Justia.com Opinion Summary: Appellant Robert Petty is sole owner of Co-Appellant R.G. Petty Masonry. Appellants contracted with Respondent Blue Cross of Northeastern Pennsylvania (Blue Cross), a nonprofit hospital corporation that provides health insurance coverage for its employees. Appellants are covered under the group policy as subscribers. Appellants filed a four-count class action suit against Blue Cross, alleging that it violated the state Nonprofit Law by accumulating excessive profits and surplus well beyond the "incidental profit" permitted by statute. The second count alleged Blue Cross breached its contract with Appellants by violating the Nonprofit Law. The third count alleged Blue Cross owed appellants a fiduciary duty by virtue of their status as subscribers, and that duty was breached when it accrued the excess surplus. The fourth count requested an inspection of Blue Cross' business records. The trial court found Appellants lacked standing to challenge Blue Cross' alleged violations of the Nonprofit Law and dismissed the suit. The Commonwealth Court affirmed the trial court. Upon careful consideration of the briefs submitted by the parties in addition to the applicable legal authorities, the Supreme Court found that Appellants indeed lacked standing under the Nonprofit Law to challenge Blue Cross by their four-count complaint. Accordingly, the Court affirmed the lower courts' decisions and dismissed Appellants' case.
Receive FREE Daily Opinion Summaries by Email Download as PDF
Loading PDF...
<![CDATA[
[J-96-2010]
IN THE SUPREME COURT OF PENNSYLVANIA
MIDDLE DISTRICT
CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY, ORIE MELVIN, JJ.
ROBERT PETTY AND R.G. PETTY
MASONRY,
Appellants
:
:
:
:
v.
:
:
HOSPITAL SERVICE ASSOCIATION OF :
NORTHEASTERN PENNSYLVANIA,
:
D/B/A BLUE CROSS OF
:
NORTHEASTERN PENNSYLVANIA, A :
NON-PROFIT PENNSYLVANIA
:
CORPORATION,
:
Appellee
:
No. 34 MAP 2010
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.
ARGUED: December 1, 2010
OPINION
MR. JUSTICE EAKIN
DECIDED: June 20, 2011
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 Law1 by accumulating excessive profits and surplus well beyond the
1
Section § 5545 provides:
A nonprofit corporation whose lawful activities involve among other things the
charging of fees or prices for its services or products, shall have the right to
receive such income and, in so doing, may make an incidental profit. All such
incidental profits shall be applied to the maintenance and operation of the
lawful activities of the corporation ....
15 Pa.C.S. § 5545.
“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.2
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).3
In reaching this conclusion, the court examined Blue Cross’s
2
On July 1, 2002, Blue Cross filed its first set of preliminary objections, to which appellants
filed an answer. The trial court did not rule on the objections as both parties agreed to stay
the matter pending this Court’s decision in Ciamaichelo v. Independence Blue Cross, 909
A.2d 1211 (Pa. 2006) (Ciamaichelo I), where this Court held Nonprofit Law violations and
breaches of contractual and fiduciary duty claims fall under the Court of Common Pleas’
jurisdiction and are not precluded by the filed rate doctrine; we remanded the case for the
Commonwealth Court to consider whether the plaintiffs had standing under the Nonprofit
Law. On remand, the Commonwealth Court determined subscribers possessed powers
similar to those of directors for purposes of the Nonprofit Law, and because their rights,
duties, and status could be influenced by corporate accumulation of excess profits, they
had standing to challenge corporate action. Ciamaichelo v. Independence Blue Cross, 928
A.2d 407 (Pa. Cmwlth. 2007) (en banc) (Ciamaichelo II). Following disposition of
Ciamaichelo II, the trial court in the current matter permitted Blue Cross to file amended
preliminary objections in the nature of a demurrer to all counts of appellants’ complaint.
After argument, the court granted the amended objections and dismissed the complaint.
3
15 Pa.C.S. § 5793(a) provides:
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.
Id. (footnote omitted).
