Advanced Surgery Center LLC v. Allstate Property and Casualty Insurance Company

Filing 14

OPINION and ORDER re 10 granting in part deft's MOTION to Dismiss and dismissing Pltf's complaint without prejudice. Signed by District Judge Nancy G. Edmunds. (CBet)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

Advanced Surgery Center LLC,
Case No. 17-10130
Plaintiff,
Honorable Nancy G. Edmunds
v.
Allstate Property and Casualty Insurance
Company,
Defendant.
/

OPINION AND ORDER GRANTING IN PART DEFENDANT’S MOTION TO DISMISS
AND DISMISSING PLAINTIFF’S COMPLAINT WITHOUT PREJUDICE [10]

This matter is before the Court on Defendant’s motion to dismiss pursuant to Fed. R.
Civ. P. 12(b)(1) and 12(b)(6). (Docket 10.) Plaintiff’s complaint arises out of a motor vehicle
accident and claims related to the Michigan No-Fault Act, Mich. Comp. Laws § 500.3101,
et seq. Plaintiff filed a response to Defendant’s motion and Defendant filed a reply. (Dkts.
12, 13.) The Court heard Defendant’s motion on August 16, 2017.
I.

FACTS
Plaintiff Advanced Surgery Center (“Plaintiff”) is a health care provider who provided

necessary medical services and accommodations for Vaneshia Williams (not a party to this
action), after Williams sustained bodily injuries in a motor vehicle accident. (Compl. ¶¶ 5-7.)
The accident occurred on September 8, 2015. (Def.’s Br. in Support of Mot. Dismiss 1, dkt.
10.) Williams has a no fault policy with Defendant, to cover the expenses incurred in the

