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Talone v. The American Osteopathic Association

United States District Court, D. New Jersey

December 3, 2018

ALBERT TALONE, D.O., CRAIG WAX, D.O., RICHARD RENZA, D.O., ROY STOLLER, D.O., individually and on behalf of all others similarly situated, Plaintiffs,



          MARK BRNOVICH, DREW C. ENSIGN, As Amici Curiae for the Attorneys General of Arizona, Idaho, Louisiana, Rhode Island, and Texas

          SCOTT B. GALLA CLARK HILL PLC Local counsel for Amici Counsel


          NOEL L. HILLMAN, U.S.D.J.

         This case concerns antitrust and fraud claims brought by osteopathic physicians against the American Osteopathic Association for its alleged unlawful tying of board certification with membership in a professional association. Presently before the Court is the parties' joint Motion for Final Approval of Certification of Settlement Class and SubClasses and Class Settlement. Also pending is Plaintiffs' Motion for Attorneys' Fees and Service Awards. For the reasons expressed below, both motions will be granted.


         Plaintiffs' complaint relates the following:[1] Plaintiffs are osteopathic physicians (“DOs”) who have been board certified as medical specialists by the American Osteopathic Association (“AOA”), and who have also purchased membership in the AOA. Approximately 48, 000 practicing DOs are members of the AOA, and approximately 32, 000 of those DOs are AOA board certified. The AOA has notified Plaintiffs and AOA board certified DOs that their board certification will be invalidated and cancelled unless they purchase annual membership in the AOA. Plaintiffs claim that in order to avoid the loss of their board certification, Plaintiffs and AOA board certified DOs have been forced to purchase AOA membership even though it serves no purpose with respect to, and has no actual connection with, AOA board certification or their practice as physicians (“Challenged Rule”).

         Plaintiffs further claim that the AOA's unlawful tying arrangement has reduced the number of DOs willing to purchase membership in other professional physician associations and has thereby foreclosed competition in the market for membership in professional physician associations (the “Association Membership Market” or “AMM”). Plaintiffs claim that the reduction in purchases by AOA board certified DOs of non-AOA professional physician association memberships has erected barriers to entry, and thus has prevented potential rivals to the AOA from entering the Association Membership Market. In addition, Plaintiffs claim that the AOA's unlawful tying arrangement has raised the costs faced by its existing rivals, as well as softened price competition between the AOA and its existing rivals.

         By reducing competition in the Association Membership Market through its unlawful tying arrangement, Plaintiffs claim that the AOA has been able to increase the price of its annual membership dues to almost double the price that its competitors in the Association Membership Market charge for membership in their associations, and there has been a corresponding reduction in competitive offerings.[2] Plaintiffs further claim that there is no evidence that the AOA's tying arrangement enhances the efficiency of its product offerings, meaning there is no pro-competitive business justification for its unlawful tying arrangement.[3]

         In addition to the tying arrangement, Plaintiffs claim that DOs who received their AOA board certification prior to 2000 were promised by the AOA that it was a “lifetime” certification that would never expire, and that promise was renewed in 2013, when the AOA initiated its Osteopathic Continuous Certification program (“OCC”). Plaintiffs claim, however, that the AOA knowingly concealed that lifetime certification holders would also have to purchase annual membership in the AOA to avoid the invalidation and cancellation of their prior “lifetime” certifications.

         Based on the foregoing, Plaintiffs, on their own behalf and on behalf of the Class and Sub-Classes, have brought the present action to obtain injunctive and monetary relief against the AOA for this alleged anticompetitive tying arrangement, alleging that it violates Section 1 of the Sherman Act, 15 U.S.C. § 1 (“Section 1”) and Section 3 of the New Jersey Antitrust Act (“NJAA”), N.J.S.A. 56:9-3 (“Section 3”), and the New Jersey Consumer Fraud Act (“NJCFA”) N.J.S.A. 56:8-1, et. seq.

