Chambers v. Moses H. Cone Mem’l Hosp., 2021 NCBC 75.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION GUILFORD COUNTY 12 CVS 6126
CHRISTOPHER CHAMBERS, on behalf of himself and all others similarly situated,
Plaintiff,
v. ORDER AND OPINION THE MOSES H. CONE MEMORIAL ON MOTION TO DISMISS HOSPITAL; THE MOSES H. CONE CONDITIONAL COUNTERCLAIMS MEMORIAL HOSPITAL OPERATING CORPORATION d/b/a MOSES CONE HEALTH SYSTEM and d/b/a CONE HEALTH; and DOES 1 through 25, inclusive,
Defendants.
Higgins Benjamin, PLLC, by John F. Bloss, and Law Offices of Barry L. Kramer, by Barry L. Kramer, for Plaintiff Christopher Chambers.
Womble Bond Dickinson (US) LLP, by Philip J. Mohr and Brent F. Powell, for Defendants The Moses H. Cone Memorial Hospital and The Moses H. Cone Memorial Hospital Operating Corporation.
Conrad, Judge.
1. Pending is a question of first impression: may a defendant in a class action
assert counterclaims against unnamed class members before the class is certified?
For the reasons discussed below, the answer is no.
2. An abbreviated background will help frame the issue. This case is about the
billing practices of The Moses H. Cone Memorial Hospital (“Moses Cone”).
Christopher Chambers sued Moses Cone on the ground that it overcharged him and
other self-pay patients who received emergency care. His amended class complaint seeks a declaratory judgment that Moses Cone’s form contract has an open price term,
that it may not bill self-pay patients at so-called Chargemaster rates, and that it is
entitled only to the reasonable value of its services. (See Am. Compl. ¶¶ 40, 41, ECF
No. 49.)
3. Ten years of litigation have yielded little progress. Discovery and class
certification were put on hold while Moses Cone twice tried to end the case. It first
argued mootness after relinquishing any claim it might have against Chambers for
nonpayment. That issue went to the North Carolina Supreme Court, which held that
Chambers could continue to seek class certification and class-wide relief even though
he no longer has a personal stake in the case. On remand from that decision, Moses
Cone again moved for dismissal, arguing that class-wide declaratory relief would
serve no useful purpose. This Court disagreed, denied the motion, and lifted the stay
of discovery. Interested readers will find a more detailed exploration of the facts and
procedural history in these earlier decisions. See generally Chambers v. Moses H.
Cone Mem’l Hosp., 374 N.C. 436 (2020); Chambers v. Moses H. Cone Mem’l Hosp.,
2021 NCBC LEXIS 63 (N.C. Super. Ct. July 19, 2021).
4. After the denial of its second motion to dismiss, Moses Cone counterclaimed
against the unnamed class members for unjust enrichment. In a nutshell, Moses
Cone alleges that most self-pay patients are in arrears and demands damages from
all class members who haven’t paid their bills. The counterclaims are expressly
conditional on class certification—that is, they are intended to take effect only if the
Court certifies a class. (See, e.g., Countercl. ¶¶ 18, 20, 31, 41, ECF No. 122.) 5. Chambers now moves to dismiss the counterclaims. (See ECF No. 123.) His
argument is blunt: members of an uncertified class are not parties and therefore not
susceptible to counterclaims. Moses Cone responds that courts treat unnamed class
members as parties for some purposes and that its counterclaims are compulsory.
After full briefing and a hearing on 19 November 2021, the motion is ripe.
6. Neither side has identified any controlling authority; North Carolina courts
simply haven’t addressed the issue. But the weight of persuasive federal authority,
applying analogous rules, favors Chambers. Although some federal courts see “no
clear answer concerning whether conditional counterclaims may proceed against
non-party putative class members prior to class certification,” Rose v. Friendly Fin.
Corp., 2016 U.S. Dist. LEXIS 2340, at *14 (S.D. Ohio Jan. 8, 2016), most have
dismissed them as premature or otherwise improper, see, e.g., In re Bank of N.Y.
Mellon Corp. Forex Transactions Litig., 42 F. Supp. 3d 520, 527 (S.D.N.Y. 2014);
Circle Click Media LLC v. Regus Mgmt. Group LLC, 2013 U.S. Dist. LEXIS 114463,
at *8–16 (N.D. Cal. Aug. 13, 2013); James D. Hinson Elec. Contr. Co. v. BellSouth
Telcoms., Inc., 2011 U.S. Dist. LEXIS 68538, at *20–24 (M.D. Fla. Mar. 28, 2011).
7. This more prevalent view is compelling. Counterclaims, whether
compulsory or permissive, may target only “an opposing party.” N.C. R. Civ. P. 13(a),
(b). No reasonable understanding of “opposing party” would include members of an
uncertified class. True, absent class members are treated as parties for some
purposes after certification. Not so before certification: “A nonnamed class member
is not a party to the class-action litigation before the class is certified.” Std. Fire Ins. Co. v. Knowles, 568 U.S. 588, 593 (2013) (cleaned up); accord Smith v. Bayer Corp.,
564 U.S. 299, 313 (2011).
8. Moses Cone contends that courts have other tools, short of dismissal, to
manage the sequencing of counterclaims, certification, and everything that follows.
