Michigan Ambulatory Surgical Center, LLC v. State Farm Mutual Automobile Insurance Company

Filing 26

OPINION AND ORDER denying 10 Motion for Summary Judgment; granting 17 Motion to Amend/Correct. Signed by District Judge Paul D. Borman. (DTof)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
MICHIGAN AMBULATORY
SURGICAL CENTER, LLC,

Case No. 16-cv-14507
Paul D. Borman
United States District Judge

Plaintiff,
v.
STATE FARM MUTUAL
AUTOMOBILE INSURANCE
COMPANY,
Defendant.
______________________________/

OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION TO AMEND THE COMPLAINT (ECF NO. 17) AND
DENYING DEFENDANT’S MOTION TO DISMISS (ECF NO. 10)
This case involves Plaintiff Michigan Ambulatory Surgery Centers, LLC’s
(“Michigan Ambulatory” or “Plaintiff”) claims for the payment of no-fault insurance
benefits stemming from an August 19, 2014 motor vehicle accident in which car
driven by Defendant State Farm Mutual Automobile Insurance Company’s (“State
Farm”) insured, Tamika R. Burrell, was struck in the rear by a hit and run driver and
Ms. Burrell sustained accidental bodily injuries. Michigan Ambulatory originally
filed its claims in Wayne County Circuit Court on or about December 2, 2016, and
Defendant State Farm removed the case to this Court on December 30, 2016, based
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upon diversity jurisdiction. (ECF No. 1, Notice of Removal.)
Michigan Ambulatory, a healthcare provider that claims to have provided
Plaintiff with services related to her care and recovery from the August 19, 2014
accident (specifically a single surgical procedure on February 9, 2016), sought in its
original Complaint to recover no-fault benefits under Michigan’s No-Fault statute for
unpaid medical expenses for the surgical services it provided to Ms. Burrell. As a
result of the Michigan Supreme Court’s May 25, 2017 decision in Covenant Medical
Center, Inc. v. State Farm Mut. Auto. Ins. Co., 500 Mich. 191, 895 N.W.2d 490
(2017), which established that medical providers such as Michigan Ambulatory do not
have a statutory claim under the Michigan No-Fault Act to recover personal protection
insurance benefits from no-fault insurers, Michigan Ambulatory now seeks to amend
its complaint to rely instead on two separate assignments, one executed by Ms. Burrell
on the day of her February 9, 2016 surgery and one executed by her on June 12, 2017,
after the Covenant decision was issued.
Defendant State Farm filed its motion to dismiss this action on June 13, 2017.
(ECF No. 10.)1 Plaintiff filed a Response (ECF No. 12) and State Farm filed a Reply
1

The Court recently issued an Opinion and Order in a related case involving different
healthcare provider claims related to Ms. Burrell’s August 19, 2014 automobile
accident. Much of the procedural and factual background, and to some degree the
analysis of State Farm’s claims, is repeated here. See ZMC Pharmacy, LLC v. State
Farm Auto. Ins. Co., No. 16-10508 (E.D. Mich. 2016) (3/29/18 Opinion and Order).
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(ECF No. 15). On October 9, 2017, Plaintiff filed a Motion for Leave to Amend the
Complaint. (ECF No. 17.) State Farm filed a Response (ECF No. 21) and Plaintiff
filed a Reply (ECF No. 22). The Court held a hearing on both motions on January 25,
2018. For the reasons that follow, the Court GRANTS Plaintiff’s Motion to Amend
and DENIES Defendant’s Motion to Dismiss.
I.

FACTUAL BACKGROUND
On or about August 19, 2014, Tamika Burrell was insured with Defendant State

Farm under a no-fault insurance policy. (ECF No. 1, Notice of Removal Ex. E,
Amended Compl. ¶ 14.) On August 19, 2014, Plaintiff Burrell was involved in a

