Opinion
CASE NO.: 02-72263
October 18, 2002
OPINION AND ORDER GRANTING DEFENDANTS' MOTION TO DISMISS
I. INTRODUCTION
In this case, plaintiff Tendercare (Michigan), Inc. (hereinafter "Tendercare"), a nursing home, sued defendants Dana Corporation, Unicare Insurance Co., and American Health Group, Inc. (hereinafter "Defendants"), seeking reimbursement for healthcare services provided to Mary Gudith. Mary Gudith was covered by a retiree medical plan that was administered and operated by the Defendants. In its First Amended Complaint, Tendercare alleges claims under various state common law causes of action, the Michigan Consumer Protection Act, and the Employee Retirement Income Security Act of 1974 (hereinafter "ERISA"). Presently before the Court is Dana Corporation's motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), which has been joined by Unicare Insurance Co. and American Health Group, Inc. (Docket Entry #6, 8, and 10). The Court heard oral argument on this motion on September 25, 2002.
For the reasons stated below, the Court holds that Tendercare does not have standing to assert a civil action under ERISA. Because Tendercare's cause of action arising under ERISA was this Court's source of subject matter jurisdiction, the Court does not have subject matter jurisdiction over this case. Accordingly, this Court GRANTS Defendants' motion to dismiss.
II. BACKGROUND
From July 29, 1997 through January 29, 1999, Mary Gudith was a resident of Taylor Total Living Center, a skilled nursing home facility operated by plaintiff Tendercare. (First Am. Compl. ¶ 7.) During the time Mary Gudith was a resident of Tendercare, she was covered by a retiree medical plan issued by defendant Dana Corporation and administered by defendants Unicare Insurance Company and/or American Health Group, Inc. ( Id. ¶ 8.)
In connection with the skilled nursing services provided to Mary Gudith, Tendercare submitted a claim for payment to Defendants for healthcare provided to Mary Gudith for the time period of November 1, 1997 through January 29, 1999. ( Id. ¶ 9.) However, Defendants denied plaintiff's claim for payment on the ground that the services provided to Mary Gudith constituted "custodial" care rather than "skilled nursing care." ( Id. ¶ 10.) Mary Gudith's medical plan provided medical coverage only for skilled nursing care where the patient shows signs of improvement with continued skilled care. ( Id. ¶ 12 and Letter from Mark Gallagher, M.D. to Don Berger of 7/10/02.) According to Tendercare, its treatment of Mary Gudith constituted skilled nursing care to treat Mary Gudith for gangrene, arteriosclerotic heart disease, congestive heart failure, arterial fibrillation, and anemia acquired hemolytic. ( Id. ¶ 13.) Tendercare requested the Defendants reconsider their claim for payment, but Defendants again determined that the services provided to Mary Gudith were not medically necessary and were, thus, not covered by Mary Gudith's medical plan. ( Id. ¶ 11.)
In response to Defendants refusal to pay for the healthcare services rendered to Mary Gudith, Tendercare brought the present lawsuit against the Defendants, asserting that Defendants are "primarily liable for payment under the Plan for those services provided to and for the benefit of Mary Gudith." ( Id. ¶ 20.) In its First Amended Complaint, Tendercare asserts claims arising under ERISA, the Michigan Consumer Protection Act, and various state common law claims, including equitable subrogation, equitable indemnification, unjust enrichment, quantum meruit, and promissory estoppel. Tendercare asserts that this court has jurisdiction over this case pursuant to 28 U.S.C. § 1331 as a cause of arising under ERISA. ( Id. ¶ 5.) Tendercare is asking this Court to order the Defendants to pay it $59,885.88 for the healthcare services provided to Mary Gudith.
Mary Gudith died in March of 1999. (Pl.'s Resp. at 4.) Tendercare did not obtain a formal assignment of medical benefits from Mary Gudith before her death. ( Id.)
Presently before the Court is Defendants' motion to dismiss Tendercare's lawsuit pursuant to Federal Rule of Civil Procedure 12(b)(6) on the ground that Tendercare lacks standing to assert a claim arising under ERISA and that Tendercare's state law claims are preempted by ERISA. Although Tendercare filed a response to Defendants' motion to dismiss, Plaintiff submitted its response over a month past the deadline for response set by the Court. The Court expedited the time for Defendants' to reply to one week. Defendants timely submitted a reply.
III. DISCUSSION
A. Standard of Review of Rule 12(b)(6) Motion
Defendants filed the instant motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). A Rule 12(b)(6) motion alleges that a complaint has failed to state a claim upon which relief can be granted. In evaluating such a motion, the court construes the complaint in the light most favorable to the plaintiff, accepts all factual allegations in the complaint as true, and "should not [grant the motion] unless is appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957); see also Bloch v. Ribar, 156 F.3d 673, 677 (6th Cir. 1998). "However, the Court need not accept as true legal conclusions or unwarranted factual inferences." Blakely v. United States, 276 F.3d 853, 863 (6th Cir. 2002) (quotations omitted).
