Opinion
C. A. S19C-01-051 CAK
12-29-2022
FIRST STATE ORTHOPAEDICS, P.A., on behalf of itself and all others similarly situated, Plaintiff, v. EMPLOYERS INSURANCE COMPANY OF WAUSAU; HELMSMAN MANAGEMENT SERVICES, LLC; LIBERTY INSURANCE CORPORATION; LIBERTY MUTUAL FIRE INSURANCE COMPANY; LM INSURANCE CORPORATION; THE FIRST LIBERTY INSURANCE CORPORATION; and WAUSAU UNDERWRITERS INSURANCE COMPANY, Defendants.
Jonathan L. Parshall, Esquire and Lauren A. Cirrinicione, Esquire, Murphy & Landon, P.A., 1011 Centre Road, Suite 210, Wilmington, DE 19805, Attorneys for Plaintiff. John S. Spadaro, Esquire, 1011 Centre Road, Suite 210, Wilmington, DE 19805, Attorney for Plaintiff. Kevin J. Connors, Esquire, Marshall Dennehey Warner Coleman & Goggin, 1007 North Orange Street, Suiter 600, Wilmington, DE 19899, Attorney for Defendants. Tiffany Powers, Esquire and Andrew Hatchett, Esquire, Alston & Bird LLP, 1201 West Peachtree Street, Atlanta, GA 30309, Attorneys for Defendants (Pro Hac Vice).
Submitted: December 16, 2022
TRIAL BY JURY DEMANDED
Jonathan L. Parshall, Esquire and Lauren A. Cirrinicione, Esquire, Murphy & Landon, P.A., 1011 Centre Road, Suite 210, Wilmington, DE 19805, Attorneys for Plaintiff. John S. Spadaro, Esquire, 1011 Centre Road, Suite 210, Wilmington, DE 19805, Attorney for Plaintiff.
Kevin J. Connors, Esquire, Marshall Dennehey Warner Coleman & Goggin, 1007 North Orange Street, Suiter 600, Wilmington, DE 19899, Attorney for Defendants.
Tiffany Powers, Esquire and Andrew Hatchett, Esquire, Alston & Bird LLP, 1201 West Peachtree Street, Atlanta, GA 30309, Attorneys for Defendants (Pro Hac Vice).
MEMORANDUM OPINION AND ORDER
Craig A. Karsnitz, R.J.
I. INTRODUCTION
First State Orthopaedics, P.A. ("Plaintiff") brought this proposed class action against certain members of the Liberty Mutual Group of companies: Employers Insurance Company of Wausau, Helmsman Management Services, LLC, Liberty Insurance Corporation, Liberty Mutual Fire Insurance Company, LM Insurance Corporation, The First Liberty Insurance Corporation, and Wausau Underwriters Insurance Company (collectively, "Defendants"). Plaintiff challenges Defendants' practice of responding to workers' compensation medical bills with an Explanation of Benefits ("EOB") that essentially states: "This service is not authorized by the Case Manager. Please contact the Case Manager for further Information." The parties sometimes refer to this language as "Code x553".
Plaintiff cites my earlier decision as the law of the case:
[Defendants] argue that the response to a claim for payment of medical bills which stated the service was "not authorized by case manager" satisfies the statutory mandate. According to defendants the plain language of the statute allows the tautological response "we deny it because we deny it." I disagree. Delaware law jealously guards the right and obligation of the legislature to control outcomes through selection of statutory language. Courts should not rewrite statutes to meet their view of policy. But for me it does not rewrite subsection 2322F(e) by requiring any denial be meaningful. More than "we won't pay because we say so, talk to the manager" is required.
First State Orthopaedics, P.A. v. Emp'rs. Ins. Co. of Wausau, 2020 WL 2458255, at *2 (Del. Super. May 12, 2020) (citing 19 Del. C. § 2322F(e)).
Plaintiff seeks declaratory relief under Delaware's Declaratory Judgment Act (the "Act") and no monetary relief. The purpose of the Act is "to afford relief from uncertainty with respect to rights." Since Plaintiff's Complaint seeks only declaratory relief, individual notice to absent class members is not required. Plaintiff seeks a declaratory judgment that Defendants' EOB fails to meet the requirements of several provisions of the Delaware workers' compensation statute because, though the EOBs purport on their face to deny coverage for the health care invoice(s) in question, they do not set forth any reason for denial of coverage. Since Defendants' conduct violates these statutes, Plaintiff argues that it is contrary to law. Plaintiff thus argues that the Amended Complaint entails a viable dispute over the interpretation and operation of the workers' compensation statute and whether Defendants must provide a different EOB when denying claims. This dispute, Plaintiff contends, is consistent with and complementary to, but separate from, the dispute over the adequacy of the Code x553 language.
