UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

BHM HEALTHCARE SOLUTIONS, INC.,

Plaintiff,

v. 

URAC, INC.,

Defendant.

Case No. 1:18-cv-01119 (TNM)

MEMORANDUM OPINION

BHM Healthcare Solutions, Inc. (“BHM”), a medical review service provider, seeks a 

preliminary injunction against URAC, Inc.’s (“URAC”) revocation of its accreditation as an 

independent review organization. Am. Compl. 1, ECF No. 15. BHM argues that URAC applied 

its review standards arbitrarily and capriciously, violated BHM’s common law due process rights 

and breached the implied covenant of good faith and fair dealing, and that without an injunction, 

its business will suffer significant loss. Id. ¶¶ 169-93. URAC asserts, among other defenses,

that the parties’ contract prohibits BHM from bringing this action, and therefore seeks dismissal 

of the case. Opp. to Pl.’s Mot. for Prelim. Inj. (“Opp. to Mot. for Prelim. Inj.”) 16, ECF No. 14; 

Mot. to Dismiss 12-16, ECF No. 17.

1

 The Court finds that the exculpatory clause in the parties’ 

contract precludes this action and that the clause is not unconscionable. BHM’s Motion for a 

Preliminary Injunction will be denied and URAC’s Motion to Dismiss will be granted.

 1

 While briefing was ongoing for the Motion for a Preliminary Injunction, BHM filed an 

Amended Complaint; URAC responded with a Motion to Dismiss. See id. The parties agreed 

during a telephone conference that both motions could be considered together and consolidated 

into one Memorandum Opinion. See Minute Entry, June 19, 2018.
2

I. BACKGROUND

A. BHM and Its Accreditations from URAC

BHM, a for-profit corporation headquartered in Florida, provides medical review services 

to health insurance plans, healthcare systems, and related administrators and management 

organizations. Am. Compl. ¶ 2. Most of its business, which reached $6.3 million in revenues in 

2017, is based on services provided as an independent review organization (“IRO”) assessing 

whether medical services are medically necessary and eligible for coverage. Id. BHM’s IRO 

services are divided between “internal” reviews where a BHM peer reviewer determines in the 

first instance either to approve medical treatment or deny or reduce coverage (an “adverse 

benefit determination”), and “external” reviews where a BHM peer reviewer reviews an adverse 

benefit determination made by another IRO and either upholds or overturns it. Id. ¶¶ 10, 12, 17-

21. URAC is a non-profit entity headquartered in the District of Columbia; it evaluates and 

accredits organizations that provide IRO services. Id. ¶ 3.

BHM has provided IRO services since 2002, but first became URAC-accredited in 

August 2012 after increasing client demand for this accreditation. Supp. Decl. of Brian Johnson 

(“Supp. Johnson Decl.”) ¶¶ 9, 25, ECF No. 15-1. During oral argument, BHM attributed much 

of this sea change to the Patient Protection and Affordable Care Act (“ACA”) and revisions to 

the Code of Federal Regulations requiring third party reviews to be conducted by “an IRO that is 

accredited by URAC or by [a] similar nationally-recognized accrediting organization.” 45 CFR 

§ 147.136(d)(2)(iii) (2016); TRO Hr’g Tr. 17, May 21, 2018. The initial accreditation lasted for 

a term of three years. See Am. Compl. ¶ 39.

In September 2014, BHM and URAC entered an Accreditation Application Agreement 

(the “Contract”) for another three-year accreditation. Id.; id. Ex. 1 Attach. 3 (“2014 Contract”), 
3

ECF No. 15-4. As part of its accreditation process, URAC conducted an onsite validation review 

and evaluated BHM’s policies, procedures, and internal systems against URAC’s standards (the 

“Core Requirements”). Am. Compl. ¶ 35. Having successfully met the Core Requirements, 

BHM received another three-year accreditation from August 2015 to August 2018. Id. ¶¶ 35, 39. 

As this is the revoked accreditation at issue, the provisions of this Contract control.

In July 2017, before the August 2015 accreditation expired, BHM applied for reaccreditation. Id. ¶ 41. BHM’s desktop review was successful and URAC found BHM to be in 

full compliance with all “Mandatory Standard Elements.” Id. ¶ 42; Id. Ex. 1 Attach. 5, ECF No. 

15-6. In late May 2018, after this action began, URAC wrote to BHM that it “looks forward to 

moving ahead with you into the next phase of the accreditation process.” Id. Attach. 6, ECF No. 

15-7. On July 13, 2018, BHM’s application was approved, and BHM will be “fully accredited 

by URAC effective August 1, 2018.” Def.’s Supp. Mem. Regarding Pl.’s Mot. for Prelim. Inj., 

ECF No. 20. Nonetheless, the company still seeks relief because of the reputational harm from 

the prior revocation’s “lasting effects.” See Am. Compl. ¶ 175.

B. URAC’s Revocation of BHM’s Accreditation

In August 2017, URAC informed BHM that it received a grievance reporting “[c]oncerns 

about the quality of services, edits of clinical determinations on reviews completed by peer 

reviewers.” Id. Attach. 7, ECF No. 15-8. URAC requested documentation from BHM relating 

to Core Requirements 17 (Performance Monitoring) and 18 (Summary Reports). Id. URAC 

notified BHM that after reviewing the information requested, it could conduct, among other 

remedial measures, a “for cause” onsite review “[s]hould further steps become necessary to 

complete this investigation.” Id. URAC did perform an onsite review in late November 2017, 

led by Dr. Karen Watts. Am. Compl. ¶ 49. Dr. Watts and her team interviewed only non-
4

leadership BHM staff members, except for Dr. Jennifer Jackson-Wohl, BHM’s Medical Director 

for Behavioral Health, who resigned from BHM shortly afterwards. Id. ¶¶ 54, 149. BHM 

complains that URAC did not conduct an entrance or exit conference contrary to previous 

practices, nor permitted senior leadership to be present during the interviews. Id. ¶¶ 51-55. 

