O'NEAL v. Oxendine

Ruffin, Judge.

John O’Neal appeals from the trial court’s denial of his motions to intervene and to take discovery in a rehabilitation action filed by John Oxendine, Commissioner of Insurance for the State of Georgia (the Commissioner), against Master Health Plan, Inc. (MHP), a Georgia health maintenance organization. He also contends that the trial court erred in refusing to allow him to present evidence at a *172hearing in the rehabilitation action. For reasons discussed below, we affirm.

On June 11, 1997, the Commissioner filed a petition for rehabilitation against MHP pursuant to OCGA § 33-37-11, alleging, among other things, that MHP was undercapitalized, that it had suffered net operating losses in every quarter since September 30, 1994, that its controlling shareholder had been convicted of several offenses including conspiracy to defraud the United States, and that it had filed a bankruptcy petition in U. S. bankruptcy court. On June 19, 1997, the trial court entered a consent order appointing the Commissioner as rehabilitator of MHP, with the power to manage MHP’s business and to take any and all actions necessary or appropriate to reform and revitalize MHP. See OCGA § 33-37-13 (c).

The business continued to suffer operating losses after the appointment of the rehabilitator, and the Commissioner was unsuccessful in his attempts to locate a purchaser for the business. On January 14, 1998, the Commissioner entered into a letter agreement with HMO Georgia, Inc. (HMOG), a Georgia health maintenance organization, providing that, upon approval by the trial court, the parties would enter into an assumption reinsurance agreement whereby HMOG would assume MHP’s policy obligations with respect to its 6,400 remaining policyholders.

On January 20, 1998, the Commissioner filed a motion seeking the trial court’s approval of the reinsurance agreement pursuant to OCGA § 33-37-13 (e). The trial court entered an order requiring any interested parties to appear at a hearing on February 9,1998 to show cause why the motion should not be granted. It also ordered that no discovery would be allowed without approval of the trial court, after notice and a hearing and upon a showing of good cause.

O’Neal, a former executive director of MHP, had obtained a $476,592.30 judgment against MHP on May 12,1997 for violations of the federal False Claims Act, 31 USC § 3730. On January 23, 1998, O’Neal filed a motion to intervene in the rehabilitation action. On January 29, O’Neal filed a motion seeking authority to take depositions of MHP and HMOG and to obtain discovery of certain financial records and other documents of MHP and HMOG. O’Neal contended that such discovery was necessary to enable him to determine whether approval of the reinsurance agreement was fair and in his best interest.

The trial court held a hearing on the motion for approval of the reinsurance agreement on February 9, 1998. At the hearing, the Commissioner’s attorney informed the court that MHP continued to suffer substantial losses, approximately $200,000 to $300,000 per *173month, after the appointment of the rehabilitator.1 At the time of the hearing, the company had approximately 6,400 policyholders, or subscribers, left. The Commissioner had attempted to find a purchaser for the company, but all negotiations for a sale were unsuccessful. The Commissioner then began looking for a company to assume MHP’s obligations with respect to its existing subscribers, and HMOG was the only company to make an offer to do so.

The proposed reinsurance agreement with HMOG consisted of three components. First, HMOG would assume MHP’s outstanding liabilities under its insurance policies as of December 31, 1997, and MHP would transfer approximately $1.2 million in cash reserves to enable HMOG to satisfy such liabilities. Second, HMOG would co-insure on a 100 percent basis MHP’s obligations under its existing policies from January 1, 1998 until March 1, 1998, in exchange for a transfer of policy premiums from MHP to HMOG. According to the Commissioner, this would benefit MHP because the premiums generated from its policies were insufficient to cover the payments required under such policies. Finally, on March 1, 1998, all of MHP’s existing policies would be converted into HMOG policies, and MHP would be relieved of any further liability on such policies. The reinsurance agreement contained an escape clause, allowing HMOG to terminate the agreement if closing did not occur by March 1, 1998.

According to the Commissioner, entering into the reinsurance agreement with HMOG would “stop the bleeding of the company” and avert an immediate liquidation. Unless otherwise approved by the court, liquidation would require MHP to remain liable under its policies for at least 30 days following the liquidation order. See OCGA § 33-37-18. Thus, if the reinsurance agreement were not approved and MHP were forced to liquidate, HMOG would not assume MHP’s losses for January and February 1998, and MHP would be liable for further losses at least through March. If the agreement were approved, however, MHP could avoid these continuing losses. In addition, MHP could continue for a time to operate its profitable “third party administrator” business, providing administrative services to self-insured plans, although the Commissioner believed that liquidation ultimately was likely.

