Lindsey Hayes v. Usaa Casualty Insurance Company ( 2015 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
LINDSAY HAYES and MATT
ROSSTON, husband and wife; JAMES DIVISION ONE
W. BEASLEY II; and all others similarly
situated, No. 70735-3-
Appellants,
v.
USAA CASUALTY INSURANCE UNPUBLISHED OPINION
COMPANY, a foreign insurance
company doing business in the State
of Washington; UNITED SERVICES
AUTOMOBILE ASSOCIATION, a
foreign intrainsurance exchange doing
business in the State of Washington;
USAA GENERAL INDEMNITY
COMPANY, a foreign insurance
company doing business in the State
of Washington; GARRISON
PROPERTY AND CASUALTY V?
INSURANCE COMPANY, a foreign CO
Ci
insurance company doing business in
the State of Washington; JOHN DOES
l-XX,
Respondents. FILED: February 17, 2015
Dwyer, J. — The appellants in this insurance coverage dispute filed suit in
King County Superior Court on their own behalf and on behalf of all persons
similarly situated within the State of Washington. After the respondents removed
the case to federal court, the appellants, by representing to the federal court that
the scope of their claims were narrower than as characterized by the
respondents, secured a remand to King County Superior Court. Yet, when the
No. 70735-3-1/2
appellants returned to state court, it became clear that they had whittled their
claims down to a point where the alleged misbehavior of the respondents no
longer fell within the ambit of their claims, as reformulated. Recognizing their
predicament, the appellants attempted to retreat from their federal court position;
however, the trial court invoked the doctrine of judicial estoppel and rebuffed their
attempt. We conclude, as did the trial court, that the appellants were not entitled
to vary their claims according to the exigencies of the moment. Therefore, we
affirm.
I
On May 16, 2012, Lindsay Hayes, Matt Rosston, and James Beasley II
(collectively Insureds) filed suit in King County Superior Court on behalf of
themselves and on behalf of all persons similarly situated within the State of
Washington. Named as defendants were United Services Automobile
Association, USAA Casualty Insurance Company, USAA General Indemnity
Company, and Garrison Property and Casualty Insurance (collectively
Companies).
The Insureds alleged that the Companies had improperly denied their
claims for reimbursement of medical expenses submitted under their first-party
medical benefits coverage. Among the methods of denying insurance claims
challenged by the Insureds were those involving "computer-generated
reductions" and "human-generated reductions."
With regard to computer-generated reductions, the Insureds challenged
the Companies' medical bill audit system, which was facilitated, in part, by a
-2-
No. 70735-3-1/3
third-party vendor called Auto Injury Solutions (AIS). The Insureds alleged that
the Companies utilize "an undisclosed cost containment scheme which
wrongfully deprives their insureds ... of insurance benefits for medical
treatment." The Insureds alleged that after they suffered injuries, their "medical
treatment was then wrongfully denied by USAA on the basis of fraudulent file
reviews." These allegedly fraudulent file reviews, the Insureds averred, were a
result of a computer program employed by AIS, which was responsible for "denial
of medical payment benefits ... in situations] where a deviation exists in the
insured's medical records from what USAA or its agents, or the computer system
employed by USAA or its agents, interprets as 'appropriate' medical and/or billing
documentation."
As to human-generated reductions, the Insureds challenged the alleged
practice of using "sham" peer reviews of medical records, which were purportedly
conducted by healthcare professionals retained by AIS, in order to determine
whether the treatment received was medically necessary.
The Insureds pleaded the following six "causes of action:" (1) unjust
enrichment, (2) breach of contract, (3) breach of covenant of good faith and fair
dealing, (4) injunctive and declaratory relief, (5) violation of the Washington
Consumer Protection Act (CPA),1 and (6) violation of the Insurance Fair Conduct
Act (IFCA).2
The Insureds claimed that they had suffered "damages in the form of
1 Chapter 19.86 RCW.
2 Chapter 48.30 RCW.
No. 70735-3-1/4
economic loss for underpayment of PIP[3] and/or medpay claims, out of pocket
expenses, loss of benefit of the insurance policies purchased from USAA and the
full benefit of the premiums paid." Yet, they expressly capped the amount of
damages to which they believed they were entitled, stating, "the total amount in
controversy in this action is believed to be less than $5 million."
