Opinion
Case No. 3:97CV7209
April 26, 2001
William H. Bartle, Murray Murray, Sandusky, OH, representing pty James Scavio, Jr., William Deehr.
Steven C. Bechtel, Murray Murray, Sandusky, OH, representing pty James Scavio, Jr., representing pty William Deehr.
Neema M. Bell, Shumaker, Loop Kendrick, Toledo, OH, representing pty Smart Corporation.
Peter O. DeClark, Williams, Jilek, Lafferty, Gallagher Scott Toledo, OH, representing pty James Scavio, Jr., William Deehr.
Teresa L. Grigsby, Spengler Nathanson P.L.L., Toledo, OH, representing pty Medical Information Solutions, Inc.
W. Patrick Murray, Murray Murray, Sandusky, OH, representing pty James Scavio, Jr., William Deehr.
David W Wicklund, Shumaker, Loop Kendrick, Toledo, OH, representing pty Smart Corporation.
ORDER
This is a case in which plaintiffs sued Med Cor and Smart Corporation for charging excessive prices for copies of medical records under the Ohio Consumer Sales Protection Act ("OCSPA"), Ohio Revised Code § 1345.03. This court has jurisdiction pursuant to 28 U.S.C. § 1332. Pending is defendants' motion for summary judgment. For the following reasons, the motion is granted.
BACKGROUND
Plaintiffs are Ohio residents. They requested copies of their medical records from the hospitals that treated them for their injuries. They needed these records for litigation following the accidents that caused their injuries. (Doc.1 at 2,3). Defendants Med Cor and Smart Corporation have contracts with hospitals to provide copies of medical records on request. (Id. at 9,10). Once the hospital receives the request for copies of medical records, hospital personnel pull and place the medical records on a cart. (Doc. 86, Ex. 3, Trujillo Dep. at 8). At that point, defendants' employees retrieve the records and review them to make sure that they have the proper authorization. (Id. at 31) Those employees also review the records to insure that no legally protected information is included in the items to be copied. (Doc. 78, Ex. A). Then defendants' employees process the request. (Id.) Defendants charge approximately $1 per page for the medical records. (Doc.1 at 12).
Plaintiffs filed a class action suit in Erie County, Ohio, under OCSPA alleging that the defendants charge excessive prices for their copies. (Doc. 11 at 5). Defendants removed the suit to this court on the basis of diversity jurisdiction. (Doc. 1). Issues relating to class certification have been deferred until the summary judgment issues have been resolved.
DISCUSSION I. Summary Judgment Standard
Summary judgment must be entered "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the record which demonstrate the absence of a genuine issue of material fact. Id. at 323. The burden then shifts to the nonmoving party who must set forth facts showing that there is a genuine issue for trial."Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986).
Once the burden of production shifts, the party opposing summary judgment cannot rest on its pleadings or merely reassert its previous allegations. It is insufficient "simply [to] show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather, Rule 56(e) "requires the nonmoving party to go beyond the [unverified] pleadings" and present some type of evidentiary material in support of its position. Celotex, 477 U.S. at 324.
Summary judgment shall be rendered if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any show there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed R. Civ. P 56(c).
II. OCSPA applies in this case
A. The sale of medical records is governed by OCSPA .
Defendants argue that O.R.C. § 3701.74 governs accessability of medical records to patients and applies to the present case. Thus, they assert their activities come within an exception to OCSPA, which states that the Act does not apply to conduct governed by other sections of the Revised Code.
Revised Code § 3701.74, as originally enacted, relates to access to medical records and does not address pricing or costs. The legislature amended the statute in November, 2000 to address the pricing of medical records.
Because the conduct at issue occurred before enactment of the amendments, these amendments do not apply. The prior version of § 3701.74 does not mention prices and costs; consequently, OCSPA governs the consumer transactions involved in this case.
