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John Ivan Sutter, M.D., P.A., On Behalf of Himself v. Horizon Blue Cross Blue Shield of New Jersey

July 11, 2012

JOHN IVAN SUTTER, M.D., P.A., ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFF-RESPONDENT/ CROSS-APPELLANT, AND MARIO CRISCITO, M.D., NIRANJAN V. RAO, M.D., ROBERT I. OBERHAND, M.D., AND ALEXANDER DLUGI, M.D., PLAINTIFFS/OBJECTORS-APPELLANTS/CROSS-RESPONDENTS,
v.
HORIZON BLUE CROSS BLUE SHIELD OF NEW JERSEY, DEFENDANT-RESPONDENT. UNION COUNTY MEDICAL SOCIETY, MERCER COUNTY MEDICAL SOCIETY, NEW JERSEY PEDIATRIC SOCIETY, NEW JERSEY ASSOCIATION OF OSTEOPATHIC PHYSICIANS AND SURGEONS, AMERICAN COLLEGE OF EMERGENCY PHYSICIANS, VASCULAR SOCIETY OF NEW JERSEY, NEW JERSEY PATHOLOGY SOCIETY, RADIOLOGICAL SOCIETY OF NEW JERSEY, NEW JERSEY ACADEMY OF OPHTHALMOLOGY, NEW JERSEY STATE SOCIETY OF ANESTHESIOLOGISTS, ORTHOPEDIC SURGEONS OF NEW JERSEY, AND THE NEW JERSEY CHAPTER OF THE AMERICAN COLLEGE OF CARDIOLOGY, APPELLANTS/CROSS-RESPONDENTS.



On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L-3685-02.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued March 21, 2012 --

Before Judges Fuentes, Koblitz and Haas.

This case returns to us after we ordered a hearing on remand in Sutter v. Horizon Blue Cross Blue Shield of New Jersey, 406 N.J. Super. 86 (App. Div. 2009). It involves the settlement of a class-action lawsuit instituted on April 12, 2002, by New Jersey physicians against Horizon Blue Cross Blue Shield of New Jersey, Inc. (Horizon), a major medical insurance provider. The objecting class-member physicians (objectors) appeal from the June 16, 2010 order, arguing that the settlement was not fair and reasonable and that the attorneys' fees awarded to class counsel were not properly considered under the law. Plaintiff class cross-appeals, arguing that appellants' claims regarding the fairness of the settlement should be dismissed as they admitted in another proceeding that the settlement provided value to them. After reviewing the record in light of the contentions advanced by both sides on appeal, we affirm.

We incorporate in this opinion the pertinent facts from our prior opinion. Sutter, supra, 406 N.J. Super. at 95-96. The original suit alleged that Horizon delayed and impeded compensation to the doctors whose patients were covered by Horizon. It was settled pursuant to an agreement that Horizon would simplify and expedite its claims processing and provide other relief through various specific measures. No financial relief was provided for class members.

Teresa Waters was retained by plaintiffs to value the settlement. Ms. Waters has a Ph.D. in economics with a concentration in health economics and industrial organization. She completed a valuation of the settlement's worth in 2006.

After our remand, Waters completed a new valuation of the settlement and testified at the fairness hearing. Waters worked with Research and Polling, Inc. (RPI), a survey research company, to construct a telephone survey about the value of the settlement to the class members. Waters calculated the value to the class in time saved by the more efficient insurance claim processing procedures. Her approach attributed value to time; in other words, a physician's billing clerk could spend his or her time performing other tasks if not handling Horizon issues. Overall, Waters opined that the settlement was worth $35.01 million for a class of just over 20,000 physicians, which worked out to $1741 per physician for the five-year period, or $348 per physician per year. The objectors did not present an expert, although they cross-examined Waters about her assumptions and technique.

Testimony was also taken at the remand hearing regarding class counsel's fee request. Class counsel Eric D. Katz testified that the firm had a contingent fee agreement with Sutter, as it did with "virtually all" of its other clients. Katz had "no idea" about his hourly billing rate. His partner, David A. Mazie, testified that three years earlier, in a declaratory judgment action, in addition to his contingency fee, the court awarded him an hourly rate of $525 an hour, which was an "arbitrary number" that he chose for the fee application. Other than that, he did not have any hourly clients; he handled only contingency fee cases.

The judge admitted into evidence a certification submitted by Mazie to the United States District Court for the District of New Jersey in connection with Beye v. Horizon, 568 F. Supp. 2d 556 (D.N.J. 2008), in which he and a former partner were arguing over the division of fees, which showed hourly rates for Mazie ranging from $375 to $560, and for Katz from $275 to $435 in 2006-2008. Two other attorneys in the office billed at about $360 per hour, one at $425 per hour, and several billed between $160 and $270 per hour. Mazie claimed that these were only arbitrary "placeholder" rates necessitated by the office computer program, not actual rates billed to clients. He then said, "[I]f I were an hourly lawyer, and I'll concede this, these are the rates that we would charge."