On June 19, 2012, the Companies removed the case to federal court.
United States District Court Judge James Robart was assigned the case. The
basis for removal was the Class Action Fairness Act of 2005 (CAFA),4 which
requires, in pertinent part, an amount in controversy that exceeds $5 million. 28
U.S.C. § 1332(d)(2).
In removing the case to federal court, the Companies contended that the
Insureds' claims involved the following two practices:
In their Complaint, Plaintiffs allege two disputed practices. The first
is that USAA fails to pay PIP claims based on a lack of adequate
documentation. . . .
The second disputed practice in the Complaint is that USAA uses a
medical review by a third-party health care provider or professional
to deny payment of reasonable and necessary medical expenses
based on the treatment either not being related to the covered
accident and/or the treatment not being necessary.
Fed. Doc. 45 at 7.
On September 13, the Insureds moved to remand the case back to King
County Superior Court. They argued that the Companies had failed to meet their
burden of proving that CAFA's amount in controversy requirement was satisfied.
3 PIP is an acronym of "personal injury protection."
4 Pub. L. No. 109-2, 119 Stat. 4 (2005).
No. 70735-3-1/5
Fed. Doc. 41 at 2. The Insureds averred that the Companies, in calculating the
alleged amount in controversy, had mischaracterized their claims. According to
the Insureds, although they "allege[d] two types of unfair practices, both are
defined by the fact that they only exist because a computer generated a
reduction for 'inadequate documentation' without human involvement."
With regard to the issue of "inadequate documentation," counsel for the
Insureds informed Judge Robart that, in considering their motion to remand, he
"should look at 'DOC'" Reason Codes,5 but "should not look," for instance, at
"NR" Reason Codes "because ... the complaint doesn't speak to nurse reviews."
Counsel for the Insureds added, "The only category of the ones that he actually
mentioned might be physician review, which is PR. But even there it's
overinclusive. It's total reductions when there's been any type of physician
review. That's not our complaint. We're not complaining about any type of
physician review." (Emphasis added.) In effect, the Insureds represented to
Judge Robart that their claims were based on denials of coverage that
corresponded to "DOC Reason Codes." The significance of this representation,
which is explained in more detail below, is that DOC Reason Codes correspond
to denials in which documentation is missing—as opposed to being present but
inadequate to substantiate the necessity of treatment.
The Insureds also maintained that the amount in controversy had been
overstated. They argued that the amount in controversy estimated by the
5 "Reason Codes" are certain combinations of letters and numbers that correspond to
particularjustifications for denying reimbursement of healthcare charges; for instance, missing
documentation.
No. 70735-3-1/6
Insureds was "not a reliable statement of the amount of class damages because
it is not the amount in fact paid by the class members and overstates the
potential debt owed by class members to providers because it includes
reductions that were written off by providers." Fed. Doc. 41 at 2. The Insureds
explained that providers may write off unreimbursed charges, and that the insurer
may pay a bill when the providers threaten to "balance bill"6 the insured.
Therefore, they alleged, the measure of actual damages that could be awarded
pursuant to the CPA was properly calculated by determining "the amount that the
class member insured actually paid providers." Fed. Doc. 50 at 6.
Judge Robart granted the Insureds' motion to remand. He concluded that
the Companies had failed to meet their burden of proof as to the amount in
controversy requirement and, in doing so, found that the only reductions at issue
were "those both generated by a computer and attributable to missing
documentation." Order Granting Plaintiffs' Motion to Remand at 15 (hereinafter
Remand Order). To illustrate his understanding of that which constituted
"missing documentation," Judge Robart compared and contrasted two different
"Reason Codes."
