A federal judge insured by Aetna has taken himself off about a dozen class-action suits against the carrier.
U.S. District Judge Stanley Chesler on April 15 granted a motion to recuse in Cooper v. Aetna Health Inc., 07-cv-3541, recognizing he and his wife were potential class members due to her Aetna plan, in which he is a beneficiary.
He said the realization struck him upon reviewing a proposed settlement that excludes from the class "[a]ny judge who presides or has presided over the Actions, together with his/her immediate family members and any other individual residing in the Judge’s household." He said that "were it not for the express exclusion, [he] and his wife could be considered absent members of the putative class."
Since Cooper has been consolidated with other cases for pretrial proceedings by the Judicial Panel on Multi-District Litigation as In re Aetna UCR Litigation, MDL No. 2020, Chesler’s recusal applies to all of them.
Cooper was the first to be filed, in 2007 in Newark, and was assigned to U.S. District Judge Faith Hochberg. Chesler took over in June 2011 while a motion to dismiss was pending.
He stated in his recusal decision that the motion was never decided because the parties got down to serious talks, which yielded the proposed settlement submitted to the court for preliminary approval last Dec. 7.
In the 18-month interim, Chesler’s involvement was "minimal" — limited to "periodic status conferences with the attorneys to confirm that the parties remained committed to attempting to reach an amicable resolution … and wished to continue the informal stay of litigation," he said in his opinion.
The plaintiffs’ central allegation is that Aetna reimbursed out-of-network providers and insureds based on rates that were out-of-date, and thus too low.
The $120 million settlement was negotiated between Aetna and Carella Byrne Cecchi Olstein Brody & Agnella in Roseland, which Hochberg designated in 2009 as settlement liaison counsel.
The largest component is a $60 million general fund from which members of two classes — providers and subscribers — can collect $40 for each year in which they received or provided a covered service for which they were paid less than the amount charged, with no need to submit supporting documentation for individual claims. That pot of money would also pay legal fees, administrative expenses and incentive awards.
The other $60 million would be allocated to alternative "prove-up" funds — $40 million for insureds and $20 million for providers — and could pay more but require documentary proof. Aetna would not have to deposit the money in escrow up front, in contrast to the general fund.
The five Cooper plaintiffs, represented by Wilentz, Goldman & Spitzer in Woodbridge, objected to the settlement on various grounds. They say it was negotiated by plaintiffs who are not proper class representatives because they lack viable claims or are otherwise inadequate and improperly excluded from the process those who are adequate. They further allege absence of quantification of damages or information on attorney fees and costs, and the impossibility of meeting the prove-up fund criteria.
Chesler had scheduled a hearing on the objections for Jan. 23. But when the parties showed up that day, he informed them that his wife was covered by an Aetna plan through her job. Although he is insured through the Government Employees Health Association, he also has secondary coverage through his wife’s plan.
Chesler added that he wanted to "make my mea culpas about falling asleep at the switch" for not noticing earlier.
Further, he renounced on the record any interest he or his wife might have in the lawsuit and noted they were excluded from the settlement class.
Aetna and the settling plaintiffs wanted Chesler to proceed with the motion for preliminary approval but the objectors wanted time to decide what to do, which Chesler allowed, postponing a decision on the settlement.
The objectors’ first move was a Jan. 31 motion to compel discovery from Aetna that they said would help them develop a record for possible recusal.
They wanted to know such things as: what claims the Cheslers submitted; how much Aetna paid on them; whether the claims were handled like those of other insureds; when and how Aetna learned of the connection; who at Aetna knew, including outside counsel; why the judge exclusion clause was added to the settlement and who was involved.
That motion, denied by U.S. Magistrate Judge Patty Shwartz on March 1, was pending when the objectors moved on Feb. 7 for Chesler’s recusal. Settlement could impact Chesler if he shared in recovery and also if it resulted in increased premiums or reduced coverage, they argued.
The objectors also said sanctions for Aetna might be warranted if it knew but did not disclose the connection.
Aetna opposed recusal on the basis that Chesler promptly cured the situation by opting out of any settlement at the Jan. 23 hearing.
Its lawyer, Liza Walsh of Connell Foley in Roseland wrote Chesler on Feb 27 to emphatically deny the suggestion in the objectors’ reply brief that Aetna knew earlier and made a "strategic decision" not to disclose the fact to "keep a proverbial ace up its sleeve."
In his April 15 opinion, Chesler concluded recusal was appropriate under 28 U.S.C. 455 given that he "had a disqualifying interest for such a long period of time and made a belated discovery on the presentation of the critical motion for preliminary certification of a Settlement Class," combined with his "performance of no substantive work on this action."
He suggested he would have avoided recusal if he had invested more effort in the litigation, noting the "safe haven" of 28 U.S.C. 455(f), which allows a judge to remain on the case if he or she "divests himself or herself of the interest that provides the grounds for the disqualification" in circumstances where "substantial judicial time has been devoted to the matter."
The same day, Chesler denied a recusal motion in a similar suit, Franco v. Connecticut General Life Insurance, 07-cv-6039, against CIGNA brought by plaintiffs also represented by the Wilentz firm. As of Jan. 1, his wife’s plan switched from Aetna to CIGNA. Chesler explained that he decided differently as to CIGNA because neither he nor his wife could become a class member. Their CIGNA coverage started after CIGNA stopped using the disputed reimbursement rates.
On Tuesday, the litigation was reassigned to U.S. District Judge Katharine Sweeney Hayden.
Chesler declines comment.
Barry Epstein of Wilentz says: "We made the motion, the judge agreed and he gave his reasons."
A call to Walsh was referred to Aetna spokeswoman Cynthia Michener, who says, "We look forward to our motion being addressed on the merits."
Carella Byrne’s James Cecchi did not return a call.