No. 92-249
IN THE SUPREME COURT OF THE STATE OF MONTANA
1992
STATE MEDICAL OXYGEN AND SUPPLY,
INC., a Montana corporation,
Plaintiff and Appellant,
AMERICAN MEDICAL OXYGEN CO., a
Montana corporation; J. C. LYNDES,
GARY GOMEZ, and RONALD WRIGHT,
Defendants and Respondents.
APPEAL FROM: District Court of the Second Judicial District,
In and for the County of Silver Bow,
The Honorable Mark P. Sullivan, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
~ r i a n Delaney and P, Mars Scott, Mulroney,
L.
Delaney & Scott, iss sou la, Montana
For Respondent:
~ichael Moses, Moses Law Firm, Billings, Montana
G.
Philip P. McGimpsey, Billings, Montana
Submitted on Briefs: October 22, 1992
Decided: December 1 7 , 1992
Filed:
I
" Clerk
Chief Justice J. A. Turnage delivered the Opinion of the Court.
State Medical Oxygen and Supply, Inc. (State Medical), appeals
an order granting partial dismissal and partial summary judgment in
favor of American Medical Oxygen Co. (American Medical). The order
was entered in the Second Judicial District, Silver Bow County. We
reverse and remand.
The issues raised by the parties to this appeal are:
1. Was the order entered in the Eighth Judicial District,
Cascade County, binding upon the parties in subsequent judicial
proceedings in the Second Judicial District, based upon res
judicata and collateral estoppel?
2. Does 42 USC 5 1395a expressly or impliedly bar a claim
under state law for tortious interference with a business
relationship?
As the parties to this litigation have been before this Court
on two prior occasions, repetition of all underlying facts is
unnecessary. A full recitation of the facts can be found in State
Medical Oxygen and Supply, Inc. v. American Medical Oxygen Co.
(l988), 230 Mont. 456, 750 P.2d 1085 (State Med I), and State
Medical Oxygen and Supply, Inc. v. American Medical Oxygen Co.
(l989), 240 Mont. 70, 782 P.2d 1272. However, because of the
arduous nature of this lawsuit, an outline of certain facts and
procedure is necessary in order to follow the events leading to
this appeal.
At its inception, this lawsuit involved complaints filed in
five different counties by State Medical against American Medical,
certain employees of American Medical, and the directors of
American Medical. Because of the similarities in the five
lawsuits, the parties agreed to choose one venue to serve as the
"lead case." The Eighth Judicial District, Cascade County, was
chosen for this purpose.
In its initial complaints, State Medical alleged, inter alia,
that violation of 5 1877(b) of the Social Security Act, 42 USC 3
1395nn, gave rise to a private cause of action under Montana law.
State Med I, 750 P.2d at 1086. In affirming summary judgment as to
this issue, we held State Medical was not of the class the federal
statute was designed to benefit and did not meet the criteria
necessary to pursue a private cause of action arising from an
alleged violation of the statute. State Med I, 750 P.2d at 1087-
88.
On the other hand, we held the depositions of three material
witnesses were relevant to a claim of tortious interference with a
business relationship and should have been considered before
summary judgment was granted as to all issues. State Med I, 750
P.2d at 1089. We reversed this part of the District Court's order
and granted State Medical leave to amend or supplement its
pleadings as to the claim of tortious interference. State Med I,
750 P.2d at 1089. This reversal and remand set the stage for round
three of this litigation bout.
After our decision in State Med I, State Medical filed amended
complaints directly pleading tortious interference with a business
relationship. The amended complaints were filed in all venues
where an action was pending. After the amended complaints were
filed, State Medical's counsel was appointed a District Judge in
Lincoln County. New counsel was substituted to represent State
Medical. The parties continued to actively litigate, with Cascade
County continuing to serve as the "lead case."
In February 1990, American Medical filed a motion to dismiss
and motion for summary judgment to limit damages and discovery. In
early March 1990, the District Court granted American Medical's
motion. The order did not contain any analysis as to why the
District Court granted this motion. Apparently, the District Court
adopted the argument outlined in American Medical's brief.
American Medical's position was that the Medicare/Medicaid
customers were free to choose any qualified oxygen supplier.
Therefore, American Medical argued, State Medical was barred from
a private cause of action as to this class of customers regardless
of whether American Medical obtainedthese customers via a tortious
act. State Medical did not appeal or seek certification of this
order.
For reasons that are not entirely clear, the parties agreed to
transfer venue to the Second Judicial District, Silver Bow County.
Silver Bow County was now considered the "lead case" and the
parties began making preparations for trial. In all likelihood,
the outcome of a trial in Silver Bow County would be controlling in
the other four pending actions. In October 1991, American Medical
filed a motion to dismiss and motion for summary judgment to limit
damages and discovery based upon estoppel and res judicata.
