IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
THE EVERETT CLINIC, PLLC, a Washington limited liability company No. 82687-5-I
Appellant, DIVISION ONE
v. UNPUBLISHED OPINION
PREMERA, a Washington corporation, and PREMERAFIRST, INC., a Washington corporation
Respondent.
CHUNG, J. — Premera, a health care insurer, had separate contractual
agreements with the Everett Clinic (TEC) and Eastside Family Medical Clinic
(EFMC) for health care services provided to Premera enrollees. In 2018, TEC
purchased certain assets of EFMC and began charging Premera the
reimbursement rate under the TEC-Premera contract for the services at that
location. Premera continued to reimburse at the lower rate set out in the EFMC-
Premera contract. TEC sued for breach of contract and declaratory judgment.
Premera counterclaimed for breach of contract, tortious interference, and
violation of the Consumer Protection Act (CPA), ch. 19.86 RCW. The trial court
granted Premera’s motion for summary judgment on TEC’s claims for breach of
contract and declaratory relief and on Premera’s CPA claim. The trial court also
awarded Premera attorney fees and costs. No. 82687-5-I/2
We conclude that the TEC-Premera contract allows TEC to charge the
higher reimbursement rate at the newly acquired location and that TEC is not
bound by the EFMC-Premera Agreement under principles of successor liability.
Additionally, Premera has failed to establish that TEC engaged in unlawful tying
in violation of the CPA. Therefore, we reverse the grant of summary judgment for
Premera on both the contract and CPA claims, reverse the awards to Premera of
attorney fees and costs, and remand for entry of summary judgment for TEC on
its breach of contract and declaratory judgment claims.
FACTS
Premera is a not-for-profit company that provides health insurance plans
to more than two million people in Washington State. Premera has contracts for
standard reimbursement rates with many health care providers. Some health
care providers can command much higher reimbursement rates due to their
market power. Premera negotiates directly with these providers to establish their
rates. The Everett Clinic (TEC) is one such provider.
TEC is a large physician group operating multiple clinics that provide
health care services in Washington. As of May 2019, TEC had 550 clinicians
serving 320,000 patients in 30 locations. TEC is the dominant health care
provider in Snohomish County. In 2009, TEC and Premera entered into a
contract for TEC (TEC Agreement) to provide services to Premera enrollees at
an agreed rate. Premera pays TEC among the highest rates in Washington due
to TEC’s market power in Snohomish County.
2 No. 82687-5-I/3
TEC was well-known and respected in Snohomish County but had little
presence in King County. TEC wanted to grow and acquire medical groups in
King County in order to increase its brand presence. To that end, TEC became
interested in purchasing Eastside Family Medical Clinic (EFMC), a small
Bellevue medical practice owned by three physicians. On December 1, 2018,
TEC finalized an asset purchase agreement of certain assets of EFMC, and the
clinic became part of TEC.
Prior to the purchase by TEC, EFMC had its own contract with Premera
(EFMC Agreement) that had a much lower reimbursement rate. The TEC
purchase agreement did not list the EFMC Agreement as a purchased asset or
assigned contract. Because it was not an assigned contract, TEC considered the
EFMC Agreement to be an excluded asset for the purpose of its purchase
agreement. In November 2018, before the asset purchase agreement closed,
TEC requested that Premera begin to pay TEC’s rates from the TEC Agreement
(TEC rate) at the Bellevue clinic 1 as of January 1, 2019. Premera refused and
offered instead to pay a “blended rate,” which TEC did not accept.
When it assumed operations at EFMC, TEC began charging the TEC rate
at the Bellevue clinic. Premera instead continued to reimburse for services
provided at the Bellevue clinic at the rate established by the EFMC Agreement.
The TEC Agreement expired at the end of 2020. In October 2020, Premera sent
a proposal for 2021 rates, to which TEC did not respond.
1 We will refer to the former EFMC after TEC’s asset purchase as “the Bellevue clinic.” 3 No. 82687-5-I/4
In September 2019, TEC filed a complaint for breach of contract against
Premera, requesting damages and a declaration of rights under the TEC
Agreement. Premera answered with counterclaims for breach of the TEC
Agreement by TEC, breach of the EFMC Agreement by EFMC, tortious
interference with the EFMC Agreement by TEC and the prior physician owners of
EFMC, and a violation of the Consumer Protection Act (CPA) through an
unlawful tying arrangement. Premera also asserted as an affirmative defense
that TEC is bound by the EFMC Agreement under the doctrine of successor
liability. EFMC moved to dismiss Premera’s counterclaims for tortious
interference and breach of contract. The trial court granted EFMC’s motion and
dismissed EFMC and its prior physician owners from the case.
In April 2020, Premera filed its own lawsuit against TEC and EFMC
requesting a declaratory judgment that the EFMC Agreement continues in full
effect and that TEC has breached the TEC and EFMC Agreements. The trial
court consolidated the two lawsuits, but they retained their separate identities.
