Medical Association of Georgia v. Wellpoint, Inc. , 756 F.3d 1222 ( 2014 )

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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 12-14013
________________________
D.C. Docket No. 1:00-md-01334-FAM
In Re: MANAGED CARE, et al.
_____________________________________
MEDICAL ASSOCIATION OF GEORGIA,
CALIFORNIA MEDICAL ASSOCIATION, et al.,
Plaintiffs - Appellants,
versus
WELLPOINT, INC.,
Defendant - Appellee.
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(June 18, 2014)
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Before MARTIN and JORDAN, Circuit Judges, and BAYLSON, * District Judge.
BAYLSON, District Judge:
I. INTRODUCTION
The issue before us is whether the District Court abused its discretion in
finding Appellants in contempt for violating the terms of a prior Settlement
Agreement.
Underlying this overarching issue is a complex, twelve-year-old,
multidistrict litigation; a related multidistrict litigation pending in another federal
district court; and whether the District Court reasonably interpreted the Settlement
Agreement in the first action.
A. MDL 1334
In 2000, a number of physicians and physician associations initiated a group
of class actions against various providers of health plans, which were consolidated
into a multidistrict litigation and assigned to the Southern District of Florida
(“District Court”). In re Managed Care Litig., No. 1:00-md-01334 (S.D. Fla. Apr.
17, 2000) (“MDL 1334”). The parties settled that lawsuit in 2005, resulting in a
Settlement Agreement and an Order issued by the Southern District of Florida
approving that Settlement Agreement.
*
Honorable Michael M. Baylson, United States District Judge for the Eastern District of
Pennsylvania, sitting by designation.
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B. The UCR MDL
In 2009, another group of physicians and physician associations – including
Appellants – filed multiple lawsuits against, Appellee, WellPoint, Inc.
(“WellPoint”), which were consolidated into a multidistrict litigation in the Central
District of California. In re WellPoint, Inc. Out-of-Network “UCR” Rates Litig.,
No. 2:09-ml-02074 (C.D. Cal. Aug. 20, 2009) (“UCR MDL”).
C. The Present Dispute
The present dispute involves the propriety of the District Court’s Order
holding Appellants in contempt and imposing sanctions for the violation of an
injunction. An earlier Order from the District Court barred Appellants from
pursuing their claims in the UCR MDL, because the District Court found that the
claims had been released by the Settlement Agreement reached by the parties in
MDL 1334. When Appellants refused to withdraw those claims as directed, the
District Court held Appellants in contempt and imposed sanctions.
For the reasons stated below, we affirm the judgment of the District Court in
large part, but vacate the Injunction as to Appellants’ ERISA claims insofar as they
hinge on the denial or underpayment of benefits following the Settlement
Agreement’s Effective Date (as defined below), and remand to the District Court
for a determination of which ERISA claims can proceed in view of this opinion
and for reconsideration of the imposition of sanctions.
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II. PROCEDURAL HISTORY
A. MDL 1334
1. MDL 1334 Allegations
In 2000, physicians and physician associations initiated an action in the
Southern District of Florida against a group of healthcare insurance companies,
including WellPoint, on behalf of a nationwide class of physicians. This action
was later consolidated into a multidistrict litigation in April 2000. The class
representatives alleged that these insurance companies engaged in a conspiracy by
means of mail and wire fraud to inflate profits by systematically denying, delaying,
and diminishing payments due to them and that “the conspiracy was conducted
through and implemented by” several means, including “the development and
utilization of automated and integrated claims processing and other systems such
as those generated by” the company Ingenix. 1 MDL 1334 D.E. 1607 ¶ 120. 2
2. Settlement Agreement
In 2005, WellPoint settled the MDL 1334 claims on a national, class-wide
basis, agreeing to pay $198 million to the class and class counsel and promising to
1
Ingenix is a nationwide healthcare information company that sells pricing schedules to
medical providers, healthcare insurers, and others. UCR MDL D.E. 113 (Second Consol. Am.
Compl.) ¶ 116. Ingenix creates its pricing schedules by relying on its database, which compiles
provider charge data regarding various medical procedures throughout the country that it
receives from health insurance companies. Id. ¶ 103-113. The Second Consolidated Amended
Complaint alleges that the conspirators used and manipulated the Ingenix database to
systematically under-reimburse for services. Id. ¶ 114.
2
We adopt the above citation method to differentiate between citations to the two
different MDL dockets. Throughout this opinion, where we cite to page numbers of docket entry
items, we refer to the ECF generated page number.
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make a wide range of changes to its business practices, including changes to the
method used to determine usual, customary, and reasonable (“UCR”) rates. MDL
1334 D.E. 4321 (“Settlement Agreement”) §§ 7, 8.1, 8.2, 9.1, 16. WellPoint
specifically “agree[d] that, to the extent it uses Physician charge data to determine
the usual, reasonable, and customary amount to be paid for services performed by
Non-Participating Physicians, it will not use any internal claims database” that
systematically underprices claims. Settlement Agreement § 7.14(d).
In exchange, the class agreed to release all claims related to the allegations
underlying MDL 1334 once the Settlement Agreement took effect. Section 13.1(a)
of the settlement agreement defines a “released claim” and provides:
[Released Parties shall be released] from any and all causes of action,
judgments, liens, indebtedness, costs, damages, obligations, attorneys’
fees, losses, claims, liabilities and demands of whatever kind or
character (each a “Claim”), arising on or before the Effective Date,
that are, were or could have been asserted against any of the Released
Parties by reason of, arising out of, or in any way related to any of the
facts, acts, events, transactions, occurrences, courses of conduct,
representations, omissions, circumstances or other matters referenced
in the Actions . . . .
Id. § 13.1(a). The next subsection, applicable only to claims against the Blue
Cross Blue Shield Association (“BCBSA”), further provided that:
The Releasing Parties further agree to forever abandon and discharge
any and all Claims that exist nor or that might arise in the future
against BCBSA . . ., which Claims arise from, or are based on,
conduct by any of the Released Parties that occurred on or before the
Effective Date and are, or could have been, alleged in the Complaints,
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whether any such Claim was or could have been asserted by any
Releasing Party on its own behalf or on behalf of other Persons.
Id. § 13.1(b).
The Settlement Agreement further provides:
Each Class Member who has not validly and timely requested to Opt-
Out of this Agreement and each Signatory Medical Society may
hereafter discover facts other than or different from those which he,
she or it knows or believes to be true with respect to the claims which
are the subject matter of the provisions of § 13, but each such Class
Member and each Signatory Medical Society hereby expressly waives
and fully, finally and forever settles and releases, upon the entry of
Final Order and Judgment, any known or unknown, suspected or
unsuspected, contingent or non contingent claim with respect to the
subject matter of provisions of § 13, whether or not concealed or
hidden, without regard to the discovery or existence of such different
or additional facts.
Id. § 13.5(b).
3. Notice to Class Members
The District Court preliminarily approved the settlement, MDL 1334 D.E.
4336, and notice was mailed to potential class members in August 2005. The
notice stated:
IF YOU ARE A PHYSICIAN WHO PROVIDED COVERED
SERVICES TO ANY INDIVIDUAL ENROLLED IN OR
COVERED BY CERTAIN HEALTH CARE PLANS AT ANY TIME
BETWEEN AUGUST 4, 1990 AND JULY 15, 2005 . . . PLEASE
READ THIS NOTICE CAREFULLY.
MDL 1334 D.E. 4608 at 62.
In the section describing the claims released against WellPoint, the notice
stated that they consisted of claims “arising on or before the date that the Court’s
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order approving the settlement becomes final, that are, were or could have been
asserted.” Id. at 65. The next sentence added that certain “claims that exist now or
that might arise in the future” are waived against the Blue Cross and Blue Shield
Association (“BCBSA”). Id. The notice also stated that the District Court would
hold a hearing in which it “will consider whether to enter orders that would prevent
members of the Class and certain other persons, including the Defendants in the
Actions other than WellPoint, from asserting certain claims against WellPoint in
the future.” Id. at 66. The notice further described how to obtain additional
information about the proposed settlement.
4. Approval of Settlement Agreement
In November 2005, one month after the deadline for filing objections or
opting out of the class, the parties filed a joint motion for the court’s final approval
of the settlement. MDL 1334 D.E. 4608. Among other things, the joint motion:
(1) recited the obligation of the insurance companies to change their business
practices, id. at 10-17; (2) asked the District Court to overrule the limited
objections filed by class members, id. at 29-49; and (3) advised the District Court
that one objector was “simply wrong that the release [was] too broad,” id. at 44.
