Borrero v. UNITED HEALTHCARE OF NEW YORK, INC.

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT
FILED
_____________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
JULY 6, 2010
No. 08-15264
JOHN LEY
_____________________
CLERK

D. C. Docket Nos. 02-20080-CV-FAM,
00-01334-MD-FAM

MD EDGAR BORRERO,
on behalf of himself and all others
similarly situated,
MD MALCOLM GOTTESMAN,
on behalf of himself and all others
similarly situated,

Plaintiffs-Appellants,

versus

UNITED HEALTHCARE OF NEW YORK, INC.,
UNITED HEALTHGROUP, INC.,

Defendants-Appellees.

________________________

No. 08-15265
________________________

D.C. Docket Nos. 01-04730-CV-FAM,
00-01334-MD-FAM

M.D. KAREN LAUGEL,
 Plaintiff-Appellant,

versus

UNITED HEALTHCARE INSURANCE COMPANY,
UNITED HEALTHGROUP, INC.,

Defendants-Appellees.

________________________

No. 08-15267
________________________

D.C. Docket Nos. 02-22486-CV-FAM,
00-01334-MD-FAM

TENNESSEE MEDICAL ASSOCIATION,

Plaintiff-Appellant,

versus

UNITED HEALTHGROUP, INC.,
UNITED HEALTHCARE OF TENNESSEE, INC.,

Defendants-Appellees.

________________________

No. 08-15271
________________________

D.C. Docket Nos. 02-20079-CV-FAM,
00-01334-MD-FAM

MEDICAL SOCIETY OF THE STATE OF NEW YORK,

2
 Plaintiff-Appellant,

versus

UNITED HEALTHCARE OF NEW YORK, INC.,
UNITED HEALTHGROUP, INC.,

Defendants-Appellees.

________________________

No. 08-15273
________________________

D.C. Docket Nos. 04-22165-CV-FAM,
00-01334-MD-FAM

NORTH CAROLINA MEDICAL SOCIETY,

Plaintiff-Appellant,

versus

UNITED HEALTHGROUP INCORPORATED,
UNITED HEALTHCARE OF NORTH CAROLINA,
MAMSI LIFE AND HEALTH INSURANCE COMPANY,

Defendants-Appellees.

________________________

No. 08-15274
________________________

D.C. Docket Nos. 02-22487-CV-FAM,
00-01334-MD-FAM

MD ZACHERY ROSENBERG,

3
on behalf of himself and all others
similarly situated,

Plaintiff-Appellant,

versus

UNITED HEALTHGROUP, INC.,
UNITED HEALTHCARE OF TENNESSEE, INC.,

Defendants-Appellees.

________________________

No. 08-15275
________________________

D.C. Docket Nos. 01-04731-CV-FAM,
00-01334-MD-FAM

CONNECTICUT STATE MEDICAL SOCIETY,
Plaintiff-Appellant,

versus

UNITED HEALTHCARE INSURANCE COMPANY,
UNITED HEALTHGROUP, INC.,

Defendants-Appellees.

________________________

Appeals from the United States District Court
for the Southern District of Florida
________________________
(July 6, 2010)

4
Before DUBINA, Chief Judge, KRAVITCH, Circuit Judge, and ALBRITTON,*
District Judge.

DUBINA, Chief Judge:

In this consolidated appeal, three physicians and four representative

organizations (“Appellants”) appeal the district court order dismissing their

complaints against United HealthCare and its related entities (“United”). The

district court held that the Appellants’ contract-based claims were precluded by the

judgment in a class action suit based on the Racketeer Influenced and Corrupt

Organizations Act, 18 U.S.C. §§ 1961–1968 (2006) (“RICO”), asserted by

physicians against United and other health insurance entities. Appellants dispute

both the district court’s subject matter jurisdiction and its substantive decision

regarding the claim preclusive effect of the RICO class action judgment. We hold

that the district court properly exercised subject matter jurisdiction over all of the

claims presented, but reverse its order dismissing those claims based on res

judicata.

I. BACKGROUND

Appellants independently brought seven cases against United in various state

courts during the years 2001 and 2002. Appellants, who are healthcare providers

*
Honorable William H. Albritton, III, United States District Judge for the Middle District
of Alabama, sitting by designation.

5
or their representative associations, allege that United breached its contracts with

them (often called provider or subscriber agreements) by not paying them the full

contracted rate for services rendered to United’s insureds, in violation of common

and statutory law. United removed all of the cases to federal court, asserting the

court’s federal question jurisdiction over matters covered by the Employee

Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1132(a) (2006). At the

time the cases were filed, another case was pending in the Southern District of

Florida that alleged breaches of contract by various health insurers and a

nationwide conspiracy among health insurers, including United, to delay and

reduce payment to healthcare providers in violation of various subscriber

agreements. See In re Managed Care Litig., 430 F. Supp. 2d 1336 (S.D. Fla. 2006)

(“Shane”), aff’d sub nom. Shane v. Humana, Inc., 228 F. App’x 927 (11th Cir.

