Argument Recap:  Gold v. Rowland, SC 19585

The Supreme Court heard oral argument for a second time in the 15-year old lawsuit by a class of Connecticut state employees claiming that they were members entitled to shares of stock when their insurer, Anthem, demutualized in 2001.  At the time Anthem converted from a mutual to a stock corporation, Anthem determined that the State of Connecticut, as the group under the policies, was the member under Anthem’s Articles of Incorporation.  Therefore, the State received 1,645,773 shares of stock that it later sold for $93 million.  The employees claim that the Articles of Incorporation also deem them, as individual certificate holders under the group policy, to be members and that they should have received stock or cash.  Both Judge Sheldon and Judge Bright ruled on summary judgment that the Articles of Incorporation are ambiguous.  Judge Bright held a bench trial and issued a 90-page decision in which he ruled for Anthem that only the State was a member at the time of the demutualization.

On appeal, the employees are arguing that under a plenary standard of review, the language of the Articles of Incorporation are clear and unambiguous that they are members, and that the trial court improperly considered extrinsic evidence to construe these Articles.  The employees also argue that if the Articles were ambiguous, the court should have applied the doctrine of contra proferentem to construe them against the drafter, Anthem, and in favor of the employees.  Anthem, seeking a clearly erroneous standard of review, argues that the trial court, having found the Articles to be ambiguous, properly considered other documents referenced by the Articles and extrinsic evidence to construe the ambiguity and need not have applied the doctrine of contra proferentem because the Articles were not a contract of adhesion.

The Supreme Court, which must apply Indiana law, may consider some important issues in contract interpretation:

  • Are the Articles of Incorporation a contract of adhesion?
  • If the contract terms are ambiguous and the contract is one of adhesion, should a court directly apply the doctrine of contra proferentem or should a court first consider extrinsic evidence to try to interpret the terms?
  • Are other sections of the contract or documents that are referenced in the contract extrinsic evidence?
  • What types of extrinsic evidence should be considered to interpret a contract?

The Court can be expected to start out with a de novo analysis of whether the Articles of Incorporation are ambiguous.  If the Court agrees with the employees that they are not ambiguous and that the employees’ interpretation is correct, its analysis may stop there.  If, on the other hand, the Court agrees with the trial court judges and Anthem that the language is ambiguous, it is likely to undertake a clearly erroneous review of the parties’ intent.

Applying Connecticut law, the Court has taken two different approaches on the question of which comes first – contra proferentem or extrinsic evidence.  The Court has held that after a bench trial like this one, it is appropriate to consider extrinsic evidence first and to apply contra proferentem only as a last resort.  See, e.g., Cruz v. Visual Perceptions, LLC, 311 Conn. 93, 107-08 (2014).  By contrast, when construing insurance policies on motions for summary judgment, the Court has gone directly to contra proferentem and construed the policies against the insurance companies as the drafters without considering extrinsic evidence.  See, e.g., R.T. Vanderbilt Co. v. Continental Cas. Co., 273 Conn. 448, 463-65 n.25 (2005); Israel v. State Farm Mutual Automobile Ins. Co., 259 Conn. 503, 512 (2002).  The Court has said that it applies the doctrine more rigorously to insurance policies than to other types of contracts.  Since Anthem’s Articles of Incorporation are not insurance policies and Indiana law applies, it will be interesting to see where the Court comes out on this question