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Gold v. Rowland

Supreme Court of Connecticut

April 11, 2017

RONALD GOLD, INDIVIDUALLY AND ON BEHALFOF ALL OTHERS SIMILARLY SITUATED
v.
JOHN ROWLAND ET AL.

          Argued October 17, 2016

          E.J. Robbin Greenspan, with whom were Matthew T. Wax-Krell and Andrew W. Krevolin, for the appellants (named plaintiff et al.).

          Adam K. Levin, pro hac vice, with whom were Patrick M. Fahey and Craig A. Hoover, pro hac vice, and, on the brief, Charles L. Howard and Peter R. Bisio, pro hac vice, for the appellees (defendant Anthem, Inc., et al.).

          Palmer, Eveleigh, McDonald, Espinosa and Robinson, Js. [*]

          OPINION

          PALMER, J.

         This certified class action, which arises from a dispute over the proceeds of the 2001 demutualization of the defendant Anthem Insurance Companies, Inc. (Anthem Insurance), comes before this court for the second time. The plaintiffs are a class of state employees and retirees who, at the time of the demutualization, were enrolled in an Anthem Insurance group health care insurance plan. They contend that their participation in that plan entitled them to membership in Anthem Insurance and a share of the demutualization proceeds, and that Anthem Insurance and the other insurance company defendants; see part I E of this opinion; breached their contractual obligations by not paying the plaintiffs for their membership interests and instead distributing their share of the proceeds to the defendant state of Connecticut. The first time we considered this case, we concluded that all of the plaintiffs' claims against the named defendant, John Rowland, the former governor of Connecticut, and the state were barred by the doctrine of sovereign immunity or otherwise should have been dismissed. See Gold v. Rowland, 296 Conn. 186, 205, 209-11, 994 A.2d 106 (2010). Following our decision and a subsequent trial to the court of the plaintiffs' breach of contract claims against the remaining defendants, the trial court, Bright, J., rendered judgment for those defendants. On appeal, the plaintiffs contend that the trial court incorrectly concluded that the relevant contract provisions were ambiguous and improperly consulted extrinsic evidence to determine their meaning. Finding no error, we affirm the trial court's judgment.[1]

         I

         FACTUAL AND PROCEDURAL HISTORY

         Familiarity with the complete factual record, as detailed in the trial court's memorandum of decision, is presumed. The relevant facts, as found by the trial court or stipulated to by the parties, and procedural history may be briefly summarized as follows.

         A

         Merger of Anthem Insurance and Blue Cross and Blue Shield of Connecticut, Inc.

         The dispute between the parties arises from three principal transactions and two group health care insurance policies. The first occurred on July 31, 1997, when Anthem Insurance, a mutual insurance company organized under Indiana law, merged with Blue Cross and Blue Shield of Connecticut, Inc. (Blue Cross), a mutual insurance company organized under Connecticut law. The merger was executed pursuant to a November, 1996 agreement to merge, which included as attachments a plan and joint agreement of merger, a proposed form of Anthem Insurance's third amended and restated articles of incorporation (1997 articles), and a form group guaranty health care insurance policy and certificate of membership (guaranty policy).[2] Under the plan and joint agreement of merger, Anthem Insurance was designated as the company that would survive the merger. Three months prior to the merger, in April, 1997, the directors and members of Anthem Insurance formally adopted the 1997 articles. Following the merger, Anthem Insurance, through its subsidiary, the defendant Anthem East, Inc., continued the former Blue Cross operations under the auspices of the defendant Anthem Health Plans, Inc., doing business as Anthem Blue Cross and Blue Shield of Connecticut (New CT-Blue).

         Prior to their merger, the two mutual insurance companies took different approaches to membership. Under Anthem Insurance's premerger membership rules, each employee or individual holder of a certificate of coverage under a fully insured group health care insurance policy was an individual member and owner of Anthem Insurance. The employer, membership organization, or other group that procured the group coverage was not an owner member.

