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Dischinger Orthodontics, PC v. Regence Bluecross Blueshield of Oregon

Court of Appeals of Oregon

October 18, 2017

DISCHINGER ORTHODONTICS, PC, a domestic professional corporation; and Tanya L. March, individually and as a parent and natural guardian of BMS#1, a minor, and BMS#2, a minor, individually and on behalf of all others similarly situated, Plaintiffs-Appellants,
v.
REGENCE BLUECROSS BLUESHIELD OF OREGON, an Oregon non-profit public benefit corporation, Defendant-Respondent.

          Argued and submitted May 17, 2016.

         Multnomah County Circuit Court 14CV07130; Stephen K. Bushong, Judge.

          David S. Senoff, Pennsylvania, argued the cause for appellants. With him on the opening brief were Darian A. Stanford, Nicholas J. Slinde, Phil J. Nelson, and Slinde Nelson Stanford; William R. Caroselli, Lauren C. Fantini, and Caroselli, Beachler, McTiernan & Conboy, Pennsylvania; and Jay Edelson, Rafey S. Balabanian, Ari J. Scharg, J. Aaron Lawson, and Edelson PC, Illinois. With him on the reply brief were Darian A. Stanford, Nicholas J. Slinde, Phil J. Nelson, and Slinde Nelson Stanford; Anapol Weiss, Pennsylvania; and Jay Edelson, Rafey S. Balabanian, Ari J. Scharg, J. Aaron Lawson, and Edelson PC, Illinois.

          Joel A. Mullin argued the cause for respondent. With him on the brief were Rachel C. Lee and Stoel Rives LLP.

          Before Armstrong, Presiding Judge, and Egan, Judge, and Shorr, Judge.

         [288 Or.App. 298] Case Summary:

         Plaintiffs brought these putative class action breach of contract claims against defendant claiming that defendant breached insurance contracts with it policyholders by retaining excessive earnings and distributing them as compensation to executives, in violation of defendant's contracts, articles of incorporation, and state law. Plaintiffs also sought a declaration that defendant violated its articles of incorporation, contracts with policyholders, and state law, and an order requiring defendant to recover the improperly distributed earnings. On defendant's motion to dismiss under ORCP 21 A(6), the trial court ruled that plaintiffs lack standing to bring their claims under ORS 65.084, which provides that, except as otherwise provided, "the validity of corporate action may not be challenged on the ground that the corporation lacks or lacked power to act." Plaintiffs appeal, contending the trial court erred in its construction of ORS 65.084 and the Declaratory Judgment Act.

         Held:

         Plaintiffs lacked standing to bring their breach of contract claims under ORS 65.084, because their allegations that defendant has violated provisions of its articles of incorporation and state law challenged the validity of corporate action. As the narrower and more specific statute, ORS 65.084 takes precedence over the more general standing provisions of the Declaratory Judgment Act, and the trial court therefore did not err in also dismissing plaintiffs' claim for declaratory judgment.

         Affirmed.

         [288 Or.App. 299] EGAN, J.

         Plaintiffs brought these putative class action claims against defendant Regence BlueCross and BlueShield of Oregon, claiming that defendant breached insurance contracts with its policyholders by retaining excessive earnings and distributing them as compensation to executives, in violation of defendant's contracts, articles of incorporation, and state law. Plaintiffs also sought a declaration that defendant violated its articles of incorporation, contracts with policyholders, and state law, and an order requiring defendant to recover the improperly distributed earnings. On defendant's motion to dismiss under ORCP 21 A(6) ("the party asserting the claim is not the real party in interest"), the trial court concluded that plaintiffs' claims are barred. We agree with the trial court that plaintiffs lack standing to bring their claims, and we therefore affirm.

         We take our summary of the facts from the allegations of plaintiffs' complaint, which we assume to be true for purposes of reviewing the trial court's ruling. Simonsen v. Ford Motor Co., 196 Or.App. 460, 462, 102 P.3d 710 (2004), rev den, 338 Or. 681 (2005). Defendant is an independent licensee of the national BlueCross and BlueShield Association and provides health insurance coverage to approximately 500, 000 Oregonians. Defendant is incorporated as a nonprofit public benefit corporation that was formed pursuant to ORS 65.044 to 65.067. See ORS 65.001(35).

Defendant's articles of incorporation state:
"This corporation is a public benefit corporation. The purposes of this Corporation shall be:
"Without profit to itself to furnish, provide, contract for or pay for health care services, including but not limited to medicine, medical and surgical treatment, nursing, hospital service, ambulance service, dental service, and any other necessary services, whether or not contingent upon injury, sickness or accident."

         The complaint alleges that defendant's website states, "Being a nonprofit means we put people first. * * * We maintain our status as a not-for-profit organization to remain focused on providing value to our members."

         [288 Or.App. 300] The representative plaintiffs for the putative class are alleged to own health insurance policies issued by defendant. Plaintiffs' complaint alleges that, as a nonprofit public benefit corporation, defendant's activities are required to benefit the community as a whole and are not to be focused on the accumulation of profits. "In particular, " ...


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