Chan Healthcare Group v. Liberty Mutual Fire Ins. Co. ( 2017 )

2011DEC 11 L.,U .
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION ONE
CHAN HEALTHCARE GROUP, PS, ) No. 75541-2-1
a Washington professional services)
corporation, )
)
Respondent, )
)
v. )
)
LIBERTY MUTUAL FIRE INSURANCE )
COMPANY and LIBERTY MUTUAL )
INSURANCE COMPANY,foreign ) PUBLISHED OPINION
insurance companies, )
) FILED: December 11, 2017
Petitioners. )
)
VERELLEN, C.J. — This appeal turns on the standard governing a due
process collateral attack on a sister state's resolution of a multistate class action.
Under full faith and credit principles, a collateral attack in Washington fails if that
same due process challenge was raised, litigated, and decided in the sister state.
Under these circumstances, Washington courts do not second guess the analysis
and resolution by the trial and appellate courts in the sister state.
Because the substance of respondent's due process claim of inadequate
representation was raised, litigated, and decided in Illinois, the Illinois settlement is
entitled to full faith and credit.
Therefore, we reverse.
No. 75541-2-1/2
FACTS
This appeal concerns use by Liberty Mutual Insurance Company (Liberty) of
a computerized database to determine the amounts payable for treatments
covered by personal injury protection (PIP) coverage under automobile insurance
policies. Washington's PIP statute requires automobile insurers to pay all
reasonable and necessary medical expenses incurred by the insured.' Insurers
must "conduct[]a reasonable investigation" before refusing to pay claims.2
Liberty sets the benchmark reasonable medical charges payable using the FAIR
Health database, reflecting other healthcare provider charges in the same
geographic area.
Liberty's use of the FAIR Health database was previously challenged in
Lebanon Chiropractic Clinic v. Liberty Mutual Insurance Company, a multistate
class action lawsuit litigated in Illinois.3 The class included Washington providers.
The lawsuit alleged that Liberty's use of the FAIR Health database was unfair
under the Illinois Consumer Fraud and Deceptive Business Practices Act4 and
other states' equivalent acts, including the Washington Consumer Protection Act.5
Chan, a Lebanon class member, received reasonable notice and did not opt out.
1 RCW 48.22.095(1), .005(7).
2 WAC 284-30-330(4).
3 No. 5-15-0111, 150111,2016 IL App (5th) 150111-U, 2016 WL 546909(Feb. 9, 2016)(unpublished).
4 815 ILL. COMP. STAT. ANN. 505/1 (2007).
5 Ch. 19.86 RCW.
2
No. 75541-2-1/3
In October 2014, the parties in Lebanon reached a proposed class
settlement. In January 2015, class member Dr. David Kerbs, a Washington
chiropractor, filed an objection to the proposed settlement asserting, among other
things,"Lebanon Chiropractic Clinic is an inadequate class representative for
Washington providers and has a conflict of interests with Washington providers."6
Dr. Kerbs argued the conflict of interest was the result of differences between
Illinois and Washington's consumer protection statutes.
In February 2015, following a fairness hearing, the Illinois court entered a
final order and judgment approving settlement and dismissing the case. In the
order, the court acknowledged Dr. Kerbs' objection, overruled all objections to the
proposed settlement, and determined the named plaintiff was an adequate
representative.7
Dr. Kerbs appealed the judgment to the Appellate Court of Illinois. He
specifically challenged the adequacy of representation resulting from conflict
between the Illinois and Washington's consumer protection and PIP statutes. In
February 2016, the Illinois appellate court affirmed the trial court in an unpublished
opinion.8
In September 2015, while Dr. Kerbs' appeal was still pending in Illinois,
Chan Healthcare Group, PS(Chan)filed the current case against Liberty in King
6 Clerk's Papers(CP)at 4042.
7 See CP at 4155-56.
8 Lebanon Chiropractic, 2016 WL 546909, at *15.
3
No. 75541-2-1/4
County Superior Court. Chan alleged Liberty's reliance on the FAIR Health
database constituted an unfair practice under the Washington Consumer
Protection Act.
Chan moved for a declaratory judgment that Lebanon did not preclude the
claims because the class representative was an inadequate representative.
Liberty moved for summary judgment seeking dismissal of the case. The superior
court declined to give full faith and credit to the Lebanon settlement and found the
named plaintiff in Lebanon did not adequately represent the interests of
-
Washington providers. The trial court granted Chan's motion and denied Liberty's
motion.
We granted Liberty's motion for discretionary review.
ANALYSIS
Liberty contends the trial court erred when it failed to give full faith and
credit to the Lebanon settlement.
