BLUE CROSS & BLUE SHIELD OF N.C. v. MH MASTER HOLDINGS, LLLP, 2023 NCBC 31

STATE OF NORTH CAROLINA
DURHAM COUNTY
IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
22 CVS 3957
BLUE CROSS AND BLUE SHIELD
OF NORTH CAROLINA,
Plaintiff,
v.
MH MASTER HOLDINGS, LLLP;
MH MISSION HOSPITAL
McDOWELL, LLLP; ANC
HEALTHCARE, INC. f/k/a MISSION
HEALTH SYSTEM, INC.; and ANC
McDOWELL HOSPITAL, INC. f/k/a
THE McDOWELL HOSPITAL, INC.,
Defendants.
ORDER AND OPINION
ON DEFENDANTS’
MOTION TO DISMISS1
1. 	THIS MATTER is before the Court upon Defendants MH Master
Holdings, LLLP, MH Mission Hospital McDowell, LLLP, ANC Healthcare, Inc., and
ANC McDowell Hospital’s (together, “Defendants”) Motion to Dismiss (the “Motion”).2
2. 	After considering the Motion, the parties’ briefs in support of and in
opposition to the Motion, the relevant pleadings, and the arguments of counsel at the
hearing on the Motion, the Court hereby GRANTS the Motion and DISMISSES this
action with prejudice.
1 Recognizing that this Order and Opinion cites and discusses information that the parties
maintain should remain filed under seal in this action, and out of an abundance of caution,
the Court initially elected to file this Order and Opinion under seal on 4 April 2023. 	The
Court then permitted the parties an opportunity to advise whether the Order and Opinion
contained confidential information that either side contended should be redacted from a
public version of the document. 	On 13 April 2023, the parties advised the Court that no
redactions are necessary. Accordingly, the Court removes the “filed under seal” designation
and files this Order and Opinion, without redactions, as a matter of public record.
2 (ECF No. 18.)
Blue Cross & Blue Shield of N.C. v. MH Master Holdings, LLLP, 2023 NCBC 31.

Ellis & Winters LLP, by, Thomas H. Segars, Luke J. Farley, and
Christopher Rhodes for Plaintiff Blue Cross and Blue Shield of North
Carolina.
Faegre Drinker Biddle & Reath, LLP, by Justin O. Kay and Ian
Thresher, 	and 	Bradley 	Arant 	Boult 	Cummings 	LLP, 	by 	Dana 	C.
Lumsden and Hanna E. Eickmeier, for Defendants MH Master Holdings,
LLLP, MH Mission Hospital McDowell, LLLP, ANC Healthcare, Inc.,
and ANC McDowell Hospital, Inc.
Bledsoe, Chief Judge.
I.
FACTUAL AND PROCEDURAL BACKGROUND
A. 	Factual Background
3. 	The Court does not make findings of fact on a motion to dismiss under Rule
12(b)(6) of the North Carolina Rules of Civil Procedure (the “Rule(s)”). 	Rather, the
Court 	recites 	the 	allegations 	asserted 	and 	documents 	referenced 	in 	Plaintiffs’
Complaint that are relevant to the Court’s determination of the Motion.
4. 	This case arises from disputes over health insurance reimbursements. 	In
2017, Plaintiff 	Blue Cross 	& 	Blue Shield of 	North Carolina 	(“Blue 	Cross” 	or
“Plaintiff”) entered into a Network Participation Agreement (the “NPA”) with The
McDowell Hospital, Inc. (“McDowell”), located in Marion, North Carolina.3 	Under
the NPA, Blue Cross agreed to pay McDowell for healthcare services that McDowell
3 (Compl. ¶ 2, ECF No. 3; Mem. Law Supp. Defs. MH Master Holdings LLLP; MH Mission
Hospital McDowell, LLLP; ANC Healthcare, Inc.; ANC McDowell Hospital, Inc,’s Mot.
Dismiss 1 [hereinafter “Br. Supp.”], ECF No. 19; Br. Supp. Ex. A, Network Participation
Agreement [hereinafter “NPA”], ECF No. 19.1.) 	When a complaint specifically refers to a
contract at issue, the Court may consider the contract without converting a Rule 12 motion
into a motion for summary judgment, even if the contract is actually produced by the
defendant. See Oberlin Cap., LP v. Slavin, 147 N.C. App. 52, 60 (2001). The Court therefore
can and does consider the NPA in its decision on the Motion.

