Opinion
Case No. 99-MDL-1317-SEITZ/KLEIN.
July 8, 2005
ORDER REGARDING OPT-OUTS FROM THE INDIRECT PURCHASER PLAINTIFF CLASSES' SETTLEMENT
THIS MATTER is before the Court upon (1) the Motion of the Plaintiffs in the Illinois Opt Out Case to Extend the Indirect Purchaser Opt-Out Deadline to Accommodate Four Day U.S. Mail Delivery Delay [DE-1580]; (2) the Motion of Trustees of Correction Officers Benevolent Association Security Benefits Fund-Retirees and The Correction Officers Benevolent Association Security Benefits Fund Active, Trustees of Local 445 Freight Division Welfare Fund, Trustees of the Local 445 Construction Division Welfare Fund, and New York City Transit Authority (collectively, "the New York TPPs") for Leave to File Late Opt-Out Notices [DE-1586]; (3) the Motion of the Illinois Plaintiffs to Establish a Conditional Schedule for Class Settlement Objections and Class Member Claims [DE-1600]; (4) the New York TPPs' Motion to Join the Motion of the Illinois Opt-Out Plaintiffs to Establish a Conditional Schedule [DE-1598]; and (5) the Motion of the Illinois Plaintiffs for Leave to File a Reply Brief to Address Issues Raised by Defendants in Late-Served Opposition Brief and at Oral Argument [DE-1601]. The deadline by which the Claims Administrator had to receive all third-party payer ("TPP") requests to opt-out of the Indirect Purchaser Plaintiff Classes' ("IPP") settlement was April 11, 2005. In these motions, certain TPPs ask the Court to extend the opt-out deadline and/or accept their untimely opt-outs. Having considered all of the submissions and arguments with respect thereto, including the arguments of counsel at the final fairness hearing held on June 28 and June 29, 2005, and otherwise being fully informed in the premises, the Court denies both motions in accordance with its oral rulings at the end of the fairness hearing.
I. The Illinois TPPs
In the Illinois motion, a group of TPPs who are Plaintiffs in BCBSM, et al. v. Abbott Labs., Inc., and Geneva Pharms., Inc., Case No. 03L-009743, before the Honorable Paddy H. McNamara in Cook County, Illinois, seek a four-day extension of the April 11, 2005, opt-out cutoff. All fifteen of the Illinois TPPs mailed their Requests for Exclusion from the IPP settlement, together with their drug payment data, sometime on Thursday, April 7, 2005. Eight of the notices arrived on or before April 11, 2005, but, as verified by the Claims Administrator, seven of the notices did not arrive until April 13 or April 15, 2005. The Illinois TPPs state that they acted in good faith and with all reasonable diligence, and argue that they should not be penalized for a Postal Service delay that was not within their reasonable control.
The Illinois Plaintiffs are Anthem, Blue Cross Blue Shield of Minnesota, Blue Cross Blue Shield of Massachusetts, Blue Cross Blue Shield of Nebraska, Wellchoice (Empire), Horizon Healthcare Services, Mutual of Omaha Insurance Company, Blue Cross Blue Shield of Tennessee, CareFirst, Excellus Health Plan, Guardian Life Insurance Company, Health Care Service Corp., Federal Mutual Insurance Company, Wellmark, Blue Cross Blue Shield of Florida, and their subsidiaries.
The Illinois TPPs rely on Fed.R.Civ.P. 6(b)(2), and argue that they have demonstrated "excusable neglect" for an extension of the opt-out deadline. Rule 6(b)(2) provides that:
When by these rules or by a notice given thereunder by order of the court an act is required or allowed to be done within a specified time, the court for cause shown may at any time in its discretion . . . upon motion made after the expiration of the specified period permit the act to be done when the failure to act was the result of excusable neglect.