The District Court approved the Settlement Agreement in an Amended
Order issued on January 3, 2006. MDL 1334 D.E. 4684 (the “Injunction”). The
Order enjoined the class members – “Released Parties” under the Settlement
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Agreement – from participating in lawsuits “arising out of or relating in any way to
the Released Claims.” Id. ¶¶ 2, 5, 18. Generally tracking the language in the class
notice, the amended order approving the settlement noted that the agreement
released claims “that exist now or that might arise in the future against BCBSA,”
id. ¶ 6, and released claims against WellPoint “that are, were or could have been
asserted against any of the Released Parties by reason of, arising out of, or in any
way related to” the facts at issue in MDL 1334. Id. ¶ 5. The District Court
retained jurisdiction on “all matters relating to (a) the interpretation,
administration, and consummation of the Settlement Agreement and (b) the
enforcement of the injunctions described.” Id. ¶ 27.
B. UCR MDL
In 2009, Appellants – three medical associations and three physicians, who
had been members of the settlement class in MDL 1334 – joined with other
plaintiffs to file multiple lawsuits against WellPoint regarding alleged
underpayment for the provision of medical services. The Judicial Panel on
Multidistrict Litigation consolidated those lawsuits into the UCR MDL, a separate
multidistrict litigation in California. Plaintiffs filed the First Consolidated
Amended Complaint on November 2, 2009, in which the physicians brought
ERISA claims under § 1132(a)(1)(B), the medical associations brought various
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state law claims, and all plaintiffs brought RICO and antitrust claims. UCR MDL
D.E. 12.
The UCR MDL plaintiffs then filed a Motion for Leave to File a Second
Consolidated Amended Complaint on June 28, 2010. UCR MDL D.E. 113. On
July 12, 2010, the district court granted the plaintiffs’ motion and deemed the
Second Consolidated Amended Complaint filed as of that day. UCR MDL D.E.
124. The Second Consolidated Amended Complaint reiterated the allegations of
the First Amended Consolidated Complaint, setting forth allegations that
WellPoint had engaged in a conspiracy with other managed care companies to
systematically set artificially reduced rates by using the Ingenix database to price
claims, thus under-reimbursing physicians for certain medical services, in violation
of the Sherman Act, ERISA, and various state laws. 3 UCR MDL D.E. 113-1.
Specifically, the Second Consolidated Amended Complaint alleged that:
• Defendants and the Conspirators entered into secret and intentionally
concealed agreements to depress reimbursements for [out-of-network
services or “ONS”]. The conspiracy and illegal conduct result in
invoicing of inflated and improper charges to and out-of-pocket
payments made by and for healthcare providers. The conspiracy and
3
The allegations at issue in MDL 1334 covered a broader range of conduct than the UCR
MDL. Nevertheless, at least some of the allegations in MDL 1334 closely relate to the UCR
MDL allegations currently at issue. For example, in language very similar to the UCR MDL
allegations, the MDL 1334 plaintiffs alleged that WellPoint and others engaged in an “automated
scheme to deny and reduce payments to doctors” that was “conducted through and implemented
by . . . the development and utilization of automated and integrated claims processing and other
systems such as those generated by . . . Ingenix . . . and the configuration and use of such
systems to similarly deny, diminish and delay payments to physicians . . . .” MDL 1334 D.E.
4661 (Third Amended Consolidated Class Action Complaint) ¶¶ 82-83.
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illegal conduct also results in underpayment of healthcare providers
for services rendered … . Id. ¶ 67.
• Plaintiffs’ claims in this case are directed at a secret, illegal agreement
and deceptive scheme involving Defendants and most of the country’s
largest health insurers to systematically under-reimburse for ONS.
During the Relevant Time Period [defined as “1998 to the present,”
id. ¶ 26], the Insurer Conspirators agreed to fix the UCRs used to
reimburse for ONS at artificially low levels. Pursuant to this
agreement, Defendants and their Conspirators knowingly created a
flawed system that uses limited amounts of manipulated data to
artificially depress reimbursement rates for ONS. Id. ¶ 70.
• Unbeknownst to Plaintiffs, healthcare consumers and providers
nationwide, Defendants and the Conspirators have conspired to ensure
that the UCR pricing schedules generated by Ingenix are artificially
low (“False UCRs”). When the Insurer Conspirators then use those
schedules to calculate ONS reimbursements, the resulting payments to
subscribers and providers are artificially low and substantially below
the actual UCR for similar services in the relevant geographic area.
Id. ¶ 72.
• Defendants engaged in price fixing when they agreed with their
Conspirators to utilize precisely the same flawed database to
determine the UCR amounts for out-of-network medical services,
which lead to them paying substantially reduced amounts for services
rendered to their subscribers. Id. ¶ 86.
• The way in which the Ingenix Database has operated and continues to
operate, and the manner in which the Insurer Conspirators utilize the
Ingenix Database, demonstrate that the anticompetitive agreement to
establish False UCRs persists to the present. Id. ¶ 115.
• WellPoint breached its fiduciary duties by failing to disclose the
actual and true reimbursement rules used to pay ONS benefits by
knowingly using inaccurate, flawed and fabricated data from the
Ingenix Database to calculate UCRs, by knowingly delegating their
duty to collect accurate information regarding UCRs to Ingenix
(whom WellPoint knew was collecting inadequate and inaccurate data
regarding UCRs), and by failing to fulfill its obligations of good faith,
due care and loyalty. Moreover WellPoint breached its duties by
manipulating the data it used to pay ONS so as to artificially depress
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the data Ingenix relied upon in creating UCR schedules for ONS
reimbursements. Id. ¶ 178.
• In processing claims of ONS charges, WellPoint is obligated under
ERISA to calculate accurate UCRs and reimburse subscribers
accurately ICRs in a manner consistent with the definition of UCR
used by WellPoint to describe its health plans to its plan subscribers.
WellPoint does not fulfill this obligation because it fails to pay
benefits based on accurate UCRs. Id. ¶ 196.
• The WellPoint-Ingenix Enterprise was formed in 1998, at the time of
the sale of the PHCS database by HIAA to Ingenix,” and “[a]t all
relevant times, the Enterprise was engaged in, and its activities
affected, interstate commerce within the meaning of RICO, 18 U.S.C.
§ 1962(c). Id. ¶ 291.
C. Motion to Enjoin UCR MDL Plaintiffs
WellPoint took the position that both the Settlement Agreement reached in
MDL 1334, and the District Court’s January 3, 2006 Order approving that
Settlement Agreement, barred the UCR MDL plaintiffs from pursuing their claims
in the UCR MDL. WellPoint thus filed a Motion to Enforce the Injunction Against
Physician Plaintiffs in the Southern District of Florida, seeking to enforce that
January 3, 2006 Order against the UCR Plaintiffs. MDL 1334 D.E. 6053.
2. UCR Plaintiffs Ordered to Withdraw Claims
On August 15, 2010, after consideration of WellPoint’s Motion to Enforce
the Injunction, MDL 1331 D.E. 6053, Magistrate Judge Torres issued a Report and
Recommendation (“R&R”), recommending that the District Court grant
WellPoint’s Motion and order the California MDL plaintiffs, including Appellants,
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to withdraw their claims. 4 MDL 1334 D.E. 6116. Judge Torres found that, “as
indicated by the broad release language of the Settlement Agreement, Plaintiffs
have released all of their claims based on WellPoint’s alleged improper UCR
calculations . . . .” Id. at 17. Pursuant to this understanding, Judge Torres also
found that “the RICO and antitrust claims clearly fall within the scope of Released
Claims . . . because they all relate to WellPoint’s conspiracy to systematically
under-compensate the non-participating parties,” id. at 10, and that “Plaintiffs’
ERISA and contractual claims asserted in the UCR [MDL] all pertain to
WellPoint’s practices regarding the fee-for-service claims and the calculation of
UCRs,” or “the very same practices” that were “expressly addressed in the In re
Managed Care Complaints,” id. at 16. Judge Torres also noted that “[i]n no way
does the Release immunize WellPoint from liability against new RICO, antitrust or
contractual violations that arise from a brand new set of events and course of
conduct than the one settled in the MDL Litigation.” Id. at 22.
4
In 2009, Judge Torres issued two related R&Rs, concluding that broad releases in
similar In re Managed Care settlement agreements barred subsequent RICO and antitrust claims.
MDL 1334 D.E. 6022 (R&R on Settling Def. CIGNA’s Mots. to Enforce Injunction); MDL 1334
D.E. 6023 (R&R on Settling Def. CIGNA’s Mot. to Enforce Injunction). Judge Moreno adopted
both of those R&Rs. MDL 1334 D.E. 6032-33. Plaintiffs appealed both Orders but this Court
dismissed those appeals due to lack of appellate jurisdiction. Klay (AMA et al.) v. All
Defendants, No. 09-16261 (11th Cir. June 16, 2010) (per curiam); Klay (Higashi) v. All
Defendants, No. 09-16302-E (11th Cir. Apr. 21, 2010).
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On March 8, 2011, the District Court adopted Judge Torres’ R&R and
ordered the plaintiffs in the UCR MDL to withdraw their claims against WellPoint
within 20 days or else be found in contempt. MDL 1334 D.E. 6190.
