Mell v. Anthem, Inc.

688 F.3d 280

Ronald D. MELL, Sr., Plaintiff,Estate of Frieda M. Wilmes; Robert K. Espel; and James C. Matacia, on Behalf of Themselves and All Others Similarly Situated, Plaintiffs–Appellants,

v.ANTHEM, INC., nka WellPoint, Inc.; Anthem Insurance Companies, Inc.; Community Insurance Company, fka Community Mutual Insurance Company; and the City of Cincinnati, Ohio, Defendants–Appellees.

No. 10–3440.

United States Court of Appeals, Sixth Circuit.

Argued: Jan. 20, 2012.

Decided and Filed: July 25, 2012.

ARGUED:Eric H. Zagrans, Zagrans Law Firm, LLC, Elyria, Ohio, for Appellants. Peter R. Bisio, Hogan Lovells US LLP, Washington, D.C., Terrance A. Nestor, City Solicitor's Office, Cincinnati, Ohio, for Appellees. ON BRIEF:Eric H. Zagrans, Zagrans Law Firm, LLC, Elyria, Ohio, Alphonse A. Gerhardstein, Gerhardstein & Branch Co., L.P.A. for Appellants. Peter R. Bisio, Craig A. Hoover, Adam K. Levin, Hogan Lovells US LLP, Washington, D.C., Glenn V. Whitaker, Vorys, Sater, Seymour and Pease LLP, Cincinnati, Ohio, Paul A. Wolfla, Baker & Daniels LLP, Indianapolis, Indiana, Robert N. Webner, Vorys, Sater, Seymour and Pease LLP, Columbus, Ohio, Terrance A. Nestor, City Solicitor's Office, Cincinnati, Ohio, for Appellees.

Before: SILER, CLAY, and ROGERS, Circuit Judges.

OPINION

CLAY, Circuit Judge.

Plaintiffs, the Estate of Frieda M. Wilmes through its appointed fiduciary, Claudette Schenck, Robert K. Espel, and James C. Matacia (collectively “Plaintiffs”), on behalf of themselves and all other similarly-situated employees and retirees, appeal the district court's order granting summary judgment to Defendants Anthem, Inc., Anthem Insurance Companies, Inc., Community Insurance Company, and the City of Cincinnati (collectively “Defendants”) pursuant to Fed.R.Civ.P. 56. Plaintiffs seek to recover funds they alleged were owed to them when Anthem Insurance Companies, Inc. demutualized in 2001 and issued 870,021 shares of stock to the City of Cincinnati, Plaintiffs' employer, instead of to Plaintiffs.

For the reasons set forth below, we AFFIRM the decision of the district court.

BACKGROUND

I. Procedural History

On October 15, 2008, Plaintiffs filed a complaint to recover on behalf of themselves and all other similarly-situated employees and retirees of the City of Cincinnati, Ohio (the “City”) the current value of the 870,021 shares of Anthem common stock that the City received from the demutualization of Anthem Insurance.¹ In their complaint, Plaintiffs asserted eight claims for breach of contract and four tort claims against Anthem, Inc. n/k/a WellPoint Inc., Anthem Insurance Companies, Inc. (“Anthem Insurance”) and Community Insurance Company (“CIC”) (collectively, “Anthem”).² In addition, Plaintiffs brought three breach of contract claims and four tort claims against the City.

On September 1, 2009, Plaintiffs filed a motion for class certification. The district court granted Plaintiffs' motion and certified the proposed class. The class consists of 2,536 employees and retirees of the City who were named as insured persons, or former members of a group of insured persons, covered under a health care group policy from June 18, 2001 through November 2, 2001. The class includes two subsets: “Class A” members were defined as individuals who had an insurance policy with Anthem prior to the merger between Community Mutual Insurance Company (“CMIC”) and Anthem in 1995; and “Class B” members were defined as individuals who received a health insurance group policy after the 1995 merger. The district court designated Schenck, Espel, and Matacia to serve as the class representatives of both classes.

The parties proceeded to discovery, after which they filed cross motions for summary judgment. On March 3, 2010, the district court denied Plaintiffs' motion for summary judgment; granted Anthem's cross-motion for summary judgment; granted in part the City's cross-motion for summary judgment; and dismissed the case. Plaintiffs timely appealed.

We have jurisdiction pursuant to the Class Action Fairness Act of 2005, which extends the diversity jurisdiction of the federal courts to certain class actions.³See28 U.S.C. § 1332(d). We also have appellate jurisdiction under 28 U.S.C. § 1291.

