In re Blue Cross Blue Shield Antitrust Litig.

• Decision Date: 05 April 2018
• Docket Number: Master File No.: 2:13–CV–20000–RDP,MDL NO.: 2406
• Citation: 308 F.Supp.3d 1241
• Parties: IN RE: BLUE CROSS BLUE SHIELD ANTITRUST LITIGATION This document relates to all cases.
• Court: U.S. District Court — Northern District of Alabama

308 F.Supp.3d 1241

IN RE: BLUE CROSS BLUE SHIELD ANTITRUST LITIGATION

This document relates to all cases.

Master File No.: 2:13–CV–20000–RDP

MDL NO.: 2406

United States District Court, N.D. Alabama, Southern Division.

FILED April 5, 2018

MEMORANDUM OPINION SECTION 1 STANDARD OF REVIEW AND SINGLE ENTITY DEFENSE

R. DAVID PROCTOR, UNITED STATES DISTRICT JUDGE

I. Introduction

As the Supreme Court has observed, "the ‘central evil addressed by Sherman Act § 1’ is the ‘elimin[ation of] competition that would otherwise exist.’ " Am. Needle, Inc. v. Nat'l Football League , 560 U.S. 183, 195, 130 S.Ct. 2201, 176 L.Ed.2d 947 (2010) (quoting Areeda & Hovenkamp ¶ 1462b, at 193–194).

Currently before the court are (1) the parties' respective motions for partial summary judgment on the standard of review applicable to Plaintiffs' claims under Section 1 of the Sherman Act, 15 U.S.C. § 1 (Docs. # 1348, 1350, 1353), and (2) Subscriber Plaintiffs' motion for partial summary judgment on Defendants' "single entity" defense. (Doc. # 1434).¹ The motions have been fully briefed. (Docs. # 1431, 1432, 1435, 1551, 1552, and 1554). And, the parties have conducted discovery that the court found necessary before deciding the appropriate standard of review for the Sherman Act claims. See In re Blue Cross Blue Shield Antitrust Litig. , 26 F.Supp.3d 1172, 1186–87 (N.D. Ala. 2014). See also Nat'l Bancard Corp. (NaBanco) v. VISA U.S.A., Inc. , 779 F.2d 592, 596 (11th Cir. 1986).

II. Relevant Undisputed Facts

The facts set out in this opinion are gleaned from the parties' submissions of facts claimed to be undisputed, their respective responses to those submissions, and the court's own examination of the evidentiary record. All reasonable doubts about the facts have been resolved in favor of the nonmoving party. See Info. Sys. & Networks Corp. v. City of Atlanta , 281 F.3d 1220, 1224 (11th Cir. 2002). These are the "facts" for summary judgment purposes only. They may not be the actual facts that could be established through live testimony at trial. See Cox v. Admr. U.S. Steel & Carnegie Pension Fund , 17 F.3d 1386, 1400 (11th Cir. 1994). Some familiarity with the Blue Cross and Blue Shield organizations is presumed.

A. The History of Blue Cross and Blue Shield Organization

Nearly one hundred years ago, Justice Holmes reminded us that a "page of history is worth volumes of logic." N.Y. Trust Co. v. Eisner , 256 U.S. 345, 349, 41 S.Ct. 506, 65 L.Ed. 963 (1921). In order to properly assess Plaintiffs' claims and Defendants' arguments, the court begins with a discussion of the history of the Blue Cross and Blue Shield organization and the trademarks (the "Blue Marks").²

During the Great Depression, the majority of the population was medically underserved because most people simply could not afford hospital and medical care. (Docs. # 1349 at 11; 1431 at 14; 1435 at 10, n. 4).³ In response, local hospitals and medical societies developed prepaid plans to serve Americans' healthcare needs in local areas. (Docs. # 1349 at 11; 1431 at 14; 1435 at 10). On occasion, a subscriber prepaid at one hospital but desired services from a different hospital at the time of illness. To remedy this problem, multi-hospital plans became the norm. (Docs. # 1349 at 11; 1431 at 15; 1435 at 11).

By 1939, the American Hospital Association ("AHA") issued "Standards for Non–Profit Hospital Service Plans." (Doc. # 1350–13). Under these standards, approval by the AHA's Commission on Hospital Service gave a Plan "permission to identify the plan by using the seal of the American Hospital Association superimposed upon a blue cross." (Docs. # 1350–13 at 5–6; Doc. # 1353–19 at 6). The approval program for Blue Cross Plans was controlled by the Blue Cross Commission.

(Doc. # 1353–5 at 11–12). The AHA standards discouraged the establishment of new Plans where the community was already being "adequately served by existing Blue Cross Plans." (Doc. # 1353–5 at 14). The Blue Cross Commission promoted one Plan per service area to reduce administrative costs through economies of scale, as well as to reduce health care costs by obtaining participation of hospitals on more favorable terms to the Plans. (Doc. # 1431–29 at 13–15).

The American Medical Association ("AMA") also approved the concept of prepayment plans, and promulgated approval standards for such plans. (Docs. # 1349 at 12; 1431 at 15; 1435 at 13). The AMA set up the Associated Medical Care Plans ("AMCP") "to administer the approval program" for Blue Shield Plans. (Doc. # 1353–7 at 84–85). Medical care plans that met the AMA/AMCP's standards likewise could use a blue shield emblazoned with a caduceus. (Docs. # 1353–20 at 16; 1431 at 15; 1435 at 13).