As the Supreme Court has explained, the determination of whether to accept a late filing based on excusable neglect is "at bottom an equitable one, taking account of all relevant circumstances surrounding the party's omission." Pioneer Inv. Servs. v. Brunswick Assocs. Ltd. P'ship, 507 U.S. 380, 388 (1993). The factors to be considered are "the danger of prejudice to the [opposing party], the length of the delay, including whether it was within the reasonable control of the movant, and whether the movant acted in good faith." Id. Further, "the starting point and common denominator (indeed, the sine qua non) in every case employing an analysis of excusable neglect is an explanation of the reason for the delay." Demint v. Nations Bank Corp., 208 F.R.D. 639, 642 n. 4 (M.D. Fla. 2002); see also Manual for Complex Litigation (Third) § 30.231 (1995) (stating that "[t]he Court may, in its discretion, treat as effective a tardy election to opt out. In exercising its discretion, the court should consider the reasons for the delay, whether there was excusable neglect, and whether prejudice resulted.").
Upon review of the facts set forth in the affidavit of Lyzette Wallace, of the law firm of Robins, Kaplan, Miller Ciresi L.L.P., the parties' submissions, and the arguments of counsel at the fairness hearing, the Court finds that there is insufficient evidence to support a finding of excusable neglect. The Illinois TPPs have long been aware of the settlement in this case, and were given ample notice of the April 11, 2005, opt-out deadline. In fact, the Illinois TPPs are represented by the same attorneys who represented Kaiser Foundation Health Plans, Inc., in this multi-district litigation before Kaiser was remanded to California in June 2005. Although the Illinois TPPs urge the Court to place the blame for the late arrival of seven of their opt-out requests on the U.S. Postal Service, the fact remains that they assumed the risk of missing the deadline by allotting only two business days for mailing and using regular first class mail instead of an expedited service such as priority mail. See In re New England Mut. Life, 204 F.R.D. 6, 14 (D. Mass. 2001) ("It is well-established that the party that selects the mode of transmission undertakes the risks associated with that method."). And further, Ms. Wallace's affidavit provides no indication to the Court as to what time on Thursday, April 7, 2005, the exclusion requests were mailed, nor did counsel clarify that issue for the Court at the fairness hearing. The failure to clarify this point leaves the Court to assume that, more likely than not, the opt-out forms were mailed after working hours on April 7, 2005. Thus, it was an exceedingly risky proposition for the Illinois TPPs to presume that the exclusion forms would make it from Washington, D.C., and be received in West Palm Beach, Florida in only two business days.
The Illinois TPPs contend that they had no choice but to send their exclusion forms by ordinary first class mail, as that was the method of delivery prescribed in the TPP Notice. However, this argument misses the fact that Priority Mail, designed to deliver mail in 2-3 days, is clearly identified in the U.S. Postal Service website as a subset of first class mail. The Illinois TPPs have failed to provide any explanation as to why they failed to use this expedited method of delivery.
The Illinois TPPs also fail to explain why they did not, given the late mailing date, follow up with the Claims Administrator to confirm timely receipt on April 11, 2005, instead waiting until June 16, 2005 to contact Complete Claim Solutions, Inc. This failure further supports a finding that the Illinois TPPs did not act with all reasonable diligence to meet the April 11, 2005, deadline.
The Court further finds that the factors enumerated in Pioneer do not support the Illinois TPPs' position. First, as explained above, while the Illinois TPPs may not have control over how quickly the mail is delivered, they did have control over how far in advance they mailed their exclusion forms, and what method of delivery they utilized. Despite being fully aware of the approaching deadline, the Illinois TPPs left only two business days for the exclusion forms to be mailed and received, and did not utilize the most expeditious means of delivery that was at their disposal. Second, while the length of the delay was not substantial, allowing late opt-outs would prejudice the Defendants in that they would be required to litigate against entities who inexcusably failed to submit timely opt-outs forms. Defendants entered into the IPP settlement in order to achieve a full and complete resolution of all IPP claims, and the parties are entitled to hold potential class members to the deadlines that were the product of vigorous negotiations. Third, contrary to their conclusory assertion in the motion, the Illinois TPPs have offered no evidence to support a finding that they acted in "good faith." As the Defendants point out in their response, absent any affidavits or other evidence establishing some good faith reason for their delay, the Court could reasonably conclude that the Illinois TPPs waited until the last minute intentionally with the hopes of minimizing the chance that the Defendants might seek to terminate the IPP settlement on April 11, 2005, based on their exclusions.