         Under Blue Cross' premerger bylaws, by contrast, the employers were the owner members. Each employer was considered one policyholder and would designate a representative to act on behalf of the group for voting purposes. Individual employees who had been issued insurance certificates were not considered to be voting members with equity rights.

         B

         Relevant Health Care Insurance Policies

         Before the merger, the state held two Blue Cross group health care insurance policies relevant to the present dispute.[3] The first, known as Care Plus, provided Medicare supplement group health care insurance for retired state employees and their dependents. The state closed enrollment in Care Plus to new members in 1994 but permitted enrolled members to retain their coverage. The Office of the Comptroller was designated as the voting member for that policy. In connection with the merger, New CT-Blue delivered a guaranty policy for Care Plus to the Office of the Comptroller.

         The second plan originated as a Blue Cross health care insurance policy that was offered to state employees and non-Care Plus state retirees prior to 1993. In 1993, the state converted this policy to a self-funded, administrative services only contract with Blue Cross (ASO agreement). It is undisputed that the ASO agreement, as administered by Blue Cross after 1993, was not an insurance policy. Both Care Plus and the ASO agreement were active in 1997 when Anthem Insurance and Blue Cross merged, and they remained in effect through the first half of 1999.

         On June 30, 1999, the state terminated the self-funded ASO agreement and instead entered into a new, fully insured group health care insurance policy from New CT-Blue (1999 group policy). Under the 1999 group policy, New CT-Blue began providing health care insurance benefits to substantially the same group of state employees and retirees who had been covered under the ASO agreement.

         The following year, in July, 2000, the state also terminated the Care Plus plan. At that time, Care Plus covered 512 state retirees. Those retirees were given the option of enrolling in the 1999 group policy or in any of the other health care insurance plans available to state retirees. Unless they opted out, Care Plus members were, by default, enrolled in the 1999 group policy without a lapse in coverage. Approximately 456 of the 512 former Care Plus retirees ultimately were enrolled in the 1999 group policy without any lapse in coverage.

         C

         Demutualization of Anthem Insurance

         The second key transaction that gave rise to the present dispute occurred on June 18, 2001, when Anthem Insurance's board of directors approved a plan to convert from a mutual insurance company to a stock corporation under Indiana law.[4] Under the plan of conversion, upon the effective date of the demutualization, all of the outstanding capital stock of Anthem Insurance would be issued to the defendant Anthem, Inc., and eligible members of Anthem Insurance would become entitled to receive stock in Anthem, Inc., or cash, in exchange for the extinguishment of their membership interests in Anthem Insurance. The plan of conversion defined an eligible member as ‘‘a [p]erson who (a) is a [s]tatutory [m]ember of Anthem Insurance on the [a]doption [d]ate [June 18, 2001] and continues to be a [s]tatutory [m]ember of Anthem Insurance on the [e]ffective [d]ate [November 2, 2001], and (b) has had continuous health care benefits coverage with the same company during the period between those two dates under any [p]olicy or [p]olicies without a break of more than one day.'' During the relevant period from June 18 through November 2, 2001 (eligibility period), the plaintiffs continuously held certificates of coverage under the 1999 group policy.

         D

         Stock Distribution

         The third relevant transaction occurred between late 2001 and early 2002, when Anthem Insurance distributed more than 1.6 million shares of stock in Anthem, Inc., to the state, on the basis of its determination that the state-and not the individual state employees and retirees-was the eligible member under the 1999 group policy. Thereafter, the state sold the stock for $93, 768, 950, transferred the proceeds to the general fund; see Public Acts, Spec. Sess., May, 2002, No. 02-1, § 39; and spent them. Gold v. Rowland, supra, 296 Conn. 193-94. Anthem Insurance made no distribution to the individual state employees and retirees under the 1999 group policy.

         At the time of the demutualization, the state received notice thereof and was given the option to receive its share of the proceeds in stock or cash. There is no evidence that individual enrollees in the 1999 group policy received notice of the demutualization. However, public hearings concerning the demutualization were held before the Indiana Department of Insurance.

