PART ONE: Insurance Class Action Secrecy REVERSED. Hang on; this may be only a part of the story of this decision, but it is a LONG part. We'll discuss the background of this case first.
The background.
Blue Cross Blue Shield of Michigan is a huge player in health insurance plans in Michigan. With over 60% of the market, it can help many people. Or it can allegedly fix prices.
By 2007, or so the United States Department of Justice alleged in a complaint, Blue Cross initiated a "price-fixing scheme." Blue Cross insisted on either one of two kinds of agreements with Michigan hospitals. One was an "MFN" agreement, in which "Blue Cross agreed to raise its own reimbursement rates for each hospital's services, so long as the hospital agreed to charge other commercial health insurers rates at least as high as the hospital charged Blue Cross."
The other was an "MFN-plus agreement." Under that second kind of agreement, "Blue Cross agreed to pay higher rates to each hospital so long as the hospital agreed to charge even higher rates -- up to 40% higher, according to DOJ's complaint -- to other commercial health-insurers."
Blue Cross's two plans brought results. "Few if any of the hospital systems in Michigan can afford to turn away an insurer that brings with it more than half of the privately insured patients in Michigan." Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., Nos. 15-1544/1551/1552, ___ F.3d ___, 2016 WL 3163073, at *1 (6th Cir. June 7, 2016).
DOJ's lawsuit soon attracted class action lawsuits filed on behalf of individuals who alleged that they and their putative classes of Michigan hospital patients were damaged by the increased fees which Blue Cross allegedly caused Michigan hospitals to charge for medical services. "Thus, the effect of Blue Cross's market power was not to lower its customers' rates, as typically advertised. Instead the effect was to raise them, for Blue Cross's customers and everyone else -- while preserving or expanding Blue Cross's market share." Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., Nos. 15-1544/1551/1552, ___ F.3d ___, 2016 WL 3163073, at *1 (6th Cir. June 7, 2016).
The consolidated class action lawsuits ultimately resulted in secrecy agreements which were confirmed by secrecy orders, and an overall order approving a health insurance class action settlement.
This article is in two parts. This first part addresses the secrecy orders in this case which the Sixth Circuit reversed. The second part will address the Sixth Circuit's rejection and remand of the lower court's order approving the insurance class action settlement.
Part 1. The Secrecy of the Health Insurance Class Action Settlement.
Plaintiffs' class counsel attached 90 exhibits to their motion for class certification. All of it was filed in the Court file under seal.
Blue Cross attached 42 exhibits to its brief opposing the class action certification. All of these too were filed in the Court file under seal.
Later, Blue Cross filed a motion to exclude the plaintiffs' class action expert's "report and testimony, attaching his report and 34 other exhibits." All of these materials were also filed under seal. Parenthetically, the settlement provided that the expert would be paid $2 Million from the class action settlement for his sealed report. Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., Nos. 15-1544/1551/1552, ___ F.3d ___, 2016 WL 3163073, at *4 (6th Cir. June 7, 2016).
Ultimately, the parties requested that the District Court seal certain pleadings plus 194 exhibits in the Court file, and the District Court entered the requested sealing orders during the course of approving the parties' proffered settlement.
Objectors who were not class members argued that their lack of access to the Court record, particularly to the record of materials upon which the class action plaintiffs settled with Blue Cross, deprived them of the ability to evaluate the settlement. A "group of 26 self-insured businesses with health plans administered by Blue Cross (a group we call the 'Varnum Group') also sought to unseal the court record by means of a motion to intervene for that limited purpose." The district court approved the proposed settlement and the secrecy of the sealed materials, and denied the motion to intervene. Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., Nos. 15-1544/1551/1552, ___ F.3d ___, 2016 WL 3163073, at *3 (6th Cir. June 7, 2016).
The Sixth Circuit reversed the trial court's secrecy rulings. To the contrary, the Sixth Circuit held that the District Court "abused its discretion when, at the parties' behest, it sealed from public view most of the court filings and exhibits that underlay the proposed settlement in this case." Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., Nos. 15-1544/1551/1552, ___ F.3d ___, 2016 WL 3163073, at *3 (6th Cir. June 7, 2016).
