MARQUIS D. STREET,
Plaintiff on behalf of Himself and All Others
Similarly Situated,
v
.
SMART CORPORATION,
Defendant.
Donaldson & Black, P.A., by Arthur J. Donaldson and John T.
O'Neal, for plaintiff-appellant.
Womble Carlyle Sandridge & Rice, PLLC, by Hada V. Haulsee and
Michael Montecalvo, for defendant-appellee.
EAGLES, Chief Judge.
Marquis D. Street (“plaintiff”) appeals from the trial court's
order dismissing plaintiff's complaint because of lack of standing.
After careful consideration of the briefs and record, we affirm.
Plaintiff is a personal injury attorney and a resident of
Greensboro. Four individuals were injured in separate motor
vehicle accidents occurring from 31 December 1998 to 16 October
2000. Two of the individuals received medical treatment from Moses
H. Cone Memorial Hospital and/or Moses Cone Health System, one
received treatment from Southeastern Orthopaedic Specialists, and
another received treatment from Wesley Long Hospital. The four
individuals each retained plaintiff to represent them in their
separate liability claims for personal injury. For each individualclient, plaintiff, with proper authorization, requested his
client's “medical records relating to the medical services
rendered” by the respective medical treatment providers.
Smart Corporation (“defendant”), a California corporation,
provides photocopies and reproductions of medical records for
healthcare providers in North Carolina for a fee. Defendant
provided photocopies of medical records for each of plaintiff's
four clients. For each client's records, defendant sent plaintiff
an invoice which was paid by plaintiff.
Plaintiff commenced this action alleging that defendant
submitted invoices charging in excess of the amount allowable under
North Carolina state law, G.S. § 90-411. Plaintiff also alleged
that defendant's actions constituted an unfair and deceptive trade
practice in violation of G.S. § 75-1.1. Defendant answered and
raised several defenses including lack of standing, failure to name
the real party in interest, and lack of subject matter
jurisdiction.
Defendant moved to dismiss pursuant to the North Carolina
Rules of Civil Procedure Rule 12(b)(1) and (6) alleging that “the
[p]laintiff is not the real party in interest and therefore lacks
standing,” that “there is no private cause of action under [G.S.]
§ 90-411” and that “[p]laintiff's claims are barred by the
voluntary payment doctrine.” The trial court granted defendant's
motion to dismiss with prejudice “on the grounds that the plaintiff
is not the real party in interest and has no standing to prosecute
this action.” Plaintiff appeals. On appeal, plaintiff contends that the trial court erred in
granting defendant's Rule 12(b)(6) motion to dismiss because
plaintiff is the real party in interest and does have standing.
After careful consideration, we disagree and affirm.
Plaintiff argues that he is the direct purchaser of the
photocopies of the medical records which provides him with
standing. In the alternative, plaintiff argues that he is an
indirect purchaser and would have standing in a state action.
Plaintiff further argues that equity would dictate that he be
allowed to pursue an action because he could be sued by defendant
for not paying for the records. Also, plaintiff argues that
instead of dismissing the action, the trial court should have
continued the matter to allow the plaintiff to substitute the real
party in interest. Though we are concerned with the cumulative
effect of defendant's alleged overcharges, we are not persuaded.
Here, the trial court's order does not specify whether it
applied Rule 12(b)(1) or (6). The trial court's order states that
the motion to dismiss “is GRANTED and this action is dismissed with
prejudice on the grounds that the plaintiff is not the real party
in interest and has no standing to prosecute this action.” We note
that the plaintiff contends that the trial court erred in granting
defendant's Rule 12(b)(6) motion to dismiss for lack of standing.
However, defendant's motion to dismiss raises both Rule 12(b)(1)
and (6) as grounds for dismissal. While the practical effect of
either a Rule 12(b)(1) or 12(b)(6) dismissal of a complaint is the
same, i.e. the case is dismissed, “the legal effect is quitedifferent.” Cline v. Teich, 92 N.C. App. 257, 263, 374 S.E.2d 462,
466 (1988). “'[A] dismissal under b(1) is not on the merits and
thus is not given res judicata effect.'” Id. at 264, 374 S.E.2d at
466 (citation omitted) (emphasis in original). A Rule 12(b)(6)
dismissal “is an adjudication on the merits” that “bars subsequent
relitigation of the same claim.” Id. Here, the trial court
dismissed the action with prejudice. This implicates a Rule
12(b)(6), rather than a Rule 12(b)(1), dismissal.