10 Del. C. § 6501 et seq.
Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 872 A.2d 611, 631 (Del. Ch. 2005), aff'd in part, rev'd in part, 901 A.2d 106 (Del. 2006).
Under Super. Ct. Civ. R. 23(b)(2).
See Wetzel v. Liberty Mut. Ins. Co., 508 F.2d 239, 254 (3d Cir. 1975), cert. denied, 421 U.S. 1011 (1975) (noting that "Rule 23 definitely does not require mandatory notice for (b)(2) actions.") See also id. at 255 (where the class is homogeneous, so that "the claims of each member of the class rest squarely on the same issue"-in this case, an issue of statutory construction - "individual notice is superfluous.")
Amended Compl. at ¶28.
Id. at ¶29.
II. PROCEDURAL BACKGROUND
Plaintiff filed its Proposed Class Action Complaint on January 31, 2019. On March 14, 2019, the case was removed to the United States District Court for the District of Delaware. The case was remanded back to this Court on August 29, 2019.
On September 26, 2019, Defendants filed a Motion to Dismiss. After Answering (November 7, 2019) and Reply (November 18, 2019) Briefs, and Supplemental Letter Briefs from Plaintiff (March 13, 2020) and Defendants (March 27, 2020), I denied the Motion to Dismiss on May 12, 2020.
After Defendants filed a Motion for Reargument on May 19, 2002, and Plaintiff filed its Opposition on May 26, 2020, I denied the Motion for Reargument on June 15, 2020.
Defendants filed their Answer on May 22, 2020. On June 16, 2020, the parties stipulated that Defendants would file an Amended Answer, which they did on June 25, 2020.
Plaintiff filed a Motion to Amend Complaint on August 17, 2020, which I granted on November 4, 2020. The Amended Complaint was filed on November 6, 2020, and Defendants filed their Answer on December 18, 2020.
On May 3, 2021, the parties agreed to suspend further briefing pending mediation of the case, which ultimately proved unsuccessful.
On April 21, 2021, Plaintiff filed its Motion for Class Certification, which is now before me. Plaintiff filed its Supplemental Opening Brief in support of this Motion on May 28, 2022. Defendants filed their Response Opposing this Motion on July 26, 2022, and Plaintiff filed its Reply on August 26, 2022.
Defendants filed their Motion for Summary Judgment on March 18, 2022, which is also before me. On May 31, 2022, Plaintiff filed its Answering Brief Opposing this Motion. Defendants filed their Reply in Support of this Motion on June 28, 2022.
I held oral argument on both the Motion for Class Certification and the Motion for Summary Judgment on November 9, 2022. Supplemental Letter Briefs were filed by Defendants (November 18, 2022) and Plaintiff (November 28, 2022). On December 16, 2022, Defendants filed a letter addressing several points in Plaintiff's Reply.
This is my decision on both the Motion for Class Certification and the Motion for Summary Judgment.
III. STANDARDS OF REVIEW
A. CLASS CERTIFICATION
Under Superior Court Civil Rule 23(a), there are four requisites to a class action:
One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.
Super. Ct. Civ. R. 23(a) (emphasis supplied).
Note that the statutory language is conjunctive; i.e., all four requisites must be satisfied.
Even if the requirements of Rule 23(a) are met, certain additional requirements must be met under Rule 23 (b). These requirements are discussed more fully, below.
Super. Ct. Civ. R. 23(b).
B. SUMMARY JUDGMENT
I will grant summary judgment if "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." At this stage, my role is to detect genuine factual issues, not to decide them. In considering a motion for summary judgment, I must construe the record "in the light most favorable to the non-moving party [Plaintiff]." Defendants bear the initial burden of demonstrating "clearly the absence of any genuine issue of fact." If Defendants meet this burden, then Plaintiff must show "there is a genuine issue for trial." "It is not enough for [Plaintiff] merely to assert the existence of such a disputed issue of fact." It must offer facts to demonstrate that there is a genuine dispute, and that there is a material fact to go to the jury. If it does so, a Motion for Summary Judgment is premature because summary judgment is inappropriate "if there is a dispute as to a material fact or the inferences to be drawn therefrom." However, "[i]f the facts permit reasonable persons to draw but one inference, the question is ripe for summary judgment."
Brzoska v. Olson, 668 A.2d 1355, 1364 (Del. 1995) (quoting Super. Ct. Civ. R. 56(c)).
