R. Parungao v. Community Health Systems, Inc. ( 2017 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 16-3021
R. SHERWIN PARUNGAO,
Plaintiff-Appellant,
v.
COMMUNITY HEALTH SYSTEMS, INC., et al.,
Defendants-Appellees.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:15-cv-04453 — Robert W. Gettleman, Judge.
____________________
ARGUED APRIL 26, 2017 — DECIDED MAY 24, 2017
____________________
Before WOOD, Chief Judge, and RIPPLE and SYKES, Circuit
Judges.
PER CURIAM. This is the fourth lawsuit that Dr. R. Sherwin
Parungao, a surgeon, has brought against affiliates of Gales-
burg Cottage Hospital. The district court ruled that Dr. Pa-
rungao’s complaint was barred by res judicata and Illinois’s
closely related single-refiling rule. Because we agree that this
2 No. 16-3021
suit violates the doctrine of res judicata, we affirm the district
court’s judgment. 1
I
BACKGROUND
Dr. Parungao began practicing surgery at Galesburg Cot-
tage Hospital in 2006. He first worked as a private practi-
tioner, but later accepted employment with Knox Clinic,
which supplies doctors for the hospital. Knox Clinic told
Dr. Parungao in May 2013 that it was discharging him with-
out cause, as allowed under his employment agreement.
Dr. Parungao believes that the hospital orchestrated this dis-
charge to harm his career. He asserts that before Knox Clinic
fired him, the hospital’s medical executive committee manip-
ulated the peer-review process to insinuate that he had per-
formance problems and make it difficult for him to secure fu-
ture employment. Dr. Parungao later resigned from Gales-
burg and sought other employment, but alleges that he was
thwarted in those efforts by the hospital and its doctors.
This is not the first time Dr. Parungao has attempted to re-
cover based on these, or similar, allegations. His first suit
against Galesburg Cottage Hospital and its corporate affili-
ates was voluntarily dismissed. See Doe v. Cmty. Health Sys.
Prof’l Servs. Corp., Galesburg Hosp. Corp., & Knox Clinic Corp.,
No. 2013-CH-73 (Knox Cty., Ill. Cir. Ct., filed July 15, 2013).
The day after he voluntarily dismissed that action, Dr. Pa-
rungao filed another petition in the same court, requesting to
1The district court had jurisdiction over this case under 28 U.S.C. § 1332.
Our jurisdiction is premised on 28 U.S.C. § 1291.
No. 16-3021 3
refile the case under seal and under a fictitious name. That
petition was denied, so no complaint or suit was filed. Dr. Pa-
rungao then brought another suit in state court against the
chief of the medical staff at Galesburg, Dr. Daniel K. Piper. See
Parungao v. Piper, No. 2013-L-40 (Knox Cty., Ill. Cir. Ct., filed
Oct. 21, 2013). Because this appeal and the defense of res judi-
cata rest on the relationship between the Piper litigation and
Dr. Parungao’s current federal lawsuit, we briefly compare the
allegations set forth in the two relevant complaints.
In October 2013, Dr. Parungao sued Dr. Piper for defama-
tion in circuit court in Knox County, Illinois. That lawsuit fo-
cused on the time during which Dr. Parungao sought employ-
ment at other hospitals after he resigned from Galesburg. He
alleged that Dr. Piper had made false and harmful represen-
tations to hospital entities with which he sought employment.
These representations, made in letters bearing Galesburg Cot-
tage Hospital letterhead, suggested to those entities that
Dr. Parungao had been the subject of some type of nondisci-
plinary action related to his professional conduct. The rele-
vant allegations from the Piper complaint are set forth below:
7. Although Dr. Parungao’s privileges to
practice at GCH [Galesburg Cottage Hospital]
remained intact, Dr. Parungao ceased perform-
ing surgeries at GCH on or about May 15, 2013,
and he thereafter sought employment else-
where.
8. On or about May 28, 2013, Dr. Piper rep-
resented to Gaye Shaw, Director of Medical Staff
Affairs at St. Mary’s Hospital in Centralia, Illi-
nois (collectively “St. Mary’s”) that he was au-
thorized to respond to a request by St. Mary’s
4 No. 16-3021
for verification of Dr. Parungao’s staff privileges
and credentials at GCH.
9. On or about May 28, 2013, Dr. Piper rep-
resented to Natalie Brown, Medical Staff Coor-
dinator at Weatherby Locums in Fort Lauder-
dale, Florida (collectively “Weatherby”) that he
was authorized to respond to a request by
Weatherby for verification of Dr. Parungao’s
staff privileges and credentials at GCH.
10. Dr. Piper informed St. Mary’s and
Weatherby that Dr. Parungao was not the sub-
ject of any disciplinary action as a member of
the Medical Staff, he was the subject of “other
action” as a result of an ongoing review related
to his participation in an impaired practitioner
program.
