Gusmano v. Allstate Insurance Company

Filing 10

OPINION AND ORDER Dismissing Count II of First Amended Complaint and Declining to Exercise Supplemental Jurisdiction Over Remaining State-Law Claims. Signed by District Judge Sean F. Cox. (PMil)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
Barbara Gusmano,
Plaintiff,
v.

Case No. 13-13208

Allstate Insurance Company,

Sean F. Cox
United States District Court Judge

Defendant.
_____________________________/
OPINION & ORDER
DISMISSING COUNT II OF FIRST AMENDED COMPLAINT
AND DECLINING TO EXERCISE SUPPLEMENTAL JURISDICTION OVER
REMAINING STATE-LAW CLAIMS
This action was filed in Wayne County Circuit Court. Approximately eight months later,
after Plaintiff amended her complaint to include a federal claim, the action was removed to this
Court. The action is currently before the Court on the Defendant insurer’s motion seeking to
dismiss Count II of Plaintiff’s First Amended Complaint, which asserts a claim for double
damages under the Medicare Secondary Payer Act. In this motion, the Defendant insurer asserts
that the Court must dismiss that count, under the Sixth Circuit’s decision in Bio-Medical,
because Plaintiff does not allege that it denied her claims due to her eligibility for Medicare. The
Court finds that the issues have been adequately presented in the parties’ briefs and that oral
argument would not significantly aid the decisional process. See Local Rule 7.1(f)(2), U.S.
District Court, Eastern District of Michigan. The Court therefore orders that the motion will be
decided upon the briefs. For the reasons set forth below, the Court shall: 1) grant the Defendant
insurer’s Motion to Dismiss and dismiss the count asserting a claim under the Medicare

1

Secondary Payer Act; and 2) after dismissing that sole federal claim, remand Plaintiff’s
remaining state-law claims to the Wayne County Circuit Court.
BACKGROUND
Plaintiff Barbara Gusmano (“Plaintiff” or “Gusmano”) filed suit against Defendant
Allstate Insurance Company (“Defendant” or “Allstate”) in Wayne County Circuit Court on or
about November 30, 2012. Her original complaint asserted a breach of contract claim.
On July 8, 2013, however, Gusmano was granted leave to file a First Amended
Complaint that asserts two counts against Allstate: “Right of Coverage and Reimbursement,
Violation of the Michigan No-Fault Act and Breach of Contract” (Count I); and “Defendant’s
Liability and Recovery Under the Medicare Secondary Payor Act” (Count II). After Gusmano
filed that First Amended Complaint, Allstate removed the action to this Court, based upon
federal question jurisdiction over Count II.
Gusmano’s First Amended Complaint alleges that on or about December 5, 2011, she
was insured with Allstate “under the provisions of an automobile policy issued by [Allstate] that
was then in effect in accordance with the provisions of MCLA 500.3101 et seq. (The Michigan
No-Fault Act) and for which applicable insurance premiums were paid. The contract also
included personal protection insurance coverage to [Gusmano].” (First Am. Compl. at ¶ 4).
Gusmano alleges that, under the terms and conditions of the contract of insurance, Allstate
“became obligated to pay certain expenses or losses in the event [she] sustained bodily injury or
death in an accident arising out of the ownership, operation, maintenance, or use of a motor
vehicle.” (Id. at ¶ 8).
On or about December 5, 2011, Gusmano was a driver of a motor vehicle “that was

2

involved in an collision where [she] suffered accidental bodily injuries within the meaning of
Defendant’s policy of insurance and the statutory provisions of MCLA 500.3105.” (Id. at ¶ 9).
Gusmano alleges that Allstate “has refused to pay or is expected to refuse to pay [her] all
personal protection insurance benefits in accordance with the applicable No-Fault contract
provisions.” (Id. at ¶ 13).
Count II, which is the count at issue in the pending motion, seeks to recover double
damages under the Medicare Secondary Payer Act and alleges, in its entirety:
16.
17.

All paragraphs are incorporated by reference.
At all times herein alleged, [Gusmano] was over the age of 65, and
eligible for coverage of medical care under the Federal Medicare program;
notwithstanding that eligibility, Defendant Allstate was primary and in
first priority for payment of all medical bills.
18.
Plaintiff has received medical services and incurred substantial medical
bills, which bills have been submitted to [Allstate] and denied, and
thereafter, were submitted to and paid by Medicare.
19.
Plaintiff now has a direct right to enforce the payment of all medical
services paid by Medicare by Defendant Allstate, pursuant to the
Medicare Secondary Payor Act (“MSPA”), 42 USC 1395y(b)(2)(B)(ii).
20.
[Allstate] was the primary plan for payment of the no-fault costs asserted
as due and owing herein, and had a responsibility under the Michigan NoFault Act to make payment with respect to such services.
21.
As a result of [Allstate’s] denial of benefits, Plaintiff’s medical providers
have billed and received a conditional payment from Medicare, for which
Defendant is liable for reimbursement pursuant to the MSPA.
22.
Pursuant to the MSPA, Defendant remains liable for double damages,
inasmuch as Defendant has refused to make reimbursement to the medical
provider of its charges, and by its denial of further coverage, has refused
to make reimbursement to Medicare, pursuant to 42 USC 1395y(b)(#3(A)
[sic].
WHEREFORE Plaintiff demands Judgment in such amount as it [sic] is
legally and equitable [sic] entitled to in an amount in excess of $25,000.00, costs,
fees, penalties, and interest allowed under Michigan law, and double damages,
interest, and all relief as may be allowed under the Medicare Secondary Payor
Act.
(First Am. Compl. at 4-5). Notably, Gusmano’s First Amended Complaint does not allege that

