No. 92-249 

### IN 

### THE SUPREME COURT OF THE 

### STATE OF MONTANA 1992

STATE MEDICAL OXYGEN AND SUPPLY, INC., a Montana corporation, Plaintiff and Appellant,

AMERICAN MEDICAL OXYGEN CO., a Montana corporation; J. C. 

### LYNDES, GARY GOMEZ, and RONALD WRIGHT, Defendants 

### and Respondents.

APPEAL FROM: 

### District Court of the Second 

### Judicial District, In and for the County of Silver 

### Bow, The Honorable Mark P. Sullivan, Judge 

### presiding.

COUNSEL OF RECORD: For Appellant: ~rian L. Delaney and P, Mars Scott, Mulroney, Delaney & Scott,

### iss sou la, Montana 

### For Respondent: ~ichael G. Moses, Moses Law Firm, Billings,Montana Philip 

### P. McGimpsey, 

### Billings,Montana

Submitted on Briefs: October 22, 1992 Decided: December 17, 1992 Filed:

I 

## "Clerk

### Chief Justice J. 

### A. Turnage delivered the Opinion of the Court. StateMedical Oxygenand Supply,Inc. (StateMedical), appeals

an order grantingpartial dismissal andpartial summary judgment in favor ofAmericanMedical OxygenCo. (AmericanMedical). The order

was entered in the SecondJudicial District, SilverBow County. We

reverse and remand. The issues raised by the parties to this appeal are: 1. Was the order entered in the Eighth Judicial District, Cascade County, binding upon the parties in subsequent judicial proceedings in the Second Judicial District, based upon res judicata and collateral estoppel? 2. Does 42 

### USC 5 

### 1395a expressly or impliedly bar a claim under state law for tortious interference with a business relationship? As the parties to this litigationhave been before this Court

on two prior occasions, repetition of all underlying facts is unnecessary. A full recitation of the facts canbe found in State Medical Oxygen and Supply, Inc. v. American Medical Oxygen Co.

(l988), 230 Mont. 456, 750 P.2d 1085 

### (State Med I), 

### and State Medical Oxygen and Supply, Inc. v. American Medical Oxygen Co.

(l989), 240 

### Mont. 70, 782 P.2d 1272. However, because of the arduous nature of this lawsuit, an outline of certain facts and procedure is necessary in order to follow the events leading to this appeal. At its inception, this lawsuit involved complaints filed in fivedifferent countiesby StateMedical against American Medical,certain employees of American Medical, and the directors of American Medical. Because of the similarities in the five lawsuits, the parties agreed to choose one venue to serve as the "lead case." The Eighth Judicial District, Cascade County, was chosen for this purpose. In its initial complaints, StateMedical alleged, inter alia, that violation of 5 1877(b) of the Social Security Act, 42 USC 3 1395nn, gave rise to a private cause of action under Montana law. StateMed I, 750P.2d at 1086. Inaffirming summary judgment as to this issue,we held StateMedical was not of the class the federal statute was designed to benefit and did not meet the criteria necessary to pursue a private cause of action arising from an alleged violation of the statute. StateMed I, 750 P.2d at 1087- 88. On the other hand, we held the depositions of threematerial witnesses were relevant to a claim of tortious interference with a business relationship and should have been considered before summary judgment was granted as to all issues. State Med I, 750 P.2d at 1089. We reversed thispart of the District Court's order and granted State Medical leave to amend or supplement its pleadings as to the claim of tortious interference. State Med I, 750 P.2d at 1089. This reversal and remand set the stage for round three of this litigation bout.After our decision in StateMed 

### I,State Medical filed amended complaints directlypleading tortious interferencewith a business relationship. The amended complaints were filed in all venues where an action was pending. After the amended complaints were filed, State Medical's counsel was appointed a District Judge in Lincoln County. New counsel was substituted to represent State Medical. Theparties continued to actively litigate,with Cascade County continuing to serve as the "lead case." In February 1990,American Medical filed a motion to dismiss andmotion for summary judgment to limitdamages and discovery. In early March 1990, the District Court granted American Medical's motion. The order did not contain any analysis as to why the District Court granted thismotion. Apparently,theDistrictCourt adopted the argument outlined in American Medical's brief. American Medical's position was that the Medicare/Medicaid customers were free to choose any qualified oxygen supplier. Therefore, American Medical argued, State Medical was barred from

a private cause of action as to this class of customers regardless of whether American Medical obtainedthese customersvia a tortious act. State Medical did not appeal or seek certification of this order. For reasons that arenot entirely clear,theparties agreed to transfervenue to the SecondJudicial District, Silver Bow County. Silver Bow County was now considered the "lead case" and theparties began making preparations for trial. In all likelihood, the outcome of a trial in Silver Bow Countywould be controlling in the other fourpending actions. In October 1991,American Medical filed a motion to dismiss and motion for summary judgment to limit damages and discovery based upon estoppel and res judicata. American Medical argued that the Silver Bow County District Court should adopt the holding of the District Court in Cascade County based upon the principles of res judicata, judicial estoppel, and collateral estoppel. Alternatively, American Medical argued the District Court should grant the motion because federal law barred

a cause of action under state law as to the Medicare/Medicaid customers. After a hearing on November 14, 1991, the District Court determined that good cause existed to grant American Medical's motions for summary judgment and to limit damages and discovery as to the Medicare/Medicaid customers. The District Court certified its order pursuant toRule 54(b)

