Mudge must decide if Fifth District decision 'torpedoes' Employers Mutual class action

By Steve Korris | Nov 10, 2011

Mudge Madison County Circuit Judge William Mudge must decide whether Fifth District appellate judges who stopped a Lakin Chapman class action against Travelers Insurance also stopped one against Employers Mutual Casualty.


Madison County Circuit Judge William Mudge must decide whether Fifth District appellate judges who stopped a Lakin Chapman class action against Travelers Insurance also stopped one against Employers Mutual Casualty.

Mudge took it under advisement on Sept. 30, after a hearing where Employers lawyer Thomas Pender compared the Fifth District decision for Travelers to a torpedo.

In both cases, former circuit judge Daniel Stack certified class actions and appointed local chiropractor Frank Bemis as class representative.

Mudge asked Pender, "So you think this is the death knell in the kind of cases of this nature?"

Pender said, "Based on this provider agreement, which is the same provider agreement, yes."

"Based on the payor agreements which are virtually identical, yes," Pender said.

"It's the same class representative, Dr. Frank Bemis. It's the same complaint with the same four theories of recovery."

Robert Schmieder of Lakin Chapman answered, "The Travelers opinion was anything but a torpedo."

He said plaintiffs in the Travelers case would amend the complaint.

"That case is still alive," he said. We're going to be back."

Pender replied, "That further action is going to be Dr. Coy's and Dr. Bemis's single stand alone causes of action against Travelers.

"It will not go back as a class action.

"Maybe Dr. Bemis does have a stand alone claim for his $14 against EMC under these theories, not a class action."

The former Lakin Law Firm filed a series of insurance suits for Bemis in 2005, ahead of the effective date of a national law that steered most new class actions to federal courts.

Stack interpreted the Travelers case as a contract dispute, but Fifth District judges ruled that no contract existed between the insurer and providers.

Employers then asked Mudge to reconsider Stack's class certification order.

Two days before the hearing, the Illinois Supreme Court denied Bemis leave to appeal the Travelers decision.

At the hearing, Pender said Fifth District judges found Bemis agreed to accept reduced reimbursements when he signed a preferred provider contract.

"Nowhere in that contract was the doctor told that he would get an increased volume of patients," Pender said.

Mudge asked Jonathan Piper of Lakin Chapman, "What about this software license agreement, is this is or is it not a payor agreement?"

Piper said, "That's the number one question in this case, is there a contractual relationship here?

"The provider has a contract with the network, the network has a contract with the payor, and the payor has policies with the patients.

"The provider is looking for some sort of increased volume in patient volume through steerage, in return for which he gets discounts on his bills.

"Even if First Health has a payor agreement with First Isaac, which we haven't seen, that may not be a payor agreement because they don't have an obligation to provide health care services or benefits.

"Is Employers claiming that First Isaac is the authorized representative of First Health?

, "That's the big issue on the merits that has to be resolved in the case."

He meant Fair Isaac, third party defendant in the case.

"They cannot turn this software agreement into a payor agreement under the definition of what a payor agreement is," Piper said.

"Was Employers really part of the network based on what the providers had agreed had to happen before they got discounts?"

For Fair Isaac, Richard Lageson said plaintiffs never directed a discovery request to his client in six years.

"Fair Isaac is not a payor," Lageson said.

"They are a software licensing company," he said. "This case should end now.

"We haven't been willing to settle.

"This case has some flawed theories and some flawed facts," he said.

Robert Schmieder of Lakin Chapman said, "They don't have a payor agreement."

"Not one of the things Employers did was legitimate," Schmieder said.

Pender said, "For them to say there is no payor agreement is silly because that was the basis of their class definition."

"Dr. Bemis was never told what counsel is now arguing he should have been told, that this was a payor agreement between a payor like EMC and First Health," Pender said.

He said the Travelers decision was the elephant in the room.

"It is the law now," Pender said.

Schmieder said, "Is it an elephant or is it a dog?

"That's the issue that we teed up, and that's the issue that's common to everybody, and that's why a class action procedure works here."

Mudge said, "I'm going to reexamine the submissions and the Travelers case and issue an order."

As of Nov. 9, it remained under advisement.

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