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Crowell & Moring will withdraw in Humana litigation after Walgreens alleges 'betrayal'

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Crowell & Moring is withdrawing from the representation of health insurer Humana after its litigation opponent accused the law firm of “unethical side-switching.”

Crowell lawyers disclosed their withdrawal in a June 12 brief arguing that there was no conflict of interest in its representation of Humana in litigation against Walgreens.

Law360 has coverage.

Walgreens made the accusation of “betrayal” in a petition to vacate a $642 million arbitration award obtained by Humana for Walgreens overcharges.

Walgreens alleges that Crowell advised Walgreens in 2008 and 2009 on whether a pharmacy savings club would affect the “usual and customary” prices that the pharmacy reported to insurers for reimbursement.

Then in 2017, Crowell sent a “pitch” document to Humana arguing that Walgreens and other pharmacies had overcharged the insurer because the savings club prices were not treated as usual and customary. Humana hired to pursue litigation against Walgreens.

In the June 12 brief, Humana argued that Walgreens failed to file a motion to disqualify at the outset of the arbitration, instead holding its conflict claims as a “get out of jail free” card if it lost in arbitration.

“Such gamesmanship is not permitted, and Walgreens has waived any right to seek disqualification so late in the process,” the brief argues. “To foreclose this kind of gamesmanship, several courts have held that a failure to timely move to disqualify also operates to waive breach of fiduciary duty claims. … The same principle should preclude Walgreens’ argument to vacate the arbitral award based on Crowell’s alleged conflict.”

A separate lawsuit filed by Walgreens against Crowell in Washington, D.C., superior court alleges that the firm breached its fiduciary duty to Walgreens.

The Humana brief was not submitted by Crowell lawyers. A footnote in the brief addressed an issue raised by the judge overseeing litigation over the arbitration award, U.S. District Judge Ana C. Reyes of the District of Columbia, Law360 reports.

Reyes said in a hearing last week language in Crowell’s engagement letter with Humana may explain why the firm was fighting to remain in the litigation. Her reading of the clause is that Crowell must forfeit its fees if it withdraws from the case, according to Law360.

The footnote said neither Humana nor Crowell thinks that the two paragraphs at issue apply to the present situation. Nor do they think that the provision poses “any financial disincentive or impediment to Crowell’s withdrawal here.”

Crowell elaborated in an exhibit attached to the brief in which it answered questions posed in the court hearing.

The paragraphs identified by Reyes provide that Humana owes no fees in two situations, Crowell said. They are: if Crowell withdraws after it concluded that the matter lacked merit or if a conflict arises between Humana and another health plan it represented, leading Crowell to think that withdrawal is required.

“Neither of those circumstances are relevant or a basis for a conflict here,” Crowell says.

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