BHM also had no opportunity to review or discuss Dr. Watts’ findings while she was onsite or 

anytime later until January 9, 2018, when URAC informed BHM that it was revoking BHM’s 

accreditation. Id. ¶¶ 58-59.

The following day, URAC provided BHM with a “Scoring Summary Report” listing each 

Mandatory Standard Element and URAC’s determination whether or not it was met. Id. Ex. 1 

Attachs. 10-11. Over the next few weeks, BHM sought clarification and documentation from 

URAC about its decision and rationale, id. ¶ 75, resulting in Dr. Watts sending a three-page 

document to BHM briefly explaining the findings of non-compliance. Id. Ex. 1 Attach. 12. The 

document explained that BHM was non-compliant with the following Core Requirements for 

these reasons:

2

• Core Requirement 4(b) (“ensures the organization’s compliance with 

applicable laws and regulations”) – BHM failed to file the annual report

necessary for incorporation in Florida. The report was due between January 1 

and May 1, 2017 and BHM’s corporation status was dissolved due to the failure 

to file the report. BHM paid a penalty and was reinstated on September 26, 

2017.

• Core Requirement 13(a) (“provides for data integrity”) – BHM “could not 

provide system demonstration or policy or procedure that support Reviewer 

decisions were not being changed.” Contrary to BHM’s policy that stated that 

“once the independent review is complete, a record can only be changed or 

edited by the system administrator (President/CEO) following a strict protocol,” 

reviewers found that several individuals demonstrated that they had access to 

the drop-down menu that permits changes to a Peer Reviewer’s decisions;

others stated that changes could be made with the Peer Reviewer’s approval; 

 2

 In addition to the four Core Requirements listed, Dr. Watts identified non-compliance with 

Core Requirements 4(a), 4(c), and 11(c), which were later overturned by URAC’s Executive 

Committee. Id. ¶¶ 156-58.
5

and interviewees apparently stated that the “strict protocol” referenced in the 

policy was under development.

• Core Requirement 17(a)(ii) (“The organization conducts a quality check and 

if a review does not meet the organization’s quality standards, then each issue 

and its outcome are documented”) – 30 files were randomly selected from a 

report provided by BHM listing any file with changes after completion (in 

URAC’s view, “completion” means after a Peer Reviewer makes a final clinical 

decision) and only 27% of the files had documented issues and outcomes. See 

also Am. Compl. ¶ 131.

• Core Requirement 32(b) (“is responsible for oversight of clinical decisionmaking aspects of the program”) – During the interview of the BHM’s senior 

clinical staff person, Dr. Jackson-Wohl, she claimed to be unaware of her IRO 

roles and responsibilities.

Id. Ex. 1 Attach. 12. BHM submitted a 26-page written response to the findings outlined in the 

document. Id. ¶ 89; see also id. Ex. 1 Attach. 8 (“BHM Appeal”), ECF No. 15-9. The 

arguments in its internal appeal to URAC are largely the same as those in its Amended 

Complaint and Motion for a Preliminary Injunction.

As for Core Requirement 4(b), BHM explained that it relied on a third-party agent to 

track deadlines and make the appropriate filings and that, when the agent changed names and 

updated its record in Florida, it inadvertently excluded the email address for BHM’s point of 

contact, leading to a missed deadline for the annual filing. Id. at 7. Once BHM discovered the 

issue, it corrected the error and received reinstatement within hours. Id. BHM also argued that 

URAC’s own Accreditation Guide states that it “is evaluating that the organization has a 

mechanism in place to comply with regulatory requirements; URAC is not verifying that the 

organization is in compliance with those regulations.” Id. at 6. BHM now also argues that 

Florida law treats corrected dissolutions as retroactive to the effective date of the dissolution, as 

“if the administrative dissolution had never occurred.” Mem. in Support of Mot. for Prelim. Inj. 

(“Mot. for Prelim. Inj.”) 11, ECF No. 13-1 (quoting Fla. Stat. § 607.1422(3)); see also Am. 
6

Compl. ¶¶ 97-103. To BHM, it is irrational for URAC to hold it accountable for this error when 

Florida itself does not. See Mot. for Prelim. Inj. 11.

As for Core Requirement 13(a), BHM argued that URAC erred by not speaking with its 

Chief Information Officer (“CIO”), opting instead to speak with the Compliance Officer and 

clinical specialists who are not subject matter experts on data integrity and security. BHM 

Appeal 9-10. BHM claimed that URAC’s findings all derived from a misunderstanding of 

BHM’s systems and terminology, which would have been avoided had URAC interviewed the 

CIO or conducted an exit conference. Id. at 10-11. BHM now also contends that its electronic 

record tracks any changes made, and that the arbitrariness of URAC’s decision is underscored by 

the fact that URAC has identified no instance in which a BHM employee made an improper 

change. Mot. for Prelim. Inj. 14-15; see also Am. Compl. ¶ 118.

For Core Requirement 17(a)(ii), BHM quarreled with URAC’s definition of 

“completion” as “when the Peer Reviewer makes the final clinical decision and submits the file 

to the Applicant” rather than “after a quality check has been completed” and submitted to the 

ultimate client. BHM Appeal 16; Mot. for Prelim. Inj. 11-12. The difference matters, BHM 

says, because it means that the case files URAC selected for review are not within the scope of 

this Core Requirement. Id. at 11; Am. Compl. ¶¶ 129-30. Substantively, BHM argues that, for 

the cases sampled where a quality check occurred, most of the cases identified no issues and so

required no follow-up. Mot. for Prelim. Inj. at 12-13; see also BHM Appeal 17. For the 

remaining cases sampled where a quality check was not conducted, BHM explains that the cases 

were older and completed under a then-existing protocol that did not require documentation at all 

if no issue arose during the quality check. Id. BHM points to URAC’s guidance, which accepts 
7

“‘documentation by exception’” as standard industry practice. Id.; Mot. for Prelim. Inj. 12; Am. 