[J-96-2010] - 2
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
[J-96-2010] - 3
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
[J-96-2010] - 4
legislative intent.” Chanceford Aviation Properties, L.L.P. v. Chanceford Township Board of
Supervisors, 923 A.2d 1099, 1104 (Pa. 2007) (citation omitted).
Appellants contend the Commonwealth Court’s decision establishes an overly
restrictive standard for a party to establish standing under the Nonprofit Law. They contend
the court created too narrow a standard which essentially requires an individual have a
“special relationship” with the corporation “equivalent to an officer, director, or member.”
Petty, at 447. Appellants argue this restrictive standard necessarily produces the illogical
result that the only persons able to challenge wrongful corporate conduct would likely be
the very same people responsible for making dubious decisions or undertaking
questionable action.
Appellants argue the existence of a special relationship between themselves and
Blue Cross as subscribers was established by Blue Cross’s articles of incorporation, which
clearly provide that the corporation contemplated no pecuniary gain or profit and was
formed for the purpose of operating a nonprofit plan to provide health benefits to
subscribers. Thus, as Blue Cross operates solely for the subscribers’ benefit, they possess
a special interest in the corporation’s actions sufficient to bestow upon them standing to
challenge the surplus accumulation under § 5793(a).
In response, Blue Cross claims appellants lack standing to bring a claim under the
Nonprofit Law, arguing appellants hold no role in corporate operations, administration, or
governance, and therefore do not fall within § 5793(a)’s “or otherwise” language. Blue
Cross maintains the Commonwealth Court did not create an overly restrictive standing
standard by using the words “equivalent” and “in the same class” interchangeably, as its
true focus remained whether “subscribers [are] in the same class as members, directors,
other body members [and] officers.” Petty, at 447. Blue Cross argues appellants lack any
“special relationship” with the corporation to afford them standing. It claims appellants fail
to articulate how they have suffered harm, other than to assert an undefined harm to
[J-96-2010] - 5
groups allegedly affected by the excess surplus.
Blue Cross maintains appellants’
allegations are unable to surpass the common interests of a general citizen in procuring
obedience to the law.
The plain language of 15 Pa.C.S. § 5793(a) permits a court to review a corporate
action “[u]pon 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 ….” Id. The contentious statutory language
in this instance is “or otherwise,” as appellants do not propose they qualify as one of the
specific titles listed. Following the doctrine of ejusdem generis, we conclude that the
general expression “or otherwise” is restricted in its interpretation to encompass only those
positions similar to those expressly listed. Summit House Condominium v. Commonwealth,
523 A.2d 333, 336 (Pa. 1987) (quoting Butler Fair and Agricultural Association v. Butler
School District, 132 A.2d 214, 219 (Pa. 1957) (“The doctrine of ejusdem generis mandates
that ‘[g]eneral expressions used in a statute are restricted to things and persons similar to
those specifically enumerated in the language preceding the general expressions.’”)).
In order to determine whether appellants’ status falls under this umbrella, we must
first understand the nature of the enumerated terms. The Nonprofit Act defines each of
these titles specifically:
“Directors.” Persons designated, elected or appointed, by that or any other
name or title, to act as directors, and their successors. The term does not
include a member of an other body, as such. The term, when used in relation
to any power or duty requiring collective action, shall be construed to mean
“board of directors.”
*
*
*
“Member.” One having membership rights in a corporation in accordance
with the provisions of its bylaws. The term, when used in relation to the taking
of corporate action includes:
(1) the proxy of a member, if action by proxy is permitted
under the bylaws of the corporation; and
[J-96-2010] - 6
(2) a delegate to any convention or assembly of delegates of
members established pursuant to any provision of this
subpart.
If and to the extent the bylaws confer rights of members upon
holders of securities evidencing indebtedness or
governmental or other entities pursuant to any provision of
this subpart the term shall be construed to include such
security holders and governmental or other entities. The term
shall be construed to include “shareholder” if the corporation
issues shares of stock.
*
*
*
“Officer.” If a corporation is in the hands of a custodian, receiver, trustee or
like official, the term includes that official or any person appointed by that
official to act as an officer for any purpose under this subpart.
