Tate v. Blue Cross of Washington & Alaska

MOYLAN, Judge. The appellee is Blue Cross , of Washington and Alaska (Blue Cross). The only question on this appeal is that of what business engaged in by Blue Cross or obligation undertaken by Blue Cross will bring it within the reach of Maryland’s “long-arm” statute and subject it, therefore, to the in personam jurisdiction of the courts of this state. Blue Cross is a nonprofit corporation organized under the laws of the State of Washington and qualified to do business in both Washington and Alaska.

Its principal place of business is Seattle, Washington. It provides medical health benefits on behalf of its subscribers (and their covered dependents), who work or once worked in Washington or Alaska. The appellant, Mrs. Phyllis Tate, is also a resident of Alaska. She was formerly married to Frank Ferguson, who was employed by the State of Alaska and was covered under a prepaid health benefit policy issued by Blue Cross.

That policy covered, as a dependent, the daughter of Frank Ferguson and the appellant, Pamela Ferguson. Following her divorce from Mr. Ferguson, the appellant married John Haggitt, who was also an employee of the State of Alaska and was also covered under a prepaid health benefit policy ²⁰⁹ issued by Blue Cross. Pamela Ferguson, during the time she was the stepdaughter of John Haggitt, was also a covered dependent under his policy. As the result of a third marriage, the appellant is now Mrs. Tate.

In early 1978, Pamela was being treated for various psychiatric problems in Alaska, where both she and her mother then resided. One of the primary physicians recommended to Mrs. Tate that Pamela could benefit from treatment at Chestnut Lodge, a private psychiatric facility located in Rockville, Maryland. Mrs. Tate wrote to and received information about Chestnut Lodge, its facilities, and its care programs. She furnished information about Pamela to Chestnut Lodge.

Chestnut Lodge responded that it would not consider accepting Pamela into the program unless both Pamela and her mother came to Maryland to discuss details with them. Mrs. Tate and Pamela made one trip to Maryland, but Pamela was not accepted by Chestnut Lodge for treatment at that time. Chestnut Lodge insisted, inter alia, that they receive confirmation that there was adequate medical insurance coverage for the bills that would be incurred. Mrs. Tate wrote to Blue Cross at its main office in Seattle, Washington.

She received on March 30, 1978, a written reply from Blue Cross indicating that Pamela was covered for in-patient psychiatric benefits under both Blue Cross policies, that of Pamela’s father and that of Pamela’s then stepfather. There is no dispute but that the policies covered appropriate in-patient care and treatment in other states as well as in Washington and Alaska. On April 27, 1978, Mrs. Tate succeeded in having Pamela admitted to Chestnut Lodge. Mrs. Tate signed an agreement with Chestnut Lodge contracting to pay for the professional care rendered.

Pamela remained at Chestnut Lodge for the next several years. Initially, Blue Cross made payments to Chestnut Lodge directly under the policies.. No payments were made to Chestnut Lodge, however, after August 31, 1979, and on August 6, 1982, Chestnut ²¹⁰ Lodge sued Mrs. Tate in the .Circuit Court for Montgomery County for an unpaid balance of $37,834.29. Initially, Mrs. Tate sought unsuccessfully to challenge Maryland’s exercise of personal jurisdiction over her.

When that effort failed, she filed a third-party claim against Blue Cross. Blue Cross filed a Motion Raising Preliminary Objection, alleging that Maryland did not have personal jurisdiction over it. After hearing oral argument on July 27, 1983, the hearing judge granted Blue Cross’s motion and entered judgment in favor of it. This appeal has timely followed.

The pertinent statutory provisions are Courts and Judicial Proceedings Article, § 6-103(b): “A court may exercise personal jurisdiction over a person, who directly or by an agent: (1) Transacts any business or performs- any character of work or service in the State; (2) Contracts to supply ... services ... in the State; (6) Contracts to insure or act as surety for, or on, any person ..., contract, obligation, or agreement located ... or to be performed within the State at the time the contract is made____-’ Blue Cross has noted that it never at any time entered into a contract with Chestnut Lodge. That is quite true. Blue Cross has noted, moreover, that neither Pamela Ferguson, the twice-covered dependent, nor either of Frank Ferguson or John Haggitt, the Blue Cross policyholders, are parties to this suit. That is also quite true.

All of these observations are, however, for immediate and present purposes, beside the point. We have not given any consideration to and intimate nothing with respect to the question of Mrs. Tate’s standing to implead Blue Cross. It may be that Blue Cross has some other threshold defense in this regard, but that was not the issue before the court below, and it is not the issue before us. Our sole concern is with Blue Cross’s contact with Maryland and not with the standing of the party who asserts that contact.

