April Showers Bring Closure On Unsettled Legal Issues Too

Posted by Dan Bushell on May 01, 2012

As I mentioned in my last post, the Florida Supreme Court's decision to approve the Florida Senate's amended redistricting plan wasn't the only late April 2012 decision to bring a measure of closure to unsettled legal issues. The stars seem to have aligned such that our state appellate courts as well the U.S. Court of Appeals for the 11th Circuit all released decisions in late April bringing a measure of closure on prominent, unsettled issues.

First, in Geico General Insurance Co. v. Virtual Imaging Services, Inc. (a/a/o Maria Tirado), No. 3D11-581,the 3rd DCA went a long way toward finding closure on the hotly contested issue of whether PIP insurers can take advantage of the reimbursement rate caps provided in the 2008 amendments to Florida's No Fault/Personal Injury Protection Law if their policies don't expressly state that the caps will be used. That issue, on which the 4th DCA had the first word among Florida appellate courts in its 2011 decision in Kingsway Amigo Insurance Company v. Ocean Health, Inc., has pre-occupied PIP lawyers ever since. I've also written multiple posts about it, including this one, this one, and this one.

In its Tirado decision, the Third District did a tremendous favor for opponents of the rule set down in Kingway Amigo (PIP insurers and their lawyers chief among them) by certifying the issue as a question of great public imporance. You may recall that the lack of an express and direct conflict among the District Courts of Appeal on the issue has prevented the Florida Supreme Court from stepping in end the controversy.

But now the issue has been certified as a question of great public importance, the Florida Supreme Court can exercise jurisdiction to review Tirado even without a conflict among the DCAs. If the Supreme Court chooses to do so, as the ultimate arbiter of Florida law, it can bring closure to this ongoing PIP battle. I'm guessing that it will.

Second, in the parallel cases of Calder Race Course, Inc. v. Florida Department of Business and Professional Regulation, West Flagler Associates, Ltd. v. Fla. DBPR, and Florida Gaming Centers, Inc. v. Fla. DBPR, the Florida Supreme Court brought closure on the issue of whether the legislature validly exercised its Constitutional authority in enacting 2009 legislation that allowed Hialeah Race Track to operate slot machines. That legislative enactment had been challenged by the three Miami-Dade facilities that were already licensed to operate slot machines prior to the legislation, as discussed in this post. On the same day as its redistricting decision was released, the Supreme Court declined to exercise its discretionary jurisdiction over the competitors' appeal from the 1st DCA's decision upholding Hialeah Race Track's authorization to operate slot machines.

Third, the 11th Circuit released its long awaited decision in FTC v. Watson Pharmaceuticals, Inc., (a/k/a In re: Androgel Antitrust Litigation) addressing the prominent antitrust/patent/health care law issue of the validity of so-called "reverse payment" or "pay for delay" settlements between pharmaceutical patent holders (i.e. name brand drug makers) and competing drug makers seeking to market generic alternatives. The FTC and the Antitrust Division of the DOJ, in addition to certain academics have fretted for years about such arrangements, and their effects on drug prices...             

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April Brings Some Closure to the Supreme Court's Redistricting Saga

Posted by Dan Bushell on May 01, 2012

The end of April traditionally marks the end of the busy season in South Florida, with spring break and holidays over, snow birds returning north, traffic easing, and lower summer rates kicking in. So I guess it's fitting that our appellate courts last week issued a slew of decisions bringing closure to quite a few unsettled legal issues as well.

Most prominent among them was the decision released by the Supreme Court of Florida last Friday that finally put to rest a battle that had commanded the better part of the Supreme Court's attention over the past few months -- namely, the fight over whether the Florida Senate's post-census plan for allocating state senate districts complied with Amendment 5, a/k/a the Fair Districts Amendment to the Florida Constitution, enacted by voter initiative in 2010. The upshot was that the Supreme Court concluded the review mandated by Article III, section 16 of the Florida Constitution, by declaring that the plan (as modified in response to the Court's March 9, 2012 decision) was Constitutionally valid. By doing so, the Court avoided taking the unprecedented step of taking the redistricting process out of the legislature's hands and writing its own plan.

Last week's decision unquestionably brought closure to the redistricting process, and the initial challenges to the 2012 legislative redistricting (with the Court even prohibiting motions for rehearing). But it may not bring closure in the larger sense of foreclosing other challenges to the redistricting plans based on the Fair Districts Amendment through separate lawsuits.

The overarching issue in the case from the outset was whether the Court would entertain a full scale challenge to the plans in the course of its mandatory review, which can last for no more than 30 days, and in which no evidentiary record can be built in a trial court for it to work from, or would instead limit its review to "facial" challenges only, as it had in the past. And correspondingly, would the Court's review of the challenges at this stage, by way of res judicata and/or stare decisis, preclude challenges to the districts that might be pursued in separate litigation, or as was true of the Court's initial review of redistricting plans before the Fair District Amendments, would the declaratory judgment leave open the possibility of separate challenges?