We review a court's refusal to accord full faith and credit to a foreign
judgment de novo.° The full faith and credit clause of the United States
Constitution requires states "to recognize judgments of sister states."1° A state
court judgment in a class action is "presumptively" entitled to full faith and credit
9 OneWest Bank, FSB v. Erickson, 185 Wn.2d 43, 56, 367 P.3d 1063(2016).
10 Id. at 55 (citing U.S. CONST. art. IV,§ 1).
4
No. 75541-2-1/5
from the courts of other jurisdictions.11 "[P]arties can collaterally attack a foreign
order 'only if the court lacked jurisdiction or constitutional violations were
involved.'"12 Specifically, "a foreign state is not required to give full faith and credit
to a judgment against an affected party who did not receive due process when the
judgment was entered."13 Due process in a class action requires (1)"'reasonable
notice' that apprises the party of the pendency of the action, affords the party the
opportunity to present objections, and describes the parties' rights,"(2)the
opportunity to opt out, and (3)"a named plaintiff who adequately represents the
absent plaintiffs' interests."14
Here, there is no dispute Chan had adequate notice and did not exercise
the right to opt out. The sole dispute is whether Chan can collaterally attack the
Lebanon settlement for lack of adequate representation. We must decide, under
full faith and credit, the standard for a collateral attack asserting lack of due
process in a sister state's class settlement approval.
In In re Estate of Tolson, Division Two of this court considered whether a
Washington court was bound in a probate proceeding to a prior determination by a
California court that decedent was domiciled in California at date of death.15
11 Matsushita Elec. Indus. Co., Ltd. v. Epstein, 516 U.S. 367, 374, 1168.
Ct. 873, 134 L. Ed. 2d 6(1996).
12 OneWest Bank, 185 Wn.2d at 56 (quoting State v. Berry, 141 Wn.2d 121,
128, 5 P.3d 658 (2000)).
13 Nobl Park, L.L.C. of Vancouver v. Shell Oil Co., 122 Wn. App. 838, 845,
95 P.3d 1265(2004).
14 Id.15 89 Wn. App. 21, 32, 947 P.2d 1242(1997).
5
No. 75541-2-1/6
Division Two concluded that while "enforcement of a judgment under [the full faith
and credit clause] can be challenged by a showing that the court rendering
judgment lacked jurisdiction[,]. .. it is also well settled that if the jurisdictional
question has been litigated in the rendering court, principles of res judicata attach,"
and that question cannot be relitigated on collateral attack.16
Our Supreme Court adopted a similar approach in OneWest Bank, FSB v.
Erikson when considering "whether a Washington court must give full faith and
credit to an Idaho court order encumbering Washington property."17 "This case
arose through OneWest Bank FSB's attempted foreclosure of Washington
property based on a reverse mortgage that an Idaho court ordered through [the
decedent's] conservatorship proceeding."18 The decedent's daughter
"challeng[ed] the foreclosure, claiming the reverse mortgage [was] void because
she was the actual owner of the property and the Idaho court had no jurisdiction to
affect Washington property."19
Our Supreme Court concluded,"[W]e cannot question [the decedent's]
domicile because the personal jurisdiction issue was already litigated and decided
in the Idaho conservatorship proceedings."26 The court was persuaded the issue
of jurisdiction was already litigated and decided because the record, chiefly the
16 Id.(emphasis added).
17 185 Wn.2d 43, 55, 367 P.3d 1063(2016).
18 Id. at 47-48.
19 Id.29 Id. at 57(emphasis added).
6
No. 75541-2-1/7
Idaho court's docket entries, revealed the decedent "objected to personal
jurisdiction in the Idaho court, but the court denied his objection and exercised
jurisdiction over him."21
Although we do not have the particular Idaho court order at issue, we
have sufficient evidence that the Idaho court considered challenges
to [the decedent's] domicile and ruled that it had jurisdiction to
appoint a conservator over him. ... There was enough evidence for
the Idaho court to conclude it had sufficient contacts to exercise
jurisdiction over [the decedent]. If[the daughter] wanted to challenge
this determination, the Idaho court was the proper forum for doing
so. She cannot collaterally attack that determination here.E22]
Limited collateral review of a sister state court's finding of jurisdiction as
provided by Tolson and OneWest Bank is consistent with nonbinding federal
authority addressing the scope of collateral review in the context of a due process
challenge to a foreign court's class settlement approval.
In Epstein v. MCA, Inc., the Ninth Circuit addressed the effect of a
Delaware state court judgment that approved a class action settlement releasing
exclusively federal claims.23 The Ninth Circuit rejected a broad, merit-based
collateral review and held that collateral review is limited to "whether the
procedures in the prior litigation afford the party against whom the earlier judgment
is asserted a 'full and fair opportunity' to litigate the claim or issue."24 Due process
21 Id. at 58.
22 Id.(emphasis added).
23 179 F.3d 641,643(9th Cir. 1999).
