Opinion
Civil Action No. 3:04CV521LN.
March 1, 2005
MEMORANDUM OPINION AND ORDER
This cause is before the court on separate motions to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) filed by defendants St. Dominic Health Services, Inc. and St. Dominic-Jackson Memorial Hospital (St. Dominic) and by The American Hospital Association. Plaintiffs Dorothy Wright, Louis Turner and Kimberly King have responded in opposition to the motion and the court, having considered the memoranda of authorities submitted by the parties, together with additional pertinent authorities, concludes that plaintiffs' federal claims are due to be dismissed for failure to state a claim, and because the court declines to exercise supplemental jurisdiction over the remaining state law claims, plaintiffs' complaint will be dismissed in its entirety.
Plaintiffs are individuals who have no health insurance and are ineligible for public aid who claim, inter alia, that St. Dominic, despite being granted exemption from taxation by the federal and state governments as an ostensibly charitable institution, in fact, operates as a "for profit" institution that has wholly failed to deliver the bargained-for charitable medical care to uninsured healthcare consumer/patients that is the basis for its tax-exempt status. Plaintiffs, who purport to bring this action on behalf of themselves and a class of uninsured healthcare consumer/patients, submit that St. Dominic's failure in this regard constitutes a breach of its agreement with the federal and state governments, to the detriment of these plaintiffs and the putative class, and a betrayal of the public trust. Plaintiffs have thus asserted federal claims against St. Dominic for thirdparty breach of contract and breach of charitable trust premised on St. Dominic's status as a tax exempt charitable entity under 26 U.S.C. § 501(c)(3). Plaintiffs have also asserted a federal claim for violation of the Emergency Medical Treatment and Active Labor Act (EMTALA), 42 U.S.C. § 1395dd, based on allegations that St. Dominic would not provide them with medical screening or treatment until plaintiffs and class members signed "form contracts" agreeing to pay St. Dominic in full for unspecified and undiscounted medical charges.
Plaintiffs additionally charge that St. Dominic not only has failed to provide them the free or discounted medical care to which they are entitled, but has charged them unreasonably high costs for their medical care in breach of its express and/or implied contractual duty to charge the plaintiffs and the class "no more than a fair and reasonable charge for . . . medical care," and in breach of its duty of good faith and fair dealing, as a result of all of which St. Dominic has been unjustly enriched. Based on these and similar related allegations, plaintiffs have asserted state law claims for breach of contract, breach of duty of good faith and fair dealing, unjust enrichment/constructive trust, and violations of the Mississippi Consumer Protection Act.
Finally, plaintiffs allege that the American Hospital Association (AHA), a representative and advocate for the hospital industry, advised its membership (which includes St. Dominic) on billing and collection practices concerning the uninsured and thereby provided substantial assistance to St. Dominic which "directly caused and/or contributed to St. Dominic's unjust enrichment at the Plaintiffs' expense. . . ." Plaintiff has thus sued AHA for conspiracy and aiding and abettting.
The primary focus of counts two and four of plaintiffs' complaint (for third-party breach of contract and breach of charitable trust) is on St. Dominic's status as a tax exempt "charitable" institution under 26 U.S.C. § 501(c)(3). In count 2, plaintiffs allege that in exchange for the exemption from taxation afforded St. Dominic by § 501(c)(3), St. Dominic has "entered into express and/or implied agreements with The United States Government, The State of Mississippi, and city and county governments to provide mutually affordable medical care" to all of its patients and yet it has breached this contract, to which plaintiffs claim to be third-party beneficiaries, by failing to provide medical care to its uninsured patients without regard to their ability to pay and by charging uninsured patients more than insured patients for the same medical services. Without exception, every federal court that has confronted the issue has held, with consistent reasoning, that these allegations do not state a viable claim for relief. In dismissing an identical claim for relief, the court in Lorens v. Catholic Health Care Partners aptly observed as follows:
Section 501 exempts certain organizations from taxation, including
(3) Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.
The court notes that this is but one of numerous similar (or in some cases identical) lawsuits brought in various courts across the country.
