Folweiler Chiropractic, PS, Prof'l Servs. Corp. v. Fair Health, Inc.

FOLWEILER CHIROPRACTIC, PS,a Washington professional services corporation, Appellant, v. FAIR HEALTH, INC., a New York corporation, Respondent.

No. 75864-1-I

COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION ONE

June 4, 2018

UNPUBLISHED OPINION

LEACH, J. — Folweiler Chiropractic PS sued FAIR Health Inc., alleging a violation of Washington's Consumer Protection Act¹ (CPA). Folweiler appeals the trial court's summary judgment dismissal of this claim and denial of its motion to continue. FAIR Health, in turn, appeals the trial court's assertion of specific personal jurisdiction over it and the denial of its request for attorney fees under the long-arm statute.

Because FAIR Health does not have contacts with Washington sufficiently connected to this lawsuit, Washington courts do not have personal jurisdiction over it. If we had personal jurisdiction to decide this case on the merits, we would affirm. Folweiler does not show an issue of fact about two elements of itsCPA claim: (1) that FAIR Health committed an unfair or deceptive act or practice and (2) that act or practice caused Folweiler's alleged injury. Also, the long-arm statute entitles FAIR Health to attorney fees incurred in this litigation, including fees on appeal. We affirm the dismissal, but we remand so the trial court can award these fees.

FACTS

FAIR Health is a New York nonprofit corporation. FAIR Health was created as part of a settlement between UnitedHealth Group and the New York State Attorney General after an investigation of Ingenix Inc. This company performed much the same function that FAIR Health now does. The New York Attorney General determined that Ingenix, as a wholly owned subsidiary of UnitedHealth Group Incorporated, had a conflict of interest. FAIR Health was designed to operate independently of any insurer.

Fair Health provides an independent, impartial source of data about the cost of health care procedures. It educates consumers and offers them free tools to make it easier for them to estimate out-of-network expenses, disseminates its data to all health care participants to promote fair billing and reimbursement practices, and makes its data available for policy making and academic research.

FAIR Health developed a national database with the help of academic experts, statisticians, and health care economists. The database contains health care charges for privately insured individuals. The database includes the actual, nondiscounted fees charged by providers before network discounts or other allowances are applied. FAIR Health maintains its database by collecting data from health insurers and plan administrators, including Washington insurers, who license the database for use in paying claims. FAIR Health organizes the data based on "geo-zips," the first three digits of providers' zip codes, and a specific procedure's current procedural terminology (CPT) code.²

Folweiler is a Washington professional services corporation that provides chiropractic and massage therapy care in Washington. Folweiler provided care to patients with personal injury protection (PIP) coverage under an automobile insurance policy issued in Washington by Progressive Insurance. The PIP statute requires insurers to pay all reasonable bills submitted.³ Insurers must investigate if a bill is reasonable before refusing to pay it in full.⁴ Mitchell Medical, a California company that does business in California, reviewedFolweiler's bills for Progressive.⁵ Folweiler alleges that Mitchell used the FAIR Health database to automatically reduce its bills to the 90th percentile of the charges for the same procedure in the same geographical area. Progressive then determined that Folweiler's charge of $95 for a certain procedure was unreasonable and instead reimbursed it at the 90th percentile level, which was $91.

Folweiler sued FAIR Health, alleging a CPA violation.⁶ The trial court denied FAIR Health's motion to dismiss for lack of personal jurisdiction. The court granted Folweiler's motion for class certification. Both parties moved for partial summary judgment on the issue of liability. The motions were set to be argued together. Folweiler asked the court to delay consideration of FAIR Health's motion so Folweiler could do further discovery but to proceed to hear Folweiler's own motion. The trial court denied the continuance request. It considered both summary judgment motions at the same time. The trial court granted FAIR Health's motion and denied Folweiler's.

Both Folweiler and FAIR Health appeal the trial court's various decisions.

ANALYSIS

I. Jurisdiction

Due process limits a state court's authority to proceed against a defendant.⁷ Thus, we first must consider FAIR Health's personal jurisdiction challenge. We conclude that Washington state courts do not have personal jurisdiction over FAIR Health in this matter.

