case number thirteen fourteen sixty eight william beaumont hospital versus federal insurance company oral argument not to exceed fifteen minutes per side mr perlis for the opponents welcome counsel to the court  have you reserved any time for rebuttal mr parlous yes your honor four minutes thank you you might proceed thank you your honor my name is michael perlis with me is richard johnson and we have the privilege of representing the appellant federal insurance company today i think that both the apple e and the appellant agree on one thing that judge rosen could have decided this case in accordance with the expressed terms of the insurance policy particularly indorsement thirty one where we disagree as to the outcome we believe indorsement thirty one clearly renders the indemnity payment made by federal uninsured bowl and refundable endorsement thirty one says only with respect to any claim based upon arising from or in consequence of profit remuneration or advantage to which an insured was not legally entitled to the term loss as defined in section fifteen definitions of this covered section shall not include disgorgement by any insured or any amount reimbursed by any insured person though the question is really settlement disgorgement judge rosen answered no to both questions and we think that that was clearly erroneous first with respect to the issue of whether or not this claim arose out of an advantage to which oman was not legally entitled we all know that the term a wising from is generally broadly construed in terms of a minimal connection between in this case the property or advantage in the underlying claim but in this case no minimal connection is required if compensation properly earned by r n s employed at detroit area hospitals by the unlawfully retained by such hospitals as a result of the conspiracy alleged here and then when one turns to paragraph forty nine which is captioned injury to plaintiffs in the class it says during the class period and before plaintiffs have suffered substantial economic harm in the form of lost compensation as a direct result of the various facilities that are involved in the case yes your honor and does that not make a difference as to your calling that it is disgorgement by stone the fact that there is a prayer for damages and the prayer and the resolution of the case also includes a klein for treble damages no your honor because i think courts in most jurisdictions including michigan have held that how one labels a particular claim does not count in terms of what the essence of the claim is and specifically i'd prefer to see it all hotels in the eleventh circuit a land go in the district of arizona all states versus freeman the supreme court of michigan conseco in indiana level three of the seventh circuit and unified western grocers in the ninth circuit all of these cases particularly in the securities area where the remedy specifically called for by the statute is for damages i've said well it may be damages as specified but it really gives discordant and or restitution and the reverse is also true for example in the new york court of appeals decision in  p morgan where the f c c obtained by way of settlement is gorgeous and the court said at least at the early stage of that proceeding even though it was call disgorgement it may not be and understand the settlement in the allocation of the proceeds only some portion of it is going to the boma nurses and other class members will receive nurses the other class members are receiving is not covered under the policy i understand your argument believe your argument is nothing's covered but there's no advantage that beaumont up from the nurses who were underpaid by other hospitals who now are going to see make up pay or whatever you want to call it compensation damages at the very least that portion is cover your i've got i have two points one it's my understanding that the settlement number was calculated based upon the nurses only and so whatever the number that bowman paid was a percentage of that total loss claimed by paul months nurses but in any event our efforts to obtain discovery to determine whether or not monies went to other people were frustrated in connection with judge rosen's ruling on the jackson on the pleadings he denied us the ability to get discovery and in fact there is any any merit to the argument that even though what beaumont disgorged was relative to its own nurses that somehow some of that money wound up with other nurses that is something we should have been able to discover and act on accordingly except i guess counter what i'm struggling with is the conceptual basis for this antitrust case is not as i understand it or the complaint is not that the nurses of beaumont hospital made a little bit different amount of money and they lost this amount that they should have gotten the nurses from three other facilities all made a different amount and very should have gotten a different a concern is that the the conceptual basis of an antitrust case is that in this one in particular is that it is to compensate the members of the class for injury suffered anti competitive conduct and that injury may be the same across all of those various nurses who worked in different manners and in different locations because it's not just what they may it's what their profession suffered as a result of anti competitive conduct so help me understand how your argument would not  cases where there is a bar to entry into the market might be an example where there is an essential facility case might be example arguably where there may be predatory pricing might be an example so that not all antitrust claims or unfair trade claims or any of the anti competitive claims that would be the subject of the endorsement would necessarily be barred and not only that there is the payment of defense costs which in this case exceeded three million dollars which we are not seeking back which is a substantial benefit for example in the downey venture case the california court of appeal in the face of coverage that expression we called for coverage for malicious prosecution that sorry public policy of california will not allow it and even though there was a settlement the insurance company can get that money back and it's not illusory coverage because you pay defense costs just as here understand that you have an argument on the  costs i'm still struggling with the basic conceptual basis because any time you have an anti competitive activity taken it accrues to the benefit of the person who took it in that's kind of the for the purpose of doing it and i'm just struggling with why