[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________ FILED
U.S. COURT OF APPEALS
No. 09-11012 ELEVENTH CIRCUIT
MAY 12, 2010
________________________
JOHN LEY
CLERK
D.C. Docket No. 00-01334 MD-FAM
IN RE:
MANAGED CARE LITIGATION
____________________________
DOCTORS HEALTH, INC.,
Interested Party-Appellant,
versus
AETNA,
AETNA U.S. HEALTHCARE, INC.,
Defendants-Appellees.
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(May 12, 2010)
Before TJOFLAT and COX, Circuit Judges, and KORMAN,* District Judge.
*
Honorable Edward R. Korman, United States District Judge for the Eastern District of New
York, sitting by designation.
PER CURIAM:
We consider in this appeal whether the district court properly enjoined Doctors
Health, Inc. (“Doctors Health”) from pursuing a breach of contract claim against
NYLCare Health Plans of the Mid-Atlantic, Inc. (“NYLCare”) that resulted in a
judgment for Doctors Health in bankruptcy court. The district court determined that
the claim had been released in a settlement agreement in Shane v. Humana, Inc., et
al., a federal class action lawsuit brought by medical providers against managed-care
companies. We hold that the claim at issue was not released and vacate the district
court’s order enjoining Doctors Health from pursuing that claim.
I. BACKGROUND AND PROCEDURAL HISTORY
Beginning in late 1997, Doctors Health managed NYLCare’s Medicare HMO
plan in Maryland, Virginia, and the District of Columbia, pursuant to a three-year
contract between those parties. In July 1998, NYLCare became a subsidiary of Aetna
U.S. Healthcare, Inc. (“Aetna”). Shortly thereafter, NYLCare determined that it
would discontinue the Medicare HMO plan in Doctors Health’s geographic region
and informed the government that it would not renew its Medicare contracts for that
region as of December 31, 1998. NYLCare then notified Doctors Health that, as of
January 1, 1999, there would be no Medicare HMO plan for Doctors Health to
manage.
2
In November 1998, Doctors Health filed, in Maryland, a Petition for Relief
under Chapter 11 of the United States Bankruptcy Code. NYLCare submitted a proof
of claim in the bankruptcy case. Doctors Health did not pay the claim. Instead, the
trustee filed an adversary action against NYLCare, alleging that NYLCare had
breached its Medicare HMO management contract with Doctors Health and had
caused Doctors Health damages in excess of NYLCare’s claim in the bankruptcy
case. (R.1-5879, Ex. A.) The adversary action was tried at the end of 2001, and the
bankruptcy court took the case under advisement.
In 2000 (while the bankruptcy case was pending but before the adversary
action was tried), numerous putative class action lawsuits were initiated in federal
district courts against health insurance companies in the managed-care industry.
Those lawsuits were transferred by the Judicial Panel on Multidistrict Litigation to
the Southern District of Florida and consolidated for pretrial proceedings. The
consolidated cases moved forward as In re Managed Care Litigation, MDL 1334, on
two tracks: the Subscriber Track (cases brought on behalf of subscribers or members
of health plans) and the Provider Track (cases brought on behalf of physicians and
other providers of healthcare services).
In September 2002, the claims asserted in the Provider Track cases were
brought in a second amended consolidated class action complaint styled Shane v.
3
Humana, Inc., et al. Doctors Health was not a named party. The Shane plaintiffs
were certified as a nationwide class.
In May 2003, Aetna, Inc. (and all its subsidiaries, including NYLCare) entered
into a settlement with the Shane plaintiff class. The terms of that settlement were
memorialized in a settlement agreement dated May 21, 2003 (“the Agreement”).
(R.1-2000, Ex. B.) The Agreement defined the class as “any and all Physicians,
Physicians 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 of their
respective current or former subsidiaries or affiliates, in each case from August 4,
1990 through [May 30, 2003].” (Id. at 4, ¶ 1.15; R.1-2011.) Physician Organization
was defined as “any association, partnership, corporation or other form of
organization (including without limitation independent practice associations and
physician hospital organizations) that arranges for care to be provided by Physicians
organized under multiple taxpayer ID numbers, to Plan Members.” (R.1-2000, Ex.
B at 10, ¶ 1.70.)
