UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ---------------------------------------------------------------x THE AMERICAN MEDICAL ASSOCIATION, : et al., : Plaintiffs, : -against- : UNITED HEALTHCARE CORPORATION, et al., : Defendants. : ---------------------------------------------------------------x

Master File No. 00 Civ. 2800 (LMM)(GWG)

CORRECTED MEMORANDUM OF LAW IN SUPPORT OF CLASS PLAINTIFFS’

MOTION FOR FINAL APPROVAL OF THE PROPOSED SETTLEMENT

Stanley M. Grossman D. Brian Hufford Shaheen Rushd Robert J. Axelrod Susan J. Weiswasser Jay Douglas Dean POMERANTZ HAUDEK BLOCK GROSSMAN & GROSS LLP 100 Park Avenue New York, New York 10017 212.661.1100

Lead Settlement Class Counsel

(Additional Counsel Listed on Signature Page)

TABLE OF CONTENTS

PRELIMINARY STATEMENT .....................................................................................................1

KEY TERMS OF THE SETTLEMENT .........................................................................................4

PROCEDURAL BACKGROUND..................................................................................................6

SUMMARY OF SETTLEMENT NEGOTIATIONS .....................................................................7

I. THE SETTLEMENT SHOULD BE APPROVED AS FAIR, REASONABLE AND ADEQUATE...................................................................................9

A. The Standard for Court Approval of a Class Action Settlement .............................9

B. The Settlement is Presumptively Fair Because It Is the Product of Arm’s-Length Negotiations by Informed and Knowledgeable Counsel ...........11

C. A Review of the Grinnell Factors Confirms That the Settlement is Fair, Adequate, and Reasonable.............................................................................13

1. Continued Litigation Would Be Long, Complex, and Expensive .............13

2. Reaction of the Class to the Settlement .....................................................16

3. Stage of the Proceedings and Amount of Discovery Completed...............18

4 Risks of Establishing Liability...................................................................19

5. Risks of Establishing Damages..................................................................22

6. Risks of Maintaining the Class Action Through Trial...............................28

7. Ability of the Defendants to Withstand a Greater Judgment.....................30

8 The Range of Reasonableness of the Settlement .......................................31

II. THE PLAN OF ALLOCATION IS FAIR, ADEQUATE AND REASONABLE AND SHOULD BE APPROVED..........................................................33

III. THE REQUIREMENTS FOR CLASS CERTIFICATION HAVE BEEN MET AND THE SETTLEMENT CLASS SHOULD BE CERTIFIED...............................................37

A. Numerosity.............................................................................................................38

B. Commonality..........................................................................................................39

(i)

C. Typicality ...............................................................................................................42

D. Adequacy ...............................................................................................................44

E. Common Questions Predominate ..........................................................................46

F. Superiority of the Class Action..............................................................................49

CONCLUSION..............................................................................................................................50

(ii)

(iii)

TABLE OF AUTHORITIES

CASES American Medical Association (“AMA”) v. United Healthcare Corp.,

2001 U.S. Dist. LEXIS 10818 (S.D.N.Y. July 31, 2001) .........................................................6

AMA v. United Healthcare Corp., 2002 U.S. Dist. LEXIS 20309 (S.D.N.Y. Oct. 22, 2002) ...................................................6, 27

AMA v. United Healthcare Corp., 2003 U.S. Dist. LEXIS 14686 (S.D.N.Y. Aug. 22, 2003) ........................................................7

AMA v. United Healthcare Corp., 2006 U.S. Dist. LEXIS 93864 (S.D.N.Y. Dec. 29, 2006) ........................................................7

AMA v. United Healthcare Corp., 2007 U.S. Dist. LEXIS 18729 (S.D.N.Y. Mar. 5, 2007) ..........................................................7

AMA v. United Healthcare Corp., 2007 U.S. Dist. LEXIS 44196 (S.D.N.Y. June 15, 2007).................................7, 21, 22, 25, 26

AMA v. United Healthcare Corp., 2008 U.S. Dist. LEXIS 67592 (S.D.N.Y. Aug. 22, 2008) .........................................................7

AMA v. United Healthcare Corp., 2009 U.S. Dist. LEXIS 112634 (S.D.N.Y. Nov. 17, 2009) .................................3, 15, 20, 22, 24, 28, 32, 39, 40, 43, 45, 47, 49

AMA v. United Healthcare Corp., 2009 U.S. Dist. LEXIS 45610 (S.D.N.Y. May 19, 2009).......................................................20

In re Aetna UCR Litigation,

2009 U.S. Dist. LEXIS 66853 (D.N.J. July 31, 2009)............................................................12

Amchem Products Inc. v. Windsor, 521 U.S. 591 (1997)....................................................................................................38, 46, 49

In re American Banknote Holographics, 127 F. Supp. 2d 418 (S.D.N.Y. 2001).....................................................................................33

Anixter v. Home-Stake Prod. Co., 77 F.3d 1215 (10th Cir. 1996) ................................................................................................14

Backman v. Polaroid Corp., 910 F.2d 10 (1st Cir. 1990).....................................................................................................14

Baffa v. Donaldson, Lufkin & Jenrette Sec. Corp., 222 F.3d 52 (2d Cir. 2000)......................................................................................................44

Brooks v. Educators Mutual Life Insurance Co., 206 F.R.D. 96 (E.D. Pa. 2002)................................................................................................41

Caridad v. Metropolitan-North Commuter R.R., 191 F.3d 283 (2d Cir. 1999)....................................................................................................43

Carson v. American Brands, Inc., 450 U.S. 79 (1981)..................................................................................................................11

Celardo v. Gny Automobile Dealers Health & Welfare Trust, 318 F.3d 142 (2d Cir. 2003)....................................................................................................21

Central States Southeast & Southwest Areas Health & Welfare Fund v. Merck- Medco Managed Care, L.L.C., 504 F.3d 229 (2d Cir. 2007) ..................................................10

Clark v. Ecolab Inc., 2010 U.S. Dist. LEXIS 47036 (S.D.N.Y. May 11, 2010)...........................................28, 29, 31

In re Corel Corp. Securities Litigation, 293 F. Supp. 2d 484 (E.D. Pa. 2003) ......................................................................................37

Cromer Finance Ltd. v. Berger, 205 F.R.D. 113 (S.D.N.Y. 2001) ......................................................................................39, 42

In re Currency Conversion Fee Antitrust Litigation, 264 F.R.D. 100 (S.D.N.Y. 2010) ......................................................................................47, 48

D'Amato v. Deutsche Bank, 236 F.3d 78 (2d Cir. 2001)................................................................................................10, 18

Damassia v. Duane Reade, Inc., 250 F.R.D. 152 (S.D.N.Y. 2008) ............................................................................................44

In re Datatec System, Inc. Sec. Litigation, 2007 U.S. Dist. LEXIS 87428 (D.N.J. Nov. 28, 2007)...........................................................34

Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir. 1974)........................................................................3, 10, 11, 19, 20, 33

Diagnostic Med. Assoc. MD, P.C. v. New York City Dist. Council of Carpenters

Welfare Fund, 2007 U.S. App. LEXIS 9933 (2d Cir. April 30, 2007)...................................21

(iv)

In re Domestic Air Transport Antitrust Litig., 148 F.R.D. 297 (N.D. Ga. 1993).............................................................................................30

In re EVCI Career Colleges Holding Corp. Sec. Litig., 2007 U.S. Dist. LEXIS 57918 (S.D.N.Y. July 27, 2007) .......................................................10

Eggleston v. Chicago Journeymen Plumbers' Local Union Number 130, 657 F.2d 890 (7th Cir. 1981) ..................................................................................................30

In re Elan Sec. Litig., 385 F. Supp. 2d 363 (S.D.N.Y. 2005).....................................................................................15

Fallick v. Nationwide Mutual Insurance Co., 162 F.3d 410 (6th Cir. 1998) ..................................................................................................42

First State Orthopaedics v. Concentra, Inc., 534 F. Supp. 2d 500 (E.D. Pa. 2007) ......................................................................................17

Frank v. Eastman Kodak Co., 228 F.R.D. 174, 186 (W.D.N.Y. 2005) ........................................31 In re General Instrument Sec. Litig.,

209 F. Supp. 2d 423 (E.D. Pa. 2001) ......................................................................................34

In re Gilat Satellite Networks, Ltd., 2007 U.S. Dist. LEXIS 68964 (E.D.N.Y. Sept. 18, 2007)....................................13, 15, 16, 19

In re Global Crossing Sec. & ERISA Litig., 225 F.R.D. 436 (S.D.N.Y. 2004) .........................................................................19, 34, 40, 42,

In re Gulf Oil/Cities Serv. Tender Offer Litigation, 142 F.R.D. 588 (S.D.N.Y. 1992) .............................................................................................33

Hertzberg v. Asia Pulp & Paper Co., 2006 U.S. App. LEXIS 23648 (2d Cir. Sept. 13, 2006) .........................................................31

In re Independent Energy Holdings PLC Sec. Litig., 2003 U.S. Dist. LEXIS 17090 (S.D.N.Y. Sept. 26, 2003)......................................................15

In re Industrial Diamonds Antitrust Litig., 167 F.R.D. 374 (S.D.N.Y. 1996) ............................................................................................47

In re Interpublic Securities Litig., 2004 U.S. Dist. LEXIS 21429 (S.D.N.Y. Oct. 26, 2004) .......................................................33

Joel A. v. Giuliani, 218 F.3d 132 (2d Cir. 2000)....................................................................................................10

(v)

Klay v. Humana, Inc.,

382 F.3d 1241 (11th Cir. 2004) ..............................................................................................46

Krauss v. Oxford Health Plans, Inc., 517 F.3d 614 (2d Cir. 2008)....................................................................................................25

Krueger v. N.Y. Telegraph Co., 163 F.R.D. 433 (S.D.N.Y. 1995) ............................................................................................48

Kurz v. Philadelphia Electric Co., 96 F.3d 1544 (3d Cir. 1996)....................................................................................................14

Malchow v. Oxford Health Plans, Inc., Civ. Case No. 08-935 (FSH)(PS)..............................................................................................3

Maley v. Del Global Technologies Corp., 186 F. Supp. 2d 358 (S.D.N.Y. 2002).....................................................................................22

Marisol A. by Forbes v. Giuliani, 126 F.3d 372 (2d Cir. 1997) ........................................39, 43, 44

Mba v. World Airways, Inc., 2010 U.S. App. LEXIS 5068 (2d Cir. Mar. 10, 2010).............................................................10

McCoy v. Health Net, Inc., 569 F. Supp. 2d 448 (D.N.J. 2008)........................................12, 15, 17, 20, 23, 24, 31, 38, 39, 41, 42, 44, 46, 47, 50

In re MetLife Demutualization Litig., 2010 U.S. Dist. LEXIS 12413 (E.D.N.Y. Feb. 12, 2010).......................................................11

Miller v. United Welfare Fund, 72 F.3d 1066 (2d Cir. 1995)....................................................................................................27

Moore v. PaineWebber, Inc., 306 F.3d 1247 (2d Cir. 2002)..................................................................................................46

In re NASDAQ Market-Makers Antitrust Litigation, 169 F.R.D. 493 (S.D.N.Y. 1996) ............................................................................................39

In re NTL Sec. Litigation, 2006 U.S. Dist. LEXIS 5346, (S.D.N.Y. Feb. 14, 2006)........................................................39

In re Oxford Health Plans, Inc. Sec. Litig., 191 F.R.D. 369 (S.D.N.Y. 2000) ............................................................................................42

(vi)

Paese v. Hartford Life & Accident Ins. Co., 449 F.3d 435 (2d Cir. 2006)..............................................................................................30, 48

Pagan v. NYNEX Pension Plan, 52 F.3d 438 (2d Cir. 1995)......................................................................................................21

Parker v. Time Warner Entertainment Co., L.P., 631 F. Supp. 2d 242 (E.D.N.Y. 2009) ....................................................................................18

In re Prudential Ins. Co. of Am. Sales Practices Litig., 962 F. Supp. 450 (D.N.J. 1997) ..............................................................................................19

In re Prudential Sec. Inc. Ltd. Pships. Litig., 163 F.R.D. 200 (S.D.N.Y. 1995) ......................................................................................42, 43

In re Rent-Way Securities Litigation, 305 F. Supp. 2d 491 (W.D. Pa. 2003).....................................................................................22

Robbins v. Koger Properties, 116 F.3d 1441 (11th Cir. 1997) ..............................................................................................14

Robidoux v. Celani, 987 F.2d 931 (2d Cir. 1993)....................................................................................................42

Scottish Heritable Trust, PLC v. Peat Marwick Main & Co., 81 F.3d 606 (5th Cir. 1996) ....................................................................................................14

Slomovics v. All for a Dollar, Inc., 906 F. Supp. 146 (E.D.N.Y. 1995) .........................................................................................14

Spicer v. Pier Sixty LLC, 2010 U.S. Dist. LEXIS 76782 (S.D.N.Y. July 27, 2010) .............................................................................................40, 43, 44

Strougo v. Bassini, 258 F. Supp. 2d 254 (S.D.N.Y. 2003).....................................................................................15

In re Sumitomo Copper Litig., 189 F.R.D. 274 (S.D.N.Y. 1999) ............................................10, 13

Teachers' Retirement System v. A.C.L.N., Ltd., 2004 U.S. Dist. LEXIS 8608 (S.D.N.Y. May 14, 2004).........................................................33

In re Telik, Inc. Sec. Litig., 576 F. Supp. 2d 570 (S.D.N.Y. 2008)................................................11

Trief v. Dun & Bradstreet Corp., 144 F.R.D. 193 (S.D.N.Y. 1992) ............................................................................................42

(vii)

In re Union Carbide Corp. Consumer Products Business Sec. Litig., 718 F. Supp. 1099 (S.D.N.Y. 1989)........................................................................................33

Varljen v. H.J. Meyers & Co., 2000 U.S. Dist. LEXIS 16205 (S.D.N.Y. Nov. 6, 2000) ........................................................43

In re Vicuron Pharmaceuticals, Inc. Securities Litig., 512 F. Supp. 2d 279 (E.D. Pa. 2007) ......................................................................................19

In re Visa Check, 192 F.R.D. 68 (E.D.N.Y. 2000) ..............................................................................................48

In re Visa Check/MasterMoney Antitrust Litig., 280 F.3d 124 (2d Cir. 2001)..............................................................................................46, 48

