Larsen v. Chinwuba

ELDRIDGE, J. The Maryland Insurance Commissioner in the course of a statutorily authorized investigation into the financial affairs and solvency of a Maryland health maintenance organization (“HMO”), and shortly before instituting receivership proceedings against the HMO, sent letters to the HMO requesting information. The Commissioner allegedly disclosed the contents of these letters to the press, along with making statements to the press about the investigation. The single dispos-itive issue in this defamation and invasion of privacy action against the Commissioner, by the principal official associated with the HMO, is whether the Commissioner’s actions were within the scope of his public duties. If they were, the Commissioner was entitled to immunity under the Maryland Tort Claims Act. 1 We shall hold that the Commissioner’s ⁹⁵ actions, forming the basis for this tort suit, were within the scope of his public duties.

Accordingly, the Commissioner was entitled to immunity. I. The relevant facts of this case were set forth in the reported opinion of the Court of Special Appeals as follows (Chinwuba v. Larsen, 142 Md.App. 327, 339-345 , 790 A.2d 83, 89-93 (2002) (footnotes omitted)): “This is another appellate chapter arising from the misfortunes of PrimeHealth Corporation (‘PrimeHealth’), a defunct Maryland health maintenance organization (‘HMO’). Christian Chinwuba, M.D., appellant, was the primary owner of PrimeHealth, until the State placed the insolvent HMO into receivership. In this case, Chinwuba complains about certain statements and actions of the Maryland Insurance Administration (the ‘MIA’) and its Commissioner, Steven B. Larsen (the ‘Commissioner’), appellees, during the investigation leading up to that receivership. “In the Circuit Court for Prince George’s County, Chin-wuba filed a four count complaint against the MIA and Larsen, alleging defamation, false light invasion of privacy (‘false light’), abuse of process, and violation of due process under Articles 24 and 26 of the Maryland Declaration of Rights.

The MIA and Larsen successfully moved to transfer the case to the Circuit Court for Baltimore City, and then moved to dismiss the complaint, or, in the alternative, for summary judgment. “In reviewing the dismissal of a complaint, we credit the allegations of the complaint, and draw all reasonable inferences in favor of the plaintiff. * * * Consequently, this opinion features Chinwuba’s version of events.... ⁹⁶ “Dr. Chinwuba, a radiologist, had an ownership share in PrimeHealth, through ownership of PrimeHealth’s sole shareholder, and was the sole owner of Diagnostic Health Imaging Systems, Inc. (‘DHIS’). In November 1995, Pri-meHealth applied to the MIA for a certificate of authority to operate as an HMO in Maryland. In support of the application, Chinwuba submitted an affidavit describing a transfer of certain medical equipment by DHIS to PrimeHealth. The purpose of the transfer was to ensure that PrimeHealth had a minimum surplus of $1.5 million in assets, as required by the MIA’s solvency standards for health maintenance organizations.

In its initial audit, the MIA raised concerns that PrimeHealth did not meet this requirement. With the ‘acquisition’ of the medical equipment from DHIS, Prime-Health had sufficient assets to satisfy the standard. In December 1996, however, ‘DHIS became totally operationally defunct.’ “Based on the effect of this transfer on DHIS, the MIA became concerned that DHIS creditors might be able to challenge it as a fraudulent conveyance. On August 28, 1996, the MIA asked Chinwuba to provide a notarized statement disclosing ‘[a]ny and all liabilities or debts of DHIS, and any and all liens or encumbrances on the assets of DHIS immediately preceding the gift of assets to Prime-Health.’ Chinwuba was asked to attest that neither he nor DHIS was aware of any creditors ‘that could have the gift of DHIS’ accounts receivable and equipment set aside or annulled to satisfy their claim or levy* or ‘that would force DHIS to file for bankruptcy in the foreseeable future.’ “Chinwuba responded to the MIA’s request Pay three separate certifications in September 1996, the first two of which were notarized]. “The third certification ... [stated] that ‘DHIS does not have any other liabilities or debts or any liens or encumbrances on the “contributed” assets of DHIS[.]’ In November 1996, relying on Chinwuba’s statements in all three ⁹⁷ certifications, the MIA granted PrimeHealth a certificate of authority to operate as an HMO. “By early 1998, the MIA claimed that it had discovered millions of dollars in judgments against DHIS, that these judgments had been in existence when DHIS transferred the medical equipment to PrimeHealth, and that none of these judgments had been disclosed in any of Chinwuba’s certifications.

