Petty v. Hospital Service Ass'n
23 A.3d 1004
| Pa. | 2011Background
- Appellants challenge Blue Cross of Northeastern Pennsylvania, a nonprofit hospital corporation, over its accumulation of excess surplus under the Nonprofit Law (15 Pa.C.S. §5545) and its incorporation of that law into the contract with Blue Cross subscribers.
- Plaintiffs alleged four theories: (1) unlawful excess profits under §5545; (2) breach of contract and implied good-faith handling due to surplus; (3) breach of fiduciary duty as subscribers; (4) request for inspection of Blue Cross records/bylaws.
- Trial court held lack of standing under §5793(a) as to nonprofit-law challenges; common-law standing also denied because no cognizable contractual breach or fiduciary-duty claim under the circumstances.
- Commonwealth Court (en banc) affirmed, echoing prior decisions, and holding subscribers/policyholders lack standing to sue under the Nonprofit Law; speculation of harms to general class without direct interest.
- The Pennsylvania Supreme Court granted review to decide (1) whether policyholders/subscribers have standing under §5793(a); (2) whether they can maintain a common-law contract claim for Nonprofit Law violations; (3) whether they may maintain a fiduciary-duty claim for surplus.
- The Court held: subscribers do not have standing under §5793(a) to challenge corporate actions; they also lack standing to pursue a common-law breach of contract or a breach-of-fiduciary-duty claim arising from the non-profit’s internal business decisions; the decision of the Commonwealth Court is affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing under §5793(a) for subscribers | Petty argues subscribers have a special relationship under the bylaws. | Blue Cross contends no special relationship; “or otherwise” is restricted. | Subscribers lack standing under §5793(a). |
| Contract claim for Nonprofit Law violations | Nonprofit Law violations incorporated into contract; consumers harmed by surplus. | Standing bars such indirect enforcement; no private action under Nonprofit Law. | No standing to assert common-law contract claim. |
| Fiduciary-duty claim by subscribers | Blue Cross violated fiduciary duties by accumulating excess surplus. | Any fiduciary duty is limited to contract; not to corporate actions outside the contract. | No standing; fiduciary-duty claim rejected. |
Key Cases Cited
- White v. Associates in Counseling and Child Guidance, 767 A.2d 638 (Pa. Cmwlth. 2001) (limits standing under §5793(a) for a non-enumerated role; must be equivalent to enumerated titles or in same class as them)
- Ciamaichelo II v. Independence Blue Cross, 928 A.2d 407 (Pa. Cmwlth. 2007) (subscribers with powers akin to directors/members may have standing under §5793(a))
- Ciamaichelo v. Independence Blue Cross, 589 Pa. 415, 909 A.2d 1211 (2006) (initial remand on standing under Nonprofit Law)
- Summit House Condominium v. Commonwealth, 523 A.2d 333 (Pa. 1987) (ejusdem generis — restricts general terms to similar enumerated categories)
- Chanceford Aviation Properties, L.L.P. v. Chanceford Township Board of Supervisors, 923 A.2d 1099 (Pa. 2007) (statutory interpretation guidance for broad terms)
- 1 Pa.C.S. § 1921(a) (statutory construction relevance), — (—) (evidence of preference to give effect to all provisions)