3

Allstate denied her claims due to her Medicare eligibility.
On August 2, 2013, Allstate filed the instant “Motion to Dismiss Count II of First
Amended Complaint” (Docket Entry No. 3), pursuant to Fed. R. Civ. P. 12(b)(6).
ANALYSIS
In its Motion to Dismiss, Allstate asserts that the Court should dismiss Count II under
Bio-Medical Applications of Tennessee, Inc., 656 F.3d 277 (6th Cir. 2011)1 because Gusmano
has not alleged, and could not allege, that Allstate denied her claims due to her eligibility for
Medicare.
In response, Gusmano asserts that she is not required to allege a violation of both 42
U.S.C. § 1395y(b)(1) and (2)(A) and that Allstate’s reliance on Bio-Medical, and other decisions
cited by Allstate, is misplaced.
This Court very recently addressed this very same argument in another case. See
Michigan Spine and Brain Surgeons, PLLC v. State Farm Mut. Auto. Ins. Co., 2013 WL
5435284 (E.D. Mich. 2013).
I.

This Court Shall Grant Allstate’s Motion To Dismiss Plaintiff’s Claim Under The
Medicare Secondary Payer Act, Under Bio-Medical, For The Same Reasons It Did
So In Michigan Spine.
As this Court explained in Michigan Spine, in Bio-Medical, the Sixth Circuit analyzed

the private cause of action provided for in the Medicare Secondary Payer Act. Bio-Medical, 656
F.3d at 284-87. It began by looking to how the private right of action is defined under the Act.

1

Allstate also directs the Court to several decisions from courts outside of the Sixth
Circuit that have cited Bio-Medical favorably. Harris Corp. v. Humana Health Ins. Co., 253
F.3d 598 (11th Cir. 2001); Bio-Medical Applications of Georgia, Inc. v. City of Dalton, Georgia,
685 F.Supp.2d 1321 (N.D. Ga. 2009); and Pachaly v. Benefits Admin. Comm. Unilever United
States, Inc., 2013 WL 172993 (D. Conn. 2013).
4

Id. at 284. The Medicare Secondary Payer Act states:
(A) Private cause of action
There is a private cause of action for damages (which shall be in an
amount double the amount otherwise provided) in the case of a primary plan
which fails to provide for primary payment (or appropriate reimbursements) in
accordance with paragraphs (1) and (2)(A).
42 U.S.C. § 1395y(b)(3)(A). The court noted that, by providing for recovery of double damages,
the provision is attractive to a healthcare provider like Bio-Medical. Id.
“But a private party can recover under this provision only if a private plan has failed to
provide primary payment or appropriate reimbursement ‘in accordance with paragraphs (1) and
(2)(A).’ When does that occur?” Id. (emphasis added). The Sixth Circuit then answered that
question. In doing so, the court explained:
When does a primary plan fail to make payment “in accordance with paragraph
(1) and (2)(A)”? Determining when a primary plan violates paragraph (1) is easy.
A primary plan fails to pay under paragraph (1) by, among other things, “tak[ing]
into account” that a planholder is entitled to Medicare benefits after being
diagnosed with end-stage renal disease. See 42 U.S.C. § 1395y(b)(1)(C)(i). As
discussed in Part II above, [defendant] Central States did precisely that by
terminating the patient’s coverage because of her entitlement to Medicare
benefits. But the private cause of action uses the conjunctive: it requires that the
primary plan fail to make payment “in accordance with paragraphs (1) and
(2)(A).” Id. § 1395y(b)(3)(A). (emphasis added). The private cause of action,
therefore, also apparently requires us to determine when a primary plan fails to
pay in accordance with subparagraph (2)(A).
Id. at 285.
The court explained that “[t]he challenge with making this determination is that
subparagraph (2)(A) only addresses Medicare – not primary plans – as its subject.” Id. “How
can a primary plan fail to make a payment in accordance with subparagraph (2)(A), if that
subparagraph only instructs when Medicare, and not primary plans, may or may not make
payments? The answer, of course, is that it cannot: it is impossible for one to violate an order
5