“A lack of standing may be challenged by motion to dismiss for
failure to state a claim upon which relief may be granted. Rule
12(b)(6) 'generally precludes dismissal except in those instances
where the face of the complaint discloses some insurmountable bar
to recovery.'” Energy Investors Fund, L.P. v. Metric Constructors,
Inc., 351 N.C. 331, 337, 525 S.E.2d 441, 445 (2000) (citations
omitted). When deciding a Rule 12(b)(6) motion to dismiss, “all
factual allegations in the complaint are taken to be true.” Cline,
92 N.C. App. at 259, 374 S.E.2d at 463.
“Standing refers to whether a party has a sufficient stake in
an otherwise justiciable controversy such that he or she may
properly seek adjudication of the matter.” American Woodland
Industries v. Tolson, __ N.C. App. __, __, 574 S.E.2d 55, 57
(2002). “'Standing is a necessary prerequisite to a court's proper
exercise of subject matter jurisdiction.'” Neuse River Foundation,
Inc. v. Smithfield Foods, Inc., __ N.C. App. __, __, 574 S.E.2d
48, 51 (2002) (quoting Aubin v. Susi, 149 N.C. App. 320, 324, 560
S.E.2d 875, 878 (2002)). “The gist of standing is whether there isa justiciable controversy being litigated among adverse parties
with substantial interest affected so as to bring forth a clear
articulation of the issues before the court.” Texfi Industries v.
City of Fayetteville, 44 N.C. App. 268, 269-70, 261 S.E.2d 21, 23
(1979), aff'd, 301 N.C. 1, 269 S.E.2d 142 (1980). “Standing most
often turns on whether the party has alleged 'injury in fact' in
light of the applicable statutes or caselaw.” Neuse River
Foundation, Inc., __ N.C. App. at __, 574 S.E.2d at 52.
“Every claim must be prosecuted in the name of the real party
in interest.” Goodrich v. Rice, 75 N.C. App. 530, 536, 331 S.E.2d
195, 199 (1985). See also G.S. § 1A-1, Rule 17(a) (2001); G.S. §
1-57 (2001). “'“A real party in interest is a party who is
benefited or injured by the judgment in the case. An interest
which warrants making a person a party is not an interest in the
action involved merely, but some interest in the subject-matter of
the litigation.”'” Energy Investors Fund, L.P., 351 N.C. at 337,
525 S.E.2d at 445 (citations omitted).
The Revised Rules of Professional Conduct of The North
Carolina State Bar state:
Rule 1.8 Conflict of interest: Prohibited
transactions and other specific applications.
. . . .
(e) A lawyer shall not provide financial
assistance to a client in connection with
pending or contemplated litigation except that
a lawyer may advance court costs and expenses
of litigation including expenses of
investigation and medical examinations and
cost of obtaining and presenting evidence,
provided the client remains ultimately liable
for such costs and expenses.
Rev. R. Prof. Conduct N.C. St. B. 1.8(e), 2003 Ann. R. (N.C.) 625
(emphasis added).
Here, the plaintiff alleged in his amended complaint that each
of the four named clients were overcharged by defendant for
photocopies of their medical records. Plaintiff further alleged
that the “[p]laintiff, in order to obtain the medical records, paid
the defendant's invoice in an amount in excess of amounts
chargeable under N.C.G.S. 90-411.” The plaintiff advanced the
costs “in order to obtain the medical records” but the individual
clients remain liable for those costs. While the plaintiff might
have an interest in the action because he advanced certain costs on
behalf of his clients, he does not have an interest in the subject
matter of the litigation because he is not ultimately responsible
for those costs. The plaintiff has not suffered an injury and does
not have standing to pursue this action. The plaintiff is not the
real party in interest. The plaintiff will not benefit from or be
injured by the judgment because he is not ultimately responsible
for the costs.
The plaintiff cites McCarthy v. Recordex Service, Inc., 80
F.3d 842 (3rd Cir. 1996) to support his contention that he has
standing. In McCarthy, plaintiff-clients brought an action against
defendants that included hospitals and medical records providers.
Id. at 845. The issue there was “whether the plaintiff-clients,
whose attorneys purchased photocopies of the clients' hospital
records for the purpose of prosecuting their clients' personal
injury and medical malpractice claims, have standing to bring anantitrust action against the sellers of the photocopies.” Id. at
844. McCarthy held that the plaintiff-clients were not “direct
purchasers” of the photocopies and lacked standing to bring a
federal antitrust action. Id. The court noted that the
plaintiff-clients' attorneys were the direct purchasers of the
records. Id. at 852. McCarthy is distinguishable from this
case. In McCarthy, the plaintiff-clients entered into contingent
fee agreements with their respective attorneys. Id. at 845 The
agreements provided that plaintiff-clients would not be responsible
for reimbursing the law firms for advancing certain costs of
litigation if the plaintiff- clients did not receive a monetary
award. Id. at 845-46. The Pennsylvania Rules of Professional
Conduct provide that “a lawyer may advance court costs and expenses
of litigation, the repayment of which may be contingent on the
outcome of the matter.” Id. at 858 n.2 (Stapleton, J.,
dissenting). Here, the Revised Rules of Professional Conduct of
The North Carolina State Bar do not allow the reimbursement of
costs advanced by an attorney to be contingent upon the outcome of
the action. An attorney in North Carolina may only advance costs
on behalf of a client so long as the plaintiff client remains
ultimately liable for those costs. Rev. R. Prof. Conduct N.C. St.
B. 1.8(e), 2003 Ann. R. (N.C.) 625.
In the alternative, the plaintiff argues that he is an
indirect purchaser and would have standing in a state action.
