Heritage Healthcare Serv. Inc. v. Marques, 2008–160–M.P.

Citation14 A.3d 932
Decision Date06 January 2011
Docket NumberNo. 2008–160–M.P.,2008–160–M.P.
PartiesHERITAGE HEALTHCARE SERVICES, INC.v.A. Michael MARQUES, Director of the Rhode Island Department of Business Regulation, et al.
CourtUnited States State Supreme Court of Rhode Island

OPINION TEXT STARTS HERE

Jason B. Adkins, pro hac vice, for Plaintiff.Elizabeth Kelleher Dwyer (Department of Business Regulation), Melissa E. Darigan (Beacon Mutual Insurance Company), Providence, for Defendant.Present: SUTTELL, C.J., GOLDBERG, FLAHERTY, ROBINSON, and INDEGLIA, JJ.

OPINION

Justice FLAHERTY, for the Court.

“If only simplicity were not the most difficult of all things.” 1 Before this Court is a case with a complex and circuitous procedural travel; however, the narrow issue that this Court must determine is whether the phrase “lowest possible price” (LPP) in a statutorily crafted insurance charter gives rise to an individual cause of action. For the reasons set forth in this opinion, we hold that it does not, and we affirm the judgment of the Superior Court.

Facts and Travel

The serpentine journey of this matter began in 2002, when the petitioner, Heritage Healthcare Services, Inc. (Heritage), brought a Superior Court civil action against Beacon Mutual Insurance Company, Inc. (Beacon).2 Essentially, plaintiffs in the 2002 civil action allege that Beacon diverted over $100,000,000 in surplus reserves to a small percentage of its policyholders through artificially low insurance rates, instead of distributing surplus funds equally among its policyholders as dividends.

As the result of a series of amendments to the complaint, the continuing 2002 action eventually contained contractual and tort claims against Beacon for its alleged failure to provide workers' compensation insurance at the “lowest possible price.” This claim rests on the language of P.L.2003, ch. 410 (repealing G.L.1956 § 27–7.2–2), that Heritage argues can be interpreted only as an express mandate to Beacon through its statutory charter. It was Heritage's position in that action, as it is now, that Beacon's failure to provide coverage at the LPP gives rise to a private cause of action. The relevant disputed statutory language is as follows:

SECTION 3. Creation of fund.(a) The purpose of the fund is to ensure that all employers in the state of Rhode Island have the opportunity to obtain workers' compensation insurance at the lowest possible price. It is also the policy and purpose of this act to establish and maintain that the fund shall be the workers' compensation insurance carrier of last resort. The fund is created as a nonprofit independent public corporation for the purpose of insuring employers against liability for personal injuries for which their employees may be entitled to benefits under [G.L.1956] chapter 33 of title 28 or under 33 U.S.C. Section 901 et seq., and other employer's liabilities incidental to those provisions.

“ * * *

(f) The general assembly declares that a stable market for workers' compensation insurance for all employers seeking coverage is necessary to the economic welfare of Rhode Island; that a stable and competitive insurance market will benefit all employers, all employees and their families, and all insurance companies doing business in Rhode Island; that without this insurance at a competitive rate, the orderly growth and economic development of the state would be severely impeded; and that the provision of competitive insurance coverage by the fund for employers in Rhode Island and the capitalization of the fund through capital assessments as provided in this act is for the benefit of the public and in furtherance of a public purpose. P.L.2003, ch. 410. (Emphases added.)

Beacon moved to dismiss count 3 of Heritage's fifth amended complaint (count 3).3 In so doing, Beacon argued that the court lacked subject-matter jurisdiction, and that such a claim should be brought before the Department of Business Regulation (DBR), the agency with clear statutory authority over Beacon's rate setting.

In a written decision dated August 29, 2005, the trial justice granted Beacon's motion to dismiss count 3 “because Heritage's claims belong before the DBR.” In his ruling, the trial justice reasoned that count 3 implicated a controversy when “it is quite clear that the legislature intended that disputes * * * be resolved in an administrative forum.” The court said that [b]ecause a state agency is not yet involved in the case before the Court, the proper analytic framework is the doctrine of primary jurisdiction.” Quoting from United States v. Western Pacific Railroad Co., 352 U.S. 59, 63–64, 77 S.Ct. 161, 1 L.Ed.2d 126 (1956), the trial justice explained, that [p]rimary jurisdiction applies” where:

“a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body; in such a case the judicial process is suspended pending referral of such issues to the administrative body for its views.”