TEC filed a motion to dismiss Premera’s claims in the second suit. The
trial court granted the motion and awarded attorney fees and costs after finding
that Premera initiated the lawsuit in bad faith. Premera appealed, and this court
reversed the dismissal and the award of attorney fees. 2 That case is now stayed
pending resolution of this appeal.
2 Everett Clinic, PLLC v. Premera, No. 81684-5-I, slip op. at 10 (Wash. Ct. App. August 16, 2021) (unpublished) https://www.courts.wa.gov/opinions/pdf/816845.pdf. 4 No. 82687-5-I/5
In this case, in January 2021, TEC filed a motion for partial summary
judgment on Premera’s counterclaims, which the court denied. In March 2021,
Premera moved for summary judgment on its CPA claim and TEC’s claims for
breach of contract and declaratory relief. Also in March 2021, TEC filed a second
summary judgment motion on its claims for breach of contract and declaratory
relief. The trial court granted Premera’s summary judgment motion and denied
TEC’s second summary judgment motion. The trial court also denied TEC’s
motion for reconsideration and entered an award and a supplemental award of
attorney fees and costs for Premera.
TEC appeals.
ANALYSIS
We review orders on summary judgment de novo. Kim v. Lakeside Adult
Family Home, 185 Wn.2d 532, 547, 374 P.3d 121 (2016). Summary judgment is
appropriate when there is no genuine issue of material fact and the moving party
is entitled to judgment as a matter of law. Folsom v. Burger King, 135 Wn.2d 658,
663, 958 P.2d 301 (1998) (citing CR 56(c)). We consider the evidence and
reasonable inferences in the light most favorable to the nonmoving party. Kim,
185 Wn.2d at 547. To defeat summary judgment, the opposing party must set
forth specific facts showing a genuine issue of material fact and may not rely on
allegations or self-serving statements. Newton Ins. Agency & Brokerage, Inc. v.
Caledonian Ins. Grp., Inc., 114 Wn. App. 151, 157, 52 P.3d 30 (2002).
I. Contract Claims
5 No. 82687-5-I/6
Premera’s relationships with both TEC and EFMC are governed by
contract. Washington follows the objective manifestation theory of contracts
where “we attempt to determine the parties’ intent by focusing on the objective
manifestations of the agreement, rather than the unexpressed subjective intent of
the parties.” Hearst Commc’ns, Inc. v. Seattle Times Co., 154 Wn.2d 493, 503,
115 P.3d 262 (2005). Therefore, “[m]utual assent of the parties must be gleaned
from their outward manifestations.” Saluteen-Maschersky, 105 Wn. App. 846,
854, 22 P.3d 804 (2001). Subjective intent lacks relevance if intent can be
determined from the actual words used. Hearst, 154 Wn.2d at 503-04. The court
must examine the reasonable meaning of the words used, giving effect to their
ordinary, usual, and popular meaning unless the entirety of the agreement clearly
demonstrates a contrary intent. Id. at 504. “Courts will not revise a clear and
unambiguous agreement or contract for parties or impose obligations that the
parties did not assume for themselves.” Condon v. Condon, 177 Wn.2d 150, 163,
298 P.3d 86 (2013).
A trial court may examine extrinsic evidence “for the limited purpose of
construing the otherwise clear and unambiguous language of a contract in order
to determine the intent of the parties.” Go2Net, Inc. v. C I Host, Inc., 115 Wn.
App. 73, 84, 60 P.3d 1245 (2003). Thus, extrinsic evidence relating to the context
of the agreement may be examined to determine the meaning of specific words
and terms used, but cannot show “intention independent of the instrument” or
“vary, contradict or modify the written word.” Hollis v. Garwall, Inc., 137 Wn.2d
683, 695-96, 974 P.2d 836 (1999). “The court considers the relevant evidence of
6 No. 82687-5-I/7
the situation and relations of the parties, the subject matter of the transaction,
preliminary negotiations and statements made in those negotiations, trade
usage, and the course of dealing between the parties.” Diamond B Constructors,
Inc. v. Granite Falls Sch. Dist., 117 Wn. App. 157, 161, 70 P.3d 966, 968 (2003).
Both the TEC and EFMC Agreements include the same provisions on
assignment or transfer and on change in ownership or control. Section 9.02 of
both agreements reads:
A. Assignment or Transfer. Provider shall not assign or transfer, or attempt to assign or transfer, the rights, duties or obligations of this Agreement, in whole or in part, including but not limited to assignment or transfer by operation of law, to another Provider, Practitioner, person or entity, or apply or attempt to apply the terms of this Agreement, in whole or in part, to Covered Services provided to Enrollees by another Provider, Practitioner, person or entity, without Plan’s prior written consent.