See, e.g., GMG Cap. Invs., LLC v. Athenian Venture Partners I, L.P., 36 A.3d 776, 783 (Del. 2012) ("[T]he court cannot try issues of fact on a Rule 56 motion but only is empowered to determine whether there are issues to be tried." (internal quotation marks omitted)); see also Cerberus Int'l, Ltd. v. Apollo Mgmt., L.P., 794 A.2d 1141, 1150 (Del. 2002) ("The test is not whether the judge considering summary judgment is skeptical that [Plaintiff] will ultimately prevail.").
Merrill v. Crothall-Am., Inc., 606 A.2d 96, 99 (Del. 1992).
Brown v. Ocean Drilling & Expl. Co., 403 A.2d 1114, 1115 (Del. 1979).
Super. Ct. Civ. R. 56(e); see, e.g., Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1979).
Brzoska v. Olson, 668 A.2d at 1364.
Vanaman v. Milford Mem'l Hosp., Inc., 272 A.2d 718, 720 (Del. 1970).
Brzoska v. Olson, 668 A.2d at 1364.
IV. ANALYSIS
A. CLASS CERTIFICATION UNDER RULE 23
Our Supreme Court has set forth a two-step analysis for class certification under Rule 23. Rule 23(a) sets forth the criteria that govern the first, threshold step of the analysis, while Rule 23(b) sets forth the criteria for the second step of the analysis.
Prezant v. De Angelis, 636 A.2d 915, 920 (Del. 1994) (citing Nottingham Partners v. Dana, 564 A.2d 1089, 1094 (Del. 1989)).
1. RULE 23(a) REQUIREMENTS As discussed above, there are four requisites under Rule 23(a) for a class action: numerosity, commonality, typicality, and adequacy. I find that Plaintiff has satisfied all four of these requirements.
2. RULE 23(b)(2) REQUIREMENTS
Although Plaintiff has met its burden under Rule 23(a), it must also show that class certification is appropriate under Rule 23(b)(2) because:
The party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole …
Super. Ct. Civ. R. 23(b)(2) (emphasis supplied).
I am not persuaded that there is a need for such class certification in this case. In First State Orthopaedics, P.A. v. Liberty Mutual Insurance Co., plaintiff alleged that defendants violated 19 Del. C. § 2322F(h) by not paying statutory interest on invoices that were paid outside the 30-day statutory payment window. Plaintiff originally sought to certify a Rule 23(b)(3) class, but later sought leave to amend its complaint to certify a Rule 23(b)(2) class after the Court concluded that a Rule 23(b)(3) class would be overrun with individualized inquiries into the statutory interest calculation. The Court denied plaintiff's proposed amendment to certify a Rule 23(b)(2) class because, inter alia, the relief plaintiff sought could be afforded in an individual action. The Court explained that an earlier summary judgment decision had "already establishe[d] Defendants' duty to pay interest, which was the declaratory relief sought in the complaint. "[B]ecause the Court's previous Opinion serves the same purpose as declaratory judgment, under the facts here the Court finds that Rule 23(b)(2) relief is not appropriate." In addition, the Court concluded that there was no need for injunctive relief to "punish Defendants for past conduct." Instead, the Court held that "if Defendants continued the practice asserted by Plaintiff, perhaps at that time injunctive relief and class certification under Rule 23(b)(2) would be appropriate." In my view, the same analysis applies here. In my May 12, 2020 Order, I held that 19 Del. C. § 2322F(e)'s written-explanation requirement implicitly requires that the explanation be "meaningful."
2020 WL 6875219 (Del. Super. Nov. 20, 2020).
Id. at *11.
Id. at *12.
Id. at *13 -14.
Id. at *13.
Id.
First State Orthopaedics, P.A. v. Emp'rs. Ins. Co. of Wausau, 2020 WL 2458255, at *2 (Del. Super. May 12, 2020), at *6.
Plaintiff argues in response that a class is necessary as it will increase the precedential value of my decision. Ultimately my decision is my opinion. It is now the law of this case. It binds the parties. Precedent is precious, until it is not. In any event, adding a class element changes none of these principles.
Dobbs v. Jackson Women's Health Organization, 142 S.Ct. 2228 (June 24, 2022).
My rulings in favor of Plaintiff and my ruling on the Motion for Summary Judgment, below, resolve the case in a manner that will bind Defendants even if no class is certified. Furthermore, like the statutory interest case, injunctive relief is not necessary or warranted, as I am unwilling to punish Defendants for past conduct, particularly given their abandonment of the use of Code x553.
3. SUBCLASS CERTIFICATION UNDER RULE 23(c)(4)
In its amended complaint, Plaintiff also seeks to certify a subclass of persons or entities who originally received Code x553 denials but who, unlike Plaintiff, have not received a supplemental explanation. Given my ruling above denying class certification, it is unnecessary to address the need for creation of a subclass.
B. SUMMARY JUDGMENT
1. STATUTE OF LIMITATIONS
Plaintiff alleges that Defendants' use of Code x553 violated Section 2322F(e)'s requirement that insurers provide a written explanation of the reason for denial. Because FSO's claim is statutory in nature, it is subject to a three- year statute of limitations. Plaintiff filed its Complaint on January 31, 2019. Thus, if Plaintiff's claim accrued before January 31, 2016, it is barred by the three-year statute of limitations. Defendants argue that Plaintiff's claim accrued well before January 2016. The first EOB with Code x553 was received by Plaintiff more than twenty years ago, and Plaintiff believed that the explanation associated with Code x553 violated the statute as early as January 2009, ten years before it filed the Complaint. Nothing prevented Plaintiff from filing the Complaint earlier.
See 10 Del. C. § 8106 ("[N]o action based on a statute . . . shall be brought after the expiration of 3 years from the accruing of the cause of such action . . .").
Plaintiff responds that it is not only challenging the general language of Code x553 but also 19 discrete invoices sent within the three-year period before the Complaint was filed. The Amended Complaint states that Plaintiff is proceeding in two capacities: in its own right for a declaratory judgment under 19 Del. C. § 2322F(e) (since it needs to understand the reason for the denial so it can know whether to challenge it), and as an assignee of its patients/assignors who received an EOB with Code x553 in the three-year period before it filed the Complaint. The claims that it asserts in its own right are subject to the three-year limitations period for actions based on the statute, while the claims assigned by its patients are subject to the three-year limitations period for actions based on a promise having its root in the workers' compensation insurance contract. The declaratory judgment claim is based on Defendants' general practice of sending EOBs with Code x553 to patients. The claims it asserts as assignee are specific claims, arising from specific transactions with specific dates within the statute of limitations. Plaintiff states that, over time, Defendants' practices became problematic enough to become intolerable, and that it filed the Complaint when the offending practice had become widespread enough to threaten Plaintiff's bottom line.
Amended Compl. at ¶3.
See 10 Del. C. § 8106(a).
I agree with Plaintiff. It is challenging both the general language of Code x553 and the 19 discrete invoices sent within the three-year period before the Complaint was filed. The declaratory judgment that it seeks in its own name is subject to the three-year statute of limitations for actions based on the statute, and the claims it seeks on behalf of its patients are for specific transactions with specific dates within the three-year statute of limitations for those specific claims. Thus, I find that Plaintiff's claims are within the applicable statutes of limitations.
I note that Defendants alternatively raised the equitable defense of laches.When applying the laches doctrine, courts give presumptive effect to the most closely analogous statute of limitations period, which here is the three-year limitation period for claims based on a statute. Defendants argue that Plaintiff's delay in filing the Complaint reflects a lack of diligence and the doctrine of laches applies when plaintiff had knowledge of the claim and "unreasonably delay[ed] in bringing the claim" resulting in prejudice to the defendant.Defendants argue that they are entitled to an irrebuttable presumption of prejudice. However, this is not a court of equity, so laches has no application. Assuming I have the ability to apply the doctrine of laches, I find no evidence of record that Plaintiff unreasonably delayed bringing its claims that would support a finding of laches.
"Laches is an equitable doctrine 'rooted in the maxim that equity aids the vigilant, not those who slumber on their rights.'" Kraft v. WisdomTree Invs., Inc., 145 A.3d 969, 974 (Del. Ch. 2016) (quoting Whittington v. Dragon Gp., L.L.C., 991 A.2d 1, 8 (Del. 2009)).
Id. at 988 (finding plaintiff's declaratory judgment "claim to be legal and the relief [it] seeks to be equitable" but applying the three-year limitations period from 10 Del. C. § 8106 because "if an applicable statute of limitations exists, I will apply it by analogy and give it presumptive effect").
Kraft, 145 A.3d at 974.
Id. (explaining that courts "presume prejudice if the claim is brought after the analogous limitations period has expired").
2. STANDING
Standing and mootness are two related, but distinct, jurisdictional doctrines. Standing considers if there is a justiciable controversy at the time the suit was filed. Mootness considers whether the litigant can maintain standing throughout the pendency of the litigation. Defendants assert that Plaintiff's claims fail under both doctrines.