But more than procedure is at play. There are due process concerns too. Because an
uncertified class is really no class at all, its members are not truly before the presiding
court. Certification is the event that, “critically, renders them subject to the court’s
power.” In re Checking Account Overdraft Litig., 780 F.3d 1031, 1037 (11th Cir. 2015);
accord Cruson v. Jackson Nat’l Life Ins. Co., 954 F.3d 240, 250 (5th Cir. 2020). Even
then, class members may have the right to opt out. See Ehrenhaus v. Baker, 216 N.C.
App. 59, 78–82 (2011). Due process principles warn against allowing a defendant to
threaten class members with liability, even in a preliminary way, before the court
has power over them and before they have had a chance to opt into or out of the class.
See Crow v. Citicorp Acceptance Co., 319 N.C. 274, 283 (1987) (stressing “that
fundamental fairness and due process” require notice to class members).
9. Moses Cone also worries that it might have waived its right to counterclaim
had it waited until certification. The law is not so capricious as that. Looking again
to federal decisions, courts do not require defendants to take premature steps against
putative class members just to preserve positions that may never ripen. See, e.g.,
Cruson, 954 F.3d at 250–52 (holding that personal jurisdiction defense was
unavailable before certification and that defendant did not waive it by first raising it
afterward). 10. In short, precertification counterclaims against absent class members are
not authorized by rule, are not necessary for preservation purposes, and may
endanger the due process rights of the absentees. On the other hand, nothing is to
be gained by retaining the counterclaims in limbo. Moses Cone intends to argue that
its counterclaims weigh against class certification, but its argument will be the same
whether they are pending or merely promised. Likewise, class certification discovery
Free access — add to your briefcase to read the full text and ask questions with AI
Chambers v. Moses H. Cone Mem’l Hosp., 2021 NCBC 75.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION GUILFORD COUNTY 12 CVS 6126
CHRISTOPHER CHAMBERS, on behalf of himself and all others similarly situated,
Plaintiff,
v. ORDER AND OPINION THE MOSES H. CONE MEMORIAL ON MOTION TO DISMISS HOSPITAL; THE MOSES H. CONE CONDITIONAL COUNTERCLAIMS MEMORIAL HOSPITAL OPERATING CORPORATION d/b/a MOSES CONE HEALTH SYSTEM and d/b/a CONE HEALTH; and DOES 1 through 25, inclusive,
Defendants.
Higgins Benjamin, PLLC, by John F. Bloss, and Law Offices of Barry L. Kramer, by Barry L. Kramer, for Plaintiff Christopher Chambers.
Womble Bond Dickinson (US) LLP, by Philip J. Mohr and Brent F. Powell, for Defendants The Moses H. Cone Memorial Hospital and The Moses H. Cone Memorial Hospital Operating Corporation.
Conrad, Judge.
1. Pending is a question of first impression: may a defendant in a class action
assert counterclaims against unnamed class members before the class is certified?
For the reasons discussed below, the answer is no.
2. An abbreviated background will help frame the issue. This case is about the
billing practices of The Moses H. Cone Memorial Hospital (“Moses Cone”).
Christopher Chambers sued Moses Cone on the ground that it overcharged him and
other self-pay patients who received emergency care. His amended class complaint seeks a declaratory judgment that Moses Cone’s form contract has an open price term,
that it may not bill self-pay patients at so-called Chargemaster rates, and that it is
entitled only to the reasonable value of its services. (See Am. Compl. ¶¶ 40, 41, ECF
No. 49.)
3. Ten years of litigation have yielded little progress. Discovery and class
certification were put on hold while Moses Cone twice tried to end the case. It first
argued mootness after relinquishing any claim it might have against Chambers for
nonpayment. That issue went to the North Carolina Supreme Court, which held that
Chambers could continue to seek class certification and class-wide relief even though
he no longer has a personal stake in the case. On remand from that decision, Moses
Cone again moved for dismissal, arguing that class-wide declaratory relief would
serve no useful purpose. This Court disagreed, denied the motion, and lifted the stay
of discovery. Interested readers will find a more detailed exploration of the facts and
procedural history in these earlier decisions. See generally Chambers v. Moses H.
Cone Mem’l Hosp., 374 N.C. 436 (2020); Chambers v. Moses H. Cone Mem’l Hosp.,
2021 NCBC LEXIS 63 (N.C. Super. Ct. July 19, 2021).
4. After the denial of its second motion to dismiss, Moses Cone counterclaimed
against the unnamed class members for unjust enrichment. In a nutshell, Moses
Cone alleges that most self-pay patients are in arrears and demands damages from
all class members who haven’t paid their bills. The counterclaims are expressly
conditional on class certification—that is, they are intended to take effect only if the
Court certifies a class. (See, e.g., Countercl. ¶¶ 18, 20, 31, 41, ECF No. 122.) 5. Chambers now moves to dismiss the counterclaims. (See ECF No. 123.) His
argument is blunt: members of an uncertified class are not parties and therefore not
susceptible to counterclaims. Moses Cone responds that courts treat unnamed class
members as parties for some purposes and that its counterclaims are compulsory.
