15769164.28

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

HEALTH ALLIANCE PLAN OF

MICHIGAN, HAP PREFERRED,

INCORPORATED, and ALLIANCE

HEALTH AND LIFE INSURANCE

COMPANY,

Plaintiffs,

v.

BLUE CROSS BLUE SHIELD OF

MICHIGAN MUTUAL INSURANCE

COMPANY, a Michigan mutual

insurance company,

Defendant.

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Case No: 14-cv-13788-DPH-MJH

Judge Denise Page Hood

Magistrate Judge Michael J.

Hluchaniuk

CORRECTED

REPORT AND DISCOVERY PLAN AND

REQUEST FOR STATUS CONFERENCE

Pursuant to Fed. R. Civ. P. 26(f), Plaintiffs Health Alliance Plan of

Michigan, HAP Preferred, Incorporated, and Alliance Health and Life Insurance

Company (collectively “HAP”) and Defendant Blue Cross Blue Shield of

Michigan Mutual Insurance Company (“BCBSM”) met and conferred (hereafter

referred to as the “Rule 26(f) Conference”). The parties now jointly submit the

following report and discovery plan. Except as otherwise stated, the parties are in

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agreement. The parties jointly request a status conference at the Court’s

convenience to resolve the issues that remain in dispute.

I. Description of Case

A. Jurisdiction

The Complaint alleges federal antitrust claims under Sections 1 and 2 of the

Sherman Act, 15 U.S.C. § 1-2, brought under 15 U.S.C. § 15, as well as state law

claims under Sections 2 and 3 of the Michigan Antitrust Reform Act, M.C.L.A.

445.772 and 445.773, and the common law, over which the Court may exercise

supplemental jurisdiction.

B. Description of Claims

1. HAP’s Statement of the Case

Plaintiffs Health Alliance Plan of Michigan, HAP Preferred Incorporated

and Alliance Health and Life Insurance Company (collectively “HAP”) allege that

BCBSM entered into most favored nations “plus” clauses in contracts with

numerous hospital providers, whereby BCBSM was required to receive a rate

lower than that received by other health insurers by a predetermined, substantial

percentage, as much as 39% in some cases. These MFN plus clauses harmed

competition in a relevant market, the purchase and sale of hospital services in

Oakland County, Michigan, by substantially increasing prices for hospital services

and significantly harming purchasers of hospital services, including health insurers

competing with BCBSM, such as HAP. These actions also caused significant

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harm to competition among health insurers in a relevant health insurance market in

Oakland County, and thereby injured HAP, among others. These anticompetitive

effects were especially pernicious because they enabled BCBSM to maintain and

enhance its monopoly power as a purchaser of hospital services in the relevant

hospital market and as a seller of commercial health insurance services in the

relevant health insurance market.

HAP had a reasonable business expectancy of obtaining continuing business

from employers and health insurance agents. There is a high likelihood that HAP

would have retained these relationships and obtained additional such relationships

but for BCBSM’s interference. BCBSM knowingly, willfully and wrongfully

interfered with HAP’s prospective economic relationships by placing

anticompetitive pressure on hospitals to adopt MFN plus clauses which raised

prices that HAP paid for hospital services. This harmed HAP’s ability to compete

with BCBSM on price and interfered with HAP’s customers and prospective

customers.

BCBSM’s actions constituted an unreasonable restraint of trade, in violation

of both the Sherman Act and Michigan Antitrust Reform Act, unlawful

monopolization, in violation of both statutes, and unlawful tortious interference

with prospective advantage. These actions have caused significant damage to

HAP, by increasing the price it paid for hospital services, costing it substantial lost

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sales, significantly eroding its margins, and seriously harming its reputation among

health insurance agents and employers who are purchasers of health insurance

services.

