Thursday, May 28, 2009

Eleventh Circuit Affirms Order Enjoining Litigant from Bringing Action

In Thomas v. Blue Cross & Blue Shield (08-15395), the Eleventh Circuit affirmed Judge Moreno's order permanently enjoining the appellant from bringing suit against Blue Cross. The decision discusses a number of different legal theories including claim preclusion, the impact of a bankruptcy stay, laches, equitable challenges, the power of a court to adjudicate issues not raised and issues raised for the first time on appeal.


Judge Moreno issued the injunction based upon the judgment entered in a prior case pending before him. The prior case, Love, et al. v. Blue Cross Blue Shield Ass’n, et al., No. 03-21296-CV (S.D. Fla. Apr. 19, 2008), "alleged that Blue Cross cheated doctors by devising ways to delay, diminish, and deny properly requested payments based on their cost instead of medical necessity. In 2007 Blue Cross agreed to settle the case for $130,000,000 and an agreement to change many of its business practices. Most notably, Blue Cross agreed to use medical standards and scientific evidence in making its “medical necessity” determinations. The settlement agreement also included a release designed to prevent doctors who were members of the plaintiff class from pursuing further claims based on the same actions by Blue Cross. Notices of the preliminary Love settlement were mailed to Dr. Jemsek and the Jemsek clinic in July 2007. A summary notice was also published in USA Today, the Wall Street Journal, the Journal of the American Medical Association, and the American Medical News. Neither Dr. Jemsek nor the Jemsek clinic opted out of the plaintiff class. Accordingly, they were bound by the settlement agreement when the district court issued its final approval in April 2008."

"The district court’s order enjoined Jemsek from bringing, against any Blue Cross defendant, claims that: [A]re, were, or could have been asserted against any of the Released Parties by reason of, arising out of, or in any way related to the facts, acts, events, transactions, occurrences, courses of conduct, business practices, representations, omissions, circumstances, or other matters referenced in the [Love] Action, or addressed in the Settlement Agreement, whether any such Claim was or could have been asserted by any Releasing Party on its own behalf or on behalf of other Persons . . . . This includes, without limitation and as to Released Parties only, any aspect of any fee for service claim submitted by any Class Member."

Blue Cross sued the doctor in North Carolina and the doctor responded by filing bankruptcy, removing the action to the North Carolina bankruptcy court and filing nine compulsory counterclaims in the North Carolina bankruptcy court. In response, Blue Cross moved the Florida district court to enjoin the doctor from bringing the action.

Claim Preclusion

“In order for claim preclusion to apply, four elements are required: (1) a final judgment on the merits; (2) rendered by a court of competent jurisdiction; (3) identity of the parties; (4) identity of the causes of action."


An “identical factual predicate” requires only a common nucleus of operative fact.


"We hold that Dr. Jemsek’s counterclaims and the Love action, both of which arise out of Blue Cross’ conniving to deny, diminish, or delay payment for covered services based on cost instead of medical necessity, share the same operative nucleus of fact."

Claims Not Before the Court

"But “even when the court does not have power to adjudicate a claim, it may still approve release of that claim as a condition of settlement of an action before it...Given a broad enough settlement agreement— which it clearly was—and provided that Jemsek had notice of it and an opportunity to opt out, it is perfectly acceptable for the Love action to preclude his claims, even if they could not have been part of that action itself.

Bankruptcy Court's Automatic Stay

"Next, Dr. Jemsek contends that the district court’s injunction against his counterclaims should not be enforced because it violated the automatic stay in his bankruptcy case...Under the plain language of the [11 U.S.C. § 362(a)(1–3)], Jemsek’s counterclaims against Blue Cross are not “against the debtor,” and thus were not subject to the automatic stay...Therefore, the bankruptcy stay created by § 362 did not “cement” Jemsek’s claims into his sealed estate and thereby shield them from the Florida district court’s order in the Love action. Jemsek’s counterclaims were not stayed, so there is no reason why the judgment in the Love action could not foreclose them...

Nor did the Florida district court improperly “exercise control over property of the estate” under § 362(a)(3) by requiring Jemsek to choose whether to opt out of the Love action. Given that his counterclaims, though they may be “property of the estate,” were not stayed by the automatic bankruptcy stay, they were open to possible defeat by Blue Cross’ defenses. It would not make sense under a plain reading of the statute to treat raising a defense against a non-stayed counterclaim as an “exercise of control over property.”

Arguments Raised for the First Time on Appeal

“Arguments raised for the first time on appeal are not properly before this Court.” Hurley v. Moore, 233 F.3d 1295, 1297 (11th Cir. 2000); see also Blue Cross Blue Shield of Alabama v. Weitz, 913 F.2d 1544, 1549 (11th Cir. 1990).


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