accident.1 (Compl. ¶ 8.) Plaintiff submitted to Defendant proof of its charges for services
it provided to Williams for injuries that arose from the motor vehicle accident. (Compl. ¶ 9.)
Defendant did not pay Plaintiff and Plaintiff brought this action for breach of contract,
initially filed in Wayne County Circuit Court, seeking declaratory relief and a judgment in
the amount of approximately $75,000.000, together with interest, costs and attorneys fees.
(Compl. ¶¶ 10-14.) Defendant removed to this Court on January 16, 2017. (Dkt. 1.)
Defendant now seeks dismissal of Plaintiff’s cause of action on the basis of the
Michigan Supreme Court’s recent decision in Covenant Med. Ctr., Inc. v. State Farm Mut.
Auto. Ins. Co., 895 N.W.2d 490 (Mich. 2017), arguing that a healthcare provider such as
Plaintiff does not possess a statutory cause of action against a No-Fault insurer for the
payment of an injured person’s benefits. (Def.’s Mot. Dismiss 1.)
II. LEGAL STANDARD
Defendant seeks to dismiss pursuant to Fed. R. Civ. P. 12(b)(1), alleging that Plaintiff
lacks standing to pursue a direct cause of action against Defendant, and Fed. R. Civ. P.
12(b)(6), alleging the "failure to state a claim upon which relief can be granted." Fed. R. Civ.
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Although not part of Plaintiff’s complaint, Defendant in its statement of facts alleges
that because Williams had no auto policy affording her coverage for no-fault benefits,
she made a claim for such benefits with the Michigan Assigned Claims Plan on
September 21, 2015. (Def.’s Br. in Support of Mot. Dismiss 1, Exs. A, B, dkt. 10-2, 103.) According to Defendant, the claim was assigned to Defendant on October 13, 2015
and Williams’ no-fault benefits were subsequently denied in March 2016, with a denial
letter sent to Williams’ attorney. (Def.’s Br. in Support Ex. C, dkt. 10-4.) In December,
2016, while Williams’ no-fault cause of action was pending in Oakland County Circuit
Court, Plaintiff filed a separate cause of action in Wayne County Circuit Court seeking
reimbursement of no-fault PIP (personal injury protection) medical expenses on behalf
of Williams. (Def.’s Mot. Dismiss. 1.) Williams settled her lawsuit in Oakland County on
April 13, 2017, and the Oakland County Circuit Court entered a stipulated order of
dismissal on May 2, 2017. (Stipulation for Dismissal, Def.’s Mot. Dismiss, Ex. E, dkt. 106.)
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P. 12(b)(1), (6). Fed. R. Civ. P. 12(b)(1) provides the basis for a motion to dismiss for “lack
of subject-matter jurisdiction.” Fed. R. Civ. P. 12(b)(1). “Standing represents a jurisdictional
requirement which remains open to review at all stages of the litigation.” National Org. For
Women, Inc. v. Scheidler, 510 U.S. 249, 255 (1994).
Motions to dismiss for lack of subject matter jurisdiction fall into two general
categories: facial attacks and factual attacks. A facial attack is a challenge to
the sufficiency of the pleading itself. On such a motion, the court must take the
material allegations of the petition as true and construed in the light most
favorable to the nonmoving party. A factual attack, on the other hand, is not a
challenge to the sufficiency of the pleading's allegations, but a challenge to the
factual existence of subject matter jurisdiction. On such a motion, no
presumptive truthfulness applies to the factual allegations, and the court is free
to weigh the evidence and satisfy itself as to the existence of its power to hear
the case.
U.S. v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994) (citations and emphasis omitted).
With respect to “failure to state a claim,” the Sixth Circuit noted that under the United
States Supreme Court's heightened pleading standard laid out in Bell Atl. Corp. v.
Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), “a complaint
only survives a motion to dismiss if it contains sufficient factual matter, accepted as true,
to state a claim to relief that is plausible on its face.” Estate of Barney v. PNC Bank, Nat'l
Ass’n, 714 F.3d 920, 924 (6th Cir. 2013) (internal quotations and citations omitted). The
court in Estate of Barney goes on to state that under Iqbal, “[a] claim is plausible 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. (internal quotations and citations
omitted). Furthermore, while the "plausibility standard is not akin to a ‘probability
requirement,’ . . . it asks for more than a sheer possibility that a defendant has acted
unlawfully.” Iqbal, 556 U.S. at 678. “[W]here the well-pleaded facts do not permit the court
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to infer more than the mere possibility of misconduct, the complaint has alleged—but it has
not ‘show[n]’—‘that the pleader is entitled to relief.’” Estate of Barney, 714 F.3d at 924
(citing Iqbal, 556 U.S. at 679 (quoting Fed. R. Civ. P. 8(a)(2)). If the plaintiffs do "not nudge[
] their claims across the line from conceivable to plausible, their complaint must be
dismissed." Twombly, 550 U.S. at 570. Finally, the Court must keep in mind that “on a
motion to dismiss, courts are not bound to accept as true a legal conclusion couched as
a factual allegation.” Id. at 555 (quotation and citation omitted).
“[D]ocuments attached to the pleadings become part of the pleadings and may be
considered on a motion to dismiss.” Commercial Money Ctr., Inc. v. Ill. Union Ins. Co., 508
F.3d 327, 335 (6th Cir. 2007) (citing Fed.R.Civ.P. 10(c)). "A court may consider matters of
public record in deciding a motion to dismiss without converting the motion to one for
summary judgment.” Id. at 336. "In addition, when a document is referred to in the
pleadings and is integral to the claims, it may be considered without converting a motion
to dismiss into one for summary judgment." Id. at 335-36; see also Greenberg v. Life Ins.
Co. of Va., 177 F.3d 507, 514 (6th Cir. 1999)(documents not attached to the pleadings may
still be considered part of the pleadings when the “document is referred to in the complaint
and is central to the plaintiff's claim”) (internal quotation marks and citations omitted).
III.

ANALYSIS
A. Whether Plaintiff Lacks Standing to Bring This Cause of Action
As an initial matter, the parties agree that Michigan law applies to the substantive

issues herein. See generally Erie R. Co. v. Tompkins, 304 U.S. 64 (1938). Defendant relies
on the Michigan Supreme Court’s recent holding in Covenant that “healthcare providers do