Under the Agreement, potential members of the class were to be given notice
of the proposed settlement and an opportunity to opt out of the class and the
Agreement. (R.1-2011 at 7.) Notice was to be given through the mail to the potential
4
class members’ last known addresses and through publication. (Id. at 5-6.) Those
class members who did not opt out released Aetna and all its subsidiaries from all
claims “arising on or before the Preliminary Approval Date, that are, were or could
have been asserted against any of the Released Parties based on or arising from the
factual allegations of the Complaint . . . .” (R. 1-2000, Ex. B at 72, ¶ 13(a).) The
district court granted final approval of the settlement, on the terms stated in the
Agreement, on October 24, 2003. (R.1-2533.) On November 6, 2003, the district
court clarified its October 24, 2003 order and enjoined class members who did not opt
out from the settlement from pursuing any released claims against Aetna and its
subsidiaries. (R.1-2570 at 2-4.) The court retained jurisdiction over all matters
relating to the interpretation, administration, and consummation of the Agreement and
enforcement of the injunctions. (Id. at 9.)
In April 2005, the bankruptcy court issued its ruling in the adversary action.
The court disallowed NYLCare’s proof of claim in its entirety and awarded Doctors
Health contract damages of $21.3 million. (R.1-5879, Ex. C at 10.) Now a subsidiary
of Aetna, NYLCare took two courses of action: (1) as NYLCare, it appealed to the
District of Maryland; and (2) as Aetna, it filed a Motion to Show Cause in the
Southern District of Florida seeking an order enforcing the release in the Agreement
as a bar to the bankruptcy court’s judgment. Doctors Health responded with an
5
emergency motion in the bankruptcy court, seeking an injunction requiring Aetna to
withdraw its motion in the Southern District of Florida. The bankruptcy court granted
that motion. (R.1-5879, Ex. B.) But, the Maryland district court vacated the
bankruptcy court’s injunction and stayed the appeal of the bankruptcy court’s rulings
on NYLCare’s proof of claim and Doctors Health’s breach of contract judgment
pending consideration by the Southern District of Florida as to whether the
Agreement operated to release the claim Doctors Health pursued against NYLCare
in the adversary action. (R.1-5879, Ex. C.)
In the Southern District of Florida, the judge who approved the settlement
between the Shane plaintiffs and Aetna considered whether Doctors Health’s claims
against NYLCare were released by operation of the Agreement. (R.1-5960.) He
concluded that Doctors Health was a member of the settlement class, that Doctors
Health received adequate notice of the settlement, and that Doctors Health failed to
timely opt out of the settlement. (Id. at 2.) He further concluded that the claim
Doctors Health had pursued against NYLCare in the adversary action was released
by the Agreement. (Id.) And, he enjoined Doctors Health from pursuing that claim.
(Id.)
6
II. ISSUES ON APPEAL & CONTENTIONS OF THE PARTIES
Doctors Health appeals the Southern District of Florida injunction.1 Doctors
Health contends that the claim it prosecuted in the adversary action was not released
because: (1) Doctors Health was not a member of the settlement class and therefore
not a party to the Agreement; (2) Doctors Health was not given adequate notice of the
settlement or the Agreement; and (3) the scope of the release of claims in the
Agreement does not include the claim Doctors Health pursued in the adversary action.
In the alternative, Doctors Health contends that, in the interests of justice, it should
be given the opportunity to opt out of the settlement. Finally, Doctors Health
contends that Aetna should be estopped from asserting that Doctors Health’s claim
against NYLCare was released by the Agreement because Aetna did not make that
argument until after the judgment in the adversary action.
Aetna contends that the district court did not abuse its discretion by enjoining
Doctors Health’s pursuit of the claim it prosecuted against NYLCare in the adversary
action because Doctors Health was a Physician Organization member of the class,
received adequate notice of the settlement, and did not timely opt out of the
1
The parties assert that we have jurisdiction to consider this appeal pursuant to 28
U.S.C. § 1292(a)(1). We agree. The order appealed from grants or modifies an injunction. By its
own terms, the order grants a new injunction against Doctors Health. And, even if the order is
considered one clarifying the injunction issued by the district court on November 6, 2003, it is a
modification of that existing injunction. Birmingham Fire Fighters Ass’n 117 v. Jefferson County,
280 F.3d 1289, 1293 (11th Cir. 2002).
7
Agreement. Aetna also contends that the release language of the Agreement is
sufficiently broad to cover the claim Doctors Health pursued in the adversary action.
Aetna opposes Doctors Health’s request for an opportunity to opt out after the
deadline.
III. STANDARDS OF REVIEW
We review a district court’s injunction of related litigation pending in another
federal court for abuse of discretion. See Adams v. S. Farm Bureau Life Ins. Co., 493
F.3d 1276, 1285 (11th Cir. 2007) (“‘In reviewing the district court’s decision to grant
an injunction, including an injunction under the All Writs Act, we apply an abuse-of-
discretion standard.’”) (quoting Klay v. United Healthgroup, Inc., 376 F.3d 1092,
1096 (11th Cir. 2004)); Alabama v. U.S. Army Corps of Eng’rs, 424 F.3d 1117, 1132
n.22 (11th Cir. 2005) (explaining that “injunction enjoining related federal
proceedings” in class-action context is properly issued under All Writs Act and citing
In re Managed Care Litig., 236 F. Supp. 2d 1336 (S.D. Fla. 2002)).
