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It was touted as the Next Big Thing. In 1999 a star-studded team of plaintiffs lawyers vowed to bring the managed health care industry to its knees. The group included tobacco-war veterans Richard Scruggs from Mississippi, Russ Herman from New Orleans, and Walter Umphrey from Beaumont, Texas, and was backed by their vast war chest. And this time around they were joined by none other than David Boies, fresh off his magnificent performance for the government in the Microsoft Corp. antitrust trial. With the wily Scruggs and the brilliant Boies at the helm, this looked like another ship steaming to port with untold riches for the plaintiffs bar. The business world took them seriously. In September 1999, The Wall Street Journal reported that the lawyers would use the Racketeer Influenced and Corrupt Organizations Act (RICO) to hurl federal charges against HMOs on behalf of 145 million plan members. In response, some health care stocks plunged 20 percent or more. Fortune devoted an 11-page spread to forecasting a nightmare scenario for the industry. Pictured in the magazine lounging at the helm of his yacht, Scruggs warned of “ruinous” judgments if the industry fought them. But this time, the ship never came in. In August the last of the plaintiffs’ cases was dismissed after the recovery of less than $250,000 in total settlements for a dozen individuals. Attorney fees? Nada. “We got hammered,” admits Scruggs. Meanwhile, in the same court before the same judge, another group of plaintiffs lawyers took aim at the same health care companies. This legal team represented doctors fed up with managed care policies and red tape. While the Boies-Scruggs team saw its patients case disintegrate, these lower-profile lawyers have kept rolling along quite nicely. In early September they announced a $540 million settlement with the CIGNA Corp., lifting their settlements so far above the $1 billion mark. Their fees to date may approach $105 million. WHAT HAPPENED? The story starts in the fall of 1999, when Boies and Scruggs independently took aim at HMOs. Boies filed a RICO suit in Miami federal court in October 1999, and Scruggs followed a few weeks later in federal court in Hattiesburg, Miss. The suits accused HMOs of misrepresenting that their coverage and treatment decisions were based on medical necessity, when they allegedly denied or limited claims simply to save money. Joseph Langston, an attorney who worked with Scruggs, says their group initially considered representing both doctors and patients, but conflicts forced them to choose. “We decided to spin off the [doctor] part of the case,” says Langston, who practices in Booneville, Miss. “We thought, frankly, the patients had the more compelling and emotional stories to tell.” Langston approached his college roommate, Archie Lamb Jr., who runs a three-lawyer firm in Birmingham, Ala., about taking the doctors’ cases. Lamb agreed and enlisted a few other firms. In late 1999, they filed federal RICO cases in San Francisco and Birmingham on behalf of several state medical associations. After much jockeying, in 2000 all the suits — patients and doctors — ended up before federal District Judge Federico Moreno in Miami, coordinated as multidistrict litigation. Boies and Scruggs were appointed lead counsel for the patients; Lamb and Miami lawyer Harley Tropin took the lead for the doctors. They faced an array of defense counsel from some of the nation’s biggest firms: Gibson, Dunn & Crutcher (for Aetna Inc.); Skadden, Arps, Slate, Meagher & Flom (for Foundation Health Systems, Inc.); Philadelphia’s Harkins Cunningham (for CIGNA); O’Melveny & Myers (for Humana Inc. and Wellpoint Health Networks Inc.); Weil, Gotshal & Manges (for UnitedHealthcare); Cooley Godward (for PacifiCare Health Systems, Inc.); and Sullivan & Cromwell (for Oxford Health Plans Inc.). Out of that scrum, Gibson, Dunn emerged as lead defense counsel for the patient and doctor cases. Los Angeles partner Richard Doren nearly buried himself alive in documents to learn Aetna’s business from the inside out. In Washington, D.C., his partner Miguel Estrada focused on briefings and court appearances (in between sparring matches with senators over his now-withdrawn nomination to the U.S. Court of Appeals for the D.C. Circuit). “We took these cases extremely seriously,” says Doren. “[The plaintiffs lawyers] were pretty unabashed in their statements that they were out to cripple our clients.” Lamb notes that in contrast to the operation run by Boies and Scruggs, their case attracted little public attention. “We were very much in the background and not on anybody’s radar screen,” Lamb claims. Estrada says the defendants weren’t ignoring them: “We didn’t take the view that just because one [case] was filed by David Boies and Dickie Scruggs that it was more important.” The doctors’ team got a name-brand boost in the summer of 2002, when Milberg Weiss Bershad Hynes & Lerach, which had been separately pursuing several state court cases against HMOs, joined Lamb’s team. The class action behemoth sided with the doctors in federal court after it tried and failed to get a prominent spot on the Boies-Scruggs patients team. Milberg’s timing was perfect. A year ago, Judge Moreno certified a class of more than 600,000 doctors. The insurers appealed and a hearing was held before the 11th Circuit on Sept. 11. Two insurers, however, decided not to roll those dice. In May, Aetna agreed to a settlement with the doctors valued at $470 million, including $120 million in cash and policy changes valued at $300 million. On Sept. 3, CIGNA announced a similar settlement with physicians valued at $540 million, including $65 million in cash payments and changes valued upward of $300 million. As for attorney fees, Aetna has agreed to pay as much as $50 million; CIGNA, up to $55 million, with both subject to court approval. (Aetna used Davis Polk & Wardwell, not Gibson, to negotiate its settlement. Doren explains that the company wanted Gibson to remain “100 percent” committed to litigating.) In the Boies-Scruggs camp, things weren’t going so well. In the same ruling in which he certified a physician class, Judge Moreno denied class certification to the patients. He reasoned that they had received too many differing representations about their coverage. Scruggs was shocked. “David Boies and I felt good after the [certification] argument,” explains Scruggs, who argued the motion with his co-lead counsel. Judge Moreno’s decision was a death knell to the patients’ team. They didn’t even appeal. They settled the named plaintiffs’ claims for amounts ranging from $2,000 to $8,000 each. Stephen Neuwirth, a partner at Boies, Schiller & Flexner who worked extensively on this case, says he’s disappointed but insists their efforts weren’t in vain. “I certainly don’t regret we pursued these claims,” Neuwirth says. “We were able to do some good.” He notes that several companies have already changed policies for patients. (Boies was not available for comment.) O’Melveny & Myers partner Stan Blumenfeld, who represents Wellpoint, says the Boies-Scruggs team faced many obstacles: “It was a very ambitious, novel approach they took in bringing the lawsuits in the first place. There is appellate case law out there that would trip these cases up from the get-go.” Mississippi lawyer Langston estimates that the patients’ team invested $10 million to $20 million in time, including $3 million to $4 million in out-of-pocket expenses. Roughly 60 firms were involved. But, he claims, no one is crying too much. “These lawyers are all big boys. They know they’re betting on the ‘come,’ ” says Langston. Like Neuwirth, he stresses that their efforts prompted some industry changes. “ We don’t consider these cases a complete loss,” he says. “But financially, they were an absolute loser.” Scruggs says this failure has been his most disappointing professional setback. “I don’t know of a bigger one than this — given the stakes and what we were trying to accomplish.” Susan Beck is a senior writer at The American Lawyer. This article first appeared in the October issue.

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