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From Antitrust Law Daily, October 18, 2016

Anthem, Cigna must disclose letters over merger breach claims in DOJ challenge

By Linda O’Brien, J.D., LL.M.

In the Justice Department’s challenge to the proposed merger of healthcare insurers Anthem, Inc., and Cigna Corp. as anti-competitive, the insurance companies must disclose to the government correspondence from in-house attorneys, in which they accuse each other of breaking their $54 billion merger deal, the federal district court in Washington, D.C., has ruled in adopting a Special Master’s fifth Report and Recommendation (U.S. v. Anthem Inc., October 14, 2016, Jackson, A.).

In July 2015, Anthem, the largest member of the Blue Cross and Blue Shield Association, agreed to acquire all outstanding shares of Cigna for an estimated $54.2 billion. The transaction would make Anthem the largest health insurance company by membership in the U.S.

In July 2016, the Department of Justice, 11 states, and the District of Columbia filed a complaint seeking to block the deal, alleging that the proposed merger between Anthem and Cigna was likely to "substantially lessen competition for the sale of health insurance to large-group employers."

In August 2016, Cigna informed the Special Master appointed to oversee discovery disputes that counsel for Anthem and Cigna exchanged letters accusing their respective corporations of breaching the merger contract. Subsequently, the government served on each defendant requests for production of those documents. Anthem also moved to compel the Justice Department to identify the markets at issue in which the proposed merger was purportedly unlawful and provide the market share calculations used to support its determination.

Counsel correspondence. The court noted that, in his fifth report, the Special Master first determined that the contract letters were relevant to the question of efficiencies. Anthem asserted post-merger synergies as an affirmative defense to the action and, by electing to do so, permitted discovery of any non-privileged matter relevant to any claim or defense. The letters would be evidence as to the likelihood that those synergies would develop.

Next, the Special Master determined that the attorney-client privilege did not protect the letters. The defendants failed to show that the communications related to "a fact of which the attorney was informed by his client," or any context to show precisely what confidential facts were contained in the letters.

Further, although the letters do qualify for protected opinion work product, each defendant voluntarily disclosed the contents of the letters to the other party. Voluntary disclosure waives the work product protection when such disclosure is to an adversary. Here, if the breach of contract claims relating to the merger agreement, then Anthem and Cigna would be adversaries in that litigation.

Finally, the joint defense privilege would not protect documents alleging breach of the merger agreement since their contents did not fall within the "four corners of the joint defense agreements." The joint defense agreements were specific and limited in scope to the instant merger and the letters asserted the wholly different concerns of claims of breach of the merger agreement. Anthem and Cigna offered no evidence that the breach allegations were designed in any way to further the joint defense effort.

Relevant markets. In denying Anthem’s motion to compel the government to identify the relevant markets that are presumptively unlawful, the court noted that the request sought the identification of the actual market shares, the methodology, and the economic models used to calculate those shares. The Special Master, in his sixth report, concluded that such information was opinion work product and Anthem did not show an extraordinary need for the information. The Justice Department had already provided Anthem with the basis upon which it determined that the merger was presumptively unlawful in 20 and 25 markets. However, its method which was used to determine that the merger would result in a more than 33 percent concentration relied on the government’s independent determination of market shares, which was opinion work product.

Even if the identities of the market shares qualified as unprotected factual work product, the Special Master noted, Anthem did not make the necessary showing of a substantial need to obtain the identities or an inability to obtain its equivalent without undue hardship.

Market share calculations. Anthem’s motion to compel production of the government’s market share calculations for the sale of health insurance to large-group employers and alleged monopsonistic impacts on healthcare provider reimbursement rates was also denied by the court. In his fourth report, the Special Master found that, although the requested information on market share calculations was relevant to the claims and defenses of the case, much of the information was protected by the work product doctrine. Similarly, the methodology and economic models used to calculate those shares was also protected opinion work product. Since Anthem failed to show a substantial need or inability to obtain the same information without undue hardship, the government was not required to produce any further data or compilations other than what has already been provided to Anthem, the Special Master concluded.

The case is No. 1:16-cv-01493.

Attorneys: Eric J. Mahr, U.S. Department of Justice, for the United States. Patricia L. Nagler, Office of the Attorney General, for State of California. Rachel O. Davis, Office of the Attorney General, for State of Connecticut. Andrew Keith Mann (White & Case LLP) and Danielle M. Garten (Arnold & Porter LLP) for Anthem, Inc. Andrew J. Forman (Paul, Weiss, Rifkind, Wharton & Garrison LLP) for Cigna Corp.

Companies: Anthem, Inc.; Cigna Corp.

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