Appeal of Health Trust, Inc. ( 2018 )

THE STATE OF NEW HAMPSHIRE
SUPREME COURT
In Case No. 2016-0654, Appeal of HealthTrust, Inc., the
court on March 29, 2018, issued the following order:
Having considered the briefs and oral arguments of the parties, the court
concludes that a formal written opinion is unnecessary in this case. This is the
third time that this matter has come before us. The respondent, HealthTrust,
Inc. (HealthTrust), is a pooled risk management program operated by the Local
Government Center, Inc. Appeal of the Local Gov’t Ctr., 165 N.H. 790, 794
(2014). HealthTrust appeals orders issued by a presiding officer of the
petitioner, the New Hampshire Bureau of Securities Regulation (Bureau), which
were issued after remand. See Appeal of Town of Salem, 168 N.H. 572, 580-81
(2016). On appeal, HealthTrust argues that the presiding officer exceeded the
scope of remand when he required HealthTrust to pay an additional $2.1
million to 66 of its former and current members that had not previously
participated in this case. We agree and, therefore, reverse that portion of the
presiding officer’s order.
The following facts were found by the presiding officer, were recited in
our prior opinions, or appear in the record before us. See Appeal of Local Gov’t
Ctr., 165 N.H. at 794-803; Appeal of Town of Salem, 168 N.H. at 574-76.
Briefly, in 2011, the secretary of state began an administrative proceeding
against HealthTrust and related pooled risk management programs, including
Property-Liability Trust, Inc. (Property-Liability Trust), based upon allegations
that the pooled risk management programs had violated RSA chapter 5-B. See
Appeal of Town of Salem, 168 N.H. at 575. In an August 2012 order, the
Bureau’s presiding officer decided that the pooled risk management programs
had violated several provisions of RSA chapter 5-B, including RSA 5-B:5, I(c)
(2013), which requires a pooled risk management program to return to
“participating political subdivisions” the “earnings and surplus” that are “in
excess of any amounts required for administration, claims, reserves, and
purchase of excess insurance.” Id. (quotations omitted).
To remedy the violation of RSA 5-B:5, I(c), the presiding officer ordered
the Bureau and HealthTrust to submit an agreed-upon plan for the return of
$33.2 million to HealthTrust’s members who had participated in HealthTrust
“at any time after June 14, 2010.” See Appeal of Local Gov’t Ctr., 165 N.H. at
802. If the Bureau and HealthTrust failed to agree, the order required that the
$33.2 million be disbursed only to those members who participated in
HealthTrust as of August 16, 2012, the date of the presiding officer’s decision.
See Appeal of Town of Salem, 168 N.H. at 575. The presiding officer ordered
that the $33.2 million be returned to HealthTrust members by September 1,
2013. Appeal of Local Gov’t Ctr., 165 N.H. at 802.
The presiding officer also ordered Property-Liability Trust to transfer
$17.1 million to HealthTrust. See id. at 794, 802-03. Those funds, “to the
extent they constitute[d] amounts in excess of earnings and surplus” of
HealthTrust, were to be “returned to members consistent with RSA 5-B:5, I(c).”
See id. at 803; Appeal of Town of Salem, 168 N.H. at 580.
HealthTrust, Property-Liability Trust, and the other pooled risk
management programs appealed the presiding officer’s August 2012 order to
this court. See Appeal of Local Gov’t Ctr., 165 N.H. at 793-94. We affirmed in
part, vacated portions of the order not relevant here, and remanded for further
proceedings. See id. at 809, 810, 814.
The Bureau subsequently filed a motion for entry of a default order
against HealthTrust and the other pooled risk management programs. See
Appeal of Town of Salem, 168 N.H. at 575-76. The motion for entry of a default
order alleged that, unbeknownst to the Bureau, HealthTrust and Property-
Liability Trust had entered into a confidential settlement agreement, effective
upon the issuance of our opinion in Appeal of Local Government Center. The
motion asserted that the settlement agreement violated the presiding officer’s
August 2012 order and requested that the presiding officer so rule.