2. BCBSM’s Statement of the Case

HAP’s claims for monopolization, tortious interference, and lost profits are

time-barred under the four-year statute of limitations for antitrust claims and the

three-year statute of limitations for tortious interference claims. See 15 U.S.C. §

15b; M.C.L. § 445.781(2); Grain v. Trinity Health, No. 03-72486, 2008 WL

3833276, at *4 (E.D. Mich. Aug. 13, 2008); Blazer Foods, Inc. v. Rest. Props. Inc.,

673 N.W.2d 805, 813 (Mich. Ct. App. 2003).

Further, HAP’s antitrust claims lack merit. First, HAP’s proposed “Oakland

County” geographic market is implausibly narrow and ignores the geographic and

economic realities of the region. Second, HAP’s antitrust claims fail because the

MFNs (HAP’s claims challenge only differential MFNs or “MFN plus” clauses, so

the term “MFN” refers only to differential MFNs) did not harm HAP or

competition, there are no factual allegations that BCBSM engaged in predatory

bidding, and for many other reasons. Third, BCBSM’s use of MFNs was

procompetitive. Among other things, they helped BCBSM lower its costs, which

is not a violation of the antitrust laws.

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Similarly, HAP fails to plead a plausible tortious interference claim under

Michigan law. HAP does not and cannot identify specific business relationships

(either actual or potential) that were intentionally targeted and disrupted by

BCBSM’s challenged conduct. Further, to assert a tortious interference claim,

HAP is required to plead that BCBSM acted for the specific purpose of harming

the relationship between HAP and one of its customers. BCBSM’s negotiation of

MFNs was designed to lower BCBSM’s costs, enable BCBSM to reach contractual

agreements with hospitals, and protect BCBSM’s investments in hospitals

efficiently, not to unlawfully interfere with HAP’s business relationships.

II. Subjects of Discovery

A. HAP’s Position

Discovery may include the full range of issues implicated by HAP’s

Complaint, including without limitation:

1. The existence and adoption of Most Favored Nations Plus

clauses, including BCBSM’s plans and intent relating thereto;

2. The definition of relevant markets and competition within the

relevant markets;

3. BCBSM’s market position and monopoly (and/or monopsony)

power in the relevant markets;

4. The impact of Most Favored Nations Plus clauses in the

relevant markets on hospital rates, commercial insurers,

competition and HAP;

5. Damages; and

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6. Any alleged procompetitive effects of the Most Favored

Nations Plus clauses.

Since most of these issues have been the subject of substantial discovery in

the prior MFN cases, HAP believes that discovery in this case can be conducted

relatively quickly and efficiently. HAP does not intend to engage in duplicative or

unnecessary discovery. Moreover, because this case is limited to MFN Plus

clauses and HAP has alleged a relevant market in Oakland County, the necessary

discovery should be further confined, with only limited discovery necessary

beyond Oakland County.

To the extent that Blue Cross wishes to address issues in broader areas, of

course, it can do so. But that broader discovery has already occurred in the prior

MFN cases, and there is no reason to redo it.

Of course, this efficient approach depends upon full production of the

discovery record in the prior cases, subject to the necessary approvals under the

protective order. All such materials ought to be made available, subject to these

protections.

B. BCBSM’s Position

Like HAP, BCBSM does not intend to engage in duplicative or

unnecessary discovery; however, the discovery conducted in the U.S. v. BCBSM,

Aetna v. BCBSM, and Shane Group v. BCBSM cases is not sufficient for purposes

of this case. The present case involves different parties, facts, and issues and, as

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such, will require additional discovery not previously conducted. BCBSM plans to

seek documents, data, and deposition testimony regarding competitive effects,

access to the alleged relevant markets, and other aspects of HAP’s claims from:

1. Plaintiffs;

2. Hospitals in Michigan, with particular emphasis on those in and near

Oakland County;

3. Competitors of both BCBSM and HAP;

4. Purchasers of commercial health insurance; and

5. Other entities with relevant information.

III. Changes that Should Be Made in the Timing, Form, or Requirement for

Disclosures Under Rule 26(a) Including a Statement of When Initial

Disclosures were Made or Will be Made

The Parties have agreed to an exchange of initial disclosures described in

Fed. R. Civ. P. 26(a)(1)(A) on May 4, 2016.

IV. Discovery Schedule

A. Schedule

Event Date

Fact discovery opens May 4, 2016

Exchange Rule 26(a)(1)(A) disclosures

and organizational charts

May 4, 2016 (complete

disclosures)

Interim Status Conference June 2, 2016

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Event Date

BCBSM Position: BCBSM provides all

documents and data (and all related

privilege logs), and all fact witness

depositions of defendant’s personnel,

provided by defendant in U.S. v.

