United States District Court, E.D. Michigan, Southern Division
ESTATE OF TONA GRIMMETT, MICHIGAN AMBULATORY SURGICAL CENTER, SOUTHEAST MICHIGAN SURGICAL HOSPITAL, LLC, OAKLAND MRI, LLC, Plaintiffs,
ENCOMPASS INDEMNITY COMPANY, Defendant. MICHIGAN AMBULATORY SURGICAL CENTER, OAKLAND MRI, LLC, Cross-Claimants,
ESTATE OF TONA GRIMMETT, Cross-Defendant
MEMORANDUM AND ORDER DENYING DEFENDANT'S MOTION
TO DISMISS (DOC. 97), DENYING DEFENDANT'S MOTION TO
DISMISS (DOC. 98), AND DENYING DEFENDANT'S MOTION FOR
JUDGMENT ON THE PLEADINGS (DOC.99).
COHN, UNITED STATES DISTRICT JUDGE.
INTRODUCTION AND PROCEDURAL HISTORY
an automobile no-fault insurance case involving personal
protection benefits. Plaintiff Brian Grimmett is the personal
representative of the estate of Tona Grimmett (Grimmett),
was injured in a motor vehicle accident on March 4, 2013. At
the time of the accident, Grimmett was insured under a
no-fault policy issued by Defendant Encompass Indemnity
Company (Encompass) in accordance with Michigan's
No-Fault Act, M.C.L. § 500.3101, et seq.
(No-Fault Act). Grimmett sued Encompass in the Wayne County
Circuit Court (14-005777-NF) because Encompass refused to
cover her medical expenses (Doc. 8).
Michigan Ambulatory Surgical Center, LLC (MASC) also sued
Encompass in the Wayne County Circuit Court (15-014301-NF)
for expenses it incurred performing a lumbar spine fusion
surgery on Grimmett following the accident (Doc. 49).
Encompass removed both cases to federal court, where they
were consolidated into the present case (Doc.
Michigan Surgical Hospital, LLC (Southeast) intervened as a
plaintiff at the state level (Doc. 1), seeking to recover
from Encompass expenses related to a cervical spine fusion
surgery that Southeast performed on Grimmett following the
MRI, LLC (OMRI) intervened as a plaintiff after the case was
removed to federal court (Doc. 21), seeking to recover from
Encompass expenses related to an MRI scan that OMRI performed
on Grimmett following the accident.
25, 2017, the Michigan Supreme Court decided in Covenant
Med. Ctr., Inc. v. State Farm Mut. Auto. Ins. Co., 500
Mich. 191 (2017) that medical service providers have no
statutory cause of action to collect personal protection
insurance benefits from no-fault insurers under the No-Fault
Act. Id. This holding applies retroactively. W A
Foote Mem'l Hosp. v. Michigan Assigned Claims Plan,
No. 333360, 2017 WL 3836645, at *14 (Mich. Ct. App. Aug. 31,
2017). In light of Covenant, MASC and OMRI filed
amended complaints (Docs. 93, 94) presenting new theories of
recovery against Encompass. Both parties also brought
cross-claims against Grimmett to recover their expenses.
Southeast did not amend its complaint, but has now requested
leave to amend in order to cure any deficiencies revealed by
the Court's ruling on the present motions.
before the Court are Encompass' Motion to Dismiss
MASC's claim pursuant to Fed.R.Civ.P. 12(b)(6) (Doc. 97),
Motion to Dismiss OMRI's claim pursuant to Fed.R.Civ.P.
12(b)(6) (Doc. 98), and Motion for Judgment on the Pleadings
as to Southeast's claim pursuant to Fed.R.Civ.P. 12(c)
(Doc. 99). For the reasons that follow, all three motions are
DENIED. Additionally, Southeast is granted leave to amend its
Fed.R.Civ.P. 12(b)(6) motion seeks dismissal for a
plaintiff's failure to state a claim upon which relief
can be granted. “To survive a motion to dismiss under
Rule 12(b)(6), a ‘complaint must contain either direct
or inferential allegations respecting all the material
elements to sustain a recovery under some viable legal
theory.'” Advocacy Org. for Patients &
Providers v. Auto Club Ins. Ass'n, 176 F.3d 315, 319
(6th Cir. 1999) (quoting Scheid v. Fanny Farmer Candy
Shops, Inc., 859 F.2d 434, 436 (6th Cir. 1988)). A claim
“must be dismissed . . . if as a matter of law it is
clear that no relief could be granted under any set of facts
that could be proved consistent with the allegations.”
Neitzke v. Williams, 490 U.S. 319, 327 (1989)
(quoting Hishon v. King & Spalding, 467 U.S. 69,
73 (1984)) (internal quotation marks omitted).
Civ. P. 12(c) provides that "[a]fter the pleadings are
closed-but early enough not to delay trial-a party may move
for judgment on the pleadings." A motion for judgment on
the pleadings under Rule 12(c) utilizes the same standard of
review applicable under Rule 12(b)(6). Wee Care Child
Ctr., Inc. v. Lumpkin, 680 F.3d 841, 846 (6th Cir.
2012). Thus, “[f]or purposes of a motion for judgment
on the pleadings, all well-pleaded material allegations of
the pleadings of the opposing party must be taken as true,
and the motion may be granted only if the moving party is
nevertheless clearly entitled to judgment.” Poplar
Creek Development Co. v. Chesapeake Appalachia, L.L.C.,
636 F.3d 235, 240 (6th Cir. 2011).
most salient among the healthcare providers' claims are
those regarding assignments and third party beneficiaries,
since the Covenant court explicitly left open the
possibility of a provider cause of action based on each
theory. MASC and Southeast argue that Grimmett validly
assigned to them her rights to receive payment under her
insurance contract with Encompass. MASC and OMRI argue that
they are intended third party beneficiaries of the contract
between Grimmett and Encompass.