After a five-day remand hearing, the judge issued a revised written opinion, incorporating the findings he made in the first decision and confirming the settlement, but reducing counsel fees and costs by 28% from $6,500,000 to $4,685,285.

I

In their cross-appeal, plaintiffs argue that the objectors' appeal regarding the settlement's value should be dismissed in its entirety because they admitted that one settlement provision had a value of at least $30 million. This argument rests on an incomplete reading of the objectors' pleading in a companion case, in which they indicated that plaintiffs had valued this provision in excess of $30 million. This argument is without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).

II

The objectors argue that the judge should not have approved the settlement as it provided nothing of value to the class members. The court can approve a settlement "only after a hearing and on finding that the settlement . . . is fair, reasonable, and adequate." R. 4:32-2(e)(1)(C). "If the settlement is fair and reasonable, it may be approved even though individual members of the class refuse to consent." Chattin v. Cape May Greene, 216 N.J. Super. 618, 627 (1987) (citations omitted). A settlement may be approved even if the majority of the class disapproves of its terms, but the overwhelming opposition of class members to a proposed settlement "is a significant consideration militating against court approval." Id. at 627-28 (citing Pettway v. American Cast Iron Pipe Co., 576 F.2d 1157, 1215-18 (5th Cir. 1978), cert. denied, 439 U.S. 1115, 99 S. Ct. 1020, 59 L. Ed. 2d 74 (1979)).

The court has "considerable discretion" in determining whether a settlement is fair and reasonable, and, thus, its determination will be reversed only for an abuse of discretion. Bryan v. Pittsburgh Plate Glass Co., 494 F.2d 799, 801 (3d Cir.) cert. denied, 419 U.S. 900, 95 S. Ct. 184, 42 L. Ed. 2d 146 (1974);*fn1 Chattin, supra, 216 N.J. Super. at 628. An appellate court may find an abuse of discretion where the trial court's decision rests upon "a clearly erroneous finding of fact, an errant conclusion of law or an improper application of law to fact." In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 783 (3d Cir.), cert. denied, 516 U.S. 824, 116 S. Ct. 88, 133 L. Ed. 2d 45 (1995). An appellate court may not substitute its findings for that of the trial court; it may only make an assessment of whether there is enough evidence to support such findings. Cox v. Keystone Carbon Co., 894 F.2d 647, 650 (3d Cir.), cert. denied, 498 U.S. 811, 111 S. Ct. 47, 112 L. Ed. 2d 23 (1990). Further, "[w]hen there are two permissible views of the evidence, the [trial court's] choice of one view cannot be clearly erroneous." Ezold v. Wolf, Block, Schorr & Solis-Cohen, 983 F.2d 509, 525 (3d Cir. 1992).

A

Objectors first argue that the approval of the settlement should be reversed because the judge did not consider the impact of a settlement from a similar case in Florida, Love v. Blue Cross & Blue Shield Ass'n, No. 03-21296, (S.D. Fla. April 20, 2008).

The Love lawsuit was instituted in the United States District Court for the Southern District of Florida after the Sutter suit was begun and raised largely the same issues against Horizon. The parties in Love reached a settlement agreement similar to this one, and the court entered a final order approving the Love settlement on April 20, 2008, which was after the Sutter final approval (February 2, 2007), but before our decision remanding for an expanded fairness hearing (March 25, 2009).

On remand, the judge acknowledged objectors' contention that he should consider the Love settlement when determining the fairness of this settlement "because Love settled (with a settlement agreement encompassing many of the same terms as the Sutter settlement), [the objectors] are receiving nothing of value in this matter." He rejected this argument, writing that, it would be improper to allow [o]bjectors to argue in hindsight that they have received nothing of value because of a subsequent settlement. The interplay between the Sutter settlement and Love settlement is nothing new to the parties and was a risk anticipated during the Sutter settlement negotiation. Furthermore, it could be equally argued that the Love settlement may not have been as valuable had they not copied provisions from the Sutter settlement.

It should be noted that the Love settlement was not a factor that the Appellate Division directed this [c]court to consider on remand; no party raised this concern before the Appellate Division despite the fact that the Love settlement occurred while the appeal was going on. Nevertheless, if this [c]court considers any impact of the Love settlement, it would be that the [c]lass is likely to be without any cause of action if this settlement agreement is not approved, because Love potentially extinguishes the Sutter cause of action.

[emphasis in the original.]

We agree and adopt the reasoning of the judge in this regard. He considered the Love settlement as it reasonably applied to the issues.

B

Objectors argue that the proposed settlement fails under the analysis set forth in Girsh v. Jepson, 521 F.2d 153 (3d Cir. 1975), which is to be used when determining whether a class action settlement is fair and reasonable.*fn2 In Girsh, the United States Court of Appeals for the Third Circuit set forth nine factors to consider in determining whether a class action settlement is fair and reasonable. Those factors are:

(1) the complexity, expense and likely duration of ...


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