• Recent 11th Circuit Opinion Shapes Future of Managed Care Class Action Litigation
  • May 7, 2010
  • Law Firm: Fowler White Boggs P.A. - Tampa Office
  • On March 30, 2010, the Eleventh Circuit held that class certification was improper where approximately 260 network healthcare providers located throughout the southeastern United States sought to certify a class against a health maintenance organization (“HMO”) that implemented a new payment structure that negatively impacted the providers. See Sacred Heart Health Sys., Inc., et al. v. Humana Military Healthcare Servs., Inc., No. 08-16430 (11th Cir. Mar. 30, 2010). The Defendant, Humana Military Healthcare Services, Inc. (“Humana”), petitioned for interlocutory review of the class certified by the U.S. District Court for the Northern District of Florida. Id. at 13. The sole issue on appeal was whether the requirements of Federal Rule of Civil Procedure 23(b)(3) had been satisfied. Id. at 14. The court ultimately reversed the district court’s class action certification and held that the use of the class action methodology would be “either singularly inefficient . . . or unjust,” as a vehicle for litigating the claims of 260 putative hospital plaintiffs in a contract action. Sacred Heart, at 50 (internal citations omitted).

    Principally, Humana argued that, if allowed to proceed as a single class, the litigation would be overwhelmed by individualized issues flowing from the variations in the network contracts which contained at least 33 different payment clauses. The plaintiffs attempted to organize these variants into six subclasses in accordance with the language of the individual payment clauses. The court found that the use of proposed subclasses failed to demonstrate the predominance requirement of Rule 23(b)(3) and would “mask a staggering contractual variety.” Id. at 29 (“The sixth proposed subclass -- a miscellaneous residue of numerous payment clauses that are insusceptible of ready classification -- alone is fatal to predominance.”).

    Additionally, the court discussed the application of the various state law treatments of extrinsic evidence on the interpretation of the individual network agreements. Id. at 31. In its analysis, the court found that beyond the difficulty of managing the variation in the material terms of the individual agreements, the trial court would be required to evaluate the “significant quantities of individualized extrinsic evidence” in connection with Humana’s affirmative defenses and the plaintiffs’ responses to those defenses. Id. at 47. The analysis of the extrinsic evidence would be further complicated by the substantial variations among the bodies of applicable state law. Id.

    In reversing the district court’s class certification, the court held “the lack of predominance belies any suggestion that a fair administration of the class claims could save the resources of both the court and the parties.” Id. at 49. Ultimately, the case was remanded to the district court for a determination of whether any subset of the claims or class members might be susceptible to fair and efficient class treatment in accordance with the principles set forth.