Air Evac EMS, Inc. v. Usable Mut. Ins. Co.

533 S.W.3d 572

AIR EVAC EMS, INC., Petitioner

v.USABLE MUTUAL INSURANCE COMPANY d/b/a Arkansas Blue Cross Blue Shield, Respondent

No. CV–17–103

Supreme Court of Arkansas.

Opinion Delivered: December 14, 2017

Steel, Wright, Gray & Hutchinson, PLLC, by: Nate Steel, Little Rock, Scott Poynter (of counsel), Jeremy Hutchinson, Rogers, and Alex T. Gray ; and Whatley Kallas, LLP, by: Henry C. Quillen, pro hac vice, for appellant.

Wright, Lindsey & Jennings LLP, Little Rock, by: Gordon S. Rather, Jr. ; Chet Roberts, Little Rock, Arkansas Blue Cross Blue Shield; and Miller & Chevalier Chartered, by: Anthony F. Shelley, pro hac vice, for appellee.

Leslie Rutledge, Att'y Gen., by: Shawn J. Johnson, Sr. Ass't Att'y Gen., for appellee, amicus curiae brief in support of appellant.

ROBIN F. WYNNE, Associate Justice

Pursuant to Arkansas Supreme Court Rule 6–8, we accepted two certified questions of law from the United States District Court for the Eastern District of Arkansas, Western Division. Petitioner Air Evac EMS, Inc. (Air Evac), has filed suit against respondent USAble Mutual Insurance Company d/b/a Arkansas Blue Cross Blue Shield (Blue Cross) alleging, among other things, violations of the Arkansas Deceptive Trade Practices Act (ADTPA). Blue Cross has filed a motion to dismiss, alleging that it should receive the benefit of the so-called safe-harbor provision of the ADTPA. Because this court has never expressly interpreted the safe-harbor provision of the ADTPA, we are now presented with the following questions of law:

1. Are the rulings in DePriest v. AstraZeneca Pharmaceuticals, L.P. , 2009 Ark. 547, 351 S.W.3d 168, and Arloe Designs, LLC v. Arkansas Capital Corp. , 2014 Ark. 21, 431 S.W.3d 277, in conflict with one another, and if so, how should that conflict be resolved?

2. Does the safe harbor provision of the Arkansas Deceptive Trade Practices Act, which exempts "[a]ctions or transactions permitted under laws administered by" state and federal regulators, Ark. Code Ann. § 4–88–101(3), apply to actions or transactions prohibited under laws administered by state and federal regulators?

At issue in both certified questions is the proper interpretation of the safe-harbor provision of the ADTPA, and we exercise our discretion to reformulate the questions and answer the following: Should the ADTPA's safe-harbor provision, Ark. Code Ann. § 4–88–101(3), be applied according to the specific-conduct rule or the general-activity rule? As explained in this opinion, we hold that Arkansas follows the specific-conduct rule.¹

The ADTPA prohibits a variety of listed practices, including "[k]nowingly making a false representation as to the characteristics ... [or] benefits ... of goods or services," "[k]nowingly taking advantage of a consumer who is reasonably unable to protect his or her interest because of ... [i]nability to understand the language of the agreement," and a catchall provision prohibiting "any other unconscionable, false, or deceptive act or practice in business, commerce, or trade." Ark. Code Ann. § 4–88–107(a)(1), (a)(8), (a)(10) (Repl. 2011). Here, the federal district court's order outlines Air Evac's ADTPA claims as follows:

Air Evac alleges Blue Cross has unlawful business practices in violation of the ADTPA in two ways. First, Blue Cross's refusal to contract with ambulance providers violates Arkansas insurance regulations requiring out-of-network costs to have no greater cost than in-network costs when in-network provider list is inadequate. Second, Blue Cross is misleading its customers by informing them they could incur substantial out-of-pocket expenses by using out-of-network providers, except in circumstances involving "Emergency or Imperative Services" provided by out-of-network providers,which in those cases, the out-of-network services would be subject to in-network benefits. Air Evac alleges this creates the false impression that plan members would not suffer the significant expenses associated with out-of- network care in emergency situations because Blue Cross does not disclose that there is no in-network benefit for emergency ambulance service, and the extent of its advertised benefit for that service is subject to a potentially illegally low cap. Consequently, insureds never realize the benefit of the emergency exception and when they receive a bill for the out-of-network air transport service that potentially saved their life, Blue Cross's only contribution is an unlawfully capped reimbursement.

The parties agree that, at the relevant time, the safe-harbor provision provided that the ADTPA does not apply to

[a]ctions or transactions permitted under laws administered by the Insurance Commissioner, the Securities Commissioner, the State Highway Commission, the Bank Commissioner, or other regulatory body or officer acting under statutory authority of this state or the United States, unless a director of these divisions specifically requests the Attorney General to implement the powers of this chapter.

