In re Managed Care Litigation

• Decision Date: 12 December 2002
• Docket Number: No. 00-1334-MD.,No. 1334.,1334.,00-1334-MD.
• Citation: 236 F.Supp.2d 1336
• Parties: In re: MANAGED CARE LITIGATION This Document Relates to Provider Track Cases
• Court: U.S. District Court — Southern District of Florida

236 F.Supp.2d 1336

In re: MANAGED CARE LITIGATION

This Document Relates to Provider Track Cases

No. 1334.

No. 00-1334-MD.

United States District Court, S.D. Florida, Miami Division.

December 12, 2002.

ORDER GRANTING PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION

MORENO, District Judge.

THIS MATTER came before the Court upon Plaintiffs' Motion for Preliminary Injunction and Supporting Memorandum of Law (D.E.# 1702), filed on November 5, 2002, Supplement to Provider Plaintiffs' Motion for Preliminary Injunction (D.E.# 1753), filed on November 20, 2002, and Plaintiffs' Reply and Amended Motion for Preliminary Injunction (D.E.# 1760), filed on December 2, 2002.

THE COURT has considered the motions, responses and the pertinent portions of the record, and being otherwise fully advised in the premises, it is

ADJUDGED that the Motion is GRANTED. Accordingly, pursuant to the All Writs Act, 29 U.S.C. § 1651(a), the Court ENJOINS CIGNA, its attorneys John Harkins and the firm of Harkins and Cunningham, and any party acting in concert with CIGNA, from proceeding in any manner with the proposed settlement that has been "preliminarily" approved in the Kaiser et al v. CIGNA Corp. et al, Civil Action No. 02-1179-GPM, United States District Court for the Southern District of Illinois, without the express approval of this Court, and from contacting in any way the members of the class certified by this Court.

I. Background

28 U.S.C. § 1407 authorizes the creation of the Judicial Panel on Multidistrict Litigation ("JPML") to determine, when civil actions involving one or more common questions of fact are pending in different districts, whether such actions should be consolidated or coordinated for pretrial proceedings. Factors relevant in the JPML decision are whether transfers for such proceedings will be for the convenience of the parties and witnesses and will promote the just and efficient conduct of such actions. 28 U.S.C. § 1407(a). Multidistrict litigation is also subject to a special set of Rules of Procedure. See Fed. R. Proc. J.P.M.L. ("MDL Rules").

The JPML consolidated various actions brought by providers against the eight managed care insurance companies defendants on April 13, 2000.¹ On October 23, 2000, the JPML consolidated additional MDL actions pending before various courts into MDL 1334 because they all involve common questions of fact concerning whether defendants — either singly or as part of a conspiracy — implemented certain policies, which unlawfully interfered with health care providers' delivery of care to their patients. The JPML determined that:

transfer to a single district under Section 1407 has the salutary effect of placing all the related actions before a single judge who can formulate a pretrial program that: 1) allows pretrial proceedings with respect to any non-common issues to proceed concurrently with pretrial proceedings on common issues, In re Multi-Piece Rim Products Liability Litigation, 464 F.Supp. 969, 974 (Jud. Pan.Mult.Lit.1979); and 2) ensures that pretrial proceedings will be conducted in a manner leading to the just and expeditious resolution of all actions to the overall benefit of the parties.

In re Managed Care Litigation, 2000 WL 1925080 (Jud.Pan.Mult.Lit.2000). This Court has been managing the consolidated case for over two years now. Orders on several major issues have been rendered, most notably an order granting class certification status to the Provider Plaintiffs, entered on September 26, 2002.²

II. The Current Dispute

This Court first learned of the current dispute on November 5, 2002, when Plaintiffs filed their first Motion for Preliminary Injunction requesting that this Court enjoin CIGNA, and those acting in concert with CIGNA, from pursing settlement of the claims at issue in this action in any other forum without the express approval and involvement of this Court. At that time, CIGNA was apparently involved in a parallel Illinois state court class action and was participating in settlement negotiations that may have had an impact on this multidistrict litigation.³ The plaintiffs in the Illinois state court case moved to enforce a settlement agreement they had reached with CIGNA. That motion prompted the action by Plaintiffs in this Court to prevent the settlement from being enforced.

Since that initial motion was filed, however, much activity has occurred in both state and federal courts in Illinois that now renders the initial dispute moot. First, on November 22, 2002, Illinois state court plaintiffs' counsel amended the complaint to create federal jurisdiction and to state for the first time claims for RICO violations, conspiracy to commit RICO violations unjust enrichment, prompt pay violations and ERISA claims.⁴ The amended complaint also changed the class definition, even though the smaller class of PPO only providers had been certified for approximately 18 months, so that it encompasses the entire class this Court had already certified on September 26, 2002.

