Court Opinion

ID: 2976298
Source: CourtListenerOpinion
Date Created: 2015-09-22 17:49:38.987732+00
Date Added: 2024-06-11T15:36:49.804775
License: Public Domain

NOT RECOMMENDED FOR PUBLICATION
                             File Name: 08a0133n.06
                               Filed: March 5, 2008

                                       No. 07-3357

                        UNITED STATES COURT OF APPEALS
                             FOR THE SIXTH CIRCUIT

FRANCINE BERGMOSER; TERRY KING;
LINDA L. HEIDL,

       Plaintiffs-Appellants,
                                                      On appeal from the United States
v.                                                    District Court for the Northern
                                                      District of Ohio
SMART DOCUMENT SOLUTIONS, LLC;
SMART CORPORATION,

       Defendants-Appellees.
                                            /

BEFORE:       RYAN, BATCHELDER, and GRIFFIN, Circuit Judges.

       RYAN, Circuit Judge.        The plaintiffs appeal the district court’s decision to grant

the defendants’ motion to dismiss their claims and to deny the plaintiffs’ motion for leave

to amend their complaint. Because we believe dismissal was warranted and that the

district court did not abuse its discretion in denying the plaintiffs leave to amend their

complaint, we affirm the district court’s judgment.

                                                I.

       The plaintiffs filed this putative class action suit against the defendants, Smart

Document Solutions, LLC, and Smart Corporation (collectively, Smart), alleging that

Smart’s practice of charging consumers more than the actual cost for shipping, and

assessing sales tax on the services they provide, violates the Ohio Consumer Sales
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Practice Act (OCSPA), as well as Ohio common law. The plaintiffs are requesting

compensatory damages and an order enjoining Smart from continuing this practice.

       Smart is a medical records processing company that provides copies of medical

records to consumers upon request. Smart contracts with clinics, hospitals, and other

healthcare providers to process medical record requests made by patients. Through its

5,500 facilities nationwide, Smart processes approximately 20,000 medical document

requests and sends approximately 600,000 pages of documents through the United States

Postal Service (USPS) each day.

       The individual plaintiffs in this suit are among those who have requested and

received copies of medical records from different healthcare providers having agreements

with Smart to fill their requests. Each of the plaintiffs received invoices detailing the various

fees that Smart charged in the transactions. The descriptive categories on the invoices

included a “Basic Fee,” “Retrieval Fee,” “Per Page Copy,” “Shipping/Handling,” and “Sales

Tax.” Upon receiving the invoices along with the medical records, the plaintiffs remitted

the amount indicated on the invoices and kept the copies of the medical records.

       Under the line item “Shipping/Handling,” Smart charged the plaintiffs at a rate

identical to the rate of then-first class postage (approximately $.39), while Smart actually

paid approximately $.33, a discounted postage rate for shipping the documents through

the USPS. Smart also charged the plaintiffs sales tax on this service.

       The plaintiffs filed suit in the Erie County Ohio Court of Common Pleas and the

defendants removed the case to the United States District Court for the Northern District

of Ohio. Smart moved to dismiss all the plaintiffs’ claims under Federal Rule of Civil
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Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. The

plaintiffs opposed the motion and filed a motion to amend their complaint to add a new

claim under the Deceptive Trade Practices Act (DTPA), a claim for unjust enrichment and

sought equitable accounting. The district court granted Smart’s motion to dismiss and

denied the plaintiffs’ motion to amend. The plaintiffs now appeal both decisions.

                                             II.

       Dismissal under Rule 12(b)(6) is appropriate when a court concludes the plaintiffs

could not prove any set of facts in support of their claims that would entitle them to relief.

Moon v. Harrison Piping Supply, 465 F.3d 719, 723 (6th Cir. 2006), cert. denied, 127 S. Ct.
1832 (2007). We review the district court’s decision to grant a motion to dismiss de novo.

Doe v. Bredesen, 507 F.3d 998, 1002 (6th Cir. 2007).

                                             III.

       The plaintiffs claim Smart violated the OCSPA by charging more than the actual cost

it paid for mailing the medical records to the consumers. Specifically, the plaintiffs argue

that the provisions of the OCSPA, Ohio Revised Code Ann. § 1345.01-1345.12, which

prohibit unfair or deceptive sales practices, preclude Smart from charging more than its

actual costs for shipping. Further, the plaintiffs contend that Smart is bound by the

schedule of charges set forth in the Medical Records Statute, Ohio Rev. Code Ann. §

3701.741, which specifically proscribes charging more than the actual cost of postage

incurred by the medical record processing company. See Ohio Rev. Code Ann. §

3701.741(B)(1)(c), (B)(2)(d) (West 2005).
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       The OCSPA excludes from its scope, acts or practices that are “required or

specifically permitted . . . by or under other sections of the Revised Code.” Ohio Rev.

Code Ann. § 1345.12(A). Section 3701.741, subsection (E), is such an “other section[].”

It authorizes medical record companies to contract with patients, patients’ representatives,

and authorized individuals to provide these services and it does not place limitations on the

terms of these agreements. See Ohio Rev. Code Ann. § 3701.741(E)(1).

