In re Receivership of Harvard Pilgrim Health Care, Inc.
MA Supreme Judicial Court
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IN THE MATTER OF THE RECEIVERSHIP
OF
HARVARD PILGRIM HEALTH CARE, INC., et
al.
SJC-08354
IN THE MATTER OF THE RECEIVERSHIP OF
HARVARD PILGRIM HEALTH CARE, INC., &
others.[1]
Suffolk. March 5, 2001. – April 26,
2001.
Present: Marshall, C.J., Greaney, Ireland, &
Sosman, JJ.
Health Maintenance Organization.
Receiver. Practice, Civil, Standing, Parties. Supreme Judicial
Court, Appeal from order of single justice, Jurisdiction.
Civil action commenced in the Supreme
Judicial Court for the county of Suffolk on January 4, 2000.
The case was heard by Spina, J.
S. Stephen Rosenfeld (Laurie
Martinelli with him) for Health Care for All.
J. David Leslie, Special Assistant Attorney
General (Eric A. Smith, Special Assistant Attorney General, with him) for
Commissioner of Insurance & another.
Walter W. Miller, Jr., amicus curiae,
submitted a brief.
GREANEY, J.
This appeal arises out of the receivership of Harvard Pilgrim
Health Care, Inc., Pilgrim Health Care, Inc., and Harvard Pilgrim Health Care of
New England, Inc. (collectively, HPHC), which conduct business as health
maintenance organizations (HMO or HMOs).[2] Health Care for
All (Health Care), a nonprofit, consumer advocacy organization, which was
permitted, essentially as an amicus curiae, to participate in the receivership
proceedings, filed notices of appeal from orders entered by the single justice
of this court who presided over the receivership proceedings. The challenged
orders approved the amended plan of rehabilitation of HPHC which was presented
by the Commissioner of Insurance (commissioner) and the Attorney General;
entered permanent injunctions against certain claims being brought against HPHC
and others; and dismissed the receivership proceeding, thereby releasing HPHC
from receivership. Health Care argues that the single justice did not adhere to
applicable legal standards governing his role in overseeing a receivership of
this type because he failed to require the commissioner to produce for
examination business and financial documents of HPHC that the commissioner had
relied on in submitting the proposed plan for HPHC’s rehabilitation. Health Care
asks that the case be remanded to the single justice for additional proceedings
at which the undisclosed information is to be produced and examined. We conclude
that Health Care’s appeal should be dismissed. We shall, however, take this
opportunity to discuss how a dispute like this one should be handled in the
future by a single justice dealing with a HMO receivership.
The background of the case is as follows. On January 4, 2000,
the commissioner, through the Attorney General, filed receivership proceedings
pursuant to G. L. c. 176G, ? 20,[3] and G. L. c. 175, ?
180B, [4] in the Supreme Judicial Court for
Suffolk County, seeking HPHC’s rehabilitation.[5] HPHC assented to these proceedings,
and that same day, a single justice entered a temporary injunction and order
appointing the commissioner as temporary receiver.[6] Subsequently, Health Care moved for
leave of court to appear as an amicus curiae. The commissioner and the Attorney
General notified the court that they did not oppose Health Care’s motion. On
February 1, 2000, a single justice entered the following order:
“It is ORDERED that no action will be taken on the motion[].
Counsels’ appearances will suffice to entitle [Health Care] to receive copies of
all papers and to express [its] positions as to any matter in writing, and, with
leave of court, in oral argument. [Health Care] will not have party
status.”
