Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Ala.: Court denies piggy-backing attempt on Blue Cross discovery by state case plaintiff, (Oct 21, 2024)

By Kenneth H. Ryesky, M.B.A., J.D.

Judge calls attempt by plaintiff in state court case against Blue Cross to obtain disclosure of confidential discovery materials in federal multidistrict litigation "a naked attempt to free ride."

The federal district court in Birmingham, Alabama has conditionally denied the requests for confidential materials produced in federal multidistrict litigation against Blue Cross Blue Shield. The materials were requested by counsel for plaintiffs in a California state court case against Blue Cross and some of its affiliates. Finding it inequitable for the state court plaintiffs to benefit after counsel for plaintiff class in the federal multidistrict litigation expended considerable amounts of time, energy, and money, the court declined to grant disclosure of those materials unless the state court plaintiffs and the federal court class counsel come to mutual agreement for recompense (In Re Blue Cross Blue Shield Antitrust Litigation, No. 2:13-cv-20000-RDP (N.D. Ala. Oct. 17, 2024)).

Background. The Blue Cross Blue Shield Association (BCBSA) is an entity governed by its healthcare insurer operating company members. BCBSA licenses the use of its familiar trademarks and other intellectual property to its members, and promulgates rules for members' operation. Licensees agree to adhere to the BCBSA bylaws and other rules. Two such rules became the subjects of contention: (1) the National Best Efforts (NBE) Rule, promulgated in 2005, which required each insurer member to derive at least two-thirds of their healthcare revenues from BCBS brand health plans; and (2) a scheme that designated various geographical regions as exclusive service areas (ESAs) and permitted only one BCBS plan to compete in any ESA at any given time.

Various antitrust lawsuits, class action and otherwise, were brought against BCBSA and/or its component entities (collectively, BCBS) regarding those rules. The cases were consolidated in 2013 for multidistrict litigation in the Northern District of Alabama. From the multidistrict litigation emerged two plaintiff classes, the insured individuals who subscribed to the BCBS healthcare insurance plans (Subscribers) and the healthcare providers who are paid by the BCBS plans (Providers).

The purpose of multidistrict litigation is to achieve judicial economy in the pre-trial stages of litigation when "common questions of fact are pending in different districts". Although discovery and other pretrial processes are significantly simplified, issues can arise over which parties will bear which costs, especially when a party that has not materially participated in the discovery would stand to benefit from the discovery adduced by a party that has expended substantial amounts. Under the American System, in which each party is responsible for their own attorney fees and costs, a nonparticipating party would be able to get a so-called "free ride" if such discovery materials were availed to it. But an exception to the American Rule has arisen in the so-called "common-benefit doctrine" whereby courts assess costs upon the recoveries secured by beneficiaries of work done by other parties' counsels. The "free ride" issue has appeared with increased frequency in multidistrict litigation.

On October 14, 2024, the Providers reached a proposed settlement with BCBS. In addition to the $2.8 billion monetary settlement fund, the settlement entails accountability and transparency provisions, as well as rules that open competition opportunity to non-BCBS insurers. The multidistrict litigation continues, however, because there remain parties who are not covered by the proposed settlement, including parties who have opted out of the class action. The Providers and their counsel expended significant amounts of time and money in the discovery that led up to the settlement.

A case is pending in a California state court against BCBS [VHS Liquidating Trust v. Blue Cross of California, Case No. RG21106609, Cal. Super, Alameda Co.]. Counsel for the plaintiffs in that case (Prime Plaintiffs) seek materials disclosed in the multidistrict litigation by BCBS and designated as confidential under the relevant protective orders of the court. Following various conferences, the materials sought by the Prime Plaintiffs have been classified into three categories.

The Optum data. The court conditionally permitted disclosure of the Optum data. HCCI is a nonprofit entity that avails data to healthcare cost researchers, and OptumInsight (Optum) is subcontracted by HCCI to de-identify the data of personal information HCCI receives from three national insurers who have an interest in the litigation. The de-identified data for the years 2008 to 2014 was produced during discovery in the multidistrict litigation. This data is only available in the multidistrict litigation, inasmuch as HCCI, Optum, and national insurers have since discarded it. BCBS is willing to disclose that data to the Prime Plaintiffs, but the Providers object to the Prime Plaintiffs getting a "free ride." The court allowed BCBS to disclose the Optum data, provided that the Prime Plaintiffs pay Providers the "hard costs" of that data.

Expert reports and depositions. The court permitted BCBS to disclose its experts' reports to the Prime Plaintiffs, finding that such materials were the objects of discovery which BCBS had a duty to disclose. As for the experts' deposition transcripts, the court, noting that the Prime Plaintiffs were at liberty to "do their own work, take their own depositions, and send out their own discovery requests," the court declined to order the Providers to disclose the transcripts to the Prime Plaintiffs unless the Providers and the Prime Plaintiffs agreed upon a fair compensation payment for the deposition costs expended by the Providers.

For the same reasons, the court more compellingly denied disclosure of the deposition transcripts and accompanying exhibits of the BCBS witnesses absent mutual agreement on compensation. On this score, the court noted the tens of millions of dollars and thousands of hours expended by the Providers' counsel.

The Case is No. 2:13-cv-20000-RDP.

Judge: Proctor, R.

Attorneys: Alan McQuarrie Mansfield (Whatley Kallas, LLP) for Plaintiffs. David Paul George Barillari (Boies Schiller Flexner LLP) for Anesthesia Associates of Ann Arbor, PLLC. Alyssa C. Kalisky (Kirkland & Ellis LLP) for Defendants. Claudine Columbres (White & Case LLP) for Anthem, Inc. Jeffrey John Fowler (O'Melveny & Myers LLP) for Health Care Service Corp.

Companies: Anesthesia Associates of Ann Arbor, PLLC; Anthem, Inc.; Health Care Service Corp.

Cases: Antitrust AlabamaNews