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UNITED STATES DISTRICT COURT 

EASTERN DISTRICT OF MICHIGAN 

SOUTHERN DIVISION 

REHAB SOLUTIONS, INC., 

Plaintiff, 

v. 

ST. JAMES NURSING & PHYSICAL 

REHABILITATION CENTER, INC., 

Defendant. 

 / 

Case No. 14-cv-13651 

UNITED STATES DISTRICT COURT JUDGE

GERSHWIN A. DRAIN

UNITED STATES MAGISTRATE JUDGE

MONA K. MAJZOUB

OPINION AND ORDER DENYING PLAINTIFF’S 

MOTION FOR SUMMARY JUDGMENT [33] 

I. INTRODUCTION

On September 19, 2014, Rehab Solutions, Inc. (“Rehab Solutions” or “Plaintiff”), 

commenced this breach of contract action against St. James Nursing & Physical Rehabilitation 

Center, Inc. (“St. James” or “Defendant”), alleging that St. James failed to pay certain invoices 

for services rendered by Rehab Solutions. See Dkt. No. 1. Presently before the Court is Rehab 

Solutions’ Motion for Summary Judgment [33]. This matter is fully briefed and a hearing was 

held on August 18, 2015. After reviewing the record in its entirety, the Court will DENY Rehab 

Solutions’ Motion [33]. The Court’s Opinion and Order is set forth in detail below. 

II. BACKGROUND

St. James is a Michigan corporation with its principal place of business in Michigan. See 

Dkt. No. 1 at ¶ 1. St. James is a nursing facility that provides nursing care and services, including 

physical therapy to the sick and elderly. See id. at ¶ 6. Rehab Solutions is a North Carolina 

corporation with its principal place of business in North Carolina. See id. at ¶ 2. Rehab Solutions 

provides physical, occupational and speech therapy services in nursing facilities. See id. at ¶ 5. 

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A. The Agreement 

On October 24, 2013, Rehab Solutions and St. James entered into a one-year outsourcing 

Therapy Services Agreement (“the Agreement”). See Dkt. No. 1-2 at ¶ 1. The Agreement 

automatically renewed for successive one-year terms unless either party delivered written notice 

to the other of intent not to renew at least thirty days prior to the end of each term. See id. 

 Per the terms of the Agreement, Rehab Solutions was to provide St. James with 

“specialized therapy services,” including physical therapy, occupational therapy, and speech and 

language pathology. See Dkt. No. 1-2 at ¶ 2. The Agreement indicates that the scope of the 

services provided by Rehab Solutions included, amongst other things, “accurate CPT coding and 

ICD-9 identification on service logs submitted to the billing office” and a requirement that Rehab 

Solutions “[p]rovide all required therapy billing information to the business office per the terms 

of the contract[.]” Dkt. No. 1-2 at 10. 

 The Agreement further indicates that Rehab Solutions was to be compensated by St. 

James “for services rendered during each calendar month according to invoices submitted to [St. 

James] by Rehab Solutions.” Id. at ¶ 3. The Agreement required that Rehab Solutions “be paid in 

full within 30 days after each invoice is submitted by Rehab Solutions to [St. James].” Id. The 

invoices were required to “reflect the Schedule of Rates agreed to by Rehab Solutions and [St. 

James]” Id. (referencing Dkt. No. 1-2 at 8-9 “Exhibit A-Fee Schedule”). 

 The Agreement also contained the following provision outlining an appeals procedure in 

the event that Rehab Solutions claimed and received payment from St. James for service that was 

later disallowed, denied or recaptured by a third-party: 

In the event Rehab Solutions claims and receives payment from [St. James] for 

service, reimbursement for which is later disallowed or recaptured in part or in 

full by the federal, state or local government, or other third party payor, including 

without limitation the Medicare or Medicaid programs, and where such 

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disallowance or recapture is directly attributable to the acts or omissions of Rehab 

Solutions, its employees or contractors, . . . Rehab solutions shall promptly refund 

the disallowed or recaptured amount, previously received by Rehab Solutions to 

[St. James] upon final resolution (by the fiscal intermediary, carrier, or, if 

appealed, by final administrative or judicial determination)[.] 

