Summary
rejecting the delayed-damages rule implicitly
Summary of this case from Nat'l Credit Union Admin. Bd. v. Ciuni & Panichi, Inc.Opinion
No. 89-2127
Submitted December 11, 1990 —
Decided February 13, 1991.
Contracts — Care provider subject to audit under the Medicaid program is not an intended third-party beneficiary of the audit contract between the Ohio Department of Public Welfare and the auditor.
A care provider subject to an audit of reimbursable costs under the Medicaid program is not an intended third-party beneficiary of the audit contract between the Ohio Department of Public Welfare and the auditor.
APPEAL from the Court of Appeals for Mahoning County, No. 87 C.A. 187.
The federal Medicaid program, Title XIX of the Social Security Act of 1965, provides reimbursement to care providers for reasonable operating costs. Medicaid makes these payments through approved state plans. At the times relevant to this appeal, the Ohio Department of Public Welfare ("ODPW") (now the Ohio Department of Human Services) administered the Medicaid care provider reimbursement plan in Ohio. On the federal side, the Health Care Financing Administration ("HCFA") distributed the Medicaid funds to the states. The HCFA required that state plans provide for periodic audits of participating care providers to assess the reasonableness of the costs for which care providers seek reimbursement. Former Section 450.30, Title 42, C.F.R. (1977), recodified at former Sections 447.290-447.296, Title 42, C.F.R. (see 43 Fed. Reg. 45259 et seq.). Today's dispute arises from one such audit.
During April 1980, Ohio accepted bids from private auditors to perform audits of care providers by the end of that year. The state contract required a complete audit for 1975 and a limited audit for the period July 1972 through December 1978. The audits were designed to discover overpayments made to care providers. Former Section 447.294, Title 42, C.F.R.
On May 14, 1980, the state accepted the bid of Alexander Grant Co., now known as Grant Thornton ("Grant"), and assigned Grant to audit six nursing homes operated by Windsor House, Inc. ("Windsor"). Grant's audit of Windsor was completed in November 1980 and concluded that Windsor's records were insufficient upon which to certify an opinion as to the reasonableness of Windsor's reimbursed costs. Grant related this conclusion to Windsor during an exit interview on November 21, 1980. Grant then issued its report to the ODPW on November 24, 1980, expressing the same conclusion.
Grant's report to ODPW read in relevant part:
"The accounting records of the Provider were not in an adequate condition to support the costs claimed for reimbursement in the Cost Reports filed for the six-month periods ended June 30, 1975 and December 31, 1975. Nor was it practicable to extend our auditing procedures in order to satisfy ourselves that such costs were allowable (necessary and reasonable for patient care).
"Because of the significance of the matter discussed in the preceding paragraph, the scope of our work was not sufficient to enable us to express, and we do not express, an opinion on the accompanying Schedule of Reimbursable Costs for the six-month periods ended June 30, 1975 and December 31, 1975."
According to Windsor, in September 1982 the ODPW notified Windsor that it had received $2.5 million in overpayments and ordered Windsor to repay that amount to the state. Planning an appeal, Windsor hired Grant in November 1982 to explain the deficiencies in Windsor's records, to extend its review procedures to Windsor's records, and to assist Windsor during the appeal process. Windsor subsequently hired Grant during 1983 and 1984 for services unrelated to the ODPW repayment order.
On October 31, 1985, Grant filed suit against Windsor in the Court of Common Pleas of Mahoning County, asserting that Windsor had breached the contracts between Grant and Windsor made in 1982, 1983, and 1984. In its answer to Grant's complaint, filed on January 30, 1986, Windsor asserted eight counterclaims. Grant subsequently moved for summary judgment on the first five of Windsor's counterclaims, each arising from Grant's original audit of Windsor performed for the ODPW. These five claims, respectively, sound in negligence, contract, malpractice, fraud, and libel.
The common pleas court ruled in favor of Grant's motion, dismissing each of the five claims. The court dismissed the negligence, malpractice, and fraud claims on the ground that they were not brought within the four-year statute of limitations contained in R.C. 2305.09. The court dismissed the second claim, alleging breach of contract, because the court found that Windsor was not an intended beneficiary of the contract between Grant and the ODPW. Lastly, the court dismissed the libel claim because it found that the communication upon which the claim was based was not defamatory.
Windsor appealed the dismissal of the first four claims to the Court of Appeals for Mahoning County. The appeals court reversed the grant of summary judgment on all four counts, ruling that the negligence, malpractice, and fraud claims did not accrue until Windsor sustained damage — when the ODPW ordered repayment — and hence were brought within the four-year statute of limitations. The appeals court also ruled that there was conflicting evidence concerning whether Windsor was an intended third-party beneficiary of Grant's contract with the ODPW and, hence, that summary judgment was inappropriate.
Grant now appeals the decision of the court of appeals to this court as to Windsor's negligence, malpractice, and contract claims. The cause comes before this court upon the allowance of a motion to certify the record.
Roberts Roberts Co., L.P.A., James E. Roberts, Cohen Grigsby and Richard R. Nelson II, for appellant.
Fleck, Mostov Schwartz, Jeffrey B. Fleck and Mary DeGenaro, for appellee.
Squire, Sanders Dempsey, David J. Young and Kim L. Swanson, urging reversal for amicus curiae, Ohio Society of Certified Public Accountants.
