Court Opinion

ID: 8410010
Source: CourtListenerOpinion
Date Created: 2022-11-02 17:18:07.706234+00
Date Added: 2024-06-11T16:47:44.628655
License: Public Domain

KEARSE, Circuit Judge,
dissenting in part.
I respectfully dissent from the majority opinion in several respects. First, I disagree that a hospital that had a written Contracting Hospital Agreement (“CHA”) with defendant or its predecessors (collectively “Horizon” or the “Plan”) is barred from recovery by the contractual one-year limitations period specified in the CHA. Second, I disagree (a) that a plaintiff hospital that had no written contract with Horizon had an implied-in-fact contract calling for payments at the rate mandated by the 1988-1996 legislation known as the New York Prospective Hospital Reimbursement Methodology (“NYPHRM”), and (b) that such rights as those hospitals had to receive payment at the NYPHRM-mandated rate could be waived. In my view, NYPHRM abrogated the CHAs, and there were no implied-in-fact contracts calling for payments at the NYPHRM-mandated rate; however, I believe that plaintiffs’ claims in quantum meruit should not have been summarily dismissed to the extent that they accrued within six years of the commencement of the present action.
A. The Upholding of the Contractual Limitations-Period Provision
I agree with the majority that NYPHRM abrogated the payment provisions of the CHAs. NYPHRM provided, with exceptions not pertinent here, that “[sjpecial 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(l)(c), the CHAs were contrary to public policy. I disagree with the majority’s view, however, that the CHA was a severa-ble contract from which the provision for payment could be excised leaving the limitations-period provision enforceable.
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 *589engage 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.
The majority opinion instead views the CHA — a 3-page, 12-paragraph form document created by Horizon — as dealing with “many ... topics”:
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.
Majority Opinion ante at 576. But every one of the substantive topics covered in the CHA concerned payment.
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 ¶ l.B. (emphasis added).)
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.)
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.
Given that the agreement for payment is invalid, I would conclude that the district court ruled correctly that the CHAs were abrogated in toto.
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 *590themselves that they would be governed by New Jersey law.
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.
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.
B. Implied-iiir-Fact Contracts and Waiver
I also disagree with the majority’s view that the hospitals that did not have written contracts with Horizon may be found to have waived their right to payment at the rate mandated by NYPHRM. The majority’s premise is that “valid, enforceable implied-in-fact contracts existed” between Horizon and the plaintiff hospitals that did not have written contracts, see Majority Opinion ante at 587; and it notes that contract rights may be waived, see, e.g., id. at 585 (“waiver of a contract right is the voluntary abandonment or relinquishment of’ such a right (internal quotation marks omitted) (emphasis added)); id. (“waiver of a contract right must be proved to be intentional” (emphasis added)).
I disagree with the majority’s premise. I do not see in the parties’ words or conduct a basis for imputing to Horizon and any of the hospitals that accepted Horizon’s rate an intention that Horizon would pay the NYPHRM-mandated rate.
Thus, it seems to me that the hospitals’ right to payment at the rate mandated by NYPHRM was not a contract right; it was a right conferred by statute. As discussed above, that statute sought to further New York’s interest in maintaining the fiscal viability of its hospitals in order to ensure the availability of adequate medical treatment for persons in New York. My view is that the right to be paid at a rate that was statutorily mandated in the interest of public welfare, i.e., for purposes beyond that of merely filling hospital coffers, could not be waived. Indeed, the view that the hospitals that had no written contracts with Horizon may permissibly be found to have waived their rights to the NYPHRM-mandated payment rate if their actions *591were knowing, voluntary, and intentional would seem to be inconsistent with this panel’s unanimous view that the lower-than-NYPHRM-mandated rate actually agreed to in writing by the hospitals that entered into CHAs cannot be enforced.
In sum, my view is that all of the plaintiffs’ claims based on contracts, express or implied, were properly dismissed. But given the statutory landscape, the court should not have granted summary judgment dismissing their claims for quantum meruit.
Claims in quantum meruit in New York are subject to a six-year statute of limitations. See N.Y. C.P.L.R. § 213(1). Accordingly, I would vacate the judgment to the extent that it dismissed plaintiffs’ quantum meruit claims and would remand for the adjudication of those claims to the extent that they accrued within the six-year period prior to the commencement of the present action.