The Common Law Power of the Legislature: Insurer Conversions and Charitable Funds

The Milbank Quarterly, Vol. 83, No. 2, pp. 225-46, 2005

U of Michigan Law & Economics, Olin Working Paper No. 07-013

18 Pages Posted: 19 Jul 2007  

Jill R. Horwitz

UCLA School of Law; National Bureau of Economic Research (NBER)

Marion R. Fremont-Smith

Harvard University - The Hauser Center

Abstract

New York's Empire Blue Cross and Blue Shield conversion from nonprofit to for-profit form has considerable legal significance. Three aspects of the conversion make the case unique: the role of the state legislature in directing the disposition of the conversion assets, the fact that it made itself the primary beneficiary of those assets, and the actions of the state attorney general defending the state rather than the public interest in the charitable assets. Drawing on several centuries of common law rejecting the legislative power to direct the disposition of charitable funds, this article argues that the legislature lacked power to control the conversion and direct the disposition of its proceeds and that its actions not only undermined the nonprofit form but also raised constitutional concerns.

Keywords: organizations, nonprofit, Blue-Cross plans, legal aspects, for-profit conversions

JEL Classification: I11

Suggested Citation

Horwitz, Jill R. and Fremont-Smith, Marion R., The Common Law Power of the Legislature: Insurer Conversions and Charitable Funds. The Milbank Quarterly, Vol. 83, No. 2, pp. 225-46, 2005; U of Michigan Law & Economics, Olin Working Paper No. 07-013. Available at SSRN: https://ssrn.com/abstract=1000461

Jill R. Horwitz (Contact Author)

UCLA School of Law ( email )

Box 951476
Los Angeles, CA 90095-1476
United States
310-206-1577 (Phone)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Marion R. Fremont-Smith

Harvard University - The Hauser Center ( email )

79 JFK Street
Cambridge, MA 02138
United States

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