American Medical argued that the Silver Bow County District Court
should adopt the holding of the District Court in Cascade County
based upon the principles of res judicata, judicial estoppel, and
collateral estoppel. Alternatively, American Medical argued the
District Court should grant the motion because federal law barred
a cause of action under state law as to the Medicare/Medicaid
customers.
After a hearing on November 14, 1991, the District Court
determined that good cause existed to grant American Medical's
motions for summary judgment and to limit damages and discovery as
to the Medicare/Medicaid customers. The District Court certified
its order pursuant to Rule 54 (b), M.R.Civ.P. This appeal followed.
Was the order entered in the Eighth Judicial District, Cascade
County, a final order and as such binding upon the parties and
courts in subsequent judicial proceedings based upon res judicata
and collateral estoppel?
The majority of American Medical ' s brief attempts to persuade
this Court that the order for dismissal and summary judgment
entered in the District Court for the Eighth Judicial District was
a final judgment on the merits. As a result, American Medical
argues, because State Medical did not appeal that order, it became
final and binding upon the parties and courts of concurrent
jurisdiction based upon res judicata and collateral estoppel. We
do not agree. American Medical's conclusion is based upon a faulty
premise and therefore is incorrect as a matter of law.
Res judicata reflects the ideal that a lawsuit should provide
justice for an aggrieved party as well as a final resolution of the
controversy. Brault v. Smith (1984), 209 Mont. 21, 25, 679 P.2d
236, 238. Its underlying purpose is to prevent a party from
litigating a matter more than once. Brault, 679 P.2d at 238. In
order for a plea of res judicata to operate as a bar and prevent
the same parties from relitigating the same cause of action:
1) the parties or their privies must be the same;
2) the subject matter of the action must be the same;
3) the issues must be the same and relate to the same
subject matter; and
4) the capacities of the persons must be the same in
reference to the subject matter and to the issues
between them.
Audit Services, Inc. v. Anderson (1984), 211 Mont. 323, 327, 684
However, in order for the operative criteria to apply, there
must be "a final judgment on the merits by a court of competent
jurisdiction . . . ." S-W Company v. John Wight, Inc. (1978), 179
Mont. 392, 407, 587 P.2d 348, 356. A final judgment on the merits
. . . is a finality as to the claim or demand in
controversy, concluding [sic] parties and those in
privity with them, not only as to every matter which was
offered and received to sustain or defeat the claim or
demand, but as to any other admissible matter which might
have been offered for that purpose.
S-W Company, 587 P.2d at 356 (emphasis added).
The order of dismissal and summary judgment entered by the
Cascade County District Court, as to the Medicare/Medicaid
customers, was not a final judgment on the merits. It was a
partial order. There was no right to immediate appeal absent a
determination by the District Court that there was no just reason
for delay and a final judgment was entered and certified for
appeal. In Re the Marriage of Adams (1979), 183 Mont. 26, 28, 598
P.2d 197, 198. The order adjudicated "less than all the claims or
the rights and liabilities of less than all the parties" and was
"subject to revision at any time before the entry of judgment
adjudicating all the claims and the rights and liabilities of all
the parties." Rule 54(b), M.R.Civ.P. Therefore, in a strict
sense, and applicable to the case at bar, res judicata does not
apply to the decision of a motion. See August v. Burns (1927), 79
Mont. 198, 215, 255 P. 737, 742.
Likewise, the doctrine of collateral estoppel is inapplicable.
Like res judicata, in order for collateral estoppel to apply, a
final judgment on the merits is required. Smith v. Schweigert
(1990), 241 Mont. 54, 58, 785 P.2d 195, 197. As the order of
partial dismissal and partial summary judgment was not a final
judgment on the merits, an extended discussion is unnecessary.
Suffice it to say, we hold collateral estoppel has no application
to the instant case.
Does 4 2 USC 5 1395a expressly or impliedly bar a claim under
state law for tortious interference with a business relationship?
We next turn our attention to whether 42 USC 5 1395a bars
State Medical from a private cause of action under state law for
damages relating to the loss of Medicare/Medicaid customers.
American Medical argues that because the Medicare/Medicaid
customers are free to choose a qualified provider, 42 USC 3 1395a
operates to insulate it from damages regardless of whether it
tortiously interfered with the business relationship between State
Medical and these customers. Therefore, American Medical claims,
as a matter of law the District Court in Silver Bow County was
correct in its order for partial dismissal and partial summary
judgment that 42 USC 5 1395a bars State Medical from seeking
damages as to these customers. We disagree and reverse and remand.
42 USC 3 1395a in its entirety reads:
Any individual entitled to health benefits under
this subchapter may obtain health services from any
institution, agency, or person qualified to participate
under this subchapter if such institution, agency or
person undertakes to provide him such service.