A number of the UCR MDL plaintiffs withdrew their claims, but Appellants
did not.
D. Motion to Find Appellants in Contempt and Impose Sanctions
On September 19, 2011, after Appellants and certain other plaintiffs still had
not withdrawn their claims in the UCR MDL, WellPoint moved the District Court
to find Appellants and the other noncompliant plaintiffs in contempt. D.E. 6264.
On October 17, 2011, the UCR MDL plaintiffs filed the Third Consolidated
Amended Complaint. UCR MDL D.E. 274. On January 10, 2012, the District
Court granted WellPoint’s motion, found the noncompliant plaintiffs in contempt,
and scheduled a sanctions hearing. MDL 1334 D.E. 6303. The parties submitted
extensive briefing on the question of sanctions and the propriety of the underlying
finding of contempt. MDL 1334 D.E. 6313, 6316, 6318, 6327, 6328, 6329, 6331,
6334, 6335, 6336. WellPoint sought (1) a coercive sanction against the plaintiffs
and (2) a compensatory sanction for attorney’s fees. The District Court held a
hearing to determine the appropriate sanctions on March 16, 2012. MDL 1334
D.E. 6322, 6324. On July 25, 2012, the District Court entered a final Order of
Contempt and Sanctions, in which it ordered the physician Appellants to pay $100
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and the association Appellants to pay $500 for every month they continued to
violate the order. MDL 1334 D.E. 6340. The court declined to rule on
compensatory sanctions, but noted that it was granting the motion in part and
denying it in part.
E. Present Appeal and Jurisdiction
On July 26, 2012, Appellants filed this appeal, seeking review of the July 25,
2012 Order issuing sanctions against Appellants. Appellants challenge the validity
of the District Court’s July 25, 2012 Order, arguing that the District Court, in its
March 8, 2011 Order, erred in finding that Appellants violated the Injunction.
Thus, we must presently consider both Orders. Appellant Br. at 14-15.
After the filing of the Notice of Appeal, on November 5, 2012, the UCR
MDL plaintiffs filed their Fourth Consolidated Amended Complaint. 5 UCR MDL
D.E. 373. The UCR MDL docket is unclear on which is the operative complaint.
This Court has jurisdiction pursuant to 28 U.S.C. § 1291, which grants us
“jurisdiction of appeals from all final decisions of the district courts.” The District
Court’s July 25, 2012 Order constitutes a final order because it disposed of all
5
On September 5, 2012, the UCR MDL court, the Central District of California, issued
an Order granting in part and denying in part WellPoint and Ingenix’s Motions to Dismiss, and
dismissed the RICO and antitrust claims with prejudice. UCR MDL D.E. 365. Appellants
nevertheless ask this Court to review the Southern District of Florida’s ruling that the Settlement
Agreement released those claims in order to preserve their Ninth Circuit appellate rights as to the
Central District of California’s dismissal. Appellant Br. at 28 n.9. In their Fourth Consolidated
Amended Complaint, Appellants reassert causes of action under federal antitrust and conspiracy
law. UCR MDL D.E. 373.
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issues before it. See MDL 1334 D.E. 6340; Thomas v. Blue Cross & Blue Shield
Ass'n, 594 F.3d 814, 819 (11th Cir. 2010) (“In postjudgment proceedings, a
postjudgment order is final for purposes of section 1291 if it ‘finally settles the
matter in litigation’ by disposing of all issues raised in the motion.’” (quoting
Delaney’s, Inc. v. Ill. Union Ins. Co., 894 F.2d 1300, 1305 (11th Cir. 1990)).
III. THE PARTIES’ CONTENTIONS
A. Appellants’ Contentions
Plaintiffs-Appellants argue that the District Court erred by finding them in
violation of the Injunction and requiring them to dismiss their claims in the UCR
MDL, and thus also erred by holding them in contempt and sanctioning them.
Appellants argue that the District Court Orders constituted legal error since the
claims asserted in the UCR MDL do not constitute Released Claims. Appellants
first contend that a Released Claim must not only arise from the facts at issue and
settled in MDL 1334, but must also have arisen prior to the Effective Date of the
Settlement Agreement. Id. at 21. Appellants tacitly concede that the allegations in
the UCR MDL relate to those of MDL 1334, but they contend that the asserted
claims could not have been brought as part of MDL 1334 and, therefore, did not
arise prior to the Effective Date of the Settlement Agreement. Id. at 13.
Appellants focus specifically on their ERISA claims, which they argue
accrue only once each of the following steps is complete: (1) a provider treats a
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WellPoint plan member, (2) WellPoint plan members or their provider submits an
application of benefits to WellPoint, (3) WellPoint fails to make appropriate
payment, and (4) the member or provider exhausts available administrative
remedies. Id. at 24-25. The UCR MDL Second Consolidated Amended Complaint
alleges some instances where each of these elements took place after the Effective
Date. Id. at 26. Appellants argue that they could not have asserted those ERISA
claims prior to the Effective Date and, thus, those claims do not constitute
Released Claims. Id.
Moreover, Appellants contend that the District Court’s interpretation of the
Settlement Agreement would result in an agreement that releases future claims, in
contravention of public policy. Id. at 14. Appellants argue that Judge Moreno’s
interpretation would bar, in perpetuity, any physician from putting forth any claim
regarding WellPoint’s use of Ingenix to make benefit determinations. Id. at 16.
B. WellPoint’s Contentions
WellPoint asks this Court to affirm the District Court’s Orders because the
Settlement Agreement barred the UCR MDL plaintiffs from pursuing their claims,
which arose out of similar allegations made in MDL 1334. Appellee Br. at 4.
Appellees argue that the Magistrate Judge correctly identified the claims at issue in
the UCR MDL as Released Claims under the terms of the Settlement Agreement,
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and that the District Court acted within its discretion by adopting the R&R. Id. at
16-17.
WellPoint contends that Appellants do not dispute that their claims in the
UCR MDL “aris[e] out of, or in any way relate[ ] to” the matters at issue in MDL
1334, but rather that they merely argue that their claims did not arise prior to the
Effective Date. Id. at 27. In response, WellPoint argues that the Magistrate Judge
correctly observed that Appellants’ arguments “are premised on a conspiracy and
course of conduct that allegedly began in 1998, years before the Effective Date.”
D.E. 6132 (Resp. to Objs. to R&R) at 9-10. WellPoint further argues that
Appellants’ attempt to read into the contract a requirement that a cause of action
must have accrued prior to the Effective Date must fail because the argument lacks
any basis in the contractual language. Rather, according to WellPoint the
Settlement Agreement includes very broad release language, including an
expansive definition of “claim” and language expressly releasing “unknown,”
“unsuspected,” and “contingent” claims – in fact, Appellants released all claims
“of whatever kind or character – “whether or not concealed or hidden.” Appellee
Br. at 34 (quoting Settlement Agreement § 13.5).6
6
WellPoint argues against the import of cases relied on by Appellants to show when
claims accrue because those cases discuss accrual in the statute of limitations context, not in an
effort to interpret contractual language. The Supreme Court recently made clear the distinction
between the accrual of an ERISA cause of action and the applicable statute of limitations.
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Despite Appellants’ efforts to distance their ERISA claims from their
conspiracy allegations, WellPoint argues that those claims arise from the same
alleged course of conduct that underlies all other allegations in both MDLs: that
WellPoint improperly used the Ingenix database to price claims for out-of-network
service. Id. at 45.
IV. ANALYSIS
A. Standard of Review
The propriety of the District Court’s contempt order turns on whether it properly
interpreted the Settlement Agreement. 7 The law is clear that “[p]rinciples
governing general contract law apply to interpret settlement agreements.” In re
Chira, 567 F.3d 1307, 1311 (11th Cir. 2009) (interpreting settlement agreement
under Florida law) (quoting Resnick v. Uccello Immobilien GMBH, Inc., 227 F.3d
1347, 1350 (11th Cir. 2000)). District Courts must construe contracts to give
effect to the parties’ intentions. Accord Solymar Investments, Ltd. v. Banco
Santander S.A., 672 F.3d 981, 991 (11th Cir. 2012) (citing Commerce Nat’l Bank
v. Safeco Ins. Co., 252 So. 2d 248, 252 (Fla. 4th DCA 1971)). This court reviews
Heimeshoff v. Hartford Life & Accident Ins. Co., 134 S. Ct. 604, 610 (2013) (“At the same time,
we have recognize that statutes of limitation do not inexorably commence upon accrual.”).
7
The parties agreed that the Settlement Agreement "and all agreements, exhibits, and
documents relating to [the] Agreement shall be construed under the laws of the State of Florida,
excluding its choice of law rules." Settlement Agreement § 25.
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a district court’s interpretation of contract provisions de novo. Ohio Cas. Ins. Co.
v. Holcim (US), Inc., 548 F.3d 1352, 1356 (11th Cir. 2008).
