Opinion ID: 1924685
Heading Depth: 3
Heading Rank: 2

Heading: Vexatious Conduct under Section 2503(9)

Text: Turning to Appellants' argument that the Commonwealth Court abused its discretion by determining that Appellants' conduct was vexatious, Appellants first assert that the court failed to cite any statutory provision or case law in support of its decision. Moreover, they observe that the court's analysis of this issue is merely one paragraph, which contains no discussion of the record. Noting that Highmark moved for fees under both Sections 2503(7) and 2503(9), Appellants maintain that Section 2503(7) is not relevant here because Highmark has not asserted that Appellants engaged in dilatory, obdurate or vexatious conduct during the pendency of a matter. See 42 Pa.C.S. § 2503(7). In this regard, Appellants observe that this case was dismissed on preliminary objections. Instead, Appellants argue that only Section 2503(9), which applies to a party's decision to commence an action, is at issue here, but maintain that their conduct did not violate this provision. In order to find that a lawsuit's initiation was vexatious, Appellants note that two separate findings must be made: 1) the suit was filed without sufficient ground in either law or in fact; and 2) the suit served the sole purpose of causing annoyance. See Brief for Appellants at 14 (citing Thunberg v. Strause, 545 Pa. 607, 615, 682 A.2d 295, 299 (1996)). Concerning the first prong, Appellants assert that they advanced a legitimate legal theory in which they sought to challenge Highmark's inclusion of a risk and contingency factor in its 2004 filed rates on the basis of the Commissioner's February 9, 2005 determination. Appellants also challenge the Commonwealth Court's decision to grant fees based upon previous suits filed by Appellant against Highmark. Instead, Appellants suggest that all of their actions were good faith efforts to enforce obligations created under Pennsylvania law and/or by the Pennsylvania Insurance Department. Appellants note that the basic premise referred to by the court, namely, that rates and reserves are part of a regulatory process under the sound discretion of the Commissioner, and are not the proper subject of adversary litigation, was, at the time, being considered by this Court in our review of the Commonwealth Court decision in Ciamaichelo v. Independence Blue Cross, 814 A.2d 800 (Pa.Cmwlth.2002). Moreover, Appellants assert that each of the suits they brought against the Blue Plans was separate and distinct. In the first action, Ciamaichelo, Appellants sought to remedy, inter alia, Highmark's alleged violation of Pennsylvania's Non-Profit Law, as well as Highmark's claimed breach of contract and breach of fiduciary duty. In the second action, Petty, Appellants explain that they brought similar claims in the Pennsylvania Insurance Department on their belief that the Department was the appropriate forum for such complaints. In a third action, City of Philadelphia, Appellants filed a petition for review in the Commonwealth Court asserting that the Insurance Commissioner's February 9, 2005 Determination and Order was based upon a constitutionally infirm process. Finally, in a fourth action, Old Forge School District, Appellants brought suit in the Commonwealth Court's original jurisdiction challenging Highmark's inclusion of a risk and contingency factor in its 2004 filed rates on the basis of a portion of the Commissioner's February 9, 2005 Determination and Order. As to Thunberg's second consideration, Appellants argue that Highmark has not alleged, and the court has not made any findings, that their suits served the sole purpose of causing annoyance. Instead, Appellants maintain that their actions sparked public interest and prompted the Insurance Department to become more involved in reviewing and regulating the surplus levels maintained by the Blue Plans. Specifically, Appellants suggest that their actions brought about the Commissioner's decision, in September 2002, to hold hearings concerning the Blue Plans' reserve and surplus levels. In connection with these hearings, Appellants note that Pennsylvania State Representative Phyllis Mundy highlighted the impact of Appellants' suits in generating public interest in a letter addressed to the Insurance Commissioner: [T]here is a substantial public interest in this issue, which has been brought to the public's attention through a series of class action lawsuits brought by policyholders and subscribers of the respective Pennsylvania Blue Plans in the Courts of Common Pleas of Lackawanna, Bucks and York Counties. See Letter of Hon. Phyllis Mundy to M. Diane Koken, dated August 23, 2002, available at http://www.insurance.state.pa. us/bchearing/comments/bc_ind_0017.pdf. In addition, Appellants assert that their actions were instrumental in triggering a dialogue that led to an unprecedented Agreement on Community Health Reinvestment between the Pennsylvania Blue Plans and the Insurance Department, which required the Blue Plans to commit a certain percentage of the their income received from health premiums and in connection with Medicare and Medicaid premiums to fund social programs. See Agreement on Community Health Reinvestment, dated February 2, 2005, 35 Pa. Bull. 4155 (July 23, 2005). [8] Highmark, by contrast, argues that the Commonwealth Court did not abuse its discretion in granting its fee application because Appellants are serial litigators who have ignored the court's previous rulings. See Brief for Appellees at 17. Highmark asserts that all of Appellants' suits have a single alleged goal, namely, to force the Blue Plans to disgorge allegedly excessive reserves and surplus derived from allegedly excessive rates. See Brief for Appellee at 9. Highmark notes that the previous rulings by the Commonwealth Court reflect the current state of the law on the right of private litigants to police and enforce the insurance laws of this Commonwealth. Highmark further contends that the Commonwealth Court's order, in the present matter, was supported by the record. As the Commonwealth Court appears to have based its decision on the various actions filed by Appellants, our decision here is to remand this issue for that court to reevaluate its decision in light of this Court's recent decision in Ciamaichelo v. Independence Blue Cross, 589 Pa. 415, 909 A.2d 1211 (2006). In Ciamaichelo, this Court held that a complaint containing, inter alia, allegations that Independence Blue Cross, a Pennsylvania Blue Plan, breached its contractual and fiduciary duties to its policyholders in having amassed an excess in surplus funds, could proceed in the court of common pleas. Mr. Chief Justice Cappy, writing for a majority of the Court, reasoned that the Legislature has empowered the court of common pleas, not the Insurance Department, to adjudicate such claims. See Ciamaichelo, 589 Pa. at 425, 909 A.2d at 1217. Thus, the basic premise referred to by the Commonwealth Court, namely, that challenges to rates and reserves are entirely within the sound discretion of the Commissioner and are not the proper subject of adversary litigation, has been undermined by this Court's holding in Ciamaichelo. Accordingly, we believe that a remand in light of Ciamaichelo is warranted. In addition, the Commonwealth Court's decision is problematic because the court did not articulate its reasoning according to the two-prong test for vexatious conduct set forth in Thunberg. Specifically, the court made no findings as to the second prong of Thunberg, namely, whether the suit served the sole purpose of causing annoyance. See Thunberg, 682 A.2d at 299.