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Myers v. Medquist

December 20, 2006


The opinion of the court was delivered by: Simandle, District Judge



I. BACKGROUND......................... 4

A. The Parties...................... 4

II. STANDARD OF REVIEW .................... 9

III. DISCUSSION........................ 10

A. Whether Plaintiffs Can Maintain this Suit as a Class Action....................... 10

B. Whether Plaintiffs' Breach of Contract and Breach of the Covenant of Good Faith and Fair Dealing Claims are Properly Pled (Counts I and II).. . . . . . . . . . 16

VI. CONCLUSION ....................... 25

This matter is before the Court upon the motion to dismiss the Consolidated Amended Complaint under Rule 12(b)(6), Fed. R. Civ. P., by Defendants MedQuist Inc. ("MedQuist, Inc.") and MedQuist Transcriptions, Ltd. ("Transcriptions")*fn1 [Docket Item 17]. Plaintiffs*fn2 are current and former medical transcriptionists who brought this action as a putative class action on behalf of medical transcriptionists that worked for MedQuist. According to Plaintiffs, MedQuist hatched a scheme to cheat both MedQuist customers and its transcriptionists employees in which MedQuist manipulated its computer programs so that transcriptionists would be systematically underpaid, while at the same time, MedQuist customers would be systematically overcharged for their transcription services. Plaintiffs' current action seeks redress for the systematic underpayment of MedQuist transcriptionists by alleging claims of (1) breach of contract, (2) breach of the covenant of good faith and fair dealing, and (3) unjust enrichment. Plaintiffs also seek from MedQuist an accounting of the compensation withheld from the Plaintiffs.

In this motion to dismiss, MedQuist argues that Plaintiffs' class allegations are unsustainable under Rule 23, Fed. R. Civ. P. and should be dismissed. Next, MedQuist argues that Plaintiffs have failed to state a claim for breach of contract. Finally, MedQuist argues that Plaintiffs' claims for certain equitable relief (such as an accounting and unjust enrichment) are improperly pled and must be dismissed. For the reasons set forth in this Opinion, the Court will deny MedQuists' motion to dismiss in its entirety.


A. The Parties

Plaintiffs are individuals who are either current MedQuist medical transcriptionists or worked as medical transcriptionists for MedQuist either as employees or independent contractors from at least November 29, 1998 through July 30, 2004. (Consolidated Amended Complaint ("CAC") ¶ 1.) MedQuist is the largest provider of medical transcription services in the United States, employing over 8,600 medical transcriptionists serving approximately 3,000 clients (primarily hospitals) nationwide. (Id. at ¶ 12.) MedQuist Transcriptions, Ltd. ("Transcriptions") is a wholly-owned subsidiary of and is totally controlled by MedQuist, Inc. ("MedQuist, Inc.") (Id. at ¶ 11.)

B. The Underlying Facts

Medical transcription entails the conversion of voice information dictated by health care professionals into an electronic format or written report. (CAC at ¶ 18.) Dictation is forwarded electronically to a MedQuist transcriptionist who pulls up a computer template for the particular type of report or account and transcribes the medical report. (CAC at ¶ 19.) The report is then transmitted electronically to MedQuist's computer system for client billing and payroll. (Id.) Although the transcription technology employed by MedQuist has changed over the years, the basis for its payment of medical transcriptionists has not. (Id. at ¶ 20.) Transcriptionists are paid according to the number of "lines" they transcribe, and MedQuist agreed that a line would consist of 65 "characters." (Id. at ¶ 21.) Under the agreements the transcriptionists had with MedQuist, "characters" were defined as all characters typed by a transcriptionists and appearing in a document, including blank spaces between words and the actual character count of words generated by macros and expanders. (Id. at ¶ 24-26, 28-29, 31.)*fn3 For transcriptionists payroll purposes, the line count was to be determined by accurately counting the total number of characters and dividing by 65. According to Plaintiffs, MedQuist repeatedly affirmed its agreement to pay transcriptionists based on the 65-character line count (with such statements being made by officers of MedQuist, on MedQuist's web site, and through representations made by MedQuist when it acquired a new business.) (Id. at ¶ 29, 31.)

According to Plaintiffs, such representations and assurances were false. (Id. ¶ 33.) Despite agreeing to pay transcriptionists based on a 65-character defined line, MedQuist systematically undercounted its transcriptionists' output and manipulated the number of characters and/or lines used to calculate payments to transcriptionists. (Id.)*fn4 According to Plaintiffs, to effectuate their scheme, MedQuist manipulated the MedQuist computer systems used for billing and payroll purposes and falsified line counts to achieve a 2:1 or even 3:1 billing-to-payroll ratio. (Id. at ¶ 37.)

Plaintiffs also allege that, after Plaintiffs became suspicious that MedQuist was not properly accounting for their services, MedQuist "used systems that made it difficult or impossible for Plaintiffs . . . to discover [MedQuist's] wrongdoing." (Id. at ΒΆ 44.) As such, the Plaintiffs "were ...

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