SECRETARY CLAIRE DEMATTEIS in hеr official capacity as Secretary of the Delaware Department of Human Resources and Co-Chair of the State Employee Benefits Committee, DIRECTOR CERRON CADE in his official capacity as Director of the Delaware Office of Management and Budget and Co-Chair of the State Employee Benefits Committee, DELAWARE DEPARTMENT OF HUMAN RESOURCES, DELAWARE STATE EMPLOYEE BENEFITS COMMITTEE, and DELAWARE DIVISION OF STATEWIDE BENEFITS v. RISEDELAWARE INC., KAREN PETERSON, and THOMAS PENOZA
No. 178, 2023D
IN THE SUPREME COURT OF THE STATE OF DELAWARE
April 12, 2024
Before TRAYNOR, LEGROW, Justices; and ARRINGTON, Judge.
Upon appeal from the Superior Court of the State of Delaware. REVERSED.
Patricia A. Davis, Esquire, Adria Martinelli, Esquire, DELAWARE DEPARTMENT OF JUSTICE, Wilmington, Delaware; Max B. Walton, Esquire (argued), Shaun Michael Kelly, Esquire, Lisa R. Hatfield, Esquire, CONNOLLY GALLAGHER LLP, Wilmington, Delaware, for Appellants/ Cross Appellees Secretary Claire Dematteis in her official capacity as Secretary of the Delaware Department of Human Resources and Co-Chair of the State Employee Benefits Committee, Director Cerrоn Cade in his official capacity as Director of the Delaware Office of Management and Budget and Co-Chair of the State Employee Benefits Committee, Delaware Department of Human Resources, Delaware State Employee Benefits Committee, and Delaware Division of Statewide Benefits.
Sidney S. Liebesman, Esquire (argued), Austen C. Endersby, Esquire, Nathan Barillo, Esquire, FOX ROTHSCHILD LLP, Wilmington, Delaware, for Appellees/ Cross Appellants RiseDelaware Inc., Karen Peterson, and Thomas Penoza.
LEGROW, Justice:
This is an appeal from a decision of the Superior Court (1) finding that the decision of the State Employee Benefits Committee (“SEBC“) adopting a Medicare Advantage Plan for State retirees was subject to the requirements of Delaware‘s Administrative Procedures Act (“APA“); (2) granting Appellees’ Motion to Stay the implementation of the Medicare Advantage Plan; and (3) requiring the State to keep its retirees’ Medicare Supplement Plan in full force and effеct. On cross-appeal, Appellees challenge the Superior Court‘s decision denying their application for attorneys’ fees.
The core question before us is one of statutory interpretation: under the APA, is the SEBC‘s selection of a particular type of Medicare plan a “regulation” as the General Assembly has defined that term? Because the statute relevantly limits a regulation to a “rule or standard,” and the SEBC‘s choice of a statutorily authorized Medicare plan does not fall within the plain meaning of the terms “rule” or “standard,” we conclude that the SEBC‘s decision was not a regulation. Accordingly, the Superior Court did not have jurisdiction to enter the challenged stay, and we reverse the decision on appeal. The important policy considerations that attend the selection of heаlthcare coverage for State retirees are questions appropriately addressed to the legislative and executive branches.
