Antitrust Law Daily Wrap Up, RICO—N.D. Cal.: First-to-file rule required transfer of suit against union, (Oct 27, 2014)

By Jody Coultas, J.D.

A Racketeer Influenced and Corrupt Organizations Act claim filed by Prime Healthcare Services, Inc. against the Service Employees International Union (SEIU) and other labor unions was transferred to the federal district court in San Diego from the federal district court in Oakland based on the first-to-file rule (Prime Healthcare Services, Inc. v. Service Employees International Union, October 24, 2014, Rogers, Y.).

Prime, a provider of healthcare services on a fee-for-service basis, filed suit against labor unions, union-related entities, and their executives alleging that they engaged in a conspiracy to either unionize Prime-owned hospitals or force Prime out of the healthcare market. Prime also alleged a “corporate campaign” that employed extortion and public attacks to embarrass Prime and disrupt Prime’s relationship with its customers.

In a substantially similar case, the federal district court in San Diego held that Prime failed to adequately allege that its competitor Kaiser Foundation Health Plan, Inc. and SEIU conspired to restrain trade in and monopolize certain healthcare markets in California’s San Bernardino, San Diego, Los Angeles, and Orange counties, as well as several subregional geographic markets.

SEIU and the other defendants filed a motion seeking to transfer the case to the San Diego court based on the first-to-file rule.

The first-to-file rule permits a district court to decline jurisdiction over an action to alleviate the burden placed on the federal judiciary by duplicative litigation and to prevent the possibility of conflicting judgments. Courts look at: (1) chronology of the actions; (2) similarity of the parties; and (3) similarity of the issues.

Each of the three elements of the first-to-file rule weighed in favor of transfer of the case, according to the court. Prime filed the first action in the Southern District in 2011, and filed the instant action in 2014. While the parties in the two actions were not identical, the core nucleus of the parties was the same. Prime, SEIU, and Service Employees International Union - United Healthcare Workers West (UHW) were parties to both suits. The five newly-named defendants in the second suit were closely related to SEIU and UHW. The fact that Kaiser was not a defendant in the second suit did not render the parties so dissimilar as to avoid the first-to-file rule. The two suits arose out of many of the same operative facts, alleged largely identical conspiracies, alleged that the defendants campaigned to prevent Prime from acquiring new hospital licenses, and some of the language in the second complaint was taken verbatim from the first complaint.

Prime argued that transfer would not further the interests of justice because the San Diego case had been dismissed and there was no guarantee the judge that had presided over the first case would preside over the transferred case. The Southern District has rules that would allow the same judge who presided over the first case to preside over the transferred case, and the rule applies regardless of whether the first case is pending, has been dismissed, or has otherwise been terminated. Counsel must file a notice of related case whenever counsel becomes aware of a pending case or a case that is soon to be filed that is related to another proceeding already on file. Further, even assuming that there were no rulings made in the first case that would have a preclusive effect in the case at hand, the judge who dismissed the first amended complaint gained a familiarity with the overlapping parties and legal issues allowing for more efficiency in presiding over the transferred case.

Finally, transfer was in the interest of justice by conserving resources and preventing duplicative efforts, according to the court.

The case is No. 14-CV-3831 YGR.

Attorneys: Kathleen Sue Kizer (DLA Piper LLP) for Prime Healthcare Services, Inc. Glenn Rothner (Rothner, Segall & Greenstone) for Service Employees International Union. Leon O. Dayan (Bredhoff & Kaiser PLLC) for Change to Win, and CtW Investment Group. Theodore Franklin (Weinberg Roger & Rosenfeld) for Service Employees International Union - United Healthcare Workers West.

Companies: Prime Healthcare Services, Inc.; Service Employees International Union; Service Employees International Union - United Healthcare Workers West

Cases: RICO CaliforniaNews