Ronald Gold et al.  Individually and on Behalf of all Others Similarly Situated v. Governor John G. Rowland et al. (2013)

MEMORANDUM OF DECISION ON CROSS MOTIONS FOR SUMMARY JUDGMENT

I. INTRODUCTION

This certified class action arises out of defendant Anthem Insurance Companies, Inc.'s ¹ (“Anthem Insurance”) 2001 demutualization, pursuant to which it converted from a mutual insurance company into a stock company.   As part of that process, Anthem Insurance paid stock and cash to its members in exchange for them relinquishing their membership interests in the mutual company.   The plaintiffs, Ronald Gold and Lois O'Connor, on behalf of themselves and similarly situated State of Connecticut employees who had insurance coverage through Anthem at the time of the demutualization, claim that Anthem breached its obligations to them and the other class members by not paying them for their membership interests in the mutual company.   The defendants deny that the plaintiffs were members of the mutual company.   Instead, they argue that the State of Connecticut, through whom the plaintiffs' coverage was provided, was the member.   There is no dispute that Anthem distributed 1,645,773 shares of Anthem, Inc. stock to the State of Connecticut in exchange for what it believed were all of the membership rights that existed by virtue of the policies that covered the plaintiffs.   Thus, the question is whether Anthem was correct in its conclusion as to where the membership interest in the mutual company existed.

The parties have filed cross motions for summary judgment on this question.   Both plaintiffs and defendants claim that the contract documents that governed the demutualization transaction and Anthem's relationship with the State and its employees require that judgment enter in their favor.²  Despite taking this position, both sides have filed numerous exhibits beyond the transactional documents either in support of their claim or in opposition to the other side's motion.

In addition, these are not the first summary judgment motions in this case.   Over ten years ago, the defendants filed a similar motion for summary judgment which was denied by Judge Sheldon. (# 115.00.) Since then, the parties have conducted additional discovery and gathered additional evidence, and courts in other jurisdictions have addressed issues similar to those raised here.³  Consequently, the parties agreed that the court should revisit summary judgment, this time with the plaintiffs also moving for judgment in their favor.⁴

II. UNDISPUTED FACTS

The following material facts are undisputed.   In 1984, Blue Cross and Blue Shield of Connecticut (“BCBSCT”) became a mutual insurance company through a process known as mutualization.   Mutual companies are generally owned by their policyholders, who hold voting or equity rights in the company.   As a result, the individuals and employer groups who owned BCBSCT insurance policies became the owners and members of the company.

In 1989, BCBSCT amended its bylaws to reflect the mutual membership structure.   Article II of the bylaws, entitled “Members,” provided that the company “shall have one class of members, known as Voting Members,” Def. Ex. 1, Art. II, § 1, and stated that “[a] Voting Member shall be any policyholder of the Corporation as hereinafter defined.”  Id. For group insurance policies, the bylaws provided:  “In the case of a group policy, the group as a whole shall be considered one policyholder, and such policyholder's rights as a Voting Member shall be exercised by the individual designated in, or pursuant to, such policy to act for the group for voting purposes.   Individual members of the group who have not been issued certificates shall not be Voting Members.”  Id., Art. II, § 1(b).  The bylaws also provided that “Irrespective of the number of policies held, a Voting Member shall be entitled to cast only one vote[.]”  Id. Art. II, § 1.

In or about July 1989, a BCBSCT subsidiary/affiliate, Community Health Care Plan (“CHCP”), offered the state two Medicare supplement insurance policies for the state's retired employees.   The policies were known as Senior Care 65 and Care Plus. Def. Ex. 3. The state chose the Care Plus policy as the group policy for its retired employees.   Def. Ex. 4, ¶ 3.   The state paid the premiums for the Care Plus plan.   Def. Ex. 5., p. 17.   At the time, the state also offered fully-insured health insurance to its employees and retirees through a separate group policy with BCBSCT.   Def. Ex. 7, ¶ 9.

In 1993, the state abandoned its fully-insured BCBSCT health insurance policy for its employees and retirees and adopted a state funded health plan that was administered by BCBSCT under an Administrative Services Agreement (the “ASO Agreement”) dated October 1, 1993.   Pl.Ex. L. The ASO Agreement was not an insurance policy.  Id., ¶ 10 and Bates-labeled page “STA 000943.”

In 1994, the state closed enrollment in Care Plus to new members for the plan year starting on July 1, 1994.   Def. Ex. 10–11.   However, retirees and dependents who were already enrolled in Care Plus were allowed to continue in the plan.   In approximately 1996, BCBSCT dissolved CHCP and began offering Care Plus directly with the approval of the Connecticut Insurance Department.   Def. Ex. 12–13.   Those individuals covered under the CHCP Care Plus policy consequently became covered under the BCBSCT policy.