BCBSM, Aetna v. BCBSM, or Shane

Group v. BCBSM or in response to

Department of Justice or State of

Michigan civil investigative demands or

subpoenas.

HAP Position: BCBSM provides all

documents, data, interrogatory answers

and responses to requests for admissions

(and all related privilege logs), and all

deposition testimony and reports by

defendant’s personnel and experts,

provided by defendant in U.S. v. Blue

Cross, Aetna v. Blue Cross or Shane

Group v. Blue Cross or in response to

Department of Justice or State of

Michigan civil investigative demands or

subpoenas.1

July 29, 2016

1 Deposition testimony shall be provided in the formats produced, including video

and electronic form. HAP is responsible for all copying costs associated with

production of these materials.

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Event Date

HAP provides all documents currently

known to it, after a reasonable search of

HAP documents, through December 31,

2015, addressing its reimbursement

provisions of its contracts and

reimbursement negotiations with

Beaumont Health, Botsford Hospital

(now known as William Beaumont

Hospital –Farmington Hills), and St.

John Providence, and any other

documents and data currently known to

it after a reasonable search which HAP

claims to support its theory of impact by

MFNs at any of those hospitals, subject

to later good faith supplementation,

including without limitation

supplementation after discovery or after

analysis by any experts retained by HAP.

July 29, 2016

Deadline to join additional parties 90 days after discovery opens

or 60 days after Answer is

served, whichever is later

Last day to amend pleadings 90 days after discovery opens

or 60 days after Answer is

served, whichever is later

Substantial compliance with production

of all documents in response to requests

made before June 1, 2016.

October 14, 2016

Exchange of Initial Fact Witness List

Due – Includes only witnesses parties

reasonably expect to call at trial; parties

must supplement as they become aware

of other such witnesses.

October 31, 2016

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Event Date

Deadline for serving document requests,

interrogatories, requests for admissions,

and Rule 45 subpoenas.

February 3, 2017

Interim Status Conference May 30, 2017

Fact discovery completed June 30, 2017

Expert reports and Rule 26(a)(2)(A)

disclosures due from Plaintiffs

August 25, 2017

The timing of expert depositions,

Defendant’s responsive expert reports

and disclosures, and rebuttal reports, if

any, is disputed by the parties. The

parties provide their positions in

subsections IV(B)(1) and (B)(2) below.

DISPUTED

Last day for expert discovery, including

expert depositions

December 22, 2017

B. Statements Regarding Sequence and Timing of Expert Discovery

The Parties disagree on the sequence of expert reports, disclosures, and

depositions, including whether BCBSM can depose HAP’s experts prior to

submitting its own expert reports and Rule 26(a)(2)(A) disclosures and whether

HAP will be allowed to submit rebuttal expert reports.

1. HAP’s Position:

It is HAP’s position that the parties’ experts should submit reply expert

reports in response to the other party’s expert reports. BCBSM’s position (which

is that the experts should not submit reply reports) does not give Plaintiffs’ experts

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the opportunity to respond to arguments raised by BCBSM’s experts. HAP also

believes that each party’s experts should only be deposed after all expert reports

are in, so that Plaintiffs’ experts are able to offer opinions at deposition reflecting

their understanding of the positions of both parties’ experts. This will avoid

“deposition by ambush.” Thus, HAP’s proposal for expert discovery is as follows:

Event HAP’s Proposal

Expert reports and Rule 26(a)(2)(A)

disclosures due from Plaintiffs

August 25, 2017

Responsive expert reports and Rule

26(a)(2)(B)-(C) disclosures due from

Defendant

October 6, 2017

Reply Expert Reports November 3, 2017

Depositions of witnesses who have

provided written reports required by Rule

26(a)(2)(B) may begin

November 3, 2017

Last day for expert discovery, including

expert depositions

December 1, 2017

2. BCBSM’s Position:

BCBSM proposes that following expert reports and Rule 26(a)(2)(A)

disclosures from HAP, BCBSM be allowed to depose HAP’s experts prior to

submitting its own expert reports and Rule 26(a)(2)(A) disclosures. This will

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provide BCBSM and its experts the opportunity to discover the basis and reasons

for HAP’s experts’ opinions and to respond meaningfully. Thus, BCBSM’s

proposal for expert discovery is as follows:

Event BCBSM’s Proposal

Expert reports and Rule 26(a)(2)(A)

disclosures due from Plaintiffs

August 25, 2017

Depositions of Plaintiffs’ Experts September 11, 2017 – September

22, 2017

Responsive expert reports and Rule

26(a)(2)(B)-(C) disclosures due from

Defendant

October 23, 2017

Depositions of Defendant’s Experts November 6, 2017 – November 17,

2017

Last day for expert discovery, including

expert depositions

December 22, 2017

BCBSM’s position is that rebuttal reports should not be permitted. If

Plaintiffs’ experts are permitted to file rebuttal reports, BCBSM should be entitled

to depose those experts regarding their rebuttal reports.

V. Any Issues about Disclosure or Discovery of Electronically Stored

Information, Including the Form or Forms in Which it Should be

Produced

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The parties will negotiate an agreement in good faith to handle ESI-related

issues that arise in the litigation. To the extent the parties are required to provide

copies to one another of materials received from non-parties, the parties agree to

provide copies of the materials in the form in which they were received or

otherwise utilized in the proceedings. The parties do not know of any disputed

issues regarding disclosure and discovery of electronically stored information, but

the parties have not yet completed detailed discussions regarding ESI, including

de-duplication protocols. If any such issues arise, the parties will work with each

other in good faith to resolve them.

VI. Any Issues about Claims of Privilege or of Protection as TrialPreparation Materials, Including If the Parties Agree on a Procedure to

Assert These Claims after Production, Whether to Ask the Court to

Include Their Agreement in an Order

The parties will provide privilege logs related to a document production

within a reasonable time following the production of associated documents.

Except for good cause shown, privilege logs should be disclosed within 60 days

following the production of associated documents.

The parties have agreed that the disclosure of privileged or work-product

material will be governed by the pertinent provisions of the Federal Rules of Civil

Procedure. The parties agree that the amendments made to Rule 26(b)(5) as of

December 1, 2010, shall apply to this action.

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VII. Any Other Orders that the Court Should Issue Under Rule 26(c) or

Under Rule 16(b) or (c)

A. Parties’ Use of Discovery and Other Information from U.S. v.

BCBSM, Aetna v. BCBSM, Shane Group v. BCBSM, or

Department of Justice or State of Michigan Civil Investigative

Demands or Subpoenas

Documents, data, and fact witness deposition testimony produced or

provided by parties or third parties in U.S. v. BCBSM, Aetna v. BCBSM, Shane

Group v. BCBSM, or in response to Department of Justice or State of Michigan

civil investigative demands or subpoenas will be treated as if it were produced,

provided, utilized, and taken in this action with the participation of both parties.2

However, any such documents, data, or fact testimony produced or provided by

third parties or by parties other than defendant in such prior actions designated as

Highly Confidential or Confidential in those prior actions may not be utilized in

this case by either party, unless authorized by the entity or person whose

confidential information is being sought, produced separately in discovery in this

action, or ordered by the Court. In either event, documents, data, and fact

testimony received from such persons other than the defendant in such prior

actions shall receive the protections with regard to confidentiality as provided in

2 However, BCBSM objects to treating the deposition testimony produced or

provided by parties pursuant to a civil investigative demand process as if it were

produced, provided, utilized, and taken in this action with the participation of both

parties. BCBSM reserves all objections as to the admissibility and otherwise of

such materials.

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the cases in which they were produced, and BCBSM shall promptly provide copies

of any such materials possessed by it or the defendant in the prior actions to

Plaintiffs subject to HAP’s payment of the costs of duplication, upon a showing of

written consent from the third party. BCBSM will provide HAP a list of third

parties that provided documents or testimony in U.S. v. BCBSM, Aetna v. BCBSM,

Shane Group v. BCBSM or in response to Department of Justice or State of

Michigan civil investigative demands or subpoenas. If either BCBSM or HAP

seeks consent from any third party, the consent sought shall be on behalf of both

parties.