Hampton v. Turner, 2015 WL 1947067 (Del. Ch. Apr. 29, 2015).
GMC v. New Castle Cnty., 701 A.2d 819, 824 (Del. 1997) ("A party must have continued standing throughout the pendency of the action to avoid an invocation of the mootness doctrine.").
With respect to standing, since Defendants discontinued the use of the challenged Code x553 about six months before Plaintiff filed its Complaint, Defendants argue that Plaintiff lacked standing at the time it filed the Complaint. However, as I pointed out in my Opinion denying Defendants' Motion to Dismiss on May 12, 2020, they were unwilling to admit that they violated 19 Del. C. § 2322F(e), and that "Defendants may return to their old ways in the future." Defendants ask me to reconsider that ruling, arguing that Plaintiff bears the burden of demonstrating that it is likely -- not merely possible -- that the challenged conduct will recur. Defendants assert that "if a plaintiff lacks standing at the time the action commences, the fact that the dispute is capable of repetition yet evading review will not entitle the complainant to a [federal] judicial forum."
D.I. 32 at 8.
Id. at 8-9.
Citing Friends of the Earth, Inc. v. Laidlaw Envtl. Serv., 528 U.S. 167, 189 (2000) ("[I]n a lawsuit brought to force compliance [with a statute], it is the plaintiff's burden to establish standing by demonstrating that, if unchecked by the litigation, the defendant's alleged wrongful behavior will likely occur or continue, and that the 'threatened injury [is] certainly impending.") (emphasis added).
Id. at 191; see also Renne v. Geary, 501 U.S. 312, 320 (1991) ("The mootness exception for disputes capable of repetition yet evading review . . . will not revive a dispute which became moot before the action commenced.").
Plaintiff counters that a dispute may merit declaratory relief where a "claim of right or other legal interest is asserted against one who has an interest in contesting the claim . . . ." For example, in Sanborn v. Geico Gen'l Ins. Co. plaintiff challenged insurer's refusal to pursue recovery of its insured's PIP deductibles in cases where only some (but not all) of the deductible had been exhausted. After the plaintiff filed suit, the carrier adopted a new policy of pursuing PIP deductibles even where they had not been exhausted. Yet the insurer continued to defend its reading of the PIP statute, and that it had done nothing wrong. The Court found that plaintiff had standing to challenge the insurer's interpretation of the statute, despite the carrier's change of direction:
Hoechst Celanese Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, 623 A.2d 1133, 1136-37 (Del. Super. Ct. 1992); Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 872 A.2d 611, 631 (Del. Ch. 2005), aff'd in part, rev'd in part, 901 A.2d 106 (Del. 2006) (purpose of Delaware's Declaratory Judgment Act is "to afford relief from uncertainty with respect to rights.")
2016 WL 520010 (Del. Super. Feb. 1, 2016).
Under 21 Del. C. § 2118(a)(2)(f).
The Court finds that Ms. Sanborn has established an injury-in-fact. At the time Ms. Sanborn filed this action, GEICO's then-current policy did not routinely seek recovery of the deductibles of its insured until the applicable deductible was exhausted. Shortly after Ms. Sanborn filed her lawsuit, GEICO's new claims-handling policy was implemented. The new policy provides that GEICO will assert its subrogation rights and protect its insureds' interests, regardless of whether the applicable deductible has been exhausted. Although GEICO's new policy adheres to 21 Del. C. § 2118(a)(2)(f), GEICO has made it clear, in this litigation and as recently as at oral arguments on October 26, 2015, that GEICO still disagrees with the Court's decision in Stratton and does not believe its former policy violated 21 Del. C. § 2118(a)(2)(f). Accordingly, and despite the new claims handling policy, GEICO still maintains the position that the insurer is not required to pursue recovery of an insured's deductible until the deductible is exhausted.
Because GEICO's legal position as to 21 Del C. § 2118(a)(2)(f)
appears to be at odds with its current policy, seeking subrogation and protecting the insured's interests regardless of whether the applicable deductible has been exhausted, the Court finds that Ms. Sanborn suffered an injury-in-fact at the time the Complaint was filed.
The Court recognized that:
[J]ust as GEICO voluntarily adopted the new claims-handling policy, GEICO could just as easily revert back to the former policy, which is in alignment with its position on the ability to seek recovery of its insureds' deductibles.
Sanborn, at *7-8.
Id. at *8.
Although in Sanborn the insurer changed its actions after the complaint was filed, and in the instant case Defendants changed their actions before Plaintiff filed the Complaint, I find that Defendants supplied no explanations of its EOB denials until after the Complaint was filed. Nor have Defendants provided me with the corrected explanations, or corrected the incorrect denials that it sent to patients over the years, including the 19 patients as to which Plaintiff claims to be an assignee.
