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Academy of Allergy & Asthma in Primary Care v. Louisiana Health Service and Indemnity Co.

United States District Court, E.D. Louisiana

October 2, 2018

ACADEMY OF ALLERGY & ASTHMA IN PRIMARY CARE, ET AL.
v.
LOUISIANA HEALTH SERVICE AND INDEMNITY COMPANY, ET AL.

         SECTION: “J” (2)

          ORDER AND REASONS

          CARL J. BARBIER UNITED STATES DISTRICT JUDGE.

         Before the Court is a Motion to Disqualify Counsel of Record (Rec. Doc. 57) filed by Plaintiff, United Biologics, L.L.C. d/b/a United Allergy Services. Defendants, Louisiana Health Service and Indemnity Company d/b/a Blue Cross Blue Shield of Louisiana and Allmed Healthcare Management, Inc., have jointly filed an opposition (Rec. Doc. 76), arguing against disqualification of their counsel, Baker Donelson Bearman Caldwell & Berkowitz, P.C. Movant responded with a reply (Rec. Doc. 87) to which Defendants responded in a supplemental opposition (Rec. Doc. 88). Having considered the Motion and legal memoranda, the record, the Parties' arguments at oral argument, and the applicable law, the Court finds that the Motion should be GRANTED.

         FACTS AND PROCEDURAL BACKGROUND

         According to Plaintiffs' complaint, this “case concerns a conspiracy and agreement among various health insurance company competitors . . . to restrict competition in the relevant markets for allergy testing and allergen immunotherapy for seasonal and perennial allergies . . . in local areas throughout Louisiana, Kansas, and other local markets serviced by Humana.” (Rec Doc. 1 at 1-2). Plaintiffs are Academy of Allergy & Asthma in Primary Care (the “Academy”) and United Allergy Services (“UAS”).

         The Academy describes itself as “a 504(c)(6) non-profit organization of over 250 member physicians” dedicated to fostering “the ability of primary care physicians to provide high quality, patient accessible diagnostic and therapeutic allergy and asthma care.” (Rec. Doc. 1 at 4). One of its purposes is to promote the interests of primary care physicians who seek to practice in the allergy testing and immunotherapy markets. (Rec. Doc. 1 at 4). UAS is an LLC that provides “technician and support services for physicians practicing allergy testing and allergen immune therapy.” (Rec. Doc. 1 at 5). In this way, “UAS and the primary care and other physicians UAS supports, compete directly with the businesses of board-certified allergists.” (Rec. Doc. 1 at 5).

         Plaintiffs allege that UAS's services allow primary care physicians to conduct cost-effective allergy skin testing and immunotherapies from these physicians' own offices or clinics. This allows these non-specialized physicians to enter the allergy market for themselves, and eliminates the need to refer patients to board-certified allergists or outsource blood allergy tests to reference laboratories. Plaintiffs allege UAS's entrance into the allergy market had two major consequences: it disrupted the system of referrals from primary care doctors to allergy specialists and it also required health insurance companies “to pay more upfront in preventative medicine by reaching far more patients than board-certified allergists could in their respective markets.” (Rec. Doc. 1 at 10). Defendants are three health insurance companies-who pay the costs of these services for their customers-and a company that was hired as an independent review organization of appeals made to Blue Cross for denying reimbursement claims. The relevant defendants to this Motion are Blue Cross Blue Shield of Louisiana (“Blue Cross”) and the independent review company, AllMed Healthcare Management (“AllMed”), who share the law firm of Baker Donelson Bearman Caldwell & Berkowitz, P.C. (“Baker Donelson”) as their current counsel. According to Defendants, Blue Cross has been a client of Baker Donelson since 2010, though Baker Donelson only began acting as antitrust counsel in 2018.

         UAS began doing business in Louisiana in January of 2010. (Rec. Doc. 57-2 at 2). About three years later, primary care physicians who had contracted with UAS began informing UAS that they had received communications from the Louisiana State Board of Medical Examiners (the “Board”) concerning allergy testing and immunotherapy services these physicians had provided in late 2013 and early 2014. (Rec. Doc. 57-2 at 2). These physicians also informed UAS of similar communications received from Blue Cross. UAS sought Donna Fraiche, a partner specializing in health care law at Baker Donelson, to represent UAS and these physicians regarding these communications. Ms. Fraiche agreed to the representation on behalf of Baker Donelson and sent an engagement letter and a term sheet to UAS, which the then-CEO of UAS, Nicolas Hollis, signed on December 5, 2013. (Rec. Doc. 57-2 at 8-10). The engagement letter states that Baker Donelson has been engaged to represent UAS “with respect to advices regarding [UAS's] relationship with the [Board].” (Rec. Doc. 57-2 at 8).

