Tennessee Supreme Court Rejects Efforts to Alter Existing Law on the Collateral Source Rule in Personal Injury CasesLast month the Tennessee Supreme Court, in Dedmon v. Steelman, affirmed the long-standing collateral source rule in personal injury cases. As long as an injured plaintiff can establish that the medical expenses they incurred were reasonable and necessary for their treatment, the full amount of the charges from the medical providers can be accepted into evidence. Defendants cannot challenge the reasonableness of these medical expenses with evidence of the actual (discounted) amounts paid to medical providers by the plaintiff’s insurance provider.

Defendants sought to extend the Court’s decision in West v. Shelby County Healthcare Corp. to personal injury cases. West interpreted Tennessee’s Hospital Lien Act (HLA) to preclude a hospital from seeking the balance of medical expenses charged to a patient after the hospital had accepted discounted payment from the insurance company in satisfaction of the debt.  Since a lien only exists for the amount a patient owes, “reasonable charges” could not exceed what the patient was required to actually pay the hospital.

The Court in Dedmon rejected the defendants efforts to limit recovery of injured plaintiffs to the discounted amounts that medical providers accepted from insurance companies in payment of medical expenses. The Court considered and rejected the “actual amount paid,” “benefit of the bargain,” and “reasonable value/actual amount paid” approach adopted in other jurisdictions. Finding that these alternatives created as many problems as they solved, the Court retained Tennessee’s “reasonable value/full bill” approach.

To rebut an injured plaintiff’s claim that the charges are reasonable and necessary, defendants are limited to competent evidence that does not run afoul of the collateral source rule.

Practical effect: No change in Tennessee to proving or disputing an injured plaintiff’s medical expenses.

A Corporation May Not Pick and Choose Its Citizenship to Create Diversity under CAFAThe Sixth Circuit became the third court of appeals to reject the “alternative citizenship” theory of diversity under the Class Action Fairness Act (CAFA).  In Roberts v. Mars Petcare US, Inc., a putative class of Tennessee citizens sued Mars Petcare in Tennessee state court.  Mars Petcare removed the case to federal court, relying on diversity jurisdiction under CAFA, 28 U.S.C. § 1332(d), which provides for federal jurisdiction over class actions involving at least 100 class members, with $5 million or more at stake, and in which “any member of a class of plaintiffs is a citizen of a State different from any defendant.”  Unlike diversity jurisdiction in most other contexts, CAFA allows minimal diversity—as long as one plaintiff maintains citizenship in a state different from one defendant’s citizenship, diversity is satisfied, regardless of where all other parties reside.

As a corporation, Mars Petcare is a citizen of both its state of incorporation, Delaware, and the state where it maintains its principal place of business, Tennessee.  A class of Tennessee plaintiffs facing a Tennessee defendant cannot satisfy even minimum diversity.  Yet Mars Petcare argued that diversity nevertheless existed under CAFA based on the company’s Delaware citizenship.  Under Mars Petcare’s argument, the company could pick between its Delaware and Tennessee citizenship to either satisfy or defeat diversity.  The Sixth Circuit easily rejected the company’s argument, relying on § 1332’s plain meaning, historical context, and constitutional avoidance.  For purposes of CAFA’s diversity calculus, Mars Petcare is a citizen of Delaware and Tennessee, not Delaware or Tennessee.

The court apparently had no trouble arriving at this decision; it published an opinion just two days after oral argument.  In doing so, the Sixth Circuit joined the Fourth and Eleventh Circuits in rejecting various class-action defendants’ alternative-citizenship theory of diversity, leaving the theory with unanimous rejection in the courts of appeals to have addressed it so far.

Clawing Back Secrets after Shane GroupIt is clear by now that the federal courts in Tennessee are not a safe place for most sensitive business information. Legitimate trade secrets are safe. Well-established privileges (e.g., attorney-client privilege) still apply. And the courts still respect statutory requirements to protect things like personal health information. But unless your sensitive business information is a matter of national security, a recent series of Sixth Circuit opinions means you cannot expect to get or keep a broad seal covering documents in the courts’ records. Now that Tennessee’s federal courts cannot keep your secrets, how do you get them back?

Redact and Replace

The core principle of Shane Group is that the public generally is entitled to see whatever the courts rely on in deciding the merits of the cases before them. So if your secrets are irrelevant to the merits of the case—e.g., names of customers or suppliers unrelated to litigation with a third party—consider redacting the irrelevant secrets and filing a substitute document with the court.

This gets more complicated (and expensive) when relevant and irrelevant information are intertwined in a document or a document would require extensive line-by-line redactions. When redactions are not cost effective, consider substituting a stipulation to the relevant facts.

Redact and Justify

The courts are serious about maintaining themselves as open institutions, and the extra procedural requirements of the Shane Group cases make it much easier for a court to just deny a motion to seal. But if your secrets are necessary for deciding the merits of your case and they satisfy the substantive standards of Shane Group, the extra procedural steps are demanding but clear.   

Narrowly redact the protected information, and make a chart as you go documenting, line-by-line, the reason for the redaction backed up by legal citation. If you make it easy for the court to follow what you redacted and easy to adopt your explanations in its order, you stand a much better chance of keeping the original document under seal.

Work With (or Around) Opposing Counsel

Each of these approaches is more difficult when your secrets are in the other party’s filings. If both parties have secrets in the record, consider collaborating on an agreed order dealing with both parties’ sensitive information in a Shane Group-compliant way. If opposing counsel sees Shane Group as an opportunity to gain leverage, consider whether your current protective order gives you the right to claw back or redact documents already produced in discovery.

Keep Your Head Down, But Not In the Sand

While you are preparing Shane Group-compliant replacements or justifications, try not to draw the court’s attention to the sealed documents. This means avoiding new motions to seal documents that might trigger a general “show cause” order.

Do not, however, simply hope that no one will notice. The Sixth Circuit has vacated seals on its own motion, and district courts in Tennessee are following the Sixth Circuit’s lead by proactively addressing old seals. If your secrets are under seal in an active case in Tennessee’s federal courts, you should expect to encounter Shane Group sooner or later. Be prepared.