In re Visa Check/MasterMoney Antitrust Litig., 297 F. Supp. 2d 503 (E.D.N.Y. 2003) ..............................................................................14, 33

Wachtel v. Guardian Life Insurance Co., 223 F.R.D. 196 (D.N.J. 2004).................................................11, 13, 17, 31, 37, 41, 46, 47, 50

Wal-Mart Stores, Inc. v. Visa U.S.A. Inc., 396 F.3d 96 (2d Cir. 2005)....................................................................................11, 13, 17, 31

In re Warner Communications Securities Litigation, 618 F. Supp. 735 (S.D.N.Y. 1985), aff'd, 798 F.2d 35 (2d Cir. 1986)................................................................22

In re Westcap Enterprises, 230 F.3d 717 (5th Cir. 2000)..............................................................14

Wright v. Stern, 2008 U.S. Dist. LEXIS 39473 (S.D.N.Y. May 15, 2008) ...................................18

STATUTES

Fed. R. Civ. P. 23...........................................................................................................................28

Fed. R. Civ. P. 23(b)(3)............................................................................................................46, 49

Fed. R. Civ. P. 23(c) ......................................................................................................................30

TREATISES

Manual for Complex Litigation, Third, § 30.42 (1995).................................................................11

(viii)

Pursuant to Rule 23(e) of the Federal Rules of Civil Procedure, Settling Plaintiffs1 in the

above-captioned litigation respectfully submit this Memorandum of Law in Support of the Joint

Motion for final approval of the proposed settlement of this class action (the “Action”), as set forth

in the Settlement Agreement January dated 14, 2009.2

PRELIMINARY STATEMENT

This case represents the first major challenge to how the insurance industry reimbursed their

subscribers for health care services offered by providers who had not entered into in-network

contracts with insurers, known as out-of-network, or “ONET,” providers. As detailed in the

accompanying Declaration of D. Brian Hufford in Support of Class Plaintiffs’ Motion for Final

Approval of the Proposed Settlement and for an Award of Attorneys’ Fees, Reimbursement of

Expenses and Compensatory Awards to Class Plaintiffs, filed concurrently herewith (the “Hufford

Decl.”), the majority of major health insurers set ONET reimbursement levels based on a database

developed and promulgated by Defendant United Healthcare Corp. (“UHC,” now known as United

Health Group), through its wholly-owned subsidiary, Ingenix, Inc. Hufford Decl., ¶ 8. This Ingenix

Database was a “black box,” in that it established the numbers used by insurers to set the usual,

customary and reasonable (“UCR”) rates for limiting ONET reimbursement levels without providing

subscribers or their providers access to the underlying methodology or data – which was deemed by

UHC to be confidential and proprietary – and therefore denying them the ability to question or

seriously dispute the reimbursement levels set forth by Ingenix.

1 Unless otherwise defined herein, capitalized terms have the meaning ascribed to them in the Settlement Agreement which was previously filed with the Court. The Settlement Agreement was amended as of August 25, 2010, to expand the definition of “Settling Plaintiffs” to include a number of additional plaintiffs.

2 Plaintiffs are filing herewith a separate motion in support for an award of attorneys’ fees, expenses and incentive awards for the individual named Settling Plaintiffs.

After more than ten years of contentious litigation, extensive briefing, multiple motions to

dismiss, substantial “Stage One discovery,” nearly a year of arm’s-length and intensive settlement

negotiations, and an in-depth preliminary approval process consisting of an exhaustive evidentiary

hearing, multiple court filings and months of confirmatory discovery, Settling Plaintiffs succeeded in

achieving a number of major accomplishments. Not only did Settling Plaintiffs succeed in obtaining

an historic agreement with Defendants that establishes the largest settlement fund ever achieved in a

private healthcare action, but they also played a major role in reforming the entire health insurance

industry and the manner in which it establishes reimbursement levels for ONET services.

Pursuant to the terms of the Settlement Agreement, Defendants shall establish a $350 million

non-reversionary cash Settlement Fund (plus interest of approximately $12 million), which, upon the

Court’s approval, will be distributed to eligible health plan members and out-of-network (“ONET”)

health care providers. In addition, Class Counsel brought the Ingenix problem to the attention of the

Office of the Attorney General of the State of New York (“OAG”), and then worked closely with the

OAG in negotiating the establishment of a new and independent database to replace that offered by

Ingenix, which was set in place by an Assurance of Discontinuance (“AOD”) entered into between

the OAG and UHC on January 13, 2009, one day before the Settlement Agreement was signed. The

Settlement Agreement requires UHC to cooperate with a non-profit organization, FAIR Health, Inc.,

established pursuant to the AOD, which will work with an independent health care research network

headquartered at Syracuse University to design and operate an independent database (the “FAIR

Database”).3 The FAIR Database shall be used as a tool for determining allowed amounts for

3 Class Counsel are not seeking any attorneys’ fees attributable to the value provided by the establishment of the Fair Database. Nevertheless, this lawsuit and Plaintiffs’ Counsel played an integral role in the negotiations leading to this significant relief, and by incorporating it into the Settlement, it establishes a mechanism for enforcing UHC’s obligations that extend well beyond what would be available to the OAG.

2

covered ONET services and supplies under healthcare plans insured or administered by UHC which

reimburse based on UCR, and it shall replace the Ingenix Database, which Settling Plaintiffs allege

is inherently flawed and inadequate to establish appropriate UCR amounts, for the health industry in

general.

After completing an unprecedented examination of the proposed Settlement, the Court

granted preliminary approval. See AMA v. United Healthcare Corp., 2009 U.S. Dist. LEXIS 112634

(“Prelim. Appr. Op.”)(S.D.N.Y. Nov. 17, 2009). As Judge Faith Hochberg of the District of New

Jersey noted, in staying a related case against UHC-subsidiary Oxford Health Plans, Inc., due to the

proposed Settlement here, this Court “undertook an exceptionally thorough review of the

Settlement,” based on an “expansive record developed during the preliminary approval

proceedings.” Malchow v. Oxford Health Plans, Inc., Civ. Case No. 08-935 (FSH)(PS), Order dated

Jan. 14, 2010, at 1-2. Then, according to Judge Hochberg, this Court granted preliminary approval

based on the standards of Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir. 1974), which are

“routinely considered in connection with the final approval of class action settlements.” Id. at 2. See

also Hufford Decl., ¶¶ 153 - 156 (summarizing Court’s opinion granting preliminary approval). In

its decision, this Court evaluated in detail “‘[t]he most important [Grinnell] factor’” in assessing a

settlement, which “‘is the strength of the case for plaintiffs on the merits, balanced against the

amount offered in settlement,’” in holding that the proposed Settlement should be preliminarily

approved. 2009 U.S. Dist. LEXIS 112634, at *25-26 (quoting Grinnell, 495 F.2d at 455). Thus, the

Court should be extremely comfortable with granting final approval now.

Despite the fact that Class Notice, as approved by the Court, was disseminated to more than

14 million Class Members, with Publication Notice widely disseminated throughout the country, see

accompanying Declaration of Michael Rosenbaum re Mailing Publication of Notice and Requests

3

for Exclusion (“Rosenbaum Decl.”), ¶ 3, and that the settlement itself received substantial press

coverage as a result of the parallel OAG settlement and the initial questions raised by co-counsel

Wilentz, Goldman and Spitzer, P.A. (which is now supporting the Settlement after determining that

it is in the best interest of the Classes), the Court has received only 25 objections, many of which

were submitted by so-called “professional objectors,” and none of which are well founded. See

accompanying Memorandum of Law in Response to Objections. The Settlement is a substantial

achievement that played a fundamental part in reforming a key part of the health insurance industry

relating to how it reimburses for ONET services. For the reasons detailed herein, the Court should

approve the Settlement Agreement as fair, adequate, and reasonable.

KEY TERMS OF THE SETTLEMENT

The proposed settlement calls for UHC to pay $350 million into a non-reversionary cash

settlement fund, against which Class Members may make claims for reimbursement. Up to

$500,000 shall be made available from interest accruing on the Cash Settlement Fund for a Joint

Insurer-Provider Institute.4 This Institute shall be used to facilitate cooperation between private

sector healthcare insurers and healthcare providers in the delivery of patient healthcare.

The Settlement Agreement also requires UHC to engage in a number of significant business

practice initiatives. It is conditioned on UHC entering into the Assurance of Discontinuance with the

OAG, under which Syracuse University will oversee the operation of a new non-profit organization

to establish and operate the new FAIR Database as a replacement for the Ingenix Database that is at

4 Pursuant to the Settlement Agreement, if the date that UHC must establish the Cash Settlement Fund is later than May 1, 2009, it must pay interest that shall accrue on the current balance of the Settlement Fund based on the average daily prime rate beginning on May 1, 2009 and ending the day before the establishment of the Settlement Fund. All interest on the Settlement Fund shall accrue to the benefit of the Settlement Class, in addition to funding the Joint Insurer-Provider Institute.

4

the center of this litigation and a number of other class actions around the country. UHC is required

under the Settlement Agreement to contribute $50 million to the funding, development, and

implementation of the FAIR Database, and it must provide Syracuse with all requested data for all

available years to assist in the development of the substitute database. Further, within 60 days of the

first release of the FAIR Database, UHC must cease operating and using the Ingenix Database to

determine allowed amounts for covered out-of-network services and supplies, and must use the

FAIR Database for this purpose where plan terms specify payment based on UCR amounts. During

a five-year period following the first release of the FAIR Database, UHC may not own, operate, or

fund a competing database. Each of these provisions ensure that UHC is required to comply with the

provisions also incorporated into the AOD, thereby rendering UHC’s obligations judicially

enforceable on a nationwide basis, a remedy likely to be unavailable to the New York Attorney

General.

In addition, consistent with the AOD, UHC must coordinate with the Syracuse University in

order to create a website, entitled the “Healthcare Information Transparency Website,” or “HIT

Website,” accessible to the public. The HIT Website will permit consumers to know the charged

amount at a stated percentile in a specific geographical area, or a range of charges, from the New

Database. Thus, no longer will out-of-network reimbursement be a “black box,” and consumers may

use the HIT Website to determine whether to utilize an out-of-network provider and, if so, how

much they should expect to be reimbursed for covered out-of-network services and supplies.

Until the FAIR Database is established and made available to UHC, Defendants may process

out-of-network claims using the current releases of the Ingenix Database. However, under the Plan

of Allocation, Settlement Class Members may submit claims against the Settlement Fund through

the Final Order and Judgment Date.

5

PROCEDURAL BACKGROUND

As detailed in the accompanying Hufford Declaration, the history of this action involved the

better part of a decade, with numerous parties, amended complaints, complicated motions and

intense discovery. This action was originally filed in the Supreme Court of the State of New York,

New York County in March 15, 2000, before it was removed to the United States District Court for

the Southern District of New York on April 12, 2000. A second action was filed in United States

District Court for the Southern District of New York on September 25, 2000, with the two cases

consolidated on July 27, 2001, under Master File No. 00-2800.

Settling Plaintiffs filed a First Amended Complaint on August 25, 2000, a Second Amended

Complaint on September 22, 2000, a Third Amended Complaint on January 11, 2002, and a Fourth

Amended Complaint on July 11, 2007. The Fourth Amended Complaint (the “FAC”) alleged claims

under the Employee Retirement Income Security Act (“ERISA”), the Sherman Antitrust Act, the

federal civil Racketeer Influenced and Corrupt Organization Act (“RICO”), the Florida state RICO

statute, and New York state law. During the lengthy pendency of the litigation, the parties have

engaged in substantial discovery, including the production by UHC of hundreds of thousands of

pages of documents and a number of depositions, which allowed Plaintiffs to gain a detailed

understanding of the Ingenix Database and how it was administered. The parties also engaged in

extensive briefing relating to numerous critical motions by both parties. With regard to those

motions, this Court rendered numerous decisions, including:

granting in part and denying in part UHC’s motion to dismiss the First Amended Complaint, AMA v. United Healthcare Corp., 2001 U.S. Dist. LEXIS 10818 (S.D.N.Y. July 31, 2001);

granting in part and denying in part UHC’s motion to dismiss the Third Amended Complaint and authorizing “Stage One” discovery relating to “the standing of various groups of plaintiffs in this case, the alleged exhaustion of remedies by certain plaintiffs, and the proper defendants,” AMA v. United Healthcare Corp., 2002 U.S. Dist. LEXIS 20309, *9 (S.D.N.Y. Oct. 22, 2002);

6

denying UHC’s motion to dismiss and to compel arbitration of the claims of the Union Plaintiffs, whose motion to intervene in the action on behalf of their members in UHG’s government sponsored Empire Plan had previously been granted, AMA v. United Healthcare Corp., 2003 U.S. Dist. LEXIS 14686 (S.D.N.Y. Aug. 22, 2003);

granting in part Plaintiffs’ motion to amend the Third Amended Complaint in order to add RICO and antitrust claims against UHC, AMA v. United Healthcare Corp., 2006 U.S. Dist. LEXIS 93864 (S.D.N.Y. Dec. 29, 2006);

granting Plaintiffs’ motion to dismiss UHC’s counterclaim against the Medical Association Plaintiffs for antitrust violations and granting in part Plaintiffs’ motion to dismiss UHG’s counterclaim against one of the individual provider plaintiffs for improper reimbursements, AMA v. United Healthcare Corp., 2007 U.S. Dist. LEXIS 18729 (S.D.N.Y. Mar. 5, 2007);

granting in part and denying in part UHC’s motion for summary judgment relating to exhaustion of administrative remedies, standing and proper parties, AMA v. United Healthcare Corp., 2007 U.S. Dist. LEXIS 44196 (S.D.N.Y. June 15, 2007); and

granting in part and denying in part UHC’s motion to dismiss the Fourth Amended Complaint, including by dismissing all benefits and damages claims of the provider plaintiffs, with leave to replead under RICO, and upholding the subscribers’ antitrust claims for damages and the providers’ antitrust claims for injunctive relief, AMA v. United Healthcare Corp., 2008 U.S. Dist. LEXIS 67592 (S.D.N.Y. Aug. 22, 2008).

While Plaintiffs were able to survive these decisions in order to continue prosecuting the

litigation on behalf of the putative Classes, they nevertheless were subjected to numerous rulings of

this Court that highlight the difficulties they would face were the case to proceed to trial. In light of

the inherent risks at issue, and based on a reasonable evaluation of potential damages that could be

recovered were the case to proceed to trial, there is no legitimate dispute that the proposed

Settlement is a tremendous result and within the best interests of the proposed Classes.

