Sumeru Health Care Group v. Michael Hutchens
657 F. App'x 381
| 6th Cir. | 2016Background
- Sumeru Health Care Group opened clinics in East Tennessee (1998–2001) staffed by foreign physicians under a federal visa-waiver program; Kutty was Sumeru’s owner.
- Sumeru negotiated with Claiborne County Hospital (CCH) and its administrator Hutchins about locating a Tazewell clinic and hospital privileges; Sumeru alleges promises not to divert cardiology work and not to induce Sumeru physicians to breach employment contracts.
- Disputes arose when Sumeru reduced physicians’ pay in late 2000–2001; several physicians complained to the Department of Labor (DOL) alleging wage and labor violations by Kutty/Sumeru.
- The DOL administrative law judge (ALJ) held Kutty/Sumeru liable for back wages, penalties, and found the physicians did not breach their contracts or earn outside income from CCH; the ARB and this Court affirmed those determinations (Kutty v. Dep’t of Labor).
- While Sumeru’s state-law claims (tortious interference, fraud/misrepresentation, breach of implied contract, unfair competition) proceeded in federal court, defendants moved for summary judgment arguing issue preclusion from the DOL proceedings.
- The district court granted summary judgment for defendants; the Sixth Circuit affirmed, holding issue preclusion barred Sumeru’s claims because they depended on factual issues already decided by the ALJ.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Sumeru’s state-law claims are precluded by prior DOL adjudication | Sumeru seeks damages for reliance on CCH’s alleged inducements to locate in Tazewell (up-front costs); argues misrepresentations and implied agreements are distinct from wage findings | ALJ’s factual findings that physicians did not breach contracts and did not receive outside pay are dispositive and were actually litigated | Preclusion applies; Sumeru’s claims rest on issues already decided by the ALJ, so barred |
| Whether the precise issues were actually litigated in the DOL proceeding | Sumeru contends inducement/agreement claims concern Hutchins’ representations, not wage determinations | Defendants show ALJ directly resolved physicians’ duties, work locations, and compensation—central to inducement claims | Court: precise issues (physicians’ conduct and whether they breached contracts) were raised and litigated in DOL matter |
| Whether the DOL proceeding produced a final judgment on the merits and was necessary to that outcome | Sumeru did not dispute finality | Defendants: ARB affirmed ALJ and appellate review concluded—final on merits | Court: final judgment on merits satisfied |
| Whether Kutty/Sumeru had a full and fair opportunity to litigate the issues before the ALJ | Sumeru argued some inducement facts were separate and might not have been fully litigated | Defendants: Kutty litigated these defenses at length before the ALJ, including extensive hearings and findings | Court: Kutty had a full and fair opportunity; all four preclusion prongs met |
Key Cases Cited
- Kutty v. Department of Labor, 764 F.3d 540 (6th Cir. 2014) (affirming DOL/ARB rulings against Kutty and Sumeru)
- Georgia-Pacific Consumer Prods. LP v. Four-U-Packaging, Inc., 701 F.3d 1093 (6th Cir. 2012) (standard of review for issue-preclusion determinations)
- B & B Hardware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293 (2015) (issue-preclusion principle explained)
- United States v. Cinemark USA, Inc., 348 F.3d 569 (6th Cir. 2003) (four-part test for issue preclusion)
- Cromwell v. County of Sac, 94 U.S. 351 (1877) (foundational statement on issue preclusion)