See discussion infra. As discussed at length by the Court in its Opinion and Order in
ZMC, State Farm appears confused regarding the appropriate Federal Rule of Civil
Procedure under which it seeks relief. And of course this is significant because the
Federal Rule of Civil Procedure under which a party moves dictates the matters that
this Court is permitted to consider in ruling on the motion. State Farm’s motion is
titled “Defendant State Farm’s Motion for Summary Judgment of Provider No-Fault
Claim Under FRCP 12(b)(6).” (ECF No. 10.) Of course, Fed. R. Civ. P. 56, and not
Rule 12(b)(6), applies to motions for summary judgment. And, as explained at length
by this Court in the ZMC Opinion and Order, Rule 12(b)(6) is inapplicable here
because State Farm answered Michigan Ambulatory’s Complaint in state court on or
about December 29, 2016. A motion asserting the defense of failure to state a claim
under Rule 12(b)(6) “must be made before pleading if a responsive pleading is
allowed.” Fed. R. Civ. P. 12(b). As explained at length in this Court’s Opinion and
Order in ZMC, because State Farm has answered the Complaint and seeks dismissal
under Rule 12 for failure to state a claim, the appropriate subsection is Fed. R. Civ.
P. 12(c) for judgment on the pleadings. The Court thus construes State Farm’s motion
as one for judgment on the pleadings and analyzes the merits of the motion alongside
Plaintiff’s motion to amend.
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motor vehicle accident in which she sustained accidental bodily injuries. (Id. ¶ 16.)
Plaintiff Burrell was struck in the rear of her vehicle by a hit and run driver, pushing
her into the vehicle in front of her, and therefore seeks uninsured motorist benefits in
the amount of the policy limits of $50,000. (Id. ¶ 17.) Plaintiff Burrell claims to have
suffered permanent disfigurement that has affected her ability to lead a normal life,
specifically but not limited to post-concussion syndrome, disc herniation at multiple
levels compressing the thecal sac, myofascial syndrome in the spine, closed head
injury, cervical and lumbar radiculopathy, anxiety, and depression. (Id. ¶ 21.)
Plaintiff Burrell also claims to have lost wages and suffered diminished earning
capacity, as well as having incurred economic expenses and medical expenses. (Id.
¶¶ 22-23.)
This action is related to another case against State Farm, arising out of the same
motor vehicle accident, filed by the insured, Ms. Burrell, and two other healthcare
providers also seeking to recover no-fault benefits related to services provided related
to Ms. Burrell’s August 19, 2014 accident. See ZMC Pharmacy, LLC v. State Farm
Mutual Auto. Ins. Co., No. 16-10508 (E.D. Mich. 2016). In ZMC, Plaintiffs Burrell
and Intervening Plaintiff MMT Integrative Services (“MMT”) accepted case
evaluation awards on May 9, 2017, and stipulated to dismiss their claims against
Defendant State Farm with prejudice. Intervening Plaintiff ZMC participated in the
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case evaluation proceeding but did not accept the case evaluation award and did not
dismiss its claims against State Farm. At the time that ZMC elected not to accept the
case evaluation award, the Michigan Supreme Court had just issued its May 25, 2017
decision in Covenant, establishing that healthcare providers such as Michigan
Ambulatory have no statutory claim under the Michigan No-Fault Act to recover
personal protection insurance benefits from no-fault insurers. Michigan Ambulatory,
the Plaintiff in this action, did not participate in the Burrell/ZMC case evaluation
process, although it was aware of the Burrell/ZMC litigation, which State Farm noted
as a possible companion in its removal papers. In its recent Opinion and Order in
ZMC, this Court granted State Farm’s motion to dismiss based upon Ms. Burrell’s
dismissal with prejudice of her claims against State Farm in that action following her
acceptance of case evaluation. See ZMC Pharmacy, LLC v. State Farm Auto. Ins. Co.,
No. 16-10508 (E.D. Mich. 2016) (3/29/18 Opinion and Order).
In light of Covenant, Michigan Ambulatory now seeks to amend its Complaint
and to assert a claim to enforce its rights under an assignment of rights executed by
Ms. Burrell on February 9, 2016, the day of her surgical procedure and under a second
assignment that Michigan Ambulatory obtained from Ms. Burrell on June 12, 2017.

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II.

STANDARD OF REVIEW
“Motions for judgment on the pleadings pursuant to Federal Rule of

Civil Procedure 12(c) are analyzed under the same de novo standard as motions to
dismiss pursuant to Rule 12(b)(6).”