In 1997, BCBSCT proposed to merge with Anthem Insurance, at the time an Indiana mutual insurance company.   Because BCBSCT was a mutual insurance company, its members had to vote on and approve the merger.   In connection with that vote, BCBSCT sent its voting members an Information Circular about the proposed merger.   Def. Ex. 15.   In connection with the vote on the proposed merger, the Information Circular provided:  “The company is a mutual insurance company.   It has no shareholders or voting securities.   Instead, the company is owned by its members, who have all the voting rights.   The Company's members are its policyholders.   Each holder of a group or individual policy of insurance of the Company will be entitled to cast one vote (regardless of the number of policies held by such member) in person or by proxy on each matter submitted to a vote of Members at the Meeting.  (Group policyholders, and not the persons constituting the groups, are members of the Company;  accordingly, each group policyholder is entitled to one vote regardless of the number of persons in the group.)”  Id., p. 2. This information was repeated in the Notice of Special Meeting BCBSCT issued for the vote.  “Group policyholders of the Company ․ are members of the Company and are entitled to one vote on all matters submitted to a vote of the members of the Company.   Group policyholders of the Company also possess certain proprietary rights in the Company.   The holders of certificates of benefits issued under the Company's group policies are not members of the Company and are not entitled to vote and do not have membership proprietary rights.”   Def. Ex. 16, p. 14.

When the vote on the merger was held, Nancy Wyman, the Sate's Comptroller, voted the membership interest arising out of the Care Plus insurance policy against the merger.   Def. Ex. 28 Ms. Wyman voted by way of a Voting Member's Proxy dated March 27, 1997.  Id.

The majority of the members of both BCBSCT and Anthem Insurance voted in favor of the merger.   The merger also had to be approved by the insurance commissioners in both Connecticut and Indiana.   In connection with Connecticut's approval, Anthem Insurance and BCBSCT filed a joined statement regarding the merger with the Connecticut Insurance Department.   In that statement, the companies restated the notice BCBSCT had given its members regarding voting rights.  “In the case of a group insurance policy, the group as a whole is considered one policyholder and a Voting Member, entitled to one vote ․ Individuals who are issued certificates under the group policy are not considered to be Voting Members and have no vote separate from the vote of the group.”   Def. Ex. 18, p. 52.

The Connecticut Insurance Department approved the merger on July 31, 1997, Def. Ex. 34, and the merger between Anthem Insurance and BCBSCT became effective that day.   The merger was governed by the Plan and Joint Agreement of Merger (the “Plan and Agreement”), which designated Anthem Insurance as the surviving company of the merger.   Pl.Ex. J. Anthem continued the operation of BCBSCT under the trade name “Anthem Blue Cross & Blue Shield of Connecticut (“New CT–Blue”).

The Plan and Agreement recognized that BCBSCT was a “Qualified Mutual Insurer” and that the merger was a “Qualified Membership Merger” as defined in Anthem Insurance's Third Amended Articles of Incorporation (“1997 Articles of Incorporation”).   Id., § 1.2. The Plan and Agreement also provided that in exchange for each BCBSCT member's interest in BCBSCT, the member would receive:  1) an assumption certificate or an insurance policy or healthcare contract providing the same benefits as provided by the BCBSCT policy prior to the merger;  2) a new Anthem guaranty policy granting the member the right to vote as a member of Anthem and giving the member rights in the event the liquidation, merger, consolidation, or demutualization of Anthem.”   Id., § 3.1. The Plan and Agreement further provided that:  “The Anthem guaranty policy shall continue in effect as long as (1) the health insurance policy or healthcare benefits contract assumed or issued by New CT–Blue pursuant to Section 3.1(A) above is in effect or has been renewed, amended, or replaced, without a lapse in coverage, by any New CT–Blue insurance policy or healthcare contract ․” Id.

Following the merger, Anthem delivered to the state Comptroller's office a new member welcome package, which included a “Group Guaranty Health Policy and Certificate of Membership” (The “Guaranty”).   Def. Ex. 13, 35.   Article IV of the Guaranty, consistent with the requirements of § 3.1 of the Plan and Agreement, set forth the new member's voting and equity rights.   In doing so, it specifically provided:  “No Enrollee or dependent of an Enrollee shall receive any equity rights by virtue of being an Enrollee or dependent of an Enrollee.”   Def. Ex. 35, p. 3. Article VI of the Guaranty also provided that the Guaranty would remain in effect “for so long as the [New CT–Blue] Contract is in effect, or has been renewed, amended, or replaced by any [New CT–Blue] Contract without a lapse in coverage.”  Id.

Anthem Insurance's 1997 Articles of Incorporation also set forth who owned membership interests in the company following the merger.   Def. Ex. 17.   The 1997 Articles of Incorporation were approved by the Indiana Insurance Commissioner on May 27, 1997, as the Anthem Insurance and BCBSCT merger was proceeding to conclusion.   It is undisputed that the Articles were amended at that time in light of that merger and others in which Anthem had been involved Consequently, the Articles discussed membership rights in light of the different mergers.   Section 7.1 of the Articles generally defined Members as:  “(a) all persons to whom certificates of membership have been issued, and (b) all persons who have the rights of members granted to them under insurance agreements made between the Corporation and employers, or group agents, of such persons acting for and on their behalf.”   Id., § 7.1. Sections 7.2–7.5 of the Articles addressed membership rights in light of two other mergers Anthem had completed in 1993 and 1995.   There was no provision in the Articles expressly identifying membership rights arising out of the BCBSCT merger.   Nevertheless, it is undisputed that any such rights are to be determined with reference to Section 7.6, entitled “Qualified Membership Mergers.”   In fact, as noted above, the Plan and Agreement specifically identified the BCBSCT merger as a Qualified Membership Merger.   Section 7.6 sets forth membership rules both for “Former Members of Qualified Mutual Insurers” and “New Members Under Post–Merger Policies, Contracts and Certificates of Qualified Membership Subsidiaries.”   Under the Plan and Agreement, BCBSCT was a Qualified Mutual Insurer.

