Hawes v. Colorado Div. of Ins.

• Decision Date: 03 March 2003
• Docket Number: No. 01SC743.,01SC743.
• Citation: 65 P.3d 1008
• Parties: Taylor HAWES and Colorado Health Care Conversions Project, Petitioners, and Kelly, Haglund, Garnsey, & Kahn LLC; and Colorado Center On Law & Policy, Attorney-Petitioners, v. COLORADO DIVISION OF INSURANCE, William J. Kirven III, in his capacity as Commissioner of Insurance; Rocky Mountain Hospital and Medical Service, Inc., d/b/a Anthem Blue Cross Blue Shield of Colorado, a Colorado insurance corporation, a continuation of Rocky Mountain Hospital and Medical Service, d/b/a Blue Cross Blue Shield of Colorado, a Colorado nonprofit hospital, medical-surgical health service corporation; Anthem Insurance Companies, Inc., an Indiana mutual insurance company; Anthem West, Inc., an Indiana stock insurance company; and Caring for Colorado Foundation, Respondents.
• Court: Colorado Supreme Court

65 P.3d 1008

Taylor HAWES and Colorado Health Care Conversions Project, Petitioners, and Kelly, Haglund, Garnsey, & Kahn LLC; and Colorado Center On Law & Policy, Attorney-Petitioners, v. COLORADO DIVISION OF INSURANCE, William J. Kirven III, in his capacity as Commissioner of Insurance; Rocky Mountain Hospital and Medical Service, Inc., d/b/a Anthem Blue Cross Blue Shield of Colorado, a Colorado insurance corporation, a continuation of Rocky Mountain Hospital and Medical Service, d/b/a Blue Cross Blue Shield of Colorado, a Colorado nonprofit hospital, medical-surgical health service corporation; Anthem Insurance Companies, Inc., an Indiana mutual insurance company; Anthem West, Inc., an Indiana stock insurance company; and Caring for Colorado Foundation, Respondents.

No. 01SC743.

Supreme Court of Colorado, En Banc.

March 3, 2003.

Rehearing Denied April 7, 2003.

Jean E. Dubofsky, P.C., Jean E. Dubofsky, Boulder, Colorado, Attorney for Attorney-Petitioners Kelly, Haglund, Garnsey, & Kahn, LLC.

Kelly, Haglund, Garnsey, & Kahn LLC, Edwin S. Kahn, Christine L. Murphy, Denver, Colorado, Attorneys for Petitioner Taylor Hawes.

Colorado Center on Law & Policy, Elisabeth D. Arenales, Denver, Colorado, Attorneys for Petitioner Colorado Health Care Conversions Project and for Itself as Attorney-Petitioner.

Ken Salazar, Attorney General, James F. Carr, Senior Assistant Attorney General, Business and Licensing Section, Denver, Colorado, Attorneys for Respondent Colorado Division of Insurance and William J. Kirven, III, Commissioner of Insurance.

Cantilo & Bennnett, LLP, Patrick Cantilo, Austin, Texas, Also Attorney for Respondent Colorado Division of Insurance and William J. Kirven III, Commissioner of Insurance.

Baker & Hostetler LLP, Mark D. Flink, Alfred C. Chidister, Denver, Colorado, Attorneys for Respondent Caring for Colorado Foundation.

Sherman & Howard LLC, Frederick Y. Yu, Writer Mott, Denver, Colorado, Attorneys for Respondents Rocky Mountain Hospital & Medical Service, Inc., d/b/a Anthem Blue Cross Blue Shield of Colorado, a continuation of Rocky Mountain Hospital and Medical Service, d/b/a Blue Cross Blue Shield of Colorado, Anthem Insurance Companies, Inc., and Anthem West, Inc.

Isaacson, Rosenbaum, Woods & Levy PC, Edward T. Ramey, Denver, Colorado, Attorneys for Amicus Curiae Colorado Lawyers Committee.

Justice MARTINEZ delivered the Opinion of the Court.

Today we decide whether the Commissioner of Insurance has incidental and implied authority to award attorneys' fees from a common fund when presiding over a quasi-adjudicatory, equitable conversion proceeding if the attorneys' representation of the public interest was necessary to the Commissioner's performance of his express statutory duties, and if no legislation prohibits such an award. Resolution of this issue requires that we analyze whether the Division of Insurance and the Commissioner have implied powers within their enabling acts and within the conversion statute to award attorneys' fees.

