Phelps Achieves Early Dismissal of Price-Fixing Claims in Closely Watched Antitrust Suit

Phelps helped a major health care vendor defeat antitrust claims and avoid lengthy litigation, securing a ruling that out-of-network reimbursement rates do not constitute a “price” sufficient to maintain a price-fixing or tampering claim. This win in California’s trial court could impact future similar suits across the country. 

The vendor offers health care data and analytics services, including providing pricing recommendations for out-of-network claims. A California health system’s bankruptcy liquidator claimed the vendor and leading health insurers entered into an unlawful arrangement to fix reimbursement rates for out-of-network services at unreasonably low, anticompetitive levels.

The plaintiff brought claims under California’s Cartwright Act and Unfair Competition Law. The claims included price fixing, price tampering, unlawful exchange of competitively sensitive business information, and statutory unfair competition. Phelps’ health care litigation team argued that an antitrust claim could not stand in the absence of a discrete product or service that can be bought and the price of which can be fixed through an unlawful agreement.

Early in litigation, the Superior Court of California for San Francisco County agreed with Phelps’ argument and dismissed each of the claims in full. The court noted that:

• Out-of-network reimbursements were not a discrete product or service that could be bought and the price of which could be fixed through unlawful agreement.
• Out-of-network reimbursement rates do not constitute a "price" sufficient to maintain a price-fixing or tampering claim.
• The exchange of competitively sensitive business information is not invariably anticompetitive, and the related claims were derivative of the failed price-fixing and tampering claims.

Phelps lawyers Errol King, Katie Mannino, Craig Caesar, Paul LeBlanc, Taylor Crousillac and Brittany Alexander secured the victory that could offer insight as federal courts contend with a recent spike in antitrust lawsuits.