In Eileen Maldonado, et al. v. Ochsner Clinic Foundation, et al., No. 04-2635 (E.D. La. Dec. 7, 2004), the court considered a motion by the American Hospital Association (AHA) to dismiss pursuant to Rule 12(b)(6) in which it asserted, as one basis for dismissal, that there was no underlying wrong by Ochsner Clinic upon which to base the conspiracy and aiding and abetting claims alleged against AHA. In response, the court merely stated that "[d]eclaring all of plaintiffs' claims meritless, as AHA requests, would . . . require the Court to look into facts beyond those stated in the complaint. It is sufficient to say that a certain set of facts could give rise to a remedy at law."
Notwithstanding this broad declaration, there is nothing in the court's opinion to indicate that it was presented with a motion for dismissal by Ochsner which raised the issues herein presented.
Permitting this claim to continue would require the court to make numerous jumps in logic that run counter to legal authority. First, the court would need to find that the tax code creates a binding contract, a proposition for which there is nearly no legal support. The court would then need to find an implied cause of action in the tax statute granting private citizens the right to sue for damages, a cause of action that is not supported by the case law. Next, the court would need to find that Plaintiff had standing to sue as a third-party beneficiary on a purported contract under which Plaintiff and Plaintiff's class are not specifically mentioned as third party beneficiaries. Even if the court made these stretches in legal interpretation, the court would then need to construct specific terms in such a contract (specific terms that do not appear to exist in the statutory or regulatory language) and assess whether Plaintiff's allegations, if true, could constitute a breach. While the court in no way minimizes the importance of the issues Plaintiff seeks to raise, an analysis of the claim indicates that it has no legal merit. Lorens, No. 1:04CV1151, 2005 WL 407719, *2 (N.D. Ohio Jan. 13, 2005). For other cases reaching the same conclusion, see Peterson v. Fairview Health Servs., No. Civ.A04-2973 ADM/AJB, 2005 WL 226168, at 5 (D. Minn. Feb. 1, 2005) (concluding there was "no legal support to bolster Plaintiffs' theory of liability," and observing that "§ 501(c)(3) does not establish a contract between the federal government and Defendants and does not provide Plaintiffs with an implied cause of action or a right to sue as third-party beneficiaries"); Shriner v. ProMedica Health System, Inc., No. 3:04 CV 7435, 2005 WL 139128 (N.D. Ohio Jan. 21, 2005) (upon considering complaint alleging identical claim, ordering that plaintiff's federal law claims would be dismissed for a failure to state a claim on which relief can be granted "because § 501(c)(3) does not create a contract, plaintiff is not a third-party beneficiary, and plaintiff does not have standing"); Burton v. William Beaumont Hosp., 347 F. Supp. 2d 486, 4933-94 (E.D. Mich. Dec. 3, 2004) (concluding that the plaintiffs could not prove any set of facts to support their claim for third-party breach of contract "because there is no legal authority to support the notion that a theory of liability exists based on [the defendant hospital's] status as a § 501(c)(3) organization"); Darlene Daly, et al. v. Baptist Health, et al., No. 4:04CV789GH, at 6 (E.D. Ark. Jan. 31, 2005) (finding that the plaintiff had failed to state a claim for breach of contract because the defendant hospital's "tax-exempt status [under § 501(c)(3)] does not constitute a contract" and thus dismissing federal claims against both hospital and AHA); Darr v. Sutter Health, Nos. C 04-02624 WHA and C 04-02837 WHA, 2004 WL 2873068, at 3 (N.D. Cal. Nov. 30, 2004) (concluding that the plaintiffs had not "establish[ed] that Section 501(c)(3) provides for the creation of contracts with the government," and had further failed to establish standing to sue for breach of contract in any event); George Scott Ferguson, et al. v. Centura Health Corp., No. 04-1285, at 6, 4 (D. Colo. Dec. 29, 2004) (stating that to construe the "Congressional grant of the exemption in § 501(c)(3) [as] creat[ing] a contractual relationship between the government and the tax-exempt entity . . . would be contrary to the well established law that provisions of the Internal Revenue Code are not contractual in nature," and observing further that "§ 501(c)(3) cannot be construed to create an implied private action for enforcement"); Thomas E. Hudson v. Central Georgia Health Systems, Inc., No. 5:04-CV-301(DF) (M.D. Ga. Jan 13, 2005) (concluding that "§ 501(c)(3) does not create a contract between the federal government and Defendants, it merely declares that not-for-profit hospitals are entitled to exemption from federal taxation," and holding further that in any event, "there is no private right of action found in § 501(c)(3) . . . that would enable Plaintiff to sue on this implied contract"); Katie M. Washington, et al. v. Medical Center of Central Georgia, Inc., No. 5:04CV185(CAR) (M.D. Ga. Jan. 21, 2005) (stating that "[t]he Government's recognition of the Medical Center's tax-exempt status under Section 501(c)(3) cannot be construed as a contract between the Government and the Medical Center"); Gary Amato, et al. v. UPMC, et al, No. 04-1025 (W.D. Pa. Nov. 23, 2004) (holding that § 501(c)(3) "contains no language indicating that Congress intended to create contract rights inuring to any citizen," and that even if a contract were created, the purported contract did not afford the plaintiffs a right to pursue third-party breach of contract claims against the defendant hospital).
The conclusions reached in these decisions are based on sound, well-established legal principles, which no doubt explains why plaintiffs have failed to present any cases in which a contrary conclusion has been reached. For the reasons well stated in each of the cited cases, this court concludes that plaintiffs' claim for "third-party breach of contract" fails to state a claim upon which relief may be granted.
Similar to count two, plaintiffs' count four, for breach of charitable trust, is based on the notion that St. Dominic, by virtue of its tax exempt status, "created and entered into a public charitable trust to provide mutually affordable medical care to uninsured patients," to which trust plaintiffs (and the putative class) claim to be the intended beneficiaries. However, just as with their breach of contract claim based on the tax exemption afforded by § 501(c)(3), this notion that an implied charitable trust has arisen as a consequence of St. Dominic's tax exemption has been repeatedly and soundly rejected by the courts that have considered it. In Peterson, supra, for example, the court explained that whereas "charitable trusts require specific language demonstrating intent to create a trust[,] Section 501(c)(3) contains no such language," and that even assuming § 501(c)(3) did establish a trust, the plaintiffs "lack[ed] standing to sue for breach of such a charitable trust," since "[m]embers of the public do not have standing to sue on the trust merely because they benefit from the trust." 2005 WL 226168, at 7 (citations omitted). Numerous other courts have reached the same conclusion on the same bases. See, e.g., Shriner, 2005 WL 139128, at *3 ("Charitable trusts require express language demonstrating a specific intent to create the trust. Restatement (Second) of Trusts §§ 348-49. There is no such language [in § 501(c)(3)], and therefore, no trust. Even if a trust existed, it would not provide the plaintiff with standing to sue.");Washington, No. 5:04-cv-185(CAR), at 9 ("A review of general trust principles shows that the tax exemption granted under Section 501(c)(3) does not create a trust, express or implied, resulting or constructive."); Ferguson, No. 04-1285 (dismissing breach of charitable trust claim premised on § 501(c)(3));Amato, No. 04-1038, at 7-8 (dismissing claim for breach of charitable trust as there was no allegation that the defendant hospital intended to create a charitable trust for the plaintiffs' benefit and § 501(c)(3) contained no language mandating that a tax exempt entity must establish a charitable trust, and noting further that in any event, the plaintiffs lacked standing to enforce such a claim). No court has held to the contrary, and this court, finding that plaintiffs have failed to present any persuasive reason for concluding otherwise, concludes that count four fails to state a claim upon which relief can be granted.
