Law firms clash over clients in $2.8 billion Blue Cross settlement

By Mike Scarcella and David Thomas

Jan 30 (Reuters) - (Legal Fee Tracker is a weekly feature focused on attorney compensation. Please send tips or suggestions to D.Thomas@thomsonreuters.com)

A tug-of-war is underway between law firms in a $2.8 billion antitrust settlement with Blue Cross Blue Shield, as a deadline approaches for hospitals and other health providers to decide whether to participate in the deal or sue the insurer on their own.

The fight pits plaintiffs firm Whatley Kallas, which brokered the antitrust accord in Alabama federal court, against other lawyers that could seek to represent "opt-out" plaintiffs. At stake are millions of dollars in potential new legal fees for law firms that worked on related prior litigation against the health insurer.

Whatley Kallas asked Chief U.S. District Judge R. David Proctor to bar law firms Zuckerman Spaeder and Polsinelli from soliciting and representing any hospitals opting out of the settlement to wage new cases against Blue Cross. The firm said attorney ethics obligations required it to present its concerns to the court.

"As class counsel we want to make sure that the decisions of class members are made based on full and complete information, coming from lawyers who are not conflicted," the firm told Reuters.

A certain number of opt-outs can sometimes allow a defendant to scrap a class action settlement. That number often is not made public, and it does not appear in the Blue Cross settlement. Whatley Kallas said the opt-out number was not driving the firm's disqualification bids.

Whatley Kallas accused Zuckerman in a court filing of abusing its access to confidential information based on its prior work for a class of insurance subscribers that settled similar claims with Blue Cross in 2020 for $2.7 billion.

Blue Cross was the primary defendant in both cases. Subscribers accused the organization of overcharging them for insurance, and providers said they were under-reimbursed.

The U.S. Supreme Court upheld the earlier settlement last year, and the subscribers' law firms were awarded $667 million in fees.

Polsinelli, according to Whatley Kallas, has a conflict based on other prior work for Blue Cross.

Zuckerman denied that its work on the earlier case created a conflict, and warned in a recent filing that disqualifying the firm from representing hospitals in new Blue Cross litigation could also handcuff dozens of other law firms that were involved in the subscriber case.

"A large number of highly qualified law firms...would be barred from advising and representing prospective opt-outs," lawyers for Zuckerman Spaeder and its partner Cy Smith told the judge, calling Whatley Kallas' allegations false and misleading.

A Polsinelli partner did not immediately respond to a request for comment.

Boies Schiller Flexner, one of the lead firms in the earlier subscriber settlement, waded into the dispute proactively last week, telling the Alabama judge that it should be allowed to continue to represent an anesthesia practice already suing Blue Cross Blue Shield of Michigan.

The firm has represented the client since 2020. The case is on hold pending resolution the providers' class settlement, and Boies Schiller said there is "no basis" to suggest that its prior work in the subscribers' class action would be an ethical conflict.

Whatley Kallas has not moved to disqualify Boies Schiller.

Hospitals and other providers in the Alabama case have until March 4 to opt out of the settlement class.

-- President Donald Trump's picks to represent the United States in international trade negotiations and to lead the U.S. Justice Department's antitrust division filed new financial disclosures this week.

U.S. trade representative nominee Jamieson Greer reported earning $1.4 million in salary from law firm King & Spalding, where he is a Washington-based partner. His clients included the National Milk Producers Federation.

Gail Slater, Trump's choice to lead DOJ's antitrust division, reported earning a $1.1 million salary and $400,000 in severance from Roku, where she served as the streaming service's vice president of public policy. She was an economic adviser for Vice President J.D. Vance.

-- The Nevada Supreme Court on Monday rejected efforts by ride-hailing giant Uber Technologies UBER.N to cap the contingency fees lawyers can earn in civil lawsuits to 20% of the amount their clients' recover.

Nevada's proposed fee cap would have been the most restrictive in the country, opponents of Uber's proposed ballot initiative said. The high court said Uber's initiative contained "misleading and confusing" language.

-- Sierra Leone must face a lawsuit by U.S. law firm Jenner & Block seeking to recover more than $8 million in fees from the West African country for several years of legal work, a federal judge ruled.

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