A. SEBC process
The SEBC is responsible for implementing, overseeing, and managing State employee benefits.3 The agency‘s powers and duties are codified in
The SEBC held a meeting on February 28, 2022, at which it unanimously approved a motion to move the retirees to a Group Medicare Advantage plan, which is a plan under Medicare part C.7 “At the March 14th meeting, the Committee approved the implementation of the Medicare Advantage plan for the January 1, 2023 plan year.”8 The SEBC met again on April 25, 2022, and “approved the rates for the Medicare pensioner plan options and those proposed options were voted on to replace the [then-existing plans].”9 At the same meeting, “a motion was adopted to approve Medicare Advantage plan with prescription as the only Medicare pensioner option.”10 On June 1, 2022, an introductory mailing was sent to eligible Medicare pensioners about the transition to a Medicare Advantage Plan beginning January 1, 2023.11
The Medicare Advantage contract was awarded on February 28, 2022, and finalized on September 28, 2022.12 Two days later, on September 30, 2022, “the State updated information on its website providing an 11-page document labeled “Frequently
B. Complaint filed in Superior Court
On September 25, 2022, Appellees/Plaintiffs below, RiseDelaware Inc.;15 Karen Peterson; and Thomas Penoza (collectively, “Appellees” or “RiseDelaware“) filed a Complaint in the Superior Court against Appellants/Defendants below, Secretary Claire DeMatteis, in her official capacity as Secretary of the Delaware Department of Human Resources and Co-Chair of the SEBC; Director Cerron Cade, in his official capacity as Director of the Delaware Office of Management and
Budget and Co-Chair of the SEBC; the SEBC; the Delaware Department of Human Resources (“DHR“); and the Delaware Division of Statewide Benefits (“DSB“) (collectively, “Appellants” or “SEBC“).16 The Complaint contained three counts and sought two forms of relief: (1) declaratory relief under
C. Motion to Stay and Stay Order
On October 4, 2022, Appellees filed a Motion to Stay “implementation of the new Highmark Medicare Advantage Plan for State retirees and the open enrollment period currently in effect for State retirees” under
to Stay and reserved its decision.21 On October 19, 2022, the Superior Court issued an Order granting the Motion to Stay (the “Stay Order“).22
In granting the Motion to Stay, the Superior Court held that it had authority to enter a stay under
The court next assessed the merits of Appellees’ arguments for a stay, including the likelihood of success on the merits and imminent harm, finding that there was a likelihood of success on the merits and that retirees in the present and future would face irreparable harm if the stay was not granted.29 Further, the court found that a stay would not harm the public and concluded that “the harm to [Appellees] far outweighs the harm to [Appellants] and the public.”30
In granting the Appellees’ Motion to Stay, which effectively meant State retirees would retain their currеnt benefits for the immediately foreseeable future, the court stated that “implementation of a Medicare Advantage Plan for State retirees and acceptance of enrollment into the Plan, including by way of automatic
enrollment in the open enrollment period currently in effect for State retirees is stayed until further Order by this Court.”31 The court also required the State to ensure “that the healthcare insurance and benefits available to State retirees prior to October 3, 2022, or in which they were enrolled prior to that time, remain in full force and effect.”32 Further, the court scheduled a trial on the merits to make final factual determinations.33 Not long after that, the trial was removed from the calendar at the parties’ request.34
On November 14, 2022, Appellees filed a Motion for Attorneys’ Fees (the “Fee Motion“), arguing that the APA allows an award of fees when there is success in achieving a stay order and that the Appellants’ conduct warranted fee-shifting in this case.35 On February 8, 2023, the court issued an order denying Appellees’ Fee Motion.36
E. Stipulations for Final Judgment
On November 18, 2022, the parties filed a Joint [Proposed] Stipulation and Order for Resolution of Remaining Claims and Issues.37 The proposed joint stipulation and order provided: (1) that Appellants would file a memorandum in opposition to Appellees’ Fee Motion; (2) the timelines for filings and procedures if the court were to rule in favor of the Fee Motion; (3) the procedure the parties would follow upon resolution of the Fee Motion; and (4) that “[u]pon entry of final judgment, each party shall be permitted to appeal as authorized by law. Nothing in this stipulation shall be deemed a waiver of any aрplicable right of appeal nor shall it be deemed to preclude any arguments on appeal that were raised in the underlying proceedings.”38 On December 6, 2022, the court refused to enter the November 18, 2022 stipulation and proposed order, requesting that the parties “[p]lease file a stipulation reflective of the resolution of the case. It seems that the parties are at the point of over litigating this case.”39
On December 16, 2022, the parties filed another Stipulation and [Proposed] Order for Entry of Final Judgment asking the court to enter a Final Order stating that: (1) the action was ripe for entry of final judgment on all matters except the
court‘s ruling on the Motion to Amend40 and the Fee Motion; (2) “[u]pon rendering its rulings on the Motion to Amend and Fee Petition, the Court may enter the form of Order, attached hereto as Exhibit 1, as its Order and Final Judgment, fully disposing of all matters in the Action[;]” and (3) “[u]pon entry of the attached form of Order, each party shall be permitted to appeal as authorized by law. Nothing in this stipulation shall be deemed a waiver of any applicable right of appeal; nor shall it be deemed to preclude any arguments on appeal that were raised in the underlying proceedings.”41 For reasons that are not clear from the record before us, the court never entered this proposed stipulation and order.