On the one hand, in its March decision, the Court made clear that the Fair Districts Amendment required, and it was willing to undertake, a more probing review than it had deemed appropriate when reviewing previous redistricting plans. In fact, the March decision was the first time ever that the Court invalidated a redistricting plan, at least in part.

On the other hand, in its April decision, the Court seems to have gone out of its way to point out that its review was only "facial" and that its conclusion was that "the opponents have failed to satisfy their burden of demonstrating any constitutional violation in this facial review." In declining to consider challenges to certain aspects of the revised plan that could have been made against the original plan, but were not, the Court engaged in a lengthy explanation that the reason it was declining to do so was that it would be unfair at that stage of the game. And in what seems like an unnecessary tangent, the Court expreslly stated not only that the new arguments themselves were not barred by res judicata, but that the Court's review of redistricting plans under its Article III, section 16 duties, is not the type of proceeding that can have res judicata effect. In other words, if opponents of the redistricting plans are looking to challenge them in a separate lawsuit, the the Supreme Court's decision is unlikely to get in their way.   

So while the decision undoubtedly brings closure to the Court's Constitutional review of the redistricting plans, and the redistricting process itself, it's probably premature to see it as bringing closure to the larger battle over redistricting.     

The Supreme Court Health Insurance Precedent No One Is Talking About

Posted by Dan Bushell on March 27, 2012

It turns out that the case challenging the ACA's individual mandate isn't the first time the Supreme Court has been confronted with questions about the interplay of the health insurance and health care markets. The previous case, called Blue Shield of Virginia v. McCready, 457 U.S. 465 (1983), is a decision dealing with the Sherman Act, not Constitutional issues. But the Court examined an issue that closely parallels one of the key issues in the individual mandate case. And it seems to have been totally missed in the debate.

A major issue in today's oral arguments before the Supreme Court on the individual mandate, as in the court of appeals' decisions, is whether the market the individual mandate seeks to regulate is the market for health insurance (in which some people who don't participate will be required to participate by the mandate) or the market for health care, in which almost everyone will participate at one point or another.

An exchange between several justices and Paul Clement, arguing for the 26 states challenging the law, focused on whether the two markets are in fact separable. Isn't health insurance just a way to pay for health care, as the government argues? No, according to Mr. Clement:

CHIEF JUSTICE ROBERTS: Well, Mr. Clement,the key to the government's argument to the contrary is that everybody is in this market. It's all right to regulate Wickard -- again, in Wickard against Filburn, because that's a particular market in which the farmer had been participating. Everybody is in this market, so that makes it very different than the market for cars or the other hypotheticals that you came up with, and all they're regulating is how you pay for it.

MR. CLEMENT: Well, with respect, Mr. Chief Justice, I suppose the first thing you have to say is what market are we talking about? Because the government -- this statute undeniably operates in the health insurance market. And the government can't say that everybody is in that market. The whole problem is that everybody is not in that market, and they want to make everybody get into that market.

JUSTICE KAGAN: Well, doesn't that seem a little bit, Mr. Clement, cutting the bologna thin? mean, health insurance exists only for the purpose of financing health care. The two are inextricably interlinked. We don't get insurance so that we can stare at our insurance certificate. We get it so that we can go and access health care.

MR. CLEMENT: Well, Justice Kagan, I'm not sure that's right. I think what health insurance does and what all insurance does is it allows you to diversify risk. And so it's not just a matter of I'm paying now instead I'm paying later. That's credit. Insurance is different than credit. Insurance guarantees you an upfront, locked-in payment, and you won't have to pay any more than that even if you incur much great expenses. And in every other market that I know of for insurance, we let people basically make the decision whether they are relatively risk averse, whether they are relatively non-risk averse, and they can make the judgment based on -

In other words, according to Clement, the health insurance market is distinct from the health care market because buying insurance is not the same thing as paying for health care in advance. You buy insurance to avoid risk, not to pay for things you'll buy later.

The counter-argument is that while that's true for most kinds of insurance, health insurance is fundamentally different. Why? Because when you buy homeowner's insurance, you are trying to avoid the risk of a financial loss if it turns out that a hurricane comes along and damages my house. But there's also the (better than 50%) chance that a hurricane won't come along.

When I buy health insurance, on the other hand, I'm not (only) protecting against the risk that I might need to go to the doctor at some point -- I know I'm going to go to the doctor. So it can be argued that I buy health insurance, at least in part, as a sort of pre-payment for my doctor's care (and to take advantage of the lower prices my doctor charges to the insurer).

And that's pretty much what the Supreme Court said in McCready. McCready was a participant in her employer's group health plan, provided by Blue Shield of Virginia, who sued Blue Shield based on an alleged conspiracy with psychiatrists to prevent reimbursement for treatment by psychologists. The issue was whether the injury she suffered by being denied reimbursement for treatment was too remote for her to have standing to challenge the conspiracy under the Sherman Act.