2007) (unpublished).

The Joint Judicial Panel on Multidistrict Litigation transferred each of the

cases covered by this consolidated appeal to the Southern District of Florida after

its removal. There, the cases remained on the “tag-along” docket of the court and

were stayed until the disposition of the Shane litigation, despite Appellants’ efforts

to remand the cases to state court. After the court entered judgment in the Shane

litigation, United moved to dismiss all of the cases underlying this appeal based

6
upon the preclusive effect of Shane. Appellants opposed the motions and argued

that remand would be the proper disposition because the court lacked subject

matter jurisdiction over their claims. The court held in favor of United and ordered

dismissal of all Appellants’ complaints.

The Shane litigation has its own complex procedural history that is

exceedingly relevant to the outcome of the present action. In Shane, a group of

plaintiffs, initially not including the Appellants, asserted breach of contract and

RICO conspiracy claims against a number of health insurers, including United.

The plaintiffs in Shane included healthcare providers both with and without

contracts with the insurers.

An order compelling arbitration of all contract-based claims between

insurers and providers who had an existing contractual relationship, based on the

terms of the subscriber agreements, marked the first major procedural step in the

Shane litigation. In re Managed Care Litig., 132 F. Supp. 2d 989 (S.D. Fla. 2000),

modified, 143 F. Supp. 2d 1371 (S.D. Fla. 2001). This order did not apply to the

Appellants in this case because the plaintiffs in Shane had not yet sought class

certification. Left remaining in the case were the payment claims asserted by

providers who had no contractual relationship with the insurers, as well as the

RICO claims asserted by all of the providers.

7
 The plaintiffs in the Shane action next sought class certification for both the

remaining payment claims on behalf of the non-participating providers and for the

RICO claims asserted by all of the providers. The district court certified both

classes, but this court held that only the RICO claims were appropriate for class

certification. Klay v. Humana, Inc., 382 F.3d 1241, 1261 (11th Cir. 2004). In

response, the Shane plaintiffs amended their complaint to include only the class

action RICO claims, on which the district court granted summary judgment in

Shane, 430 F. Supp. 2d 1336. There, the district court granted summary judgment

in favor of United and held that the class of physicians had failed to produce

sufficient evidence that a conspiracy existed amongst the insurers to underpay and

otherwise defraud the physicians. Id. at 1357. Following the disposition in Shane,

the district court dismissed the underlying cases at issue here, leading to the instant

appeal.

II. STANDARD OF REVIEW

We review a district court’s preemption analysis de novo. Ervast v. Flexible

Prods. Co., 346 F.3d 1007, 1012 (11th Cir. 2003). We also review de novo a

dismissal order based on res judicata. Kizzire v. Baptist Health Sys., Inc., 441 F.3d

1306, 1308 (11th Cir. 2006).

III. DISCUSSION

8
 We confront two primary issues in this appeal: whether the claims of the

individual and associational Appellants are completely preempted by ERISA §

502(a), 29 U.S.C. § 1132(a), and thus subject to federal question jurisdiction, and

whether the claims pursued by the Appellants are sufficiently related to those

resolved in the Shane litigation so as to preclude their assertion here. We conclude

that Appellants’ claims are completely preempted by ERISA and thus are subject

to federal jurisdiction. Those claims are not, however, subject to claim preclusion

because they arise from a nucleus of operative fact distinct from those resolved in

the Shane litigation.

A. ERISA Preemption

Section 502(a) of ERISA creates a civil cause of action for participants and

beneficiaries of ERISA plans to recover benefits or enforce rights under an ERISA

plan. 29 U.S.C. § 1132(a). This section definitively “converts an ordinary state

common law complaint into one stating a federal claim for purposes of the well-

pleaded complaint rule.” Aetna Health Inc. v. Davila, 542 U.S. 200, 209, 124 S.

Ct. 2488, 2496 (2004) (quoting Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 65–66,

107 S. Ct. 1542, 1547 (1987)). United contends that Appellants’ ostensible state

law claims are preempted by ERISA because the claims seek enforcement of rights

under ERISA plans.

9
 The Supreme Court set out a two-part test for complete preemption under

ERISA’s remedies provision in Davila. A state law claim is completely preempted

by ERISA, and therefore removable to federal court, if two conditions are met: the

claimant must have been able to, at some point in time, bring his claim under

ERISA § 502(a)(1)(B), and there must be “no other independent legal duty that is

implicated by a defendant’s actions.” Id. at 210, 124 S. Ct. at 2496. We adopted

this framework for ERISA preemption analysis in Connecticut State Dental Ass’n

v. Anthem Health Plans, Inc., 591 F.3d 1337, 1345 (11th Cir. 2009).

