Biden judges overturn judgment for large health care network and give consumers another chance to recover damages

Judge Lucy Koh, President Biden’s nominee to the Court of Appeals for the Ninth Circuit, wrote a 2-1 decision joined by Biden Judge Roopali Desai that reversed a lower court’s ruling finding a large California health care chain not guilty of state antitrust violations and providing consumers with another opportunity to obtain compensation and other redress. Trump judge Patrick Bumatay disagreed in favor of the network. The June 2024 decision has been made Sidibe v. Sutter Health.

What is the background to this case?

In 2012, Djeneba Sidibe and other individuals and small businesses in Northern California filed an antitrust class action lawsuit against Sutter Health, a large health care system that “includes 24 hospitals” and 40 ambulatory surgery centers. The plaintiffs alleged that Sutter abused its market power by charging “supercompetitive rates” to the health plans through which they purchased health care, which in turn charged them “higher premiums.” They sought monetary damages and injunctive relief under federal and state law.

The case went to trial for damages under the state’s Cartwright Act. After significant pretrial arguments regarding jury instructions and other issues, the jury found in Sutter’s favor and the claims against her were dismissed. Sidibe and his co-plaintiffs appealed to the Ninth Circuit.

How did Judge Koh and the Ninth Circuit rule and why does it matter?

Judge Koh issued a 2-1 ruling, joined by Judge Desai, that reversed the decision in Sutter’s favor. They focused on two major legal errors of the court below. Initially, contrary to customary jury instructions in such cases, she was not told that plaintiffs could prove that Sutter had engaged in “unreasonable conduct” by demonstrating “anti-competitive purpose or effect.” Instead, proof of “anti-competitive effect only” was required.

Koh explained that while evidence of anti-competitive effect is important, precedent clearly shows that purpose is a “relevant factor” that must be taken into account when determining whether conduct is anti-competitive. The dissent “mischaracterizes” the decision below, she added, and it was an “error” for the court not to instruct the jury that it “might consider it an anti-competitive purpose.”

Koh and Desai also ruled that the lower court erred “by excluding pre-2006 evidence from the case.” Based on a careful review of the records, Koh wrote that plaintiffs had evidence that between 2001 and 2005, Sutter began including several specific contract terms in systemwide contracts “in order to impose higher prices.” In fact, she added, the evidence showed that after “imposing the challenged contract terms, Sutter began charging health plans significantly higher rates, as much as 40 to 50 percent higher.” After a careful review of the record and past precedent, Koh concluded that the court below’s exclusion of this important evidence was an “abuse of discretion.”

Judges Koh and Desai therefore vacated the judgment in Sutter’s favor and remanded the case so that Djeneba Sidibe and the other plaintiffs would have a fair opportunity to prove their claims and recover damages in a new trial. In addition to what this result means for victims of Sutter’s anticompetitive conduct, this decision sets an important precedent regarding the proper interpretation of state antitrust law in California. It also serves as an important reminder of the importance of continuing to quickly confirm honest judges to our federal bench.