Opinion
CIVIL ACTION NO. 00-2226, SECTION "N"
August 13, 2001
ORDER AND REASONS
Before the Court are (1) plaintiff Orleans Parish School Board's Motion to Strike Any References to the Affidavit of Thomas B. Watkins, or, Alternatively, to Strike the Affidavit (Again) and (2) Bankers Life and Casualty Company's Renewed Motion for Summary Judgment. For the following reasons, the School Board's motion is GRANTED, and Bankers' motion is GRANTED IN PART and DENIED IN PART.
BACKGROUND
In 1989 the Orleans Parish School Board ("School Board") hired Group Insurance Administration of Louisiana, Inc. ("GIA") and Bankers Life and Casualty Company ("Bankers") to administer the School Board's health care benefits program. GIA, the School Board and Bankers entered into an Administrative Services Agreement ("Agreement") under which GIA agreed to process School Board employees' medical claims and Bankers agreed to provide life insurance and stop loss insurance for the plan.
GIA filed for Chapter 7 bankruptcy protection in 1995. Since then, the School Board has filed several lawsuits asserting claims against GIA, Bankers and their insurers in an attempt to recover damages that resulted from GIA's alleged failure to properly administer the health care program. The School Board has settled every case but this one.
In the instant suit, the School Board first sued GIA president Robert H. Carter, III ("Carter") as well as several insurance companies that had issued policies to GIA. The School Board then joined Bankers as a defendant, alleging that Bankers is solidarily liable with GIA and that it committed its own acts of malfeasance. In an order and reasons entered April 6, 2001, the Court granted Bankers' motion for summary judgment against the School Board for all claims arising out of contractual solidary liability, but ordered further briefing on the claims asserted against Bankers individually. Bankers' renewed motion for summary judgment is now before the Court.
LAW AND ANALYSIS A. School Board's Motion to Strike Affidavit
In connection with Bankers' renewed motion, the School Board has refiled its motion to strike the affidavit of Bankers' employee Thomas Watkins. This Court has already ruled on this motion. In its opposition to the School Board's original motion to strike, Bankers contended that "even were the Court to strike every portion of the Affidavit to which [the School Board] objects, there would still remain ample evidence to support Bankers' motion for summary judgment." Bankers further argued that the School Board's motion was "effectively mooted by the multiple sources of support for which Bankers cites the passages in question." Bankers' Mem. Opp. at 2-3. In accordance with Bankers' position, this Court held that Watkins' affidavit was cumulative to Bankers' other evidence and granted the School Board's motion to strike all portions of the affidavit to which it objected, and that ruling is still in effect.
B. Bankers' Renewed Motion for Summary Judgment 1. Solidary Liability
In its previous order and reasons, the Court held that, under the terms of the Administrative Services Agreement, Bankers is not jointly or solidarily liable with GIA for GIA's alleged misconduct. This conclusion was dictated by the Fifth Circuit's holding in Transit Mgmt. of SE LA v. Group Ins. Admin., 226 F.3d 376 (5th Cir. 2000), a case almost identical to the instant suit. Like the School Board, Transit Management entered into an administrative services agreement for its health care program with Bankers and GIA; and like the School Board, Transit Management sought to hold Bankers solidarily liable for GIA's alleged mismanagement of its health care plan. The Fifth Circuit considered the agreement and held (1) that Bankers and GIA did not establish a joint venture and (2) that "[b]ecause neither was obligated to perform the obligations of the other, liability for the respective obligations of [Bankers] and GIA is several rather than solidary." Id. at 387. Because the terms of the agreement in Transit Management are identical to the terms of the Administrative Services Agreement in the instant case, the Transit Management court's holding on the solidary liability issue is binding on this Court. Accordingly, this Court held in the April 6, 2001 order and reasons that Bankers and GIA are not solidarily liable under the terms of their contract with the School Board.
In its opposition to Bankers' renewed motion for summary judgment, the School Board has raised a new theory of solidary liability based on Bankers' alleged individual tortious acts. This theory of liability has not been previously addressed by the Court and is not controlled by the Fifth Circuit's decision in Transit Management. The School Board now argues that Bankers is solidarily liable with GIA under La. Civ. Code art. 2324, which establishes solidary liability for conspiring to commit "an intentional or willful act." Specifically, the School Board contends that Bankers "aided [GIA president Robert] Carter in his request to mislead the Board." School Board Surreply Mem at 7. The Board's argument for tort-based solidary liability is not foreclosed by the Fifth Circuit's decision in Transit Management, which recognized that the plaintiff had "not alleged or argued that [Bankers] participated, aided, or abetted GIA in its breach of the contract." Transit Mgmt., 226 F.3d at 387.
