By Gerald L. Maatman, Jr. and Sean P. McConnell
Duane Morris Takeaways: On October 25, 2023, in the litigation of In Re Blue Cross Blue Shield Antitrust Litigation, MDL No. 2406 (11th Cir. Oct. 25, 2023), a three-judge panel of the U.S. Court of Appeals for the Eleventh Circuit affirmed a district court’s order giving approval to the Blue Cross Blue Shield insurers’ $2.67 billion class action settlement resolving allegations of antitrust violations and other anti-competitive practices. The settlement, which was reached nearly three years ago, involved Blue Cross Blue Shield agreeing to a multi-billion dollar settlement fund and incorporating various reforms to resolve alleged anti-competitive business practices to harm competition. The Eleventh Circuit rejected various objections from corporate and individual objectors, including arguments that the settlement release would frustrate national employers from participating in the settlement and/or from making similar claims in the future, that the district court failed to scrutinize the allocation of the settlement proceeds among plaintiffs, and issues with the attorneys’ fees awarded. Instead, the Eleventh Circuit found that the district court did not abuse its discretion in approving the settlement.
The affirmation of the district court’s settlement approval in Blue Cross Blue Shield Antitrust Litigation is required reading for any corporate counsel considering settlement of antitrust class action litigation.
Case Background
The underlying multidistrict litigation began in 2012 when subscribers alleged that Blue Cross Blue Shield and member plans engaged in an anti-competitive market allocation and exclusive-dealing scheme to harm competition. The Blue Cross Blue Shield Association is a national insurance company. It owns and licenses its federal trademarks to local member plans and affiliated entities. According to the underlying complaint, subscribers who bought health insurance from Blue Cross Blue Shield alleged that Blue Cross Blue Shield allocated geographic territories, limited member plans’ competition by mandating a minimum percentage of business under the Blue Cross brand for each member doing business inside and outside their territories, restricted the right of member plans to be sold to companies outside the Association, and agreed to other ancillary restraints on competition. There was a separate track of litigation for claims brought by providers, but the case at bar does not involve that track. After the district court granted partial summary judgment for the subscribers in 2018, the parties reached a class action settlement that divided the subscriber-track plaintiffs into two groups: (i) a monetary damages class and (ii) an injunctive relief class.
Settlement Affirmed
Several parties appealed the district court’s approval of the class action settlement. Home Depot argued that the settlement release would, among other things, frustrate enforcement of the federal antitrust laws. The Eleventh Circuit rejected this argument because “[p]rivate enforcement is only one mechanism by which federal antitrust laws may be vindicated.” Id. at 13. The Eleventh Circuit noted that the “government may also enforce the antitrust laws against companies like Blue Cross” and intimated that DOJ or state attorneys general could investigate and bring claims against Blue Cross for anticompetitive conduct. Id. at 13-15. With respect to argument about the apportionment of settlement funds, the Eleventh Circuit opined that federal laws requires “equity, not equality.” Id. at 25. It therefore concluded that the approval of the class-wide settlement, though facially unequal, was not unfair and not an abuse of discretion.
Implications for Defendants in Class Actions
In Re Blue Cross Blue Shield Antitrust Litigation is one of the most significant antitrust class actions in recent years, and is arguably a historic resolution in terms of industry practices. From the early stages of the action, a court-appointed settlement master helped the parties in settlement negotiations, and the Eleventh Circuit referred to the settlement master’s view that the settlement at issue was reasonable.