         In January of 2014, UAS met with the Board to discuss the UAS services that were being offered by primary care physicians. The Board was investigating the primary care physicians for “allegedly treating their allergy patients outside their professional scope of practice.” (Rec. Doc. 76-2 at 3). According to Movant, a primary reason for this meeting was to discuss an anonymous complaint[1] that had been made to the Board concerning UAS's allergy protocols and services. (Rec. Doc. 57-1 at 4). Before the meeting, Baker Donelson allegedly “review[ed] UAS's confidential information to respond” to the anonymous complainant's questions. (Rec. Do. 57-1 at 4). Ms. Fraiche avers that she passed the information given to her by UAS to the Board, per UAS's instructions. (Rec. Doc. 76-2 at 4).

         Ms. Fraiche served as counsel for UAS and several primary care physicians at the meeting. Ms. Fraiche describes her and Baker Donelson's representation at the meeting as an effort to “convince the [Board] not to take these primary care physicians' licenses for treating their allergy patients as general primary care physicians.” (Rec. Doc. 76-2 at 3). Ms. Fraiche describes the physicians as the “primary clients” for whom UAS simply paid the bills.

         Around the same time, Blue Cross began to deny claims made for reimbursement for allergy testing and immunotherapy that used UAS's protocols. In or around February of 2014, UAS asked Ms. Fraiche to also represent UAS and the primary care physicians in appealing these denials by Blue Cross. (Rec. Doc. 76-2 at 5). Baker Donelson began meeting with Blue Cross to discuss Blue Cross's investigation and audits of UAS and its allergy protocols. For Example, on February 18, 2014, Baker Donelson met with Blue Cross's Chief Medical Officer, Dr. Carmouche, on UAS's behalf. (Rec. Doc. 57-1 at 4). Baker Donelson formally accepted this expanded representation in April. In an e-mail dated April 29, 2014, Donna Fraiche wrote to the then CEO of UAS, Nicolas Hollis: “[O]ur firm has now been specifically engaged and authorized to serve as your counsel to the certain physician customers of UAS who received denials from Blue Cross specifically related to the ordering and administration of allergy testing and or immunotherapy as provided through their UAS affiliation and protocols.” (Rec. Doc. 57-2 at 12).

         Mr. Hollis avers that, “both UAS and the contracting physicians trusted Baker Donelson with confidential information regarding the appeals . . . including the basis for contesting [Blue Cross's] spurious claims of lack of medical necessity.” (Rec. Doc. 57-2 at 4). Communications between Mr. Hollis and Baker Donelson were extensive; Mr. Hollis estimates that he exchanged over 500 e-mails with Baker Donelson that he regards as confidential. (Rec. Doc. 57-1 at 4). Using this information, Baker Donelson appealed Blue Cross's denials of reimbursement through an internal review process. The appeals were denied. A second level of appeal was to be handled by an independent review organization. Plaintiffs did not know at the time that the independent review organization was Defendant AllMed. (Rec. Doc. 57-1 at 4). AllMed denied all of the appeals-which Plaintiffs allege was agreed upon in-advance, as a part of the conspiracy between health insurers in Louisiana. (Rec. Doc. 57-1 at 5).

         After these appeals failed, Baker Donelson, as UAS's counsel, reached out to the Louisiana Department of Insurance (the “Department”) to set up a meeting with the Department's Commissioner, James Donelon. According to a summary of the meeting published by the Department (the “Summary”) (Rec. Doc. 57-2 at 15-21) the meeting was held in July of 2014; Baker Donelson appeared as UAS's legal counsel as did the firm Bracewell & Giuliani L.L.P. Mr. Hollis acted as UAS's company representative. Dr. Carmouche and Dr. Dwight Brower-the Medical Director at Blue Cross-acted as the representatives of Blue Cross. Sheldon Faulk, Senior In-house Counsel of Blue Cross, appeared as Blue Cross's attorney. At the meeting, Dr. Brower informed the commissioner that the independent reviewer had upheld every appeal. However, Movant alleges that “Dr. Brower concealed any agreement with AllMed and denied any agreement with outside allergist organizations.” (Rec. Doc. 57-1 at 5).

         The Summary-which Baker Donelson helped prepare[2]-demonstrates that the critical issue in this meeting was whether Blue Cross had appropriately denied claims for reimbursement. Blue Cross argued to the Department that its rejection of reimbursement to the primary care physicians using UAS's protocols was justified for three reasons: (1) safety, (2) efficacy, and (3) costs. UAS responded to each of these arguments at length. For example, UAS attempted to rebut Blue Cross's arguments that UAS allergy testing and therapy protocols are ineffective by arguing:

Blue Cross does not cite any adverse events under the UAS protocol and does not refer to any complaints by patients or treating physicians, other than competitor physicians who are upset that they may lose business to their PCP colleagues. UAS sincerely believes the objections are competitor driven and that certain physicians have used unfounded complaints about safety and efficacy to convince Blue Cross Louisiana not to pay those physicians' competitors.