1. Whether Appellants Could Have Brought Their Claims Under ERISA

The first question posed by Davila in assessing complete preemption is

whether “an individual, at some point in time, could have brought his claim under

ERISA § 502(a)(1)(B).” Davila, 542 U.S. at 210, 124 S. Ct. at 2496. Under

ERISA § 502(a)(1)(B), claims pursuant to ERISA benefit plans may be brought

“by a participant or beneficiary.” 29 U.S.C. § 1132(a)(1). In Davila, it was clear

that the plaintiffs, themselves participants in and beneficiaries under ERISA plans,

were appropriate parties to enforce rights under the statute. By contrast,

“[h]ealthcare providers . . . generally are not considered ‘beneficiaries’ or

‘participants’ under ERISA” and thus lack standing to sue under the statute.

Hobbs v. Blue Cross Blue Shield of Ala., 276 F.3d 1236, 1241 (11th Cir. 2001).

10
 Healthcare providers may have standing under ERISA only when they

derivatively assert rights of their patients as beneficiaries of an ERISA plan. Id.

To sue derivatively, the provider must have obtained a written assignment of

claims from a patient with standing to sue under ERISA. Id. In Hobbs, we

determined that a healthcare provider had no standing to sue when there was no

evidence that it received any assignments from its eligible patients. Id. at 1241–42.

As a result, we concluded that there was no complete preemption of the provider’s

claims because there was no evidence of derivative standing. Id. at 1242–43.

In Connecticut State Dental, we addressed the ERISA preemption issue in a

case related to those on appeal here.1 Two dentists and their representative

organization sued a health plan administrator for damages relating to the payment

contracts between the parties. The dentists claimed that the administrator

wrongfully paid them below their contracted rates and refused to make payment on

claims for “medically necessary” services. This court held that the dentists’ claims

were completely preempted by ERISA’s remedies provision, and that the court

therefore had subject matter jurisdiction over the claims. Connecticut State Dental,

591 F.3d at 1350–53.

1
Connecticut State Dental was also a case on the tag-along docket of the Shane litigation.
591 F.3d at 1342.

11
 In Connecticut State Dental, we discussed two types of claims that can be

made by providers against insurers: those challenging the “rate of payment”

pursuant to the provider-insurer agreement, and those challenging the “right to

payment” under the terms of an ERISA beneficiary’s plan. Id. at 1349–50; see

also Lone Star OB/GYN Assocs. v. Aetna Health, Inc., 579 F.3d 525, 530 (5th Cir.

2009); Pasack Valley Hosp., Inc. v. Local 464A UFCW Welfare Reimbursement

Plan, 388 F.3d 393, 402–03 (3d Cir. 2004). We indicated that a “rate of payment”

challenge does not necessarily implicate an ERISA plan, but a challenge to the

“right to payment” under an ERISA plan does. Connecticut State Dental, 591 F.3d

at 1350–51. We then examined the dentists’ complaint and concluded that it

challenged both the rate of payment and the right to payment under the ERISA

plan because it alleged that the administrator both paid them the wrong rate and

denied payment altogether for “medically necessary” services, a coverage

determination defined by the beneficiary’s ERISA plan. Id.

We next concluded that the complaint presented a “hybrid claim,” some of

which was within ERISA and some of which was not. Id. at 1351. Therefore, to

resolve the first prong of the Davila test, we evaluated whether the dentists had

standing to assert their beneficiaries’ claims. Id. Noting that the dentists had in the

past submitted claim forms that authorized benefit payments to go to the dentists

12
on the beneficiary’s behalf, we concluded “that these claim forms suffice to show

an assignment of benefits by” the dentists’ patients. Id. at 1351; see also Hobbs,

276 F.3d at 1241 (requiring assignment of benefits for complete preemption under

ERISA). We reasoned that “[o]ur own cases confirm that assignment of the right

to payment is enough to create standing.” Connecticut State Dental, 591 F.3d at

1352.

In this case, the only remaining question is whether the Appellants, at any

time, asserted claims on behalf of ERISA beneficiaries. United presented evidence

of such assignments to the district court. Appellants make two principal arguments

in an attempt to distinguish their cases from Connecticut State Dental. First, they

contend that their complaints expressly disclaim causes of action under ERISA,

unlike those in Connecticut State Dental. Second, they contend that the claim

forms exhibiting assignments were “representative” and “typical” of assignments

in Connecticut State Dental, but the assignment forms presented in this case are

anomalous and thus could not confer standing upon them.

Both attempted distinctions are unavailing. We emphasize that the first

Davila prong is satisfied by a two-part showing: “(1) the plaintiff's claim must fall

within the scope of ERISA; and (2) the plaintiff must have standing to sue under

ERISA.” Connecticut State Dental, 591 F.3d at 1350. The Appellants’ first

13
contention attempts to undermine their own standing to sue here. In the midst of

disclaiming the assignments of benefits, Appellants’ complaints contend generally

that “this action does not otherwise seek benefits or other remedies under

[ERISA.]” But our above analysis indicates that the factual allegations raise

precisely the type of ERISA determinations that trigger complete preemption and

convert the otherwise state law claims into federal claims.