The taxation of excess profits and the freezing of wage rates during World War II stimulated employer participation in paying the cost of hospitalization and other medical protection for employees. This change enabled employers to give a small wage increase to their employees at very little net cost to themselves by paying part or all of the cost of group health insurance. (Doc. # 1353–4 at 76). After the war, the Taft–Hartley Act established health benefits as a condition of employment (Doc. # 1353–7 at 93), and the National Labor Relations Board ruled that health insurance was "a mandatory subject of collective bargaining." Cross, W.W., & Co. , 77 N.L.R.B. 1162 (1948).

In 1947, in an effort to better compete with commercial insurance companies for employer-sponsored plans, Plans started experimenting with syndicates. (Doc. # 1353–7 at 94). Under these arrangements, a Plan in a state where a company's home office was located negotiated benefits at a certain price. (Id. ). Plans in other regions or states where the company had operations were given the details of the arrangement, and those Plans could choose to participate in the arrangement. (Id. ). The "Home" Plan guaranteed full delivery to the company and accepted all or part of the underwriting risk, depending on the cooperating Plans' agreed participation. (Id. ). "Within five years, some 250 syndicates were providing coverage to about 1.2 million people." (Doc. # 1353–7 at 94). By working together, Plans were able to service national accounts, including the Federal Employees Health Benefit Program. (Doc. # 1353–1 at 16; 1431 at 18; 1435 at 17).

In 1972, the AHA transferred ownership of the Blue Cross Marks to the Blue Cross Association. (Doc. # 1349–1 at 32). On a separate track, the AMA–sponsored AMCP changed its name to the Blue Shield Medical Care Plans, then it became the National Association of Blue Shield Plans, and then later the Blue Shield Association. (Doc. # 1349–1 at 32–33).

At some point in the 1970s, the Blue Cross and Blue Shield Associations concluded that the Blue System needed cohesive national unity, which they believed could be achieved by working together. (Doc. # 1353–55 at 2). The staffs of the two associations began to consolidate in 1977 or 1978 (Doc. # 1349–1 at 33), but the associations did not legally merge until 1981 or 1982. (Id. ). The associations merged in order to reduce duplication, increase efficiency, reduce administrative costs, enjoy economies of scale, and achieve greater coherence in the Blue Cross and Blue Shield system. (Doc. # 1353–10 at 80). At that time, the Blue Cross and Blue Shield names and Marks were brought under the control of one organization, the Blue Cross and Blue Shield Association ("the Association"), which was governed by its Member Plans. (Doc. # 1352–43 at 3).

By the early 1980s, the Blue System was suffering from declining reserves, increasing financial instability, decreasing customer satisfaction, and declining business volume. (Doc. # 1349–7 at 9–24). According to the 1982 Long–Term Business Strategy, the Blue Plans viewed "collective strength" as their "only real defense" against business declines. (Doc. # 1349–7 at 23–24).

B. History of the Blue Cross and Blue Shield Marks

In 1934, the St. Paul hospital Plan began using a blue cross symbol. (Docs. # 1349 at 11; 1431 at 15; 1435 at 11). The first use of the Blue Shield Service Mark was by the Western New York Plan, located in Buffalo, New York, in 1939. (Doc. # 1350–35 at 2). Other Plans began using these same symbols as well. (Id. ; Docs. # 1349 at 11; 1431 at 15; 1435 at 12).

Both the St. Paul and Buffalo Plans acquiesced in, and even encouraged, other Plans to use the Cross and Shield Marks during this time period. (Docs. # 1349 at 11; 1431 at 15; 1435 at 12). The St. Paul Plan allowed Plans in every bordering state (North Dakota, South Dakota, Wisconsin, and Iowa) to use the Blue Cross Marks. (Doc. # 1353–4 at 29–30). The Buffalo Plan allowed Plans in Syracuse and Rochester (locations close to Buffalo) as well as other Plans in New York to use the Blue Shield Mark. (Doc. # 1353–5 at 38).⁴

Between 1939 and 1947, the Shield Mark was used by various organizations for intrastate non-profit prepaid medical plans. (Id. ). In 1946, the Commission of Associated Medical Care Plans was formed by certain medical plans. (Doc. # 1350–35 at 2). The Blue Shield Medical Care Plans is the successor to AMCP. (Doc. # 1432 at 15). On December 13, 1947, the Blue Shield Medical Care Plans (the "National Organization") formally adopted the Shield Mark as the official service mark for the Organization. (Docs. # 1350–35 at 2; 1353–48). Thereafter, in 1950, Blue Shield Medical Care Plans applied for federal registration of the Blue Shield Marks. (Docs. # 1353–46; Doc. # 1353–48). The Blue Shield Medical Plans had permission from the first user, the Buffalo Plan, to apply for registration. (Docs. # 1353–101; 1436–11 at 135–40). After the application for federal registration, on December 1, 1952, the users of the Shield Mark entered into an Agreement (the "1952 Agreement") relating to the Collective Service Mark "Blue Shield." (Id. ; Doc. # 1352–227 at 24). Although the Plans "recogni[zed] that the words ‘Blue Shield’ and the identifying symbol are the...