Dkt. No. 1-2 at ¶ 4.1.1

 However, the Agreement indicates that Rehab Solutions would only 

refund the disallowed or recaptured amount only if the denial is based on a finding that “[t]he 

services were not medically necessary; . . . [t]he services were otherwise not covered services 

under polices and the rules of any applicable payment program; or, . . . [t]he services were not 

supported by timely and complete invoices and other necessary documentation of a claim.” Id. at 

¶¶ 4.1.1–4.1.3. After Rehab Solutions provided a refund for a claim, the Agreement contained a 

procedure for Rehab Solutions to appeal the disallowed claim. Id. at ¶¶ 4.2–4.2.2. 

 St. James was required by the Agreement to provide notice to Rehab Solutions with 

respect to denied claims. See Dkt. No. 1-2 at ¶ 4.3. Specifically, the Agreement indicates that 

“[i]n order to timely appeal denied claims, Rehab Solutions requires notification and receipt of 

the detailed remittance advice and UB04 for residents within 14 calendar days of the ‘paid date’

on the remittance advice.” Id. at ¶ 4.3.1. If St. James did not notify Rehab Solutions “of such a 

claim denial . . . disallowance or recapture as required [in the Agreement], Rehab Solutions 

[was[ entitled to receive and retain full payment of such claim rom [St. James] and [had] no 

obligation to refund or reimburse any portion of such claim to[St. James.]”  Id. at ¶ 4.3.2. 

Per the terms of the agreement either party could terminate the Agreement if either 

materially failed “to comply with any of the obligations, liabilities or undertaking assumed by 

such party under this Agreement” following a stated period of written notice. See Dkt. No. 1-2 at 

 1

 The Agreement specifically notes that “without limitation, Rehab Solutions shall have no obligation to refund or 

reimburse in any instance where Rehab Solutions has committed no act or omission giving rise to disallowance or 

recapture but an act or omission of [St. James] or a third party results in disallowance or recapture[.]” Dkt. No. 1-2 

at ¶ 4.1. 

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¶ 1. However, Rehab Solutions could terminate the Agreement “immediately” upon the 

occurrence of, amongst other things, the “failure of [St. James to pay compensation as provided 

for herein.” Id. The Agreement also contained a choice of law provision indicating it was to “be 

governed and construed in accordance with the laws of the State of North Carolina.” Id. at ¶ 16. 

B. The Dispute 

Rehab Solutions began providing services at St. James’ facility in October of 2013, and 

provided invoices for services rendered through September 2014. See Dkt. No. 1-5 at 7-17. 

Rehab Solutions asserts that it provided St. James with “the necessary information to seek 

reimbursement from third-party payors for the services rendered by Rehab Solutions[,]”

including, “inter alia, therapy and service logs, ICD-9 codes for medical treatment diagnoses, G 

codes, change of therapy and information regarding the onset, star and end dates of care.” Dkt. 

No. 33 at 13 (citing Dkt. No. 33-5 at ¶¶ 4, 9-10 “Affidavit of Brandy Shumaker”). 

Nevertheless, Rehab Solutions asserts that St. James did not pay Rehab Solutions for 

services rendered from October 2013 through April 2014. See Dkt. No. 33 at 14 (citing Dkt. No. 

33-4 at ¶ 10 “Affidavit of Donald R. Tesner”). Rehab Solutions claims that it made numerous 

attempts to collect past-due amounts until it sent a demand letter to St. James on May 14, 2014, 

requesting that St. James immediately pay all past-due invoices. Id. (citing Letter from Emily A. 

Shupe, Counsel for Rehab Solutions, to Administrator of St. James (May 14. 2014) (Dkt. No. 1-

3)). Rehab Solutions further asserts that “St. James did not pay those invoices, but it represented 

that it would work towards a payment plan for the outstanding invoices if Rehab Solutions would 

continue to provide services at its facility.” Id. (citing Dkt. No. 33-4 at ¶ 10). 

