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Legalized Extortion Department: the HMO class actions

A gigantic series of class actions in Florida, alleging a wide-ranging conspiracy between competing HMOs to cheat doctors through sinister use of claims-processing software, was dismissed on summary judgment for lack of evidence. But the lawyers who brought the class action don't mind: they already settled with six co-defendants for about $600 million, $183 million of which will be split amongst the plaintiffs' lawyers. The settlements essentially allowed them to, as gamblers say, "play with the house's money" in continuing the case against United Healthcare and Coventry, who are still on the hook for millions (and perhaps tens of millions) of dollars for their own attorneys and expenses (including the cost of experts for analyzing millions of computerized records) in responding to the five-year litigation. $400 million will be split amongst 700,000 doctors (as well as the costs of administering the settlement). Next time the AMA complains about the costs of excessive meritless litigation, they can perhaps look in the mirror. Plaintiffs lawyers included David Boies (Dec. 1, 2003; Jan. 1; Sep. 30, 1999) Dickie Scruggs (who brought consumer class actions that were thrown out earlier) and Archie Lamb, who hasn't updated his litigation website. Plaintiffs have not yet decided whether to appeal, but, as the suit sought billions, and settled for much less, one suspects they knew all along their case was weak. (Julie Kay, "HMO Suit Brings Big Payoffs to Lawyers but Leaves Unsettled Questions", Daily Business Review, Jun. 27; John Dorschner, "Suit against insurers tossed out", Miami Herald, Jun. 20). Press coverage was diverted by an irrelevant footnote Judge Moreno left criticizing executive compensation at HMOs.

Disclosure: I represented CIGNA in an appeal of collateral litigation related to these class actions.



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.