McCready was not actually a participant in the health insurance market because her employer purchased a group policy, but she was a participant in the health care market because she went to see a psychologist and paid for it (then sought reimbursement). Blue Shield argued that McCready lacked standing because the market targeted by the alleged conspiracy was the health insurance market, not the health care market:

Petitioners next argue that...the Section 4 remedy...is not available to McCready because she was not an economic actor in the market that had been restrained. In petitioners' view, the proximate range of the violation is limited to the sector of the economy in which a violation of the type alleged would have its most direct anticompetitive effects. Here, petitioners contend that that market, for purposes of the alleged conspiracy, is the market in group health care plans. Thus, in petitioners' view, standing to redress [457 U.S. 465, 480] the violation alleged in this case is limited to participants in that market - that is, to entities, such as McCready's employer, who were purchasers of group health plans, but not to McCready as a beneficiary of the Blue Shield plan.

The Supreme Court rejected that argument, explaining that "as a consumer of psychotherapy services entitled to financial benefits under the Blue Shield plan, we think it clear that McCready was 'within that area of the economy . . . endangered by [that] breakdown of competitive conditions' [457 U.S. 465, 481] resulting from Blue Shield's selective refusal to reimburse." In other words, although the conduct was directed toward the health insurance market, it had direct effects on participants in the health care market.

 

In a footnote, the Court also agreed with the court of appeals that the health insurance plan was really akin to a means for pre-paying for medical treatment, not an insurance policy in the usual sense:

Blue Shield Plans are not insurance companies, though they are, to a degree, insurers. Rather, they are generally characterized as prepaid health care plans, quantity purchasers of health care services.

The ultimate Sherman Act-specific holding of McCready has little to do with the individual mandate case, but the point is that the Supreme Court has already addressed the interplay of the health insurance market with the health care market, and has expressed a view that strongly suggests that they are not two independent markets.

Is McCready a silver bullet? Probably not. But it sure seems important to me that there is Supreme Court precedent on an issue that is so central to the debate. Certainly important enough to at least enter the discussion. Why isn't anyone talking about it? 

Litigation Lessons From the 9th Circuit's Decision in Perry v. Brown

Posted by Dan Bushell on February 08, 2012

I may be the only person in the world who is more interested in the 9th Circuit's decision in Perry v. Brown, (the much publicized suit over the constitutionality of California's Proposition 8) for its lessons in advocacy than for its political issues. I see this case as one of the true tests of the limits of legal skill. From the get-go, the question has been whether two of the brightest legal minds out there -- David Boies, whose famous cases include representing former VP Al Gore in Bush v. Gore and Ted Olson, who represented former President Bush in that case, and served as Solicitor General after it -- could come up with a way to convince the courts (most importantly, a majority of the Supreme Court of the United States) to find a Constitutionally protected right to same-sex marriage.  

But after digesting the 9th Circuit's decision, it is also clear that there's now something else at work: the fact that judges don't like handing down decisions that are likely to be reversed. And that apparently includes 9th Circuit Judge Stephen Reinhardt, despite his having told the LA Times in July that he wasn't bothered that the Supreme Court had reversed so many 9th Circuit decisions (including several he authored) of late.

So once Boies, Olson, and their allies convinced the district court and 9th Circuit to go along with their arguments (which was far from assured at the outset) the authors of the two opinions, who are pretty brainy themselves, added their own slants with the intent of avoiding reversal. It's interesting to see the way in which the district court's decision (authored by Judge Walker) and the 9th Circuit's opinion (by Judge Reinhardt) reach the same result through very different means, with each approach apparently intended to minimize the chances that the Supreme Court will reverse. 

Judge Walker's decision made a sweeping proclamation that, in effect, there is a constitutional right to same-sex marriage. Perhaps recognizing that this holding would have a hard time surviving appellate scrutiny given the current state of the law, he grounded his decision on a broad base of factual findings about the purpose and effect of Proposition 8, presumably hoping for the deference appellate courts grant to a district court's factual findings.

But the 9th Circuit was convinced by the proponents of Prop 8 (whose counsel is no slouch either) that most of Judge Walker's factual findings were "legislative facts," i.e. generalized facts, rather than the type of case-specific facts to which appellate courts might defer, and didn't defer to Judge Walker's fact-finding.

And the current Supreme Court seems unlikely to find a constitutional right to same-sex marriage. That's probably why Judge Reinhardt reframed the issues such that it affirmed Judge Walker's finding that Proposition 8 is unenforceable, but avoided making a broadly applicable pronouncement of a constitutional right to same-sex marriage.

The 9th Circuit's decision reinforces the importance of how you frame the question to be answered, particularly when it comes to issues of constitutional interpretation. [I touched on this topic in discussing the arguments for and against the individual mandate in the PPACA, where the challengers frame the "commerce" it regulates as the health insurance market and argue that the individual mandate improperly requires citizens to participate in a market they otherwise would not rather than regulating the activities of persons already participating in commerce; while the Justice Department argues that the "commerce" at issue is healthcare financing, and that all (or almost all) citizens participate in the healthcare market, so the individual mandate regulates existing commerce rather than requiring citizens to participate in a market where they otherwise would not. This issue is discussed more in-depth at Volokh Conspiracy by Case Western Law Professor Jonathan Adler.] 

