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When Miami lawyer James B. Tilghman Jr. steps to the lectern in Atlanta today to ask the 11th U.S. Circuit Court of Appeals to bless the biggest class action it has ever considered, he’ll face a court with a reputation for being unfriendly to such enormous class actions. The court will hear oral argument on a motion by the nation’s largest for-profit managed health care insurers that seeks to reverse last year’s decision by U.S. District Judge Federico A. Moreno in Miami to certify a national class of more than 700,000 physicians. The doctors claim that the insurers have treated them unfairly and paid them belatedly and inadequately for patient care. Tilghman, a partner at Stewart Tilghman Fox & Bianchi, will speak to the court for the 11 law firms that represent the doctors in their broad challenge to longstanding industry practices. It promises to be a make or break moment for the multibillion-dollar racketeering case the doctors have brought in U.S. District Court in Miami against 10 insurers that collectively control about half the nation’s managed care market. If the managed care industry wins, it will have dodged yet another bullet in its continuing battle to stave off restrictions on how health plans operate and control medical costs. The Republican takeover of the U.S. Senate last fall effectively stymied federal legislation to establish tough rules for how health plans treat their medical providers and patients. Some observers had seen the class action litigation as an alternative way to regulate the industry. In addition, the national plaintiff bar’s hopes of turning the managed care industry into another cash cow, like the tobacco industry, will have been dealt a major blow. The doctors’ class action case against the managed care firms was established in August 2000, just a few months after a number of individual court actions brought by aggrieved doctors in courts across the nation were consolidated in the Southern District of Florida by a panel of federal judges that regulates multidistrict litigation. The managed care industry’s hopes for a knockout before trial, which is scheduled to start in March, rest on the 11th Circuit’s reputation as a graveyard for large class actions. That reputation is rooted in about a half-dozen cases in which the court has reversed large class certifications granted by district court judges. Judge Gerald Bard Tjoflat, who authored one of those decisions, is on the panel that will hear arguments today in the managed care case. He will be joined by Judge Stanley F. Birch Jr. and Senior Judge Alfred T. Goodwin, a visiting judge from the 9th Circuit in California. Rulings in such cases typically take six months. If the appellate judges reverse Judge Moreno’s decision to certify the class of physicians, they would torpedo the single, mass claim for damages. Instead, the doctors would be forced to file individual lawsuits in state or federal courts. “How important is this? It’s huge,” said Harley S. Tropin, another leading lawyer for the physicians and a partner at Miami’s Kozyak Tropin & Throckmorton. “If we don’t win, there will be state court cases all over the country doing the same thing, and it will be a lot more expensive.” New York City lawyer Jeffrey S. Klein, the spokesman for the defense team, agreed that today’s hearing is pivotal. But he said Tropin is bluffing, and that it’s unlikely the doctor groups would pursue separate actions in the state courts. “The plaintiff lawyers have told the trial court that they aren’t interested in pursuing the claims if they actually have to pursue them one at a time as the contracts [between the doctors and the insurers] required,” said Klein, a partner at Weil Gotshal & Manges. In all, nearly 60 lawyers at 11 law firms represent the doctors. The managed care companies have more than 100 lawyers defending them, including local counsel at some of South Florida’s most prominent firms — Greenberg Traurig, Steel Hector & Davis and Adorno & Yoss. Edward Soto, a partner who heads Weil Gotshal’s litigation practice in Miami, is liaison counsel to all the defendants. CONSPIRACY TO CHEAT? The current class action case began with dozens of lawsuits filed by individual doctors in courts around the country during the late 1990s. The Judicial Panel on Multidistrict Litigation consolidated the cases in Miami in April 2000, and they were assigned to Judge Moreno in November of that year. Four months after the cases were consolidated, a lead case emerged when nine doctors, led by Louisville, Ky., gynecologist Dr. Charles Shane, filed an amended complaint seeking class action treatment of their claims for damages and injunctive relief against the insurance companies under the federal Racketeer Influenced and Corrupt Organizations statute. Specific acts of alleged industry wrongdoing included mail and wire fraud and conspiracy. Moreno divided the class action into two tracks, one involving medical providers and the other involving plan subscribers. The plan enrollees claimed they were duped into believing they would be covered according to their individual medical needs. The physicians claim that for more than a decade, under the banner of cost-containment, the insurers have conspired to cheat them by denying or manipulating claims to wrongly reduce or delay payments. To pull it off, court papers allege, the managed care companies “developed and deployed” various automated claims processing schemes like “downcoding” that routinely exclude some covered patient services from payment. Last September, Judge Moreno granted class certification to the doctors. After analyzing the facts and circumstances, he ruled that the many physician claims had common threads sufficient to be adjudicated best through consolidation into a single, massive case. In the same order, the judge rejected as too unwieldy the proposed class action on behalf of 145 million managed care consumers, effectively ending that track of the case. Moreno’s order certifying the class of physicians was quickly appealed by defendants Aetna, Health Net, Humana, PacifiCare Health Systems, Prudential Insurance Co. of America, UnitedHealth Group, WellPoint Health Networks, and Cigna HealthCare. The appeal claimed fundamental error and abuse of discretion by Judge Moreno. Two other large health benefit corporations, Anthem and Coventry Health Care, weren’t named as defendants until after the class was certified and are not parties to the pending appeal. In their appellate briefs, the health insurers characterized the doctors’ class action as a “broad attack on the American managed health care system” that improperly seeks to have one jury adjudicate millions of individual allegations involving a multiplicity of circumstances. “A single jury, in a single trial, should not decide the fate of the managed care industry,” the court papers say. The doctors’ retort that “defendants characterize the doctors’ claims as an undisciplined attack on the country’s health care system, but the attack is neither