James J. Donelon v. Terry S. Shilling

JAMES J. DONELON, COMMISSIONER OF INSURANCE FOR THE STATEOF LOUISIANA, IN HIS CAPACITY AS REHABILITATOR OF LOUISIANAHEALTH COOPERATIVE, INC. v. TERRY S. SHILLING, GEORGE G. CROMER, WARNER L. THOMAS, IV,WILLIAM A. OLIVER, CHARLES D. CALVI, PATRICK C. POWERS, CGITECHNOLOGIES AND SOLUTIONS, INC., GROUP RESOURCESINCORPORATED, BEAM PARTNERS, LLC, MILLIMAN, INC., BUCKCONSULTANTS, LLC, AND TRAVELERS CASUALTY AND SURETYCOMPANY OF AMERICA

2017 CW 1483

STATE OF LOUISIANA COURT OF APPEAL FIRST CIRCUIT

February 28, 2019

On review from the Nineteenth Judicial District Court Parish of East Baton Rouge State of Louisiana

Case No. 651,069

The Honorable Timothy E. Kelley

James A. Brown

Mirais M. Holden

A'Dair R. Flynt

New Orleans, Louisiana

Jamie D. Rhymes

Lafayette, Louisiana

Attorneys for Applicant-Relator

Buck Consultants, LLC

J.E. Cullens, Jr.

Edward J. Walters, Jr.

Darrel J. Papillion

David Abboud Thomas

Jennifer Wise Moroux

Baton Rouge, Louisiana

Attorneys for Respondent,

James J. Donelon, Commissioner of

Insurance for the State of Louisiana,

in His Capacity as Rehabilitator of

Louisiana Health Cooperative, Inc.,

through His Duly Appointed Receiver,

Billy Bostick

BEFORE: HIGGINBOTHAM, HOLDRIDGE, and PENZATO, JJ.

HOLDRIDGE, J.

In this writ application, applicant, Buck Consultants, LLC ("Buck"), challenges the ruling of the trial court, which overruled Buck's Declinatory Exception of Improper Venue.¹ For the following reasons, we affirm the ruling of the trial court.

FACTS AND PROCEDURAL HISTORY

This matter arises from the insolvency and the rehabilitation of Louisiana Health Cooperative, Inc. ("LAHC"). On March 31, 2014, Buck tendered a letter agreement ("Agreement") to LAHC, outlining the terms of its engagement with LAHC to provide certain actuarial and consulting services. The Agreement states, in pertinent part, as follows:

1. Services. In consideration for, and subject to, the mutual undertakings set forth herein, [Buck] agrees to provide the Services described in Exhibit A hereto.

***

9. Miscellaneous. ... The parties hereto expressly agree that this Agreement will be construed and enforced in accordance with the internal laws of the State of New York, without regard to New York choice of law provisions. The parties hereby consent to the exclusive jurisdiction and venue of the federal and state courts situated in and for the State of New York, County of New York with respect to any dispute arising between the parties, regardless of whether such dispute arises pursuant to this Agreement or otherwise. ...

A representative of LAHC signed the Agreement on April 4, 2014. Exhibit A to the Agreement outlined Buck's scope of services as follows:

• Review current plan designs and calculate the Average Benefit Value for each plan

• Review previous documents filed with [Centers for Medicare and Medicaid Services] for the 2014 rates

• Review current demographics and adjust rates to reflect population enrolled

• Develop cost models to prepare 2015 rates for Public Exchange

• Adjust rates to reflect network discounts

• Prepare rates by Region

• Prepare smoke[r] and non-smoker rates

• Present target rates for review and revision

• Adjust plan designs to meet market objections

• Review and price new plan designs

• Review proposed administrative budget and commissions and incorporate into 2015 rates

• Review rate filing requirements

• Prepare and submit rate filings and assist [LAHC] with state rate filing

• Review competitive products and rates

• Prepare rates for commercial group quotes as requested (Off exchange quotes)

• Prepare Incurred But Not Reported (IBNR estimates)

• Assist with Commercial rate filing

• Meet with [LAHC] as needed

On November 4, 2014, Buck tendered a second letter ("Addendum") to LAHC, modifying the scope of services, payments to Buck, and the term of the Agreement. The Addendum notes that "[t]he Agreement, as modified hereby, remains and continues in full force and effect ..." A representative of LAHC signed the Addendum.

It is alleged that LAHC applied for and received loans from the U.S. Department of Health and Human Services, Centers for Medicare and Medicaid Services. However, it is alleged that, by July 2015, LAHC stopped doing business.