We must then resolve the inherent conflict in a factually pled but

simultaneously disclaimed cause of action. Appellants’ attempt to characterize

their claims as eluding the scope of ERISA itself presents a legal rather than factual

conclusion. It is our function, however, to draw legal conclusions from the facts

pled. See Ashcroft v. Iqbal, __ U.S. __, 129 S. Ct. 1937, 1949 (2009) (“[T]he tenet

that a court must accept as true all of the allegations contained in a complaint is

inapplicable to legal conclusions.”).

We acknowledge that “the plaintiff is the master of the complaint.”

Caterpillar Inc. v. Williams, 482 U.S. 386, 398–99, 107 S. Ct. 2425, 2433 (1987).

But when the plaintiff chooses to plead a cause of action completely preempted by

federal law, the plaintiff is not always master of the forum. In Caterpillar, the

plaintiffs had at their disposal a set of contracts covered by a collective bargaining

agreement and a set of individual employment contracts governed only by state

14
law. The plaintiffs sued only on the individual contracts. The defendant removed

their claims to federal court, arguing that the claims were founded on the collective

bargaining agreements and were governed exclusively by federal law. Id. at 394,

107 S. Ct. at 2430.

The Supreme Court held that removal was impermissible. Id. at 399, 107 S.

Ct. at 2433. The Supreme Court recognized that the state law claims were distinct

from any potential claims related to the collective bargaining agreements, and

reasoned that “respondents’ complaint is not substantially dependent upon

interpretation of the collective-bargaining agreement.” Id. at 395, 107 S. Ct. at

2431. Caterpillar demonstrates that plaintiffs may choose to exclusively pursue

their state law claims in state court, even against the backdrop of another set of

potentially preempted claims.

Appellants here have not pursued exclusively state law claims, but instead

have cast their pleadings in a way that implicates federal law as well. Their claims

are “substantially dependent upon interpretation” of ERISA plans. Ultimately, we

ask whether the physicians and their associations “could have brought his claim

under ERISA § 502(a)(1)(B).” Davila, 542 U.S. at 210, 124 S. Ct. at 2496

(emphasis added). Our precedent reveals this to be true here. See Connecticut

State Dental, 591 F.3d at 1350–53.

15
 Second, nothing in Connecticut State Dental indicates that the assignment of

benefits forms submitted to the court must be “typical” of those regularly

submitted by the providers in order to confer standing. The result in Connecticut

State Dental turned on whether the doctors had standing to pursue any claim

asserted against the insurer, not whether the doctors had standing to pursue their

average or “typical” claims against the insurer. Here, all of the individual

Appellants at one time received assignments of benefits from their patients.

Because their complaints contest the global practices of United and do not identify

any specific patient, we must assume that the providers are asserting at least some

derivative claims.

2. Whether the Conduct Implicates a Legal Duty Independent of ERISA

The test in Davila is conjunctive—both conditions must be satisfied for a

claim to be completely preempted. After United has demonstrated that Appellants’

claims could have been brought under ERISA, it next must show that the claims

asserted did not implicate legal duties independent of those imposed by ERISA or

an ERISA plan’s terms. Davila, 542 U.S. at 210, 124 S. Ct. at 2496. Because the

Appellants pled claims based on coverage determinations under ERISA plans in

addition to claims based on their provider contracts, the legal duty implicated is

dependent upon an ERISA plan. As both Davila factors are met, the coverage

16
claims are completely preempted. This gives a federal court federal question

jurisdiction over those claims and supplemental jurisdiction over the remaining

claims.

In Connecticut State Dental, we concluded that certain claims in the

dentists’ complaints were not predicated on a legal duty independent of ERISA.

Connecticut State Dental, 591 F.3d at 1353. We reasoned that claims involving

only the amount owed based on the rate of payment might not implicate ERISA,

but the claims that challenged coverage determinations under ERISA plans clearly

implicated ERISA. Id. We held that subject matter jurisdiction existed over all of

the claims in the complaint because jurisdiction existed over the completely

preempted claims and those joined with them. Id.

Appellants contend that their state law claims, based predominantly on their

contracts with United, implicate legal duties independent of ERISA because state

law, not ERISA, defines the contractual obligations of the parties. Though this is

true in the abstract, the Supreme Court has indicated that we must evaluate each

claim by its actual content. See Davila, 542 U.S. at 212–213, 124 S. Ct. at

2497–98 (concluding that Texas law imposing standard of care on managed care

entities did not impose a duty independent of ERISA because “interpretation of the

terms of [ERISA] benefit plans forms an essential part of [the state law] claim”).

17
Here, the content of the claims necessarily requires the court to inquire into aspects

of the ERISA plans because of the invocation of terms defined under the plans.

Consistent with Connecticut State Dental, at least some of the claims

pursued by the Appellants implicate legal duties dependent on the interpretation of

an ERISA plan. These claims—about wrongfully denied benefits based on

determinations of medical necessity—relate directly to the coverage afforded by

the ERISA plans. Many of the other allegations in the complaint, for practices like

downcoding and bundling, are based on independent provider-insurer contracts and

do not implicate ERISA. But, because at least some of the allegations are

dependent on ERISA, those claims are completely preempted and federal question

jurisdiction exists. Because Appellants’ claims are completely preempted by

ERISA, a federal court has subject matter jurisdiction over Appellants’ suit.

