That’s what plaintiffs’ lawyers will receive for a federal class action that was dismissed on summary judgment for lack of evidence. The Eleventh Circuit had previously pooh-poohed defendants’ claims that the potentially bankrupting scope of the class action would force them into extortionate settlements. For refusing to pay protection money, United Healthcare and Coventry avoided paying millions of dollars in settlement money, but still had to pay their own attorneys and experts millions—and faced substantial risk that a court and a jury would get the decision wrong. Details at today’s Point of Law.
$183 million for a meritless claim
That’s what plaintiffs’ lawyers will receive for a federal class action that was dismissed on summary judgment for lack of evidence. The Eleventh Circuit had previously pooh-poohed defendants’ claims that the potentially bankrupting scope of the class action would force them into extortionate settlements. For refusing to pay protection money, United Healthcare and Coventry avoided […]
3 Comments
I’m not sure I would characterize this as meritless.
Plaintiffs settled with six defendants for $583 million and changes in operating procedure, which the judge thinks will make the system more efficient and fair. Quoting the judge: “The settlements with the other defendants will undoubtedly cause the remaining defendants to offer the physicians a similarly efficient and fair service . . .”
In addition, the case is far from done. Plaintiffs may appeal, as they have a right to. RICO laws are highly subjective and a different judge could easily overturn this ruling. The judge’s opinion itself reflects ambivalence. In addition, the claims of patients have not yet been heard and all the claims can probably be pursued under other legal theories. Even though hundreds of millions of dollars have been spent on lawyers, we are far from learning where the law lies in this dispute.
I’m hesitant to call this another example of lawyers filing a lawsuit with no purpose other that putting money in their pockets. The HMO disputes may be important enough to be worth a billion dollars of legal fees.
However, at some point I think congress will have to step in and resolve the HMO disputes via legislation.
Your analysis is faulty.
1) Both settling plaintiffs and settling defendants have an incentive to overstate the benefits and value of the settlement to encourage the judge to approve the settlement.
2) This almost certainly happened here. HMOs compete vigorously to sign medical practices; when they fail to do so, they lose customers. There is no reason to think that litigants are more likely to come up with a more “efficient” system for resolving disputes than these market pressures did; the judge’s statement to the contrary merely demonstrates a fundamental misunderstanding of how markets work. We can reasonably infer that (a) if the settlements did require more efficient procedures, these were procedures that would have been adopted anyway; or (b) the settlements forced the HMOs into more inefficient procedures whose cost will be passed on to consumers.
3) The decision had nothing to do with the vagaries of RICO, but with the failure of the plaintiffs to have a speck of evidence supporting their claims.
4) Your analysis ignores the stated value of the settlements relative to the damages claimed. By settling for pennies on the dollar, the lawyers demonstrated that this was a case of legalized extortion, rather than a meritorious case. The settling companies were buying protection because they didn’t trust the legal system to arrive at the correct answer.
…”this was a case of legalized extortion”…
Is this any surprise? Attorneys making an attempt to overpad their own pocket books?
Industry norm.