This Court reviews a district court’s civil contempt order for abuse of
discretion. Riccard v. Prudential Ins. Co., 307 F.3d 1277, 1296 (11th Cir. 2002).
“[W]hen employing an abuse-of-discretion standard, we must affirm unless we
find that the district court has made a clear error of judgment, or has applied the
wrong legal standard.” United States v. Frazier, 387 F.3d 1244, 1259 (11th Cir.
2004; see also Klay v. United Healthgroup, Inc., 376 F.3d 1092, 1096 (11th Cir.
2004) (“A district court abuses its discretion if it applies an incorrect legal
standard, follows improper procedures in making the determination, or makes
findings of fact that are clearly erroneous.” (quoting Martin v. Automobili
Lamborghini Exclusive, Inc., 307 F.3d 1332, 1336 (11th Cir. 2002)).
A district court’s contempt determination must be “supported by clear and
convincing evidence.” Riccard, 307 F.3d at 1296. If the evidence is such that a
reasonable person could find a clear and convincing violation of the Injunction,
this Court must affirm the contempt ruling of a district court. Howard Johnson Co.
v. Khimani, 892 F.2d 1512, 1516 (11th Cir. 1990).
B. The All Writs Act
Federal courts have long recognized a court’s power to effectuate its orders.
The All Writs Act, 28 U.S.C. § 1651(a), provides that “[t]he Supreme Court and all
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courts established by 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.” A federal court thus retains the power “to effectuate and prevent the
frustration of orders it has previously issued in its exercise of jurisdiction otherwise
obtained.” United States v. New York Tel. Co., 434 U.S. 159, 172, 98 S. Ct. 364,
372, 54 L.Ed.2d 376 (1977); see also Henson v. Ciba–Geigy Corp., 261 F.3d 1065,
1068 (11th Cir. 2001) (“[A] district court has the authority . . . to enjoin a party to
litigation before it from prosecuting an action in contravention of a settlement
agreement over which the district court has retained jurisdiction.”); Wesch v.
Folsom, 6 F.3d 1465, 1470 (11th Cir. 1993) (noting that the All Writs Act, 28
U.S.C. § 1651, “empowers federal courts to issue injunctions to protect or
effectuate their judgments”).
Federal courts may invoke the authority conferred by the All Writs Act to
enjoin parties from prosecuting separate litigation to protect the integrity of a
judgment entered in a class action and to avoid relitigation of issues resolved by a
class action. See, e.g., United States v. New York Tel. Co., 434 U.S. at 172 (“This
Court has repeatedly recognized the power of a federal court to issue such
commands under the All Writs Act as may be necessary or appropriate to
effectuate and prevent the frustration of orders it has previously issued in its
exercise of jurisdiction otherwise obtained.”); Klay, 376 F.3d at 1104 (“We have
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ruled, for example, that a district court may issue an injunction under the All Writs
Act to prevent prosecution of a state court action that had already been settled
under the terms of a federal settlement agreement.”); Wesch, 6 F.3d at 1470 (“The
district court here based its injunction on the long recognized power of courts of
equity to effectuate their decrees by injunctions or writs of assistance and thereby
avoid relitigation of questions once settled between the same parties.”); VMS Ltd.
P’ship Sec. Litig. v. Prudential Sec. Inc., 103 F.3d 1317, 1324 (7th Cir. 1996),
overruled on other grounds by Envision Healthcare, Inc. v. PreferredOne Ins. Co.,
604 F.3d 983 (7th Cir. 2010) (“Other circuits have similarly approved a district
court’s use of the All Writs Act to prevent litigants from frustrating or
circumventing its orders.”); White v. Nat’l Football League, 41 F.3d 402, 409 (8th
Cir. 1994) (“While the All Writs Act is not an independent grant of jurisdiction,
the ability to facilitate the present settlement by enjoining related suits of absent
class members in ancillary to jurisdiction over the class action itself.”); In re Y &
A Grp. Sec. Litig., 38 F.3d 380, 382-83 (8th Cir. 1994) (“The All Writs Act makes
plain that each federal court is the sole arbiter of how to protect its own judgments
. . . It is this concept that underlies the related rule that the court which issues an
injunction is the only one with authority to enforce it.”); see also Henson, 261 F.3d
at 1068 (“[A] district court has the authority under the Act to enjoin a party to
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litigation from prosecuting an action in contravention of a settlement agreement
over which the district court has retained jurisdiction.”).
C. Civil Contempt Jurisprudence
We review “a district court’s interpretation of its own orders only for an
abuse of discretion,” a standard that “carries over to the interpretation of
injunctions.” Alley v. U.S. Dep’t of Health and Human Servs., 590 F.3d 1195,
1201 (11th Cir. 2009).
“Great deference is due the interpretation placed on the terms of an
injunctive order by the court who issued and must enforce it.” Ala. Nursing Home
Ass’n v. Harris, 617 F.2d 385, 388 (5th Cir. 1980);8 Alley v. U.S. Dep’t of Health
and Human Servs., 590 F.3d 1195, 1202 (11th Cir. 2009) (“The district court is in
the best position to interpret its own orders.” (internal quotation marks omitted));
Cave v. Singletary, 84 F.3d 1350, 1354 (11th Cir. 1996) (“The district court's
interpretation of its own order is properly accorded deference on appeal when its
interpretation is reasonable.”).
Notwithstanding the deference afforded to the District Court’s interpretation
of its own orders, the law is clear that “[i]nvalidity of the underlying order is . . . a
defense to a civil contempt citation.” In re Novak, 932 F.2d 1397, 1401 n.6 (11th
8
In Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir. 1981) (en banc), we adopted as
binding precedent all decisions of the former Fifth Circuit handed down before October 1, 1981.
Id. at 1209.
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Cir. 1991); see also United States v. United Mine Workers of Am., 330 U.S. 258,
295, 67 S. Ct. 677, 696, 91 L. Ed. 884 (1947) (“The right to remedial relief falls
with an injunction which events prove was erroneously issued.”). Thus, the
application of an incorrect legal standard taints the District Court’s findings in
support of a contempt order. See Holton v. City of Thomasville Sch. Dist., 425
F.3d 1325, 1355 (11th Cir. 2005).
D. Interpretation of the Settlement Agreement
For many reasons, the district court’s interpretation of its own injunction and
decision to hold parties in contempt for violating that injunction should be upheld
unless a district court a makes a clear error of law in contract interpretation.
The District Court is best equipped to assess the parties’ intentions in
entering a settlement agreement and, therefore, to construe its terms, particularly in
a complicated litigation such as MDL 1334. See Weyher/Livsey Constructors, Inc.
v. Int'l Chem. Co., 864 F.2d 130, 131 n.1 (11th Cir. 1989) (noting that “matter[s] of
interpretation” are “best left to the district court”).
MDL 1334 is a highly complex multidistrict litigation, first assigned to the
Southern District of Florida in April 2000. The allegations involve a wide-ranging
conspiracy by many participants, affecting a large number of plaintiffs. The
parties took more than five years to reach the Settlement Agreement and moved for
its preliminary approval on July 11, 2005. MDL 1334 D.E. 4321. The District
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Court issued its Amended Order approving that Settlement Agreement on January
3, 2006, MDL 1334 D.E. 4684, after months of hearings and briefing. Judge
Moreno issued his Order imposing sanctions on Appellants in July 2012, over
twelve years after the case first came before the Southern District of Florida. That
Order appears on the docket as entry number 6,340.
In Thomas v. Blue Cross & Blue Shield Ass'n, 594 F.3d 814, 817 (11th Cir.
2010), this Court considered release language similar to that of the present
Settlement Agreement. There, we set forth the framework for determining whether
the release language in a settlement agreement bars claims:
Under the settlement agreement entered in the class action, the
relevant inquiry for determining whether a claim is released is not
whether the acts giving rise to the complaint occurred after the class
action was filed or the settlement agreement was entered, but whether
they occurred after the effective date of the settlement agreement.
Id. at 822. Thus, if “the acts giving rise to the complaint occurred . . . after the
effective date of the settlement agreement,” the agreement would not release them;
whereas, if they arose prior to the effective date of the agreement, they would be
barred.
In his R&R, the Magistrate Judge applied this framework and concluded that
“all of the Physician Plaintiffs’ claims arose ‘from acts that occurred before the
effective date’ of the WellPoint Settlement” and were therefore barred by the
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“broad and sweeping” release language. MDL 1334 D.E. 6116 (R&R) at 16, 20-
21.
