Health Republic Ins. Co. v. United States

• Decision Date: 16 September 2021
• Docket Number: 16-cv-259C
• Parties: HEALTH REPUBLIC INSURANCE COMPANY, Plaintiff, v. THE UNITED STATES, Defendant. COMMON GROUND HEALTHCARE COOPERATIVE, Plaintiff, v. THE UNITED STATES, Defendant.
• Court: U.S. Claims Court

HEALTH REPUBLIC INSURANCE COMPANY, Plaintiff, v. THE UNITED STATES, Defendant.

COMMON GROUND HEALTHCARE COOPERATIVE, Plaintiff, v. THE UNITED STATES, Defendant.

No. 16-cv-259C

United States Court of Federal Claims

September 16, 2021

OPINION AND ORDER

KATHRYN C. DAVIS JUDGE

Before the Court are Class Counsel Quinn Emanuel Urquhart &amp Sullivan LLP's Motions for Approval of Attorney's Fee Request and Class Representative Incentive Award related to their representation of certain classes certified in the above-captioned cases. See Health Republic ECF No 84; Common Ground ECF No. 107.^[1] Class Counsel seek approval of an attorney's fee award of five percent, approximately $185 million of the combined $3.7 billion judgment recovered on the Non-Dispute Subclasses' risk corridors claims. They also seek approval of $ 100, 000 incentive awards to both Health Republic Insurance Co. ("Health Republic") and Common Ground Healthcare Cooperative ("Common Ground") (collectively, "named Plaintiffs") as representatives of their respective classes, to be paid from Class Counsel's fee. The Court is tasked with determining the reasonableness of these awards. For the reasons that follow, the Court approves in part and denies in part Class Counsel's requests.

I. BACKGROUND

On February 24, 2016, Class Counsel filed a complaint on behalf of Health Republic as the first challenge to the Government's failure to make risk corridors payments to Qualified Health Plan ("QHP") issuers pursuant to Section 1342 of the Patient Protection and Affordable Care Act, Pub. L. No. 111-148 (2010), 124 Stat. 119, and the Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152(2010), 124 Stat. 1029 (collectively, the" ACA"). See Pl.'s Class Action Compl., Health Republic ECF No. 1. The risk corridors program was designed to mitigate risk for QHP issuers participating in the new insurance market created by the ACA. It did so by providing QHP issuers compensation from the Government for any "losses exceed[ing] a certain defined amount due to high utilization and high medical costs," while on the other hand requiring QHP issuers to pay the Government "a percentage of any profits [QHP issuers] made over similarly-defined amounts." Id.¶5. In the Complaint, Class Counsel argued on behalf of Health Republic and a putative class of QHP issuers that Section 1342 was a money-mandating statutory provision that required the Government to "pay any QHP certain amounts exceeding the target costs they incurred in [benefit years] 2014 and 2015," id. ¶ 60, notwithstanding Congress's decision not to appropriate sufficient funds to pay such amounts, id. ¶ 10. Health Republic was the first lawsuit filed challenging the Government's withholding of risk corridors payments and the first of its kind to raise a money-man dating theory of recovery under the Tucker Act. Health Republic ECF No. 84 at 9 (citing Decl. of Stephen A. Swedlow ¶ 8, ECF No. 84-1).

By August 2016, numerous other firms had brought similar suits in this court on behalf of individual QHP issuers, each arguing, among other things, that Section 1342 mandated the Government to make risk corridors payments. See, e.g., First Priority Life Ins. Co. v. United States, No. 16-cv-587(Fed. CI.) (filed May 17, 2016); Moda Health Plan, Inc. v. United States, No. 16-cv-649(Fed. CI.) (filed June 1, 2016); Blue Cross and Blue Shield of N.C. v. United States, No. 16-cv-651 (Fed. CI.) (filed June 2, 2016);Me. Cmty. Health Options v. United States, No. 16-cv-967 (Fed. CI.) (filed Aug. 9, 2016); see also Health Republic ECF No. 84-1 ¶ 11.

The Government moved to dismiss Health Republic's Complaint, arguing that the Court of Federal Claims lacked subject matter jurisdiction under the Tucker Act because Section 1342 did not constitute a money-man dating statute providing a substantive right to payment. See Defi's Mot. to Dismiss at 21-26, Health Republic ECF No. 8. The court rejected that argument and denied the Motion to Dismiss as to the Section 1342 claim. See Health Republic Ins. Co. v. United States, 129 Fed. CI. 757 (2017).