Thereafter, HealthTrust and Property-Liability Trust entered into a new
agreement that, in effect, extinguished their prior settlement agreement. In its
pleading notifying the presiding officer of the new agreement, HealthTrust
stated that “subject to the Presiding Officer’s and [the Bureau’s] approval,
HealthTrust will distribute the $17.1 million to its current members or another
identified combination of current and former HealthTrust members.”
In response, eight towns sought to intervene in the proceedings. See id.
at 576. For ease of reference, we refer to those towns as “the intervenor
towns.” The presiding officer granted them “limited intervenor status,” allowing
them “to address solely the issue of any payment of funds by HealthTrust . . .
to political subdivisions” from the $17.1 million transferred to HealthTrust by
Property-Liability Trust. See id.Subsequently, the Bureau, HealthTrust, and Property-Liability Trust
entered into a consent decree, approved by the presiding officer, that resolved
the issues raised in the Bureau’s motion for entry of a default order. See id. In
the consent decree, the parties acknowledged that Property-Liability Trust had
paid to HealthTrust approximately $15.4 million of the $17.1 million owed.
The decree set forth the terms by which Property-Liability Trust would pay the
remaining $1.7 million and provided that the Bureau would not “take any
regulatory action” against Property-Liability Trust based solely and exclusively
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on those payments. The consent decree provided that the parties “waive[d] all
appeals from the enforcement proceeding which is resolved by this Consent
Decree.”
The intervenor towns filed a motion proposing how to distribute the
$17.1 million to former members of HealthTrust. See id. The intervenor towns
recommended a method by which to calculate each former member’s proposed
proportional share of the $17.1 million in surplus funds. The portion of the
$17.1 million sought by the intervenor towns was $278,587. HealthTrust
objected to the intervenor towns’ motion; the Bureau took no position on it.
The presiding officer denied the intervenor towns’ motion, ruling that the
towns could not share in the surplus funds because, pursuant to the presiding
officer’s August 2012 order, the $17.1 million was to be “returned to members
consistent with RSA 5-B:5, I(c),” and because RSA 5-B:5, I(c) allows return of
funds only to “participating political subdivisions.” Id. at 580 (quotation
omitted). The presiding officer interpreted the phrase “participating political
subdivisions” to refer only to towns that were current members of HealthTrust
and not to towns that were past or former members. Id. The presiding officer
specifically noted that the intervenor towns did not represent any entities other
than themselves, and, thus, he declined to consider whether any other
potential intervenors had standing.
The intervenor towns appealed, but, according to HealthTrust, no party
moved to stay HealthTrust’s distribution of the $17.1 million. Id. at 576.
Thus, in September 2014, HealthTrust disbursed the $17.1 million to 352 of its
then-current members based upon each member’s proportional payments
during the 2014 fiscal year.
In the intervenor towns’ appeal, we held that the presiding officer had
erred when he ruled that the intervenor towns were not entitled to a share of
the $17.1 million. See id. at 580-81. We explained that RSA 5-B:5, I(c) is the
provision that HealthTrust violated; “it does not circumscribe the remedy.” Id.
at 580. Rather, RSA 5-B:4-a, I(b)(2) (2013) allows the presiding officer to
remedy a violation of RSA 5-B:5, I(c) by ordering rescission, restitution, or
disgorgement. Id. We further explained that “to the extent the presiding officer
concluded that he lacked the authority to penalize a violation of RSA 5-B:5, I(c)
by ordering payment to former members of a pooled risk management program
as either restitution or disgorgement, he committed an error of law.” Id. at
581. Therefore, we vacated the presiding officer’s decision on the intervenor
towns’ motion and remanded “for further proceedings.” Id. We stated that we
expressed no opinion “as to what penalty should be ordered in this case,” given
that we were merely clarifying the scope of the presiding officer’s authority
under RSA 5-B:4-a (Supp. 2017) to penalize violations of RSA 5-B:5, I(c). Id.3
On remand, the presiding officer determined that, in light of this court’s
statutory interpretation, he had erred when he had excluded former
HealthTrust members from the universe of potential recipients of the $17.1
million surplus funds. He decided that the remand proceeding had to “resolve
the issues of both the universe of potential recipients and the proportional
distribution of the $17.1 million surplus funds.” He further determined that
preclusion did not apply to claims of restitution by political subdivisions that
had not sought to intervene in the proceedings. According to the presiding
officer, our decision in Appeal of Town of Salem gave “breath to all political
subdivisions now determined to have a statutory right to receive a
proportionate share of the illegal subsidy made by [HealthTrust] to support . . .
