Grider v. Keystone Health Plan ( 2007 )

Opinions of the United
2007 Decisions States Court of Appeals
for the Third Circuit
8-28-2007
Grider v. Keystone Health Plan
Precedential or Non-Precedential: Precedential
Docket No. 07-1231
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos. 07-1231, 07-1232 and 07-1270
NATALIE M. GRIDER, M.D.;
KUTZTOWN FAMILY MEDICINE, P.C.
v.
KEYSTONE HEALTH PLAN CENTRAL, INC.;
THOMAS F. BICKMAN; HIGHMARK, INC.;
JOHN S. BROUSE; CAPITAL BLUECROSS;
JAMES M. MEAD; JOSEPH PFISTER
Keystone Health Plan Central, Inc.;
Capital BlueCross; James M. Mead; Joseph Pfister,
Appellants, No. 07-1231
Highmark, Inc.; John S. Brouse,
Appellants, No. 07-1232
*CROWELL MORING LLP;
KATHLEEN TAYLOR SOOY;
MICHAEL L. MARTINEZ,
Appellants, No. 07-1270
(*Pursuant to F.R.A.P. 12(a))
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 01-cv-05641)
District Judge: Honorable James Knoll Gardner
Argued June 19, 2007
Before: McKEE, FISHER and CHAGARES, Circuit Judges.
(Filed: August 28, 2007)
Malcolm J. Gross
Gross, McGinley, LaBarre & Eaton
33 South 7th Street
P.O. Box 4060
Allentown, PA 18105
Kathleen T. Sooy (Argued)
Clifton S. Elgarten
Tracy A. Roman
Crowell & Moring
1001 Pennsylvania Avenue, N.W.
Washington, DC 20004-2505
Attorneys for Appellants (No. 07-1231),
Keystone Health Plan Central, Inc.,
Capital BlueCross, James M. Mead
and Joseph Pfister
2
Daniel I. Booker
Donna M. Doblick
James C. Martin (Argued)
Reed Smith
435 Sixth Avenue
Pittsburgh, PA 15219
Sandra A. Girifalco
Stradley, Ronon, Stevens & Young
2600 One Commerce Square
Philadelphia, PA 19103
Attorneys for Appellants (No. 07-1232),
Highmark, Inc. and John S. Brouse
Clifton S. Elgarten
Tracy A. Roman
Crowell & Moring
1001 Pennsylvania Avenue, N.W.
Washington, DC 20004-2505
Attorneys for Appellants (No. 07-1270),
Crowell Moring LLP, Kathleen Taylor
Sooy and Michael L. Martinez
Louis C. Bechtle
Conrad, O’Brien, Gellman & Rohn
1515 Market Street, 16th Floor
Philadelphia, PA 19102
3
Joseph A. O’Keefe
O’Keefe & Sher
15019 Kutztown Road
Kutztown, PA 19530
Francis J. Farina
577 Gregory Lane
Devon, PA 19333
Kenneth A. Jacobsen (Argued)
12 Orchard Lane
Wallingford, PA 19086
Attorneys for Appellees,
Natalie M. Grider, M.D., and
Kutztown Family Medicine, P.C.
OPINION OF THE COURT
FISHER, Circuit Judge.
This appeal requires us to explore the limits of the All
Writs Act, 28 U.S.C. § 1651(a), as it relates to actions by one
federal court that may affect those in a different federal court.
Specifically, in this case, Dr. Natalie Grider and Kutztown
Family Medicine P.C., representing a class of approximately
6,000 doctors in Central Pennsylvania, filed a suit against
Keystone Health Plan Central, Inc. (“Keystone”); Keystone’s
two former fifty-percent owners, Highmark, Inc. (“Highmark”)
4
and Capital Blue Cross (“Capital”); and each company’s chief
executive officer, Joseph Pfister, John Brouse, and James Mead.
The suit alleges that Keystone’s claims handling practices
violated the Racketeer Influenced and Corrupt Organizations
Act (“RICO”), 18 U.S.C. §§ 1961 - 1968, and Pennsylvania’s
“prompt pay” statute, 40 Pa. Stat. §§ 991.2101 ! 991.2193.
Around that time, similar nationwide claims were consolidated
by a Multidistrict Litigation (“MDL”) panel in the United States
District Court for the Southern District of Florida (“Florida
MDL”), which declined to add the Grider case as an tag-along
action because it was at a more advanced stage in its
proceedings. Recently, however, as the parties in the Florida
MDL moved towards a comprehensive settlement agreement,
the United States District Court for the Eastern District of
Pennsylvania issued an injunction under the All Writs Act
prohibiting the Grider Defendants from settling or attempting to
settle claims in the Florida MDL that would have the effect of
also settling the claims in Grider. The question presented to us
is whether this is a permissible exercise of power under the All
Writs Act. For the reasons that follow, we conclude that it is
not, and we will therefore vacate the injunction issued by the
District Court.