provided to Blue Cross benefit plan members.4 	The NPA permits Blue Cross to
request a refund for any overpayment, and requires McDowell to promptly remit
payment to Blue Cross for any such overpayments.5 	In addition to other remedies,
the NPA also permits Blue Cross to recover overpayment by offset against future
amounts payable to McDowell,6 and states that neither party may recover an over-
or under-payment from the other any later than two years after the payment in
question is made.7
5. 	In August 2018, McDowell’s then-owners negotiated an agreement with MH
Master Holdings, LLLP (“MH”), under which MH agreed to acquire McDowell.8 Blue
Cross consented to the assignment of the NPA to MH in 2018.9
6. 	In 2018 and 2019, McDowell submitted certain claims to Blue Cross for
payment, but these claims were misprocessed, resulting in Blue Cross overpaying on
these claims by approximately $3.1 million.10 The NPA ordinarily permitted (but did
not require) Blue Cross to recover any overpaid claims by offsetting the overpaid
4 (Compl ¶ 2.)
5 (Compl. ¶ 24.)
6 (Compl. ¶ 24.)
7 (Br. Supp. 7; NPA § 4.7.)
8 (Compl. ¶ 27.)
9 (Compl. ¶¶ 29–30.) 	This sale has obscured which defendant entity should be responsible
for refunding the $3.1 million. (See Compl. ¶ 39.)
10 (Compl. ¶¶ 32–35.)

amount against future claims.11 However, Blue Cross could not pursue this remedy
with the particular claims at issue through no fault of its own due to McDowell’s sale
to MH.12
7. 	Blue 	Cross 	requested 	a 	refund 	from 	McDowell 	after 	learning 	of 	the
overpayments. 	To facilitate refund negotiations, the parties entered into a tolling
agreement (the “Tolling Agreement”) that purported to remove the period between 29
December 	2021 	and 	28 	October 	2022 	from 	the 	calculation 	of 	any 	statute 	of
limitations-based defenses to Blue Cross’s claims.13 By its express terms, the Tolling
Agreement did not revive claims that were time-barred as of 29 December 2021.14
8. 	Defendants did not refund the alleged overpayments, and Blue Cross
therefore filed the above-captioned action on 28 October 2022.15 	Because of the
uncertainty over which Defendant is actually responsible for reimbursing Blue Cross
under the NPA,16 Blue Cross’s Complaint asserts claims against two distinct groups
of Defendants: the “HCA Defendants”17 and the “ANC Defendants.”18 Plaintiff pleads
11 (Compl. ¶ 36.)
12 (See Compl. ¶ 36.)
13 (See Br. Supp. 13; see generally Br. Supp. Ex. B, Tolling Agreement [hereinafter “Tolling
Agreement”], ECF No. 19.2.)
14 (Tolling Agreement 2 ¶ 3.)
15 (Compl.)
16 (See Compl. ¶ 39.)
17 Defendants MH Master Holdings, LLLP and MH Mission Hospital McDowell, LLLP. (See
Compl. ¶ 12.)
18 Defendants ANC Healthcare, Inc. and ANC McDowell Hospital, Inc. (See Compl. ¶ 16.)