3. Associational Standing

The representative associations argue that the district court lacked federal

jurisdiction over their claims, even if the claims of the individual Appellants were

completely preempted by ERISA. At oral argument, the medical associations

argued that under our recent decision in Connecticut State Dental, they lack

standing to pursue their claims in federal court, and their claims therefore cannot

18
be completely preempted by ERISA.2 In Connecticut State Dental, we held that

the associational plaintiff lacked standing to sue in a representative capacity

because it sought damages on behalf of its individual members. Connecticut State

Dental, 591 F.3d at 1353–54. Because the associational Appellants in this case

seek only equitable relief, they have standing to assert claims under ERISA.

The Supreme Court has established a three-prong test by which we evaluate

associational standing:

[A]n association has standing to bring suit on behalf of its members

when: (a) its members would otherwise have standing to sue in their

own right; (b) the interests it seeks to protect are germane to the

organization’s purpose; and (c) neither the claim asserted nor the

relief requested requires the participation of individual members in the

lawsuit.

Hunt v. Wash. State Apple Adver. Comm'n, 432 U.S. 333, 343, 97 S. Ct. 2434,

2441 (1977). “It has long been settled that an organization has standing to sue to

redress injuries suffered by its members without a showing of injury to the

association itself and without a statute explicitly permitting associational

standing.” Doe v. Stincer, 175 F.3d 879, 882 (11th Cir. 1999). The medical

2
In their briefs to this court, filed before we released our decision in Connecticut State
Dental, Appellants argued that the medical associations qualified for associational standing.

19
associations admit in their complaints that they seek to vindicate the rights of the

associations and their members. They admit that the purposes of the associations

encompass ensuring appropriate service-payment transactions between providers

and insurers.

Other circuits have expressly permitted representative entities to sue under

ERISA through associational standing. See S. Ill. Carpenters Welfare Fund v.

Carpenters Welfare Fund of Ill., 326 F.3d 919, 922 (7th Cir. 2003); Pa. Psychiatric

Soc'y v. Green Spring Health Servs., Inc., 280 F.3d 278, 284–87 (3d Cir. 2002);

Self-Ins. Inst. of Am., Inc. v. Korioth, 993 F.2d 479, 484–85 (5th Cir. 1993). In

Connecticut State Dental, we held that a medical association lacked standing to sue

under ERISA because it sought both equitable and legal relief. 591 F.3d at 1354.

We noted that the adjudication of claims for money damages would require the

kinds of “individualized proof” that run afoul of the third prong for associational

standing enunciated in Hunt. Id.; see also Warth v. Seldin, 422 U.S. 490, 515–16,

95 S. Ct. 2197, 2214 (1975).

We hold that the claims for injunctive and declaratory relief made by the

medical associations are completely preempted. That the associations’ members

have standing to sue in their own right is unquestioned and is indicated by their

individual presence in this consolidated appeal. The allegations within the

20
associations’ complaints demonstrate the nexus between their organizational

purposes and the objects of their claims. The only remaining question is whether

their claims would require excessive participation by individual members. It is a

question we answered affirmatively in Connecticut State Dental because of the

presence of claims for money damages. 591 F.3d at 1354.

In this case, the medical associations seek only declaratory and injunctive

relief. In Pennsylvania Psychiatric Society, the Third Circuit focused its attention

on the content of the society’s challenges in determining whether excessive

individual participation would be required, and would thus thwart associational

standing. Because the society challenged the methods of the managed care

organizations, and not specific decisions made by the organizations, its case could

be proved by sample testimony. 280 F.3d at 286. The court believed it possible

that the society could establish its claims with limited individual participation, and

therefore held that associational standing existed, reversing the district court’s

order that dismissed the complaint. Id. at 286–87.

A review of the medical associations’ complaints in this case shows that

their claims, too, can be litigated with limited individual participation. The

medical associations challenge United’s practices—improper coding, bundling,

downcoding, edits, improper use of guidelines, and poor claims resolution. The

21
relief they seek is an alteration of United’s methodology, not redress for any

specific past decision. Because these claims can be proved with the limited

participation of organization members, the organization has standing to assert them

here.3 And, just as the individual physicians’ claims implicate ERISA plans, the

claims of the medical associations are completely preempted by ERISA and are

properly subject to the jurisdiction of a federal court.

B. Res Judicata

Appellants next contest the district court’s conclusion that their claims are

precluded by the judgment in the prior Shane litigation. In this circuit, a claim is

precluded by the judgment in a prior case when (1) the prior judgment was

rendered by a court of competent jurisdiction; (2) the judgment was final and on

the merits; (3) both cases involve the same parties or those in privity with them;

and (4) “both cases . . . involve the same causes of action.” In re Piper Aircraft

Corp., 244 F.3d 1289, 1296 (11th Cir. 2001). Appellants first contend that the

court rendering the Shane judgment was not “of competent jurisdiction” because it

could not have heard their arbitrable claims. Second, Appellants contend that the

current case is not the same cause of action as the first because it depends on

3
We note, as the Third Circuit did in Pennsylvania Psychiatric Society, 280 F.3d at 286–87,
that should the actual litigation of the medical associations’ claims involve excessive individual
participation, the district court retains discretion to consider the associations’ standing at that later
time. But, at the pleadings stage, we think dismissal is premature.

