L.A. Judge Tosses Aetna Suit Against Plaintiffs’ Firms

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L.A. Judge Tosses Aetna Suit Against Plaintiffs’ Firms

By Alison Frankel, REUTERS

September 10, 2018


(Reuters) – Aetna’s quest to pin the blame on someone else for exposing the HIV status of thousands of its health insurance customers ran into a cul-de-sac on Friday. Los Angeles Superior Court Judge Richard Rico dismissed Aetna’s case against Whatley Kallas and Consumer Watchdog, holding that the insurer’s claims failed under California’s anti-SLAPP prohibition on suits intended to silence or intimidate critics. Aetna still has a parallel suit against the plaintiffs’ firms under way in federal court in Philadelphia, but Judge Rico’s decision is a welcome confirmation that anti-SLAPP laws protect consumers and the lawyers who represent them.

Aetna’s suit, as I’ve reported, arose from what is surely the most expensive fiasco in the history of claims administration. This takes a bit of explaining. Back in 2014, Aetna announced a new policy that would require healthcare plan members to receive HIV medications by postal delivery, rather than picking up their meds at the pharmacy. Consumers – including plaintiffs represented by Whatley Kallas and the non-profit Consumer Watchdog – filed prospective class actions claiming (among other things) that the new policy violated their privacy rights because neighbors and employers would see the deliveries, which come in special refrigerated containers.

Aetna ultimately agreed to ditch the policy change and to allow health plan members to continue to fill HIV prescriptions at pharmacies. The insurer’s settlement with consumers called for the claims administrator Kurtzman Carson Consultants to mail notifications to about 12,000 Aetna health plan members.

Unfortunately, the notification was mailed in an envelope with a see-through window that showed not just recipients’ names and addresses but also the words “when filling prescriptions for HIV medications.” In other words, the settlement notification exposed exactly the private health information that consumers had sued Aetna to protect.

Outrage ensued. Aetna spent about $20 million to settle a class action over the settlement notification and to resolve the New York Attorney General’s investigation of the incident. The company has alleged it may face additional repercussions from the botched notice.

Aetna insisted it wasn’t the true villain of the tale. Last February, the insurer sued KCC in Philadelphia federal court, blaming the claims administrator for choosing the overly revealing envelope. KCC counterattacked with a complaint in Los Angeles federal court accusing Aetna of failing to safeguard its customers’ private health data, but the judge in its case deferred to the first-filed Philadelphia case. KCC has moved to dismiss, transfer or stay the Philadelphia case.

Aetna also sought to rope in Whatley Kallas and Consumer Watchdog, in nearly identical suits in federal court in Philadelphia and Superior Court in Los Angeles. The insurer contended that plaintiffs’ advocates recommended KCC as a claims administration, demanded Aetna give KCC confidential information about its customers and then neglected to protect the information.

In Friday’s decision, Judge Rico in Los Angeles said Aetna can’t bring claims based on litigation in which consumers express their grievance against a corporation. “The claims arise solely from (Whatley Kallas’ and Consumer Watchdog’s) involvement in a settlement that required mailing of notices,” the judge wrote. “All of this is indisputably appropriate conduct and is subject to the litigation privilege.”

Judge Rico is not the first California court to hold that lawyers’ actions in litigation fall under the aegis of California’s anti-SLAPP statute. Friday’s opinion quoted at length from 2017’s Optional Capital v. Akin Gump (18 Cal.App.5th 95), in which a state appellate court barred a venture capital fund’s claim that by representing a former Optional Capital investor, Akin Gump helped the investor loot the fund.

Aetna’s lawyers at Manatt Phelps & Phillips argued that the insurer was alleging a breach of duty to the very clients Whatley Kallas and Consumer Watchdog were supposed to be representing. Citing precedent in which California courts denied an anti-SLAPP motion to dismiss a malpractice suit, Aetna contended that Whatley Kallas and Consumer Watchdog should not be shielded by litigation privilege. The judge rejected that analogy, holding that there’s little doubt the anti-SLAPP litigation privilege encompasses settlement negotiation and enforcement.

Moreover, he wrote, the original consumer privacy litigation against Aetna is exactly the sort of public grievance the California law was intended to protect. “The situation is a classic case of an attempt to chill and … punish the original plaintiffs for exercising their right to address a grievance,” Judge Rico wrote. “(The plaintiffs’ firms’) actions clearly arose out of their involvement in representing their clients in the settlement, and this current lawsuit for indemnity is a way of punishing the lawyers.”

As I mentioned, Aetna is pursuing a parallel suit against Whatley Kallas and Consumer Watchdog in Philadelphia federal court. Whatley Kallas has moved to dismiss that suit, highlighting Aetna’s jurisdictional gamesmanship in the two-track filings. Consumer Watchdog’s brief is due later this month. The group’s litigation director, Jerry Flanagan, told me in an email that Judge Rico’s opinion “makes clear Aetna’s suit is meritless” and “will be Exhibit A in our efforts to dismiss the Pennsylvania action.”

Aetna counsel Matthew Kanny of Manatt did not respond to an email requesting comment. Whatley Kallas was represented in the L.A. case by Julian Brew of Thompson Coburn, who didn’t respond to my email.

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