Kasle et al v. BCBSM Foundation d/b/a Blue Cross Blue Shield of Michigan

Filing 23

OPINION AND ORDER Granting Defendant's 16 Motion for Partial Dismissal. Signed by District Judge David M. Lawson. (SPin)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
LISA KASLE, individually and as legal
guardian of JAKE KASLE,
Plaintiffs,

Case Number 18-11888
Honorable David M. Lawson

v.
BCBSM FOUNDATION, d/b/a BLUE CROSS
BLUE SHIELD OF MICHIGAN
FOUNDATION, a/k/a BLUE CROSS BLUE
SHIELD OF MICHIGAN,
Defendant.
___________________________________________/

OPINION AND ORDER GRANTING DEFENDANTS’
MOTION FOR PARTIAL DISMISSAL
Plaintiffs Lisa Kasle and Jake Slavik filed an amended complaint alleging that defendant
Blue Cross Blue Shield of Michigan improperly refused to pay benefits under a health insurance
plan that it issued to cover substance abuse and mental health treatment for Slavik. Presently
before the Court is a motion by the defendant to dismiss the plaintiffs’ state law claims. They
argue that those claims are preempted by the Employee Retirement and Income Security Act of
1974 (ERISA). The plaintiffs have not offered a defense to the arguments, probably because one
does not exist. The Court will grant the motion.
I.
Kasle is Slavik’s legal guardian, and she is covered by a medical insurance plan issued by
Blue Cross through her employer, Kasle Family, LLC. Slavik was admitted to an inpatient mental
health treatment facility in 2013. Blue Cross paid out benefits to cover his treatment until
September 1, 2015 but has refused to pay benefits thereafter. Kasle appealed the denial of benefits
and was informed that the claims were denied because the plan did not cover out-of-network

inpatient psychiatric services, and Kasle had not secured pre-approval before Slavik was admitted.
Kasle alleges that the denial was improper under the terms of the plan.
The amended complaint pleads claims for (1) denial of benefits under ERISA, 29 U.S.C. §
1132(a)(1)(B) (Count I); (2) “federal common law equitable estoppel,” (Count II); (3) breach of
contract (Count III); and (4) a demand for payment of penalty interest under Michigan’s Unfair
Trade Practices Act, Mich. Comp. Laws § 500.2006. The defendant answered the amended
complaint and denied liability asserting, among other things, that Kasle Family, LLC is the
administrator of the plan, not the defendant. It also filed the present motion to dismiss under
Federal Rule of Civil Procedure 12(b)(6), seeking dismissal of the state law claims on the ground
that they are preempted by ERISA.
II.
“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 547 (2007)). A
“claim is facially plausible when a plaintiff ‘pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged.’” Matthew N.
Fulton, DDS, P.C. v. Enclarity, Inc., 907 F.3d 948, 951-52 (6th Cir. 2018) (quoting Iqbal, 556
U.S. at 678). When reviewing the motion, the Court “must ‘construe the complaint in the light
most favorable to the plaintiff[] [and] accept all well-pleaded factual allegations as true.’” Id. at
951 (quoting Hill v. Snyder, 878 F.3d 193, 203 (6th Cir. 2017)).
The defendant argues that it is well settled that state law claims for breach of contract and
other causes of action are preempted by ERISA. The plaintiffs respond that they do not intend to
contest preemption, if the defendant concedes that it is the plan administrator. They represented

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in their September 21, 2018 response to the motion that they intended within 10 days to tender for
the defendant’s perusal a second amended complaint dropping the state law claims and adding a
claim for breach of fiduciary duty under ERISA.

However, no such pleading has been

forthcoming, and the plaintiffs have not filed any motion for leave to amend. The plaintiffs offer
no developed argument in opposition to the motion and apparently concede that their state law
claims are preempted.
“ERISA creates a ‘uniform regulatory regime over employee benefit plans.’” Milby v.
MCMC LLC, 844 F.3d 605, 609 (6th Cir. 2016) (quoting Aetna Health Inc. v. Davila, 542 U.S.
200, 208 (2004)). “Congress intended that this federal regime protect beneficiaries of employee
benefit plans while providing employers with uniform national standards for plan administration.”
Ibid. “ERISA’s regime includes an integrated system of procedures for enforcement, and section
1132(a) of ERISA completely preempts any state-law cause of action that duplicates, supplements,
or supplants the ERISA civil enforcement remedy because such actions conflict with the clear
congressional intent to make the ERISA remedy exclusive.” Ibid. (quotations and alterations
omitted). However, “claims that stem from a duty that is not derived from, or conditioned upon,
the terms of an ERISA plan are not completely preempted.” Ibid.
“A claim falls in the category of complete preemption under § 1132(a) when a claim
satisfies both prongs of the following test: ‘(1) the plaintiff complains about the denial of benefits
to which he is entitled only because of the terms of an ERISA-regulated employee benefit plan;
and (2) the plaintiff does not allege the violation of any legal duty (state or federal) independent
of ERISA or the plan terms.’” Id. at 610 (quoting Gardner v. Heartland Industrial Partners, LP,
715 F.3d 609, 613 (6th Cir. 2013)). Under the first prong, a “claim ‘likely falls within the scope
of § 1132 when the only action complained of is a refusal to provide benefits under an ERISA plan

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and the only relationship between the plaintiff and defendant is based on the plan.’” Ibid. (quoting
Davila, 542 U.S. at 211). And a “state-law tort is independent of ERISA when the duty conferred
was ‘not derived from, or conditioned upon, the terms of’ the plan and there is no ‘need[] to
interpret the plan to determine whether that duty exists.’” Id. at 611 (quoting Gardner, 715 F.3d
at 614)).
The breach of contract and penalty interest claims in this case both are preempted by
ERISA and must be dismissed. It is well settled that “ERISA specifically provides for remedies
for breaches of contract and fiduciary duties. Consequently, any state law claim that grants relief
for these breaches duplicates, supplements, or supplants the ERISA civil remedies,” and is
completely preempted. Soehnlen v. Fleet Owners Ins. Fund, 844 F.3d 576, 589 (6th Cir. 2016)
(quotations and alterations omitted).
The case law considering the penalty interest claim is thin, but those courts in this district
that have confronted the issue readily have concluded that Michigan’s Uniform Trade Practices
Act is not an act that “regulates insurance,” and, accordingly, claims for penalty interest under
Michigan Compiled Laws § 500.2006 completely are preempted. E.g., Biondo v. Life Insurance
Co. of North America, 116 F. Supp. 2d 872, 883 (E.D. Mich. 2000). The plaintiffs have offered
no authority to the contrary, and they appear to concede the question of preemption on both of the
challenged claims.
III.
The defendant’s motion and response fully set forth the arguments, and oral argument will
not assist in the disposition of the motion. The plaintiffs’ state law claims are based on the rights
and obligations created by under a health insurance plan that is governed by ERISA. ERISA’s
preemption provision requires that the plaintiffs’ state-law-based claims be dismissed.

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Accordingly, it is ORDERED that the Court will decide the motion for partial dismissal
on the papers, see E.D. Mich. LR 7.1(f)(2), and the hearing scheduled for January 3, 2019 is
CANCELLED.
It is further ORDERED that the defendant’s motion for partial dismissal (ECF No. 16) is
GRANTED. Counts III and IV of the amended complaint are DISMISSED.

s/David M. Lawson_____
DAVID M. LAWSON
United States District Judge
Date: January 2, 2019
PROOF 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 January 2, 2019.
s/Susan K. Pinkowski
SUSAN K. PINKOWSKI

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