GS Labs, LLC v. Medica Insurance Company

Background

GS Labs, a provider of COVID-19 diagnostic testing, previously sued Medica over reimbursement for testing provided to Medica-insured individuals. In that earlier case, GS Labs asserted claims under the Coronavirus Aid, Relief, and Economic Security Act and several state-law claims. The court dismissed the CARES Act claims with prejudice after holding that the statute did not provide testing providers with a private right of action or remedy to recover reimbursement at the publicly posted cash price. The court dismissed the state-law claims without prejudice after declining to exercise supplemental jurisdiction over them. GS Labs appealed that decision, and the appeal was pending when this order was issued.

GS Labs then filed this second lawsuit. It repeated several earlier allegations and added allegations that Medica’s insureds assigned GS Labs rights under their insurance plans. The complaint asserted unjust enrichment, negligence per se, tortious interference with prospective economic advantage, breach of contract, and a claim under Section 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974. Medica moved to dismiss, arguing that claim preclusion—also called res judicata, a rule generally barring a later lawsuit based on claims that were or could have been raised earlier—applied.

Claim Preclusion

The court explained that claim preclusion requires a final judgment on the merits, proper jurisdiction in the first case, the same parties or parties in legal privity, and the same claims or causes of action.

The court held that the earlier dismissal with prejudice of the CARES Act claims was a final judgment on the merits for claim-preclusion purposes. It rejected GS Labs’ argument that the earlier decision concerned standing. The court stated that the earlier decision addressed whether the CARES Act provided a private cause of action, which was a merits question involving statutory interpretation rather than a question of constitutional standing.

The court held that the earlier dismissal without prejudice of the state-law claims had no preclusive effect because the court had declined to exercise supplemental jurisdiction over those claims. As a result, the earlier decision had only partial preclusive effect.

The court further held that GS Labs’ ERISA claim arose from the same core set of facts as the earlier CARES Act claims. Both cases concerned Medica’s alleged refusal to fully reimburse GS Labs for COVID-19 testing at the requested rate. The court found that the assignment allegations and the different legal theory did not change the underlying factual connection. Because the ERISA claim could have been brought in the earlier lawsuit and all four elements of claim preclusion were met, the court ruled that GS Labs could not proceed with that claim.

State-Law Claims and Disposition

After dismissing the only claim over which it had original federal jurisdiction, the court declined to exercise supplemental jurisdiction over the remaining state-law claims. The court stated that the case was at an early stage, judicial economy and convenience did not strongly favor retaining the claims, Minnesota state courts had an interest in resolving the additional state-law issues, and the procedural history supported declining jurisdiction.

The court therefore granted Medica’s motion to dismiss. It dismissed Count V, the ERISA Section 502(a)(1)(B) claim, with prejudice. It dismissed Counts I through IV—unjust enrichment, negligence per se, tortious interference with prospective economic advantage, and breach of contract—without prejudice. It also denied as moot Medica’s motion to stay discovery pending resolution of the dismissal motion.