On August 31, 2022, the United State Fifth Circuit Court of Appeals handed down its Opinion in Henly v. Biloxi HMA. In doing so, the Fifth Circuit addressed Mississippi law on the duty to disclose information in the setting of hospital charges.

The facts in Henley

Henly sued Biloxi H.M.A. d/b/a Merit Health Biloxi (hereinafter “Merit”) for failure to disclose the fact that she would be charged a certain fee if treated at Merit’s facility.

Specifically, Henly alleged that Merit Health charges every emergency room patient that visits one of its facilities in Mississippi a surcharge.

The surcharges are not based on the individual services or treatments that a patient receives. Instead, Henly claimed, Merit includes a surcharge in the bill of every patient that is seen at the emergency room of its facility, in addition to the line-item charges for specific services provided.

Further, Henly alleged, Merit does not inform patients prior to treatment, either verbally or through signage, of the existence or amounts of the surcharges.

According to Henly’s complaint, patients like Henly are not aware that the surcharge will be added to their bills and Merit knows that patients are unaware of the surcharge.

Thus, Henly sought a declaratory judgment that the hospital had a duty under Mississippi state law to disclose the surcharge to patients prior to treatment.

The district court dismisses Henly’s suit.

Merit moved to dismiss Henly’s suit under Rule 12(b)(6) of the Federal Rules of Civil Procedure. This Rule allows a court to dismiss a complaint in situations where, even if all the facts alleged in the complaint are true, the law does not give rise to a claim for the plaintiff.

The district court held that Mississippi law did not create a claim for Henly because Merit had no duty to disclose the surcharge to Henly.

The Fifth Circuit reverses the district court’s ruling.

The Fifth Circuit began its analysis with the test required by Rule 12(b)(6).

“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.”

“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”

The Court then turned to Mississippi law on the duty to disclose facts in certain transactions.

“According to the Mississippi Supreme Court, in order to be liable for nondisclosure, a party must have had a legal duty to communicate a known material fact.”

“Thus, nondisclosure in itself, even if fraudulent, does not give rise to a legal claim. The party must have concealed something that he or she was legally required to disclose.”

The Fifth Circuit acknowledged that there was not Mississippi court decision directly on point with Henly’s situation. Yet, Mississippi decisions in other non-disclosure cases provided guidance.

For example, in Holman v. Howard Wilson Chrysler Jeep, two customers seeking to buy a new car were actually sold a demonstrator model that had been damaged in a wreck and repaired for a sum of $2,190.38 prior to the sale.

The Mississippi Supreme Court reversed a grant of summary judgment to the dealership, holding that the dealership might have owed a duty to disclose the repaired damage if knowledge of the damage would be material to the customers’ purchase of the automobile.

In Green Realty Management Corporation v. Mississippi Transportation Commission, the MTC purchased two pieces of undeveloped land from Green Realty as part of a road-widening project.

Only after construction began did Green Realty learn that the project would increase the flow of surface water onto its adjacent property.

The Mississippi Supreme Court held “if the state agency knew it would divert water flow, which would cause damage to property . . . and remained silent as to this fact, the agency suppressed material facts. Given that scenario, a material misrepresentation by silence was visited upon Green.”

From examining Mississippi case law, the Fifth Circuit found three requirements for a duty to disclose to arise under Mississippi law:

(1) a material fact;

(2) one party’s knowledge that the other is under a mistake as to the fact, and

(3) the other party’s reasonable expectation that it would be disclosed.

The Fifth Circuit concluded: “Applying the foregoing legal precepts, we think that the Mississippi Supreme Court would hold that Henly has sufficiently alleged facts that Merit had a duty to exercise reasonable care to disclose the surcharge.”

The case was then remanded to the district court for further proceedings.

S. Craig Panter

Panter Law Firm, PLLC

601-607-3156

www.craigpanterlaw.com