I.
A. The Grider Case
This case involves a certified class of approximately
6,000 doctors in Central Pennsylvania who were providers with
the Keystone health maintenance organization (“HMO”), which
operates exclusively in Central Pennsylvania. These doctors had
5
signed contracts with Keystone to provide medical services to
patients who subscribed to the Keystone HMO. To receive
reimbursement for services they provided to subscribers, the
doctors submitted claims on forms provided by Keystone, using
a standardized set of numerical codes provided by the American
Medical Association, which are referred to as “CPT codes.”
These codes are provided for virtually every medical procedure
in order to avoid variations in descriptions given by doctors.
Because each code only represents a single procedure, one visit
to a doctor may result in a reimbursement claim containing
multiple CPT codes. A typical claim form, for instance, may
have one code for the office visit itself, and another for the
administration of a particular test.
During the class period certified by the District Court,
when a doctor within Keystone’s network submitted one of
these claim forms, it was processed through a company named
Synertech, Inc. (“Synertech”). Synertech is located in Central
Pennsylvania, and used a proprietary software system owned by
Tingley, Inc. to process these claims.
In addition to being reimbursed on a fee-for-service basis,
many doctors in Keystone’s network also received
reimbursements for certain pools of patients ! usually
employees of a large employer ! under contractual “capitation”
arrangements with Keystone. Approximately 28% of the
certified class members in this case are family practice
providers, most of whom were under contractual capitation
arrangements with Keystone. Under these capitation
agreements, doctors are paid a set monthly fee in exchange for
providing basic medical services ! such as examinations and
6
treatment for minor illnesses ! to a pool of patients. More
complicated medical procedures not on the list of capitation
services are supposed to be billed to Keystone and paid on a fee-
for-service basis.
On October 5, 2001, the Plaintiffs in this case filed an
action in Pennsylvania state court, which the Defendants
promptly removed to the United States District Court for the
Eastern District of Pennsylvania. The suit alleges that Keystone
violated RICO by not processing and paying claims as it had
promised to do in its contracts and other communications with
the doctors in its network. According to the Plaintiffs, Keystone
used automated systems and software built into Synertech’s
computerized claims processing operations to systematically
“bundle” two or more CPT codes. By doing so, it would pay for
only one procedure, thereby reducing payments to doctors. The
Plaintiffs also allege that Keystone used Synertech’s software to
systematically “downcode” the doctors’ claims by automatically
changing the CPT code on a claim form to a less costly
procedure.
In terms of the capitation agreements, the Plaintiffs allege
that Keystone secretly reduced monthly capitation payments to
participating doctors. Specifically, they claim that Keystone
“shaved” capitation payments by “secretly: 1) shifting patients
off of a doctor’s capitation roster to so-called ‘dummy accounts’
set up by Keystone, whereby doctors continued to treat the
insured patient and Keystone continued to collect premiums for
medical insurance paid by or on behalf of the member, but
retained those premiums for itself instead of paying them to the
doctor; and 2) delaying capitation payments to providers for
7
newly enrolled members assigned to that doctor’s capitation
roster.”
In addition to these claims, the complaint also alleges
violations of Pennsylvania’s “prompt pay” statute, which
requires insurers to reimburse doctors within forty-five days
after receiving a reimbursement claim.
On December 21, 2006, following three years of
discovery, the District Court certified a class of providers in the
Keystone network who were alleged to have been defrauded by
the practices described in the complaint. The class includes:
All medical service providers in connection with
medical services rendered to patients insured by
Keystone Health Plan Central Inc. who during the
period January 1, 1996 through October 5, 2001:
(1) submitted claims for
reimbursement on a fee-for-service
basis for covered services which
claims were denied or reduced
through the application of
automated edits in the claim
processing software used by
defendants to process those claims;
and/or
(2) received less in capitation
payments than the provider was
entitled through the use and
8
application of automated systems to
“shave” capitation payments in the
manner alleged in plaintiffs’
Amended Complaint filed
October 6, 2001.
Grider v. Keystone Health Plan Cent., Inc.,
No. 2001-CV-05641, 2007 WL 201011, *2 (E.D. Pa. Jan. 19,
2007). Now that the class is certified, the case appears to be
headed towards trial.
