Chipman v. Nw. HealthCare Corp.

• Decision Date: 30 October 2012
• Docket Number: No. DA 12–0050.,DA 12–0050.
• Citation: 366 Mont. 450,288 P.3d 193,2012 MT 242
• Parties: Sheila CHIPMAN, Deborah Wallen, and Ellen Hames, individually and on behalf of all others similarly situated, Plaintiffs and Appellees, v. NORTHWEST HEALTHCARE CORPORATION, and Kalispell Regional Medical Center, et al., Defendants and Appellants.
• Court: Montana Supreme Court

366 Mont. 450

288 P.3d 193

2012 MT 242

Sheila CHIPMAN, Deborah Wallen, and Ellen Hames, individually and on behalf of all others similarly situated, Plaintiffs and Appellees,

v.NORTHWEST HEALTHCARE CORPORATION, and Kalispell Regional Medical Center, et al., Defendants and Appellants.

No. DA 12–0050.

Supreme Court of Montana.

Argued and Submitted Aug. 29, 2012.

Decided Oct. 30, 2012.

For Appellants: Robert C. Lukes (argued), Charles E. Hansberry, Garlington, Lohn & Robinson, PLLP, Missoula, Montana, Richard M. Kobdish, Attorney at Law, Addison, Texas.

For Appellees: Amy Eddy (argued), David Sandler, Bottomly Eddy & Sandler Trial Attorneys, PLLP, Kalispell, Montana.

Justice PATRICIA O. COTTER delivered the Opinion of the Court.

[366 Mont. 452]¶ 1 Plaintiffs Sheila Chipman (Chipman), Deborah Wallen (Wallen), and Ellen Hames (Hames) are employees of Defendant Kalispell Regional Medical Center, Inc. (KRMC) in Kalispell, Montana. Defendant Northwest Healthcare Corporation (NWHC) is the parent corporation of the remaining defendant entities. This case arises out of a dispute over the discontinuation of a sick leave buy-back program. Defendants appeal the order of the Eleventh Judicial District Court, Flathead County, granting Plaintiffs' motion for class certification. We affirm.

ISSUES

¶ 2 We review the following two issues on appeal:

¶ 3 Whether the District Court properly determined that Plaintiffs have standing because the juridically linked defendants were operating under a common scheme; and

¶ 4 Whether the District Court abused its discretion in certifying the class under Rule 23(a) and (b) of the Montana Rules of Civil Procedure.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 5 The Appellants/Defendants are affiliated corporate entities (collectively Employers) who own and administer a hospital and other healthcare-related businesses in northwest Montana. NWHC is the umbrella parent corporation that exercises direct or indirect control over the other subsidiary defendant entities. KRMC, Brendan House, and The Summit are all nonprofit wholly owned subsidiaries of NWHC. The remaining Defendants, Applied Health Services, Inc. (AHS) and Northwest Orthopedic & Sports Medicine (NOSM), are for-profit wholly owned subsidiaries.

¶ 6 Some years ago, Employers implemented a benefit buy-back program that allowed eligible employees to accrue unused paid leave time designed to accommodate long-term illnesses, personal injury, or approved Family and Medical Leave Act time. This leave time could be accumulated in a continued illness bank (CIB). Permanent full-time and part-time employees (Employees) were eligible for the program after completing six months of employment. Employees who had worked twenty-five years or more for one of the Employers could cash out any CIB hours which remained in their “bank” upon retirement or severance. Employees could accrue up to 866 CIB hours. The CIB hours would be purchased back by Employers at the Employees' rate of pay at the time of retirement or severance.

¶ 7 Employers instituted the new policy at different times. NWHC, KRMC, and AHS implemented the plan on March 31, 2002. NOSM adopted the CIB program on November 11, 2005. The Summit adopted the policy on March 25, 2007. The record does not include the date upon which Brendan House implemented the CIB buy-back program.

¶ 8 The CIB buy-back policy was adopted as part of a compensation adjustment program aimed at recruiting and retaining Employees. Additionally, vacation and sick leave benefits were used to encourage Employees to remain in permanent status positions because PRN (as needed) or seasonal employees earned higher rates of pay. The CIB buy-back policy was also used as a way to partially compensate Employees when they were required to take low patient census days off from their regular work schedule. It was the hope of management that the benefit package would decrease the likelihood of workforce unionization. Evidence shows that during the tenure of the CIB buy-back program, the retention of Employees increased over 100 percent. Notably, the amount of sick leave accrued by Employees increased by more than 300 percent while the program was in effect.

¶ 9 All employees of Employers, other than the CEO and approximately forty physicians, were initially employed pursuant to a standardized written probationary contract of employment. Employers maintained written employee policies and procedures which were contained in a handbook made available to Employees. According to Pat Wilson, NWHC Vice President of Human Resources, while the handbook summarized information for Employees and explained certain policies, the NWHC Official Policies and Procedures Manual was the overriding and controlling document. Employers created the manual to assure and maintain the consistency and accountability of corporate actions.