Appellants do not contend that the Magistrate Judge applied an incorrect
legal standard. Nor do they cite any legal authority to suggest that the Magistrate
Judge adopted the incorrect legal framework when interpreting the Settlement
Agreement. In fact, the cases that they cite in their opening brief endorse the same
relevant inquiry set forth by the Magistrate Judge – that is, that the “relevant
inquiry for determining whether a claim is released is . . . whether the acts giving
rise to the [new] complaint . . . occurred after the effective date of the settlement
agreement.” Appellant Br. at 30 (quoting Thomas v. Blue Cross & Blue Shield
Ass'n, 594 F.3d at 817 (alterations in original). 9
Appellants have failed to show that the District Court abused its discretion in
barring the Appellants from pursuing their RICO and antitrust claims in the UCR
MDL and holding them in contempt when they refused to withdraw those claims.
Appellants, however, have demonstrated that the District Court erred in enjoining
9
Appellants also rely on Klay v. All Defs., 309 F. App’x 294 (11th Cir. 2009) and
Madison Square Garden, L.P. v. National Hockey League, No. 07 CV 8455(LAP), 2008 WL
4547518 (S.D.N.Y. Oct. 10, 2008). These cases, along with Thomas, agree upon the appropriate
analysis when determining whether a release provision in a settlement agreement releases claims
in a subsequent action. The District Court must determine whether the legal basis of the claim
relies on events that predated the effective date of the agreement. See Klay, 309 F. App’x at 295
(noting magistrate judge’s conclusion that plaintiffs were “forced to concede that their claims
predate[d] the Effective Date of the settlement”); Madison Square Garden, L.P., 2008 WL
4547518, at *6 (finding antitrust claim barred by release because it existed “at the time of the
release” and “contain[ed] no allegations of post-2005 conduct”).
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the ERISA claims to the extent that they stem from the denial or underpayment of
benefits post-dating the Effective Date, and therefore the Injunction should be
vacated to the extent that it bars these claims.
A. RICO and Antitrust Allegations
With respect to the RICO and antitrust claims, Appellants’ argument falls far
short. In reasoning adopted by the District Court, the Magistrate Judge observed
that the Appellants “d[id] not dispute that they were aware well before entering
into the Settlement Agreement about WellPoint’s utilization of the Ingenix
Database in order to allegedly engage in their industry-wide conspiracy to
underpay providers.” R&R at 11. The Magistrate Judge continued: “[T]aken as a
whole, the allegations listed in the Complaint clearly relate to the alleged
conspiracy of WellPoint and other managed care institutions to underpay providers
for their services.” Id. at 13. 10 Magistrate Judge Torres noted, and the District
Court agreed, that Plaintiffs had the option of seeking to enforce the Settlement
Agreement if WellPoint had not complied with it, but stated that Appellants could
not “get another bite at a very devoured apple if they are not happy with
consideration they received in exchange for their broad release.” Id. at 13.
10
In comparison, consider our opinion in Doctors Health, Inc. v. Aetna, 605 F.3d 1146(11th Cir. 2010). There, Appellants appealed the district court’s determination that their breach
of contract claim had been released in a settlement agreement from an earlier class action. We
vacated that determination, holding that the release did not bar Appellants’ breach of contract
claim where that claim “share[d] no factual basis” with the complaint in the earlier class action.
Id. at 1151.
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In adopting the R&R, the District Court properly determined that the
Settlement Agreement released the Appellants’ RICO and antitrust claims in the
UCR MDL. First, the record fully supports the District Court’s finding that
Appellants’ RICO and antitrust claims arose out of the claims at issue in MDL
1334. The RICO and antitrust claims in the UCR MDL echo the earlier allegations
in MDL 1334 – that WellPoint engaged in a scheme to underpay healthcare
providers for claims through the use of the Ingenix database. The Second
Consolidated Amended Complaint makes clear that the conspiracy enterprise “was
formed in 1998” and that the antitrust conduct also began “at least as early as
January 1, 1998.” UCR MDL D.E. 113-1 (Second Consol. Am. Compl.) ¶¶ 288,
369. Second, the factual record clearly demonstrates that these claims could have
been asserted at the time of the Effective Date, since all facts necessary to state a
cause of action had occurred long before the Settlement Agreement took effect.
The fact that Appellants seek to base the new claims on certain conduct post-dating
the Effective Date does not change this conclusion. Because they merely
constitute a continuation of the conspiracy alleged in MDL 1334, WellPoint's
purported bad acts are best seen as new, overt acts within an ongoing conspiracy,
rather than new claims in and of themselves.
Moreover, Appellants' decision to release claims stemming from the
conspiracy alleged in MDL 1334 in no way interfered with their ability to obtain
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relief from ongoing violations of the Settlement Agreement. Through its Approval
Order, the district court retained jurisdiction over “all matters relating to (a) the
interpretation, administration, and consummation of the Settlement Agreement and
(b) the enforcement of the injunctions described[.]” Approval Order ¶ 27.
Although Appellants were barred from asserting new claims premised on
violations of the Settlement Agreement, they could have sought relief from such
violations through the procedure to which they consented: namely, through a
motion in the district court to enforce the Settlement Agreement and Approval
Order.
These claims thus arose “on or before the effective date,” “could have been
asserted” against WellPoint, and “ar[o]s[e] out of, or [were] in any way related to
any of the . . . facts, acts, events, transactions, occurrences, courses of conduct,
representations, omissions, circumstances, or other matters referenced” in MDL
1334. 11 Settlement Agreement § 13.1(a). The RICO and antitrust claims therefore
constitute Released Claims under § 13.1 of the Agreement. Because the
Settlement Agreement released these claims, the District Court did not abuse its
discretion by ordering Appellants to withdraw them and holding Appellants in
contempt when they refused to comply with that order.
11
Appellants argue that plaintiffs can assert continuing violations of RICO, however, the
claims clearly arose before the Effective Date and could have been asserted against WellPoint at
that time.
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B. ERISA Allegations
The district court did, however, incorrectly interpret the Settlement
Agreement and thereby abused its discretion with respect to certain of the ERISA
claims. ERISA claims “could [not] have been asserted” on or before the Effective
Date to the extent that they were based on denials or underpayments following the
Effective Date.
WellPoint contends that the ERISA claims “arise from the exact same
alleged course of conduct that underlies the entire UCR MDL Complaint” in that
the claims are based entirely on an alleged scheme that WellPoint improperly used
the Ingenix database to price claims for out-of-network services. Appellee Br. at
45.
The Magistrate Judge agreed with WellPoint. The R&R states:
Plaintiffs enjoy the broad and sweeping nature of the Settlement
Agreement’s release. Plaintiffs’ ERISA and contractual claims
asserted in the UCR [MDL] all pertain to WellPoint’s practices
regarding the fee-for-service claims and the calculation of the UCRs.
The very same practice and WellPoint’s alleged improper use of the
Ingenix database were expressly addressed in the [MDL 1334]
Complaints.
MDL D.E. (R&R) 6116 at 16. There is no dispute that a claim could have arisen
before the Effective Date if facts forming the basis of the claim existed prior to the
Effective Date. We assume, without deciding, that the District Court correctly
concluded that the ERISA claims arise out of the “facts, acts, events, transactions,
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occurrences, courses of conduct, representations, omissions, circumstances or other
matters” at issue in MDL 1334.
However, the District Court’s conclusion – that “all of Physician Plaintiffs’
claims arose ‘from acts that occurred before the effective date’ of the WellPoint
Settlement and are, similarly, barred” – does not follow. Id. at 21. That
conclusion does not complete the analysis because Appellants contend, in part, that
even if the necessary factual basis upon which Appellants could assert their ERISA
claims did exist at the time of the Effective Date, the claims nevertheless could not
have been asserted at that time. Put another way, if the ability to “assert” an
ERISA cause of action for denial of these benefits only occurred after the Effective
Date of the Settlement Agreement, then § 13.1(a) would not bar such a claim.
Our resolution of this issue hinges in large part on at what point an ERISA
claim can be asserted. 12 A similar issue arose in Paris v. Profit Sharing Plan for
Emp. of Howard B. Wolf, 637 F.2d 357, 361 (5th Cir. Feb. 17, 1981). In Paris, we
considered whether we had jurisdiction – there, whether the claim arose under
federal jurisdiction – to review a district court’s determination that appellants were
not entitled to certain benefits under ERISA. The jurisdictional question turned on
12
Dictionaries offer a broad definition of the word “assert” and provide no guidance as to
whether “assert” in the Settlement Agreement requires the filing of a lawsuit. See, e.g., Black’s
Law Dictionary 124 (8th ed. 2004) (“1. To state positively. 2. To invoke or enforce a legal
right.”); Oxford English Dictionary Online, http://english.oxforddictionaries.com (last visited
Mar. 18, 2014) (defining assert as to “state a fact or belief confidently and forcefully”).
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whether the claim arose before the date on which ERISA took effect: January 1,
1975. Id. at 359. If the claim arose on the date of the claimant’s termination, it
would predate the Effective Date of ERISA. If it arose upon the denial of benefits,
it would post-date the Effective Date, and thus arise under federal law. We held
that we did have jurisdiction, observing that “for purposes of ERISA a cause of
action does not accrue until an application [for benefits] is denied.” Id. at 361.
