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Exeter Hospital, Inc. v. The American Registry of Radiologic Technologists

United States District Court, D. New Hampshire

May 5, 2017

Exeter Hospital, Inc., Plaintiff
v.
The American Registry of Radiologic Technologists; and Triage Staffing, Inc., Defendants

          ORDER

          Steven J. McAuliffe United States District Judge.

         By order dated October 31, 2016 (document no. 94), the court granted motions to dismiss filed by The American Registry of Radiologic Technologists (“ARRT”) and Triage Staffing, and dismissed counts 73 and 74 of Exeter Hospital's Third Amended Complaint.

         Count 73 sought statutory contribution from ARRT and Triage pursuant to N.H. Rev. Stat. Ann. (“RSA”) 507:7. But, the court concluded that the complaint's factual allegations “fall well short of plausibly asserting a factual basis for viable negligence, negligent infliction of emotional distress, or intentional infliction of emotional distress claims by each of the 188 individual negative results claimants against either ARRT or Triage.” Id. at 12-13. The court also found that, because count 74 is derivative of count 73, “it too fails to state a viable cause of action against Triage for contractual indemnification of the sums Exeter Hospital paid in settlement to the negative results claimants.” Id. at 13.

         Nevertheless, the court afforded Exeter Hospital the opportunity to “file an amended complaint that adequately and plausibly sets forth factual allegations sufficient to state a viable basis to recover against ARRT and/or Triage for settlements made to one or more of the 188 negative results claimants.” Id. Exeter Hospital has not availed itself of that opportunity. Instead, it moves the court to reconsider its dismissal of count 74, to vacate (in part) its order of October 31, and to reinstate its contractual indemnification claim against Triage. That motion is denied.

         Discussion

         In count 74 of the Third Amended Complaint, Exeter Hospital alleges that, pursuant to a staffing agreement between Triage and AHSA (an organization of which Exeter Hospital is a member), Triage is contractually obligated to defend and indemnify Exeter Hospital against the claims advanced by the negative results claimants. See Third Amended Complaint at paras. 973-77. See also AHSA Group Staffing Services Program Standard Agency Staffing Agreement (document no. 66-1) at para. 7(c)(i). The “negative results claimants” are 188 people who were potentially exposed to the Hepatitis-C virus at Exeter Hospital, tested negative for the disease, but nevertheless threatened to bring some sort of negligence or emotional distress claims against the hospital. Importantly, however, “none of the patients who tested negative ever filed a lawsuit” against Exeter Hospital. Third Amended Complaint at para 951, n.2. Still, says Exeter Hospital, because it gave Triage notice of those potential claims and because it subsequently settled those potential claims for a “reasonable” amount, Triage is obligated to reimburse it for that sum, plus reasonable attorney's fees incurred in the process of effecting those settlements.

         Exeter Hospital says that in dismissing its contractual indemnification claim for failure to state a viable cause of action, the court misapprehended “the legal distinction - in the context of contractual indemnity - between ‘actual liability' and ‘potential liability.'” Plaintiff's Motion to Reconsider (document no. 95) at 2. And, says the hospital, because it “plausibly alleged ‘potential liability'” with respect to the negative results claimants, “Triage's contractual duties to defend and indemnify” were triggered. Id. But, as the court held in its prior order, Exeter Hospital did not plausibly allege that it had any “potential liability” to the negative results claimants.

Rather than alleging a plausible instance of at least possible exposure to Hepatitis-C for each of the negative results claimants, the amended complaint suggests that Exeter Hospital (laudably) tested those patients out of an abundance of caution and, ultimately, settled their claims despite the fact that there may have been no legal obligation to do so (or, at a minimum, without requiring those claimants to demonstrate that they had, indeed, suffered legally compensable emotional distress). Of course, independent of any legal obligation the hospital may have had to compensate the negative results claimants, one can imagine many reasons that might have motivated the hospital to settle those claims quickly and out of court.

         Order Dated October 31, 2016 (document no. 94) at 9 (emphasis in original). See also Id. at 7-8 (“[T]he Third Amended Complaint fails to adequately allege that each of the 188 negative results claimants was adequately exposed to the Hepatitis-C virus to have a reasonable fear of developing the illness.”) (emphasis in original).

         Consequently, if, as Exeter Hospital claims, Triage's contractual duty to defend and indemnify is triggered upon the hospital's plausible allegation of “potential liability” to the negative results claimants, that condition was not met in this case. Exeter Hospital's Third Amended Complaint fails to plausibly allege that any of the negative results claimants had a viable, legally cognizable, and trial-worthy claim against the hospital. In other words, the hospital had no “potential liability” to the negative results claimants because their claims were entirely without legal merit.[1]

         Moreover, even if Exeter Hospital were correct in asserting that Triage's obligation to indemnify was triggered merely by the hospital's broad invocation of “potential liability” to the negative results claimants (regardless of how meritless or even frivolous those claims might have been), its argument still falters. According to the hospital, once it notified Triage of its “potential liability” to the negative results claimants, Triage became obligated to indemnify the hospital to the extent its subsequent settlement with those claimants was “reasonable.” See Plaintiff's Motion to Reconsider at 4 (“In order for an indemnitee who has paid a settlement to recover from an indemnitor for breach of the duties triggered by ‘potential liability, ' an indemnitor must show: (1) the fact situation of the original claim is covered by the contract or indemnity, and (2) the settlement is reasonable.”) (citation and internal punctuation omitted). And, says the hospital, assessing the “reasonableness” of that settlement is a factual question that involves consideration of just two factors: the likelihood that the negative results claimants would have prevailed at trial (and, if so, in what amount), balanced against the likelihood that Exeter Hospital would have prevailed at trial. Id. at 4 (citing Trim v. Clark Equipment Co., 274 N.W.2d 33, 36 (Mich. App. 1978)).[2]

         In support of that position, Exeter Hospital also relies upon the court of appeals' opinion in Fashion House, Inc. v. K Mart Corp, 892 F.2d 1076 (1st Cir. 1989) (applying Michigan law and relying upon Clark Equipment). There the circuit noted:

In this case, the indemnity clause is written in such broad, sweeping language as to make it highly probable that the parties never meant to make actual, as opposed to reasonably perceived, liability a prerequisite to indemnification. In addition, the record makes manifest that the putative indemnitor, FHI, had notice of the trademark owner's action against K mart, but declined to defend it. In such circumstances, the general rule in both New York and Michigan is that the indemnitor will be bound by any reasonable, good faith settlement the indemnitee might thereafter make. For our purposes, this means that an indemnitee, like K mart, may recover based on its potential liability and need not demonstrate actual liability by proving the elements of the underlying claim against it. In fine, the indemnitee must show only that the fact situation of the original claim is covered by the contract of indemnity and that the settlement is reasonable.

Fashion House, 892 F.2d at 1094 (citations and internal punctuation omitted) (emphasis in original). Turning to the means by which the “reasonableness” of the indemnitee's ...


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