On Monday, November 25, 2002, at 10:38 a.m., CIGNA removed the case to federal district court, where it became Timothy N. Kaiser, M.D., et al v. CIGNA Corp., Civil No. 02-1179-GPM (S.D.Ill.)("Kaiser"). That afternoon, the case was reassigned to Judge Murphy.

On Tuesday, November 26, 2002, at 9:11 a.m., CIGNA and the Illinois Plaintiffs filed a settlement agreement dated November 25, 2002, and a motion requesting preliminary approval of the settlement and conditional certification of a settlement class. The motion did not reveal to the Judge the fact that the requested class encompassed a class previously certified by this Court, the pendency of the Injunction Motion, or the imminent injunction hearing (scheduled for December 3, 2002). That same day, at 10:05 a.m., Judge Murphy conducted a preliminary settlement approval hearing, and granted preliminary approval of the settlement by 10:25 a.m. The settlement purports to settle, among other things, RICO claims, conspiracy claims, and slow pay claims that were not even part of the lawsuit until November 22, 2002.

Plaintiffs have now filed an amended motion outlining the activities since November 22, 2002, and request an injunction which would have the ultimate effect of enjoining an action in a fellow federal court.

III. Analysis

A. Federal Courts Power to Enjoin Parties Before It

The All Writs Act, 28 U.S.C. § 1651(a), confers "extraordinary powers" upon federal courts. See ITT Community Dev. Corp. v. Barton, 569 F.2d 1351 (5th Cir. 1978). The Act provides: "the Supreme Court and all courts established by this Act of Congress may issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law." 28 U.S.C. § 1651(a). With respect to this Act, the Supreme Court has emphasized that "`a federal court may avail itself of all auxiliary writs as aids in the performance of its duties, when the use of such historic aids is calculated in its sound judgment to achieve the ends of justice entrusted to it.'" United States v. New York Tel. Co., 434 U.S. 159, 98 S.Ct. 364, 54 L.Ed.2d 376 (1977)(quoting Adams v. United States ex rel. McCann, 317 U.S. 269, 63 S.Ct. 236, 87 L.Ed. 268 (1942)).

While these powers are extraordinary, they are also "firmly circumscribed." ITT Community, 569 F.2d at 1358. The scope of a federal court's power under the All Writs Act depends on the nature of the case before the court and the legitimacy of the ends sought to be achieved through the exercise of the power. See In re Lease Oil Antitrust Litigation, 48 F.Supp.2d 699 (S.D.Tx.1998). A court may not rely on the Act to enjoin conduct that is "not shown to be detrimental to the court's jurisdiction," instead, any order under the Act must be "directed at conduct which, left unchecked, would have had the practical effect of diminishing the court's power to bring the litigation to its natural conclusion." ITT Community Dev. Corp., 569 F.2d at 1359.

Thus, even though the powers under the Act are in general narrowly circumscribed, the Act frequently enables a court to issue preliminary orders which will quell a threat to the proper exercise of its jurisdiction.

Several district courts have determined that a federal court's inherent power under the All Writs Act allows it to enter an injunction which would have preclusive effect on a state court's action, where the possibility existed that the defendants would attempt to reach an inadequate or collusive settlement in the state court proceeding and "settle on the cheap." In re Lease Oil Antitrust Litigation, 48 F.Supp.2d 699 (S.D.Tx.1998); Reynolds v. Beneficial Nat'l Bank, 288 F.3d 277, (7th Cir.2002). This is so even in the face of the Anti-Injunction Act which explicitly prohibits federal courts from enjoining state courts unless one of three narrow exceptions are met.

Clearly, the situation facing this Court is different than if it were presented with the original dispute, that is, to enjoin a state court proceeding. The caselaw is sparse, if not non-existent in situations where part of a consolidated MDL federal case was settled in a different federal court, because of a loop-hole in 28 U.S.C. § 1407 and the MDL Rules. This Court is hard-pressed to believe that counsel for CIGNA is the first to imagine these maneuvers to avoid a MDL Court's jurisdiction, yet that appears to be the case.

Plaintiffs claim In re Lease Oil is instructive. There, multiple related law suits were brought against a number of oil companies in both state and federal court. One of the oil company defendants entered into a purported "global settlement agreement" with the plaintiffs in one of the state court actions that released all federal and state law claims pending against that defendant. In re Lease Oil, 48 F.Supp.2d. at 701. Shortly thereafter, and while the JPML was considering whether all of the federal actions should be consolidated in one court for coordinated...