claims for breach of contract and breach of the covenant of good faith and fair dealing
against the HCA Defendants,19 and it pleads the same in the alternative against the
ANC Defendants.20 Plaintiff also pleads claims of unjust enrichment and conversion
against both groups of Defendants,21 and requests that a constructive trust be
imposed on both groups of Defendants.22
9. 	Defendants moved to dismiss the Complaint on 6 February 2023.23 	The
Court received briefing on the Motion and held a hearing on 21 March 2023, at which
all parties were represented by counsel (the “Hearing”). 	The Motion is now ripe for
decision.
II.
LEGAL STANDARD
10. 	When deciding whether to dismiss for failure to state a claim under Rule
12(b)(6), the Court considers “whether the allegations of the complaint, if treated as
true, are sufficient to state a claim upon which relief can be granted under some legal
theory.” 	Corwin v. British Am. Tobacco PLC, 371 N.C. 605, 615 (2018) (quoting
CommScope Credit Union v. Butler & Burke, LLP, 369 N.C. 48, 51 (2016)).
19 (Compl. ¶¶ 43–54.)
20 (See Compl. ¶¶ 55–68.)
21 (Compl. ¶¶ 69–86.)
22 (Compl. ¶¶ 87–89.)
23 (Mot. Dismiss.)

11. 	“[D]ismissal pursuant to Rule 12(b)(6) is proper when ‘(1) the complaint on
its face reveals that no law supports the plaintiff’s claim; (2) the complaint on its face
reveals the absence of facts sufficient to make a good claim; or (3) the complaint
discloses some fact that necessarily defeats the plaintiff’s claim.’ ” Id. (quoting Wood
v. Guilford Cnty., 355 N.C. 161, 166 (2002)).
12. 	Under Rule 12(b)(6), “the complaint is construed liberally, viewing the
allegations as true and in the light most favorable to the non-moving party, and the
claim is not dismissed unless it appears beyond doubt that the plaintiff could prove
no set of facts in support of his claim which would entitle him to relief.” 	Krawiec v.
Manly, 370 N.C. 602, 618 (2018) (cleaned up). 	While “the well-pleaded material
allegations of the complaint are taken as true[,] conclusions of law or unwarranted
deductions of fact are not admitted.” 	Azure Dolphin, LLC v. Barton, 371 N.C. 579,
599 (2018) (quoting Arnesen v. Rivers Edge Golf Club & Plantation, Inc., 368 N.C.
440, 448 (2015)).
III.
ANALYSIS
13. 	The Motion presents three related issues for the Court’s consideration.
First, the parties dispute whether the NPA’s terms impose a two-year statute of
limitations on the parties’ NPA-related claims.24 	The parties then clash over
whether, if not, Plaintiff should be judicially estopped from advancing its current
24 (Br. Supp. 6–12; Mem. Law Opp’n Defs.’ Mot. Dismiss 7–10 [hereinafter “Br. Opp’n”], ECF
No. 36.)

interpretation of the contract,25 and whether North Carolina’s general statute of
limitations on contract claims forecloses this lawsuit.26
14. 	After 	careful 	review, 	the 	Court 	concludes 	that 	the 	NPA 	clearly 	and
unambiguously 	imposes 	a 	valid, 	contractual 	statute 	of 	limitations 	which 	bars
Plaintiff’s claims. 	The Court thus resolves the Motion on that basis and need not
reach the latter two questions.
15. 	“The 	intention 	of 	the 	parties 	is 	the 	controlling 	guide 	to 	[contract]
interpretation,” Duke v. Mut. Life Ins. Co., 286 N.C. 244, 247 (1974), and thus
“[i]nterpreting a contract requires the court to examine the language of the contract
itself for indications of the parties’ intent at the moment of execution.” State v. Philip
Morris USA Inc., 359 N.C. 763, 773 (2005). If a contract’s language is unambiguous,
its meaning, and therefore the parties’ intent, is a question of law for the Court. Lane
v. Scarborough, 284 N.C. 407, 410 (1973). As a result, when contractual language is
clear, the Court must enforce the contract as written. 	See, e.g., Morrell v. Hardin
Creek, Inc., 371 N.C. 672, 686 (2018); Woods v. Nationwide Mut. Ins. Co., 295 N.C.
500, 506 (1978).
16. 	The issues presented by the Motion revolve around Section 4.7 of the NPA
(“Section 4.7”), so the Court reproduces that passage in its entirety:
“[McDowell] agrees[s] that in the event of any overpayment, duplicate
payment, or other payment by [Blue Cross] in excess of the member’s
benefits 	payable 	according 	to 	the 	member’s 	benefit 	plan
(“Overpayment”), [McDowell] will promptly remit payment to [Blue
Cross]. 	In addition to other remedies, if within forty-five (45) days of a
25 (Br. Supp. 12–13; Br. Opp’n 10–13.)
26 (Br. Supp. 14–16; Br. Opp’n 13–16.)

