March 26, 2020 Practice Points

Sixth Circuit Holds Class Action Dismissal Only Covers Named Plaintiffs Prior to Class Notification

The summary judgment decision binds only named plaintiffs when court issues summary judgment order dismissing entire case after class is certified but before class notification.

By Neeckaun Irani

The Sixth Circuit’s decision in Faber v. Ciox Health, LLC, 944 F.3d 593 (6th Cir. 2019) highlights a significant drawback to obtaining dismissal prior to a plaintiff effectuating notice on a certified class. Writing for a divided court, Judge John B. Nalbandian’s decision held that a summary judgment dismissal occurring after class certification, but before class notification, binds only the named plaintiffs who filed the claims. Relatedly, the court also held that providing the class with post-judgment notice would not bind the absent class members.

Ciox is one of the largest medical-records providers in the country. In 2018, Ciox processed over 4 million pages of medical records daily, with three out of five hospitals using their services. The Tennessee plaintiffs alleged that Ciox violated the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and Tennessee’s Medical Records Act (TMRA) by overcharging them when servicing their information requests. Both laws require charging only reasonable cost-based fees for patients to access their records. Because HIPAA does not allow for private rights of action, the plaintiffs also alleged Tennessee common law causes of action, including negligence, negligence per se, unjust enrichment, and breach of implied-in-law contract.

The plaintiffs moved to certify a class of “persons who requested their medical records from medical providers and were subsequently overcharged for their medical records by Defendant Ciox.” Although the district court dismissed the TMRA cause of action for failure to state a claim, the district court certified a class of individuals with respect to the HIPAA-styled common law claims who Ciox charged (1) a basic fee and/or electronic delivery fee surpassing $6.50, (2) a per page fee when records were provided electronically, (3) or a per-page fee which exceeds the actual labor and supply costs incurred. Two weeks after class certification, before notice of that decision was sent to absent class members, the district court granted Ciox’s summary judgment motion dismissing all remaining claims and reasoning that federal preemption bars plaintiffs from using Tennessee common law to circumvent congressional intent to preclude private rights of action.

The Sixth Circuit affirmed the district court’s summary judgment decision on the merits. Since that the district court certified a class before dismissing the entire case, the appellate court needed to decide if absent class members were bound by the dismissal when notice to the class had not been made. The defendants proposed remanding back to the district court to provide the class with post-judgement notice. The Sixth Circuit rejected this proposal, noting that post-judgment notice essentially invites absent class members to enter a fight that they have already lost. Binding absent class members to a judgment before class notice is provided would likely violate those class members’ due process rights. While the court acknowledged similarly situated plaintiffs could still bring claims, the principles of stare decisis, and possibly issue preclusion, still provide defendants an asset against potential future suits.

The outcome in Ciox demonstrates that defendants confident in the merits of their case should attempt to stage dispositive motions after class certification and class notice. When both motions are pending, defendants may want to request holding dispositive motions in abeyance until class notice is completed.

Neeckaun Irani is an associate with Weil, Gotshal & Manges LLP in Silicon Valley, California.

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