836 F. Supp. 2d 821
S.D. Ind.2011Background
- Anthem demutualized in 2001, converting from mutual to stock structure in Indiana with a plan that paid members either cash or Anthem, Inc. stock; the plan ensured aggregate consideration equaled the plan’s fair value and was reviewed by the Indiana Department of Insurance (IDOI).
- The Plan allowed eligible members to choose cash or stock, with cash as default and a top-up mechanism increasing cash if stock price rose post-IPO; cash finalization depended on IPO cash sufficiency.
- The IDOI held a public hearing approving the Plan with conditions, including regulatory approvals and pro-for-ma documentation, before members voted on the Plan.
- The IPO priced at $36 and issued 55.2 million shares, with additional shares allocated to members electing stock; stock began trading at $40.90, with initial closing at $42.90 and cash recipients receiving approximately $39.60 per value share due to top-up mechanics.
- The Ormond case previously allowed a tort theory related to pricing and sizing of the IPO to survive, but the present case seeks to test SLUSA preemption and Delaware Carve-Out applicability to a demutualization class action seeking damages for undervalued stock.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does SLUSA preempt this state-law class action? | Jorling argues SLUSA does not apply. | Anthem argues SLUSA preempts all state-law claims. | SLUSA preemption applies; the Delaware Carve-Out does not rescue the claims. |
| Does the Delaware Carve-Out apply to this demutualization case? | Jorling contends Carve-Out exempts the suit. | Anthem contends plaintiffs are not holders of equity securities. | Delaware Carve-Out does not apply. |
| Are the contract claims viable apart from SLUSA analysis? | Jorling asserts some contract claims survive independent of SLUSA. | Anthem argues contract claims are precluded as in Ormond. | Contract claims barred by SLUSA framework and prior rulings. |
Key Cases Cited
- Segal v. Fifth Third Bank N.A., 581 F.3d 305 (6th Cir. 2009) (substance over phrasing governs SLUSA applicability)
- Brown v. Calamos, 664 F.3d 123 (7th Cir. 2011) (go beyond complaint’s words; SLUSA preemption analysis hinges on substance)
- Sofonia v. Principal Life Ins. Co., 465 F.3d 873 (8th Cir. 2006) (Delaware Carve-Out not applicable where plaintiffs were not holders of equity securities)