On September 21, 2015, in response to a verified petition and testimony on behalf of Caroline Brock, Deputy Commissioner of Financial Solvency for the Louisiana Department of Insurance and Billy Bostick, a Permanent Order of Rehabilitation and Injunctive Relief (the "Rehabilitation Order") was signed, confirming James J. Donelon, Commissioner of Insurance for the State of Louisiana ("the Commissioner") as Rehabilitator of LAHC and Billy Bostick as Receiver of LAHC. The Rehabilitation Order further states, in pertinent part, as follows:

[T]he requirements for rehabilitation under the provisions of La. R.S. 22:2001, et seq., have been met ... LAHC shall be and hereby is placed into rehabilitation under the direction and control of the Commissioner

***

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that ... any and all persons and entities shall be and hereby are permanently enjoined from obtaining preferences, judgments, attachments or other like liens or the making of any levy against LAHC, its property and assets

***

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the Rehabilitator shall be and hereby is entitled to the right to enforce or cancel ... contract performance by any party who had contracted with LAHC.

***

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that LAHC providers and contractors are required to abide by the terms of their contracts with LAHC

***

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the Rehabilitator and Receiver of LAHC ... shall be and hereby are allowed and authorized to ... [c]ommence and maintain all legal actions necessary, wherever necessary, for the proper administration of this rehabilitation proceeding

***

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that all contracts between LAHC and any and all persons or entities providing services to LAHC ... shall remain in full force and effect unless canceled by the Receiver, until further order of this Court.

On August 31, 2016, the Commissioner, as Rehabilitator of LAHC, through his duly appointed Receiver, Billy Bostick, filed a Petition for Damages and Jury Demand, in a separate matter from the rehabilitation proceeding, asserting claims of breach of fiduciary duty, breach of contract, negligence, and gross negligence against multiple defendants and seeking damages in connection with LAHC's failure. Buck was named as a defendant in the Commissioner's First Supplemental, Amending and Restated Petition for Damages and Request for Jury Trial filed on November 29, 2016.

The Commissioner alleged professional negligence, breach of contract, and negligent misrepresentation against Buck. The Commissioner alleged that Buck was engaged to provide actuarial and consulting services and outlined Buck's tasks as set forth in the Agreement, including developing cost models to prepare 2015 rates; presenting target rates for review and revision; reviewing and pricing new plan designs; preparing and submitting rate filings; and assisting LAHC with the rate filings.

As to the professional negligence and breach of contract claims, the Commissioner alleged the following: (1) Buck's April 2, 2015 Statement of Actuarial Opinion was inaccurate and unreliable; (2) Buck's actuarial work was unreliable, inaccurate, and not the result of careful, professional analysis; (3) Buck may have been unqualified to provide actuarial services; (4) Buck owed a duty to LAHC to exercise reasonable care and to act in accordance with the professional standards applicable to actuaries; (5) when preparing premium rates in 2015, Buck unreasonably disregarded data and claim experience and made unreasonable assumptions; (6) Buck breached its duty by failing to discharge its duties to LAHC with reasonable care and failing to act in accordance with the professional standards applicable to actuaries by failing to produce a feasibility study and premium rates that were accurate and reliable and failing to exercise the reasonable judgment expected of professional actuaries under like circumstances; and (7) Buck's failure to exercise reasonable care and its failure to act in accordance with the professional standards applicable to actuaries was the legal cause of LAHC's damages. The Commissioner further alleged that Buck's advice and reports to LAHC negligently misrepresented the actual funding needs and premium rates of LAHC, and Buck had a duty to provide accurate and up-to-date information to LAHC that Buck knew or should have known LAHC would rely on in making its decision concerning premium amounts.

In response to the First Supplemental, Amending and Restated Petition for Damages, Buck filed a Declinatory Exception of Improper Venue, requesting that the trial court enforce the forum-selection clause contained in the Agreement. Buck requested that the Commissioner's claims against it be dismissed, without prejudice. Attached to Buck's exception was the Affidavit of Harvey Sobel, an employee of Buck who managed and directed actuarial work for LAHC, which attached the Agreement and the Addendum.

The Commissioner opposed the exception arguing, in pertinent part, as follows: (1) the forum-selection clause violates Louisiana public policy where the Rehabilitation, Liquidation, Conservation Act, La. R.S. 22:2001 et seq. ("the RLC Act") of the Louisiana Insurance Code is comprehensive and exclusive in scope and La. R.S. 22:257(F) gives the Nineteenth Judicial District Court exclusive jurisdiction of this matter; (2) forcing the Commissioner to litigate in New York would violate the Rehabilitation Order; (3) the Commissioner did not sign the Agreement containing the forum-selection clause and is not bound thereto; (4) Buck does not cite or distinguish Ohio Supreme Court's decision in Taylor v. Ernst & Young, L.L.P., 2011-Ohio-5262, 130 Ohio St. 3d 411, 958 N.E.2d 1203; (5) the Commissioner...