B. Sales or transactions need not be completed for the Consumer Protection Act to apply .
Defendants assert that one of the plaintiffs cannot bring a cause of action under OCSPA because he has not paid for his transaction. A "consumer transaction" is defined in the Act as "a sale, lease, assignment, award by chance, or other transfer of items of goods, a service, a franchise, or an intangible , to an individual for purposes that are primarily personal, family or household or solicitation to supply any of these things." O.R.C. § 1345.01(A) (emphasis added). The legislature enacted OCSPA to protect consumers against unfair or deceptive acts and should be construed broadly. Mermer v. Med. Correspondence Serv. , 115 Ohio App.3d 717, 720, (1996). In Liggins v. May Co., 44 Ohio Misc. 81, 83-84 (Cl. P. 1975), the court held a supplier liable under OCSPA even though it had tried to assign its claim to another party. The court stated that transfer of the debt to relieve the defendant of liability would defeat the purpose of the Act to protect consumers. (Id.)
The approach taken in Liggins applies here. For defendants to say that they are not liable under the Act because they choose not to pursue payment for the debt would allow them to escape liability and defeat the purpose of the Act. Furthermore, both sections of OCSPA state that violations under the Act can occur if the illegal conduct happens before, during or after the transaction. See O.R.C. §§ 1345.02(A), 1345.03(A). Thus, violations can occur prior to completion of a transaction. The Act applies in this case.
Defendants also assert that another plaintiff waived his right to sue under the Act because he paid his bill without complaint. Again, the statute states that violations under this section can occur before, during or after the transaction. O.R.C. §§ 1345.02(A), 1345.03(A). Consumers often are not aware of the deceptive or unconscionable act by the vendor until after the transaction has been completed — i.e., the goods have been received and payment has been made. While Ohio courts have not considered whether the consumer waived his rights under the Act if he paid for the item, some courts have considered cases both when the transaction had been paid and when it had not. See Mermer, 15 Ohio App.3d at 721; Weaver v. J.C. Penney Co. Inc., 53 Ohio App.2d 165, 168-9 (1977) (liability arises under OCSPA even if the transaction does not actually take place). To rule that potential plaintiffs could not sue under the Act because they waived their rights by payment would allow many otherwise prohibited acts to go unchallenged simply because the supplier managed to pocket the customer's money. This would undermine the major goal of OCSPA. Therefore, OCSPA applies to the transactions in this case.
III. Excessive Pricing under the Ohio Consumer Protection Act
A. Defendants' acts under O.R.C. § 1345.02 .
Plaintiffs claim that the defendants violated O.R.C. § 1345.02 because the high price defendants charged for medical copies was "price gouging" and thus an unfair or deceptive practice. I conclude that defendants did not violate § 1345.02.
Defendant Med Cor and Plaintiffs both argue claims under O.R.C. § 1345.02, even though the claim was not asserted in the Complaint. Because both sides have argued the claim, the court will address the claim. The court also notes that Defendant Smart Corp has not addressed the claim.
An act is deceptive, under § 1345.02, if it has the likelihood of inducing a state of mind in the consumer that is not in accord with the facts. Crull v. Maple Park Body Shop, 36 Ohio App.3d 153, 158 (1987). Section 1345.02 does not address excessive prices; it deals rather with such acts as deceptive advertising, bait and switch schemes, and misrepresentation of the quality of the goods sold.
Plaintiffs have not shown that they were deceived in this case. Indeed, letters sent to the plaintiffs with the copies stated that they could refuse the copies and make alternative arrangements with the hospitals to obtain the requested copies. (Doc. 78 Ex. E and Doc. 86 Ex. 4, Reiter Dep. at 110-112.). Plaintiffs were not required to use defendants' services to obtain copies of their medical records. Defendants are not required under the Act to inform consumers of cheaper prices elsewhere, though they did notify plaintiffs that alternatives existed.