Court will address each claim in turn.
Michigan Supreme Court explicitly stated in Covenant
that “our 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, 500 Mich. at 217 n.40. Thus, while a
health care provider no longer has a statutory cause of
action against insurers, it may still have a contract-based
cause of action if there has been a valid assignment of
rights. See Id. at 217 n.39 (acknowledging that
contractual causes of action may still exist). An insurer has
standing to “challenge an assignment if that challenge
would render[ ] the assignment absolutely invalid or
ineffective, or void.” Conlin v. Mortg. Elec.
Registration Sys., Inc., 714 F.3d 355, 361 (6th Cir.
2013) (quoting Livonia Props. Holdings, LLC v.
12840-12976 Farmington Rd. Holdings, LLC, 399 F.
App'x 97, 102 (6th Cir. 2010)) (internal quotation marks
omitted). Here, Encompass has standing to challenge the
assignments because it argues that the assignments are
amended complaint, MASC alleges that the assignment of rights
Grimmett signed on the day of her treatment (Doc.
entitles it to receive payment directly from Encompass for
the services rendered. Encompass says the assignment is
invalid and unenforceable for several reasons: (1) the
assignment mentioned only the name “Specialty Surgical
Center” and did not reference “Michigan
Ambulatory Surgical Center;” (2) the assignment was for
future, not present rights under the policy because proof of
reasonableness has to be submitted to the insurer before
payment becomes due; (3) the assignment was not notarized,
and it was not clear that MASC unambiguously accepted
Grimmett's offer to assign rights; (4) the assignment did
not comply with the Statute of Frauds because it was not
signed by a MASC representative; (5) the assignment did not
provide for the right to sue both the insurer and Grimmett;
and (6) the policy contained an anti-assignment clause.
previously mentioned, Southeast did not file an amended
complaint after Covenant. In its response to
Encompass' motion for judgment on the pleadings, however,
Southeast asserts that it had a valid assignment of rights
from Grimmett. The Court therefore allows Southeast to amend
its complaint to include relevant arguments regarding an
assignment of rights. See Fed.R.Civ.P. 15(a)(2)
(“The court should freely give leave” to amend
advances many of the same arguments in opposition to
Southeast's assignment as it did regarding MASC's
assignment, namely that: (1) Southeast's exact name does
not appear on the assignment; (2) the assignment was for
future benefits; (3) it is not clear that there was an offer
and acceptance of the assignment; (4) the assignment violates
the Statute of Frauds; and (5) the insurance contract
contained an anti-assignment clause. In addition, Encompass
argues that the assignment was not supported by
law provides that “[a] domestic or foreign corporation
may transact business under any assumed name or names other
than its corporate name.” Mich. Comp. Laws §
450.1217. “[T]he obvious purpose of the [assumed name]
statute is to inform the public with whom it is dealing, and
thereby serve its convenience and to prevent imposition and
fraud.” Bankers Tr. Co. v. Bradfield, 324
Mich. 116, 123 (1949) (internal quotation marks omitted).
This means that “[a] corporation that has complied with
this statute has notified the public constructively regarding
its assumed name. Accordingly, parties contracting with
agents of the corporation operating under the assumed name
cannot claim that they were without notice regarding the
existence or identity of the corporation.” Penton
Pub., Inc. v. Markey, 212 Mich.App. 624, 627 (1995).
courts have also declined to allow a party to avoid a
contract even though an assumed name certificate was not
filed. See, e.g. People's State Bank v. Trombly,
241 Mich. 199, 208 (1928); Rossello v. Trella, 206
Mich. 20, 24 (1919). While an assignment and a contract are
not the same in all respects, both involve manifestation of
intent toward the other party. See Burkhardt v.
Bailey, 260 Mich.App. 636, 654-55 (2004); W.
Michigan Univ. Bd. of Trustees v. Slavin, 381 Mich. 23,
31 (1968) (“An offer is a unilateral declaration of
intention.”). Thus, where the identity of an assignee
is at issue, Michigan law regarding contracts entered into
under an assumed name can be applied.
in each case Grimmett knew she was assigning her rights to
the hospital that was about to perform surgery. Since MASC
filed a Certificate of Assumed Name before the date of the
surgery,  Grimmett was on constructive notice that
Specialty Surgical Center and MASC were the same entity.
Therefore, whether or not she actually knew the correct name
of the hospital is irrelevant to determining the validity of
Southeast only showed it had an assignment in its response to
Encompass' motion, it did not have a chance to respond to
the name argument in Encompass' reply. As such, it has
not provided documentation showing that “Michigan
Surgical Hospital, ” the name that appears on the
assignment, is the same entity as “Southeast Michigan
Surgical Hospital.” It is for this reason also that the
Court grants leave for Southeast to amend its complaint.
Assignment of Present Rights
Michigan, an assignment is valid “if it clearly
reflects the intent of the assignor to presently transfer
‘the thing' to the assignee.” Burkhardt
v. Bailey, 260 Mich.App. 636, 654-55 (2004). As the
Covenant court noted, only past or present rights to
insurance benefits are assignable. Covenant, 500
Mich. at 217 n.40; Mich. Comp. Laws § 500.3143
(providing that assignments of future rights are void).
Therefore, the Court must determine “whether the
assignment in question purports to assign only past due and
presently due benefits or ...