Blue Cross Blue Shield of North Carolina v. Jemsek Clinic, P.A.

In 2003, a group of doctors filed a nationwide class action against Blue Cross and Blue Shield Association and its member entities, including Blue Cross NC (Love v. Blue Cross and Blue Shield Ass'n). The doctors alleged that the Blue Cross companies used several underhanded business practices to deny, delay, and reduce payments for medical treatments based solely on considerations of cost. After Blue Cross NC filed suit against debtor and his clinic in 2006, debtor filed for Chapter 11 bankruptcy for himself and on behalf of his clinic. Debtor then removed Blue Cross NC's suit to the bankruptcy court, asserting affirmative defenses and nine counterclaims that were essentially the same as in Love. In 2007, the Love parties entered into a settlement and enjoined the doctors from litigating any released claims. It was undisputed that debtor was a putative member of the Love class and that this injunction applied to his first seven counterclaims. Ten months after the Love court had issued its injunction, Blue Cross NC informed the bankruptcy court of the injunction. In 2009, after a nearly two-year hiatus in the North Carolina bankruptcy proceedings, debtor filed a motion for sanctions against Blue Cross NC. The bankruptcy court granted the motion, finding that Blue Cross NC purposefully avoided informing the court and debtor about the Love settlement and the injunction, causing the lost of counterclaims worth potentially millions, delayed litigation, and attorneys fees and costs. The bankruptcy court dismissed Blue Cross NC's claims with prejudice and ordered it to pay debtor a total of $1.29 million in attorneys' fees and costs. The court concluded that the bankruptcy court did not err in finding that Blue Cross NC acted in bad faith. However, the court explained that the sanctions were excessive and based on a faulty premise: that Blue Cross NC bore the responsibility for debtor's lack of diligence. Accordingly, the court vacated and remanded for further proceedings. View "Blue Cross Blue Shield of North Carolina v. Jemsek Clinic, P.A." on Justia Law