809 F. Supp. 2d 665
E.D. Mich.2011Background
- Action filed Oct 18, 2010 by United States and Michigan against Blue Cross Blue Shield of Michigan over MFN clauses in hospital contracts alleging Sherman Act §1 and MARA violations.
- Complaint contends MFN provisions with 70+ Michigan hospitals restrain competition and raise costs via MFN-plus and Equal-to MFN arrangements.
- Blue Cross seeks dismissal; court holds motion to dismiss and related motions are denied in large part; several discovery and procedural issues addressed.
- Markets and effects alleged include local geographic markets and two product markets: commercial group and commercial individual health insurance; alleged anticompetitive effects include higher prices and reduced competition.
- Court also addresses state action immunity, quasi-public entity status, abstention, and authorization to file supplemental authority; orders various discovery-related relief.
- Procedural posture unresolved as to interlocutory appeal and need for further factual development.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether MFN clauses plausibly restrain trade under the rule of reason | MFN clauses produce adverse anticompetitive effects in markets | MFNs are procompetitive or insufficiently alleged to restrain | Denied; pleadings plausibly allege anticompetitive effects under rule of reason |
| Whether the complaint plausibly defines product markets | Two markets exist: commercial group and commercial individual health insurance | Court requires market-by-market pleading; insufficient detail | Plausible product markets alleged; no market-by-market detail required at pleading stage |
| Whether geographic markets are plausibly alleged | Markets are local; networks and MSAs define geography | Geography too broad; health insurance markets may be national | Plausible local geographic markets; use of localized approach and data acceptable at pleading stage |
| Whether MARA exemptions apply to Blue Cross's MFN conduct | MFN use in restraint violates MARA; exemptions do not cover MFN rebates | Blue Cross argues exemptions apply, including regulatory scheme | Not exempt at this stage; MARA claim survives and motion to dismiss denied |
| Whether state action immunity or abstention applies | State action immunity not satisfied; no adequate overt state policy or supervision; abstention improper | NHCCRA and state supervision may shield Blue Cross | State action immunity and Burford abstention do not apply; case may proceed in federal court |
Key Cases Cited
- United States v. Conn. Nat'l Bank, 418 U.S. 656 (1974) (geographic market need not be precisely defined; plausibility suffices)
- United States v. Marine Bancorporation, Inc., 418 U.S. 602 (1974) (geographic market contours may be plausible rather than precise)
- White & White, Inc. v. American Hospital Supply Corp., 723 F.2d 495 (6th Cir. 1983) (defines market power and market definition standards at pleading stage)
- Todd v. Exxon Corp., 275 F.3d 191 (2d Cir. 2001) (market definition is fact-intensive and determined after factual inquiry)
- Jacobs v. Tempur-Pedic International, Inc., 626 F.3d 1327 (11th Cir. 2010) (courts may accept plausible geographic market contours at pleading)