Key Points

  • OCGA ยง 33-37-4(c)(4) provides an additional, independent basis for personal jurisdiction over anyone holding assets the receiver claims when the delinquency proceeding is instituted, and it alone conferred jurisdiction over FHP-ABC.
  • The relevant date was August 1, 2023, when Friday Health Plans of Georgia was placed into liquidation, not the June 2, 2023 filing of the consent order; FHP-ABC received the assets on July 6, 2023.
  • The Commissioner has standing under the Act, and whether a statute supplies a cause of action is a question of statutory interpretation, not subject matter jurisdiction.
  • The conversion and preferential and fraudulent transfer claims satisfied Georgia's notice-pleading standard.
  • The Delaware secured creditor was not a necessary party, and FHP-ABC failed to carry its burden for forum non conveniens dismissal; the trial court's judgment was reversed.

The Georgia Court of Appeals on Tuesday revived Insurance Commissioner John F. King's lawsuit to recover money allegedly drained from a failed Georgia health maintenance organization. The court ruled that the state's insurer-liquidation law, on its own, gives Georgia courts power over the Delaware company that held the assets when the liquidation proceeding began.

A three-judge panel reversed a trial court order that had dismissed the case against FHP-ABC on every ground the company raised. Judge Markle wrote the unanimous opinion, and Presiding Judge Barnes and Judge Hodges concurred.

Under the ruling, a Georgia court with subject matter jurisdiction can hear a receiver's action concerning a domestic insurer's assets against anyone who held those assets when the delinquency proceeding began. The panel set that starting point at the date the insurer was actually placed into liquidation, not the earlier date the parties filed a consent order. That choice decided the jurisdiction question, because the assets changed hands between the two dates.

The case arises from the collapse of Friday Health Plans of Georgia, an HMO that the commissioner agreed to liquidate under a consent order filed in Fulton County Superior Court on June 2, 2023. Under that order, the HMO would not be "placed into liquidation" until Aug. 1, 2023.

According to the complaint, as the opinion summarized it, the Georgia HMO was wholly owned by FHP Management Services, which in turn was wholly owned by Friday Health Plans. The management company supplied the HMO's employees and administrative services for a fee. The commissioner alleged that although its contract barred advance payment, the management company took $21 million in advance funds between 2022 and 2023 and kept collecting fees while failing to pay the HMO's vendors, leaving $35 million in debt.

Both parent companies then redomesticated from Colorado to Delaware. FHP-ABC, a newly formed Delaware limited liability company, became the assignee of all their assets on July 6, 2023, including the funds allegedly taken from the HMO. FHP-ABC then agreed to pay the HMO's assets over to a third-party secured lender in connection with an insolvency proceeding in the Delaware Court of Chancery, the opinion said.

The commissioner sued all three companies under Georgia's Insurers Rehabilitation and Liquidation Act, asserting conversion and fraudulent and preferential transfers. The commissioner alleged, in the opinion's summary, that "the redomestication was done purely to evade jurisdiction in Georgia." The commissioner won default judgments against the two parent companies. FHP-ABC appeared specially to contest jurisdiction and moved to dismiss, and after a hearing at which no evidence was presented, the trial court granted the motion in its entirety.

On personal jurisdiction, the panel relied on a provision of the act reaching anyone who held assets the receiver claims "at the time of the institution of the delinquency proceeding." Judge Markle wrote that the provision supplies a "separate and independent ground for personal jurisdiction." The court therefore did not need to decide whether Georgia's general long-arm statute also applied.

At oral argument, FHP-ABC contended that the proceeding began with the June consent order, before it received the assets. The panel rejected that reading as conflicting with the act's grant of hearing and subpoena powers to the liquidator. The commissioner "was authorized to conduct proceedings, which could not occur until August 1, 2023 when FHP-GA was placed into liquidation," Judge Markle wrote.

The trial court had also found that the commissioner lacked standing because the commissioner had not shown an injury caused by FHP-ABC and any relief would be speculative given secured creditors' competing claims. The panel held that whether a statute gives a plaintiff a cause of action is a question of statutory interpretation, not of the court's jurisdiction. It pointed to the act's provision vesting the commissioner "by operation of law with the title to all of the property, contracts, and rights of action" of the insurer. "As read in its most plain and natural way, the Act clearly grants the Commissioner standing to bring the present action," the court held.

The panel next found the conversion and transfer claims adequately pleaded under Georgia's notice-pleading rule, which requires only a short and plain statement of a claim. It said the trial court had relied on conversion cases decided at summary judgment or trial. The complaint alleged that FHP-ABC was the final recipient of a series of transfers satisfying the statutory requirement of an antecedent debt, the opinion said. "The trial court thus erred by applying too rigid a standard at this phase of litigation," Judge Markle wrote.

The trial court had also dismissed the case because the commissioner did not join the creditor that received the disputed funds in the Delaware action. The panel said the joinder rule calls for adding a necessary party, not dismissing the case, and went further to hold that the creditor was not a necessary party at all. Under the act, "the Commissioner, alone, has a right to the disputed funds by operation of law," the opinion said. The court added that the Delaware court had chosen to defer to local courts to "avoid stepping on the toes of other courts and the entry of inconsistent orders."

Finally, the panel reversed the dismissal under forum non conveniens, a doctrine allowing a court to send a case to a more appropriate forum in another state. It held that the trial court "improperly shifted the burden to the Commissioner" to identify physical evidence located in Georgia. "Simply put, the evidence of record is inadequate to enable the trial court to carefully consider the forum non conveniens factors," Judge Markle wrote, concluding that FHP-ABC had failed to carry its burden.

Under the court's rules, any motion for reconsideration must be received within 10 days of the Nov. 3 decision.