To be more specific, the following reason code is an example of the
conduct that could fall under the scope of reductions challenged by
Plaintiffs in this action:
DOC55: In order to make a reimbursement decision,
documentation is needed to support the
6"The common usage ofthe term 'balance billing' refers to when a patient is liable for the
difference between the bill and the benefit determination of the insurer." Stewart Reifler,
Challenging Medicare Part B Amount Determinations: The Transcendence of the Reasonable
Charge. 37 N.Y.L. Sch. L. Rev. 383, 421 n.358 (1992).
No. 70735-3-1/7
medical necessity for continued care or
treatment. Documentation must include all
records such as patient history, evaluations,
test results, progress notes, prescriptions and
treatment plans.
. . . This reason code is clear that denial was based on the fact that
adequate documentation was absent from the insurance claim form
submitted by the primary healthcare provider. Here, on the other
hand, is an example of reductions that Plaintiffs do not challenge:
NR162: Review of the submitted documentation does
not substantiate the medical necessity for
passive physical therapy in the absence of
active physical therapy at this state in
treatment.
Remand Order at 11 (emphasis added).
Based on these examples, Judge Robart determined that the Insureds'
asserted claims were limited to those instances wherein adequate documentation
was missing—contrasted with instances in which the submitted documentation
failed to substantiate the necessity for the treatment provided.
As opposed to DOC55, NR162 explains that denial was based on
the fact that the documentation submitted by the primary healthcare
provider did not substantiate the treatment provided. Despite
USAA's attempt to blur the lines between these two rationales for
denial, they are in fact distinct.
Remand Order at 12 (emphasis added) (footnote omitted).
Although he granted the Insureds' motion to remand, Judge Robart stated
that, in the event that the Insureds adopted a contrary position in state court to
that which they took in their motion to remand, the Companies could avail
themselves of the equitable defense of judicial estoppel.
With respect to USAA's fear that Plaintiffs are mischaracterizing
their complaint in order to "leave open the possibility of seeking
No. 70735-3-1/8
more than the jurisdictional minimum in state court. . . ." (Resp. at
7), "[w]e acknowledge that strict construction of our jurisdiction
creates the potential for manipulation of the jurisdictional rules by
plaintiffs who may plead for damages below the jurisdictional
amount in state court with the knowledge that the claim is actually
worth more, but also with the knowledge that they may be able to
evade federal jurisdiction by virtue of the pleading." Lowdermilkr v.
U.S. Bank Nat'l Ass'nl, 479 F.3d [994,] 1002 [(9th Cir. 2007)]
(internal citation and quotation marks omitted). Nevertheless, if
Plaintiffs do indeed suddenly adopt a position contrary to the one
raised in their motion, then USAA will certainly have at its disposal
the defense of judicial estoppel: "Judicial estoppel precludes a party
from gaining an advantage by taking one position and then seeking
a second advantage by taking an incompatible position in a
subsequent action." Johnson v. Si-Corlnc. [107 Wn. App. 902,]
906, 28 P.3d 832, 834 (Wash. Ct. App. 2001).
Remand Order at 12 n.3.
In addition, Judge Robart explained that because "the reductions taken by
USAA do not necessarily constitute actual damages," the Companies' calculation
of the amount in controversy was suspect.
As made clear in the record by several depositions of primary
healthcare providers, when an insurance company does not pay an
insurance claim in full, it is not necessarily the practice of primary
healthcare providers to simply pass along the balance of the bill to
its patients Sometimes, for example, the primary healthcare
provider writes-off a portion of the bill As such, just because
USAA applies reductions to an insurance claim does not mean that
a policyholder suffers actual monetary damages in an amount
equivalent to the total of those reductions.
Remand Order at 14 (emphasis added).
After the case was remanded to King County Superior Court, the
Companies moved, on January 23, 2013, to dismiss all ofthe Insureds' claims
pursuant to CR 12(b)(6).
On February 19, the Insureds moved to strike the motion to dismiss and
8
No. 70735-3-1/9
asked King County Superior Court Judge Mary Yu7 to impose CR 11 sanctions.