The Court also rejects the Illinois TPPs suggestion that there is some legally cognizable rule assuming that mail will reach its destination within three mailing days. Although some case law has referred to a general standard of three days for mailing, see Zipperer v. School Bd. of Seminole Cty., 111 F.3d 847, 850 (11th Cir. 1997), there is no set rule that insulates parties whose papers are not delivered within three days from suffering the consequences of their own actions. See Reinsurance Co. of Am., Inc. v. Administratia Asigurarilor de stat, 808 F.2d 1249, 1253 (7th Cir. 1987) (holding that "claims that Fed.R.Civ.P. 6(e), allowing an extra three days when documents are served by mail, was intended to establish presumptively that mail reaches its intended destination in three days [are] clearly specious.").
As part of their argument, the Illinois TPPs contend that Defendants cannot claim to be prejudiced by the late opt-out because they made "their intention to opt out of the indirect purchasers' class action clear" years ago. However, Defendants refute that suggestion, and point out that the Illinois TPPs do not identify when that intention was made clear, and provide no citation or support for their statement. In the absence of any evidence to the contrary, the Court takes as true the Defendants' statement that the Illinois TPPs consistently refused to tell the Defendants whether they intended to opt-out of the MDL action.
At the hearing, counsel for the Illinois TPPs suggested that the reason that the exclusion forms were not sent out until April 7, 2005, was because of the time and effort that it took to gather all of the documentation that was required to be submitted in accordance with the instructions on the exclusion form. However, there is no record evidence on that issue, and indeed, neither the motion nor the affidavit of Ms. Wallace even mentions the document production as a factor. Further, it appears that much of the documentation that was being gathered was not even necessary for the Illinois TPPs to opt-out.
For these reasons, and upon review of the applicable caselaw cited in the parties' briefs and addressed at the fairness hearing, the Court finds that there is no support for a finding of excusable neglect, such that an extension of the opt-out deadline is warranted. See Grilli v. Metro. Life Ins. Co., Inc., 78 F.3d 1533, 1538 (11th Cir. 1996) (finding no abuse of discretion in the district court's refusal to allow late opt-outs in the absence of a clear showing of excusable neglect); see also Demint, 208 F.R.D. at 643; In re New England Mut. Life Ins. Co. Sales Practices Litig., 204 F.R.D. 6, 14 (D. Mass. 2001). Accordingly, the Illinois TPPs' Motion to Extend the Indirect Purchaser Opt-Out Deadline to Accommodate Four Day U.S. Mail Delivery Delay is denied.
This finding is in accordance with other similar actions involving late opt-outs. See In re Prudential Ins. Co. of Am. Sales Practices Litig., 177 F.R.D. 216, 237 (D.N.J. 1997) (recognized that granting leave for an extension of the opt-out deadline is an infrequent occurrence and is only warranted where significant mitigating circumstances exist).
II. The New York TPPs
Similarly, the New York TPPs ask the Court for leave to file late opt-out notices. The New York TPPs are five plaintiffs represented by the same counsel in a related action captioned Asher v. Abbott Labs., et al., pending in the Supreme Court of the State of New York under the Index No. 123431/99. The Asher action was stayed in favor of this multi-district litigation in July 2003. The New York TPPs state that counsel for the parties in this action should have, but did not, advise their counsel or the New York court of the proposed settlement. Hypothesizing that the choice not to advise them was a "deliberate decision" designed to deprive them of their right to opt-out, the New York TPPs argue that an extension of the opt-out deadline is necessary to avoid the inequitable result of preventing them from pursuing their individual claims.
At the fairness hearing, the Court inquired of Thomas Glenn of Complete Claim Solutions, Inc. ("CCS"), as to whether the New York TPPs were notified of the settlement as part of the TPP Notice Plan. Under oath, Mr. Glenn testified that notices were mailed directly to the New York TPPs, in addition to the notice by publication. Mr. Glenn and counsel for the New York TPPs also confirmed that the addresses that CCS had on file for the New York TPPs were correct and accurate. Having established that notices were mailed to the proper addresses, and in light of the Court's previous finding that the Notice Plan was fair and reasonable and the best notice practicable under the circumstances, there is no basis for extending the opt-out deadline for the New York TPPs.
One of the five New York TPPs, the Transit Workers Fund, has actually filed a partial claim as part of the IPP settlement. That TPP, therefore, cannot now be heard to argue that it was not aware of the settlement or that it should be excused from applicable deadlines.