Section 7.6(b), relating to Former Members, provided:  “Upon effectiveness of the Qualified Membership Merger, all of the members of the Qualified Mutual Insurer shall (1) retain their insurance and/or medical and health benefits under Qualified Contracts, and become members of the Corporation pursuant to, and shall be entitled to receive guaranty insurance policies/membership certificates issued by the Corporation in respect of such Qualified Contracts.   Each such guaranty insurance policy/membership certificate shall continue in effect and confer membership and other rights in the Corporation as long as (x) the related Qualified Contract is in effect, or has been renewed, amended, or replaced, without a lapse in coverage, by any insurance policy or health care benefits contract issued by a Qualified Membership Subsidiary for that Qualified Membership Merger, and (y) the membership fees required under such guaranty policy/membership certificate are paid when due pursuant to the terms of such guaranty insurance policy/membership.”   Def. Ex. 17, § 7.6(b).

Section 7.6(c)(1), relating to New Members, provided:  “Except as provided in Subsections 7.6(c)(2) and (3) below, each holder of an individual insurance policy or health care benefits contract, and each holder of a certificate of coverage under a group insurance policy or health care benefits contract, which individual or group policy or contract is originally issued by a Qualified Membership Subsidiary for that Qualified Membership Merger after the effectiveness of such Merger, shall be entitled to receive a guaranty insurance policy or certificate of membership from the Corporation.   Each such individual guaranty insurance policy and each such certificate of membership issued under a group guaranty insurance policy shall grant the following rights:  (i) voting rights on all matters that come before the members of an Indiana domestic mutual insurance company under Indiana Insurance Law ․;  (ii) a guarantee of the benefits provided under the insurance policy or health care benefits contract issued by the Qualified Membership Subsidiary;  and (iii) rights in the event of a liquidation, merger, consolidation, demutualization or conversion of the Company ․” Id., §  7.6(c)(1).

Section 7.6(c)(3) ⁵  provided that:  “Section 7.6(c)(1) shall apply only with respect to insurance policies and health care benefits contracts, and certificates of coverage thereunder, issued by a Qualified Membership Subsidiary after the effectiveness of the Qualified Membership Merger and shall not apply with respect to Qualified Contracts (or certificates of coverage thereunder) as described in Section 7.6(b), or any insurance policy or health care benefits contract issued as a renewal, amendment or replacement of such Qualified Contracts (or certificates of coverage thereunder) where there was no lapse of coverage.”   Id., § 7.6(c)(3).

From the completion of the merger in 1997 until July 31, 1999, New Blue–CT (the Qualified Membership Subsidiary formed in connection with the merger) continued to provide administrative services to the state's self-funded plan under the 1993 ASO Agreement.   At the same time, New Blue–CT continued to provide insurance coverage to the approximately 500 state retirees who were still enrolled in the Care Plus policy.

On or about July 1, 1999, the state discontinued its self-funded employee health plan and terminated the ASO Agreement.   The state replaced the ASO Agreement with a fully insured group health policy from New Blue–CT (the “1999 Policy”).   Under the 1999 Policy, New Blue–CT began providing fully insured health benefits to substantially the same group of state employees and retirees who had previously been covered by the state's self-insured plan under the ASO Agreement.   The 1999 Policy did not in any way affect the Care Plus policy.

On July 1, 2000, the state terminated Care Plus. At that time, Care Plus covered 512 state retirees.   Those retirees were given the option of enrolling in any of the other available retiree health plans, including the 1999 Policy. 456 of the 512 retirees chose that option.   Pl.Ex. N, § 7.⁶ There was no lapse in coverage for any of those retirees.   In fact, unless they opted out, the retirees that had been covered by Care Plus were defaulted in to the 1999 Policy.

On June 18, 2001, the board of directors of Anthem Insurance approved a plan to convert the company from a mutual company to a stock company (the “Plan of Conversion”).   Pl.Ex. A, ¶ 29;  Def. Ex. 43.   On November 2, 2001, Anthem Insurance filed Amended and Restated Articles of Incorporation with the Indiana Insurance Department, finalizing the demutualization of the company.   Pl.Ex. A, ¶ 27.

In accordance with Indiana's Demutualization Law, the Plan of Conversion established a process by which Anthem would provide its “Eligible Statutory Members” with cash or stock in the new company in exchange for their membership interests in the former mutual company.   Def. Ex. 43, Art. III, V. The Plan of Conversion defined a “Statutory Member” as “any Person who, in accordance with the records, articles of incorporation and by-laws of Anthem Insurance, [was] the Holder of an In Force Policy” that was fully-insured as of June 18, 2001.   Id., Art. XIII, § 13.2. “Eligible” Statutory Members were those who continuously maintained their fully-insured coverage from June 18, 2001 through November 2, 2001.  Id., Pl.Ex. A, ¶ 28.   During the entire period from June 18, 2001 through November 2, 2001 the 1999 Policy remained in effect.