you were actually qualifies as disgorgement on a conceptual bice's i believe the black letter law  anti trust a lot is that you don't for example get recruitment offset and doesn't that by a system antitrust law tell you that you are not giving back to the members of the class something that they should have head but you are instead in fact seeking to give them damages for the entire impact of anti competitive activity so tell me how you you know you just losing me on why yours is disgorgement under your argument and that wouldn't really apply to any anti had there been joint and several liability and i had all of the money been collected from beaumont assuming there had been coverage under those circumstances then it seems to me federal would have been entitled to say ok we can deduct from this liability that which went to your nurses but you will still have to pay federal went to other nurses so there would be coverage in that regard but it's a bit of the pain that most beaumont is made to satisfy the entirety of the kleins brought against it help that money gets divided among class members was it not a separate question but because the settlement number is calculated based upon the amount of damage inflicted on the nurses and is designed to compensate primarily or exclusively the bulb nurses based on that calculation then i think all you're doing is taking the money away from beaumont and giving it to the nurses which is your classic disgorgement followed by restitution well but is that i mean i mean you wrote this policy and it seems to me that the concepts of both disgorgement and restitution should not be given the flexible meaning that they may have been given insecurities in other cases and it's my understanding that if you look at the dictionary then volved a return to someone of something that you actually have taken from them and i see a difference between withholding something that you ought to have paid that the law required you to pay and having gone out and taken it from them and kept it and i think  understanding what both disgorgement and restitution to restore the roots of the same of it includes the concept of the act of so i don't find securities cases and other cases apas it because you're not dealing there was the construction of an insurance contract which obviously needs to be read narrowly against company the closest analogy rahner is the american medical security case the executive risk which is the eastern district of look at wisconsin in two thousand and five factually very similar in the sense that  the american medical provided medical insurance policies to consumers that were arguably were supposed to be renewable at the option of the consumer american medical decided to cancel a bunch of policies to avoid paying benefits which they might otherwise be obligated to pay and sometimes agreed to rewrite at much higher premium or more limited coverage the class action was brought for breach of contract and related types of claims and the western eastern i'm sorry eastern district with cotton held that the american medical security voided making a payment it would otherwise have had to make and therefore ordered that it had to in essence does gorge what i to make back to the class that involved it was the term disgorgement or restitution any part of the insurance documents in that case well no your honor what and that's my point with this case went on off on was a public policy and followed level three in the seventh circuit and said this is just uninsured bill as a matter of law which is also an exclusion in the definition  loss in the federal policy in this case we understand that's another issue i believe your time is up counsellor you will have your rebuttal for  what is the answer the question as to whether the amount of sodomy paid by the hospital is limited only to i calculated upon what the nurses did not receive or is some portion or substantial portion the solomon all committee going to going to benefit non belmont nurses may answer quite simply your honor is that there is absolutely nothing in the records nor would there ever be through any amount of discovery and anything in a record to support the notion that the settlement payment made by william boman hospital to get out of a potential one point eight billion dollar claim was intended to be or was allocated in any way shape or form to william bell my little nurses date someone agreement is part of the record the settlement agreement provides that there's a payment made by moment into a settlement funded be administered by class council how that money is distributed will ultimately be an issue to be determined between class counsel and chief judge rosen the notion that coverage for this claim should on what chief judge rosen and class call so ultimately determine is an equitable way to distribute the class fund i think finds no support in this policy and  more was paid by boma then it's nurses are going to get and at the end of the day it's nurses are going to get a certain sum of money may have to wait until the end of the day to find out whether that's all par or less than what belmont pay but you haven't answered my question and  the ultimate answer may have to wait for the proceedings but it does seem to me that if beaumont paid more then nurses get  on paid compensation at least that portion above and beyond what his own nurses got is clearly covered in my view that's all because i'm sorry your honor that hardly can be described as disgorgement or restitution of an advantage that bomani got from its anti competitive conduct that's all go ahead a number of definitions of disgorge and discouragement i'll admit the ones that refer to discharging through the throat are mouth i didn't realize that was an alternative definition but they all involve a return of ill gotten gains definitions like repayment of ill gotten gains that is imposed on wrongdoers by the courts funds that we receive through illegal or unethical business practices our disgorged were paid back with interest to those affected by the action dictionary dot com just surrender or you go to something especially something illicitly obtained cases and this case is as i believe frankly judge scrunches rations brought out this is for class  wide alleged damages and let's also keep in mind that the conspiracy count and the intentional claim or the per se claim was dismissed on summary judgment by judge rosen and at the time this judgment was entered all that remained was a rule reason claim that basically the gist of which was that these  citizens shared information and it may have may have had an anti competitive