The standing test applied in Sanborn is well-stated by the Delaware Supreme Court:
To establish standing, a plaintiff or petitioner must demonstrate first, that he or she sustained an "injury-in-fact"; and second, that the interests he or she seeks to be protected are within the zone of interests to be protected. The requirements for Article III constitutional standing have been identified by the United States Supreme Court and were recently summarized by the United States
Court of Appeals for the Third Circuit, as follows:
(1) the plaintiff must have suffered an injury in fact- an invasion of a legally protected interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) there must be a causal connection between the injury and the conduct complained of-the injury has to be fairly traceable to the challenged action of the defendant and not the result of the independent action of some third party not before the court; and (3) it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.
Dover Hist. Soc. v. City of Dover Plan. Comm'n, 838 A.2d 1103, 1110 (Del. 2003) (quoting Society Hill Towers Owners' Ass'n v. Rendell, 210 F.3d 168, 175- 76 (3d Cir. 2000)).
In my view, this test is met in this case. Plaintiff has alleged actual and concrete injury from Defendants' conduct, in the form of delayed processing of its claims for payment of health care invoices. Defendants' conduct is alleged to be the sole cause of the injury. Finally, a declaratory judgment that claim denials under 19 Del. C. § 2322F(e) must set forth meaningful explanations would redress the injury.
The challenged conduct and the dispute over it are ongoing. Defendants have not proffered a global effort to withdraw their explanations, or to correct them with new explanations. Even if Defendants have corrected the explanations for Plaintiff's patients, the challenged claim denials remain the operative explanations for other numerous patient claims in Delaware. Defendants' designee would not concede that claim denials must communicate an actual basis in fact or law for the insurer's position. Thus, there remains an ongoing dispute between the parties. I find that Plaintiff has standing.
3. MOOTNESS
With respect to mootness, Defendants argue that, even if Plaintiff had standing when it filed its Complaint, its claim is now moot because (1) Plaintiff has admitted that Defendants did not violate 19 Del. C. § 2322F(e)), and (2) Defendants have provided all other relief sought in the complaint because they (a) quit using Code x553 in 2018, (b) are willing to enter a consent judgment that would prevent them from using Code x553 in the future, and (c) identified every EOB since January 2016 that used Code x553 and provided Plaintiff with an updated EOB with a supplemental explanation that does not reference Code x553.
Plaintiff must not only have standing at the time the Complaint was filed but must maintain standing throughout the pendency of the litigation. There must be an "actual controversy" that I can resolve if I deny the Motion for Summary Judgment. "The 'actual controversy' requirement is the foundation for the mootness doctrine, which provides for dismissal of litigation if the alleged threatened injury no longer exists." "A dispute is moot if 'a grant of relief cannot have any practical effect on the existing controversy.'"
Gannett Co. v. Bd. of Managers of the Del. Criminal Justice Info. Sys., 840 A.2d 1232, 1237 (Del. 2003).
Certain Underwriters at Lloyd's v. Nat'l Installment Ins. Servs., 2007 WL 4554453, at *24 (Del. Ch. Dec. 21, 2007).
Id. at *23.
Plaintiff posits the test for mootness as:
(1) It must be a controversy involving the rights or other legal relations of the party seeking declaratory relief; (2) it must be a controversy in which the claim of right or other legal interest is asserted against one who has an interest in contesting the claim; (3) the controversy must be between parties whose interests are real and adverse; (4) the issue involved in the controversy must be ripe for judicial determination.
Rollins Int'l Inc. v. Int'l Hydronics Corp., 303 A.2d 660, at 662-63 (Del. 1973).
Applying our Supreme Court's test, I find that it is met in this case. The dispute involves Plaintiff's right to meaningful explanation under 19 Del. C. § 2322F(e). Defendants resist the proposition that denials must provide a factual or legal basis for the failure to pay, so they have an interest in contesting Plaintiff's claim. The interests of the parties are real and adverse. No one has contested that the controversy is ripe for adjudication.
With respect to Plaintiff's "admission" that Defendants did not violate 19 Del. C. § 2322F(e)), Defendants cite Plaintiff's designee's deposition testimony that Code x553 constitutes a written explanation of the reason for denial; however, the real gravamen of Plaintiff's claim is that Code x553 does not constitute a meaningful explanation of the reason for denial. With respect to Defendants' discontinuation of Code x553 in 2018, and as I have said before, Defendants could start using Code x553 in the future. Defendants may have corrected some of the EOBs that used Code x553, but by no means all of them. I find that Plaintiff's claims are not moot.
