fusion began referring tests to a third-party laboratory. Fusion then provided the report from the outside laboratory to the referring physician.

Against this backdrop, LabCorp and Fusion entered into an oral agreement in March 2014. According to Fusion, it would send LabCorp samples for testing which Fusion did not have the capacity to do in-house. In exchange, LabCorp would charge Fusion seventy percent less than its book price. In addition, Fusion's phlebotomists at its referring physicians' offices would draw blood from those patients who utilized insurances known as New Jersey Family Care and Horizon New Jersey Health. According to Fusion, it agreed to this arrangement "because LabCorp had agreements with those private insurance companies that the members of those HMOs would only be covered for laboratory work if they used LabCorp's services." Fusion claimed it did not know then but found out months later was that LabCorp had "capitation agreements"¹ with those insurers. Fusion alleged that under this arrangement, LabCorp would save the expense of the phlebotomist, Fusion would service the physician account, LabCorp would pick up the samples and furnish reports to Fusion within twenty-four to forty-eight hours, and LabCorp would utilize athird-party billing account and bill the insurance carriers directly. These transactions are known in the industry as "full send outs."

Fusion alleged LabCorp breached the agreement in three ways: (1) LabCorp billed Fusion at its full book price without applying the seventy percent discount as promised for those referrals where Fusion did not have the capacity to perform the testing; (2) LabCorp did not utilize the already established third-party billing account for the "full send outs" and instead billed Fusion directly for those patients that utilized New Jersey Family Care and Horizon New Jersey Health; and (3) LabCorp repeatedly provided analysis for routine reports well after the twenty-four to forty-eight hour industry accepted time standard, injuring Fusion's reputation on its physician accounts.

Fusion's contractual relationship with LabCorp spanned from March 2014 until July 15, 2014. According to Fusion, the relationship soured and ended because LabCorp refused to honor its pricing agreement, continued to bill Fusion for the full send outs, and repeatedly failed to provide reports within twenty-four to twenty-eight hours. Fusion claims it immediately, and continuously, objected to the overcharges when it was first invoiced by LabCorp. Accordingly, Fusion refused to remit any payment for the perceived overcharges.

In response, LabCorp closed the account and claimed Fusion owed it a balance of $112,381.40. Fusion claims that amount was seventy percent greater than agreed upon and included $23,146.77 for the full send outs, which were unbillable because it could not directly bill the insurers. Fusion also alleged LabCorp failed to provide timely reports within twenty-four to twenty-eight hours resulting in lost business accounts.

As a result of Fusion's refusal to pay for services rendered, LabCorp filed a five-count complaint sounding in breach of contract, book account, quantum meruit, unjust enrichment, and an account stated. Plaintiff sought $136,736.67 in damages. Fusion filed an answer and ten-count counterclaim that alleged breach of contract (counts I and II), violation of the New Jersey Consumer Fraud Act (CFA) (count III), common law fraud (count IV), unfair competition (count V), intentional interference with contractual relations (count VI), intentional interference with prospective economic relations (count VII), negligent interference with prospective economic relations (count VIII), fraudulent concealment (count IX), and restraint of trade (count X). Notably, in its answer to the first count of the complaint Fusion stated, "The total owed by the defendant to plaintiff, not including offsets to which the defendant is otherwise entitled, is $33,714.42."

On October 20, 2016, LabCorp moved for partial summary judgment to dismiss Fusion's counterclaims other than the two breach of contract counts. The motion was granted on May 12, 2017.

A two-day bench trial began on April 18, 2018. That day, plaintiff reduced its claim by approximately $16,700. Over the course of trial, Tawanda Blackwell and James Henriques testified for plaintiff, including a rebuttal; Moataz Abdalla testified for defendant.

Blackwell testified she was a collection supervisor at LabCorp and was responsible for accounts receivable. She "confirmed that the account had a [seventy] percent across-the-board discount for discountable testing and noted on the bills where the discount was reflected." Blackwell also acknowledged two initial, erroneous invoices showed Fusion owed LabCorp $135,736.67, when the outstanding amount was actually $118,942.63 after the discounts were applied. She explained Fusion had two accounts with LabCorp: a third-party billing account billed to Horizon, an HMO, and a direct client account billed to Fusion. The trial court determined her testimony was credible and non-evasive.

Henriques testified he was a key hospital services representative for LabCorp, which required him to solve reporting issues, special pricing, equipment, and supplies relative to hospital and clinical facility accounts. Hetook control of the Fusion accounts in March 2014, but was not involved in the initial meeting, which was handled by a former LabCorp employee named Chip Murphy. Henriques' main contact with Fusion was Dr. Walter Shonkwiler. The two reached an agreement to make Fusion a hospital key account, which allowed for a seventy percent discount on all discountable testing, and Henriques further agreed to make special requests for pricing on specific tests when Fusion desired.

According to Henriques, there were no discussions regarding delayed reporting; the discussions with Dr. Shonkwiler were limited to pricing. He also testified, and objective evidence showed, Fusion received special pricing on at least two occasions. Henriques explained LabCorp was required to provide insurance and other processing information to receive payments from third parties. He claimed Fusion frequently failed to provide that information. He also testified, however, that the services were always completed even without the proper billing information. Ultimately, LabCorp wrote off the third-party billing account receivable because Dr. Shonkwiler never provided the proper information.

The court found Henriques' testimony was credible and supported by the objective evidence presented during trial, which the court reviewed extensively.The court noted Fusion failed to submit any of its own records to disprove the information contained in the LabCorp reports.

The court concluded the "vast majority of the delay issues were problems caused by Fusion's method drawing samples or adding verbal tests that required written authorizations from Fusion to complete." Furthermore, the court accepted Henriques' testimony that he never guaranteed a turnaround time for testing. The evidence also showed that, "[o]ver the four-month period that Fusion sent samples to LabCorp for testing, LabCorp accepted over a thousand orders" for which Fusion did not remit payment. Plaintiff rested after Henriques' testimony.

Abdalla testified Fusion could not charge for testing billed to Horizon due to an exclusivity agreement between Horizon and LabCorp for testing. Therefore, Fusion entered into an agreement with LabCorp so Fusion could market its services to doctors who accepted Horizon. Abdalla testified LabCorp's March 2014 reports indicated LabCorp did not receive samples or that tests were missing or ordered improperly. He described the relationship as Fusion existing at LabCorp's mercy.

The court noted most of Abdalla's testimony was unsupported by objective evidence and the testimony that did relate to objective evidence was plagued byerrors. For example, Abdalla testified Fusion's profit margin was usually thirty...