B. The Love and Solomon Cases in Florida
The Grider case was just one of many similar cases that
were being filed around the country at the time. On May 22,
2003, three doctors from Alabama, one doctor from Puerto Rico,
and the medical societies of South Carolina, Louisiana, Northern
Virginia, and Puerto Rico, filed a complaint in the United States
District Court for the Southern District of Florida against sixty-
nine separate Blue Cross and Blue Shield companies throughout
the United States (“Blues defendants”), and their national trade
association, the Blue Cross and Blue Shield Association (“the
Association”). Capital and Highmark are among the specifically
named defendants, but Keystone is not.1 The case, which is now
1
Keystone Health Plan East, Inc., which is a wholly
owned subsidiary of Independence Blue Cross operating out of
the Philadelphia area, is named as a defendant in Love. The
complaint also purports to include the subsidiaries of all of the
named defendants, which ostensibly would cover Keystone
Health Plan Central. However, while some of those subsidiaries
9
known as the Love case (formerly, it was known as Thomas),
No. 03-21296 (S.D. Fla.), was eventually assigned to District
Judge Federico Moreno. It alleges a national conspiracy among
the Blues defendants, with the Association as the “hub,” to
bundle and downcode claims and to delay payments to providers
under contract with the defendant HMOs.
On November 4, 2003, thirteen chiropractic physicians,
podiatrists, physical therapists, and psychologists from Florida,
Texas, Oregon, and Arizona filed the action now known as
Solomon, No. 03-22935 (S.D. Fla.). The Solomon case involves
essentially the same claims as Love. As in Love, both Capital
and Highmark are named defendants. Although the complaint
purports to include the subsidiaries of all of the named
defendants as defendants themselves, it does not specifically list
Keystone as a defendant in the case.
The Love and Solomon cases are part of the consolidated
multidistrict proceedings being conducted in the United States
District Court for the Southern District of Florida (MDL No.
1334) pursuant to 28 U.S.C. § 1407. On March 27, 2004,
Highmark and Capital filed notice with the Judicial Panel on
Multidistrict Litigation pursuant to 28 U.S.C. § 1407(c)(ii)
arguing that the Grider case would be appropriate for transfer to
the Florida MDL proceedings as a tag-along action. Keystone
did not join the motion to transfer. On August 10, 2004, the
Chairman of the Judicial Panel on Multidistrict Litigation
are specifically listed, Keystone Health Plan Central is not a
specifically named defendant.
10
entered an order denying transfer of the Grider case to the
Florida MDL. The order explained that
while Grider shares some questions of fact with
actions in this litigation previously centralized in
the Southern District of Florida, inclusion of
Grider in MDL-1334 proceedings in the Southern
District of Florida will not necessarily serve the
convenience of the parties and witnesses and
promote the just and efficient conduct of this
litigation. We point out that Grider is nearly
three years old with a discovery cutoff date of less
than five months away. Moreover, alternatives to
Section 1407 transfer exist that can minimize
whatever possibilities there might be of duplicate
discovery, inconsistent pretrial rulings, or both.
Grider, 2007 WL 201011, *6 (quoting Judicial Panel on
Multidistrict Litigation Order Denying Transfer (Aug. 10,
2004)) (internal quotation marks omitted). Accordingly, the
Grider case continued to proceed independently of the Florida
MDL.
C. Grider Injunction Decision
On November 29, 2006, Highmark’s counsel announced
that Highmark had joined a “substantial majority” of Blues
defendants in Love who had decided to settle that litigation, and
that the Grider claims would be released under a broad release
negotiated as part of that settlement. However, because of the
confidentiality of the pending settlement agreement, Highmark’s
11
counsel would not discuss any details at that time. Plaintiffs’
counsel in Love subsequently confirmed that Highmark had
agreed to settle the Love litigation, and that the release in Love
would also release claims against all present and former
subsidiaries of any defendant in Love, which would include
Keystone.
After learning of this pending settlement agreement, the
Plaintiffs in Grider filed a motion for a preliminary injunction
against Highmark, Capital, and other co-defendants, to enjoin
them from settling the Grider claims as part of the Florida Love
and Solomon settlements. Subsequently, on January 19, 2007,
the United States District Court for the Eastern District of
Pennsylvania granted the injunction sought by the Plaintiffs. Its
order provides that:
IT IS ORDERED that plaintiffs’ motion for an
injunction is granted.
IT IS FURTH[E]R ORDERED that pursuant to
the All Writs Act, 28 U.S.C. § 1651(a), the court
enjoins defendants Keystone Health Plan Central,
Inc.; Highmark, Inc.; John S. Brouse; Capital
Blue Cross; James M. Mead; Joseph Pfister; their
attorneys, including, but not limited to, Michael
L. Martinez, Kimberly J. Krupka, Kathleen
Taylor Sooy, Sandra A. Girifalco, Mary J.
Hackett, Steven E. Siff and their respective law
firms; and anyone acting [o]n their behalf or in
concert with them, from settling, or attempting to
settle, the class and subclass claims in, or any part
12
of, the within litigation, which claims the
undersigned certified by Order and Opinion dated
December 20, 2006, and filed December 21,
2006, and which are pending before this court, in
any other forum without the express approval of
this court.