Compl. ¶ 136. 

Last, for Core Requirement 32(b), BHM appealed because the Medical Director 

interviewed left the company soon afterward, suggesting that her answers were, at best, 

unreliable or, at worst, intentionally false. BHM Appeal 12. BHM presented evidence showing

that the Medical Director was aware of her oversight role of the clinical program, including 

timesheets, copies of emails, a signed job description, and a transcript of a training video. Id.; 

Mot. for Prelim. Inj. 15; Am. Compl. ¶ 150. In its Amended Complaint and motion for a 

preliminary injunction, BHM argues that another individual, Dr. Daniel Harrop, also served as a 

behavioral health clinical staff person and was also capable of overseeing behavioral health, 

meeting the requirement that “URAC will verify that there is a senior clinical staff person, other 

clinicians, or a combination of the two available to cover the clinical areas”). Id. ¶ 152; Mot. for 

Prelim. Inj. 16.

URAC’s Executive Committee reviewed BHM’s appeal and upheld the findings of noncompliance with these four Core Requirements. Am. Compl. ¶¶ 156, 159. The Executive 

Committee overturned three other findings of non-compliance, but it found that the upheld

findings were enough to sustain the revocation of BHM’s accreditation. Id. ¶¶ 156, 158.

C. Proceedings in this Action

The day after BHM received notice of URAC’s Executive Committee’s decision to 

uphold the revocation of accreditation, it sought a temporary restraining order and preliminary 

injunction from this Court. Mot. for TRO and Mot. for Prelim. Inj., ECF No. 2. I denied the 

motion for a temporary restraining order. Minute Order, May 21, 2018. A revised motion for a 

preliminary injunction followed, and BHM filed an Amended Complaint while the motion was 
8

being briefed. URAC responded to the Amended Complaint with a motion to dismiss and the 

parties agreed that both motions could be considered together given the similar arguments made. 

See Minute Entry, June 19, 2018.

BHM seeks a preliminary injunction to restore its accreditation in full and to order URAC 

to conduct its grievance and accreditation processes consistent with the Core Requirements and 

BHM’s contractual and due process rights. Mot. for Prelim. Inj. 26. BHM asserts two causes of 

action: the violation of common law due process and breach of the implied covenant of good 

faith and fair dealing. Id. at 25-26. BHM also seeks a determination that a provision in the 

parties’ contract purporting to preclude judicial review is unconscionable. Id. at 26.

URAC argues that the parties’ governing contract explicitly precludes filing a judicial 

action. Opp. to Mot. for Prelim. Inj. 16-22; Mot. to Dismiss 12, 16. On the merits, URAC 

argues that substantial deference should be given to the determinations of accrediting 

organizations and that no claim exists for the breach of the implied duty of good faith and fair 

dealing in the context of accreditation determinations. Id. at 34-35; Opp. to Mot. for Prelim. Inj. 

22-28, 35-36. URAC also disagrees that BHM has met any of the factors considered by courts in 

evaluating motions for preliminary injunctions. Id. at 3.

II. LEGAL STANDARDS

A preliminary injunction is an “extraordinary remedy never awarded as of right” but is an 

exercise of a court’s equitable discretion. Winter v. Natural Resources Defense Council, Inc., 

555 U.S. 7, 24 (2008). A party seeking a preliminary injunction “must establish” that it is 

(1) likely to succeed, (2) likely to suffer irreparable harm without preliminary relief, (3) that the 

balance of equities tips in its favor, and (4) that an injunction is in the public interest. Id. at 20. 

Historically, these four factors have been balanced and evaluated on a “‘sliding scale,’” where a 
9

strong showing in one factor can compensate for a weaker showing on another factor. Davis v. 

Pension Benefits Guaranty Corp., 571 F.3d 1288, 1291-92 (D.C. Cir. 2009). But the Supreme 

Court’s decisions in Winter and Munaf v. Green, 553 U.S. 674, 690 (2008), suggest that the 

standard may be more exacting: a party seeking a preliminary injunction must establish both a 

likelihood of success on the merits and irreparable harm. Davis, 571 F.3d at 1292 (demurring on 

whether the stricter standard applies); id. at 1295-96 (explaining that the “old sliding-scale 

approach” may no longer be controlling) (Kavanaugh, J., concurring).

A party may move to dismiss a complaint because it “fail[s] to state a claim upon which

relief can be granted.” Fed. R. Civ. P. 12(b)(6). Federal Rule of Civil Procedure 8(a)(2) requires 

that a complaint contain “a short and plain statement of the claim showing that the pleader is 

entitled to relief.” This requires the complaint to contain sufficient factual allegations that, if 

true, “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 

544, 570 (2007). A complaint is insufficient if it merely offers “‘labels and conclusions’” or 

“‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Ashcroft v. Iqbal, 556 U.S. 662, 

678 (2009) (quoting Twombly, 550 U.S. at 555, 546). Instead, “[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.” Iqbal, 556 U.S. at 678. In evaluating a 

motion to dismiss under Rule 12(b)(6), the Court must construe the complaint in the light most 

favorable to the plaintiff and accept as true all reasonable factual inferences drawn from wellpleaded factual allegations. See In re United Mine Workers of Am. Emp. Benefit Plans Litig., 

854 F. Supp. 914, 915 (D.D.C. 1994). Last, “[i]n determining whether a complaint fails to state 

a claim, [the court] may consider only the facts alleged in the complaint, any documents either 

attached to or incorporated in the complaint and matters of which [the court] may take judicial 
10

notice.” Hurd v. District of Columbia Gov’t, 864 F.3d 671, 678 (D.C. Cir. 2017) (internal 

quotation omitted).