This case presents two questions for review: whether this court intends to stand by our 1989 decision in Investors REIT One v. Jacobs, 46 Ohio St.3d 176, 546 N.E.2d 206, and whether a care provider participating in the Medicaid reimbursement program is an intended third-party beneficiary of a private auditor's contract with the ODPW to audit the provider. We answer in the affirmative to the first question and in the negative to the second. Consequently, we reverse the decision of the court of appeals.
I
Our decision in Investors governs Windsor's negligence and malpractice claims. Neither party disputes the applicability of Investors to the facts of this case; however, Windsor argues first that Investors is bad law and thus we should reverse it, or, in the alternative, that Investors alters vested substantive rights and thus we may not apply it retroactively to Windsor's cause of action. We choose not to reverse Investors, and further, we hold that Investors poses no retroactivity problem.
In Investors, we held that the four-year statute of limitations in R.C. 2305.09 applied to accountant negligence actions and that Ohio has no discovery rule to delay the running of the statute of limitations in accountant negligence actions. Paragraph one of the syllabus held that:
R.C. 2305.09 reads:
"An action for any of the following causes shall be brought within four years after the cause thereof accrued:
"(A) For trespassing upon real property;
"(B) For the recovery of personal property, or for taking or detaining it;
"(C) For relief on the ground of fraud;
"(D) For an injury to the rights of the plaintiff not arising on contract nor enumerated in sections 2305.10 to 2305.12, inclusive, 2305.14 and 1304.29 of the Revised Code.
"If the action is for trespassing under ground or injury to mines, or for the wrongful taking of personal property, the causes thereof shall not accrue until the wrongdoer is discovered; nor, if it is for fraud, until the fraud is discovered."
"Claims of accountant negligence are governed by the four-year statute of limitations for general negligence claims found in R.C. 2305.09(D), not by the two-year period for bodily injury or injury to personal property set forth in R.C. 2305.10, or by the one-year limitations period for professional malpractice claims in R.C. 2305.11(A)."
Part (a) of paragraph two of the syllabus held that:
"The discovery rule is not available to claims of professional negligence brought against accountants."
R.C. Chapter 2305 dictated the result in Investors. That same chapter dictates the same result today.
In the alternative, Windsor argues that Investors alters existing legal rights by shortening the statute of limitations for accountant negligence actions and, therefore, pursuant to Section 28, Article II of the Ohio Constitution, we may not apply Investors retroactively to Windsor's claims. See Adams v. Sherk (1983), 4 Ohio St.3d 37, 4 OBR 82, 446 N.E.2d 165. This argument must fail. Investors did not create new law, it merely interpreted the law as it then stood. Consequently, Investors guides us to the conclusion that Windsor's negligence and malpractice claims were not brought within the statute of limitations and therefore the trial court properly entered judgment in favor of Grant on those claims.
II
We now turn to the contract claim. Only a party to a contract or an intended third-party beneficiary of a contract may bring an action on a contract in Ohio. Visintine Co. v. New York, Chicago, St. Louis RR. Co. (1959), 169 Ohio St. 505, 9 O.O. 2d 4, 160 N.E.2d 311. Windsor asserts that it was an intended third-party beneficiary of the contract and that the parties to the contract — the ODPW and Grant — intended for Windsor to benefit from the contract. However, this is not the case.
Grant's duty under its contract with the ODPW was intended only to benefit the ODPW. The audit of Windsor was intended solely for the ODPW's use in assessing Windsor's dealings under the state's Medicaid plan. While Windsor arguably stood to benefit from a favorable result in the audit, it just as easily could have been, and here was, harmed by a negative result. The purpose of the audit was to search for overpayments to care providers. Any potential benefit to Windsor was merely incidental to the contract and therefore insufficient to support a breach of contract cause of action. Visintine Co., supra, at 507, 9 O.O. 2d at 5, 160 N.E.2d at 313. Accordingly, we hold that a care provider subject to an audit of reimbursable costs under the Medicaid program is not an intended third-party beneficiary of the audit contract between the Ohio Department of Public Welfare and the auditor. The trial court thus properly dismissed Windsor's contract claim.
III
The trial court also entered summary judgment against Windsor on count four, the fraud claim. The court of appeals reversed the trial court on this claim as well. In this appeal from the judgment of the court of appeals, Grant has failed to brief whether judgment was properly entered on the fraud claim, and thus has waived review of this question. Nevertheless, we note that R.C. 2305.09(D) specifically provides a discovery rule for actions based on fraud and, therefore, summary judgment was not properly entered against Windsor on its fraud claim. Investors, supra, at paragraph 2b of the syllabus.
Accordingly, we reverse the judgment of the court of appeals and reinstate summary judgment in favor of Grant on counts one, two, and three of Windsor's counterclaim.
Judgment reversed.
MOYER, C.J., HOLMES, H. BROWN and RESNICK, JJ., concur.
SWEENEY and DOUGLAS, JJ., dissent.
For the reasons stated in my concurring and dissenting opinion in Investors REIT One v. Jacobs (1989), 46 Ohio St.3d 176, 183, 546 N.E.2d 206, 221, I would affirm the decision of the court of appeals below.
DOUGLAS, J., concurs in the foregoing dissenting opinion.