Sensations, Inc. v. City of Grand Rapids, 526

F.3d 291, 295 (6th Cir. 2008) (citing Penny/Ohlmann/Nieman, Inc. v. Miami Valley
Pension Corp., 399 F.3d 692, 697 (6th Cir. 2005)). “[T]he legal standards for
adjudicating Rule 12(b)(6) and Rule 12(c) motions are the same . . . .” Lindsay v.
Yates, 498 F.3d 434, 437 n. 5 (6th Cir. 2007). The Sixth Circuit has defined the
pleading requirements necessary to withstand a challenge under Rule 12(c):
We recently explained the pleading requirements that are necessary to
survive a Rule 12(c) motion:
In Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct.
1955, 167 L.Ed.2d 929 (2007), the Supreme Court
explained that “a plaintiff's obligation to provide the
‘grounds’ of his ‘entitle[ment] to relief’ requires more than
labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do.... Factual
allegations must be enough to raise a right to relief above
the speculative level....” Id. at 1964-65 (internal citations
omitted). In Erickson v. Pardus, 550 U.S. ----, 127 S.Ct.
2197, 167 L.Ed.2d 1081 (2007), decided two weeks after
Twombly, however, the Supreme Court affirmed that
“Federal Rule of Civil Procedure 8(a)(2) requires only ‘a
short and plain statement of the claim showing that the
pleader is entitled to relief.’ Specific facts are not
necessary; the statement need only ‘give the defendant fair
notice of what the ... claim is and the grounds upon which
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it rests.’” Id. at 2200 (quoting Twombly, 127 S.Ct. at 1964).
The opinion in Erickson reiterated that “when ruling on a
defendant's motion to dismiss, a judge must accept as true
all of the factual allegations contained in the complaint.” Id.
(citing Twombly, 127 S.Ct. at 1965). We read the Twombly
and Erickson decisions in conjunction with one another
when reviewing a district court's decision to grant a motion
to dismiss for failure to state a claim or a motion for
judgment on the pleadings pursuant to Federal Rule of Civil
Procedure 12. Sensations, Inc., 526 F.3d at 295-96
(footnote omitted).
Tucker v. Middleburg-Legacy Place, 539 F.3d 545, 550 (6th Cir. 2008) (quoting
Sensations, 526 F.3d at 295 (6th Cir. 2008)).
When reviewing a motion to dismiss under Rule 12(b)(6), and therefore under
Rule 12(c), a court must “‘construe the complaint in the light most favorable to the
plaintiff, accept its allegations as true, and draw all reasonable inferences in favor of
the plaintiff.’” Handy-Clay v. City of Memphis, 695 F.3d 531, 538 (6th Cir. 2012)
(quoting Directv Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007)). The court “need
not accept as true a legal conclusion couched as a factual allegation, or an unwarranted
factual inference.” Handy-Clay, 695 F.3d at 539 (internal quotation marks and
citations omitted). See also Eidson v. State of Tenn. Dep’t of Children’s Servs., 510
F.3d 631, 634 (6th Cir. 2007) (“Conclusory allegations or legal conclusions
masquerading as factual allegations will not suffice.”).

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In Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), the Supreme Court
explained that “a plaintiff’s obligation to provide the grounds of his entitle[ment] to
relief requires more than labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do. Factual allegations must be enough to raise
a right to relief above the speculative level . . . .” Id. at 555 (internal quotation marks
and citations omitted) (alteration in original). “To state a valid claim, a complaint must
contain either direct or inferential allegations respecting all the material elements to
sustain recovery under some viable legal theory.” LULAC v. Bredesen, 500 F.3d 523,
527 (6th Cir. 2007).
The Supreme Court clarified the concept of “plausibilty” in Ashcroft v. Iqbal,
556 U.S. 662 (2009), explaining that “[a] claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged. Id. at 678.” Thus, “[t]o survive
a motion to dismiss, a litigant must allege enough facts to make it plausible that the
defendant bears legal liability. The facts cannot make it merely possible that the
defendant is liable; they must make it plausible. Bare assertions of legal liability
absent some corresponding facts are insufficient to state a claim.” Agema v. City of
Allegan, 826 F.3d 326, 331 (6th Cir. 2016) (citing Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009)).
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In ruling on a motion to dismiss, the Court may consider the complaint as well
as (1) documents that are referenced in the plaintiff’s complaint and that are central
to plaintiff’s claims, (2) matters of which a court may take judicial notice (3)
documents that are a matter of public record, and (4) letters that constitute decisions
of a governmental agency. Thomas v. Noder-Love, 621 F. App’x 825, 829 (6th Cir.
2015) (“Documents outside of the pleadings that may typically be incorporated
without converting the motion to dismiss into a motion for summary judgment are
public records, matters of which a court may take judicial notice, and letter decisions
of governmental agencies.”) (Internal quotation marks and citations omitted);
Armengau v. Cline, 7 F. App’x 336, 344 (6th Cir. 2001) (“We have taken a liberal
view of what matters fall within the pleadings for purposes of Rule 12(b)(6). If
referred to in a complaint and central to the claim, documents attached to a motion to
dismiss form part of the pleadings. . . . [C]ourts may also consider public records,
matters of which a court may take judicial notice, and letter decisions of governmental
agencies.”); Greenberg v. Life Ins. Co. Of Virginia, 177 F.3d 507, 514 (6th Cir. 1999)
(finding that documents attached to a motion to dismiss that are referred to in the
complaint and central to the claim are deemed to form a part of the pleadings). Where
the claims rely on the existence of a written agreement, and plaintiff fails to attach the
written instrument, “the defendant may introduce the pertinent exhibit,” which is then
9

considered part of the pleadings. QQC, Inc. v. Hewlett-Packard Co., 258 F. Supp. 2d
718, 721 (E.D. Mich. 2003). “Otherwise, a plaintiff with a legally deficient claims
could survive a motion to dismiss simply by failing to attach a dispositive document.”
Weiner v. Klais and Co., Inc., 108 F.3d 86, 89 (6th Cir. 1997).
B.