Based on a review of both its records and the records of New Blue–CT, Anthem Insurance determined that the state was an Eligible Statutory Member because it “continuously maintained a group insurance policy with the same subsidiary of Anthem Insurance through the effective date of demutualization.”   Pl.Ex. A, ¶ 29.   Based on this determination, on December 18, 2001, Anthem Insurance transferred 1,645,773 shares of its common stock to the state for any membership rights that existed by virtue of the 1999 Policy or any previously existing policy.   Anthem Insurance made no distribution to the Class members because it did not believe that they were Eligible Statutory Members at the time of the Anthem Insurance demutualization.

Additional facts will be discussed as necessary.

III. SUMMARY JUDGMENT STANDARD

“In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party ․ The party seeking summary judgment has the burden of showing the absence of any genuine issue [of] material facts which, under applicable principles of substantive law, entitle him to a judgment as a matter of law ․ and the party opposing such a motion must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact.”  (Citations and internal quotation marks omitted.)  Liberty Mut. Ins. v. Lone Star Indus., Inc., 290 Conn. 767, 787, 967 A.2d 1 (2009).  “It is not enough, however, for the opposing party merely to assert the existence of such a disputed issue.   Mere assertions of fact ․ are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court [in support of a motion for summary judgment].”  Home Ins. Co. v. Aetna Life & Casualty, Co., 235 Conn. 185, 202, 663 A.2d 1001 (1995).

IV. DISCUSSION

The plaintiffs' sole remaining claim is for breach of contract.   The plaintiffs claim that Anthem Insurance breached its obligation to the Class to pay them for their membership interests in the company when it demutualized in 2001.   The defendants claim that Anthem Insurance did not breach any obligation because the Class members were not members of Anthem Insurance.   According to the defendants, the Eligible Statutory Member under the 1999 Policy was the state.

Both patties argue that the underlying contractual documents, in particular the Articles of Incorporation adopted in 1997, clearly and unambiguously support their position and require that judgment enter in their favor.   Consequently, the court begins with the principles of contract interpretation that it must apply.⁷

“Where the language of the contract is clear and unambiguous, the contract is to be given effect according to its terms.   It is well established that where there is definitive contract language, the determination of what the parties intended by their contractual commitments is a question of law.”  (Internal quotation marks omitted;  citations omitted.)  Crews v. Crews, 295 Conn. 153, 162, 989 A.2d 1060 (2010).  “The intent of the parties as expressed in a contract is determined from the language used interpreted in the light of the situation of the parties and the circumstances connected with the transaction ․ [T]he intent of the parties is to be ascertained by a fair and reasonable construction of the written words and ․ the language used must be accorded its common, natural, and ordinary meaning and usage where it can be sensibly applied to the subject matter of the contract ․ Where the language of the contract is clear and unambiguous, the contract is to be given effect according to its terms.   A court will not torture words to import ambiguity where the ordinary meaning leaves no room for ambiguity ․ Similarly, any ambiguity in a contract must emanate from the language used in the contract rather than from one party's subjective perception of the terms.”   Connecticut Light and Power v. Lighthouse Landings, 279 Conn. 90, 109–10, 900 A.2d 1242 (2006).  “The mere fact that the parties advance different interpretations of the language in question does not necessitate a conclusion that the contract is ambiguous ․ If the language of the contract is susceptible to more than one reasonable interpretation, the contract is ambiguous ․ By contrast, language is unambiguous when it has a definite and precise meaning ․ concerning which there is no reasonable basis for a difference of opinion.”  (Citations omitted;  internal quotation marks omitted.)  Goldberg v. Hartford Fire Insurance Co., 269 Conn. 550, 559, 849 A.2d 368 (2004).  “A court should construe the language of a contract so as not to render any words, phrases, or terms ineffective or meaningless.”  (Citations omitted;  internal quotation marks omitted.)  Sunburst Chem., LLC v. Acorn Distributors, Inc., 922 N.E.2d 652, 654 (Ind.Ct.App.2010).  “Also, the contract should be read as a whole, and its terms should be interpreted to the extent that the provisions can be harmonized.”  Indianapolis–Marion County Pub Library v. Shook, LLC, 835 N.E.2d 533, 542 (Ind.Ct.App.2005).  “Generally, the courts should presume that all provisions included in a contract are there for a purpose and, if possible, reconcile seemingly conflicting provisions to give effect to all provisions.”  (Citations omitted;  internal quotation marks omitted.)  Id., 541–42.

Even if a court determines that the contract language is ambiguous, the court may nevertheless grant summary judgment if there are no genuine issues of material fact surrounding resolution of the ambiguity.   In this way, a contract dispute is no different than any other civil action that turns on facts as to which there are no dispute.