Plaintiffs' sole remaining federal claim is for breach of the Emergency Medical Treatment and Active Labor Act (EMTALA), 42 U.S.C. § 1395dd. Under EMTALA, hospitals that participate in the federal Medicare program are required to conduct a screening on every patient that presents to the emergency room to determine if the patient is suffering from an emergency medical condition, and if such a condition exists, it must stabilize the patient before the patient may be transferred or discharged. 42 U.S.C. §§ 1395dd. A participating hospital "may not delay provision of appropriate medical screening examination . . . or further medical examination and treatment . . . in order to inquire about the individual's method of payment or insurance status." § 1395dd(h). A single provision of EMTALA provides for civil enforcement of the Act by patients, § 1395dd(d)(2)(A), which states:
Any individual who suffers personal harm as a direct result of a participating hospital's violation of a requirement of this section may, in a civil action against the participating hospital, obtain those damages available for personal injury under the law of the State in which the hospital is located, and such equitable relief as is appropriate.
Plaintiffs herein allege that
[w]hen Defendant St. Dominic would provide emergency medical screening and/or treatment for "emergency medical conditions" to the Plaintiffs and the Class, it required the Plaintiffs and the Class to sign "form contracts" agreeing to pay St. Dominic in full for unspecified and undiscounted medical charges. By conditioning medical screening and/or treatment for "emergency medical conditions" on the Plaintiffs' and the Class' ability to pay (financial guarantees), St. Dominic violated the EMTALA.
However, no plaintiff alleges that he/she suffered any "personal harm" as a result of any alleged violation of the EMTALA. Rather, the complaint simply recites that each plaintiff "sought medical care at St. Dominic," and that "[w]ithout first counseling [such plaintiff] on [his/her] financial ability to pay, St. Dominic required [him/her] by `form contract' to agree to be responsible for [his/her] medical bills" and thereafter "pursued [him/her] with aggressive collection tactics." In the court's opinion, this does not suffice to state a claim for relief under the EMTALA.See Peterson, 2005 WL 226168, at 9 (dismissing EMTALA claim based on absence of allegation that plaintiffs suffered personal harm as a result of being required to sign "patient waivers" guaranteeing payment"); Rhonda Kizzire, et al. v. Baptist Health System, Inc., Case No. CV-04-HS-1247-S (S.D. Ala. Oct. 21, 2004) (opining that even if plaintiffs had adequately pleaded a cause of action under the EMTALA, their alleged economic injuries were not "personal injuries" and were thus not compensable under the enforcement provisions of the EMTALA); Amato, No. 04-1038 (finding EMTALA claim deficient because the plaintiffs incurred only economic injury).
From the foregoing, it follows that plaintiffs' federal claims against both St. Dominic and AHA are due to be dismissed with prejudice. The question becomes whether the court should exercise supplemental jurisdiction over plaintiffs' state law claims, and the court concludes it should not. Pursuant to 28 U.S.C. § 1367, the district courts may decline to exercise supplemental jurisdiction if a claim raise a novel or complex issue of state law, the claim substantially predominates over the claim or claims over which the district court has original jurisdiction, the district court has dismissed all claims over which it has original jurisdiction, or in exceptional circumstances, there are other compelling reasons for declining jurisdiction. While the decision whether to exercise supplemental jurisdiction is discretionary, "the general rule [is that] it is proper to decline to exercise supplemental jurisdiction over state law claims when all federal claims are dismissed or otherwise eliminated from a case prior to trial." Yetiv v. Hall, 2005 WL 19500, at 3 (5th Cir. 2005) (citing Batiste v. Island Records, Inc., 179 F.3d 217, 227 (5th Cir. 1999)). Consistent with the general rule, this court declines to exercise jurisdiction over plaintiffs' state law claims.
To the extent that plaintiffs allege that AHA conspired with and/or aided and abetted St. Dominic to breach its contract with the government to provide free or discounted healthcare to plaintiffs and the putative class on the basis of St. Dominic's exemption from taxation, it follows from the court's conclusion that there was no such contractual obligation, that "AHA could not have entered into a conspiracy to breach a contract, and the AHA could not have aided and abetted [St. Dominic] in avoiding the non-existent obligations." Peterson, 2005 WL 226168, at 10 (concluding that "[i]nsofar as these claims depend on § 501(c)(3), they must be dismissed . . . for failure to state a claim upon which relief can be granted.").
Accordingly, it is ordered that defendants' motions to dismiss are granted.
A separate judgment will be entered in accordance with Rule 58 of the Federal Rules of Civil Procedure.
SO ORDERED.