1. Expert Reports from Prior Litigation

(i) HAP’s Position

Expert testimony and reports produced or provided by parties or third parties

in U.S. v. BCBSM, Aetna v. BCBSM, Shane Group v. BCBSM or in response to

Department of Justice or State of Michigan civil investigative demands or

subpoenas should also be treated as if they were produced, provided, utilized, and

taken in this action with the participation of both parties. Portions of such expert

reports containing specific identifiable evidence from third parties which is

confidential or highly confidential should be governed by the provisions of VII.A

above. BCBSM should provide redacted versions of expert reports and expert

testimony from U.S. v. BCBSM, Aetna v. BCBSM, and Shane Group v. BCBSM

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(excluding specific evidence which is identifiably from third parties) at the time of

BCBSM’s production of defendant’s proposed trial exhibits from Aetna v. BCBSM.

Said production shall not be dependent upon receipt of consents upon any third

parties. BCBSM shall promptly provide expert reports and expert testimony

disclosing such third-party evidence, upon receipt of consents to do so.

Blue Cross is inappropriately attempting to restrict the production of expert

reports from the prior MFN cases which HAP would receive in this case. There is

no reason to keep from HAP this highly relevant information which can contribute

to the more informed and more efficient conduct of discovery and trial in this case.

Blue Cross claims that expert reports in Aetna v. Blue Cross are “wholly

irrelevant” here. But the Aetna case, like this case, involved the impact of MFN

clauses on a competitor of Blue Cross during the same time period at issue in this

case. While the Aetna case covered a larger geographic area (the entire state), and

both MFN and MFN Plus clauses, its focus certainly included the geographic areas

and specific agreements at issue in this case. Aetna addressed MFN Plus clauses

(see Aetna Complaint (Dkt. 1) (“Aetna Cplt.”) at ¶¶ 4, 18, 18(A), 39, 43, 45, 45(C),

49, 50); as well as their effects on pricing (id. at ¶¶ 3-5, 9, 18(A), 19, 21, 29-30, 41,

47(c), 47(d), 50-52) and on competition (id. at ¶¶ 19, 26, 28-30, 41, 47, 47(a),

47(e), 48-49). Similarly, HAP’s Complaint addresses MFN Plus clauses (HAP

Am. Cplt. (Dkt. 24) ¶¶ 1-5, 11-14); their effects on increased prices (id. at ¶¶ 1, 11-

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14, 20, 37, 39-41, 48, 50); and the resulting harm to competition (id. at ¶¶ 3, 5, 37,

44, 48-49, 53). HAP’s claims, like the Aetna claims, involve, in part, injury to

HAP as a purchaser of hospital services. See HAP Am. Cplt. ¶¶ 50, 55-57, Aetna

Cplt. ¶¶ 4-5, 47(a), 47(c), 58, 59(d).

Evidence from expert reports in Aetna v. Blue Cross is therefore potentially

highly relevant here. There is no reason to exclude the production of these reports

(which should involve very little burden), except, potentially, to keep HAP from

having access to all the relevant information that has been gathered laboriously in

these cases.

(ii) BCBSM’s Position

Upon receipt of the appropriate consents, BCBSM will provide HAP with a

copy of the expert report of Jeffrey Leitzinger, filed in support of the Shane

plaintiffs’ motion for class certification. However, HAP is not entitled any other

expert reports because all other expert opinions and conclusions from Aetna v.

BCBSM and Shane Group v. BCBSM do not fall within the scope of discovery

contemplated by the Federal Rules and would be unnecessarily burdensome and

prejudicial in this matter because of the introduction of facts and issues wholly

irrelevant to the case at hand. Notably, the Aetna and Shane matters were

coordinated for purposes of discovery only. Expert reports and expert deposition

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testimony were not shared across cases. BCBSM is prepared to file a motion for a

protective order addressing discovery of prior expert reports and depositions.

2. Discovery Materials from Prior Litigation and Trial

Preparation Materials

(i) HAP’s Position:

BCBSM should provide all trial exhibits and all of defendant’s deposition

testimony designated for use at trial by Aetna in the Aetna v. BCBSM litigation.

