Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Mich.: Settlement of “MFN” suit against Blue Cross Blue Shield gets final approval, (Apr 1, 2015)

By Linda O’Brien, J.D., LL.M.

The federal district court in Detroit has given final approval to the settlement of a class action lawsuit against Michigan’s largest health insurer, involving “Most Favored Nation” (MFN) agreements that the insurer made with more than 70 hospitals within the state. The settlement of nearly $30 million was found fair, reasonable, and adequate (The Shane Group v. HSBC Bank Nevada, N.A., March 31, 2015, 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 these agreements, conforming hospitals must charge other commercial insurers either as much as they charge Blue Cross, under so-called “equal-to MFN” agreements, or more than they charge Blue Cross, under so-called “MFN-plus” agreements. In June 2014, the court granted preliminary approval to the class action settlement. The plaintiffs moved for final approval of the settlement and for attorneys’ fees and expenses.

Settlement. The court found that the settlement of $29,990,000 was fair, reasonable, and adequate. There was no indication of fraud or collusion in the settlement negotiations, and the MFN issues raised by the plaintiffs were complex, expensive to litigation, and likely to continue for years. There was no dispute that extensive discovery was undertaken in which the parties were able to evaluate the propriety and fair value of settlement.

Moreover, the settlement amount was fair in light of any success the plaintiffs may obtain on the merits of the case, and there was a strong public interest in encouraging settlement of complex litigation. The court noted that the low opt-out rate of .02 percent of the class and the few number of objections weighed in favor of settlement. Finally, the plan for distributing the settlement fund was fair and reasonable, according to the court.

Attorney fees and incentive awards. Class counsel was seeking a fee award of almost $10 million, equal to 30 percent of the settlement fund. In evaluating the reasonableness of the award, the court found that the percentage of the fund method was the proper measure to award attorneys’ fees in this case, since it eliminated questions regarding the reasonableness of rates and hours incurred by numerous counsel and fully aligned with the interest of the class. Also, the fee was reasonable in light of the time and resources expended by class counsel in the case. The requested amount of $3.5 million for expenses was reasonable in light of the time, resources, expert analysis, and complexity of the litigation. The court also concluded that the incentive awards totaling $165,000 to the class representatives were reasonable as their participation during discovery benefited the class.

The case is No. 10-CV-14360.

Attorneys: Brent W. Johnson (Cohen Milstein Sellers & Toll PLLC) for The Shane Group, Inc., Michigan Regional Council of Carpenters Employee Benefits Fund, Abatement Workers National Health and Welfare Fund, and Monroe Plumbers and Pipefitters Local 671 Welfare Fund. Donald Bruce Hoffman (Hunton & Williams LLP) for Blue Cross Blue Shield of Michigan.

Companies: The Shane Group, Inc.; Michigan Regional Council of Carpenters Employee Benefits Fund; Abatement Workers National Health and Welfare Fund; Monroe Plumbers and Pipefitters Local 671 Welfare Fund; Blue Cross Blue Shield of Michigan

Cases: Antitrust MichiganNews