The defendants argue that they are entitled to summary judgment because Section 7.6(b) of Anthem Insurance's 1997 Articles of Incorporation makes clear that the state, not the plaintiffs, was the member of Anthem Insurance from the date of the BCBSCT merger through Anthem's demutualization.   They claim that, at the time of the merger, the state was a member of the Qualified Mutual Insurer (BCBSCT) pursuant to a Qualified Contract (Care Plus).   They further claim that the state remained a member because the Qualified Contract was replaced in 2000, without a lapse in coverage, by the 1999 Policy.

The plaintiffs respond in two ways.   First, they argue that the state was not the member under the Care Plus contract.   Instead, they claim the member of the Care Plus policy was “the group as a whole,” meaning all of the retirees covered by Care Plus. If the plaintiffs are correct, then the state was never a member of BCBSCT and would not meet the requirements of Section 7.6(b).  In support of this argument, the plaintiffs rely on BCBSCT's bylaws.   Def. Ex. 1 Article II, Section 1(b) of the bylaws did provide that “in the case of a group policy, the group as a whole shall be considered one policyholder.” ⁸

The court is not persuaded by the plaintiffs' argument.   The plaintiffs' reliance on the “group as a whole” language in the bylaws takes that language out of context and ignores other clear and unambiguous language in the bylaws that leads to a contrary result.   First, Article II explicitly provides that there is only one class of members in BCBSCT—Voting Members.   Def. Ex. 1. Thus, in order to be a member in BCBSCT one must be a Voting Member.   Article II, Section 1(b) explicitly states, in the sentence immediately following the one that uses the “group as a whole” language, that “Individual members of the group who have been issued certificates shall not be considered Voting Members.”   Id. (Emphasis added.)   Logic dictates that because the individual members of the group were not Voting Members, and because the only members of BCBSCT were Voting Members, the individual members of the group were not members of BCBSCT.   Because there is nothing ambiguous in this language, it must be construed to mean that the state, not the individual retirees, was the member of BCBSCT under the Care Plus policy.9

Second, the plaintiffs argue that the 1999 Policy did not replace the Care Plus policy.   If it did not, then the Care Plus policy lapsed when it was cancelled in 2000 without a replacement policy in place, removing the state as a member of Anthem.   In support of this argument, the plaintiffs point out that when the 1999 Policy was put in place, Care Plus continued to provide separate and unrelated coverage to the approximately 500 retirees covered by it.

While it may be true that the 1999 Policy did not replace Care Plus in 1999, the undisputed facts establish that the 1999 Policy did replace Care Plus in 2000 when Care Plus was terminated.¹⁰  All of the enrollees in Care Plus were offered coverage under the 1999 Policy.   The 1999 Policy was in fact the default replacement for Care Plus. Overall, almost 90% of the retirees under the Care Plus policy became enrollees under the 1999 Policy.

The plaintiffs argue that even though the Care Plus retirees were offered coverage under the 1999 Plan, they were not issued a replacement policy.   In support of this argument, the plaintiffs rely upon Judge Sheldon's discussion of the difference between “policies” and “coverage” in his earlier decision.   Judge Sheldon's discussion though did not relate to Section 7.6(b).  He was discussing Section 7.6(c)(3) which required that the policy on which membership is based be “issued as a renewal, amendment or replacement of such Qualified Contract.”   Section 7.6(b) does not have this requirement.   It merely requires that the Qualified Contract “has been renewed, amended or replaced, without a lapse in coverage.”   Def. Ex. 17, § 7.6(b).  There is no question that Care Plus (a Qualified Contract) was replaced by the 1999 Policy without any lapse in coverage.

For these reasons, the court concludes that the state was a member of Anthem Insurance entitled to compensation when Anthem went through its 2001 demutualization.

The defendants claim that this conclusion is dispositive of any claim by the plaintiffs that they became members of Anthem pursuant to the rules set forth in Section 7.6(c) of the 1997 Articles of Incorporation.   According to the defendants, it is not possible that both the state and the plaintiffs could simultaneously be members of Anthem.   Before reaching this question, the court considers whether the plaintiffs meet the requirements of Section 7.6(c).

Section 7.6(c) is entitled “New Members Under Post–Merger Policies, Contracts and Certificates of Qualified Membership.”   Under Subsection 7.6(c)(1), “each holder of a certificate of coverage under a group insurance policy or health benefits contract” issued by a Qualified Membership Subsidiary after the effectiveness of the merger becomes a member of Anthem.   The plaintiffs argue that they all became holders of a certificate of coverage under the 1999 Policy, which was a group insurance policy or health benefits contract issued by New Blue–CT (a Qualified Membership Subsidiary).   They also argue that it is undisputed that the contract was issued after the BCBSCT merger, which occurred in 1997.   Pursuant to the explicit language of Section 7.6(c)(1), the plaintiffs argue that they were entitled to “rights in the event of a liquidation, merger, consolidation, demutualization or conversion of the Corporation.”   Def. Ex. 17, § 7.6(c)(1)(iii).   The court agrees that based on a reading of the plain language of just Section 7.6(c)(1), it would appear that the plaintiffs were members of Anthem Insurance entitled to demutualization compensation, unless one of the exceptions to Section 7.6(c)(1) applied.