IT IS FURTHER ORDERED that the aforesaid
persons and firms are specifically enjoined from
settling, or attempting to settle, the certified class
and subclass claims in, or in any part of, the
within matter in the multidistrict litigation
currently pending before United States District
Judge Federico A. Moreno in case number MDL
No. 1334 in the United States District Court [for]
the Southern District of Florida, Miami Division,
in the cases known as Love, et al. v. Blue Cross
and Blue Shield Association, et al., case number
1:03-CV-21296; . . . Solomon, et al. v. Blue Cross
and Blue Shield Association, et al., case number
1:03-CV-22935; and any other related case or
cases.
Grider, 2007 WL 201011, *1.
In granting this injunction, the District Court explained
that “[i]n doing so, I am not enjoining Judge Moreno from
taking any action in his MDL cases in Florida. Nor am I
enjoining any of the parties in the Florida litigation, including
Highmark, Inc. and Capital Blue Cross, from settling any of the
Florida plaintiffs’ claims in the Florida litigation, which in my
13
view are different than the class claims which I certified in this
Pennsylvania litigation.” Id. at *2. The Court emphasized that
the Defendants “will still be able to settle the Love and Solomon
claims in Florida.” Id. at *25.
Indeed, the District Court arrived at this view, in part,
based on statements from the Defendants themselves, who had
argued at various times earlier in the proceedings that the Grider
case was distinct from the Florida MDL. In response to
discovery requests regarding the Florida MDL, for example,
Capital stated that the MDL “concerns unrelated defendants
with different payment policies, different payment practices, and
different payment software,” and explained that Love and
Solomon “do not involve defendant [Keystone Health Plan]
Central’s HMO.”
D. Proposed Settlement Agreement Reached in Love
On April 27, 2007, after engaging in court-ordered
mediation, the plaintiffs in the Love case announced that they
had reached a settlement with a majority of the named
defendants. The settlement provides that the settling defendants
will pay $128.3 million to members of the settlement class and
will adopt a range of new policies and procedures concerning
their business practices. In exchange, the settling defendants
will be released from all causes of action, judgments, and claims
of every kind “that 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 transactions and conduct giving rise to the
settlement agreement. Love v. Blue Cross & Blue Shield
14
Association et al. Settlement Agreement, at 88-89 (Apr. 27,
2007). The settlement class is defined in the agreement as:
[A]ny and all Physicians, Physician Groups and
Physician Organizations who provided Covered
Services to any Plan Member or any individual
enrolled in or covered by a Plan offered or
administered by any Person named as a defendant
in the Complaint or by any other primary licensee
of the [Blue Cross and Blue Shield Association]
or by any of their respective current or former
subsidiaries or Affiliates, in each case from May
22, 1999 through the Preliminary Approval Date.
The Class shall exclude: (I) all Persons who, in
accordance with the terms of this Agreement,
execute a timely request for exclusion (Opt-Out)
from the Class; and (ii) the Blue Parties, their
Affiliates and any of their officers, directors and
employees.
Id. at 6. Under this definition, the Love settlement class would
include Dr. Grider and nearly all of the Pennsylvania physicians
she represents in the Grider litigation.
In light of the progressing settlement activity in the
Florida MDL and the likelihood that it will impact the claims in
Grider, the affected parties have filed the appeals currently
before this Court. Specifically, currently before us are the
consolidated appeals of: (1) Capital, James Mead, Keystone,
and Joseph Pfister (No. 07-1231); (2) Highmark and John
15
Brouse (No. 07-1232); and (3) Crowell & Moring and its
attorneys (No. 07-1270).
II.
We exercise jurisdiction over this case pursuant to 28
U.S.C. § 1292(a)(1). When determining whether or not a
district court has the authority to issue an injunction under the
All Writs Act, we exercise plenary review. See, e.g., In re Diet
Drugs Prods. Liab. Litig. II, 369 F.3d 293, 304 (3d Cir. 2004).
Once that authority has been established, a district court’s
decision to issue such an injunction is reviewed for abuse of
discretion. Id. In addition, “[w]e review the terms of an
injunction for an abuse of discretion, underlying questions of
law receive de novo review, and factual determinations are
reviewed for clear error.” Id. (quoting In re Prudential Ins. Co.
of Am. Sales Practices Litig., 261 F.3d 355, 363 (3d Cir. 2001))
(internal quotation marks omitted).
III.
The All Writs Act provides that “[t]he Supreme Court
and all 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.” 28 U.S.C. §
1651(a). “The All Writs Act confers on courts ‘extraordinary
powers’ that are ‘firmly circumscribed.’” Alabama v. U.S. Army
Corps of Eng’rs, 424 F.3d 1117, 1132 (11th Cir. 2005) (quoting
ITT Cmty. Dev. Corp. v. Barton, 569 F.2d 1351, 1358 (5th Cir.