## ,M.R.Civ.P. Thisappeal followed.

Was theorder entered in theEighthJudicial District,Cascade County, a final order and as such binding upon the parties and courts in subsequent judicial proceedings based upon res judicata and collateral estoppel? Themajority of American Medical

## 'sbrief attempts to persuade this Court that the order for dismissal and summary judgment entered in the District Court for the Eighth Judicial Districtwasa final judgment on the merits. As a result, American Medical argues, because StateMedical did not appeal that order, itbecame final and binding upon the parties and courts of concurrent jurisdiction based upon res judicata and collateral estoppel. We donot agree. American Medical's conclusion isbased upon a faulty premise and therefore is incorrect as a matter of law. Res judicata reflects the ideal that a lawsuit should provide justice for an aggrieved party aswell asa final resolution of the controversy. Brault v. Smith (1984), 209 Mont. 21, 25, 679 P.2d 236, 238. Its underlying purpose is to prevent a party from litigating a matter more than once. Brault, 679 P.2d at 238. In order for a plea of res judicata to operate as a bar and prevent the same parties from relitigating the same cause of action: 1) the parties or their privies must be the same; 2) the subject matter of the action must be the same; 3) the issues must be the same and relate to the same subject matter; and 4) the capacities of the persons must be the same in reference to the subject matter and to the issues between them. Audit Services, Inc. v. Anderson (1984), 211 Mont. 323, 327, 684

However, in order for the operative criteria to apply, there must be "a final judgment on the merits by a court of competent jurisdiction

# . . .." S-W Company v. JohnWight, Inc. (1978), 179 Mont. 392, 407, 587 P.2d 348, 356. A final judgment on themerits

# . . . is a finality as to the claim or demand in controversy, concluding [sic] parties and those in privity with them, not only as to every matter which was offered and received to sustain or defeat the claim or demand,but as to any other admissiblematter which might have been offered for that purpose. 

### S-W Company, 587 P.2d at 356 (emphasisadded). The order of dismissal and summary judgment entered by the Cascade County District Court, as to the Medicare/Medicaid customers, was not a final judgment on the merits. It was a partial order. There was no right to immediate appeal absent a determination by the District Court that there was no just reason for delay and a final judgment was entered and certified for appeal. InRe theMarriage of Adams (1979), 183 Mont. 26, 28, 598 P.2d 197, 198. The order adjudicated "less than all the claims or the rights and liabilities of less than all the parties" and was "subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties." Rule 54(b), M.R.Civ.P. Therefore, in a strict sense, and applicable to the case at bar, res judicata does not apply to the decision of a motion. SeeAugust v. Burns (1927), 79 Mont. 198, 215, 255 P. 737, 742. Likewise,thedoctrine of collateral estoppel is inapplicable. Like res judicata, in order for collateral estoppel to apply, a final judgment on the merits is required. Smith v. Schweigert (1990), 241 Mont. 54, 58, 785 P.2d 195, 197. As the order of

### partial dismissal and partial summary judgment was not a final judgment on the merits, an extended discussion is unnecessary. Suffice it to say,we hold collateral estoppel has no application to the instant case.

Does 42 

### USC 5 

### 1395a expressly or impliedly bar a claim under state law for tortious interferencewith a business relationship? We next turn our attention to whether 42 

### USC 5 

### 1395a bars State Medical from a private cause of action under state law for damages relating to the loss of Medicare/Medicaid customers. American Medical argues that because the Medicare/Medicaid customers are free to choose a qualified provider, 42 

### USC 3 

### 1395a operates to insulate it from damages regardless of whether it tortiously interferedwith thebusiness relationship between State Medical and these customers. Therefore, American Medical claims,

as a matter of law the District Court in Silver Bow County was correct in its order for partial dismissal and partial summary judgment that 42 

### USC 5 

### 1395a bars State Medical from seeking damagesas to these customers. We disagree and reverseand remand. 42 

### USC 3 

### 1395a in its entirety reads: Any individual entitled to health benefits under this subchapter may obtain health services from any institution, agency, or person qualified to participate under this subchapter if such institution, agency or person undertakes to provide him such service. 42 

### USC 3 

### 1395a.At first glance, the statute does not lead one to believe Congress intended to bar a cause of action under state law simply because those entitled to benefits have the right to choose fromwhom they want health services. It is well settled that state laws are presumed valid against preemption challenges unless Congress clearly intendedtheybepreempted by federal law. Mountain States Telephone v. Commissioner of Labor (1979), 187 Mont. 22, 41, 608 P.2d 1047, 1057. Cipollonev. Liggett Group, Inc. (1992), -U.S.