22
contract-based claims and does not depend on the existence of a conspiracy.

Because we conclude, as discussed below, that the conspiracy and contract claims

derive from sufficiently distinct factual sets, we hold that the Appellants’ claims in

this case are not barred by claim preclusion.

1. Court of Competent Jurisdiction

“It is well-established that the general rule against splitting causes of action

does not apply when suit is brought in a court that does not have jurisdiction over

all of a plaintiff’s claims.” Aquatherm Indus., Inc. v. Fla. Power & Light Co., 84

F.3d 1388, 1392 (11th Cir. 1996). Appellants contend that the court in

Shane lacked jurisdiction over their state law claims because they had to arbitrate

those claims pursuant to their contracts with United, and therefore claim preclusion

does not apply here. United argues that the arbitrability of a claim does not mean

that a federal court lacks jurisdiction over that claim.

Most courts considering the issue have concluded that the arbitrability of a

claim is not a jurisdictional limitation. See, e.g., Gabbanelli Accordions & Imps.,

L.L.C. v. Gabbanelli, 575 F.3d 693, 695 (7th Cir. 2009) (noting that an agreement

to arbitrate “no more deprives the court of jurisdiction than a defense based on any

other contractual forum-selection clause would”); Skirchak v. Dynamics Research

Corp., 508 F.3d 49, 56 (1st Cir. 2007) (“An agreement to arbitrate does not divest

23
a court of its jurisdiction.”). In Kelly v. Merrill Lynch, Pierce, Fenner & Smith,

Inc., this court considered factual circumstances similar to those presented here and

held contrary to the Appellants’ position. 985 F.2d 1067 (11th Cir. 1993),

abrogated on other grounds by Howsam v. Dean Witter Reynolds, Inc., 537 U.S.

79, 123 S. Ct. 588 (2002).

In Kelly, the plaintiff declined to present state law claims to the federal court

in the prior action because of the applicability of an arbitration agreement. We

held that the plaintiff should have presented them despite the agreement, and that

the agreement to arbitrate would not limit the applicability of claim preclusion. Id.

at 1070. “Plaintiffs could have asserted the state claims before the district court,

which would have had pendent or diversity jurisdiction over the claims. The

uncertainty of whether defendant would move to compel arbitration of the state

claims did not justify two proceedings.” Id.

In this case, Appellants’ uncertainty about whether United would move to

compel arbitration did not relieve them of the obligation to assert all of their claims

in the prior action. The arbitrability of claims is not jurisdictional, and the district

court in the Shane litigation would have been competent to hear those claims even

though it might have ordered them to arbitration. We reject Appellants’ argument

that they were unable to present their claims to the district court because they were

24
the subject of an arbitration agreement.

2. Same Cause of Action

We next turn to considering whether the two cases comprise the same cause

of action. The doctrine of claim preclusion serves several important policy

functions, and the analysis we undertake to measure the identity of claims

promotes these ends. One of the chief concerns of res judicata is the prevention of

inconsistent results. 18 Charles Alan Wright, Arthur R. Miller & Edward H.

Cooper, Federal Practice and Procedure § 4403 (2d ed. 2002) (“The most purely

public purpose served by res judicata lies in preserving the acceptability of judicial

dispute resolution against the corrosive disrespect that would follow if the same

matter were twice litigated to inconsistent results.”); see also Ragsdale v.

Rubbermaid, Inc., 193 F.3d 1235, 1240 (11th Cir. 1999) (noting that permitting the

severance of related claims would allow “a second bite at the apple”). In addition,

“res judicata and collateral estoppel relieve parties of the cost and vexation of

multiple lawsuits, conserve judicial resources, and, by preventing inconsistent

decisions, encourage reliance on adjudication.” Allen v. McCurry, 449 U.S. 90, 94,

101 S. Ct. 411, 415 (1980). Ultimately, courts applying res judicata seek “to strike

a delicate balance between, on the one hand, the interests of the defendant and of

the courts in bringing litigation to a close and, on the other, the interest of the

25
plaintiff in the vindication of a just claim.” Restatement (Second) of Judgments §

24 cmt. b (1982).

In consideration of these goals, our circuit has used a variety of labels to

describe the methods by which we judge the similarity of two causes of action.

Compare NAACP v. Hunt, 891 F.2d 1555, 1561 (11th Cir. 1990) (noting that the

“principle test” for comparing cases involves inquiry into the primary rights and

duties implicated) with In re Atlanta Retail, Inc., 456 F.3d 1277, 1288 (11th Cir.