B. Change in Ownership or Control. Any change in ownership or control of Provider, in whole or in part, directly or indirectly resulting by or from operation of law, merger, acquisition, affiliation, consolidation, stock transfer, asset sale, lease, corporate dissolution or otherwise, shall be deemed an assignment or transfer, or attempted assignment or transfer, of this Agreement that requires Plan’s prior written consent. In the event of any such change or attempted change in ownership or control of Provider, or in the event Provider operates or does business under another name or with another Provider, Practitioner, person or entity, then this Agreement shall continue in full force and effect with respect to Covered Services provided by Provider to Enrollees.
The TEC Agreement establishes TEC as “Provider” and the EFMC Agreement
establishes EFMC as “Provider” for the purposes of their respective individual
contracts with Premera.
The parties’ arguments boil down to different views as to which of the two
agreements controls Premera’s rates of payment to TEC for the services at the
7 No. 82687-5-I/8
Bellevue clinic. TEC argues that rates for services at all its locations are
governed by the TEC Agreement, and that Section 9.02A, which prohibits
applying the Agreement to “Covered Services provided to Enrollees by another
Provider, Practitioner, person or entity,” does not apply to the Bellevue clinic. On
the other hand, Premera asserts that TEC’s purchase of EFMC was a change in
ownership or control, so under Section 9.02B and successor liability principles,
the EFMC Agreement rate applies to services at the Bellevue clinic.
A. The EFMC Agreement
Section 9.02B of the EFMC Agreement requires Premera’s prior written
consent before “[a]ny change in ownership or control of Provider.” Further, in the
event of any such change or attempted change, the Agreement “shall continue in
full force and effect with respect to Covered Services provided by Provider to
Enrollees.”
TEC argues that “TEC’s purchase of certain of EFMC’s assets did not
change the ownership or control of EFMC” because the EFMC Agreement was
an asset excluded from the sale, and it was not identified in the asset purchase
agreement as a “candidate for termination.” Thus, TEC argues, the EFMC
Agreement remained in effect 3—not between Premera and EFMC, but between
Premera and the new corporate entity, DAN MD, that was created solely to wrap
up the accounts receivable and no longer provides patient care. 4 In TEC’s view,
3 Neither party argues that the EFMC Agreement was terminated or that the termination provisions in Part 6 of the Agreement were triggered. 4 As of December 1, 2018, EFMC no longer exists as a corporate entity. The successor corporate entity is DAN MD, P.S. 8 No. 82687-5-I/9
even though DAN MD does not provide services, it is still the “Provider” under the
EFMC Agreement. Therefore, TEC cannot be bound by the requirements of
9.02B that apply to the Provider upon a change of ownership or control.
According to Premera, the EFMC Agreement continues to control the rate
of payment by Premera for services provided at the Bellevue clinic, because this
was a “change in ownership or control” covered by Section 9.02B.
Notwithstanding the creation of DAN MD as a successor corporate entity for the
remaining EFMC assets, Premera asserts TEC stepped into the shoes of EFMC
and is “the Provider” covered by the EFMC Agreement through the doctrine of
successor liability. Premera views TEC’s purchase of EFMC as a de facto
merger and the Bellevue clinic as a “mere continuation” of EFMC. 5
“Washington adheres to the general rule that a corporation purchasing the
assets of another corporation does not become liable for the debts and liabilities
of the selling corporation.” Cambridge Townhomes, LLC v. Pac. Star Roofing,
Inc., 166 Wn.2d 475, 481-82, 209 P.3d 863 (2009). An exception to this rule may
exist, however, where (1) there is express or implied agreement for the
purchaser to assume liability; (2) the purchase is a de facto merger; (3) the
purchaser is a mere continuation of the seller; or (4) the transfer of assets is for
the fraudulent purpose of escaping liability. Id. at 482. Successor liability is an
equitable claim. Columbia State Bank v. Invicta Law Group PLLC, 199 Wn. App.
306, 316, 402 P.3d 330 (2017).
5 Br. of Resp’t at 43 (quoting Hall v. Armstrong Cork, Inc., 103 Wn.2d 258, 261- 62, 692 P.2d 787 (1984)). 9 No. 82687-5-I/10
Thus, the determinative issue is whether the doctrine of successor liability
applies to TEC such that it assumed liability for, and is “the Provider” in, the
EFMC Agreement. Premera does not argue that there is an express or implied
agreement for TEC to assume liability, or that the asset transfer was for the
fraudulent purpose of escaping liability, but rather, focuses on the second two
exceptions to the general rule of no successor liability. TEC argues that the asset
purchase was not a de facto merger, nor is the Bellevue clinic a “mere
continuation” of EFMC. We agree with TEC.
1. De Facto Merger
Premera contends the evidence creates a material issue of fact as to
whether TEC’s purchase of EFMC assets was a de facto merger. We disagree.
A merger or consolidation occurs with the union of two or more
corporations that results in either the absorption of one by the other or a new
corporate entity. Payne v. Saberhagen Holdings, Inc., 147 Wn. App. 17, 25-26,
190 P.3d 102 (2008). The resulting entity is responsible for the liabilities of the
merged or subsumed company. Id. at 26. “De facto merger is a judicial
framework for analyzing the substance of the transaction over its form.” Id.
