IN THE COMMONWEALTH COURT OF PENNSYLVANIA

COMMONWEALTH OF PENNSYLVANIA, :
By JOSH SHAPIRO, :
Attorney General, et al.; :
:
Petitioners, :
v. : No. 334 M.D. 2014
:
UPMC, A Nonprofit Corp., et al.; :
:
Respondents :

APPLICATION FOR RELIEF BY EN-BANC REVIEW

OF ORDER DENYING APPLICATION FOR RECONSIDERATION
OF AN ORDER BY A SINGLE JUDGE
FOLLOWING DENIAL OF APPLICATION FOR LEAVE TO INTERVENE
[ADDENDUM]
_______________________________________________________________________________ ______

As noted on 4/4/2019, a paper-copy of the denial of the Reconsideration Application had

not yet been received and, therefore, it was not possible to discern the Judge’s reaction to

this filing. Therefore, a paper-copy of the Order was requested from the Prothonotary,

lest a filing-deadline be missed; it was received on 4/6/2019. Also, on 4/5/2019, received

was the Opinion/Order about which news-reports had emerged, referenced previously.

Therefore, noting the fortnight-deadline, this Addendum is composed/filed expeditiously;

the goal is to amplify the necessity to attain Standing based upon key-excerpts from the

latter document, inasmuch as the former document again lacks any exposition that would

[1]—enumerate rationale, and/or [2]—refute the filing that had triggered its issuance.

The gravamen of this initiative is based upon the ongoing necessity to uphold PBS’s

Social Mission (as Highmark’s predecessor entity); out of an abundance of caution, all

available criteria were invoked to buttress arguments in favor of harboring Standing.

This is filed in accordance with P.R.A.P. 123(e), and it references the law-of-the-case,

manifest in the Opinion/Order; references to the Social Missions of UPMC/Highmark are

correlative with the original Social Mission of PBS, although the focus must be trained

primarily upon Highmark (the PBS/BCWP consolidated entity). This initiative is

consistent with key-points in a newsletter by Troy B. Rider, Esq., published on 11/2013

[“De Facto Merger Doctrine and Successor Liability under Pennsylvania Law”] reprinted

in its entirety [https://www.barley.com/?t=40&an=30715&format=xml&p=6933]:

Successor liability is an exception to the general rule that, when one entity
sells assets to another entity, the assets are transferred free and clear of all
but valid liens and security interests. When successor liability is imposed,
a plaintiff with a claim against the seller may assert that claim against and
collect payment from the buyer. In Pennsylvania, the general rule does not
apply and liability attaches to the successor when one of the following is
shown: (1) the purchaser expressly or impliedly agrees to assume such
obligation; (2) the transaction amounts to a consolidation or merger (“de
facto merger”); (3) the purchasing corporation is merely a continuation of
the selling corporation; (4) the transaction is fraudulently entered into to
escape liability; (5) the transfer was not made for adequate consideration
and provisions were not made for the creditors of the transferor; or (6) the
successor undertakes to conduct the same manufacturing operation of the
transferor’s product lines in essentially an unchanged manner. The
successor is then strictly liable for injuries caused by defects in the product
line, even if previously manufactured and distributed by the transferor
(commonly referred to as the “Product Line exception”).

Four factors are analyzed in determining whether the de facto merger

exception applies: (1) continuity of ownership, (2) cessation of ordinary
business by, and dissolution of, the predecessor as soon as practicable, (3)
assumption by the successor of liabilities ordinarily necessary for
uninterrupted continuation of the business, and (4) continuity of the
management, personnel, physical location and general business operations.

In the traditional asset purchase transaction between unrelated parties, the

second, third and fourth factors are often present. Accordingly, the
absence of the first factor (continuity of ownership) is all that prevents a
de facto merger and the purchaser being liable for the obligations of the
seller. Until 2009, Pennsylvania law required courts to consider all four
factors, but a de facto merger finding did not require that all four factors
were present.

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 The Pennsylvania Superior Court, in a 2009 case, established the primacy
of the continuity of ownership factor by holding that if the owners or the
seller do not have an ownership interest in the purchaser, the transaction is
not a de facto merger and, accordingly, the purchaser is not liable for the
seller’s obligations. In 2012, the Pennsylvania Supreme Court vacated and
remanded the Superior Court’s 2009 decision in Fizzano Brothers
Concrete Products, Inc. v. XLN, Inc., et al., 42 A.3d 952 (2012).

In Fizzano, the Supreme Court held that continuity of ownership is still

required for a de facto merger, but broadened the confines of what
constitutes continuity of ownership to include a “stockholder interest.”
Unfortunately, the court did not define “stockholder interest.”
Fizzano specifically dealt with a construction company trying to collect on
a $114,000 judgment obtained against a company that sold its assets to
another unrelated company. The Supreme Court did not opine on whether
a de facto merger occurred but rejected the Superior Court’s analysis of
the continuity of ownership element, and focused on a comparison to
statutory mergers under Pennsylvania law. Because in a statutory merger
the sellers can receive consideration other than stock, the Supreme Court
held that the same is true for the de facto merger exception. In other
words, continuity of ownership may be satisfied if the owners of the
selling business have some type of interest in the purchaser (i.e. a
“stockholder interest”) even though the owners of the seller and the
purchaser are not identical.

Due to Fizzano, sellers and purchasers should be cautious in structuring

transactions to avoid any potential successor liability. Ideally, future
decisions will help delineate what constitutes a “stockholder interest” but
until then, the saga of successor liability continues.

It is averred the Consolidation that created Highmark constituted a de facto merger

and, thus, Standing in the prior litigation mandates Standing in the current litigation.

The Social Mission is intertwined with the other matters before the Court, as illustrated

by the following citations regarding the Current Petition{page #/paragraph #/line #},

noting that these excerpts do not constitute an exhaustive annotation of this document

[which often repeats the thrust of cited-phraseology within an often-lengthy paragraph].

Indeed, discussion of commercial insurance procedures is germane to the Social Mission.

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Finally, “context” is not rigorously maintained in this process, for the goal is to show that

the assessment of the Consent Decree must include each of the concerns raised in the

initial filing, notwithstanding the fact that it was composed prior to reviewing points both

in the new Opinion/Order and in the aforementioned Newsletter. Inasmuch as the rapid

pace-of-events seems now to be forestalled (noting that filing of an Interlocutory Appeal

is contemplated in the Order), it is again felt that addressing [and honoring] this Petition

will not appreciably delay the prompt/efficient resolution of the overall matter. Consider:

{6/3/5} “public interest”

{7/2/1} “charitable nonprofit”
{7/4/2} “charitable hospitals”
{8/2-6} [community mission statement]
{11/1/3} “ensure senior citizens & other vulnerable members of the public”
{11/3/2} “must continuously satisfy all of its obligations to the public”
{13/2/1} “Pennsylvanians”
{14/3/1} “people…communities”
{18/3/6} “impact thousands more Pennsylvanians”
{19/2/7} “charitable missions”
{23/1/3} “public at-large”
{23/2/5} “charitable obligations”
{26/1/1} “patients seeking access”
{29/2/4} “public interest”
{33/1/3} “public interest”
{33/4/1} “public interest”
{34/2/5} “public interest”
{41/3/3} “public interest”
{42/1/1} “public interest”

One more point should be derived from the “Gestalt” of the overall document, to wit, that

many points raised by the Parties are subsequently adjudicated as whether they satisfy the

ambit of the Consent Order that they fall within its confines. Thus, pre-emptive claims

that Applicant will err from the thrust of the case are unjustified, for sufficient routine

remedies are available and have been employed to preclude confusion/delay in this case.

“Abuse of Discretion” claims are enhanced by awareness of this key-observation.

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It is averred the Opinion/Order corroborates assertions that the Court (and the public)

would benefit were Applicant to be granted Standing to become involved in the process

of reviewing the Consent Decree, focusing on manifestations of the “Social Mission”

of Highmark and, to whatever degree there is overlap, of UPMC (concurrent with the

anticipated activities of the AG), inclusive of compliance/violation concerns to the level

of involvement that the Court would determine to be indicated and of-benefit.

THEREFORE, noting BOTH how the reasons for granting Standing have been

articulated AND how previous arguments for denying Standing have been refuted, it is

respectfully requested that Standing be granted while the Consent Decree is reviewed.

Respectfully submitted,

Robert B. Sklaroff, M.D.

Robert B. Sklaroff, M.D., Pro Se

April 6, 2019

8001 Roosevelt Boulevard, Suite #500C

Philadelphia, Pennsylvania 19152-3041
215-333-4900
rsklaroff@gmail.com

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 CERTIFICATE OF SERVICE

I hereby certify that I am this 6th day of April, 2019, serving a true and correct copy of the
foregoing
APPLICATION FOR RELIEF BY EN-BANC REVIEW
OF ORDER DENYING APPLICATION FOR RECONSIDERATION
OF AN ORDER BY A SINGLE JUDGE
FOLLOWING DENIAL OF APPLICATION FOR LEAVE TO INTERVENE
on all parties via electronic mail as indicated below:

Stephen A. Cozen, Esquire

COZEN O’CONNOR
(Counsel for UPMC)
scozen@cozen.com

Leon F. DeJulius, Jr., Esquire

(Counsel for UPMC)
JONES DAY
lfdejulius@jonesday.com

W. Thomas McGough, Jr., Esquire

UPMC
mcgought@upmc.edu

Daniel I. Booker, Esquire

REED SMITH
(Counsel for Highmark)
dbooker@reedsmith.com

Thomas L. Vankirk, Esquire

HIGHMARK
thomas.vankirk@highmark.com

Kenneth L. Joel
Deputy General Counsel
PA OFFICE OF GENERAL COUNSEL
kennjoel@pa.gov

Victoria S. Madden
Deputy General Counsel
PA OFFICE OF GENERAL COUNSEL
vmadden@pa.gov

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 Amy Daubert
Chief Counsel
PA Department of Insurance
adaubert@pa.gov

Yvette Kostelec
Chief Counsel
PA Department of Health
ykostelac@pa.gov

James A. Donahue, III

Executive Deputy Attorney General
Public Protection Division
jdonahue@attorneygeneral.gov

Mark A. Pacella
Chief Deputy Attorney General
Charitable Trusts and Organizations Section
mpacella@attorneygeneral.gov

Tracy W. Wertz
Chief Deputy Attorney General
Antitrust Section
twertz@attorneygeneral.gov

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