After having filed two status reports with the court, the
commissioner and the Attorney General moved, on March 20, 2000, for the approval
of a plan of rehabilitation for HPHC. On March 21, 2000, the single justice
entered an order
which: (1) addressed
the manner of notifying interested persons of the proposed plan; (2) established
a deadline of April 10, 2000, for the filing of written oppositions to the
proposed plan; (3) established a deadline of April 18, 2000, for any
response by the commissioner and the Attorney General to any opposition; and (4)
scheduled a hearing on the motion for April 27, 2000. On April 10, Health Care,
asserting that the evidentiary disclosure supporting the commissioner’s proposed
rehabilitation plan was inadequate, filed a motion and memorandum of law
opposing the proposed plan, or alternatively, requesting that the plan be
amended. On April 18, the commissioner and the Attorney General filed an amended
plan for HPHC’s rehabilitation (amended plan), as well as a consolidated
response to the various oppositions filed (including Health Care’s opposition)
to the initially proposed plan.[7] The single justice held a hearing
concerning the amended plan on April 27, at which Health Care, among others, was
heard. On May 24, the single justice entered a memorandum of decision addressing
and rejecting objections, including Health Care’s, to the amended plan, and, an
order approving the amended plan. After the commissioner filed her certificate
(as had been ordered by the single justice) stating that she had completed the
steps necessary to implement the amended plan, the single justice, on June 21,
2000, entered an order dismissing the proceeding, vacating the temporary
injunction, and discharging the commissioner as temporary receiver.[8] Health Care filed notices of appeal
from the orders approving the amended plan, and dismissing the receivership
proceedings.
On appeal, Health Care argues that the single justice erred in
approving the amended plan, and in terminating the receivership proceedings,
“under circumstances where the [r]eceiver failed to disclose to the court and
the affected parties critical financial data, health care business plans and
other reports that served as the exclusive basis upon which the [r]eceiver
relied in recommending that the receivership be terminated.” The specific
documents that Health Care claims should have been disclosed are (1) HPHC’s
“turnaround plan,” (2) HPHC’s “2000 business plan,” and (3) an outside
accounting firm’s (KPMG Peat Marwick) review of the business plan (collectively,
documents). Although the commissioner, in her affidavit in support of the motion
for the approval of the amended plan, identified, and to some extent summarized,
these documents, Health Care argues that the single justice was required to
review these documents independently instead of relying on the commissioner’s
reference to, and summary of, these documents in her affidavit.
The appellees, the commissioner and the Attorney General, argue
that Health Care lacks standing to appeal, and, that, in any event, the single
justice acted within his discretion in not requiring the submission of the
documents. The appellees further argue that this appeal should be dismissed as
equitably moot because the amended plan has been implemented and the
receivership has been terminated.
1. Health Care properly does not dispute the appellees’ claim
that it is not a “party aggrieved” within the meaning of G. L. c. 231, ?
114, and has no standing to appeal.[9] Instead, Health
Care contends that the court should exercise its discretion to hear Health
Care’s appeal because the appeal involves an issue of significant public
interest. In addition, Health Care maintains that other factors weigh in favor
of the court’s exercising its discretion, such as the fact that Health Care was
treated like a party before the single justice, and that the appellees never
argued below that Health Care lacked standing, but had they, Health Care could
have moved to intervene.
Health Care’s latter arguments, listed as “other factors,”
provide no basis to accord it the standing it seeks. The single justice made it
clear, in his February 1, 2000, order, that Health Care would not have party
status in the proceedings, and he essentially treated Health Care, in keeping
with its request, as an amicus curiae and not as a party. The issue of standing
may be raised at any time. See Ginther v. Commissioner of Ins.,
427 Mass. 319, 322 (1998); Litton Business Sys., Inc. v. Commissioner
of Revenue, 383 Mass. 619, 622 (1981). See also Mass. R. Civ.
P. 12 (h) (3), 365 Mass. 754 (1974). Thus, any failure of the
appellees to raise the issue of Health Care’s standing below does not result in
a waiver of the issue. See Litton Business Sys., Inc. v. Commissioner
of Revenue, supra. Further, what Health Care “could have done” in
other circumstances is speculative. If Health Care wanted to be treated as a
party, it should have moved to intervene during the proceedings, or after the
entry of judgment. See Corbett v. Related Cos. Northeast, Inc.,
424 Mass. 714, 718 (1997); Spence v. Boston Edison Co., 390 Mass.
604, 611 (1983).