III. ANALYSIS

The exculpatory clause in the parties’ Contract, which is not unconscionable, precludes 

this action from judicial review. For this reason, URAC’s Motion to Dismiss must be granted. 

This determination also means that BHM has failed to show a likelihood of success on the 

merits, which is fatal under Winter’s suggestion, if not holding, that this factor is “an 

independent, free-standing requirement for a preliminary injunction.” See Sherley v. Sebelius, 

644 F.3d 388, 393 (D.C. Cir. 2011). Even if considered under a sliding scale approach, BHM’s 

showing of irreparable harm does not overcome its deficient showing on the likelihood of 

success on the merits. See Davis, 571 F.3d at 1292 (determining that the court need not decide 

whether the stricter standard applies because the plaintiffs lose under a sliding scale approach).

A. The Parties’ Contract Precludes Judicial Review and Is Not Unconscionable

1. The Plain Meaning of the Exculpatory Provision Precludes Judicial Review

The parties’ Contract sets clear limitations on BHM’s legal rights (referred to within the 

Contract as the “Applicant”):

Applicant agrees that it will not file or take any legal or regulatory 

or administrative action against URAC, its directors, officers, 

employees, agents, or advisors in connection with the accreditation 

process including the denial, revocation, suspension, corrective 

action, or any other action effecting Applicants [sic] accreditation 

status.

2014 Contract § I.V. (emphasis added). This action involves the revocation of BHM’s 

accreditation and is a legal action against URAC. It is thus squarely within the clear prohibition 
11

on legal action agreed to by the parties. See Spellman v. Am. Sec. Bank, N.A., 504 A.2d 1119, 

1127 (D.C. 1986) (“The construction of a written agreement is a question of law when its 

provisions are unambiguous.”).

Although District of Columbia case law does not directly address the validity of 

exculpatory clauses for accreditation decisions, exculpatory clauses in other contexts have been 

upheld. See id. § III.G. (selecting the District of Columbia as governing law); Ferenc v. World 

Child, Inc., 977 F. Supp. 56, 61 (D.D.C. 1997) (“Exculpatory contract provisions are valid and 

enforceable in the District of Columbia.”). In DLY-Adams Place, LLC v. Waste Management of 

Maryland, Inc., 2 A.3d 163, 167-70 (D.C. 2010), the court affirmed the trial judge’s ruling that a 

forbearance agreement prevented the plaintiff from bringing a lawsuit to inhibit the defendant’s 

use of an alleyway. The court determined that the contractual language was “plain and 

unambiguous” and that the plaintiff could not “challenge the plain reading of the forbearance 

agreement simply because it does not like its effect.” Id. at 168. Provisions releasing defendants 

from liability in tort actions have also been reviewed without issue, see, e.g., Lamphier v. 

Washington Hosp. Ctr., 524 A.2d 729, 731-735 (D.C. 1987) (remanding a case to determine the 

meaning and effect of a liability release), McKenna v. Austin, 134 F.2d 659, 662 (D.C. Cir. 1943)

(finding that the release signed “would discharge defendant by operation of law.”).

Courts in other districts have considered the issue in circumstances more like

accreditation. In Sanjuan v. American Board of Psychiatry and Neurology, Inc., the court upheld 

a contractual agreement to handle internally any disagreements over the plaintiffs’ failed 

applications for entrance into the American Board of Psychiatry and Neurology, and rejected the 

argument that the release was an unconscionable contract of adhesion. 40 F.3d 247, 248-49 (7th 

Cir. 1994). The court noted that the Board, a private organization, may determine its rules for 
12

membership and administration, and that removing the release would likely increase the cost of 

application which most applicants would oppose. Id. at 249. Similar agreements for other 

national certifications have been upheld. See, e.g., Whyte v. Am. Bd. of Physical Med. & Rehab., 

393 F. Supp. 2d 880, 888-90 (D. Minn. 2005) (citing Balaklaw v. Am. Bd. of Anesthesiology, 

Inc., 562 N.Y.S.2d 360, 361-63 (Sup. Ct. 1990), Am. Registry of Radiologic Technologists v. 

McClellan, No. 300-cv-2577, 2003 WL 22171702, at *2-3 (N.D. Tex. Mar. 5, 2003)). In these 

cases, the courts “have upheld release provisions that bar medical professionals from suing a 

certifying board because of actions taken by the board during the certification process.” Whyte, 

393 F. Supp. 2d at 889. The circumstances of these cases are analogous to BHM’s and URAC’s 

relationship—BHM, the applicant, is suing over the decision of URAC, a private certifying 

entity, not to afford it a certain designation (here, an accreditation). The jurisdictions in most of 

these other cases recognized the validity of exculpatory clauses, as the District of Columbia does. 

See Sanjuan, 40 F.3d at 249 (Illinois law); Whyte, 393 F. Supp. 2d at 888 (Minnesota law); 

McClellan, 2003 WL 22171702 at *2 (Texas law).

BHM argues that Sanjuan, Whyte, and Balaklaw all suggest that their holdings may be 

different were membership an “economic necessity,” Reply in Supp. of Mot. for Prelim. Inj. 19, 

but it has not shown that the District of Columbia has any similar prohibition.