BCBSM should also be required to produce all interrogatory answers, responses to

requests for admissions, and all other materials that were produced in discovery or

in response to Department of Justice or State of Michigan civil investigative

demands or subpoenas by defendant in U.S. v. BCBSM, Aetna v. BCBSM, and

Shane Group v. BCBSM or any third party, subject to permission by the other

parties as outlined above. There is no reason to restrict the materials that are

produced, except to limit the relevant information available to HAP and hamstring

its pursuit of its case. The goal of the discovery process ought to be to uncover the

truth, and to the extent that has already occurred in the prior MFN cases, the

information ought to be fully available to both parties here.

(ii) BCBSM’s Position:

BCBSM objects to HAP seeking discovery of all interrogatory answers,

responses to requests for admissions, trial exhibits, and all of defendant’s

deposition testimony designated for use at trial by Aetna in the Aetna v. BCBSM

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litigation. Such materials were not shared across cases in U.S. v. BCBSM, Aetna v.

BCBSM, and Shane Group v. BCBSM, and similarly, should not be shared in this

case. BCBSM is prepared to file a motion for a protective order addressing

discovery of these discrete portions from the prior litigation. BCBSM is likewise

prepared to file a motion for a protective order addressing discovery of this

information.

B. Confidentiality and Protective Order

The parties will negotiate a confidentiality and protective order in good faith

using the existing Protective Orders from U.S. v. BCBSM, Aetna v. BCBSM, and

Shane Group v. BCBSM as guidance.

The parties will include provisions of the supplemental protective order

entered with respect to HAP in the Shane Group v. BCBSM to protect both HAP

and BCBSM data in this matter.

C. Summary Judgment

BCBSM currently expects to seek leave from the Court to file an early

summary judgment motion on a narrow issue, reserving the right to file a summary

judgment motion on remaining issues, if any, later in the case. HAP currently

expects to oppose BCBSM’s request, since HAP believes that Blue Cross’

contemplated motion involves very broad issues that will be developed throughout

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the discovery period. The parties expect to meet and confer on this issue when it

becomes ripe.

VIII. What Changes Should Be Made in the Limitations on Discovery

Imposed Under These Rules or by Local Rules, and What Other

Limitations Should be Imposed

A. Discovery Limits

1. Written Discovery

The parties agree that, except for good cause shown, the parties shall be

limited to 50 interrogatories (including distinct subparts) per party and 50 requests

for admission per party.

2. Depositions

HAP’s Position: HAP proposes a limit of 20 depositions per side, except for

good cause shown. In light of the fact that (i) substantial discovery has already

been taken in U.S. v. BCBSM, Aetna v. BCBSM, and Shane Group; (ii) the focus of

this action will be primarily on Oakland County; and (iii) this action is focusing

only on MFN Plus contracts, the parties should need no more than 20 depositions.

Blue Cross argues for more than 20 depositions per side based upon the

assertion that a smaller number will unfairly benefit HAP because HAP will have

access to a substantial number of depositions taken previously in this case, whereas

Blue Cross has not previously conducted significant discovery of HAP.

This approach not only reflects an inappropriate view of litigation as

“gamesmanship”, but does not properly take account of the facts. The vast

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majority of prior discovery occurred outside the Oakland County area which HAP

defines as the relevant market here and is related to MFNs (not MFN Plus) clauses,

which are the sole focus of HAP’s Amended Complaint. Moreover, the discovery

of Blue Cross that has been undertaken to date will likely relieve HAP of the need

to take extensive additional deposition discovery of Blue Cross personnel.3

For all these reasons, a limit of 20 depositions per side ought to be more than

sufficient to resolve this additional, relatively narrow case. Blue Cross’

incremental discovery will likely be limited to HAP personnel. 20 depositions

(double the normal 10 deposition limit) ought to be more than enough to address

the knowledge of HAP personnel regarding the injury and damage it suffered due

to the MFN Plus clauses.