On March 1, Judge Yu denied the Insureds' motion to strike, ruling that the
court would decide the Companies' motion to dismiss on the merits.
On March 12, the Companies filed a reply in support of their motion to
dismiss pursuant to CR 12(b)(6), wherein they stated that the Insureds had failed
to file or serve a response in opposition to their motion to dismiss the complaint.
That same day, the Insureds informed the court of their "inten[t] for the Court to
rely on their motion to strike Defendants' motion to dismiss and their Reply on
that motion."
On March 25, following a hearing on the motion to dismiss, Judge Yu
granted the Companies' motion and dismissed all of the Insureds' claims. Her
basis for granting the Companies' motion was a lack of contractual privity
between the named plaintiffs and named defendants.
The court grants the motion to dismiss on the basis that the named
Plaintiffs do not have a contractual relationship with the named
Defendants. Without an insurance policy that connects a specific
Plaintiff to a specific Defendant, Plaintiff cannot assert a claim or
liability pursuant to an insurance policy when there is no privity.
Two days later, on March 27, the Insureds moved for "clarification and/or
reconsideration of court's order granting defendants' motion to dismiss."
An additional two days later, on March 29, the Insureds filed a "motion for
reconsideration of court's order granting defendants' motion to dismiss claims
7 Since her involvement in this matter, the Honorable Mary Yu was appointed and then
elected to serve as a member of our Supreme Court. Nonetheless, in the interest of accuracy,
we referto her as Judge Yu throughout our opinion, given her role in presiding over this case in
the superior court.
-9-
No. 70735-3-1/10
against defendants with whom plaintiffs have no contract."
Judge Yu denied the March 29 motion; however, she agreed to clarify or
reconsider "the issue as to whether there is privity."
On May 13, Judge Yu entered an "order on motion for
reconsideration/clarification." Therein, she explained that, as to the contract
claims, she was dismissing only those claims brought against the two named
defendants with whom none of the named plaintiffs had a contractual
relationship.
The court dismissed all contractual claims against any Defendant
where there was no privity with any of the named Plaintiffs. The
confusion lies in Plaintiffs' insistence on clustering alleged related
insurance companies for purposes of finding a contractual
relationship. The court rejects the argument and clarifies that the
court is dismissing all contractual claims against the two named
Defendants who have no contractual privity with any of the
Plaintiffs. These two Defendants are USAA General Indemnity
Company . . . and Garrison Property and Casualty Insurance
Company.
Concerning the Insureds' CPA claims, Judge Yu stated, "the court will
reconsider dismissal of the CPA claims if Plaintiffs can actually show injury to
their business or property caused by each Defendant against which they bring a
CPA claim." She stated that the court would allow the Insureds to note a motion
to provide evidence that they could meet the elements of a CPA claim.
So, the question this court still has for Plaintiffs is: what is the
cognizable injury or damage? Did the Plaintiffs actually pay
providers for any charges not paid by the insurer? Are there "out-
of-pocket" expenses that Plaintiffs might not have incurred but for
the alleged injury?
In the event, however, that the motion was not heard within 60 days,
10
No. 70735-3-1/11
Judge Yu ruled that the court would reinstate the dismissal of the CPA claims as
against all of the Companies.
Judge Yu also clarified that the Insureds' claims of fraud and unjust
enrichment, which had previously been dismissed, remained dismissed.
On June 17, the Insureds filed another motion for reconsideration, in
which they sought an order that: "(1) Reinstates their CPA claims against USAA
and USAA Casualty; (2) Clarifies that their individual and class claims against
USAA and USAA Casualty for breach of contract, breach of good faith,
declaratory and injunctive relief and violation ofthe Insurance Fair Conduct Act
are not dismissed; and (3) clarifies that their class claims against USAA General
and Garrison will be determined on their motion for class certification."
On July 12, Judge Yu denied the Insureds' third motion for
reconsideration. Her order is quoted, in pertinent part, below.
This court entered an order on May 13, 2013 upon Plaintiffs'
Motion for Reconsideration/Clarification specifically advising
Plaintiffs[] that the court would permit a showing of "injury" in order
to save the CPA claims from final dismissal. The sole issue was
whether Plaintiffs could show injury from Defendants' alleged
practice ofdenying insurance claims based upon an automated or
computer review. Non-payment of claims for other reasons are not
part of this lawsuit.
The court rejected Defendants' arguments that the claim was
damages for personal injuries and accepted Plaintiffs' claim that
their CPA claims were based upon an alleged practice of reviewing
and denying insurance claims by a computer (without human
review). The court afforded Plaintiffs with an additional opportunity
to provide the court with such evidence of injury as a result ofthis
practice, but Plaintiffs have not done so in their latest pleading and
barrage ofpaper. Rather than focus on this narrow issue, Plaintiffs
have instead opted to disregard the court's order and filed an
untimely Motion for Reconsideration ofthe court's entire order
-11 -
No. 70735-3-1/12
without asking leave to do so (See CR 59 setting a ten day
timeline).
On August 6, the Insureds sought discretionary review in this court of the
trial court's adverse rulings chronicled above.
In the meantime, the Companies had, on May 30, filed a motion for
summary judgment pursuant to CR 56. Their basis for bringing the dispositive
motion was that none of the claims submitted by the Insureds had been reduced
or denied due to a "computer-generated reduction" based on "inadequate
documentation." As to plaintiff-appellant Hayes, the Companies averred that
none of the charges submitted under her PIP claim were denied or reduced
based on "inadequate documentation," and none of the charges were denied or
reduced with a corresponding DOC Reason Code. As to plaintiff-appellant
Rosston, the Companies averred that he never submitted a PIP claim in his own
right. As to plaintiff-appellant Beasley, the Companies averred that, although
there was an instance of inadequate documentation in his PIP claim (along with a
corresponding DOC55 Reason Code), it resulted not from an automatic,
computer-generated determination but, rather, followed from a review with
human involvement.
The Insureds disagreed with the manner in which their claims were
described. They characterized their "actual claims" as involving an initial
computer-generated "flagging" for non-payment followed by either automatic non
payment or non-payment based on a "sham" human review. Notably, however,
the Insureds did not aver that any of the named plaintiffs had been denied
-12-
No. 70735-3-1/13
coverage based on a computer-generated reduction without human involvement.
On August 30, a hearing was held on the summary judgment motion. At
the hearing, Judge Yu orally granted summary judgment in favor of the
Companies and, in doing so, invoked the doctrine of judicial estoppel to block the
Insureds' attempt to retreat from their representations made to the federal court.
THE COURT: You know, I feel very familiar with this record.
I can't tell you how many times I've gone back and have read the
record, reviewed the record, tried to comprehend all of the
pleadings that have been submitted, including what came from
Judge Robart on a remand, and I am granting the summary
judgment today.
Igo back even to my own order that was entered on July
12th of this past year and, for the second time, trying to also clearly
indicate what was the scope of this particular case.
I said it more than once. I asked about it each time, and
then again even asserted it specifically, and the pleadings that
came back always were different.
It seemed to be a refinement, and it was an attempt to really
be very clear about what this case was.
I agree completely, frankly, with defense counsel's argument
today in terms ofwhat came back from Judge Robart, what the
remand was, what my decisions have been, and what the pleadings
have been, and it's consistently changed.
And I do believe that—that plaintiffs should be estopped
from continuously shifting what the case is about.
I'm granting the motion. . ..
MR. BRESKIN: Your Honor, may we ask, just to make clear
for the record, it's the Court's belief that the claim is limited to a doc
55 then?
Is that the Court's—because that's what they moved on was
doc 55.
THE COURT: It's not solely what they moved on. It really is
the allegation that the denials are based on a computer-generated
review.
MR. BRESKIN: As opposed to a computer flagging; is that
the Court—I mean—
THE COURT: Computer flagging is not a denial. It simply
shifts it into a whole 'nother review process. This flagging is a new
way of looking at the same question.