This holding was followed by this Court in Gulf Life Ins. Co. v. Arnold, 809 F.2d
1520, 1525 (11th Cir. 1987). Accordingly, an ERISA lawsuit cannot be filed in
federal court until a claim is denied.
In keeping with this conclusion, Appellants' ERISA claims based on the
denial or underpayment of benefits following the Effective Date cannot meet the
"could have been asserted" prong of § 13.1 of the Settlement Agreement because,
absent a denial or underpayment on or before the Effective Date, such claims
would not have accrued. Appellants set forth a number of allegations that meet
these criteria. For instance, the Second Consolidated Amended Complaint alleges
that, following the Effective Date, Dr. Schwendig provided emergency medical
services to patients participating in a plan that WellPoint administered. UCR MDL
D.E. 113-1 (Second Consol. Am. Compl.) ¶¶ 224. Dr. Schwendig was allegedly
underpaid, appealed the purported underpayments, and was unable to recoup the
amount owed to him. Id. at ¶ 228. Likewise, in November and December of 2007,
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Dr. Kavali purportedly provided medical services, was underpaid for those
services, and was given no apparent mechanism for appealing the underpayment.
Id. at ¶¶ 254-56, 259. Because ERISA claims stemming from the denial or
underpayment of benefits following the Effective Date “could [not] have been
asserted” on the Effective Date, the District Court erred in enjoining the Appellants
from pursuing such claims.
WellPoint argues that another section of the Settlement Agreement, titled
Covenant Not to Sue, supports its interpretation and the District Court’s Contempt
Order. We disagree. Section 13.2(a) states that the releasing parties will not
participate in litigation “based upon or related to any Released Claim.” In effect,
WellPoint argues that any underpayment must be related to this settlement simply
by virtue of being an underpayment. But the inclusion of an Effective Date into
the Settlement Agreement clearly contrasts the idea of barring all claims against
WellPoint in perpetuity. The Covenant Not to Sue section does not apply to claims
that could not have been asserted prior to the Effective Date and, therefore, does
not bar such claims.
We note briefly that, even though § 13.5 broadens the scope of the release, it
does not go so far as to release claims where the full factual basis required to
legally state a cause of action, such that the cause of action “could have been
asserted,” did not exist as of the Effective Date. In § 13.5, Appellants agreed to
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“fully, finally and forever” release “any known or unknown, suspected or
unsuspected, contingent or non contingent claim with respect to the subject matter
of the provisions of § 13, whether or not concealed or hidden, without regard to the
discovery or existence of such different or additional facts.” Settlement
Agreement § 13.5. This section broadly releases any claim that could have been
brought, at the time of the Effective Date, based on the existence of facts – whether
they be known or unknown – as of the Effective Date. The language of this section
does not, however, go so far as to release claims based on facts occurring after the
Effective Date.13
Furthermore, the Settlement Agreement does release post-Effective Date
claims in certain narrow instances. In §13.1(b), which addresses claims against
BCBSA, the release language makes clear that the parties agreed to “forever
abandon and discharge any and all Claims that exist now or that might arise in the
future” where such claims “are based on conduct by any of the Released Parties
that occurred on or before the Effective Date and are, or could have been asserted
by any Releasing Party . . . .” Settlement Agreement § 13.1(b). If the parties had
13
Undoubtedly, certain facts existed that could have given rise to some ERISA claims,
even if not the ones presently at issue, and Appellants had knowledge of those facts. For
example, the Second Consolidated Amended Complaint alleges that WellPoint underpaid for
benefits for many years prior to the Effective Date of the Settlement Agreement. Denial of
proper payment for those benefits may have constituted an ERISA claim that could have been
asserted prior to the Effective Date. Appellants should have explicitly excluded such ERISA
claims in the release, but did not do so. This, however, has no bearing on ERISA claims based
on underpayment for procedures performed after the Effective Date.
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intended the scope of § 13.1(a) to mirror that of 13.1(b), which expressly releases
claims that could arise after the Effective Date – although based on conduct that
existed prior to the effective date – the parties would have used such language in §
13.1(a). Accordingly, at least some of Appellants’ ERISA claims “could [not]
have been asserted” on the Effective Date. The Settlement Agreement does not
release them, and the Injunction must be vacated as to such claims.
We note that Judge Martin dissents from our opinion, in part, based on her
conclusion that the Settlement Agreement does not bar the RICO and antitrust
claims. We agree with Judge Martin that the Settlement Agreement “did not
protect WellPoint for any misconduct for all time.” The crux of our disagreement,
however, is that Judge Martin believes that the allegations in the UCR MDL
indicate “new, wrongful conduct” whereas we view the conduct as being a
continuation of the same conduct raised in MDL 1334.
The cases cited by Judge Martin do not persuade us otherwise. For example,
Judge Martin distinguishes Madison Square Garden, L.P. v. National Hockey
League, 2008 WL 4547518. There, the court observed that the plaintiff’s
allegations were not based on conduct that post-dated the release, but were instead
based on a continuation of pre-existing policies. Id. at *6. The court thus had
“little trouble” concluding that the antitrust claims existed at the time of the release
and that the parties intended the release to bar those claims. Id. We view the UCR
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MDL allegations similarly, and conclude that the claims based on those allegations
“could have been asserted,” and were in fact asserted, prior to the Effective Date.
We once again note that Appellants were not without recourse if WellPoint
acted in violation of the Settlement Agreement after the Effective Date. Rather,
they could have filed a motion in the district court to enforce the Settlement
Agreement and the corresponding Approval Order. Their failure to do so does not
warrant a departure from the parties’ intentions to bar claims that arose out of the
conduct at issue in MDL 1334 and that could have been asserted as of the Effective
Date.
In sum, because Appellants’ ERISA claims that are premised on the denial
or underpayment of benefits subsequent to the Effective Date do not fall within the
“could have been asserted” prong of the Settlement Agreement, the Settlement
Agreement does not release such claims. Thus, we vacate the District Court’s
judgment barring Appellants’ ERISA claims to the extent that they arise out of
post-Effective Date underpayments or denials of benefits.
V. SANCTIONS
A district court has “broad discretion in fashioning civil contempt
sanctions,” Howard Johnson Co. v. Khimani, 892 F.2d 1512, 1519 (11th Cir.
1990), and this court “review[s] the district court’s assessment of contempt
sanctions for an abuse of discretion,” McGregor v. Chierico, 206 F.3d 1378, 1388
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(11th Cir. 2000). Appellants do not challenge the method by which the District
Court assessed sanctions, but rather limit their challenge to the validity of the
underlying Order barring Appellants from proceeding with their claims. On
remand, the District Court will be tasked with determining which of Appellants’
ERISA claims are based on the denial or underpayment of benefits following the
Settlement Agreement’s Effective Date. The District Court will also need to
reconsider its assessment of sanctions in light of this opinion. Thus, we will vacate
the sanctions and remand to the District Court.
VI. CONCLUSION
For the foregoing reasons, the judgment of the District Court is affirmed in
part, vacated in part, and remanded. We affirm the Injunction as to Appellants’
RICO and antitrust claims and as to ERISA claims based on the denial or
underpayment of benefits on or before the Settlement Agreement’s Effective Date,
but vacate the Injunction as to ERISA claims based on the denial or underpayment
of benefits following the Settlement Agreement’s Effective Date. On remand, the
District Court will need to determine which of Appellants’ ERISA claims fall on
the permissible side of the line, and reconsider the assessment of sanctions.
AFFIRMED IN PART; VACATED IN PART; REMANDED.
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MARTIN, Circuit Judge, concurring in part and dissenting in part:
I agree with my colleagues that, based on WellPoint’s actions after the
Effective Date of the Settlement Agreement in the earlier class action regarding
WellPoint’s reimbursement of claims, the District Court abused its discretion in
concluding that certain ERISA claims in the later-filed cases were Released
Claims. 1 But based on the language of that Settlement Agreement, I would reach
this same result for the RICO and antitrust claims the Physicians seek to bring here
as well. Like the ERISA claims, the RICO and antitrust claims also depend on
WellPoint’s actions taken after the Effective Date. Therefore, the ruling I seek—
that the ERISA, RICO, and antitrust claims based on WellPoint’s actions taken
after the Effective Date of the Settlement Agreement were not released by that
Agreement—would treat all of these claims the same. In contrast, the Majority’s
Opinion reaches different results for various claims made based on identical post-
Effective Date actions taken by WellPoint and vacates the injunction only as to
certain ERISA claims. I would lift the Injunction as to the RICO and antitrust
claims as well, so I dissent from the Majority Opinion in that respect.