       Here, the parties entered into contracts that were expressly authorized by the

Medical Records Statute. When each plaintiff requested medical records from Smart,

received and retained the records, and remitted payment in accordance with the terms of

the invoice, the result was a binding contract with Smart, as allowed in subsection (E).

These transactions are expressly authorized by the Medical Records Statute and are

outside the scope of the OCSPA.

                                             IV.

       The plaintiffs also claim the defendants improperly collected sales tax on these

transactions. The defendants argue, and we agree, that the plaintiffs have not stated a

claim upon which the district court could grant relief. Even if the taxes were improperly

assessed, the Ohio Administrative Code does not authorize private suits against vendors,

seeking recovery of collected taxes. The Ohio Administrative Code § 5703-9-07(B) sets

forth the proper method of pursuing a tax refund. The consumer may either file an

application directly with the tax commissioner or request a refund from the vendor. Ohio

Admin. Code § 5703-9-07(B) (2004). The plaintiffs argue that they should be allowed to

pursue their claim for wrongfully assessed taxes because § 5703-9-07 permits consumers
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to “[r]equest a refund from the vendor.” Id. at § (B)(1)(b). But, this section concludes, “[i]f

a vendor or seller denies a consumer’s refund request, the consumer may file an

application for refund with the tax commissioner . . . . That is the consumer’s sole remedy

to claim refund of the tax.” Id. at § (B)(2). We conclude that the Administrative Code does

not authorize private actions to recover sales taxes and the plaintiffs have not stated a

claim upon which relief can be granted.

                                              V.

       The plaintiffs also claim common law fraud. The elements of common law fraud in

Ohio are:

       (a) a representation or, where there is a duty to disclose, concealment of a
       fact, (b) which is material to the transaction at hand, (c) made falsely, with
       knowledge of its falsity, or with such utter disregard and recklessness as to
       whether it is true or false . . . , (d) with the intent of misleading another into
       relying upon it, (e) justifiable reliance upon the representation or
       concealment, and (f) a resulting injury proximately caused by the reliance.

Gaines v. Preterm-Cleveland, Inc., 514 N.E.2d 709, 712 (Ohio 1987).

       The plaintiffs’ claim fails this test for two reasons. First, they do not allege that

Smart expressly represented to the plaintiffs that Smart charged its actual postage cost

under its “Shipping/Handling” charge. The plaintiffs assumed that this charge reflected the

actual cost Smart paid. However, in the absence of facts indicating that Smart affirmatively

misrepresented the nature of the charge, an essential element of common law fraud is

missing. Second, the plaintiffs’ claim, that Smart fraudulently charged non-actual postage

costs, amounts to a misrepresentation of law. A legal misrepresentation cannot form the

basis of a fraud or intentional misrepresentation claim, as a matter of law. See Equal
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Justice Found. v. Deutsche Bank Trust Co. Ams., 412 F. Supp. 2d 790, 795 (S.D. Ohio

2005). Therefore, the plaintiffs have not stated an actionable common law fraud claim.

                                                VI.

       The plaintiffs also appeal the district court’s decision denying their motion to amend

their complaint to add claims rising under the Deceptive Trade Practices Act, Ohio Rev.

Code Ann. § 4165.02(A)(2) and (3), and the equitable theories of unjust enrichment and

accounting. When, as in this case, a district court bases its decision to deny leave to

amend a complaint on the legal conclusion that the amended claims could not withstand

a motion to dismiss, we review the decision de novo. PR Diamonds, Inc. v. Chandler, 364
F.3d 671, 680 (6th Cir. 2004).

       The district court denied the plaintiffs’ motion to amend the complaint primarily on

the ground that the proposed amendment would be “futile.” The court determined that the

DTPA did not apply to the facts of this case and that the plaintiffs’ claim under this statute

would not state a claim upon which relief can be granted. The court concluded that

plaintiffs’ equitable claims likewise failed.

       A motion to amend is “futile” if it would not withstand a Rule 12(b)(6) motion to

dismiss. Rose v. Hartford Underwriters Ins. Co., 203 F.3d 417, 420-21 (6th Cir. 2000).

The DTPA deals with misrepresentations regarding corporate affiliations and does not

pertain to other types of misrepresentation claims. See Leventhal & Assoc., Inc. v.

Thomson Cent. Ohio, 714 N.E.2d 418, 424-25 (Ohio Ct. App. 1998). Therefore, since the

plaintiffs are not alleging any corporate affiliation misrepresentation, they are unable to

recover under this theory.
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       A party cannot prevail on a theory of unjust enrichment when an express contract

has been formed. See Delicom Sweet Goods of Ohio, Inc. v. Mt. Perry Foods, Inc., No.

04 CA 4, 2005 WL 525185, at *4 (Ohio Ct. App. Mar. 2, 2005). The plaintiffs agree that

they entered into express contracts with Smart to provide the medical records copying

service; and their claims address the legal implications of these contracts. It follows that

the plaintiffs have not stated a valid claim for unjust enrichment and equitable accounting

upon which relief can be granted.

                                            VII.

       One of the plaintiffs is a law firm and argues that it has standing to sue Smart. The

district court did not address this issue when it granted Smart’s motion to dismiss and it is

not necessary that we do so.

                                            VIII.

       For the reasons set forth above, we AFFIRM the district court’s judgment.