United States District Court, D. Arizona
ORDER
DOMINIC W. LANZA UNITED STATES DISTRICT JUDGE.
INTRODUCTION
Defendant
Spring Excellence Surgical Hospital LLC (“SESH”)
contends it is not bound by the contract at issue in this
lawsuit, the “Exclusive Healthcare ‘Out of
Network’ Claims Billing Agreement” (the
“Billing Agreement”), because the manager who
executed the Billing Agreement on SESH’s behalf, Joanna
Davis (“Davis”), lacked authority to do so. SESH
also claims that even if the Billing Agreement were a valid
contract, it is not liable because Plaintiff Advanced
Reimbursement Solutions LLC (“ARS”) breached the
Billing Agreement first.
ARS has
moved for partial summary judgment on the issue of liability,
contending that SESH is bound by the Billing Agreement for
three reasons: (1) Davis had actual authority to enter into
the Billing Agreement on SESH’s behalf under Arizona
agency law; (2) Davis executed the Billing Agreement as a
manager of an LLC in the ordinary course of business,
rendering SESH liable for its breach under Texas LLC law; and
(3) SESH subsequently ratified the Billing Agreement. (Doc.
97.) ARS also disputes SESH’s argument that it breached
the Billing Agreement. Alternatively, ARS seeks summary
judgment on its unjust enrichment claim.[1]
For the
following reasons, the Court grants partial summary judgment
to ARS concerning its breach of contract claim and denies as
moot ARS’s motion for partial summary judgment
concerning its claim for unjust enrichment.
BACKGROUND
A.
The Parties
ARS is
a medical billing service that contracts with medical
providers to process and bill out-of-network health insurance
claims. (Doc. 98 ¶ 5; Doc. 98-2 at 49.)
SESH, a
surgical hospital, is an LLC formed pursuant to the Texas
Business Organizations Code. (Doc. 98 ¶ 6; Doc. 98-2 at
52.) SESH is a manager-managed LLC. (Doc. 98 ¶ 7; Doc.
98-2 at 52.) When it was formed, SESH’s sole manager
was Excellence Medical Group, LLC (“EMG”). (Doc.
98 ¶ 8; Doc. 98-2 at 55.)
SESH’s
Company Agreement, which became effective in June 2016,
provided that SESH would have up to three managers. (Doc. 98
¶ 9; Doc. 98-1 at 18.) In August and September 2016,
these managers were Davis, Devorshia Janell Russell
(“Russell”), and Dr. Richard Francis
(“Francis”). (Doc. 98 ¶ 11; Doc. 98-2 at
56.)
SESH’s
Company Agreement provides that “the business and
affairs of the Company shall be managed by the managers of
the Company” and requires that all decisions required
or permitted to be made by the managers “be agreed upon
by a Majority vote of the Managers.” (Doc. 98 ¶
12; Doc. 98-1 at 17.)
B.
The Negotiation And Execution Of The Billing
Agreement
In or
around July or August 2016, Jeffrey Webb
(“Webb”), ARS’s National Director of Sales,
learned that SESH might be interested in ARS’s billing
services and was referred to Davis. (Doc. 98 ¶¶
13-14; Doc. 98-3 at 11-12.) During Webb’s initial phone
call with Davis, Davis represented that she had an ownership
interest in SESH and that she handled SESH’s day-to-day
management. (Doc. 98 ¶ 15; Doc. 98-3 at 12.)
Webb
requested that SESH execute a Mutual Non-Disclosure Agreement
and Business Associates Agreement. (Doc. 98 ¶ 16; Doc.
98-3 at 12.) Davis executed the former as CEO on behalf of
EMG and the latter as CEO on behalf of SESH. (Doc. 98
¶¶ 17-18; Doc. 98-2 at 61; Doc. 98-3 at 15-29.)
Webb
later made a presentation to SESH’s management team
during which Davis, Russell, and Francis were present. (Doc.
98 ¶¶ 19-20, Doc. 98-2 at 61.) Following
Webb’s presentation, Webb communicated with Davis to
negotiate the terms of the Billing Agreement. (Doc. 98 ¶
21; Doc. 98-2 at 61.)
On or
about August 31, 2016, SESH’s governing board held a
board meeting at which Davis, Russell, Francis, and two other
SESH affiliates were present. (Doc. 98 ¶ 22; Doc. 98-2
at 61; Doc. 98-3 at 31-34.) The minutes of the meeting
indicate that SESH was in the process of searching for a
full-time CEO and that the attendees unanimously approved
that Russell and Davis would “work together to handle
the day-to-day operations, functions, and administrative
oversight of the CEO for SESH.” (Doc. 98-3 at 31.)
The
August meeting minutes do not mention the Billing Agreement.
However, Davis states in her affidavit that, during the
August 31, 2016 meeting, “SESH’s board members .
. . unanimously agreed to proceed moving forward with the
Billing Agreement with no additions or deletions.”
(Doc. 98-2 at 62.) Russell similarly states in her affidavit
that she and Francis authorized Davis to execute the Billing
Agreement. (Doc. 98-3 at 9.)
Dr.
Yueh Bryan Lee (“Lee”) and Dr. Sherman Nagler
(“Nagler”), who were affiliated with EMG members,
have indicated in affidavits that they do not recall ever
seeing, discussing, or voting on a copy of any billing
agreement between ARS and SESH. (Doc. 211 at 22, 26-27.)
Although these individuals indicated in their affidavits that
they “attended scheduled meetings of EMG which included
reviewing SESH business,” they did not specify which
meetings they attended. (Id. at 22, 26.)
The
Billing Agreement indicates that it was signed by Davis as
CEO of SESH on September 1, 2016 and by ARS’s president
on September 6, 2016. (Doc. 98-4 at 15-26; see also
Doc. 98-2 at 62.) The Billing Agreement includes a provision
in which the signatories represent and warrant that they have
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