McCracken v. Verisma Sys.

91 F.4th 600

Ann MCCRACKEN, Joan Farrell, Sara Stilson,Kevin McCloskey, Christopher Trapatsos, Kimberly Bailey, Plaintiffs-Appellants, v. VERISMA SYSTEMS, INC., Defendant-Cross-Defendant-Appellee,

Strong Memorial Hospital, Highland Hospital,

University of Rochester, Defendants-Cross-Claimants-Appellees.

Marissa Carter, Evelyn Grys, Bruce Currier, Sharon Koning, Sue Beehler,Marsha Mancuso, Brad S. Tiefel, as Administrator of the Estate of Jaclyn Cuthbertson,as individuals and as representatives of the classes, Plaintiffs-Appellants, v. The Rochester General Hospital, The Unity Hospital of Rochester, Defendants-Appellees,F.F. Thompson Hospital, Inc., Cross-Claimant-Defendant-Appellee,CIOX Health, LLC, f/k/a/ HealthPort Technologies, LLC, Cross-Defendant-Defendant-Appellee.

No. 22-2928

No. 22-2036^*

August Term, 2023

United States Court of Appeals, Second Circuit

Argued: January 10, 2024

Decided: January 29, 2024

On Appeal from Judgments of the United States District Court for the Western District of New York.

Stephen G. Schwarz (Kathryn Lee Bruns, on the brief), Faraci Lange, LLP, Rochester, NY, for Plaintiffs-Appellants.

Meghan M. Brown (Christopher J. Belter, James D. Macri, on the brief), Goldberg Segalla LLP, Buffalo, NY, for Defendant-Appellee Verisma Systems, Inc.

Amanda B. Burns (Eric J. Ward, Claire E. Wells, on the brief), Ward Greenberg Heller & Reidy LLP, Rochester, NY, for Defendants-Appellees Strong Memorial Hospital, Highland Hospital, and University of Rochester.

Jodyann Galvin (Cynthia Ludwig, Mohammed A. Alam, on the brief), Hodgson Russ, LLP, Buffalo, NY, for Defendants-Appellees Rochester General Hospital, Unity Hospital of Rochester, F.F. Thompson Hospital, Inc., and CIOX Health, LLC, f/k/a HealthPort Technologies, LLC.

Before: Kearse, Lynch, and Nardini, Circuit Judges.

William J. Nardini, Circuit Judge:

New York Public Health Law ("PHL") § 18(2)(e) provides that, when responding to a request for a patient's medical records by a "qualified person," which includes the patient's attorney, a health care provider cannot charge a per-page price for reproducing the records that exceeds the lower of the actual cost of production or 75 cents. In Ortiz v. Ciox Health LLC, 37 N.Y.3d 353, 157 N.Y.S.3d 822, 179 N.E.3d 635 (2021), the New York Court of Appeals held that PHL § 18(2)(e) does not provide a private right of action. Based on that decision, this Court held in Ortiz v. Ciox Health LLC, 21 F.4th 50 (2d Cir. 2021), that an unjust enrichment claim under New York law fails where it does not allege any actionable wrong independent of the requirements of PHL § 18(2)(e). In these consolidated appeals, we confront whether our holding in Ortiz should extend to a claim of a deceptive business practice under New York General Business Law ("GBL") § 349 that is similarly premised on a violation of PHL § 18(2)(e). We hold that it does.

Try as they might to characterize the theories of wrongdoing underlying their GBL § 349 and unjust enrichment claims as distinct from violations of PHL § 18(2)(e), all of Plaintiffs-Appellants' attempts either point back to § 18(2)(e) or are not cognizable under those causes of action for other reasons. If plaintiffs could simply repackage their PHL § 18(2)(e) claims as GBL § 349 claims or unjust enrichment claims, they could make an end run around the New York Court of Appeals' holding that PHL § 18(2)(e) does not provide a private right of action. New York law does not permit such a result. Accordingly, we AFFIRM the judgments of the district court.

I. Background

The Plaintiffs-Appellants in both of these consolidated cases are patients whose counsel requested copies of their medical records from hospitals where they received treatment. Each group of plaintiffs sued two categories of defendants: the hospitals and the vendors with which each hospital contracted to produce the records. We consolidated these appeals for decision after oral argument due to their factual overlap and because they concern the same central legal issue. We refer to the plaintiffs in both cases collectively as the "Patients" and the defendants in both cases collectively as the "Hospitals" and the "Vendors," distinguishing where necessary.

The Patients in each case appeal from a judgment of the United States District Court for the Western District of New York (Frank P. Geraci, Jr., District Judge), entered on August 19, 2022 (Carter) and October 11, 2022 (McCracken), granting judgment pursuant to Federal Rule of Civil Procedure 12(c) in favor of the Hospitals and Vendors.

