An Important Update on MLMIC Demutualization
Momentum is building for MLMIC Policyholders in disputes over MLMIC Conversion Proceeds. The Appellate Division Third Department’s June 18, 2020 decisions in Schoch and Shoback are major victories for policyholders across New York State.
We previously reported that on April 24, 2020, the Appellate Division Fourth Department issued its decision in Maple-Gate Anesthesiologists, P.C. v. Nasrin, 182 A.D.3d 984 (4th Dep’t Apr. 24, 2020) (“Maple-Gate”), creating a split of authority with an earlier appellate decision of the First Department in Matter of Schaffer, Schonholz & Drossman, LLP v. Title (171 A.D.3d 465 [1st Dep’t 2019]) (“Schaffer”). We recently described the Maple-Gate decision, which held that the NY Insurance Law and MLMIC Plan of Conversion entitled the policyholders to the Cash Consideration, and that “as a matter of law . . . [the employer] had no legal or equitable right of ownership to the demutualization payments,” as a major victory for policyholders.
Appellate Division, Third Department Victory
Policyholders obtained another major victory when, on June 18, 2020, the Appellate Division for the Third Department issued its decisions in Schoch v. Lake Champlain OB-GYN, P.C., 2020 NY Slip Op 03444 (3d Dep’t June 18, 2020) and Shoback v. Broome Obstetrics & Gynecology, P.C., 2020 NY Slip Op 03447 (3d Dep’t June 18, 2020), in which the court provided a detailed analysis and discussion of the issues, and, like the Fourth Department, ruled in favor of the policyholders. These decisions are particularly noteworthy because (a) the court discussed and then rejected virtually all of the arguments made by employers in cases pending throughout the state, and (b) expressly rejected the Appellate Division First Department’s holding in Schaffer.
Together, the Appellate Division Third and Fourth Department decisions represent a tidal shift in momentum in MLMIC demutualization litigation. Schaffer can no longer be viewed as binding authority outside the Appellate Division First Department, and Schoch/Shoback and Maple-Gate will be binding authority within the Third and Fourth Departments, respectively. In addition, we are hopeful these recent decisions will be highly persuasive to the Appellate Division Second Department in appeals we have pending there, and in a pending appeal before the Appellate Division First Department, in which we are asking the court to reverse its prior decision in Schaffer.
Nolan Heller Kauffman LLP represents more than 100 healthcare professionals in over 50 cases throughout New York State relating to disputes over MLMIC cash consideration. If you are or were a MLMIC policyholder and have questions, or would like to learn more about this subject, please contact Justin A. Heller, Esq. at firstname.lastname@example.org or Alexandra B. Becker, Esq. at email@example.com, or call us at (518) 449-3300.
Nolan Heller Kauffman LLP is a preeminent, award-winning business law firm with offices in Albany and Syracuse, New York, and serving clients throughout New York State.