         E

         Procedural History

         In January, 2002, the named plaintiff, Ronald Gold, a state employee, brought this action on his own behalf and on behalf of all others similarly situated, against the defendants, former Governor Rowland, the state, Anthem, Inc., New CT-Blue, Anthem East, Inc., and Anthem Insurance.[5] Gold initially filed a two count inter pleader action alleging that, pursuant to the plan of conversion, he and other similarly situated state employees enrolled in the 1999 group policy were entitled to receive the 1.6 million shares of Anthem, Inc., stock that the insurance company defendants had issued to the state. In a second amended complaint, Gold claimed a right to the funds under various theories sounding in unjust enrichment, constructive trust, resulting trust, conversion of property, breach of duty, and unconstitutional takings and procedural due process violations.

         Thereafter, former Governor Rowland and the state filed a motion to dismiss Gold's claims against them, arguing, among other things, that the claims were barred by the doctrine of sovereign immunity. The trial court, Sheldon, J., concluded that Gold's common-law claims were barred by sovereign immunity and dismissed those claims. However, the court denied the motion to dismiss Gold's inter pleader and state constitutional takings claims. On appeal, this court concluded that all of Gold's claims against former Governor Rowland and the state should have been dismissed. See id., 223.

         Following the return of the case to the Superior Court, Gold filed the operative fourth amended com-plaint, [6] and Lois O'Connor, a former state employee who retired in 1997, was added as a plaintiff. In 2011, the case was assigned to the court, Bright, J. Class certification was granted to the group of state employees and retirees who continuously held a certificate of coverage under the 1999 group policy or who had continuous health care insurance coverage under that policy during the eligibility period but did not receive compensation as a result of the demutualization.

         In 2013, the plaintiffs and the insurance company defendants filed separate motions for summary judgment, each side claiming that the contract documents that governed the demutualization process and Anthem Insurance's relationship with the state and state employees required that judgment as a matter of law be rendered in their favor. The court denied the motions, concluding that the contract language regarding the distribution of demutualization proceeds was ambiguous[7] and, therefore, that it was necessary to consult extrinsic evidence of the parties' intent, and that there were genuine issues of material fact that needed to be resolved at trial.

         The court bifurcated the proceedings, and the case proceeded to trial before the court solely on the issue of liability. The court heard testimony from a number of attorneys and other witnesses who were involved with the transactions at issue. Following the trial, the court issued a thoughtful and comprehensive memorandum of decision in which it concluded that (1) the various merger documents were all part and parcel of the same transaction, (2) when construed together, those documents are ambiguous with respect to the plaintiffs' entitlement to membership in Anthem Insurance and a share of the demutualization proceeds, and (3) the extrinsic evidence conclusively supported the insurance company defendants' interpretation of the merger documents, pursuant to which the state, rather than the plaintiffs, was the member entitled to the group's share of the demutualization proceeds. Consistent with these conclusions, the trial court rendered judgment in favor of the insurance company defendants.

         The plaintiffs timely appealed to the Appellate Court, and we transferred the appeal to this court pursuant to General Statutes § 51-199 (c) and Practice Book § 65-1. On appeal, the plaintiffs contend that the 1997 articles unambiguously entitled them to the demutualization proceeds arising from the 1999 group policy and that the trial court improperly considered extrinsic evidence of the meaning of the relevant contract provisions. Consistent with this contention, they further claim that they are entitled to judgment as a matter of law. Additional facts will be set forth as necessary.

         II

         LEGAL ANALYSIS

         We begin our analysis of the plaintiffs' claim by setting forth the standard of review and governing legal principles. ‘‘When the language of a contract is ambiguous, the determination of the parties' intent is a question of fact . . . . [When] there is definitive contract language, [however] the determination of what the parties intended by their contractual commitments is a question of law. . . . It is implicit in this rule that the determination as to whether contractual language is plain and unambiguous is itself a question of law subject to plenary review.''[8] (Citations omitted; internal quotation marks omitted.) Cruz v. Visual Perceptions, LLC, 311 Conn. 93, 101-102, 84 A.3d 828 (2014).

         Because the parties have agreed that Indiana law governs the 1997 articles and other documents at issue in this case, we apply the law of that state. See, e.g., Hottle v. BDO Seidman, LLP, 268 Conn. 694, 706, 846 A.2d 862 (2004). Under Indiana law, ‘‘[t]he ultimate goal of any contract interpretation is to determine the intent of the parties at the time that they made the agreement. . . . [Indiana courts] begin with the plain language of the contract, reading it in context and, whenever possible, construing it so as to render each word, phrase, and term meaningful, unambiguous, and harmonious with the whole.'' (Citation omitted.) Citi Mortgage, Inc. v. Barabas, 975 N.E.2d 805, 813 (Ind. 2012). ‘‘Unless the terms of a contract are ambiguous, they will be given their plain and ordinary meaning.'' Centennial Mortgage, Inc. v. Blumenfeld, 745 N.E.2d 268, 273-74 (Ind. App. 2001).

         ‘‘A contract is ambiguous if a reasonable person would find the contract subject to more than one interpretation.'' (Internal quotation marks omitted.) Citi-Mortgage, Inc. v. Barabas, supra, 975 N.E.2d 813. ‘‘The terms of a contract are not ambiguous merely because controversy exists between the parties concerning the proper interpretation of terms.'' Centennial Mortgage, Inc. v. Blumenfeld, supra, 745 N.E.2d 274.

         ‘‘If [a court] find[s] ambiguous terms or provisions in the contract, [it] will construe them to determine and give effect to the intent of the parties at the time they entered into the contract.'' (Internal quotation marks omitted.) Citi Mortgage, Inc. v. Barabas, supra, 975 N.E.2d 813. ‘‘If . . . any terms of a [contract] are ambiguous, then the parties may introduce extrinsic evidence of its meaning, and interpretation of that term becomes a question of fact . . . .''[9] Beradi v. Hardware Wholesalers, Inc., 625 N.E.2d 1259, 1261 (Ind. App. 1993). In such case, the finder of fact may consider any relevant extrinsic evidence of the parties' intent. See University of Southern Indiana Foundation v. Baker, 843 N.E.2d 528, 535 (Ind. 2006). This includes the circumstances surrounding the drafting of the agreement; see Grant v. North River Ins. Co., 453 F.Supp. 1361, 1366 (N.D. Ind. 1978); statements made between the parties; see Washburn-Crosby Milling Co. v. Brown, 56 Ind.App. 104, 109, 104 N.E. 997 (1914); testimony or affidavits from attorneys who drafted the agreement; see University of Southern Indiana Foundation v. Baker, supra, 535; the conduct of the parties to the contract after it was formed; see Peterson v. First State Bank, 737 N.E.2d 1226, 1229-30 (Ind. App. 2000); Pierce v. Yochum, 164 Ind.App. 443, 451, 330 N.E.2d 102 (1975); and subsequently prepared documents that reflect the parties' courseof performance. See Tender Loving Care Management, Inc. v. Sherls, 14 N.E.3d 67, 72-73 (Ind. App. 2014).

         In the event that review of extrinsic evidence of the parties' intent fails to resolve a contractual ambiguity, Indiana courts then apply the doctrine of contra profer-entem, pursuant to which such ambiguities are construed against the drafter. See Indiana-Kentucky Electric Corp. v. Green, 476 N.E.2d 141, 146 (Ind. App. 1985). This doctrine is used only as a tie breaker, however, after all other rules of construction have been applied and all indicia of the parties' intent have been exhausted. See id.; see also Bradley v. Western & Southern Financial Group, Docket No. 2:05 CV 39, 2005 WL 2709282, *7 (N.D. Ind. October 20, 2005) (‘‘the application of contra proferentem is premature in situations [in which] there has not yet been any attempt to resolve the ambiguity through the ordinary interpretive guides-namely, a consideration of the extrinsic evidence'' [internal quotation marks omitted]); Bradley v. Western & Southern Financial Group, supra, *7 (explaining that, if doctrine of contra proferentem were applied at outset upon finding of ambiguity, then rule allowing for consideration of extrinsic evidence to interpret ambiguous contracts would be meaningless).

