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FOR IMMEDIATE NEWS RELEASE NEWS RELEASE #020 FROM: CLERK OF SUPREME COURT OF LOUISIANA The Opinion handed down on the 1st day of April, 2011, is as follows:

BY CLARK, J.: 2009-C -0571 C/W 2009-C -0584 C/W 2009-C -0585 C/W 2009-C -0586 J. ROBERT WOOLEY, AS COMMISSIONER OF INSURANCE FOR THE STATE OF LOUISIANA v. THOMAS S. LUCKSINGER, MICHAEL D. NADLER, STEPHEN J. NAZARENUS, SCOTT WESTBROOK, MICHAEL K. JHIN, WILLIAM F. GALTNEY, JOHN P. MUDD, EXECUTIVE RISK INDEMNITY, INC., EXECUTIVE RISK MANAGEMENT ASSOCIATES, EXECUTIVE RISK SPECIALTY INSURANCE CO., EXECUTIVE LIABILITY UNDERWRITERS AND GREENWICH INSURANCE CO., AMCARECO, INC., AMCARE MANAGEMENT, INC. C/W J. ROBERT WOOLEY, COMMISSIONER OF INSURANCE FOR THE STATE OF LOUISIANA, IN HIS CAPACITY AS LIQUIDATOR OF AMCARE HEALTH PLANS OF LOUISIANA v. FOUNDATION HEALTH CORPORATION, FOUNDATION HEALTH SYSTEMS, INC., HEALTH NET, INC. C/W J. ROBERT WOOLEY, COMMISSIONER OF INSURANCE FOR THE STATE OF LOUISIANA, AS LIQUIDATOR FOR AMCARE HEALTH PLANS OF LOUISIANA, INC., IN RECEIVERSHIP v. PRICEWATERHOUSECOOPERS, LLP (Parish of E. Baton Rouge) Retired Judge Robert J. Lobrano, assigned as Justice ad hoc, sitting for Chief Justice Catherine D. Kimball. For the foregoing reasons, we rule, as follows: 1. The court of appeal's ruling on the contract claim of the Louisiana Receiver regarding the parental guarantee is affirmed; 2. The court of appeal's ruling on liability for the tort claims of the Louisiana and Oklahoma Receivers is reversed and the district court's judgment on the liability for the tort claims of the Louisiana and Oklahoma Receivers is reinstated; 3. The court of appeal's ruling on liability for the tort claims of the Texas Receiver is reversed and the jury's verdict on the liability for the tort claims of the Texas Receiver is reinstated; 4. The amount of compensatory damages awarded to the Louisiana and Oklahoma Receivers by the district court is reinstated; 5. The amount of compensatory damages awarded to the Texas Receiver by the jury is reinstated; 6. The amount of punitive damages awarded to the Texas Receiver by the jury is reinstated; 7. The district court's ruling on attorneys fees and punitive damages for the Louisiana and Oklahoma Receivers is affirmed; 8. The district court's ruling on the motion for JNOV is affirmed in part and reversed in part; and 9. The district court's ruling on the allocation of costs is reinstated and remanded to the district court for a determination of quantum. AFFIRMED IN PART, REVERSED IN PART AND REMANDED IN PART. WEIMER, J., additionally concurs and assigns reasons.

04/01/2011 SUPREME COURT OF LOUISIANA NO. 2009-C-0571 CONSOLIDATED WITH NOS. 2009-C-0584, 2009-C-0585, AND 2009-C-0586 J. ROBERT WOOLEY, AS COMMISSIONER OF INSURANCE FOR THE STATE OF LOUISIANA VERSUS THOMAS S. LUCKSINGER, MICHAEL D. NADLER, STEPHEN J. NAZARENUS, SCOTT WESTBROOK, MICHAEL K. JHIN, WILLIAM F. GALTNEY, JOHN P. MUDD, EXECUTIVE RISK INDEMNITY, INC.,EXECUTIVE RISK MANAGEMENT ASSOCIATES, EXECUTIVE RISK SPECIALTY INSURANCE CO.,EXECUTIVE LIABILITY UNDERWRITERS AND GREENWICH INSURANCE CO., AMCARECO, INC., AMCARE MANAGEMENT, INC. CONSOLIDATED WITH J. ROBERT WOOLEY, COMMISSIONER OF INSURANCE FOR THE STATE OF LOUISIANA, IN HIS CAPACITY AS LIQUIDATOR OF AMCARE HEALTH PLANS OF LOUISIANA VERSUS FOUNDATION HEALTH CORPORATION, FOUNDATION HEALTH SYSTEMS, INC., HEALTH NET, INC. CONSOLIDATED WITH J. ROBERT WOOLEY, COMMISSIONER OF INSURANCE FOR THE STATE OF LOUISIANA, AS LIQUIDATOR FOR AMCARE HEALTH PLANS OF LOUISIANA, INC., IN RECEIVERSHIP VERSUS PRICE WATERHOUSE COOPERS, LLP ON WRIT OF CERTIORARI TO THE COURT OF APPEAL, FIRST CIRCUIT, PARISH OF EAST BATON ROUGE CLARK, Justice1

Retired Judge Robert J. Lobrano, assigned as Justice ad hoc, sitting for Chief Justice Catherine D. Kimball.

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This matter comes before the court pursuant to four writ applications filed by the plaintiffs, consolidated here for review. At issue are questions of fact and law arising in tort and contract causes of action. In the trial court, the Louisiana Commissioner of Insurance filed three separate lawsuits against several defendants on behalf of a failing health maintenance organization. One of the lawsuits sounded in contract, the other two sounded in tort. The Oklahoma Commissioner of Insurance and a receiver appointed by the Texas Commissioner of Insurance intervened as plaintiffs in the tort cases on behalf of affiliated health maintenance organizations, organized and doing business in those states, which had similar tort causes of action against the defendants. The three lawsuits--which alleged causes of action in negligence, negligent misrepresentation, conspiracy, fraud, breach of fiduciary duty, unfair or deceptive acts or practices, and contractual liability--were consolidated. Prior to trial, all of the defendants, except one, settled with the plaintiffs. The consolidated matters were tried to both the bench and jury against the sole remaining defendant. Both the judge and jury found in favor of the plaintiffs on the tort and contract causes of action and awarded damages. The defendant appealed. Finding errors of law which interdicted both the bench and jury findings of fact in the tort claims, the court of appeal conducted a de novo review of the record and reversed the judgments which had been rendered in favor of the plaintiffs and the awards of damages. The court of appeal, in a separate opinion, affirmed the liability of the defendant in the contract matter, but amended the trial court's judgment to reduce the amount of the award. This court granted certiorari to determine the correctness of the court of appeal's rulings. FACTS At the outset we acknowledge this court's recitation of the facts is very

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different from those discussed in the court of appeal opinion which we now review. Our study of the record convinces us the court of appeal fundamentally misunderstood the facts underlying these complex business transactions and the issues presented. However, we believe the court of appeal's confusion of the issues and failure to understand the facts are somewhat understandable. The record of these three consolidated cases is extensive, consisting of the pleadings in all three cases, a large number of documents and exhibits, and transcripts from numerous pretrial hearings and a lengthy trial.2 The business transactions, and their accompanying accounting treatment, are unusual. Most important in the consideration of the reasons for the court of appeal's failure of understanding is the fact that what is at the core of these matters is a sophisticated deception which fooled even those individuals tasked with regulating the type of transaction at issue. The operative facts of the tortious conduct to be described are common to all of the claims asserted by the plaintiffs. From the evidence presented at trial, the judge and jury could find the following facts. Corporate History Prior to 1997, Foundation Health Corporation ("Foundation"), a Delaware corporation with its principal place of business in California, owned all of the stock
As will be described in more detail in the procedural history, the three lawsuits filed in the 19th Judicial District Court by the Louisiana Commissioner of Insurance were assigned Docket Numbers 499,737, 509,297 and 512,366. After consolidation, all of the subsequent pleadings referenced all three docket numbers, but were generally filed into the record of Docket Number 499,737. The appellate record consists of the pleadings filed in the three district court actions, the transcripts of hearings and of trial, and exhibits. In Docket Number 499,737, there are 89 volumes of pleadings, including the pleadings filed after consolidation, which will be referred to herein as Vol. # (89), p. #. In Docket Number 509,297, there are 7 volumes of pleadings, which will be referred to as Vol. # (7), p.#. In Docket Number 512,366, there are 5 volumes of pleadings, which will be referred to as Vol. # (5), p. #. The transcripts of hearings and of trial are contained in 20 volumes. The first 19 of those volumes are designated as Vol. # of 19, as the 20th volume was added later as a supplement. The transcripts will be referred to herein as Tr. # (19), p. #, consistently with the manner in which the volumes are marked. The 20th volume of the transcripts will be referred to as Tr. 20(20), p. #, as it is marked. All exhibits will be referred to with their trial exhibit number, as Ex. #. In addition, this court requested the record be supplemented with certain pleadings filed in the court of appeal and rulings from that court. This information will be referred to herein as Supp. R., with a description of the document.
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of three health maintenance organizations ("HMOs"). These subsidiary HMOs were known as Foundation Health, a Louisiana Health Plan, Inc., a Louisiana corporation operating in the State of Louisiana ("the Louisiana HMO"); Foundation Health, an Oklahoma Health Plan, Inc., an Oklahoma corporation operating in the State of Oklahoma ("the Oklahoma HMO"); and Foundation Health, a Texas Health Plan, Inc., a Texas corporation operating in the State of Texas ("the Texas HMO"). In 1997, Health Systems International acquired Foundation. Thereafter, Health Systems International, Inc. changed its name to Foundation Health Systems, Inc. and is now known as Health Net, Inc. ("Health Net").3 In this way, Health Net acquired sole ownership of the three HMOs. The HMOs Almost from the beginning, Health Net wanted to divest itself of the HMOs. These three HMOs were the smallest plans owned by Health Net, consisting of approximately 75,000 members combined, and did not fit Health Net's overall business strategy. Health Net wanted to focus on its three main business units

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