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A split Ninth Circuit panel on Tuesday overturned Sutter Health's win in insurance plan purchasers' $400 million antitrust suit, ruling that the lower court wrongly excluded "highly relevant" evidence — including admissions by Sutter executives — that would've helped the purchasers potentially prove claims they overpaid thanks to Sutter's anticompetitive conduct.

The majority held that the California federal court abused its discretion when it excluded all evidence of Sutter's conduct before 2006, or five years before the purchasers' contracts were negotiated. That evidence would've refuted many of Sutter's arguments during the 2022 jury trial, according to the opinion penned by U.S. Circuit Judge Lucy H. Koh and joined by U.S. Circuit Judge Roopali H. Desai.

On top of that, the district court should've instructed the jury to consider Sutter's anticompetitive "purpose," the majority said. Instead, it adopted Sutter's proposed instructions, which omitted the word "purpose," and told the jury that the purchasers had to prove that the "effect of Sutter's conduct was to restrain competition," per the ruling.

"These errors were prejudicial, so we reverse," Judge Koh said.

However, U.S. Circuit Judge Patrick J. Bumatay said in a dissent that the jury's verdict should've been affirmed because it's up to the district court — not the appellate court — to determine the reasonable cutoff date for relevant evidence.

"So broad is the district court's discretion in this context that, to my knowledge, no federal circuit court has ordered a retrial based on the setting of a reasonable evidence cutoff date," he said. "We are now the first."

The class of roughly 3 million premium payors allege that Sutter used its market power to illegally force insurers to agree to contract terms blocking plans that steered patients to lower-cost hospitals. Sutter also forced insurers to contract for services at Sutter's more expensive hospitals in order to get access to the hospitals that members needed, the purchasers claimed. The suit was initially filed more than a decade ago.

The class is composed of those who purchased health insurance policies from Blue Shield, Anthem Blue Cross, Aetna, Health Net or United Healthcare, which accounts for the vast majority of all fully insured patients in California, according to an expert for the plaintiffs.

A nine-member jury sided with Sutter in March 2022, following a four-week trial. The purchasers' appeal landed in the Ninth Circuit later that year.

During oral arguments in August 2023, Judge Koh appeared to lean toward undoing Sutter's victory, questioning the various pieces of evidence omitted from the trial. Judge Koh said at the time that the exclusion "just seems contrary" to state precedent.