The Inclusion of Diversity in the Selection Process Of A Class Settlement Monitor Is In The Public Interest, UFCW & Employers Benefit Trust v. Sutter Health, et al., Case No. CSG 14-538451 (Cal. Sup. Ct. San Francisco. Cnty, 2021).

Anthony Leon in-house counsel

In a recent order, Judge Anne-Christine Massullo of the San Francisco Superior Court granted a motion for preliminary approval of Sutter Health’s $575 million settlement in the long-standing antitrust class action intended by the UFCW & Employers Benefit Trust (UEBT) and the State of California, UFCW & Employers Benefit Trust v. Sutter Health, et al., Case No. CSG 14-538451 (Cal. Sup. Ct. San Francisco. Cnty, 2021). The approval comes more than a year after the parties reached a settlement, as the Court originally denied it due to concerns over the settlement monitor’s selection process.

In 2014, the UEBT filed an antitrust class action against the Northern California healthcare provider Sutter Health. The plaintiffs alleged that Sutter Health entered into anticompetitive contracts with network vendors resulting in overcharges by its hospitals, in violation of California’s antitrust and unfair competition law. The State of California initiated its case against Sutter Health in 2018, which was then consolidated with UEBT’s case. Originally scheduled for a three-month jury trial starting in late 2019, the parties made public days before the trial of their intention to settle. The settlement was finalized in December 2019.

In the course of reaching an agreement, the parties also searched for a settlement compliance monitor. Both parties looked for candidates and selected a small pool of fifteen potential candidates using criteria such as: antitrust and healthcare knowledge and experience, lack of actual or potential conflicts of interest, ability to be impartial based on prior experience and or current professional relationships, and reputation for effectiveness, fairness, and good judgment. The parties narrowed down the list to five candidates, whose application was then individually solicited. All of these candidates were White men. In the meantime, Defendant’s attorney kept searching for potential monitors and found Ms. Dionne Lomax, a Black woman. Ms. Lomax, who was solicited after the five other candidates, did not apply as she thought she would not have the resources required for a lead position. She ended up being on the team of another candidate, Mr. Jesse Caplan. Mr. Caplan’s team was then designated by both parties to be the monitor.

Plaintiff filed a motion for preliminary approval of the class action settlement in December 2019. Mr. Caplan’s appointment as a monitor was part of the settlement. Due to the pandemic, the hearing originally continued for April 6, 2020, was postponed to August 12, 2020.

The importance of diversity in selecting a class settlement monitor.

On September 22, 2020, Judge Massullo denied the motion for preliminary approval of the class action settlement due to concerns regarding the selection process that led to Mr. Caplan’s appointment, Case No. CSG 14-538451 (Cal. Sup. Ct. San Francisco. Cnty, September 22, 2020). The Court considered that the process used to select the monitor was “unreasonable and contrary to public policy,” Id. at 1. Specifically, the Court found the process to be limited and confidential: in a concise period, only candidates that were solicited have been considered, Id. at 2. As such, Ms. Lomax, who was solicited after the five other candidates—including a man from her organization—and only a few days before the end of the selection period, did not have a fair opportunity to be the monitor, Id. at 9. The Court, in general, regretted the lack of diversity in the selection process, an issue already seen in litigation teams appearing before it, Id. at 9.

There is no legal standard to evaluate the appointment of a class settlement monitor. The guidance published by the American Bar Association and the U.S. Department of Justice develop criteria such as experience, credibility, integrity, relevant skills, costs, etc. These criteria should be used with caution, as much as reputation or prior monitor experience, as they tend to go against diversity. They perpetuate an all-white-men circle of candidates. In Judge Massullo’s words, “[d]iverse candidates are not prohibited from applying, but they are often found to lack the ‘experience’ or ‘resources’ that white male candidates possess on paper, and thus are weeded out of the process before getting even an opportunity to establish themselves,” Id. at 9. Further, “the idea that in 2020 there are only five white men in the United States who are qualified to be interviewed for this position is anathema to what are today basic notions of fairness, equity, and justice,” Id. at 9.

Diversity should be integrated into the selection of a class settlement monitor. This is especially relevant when the People are part of the class action. It is indeed in the public interest to have a selection process that reflects the whole class. There must be public confidence in the monitor selection. As such, parties should use objective criteria in selecting the monitor. 

In this case, the Court questioned the objectivity of the selection process and invited the parties to work on it before the settlement’s preliminary approval. 

The welcomed use of an objective selection process

In March 2021, the Court granted the motion for preliminary approval of the class settlement, including the appointment of Ms. Dionne Lomax as the monitor. During the hearing, Judge Massullo declared she was “very impressed by the second round of interviews of monitors,” Case No. CSG 14-538451 (Cal. Sup. Ct. San Francisco. Cnty, March 10, 2021)

In an affidavit filed in support of the motion, Malinda Lee, Deputy Attorney General within the Health Rights and Access (HRA) Section of the Office of the California Attorney General (AGO), gave a detailed description of the new selection process. During an initial 45-day period request for proposal, the parties publicly called for candidates. The request was circulated to more than 650 recipients and on social networks. After six separate inquiries, the parties received twelve proposals coming from across the country by December 10, 2020. All the proposals were thoroughly reviewed, and the absence of prior experience did not lead to immediate rejection. The applicants were all from various professions, including law, investigations, alternative dispute resolution, consulting academia, and monitoring. Per Melinda Lee, “over 75% of the applicants consisted of proposed lead or co-lead monitors who were people of color and/or women, LGBTQ or some combination thereof,” Affidavit at 5. From this pool of twelve applicants, each party advanced three candidates. Both parties selected Ms. Lomax, and the five other candidates have been interviewed. The parties narrowed down the six candidates to two, one of which being Ms. Dionne Lomax. In Lomax’s team was included Mr. Caplan, who was interviewed individually regarding his prior proposal in 2019. Following an interview of both final candidates, the Plaintiffs and Defendants agreed to appoint Ms. Dionne Lomax as monitor, Settlement at 24. 

Conclusion

This case should encourage parties of a class action settlement to select a monitor using criteria promoting diversity. Fairness, equity, and reasonableness should guide parties during the selection process, which should be as objective as possible. As noted by the Court, an objective and diverse selection process is in the public interest.

The $575 million settlement reached by both parties requires Sutter Health to be monitored for a period that could go up to thirty years. While Sutter Health does not admit guilt, the settlement will ensure that insurers, employers, and self-funded plans will receive details regarding Sutter Health’s services’ quality and pricing.