BCBSM’s Position: BCBSM proposes that the Parties shall be limited to 40

depositions per side in total, except for good cause shown. This number may be

higher depending on how many deponents in the previous cases authorize the use

of confidential depositions in this action. See § VII.A., supra.

HAP’s proposal to limit depositions to no more than 20 per side limits

BCBSM’s ability to take necessary depositions but provides no real limitation on

HAP. This is because, as stated in § IV, supra, BCBSM agreed to provide HAP

3 Blue Cross has taken depositions of two HAP personnel already in the prior MFN

cases.

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with more than 30 fact depositions of BCBSM employees previously taken in U.S.

v. BCBSM, Aetna v. BCBSM, and Shane Group v. BCBSM. BCBSM further agreed

that these depositions will be deemed “taken” in this action such that HAP can

utilize them for all purposes allowed by the Federal Rules of Civil Procedure and

the Federal Rules of Evidence.

There is no equivalent discovery record of HAP employees. BCBSM will

thus be starting virtually from scratch, and will need to take depositions of all

relevant HAP witnesses as well as third-party witnesses to prepare its defense.

BCBSM will need to take numerous third-party depositions, particularly hospital

depositions. Although many of the hospitals were previously deposed in the other

cases, the depositions did not address certain aspects of HAP’s claims (e.g., the

contention that Oakland County is a relevant market, and the claim that

competition was somehow injured in a market for the sale of hospital services as

opposed to the market for health insurance). Consistent with the prior cases, the

number of depositions of HAP employees alone could approach or even exceed 20

depositions. HAP’s proposal, if adopted, would prejudice BCBSM by eliminating

necessary depositions but would not affect HAP’s ability to take discovery.

3. Role of Honigman in Discovery

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BCBSM’s Position: Honigman cannot participate in any discovery,

including depositions, of any client previously represented by Honigman in U.S. v.

BCBSM, Aetna v. BCBSM, or Shane Group v. BCBSM.

Honigman cannot participate in discovery, including depositions of any

HAP executive(s) (like its hospital contract negotiators) that directly negotiated

with any client represented by Honigman in U.S. v. BCBSM, Aetna v. BCBSM, or

Shane Group v. BCBSM. Honigman’s hospital clients (some of which are in

Oakland County) were targets of discovery by BCBSM in the former cases and

will be targets of discovery in this case to show that, among other things, health

insurance competition and hospital competition extend beyond Oakland County

and, further, that MFNs did not have anticompetitive effects in the metropolitan

Detroit area or the state. Honigman obtained confidential and commercially

sensitive information regarding its hospital clients’ contracting and negotiation

strategies in the former cases. Honigman cannot counsel, advise, or question HAP

executives that directly negotiated with its hospital clients without exposing or

improperly utilizing (explicitly or implicitly) the confidential and commercially

sensitive material learned about its hospital clients. This issue was raised by

BCBSM in its reply in support of its motion for disqualification, see Dkt. No. 32 at

5, and was not cured by the consents obtained from Honigman’s hospital clients,

which described HAP’s claims as relating to Oakland County only. See, e.g., Dkt.

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No. 53-2. Because of the narrow description of the case, consenting hospitals

would have no reason to know that the HAP executive who negotiated with them

also negotiated with other hospitals in Oakland County. See, e.g., Dkt. 32-4

(Excerpts from the Deposition transcript of Laura Eory, Nov. 12, 2012).

HAP’s Position: Blue Cross’ argument seeks (without a motion and without

any basis) to substantially interfere with Honigman’s representation of HAP in this

case. BCBSM’s assertion that Honigman should not be permitted to participate in

depositions or discovery of any HAP hospital executives that directly negotiated

with any clients represented by Honigman makes absolutely no sense, and has no

basis, for several reasons.

First, Blue Cross cites no law or rule supporting its argument, and there is

none. MRPC 1.9(c)(1) says that a lawyer who has formerly represented a client

shall not “use information relating to the representation to the disadvantage of the

former client. . .” Honigman has no intention of doing so. The rule does not

impose restrictions on a lawyer based on an unfounded assumption (as Blue Cross

raises) that the rule might be violated in the future. There is certainly no reason

why Honigman would have any interest in using its other clients’ information to

their disadvantage.