Courts consider four factors for this analysis: (1) continuity of the business;
(2) continuity of ownership; (3) the seller’s existence ceasing as soon as legally
and practically possible; and (4) the purchaser expressly or impliedly assumes
the seller’s obligations. Id.
“Generally, a de facto merger is found where a seller corporation
continues its business existence as an absorbed part of the buyer and the
10 No. 82687-5-I/11
seller’s shareholders or officers continue their interest in the business after the
dissolution of the selling corporate entity.” Fox v. Sunmaster Prods, Inc., 63 Wn.
App. 561, 570, 821 P.2d 502 (1991). The typical example is “when the
consideration given to the selling corporation for its assets is shares of the
purchasing corporation’s stock, rather than cash.” Cashar v. Redford, 28 Wn.
App. 394, 398, 624 P.2d 194 (1981); Payne, 147 Wn. App. at 26. The rationale is
that shareholders of the seller corporation retain an ownership interest in the
business transferred. Uni-Com Nw., Ltd. v. Argus Publ’g Co., 47 Wn. App. 787,
802, 737 P.2d 304 (1987). Washington courts have generally declined to assign
successor liability under the de facto merger theory without a stock transaction.
See Cashar, 28 Wn. App. at 398; Uni-Com Nw. Ltd., 47 Wn. App. at 803-04;
Payne, 147 Wn. App. at 26.
Premera contends that the lack of a stock transaction for purchase of
EFMC is not fatal, relying on Lehman Bros. Holdings, Inc. v. Gateway Funding
Diversified Mortgage Services, 989 F. Supp. 2d 411, 430-31 (E.D. Pa. 2013),
aff’d, 785 F.3d 96 (3d Cir. 2015). While Lehman Bros., a federal case interpreting
another state’s law, 6 is not controlling here, we agree that a stock transaction is
not required for a de facto merger. “Not all four elements must be present to find
6 In Lehman Bros., a federal court considered similar Pennsylvania law on de facto mergers. 989 F. Supp. 2d at 430-31. The court concluded that an exchange of stock was not necessary to prove continuity of ownership for a de facto merger, relying on a Pennsylvania Supreme Court decision that so held, and which noted the incongruity of a blanket rule that a de facto merger required purchase with stock shares when the state statute governing corporate mergers did not require the same. Id. at 434 (analyzing Fizzano Bros. Concrete Prods., Inc. v. XLN, Inc., 615 Pa. 242, 42 A.3d 951, 968-69 (2012)). 11 No. 82687-5-I/12
an asset purchase constitutes a de facto merger.” Payne, 147 Wn. App. at 26.
However, “continuity of ownership has repeatedly been held essential.” Id.
Here, using the judicial framework for de facto mergers, we determine
there is no triable question of fact as to whether TEC’s purchase of EFMC was a
de facto merger for the purpose of successor liability, particularly because
evidence of the essential element of continuity of ownership is lacking. 7 The
record does show some continuity of business, as after acquisition by TEC, the
Bellevue clinic outwardly continued to function as before. The Bellevue clinic as
part of TEC maintained the same location, retained most of its employees, and
offered the same services. TEC made some changes to procedure and installed
computers in every exam room. But the goal of the acquisition, as stated by
TEC’s business development project manager for the EFMC asset purchase,
was that “an office visit should feel the same on day one as it did the day before
day one.” EFMC informed its patients that the only immediate change would be
that billing statements would come from TEC. The Bellevue clinic initially
7 In support of a de facto merger, Premera submitted a declaration from expert Lawton R. Burns of the Wharton School of the University of Pennsylvania. He opined that the TEC/EFMC combination was a merger rather than an asset purchase. According to Burns, the transaction was a de facto merger because EFMC was absorbed into TEC, EFMC’s owners retained indicia of ownership and continuing control, the enterprise functioned uninterrupted, and EFMC remained only as a paper entity. Thus, on this topic, Burns’s declaration provides an improper legal opinion. “Experts may not offer opinions of law in the guise of expert testimony.” Terrell C. v. Dep’t of Soc. & Health Servs., 120 Wn. App. 20, 30, 84 P.3d 899 (2004). This court makes its own determinations on legal issues. Zwink v. Burlington Northern, Inc., 13 Wn. App. 560, 567, 536 P.2d 13 (1975) (“[I]t is the province of the court to determine questions of law.”). 12 No. 82687-5-I/13
continued to identify itself as Eastside Family Medicine so patients would not be
confused. 8
On the other hand, while many aspects of the Bellevue clinic’s patient-
facing services remained unchanged, it is undisputed that TEC’s business
operations process was superimposed on the normal daily patient operations. All
work involving billing, deposits, and interactions with insurance companies was
relocated to Everett. The reporting structure also changed. Whereas the three
original owners shared their management duties equally and governed together,
after the asset purchase, only Antony Egnal assumed a management role at the
Bellevue clinic. As the facility medical director, he held a general leadership role
and oversaw staffing and management issues at the clinic.
