Gold v. Rowland

• Decision Date: 11 May 2010
• Docket Number: No. 17854.,17854.
• Citation: 994 A.2d 106,296 Conn. 186
• Court: Connecticut Supreme Court
• Parties: Ronald GOLD, Individually and on Behalf of All Others Similarly Situatedv.John G. ROWLAND et al.

296 Conn. 186

994 A.2d 106

Ronald GOLD, Individually and on Behalf of All Others Similarly Situatedv.John G. ROWLAND et al.

No. 17854.

Supreme Court of Connecticut.

Argued Nov. 20, 2008.

Decided May 11, 2010.

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Linda L. Morkan, with whom were Marion B. Manzo and, on the brief, Frank F. Coulom, Jr., Richard F. Vitarelli and Andrea Donovan Napp, Hartford, for the appellants-cross appellees (named defendant and defendant state of Connecticut).

Elizabeth J. Robbin Greenspan, with whom was Matthew T. Wax-Krell, Hartford, for the appellee-cross appellant (plaintiff).

Charles L. Howard, with whom was Sheila A. Huddleston, Hartford, for the appellee-cross appellants (defendants Anthem, Inc., et al.).

NORCOTT, PALMER, VERTEFEUILLE, SCHALLER, SULLIVAN, McLACHLAN and ALVORD, Js.^*

SULLIVAN, J.

The plaintiff, Ronald Gold, a state employee, brought this action on his own behalf and on behalf of all others similarly situated, against the defendants, John G. Rowland, the former governor of the state of Connecticut, and the state of Connecticut (collectively referred to as the state), and also against Anthem, Inc., Anthem Health Care Plans, Inc., doing business as Anthem Blue Cross and Blue Shield of Connecticut, Anthem East, Inc., and Anthem Insurance Companies, Inc. (collectively referred to as the insurance company defendants), alleging that the state had received approximately 1.6 million shares of stock in Anthem, Inc., that should have been distributed to the plaintiff and other state employees. The state filed a motion to dismiss the complaint on the ground that it was barred by the doctrine of sovereign immunity. The trial court granted the state's motion to dismiss with respect to eleven of the complaint's seventeen counts against the state, but denied the motion with respect to the counts alleging that the state had taken the plaintiff's property in violation of article first, § 11, of the constitution of Connecticut ¹ and had violated his due process rights under article first, § 8, of the constitution of Connecticut. ² The trial court also denied the motion to dismiss the plaintiff's interpleader claims under General Statutes § 52-484.³ The state then appealed,⁴ claiming that the trial court improperly had denied its motion to dismiss the counts alleging constitutional violations. The insurance company defendants filed a cross appeal claiming that the trial court improperly had concluded that the plaintiff did not have a colorable claim of an unconstitutional taking under a theory of individual entitlement and that the trial court improperly had dismissed the plaintiff's constructive trust claims. The plaintiff also filed a cross appeal claiming that the trial court improperly had granted the state's motion to dismiss with respect to his constructive trust and resulting trust claims.⁵ With respect to the state's appeal, we conclude that the trial court improperly denied the state's motion to dismiss the plaintiff's claims under the state constitution. With respect to the insurance company defendants' cross appeal, we conclude that they lack standing to raise their claims. Finally, with respect to the plaintiff's cross appeal, we conclude that the trial court properly dismissed the plaintiff's claims of a constructive trust and a resulting trust. ⁶ Accordingly, we reverse in part and affirm in part the judgment of the trial court.

The record reveals the following undisputed facts and procedural history. On July 31, 1997, Anthem Insurance Companies, Inc. (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. Under the plan and joint agreement of merger, Anthem Insurance was designated as the company that would survive the merger. In connection with the merger, Blue Cross formed a subsidiary, Anthem Health Care Plans, Inc., doing business as Anthem Blue Cross and Blue Shield of Connecticut (Anthem Health Care), to carry on the health insurance business of Blue Cross after the merger.