Ark. Code Ann. § 4–88–101(3) (Repl. 2011).

Generally, there are two different approaches to the safe-harbor provisions found in deceptive-trade-practices statutes: (1) the majority "specific conduct" rule, which looks to whether state law permits or prohibits the conduct at issue and only exempts permitted conduct from DTPA claims; and (2) the minority "general activity" rule, which looks to whether a state agency regulates the conduct, in which case a regulated party enjoys a full exemption from the DTPA. Nathan Price Chaney, The Arkansas Deceptive Trade Practices Act: The Arkansas Supreme Court Should Adopt the Specific–Conduct Rule , 67 Ark. L. Rev. 299, 300 (2014). In a widely cited opinion, the Tennessee Court of Appeals wrote the following when it addressed Tennessee's safe-harbor provision:

The purpose of the exemption is to insure that a business is not subjected to a lawsuit under the Act when it does something required by law, or does something that would otherwise be a violation of the Act, but which is allowed under other statutes or regulations. It is intended to avoid conflict between laws, not to exclude from the Act's coverage every activity that is authorized or regulated by another statute or agency. Virtually every activity is regulated to some degree. The defendant's interpretation of the exemption would deprive consumers of a meaningful remedy in many situations.

Skinner v. Steele , 730 S.W.2d 335, 337 (Tenn. Ct. App. 1987) (rejecting contention that acts or transactions involving insurance were expressly exempted from the state's consumer protection act, which exempted acts or transactions "required or specifically authorized" by regulation). We keep this purpose—avoiding a conflict between laws—in mind in answering the question presented.

The basic rule of statutory construction is to give effect to the intent of the legislature. Holbrook v. Healthport, Inc. , 2014 Ark. 146, at 5, 432 S.W.3d 593, 596. Where the language of a statute is plain and unambiguous, this court determines legislative intent from the ordinary meaning of the language used. Id. The word "permit" is defined as follows:

1. To consent to formally; to allow (something) to happen, esp. by an official ruling, decision, or law < permit the inspectionto be carried out>. 2. To give opportunity for; to make (something) happen < lax security permitted the escape>. 3. To allow or admit of < if the law so permits>.

Black's Law Dictionary 1322 (10th ed. 2014). Air Evac contends that for the safe harbor to apply, an action or transaction must be "permitted"—not merely subject to regulation, and certainly not prohibited. This invokes a definition of "permit" in the sense of actively or formally allowing something to happen. Blue Cross, on the other hand, points to the possibility of "permit" meaning to passively allow something to happen, and it argues that this is characteristic of the general-activity rule (i.e., the entity is subject to regulation but the regulator may not have addressed the action at issue). Thus, the word "permit" could support either interpretation.

We turn now to the ADTPA as a whole. Dickinson v. SunTrust Nat'l Mortg. Inc. , 2014 Ark. 513, at 4, 451 S.W.3d 576, 579 ("When a statute is ambiguous, this court must interpret it according to legislative intent, and our review becomes an examination of the whole act."). The preamble to the ADTPA's enacting legislation reveals that the legislature's remedial purpose was "to protect the interests of both the consumer public and the legitimate business community[.]" State ex rel. Bryant v. R & A Inv. Co. , 336 Ark. 289, 295, 985 S.W.2d 299, 302 (1999). Remedial legislation should be liberally construed. Schultz v. Rector–Phillips–Morse, Inc. , 261 Ark. 769, 778, 552 S.W.2d 4, 9 (1977). The general-activity rule would undermine the ADTPA's purpose by exempting all conduct subject to regulation by a state or federal regulator; virtually all conduct is regulated in some way, and the general-activity rule would essentially read the ADTPA out of existence. Viewing the ADTPA as a whole, we believe that the specific-conduct rule is consistent with the broad remedial purposes of the act.

Finally, in Act 986 of 2017, the General Assembly amended the safe-harbor provision to add the word "specifically" before the word "permitted." This clarification by the General Assembly followed the federal courts' interpretation of our decision in Arloe Designs, LLC v. Arkansas Capital Corp. , 2014 Ark. 21, 431 S.W.3d 277, as indicating that Arkansas followed the general-activity rule. See Gabriele v. ConAgra Foods, Inc. , No. 5:14-CV-05183, 2015 WL 3904386, at *7 (W.D. Ark. June 25, 2015) (citing Arloe and stating that "[c]onsistent with the plain language of the ADTPA, it appears that the Arkansas Supreme Court recognizes and applies the so-called general-activity rule. In other words, the safe-harbor provision exempts regulated conduct by regulated actors regardless of whether...