11. Dr. Piper defined “other action” as fol-
lows:
Other Actions:
This category includes any resignation
while under investigation, termination of
the physician’s relationship with the
Hospital via contract for reasons related
to competence or professional conduct,
active participation in an impaired prac-
titioner program due to a directive of the
MEC [Medical Executive Committee],
peer review committee or impaired prac-
titioner committee (where disclosure is
No. 16-3021 5
permitted by law), and formal repri-
mands.
…
16. The information Dr. Piper conveyed to
St. Mary’s and Weatherby regarding the exist-
ence of “other action” against Dr. Parungao was
false.[ 2]
The Illinois circuit court granted Dr. Piper’s motion to dis-
miss for failure to state a claim of defamation, and the Appel-
late Court of Illinois affirmed the dismissal. Parungao v. Piper,
No. 3-14-0197, 2014 WL 7251127, at *4–8 (Ill. App. Ct. Dec. 18,
2014), reh’g denied and amended (Ill. App. Ct. Jan. 28, 2015).
Dr. Parungao then filed the present lawsuit in federal court
in the Northern District of Illinois. 3 While the earlier Piper suit
focused on the letters Dr. Piper had sent that kept Dr. Pa-
rungao from obtaining employment with Weatherby and St.
Mary’s (and named only Dr. Piper as a defendant), the present
suit focuses on the events leading up to those same letters
(and excludes Dr. Piper as a defendant). Dr. Parungao alleges
that Galesburg’s medical staff president, Dr. Mark E. Davis,
initiated a sham peer-review process against him for personal
reasons. He refused to participate and later received confir-
mation that “no adverse action was ever taken or recom-
mended against him.” 4 Dr. Parungao alleges that the process
2 R.91-7 at 3–4.
3 Parungao v. Cmty. Health Sys., Inc., Cmty. Health Sys. Prof’l Servs. Corp.,
Galesburg Hosp. Corp., Knox Clinic Corp., & Davis, No. 1:15-cv-04453, (N.D.
Ill. filed May 20, 2015).
4 R.65 at 7.
6 No. 16-3021
undertaken by the hospital constituted a breach of contract,
tortious interference with contractual relations, intentional in-
fliction of emotional distress, and civil conspiracy.
As in the Piper complaint, Dr. Parungao also alleges that,
after this process was initiated, he “sought employment with
other healthcare entities,” which “submitted requests for ver-
ification that [he] was in good standing on GCH’s medical
staff.” 5 And, also just as in the Piper complaint, he alleged that
he had trouble obtaining further employment with those
healthcare entities because of the responses of the hospital de-
fendants. But rather than attribute his troubles specifically to
Dr. Piper’s letters to Weatherby and St. Mary’s, he broadened
his allegation as follows:
44. Despite the fact that plaintiff was at all
times in good standing and not subject to any
disciplinary proceedings or adverse actions,
GCH refused to provide these healthcare enti-
ties with verification of the same, thereby hin-
dering plaintiff’s ability to obtain privileges
with the medical staffs of other healthcare enti-
ties.[ 6]
Nonetheless, this timeline of events, including Galesburg’s
“refusal to verify” Dr. Parungao’s good standing, is consistent
with the timeline in Piper, which alleged that Dr. Piper’s re-
sponses to Weatherby and St. Mary’s contained false and
harmful information about his standing on the medical staff.
5 Id.
6 Id.
No. 16-3021 7
Dr. Parungao moved in the district court for a protective
order and supervision of discovery, and in his attached mem-
orandum of law he confirmed this overlap between the alle-
gations in his two suits. His motion referred to and attached
Dr. Piper’s letters to Weatherby and St. Mary’s and used lan-
guage similar to that used in his Piper complaint to describe
the content of those letters as false. The motion attributed the
letters to the defendants in this case and characterized them
as evidence of a conspiracy among the hospital defendants to
ruin his professional standing. The motion sought a protec-
tive order to allow Dr. Parungao to obtain potentially privi-
leged information from the hospital defendants about the
“other actions” described in Dr. Piper’s letters as well as any
other supposed peer-review processes that had occurred. The
district court denied Dr. Parungao’s motion.
All but one of the defendants moved to dismiss for failure
to state a claim under Federal Rule of Civil Procedure 12(b)(6).
(Community Health Systems, Inc., moved to dismiss for lack
of personal jurisdiction.) They argued that Dr. Parungao’s
complaint was barred by res judicata and Illinois’s related sin-
gle-refiling rule, see 735 ILCS § 5/13-217, which provides that
a suit, once voluntarily dismissed, can be refiled only one
time. Several of the defendants referred to Dr. Parungao’s mo-
tion for a protective order in their motions to dismiss, assert-
ing that Dr. Parungao’s motion in effect acknowledged that
his federal suit was based on the same facts as alleged in the
Piper suit. Dr. Parungao, however, responded that there was
no privity between Dr. Piper and the medical defendants, so
that neither res judicata nor the single-refiling rule could sup-
port dismissal.