Judge Reinhardt reframed the question in Perry from whether it is unconstitutional to prohibit same-sex marriage to the much narrower issue of whether it is unconstitutional for a state in which same-sex couples (1) have the right to marry; and (2) have all of the same rights as other couples with regard to adoption and other family-related matters, to revoke the right of same-sex couples only to marry. The apparent strategy in that approach was that it not only avoided a broad pronouncement of a newly recognized constitutional right, but also essentially limited the reach of the holding to California only.

A time-honored way to avoid Supreme Court review is to decide the case on pure state law grounds. But that being impossible in Perry, the 9th Circuit did the next best thing by deciding it on federal grounds that apply only to one state. The other apparent advantage is that by reframing the issue as being about revoking existing rights that same-sex couples had shared with the general population, it has parallels to the Supreme Court's relatively recent decision in Romer v. Evans. 

Will the Supreme Court take up the case despite the more narrow focus of the holding on California? I'd be shocked if it didn't. A bigger question will be whether the Supreme Court will address it through the narrower frame of the 9th Circuit's opinion. And if it does, the question will become whether the Court will think the facts are similar enough to Romer to apply stare decisis. It's noteworthy that Judge Smith, in his dissent from the 9th Circuit's decision, accepted the framework adopted by the majority, but concluded that Romer was distinguishable and that Proposition 8 passed constitutional muster.

Judge Reinhardt's opinion, however, may not be the 9th Circuit's last word on Perry. According to Lyle Denniston at SCOTUSBLOG, the proponents of Proposition 8 plan to ask the 9th Circuit to rehear the case en banc before petitioning for certiorari. They may be hoping the 9th Circuit will itself reframe the issues in the case before it even reaches the Supreme Court.   

11th Circuit Elevates Individual Circumstances Over Categorical Rules in Assessing Union-Employer Cooperation Agreements

Posted by Dan Bushell on January 19, 2012

Appellate courts often struggle with the tension between allowing for consideration of the individual circumstances of each case and establishing clear dividing lines between conduct that violates the law and conduct that does not. Courts have assigned varying amounts of weight to each of these considerations at different points in history. Particularly in recent years (and particularly in U.S. Supreme Court decisions), the goal of line-drawing and predictability has been increasingly emphasized.

Yesterday, the 11th Circuit released its opinion in Mulhall v. Unite Here Local 355 (No. 11-10594), a case involving union-employer relations, that appears to be a step in the opposite direction. The first thing that jumps out about Mulhall is that, unlike in many cases involving employer-union relations, the litigation did not result from the failure of an employer and union to reach an agreement, but from the fact that they did reach an agreement. The problem, according to Mulhall (who worked for the employer, Mardi Gras Gaming) was that the agreement allegedly violated the Labor Management Relations Act (a/k/a the Taft-Hartley Act).

The essential facts are these: The union wanted to organize Mardi Gras employees. Mardi Gras wanted support for a ballot initiative regarding casinos. They entered into an agreement under which Mardi Gras would give the union access to and information about employees and would remain neutral about unionization. In return, the union promised not to strike if the employees chose to unionize, and to provide financial support for the ballot initiative.

Mulhall didn't want Mardi Gras employees to unionize. So he sued the employer and union, claiming their agreement violated the LMRA's prohibition on "any employer...pay[ing], lend[ing], or deliver[ing] any money or other thing of value...to any labor organization...[that] seeks to represent" its employees. The purpose of this prohibition is to prevent corruption, i.e., unions being bought off by employers.

The issue in Mulhall was whether the access, information, and neutrality Mardi Gras promised to the union could amount to a "thing of value" paid, lent, or delivered to the union. The district court said it could not, and dismissed the complaint.

Subsumed within that issue was the question of how to define "thing of value." The majority of the 11th Circuit panel (consisting of Judges Wilson and Fay) held that it was for the jury to decide whether the "organizing assistance" (access, information and neutrality) promised by Mardi Gras had monetary value and was therefore a "thing of value." In so holding, the 11th Circuit acknowledged that it was creating a circuit split with the 3rd and 4th Circuits, both of which have held that, as a matter of law, an employer's promise of neutrality and cooperation does not violate the LMRA.

The majority partly based its conclusion on 11th Circuit decisions interpreting the phrase "thing of value" in other statutes as well as on a recent 6th Circuit decision finding that an intangible benefit can be a "thing of value." But its decision was more heavily influenced by an old 2nd Circuit opinion explaining that courts should use common sense in deciding whether a benefit is a "thing of value" because value is in the eyes of the beholder. Applying the 2nd Circuit's "common sense" test, the majority said that intangible benefits cannot be categorically exempted from the LMRA.

