• Jamaica Hospital Medical Center v. UnitedHealth Group, Inc., et. al. E.D.N.Y., No. 07-506 Memorandum and Order 10/21/08
  • December 10, 2008 | Authors: Arthur N. Lerner; Bruce O. Tavel
  • Law Firm: Crowell & Moring LLP - Washington Office
  • In 2006, Plaintiff hospitals filed a complaint in state court, alleging breach of contract, fraud, unjust enrichment and violations of New York Human Rights and General Business laws. Plaintiffs claimed that UnitedHealth Group fraudulently negotiated and terminated contracts to reduce reimbursement rates and conspired with subsidiaries to minimize payments due to defendants. The state court compelled arbitration pursuant to the mandatory arbitration clauses contained in the agreements between the parties. Plaintiffs subsequently filed a motion to renew its opposition to Defendants' motion, citing the discovery of new information. The state court denied Plaintiffs' motion to renew.

    In 2007, while Plaintiffs' motion to renew was pending, Plaintiffs filed a complaint in federal court, alleging identical claims asserted in the state court lawsuit, in addition to violations under the Racketeer Influenced and Corrupt Organizations Act ("RICO"). Plaintiffs also named additional defendants in the Complaint. In response, Defendants filed a motion requesting the Court abstain from asserting jurisdiction, or in the alternative, to compel arbitration or stay the action.

    The federal court first denied Defendants' motion to abstain from asserting jurisdiction, finding that the facts did not weigh in favor of abstention, as applied under the six-factor test enunciated by the Supreme Court in Colorado River Water Conservation District v. United States. The federal court then considered Defendants' motion to compel arbitration or stay the action. The court evaluated the complaint and found that res judicata applied, thereby precluding the hospitals from bringing the complaint in federal court. The federal court reasoned that the pattern of racketeering alleged in the federal complaint was previously alleged in the state court complaint and did not create the basis for RICO claims where none existed. Furthermore, the federal court found that the addition of new defendants did not affect its ruling, reasoning that "while the State Court Complaint did not name an identical set of defendants, in it Plaintiffs alleged wrongs committed by all of the instant defendants; those wrongs collectively served to further the business practices about which Plaintiffs complain in both their state and federal actions."