In re Blue Cross Blue Shield Antitrust Litig.

• Decision Date: 21 December 2016
• Docket Number: Master File No. 2:13–CV–20000–RDP,MDL No. 2406
• Citation: 225 F.Supp.3d 1269
• Parties: IN RE: BLUE CROSS BLUE SHIELD ANTITRUST LITIGATION
• Court: U.S. District Court — Northern District of Alabama

225 F.Supp.3d 1269

IN RE: BLUE CROSS BLUE SHIELD ANTITRUST LITIGATION

Master File No. 2:13–CV–20000–RDP

MDL No. 2406

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

Signed December 21, 2016

MEMORANDUM OPINION

This document relates to both tracks

R. DAVID PROCTOR, UNITED STATES DISTRICT JUDGE

I. Introduction

This case is before the court on five Motions to Dismiss (e.g. , Docs. # 208, 210, 211, 212, 213, Case No. 2:12–cv–02169–RDP) that have been filed by nine of the thirty-eight Defendant Blue Plans¹ (collectively referred to as "Moving Defendants"). In their motions, these nine Defendants contest personal jurisdiction over them with respect to the actions filed in the Northern District of Alabama ("Northern District") and contend venue is improper in the Northern District for these actions.² The other twenty-nine Blues have not challenged personal jurisdiction or venue. The motions are fully briefed. (See, e.g. , Docs. # 209–13, 218, 220–22, 227, Case No. 2:12–cv–02169–RDP; Docs. # 369, 374–77, Case No. 2:12–cv–02532–RDP). After careful review, and with the benefit of oral argument from the parties, the court concludes that Moving Defendants' motions to dismiss are due to be denied.

II. Relevant Factual Allegations from Provider Plaintiffs' and Subscriber Plaintiffs' Master Complaints

In their operative complaint, Provider Plaintiffs assert several grounds for the court's personal jurisdiction over Defendants. (Doc. # 236 at ¶¶ 12–13, Case No. 2:13–cv–20000–RDP). First, they claim that Defendants are subject to the court's personal jurisdiction under Section 12 of the Clayton Act because they "transact business in this [d]istrict." (Id. at ¶ 13). Second, they contend that the court may exercise personal jurisdiction over Defendants under the conspiracy theory of jurisdiction because (1) Defendants have participated in a conspiracy, and (2) at least one co-conspirator, Blue Cross and Blue Shield of Alabama ("BCBS–AL"), has committed overt acts in furtherance of the conspiracy within Alabama. (Id. at ¶¶ 12–13). Third, they claim that all Defendants have maintained minimum contacts with Alabama by paying health care entities and individuals that provide services within Alabama. (Id. at ¶ 13).

In their consolidated complaint, Provider Plaintiffs allege that Defendants have violated various federal and state competition laws, including the Sherman Act, by agreeing to allocate geographic service areas between Blue Cross and Blue Shield entities (or plans) ("Blue Plans"), fix prices for certain products and services available from health care providers, and boycott all health care providers who reside outside of a Blue Plan's allocated geographic service area. (See, e.g. , id. at ¶¶ 4, 169, 229). Specifically, they allege that in September 1982 the Board of Directors for the Blue Cross Blue Shield Association³ ("BCBSA" or "Association") adopted a Long Term Business Strategy, through which "Defendants agreed not to compete with each other." (Id. at ¶ 187). The Blue Plans agreed to "centralize the ownership of their trademarks and trade names" and to ensure that by the end of 1985 "each state would only have one Blue [Plan]." (Id. at ¶¶ 188–89).

According to Provider Plaintiffs, all of the Blue Plan Defendants (including Moving Defendants) held a series of meetings in 1987, during which they agreed to sell insurance under the Blue Cross and Blue Shield trademarks in exclusive geographic service areas. (Id. at ¶ 190). Thereafter, each Blue Plan entered into Blue Cross License Agreements and Blue Shield License Agreements (collectively referred to as "License Agreements") with the Association. (Id. at ¶ 192). These License Agreements prevent a Blue Plan or its subsidiaries from competing under the Blue Cross and Blue Shield trademarks outside of a designated geographic service area. (Id. at ¶ 196). Moreover, the License Agreements dictate that the entity owning a Blue Plan for a certain geographic service area must obtain at least 80 percent of its annual revenue generated within that designated service area from services offered under the Blue Cross and Blue Shield trademarks. (Id. at ¶ 197).

Additionally, the License Agreements mandate that Blue Plans participate in various BCBSA national programs, including the BlueCard Program and the National Accounts Program. (Id. at ¶ 229). Pursuant to the National Accounts Program, Blue Plans agree, with limited exceptions, not to solicit services from or contract with health care providers outside of their designated geographic service areas. (Id. at ¶ 230). If a Blue Plan's member requires health care services while he or she is outside of the Blue Plan's geographic service area, the BlueCard Program allows that member to receive health care services from a provider who has a contract with the Blue Plan that controls that geographic service area. (See id. at ¶ 231). When a health care provider serves a member of a Blue Plan from another geographic service area, the provider submits a claim to the Blue Plan within that geographic service area (called the Host Plan). (Id. at ¶ 236). The Host Plan "prices [the claim] according to contracted provider agreements, then sends an electronic submission" to the member's out-of-area Blue Plan (called the Home Plan). (Id. ). The Home Plan reviews the submitted claim from the Host Plan and sends a disposition to the Host Plan, which is responsible for reimbursing the health care provider. (Id. ).

Provider Plaintiffs allege that BCBS–AL is the thirteenth largest health insurer in the nation and that it would likely offer health care financing in regions other than the state of Alabama but for the territorial restrictions in the License Agreements.⁴ (Id. at ¶ 141). According to Provider Plaintiffs, BCBS–AL has market power throughout Alabama in the health care financing market, with an 86 percent market share in the entire state. (Id. at ¶ 259). They claim that BCBS–AL's reimbursement rates for primary care physicians are so low that many primary care physicians retire because it is not worthwhile for them to continue practicing medicine. (Id. at ¶ 326). Moreover, BCBS–AL prohibits providers from offering similar price terms to other health care insurers. (Id. at ¶ 340). Accordingly, "competition in the state of Alabama has been and continues to be harmed in that the other 36 Blue [ ] [Plans] agree not to enter the Alabama market to complete with Blue Cross Blue Shield of Alabama[,] no matter the circumstances." (Id. at ¶ 346).

Plaintiffs allege that, on at least one occasion, BCBS–AL enforced this price fixing conspiracy against an Alabama hospital when the hospital billed a higher rate to another Blue Plan. According to Provider Plaintiffs' complaint:

[W]hen a hospital in east Alabama billed other Defendant Blues directly for their subscribers, those Blues, including Blue Cross of Minnesota[,] paid for those services at the rates that it normally pays, which are higher than the rates paid by Blue Cross of Alabama. When Blue Cross of Alabama learned of those payments, it then recouped the difference between those higher rates and the Blue Cross of Alabama rates from payments due for services for Blue Cross of Alabama subscribers. Based on information and belief, Plaintiffs allege that Blue Cross of Alabama and the other Blues divided the funds recouped under the procedures established by the Defendant Blues.

(Id. at ¶ 234).

In their operative complaint, Subscriber Plaintiffs point to several grounds upon which this court may assert personal jurisdiction over Defendants. First, Subscriber Plaintiffs rely on Section 12 of the Clayton Act. (Doc. # 244 at ¶ 12A, Case No. 2:13–cv–20000–RDP). Second, they rely on the conspiracy theory of personal jurisdiction because Defendants participated in a conspiracy that injured subscribers in Alabama, and overt acts were committed to further the conspiracy in Alabama. (See id. at ¶ 12A(a)). Third, they contend that Defendants have maintained minimum contacts with Alabama because Defendants have either (1) committed intentional acts that were intended to cause harm in Alabama and actually caused harm in Alabama, or (2) committed intentional acts that they knew were likely to cause injury within Alabama. (See id. at ¶ 12A(b)–(c)). Fourth, they allege that Defendants have maintained minimum contacts with Alabama because they have members in Alabama or they transact business within Alabama. (See id. at ¶ 12A(f)).

With regard to the conspiracies alleged in these cases, Subscriber Plaintiffs contend that in 1982 the Association became the sole owner of the Blue Cross and Blue Shield trademarks after the Blue Cross Association and the Blue Shield Association merged.⁵ (Id. at ¶ 324). According to Subscriber Plaintiffs, BCBSA is actually controlled by the Blue Plans, and its rules and regulations are actually horizontal agreements between the Blue Plans. (Id. at ¶ 344). Through the License Agreements, membership guidelines, and membership standards, the Blue Plans have conspired with each other "to divide the geographic market for health insurance." (Id. at ¶¶ 350–51). Defendants' agreement to allocate geographic markets has resulted in the following harms to the residents of Alabama: (1) a reduction of health insurance companies competing with BCBS–AL for business; (2) unreasonable limitations on entering the Alabama health insurance market; (3) the maintenance and enlargement of BCBS–AL's market power; (4) supra-competitive premiums; and (5) the deprivation of "benefits of free and open competition," including the deprivation of access to a market whose prices have been established in the absence of non-price restraints on competition. (Id. at ¶¶ 571, 573).

In addition, Provider Plaintiffs allege that BCBS–AL is licensed to use the Blue Cross and Blue Shield trademarks and has agreed to conduct business under those brands only in Alabama.⁶ (Id. at ¶ 415). They claim that BCBS–AL has at least a 90 percent market...