2017 Mass. App. Div. 103

November 18, 2016 - May 16, 2017

Appellate Division Northern District

Court Below: District Court, Lawrence Division

Present: Coven, P.J., Crane & Nestor, JJ.

Charles S. White for the plaintiff.

David M. Gresham for the defendants.

CRANE, J. This appeal involves a second action by a health care provider seeking recovery of personal injury protection ("PIP") benefits against two rental car companies after its first action against the same rental car companies' claims administrator resulted in a directed verdict for that defendant. Instead of naming the current defendants, Enterprise Rent-A-Car of Boston, Inc. and Enterprise Rent-A-Car Company (collectively, "ERAC") in the original action, the plaintiff named ELCO Administrative Services ("ELCO") as the only defendant in the original action.

The plaintiff seeks to recover for chiropractic services rendered to a patient for injuries allegedly suffered in an accident on September 25, 2009. The current complaint alleges that the patient was in a car insured by ERAC, and that ERAC was responsible to pay from PIP coverage for services the patient received from the plaintiff as a result of the accident. Except for the substitution of the ERAC parties for ELCO, the current complaint is identical to the complaint in the original action against ELCO.

The plaintiff submitted claims information concerning the services rendered to the patient to ELCO. ELCO administers claims for ERAC. When the current plaintiff did not receive payment for services within thirty days, it brought suit against ELCO. The action against ELCO went to trial. The current ERAC defendants were not parties to that action. After the close of the plaintiff's evidence, the trial judge granted ELCO's motion for directed verdict, and judgment for ELCO entered on that ruling on the motion for directed verdict on January 13, 2016. The motion that the court did allow, without explanation, asserted, in pertinent part, that the plaintiff "has not submitted any direct evidence to establish the Defendant, ELCO Administrative Services, is an insurer or a party to a contract with either the Plaintiff or the Plaintiff's patient. The Plaintiff has failed to properly name the Defendant and introduce into evidence [sic] of a party as an insurer."

The plaintiff did not introduce any contract of insurance or rental contract to which ELCO was a party. [Note 2] In its answer and responses to requests for admissions, ELCO

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denied that it provided insurance for PIP benefits that the plaintiff may have been entitled to arising from this accident. However, until its motion for directed verdict, ELCO never explicitly asserted that any other party was responsible to provide PIP benefits to the patient. There was testimony from an adjuster employed by ELCO that she had received claims information from the plaintiff and its representatives but declined to pay PIP benefits on behalf of ERAC and that ERAC self-insured for PIP benefits. [Note 3] Other than testimony from the adjuster that ELCO acted as a claims administrator for ERAC, there was no evidence that ELCO issued any policy of insurance that insured ERAC for liability for PIP benefits or was obligated under any bond for the same.

The plaintiff commenced the current action on January 8, 2016, the day after the court allowed the motion for directed verdict in the original action, making allegations and seeking relief that was identical to what it had sought in the original action, but named ERAC as the defendants instead. It also filed motions to reconsider the ruling on the directed verdict or, in the alternative, to amend its complaint to add the current ERAC parties as defendants in the original action.

ERAC then moved for dismissal of the new action asserting that 1) the original action then constituted a prior pending action requiring dismissal pursuant to Mass. R. Civ. P. 12(b)(9); and 2) the judgment in the original action was res judicata requiring dismissal of the current action pursuant to Rule 12(b)(6) or Rule 56. After a consolidated hearing, the trial judge in the original action ruled on both motions. The judge denied the plaintiff's motions for reconsideration and to amend to add the ERAC parties to the original action. The plaintiff did not appeal from this ruling. The judge also allowed the ERAC defendants' motion to dismiss the second action. The plaintiff appeals from this ruling.

On appeal, the plaintiff argues that res judicata does not apply and that the original action was not a prior pending action because the ERAC defendants were not parties to the original action or in privity with ELCO, and that it was error to dismiss the current action. The ERAC defendants respond that ELCO was in privity with them because it is a subsidiary of the ERAC defendants.

"The term 'res judicata' includes both claim preclusion and issue preclusion." Sarvis v. Boston Safe Deposit & Trust Co., 47 Mass. App. Ct. 86, 98 (1999). "The doctrine of claim preclusion makes a valid, final judgment conclusive on the parties and their privies, and bars further litigation of all matters that were or should have been adjudicated in the action." Heacock v. Heacock, 402 Mass. 21, 23 (1988). For claim preclusion to bar the plaintiff's claims for PIP benefits against the ERAC defendants, "three elements are required: (1) the identity or privity of the parties to the present and prior actions; (2) identity of the cause of action; and (3) prior final judgment on the merits." Gloucester Marine Rys. Corp. v. Charles Parisi, Inc., 36 Mass. App. Ct. 386, 390 (1994).

"The doctrine of issue preclusion 'prevents relitigation of an issue determined in an earlier action where the same issue arises in a later action, based on a different claim, between the same parties or their privies.' [Heacock, supra] at 23 n.2. It requires proof that '(1) there was a final judgment

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on the merits in the prior adjudication; (2) the party against whom estoppel is asserted was a party (or in privity with a party) to the prior adjudication; and (3) the issue in the prior adjudication is identical to the issue in the current adjudication. Additionally, the issue decided in the prior adjudication must have been essential to the earlier judgment.' Commissioner of the Dep't of Employment & Training v. Dugan, 428 Mass. 138, 142 (1998) (citation omitted). Issue preclusion can be used only to prevent relitigation of issues actually litigated in the prior action, Fidelity Mgmt. & Research Co. v. Ostrander, 40 Mass. App. Ct. 195, 199 (1996), and thus we look to the record to see what was actually litigated. See Gleason v. Hardware Mut. Cas. Co., 324 Mass. 695, 699 (1949)."

