Class certification is proper in physicians' RICO suit against various HMOs

Law Reporter, Dec 2004

Klay v. Humana, Inc., 382 F.3d 1241 (11th Cir. 2004).

The Eleventh Circuit Court of Appeals held that a federal trial court did not abuse its discretion in certifying a class of physicians in their lawsuit against various health maintenance organizations (HMOs) for alleged violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961 et seq.

Here, plaintiffs alleged defendants promised to fully reimburse them but instead systematically underpaid them using various methods. A federal trial court certified classes that included a global class composed of all doctors who provided services to any person insured by defendants after August 1990 and a national subclass of all doctors who treated insured persons and want to pursue direct RICO violations, among other claims.

Affirming the class certification as to all RICO claims, the Eleventh Circuit noted plaintiffs' argument is that defendants created an enterprise made up of themselves, companies that review defendants' claims, and industry organizations, among others. This enterprise, plaintiffs claim, was created to systematically underpay physicians for die services they provide and conceal the manner in which that is done. The main question, the court said, is whether the common questions of fact or law predominate over individual issues. The court agreed with the trial court that this case "involves a conspiracy and joint efforts to monopolize and restrain trade," and these allegations constitute the essential elements of the RICO claims. Thus, the issues are common to all plaintiffs.

The court further found that previous holdings that each individual plaintiff must prove reliance on the alleged misrepresentations do not apply in this case because all of the plaintiffs allege that all of the defendants conveyed the message that they would honestly pay the doctors. The court said a jury could reasonably find that reliance was common to the whole class. Moreover, the court rejected defendants' argument that the suits require individualized damages determinations, reasoning damages should not be an impediment where a mechanical method can be used to compute damages on an individual basis.

After concluding the common issues of die RICO claims predominate over individual issues, the court determined a class certification is also superior to other available methods for adjudicating the matter. Holding separate trials for each individual plaintiff would be costly and inefficient and might deter plaintiffs because it would not be as economically feasible as a class action. Though a class action with this many plaintiffs would be complicated, the potential difficulties are nowhere near the magnitude of problems that could arise from several hundred thousand possible individual suits, the court said.

Accordingly, the court remanded for trial on the RICO claims.

Plaintiffs' Counsel

*Joe R. Whatley Jr.,

*Charlene R Ford, and

*Othni J. Lathram, all of Birmingham, Ala.

*Harley S. Tropin, Miami, Fla.

*James B. Tilghman Jr., Miami, Fla.

Comment: For a case in which physicians alleged RICO violations against Aetna, and the parties settled, see In re Managed Care Litig., 46 ATIA L. Rep. 233 (Sept. 2003).

Documents in Klay are available through the Court Documents section in the back of this issue, courtesy of Mr. Whatley.