Oh June 18, 2014, Judge R. David Proctor of the United States District Court for the Northern District of Alabama denied several motions to dismiss claims against the Blue Cross Blue Shield Association and all of its members for violating federal antitrust law.  Two sets of plaintiffs, subscribers to Blue Cross and Blue Shield plans and health care providers who treat patients covered by Blue Cross and Blue Shield plans, alleged that the members of the Blue Cross Blue Shield Association have agreed not to operate outside of designated “service areas, ” ensuring that they will not compete with each other.  The plaintiffs alleged that this agreement not to compete amounts to an unlawful horizontal market allocation, which increases premiums for subscribers and decreases reimbursements for providers.  The defendants moved to dismiss on a variety of grounds, claiming that their trademark rights allow them to agree not to compete with each other, that their arrangement has pro-competitive benefits, that the McCarran-Ferguson Act exempts the “business of insurance” from the antitrust laws, and that under the “filed rate doctrine.” the subscriber plaintiffs cannot challenge insurance premiums approved by state regulators.

The Court rejected all of these arguments.  First, the court held that legal and factual issues surrounding the defendant’s trademark rights preclude dismissal of the plaintiff’s claims.  The Court then held that it is too early in the case to decide whether any pro-competitive effects of the defendant’s conduct, if they exist, would allow the defendants to agree not to compete with each other, although the Court noted that the Supreme Court precedent supports the plaintiff’s argument that the defendants’ conduct violates the antitrust laws regardless of any  pro-competitive benefits it might have.  The Court then held that an agreement to allocate territories is not the “business of insurance” under the McCarran-Ferguson Act, and that the filed rate doctrine either does not apply to the defendants’ conduct or raises factual questions that prevent dismissal.

Although the Court’s opinion addressed the defendants’ main arguments, it did not decide certain other issues raised in the defendants’ motions to dismiss, including whether some of the defendants can be required to defend themselves in the Northern District of Alabama, and whether the provider plaintiffs have adequately pleaded a claim for price-fixing. The Court asked the parties to submit a proposal for consideration of the remaining issues by July 15.

Penn & Seaborn is representing the Provider Class in this important antitrust litigation.  Myron Penn has been selected to serve on the discovery committee.  Judge Proctor has appointed Edith Kallas and Joe Whatley to serve as lead counsel for the Providers, which include hospitals, ambulatory surgery centers, other facilities, medical doctors, chiropractors, physical therapists, other individual providers, pharmacies, as well as other healthcare providers.

The case is In re Blue Cross Blue Shield Antitrust Litigation, No. 13-cv-20000-RDP (N.D. Ala.)