F. Appellants’ First Appeal
On February 15, 2023, following the ruling denying the Fee Motion, the Appellants filed their Notice of Appeal in this Court.42 Because the court had not entered a final order, the Appellants’ first appeal was dismissed as interlocutory and remanded to the Superior Court.43
After dismissal of Appеllants’ first appeal, Appellants submitted a Motion and [Proposed] Order for Entry of Final Judgment.44 Appellees opposed that motion, and the court heard oral argument.45 On May 22, 2023, the court issued its Order on Final Judgment (the “Final Order“).46 The Superior Court‘s Final Order did not adopt the language proposed by the SEBC.47 Appellants filed their notice of appeal in this Court on the same day. On June 21, 2023, Appellees filed their notice of cross-appeal.
II. STANDARD OF REVIEW
This Court reviews questions of law, including the interpretation of a statute, de novo.48 “The goal of statutory construction is to determine and give effect to legislative intent.”49 When the unambiguous language of the statute clearly reflects the legislature‘s intent, the plain meaning of the statutory language controls.50 “A
statute is ambiguous ‘if it is reasonably susceptible of different constructions or interpretations’ or ‘if a literal reading of the statute would lead to an unreasonable or absurd result not contemplated by the legislature.‘”51
We review an attorneys’ fee award for abuse of discretion.52 Delaware law follows the American Rule, under which litigants are generally responsible for paying their own litigation costs.53 Courts recognize “limited equitable exceptions” to the American Rule, including one for a party‘s “bad faith” conduct throughout litigation.54 Although there is no all-encompassing definition of “bad faith” conduct, Delaware courts have granted attorneys’ fees where a party “unnecessarily prolonged or delayed litigation, falsified records, or knowingly asserted frivolous claims.”55 In Delaware, the “bad faith” exception only applies in “extraordinary circumstances.”56 Its purpose is “to deter abusive litigation and protect the integrity
III. ANALYSIS
There are two main issues on appeal. First, Appellants assert that the Superior Court erred in holding that the SEBC‘s decision adopting a Medicare Advantage plan was a regulation as that term is defined in the APA. Second, on cross-appeal, Appellees argue that the Superior Court erred by refusing to grant their application for attorneys’ fees.
A. The Superior Court erred in holding that the SEBC‘s decision was a regulation as defined in Delaware‘s Administrative Procedures Act.
Appellants contend that the SEBC is not required to promulgate a regulation when it enters into a contract for the administration of health care benefits for State retirees or employees.58 Appellants argue that the SEBC‘s decision to move State retirees to a Medicare part C plan was consistent with a specific statutory directive authorizing that step and that the canons of statutory construction show that the selection of a carrier is not a “regulation” as the APA defines that term.59 Because the SEBC‘s Medicare Advantage decision is not governed by the APA, Appellants contend that the Superior Court‘s Stay Order, which was issued under the APA, must be reversed.60
In response, Appellees argue that Appellants are legally foreclosed from challenging the Stay Order in this appeal because: (1) Appellants “did not ask the Superior Court at the final judgment stage to lift the Stay Order‘s injunction against the implementation of Medicare Advantage; and” (2) Appellants’ “Opening Brief did not challenge the Final Order so that their arguments seeking to have the Stay Order overturned amount to an untimely interlocutory appeal not in compliance with Superior Court Rule 42[.]”61 Appellees further argue that, if this Court reaches thе merits of the issue on appeal, the Stay Order should be upheld because the SEBC‘s decision to move to a Medicare Advantage Plan is a “policy change” and therefore is a regulation within the meaning of the APA. Appellees argue that the SEBC‘s adoption of Medicare Advantage was not pursuant to a specific legislative directive and no statutory provision negated the APA‘s binding rule-making obligations on the SEBC.62