After full briefing and a hearing on 19 November 2021, the motion is ripe.
6. Neither side has identified any controlling authority; North Carolina courts
simply haven’t addressed the issue. But the weight of persuasive federal authority,
applying analogous rules, favors Chambers. Although some federal courts see “no
clear answer concerning whether conditional counterclaims may proceed against
non-party putative class members prior to class certification,” Rose v. Friendly Fin.
Corp., 2016 U.S. Dist. LEXIS 2340, at *14 (S.D. Ohio Jan. 8, 2016), most have
dismissed them as premature or otherwise improper, see, e.g., In re Bank of N.Y.
Mellon Corp. Forex Transactions Litig., 42 F. Supp. 3d 520, 527 (S.D.N.Y. 2014);
Circle Click Media LLC v. Regus Mgmt. Group LLC, 2013 U.S. Dist. LEXIS 114463,
at *8–16 (N.D. Cal. Aug. 13, 2013); James D. Hinson Elec. Contr. Co. v. BellSouth
Telcoms., Inc., 2011 U.S. Dist. LEXIS 68538, at *20–24 (M.D. Fla. Mar. 28, 2011).
7. This more prevalent view is compelling. Counterclaims, whether
compulsory or permissive, may target only “an opposing party.” N.C. R. Civ. P. 13(a),
(b). No reasonable understanding of “opposing party” would include members of an
uncertified class. True, absent class members are treated as parties for some
purposes after certification. Not so before certification: “A nonnamed class member
is not a party to the class-action litigation before the class is certified.” Std. Fire Ins. Co. v. Knowles, 568 U.S. 588, 593 (2013) (cleaned up); accord Smith v. Bayer Corp.,
564 U.S. 299, 313 (2011).
8. Moses Cone contends that courts have other tools, short of dismissal, to
manage the sequencing of counterclaims, certification, and everything that follows.
But more than procedure is at play. There are due process concerns too. Because an
uncertified class is really no class at all, its members are not truly before the presiding
court. Certification is the event that, “critically, renders them subject to the court’s
power.” In re Checking Account Overdraft Litig., 780 F.3d 1031, 1037 (11th Cir. 2015);
accord Cruson v. Jackson Nat’l Life Ins. Co., 954 F.3d 240, 250 (5th Cir. 2020). Even
then, class members may have the right to opt out. See Ehrenhaus v. Baker, 216 N.C.
App. 59, 78–82 (2011). Due process principles warn against allowing a defendant to
threaten class members with liability, even in a preliminary way, before the court
has power over them and before they have had a chance to opt into or out of the class.
See Crow v. Citicorp Acceptance Co., 319 N.C. 274, 283 (1987) (stressing “that
fundamental fairness and due process” require notice to class members).
9. Moses Cone also worries that it might have waived its right to counterclaim
had it waited until certification. The law is not so capricious as that. Looking again
to federal decisions, courts do not require defendants to take premature steps against
putative class members just to preserve positions that may never ripen. See, e.g.,
Cruson, 954 F.3d at 250–52 (holding that personal jurisdiction defense was
unavailable before certification and that defendant did not waive it by first raising it
afterward). 10. In short, precertification counterclaims against absent class members are
not authorized by rule, are not necessary for preservation purposes, and may
endanger the due process rights of the absentees. On the other hand, nothing is to
be gained by retaining the counterclaims in limbo. Moses Cone intends to argue that
its counterclaims weigh against class certification, but its argument will be the same
whether they are pending or merely promised. Likewise, class certification discovery
is under way and does not hinge on the pendency of the counterclaims. Moreover, a
dismissal without prejudice means that Moses Cone is no worse off. If a class is
certified, Moses Cone will have the chance to reassert its counterclaims and, if
needed, to request a reasonable adjustment of the discovery schedule to accommodate
those claims.
11. At the hearing, Chambers urged the Court to go further and hold that
counterclaims are never appropriate against unnamed class members, even after
class certification. But he did not fairly raise that issue in his brief, giving it no more
than a mention in a footnote. And the issue may never resurface if the class is not
certified or if (admittedly unlikely) Moses Cone chooses not to reassert the claims.
These are good reasons not to decide the question now, especially when the conclusion
that Moses Cone’s counterclaims are premature is enough to resolve the motion.
12. For all these reasons, the Court GRANTS Chambers’s motion and
DISMISSES Moses Cone’s conditional counterclaims without prejudice. SO ORDERED, this the 3rd day of December, 2021.
/s/ Adam M. Conrad Adam M. Conrad Special Superior Court Judge for Complex Business Cases