Chan Healthcare Grp. v. Liberty Mut. Fire Ins. Co. ( 2018 )

This opinion was filed for record
wmE\
IN CLERKS OPPICE \
at on"13^ ^
8IS>RSbE COURT,SmiE OF WASHiNQTQM
DATE C/.
V\aaa."\ SUSAN L. CARLSON
SUPREME COURT CLERK
GM&jusrice
IN THE SUPREME COURT OF THE STATE OF WASHINGTON
CHAN HEALTHCARE GROUP PS,
a Washington professional services
corporation,
Petitioner, No. 95416-0
V.
LIBERTY MUTUAL FIRE INSURANCE
COMPANY and LIBERTY MUTUAL
INSURANCE COMPANY,foreign
insurance companies. Filed npr 1 3 2D18
Respondents.
Gonzalez, J.—We are asked to determine if the full faith and credit
clause requires Washington courts to enforce an Illinois class action
judgment by dismissing a subsequent local action based on the same facts.
Lebanon Chiropractic Clinic, an Illinois medical provider, brought a
nationwide consumer protection class action against Liberty Mutual
Insurance in Illinois. This suit was resolved in a settlement that was
approved by an Illinois trial court and entered as a judgment. Chan
Healthcare Group, a Washington medical provider, received reasonable
Chan Healthcare Group v. Liberty Mutual, No. 95416-0
notice of the suit and neither opted out of the class nor objected to the entry
ofjudgment. Chan now seeks to collaterally challenge the Illinois judgment
in our courts, arguing the interests of the Washington class members were
not adequately represented in the Illinois action. Chan fails to show its due
process rights were violated. Thus, the full faith and credit clause requires
us to enforce our sister court's judgment.
Facts
Chan sued Liberty for failing to pay its reasonable bills as required by
our casualty insurance statutes, RCW 48.22.095,.005(7), and engaging in an
unfair practice under Washington's Consumer Protection Act, chapter 19.86
RCW. Liberty moved for summary judgment based on an Illinois trial
court's previous approval of a nationwide class action settlement of all
claims against Liberty and the other defendants arising from the same bad
acts Chan now alleges here. See Lebanon Chiropractic Clinic ProfI Corp.
V. Liberty Mut. Ins. Co., 2016 IL App (5th) 150111-U, 2016 WL 546909(unpublished). Chan argued that its claims were not released by the Illinois
settlement of Lebanon's nationwide class action on the theory that the
interests of Washington class members were not adequately represented in
the Illinois action and thus the settlement was unenforceable against them.
Chan Healthcare Group v. Liberty Mutual, No. 95416-0
The Illinois court dismissed all objections to the settlement. The very
issue of adequate class representation for Washington class members was
raised in the Illinois class action by Dr. David Kerbs, a Washington
chiropractor.' Dr. Kerbs argued that the class representative, Lebanon,
could not adequately represent the Washington class in light of
Washington's more protective consumer protection laws. Following a
fairness hearing, the Illinois trial court rejected Dr. Kerbs' inadequacy of
representation argument and approved the nationwide settlement. The
Illinois trial court found that Lebanon "will fairly and adequately protect the
interests of the Settlement Class." Clerk's Papers(CP)at 4154. Dr. Kerbs
unsuccessfully appealed and did not seek review by the Illinois Supreme
Court.
In Chan's new case, the King County Superior Court ruled that the
Illinois trial court did not address adequate representation with any
specificity—it made only a "passing rubber stamp reference" in the final
order approving settlement. Verbatim Report of Proceedings (June 24,
2016) at 196 (citing Hesse v. Sprint Corp., 598 F.3d 581 (9th Cir. 2010)).
The superior court also contrasted Illinois and Washington law and stated
that "it looks to be more difficult to mdke out a [consumer protection] claim
'Chan received reasonable notice and did not opt out of or object to the class action
settlement.