1. The issue on appeal may be considered on its merits.
Before addressing the substance of Appellants’ position, Appellees advance several procedural arguments that they contend bar our consideration of this appeal. Appellees first urge us to remand without addressing the merits of Appellants’
arguments because the appeal challenges an interlocutory order.63 Appellees assert that Appellants only dispute the Stay Order, that this Court dismissed as interlocutory Appellants’ previous attempt to appeal that order,64 and that Appellants did not
We confess that this argument is both puzzling and challenging to address because of the unusual order of proceedings in the Superior Court. We conclude, however, that Appellees’ procedural arguments lack merit. Although Appellees are correct that the Final Order does not expressly merge with the Stay Order, the Final Order refers to the Stay Order multiple times.67 The trial court‘s clear intent was to enter a final, appealable order as to all the issues in the case. Moreover, Appellees
conceded at oral argument that they had agreed that the issue was ripe for appeal and “the [Appellees] were more than happy to come on to an appeal on the issue of whether the APA applied.”68
Appellees support their contention that this appeal is interlocutory by citing Tyson Foods, Inc. v. Aetos Corp.69 Tyson stands for the proposition that “[a]n aggrieved party can appeal to this Court only after a final judgment is entered by the trial court. . . . [and] a final judgment is one that determines all the claims as to all the parties.”70 But Appellees’ reliance on Tyson is misplaced; unlike the appellant in Tyson, the Appellants here filed a timely appeal of the trial court‘s subsequent judgment, which was the Final Order. The Final Order was entered a month after this Court remanded the matter to the trial court after holding that the Stay Order was interlocutory.71 The trial court and the parties intended the Final Order to be a final judgment. To remand the matter again as interlocutory would be absurd and would put the courts in a perpetual loop, ignoring the clear intent of the trial court
and the parties. Dismissal of the appeal also would leave the SEBC without a clear directive as to whether the APA applies to its selection of health plans for State employees and retirees.
Appellees also make a “merger” argument, citing a series of non-Delaware cases72 that explain that a “provisional
Appellees’ argument that Appellants are legally foreclosed from challenging the Stay Order on the basis of waiver is equally unavailing. The parties agreed to
two stipulations—on November 18, 2022 and December 16, 2022—that express their shared intent that a final judgment be entered.74 The stipulated final orders proposed by the parties would have made merger clear. Further, at oral argument the trial court recognized that the “cased ended outside of court” with “no trial” and no “findings of fact or conclusions of law,” and the only issue left to address by the court was the request for attorneys’ fees.75
These stipulations contained clear language that “[w]ith the exception of the Court‘s rulings on the Motion to Amend and Fee Petition, the Action is ripe for entry of final judgment.”76 Further, the December 16, 2022 stipulation provided that upon a ruling on the Motion to Amend and Fee Petition, all matters in the action were fully disposed, and “[n]othing in this stipulation shall be deemed a waiver of any applicable right of appeal; nor shall it be deemed to preclude any arguments on appeal that were raised in the underlying proceedings.”77 Appellants argue that:
Although the Superior Court did not sign this particular proposed order, choosing to use its own form of order, both parties agreed that the conclusions of law to date disposed of the issues, other than [Appellees‘] request for attorneys’ fees, at the lower court level. The parties presented the stipulation to the Court with full knowledge that
the other side would be appealing any adverse decision of the Superior Court.78
We agree with this reasoning. Although the court did not enter either proposed stipulation, the fact remains that the parties agreed to their terms, and nothing in Appellants’ actions can fairly be construed as a waiver of their right to appeal the trial court‘s legal holding. Appellees cite no authority for their assertion that Appellants waived the issue by failing to ask the trial court to lift the Stay Order, and we cannоt discern a legal or practical reason to find waiver under these circumstances.
and proper steps to ensure that the healthcare insuranсe and benefits available to State retirees prior to October 3, 2022, or in which they were enrolled prior to that time, remain in full force and effect.”81 The Court cannot conclude that the SEBC‘s actions in compliance with the trial court‘s order mooted the SEBC‘s appeal challenging that order. There is a live controversy about the Stay Order, which the next section of this opinion addresses.
