IN THE SUPREME COURT OF THE STATE OF DELAWARE
SECRETARY CLAIRE DEMATTEIS § in her official capacity as Secretary of § the Delaware Department of Human § No. 178, 2023D Resources and Co-Chair of the State § Employee Benefits Committee, § Court Below: Superior Court DIRECTOR CERRON CADE in his § of the State of Delaware official capacity as Director of the § Delaware Office of Management and§ C.A. No. N22C-09-526 Budget and Co-Chair of the State § Employee Benefits Committee, § DELAWARE DEPARTMENT OF § HUMAN RESOURCES, DELAWARE § STATE EMPLOYEE BENEFITS § COMMITTEE, and DELAWARE § DIVISION OF STATEWIDE § BENEFITS § § Defendants Below, § Appellants/Cross Appellees, § § v. § § RISEDELAWARE INC., KAREN § PETERSON, and THOMAS PENOZA, § § Plaintiffs Below, § Appellees/Cross Appellants. §
Submitted: January 31, 2024 Decided: April 12, 2024
Before TRAYNOR, LEGROW, Justices; and ARRINGTON, Judge.1
Upon appeal from the Superior Court of the State of Delaware. REVERSED.
1 Sitting by designation under Del. Const. art. IV, § 12 and Supreme Court Rules 2(a) and 4(a), to complete the quorum. Patricia A. Davis, Esquire, Adria Martinelli, Esquire, DELAWARE DEPARTMENT OF JUSTICE, Wilmington, Delaware; Max B. Walton, Esquire (argued), Shaun Michael Kelly, Esquire, Lisa R. Hatfield, Esquire, CONNOLLY GALLAGHER LLP, Wilmington, Delaware, for Appellants/ Cross Appellees Secretary Claire Dematteis in her official capacity as Secretary of the Delaware Department of Human Resources and Co-Chair of the State Employee Benefits Committee, Director Cerron Cade in his official capacity as Director of the Delaware Office of Management and Budget and Co-Chair of the State Employee Benefits Committee, Delaware Department of Human Resources, Delaware State Employee Benefits Committee, and Delaware Division of Statewide Benefits.
Sidney S. Liebesman, Esquire (argued), Austen C. Endersby, Esquire, Nathan Barillo, Esquire, FOX ROTHSCHILD LLP, Wilmington, Delaware, for Appellees/ Cross Appellants RiseDelaware Inc., Karen Peterson, and Thomas Penoza.
LEGROW, Justice: This is an appeal from a decision of the Superior Court (1) finding that the
decision of the State Employee Benefits Committee (“SEBC”) adopting a Medicare
Advantage Plan for State retirees was subject to the requirements of Delaware’s
Administrative Procedures Act (“APA”); (2) granting Appellees’ Motion to Stay the
implementation of the Medicare Advantage Plan; and (3) requiring the State to keep
its retirees’ Medicare Supplement Plan in full force and effect. On cross-appeal,
Appellees challenge the Superior Court’s decision denying their application for
attorneys’ fees.
The core question before us is one of statutory interpretation: under the APA,
is the SEBC’s selection of a particular type of Medicare plan a “regulation” as the
General Assembly has defined that term? Because the statute relevantly limits a
regulation to a “rule or standard,” and the SEBC’s choice of a statutorily authorized
Medicare plan does not fall within the plain meaning of the terms “rule” or
“standard,” we conclude that the SEBC’s decision was not a regulation.
Accordingly, the Superior Court did not have jurisdiction to enter the challenged
stay, and we reverse the decision on appeal. The important policy considerations
that attend the selection of healthcare coverage for State retirees are questions
appropriately addressed to the legislative and executive branches. I. RELEVANT FACTUAL AND PROCEDURAL BACKGROUND2
A. SEBC process
The SEBC is responsible for implementing, overseeing, and managing State
employee benefits.3 The agency’s powers and duties are codified in 29 Del. C. §§
9602(b) and 5210(1-5). Those responsibilities and powers include the “[s]election
of the carriers or third-party administrators deemed to offer the best plan to satisfy
the interests of the State and its employees and pensioners in carrying out the intent
of this chapter.”4 The Delaware Code cabins the SEBC’s discretion by specifying
the types of coverage it must provide, including that the SEBC must select “a plan
which is supplemental to Medicare parts A and B, or constructed as a plan under
Medicare part C, for eligible pensioners entitled to services, rights or benefits under
the federal Medicare Program.”5 Before 2023, the State retirees’ health insurance
plan was a Medicare part A and B supplemental plan titled “Highmark BCBS
Special Medicfill Supplemental Plan.”6
2 Unless otherwise noted, the recited facts are taken from the Superior Court’s October 19, 2022 Order. See RiseDelaware Inc. v. DeMatteis, 2022 WL 11121549 (Del. Super. Oct. 19, 2022) (hereinafter “Stay Order at __.”). 3 Corrected Appellants’ Opening Brief at 5 (hereinafter, “Appellants’ Opening Br. at __”). Title 29, Section 9602(a) of the Delaware Code establishes the members of the SEBC. 4 29 Del. C. § 5210(3). 5 29 Del. C. § 5203(b). 6 Appellants’ Opening Br. at 6 (citing App. to Appellants’ Opening Br. at A27, A67). See Appellees’ Answering Br. on Appeal and Cross-Appellants’ Opening Br. on Cross Appeal at 10 (hereinafter, “Appellees’ Answering Br. at __.”) (containing an explanation of retirees’ healthcare benefits).