Regarding the “essential” factor for a de facto merger, continuity of
ownership, it is undisputed that the ownership changed. The asset purchase
agreement identified the sellers as Eastside Family Medicine Clinic, a
professional services corporation, and its three physician shareholders, and the
buyers as The Everett Clinic, PLLC and Everett MSO, Inc. (MSO), which
provides non-clinical management services to TEC. The purchase agreement
provided that MSO would purchase identified assets relating to administrative
and/or non-clinical portions of the practice, and TEC would purchase identified
assets relating to the clinical portions of the practice.
8 Initially, after the acquisition, receptionists answered the phone as The Everett Clinic at Eastside Family Medicine. Due to negative feedback, they switched for about a year to “Eastside Family Medicine of The Everett Clinic,” and subsequently, “The Everett Clinic Eastside Family Medicine.” 13 No. 82687-5-I/14
The three physician shareholders of EFMC became employees of TEC.
Although TEC formally designated them as “partner physicians,” that title did not
confer any ownership interest in TEC. They each signed a “physician partner
employment agreement” that provided rights and privileges such as eligibility to
vote and run for election to clinic leadership, the right to appeal terminations, and
removal of geographic restrictions on competition. “Partnership” provided
employment benefits and opportunity for managerial participation rather than any
ownership interest. The former EFMC physicians understood that they were not
owners or shareholders at TEC. Ownership and operational control moved to
TEC and MSO.
Finally, as to the last two factors for determining whether there has been a
de facto merger, while the seller EFMC ceased to exist in December 2018, the
asset purchase agreement clearly identified which of the EFMC’s obligations the
purchasers were assuming and which they were not. The purchase agreement
included specific sections addressing purchased assets, excluded assets,
assumed liabilities, and excluded liabilities. The record establishes that the
purchaser did not expressly or impliedly assume all of the seller’s obligations.
In light of the undisputed evidence, including evidence of a clear change in
ownership, Premera failed to present evidence necessary to establish that TEC’s
purchase of the EFMC practice was a de facto merger.
14 No. 82687-5-I/15
2. Mere Continuation
Premera alternatively contends TEC’s operations at EFMC’s former facility
make it a “mere continuation” of EFMC, leading to successor liability. Again, we
disagree.
In assessing whether a successor business is a “mere continuation” of a
prior entity, courts rely on factors such as “common identity between the officers,
directors, and stockholders of the selling and purchasing companies, and the
sufficiency of the consideration running to the seller corporation in light of the
assets being sold.” Cambridge Townhomes, 166 Wn.2d at 482. The fact that the
purchaser continues the operations of the seller does not necessarily impose
liability. Cashar, 28 Wn. App. at 397. The objective is to determine whether the
purchaser is “merely a ‘new hat’ for the seller.” Id. (internal citations omitted). The
particular form of the business entity is not determinative. Cambridge
Townhomes, 166 Wn.2d at 482.
Where the facts are undisputed, the court may rule whether a successor
entity is a mere continuation of a predecessor entity as a matter of law. See, e.g.,
Northgate Ventures LLC v. Geoffrey H. Garrett PLLC, 10 Wn. App. 2d 850, 450
P.3d 1210 (2019) (affirming summary judgment dismissal of claims against a law
firm; undisputed facts showed that though the same attorney was the sole
member of both the predecessor and new law firm, the new law firm had paid
adequate consideration for the assets, so plaintiff’s mere continuation claim
failed); Cambridge Townhomes, 166 Wn.2d 475 (Supreme Court affirmed
reversal of the trial court’s ruling dismissing claims against a successor
15 No. 82687-5-I/16
corporation, holding corporation was a “mere continuation” of prior sole
proprietorship where it was undisputed that the same individual was the head of
both the initial and subsequent entities and there was no issue regarding
sufficient consideration because there was no sale of assets).
Here, there is no dispute that consideration was paid and that it was
sufficient “in light of the assets being sold.” Cambridge Townhomes, 166 Wn.2d
at 482. 9 And as discussed above, it is also undisputed that the ownership of the
former EFMC changed and there was no “common identity between the officers,
directors, and stockholders of the selling and purchasing companies.” Cambridge
Townhomes, 166 Wn.2d at 482. The three original shareholders of EFMC sold
most of EFMC’s assets to TEC and MSO, who became the new owners of the
Bellevue clinic location.
Premera has not established successor liability such that TEC is bound by
the EFMC Agreement. The requirements and limitations in the event of a change
in ownership or control outlined in section 9.02B do not apply to TEC’s purchase
of EFMC. Because TEC is not the “Provider” in the EFMC Agreement, it is not
obligated by that Agreement to charge the EFMC rates for services at the new
TEC location at the Bellevue clinic.
B. The TEC Agreement
9 Premera makes only a passing statement about the consideration paid for purchase of EFMC, noting that “[t]he value of the employment agreements, and the lucrative retention bonuses they received, explain why the cash that TEC paid was substantially less than the appraisal TEC obtained.” Br. of Resp’t at 49. 16 No. 82687-5-I/17
Premera also maintains that TEC breached Section 9.02A of the TEC
Agreement under which it was obligated to obtain written consent prior to “an
attempt to apply the terms of this Agreement, in whole or in part, to Covered
Services provided to Enrollees by another Provider, Practitioner, person or
entity.” Thus, whether 9.02A of the TEC Agreement applies depends on whether
the Bellevue clinic is “another Provider, Practitioner, person or entity.” We
conclude it is not.
Premera asserts that section 9.02A governs acquisition of another
practice and prohibits TEC from applying the TEC Agreement and its higher rates
to the Bellevue clinic. 10 TEC contends the asset purchase “did not result in
EFMC operating under another name or in conjunction with another business,”
because “TEC alone owns and operates its Bellevue clinic location.” Under this
interpretation, TEC is not “another Provider” but rather, “the Provider” at the
Bellevue location.
The plain language of the Agreement read as a whole supports TEC’s
interpretation. The first line of the TEC Agreement identifies TEC as a party to
the contract and notes TEC will be “hereafter referred to as ‘Provider.’” 11
In the “General Provisions” section, Section 9.01 defines the “relationship
of the parties,” stating “This Agreement shall be construed to confer no rights
10 Section 9.02B is not applicable because there was no “change in ownership or control” of TEC, the Provider in the TEC Agreement. 11 Section 1.14 in the “Definitions” section of the TEC Agreement defines “Provider” as defined as “any individual or entity which agrees to accept from and to look solely to Plan for payment according to the terms of the Subscriber Agreement for Covered Services rendered to Enrollees according to the terms of this Agreement.” 17 No. 82687-5-I/18
whatsoever on any third parties, including Enrollees, other providers, or other
individuals or entities.” Next, also in the “General Provisions” section, Section
9.02A prohibits the assignment of TEC’s contract provisions to “another Provider,
Practitioner, person or entity.”
The dictionary defines “another” as “different or distinct from the one first
named or considered.” W EBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 89
(2002). Because TEC is named as Provider, the plain language of Section 9.02A
prevents assignment of the contract provision to those who are “different or
distinct from” TEC.
Prior to the asset purchase, EFMC was not a TEC entity, and would have
been considered “different or distinct from TEC,” and therefore, “another
Provider” under the TEC Agreement. However, when TEC acquired EFMC’s
assets, EFMC ceased to exist as a health care services provider. The Bellevue
clinic became another TEC location, part of the larger TEC entity that is “the
Provider” for the purposes of the TEC Agreement. Through operation of the asset
purchase, the Bellevue clinic is not “another Provider, Practitioner, person or
entity” subject to the requirement of Premera’s written consent as set out in
Section 9.02A of the TEC Agreement. Therefore, Section 9.02A does not
preclude the assignment or transfer of TEC rates to the Bellevue clinic as a
location of the Provider.
Premera argues that it drafted Section 9.02A to prevent TEC from
transferring the higher rates of reimbursement, necessitated by Snohomish
County market forces, to smaller clinics outside that county. While that may have
18 No. 82687-5-I/19
been Premera’s intent, the language of Section 9.02A does not account for the
fact that the asset purchase and employment agreements with former EFMC
physicians resulted in the assets and employees becoming a part of TEC and no
longer “another Provider, Practitioner, person or entity.” As Premera was the
drafter, any ambiguities in the contract are construed against it. See King v. Rice,
146 Wn. App. 662, 671, 191 P.3d 946 (2008).
Moreover, the TEC Agreement contemplates TEC adding new
practitioners. TEC warrants that any affiliated practitioners meet the Plan’s
credentialing standards and requires TEC to provide notice and certain
information to the Plan, including “ownership, business address, tax identification
number of new persons or entities proposed to be included as a Provider
pursuant to this Agreement ….” Further, the Agreement addresses the situation
of TEC contracting with others to provide covered services and requires the
contracting entities to comply with the Agreement, including with provisions on
payment and billing. 12 These terms in the TEC Agreement indicate that through
those contracts with additional practitioners, those practitioners’ services become
services provided by the Provider rather than by “another Provider.”
12 Section 3.11 states: “Employed or Contracted Providers. If Provider is signing on behalf of a legal entity, each individual physician who is employed by or contracted with such entity must comply with the terms of this Agreement.” CP 2330. Section 4.01F on “Payment and Billing” states, “If Provider contracts with other providers that agree to provide Covered Services to Plan Enrollees with the expectation of receiving payment directly or indirectly from Plan, such Providers and health care facilities must agree to abide by the provisions of A, B, C, D and E of this section [which address limitations on seeking payment and billing of Enrollees].” 19 No. 82687-5-I/20
Extrinsic evidence of the parties’ course of dealing also supports TEC’s
understanding that it is the “Provider” and entitled to reimbursement at its
negotiated rate at all of its locations—even those established by acquisition. 13
TEC has clinics throughout Snohomish County and an increasing number of
clinics in other counties. Historically, the TEC Agreement rate applied to all new
TEC locations. For example, TEC opened new locations in Edmonds,
Woodinville, and Bothell in 2017 and 2018. Premera reimbursed service at all of
these locations under the TEC rate. Also during this period, TEC purchased
assets of Totem Lake Family Medicine that became TEC’s Kirkland location.
