Shannon v. Mayo Clinic Health Sys. - Nw. Wis. Region, Inc.

398 Wis.2d 685

963 N.W.2d 115

2021 WI App 49

Dorothy SHANNON, Individually and on Behalf of a Class of Others Similarly Situated, ^† Plaintiff-Respondent,

v.MAYO CLINIC HEALTH SYSTEM - NORTHWEST WISCONSIN REGION, INC., Defendant-Appellant.

Appeal No. 2020AP1186

Court of Appeals of Wisconsin.

Submitted on Briefs: January 5, 2021

Opinion Filed: June 2, 2021

On behalf of the defendant-appellant, the cause was submitted on the briefs of Matthew J. Splitek and James E. Goldschmidt of Quarles & Brady LLP, Madison and Milwaukee offices, respectively.

On behalf of the plaintiff-respondent, the cause was submitted on the brief of Robert J. Welcenbach of Welcenbach Law Offices, S.C., Milwaukee; Scott Borison of Legg Law Firm LLC, Baltimore, Maryland; Jay Heit of Herrick and Hart, S.C., Eau Claire; and John Craig Jones of Jones Hill Trial Lawyers, South Oakdale, Louisiana.

Before Stark, P.J., Hruz and Seidl, JJ.

SEIDL, J.

¶1 Dorothy Shannon alleges in this class action lawsuit that she was overcharged for the costs of obtaining medical records in 2013 by a nonprofit corporation, Mayo Clinic Health System—Red Cedar (hereinafter "Red Cedar"), which merged into a separate nonprofit corporation, Mayo Clinic Health System—Northwest Wisconsin Region, Inc. (hereinafter "Northwest"), in 2018. Shannon moved to certify a class against Northwest, to which Northwest objected. The sole issue on appeal is whether, in order to accurately define the scope of the certified class, the class notice should have identified Red Cedar, rather than Northwest, as the entity whose alleged conduct triggered Shannon's claim.

¶2 Northwest argues the circuit court violated WIS. STAT. § 803.08(11) (2019-20),¹ by ordering that Northwest be named in the class notice because the class definition includes references to conduct by Northwest that are unsupported by any evidence. In response, Shannon asserts that due to the entities’ merger, the court did not err in refusing to name Red Cedar and, instead, naming Northwest in the notice. Shannon further argues that Northwest should be judicially estopped from claiming it should not be included as the party whose conduct is at issue in the class definition because that position is inconsistent with the position Northwest took in earlier moving to dismiss Red Cedar from the lawsuit.

¶3 We conclude the class as certified incorrectly defines the members who may claim damages as a result of being charged for obtaining medical records by Red Cedar. Accordingly, the circuit court erred in failing to amend the class definition. We further conclude that Northwest is not judicially estopped from seeking to correctly define the class action members. We therefore reverse that part of the court's class certification order, which defines the members as those persons who were charged for obtaining medical records by Northwest, and remand with directions to substitute Red Cedar for Northwest in the class definition.

BACKGROUND

¶4 In December 2013, Shannon's attorney made a request for certified medical records from Red Cedar. Red Cedar responded to Shannon's records request with an invoice for forty-one dollars. The invoice stated that checks should be made payable to Red Cedar. Shannon's counsel thereafter paid the charge to Red Cedar.

¶5 On January 1, 2018, Red Cedar merged into Northwest. By statute, Red Cedar ceased to exist at the time of the merger. See WIS. STAT. § 181.1106(1). As the surviving entity, however, Northwest succeeded to Red Cedar's liabilities as they existed prior to the merger. See § 181.1106(3).

¶6 Shannon thereafter filed the instant lawsuit against Red Cedar and Northwest, asserting violation of WIS. STAT. § 146.83² and other causes of action on behalf of herself and a putative class. The complaint identified Red Cedar and Northwest as separate parties. It also alleged Northwest was the "parent entity of other corporations" and of Red Cedar. The complaint was based on Shannon's counsel's December 2013 transaction with Red Cedar, and it named her as the class representative.

¶7 Based upon the earlier merger, Northwest moved to dismiss Red Cedar as a party, explaining that Red Cedar had merged into Northwest. Given the merger, Red Cedar no longer had the capacity to be sued, but Northwest acknowledged that it succeeded to any Red Cedar liabilities on Shannon's and the putative class's claims. The circuit court granted the motion and dismissed Red Cedar. The court denied a separate motion to dismiss Northwest, which remained in the case as Red Cedar's successor.

