Opinion ID: 794393
Heading Depth: 2
Heading Rank: 1

Heading: The Upholding of the Contractual Limitations-Period Provision

Text: 59 I agree with the majority that NYPHRM abrogated the payment provisions of the CHAs. NYPHRM provided, with exceptions not pertinent here, that [s]pecial payment rate methodology agreements . . . shall not be authorized, and no other arrangements with a general hospital for inpatient rates of payment other than those established in accordance with this section shall be negotiated. N.Y. Pub. Health Law § 2807-c(2)(c). As the majority notes, this section constituted a clear statement of New York public policy. Majority Opinion ante at 12. Because the CHAs allowed Horizon to pay New York hospitals at a lower rate than that permitted by NYPHRM § 2807-c(1)(c), the CHAs were contrary to public policy. I disagree with the majority's view, however, that the CHA was a severable contract from which the provision for payment could be excised leaving the limitations-period provision enforceable. 60 As the majority opinion recognizes, see ante at 581, it is established that [i]f less than all of an agreement is unenforceable [on grounds of public policy], a court may nevertheless enforce the rest of the agreement in favor of a party who did not engage in serious misconduct if the performance as to which the agreement is unenforceable is not an essential part of the agreed exchange.  Restatement (Second) of Contracts § 184(1) (1981) (emphasis mine). However, the latter condition is not satisfied in the present case, for Horizon's payment to the hospital was an essential part of the agreed exchange. Indeed, it was the entire essence of the CHA: The only substantive promise Horizon made to the hospitals was to pay them. 61 The majority opinion instead views the CHA—a 3-page, 12-paragraph form document created by Horizon—as dealing with many . . . topics: 62 The CHAs governed the relationship between Horizon and the hospitals as to many specific topics: types of services to be rendered by the hospitals, rate of payment, limitations of actions, notices of hospital admissions and eligibility for services, disposition of charges for ineligible services, effect of prior agreements, termination, availability of medical and financial records, confidentiality, and choice of governing law. 63 Majority Opinion ante at 576. But every one of the substantive topics covered in the CHA concerned payment. 64 For example, the CHA did not govern the types of services to be rendered by the hospitals or a patient's eligibility for services; rather, it governed only the types of services for which — for Horizon subscribers—Horizon agreed to pay. Thus, the CHA defined eligible persons to mean[ ] such persons as are entitled to eligible hospital services as Plan subscribers, and it defined eligible hospital services to mean[ ] such hospital services as Plan has contracted to provide payment for eligible persons. (CHA ¶ 1.B. (emphasis added).) 65 Similarly, notice of an admission to the Hospital was required only with respect to services purporting to be eligible for payment by the Plan under this Agreement. ( Id. ¶ 4.) The CHA's termination paragraph made provision for payment for past eligible hospital services and the continuation of current eligible hospital services. ( Id. ¶ 7.) And medical records were required to be made available only as they pertain[ed] to claim determination. ( Id. ¶ 8.) 66 Aside from imposing a duty to keep patient information confidential, the remainder of the CHA consists of provisions that are merely procedural. ( See id. ¶ 3 (one-year limitation period for lawsuits); id. ¶ 10 (choice of law); id. ¶ 11 (where to send notices of termination); and id. ¶ 12 (CHA paragraph headings not to be deemed controlling as to contract meaning).) In my view, the contractual limitations-period provision cannot survive the invalidation of the payment provision, for if there had been no provision for Horizon to make payments to the hospitals, there would have been no contract at all. 67 Given that the agreement for payment is invalid, I would conclude that the district court ruled correctly that the CHAs were abrogated in toto. 68 I note in passing my disagreement with Horizon's contention that the CHA provision for payments at a below-NYPHRM-mandated rate should be upheld on the theory that New Jersey law does not require payment at the NYPHRM rate and the CHAs provided that New Jersey law should apply. The plaintiff hospitals were domiciled in New York; they treated patients in New York; and NYPHRM sought to protect the New York hospitals' viability. The New York hospitals and those who dealt with them could not defeat New York's interest in the public welfare or override the statute implementing it, by the simple expedient of agreeing among themselves that they would be governed by New Jersey law. 69 I agree with the district court's rejection of plaintiffs' contention that once the CHAs were overridden by the statute, the parties were performing pursuant to implied contracts. The district court correctly ruled that a contract may be implied in fact from the presumed intention of the parties as indicated by their conduct, see, e.g., Nadel v. Play-By-Play Toys & Novelties, Inc., 208 F.3d 368, 376 n. 5 (2d Cir.2000), but that there is no indication here that the parties intended that Horizon would pay the hospitals at the rate mandated by NYPHRM. 70 However, given the invalidation of the express contracts and the absence of any implied-in-fact contracts, I see no doctrinal impediment to plaintiffs' pursuit of claims in quasi contract, or quantum meruit. See generally Clark-Fitzpatrick, Inc. v. Long Island Rail Road Co., 70 N.Y.2d 382, 388, 521 N.Y.S.2d 653, 656, 516 N.E.2d 190 (1987) (a claim in quasi-contract or quantum meruit is normally not available where a valid and enforceable agreement exists between the parties). The district court dismissed the quantum meruit claims here on the ground that there was no injustice because plaintiffs accepted the below-NYPHRM-mandated rate without protest for eight years. This seems to me an unduly narrow view of what is just, especially given that NYPHRM sought to further New York['s] . . . important interest in maintaining the viability of hospitals in the state through the setting of appropriate rates, Majority Opinion ante at 584 n. 5, and that the hospitals' viability is, in turn, critical to the availability of adequate medical treatment for the people of and in New York. I do not believe the quantum meruit claim was susceptible to summary judgment in favor of Horizon simply on the basis of the hospitals' failure to commence this action sooner.