The opinion of the court was delivered by: Chief Judge Kane
Before the Court is Defendants' motion to dismiss Plaintiffs' complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). (Doc. No. 8.) Both parties have filed briefs in connection with the motion, and the motion is ripe for disposition. For the reasons that follow, the motion will be denied.
Plaintiffs in this action are the Pennsylvania Builders Association Benefits Trust, a multi- employer health and welfare fund comprising "various members of the building and shelter industry in Pennsylvania" (Compl. ¶¶ 1, 9), and the Trustees thereof (collectively "Builders Trust"). Defendants are Capital BlueCross and Capital Advantage Insurance Co. (collectively "Capital"), which engage "in the business of providing healthcare and other welfare coverage." (Compl. ¶ 5.) For several years, Builders Trust and Capital maintained a contractual relationship to provide healthcare benefits to Builders Trust's members. (Compl. ¶ 16.) The instant motion to dismiss calls upon the Court to consider how that contractual relationship came to an end, and the effect that such cessation had on Capital's post-contractual obligations to Builders Trust.
In 2005, Builders Trust and Capital negotiated a contract ("2005 Contract"), under which Capital was to provide healthcare coverage to Builders Trust's members from April 1, 2005, to March 31, 2006. (Compl. ¶¶ 23, 25.) As part of the 2005 Contract, the parties agreed to a "Retrospective Credit Financial Arrangement" for calculating the subscription rates for Builders Trust's members. Under the Rate Arrangement, Capital agreed to adjust its rates for Builders Trust's members according to the amount of money held in a Rate Stabilization Fund ("RSF"). (Compl. ¶¶ 28-30.) The RSF, which is central to Builders Trust's complaint, "was established for use in stabilizing the . . . experience rate for all of Capital's healthcare products offered to [Builders Trust's] members." (Compl. ¶ 31.) By the terms of the Rate Arrangement, the balance of the RSF was to be calculated thus:
The balance in the [Builders Trust's] RSF shall be based upon an Interim and a Final Settlement. The Interim Settlement will be prepared in or about October 2006, and will include all claims incurred during the Contract experience period and processed through September 30, 2006. Thereafter, a Final Settlement will be prepared in or about July 2007 and will include claims incurred during the Contract experience period and processed through June 30, 2007. Based upon the Interim and Final Settlements, the [Builders Trust's RSF] shall be determined as follows:
1. If the total income received during the base experience period exceeds the total of claims incurred plus retention, a surplus results and will be added to the RSF.
2. If the total income received during the base experience period is less than the total of incurred claims plus retention, a deficit results and will be deducted from the RSF. (Compl. ¶ 35.) As of March 31, 2006, the RSF had a surplus of over $13 million. (Compl. ¶ 58.) Builders Trust now seeks to recover that surplus.
Under Capital's theory of the case, Builders Trust's entitlement to the RSF surplus is governed by section I of the Rate Agreement.*fn2 That section provides that "six months after termination of the Group Contract for any reason," Capital would calculate a final settlement of the RSF, after which: (1) any surplus in the RSF balance would be refunded to Builders Trust; or (2) any deficit in the RSF balance would be paid by Builders Trust. (Doc. No. 9-2, at 21-22; Ex. "A") (emphasis added). Based on the language of section I, Capital suggests that Builders Trust's entitlement to the RSF surplus under section I is dependent on the termination of the 2005 Contract.
Under section 8 of the 2005 Contract, the contract terminated if the parties could not "agree upon a rate renewal." In such an event, section 8.2 provides that the 2005 Contract would "automatically terminate at the end of the Contract Year during which Capital presented the rate renewal, unless the parties agree[d] in writing to an extension thereof." The contract also separately provides-under section 8.3-for termination by Builders Trust either without cause "by giving written notice to Capital at least sixty (60) calendar days in advance" or with cause by giving "thirty (30) calendar days written notice in the event of a material breach by Capital if Capital fails to cure such breach within fifteen business days of receipt of the notice to terminate." Finally, under section 8.4, Capital could terminate the contract if "any payment due to Capital, including premiums, [was] not made within thirty-one (31) days after the date it is due," or if Builders Trust "performed an act or practice constituting fraud or intentionally misrepresented material facts in connection with coverage." Additionally, Capital could terminate the Contract if any of Builders Trust's members violated any of the "participation or contribution rules," or if Capital stopped offering the coverage.
Pursuant to the 2005 Contract, between April 1, 2005, and March 31, 2006, Builders Trust paid premiums to Capital, Capital provided healthcare coverage for Builders Trust's members, and neither Builders Trust nor Capital expressed any intention to terminate the contract. On February 1, 2006, Capital sent Builders Trust a letter "regarding revised rates for the period from April 1, 2006 through March 31, 2007," (Compl. ¶ 38), and attached a "Program Acceptance Form" specifying the revised rates for the 2006-2007 period. Subsequently, a representative of Builders Trust signed the Program Acceptance Form and returned it to Capital. (Compl. ¶¶ 39-41.)
On March 31, 2006, Capital emailed Builders Trust a "standard form association contract" for the 2006-2007 period. (Compl. ¶¶ 42-45.) Finding the contract unacceptable, Builders Trust replied to Capital on April 6, 2006, that it would not accept the "standard form association contract," but that it wished to negotiate agreeable terms. (Compl. ¶¶ 46, 47.) On April 10, 2006, Capital responded that the proposed contract "followed [its] purported 'new standard form association contract' and that [the] form contract would apply to the 2006 contract year" (Compl. ¶ 48), and ...