Appeals Court Dismisses Case Against Quest

The U.S. Court of Appeals for the Third Circuit Sept. 11 dismissed a lawsuit filed against Quest Diagnostics, agreeing with the trial court that the proposed class of former Quest patients didn’t meet the requirements of class certification (Grandalski v. Quest Diagnostics Inc.). Plaintiffs Richard Grandalski, Janet Grandalski, and Denise Cassese alleged that Quest overbilled patients for services by requesting payment from patients in excess of the amount allowed by insurers in the explanation of benefits. They sought damages for violations of state consumer fraud laws and for unjust enrichment. The U.S. District Court denied class certification, and the plaintiffs appealed. Consumer Fraud Claims The plaintiffs sought to certify a nationwide class based on allegations that Quest violated state consumer fraud laws. The trial court engaged in a choice-of-laws analysis and determined that the laws of each class member’s home state would determine whether he or she could recover damages from Quest. This would pose an “intractable” problem for trial management and, thus, the trial court said, made class certification inappropriate. On appeal, the plaintiffs argued that the trial court shouldn’t have engaged in a choice-of-law analysis at this stage of the proceedings. The appeals court disagreed, saying it was appropriate for the trial court to determine whether there were variations in state law that would “swamp” any common issues. The appeals court also said the trial court didn’t err in concluding that the laws of the class members’ home states controlled the state law claims. The place where the class members received Quest’s bills and relied upon them in settling the accounts—that is, their home states—weighed in favor of applying the law of the members’ home states, the Third Circuit said. The place where Quest made the misrepresentations, its home state of New Jersey, weighed in favor of applying New Jersey law, the court said. But nothing else about the parties’ relationship took place in that state, it said. The place where the consumer received and relied on the defendant’s alleged fraud, the consumer’s home state, had the most significant relationship to the action, the court said. Due to the number of state laws that would apply here, this wasn’t a proper case for class certification, it concluded. Unjust Enrichment Claims The Third Circuit came to a similar conclusion with respect to the purported class’s unjust enrichment claims. Because Quest may have had reasons for mistakenly overbilling certain patients, the trial court would have to look at each member’s case individually to determine whether Quest was unjustly enriched by an overpayment. That there were individualized questions of fact regarding each member counted against class certification, the court said. Takeaway: Quest Diagnostics escaped a challenge to its billing practice due to lack of class certification.