Judge Tosses Out Bulk of Suit Against Health Net

A state judge has thrown out the bulk of a lawsuit that Qual-Med Inc. filed against Health Net, a suit that challenged Health Net’s conversion from a nonprofit to a for-profit entity in February.

Health Net, based in Woodland Hills, is the state’s second largest health maintenance organization (HMO) with nearly 900,000 members. Qual-Med, headquartered in Pueblo, Colo., operates HMOs in several states and has unsuccessfully attempted to acquire Health Net.

Superior Court Judge Ronald B. Robie in Sacramento earlier this month effectively barred Qual-Med from continuing to sue Health Net for any damage claims related to Health Net’s conversion, which was approved by California Corporations Commissioner Thomas Sayles on Feb. 6. Qual-Med, among other things, had contended that the conversion illegally interfered with Qual-Med’s efforts to buy Health Net.

As part of that conversion, voting control of Health Net was purchased by the HMO’s management and most of its stock was donated to a newly formed health-related foundation called The Wellness Foundation. Health Net will donate $300 million to the foundation over 15 years.