Preview:

STATE OF MICHIGAN COURT OF APPEALS

RICHARD LEVINE and MELISSA LEVINE, d/b/a HART EMS MONROE, Plaintiffs-Appellants, v MONROE COUNTY EMERGENCY MEDICAL AUTHORITY and COUNTY OF MONROE, Defendants-Appellees.

UNPUBLISHED July 29, 2010

No. 288844 Monroe Circuit Court LC No. 06-021923-CK

Before: GLEICHER, P.J., and O'CONNELL and WILDER, JJ. PER CURIAM. Plaintiffs Richard and Melissa Levine appeal as of right from an order granting summary disposition in favor of defendants County of Monroe (Monroe County) and Monroe County Emergency Medical Authority (MCEMA). Because we determine that defendants have no liability under tort or contract law, we do not reach the issue of governmental immunity.1 We affirm the trial court's learned opinion. Plaintiffs ran Hart EMS Monroe (Hart EMS), a business that provided emergency medical services (EMS) in Monroe County.2 The predecessor in interest to Hart EMS, Hart

Were we to address the issue of governmental immunity, we would agree with Judge Gleicher's analysis of this issue in her concurring opinion. We note that the issue of governmental immunity as it relates to public contracts presents a unique issue. Although private entities can employ bad faith, misrepresentation, and fraud in the inducement as shields to a contract action, they are prohibited from employing the same concepts as a sword. In our opinion, this leads to an interesting exchange of ideas concerning these cases, especially when the public entity negotiated the contract in bad faith or misrepresented the essential terms and conditions of the contract, or as the cases cited in this opinion clearly indicate, intentionally failed to disclose pertinent information to the private entity. Although we find these concepts interesting and unique to public contracts, such a discussion is best left for another day.
2

1

Richard and Melissa Levine are married. Although both had ownership of Hart EMS, Richard Levine was actively involved in the events described herein. Accordingly, we refer to Richard and Melissa Levine together as "plaintiffs" and to Richard Levine individually as "Levine." -1-

Medical, Inc., (Hart Medical) entered into a contract to provide EMS services in Monroe County in November 2003. The MCEMA oversaw all emergency medical services in Monroe County except in the city of Monroe, which had its own EMS operation, and the organization had the authority to accept bids and enter contracts for the provision of EMS on behalf of Monroe County and its municipalities. In 2001, defendants commissioned a study by the Ludwig Group, a consulting firm, to address the development of a comprehensive strategic plan to improve the provision of emergency services in Monroe County.3 The study, known as the Ludwig Report, constituted an "audit" with respect to the delivery of emergency medical services in Monroe County and provided recommendations for "developing a comprehensive emergency services strategic plan and design for an emergency medical service delivery system for medical services, emergency services responses, training, and an effective communications system." As part of this study, the Ludwig Group compared the benefits of keeping American Medical Response (AMR) as the current EMS provider in Monroe County with developing a county-operated system. The Ludwig Group acknowledged that the conclusions in its report were "recommendations" to ensure "that the Monroe County EMS system delivers the right level of care in the right amount of time" and noted that changes were "constantly occurring to the delivery of emergency services." It also noted that some of the factors it considered, especially available resources and population demographics, were constantly changing, requiring any EMS system to "constantly look inward and make corrections and modifications to constantly enhance the system." The Ludwig Report highlighted several structural and organizational concerns with AMR related to its ability to provide cost-effective EMS services within the county. In particular, the report detailed serious financial problems that AMR and its parent company had faced in the years immediately preceding the compilation of the report. The Ludwig Group also explained that because AMR was privately owned, it could not access much of the company's financial data. However, it reported that one AMR manager, "[w]hen questioned about the financial solvency of the Monroe operation, . . . indicated they operated on about a four percent profit margin in the community." The Ludwig Group assumed that this four-percent profit margin exclusively concerned AMR's profit margin from the Monroe County contract. The report also indicated that new Medicare regulations and changing reimbursement rates between 2002 and

At the time, the emergency services system in Monroe County consisted of a public/private partnership between American Medical Response (AMR), a for-profit commercial ambulance provider, and career, volunteer, and combination career/volunteer firefighters throughout the county. AMR was contractually obligated to provide four ambulances, while 21 other ambulances were housed in various fire departments within the county. Firefighters often provided first responder services during medical emergencies, while AMR would provide more advanced paramedic services and hospital transport during medical emergencies. The county did not fund the system; instead, funding came from the fire departments, Mercy Memorial Hospital (the hospital serving Monroe County), and AMR.