Motion for Leave to Amend Under Rule 15(a)

“Rule 15(a) declares that leave to amend ‘shall be freely given when justice so
requires’; this mandate is to be heeded.” Foman v. Davis, 371 U.S. 178, 182 (1962).
“If the underlying facts or circumstances relied upon by a plaintiff may be a proper
subject of relief, he ought to be afforded an opportunity to test his claim on the merits.
In the absence of any apparent or declared reason—such as undue delay, bad faith or
dilatory motive on the part of the movant, repeated failure to cure deficiencies by
amendments previously allowed, undue prejudice to the opposing party by virtue of
allowance of the amendment, futility of amendment, etc.—the leave sought should,
as the rules require, be ‘freely given.’” Id. “Although Rule 15(a)(2) provides that
‘[t]he court should freely give leave when justice so requires,’ leave may be denied
on the basis of undue delay, bad faith by the moving party, repeated failure to cure
defects by previously-allowed amendments, futility of the proposed new claim, or
undue prejudice to the opposite party.” Spigno v. Precision Pipeline, LLC, 59 F.
Supp. 3d 831, 834 (E.D. Mich. 2014) (citing Foman v. Davis, 371 U.S. 178, 182
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(1962)). “In assessing the alleged futility of a proposed amendment, the focus is on
whether the allegations in the amended complaint could withstand a motion to
dismiss, not the whether the plaintiff will be able to support the allegations with
proofs. That reality confines the inquiry to the proposed pleading.” Spigno, 59 F.
Supp. 3d at 835 (citing Head v. Jellico Housing Authority, 870 F.2d 1117, 1123 (6th
Cir. 1989)). Thus, the Court will consider State Farm’s motion to dismiss “in light of
the proposed amendments to the complaint.” Begala v. PNC Bank, Ohio, Nat. Ass’n,
214 F.3d 776, 784 (6th Cir. 2000) (citation omitted). The Court will not dismiss the
action if it is “convinced that the deficiencies in the complaint [] have been cured by
the proposed amendments.” Id.
III.

ANALYSIS
The parties agree that Michigan substantive law governs the issues presented

in State Farm’s motion. There is no dispute, after the Michigan Supreme Court’s
decision in Covenant that “[a] healthcare provider possesses no statutory cause of
action against a no-fault insurer for recovery of PIP benefits.” Thus, medical
providers such as Michigan Ambulatory do not have a statutory claim, separate and
independent from the insured, to recover personal protection insurance benefits from
no-fault insurers. There is also no real dispute, after the Michigan Court of Appeals
decision in Foote Memorial Hosp. v. Michigan Assigned Claims Plan, No. 333360,
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2017 WL 3836645, at *14 (Mich. Ct. App. Aug. 31, 2017) (noting that “the Supreme
Court both applied the rule of law it announced in Covenant to the parties before it
and has also directed this Court to consider Covenant's application to cases pending
on direct appeal,” and applying Covenant retroactively), that Covenant would bar the
claims of Michigan Ambulatory’s original complaint, which stated only a statutory
claim under the Michigan No-Fault statute seeking to recover the cost of medical
treatment that it rendered to State Farm’s insured, Ms. Burrell, in connection with her
injuries allegedly stemming from the August 19, 2014 hit and run accident.
State Farm’s motion to dismiss was very short and succinct: Covenant
establishes that Michigan Ambulatory has no claim under the Michigan No-Fault
statute and therefore State Farm is entitled to dismissal of Michigan Ambulatory’s
one-count statutory-based Complaint. (ECF No. 10, Def.’s Mot. For Summary
Judgment.) Michigan Ambulatory responded that this case is distinguishable from
Covenant because Ms. Burrell executed an Assignment of her rights to Michigan
Ambulatory at the time of her February 9, 2016 surgery. The February 9, 2016,
Assignment which Michigan Ambulatory attaches to its Response, was not expressly
referred to in, or attached to, Plaintiff’s original Complaint. Michigan Ambulatory did
attach a Health Insurance Claim Form to its Original Complaint, on which Ms. Burrell
checked a box suggesting that she had “a signature on file” previously assigning to
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Michigan Ambulatory her rights to payment of medical benefits. (ECF No. 12, Pl.’s
Resp. Ex. B, State Court Complaint Ex. A.) Although Michigan Ambulatory
concedes that it did not plead a claim based on this February 9, 2016 Assignment in
its original Complaint, it suggests in its response to State Farm’s motion that the Court
should grant Michigan Ambulatory leave to amend to add such a claim. And, on
October 9, 2017, Michigan Ambulatory did file a formal Motion for Leave to Amend,
that is also before the Court for decision at this time.
In its motion to dismiss and in response to Plaintiff’s motion for leave to
amend, State Farm responds that: (1) Plaintiff’s February 9, 2016 Assignment, signed
the morning of her surgery, assigned future rights to benefits payable, for a loss that
had not yet been incurred, and were not therefore assignable;2 (2) Plaintiff’s
assignment-based claims are invalid under Ms. Burrell’s State Farm Policy, which
contained an assignment approval clause; (3) Plaintiff’s assignment-based claims are
invalid as partial assignments; (4) the Michigan UCC does not apply to invalidate the
assignment approval clause; (5) Covenant should be applied retroactively; and (6)
Plaintiff’s June 12, 2017 Assignment is barred by Plaintiff’s acceptance of a case
evaluation award and dismissal of its claims against State Farm in the ZMC case.

