Capital Health Sys., Inc. v. Horizon Healthcare Servs., Inc. — June 2016 (Summary)

CONTRACTS & INSURANCE COMPANIES/NARROW NETWORKS

Capital Health Sys., Inc. v. Horizon Healthcare Servs., Inc.
Docket No. A-2913-15T2, A-2929-15T2 (N.J. Super. Ct. App. Div. June 23, 2016)

Several hospitals sued Horizon Healthcare Services, Inc. for breach of contract when Horizon established a new network that created a higher tier status for which the suing hospitals were deemed ineligible. The hospitals claimed they did not receive sufficient notice about the new network or how to qualify for the new tier, thereby being subject to unfair competition.  Horizon argued that its contract with the hospitals reserved Horizon’s right to establish a new network and did not guarantee the hospitals’ participation in the new network.

The hospitals sought “key documents” concerning the tier criteria and Horizon’s partnership communications.  The trial court held in the hospitals’ favor.  The Superior Court of New Jersey, Appellate Division, reversed and remanded the trial court’s decision on the grounds that the documents were not relevant to the hospitals’ claims and were Horizon’s protected confidential and proprietary business information.

Horizon did not disclose the standards for inclusion in the new network, nor did it offer the hospitals an opportunity to participate in the new network as it had done in the past. The hospitals sought discovery of the “key documents”; the trial court granted the hospitals that discovery.

Horizon argued that the documents should not be released because they were irrelevant to the hospitals’ claims and they contained confidential and proprietary information.  The heart of the hospitals’ claims concerned a breach of contract.  The appellate court held that disclosing confidential information was not relevant to contract interpretation, and the interest in keeping that information confidential outweighed the hospitals’ asserted need of production.  The court noted that the hospitals were not entitled to confidential information “merely on the strength of having filed a complaint.”