Whether a cooperation and neutrality agreement violates the LMRA depends on the circumstances, the majority concluded. Most important is the intent underlying the agreement, as "innocuous ground rules can become illegal payments if used as valuable consideration in a scheme to corrupt a union or to extort a benefit from an employer." So it was for the jury to decide whether the agreement between Mardi Gras and the union crossed that line. Thus, the court majority rejected the 3rd and 4th Circuits' categorical rule for a case-by-case analysis of the surrounding circumstances.

The dissent went the other way. Judge Restani of the U.S. Court of International Trade, sitting on the 11th Circuit by designation (as she does on a fairly regular basis), agreed with the 3rd and 4th Circuits' reasoning. She also took issue with the majority's focus on intent as the deciding factor, and noted that even if intent was the polestar, Mulhall's complaint did not allege facts showing corrupt intent.       

Mulhall is a good illustration of the trade-off between line-drawing and situational justice, and the reason for the tension between them. It's hard to argue with the majority's common sense insight that depending on the circumstances, an intangible benefit can be either innocuous or corrupt. And the benefit of its case-by-case approach is that it does not give immunity in situations where there is a corrupt bargain.

But the countervailing consequence is that employers and unions within the 11th Circuit's jurisdiction are now left without clear guidance about the legality of entering into cooperation and neutrality agreements. Lacking such predictability, they may forego entering into such arrangements entirely, even when to do so would be beneficial and entirely legal.

Of course, given the circuit split, there's a decent chance that Mulhill will wind up before the U.S. Supreme Court. And if recent history is any guide, the Court may well choose to elevate clear line-drawing over consideration of individual circumstances. Or not. 

Home Away From Home: 11th Circuit Finds Care by Facility Staff Is Covered "Home Healthcare"

Posted by Dan Bushell on January 15, 2012

The 11th Circuit is back in full swing releasing opinions after a brief hiatus during the holiday season. Among the decisions handed down last week was Storcher v. Guarantee Trust Life Insurance Company, a decision on insurance coverage under a home health care policy.

At issue was whether a policy covering "[v]isits by a Home Health Aide to provide custodial care and other personal health care services specifically ordered by a Doctor” required the insurer to pay for care provided by the staff of an assisted living facility to a resident. The Eleventh Circuit held that it did.

That result may seem odd given that we often think of "home health care" as care provided to a patient living independently in a house or apartment, as contrasted with care administered in a hospital, nursing home, or similar facility. Assisted living facilities would seem to fall somewhere in between those alternatives.

But the court didn't confront the status of assisted living facilities head on, as the insurer conceded that the care was administered to Storcher was in his "home." The opinion does not disclose the policy's definition of "home," but I suspect that this concession was necessitated by a broad definition that (perhaps unintentionally) could not reasonably be said to exclude assisted living facilities.

Instead, the insurer tried to raise the issue from the other side, contesting coverage by arguing that the assisted living facility staff members who provided the care were not "Home Health Aides," i.e., employees of a "Home Health Care Agency." Unfortunately for the carrier (and fortunately for Storcher), however, that term was also broadly defined to include "a service or agency which is licensed by or legally operated in your state" except for Employment Agencies and Nurse Registries.

The insurer argued that this definition, and its exclusion of the two types of entities that were allowed to provide home health care without a license at the time the policy was issued, showed that the policy only covered care provided by licensed home health agencies. And the facility where Storcher was living was licensed as an assisted living facility, not a home health agency. (After the policy was issued, the home health agency statute, Florida Statutes Section 400.464, was amended to specifically exempt assisted living facilities from licensing under that statute so long as they are licensed as assisted living facilities.) So the carrier argued that since the assisted living facility wasn't licensed as a home health agency, the care it provided wasn't covered. 

But as in many cases where coverage is contested based on policy language that was assertedly intended to track statutory language, the 11th Circuit was unwilling to entertain that argument in the face of broad policy language that the court felt was unambiguous and had a simple meaning that did not explicitly so limit coverage. 

'Tis the Season for Antitrust

Posted by Dan Bushell on December 28, 2011

Despite the annual slow down in appellate courts (as in the rest of the world) at this time of year, December 2011 has seen a spate of major antitrust decisions being handed down. As I know from experience, antitrust cases are about as complex as it comes, and as a result, they often require long opinions to decide. It may be that these decisions' release dates might have something to do with busy judges putting off these time-consuming decisions to the end of the year, but wanting to get them out before they became part of year-end unresolved case statistics. But that would only be a guess.

In any event, major decisions have recently come down at the federal level from the 3rd and 11th Circuits, and on the state level from Florida's 4th District Court of Appeal.

The 4th DCA's decision in MYD Marine Distributor, Inc. v. International Paint Ltd. (released on December 14, 2011) takes on the U.S. Supreme Court's major decisions in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), which requires plaintiffs pleading claims based on antitrust conspiracies to include detailed factual allegations supporting the assertion that the defendants entered into an unlawful agreement, and Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007), which set down standards for pleading that a conspiracy harmed competition. The 4th DCA held that both decisions apply to cases filed in Florida state court asserting claims under the Florida Antitrust law. But it also held that MYD's complaint, which alleged that its competitor marine paint distributors had conspired with one another as well as with the manufacturer of a premium paint for boats to have MYD cut off as a distributor of that paint because MYD was undercutting their prices. 