This court also reviews denials of requests for extensions of time to opt out and
denials of assertions of judicial estoppel under the abuse-of-discretion standard. See
Stephens v. Tolbert, 471 F.3d 1173, 1175 (11th Cir. 2006); Grilli v. Metropo. Life Ins.
Co., 78 F.3d 1533, 1538 (11th Cir. 1996).
8
“A district court by definition abuses its discretion when it makes an error of
law.” Koon v. United States, 518 U.S. 81, 100, 116 S. Ct. 2035, 2047 (1996) (citation
omitted), superseded by statute on other grounds as noted in United States v.
Mandhai, 375 F.3d 1243, 1249 (11th Cir. 2004). We consider questions of law de
novo. Tally-Ho, Inc. v. Coast Cmty. College Dist., 889 F.2d 1018, 1022 (11th Cir.
1989). But, the district court’s factual findings will be reversed only if clearly
erroneous. Id. (citing E. Remy Martin & Co., S.A. v. Shaw-Ross Int’l Imports, Inc.,
756 F.2d 1525, 1529 (11th Cir. 1985)); see also Gold Coast Publ’ns, Inc. v. Corrigan,
42 F.3d 1336, 1343 (11th Cir. 1994).
IV. DISCUSSION
We find resolution of one issue in this case dispositive of the entire appeal. We
assume (but do not decide) that Doctors Health falls within the Agreement’s
definition of a member of the class and that Aetna gave Doctors Health adequate
notice of the settlement and the Agreement. Nevertheless, we hold that the district
court’s injunction must be vacated because the Agreement does not release the claim
Doctors Health pursued against NYLCare in the adversary action.
It is clear from the Agreement that only claims “based on or arising from the
factual allegations of the [Shane] Complaint” were released by virtue of the
settlement. (R.1-2000, Ex. B at 72, ¶ 13(a).) Review of the Shane complaint reveals
9
that all of its factual allegations concern the defendant managed-care companies’
financial relationships with the providers of medical services. The gist of the
complaint is that defendants, including Aetna, did not treat providers of medical
services fairly–failing to pay them what they were owed when covered and medically
necessary services were rendered; manipulating the capitation system2 to underpay
medical providers; and using their market dominance to coerce medical providers into
accepting contract terms unfair to medical providers. The complaint includes
allegations that the defendants denied payments to physicians on the basis of financial
criteria rather than lack of coverage or medical necessity; used automated programs
to systematically manipulate reimbursement codes and artificially reduce the amount
paid physicians; delayed payments to physicians; and covertly manipulated the
capitation system to undermine its actuarial basis and deprive physicians of payments
to which they were entitled.3 (R.1-1607 ¶¶ 5-7, 84-111.)
2
Under a capitation system, medical providers are paid based on the number of patients they
agree to treat rather than on a fee-for-service basis. (R.1-1607 ¶ 102.)
3
The Shane complaint alleges that, while capitation rolls are supposed to include all the
patients enrolled in a managed-care plan and medical providers were to be paid on a per-enrollee
basis, the managed-care companies manipulated the capitation rolls to include only those enrollees
who sought treatment, “thus dramatically altering the actuarial underpinnings of the capitation
agreement by withholding payments for ‘well’ members that are needed to offset the cost of treating
the sick.” (R.1-1607 ¶ 105.) The complaint also alleges that the managed-care companies inflated
charges against the capitation payments due medical providers based upon false drug costs and used
false year-end statements to avoid paying contractually-required incentives to the medical providers.
(Id. ¶¶ 106-09.)
10
The Shane complaint also alleges that the defendants, through their
“overwhelming economic power and market dominance,” coerced plaintiffs “into
providing care under Defendants’ policies and practices on a ‘take it or leave it’ basis,
and providing care on a capitated as opposed to fee for service basis pursuant to ‘all
products’ requirements.” (Id. ¶ 113.) The complaint further alleges:
Defendants further wield their economic power and market dominance
in a coercive manner by reserving the right to unilaterally amend
contracts with physicians, refusing to provide information concerning
pricing or fee structures to Plaintiffs or class members, and failing to
provide any feasible mechanism for review of the automated payment
reductions – all in furtherance of the scheme described above.