8 No. 16-3021
The district court dismissed Dr. Parungao’s complaint. It
ruled that Dr. Parungao was impermissibly attempting to re-
litigate the Piper complaint, which had been fully and fairly
litigated in the Illinois courts. The district court decided that
both the current suit and the Piper suit were “refilings” of
Dr. Parungao’s first, voluntarily dismissed, complaint in state
court. Accordingly, the court concluded that both res judicata
and the single-refiling rule supported dismissal. Dr. Parungao
timely appeals.
II
DISCUSSION
Dr. Parungao contends that neither res judicata nor the Il-
linois single-refiling rule supported dismissing his complaint.
He argues that the question whether the hospital defendants
in this case are in “privity” with Dr. Piper, as required for pre-
clusion rules to apply, cannot be decided now. We conclude
that the district court correctly ruled that res judicata barred
the complaint, and therefore do not reach the applicability of
Illinois’s single-refiling rule.
The principles governing our review are clearly estab-
lished. In reviewing a dismissal under Federal Rule of Civil
Procedure 12(b)(6), we accept as true all factual allegations in
the complaint and draw all reasonable inferences in favor of
the plaintiff. Anicich v. Home Depot U.S.A., Inc., 852 F.3d 643,
648 (7th Cir. 2017). In this procedural posture, district courts
No. 16-3021 9
ordinarily should not dismiss a complaint based on an affirm-
ative defense such as res judicata. 7 But when it is “clear from
the face of the complaint, and matters of which the court may
take judicial notice, that the plaintiff’s claims are barred as a
matter of law,” dismissal is appropriate. Conopco, Inc. v. Roll
Int’l, 231 F.3d 82, 86 (2d Cir. 2000); see Watkins v. United States,
___ F.3d ___, No. 16-2109, 2017 WL 1505314, at *2–3 (7th Cir.
Apr. 27, 2017) (ruling that court could take judicial notice of
earlier state-court complaint and thereby dismiss based on an
affirmative defense). Courts may take judicial notice of court
filings and other matters of public record when the accuracy
of those documents reasonably cannot be questioned. See Ad-
kins v. VIM Recycling, Inc., 644 F.3d 483, 492–93 (7th Cir. 2011);
Gen. Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074,
1080–81 (7th Cir. 1997).
We apply Illinois’s law of res judicata to this diversity ac-
tion. See Harmon v. Gordon, 712 F.3d 1044, 1054 (7th Cir. 2013)
(applying Illinois law). The doctrine of res judicata, also
known as claim preclusion, applies if there is “(1) a final judg-
ment on the merits rendered by a court of competent jurisdic-
tion; (2) an identity of the causes of action; and (3) an identity
of the parties or their privies.” Rose v. Bd. of Election Comm’rs
for the City of Chi., 815 F.3d 372, 374 (7th Cir. 2016) (applying
Illinois law). If the doctrine applies, the plaintiff is barred
from raising “not only every matter that was actually deter-
mined in the first suit, but also every matter that might have
been raised and determined in that suit.” Chicago Title Land
Trust Co. v. Potash Corp. of Saskatchewan Sales Ltd., 664 F.3d
7See Carr v. Tillery, 591 F.3d 909, 913 (7th Cir. 2010); Muhammad v. Oliver,
547 F.3d 874, 878 (7th Cir. 2008).
10 No. 16-3021
1075, 1079 (7th Cir. 2011) (quoting Hudson v. City of Chicago,
889 N.E.2d 210, 217 (Ill. 2008)) (applying Illinois law).
Illinois employs a “transactional test” to decide whether
complaints allege the same cause of action. Id. at 1079–80. Un-
der this test, “separate claims will be considered the same
cause of action for purposes of res judicata if they arise from
a single group of operative facts, regardless of whether they
assert different theories of relief.” Id. (quoting River Park, Inc.
v. City of Highland Park, 703 N.E.2d 883, 893 (Ill. 1998)). There
need not be a “substantial overlap of evidence,” so long as the
complaints arise from the same transaction or “series of con-
nected transactions.” Id. at 1080. As for privity, Illinois courts
conclude that it exists “between parties who adequately rep-
resent the same legal interests.” Id. (quoting People ex rel. Bur-
ris v. Progressive Land Developers, Inc., 602 N.E.2d 820, 825 (Ill.
1992)).
We agree with the district court that all of these elements
are present in this case. First, the parties do not dispute that
there was a final judgment in Dr. Parungao’s suit against
Dr. Piper. That action, the Piper suit, ended in a dismissal with
prejudice for failure to state a claim. See Rose, 815 F.3d at 374
(noting that involuntary dismissal is “unquestionably” final
judgment on the merits under Illinois law). The district court
thus correctly concluded that this first element of res judicata
was present.
