Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Shareholders of The MIIX Group Inc. are suing its officers and directors, who they say gutted the Lawrenceville, N.J., medical malpractice insurer in order to enhance the fortunes of a startup venture. MIIX stopped writing policies for doctors so that a newly formed stock company, MIIX Advantage Inc., could take over the business. “They left the old shareholders with all the liabilities and gave all the opportunities to the new company,” says plaintiffs’ lawyer Harvey Kesner, of Lampf, Lipkind, Prupis & Petigrow in West Orange, N.J. The putative class action, Glasser v. The MIIX Group Inc., 03-CV-536, filed Feb. 14 in federal court, has been assigned to Judge Anne Thompson in Trenton. MIIX management allegedly spearheaded an effort that raised $17 million in capital from New Jersey doctors to get MIIX Advantage started. Though the new company is at the same location and is under the same management, it is owned by a different set of shareholders. Last August, MIIX filed with the Securities and Exchange Commission agreements transferring MIIX’s policy renewal rights to MIIX Advantage, licensing use of the MIIX name and trademarks, allowing MIIX to provide management services to the new company and barring MIIX from issuing policies for at least 10 years. MIIX Advantage agreed to pay MIIX a 10 percent commission on nonbrokered renewals, and 3 percent where a broker was involved, for giving up the right to do business. MIIX was to liquidate its business during the next several years, paying off claims under existing policies but writing no new ones. The New Jersey Department of Banking and Insurance approved MIIX’s plans in May and gave approval in August for MIIX Advantage to enter the market as of Sept. 1, 2002. A feasibility plan filed by MIIX Advantage projects profits for the new company of more than $8 million in net income by 2007. Nevertheless, say the plaintiffs, the transfer of business was tainted by conflicts because every MIIX director sat on the MIIX Advantage board or on the board of the Medical Society of New Jersey, which owns 821,365 shares of MIIX stock and is a named defendant. The suit alleges violations of federal securities laws and regulations by deceiving investors through false and misleading statements and by failing to disclose material information. The suit charges that MIIX failed to disclose problems and financial irregularities that caused a sharp drop in MIIX stock price in 2002, from a 52-week high of $13.50 a share to as low as 60 cents on July 8, 2002. Last Friday, the stock was trading at 80 cents a share. The suit charges that MIIX officers and directors sold their shares before the price plummeted, while luring investors to purchase at an artificially inflated price. The suit also charges that the agreements reduced competition, in violation of the New Jersey Anti-Trust Act, N.J.S.A. 56:9-1 et seq. MIIX DEFENDS ACTIONS In a press release, MIIX calls the suit “without merit” and defends the decision to go into voluntary solvent runoff. It says it “could not continue to write insurance due to the size of the losses it had incurred in 2000 and 2001″ and that it “reacted quickly and decisively to this crisis by implementing a business plan that was intended to preserve shareholder value.” The latest MIIX financial report, filed Feb. 26, shows a $63.7 million loss for the last quarter of 2002 and $107.5 million for the year. It also states that known claims dropped last year from 8,853 to 8,139. MIIX’s lawyer, David D’Aloia, a partner with Newark’s Saiber Schlesinger Satz & Goldstein, declines comment. The medical society’s general counsel, Robert Conroy, calls the suit “nonsensical and na�ve” in ignoring the medical society’s right as a major shareholder to “have people on the board who are responsive to them.” Conroy, a partner with Kern Augustine Conroy & Schoppmann in Bridgewater, says it “defies rational belief” to assert that a company like MIIX would give up a thriving business and points out that the state approved the MIIX voluntary solvent runoff and the market entry of MIIX Advantage. OTHER LITIGATION This is not the first suit to allege conflicts of interest on the part of MIIX directors. Neil Weisfeld, the medical society’s former deputy executive director, filed a whistleblower suit on Nov. 23, alleging he was fired for calling attention to conflicts of interest by medical society directors who were also directors and investors in MIIX. Weisfeld v. Medical Society of New Jersey, MER-L-3632-02. Weisfeld contends that five directors and officers, four of whom are defendants in the Glasser suit, favored the interests of MIIX over those of the medical society. The Glasser plaintiffs, by contrast, say the dual directors favored Medical Society interests over those of MIIX. Conroy notes the contradictory allegations, saying they both cannot be true and that in fact, neither is. Weisfeld’s lawyer, Ron Schmidt, a partner in the Washington, D.C., office of Jersey City’s Shaffer Rapaport & Schmidt, says the defendants have not answered but have moved to dismiss. Plaintiff Sidney Glasser, a Pennsylvania doctor, owns 500,000 shares of MIIX stock. His lawyers represented doctors who sued unsuccessfully in 1999 to block MIIX from going public.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.