request for a refund by [Blue Cross], the requested refund has not been
made and [McDowell] ha[s] not appealed the Overpayment, [Blue Cross]
may 	recover 	this 	amount 	by 	offset 	of 	future 	amounts 	payable 	to
[McDowell]. Neither party may recover overpayments or underpayments
made to the other party any later than two (2) years after the date of the
original claim payment unless there is reasonable belief on behalf of the
party 	demanding 	the 	overpayment 	of 	fraud 	or 	other 	intentional
misconduct by the party from whom the demand is made. 	In the event
of any incorrect recoupment or offset by [Blue Cross], [Blue Cross]
agree[s] to use best efforts to promptly remit payment to [McDowell]
within forty-five (45) days of a request for refund by [McDowell].27
17. 	It is well-established that “the parties to a contract . . . may fix a given time,
shorter than that allowed by the general statute of limitations, within which suit for
breach of the contract shall be brought.” 	Holmes & Dawson v. E. Carolina Ry., 186
N.C. 58, 63 (1923); see also, e.g., Horne-Wilson, Inc. v. Nat’l Sur. Co., 202 N.C. 73, 74–
75 (1932); Morgan v. Lexington Furniture Indus., 2006 N.C. App. LEXIS 2469, at *5
(N.C. Ct. App. Dec. 19, 2006); Provectus Biopharmaceuticals, Inc. v. RSM US LLP,
2018 NCBC LEXIS 101, at *13 (N.C. Super. Ct. Sept. 28, 2018).
18. 	Our courts have upheld contractually abridged statutes of limitations as
short as six and nine months and which proportionally eliminated much or even most
of the statutory limitations window. 	See Turning Point Indus. v. Global Furniture,
Inc., 183 N.C. App. 119, 123–26 (2007) (upholding a contractual term that shortened
limitations period from one year to nine months); Morgan, 2006 N.C. App. LEXIS
2469, at *6–9 (upholding a contractual term that shortened limitations period from
three years to six months).
27 (NPA § 4.7 (emphasis added).) The Court has altered references to “you,” “we,” and “us” to
the parties’ names to which these pronouns refer, as defined elsewhere in the contract. (See
NPA 1.)

19. 	The language of Section 4.7 establishes just such a contractual statute of
limitations of two years, unless a reasonable suspicion of fraud or intentional
misconduct is shown. 	Plaintiff, however, has not alleged any fraud or other
intentional misconduct.28 	Nor can the Court conclude that shortening a three-year
statute of limitations to two years is unreasonable; the remaining window of time is
longer than other periods that North Carolina courts have approved, in both absolute
terms and as a proportion of the original period. Cf. Global Furniture, 183 N.C. App.
at 123–26; Morgan, 2006 N.C. App. LEXIS 2469, at *6–9.
20. 	After careful review, the Court agrees with Defendants that “there are no [ ]
reasonable interpretations of [Section 4.7] other than [as] an agreed upon time during
which the parties may recover overpayments or underpayments.”29 And because the
language of the contract is “clear and only one reasonable interpretation exists,” this
Court “must enforce the contract as written.” Woods, 295 N.C. at 506. In short, the
Court concludes that the NPA unambiguously provides that in the absence of fraud,
neither party may recover an over- or under-payment under the contract any later
than two years after the payment. 	Blue Cross made the payments at issue in 2018
and 2019,30 does not allege any fraud, and filed this action on 28 October 2022.31
Thus, all the payments at issue were made more than two years before Blue Cross
28 (See generally Compl.)
29 (Br. Supp. 8.)
30 (Compl. ¶¶ 32–35.)
31 (See Compl 18.)