I. BACKGROUND
1
I will use the terms the Majority did, including UCR MDL (referring to the lawsuit filed
in 2009 challenging the post-Settlement Agreement’s usual, customary, and reasonable rates of
reimbursement, which is the subject of this appeal), MDL 1334 (referring to the case number of
the earlier litigation originally filed in 2000, assigned as a Multi-District Litigation case to the
District Court in the Southern District of Florida, and settled in 2005), and BCBSA (Blue Cross
Blue Shield of America). Also, when I use the term Physicians, I refer collectively to the doctors
and their professional associations that are the Appellants in this case.
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In 2005, WellPoint agreed to change a number of its business practices in
order to settle MDL 1334. Among the changes WellPoint agreed to was to change
the way it had determined usual, customary, and reasonable rates. Specifically, the
Settlement Agreement stated that WellPoint “agrees that, to the extent it uses
Physician charge data to determine the usual, reasonable and customary amount to
be paid for services performed by Non-Participating Physicians, it will not use any
internal claims database that” systematically underprices the claims.
For their part, the Physicians agreed that as of the Effective Date of the
agreement they were giving up certain claims. The Settlement Agreement defined
the Released Claims as:
any and all causes of action, judgments, liens,
indebtedness, costs, damages, obligations, attorneys’
fees, losses, claims, liabilities and demands of whatever
kind or character (each a “Claim”), arising on or before
the Effective Date, that are, were or could have been
asserted against any of the Released Parties by reason of,
arising out of, or in any way related to any of the facts,
acts, events, transactions, occurrences, courses of
conduct, representations, omissions, circumstances or
other matters referenced in the Actions, whether any such
Claim was or could have been asserted by any Releasing
Party on its own behalf or on behalf of other Persons, or
to the business practices that are the subject of § 7.
Settlement Agreement § 13.1(a). As the Majority recognizes, “the inclusion of an
Effective Date into the Settlement Agreement clearly contrasts the idea of barring
all claims against WellPoint in perpetuity.” Maj. Op. at 31.
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After preliminary approval of the settlement by the District Court, a notice
of the settlement was mailed to potential class members. The notice began: “IF
YOU ARE A PHYSICIAN WHO PROVIDED COVERED SERVICES TO ANY
INDIVIDUAL ENROLLED IN OR COVERED BY CERTAIN HEALTH CARE
PLANS AT ANY TIME BETWEEN AUGUST 4, 1990 AND JULY 15, 2005 . . .
PLEASE READ THIS NOTICE CAREFULLY.” The part of the notice that told
the class members about the claims which would be released against WellPoint
described them as those “arising on or before the date that the Court’s order
approving the settlement becomes final, that are, were or could have been
asserted.” The next sentence added that “claims that exist now or that might arise
in the future” are waived against BCBSA. The notice highlighted that at an
upcoming hearing, the District Court “will consider whether to enter orders that
would prevent members of the Class and certain other persons, including the
Defendants in the Actions other than WellPoint, from asserting certain claims
against WellPoint in the future.”
The District Court approved the Settlement Agreement for MDL 1344 in an
Amended Order filed in January 2006. That Order permanently enjoined the
Physicians who had not opted out of the Settlement Agreement from participating
in lawsuits “arising out of or relating in any way to the Released Claims.”
Generally tracking the language in the class notice, the amended order approving
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the settlement noted that claims “that exist now or that might arise in the future
against BCBSA” were released, while against WellPoint claims were released “that
are, were or could have been asserted against any of the Released Parties by reason
of, arising out of, or in any way related to” the facts at issue. The District Court
retained jurisdiction on “all matters relating to (a) the interpretation,
administration, and consummation of the Settlement Agreement and (b) the
enforcement of the injunctions described.”
Then in 2009 came the UCR MDL lawsuit alleging antitrust, RICO, ERISA,
and state law violations by WellPoint and others in connection with a conspiracy of
failing to pay the UCR rates for out-of-network services. The Second
Consolidated Amended Complaint in the UCR MDL alleged that “Ingenix serves
as a conduit for the conspiracy and is a hidden profit engine of the health insurance
business.” That Complaint includes allegations, for example, that after the
Effective Date of the Settlement Agreement for the MDL 1344 case, WellPoint
provided false and misleading certifications to Ingenix, and that Ingenix, knowing
that certain answers from WellPoint were false, “continued to accept the data and
overlook the falsehoods, nevertheless.” Fundamentally, the question presented by
this appeal is whether the claims raised by these plaintiffs in the UCR MDL are
barred because they are Released Claims under the MDL 1334 Settlement
Agreement.
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II. DISCUSSION
There are two related ways to analyze whether the claims advanced in this
lawsuit were released in the earlier one. The first is to examine the language used
in the Settlement Agreement and class notice. The second is to apply this Court’s
precedent to the facts of this case. Both analyses lead to the conclusion that the
UCR MDL claims were not released.
A. TEXT OF THE SETTLEMENT AGREEMENT AND CLASS NOTICE
I begin with the language of the Settlement Agreement, particularly the
definition of Released Claims. It is not in dispute that if parties to a settlement
clearly and unambiguously agree to do so, “[f]uture damages may be released if
such is the intent of the parties.” W.J. Perryman & Co. v. Penn Mut. Fire Ins. Co.,
324 F.2d 791, 793 (5th Cir. 1963). 2 However, the language of a settlement
agreement determines whether that is so. “Litigation or settlement will not
automatically bar a later suit for a second, identical breach.” Klein v. John
Hancock Mut. Life Ins. Co., 683 F.2d 358, 360 (11th Cir. 1982). There are two
ways in which the definition of Released Claims here indicates the intent to limit
the release and not include future damages. They are the definition’s time limit of
2
In Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir. 1981) (en banc), we adopted as
binding precedent all decisions of the former Fifth Circuit handed down before October 1, 1981.
Id. at 1209.
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“arising on or before the Effective Date,” and the statement that the claims released
“are, were or could have been asserted.”
Because the term “arising” is not defined in the Settlement Agreement, it is
necessary to look to the common understanding of the term. For a long time,
courts have understood that an action does not arise until a plaintiff has a legal
right to sue on it. See, e.g., St. Louis & S.F.R. Co. v. Spiller, 274 U.S. 304, 313,
47 S. Ct. 635, 638 (1927) (finding “that the term ‘arise’ was used in the decree as
the equivalent of ‘accrue’”); Fed. Reserve Bank v. Atlanta Trust Co., 91 F.2d 283,
287 (5th Cir. 1937) (“This cause of action did not, it could not, arise until plaintiff
had paid the moneys out, and was in a position to demand reimbursement.”); see
also Levy v. Ohl, 477 F.3d 988, 992 (8th Cir. 2007) (stating that “plaintiff’s right
to sue arises . . . when the plaintiff could first maintain his cause of action
successfully” (quotation omitted)).
Based on this understanding of the word arising, and because the Settlement
Agreement defined Released Claims as those “arising on or before the Effective
Date,” the Physicians released only those claims they could have sued for as of the
Effective Date. In contrast, the only claims asserted in the UCR MDL were those
that required additional acts to take place after the Effective Date. Critically, the
Physicians allege that WellPoint committed new acts after the Effective Date,
which caused them to be underpaid for certain services.
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The import of the definition of Released Claims in the Settlement
Agreement is buttressed by its use of the phrase “are, were or could have been
asserted.” “Are” asserted claims were those asserted at the time of the Settlement
Agreement—clearly the claims in the UCR MDL are not among those. “Were”
asserted claims would be those that had already been asserted. Again, the UCR
MDL claims had not. The question remaining, then, is whether the UCR MDL
claims “could have been” brought at the time the parties entered into the
Settlement Agreement. Following this analysis, the Majority acknowledges and
recognizes that certain claims in the UCR MDL could not have been brought but
for the new actions WellPoint took after the Effective Date. Maj. Op. 30–31. I
agree. However, the Majority does not extend the logic behind its recognition that
the ERISA claims could not have been brought prior to the Effective Date of the
Settlement of the MDL 1344 case to the remainder of claims brought by the
Physicians in the UCR MDL. To the contrary, the Majority finds that the
remaining claims were released by the Settlement Agreement.
WellPoint argues that the Physicians “do not suggest . . . WellPoint began
doing something different or new that it had not been doing before.” But this
argument ignores that WellPoint agreed to quit doing what it had done before. The
Physicians entered into the Settlement Agreement, which called for payments by
WellPoint and WellPoint’s agreement to change the way it made reimbursements
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so as to avoid future problems. Nothing in the Settlement Agreement suggests that
the Physicians gave up their right to take action in the future if WellPoint engaged
in new, wrongful conduct that resulted in underpayment for services not yet
rendered. So while the Physicians never dispute that WellPoint had underpaid
them in the past, they do allege new acts resulting in fresh underpayments. Cf.
Manning v. City of Auburn, 953 F.2d 1355, 1360 (11th Cir. 1992) (“[W]e do not
believe that the res judicata preclusion of claims that ‘could have been brought’ in
earlier litigation includes claims which arise after the original pleading is filed in
the earlier litigation.”).