Chan Healthcare Group v. Liberty Mutual, No. 95416-0
in Illinois than in Washington." Id. at 198. Finally, the superior court
disagreed with the lack of appointment of anybody to represent a
Washington subclass on its CPA claims. Id. at 200.^
The Court of Appeals commissioner granted Liberty's motion for
interlocutory discretionary review^ and the Court of Appeals reversed,
concluding the Illinois settlement was owed full faith and credit. The Court
of Appeals adopted a three-part test: "(1) whether the specific due process
objection was before the sister state court,(2) whether the parties presented
briefing on the objection, and (3) whether the sister state court ruled on the
objection." Chan Healthcare Grp. PS v. Liberty Mut. Fire Ins. Co., 1 Wn.
App. 2d 529, 536-37, 406 P.3d 700(2017).
Chan appealed, alleging the commissioner improperly granted review
and the Court of Appeals applied too narrow a standard to collateral
challenges. We granted review and affirm.
Analysis
1. Interlocutory Review
Chan argues the Court of Appeals "lacked jurisdiction" to consider the
King County Superior Court's ruling and did not rely on RAP 2.3. Pet. for
^ The approved settlement had subclasses for policyholders, claimants, and providers, but
no geographic subclasses for providers.
^ Chan unsuccessfully moved to modify this decision and did not seek this court's review
of the denial of its motion to modify.
Chan Healthcare Group v. Liberty Mutual, No. 95416-0
Review at 9. We disagree. Read as a whole, the commissioner's ruling
granting interlocutory discretionary review suggests that the King County
Superior Court committed probable error by declining to give full faith and
credit to the Illinois trial court's ruling. The scope of review under the full
faith and credit clause is a threshold question and the commissioner
sustainably concluded that the King County Superior Court's ruling
conflicted WiXhNobl Park, LLC of Vancouver v. Shell Oil Co., 122 Wn.
App. 838, 95 P.3d 1265 (2004). More importantly, even if the commissioner
erred, such error would not have deprived the court ofjurisdiction. It would
simply be an error subject to modification and review, and Chan did not seek
our review of that decision at that time. See Geoffrey Crooks,Discretionary
Review of Trial Court Decisions under the Washington Rules ofAppellate
Procedure, 61 WashL.Rev. 1541, 1547 n.28 (1986)(citing RAP 6.2(a)).
2. Full Faith and Credit
The King County Superior Court determined that Chan's release of
claims in the Illinois settlement was not entitled to full faith and credit in
Washington courts. We review the trial court's orders and the legal question
under the full faith and credit clause de novo. OneWest Bank, FSB v.
Erickson, 185 Wn.2d43, 56, 367 P.3d 1063 (2016)(citing In re Parentage
ofInfant Child F., 178 Wn. App. 1, 8, 313 P.3d 451 (2013)).
Chan Healthcare Group v. Liberty Mutual, No. 95416-0
The United States Constitution requires that "[f]ull faith and credit
shall be given in each state to the . . . judicial proceedings of every other
state." U.S. Const, art. IV, § 1; 28 U.S.C. § 1738; RCW 6.36.025. The
purpose ofthe full faith and credit clause is to mitigate the "risk that two or
more States will exercise their power over the same case or controversy" and
to avoid "the uncertainty, confusion, and delay that necessarily accompany
relitigation of the same issue." Underwriters Nat'I Assur. Co. v. N.C. Life &
Accident & Health Ins. Guar. Ass'n, 455 U.S. 691, 704, 102 S. Ct. 1357, 71
L. Ed. 2d 558 (1982).
Judgments in class action lawsuits are entitled to full faith and credit
absent a due process violation or jurisdictional defect. State v. Berry, 141
Wn.2d 121, 128, 5 P.3d 658(2000)(applying full faith and credit when sole
allegation was misapplication of sister state's laws); see also Kremer v.