The School Board claims that Bankers conspired with GIA in two distinct ways. First, the Board claims that Bankers' employee Douglas DeVoss gave GIA president Robert Carter a letter, which was eventually forwarded to the Board, describing allegedly "new procedures" that would speed up GIA's notoriously slow claim payments. According to the Board, Bankers later admitted that these "new procedures" were actually established business practices that GIA should have been following all along. The Board maintains that this alleged misrepresentation by Bankers helped keep GIA in the Board's good graces, and that Bankers' agreement to aid GIA in this deception subjects it to full solidary liability with GIA under La. Civ. Code art. 2324.
The only evidentiary support for the School Board's allegation is a four-page excerpt from DeVoss' deposition. DeVoss stated that, in response to Carter's request for details regarding excess-risk claims, he wrote Carter a letter that he "guessed" Carter would eventually show to the School Board. After speaking to Carter, DeVoss wrote the following interoffice memo:
Mr. Carter also requested that I describe briefly the "new procedures' GIA and Bankers are instituting to facilitate claim payment. He meant the monthly reporting that GIA should have been doing all along, which to date we have not received from them. He felt it would improve his position with the school board if he had a letter from Bankers containing this type of information.
DeVoss Dep. at 177-180 (reading from interoffice memo).
From this deposition testimony, the School Board concludes that because "the procedures were not new procedures, Bankers' representation to the Board was blatantly false and misleading." School Board's Mem. Opp. at 23 (emphasis in original). The Court is not fully convinced that the School Board's reading of DeVoss' testimony is correct. Although Carter may have believed that the processing procedures were new and may have even told the School Board they were new, it is not clear that DeVoss' letter represented that the procedures were new. However, since neither party has offered DeVoss' letter as evidence, the Court finds that an issue of material fact exists as to whether Bankers misrepresented the claims processing procedures to the School Board. See Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).
The second alleged misrepresentation by Bankers is that it called the Administrative Services Agreement ajoint venture "when doing so enabled it to get the Board's business, and then promptly and expediently denied the existence of a joint venture when it was sued as a joint venturer." School Board's Mem. Opp. at 22. The Transit Management court rejected a similar argument. Transit Management claimed that, even if Bankers and GIA were not in fact partners in a joint venture, "by virtue of Transit's justified detrimental reliance upon the life insurers' representations of the existence of a joint venture, [Bankers] is estopped to deny the formation of such a juridical entity." Transit Mgmt., 226 F.2d at 382-383. The Fifth Circuit held that:
[w]hile Louisiana law at least nominally recognizes the possibility that a person may be estopped to deny the existence of a partnership that he has represented to exist when he holds himself out as a partner to the justified detrimental reliance of a third party, Louisiana courts have refused to apply the estoppel theory where the alleged partners have not shared in the profits and losses of a common enterprise.
Id. at 384. "Applying these principles," the Fifth Circuit concluded that, "because GIA did not agree to share profits and losses with any of the life insurers related to any of the contracts between them, none of the life insurers became a joint venturer with GIA either by agreement or estoppel." Id. However, unlike the School Board, the Transit Management plaintiff did not allege that Bankers intentionally misrepresented its alliance with GIA as a joint venture in order to get its business. Because Bankers has not refuted either of the School Board's charges of intentional misrepresentation, the Court cannot grant summary judgment on the tort-based solidary liability theory.
2. General Arguments
Even if it shares liability with GIA under La. Civ. Code art. 2324, Bankers offers several general arguments in an attempt to extinguish its exposure.
a. No Damages
First, Bankers argues that the School Board has not suffered any damages as a result of GIA's failure to pay the health care providers. In Paragraph 7 of its second supplemental and amended complaint, the School Board asserts that it paid more than $2,000,000 to GIA and that GIA failed to forward that money to the Preferred Providers Organization ("PPO"). Bankers argues (1) that GIA was the agent for both the School Board and the PPO, (2) that the School Board fulfilled its obligations when it paid GIA, and (3) that the PPO's recourse is against its own agent, GIA, and not against the School Board. However, as the Court reads the complaint, the School Board is not seeking recovery for its potential liability to the PPO providers. The School Board is seeking recovery for more than $2,000,000 that it entrusted to GIA with the specific instructions that it be paid to the PPO. GIA failed to distribute the money as instructed, and the School Board wants it back. The Court is not convinced that the alleged absence of liability of the School Board towards the PPO has any effect on the School Board's claim against GIA.
