Hawaii Children's Bl v. Hawai'i Pacific Heal, et al

Filing 179

ORDER DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT AND STAYING THE CASE PENDING RESOLUTION OF CONCURRENT STATE COURT PROCEEDINGS 156 - Signed by JUDGE SUSAN OKI MOLLWAY on 1/8/09. (This case is stayed until a final judgment is entered in the state court litigation following completion of appellate proceedings. The Clerk of Court is directed to close this case administratively. The parties are ordered to move to reopen this case upon the conclusion of state appellate proceedings.) (emt, )

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAII HAWAII CHILDREN'S BLOOD AND CANCER GROUP, Plaintiff, vs. HAWAI`I PACIFIC HEALTH; KAPI`OLANI MEDICAL SPECIALISTS; KAPI`OLANI MEDICAL CENTER FOR WOMEN AND CHILDREN, Defendants. _____________________________ ) ) ) ) ) ) ) ) ) ) ) ) ) ) CIVIL NO. 03-00708 SOM/LEK ORDER DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT AND STAYING THE CASE PENDING RESOLUTION OF CONCURRENT STATE COURT PROCEEDINGS

ORDER DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT AND STAYING THE CASE PENDING RESOLUTION OF CONCURRENT STATE COURT PROCEEDINGS Plaintiff Hawaii Children's Blood and Cancer Group ("HCBCG") seeks a permanent injunction and damages for alleged violations of the Sherman Act, 15 U.S.C. §§ 1-2, the Clayton Act, 15 U.S.C. §§ 15-16, and the Lanham Act, 15 U.S.C. § 1125, by Defendants Hawai`i Pacific Health, Kapi`olani Medical Specialists, and Kapi`olani Medical Center for Women and Children. Defendants seek summary judgment on all claims. This

court denies the motion without prejudice to its being filed after appellate proceedings in a related state court action have been concluded. Pending resolution of those state appellate

proceedings, this action is stayed.

I.

FACTUAL BACKGROUND. HCBCG originally filed this action in federal court on

December 29, 2003.

HCBCG is an unincorporated medical group

consisting of Kelley Woodruff, M.D., and Robert Wilkinson, M.D., both pediatric hematology-oncology physicians. Before founding HCBCG, Drs. Woodruff and Wilkinson were employed by Kapi`olani Medical Specialists, a physicians' group. Both have staff privileges at Kapi`olani Medical Center for Women and Children, a local hospital, where they continue to see and treat patients. Both the physicians' group and the hospital are

under the umbrella of Hawai`i Pacific Health, a health care system with a state-wide network of hospitals, clinics, and physicians. HCBCG alleges that Defendants used the health care

system's monopoly in the market of pediatric hematology-oncology services, as well as false and misleading advertising, to exclude Dr. Woodruff and Dr. Wilkinson from receiving new patient referrals and to redirect existing patients to other doctors in the physicians' group. In January 2002, Dr. Woodruff had filed an action in state court, asserting state antitrust claims, defamation, retaliatory discharge, breach of contract, and tortious interference, all based on essentially the same factual allegations that were recited in HCBCG's federal filing. Dr.

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Woodruff later amended her complaint in the state action to add HCBCG as a plaintiff. On October 22, 2004, this court issued an order denying Defendants' motion to dismiss and granting Defendants' alternative motion to stay proceedings in federal court pending resolution of the older state action. An exception was granted

for any discovery in the state action that would also be relevant to the federal claims. On March 18, 2008, in the state court action, Judge Bert Ayabe granted the last of a series of summary judgment orders, resolving all state law claims. The plaintiffs moved in

state court for reconsideration of the summary judgment orders; Judge Ayabe denied the motion for reconsideration on July 1, 2008. Citing a final judgment in state court, Defendants sought an amendment of the dispositive motions deadline in the federal action, which Magistrate Judge Leslie Kobayashi granted. HCBCG moved to dissolve the stay and continue the January 5, 2009, hearing on the summary judgment motion. Judge Kobayashi

denied the motion to continue but granted the motion to dissolve the stay. Meanwhile, the plaintiffs in the state court case

filed an appeal. Defendants now seek summary judgment on all claims in this court. They assert that claim preclusion bars the Lanham

