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The Grand Traverse Band of Ottawa and Chippewa Indians v. Blue Cross And Blue Shield of Michigan

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

May 20, 2019

The Grand Traverse Band of Ottawa and Chippewa Indians, and Its Employee Welfare Plan Plaintiffs,
v.
Blue Cross and Blue Shield of Michigan, Defendant.

          Mona K. Majzoub Mag. Judge.

          OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS [117]

          JUDITH E. LEVY UNITED STATES DISTRICT JUDGE.

         In its earlier stages, this case was about claims brought under the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001; now, this case is about state law violations regarding non-employee group health insurance. Plaintiffs, the Grand Traverse Band of Ottawa and Chippewa Indians (“the Tribe”) and its Employee Welfare Plan (“the Plan”) raise EIRSA, state law breach of contract, Michigan's Health Care False Claims Act (“HCFCA”), Mich. Comp. Laws § 752.1001, common law fiduciary duty, and other common law tort claims against defendant Blue Cross Blue Shield of Michigan (“BCBSM”), the Plan administrator. Previously, the Court rejected all of plaintiffs' claims except its breach of contract claim, in part because the parties agreed that the breach of common law fiduciary duty and the HCFCA claims were preempted by ERISA. However, the parties agreed to reinstate the common law fiduciary duty and HCFCA claims in the wake of the Sixth Circuit's decision in Saginaw Chippewa Indian Tribe of Mich. v. Blue Cross Blue Shield of Mich., 748 Fed.Appx. 12 (6th Cir. 2018). Before the Court is defendant's motion to dismiss those two claims.

         I. Background

         The Court provided a complete factual background of the underlying claims in its previous opinion and order granting in part and denying in part defendant's motion to dismiss, which it reincorporates fully here. (Dkt. 99 at 2-6.) For clarity, the Court summarizes the background and notes new developments in the case's procedural history.

         The Tribe is federally-recognized. The Tribe maintains a self-funded employee welfare plan, the Plan, which covers three groups of participants: members of the Tribe who are employed by the Tribe (Group #01010); members of the Tribe who are not employed by the Tribe (Group #01020); and employees of the Tribe who are not members of the Tribe (#48571). BCBSM has been the Plan administrator since 2000. (Dkt. 90-2 at 3.)

         In 2007, new federal regulations went into effect which provided that “[a]ll Medicare-participating hospitals . . . must accept no more than the rates of payment under the methodology described in this section as payment in full for all terms and services authorized by [Indian Health Service], Tribal, and urban Indian organization entities, ” and even if the parties had negotiated different rates, tribes would “pay the lesser of” the amount determined by the methodology and the negotiated amount. 42 C.F.R. §§ 136.30(a), (f). These are known as the “Medicare-Like Rates” (“MLR”) regulations.

         Plaintiffs allege that they asked BCBSM to ensure that they were receiving MLR for the Tribe member groups, Groups #01019 and #01020. (Dkt. 90 at 14). BCBSM claimed that “it could not adjust its entire system to calculate MLR on those claims eligible for MLR discounts, ” but could provide a rate that would be close to MLR by providing a discount for plaintiffs' claims for services at the Munson Medical Center to Group #01020, the non-employee Tribe members. (Id. at 15.) This led the parties to enter into the Facility Claims Process Agreement (“FCPA”) with Munson Medical Center, effective on March 1, 2009. (Dkt. 90 at 6; Dkt. 90-4.) However, in 2012, plaintiffs obtained a third-party audit and discovered that they were “not paying anything ‘close to MLR' on claims.” (Dkt. 90 at 16.) They state that they “did not discover the full extent of BCBSM's” conduct until 2013. (E.g., id. at 19.)

         Plaintiffs filed their first complaint on April 1, 2014. (Dkt. 1.) On January 24, 2019, plaintiffs were permitted to file an amended complaint, alleging breach of fiduciary duty under ERISA, violations of the HCFCA, breach of contract and the covenant of good faith and fair dealing in the alternative, breach of common law fiduciary duty, fraud and misrepresentation, and silent fraud. (Dkt. 90.) BCBSM filed a motion to dismiss those claims (Dkt. 94), which the Court granted in part and denied in part. (Dkt. 99.) The Court dismissed all claims except for the breach of contract claim, noting that the parties agreed that the breach of common law fiduciary duty and HCFCA claims were preempted by ERISA. (Id. at 22, 25.) Plaintiffs filed a motion for reconsideration (Dkt. 101) and a motion to file a second amended complaint (Dkt. 102), and both were denied. (Dkt. 107.)

