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Saginaw Chippewa Indian Tribe of Michigan v. Blue Cross Blue Shield of Michigan

United States District Court, E.D. Michigan, Northern Division

October 27, 2016

SAGINAW CHIPPEWA INDIAN TRIBE OF MICHIGAN, el al., Plaintiff,
v.
BLUE CROSS BLUE SHIELD OF MICHIGAN, Defendant.

          ORDER GRANTING IN PART PLAINTIFFS' MOTION FOR RECONSIDERATION

          Honorable Thomas L. Ludington, Judge

         On January 29, 2016, Plaintiffs Saginaw Chippewa Indian Tribe of Michigan and the Welfare Benefit Plan (“Plaintiffs”) brought suit against Blue Cross Blue Shield of Michigan (“BCBSM”). Plaintiffs' suit takes issue with BCBSM's management of Plaintiffs' “self-insured employee benefit Plan.” Am. Compl. at 1, ECF No. 7. Specifically, Plaintiffs assert that BCBSM violated its fiduciary duty under the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001, et seq., when it did not authorize payment of Medicare-like Rates[1] for certain health services (Count I), that BCBSM engaged in prohibited transactions under ERISA when it charged Plaintiff hidden fees (Count II), and seven state law claims (Count III-IX). On August 3, 2016, the Court granted Defendant's motion to dismiss Counts I and III-IX. ECF No. 22. Plaintiffs filed a motion for reconsideration, ECF No. 24, which is now before the Court.

         I.

         The relevant allegations have been recounted in the Court's August 3, 2016, order granting Defendant's motion to dismiss. ECF No. 22. That summary will be incorporated as if fully recounted herein. For clarity, the procedural history of this action will be further described.

         On April 25, 2016, Defendant filed a motion to dismiss Plaintiffs' state law claims and ERISA claims related to the nonpayment of Medicare-like Rates. Mot. Dismiss, ECF No. 14. In that motion, Defendant argued that Plaintiffs' claims related to the nonpayment of Medicare-like rates should be dismissed because “when: (a) an ERISA-governed plan does not include a particular benefit . . .; and (b) ERISA does not require application of the non-ERISA federal law in question, then a third-party administrator does not owe a fiduciary duty relative to the same.” Mot. Dismiss at 7, ECF No. 14. Defendant cited numerous cases in support of the proposition that “absent clear and unambiguous language by Congress, ERISA liability does not extend to an alleged failure to comply with a non-ERISA statute.” Id. at 10 (citing, among other cases, Bell v. Pfizer, Inc., 626 F.3d 66, 77-78 (2d Cir. 2010); Clark v. Feder Somo and Bard, P.C., 739 F.3d 28 (D.C. Cir. 2014); Reklau v. Merchants Nat'l Corp., 808 F.2d 628, 631 (7th Cir. 1986)). Plaintiffs countered by arguing in general terms that BCBSM's behavior violated its ERISA fiduciary duties by not paying the lowest possible rate for medical services rendered. Pl. Resp. at 13-14, ECF No. 18. Plaintiffs further attempted to distinguish the cases cited by Defendant. See Id. at 16-19. In particular, Plaintiffs tried to distinguish Clark by arguing that the case did not involve a claim that the ERISA fiduciary violated his “prudent person” obligations under 29 U.S.C. § 1104(a)(1). Id. at 17. Plaintiffs did not cite any legal authority which affirmatively established that ERISA liability should be extended to cover BCBSM's failure to take advantage of Plaintiffs' entitlement to Medicare-like Rates under 42 C.F.R. § 136.30.

         On August 3, 2016, the Court granted Defendant's motion to dismiss. ECF No. 22. The Court dismissed Plaintiffs' state law claims with prejudice because all parties agreed that they were preempted by ERISA. The Court further dismissed Count I in whole and Count II to the extent it related to BCBSM's obligation to ensure that the Plan paid Medicare-like Rates for healthcare claims. In the order, the Court explained that “courts have uniformly held that an ERISA fiduciary does not owe a duty to the plan to comply with obligations extrinsic to the text of ERISA and the plan.” Id. at 6. In support, the order extensively discussed the D.C. Circuit's decision in Clark. Id. at 6-8. The Court noted that the plaintiff in Clark “grounded her claim in § 404 of ERISA (29 U.S.C. § 1104), ” like Plaintiffs here.

         On August 17, 2016, Plaintiffs filed a motion for reconsideration of the Court's order which granted Defendant's motion to dismiss. ECF No. 24. For the reasons stated below, Plaintiffs' motion for reconsideration will be granted in part.

         II.

         Pursuant to Eastern District of Michigan Local Rule 7.1(h), a party can file a motion for reconsideration of a previous order, but must do so within fourteen days. A motion for reconsideration will be granted if the moving party shows: “(1) a palpable defect, (2) the defect misled the court and the parties, and (3) that correcting the defect will result in a different disposition of the case.” Michigan Dept. of Treasury v. Michalec, 181 F.Supp.2d 731, 733-34 (E.D. Mich. 2002) (quoting E.D. Mich. LR 7.1(g)(3)). A “palpable defect” is “obvious, clear, unmistakable, manifest, or plain.” Id. at 734 (citing Marketing Displays, Inc. v. Traffix Devices, Inc., 971 F.Supp.2d 262, 278 (E.D. Mich. 1997). “[T]he Court will not grant motions for rehearing or reconsideration that merely present the same issues ruled upon by the Court, either expressly or by reasonable implication.” E.D. Mich. L.R. 7.1(h)(3). See also Bowens v. Terris, No. 2:15-CV-10203, 2015 WL 3441531, at *1 (E.D. Mich. May 28, 2015).

         III.

         In their motion for reconsideration, Plaintiffs take issue with two aspects of the Court's opinion. First, Plaintiffs argue the Court misconstrued Clark v. Feder Somo and Bard, P.C. when holding that Plaintiffs had not stated a claim on which relief can be based regarding BCBSM's obligation to ensure the Plan was paying only Medicare-like Rates. Second, Plaintiffs argue that Count I should not have been dismissed in its entirety.

         A.

         Plaintiffs begin by arguing that “BCBSM's decision not to take advantage of MedicareLike Rates” violated BCBSM's fiduciary duties pursuant to § 1104(a) of ERISA. Mot. Reconsideration at 7-9, ECF No. 24. Plaintiffs assert that BCBSM imprudently paid contractual rates to hospitals instead of the lower Medicare-like Rates, and that this refusal violates BCBSM's general fiduciary duty under ERISA. This argument is materially identical to the argument considered and rejected in the Court's opinion granting Defendant's motion for reconsideration. See Order Granting Mot Dismiss at 5-6.

         Plaintiffs support this reiterated argument by citing two cases for the proposition that “a plan administrator breaches its fiduciary duties when the administrator has a pattern or practice of using plan assets to overpay healthcare claims”: United Teamster Fund v. Magnacare Administrative Services, LLC, 39 F.Supp.3d 461, 471 (S.D.N.Y. 2014) and Autonation, Inc. v. United Healthcare Ins. Co., 423 F.Supp.2d 1265, 1272-73 (S.D. ...


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