This plain reading of the Settlement Agreement is in keeping with the notice
to potential class members. Certainly it is the language of the Settlement
Agreement that controls, but the notice underscores that the UCR MDL claims
were not released in the MDL 1334. First, the notice, in all capital letters, tells
physicians who provided services “between August 4, 1990 and July 15, 2005” to
read the notice carefully. As a result, physicians providing services after July 15,
2005 are not given any notice that they are impacted by the settlement. It is only
those doctors who provided services between the delineated dates that were clearly
informed of the release. Physicians who had not yet provided the relevant services,
but might do so in the future, would understandably believe this notice had no
relevance to them.
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Second, the notice states that class members are giving up “all claims that
exist now or that might arise in the future” against BCBSA. But the language the
parties chose to describe the claims that were released against WellPoint is
strikingly different. For WellPoint, the notice says that class members are giving
up claims arising on or before the Effective Date. It is true that the details of the
settlement, including the treatment of possible future claims, was to be the subject
of a hearing before the District Court. Again however, the notice gave no
indication that the Settlement Agreement was intended to release future claims
against WellPoint by class members for services not yet rendered.
WellPoint argues that if the Settlement Agreement is interpreted to allow for
future claims, “companies would not be able to settle class action lawsuits because
they could never be assured of ‘buying peace’ no matter how much they paid.”
Quite to the contrary, the Settlement Agreement did buy peace for WellPoint for
all of its conduct prior to the Effective Date. It just did not protect WellPoint for
any misconduct for all time. WellPoint remains “on the hook” for any new bad
acts it commits after the Effective Date. And it is only new actions, taking place
after the Settlement Agreement, which are at issue in the UCR MDL. See Lawlor
v. Nat’l Screen Serv. Corp., 349 U.S. 322, 329, 75 S. Ct. 865, 869 (1955)
(“Acceptance of the respondents’ novel contention would in effect confer on them
a partial immunity from civil liability for future violations.”).
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WellPoint argues that another section of the Settlement Agreement, titled
“Covenant Not to Sue,” supports their interpretation. Section 13.2(a) states that the
releasing parties will not participate in litigation “based upon or related to any
Released Claim.” While the use of “related to” in § 13.2(a) suggests a broader
covenant not to sue than what is in the definition of Released Claims, when read
alongside the other Settlement Agreement provisions it is clear the parties intended
a cutoff point. WellPoint argues, in effect, that any underpayment must be related
to this settlement, simply by virtue of being an underpayment. But the setting of
an Effective Date within the Settlement Agreement conflicts with the idea of
barring all claims against WellPoint in perpetuity. New actions taken by WellPoint
after the Effective Date of the Settlement Agreement, and resulting in
underpayments, are not covered by the Covenant Not To Sue. Those claims—
ERISA or otherwise—are therefore not released.
Counsel for WellPoint seemed to acknowledge this point at oral argument.
He said that if WellPoint began doing something new after the Effective Date, it
would be actionable under the Settlement Agreement:
So let’s say we stopped using Ingenix in 2008 and we
began using a brand new database that we hadn’t used
before. Then I think the Plaintiffs could come along and
say, “Well, look, we’re complaining about something
new that you weren’t doing before.” 3
3
Oral Argument at 27:52–28:11, Oct. 9, 2013.
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But this is a distinction without a meaningful difference. The Settlement
Agreement does not mention Ingenix. The gravamen of the Physicians’ concern
was with being underpaid—by whatever mechanism. The Settlement Agreement
was intended to compensate the Physicians for underpayments in the past and
change WellPoint’s business practices to avoid underpayments in the future. And
the Majority acknowledges that WellPoint engaged in “new, overt acts.” Maj. Op.
at 26. However, the Majority characterizes those acts as being a part of “an
ongoing conspiracy.” The plain language of the Settlement Agreement provides
that claims predicated upon future acts taken by WellPoint to underpay physicians
are not released.
B. APPLICATION OF CASE LAW TO FACTS
A familiar canon of construction helps clarify that the claims here were not
released. The word “future” does not appear in the definition of Released Claims
in § 13.1(a) of the Settlement Agreement. And the parties were certainly aware of
their ability to negotiate away future claims. That is evidenced by the fact that the
parties referred to future claims in § 13.1(b), where the Settlement Agreement
discusses claims against BCBSA. To my mind, this distinction demonstrates the
parties’ choice not to address future claims as to WellPoint. See In re Celotex
Corp., 487 F.3d 1320, 1334 (11th Cir. 2007) (“[W]hen certain matters are
mentioned in a contract, other similar matters not mentioned were intended to be
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excluded.” (quotation omitted)); see also Maj. Op. at 32–33 (“If the parties had
intended the scope of § 13.1(a) to mirror that of 13.1(b), which expressly releases
claims that could arise after the Effective Date—although based on conduct that
existed prior to the effective date—the parties would have used such language in §
13.1(a).”)
WellPoint argues that “federal class action settlements routinely include
releases waiving future claims.” This is certainly true. However, the cases
WellPoint points to in support of this proposition are readily distinguishable, at
least because the Settlement Agreement it relies upon does not refer to future
claims against WellPoint. For example, WellPoint cites to McClendon v. Georgia
Department of Community Health, 261 F.3d 1252 (11th Cir. 2001). The
McClendon litigation arose out of a tobacco settlement agreement negotiated by 46
states and a number of tobacco companies. The McClendon plaintiffs were
Medicaid recipients who wanted proceeds of the settlement beyond what Georgia
paid on medical assistance, but they had not participated in the negotiations of that
settlement agreement. The defendants moved to dismiss. In addition to being
factually inapposite and arising in a very different procedural posture, then, the
language of the release in McClendon refers explicitly to “future conduct” and
“future Claims.” Id. at 1254. Considering that language, this Court observed that
“[a]s the quoted provisions indicate, by entering into the settlement agreement
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Georgia released its past and future claims.” Id. at 1255. The McClendon release
clearly reflected the intent of the parties as to future claims, while the agreement
before us does not. For many reasons, McClendon’s guidance for this case is
limited.
WellPoint also points to cases addressing antitrust violations based on
conduct that originated at a prior time, arguing that courts “have found that
releases do bar antitrust claims when they are based on a continuation of the
released conduct.” Again—this is certainly true. However, the utility of the cases
relied upon by WellPoint to help it here is belied by the facts of those decisions.
For example, WellPoint claims the case Madison Square Garden, L.P. v. National
Hockey League, 2008 WL 4547518 (S.D.N.Y. Oct. 10, 2008), is similar to this
case. Instead it is quite different. Madison Square Garden had signed an
agreement that “forever releases and discharges” the National Hockey League from
any claims related to policies in effect at the time the agreement was executed in
2005. Id. at *5. Notwithstanding this language, Madison Square Garden sued
based on “no allegations of post-2005 conduct apart from (1) the enforcement of
pre-existing policies and (2) the 2006 extension of the licensing agreement that had
been in place since 1994, which reaffirmed each Member Club’s assignment of the
right to ‘use or license its team’s trademarks’ to the League.” Id. at *6. Given the
gap between what claims Madison Square Garden released and what claims they
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subsequently brought, the District Court “ha[d] little trouble” dismissing certain
claims. Id. at *7. Quite distinctive from Madison Square Garden, this case
involves new post-release conduct. Thus, the holding in Madison Square Garden
is of little assistance here.
WellPoint also relies on Klay v. All Defendants, 309 F. App’x 294 (11th Cir.
2009). In Klay, the plaintiffs were “forced to concede that their claims predate the
Effective Date of the settlement.” Id. at 295 (quoting MDL 1334 Dkt. 5838 (MDL
1334 R&R) at 18). Indeed, a review of the Report & Recommendation in that case
makes the distinction between Klay and this case even more clear. In Klay,
“Plaintiffs suggest that it is irrelevant whether their claims existed prior to the
settlement, so long as they were subjectively unaware of the existence of their
claims.” (MDL 1334 R&R at 18 (emphasis added)). There is no such concession
or suggestion here. Thus, Klay is of little relevance to this case. The same is true
of Thomas v. Blue Cross & Blue Shield Ass’n, 594 F.3d 814 (11th Cir. 2010),
another case relied upon by WellPoint and cited by the Majority. See id. at 822(“Kolbusz’s claims of tortious interference and defamation arise from acts that
occurred before the effective date, which is the only date the district court should
have considered.”).
WellPoint is correct that this Court and others have encouraged the pretrial
settlement of class action lawsuits. See, e.g., In re U.S. Oil & Gas Litig., 967 F.2d
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489, 493 (11th Cir. 1992). But I am not aware that this Court has ever encouraged
protection for future wrongdoing, particularly where parties have not expressly
addressed it in their settlement agreement. The Settlement Agreement here did not
immunize WellPoint for future underpayments to doctors. For these reasons, I
would vacate the Injunction not just for the ERISA claims, but for the RICO and
antitrust claims as well.
51