SUMMARY OF SETTLEMENT NEGOTIATIONS

The Settling Parties engaged in extensive and arm’s-length settlement negotiations

commencing in March 2008 and proceeding on a daily basis until the execution of the Settlement

Agreement on January 14, 2009. This is detailed at length in the accompanying Hufford

Declaration. The Parties’ settlement negotiations involved virtually daily telephonic and in-person

meetings with outside and inside counsel for Defendants, Defendants’ employees, experts retained

7

by both Parties, representatives of Syracuse University, and the OAG internal and outside counsel.

Even before the commencement of settlement negotiations with Defendants, Class Counsel, together

with their statistical expert, met with the AOG to provide a brief on the defects with the Ingenix

Database, thereby contributing to the investigation that was subsequently initiated by the OAG.

Thereafter, Class Counsel was fully engaged in negotiating the terms of both the Settlement

Agreement and the parameters under which the FAIR Database would be established to replace the

Ingenix Database as the source for UCR determinations.

Each material portion of what became the Settlement Agreement – including the definition of

the class, the amount of the Settlement Fund, the interest that Defendants would pay on the Fund, the

business practice initiatives, the interplay with the AOD, the transition period, the claims

administration, the scope of the releases, class notice, and the plan of allocation – was intensely

negotiated, resulting in dozens of separate drafts, redrafts, modifications and substantive edits. The

Parties only executed the Settlement Agreement after having completed this complex process and

obtaining a result that Class Counsel strongly believes is in the best interests of Settling Plaintiffs

and the Settlement Class.

DISTRIBUTION OF THE SETTLEMENT FUND

Pursuant to the Plan of Allocation, Subscriber Class Members may choose to utilize a

simplified claim form by checking a box and providing only the number of years they were a

member of a Defendants’ healthcare plan (“Group A Claimants”). For each such year, eligible

Subscriber Class Members will be allocated a recognized loss of $50, the aggregate sum of which

will be allocated on a pro rata basis to all Group A Claimants, up to a maximum amount of $50

million. This simplified form is designed to provide an efficient means to distribute funds to the

large percentage of the Subscriber Class Members who received only small UCR reductions each

8

year, or who otherwise are unable to substantiate their claims going all the way back to 1994. In

addition, Subscriber Class Members may elect to provide information concerning their out-of-pocket

payments to their ONET providers, in which their recognized loss is 100% of the out-of-pocket

amount (adjusted for co-payments, co-insurance and deductibles). Subscriber Class Members may

also elect to provide information concerning adjusted bill amounts they did not pay, with the

percentage of their recognized losses based on certain additional criteria detailed in the Class Notice.

Provider Class Members are eligible to receive their recognized loss (also to be allocated on a

pr rata basis) based on certain criteria, including having received an assignment from a Subscriber

Class Member (thereby providing them standing to pursue claims for benefits on behalf of their

patients). Such assignments can be demonstrated by, inter alia, having been paid directly by

Defendants for providing ONET services to UHC insureds. Such Class Members will be entitled to

a higher percentage of their recognized losses if they sent an adjusted bill to their patients, or

otherwise took action to indicate that they sought payment for the unpaid portion of their bills,

demonstrating that their bills reflected their usual charges which they reasonably expected to be paid.

In addition, to assist both Subscriber and Provider Class Members, Defendants made

available to the Claims Administrator certain claims data, which will be provided to Settlement Class

Members upon request. Provider Class Members, who did not receive assignments or payment

directly from Defendants, will also be able to request information from the Claims Administrator on

whether a Subscriber Class Member who was a patient – and who owes the Provider Class Member

for services rendered – had made a claim from the Settlement Fund.

I. THE SETTLEMENT SHOULD BE APPROVED AS FAIR, REASONABLE AND ADEQUATE

A. The Standard for Court Approval of a Class Action Settlement

Settlement of a class action requires a court’s determination that it is “fair, adequate, and

9

reasonable, and not a product of collusion.” Joel A. v. Giuliani, 218 F.3d 132, 138 (2d Cir. 2000).

That determination, however, is a matter within the broad discretion of the district court. Cent.

States Southeast & Southwest Areas Health & Welfare Fund v. Merck-Medco Managed Care,

L.L.C., 504 F.3d 229, 246 (2d Cir. 2007). To determine whether a settlement is fair, a “district court

must look at both the settlement's terms and the negotiating process leading up to the settlement.”

Mba v. World Airways, Inc., 2010 U.S. App. LEXIS 5068, at *3 (2d Cir. Mar. 10, 2010); see also

D’Amato v. Deutsche Bank, 236 F.3d 78, 85 (2d Cir. 2001). There is a strong presumption of the

fairness of a settlement when it is “the product of arm’s-length negotiations conducted by capable

counsel, well-experienced in class action litigation.” In re EVCI Career Colleges Holding Corp. Sec.

Litig., 2007 U.S. Dist. LEXIS 57918, at *11 (S.D.N.Y. July 27, 2007) (citing In re Sumitomo Copper

Litig., 189 F.R.D. 274, 280 (S.D.N.Y. 1999)). Indeed, “[a]bsent fraud or collusion, the court should

be hesitant to substitute its judgment for that of the parties who negotiated it. In re Veeco

Instruments Secs. Litig., 2007 U.S. Dist. LEXIS 85629 (S.D.N.Y. Nov. 7, 2007); see also EVCI,

2007 U.S. Dist. LEXIS 57918, at *12.

In making a final determination of whether a settlement is fair, adequate and reasonable,

district courts in the Second Circuit apply what have come to be known as the Grinnell factors: (1)

the complexity, expense and likely duration of the litigation; (2) the reaction of the class to the

settlement; (3) the stage of the proceedings and the amount of discovery completed; (4) the risks of

establishing liability; (5) the risks of establishing damages; (6) the risks of maintaining the class

action through the trial; (7) the ability of the defendants to withstand a greater judgment; (8) the

range of reasonableness of the settlement fund in light of the best possible recovery; and (9) the

range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks

of litigation. See Detroit v. Grinnell Corp., 495 F.2d 448, 463 (2d Cir. 1974); Mba, 2010 U.S. App.

10

LEXIS 5068, at *4.

In applying the Grinnell factors, “not every factor must weigh in favor of the settlement, but

rather the court should consider the totality of these factors in light of the particular circumstances.”

In re Metlife Demutualization Litig., 2010 U.S. Dist. LEXIS 12413, at *74 (E.D.N.Y. Feb. 12, 2010)

(quoting In re Telik, Inc. Sec. Litig., 576 F. Supp. 2d 570, 575 (S.D.N.Y. 2008)). As the Second

Circuit has noted, “[t]he Court must eschew any rubber stamp approval in favor of an independent

evaluation, yet, at the same time, it must stop short of the detailed and thorough investigation that it

would undertake if it were actually trying the case.” Grinnell, 495 F.2d at 462. In this regard, courts

have consistently concluded that the function of a judge reviewing a settlement is not to rewrite the

settlement agreement reached by the parties or to try the case by resolving issues intentionally left

unresolved. See, e.g., Carson v. American Brands, Inc., 450 U.S. 79, 88 (1981).

As set forth below and in the Hufford Declaration, the Settlement should be granted final

approval, as it is an excellent result, is presumptively fair, and satisfies the Grinnell factors.

B. The Settlement is Presumptively Fair Because It Is the Product of Arm’s-Length Negotiations by Informed and Knowledgeable Counsel

There is a presumption of fairness for a settlement when it is the product of arm’s-length

negotiations conducted by experienced counsel who are fully familiar with all aspects of class action

litigation. Wal-Mart Stores, Inc. v. Visa U.S.A. Inc., 396 F.3d 96, 116 (2d Cir. 2005) (citing Manual

for Complex Litigation, Third, § 30.42 (1995)). Here, the Settlement was negotiated on behalf of the

Settling Plaintiffs by Lead Settlement Counsel, the Pomerantz Firm, one of the premier and oldest

class action law firms in the country. Defendants were similarly represented in the litigation,

including settlement negotiations, by top notch counsel, Weil, Gotshal and Manges, LLP, one of the

premier defense firms in America.

Pomerantz has been a leader in health care class actions over the past 15 years, successfully

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bringing cutting edge litigations on behalf of subscribers and providers against many of the nation’s

largest insurers. In an action against Health Net, Inc., for example, Pomerantz was co-lead counsel

in another major litigation involving the use of the Ingenix Database to set ONET reimbursement

levels. In approving the $250 million settlement in that action, Judge Hochberg found Class Counsel

to be “well-seasoned,” and having “demonstrated adequacy and tenacity during the protracted

proceedings” and “proven themselves capable litigators.” McCoy v. Health Net, Inc., 569 F. Supp.

2d 448, 458 (D.N.J. 2008). Judge Hochberg subsequently appointed Pomerantz to be the Chair of

Plaintiffs’ Executive Committee in a UCR-based multidistrict litigation pending against Aetna, Inc.,

noting that it had “similarly appointed Pomerantz to be Plaintiffs' spokesman to the Court in the

Health Net litigation because the Court found D. Brian Hufford, Esq. to be the attorney most capable

of presenting Plaintiffs' positions in a clear and concise manner.” In re Aetna UCR Litig., 2009 U.S.

Dist. LEXIS 66853 (D.N.J. July 31, 2009). Mr. Hufford has been the partner at Pomerantz

overseeing this litigation from its inception. See Hufford Decl., ¶ 1. Pomerantz is also serving as

co-lead counsel in similar UCR-based litigations against CIGNA and WellPoint, in addition to many

other cases it has or is in the process of prosecuting in the health care arena.

The case was only settled after years of intense litigation in which both sides conducted

extensive discovery that informed their knowledge of the strengths and weaknesses of each side, and

after numerous decisions reached by this Court that established the parameters of the many

complicated legal issues confronting the parties. See Hufford Decl. at ¶¶ 11, 160. In addition, the

settlement itself was only reached after vigorous negotiations over an extended period of time, with

the active participation of the OAG as well as the American Medical Association and the other

Medical Association Plaintiffs. Id., at ¶¶ 10, 13. The lengthy and contentious negotiations evidence

that the Settlement was the result of arm’s-length negotiations by well-informed counsel, which

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establishes a presumption that the Settlement is fair, adequate and reasonable.

C. A Review of the Grinnell Factors Confirms That the Settlement is Fair, Adequate, and Reasonable

1. Continued Litigation Would Be Long, Complex, and Expensive

Courts have consistently held that the expense and possible duration of litigation must be

considered in evaluating the reasonableness of a settlement. In re Gilat Satellite Networks, Ltd.,

2007 U.S. Dist. LEXIS 68964, at *31 (E.D.N.Y. Sept. 18, 2007); In re Sumitomo Copper Litig., 189

F.R.D. at 281. This first factor captures the probable costs, in both time and money, of continued

litigation, which here would be expensive and time-consuming. See Hufford Decl. at ¶¶ 154, 156.

The parties have spent nearly a decade litigating this case, and considerably more time and

money would have been required to prosecute it to its conclusion. To obtain a significant damages

award, Plaintiffs faced the prospect of continued documentary discovery and depositions, class and

merits expert reports and depositions, class certification and motions for summary judgment. Even

were the Action to survive summary judgment, after class certification, Plaintiffs would face

substantial burdens at trial. Requiring complex proof on the issues of the flaws of the Ingenix

database, liability of Defendants under ERISA, RICO and the antitrust laws, on the conflict of

interest inherent in the benefit determination process. on the extent to which Subscriber Class

Members would be required to prove out-of-pocket losses or Provider Class Members to prove

assignments, and on the submission of balance bills prior to recovery, and the determination of

whether exhaustion of administrative remedies would be required for all Class Members, the trial

would have expended substantial judicial resources, involved considerable attorney and expert time,

and required extensive testimony and documentary evidence.

Where a successful outcome for the Class was far from certain, these facts strongly support

approval of the Settlement. See Wal-Mart Stores, Inc. v. Visa U.S.A. Inc., 396 F.3d 96, 118 (2d Cir.

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2005) (finding the “complexity, expense and likely duration of the litigation” strongly favored

settlement, given that “Federal antitrust cases are complicated, lengthy, and bitterly fought”);

Slomovics v. All for a Dollar, Inc., 906 F. Supp. 146, 149 (E.D.N.Y. 1995) ("The potential for this

litigation to result in great expense and to continue for a long time suggest that settlement is in the

best interests of the Class."). Even were the Class to have recovered a larger judgment at trial, courts

recognize that the delay occasioned by the trial, post-trial, and appellate processes would greatly

reduce its value. See, e.g., In re Visa Check/MasterMoney Antitrust Litig., 297 F. Supp. 2d 503, 510

(E.D.N.Y. 2003) (approving settlement where action “would have taken many more years to finally

resolve, taking into account the time necessary to exhaust all avenues of review”). As the Court is

well aware, even very large judgments recovered after lengthy litigation and trial can be completely

lost on appeal or as a result of a post-trial judgment as a matter of law.5

Perhaps the most persuasive voice on the issues facing Plaintiffs in this action comes from

the Health Net court, which approved a settlement arising from a case involving many of the

identical Ingenix-related issues being tried here. As Judge Hochberg there held:

Prior to trial, the parties would, among other things, be required to further examine the Ingenix database and analyze claims data for millions of subscribers. This would undoubtedly involve numerous experts and further pretrial motions, and thousands more hours billed to this matter. Further, the likelihood of appeal from any decision on the merits counsels in favor of approving the Settlement. See, e.g., In re Ikon Office Solutions, Inc., Secs. Litig., 194 F.R.D. 166, 179 (E.D. Pa. 2000)

5 See, e.g., In re Westcap Enters., 230 F.3d 717, 719-20 (5th Cir. 2000) (reversing on appeal $51 million judgment); Robbins v. Koger Props., 116 F.3d 1441 (11th Cir. 1997) (reversing $81.3 million jury verdict for plaintiff after 7 years of litigation); Kurz v. Philadelphia Elec. Co., 96 F.3d 1544 (3d Cir. 1996) (in ERISA class action, Third Circuit reversed judgment for plaintiffs in bench trial and entered judgment for all defendants on all counts); Scottish Heritable Trust, PLC v. Peat Marwick Main & Co., 81 F.3d 606 (5th Cir. 1996) (reversing verdict for plaintiffs on negligent misrepresentation claim against defendant auditor and dismissing claim); Anixter v. Home-Stake Prod. Co., 77 F.3d 1215 (10th Cir. 1996) (overturning, on the basis of 1994 Supreme Court opinion, jury verdict rendered at trial in 1988 for case filed in 1973); Backman v. Polaroid Corp., 910 F.2d 10 (1st Cir. 1990) (multi-million dollar judgment for plaintiffs reversed on appeal after 11 years of litigation).