undisciplined nor directed at managed care. Rather, plaintiffs’ claims focus on fraudulent claims processing tactics.” The assertion that the fraud is a common and automated course of conduct by the insurance companies makes the lawsuit “ideally suited for class treatment,” according to the doctors’ brief. MOVING TO SETTLE Meanwhile, despite the managed care industry’s attempt to kill the doctors’ class action litigation, Aetna and Cigna have announced their intention to settle the doctors’ claims against them. Aetna’s deal, set to be considered for final approval by Judge Moreno on Oct. 26, is estimated to be worth more than $470 million to the doctors over five years. That includes about $300 million in value from improvements in processing future claims that were agreed to by Aetna as part of the settlement. Also to be paid by the insurers to the doctors: $100 million in cash, $50 million for legal fees and $20 million to establish a private foundation to address health card issues. About 3,000 of the 700,000 doctors opted out of the proposed settlement before an Aug. 29 deadline, Tropin said. Those physicians are free to litigate individually. Greenberg Traurig partners Hilarie Bass and Mark P. Schnapp are representing Aetna in Miami. Aetna’s Washington, D.C., legal team at Gibson Dunn & Crutcher is led by Miguel A. Estrada, who last week withdrew his name from consideration as President Bush’s nominee to the federal appeals court in Washington. The settlement with Cigna, given preliminary approval by Moreno last week, is similar to the Aetna settlement. But its estimated value at the moment is disputed. Tropin said the deal is worth “well north of $500 million” — and as much as $700 million — to the doctors, depending largely on the implementation of changes to Cigna’s payment practices. The settlement includes $55 million in fees for the plaintiff lawyers, who will begin filing claims for those fees within the next 60 days. But as described by Cigna in a news release, the settlement figures, while conditional, total less than $500 million, including “a value in change of practices in excess of $400 million” and a “minimum guaranteed cash payment to physicians” of $85 million. Cigna said that includes $15 million for the new foundation that will focus on matters such as the elimination of racial and ethnic disparities in medical treatment. Judge Moreno has scheduled a final approval hearing on settlement with Cigna for Dec. 18. The case involving the remaining defendants continues in court-ordered mediation, but prospects for other settlements are dim, Tropin said. The mediator is former 3rd District Court of Appeal Judge Rodolfo Sorondo Jr., now a partner at Holland & Knight in Miami. Why are Aetna and Cigna moving to settle when the underlying class action faces possible decertification by the 11th Circuit? The answer, which defense attorneys interviewed for this article declined to discuss on the record, is that a settlement is perceived as good for business and public relations. Aetna and Cigna expect that their relations with physicians will improve, that uncertainty over the possibility of future litigation in state courts will largely cease, and that they’ll gain a competitive advantage over other insurers from appearing to give doctors more control over patient care decisions. MORENO’S ERRORS Nevertheless, with Aetna and Cigna still on board, the managed care defendants will press forward today in Atlanta in hopes of derailing the class. Court briefs filed by the defendants argue that Judge Moreno’s class certification order should be reversed because it’s riddled with legal errors, and strays from established precedent. Even the doctors, in their appellate brief, acknowledge errors by Moreno, but they argue they shouldn’t be considered fatal to class action status. As described in court papers, Moreno’s errors involved incorrect analyses of the applicability of certain legal requirements. One matter involved a decision about how best to adjudicate the element of individual reliance by doctors on the business assurances of the insurance companies with which they contracted. Moreno’s ruling held that because “a common scheme is alleged and demonstrated by the evidence here, there are no individual issues of reliance” to resolve. The doctors’ appellate brief acknowledges that Moreno’s statement is “incorrect,” but argued that “individual issues of reliance do not preclude certification” because reliance can nonetheless be established on a class basis by “circumstantial evidence.” In their reply brief, lawyers for the insurance industry said the doctors’ argument was “tantamount to the presumption of reliance that this court rejected in Sikes.” Today’s arguments, as detailed in court briefs filed by both sides, will turn on the 11th Circuit’s interpretation of two of its previous decisions on class certification — last year’s Sikes v. Teleline and Andrews v. American Telephone & Telegraph in 1996. In both cases, the 11th Circuit reversed lower court orders certifying large classes of plaintiffs. The decision in Sikes, written by Judge Tjoflat, addressed claims arising from a “900-number” telemarketing program. It found an “abuse of discretion” by a federal judge in Georgia who certified a class because he gave too much consideration to questions common to all class members — and not enough weight to matters of concern only to individual members. Hilarie Bass, who represents Aetna, said Sikes and other rulings by the 11th Circuit are indicative of what’s likely to come when the court issues its ruling in the managed care case. “The 11th Circuit takes a much more jaundiced eye toward the issue of certification, and has refused to certify classes that would pass muster elsewhere,” she said. “They have real concerns about the use of large class actions to put undue pressure on defendants to settle cases.” Plaintiff lawyers privately acknowledge the 11th Circuit’s seeming hostility to large class actions. Court papers filed on behalf of the doctors, however, argue that Sikes and other decisions simply don’t apply now because they aren’t on point with issues in the managed care case. For example, the plaintiff lawyers argued that both Sikes and Andrews — the case on which the Sikes ruling relied — involved the legality of certain telephone games regulated by various state gambling statues that aren’t at issue in the managed care case. “ Sikes hardly stands for the proposition that no nationwide class certification based on state law can be certified,” the plaintiff’s brief says. Still, not every observer thinks that the 11th Circuit’s previous decisions to decertify in Sikes, Andrews and other cases are necessarily useful in making a forecast this time. “I don’t think it’s really true that they’re hostile,” said Nova Southeastern University law school professor Robert M. Jarvis. “My sense is that if you can convince the trial court judge — and that is hard to do — the 11th is no more hostile to it than any other circuit.”

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