4. GENUINE ISSUE OF MATERIAL FACT
A jury trial has been demanded in this case. As discussed above, the question for me on a Motion for Summary Judgment is whether there is a genuine issue of material fact to go to the jury. If not, I may render a judgment as a matter of law. On the facts of the record to date, I see no genuine dispute between the parties as to whether Code x553 provides a meaningful explanation for denial under 19 Del. C. § 2322F(e)) that can be readily understood. In my view, however, Defendants fail to make a case for summary judgment in their favor. Therefore, and for the reasons discussed in 1, 2, and 3 above, I deny Defendants' Motion for Summary Judgment.
5. SUA SPONTE GRANT OF SUMMARY JUDGMENT
Rather, on the facts of the record to date, I find that Code x553 does not provides a meaningful explanation for denial under 19 Del. C. § 2322F(e)) that can be readily understood. Therefore, although Plaintiff did not file a cross-motion for summary judgment, I sua sponte grant summary judgment to Plaintiff.
Under Superior Court Rule 56, I may grant summary judgment to Plaintiff "when the state of the record is such that the non-moving party is clearly entitled to such relief." In Stroud, minority shareholders brought an action against the board of directors of a closely held corporation contesting the validity of a notice of annual meeting and the validity of a charter amendment and a bylaw adopted at that meeting. The Court of Chancery sua sponte granted summary judgment in favor of the board of directors, and the shareholders appealed. Our Supreme Court held:
Stroud v. Grace, 606 A.2d 75, 81 (Del. 1992).
Plaintiffs argue that the trial court erred as a matter of law in sua sponte granting summary judgment in favor of the defendants. The Strouds also contend that the trial court failed to consider the evidence in a light most favorable to them because the record supposedly contained disputed issues of material fact.
Our review of the trial court's grant of summary judgment to the defendants is de novo. The Court must analyze the entire record, including the trial court's opinion, the pleadings, depositions and other relevant evidence contained in the record. We treat all facts in a light most favorable to the non-moving party. We will draw our own factual conclusions if the trial court's rulings are clearly wrong and we will decide the summary judgment issue only if there is no dispute of material facts. We examine all legal issues to determine whether the trial court "erred in formulating or applying legal precepts."
A review of the record indicates that the trial court properly granted summary judgment to the defendants. In
Bank of Delaware v. Claymont Fire Co. No. 1, we found that in the interests of judicial economy, Chancery Court Rule 56 gives that court the inherent authority to grant summary judgment sua sponte against a party seeking summary judgment. We explained that "[t]he form of pleadings should not place a limitation upon the court's ability to do justice." Claymont Fire also recognized that the Court of Chancery should only sua sponte grant summary judgment against a party seeking summary judgment when the "state of the record is such that the non-moving party is clearly entitled to such relief...."
In essence, plaintiffs' claim that the record was insufficient for a sua sponte grant of summary judgment in the defendants' favor merely reargues the merits of plaintiffs' substantive claims-a boot-strap argument at best. In our opinion, the record adequately supports the trial court's decision. This appeal must turn on the merits of plaintiffs' substantive claims, not empty procedural objections.
Id. (citations omitted).
In Bank of Delaware v. Claymont Fire Co. No. 1, a trustee sought to reform or terminate a lease between the trustee as landlord and the tenant. The trustee filed a motion for summary judgment. The Chancery Court found that the motion was without merit and granted summary judgment for the tenant, even though the tenant had not so moved. On appeal, the Supreme Court, as a matter of first impression in Delaware, held that when a party moves for summary judgment, and the court concludes that the moving party is not entitled to summary judgment, and the state of the record is such that the non- moving party clearly is entitled to such relief, the judge may grant final judgment in favor of the non-moving party. The Court stated:
528 A.2d 1196 (Del. 1987).
Id. at 1199.
Finally, plaintiff contends that the trial judge erred in granting summary judgment for the defendant where the defendant did not seek summary judgment under Rule 56. The Trustee argues that it was not aware that it was defending a case-dispositive motion and that it was therefore unfair and prejudicial for the trial judge to sua sponte grant summary judgment in favor of defendant. We find that argument unpersuasive here… The form of the pleadings should not place a limitation upon the court's ability to do justice. Here, plaintiff had a full and fair opportunity to present its views. The Trustee's motion for summary judgment lacked proper factual support. Rather than establishing the validity of its claim, plaintiff's summary judgment motion and the accompanying affidavits demonstrated the claim's lack of merit. On the state of that record the trial judge properly entered judgment in favor of defendant in the interests of justice and judicial economy. We find no error in that decision.