Property[-]Liability Trust . . . .” Thus, the presiding officer concluded that our
decision in Appeal of Town of Salem required that “a true proportionate
restitution” be “made to all political subdivisions which had contributed funds
during the years 2003 through 2010” to HealthTrust. (Emphasis added.)
Accordingly, the presiding officer ordered HealthTrust to make payments
to an “expanded pool of recipients,” which included “all former members and,
as appropriate, current members,” in accordance with amounts to which the
parties and intervenor towns had previously stipulated. He also ordered that,
to the extent that funds in excess of $17.1 million were required to be paid,
those funds constituted an additional penalty for HealthTrust’s prior violation
of RSA 5-B:5, I(c). HealthTrust asserts that the presiding officer’s decision
requires it to pay an additional $2.1 million to 66 of its former and current
members that had not previously participated in this case.
HealthTrust unsuccessfully moved for reconsideration of the presiding
officer’s decision, and this appeal followed. At HealthTrust’s request, we have
stayed the presiding officer’s decision while this appeal is pending.
HealthTrust represents that, after it filed this appeal, it agreed to pay the
intervenor towns $278,587, the entire amount of their claim. Because the
intervenor towns have represented that they are no longer interested parties in
this appeal, they are deemed non-participants.
Our standard of review of the presiding officer’s decision is set forth in
RSA 541:13 (2007). See RSA 5-B:4-a, VIII (2013). Thus, we will not set aside
the presiding officer’s decision except for errors of law, unless we are satisfied,
by a clear preponderance of the evidence, that his order is unjust or
unreasonable. Appeal of Local Gov’t Ctr., 165 N.H. at 803; see RSA 541:13.
The presiding officer’s findings of fact are deemed prima facie lawful and
reasonable. Appeal of Local Gov’t Ctr., 165 N.H. at 803; see RSA 541:13.
HealthTrust and the Bureau dispute the scope of our remand to the
presiding officer. “The scope of remand is limited by the nature of the error or
issue identified.” Kalil v. Town of Dummer Zoning Bd. of Adjustment, 155 N.H.
307, 312 (2007). In Appeal of Town of Salem, the issue before us was narrow:
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whether the presiding officer had erred when he denied the intervenor towns’
motion regarding distribution of the $17.1 million. See Appeal of Town of
Salem, 168 N.H. at 580-81. We decided only that discrete issue. See id. We
explained that, when the presiding officer denied the motion, he did so because
he mistakenly determined that the statutory scheme precluded former
HealthTrust members from sharing in those funds. Id. Having clarified the
law, we then vacated the presiding officer’s denial of the intervenor towns’
motion and remanded for him to decide the motion anew. See id. at 581.
We intended that the presiding officer, on remand, would address only
the narrow issue of whether to grant or deny the intervenor towns’ motion
regarding distribution of the $17.1 million in surplus funds. See id. Although,
in their motion, the intervenor towns also sought a remedy on behalf of other
former HealthTrust members, they had no standing to do so. As the presiding
officer observed, the intervenor towns represented only themselves. To the
extent that the presiding officer decided issues beyond whether the intervenor
towns were entitled to a remedy, he exceeded the scope of remand. We,
therefore, reverse his decision to the extent that it required HealthTrust to
make payments to political subdivisions other than the intervenor towns and
the 352 then-current members to which HealthTrust paid the $17.1 million in
September 2014.
Reversed in part.
HICKS, LYNN, and HANTZ MARCONI, JJ., concurred.
Eileen Fox,
Clerk
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