3

-2-

2006 would likely impact AMR's financial solvency in the county, although the report did not detail whether the impact would be positive or negative. The report also noted that each AMR vehicle received 4.6 calls per day and explained that this low call ratio "would generally indicate that AMR has vehicles available at all times for calls."4 The report mentioned that AMR's four ambulances were primarily based in the center part of the county, not in more rapidly growing areas in the northern and southern parts of the county. Further, AMR had a 60 percent transport rate, which it considered high for a rural county and at a level typically seen in urban areas with lower social-economic individuals. The report repeated concerns from firefighters and first responders that at times, AMR would not arrive at an emergency scene in a timely manner and the first responders would be forced to transport a patient to the hospital in a first-responder vehicle. This was particularly common at emergency scenes in the northern and southern parts of the county. The report discussed possible reasons for these reports of long response times, mentioning the placement of base station locations, the comparative lack of major east-west highways in the county, personnel discouraging individuals from going to the hospital, a significantly high number of false alarms in the community, or the fact that patients had already been transported by the fire department because of AMR's prolonged response time. However, because of limitations on the type of data collected by Monroe County, the Ludwig Group admitted that it could not draw firm conclusions regarding the reasons for AMR's slow response times. The Ludwig Group relied on data from 1997 through 2000 and used a linear regression model to determine future EMS demand, predicted an average annual increase in the future call load of approximately 800 calls, and estimated that the EMS system would "possibly reach 10,000 EMS runs by 2004." The report noted that this prediction was based on the assumption that the rate of growth in demand would remain consistent, and emphasized that "EMS demand is most correlated with the population and median income of the community served." The report stated, In general, EMS demand is directly proportional to population (the more people, the more calls) and inversely proportional to median income (low income households tend to be higher users of EMS for a variety of reasons). There are

The Ludwig Group explained that AMR has four ambulances available for Monroe County at all times. Between July 1, 2000, and June 30, 2001, AMR responded to 6,771 calls, each taking an average of one hour to complete. Using this data, it then calculated the unit-hour utilization for each ambulance by dividing the number of EMS runs (6,771) by the product of the number of ambulances in the county (4) multiplied by the number of hours in a year (8,760). The unit-hour utilization number that it calculated, 0.19, represents "the ratio of the number of unit-hours spent delivering EMS to the total number of unit-hours that the system could possibly deliver." Although the Ludwig Group admitted that the standard for effective use of EMS resources varied from community to community, it also noted that the unit-hour utilization ratio was low, and possibly indicated an inefficient use of resources. The report stated, "By some standards, an UH:U less than 0.30 means that transport resources are not being used efficiently, while UH:U in excess of 0.40 is over-utilization."

4

-3-

many other factors that influence demand, too, such as the self-reliance of the population (i.e. take care of themselves or taking themselves to the hospital). EMS demand is also subject to external occurrences (exogenous factors) that cannot be anticipated or controlled, such as heat waves, snow emergencies, etc. The Ludwig Group concluded with a series of recommendations. In particular, it recommended revising the centralized radio communication system that AMR used to dispatch its units, opining that having Monroe County Central Dispatch dispatch the AMR ambulances directly and at the same time as the fire department, would decrease response times. The report also recommended increasing the number of ambulances operated by the county EMS provider to at least seven advanced life support (ALS) ambulances during peak periods and five ALS ambulances during non-peak periods. Finally, the report outlined the benefits and costs of keeping AMR as an ambulance provider as opposed to having the county or local fire departments provide ALS service. It opined that if the county chose to renew its contract with AMR, it would probably need to provide a subsidy to AMR in order to increase AMR resources. Alternatively, the county could open the contract to competitive bids from both AMR and other licensed private ambulance services. Although the report anticipated that "based upon like communities and recommended deployment of seven ambulances, it is anticipated the additional subsidy . . . will range from $150,000 - $375,000," it also noted that the competitive bidding process would possibly lower the amount of any subsidy that might need to be paid. Further, the report noted, well-managed, efficiently run systems can survive with minimal subsidization. Subsidy, when it occurs, is most often required by political and practical considerations such as the need to serve remote locations or locations with poor payer mixes. Specifically, experience has shown that a minimum population base of 250,000 is necessary in order for an ambulance service to be self-sufficient. Systems serving populations less than that will be required to provide some sort of external funding in addition to the amount recouped through reimbursement. The Monroe County Board of Commissioners (the board) received the Ludwig Report in May 2002. The deputy clerk for the board kept the original report and would provide a copy free of charge to anyone who requested it. The report initiated a fair amount of debate among members of the board and the MCEMA, as local officials studied the report and discussed points of agreement and disagreement. By 2003, the MCEMA had decided to solicit bids for the provision of ambulance services in the county.5 In the spring of 2003, the MCEMA released a request for proposed bids (RFP)

The EMS contract in question was not a traditional bid in the sense that the county was seeking a provider who would provide ambulance service in exchange for a fee. Instead, the county was requesting proposals from private ambulance companies to be given an exclusive right to provide ambulance service for the county. Instead of being paid by the county for providing this service, the ambulance service would profit by collecting fees for the ambulance runs it provided in the county. Regardless, Monroe County's process for selecting a service provider is similar to a
(continued...)