3

 In addition to the 

similarities between these facts and other cases just described, the parties here were also known 

 3

 In Sanjuan, the court held that despite the plaintiff’s argument that the Board was the only 

organization in the United States offering this certification, it was not a “practical necessity for 

his livelihood;” in other words, it was not required for the plaintiff to practice physical medicine 

and rehabilitation. 393 F. Supp. 2d at 888-89. The parties here agree that URAC may be the 

only accrediting entity for IROs, TRO Hr’g Tr. 21, May 21, 2018, but it is also undisputed that 

BHM successfully operated for a decade before initially seeking and obtaining URAC 

accreditation. Supp. Johnson Decl. ¶¶ 9, 25. While passage of the ACA may have made 

accreditation more valuable, and indeed, necessary for many contracts, it is not necessarily the 

case that BHM could not sustain a successful business model without URAC accreditation. 
13

to each other, having successfully contracted in 2012 and maintained a three-year relationship 

without issue. Thus, in 2014, when BHM paid over $26,000 to contract with URAC for another 

three years, 2014 Contract § I.B., it had already operated under URAC’s rules (which neither 

party has alleged changed) without issue; no evidence has arisen suggesting that when BHM 

entered the 2014 Contract, it was not negotiating at arm’s length; and presumably the price of 

application would have been higher and less desirable if BHM had sought to contract around the 

exculpatory clause. Given these considerations, the plain language of the provision, and the 

similarities between this case and the examples cited by the parties, all operating against the 

backdrop of a presumption of enforceability of exculpatory clauses, I find that the exculpatory 

clause in the parties’ contract precludes judicial review of this action.

2. The Contract Is Not Substantively Unconscionable

BHM seeks to save its claim by arguing that the exculpatory clause is unconscionable. 

Mot. for Prelim. Inj. 29-33, Opp. to Mot. to Dismiss 21-24. To establish that a contract is 

unconscionable, the party seeking to avoid the contract must show “an absence of meaningful 

choice on the part of one of the parties together with contract terms which are unreasonably 

favorable to the other party.” Urban Invs., Inc. v. Branham, 464 A.2d 93, 99 (D.C. 1983). In 

other words, the challenging party must establish both procedural unconscionability—how the 

contract was made, and substantive unconscionability—the actual terms of the contract. Id. An 

unconscionable contract must “affront[] the sense of decency” and the party seeking to avoid the 

contract must show that the “terms are so extreme as to appear unconscionable according to the 

mores and business practices of the time and place.” Id. at 100 (internal quotation marks 

omitted). To determine this question of law, a court looks beyond the four corners of the 

contract to the “commercial setting, purpose, and effect of the contract.” Id.
14

Here, the record reflects no extraordinary circumstances—except potentially one, 

discussed below—that make the Contract one of adhesion. A contract of adhesion is “one 

imposed upon a powerless party, usually a consumer, who has no real choice but to accede to its 

terms.” Woodroof v. Cunningham, 147 A.3d 777, 789 (D.C. 2016). That a contract is “take-itor-leave-it” cannot establish procedural unconscionability; a party must show that the “parties 

were greatly disparate in bargaining power, that there was no opportunity for negotiation and that 

the services could not be obtained elsewhere.” Ruiz v. Millennium Square Residential Ass’n, 156 

F. Supp. 3d 176, 181 (D.D.C. 2016). BHM has not provided contemporaneous evidence to 

suggest that, when it entered the contract in September 2014, the parties did not negotiate in 

good faith or at arm’s length; it also has not argued that exculpatory clauses were not recognized

in the law or not accepted business practice at the time. See generally Mot. for Prelim. Inj. 29-

33, Opp. to Mot. to Dismiss 21-24. Both parties are sophisticated commercial entities that had 

transacted before without issue, and BHM does not suggest that URAC’s contract terms changed 

between its initial term of accreditation and the 2014 Contract. See id.

Instead, BHM focuses on the fact that, because it needs URAC accreditation “to maintain 

the viability of its business,” it is a powerless party relative to URAC. Mot. for Prelim. Inj. 30. 

It alleges that this relative disparity meant that it could not have negotiated more favorable terms 

over the exculpatory clause. Id. at 31. Other than this brief, conclusory statement, BHM 

provides no evidence to show that it considered this avenue or that it tried, and failed, to 

negotiate amendment of the exculpatory provision. See id. BHM finds it an “absurd” suggestion 

that the parties had equal bargaining power because URAC has four times the revenue and was 

the “gatekeeper to the IRO marketplace,” id. at 30 n.9, but this argument proves too much. The 

law does not require that parties have equal revenues to make an enforceable contract; the law 
15

also specifically contemplates, and condones, certifying entities acting as “gatekeepers” giving 

applicants the stamp of approval to engage in an activity under a certain professional 

designation. See, e.g., Sanjuan, 393 F. Supp. 2d at 888-89 (rejecting plaintiff’s argument, part of 

which was based on the fact that the certifying board was the only organization in the United 

States offering the certification). Stripped to its essence, BHM’s argument is that the Contract 

was procedurally unconscionable because it was a “take-it-or-leave-it” contract, which even they 

admit is insufficient. See Mot. for Prelim. Inj. at 30 (citing Ruiz, 156 F. Supp. 3d at 181). Based 

on these arguments, BHM has failed to show that the “parties were greatly disparate in 

bargaining power, [and] that there was no opportunity for negotiation.” See id.

A fact that perhaps differentiates BHM’s and URAC’s Contract is that in November 

2015, the Department of Health and Human Services promulgated a final rule, effective January 

1, 2016, requiring IROs to be “accredited by URAC or [a] similar nationally-recognized 

accrediting organization.” 80 Fed. Reg. 72,192, 72,269 (Nov. 18, 2015) (codified at 45 C.F.R. 

§ 147.136(d)(2)(iii)). This codified URAC’s role as the gatekeeper to entities seeking to provide 

IRO services and strengthens BHM’s argument that URAC’s “services could not be obtained 

elsewhere.” See Ruiz, 157 F. Supp. 3d. at 181.

