Chambers v. The Moses H. Cone Mem'l Hosp.

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2021 NCBC 75

CHRISTOPHER CHAMBERS, on behalf of himself and all others similarly situated, Plaintiff, v. THE MOSES H. CONE MEMORIAL HOSPITAL; THE MOSES H. CONE MEMORIAL HOSPITAL OPERATING CORPORATION d/b/a MOSES CONE HEALTH SYSTEM and d/b/a CONE HEALTH; and DOES 1 through 25, inclusive Defendants.

No. 12 CVS 6126

Superior Court of North Carolina, Guilford

December 3, 2021

Higgins Benjamin, PLLC, by John F. Bloss, and Law Offices of Barry L. Kramer, by Barry L. Kramer, for Plaintiff Christopher Chambers.

Womble Bond Dickinson (US) LLP, by Philip J. Mohr and Brent F Powell, for Defendants The Moses H. Cone Memorial Hospital and The Moses H. Cone Memorial Hospital Operating Corporation.

ORDER AND OPINION ON MOTION TO DISMISS CONDITIONAL COUNTERCLAIMS

ADAM M. CONRAD, JUDGE

1. Pending is a question of first impression: may a defendant in a class action assert counterclaims against unnamed class members before the class is certified? For the reasons discussed below, the answer is no.

2. An abbreviated background will help frame the issue. This case is about the billing practices of The Moses H. Cone Memorial Hospital ("Moses Cone"). Christopher Chambers sued Moses Cone on the ground that it overcharged him and other self-pay patients who received emergency care. His amended class complaint seeks a declaratory judgment that Moses Cone's form contract has an open price term, that it may not bill self-pay patients at so-called Chargemaster rates, and that it is entitled only to the reasonable value of its services. (See Am. Compl. ¶¶ 40, 41, ECF No. 49.)

3. Ten years of litigation have yielded little progress. Discovery and class certification were put on hold while Moses Cone twice tried to end the case. It first argued mootness after relinquishing any claim it might have against Chambers for nonpayment. That issue went to the North Carolina Supreme Court, which held that Chambers could continue to seek class certification and class-wide relief even though he no longer has a personal stake in the case. On remand from that decision, Moses Cone again moved for dismissal, arguing that class-wide declaratory relief would serve no useful purpose. This Court disagreed, denied the motion, and lifted the stay of discovery. Interested readers will find a more detailed exploration of the facts and procedural history in these earlier decisions. See generally Chambers v. Moses H Cone Mem'l Hosp., 374 N.C. 436 (2020); Chambers v. Moses H. Cone Mem'l Hosp., 2021 NCBC LEXIS 63 ( N.C. Super. Ct. July 19, 2021).

4. After the denial of its second motion to dismiss, Moses Cone counterclaimed against the unnamed class members for unjust enrichment. In a nutshell, Moses Cone alleges that most self-pay patients are in arrears and demands damages from all class members who haven't paid their bills. The counterclaims are expressly conditional on class certification-that is, they are intended to take effect only if the Court certifies a class. (See, e.g., Countercl. ¶¶ 18, 20, 31, 41, ECF No. 122.)

5. Chambers now moves to dismiss the counterclaims. (See ECF No. 123.) His argument is blunt: members of an uncertified class are not parties and therefore not susceptible to counterclaims. Moses Cone responds that courts treat unnamed class members as parties for some purposes and that its counterclaims are compulsory. After full briefing and a hearing on 19 November 2021, the motion is ripe.

6. Neither side has identified any controlling authority; North Carolina courts simply haven't addressed the issue. But the weight of persuasive federal authority, applying analogous rules, favors Chambers. Although some federal courts see "no clear answer concerning whether conditional counterclaims may proceed against non-party putative class members prior to class certification," Rose v. Friendly Fin. Corp., 2016 U.S. Dist. LEXIS 2340, at *14 (S.D. Ohio Jan. 8, 2016), most have dismissed them as premature or otherwise improper, see, e.g., In re Bank of N.Y. Mellon Corp. Forex Transactions Litig., 42 F.Supp.3d 520, 527 (S.D.N.Y. 2014); Circle Click Media LLC v. Regus Mgmt. Group LLC, 2013 U.S. Dist. LEXIS 114463, at *8-16 (N.D. Cal. Aug. 13, 2013); James D. Hinson Elec. Contr. Co. v. BellSouth Telcoms., Inc., 2011 U.S. Dist. LEXIS 68538, at *20-24 (M.D. Fla. Mar. 28, 2011).

7. This more prevalent view is compelling. Counterclaims, whether compulsory or permissive, may target only "an opposing party." N.C. R. Civ. P. 13(a), (b). No reasonable understanding of "opposing party" would include members of an uncertified class. True, absent class members are treated as parties for some purposes after certification. Not so before certification: "A nonnamed class member is not a party to the class-action litigation before the class is certified." Std. Fire Ins. Co. v. Knowles, 568 U.S. 588, 593 (2013) (cleaned up); accord Smith v. Bayer Corp., 564 U.S. 299, 313 (2011).

8. Moses Cone contends that courts have other tools, short of dismissal, to manage the sequencing of counterclaims certification, and everything that follows. But more than procedure is at play. There are due process concerns too. Because an uncertified class is really no class at all, its members are not truly before the presiding court. Certification is the event that, "critically, renders them subject to the court's power." In re Checking Account Overdraft Litig., 780 F.3d 1031, 1037 (11th Cir. 2015); accord Cruson v. Jackson Nat'l Life Ins. Co., 954 F.3d 240, 250 (5th Cir. 2020). Even then, class members may have the right to opt out. See Ehrenhaus v. Baker...