“Other body.” A term employed in this subpart to denote a person or group,
other than the board of directors or a committee thereof, who pursuant to
authority expressly conferred by this subpart may be vested by the bylaws of
the corporation with powers which, if not vested by the bylaws in such person
or group, would by this subpart be required to be exercised by either:
(1) the membership of a corporation taken as a whole;
(2) a convention or assembly of delegates of members established
pursuant to any provision of this subpart; or
(3) the board of directors.
Except as otherwise provided in this subpart a corporation may establish
distinct persons or groups to exercise different powers which this subpart
authorizes a corporation to vest in an other body.
15 Pa.C.S. § 5103.
As the nature of the parties’ contractual relationship is defined by the incorporation
documents, we must consider the statutory definitions in light of their characterizations in
the corporate bylaws. In regard to “members,” Blue Cross’s corporate bylaws provide “[t]he
membership of the Corporation shall consist of no less than forty (40) nor more than one
hundred (100) persons who are subscribers to the Blue Cross of Northeastern
Pennsylvania Plan or subscribers to any program offered by a wholly-owned subsidiary of
the Corporation.” Blue Cross Bylaws, at 1. Members are elected by a majority vote, and
have the power to determine membership numbers, elect and remove members, vote on
[J-96-2010] - 7
corporate actions, amend the bylaws, and perform any other legal act not inconsistent with
the bylaws. Id., at 2.
“Directors” possess even more authority than the members under the bylaws: they
are entrusted with all the powers of the corporation except those specifically reserved or
granted to the members. These powers generally relate to directing the corporation’s
business affairs, and include the power to borrow money, administer and dispose of real
estate, and change the location of the registered office or principal place of business. Id.,
at 3. A director must be elected by the members and must satisfy various criterion to be
eligible to hold such office. Id., at 4. “Officers” refers to elected positions such as a
“Chairperson of the Board, a President, Executive or Senior Vice Presidents, a Treasurer,
and a Secretary” and such other officers as may need to be appointed. Id., at 8.
What is clear from examining both the statutory and corporate definitions of these
terms is that each position entails various levels of authority, rights, and influence over
corporate decision-making. Certainly, in listing all these titles, § 5793(a) clearly calls for a
person of “status” with “duties.” The list is noticeably vacant of any non-elected or nonauthority-holding position. Accordingly, it must be concluded the “or otherwise” clause
does not call for the inclusion of a layperson with no vested interest or authority in the
corporation’s inner workings.
The Commonwealth Court has previously referred to this interest as a “special
relationship” or a “special interest.” In White, the Commonwealth Court considered whether
“a non-officer at-will employee mentioned in the By-Laws of a nonprofit corporation ha[s]
standing under the ‘or otherwise’ provision of the Pennsylvania Nonprofit Corporation Law.”
White, at 639. The court determined § 5793(a)’s “or otherwise” language expanded the
class of persons covered by the provision beyond those expressly enumerated, but that
those additional individuals must be of the same “class[] of person[] of the same general
nature as an officer, director or member, but not limited to persons in those groups.” Id., at
[J-96-2010] - 8
642. The court found White, who was an original incorporator of the nonprofit corporation,
provided one-half or more of the essential assets for initial corporate performance, was
appointed by Board resolution, acted as corporate liaison with outside entities, and carried
multiple supervisory responsibilities, had a very special relationship with the nonprofit
corporation which fell within the parameters of the “or otherwise” provision. Accordingly,
the court found White had standing to challenge corporate actions. Id., at 640, 642.
Following our remand in Ciamaichelo I, the Commonwealth Court considered the
question of whether subscribers had standing under the Nonprofit Law to pursue their
remedies.