The necessary narrow ²¹¹ ing of focus in this regard was well explained by Judge Barnes for the Court of Appeals in Groom v. Margulies, 257 Md. 691, 703-704 , 265 A.2d 249 (1970): “In considering problems arising under the Long Arm Statute, it is important to distinguish between the jurisdiction of the forum state over the out-of-state defendant, on the one hand, and the merits of the case, on the other.... The contention [that contending that the defendant was not a proper party to the suit] is that the ‘transaction of business’ was not for Margulies individually but for a corporation, which Margulies contends was a disclosed principal. This contention, however, in our opinion is directed at the question of ultimate liability in the case. The statute makes the test of jurisdiction in the present circumstances, the transaction of any business without any qualification.

Margulies did transact business in Maryland and Maryland has personal jurisdiction over him. His defense that he is not liable because he was acting for a disclosed corporate principal goes to the merits of the case, not to the power of the court to make the adjudication.” (Emphasis in original). See also Feldman v. Magnetix Corporation, 50 Md.App. 308, 310-312 , 437 A.2d 895 (1981). Any possible challenge to standing is another question for another day.

Our analysis will proceed, therefore, just as if the third-party plaintiff were Pamela Ferguson, Frank Ferguson, or John Haggitt rather than Phyllis Tate. Although the application of Maryland’s “long-arm” jurisdiction to a medical insurance carrier whose contact with Maryland consists of paying claims is one of first impression, the unmistakable trend and direction of the case law, state and federal, both focuses and controls the analysis that follows. Although earlier decisions may have foreshadowed the new approach, it was the Supreme Court’s 1945 decision in International Shoe Company v. Washington, 326 U.S. 310 , 66 S.Ct. 154 , 90 L.Ed. 95 , that gave birth to the modern era of in personam jurisdiction over nonresident corporations. Eschewing the earlier law that ²¹² the presence of a corporation (actual or constructive) in a state was a prerequisite to being subjected to that state’s jurisdiction, the Supreme Court propounded its new formula of “minimum contacts,” at 326 U.S. 316 , at 66 S.Ct. 158 : “Historically the jurisdiction of courts to render judgment in personam is grounded on their de facto power over the defendant’s person.

Hence his presence within the territorial jurisdiction of a court was prerequisite to its rendition of a judgment personally binding him. Pennoyer v. Neff, 95 U.S. 714, 733 [ 24 L.Ed. 565 ]. But now that the capias ad respondendum has given way to personal service of summons or other form of notice, due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’ ” Subsequent Supreme Court decisions have reaffirmed the “minimum contacts” formulation as the standard by which to determine whether a state’s exercise of jurisdiction over a nonresident defendant comports with the requirements of due process of law. McGee v. International Life Insurance Company, 355 U.S. 220 , 78 S.Ct. 199 , 2 L.Ed.2d 223 (1957); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 , 100 S.Ct. 559 , 62 L.Ed.2d 490 (1980); Keeton v. Hustler Magazine, Inc., — U.S. —, 104 S.Ct. 1473 , 79 L.Ed.2d 790 (1984).

In the wake of the Supreme Court’s 1945 decision expanding the constitutionally permissive exercise of personal jurisdiction by states, the National Conference of Commissioners on Uniform State Laws in August, 1962, promulgated the Uniform Interstate and International Procedure Act. This was approved by the House of Delegates of the American Bar Association in February, 1963. Maryland, in 1964, was among the first states to adopt the basic provisions of the new Uniform Act. 1964 Md.Laws, ch. 95. See Auerbach, The “Long Arm ” Comes to Maryland, 26 Md.L. ²¹³ Rev. 13 (1966).

A thorough and scholarly analysis of the pre-1964 law in Maryland and the developments following the adoption of the Uniform Act was made by Judge Wilner for this Court in Springle v. Cottrell Engineering Corp., 40 Md.App. 267 , 391 A.2d 456 (1978). The consistent trend of the Court of Appeals in interpreting the new Maryland “long-arm” statute has been to push it to the limits permitted by the Supreme Court’s interpretation of the due process clause. In Harris v. Arlen Properties, 256 Md. 185, 195-196 , 260 A.2d 22 (1969), Judge Finan spoke for the Court of Appeals: “In our own State the Legislature sought to provide a more flexible approach to jurisdiction by enacting our present ‘Long Arm’ Statute, Chapter 95 of the Acts of 1964. This Court recognized that there was a purposeful effort on the part of the Legislature to broaden jurisdiction by expanding it to the boundaries of permissible constitutional limits.” (Emphasis supplied).

In Geelhoed v. Jensen, 277 Md. 220, 224 , 352 A.2d 818 (1976), Judge Levine reiterated that any exercise of personal jurisdiction that passes muster according to the due process clause will be compatible with the law of this state: “Application of the long arm statute is a two-step process. First, it must be determined whether the statute purports to authorize the assertion of personal jurisdiction. And secondly, it must be determined whether an exercise of jurisdiction permitted by the statute violates the Due Process Clause of the Fourteenth Amendment. It is