1978)).
16
Typically, the All Writs Act has been used by federal
courts to enjoin action by state courts that threatens the federal
court’s jurisdiction. In this context, the Anti-Injunction Act
restricts injunctions under the All Writs Act that have the effect
of staying a state court proceeding to those “expressly
authorized by Act of Congress, or where necessary in aid of [a
federal court’s] jurisdiction, or to protect or effectuate its
judgments.” 28 U.S.C. § 2283.2
2
We have repeatedly noted that the two statutes’ “parallel
‘necessary in aid of jurisdiction’ language is construed
similarly.” In re General Motors Corp. Pick-Up Truck Fuel
Tank Prods. Liab. Litig., 134 F.3d 133, 143 (3d Cir. 1998)
(citing Carlough v. Amchem Prods., Inc., 10 F.3d 189, 201 n.9
(3d Cir. 1993)). Nonetheless, these similar standards are not
identical. The Anti-Injunction Act authorizes writs that are
“necessary in aid of . . . jurisdiction.” 28 U.S.C. § 2283. The
All Writs Act, on the other hand, authorizes all writs “necessary
or appropriate in aid of . . . jurisdiction[].” 28 U.S.C. § 1651(a)
(emphasis added). The use of the disjunctive “or” followed by
the more expansive “appropriate” connotes a larger quantum of
injunctive authority than that provided by the Anti-Injunction
Act. See Reiter v. Sonotone Corp., 442 U.S. 330, 339 (1979)
(“Canons of construction ordinarily suggest that terms
connected by a disjunctive be given separate meanings, unless
the context dictates otherwise . . . .”). Thus, this Court has
recognized that “[i]nsofar as [the All Writs Act] also permits
writs ‘appropriate in aid’ of jurisdiction, the court’s authority to
issue writs is, if anything, broader than the exception contained
in the Anti-Injunction Act.” In re Diet Drugs, 282 F.3d at 239.
17
In In re Diet Drugs Products Liability Litigation I, 282
F.3d 220 (3d Cir. 2002) (“In re Diet Drugs”), for example, we
upheld an injunction that had been issued under the All Writs
Act to stop the parties from litigating in state court. There,
patients had brought various class action cases against diet drug
manufacturers after a link had been discovered between the
drugs and valvular heart disease, and the cases were
consolidated in the United States District Court for the Eastern
District of Pennsylvania. Id. at 225. After the consolidation, the
court issued an order conditionally certifying a class containing
six million members and approving a settlement agreement that
had been reached. As this was happening, however, one of the
plaintiffs whose case had been transferred to the MDL filed an
action in Texas state court, seeking to certify an independent
class. In so doing, that plaintiff sought an order from the Texas
court opting-out all of the members of this new class from the
Pennsylvania MDL settlement class, which was granted. Id. at
226. In response, the United States District Court for the
Eastern District of Pennsylvania issued an order enjoining class-
wide opt-outs and declaring the Texas court’s opt-out order null
and void. Id. at 228.
In upholding the injunction, we were careful to explain
the narrow circumstances under which such an order would be
appropriate: “Without more, it may not be sufficient that prior
resolution of a state court action will deprive a federal court of
the opportunity to resolve the merits of a parallel action in
federal court.” Id. at 234. Rather, “[t]he traditional notion is
that in personam actions in federal and state court may proceed
concurrently, without interference from either court, and there
is no evidence that the exception to § 2283 was intended to alter
18
this balance.” Id. (quoting Vendo Co. v. Lektro-Vend Corp., 433
U.S. 623, 642 (1977) (plurality opinion)) (internal quotation
marks omitted). As we explained,
[i]n ordinary actions in personam, “[e]ach court is
free to proceed in its own way and in its own
time, without reference to the proceedings in the
other court. Whenever a judgment is rendered in
one of the courts and pleaded in the other, the
effect of that judgment is to be determined by the
application of the principle of res adjudicata by
the court in which the action is still pending . . . .”
Id. (quoting Kline v. Burke Constr. Co., 260 U.S. 226, 230
(1922)).
Thus, we concluded in In re Diet Drugs that “it may not
be sufficient that state actions risk some measure of
inconvenience or duplicative litigation.” Id. (citing In re
Baldwin-United Corp., 770 F.2d 328, 337 (2d Cir. 1985)).
Rather, an injunction under the All Writs Act is appropriate only
when “the state court action threatens to frustrate proceedings
and disrupt the orderly resolution of the federal litigation.” Id.
(quoting Winkler v. Eli Lilly & Co., 101 F.3d 1196, 1202 (7th
Cir. 1996)). That is, “the state action must not simply threaten
to reach judgment first, it must interfere with the federal court’s
own path to judgment.”3 Id.
