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. 

State Medical Oxygen and Supply, Inc. (State Medical), appeals 

an order granting partial dismissal and partial summary judgment in 

favor of American Medical Oxygen Co. (American Medical). The order 

was entered in the Second Judicial District, Silver Bow 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 litigation have been before this Court 

on two prior occasions, repetition of all underlying facts is 

unnecessary. A full recitation of the facts can be 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 

five different counties by State Medical 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, State Medical 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. 

State Med I, 750 P.2d at 1086. In affirming summary judgment as to 

this issue, we held State Medical 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. State Med I, 750 P.2d at 1087- 

88. 

On the other hand, we held the depositions of three material 

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 this part 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 State Med I, State Medical filed amended 

complaints directly pleading tortious interference with 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. The parties continued to actively litigate, with Cascade 

County continuing to serve as the "lead case." 

In February 1990, American Medical filed a motion to dismiss 

and motion for summary judgment to limit damages 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 this motion. Apparently, the District Court 

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 customers via a tortious 

act. State Medical did not appeal or seek certification of this 

order. 

For reasons that are not entirely clear, the parties agreed to 

transfer venue to the Second Judicial District, Silver Bow County. 

Silver Bow County was now considered the "lead case" and the 
parties began making preparations for trial. In all likelihood, 

the outcome of a trial in Silver Bow County would be controlling in 

the other four pending 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 to Rule 54 (b) , M.R.Civ.P. This appeal followed. 

Was the order entered in the Eighth Judicial 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? 

The majority of American Medical ' s brief attempts to persuade 

this Court that the order for dismissal and summary judgment 

entered in the District Court for the Eighth Judicial District was 
a final judgment on the merits. As a result, American Medical 

argues, because State Medical did not appeal that order, it became 

final and binding upon the parties and courts of concurrent 

jurisdiction based upon res judicata and collateral estoppel. We 

do not agree. American Medical's conclusion is based 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 as well as a 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. John Wight, Inc. (1978), 179 

Mont. 392, 407, 587 P.2d 348, 356. A final judgment on the merits 
. . . 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 admissible matter which might 

have been offered for that purpose. 

S-W Company, 587 P.2d at 356 (emphasis added). 

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. In Re the Marriage 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. See August v. Burns (1927), 79 

Mont. 198, 215, 255 P. 737, 742. 

Likewise, the doctrine 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 interference with 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 interfered with the business 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 

damages as to these customers. We disagree and reverse and 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 from whom they 

want health services. It is well settled that state laws are 

presumed valid against preemption challenges unless Congress 

clearly intended they be preempted by federal law. Mountain States 

Telephone v. Commissioner of Labor (1979), 187 Mont. 22, 41, 608 

P.2d 1047, 1057. Cipollone v. 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 Industries v. 

National Surety Corporation (9th Cir. 1988), 855 F.2d 640, 642, n. 

3. First, the federal law may expressly preempt state law; second, 

Congress may 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 the plain language of the statute "unless there 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 its 
application to the facts presented here, state law espousing a 

cause of action for tortious interference with a business 

relationship as to Medicare/Medicaid customers does not operate to 

supplement the field of Social Security. Case law holds that the 

federal law must 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' right to choose the provider of their 

choice. 

Finally, we address whether our state law actually conflicts 

with the federal law. Where the federal statute is lacking in an 

express Congressional command, a state law will 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 determine whether 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 construe American Medical's argument, it contends that 

one cannot "capturew the Medicare/Medicaid class of customers and 

that allowing a cause of action under state law as to this class of 
customers 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 (42 USC 51395a) provides that any individual 

entitled to benefits under Title XVIII may obtain health 

services from any institution, agency, or person 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 for health insurance 

and medical care for the aged under the Social 

Security Administration; 

2. Expand services for maternal and child health; 

3. Revise and improve benefit coverage; and 

4. Improve and expand public assistance programs. 

1965 U.S. Code Cong. & Admin. News 1943, 1943-44. 

There is no conflict between our state law allowing legal 

action for tortious interference with a business relationship and 

the purpose of the Social Security Act and in particular 42 USC 5 

1395a. 42 USC 5 1395a simply allows a recipient of 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 of 
customers. We hold there is no Itreliable indicium 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 

CERTIFICATE OF SERVICE 

I hereby certify that the following order was sent by United States maif, prepaid, to the 

following named: 

Dexter L. Delaney & P. Mars Scott 

Mulroney, Delaney & Scott 

Ste. 100, 100 Ryrnan 

P.O. Box 8228 

Missoula, MT 59807 

Michael G. Moses 

Moses Law Firm 

P.O. Box 2533 

Billings, MT 59103-2533 

Philip P. McGimpsey 

Attorney at Law 

P.O. Box 1050 

Billings, MT 59103- l5OO 

ED SMITH 

CLERK OF THE SUPREME COURT 

STATE OF MONTANA