         In August 2018, the Sixth Circuit held that the Saginaw Chippewa Indian Tribe of Michigan's Welfare Benefit Plan was not an ERISA plan when it covered non-employee Tribe members. Saginaw Chippewa Indian Tribe of Mich. v. Blue Cross Blue Shield of Mich., 748 Fed.Appx. 12, 19 (6th Cir. 2018). Because this undermined the parties' previous agreement that all claims for violations of HCFCA and breach of common law fiduciary duty were preempted by ERISA, the parties agreed to reinstate those claims as to Group #01020, the non-employee Tribe members, for the purpose of testing that legal theory in this case. (Dkt. 116.) The motion to dismiss before the Court followed (Dkt. 117) and is now fully briefed.[1] (Dkts. 119, 120.)

         II. Legal Standard

         When deciding a motion to dismiss under Federal Rule of Procedure 12(b)(6), the Court must “construe the complaint in the light most favorable to the plaintiff and accept all allegations as true.” Keys v. Humana, Inc., 684 F.3d 605, 608 (6th Cir. 2012). “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). A plaintiff's claim is facially 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. A plausible claim need not contain “detailed factual allegations, ” but it must contain more than “labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

         III. Analysis

         For the reasons set forth below, plaintiffs raise claims under the HCFCA and for breach of common law fiduciary duty, but only state a claim as to the HCFCA. Plaintiffs have statutory standing under the HCFCA. However, their breach of fiduciary duty claim, although cognizable, is barred by the statute of limitations.

         A. Health Care False Claims Act

         In its motion, defendant argues that plaintiffs lack statutory standing under the HCFCA. (Dkt. 117 at 11.) It is undisputed that plaintiffs must meet the definition of a “health care insurer” to have statutory standing under the HCFCA. Mich. Comp. Laws § 752.1009 (“A person who knowingly presents or causes to be presented a claim which contains a false statement, shall be liable to the health care corporation or health care insurer for the full amount of the benefit or payment made.” (emphasis added)). A “health care insurer” is “any legal entity which is self-insured and providing health care benefits to its employees.” Mich. Comp. Laws § 752.1002(f) (emphasis added). The Plan is self-insured, and so the only remaining question is whether plaintiffs are “providing health care benefits to its employees” in relation to the non-employee Tribe members, Group #01020.

         Statutory standing is a matter of statutory interpretation. Miller v. Allstate Ins. Co., 481 Mich. 601, 607 (2008) (quoting Graden v. Conexant Sys., Inc., 496 F.3d 291, 295 (3d Cir. 2007)). “When interpreting a statute, the primary rule of construction is to discern and give effect to the Legislature's intent . . . .” Perkovic v. Zurich Am. Ins. Co., 500 Mich. 44, 49 (2017) (citing Jesperson v. Auto Club. Ins. Ass'n, 499 Mich. 29, 34 (2016)). And the key question when interpreting statutory standing provisions is “whether [the Legislature] has accorded this injured plaintiff the right to sue the defendant to redress his injury.” Miller, 481 Mich. at 607 (emphasis in original) (quoting Graden, 496 F.3d at 295).

         “[C]lear and unambiguous” statutory language is the best evidence of legislative intent. Perkovic, 500 Mich. at 49 (citing Jesperson, 499 Mich. at 34). When interpreting statutory language, courts “enforce such language as written, giving effect to every word, phrase, and clause, ” id. (same), meaning that “every . . . word in the statute must be read and understood in its grammatical context, ” Herman v. Berrien Cty., 481 Mich. 352, 366 (2008) (quoting Sun Valley Foods Co. v. Ward, 460 Mich. 230, 237 (1999)). Generally, “[i]ndividual words and phrases . . . should be read in the context of the entire legislative scheme.” Bush v. Shabahang, 484 Mich. 156, 167 (2009) (footnotes omitted). If “the language of the statute is unambiguous, ” “no further judicial construction is required or permitted”; but if the language is ambiguous, courts may use other methods of interpretation “to ascertain legislative intent.” City of Coldwater v. Consumer's Energy Co., 500 Mich. 150, 167 (2017) (quoting Sun Valley, 460 Mich. at 236).

         When the text of the statute is ambiguous because two equally reasonable readings are possible, courts “should give effect to the interpretation that more faithfully advances the legislative purpose behind the statute.” People v. Adair, 452 Mich. 473, 479-80 (1996) (citing People v. Rehkopf, 422 Mich. 198, 207 (1985)). “Statutes must [also] be construed to prevent absurd results.” People v. Tennyson, 487 Mich. 730, 741 (2010) (quoting Rafferty v. Markovitz, 461 Mich. 265, 270 (1999)). In this case, plaintiffs offer a plain language interpretation that is in accord with these principles. But even if the Court were to ...


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