2

This argument was not made in ZMC, where there was no previously-executed
assignment, obtained at the time of services rendered, at issue.
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III.

ANALYSIS
A.

The February 9, 2016 Assignment, Executed by Ms. Burrell the
Morning of Her Surgery, Assigned Present and Not Future Rights

It is now accepted that Covenant, which expressly declined to alter the rights
of an insured to assign her rights to a medical provider, did not bar claims based on
contractual assignments for presently or past due benefits. “[O]ur conclusion today
is not intended to alter an insured’s ability to assign his or her right to past or presently
due benefits to a healthcare provider.” Covenant, 895 N.W.2d at 505 n. 40 (citing
Mich. Comp. Laws § 5143 and Professional Rehab Assoc. v. State Farm Mut. Auto.
Ins. Co., 228 Mich. App. 167, 172 (1998) (holding that the Michigan no-fault act
“serves only to ban the assignment of benefits payable in the future and not those that
are past due or presently due”)).
The morning of her surgery, Ms. Burrell signed an “Assignment of Rights and
Guarantee” in which she specifically assigns to Specialty Surgical Center (a/k/a
Michigan Ambulatory Surgical Center)3 her “rights to collect no-fault insurance from

3

In Estate of Grimmett v. Encompass Indemnity Co., No. 14-cv-14646, 2017 WL
5592897, at *3 (E.D. Mich. Nov. 21, 2017), Judge Avern Cohn of this District found
that Michigan Ambulatory Surgical Center and Specialty Surgical Centers are the
same entity. While State Farm raises this issue, the Court agrees with Judge Cohn that
any failure to name Michigan Ambulatory on the Assignment Form does not
invalidate the Assignment. Ms. Burrell knew to whom she was assigning her rights
to collect no-fault benefits.
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her auto insurer for her care at the Center.” (ECF No. 17, Pl.’s Mot. to Amend Ex. C,
Feb. 9, 2016 Assignment; Ex. N, Pl.’s Proposed First of Amended Complaint Ex. B.)
State Farm argues that because Ms. Burrell’s surgery did not commence until 10:30
a.m., and because Ms. Burrell signed the “Assignment of Rights” at 8:26 a.m., she
assigned future and not present rights. (ECF No. 17, Def.’s Resp. 8-9, PgID 517-19.)
State Farm reasons that at the time Ms. Burrell assigned her rights, i.e. at 8:26 a.m.,
services had not yet been rendered because the surgical procedure had not yet
commenced, and therefore the February 9, 2016 Assignment was for benefits payable
in the future and is therefore void. In making this argument, State Farm relies on
matters outside the pleadings, i.e. Ms. Burrell’s medical records that are neither
referenced in nor central to her claims and are not attached to either her original or
proposed Amended Complaint. The Court cannot consider these records in resolving
this motion. The Court is limited to considering the language of the February 9, 2016
itself, which we know was executed at 8:26 a.m. the day of Ms. Burrell’s surgery
because it bears that time and date stamp.
United States District Judge Avern Cohn addressed this issue of a “same day
as surgery” assignment in Estate of Grimmett v. Encompass Indemnity Co., No. 14-cv14646, 2017 WL 5592897, at *4-5 (E.D. Mich. Nov. 21, 2017), concluding that the
assignment there, which also involved Michigan Ambulatory, and contained language
15