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("Finally, the extremely large sums of money at issue almost guarantee that any outcome, whether by summary judgment or trial, would be appealed. This factor thus weighs in favor of the proposed settlement."). Finally, "even if a trial resulted in a judgment for Plaintiffs, such judgment might not equal the amount of the Settlement, while Plaintiffs would have incurred additional expense and delay, as well as the risk of non-recovery based on a verdict for Defendants or reversal of a verdict for Plaintiffs on appeal. Therefore, this factor weighs in favor of approving the Settlement." In re Remeron Direct, 2005 U.S. Dist. LEXIS 27013, 2005 WL 3008808 [(D.N.J. Sept. 13, 2005)], at *5.

569 F. Supp. 2d at 460. This Court should reach a similar decision.

In granting preliminary approval of this action, after a lengthy and in-depth review, this

Court recognized the time and expense that would be required were the case to proceed in lieu of

settling, stating:

Pretrial discovery and motion practice could, realistically, take some two years or so, and a trial would no doubt be quite lengthy. A favorable result, for reasons some of which have been mentioned, is by no means assured, and the amount of recovery, in the event of success, could be quite small compared to the Deltas suggested. The cost, in fees and expenses, would obviously be enormous. All of the foregoing convinces the Court that the proposed settlement should be presented to the class, and the settlement is preliminarily approved.

2009 U.S. Dist. LEXIS 112634, at *29. The same analysis supports final approval as well. In sum,

the substantial and certain Settlement reached in this Action, when weighed against the significant

complexity, time, expense and inherent uncertainty of attempting to achieve a more favorable result

at trial, weighs “heavily in favor of the Settlement.” In re Indep. Energy Holdings PLC Sec. Litig.,

2003 U.S. Dist. LEXIS 17090, at *11 (S.D.N.Y. Sept. 26, 2003).6

6 See also In re Elan Sec. Litig., 385 F. Supp. 2d 363, 369 (S.D.N.Y. 2005) (the first Grinnell factor favored a settlement where “[t]he action involve[d] litigation of complex liability, accounting and damages issues” and “[s]ignificant time, effort, and expense would be incurred were the case to go forward, including, among other things, . . . extensive discovery . . . summary judgment motions, and ultimately a lengthy trial”); Strougo v. Bassini, 258 F. Supp. 2d 254, 258 (S.D.N.Y. 2003) (“‘[I]t is beyond cavil that continued litigation in this . . . securities class action would be complex, lengthy, and expensive, with no guarantee of recovery by the class members’”)(citation omitted); In re Gilat Satellite Networks, Ltd., 2007 U.S. Dist. LEXIS 68964, at *31 (same).

15

2. Reaction of the Class to the Settlement

Pursuant to the Order Preliminarily Approving the Settlement, the Claims Administrator,

Berdon Claims Administration LLC, has caused the Notice of Pendency and Settlement of Class

Action (the “Notice”) to be mailed to over 14.6 million potential Class Members. See Affidavit of

Michael Rosenbaum re: Mailing Publication and Requests for Exclusion (“Rosenbaum Aff.,”

submitted herewith), ¶ 3. Additionally, the Summary Notice of Pendency and Settlement of Class

Action (the “Summary Notice”) was published in a wide spectrum of national, regional and local

newspapers across the country, ensuring widespread knowledge of the settlement. Id. ¶ 6. There

also was substantial publicity surrounding the Settlement, both because of the OAG entering into its

agreement to resolve its investigation by creating the FAIR Database to replace Ingenix as the basis

for making UCR determinations, which was discussed by the press along with the class action

Settlement, and in light of the objections initially raised by the Wilentz firm leading to the Court’s

exhaustive preliminary approval review. Thus, there can be no doubt that Class Members were

given a full opportunity to learn about and respond as appropriate to the Settlement.

The Notice informed the Class Members that they had until July 27, 2010 to request

exclusion from the Settlement class and to object to the Settlement. As of that date, 1,963 timely opt

outs had been received, along with 18 separate objections. 7 Of that total, eight objectors focused

primarily on the attorneys’ fees and did not challenge the substance of the Settlement.8 Given the

7 A separate memorandum of law is being filed herewith to address the issues raised by the various objectors..

8 One of the objections, which was filed purportedly on behalf of 31 Provider Class Members, solely raised concerns over the requirement that providers had to submit proof of assignments in order to be entitled to submit claims. Once Pomerantz informed them that the assignment requirement could be satisfied by showing that Defendants had paid the providers directly or that they had filed claims with Defendants in which they had indicated that they had assignments on file, these objectors indicated that they no longer were pursuing the objection. Similarly, Rochester Medical Center had filed a conditional objection solely because they had not had an opportunity to receive their claims data from Berdon. That data has now been provided.

16

size of the class, and the magnitude of the notice and publicity concerning the Settlement, these

numbers reflect a remarkable satisfaction over what has been accomplished. In the Health Net

litigation, for example, approximately 2.5 million notices were disseminated to current and former

Health Net subscribers, less than 18 percent of the number of notices sent out here, and yet the total

number of opts out (including both to class certification and the settlement), totaled more than 1,700

– almost the same as what we have received – and nine objections, only half of the total in this case.

569 F. Supp. 2d at 459. According to the court in that action, those small numbers clearly supported

the settlement:

Class Counsel has received 601 opt-outs in addition to the 1,107 timely opt outs received following certification and mailing of notice to the McCoy and Wachtel classes, representing a combined total of approximately 0.066% of all three classes. Class Counsel received nine objections. This small percentage of opt-outs and objections qualifies for the presumption of fairness under In re Warfarin Sodium. Cf. First State Orthopaedics v. Concentra, Inc., 534 F. Supp. 2d 500, 516 (E.D. Pa. 2007) (finding presumption of fairness met when "only 0.16% of the class opted out or objected to the settlement"); In re Remeron End-Payor Antitrust Litig., No. 02-2007, 2005 U.S. Dist. LEXIS 27011, 2005 WL 2230314, at *16 (D.N.J. Sept. 13, 2005) (finding that 70 opt-outs and 8 objections from class of 850,000 qualified for presumption of fairness). Each of the factors set forth in In re Warfarin Sodium have been met and the Court will therefore extend an initial presumption of fairness to this Settlement Agreement.

The same conclusion should be reached by this Court. See also Wal-Mart, 396 F.3d at 118 (“On the

whole, the class appears to be overwhelmingly in favor of the Settlement. Only eighteen class

members out of five million objected to the Settlement. . . . ‘If only a small number of objections are

received, that fact can be viewed as indicative of the adequacy of the settlement.’”) (quoting 4

In addition, counsel for certain facilities raised a conditional objection while they sought clarification on the impact of the Settlement on facilities’ claims. After a hearing was held with the Court on July 15, 2010, after which a clarification was negotiated and submitted to the Court. The Court approved the clarification by order dated July 26, 2010, and it was posted on the Settlement website at uniteducrsettlement.com. The objectors have since issued a stipulation withdrawing their objection.

17

ALBA CONTE & HERBERT B. NEWBERG, NEWBERG ON CLASS ACTIONS, § 11.41, at 108

(4th ed. 2002)); D’Amato v. Deutsche Bank, 236 F.3d 78, 87 (2d Cir. 2001) (holding that the district

court properly concluded that 72 exclusions and 18 objections from a class of almost 28,000

“weighed in favor of settlement”); Wright v. Stern, 2008 U.S. Dist. LEXIS 39473, *21-22 (S.D.N.Y.

May 15, 2008) (after noting that of 3,500 class members, only 13 filed objections and three opted

out, the court held that “[t]he fact that the vast majority of class members neither objected nor opted

out is a strong indication that the proposed settlement is fair, reasonable, and adequate.”).

3. Stage of the Proceedings and Amount of Discovery Completed

This factor “relates to whether the plaintiffs had sufficient information on the merits of the

case to enter into a settlement.” Parker v. Time Warner Entm’t Co., L.P., 631 F. Supp. 2d 242, 259

(E.D.N.Y. 2009) (citation omitted). Extensive discovery ensures that the parties have had access to

sufficient material to evaluate their case and to assess the adequacy of the settlement proposal in

light of the strengths and weaknesses of their position. Id.

Here, the Settlement was reached after nearly ten years of investigations and rigorous

discovery. While full merits discovery had yet to begin in full, despite the age of the case, Class

Counsel had obtained and carefully reviewed hundreds of thousands of pages of documents

produced by Defendants. Moreover, after the Court had authorized “Stage One discovery,” the

parties engaged in a lengthy process involving substantial additional document discovery, requests

for admission and interrogatories, and many depositions, as well as full briefing on summary

judgment issues addressing a number of the critical issues in the case. Hufford Decl. ¶¶ 10, 64. 78,

84. Of additional importance, Class Counsel has also gained substantial understanding of the

underlying issues involving Ingenix through its work as co-lead counsel in the Health Net litigation,

in which it took depositions of key personnel at Ingenix, hired experts to evaluate the Ingenix

Database and negotiated a substantial settlement. Thus, this factor weighs in favor of the proposed

18

Settlement. As reflected above and in the Hufford Declaration, Class Counsel without doubt had a

clear picture of the strengths and weaknesses of their case, understood the legal and factual defenses

that Defendants likely would raise at trial, and were able to negotiate the terms of the Settlement on a

well-informed basis. See Hufford Decl. at ¶¶ 9, 11, 18. Accordingly, the stage of the proceedings

and discovery completed weigh strongly in favor of approving the Settlement.

4. Risks of Establishing Liability

In assessing the fairness, reasonableness and adequacy of the Settlement, the Court must

balance the risks of establishing liability and damages against the benefits afforded to the members

of the Class, and the immediacy and certainty of a substantial recovery against the risks of

continuing litigation. Grinnell, 495 F.2d at 463. Accordingly, courts should approve settlements

where, as here, “plaintiffs would have faced significant legal and factual obstacles to proving their

case.” In re Global Crossing Sec. & ERISA Litig., 225 F.R.D. 436, 459 (S.D.N.Y. 2004); see also

In re Gilat Satellite Networks, 2007 U.S. Dist. LEXIS 68964, at *33.

Liability in this case has been hotly contested throughout its long history. Defendants

vigorously opposed each of the Amended Complaints and secured successful decisions limiting or

raising substantial questions concerning Plaintiffs’ claims in a number of areas. In the Health Net

action, the court summarized the risks facing plaintiffs there, which are similar to those here, as

follows:

[T]hese cases present many difficult questions of law, the presence of which create a risk that Plaintiffs would not be able to establish liability at trial or on summary judgment. For example, there are genuine issues as to the liability of the parent company, Health Net, Inc., the availability of injunctive relief under ERISA, and the appropriate standard of review to be applied to Health Net's ONET determinations. . . . Further, with regard to the Ingenix database, Plaintiffs' arguments rely on expert testimony, which has inherent risks. See, e.g., In re Prudential Ins. Co. of Am. Sales Practices Litig., 962 F. Supp. 450, 539 (D.N.J. 1997) ("another potential risk may be plaintiffs' necessary reliance on expert testimony to establish liability and damages; a jury's acceptance of expert testimony is far from certain, regardless of the expert's credentials."); see also In re Vicuron Pharms., Inc. Secs. Litig., 512 F. Supp. 2d 279,

19

285 (E.D. Pa. 2007) ("Compelled to choose between experts, it is far from certain that a jury would have found for the class, much less awarded it damages on the order of the settlement agreement.").

569 F. Supp. 2d at 461-62. Plaintiffs in this case face nearly identical risks, in addition to the fact

that – unlike in Health Net – a class has yet to be certified.

This case is also unique because of the Court’s exhaustive preliminary approval process,

whereby it engaged in extensive analysis of the risks of the litigation that could justify the proposed

settlement. Applying the Grinnell factors, which normally apply to final rather than preliminary

approval, the Court noted that “‘[t]he most important factor’” in assessing a settlement “‘is the

strength of the case for plaintiffs on the merits, balanced against the amount offered in settlement.’”

2009 U.S. Dist. LEXIS 112634, at *25-26 (quoting Grinnell, 495 F.2d at 455). The Court then

noticed the “considerable problems facing plaintiffs should they proceed to trial” instead of settling,

which included the following:

In the first place, they will have to prove that the Ingenix databases are in fact, flawed, as alleged. That was not established in McCoy v. Health Net, Inc., 569 F. Supp. 2d 448 (D. N.J. 2008), as this Court has previously pointed out, see Am. Med. Ass'n v. United Healthcare Corp., No. 00 Civ. 2800, 2009 U.S. Dist. LEXIS 45610, 2009 WL 1437819, at *5 (S.D.N.Y. May 19, 2009), and the Court has not been made aware of any decision which has established that fact. The challenged UCR data will vary geographically and, no doubt, with time as well. The effort will obviously be a quite difficult and time consuming one.

As noted both by this Court and by Judge Hochberg in Health Net, if this case were to be

tried, Plaintiffs could not assume the invalidity of the Ingenix Database, but it would be vigorously

contested by Defendants, making it a “difficult and time consuming” process. It would become a

classic “battle of the experts” as Plaintiffs would endeavor to prove that that Database was inherently

flawed and inadequate to serve as a basis for setting UCR rates, while Defendants would use their

experts to argue to the contrary. Far from being limited to theoretical challenges to the Database,

20

this dispute would inevitably required an in-depth evaluation of the millions of claim lines at issue in

order to assess whether or not the Database actually understates proper UCR levels.

In addition, Plaintiffs would need to confront Defendants’ argument that, even if the

Database were flawed, it was not unreasonable to use it since it was designed in good faith and

offered the only viable alternative for making UCR determinations, thereby satisfying the deferential

arbitrary and capricious standard under ERISA. See, e.g., Diagnostic Medical Assoc. MD, P.C. v.

New York City District Council of Carpenters Welfare Fund, 2007 U.S. App. LEXIS 9933 (2d Cir.