24 Id. at 649(emphasis added).
7
,No. 75541-2-1/8
"does not require collateral second-guessing of those determinations and that
review."25
Consistent with Tolson, OneWest Bank, and Epstein, we hold Washington
courts do not relitigate questions of due process previously raised, litigated, and
decided by a sister state court when approving a class settlement. To determine
whether a due process issue has been previously raised, litigated, and decided,
we consider(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. If, after conducting this
limited collateral review we are reassured the sister state court litigated and
decided the same due process objection currently raised, we will not second
guess the determination of that court.26
Here, Chan reargues Dr. Kerb's contention that the class representative in
Lebanon inadequately represented Washington providers, noting
there are fundamental differences between the Washington and
Illinois consumer protection acts (including the public interest impact
prong in Washington and the more restrictive requirement in Illinois
of intent); between the remedies available in Washington and Illinois
(e.g. treble damages versus punitive; rates of interest in judgments);
and most importantly in the substantive laws underlying the
25 Id. at 648.
26 The parties disagree about the significance of the Ninth Circuit decision in
Hesse v. Sprint Corporation, 598 F.3d 581, 588 (9th Cir. 2010). At most, the
Hesse decision recognizes that in the absence of any determination of adequate
representation by the forum state, a collateral attack review of adequate
representation is permissible. But here, the question of adequate representation
of Washington class members was raised, litigated, and decided in both the Illinois
trial and appellate courts.
8
No. 75541-2-1/9
[consumer protection act] claims of Washington and Illinois
providers.[271
But the same objection concerning lack of adequate representation was
before the Illinois trial court in Lebanon. Dr. Kerbs objected to the proposed
settlement because, among other things,"Lebanon Chiropractic Clinic is an
inadequate class representative for Washington providers and has a conflict of
interests with Washington providers."28
The parties in Lebanon presented briefing on that specific conflict of
interest. In his written objection, Dr. Kerbs argued:
Washington providers have rights and causes of action for relief
under the Washington Consumer Protection Act not possessed or
available to Lebanon as an Illinois provider. Lebanon could not
adequately represent Washington providers and had a conflict of
interests in obtaining benefits that benefited Lebanon but not
Washington providers who get nothing under the Lebanon settlement
and see key benefits and rights taken away from them.[281
The court also received responses from Liberty and the class
representative rebutting Dr. Kerbs' various objections. The class representative
specifically addressed Dr. Kerbs' argument concerning differences between Illinois
and Washington law:
While [Dr. Kerbs and another objector] claim that a conflict exists,
neither has specified one. Objector Kerbs fails to identify how rights
under the Washington Consumer Protection Act are different. ... In
the end, there is no material difference or conflict, and both
27 Resp't's Br. at 20.
28 CP at 4042.
29 CP at 4049-50.
9
No. 75541-2-1/10
Objectors simply argue that providers from their respective states
have done or could do better.[30]
The record of the arguments made to the Illinois trial court is more detailed
than the docket entries relied on in OneWest Bank.31
And the issue of adequate representation was decided by the Illinois trial
court. In the written order approving class settlement, the court "overrule[d] all
objections to the Stipulation and the proposed Class Settlement and approve[d] all
provisions and terms of the Stipulation and the proposed Class Settlement in all
respects."32 The Illinois trial court also determined "Plaintiff Lebanon Chiropractic
Clinic. . . and Class Counsel will fairly and adequately protect the interests of the
Settlement Class."33 In context, this was not a mere boilerplate finding of
adequate representation.
Dr. Kerbs appealed, and the Illinois appellate court considered the same
issue of inadequate representation stemming from alleged conflicts between
Illinois and Washington law.34
In his brief to the Illinois appellate court, Dr. Kerbs renewed his specific
argument concerning differences in available relief under Illinois and Washington
30 CP at 4073.
31 OneWest Bank, 185 Wn.2d at 58.
32 CP at 4156.
33 CP at 4154.
34 See CP at 4671 (notice of appeal to appellate court of Illinois)("Lebanon
Chiropractic Clinic is an inadequate class representative for Washington providers
and has a conflict of interest with Washington providers because Lebanon does
not possess a Washington CPA claim and cannot obtain the broader relief
available to Washington health care providers.").