At the same time the court was considering the Government's Motion to Dismiss, Health Republic was moving forward in the class certification phase. The Government did not oppose certification; consequently, on January 3, 2017, the court certified the proposed class in Health Republic and appointed Quinn Emanuel lead class counsel. Order at 1-2, Health Republic ECF No. 30. On February 24, 2017, exactly one year after it initiated suit, the court granted Class Counsel's proposed class notice plan. See Order, Health Republic ECF No. 42. Consistent with the opt-in nature of class actions in the Court of Federal Claims, Class Counsel's notice explicitly informed potential class members that they must affirmatively submit a Class Action Opt-In Notice Form to join the class, otherwise they would receive no benefit from the lawsuit. Updated Proposed Class Notice at 2, 5, Health Republic ECF No. 41-1. The notice advised potential class members that, if successful, Class Counsel would seek permission to be compensated for their representation, which would be deducted from the amount of any recovery by the class. Id. at 7. It did not identify a particular amount or percentage of any proposed fee award. See id.; see also Health Republic ECF No. 84-1 ¶ 13.

According to Class Counsel, it later became known that potential class members were under the erroneous assumption that Class Counsel would be seeking a fee percentage in the ballpark of 30 percent of any judgment. Mot. to Suppl. Class Notice at 1, Health Republic ECF No. 50; Health Republic ECF No. 84-1 ¶ 13. To assuage those concerns, and with the court's approval, Class Counsel distributed a supplement to the class notice representing to potential class members that they would seek a fee of no more than five percent of the class's recovery. Proposed Suppl. Class Notice at 6, Health Republic ECF No. 50-1; Order, Health Republic ECF No. 51; Health Republic ECF No. 84-1 ¶ 15. The supplemental notice advised that the maximum award may be substantially reduced depending on the level of class participation and, in any event, would "be determined by the Court subject to, among other things, the amount at issue in the case and.. . a 'lodestar cross-check[.]'" Health Republic ECF No. 50-1 at 6. In sum, 153 QHP issuers opted into the Health Republic class. Health Republic ECF No. 84-1 ¶ 17.

In March 2017, Health Republic moved for summary judgment. See Pl.'s Mot. for Summ. J., Health Republic ECF No. 47. On June 27, 2017, before the court decided that Motion, Class Counsel filed a separate class action complaint in Common Ground for benefit year 2016. See Pl.'s Class Action Compl., Common Ground ECF No. 1. As in Health Republic, the court certified the proposed risk corridors class in Common Ground and appointed Quinn Emanuel as class counsel. Order at 2, 3, Common Ground ECF No. 17. It likewise approved Class Counsel's proposed class notice plan. Order, Common Ground ECF No. 25. The Common Ground class notice also advised potential class members that they must affirmatively opt into the class to benefit from the lawsuit and that, if successful, Class Counsel would seek approval of at most a five percent attorney's fee award to be deducted from any class recovery. Am. Proposed Class Notice at 1, 4-5, 6, Common Ground ECF No. 24-1. The notice similarly stated that Class Counsel's fee request might be reduced depending on class participation and that the fee ultimately would be determined by the court subject to a lodestar cross-check. Id. at 6. In response, 130 QHP issuers opted into the Common Ground class. Health Republic ECF No. 84-1 ¶ 17.

Meanwhile, other risk corridors cases moved through the litigation process, with Moda Health being the first to reach and be granted summary judgment. See Moda Health Plan, Inc. v. United States, 130 Fed.Cl. 436 (2017). The favorable decision in Moda was in part a credit to Class Counsel's work in Health Republic, as it relied extensively on the court's decision denying the Government's request to dismiss Health Republic's Section 1342 claim. See generally id. (citing with approval Health Republic Ins. Co., 129 Fed.Cl. at 770-72). The Government appealed the decision in Moda Health, and pending resolution of that and other related appeals, the court stayed further proceedings in the instant cases. Order, Health Republic ECF No. 62; Order, Common Ground ECF No. 9. The stays lasted approximately three years.

With Health Republic and Common Ground stayed, Class Counsel turned to filing amicus briefs on behalf of Health Republic, Common Ground, and additional parties in the United States Court of Appeals for the Federal Circuit. Health Republic ECF No. 84 at 12-13 (citing Health Republic ECF No. 84-1 ¶ 22). The Federal Circuit subsequently ruled in favor of the Government in each risk corridors appeal. See Me. Cmty. Health Options v. United States, 729 Fed.Appx. 939 (Fed. Cir. 2018); Moda Health Plan, Inc. v. United States, 892 F.3d 1311 (Fed. Cir. 2018); Land of Lincoln Mut. Health Ins. Co. v. United States, 892 F.3d 1184 (Fed. Cir. 2018). A divided Federal Circuit later denied the motion for rehearing en banc in Moda Health, with Judge Wallach and Judge Newman dissenting. Moda Health Plan, Inc. v. United States, 908 F.3d 738 (Fed. Cir. 2018). In his dissent, Judge Wallach cited several times Class Counsel's amicus submissions on behalf of Professor Kate Bundorf and other healthcare economists, as well as Health Republic and Common Ground. See id. at 747-48 (Wallach, J., dissenting).

In the subsequent Supreme Court proceedings, Class Counsel continued to work to assist the QHP issuers in the risk corridors appeals for the...