2. The challenged agency decision was not a “Regulation” under the relevant statute.
The APA grants the Superior Court the authority to stay enforcement of an agency regulation under
When an action is brought in the Court for review of an agency regulation or decision, enforcement of such regulation or decision by the agency may be stayed by the Court only if it finds, upon a preliminary hearing, that the issues and facts presented fоr review are substantial and the stay is required to prevent irreparable harm.
There is no dispute that the Superior Court‘s authority to issue a stay under Section 10144 is limited to actions challenging an agency regulation or decision. Neither side argues that the SEBC‘s action was a “decision,” which is specifically limited by statute to circumstances not at issue in this case.82 Whether the SEBC‘s action in adopting a Medicare Advantage Plan was a regulation is the only aspect of the trial
court‘s decision that Appellants challenge. If it was, the APA applies, and the SEBC concedes that it did not comply with the APA‘s procedures when it selected the Medicare Advantage Plan.83
The issue before us is a straightforward statutory interpretation question. “Regulation” is defined in
means any statement of law, procedure, policy, right, requirement or prоhibition formulated and promulgated by an agency as a rule or standard, or as a guide for the decision of cases thereafter by it or by any other agency, authority or court. Such statements do not include locally operative highway signs or markers, or an agency‘s explanation of or reasons for its decision of a case, advisory ruling or opinion given upon a hypothetical
or other stated fact situation or terms of an injunctive order or license.84
Neither party argues that the definition of “Regulation” is ambiguous.
which include controlling and managing the group health insurance program for State employees and retirees.87
When interpreting a statute, we attempt to ascertain and give effect to the General Assembly‘s intent.88
First, we must determine whether the relevant statute is ambiguous. A statute is ambiguous when it can rеasonably be interpreted in two or more different ways “or if a literal reading of its terms ‘would lead to an unreasonable or absurd result not contemplated by the legislature.‘” If we determine that a statute is unambiguous, we give the statutory language its plain meaning. If we determine that a statute is ambiguous, “we consider the statute as a whole, rather than in parts, and we read each section in light of all others to produce a harmonious whole.” We presume that the General Assembly purposefully chose particular language and therefore construe statutes to avoid surplusage if reasonably possible.89
“[U]ndefined code terms must be construed according to their common and approved usage,”90 and this Court regularly refers to dictionaries in defining code terms.91
In Free-Flow, this Court addressed the scope of the APA and recognized that not all agency actions fall within the Act.92 Our decision in Free-Flow offers a helpful framework for this appeal. First,
as a general rule, when an agency adopts a regulation, it must comply with the APA‘s procedures for adopting a
regulation; and when an agency decides whether a named party is violating a law or regulation, it must comply with the APA‘s procedures for case decisions. But, when an agency carries out other functions, as when it implements a specific and detailed statutory directive, it may operate outside the scope of the APA.93
Second, whether an agency action is a regulation does not depend on the label given to it by the agency.94
Free-Flow did not, however, further explore the meaning of “regulation,” and we therefore turn to that question now. The APA‘s definition of “regulation” contains three parts that are relevant to the parties’ dispute. “Regulation” means аny [(1)] statement of law, procedure, policy, right, requirement or prohibition [(2)] formulated and promulgated by an agency [(3)] as a rule or standard, or as a guide for the decision of cases . . .”95 Each of these elements must be satisfied for an agency action to be a regulation.
First, a regulation must be a “statement of law, procedure, policy, right, requirement or prohibition.”96 Appellees urge that the SEBC‘s selection of a Medicare Advantage plan was a “policy” because that action—if implemented—would affect many people and would be “substantively transformational.”97 Specifically, Appellees emphasize the “drastic, adverse consequences on Retiree healthcare rights” that the switch to Medicare Advantage would have, concluding that the decision therefore is a “pоlicy.”98 But this argument raises more questions than it answers. Focusing on the effect of an agency‘s decision seems to us
subjective and unwieldy. If the meaning of policy depends on an agency action‘s ultimate effect, the agency would be required to know and weigh from the outset the effect of any proposed action. That standard also would require an agency to predict how different people or groups would be affected, which will vary from case to case.
