Grandalski v. Quest Diagnostics Inc.

Citation767 F.3d 175
Decision Date11 September 2014
Docket NumberNo. 13–4329.,13–4329.
PartiesRichard GRANDALSKI; Janet Grandalski; Denise Cassese, individually and on behalf of all others similarly situated, Appellants v. QUEST DIAGNOSTICS INC; Retrieval Masters Creditors Bureau, Inc., d/b/a American Medical Collection; Credit Collection Services; Credit Bureau Central; Quantum Collections; Does 1 to 50.
CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)

OPINION TEXT STARTS HERE

Nicole M. Acchione, Esquire, Lisa J. Rodriguez, Esquire (Argued), Schnader Harrison Segal & Lewis, LLP, Cherry Hill, NJ, Joseph S. Tusa, Esquire, Southold, NY, Joseph S. Tusa, Esq., Tusa, Southolg, NY, for Appellants.

Diane A. Bettino, Esquire, Mark S. Melodia, Esquire, Reed Smith, Princeton, NJ, Robert N. Hochman, Esquire (Argued), Sidley Austin, Chicago, IL, James S. Murphy, Esquire, Garrity, Graham, Murphy, Garofalo & Flinn, East Hanover, NJ, for Appellees.

Before: RENDELL, CHAGARES and JORDAN, Circuit Judges.

OPINION

RENDELL, Circuit Judge:

Appellants filed a putative class action alleging that Quest Diagnostics Inc., a medical testing company, routinely overbilled patients. The District Court denied certification as to all four of Appellants' proposed classes. Following the denial, the Court granted summary judgment against an individual Appellant, Denise Cassese, as to her state law consumer deception claim. For the reasons that follow, we will affirm the District Court's judgments.

I. Background

Quest Diagnostics is the country's largest provider of diagnostic and clinical testing. In general, it tests a patient's specimens upon the request of a referring physician. Once Quest bills a patient's insurance provider, the provider reviews the claim and sends Quest an Explanation of Benefits (“EOB”) or an Electronic Remittance Advice (“ERA”), which informs Quest of the amount, if any, that the patientis responsible for paying. Quest then sends the patient a bill, and, if no response is received, it may turn the bill over to a collection agency. Appellants advance numerous claims, but the heart of the case is the allegation that Quest billed patients in excess of the amount stated on the EOB or ERA.

Appellants sought certification of several classes related to this alleged overbilling.1 First, they proposed a class of all persons who were billed by Quest and who paid an amount in excess of that stated on an EOB or ERA provided to Quest prior to the date of the bill (hereinafter, “Post–EOB Billing Class”). In addition, Appellants sought to certify a class of those persons similarly overbilled by Quest, who were members, participants, subscribers or beneficiaries of Anthem Blue Cross and Blue Shield and the Federal Employee Health Benefits Program (hereinafter, “Anthem BCBS FEHB Program Class”). At oral argument, Appellants acknowledged that this class is properly regarded as a subclass of the Post–EOB Billing Class. Appellants pled multiple causes of action for both classes and on appeal urge that the District Court erred in denying certification as to two such claims: state law consumer fraud and unjust enrichment.

Because Appellants proposed these two nationwide litigation classes (as distinct from settlement classes), the District Court engaged in a choice of law analysis for the state consumer fraud claim, and found that the law of the class members' home states would apply. However, the Court concluded that applying so many different fraud statutes would be unwieldy and inappropriate for class treatment at trial. It further held that Appellants had not carried their burden to show precisely how the statutes could be grouped into a few categories for litigation, and accordingly denied certification to the Post–EOB Billing Class and the Anthem BCBS FEHB Program Class as to their state consumer fraud claims.

Concerning the unjust enrichment claim, the District Court found that there were numerous explanations for overbilling that would not be wrongful or unjust. Thus, the Court held that the evidentiary showing required for each class member to show unjust enrichment would be highly individualized, such that common issues of fact did not predominate between the class members. The Court further held that because the class definitions implicitly included a requirement of wrongful loss, given the attendant difficulty of determining liability, the classes themselves were not reasonably ascertainable. Accordingly, the Court denied certification for the Post–EOB Billing Class and the Anthem BCBS FEHB Program Class as to their unjust enrichment claim.

Separately, Appellants proposed a class of all persons who received written demands from debt collectors retained by Quest which “i) stated that the debt collector may engage in ‘additional’ or ‘further’ collection efforts or may report a delinquency to credit bureaus; or ii) added interest, charges or penalties in excess of the original amount billed by Quest.” (App.19.) (hereinafter, “Debt Collector Victim Class”) 2 Appellants state that they are now seeking certification as to only the second prong of that class, and only pursuant to a claim that the debt collectors violated the Fair Debt Collection Practices Act (“FDCPA”). On that issue, the District Court found that the proposed representative plaintiff, Richard Grandalski, was not a member of the Debt Collector Victim Class because he had never received a written demand from debt collectors. Without a representative plaintiff, the Court denied certification as to prong (ii) of the Debt Collector Victim Class on the FDCPA claim.

Finally, following the denial of class certification, the District Court granted summary judgment against Denise Cassese, in her individual capacity, as to her claim under New York General Business Law § 349.

II. Jurisdiction and Standard of Review

The District Court had jurisdiction pursuant to, inter alia,28 U.S.C. § 1331, and we have jurisdiction under 28 U.S.C. § 1291. We review a class certification order for abuse of discretion, which occurs if the district court's decision ‘rests upon a clearly erroneous finding of fact, an errant conclusion of law or an improper application of law to fact.’ We review whether an incorrect legal standard has been used de novo. Hayes v. Wal–Mart Stores, Inc., 725 F.3d 349, 354 (3d Cir.2013) (citation omitted).

Separately, on review of summary judgment we employ the same standard as the District Court pursuant to Fed.R.Civ.P. 56(a), that [t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”

III. Analysis

Pursuant to Fed.R.Civ.P. 23(a), class representation is permissible if (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.” Further, a class action can be maintained if all above requirements are satisfied, and, as relevant to this case, “the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed.R.Civ.P. 23(b)(3).

Appellants take issue with several of the District Court's rulings as to these requirements. First, Appellants object to the denial of certification as to their state law consumer fraud claims. Specifically, Appellants contend that the District Court should not have engaged in a choice of law analysis at the certification stage. Appellants urge alternatively that the choice of law ruling was incorrect. As a further alternative, Appellants argue that even if the local laws of 42 states applied to the state claims, class treatment was warranted because the laws can be grouped for litigation purposes.

Separately, Appellants argue that certification should have been granted as to their claims of unjust enrichment, because common issues of fact predominated. Appellants also argue that the District Court erred in denying certification to the Debt Collector Victim Class. Finally, Appellants object to the dismissal of Denise Cassese's individual claim. We address these arguments in turn.

A. State Law Consumer Fraud Claims
1. Choice of Law Analysis Was Not Premature

As noted above, the District Court sought to determine which state law would govern the state consumer fraud claims for the proposed nationwide Post–EOB Billing Class and Anthem BCBS FEHB Program Class. Appellants argue that the District Court should not have engaged in this choice of law analysis at the class certification stage, citing Sullivan v. DB Investments, Inc., 667 F.3d 273 (3d Cir.2011) (en banc). There, we noted that “many courts find it inappropriate to decide choice of law issues incident to a motion for class certification.” Id. at 309 (citation and quotation marks omitted).

However, Sullivan concerned settlement classes, which do not pose the types of management problems that can arise in a nationwide class action trial. We specifically stated in Sullivan:

Because we are presented with a settlement class certification, we are not as concerned with formulating some prediction as to how [variances in state law] would play out at trial, for the proposal is that there be no trial. As such, we simply need not inquire whether the varying state treatments of indirect purchaser damage claims at issue would present the type of ‘insuperable obstacles' or ‘intractable management problems' pertinent to certification of a litigation class.

Id. at 303–04. We recognized that “there may still be circumstances ... where [i]n a multi-state class action, variations in state law may swamp any common issues and defeat predominance.’...

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