Accordingly, Rehab Solutions states that it kept providing services while the parties 

“attempted to negotiate a payment plan.” Dkt. No. 14 (citing Dkt. No. 33-4 at ¶ 11). Rehab 

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Solutions argues that “St. James never raised any issues with the services rendered, the amounts 

of the invoices, or the third-party payor reimbursement information.” Id. To the contrary, Rehab 

Solutions claims that “H. Roger Mali, a principal of St. James, inquired if Rehab Solutions 

would replace the current therapy service provider in another one Mali’s skilled nursing 

facilities.” Id. (citing Dkt. No. 33-4 at 13-14, ¶ 15). 

Rehab Solutions acknowledges that “St. James did make some payments towards the 

past-due invoices during the parties’ negotiations in the summer of 2014. Dkt. No. 33 at 13 

(citing Dkt. No. 33-4 at 11, ¶ 11). However, Rehab Solutions is adamant that “at no time did 

Rehab Solutions ever inform St. James that these payments constituted a full payment of its debt 

to Rehab Solutions.” Id. (citing Dkt. No. 33-4 at ¶ 11). Thus, Rehab Solutions claims that 

“[d]espite the initial progress towards repayment, St. James again became delinquent in its 

payments[.]” Id. at 14-15 (citing Dkt. No. 33-4 at ¶ 12). 

On August 29, 2014, Rehab Solutions sent St. James a letter in which it informed St. 

James that, unless certain conditions were met, including payment of the then-outstanding 

balance of $265,763.93, Rehab Solutions would terminate the Agreement effective September 

12, 2014. See Dkt. No. 33 at 15 (citing Letter from Emily A. Shupe, Counsel for Rehab 

Solutions, to Administrator of St. James (August 29, 2014) (Dkt. No. 1-4)). Still, Rehab Solution 

contends that St. James did not pay any portion of the outstanding balance. Id. (citing Dkt. No. 

33-4 at ¶¶ 13-14). Accordingly, Rehab Solutions states that it terminated the Agreement pursuant 

to Section 1(d) on September 12, 2014. See id. (referencing Dkt. No. 1-2 at ¶ 1). 

St. James gives a different account of the relationship between the parties. St. James 

emphasizes that Rehab Solutions “was required to record in a ‘Therapy Log Book’ the nature of 

the services rendered and the resident for whom said services were provided.” Dkt. No. 44 at 6. 

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(emphasis in original). According to St. James, Rehab Solutions “[i]mmediately . . . began 

defaulting on its obligation to accurately record and document the services that they had 

provided to St. James’ residents in the Therapy Logs.” Id. Specifically, St. James argues that 

Rehab Solutions “refused to remit payment previously made back to St. James, or alternatively, 

apply such payments to other amounts due and owing[.]” Dkt. No. 44 at 7. 

As a result, St. James asserts that “an alleged discrepancy developed between the 

amounts that [Rehab Solutions] invoiced St. James for, and the amounts that [St. James was] 

demanding from the insurance carriers.” Id. St. James claims that it “immediately communicated 

the issue to [Rehab Solutions] and reiterated the necessity of proper record keeping to ensure that 

[Rehab Solutions was] promptly and accurately compensated for [its] services and that St. James 

was remunerated for payments it had made to [Rehab Solutions].” Id. (emphasis in original). 

However, as the balance of the claims continued to grow, St. James argues that Rehab Solutions 

“refused to correct the deficiencies and inaccuracies in the Therapy logs and in some cases, 

refused to provide any documentation whatsoever!” Dkt. No. 44 at 7 (emphasis in original). 

Thus, despite the fact that St. James asserts it would reiterate “that in order for payments to be 

made to [Rehab Solutions], St. James needed the Therapy Logs to be capable of billing the 

insurance carriers.” Id. (emphasis in original). 

 Rehab Solutions began to demand payment in May of 2014, but St. James indicates that 

Rehab Solutions did so “despite repeated requests from St. James that [Rehab Solutions] 

correct, and in many instances provide at all, the Therapy Logs which St. James required 

in order to bill the insurance carriers.” Dkt. No. 44 at 7 (emphasis in original). When St. 

James refused to pay without proper Therapy Logs, St. James asserts that Rehab Solutions 

“began to falsify the Therapy Logs that it did provide to St. James, in many cases sending 

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Invoices to St. James which grossly exaggerated the services rendered; and in others, invoicing 

St. James for services that were never actually performed.” Id. 