identical to the February 9, 2016 Assignment at issue here, used present tense
language assigning rights for one discrete operation that was in the process of taking
place:
In Aetna Cas. & Sur. Co. v. Starkey, 116 Mich. App. 640 (1982), the
Michigan Court of Appeals refused to enforce an assignment of benefits
that “would become payable” over the course of a hospitalization. Id. at
642, 646. In contrast, the assignment from Grimmett to MASC reads “I
hereby assign to Specialty Surgical Center (the ‘Center’) my rights to
collect no-fault insurance from my auto insurer for my care at the
Center.” (Doc. 93). The assignment from Grimmett to Southeast reads
“I assign and authorize payment directly to Michigan Surgical Hospital
of any healthcare benefits that I am entitled to receive.” (Doc. 100).
Unlike in Starkey, the language in both assignments is entirely in the
present tense, the treatment at each center consisted of one discrete
operation, and Grimmett signed the assignments on the same days the
respective operations were performed. Since the No-Fault Act provides
that “[p]ersonal protection insurance benefits are payable as loss
accrues,” Mich. Comp. Laws § 500.3142(1), Grimmett essentially
assigned her rights as they came into existence. Therefore, the MASC
and Southeast assignments referred to present rights and are not void
under Mich. Comp. Laws § 500.3143. See Prof'l Rehab, 228 Mich. App.
at 173-74 (finding present-tense assignment valid to the extent it referred
to past or present benefits).
2017 WL 5592897, at *4.
In addition, here Ms. Burrell’s assignment to Michigan Ambulatory of her right
to collect no-fault benefits was reaffirmed on a Health Insurance Claim Form that also
bears her “signature on file,” and was prepared subsequent to the February 9, 2016
surgery and details the charges for the services that Plaintiff rendered. This Claim

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Form was attached to Michigan Ambulatory’s original Complaint and is also attached
to Plaintiff’s proposed First Amended Complaint. (ECF No. 1, Notice of Removal Ex.
A, Complaint Ex. A; ECF No. 17, Mot. for Leave to Amend Ex. B.)
The Court concludes that the February 9, 2016 Assignment, the existence of
which was reiterated in the subsequently-issued Health Insurance Claim Form,
“essentially assigned [Ms. Burrell’s] rights as they came into existence.” Grimmett,
2017 WL 5592897, at *4. As Judge Cohn noted in Grimmett, “an assignment is valid
‘if it clearly reflects the intent of the assignor to presently transfer ‘the thing’ to the
assignee.’” Id. Aetna Cas. & Ins. Co. v. Starkey, 116 Mich. App. 640 (1982), cited by
State Farm, is clearly distinguishable as the assignment at issue there purported to
assign “any benefits from Aetna which would become due and payable as a result of
medical treatment and care.” 116 Mich. App. at 327 (emphasis added). This
assignment purported to assign the right to collect benefits that would become payable
in the future with respect to a general, ongoing course of treatment. Ms. Burrell, by
contrast, was in the pre-operative phase of a single surgical procedure when she
assigned her present rights to no-fault benefits for expenses she was presently
incurring related to that procedure. Plaintiff has pleaded facts that plausibly suggest
that Ms. Burrell clearly intended to assign to Michigan Ambulatory the right to collect
present no-fault benefits, for expenses that she was presently incurring, and that would
17

otherwise be payable to her, for a discrete surgical procedure that began when she
reported for surgery the morning of February 9, 2016. Thus, Plaintiff’s proposed
Amended Complaint alleges an Assignment based on present rights, not one void
under Mich. Comp. Laws § 500.3143 as assigning future rights.
B.

Plaintiff’s June 12, 2017 Assignment Would Relate Back to the
Original Filing Date of Plaintiff’s Complaint

The Michigan No-Fault statute contains a damages limitation provision
(referred to as the “one-year back rule”) which precludes recovery of no-fault benefits
from an insurer for any portion of the loss that is incurred more than one year before
the date on which the action is commenced. Mich. Comp. Laws § 500.3145(1). “The
Michigan Supreme Court has explained that the ‘one-year-back rule . . . limits
recovery of [] benefits to those incurred within one year before the date on which the
no-fault action was commenced.’” Magda v. Auto. Club Ins. Assoc., No. 14-cv-12144,
2015 WL 13036945, at *3 (quoting Cooper v. Auto Club Ins. Assoc., 481 Mich. 399,
406 (2008)). “Notwithstanding the limitation, a court ‘may exercise its equitable
power to avoid the application of the one-year-back rule if there are allegations of
fraud, mutual mistake, or other unusual circumstances.’” Id. (quoting Cooper, 481
Mich. at 450). State Farm argues that relation back should not be permitted here
because Plaintiff seeks to supplement, not amend her original pleading. This