O’Neal appeared at the hearing and requested that the court consider his motions to intervene and to conduct discovery. O’Neal’s attorney told the court that he did not have enough information to determine whether the reinsurance agreement was in the interest of *174creditors, although he believed that the Commissioner had undervalued the company and questioned the Commissioner’s management of the business. However, the attorney stated that

I have to concede to you, Your Honor, it’s a dangerous thing for us to come here because it could be that what the rehabilitator says is all true. . . . Our position is simply that we would like the opportunity to learn the facts under oath so that we can intelligently make a decision about this.

The trial court denied O’Neal’s motion to conduct discovery, stating that it was hesitant to do something that might interfere with the consummation of the reinsurance agreement. The court also denied the motion to intervene, although it stated that

I heard him, so I guess he was intervening. At any rate, I don’t think it makes any difference. I can’t see any difference whether I denied your intervention or allow you to intervene and denied your relief that you sought. So to make it clean, I will just deny your intervention.

The trial court approved the reinsurance agreement, finding that it was fair and equitable to all parties in interest and “calculated to maximize the value accorded to creditors ... as well as offer uninterrupted coverage to [MHP’s] insured members.”2

1. O’Neal contends that the trial court erred in denying his motion to allow discovery with respect to the execution of the reinsurance agreement. This contention is without merit.

The Insurers Rehabilitation and Liquidation Act provides that “[t]he rehabilitator may take such action as he deems necessary or appropriate to reform and revitalize the insurer,” and vests the rehabilitator with “all the powers of the directors, officers, and managers” of the company. OCGA § 33-37-13 (c). OCGA § 33-37-13 (e) provides that

[i]f the rehabilitator determines that reorganization, consolidation, conversion, reinsurance, merger, or other transformation of the insurer is appropriate, he shall prepare a plan to effect such changes. Upon application of the rehabilitator for approval of the plan, and after such notice and hearings *175as the court may prescribe, the court may either approve or disapprove the plan proposed, or may modify it and approve it as modified. Any plan approved under this Code section shall be, in the judgment of the court, fair and equitable to all parties concerned.

(Emphasis supplied.) The Act does not set forth any specific guidelines for giving notice of proposed action or give a creditor the right to take discovery before approval of such action, but leaves such matters to the discretion of the trial court.

In this case, the show cause order required that notice of the hearing on the approval motion be mailed to creditors on January 20, 1998, 20 days before the hearing. In his motion to intervene, O’Neal’s attorney stated that O’Neal received the notice on January 20. The court specifically found that the notice required by the order “constitutes reasonable, adequate, fair and satisfactory notice of the issues to be heard by the Court at the hearing.”

O’Neal did not contend below that the 20-day notice period was unreasonable in and of itself, but argued that he should be allowed to conduct discovery to determine whether the reinsurance agreement was in his best interests.3 However, O’Neal did not file his motion for discovery until January 29, 1998, nine days after receiving notice and eleven days before the hearing. Moreover, he did not request that an expedited hearing be held on his motion, although the show cause order provided that discovery would be allowed only “after notice and a hearing and a showing of good cause.” Thus, the court was not able to consider O’Neal’s motion until the day of the approval hearing, at which point it was faced with the alternatives of either (1) continuing the hearing and thus delaying approval of the reinsurance agreement, or (2) denying the motion for discovery and proceeding with the hearing.

In balancing these alternatives, the trial court was faced with several considerations. First, and perhaps most important, HMOG was entitled to terminate the reinsurance agreement if it was not consummated by March 1, 1998, and any delay in approval of the agreement could have jeopardized the ability of the Commissioner to close the transaction in a timely manner. Moreover, requiring HMOG to submit to depositions and produce all documents relating to the proposed agreement, as requested by O’Neal, could have affected HMOG’s willingness to consummate the transaction. In denying O’Neal’s motion, the trial court indicated that it was “hesitant” to do *176anything to jeopardize the transaction.

In addition, O’Neal failed to provide the trial court with any concrete basis to expect that allowing discovery was likely to lead to evidence that would affect the trial court’s decision as to whether to approve the reinsurance agreement. Indeed, O’Neal’s attorney admitted that the reinsurance agreement proposal might be in the best interest of the parties, and that he simply wanted to conduct discovery to be able to make an informed decision about whether to support the agreement. Combined with the fact that O’Neal did not seek an expedited hearing so that the discovery motion could be considered well in advance of the approval hearing, this clearly authorized the trial court to conclude that the possible benefits of allowing discovery were outweighed by the danger of delay, particularly in light of the Commissioner’s evidence regarding the deteriorating financial condition of the company and the adverse consequences of rejecting the reinsurance agreement. Under all of these circumstances, therefore, the trial court did not abuse its discretion in denying the motion for discovery.

2. O’Neal contends that the trial court erred in approving the transfer without giving him the opportunity to present evidence in opposition to it. However, O’Neal did not attempt to present evidence at the hearing, other than through the representations of his attorney Although O’Neal’s attorney informed the court that O’Neal was present and prepared to testify that the reinsurance agreement “would not make sense,” he never attempted to call O’Neal to the witness stand. Although the attorney stated that “we have depositions we’re prepared to introduce into evidence” relating to the valuation of HMOs, he did not in fact attempt to introduce such depositions into evidence. The trial court never ruled that O’Neal was prohibited from introducing testimonial or documentary evidence at the hearing. Because O’Neal never attempted to introduce such evidence, but instead relied upon his attorney’s representations to the court, he cannot complain on appeal that the trial court prevented him from doing so. See Walker v. State, 220 Ga. App. 80, 82-83 (1) (467 SE2d 388) (1996).4

*1773. O’Neal contends the trial court erred in denying his motion to intervene. In his appellate brief, O’Neal clarifies and limits the scope of this enumeration by arguing simply that he had a right to intervene “to contest the propriety of [the reinsurance agreement].” See Mauldin v. Weinstock, 201 Ga. App. 514, 517 (3) (411 SE2d 370) (1991). In his motion below, O’Neal indicated that he sought intervention so that he could take discovery with respect to the reinsurance agreement. As discussed above, however, the trial court did not err in precluding O’Neal from conducting discovery prior to approving the reinsurance agreement. Although the trial court technically “denied” the motion to intervene, it allowed O’Neal to participate fully in the approval hearing and to raise objections to the reinsurance agreement. Although O’Neal elected to present no testimony in opposition to the approval motion, he was not prevented from doing so by the trial court. Accordingly, he has not shown how he has been harmed by the denial of his motion to intervene. See Joiner v. Lane, 235 Ga. App. 121, 125 (3) (a) (508 SE2d 203) (1998) (harm as well as error must be shown to warrant reversal).

Judgment affirmed.

McMurray, P. J., Pope, P. J., Andrews and Eldridge, JJ, concur. Blackburn, J., concurs in judgment only. Beasley, P. J., dissents.

Although no testimonial evidence was offered at the hearing, “[a]ttomeys are officers of the court and their statements in their place, if not objected to, serve the same function as evidence.” (Punctuation omitted.) Cafagno v. Hagan, 213 Ga. App. 631 (445 SE2d 380) (1994).

The Commissioner’s motion to dismiss this appeal on the grounds of mootness is denied. Although the Commissioner contends that the reinsurance agreement was consummated after the trial court’s ruling, it does not appear that O’Neal would fail to derive any benefit from a favorable ruling in this appeal. See Grindle v. Chastain, 229 Ga. App. 386, 388 (1) (493 SE2d 714) (1997).

For comparison purposes, we note that Rule 2002 (a) of the Federal Rules of Bankruptcy Procedure requires 20 days notice of, among other things, “a proposed use, sale, or lease of property of the estate other than in the ordinary course of business.”

The dissent states that another creditor attempted to present documentary evidence, but that “[t]he court declined to accept his documentary evidence as being unnecessary to the issue it had to decide.” The documentary evidence in question consisted of a contract providing that the creditor, a former officer of the company, would receive a specified amount upon the sale of the company. The colloquy between the trial court and such creditor’s counsel was as follows:

Mr. Knox: Would Your Honor like for me to leave the court this contract that I mentioned on behalf of my client? The Court: I don’t think it’s going to help us any because I don’t have any problem with believing that he is a creditor. I don’t have any problem with believing what you say about his association or his connection *177with the company. Mr. Knox: I just wanted to proffer some evidence in that regard. The Court: I have no problem with that. I don’t need to look into it. It’s just a question of what do I do about it. Mr. Knox: All we want is some time, Your Honor, to find out. The Court: All right. Thank you.

Contrary to the dissent’s statement, the trial court did not prevent the creditor from offering any evidence; rather, it appears that the creditor simply elected not to proffer such evidence after the trial court indicated that it accepted his contention that he was a creditor of the company.