The only exception that might apply is Section 7.6(c)(3).   That section provided that Section 7.6(c)(1) does not apply to Qualified Contracts under 7.6(b), “or any insurance policy or health care benefits contract issued as a renewal, amendment or replacement of such Qualified Contracts ․ where there was no lapse in coverage.”   Def. Ex. 17, § 7.6(c)(3).   It is undisputed that Care Plus was a Qualified Contract.   Thus, Section 7.6(c)(1) does not apply to Care Plus or any policy issued as a replacement for Care Plus. If the 1999 Policy was issued as a replacement for Care Plus, then Section 7.6(c)(1) would not apply, and the plaintiffs' membership claim would be defeated.   The problem for the defendants, as noted by Judge Sheldon, is that the 1999 Policy was not “issued” as a replacement for Care Plus. It was issued as a replacement for the state's self-funded coverage under the ASO Agreement.   While the 1999 Policy ultimately replaced Care Plus, it was not issued for that purpose.   Thus, a reading of the plain language of just 7.6(c)(3) leads to a conclusion that the exception does not apply here.

The above analysis would lead to a result where both the state and the plaintiffs were members of Anthem Insurance at the time of demutualization.   Anthem claims that such a result is not legally possible.   It further argues that because the state is clearly the member under Section 7.6(b), the court should never reach 7.6(c)(1).   There is nothing in the 1997 Articles of Incorporation that addresses this issue.   Nowhere do the Articles say that Section 7.6(b) and 7.6(c)(1) are mutually exclusive.   Consequently, in support of its argument, Anthem relies on a number of documents outside the 1997 Articles of Incorporation which Anthem claims show that both the group policyholder and the persons constituting the group cannot simultaneously be members.   First, Anthem points to the Information Circular provided to BCBSCT's members in connection with the Anthem merger and other similar documents.   Def. Ex. 15–16, 18.   These documents related to the BCBSCT/Anthem merger clearly provide that group policyholders, and not the persons constituting the group, are the members of BCBSCT.   E.g., Def. Ex. 15, p. 2. This, of course, is nothing more than a recognition of what was explicitly stated in the BCBSCT bylaws.   Def. Ex. 1, Art. II. These documents confirm who was the member of BCBSCT pre-merger.   However, they do not address how or when new membership interests are created post-merger.

Anthem also relies on the Guaranty it issued to the state after the merger.   The Guaranty does specifically address equity rights post-merger.   It explicitly states that “[n]o Enrollee or dependent of an Enrollee shall receive equity rights by virtue of being an Enrollee or dependent of an Enrollee.”   Def. Ex. 35, Art. IV. It further provides that the Guaranty would remain in effect as long as the underlying insurance policy was in effect “or has been renewed, amended, or replaced by any [New Blue–CT] without a lapse in coverage.”  Id., Art. VI. This language closely tracks the language of Section 7.6(b) of the 1997 Articles of Incorporation.   These two provisions of the Guaranty, read together, lead to the conclusion that not only was the state the Anthem member after the merger, the Guaranty and its terms remained in effect when the 1999 Policy replaced Care Plus. One of those terms was that the individual group members would not receive any equity rights in Anthem.

Consistent with this analysis, during Anthem's demutualization hearing before the Indiana Department of Insurance, in response to a direct question from the Department, Anthem's representative testified that:  “prior to merging into Anthem, ․ Blue Cross/Blue Shield of Connecticut had a different definition of membership rights.  [BCBSCT] gave the ownership right to group policyholders rather than subscribers or certificate holders within the group.   When [BCBSCT] merged into Anthem, [its] ownership rights were grandfathered as we call it.   In other words [it] was told that those ownership rights would continue as long as [it] had continuous qualifying coverage in an Anthem entity.   In that case because [BCBSCT] had the ownership rights, the certificate holders, the employees, cannot also be given ownership rights.   However, new groups coming on after the merger clearly followed the Anthem rule in which the subscribers or employees are given membership rights.”   Def. Ex. 44, pp. 128–29.

Anthem also argues that all of the operative documents from the BCBSCT bylaws forward make clear that membership rights are not determined on a policy-by-policy basis.   The BCBSCT bylaws specifically provided that each Voting Member was entitled to cast one vote “[i]rrespective of the number and amount of policies held.”   Def. Ex. 1, Art. II, Sec. 1. Similarly, Section 7.8 of the 1997 Articles of Incorporation provided that each member of the corporation was entitled to one vote “regardless of the number of membership certificates or memberships held by such member.”   Def. Ex. 17, § 7.8.

Finally, the defendants note that the Sixth Circuit Court of Appeals considered and rejected an argument similar to the one made by the plaintiffs.   In Mell v. Anthem, Inc., 688 F.3d 280 (2012), a subclass of plaintiffs claimed that they were members entitled to demutualization compensation because they did not receive full coverage until after Anthem's merger with Community Insurance Company, an insurer, who like BCBSCT, had provided an insurance policy to the plaintiffs' employer, the City of Cincinnati, prior to the merger.   In affirming the district court's grant of summary judgment for Anthem, the court relied upon the guaranty policy that Anthem delivered to the City following the merger.   The guaranty policy was virtually identical to the Guaranty here in that it explicitly stated that the enrollees under the group policy had no equity rights.  688 F.3d 288.   The court held that the “record indicates that Anthem intended for the City to maintain membership rights.”   Id. It further affirmed the district court's finding that “the merger document does not state that new insurance is the ‘triggering event,’ “ and concluded that “[b]ased on the reading of the merger documents, it is clear that Anthem did not create new membership rights for employees enrolled post-merger.”  688 F.3d 289.   Anthem asks this court to adopt the same analysis here.