(Rec. Doc. 57-2 at 20). The Department took no action after the meeting.

         In late September of 2014, Baker Donelson communicated to the Department that Blue Cross's “actions were threatening UAS's ability to continue to operate in the state of Louisiana.” (Rec. Doc. 57-1 at 6). Specifically, in an e-mail Ms. Fraiche sent to the Department on September 29, 2014 (Rec. Doc. 87-3), Ms. Fraiche mentions an impromptu meeting she had with Dr. Carmouche, in which she discussed the antitrust ramifications of Blue Cross's conduct. A few days later, UAS learned from Baker Donelson that Blue Cross had demanded Baker Donelson withdraw from representing UAS and its contracting physicians, because Baker Donelson was representing Blue Cross on an unrelated matter. (Rec. Doc. 57-1 at 5). Baker Donelson then withdrew as UAS's counsel. In 2015, UAS stopped doing business in Louisiana because its contracting physicians in the state could not receive reimbursement from third-party payors, such as Defendants.

         UAS initiated this litigation in January of 2018, after allegedly discovering acts of collusion on the part of Defendants. Counsel for UAS first became aware that Baker Donelson would be representing Blue Cross in this antitrust matter on February 26, 2018. Counsel for UAS called Baker Donelson regarding a possible conflict on March 8, 2018. (Rec. Doc. 57-3 at 1-2). The subsequent back-and-forth communications between UAS's current counsel and Baker Donelson regarding the alleged conflict of interest never resolved the issue to the satisfaction of either party and eventually culminated in the instant Motion to Disqualify Counsel, filed June 1, 2018. Part of the reason for UAS's delay in filing a motion to disqualify appears to be that it did not have access to its client file. UAS first requested its client file on April 6, 2018. UAS did not receive its file from Baker Donelson until July 9, 2018. (Rec. Doc. 87-2 at 7).

         Before the Motion to Disqualify was filed, Baker Donelson submitted a motion to dismiss on behalf of Blue Cross (Rec. Docs. 40). In that motion and its accompanying memorandum, Blue Cross defended itself from antitrust allegations by arguing that Blue Cross's decision to deny claim appeals was justified by concerns of safety and the efficacy of treatment. (Rec. Doc. 40-1 at 14). These legitimate concerns, Blue Cross argues in its motion, are the only reasonable explanation of Blue Cross's decisions to deny reimbursement claims. Thus, Plaintiffs' antitrust allegation that the payors illegally conspired to deny claims in order to avoid paying for preventative care is implausible and subject to dismissal.

         After UAS filed its amended complaint, Baker Donelson submitted new motions to dismiss on behalf of AllMed (Rec. Doc. 64) and Blue Cross (Rec. Doc. 74). In these motions-still pending before the Court-Baker Donelson maintains that Blue Cross denied reimbursement claims out of concern for the “safety and efficacy of [the UAS] allergy testing and treatment” protocols. (Rec. Doc. 74-1 at 9).

         APPLICABLE LAW

         A motion to disqualify is a substantive motion that affects the rights of parties; analysis of the motion is therefore subject to the standards that have developed under federal precedents. In re American Airlines, Inc., 972 F.2d 605, 610 (5th Cir. 1992). Attorneys practicing before this Court are subject to the Rules of Professional Conduct of the Louisiana State Bar Association, because these are the professional standards have been adopted by our Local Rules. L.R. 83.2.10. Nevertheless, “how these rules are to be applied are questions of federal law.” Id. at 610 (emphasis added). Furthermore, the Local Rules and the Rules of Professional Conduct are not the “sole authorit[ies] governing a motion to disqualify.” Id. (citing In re Dresser Industries, Inc., 972 F.2d 540, 543 (5th Cir. 1992)). Courts also consider the ABA's Model Rules of Professional Conduct and the ABA's Model Code of Professional Responsibility.[3] Parker v. Rowan Companies, Inc., No. CIV.A. 03-0545, 2003 WL 22852218, at *2 (E.D. La. Nov. 25, 2003) (J. Vance) (citing Horaist v. Doctor's Hospital of Opelousas, 255 F.3d 261, 266 (5th Cir. 2001)). Additionally, “[a] Court must take into account not only the various ethical precepts adopted by the profession but also the societal interests at stake.” F.D.I.C. v. U.S. Fire Ins. Co., 50 F.3d 1304, 1314 (5th Cir. 1995). The relevant provisions of the Rules of Professional Conduct provide:

Rule 1.9. Duties to Former Clients
(a) A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless ...

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