Plaintiffs have submitted an affidavit stating that they tried to obtain other services for their copies and were denied. (Doc 84, Ex 13.) If plaintiffs were denied access to their medical records, then their complaint is with the hospital. Under O.R.C. § 3701.74, hospitals cannot deny patients access to their medical records. The plaintiffs' complaint, therefore, lies with the hospital, not with the defendants. The letters sent by defendants state that alternate arrangements had to made with the hospital. While defendants should have referred plaintiffs back to the hospital when he made his inquiry to them about alternate arrangements, defendants' conduct did not rise to the level of a deceptive practice. Thus, defendants' acts were not deceptive practices under O.R.C. § 1345.02 because their acts did not induce a state of mind that was not in accord with the facts.
B. Defendants did not make any misrepresentation in the Still letter
Plaintiffs argue that a letter sent by the defendants made misrepresentations about fees being approved by state law. (Doc. 80, Ex. 9). This exhibit has not been authenticated or developed in the record. Thus, this exhibit cannot be considered under Fed. Rules of Civil Procedure 56(e). Knight and Schulman, 102 F. Supp.2d 867, 871 (S.D.Ohio 1999).
Even if this letter could be considered, defendants did not misrepresent to plaintiffs that their fees were allowable under state law. Plaintiffs argue that because no such statute existed in Ohio at the time the letter was written, fees could not be "allowed" under state statute. Thus, plaintiffs argue that defendants misrepresented that their fees were approved by the state. This sentence, however, must be read in the context of the entire letter. The first paragraph describes the method that Med Cor uses in determining fees and represents that fees are determined in accordance with state regulation. The sentence at the end of the letter merely sums up that the fees were assessed after following reference to state regulations.
Moreover, plaintiffs have not shown how this statement, in a letter sent long after copies were received, rises to the level of a deceptive practice or conduct. The letter states that fees are determined in accordance with state statutes, not that the state approved the prices Med Cor charges for medical copies. The final paragraph of the letter simply asserts that Med Cor had reviewed the applicable state statute.
In addition, plaintiffs cite two judicial orders stating that the prices of the copies were unreasonable. These orders were written more than a year after defendants wrote the letter. Med Cor could not make a misrepresentation where no determination about the alleged impropriety of its conduct had been made until after its letter was sent. Therefore, Med Cor did not misrepresent the reasonableness of its fees under state law.
C. OCSPA governs conduct by vendors and not prices
Scavio alleges defendants committed unconscionable acts under O.R.C. § 1345.03(B)(2) because they charged prices for copies substantially in excess of prices charged elsewhere. Section 1345.03(B)(2) states: "Whether the supplier knew at the time the consumer transaction was entered into that the price was substantially in excess of the price at which similar property or services were readily obtainable in similar consumer transactions by like consumers;" OCSPA regulates conduct or practices, not prices. Brown, Attorney General of Ohio v. Market Dev., Inc. 41 Ohio Misc. 57 (1974). Plaintiffs claim that the defendants have been "price gouging" consumers by charging prices for copies of medical records that are substantially in excess of prices charged for copies elsewhere.
Defendants counter that copying medical records cannot be compared to prices for other copying services and that their prices are not excessive. While copying medical records may or may not be as sophisticated or complicated as defendants describe, defendants and hospitals need to be sure that records are not accidentally copied. The hospital initially may review the records to insure that the protected information in the file is not copied. Defendants double check to insure that the hospital has not overlooked information that should not be reproduced. This is merely a second check in the system. Defendants' performance of this service sets them apart from other copying services. Defendants are insuring that neither they nor the hospital is exposed to liability for inadvertently copying confidential records.
Defendants charge a higher price than other providers of copies. A court, however, looks to the conduct of the defendant, not the reasonableness of the price. Market Dev., 41 Ohio Misc. at 62. In Green v. Paradise Pontiac, Inc., 19 Ohio App.3d 219, 220 (1984), the plaintiffs sued a car dealership under OCSPA for selling car insurance for which defendants received a 32.5 percent commission. The court found no violation of the Act because: 1) plaintiffs were not required to purchase the insurance; 2) they had requested the coverage; 3) they received the coverage; 4) they admitted that seller was entitled to a commission; 5) they could have obtained insurance on their own; and 6) defendants were not considered to be their insurance agent. Id. 220, 1215.