18

characterization of Plaintiff’s proposed amendment based on the June 12, 2017
Assignment is misplaced. Here, Plaintiff did obtain an assignment at the time that
services were rendered and the fact of that assignment was referenced in the Claim
Form that was an attachment to Plaintiff’s original Complaint. Although it is true that
Michigan Ambulatory did not plead a claim based on an assignment in its original
Complaint, there was an Assignment in existence at that time and it was referenced,
albeit indirectly, in Plaintiff’s original Complaint. Both Covenant and Foote appear
to pave the way for such amendments and Courts in this district, post-Covenant, have
permitted relation back under just such circumstances.
As discussed supra, Michigan courts have demonstrated a willingness to allow
healthcare providers whose statutory claims were pending at the time Covenant was
issued the opportunity to seek leave to amend their complaints to assert theories based
upon an assignment. See, e.g. Foote, 2017 WL 3836645, at *14 (“We conclude that
the most prudent and appropriate course for us to take at this time is to remand this
case to the trial court with direction that it allow plaintiff to move to amend its
complaint, so that the trial court may address the attendant issues in the first
instance.”); Harrison v. Allstate Prop. & Cas. Ins. Co., No. 334083, 2017 WL
5759768, at *5 (Mich. Ct. App. Nov. 28, 2017) (acknowledging that intervening
plaintiff healthcare provider MHSI had no statutory claim for benefits after Covenant
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but remanding for further proceedings in light of Covenant, noting that “an
amendment of MHSI's intervening complaint may be justified if, as MHSI contends
and as the evidence submitted to this Court suggests, Harrison assigned his rights to
MHSI”). Neither Foote nor Harrison suggests supplementation – both suggest the
possibility of amendment.
With Covenant’s clear rejection of a statutory right on behalf of healthcare
providers, and equally clear preservation of a healthcare provider’s right to proceed
against an insurer based upon a valid assignment of rights from the insured, some
courts have permitted the “relation back” of assignments executed in pending lawsuits
post-Covenant to the filing of the original complaint. See, e.g., Spine Specialists of
Michigan, P.C. v. Allstate Property & Casualty Ins. Co., No. 15-cv-14102, 2018 WL
1255149, at *6 (E.D. Mich. March 12, 2018) (considering the effect of the one-year
back rule post-Covenant and permitting an amended complaint that fell outside the
statutory period to relate back where the assignment was executed on May 27, 2014,
and the original action was filed on July 15, 2014, both events having occurred within
the statutory period); Estate of Grimmett, 2017 WL 5592897, at *8 (concluding,
without discussion, that the amended pleading asserting a claim based on an
assignment executed at the time that services were rendered “asserts a claim arising
from the same transaction or occurrence described in the original pleading”).
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The June 12, 2017 Assignment, assuming that Michigan Ambulatory would
find it necessary to rely on that Assignment here, would relate back to the filing of the
original Complaint.
C.

Plaintiff’s Assignment-Based Claims are Not Invalid Under the State
Farm Policy.

State Farm argues that Michigan Ambulatory’s attempt to rely on an assignment
must fail because Burrell’s State Farm Policy contained a clause expressly providing
that: “No assignment of benefits or other transfer of rights is binding upon us unless
approved by us.” (ECF No. 24, Def.’s Mot. Ex. E, Certified Copy of Burrell Policy,
State Farm Car Policy Booklet, General Terms ¶ 9 Assignments) (Emphasis in
original). There is no dispute that Burrell did not seek, and State Farm did not grant,
approval of her assignment of rights to Michigan Ambulatory. State Farm submits
that under Michigan law, non-assignment clauses are enforceable provided that the
contractual prohibition against assignment is clear and unequivocal. A number of
cases, however, decided in the wake of the Covenant decision, have addressed this
very issue and have concluded that because an assignment of no-fault benefits can
only assign present or past due (but not future) benefits, see Professional Rehab., 228
Mich. App. at 172 (holding that the Michigan no-fault act “serves only to ban the
assignment of benefits payable in the future and not those that are past due or

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presently due”), such assignments seek to assign only accrued losses, which cannot
be prohibited under Michigan law. See, e.g., Grimmett, 2017 WL 5592897, at *4-5
(noting that “Michigan courts have enforced anti-assignment clauses that prohibit
assignment of future benefits, but not those that prohibit assignment of accrued
losses”); Covenant Medical Center, Inc. v. Auto-Owners Ins. Co., No. 17-cv-11176,
2017 WL 4572327, at *4 (E.D. Mich. Oct. 13, 2017) (observing that under Michigan
law, “an anti-assignment clause will not be enforced where a loss occurs before the
assignment, because in that situation the assignment of the claim under the policy is
viewed no differently than any other assignment of an accrued cause of action”);
Michigan Brain and Spine Surgeons, PLLC v. State Farm Mutual Auto. Ins. Co., No.
17-158827 (Oakland County Cir. Ct. Aug. 9, 2017 Slip Op. at 1-2) (holding that it is
the “absolute right of every person” to assign claims for losses that have already
occurred).
Relatedly, Michigan courts have held post-Covenant that the Michigan Uniform
Commercial Code prohibits restrictions on assignments of healthcare insurance
receivables. Michigan Brain and Spine, Aug. 9, 2017 Slip Op. at 4-5 (“The UCC
plainly prohibits all restrictions on a health care provider’s receiving and relying on
a patient assignment of a benefit due in payment for services from an insurance
company . . . .”).
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Thus, any assignment approval clause in Ms. Burrell’s policy with State Farm
cannot serve to invalidate an otherwise valid assignment.
D.

