In The News

$84M Settlement Approved in American Osteopathic Association Antitrust Class Action

By Charles Toutant
December 4, 2018
New Jersey Law Journal

A federal judge in Camden has granted final approval to an $84 million settlement of an antitrust class action against the American Osteopathic Association.

The suit targeted a policy requiring physicians who seek board certification in osteopathy to buy membership in the association at an annual rate of $683. The settlement calls for the AOA to end the disputed policy coupling board certification with membership in the association, and to reduce the membership fee by $90, to $593.

The settlement also calls for the AOA to waive an annual $90 certification fee for three years; allow members to take two free continuing medical education courses for free annually through December 2021; and spend $4 million between 2019 and 2021 on a brand awareness campaign for osteopathic physicians. The costs of the settlement terms over three years comes to $84.2 million.

The association has roughly 48,000 members practicing osteopathy, 32,000 of whom are AOA-board certified. The value of the settlement was calculated based on an assumption that AOA membership will decline 3 percent as a result of the elimination of the challenged rule.

The judge also approved counsel fees of $2.62 million, which is slightly less than the lodestar amount of $2.65 million. The lodestar is based on a blended rate of $601 and 4,418 hours spent investigating and litigating the case. The judge also approved service awards of $15,000 each to the four class representatives.

U.S. District Judge Noel Hillman of the District of New Jersey granted final approval to the settlement after rejecting a claim by the attorneys general of Arizona, Idaho, Louisiana, Rhode Island and Texas that the settlement is structured in a manner that conflicts with the U.S. Supreme Court’s guidance in a 2011 case, Wal-Mart Stores v. Dukes. 

The five states’ attorneys general argued in an amicus curiae brief that individualized damages claims could not be certified under R. 23(b)(2) because class members may not opt out of such a settlement. The attorneys general argue that the settlement raises due process violations because under R. 23(b)(2), class members cannot opt out of the settlement and pursue individual claims for monetary damage.

But Hillman said he did not find the objections of the attorneys general compelling. The class notice clearly stated that damage claims in the suit would be extinguished in the settlement, and none of the notice recipients objected, he said. In addition, the present case did not raise concerns of collusion between named plaintiffs, class counsel and defense attorneys to resolve the case in a manner that addressed only their interests. ...

The AOA’s board of trustees approved the settlement and its House of Delegates agreed to the dues decrease, Hillman said.

“Thus, the AOA’s governing body, filling essentially the same shoes as the states’ attorneys’ general under 28 U.S.C. 1715, agreed that the settlement was fair to itself as an organization as well as to its individual members. This is a classic case of institutional reform, for which Rule 23(b)(2) is the precise vehicle,” Hillman said.

Hillman noted with frustration that the efforts of the attorneys general were “seriously misguided and myopic; their ardor and zeal badly misplaced.”

The settlement reflects, “as Rule 23(b)(2) must, the concrete over the ephemeral, the real over the hypothetical, and the tangible over unfounded fears,” Hillman said. Still, amici continued “in their quixotic quest to vindicate a principle that is not offended, on behalf of their citizens who have not complained,” he said.

“And in doing so, they have succeeded in delaying approval of the settlement, have frustrated its orderly administration and ultimately sought to scuttle an agreement that promised real, tangible and substantial benefit to literally thousands of their own citizens in each of their respective states,” Hillman said.

Arizona Assistant Attorney General Drew Ensign represented the amici. A spokeswoman for the Arizona Attorney General’s office, Katie Conner, said in a statement, “We believe we flagged significant problems in the brief we filed on behalf of bipartisan attorneys general and we’re disappointed with the outcome. To date, we’ve led more than a dozen class action fairness challenges, many of them bipartisan. We’ve always put consumers first and we will continue to fight on their behalf.”

James Greenberg of Duane Morris in Cherry Hill, representing the class, said Hillman’s ruling “nailed it,” adding that much of what was in the opinion was what he argued in his court papers. ...

Reprinted with permission from New Jersey Law Journal, © ALM Media Properties LLC. All rights reserved.