Appeals court revives $411M antitrust class action against Sutter Health

An appellate court panel has resuscitated a nine-figure antitrust class-action lawsuit against Sutter Health, ruling Tuesday that a 2022 jury was given improper instructions and that a new trial must be held.

The case, filed in the U.S. District Court for the Northern District of California back in 2012, alleged that the nonprofit health system used its market power in an uncompetitive healthcare market to force health plans into contracts that only included inpatient services at Sutter-affiliated hospitals.

Plaintiffs also alleged that Sutter forced contracts that prevented plans from steering patients to lower cost, non-Sutter providers for services and that removing those alternatives allowed Sutter to charge health plans high rates for its services.

The plaintiffs, representing a class of individuals and businesses who paid premiums to the allegedly overcharged plans, claimed about $411 million in damages from 2011 to 2020. In March 2022, a jury unanimously ruled in favor of Sutter Health following a monthlong trial.

On Tuesday, however, the 9th U.S. Circuit Court of Appeals ruled 2-1 to reverse the district court’s final judgment and remand for a new trial.

The appellate court wrote that the lower court had removed the word “purpose” from its instructions to the 2022 jury and in doing so “fail[ed] to instruct the jury to consider Sutter’s anticompetitive purpose as to the [plaintiffs’] unreasonable course of conduct claim.”

Further, the majority found that the district court should not have instructed jurors to ignore evidence predating 2006. This included internal emails that “concerned the inception, Sutter’s stated purpose and effects of the conduct challenged during the trial,” the court wrote.

“The excluded evidence would have rebutted Sutter’s testimony and arguments at trial,” according to the order.

Circuit Judge Patrick Bumatay stood by the jury’s initial verdict, writing in his dissent that the district court should be able to set “reasonable limits” for evidence in cases with long histories, “otherwise, jurors will be forced to consider every tangential storyline a litigant wants to introduce.”

Bumatay also warned that the majority’s requirement that juries consider anticompetitive purpose “creates a new antitrust rule” that will be “the law for every California and federal antitrust case going forward.”

Sacramento-based Sutter Health reported more than $16.1 billion in total revenues across 2023 and $320 million in operating income. It served 3.4 million patients that same year and employs over 57,000 people.  

The system said it disagrees with Tuesday's ruling and plans to contest the decision.

"Sutter Health is disappointed by today’s divided appellate ruling overturning a unanimous jury verdict in our favor finding Sutter did not violate antitrust laws,” a spokesperson for the system told Fierce Healthcare in an email statement. “Sutter Health intends to pursue all avenues to overturn the erroneous decision, as guided by our commitment to caring for our patients and continuing to provide them with high-quality, connected and affordable care."