42 USC 3 1395a.
At first glance, the statute does not lead one to believe Congress
intended to bar a cause of action under state law simply because
those entitled to benefits have the right to choose from whom they
want health services. It is well settled that state laws are
presumed valid against preemption challenges unless Congress
clearly intended they be preempted by federal law. Mountain States
Telephone v. Commissioner of Labor (1979), 187 Mont. 22, 41, 608
P.2d 1047, 1057. Cipollone v. Liggett Group, Inc. (1992), - U.S.
-r 112 S.Ct. 2608, 2618, - L.Ed.2d - . A state law can be
preempted by federal law in one of three ways. K-W Industries v.
National Surety Corporation (9th Cir. 1988), 855 F.2d 640, 642, n.
3. First, the federal law may expressly preempt state law; second,
Congress may have intended the federal law occupy the entire legal
field in the area; third, the state law may conflict with the
federal law. K-W Industries, 855 F.2d at 642, n. 3.
Obviously, the first preemption factor is inapplicable. The
plain language of 42 USC S 1395a contains no express prohibition
against a claim under state law for tortious interference with a
business relationship with Medicare/Medicaid customers. Effect
must be given to the plain language of the statute "unless there is
good reason to believe Congress intended the language to have some
more restrictive meaning." Ci~ollone,112 S.Ct. at 2620.
Furthermore, the second preemption criterion does not apply
and American Medical does not argue that it should. By its
application to the facts presented here, state law espousing a
cause of action for tortious interference with a business
relationship as to Medicare/Medicaid customers does not operate to
supplement the field of Social Security. Case law holds that the
federal law must so thoroughly occupy the legislative field "as to
make reasonable the inference that Congress left no room for the
States to supplement it." Cipollone, 112 S.Ct. at 2617. We hold
the law applicable to State Medical's cause of action does not
operate to supplement the legislative field governing
Medicare/Medicaid recipients' right to choose the provider of their
choice.
Finally, we address whether our state law actually conflicts
with the federal law. Where the federal statute is lacking in an
express Congressional command, a state law will be preempted if it
actually conflicts with the federal legislation. Pacific Gas &
Electric Co. v. Energy Resources Conservation and Development
Commission (1983), 461 U.S. 190, 204, 103 S.Ct. 1713, 1722, 75
L.Ed.2d 752, 765. However, because of the silence of Congress, we
must determine whether there is an implicit prohibition against a
cause of action under state law contained in the structure and
purpose of the federal law. Cipollone, 112 S.Ct. at 2617.
As we construe American Medical's argument, it contends that
one cannot "capturew the Medicare/Medicaid class of customers and
that allowing a cause of action under state law as to this class of
customers frustrates the purpose of the federal law. We do not
agree Congress intended this to be. American Medical points to
nothing in the Social Security Act itself or its legislative
history to support this proposition. Likewise, it offers us no
guidance with applicable case law. Furthermore, our own research
does not suggest any implied prohibition.
Section 1802 (42 USC 51395a) provides that any individual
entitled to benefits under Title XVIII may obtain health
services from any institution, agency, or person which is
qualified to participate under the title and which
undertakes to provide services to him.
1965 U.S. Code Cong. & Admin. News 1943, 2098.
In brief, the purpose of the Social Security Act is to:
1. Provide a coordinated approach for health insurance
and medical care for the aged under the Social
Security Administration;
2. Expand services for maternal and child health;
3. Revise and improve benefit coverage; and
4. Improve and expand public assistance programs.
1965 U.S. Code Cong. & Admin. News 1943, 1943-44.
There is no conflict between our state law allowing legal
action for tortious interference with a business relationship and
the purpose of the Social Security Act and in particular 42 USC 5
1395a. 42 USC 5 1395a simply allows a recipient of Social Security
benefits to choose the provider from which he wishes to obtain
health services. It does not operate to bar a cause of action
under state law between competing interests as to this class of
customers. We hold there is no Itreliable indicium of congressional
intent" to supplant state law in this case. Cipollone, 112 S.Ct
2619. The judgment is reversed and remanded.
J< &
/ - Chief Justice
We concur:
December 17, 1992
CERTIFICATE OF SERVICE
I hereby certify that the following order was sent by United States maif, prepaid, to the
following named:
Dexter L. Delaney & P. Mars Scott
Mulroney, Delaney & Scott
Ste. 100, 100 Ryrnan
P.O. Box 8228
Missoula, MT 59807
Michael G. Moses
Moses Law Firm
P.O. Box 2533
Billings, MT 59103-2533
Philip P. McGimpsey
Attorney at Law
P.O. Box 1050
Billings, MT 59103-l5OO
ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTANA