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RNs granted class certification in antitrust wage-fixing litigation against Detroit-area hospitals

September 19th, 2013  |  Joy Waltemath

By Susan L. Smith, J.D., MA

Two RNs successfully obtained certification of a class of RNs who provided direct patient care in short term acute care facilities while employed by eight Detroit area hospitals from December 12, 2002, through the present by demonstrating predominance and superiority (Cason-Merenda v. VHS of Michigan, Inc., September 13, 2013, Rosen, G). The RNs alleged that the hospitals violated Sec. 1 of the Sherman Act by agreeing to regularly exchanging compensation-related information among themselves in a manner that reduced competition among Detroit-area hospitals in the wages paid to RNs (rule of reason claim). The RNs met the Rule 23(a) numerosity, commonality, typicality, and adequacy of representation, and the action was maintainable under Rule 23(b)(3). The court concluded that all three elements of the RNs’ rule of reason claim – a violation of antitrust law, antitrust impact, and damages – may be established through predominantly common evidence and individualized inquiries will not play a significant role as to these three elements of the RNs’ claim.

Procedural background. The RNs sought to recover on behalf of themselves and a class of RNs against eight Detroit area hospitals alleging that the health care providers had conspired among themselves and with other local hospitals to hold down the wages of the RNs employed by the hospitals (per se claim) and had exchanged compensation-related information to reduce wage competition (the rule of reason claim). In a prior ruling, the court granted summary judgment to the hospitals on the per se claim. The court also granted final approval to settlements reached between the RNs and three of the hospitals and preliminarily approved settlements with four additional hospitals, leaving VHS as the sole hospital against which the RNs are litigating their antitrust claims.

Rule 23(a) prerequisites. To obtain class certification, the RNs first had to establish that (1) the class was so numerous that joinder of all members was impractical; (2) there were questions of law or fact common to the class; (3) the claims or defenses of the parties were typical of the claims or defenses of the class; and (4) the representative parties would fairly and adequately protect the interests of the class. The RNs and their expert estimated that the proposed class had over 20,000 members, thus satisfying the numerosity requirement. In addition, the RNs’ rule of reason claim raised a number of common issues, including: a common course of action, namely, the hospitals agreed to exchange wage information to use in the RN wage determinations; an antitrust injury, a depression in RN wages flowing from an anticompetitive aspect of the hospitals exchange of wage data; and a common question, whether the claim of each class member depended upon whether the benchmark analysis of the RNs’ expert offered a viable and permissible measure of the wage loss suffered by this particular member of the RN class.

Because the claims of the named RNs and the remaining members of the proposed class all arose from the same conspiracy and were based on the same theory of liability under the Sherman Act, the typicality standard was met. The court found that the named RNs met the adequacy of representation standard in that the RNs had interests in common with the unnamed class members as hospital nurses, in seeking to recover damages related to depressed wages, and in demonstrating their willingness to pursue the interests of the RN class.

Rule 23(b)(3). To satisfy Rule 23(b)(3), “a plaintiff must establish that the issues in the class action that are subject to generalized proof, and thus applicable to the class as a whole predominate over those issues that are subject only to individualized proof.” Although VHS identified other court cases where the court declined to certify classes in antitrust suits featuring wage suppression, the court found here that each of the cases was distinguishable from the RNs’ claim. VHA’s challenges did not lead to the conclusion that the RNs’ showing of antitrust impact, causation, or the damage elements of their antitrust claim would entail predominantly individualized inquiries directed at the characteristics of each member of the proposed class. Therefore, the court concluded that the RNs satisfied both the predominance and superiority prongs of Rule 23(b)(3).

The RNs’ expert described a broad outline of a benchmark methodology through which harm to the proposed class could (theoretically) be examined and measured, and produced a report in which he applied his benchmark approach to the record. Rather than relying on averages to demonstrate antitrust impact or measure harm allegedly suffered by the proposed RN class, he had derived what he characterized as a “conservative estimate” of the “but-for” hourly pay rate that each member of the proposed RN class would have received in a competitive market, at a minimum, in the absence of the hospitals’ alleged agreement to regularly share RN compensation data.

Quoting its earlier opinion the court stated “so long as [the expert] is able to persuade the trier of fact that his benchmark provides a truly conservative estimate of “but-for” wages . . . this will suffice to establish that the Defendants’ alleged antitrust violations had a common impact on the members of the plaintiff class, even if this benchmark might not accurately measure the precise harm suffered by each individual class member.” In addition, the court agreed with the RNs that the variations in certain components of the hospitals’ pay structures and the disparities in the amounts of compensation received by the members of the proposed class did not defeat the RNs alternative effort to establish indirectly the antitrust impact through common proof of shared or similar features among the wage structures implement by the hospitals.