Sidibe v. Sutter Health

103 F.4th 675

Djeneba SIDIBE; Jerry Jankowski; Susan Hansen; David Herman;Optimum Graphics, Inc.; Johnson Pool & Spa,on Behalf of Themselves and All Others Similarly Situated, Plaintiffs-Appellants, v. SUTTER HEALTH, Defendant-Appellee,Aetna Health of California, Inc.; Aetna Life Insurance Company;Anthem Blue Cross; Blue Shield of California; United Healthcare Services, Inc.;Kaiser Foundation Health Plan Inc., Intervenors.

No. 22-15634

United States Court of Appeals, Ninth Circuit

Argued and Submitted August 24, 2023 San Francisco, California

Filed June 4, 2024

Appeal from the United States District Court for the Northern District of California, Laurel D. Beeler, Magistrate Judge, Presiding, D.C. No. 3:12-cv-04854-LB

Matthew L. Cantor (argued) and Jean Kim, Constantine Cannon LLP, New York, New York; James J. Kovacs and J. Wyatt Fore, Constantine Cannon LLP, Washington, D.C.; Azra Z. Mehdi, The Mehdi Firm PC, San Francisco, California; David C. Brownstein and David M. Goldstein, Farmer Brownstein Jaeger Goldstein Klein & Siegel LLP, San Francisco, California; Allan Steyer, D. Scott Macrae, and Suneel Jain, Steyer Lowenthal Boodrookas Alvarez & Smith LLP, San Francisco, California; Jill Manning, Pearson Simon & Warshaw LLP, San Francisco, California; for Plaintiffs-Appellants.

Craig E. Stewart (argued), David C. Kiernan, and Matthew J. Silveira, Jones Day, San Francisco, California; Jeffrey A. LeVee, Jones Day, Los Angeles, California; Robert H. Bunzel, Oliver Q. Dunlap, and Patrick M. Ryan, Bartko LLP, San Francisco, California; for Defendant-Appellee.

Raymond Wright (argued), Assistant Attorney General, California Department of Justice, Public Rights Division, Civil Rights Enforcement Section, Office of the California Attorney General, Los Angeles, California; for Amicus Curiae.

Anna Tsiotsias, Williams & Connolly LLP, Washington, D.C., for Intervenors Aetna Health of California Inc. and Aetna Life Insurance Company.

Michelle L. Cheng and Jarrad L. Wood, Reed Smith LLP, Los Angeles, California, for Intervenor Blue Cross of America dba Anthem Blue Cross.

Elspeth V. Hansen and Christopher J. Kelly, Mayer Brown LLP, Palo Alto, California, for Intervenor Blue Shield of California.

Maxwell V. Pritt, Boies Schiller Flexner LLP, San Francisco, California, for Intervenor United Healthcare Services Inc.

Mohammad Keshavarzi, Sheppard Mullin Richter & Hampton LLP, Los Angeles, California, for Intervenor Kaiser Foundation Health Plan Inc.

William A. Sokol, Weinber Roger & Rosenfeld, A Professional Corporation, Emeryville, California, for Amicus Curiae California Health Care Coalition.

Elizabeth C. Pritzker, Pritzker Levine LLP, Emeryville, California; David A. Balto and Andre Barlow, Law Offices of David Balto, Chevy Chase, Maryland; for Amici Curiae Consumer Action and U.S. Public Interest Research Group.

Dean M. Harvey and Brendan P. Glackin, Lieff Cabraser Heimann & Bernstein LLP, San Francisco, California, for Amici Curiae Professors of Law and Economics, Economists, and Health Policy Researchers.

Randy M. Stutz, American Antitrust Institute, Washington, D.C.; Kristen G. Marttila and Joseph C. Bourne, Minneapolis, Minnesota; for Amici Curiae The Committee to Support the Antitrust Laws and American Antitrust Institute.

Malinda Lee, Justin Lowe, and Raymond Wright, Deputy Attorneys General; Emilio Varanini, Supervising Deputy Attorney General; Renuka R. George, Senior Assistant Attorney General; Rob Bonta, California Attorney General; Office of the California Attorney General, Los Angeles, California; Kwame Roul, Illinois Attorney General, Office of the Illinois Attorney General, Chicago, Illinois; Hector Balderas, New Mexico Attorney General, Office of the New Mexico Attorney General, Santa Fe, New Mexico; Josh Stein, North Carolina Attorney General, Office of the North Carolina Attorney General. Raleigh, North Carolina; Ellen F. Rosenblum, Oregon Attorney General, Office of the Oregon Attorney General, Salem, Oregon; Peter F. Neronha, Rhode Island Attorney General, Office of the Rhode Island Attorney General, Providence, Rhode Island; Karl A. Racine, District of Columbia Attorney General, Office of the District of Columbia Attorney General, Washington, D.C.; for Amici Curiae States of California, Illinois, New Mexico, North Carolina, Oregon, Rhode Island, and The District of Columbia.

Andrew R. Dunlap, Lauren J. Zimerman, Anne L. Arcoleo, Selendy Gay Elsber PLLC, New York, New York, for Amici Curiae Scholars of Healthcare Economics.

Anne L. Rauch and Trinette S. Sachrison, Berding & Weil LLP, San Diego, California; Daniel Rottinghaus, Berding & Well LLP, Walnut Creek, California; for Amicus Curiae Catalyst for Payment Reform.