Indeed, an examination of the circumstances under which Blue Cross’s

proposed prohibition would apply shows just how ridiculous it is. Under Blue

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Cross’s proposal, if Honigman chose to defend a HAP employee being deposed

concerning his negotiations on HAP’s behalf with regard to Beaumont, Honigman

would be forbidden from doing so if that employee also engaged in any

negotiations at all with any hospital who Honigman had represented in connection

with any of the prior MFN cases, whether or not such issues were or were not at all

likely to come up in a deposition.

Second, the issue Blue Cross raises concerns the interest of Honigman’s

third party clients, not Blue Cross. Those clients have already all signed fully

informed waivers of any potential conflict, after receiving copies of the Complaint

as well as this Court’s Order Denying Without Prejudice Blue Cross’ Motion to

Disqualify, Granting Blue Cross’ Motion to Stay and Setting Dates. See Doc. #41.

They were thus fully informed regarding any potential conflict issue. Under the

circumstances, there is no basis for any restriction on Honigman’s activities.4

Third, there can be no conflict issue unless Honigman is directly adverse to

its third party clients. This Court found the possibility of such adversity “may”

exist because of HAP’s claims regarding MFN clauses, which were possessed by

4 Nevertheless, Honigman’s intention is not to participate in depositions of, or

disputes relating to document requests to, its clients in prior MFN litigation

(excluding, of course, HAP and its affiliates). Another firm will do so.

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some of Honigman’s clients.5See Doc. 41 at pp. 8-10. But Blue Cross’ new

argument has nothing to do with the legality of MFN clauses.

Fourth, Blue Cross’ argument depends upon the assumptions that (a)

Honigman possesses confidential information obtained from its third party clients

in the course of earlier MFN litigation specifically relating to negotiations between

those clients and HAP, and (b) any disclosure would harm Honigman’s third party

hospital clients. But little, if any, of the information produced in discovery would

have related to negotiations with HAP. And most of the information in question is

now four or more years old. As such, it is hard to imagine that any disclosure

could possibly have any competitive significance or could possibly cause any harm

to these third party clients, since it will concern old contracts which have since

been superseded.

In any event, the rule does not prohibit counsel acting in situations where he

might hypothetically be in a position to use information to a client’s disadvantage.

The rule prohibits the use of such information, and Honigman will not do so.

Blue Cross is attempting to further hamper HAP’s pursuit of its case by

raising an issue on behalf of other, sophisticated parties which they have not

themselves raised.

5

In fact, most of Honigman’s clients did not have MFN Plus clauses, the only

clauses at issue in this case. Many of them also did not have MFN clauses.

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Respectfully submitted this 5th day of May, 2016.

HONIGMAN MILLER SCHWARTZ

AND COHN LLP

HUNTON & WILLIAMS LLP

s/David A. Ettinger s/ with consent of Todd M. Stenerson

Honigman Miller Schwartz and Cohn

LLP

2290 First National Building

660 Woodward Avenue

Detroit, MI 48226

(313) 465-7368

dettinger@honigman.com

(P26537)

Counsel for Health Alliance Plan of

Michigan, HAP Preferred, Incorporated,

and Alliance Health and Life Insurance

Company

Hunton & Williams LLP

2200 Pennsylvania Ave., NW

Washington, DC 20037

(202) 955-1500

tstenerson@hunton.com

(P51953)

Counsel for Blue Cross Blue Shield

of Michigan Mutual Insurance

Company

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15769164.28

CERTIFICATE OF SERVICE

I hereby certify that on May 5, 2016, I electronically filed the foregoing

paper with the Clerk of the Court using the ECF system which will send

notification of such filing to the following:

• ngilman@hunton.com

• bhoffman@hunton.com

• lara.phillip@honigman.com

• rphillips@bcbsm.com

• trheaume@bodmanlaw.com

• tstenerson@hunton.com

• tvandusen@bodmanlaw.com

s/David A. Ettinger

Honigman Miller Schwartz and Cohn LLP

2290 First National Building

660 Woodward Avenue

Detroit, MI 48226

(313) 465-7368 (p)

(313) 465-7369 (f)

dettinger@honigman.com

(P26537)

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