Health Net 2002 Annual Report Download - page 79

HEALTH NET, INC. | 77
Provider Track
The provider track includes the following actions involving
us: Shane v. Humana, Inc., et al. (including Foundation
Health Systems, Inc.) (filed in the Southern District of
Florida on August 17, 2000 as an amendment to a suit
filed in the Southern District of Mississippi), California
Medical Association v. Blue Cross of California, Inc.,
PacifiCare Health Systems, Inc., PacifiCare Operations,
Inc. and Foundation Health Systems, Inc. (filed in the
Northern District of California in May 2000), Klay v.
Prudential Ins. Co. of America, et al. (including
Foundation Health Systems, Inc.) (filed in the Southern
District of Florida on February 22, 2001 as an amendment
to a case filed in the Northern District of California),
Connecticut State Medical Society v. Physicians Health
Services of Connecticut, Inc. (filed in Connecticut state
court on February 14, 2001), Lynch v. Physicians Health
Services of Connecticut, Inc. (filed in Connecticut state
court on February 14, 2001), Sutter v. Health Net of the
Northeast, Inc. (D. N.J.) (filed in New Jersey state court
on April 26, 2002) and Medical Society of New Jersey v.
Health Net, Inc., et al., (D. N.J.) (filed in New Jersey state
court on May 8, 2002).
On August 17, 2000, a complaint was filed in the
United States District Court for the Southern District of
Florida in Shane, the lead provider track action in MDL
1334. The complaint seeks certification of a nationwide
class action on behalf of physicians and alleges that the
defendant managed care companies’ methods of reim-
bursing physicians violate provisions of RICO, ERISA,
certain federal regulations and various state laws. The
action seeks unspecified damages and injunctive relief.
On September 22, 2000, we filed a motion to dismiss,
or in the alternative to compel arbitration, in Shane. On
December 11, 2000, the court granted in part and denied
in part our motion to compel arbitration. Under the
court’s December arbitration order, plaintiff Dennis Breen,
the single named plaintiff to allege a direct contractual
relationship with us in the August complaint, was
compelled to arbitrate his direct claims against us. We filed
an appeal in the United States Court of Appeals for the
11th Circuit seeking to overturn the portion of the district
court’s December ruling that did not order certain claims
to arbitration. On April 26, 2001, the court modified its
December arbitration order and decided to retain jurisdic-
tion over certain direct claims of plaintiff Breen relating to
a single contract. On March 2, 2001, the District Court
for the Southern District of Florida issued an order in
Shane granting the dismissal of certain claims with preju-
dice and the dismissal of certain other claims without
prejudice, and denying the dismissal of certain claims.
On March 26, 2001, a consolidated amended
complaint was filed in Shane against managed care compa-
nies, including us. This consolidated complaint adds new
plaintiffs, including Leonard Klay and the California
Medical Association (who, as set forth below, had previ-
ously filed claims against the Company), and has, in addi-
tion to revising the pleadings of the original claims, added
a claim under the California Business and Professions
Code. On May 1, 2001, we filed a motion to compel arbi-
tration in Shane of the claims of all individual plaintiffs
that allege to have treated persons insured by us. On that
same date, we filed a motion to dismiss this action.
Preliminary discovery and briefing regarding the plaintiffs’
motion for class certification has taken place. On May 7,
2001, the court heard oral argument on class certification
issues in Shane. On May 9, 2001, the court entered a
scheduling order permitting further discovery. On May 14,
2001, Health Net joined in a motion for stay of proceed-
ings in Shane v. Humana, Inc., et al. (including Foundation
Health Systems, Inc.) (00-1334-MD) in the United States
District Court for the Southern District of Florida pending
appeal in the 11th Circuit Court of Appeals. On June 17,
2001, the district court stayed discovery until after the
district court ruled upon motions to dismiss and motions
to compel arbitration. This order staying discovery also
applied to other actions transferred to the district court by
the Judicial Panel on Multidistrict Litigation, namely
California Medical Association v. Blue Cross of California,
Inc. et al., Klay v. Prudential Ins. Co. of America, et al.,
Connecticut State Medical Society v. Physicians Health
Services of Connecticut, Inc., and Lynch v. Physicians
Health Services of Connecticut, Inc. On June 25, 2001, the
11th Circuit Court of Appeals entered an order staying
proceedings in the district court pending resolution of the
appeals relating to the district court’s ruling on motions to
compel arbitration. On March 14, 2002, the 11th Circuit
affirmed the district court’s ruling on motions to compel
arbitration. On March 25, 2002, the plaintiffs filed with
the 11th Circuit a motion for relief from the stay. We
joined in an opposition to plaintiff’s motion and joined a
petition for rehearing of the arbitration issues before the
entire 11th Circuit panel. On June 21, 2002, the 11th
Circuit denied the petition for rehearing. Certain defen-
dants filed a petition with the United States Supreme Court
requesting review of a portion of the 11th Circuit’s deci-
sion to affirm the district court’s arbitration order. On July
12, 2002, the plaintiffs filed a motion requesting leave to
amend their complaint. On July 29, 2002, the Court
ordered that the stay of discovery is lifted effective
September 30, 2002.