3
As the Appellees point out, we did recognize in In re
Diet Drugs that complex class action cases are one “category of
federal cases for which state court actions present a special
19
Of course, to the extent that this framework is useful in
the current context, it is important to note that we are dealing
with the use of the All Writs Act to enjoin another federal court,
not a state court. Although the Appellants repeatedly resort to
the rule explained above that parallel proceedings do not disturb
the jurisdiction of either court, we made it clear long ago that
this rule generally applies only when one court is a state court
and the other is a federal court. As we explained, the “parallel
threat to the jurisdiction of the federal court.” 282 F.3d at 235.
As we explained, “[u]nder an appropriate set of facts, a federal
court entertaining complex litigation, especially when it
involves a substantial class of persons from multiple states, or
represents a consolidation of cases from multiple districts, may
appropriately enjoin state court proceedings in order to protect
its jurisdiction.” Id. This is so because “maintaining ‘the
federal court’s flexibility and authority to decide’ such complex
nationwide cases makes special demands on the court that may
justify an injunction otherwise prohibited by the Anti-Injunction
Act.” Id. (quoting Carlough, 10 F.3d at 202). However, we
were careful to emphasize that “[t]his is not to say that class
actions are, by virtue of that categorization alone, exempt from
the general rule that in personam cases must be permitted to
proceed in parallel.” Id. at 236. Rather, “[w]hat is ultimately
important, in any event, is that in both [in rem and in personam]
cases state actions over the same subject matter have the
potential to ‘so interfer[e] with a federal court’s consideration or
disposition of a case as to seriously impair the federal court’s
flexibility and authority to decide the case.’” Id. (quoting Atl.
Coast Line R.R. Co. v. Bhd. of Locomotive Eng’rs, 398 U.S.
281, 295 (1970)).
20
proceedings” rule “clearly ha[s] no application to a situation in
which two actions are pending in courts of equal dignity within
the judicial system of a single sovereignty.” Crosley Corp. v.
Hazeltine Corp., 122 F.2d 925, 929 (3d Cir. 1941). In any
event, this is not important here because Grider and the Florida
MDL cases are not actually “parallel” proceedings, as we have
traditionally used that term. To be considered parallel
proceedings, “[t]he one must be materially on all fours with the
other . . . . [T]he issues ‘must have such an identity that a
determination in one action leaves little or nothing to be
determined in the other.’” Smith v. S.E.C., 129 F.3d 356, 361
(6th Cir. 1997) (quoting Congress Credit Corp. v. AJC Int’l,
Inc., 42 F.3d 686, 689 (1st Cir. 1994)). Although there is
overlap between Grider and the Florida MDL cases, none of the
parties contend that they are identical in this regard.
Although In re Diet Drugs concerned an injunction
against action in a state court – and thus involved the terms of
the Anti-Injunction Act – it is still instructive in the instant case.
Indeed, the lack of cases in which the All Writs Act has been
used to enjoin settlement efforts in another federal court is
telling. It is clear that the Act is generally used to prohibit
activities in another court that threaten to undermine a pending
settlement in the enjoining court. See, e.g., Carlough v.
Amchem Prods., Inc., 10 F.3d 189, 202-04 (3d Cir. 1993)
(upholding an All Writs Act injunction directed at a state court
action that threatened to derail a pending settlement in a
complex multidistrict class action case). When the Act has been
used to block settlement efforts in another court, it is typically
because a party was deliberately using that forum to circumvent
a pending settlement agreement in the enjoining court. This was
21
the case in both In re Lease Oil Antitrust Litigation, 48 F. Supp.
2d 699 (S.D. Tex. 1998), and In re Managed Care Litigation,
236 F. Supp. 2d 1336 (S.D. Fla. 2002).
In In re Lease Oil Antitrust Litigation, an MDL Panel had
consolidated a series of cases asserting violations of federal
antitrust laws in the United States District Court for the
Southern District of Texas. After this consolidation, other
plaintiffs filed an antitrust suit in Alabama state court, which did
not include the federal claims. In the state forum, a settlement
was proposed that would have released the federal claims
pending in the Texas MDL. 48 F. Supp. 2d at 701. Facing this
situation, the Texas MDL court explained that an injunction was
necessary “to protect its jurisdiction over the exclusively federal
antitrust claims: the Court needs to act in order to prevent the
parties before it from possibly pursuing an inadequate or
collusive settlement in state courts which would release the
apparently stronger claims in the instant case.” Id. at 704.
Thus, the court enjoined the parties before it from entering into
settlements in any other forum without its approval.