The purpose of a 12(b)(6) motion is "to test whether, as a matter of law, the plaintiff is entitled to legal relief even if everything alleged in the complaint is true." Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993). Accordingly, when reviewing a 12(b)(6) motion to dismiss, the court only examines whether the pleadings state a claim for which relief may be granted, and does not review additional evidence. See Nieman v. NLO, Inc., 108 F.3d 1546, 1554 (6th Cir. 1997). "As the First Circuit stated, `[w]e are not holding the pleader to an impossibly high standard; we recognize the policies behind Rule 8 and the concept of notice pleading. A plaintiff will not be thrown out of court for failing to plead facts in support of every arcane element of his claim. But when a complaint omits facts that, if they existed, would clearly dominate the case, it seems fair to assume that those facts do not exist.'" Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 437 (6th Cir. 1988) (quoting O'Brien v. DiGrazia, 544 F.2d 543, 546 n. 3 (1st Cir. 1976)).
B. Grounds For Motion to Dismiss 1. Standing
In Defendants' memorandum in support of their motion to dismiss, Defendants first argue that Tendercare's state law claims are preempted by ERISA and then they argue that Tendercare's claim for equitable relief under ERISA must be dismissed for lack of standing. However, this Court must address the standing issue first because standing is necessary to confer this Court with jurisdiction. Ward v. Alternative Health Delivery Sys., Inc., 261 F.3d 624 (6th Cir. 2001); Cromwell v. Equicor-Equitable HCA Corp., 944 F.2d 1272, 1279 (6th Cir. 1991) (Suhrheinrich, J., concurring) (agreeing with the dissent that "the Supreme Court and Sixth Circuit precedent clearly require that a district court make an independent inquiry at the outset to determine whether the plaintiff is a `participant' or `beneficiary' within the meaning of ERISA, before it turns to the issue of preemption."). In fact, the United States Court of Appeals for the Sixth Circuit has specifically held that ERISA standing is a jurisdictional matter, "and a plaintiff's lack of standing is said to deprive a court of jurisdiction." Ward, 261 F.3d at 626.
The legal determination of whether a party has standing is in essence a determination of whether a person or entity is the proper party to bring an action for adjudication. Warth v. Seldin, 422 U.S. 490, 498 (1975). The federal statute at issue in this case, ERISA, specifically states who may bring a civil enforcement cause of action under it. See 29 U.S.C. § 1132 (1993). The essential question is, thus, whether Tendercare is within the category of people defined in the statute as entitled to bring a civil enforcement action. Warth, 422 U.S. at 500 ("Essentially, the standing question in such cases is whether the constitutional or statutory provision on which the claim rests properly can be understood as granting persons in the plaintiff's position a right to judicial relief.").
In this case, Tendercare has brought causes of action under two sections of ERISA: 29 U.S.C. § 1132(a)(3) and 1132(a)(1)(B). 29 U.S.C. § 1132(a)(3) provides that a civil action may be brought by a "participant or beneficiary", while 29 U.S.C. § 1132(a)(1)(B) provides that a civil action may be brought by a "participant, beneficiary, or fiduciary". Therefore, Tendercare must allege facts that if taken to be true could establish that it is a participant, beneficiary, or fiduciary. See Crawford v. Roane, 53 F.3d 750, 754 (6th Cir. 1995).
Defendants in their motion to dismiss point out that Tendercare failed to even allege in its First Amended Complaint that it was a participant, beneficiary, or fiduciary of the retiree medical plan administered by the Defendants or that it obtained an assignment of benefits from a participant, beneficiary, or fiduciary. A medical provider has standing to bring a civil action under ERISA to enforce the terms of a ERISA plan if it has received a valid assignment of benefits from the beneficiary or participant of the medical plan. See Cromwell v. Equicor-Equitable HCA Corp., 944 F.2d 1272, 1277 (6th Cir. 1991); see also Michigan Affiliated Healthcare Sys., Inc. v. CC Sys. Corp. of Michigan, 139 F.3d 546, 550 (6th Cir. 1998). In response to Defendants' motion to dismiss, Tendercare admits that it did not obtain an assignment of medical benefits from Mary Gudith. (Pl.'s resp. at 4.)