filed suit, and so the plain and unambiguous language of Section 4.7 bars Blue Cross’s
attempt to recover them.
21. 	Blue Cross labors valiantly to overcome the plain language of the NPA, but
its arguments are unavailing.
22. 	First, Blue Cross contends that the NPA does not contemplate a situation in
which the self-help, offset remedy is unavailable, as was the case here, and is
therefore ambiguous as applied.32 	As Blue Cross’s counsel acknowledged at the
Hearing, however, the distinction between facial and as-applied analysis is generally
applicable to constitutional claims, see, e.g., State v. Grady, 372 N.C. 509, 522 (2019),
not contract claims. 	But even if an argument of contractual “as-applied ambiguity”
is cognizable under North Carolina law, Plaintiff’s contention still fails.
23. 	Plaintiff argues that Section 4.7 necessarily assumes that offset is possible,
so that the whole provision effectively becomes meaningless and ceases to function if
offset is impossible.33 	But Section 4.7 expressly contemplates “other remedies” in
addition to offset, and no part of Section 4.7 requires a party to attempt offset before
it may pursue other remedies.34 In other words, the NPA’s language is still clear, and
its structure for recovery of overpayments still functions, regardless of whether offset
is possible under a given set of circumstances.
32 (Br. Opp’n 7–8.)
33 (See Br. Supp. 7.)
34 (See NPA § 4.7 (stating that the offset remedy exists “[i]n addition to other remedies”).)

24. 	Indeed, the NPA explicitly contemplates litigation as another remedy.35
Plaintiff argues that if offset is impossible, Defendant’s reading of Section 4.7 leaves
Blue Cross with no other remedies,36 but nothing in the NPA prevented Blue Cross
from pursuing any other remedy of its choice, including litigation, within the two-year
contractual statute of limitations.
25. 	Moreover, both parties to this contract are large, sophisticated businesses;
if they had wished to draft their contract to require offset, to provide a more or less
stringent statute of limitations, to require additional negotiating concessions for that
limitation, or to provide any other remedial structure, they could have easily done so.
See, e.g., Novant Health, Inc. v. Aetna U.S. Healthcare of the Carolinas, Inc., 2001
NCBC LEXIS 1, at *20 (N.C. Super. Ct. Mar. 8, 2001). 	Indeed, Blue Cross has not
pleaded 	facts 	showing 	that 	Defendants 	used 	their 	“bargaining 	position 	[or]
sophistication” to impose a contractual term on “the reluctant or unwitting.” 	In re
Key Equip, Fin. Inc., 371 S.W.3d 296, 302 (Tex. App. 2012); see also Blaylock Grading
Co., LLP v. Smith, 189 N.C. App. 508, 512 (2008) (concluding that a contractual
provision was not void as against public policy because, among other reasons, “[the
entities were] sophisticated, professional parties who conducted business at arms’
length”).
26. 	In 	sum, 	contrary 	to 	Blue 	Cross’s 	argument, 	Section 	4.7 	creates 	an
unambiguous contractual statute of limitations whether the offset remedy exists in
35 (See NPA § 6.7 (setting North Carolina as the venue for any litigation arising from the
NPA).)
36 (See Br. Opp’n 7.)