         The AOA denies that its policies violate the federal or state antitrust laws in that it does not suppress competition in any relevant market. The AOA further denies that any statements or omissions by it were fraudulent or otherwise in violation of law.

         After the Court denied the AOA's motion to dismiss Plaintiffs' Amended Complaint on June 12, 2018, the parties relate that it became apparent to them that this action, unless settled, would be exceedingly costly for both sides and the outcome uncertain. Accordingly, pursuant to a September 27, 2017 Order issued by Magistrate Judge Joel Schneider, the parties entered into settlement negotiations mediated by Judge Schneider. Those negotiations spanned a period of approximately four months, from October 2017 to February 2018. They concluded with an agreement in principle on substantive terms.

         Thereafter, in mid-March 2018, the parties negotiated and agreed on the amount of attorneys' fees, costs, and service awards that may, subject to Court approval, be awarded to Class Counsel and the Class Representatives. On May 7, 2018, the AOA's Board of Trustees (“BOT”) passed a resolution approving the settlement, in June 2018 the parties entered into the Settlement Agreement, and on July 22, 2018, the AOA House of Delegates (“HOD”) agreed to the dues decrease outlined in the Settlement Agreement.

         In their present motion, Plaintiffs and the Defendant assert that they believe that the settlement is fair, reasonable, and adequate. They argue that if approved, it will provide significant benefits to the Settlement Class and SubClasses. According to Plaintiffs' calculation, the total net present value of the settlement exceeds $84, 000, 000, and the value to each class member is at least $1, 750. The settlement agreement provides various benefits to members of the class, including the permanent rescission of the Challenged Rule in exchange for dismissal with prejudice of Plaintiffs' claims against the AOA and a release of all claims that were brought or could have been brought by members of the Settlement Class and Sub-Classes, including any claims for damages. The settlement relieves the AOA of the massive potential costs of litigation of this case and of other cases that might be brought by members of the Settlement Class or Sub-Classes. The parties argue that the Settlement Class and Sub-Classes satisfy the requirements for class certification under Fed.R.Civ.P. 23(a) and (b)(2), and that the settlement satisfies all relevant factors under Girsh v. Jepson, 521 F.2d 153, 157 (3d Cir. 1975). Plaintiffs further contend that their negotiated attorneys' fees and service awards to the named Plaintiffs are also fair and reasonable.

         On July 25, 2018, this Court entered an Order preliminarily certifying the class. (Docket No. 89.) That Order set various deadlines for class notice and objections, among other filing deadlines. The Order scheduled the fairness hearing for November 9, 2018.

         On October 29, 2018, as the time to file objections to the settlement was about to expire, the Attorneys General of Arizona, Idaho, Louisiana, Rhode Island, and Texas filed a Motion for Leave to Appear Amicus Curiae and File a Brief of Amici Curiae in opposition to the settlement approval.[4] (Docket No. 93, 94.) They, along with the appropriate state officials for the other states, as well as the appropriate federal official, were provided notice of the class action settlement pursuant to 28 U.S.C. § 1715. The purpose of that statute is to enable state and federal officials to voice concerns if they believe that the class action settlement is not in the best interest of their citizens, to provide a check against inequitable settlements, and to deter collusion between class counsel and defendants to craft settlements that do not benefit the injured parties. S. Rep. No. 109-14, 2005 U.S.C.C.A.N. 3.

         These five states' Attorneys General argue that the settlement is structured in a way that directly conflicts with the United States Supreme Court's guidance in Wal-Mart Stores Inc. v. Dukes, 564 U.S. 338 (2011). In that case, the Supreme Court held that “individualized” damages claims could not be certified under Rule 23(b)(2) because classes certified under 23(b)(2) are “mandatory” and do not provide class members with the right to opt-out of the Settlement Class. The Attorneys General argue that even though the proposed settlement awards class members an array of prospective relief, it does so while not only releasing class members' claims for injunctive relief, but also certifying and releasing class members' claims for monetary relief. Since, Amici argued, those claims are plainly individualized due to the nature of the antitrust claims in this case this Court may not approve this settlement and certify the class without violating the rule set out in Dukes.[5]

         At the fairness hearing on November 9, 2018, the Court granted the Attorneys General's motion to file their amicus brief. The Court also heard argument on the parties' positions.[6]In addition to articulating why their settlement is not violative of Dukes, Plaintiffs and AOA argued that the Attorneys General lack standing to object to the settlement as they have not formally intervened as parties.

         The Court provided Plaintiffs and the AOA the opportunity to file supplemental briefs in response to the Attorneys General, as well as permitted the Attorneys General to file a brief reply. All parties filed their supplemental submissions, which the Court has considered.[7]

         The Plaintiffs and AOA's Motion for Final Approval of Certification of Settlement Class and Sub-Classes and Class Settlement is now ripe for resolution. As detailed below, because the Court finds that the parties' settlement does not present the same concerns voiced by the Supreme Court in Wal-Mart v. Dukes, the Court will approve the Settlement Class pursuant to Federal Civil Procedure Rule 23(b)(2).


         I. Subject matter jurisdiction

         This Court has jurisdiction over Plaintiffs' federal claims under 28 U.S.C. § 1331, and supplemental jurisdiction over Plaintiffs' state law claims under 28 U.S.C. § 1367.

         II. The Settlement

         A. The Settlement Class and Sub-Classes

         The Settlement Class is defined as:

All persons who were members of the AOA (regardless of membership category) and all persons or entities who paid dues on behalf of anyone who was a member of the AOA at any time since August 1, 2012.

         The Settlement Sub-Classes are comprised of: (i) an “AOA Board-Certified Sub-Class” comprised of all members of the Settlement Class that have held AOA Board certifications since August 1, 2012; and (ii) a “Lifetime Sub-Class” comprised of all members of the Settlement Class who received “lifetime” board certification (collectively, the “Settlement Class and SubClasses”).

         B. Injunctive Relief and the Settlement's Value

          The parties have agreed to the following injunctive relief:

