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Varnum Attorneys Convince Sixth Circuit to Vacate Settlement, Return BCBSM Matter to District Court

June 7, 2016

Varnum trial attorneys have successfully convinced the 6th Circuit Court of Appeals to vacate a $30 million class action settlement affecting customers of Blue Cross Blue Shield Michigan, in which key details were wrongly sealed and kept hidden from the public record.

Varnum acted on behalf of 26 client companies who were part of the class action against BCBSM, contending that the settlement was too small, too secretive and too burdensome.

The class action came on the heels of a 2010 Department of Justice antitrust lawsuit against BCBSM, in which the DOJ alleged a price-fixing scheme that pressured hospitals into contracts giving BCBSM preferential consideration over competing insurers. Millions of Michigan residents were affected by the scheme.

The DOJ dropped its suit against BCBSM in 2013 after the Michigan legislature passed laws that addressed the antitrust practice while the class action lawsuit continued in District Court, eventually settling tentatively for $30 million. Almost half the award went to attorney fees and litigation expenses.

"Our clients – along with millions of other Michigan residents – began receiving notices of the class action settlement," said Varnum trial attorney Perrin Rynders. "Given the scope of the price-fixing scheme and the number of people involved, the settlement amount seemed low, but because the records were sealed to us, it was impossible to calculate an appropriate value."

Varnum filed an objection on behalf of clients included in the class, but the settlement was approved in U.S. District Court. Varnum then appealed the matter to the Sixth Circuit, which vacated the settlement in June.

The Sixth Circuit reversed the District Court, finding that class members who would be bound by the proposed settlement had no ability to evaluate it because virtually all of the documents used in court were hidden from the public. The appellate court ordered the records be unsealed absent extraordinary reasons to keep them a secret. The appellate court also invalidated the settlement and ordered the District Court to restart the process.

"We often speak about the importance of transparency in government," said Rynders. "Transparency is particularly important when courts adjudicate the rights of millions of individuals and businesses who are not allowed to be directly involved in the litigation process. The Sixth Circuit recognized and protected the public's right to know the reasons their rights are affected."

The is now back in U.S. District Court in Detroit for re-examination. 

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