We review the denial of a motion to dismiss for lack of personal jurisdiction de novo.⁸ "When a motion to dismiss for lack of personal jurisdiction is resolved without an evidentiary hearing, the plaintiff's burden is only that of a prima facie showing of jurisdiction."⁹ Even when the trial court has considered matters outside the pleadings, "'[f]or purposes of determining jurisdiction, this court treats the allegations in the complaint as established.'"¹⁰ For matters outside the pleadings, this court draws reasonable inferences in the light most favorable to the nonmoving party.¹¹

"Under Washington's long arm jurisdiction statute, RCW 4.28.185, personal jurisdiction exists in Washington over nonresident defendants and foreign corporations as long as it complies with federal due process."¹² Due process allows Washington courts to exercise jurisdiction over a nonresident defendant so long as: (1) purposeful minimum contacts exist between the defendant and the forum state, (2) the plaintiff's injuries arise out of or relate to those minimum contacts, and (3) the exercise of jurisdiction is consistent with notions of fair play and substantial justice.¹³ If the plaintiff satisfies the first two prongs, the burden shifts to the defendant to set forth a compelling case that the exercise of jurisdiction would not be reasonable.¹⁴

Depending on the facts and the claims, Washington courts may have either general or specific personal jurisdiction over a defendant corporation.¹⁵ A state court has general jurisdiction to decide claims against a defendant corporation when that corporation's contacts with the state are so significant that it is essentially at home in the forum state.¹⁶ A corporate defendant is "at home" in the place of the corporation's incorporation and its principal place ofbusiness.¹⁷ Also, in an exceptional case, a corporation's operations in a state may be so substantial and of such a nature to make it at home there.¹⁸ Folweiler does not claim that Washington courts have general jurisdiction over FAIR Health. So we consider whether Washington courts have specific jurisdiction over FAIR Health in this case.

The court may exercise specific jurisdiction over a nonresident based on the nonresident's more limited but claim-specific contacts with the state.¹⁹ Specific jurisdiction requires a connection between the forum and the controversy.²⁰ In addition, "the relationship must arise out of contacts that the 'defendant himself' creates with the forum State."²¹

The Supreme Court of the United States most recently explained the requirements of specific personal jurisdiction in Bristol-Myers Squibb Co. v. Superior Court of California.²² The Court noted that specific jurisdiction requires an "'affiliation between the forum and the underlying controversy, principally, [an]activity or an occurrence that takes place in the forum State.'"²³ The court expressly rejected use of a "sliding scale approach" to decide specific jurisdiction issues.²⁴ This means that a corporation's continuous activity within a state cannot make up for the lack of an adequate link between that activity and the claims made in the case.²⁵

The trial court found that FAIR Health's actions were sufficient to subject it to specific jurisdiction:

I am persuaded that the defendant's collection, compilation and use of data that is Zip Code specific constitutes a sufficiently purposeful involvement in the state of Washington such that being held to answer to claims concerning related conduct in the courts of this state does not offend traditional notions of fair play and substantial justice.

Relying on Bristol-Myers Squibb, we disagree.

FAIR Health has contacts in Washington. But they are not sufficiently connected to the claims made in this lawsuit to make the exercise of specific personal jurisdiction appropriate. As the trial court observed, FAIR Health's product is organized geographically and it collects data from Washington to be used in Washington. But FAIR Health had no direct contact with Progressive orthe health care providers included in the class of plaintiffs. FAIR Health collects data in Washington from health insurers and third-party administrators. FAIR Health does not collect data from auto insurers, like Progressive, or health care providers, like the class members. FAIR Health has customers in Washington, but the class's claims did not arise out of those contacts. The class bases its claims on a contract that FAIR Health had with Mitchell, a company located in California. Mitchell had a contract with Progressive that had a contract with Folweiler's patient. Under these facts, FAIR Health's contacts with Washington are not sufficiently connected to the claims made in this lawsuit to make the exercise of personal jurisdiction proper.

Folweiler claims that Washington courts have personal jurisdiction under a stream of commerce theory. In State v. LG Electronics, Inc.,²⁶ the Washington Supreme Court explained how the stream of commerce theory can be used to establish the purposeful minimum contacts required by the first prong of a due process analysis: "where a foreign...