Health Care’s other arguments that it should be accorded the
equivalent of formal standing to attack the orders in issue merit comment. These
arguments are essentially threefold: (1) because the issues are fully briefed in
an adequate record and concern matters of important public policy that are
likely to recur, they should be decided now, see Lenox Educ. Ass’n v.
Labor Relations Comm’n, 393 Mass. 276, 278 (1984); Wellesley
College v. Attorney Gen., 313 Mass. 722, 731 (1943); (2) amici curiae
(various guaranty funds) in a prior insurance company liquidation case, had
their arguments formally considered by the full court in its analysis and
decision of questions reported to the court by a single justice, see Matter
of the Liquidation of Am. Mut. Liab. Ins. Co., 417 Mass. 724, 727 n.4 (1994)
(American Mutual); (3) a receivership proceeding such as this one is not
truly adversary because the commissioner is given virtually unlimited authority
to decide whether a plan of rehabilitation should be implemented, and the
commissioner’s decision, if improper or unfounded, may adversely affect the
HMO’s subscribers, as well as the health care providers with whom it contracts,
unless some voice in opposition to the decision is fully heard and, if need be,
afforded the right to appeal. The allegation here is that the single justice
merely “rubber stamped” his approval on the commissioner’s amended plan and
terminated the receivership solely on the basis of the commissioner’s
unsupported assurances that HPHC’s unsound financial condition had abated.
Health Care suggests that it is a voice of possible objection to, or
constructive criticism of, the amended plan because (quoting from its motion to
appear as an amicus curiae): it is “a nonprofit, statewide consumer advocacy
organization whose mission is to ensure access to quality health care for
Massachusetts’ vulnerable consumers”; it has “substantial interest and
experience in the various plans offered by [HPHC] and the health care needs of
its members”; it can provide “substantial and important feedback on any
proposals to alter the management structure of [HPHC]”; and “[i]n the case of
insolvency or liquidation, [it] can aid the [c]ourt in the transition and
equitable assignment of alternative insurance plans to cover [HPHC’s] members in
the nongroup, small group, and group markets.”[10]
The longstanding rule is that an amicus curiae is not a party to
the case, and because the amicus lacks standing, it has “no right . . . to bring
the case from one court to another, or from a single judge to the full court, by
[appeal].” Martin v. Tapley, 119 Mass. 116, 120 (1875). See
Caldwell v. A-1 Sales, Inc., 385 Mass. 753, 756 (1982). Thus, an
amicus curiae “is heard only by the leave and for the assistance of the court.”
Martin v. Tapley, supra at 120. See Mass. R. A. P. 17, as
amended, 426 Mass. 1602 (1998). These rules exist because the proceeding has
undergone an adversary hearing in the trial court where an amicus curiae was not
a party, and did not engage in the adversary process. Thus, an amicus is not
permitted to enter the picture on appeal with party status, but is allowed to
assist the appellate court by way of offering information and legal argument.
Usually such argument is limited to only those issues addressed by the parties.
See Pineo v. Executive Council, 412 Mass. 31, 35 n.6 (1992);
United Techs. Corp. v. Liberty Mut. Ins. Co., 407 Mass. 591, 593
n.3 (1990); Samuel Hertzig Corp. v. Gibbs, 295 Mass. 229, 232
(1936).
There is a limited exception to this rule in insurance
liquidation or receivership proceedings that is reflected in the American
Mutual case, supra. That case involved the liquidation of an
insurance company, and the single justice, pending the full court’s response to
his reported questions, denied, “without prejudice,” party status to guaranty
funds seeking intervention. American Mutual, supra at 725-727. The
guaranty funds, however, were permitted to assert their arguments as amici
curiae. Id. at 727 n.4, 729. The single justice reserved and reported the
case on four questions of law, framing the report in such a way that the amici
curiae, the guaranty funds, became the primary source of argument on the appeal
for a position that not only affected their rights, but also was material to a
proper resolution of the reported questions. See id. at 728. This court
exercised its discretion to hear the appeal in this posture and to address and
decide the arguments of the amici. See id. at 727 n.4, 730-731, 733-736.