effect on the market generally and there would be nothing required nor would there be necessarily any included this specific indorsement for and i trust claims and includes actual or alleged price fixing restraint of trade and as one of the judges pointed out in one of the questions it necessarily follows that any claim any claim of that ilk would be to benefit directly or indirectly the person engaging in that conduct and so if  they keep admitting the words slowly now it just doesn't arise out of but rather as it slowly arise out of that there is just no way that it follows that  what did they sell us what did they sold us an endorsement when they said you have coverage for these types of claims a public policy i would i would ask the same admittedly rhetorical question this is chop it they're negotiating with me michigan only notion that it wouldn't be michigan that is very limited in looking to the types of things that might be deemed uninsured well such is intentional infliction insurance there's a nexus between the existence of insurance and the commission of the allegedly unlawful act your point simply is that somebody who sent it doesn't increase the incentive to engage in any form of anti competitive con conduct because if you have insurance your contention it certainly yes it certainly is especially when you've got a twenty five million dollar limit and just look at this case one point eight million dollars the notion that somebody would be incentivized to expose themselves to a potential liability of one point eight billion dollars because they have a twenty five million dollar supplement for any trust claims it's completely illogical i think there's nothing there's no michigan law that even comes close to suggesting that this type of statutory violation again we're talking about a rule of reason and i  much you have questions we believe we've adequately set forth what we wanted to say in our papers we believe the chief judge rosen wrote say extremely well several opinion and unless you have questions i don't have any further argument i assume you would agree with me the restitution like this gorgeous involves a sense of restoring something that was taken rather than paying over something that was improperly withheld absolutely and in fact you know that when i looked up the dictionary definitions  it restitution and merriam webster dictionary is the act of returning something that was lost or stolen do its owner i don't alternative definition a legal action serving the c restoration of a previous state again all of their cases in the sixth level whether it's level three or all of the cases that follow that or their hypothetical in their brief about the from the plane and they're asking to return it to restore it and that has nothing to do with compensatory damages under the anti trust laws to an entire class of nurses various hospital systems we have no further questions mr pearl looked for rebuttal thank you your honor a few points number one indorsement thirty one doesn't only deal with money that has been received improperly by an insured it also talks about it vantage to the extent that the insured received an unlawful advantage that too would be precluded to the extent that the words a requirement for disgorgement there is no doubt that the whole essence of the received from the nurses it was sure it was money obtained by to their advantage because they didn't pay it out of your policy excludes only  those forms of damage used generally constitute disgorgement or restitution if it included all funds obtained by any sort of advance and any anything that was obtained by such an advantage that would be different but it doesn't it's much more limited seems to me but that's the reason your honor i quoted for you the american medical security case which was a case that involve the retention of money as opposed to the receipt of money that was not an insurance construction case correct it was an insurance construction case and that's what we have here yet it was exactly an insurance case where the question was whether or not american medical securities carrier executive risk had to reimburse them for the amount of money that they pay to policyholders that they kept that they should have otherwise paid for medical  thing was the question of what the purposes of the and i trust laws are and i want to quote briefly from u s exports the adriatic insurance which is a western district of pennsylvania case affirmed by the third circuit and it says while the argument can be made as plaintiffs suggested any award under the antitrust laws merely is designed to compensate the injured plaintiff the purpose of permitting suits for trouble damages is to deter conduct which distorts the natural functioning of an economic market and the award in such a case is at least equally designed to transfer ill gotten gains from those who have violated the law to those who have been deprived of the opportunities by that violation of course any such recovery is beyond insureds reasonable expectation of the purposes of insurance and the meaning of the term damages and that is in the context of an antitrust case and is a case that was affirmed by the third circuit on public policy grounds that it is not simply the question of securities law violations that are precluded by public policy but other types as well including antitrust now the other question that your honor asked was about where the money goes and i think there are really two aspects to that question the first is how the award was calculated and i think their discovery would clearly show that each of the settling hospitals and there's one that has been settled paid an amount of money predicated on what the claims of its own nurses work now how that ultimately gets distributed it may be distributed to a pool of nurses some of whom worked for beaumont some of whom didn't but if in essence what bomani paid was based on the amount it's nurses were due under the theory of the plaintiff that image is expert that to me is disgorgement but it a minimum would entitle us to discovery on that very issue which was precluded by chief judge rosen but we think your honor that for example if if all my violated the minimum wage law and didn't pay its nurses the minimum wage i don't think anyone would suggest that that obligation to reimburse the nurses for the minimum wage that was due them would be insurable and in fact the statute in michigan that deals with it doesn't speak in terms of discordant arrested but sets forth a measure of damages as the difference between what was paid and what should have been paid and then says in addition