In response to these points, the plaintiffs point out that nothing in the language of the 1997 Articles of Incorporation prohibits simultaneous membership by the state and individual group members when those rights arise under different policies at different times.   The plaintiffs further argue that the evidence shows that Anthem, in fact, treated two other contracts held by the state at the time of demutualization, HUSKY A and HUSKY B, as qualifying for a separate membership interest.   Def. Ex. 46.   In connection with that issue, at the time of demutualization, Attorney General Richard Blumenthal argued to Anthem that “the number of contracts, and their right to participate in any distribution, only became an issue upon demutualization.”  Id. Anthem acceded to the state's demand, and, viewing the evidence in a light most favorable to the plaintiffs, acknowledged that those two contracts created separate membership rights.  Id. Thus, a fact-finder could reasonably conclude that at least in one case, Anthem agreed that membership rights arise on a policy-by-policy basis.

At the same time, Blumenthal's letter to Anthem also acknowledges that the state only had one vote as a member, no matter how many policies it had.   Id. Thus, it could read as raising only an issue as to the amount the state was due in the demutualization, not any issue as to whether membership rights were tied to specific policies.   In addition, the defendants argue that because the HUSKY policies were issued to Connecticut's Department of Social Services, and the policyholder was the “Office of the Comptroller” and not the state, it did not fall under the state's other membership.   They also argue that the Husky plans served a completely separate group of people than did the 1999 Policy.

The court does not find any of the defendants' argument sufficient to eliminate a genuine issue of material fact as to whether separate group policies issued through the same group policyholder create new membership rights.   The defendants offered no evidence in support of their claim that the group policyholder under the HUSKY plans was really other than the state.   In fact, the argument is belied by the fact that the demutualization proceeds for the HUSKY plans were paid to the state.   Similarly, the defendants' separate group of employees argument is not dispositive in light of the fact that when the 1999 Plan was issued it covered an entirely separate group of employees and retirees than were covered by Care Plus. The treatment of the Husky plans also distinguishes this case from Mell. The court there specifically found, based on the evidence before it, that new insurance was not a triggering event.   Here, the evidence suggests that it might very well have been a triggering event with the state.

At the same time, the evidence does not clearly establish that plaintiff's reliance on Anthem's handling of the HUSKY plans is well-placed.   In light of the fact that the 1997 Articles of Incorporation do not explicitly address the issue of simultaneous membership and the language that is there could be reasonably read either way, the evidence submitted to the court is simply too inconclusive for the court to determine whether membership rights in Anthem were intended to be created on a policy-by-policy basis.

This is an important issue.   If such rights can be created on a policy-by-policy basis, then any potential conflict between Sections 7.6(b) and 7.6(c)(1) can be resolved as plaintiffs claim.   This may be particularly true given that Anthem was the drafter of the 1997 Articles of Incorporation.   On the other hand, if rights cannot be created on a policy-by-policy basis, and the group policyholder and the individuals who make up the group cannot simultaneously be members, then the only way to rationally resolve the apparent conflict between Sections 7.6(b) and 7.6(c)(1) is to conclude, as Anthem claims, that 7.6(c)(1) only applies to members who are completely new to Anthem post-merger.

Given this genuine issue of material fact, the court cannot enter summary judgment for either party based on their interpretation of the 1997 Articles of Incorporation.   Thus, the court will schedule argument to consider the other grounds Anthem has raised in support of its motion for summary judgment.

V. CONCLUSION

For all of the foregoing reasons, the plaintiffs' motion for summary judgment is denied.   As to the defendants' motion for summary judgment, the court will defer ruling until it considers the other arguments that the defendants raised and the parties briefed, but have not argued.   Argument on such issues will be scheduled.

Bright, J.

FOOTNOTES

FN1. The plaintiffs have named a number of “Anthem” companies as defendants, including Anthem, Inc., Anthem Health Plans, Inc. d/b/a Anthem Blue Cross & Blue Shield of Connecticut, Anthem East, Inc., and Anthem Insurance Companies, Inc. The claims appear to be the same as to all of the defendants.   Consequently, except where differentiation is necessary, they will be referred to collectively in this decision as “Anthem.”.  FN1. The plaintiffs have named a number of “Anthem” companies as defendants, including Anthem, Inc., Anthem Health Plans, Inc. d/b/a Anthem Blue Cross & Blue Shield of Connecticut, Anthem East, Inc., and Anthem Insurance Companies, Inc. The claims appear to be the same as to all of the defendants.   Consequently, except where differentiation is necessary, they will be referred to collectively in this decision as “Anthem.”