April 30, 2007) (“When an ERISA benefit plan vests the administrator with broad discretionary

authority to determine eligibility, we review its decisions ‘under the arbitrary and capricious

standard. Under the arbitrary and capricious standard, the scope of judicial review is narrow.’ … A

court may overturn a plan administrator's decision to deny benefits only if the decision was without

reason, unsupported by substantial evidence or erroneous as a matter of law.” (internal citations and

quotation marks omitted)); Celardo v. Gny Auto. Dealers Health & Welfare Trust, 318 F.3d 142, 145

(2d Cir. 2003); Pagan v. NYNEX Pension Plan, 52 F.3d 438, 442 (2d Cir. 1995). While Plaintiffs

would argue that the flaws in the Database made it arbitrary and capricious to use, or would assert

that a more strict standard should apply because of conflicts of interest inherent in Defendants’ UCR

determinations or the fact that Defendants had no discretion to violate plan terms, there is no

guarantee of success.

Other difficulties in proving establishing liability also exist with regard to other issues, as this

Court further recognized, stating:

There are real issues concerning the exhaustion of administrative remedies, a general requirement in cases seeking recovery of ERISA benefits. Eastman Kodak Co. v. STWB, Inc., 452 F.3d 215, 219 (2d Cir. 2006). Under this rule, this Court, in 2007, granted summary judgment in favor of defendants on this issue, on a large number of claims. Am. Med. Ass'n v. United Healthcare Corp., No. 00 Civ. 2800,

21

2007 U.S. Dist. LEXIS 44196, 2007 WL 1771498, at *4-13 (S.D.N.Y. June 18, 2007). Exhaustion issues might also create an issue as to class certification, if raised.

There is also an issue as to whether claimants who have not suffered out-of-

pocket losses as have standing to seek recovery. In 2007, the Court granted summary judgment, on standing grounds, in favor of defendants dismissing the action against several plaintiffs. 2007 U.S. Dist. LEXIS 44196, [WL] at *16-18. (Again, out-of-pocket standing issues might also create an issue as to class certification, if raised.)

2009 U.S. Dist. LEXIS 112634, at *26-27. This analysis highlights why the settlement easily

satisfies this Grinnell factor.

5. Risks of Establishing Damages

Just as is true for proving liability, an unpredictable “battle of the experts” will similarly arise

over addressing the existence and amount of damages. In re Rent-Way Secs. Litig., 305 F. Supp. 2d

491, 508 (W.D. Pa. 2003).9 At a minimum, it will be a complicated and highly contentious dispute

with respect to which there is no guarantee of success. See Maley v. Del Global Techs. Corp., 186 F.

Supp. 2d 358, 365 (S.D.N.Y. 2002) (“The determination of damages . . . is a complicated and

uncertain process, typically involving conflicting expert opinions.”) (citing In re American Bank

Note Holographics, Inc. Sec. Litig., 127 F. Supp. 2d 418, 427 (S.D.N.Y. 2001)). The fact finder,

whether the Court under ERISA or a jury for the RICO or antitrust claims, “could find that damages

were only a fraction of the amount that plaintiffs contend,” or “could be swayed by experts for the

Defendants, who would minimize the amount of Plaintiffs' losses.” Id. See In re Warner

Communications Secs. Litig., 618 F. Supp. 735, 744-45 (S.D.N.Y. 1985), aff’d, 798 F.2d 35 (2d Cir.

9 See also Id., 305 F. Supp. 2d at 506 (“[P]roof of the Class’s damages is a complex matter for which expert testimony would almost certainly be required. Moreover, there would likely be substantial disagreement at trial relative to the actual value of [defendant’s] stock at each point in time that it was purchased during the Class Period. A jury would therefore be faced with competing expert opinions representing very different damage estimates, thus adding further uncertainty as to how much money - if any - the Class might recover at trial.”).

22

1986) (“it is virtually impossible to predict with any certainty which testimony would be credited,

and ultimately, which damages would be found to have been caused by actionable, rather than the

myriad nonactionable factors such as general market conditions”).

The parties have demonstrated dramatically diverse interpretations of what damages might be

able to be awarded, or how they would be calculated. Plaintiffs contend that the breach of contract

resulting from the use of a flawed and inadequate database to make UCR determinations (whether

under ERISA or state law) in and of itself creates the liability by compelling Defendants to

recalculate benefits based on billed charges. Defendants, on the other hand, argue that even if the

Court were to reject the Ingenix Database (which it does not concede should be done), damages

should be measured by the difference between the allowed amount based on the Ingenix Database

and a new, valid UCR Database (perhaps the FAIR Database, which is likely to be up and running

by the time this case went to trial). Further, Defendants claim that any “damages” must be reduced

to the extent the Subscriber Plaintiffs cannot prove that they paid their ONET provider out-of-

pocket, or that the Provider Plaintiffs cannot prove that they had valid assignments and submitted

balance bills or otherwise demonstrated that they intended to pursue full payment of their benefits.

As the court in Health Net concluded, the risks underlying these issues supported settlement:

Finally, if Plaintiffs established liability, the extent of damages would flow from that determination. The parties have insisted on vastly different methodologies for determining damages. In short, determining damages "is a complicated and uncertain process" that counsels in favor of settlement. See In re Remeron Direct, 2005 U.S. Dist. LEXIS 27013, 2005 WL 3008808, at *8.

569 F. Supp. 2d at 460.

This Court has already reached a similar decision in granting preliminary approval when it

noted that the serious questions remained over how damages should be calculated:

Opponents argue that the contractual arrangement between UHC and its subscribers requires that, if the UCR determinations are shown to be flawed, UHC is

23

required to pay the full billed charges. (Non-Settling Pls. Supp. Brief, at 32-40.) Thus, they say, "[a]ssuming an invalid Ingenix database and subject to co-insurance and deductibles, the Delta measures the total amount of benefits that should have been paid under the terms of members' plans." (Id. at 33.) This is not the time or place to rule on any damage theory, and the Court does not do so, but it must note that opponents' stated theory is very far from self-evidently correct. The more intuitively correct theory would reimburse claimants in the amount in which they were actually damaged, i.e., the amount by which their UCR payment fell short of what may be demonstrated to be a properly calculated UCR.

2009 U.S. Dist. LEXIS 112634, at *28.

The so-called “Delta” discussed by the Court in its preliminary approval decision refers to

the difference between the aggregate billed amount of all the claims submitted by Class Members to

Defendants for processing and the allowed amount Defendants authorized, based, inter alia, on the

use of the Ingenix Database to set UCR. At the time Pomerantz entered into the Settlement

Agreement with UHC, it estimated that the total Delta through the end of 2008 was approximately

$4.12 billion. Hufford Decl., ¶ 132. The validity of this number was verified by the preliminary

approval process, with the Court finding, after the completion of the work it had authorized for

evaluating the Delta, that the number up through the end of 2009 was approximately $4.76 billion.

As reflected by the Court’s decision, however, there is substantial doubt over whether the Delta can

even be considered a valid damage measure. Instead, the Court could well determine that the

appropriate measure of damages is the difference between what was paid based on the application of

the Ingenix Database and what would have been paid if a proper measure of UCR was used. See

Hufford Decl., ¶ 154. Calculating such a damage measure will itself be a complicated process,

requiring the use of competing experts.

Even assuming that the Delta is a proper measure of the maximum damages that could

potentially be obtained in the lawsuit, that does not indicate that the $350 million is an insufficient

amount for settlement purposes. There are numerous factors that would in all likelihood lead to a

24

material reduction in damages well below the Delta, even if Plaintiffs succeed in demonstrating that

Ingenix cannot serve as a valid basis for making UCR determinations. See Hufford Decl., ¶¶ 137,

154, Exhibit A (damage chart reflecting certain risks relating to damage award).

First, the aggregate Delta does not take into account the co-insurance and deductibles for

which plan members are legally responsible, not Defendants. This amount conservatively could

account for a 20% reduction for the Class as a whole.

Second, while the UHC Delta includes both fully insured and self funded plans, it is

questionable whether Plaintiffs would be likely to obtain a recovery from Defendants in self-funded

plans, since the employers, not Defendants, would be the designated plan administrators for such

plans. The Court has already granted summary judgment in such situations, thereby dismissing

claims for benefits against UHC with respect to health care plans which were self-funded by the

employers with respect to a number of the named Plaintiffs. See AMA v. United Healthcare, 2007

U.S. Dist. LEXIS 44196, *84 (S.D.N.Y. June 16, 2007) (“In light of the undisputed fact that the

American Airlines, Osram Sylvania and Chase Manhattan Plans all have designated administrators

other than United Defendants, Defendants’ motion for summary judgment on Plaintiffs’ claims

against them for monetary benefits under ERISA §502(a)(1)(B) is GRANTED in relation to those

three plans.”). Thus, the actual Delta upon which damages could be based could be reduced by as

much as 60%, the amount of UHC’s business in self-funded plans.10

Third, UHC has argued that any monetary recovery should be limited to those subscribers

10 While the Court upheld the breach of fiduciary duty claims against UHC with regard to the self-funded plans, they will not provide a means to obtain monetary damages. See, e.g., Krauss v. Oxford Health Plans, Inc., 517 F.3d 614, 630 (2d Cir. 2008) (Plaintiffs “cannot recover money damages through their claim for breach of fiduciary duty. In order to state a claim under ERISA section 502(a)(3), ‘the type of relief a plaintiff requests must . . . be “equitable.”’ Claims for money damages are therefore not cognizable under section 502(a)(3).”) (citations omitted).

25

who paid their ONET providers out-of-pocket for the unpaid portions of their bills, or to providers

who, at a minimum, submitted balance bills to their patients, thereby demonstrating that they

intended to seek full payment for their bills. While Plaintiffs would oppose such arguments, this

Court’s prior rulings appear to support them. 2007 U.S. Dist. LEXIS 44196, at *59 n.19 (rejecting

Plaintiffs’ argument that “the beneficiaries’ contracts do not permit [UHC] to withhold rightfully due

reimbursement to beneficiaries (or their assignees) pending a demonstration of out-of-pocket loss,”

holding that “[t]his argument is inapposite to the question of standing under Article III, which is

whether any alleged violation of those contracts caused Plaintiffs ‘actual or threatened injury’”); id.

at 60-61 (granting summary judgment to dismiss various “exemplar” claims in which providers had

affirmatively waived unpaid bills, stating: “Plaintiffs argue that both deprivation of contract

expectations and harm to the relationship between patients and out-of-network providers constitute

injuries-in-fact for purposes of showing standing. To satisfy the standing requirement, however, a

plaintiff must show injury-in-fact that is ‘distinct and palpable.’”) (citation omitted). See also Prelim.

Appr. Op., at *27 (“There is also an issue as to whether claimants who have not suffered out-of-

pocket losses as have standing to seek recovery.”). If applied here, the ultimate recoverable damages

will be materially reduced, and certainly only a small percentage of the Delta.11

11 Based on claims history from the Health Net settlement, it is reasonable to estimate that the percentage of class members who can demonstrate out-of-pocket payments will not exceed 55% of the total claims. In Health Net, submitted claims totaled $290 million, of which $225 million were for Group A claimants, which required no showing of being out-of-pocket or being balance billed by providers. See Affidavit of Michael Rosenbaum (“Rosenbaum Aff.”), ¶ 4, attached as Exhibit B to the Grossman Declaration. Of the remaining $65 million in Group B and C claims, 55% were for out-of-pocket claims (Group B) and 45% were for amounts still owed to providers who were pursuing the subscribers for payment (Group C). Because anyone who could show out-of-pocket losses in the Health Net settlement would have been entitled to participate in the $40 million claims made fund, as well as be given a priority in the $160 million non-reversionary fund, there was an incentive for class members who could make a showing of out-of-pocket payments to file Group B claims. The fact that only 12% of claimants actually filed a Group B claim ($36 million out of $290 million total claims) suggests that the percentage of out-of-pocket claimants may be well lower than the 55% estimate used for this analysis.

26

Fourth, as discussed above, the Court has already ruled against Plaintiffs on the issue of

exhaustion, finding that futility was not demonstrated and therefore dismissing all unexhausted

claims. Prelim. App. Opin., at *27 (“[t]here are real issues concerning the exhaustion of

administrative remedies”). As a result, there exists a substantial possibility that the Court would

only allow Class Members to recover damages if they can show that they had exhausted their

administrative remedies. This will only be a very small fraction of the Class, given the small

percentage of subscribers or providers who actually exhaust their appeals, a general requirement in

cases seeking recovery of ERISA benefits.

Fifth, even if Plaintiffs succeed on the merits, based on their challenge to Defendants’

reliance on the Ingenix Database, the Court may not award damages at all. Instead, it could

determine it appropriate to remand the many UCR determinations back to the plan administrator for

a recalculation of benefits (i.e., to give Defendants an opportunity to issue a proper benefit

determination). UHC had moved for a remand of the UCR claims back “to the relevant plan

administrators for reconsideration” in its motion to dismiss the Second Amended Complaint, but the

Court found it was not timely, since “there has not yet been a review of any of the benefits decisions

at issue.” AMA, 2002 U.S. Dist. LEXIS 20309, at *21. At the same time, it strongly suggested that a

remand could be the proper remedy at an appropriate time, stating that “[a] remand is the proper step

to take ‘if upon review a district court concludes that the [trustee's or administrator's] decision was

arbitrary and capricious ….’” Id. (quoting Miller v. United Welfare Fund, 72 F.3d 1066, 1071 (2d

Cir. 1995)). See also Prelim. App. Op., at *28-29 (“Nor is it even clear that a jury, or the Court, for

that matter, would determine the amount to be paid to successful claimants in light of the case law

regarding remand in the case of wrongful denial or reduction of ERISA plan benefits.”). Were such a

remand to occur at some point in the future, it is likely that the FAIR Database will be up and

27

running, thereby providing Defendants with an efficient means to recalculate the benefits, with the

damages thereby representing the difference between the UCR amounts as set forth in the FAIR

Database and that provided under Ingenix (presumably with some sort of adjustment for time). The

aggregate amount of damages that would result from such a process is entirely speculative, but

clearly would be some fraction of the Delta.

Given the uncertainty of establishing damages and the right to cover them, as well as the cost

and resulting battle of the experts that would surely occur, this factor weighs strongly in favor of the

Settlement.

6. Risks of Maintaining the Class Action Through Trial

At the time the Settling Parties entered into the Settlement Agreement, a motion for class

certification had yet to be filed.12 Plaintiffs believe that they will be able to satisfy the requirements

under Fed. R. Civ. P. 23, and that the Court would have certified the proposed Class. Indeed, the

Court has done just that for settlement purposes, for which it must find that all the requirements of

Rule 23 have been satisfied (except manageability), concluding “that all of the requirements of Fed.