         It also is black letter law that ‘‘a contract is considered as a whole so as to give effect to all its provisions without narrowly concentrating [on] some clause or language taken out of context.'' Keystone Square Shopping Center Co. v. Marsh Supermarkets, Inc., 459 N.E.2d 420, 422 (Ind. App. 1984). In addition, documents that are part of the ‘‘same transaction or subject matter will be construed together in determining the intent underlying the contracts.'' Noble Roman's, Inc. v. Ward, 760 N.E.2d 1132, 1138 (Ind. App. 2002); see also State ex rel. Keith v. Common Council, 138 Ind. 455, 461, 37 N.E. 1041 (1894) (contemporaneous writings so interrelated as to be deemed ‘‘ ‘part and parcel of the same contract' '' may be read as one); Salcedo v. Toepp, 696 N.E.2d 426, 435 (Ind. App. 1998) (‘‘[i]n the absence of anything to indicate a contrary intention, writings executed at the same time and relating to the same transaction [or subject matter] will be construed together in determining the contract''). ‘‘Moreover, [as] long as two or more instruments are part of the same transaction, different execution times will not prohibit [the] instruments from being construed together.'' Centennial Mortgage, Inc. v. Blumenfeld, supra, 745 N.E.2d 275; see also Gold v. Cedarview Management Corp., 950 N.E.2d 739, 743 (Ind. App. 2011). The contemporaneous document doctrine may even beapplied when the documents at issue involve different parties, although caution must be exercised under those circumstances, and the determination that the documents constitute a sin- gle agreement must be made on a case-by-case basis. Compare Lily, Inc. v. Silco, LLC, 997 N.E.2d 1055, 1068-69 (Ind. App. 2013) (applying doctrine even though only one entity was party to all three agreements at issue), transfer denied, 6 N.E.3d 950 (Ind. 2014), and Roberts v. Vonnegut, 58 Ind.App. 142, 146-49, 104 N.E. 321 (1914) (construing contract executed between corporation's principal shareholders together with creditors' extension agreement), with Yessenow v. Hudson, Docket No. 2:08-CV-353 (PPS), 2012 WL 2990643, *6-*7 (N.D. Ind. July 19, 2012) (declining to apply contemporaneous document doctrine when indemnification agreement at issue contained integration clause, was signed on different date than merger documents were, and was not necessary condition of completing merger), and Murat v. South Bend Lodge No. 235 of the Benevolent & Protective Order of Elks, 893 N.E.2d 753, 757-58 (Ind. App. 2008) (declining to apply contemporaneous document doctrine because deeds at issue served different purposes and did not cross-reference each other, and there was no evidence that parties intended them to form unitary contract), transfer denied, 915 N.E.2d 989 (Ind. 2009); see also Beradi v. Hardware Wholesalers, Inc., supra, 625 N.E.2d 1261-63 (construing together documents signed by various corporate officers in both their individual and representative capacities); Gilmore v. Century Bank & Trust Co., 20 Mass.App. 49, 56, 477 N.E.2d 1069 (1985) (factors influencing whether different instruments should be read together as components of single transaction include ‘‘simultaneity of execution, identity of subject matter and parties, cross-referencing, and interdependency of provisions'').

         Indiana courts have applied these principles in the context of construing articles of incorporation in tandem with other corporate organizational documents. See, e.g., Bay Colony Civic Corp. v. Pearl Gasper Trust, 984 N.E.2d 231, 235 (Ind. App. 2013); Heritage Lake Property Owners Assn., Inc. v. York, 859 N.E.2d 763, 765-66 (Ind. App. 2007); National Board of Examiners for Osteopathic Physicians & Surgeons, Inc. v. American Osteopathic Assn., 645 N.E.2d 608, 617 (Ind. App. 1994). This reflects the principle that ‘‘[t]he relation between a corporation and its stockholders is one of contract in which the articles of incorporation, [bylaws], provisions of the stock certificate, and pertinent statutes are embodied.''Scott v. Anderson Newspapers, Inc., 477 N.E.2d 553, 558 (Ind. App. 1985).