The reasons behind the exception take into account that, although the single
justice in the county court is acting as a trial judge, the proceedings there
are not truly adversary because the commissioner (at times aided by the Attorney
General if a nonprofit entity is involved) and the financially stressed
insurance company or HMO are the driving force behind resolution of the
litigation. See id. at 727 n.4. There can be objections to the plan
proposed by the commissioner. But, in many cases, there are other objectors who
represent important interests that have relevant information and legal argument,
but who are unable to obtain party status because they do not meet the criteria
under Mass. R. Civ. P. 24, 365 Mass. 769 (1974), to intervene. For this reason,
single justices have consistently afforded liberal allowance to any person or
entity, who has something important to say to the single justice about the
commissioner’s action, to do so by means of amicus curiae
submissions.
The American Mutual case is not on point here. As stated
above, the American Mutual proceedings were framed by the single justice
to bring the amici squarely before us. That procedure was not followed here.
Also, in the American Mutual case, some of the guaranty funds would be
directly affected by the answers to the reported questions. While Health Care
acts as a consumer organization with a special, admittedly sincere, interest in
what occurs with HMOs in distress or not in distress, it makes no claim that it,
or its members, will be directly affected by the receivership proceedings. In
fact, although Health Care asserts it in brief that it “represents the sole
voice before this court for hundreds of thousands of subscribers,” nothing in
the record identifies who Health Care’s members are, let alone whether they are
subscribers, or members, of HPHC. These facts do not exist without significance.
See Animal Legal Defense Fund, Inc. v. Fisheries & Wildlife
Bd., 416 Mass. 635, 638 n.4 (1993) (to possess associational standing,
organization must establish that its members would independently possess
standing). Health Care also does not fully take into account the statutory duty
of the Attorney General to protect the public interest in the lawful operation
of nonprofit entities. Cf. Weaver v. Wood, 425 Mass. 270, 276
(1997), cert. denied, 522 U.S. 1049 (1998). In complying with this duty, the
Attorney General cannot disregard considering the potential consequences to
HPHC’s members associated with the implementation of any proposed rehabilitation
plan. It is important to note as well that Health Care apparently believed that
it could intervene in the proceedings, but chose not to do so, accepting its
assumed status as an amicus, and neglected, as a purported amicus, to comply
with the requirements of Mass. R. A. P. 17.
Finally, as a court of general equity jurisdiction under
G. L. c. 214, ? 1, reviewing a proceeding that is equitable in nature, see
Perez v. Boston Hous. Auth., 379 Mass. 703, 730 (1980), we cannot
ignore the current posture of this case when considering whether to exercise our
discretion to hear the appeal despite Health Care’s lack of standing.[11] In the American Mutual case,
the proceedings were halted until such time as the issues stated in the reported
questions were decided. American Mutual, supra at 727. After our
opinion was released, the case was remanded to the single justice for additional
proceedings based on the analysis and results in the decision. Id. at
739. Here, Health Care did not move to stay the proceedings while it pursued
this appeal. In the meantime, third parties have relied on the challenged orders
in dealing with HPHC, and, in implementing the amended plan. As pointed out by
the appellees, before HPHC was released from receivership, the commissioner, in
accordance with the amended plan, executed several settlements, and since the
termination of the receivership, HPHC “has not only implemented the [a]mended
[p]lan by issuing surplus notes to pre-receivership general unsecured creditors
and processing and paying claims in the [HPHC Rhode Island] liquidation, but it
has also continued with its business. As a result, it has negotiated and entered
into new or renewed contracts with thousands of employers, hundreds of thousands
of members, and hundreds of hospitals, physician groups and other
providers.”
For these reasons, we conclude that Health Care does not have
standing to appeal, and that the circumstances do not warrant our exercising our
discretion to grant the review it seeks. Health Care’s appeal will be
dismissed.
2. The case is an appropriate one to comment generally on how
similar proceedings might be handled in the future by a single justice. See
Wellesley College v. Attorney Gen., 313 Mass. 722, 731
(1943).