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not possess a statutory cause of action against no-fault insurers for recovery of personal
protection insurance benefits under the no-fault act,” thus intervening in “decades of
[Michigan] Court of Appeals caselaw concluding that a healthcare provider may assert a
direct cause of action against a no-fault insurer to recover no-fault benefits.” Covenant, 895
N.W.2d at 493, 496. Covenant was decided on May 25, 2017. Id. Plaintiff responds that
Covenant should not be applied retroactively to currently pending claims such as this. The
Covenant decision did not address the issue of whether it should be applied retroactively
or prospectively.
The few post-Covenant state court decisions that reference Covenant suggest that the
state courts are applying Covenant retroactively. As of the time of this writing, the Michigan
Supreme Court has remanded two cases to the Court of Appeals for reconsideration in light
of Covenant, in lieu of granting leave to appeal. See Bronson Methodist Hosp. v. Michigan
Assigned Claims Facility, 897 N.W.2d 735 (Mich. 2017); and Spectrum Health Hosps. v.
Westfield Ins. Co., 897 N.W.2d 166 (Mich. 2017). On July 18, 2017, the Michigan Court of
Appeals in an unpublished decision applied the May 25, 2017 Covenant holding
retroactively to an insurer’s appeal as of right of the trial court’s October 19, 2015 order
denying the defendant’s motion for summary disposition of the claims of intervening plaintiff
health care providers. See Eubanks v. State Farm Mut. Auto. Ins. Co., No. 330078, 2017
WL 3044126 (Mich. Ct. App. July 18, 2017)(the plaintiff insureds/injured parties’ claims had
already been dismissed with prejudice for failing to comply with discovery and failing to
appear; the intervening providers’ claims remained). The underlying accident had occurred
on July 8, 2013. See id. at *1. While the federal court is bound by controlling decisions of
the state’s highest court in applying state law, “[i]ntermediate state appellate courts’
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decisions are also viewed as persuasive unless it is shown that the state’s highest court
would decide the issue differently.” Savedoff v. Access Grp., Inc., 524 F.3d 754, 762 (6th
Cir. 2008).
Consistent with the application of Covenant in these state court decisions, Defendant
points out that “[t]he general rule in Michigan is that judicial decisions are given complete
retroactive effect.” People v. Houlihan, 706 N.W.2d 731 (Mich. 2005). “Prospective
application is given only to decisions that overrule clear and uncontradicted case law.” Id.
Defendant further argues that Covenant is not the “declaration of a new rule, but . . . a
vindication of controlling legal authority.” Rowland v. Washtenaw County Road Comm’n,
731 N.W.2d 41, 56 (Mich. 2007).
“The general principle is that a decision of a court of supreme jurisdiction overruling
a former decision is retrospective in its operation, and the effect is not that the former
decision is bad law, but that it never was the law.” Spectrum Health Hospitals v. Farm
Bureau Mut. Ins. Co. of Michigan, 821 N.W.2d 117, 135 (Mich. 2012). There is, however,
an exception
When a “statute law has received a given construction by the courts of last
resort and contracts have been made and rights acquired under and in
accordance with such construction, such contracts may not be invalidated, nor
vested rights acquired under them impaired, by a change of construction
made by a subsequent decision.”
Id. at 135-36. Plaintiff argues in favor of prospective application of Covenant; the Michigan
Supreme Court has held that
Although the general rule is that judicial decisions are given full retroactive
effect, a more flexible approach is warranted where injustice might result
from full retroactivity. For example, a holding that overrules settled precedent
may properly be limited to prospective application. Moreover, the federal
constitution does not preclude state courts from determining whether their
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own law-changing decisions are applied prospectively or retroactively.
Pohutski v. City of Allen Park, 641 N.W.2d 219, 232 (Mich. 2002). The Pohutski court listed
three factors to be considered “in determining when a decision should not have retroactive
application” and, in the civil context, the following threshold question: “[W]hether the
decision clearly established a new principle of law.” Id. at 233 (citing Riley v. Northland
Geriatric Center (After Remand), 433 N.W.2d 787 (Mich. 1988)).
In Pohutski, the court recognized that “[a]lthough this opinion gives effect to the intent
of the Legislature that may be reasonably be (sic) inferred from the text of the governing
statutory provisions, practically speaking our holding is akin to the announcement of a new
rule of law, given the erroneous interpretations set forth in Hadfield and Li.” Pohutski, 641
N.W.2d at 233 (referring to two Michigan Supreme Court cases). Yet in Pohutski, the prior
decisions that were overruled were both from the Michigan Supreme Court, not the court
of appeals. The Covenant decision itself states that the prior court of appeals decision was
“premised on the notion that a healthcare provider possesses a statutory cause of action
against a no-fault insurer for payment of no-fault benefits,” yet this premise was “gleaned
. . . not from the text of the no-fault act, but from previous decisions of the Court of Appeals
that are likewise devoid of the statutory analysis necessary to support that premise.”
Covenant, 895 N.W.2d at 498. According to Covenant, the basis for a construction of the
no-fault statute that allowed standing by healthcare providers was founded in previous court
of appeals decisions, not the courts of last resort. By finding that the Covenant decision did
not establish a new principle of law, the Court need not consider the remaining factors as
to whether the new rule should be retroactive.
Based on the state court application of Covenant and the analysis above, the Court
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finds that Covenant applies in this matter and will grant Defendant’s motion to dismiss
without prejudice. See Fed. R. Civ. P. 12(b)(1) and 41(b) (Involuntary dismissal operates
as an adjudication on the merits “[u]nless the dismissal order states otherwise” or “except
for [a dismissal] for lack of jurisdiction”).
B. Whether Plaintiff May Proceed Under A Valid Assignment Of The Insured’s
No-Fault Benefits
Defendant also asks this Court to conclude that any prospective assignment by
Williams to Plaintiff would be invalid. (Def.’s Br. Support Mot. Dismiss 8.) Yet there is no
indication that Plaintiff is seeking an assignment from the insured in this case. Therefore,
the Court need not address this prospective issue.
Instead, Plaintiff argues that its alternative is to amend the complaint to add the injured
party, Williams, as a defendant, and trigger the indemnification duties of Defendant set forth
in Insurance Commissioner Bulletin 92-03.2 Yet the cases on which Plaintiff relies to argue
that Defendant will have an obligation to “fully defend and indemnify the insured” are
distinguishable. In LaMothe v. Auto Club Ins. Ass’n, 543 N.W.2d 42 (Mich. Ct. App. 1995)
(overruled by Covenant on related grounds) there existed an enforceable promise by the
insurer to defend and indemnify the insured. LaMothe, 543 N.W.2d at 45, n.4 (the