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Act claims and that issue preclusion bars the Sherman Act and Clayton Act claims. In the alternative, Defendants move for

summary judgment on the merits. Given the pending appeal in state court, a final judgment has not been reached for the purposes of res judicata and collateral estoppel. therefore DENIED. The motion for summary judgment is

Instead, the case is stayed pending the

outcome of the appeal in state court. II. ANALYSIS. A. Preclusive Effect of State Court Judgment.

The Supreme Court advises: The preclusive effect of a state court judgment in a subsequent federal lawsuit generally is determined by the full faith and credit statute, which provides that state judicial proceedings "shall have the same full faith and credit in every court within the United States . . . as they have by law or usage in the courts of such State . . . from which they are taken." 28 U.S.C. § 1738. This statute directs a federal court to refer to the preclusion law of the State in which judgment was rendered. Marrese v. Am. Academy of Orthopaedic Surgeons, 470 U.S. 373, 386 (1985). This court therefore applies Hawaii law in determining

what effect the state court judgment has on the federal litigation. B. Claim Preclusion.

The Hawaii Supreme Court has declared that "parties should be spared unnecessary vexation, expense, and inconsistent

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results; that judicial resources shall not be wasted; and that the legal efficacy of final judgments shall not be undermined, but rather that final determinations by competent tribunals shall be accepted as undeniable legal truth." Albano v. Norwest Fin. Haw., Inc., 244 F.3d 1061, 1063-1064 (9th Cir. 2001)(citing Ellis v. Crockett, 51 Haw. 45, 57, 451 P.2d 814, 822 (1969)(citations omitted)). As a result, "while everyone is given the opportunity to present a case, that is limited to one such opportunity." Id.

Hawaii courts ask three questions to determine whether res judicata applies. "Was there a final judgment on the merits?

Was the party against whom the plea is asserted a party or in privity with a party to the prior adjudication? . . . Was the

issue decided in the prior adjudication identical with the one presented in the action in question?" 1. Final Judgment. Albano, 244 F.3d at 1064.

Under Hawaii state law, "where an appeal has been taken, a judgment of the trial court is not final, at least for purposes of res judicata." Littleton v. State, 6 Haw. App. 70, HCBCG filed an appeal in

76, 708 P.2d 829, 833 (Ct. App. 1985). state court on October 30, 2008.

As long as this appeal is

pending, the final judgment requirement for the purposes of res judicata is not met. Summary judgment cannot be granted in the Were the

present case on the ground of claim preclusion.

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judgment in state court to be affirmed on appeal, however, claim preclusion may well apply, as the other elements appear at this point to be met. 2. Privity.

"Privity will be found only where the interests of the non-party were adequately represented in the earlier action." Pedrina v. Chun, 97 F.3d 1296, 1301-2 (9th Cir. 1996)(citations omitted). In issuing the original stay, this court found that

HCBCG was in privity with Dr. Woodruff, the original plaintiff in the state case. This court held that HCBCG's interests would be

protected in the ongoing state litigation, and, in fact, HCBCG was added as a plaintiff in the state case. Privity therefore

exists between the parties for the purposes of claim preclusion. 3. Similarity of Issues.

The relevant question for purposes of evaluating whether both suits involve similar issues is whether the claims in the federal case "could have been raised in the earlier state court actions." Pedrina, 97 F.3d at 1301; see also Santos v.

