WellChoice Notes Lower Court Proceeding Stayed

WellChoice, Inc., the parent company of Empire Blue Cross Blue Shield, announced that the lower court proceedings in the case, Consumers Union of the U.S. et. al. vs. The State of New York and Empire HealthChoice, Inc., (d/b/a Empire Blue Cross Blue Shield), have been stayed.

The stay will remain in effect pending resolution of an appeal of the Court’s decision issued yesterday to deny Defendants’ Motion to Dismiss. Empire was to file an appeal this morning with the Appellate Division, which is required to hear the case on an expedited basis. The ruling reportedly has no impact on the day to day operations of the company.

“Judge Gammerman’s decision does not affect our ability to conduct our business,” said Michael Stocker, president and CEO of WellChoice. “We are confident that we will prevail on appeal since the statute did not grant Empire a monopoly.”

Consumers Union of the U.S. et. al., filed a lawsuit against The State of New York and Empire HealthChoice, Inc., (d/b/a Empire Blue Cross and Blue Shield) on Aug. 21, 2002.

Today’s decision reportedly follows the Court’s previous decision to dismiss all causes of action alleged in the initial lawsuit. On April 1, 2003, the plaintiffs served an amended complaint, asserting the State constitutional claim that the Conversion Legislation violates the State constitution on the ground that it applies exclusively to Empire as a single entity as suggested in the court’s initial decision to dismiss. However, WellChoice reportedly believes the constitutional provision cited by the Plaintiffs only prohibits statutes that grant monopolies. Reportedly, it is clear that Empire is not a monopoly – Empire operates in an extremely competitive market.

In November 2002 a temporary restraining order was issued in connection with the suit. Under the TRO, the court directed that the proceeds of the sale of WellChoice, Inc. common stock by The New York State Public Asset Fund and The New York State Charitable Asset Foundation in the company’s initial public offering be held in escrow by The New York State Comptroller.

The Fund and The Foundation were established pursuant to legislation to receive 100 percent of the fair market value of Empire as part of the company’s conversion from a not-for-profit health service corporation to a for-profit accident and health insurer under New York State Insurance law. The Judge ruled that the TRO would remain in effect.

In addition, the plaintiffs reportedly previously appealed the court’s initial decision to dismiss.