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Rehabcare Group East, Inc. v. Broc L.L.C.

United States District Court, W.D. Virginia, Danville Division

April 24, 2018

BROC L.L.C. and BRNURSCO, LLC, Defendants.



         This matter is before the Court on Plaintiff RehabCare Group East, Inc.'s (“RehabCare”) Motion for Partial Summary Judgment (“the Motion”). Defendants BROC, LLC (“BROC”) and BRNURSCO, LLC (“BRNURSCO”), collectively “Defendants, ” filed a brief in opposition, and RehabCare replied pursuant to the amended Pretrial Order. [ECF No. 21.] The parties submitted the matter on brief, waiving their right to oral argument before the Court. I have reviewed the briefs of the parties and the relevant evidence, and the matter is ripe for disposition. For the reasons stated herein, I will deny the Motion with respect to BROC and grant the Motion in part with respect to BRNURSCO. I find that BRNURSCO did breach an implied contract with RehabCare, entitling RehabCare to summary judgment on Count II of its Complaint.


         The parties agree on the relevant facts, and dispute only the legal significance of their actions. Prior to 2015, BROC owned and operated Blue Ridge Rehab Center (“the facility”). On November 4, 2013, RehabCare and BROC entered into a Therapy Services Agreement (“the TSA”), which generally obligated RehabCare to provide therapists and therapy services to patients of the facility, and obligated BROC to pay RehabCare according to an agreed fee schedule. [ECF No. 26-1, pgs. 117-137.][1] Up until July of 2015, there appears to have been no issue with this arrangement.

         On July 30, 2015, BROC and BRNURSCO entered into an Operations Transfer Agreement (“the OTA”) in which BROC transferred its ownership and management of the facility to BRNURSCO. [ECF No. 26-1, pgs. 214-232.]

         At the time the OTA was entered, none of the parties appear to have made attempts to have BRNURSCO assume the TSA. Nevertheless, RehabCare continued to provide therapy services at the facility under BRNURSCO's management. No express agreement was entered into between RehabCare and BRNURSCO. Over the next two years (August 1, 2015-July 31, 2017), RehabCare provided therapy services at the facility totaling over $2 million. According to Michael Marshall (“Marshall”), BROC and BRNURSCO's corporate representative, BRNURSCO paid for some of those services. Other invoices, however, went unpaid. In its answers to interrogatories, BRNURSCO asserted that it failed to pay because of improper billing to third-party payors, such as Medicare. [ECF No. 26-1, pgs. 179, 194.] At the deposition of BRNURSCO's corporate representative, Marshall admitted that BRNURSCO was indebted to RehabCare. [ECF No. 26-1, pg. 261 (“I wanted to clarify that there is an amount indebted to the plaintiff.” (emphasis added)).]

         RehabCare brought suit against BROC and BRNURSCO in this Court on June 28, 2017. (Compl. ¶¶ 2-3 [ECF No. 1].) On July 31, 2017, RehabCare informed BRNURSCO that it was terminating its services at the facility due to BRNURSCO's failure to pay. [ECF No. 26-1, pg. 251.] On March 27, 2018, RehabCare moved for summary judgment against BROC and BRNURSCO on Count I, which alleged breach of the TSA, and for summary judgment against BRNURSCO on Counts II (quantum meruit) and III (unjust enrichment). (See Mot. for Partial Summ. J., Mar. 27, 2018 [ECF No. 25].) The matter was fully briefed by the parties, and the parties jointly waived a hearing on the Motion and submitted the matter for consideration on the briefs. (See id.) The matter is ripe for disposition.


         Summary judgment is appropriate where there is no genuine dispute of material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); George & Co. LLC v. Imagination Entertainment Ltd., 575 F.3d 383, 392 (4th Cir. 2009). A genuine dispute of material fact exists “[w]here the record taken as a whole could . . . lead a rational trier of fact to find for the nonmoving party.” Ricci v. DeStefano, 557 U.S. 557, 586 (2009) (internal quotation marks and citing reference omitted); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A genuine dispute cannot be created where there is only a scintilla of evidence favoring the nonmovant; rather, the Court must look to the quantum of proof applicable to the claim to determine whether a genuine dispute exists. Scott v. Harris, 550 U.S. 372, 380 (2007); Anderson, 477 U.S. at 249-50, 254. A fact is material where it might affect the outcome of the case in light of the controlling law. Anderson, 477 U.S. at 248. On a motion for summary judgment, the facts are taken in the light most favorable to the non-moving party insofar as there is a genuine dispute about those facts. Scott, 550 U.S. at 380. At this stage, however, the Court's role is not to weigh the evidence, but simply to determine whether a genuine dispute exists making it appropriate for the case to proceed to trial. Anderson, 477 U.S. at 249. It has been noted that “summary judgment is particularly appropriate . . . [w]here the unresolved issues are primarily legal rather than factual” in nature. Koehn v. Indian Hills Cmty. Coll., 371 F.3d 394, 396 (8th Cir. 2004).


         All parties agree that Virginia law applies. It is well-settled that a federal court, sitting in diversity, applies the choice of law provisions of the state in which it sits. See Erie E. Co. v. Tompkins, 304 U.S. 64, 78 (1938); see also Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). Under Virginia's conflict of law rules, “[q]uestions concerning the validity, effect, and interpretation of a contract are resolved according to the law of the state where the contract was made.” Seabulk Offshore v. Am. Home. Assur. Co., 377 F.3d 408, 419 (4th Cir. 2004) (applying Virginia law). With respect to the TSA, it states that it “shall be construed under, and governed in accordance with, the laws of the state in which Facility is located.” [ECF No. 26-1 pg. 126 ¶ 7.k.] Therefore, claims asserting breach of the TSA are evaluated under Virginia law. Regarding the implied contract claims, Virginia holds that “a contract is made when its last act to complete it is performed . . . .” Metcalfe Bros., Inc. v. Am. Mut. Liab. Ins. Co., 484 F.Supp. 826, 829 (W.D. Va. 1980). Given that the implied contract claims all concern the provision of services at a Virginia-based skilled care facility, it seems apparent that the last act occurred in Virginia.

         a. Count I-Breach of Contract: Agreement as to BROC or BRNURSCO

         RehabCare first moves for summary judgment on its breach of contract (the TSA) against both BROC and BRNURSCO. These two defendants must be considered separately, as only one was a signatory to the contract at issue.

         “The elements of a breach of contract action are (1) a legally enforceable obligation of a defendant to a plaintiff; (2) the defendant's violation or breach of that obligation; and (3) injury or damage to the plaintiff caused by the breach of obligation.” Filak v. George, 594 S.E.2d 610, 614 (Va. 2004). As to BROC, there is no dispute that there was a legally enforceable agreement between RehabCare and BROC. What is disputed, however, is whether BROC breached that agreement when it failed to pay for services rendered by RehabCare after the OTA took effect.

         On this point, the TSA gives a clear answer: RehabCare was under no contractual obligation to provide services, and BROC was under no obligation to pay for services rendered, after the OTA took effect. By its terms, the TSA obligated RehabCare to “provide therapy services to patients of Facility . . . .” [ECF No. 26-1 pg. 117 ¶ 1.a.] “Facility” is defined as “BROC L.L.C. d/b/a Blue Ridge Rehab Center.” (Id.) Once the OTA was signed, the patients at the Blue Ridge Rehab Center were not patients of BROC, but were patients of BRNURSCO. Accordingly, the services provided by RehabCare after August 1, 2015, were not services under the contract with BROC, and ...

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