Under Anthem Insurance's premerger membership rules, each individual holder of a certificate of coverage under a fully insured group health insurance policy was an individual member of the company. The employer that had procured the coverage was not a member. Blue Cross' premerger bylaws provided in relevant part that, “[i]n the case of a group insurance policy, the group as a whole shall be considered one policyholder, and such policyholder's rights as a [v]oting [m]ember shall be exercised by the individual designated in, or pursuant to, such policy to act for the group for voting purposes. Individual members of the group who have been issued certificates shall not be considered [v]oting [m]embers....” On March 26, 1997, Blue Cross designated an entity identified as “00042-243, [s]tate of Connecticut, [o]ffice of [c]omptroller, 55 Elm Street, Hartford, CT 06106” as the voting member for a group health insurance policy, known as the care plus policy, issued by Blue Cross for 571 retired state employees.

On June 18, 2001, the board of directors of Anthem Insurance approved a plan of conversion from a mutual insurance company to a stock corporation (plan of conversion) under Indiana law.⁷ The Indiana insurance commissioner approved the plan of conversion with an effective date of November 2, 2001. Thereafter, Anthem, Inc., was organized as a stock corporation under Indiana law to be the parent corporation of Anthem Insurance. 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 Anthem, Inc., and “[e]ligible [s]tatutory [m]ember[s]” ⁸ 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 “[e]ligible [s]tatutory [m]ember” as “a [p]erson who (a) is a [s]tatutory [m]ember of Anthem Insurance on the [a]doption [d]ate [i.e., June 18, 2001] and continues to be a [s]tatutory [m]ember of Anthem Insurance on the [e]ffective [d]ate [i.e., 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 period from June 18, 2001, through November 2, 2001, the plaintiff and other state employees and retirees continuously held certificates of coverage under a group policy that the state had procured from Anthem Health Care in 1999 (1999 group policy).

In late 2001 and early 2002, Anthem Insurance distributed 1,645,773 shares of Anthem, Inc., stock to the state, on the basis of its determination that the state was an eligible statutory member under the 1999 group policy. On January 14, 2002, Nancy Wyman, the state comptroller, sent a letter to then governor John G. Rowland requesting the establishment of a “fiduciary agency fund” for the stock and any proceeds derived therefrom. Wyman explained that “the state has taken custody of an asset to which it does not have a clear and unfettered right of ownership” and asked that the stock and proceeds be maintained in the fund “pending the resolution of all ownership issues.” Governor Rowland approved the establishment of the fund. Thereafter, Attorney General Richard Blumenthal provided an opinion to the state treasurer in which he concluded that the state owned the Anthem, Inc., stock and that, “[u]nless and until a court or administrative tribunal directs otherwise, [the treasurer] ha[s] the authority to receive and manage the stock consistent with [her] statutory and fiduciary duties.” He further stated that, “[a]s a prudential matter, the proceeds from the liquidation of the stock may be maintained in [the fiduciary agency] fund until the legal issues are resolved.” Thereafter, the state sold the stock for $93,768,950.

In January, 2002, the plaintiff filed a two count inter-pleader action against the state and the insurance company defendants alleging that he and others similarly situated were entitled to receive the Anthem, Inc., stock pursuant to the plan of conversion. In April, 2002, the plaintiff filed a motion for order compelling the state and the insurance company defendants to deposit the proceeds from the sale of the stock into the court. The trial court declined to rule on the motion, but issued a scheduling order in which it ordered that all “funds received for the sale of stock received from the [insurance company defendants] ... shall remain sequestered until such time as this court shall determine the legality of so holding them, the necessity thereof to preserve the plaintiff's interest in satisfying any judgment that may be entered in his favor in this case, and any other matter the parties may raise as to the appropriateness of their continuing sequestration.”

In May, 2002, the parties entered into a stipulation in which they noted that the trial court had entered “an interim order ... solely to preserve the status quo pending its determination of the [m]otion [for order compelling the state and the insurance company defendants to deposit disputed property into court].” They agreed that “[a]ny transfer or use by the [s]tate of some or all of the proceeds [from the sale of the Anthem, Inc., stock] shall not result in the surrender, waiver, change, diminution or loss of any rights or claims of right or the enhancement of any defense of any party by virtue of such transfer or use as they may have existed or shall exist any time hereafter.” The trial court then vacated the interim order. Effective July 1, 2002, the legislature authorized the state treasurer to credit the proceeds from the sale of the stock held in the fiduciary agency fund to the...