addressed only to someone else.” In order to avoid rendering a private cause of action void, the
Court construed paragraphs (1) and (2)(A) collectively:
The solution is to consider paragraphs (1) and (2)(A) collectively, rather than
individually. Paragraph (1) prevents a primary plan from limiting a planholder’s
benefits or coverage simply because the planholder is entitled to Medicare
benefits, and subparagraph (2)(A) instructs that when a primary plan violates that
prohibition and accordingly fails to pay for treatment, Medicare may make a
conditional payment for the treatment. Thus, a primary plan fails to pay “in
accordance with paragraphs (1) and (2)(A): when it terminates a planholder’s
coverage and thereby induces Medicare to make a conditional payment on its
behalf – that is, when the primary plan violates the statutory system that these two
paragraphs set into motion. Put differently, a primary plan is liable under the
private cause of action when it discriminates against planholders on the basis of
their Medicare eligibility and therefore causes Medicare to step in and
(temporarily) foot the bill. Our interpretation, in addition to rendering operative
all relevant statutory provisions, is eminently reasonable: it permits lawsuits
against the primary plans that performed the precise actions that the Act
condemns.
Id. at 286-87 (emphasis added).
The court concluded that a private cause of action existed in Bio-Medical because the
primary plan terminated the insured’s coverage “due to her Medicare entitlement (in violation of
the Act).” Id.
Here, like the situation presented in Michigan Spine, Plaintiff does not allege that the
defendant insurer denied her claims due to the fact that she was eligible for Medicare.2
Thus, as was the situation in Michigan Spine, unless Plaintiff can identify how the
defendant insurer violated a specific provision of (1)(A) – which she has not done – she cannot

2

Plaintiff has not filed a motion seeking leave to file a Second Amended Complaint.
Nevertheless, Allstate asserts that “While it is not relevant for purposes of this Motion, Allstate
submits that Plaintiff did not allege this because she knows full well that her eligibility for
Medicare was not the reason for Allstate’s claim decision, and Plaintiff will therefore not be able
to allege this basis for a private cause of action under the MSP, consistent with Rule 11, if given
leave to amend.” (Def.’s Br. at 13 n.2).
6

pursue a private cause of action under the interpretation of the Act by the Sixth Circuit in BioMedical. As noted in Bio-Medical, the “first three subparagraphs of paragraph (1) prevent group
health plans from “taking into account” that a planholder is entitled to Medicare benefits due to
being: (a) at least sixty-five years old, (b) disabled, or (c) diagnosed with end-stage renal
disease.” Bio-Medical, 656 F.3d at 285. There are other subparagraphs but, as was the case in
Michigan Spine, they have no application here (e.g., treatment of certain members of religious
orders).
In Bio-Medical, the Sixth Circuit held that a “private party can recover under this
provision only if a private plan has failed to provide primary payment or appropriate
reimbursement ‘in accordance with paragraphs (1) and (2)(A).’” Bio-Medical, 656 F.3d at 285
(emphasis added). Gusmano has not alleged that Allstate has done so. Accordingly, this Court
shall GRANT Allstate’s Motion to Dismiss Count II.
II.

Given That This Court Is Dismissing The Only Federal Claim In This Action, The
Court Shall Decline To Exercise Supplemental Jurisdiction Over Plaintiff’s
Remaining State-Law Claims Asserted In Count I And Shall Remand This Action
To State Court.
Given that this Court is dismissing the only federal claim in this action, which was

removed to this Court based solely upon federal question jurisdiction, the Court must consider
whether it should exercise supplemental jurisdiction over the remaining state-law claims (Count
I of Plaintiff’s First Amended Complaint).
It is well-established that a federal court that has dismissed a plaintiff’s federal-law
claims should not ordinarily reach the plaintiff’s state law claims. Moon v. Harrison Piping
Supply, 465 F.3d 719, 728 (6th Cir. 2006) (citing United Mine Workers of Am. v. Gibbs, 383
U.S. 715, 726 (1966)). Residual jurisdiction should be exercised only in cases where the
7

interests of judicial economy and the avoidance of multiplicity of litigation clearly outweighs the
concern over needlessly deciding state-law issues. Moon, 456 F.3d at 728. This is not such a
case. The Court shall therefore decline to exercise supplemental jurisdiction over Plaintiff’s
remaining claims and shall remand this action to state court.
CONCLUSION & ORDER
For the reasons set forth above, IT IS ORDERED that Defendant’s Motion to Dismiss
Count II of Plaintiff’s First Amended Complaint is GRANTED and Count II is DISMISSED
WITH PREJUDICE.
IT IS FURTHER ORDERED that this Court DECLINES TO EXERCISE
SUPPLEMENTAL JURISDICTION over Plaintiff’s remaining state-law claims and this action
is hereby REMANDED to Wayne County Circuit Court.
IT IS SO ORDERED.
S/Sean F. Cox
Sean F. Cox
United States District Judge
Dated: November 21, 2013
I hereby certify that a copy of the foregoing document was served upon counsel of record on
November 21, 2013, by electronic and/or ordinary mail.
S/Jennifer McCoy
Case Manager

8