The clearest example of a court applying the All Writs
Act to enjoin settlement efforts in another federal court actually
came in the context of the Florida MDL in this very case. In In
re Managed Care Litigation, the United States District Court for
the Southern District of Florida found that one of the defendants
had attempted to circumvent its authority by filing and
immediately attempting to settle a suit in the United States
District Court for the Southern District of Illinois. 236 F. Supp.
2d at 1338-39. The court explained that
22
[a]dmittedly, in most instances, the issuance of an
injunction would be in order to protect a
settlement. Here, instead this Court seeks to
prevent a settlement. This Court is well aware of
the strong public interest favoring settlements.
However, it cannot turn a blind eye to the
underhanded maneuvers CIGNA took to obtain
this settlement agreement. CIGNA snookered
both this Court and Judge Murphy in Illinois in an
obvious attempt to avoid this Court’s jurisdiction.
Id. at 1342 (emphasis in original). Accordingly, the Florida
court, emphasizing its role as an MDL court, enjoined CIGNA
from participating in the Illinois settlement.
Based on the limited precedent in this area, there does not
appear to be any basis for the injunction in this case. Although
significant resources have been invested in the Grider litigation
to this point, there is simply no support for the proposition that
a court may enjoin parties from participating in or reaching a
bona fide settlement in another federal court that may dispose of
claims before it – particularly when there is no pending
settlement in the enjoining court and the other federal court is an
MDL court charged with attempting to reach a global
settlement.4
4
The Appellees argue that the injunction does not in any
way interfere with the Florida MDL because the claims in
Grider involve only Keystone, which is not a defendant in Love
and Solomon. As explained above, the complaints in the Florida
cases purport to include the subsidiaries of all of the named
23
First, unlike in In re Lease Oil Antitrust Litigation and In
re Managed Care Litigation, there is no evidence of any
collusion or wrongdoing by the Grider Defendants. Rather,
there is a consolidated MDL in Florida that appears to have
reached a settlement on claims similar to the ones in Grider after
court-ordered mediation. Indeed, because of the injunction
issued by the District Court, attorneys from Capital and
Highmark were not even at the table when the existing
settlement agreement was formed, subduing any suggestion that
they were trying to manipulate the settlement to deliberately
affect the Grider claims.
defendants, which include Capital and Highmark. However,
while some of those subsidiaries are specifically listed,
Keystone Health Plan Central, Inc. is not a specifically named
defendant. Regardless of whether or not Keystone could be
called into court as a defendant on this basis, it is clear that the
settlement agreement could still settle claims with those
subsidiaries in an attempt to reach a global settlement. Indeed,
the settlement agreement as it is currently written releases the
settling defendants themselves as well as their “present and
former parents, divisions and Affiliates and each of their
respective current or former officers, directors, employees,
agents, insurers and attorneys.” Love v. Blue Cross & Blue
Shield Association, et al. Settlement Agreement, at 88 (Apr. 27,
2007). Thus, it is clear that, although the claims against
Keystone may not be as squarely presented in the Florida MDL
as they are in Grider, they are tied up with the MDL court’s
settlement efforts.
24
Second, “[a]n injunction under the All Writs Act invokes
the equitable power of the court; thus, as is similarly the case for
traditional injunctions, a court may not issue an injunction under
the All Writs Act if adequate remedies at law are available.”
U.S. Army Corps of Eng’rs, 424 F.3d at 1132 (citing Rosen v.
Cascade Int’l, Inc., 21 F.3d 1520, 1526 n.13 (11th Cir. 1994);
Klay v. United Healthgroup, Inc., 376 F.3d 1092, 1100-01 (11th
Cir. 2004)). Under this standard, the general rule is that “if a
party will have opportunity to raise its claims in the concurrent
federal proceeding sought to be enjoined, that concurrent
proceeding is deemed to provide an adequate remedy at law.”
Id.; see also Porto Rico Tel. Co. v. Puerto Rico Commc’n Auth.,
189 F.2d 39, 41 (1st Cir. 1951).
Here, that adequate remedy at law is Federal Rule of
Civil Procedure 23(e), which provides that “[a]ny class member
may object to a proposed settlement, voluntary dismissal, or
compromise that requires court approval under Rule
23(e)(1)(A),” and that “[a]n objection made under Rule
23(e)(4)(A) may be withdrawn only with the court’s approval.”
Fed. R. Civ. P. 23(e)(4)(A) & (B). To the extent that the actual
proposed settlement in Love affects the Grider class members
unfairly, those class members may object, and Judge Moreno
can deal with the objections. Indeed, in In re Managed Care
Litigation, Judge Moreno explained that courts “must operate on
the basis of the assumption that all federal judges follow the law
and protect the rights of the class members in accordance with
Rule 23 of the Federal Rules of Civil Procedure.” 236 F. Supp.
2d at 1342-43.