The 11th Circuit's decision, FTC v. Phoebe Putney Health System, Inc. (released on December 9, 2011) threw a wrench in the Federal Trade Commision's campaign to take on consolidation among large healthcare facilities that threaten competition and contribute to rising healthcare costs. In the Phoebe Putney case, the FTC sought to enjoin the acquisition by a public hospital of its only competitor in Dougherty County, Georgia, and thereby create a monopoly in that market.

In an opinion authored by Judge Tjoflat, the 11th Circuit agreed that the transaction would create a monopoly but affirmed the dismissal of the FTC's case, holding that the "state action doctrine" made antitrust laws inapplicable and rendered the FTC powerless to challenge the transaction. In essence, the court held that in authorizing public hospitals like Phoebe Putney to acquire other hospitals, the Georgia legislature had contemplated and authorized even acquisitions that created monopolies. The state action doctrine therefore exempted the transaction from antitrust scrutiny. This decision essentially forecloses the FTC and DOJ from challenging any merger in Georgia involving a public hospital, and its reasoning could result in foreclosing challenges to acquisitions involving public hospitals in other states as well. 

The 3rd Circuit's en banc decision in Sullivan v. DB Investments, Inc. (released on December 20, 2011), is a significant decision dealing with antitrust class actions brought by alleged "indirect purchasers" of price-fixed goods. The en banc court held that it is appropriate (at least in the settlement context) to certify a nationwide class of indirect purchasers asserting antitrust claims under the laws of all 50 states, even though class members from certain states did not have the right to sue for damages for antitrust violations.

A more thorough discussion of Sullivan follows. 

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Florida's 3rd DCA Weighs in on PIP Reimbursement Limits After All

Posted by Dan Bushell on December 07, 2011

It looks like I spoke too soon. Not long after I wrote that the 3rd DCA would not be offering its view on when auto insurers may take advantage of the 2008 amendments to Florida's No Fault Law to limit personal injury protection reimbursements, declining to answer certified questions in  U.S. Security Insurance Company v. Professional Medical Group, Inc., the court decided to address the issue confronted by the 4th DCA in Kingsway Amigo after all. In Geico Indemnity Company v. Virtual Imaging Services, Inc. (released on November 30, 2011), the 3rd DCA answered a question certified as a matter of great public importance similar to the question in Kingsway Amigo (covered here):

May an insurer limit provider reimbursement to 80% of the schedule of maximum charges described in F.S. 627.736(5)(a) if its policy does not make a specific election to do so? 

Over Judge Rothenberg's vigorous 20 page dissent, Judge Cortinas, writing for the court majority consisting of himself and an associate judge, said no, agreeing with the 4th DCA that an auto insurer cannot limit reimbursements to 80% of 200% of the amount provided in Medicare Part B fee schedules unless the insurance policy states explicitly that this reimbursement methodology may be used.

The majority relied in part on Kingsway Amigo and the primary case that decision relied on, State Farm Insurance Co. v. Nichols, 21 So. 3d 904 (Fla. 5th DCA 2009), but diverged a bit from their reasoning. The primary thrust of the analysis in Geico deals with whether using the Medicare Part B-based reimbursement limits under section 627.736(5)(a)(2)(f) is an alternative to reimbursing for "reasonable" expenses per section 627.736(a)(1), or is merely a statutorily defined method of fixing what "reasonable" expenses are.

That question mattered because Geico's policies stated that it would pay, "in accordance with and subject to the terms, conditions, and exclusions of the Florida Motor Vehicle No-Fault Law, as amended...80% of medical expenses," with "medical expenses" defined as "reasonable expenses." So if 80% of 200% of Medicare Part B = reasonable expenses, then the policies could be characterized as stating that this reimbursement formula might be used. Judge Rothenberg agreed with Geico that this was the proper way to understand the statute and the policies, and as such, the policies could not reasonably be read to affirmatively elect to reimburse based on reasonableness rather than taking advantage of the Medicare Part B methodology.

The majority, however, understood section 627.736(5)(a)(2)(f) to offer an alternative option for calculating reimbursements:

Geico was faced with at least two ways of reimbursing reasonable medical expenses: (a) reimbursing Virtual Imaging for 80% of the amount billed, or (b) reimbursing them for 80% of 200% of the amount listed on the Medicare fee schedule.

At the very least, according the majority, the statute is ambiguous on this point. If it is ambiguous, then the policies, which incorporate the statute by reference, are also ambiguous. And when an insurance policy provision is ambiguous, i.e., susceptible to two reasonable interpretations, Florida law requires courts to adopt the interpretation that favors coverage. Thus, the majority concluded that the policies had to be understood as not allowing Geico to limit reimbursements based on Medicare Part B rates.