particular circumstances or not, and the existence of the offset remedy was not so
integral a component of the NPA that the contract cannot function or becomes
meaningless where offset is unavailable. 	The Court therefore rejects Plaintiff’s
argument that the NPA is ambiguous under these circumstances. 	State v. Philip
Morris USA, Inc., 363 N.C. 623, 641 (2009) (“A contract term is ambiguous only when,
in the opinion of the court, the language of the contract is fairly and reasonably
susceptible to either of the constructions for which the parties contend.” (cleaned up));
Wachovia Bank Nat’l Ass’n v. Superior Constr. Corp., 213 N.C. App. 341, 349 (2011)
(“The trial court’s determination of whether the language in a contract is ambiguous
is a question of law.” (cleaned up)).
27. 	Second, Blue Cross argues that this Court’s decision in Frye Reg’l Med. Ctr.,
Inc. v. Blue Cross Blue Shield of N.C., Inc., 2020 NCBC LEXIS 51 (N.C. Super. Ct.
Apr. 17, 2020), compels the conclusion that Section 4.7 is ambiguous. Frye dealt with
a materially identical NPA between Blue Cross and another hospital, which included
the same language shortening the statute of limitations.37 In Frye, Blue Cross argued
Defendants’ position here: that the NPA unambiguously abridged the statute of
limitations to two years. See id. at *24–25. The Frye Court disagreed, see id. at *26–
27, and Blue Cross now argues that Frye’s logic compels the conclusion it now
proposes.38 However, the Court is unpersuaded by Blue Cross’s reliance on Frye, and
37 The portion of Frye that includes the relevant language was filed under seal by the Court.
However, Blue Cross refers to the pertinent language of the Frye contract as “this exact
language (from a similar NPA).” (See Br. Opp’n 5.)
38 (Br. Opp’n 5–6.)

concludes that Blue Cross advanced the correct interpretation of the NPA’s language
in that case.
28. 	More specifically, the Frye court held that a contract clause that shortens a
statute of limitations must explicitly refer to the filing of lawsuits in court, after
noting 	several 	cases 	in 	which 	North 	Carolina’s 	appellate 	courts 	have 	upheld
shortened limitations periods that included explicit references to court action. Id. at
*25–26. However, none of the cases cited in Frye for this point actually held that such
language was required39 and do not demonstrate that an explicit reference to court
action is a necessary condition for the enforcement of a contractual statute of
limitations. 	Cf. Morgan, 2006 N.C. App. LEXIS 2469, at *2, *6–9 (enforcing an
arbitration provision that shortened the statute of limitations but which did not
contain an express reference to waiver of the right to initiate court action). 	Cases
from other jurisdictions are in accord.40
29. 	Thus, Blue Cross cannot surmount the plain and unambiguous language of
Section 4.7. That clause creates a contractual statute of limitations of which this suit
runs afoul. Because the Court concludes that Defendants’ interpretation of the NPA
39 See Beard v. Sovereign Lodge, W.O.W., 184 N.C. 154, 157 (1922); Global Furniture, Inc.,
183 N.C. App. at 123–24; Beachcrete, Inc. v. Water St. Ctr. Assocs., LLC, 172 N.C. App. 156,
160–61 (2005); Sanghrajka v. Family Fare, LLC, 2019 N.C. App. LEXIS 60, at *9–12 (N.C.
Ct. App. Feb. 5, 2019).
40 See, e.g, Ludwig v. Equitable Life Assurance Soc’y of the U.S., 978 F. Supp. 1379, 1381–82
(D. Kan. 1997) (rejecting argument that lack of express reference to court action rendered an
arbitration agreement unenforceable); Hays Grp., Inc. v. Biege, 222 Ore. App. 347, 349–51
(2008) (to similar effect); Garcia v. Wayne Homes, 2002 Ohio App. LEXIS 1917, at *42 (Ohio
Ct. App. Apr. 19, 2002) (same); cf. Gastelu v. Martin, 2015 N.J. Super. Unpub. LEXIS 1639,
at *10–11, *16 n.4 (N.J. Super. Ct. App. Div. July 9, 2015) (noting that while New Jersey law
requires a clear reference to waiver of a judicial forum to enforce an arbitration clause of a
consumer contract, this rule does not apply to commercial contracts).

is correct in this respect, it grants the Motion on that basis and need not reach the
remaining issues presented by the Motion.41
IV.
CONCLUSION
30. 	WHEREFORE, for the foregoing reasons, the Court hereby GRANTS the
Motion and DISMISSES Plaintiff’s Complaint with prejudice.
SO ORDERED, this the 4th day of April, 2023.
/s/ Louis A. Bledsoe, III
Louis A. Bledsoe, III
Chief Business Court Judge
41 (See Br. Supp. 14 (advancing an argument based on the default, statutory statute of
limitations as an alternative in the event the Court rejects Defendants’ interpretation of
Section 4.7).)