The only arguments that the New York TPPs advance, in their papers and at the hearing, are that they should be allowed to file late opt-outs because: (1) their case was stayed in favor of this litigation, and it was clear to all of the parties that the New York TPPs had elected to pursue their claims individually; (2) they have shown excusable neglect for the late filing because they did not learn of the settlement until June 2005, when counsel noticed a posting regarding the settlement on a website; and (3) the parties to this multi-district litigation acted in bad faith by "deliberately fail[ing] to disclose the settlement to the New York TPPs or their counsel in the hope that the New York TPPs would not learn of the settlement during the brief opt-out period. None of these arguments merit an extension of the opt-out deadline. As to the first issue, from the Defendants' perspective, it was equally possible that the New York TPPs found the settlement to be a fair and equitable resolution, and chose not to opt-out from the settlement rather than depriving themselves of a share of the settlement proceeds. Second, with respect to the notice issue, the evidence amply demonstrates that the Claims Administrator mailed notices to the New York TPPs at the correct addresses, and that notices were also published in the Wall Street Journal, the New York Times, and other major publications. Because the notice plan was fair and reasonable, and the Court found it to be the best notice practicable under the circumstances, the unfortunate fact that a particular TPP may not have received actual notice has no bearing and does not warrant an extension of the opt-out date. See In re Prudential Ins. Co. of Am. Sales Practices Litig., 177 F.R.D. 216, 238 (D.N.J. 1997) (denying request for extension of opt-out deadline where movants alleged that they did not receive notice or received notice late, but where the notice plan was found to comply with basic requirements of due process).
Finally, the New York TPPs' accusations of bad faith are unsupported by any record evidence. In fact, the Court inquired of counsel for the IPP classes, Geoffrey Horn, regarding his communications with counsel for the New York TPPs, and the Court is satisfied that there was no bad faith involved. While in the future, counsel should consider extending the professional courtesy of contacting counsel for the plaintiffs in stayed cases such as the Asher case, in order to avoid situations such as these, there has been no demonstration of bad faith or any derogation of a professional duty on class counsel's part. Accordingly, the New York TPPs have failed to meet their burden of demonstrating excusable neglect, and their motion for leave to file late opt-out notices must be denied.
Further, counsel for the New York TPPs provides no explanation as to why he failed to follow up regarding the status of this multi-district litigation, instead waiting for the IPP Classes' counsel to take the initiative and call him. In light of the stage of this litigation, and the fact that the Asher case was stayed for almost two years, counsel for the New York TPPs should have been following this case and, at the very least, could have done a public records search every few months to determine when trial was scheduled to commence, whether any settlement had been reached, and whether there was a possibility that the stay would soon be lifted. Instead, counsel for the New York TPPs merely states that he had communications with Geoffrey Horn, Esq., counsel for the IPP Classes, in July of 2003 and "after April 2004," without any specification of when the last communication took place. In this regard, it does not appear that the New York TPPs and their counsel acted diligently.