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The purpose of this bulletin is to remind no-fault insurers that they are
required to provide insureds and claimants with complete protection from
economic loss for benefits provided under personal protection insurance.
Auto insurers must act at all times to assure that the insured or claimant is
not exposed to harassment, . . . or lawsuit as a result of a dispute between
the health care provider and the insurer.
(Michigan Department of Commerce, Ins. Bureau Bulletin 92-03, Oct. 23, 1992, Pl.’s
Resp. Ex. 1, dkt. 12-1.)
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defendant insurer had sent a letter to plaintiff-insured’s attorney, expressly stating that “[i]f
any of the medical providers bring a claim against [the plaintiff], ACIA [the defendant] will
defend and indemnify him”); see also McGill v. Automobile Ass’n of Michigan, 526 N.W.2d
12 (Mich. Ct. App. 1994) (“defendants have expressly stated that they will defend and
indemnify plaintiffs in the event that plaintiffs are sued by their providers for the outstanding
balance”; the court also cited the Insurance Bureau Bulletin 92-03, Oct. 23, 1992). Unlike
LaMothe, there is no evidence or allegation before the Court that there is a specific term
or enforceable promise providing for provision of indemnity and/or defense. Defendant
argues that it never issued an insurance policy to Williams. Further, Defendant argues that
as of March 1, 2016, Defendant denied Williams further personal injury benefits and there
is no reason to hold her harmless from any providers with whom she treated after the
denial. (Def.’s Mot. Dismiss Ex. C, dkt. 10-4.) Finally, Defendant argues that Insurance
Bulletin 92-03 is not law and does not confer a statutory obligation to provide a defense in
any situation other than a “balance-billing” situation. Defendant admits that the Court may
afford Bulletin 92-03 consideration, but is not bound by it. (Def.’s Reply 4, dkt. 13.) Again,
this issue is premature, and the Court is without enough information from which to
determine whether an obligation to defend and indemnify may exist.
C. Whether Plaintiff’s Standing is Based On A Disputed Question of Fact
Finally, Plaintiff argues that “[i]t is settled law in Michigan that a motion to dismiss
should not be granted where the plaintiff’s standing to sue is based upon a disputed
question of fact.” Lewkowicz v. Youngblood, 273 N.W.2d 514 (Mich. Ct. App. 1978), aff’d
sub nom. Romulus City Treasurer v. Wayne Cnty. Drain Comm’r 322 N.W.2d 152 (Mich.
1982). Plaintiff does not develop this argument nor identify the disputed question of fact.
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IV. CONCLUSION
For the reasons set forth above the Court GRANTS in part Defendant’s motion to
dismiss and DISMISSES Plaintiff’s complaint without prejudice. Defendant’s request for
attorneys fees and costs is DENIED.
SO ORDERED.
s/Nancy G. Edmunds
Nancy G. Edmunds
United States District Judge
Dated: September 11, 2017
I hereby certify that a copy of the foregoing document was served upon counsel of record
on September 11, 2017, by electronic and/or ordinary mail.
s/Carol J. Bethel
Case Manager

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