KANSAS CITY, Mo. – Making new law, the Missouri Court of Appeals March 3 ruled that a government-run hospital cannot hide behind sovereign immunity to avoid a class action lawsuit over placing hidden trackers on patient portals to gather and sell protected patient information to third parties.
The appellate court overturned a lower court ruling that the Board of Trustees of North Kansas City Hospital had immunity from this lawsuit. In a unanimous 43-page opinion, Judge Alok Ahuja of the court’s western district wrote that the governmental board had no immunity when it was not performing a task for the common good of the government’s people but was doing so just for the pecuniary interest of the municipality.
The class action lawsuit was filed in December 2022 in Clay County by the Houston-based trial boutique Ahmad, Zavitsanos & Mensing (which goes by AZA). AZA is handling lawsuits around the country for thousands of patients whose protected health information was illegally shared with websites like Facebook, Google, YouTube and Microsoft by their healthcare providers.
In many cases, identifying information about the patients was also shared along with information about their health and treatments in return for payment to the hospital, or in some cases in trade for technology.
AZA lawyers Emily Adler and Antonio X. Milton were victorious in this Cook County case appeal.
“What’s new here is that the appellate court applied the proprietary exception to sovereign immunity to the operation of a hospital. It found that while operating the hospital generally may be a governmental function, there is no sovereign immunity when there is simply an economic motive,” Ms. Adler said. “The lawsuit states that the private information gathering is not required for the healthcare of the patients, and is instead done for pecuniary benefit.”
Ms. Adler said that although not all states have the same sovereign immunity laws as Missouri, this case could open doors to argue sovereign immunity cannot be used to insulate government actors from suit when those actions are proprietary.
The class action lawsuit alleges that the governmental board overseeing the hospital breached its fiduciary duty of confidentiality and invaded patient privacy. The hospital had promised patients that their information would remain confidential. The lawsuit also was filed against Meritas Health Corp., which supplied the clandestine trackers used to gather information from the patient portals.
“Sovereign immunity can be difficult to overcome, and this was an unexpected and most welcome decision,” said AZA partner Foster Johnson, who is overseeing the firm’s many class action cases about patient information sales.
Mr. Johnson noted this decision was issued just two weeks after the oral argument and this new legal pathway is bolstered by the fact that the court wrote so extensively rather than just kicking the case back to the trial court with little explanation.
AZA, or Ahmad, Zavitsanos & Mensing, is a Houston-based law firm that is home to true courtroom lawyers with a formidable track record in complex commercial litigation, including energy, healthcare, intellectual property and business dispute cases. AZA was recognized again by Chambers USA 2025 as among the best in Texas in commercial law and intellectual property; the firm has been listed by Best Lawyers’ Best Law Firms as one of the country’s best commercial litigation firms for 13 years; has been named Litigation Department of the Year by Texas Lawyer three times; and was dubbed a Texas Powerhouse law firm by Law360.