FN2. The defendants also raise other grounds in their motion for summary judgment including whether the plaintiffs' claims are barred for not complying with the statutory appeal period to challenge the demutualization and distributions related thereto, and whether Anthem is entitled to summary judgment because it acted in good faith in determining that the state, not the plaintiffs, was the member entitled to demutualization compensation.   During oral argument, the court informed the parties that it would address first the parties' competing contract interpretation issues.   Depending on the resolution of those issues the court would, if necessary, schedule argument on Anthem's other arguments.   The parties agreed to this procedure..  FN2. The defendants also raise other grounds in their motion for summary judgment including whether the plaintiffs' claims are barred for not complying with the statutory appeal period to challenge the demutualization and distributions related thereto, and whether Anthem is entitled to summary judgment because it acted in good faith in determining that the state, not the plaintiffs, was the member entitled to demutualization compensation.   During oral argument, the court informed the parties that it would address first the parties' competing contract interpretation issues.   Depending on the resolution of those issues the court would, if necessary, schedule argument on Anthem's other arguments.   The parties agreed to this procedure.

FN3. At the time Judge Sheldon denied the defendants' motion for summary judgment, the State of Connecticut was still a party to the case, although it did not participate in the briefing or argument on that motion because it was challenging the court's subject matter jurisdiction over it, a claim on which it later succeeded.   Judge Sheldon identified the state's lack of participation in the litigation of the motion for summary judgment as one of the reasons he was not addressing the contract interpretation issue the parties have again placed before the court.   That is no longer an issue..  FN3. At the time Judge Sheldon denied the defendants' motion for summary judgment, the State of Connecticut was still a party to the case, although it did not participate in the briefing or argument on that motion because it was challenging the court's subject matter jurisdiction over it, a claim on which it later succeeded.   Judge Sheldon identified the state's lack of participation in the litigation of the motion for summary judgment as one of the reasons he was not addressing the contract interpretation issue the parties have again placed before the court.   That is no longer an issue.

FN4. The plaintiffs have only moved for summary judgment as to liability.   If granted in their favor, the court would then have to consider what amounts are owed to the class for their membership interests in the mutual company..  FN4. The plaintiffs have only moved for summary judgment as to liability.   If granted in their favor, the court would then have to consider what amounts are owed to the class for their membership interests in the mutual company.

FN5. The parties agree that the exception set forth in 7.6(c)(2) is inapplicable to this matter..  FN5. The parties agree that the exception set forth in 7.6(c)(2) is inapplicable to this matter.

FN6. Of 782 individual enrollees in Care Plus, including dependents of the retirees, 718 enrolled under the 1999 Policy.  Id..  FN6. Of 782 individual enrollees in Care Plus, including dependents of the retirees, 718 enrolled under the 1999 Policy.  Id.

FN7. The court has cited to both Connecticut and Indiana law on contract interpretation because Connecticut law applies to some issues, like interpretation of BCBSCT's bylaws, while Indiana law applies to others, like interpretation of the Anthem Insurance Articles of Incorporation.   Not surprisingly, there is little or no difference between the two states on these well-understood principles of contract interpretation..  FN7. The court has cited to both Connecticut and Indiana law on contract interpretation because Connecticut law applies to some issues, like interpretation of BCBSCT's bylaws, while Indiana law applies to others, like interpretation of the Anthem Insurance Articles of Incorporation.   Not surprisingly, there is little or no difference between the two states on these well-understood principles of contract interpretation.

FN8. In denying the defendants' previous motion for summary judgment, Judge Sheldon found that there was a genuine issue of material fact as to who the member was under the Care Plus contract..  FN8. In denying the defendants' previous motion for summary judgment, Judge Sheldon found that there was a genuine issue of material fact as to who the member was under the Care Plus contract.

FN9. At least one other court has similarly rejected this precise argument as “an unreasonable interpretation of the bylaw language.”  Ormond v. Anthem, 799 F.Sup.2d 910, 925–26 (S.D.Ind.2011)..  FN9. At least one other court has similarly rejected this precise argument as “an unreasonable interpretation of the bylaw language.”  Ormond v. Anthem, 799 F.Sup.2d 910, 925–26 (S.D.Ind.2011).

FN10. In support of their claim that the 1999 Policy did not replace Care Plus, the plaintiffs rely upon the deposition testimony of Anthem's corporate designee, Michelle Zettergren.   Pl.Ex. C, p 28.   Such reliance is misplaced and does not create a genuine issue of material fact.   Ms. Zettergren testified that the 1999 Policy did not replace Care Plus in 1999.   As noted above, there is no dispute as to that fact.   Ms. Zettergren did not testify that the 1999 Policy did not replace Care Plus after 1999..  FN10. In support of their claim that the 1999 Policy did not replace Care Plus, the plaintiffs rely upon the deposition testimony of Anthem's corporate designee, Michelle Zettergren.   Pl.Ex. C, p 28.   Such reliance is misplaced and does not create a genuine issue of material fact.   Ms. Zettergren testified that the 1999 Policy did not replace Care Plus in 1999.   As noted above, there is no dispute as to that fact.   Ms. Zettergren did not testify that the 1999 Policy did not replace Care Plus after 1999.

Bright, William H., J.