¶8 Shannon moved to certify the class action in which she defined the class as "[a]ll persons in Wisconsin ... who were ... patient[s] of any Mayo healthcare provider," who requested health care records "from Mayo," and were charged a fee "by MAYO" in violation of WIS. STAT. § 146.83(3f)(b)4.-5. from six years preceding "commencement of this action through the date of trial." Shannon's motion explicitly defined "Mayo" as Northwest.

¶9 Northwest did not oppose the class certification, but it did move to amend the class definition. As relevant here, Northwest argued that the class could not be certified without defining the class by reference to the entity that actually charged Shannon's counsel—Red Cedar. Northwest further explained: "This proposed clarification merely seeks to align any class definition with the facts of this case. Those facts involve charges by [Red Cedar], and no charges by [Northwest]." Northwest further warned: "If Shannon defines her class in terms of persons charged by [Northwest], that class will not have any members—not even Shannon herself."

¶10 At the motion hearing, Shannon opposed this revision to the class certification because Red Cedar no longer existed, Northwest was the only remaining defendant, and if the definition was amended, Northwest would escape liability. However, Northwest expressly acknowledged that "if liability is based on [Red Cedar], the liability would go to [Northwest]." Northwest merely wanted clarification that it was Red Cedar's conduct and not Northwest's conduct that defined the scope of the class, given the facts alleged.

¶11 The circuit court agreed that the charges paid by Shannon's attorney "were Red Cedar charges."

But, in the court's view, if Northwest had assumed liability for those charges, attributing the charges to any other entity in the class notice was "kind of like splitting hairs." The court then denied the modification to amend the class definition, finding that it was an improper attempt to take Northwest out of the case. Northwest now appeals.

DISCUSSION

¶12 A circuit court's decision to grant or deny a motion for class certification is committed to the court's discretion. Harwood v. Wheaton Franciscan Servs., Inc. , 2019 WI App 53, ¶41, 388 Wis. 2d 546, 933 N.W.2d 654. A circuit court properly exercises its discretion when it considers the facts of record and reasons its way to a rational, legally sound conclusion. Id. Stated differently, in order to properly exercise its discretion, a circuit court must apply the correct standard of law to the facts at hand. National Auto Truckstops, Inc. v. DOT , 2003 WI 95, ¶13, 263 Wis. 2d 649, 665 N.W.2d 198.

¶13 Here, the circuit court's class certification decision is governed by the legal standards in WIS. STAT. § 803.08(11), which permit courts to certify class actions only "on the basis of a written decision setting forth all reasons why the action may be maintained and describing all evidence in support of the determination." Whether the certification decision here comports with this legal standard is a question of law that we review de novo, as is the circuit court's construction of the class definition language. See, e.g. , Williams v. General Elec. Cap. Auto Lease, Inc. , 159 F.3d 266, 272 (7th Cir. 1998), citing In re American Cont'l Corp./Lincoln S&L Sec. Litig. , 49 F.3d 541, 543 (9th Cir. 1995) (construction of class definition language, like construction of a statute or contract, is reviewed de novo).

¶14 There are no questions that Shannon's counsel paid Red Cedar for obtaining her medical records; that Red Cedar subsequently merged into Northwest and no longer exists; that Red Cedar's liabilities were assumed by Northwest, including any alleged overcharging for the medical records; and that Shannon did not obtain her medical records from Northwest or pay Northwest for those records. Nonetheless, the circuit court entered a written class certification order in which the approved class definition includes references to Northwest's conduct, rather than Red Cedar's conduct.

¶15 Based on these undisputed facts, Northwest contends the circuit court violated WIS. STAT. § 803.08(11) by approving a class definition that is unsupported by any evidence. We agree. The order is deficient under § 803.08(11) because it does not "describ[e]" any "evidence in support of [its] determination" that Northwest's conduct provides a basis for a class action. As Northwest correctly observes, "[i]t would be impossible to describe evidence in support of launching a class action against [Northwest] except as successor to [Red Cedar]." (Emphasis omitted.) As explained, there is no evidence in the record to support a claim that Northwest itself charged any fees to anyone, only that Red Cedar did so while it was still in existence. Accordingly, the evidence requires amending the court's class certification order to substitute Red Cedar for Northwest in the class definition.

¶16 Shannon argued, and the circuit court agreed, that Red Cedar could not be identified in the class definition because it merged into Northwest and no longer exists—or conversely, that Northwest must be identified because of its successor liability. Again, we disagree. As Northwest correctly notes, successor liability under WIS. STAT. § 181.1106(3) does not change the identity of a past actor; it merely carries liability for the past actor's actions forward to that actor's...