10
No. 75541-2-1/11
law.35 He argued the class representative had a conflict of interest with
Washington providers because
the Washington Act provides for treble damages, attorneys fees and
litigation costs and prejudgment interest at the rate of 12% per
annum on the award of actual damages. Lebanon did not have
claims that would provide such relief. It was therefore in Lebanon's
interests to negotiate a settlement with Liberty in which Washington
providers got nothing.[38]
In response, Liberty Mutual claimed
Dr. Kerbs' argument that the damages available under the
Washington Consumer Protection Act are marginally greater than
those available under the Illinois Consumer Fraud Act is legally
irrelevant. Even if his damages calculations are correct, Dr. Kerbs
fails to explain how such a difference creates antagonistic interests
between Plaintiff and Washington providers.[371
The class representative similarly argued,"Objector Kerbs has never
identified any relief that Lebanon Chiropractic sought that is antagonistic to the
interests of the Washington provider class members.. . In the end, Objector Kerbs
simply argues that Washington providers might'do better.'"38
The Illinois appellate court's unpublished opinion addressed Dr. Kerbs'
adequate representation objection, described the appropriate legal standards for
analyzing adequate representation, and rejected the claims:
36 SeeCP at 4354(Lebanon "has no claim that Liberty's reductions made to
Washington provider bills using the FAIR Health database violated Washington
insurance regulations, the Washington PIP or CPA.").
36 CP at 4354-55(emphasis omitted).
37 CP at 349(emphasis omitted).
38 CP at 1738.
11
No. 75541-2-1/12
Kerbs argues the trial court abused its discretion in approving
the settlement where Lebanon did not fairly and adequately protect
the interests of the class members.. .. When evaluating whether the
class representative can provide fair and adequate representation, the
court must determine that the representative party is not seeking relief
which is potentially antagonistic to the members of the class... .
Here, in support of his objection filed with the trial court, Kerbs
identified the following relief that was sought by Lebanon that was
antagonistic to the interests of the Washington providers:... that
Washington law requires payment of all reasonable charges[,] and
that Washington providers receive nothing under the Lebanon
settlement.[39]
It is clear the Illinois appellate court was aware of and rejected Dr. Kerbs'
argument concerning material differences between Washington and Illinois law.4°
The court observed that Kerbs had not demonstrated any "outcome-determinative
differences in Washington law and Illinois law."41
Dr. Kerbs did not seek review by the Illinois Supreme Court. The Illinois
state court system was the appropriate avenue for continuing to challenge the
certifying court's determination of adequate representation.42
39 Lebanon Chiropractic, 2016 WL 546909, at *13-14.
40 Id. at 11 ("[I]n his appellate briefs, Kerbs notes that Illinois is an at-fault
state where Washington is a no-fault state, Illinois has no comparable PIP statute
requiring the payment of all reasonable medical expenses submitted, and Illinois
has no comparable insurance regulation requiring insurers to investigate a PIP
claim before refusing to pay a claim.")
41 Id.42 See Nobl Park, 122 Wn. App. at 845, n.3 ("[A] party's right to due process
is protected by the court certifying a class action and the court's reviewing
subsequent appeals in the state issuing the judgment in such action; it is not the
obligation of the courts of another state to collaterally review due process
challenges.").
12
No. 75541-2-1/13
In essence, Chan asks this court to take on the role of the Illinois trial court
deciding the issue of adequate representation. But we do not review de novo
whether we would have found adequate representation as the Illinois trial court.
Neither do we decide whether we would have affirmed the trial court determination
of adequate representation sitting as the Illinois appellate court. And we do not
consider whether we would have affirmed the appellate court's decision if we were
the Illinois Supreme Court.
In conducting a full faith and credit analysis, we do not dwell on the precise
rationale and analysis used by the sister state to resolve the due process claim.
To allow an automatic de novo review by collateral attack whenever lack of due
process is alleged would be contrary to full faith and credit principles emphasizing
the importance of finality.
The scope of collateral attack is narrow. Our consideration of the argument
and materials before the Illinois court is limited to whether the issue at hand was
raised, litigated, and decided by that court. Chan contends the issues litigated in
Illinois are completely different than the issues raised in Washington. But in
Illinois, Dr. Kerbs argued the Lebanon plaintiff was an inadequate representative
because differences between the consumer protection and PIP statutes in
Washington and Illinois created a conflict of interest. Chan now attempts to revive
those same claims that were raised, litigated, and decided in the Illinois trial and
13
No. 75541-2-1/14
< appellate courts.43 Chan's collateral attack fails. The Lebanon settlement is
entitled to full faith and credit."
Therefore, we reverse.
WE CONCUR:
--.C
:10'elt•-
. ,c
43 To the extent Chan suggests Washington class action standards are
different than Illinois, he provides no authority that the due process standards
applicable to class action settlements vary.
44 We deny Liberty's motion to strike Chan's statement of additional
authorities.
14