Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Castille, C.J., Saylor, Eakin, Baer, Todd, Mccaffery, Orie Melvin v. Hospital Service Association of Northeastern Pennsylvania

June 20, 2011

CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, MCCAFFERY, ORIE MELVIN, JJ. ROBERT PETTY AND R.G. PETTYMASONRY, : APPELLANTS
v.
HOSPITAL SERVICE ASSOCIATION OF NORTHEASTERN PENNSYLVANIA, D/B/A BLUE CROSS OF NORTHEASTERN PENNSYLVANIA, A NON-PROFIT PENNSYLVANIA CORPORATION, APPELLEE



Appeal from the Order of the Commonwealth Court dated 02-19-2009 at No. 1346 CD 2008 affirming the Order of Lackawanna County Court of Common Pleas dated 06-27-2008 at No. 02 CV 2258.

The opinion of the court was delivered by: Mr. Justice Eakin

[J-96-2010]

ARGUED: December 1, 2010

OPINION

Appellant, Robert Petty, is sole owner of a construction company, co-appellant R.G. Petty Masonry. Petty Masonry contracts with respondent Blue Cross of Northeastern Pennsylvania, a nonprofit hospital corporation, to provide health insurance coverage for its employees; Petty is covered under the group policy as a subscriber.

Appellants filed a four-count class action lawsuit against Blue Cross on behalf of Blue Cross policyholders, subscribers, and members. The action asserted four separate theories of relief. In the first count, appellants alleged Blue Cross violated 15 Pa.C.S. § 5545 of the Nonprofit Law*fn1 by accumulating excessive profits and surplus well beyond the "incidental profit" permitted by the statute. The second count alleged Blue Cross breached its contract with appellants by violating the Nonprofit Law which was incorporated into the contract, and also breached its inherent duty of good faith and fair dealing by amassing the excess surplus. The third count contended Blue Cross owed appellants a fiduciary duty by virtue of their status as subscribers and policyholders, and Blue Cross breached this duty when it accrued the excess surplus. The fourth count requested an inspection of Blue Cross's business records and bylaws.*fn2

The trial court found appellants lacked standing to challenge Blue Cross's alleged violations of the Nonprofit Law, as they did not fall within the standing limitations set by 15 Pa.C.S. § 5793(a).*fn3 In reaching this conclusion, the court examined Blue Cross's incorporating documents and concluded appellants possessed no particular governance rights bringing them within § 5793(a)'s parameters.

The trial court then conducted what it termed a "traditional" standing analysis, and found appellants could not establish common law standing since they could not show they were aggrieved by either a breach of contract or breach of fiduciary duty by Blue Cross. The court reasoned the parties had a contractual relationship for insurance for payment of health care services, and appellants were not alleging any breach of that contractual relationship. The court opined appellants had no protected property rights in their particular rates and had the remedy of shopping elsewhere if dissatisfied. The court likewise rejected the notion that appellants adequately articulated a breach of fiduciary duty claim since Blue Cross's only fiduciary duty to appellants specifically related to the performance of its duties under the insurance contract.

The Commonwealth Court affirmed the trial court's decision. Petty v. Hospital Service Association of Northeastern Pennsylvania, 967 A.2d 439 (Pa. Cmwlth. 2009) (en banc). The court found its prior decision in White v. Associates in Counseling and Child Guidance, 767 A.2d 638 (Pa. Cmwlth. 2001), construed § 5793(a) to require a party be "equivalent to an officer, director, or member" in order to have standing. Petty, at 447. The court held appellants were mere Blue Cross customers, and nothing in the articles of incorporation or bylaws afforded them rights equivalent to "a member, officer or member of another body." Id.

The Commonwealth Court also agreed with the trial court's finding that appellants lacked standing under common law principles. The court noted, although appellants averred in their complaint that Blue Cross breached its contract by violating the Nonprofit Law, they did not assert how a particular, direct, and immediate interest under the contract (i.e., efficient receipt of health care services) was somehow compromised. Id., at 448. In rejecting appellants' breach of fiduciary duty claim, the court again noted the lack of any Blue Cross action involving its specific duties arising out of the contractual relationship with appellants. The court, once more, observed appellants were challenging the legitimacy of corporate action, and because they did not fall within the specific categories of persons eligible to challenge such an act under 15 Pa.C.S. § 5793(a), they had no cause of action for breach of fiduciary duty. Id., at 449.

We granted allocatur to consider the following questions:

1. Whether policyholders and subscribers who have purchased medical insurance from a nonprofit corporation have standing under 15 Pa.C.S. § 5793(a) of the Non Profit Corporation Law of 1988 to challenge the corporation's actions in court?

2. Whether policyholders and subscribers who have purchased medical insurance from a nonprofit corporation have standing to maintain a breach of contract claim for the nonprofit corporation's alleged violation of other provisions of the Non Profit Corporation Law of 1988, such as 15 Pa.C.S. § 5545?

3. Whether policy holders who have purchased medical insurance from a nonprofit corporation may maintain a claim for breach of fiduciary duty against that corporation for its alleged excess accumulation of surplus profits?

Petty v. Hospital Service Association of Northeastern Pennsylvania, 995 A.2d 873 (Pa. 2010) (per curiam). As these issues present pure questions of law, our scope of review is plenary, and our standard of review is de novo. See American and Foreign Insurance Company v. Jerry's Sport Center, Inc., 2 A.3d 526, 533 (Pa. 2010). As already mentioned, standing to challenge the Nonprofit Law is governed by the statute itself:

Upon petition of any person whose status as, or whose rights or duties as, a member, director, member of an other body, officer or otherwise of a nonprofit corporation are or may be affected by any corporate action, the court may hear and determine the validity of such corporate action.

15 Pa.C.S. § 5793(a) (footnote omitted). "The object of all interpretation and construction of statutes is to ascertain and effectuate the intention of the General Assembly. Every statute shall be construed, if possible, to give effect to all its provisions." 1 Pa.C.S. § 1921(a). "When the words of a statute are clear and free from all ambiguity, they are presumed to be the best indication of legislative intent." Chanceford Aviation ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.