R. Civ. P. 23(a) and 23(b) (3) have been met,” and thereby certifying the settlement class. 2009 U.S.

Dist. LEXIS 112634, at *32.

At the same time, were the case not settled and the case to proceed, Defendants would

undoubtedly have raised a number of issues in opposition to the motion for class certification which

would likely have been raised anew on Defendants’ motion for summary judgment and at trial.

Further, had this Court certified the Class, they would have then petitioned for an interlocutory

appeal under Rule 23(f) and further appealed upon a finding against them on the merits. See Clark v.

12 Plaintiffs had filed a motion for class certification with respect to the Empire Plan, but the Court stayed that motion until the completion of merits discovery. Hufford Decl., ¶ 60. That remains far off.

28

Ecolab Inc., 2010 U.S. Dist. LEXIS 47036, at *22-23 (S.D.N.Y. May 11, 2010) (“The risk of

maintaining class status throughout trial also weighs in favor of final approval. A contested class

certification motion would likely require extensive discovery and briefing. If the Court granted a

contested class certification motion, [the defendant] could seek to file a Federal Rule of Civil

Procedure 23(f) appeal and/or move to decertify, which would require additional rounds of briefing.

Settlement eliminates the risk, expense, and delay inherent in this process. The fifth Grinnell factor

weighs in favor of final approval.”). Thus, there are no guarantees concerning whether Plaintiffs

could sustain a certified class until the end of the litigation. In its preliminary approval decision, for

example, the Court noted that “[t]here are real issues concerning the exhaustion of administrative

remedies, a general requirement in cases seeking recovery of ERISA benefits,” adding that

“[e]xhaustion issues might also create an issue as to class certification, if raised.” Id. at 27.

Similarly, the Court noted that “[t]here is also an issue as to whether claimants who have not

suffered out-of-pocket losses as have standing to seek recovery,” pointing that that, “[a]gain, out-of-

pocket standing issues might also create an issue as to class certification, if raised.” Id.

Plaintiffs are confident that these issues would not have defeated class certification were

Defendants to have asserted them during the course of the litigation. As the Court held, “the

common issues relating to the Ingenix databases plainly predominate over any individual issues, and

a class action is equally plainly the superior method of pursuing these millions of small claims.” Id.

at *32. To the extent exhaustion or proof of out-of-pocket losses were found to preclude a recovery,

that could be handled at the damages stage after a finding that the underlying adverse benefits

determinations were flawed for all class members due to Defendants’ reliance on the Ingenix

Database. Nevertheless, these are issues that cannot be ignored, and which highlight the risks

confronting Plaintiffs. Moreover, a significant advantage offered by the Settlement is that

29

Defendants have effectively waived these defenses against Plaintiffs’ claims by agreeing to pay $350

million to resolve the litigation, thereby eliminating a substantial risk Class Members would

otherwise face. See Paese v. Hartford Life & Accident Ins. Co., 449 F.3d 435, 446 (2d Cir. 2006)

(after holding “that a failure to exhaust ERISA administrative remedies is not jurisdictional, but is an

affirmative defense,” the court “deem[ed] it waived” by the party seeking to assert it).

Plaintiffs are also mindful that class certification may always be reviewed or modified before

final judgment, and that Fed. R. Civ. P. 23(c) authorizes the Court to decertify at any time:

The Court’s decision to certify this case as a class action by no means ensured that all procedural difficulties were overcome. Indeed, the Court recognized that its class certification order was subject to alteration or amendment before the decision on the merits. “To paraphrase Benjamin Franklin, plaintiffs now have their class action, the question is can they keep it.”

In re Domestic Air Transp. Antitrust Litig., 148 F.R.D. 297, 317 (N.D. Ga. 1993) (citations and

quotation marks omitted); see also Eggleston v. Chicago Journeymen Plumbers’ Local Union No.

130, 657 F.2d 890, 896 (7th Cir. 1981) (“a favorable class determination by the court is not cast in

stone”).

Given the inherent risk of failing to maintain certification through trial, this Grinnell factor

weighs in favor of settlement approval.

7. Ability of the Defendants to Withstand a Greater Judgment

Plaintiffs do not contend that Defendants are unable to withstand a greater judgment. The

key issue revolves instead around whether Plaintiffs could achieve a greater judgment after trial, and

what risks confront them in their effort to do so. Even if Defendants could potentially pay more, that

does not present a valid justification for rejecting the settlement, as held in Health Net:

The Court cannot say with certainty to what extent Health Net could afford a greater settlement amount. 6 Even assuming that Health Net could, however, that is no basis for rejecting the instant Settlement. As this Court has noted, "many settlements have been approved where a settling defendant has had the ability to pay greater amounts." In re Remeron Direct, 2005 U.S. Dist. LEXIS 27013, 2005 WL

30

3008808, at *9 (citing In re Warfarin Sodium, 391 F.3d at 538 ("[T]he fact that DuPont could afford to pay more does not mean that it is obligated to pay any more than what the . . . class members are entitled to under the theories of liability that existed at the time the settlement was reached.")); Oh v. AT & T Corp., 225 F.R.D. 142, 150-51 (D.N.J. 2004); In re Linerboard Antitrust Litig., 321 F. Supp. 2d 619, 632 (E.D. Pa. 2004); Erie County Retirees Assoc. v. County of Erie, 192 F. Supp. 2d 369, 376 (W.D. Pa. 2002); Lazy Oil Co. v. Witco Corp., 95 F. Supp. 2d 290, 318 (W.D. Pa. 1997). This factor neither favors nor disfavors the Settlement.

569 F. Supp. 2d at 462-63. See also Hertzberg v. Asia Pulp & Paper Co., 2006 U.S. App. LEXIS

23648, *6 (2d Cir. Sept. 13, 2006) (in affirming district court’s decision granting final settlement

approval, notes that district court had “determined that ‘the ability of [the defendant] to withstand a

greater judgment’ was irrelevant because plaintiffs were unlikely to recovery any of whatever larger

award of damages might be achieved by further litigation”); Clark v. Ecolab Inc., 2010 U.S. Dist.

LEXIS 47036, *23 (“Although [defendant’s] ability to withstand a greater judgment is not currently

at issue, this factor is not determinative. See Frank v. Eastman Kodak Co., 228 F.R.D. 174, 186

(W.D.N.Y. 2005) (‘[D]efendant['s] ability to withstand a greater judgment, standing alone, does not

suggest that the settlement is unfair.’) (quoting In re Austrian & German Bank Holocaust Litig., 80

F. Supp. 2d 164, 178 n.9 (S.D.N.Y. 2000)). Thus, this factor does not weigh against granting

approval of the Settlement.

8 and 9. The Range of Reasonableness of the Settlement

The last two factors considered under Grinnell relate to the “range of reasonableness” of the

Settlement Fund in light of “the best possible recovery” and “the attendant risks of litigation.” A

settlement that is within a range “which recognizes the uncertainties of law and fact in any particular

case and the concomitant risks and costs necessarily inherent in taking any litigation to completion,”

will not be reversed on appeal. Wal-Mart Stores, 396 F.3d at 119. Here, this recovery is well within

such a reasonable range, as demonstrated above with regard to the risks of proving both liability and

damages.

31

During the preliminary approval stage, this Court carefully evaluated the potential damages

and the extent to which the $350 million Settlement obtained by Class Counsel fell within a

reasonable range for approval. In doing so, it considered the Delta of approximately $4.76 billion,

which, the Court did not find to be a reasonable estimate of actual damages. As discussed in detail

above, there is no reason to believe that the Delta even serves as a measure of damages and, in any

event, there are many factors that indicate that any recoverable damages would be far less than the

Delta. When taking into account all of the various factors that will arise during the litigation, subject

to the law of the case as reflected in the Court’s numerous decisions, the Court properly recognized

this fact, particularly if, as the Court rulings appear to be heading, only those Class Members who

exhausted their administrative remedies would be entitled to recover, as well as possibly those who

could prove out-of-pocket payments or balance bills. The result would be damages that would be a

fraction of the difference between billed and allowed charges. As the Court concluded:

Pretrial discovery and motion practice could, realistically, take some two years or so, and a trial would no doubt be quite lengthy. A favorable result, for reasons some of which have been mentioned, is by no means assured, and the amount of recovery, in the event of success, could be quite small compared to the Deltas suggested. The cost, in fees and expenses, would obviously be enormous. All of the foregoing convinces the Court that the proposed settlement should be presented to the class, and the settlement is preliminarily approved.

2009 U.S. Dist. LEXIS 112634, at *29 (emphasis added). For the same reason, the “range of

reasonableness” requirement has been satisfied here, and final approval is appropriate.

Of course, even if a Delta worth billions of dollars were deemed to be part of an actual range

of potential damages, that does not mean that the Settlement should not be approved. It is well-

settled in the Second Circuit that, “[t]he fact that a proposed settlement may only amount to a

fraction of the potential recovery does not, in and of itself, mean that the proposed settlement is

32

grossly inadequate and should be disapproved.” Grinnell, 495 F.2d at 455.13 Class Counsel agreed

to the proposed Settlement precisely because of the substantial risks of proving liability and

damages. See Hufford Decl., ¶ 155. The $350 million that has been obtained satisfies the

requirements for approval regardless of the potential damages, when considering those risks, as

demonstrated when reviewing other high profile health care litigations that have settled for amounts

representing only a small percentage of the estimated damages. Id.; Exhibit B (comparing results of

this Settlement to those in other health care settlements). These settlements reflect the many risks

that any such case faces before damages can be awarded. Accordingly, however one measures the

reasonableness of a recovery, this Settlement is well within the range necessary for approval.

II. THE PLAN OF ALLOCATION IS FAIR, ADEQUATE AND REASONABLE AND SHOULD BE APPROVED “‘As a general rule, the adequacy of an allocation plan turns on . . . whether the proposed

apportionment is fair and reasonable’ under the particular circumstances of the case.” In re Visa

Check, 297 F. Supp. 2d at 518-19 (citation omitted). “An allocation formula need only have a

reasonable, rational basis, particularly if recommended by ‘experienced and competent’ class

counsel.” In re American Banknote Holographics, 127 F. Supp. 2d 418, 429-30 (S.D.N.Y. 2001).

In making this determination, courts give weight to the opinion of qualified counsel. “When

13 The Second Circuit further explained that “[i]n fact there is no reason, at least in theory, why a satisfactory settlement could not amount to a hundredth or even a thousandth part of a single percent of the potential recovery.” Grinnell, 495 F.2d at 455 n.2; In re Gulf Oil/Cities Serv. Tender Offer Litig., 142 F.R.D. 588, 590-91 (S.D.N.Y. 1992) (court approved settlement after determining that the settlement would provide “a bit more than 48 cents per share” out of the potential recovery of approximately $30 per share); In re Union Carbide Corp. Consumer Prods. Bus. Sec. Litig., 718 F. Supp. 1099, 1103 (S.D.N.Y. 1989) (“Reasonableness is not a standard susceptible to a mathematical equation yielding a sum certain.”); Teachers’ Ret. Sys. v. A.C.L.N., Ltd., 2004 U.S. Dist. LEXIS 8608, at *15 (S.D.N.Y. May 14, 2004)(citation omitted) (“Rather, there is ‘a range of reasonableness with respect to a settlement.’”); In re Interpublic Secs. Litig., 2004 U.S. Dist. LEXIS 21429, *24 (S.D.N.Y. Oct. 26, 2004) (“[w]hile the Gross Settlement Fund reflects only ten to twenty percent of lead plaintiff’s aggressive damages estimate, the securities settlement sits comfortably within the range of reasonableness.”).

33

formulated by competent and experienced class counsel,” a plan for allocation of net settlement

proceeds “need have only a ‘reasonable, rational basis.’” In re Global Crossing, 225 F.R.D. at 462

(citations omitted); see also In re Datatec Sys., Inc. Sec. Litig., 2007 U.S. Dist. LEXIS 87428, at *15

(D.N.J. Nov. 28, 2007) (approving plan as “rational and consistent with Lead Plaintiffs’ theory of the

case”). In the context of securities cases, this means that a plan of allocation will usually take into

“the timing of purchases and sales of the securities at issue are common.” Id.; see also In re Gen.

Instrument Sec. Litig., 209 F. Supp. 2d 423, 431 (E.D. Pa. 2001) (deeming plan of allocation where

“claimants are to be reimbursed on a pro rata basis for their recognized losses based largely on when

they bought and sold their shares of General Instrument stock” as “even handed”).

Here, the proposed Plan of Allocation is rational and consistent with Plaintiff’s theory of the

case. As reflected in the accompanying briefs in opposition to the objectors, the Plan of Allocation

begins with the actual reduction in benefits that serves as the foundation for the claims. Then,

however, it creates a distinction based on the strength of the claims, as reflected by this Court’s

decisions and other relevant case law. Thus, Subscriber Class Members who can demonstrate that

they paid their ONET providers out-of-pocket, or that they had received balance bills for the unpaid

portions of their claims or otherwise were pursued for payment, are entitled to a greater portion of

their recognized losses. The same is true for Provider Plaintiffs who can show that they submitted

balance bills to their patients or otherwise pursued payment. In either case, the allocation is based on

the rulings that reflect that plaintiffs who can show out-of-pocket payments or balance bills have

stronger claims than those who cannot.

In addition, Class Counsel established an easy “Group A” process to facilitate the ability of

Subscribers to make claims who otherwise might have difficulty finding the necessary

documentation for their claims. The Group A claimants will be entitled to recognized losses of $50

34

per each year they were members of one of Defendants’ health care plans, with the aggregate

allocation to those claimants provided on a pro rata bases up to a maximum total amount of $50

million. This number was rationally based, as it represents the approximate average UCR reduction

experienced by 90% of the Class Members who submit ONET claims in a given year. Because the

amount of the reduction is low for the vast majority of Class Members, Class Counsel reasonably

determined that it would save substantial money and time to allow a simplified claim form rather

than to require all Class Members, even those with small potential damages, to submit

documentation proving not only their losses, but also that they had paid out-of-pocket or been

balance billed.