2006) (examining whether cases involve “the same nucleus of operative fact”) and

In re Piper Aircraft, 244 F.3d at 1296–97 (noting that claims are the same “when

they arise out of the same transaction or series of transactions”). Nothing in our

jurisprudence suggests that any meaningful analytical difference derives from the

label we affix to the method of comparison. See e.g., Ragsdale, 193 F.3d at 1239

& n.8 (concurrently reciting all three of the above labels in describing our

comparative approach).

Our sister circuits have been generally more disciplined in their comparative

approaches, and a number have explicitly adopted the transactional approach taken

by the Second Restatement of Judgments. See Restatement (Second) of Judgments

§ 24(1) (1982) (“[T]he claim extinguished includes all rights of the plaintiff to

remedies against the defendant with respect to all or any part of the transaction, or

26
series of connected transactions, out of which the action arose.”).4 We have

occasionally expressed our approval of the Restatement formulation, though we

have never formally adopted it as an exclusive comparative framework. See, e.g.,

Ragsdale, 193 F.3d at 1239 n.8 (quoting the Restatement provision and its

commentary); Isr. Disc. Bank Ltd. v. Entin, 951 F.2d 311, 315 (11th Cir. 1992)

(indicating that the transactional comparison is equivalent to the examination of the

“nucleus of operative fact”).

In fact, the general analytical method in our cases involves not an explicit

transactional approach but an evaluation of any commonality in the “nucleus of

operative facts” of the actions. See, e.g., Adams v. S. Farm Bureau Life Ins. Co.,

493 F.3d 1276, 1290 (11th Cir. 2007) (concluding that two actions encompassed

the same “broad nucleus of fact”); In re Atlanta Retail, 456 F.3d at 1288 (reciting

“nucleus of operative fact” standard); Trustmark Ins. Co. v. ESLU, Inc., 299 F.3d

4
The First, Fourth, Fifth, Tenth, and D.C. Circuits have all explicitly adopted and applied
the most recent Restatement test. See Mitchell v. City of Moore, Okla., 218 F.3d 1190, 1202 (10th
Cir. 2000) (“We employ the transactional approach of the Restatement (Second) of Judgments . .
. .”); In re Intelogic Trace, Inc., 200 F.3d 382, 386 (5th Cir. 2000) (holding that, in determining
whether two suits “involved the same cause of action, we apply the transactional test of the
Restatement (Second) of Judgments”); Stanton v. D.C. Court of Appeals, 127 F.3d 72, 78 (D.C. Cir.
1997) (“The District of Columbia, like the majority of jurisdictions, has adopted the Second
Restatement's ‘transactional’ approach . . . .”); Porn v. Nat’l Grange Mut. Ins. Co., 93 F.3d 31, 34
(1st Cir. 1996) (“In defining the cause of action for res judicata purposes, this circuit has adopted
the ‘transactional’ approach of the Restatement (Second) of Judgments.”); Keith v. Aldridge, 900
F.2d 736, 740 (4th Cir. 1990) (“Consistent with the modern trend, . . . we have adopted a
transactional approach to the identity of claims question . . . .”).

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1265, 1270 (11th Cir. 2002) (same); Isr. Disc. Bank, 951 F.2d at 315 (“In this

analysis, a court should compare the factual issues explored in the first action with

the factual issues to be resolved in the second action.”). Rather than attempting to

define the “transaction” at issue in the first case, we line up the former and current

cases side-by-side to assess their factual similarities. See In re Atlanta Retail, 456

F.3d at 1288–89 (comparing prior and current cases by looking “not only at the

facts that were before the [first] court, but also the factors which the [first] court

was required . . . to consider in making its previous decisions”); In re Piper

Aircraft, 244 F.3d at 1297 (holding that the facts at issue in the contested suit

“were neither raised nor litigated in the” first action); Isr. Dis. Bank, 951 F.2d at

315 (comparing the essential factual allegations made in the first and second suits).

This case presents a close question regarding the factual similarities between

the two cases. United points out that the factual allegations in the RICO suit and

the factual allegations in the suits now on appeal are substantially similar, and

some of the allegations appear almost verbatim in both complaints. United also

asserts that simply because the Appellants’ claims in this case are for breach of

contract instead of conspiracy does not make the claims sufficiently different for

res judicata purposes. See Adams, 493 F.3d at 1289 (“Claim preclusion applies not

only to the precise legal theory presented in the previous litigation, but to all legal

28
theories and claims arising out of the same operative nucleus of fact.”) (internal

quotation marks omitted). It is evident that the allegations “defendant harmed

plaintiff” and “defendant conspired to harm plaintiff” are substantially related.

