Antitrust Update Blog

11th Circuit May Consider Continued Viability of Per Se Standard for Horizontal Market Allocation

We wrote before about a decision by an Alabama federal district court to analyze claims in the Blue Cross Blue Shield multi-district litigation under a per se standard.  The court found that a licensing rule allegedly requiring member plans to derive at least two-thirds of their revenue from Blue-branded plans was effectively an “output restriction” which, especially combined with the designation of exclusive service areas among the member plans, constituted a per se Sherman Act violation.

More recently, the same court granted the defendants’ motion to certify that order for interlocutory review, which, the court recognized, is reserved for “truly exceptional cases.”  The Blue Cross defendants had sought certification of the question:

Whether territorial restraints or output restrictions, in isolation or in aggregation, that are not the result of a naked, horizontal agreement must be evaluated under the per se rule.

The district court chose instead to certify its own “rephrased, clarified question”:

Whether Topco, Sealy, and Palmer remain viable and require the application of the per se rule to a combination of restraints, involving horizontal market allocation and horizontal output restrictions, agreed to by competitors and potential competitors, where Defendants claim, under BMI, that there are at least arguable procompetitive benefits to the combination?

The district court explained that this question is clearly a “controlling” one under the standard for certification set forth in 28 U.S.C. § 1292(b).  It explained, “Candidly, the court and the parties are at a crossroad, and the standard of review ruling will literally direct them as to which way to continue this litigation.”

The court also engaged in a frank discussion of the uncertain state of the law.  While noting that it “earnestly believes it ‘got it right’” under Supreme Court precedent, the court acknowledged the significant doubt that has been cast upon the continuing vitality of Topco and Sealy over the years, including in a statement by Judge Bork of the D.C. Circuit that those decisions, “to the extent [they] stand for the proposition that all horizontal restraints are illegal per se . . . must be regarded as effectively overruled.”

Accordingly, the court found a substantial ground for disagreement regarding the state of the law.  It explained further that “The stakes in this multidistrict litigation are high. The parties estimate that one out of every three Americans has health coverage through the Blues. The parties have poured millions of dollars and untold hours into this litigation. If the Eleventh Circuit were to disagree with the court’s ruling, finding out sooner (rather than later) would save millions more dollars and, potentially, years of full-scale litigation.”

Following the certification, defendants—represented by noted appellate attorney Paul Clement—filed their petition to the Fifth Circuit for permission to appeal.  Plaintiffs opposed, and the appeals court has not yet ruled on the petition.

We will monitor the progress of this appeal, should it be accepted for review.