After the acquisition, Premera paid the TEC rate at the Kirkland location. In fact,
prior to the Bellevue clinic, Premera had never refused to pay the TEC
Agreement’s reimbursement rate at a new TEC location, whether newly
established or obtained through acquisition of a pre-existing practice. 14 Thus,
TEC’s application of the TEC Agreement and rates to the Bellevue location is not
an improper transfer in violation of Section 9.02A of the TEC Agreement to a
third party in breach of its contract with Premera. Rather, TEC seeks merely to
enforce the terms of the Agreement to the Bellevue location as a part of TEC
itself, the Provider.
13 Course of dealing “ ‘is a sequence of previous conduct between the parties to an agreement which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.’ ” Puget Sound Financial, LLC v. Unisearch, Inc., 146 Wn.2d 428, 436, 47 P.3d 940 (2002) (quoting RESTATEMENT (SECOND) OF CONTRACTS SEC. 223 (1981)). 16 In 2020, Premera declined to pay the TEC rate after a similar acquisition of Island Internal Medicine. 20 No. 82687-5-I/21
The trial court erred in granting summary judgment for Premera on its
breach of contract claim. Instead, Premera is in breach by failing to pay the
reimbursement rate established by the TEC Agreement. TEC is entitled to
summary judgment on its breach of contract claim and declaratory judgment that
Premera is required to reimburse services at the Bellevue clinic at the TEC rates.
II. Consumer Protection Act Claim
Premera argues that TEC violated the CPA by engaging in unlawful tying.
TEC argues that Premera has not proved unlawful tying or other requirements for
a CPA claim. We agree with TEC that the record does not establish a question of
fact regarding unlawful tying, so it is entitled to summary judgment dismissal of
the CPA claim.
The CPA prohibits unfair methods of competition in the conduct of trade or
commerce. RCW 19.86.020. The CPA expressly applies to anti-competitive
activities. “Every contract, combination, in the form of trust or otherwise, or
conspiracy in restraint of trade or commerce is hereby declared unlawful.” RCW
19.86.030. This provision of the CPA is equivalent to section 1 of the federal
Sherman Antitrust Act, 15 U.S.C. § 1, and interpretation of the federal act guides
our state courts. State v. Black, 100 Wn.2d 793, 799, 676 P.2d 963 (1984).
Federal courts have determined, and Washington courts agree, that some
agreements and practices are so plainly anti-competitive that they constitute “per
se” violations of the Sherman Act. Ballo v. James S. Black Co., Inc., 39 Wn. App.
21, 26, 692 P.2d 182 (1984). Unlawful tying arrangements are one such per se
violation. Id. at 26.
21 No. 82687-5-I/22
“Tying is defined as an arrangement where a supplier agrees to sell a
buyer a product (the tying product), but ‘only on the condition that the buyer also
purchases a different (or tied) product. . . .’ ” Brantley v. NBC Universal, Inc., 675
F.3d 1192, 1199 (9th Cir. 2012) (quoting N. Pac. Ry. Co. v. United States, 356
U.S. 1, 5, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958)). Tying arrangements are anti-
competitive because a seller that has market power over the tying product can
leverage that market to exclude other sellers of the tied product. Cascade Health
Sols v. PeaceHealth, 515 F.3d 883, 912 (9th Cir. 2008). “[T]he essential
characteristic of an invalid tying arrangement lies in the seller’s exploitation of its
control over the tying product to force the buyer into the purchase of a tied
product that the buyer either did not want at all, or might have preferred to
purchase elsewhere on different terms.” Jefferson Parish Hosp. Dist. No. 2 v.
Hyde, 466 U.S. 2, 12, 104 S. Ct. 1551, 80 L. Ed. 2d 2 (1984), abrogated on other
grounds by Illinois Tool Works Inc. v. Indep. Ink, Inc., 547 U.S. 28, 126 S. Ct.
1281, 164 L. Ed. 2d 26 (2006). The presence of “forcing” is a key indicator of
restraint on competition in the market for the tied item. Jefferson Parish, 466 U.S.
at 12.
A tying arrangement will constitute a per se violation of the Sherman Act if
the plaintiff can prove (1) the defendant tied together the sale of two distinct
products or services; (2) that the defendant possesses enough economic power
in the tying product market to coerce its customers into purchasing the tied
product; and (3) that the tying arrangement affects a “not insubstantial volume of
22 No. 82687-5-I/23
commerce” in the tied product market. Cascade Health Sols., 515 F.3d at 913.
TEC contends that Premera fails to establish these elements.