Appellants respond by insisting that the evidence needed to prove their

RICO claims in the first action is not the same as that needed to prove their

contract-based claims here. See Shane, 430 F. Supp. 2d at 1344 (“[T]he Court

concludes that the evidence proffered by the Plaintiffs is insufficient to allow a jury

to find reasonably that the Defendants conspired to manipulate their claims

processing software to systematically underpay doctors.”). This disparity in

evidence needed to prove the two causes of action, they contend, reveals that the

two cases are not the same for purposes of res judicata. See In re Atlanta Retail,

456 F.3d at 1288 (“If the evidence crucial to the second action was never raised

before the court in the first action, it is ‘powerful evidence’ that the two cases are

not based on the same nucleus of operative fact.”).

We admit the valid and persuasive positions of both sides here. Our

analytical task is seemingly straightforward: evaluate the similarity of the facts

needed to be presented in each of the cases. Even this assignment, however,

carries little order and few guideposts. See Andersen v. Chrysler Corp., 99 F.3d

846, 852 (7th Cir. 1996) (“Nonetheless, even the ‘facts’ of a case may be described

29
either broadly or narrowly.”). We are fortunate in this case to have the work of a

prior panel of this court on which to rely for guidance. See Klay v. Humana, Inc.,

382 F.3d 1241 (11th Cir. 2004).

In Klay, we affirmed class certification of the RICO claims in Shane but

reversed certification of the state law claims, which were ultimately dropped from

the suit. We noted that “[t]he facts that the defendants conspired to underpay

doctors, and that they programmed their computer systems to frequently do so in a

variety of ways, do nothing to establish that any individual doctor was underpaid

on any particular occasion.” Id. at 1264. This court went on to state that “[w]hile

allegations concerning the defendants’ conspiracy to underpay doctors, or their

policy of aiding and abetting each other in underpaying doctors, went directly to

material elements of each individual plaintiff’s RICO claim, here they are, at best,

merely circumstantial evidence tangentially relevant to each individual plaintiff’s

breach of contract claim.” Id. We observe the potential inconsistency in

emphasizing the differences between the types of claims so emphatically in Klay

and a decision here resting on the notion that these claims arise from the same

nucleus of operative fact. That the evidence presented in the prior action is only

“tangentially relevant” to the claims like those made here argues against finding an

identity between the causes of action.

30
 We also note that our analysis of the claim identity does not offend the

underlying policy goals of the res judicata doctrine. We are persuaded that these

goals would not be legitimately furthered by a finding of identity here when our

court, in the midst of the first case, made such stark pronouncements about the

contrasts between the types of claims initially and later asserted. Our decision in

Klay created whatever judicial inefficiencies might result in allowing these claims

to proceed by splitting the claims made in the case for class action certification.5

Moreover, given our emphasis on the distinctions between the RICO and contract

claims, United should have expected no repose when the district court resolved

only the RICO claims, because it was on notice that this court viewed the RICO

claims and contract-based claims as distinct. Cf. Wright, Miller, & Cooper, supra,

§ 4403 (“We want to free people from the uncertain prospect of litigation, with all

its costs to emotional peace and the ordering of future affairs. Repose is the most

important product of res judicata.”).

In consideration of our prior decision in Klay, where we relied heavily on

5
Some have been critical of the piecemeal certification of class action status for claims
within a case. See Gunnells v. Healthplan Servs., Inc., 348 F.3d 417, 446–47 (4th Cir. 2003)
(Niemeyer, J., dissenting) (arguing that the predominance requirement in Fed. R. Civ. P. 23(b)
applies to the action as a whole, not to individual subclasses or claims); Castano v. Am. Tobacco
Co., 84 F.3d 734, 745 n.21 (5th Cir. 1996) (“The proper interpretation of the interaction between
[Fed. R. Civ. P. 23] subdivisions (b)(3) and (c)(4) is that a cause of action, as a whole, must satisfy
the predominance requirement of (b)(3) and that (c)(4) is a housekeeping rule that allows courts to
sever the common issues for a class trial.”). We did not directly address the propriety of such partial
certification in Klay.

31
the differences between the RICO claims and contract-based claims brought

against United in approving only the RICO claims for class certification, we

conclude that those differences still exist sufficiently to prevent the application of

res judicata to the claims presented here. Our decision turns not on the technical

distinctions between the causes of action alleged but on the disparity in facts and

evidence needed to prove the RICO claims as opposed to these contract-based

claims.6 Because the claims resolved in the Shane litigation did not compose the

same cause of action as those presented by the Appellants here for purposes of

claim preclusion, they are not barred by res judicata.

IV. CONCLUSION

After our review of the record and the briefs, and after hearing oral

argument, we hold that the district court properly exercised jurisdiction over the

Appellants’ claims because they are completely preempted by ERISA.

Nevertheless, these claims are not barred by the disposition of the Shane litigation

because of the disparity between the claims pursued here and those resolved in

Shane. We reverse the district court order dismissing these claims and remand for

6
We emphasize the limited scope of our holding. We do not mean to suggest in any general
sense that claims based alternatively on harm and conspiracy to harm are sufficiently distinct to
prevent the application of res judicata if those claims are pursued separately. But, in this close case,
our prior pronouncements about the gulf between these particular conspiracy and contract-based
claims weigh heavily in our decision.

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further proceedings consistent with this opinion.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

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