Plaintiff cites Hyde v. Abbott Laboratories, 123 N.C. App. 572, 473
S.E.2d 680, disc. review denied, 344 N.C. 734, 478 S.E.2d 5 (1996)in support of his argument. In Hyde, this Court held “that
indirect purchasers have standing under [G.S.] § 75-16 to sue for
Chapter 75 violations.” Id. at 584, 473 S.E.2d at 688.
In Hyde, the plaintiffs were “indirect purchasers from the
defendant manufacturers because they purchased infant formula
through parties other than the manufacturer.” Id. at 574, 473
S.E.2d at 681-82. This Court further held that “the General
Assembly clearly intended to expand the class of persons with
standing to sue for a violation of Chapter 75 to include any person
who suffers an injury under Chapter 75, regardless of whether that
person purchased directly from the wrongdoer.” Id. at 577, 473
S.E.2d at 684 (emphasis added).
Here, the plaintiff is not an indirect purchaser either. The
plaintiff has not suffered an injury. He has advanced the costs of
the medical records on behalf of his clients yet his clients remain
ultimately liable for those costs.
Plaintiff also argues that Gualtieri v. Burleson, 84 N.C. App.
650, 353 S.E.2d 652, disc. review denied, 320 N.C. 168, 358 S.E.2d
50 (1987) supports his contention that he is the real party in
interest and has standing. In Gualtieri, an expert witness sued an
attorney to recover unpaid compensation for services rendered by
the expert witness. Id. at 651, 353 S.E.2d at 653. On appeal, the
defendant lawyer argued that he was “not liable because he
'identified himself as an attorney representing [his client],'
thereby making 'it clear that he acted in a representative capacity
for a disclosed principal.'” Id. at 653, 353 S.E.2d at 655. TheGualtieri court affirmed the trial court's conclusion that the
“defendant [attorney] personally contracted to pay plaintiff
[expert witness] for the services admittedly rendered.” Id. The
Gualtieri court noted that “[t]rial lawyers are always making
contracts with court reporters, investigators, and experts” and
that “there is no inhibition in the law against a lawyer
contracting to pay for services needed in a case he is handling.”
Id. at 653-54, 353 S.E.2d at 655. The court further provided that
the Rules of Professional Conduct of The North Carolina State Bar
allow an attorney to “advance or guarantee litigation expenses for
his clients, provided the client remains ultimately liable to him
for such expenses.” Id. at 654, 353 S.E.2d at 655. The court
noted that the evidence did not show that plaintiff expert witness
was aware of defendant attorney's client “as a hirer of expert
services” or that defendant attorney's client “authorized defendant
[attorney] to do so upon her credit.” Id. The court stated that
identifying himself as a lawyer with a
disabled client, all that defendant did
according to the evidence, was not sufficient
in our opinion to establish that he was not
the one contracting to pay for plaintiff's
services. For when a lawyer hiring an expert
to help on a case says or does nothing to
indicate that the obligation to pay is not
his, the expert can reasonably assume, it
seems to us, that the lawyer is acting openly
and in good faith, rather than evasively, and
that he is the contracting party, rather than
a stranger he has had no contact with.
Id.
Here, plaintiff's amended complaint alleges that he
represented the four clients. With each request for medicalrecords, the plaintiff provided “the requisite client authorization
for release of medical records.” The issue is not whether the
plaintiff contracted with the defendant to provide medical records,
but whether the plaintiff has standing to sue the defendant for
alleged overcharging of costs for which the plaintiff is not
ultimately liable.
Plaintiff also argues that the trial court should have allowed
a continuance for the plaintiff to substitute the real party in
interest instead of dismissing the action. We do not agree.
Rule 17(a) of the North Carolina Rules of Civil Procedure
states “[n]o action shall be dismissed on the ground that it is not
prosecuted in the name of the real party in interest until a
reasonable time has been allowed after objection for ratification
of commencement of the action by, or joinder or substitution of,
the real party in interest.” G.S. § 1A-1, Rule 17(a) (emphasis
added).
Here, the record does not reflect any attempt on behalf of
plaintiff or request by plaintiff to substitute the real party in
interest. The defendant raised the defense of real party in
interest in their answer of 24 August 2001. Defendant moved to
dismiss on 8 March 2002 and the trial court heard the motion in
April 2002. Plaintiff was aware of the real party in interest
defense for approximately seven months before the hearing based on
defendant's answer and for approximately three weeks based on the
motion to dismiss. Here, the plaintiff has not personally suffered an injury
because of the alleged overcharge for records. The plaintiff is
relying on injuries that have been sustained by individuals
plaintiff represents in an attorney-client relationship. Because
of the Revised Rules of Professional Conduct, plaintiff cannot pay
those costs on his clients' behalf, he may only advance the costs
so long as his clients remain ultimately liable for them. Because
the plaintiff here is not ultimately responsible for the costs, the
plaintiff neither has standing to pursue the action nor is the real
party in interest.
Accordingly, the decision of the trial court is affirmed.
Affirmed.
Judges MARTIN and GEER concur.
*** Converted from WordPerfect ***