Judge Rothenberg disagreed, explaining that prior to the 2008 amendments, insurers could anyway have reimbursed based on Medicare Part B if they stated in their policies that they would use that methodology. In her view, the point of the 2008 amendments was to avoid litigation over what reimbursement amounts were "reasonable," by giving insurers "safe harbor" amounts (80% of 200% of Medicare Part B amounts) that the statute deems to be per se reasonable. As such, there aren't alternative options for reimbursing providers under PIP; there's only one: paying "reasonable" rates. Using the Medicare schedules is simply a safe harbor for determining what "reasonable" means.

The Bottom Line

The result in Geico obviously reinforces the 4th DCA's decision in Kingsway Amigo, and avoids the inter-district conflict that insurers might have hoped would lead the Florida Supreme Court to take up these issues in Kingsway Amigo (or Geico). Given that the issue has been certified as an issue of great public importance by at least two trial courts, Geico's best hope might be in trying to convince the 3rd DCA to do the same, which would seem its best available route to the Supreme Court.

The 3rd DCA's decision may also may make it more difficult to convince other DCAs to reach a different result from the 4th DCA if and when they confront the issue addressed in Kingsway Amigo. On the other hand, ithe fact that a District Judge has now issued a long, reasoned explanation (albeit in dissent) for why the opposite result should be reached might give other District Judges reason for pause.

But pending further developments, Kingsway Amigo and Geico are effectively the law of the land throughout Florida, so section 627.736(5)(a)(2)(f) cannot be used to limit reimbursements unless the insured's policy states that those limits will be used. And insurers that want to take advantage of the statutory maximums going forward should ensure that their policies unambiguously disclose the intent to do so.

Subsequent Developments Leave Kingsway Amigo v. Ocean Health Intact, For Now

Posted by Dan Bushell on November 15, 2011

I'd be surprised if any 2011 decision of Florida's appellate courts has drawn more attention in legal, medical, and insurance professional circles than the Fourth District Court of Appeal's decision in May (covered in this post) in Kingsway Amigo Insurance Company v. Ocean Health Inc. In case you missed it (i.e. you either aren't a PI or insurance defense lawyer, a doctor that treats accident victims, or insurance company employee or you are and have been living in a cave for the last 6 months) the 4th DCA held in Kingways Amigo that auto insurers cannot rely on the 2008 amendments to Florida's No Fault law (PIP) that allow PIP reimbursement rates to medical providers to be limited to 80% of 200% of Medicare Part B reimbursement amounts unless the applicable insurance policy says explicitly that providers' reimbursement rates may be so limited. 

There have been several further developments in and related to that litigation:  

  1. The court's decision has caused considerable angst to Florida automobile insurers, with 5 of them submitting amicus curiae briefs in support of Kingsway Amigo's motion for rehearing and rehearing en banc by tthe 4th DCA.  Nonetheless, the 4th DCA denied the motions.  The 4th DCA's decision has now become final, and is reported at 63 So.3d 63.
  2. As noted in the comments to my prior post on the case, the same issue had been teed up for the 3rd DCA in U.S. Security Insurance Company v. Professional Medical Group, Inc., raising the possibility that a decision in that case could either (a) solidify the 4th DCA's holding if the 3rd DCA came out the same way; or (b) create a conflict among the Districts that would confer discretionary jurisdiction for Supreme Court review if the 3rd DCA disagreed with the 4th.  But earlier this month the 3rd DCA declined to do either one, and relinquished jurisdiction over U.S. Security.  Its reason for doing so appears to be that the parties' briefing and oral argument revealed that the case was too "fact-specific." 
  3. Having been denied rehearing by the 4th DCA, and without the benefit of a conflicting (or any) decision in U.S. Security, Kingsway Amigo has asked the Florida Supreme Court to accept review over the case.  It argues in its October 17, 2011 Brief on Jurisdiction* that the 4th DCA's decision conflicts with statements by other Districts in certain cases involving the PIP statute.  Ocean Health replies in its own Brief on Jurisdiction that there can be no direct and express conflict between Kingsway Amigo and any of the cases cited by the insurer because none of those decisions addressed the precise issue confronted by the 4th DCA, and, in fact, Kingsway Amigo addressed a matter of first impression in Florida appellate courts.  Ocean Health even goes so far as to request that Kingsway Amigo be ordered to pay for its attorney's fees.

FWIW, I don't think the Florida Supreme Court is particularly likely to accept review of Kingsway Amigo.  But the issue in dispute isn't going away, and may well make it to the Court eventually, as I expect that other Districts will weigh in on the issue sooner or later. 

*  To request discretionary review by the Florida Supreme Court, parties generally must file a Notice to Invoke Discretionary Jurisdiction and a brief explaining why the Court has jurisdiction over the case and why it should choose to exercise that jurisdiction.  The opposing party may then file an answer brief addressing those issues.)          