Generally, a “policy” is defined as “a definite course or method of action selected from among alternatives and in light of given conditions to guide and determine present and future decisions” or “a high-level overall plan embracing the general goals and acceptable procedures especially of a governmеntal body.”99 The SEBC‘s decision does not easily satisfy this meaning of “policy.” To the contrary,
Assembly. Free-Flow establishes that “when an agency . . . implements a specific and detailed statutory directive, it may operate outside the scope of the APA.”102 Here, the actions that the SEBC took when selecting a plan arguably were consistent with Free-Flow‘s determination of when an agency action falls outside the APA‘s scope. Ultimately, however, we need not determine whether the SEBC‘s action was a “policy” because, in any event, the challenged decision was not a “rule or standard.”
The third part of the definition of “regulation” requires the agency action to be one that qualifies “as a rule or standard, or as a guide for the decision of cases thereafter . . .”103 Appellees did not address in their brief and could not coherently answer at oral argument how the SEBC‘s action to select a Medicare plan would be used “as a guide for the decision of cases thereafter.” Instead, Appellees asserted, if obliquely, that the action was a “rule or standard.” Appellees did not, however, engage with the plain meaning of those words, retreating instead to their focus on the significant (negative) effects felt by State retirees as a result of the SEBC‘s action.
Merriam-Webster defines a “rule” as “a prescribed guide for conduct or action” or a “regulating principle.”104 “Standard” is defined as “something established by authority, custom, or general consent as a model or example.”105 Both words require the agency action to guide, regulate, or act as a model for future action. The SEBC‘s adoption of a particular health plan permitted by statute does not meet any of these definitions. To the contrary, the adoption of a particular plan, authorized in advance by the General Assembly, does not dictate future agency action and may be revisited in the future as the SEBC deems appropriate. Because the agency action was not a “rule or standard,” it was not a regulation under the APA, and the Superior Court lacked jurisdiction to stay that action under Title 29, Section 10144.
B. The cross-appeal challenging the Superior Court‘s attorneys’ fee ruling is moot.
On cross-appeal, Appellees сontend that the Superior Court abused its discretion
attorneys’ fees.”107 In response, Appellants contend that Appellees’ application for attorneys’ fees was properly rejected by the Superior Court because Appellees never pleaded a claim for fees and thereby waived that claim.108 Additionally, Appellants argue that the common benefit doctrine is inapplicable.109 At oral argument, Appellees withdrew their common benefit argument in light of this Court‘s recent decision in In re Delaware Public Schools Litigation.110 As suсh, this opinion does not discuss the merits of that argument.
In addition to their common benefit argument, Appellees maintain that the State officials’ “reprehensible conduct” supports an award of fees.111 In response, Appellants contend that Appellees’ reliance on the bad-faith exception to the American Rule fails because Appellees cannot establish “extraordinary circumstances here, nor can they establish by clear and convincing evidence that the SEBC acted in subjective bad faith[,]” and as such attorneys’ fees are not warranted.112
Delaware law follows the American Rule, under which litigants are generally responsible for paying their own litigation costs.113 Under the American Rule, “a prevailing party is responsible for the payment of his own counsel fees in the absence of statutory authority or contractual undertaking to the contrary.”114 Courts recognize “limited equitable exceptions” to the American Rule, including one for a party‘s “bad faith” conduct throughout litigation.115
Here, Appellees’ argument regarding bad faith is moot because fee shifting is available only against a losing party in favor of a prevailing party.116 By reversing the decision below, fee shifting is foreclosed, and it is not necessary for this Court to engage with Appellees’ bad faith arguments.
IV. CONCLUSION
For the foregoing reasons, we reverse the Superior Court‘s order dated October 19, 2022 staying implementation of a Medicare Advantage Plan for State retirees and the Superior Court‘s May 22, 2023 order entering final judgment in this case.