Audio Judge rules in favor of Medica; criticizes Hatch's actions (story audio) Photos Mike Hatch More from MPR Read Judge Zimmerman's ruling (pdf) Medica case could test attorney general's power over nonprofits (08/16/2005) Resources Medica Minnesota Attorney General's office Tools E-mail this page Print this page Sponsor

Judge rules in favor of Medica; criticizes Hatch's actions
by Elizabeth Stawicki, Minnesota Public Radio
August 18, 2005

Hennepin County Judge Lloyd Zimmerman ruled against Attorney General Mike Hatch in his attempt to replace the board of Medica, a nonprofit HMO in Minnesota. The judge said Hatch overstepped his bounds by seeking the action. (MPR file photo)

A Hennepin County judge has rebuked Attorney General Mike Hatch's attempt to remove a non-profit health care's board of directors. Judge Lloyd Zimmerman ruled on Thursday that Hatch's allegations against Medica were "completely unproven."

Minneapolis, Minn. — Judge Zimmerman said the four-year battle for control of the Medica board is over. Zimmerman's 50-page opinion details a kind of rise and fall of the attorney general's intervention into Medica that began in 2001.

Hatch found Medica's parent company, Allina, had wasted millions of dollars on executive perks and consultants. As a consequence, Allina agreed to reorganize, spin off Medica, and overhaul management. Medica's board resigned and the court appointed eight new members Hatch had hand-picked.

Zimmerman called Hatch's initial investigation into Medica and its parent company as "government at its best, protecting the public from waste and corruption."

But just last year, Hatch sought court approval to remove those same members. He said in court papers they "hijacked" the company, abused their non-profit status, held sham elections, and gave themselves lavish raises. Zimmerman disagreed. He said the new board did nothing wrong. He said it violated no law, no order, no by-law and no ethical precept.

Representing Medica's board, former Minnesota Supreme Court Justice Esther Tomljanovich says the ruling means the board can go on with its work without a big distraction.

"Far too much of our resources went into this and far too much of our thought," she said. "We had to be updated at virtually every board meeting and every committee meeting and so it was something that shouldn't have been there when you're trying to run a company."

Judge Zimmerman called the attorney general's attempt to remove Medica's new board "expensive, time-consuming and unfortunate." He said Hatch's allegations were supported only by overheated rhetoric. Zimmerman also said he was left wondering what Medica's new board did wrong because the attorney general's claims changed over time.

Hatch would not take questions, but he released a statement, continuing to question Medica's board members; people he refers to as administrators.

"We do not believe that court administrators and state administrators regardless of how blue ribbon they are should form a holding company to gain control of the board of a multi-million dollar HMO. We do not believe that court administrators and state administrators regardless of how blue ribbon they are should take control of the board of non-profit company by falsely claiming to be members of the non-profit company when in fact they are not," Hatch's statement said.

The Minnesota Council of Non-Profits filed a friend-of-the-court brief supporting Medica in the case. The Council's director, Jon Pratt, supports the attorney general's office. He says, however, the ruling affirms the autonomy of non-profit boards.

"We have one of the best attorneys general's offices in the country and it did a great service on this case. This last chapter of the case was going too far and the judge agreed," he said.

A noted authority on non-profit law, Bruce Hopkins was not so reserved.

"I read court opinions by the hundreds and it's a pretty rare day when you read one like this; not only the tone of which it's written, but the severity of the criticism of a government official by a judge is quite unusual," he said.

Hopkins has written at least a dozen books on non-profit law. He says the ruling should bolster the spirits of non-profit board members who act ethically.

"It should be a reminder to government officials that they don't have unfettered authority to just come roaring in and make wild allegations like this without the judiciary stepping in and trying to be a little more balanced."

Throughout his opinion, Hennepin County Judge Lloyd Zimmerman's appeared concerned that Hatch's stinging criticisms of board members would effect their reputations. At the end of the day, Zimmerman said, good people were unfairly accused. And after a fair and impartial trial, he said, their good name is restored to them.