Without necessarily ruling on any of the secrecy stipulations and secrecy orders entered with regard to discovery in this case, the Sixth Circuit pointedly noted that there is a great difference between discovery protective orders, and orders to seal court records entered upon adjudication. Unlike "a mere protective order [which] restricts access to discovery materials," an order adjudicating the case and sealing materials in the Court file affects the public interest. Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., Nos. 15-1544/1551/1552, ___ F.3d ___, 2016 WL 3163073, at *5 (6th Cir. June 7, 2016). There is in other words a presumption against sealing Court files and in favor of public disclosure because keeping Court files open to the public is infected with a public interest.
In the "adjudicative" stage, the public's strong interest is in having access to the Court record. "That interest rests on several grounds," said the Sixth Circuit, and none was addressed either the parties or by the trial court in this case. The grounds for the public's interest, said the Sixth Circuit, are:
- The litigation's result;
- The "conduct giving rise to the case," and
- "[I]n any of these cases, the public is entitled to assess for itself the merits of judicial decisions."
Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., Nos. 15-1544/1551/1552, ___ F.3d ___, 2016 WL 3163073, at *3 (6th Cir. June 7, 2016) (emphasis added).
Further, "[t]he burden of overcoming that presumption [of openness as to Court records] is borne by the party that seeks to seal them." This requires only the most compelling reasons. Further, those reasons must be articulated "'in detail, document by document,'" with legal citations. Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., Nos. 15-1544/1551/1552, ___ F.3d ___, 2016 WL 3163073, at *3 (6th Cir. June 7, 2016). The parties all sought to seal the Court records in this case. None of the parties met their burdens.
Nor did the District Court meet its own duties before it entered orders sealing materials in the Court file in the course of approving the parties' class action settlement. Before a District Court can properly enter such orders, it must set forth its "specific findings and conclusions," regardless of whether any party objects to the sealing. A District Court's failure to set forth its detailed reasons for sealing the Court file before it enters its orders sealing the Court file "is itself grounds to vacate an order to seal." Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., Nos. 15-1544/1551/1552, ___ F.3d ___, 2016 WL 3163073, at *4 (6th Cir. June 7, 2016).
As noted, the Sixth Circuit reversed the District Court's sealing orders which the District Court entered during the course of its order adjudicating the class action settlement with approval. However, the Sixth Circuit did not base its holding simply on the lower court's failure to state its detailed reasons for sealing. The Sixth Circuit examined the record. It noted that among other materials in the Court file which the District Court sealed from public view were "the Plaintiffs' Amended Complaint, the Plaintiffs' Motion for Class Certification and Blue Cross's Response," and a total of 194 exhibits. Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., Nos. 15-1544/1551/1552, ___ F.3d ___, 2016 WL 3163073, at *4 (6th Cir. June 7, 2016). The District Court accepted the bases for sealing these materials which the parties put before the Court, reasons which "were brief, perfunctory, and patently inadequate." According to the Sixth Circuit, the parties and the District Court in this case "conflated" discovery protective orders with sealing a Court file as a part of a Court's adjudication of the case. The class plaintiffs, for example, asserted that sealing was proper simply because Blue Cross or a third party designated the materials as confidential.
This in short is not a proper standard for sealing a Court file when a case is adjudicated. Whether or not parties can properly designate anything and everything "confidential" during discovery does not have any bearing when a case is adjudicated. Parties do not get to seal the Court file simply because they wish it so:
One can only conclude that everyone in the district court was mistaken as to which standard to apply. But one point is unmistakable: on the showings set forth in this record, every document that was sealed in the district court was sealed improperly.
Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., Nos. 15-1544/1551/1552, ___ F.3d ___, 2016 WL 3163073, at *4 (6th Cir. June 7, 2016).
The Sixth Circuit accordingly reversed and told the parties and the District Judge to do it again if they wanted to seal the Court file again in this insurance class action case. It is well worth noting that although this case involves a health insurance class action settlement, the supposed justifications advanced by counsel and accepted by the trial Court are often found in many other types of insurance -- and other -- class action lawsuits.
To be continued…..
Please Read The Disclaimer. ©2016 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with Supplements). You are invited to visit the author's website here. All rights reserved.
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