The commissioner and the Attorney General (when he is a party)
are public officials who are charged with representing the interests of the
public, and protecting the interests and expectations, to the extent possible,
of policyholders of insurance companies and members of HMOs who may be adversely
affected by the receivership as well as creditors, guaranty funds, reinsurers,
and others. The commissioner is subject to executive and legislative
oversight.
This court, and its single justice, however, play a central role
in receivership proceedings. The court has been authorized by the Legislature to
have exclusive jurisdiction over receivership rehabilitation and liquidation
proceedings. See G. L. c. 175, ? 180B (rehabilitation proceedings), ? 180C
(liquidation proceedings). The court provides a statutorily based independent
judicial oversight of the commissioner’s actions and proposals with a view
toward protecting the rights of the parties as well as the interests of the
public, members of “financially troubled” HMOs, and others with a stake in the
outcome. See St. 1999, c. 143, ? 1.
The single justice should liberally allow amicus status, and the
single justice must comply with the governing standards set forth in G. L. c.
175, ? 180B, concerning the approval of rehabilitation plans and the termination
of receivership proceedings. These standards obligate the single justice: (1)
prior to approving a proposed plan of rehabilitation, to ensure that the
receiver has taken “such measures as may be proper to eliminate the causes and
conditions which caused the institution of such proceeding”; and (2) prior to
terminating the receivership proceedings, to be “satisfied after due notice and
a full hearing that the purposes of the proceedings have been substantially
accomplished.” G. L. c. 175, ? 180B.
These enumerated tasks require the single justice to evaluate
carefully any objections presented by interested amici to termination of the
receivership against the reasons given by the receiver for concluding that the
problems that caused the receivership have been corrected. In making the
evaluation, the single justice “may give such weight as he or she considers
appropriate to the receiver’s expertise as commissioner.” American
Mutual, supra at 738.
The single justice has discretion to determine whether he or she
should examine the underlying documents relied on by the receiver in
recommending termination of the receivership. If, after full hearing, it appears
to the informed satisfaction of the single justice from the records of the case
and the receiver’s submissions that a judgment terminating the receivership is
proper, the single justice may direct that the judgment enter. On the other
hand, if the receiver’s admissions are uninformative by reason of their
conclusory nature or otherwise, then the single justice should not terminate the
receivership, but rather should call either for more detailed submissions from
the receiver or examine the underlying documents in camera (or both). If the
single justice calls for the documents and, after examining them, decides that
expert assistance is needed to reach an informed conclusion, he or she may
engage such help and charge the costs to the receivership. Further, if the
single justice decides, in his or her discretion, that an amicus who had raised
a proper objection and shown a valid interest in the proceedings, should review
and comment on the documents, the single justice may order that the documents be
disclosed to the amicus for confidential review subject, when appropriate, to
protective orders and confidentiality agreements that ensure that confidential
or proprietary information will be adequately safeguarded.
We conclude that the single justice here should have called for
the underlying documents or required the commissioner to provide a more detailed
explanation of the bases for her conclusory opinions. We do not consider the
commissioner’s affidavit and submissions, in light of the record as a whole, to
have been sufficient to show, without either further explanation from the
commissioner or review of the documents by the single justice, that “the
purposes of the [receivership] proceedings have been substantially
accomplished.” Cf. American Mutual, supra at 738 (“To perform
review effectively, the single justice should be provided with the information
on which the receiver’s decision to settle was based. The receiver’s conclusory
statement in her affidavit supporting approval, that the settlement was ‘a
reasonable exercise of [her] authority’ is not enough. The receiver should open
her records for scrutiny [by the single justice]”). For the reasons stated in
Part 1 of this opinion, however, the single justice’s decision to allow
termination of the receivership will not be disturbed.
3. The case is remanded to the county court where a judgment is
to enter dismissing Health Care’s appeal for lack of standing.
So ordered.
FOOTNOTES:
[1] Pilgrim Health Care, Inc., and Harvard Pilgrim Health Care of New
England, Inc.
