United States District Court, D. Maryland
Frederick Motz United States District Judge.
Anne Arundel County, Maryland ("The County") brings
this lawsuit against Xerox State & Local Solutions
("Xerox") seeking money damages and injunctive
relief. Anne Arundel asserts a breach of contract claim and
various tort claims relating to a contract in which Xerox
agreed to provide billing and collections services for the
County's Emergency Medical Services, ambulance
transportation, and related public amenities. Pending is
Defendant's motion to dismiss all claims against them.
(ECF No. 16-1). The motion is fully briefed, and no oral
argument is necessary. See Local Rule 105.6. For the
reasons set forth below, the motion to dismiss is granted in
part and denied in part.
dispute arises out of a contract between Anne Arundel and
Xerox for the provision of billing and collections services
for the County's Emergency Medical Services
("EMS"). (ECF No. 12 ¶ 2). In June of 2008,
Anne Arundel amended its County Code to allow the County to
charge residents for their use of EMS transports and related
services. (Id. ¶ 15). Given that Anne Arundel
was new to the practice of charging for EMS transports and
had yet to implement any sort of standardized billing system,
the County in January of 2009 solicited proposals from
experienced billing and collections firms to handle these
services on its behalf. (Id.). In February 2009,
Xerox, through its predecesso, ACS State & Local
Solutions, submitted a proposal to the County detailing the
technical services it could provide as well as cost
estimates. (Id. ¶ 17). The Xerox proposal
represented to Anne Arundel that Xerox was an expert in
billing and collections services for EMS and was prepared to
meet or exceed all of the needs outlined by the County in its
request for proposals. (Id. ¶ 18-19). On April
1, 2009, Anne Arundel and Xerox entered into an
"Agreement for Services" contract for Xerox to
provide billing and collections services for the Countyss EMS
and to act as a liaison between the County and health
insurance providers, government agencies, auditors, and
individual users of Anne Arundelss EMS. (Id.
¶¶ 24-25). The contract was for a five-year term
renewable at the sole discretion of the County for up to two
one-year periods. (Id. ¶ 26).
services contract imposed a number of obligations on Xerox.
Xerox would "furnish necessary materials, equipment,
tools, skill, engineering, technical support, and labor
necessary to fully complete in a workmanlike and timely many
the requirements of this [Request for Proposal]."
(Id. ¶ 28). The contract also provided Xerox
would develop and maintain a "comprehensive"
automated billing system that would manage, for example,
insurance claims processing, bad debt collections, "File
Interchanges" with local hospitals, and insurance
eligibility processing. (Id. ¶ 29-30). Xerox
was also required to provide monthly status reports as well
as periodic project schedule updates. (Id. ¶
31). In exchange for its services, Xerox collected a fee of
6.68% of the total amount it collected on behalf of the
County for EMS. (Id. ¶ 32).
of 2013, approximately four years into the contract term,
Anne Arundel hired an outside consulting firm to perform an
audit of Xeroxss billing and collections procedures and its
regulatory compliance practices. (Id. ¶ 34).
Anne Arundel alleges that the audit uncovered a, host of
performance deficiencies including but not limited to
improper coding and processing of claims, failure to perform
adequate claim follow-up procedures, and, in some instances,
failure to bill certain claims altogether. (Id.
¶¶ 36-38). According to Anne Arundel, Xerox
employees were inadequately trained in proper billing
procedures and did not receive any formal compliance
instruction. (Id. ¶ 41). The County contends
the audit also revealed Xeroxss ignorance of important
regulatory changes and changes in Medicare billing and coding
policies, and the billing software itself was improperly
programmed. (Id. Â¶ 41-43.. As a result of Xeroxss
alleged failure to perform according to the material terms of
the contract, the County claims it has lost millions in lost
profits and revenues and been exposed to potential
liabilities to individual claimants and insurance providers.
(Id. Â¶ 63).
December of 2015, Anne Arundel filed a complaint filed a
complaint in the Circuit Court for Anne Arundel County, and
Xerox filed a notice of removal on February 26, 2016. (ECF
No. 1 ¶ 1). Anne Arundel filed a complaint in this court
on February 26, 2016, and an amended complaint on April 21,
2016. The complaint asserts five claims against Xerox: breach
of contract (Count I), fraud: intentional misrepresentation
(Count II), negligent misrepresentation (Count III), fraud:
non-disclosure or concealment (Count IV), and conversion
(Count V). Defendant Xerox filed a motion to dismiss pursuant
to Rule 12(b)(6) of the Federal Rules of Civil Procedure,
seeking dismissal of all five counts. (ECF No. 16-1).
moves to dismiss Anne Arundelss claims under Rule 12(b)(6).
In reviewing a motion to dismiss under Rule 12(b)(6), the
court "must accept as true all of the factual
allegations contained in the complain,, " and "draw
all reasonable inferences in favor of the plaintiff."
E.I. du Pont de Nemours & Co. v. Kalan Indus.,
Inc., 637 F.3d 435, 440 (4th Cir. 2011). The complaint
must allege facts sufficient "to state a claim to relief
that is plausible on its face." Ashcroft v.
Iqbal, 566 U.S. 662, 697 (2009). The court is not
required to accept the legal conclusions derived from the
facts, and "[a] complaint that provides no more than
labels and conclusions or a formulaic recitation of the
elements of a cause of action" is insufficient to meet
the pleading standard. Bell Atl Corp. v. Twombly,
550 U.S. 544, 555 (2007) (internal quotations omitted).
Generally, a motion to dismiss for failure to state a claim
"does not resolve contests surrounding the facts, the
merits of a claim, or the applicabiltty of defenses."
Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th
Cir. 1999); see also Tobey v. James, 706 F.3d 379,
387 (4th Cir.2013).
moves to dismiss all five counts in Anne Arundelss complain..
My analysis is organized by type of claim in order to most
efficiently address the merits of the motion to dismiss.
Because, however, Xerox argues the majority of Anne Arundelss
claims are time-barred, the statute of limitations issue is
Statute of Limitations
contends Anne Arundelss breach of contract (Count I),
intentional misrepresentation (Count II), negligent
misrepresentation (Count III), and nondisclosuee and
concealment (Count IV) claims are time-barred under
Maryland's three-year statute of limitations for civil
actions. (ECF No. 16-1, p. 5). The legal standard for the
statute of limitations is addressed generally, and its
application to the breach of contract and tort claims
central premise with respect to the timeliness of the
county's claims is, given the alleged scope of Xeroxss
performance deficiencies, Anne Arundel should have been aware
of the alleged breaches and injuries almost immediately upon
the commencement of performance on the contact in 2009.
(Id. at p. 12). In order for Anne Arundelss claims
to be timely filed within the applicable statute of
limitations, they must have accrued sometime after December
3, 2012 -three years before the county's complaint was
filed in state court. See Md. Code Ann., Cts. &
jud. proc. S 5-101 (West 2016).
the statute of limitations is an affirmative defense that is
not an appropriate ground for dismissal. See Eniola v.
Leasecomm Corp., 214 F.Supp.2d 520, 525 (d. Md. 2002).
The court may, however, grant a motion to dismiss based on a
statute of limitations defense when the untimeliness of the
claim is obvious on the face of the complain.. See Evans
v. Beneficial Fin. I, Inc., No. 14-1994, 2015 WL 535718,
at *2 (d. Md. Feb. 9, 2015) (citing Brooks v. City of
Winston-Salem, N.C, 85 F.3d 178, 181 (4th Cir. 1996)).
The burden of demonstrating a viable statute of limitations
defense is on the asserting party, and the plaintiff "is
under no obligation to plead facts in a complaint to show the
timeliness of her claims." Id. Furthermore,
"[w]hether or not the plaintiffs failure to discover his
cause of action was due to failure on his part to use due
diligence, or to the fact that defendant so concealed the
wrong that plaintiff was unable to discover it by the
exercise of due diligence, is ordinarily a question of fact
for the jury." O'Hara v. Kovens, 305 Md.
280, 294-95 (1986); cf. Brown v. Neuberger, Quinn,
Gielen, Rubin & Gibber, P.A., 731 F.Supp.2d 443,
449-50 (d. Md. 2010), affd, 495 f. App'x 350
(4th Cir. 2012) ("If there is a genuine dispute of
material fact as to when the plaintiff was on inquiry notice,
summary judgment is inappropriate."); Frederick Rd
Ltd., 360 Md. at 93-94 (stating that summary judgment
was inappropriate where there was a genuine dispute of
material fact regarding whether plaintiffs could be charged
with notice of their cause of action and exercised due
diligence to protect their rights).
Maryland law, civil claims do not necessarily accrue at the
time of the breach or injury, but instead will generally
accrue when the plaintiff either knows or reasonably should
have known the breach or injury occurred. See
Poffenberger v. Risser, 290 Md. 631, 636 (1981). The
so-called "discovery rule" in effect "tolls
the accrual date of the action until such time as the
potential plaintiff either discovers his or her injury, or
should have discovered it through the exercise of due
diligence." Poole v. Coakley & Williams Const.,
Inc., 423 Md. 91, 131 (2011); see also Lumsden v.
Design Tech Builders, Inc., 358 Md. 435, 445 (2000)
(stating that "limitations begin to run when a claimant
gains knowledge sufficient to put her on inquiry. As of that
date, she is charged with knowledge of facts that would have
been disclosed by a reasonably diligent investigation").
The discovery rule "applies generally in all civil
actions." Hecht v. Resolution Trust Corp., 333
Md. 324, 334 (1994). The plaintiff will be charged with
"inquiry notice" of "all facts which  an
investigation would in all probability have disclosed if it
had been properly pursued" from the time that he or she
gains "knowledge of circumstances which ought to have
put a person of ordinary prudence on inquiry" about a
potential breach or injury. Poffenberge., 290 Md. at
681. The statute of limitations period is triggered when the
plaintiff is charged with inquiry notice. See Id.
Xerox argues Anne Arundel should be charged with inquiry
notice of both its breach of contract and tort claims
beginning in 2009.
Breach of contract (Count I)
Arundel alleges Xerox repeatedly breached numerous provisions
in the parties' services contract over the course of
several years. (ECF No. 12 ¶ 61- 62). Xerox contends
Anne Arundelss breach of contract claim is time-barred
because the alleged breaches would have been 1 apparent to
the County very early on in the contract term. (ECF No. 16-1,
pp. 12-13). Specifically, Xerox argues the County should have
been on inquiry notice that a breach may have occurred
because "[a]t minimum, it must have known whether
monthly reports were provided on a monthly basis, whether
information regarding claims ... were provided, and the
like." (ECF No. 16-1, p. 13). The crux of Xeroxss
argument seems to be that because Xerox may have failed to
provide Anne Arundel with a regular flow of information about
Xeroxss performance, the County should have known that
something was potentially amiss. According to Anne Arundel,
however, Xeroxss performance deficiencies and the existence
and scope of material breaches of the services contract did
not become apparent until the County performed its audit in
July of2013. (ECF No. 12 ...