Advanced Reimbursement Solutions LLC v. Spring Excellence Surgical Hospital LLC

          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 ...