13-
No. 70735-3-1/14
On September 6, Judge Yu's ruling was memorialized in a written order.
The Insureds then converted their earlier motion for discretionary review
into an appeal as a matter of right and filed a notice of appeal as to all adverse
rulings entered by the trial court.
II
The Insureds contend that the trial court erred in granting summary
judgment on their breach of contract claims. They maintain that this error was
due to the trial court's "reformulation" of their claims. According to the Insureds,
the "class claims" have the following characteristics: "(a) when the computer
automatically denies payment and an EOR is then sent to the insured and
provider without further review; and (b) when the computer automatically denies
payment and a sham review follows." Appellants' Opening Br. at 28. Their
"individual claims," the Insureds argue, "fall within a subset of the larger class
claims"—namely, instances in which a computer automatically denies payment
and a sham human review follows. Appellants' Opening Br. at 28. We disagree.
As the trial court correctly ruled, the doctrine of judicial estoppel prevents the
Insureds from reconstituting their claims.8
8 On appeal, the Companies contend that the Insureds waived their right to argue that the
trial court erred by "reformulating" their claims. This is so, the Companies assert, because "[the
Insureds'] opening brief does not even mention the legal basis for Judge Yu's summaryjudgment
decision—the doctrine of judicial estoppel—or the factual bases for that decision—[the Insureds']
repeated representations to the federal court regarding the scope of theirclaims, and the federal
court's ruling on that issue." Br. of Resp'ts at 36.
It is true that the Insureds, in their opening brief, are less than forthcoming with regard to
the trial court's invocation of judicial estoppel. Nonetheless, because they did argue at length that
the trial court erred by "reformulating" their claims, itwould be overly harsh for us to categorically
refuse to consider the issue.
-14-
No. 70735-3-1/15
"'"Judicial estoppel is an equitable doctrine that precludes a party from
asserting one position in a court proceeding and later seeking an advantage by
taking a clearly inconsistent position."'" In re Estate of Hambleton. Wn.2d ,
335 P.3d 398, 414 n.5 (2014) (quoting Anfinson v. FedEx Ground Package Svs.,
Inc., 174Wn.2d 851, 861, 281 P.3d 289 (2012) (Quoting Arkison v. Ethan Allen.
Inc.. 160 Wn.2d 535, 538, 160 P.3d 13 (2007))). The doctrine "generally
prevents a party from prevailing in one phase of a case on an argument and then
relying on a contradictory argument to prevail in another phase." Peoram v.
Herd rich. 530 U.S. 211, 227 n.8, 120 S. Ct. 2143, 147 L Ed. 2d 164 (2000);
accord Anfinson, 174 Wn.2d at 864 (citing Peg ram). "There are two primary
purposes behind the doctrine: preservation of respect for judicial proceedings
and avoidance of inconsistency, duplicity, and waste of time." Anfinson, 174
Wn.2dat861.
"Three factors guide judicial estoppel: '(1) whether "a party's later position"
is "clearly inconsistent with its earlier position"; (2) whether "judicial acceptance
of an inconsistent position in a later proceeding would create the perception that
either the first or the second court was misled"; and (3) "whether the party
seeking to assert an inconsistent position would derive an unfair advantage or
impose an unfair detriment on the opposing party if not estopped."'" Hambleton,
In addition, the Companies moved to strike the Insureds' reply brief. Their reasons for
doing so are similarly rooted in the failure ofthe Insureds to squarely address the issue ofjudicial
estoppel in theiropening merits brief. Although the Insureds did not squarely address judicial
estoppel until their reply brief, they did present argumentconcerning the trial court's alleged
"reformulation" of their claims. Given the Companies' emphasis on judicial estoppel in their
responsive briefing, itwas prudent for the Insureds to use their reply brief to address those
arguments. Therefore, the Companies' motion to strike the Insureds' reply brief is denied.
