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

Chambers v. Moses H. Cone Mem’l Hosp., 2021 NCBC 75.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
GUILFORD COUNTY 12 CVS 6126

CHRISTOPHER CHAMBERS, on
behalf of himself and all others
similarly situated,

Plaintiff,

v.
ORDER AND OPINION
THE MOSES H. CONE MEMORIAL
ON MOTION TO DISMISS
HOSPITAL; THE MOSES H. CONE
CONDITIONAL COUNTERCLAIMS
MEMORIAL HOSPITAL OPERATING
CORPORATION d/b/a MOSES CONE
HEALTH SYSTEM and d/b/a CONE
HEALTH; and DOES 1 through 25,
inclusive,

Defendants.

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.

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, 216 N.C.

App. 59, 78–82 (2011). Due process principles warn against allowing a defendant to

threaten class members with liability, even in a preliminary way, before the court

has power over them and before they have had a chance to opt into or out of the class.

See Crow v. Citicorp Acceptance Co., 319 N.C. 274, 283 (1987) (stressing “that

fundamental fairness and due process” require notice to class members).

9. Moses Cone also worries that it might have waived its right to counterclaim

had it waited until certification. The law is not so capricious as that. Looking again

to federal decisions, courts do not require defendants to take premature steps against

putative class members just to preserve positions that may never ripen. See, e.g.,

Cruson, 954 F.3d at 250–52 (holding that personal jurisdiction defense was

unavailable before certification and that defendant did not waive it by first raising it

afterward).
10. In short, precertification counterclaims against absent class members are

not authorized by rule, are not necessary for preservation purposes, and may

endanger the due process rights of the absentees. On the other hand, nothing is to

be gained by retaining the counterclaims in limbo. Moses Cone intends to argue that

its counterclaims weigh against class certification, but its argument will be the same

whether they are pending or merely promised. Likewise, class certification discovery

is under way and does not hinge on the pendency of the counterclaims. Moreover, a

dismissal without prejudice means that Moses Cone is no worse off. If a class is

certified, Moses Cone will have the chance to reassert its counterclaims and, if

needed, to request a reasonable adjustment of the discovery schedule to accommodate

those claims.

11. At the hearing, Chambers urged the Court to go further and hold that

counterclaims are never appropriate against unnamed class members, even after

class certification. But he did not fairly raise that issue in his brief, giving it no more

than a mention in a footnote. And the issue may never resurface if the class is not

certified or if (admittedly unlikely) Moses Cone chooses not to reassert the claims.

These are good reasons not to decide the question now, especially when the conclusion

that Moses Cone’s counterclaims are premature is enough to resolve the motion.

12. For all these reasons, the Court GRANTS Chambers’s motion and

DISMISSES Moses Cone’s conditional counterclaims without prejudice.
SO ORDERED, this the 3rd day of December, 2021.

/s/ Adam M. Conrad
Adam M. Conrad
Special Superior Court Judge
for Complex Business Cases