St. James concludes arguing that it “has no conflict with paying [Rehab Solutions] for the 

services it has rendered on behalf of St. James’ patients.” Dkt. No. 44 at 8. However, St. James 

argues it is incapable of making “payments on an alleged balance which, [Rehab Solutions] has 

repeatedly inflated through exaggerated costs and services; and for services that St. James is 

incapable of invoicing to the appropriate insurance carriers as a result of [Rehab Solutions’] 

failure and/or refusal to provide accurate therapy records.” Id. 

III. LEGAL STANDARD

Pursuant to Rule 56 of the Federal Rule of Civil Procedure, “[t]he court shall grant 

summary judgment if the movant shows that there is no genuine dispute as to any material fact 

and the movant is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a). A fact is 

material if it might affect the outcome of the case under governing law. Anderson v. Liberty 

Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The Court “views the 

evidence, all facts, and any inferences that may be drawn from the facts in the light most 

favorable to the nonmoving party.” Pure Tech Sys., Inc. v. Mt. Hawley Ins. Co., 95 F. App'x 132, 

135 (6th Cir. 2004) (internal citations omitted). 

“The moving party has the initial burden of proving that no genuine issue of material fact 

exist[.]” Stansberry v. Air Wis. Airlines Corp., 651 F.3d 482, 486 (6th Cir. 2011) (internal 

quotations omitted). “Once the moving party satisfies its burden, ‘the burden shifts to the 

nonmoving party to set forth specific facts showing a triable issue.’” Wrench LLC v. Taco Bell 

Corp., 256 F.3d 446, 453 (6th Cir. 2001) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio 

Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)). Summary judgment is 

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appropriate when “a motion for summary judgment is properly made and supported and the 

nonmoving party fails to respond with a showing sufficient to establish an essential element of 

its case[.]” Stansberry, 651 F.3d at 486 (citing Celotex Corp. v. Catrett, 477 U.S. 371, 322–23 

(1986)). However, “even where a motion for summary judgment is unopposed, a district court 

must review carefully the portions of the record submitted by the moving party to determine 

whether a genuine dispute of material fact exists.” F.T.C. v. E.M.A. Nationwide, Inc., 767 F.3d 

611, 630 (6th Cir. 2014). 

IV. DISCUSSION

According to St. James, there are three questions of fact that should preclude Rehab 

Solutions’ from summary judgment in this case: (1) whether Rehab Solutions wrongfully 

withheld therapy logs from St. James; (2) whether Rehab Solutions overstated invoices that were 

provided to St. James; and (3) whether Rehab Solutions returned funds paid by St. James for 

later-denied claims. See Dkt. No. 44 at 12; Dkt. No. 45 at 5. Rehab Solutions disagrees, and 

contends that “[o]nce the Court clears away St. James’ generalities and gets down to the specific 

facts in this case, it becomes clear that St. James has no real response to any of the arguments in 

Rehab Solutions’ motion.” Dkt. No. 45 at 1. The Court will deny Rehab Solutions’ Motion for 

Summary Judgment, because the Court finds that there is evidence in the record that creates a 

genuine question of fact for the bench trial. 

A. The Therapy Logs and Overstated Invoices 

St. James is adamant that Rehab Solutions “was required to record in a ‘Therapy Log 

Book’ the nature of the services rendered and the resident for whom said services were 

provided.” Dkt. No. 44 at 6. Nevertheless, St. James contends that Rehab Solutions 

“[i]mmediately . . . began defaulting on its obligation to accurately record and document the 

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services that they had provided to St. James’ residents in the Therapy Logs.” Id. (emphasis in 

original). Rehab Solutions takes the position that “the Agreement does not require Rehab 

Solutions to provide St. James with ‘Therapy Logs.’” Dkt. No. 45 at 5. However, as discussed in 

a prior order, and after reviewing the record again, the Court finds that there is a question of fact 

as to whether accurate Therapy Logs were provided. Cf. Dkt. No. 50 at 8. 

