Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Ala.: Interlocutory appeal certified on application of per se rule to Blue Cross market allocation scheme, (Jun 15, 2018)
Law Firms Mentioned:Axinn, Veltrop & Harkrider LLP | Crowell and Moring LLP | Kirkland & Ellis LLP | O'Melveny & Myers LLP | Simons & Associates Law PA | Sirote & Permutt PC | White & Case LLP
Organizations Mentioned:Adams & Reese, LLP | Anthem | Anthem, Inc. | Axinn Veltrop & Harkrider, LLP | Blue Cross Blue Shield of Arizona | Crowell & Moring, LLP | Excellus Health Plan, Inc. | Excellus Health Plan, Inc. d/b/a Excellus BlueCross BlueShield | Health Care Service Corp. | Kirkland & Ellis, LLP | O'Melveny & Myers, LLP | Premera Blue Cross | Sirote & Permutt, PC | Whatley Kallas, LLP | White & Case, LLP
By Edward L. Puzzo, J.D.
An interlocutory appeal to the U.S. Court of Appeals for the Eleventh Circuit was appropriate in order to rule on the question of whether the per se standard of review or the rule of reason analysis should apply to an alleged market allocation scheme by Blue Cross Blue Shield and its licensees, the federal district court in Birmingham, Alabama has ruled. The issue involved a controlling question of law with a substantial ground for difference of opinion among courts, the immediate resolution of which would materially advance the ultimate termination of the litigation, the court ruled. However, the court modified the issue presented to explicitly question whether existingprecedent still required the application of the per se rule to horizontal market restraints that arguably provided procompetitive benefits (In Re: Blue Cross Blue Shield Antitrust Litigation, June 12, 2018, Proctor, R.).
This ongoing multidistrict litigation involves allegations by two separate putative classes that the Blue Cross Blue Shield Association and its licensee Blue Plans violated the Sherman Act by agreeing to allocate exclusive geographic service areas, impose output restrictions, fixing prices for certain products and services secured from health care providers, and boycotting health care providers who resided outside of a Plan’s allocated geographic service area.
On April 5. 2018, the federal district court ruled that the defendants' aggregation of a market allocation scheme together with certain other output restrictions should be analyzed under the per se standard of review rather than rule-of-reason analysis. The defendants moved the court for certification of an immediate interlocutory appeal to the Eleventh Circuit to address the question:
"Whether territorial restraints or output restrictions, in isolation or in aggregation, that are not the result of a naked, horizontal agreement must be evaluated under the per se rule."
At this juncture, the court stated that appellate review is generally postponed until after the entry of final judgment in a case. Certification of an issue for interlocutory appeal is reserved for truly exceptional cases. The party seeking certification of an interlocutory order under Section 1292(b), the court explained, must demonstrate that (1) the order presents controlling questions of law (2) over which there is a substantial ground for difference of opinion among courts, and (3) the immediate resolution of the issues would materially advance the ultimate termination of the litigation.
Controlling question of law. Determining the appropriate standard of review will drive virtually every future key judicial decision that this MDL transferee court will make, the court stated. Therefore, the court found, there was little doubt that the standard of review applicable to a Sherman Act claim is a controlling question of law which is determinative of the future course of this litigation.
Substantial ground for difference of opinion. The defendants argued that there is a substantial ground for difference of opinion due to "evolving authority" as to the application of the per se rule to horizontal market allocations. The plaintiffs countered that there is no substantial ground for difference of opinion because the courts are bound by the Supreme Court precedent of United States v. Topco Associates., Inc., 405 U.S. 596 (1972) and United States v. Sealy, Inc., 388 U.S. 350 (1967).
The court noted that since Sealy and Topco, the Supreme Court had also declared that the rule of reason analysis must be presumptively applied and warned against a "literal approach" of applying the per se standard of review to any practice that can be labeled a per se category. The District of Columbia Circuit declared that "…to the extent that Topco and Sealy stand for the proposition that all horizontal restraints are illegal per se, they must be regarded as effectively overruled."
This court was of the view that the per se rule did apply to the aggregation of restrictions at issue here. However, it also conceded that the stakes in this multidistrict litigation were very high, costing the litigants millions of dollars and untold hours so far. If the Eleventh Circuit were to disagree with this court’s ruling, finding out sooner rather than later would potentially save years of full-scale litigation. Therefore, the court concluded that the substantial ground for difference of opinion element was met.
Resolution would advance termination of litigation. The defendants also argued that an interlocutory appeal on this question was appropriate because the resolution of the question may reduce the amount of litigation necessary on remand. They further argued that efficiency would be served by ascertaining the standard of review now so that class certification, merits expert, and summary judgment proceedings could occur with the benefit of that guidance. The court agreed, finding that without an appellate ruling on the standard of review, the parties and the court may have to perform expensive, duplicative work in order to address both the per se standard and the rule of reason standard. Therefore, the court "unhesitatingly" found that the reduction of any duplication of effort and expense met the requirement that the immediate resolution of the issues would materially advance the ultimate termination of this litigation, with the further benefit of bring clarity in other cases.
Question modified. For these reasons, court ruled that an interlocutory appeal of the April 5, 2018 order under Section 1292(b) was appropriate. However, the court modified the question presented to the following:
"Whether Topco, Sealy, and Palmer remain viable and require the application of the per se rule to a combination of restraints, involving horizontal market allocation and horizontal output restrictions, agreed to by competitors and potential competitors, where Defendants claim, under BMI, that there are at least arguable procompetitive benefits to the combination?"
The Master File Number is 2:13-cv-20000-RDP (MDL No. 2406).
Attorneys: Alan McQuarrie Mansfield (Whatley Kallas, LLP) for Plaintiffs. Barry A. Ragsdale (Sirote & Permutt PC) for Plaintiffs' Liaison Counsel. Alyssa C. Kalisky (Kirkland & Ellis LLP) and Brooke Jones Oppenheimer (Axinn, Veltrop & Harkrider LLP) for Defendants' Counsel. Claudine Columbres (White & Case LLP) for Anthem, Inc. Stephen A. Walsh (Adams & Reese, LLP) for Excellus Health Plan, Inc. d/b/a Excellus BlueCross BlueShield. Gwendolyn J. Simons (Simons & Associates Law PA) for Premera Blue Cross. Kathleen Taylor Sooy (Crowell and Moring LLP) for Blue Cross Blue Shield of Arizona. Jeffrey John Fowler (O'Melveny & Myers LLP) for Health Care Service Corp.
Companies: Anthem, Inc.; Excellus Health Plan, Inc. d/b/a Excellus BlueCross BlueShield; Premera Blue Cross; Blue Cross Blue Shield of Arizona; Health Care Service Corp.
Cases: Antitrust AlabamaNews