25
The Appellees have not explained why Rule 23(e) is not
an adequate remedy at law that would militate against injunctive
relief under the All Writs Act. They have argued instead that
they cannot avail themselves of the protections of Rule 23(e)
because they are not members of the Love class. But if it is true
that the Grider class members are not members of the Love
settlement class, any settlement reached in Love would not
affect the Grider case at all because the Grider class members
would not have to sign a release of claims. Under these
circumstances, there would be no need for an injunction.
This is not to say that there are not valid concerns with
allowing the Grider Defendants to proceed with the Florida
settlement discussions, even though there is no evidence of
collusion to this point. Although everyone involved in this case
admits there is overlap between the claims in Grider and the
claims in Love, there are aspects of the Grider claims that are
not at issue in Love. Primarily, the Love claims do not cover the
Defendants’ behavior with respect to capitation payments that
is at issue in Grider. Rather, Love is limited to the Defendants’
procedures for paying fee-for-service reimbursements. In
addition, the relevant dates of the class periods differ. In
Grider, the class includes anyone who rendered services from
January 1, 1996 through October 5, 2001, whereas the Love
settlement class period is from May 22, 1999 through the date
when the settlement is preliminarily approved.5 But any fear
5
In addition to these two distinctions, the Appellees
repeatedly argue that there is a major difference between the
cases because the reimbursement systems used by Keystone are
not used by the defendants in Love. That is, the Love defendants
26
that the Defendants may use future settlement discussions in
Florida to release themselves from liability without ever having
to answer for certain claims that are unique to the Grider
litigation is assuaged by the protections contained in Rule 23(e).
Finally, our conclusion that the injunction issued by the
District Court was an abuse of discretion is buttressed by the
fact that the court it sought to enjoin is the site of a multidistrict
consolidation on the matters at issue in Grider. The very
purpose of such a consolidation is to conserve judicial resources
by resolving as many claims as possible. See In re Managed
Care Litig., 236 F. Supp. 2d at 1342-43. Thus, although the
Grider case itself is not part of the MDL, to the extent that the
MDL court can achieve a global settlement that appropriately
and fairly deals with a range of claims, other federal courts
should be willing to let it do so absent some indication of
collusion.
Given the facts of this case, we are compelled to
conclude that the District Court abused its discretion by
do not use software from Synertech to process claims, whereas
Keystone does. However, this is a spurious distinction.
Synertech is not a party in this case. Instead, the claims asserted
by the Grider plaintiffs target the behavior of Keystone (i.e.,
downcoding and claim bundling) that happened to be
implemented by the software of Synertech. There is no
argument that Synertech’s involvement affected the downcoding
and claim bundling in a way that made it materially different
than the downcoding and claim bundling that was averred in
Love.
27
resorting to the All Writs Act.6 We have no doubt that the
injunction issued in this case was a good faith attempt by the
District Court to keep the Grider claims before it after presiding
over many years of discovery and pre-trial disputes. But we do
not believe that this is an appropriate instance in which to use
the power conferred by the All Writs Act. This is essentially a
case where another court has “threaten[ed] to reach judgment
first,” not where action in another court has “interfere[d] with
the [enjoining] federal court’s own path to judgment.” In re
Diet Drugs, 282 F.3d at 234. That is, there is no evidence that
the Appellants were trying to swindle the system to avoid the
District Court’s jurisdiction by “settling on the cheap” in another
6
The District Court also supported its decision to issue
the injunction in this case by citing the so-called “first filed”
rule, as discussed in Crosley Corp., 122 F.2d 925. However,
this rule has no application in the circumstances of this case.
Rather, the later-filed case must be “truly duplicative of the suit
before [the court].” Smith, 129 F.3d at 361. That is, “[t]he one
must be materially on all fours with the other . . . . [T]he issues
‘must have such an identity that a determination in one action
leaves little or nothing to be determined in the other.’” Id.
(quoting Congress Credit Corp., 42 F.3d at 689). In Crosley,
for example, the two suits at issue were filed by the same parties
involving the same declaratory judgment in a patent case. Those
simply are not the facts of the instant case. Here, the Love and
Solomon cases were filed by plaintiffs who have no involvement
whatsoever with the Grider case. And the claims in Love and
Solomon are neither identical claims, nor compulsory counter-
claims in Grider. As such, the District Court’s injunction order
cannot be supported by citing the first filed rule.
28
forum. In addition, the injunction has had the effect of limiting
the ability of an MDL court to comprehensively manage the
matter before it, undermining the very purpose of such a
consolidation. Accordingly, we conclude that the District Court
abused its discretion by using the All Writs Act to enjoin the
parties in this case.7
IV.
For the forgoing reasons, we will vacate the injunction
issued by the District Court.
7
Because we conclude that the District Court abused its
discretion by issuing the injunction in this case, we do not
address the remainder of the Appellants’ arguments.
29