Hawaii, Dep't of Transp., 64 Haw. 648, 652-53, 646 P.2d 962, 96566 (1982) (per curiam); Aloha Unlimited, Inc. v. Coughlin, 79 Haw. 527, 537, 904 P.2d 541, 551 (Ct. App. 1995); Fuller v. Pac. Med. Collections, Inc., 78 Haw. 213, 218-19, 891 P.2d 300, 305-306 (Ct. App. 1995). Hawaii courts apply this doctrine

broadly, precluding subsequent litigation of "all grounds of

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claim and defense which might have been properly litigated in the first action but were not litigated or decided." at 55, 451 P.2d at 822 (citations omitted). HCBCG'S Lanham Act claims in the present case appear to revolve around the same subject matter as the state litigation. Both actions allege that Defendants disseminated false and misleading information about HCBCG'S practice. The Lanham Act Ellis, 51 Haw.

claims, while not brought in state court, could have been invoked on the same set of facts. State courts have concurrent 28

jurisdiction with federal courts over Lanham Act claims. U.S.C. § 1338(a); 15 U.S.C. § 1121. Co., 160 U.S. 221, 230 (1895).

In re Keasbey & Mattison

Therefore, this prong appears to

be met regarding the claims of misleading advertising. The Sherman Act and Clayton Act claims could not have been raised in state court. "[F]ederal antitrust claims are

within the exclusive jurisdiction of the federal courts, Marrese, 470 U.S. at 380. Nonetheless, "[t]he fact that

petitioners' antitrust claim is within the exclusive jurisdiction of the federal courts does not necessarily make § 1738 inapplicable to this case. Our decisions indicate that a state

court judgment may in some circumstances have preclusive effect in a subsequent action within the exclusive jurisdiction of the federal courts." Id. at 386.

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Defendants argue that the Sherman Act claims are in fact barred by issue preclusion. This court therefore examines

the standards for issue preclusion, or collateral estoppel: Issue preclusion prevents a party from relitigating an issue decided in a previous action if four requirements are met: (1) there was a full and fair opportunity to litigate the issue in the previous action; (2) the issue was actually litigated in that action; (3) the issue was lost as a result of a final judgment in that action; and (4) the person against whom collateral estoppel is asserted in the present action was a party or in privity with a party in the previous action. The burden is on the party seeking to rely upon issue preclusion to prove each of the elements have been met. Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1050-51 (9th Cir. 2008)(internal citations omitted). Because Defendants have not demonstrated that a final judgment on the antitrust issue was entered against HCBCG in the state court, HCBCG is not estopped from asserting these federal claims. However, having already established privity, Defendants

would satisfy the criteria for issue preclusion if the state court judgment were upheld on appeal. That is because, after a

final judgment, the only questions remaining would be whether these exact issues were actually litigated in the previous action, and whether HCBCG had a fair opportunity to litigate the issues. The record before this court suggests that the same

issues were litigated in state court, and HCBCG has not shown that it lacked a fair opportunity to litigate the issues.

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This court is well aware that Hawaii antitrust statutes are interpreted "in accordance with judicial interpretations of similar federal antitrust statutes." Int'l Healthcare Mgmt. v.

Haw. Coalition for Health, 332 F.3d 600, 609 (9th Cir. 2003)(citing Haw. Rev. Stat. § 480-3). It appears on the record

before this court that the resolution of the issues in the state litigation would apply to the federal antitrust claims. Unless

HCBCG prevails on its state court appeal, it would be precluded from raising the federal antitrust issues in federal court. III. CONCLUSION. HCBCG's claims are not presently barred by claim or issue preclusion, given the absence of the final state court judgment required for the application of these doctrines. motion for summary judgment is therefore DENIED. The

This case is

stayed until a final judgment is entered in the state court litigation following completion of appellate proceedings. The Clerk of Court is directed to close this case administratively. The parties are ordered to move to reopen this

case upon the conclusion of state appellate proceedings. IT IS SO ORDERED. DATED: Honolulu, Hawaii, January 8, 2009.

/s/ Susan Oki Mollway Susan Oki Mollway United States District Judge
H a w a i i Children's Blood and Cancer Group v. Hawai`i Pacific Health; Kapi`olani M e d i c a l Specialists; Kapi`olani Medical Center for Women and Children; Civil N O . 03-00708 SOM/LEK; ORDER DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT A N D STAYING THE CASE PENDING RESOLUTION OF CONCURRENT STATE COURT PROCEEDINGS.

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