Chem. Constr. Corp., 456 U.S. 461, 482-83, 102 S. Ct. 1883, 72 L. Ed. 2d
262(1982). Chan was an absent class member, and "due process requires at
a minimum that an absent plaintiff be provided with an opportunity to
remove [itjself from the class by executing and returning an 'opt out' or
'request for exclusion' form to the court." Phillips Petrol. Co. v. Shutts, 472
U.S. 797, 812, 105 S. Ct. 2965, 86 L. Ed. 2d 628 (1985). Chan does not
dispute it received notice ofthe sister court's proceedings and was given a
Chan Healthcare Group v. Liberty Mutual, No. 95416-0
fair opportunity to be heard. Due process also requires that absent class
members be adequately represented by the named plaintiff. Id.(citing
Hansberry V. Lee, 311 U.S. 32, 42-43, 45, 61 S. Ct. 115, 85 L. Ed. 22(1940)); see also E. Tex. Motor Freight Sys., Inc. v. Rodriguez, 431 U.S.
395, 403, 97 S. Ct. 1891, 52 L. Ed. 2d 453 (1977); Nobi Park, 122 Wn. App.
at 847-48 (citing Valley Drug Co. v. Geneva Pharm., Inc., 350 F.3d 1181,
1189(11th Cir. 2003)).
We afford a sister court's judgment the same respect we desire
nationwide class actions brought in Washington to receive. See Matsushita
Elec. Indus. Co. v. Epstein, 516 U.S. 367, 373, 116 S. Ct. 873, 134 L. Ed. 2d
6(1996). We presume a sister court's ruling, made following extensive
evidence and argument, is not a "rubber stamp." The full faith and credit
clause requires this presumption. Nobl Park, 122 Wn. App. at 844 (citing
Matsushita, 516 U.S. at 374). The majority ofjurisdictions follow a similar
approach. See, e.g., In re Diet Drugs
(Phentermine/Fenfluramine/Dexfenfluramine) Prods. Liab. Litig., 431 F.3d
141, 146(3d Cir. 2005)("Once a court has decided that the due process
protections did occur for a particular class member or group of class
members,the issue may not be relitigated."); accordHosp. Mgmt. Assocs. v.
Shell Oil Co., 356 S.C. 644, 659-60, 665-66, 591 S.E.2d 611 (2004).
Chan Healthcare Group v. Liberty Mutual, No. 95416-0
However,"[a] State may not grant preclusive effect in its own courts to a
constitutionally infirm judgment, and other state and federal courts are not
required to accord full faith and credit to such a judgment." Kremer,456
U.S. at 482(footnote omitted). Thus, if Chan were able to demonstrate the
named plaintiff in Lebanon did not adequately represent Washington class
members, we would not give full faith and credit to the judgment of the
Illinois court.
Here, the Illinois trial court received Kerbs' objections to the
settlement, held a fairness hearing, and determined "Plaintiff Lebanon
Chiropractic Clinic ... and Class Counsel will fairly and adequately protect
the interests ofthe Settlement Class." CP at 4154. Chan claims Lebanon
did not adequately represent its interests. We disagree for three reasons.
First, Chan does not show Lebanon failed to prosecute the action
vigorously on behalf ofthe entire class. See Hesse, 598 F.3d at 589; see also
Stephenson v. Dow Chem., 273 F.3d 249, 258 & n.6(2d Cir. 2001). Second,
Chan fails to show a difference in the scope of relief under the respective
consumer protection laws made it so Lebanon had an insurmountable
conflict ofinterest with other class members. See Nobl Park, 122 Wn. App.
at 847-48 & n.5 (citing Ortiz v. Fibreboard Corp., 527 U.S. 815, 864, 119 S.
Ct. 2295,144 L. Ed. 2d 715 (1999)). Although differences do exist between
Chan Healthcare Group v. Liberty Mutual, No. 95416-0
Illinois and Washington consumer protection laws, the elements of a claim
under them are nearly identical and the relief available is roughly the same.
We are not convinced the slight variations between the states' laws
prevented Lebanon from adequately representing Washington class
members. Finally, Chan fails to show subclasses were required under
Amchem Products, Inc. v. Windsor, 521 U.S. 591, 627, 117 S. Ct. 2231, 138
L. Ed. 2d 689(1997). Chan argues that under Amchem,"subclasses are
mandatory when a class settlement includes distinct groups of class
members." Pet. for Review at 20.