         With these principles in mind, we turn our attention to the present dispute. The plaintiffs argue that (1) the 1997 articles represent the entirety of the relevant agreement, and (2) those articles unambiguously provide that the plaintiffs were members of Anthem Insurance who were entitled to a share of the demutualization proceeds. Because the relevant contractual language is unambiguous, the plaintiffs further contend, the trial court improperly considered extrinsic evidence of the parties' intent. The insurance company defendants respond that the relevant agreement encompasses not only the 1997 articles but also the other merger documents. The insurance company defendants further maintain that the 1997 articles, both standing alone and when read in conjunction with the other merger documents, are ambiguous with respect to the plaintiffs' membership status and entitlement to demutualization proceeds. The insurance company defendants therefore contend that the trial court properly looked to extrinsic evidence to resolve this ambiguity.

         We agree with the insurance company defendants that the 1997 articles and the other merger documents are part and parcel of the same transaction and that, when read together, they are ambiguous as to the plaintiffs' eligibility for membership in Anthem Insurance and their entitlement to a share of the demutualization proceeds relating to the 1999 group policy.[10] Accordingly, we conclude that the trial court properly consulted extrinsic evidence of their meaning.

         A

         Whether the Merger Documents Were Part and Parcel of a Single Transaction

         We first consider whether the trial court correctly concluded that the 1997 articles were ‘‘part and parcel of the merger transaction'' and, therefore, that it was appropriate to construe those articles in tandem with the other merger documents. As we previously noted, Indiana courts consider a number of factors when applying the contemporaneous document doctrine. These include (1) whether the documents were executed at the same time and by the same parties, (2) whether they address the same matter or transaction, (3) whether they reference or incorporate one another, (4) whether the execution of each document or fulfillment of the promises contained therein is a precondition for that of the others, and (5) whether the documents purport on their face to be fully integrated agreements. In the present case, most if not all of these factors favor construing the 1997 articles and the other merger documents as components of a single agreement.

         First, there is little doubt that the 1997 articles and the other merger documents all were drafted in conjunction with the same transaction, namely, the 1997 merger between Anthem Insurance and Blue Cross. Indeed, the plaintiffs concede as much in their primary appellate brief: ‘‘In connection with the proposed merger, [Anthem Insurance's] attorney . . . drafted the agreement to merge . . . the plan and joint agreement of merger . . . the guaranty policies . . . and the [1997] . . . articles . . . .'' (Citations omitted; emphasis added.) Notably, the plaintiffs also acknowledge that the membership rules contained in Anthem Insurance's existing articles of incorporation needed to be revised in order to facilitate the merger with Blue Cross.

         Second, the 1997 articles and the other merger documents contain multiple references to each other. Section 7.6 (b) of the 1997 articles provides in relevant part that, following a merger, former members of a qualified mutual insurer shall ‘‘become members of [Anthem Insurance] pursuant to, and shall be entitled to receive guaranty insurance policies/membership certificates . . . . Each such guaranty insurance policy/membership certificate shall continue in effect and confer membership and other rights . . . .'' Section 8.5 then lays out the ‘‘[r]ights of [m]embers with [g]uaranty [p]oli-cies'' in the event that Anthem Insurance were ever to demutualize. That section provides in relevant part: ‘‘Any member of [Anthem Insurance] who has an individual guaranty insurance policy of [Anthem Insurance] or a certificate of membership issued under a group guaranty insurance policy . . . shall be entitled, upon any . . . demutualization . . . of [Anthem Insurance] . . . to distributions in the form of cash, securities or other assets, and other membership and other rights and privileges . . . .'' It is clear, then, that the 1997 articles envision that guaranty policies, such as those that were attached to the agreement to merge and subsequently provided to Blue Cross members, are the mechanism by which Blue Cross group policyholders were converted into members of the merged entity and invested with proprietary rights in the event of a ...


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