Although the rule allows for accreditation by a similar national organization, the parties 

have made no written representations that any similar accrediting organization exists, either now

or in 2014, and URAC admitted during oral argument that it is unaware of another similar 

organization. See TRO Hr’g Tr. 21, May 21, 2018. So, URAC is the sole accrediting 

organization sanctioned by the Government to determine which entities can provide IRO 

services, and organizations on both the supply (subject to the ACA and/or and seeking IRO 

services) and demand (seeking to provide IRO services) sides are bound by its determinations. 
16

Having the United States Government’s imprimatur is significant, as shown here by 

BHM’s testimony that the market has increasingly required URAC accreditation and its 

estimation that a majority of its IRO revenues is now accreditation-dependent. Supp. Johnson 

Decl. ¶¶ 9, 25; Am. Compl. ¶¶ 2, 170. Even Dr. Watts from URAC describes the ACA to 

“require[] all health plans to adhere to the external review process that . . . recognizes IROs as 

eligible . . . if the IROs are accredited by ‘a nationally recognized private accrediting 

organization.” Opp. to Mot. for TRO Ex. 1 (“Decl. of Karen Watts”) ¶ 13, ECF No. 8-2. Thus, 

that URAC accreditation is codified in Government regulations sets this situation apart from the 

mine-run of cases where applicants are free to choose whether to seek accreditation or 

certification. This unusual circumstance counsels toward finding that the contract was 

procedurally unconscionable. Ultimately, however, I do not have to reach this question,4

because the contract was not substantively unconscionable.

Substantive unconscionability turns on whether the Contract terms are “unreasonably 

favorable to the other party,” Urban Invs., 464 A.2d at 99, and requires “an assessment of 

whether the contract terms are so outrageously unfair as to shock the judicial conscience.” Fox 

v. Computer World Services Corp., 920 F. Supp. 2d 90, 99 (D.D.C. 2013). A substantively 

unconscionable contract is “one that ‘no man in his senses and not under delusion would make 

on the one hand, and as no honest and fair man would accept on the other.’” Hill v. Wackenhut 

Services Intern., 865 F. Supp. 2d 84, 95 (D.D.C. 2012) (quoting Hume v. United States, 132 U.S. 

406, 411 (1889)). 

 4 I stop short of reaching this question because the regulation issued over a year after the parties 

signed the Contract and the record is not fully developed about the state of the IRO industry 

when the parties signed the Contract.
17

Here, the Contract and URAC’s policies are not substantively unconscionable, as they 

provide for the opportunity to be heard before neutral decision-makers and include a robust 

investigative and appeals process. The Contract outlines the grievance and for cause review 

procedures followed: a “for cause” review “may be initiated by URAC as a result of grievance 

resolution,” 2014 Contract § I.R.1., after which URAC will determine whether any review 

standards were violated and if “the violation is egregious, in URAC’s sole judgment; URAC may 

suspend or revoke accreditation.” Id. § I.S. Adverse accreditation decisions may be appealed

within URAC. Id. § I.T. Accreditation determination disputes, including revocations of 

accreditation, are “finally resolved” through this appeals process. Id. §§ I.T., III.A. These were

precisely the steps followed here. While these provisions tilt in URAC’s favor (e.g., the decision 

to revoke accreditation is in URAC’s sole judgment), these provisions are not unreasonably 

favorable to it because the process uses a multi-tiered approach to making final a determination 

and, within it, affords applicants the ability to appeal adverse decisions.

In addition to following the investigation, decision, and appeal procedures outlined in the 

Contract, URAC followed its Grievance Administration and Appeals Management policies. See

Decl. of Karen Watts (“Watts Decl.”) Exs. A-B. URAC notified BHM of the grievance and 

started an initial investigation, during which it determined that a for-cause review should occur. 

See id. Ex. A. §§ IV.B.2.-3, C. After the for-cause review, the investigator provided her findings 

to URAC leadership, who submitted the findings to URAC’s Accreditation Committee. Watts 

Decl. ¶ 25. All members of the Accreditation Committee are volunteers (i.e., none are URAC 

employees), and they make their decision on a blinded basis, meaning that they are unaware of 

the identity of the organization. Id. ¶¶ 26, 42. Based on the evidence presented, the 

Accreditation Committee decided to revoke BHM’s accreditation and informed BHM of its right 
18

to appeal to the Executive Committee, which may accept, reject, or modify the Accreditation 

Committee’s decision. See id. ¶¶ 34, 39; see also id. Ex. B at § I. BHM submitted written 

materials for the Executive Committee’s decision. Id. ¶ 41. BHM’s Executive Committee, 

whose voting members are volunteers (again, not URAC employees), also considered the appeal 

also on a blinded basis. Id. ¶¶ 31, 33. The Executive Committee, exercising its authority, 

overturned the Accreditation Committee’s decision on three findings, but upheld the 

Accreditation Committee’s decision on four findings. Id. Ex. C. Under URAC’s scoring 

methodology, the failure of three or more elements results in the denial (or here, revocation) of 

accreditation. See id. ¶ 44. This process—which provided for a multi-step process with blind 

grading at each critical stage and the opportunity to respond to the revocation decision in 

writing—is not unreasonably favorable to URAC.

BHM challenges aspects of each step of the process as deficient. It does not dispute 

URAC’s authority or decision here to conduct a “for cause” review but alleges that the for cause 

review team did not offer BHM an entrance or exit conference or spend meaningful time with 

senior leadership, that it did not permit management to be present during the interviews with 

staff, and that BHM leadership lacked the opportunity to discuss the team’s initial findings or 

answer any questions. See Am. Compl. ¶¶ 51, 53-55, 57-58. It also alleges that URAC provided 

only summary information about why it was revoking BHM’s accreditation, that URAC 

expanded the scope of the review beyond the scope of the initial grievance filed, and that it is 

unsure what information URAC used in making the revocation decision and appeal. Id. ¶¶ 52, 

70, 88, 95. It also quarrels with the appeals process, objecting to not being permitted to review 

the redacted (i.e., blinded) version of its appeal documents, not being provided a copy of any 
19

other materials put before the Executive Committee, and being refused to present its appeal inperson to the Executive Committee. Id. ¶¶ 92-94. 

