Health Net 2003 Annual Report Download - page 34

coordinated or consolidated pretrial proceedings. On September 23, 2002, plaintiff filed in the MDL proceeding a motion
to remand to state court. On July 24, 2003, the Health Net defendants moved to compel to arbitration the claims of
plaintiff Sutter. In August 2003, the MDL 1334 Court denied plaintiff Sutter’s motion to remand.
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 physicians. 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
Healthcare Information Networks and Technologies Act (the HINT Act) and tortious interference 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 in the New Jersey District Court 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. In
August 2003, the MDL 1334 Court denied without prejudice CSMS’s motion to remand.
The Knecht case was originally brought in the United States District Court for the District of Oregon in May 2003 by
five individual chiropractors, a chiropractic clinic, and a professional association of about 130 chiropractors in Arizona
against us and several other managed care organizations. The plaintiffs have brought this action on their own behalf and
putatively on behalf of a nationwide class of non-medical and non-osteopathic chiropractors. The Knecht plaintiffs allege
that each defendant has engaged in a “common scheme” to deny, delay, and diminish the payments due to chiropractors.
Plaintiffs contend that the defendants’ alleged practices constitute RICO and state prompt pay violations and give rise to
common law claims, including breach of contract and constructive contract/unjust enrichment. Plaintiffs seek unspecified
treble damages, declaratory and injunctive relief, and attorneys’ fees.
The Solomon case was filed on October 17, 2003 in the United States District for the Southern District of Florida
(and has been transferred to MDL 1334) against us and several other managed care organizations by two individual
podiatrists, three podiatric associations and a chiropractic association. The plaintiffs have brought this action on their own
behalf and putatively on behalf of a nationwide class of similarly situated health care providers. The plaintiffs allege that
each defendant has been engaged in a “common scheme” to deny, delay, and diminish payments due to health care
providers. Plaintiffs contend that the defendants’ alleged practices constitute RICO, ERISA, and state prompt pay
violations, and give rise to common law claims, including breach of contract and constructive contract/unjust enrichment.
Plaintiffs seek unspecified treble damages, declaratory and injunctive relief and attorneys’ fees.
On January 20, 2004, a suit, Ashton v. Health Net, Inc., et. al., was filed in the Southern District of Florida against us
and several other managed care organizations by a podiatrist, a physical therapist and two chiropractors. The plaintiffs
have brought this action on their own behalf and on behalf of a nationwide class of similarly situated healthcare
professionals. The plaintiffs allege that the defendants have been engaged in a “common scheme” to deny, delay and
diminish payments due to healthcare providers. Plaintiffs contend that the defendants’ alleged practices constitute RICO,
ERISA and state prompt pay violations, and give rise to common law claims, including breach of contract and
constructive contract/unjust enrichment. Plaintiffs seek unspecified treble damages, declaratory and injunctive relief and
attorney’s fees. Since, as noted above, this case was recently filed in the Southern District of Florida, no motion to transfer
the case to Judge Federico Moreno, the judge presiding over MDL 1334 has been filed.
We intend to defend ourselves vigorously in this litigation. While the final outcome of these proceedings cannot be
determined at this time, based on information 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 liquidity, 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 proceedings cannot be
determined at this time, based on information 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
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