-15-
No. 70735-3-1/16
335 P.3d at 414 n.5 (quoting Arkison, 160 Wn.2d at 538-39 (quoting New
Hampshire v. Maine. 532 U.S. 742, 750-51, 121 S. Ct. 1808, 149 L Ed. 2d 968
(2001))).
A trial court's decision with respect to the application of judicial estoppel is
. reviewed for an abuse of discretion.9 Arkison, 160 Wn.2d at 538. It is an abuse
of discretion to render a decision or order that is manifestly unreasonable,
exercised on untenable grounds, or exercised for untenable reasons. Anfinson,
174Wn.2dat860.
The doctrine of judicial estoppel was properly applied by the trial court.
Aided by Judge Robart's foresight, Judge Yu was prepared for the possibility that
the Insureds would attempt to reconstitute their claims in the wake of securing a
remand to state court by confining their claims to those reductions that were
generated by a computer and were attributable to missing documentation. When
they did so, Judge Yu did well to hold the Insureds to their representations in
federal court, which enabled them to secure a remand to their preferred forum.
In federal court, the Insureds characterized their breach of contract claims
as being based on reductions that were generated by a computer and
9Summary judgment orders and all rulings made in conjunction with summary judgment
are reviewed de novo. Kellar v. Estate of Kellar. 172 Wn. App. 562, 573, 291 P.3d 906 (2012),
review denied. 178Wn.2d 1025 (2013V Momah v. Bharti. 144 Wn. App. 731, 749, 182P.3d455
(2008). However, authority exists for the proposition that, when reviewing a trial court's
application ofjudicial estoppel to bar a claim on summary judgment, the appropriate inquiry is
whether the trial court abused its discretion. Eg^ Harris v. Fortin, 183 Wn. App. 522, 526-27, 333
P.3d 556 (2014). No Washington appellatecourt has endeavored to explain how the abuse of
discretion standard may be squared with the directive that rulings on summaryjudgment must be
reviewed de novo. Yet, regardless of whether our review is de novo or for abuse of discretion, it
is apparent that the trial court's ruling was proper. Because this determination may be made
under either standard of review, we need not resolve the issue herein.
-16-
No. 70735-3-1/17
attributable to missing documentation. Then, in King County Superior Court, they
took the clearly inconsistent position that their claims included reductions
involving human reviews and attributable to documentation that failed to
substantiate the necessity of the treatment. Had Judge Yu accepted this
inconsistent position, itwould have created the perception that Judge Robart,
who envisioned the possibility that the Insureds would attempt to reconstitute
their claims on remand, had been misled. Not only would this undermine respect
for the judiciary, it would result in an unfair advantage to the Insureds by allowing
them to avoid the proper, if undesired, adjudicative forum.
Nevertheless, both in the trial court and now on appeal, the Insureds
maintain that their counsel's characterization of the class claims on their motion
to remand could not limit the class claims that they could pursue in state court.
In support ofthis, they cite to the United States Supreme Court's decision in
Standard Fire Ins. Co. v. Knowles, _ U.S. _, 133 S. Ct. 1345, 185 L Ed. 2d
439 (2013). In Knowles, the Court held that putative members ofa class action
could not, by virtue ofa named plaintiffs precertification stipulation as to the
amount in controversy, have the value oftheir claims reduced, observing that a
named plaintiff "cannot legally bind members ofthe proposed class before the
class is certified." 133 S. Ct. at 1348-49. Knowles did not, however, supplant the
established rule that named plaintiffs may structure the type of claims that they
intend to bring on behalf ofthe putative class members. See, ej^, Lincoln Prop-
Co, v. Roche. 546 U.S. 81, 91, 126 S. Ct. 606, 163 L. Ed. 2d. 415 (2005) ('"In
general, the plaintiff is the master of the complaint and has the option of naming
-17-
No. 70735-3-1/18
only those parties the plaintiff chooses to sue, subject only to the rules of joinder
[of] necessary parties'" (alteration in original) (quoting 16 J. Moore et al.,
Moore's Federal Practice § 107.14[2][c], p. 107-67 (3d ed. 2005))). As the
masters of their own complaint, the Insureds were entitled to narrow the scope of
the class claims in federal court. However, after exercising their prerogative,
they were bound to act in accordance with their representations in subsequent
phases of the case, including the proceedings in King County Superior Court.