¶ 10 In 2008, KRMC met with new external auditors who informed KRMC that it must begin to account for the future payouts of the CIB program on its books, or the auditors could not issue an unqualified audit opinion. On July 1, 2008, KRMC eliminated the CIB buy-back program, citing concerns that accruing that liability on the books would jeopardize its ability to expand its operations and possibly endanger its credit rating for tax-exempt bond issuances. Only those Employees who had already reached twenty-five years of employment by July 2008 were still allowed to take advantage of the CIB buy-back program. When the program was discontinued, 1,254 employees were eligible to participate. As of January 31, 2011, that number had grown to over 1,500.

¶ 11 On September 2, 2008, three employees of KRMC initiated this action by filing a complaint in the Eleventh Judicial District Court, Flathead County. The three named Plaintiffs—Chipman, Hames, and Wallen—alleged that Employers' termination of the CIB buy-back program constituted an unlawful breach of contract and a violation of the Montana Wage Protection Act.¹ The complaint sought an order from the District Court certifying the lawsuit as a class action. Plaintiffs defined class members as “All current employees of the Defendants hired prior to June 30, 2008, who were eligible to accrue hours into the employee's Continued Illness Bank.” The complaint also requested an order directing defendants to provide class members with notice of the lawsuit.

¶ 12 At the time the lawsuit was filed, none of the named Plaintiffs had worked at KRMC for twenty-five years. Both Chipman and Hames have now reached the twenty-five-year mark. Chipman began working at KRMC as a registered nurse on July 28, 1986. Hames' employment as a registered nurse began on July 27, 1987. Wallen is a respiratory therapist who started working at KRMC on June 15, 1988.

¶ 13 The District Court granted Plaintiffs' motion for class certification on January 12, 2012. It defined the class as “[T]hose “status” employees of Northwest Healthcare, Applied Health Services, Inc., Brendan House, Kalispell Regional Medical Center, Inc., The Summit and Northwest Orthopedic & Sports Medicine, L.L.C., who were employed on or before June 30, 2008, when the sick leave policy was terminated.” The District Court dismissed all defendants not listed in its class definition. The District Court's order also directed Plaintiffs to prepare a notice to class members which would be distributed by Defendants to Employees in payroll stuffers.

¶ 14 Employers filed a Motion to Stay Proceedings Pending Appeal on January 24, 2012. On February 13, 2012, the District Court stayed all proceedings related to class certification, including issuing notice to the class. However, the District Court retained jurisdiction to address the merits of Plaintiffs' underlying substantive claims. On April 26, 2012, Plaintiffs filed a Motion for Partial Summary Judgment concerning three issues: (1) whether the employment relationship is governed by a standardized group contract, the terms of which are defined by the official policies and procedures manual; (2) whether the CIB benefit is deferred compensation that contractually vested, and as such cannot be unilaterally terminated by the Defendants; and (3) whether the CIB benefit constitutes “wages” for purposes of the Montana Wage Act. These issues have been briefed before the District Court but no decision has been made.

¶ 15 Employers challenge the District Court's January 12, 2012 order certifying the class. Employers also challenge Plaintiffs' standing. These issues were heard on oral argument before this Court on August 29, 2012.

STANDARDS OF REVIEW

¶ 16 Issues of justiciability—such as standing, mootness, ripeness, and political question—are questions of law, for which our review is de novo. Reichert v. State, 2012 MT 111, ¶ 20, 365 Mont. 92, 278 P.3d 455. A district court's determination regarding standing presents a question of law which we review de novo for correctness. Mont. State Fund v. Simms, 2012 MT 22, ¶ 14, 364 Mont. 14, 270 P.3d 64;Heffernan v. Missoula City Council, 2011 MT 91, ¶ 28, 360 Mont. 207, 255 P.3d 80.

¶ 17 We review a district court's decision on a motion for class certification for an abuse of discretion. LaMere v. Farmers Ins. Exch., 2011 MT 272, ¶ 14, 362 Mont. 379, 265 P.3d 617;Hop v. Safeco Ins. Co., 2011 MT 215, ¶ 9, 361 Mont. 510, 261 P.3d 981. The abuse of discretion question “is not whether this Court would have reached the same decision, but, whether the district court acted arbitrarily without conscientious judgment or exceeded the bounds of reason.” Newman v. Lichfield, 2012 MT 47, ¶ 22, 364 Mont. 243, 272 P.3d 625. In class certification cases, the district court's judgment should be accorded the greatest respect because it is in the best position to consider the most fair and efficient procedure for conducting any given litigation. Diaz v. Blue Cross & Blue Shield, 2011 MT 322, ¶ 10, 363 Mont. 151, 267 P.3d 756;Sieglock v. Burlington Northern & Santa Fe Ry. Co., 2003 MT 355...