Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Mich.: Auto parts supplier could not intervene in health care purchasers’ suit against Blue Cross Blue Shield of Michigan, (Aug 26, 2016)

By Linda O’Brien, J.D., LL.M.

A group of individual class action plaintiffs was denied intervention by the federal district court in Detroit in an action brought by businesses and individuals against the state’s largest health insurer in relation to "Most Favored Nation" (MFN) agreements that the insurer made with hospitals within the state (The Shane Group v. Blue Cross Blue Shield of Michigan, August 25, 2016, Hood, D.).

An employer, two individuals, and three labor union trust funds filed a class action complaint against Blue Cross Blue Shield of Michigan (BCBS), alleging that the health insurer violated Section 1 of the Sherman Act and Section 2 of the Michigan Antitrust Reform Act by executing and enforcing "Most Favored Nation" (MFN) agreements with at least 70 Michigan hospitals. Under the MFN agreements, BCBS allegedly agreed to pay higher rates to a hospital so long as the hospital agreed to charge even higher rates to other commercial health-insurers. The alleged result was increased rates for hospital customers and the expansion of Blue Cross’s market share.

In March 2015, the court granted final approval to a proposed settlement of $29,990,000. However, the U.S. Court of Appeals in Cincinnati vacated the lower court’s approval of the settlement, as well as orders sealing documents in the court record. Automotive parts supplier ADAC Automotive and 25 individual class action plaintiffs represented by the Varnum law firm sought to intervene in order to be included in all future motions, hearings, and settlement negotiations.

Law of the case doctrine. The law of the case doctrine barred the Varnum plaintiffs’ motion to intervene, the court found. The doctrine bars challenges to a decision made at a previous stage of the litigation, which could have been challenged in a prior appeal but were not, the court explained. Here, in a prior unsuccessful motion to intervene, the Varnum plaintiffs requested to unseal certain court documents for review to determine whether to object or opt out of the settlement. They did not seek to intervene in the discovery phase or settlement negotiations when their prior motion was pending. Hence, on remand, they could not seek to expand their request. Moreover, the Varnum plaintiffs received the relief they sought—to unseal the documents for review.

Limited remand. Limited remand explicitly outlined the issues to be addressed by the district court, the court explained. In vacating the district court’s approval of the settlement, the Sixth Circuit specifically stated that the approval process under Federal Rule of Civil Procedure 23 must "begin anew" and vacated all orders sealing documents in the court record. The appellate court’s opinion addressed the unsealing of the court records and not the Varnum plaintiffs’ right to intervene, in the court’s view. No further discovery or settlement negotiations by the parties was required and the unsealing of the court documents would allow unnamed or absent class members to review the documents relating to the settlement.

Intervention as a right. Intervention as of right under Federal Rule of Civil Procedure 24 allows a party to intervene upon a showing of the party’s request was timely filed, the party has a substantial legal interest in the case, the party’s ability to protect that interest will be impaired without intervention, and the existing parties will not adequately represent that interest. In this case, the Varnum plaintiffs’ motion was not timely filed, according to the court. They filed their initial motion to intervene in 2014 over four years after the case had been vigorously litigated, extensive discovery had been conducted, and settlement negotiations had begun. The purpose of the initial motion was to review documents sealed in the case. They knew or should have known of their interest in the case when suit was filed in 2010 and their failure to promptly intervene clearly prejudices the parties to the case, the court noted.

Permissive intervention. Finally, the Varnum plaintiffs failed to show that the court’s previous denial of their motion to intervene was in error or should be reconsidered. The issue regarding the sealing of the court documents did not require intervention. All the Varnum plaintiffs sought was to view materials already in the court record and they have not shown that their rights, along with other absent class members, would not sufficiently protected during the final approval and fair hearing process, the court concluded.

The case is No. 2:10-cv-14360-DPH-MKM.

Attorneys: Brent W. Johnson (Cohen Milstein Sellers & Toll PLLC) and Casey A. Fry (Miller Law Firm, PC) for The Shane Group, Inc. Donald Bruce Hoffman (Hunton & Williams LLP) and Michelle L. Alamo (Dickinson Wright PLLC) for Blue Cross Blue Shield of Michigan.

Companies: The Shane Group, Inc.; Blue Cross Blue Shield of Michigan

Cases: Antitrust MichiganNews