Health Net 2001 Annual Report Download - page 32

America, et al., Connecticut State Medical Society v. Physicians Health Services of Connecticut, Inc., and
Lynch v. Physicians Health Services of Connecticut, Inc. On June 25, 2001, the 11th Circuit Court of
Appeals entered an order staying proceedings in the district court pending resolution of the appeals
relating to the district court’s ruling on motions to compel arbitration. On March 14, 2002, the 11th
Circuit affirmed the district court’s ruling on motions to compel arbitration.
The CMA action alleges violations of RICO, certain federal regulations, and the California
Business and Professions Code and seeks declaratory and injunctive relief, as well as costs and
attorneys’ fees. As set forth above, on March 26, 2001, the California Medical Association was named
as an additional plaintiff in the consolidated amended complaint filed in the Shane action.
The Klay suit is a purported class action allegedly brought on behalf of individual physicians in
California who provided health care services to members of the defendants’ health plans. The
complaint alleges violations of RICO, ERISA, certain federal regulations, the California Business and
Professions Code and certain state common law doctrines, and seeks declaratory and injunctive relief,
and damages. As set forth above, on March 26, 2001, Leonard Klay was named as an additional
plaintiff in the consolidated amended complaint filed in the Shane action.
The CSMS case was originally brought in Connecticut state court against Physicians Health
Services of Connecticut, Inc. (‘‘PHS-CT’’) alleging violations of the Connecticut Unfair Trade Practices
Act. The complaint alleges that PHS-CT engaged in conduct that was designed to delay, deny, impede
and reduce lawful reimbursement to physicians who rendered medically necessary health care services
to PHS-CT health plan members. The complaint, which is similar to others filed against us and other
managed care companies, seeks declaratory and injunctive relief. On March 13, 2001, the Company
removed this action to federal court. Before this case was transferred to MDL 1334, the plaintiffs
moved to remand the action to state court and the District Court of Connecticut consolidated this
action and Lynch v. Physicians Health Services of Connecticut, Inc., along with similar actions against
Aetna, CIGNA and Anthem, into one case entitled CSMS v. Aetna Health Plans of Southern New
England, et al. PHS-CT has not yet responded to the complaint.
The Lynch case was also originally filed in Connecticut state court. This case was purportedly
brought on behalf of physician members of the Connecticut State Medical Society who provide health
care services to PHS-CT health plan members pursuant to provider service contracts. The complaint
alleges that PHS-CT engaged in improper, unfair and deceptive practices by denying, impeding and/or
delaying lawful reimbursement to physicians. The complaint, similar to the complaint referred to above
filed against PHS-CT on the same day by the Connecticut State Medical Society, seeks declaratory and
injunctive relief and damages. On March 13, 2001, we removed this action to federal court. Before this
case was transferred to MDL 1334, the plaintiffs moved to remand the action to state court and the
District Court of Connecticut consolidated this action and CSMS v. Physicians Health Services of
Connecticut, Inc., along with similar actions against Aetna, CIGNA and Anthem, into one case entitled
CSMS v. Aetna Health Plans of Southern New England, et al. PHS-CT has not yet responded to the
complaint.
As noted above, on June 17, 2001, the district court entered an order which applies to the Shane,
CMA, Klay, CSMS and Lynch actions and stays discovery until after the court rules upon motions to
dismiss and motions to compel arbitration.
MISCELLANEOUS PROCEEDINGS
We and certain of our subsidiaries are also parties to various other legal proceedings, many of
which involve claims for coverage encountered in the ordinary course of our business. Based in part on
advice from our litigation counsel and upon information presently available, we are of the opinion that
the final outcome of all such proceedings should not have a material adverse effect upon our results of
operations or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the security holders of the Company, either through
solicitation of proxies or otherwise, during the fourth quarter of the year ended December 31, 2001.
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