2 The SEBC held a meeting on February 28, 2022, at which it unanimously
approved a motion to move the retirees to a Group Medicare Advantage plan, which
is a plan under Medicare part C.7 “At the March 14th meeting, the Committee
approved the implementation of the Medicare Advantage plan for the January 1,
2023 plan year.”8 The SEBC met again on April 25, 2022, and “approved the rates
for the Medicare pensioner plan options and those proposed options were voted on
to replace the [then-existing plans].”9 At the same meeting, “a motion was adopted
to approve Medicare Advantage plan with prescription as the only Medicare
pensioner option.”10 On June 1, 2022, an introductory mailing was sent to eligible
Medicare pensioners about the transition to a Medicare Advantage Plan beginning
January 1, 2023.11
7 App. to Appellants’ Opening Br. at A234. 8 Stay Order at *1. 9 Id. 10 Id. The parties, especially Appellees, spent a substantial portion of their briefs detailing the SEBC’s process for considering the Medicare Advantage Plan and the notice provided to the public regarding that process. There is no dispute, however, that if the SEBC’s adoption of a Medicare Advantage Plan fell within Delaware’s Administrative Procedures Act, the SEBC did not meet the requirements of that Act. Conversely, if the SEBC’s decision did not fall within the Act, the process it followed is not relevant because Appellees are not pursuing any other claim. Accordingly, we do not recite in detail the various meetings and decision points on which Appellees focus. 11 App. to Appellants’ Opening Br. at A72.
3 The Medicare Advantage contract was awarded on February 28, 2022, and
finalized on September 28, 2022.12 Two days later, on September 30, 2022, “the
State updated information on its website providing an 11-page document labeled
“Frequently Asked Questions” (“FAQs”) under its information tab in Medicare
Benefits explaining this shift in health care coverage to Medicare Advantage.”13 On
October 12, 2022, after this action was filed in the Superior Court, an overview was
made available on the State’s website that explained the prior authorization process
that the new plan would require for certain medical procedures.14
B. Complaint filed in Superior Court
On September 25, 2022, Appellees/Plaintiffs below, RiseDelaware Inc.;15
Karen Peterson; and Thomas Penoza (collectively, “Appellees” or “RiseDelaware”)
filed a Complaint in the Superior Court against Appellants/Defendants below,
Secretary Claire DeMatteis, in her official capacity as Secretary of the Delaware
Department of Human Resources and Co-Chair of the SEBC; Director Cerron Cade,
in his official capacity as Director of the Delaware Office of Management and
12 Id. at A130. 13 Stay Order at *2 (“The FAQs document explained the policy requires State retirees to enroll in a Medicare Advantage plan with prescription or lose their State-funded health insurance.”). Id. The website was labeled “Highmark Blue Cross Blue Shield of Delaware Freedom Blue 14
Medicare Advantage PPO Prior Authorization Overview.” Id. 15 RiseDelaware Inc. is a nonprofit corporation which “was established and is managed by Delaware retirees to act as a sentinel on issues involving State health care benefits provided for Medicare-eligible Delaware retirees[.]” App. to Appellees’ Answering Br. at B4.
4 Budget and Co-Chair of the SEBC; the SEBC; the Delaware Department of Human
Resources (“DHR”); and the Delaware Division of Statewide Benefits (“DSB”)
(collectively, “Appellants” or “SEBC”).16 The Complaint contained three counts
and sought two forms of relief: (1) declaratory relief under 10 Del. C. § 6501 and 29
Del. C. § 10141, and (2) a stay order under 29 Del. C. § 10144 preventing Appellants
from executing a contract with Highmark or further implementing a Medicare
Advantage Plan pending judicial review.17 Given the expectation that open
enrollment for the new plan was scheduled to begin on October 3, 2022, the parties
engaged in expedited proceedings in the Superior Court.18
C. Motion to Stay and Stay Order
On October 4, 2022, Appellees filed a Motion to Stay “implementation of the
new Highmark Medicare Advantage Plan for State retirees and the open enrollment
period currently in effect for State retirees” under 29 Del. C. § 10144.19 Appellants
filed their Answering Brief in Opposition to the Motion to Stay on October 11,
2022.20 On October 17, 2022, the Superior Court heard oral argument on the Motion
16 Id. at B1–38. 17 Id. (“Count One. Violation of the Administrative Procedures Act, 29 Del. C. §§ 10115–10118. . . . Count Two. Violation of the Administrative Procedures Act, 29 Del. C. §§ 101414. . . . Count Three. Declaratory Relief under 10 Del. C. § 6501 and 29 Del. C. § 10141.”). 18 App. to Appellants’ Opening Br. at A34. 19 App. to Appellees’ Answering Br. at B89. 20 App. to Appellants’ Opening Br. at A17.
5 to Stay and reserved its decision.21 On October 19, 2022, the Superior Court issued
an Order granting the Motion to Stay (the “Stay Order”).22
In granting the Motion to Stay, the Superior Court held that it had authority to
enter a stay under 29 Del. C. § 10144 because “the decision of the SEBC is
considered a regulation under the Delaware Administrative Procedures Act[.]”23
The court first noted that under the APA, a “[r]egulation means any statement of
law, procedure, policy, right, requirement or prohibition formulated and
promulgated by an agency as a rule or standard, or as a guide for the decision of
cases thereafter by it or by any other agency, authority or court.”24 Further, the court
noted that the SEBC exercised its authority—which is granted under Title 21
Sections 9602 and 5210 of the Delaware Code—when it “enacted a policy requiring
retirees to move from their State-subsidized Medicare Plan to Medicare Advantage
plan or stay with traditional Medicare and give up their State-subsidized benefits.