The court observed that, under Independence Blue Cross’s articles of
incorporation, subscribers had a special relationship with the nonprofit corporation as
evidenced by their authority to both nominate and remove directors, as well as to propose
corporate action via petition. Ciamaichelo II, at 412. The court additionally noted the
subscribers’ rights, duties, and status could be affected by the nonprofit’s accumulation of
excess profits. Id., at 413. Accordingly, the court concluded, because the incorporation
documents gave subscribers powers ordinarily afforded to directors, other body members,
or members, subscribers fell within § 5793(a), and thus had standing to sue under the
Nonprofit Law. Id.
Though we are not bound by White and Ciamaichelo II, we find these decisions
instructive. Appellants assert Blue Cross operates solely for the subscribers’ benefit;
therefore, all subscribers must possess a “special interest” in the corporation’s actions
sufficient to obtain standing under § 5793(a). However, § 5793(a)’s plain language affords
standing only to those in influential positions. Appellants hold no such status, and indeed
have no more special interest in corporate decisions than the average buyer does in getting
a good bargain. While they might have a customer’s interest in corporate integrity and
business practices, that certainly does not bring them within the legislatively restricted class
of individuals who may challenge corporate actions.
[J-96-2010] - 9
Moreover, we do not believe the Commonwealth Court created an overly stringent
standard by requiring a challenging party to be “equivalent” to the enlisted titles in §
5793(a). The Petty court stated: “White then does not stand for the proposition … that any
‘special relationship’ with a non-profit grants a party the right to challenge the non-profit’s
actions, but only that a special relationship making that party equivalent to an officer,
director, or member, … confers standing under Section 5793(a) ….” Petty, at 447. The
court further clarified this statement in the next sentence, stating: “While the overall purpose
of … Blue Cross’s enabling legislation and Articles of Incorporation is to operate a plan
where health benefits are conferred to subscribers, this does not place the subscribers in
the same class as members, directors, other bodies or officers of the corporation.” Id.
(emphasis added). Considering the language in full context, we find no issue with the
court’s interchange of the terms “equivalent” and “in the same class.” Effectually, the
Commonwealth Court applied the principles of ejusdem generis and correctly determined
the interpretation of the general expression “or otherwise” was restricted to encompass only
those entitles similar in nature to the specifically enumerated titles found in § 5793(a). Id.
We appreciate appellants’ argument that subscribers are the only parties with reason
to challenge inappropriate corporate action; at first glance it may appear the
Commonwealth Court’s decision allows only the foxes to guard the henhouse. However,
this not quite accurate, for the Attorney General is vested with the power to bring an action
alleging legal violations by nonprofit corporations. 15 Pa.C.S. § 5502. The henhouse is
protected and the foxes are watched by the Attorney General, sitting like a farmer on the
hill, ready to act when the hens are troubled or in danger. Complaints about the foxes may
always be directed there.
We cannot subvert the plain language of the statute; to allow all subscribers and
policyholders to challenge the inner workings of a corporation would effectually hamstring
the corporation and render the specific language in the statute superfluous. See 1 Pa.C.S.
[J-96-2010] - 10
§ 1921(a) (“Every statute shall be construed, if possible, to give effect to all its provisions.”).
We are convinced the legislature sought to give standing only to those select individuals
vested with power and influence over the company, or, as other courts have articulated, to
those possessing a “special relationship” with the corporation. Nothing in the enabling
legislation, articles of incorporation, or corporate by-laws suggests subscribers or
policyholders possess rights or status similar to “a member, officer or member of another
body,” or to any other individual in the same class as those enumerated persons. As a
result, appellants fail to establish they fall within the “or otherwise” language of § 5793(a),
and we find they lack standing as subscribers or policyholders to challenge Blue Cross’s
corporate actions.4
Having found appellants lack standing under the Nonprofit Law to challenge
corporate actions, we turn to the question of whether they have standing to raise a breach
of contract claim. Appellants argue the Nonprofit Law provisions Blue Cross allegedly
breached were incorporated into the contract both by an express contractual provision
which provided the agreement was subject to Pennsylvania laws, as well as the established
rule that the laws in place at the time of a contract’s execution are incorporated into the
contract and become contractual obligations.
See Walsh v. School District of
Pennsylvania, 22 A.2d 909, 912 (Pa. 1941). Appellants contend they were aggrieved by
the breaches, which they also contend violated Blue Cross’s duty of good faith and fair
dealing towards them. They maintain improper accumulation of excess funds and diversion
4
Our holding today does not suggest subscribers or policyholders can never have standing
to challenge corporate actions. Truly, if Blue Cross had provided authoritative powers to
subscribers and policyholders in its incorporating documents, or if the parties had
contractually agreed to allow subscriber standing, the outcome today might be different. As
it is, we are aware of no law requiring nonprofit corporations to bestow such authority upon
subscribers or policyholders, and it is not for us to make such a requirement or to
undermine the legislative prerogative to restrict standing to challenge corporate actions.
[J-96-2010] - 11
of funds to other purposes such as mergers and acquisitions deprived them of receiving the
full benefits they were entitled to receive and would have received had Blue Cross properly
fulfilled its obligations as a nonprofit corporation.
In support of this common law argument, appellants point to Liss & Marion P.C. v.
Recordex Acquisition Corp., 983 A.2d 652, 661 (Pa. 2009) (permitting aggrieved parties to
pursue common law breach of contract claim based on statutory violation because
availability of common law claim provided only viable means to enforce statutory
provisions). Appellants claim that allowing subscribers to pursue a common law breach of
contract claim based upon a violation of the Nonprofit Law would provide aggrieved parties
a viable means to enforce the contract and effectuate the legislature’s intent to ensure that
nonprofit corporations do not unlawfully accumulate an excess surplus.
Blue Cross contends appellants’ claim fails because a party cannot do indirectly
what it cannot do directly; thus, appellants cannot base a breach of contract claim on an
alleged Nonprofit Law violation when the Nonprofit Law does not provide for a private
cause of action. Blue Cross also claims appellants’ incorporation argument fails as the
entire Nonprofit Law, including § 5793(a)’s standing provisions, would be incorporated into
the contract and prevent appellants from asserting a claim. It argues Liss is distinguishable
from the current case, as both parties in Liss intended for the statute incorporated into the
contract to control the terms, and the case did not hold a plaintiff can selectively incorporate
certain portions of the statute into the contract.
We find appellants lack standing to pursue a common law breach of contract claim in
this case.
The core concept of standing is that a party who is not negatively affected by
the matter he seeks to challenge is not aggrieved, and thus, has no right to
obtain judicial resolution of his challenge. A litigant is aggrieved when he can
show a substantial, direct, and immediate interest in the outcome of the
litigation. A litigant possesses a substantial interest if there is a discernable
adverse effect to an interest other than that of the general citizenry. It is
direct if there is harm to that interest. It is immediate if it is not a remote
consequence of a judgment.
[J-96-2010] - 12
In re Milton Hershey School, 911 A.2d 1258, 1261-62 (Pa. 2006) (internal citations and
quotations omitted). “[A]s a general rule, a party to an insurance contract has standing to
sue to enforce the terms of the insurance contract.” Kuropatwa v. State Farm Insurance
Company, 721 A.2d 1067, 1070 (Pa. 1998).
However, appellants do not seek to prove an actual breach of the insurance
contract’s terms for matters such as failing to provide coverage for treatments or for poor
settlement practices. Instead they seek to attack Blue Cross’s business-making decisions,
which we have already held they may not do under the Nonprofit Law. Appellants admitted
at argument that the totality of the Nonprofit Law was incorporated into the contract for
purposes of their argument. Logically, the Nonprofit Law’s standing provisions, which do
not include appellants, would continue to govern unless the parties specifically agreed
otherwise in the contract —they did not. Had they done so, appellants would have a better
argument they had a “special relationship” with the corporation affording them standing
under § 5793(a), but that is not the contract before us.
We must reject appellants’ reliance on Liss. Liss involved a class action on behalf of
medical record requesters alleging medical record copying servicers charged unlawful rates
for electronic records under the Medical Records Act (MRA). Liss, at 656. We found the
MRA provided no remedy and evidenced no legislative intent to limit the appellees’
common law rights or preempt common law causes of action; we noted the legislature
provided no mechanism or procedure for dispute resolution in such cases that the MRA
was violated by designated agents. Id., at 660. Accordingly, we concluded a common law
claim was available because it was necessary to effectuate the legislature’s intent to make
medical record copying servicers subject to the MRA’s pricing limits. Id., at 661.
The current situation is distinguishable from Liss for several reasons.
The
relationship between the current parties is more tenuous than that in Liss, where appellees
were directly harmed by being personally overcharged in violation of the MRA’s price
[J-96-2010] - 13
limitations.
In contrast, appellants in this case are Blue Cross subscribers and
policyholders with no direct involvement in Blue Cross’s inner workings, and are unable to
demonstrate a cognizable harm caused by Blue Cross’s actions.
Secondly, whereas in Liss the legislature intended for the appellants to be subject to
the MRA’s pricing limits and provided no limitation as to who could raise that challenge, the
Nonprofit Act’s plain language indicates the legislature did not intend for general
consumers to challenge corporate actions in a court of law. The mere presence of an
articulate listing in § 5793(a) denotes the legislative intent to limit who would be able to
challenge nonprofit corporate actions. Finally, appellants are not without remedy despite
their inability to challenge corporate decisions, as they are free to shop elsewhere for
insurance or to submit complaints to the Attorney General.
With these facts in mind, we cannot, in this case, permit appellants to do under
common law what they are clearly prohibited from doing under statute, see 1 Pa.C.S. §
1504 (where remedy is provided or duty enjoined or anything directed to be done by
statute, statutory directions must be strictly pursued), and hold appellants lack standing to
maintain their breach of contract claim.
For similar reasons, we also reject appellant’s breach of fiduciary duty claim. We
have long required an insurer to operate with the “utmost good faith” toward its insured.
Fedas v. Insurance Company of Pennsylvania, 151 A. 285, 286 (Pa. 1930); see also
Dercoli v. Pennsylvania National Mutual Insurance Company, 554 A.2d 906, 909 (Pa.
1989); Cowden v. Aetna Casualty & Sur. Company, 134 A.2d 223, 228 (Pa. 1957). The
insurer’s duty of good faith is contractual, arising from the insurance company’s assumption
of a fiduciary status via the policy’s provisions affording the insurer the right and
responsibility to handle claims and control settlement. See Gray v. Nationwide Mutual
Insurance Company, 223 A.2d 8, 11 (Pa. 1966).
[J-96-2010] - 14
Again, we note appellants do not seek to address Blue Cross’s breach of the
insurance contract, but rather seek to attack corporate actions outside of the contractual
terms to reach behavior at the core of the corporation’s business functions. Appellants’
attempt to assert a breach of fiduciary duty is simply another attempt, be it under a different
name, to attack Blue Cross’s business-making actions and decisions. While Blue Cross
may have a fiduciary duty to appellants under its contract, that duty does not extend to Blue
Cross’s business practices, and thus appellants’ breach of fiduciary duty claim cannot
stand. Moreover, as we have already held appellants lack standing to challenge these
actions under either statute or common law, we cannot allow them to attack those actions
under the facade of a breach of fiduciary duty claim.
We find appellants lack standing under the Nonprofit Law to challenge Blue Cross’s
corporate actions because they do not exhibit the necessary characteristics required by the
legislature. We likewise find appellants lack standing to maintain a breach of contract claim
for Blue Cross’s alleged Nonprofit Law violation. Finally, we find appellants may not
maintain a claim for breach of fiduciary duty against Blue Cross, as this claim is a merely
another attempt to attack corporate decision-making, and Blue Cross’s fiduciary duty under
the contract does not include a duty to make proper business decisions. Accordingly, the
Commonwealth Court’s decision is affirmed.
Jurisdiction relinquished.
Mr. Chief Justice Castille, Messrs. Justice Saylor and Baer, Madame Justice Todd,
Mr. Justice McCaffery and Madame Justice Orie Melvin join the opinion.
[J-96-2010] - 15
]]>