As previously discussed, the Agreement indicates that, amongst other things, Rehab 

Solutions was required to provide “accurate CPT coding and ICD-9 identification on service logs 

submitted to the billing office” and “all required therapy billing information to the business 

office per the terms of the contract[.]” Dkt. No. 1-2 at 10. Critically, the affidavit of Rehab 

Solutions’ own witness, Ms. Brandy Shumaker, similarly indicates that “[t]he information

necessary for reimbursement” includes “[t]herapy service records and logs, including minutes of 

therapy provided[.]” Dkt. No. 33-5 at ¶ 4(a).2

 Accordingly, the Court finds that Rehab Solutions 

is incorrect in its assertion that “the Agreement does not require Rehab Solutions to provide St. 

James with ‘Therapy Logs.’” Dkt. No. 45 at 5. 

Rehab Solutions next argues that “[e]ven if there were such a requirement, Brandy 

Shumaker’s affidavit that St. James was given access to all information for St. James to seek 

reimbursement from insurance carriers through Rehab Solutions’ software applications is 

undisputed.” Dkt. No. 45 at 5. After reviewing the record, the Court finds that there is record 

evidence to support the contention that information was missing, the invoices were incorrectly 

billed, and that St. James raised invoice issues with Rehab Solutions. Indeed, as previously 

 2

 Ms. Shumaker further indicates that, consistent with the Agreement the following were necessary in order to be 

provided to St. James: (1) “Internal Classification of Disease (ICD-9) Codes, which show which diseases are 

applicable to each individual resident. This needs to be included on the billing to know why the resident is being 

treated by nursing and or therapy;” Dkt. No. 33-5 at ¶ 4(b); and (2) “Current Procedural Terminology (“CPT”) 

Codes are used to show what types of services were rendered during each therapy session;” id. at ¶ 4(f). Cf. Dkt. No. 

1-2 at 10 (noting Rehab Solutions was required to provide “accurate CPT coding and ICD-9 identification on service 

logs submitted to the billing office[.]”). 

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mentioned, the Court reviewed every piece of record evidence in this matter, and found an email 

from Mr. Roger Mali, the principal of St. James, from July of 2014 indicating that he raised 

certain issues with regard to the billing amounts and services rendered under the Agreement by 

Rehab Solutions: 

I think the only main item is that we need some sort of mechanism to reconcile 

the bills (even the past due bills). . . . [T]he idea is that we have to have a right to 

work with Rehab Masters to reconcile the past due invoices. I think some of the 

issues that got us to where we are was the misunderstanding with some of the 

bills. To that end - I think as long as we agree that the parties will work in good 

faith and mutual acceptable adjustments, that works for everyone. 

Dkt. No. 44-3 at 75; see also id. at 81. These stated “issues” and “misunderstandings” regarding 

the Therapy Logs and invoices lead this Court to conclude that there is a question of fact as to 

whether St. James was actually given access to all information in order to seek reimbursement 

from insurance carriers through Rehab Solutions’ software applications. 

B. The Contract 

St. James also argues that it is entitled to Summary Judgment because “the Agreement 

provides for a specific process to be followed by the parties when a third-party payor denies a 

claim.” Dkt. No. 45 at 6. Here, St. James has raised several affirmative defenses. See Dkt. No. 

18. St. James’ failure to mitigate defense appears to be the only defense with merit at this stage. 

See Dkt. No. 18 at ¶ 6. 

Rehab Solutions correctly argues, and St. James does not dispute, that North Carolina 

Law should apply to this dispute because of the North Carolina choice of law provision included 

in the Agreement. See Dkt. No. 33 at 15-16 (citing Dkt. No. 1-2 at ¶ 16); see also id. (citing Kelly 

Servs., Inc. v. Marzullo, 591 F. Supp. 2d 924, 932 (E.D. Mich. 2008), to note that “Michigan has 

adopted the approach set forth in the Restatement (Second) of Conflict of Laws. According to 

this approach, a contractual choice of law provision will be binding unless either: (a) the chosen 

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state has no substantial relationship to the parties or the transaction and there is no other 

reasonable basis for the parties' choice, or (b) application of the law of the chosen state would be 

contrary to a fundamental policy of a state which has a materially greater interest than the chosen 

state in the determination of the particular issue and which, under the rule of [§] 188, would be 

the state of the applicable law in the absence of an effective choice of law by the parties.”) 