(Id. ¶ 114.) Specific to Aetna, the Shane Complaint alleges an instance of extortion
in which Aetna allegedly threatened an identified physician with telling his patients
that he had resigned from the Aetna network if he did not sign a contract with Aetna
within forty-eight hours. When the physician asked for clarification of some
contractual provisions and a fee schedule, Aetna terminated its relationship with him,
“threatening the viability of his practice and ending numerous longstanding
physician/patient relationships.” (Id. ¶¶ 156–57.)
The claim pursued by Doctors Health in the adversary action shares no factual
basis with the Shane complaint. While Shane alleged that the managed-care
companies underpaid providers of medical services, the breach of contract claim
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resolved in the adversary action hinged on Doctors Health’s allegation that NYLCare
breached its Medicare HMO management agreement with Doctors Health by failing
to renew its Medicare agreements with the government and then prematurely
terminating the Medicare HMO management agreement it had with Doctors Health.
Indeed, in awarding Doctors Health more than $21 million, the bankruptcy court
found “from the evidence that the true reason for the decision not to renew the HCFA
contract was a business decision by Aetna to discontinue its NYLCare65 Plan, which
amounted to a breach of contract.” (R.1-5879, Ex. H at 38.)
While the adversary action complaint does contain some allegations regarding
payments to providers of medical services, those allegations are that NYLCare
breached its agreement with Doctors Health by failing to pay medical providers the
lowest negotiated rate for their services. (R.1-5879, Ex. A ¶¶ 35-36.) In other words,
unlike the plaintiffs’ allegations in Shane, Doctors Health alleged that NYLCare
overpaid medical providers. Further, the Shane complaint makes no allegations
regarding the NYLCare Medicare HMO management contract. Indeed, the Shane
complaint makes no allegations whatsoever regarding any contracts between
managed-care companies like NYLCare and Aetna and companies like Doctors
Health that administered or managed the managed-care companies’ insurance plans.
12
Aetna also argues that, even if the factual allegations of the Shane complaint
do not support the claim Doctors Health brought in the adversary action, the Shane
complaint could have been amended to allege the necessary facts. But the Agreement
is unambiguous. It does not release claims that could have been asserted based on or
arising out of factual allegations that could have been added by amendment to the
Shane Complaint. The release language is clear; it concerns only claims that could
have been asserted “based on or arising from the factual allegations of the [Shane]
Complaint.” (R.1-2000, Ex. B at 72, ¶ 13(a).) The only reasonable reading of this
clause is that the scope of claims released is limited to those claims that could have
been asserted based on or arising out of the factual allegations of the existing Shane
complaint (the second amended consolidated class action complaint), not some
hypothetical complaint that might result from amendment.4
4
Whether the Shane complaint could have been amended to state facts supporting the claim
pursued in the adversary action is doubtful. Under the Medicare HMO management contract
between NYLCare and Doctors Health, Doctors Health was essentially NYLCare’s subcontractor.
(R.1-5879, Ex. A ¶¶ 11-13.) In light of that relationship, we question whether Doctors Health shared
the medical provider class members’ interests in Shane and whether amendment of the Shane
complaint to state facts supporting the claim Doctors Health pursued in the adversary action could
have been accomplished in a manner that would satisfy Federal Rule of Civil Procedure 23. See Fed.
R. Civ. P. 23(a)(3) & (4) (requiring that class representatives’ claims are typical of the claims of the
class members and that class representatives fairly and adequately protect the interests of the class).
Indeed, the Shane complaint states that the functions performed by entities like Doctors
Health are “delegated functions on behalf of and at the direction of the Defendants pursuant to
mandated policies and procedures. The [entities like Doctors Health] are monitored and audited by
the Defendants, and the delegated functions may be revoked at any time. In performing these
delegated functions[, these entities] are mere conduits through which the Defendants conduct
business. [They] are not co-conspirators of the Defendants, and, lacking the requisite intent, do not
aid and abet the unlawful conduct described herein.” (R.1-1607 ¶ 46.) The allegation that the
13
Having decided that the claim pursued by Doctors Health in the adversary
action is beyond the scope of the release in the Agreement, we conclude that the
district court erred in enjoining Doctors Health from pursuing that claim. We need
not address the remaining arguments of the parties.
V. CONCLUSION
The district court’s order and injunction, dated January 21, 2009, prohibiting
Doctors Health from pursuing its adversary action claim against NYLCare are
vacated.
INJUNCTION VACATED.
relationships between the managed-care defendants and entities like Doctors Health “may be revoked
at any time” is inconsistent with Doctors Health’s claim in the adversary action that NYLCare
breached its contract with Doctors Health by prematurely terminating that contract.
14