GS Labs, LLC v. Medica Insurance Company

Background

GS Labs, LLC provides COVID-19 diagnostic testing. It sued Medica Insurance Company after alleging that Medica did not fully reimburse GS Labs at the publicly posted cash price for testing provided to Medica-insured patients. In an earlier related proceeding, GS Labs asserted claims under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), along with state-law claims. The court dismissed the CARES Act claims with prejudice after ruling that the statute did not provide testing providers with a private right to recover the requested reimbursement. It 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 case was decided.

GS Labs then filed this lawsuit, adding claims for tortious interference with prospective economic advantage, breach of contract, and benefits under Section 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974 (ERISA). GS Labs alleged that Medica-insured patients assigned their insurance-plan rights to GS Labs. Medica moved to dismiss, arguing that claim preclusion—also called res judicata, a rule generally barring later lawsuits based on claims that were or could have been brought earlier—barred the new claims. GS Labs argued that claim preclusion did not apply.

Court’s analysis

The court applied the federal standard for a motion to dismiss for failure to state a claim. It considered whether the claim-preclusion defense was apparent from the complaint and public records, including the earlier related proceeding.

The court concluded that the earlier dismissal of the CARES Act claims with prejudice was a final judgment on the merits for claim-preclusion purposes. The court rejected GS Labs’ argument that the earlier ruling was merely a decision about standing. The earlier court had not ruled that GS Labs lacked standing; instead, it had decided through statutory interpretation that the CARES Act did not provide GS Labs with a private right of action. The court treated that as a merits ruling.

The court also found that the ERISA claim and the earlier CARES Act claims arose from the same core facts: Medica’s alleged refusal to fully reimburse GS Labs for COVID-19 testing. The addition of assignments from Medica’s insureds and the change in legal theory did not change the underlying conduct or injury. Because the requirements for claim preclusion were satisfied, the ERISA claim was barred.

The court reached a different conclusion for the state-law claims. Because the earlier court had dismissed those claims without prejudice after declining supplemental jurisdiction, that dismissal was not a final judgment on the merits and did not preclude a later action. Nevertheless, the court again declined to exercise supplemental jurisdiction over the state-law claims. It cited the early stage of the case, the limited federal-court resources invested, fairness, convenience, judicial economy, and the interest in allowing Minnesota courts to address Minnesota-law claims.

Disposition

Judge Susan Richard Nelson granted Medica’s motion to dismiss. The court 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. The court also denied as moot Medica’s motion to stay discovery pending resolution of the dismissal motion. The order directed that judgment be entered accordingly.