Chan's reliance on Amchem is misplaced, as the facts ofthat case are
readily distinguishable from those before us. Amchem involved class
members and named plaintiffs who had been exposed to asbestos or had a
family member who had been exposed, but who differed in their injuries in
that many had already manifested injury from the exposure while others had
not. 521 U.S. at 602-03. Those who had already manifested injury were
focused on "generous immediate payments," while those facing future injury
We assume, without deciding, that collusion in a settlement would violate absent class
members' due process rights. Chan's belated 'Indicia of collusion" argument calls for
speculation and is insufficient to present the issue to us. Pet'r's Resp. to Att'y Gen.'s
Amicus Br. at 10-11 (citing, among other things, that "settlement. . . occurred less than
150 days after the case was filed" and that there was no discovery); see also Pickett v.
Holland Am. Line-Westours, Inc., 145 Wn.2d 178, 188-89, 35 P.3d 351 (2001)("absence
of collusion" among criteria in making settlement approval determination (citing 2
Herbert B. Newberg & Alba Conte, Newberg on Class Actions § 11.43 (3d. ed
1992))).
Chan Healthcare Group v. Liberty Mutual, No. 95416-0
desired "an ample, inflation-protected fund for the future." Id. at 626.
These differences in injury and sought-after relief necessitated subclasses
with separate representatives who possessed the '"same interest and
suffer[ed] the same injury'" as those in the same subclass. Id. at 625-26
(quoting E. Tex. Motor Freight Sys., Inc., 431 U.S. at 403). This is not the
factual scenario before us now. Chan and Lebanon incurred the same injury,
a reduction in payments by Liberty, and thus have the same interest in
pursuing a claim against Liberty. The only differences between Lebanon
and the Washington class members were minor variations in the state laws
under which their claims arose. Because Lebanon possessed the same injury
and the same interest as the Washington class members, Amchem is not
applicable, and subclasses would not have been required.
Chan has not convinced us that Washington plaintiffs were not
adequately represented in the Lebanon court. Therefore, Chan has failed to
overcome the presumption in favor of giving full faith and credit to the
determination of the Illinois trial court.
While the Illinois trial court's finding of adequacy—after Chan was
given notice and the opportunity to object—is likely sufficient to resolve this
case, we note there is more here. Here, the same arguments made by Chan
were previously made in Illinois by Dr. Kerbs. Dr. Kerbs argued, among
10
Chan Healthcare Group v. Liberty Mutual, No. 95416-0
other things,"Lebanon Chiropractic Clinic is an inadequate class
representative for Washington providers and has a conflict of interests with
Washington providers." CP at 4042. The Illinois trial court considered Dr.
Kerbs' objections and the evidence relating to it. See, e.g., id. at 4154 ("the
Proposed Settlement is the result of good-faith, arms-length negotiations by
the parties thereto"); see also id. at 4156 ("[t]he Court overrules all
objections"). And the trial court's consideration is crystallized by the
Illinois Appellate Court, which held that Dr. Kerbs had failed to identify
"outcome-determinative differences in Washington law and Illinois law."
Lebanon, 2016 WL 546909, at *11, *14. Like Dr. Kerbs, Chan had an
opportunity to object, appeal in Illinois, and petition for writ of certiorari to
the United States Supreme Court. Nobl Park, 122 Wn. App. at 845 n.3
{ciLmg Epstein v. MCA,Inc., 179 F.3d 641, 648 (9th Cir. 1999)). Chan did
not.
Conclusion
The Court of Appeals commissioner did not improperly grant
interlocutory review, and the Illinois judgment is entitled full faith and credit
in Washington courts. We affirm and remand back to the trial court for
further proceedings consistent with this opinion.
11
Chan Healthcare Group v. Liberty Mutual, No. 95416-0
WE CONCUR:
"I 6LU\ I {'Q
JL^) v) •
11