With respect to the second element, identity of the causes
of action between the Piper litigation and the current suit, we
look to the filings in the earlier case. In doing so we are per-
suaded, as was the district court, that Dr. Piper’s letters on
Galesburg letterhead to the other hospital entities were “just
one act in the series of events that led to plaintiff’s problems
No. 16-3021 11
with and ultimate resignation from GCH,” the basis of the
present suit. 8 Our earlier decision, Chicago Title Land Trust Co.,
664 F.3d 1075, provides ample authority. In that case, the
plaintiffs had sued two defendants for fraud based on certain
representations that those defendants had made. They then
brought another suit alleging fraud and contract claims
against different defendants, but citing the same representa-
tions. Id. at 1079–80. We found that the two cases involved the
same series of events. Id.; see also Huon v. Johnson & Bell, Ltd.,
757 F.3d 556, 558–59 (7th Cir. 2014) (holding that employment
discrimination lawsuit against former employer and several
of its employees was precluded under Illinois law by earlier
defamation case against supervisor and coworker when the
two actions were based on the same series of connected trans-
actions).
In this case, the same pattern is repeated: In Piper, Dr. Pa-
rungao alleged defamation based on Dr. Piper’s representa-
tions to Weatherby and St. Mary’s about his performance. In
the present case, Dr. Parungao challenges the peer-review
process that led to those same representations that impaired
his job prospects. While his theory of recovery is different
here than in Piper, both suits arise out of statements made
around the time he resigned that made it difficult for him to
get another job. Under a “pragmatic” view, see Huon, 757 F.3d
at 558 (applying Illinois law), Dr. Parungao’s federal com-
plaint arises out of the same series of connected events alleged
in Piper.
We now turn to the matter of privity. In ruling that
Dr. Piper (in Piper) and the hospital defendants (in this case)
8 R.143 at 10.
12 No. 16-3021
are in privity, the district court observed that Dr. Piper had
maintained in the earlier suit that his legal interests were
aligned with those of the hospital defendants. The court con-
cluded that both Dr. Piper and the hospital defendants “were
each defending the integrity of the peer review process at the
hospital and that the employment information was dissemi-
nated in a proper manner.” 9
Although Dr. Parungao was careful not to mention
Dr. Piper in his federal complaint, his own motion for a pro-
tective order before the district court reveals the basis for priv-
ity because the motion treats the hospital defendants as re-
sponsible for the letters that Dr. Piper composed on hospital
letterhead. First, the motion acknowledges that Dr. Parungao
bases his theory of liability in this case partly on those letters.
In addition, the motion explains that the federal case alleges a
conspiracy among the hospital defendants to harm Dr. Pa-
rungao’s reputation with other healthcare entities by sending
letters with false information. These are the letters sent by
Dr. Piper. Finally, Dr. Parungao even attached Dr. Piper’s let-
ters to his motion, to emphasize that he sought to hold the
hospital defendants vicariously liable for those letters. Dr. Pa-
rungao therefore has characterized the legal interests of the
hospital defendants and Dr. Piper as aligned. See United States
v. Egan Marine Corp., 843 F.3d 674, 678–79 (7th Cir. 2016) (ex-
plaining relationship between vicarious liability and privity
for preclusion purposes). He has pleaded himself out of court
on the issue of privity.
Dr. Parungao responds on appeal that the allegation in the
federal complaint that the hospital “refused” to verify his
9 Id. at 11–12.
No. 16-3021 13
good standing to other entities does not refer to Dr. Piper’s let-
ters, but to some other, unexplained event. He also contends
that it is possible that Dr. Piper’s letters to Weatherby and St.
Mary’s were sent without authority from the hospital, and
that the hospital defendants in this case might disclaim re-
sponsibility for Dr. Piper’s actions. Thus, he argues, the hos-
pital defendants’ legal interests in this case are not necessarily
aligned with those of Dr. Piper in his defamation suit. Dr. Pa-
rungao’s theory might have been plausible had he not, in his
motion for a protective order, taken a position that contradicts
the one he now advances for the first time on appeal. Because
his theory is implausible in light of his own characterization
of his case in his motion for a protective order, we may rely
on that characterization to affirm the district court’s dismissal.
See Watkins, 2017 WL 1505314, at *2–3 (declining to ignore
plaintiff’s previous filing establishing statute-of-limitations
bar “[a]bsent a claim that there is a plausible, good-faith basis
to challenge” its legitimacy).
Conclusion
The district court correctly found that Dr. Parungao’s com-
plaint was barred by the doctrine of res judicata. We therefore
affirm the judgment of the district court.
AFFIRMED