Insurance Antitrust Legal News - July 2014 • Volume 3, Number 4

COURT DENIES BLUES' MOTION TO DISMISS IN RE BLUE CROSS BLUE SHIELD ANTITRUST LITIGATION (MDL 2406)

James M. Burns

On June 18, United States District Court Judge David Proctor (Northern District of Alabama) issued his highly anticipated ruling in the In re Blue Cross Blue Shield Antitrust Litigation, declining to dismiss the action prior to the commencement of discovery. The multidistrict litigation, in which the plaintiffs contend that the Blue Cross Blue Shield Association and its 38 member Blues have utilized trademark licensing agreements to limit competition between them, was consolidated and transferred to Judge Proctor by the Judicial Panel on Multidistrict Litigation in 2013.

In his first significant ruling in the matter, Judge Proctor considered three overarching arguments that the insurers had advanced in support of dismissal: (1) that the licensing agreements challenged by the plaintiffs have procompetitive benefits, and thus are not "horizontal market allocation agreements" that should be judged under per se (rather than rule of reason) principles; (2) that the Blues' alleged conduct, regardless of classification, is exempt from the antitrust laws pursuant to the "Filed Rate Doctrine;" and (3) that the defendants' conduct is also independently exempt from antitrust scrutiny based upon the insurance industry's McCarran-Ferguson Act exemption.

Judge Proctor began his analysis by focusing on the Blue trademarks, and the licensing agreements between the Blue Cross Blue Shield Association and its member Blues. Summarizing the defendants' contentions, Judge Proctor stated that the Blues "argue that the licensing agreements do not restrain trade, but merely adopt pre-existing rights to local geographic exclusivity acquired either independently by operation of trademark law, or vertically through lawful licenses granted by the American Hospital Association or the American Medical Association." Judge Proctor also noted that "defendants contend that the service areas have procompetitive benefits," and that per se condemnation of the agreements is unwarranted on that basis.

Judge Proctor, however, rejected defendants' argument, at least for now, holding that "at this early stage of the proceedings" the plaintiffs' allegations, taken as true, are sufficient as a matter of law. Specifically, Judge Proctor held that plaintiffs had plausibly alleged that the Blues' agreements "do more than merely recognize pre-existing trademarks," because, among other things, the plaintiffs had alleged that the agreements also restrict competition under non-Blue or non- trademarked brands, and that "plaintiffs...