The Patients filed class action complaints against the Hospitals and Vendors in 2014 (twice amended in McCracken, once amended in Carter) claiming three causes of action arising from the Defendants' alleged kickback scheme related to the production of the Patients' medical records: (1) a violation of PHL § 18(2)(e), (2) a violation of GBL § 349, and (3) unjust enrichment. The Patients allege that the Vendors were able to secure their record production contracts with the Hospitals by providing them "improper kickbacks," McCracken J.A. 73; Carter App'x 83: the Vendors charged patients who requested their medical records through counsel from the Hospitals a per-page price (75 cents) that was higher than the Vendors' costs of production and used the resultant profits to provide free and discounted pages of records to the Hospitals for a category of medical records that health care providers are obligated by federal law to produce free of charge. The Patients' counsel requested their medical records from the Hospitals, which the Vendors produced to them, charging 75 cents per page pursuant to the Vendors' agreements with the Hospitals.

The district court granted the defendants' Rule 12(c) motion for judgment on the pleadings as to all of the Patients' claims in both cases. McCracken v. Verisma Sys., Inc., No. 6:14-CV-6248-FPG-MJP, 2022 WL 3566682, at *3-6 (W.D.N.Y. Aug. 18, 2022); Carter v. CIOX Health, LLC, No. 6:14-CV-6275-FPG-MWP, 2022 WL 3499683, at *3-6 (W.D.N.Y. Aug. 18, 2022).¹ In both cases, the parties stipulated to judgment in favor of the defendants as to the claim for a violation of PHL § 18(2)(e)—which mandates that the per-page price a health care provider charges a patient for their medical records cannot exceed the lower of the actual cost of production or 75 cents, see N.Y. Pub. Health Law § 18(2)(e)—because the New York Court of Appeals had recently decided that PHL § 18(2)(e) does not provide a private right of action, Ortiz, 37 N.Y.3d at 364, 157 N.Y.S.3d 822, 179 N.E.3d 635. McCracken, 2022 WL 3566682, at *2; Carter, 2022 WL 3499683, at *3.

The district court concluded that the defendants are also entitled to judgment in their favor as to the GBL § 349 and unjust enrichment claims because those claims depend on a violation of PHL § 18(2)(e), and thus would "circumvent Ortiz's conclusion that there is not a private right of action for PHL § 18" if permitted to proceed, McCracken, 2022 WL 3566682, at *4; Carter, 2022 WL 3499683, at *4, and to the extent they are premised on independent theories of wrongdoing, those theories are not cognizable for other reasons, McCracken, 2022 WL 3566682, at *4-6; Carter, 2022 WL 3499683, at *4-6. The district court also denied as moot the Patients' cross-motion for summary judgment in McCracken, 2022 WL 3566682, at *6, and denied as futile the Patients' motion for leave to file a second amended complaint in Carter, 2022 WL 3499683, at *6-7. These now-consolidated appeals followed.

II. Discussion

We review a grant of a Rule 12(c) motion for judgment on the pleadings de novo "under the same standard as the grant of a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6)." Am. Soc'y for the Prevention of Cruelty to Animals v. Animal & Plant Health Inspection Serv., 60 F.4th 16, 21 (2d Cir. 2023). "That is, we evaluate a judgment on the pleadings to see whether the complaint fails to state a claim that is plausible on its face. In doing so, we draw all reasonable inferences in the plaintiff's favor to assess whether a complaint's factual allegations plausibly give rise to an entitlement to relief." Id. (internal quotation marks omitted).

A. New York General Business Law § 349 Claim

Section 349(a) of the New York General Business Law makes unlawful "[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service." To state a claim under this provision, "a plaintiff must allege that a defendant has engaged in (1) consumer-oriented conduct that is (2) materially misleading and that (3) plaintiff suffered injury as a result of the allegedly deceptive act or practice." Koch v. Acker, Merrall & Condit Co., 18 N.Y.3d 940, 941, 944 N.Y.S.2d 452, 967 N.E.2d 675 (2012) (internal quotation marks omitted). "A defendant's actions are materially misleading when they are likely to mislead a reasonable consumer acting reasonably under the circumstances." Himmelstein, McConnell, Gribben, Donoghue & Joseph, LLP v. Matthew Bender & Co., Inc., 37 N.Y.3d 169, 178, 150 N.Y.S.3d 79, 171 N.E.3d 1192 (2021) (internal quotation marks omitted). Moreover, a GBL § 349 claim cannot be premised solely on a defendant's undisclosed violation of a statute lacking a private right of action; rather, a plaintiff must allege an act that is "inherently deceptive" independent of that statute. See Schlessinger v. Valspar Corp., 723 F.3d 396, 399 (2d Cir. 2013).

As we have already held in the unjust enrichment context, to the extent the Patients' GBL § 349 claim is premised on the Vendors' charging them 75 cents per page—a price they allege exceeded the Vendors' actual cost of production—such a theory of wrongdoing is duplicative of a violation of PHL § 18(2)(e) and is thus not cognizable under New York law. See Ortiz, 21 F.4th at 52 (dismissing an unjust enrichment claim where the complaint did not "allege any actionable wrongs independent of the...