Further, the trial justice said that under such circumstances, [j]udicial review is withheld until the administrative process has run its course in order to promote the proper relationship between the courts and administrative agencies charged with particular regulatory duties,” and therefore, [d]ismissal is appropriate where the plaintiff has failed to exhaust its administrative remedies.” With this explanation providing a jurisdictional backdrop, the Superior Court directed:

“Resolution of the meaning of the term in controversy lies in the first instance with the DBR because it is the agency charged with the enforcement of the provision. Once the DBR has applied its superior expertise to the question, its decision will be entitled to due deference by this Court.”

After the trial justice dismissed that count of the complaint, Heritage followed the court's directive that it seek relief from DBR. At that time, DBR already was reviewing two petitions for declaratory relief filed by Heritage that concerned Beacon.4 As a result, the question of the meaning of LPP was added to the pending petitions.

On July 25, 2006, the DBR released its decision on all three issues.5 In its response to the issue presently before us, the DBR held:

“The question, therefore, is whether the inclusion of the words ‘lowest possible price’ alters this system to allow a private cause of action on behalf of an individual employer who claims it has been charged more than the ‘lowest possible price.’ The Department does not believe that this was the legislature's intent. Rather, inclusion of this language was a grant of jurisdiction to the Department * * *.”After describing (1) its rate-setting and review process, (2) the economic crisis that obliged the General Assembly to statutorily fashion Beacon, (3) the administrative remedy expressly provided by the legislature within the legislation, and (4) the severe marketplace instability that would arise if the DBR were to adopt Heritage's interpretation of LPP, the DBR concluded, [p]etitioner's request for a statement that the phrase ‘lowest possible price’ allows for a private cause of action is Denied.” 6 The DBR decision also ruled against Heritage with respect to the two issues arising from the original consumer complaint that Heritage filed.

Under G.L.1956 § 42–35–15 of the Administrative Procedures Act (APA), Heritage appealed all three rulings contained in the DBR decision to the Superior Court, and on August 9, 2007, the Superior Court issued a decision, which concluded:

“After due consideration of the arguments advanced by counsel in their memoranda, the Court will (1) affirm the DBR's decision which denied the request for a statement that the phrase ‘lowest possible price’ allows for a private cause of action; (2) affirm DBR's decision with respect to the formation of the Castle Hill Insurance Company; and (3) remand this case for further proceedings as to whether Beacon violated G.L.1956 § 27–9–51 relating to excess profits.”

In affirming the agency's decision about the LPP language, the Superior Court noted that “Heritage's brief does not clearly state the relief that it requested from the DBR, and that it now seeks from this Court. However, DBR viewed the issue before it as a request by Heritage ‘for a statement that the phrase ‘lowest possible price’ allows for a private cause of action' against Beacon.” In affirming the DBR decision, the court also said, [t]he Court disagrees slightly with the DBR's reasoning, but ultimately agrees with its decision to deny Heritage's request.”

Heritage immediately advanced a motion to reconsider the adverse rulings concerning LPP and the Castle Hill Insurance Company, and on May 22, 2008, the Superior Court issued an order and judgment that affirmed the 2007 decision. Of particular interest to us, the order on May 22, 2008, said, [t]he Court affirms the Decision of the Department of Business Regulations (DBR) which deemed that RI Public Law 2003, Chapter 410, Section 3 termed ‘lowest possible price’ does not create a private cause of action.”

Heritage next sought review of the issue of lowest possible price by filing a petition for certiorari, which we granted. Before this Court, Heritage claims error in:

“1. The DBR ruling that the ‘lowest possible price’ constitutes a grant of primary jurisdiction over both prices and rates for workers' compensation insurance. * * *

“2. The Superior Court ruling that the ‘lowest possible price’ statutory term is not an enforceable term of Beacon's corporate charter. * * *

“3. The Superior Court ruling that DBR has primary jurisdiction over the prices for workers' compensation insurance by virtue of having primary jurisdiction over the rates for workers' compensation insurance.”

Standard of Review

Our review under the APA, § 42–35–16, is de novo. See Johnston Ambulatory Surgical Associates, Ltd. v. Nolan, 755 A.2d 799, 805 (R.I.2000).7 “Although this...

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