Bankers also argues that any claims by the PPO against the School Board have prescribed. However, because the School Board's claims are not dependent on its potential liability to the PPO, the Court finds that the possible prescription of the PPO's claims does not affect the instant suit.
b. Tenet
In Paragraph 8 of its second supplemental and amended complaint, the Board claims that "the failure by the Joint Venture, Bankers, and/or GIA" to timely file, process and pay claims has "caused unpaid network providers to intervene in this action." Second Am. and Supp. Pet. at ¶ 8. According to Bankers, Tenet HealthSystem Hospitals, Inc. ("Tenet") is the only network provider that has intervened. Tenet has sued the School Board for the Board's failure to pay GIA, not for GIA's failure to pay the PPO. The School Board has not addressed this argument. Accordingly, since Tenet's claim is unrelated to either Bankers' or GIA's alleged mismanagement, Bankers' motion for summary judgment on any claims arising out of Tenet's lawsuit against the School Board is granted.
c. Settled Suits
Bankers also asserts that, under the settlement agreements of two previous suits, the School Board has released it from any further liability. Under Louisiana law, a settlement agreement has the same authority as res judicata. Ortego v. State Dept. of Transp. and Dev., 689 So.2d 1358, 1363 (La. 1997). A settlement agreement "must be interpreted according to the parties' intent" and is "governed by the same general rules of construction applicable to contracts."Id. (internal citations omitted).
Bankers first argues that the settlement agreement in DeSalvo v. Orleans Parish School Board, 94-04450, 95-1257 and 95-9194 (Civ. Dist. Ct.), bars all the claims brought in the instant suit. In DeSalvo, several beneficiaries of the School Board's health care program sued the School Board because of GIA's delays in payment. The School Board joined Bankers as a defendant and contended that Bankers was liable for GIA's failure to administer the program properly. The DeSalvo settlement explicitly states that the School Board "reserves all of its rights, to the extent that they are not specifically released by this Settlement." DeSalvo Settlement Agreement at ¶ 9. Bankers has not offered evidence that the claims in the instant case were "specifically released" inDeSalvo. "Because a compromise extends only to those matters the parties intended to settle" and "cannot be extended by implication," the Court finds that the DeSalvo settlement does not bar the School Board's claims in the instant case. Ortego, 689 So.2d at 1363.
In addition, Bankers argues that the settlement agreement in Orleans Parish School Board v. The Segal Company, 95-2591 (Civ. Dist. Ct.), bars the School Board's instant claims. The School Board originally sued the Segal Company for actuarial malpractice in the development of its health care plan. Segal impleaded Bankers, alleging that Bankers' and GIA's failure to maintain adequate records caused it to recommend a deficient plan to the School Board. The School Board then added Bankers and GIA as defendants, alleging that it had been damaged by their negligence in the development of the plan. Bankers argues that the School Board's claims in Segal "concerned every aspect of GIA's alleged mismanagement of the Program and Bankers' derivative liability for these acts and omissions (except, as Bankers concedes, the claims concerning GIA's failure to pay PPO providers amounts that [the School Board] had already paid GIA, which were the original claims brought in [the instant] action)." Bankers Reply Mem. at 5. The problem with Bankers' argument is that the instant case was already pending at the time of the Segal settlement, and the failure of the Segal settlement to reference the case at bar raises a genuine issue of material fact as to whether the parties intended the settlement agreement to dispose of the claims now before the Court.
d. Pendleton
Finally, in Paragraph 9 of the Second Supplemental and Amending Complaint, the School Board alleges that it has received notice of a potential claim from an unpaid service provider. The "potential claimant" is Pendleton Hospital, to which the School Board paid $702,370.00 in settlement. Bankers contends that the School Board should not have paid this amount because it satisfied its obligation to Pendleton when it paid GIA. Bankers further argues that, because the Board was not liable to Pendleton, the School Board has no right to seek indemnification. In support of its position, Bankers cites Jackson v. Lambert, 492 So.2d 498, 503 (La.App. 1 Cir. May 28, 1986), in which the court held that, under La. Civ. Code art. 3056, a surety that voluntarily pays its principal's debt without giving notice to the principal is not entitled to indemnification if the principal could have asserted a valid defense. The School Board, however, is not asserting the subrogation rights of a compensated surety. It is asserting subrogation rights derived through conventional assignment under La. Civ. Code art. 2642. In the settlement agreement, Pendleton released the School Board from any liability on claims for which the School Board already paid GIA and reserved to the Board "all rights and claims" that Pendleton had against GIA. Bankers has not addressed the viability of Pendleton's claims against GIA, nor has it established that Pendleton's assignment is ineffective. Accordingly, the School Board may assert Pendleton's claims against GIA.
