United States: Court Denies Blues’ Motion To Dismiss In Re Blue Cross Blue Shield Antitrust Litigation (MDL 2406)

On June 18, United States District Court Judge David Proctor (Northern District of Alabama) issued his highly anticipated ruling in the In re Blue Cross Blue Shield Antitrust Litigation, declining to dismiss the action prior to the commencement of discovery. The multidistrict litigation, in which the plaintiffs contend that the Blue Cross Blue Shield Association and its 38 member Blues have utilized trademark licensing agreements to limit competition between them, was consolidated and transferred to Judge Proctor by the Judicial Panel on Multidistrict Litigation in 2013.

In his first significant ruling in the matter, Judge Proctor considered three overarching arguments that the insurers had advanced in support of dismissal: (1) that the licensing agreements challenged by the plaintiffs have procompetitive benefits, and thus are not "horizontal market allocation agreements" that should be judged under per se (rather than rule of reason) principles; (2) that the Blues' alleged conduct, regardless of classification, is exempt from the antitrust laws pursuant to the "Filed Rate Doctrine;" and (3) that the defendants' conduct is also independently exempt from antitrust scrutiny based upon the insurance industry's McCarran-Ferguson Act exemption.

Judge Proctor began his analysis by focusing on the Blue trademarks, and the licensing agreements between the Blue Cross Blue Shield Association and its member Blues. Summarizing the defendants' contentions, Judge Proctor stated that the Blues "argue that the licensing agreements do not restrain trade, but merely adopt pre-existing rights to local geographic exclusivity acquired either independently by operation of trademark law, or vertically through lawful licenses granted by the American Hospital Association or the American Medical Association." Judge Proctor also noted that "defendants contend that the service areas have procompetitive benefits," and that per se condemnation of the agreements is unwarranted on that basis.

Judge Proctor, however, rejected defendants' argument, at least for now, holding that "at this early stage of the proceedings" the plaintiffs' allegations, taken as true, are sufficient as a matter of law. Specifically, Judge Proctor held that plaintiffs had plausibly alleged that the Blues' agreements "do more than merely recognize pre-existing trademarks," because, among other things, the plaintiffs had alleged that the agreements also restrict competition under non-Blue or non- trademarked brands, and that "plaintiffs have alleged that prior to the alleged agreements, but after the alleged formation of common law trademark rights, defendants actually engaged in competition."

Significantly, Judge Proctor also deferred his decision on whether plaintiffs' allegations potentially give rise to per se condemnation, rather than "rule of reason" treatment, a decision that not only impacted his decision on the Blues' motion to dismiss, but will also have significant repercussions for how the case proceeds.

As Judge Proctor noted, whether the defendants' alleged agreements should be judged under per se principles turns, in large measure, on whether the United States Supreme Court's 1972 decision in United States v. Topco Associates remains good law. In Topco, the Supreme Court held that horizontal market allocation agreements are generally subject to per se condemnation, and thus any procompetitive benefits achieved through such agreements are irrelevant in determining whether the conduct violates the antitrust laws. The Blues maintained, however, that since Topco, the Supreme Court has moved away from per se condemnation for such conduct in some circumstances, including where intellectual property rights are involved, and for that reason per se treatment was not appropriate in this case. The plaintiffs, in response, countered by noting that Topco "has never been overruled and, in fact, the Court has never expressly called [it] into question." Ultimately, Judge Proctor decided that "it is simply too early to assess which standard of review should be applied to plaintiffs' allegations," because "while the mode of analysis is certainly a question of law, underpinning that purely legal decision are numerous factual questions" that have not yet been resolved. Judge Proctor will undoubtedly face this issue again after discovery, at the summary judgment phase of the proceeding.

Turning next to the Blues' Filed Rate Doctrine defense, Judge Proctor first observed that the doctrine "generally operates to bar antitrust suits that are based upon challenges to rates that have been filed with regulatory agencies." However, because the Filed Rate Doctrine would only bar, at most, some of plaintiffs' claims for damages, and would not in any circumstance bar plaintiffs' claims for declaratory and injunctive relief, Judge Proctor held that "a decision about whether to apply the Filed Rate Doctrine at this time, even only to claims against those Blues who filed rates in the jurisdictions in which they were required to file rates, would be premature." Judge Proctor continued: "Some inquiry is needed into which defendants have filed rates and in which jurisdiction, and discovery may also be required concerning the extent of administrative oversight defendants were subjected to in each jurisdiction in which they filed rates." Accordingly, this issue will also likely be revisited at the summary judgment stage of the proceeding.

Finally, the Court also addressed the Blues' contention that their alleged conduct was exempt from the federal antitrust laws based upon the McCarran Ferguson Act, which exempts "the business of insurance" from the federal antitrust laws to the extent such conduct is "subject to state regulation" and does not constitute an act of "boycott, coercion or intimidation."

In analyzing this issue, Judge Proctor focused his attention on whether the alleged conduct constituted "the business of insurance." As Judge Proctor noted, the Supreme Court has articulated a three part test for determining whether conduct constitutes the business of insurance – (1) does the practice have the effect of transferring or spreading a policyholder's risk; (2) whether the practice is an integral part of the policy relationship between the insurer and the insured; and (3) whether the practice is limited to entities in the insurance industry. United Labor Life Insurance v. Pireno, 458 U.S. 119,129 (1982). Here, Judge Proctor held, the alleged conduct did not satisfy these requirements.

Specifically, Judge Proctor concluded that defendants' contention that "plaintiffs' market allocation theory is 'an attack on premiums,'" and thus barred by McCarran, was misplaced. The Court noted that the Supreme Court has observed that "at least in some manner, every business decision by an insurance company has some impact" on its rates, and thus, because the Blues' alleged conduct did not directly concern the spreading of risk, it was outside the scope of the exemption. In reaching this decision, the Court embraced a decision from the Third Circuit (In re Insurance Brokerage Antitrust Litigation) in which the court had reached a similar conclusion, and distinguished an 11th Circuit decision (Gilchrist v. State Farm) in which the court had viewed "the business of insurance" test more expansively. Unlike the prior two issues, which Judge Proctor is likely to face again later in the action, it appears that this ruling takes the McCarran Ferguson Act issue out of the case (at least until any possible appeal).

As the foregoing analysis makes clear, Judge Proctor deferred reaching a decision on many of the Blues' arguments, rather than rejecting them, and denied the Blues' motion on that basis. However, by doing so, Judge Proctor has authorized a massive case to proceed into discovery. The impact of that decision will likely not be known for many months, as discovery progresses. Stay tuned.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions