please call the first case fifteen fifteen saying group operated at all versus blue cross blue shield of michigan a d a c automotive at all morning i would like to reserve two minutes for a model that pleases the court please the court this court has repeatedly noted that class action settlements are different than other settlements that the district court cannot merely rely on the adversarial process between protect the interest of the persons involved in the litigation the persons most directly affected by the litigation namely the class rather this because class settlement seek to bind others millions of others in this case including my clients which are twenty six self insured companies who hired blue cross as their third party administrator to administer their health care plans class action settlements are fundamentally different because the parties to  special benefits that they would not otherwise receive in traditional litigation the defendants gain the benefits of reza judicata a fact barring claims for milk in this case millions of others who are not parties to the case otherwise would have the right to bring claims plaintiffs counsel gain the right to obtain attorney fees under the proposed settlement that might not otherwise be available to plaintiffs counsel and plaintiffs themselves in this case under the proposed settlement w receive the incentive awards that they would not otherwise receive in the litigation as a result courts have established three different procedural safeguards on a class action settlement all three of which have broken down in this case the first procedural safeguard is that the proponents of the subtle might have an affirmative burden to demonstrate the fairness of the proposed settlement unlike in a traditional case where the fairness of the settlement is essentially presumed  based on the enver serial process second the district court is to hold a fairness hearing to allow objectors to the proposed settlement the opportunity to be meaningfully heard by the court third the district independently carefully scrutinize the fairness of the settlement and cannot simply defer to counsel for the parties this court has noted numerous times that the district court cannot do so without that way without evaluating the plaintiffs particular likelihood of success on the merits against the amount and form of relief that would be received under the settlement there have been breakdowns in this case on all three of those procedural break of those procedural safeguards first the record fails to demonstrate that the proponents have met their burden of proving that the supplement is fair if you look at docket of entry one forty eight the plaintiff's unopposed motion for preliminary approval of the proposed settlement in that document there is not a single reference to a single substantive document in the case any testimony in the case anything that would inform the parties or the court that in as to the likelihood of the merits in this case there was a fairness hearing there was a fairness hearing so that at that hearing there was the court heard testimony on all kinds of things right the court did not hear any substantive testimony at all at that various hearing or is an opportunity for counsel to argue along had the court had the matter before it three years the case was of the so this was my point of course is the court had a good bit of familiarity with this case without a doubt without a doubt the court had to that there was motion practice before the court there was discovery disputes that were presented before the court so without a doubt there was some police some level of familiarity that the district court had with the case absolutely or that matter it doesn't matter to your painting the picture as if it's a clean slate here that there needed to be all this substance in that wasn't offered i'm just wondering if you would acknowledge that there was of a lot of knowledge by the court in all the parties by the time we're getting to the settlement guess it's difficult for me as the objector not being able to have seen so many of the substantive documents that were submitted to the court because the motion for class certification and all the exhibits were filed under knowledge that the district court had about the substance of the case because we're left here almost came in laos lightly you when you're in your client's came in quite late to the game here well we came in once we receive notice that there was going to be a proposed settlement that was going to affect our rise absolutely your honor and we did so in a very timely fashion once we learned of the proposed settlement but how they would you didn't know but the case being filed or any of this  thought you had ongoing litigation of your own that my client my clients have ongoing litigation had and in some cases still have ongoing litigation against blue cross related to hidden access fee issues in fact one of those cases came before the six circuit the high lex decision on behalf of one of our one of our other clients those cases don't have anything to do with the antitrust issues the most favored nation if you will agreements the blue cross entered into with  over half of the hospitals in the state of michigan so the there was of course prior context for our clients being in an adversarial relationship with blue cross frankly that's how my firm got involved in the cases we had clients who had blue head litigation with blue cross separate from this received a postcard giving us that there might be a settlement in a completely different action contact us and say well what do we do with this and that's what is happening in august and september of two thousand fourteen leading up to the time that we file or objection and then immediately follow up we tried to work with counsel for the proponents of the settlement to see if we could work out an arrangement to get access to the records to do something voluntarily we worked on that for two or three weeks what we got back was it was rejected to the point of being not meaningful and at that point in my correct in understanding that actually in that process it's the parties that are making decisions about what to redact in the district court is not exercising authority over them that's certainly what we see your honor that there was kind of a blanket protective order that was entered in the case that gave it gave the parties the ability to submit materials under seal but then the parties were making the decisions on a document by document mesas as to what to submit under seal i did not see any evidence in the record that the district court or a magistrate judge for sample on reference was actually going  through and playing any sort of oversight role and in looking at what was being filed under seal and trying to make any sort of specific findings that you know this this document should be under seal this shouldn't be under seal and in fact it clearly wasn't happening because there were not as you would often see in cases in my experience there might be a sealed version and then a redacted version available for the public that had most of the document available but had only certain specific sensitive things may be redacted and kept under seal that didn't happen in this what was lacking the most in the fairness hearing is back to did you ask the court to hear from witnesses or consider deposition your what was your position there what was lacking the most is that we had f a motion to intervene for the limited purposes of getting access to the records so that we could assess substantively what whether this was a fair settlement or not whether or not the claims had merit whether or not the damages that were being presented were you know reasonable or appropriate and we were we were really in the fairness hearing i would say we were arguing with both hands behind her back not even just one hand behind her back in terms of not having any access to and waive and against the amount of relief being afforded we were able to present meaningful argument to the district court as to the plaintiff's likelihood of success because we had absolutely no access to any of the documentary evidence where testimonial evidence that would be probative as to whether or not these damn f n agreements were in fact anti competitive driving up costs for hospitals in michigan and harming class members absolutely none of that was available to us and so the settlement did not present any evidence in their motion for approval of the subtleness as to the likelihood of success on the merits rather the approach was to look at the damages report that was submitted  by the plaintiffs and to say well twenty five percent of that that is a reasonable amount because in all kinds of other antitrust cases not the case before the court all kinds of other antitrust cases have settled for less than twenty five percent of the recovery i would suggest that that is insufficient that comparing the two different cases and different facts from different jurisdictions is insufficient is not particularly probative of the likelihood of success of the merits that the plaintiffs had in the case that was before the court and the district court unfortunately fell into that same error adopted that reasoning in her opinion and relied very heavily very heavily on the opinions of class counsel that the agreement was fair in reason essential ie the district court treated this as a traditional subtle and simply deferred to the opinion of counsel that the so i don't know what reasoning you're talking about in terms of the district court adopting as to likelihood of success because i just don't see much she says there was discovery ok mean that doesn't say much about the merits either way and that by the way as another factor in the u a w test it's not this factor and you know there's a generic statement about risks of litigation is there something else you refer to in terms of specific reasoning about the likelihood of success i would say i don't think other than deferring to counsel i don't think there is your honor other than other than i believe that the district court did in its opinion slate the cases that were presented about other antitrust cases and what they had settled for in other jurisdictions and so there are those general statements you know i trust cases are tough to win there's lots of challenges we all understand that people who have litigated in that area but there's nothing that specific to the facts that were before the in this case one thing i want to ask you is i mean you you argue this eight hundred fifty million number in your brief but at the time the plaintiff's expert comes up with his number which i think was one hundred eighteen that's correct i mean that's before so far as the record shows that's before any settlement negotiations and so at that point the plaintiff's counsel has every incentive to maximize that number and so i i mean that number doesn't seem to be subject to some of the concerns that that the case law describes on the one hand and on the other hand there just the eight fifty just doesn't seem to have much basis other than sort of some very rough mathematics and i appreciate that your honor and that's essentially all that we i know you don't have you don't have any information to look out and it's so difficult for me to comment even on the expert report because this case what's filed for years before there was a settlement plaintiff counts all reviewed millions of pages of documents in discovery participated in a hundred sixty nine depositions paid their expert two point five million dollars to work with terabytes of data to form complex regression and seize in an effort to estimate damages and you're right you at the time that that work was done we were in intense litigation blue cross with every incentive in the world to maximize the damages and we tried very hard to do that spending no doubt in moving during the  adversarial stage of the litigation i mean the concern and let me just make clear up front it is not specific to any of the lawyers in this case ok it's about incentives you know i mean so judge can't sit on a case in which he has an interest because he there are bad incentives involved for the judge personally it's not an imputation about the judge's integrity the incentives are just bad and the case law in dry max discusses how the incentives change in the settlement process and so unquestionably in the end you look at this record i mean it's different than dry max it's different  in porton ways and i totally recognize that but once you get into the settlement negotiations the incentives are different and so the district court has to be really careful and so even though there is the four years of adversarial litigation the most of what we're looking at is a settlement agreement and so we have to look at that agreement and specifically the process that leads to yes your honor i agree with that but the adversarial nature of the litigation does not and when settlement negotiations begin here it would be on earth statement to say it does right because our incentives in settlement negotiations as well as in is to maximize the recovery it's what we need to do for our clients it's what we need to do in our own interests because our recovery as lawyers is tied directly to really build it to makes all the sense in the world i mean the concern is is a little more subtle and again it's not about about you mr small i think it is that and the case law as written about this the first circuit has written about this that there is there could be a temptation there could be in  senate to take a somewhat lower overall number from the defendant in favor of what just as one example the first circuit called red carpet treatment and these you know rather than take forty or thirty five will take thirty but we get a clear sailing provision which we have in this case that's the concern and i guess i mean i'll just be candid with you my my concern in this case is that the core concern is that in evaluating the fairness the most important factor is the plaintiffs likelihood of success in there is simply no analysis none of that specifically in this opinion we have five parts recitation one part platitude and that's it unless i'm missing something well let me that's a fair question your honor let me go through what was before the district court when that decision was entered approving the settlement number one there was an extremely for record class certification motion expert reports by the plaintiff's expert reports by blue cross dobber motion by blue cross responded to by the plaintiffs challenging the work of our expert declaration from plaintiff's counsel on the nature of the settlement negotiations a contested leadership for appointment lead counsel so the court specifically weighed in on the adequacy of counsel to represent the class in this case a parallel government action raising the same issues bigger asli litigated by the justice department parallel action by aetna a competitor of blue cross bigger asli litigating this issue remains of discovery so the record really could not have been fuller particularly on the issue of whether  hundred eighteen million dollars is a reasonable estimate of damages that the court did not abuse its discretion in relying upon i guess and it's in a sense you know class actions really are different and normally sort of the parties conduct defines the scope of what we look at but here it's the name class members millions of people and organizations in michigan that are affected by  this and so what you just described shows that you you all did your job you know you really did i mean this wasn't just you know all right after a motion to dismiss the case and you are to be commended for the work in your reputation procedure that went into this don't get me wrong but the district court didn't at least when i read this i don't there's no analysis here i mean platitudes are not analysis little litigation has risks i mean what does that tell us about the merits of this claim and why it made sense to give away take the hundred thousand number i don't know why we don't triple it because that's what you must get at trial if you win must but just take one hundred eighteen the you're giving away seventy five percent of that eighty seven percent if you look at what actually goes to the unnamed class members in the district court doesn't doesn't answer the question why does it make sense well in the u a w case that this court decided  the court focused on what was presented to the district court by the parties as a foundation for whether the settlement should be approved so don't think it's the approach that courts have taken in reviewing a class action settlement it's trying to get inside the district judges head to see what was actually going on there we do have sort of a principle around here that a district court has to provide us with a document that allows us to review its work i mean we have sentencing cases all the time where a district court in computing drug quantity doesn't explain how it gets the number and the number might be right and that the parties might have put everything in front of the court you can have the the best experts with all this great data but if there's an analytical gap between the data in the opinion it's no good and i guess the quote that's what i'm concerned about here the unnamed class members are giving up an awful lot and why isn't there an analytical gap not an evidentiary gap necessarily but an analytical gap in between the  evidence here in the district court's approval well your honor there are things that the district court relied upon in did articulate in its decision and i think is highly relevant in this doesn't require a detailed analysis of the evidence in this court is help of course that the district court has wide discretion as to what evidence it considers in support of its ruling so for instance the district court had or years to observe the work of counsel in th case and specifically noted that as a reason to rely on the opinion of counsel in this case the district court you know saw the expert report for the motion side of a million people in michigan intentionally are affected by this i mean can we expect a district court to give us more than one paragraph you know five sentences two of which are relevant ones a platitude i mean is that too much to ask and that's saying i'm not saying this is unfair i'm not saying that at all but i'm saying before we had to dictate the rights of million hands of people in michigan on a serious claim it's every couple years we get one of these anti competitive cases about  process this is a serious claim and isn't it fair to ask the district court to do more well if they want to just describe the district court you are also made a finding about plaintiff's expert you know specifically found that the expert was highly qualified to perform this work and that's the key piece of this is whether the estimate of damages that our expert came up with was reliable or at proficiently reliable that it could be a basis of approving the why not today closer to one twenty of them rather than give seventy five percent away you know especially when you're going to get through sixty trials can be traveled at least why not explain explain something about why and don't worry about that like explain that's all we that's all i'm saying give us an explanation and i think you know the amount recovered the court did cite two case law that says in cases just like this i know every case is different but this is not on the fringes of the range of recovery that has been approved by several courts over the years this is right in the center of it maybe even on the high end of the recovery of damages and you know the court was aware to us under oath what this case was about it's a rule of reason cas e involving m f then provisions which are not commonly litigated very challenging hard causation issues hard to pin you know it is anti competitive in that they insure the lower and i mean literally the only analysis i see of the merits in this case are about three pages in blue cross is brief where they analogize this to predatory pricing and i guess that's for them but here it's not lowering prices according to plaintiff's theory it's raising them it's it's give us and if you give us most favored nation we'll give you higher rates in return as long as you charge everybody else that's rates it's the opposite of predatory pricing it's a lower price but that said who knows because you know the district court that had this case for four years didn't explain any of this you know we're we're not here your honor to undermine our views of the merits of liability case what we are saying is owed best effort after millions of dollars investing in expert analysis in the years of work was to prove one hundred eighteen million dollars that's our  ok again you know this is a case that affects the rights of millions of people in michigan as the as plaintiffs pointed out repeatedly in the litigation there is a very strong default in the federal courts that we are business is in public and the supreme court has said our court has said that before the district court can seal documents it basically has to satisfy strict scrutiny standard that there must be compelling reasons to seal the documents and in the ceiling has to be narrowly tailored the supreme court has said that and that that obligation is incumbent on the district court it doesn't matter whether somebody objects it doesn't matter it's like when we get a sealing motion here maybe a criminal defendant wants to sell something in the united states doesn't object that doesn't mean we granted we take a close look because our business is in public and this is just extraordinary that the basis of a settlement affecting the rights of millions of people in michigan is unknowable for them can you is there did the district court do ace specific on the record finding as required by the precedent as to you know particular documents here the expert report the motions that cetera and make a finding that there are compelling reasons here here what they are and this is why this is the most narrow approach we can take did the court do that i mean this is a huge record the court never got there your honor because there was a procedure with the fault on the part of the  objectors but my point is it's really it doesn't matter if they show up or not but not close that the docket it's not about discovery you cannot close the docket of a federal case as a district judge unless you satisfy the standard the supreme court the ninth circuit just yesterday just yesterday at an opinion in a class action that said open it up open it up to the of the class gets to see what's in here well first of all your honor protecting sensitive commercial information in  yeah i mean there are always information there are ways to protect to put it's it's a it's a very i would say routine practice in commercial cases like this one for the district court and her a protective order that happens  d i know i'm siding judge perry i make this very very quickly the the the important point your honor is this is not just you know first amendment type argument that the objectors are making that they want to have access to  sealed records that's not what it's about certainly for the plaintiffs you know it at one level it's not our confidential information in dr lloyd singer's report but i'd be happy with them to have that it's what they want to do with it that makes this different they want to use it to have more settlement approval proceedings they want to be able to come in with their own expert review the reports and what argument against that is the tardiness i take  in the six circuit decision in u a w there was a standard before an objectors in total to get discovery into multiply but it's not discovery they just want to see stuff that's already there and as you said they want to see it to be able to evaluate the merits of the settlement they could hardly do that four years ago when there was a fairly tight time window to sort of object and everything but i understand your point here from your  thank you may please the court let me turn to the ceiling issue first and give the court a little bit of background this all originated with the department of justice case the d o j insisted on a very strict protective order and what the district court did was recognize that the normal process would be to file sealed and then redacted versions in the public record the court directed the parties not to do that just because of the immense burden because of all the it's a third party confidential information so pursuant to the protective order which is a docket entry forty seven these these documents were filed completely under seal but the order expressly provide a provided a procedure for anybody any member of the public who wanted to challenge any of the designations to come in and then the burden would be on the proponent of sealing to to justify that just as your honor indicated it should be the case so what we have here then is three weeks before the fairness hearing the objector show up and they want to unseal all of this stuff most of which not only it isn't the plaintiff's information most of it isn't ours either it's third party information this is about two week or two months sixty oh wait a minute we actually want to we need to see some of this well interestingly though they were able to file details a detailed objection by the deadline without seeing anything so you know i question how much they actually needed to see in order to filed their objection and participated without seeing the expert report which is the basis for a sort of starting point well let me address that your honor i know that the public filings made clear or at least summarized the key evidence and in particular two pieces of key evidence that is that the plaintiff's expert and in the public filings described the analysis he did and his conclusion that it was he could only show measurable damages at some hospitals on a total of one hundred eighteen million dollars the filings also indicated that representatives of all of the major hospitals had testified without contradiction that the m f found agreement had no impact on their pricing decisions now the underlying testimony was sealed the expert report was sealed but the basis for the plaintiff's decision to settle was in the public record that no report was not shown of these y by the district to have it correct your honor now that's before the hearing i mean it's not that hard to just hand over a report oh well it is harder than it might seem your honor because the report was based on an extensive third party information i mean i've seen the report right so there's no no haitian and for me no there's no patient information but i don't know if there's anything specific to  particular hospitals in there i mean it's at a high altitude well jump out of me that you know hey well this is like a state seekers something well the fact is that the i don't think the district court could have just consistent with the protective order and consistent with the understanding of the third parties when they produced the information couldn't just unseal it i think you would have had to give the court would have had to give notice to the third parties and give them a chance to come in and explain why information should or should not remain under seal and we're again we're talking about three weeks before the fairness hearing and you know four more months after the notice went out on this so you're really talking about disrupting the fairness hearing that the parties have been building toward and i think your honor disrupting it a lot because what would have happened would have been basically an attempt to second guess the plaintiff's case i mean this was the plaintiff's kind of what they're trying to do and what is what they're trying to but i don't mr judge i would welcome some adversarial process in trying to make a hard decision about likelihood of success well your honor we don't think it was a hard decision these kinds of claims and if you look at the supreme court's decision and wire houser that's exactly this kind of a case the notion that  defendant tried to jack up the costs to to hurt its competitors and supreme court has said that that you have to do you have to do a predatory pricing type analysis and there is no evidence of any of that but but again here the theories i understand it and the department of justice took it serious it seriously enough the antitrust division they know what they're doing to bring a case the theory is it's not like predatory pricing because it's a most favored nation cause clause given in exchange for blue cross is agreement to let the hospitals charge blue cross more right right and then that means everybody has to pay more because of the m f m clause but that's not predatory pricing i disagree with you your honor if you look at the weyerhaeuser case  the court there says that's basically the flip side of a predatory pricing case because the defendant your you're assuming the defendant is acting irrationally by jacking up its own costs voluntarily reducing its on profits which as  and the court held as in a predatory pricing case you have to show two things you have to show that the defendant was actually operating at a loss because of that and if there was a dangerous likelihood that it would earn super competitive prices in the future to recoup that loss i mean there are arguments on both sides the problem is that we just don't have any explanation of why it made sense for the class members to give up seventy five percent and eighty seven percent and how you calculated the value that their very sophisticated expert put on the case well you're on it in any acknowledgment of what they're giving up there's not even an acknowledgement of what the the unnamed class members are giving out well you litigation not only this case but the end didn't say anything well in the court's defense ed page id sixty nine ninety one to ninety two she notes that m f and clot m f m type cases in the health care industry are difficult and basically unprecedented and then at sixty nine ninety three to ninety five where she has i think the analysis your honor was referring to earlier i think the bottom line of dan analysis is she saying even accepting that the plaintiffs have a high likelihood of success given the you know the complexity of the litigation the time told resolution twenty five percent is a good recovery and so therefore that this settlement is fair and adequate is it's it's not stated in those terms it's reciting one side's argument the other side's argument and you know here it is extensive discoveries been held the court denied your motion ok sounds like a good case so far in in light of their analysis  damages the settlement amount reached is fair i mean ok what the number the experts said one hundred twenty so why is this you know and just really quickly i mean we have less than a one percent take rate in the class is i understand twenty six thousand people out of the millions and millions so one percent let less than one percent signs up for this isn't that an indication that maybe this isn't such a great deal for the class members quick comments and responses they are that the numbers are actually up to forty three thousand at the time of the fairness hearing which twenty seven that's about one and a half percent and it's actually not surprising when you consider what the plaintiff case ultimately became which is that they could only show any competitive price increases at thirteen hospitals under a limited number of provider agreements so in fact under their own  under their own theory only a very small part of the class would have had any measurable impact anyway and so you know it's not surprising that you have a fairly low take rate because most of the class would have had minimal impact from this supposed conspiracy timing of our motion to intervene and make sure that the court understands how that all played out we were contacted by our clients and it wasn't all at once because we were contacted by multiple clients starting in essential mid august of two thousand and fourteen and we in fact myself personally led the investigation i don't know anything about a m f and case going on against blue cross whatsoever sol trying to do some research and understand what's happening here to be able to advise the clients with a mid september deadline to opt out object you know file a claim the claim filing actually added the deadline was in november but had to figure out in very short order what to do the focus of our work until mid september was let's try to understand what we can based on the information that's available and we made the decision to put together an objection immediately after we've put together objection i reach out to counsel to try to get access to the records that part of our problem here a big part of our problem is that we don't have access to these records we're prepared to file a motion to intervene we do what we're required to do under the local rules seek concurrence on the motion try to figure if we can work it out we go through a process of trying to work it out they say oh we think we can work this out we can you know redact out the really signal the real sensitive stuff and otherwise give you the information you need i go through that process with counsel for plaintiffs and counsel for blue cross for about three weeks and i get back pages and pages of black ink with nothing substantive that's the information that was attached to it substantive information did you expect to get i expected to get not we don't know what was redacted nor do you but what did you expect to be told i expected to see in light of the expected to see testimony from the blue cross people who came up with the ideas about what the goals were and what they were doing i expected to see numbers about what happened to hospital rates before and after the m f m agreements went into effect all of the work that was done by by plaintiffs and defense counsel well not all the work but certainly the work that was being relied upon  objections and they were detailed as detailed as we could make them well and a big part of the objection was we don't know i mean that was that was probably the number one objection that we had we were able to point to what we knew about the public record about the d o g s and vote really the interesting thing about your objection than that and i have a question about that is that your objections were tailored to the inflated number that was not borne out by any expert the eight hundred fifty or the billions what we could do is based on the allegation in the complaint there's an allegation in the complaint that these m f agreements actually cause prices to increase by sixteen percent on average it's paragraph five of the consolidated amended complaint so based on that allegation what we said if that's actually true because we have no evidence to evaluate whether that's true but if that's actually true this is a multibillion dollar the know at some point your your group came to know that the expert had evaluated the case significantly lower than anybody expected we knew that going we knew that at the time we filed their objection so i'm saying ok did you did you rework your objection then no because we didn't have any we didn't have access to the expert reports and we had maybe we could start over and challenge and get different get a different report get different estimate of the weather this was how damning damaging this was to consumers frankly your honor i don't know if that would happen or could happen or not because we haven't seen what's there i mean it is entirely possible that my clients if and when we actually have access to the substantive information that would you know weigh on this might look at and say that is a pretty good settlement i have no whole idea i have no way of knowing i have no way of inviting my clients one way or the other and that's the diff that's the conundrum that we're in that's the catch twenty two that we've been placed on fortunately remind me what your relief request a relief is  today we ask that the case that the district court's opinion be reversed and that the case be remanded to the district court for further proceedings that we have essentially a new fairness hearing and that in preparation for that hearing that my clients have the opportunity to inspect the record that whether that is through the record being unsealed whether it's through in camera review whether it's through the assistance of a magistrate judge in the process that our motion to intervene to unseal the record or otherwise be able to access the record be granted so that we can meaningfully course are just heard counsel that the ceiling of the record is a function of the original case by the government  put his finger on it is the fact that it was just sealed in total that there was sent a nice tailoring effort that went into that in terms of what's being filed under seal and what's not i mean to simply file the class certification motion and all ninety exhibits under se