In a March 11, 1998 letter, Commissioner Larsen informed PrimeHealth that the MIA had ‘grave concerns covering a number of critical areas relating to PrimeHealth’s ongoing ability to maintain licensure,’ and outlined those concerns. The opening paragraph of the letter acknowledged that the MIA already had begun a ‘review’ of the gift of medical equipment that Chinwuba certified had been made by DHIS to PrimeHealth. “With respect to the DHIS liabilities, Larsen wrote that ‘[recently, during the course of our investigation, the [MIA] has uncovered a substantial number of judgments against DHIS which existed at the time of the conveyance of the equipment to PrimeHealth and which have not been extinguished in the court records of Prince George’s County.’ Larsen specifically stated that ‘[t]he veracity of [Chinwu-ba’s] critical notarized statement [regarding the existence of creditors that could challenge the DHIS transfer of the medical equipment to PrimeHealth] is ... in doubt.’ Asserting that he ‘intend[ed] to continue [his] inquiry into this matter,’ Larsen demanded ‘a full explanation as to why Dr. Chinwuba certified that no additional judgments existed when the court records clearly indicate otherwise; ... and why the [MIA] should not have concerns relating to the management based on the criteria listed above.’ “PrimeHealth responded through its attorneys, by letter dated March 27, 1998. The letter was accompanied by affidavits and attachments that purported to address ‘the three areas of concern, ownership/control, the transfer of ⁹⁸ assets to PrimeHealth, and the fitness of management, which were raised in [Larsen’s] letter of March 11.’ Prime-Health interpreted the MIA’s concerns regarding its management team as related to ‘your interpretation of Dr. Chinwuba’s notarized statement of September 6, 1996.’ In the letter and a supporting affidavit, PrimeHealth took the position that ‘Dr. Chinwuba was correct in his assertion that the subject equipment was unencumbered at the time it was transferred to PrimeHealth, except as otherwise disclosed to the [MIA].’ “Larsen replied to PrimeHealth’s explanation letter, by letter dated March 31, 1998, which set forth ‘new and continued concerns.’ The MIA issued a draft ‘Limited Scope Examination Report’ (the ‘proposed report’), detailing various deficiencies in PrimeHealth’s operations. Among the matters addressed in the proposed report were Chinwu-ba’s certifications regarding the transfer of medical equipment.

The proposed report stated that those certifications were false and misleading, in that they failed to disclose the DHIS liabilities.” In his Circuit Court complaint, Dr. Chinwuba alleged that Insurance Commissioner Larsen “violated the Maryland Insurance Code” by releasing to the press the March 11th letter, PrimeHealth’s March 27th letter, and the March 31st letter, and that the statements in the March 11th and 31st letters were false, malicious, and defamatory. The complaint also alleged that, when he released to the press the March 11th and March 31st letters, the Insurance Commissioner verbally made false, malicious, and defamatory statements about Dr. Chinwuba to the press. In addition, the complaint alleged that the draft “Report” dated March 31, 1998, and submitted to PrimeHealth on or about August 7, 1998, “classified Chin-wuba as untrustworthy, unfit and unreliable to own any interest in an HMO in the State of Maryland,” and “was false, misleading and was intentionally designed to place Chinwuba in false light in the media, public and in the business community both within and without the State of Maryland.” Finally, the complaint recited that, on August 23, 1998, the Maryland ⁹⁹ Insurance Administration and Commissioner Larsen instituted receivership proceedings against PrimeHealth in the Circuit Court for Baltimore City, and that the pleadings in the receivership proceedings alleged “various wrongdoing and fraudulent acts on the part of Chinwuba.” As earlier mentioned, the Maryland Insurance Administration and Insurance Commissioner Larsen filed a motion to dismiss or, in the alternative, for summary judgment. With regard to the action against the Insurance Administration, the motion asserted that the plaintiff had failed to comply with the procedural requirements of the Maryland Tort Claims Act.

The motion further alleged that Insurance Commissioner Larsen was acting within the scope of his public duties and, therefore, was entitled to both common law public official immunity and statutory immunity under the Maryland Tort Claims Act. Alternatively, the defendants contended that the Insurance Commissioner’s letters, statements, and report were subject to an absolute privilege. As a further alternative ground, the defendants asserted that the factual allegations of the complaint were insufficient to set forth causes of action for defamation, invasion of privacy, abuse of process, or violation of rights guaranteed by the Maryland Declaration of Rights. After a hearing, the Circuit Court for Baltimore City filed an order granting the defendants’ motion to dismiss with regard to all four counts of the complaint.

The Circuit Court also filed an extensive opinion explaining its decision. The court held that the action against the Maryland Insurance Administration was barred by the plaintiffs failure to file a written claim with the State Treasurer and to serve the State Treasurer, as required by the Maryland Tort Claims Act. As to the claims against the Insurance Commissioner, the Circuit Court held that, under the allegations of the complaint, the Commissioner’s complained of actions all fell within the scope of his public duties. The court also held that the factual allegations of the complaint were insufficient to show that the Commissioner acted with malice.

Accordingly, regarding the nonconstitutional tort claims, the Circuit Court held that the ¹⁰⁰ Commissioner was entitled to both common law public official immunity and statutory immunity under the Maryland Tort Claims Act. The Circuit Court alternatively held that the Insurance Commissioner, as the head of the Maryland Insurance Administration, had an “ ‘absolute privilege to publish defamatory matter concerning [Dr. Chinwuba] in communications made in the performance of his official duties,’ ” quoting Restatement (Second) of Torts, § 591. The court held, “[i]n addition, [that] some of the published statements fall within the judicial proceedings privilege.” Finally, the Circuit Court held that the allegations of the complaint failed to state causes of action for abuse of process or for violations of Articles 24 or 26 of the Maryland Declaration of Rights. Dr. Chinwuba took an appeal to the Court of Special Appeals.

The intermediate appellate court upheld the order transferring the case to the Circuit Court for Baltimore City. In addition, the Court of Special Appeals affirmed the judgment in favor of the Maryland Insurance Administration, affirmed the judgment in favor of Commissioner Larsen on the abuse of process count (count three), affirmed the judgment in favor of Commissioner Larsen on the count alleging violations of the Maryland Declaration of Rights (count four), and vacated the judgments in favor of the Commissioner on the defamation and invasion of privacy counts (counts one and two). Chinwuba v. Larsen, supra, 142 Md.App. at 397-398 , 790 A.2d at 124 . In affirming the judgment in favor of the Maryland Insurance Administration, the Court of Special Appeals agreed with the Circuit Court that the plaintiffs failure to give notice of his claim to the State Treasurer, as required by the Maryland Tort Claims Act, barred the action against the Insurance Administration. 142 Md.App. at 353-357 , 790 A.2d at 98-100 .

The Court of Special Appeals also upheld the Circuit Court’s decisions that the factual allegations of the complaint were insufficient to show that Commissioner Larsen acted with ¹⁰¹ “malice” or “to benefit his own political career or reputation,” insufficient to set forth a cause of action for abuse of process, and insufficient to allege a violation of the Maryland Declaration of Rights. 142 Md.App. at 380-384, 395-397 , 790 A.2d at 114-116, 123-124 . Nevertheless, the Court of Special Appeals disagreed with the Circuit Court’s dismissal of the counts charging Commissioner Larsen with defamation and invasion of privacy on the ground that, according to the intermediate appellate court, the Commissioner was not acting within the scope of his duties. The Court of Special Appeals reached this conclusion based on its view that the Commissioner’s disclosures, prior to the completion of his examination and final report, violated Maryland Code (1997, 2002 Supp.), § 2-209(g) of the Insurance Article. Section 2-209(g) provides in pertinent part as follows: “(g) Disclosure to regulatory or law enforcement agency ... -(1) Subject to paragraph (2) of this subsection, the Commissioner may disclose the preliminary examination report, investigation report, or any other matter related to an examination made under § 2-205 ... only to the insurance regulatory agency of another state or to a federal, State, local, or other law enforcement agency.

(2) A disclosure may be made under paragraph (1) of this subsection only if: (i) the disclosure is made for regulatory, law enforcement, or prosecutorial purposes; (ii) the agency receiving the disclosure agrees in writing to keep the disclosure confidential and in a manner consistent with this section; and (iii) the Commissioner is satisfied that the agency will preserve the confidential nature of the information. (3) Notwithstanding the provisions of this subsection, final reports of examinations are considered public documents and may be disclosed to the public.” (Emphasis added.) The Court of Special Appeals rejected various arguments by the Insurance Commissioner that the Commissioner’s disclo ¹⁰² sures did not violate § 2-209(g) and that the release of the letters and other disclosures were fully authorized. The intermediate appellate court stated “that Chinwuba adequately alleged specific facts that raised a factual dispute about whether Larsen made tortious statements to the press ... during the confidentiality period ... established by subsection 2-209(g).” 142 Md.App. at 380 , 790 A.2d at 114 . The Court of Special Appeals held that “Larsen’s violation of subsection 2-209(g), by itself, [would] be grounds to hold as a matter of law that Larsen acted outside the scope of his public duties” and that “disclosures in violation of subsection 2-209(g) cannot be made ‘in the performance of the Commissioner’s public duties,”’ 142 Md.App. at 376, 378 , 790 A.2d at 111, 113 (emphasis in original).

Pointing out that neither common law public official immunity nor statutory immunity under