5

-4-

for the county EMS contract. AMR and another EMS provider submitted bids.6 However, neither bid was consistent with the criteria set forth in the RFP, so the MCEMA decided to reject both bids for nonconformance and reopen the bidding process. During the meeting at which this was decided, a MCEMA committee member recommended amending the RFP to only require the provision of six ALS units instead of seven, while also requiring that an equal number of units be placed north and south of the River Raisin. The MCEMA agreed and amended the RFP to only require that a provider have six fully staffed ambulance units available around the clock, with an additional two units available on a backup basis. After this meeting, the MCEMA again invited bids and proposals from private-sector vendors. At this time, Adam Gottlieb, the CEO and only shareholder of Hart Medical, learned about the RFP. In 2003, Hart Medical primarily provided ambulance services at special events; apparently the company had never taken on a municipal contract as extensive as that proposed in the RFP. Gottlieb decided to bid on the contract, but realized that he would need to obtain financing to expand into Monroe County. At the time, Levine was working for Hart Medical as a paramedic; Gottlieb asked Levine to become a stockholder and co-owner of the company in exchange for providing capital to Hart Medical. Gottlieb and Levine relied on Richard Schaffner, the Hart Medical operations manager, to prepare the bid proposal.7 Levine was not heavily involved in preparing the bid proposal and did not know what information the county provided in the RFP. Gottlieb and Schaffner took responsibility for preparing their proposal, submitting the bid, and later, negotiating toward a final contract.8 The MCEMA selected Hart Medical's bid to provide ambulance and life support services in Monroe County,9 and on November 7, 2003, the MCEMA and Hart Medical entered into a three-year contract.10 The contract specified that Hart Medical would have six ALS units available at all times and have another two units available as backup, in the manner set forth in the RFP. Hart Medical was scheduled to begin providing services in Monroe County on January 1, 2004.
(...continued)

traditional bidding process for a public-works contract, and the parties refer to the process in question as a bidding process and the request submitted by plaintiffs as a "bid." We shall do the same. The RFP was not included in the lower court record, and we do not know what information was disclosed in it. It appears, however, that the RFP reflected the county's decision to require the centralization of all emergency communications and to increase the number of ALS ambulances within the county.
7 6

Schaffner had never worked up a bid proposal for a contract with a municipality or other unit of government before.

Levine said that he "looked over" the figures on the bid proposal, but he did not verify that the figures were correct.
9

8

The parties never provided copies of Hart Medical's bid, and it was not included in the lower court record. Gottlieb signed the contract on behalf of Hart Medical.

10

-5-

Gottlieb and Levine never formalized in writing their agreement transferring partial ownership of Hart Medical to Levine. After Hart Medical began service pursuant to the Monroe County contract, the business began to struggle. Levine continued loaning Hart Medical significant amounts of money, totaling over $800,000. The relationship between Levine and Gottlieb soured, and on September 30, 2004, Gottlieb and plaintiffs entered into an agreement to sever their business relationship and divide Hart Medical. Plaintiffs received control over the portion of the business located in Monroe County, taking on both the debts and assets associated with the Monroe County operation, while Gottlieb received the portion of the business outside Monroe County. Levine renamed the Monroe County business "Hart EMS Monroe, PLLC" (Hart EMS). Hart EMS continued to lose money, and by March 2005, Levine gave up the Monroe County contract and ended the business. Although Levine admitted that he heard "rumors" of the Ludwig Report before Hart EMS closed, he first acquired a copy of the report in April 2005.11 Levine claimed that his failed experiences executing the Monroe County contract corresponded with the predictions set forth in the report, that he would have needed a subsidy in order for Hart EMS to survive, and if he had seen this report at the time Gottlieb and Schaffner were preparing the bid, he would have recommended that they not bid on the contract and he would have not invested in the company. Gottlieb and Schaffner also admitted that they had not been aware of the report when they placed their bid, but had they been aware of the report and the information provided therein, they would have seriously discussed whether to place a bid and, if placing a bid, they would have asked for a subsidy and other concessions.12 On appeal, plaintiffs claim that defendants had a common law duty to disclose the Ludwig Report to representatives of Hart Medical before the company placed a bid for the Monroe County EMS contract. Plaintiffs argue that the trial court erred when it concluded that defendants had no duty to disclose the report to them. We disagree, finding instead that the trial court did not err when it granted defendants' motion for summary disposition. We review a trial court's grant of summary disposition de novo. Maiden v Rozwood, 461 Mich 109, 118; 597 NW2d 817 (1999). To describe what they mean by a "common law duty," plaintiffs quote Buczkowski v McKay, 441 Mich 96, 100-101; 490 NW2d 330 (1992), which states, Duty is actually a "`question of whether the defendant is under any obligation for the benefit of the particular plaintiff' and concerns `the problem of the relation between individuals which imposes upon one a legal obligation for the benefit of the other.'" Friedman v Dozorc, 412 Mich 1, 22; 312 NW2d 585 (1981); Prosser & Keeton, Torts (5th ed),

Download RICHARD LEVINE V MONROE CO EMERGENCY MEDICAL AUTHORITY.pdf

Michigan Law