III. List of Timely, Effective Opt-Outs
In light of the Court's denial of the motions of the Illinois and New York TPPs, those particular entities may not opt-out and are bound by the IPP settlement. For purposes of clarity, the following are the TPPs and consumers whose opt-outs were timely received and who are deemed to have effectively excluded themselves from the IPP settlement:
Effective TPP Opt-Outs
Nissan North America Inc. c/o Virginia King Sr. Manager Employee Recs. P.O. Box 191 Gardena, CA 90248-0191
Boca Resorts Inc., Employee Benefit Plan c/o Sonia Marrero Director of Benefits 501 E Camino Real Boca Raton, FL 33432
Kaiser Found. Health Plan of Georgia c/o Mitchell Cohen Sr. Counsel 3495 Piedmont Road NE Bldg. 9 Atlanta, GA 30305-1736
Kaiser Found. Health Plan of the Mid-Atlantic c/o Mitchell Cohen Sr. Counsel 2101 E Jefferson Rockville, MD 20852
Boca Resorts Resorts Club Employee Benefit Plan c/o Sonia Marrero Director of Benefits 501 E Camino Real Boca Raton, FL 33432
Paul T. Liistro 385 W Center Street Manchester, CT 06040
DLA Piper Rudnick Gray Cary US LLP c/o Tracey M. McClaughlin HR Benefits 6225 Smith Avenue Suite 2B Baltimore, MD
Kaiser Foundation Health Plan c/o Mitchell Cohen Sr. Counsel One Kaiser Plaza Oakland, CA 94612
Kaiser Foundation Hospitals c/o Mitchell Cohen Sr. Counsel One Kaiser Plaza Oakland, CA 94612
Kaiser Foundation Health Plan of Colorado c/o Mitchell Cohen Sr. Counsel 10350 E Dakota Avenue Denver, CO 80231-1314
Empire BCBS c/o Mitchell D. Richling VP 11 W 42nd Street New York, NY 10036
BCBS of Nebraska c/o Thomas J Jenkins VP and Gen. Counsel 7261 Mercy Road Omaha, NE 68180-0001
BCBS of Massachusetts c/o Steven Skwara Ass. Gen. Counsel Robins Kaplan Miller Ciresi 1801 K Street NW Washington, DC 20006
Kaiser Found. Health Plan of the Northwest c/o Mitchell Cohen Sr. Counsel 500 NE Multnomah, Suite 100 Portland, OR
Kaiser Found. Health Plan of Ohio c/o Mitchell Cohen Sr. Counsel North Point Tower 1001 Lakeside Avenue, Suite 1200 Cleveland, OH
Wellmark Inc. c/o F. Joseph Du Bray Gen. Counsel 636 Grand Avenue Des Moines, IA 50309-2565
Swiss Re Life Health America Inc. c/o Peter J. Durand VP Nat. Trial Counsel 175 King Street Armonk, NY 10504-1606
Swiss Re America Holding Corp. C/o Peter J. Durand 175 King Street Armonk, NY 10504-1606
Swiss Am Reasurance Co. Swiss Re Life Health Am Inc. 175 King Street Armonk, NY 10504-1606
Excellus Health Plan Inc. c/o Ralph Cox Gen. Counsel Robins Kaplan Miller Ciresi 1801 K Street NW Washington, DC 20006-1307
Guardian c/o Robert D. Grauer Sen. Atty. 7 Hanover Sq. New York, NY 10004
Effective Consumer Opt-Outs
Mr. Edward P. McCarthy of East Setauket, NYIV. Conclusion
For the reasons set forth above, and as articulated on the record at the June 28 and June 29, 2005, fairness hearing, it is hereby
ORDERED that:
(1) The Motion of the Plaintiffs in the Illinois Opt Out Case to Extend the Indirect Purchaser Opt-Out Deadline to Accommodate Four Day U.S. Mail Delivery Delay [DE-1580] is DENIED;
(2) The Motion of Trustees of Correction Officers Benevolent Association Security Benefits Fund-Retirees and The Correction Officers Benevolent Association Security Benefits Fund Active, Trustees of Local 445 Freight Division Welfare Fund, Trustees of the Local 445 Construction Division Welfare Fund, and New York City Transit Authority for Leave to File Late Opt-Out Notices [DE-1586] is DENIED;
(3) The Motion of the Plaintiffs in the Illinois Opt-Out Case to Establish a Conditional Schedule for Class Settlement Objections and Class Member Claims [DE-1600] is DENIED, as the Illinois TPPs have failed to provide any justification or supporting authorities for the extraordinary request that the period of time for objections be reopened, following a two-day fairness hearing and following the Court's oral ruling finally approving the IPP settlement;
(4) The New York TPPs' Motion to Join the Motion of the Illinois Opt-Out Plaintiffs to Establish a Conditional Schedule for Class Settlement Objections and Class Member Claims [DE-1598] is DENIED, for the same reasons articulated in paragraph 3 above;
(5) The Motion of the Plaintiffs in the Illinois Opt-Out Case for Leave to File a Reply Brief to Address Issues Raised by Defendants in Late-Served Opposition Brief and at Oral Argument [DE-1601] is DENIED, in light of the fact that the Court orally announced its ruling denying the Illinois TPPs' motion for leave to file a late opt-in at the fairness hearing, and the Illinois TPPs fail to provide any authorities or arguments justifying the reversal of the Court's ruling.
DONE and ORDERED.