3. Individual Counts
In addition to its general arguments, Bankers addresses each count of the second supplemental and amending complaint separately. In Counts I, IV and VI, the School Board alleges that Bankers is solidarily liable with GIA for GIA's alleged negligent administration of the health care plan, its breaches of the Administrative Services Agreement, and its misappropriation of funds. Although Bankers is not contractually liable for these alleged actions, it may be liable in tort for aiding and abetting GIA in its misconduct. Because Bankers has not refuted the School Board's tort-based theory of solidary liability, the Court denies Bankers' motion for summary judgment on Counts I, IV and VI.
In Counts II and III, the School Board seeks damages for GIA's failure to obtain proper insurance. The Court has already determined that GIA's obligations under the Administrative Services Agreement were discrete from Bankers' obligations such that Bankers and GIA were each responsible for obtaining their own insurance. The School Board has not explained how Bankers "aided and abetted" GIA in its failure to obtain proper insurance. Accordingly, Bankers' motion for summary judgment on Counts II and III is granted.
In Count V the School Board contends that Bankers is solidarily liable with GIA "for all the expenses, including attorney fees, the School Board has incurred relating to this case as a result of their breach of the Agreement." Second Supp. and Am. Compl. at ¶ 39. The School Board further alleges that Bankers "committed such acts of breach wilfully, maliciously and in bad faith." Id. at ¶ 40. In addition to its general arguments discussed above, Bankers argues that Count V should be dismissed because there is no evidence that it acted in bad faith. Indeed, the School Board has withdrawn its allegation that Bankers acted in bad faith, so Bankers' summary judgment motion on Count V is granted as to the School Board's bad faith allegations.
Count VII alleges that Bankers misled the School Board by representing that Bankers and GIA would be self-insured. Bankers argues that these claims have been released in the Segal and DeSalvo lawsuits. The Court has already rejected this argument, and Bankers' motion for summary judgment on Count VII is denied.
In Count VIII, the School Board alleges that "Bankers and GIA represented to the School Board that they would form a joint venture and the School Board relied on that representation in executing the [Administrative Services Agreement] and the Agreement for Administrative Services on Run-Out-Claims." Second Supp. and Am. Compl. at ¶ 51. The Court has already explained that Bankers and GIA did not form a joint venture. However, Bankers has not refuted the School Board's argument that it intentionally misrepresented the status of its arrangement with GIA. Bankers' motion to dismiss Count VIII is denied.
Count IX charges that Bankers failed to exercise due care in sponsoring and recommending GIA. Bankers claims that there is no evidence that it "sponsored" or "recommended" GIA to the School Board. Except for its general allegations that Bankers and GIA represented themselves as partners, the School Board has not addressed this argument. Since the Board has not presented any evidence that Bankers sponsored or recommended GIA, the Court grants Bankers motion for summary judgment on Count IX.
In Count X the School Board asserts claims arising by subrogation and assignment from Pendleton Hospital, to which it paid $702,370.00 pursuant to a settlement agreement. The Court has previously stated that Bankers has not invalidated Pendleton's conventional assignment of its claims against GIA to the School Board, and the motion for summary judgment on Count X is denied.
Finally, in Count XI the School Board asserts a claim of promesses de porte-fort under La. Civ. Code art. 1977, which provides:
The object of a contract may be that a third person will incur an obligation or render a performance.
The party who promised that obligation or performance is liable for damages if the third person does not bind himself or does not perform.
The School Board contends that Bankers is liable "for GIA's failure to render performance of its discrete obligations" because Bankers represented that GIA would perform its duties. School Board Reply Mem. at 26.
Bankers disputes that it ever made such a representation, but the Court finds a genuine issue of material fact exists on this issue. It is clear that Bankers and GIA did not in fact enter into a joint venture and are not solidarily liable under the contract. However, Bankers' alleged intentional misrepresentation that it was a partner in a joint venture with GIA may be construed as a representation or promise that GIA would render performance. Accordingly, because Bankers has not established that it did not intentionally misrepresent its arrangement with GIA to the School Board, the Court finds that summary judgment on Count XI is not appropriate.
CONCLUSION
For the reasons given above, IT IS ORDERED that the Orleans Parish School Board's Motion to Strike Any References to the Affidavit of Thomas B. Watkins, or, Alternatively, to Strike the Affidavit (Again) is GRANTED.
IT IS FURTHER ORDERED that Bankers Life and Casualty Company's Renewed Motion for Summary Judgment is GRANTED as to any alleged liability arising through Tenet HealthSystem, Inc.'s intervention in the instant matter; as to Count V. to the extent that it alleges that Bankers acted in bad faith; and as to Counts II, III, and IX. In all other respects, Bankers' motion for summary judgment is DENIED.