Heightened Fiduciary Duties? Making Gifts From Trust Principal During Settlor's Lifetime Exposes Personal Representative & Corporate Trustee to Liability

Posted by Dan Bushell on November 01, 2011

In its second look at the dispute in Siegel v. JP Morgan Chase Bank, No. 4D09-699 (released on October 19, 2011) Florida's Fourth District Court of Appeal gave personal representatives and corporate trustees plenty of reason to be cautious about invading the principal of a trust during the settlor's lifetime.  The 4th DCA again reversed the trial court's decision to dismiss the case and strongly implied that the trustee and personal representative exceeded their powers and breached fiduciary duties in depleting the principal of the trust by "lavishing gifts on third parties" while the settlor was incapacitated prior to her death.

Background:

Dorothy Rautbord, the Settlor, appointed JP Morgan Chase as trustee of her trust, allowing it to make payments from principal and income as it deemed appropriate for her “support, maintenance, health, comfort or general welfare.” The remainder was to go to her surviving children, including her daughter (Novack) and sons (the Siegels). The trust document reserved to Rautbord the power of amendment, modification and revocation of the trust, and excluded anyone else from doing so, even if acting under a power of attorney.

Rautbord also executed a power of attorney appointing Novack as her attorney in fact, giving her, among other things, including the power to make gifts so long as they were consistent with her giving history and did not incur gift taxes. Prior to her death in 2002, Rautbord developed dementia.

While her mother was incapacitated, Novack, acting as her attorney in fact, withdrew large significant amounts of the principal in reliance on letters purporting to revoke portions of the trust, and made gifts to third parties. JP Morgan, the trustee, approved those gifts.

In a prior appeal, Siegel v. Novak, 920 So. 2d 89 (Fla. 4th DCA 2006), the 4th DCA had held that the sons had standing to challenge the propriety of Novack’s actions even though they were done while their mother was still alive, because her actions affected the corpus of the trust in which they had a direct interest after their mother’s death.

A Beneficiary’s Standing to Challenge a Trustee’s Conduct is a Separate Question From the Propriety of the Trustee’s Conduct

On remand from the first appeal, the trial court erred in taking up the issue of standing (again) by examining whether Novack’s withdrawals were within her discretionary powers. The resolution of that issue would resolve who was entitled to ultimately prevail on the merits, not whether the Siegels had a right to ask the court to decide the merits in the first instance:

The issue of whether the withdrawals and expenses were appropriate and authorized was not a preliminary standing question but the entire substance of the proceeding, i.e., whether the trustee and attorney-in-fact breached their fiduciary duties. The trial court incorrectly treated the question of whether the withdrawals were appropriate and authorized as a question of standing.

Thus, standing should have been considered a settled question on remand, as the 4th DCA had already found that the Siegels had standing to assert that their interests as trust beneficiaries were impaired by Novack and JP Morgan's alleged improprieties.

Invading Trust Principal for Third Party Gifts Can Amount to Partial Revocation

The 4th DCA went on to explain that the trial court's interpretation of the trust documents was wrong, and that the beneficiaries’ claims that the trustee and Novack breached their fiduciary duties could well be meritorious.  It held that the trustee had no right to make gifts in its own right, and that the attorney-in-fact had a very limited ability to make gifts.

JP Morgan had no right to make gifts to third parties as such. Its power to dip into trust principal was limited to spending for the Settlor’s maintenance and welfare. The court doubted that gifts to third parties could ever be justified as undertaken “for the support, maintenance, health, comfort, or general welfare of the Settlor.” Even if they could, the trustee would need to justify them as such through an evidentiary showing.

Regarding the personal representative, Novack’s power of attorney empowered her to make gifts on Rautbord’s behalf, but only if they were “reasonably consistent with any pattern of [Rautbord’s] giving or with [her] estate plan” or did “not exceed the annual exclusion available from time to time for federal gift tax purposes.”  But the Siegels asserted that the gifts did not comply with these limitations, and the trial court could not conclude that they were proper without an evidentiary record on these points.

The court also found that Novack’s power to make gifts under the PoA did not extend to using trust principal for that purpose. The trust document prohibited anyone other than the Settlor (excluding an attorney-in-fact acting on her behalf) from amending, modifying, or revoking the trust.

This prohibition, combined with the PoA’s statement that the attorney-in-fact was not being given the power “[t]o amend, modify or revoke, in whole or in part, or withdraw any of the principal of, any trust over which I have reserved or have been granted such power,” expressly prohibited Novack from invading the trust principal for any purpose. Under the facts of the case, Novack’s withdrawal of principal was essentially the same thing as partially revoking the trust, the court explained.

If Novack and JP Morgan exceeded their powers in using trust principal to make gifts to third parties, they can be held liable for breaching fiduciary duties to the trust’s beneficiaries. And  while the 4th DCA’s decision officially leaves that issue open for trial, it strongly suggests that that fiduciary duties were breached, commenting that if “the gifts were made from substantial invasion of principal,” that fact “at least suggests” that Novack “breached her fiduciary duty.”

The lesson here is that, at least under similar facts, fiduciaries' distributions of trust principal during the settlor's lifetime are definitely open to challenge.  And such challenges should not be lightly dismissed based on fiduciaries' broad discretionary powers.