But focusing on these complaints misses the forest for the trees. Ultimately, these tiffs do 

not alter the big picture; that BHM received written notice of the elements on which it was 

considered non-compliant and the reasons for the determinations, it was provided an opportunity 

to present written arguments, and its internal appeal went through two layers of blinded 

evaluation. Both the terms of the contract and the process afforded to BHM are not so 

outrageously unfair as to shock the judicial conscience, and the Contract is therefore not 

substantively unconscionable. So, the Court will dismiss BHM’s claims.

B. A Preliminary Injunction Should Not Be Granted, as BHM Has Not Shown a

Likelihood of Success on the Merits

The enforceable exculpatory clause of the parties’ Contract settles this lawsuit. Even 

balancing the four preliminary injunction factors, however, BHM would not be entitled to a 

preliminary injunction. Under Winter’s suggestion that likelihood of success on the merits is “an 

independent, free-standing requirement for a preliminary injunction,” Sherley, 644 F.3d at 393, 

the Court’s analysis on the exculpatory clause is determinative. Under the historical sliding scale 

approach, the Court finds that BHM’s lack of likelihood of success on the merits weighs 

decisively in favor of determining that it is not entitled to a preliminary injunction. 

Setting aside the exculpatory clause, analyzing BHM’s claims on the merits still leads to 

the conclusion that the company is unlikely to succeed. BHM’s action is based on the implied 

covenant of good faith and fair dealing and its common law due process rights. Am. Compl. ¶¶ 

187-93. BHM claims that URAC’s “application of its standards was arbitrary, unreasonable, and 

contrary to the facts” and that it denied BHM due process when it “reviewed and rescinded 
20

BHM’s accreditation without meaningful opportunity to be heard, proper disclosure of pertinent 

facts, or a reasoned decision.” Mot. for Prelim. Inj. 23. The standards BHM cites focus on 

reviewing for arbitrary and capricious (i.e., not unreasonable) decision-making. See Wright v. 

Howard Univ., 60 A.3d 749, 754 (D.C. 2013) (explaining that a breach of the implied duty of 

good faith and fair dealing must either involve bad faith or conduct that is arbitrary or 

capricious); Allworth v. Howard Univ., 890 A.2d 194, 202 (D.C. 2006) (explaining that “‘fair 

dealing’ involves reasonable rather than arbitrary or capricious action”); Kumar v. George 

Washington Univ., 174 F. Supp. 3d 172, 190 (D.D.C. 2016) (stating that an arbitrary or 

capricious decision is one that “could not be fairly characterized as the product of reasoned 

decision-making.”). Although these cases arose in the context of employment disputes, Marjorie 

Webster Junior Coll., Inc. v. Middle States Ass’n of Colls. & Secondary Schs., 432 F.2d 650, 655 

(D.C. Cir. 1970), considered an accreditation denial. There, the D.C. Circuit, relying on cases 

from various districts, summarized that courts will “scrutinize[] the standards and procedures 

employed” and that the “standards set must be reasonable, applied with an even hand, and not in 

conflict with the public policy of the jurisdiction.” The Court’s role is not to conduct a de novo 

review of the evidence, but to determine whether URAC’s decision-making process was 

reasonable and supported by the evidence before it. See Kumar, 174 F. Supp. 3d at 190. This is

necessarily a deferential standard because “professional societies possess a specialized 

competence in evaluating the qualifications of an [entity] to engage in professional activities.” 

Marjorie Webster, 432 F.2d at 655.

Courts confronted with accreditation-specific cases use similar standards. McKeesport 

Hospital v. Accreditation Council for Graduate Medical Education recognized that 

“accreditation associations [should] employ fair procedures when making decisions affecting 
21

their members,” 24 F.3d 519, 534-35 (3d Cir. 1994); Medical Institute of Minnesota v. National 

Association of Trade & Technical Schools required an accrediting agency to “confirm its actions 

to fundamental principles of fairness,” 817 F.2d 1310, 1314 (8th Cir. 1987); and North Dakota v. 

North Central Association of Colleges and Secondary Schools, 99 F.2d 697, 700 (7th Cir. 1938)

noted that accreditation decisions would not survive if “arrived at arbitrarily and without 

sufficient evidence.” And more recently, in Professional Massage Training Center, Inc. v. 

Accreditation Alliance of Career Schools and Colleges, 781 F.3d 161, 170, 172 (4th Cir. 2015) 

applied the arbitrary and capricious and fairness standards to uphold an accreditation denial.

Notably, these cases are all in the higher education accreditation, and few cases address 

applying these standards outside that context. See Mot. to Dismiss 17 (citing one 2015 district 

court case in which the Western District of Virginia declined to extend the federal common law 

right to due process outside the context of higher education). But given the similarities between 

the industries—both the higher education and IRO services industries are highly regulated, both 

provide services affecting the public, and both involve accreditation from private 

organizations—it is appropriate to follow the same standard in this accreditation context.

5

Under this deferential analysis, URAC’s decision was not arbitrary or capricious. For 

each of the four standards upheld by URAC’s Executive Committee, BHM argues that URAC 

 5

 URAC contends that that the duty of good faith and fair dealing does not cover challenges to 

accreditation decisions, and quotes from cases where courts have dismissed accreditation actions 

brought under breach of contract. Mot. to Dismiss 34-35. But these cases also reference that the 

“deferential principles of administrative law” could apply instead. Tsamota Certification Ltd. v. 

Ansi ASQ Nat’l Accreditation Bd. LLC, No. 17-cv-839, 2018 WL 1936840, at *6 (E.D. Wis. 

April 24, 2018); see also Found. For Interior Design Educ. Research v. Savannah Coll. of Art & 

Design, 244 F.3d 521, 532 (6th Cir. 2001) (“the Foundation did not act in an arbitrary or 

unreasonable manner in denying the College’s accreditation application”). I therefore assume 

for the sake of argument that in the District of Columbia, an accreditation decision can be 

reviewed under an arbitrary and capricious standard.
22

considered the “wrong” evidence or should have employed other procedures to ensure that it 

obtained and considered the “right” evidence. See Mot. for Prelim. Inj. 10-16. As detailed in 

Section I.B., the arguments that BHM makes to this Court largely mirror those that it advanced 

in its 26-page written appeal to the Executive Committee. 