Premera argues that the TEC physician services in Snohomish County
and physician services at EFMC in Bellevue are two different products –
specifically, that EFMC services are the tied product that Premera must purchase
in order to secure the tying product of TEC services in Snohomish. According to
Premera, “TEC provides services in Snohomish County and at the EFMC
location to different patients in distinct facilities in different counties that, until an
overnight switch, were sold by separate entities.”
In support of its claim that there are two different products, Premera cites
Jefferson Parish, 466 U.S. at 24, in which a hospital required its surgical patients
to obtain anesthesiology services from specific providers. There, the hospital
“combined the purchase of two distinguishable services in a single transaction.”
Id. The Court noted, “the answer to the question whether one or two products are
involved turns not on the functional relation between them, but rather on the
character of the demand for the two items.” Id. at 19. A tying arrangement cannot
exist unless two separate product markets are linked. Id. at 20-21.
In this case, Premera is purchasing one product, TEC provider services, in
multiple locations. These services’ main distinguishing characteristic is the
location 15 where they are offered, unlike in Jefferson Parish, where anesthesia
services were found to be a product separate from other hospital services. Id. at
15 Various locations may also have different physicians and specialties. 23 No. 82687-5-I/24
24-25. See also Times-Picayune Pub. Co. v. U.S., 345 U.S. 594, 613, 73 S. Ct.
872, 97 L. Ed. 1277 (1953) (the readership “bought” by advertisers in the
morning newspaper was the selfsame “product” sold by the evening paper and
not distinguishable in the eyes of buyers). Here, the purported tied products are
not different products, but the same product in different geographic markets.
Therefore, Premera has not established the first requirement for per se unlawful
tying.
Additionally, Premera’s purchase of services does not have the same
force or coercion present in unlawful tying cases. Unlawful tying is
anticompetitive because it forces the purchase of goods or services not
otherwise desired. Jefferson Parish, 466 U.S. at 26; Cascade Health, 515 F.3d at
915. But TEC’s acquisition of EFMC does not force Premera to buy a service it
does not want. Premera historically purchased physician services from EFMC
and provides no evidence of an interest in discontinuing those services after
TEC’s purchase of the practice. Rather, Premera wants the product—the
services in Bellevue—but at a different rate from the price at the other TEC
locations. While a situation in which a party uses its market power to drive up
24 No. 82687-5-I/25
prices can be anticompetitive, 16 here, Premera has not shown per se unlawful
tying to satisfy the unfair practice component of a CPA claim. 17
Because Premera failed to establish unfair practice as required for a CPA
claim, TEC was entitled to summary judgment and dismissal of the CPA claim.
CONCLUSION
We reverse the trial court’s summary judgment in favor of Premera on its
CPA claim and on TEC’s claims for breach of contract and declaratory relief.
Because we reverse the court’s order granting summary judgment on the CPA
claim, we also reverse the awards to Premera of attorney fees and costs that are
predicated on the CPA claim. Finally, we remand for entry of summary judgment
16 Premera mischaracterizes the holding in Washington v. Franciscan Health System, 388 F. Supp. 3d 1296 (W.D. Wash. 2019). This was not a tying case, but rather, a challenge to Franciscan Health System’s acquisition of a multi-specialty group. The claim there was that agreements by Franciscan and a multispecialty physician group to jointly negotiate prices constituted a horizontal price-fixing agreement that was per se illegal or otherwise constituted an unreasonable restraint of trade in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, and that the effect of the acquisition was to substantially lessen competition to create a monopoly in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18. Id. at 1299. 17 Premera also raises another ground for its CPA claim, that TEC violated antitrust laws by acquiring information from EFMC that detailed financial information about EFMC’s relationship with Premera before closing the asset purchase. TEC refers to this as Premera’s horizontal price fixing argument. However, Premera did not make this argument below. In support of this ground, Premera cites only to an article published by the Federal Trade Commission that “ ‘collection of company-specific information about future product offerings, price floors, discounting practices, expansion plans, and operations and performance’ before closing of the acquisition is an antitrust violation under the Sherman Act.” Br. of Resp’t at 68-69 (quoting Holly Vedova et al., Avoiding antitrust pitfalls during premerger negotiations and due diligence, Fed. Trade Comm’n (Mar. 20, 2018), https://www.ftc.gov/newsevents/blogs/competition- matters/2018/03/avoiding-antitrustpitfalls-during-pre-merger). Premera fails to provide citations to legal authority and argument as to this alleged antitrust violation. We do not consider conclusory arguments that are unsupported by citation to authority. Brownfield v. City of Yakima, 178 Wn. App. 850, 876, 316 P.3d 520 (2014); RAP 10.3(a)(6). Nor must we consider an argument raised for the first time on appeal. RAP 2.5(a). 25 No. 82687-5-I/26
for TEC on its claim for breach of the TEC Agreement and for declaratory
judgment and for further proceedings consistent with this opinion.
Reversed.
WE CONCUR: