Court Opinion

ID: 9697325
Source: CourtListenerOpinion
Date Created: 2023-08-25 19:13:57.404919+00
Date Added: 2024-06-11T18:20:31.658878
License: Public Domain

NEWMAN, Justice,
concurring.
Although I join the Majority’s Opinion, I write separately because I disagree in part with the Majority’s conclusion that *583the policyholders’ Complaint does not constitute a collateral attack on the Insurance Commissioner’s approval of the merger. While I agree that Count I of the Complaint may reasonably be interpreted as alleging corporate tort claims that are outside the jurisdiction of the Insurance Commissioner, the allegations of Count II appear to be directed solely toward the very issues upon which the Commissioner based her findings of fairness, e.g., the financial effects of the merger on Covenant’s policyholders. Accordingly, I would dismiss Count II as an impermissible collateral attack on the Insurance Commissioner’s approval of the merger.
In her Order and Opinion dated September 28, 1994, the Insurance Commissioner made, inter alia, the following determinations:
11. The Commissioner believes that the Plan [of Merger] meets the standards of Section 205(b) of the [Business Corporation Law] and further believes that the Plan is not injurious to the interests of the policyholders and creditors of either corporation.
14. The Commissioner, based on the standards set forth at 40 P.S. § 991.1402(f)(l)(a)(iii), has not found that Provident’s financial condition is such as might jeopardize the financial stability of Covenant or prejudice the interests of policyholders.
15. The Commissioner, based on the standards set forth at 40 P.S. § 991.1402(f)(l)(a)(iv), has not found that Provident’s plans or proposals, if any, to make any material change in the business or corporate structure or management of Covenant, are unfair and unreasonable to policyholders of Covenant and not in the public interest,
16. The Commissioner, based on the standards set forth at 40 P.S. § 991.1402(f)(l)(a)(v), has not found that the competence, experience and integrity of those persons who would control the operation of Provident, as the surviving corporation, are such that it would be adverse to the *584interest of policyholders of the insurer and of the public to permit the merger.
On its face, Count II of the policyholders’ Complaint, entitled, “Class Action Claim as Against All Defendants for Fundamental Unfairness of the Merger,” addresses precisely the issues of fairness and financial consequences that the Insurance Commissioner ruled on in approving the merger. In Count II, the policyholders allege, inter alia, that:
“[The] merger transaction ... is fundamentally unfair to plaintiffs and other Covenant policyholders.... ” [Complaint ¶ 93];
“The Merger is also at an unfair price. The transaction negotiated by defendants fails to provide plaintiffs and the class with any consideration for their valuable ownership interest in Covenant.” [Complaint,¶ 93];
“Defendant Provident and the Individual Defendants, on behalf of defendant Covenant, have acted in structuring this unfair merger to usurp Covenant’s valuable assets.... ” [Complaint ¶ 94];
“These tactics pursued by defendants are ... wrongful, unfair and harmful to Covenant’s policyholders, and are an attempt by certain defendants to aggrandize their personal positions, interests and finances at the expense, and to the detriment, of Covenant’s policyholders.” [Complaint^ 95]; and
“As a result of the actions of the defendants, plaintiffs and the class have been and will be damaged in that they will not receive fair value for Covenant’s assets, business and surplus.... ” [Complaint ¶ 96].
The allegations of Count II are clearly inconsistent with the Insurance Commissioner’s determinations regarding the fairness of the merger to policyholders. Indeed, in the Prayer for Relief following Count II, the policyholders specifically ask the Court of Common Pleas to, “[d]eclar[e] that the proposed merger is unfair, unjust and inequitable to plaintiffs and the other members of the class.... ” Thus, I cannot view Count II as anything other than a collateral attack on the Insurance *585Commissioner’s approval of the merger. Accordingly, I would dismiss Count II and allow the policyholders to proceed only against Covenant’s directors for alleged breaches of fiduciary duty as set forth in Count I of the policyholders’ Complaint.