Jamie Crooks and Rucha Desai, Fairmark Partners LLP, Washington, D.C.; for Amicus Curiae Purchaser Business Group on Health.

Boris Bershteyn, Skadden Arps Slate Meagher & Flom LLP, New York, New York, for Amicus Curiae American Hospital Association.

Timothy M. Snyder and Jordan R. Goldberg, Latham & Watkins LLP, Washington, D.C.; Alfred C. Pfeiffer, Jr., Christopher S. Yates, and Sarah M. Ray, Latham & Watkins LLP, San Francisco, California; for Amici Curiae Economists and Antitrust Scholars.

Before: Patrick J. Bumatay, Lucy H. Koh, and Roopali H. Desai, Circuit Judges.

Opinion by Judge Koh;

Dissent by Judge Bumatay

OPINION

KOH, Circuit Judge:

Djeneba Sidibe, Jerry Jankowski, Susan Hansen, David Herman, Optimum Graphics, Inc., and Johnson Pool & Spa ("Plaintiffs") represent a certified class of individuals and businesses in Northern California who paid health insurance premiums to certain health plans run by Aetna, Anthem Blue Cross, Blue Shield of California, Health Net, and United Healthcare. Plaintiffs allege that Sutter Health ("Sutter"), which operates a healthcare system in Northern California, has abused its market power in the region to charge supracompetitive rates to these health plans, which were then passed on to the class in the form of higher premiums. Following a four week trial on Plaintiffs' claims under California's Cartwright Act for tying and unreasonable course of conduct, a jury returned a verdict in favor of Sutter.

Plaintiffs now appeal the entry of final judgment in favor of Sutter. They contend that the district court impermissibly excluded relevant evidence, failed to instruct the jury to consider Sutter's anticompetitive purpose, failed to instruct the jury that the relevant purchasers are the health plans, and wrongly denied Plaintiffs' motion for sanctions against Sutter for the destruction of evidence.

We have jurisdiction under 28 U.S.C. § 1291. The district court erred by failing to instruct the jury to consider Sutter's anticompetitive purpose and by excluding evidence of Sutter's conduct before 2006. These errors were prejudicial, so we reverse.¹

I.

Plaintiffs represent a class of individuals and businesses who are or were insured by health plans that contract with Sutter, a healthcare system that spans 24 hospitals, five medical foundations, and 40 ambulatory surgery centers. Plaintiffs allege that Sutter charged supracompetitive rates to these health plans, which the health plans in turn passed on to Plaintiffs by charging higher premiums. Plaintiffs are therefore "indirect purchasers" of Sutter's services, and their "theory of antitrust impact depends on two separate overcharges": an overcharge by Sutter to the health plans, and an overcharge by the health plans to Plaintiffs. Olean Wholesale Grocery Coop., Inc. v. Bumble Bee Foods LLC, 31 F.4th 651, 684 (9th Cir. 2022) (en banc), cert. denied, — U.S. —, 143 S. Ct. 424, 214 L.Ed.2d 233 (2022).

In 2012, Plaintiffs filed this class action against Sutter, alleging violations of the Sherman Act, California's Cartwright Act, and California's Unfair Competition Law. Specifically, Plaintiffs alleged that Sutter engaged in unlawful tying, in violation of 15 U.S.C. § 1 and Cal. Bus. & Prof. Code § 16720; that Sutter engaged in an unreasonable course of conduct, in violation of the same; that Sutter engaged in monopolization and attempted monopolization, in violation of 15 U.S.C. § 2; and that Sutter engaged in unlawful business acts or practices, in violation of Cal. Bus. & Prof. Code § 17200.

This litigation has proceeded for over a decade, and so we discuss only a few relevant events from its history. First, in certifying a Rule 23(b)(2) and later a Rule 23(b)(3) class, the district court initially set a damages period beginning on September 28, 2008. This was four years before Plaintiffs sued in September 2012, reflecting the statute of limitations for all three statutes. See 15 U.S.C. § 15b; Cal. Bus. & Prof. Code § 16750.1; Cal. Bus. & Prof. Code § 17208.

Second, the district court granted summary judgment to Sutter on Plaintiffs' monopolization claims (section 2 of the Sherman Act) and for all claims between 2008 and 2010. Thus, the damages period began on January 1, 2011.

Third, the district court granted several of Sutter's motions in limine to exclude evidence. The court excluded:

• Evidence relating to other litigation and investigations, including (1) a 1999 challenge to the merger of Sutter's Alta Bates Medical Center in Berkeley and the Summit Medical Center in Oakland, and (2) two state court actions alleging similar anticompetitive conduct as this federal suit brought by UFCW & Employers Benefit Trust and the State of California (these latter two actions were later consolidated, and the parties settled in October 2019).

• Evidence relating to Sutter's practices before January 1, 2006 (that is, five years before the damages period). However, the court left open the possibility that Plaintiffs might make an offer of proof as to a specific exhibit.

• A 2006 memo by Strategy Advantage, which included statements about Sutter's marketing position but "necessarily look[ed] back at" pre-2006 evidence.

All three of these rulings were premised on Federal Rule of Evidence 403, which permits courts to exclude evidence that is...