Justices Uphold Award Over Medical Records Overcharge

The Legal Intelligencer

 

By Gina Passarella

 

November 18, 2009

 

The state Supreme Court upheld a nearly $600,000 award for a class of lawyers and law firms who claimed they were overcharged for copies of electronic medical records under the Medical Records Act.

 

Although the court agreed with defendant Recordex Acquisition Corp.'s argument that the act doesn't provide a statutory remedy to recover overcharges, it ruled the lawyers had a common law contract claim. The court also upheld the certification of class in the case and dismissed Recordex's argument that because the lawyers voluntarily paid the charges without complaint, they were without remedy.

 

The Medical Records Act provides for two types of charges. One rate is for copies of paper records and the other, higher rate is for copies of microfiche or microfilm.

 

The class argued they were improperly charged the higher microfilm rate for copies of electronic records even though the electronic records would be less expensive to copy, according to court documents in the case.

 

Writing for the unanimous court in Liss & Marion v. Recordex Acquisition Corp. , Justice Jane Cutler Greenspan said "absence of statutory language is not a 'term' that can be implied into a contract as a matter of law to bar a common law cause of action where such an action would otherwise be proper."

 

Greenspan pointed out in a footnote that trial Judge Mark I. Bernstein specifically dismissed the class' statutory claim, allowing the case to go forward only on the breach of contract claim.

 

She also disagreed with Recordex's argument that the voluntary payment defense bars recovery here.

 

"[The class] did not discover the overcharge because appellants misrepresented the source of the copies in the invoices," Greenspan said. The class' "claim did not stem, as the appellants suggest, from its ignorance of the MRA's rates for copies from electronic records."

 

Greenspan said Recordex failed to clearly indicate on the invoices that the original records were electronic rather than microfilm.

 

"Indeed, they falsely represented that the copies were from microfilm by using the term 'fiche,'" she said.

 

Once the court determined a contract claim existed, it looked at whether Recordex improperly charged for electronic copies. Recordex, which does business as Sourcecorp Healthserve and has contracts with several local hospitals to make copies of their records when requested for discovery, argued that "reasonable" rates should apply for electronic records given the MRA only specifies rates for paper and microfilm copies.

 

Greenspan disagreed and said the copies of the electronic files were ultimately paper copies and should have been charged at that rate. In a footnote, she dismissed the argument that the cost of storing electronic copies is greater than actual paper files and said the cost of storage is irrelevant under the MRA.

 

Greenspan took several pages of her 20-page opinion to go over why the class was properly certified. She said they shared commonality in their claims. Greenspan also dismissed Recordex's argument that individual issues predominate because some of the class members negotiated their own rates and therefore could not have been overcharged. The justice said people who fell into that category were specifically excluded from the class.

 

The fact that some lawyers who were party to this case may have already passed the excess charges along to clients is irrelevant to their recovery here, Greenspan said.

 

"Here, all class members suffered damages when they were overbilled and paid those bills," she said. "It is a separate matter whether any class members who passed along improperly augmented copying costs to their clients will ultimately be required to indemnify those clients upon recovery in the present litigation."

 

Greenspan said the lawyers conceded in court proceedings that some of the class members would have to reimburse clients.

 

Don Foster of Klehr Harrison Harvey Branzburg & Ellers represented Recordex. He said he was disappointed the court affirmed the award and thinks a decision in favor of the class could present some significant public policy ramifications. Foster was traveling and didn't have a chance to read through the entire opinion in order to comment further.

 

Thomas More Marrone of Feldman Shepherd Wohlgelernter Tanner Weinstock & Dodig represented the class.

 

Marrone said he thought the opinion was thorough, well-reasoned and correct.

 

"We're thrilled that the unanimous Supreme Court agreed with us that the defendants were ripping off lawyers and their clients," he said.

 

Marrone said the decision clarified certain areas of class action law that haven't been touched on by the court in recent years. In particular, he pointed to the court's reiteration that not all class members have to show they suffered actual injury or damages in order to be part of the class. The court was referring to the lawyers who may have passed the extra costs onto their clients.

 

In ruling in Liss & Marion , the Superior Court adopted Bernstein's argument in granting summary judgment to the class that electronic documents are not more expensive to copy than paper documents and should not be charged at the higher, microfilm rate.

 

Aside from the fact that no testimony was offered to suggest otherwise, Bernstein said it is "counterintuitive" to suggest there are any increased costs for electronic documents, according to Superior Court Senior Judge Stephen J. McEwen Jr.'s opinion.

 

"'The costs of producing a paper copy of medical records from electronically stored medical records is cheaper than the cost of producing a copy from even paper medical records because there is no need to disassemble records, feed records into a copier and reassemble both the original and the copy,'" McEwen said, citing Bernstein's opinion.

 

The total award for the class was $594,301, which included an award of $479,473 and prejudgment interest of $114,828, according to the opinion.