II. Factual Background

A. The City of Cincinnati's Group Health Care Benefits

In 1986, the City of Cincinnati entered into a Master Group Contract for various group health care benefits with CMIC, a mutual insurance company licensed by Ohio Blue Cross/Blue Shield (“BC/BS”). The Master Group Contract covered both active and retired employees and included such benefits as medical, hospitalization, and, in the case of firefighters, dental coverage. According to the declaration of Andrea Schell, Regional Vice President of Group Underwriting for CMIC, the Master Group Contract granted the City mutual company membership interests (voting and equity rights) in CMIC. Section 1.01 of the CMIC bylaws defined the members of the group insurance plan and stated in relevant part:

Every policyholder of the corporation, except the holder of a policy or contract of reinsurance, is a member of the corporation while the policy is in force, and is entitled to one vote, and no more, regardless of the amount of insurance held by such policyholder, the number of policies in force in the name of such policyholder or the amount of premiums paid by such policyholder. Policyholder means the person or group of persons identified as the named insured in the declarations page of a policy of insurance of the corporation.... In the case of a master contract for group insurance, the member shall be the holder of the master policy, and the holder of any certificate or contract issued subordinate to such master policy shall not be a member unless it makes specific provision of such membership....

(R.32–2: Ex. B. CMIC Bylaws § 1.01.) Schell stated that the City's group contract was “renewed each year between 1986 and 1999.”

B. The Formation of Anthem Insurance

Anthem Insurance's predecessor was Associated Insurance Companies, Inc. (“Associated”), an Indiana mutual insurance company. In the early 1990s, Associated began acquiring BC/BS licenses in Kentucky (1993) and Ohio (1995). The Ohio BC/BS licensee that was acquired on October 1, 1995 was CMIC. At the time of the 1995 merger between CMIC and Associated, CMIC members received the following:

(A) An assumption certificate from [CIC] ... that shall provide to [CMIC members] the same medical and health benefits in effect immediately prior to the Effective Time under the terms and conditions of the [CMIC's] insurance policy or health care benefits contract, as the case may be; and

(B) A new Associated guaranty insurance policy/membership certificate which shall grant to that [CMIC member] the following rights:

(1) voting rights on all matters that come before the members of an Indiana domestic mutual insurance company under the Indiana Insurance Law ...;

(2) insurance benefits which shall guarantee the benefits granted under the insurance policy or health care benefits contracts assumed by CIC; and

(3) rights in the events of liquidation, merger, consolidation, or demutualization of Associated as set herein, therein and in Associated's Second Amended and Restated Articles of Incorporation, which rights are intended to be equivalent to the rights such [CMIC member] would have had if such [CMIC member] had owned an insurance policy, issued directly by Associated....

(R.31–23: PTX–20, Page ID # 1560.)

CMIC and Associated jointly petitioned the Ohio Department of Insurance (“Ohio DOI”) for approval of the merger. Both companies disclosed to the Ohio DOI that the employers that previously purchased group policies, and not the employees receiving benefits under those policies, were CMIC members. Associated incorporated into the merger agreement a “grandfather” clause which allowed former CMIC members to maintain their membership rights as long as each “grandfathered group” renewed, amended, or replaced its group policy without a lapse in coverage. New customers or those who entered into the contract after the merger would not become members. The joint petition between CMIC and Associated stated the following:

Group policyholders of [CMIC] ... are members of [CMIC] and are entitled to one vote on all matters submitted to a vote of the members of CMIC. Group policyholders of [CMIC] also possess certain proprietary rights in CMIC. The holders of certificates of benefits issued under [CMIC's] group polices are not members of [CMIC], are not entitled to vote and do not have proprietary rights in [CMIC].

In order to preserve the existing voting and proprietary rights of [CMIC's] group policyholders, Associated general practice regarding voting and other membership rights relating to group policies will not apply to holders of group polices issued by [CMIC]. Instead, group holders of Guaranty Policies issued as part of the Merger will be treated as members of Associated and will have membership rights in Associated....

(R.31–16: PTX–12, Page ID # 1497) (emphasis added).

According to the terms of the merger agreement, the City received a Group Guaranty Policy, which confirmed that it was a member of Associated, and the policy also indicated that City employees who obtained coverage as enrollees in the City's group policy were not members of nor had equity rights in Associated. The Ohio DOI approved the merger and the agreement became effective on October 1, 1995. After the merger, Associated changed its name to Anthem Insurance Companies, Inc.

C. The Demutualization of Anthem Insurance

In 2001, Anthem developed a Plan of Conversion to convert Anthem Insurance from an Indiana mutual insurance company to an Indiana stock insurance company in accordance with Indiana demutualization law under Indiana Code § 27–15–1–1, et seq. Anthem decided to demutualize in order to increase the company's financial flexibility through improved access to capital. Under...