Plaintiff’s Assignment-Based Claims are Not Invalid as Partial
Assignments.

Nor are the Assignments invalid as partial assignments. “[T]he Michigan
No-Fault Act contemplates that an injured person may be entitled to various types of
benefits, including wage loss, replacement services, or medical bills, and not all of
those benefits may accrue at the same time.” Advanced Surgery Ctr., LLC v. Allstate
Ins. Co., No. 17-cv-12492, 2017 WL 4792376, at *3 (E.D. Mich. Oct. 24, 2017).
“The Act contemplates that a complaint may be filed seeking no-fault benefits from
time to time. In this case, plaintiff seeks to recover payment for all of its past and
present claims in one lawsuit. Neither the partial nor piecemeal nature of the
assignment made by Mr. Minor renders the assignment invalid.” Id. The same is true
here and the Assignments are not invalid as partial assignments.
E.

The Michigan Court of Appeals Has Decided That Covenant Will Be
Applied Retroactively.

In Foote, supra, the Michigan Court of Appeals expressly instructed that
Covenant is to be applied retroactively: “We therefore conclude . . . that Covenant
applies retroactively.” 2017 WL 3836645, at *14. Accordingly, the Court rejects
Michigan Ambulatory’s assertion that Covenant should be applied prospectively only.
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F.

The Court Cannot Conclude, at This Stage of the Proceedings, That
Plaintiff’s Proposed Amended Complaint is Futile Based Upon Ms.
Burrell’s Acceptance of a Case Evaluation Award and Dismissal of
Her Claims Against State Farm in the ZMC Case.

State Farm argues in its Response to Plaintiff’s motion for leave to amend the
Complaint that “Tamika Burrell extinguished her right to any and all claims incurred
on or before May 9, 2017 when she, and State Farm, mutually accepted case
evaluation.” (ECF No. 21, Resp. at 6-8, PgID 515-17.) The Court was able to
conclude in ZMC that Ms. Burrell’s acceptance of a case evaluation award and her
dismissal of her claims against State Farm in that action with prejudice, rendered
ZMC’s proposed amended complaint, which was based on a single assignment
executed by Ms. Burrell after her dismissal of her claims against State Farm in that
case, futile. It cannot do so here. First, the Court was able to take judicial notice in
ZMC of the entries on its own docket in that case establishing that (1) ZMC did
participate in the case evaluation process, (2) that Plaintiff, State Farm, and MMT
accepted case evaluation awards and dismissed their claims for no-fault benefits
against State Farm, and (3) that ZMC did not accept a case evaluation award and
continued with its claims against State Farm relying on a single assignment that was
executed by Ms. Burrell after she dismissed her claims against State Farm in that
action. Even assuming the Court could likewise take judicial notice of the docket in

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ZMC for purposes of analyzing the motions in this case, the Court cannot conclude,
as a matter of law and based solely on the proposed Amended Complaint, that the case
evaluation proceeding and subsequent dismissal by Plaintiff of her claims against
State Farm in that action also bar Michigan Ambulatory’s claims here. The parties’
briefing on this issue, and discussion by counsel at the January 25, 2018 hearing,
demonstrate that there are several factual disputes regarding whether Michigan
Ambulatory’s claims were even a part of that case evaluation process and, if they
were, what effect that might have on Michigan Ambulatory’s right to proceed in this
action. Michigan Ambulatory suggests that it was understood by all parties that
Michigan Ambulatory’s bill was not part of the case evaluation process and that it
would proceed with this action independent of that process. State Farm suggests, and
provided a document to the Court via email suggesting, that Michigan Ambulatory’s
bill was a part of the case evaluation process. None of this argument or evidence can
be considered by the Court in its analysis of the instant motions to dismiss and to
amend the Complaint. While State Farm is not precluded from making such an
argument on a more fully developed summary judgment record, the Court does not
find futility here. Accordingly, Michigan Ambulatory will be permitted to file its
Amended Complaint.

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IV.

CONCLUSION
For the foregoing reasons, the Court GRANTS Plaintiff’s Motion for Leave to

File an Amended Complaint and DENIES State Farm’s Motion to Dismiss. Plaintiff
shall file its Amended Complaint within ten (10) days of the date of this Order.
IT IS SO ORDERED.

s/Paul D. Borman
PAUL D. BORMAN
UNITED STATES DISTRICT JUDGE
Dated: March 30, 2018
CERTIFICATE OF SERVICE
The undersigned certifies that a copy of the foregoing order was served upon each
attorney or party of record herein by electronic means or first class U.S. mail on
March 30, 2018.

s/Deborah Tofil
Case Manager

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