-r 112 S.Ct. 2608, 2618, 

## -L.Ed.2d 

### - 

# . A state law can be preempted by federal law in one of three ways. K-W Industriesv. National Surety Corporation (9thCir. 1988), 855 F.2d 640, 642,n. 3. First, the federal lawmay expressly preempt state law; second, Congressmay have intended the federal law occupy the entire legal field in the area; third, the state law may conflict with the federal law. K-W Industries, 855 F.2d at 642,n. 3. Obviously, the first preemption factor is inapplicable. The plain language of 42 USC S 1395a contains no express prohibition against a claim under state law for tortious interference with a business relationship with Medicare/Medicaid customers. Effect must be given to theplain language of the statute "unlessthere is good reason to believe Congress intended the language to have some more restrictive meaning." Ci~ollone, 112 S.Ct. at 2620. Furthermore, the second preemption criterion does not apply and American Medical does not argue that it should. By itsapplication to the facts presented here, state law espousing 

### a

cause of action for tortious interference with 

### a business relationship as toMedicare/Medicaid customers does not operate to supplement the field of Social Security. Case law holds that the federal lawmust so thoroughly occupy the legislative field "as to make reasonable the inference that Congress left no room for the States to supplement it." Cipollone, 112 S.Ct. at 2617. We hold the law applicable to State Medical's cause of action does not operate to supplement the legislative field governing Medicare/Medicaid recipients'rightto choosetheprovider of their choice. Finally,we addresswhether our state law actually conflicts with the federal law. Where the federal statute is lacking in an express Congressional command, a state lawwill be preempted if it actually conflicts with the federal legislation. Pacific Gas & Electric Co. v. Energy Resources Conservation and Development Commission (1983), 461 U.S. 190, 204, 103 S.Ct. 1713, 1722, 75 L.Ed.2d 752, 765. However, because of the silence of Congress,we must determinewhether there is an implicit prohibition against a
cause of action under state law contained in the structure and purpose of the federal law. Cipollone, 112 S.Ct. at 2617. As we construeAmerican Medical's argument, it contends that one cannot "capturew the Medicare/Medicaid class of customers and that allowing a cause of actionunder state lawas to this class ofcustomers frustrates the purpose of the federal law. We do not agree Congress intended this to be. American Medical points to nothing in the Social Security Act itself or its legislative history to support this proposition. Likewise, it offers us no guidance with applicable case law. Furthermore, our own research does not suggest any implied prohibition. Section 1802 (42USC 51395a)provides thatany individual entitled to benefits under TitleXVIII may obtain health servicesfromany institution,agency,orperson which is qualified to participate under the title and which undertakes to provide services to him. 1965 U.S. Code Cong. & Admin. News 1943, 2098. In brief, the purpose of the Social Security Act is to: 1. Provide a coordinated approach forhealth insurance and medical care for the aged under the Social Security Administration; 2. Expand services formaternal and child health; 3. Revise and improve benefit coverage; and 4. Improve and expand public assistanceprograms. 1965U.S. Code Cong. & Admin. News 1943, 1943-44. There is no conflict between our state law allowing legal action for tortious interferencewith a business relationship and the purpose of the Social Security Act and in particular 42USC 5 1395a. 42USC 5 1395a simplyallowsa recipientof Social Security benefits to choose the provider from which he wishes to obtain health services. It does not operate to bar a cause of action under state law between competing interests as to this class ofcustomers. We hold there is no Itreliableindicium of congressional intent" to supplant state law in this case. Cipollone, 112 S.Ct 2619. The judgment is reversed and remanded. 

# J/<-& Chief Justice

We concur:December 

### 17,1992 CERTIFICATEOFSERVICE I herebycertifythatthefollowingorderwassentby United 

### Statesmaif,prepaid, tothe followingnamed:

Dexter

### L.Delaney&

### P.MarsScott Mulroney,

### Delaney&Scott 

### Ste.100, 100

### Ryrnan P.O.

### Box8228 Missoula,

### MT 59807

Michael

### G.Moses Moses

### LawFirm 

### P.O.Box2533 Billings,

### MT 59103-2533 Philip

### P.McGimpsey AttorneyatLaw 

### P.O.Box 

### 1050 Billings,MT 

### 59103-

### l5OO

ED

### SMITH CLERKOF

### THE

### SUPREMECOURT STATE

### OFMONTANA