Once the Insureds were judicially estopped from reconstituting their
claims, summary adjudication was proper. The Insureds failed to present
evidence—or even to allege—that the named plaintiffs had been denied
coverage based on reductions generated by a computer and attributable to
missing documentation. Therefore, there were no issues offact in need of
resolution, and the Companies were entitled to judgment as a matter of law.
Accordingly, the trial court did not err in granting the Companies' CR 56 motion
and dismissing the Insureds' remaining claims.10
Ill
The Insureds next contend that the trial court erred in dismissing their
CPA claims. This is so, they maintain, because the court ignored the evidence
they presented and failed to adhere to proper procedural rules. We disagree.
10 The Insureds also assert that their "causes of action" for bad faith, declaratory relief,
and violation of the IFCA, as well as their claims against the two named defendants with which
none ofthe named plaintiffs had an insurance policy, were improperly dismissed. Aswith the
dismissal of their breach of contract claims, the Insureds contend that the trial court improperly
reformulated their claims. Because we conclude to the contrary, we decline to grant the Insureds
the appellate relief they seek.
-18-
No. 70735-3-1/19
In her May 13, 2013 order, Judge Yu provided the Insureds with an
opportunity to submit evidence that the named plaintiffs had suffered injury based
on "an alleged practice of reviewing and denying insurance claims by a computer
(without human review)." The Insureds argue that they complied with Judge Yu's
order. They assert that they did so by "submitting undisputed evidence showing
that their bills would have been paid under USAA's payment protocol but for the
computer automatically flagging the bill for non-payment and the bill[] being 'auto
moved' to a nurse or 'professional' for review." Appellants' Opening Br. at 15. In
other words, the Insureds contend that they produced evidence of cognizable
CPA injury as a result of the allegedly improper act of coverage being denied.
The Insureds' position is again belied by the doctrine of judicial estoppel.
By arguing in federal court that the Companies could not show that the out-of-
pocket expenses incurred by the Insureds satisfied CAFA's amount in
controversy requirement, the Insureds secured a remand to their desired forum.
Once they returned to state court, however, the Insureds were not entitled to
change course by arguing that the injury they suffered stemmed from the
allegedly improper act of coverage being denied, rather than as a result of out-of-
pocket expenses they incurred by virtue of coverage being denied. Instead, it
was incumbent upon them, given the position they took in federal court, to
produce evidence of actual damages attributable to out-of-pocket expenses paid
as a result of computer-generated reductions made without human involvement.
19
No. 70735-3-1/20
When they failed to do so, Judge Yu properly dismissed their CPA claims.11
Nevertheless, the Insureds argue that they should not have been required
to produce evidence at the motion to dismiss stage and that, instead, the trial
court should have considered only that which was pleaded in the complaint. Yet,
the complaint did not include any allegations that the named plaintiffs had
suffered injury in the form of out-pocket-expenses caused by computer-
generated reductions made without human involvement. Thus, in effect, the
Insureds challenge an act of largesse by the trial judge, who could have
dismissed the Insureds' CPA claims for failure to state a claim but, rather,
provided the Insureds with an opportunity to produce evidence of actual
damages in the form of out-of-pocket expenses that were caused by computer-
generated reductions made without human involvement. The trial court did not
err. No appellate relief is warranted.
Affirmed.
"-y^,
We concur:
6cj*a .
11 While the Insureds correctly observe that, as a general matter, plaintiffs are not
required to allege and produce evidence of actual damages in order for their CPA claims to
survive both a CR 12 motion and a CR 56 motion, Panag v. Farmers Ins. Co. of Wash., 166
Wn.2d 27, 204 P.3d 885 (2009), the Insureds' representations in federal court left them in a
position where they were, in fact, required to show actual damages to prove their CPAclaims in
state court.
-20-