Id. (citations omitted).
In Barker v. Huang, plaintiff, a former patient, sued the defendant physician alleging a variety of torts, including both defamation and non-defamation claims. The Superior Court denied defendant's motion for summary judgment on the defamation claims because plaintiff's unrebutted affidavit established a material issue of fact. However, the Court sua sponte reached the merits of plaintiff's non-defamation claims and ruled against her because the defendant's "motions were sufficient notice to plaintiff that all of her claims were called into question."
610 A.2d 1341 (Del. 1882).
Id., at 1348.
In Comet Systems, Inc. Shareholders' Agent v. Miva, Inc., former shareholders of an acquired corporation brought an action against the surviving corporation alleging that the surviving corporation breached the earnout provisions of the earnout agreement. With respect to one count, defendant moved for summary judgment and plaintiff did not. The Court nonetheless sua sponte granted summary judgment to plaintiff stating:
980 A.2d 1024 (Del. Ch. October 22, 2008).
The court has inherent authority to grant summary judgment sua sponte against the moving party, but should only do so when the state of the record is such that the non-moving party is clearly entitled to such relief.
Id., at 1034.
In Sycamore Partners Management, L.P. v. Endurance American Insurance Company, a complex corporate dispute, plaintiffs asked the Superior Court to grant it summary judgment sua sponte on one of defendants' defenses. The Court declined, stating:
2021 WL 4130631 (Del. Super. Sept. 10, 2021).
Granting summary judgment sua sponte typically is reserved for cases in which a claim or defense is so invalid as a matter of law and fact that it would be unjust to permit its survival simply because the non-movant formally did not request judgment against it.
Id. at fn 153.
In The Continental Insurance Co. v. Rutledge & Co., Inc., defendants moved for summary judgment and the Chancery Court sua sponte granted summary judgment for plaintiffs. Defendants moved to reargue and the Court denied the motion for reargument, stating:
2000 WL 268297 (Del. Ch. Feb. 15, 2000).
The defendants initially claim that they had "no reason to believe" the Court would consider the plaintiffs' cross motion for summary judgment; therefore, the defendants argue, the Court denied the defendants' "due process right to adequate notice." This claim lacks merit. First, Delaware law clearly entitles this Court to grant summary judgment upon suggestion of the non-moving party or sua sponte against a party seeking summary judgment. The defendants do not cite any Delaware law contesting this well-recognized principal [sic]. Second, the plaintiffs' answering brief clearly placed defendants on full notice regarding plaintiffs' request for summary judgment on the issues the defendants raised.
Id. at *1.
I apply the lessons of these cases to this case. Defendants argue that the evidence of record shows that Plaintiff and Defendants agree on the facts underlying the analysis of whether Code x553 complies with 19 Del. C. § 2322F(e)'s written explanation requirement. I disagree. Plaintiff has argued from the beginning that 19 Del. C. § 2322F(e) requires not just a written explanation, but a meaningful explanation with enough detail so that the provider can determine the actual reason why payment has been denied. Defendants have never conceded that point. Defendants have never admitted that "we deny it because we deny it" is an unlawful tautology. Defendants may have attempted to correct the Code x553 language with certain of Plaintiff's patients, but not with other patients in Delaware. Rather, they distort Plaintiff's designee's deposition testimony to argue that now Plaintiff agrees that the Code x553 complies with 19 Del. C. § 2322F(e). Both the federal case involving these parties and my earlier opinion clearly establish that the law of the case is that Plaintiff must be able to make an informed decision whether or not to challenge particular denials of claims that Plaintiff has submitted. Plaintiff has identified more than sufficient facts to create a genuine dispute of material fact as to whether Plaintiff understood these denials.
Indeed, to use the language of Sycamore, supra, this is a case where Defendants' claims and defenses are so invalid as a matter of law and fact that it would be unjust to permit their survival simply because Plaintiff did not formally request summary judgment against Defendants. I grant summary judgment in favor of Plaintiff.
V. CONCLUSION
For the reasons discussed above, Plaintiff's Motion for Class Certification is DENIED. For the reasons discussed above, Defendants' Motion for Summary Judgment is DENIED. Summary Judgment is GRANTED to Plaintiff sua sponte by the Court. I declare that the response to request to pay medical bills pursuant to Delaware's Worker's Compensation Law requires a meaningful response from an insurance carrier denying the request. The response at issue here, Code x553, does not comply with the Delaware Worker's Compensation Law.
IT IS SO ORDERED.