Health Net 2002 Annual Report Download - page 81

HEALTH NET, INC. | 79
On April 26, 2002, plaintiff John Ivan Sutter, M.D.,
P.A. filed an amended complaint in New Jersey state court
joining Health Net of the Northeast, Inc. (Health Net of
the Northeast), a subsidiary of ours, in an action originally
brought against Horizon Blue Cross Blue Shield of New
Jersey, Inc., CIGNA Healthcare of New Jersey, Inc. and
CIGNA Corp (collectively known as CIGNA), United
Healthcare of New Jersey, Inc. and United Healthcare
Insurance Company and Oxford Health Plans, Inc. The
complaint seeks certification of a statewide class of health-
care providers who render or have rendered services to
patients who are members of health care plans sponsored
by the defendants.
Plaintiff alleges that the defendants engage in unfair
and deceptive acts and practices which are designed to
delay, deny, impede and reduce compensation to physi-
cians. The complaint seeks unspecified damages and sets
forth causes of action for breach of contract, breach of the
implied duty of good faith and fair dealing, violations of
the New Jersey Prompt Payment Act and the Healthcare
Information Networks and Technologies Act (the HINT
Act), reformation, violations of the New Jersey Consumer
Fraud Act, unjust enrichment and conversion. On May 22,
2002, the New Jersey state court severed the action filed
by Dr. Sutter into five separate cases, including an action
against Health Net of the Northeast only. On May 24,
2002, Health Net of the Northeast removed the case
against it to federal court. That same day, the CIGNA enti-
ties removed plaintiff Sutter’s action against them to
federal court and the United Healthcare entities removed
plaintiff Sutter’s action against them to federal court.
Plaintiff moved to remand all of these cases to state court
and the defendants moved to stay the cases pending ruling
by the JPML as to whether these cases should be trans-
ferred to MDL 1334 for coordinated or consolidated
pretrial proceedings. On July 9, 2002, the federal district
court denied plaintiff’s motion to remand without preju-
dice, consolidated the cases against Health Net of the
Northeast, the CIGNA entities, and the United Healthcare
entities into one case for pretrial proceedings, and stayed
the case pending the JPML’s ruling on transfer to MDL
1334. On July 18, 2002, the JPML transferred this action
to MDL 1334 for coordinated or consolidated pretrial
proceedings. On September 23, 2002, plaintiff filed in the
MDL proceeding a motion to remand to state court. On
November 5, 2002, defendants moved to suspend briefing
on remand. The district court denied this motion on
November 18, 2002, and remand briefing was completed
on December 30, 2002.
On May 8, 2002, the Medical Society of New Jersey
filed a complaint in New Jersey state court against us and
our subsidiaries, Health Net of the Northeast, Inc., First
Option Health Plan of New Jersey, Inc., and Health Net of
New Jersey, Inc. (the Health Net defendants). Plaintiff
brought this action on its own behalf and purportedly on
behalf of its physician members and alleges that the Health
Net defendants engage in practices which are designed to
delay, deny, impede and reduce compensation to physi-
cians. Plaintiff has requested declaratory and injunctive
relief and has set forth causes of action for violation of
public policy, violations of the New Jersey Consumer
Fraud Act, violations of the HINT Act and tortious inter-
ference with prospective economic relations. On June 14,
2002, the Health Net defendants removed this case to
federal court. On July 3, 2002, the Health Net defendants
filed a motion to stay this action pending ruling by the
JPML on whether to transfer this case to MDL 1334. On
July 15, 2002, plaintiff filed a motion to remand this case
to state court. On August 2, 2002, the JPML transferred
this case to MDL 1334 for coordinated or consolidated
pretrial proceedings.
We intend to defend ourselves vigorously in all of this
JPML litigation. While the final outcome of these proceed-
ings cannot be determined at this time, based on informa-
tion presently available, we believe that the final outcome
of such proceedings will not have a material adverse effect
upon our results of operations or financial condition.
However, our belief regarding the likely outcome of such
proceedings could change in the future and an unfavorable
outcome could have a material adverse effect upon our
results of operations or financial condition.
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. While the final outcome of these procedings
cannot be determined at this time, based on information
presently available, we believe that the final outcome of all
such proceedings will not have a material adverse effect
upon our results of operations or financial condition.
However, our belief regarding the likely outcome of such
proceedings could change in the future and an unfavorable
outcome could have a material adverse effect upon our
results of operations or financial condition.