Chan Healthcare Grp. v. Liberty Mut. Fire Ins. Co.

Opinion

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(unpublished).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:

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