The Group A process is also important because it allows claimants who may have claims

going back to 1994, when the Class Period begins, to obtain at least some recovery, where otherwise

they may have none. During the Settlement negotiations, Class Counsel fought hard to require UHC

to produce its claims data for purposes of identifying the total individual UCR reductions of all Class

Members throughout the Class Period. Defendants, however, vigorously opposed that obligation,

claiming, in particular, that the older the claims were, the more difficult, expensive and

impracticable it became to identify and produce such data, particularly in light of the numerous

platforms that were involved, many of which were outdated or no longer used. Therefore, Class

Counsel ultimately agreed as part of the give-and-take of the negotiation process that UHC would

produce the claims data from the beginning of 2002 to the present, which the claims administrator

would then provide to Class Members upon request. Given that Class Members would be

responsible for locating their own data from prior to 2002, an obligation that would likely have

remained with Class Members had the case proceeded to trial, Class Counsel recognized that the

older claims would be more difficult to substantiate. The Group A claims process provides a

35

mechanism to address that issue for Subscriber Class Members who primarily have claims in that

older period.

Class Counsel further only allowed the Group A claims to be made by Subscriber Class

Members, recognizing that it was reasonable to expect Provider Class Members to have better

records for purposes of preparing their claims. At the same time, the Plan of Allocation provides a

“simplified” claim for providers as well, by allowing them to rely on the claims data provided by the

claims administrator from 2002 to the present for purpose of their claims, without having to submit

further documentation.

The entire Plan of Allocation is clearly rationally based, after taking into account the

strengths and weaknesses of the Class Members’ claims. Moreover, it is comparable to the Plan of

Allocation approved by the court in Health Net. In that subscriber case, Class Counsel were able to

settle for a non-reversionary settlement fund of $160 million, plus a $40 million reversionary claims

made fund. (An additional $15 million was allocated to the New Jersey Department of Business

and Insurance as part of its investigation of Health Net’s use of outdated Ingenix data, which had

been prompted by our litigation.) The $160 million portion was to be allocated based on the

recoverable losses, without requiring additional documentation. However, the $40 million

reversionary fund was allocated to those who could prove that they had paid out-of-pocket or had

been subjected to balance bills or other collection efforts by their ONET providers. In short, the

court adopted a similar distinction to what is being applied here.

In approving this plan of allocation in Health Net, the court stated:

This Plan of Allocation reimburses Class Members in accordance with the nature of their claims and the extent of their injuries. The Court "conclude[s] that the plan of allocation is reasonable, and the disparity in treatment accurately reflects the different . . . losses experienced by individuals who" were subject to Health Net's allegedly improper ONET determinations.

36

In re Corel Corp. Secs. Litig., 293 F. Supp. 2d 484, 494 (E.D. Pa. 2003). For similar reasons, the

Plan of Allocation implemented by Plaintiffs here should be approved.14

III. THE REQUIREMENTS FOR CLASS CERTIFICATION HAVE BEEN MET AND THE SETTLEMENT CLASS SHOULD BE CERTIFIED The Settling Parties stipulated to certification of the Class for settlement purposes as follows:

“Settlement Class” means: (i) all Persons whose health care benefits were insured or administered by any Defendant who, at any time from March 15, 1994 through the Preliminary Approval Date, received out-of-network health care benefits that were processed or reimbursed by such Defendant using the Ingenix Databases or any of Defendants’ Seven Relevant Out-Of-Network Reimbursement Policies; and (ii) all Out-Of-Network Health Care Providers and Out-Of-Network Health Care Provider Groups who provided Covered Out-Of-Network Services or Supplies to Persons whose health care benefits were insured or administered by any Defendant at any time from March 15, 1994 through the Preliminary Approval Date, and whose resulting claims were processed or reimbursed by such Defendant using the Ingenix Databases or any of Defendants’ Seven Relevant Out-Of-Network Reimbursement Policies.

The ultimate decision regarding certification, however, rests with the Court.

In its November 17, 2009, Order of Preliminary Approval, the Court conditionally certified

the Class for purposes of settlement. In so doing, the Court carefully evaluated Rule 23 and

concluded in no uncertain terms that its requirements have been satisfied in this action. This

decision is strongly supported under the law, and adopts the same ruling that Judge Hochberg

reached in two important decisions involving identical claims relating to the use of the Ingenix

Database, the first in granting class certification, see Wachtel v. Guardian Life Ins. Co., 223 F.R.D.

14 Although Class Counsel do not believe that there is any need to do so, the Court could order a change in the Plan of Allocation if it believed it necessary. The Settling Parties agreed that the Plan of Allocation was not a formal part of the Settlement Agreement, such that the Settlement Agreement could be approved by the Court, and the Plan of Allocation changed, without affecting final approval.

37

196, 219 (D.N.J. 2004)),15 and the second in repeating that decision in approval of the settlement of

that action. Health Net, 569 F. Supp. 2d at 455.

The common issue that clearly predominates over any individual issue in this case is whether

the use of the Ingenix Database to set UCR is invalid because of its inherent flaws and inadequacies.

Plaintiffs allege that these flaws in the Ingenix Database mean that it cannot be relied upon to set

UCR rates, so that each and every time Defendants used it to make its benefit determinations, they

did so without a valid basis. That presents the requisite classwide issue with classwide impact. To

the extent the Court might later determine on the merits that Class Members are required to make

other showings in order to recover damages as a result of Defendants’ invalid benefit determinations,

such as out-of-pocket payments or the submission of unpaid balance bills (issues that certain of the

objectors raise), that can be handled at the damages stage, or during the claims process after a

finding of liability. Plaintiffs have therefore clearly satisfied the standards for class certification

under Rule 23. In light of the substantial benefits the Settlement confers on the Class, Plaintiffs

respectfully request that the Court now grant this action final class certification status for the

purposes of the Settlement. See Amchem Prods. Inc. v. Windsor, 521 U.S. 591 (1997) (settlement

classes permissible).

A. Numerosity

Rule 23(a)(1) requires that the class be so numerous that joinder of all class members would

be impracticable. To date, the Settlement Administrator has mailed more than 14.6 million Notices

15 Judge Hochberg’s initial class certification decision was vacated by the Third Circuit under a Rule 23(f) appeal, but not on the merits of her decision, but only to identify the specific class claims, issues and defense that were being certified. Wachtel v. Guardian Life Ins. Co., 453 F.3d 179, 181 (3d Cir. 2006). After complying with the Third Circuit’s strictures, Judge Hochberg reissued her class decision, and this time the Third Circuit declined to grant a Rule 23(f) appeal. Wachtel v. Guardian Life Ins. Co., Case No. 06-8054, Slip Op. at 2 (3d Cir. Dec. 11, 2006)

38

to potential Class Members, see Rosenbaum Aff. ¶ 3, and, in its preliminary approval order, the

Court accepted the Settling Parties' estimate of approximately 21.11 million Class Members, finding

that this “plainly satisfies” the numerosity requirement. 2009 U.S. Dist. LEXIS 112634, at *19.16

Joinder of such a great number of persons would be exceedingly difficult and impracticable. Thus,

Rule 23(a)(1) is easily met. See Health Net, 569 F. Supp. 2d at 455 (“The instant classes easily

satisfy Rule 23(a)(1)'s numerosity requirement. There are well over 2 million Class Members in the

. . . classes. The parties have stated that class notice was sent to over 2.5 million individuals who are

or were insured by Health Net. The Court finds that Rule 23(a)(1)'s numerosity requirement is

satisfied.”); In re NASDAQ Market-Makers Antitrust Litig., 169 F.R.D. 493, 508-09 (S.D.N.Y.

1996).

B. Commonality

Rule 23(a)(2) requires that the grievances of the named plaintiffs “‘share a common question

of law or of fact’ with those of the proposed class.” Cromer Fin. Ltd. v. Berger, 205 F.R.D. 113,

122 (S.D.N.Y. 2001) (quoting Marisol A. by Forbes v. Giuliani, 126 F.3d 372, 376 (2d Cir. 1997)).

This requirement is satisfied “if the class shares even one common question of law or fact, and

factual differences in the claims of the class do not preclude a finding of commonality." Lee v. ABC

Carpet & Home, (quoting In re NTL Sec. Litig., 2006 U.S. Dist. LEXIS 5346, 2006 WL 330113, at

*6 (S.D.N.Y. Feb. 14, 2006)). Thus, if “class members assert the same legal claim . . . that was in all

material respects nearly identical for each Plaintiff,” then commonality is shown, even if there were

slight variations” in the way Defendants’ conduct affected Plaintiffs, so long as it occurred “in an

16 There were fewer actual notices mailed than the number of estimated Class Members during the preliminary approval hearings because various households have more than one Class Member, so only one notice was mailed to the applicable address.

39

essentially uniform manner.” Spicer v. Pier Sixty LLC, 2010 U.S. Dist. LEXIS 76782, *38-39

(S.D.N.Y. July 27, 2010). In fact, “an allegation that the defendants’ overall policy injured the

plaintiffs satisfies the commonality requirement.” Summerfield v. Equifax Info. Servs., 264 F.R.D.

133, 139 (D.N.J. 2009).

That, too, is satisfied here, as the Court has found, in noting that “there is at least one

question of fact and law that is common to all members of the class, i.e., whether they have been

under-reimbursed by UHC's use of the Ingenix databases.” 2009 U.S. Dist. LEXIS 112634, at *30

(citing In re Global Crossing Sec. & ERISA Litig., 225 F.R.D. 436, 451 (S.D.N.Y. 2004)). As a

result, there is one overarching issue in this case that is common to all the Classes: “whether

Defendants’ use of the Ingenix Database in determining reimbursement for [ONET services]

violated ERISA, the Sherman Antitrust Act, RICO, or state law.” See Notice of Proposed Settlement

of Class Action and Final Settlement Hearing (as approved by the Court and disseminated the Class

Members), at 3. Related questions also include:

(a) Whether ERISA or RICO requires each Class Member to prove exhaustion or futility as to each ERISA claim;

(b) Whether ERISA, RICO or the antitrust laws requires each Provider Class Member

to prove the existence of an assignment;

(c) Whether Subscriber Class Members may recover damages if they have not paid their ONET providers out-of-pocket for the unpaid portion of the provider’s bills;

(d) Whether Subscriber or Provider Class Members may recover damages if the

Provider has not balance billed the Subscriber for the unpaid portion of the Providers bills.

In the analogous Health Net litigation, this Court held that the ERISA classes had “easily

met” the Rule 23(a) commonality test because they were “based on common operative facts and

questions of law” – namely, the allegation of “a systematic course of conduct in interpreting

contracts of insurance in an improper, undisclosed, and self-serving way in contravention of the

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plans and of [the defendant’s] fiduciary duty to beneficiaries who chose to use out-of-network

providers.” Health Net, 569 F. Supp. 2d at 455-56. The Court noted that if each member of the

proposed classes were to have brought an individual action, “each would [have] be[en] required to

prove that Health Net’s R&C and other policies violated ERISA,” and that, therefore, “‘[t]he issues

of law and fact relating to whether Health Net fully disclosed and properly applied its reimbursement

mechanisms for out-of-network provider services [we]re common to the class members and

predominate[d] over individual questions.’” Id. (quoting Wachtel, 223 F.R.D. at 213) (original

class certification decision which was reaffirmed after a remand to list class claims, issues and

defenses) (“The issues of law and fact relating to whether Health Net fully disclosed and properly

applied its reimbursement mechanisms for out-of-network provider services are common to the class

members and predominate over individual questions.”).

The court in another analogous ERISA action challenging the defendant’s method of

determining “reasonable and customary charges” for anesthesia services likewise found the

commonality element satisfied. See Brooks v. Educators Mut. Life Ins. Co., 206 F.R.D. 96, 101 (E.D.

Pa. 2002). There, the plaintiff alleged that neither of the two databases defendant used complied

with the “same geographical area” requirement of participants’ and beneficiaries’ health plans. As

the Brooks court explained:

To certify, I need only find one common question of law or fact. Whether [the insurance company] engaged in a course of conduct or practice of paying for the anesthesia services of class members at some flat fee (20% of the surgeon’s fee), or a fee that ignored the contractually-specified criteria for calculating reimbursements (through the use of the Medicode and Medicare programs) in violation of their contractual obligations, as the Amended Complaint alleges, constitutes a ‘factual and legal claim common to the entire class.”

41

206 F.R.D. at 101 (citation omitted).17 As the Court also noted, the fact that ERISA provides

“uniform federal law” further supports class certification. See also Fallick v. Nationwide Mut. Ins.

Co., 162 F.3d 410 (6th Cir. 1998) (reversing the denial of class certification to a class of participants

and beneficiaries challenging the same Ingenix database that the Plaintiff and the Class challenge

herein).

Similarly, the Court in Health Net held that the RICO class also satisfied the commonality

requirement because it “alleged an association-in-fact between Health Net and Ingenix in which

Health Net and Ingenix carried out a scheme to underpay benefits to Health Net subscribers.”

McCoy, 569 F. Supp. 2d at 456. This is the identical “association-in-fact” and related scheme

alleged here. Thus, the commonality element is also easily met in this case, where the ERISA,

antitrust, RICO and state law claims sounding in contract and quasi contract all involve resolution of

issues concerning Defendants’ methodologies for determination of UCR, including through their use

of the Ingenix Database.

C. Typicality

Rule 23(a)(3)’s typicality requirement concerns whether the "claims of the representative

plaintiffs arise from the same course of conduct that gives rise to claims of the other class members,

where the claims are based on the same legal theory, and where the class members have allegedly

been injured by the same course of conduct as that which allegedly injured the proposed

representatives.'" Global Crossing, 225 F.R.D. at 452 (quoting In re Oxford Health Plans, Inc. Sec.

Litig., 191 F.R.D. 369, 375 (S.D.N.Y. 2000)). See also Robidoux v. Celani, 987 F.2d 931, 936-37

(2d Cir. 1993) ("[T]ypicality is satisfied 'when each class member's claim arises from the same

17 The Medicode database, which was one of the databases used to set UCR in Brooks, was eventually acquired by Ingenix and became part of the Ingenix Database, along with that developed by HIAA.

42

course of events and each class member makes similar legal arguments to prove the defendant's

liability.'"); Cromer, 205 F.R.D. at 122. The typicality requirement is liberally construed and does

not require that the claims be identical. In re Prudential Sec. Inc. Ltd. Pships. Litig., 163 F.R.D.

200, 208 (S.D.N.Y. 1995); Trief v. Dun & Bradstreet Corp., 144 F.R.D. 193, 200 (S.D.N.Y. 1992).

Rather, injuries must simply “derive from a unitary course of conduct by a single system.” Marisol

A., 126 F.3d 372, 377. Moreover, typicality "does not require that the factual background of each

named plaintiff's claim be identical to that of all class members; rather, it requires that the disputed

issue of law or fact occupy essentially the same degree of centrality to the named plaintiff's claim as

to that of other members of the proposed class." Caridad v. Metro-North Commuter R.R., 191 F.3d

283, 293 (2d Cir. 1999).