We proceed in our analysis as follows. First, we show that the common fund doctrine is a common law equitable remedy available in courts of general jurisdiction and recognized by Colorado courts. Second, we highlight the jurisdiction of the Division of Insurance and its Commissioner, including express powers from which the implied and incidental authority to do equity may emanate. Third, we explain that the General Assembly did not abrogate the common law right to common fund fees in either the enabling statutes or by reposing in the Commissioner exclusive jurisdiction to preside over the conversion proceeding. Finally, we conclude with our holding: in its broad statutory grant of power to the Division of Insurance and its Commissioner, the General Assembly has delegated incidental and implied powers to the Commissioner to award attorneys' fees under the common fund doctrine where it is necessary for the Commissioner to discharge his responsibilities in an equitable conversion proceeding and if nothing prohibits such an award. However, the Division is without jurisdiction to reach an award of attorneys' fees for lobbying efforts conducted prior to the establishment of the Commissioner's authority to preside over a conversion proceeding. Our decision today is not a broad declaration that a state agency has available to it all powers of a court to do equity; nor does it expand the jurisdiction of the Commissioner or the Division into the equitable arena. Thus, our holding is a narrow one, limited to well-established implicit powers of an administrative agency to do all that is necessary to effectuate its express mandate.

I. Facts & Procedure

In this sui generis case, we assume a common fund arose from petitioners' role in the conversion of Rocky Mountain Hospital & Medical Service, d/b/a Blue Cross Blue Shield of Colorado, from a nonprofit to a for-profit corporation pursuant to section 10-16-324, 3 C.R.S. (2002) (conversion statute). The conversion proceeding is an equitable one, and is the legislative equivalent of the cy pres doctrine: the assets of the nonprofit insurance provider are transferred to accomplish a charitable intent as near as possible to the original intent.

Petitioner-attorneys and petitioners (together "petitioners") consisted of two separate groups who intervened in the conversion proceeding. One set of intervenors represented two Blue Cross subscribers, first Jess McGee and later Taylor Hawes; another set represented Colorado Health Care Conversions Project, a community-based coalition of thirty organizations.

Upon conversion, $155 million, the fair market value of Blue Cross was transferred to the Caring for Colorado Foundation, a private charitable corporation created specifically for the conversion. According to petitioners, they enhanced the fair market value the Foundation received by $55 million, and that portion constitutes the common fund from which they seek fees and costs.

We assume, without deciding, for purposes of this appeal, that petitioners' zealous advocacy enhanced both the pecuniary and nonpecuniary aspects of the conversion. Had the conversion taken place in a court, petitioners would have a classic common law claim for attorneys' fees under the common fund doctrine. Additionally, courts, in their inherent equity jurisdiction, may award common fund attorneys' fees for advocacy in administrative proceedings. Moreover, the parties do not dispute that the conversion statute, granting the Commissioner exclusive jurisdiction over the conversion, and precluding litigation in a court of general jurisdiction, did not abrogate the common law right of petitioners to fees under the common fund doctrine. Nor do they dispute the absence of legislation prohibiting any award of attorneys' fees. Therefore, what remains for us to determine is whether the Commissioner of Insurance has the authority to grant attorneys' fees under the equitable common fund doctrine.

A. The Blue Cross Conversion

In January 1997, Blue Cross filed with the Division of Insurance its Plan of Conversion to a Stock Insurance Company required by the conversion statute. During the conversion, the Commissioner determined the structure of the qualifying entity and the fair market value of the converting corporation. Then, the deal between Blue Cross and Anthem West was consummated upon Anthem's acquisition of the shares of Blue Cross, pursuant to the exchange statute, section 10-3-601, 3 C.R.S. (2002), which is not at issue here.

Petitioners claim that their advocacy enhanced the value of the charitable trust that passed to the Foundation. In their list of accomplishments, which we recite only in part, they state that during the drafting of the conversion statute, section 10-16-324, their lobbying efforts influenced the legislature's formulation of consideration paid from the converting corporation to the charitable qualifying entity receiving the funds of conversion. Moreover, counsel allege they were instrumental in the establishment of the governance and structure of the qualifying entity: whether it was a private or public one, and the determination of the selection of advisory board members. Finally, counsel state that their efforts ensured that the converting corporation, rather than the qualifying entity, paid for the conversion, and that the consideration paid to the entity was in cash, not stock. The extent to which petitioners enhanced the consideration, however, is in dispute, because it was not addressed after the Commissioner's decision that he lacked authority to award attorneys' fees. For their efforts, petitioners requested $2.75 million in attorneys' fees, $16,363.07 for out-of-pocket expenses, and $62,043.50 for expert witness fees.

Petitioners were not alone in representing the public interest in the conversion proceedings. A Testimonial Staff, created pursuant to the conversion statute, also advanced the public interest, though its advice to the Commissioner was at times contrary to that of petitioners. The Testimonial Staff's fees were paid by the converting corporation, as required by the conversion statute. § 10-16-324(5).

B. Commissioner's Decision and Subsequent Appeal

Upon conclusion of the conversion and exchange, the petitioners requested attorneys' fees. The Commissioner stated that his position has neither statutory grant, equitable powers existing apart from any legislative grant, nor legislative power similar to that of the Public Utilities Commission (PUC) to award fees.

Petitioners appealed the Commissioner's decision to the court of appeals, which affirmed. The court of appeals agreed that the Commissioner has neither express nor implied statutory authority to award fees. Specifically, the court of appeals explained that section 10-1-101, 3 C.R.S. (2002) does not empower the Commissioner to do equity. Although that provision states that all persons having to do with insurance services must practice...