Sutter Health Sanctioned for Destruction of Evidence

SAN FRANCISCO, CA--(Marketwired - Nov 15, 2017) - The California Superior Court in San Francisco sanctioned Sutter Health yesterday for deliberately destroying 10 years of evidence concerning the healthcare conglomerate's alleged anticompetitive conduct and overcharges at its Northern California hospitals. Judge Curtis Karnow, ruling on a discovery motion in UFCW & Employers Benefit Trust v. Sutter Health (case no: CGC-14-538451), found that Sutter's cover-up was approved by the vice president, who is the alleged mastermind behind its antitrust violations, as well as its in-house legal counsel, despite the requirement that Sutter preserve and disclose its records in ongoing antitrust litigation.

Sutter's lawyer told the Court that his client simply "forgot" about the multi-million dollar antitrust lawsuit when it destroyed the evidence. However, documents show that when the employee instructed to shred the documents "pushed the button," she emailed Sutter Vice President Melissa Brendt to inform her that if the destroyed documents were needed she would be "running and hiding." She went on to say, "Fingers crossed I haven't authorized something the FTC will hunt me down for." The Federal Trade Commission is one of the primary government agencies responsible for enforcing the federal antitrust statutes.

In his decision sanctioning Sutter Health for its destruction of evidence, Judge Karnow said, "The record shows that Sutter's conduct was more than just an inadvertent error. Ms. Brendt personally selected the 10-year timeframe for the boxes to be destroyed."

Sutter Health and its affiliates are defendants in an antitrust class action lawsuit seeking to recover hundreds of millions of dollars of alleged hospital overcharges made possible by the terms of Sutter's agreements with the major health insurance companies in Northern California. 

"Sutter imposed contract terms that illegally insulated it from the discipline of price competition present in any healthy competitive market," said Richard Grossman, lead counsel for the class of more than 1,500 self-funded healthcare plans that directly pay hospitals for the healthcare provided to their employees.

Grossman, a lawyer with Pillsbury & Coleman, welcomed the Court's ruling saying, "Sutter's illegal conduct was a blow to the basic integrity of our court system. Fortunately, the Court recognized that Sutter cannot be permitted to alter the outcome of this important case by shredding the evidence of its conduct." 

Grossman added, "At a time when many members of the public are questioning whether our democratic institutions are still governed by the rule of law, it is comforting to know that our court system continues to insist upon the preservation of incriminating evidence that companies like Sutter would prefer to hide." 

The lawsuit asserts that Sutter entered into agreements making it nearly impossible for health plans to exclude allegedly overpriced Sutter hospitals from their provider networks in locations where high quality, lower priced alternatives are available. Health plans also were allegedly prohibited from giving their members comparative price information or financial incentives to choose hospitals providing better value. 

The plaintiff in the case is UFCW & Employers Benefit Trust, which pays for the healthcare provided to the employees of many Northern California unionized grocery companies and other retailers. On Aug. 14, 2017, it was appointed by the Superior Court to represent all other California self-funded health plans in a class action to recover Sutter's alleged anticompetitive overcharges.

In addition to Pillsbury & Coleman, the plaintiffs are represented by Farella Braun + Martel (John Cooper) of San Francisco; Kellogg Hansen (Michael Kellogg) of Washington D.C.; Cohen Millstein Sellers & Toll (Daniel Small) of Washington D.C.; and McCracken, Stemerman & Holsberry (Steven Stemerman) of San Francisco. Sutter Health is represented by Jones Day (Jeffrey LeVee) of Los Angeles and Bartko Zankel Bunzel (Robert Bunzel) of San Francisco.