Rescission of the Challenged Rule: No. later than the Effective Date (as defined in the Settlement Agreement), the AOA shall permanently decouple AOA Board certification from membership in the AOA, such that, as of the Effective Date, AOA Board certification shall no longer be conditioned upon membership in the AOA;
Suspension of Board Certification Maintenance Fee: The AOA shall, for the period from June 1, 2019 through May 31, 2022, terminate the Certification Maintenance Fee (currently $90) that the AOA currently charges AOA Board-certified DOs - with AOA having the right to reinstate a Certification Maintenance Fee at any time after May 31, 2022, if so determined by the AOA HOD;
Dues Reduction: The AOA BOT shall recommend to the AOA HOD that the HOD approve[8] (1) a $90 reduction in the annual membership dues for Annual Regular Membership, which is currently $683 for the period from June 1, 2019 through May 31, 2020; and (2) a resolution that the Annual Regular Membership dues will not be increased over that reduced amount for the period from June 1, 2020 through May 31, 2022, provided that, assuming that the HOD accepts this recommendation, the level of Annual Regular Membership dues beginning June 1, 2022 shall be determined by the HOD, in accordance with the AOA's Constitution and Bylaws;
Lifetime Certification Holders: The AOA will not require Board-certified DOs who received “lifetime” Board certification to participate in Osteopathic Continuous Certification (“OCC”) or to remain members of the AOA. However, to maintain lifetime certification, a DO will continue to be required to maintain a license to practice in good standing in the state or other jurisdiction in which the physician practices, satisfy specialty specific Continuing Medical Education requirements identified by the certifying Board, and not be cited for unethical or unlawful conduct. Lifetime certificants who choose not to participate in OCC can claim to be certified but cannot hold themselves out as recertified or as otherwise participating in continuing certification;
Continuing Medical Education (“CME”): The AOA shall, for the period from January 1, 2019 through December 31, 2021, make available to all AOA members who purchase Annual Regular Membership two courses from the online CME programming on a complimentary basis, subject to an aggregate maximum of 12 CME credits each calendar year;
CME Acceptance for AOA Membership: The AOA shall recognize accredited CME whether taken in person or online, for purposes of maintaining membership in the AOA. The AOA shall not adopt membership requirements based on the number of CME credits that may be taken online versus the number of CME credits that must be taken in person. However, the AOA and AOA specialty Boards may lawfully set and enforce requirements for the number and nature of CME credits that must be obtained to maintain AOA Board certification;
No Enforcement of CME Requirements for Non-Board Certified DO Members: The AOA may maintain CME requirements as aspirational goals for members. However, physicians will not lose membership in the AOA as a result of failing to meet the CME requirement, provided that the physicians meet the CME requirements for the state(s) in which they practice;
Osteopathic Awareness Campaign Expenditures: The AOA shall, for the June 1, 2019-2020 and June 1, 2020-2021 Fiscal Years, provide funding of not less than $2 million per fiscal year for the D.O. Osteopathic Physician Brand Awareness Campaign, which refers to the campaign to take “osteopathic medicine to a wide audience, ” described in detail on the AOA's website at: campaign.aspx;
Establishment of Independent/Private Practice DO Task Force: The AOA shall establish a task force comprised of between five and seven members consisting of independent private practice DOs or DOs who practice in an independent private practice DO group, all of whom are engaged in direct patient care. The membership of this task force will be determined at the sole discretion of the AOA Board of Trustees as long as the members meet the above qualifications. The task force will be treated like any other task force of the AOA. This task force shall be established for a minimum of three years.
Costs of Notice. The AOA shall bear the costs relating to notice to the Settlement Class and Sub-Classes.[9]

         The parties contend that a number of the settlement's terms have a quantifiable economic value, such as: (i) waiver of the $90 board certification fee for approximately 33, 000 AOA board certified DOs for three years; (2) the $90 reduction in the dues amount from $683 to $593 for all of the approximately 28, 000 regular-level AOA members, including AOA board certified DOs, and a freeze of the dues at the reduced amount for three years; (3) the two continuing medical education courses of up to 12 credits total for all regular AOA members for three years; and (4) the $2, 000, 000 contribution to an osteopathic brand awareness program each year for two years.

         For each of the years in which the above economic terms apply, the net present values of the package they comprise, assuming a modest 3% decline in AOA membership resulting from the elimination of the Challenged Rule and assuming each CME credit costs $75, are as follows:

Year 1: $31, 388, 060
Year 2: $28, 534, 600
Year 3: $24, 287, 652

         The total net present value of the settlement from years one to three is $31, 388, 060, $59, 922, 660 and $84, 210, 312.

         The parties further contend that the non-monetary terms of the settlement also provide meaningful benefits to the Settlement Class and Sub-Classes, including several terms that will save the members of the Settlement Class and Sub-Classes time and money. In particular, by eliminating the requirement that members attend in-person CME, the settlement provision provides cost and time savings. Moreover, the establishment of a task force consisting of independent private practice DOs will improve the AOA by ensuring that all viewpoints of AOA membership are heard.

         C. Dismissal with Prejudice and Release of Claims

          In exchange for the above benefits, the settlement provides for the dismissal with prejudice of the claims asserted in this action, and that all members of the Settlement Class and SubClasses will fully release the AOA from all federal and state law claims, including claims for damages, that could have been asserted in this action, including but not limited to claims that result from, relate to, or arise out of (i) the Challenged Rule, and (ii) any alleged or actual misstatements or omissions concerning the “lifetime” nature of the AOA Board certifications originally characterized as “lifetime” certification. The release does not, however, include claims against the AOA that are completely unrelated to the Released Claims.

         D. Attorneys' Fees ...

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