Sarvis, supra at 98-99.

As the party moving for summary judgment on the basis of claim and issue preclusion, the ERAC defendants bear the burden of establishing each of these factors. Id. at 99. See Pederson v. Time, Inc., 404 Mass. 14, 16-17 (1989).

"Claim preclusion has as a prerequisite that there be an identity or privity of the parties to the present and prior actions, while issue preclusion requires that the party against whom issue preclusion is asserted in the present action was a party or in privity with a party to the prior adjudication." TLT Constr. Corp. v. A. Anthony Tappe & Assocs., Inc., 48 Mass. App. Ct. 1, 5 (1999). ELCO and the ERAC defendants are not identical, but the ERAC defendants claim privity with ELCO because they contend that it is a subsidiary of the ERAC defendants. This is not supported in the record of this case that is on appeal or in the record of the original action. In fact, it was because ELCO was only a claims administrator and not the provider of PIP benefits for the patient, whether as an insurer or owner of the car rented by the ERAC defendants, that provided grounds for the court's ruling allowing the motion for directed verdict for ELCO in the first action.

"[O]ne not a party to the first action may use a judgment in that action defensively against a party who was a plaintiff in the first action on the issues which the judgment decided." Home Owners Fed. Sav. & Loan Ass'n v. Northwestern Fire & Marine Ins. Co., 354 Mass. 448, 455 (1968). See Bailey v. Metropolitan Prop. & Liab. Ins. Co., 24 Mass. App. Ct. 34, 36 (1987). "A nonparty to a prior adjudication can be bound by it 'only where [the nonparty's] interest was represented by a party to the prior litigation.'" Massachusetts Prop. Ins. Underwriting Ass'n v. Norrington, 395 Mass. 751, 754 (1985), quoting Mongeau v. Boutelle, 10 Mass. App. Ct. 246, 249-250 (1980). See Roche v. Roche, 22 Mass. App. Ct. 306, 309 (1986); Morganelli v. Building Inspector of Canton, 7 Mass. App. Ct. 475, 481 (1979).

There is no dispute that the court's ruling in the original action was on the merits after an evidentiary hearing and that the plaintiff was a party to that action. However, whether ELCO was obligated to provide PIP benefits, as either a party to a rental contract or as an insurer, was the only issue that was essential to the ruling in the original action. Fireside Motors, Inc. v. Nissan Motor Corp. in U.S.A., 395 Mass. 366, 373-374 (1985), citing Restatement (Second) of Judgments § 27 (1982). See Bannister v. Commonwealth, 411 Mass. 130, 131 (1991). The grounds for the directed verdict granted in the original action never addressed whether the plaintiff was entitled to PIP benefits or in any amount. It also did not require a determination whether the ERAC

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defendants were responsible to provide PIP benefits to the plaintiff's patient. It did not establish that other parties such as the current ERAC defendants were absolved from liability for PIP benefits as insurers or otherwise.

The judgment for ELCO by directed verdict established only that ELCO was not an insurer and did not have a contract with the plaintiff or the plaintiff's patient to provide PIP benefits. Whatever the relationship was between ELCO and the ERAC defendants was not essential to the ruling on the directed verdict. The ERAC defendants cannot use the judgment in the original action to defeat the plaintiff's claims in this action through issue preclusion. This is consistent with ELCO's position in the original action that it was not responsible for any obligations of the ERAC defendants. The ruling for ELCO could bar the plaintiff's claims against the ERAC defendants only if they could establish that they were in privity with ELCO. They cannot. The only evidence in the record is that ELCO administered claims for the ERAC defendants, including the plaintiff's. We have no evidence in the record whether ELCO was an independent claims service provider or had some other relationship with the ERAC defendants, such as a subsidiary as they argue. [Note 4]

When the court allowed the motion to dismiss the current action against the ERAC defendants, judgment had entered in the original action and what was "pending" was a postjudgment motion by the plaintiff to amend to add the ERAC defendants and for reconsideration. Under the circumstances, where the trial court denied that motion, it was error for it to allow simultaneously the motion to dismiss the current action because of a prior pending action whose outcome did not preclude this action as res judicata because of claim or issue preclusion.

Judgment vacated, and the matter is returned to the trial court for further proceedings.

So ordered.


[Note 1] Enterprise Rent-A-Car Company.

[Note 2] Because the parties to this appeal included a substantial part of the record in the original action in the record of this appeal, but not the exhibits, this Division requested the trial court to provide it with the exhibits. They did not contain any contract of insurance or rental contract.

[Note 3] General Laws c. 90, §§ 34A and 34M authorize parties to furnish a motor vehicle liability bond that includes personal injury protection benefits.

[Note 4] We express no view whether more evidence about the nature of any relationship between ELCO and the ERAC defendants might warrant the application of issue preclusion upon the plaintiff's current claims.