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Anne Arundel County v. Xerox State & Local Solutions, Inc.

United States District Court, D. Maryland

September 30, 2016


          Anne Arundel County, Maryland, Plaintiff, represented by Kemp Walden Hammond, Anne Arundel County Office of Law.

          Anne Arundel County, Maryland, Plaintiff, represented by Andrew J. Murray, Anne Arundel County Office of Law.

          Xerox State & Local Solutions, Inc., Defendant, represented by Charles O. Monk, II, Saul Ewing LLP, Katrina J. Dennis, Saul Ewing LLP & Matthew John Antonelli, Saul Ewing LLP.


          J. FREDERICK MOTZ, District Judge.

         Plaintiff 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.


         This 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 predecessor, 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 County's EMS and to act as a liaison between the County and health insurance providers, government agencies, auditors, and individual users of Anne Arundel's 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).

         The 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).

         In July of 2013, approximately four years into the contract term, Anne Arundel hired an outside consulting firm to perform an audit of Xerox's 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 Xerox's ignorance of important regulatory changes and changes in Medicare billing and coding policies, and the billing software itself was improperly programmed. ( Id. ¶ 41-43). As a result of Xerox's 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. ¶ 63).

         In 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).


         Defendant moves to dismiss Anne Arundel's 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 complaint, " and "draw all reasonable inferences in favor of the plaintiff." E.I. du Pont de Nemours & Co. v. Kolon 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 applicability 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).


         Defendant moves to dismiss all five counts in Anne Arundel's complaint. 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 Arundel's claims are time-barred, the statute of limitations issue is addressed first.

         I. Statute of Limitations

         Xerox contends Anne Arundel's breach of contract (Count I), intentional misrepresentation (Count II), negligent misrepresentation (Count III), and nondisclosure 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 follows.

         a. Legal standard

         Xerox's central premise with respect to the timeliness of the county's claims is, given the alleged scope of Xerox's 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 Arundel's 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. § 5-101 (West 2016).

         Generally, 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 complaint. 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 plaintiff's 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), aff'd, 495 F.Appx. 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).

         Under 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. SeePoffenberger 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 alsoLumsden 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. P ...

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