## Facts

- Physicians and physician groups alleged that multiple HMOs used uniform, computerized claims-processing practices to systematically underpay for covered medical services.
- The alleged underpayment methods included applying undisclosed “edits,” bundling services, and ignoring or stripping claim modifiers to reduce reimbursements.
- Plaintiffs asserted federal RICO claims, including a conspiracy claim under 18 U.S.C. § 1962(d), predicated largely on mail and wire fraud.
- Physicians had differing contractual relationships with the HMOs; some agreements contained arbitration clauses and varied in reimbursement terms and structures.
- The suits were consolidated in a managed-care multidistrict proceeding in the Southern District of Florida.

## Issues

1. Whether Rule 23(b)(3) predominance was satisfied for classwide RICO claims where causation and any reliance related to mail and wire fraud predicates could require individualized proof.
2. Whether predominance was satisfied for state-law contract and related claims given variations in contract language, payment terms, and course-of-dealing evidence.
3. Whether a Rule 23(b)(3) class action was superior and manageable in light of the size of the litigation and potentially individualized damages and proof.

## Decision

- The court granted interlocutory review under Rule 23(f) and issued a mixed ruling on certification.
- The court affirmed certification as to the central RICO conspiracy theory to the extent liability turned on common proof about an alleged agreement and uniformly implemented underpayment practices.
- The court reversed or narrowed certification for claims (including many contract-based theories) that depended on individualized contract interpretation, individualized proof of causation or reliance-type showings, or individualized performance histories.
- The court held that manageability and superiority favored class treatment for common liability questions tied to the alleged uniform scheme, but not for claims dominated by individualized issues.

## Legal Principles

- Rule 23(b)(3) predominance is a qualitative inquiry focusing on whether common questions are more central to liability than individual questions.
- A RICO conspiracy claim under § 1962(d) can be suitable for class treatment when the key liability question is a common one: whether defendants agreed to pursue a racketeering scheme implemented through standardized practices.
- In civil RICO cases predicated on fraud, individualized reliance is not invariably required to certify a class when the alleged fraudulent conduct operates through uniform mechanisms and the asserted injury flows from those mechanisms.
- Class treatment is generally inappropriate for contract-based claims when liability requires individualized interpretation of varied agreements and individualized evidence of performance and breach.
- Superiority may be satisfied where individual claims are comparatively small and class treatment reduces duplicative litigation and inconsistent liability outcomes, but individualized issues can defeat manageability for particular claims.

## Conclusion

The Eleventh Circuit held that class certification under Rule 23(b)(3) was appropriate for the physicians’ core RICO conspiracy theory premised on an alleged uniform, systemwide underpayment scheme, but improper (or subject to substantial limitation) for claims requiring individualized proof, especially those turning on divergent contract terms and individualized causation or reliance-related questions.


Klay v. Humana, Inc., 382 F.3d 1241 (11th Cir. 2004)