Here, each class member's claim "arises from the same course of events," produced by a

"single system," namely, the use of the Ingenix Database to set UCR rates, and the same legal

arguments over whether that practice is in violation of ERISA, RICO or the antitrust laws. As this

Court found, typicality therefore exists because “all members of the class possess claims based on

the reimbursement practices of UHC.” 2009 U.S. Dist. LEXIS 112634, at *30. See Spicer, 2010

U.S. Dist. LEXIS 76782, at *40 (“Defendants' system for collecting, explaining, representing, and

distributing the service charge” represents the “single system” for satisfying typicality); Varljen v.

H.J. Meyers & Co., 2000 U.S. Dist. LEXIS 16205, at *7 (S.D.N.Y. Nov. 6, 2000) (finding the

typicality requirement satisfied where “plaintiffs’ claims stem from similar events and rely on

similar legal arguments”); Prudential Sec., 163 F.R.D. at 208 (finding that plaintiffs satisfied the

typicality requirement where they alleged that defendants committed the same acts, in the same

manner against all class members).

Significantly, even if certain issues could ultimately arise which could affect the ability of

43

Class Members to recover upon a finding of liability, such as exhaustion or whether they had paid-

of-pocket or distributed balance bills, the extent to which they create problems for recovery is itself a

class issue. Moreover, they do not alter the fact that all Class Members have a similar interest in

proving the invalidity of the Ingenix database to make UCR determinations. Plaintiffs’ claims are

therefore typical of the claims of all Class Members. See Health Net, 569 F. Supp. 2d at 456

(typicality is satisfied because the class claims “arise from Health Net's reliance on the Ingenix

database to calculate UCR charges, [and] [a]lthough facts of individual class members' claims differ

in some ways -- the ONET treatments they received or whether they have exhausted the appeals

process, for example -- those minor difference do not alter the fact that all Plaintiffs rely on the same

legal theories in both the ERISA class and the RICO class”).

D. Adequacy

The adequacy requirement of Rule 23(a)(4) requires the representative plaintiffs to

demonstrate that: (1) there is no conflict of interest between them and the other class members; and

(2) Class Counsel are qualified, experienced, and capable of conducting the litigation. Marisol A.,

126 F.3d at 378. Both requirements have been met here.

In considering if there is a conflict between representative Plaintiffs and the Class, courts

frequently question whether “plaintiff's interests are antagonistic to the interest of other members of

the class." Baffa v. Donaldson, Lufkin & Jenrette Sec. Corp., 222 F.3d 52, 60 (2d Cir. 2000).

Moreover, courts recognize that “‘[t]he fact that plaintiffs' claims are typical of the class is strong

evidence that their interests are not antagonistic to those of the class; the same strategies that will

vindicate plaintiffs' claims will vindicate those of the class.’" See Spicer, 210 U.S. Dist. LEXIS

76782, at *40-41 (quoting Damassia v. Duane Reade, Inc., 250 F.R.D. 152, 158 (S.D.N.Y. 2008)) .

In this case, Plaintiffs’ claims are typical and not antagonistic given that “the same strategies

that will vindicate plaintiffs' claims will vindicate those of the class.” In other words, as discussed

44

above, all Class Members have the same interest in proving that the Ingenix Database cannot serve

as a valid basis for making ONET benefit determinations. The representative Plaintiffs include both

subscribers and providers, with numerous and extensive experience with Defendants and their ONET

reimbursement policies. While some of the objectors seek to create a conflict by arguing that

subscribers and providers have divergent interests, that is not true. All Class Members, whether

subscribers or providers or whether a Medical Doctor or an ancillary provider, have a common

interest in proving that Defendants’ use of the Ingenix Database to set UCR was invalid, and they

rely on the same legal theories, while seeking the same damages – a return of improperly withheld

benefits. The only difference between them is that, if the subscribers have paid their providers for

the unpaid portion of the claim, the subscribers are entitled to recover, while if the providers are

unpaid, they have priority. The Plan of Allocation, then, is designed to address this issue by taking

into account the various strengths and weaknesses of the claims and providing a reasonable

mechanism for distributing the Settlement Fund. But that does not mean that the interests of

subscriber and providers are antagonistic with each other with regard to litigating the case or

negotiating the Settlement. They are not, as this Court has held. 2009 U.S. Dist. LEXIS 112634, at

*31 (“there are no antagonistic interests between any members of the class (including between

subscribers to UHC plans and their health care providers)”).

As for Class Counsel, they have demonstrated, both throughout the course of the litigation

and during the lengthy preliminary approval process, that they are highly qualified to represent the

Class as a result of their abilities and their understanding of the underlying issues. Class Counsel

have extensive experience both with health care litigation and in the class action arena, and have

vigorously and skillfully prosecuted this Action, securing for the Class a substantial recovery.

Further, their experience in other health care cases, particularly those which similarly challenge the

45

use of the Ingenix database to set UCR rates, confirms their qualifications to prosecute this litigation

and negotiate a proper settlement, as the Court has had ample opportunity to verify. No one has

objected to the qualifications of Class Counsel and they easily meet the Rule 23 adequacy

requirement. Id., at *31 (“counsel proposing the settlement are plainly qualified, experienced and

able to conduct this litigation”); Health Net, 569 F. Supp. 2d at 457 ("‘Counsel for McCoy and the

Wachtels are well-seasoned and have demonstrated adequacy and tenacity during the protracted

proceedings that have already occurred in this case." Wachtel, 223 F.R.D. at 216. As evidenced by

the lengthy procedural history outlined above, in the years since the Court certified the Wachtel and

McCoy classes, Class Counsel have proved themselves more than adequate to face the challenges

posed by this litigation.”).

E. Common Questions Predominate

To certify a class under Rule 23(b)(3), a court must find that “questions of law or fact

common to the members of the class predominate over any questions affecting only individual

members.” Fed. R. Civ. P. 23(b)(3). See In re Visa Check/MasterMoney Antitrust Litig., 280 F.3d

124, 132-33 (2d Cir. 2001). The predominance requirement tests whether a class is “sufficiently

cohesive to warrant adjudication by representation.” Amchem Prods., Inc. v. Windsor, 521 U.S. 591,

623 (1997). Significantly, “[i]t is not necessary that all questions of fact or law be common, but only

that some questions are common and that they predominate over individual questions.” Klay v.

Humana, Inc., 382 F.3d 1241 (11th Cir. 2004). Predominance is established where “the issues in the

class action that are subject to generalized proof, and thus applicable to the class as a whole, . . .

predominate over those issues that are subject only to individualized proof.” Wal-Mart Stores, Inc.

v. Visa U.S.A. Inc, 280 F.3d 124, 139 (2d Cir. 2001) (overruled on other grounds); see also Moore v.

PaineWebber, Inc., 306 F.3d 1247, 1252 (2d Cir. 2002) (“Class-wide issues predominate if

resolution of some of the legal or factual questions that qualify each class member's case as a

46

genuine controversy can be achieved through generalized proof, and if these particular issues are

more substantial than the issues subject only to individualized proof.”); In re Visa Check, 280 F.3d at

136.

In this case, the common question (subject to class wide proof) is whether the Ingenix

database, used by Defendants to process class members’ claims for ONET benefits, was

fundamentally flawed, resulting in a reimbursement decision that was unsupported and therefore

invalid. These issues are all subject to common proof based on the validity of the Ingenix Database

itself. In contrast, if each class member were to bring an individual action challenging his or her

adverse benefit determination, each would have to prove that Defendants’ reimbursement

mechanisms for ONET services violated ERISA, the Sherman Antitrust Act, RICO and state law.

Thus, as this Court already explained: “the common issues related to the Ingenix database plainly

predominate over any individual issues.” 2009 U.S. Dist. LEXIS 112634, at *32. Health Net, 569

F. Supp. 2d at 456 ("‘[t]he issues of law and fact’” relating to whether defendant improperly relied

on the Ingenix database or other reimbursement policies to reduce ONET benefits “‘predominate

over individual questions’”) (quoting Wachtel, 223 F.R.D. at 213).

While there may be individual issues as to the extent of damages for each individual class

member, such as whether a subscriber paid the ONET provider out-of-pocket, or whether a provider

balance billed the subscriber, these clearly do not predominate over the central theme of whether the

underlying bases for the benefits determination was valid. It is well-settled that a finding of

predominance is not precluded even if the damages suffered by each individual class member cannot

be precisely determined without individualized inquiry. See In re Currency Conversion Fee

Antitrust Litig., 264 F.R.D. 100, 116 (S.D.N.Y. 2010) (internal citations omitted); see also In re

Industrial Diamonds Antitrust Litigation, 167 F.R.D. 374, 382 (S.D.N.Y. 1996).

47

In In re Currency Conversion Fee, for example, the court considered similar arguments to

those raised by certain of the objectors, which did not challenge the central issue that plaintiffs

alleged caused the classwide injury, but instead focused on defenses that the defendants could raise

to defeat damages on an individual basis. Such arguments do not defeat class certification. 264

F.R.D. at 116 (“Indeed, Defendants offer no argument that there are individual issues about how any

overcharge should be calculated--rather, they argue only that there are class members who have

either been fully compensated by the MDL Settlement or have released their claims under the

LiPuma Settlement. This is insufficient to deny class certification at this point.”). See also In re Visa

Check, 192 F.R.D. 68, 86 (E.D.N.Y. 2000) ("However, the presence of individualized defenses, such

as mitigation, going only to damages are generally regarded as no barrier to class certification.");

Krueger v. N.Y. Tel. Co., 163 F.R.D. 433, 440-41 (S.D.N.Y. 1995) ("To the extent that there may be

specific defenses against specific members of the class, they would not justify denying class action

certification."). And even if “these potential defenses could present some individual issues, there are

many ways in which this Court can deal with those issues when they arise.” In In re Currency

Conversion Fee, 264 F.R.D. at 116 (citing In re Visa Check, 280 F.3d at 141, listing possible

"management tools" available to a district court to address individualized damages issues).

The issues raised by certain objectors in challenging the Settlement fall squarely with the

defenses argument that do not defeat class certification. As discussed above, for example, the issue

of exhaustion – which does create substantial concerns for Plaintiffs with regard to damages that

may ultimately be recovered – is not a class certification issue, because it is an affirmative defense

that only arises once there is a finding of liability on a classwide due to the misuse of the Ingenix

Database. See Paese, 449 F.3d at 446-47 (finding exhaustion to be an “affirmative defense” that can

be waived). Similarly, the questions of whether subscribers paid out-of-pocket or providers balance

48

billed only arise as a defense once Plaintiffs show – on a classwide basis – that Class Members were

improperly reimbursed due to the use of the flawed and untrustworthy Ingenix Database. Thus,

predominance is met without difficulty in this action.

F. Superiority of the Class Action

Finally, Rule 23(b)(3) requires that the class action be “superior to other available methods

for the fair and efficient adjudication of the controversy.” Fed. R. Civ. P. 23(b)(3). Here, the

potential Class Members number in the millions, and are dispersed throughout the country. In

addition, most of those injured have not been damaged to a degree where it would be cost-effective

for them to seek recovery on their own. Were a class not to be certified, Defendants’ use of the

Ingenix Database to set UCR rates could only be challenged in numerous individual claims repeating

the same claims over and over in an effort to reach the same conclusion that a new methodology

should be used. As this Court has already held, “a class action is equally plainly the superior method

of pursuing these millions of small claims.” 2009 U.S. Dist. LEXIS 112634, at *32. This is

particularly true given that manageability need not be of concern for purposes of a settlement class,

thereby avoiding what could be a substantial issue were the case not to be settled. See Amchem

Prods., Inc. v. Windsor, 521 U.S. 591, 620 (1997) ("Confronted with a request for settlement-only

class certification, a district court need not inquire whether the case, if tried, would present

intractable management problems.").

This conclusion was reinforced by the Health Net court, which confirmed the superiority of

the class action to address the same issues being litigated here, both in approving the settlement there

and in its original decision granting class certification. As the court there explained:

Superiority is also easily satisfied in these cases for the reason given at the time of the Wachtel and McCoy class certifications. As the Court explained

49

Class action is the superior form of litigation in this case because it ensures that potentially meritorious claims will be addressed efficiently and without waste of judicial resources. There is no indication that individual members of the class[es] have a compelling interest in controlling the prosecution of separate actions. Indeed, the high cost of prosecuting this complex case on an individual basis suggests that the opposite is true. This Court is not aware of pending litigation against Health Net by any proposed class members that would undermine the suitability of class litigation. The high cost of this complex litigation also suggests that meritorious claims may go unaddressed unless the Plaintiffs are permitted to proceed as a class. Relitigating the same issues and presenting similar evidence regarding Health Net's policies and practices and non-disclosures for out-of-network charges would be inefficient and wasteful of judicial resources. Joinder or wholesale intervention would result in a multiplicity of repetitive actions.

Wachtel, 223 F.R.D. at 217 (internal citations omitted).

Health Net, 569 F. Supp. 2d at 457-58.

For the reasons summarized herein, and as the Court recognized in its preliminary approval

order, certification of the proposed Class is appropriate.

CONCLUSION

The Settlement reached in this case is an outstanding result under difficult circumstances.

For the foregoing reasons, the $350,000,000 Settlement and Plan of Allocation are fair, reasonable

and adequate and should be granted the Court’s final approval. Additionally, all the requirements for

certification have been met, and the Court should certify the Class for Settlement purposes.

50

Klari Neuwelt Law Office of Klari Neuwelt 110 East 59th Street, 29th Floor New York, NY 10022 (212) 593-8800 Barry M. Epstein Barbara G. Quackenbos Lynne Kizis Kevin P. Roddy WILENTZ, GOLDMAN & SPITZER, P.A. 90 Woodbridge Center Drive, Suite 900 Woodbridge, NJ 07095 (732) 636-8000 Wood R. Foster, Jr. Jordan Lewis SIEGEL BRILL GREUPNER DUFFY & FOSTER, P.A. 1300 Washington Avenue South Minneapolis, MN 55401 (612) 337-6100 Jonathan L. Alpert THE ALPERT LAW FIRM, P.A. 5920 River Terrace Tampa, FL 33601-3270 (813) 223-4131 Paul M. Sod LAW OFFICES OF PAUL M. SOD 337R Central Avenue Lawrence, New York 11559 (516) 295-0707 Attorneys for Class Plaintiffs

52