Many of those same factors are present in this case. Here, plaintiffs requested and received the copies. (Doc. 86 Ex. 4, Reiter Dep. at 110-112). They had alternate means for obtaining the copies and were informed by defendants that alternate means existed. (Id.)
A substantially excessive price is one "circumstance" to be used in determining unconscionability. O.R.C. § 1345.03(B). Here, the defendants may have known that their prices were higher than other copying services. But they told plaintiffs that alternatives existed. Plaintiffs chose to retain the copies and continue using defendants' services even though they knew the price differential and that they had other options. Therefore, defendants' conduct was not unconscionable under the Act.
D. Providing courtesy copies is not an unconscionable act
Plaintiffs also argue that providing courtesy copies to hospitals is an unconscionable act under the statute. The Act does not proscribe courtesy copies. Such copies for doctors and hospitals are not necessarily "perks" as plaintiffs allege, because in all likelihood, the medical providers would pass any such expenses on to their patients. As in Green, where defendants were not required to disclose the amount of their commission, the defendants do not have to disclose the hospitals' receipt of courtesy copies or how their fees are determined. Courtesy copies are not unconscionable under the Act.
IV. The defendants' sales tax charges were not an unconscionable or deceptive act.
Defendants charged sales tax under O.R.C. § 5739.01(B)(5). Plaintiffs argue that this transaction is exempt from sales tax under the Ohio Sales Tax Act because the service provided here is for "professional service transactions." Revised Code § 5739.01(B)(5) provides "`sale' and `selling' do not include professional, insurance, or personal service transactions which involve the transfer of tangible personal property as an inconsequential element, for which no separate charges are made."
The Ohio Supreme Court has held that to determine if a transaction is exempt under this statute, courts must determine if the "overriding purpose" of the transaction was to provide a service or deliver tangible personal property. WBNS TV, Inc. v. Tracy, 75 Ohio St.3d 572, 576 (1996). In that case, the court held that a professional service transaction is taxable where the charge for services was not separate from the charge for the property and the overriding purpose was to obtain tangible personal property. Here, the overriding purpose of the transaction was to receive copies of medical records for use in a lawsuit. While the transaction involved, in part, a service, the overriding purpose was to receive copies of medical records. The sales tax was properly charged by defendants.
Plaintiffs also state that defendants committed an unconscionable act by charging tax on shipping and handling for the delivery of its copies. Defendants have provided a letter from the Ohio Department of Taxation stating that tax should be applied to defendants' transactions. In its letter to the agency, Smart Corp mentioned all the factors involved in their transactions, including shipping and handling. The Department's response to Smart's letter simply stated that taxation applied to Smart's transactions. Smart cannot be found to have committed an unconscionable act when it complied with the Department's directions.
V. Defendants did not violate the Ohio Administrative Code by not providing cost estimates to plaintiffs
Plaintiffs claim that defendants violated Ohio Administrative Code § 109:4-3-05(C)(1) and(D)(7) by not providing them an estimate of the total price before the service was performed. Section 109:4-3-05(D)(7) states:
In any consumer transaction involving the performance of any repair or service it shall be a deceptive act or practice for a supplier to: (7) Fail to disclose upon the first contact with the consumer that any charge not directly related to the actual performance of the repair or service will be imposed by the supplier . . . whether or not repairs or services are performed.
Services are defined in § 109:4-3-01(C)(2) as "performance of labor for the benefit of another." Goods are defined in § 109:4-3-01(C)(1) as "all things which are movable at the time of identification to the contract for sale other than money in which the price is to be paid, . . . and things in action."
Medical copies are movable at the time of sale and are goods under the contract. While copying requires some labor as part of the transactions, to say that this is a service would mean that all labor used in the production of goods would be a service. This would swallow any distinction between "goods" and "services." I conclude that the transaction in this case is one for the sale of goods and not services. As a sale of goods, defendants did not violate this section of the Ohio Administrative Code when they did not provide an estimate before making the copies.
CONCLUSION
It is, therefore, ORDERED THAT Defendants' motion for summary judgment (Docs. 77 and 78), be and hereby is granted.