[2] General Laws c. 176G, ? 1, defines a “[h]ealth maintenance organization”
as:
“a company organized under the laws of the commonwealth, or
organized under the laws of another state and qualified to do business in the
commonwealth, which:
“(1) provides or arranges for the provision of health services
to voluntarily enrolled members in exchange primarily for a prepaid per capita
or aggregate fixed sum.
“(2) demonstrates to the satisfaction of the commissioner [of
insurance] proof of its capability to provide its members protection against
loss of prepaid fees or unavailability of covered health services resulting from
its insolvency or bankruptcy or from other financial impairment of its
obligations to its members.”
[3] General Laws c. 176G, ? 20, inserted by St. 1999, c. 143, ? 7,
provides:
“Any administrative supervision, rehabilitation or liquidation
of a health maintenance organization [that is ‘insolvent or in unsound financial
condition’] shall be deemed to be the administrative supervision, rehabilitation
or liquidation of an insurance company and shall be instituted on the grounds
contained in and conducted pursuant to sections . . . 180A to 180L, inclusive,
of chapter 175 . . . .”
[4] General Laws c. 175, ? 180B, authorizes the commissioner to “institute a
rehabilitation proceeding” by “making application to the supreme judicial court
for [her] appointment as receiver.” On appointing the commissioner as temporary
or permanent receiver, the court may authorize the receiver “to take possession
of all property and effects of the company and to conduct its business for the
purpose of rehabilitating it by taking such measures as may be proper to
eliminate the causes and conditions which caused the institution of such
proceedings, subject to the order of the court.” Id. At any time, the
receiver may apply to the court for a termination of such proceedings and “for
the return to the company of all its property and effects, with authority to
resume the conduct of its business.” Id.
[5] At that time, HPHC provided health care coverage to approximately 1.1
million group, individual, Medicaid, and Medicare members in New England. The
commissioner sought receivership over HPHC after determining that HPHC was “in
an unsound financial condition” based, in part, on: significant deterioration in
HPHC’s financial performance in 1997 and 1998 (HPHC experienced a net loss of
$54 million for the year ending 1998); HPHC’s “thin” capitalization; the failure
of HPHC’s board to restore HPHC’s financial condition through the implementation
of a “turnaround plan”; and HPHC’s projected net operating loss of at least $150
million for the year ending 1999.
[6] On January 21, 2000, an amended complaint was filed adding the Attorney
General as a party plaintiff because of his role, under G. L. c. 12, ? 8, in
overseeing the funds of nonprofit organizations such as HPHC.
[7] The amended plan incorporates certain changes, not relevant here,
suggested by several objectors other than Health Care.
[8] Permanent
injunctions that previously had been entered in connection with the approval of
the amended plan remain in effect.
[9] General Laws c. 231, ? 114, provides:
“A party aggrieved by a final judgment of a single justice of
the supreme judicial court may appeal therefrom to the full court of the supreme
judicial court.”
[10] Insolvency or
liquidation did not occur here, but those steps may follow when a financially
distressed HMO cannot be made stable by means of a plan of
rehabilitation.
[11] We reject the
appellees’ contention that the current posture of the case, that is, the fact
that the amended plan has been implemented and the receivership has been
terminated, presently render the appeal “equitably moot.” See In re Healthco
Int’l, Inc., 136 F.3d 45, 48 (1st Cir. 1998) (equitable mootness test
“inquires whether an unwarranted or repeated failure to request a stay enabled
developments to evolve in reliance on the bankruptcy court order to the degree
that their remediation has become impracticable or impossible,” thus barring an
appeal). Whether remediation of the challenged orders, if ordered, would be
impracticable or impossible depends on the type of remediation ordered, an issue
that cannot be fully examined or resolved unless or until such remediation is
ordered. Such a determination would lie with the single justice. Further, even
if the appeal were moot, in our discretion we could hear the appeal. See
Lockhart v. Attorney Gen., 390 Mass. 780, 783 (1984), and cases
cited (recognizing exception to mootness where issue was one of public
importance, was fully argued, and was very likely to arise again).