The Committee’s decision to uphold the findings are supported by the record. For 

example, for Core Requirement 4(b), not even BHM disputes the fact that it failed to file the 

annual report necessary for incorporation in Florida, and that its corporate status was dissolved

for months as a result. BHM Appeal 7. It argues for essentially a “no harm, no foul” rule 

because its corporate status was reinstated and made retroactive, but this does not change the fact 

that the evidence still supports a finding of non-compliance. See id. For Core Requirement 

13(a), BHM argues that URAC should have spoken with BHM’s CIO instead of the clinical 

specialists who showed that they could access the drop-down menu that permits changes to be 

made to a reviewer’s decision. Id. at 9-10. Again, the evidence—which not only involved this 

demonstration, but other testimonial evidence as well—supports URAC’s finding, and it was 

entitled to fashion its investigation in a way that efficiently and sufficiently answered its 

inquiries. Am. Compl. Ex. 1 Attach 12. Who URAC selects to interview, as well as what 

questions it asks, and whether and to what extent it conducts any follow-up, are matters within its 

discretion that neither BHM nor this Court should dictate. The same analysis applies for Core 

Requirements 17(a)(ii) and 32(b). BHM disputes URAC’s substantive findings and argues that 

URAC should have ceded to BHM’s explanations for its seeming non-compliance. Mot. for 

Prelim. Inj. 11-14, 15-16. But URAC, on three separate occasions, two of which were on a 

blinded basis, determined that evidence gathered during the for-cause investigation was enough

to sustain a finding. The final decision-maker, the Executive Committee, made its decision with 
23

the benefit of BHM’s written appeal. This Court will not disturb these findings, which were 

made upon review of the facts by a knowledgeable entity with subject matter expertise, when 

they are supported by the record and adequately explained by URAC. See Mot. to Dismiss 27-33

(explaining its determinations); Kumar, 174 F. Supp. 3d at 190 (D.D.C. 2016) (an arbitrary or 

capricious decision is one that “could not be fairly characterized as the product of reasoned 

decision-making.”).

As for URAC’s decision-making process, the record shows that it followed “fundamental 

principles of fairness.” See Med. Inst. of Minn. v. Nat’l Ass’n of Trade & Tech. Schs., 817 F.2d 

at 1314. As described in greater detail in Section I. A.2., URAC followed its written procedures 

throughout this process, involving: receiving a grievance, conducting a preliminary investigation, 

starting a for cause review, conducting a site visit, making a determination, and considering and 

resolving an appeal. There is no evidence of bias against BHM at any point throughout the 

proceedings; indeed, both the Accreditation and the Executive Committees considered the 

evidence and made their decisions on a blinded basis. Members of these committees also are 

unpaid volunteers and not URAC employees. At the Executive Committee level, BHM 

submitted a written appeal to advocate its case. And as evidence of the process working, the 

Executive Committee overturned three of the seven findings below. These steps—the several 

levels of independent and unbiased review with the opportunity to respond—satisfy any common 

law due process rights that BHM has.

In summary, BHM cannot show a likelihood of success on the merits, both because of the 

exculpatory language in the parties’ Contract and because URAC’s determinations were the 
24

product of reasoned decision-making and a fair process. I conclude that BHM’s inability to 

succeed on the merits is determinative and warrants a denial of the its Motion.6 

C. URAC’s Motion to Dismiss Should Be Granted

Because the parties’ contractual language is valid and enforceable, URAC’s Motion to 

Dismiss must be granted. BHM’s Amended Complaint, even if the allegations it contains are 

assumed to be true, does not state claims for which the Court may grant relief, as BHM agreed to 

the exculpatory clause that precludes it from pursuing legal action for URAC’s revocation 

decisions. 

 6 Because this case must be dismissed under the exculpatory clause, the Court need not linger on 

the other preliminary injunction factors. But consideration of these factors demonstrates that 

BHM would not be entitled to an injunction in any case. 

The Court agrees that BHM likely suffered significant reputational harm resulting from a 

revocation of its accreditation. Though BHM did not provide any concrete evidence of a loss of 

clients, and though URAC has since re-accredited BHM for 2018, the Court assumes that the 

“irreparable harm” factor would tip in BHM’s favor. 

The balance of equities in this case is in equipoise. It is true that URAC is the sole accrediting 

entity that governs who may provide IRO services under the ACA. Thus, a loss of URAC 

accreditation harms BHM’s capacity to conduct third party reviews for several clients. However, 

URAC’s status as the sole accrediting entity also means that public trust in the fairness and 

efficacy of its review processes is paramount. The perception that it may permit non-compliant 

entities to continue providing critical, medical services would severely erode this trust. 

Finally, the public interest is better served by denying a preliminary injunction. BHM argues that 

its lack of accreditation “disrupt[s] reviews of medical decisions for hundreds of patients and 

health plans, delaying prior authorization and coverage determinations until the health plans and 

patients can resubmit their cases to other IROs.” Mot. for Prelim. Inj. 29. However, BHM has 

not cited any support for this claim, and other accredited IROs could likely step in to service 

BHM’s clients. Thus, it does not appear that any public harm would be long-lasting. On the 

other hand, as discussed, the ability of the public to trust URAC-accredited entities is of the 

utmost importance due to URAC’s status as the sole accrediting organization. 
25

IV. CONCLUSION

For these reasons, the Plaintiff’s Motion for a Preliminary Injunction will be denied and 

the Defendant’s Motion to Dismiss will be granted. A separate order will issue.

Dated: July 20, 2018 TREVOR N. MCFADDEN, U.S.D.J.