(internal citations omitted). 

“North Carolina recognizes a failure to mitigate damages as a valid affirmative defense.”

Guessford v. Pennsylvania Nat. Mut. Cas. Ins. Co., 983 F. Supp. 2d 652, 667 (M.D.N.C. 2013) 

(citing Elm St. Gallery, Inc. v. Williams, 191 N.C. App. 760, 762, 663 S.E.2d 874, 875 (2008) 

reconsideration denied, No. 1:12CV260, 2013 WL 5840050 (M.D.N.C. Oct. 30, 2013)). “The 

purpose of asserting the affirmative defense of failure to mitigate damages is to introduce ‘facts 

which show that the plaintiff's . . . cause of action does not entitle him to so large an amount as 

the showing on his side would otherwise justify the jury in allowing him.’” Id. (citing Scott v. 

Foppe, 247 N.C. 67, 71, 100 S.E.2d 238, 240–41 (1957), which cites 1 Sutherland, Damages, 4th 

ed., § 149)). 

 Here, St. James argues that Rehab Solutions’ “claims are barred, in whole or in part, for 

failure to mitigate damages,” because 

despite multiple requests from [St. James], Rehab Solutions repeatedly withheld, 

falsified and refused to remit the Therapy Logs for [St. James’ patients], which 

are necessary for Defendant to receive remuneration from the appropriate 

insurance provider, (i.e. Medicare, VA, private insurance), and which are also 

necessary for [St. James] to make payment to [Rehab Solutions], for products 

and/or services properly billed to [St. James]. 

Dkt. No. 18 at ¶ 6. According to St. James, “[h]ad [Rehab Solutions] properly maintained its 

Therapy Logs, allowing [St. James] to submit such records to its patient’s insurance carriers, 

[Rehab Solutions] would have no damages, whether fabricated or legitimate.” Id. 

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Rehab Solutions argues that because it attempted to negotiate with St. James about the 

invoices “the undisputed facts conclusively demonstrate that Rehab Solutions did make efforts to 

mitigate its damages.” Dkt. No. 33 at 26-27. However, as Rehab Solutions itself notes, 

“[m]itigation requires the non-breaching party to use fair and reasonable prudence required to 

reduce the damage from the breach.” Dkt. No. 33 at 26 (citing Turner Halsey Co. v. Lawrence 

Knitting Mills, Inc., 38 N.C. App. 569, 572 (N.C. Ct. App. 1978)). 

After reviewing the record, and construing the evidence and all reasonable inferences in 

the light most favorable to the non-moving party, the Court finds there is a question of fact as to 

whether Rehab Solutions fairly and reasonably tried to mitigate its damages—namely, the degree 

of Rehab Solution’s cooperation and whether it should have been more forthcoming with 

assistance in providing medical records or access to them so that St. James could properly bill 

insurance carriers. See, e.g., Guessford, 983 F. Supp. 2d at 667 (finding genuine disputes of 

material fact preclude summary judgment because the Defendant argued that Plaintiff failed to 

mitigate his damages by not providing the requisite documentation for evaluation, never returned 

a signed medical authorization sent by Defendant to Plaintiff, and did not provide any additional 

medical records beyond those Plaintiff felt was necessary).

V. CONCLUSION

In conclusion, the Court notes that Rehab Solutions has put forth a compelling argument 

in support of its Motion for Summary Judgment. However, the Court emphasizes that the 

evidence and all reasonable inferences must be construed in the light most favorable to the nonmoving party. See Matsushita, 475 U.S. at 587, 106 S.Ct. 1348, 89 L.Ed.2d 538. Keeping this in 

mind, the Court finds that the nonmoving party has set forth facts showing a triable issue for the 

bench trial as to whether the therapy logs were properly submitted, the invoices were properly 

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stated, and whether there was a failure to mitigate damages. Cf. Wrench LLC., 256 F.3d at 453. 

For the foregoing reasons, the Court HEREBY DENIES Rehab Solutions’ Motion for Summary 

Judgment [33]. 

IT IS SO ORDERED. 

Dated: September 15, 2015 

 /s/ Gershwin A Drain 

 HON. GERSHWIN A. DRAIN 

 United States District Court Judge

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