Therefore, such policy change is a regulation under the APA.”25 The court rejected
Appellants’ argument that, under this Court’s decision in Free-Flow Packaging Int’l,
21 Id. at A9. 22 Stay Order at *1. 23 Id. at *3. 24 Id.; 29 Del. C. § 10102(7). 25 Stay Order at *3.
6 Inc. v. Sec’y of Dep’t of Nat. Res. & Env’t Control of State,26 29 Del. C. §§ 9602 and
5210 “authorized [the] SEBC to change retirees’ healthcare plans without following
the formal APA requirements.”27 The court held that “[h]ere, there is no specific
statutory directive for SEBC to force all retirees from their State-subsidized benefits
to a Medicare Advantage plan or lose benefits[,]” and “[t]herefore, Free-Flow does
not apply.”28
The court next assessed the merits of Appellees’ arguments for a stay,
including the likelihood of success on the merits and imminent harm, finding that
there was a likelihood of success on the merits and that retirees in the present and
future would face irreparable harm if the stay was not granted.29 Further, the court
found that a stay would not harm the public and concluded that “the harm to
[Appellees] far outweighs the harm to [Appellants] and the public.”30
In granting the Appellees’ Motion to Stay, which effectively meant State
retirees would retain their current benefits for the immediately foreseeable future,
the court stated that “implementation of a Medicare Advantage Plan for State retirees
and acceptance of enrollment into the Plan, including by way of automatic
26 Free-Flow Packaging Int’l, Inc. v. Sec’y of Dep’t of Nat. Res. & Env’t Control of State, 861 A.2d 1233 (Del. 2004). 27 Stay Order at *3. 28 Id. 29 Id. at *3–4. 30 Id. at *5.
7 enrollment in the open enrollment period currently in effect for State retirees is
stayed until further Order by this Court.”31 The court also required the State to
ensure “that the healthcare insurance and benefits available to State retirees prior to
October 3, 2022, or in which they were enrolled prior to that time, remain in full
force and effect.”32 Further, the court scheduled a trial on the merits to make final
factual determinations.33 Not long after that, the trial was removed from the calendar
at the parties’ request.34
D. Petition for Attorneys’ Fees
On November 14, 2022, Appellees filed a Motion for Attorneys’ Fees (the
“Fee Motion”), arguing that the APA allows an award of fees when there is success
in achieving a stay order and that the Appellants’ conduct warranted fee-shifting in
this case.35 On February 8, 2023, the court issued an order denying Appellees’ Fee
Motion.36
31 Id. 32 Id. 33 Id. 34 App. to Appellants’ Opening Br. at A8 (11/9/2022 Stipulation and [Proposed] Order for Resolution of Remaining Claims and Issues, D.I. No. 36). 35 App. to Appellees’ Answering Br. at B340–61. 36 Id. at B288–94.
8 E. Stipulations for Final Judgment
On November 18, 2022, the parties filed a Joint [Proposed] Stipulation and
Order for Resolution of Remaining Claims and Issues.37 The proposed joint
stipulation and order provided: (1) that Appellants would file a memorandum in
opposition to Appellees’ Fee Motion; (2) the timelines for filings and procedures if
the court were to rule in favor of the Fee Motion; (3) the procedure the parties would
follow upon resolution of the Fee Motion; and (4) that “[u]pon entry of final
judgment, each party shall be permitted to appeal as authorized by law. Nothing in
this stipulation shall be deemed a waiver of any applicable right of appeal nor shall
it be deemed to preclude any arguments on appeal that were raised in the underlying
proceedings.”38 On December 6, 2022, the court refused to enter the November 18,
2022 stipulation and proposed order, requesting that the parties “[p]lease file a
stipulation reflective of the resolution of the case. It seems that the parties are at the
point of over litigating this case.”39
On December 16, 2022, the parties filed another Stipulation and [Proposed]
Order for Entry of Final Judgment asking the court to enter a Final Order stating
that: (1) the action was ripe for entry of final judgment on all matters except the
37 Id. at B270–72. 38 Id. 39 Id. at B274–78.
9 court’s ruling on the Motion to Amend40 and the Fee Motion; (2) “[u]pon rendering
its rulings on the Motion to Amend and Fee Petition, the Court may enter the form
of Order, attached hereto as Exhibit 1, as its Order and Final Judgment, fully
disposing of all matters in the Action[;]” and (3) “[u]pon entry of the attached form
of Order, each party shall be permitted to appeal as authorized by law. Nothing in
this stipulation shall be deemed a waiver of any applicable right of appeal; nor shall
it be deemed to preclude any arguments on appeal that were raised in the underlying
proceedings.”41 For reasons that are not clear from the record before us, the court
never entered this proposed stipulation and order.
F. Appellants’ First Appeal
On February 15, 2023, following the ruling denying the Fee Motion, the
Appellants filed their Notice of Appeal in this Court.42 Because the court had not
entered a final order, the Appellants’ first appeal was dismissed as interlocutory and
remanded to the Superior Court.43
40 On December 2, 2022, the Appellees filed a Motion to Amend and Supplement their Complaint, which the court denied on December 19, 2022. Id. at B444; Appellants’ Opening Br. at 12. 41 App. to Appellees’ Answering Br. at B279–87. 42 Appellants’ Opening Br. at 13. 43 DeMatteis v. RiseDelaware Inc., 295 A.3d 1098, 2023 WL 2761690, at *2 (Del. Apr. 3, 2023) (TABLE).
10 G. Appellants’ Motion for Final Order and the Trial Court’s Order on Final Judgment
After dismissal of Appellants’ first appeal, Appellants submitted a Motion and
[Proposed] Order for Entry of Final Judgment.44 Appellees opposed that motion,
and the court heard oral argument.45 On May 22, 2023, the court issued its Order on
Final Judgment (the “Final Order”).46 The Superior Court’s Final Order did not
adopt the language proposed by the SEBC.47 Appellants filed their notice of appeal
in this Court on the same day. On June 21, 2023, Appellees filed their notice of
cross-appeal.
II. STANDARD OF REVIEW
This Court reviews questions of law, including the interpretation of a statute,
de novo.48 “The goal of statutory construction is to determine and give effect to
legislative intent.”49 When the unambiguous language of the statute clearly reflects
the legislature’s intent, the plain meaning of the statutory language controls.50 “A
44 App. to Appellees’ Answering Br. at B301–12. 45 Plaintiffs’ Opp. To Defendants’ Motion for Entry of Final Judgment (Super. Ct. D.I. No. 64); App. to Appellees’ Answering Br. at B313–29. 46 RiseDelaware Inc. v. DeMatteis, 2023 WL 3625996 (Del. Super. May 22, 2023) (hereinafter “Final Order at __.”). 47 Id.; App. to Appellees’ Answering Br. at B301–05. 48 City of Wilm. v. Nationwide Ins. Co., 154 A.3d 1124, 1127 (Del. 2017); Clark v. Clark, 47 A.3d 513, 517 (Del. 2012). 49 Eliason v. Englehart, 733 A.2d 944, 946 (Del. 1999). 50 Spielberg v. State, 558 A.2d 291, 293 (Del. 1989); Eliason, 733 A.2d at 946.
11 statute is ambiguous ‘if it is reasonably susceptible of different constructions or
interpretations’ or ‘if a literal reading of the statute would lead to an unreasonable
or absurd result not contemplated by the legislature.’” 51
We review an attorneys’ fee award for abuse of discretion.52 Delaware law
follows the American Rule, under which litigants are generally responsible for
paying their own litigation costs.53 Courts recognize “limited equitable exceptions”
to the American Rule, including one for a party’s “bad faith” conduct throughout
litigation.54 Although there is no all-encompassing definition of “bad faith” conduct,
Delaware courts have granted attorneys’ fees where a party “unnecessarily
prolonged or delayed litigation, falsified records, or knowingly asserted frivolous
claims.”55 In Delaware, the “bad faith” exception only applies in “extraordinary
circumstances.”56 Its purpose is “to deter abusive litigation and protect the integrity
of the judicial process.”57
51 LeVan v. Independence Mall, Inc., 940 A.2d 929, 933 (Del. 2007) (quoting Newtowne Vill. Serv. Corp. v. Newtowne Rd. Dev. Co., 772 A.2d 172, 175 (Del. 2001)). 52 Bako Pathology LP v. Bakotic, 288 A.3d 252, 266 (Del. 2022); Bhole, Inc. v. Shore Invs., Inc., 67 A.3d 444, 449 (Del. 2013); Sternberg v. Nanticoke Mem'l Hosp., Inc., 62 A.3d 1212, 1220 (Del. 2013); Johnston v. Arbitrium (Cayman Is.) Handels AG, 720 A.2d 542, 546 (Del. 1998). 53 Mahani v. Edix Media Group, Inc., 935 A.2d 242, 245 (Del. 2007); Johnston, 720 A.2d at 545. 54 Montgomery Cellular Holding Co., Inc. v. Dobler, 880 A.2d 206, 227 (Del. 2005). 55 Johnson, 720 A.2d at 546. 56 Brice v. State Dept. of Correction, 704 A.2d 1176, 1179 (Del. 1998). 57 Montgomery Cellular, 880 A.2d at 227.
12 III. ANALYSIS
There are two main issues on appeal. First, Appellants assert that the Superior
Court erred in holding that the SEBC’s decision adopting a Medicare Advantage
plan was a regulation as that term is defined in the APA. Second, on cross-appeal,
Appellees argue that the Superior Court erred by refusing to grant their application
for attorneys’ fees.
A. The Superior Court erred in holding that the SEBC’s decision was a regulation as defined in Delaware’s Administrative Procedures Act.
Appellants contend that the SEBC is not required to promulgate a regulation
when it enters into a contract for the administration of health care benefits for State
retirees or employees.58 Appellants argue that the SEBC’s decision to move State
retirees to a Medicare part C plan was consistent with a specific statutory directive
authorizing that step and that the canons of statutory construction show that the
selection of a carrier is not a “regulation” as the APA defines that term.59 Because
the SEBC’s Medicare Advantage decision is not governed by the APA, Appellants
contend that the Superior Court’s Stay Order, which was issued under the APA, must
be reversed.60
58 Appellants’ Opening Br. at 14. 59 Id. at 14, 19. 60 Id. at 24.
13 In response, Appellees argue that Appellants are legally foreclosed from
challenging the Stay Order in this appeal because: (1) Appellants “did not ask the
Superior Court at the final judgment stage to lift the Stay Order’s injunction against
the implementation of Medicare Advantage; and” (2) Appellants’ “Opening Brief
did not challenge the Final Order so that their arguments seeking to have the Stay
Order overturned amount to an untimely interlocutory appeal not in compliance with
Superior Court Rule 42[.]”61 Appellees further argue that, if this Court reaches the
merits of the issue on appeal, the Stay Order should be upheld because the SEBC’s
decision to move to a Medicare Advantage Plan is a “policy change” and therefore
is a regulation within the meaning of the APA. Appellees argue that the SEBC’s
adoption of Medicare Advantage was not pursuant to a specific legislative directive
and no statutory provision negated the APA’s binding rule-making obligations on
the SEBC.62
1. The issue on appeal may be considered on its merits.
Before addressing the substance of Appellants’ position, Appellees advance
several procedural arguments that they contend bar our consideration of this appeal.
Appellees first urge us to remand without addressing the merits of Appellants’
61 Appellees’ Answering Br. at 31. 62 Id. at 38–43.
14 arguments because the appeal challenges an interlocutory order.63 Appellees assert
that Appellants only dispute the Stay Order, that this Court dismissed as
interlocutory Appellants’ previous attempt to appeal that order,64 and that Appellants
did not “argue the Stay Order was merged into and affected the Final Order, such
that the Stay Order could be appealed on that basis.”65 Appellees further argue that
“[t]he Superior Court’s Final Order was affected not by the Stay Order, but rather
[by] the parties’ own actions to resolve the matter after the Stay Order was
entered.”66
We confess that this argument is both puzzling and challenging to address
because of the unusual order of proceedings in the Superior Court. We conclude,
however, that Appellees’ procedural arguments lack merit. Although Appellees are
correct that the Final Order does not expressly merge with the Stay Order, the Final
Order refers to the Stay Order multiple times.67 The trial court’s clear intent was to
enter a final, appealable order as to all the issues in the case. Moreover, Appellees
63 Id. at 32. 64 Id. See DeMatteis v. RiseDelaware Inc., 295 A.3d 1098, 2023 WL 2761690, at *2 (Del. Apr. 3, 2023) (TABLE) (“[T]he Superior Court's failure to enter the proposed order for entry of final judgment—again, submitted at the Superior Court's request and the form and substance of which was agreed to by the parties—renders the finality and scope of the Order and the Decision uncertain. Accordingly, we must dismiss this appeal for the State’s failure to comply with Rule 42 when taking an appeal from an interlocutory order.”). 65 Appellees’ Answering Br. at 33. 66 Id. 67 Final Order at *2.
15 conceded at oral argument that they had agreed that the issue was ripe for appeal and
“the [Appellees] were more than happy to come on to an appeal on the issue of
whether the APA applied.” 68
Appellees support their contention that this appeal is interlocutory by citing
Tyson Foods, Inc. v. Aetos Corp.69 Tyson stands for the proposition that “[a]n
aggrieved party can appeal to this Court only after a final judgment is entered by the
trial court. . . . [and] a final judgment is one that determines all the claims as to all
the parties.”70 But Appellees’ reliance on Tyson is misplaced; unlike the appellant
in Tyson, the Appellants here filed a timely appeal of the trial court’s subsequent
judgment, which was the Final Order. The Final Order was entered a month after
this Court remanded the matter to the trial court after holding that the Stay Order
was interlocutory.71 The trial court and the parties intended the Final Order to be a
final judgment. To remand the matter again as interlocutory would be absurd and
would put the courts in a perpetual loop, ignoring the clear intent of the trial court
68 Oral Argument at 18:12–19:20. 69 809 A.2d 575, 580 (Del. 2001); Appellees’ Answering Br. at 34. 70 Tyson Foods, 809 A.2d at 579 (“The test for whether an order is final and therefore ripe for appeal is whether the trial court has clearly declared its intention that the order be the court's ‘final act’ in a case.”) (citing Del. Const. art. IV, § 11(1)(a); Harrison v. Ramunno, 730 A.2d 653 (Del. 1999)). See J.I. Kislak Mortgage Corp. v. William Matthews Builder, Inc., 303 A.2d 648, 650 (Del. 1973) (holding order is deemed final if decision is trial court’s last act in disposing of all justiciable matters within its jurisdiction). 71 The Final Order was issued on May 22, 2023. Final Order at *1. This Court issued its decision in the initial appeal on April 3, 2023. DeMatteis v. RiseDelaware Inc., 295 A.3d 1098, 2023 WL 2761690, at *2 (Del. Apr. 3, 2023) (TABLE).
16 and the parties. Dismissal of the appeal also would leave the SEBC without a clear
directive as to whether the APA applies to its selection of health plans for State
employees and retirees.
Appellees also make a “merger” argument, citing a series of non-Delaware
cases72 that explain that a “provisional remedy designed to retain the status quo while
the action was pending [] does not ‘necessarily affect’ the final judgment, and thus
the appeal does not bring it up for review.”73 Although it is true that a provisional
remedy may not always “affect” the final judgment, here the Stay Order does just
that. The trial court’s conclusion that the APA applied to the SEBC’s decision
effectively resolved the merits of the parties’ dispute and ended the need for further
litigation in the Superior Court. Given the facts of this case, the language of the
proposed stipulations and the Final Order, and the fact that there were no other
readily apparent steps available to Appellants to seek review of the trial court’s legal
conclusions regarding the scope of the APA, the requirements for merger are met.
Appellees’ argument that Appellants are legally foreclosed from challenging
the Stay Order on the basis of waiver is equally unavailing. The parties agreed to
72 See Camesi v. Univ. of Pittsburgh Med. Ctr., 729 F.3d 239, 244–45 (3d Cir. 2013) (“Under the ‘merger rule,’ prior interlocutory orders merge with the final judgment in a case, and the interlocutory orders (to the extent that they affect the final judgment) may be reviewed on appeal from the final order.”) (citing and quoting In re Westinghouse Sec. Litig., 90 F.3d 696, 706 (3d Cir. 1996)). 73 Two Guys From Harrison-NY v. S.F.R. Realty Assocs., 186 A.D.2d 186, 189(N.Y. App. Div. 1992); Appellees’ Answering Br. at 33.
17 two stipulations—on November 18, 2022 and December 16, 2022—that express
their shared intent that a final judgment be entered.74 The stipulated final orders
proposed by the parties would have made merger clear. Further, at oral argument
the trial court recognized that the “cased ended outside of court” with “no trial” and
no “findings of fact or conclusions of law,” and the only issue left to address by the
court was the request for attorneys’ fees.75
These stipulations contained clear language that “[w]ith the exception of the
Court’s rulings on the Motion to Amend and Fee Petition, the Action is ripe for entry
of final judgment.”76 Further, the December 16, 2022 stipulation provided that upon
a ruling on the Motion to Amend and Fee Petition, all matters in the action were
fully disposed, and “[n]othing in this stipulation shall be deemed a waiver of any
applicable right of appeal; nor shall it be deemed to preclude any arguments on
appeal that were raised in the underlying proceedings.”77 Appellants argue that:
Although the Superior Court did not sign this particular proposed order, choosing to use its own form of order, both parties agreed that the conclusions of law to date disposed of the issues, other than [Appellees’] request for attorneys’ fees, at the lower court level. The parties presented the stipulation to the Court with full knowledge that
74 App. to Appellees’ Answering Br. at B270–72, B279–87. 75 Id. at B315. 76 Id. at B280. 77 Id. at B281.
18 the other side would be appealing any adverse decision of the Superior Court.78
We agree with this reasoning. Although the court did not enter either proposed
stipulation, the fact remains that the parties agreed to their terms, and nothing in
Appellants’ actions can fairly be construed as a waiver of their right to appeal the
trial court’s legal holding. Appellees cite no authority for their assertion that
Appellants waived the issue by failing to ask the trial court to lift the Stay Order,
and we cannot discern a legal or practical reason to find waiver under these
circumstances.
Appellees also argue that the appeal was mooted by the SEBC’s later actions,
particularly (1) a September 7, 2023 agreement signed by the State and Highmark
Blue Cross Blue Shield terminating the contract at issue in the trial court; and (2) a
decision and vote by the SEBC on October 2, 2023 to solicit bids for a Medicare
supplement plan that “duplicates the current plan without deviation.”79 The issue of
mootness was raised at oral argument, but it was not properly presented in the
parties’ briefs and rests on facts that are not part of the appellate record.80 In any
event, the plain language of the Stay Order required Appellants to “take all necessary
78 Appellants’ Reply Br. on Appeal and Cross-Appellees’ Answering Br. on Cross-Appeal at 23 (hereinafter, “Appellants’ Reply Br. at __.”) (citing App. to Appellees’ Answering Br. at B261, B272, B311). 79 Oral Argument at 21:18–22:47. 80 Id. at 21:09–24:59.
19 and proper steps to ensure that the healthcare insurance and benefits available to
State retirees prior to October 3, 2022, or in which they were enrolled prior to that
time, remain in full force and effect.”81 The Court cannot conclude that the SEBC’s
actions in compliance with the trial court’s order mooted the SEBC’s appeal
challenging that order. There is a live controversy about the Stay Order, which the
next section of this opinion addresses.
2. The challenged agency decision was not a “Regulation” under the relevant statute.
The APA grants the Superior Court the authority to stay enforcement of an
agency regulation under 29 Del. C. § 10144, which states:
When an action is brought in the Court for review of an agency regulation or decision, enforcement of such regulation or decision by the agency may be stayed by the Court only if it finds, upon a preliminary hearing, that the issues and facts presented for review are substantial and the stay is required to prevent irreparable harm.
There is no dispute that the Superior Court’s authority to issue a stay under Section
10144 is limited to actions challenging an agency regulation or decision. Neither
side argues that the SEBC’s action was a “decision,” which is specifically limited
by statute to circumstances not at issue in this case.82 Whether the SEBC’s action in
adopting a Medicare Advantage Plan was a regulation is the only aspect of the trial
81 Stay Order at *5. 82 29 Del. C. §§ 10102(3), 10142.
20 court’s decision that Appellants challenge. If it was, the APA applies, and the SEBC
concedes that it did not comply with the APA’s procedures when it selected the
Medicare Advantage Plan.83
The issue before us is a straightforward statutory interpretation question.
“Regulation” is defined in 29 Del. C. § 10102. The code states that “Regulation”:
means any statement of law, procedure, policy, right, requirement or prohibition formulated and promulgated by an agency as a rule or standard, or as a guide for the decision of cases thereafter by it or by any other agency, authority or court. Such statements do not include locally operative highway signs or markers, or an agency's explanation of or reasons for its decision of a case, advisory ruling or opinion given upon a hypothetical or other stated fact situation or terms of an injunctive order or license.84
Neither party argues that the definition of “Regulation” is ambiguous. Section 9602
establishes the SEBC and its members85 and broadly defines its powers, duties, and
functions.86 29 Del. C. § 5210 further describes the SEBC’s powers and duties,
83 Appellees argue that the statutory interpretation issue was not raised below. Appellees’ Answering Br. at 36 (“Defendants did not dispute below, nor do they now on appeal, that the SEBC is subject to the APA governing the adoption regulations.”). This argument embraces an unworkable and unhelpful view of the court’s role by implying that the court should ignore the plain language of the statute because the parties did not sufficiently focus on it below. 84 29 Del. C. § 10102(7). 85 29 Del. C. § 9602(a). 86 29 Del. C. § 9602(b)(1)–(5). The SEBC’s powers, duties, and functions include: “. . . (2) Selection of all carriers or third-party administrators necessary to provide coverages to State employees. (3) Authority to contract on an insured or self insured basis. (4) Authority to adopt rules and regulations for the general administration of the employee benefit coverages. (5) Authority to make and enter into any and all contracts with any agency of the State, or any outside agency, for the purpose of assisting in the general administration of this section.” Id.
21 which include controlling and managing the group health insurance program for
State employees and retirees.87
When interpreting a statute, we attempt to ascertain and give effect to the
General Assembly’s intent.88
First, we must determine whether the relevant statute is ambiguous. A statute is ambiguous when it can reasonably be interpreted in two or more different ways “or if a literal reading of its terms ‘would lead to an unreasonable or absurd result not contemplated by the legislature.’” If we determine that a statute is unambiguous, we give the statutory language its plain meaning. If we determine that a statute is ambiguous, “we consider the statute as a whole, rather than in parts, and we read each section in light of all others to produce a harmonious whole.” We presume that the General Assembly purposefully chose particular language and therefore construe statutes to avoid surplusage if reasonably possible.89
87 Among the powers, duties, and functions the SEBC is granted, Section 5210 details that the SEBC shall: “(1) Control and management of the State employees group health insurance program provided for in this chapter. (2) Authority to establish the State employees group health insurance program on an insured or self-insured basis. (3) Selection of the carriers or third-party administrators deemed to offer the best plan to satisfy the interests of the State and its employees and pensioners in carrying out the intent of this chapter. (4) Authority to adopt rules and regulations for the general administration of the State employees group health insurance program. (5) Authority to make and enter into any and all contracts with any agency of the State, or any outside agency, for the purpose of assisting in the general administration of this chapter. . . .” 29 Del. C. § 5210(1)–(5). 88 Sussex Cty. Dep’t of Elections v. Sussex Cty. Republican Comm., 58 A.3d 418, 422 (Del. 2013). 89 Id. (footnotes omitted).
22 “[U]ndefined code terms must be construed according to their common and
approved usage,”90 and this Court regularly refers to dictionaries in defining code
terms.91
In Free-Flow, this Court addressed the scope of the APA and recognized that
not all agency actions fall within the Act.92 Our decision in Free-Flow offers a
helpful framework for this appeal. First,
as a general rule, when an agency adopts a regulation, it must comply with the APA's procedures for adopting a regulation; and when an agency decides whether a named party is violating a law or regulation, it must comply with the APA's procedures for case decisions. But, when an agency carries out other functions, as when it implements a specific and detailed statutory directive, it may operate outside the scope of the APA.93
Second, whether an agency action is a regulation does not depend on the label given
to it by the agency.94
90 Moore v. Wilm. Hous. Auth., 619 A.2d 1166, 1173 (Del. 1993). 91 See, e.g., Id. at 1174 (citing WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY (1986) for the definitions of the words “building” and “public” to define the code term “public building”). 92 Free-Flow, 861 A.2d at 1236. 93 Id. 94 Baker v. Delaware Dep’t of Nat. Res. & Envtl. Control, 2015 WL 5971784, at *13 (Del. Super. Oct. 7, 2015), aff’d, 137 A.3d 122 (Del. 2016) (agency action that meets the broad definition of regulation “must be subject to the rigors of the APA whether they are located in documents captioned ‘Regulations’ or whether they are contained in some other document”); Christina Educ. Ass’n v. Delaware State Bd. of Educ., 1994 WL 637000, at *4 (Del. Super. May 25, 1994) (action designated by agency as a “calendar change” was a de facto regulation).
23 Free-Flow did not, however, further explore the meaning of “regulation,” and
we therefore turn to that question now. The APA’s definition of “regulation”
contains three parts that are relevant to the parties’ dispute. “Regulation” means any
[(1)] statement of law, procedure, policy, right, requirement or prohibition [(2)]
formulated and promulgated by an agency [(3)] as a rule or standard, or as a guide
for the decision of cases . . .” 95 Each of these elements must be satisfied for an
agency action to be a regulation.
First, a regulation must be a “statement of law, procedure, policy, right,
requirement or prohibition.”96 Appellees urge that the SEBC’s selection of a
Medicare Advantage plan was a “policy” because that action—if implemented—
would affect many people and would be “substantively transformational.”97
Specifically, Appellees emphasize the “drastic, adverse consequences on Retiree
healthcare rights” that the switch to Medicare Advantage would have, concluding
that the decision therefore is a “policy.”98 But this argument raises more questions
than it answers. Focusing on the effect of an agency’s decision seems to us
95 29 Del. C. § 10102(7) (emphasis added). The parties do not substantively engage on the second part of the definition, the issue of whether the SEBC’s actions were formulated and promulgated by an agency, and this factor therefore is not an element in our decision. 96 Id. 97 Appellees’ Answering. Br. at 37, 39. 98 Id. at 1. See Oral Argument at 27:28–27:58 (“It was a significant difference from Medicare. . . . [it] impose[d] a lot of rules that are in the papers about prior authorizations out of network, [] out- of-pocket expenses and things like that. This was major.”).
24 subjective and unwieldy. If the meaning of policy depends on an agency action’s
ultimate effect, the agency would be required to know and weigh from the outset the
effect of any proposed action. That standard also would require an agency to predict
how different people or groups would be affected, which will vary from case to case.
Generally, a “policy” is defined as “a definite course or method of action
selected from among alternatives and in light of given conditions to guide and
determine present and future decisions” or “a high-level overall plan embracing the
general goals and acceptable procedures especially of a governmental body.”99 The
SEBC’s decision does not easily satisfy this meaning of “policy.” To the contrary,
29 Del. C. § 5203 expressly permits the SEBC to adopt a Medicare part C plan.100
This specific statutory directive, which authorizes the challenged agency action,
undermines Appellees’ position that this was a policy decision made by the SEBC.101
Instead, the SEBC selected a type of plan from a list of options chosen by the General
99 Policy, Merriam-Webster (2024) https://www.merriam-webster.com/dictionary/policy (Mar. 14, 2024) (emphasis added). 100 29 Del. C. § 5203(a)–(b) (“(a) The basic health care insurance plan for state employees shall be equivalent to the ‘minimum creditable coverage’ as defined by applicable federal law and include coverage for contraceptive methods under § 5203A of this title. . . . (b) The plan shall be for regular employees and eligible pensioners under 65 years of age and for employees and eligible pensioners over 65 years of age who are not entitled to services, rights or benefits under the federal Medicare Program (U.S. Public Law 89-97, as amended) [42 U.S.C. § 1395 et seq.]; and a plan which is supplemental to Medicare parts A and B, or constructed as a plan under Medicare part C, for eligible pensioners entitled to services, rights or benefits under the federal Medicare Program.”). 101 This is consistent with Free-Flow, where this Court held that “[w]e disagree with the premise that all of what an agency does must culminate in a regulation or case decision.” Free-Flow, 861 A.2d at 1236.
25 Assembly. Free-Flow establishes that “when an agency . . . implements a specific
and detailed statutory directive, it may operate outside the scope of the APA.”102
Here, the actions that the SEBC took when selecting a plan arguably were consistent
with Free-Flow’s determination of when an agency action falls outside the APA’s
scope. Ultimately, however, we need not determine whether the SEBC’s action was
a “policy” because, in any event, the challenged decision was not a “rule or
standard.”
The third part of the definition of “regulation” requires the agency action to
be one that qualifies “as a rule or standard, or as a guide for the decision of cases
thereafter . . .” 103 Appellees did not address in their brief and could not coherently
answer at oral argument how the SEBC’s action to select a Medicare plan would be
used “as a guide for the decision of cases thereafter.” Instead, Appellees asserted, if
obliquely, that the action was a “rule or standard.” Appellees did not, however,
engage with the plain meaning of those words, retreating instead to their focus on
the significant (negative) effects felt by State retirees as a result of the SEBC’s
action.
102 Id. 103 29 Del. C. § 10102(7) (emphasis added).
26 Merriam-Webster defines a “rule” as “a prescribed guide for conduct or
action” or a “regulating principle.”104 “Standard” is defined as “something
established by authority, custom, or general consent as a model or example.”105 Both
words require the agency action to guide, regulate, or act as a model for future action.
The SEBC’s adoption of a particular health plan permitted by statute does not meet
any of these definitions. To the contrary, the adoption of a particular plan, authorized
in advance by the General Assembly, does not dictate future agency action and may
be revisited in the future as the SEBC deems appropriate. Because the agency action
was not a “rule or standard,” it was not a regulation under the APA, and the Superior
Court lacked jurisdiction to stay that action under Title 29, Section 10144.
B. The cross-appeal challenging the Superior Court’s attorneys’ fee ruling is moot.
On cross-appeal, Appellees contend that the Superior Court abused its
discretion by not considering and granting an award of attorneys’ fees to
Appellees.106 Specifically, Appellees argue that “by stopping [Appellants’]
unilateral conversion of retirees’ healthcare plan to Medicare Advantage,
[Appellees] achieved a substantial common benefit that merits an award of
104 Rule, Merriam-Webster (2024) https://www.merriam-webster.com/dictionary/rule (Mar. 14, 2024). 105 Standard, Merriam-Webster (2024) https://www.merriam-webster.com/dictionary/standard (Mar. 14, 2024). 106 Appellees’ Answering Br. at 44.
27 attorneys’ fees.”107 In response, Appellants contend that Appellees’ application for
attorneys’ fees was properly rejected by the Superior Court because Appellees never
pleaded a claim for fees and thereby waived that claim.108 Additionally, Appellants
argue that the common benefit doctrine is inapplicable.109 At oral argument,
Appellees withdrew their common benefit argument in light of this Court’s recent
decision in In re Delaware Public Schools Litigation.110 As such, this opinion does
not discuss the merits of that argument.
In addition to their common benefit argument, Appellees maintain that the
State officials’ “reprehensible conduct” supports an award of fees.111 In response,
Appellants contend that Appellees’ reliance on the bad-faith exception to the
American Rule fails because Appellees cannot establish “extraordinary
circumstances here, nor can they establish by clear and convincing evidence that the
SEBC acted in subjective bad faith[,]” and as such attorneys’ fees are not
warranted.112
107 Id. 108 Appellants’ Reply Br. at 33. 109 Id. at 34–39. 110 In re Delaware Pub. Sch. Litig., --- A.3d ---, 2024 WL 332738 (Del. Jan. 30, 2024). 111 Appellees’ Answering Br. at 50. 112 Appellants’ Reply Br. at 39–42.
28 Delaware law follows the American Rule, under which litigants are generally
responsible for paying their own litigation costs.113 Under the American Rule, “a
prevailing party is responsible for the payment of his own counsel fees in the absence
of statutory authority or contractual undertaking to the contrary.”114 Courts
recognize “limited equitable exceptions” to the American Rule, including one for a
party’s “bad faith” conduct throughout litigation.115
Here, Appellees’ argument regarding bad faith is moot because fee shifting is
available only against a losing party in favor of a prevailing party.116 By reversing
the decision below, fee shifting is foreclosed, and it is not necessary for this Court
to engage with Appellees’ bad faith arguments.
IV. CONCLUSION
For the foregoing reasons, we reverse the Superior Court’s order dated
October 19, 2022 staying implementation of a Medicare Advantage Plan for State
retirees and the Superior Court’s May 22, 2023 order entering final judgment in this
case.
113 Mahani, 935 A.2d at 245. 114 Tandycrafts, Inc. v. Initio Partners, 562 A.2d 1162, 1164 (Del. 1989). 115 Montgomery Cellular, 880 A.2d at 227. 116 See Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 245 (1975) (noting that “the general ‘American rule’ [is] that the prevailing party may not recover attorneys’ fees as costs or otherwise” unless there is an applicable statutory authorization for such an award or the award falls within an exception to the American rule).