Insurance commissioner’s antitrust suit against eyewear giant proceeds

The California insurance commissioner's antitrust lawsuit against the world's largest manufacturer and provider of prescription eyeglass lenses and coatings moved toward trial Wednesday in San Francisco County Superior Court.

Judge Andrew Y.S. Cheng heard oral arguments for a demurrer and a motion to strike the third amended complaint by the state of California, through Insurance Commissioner Ricardo Lara and the relator, Christie Rudolph, accusing Essilor Laboratories of America Inc., of bribing eye care providers and retailers for exclusivity.

Essilor has deals with many of the top 50 optical retailers in the United States including LensCrafters, Sunglass Hut, EyeCare Centers of America and Costco.

The state is seeking civil penalties of $10,000 for each fraudulent claim, three times the amount of each fraudulent claim, damages and restitution sufficient to disgorge its unlawful profit and an order enjoining Essilor from continuing to engage in fraud.

The complaint was filed by Mitchell S. Neumeister, who represents Lara; plus Jeffrey F. Keller and Kathleen R. Scanlan of Keller Grover LLP and Scott Simmer, Noah M. Rich and William G. Powers of Baron & Budd PC, all of whom represent Rudolph. Rudolph says she is a whistleblower who spent 15 years in the eyewear industry, including as district sales manager for Essilor. State of California v. Essilor Laboratories of America, Inc. et al., CGC-16-551940, (S.F. Super. Ct., filed May 11, 2016).

In the complaint, the state accused Essilor of offering and paying hundreds of millions of dollars in bribes to optometrists, opticians and ophthalmologists to obtain new business and reward eye care providers who already patronize its more expensive products and lab services.

Attorneys for the defendant, Samuel D. Jubelirer, Sean C. Cenawood, Kiran Patel, Stephen G. Della Fera, Gadi Weinreich and Jasmine M. Fisher, of Dentons US LLP, successfully moved to strike portions of the complaint in September, leading to the complaint's current redacted iteration.

The state accuses Essilor of violating the Insurance Frauds Prevention Act, and says that "a significant focus of the alleged scheme occurred in California." Essilor wholly or partially owns businesses in California and employed numerous sales consultants in California that allegedly handed out bribes, according to the complaint.

From at least 2008 to the present, the state accuses Essilor of buying and rewarding the loyalty of eye care providers who switched to Essilor products and lab services. Its more expensive services, lenses and lens coatings allegedly drove up the cost of eye care for California insurance policyholders, the state says.

California also accuses Essilor of knowingly violating insurance fraud law. The complaint reads, "before the 2016 filing of this action, Essilor had no code of ethics or employee policies to prevent the illegal conduct alleged here. However, after the filing of relator's detailed complaint describing Essilor's bribery and corrupt business practices, and more specifically the California Department of Insurance's investigation of those allegations, Essilor for the first time adopted clear rules prohibiting the very unlawful practices alleged herein."