When ruling on a motion to dismiss, although the non-movant's factual allegations must be taken as true, a court is not required to accept mere legal allegations as true. Blakely v. United States, 276 F.3d 853, 863 (6th Cir. 2002); Teagardener v. Republic-Franklin Inc. Pension Plan, 909 F.2d 947, 950 (6th Cir. 1990). This is especially true in pleading standing, where the Supreme Court has stated that a complainant must clearly allege facts demonstrating that it is a proper party. Warth v. Seldin, 422 U.S. 490, 518 (1975); McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189 (1936) (holding that "the party who seeks the exercise of jurisdiction in his favor . . . must allege in his pleading the facts essential to show jurisdiction. If he fails to make the necessary allegations he has no standing."). Thus, Tendercare in this case "must allege facts essential to show jurisdiction." McNutt, 298 U.S. at 189. If it fails to make the necessary allegations, it has no standing. Id.
Tendercare, in response to Defendants' motion to dismiss, argues that standing is proper in this case because (1) Defendants waived any lack of standing argument by failing to raise lack of standing when Defendants denied Plaintiff's claim for payment, (2) Defendants "formal policy" of allowing "providers" to challenge any determinations as to medical coverage gives it a "vested standing" to pursue benefits under Mary Gudith's medical plan, and (3) it is a beneficiary under 29 U.S.C. § 1132(a) and, therefore, has standing.
Tendercare first argues that Defendants waived standing by failing to bring the standing issue to Tendercare's attention when Tendercare initially submitted a claim for payment to the Defendants. In other words, Tendercare's position is that Defendants waived standing before this lawsuit even began by failing to inform Tendercare it did not have standing. If Defendants would have asserted that Tendercare lacked standing earlier, Tendercare argues, then it would have sought an assignment of benefits from Mary Gudith before her death. Tendercare does not cite legal authority for the proposition that standing can be waived.
Tendercare's argument that standing can be waived is incorrect. In fact, it is black letter law that standing cannot be waived. See Lewis v. Casey, 518 U.S. 343, 349 n. 1 (1996) (holding that standing is not subject to waiver). The Sixth Circuit has specifically held that standing under ERISA "is thought of as a `jurisdictional' matter, and a plaintiff's lack of standing is said to deprive a court of jurisdiction." Ward v. Alternative Health Delivery Sys., Inc., 261 F.3d 624, 626 (6th Cir. 2001). The Supreme Court has described standing as "`perhaps the most important of [the jurisdictional] doctrines." FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 231 (1990) (quoting Allen v. Wright, 468 U.S. 737, 750 (1984)). Since standing is not subject to waiver, the Court rejects this argument.
Tendercare also argues that Defendants' "formal policy" of allowing medical providers to challenge any determinations as to medical coverage gives it a "vested standing" to pursue benefits under Mary Gudith's medical plan. (Pl.'s resp. at 5). This argument by Tendercare is brief, not supported by any legal authority, and seems to be related to Tendercare's argument that Defendants' waived standing. The Court holds that standing cannot be waived and, therefore, rejects this argument.
Lastly, the Tendercare argues that it has standing under 29 U.S.C. § 1132(a) because it is a "beneficiary" as the term is defined in ERISA. Although Tendercare cites 29 U.S.C. § 1132(a)(8) for the definition of "beneficiary," the definition for beneficiary is actually located at 29 U.S.C. § 1002(a)(8). 29 U.S.C. § 1002(a)(8) states as follows:
(8) The term "beneficiary" means a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder."
Tendercare's argument that it is a beneficiary under ERISA takes up a single paragraph of its response to Defendants' motion to dismiss and contains no case law citations. Tendercare's argument is based solely on the fact that Defendants have a formal policy of granting healthcare providers one formal internal appeal after initially denying medical coverage under the terms of the medical plan. Tendercare seems to assert that because it was given a right to formally appeal the denial of its claim for medical coverage, it is a "beneficiary" under 29 U.S.C. § 1002(8) because, under the terms of the retiree medical plan, it is an entity that "is or may become entitled to a benefit" under the medical plan. See 29 U.S.C. § 1002(8) (1999).
Tendercare's assertion is without merit. In Crawford v. Roane, 53 F.3d 750, 755 (6th Cir. 1995), the Sixth Circuit held that, "in this Circuit, one is a `beneficiary' with ERISA standing if he has a reasonable or colorable claim to benefits under an ERISA plan." Just because Defendants had a formal policy of giving medical providers a right to appeal a denial of coverage under the retiree medical plan, that fact in no way makes Tendercare a beneficiary under the terms of the plan. As the Sixth Circuit has stated, "[t]he fact that plaintiff may be entitled to payment from defendants as a result of . . . [its] client participation in an employee plan does not make . . . [it] a beneficiary for the purpose of ERISA standing." Ward v. Alternative Health Delivery Sys., Inc., 261 F.3d 624, 627 (6th Cir. 2001). Generally, for a healthcare provider to have standing under ERISA it must obtain an assignment of benefits from a participant or beneficiary of the medical plan. See Michigan Affiliated Healthcare Sys., Inc. v. CC Sys. Corp. of Michigan, 139 F.3d 546, 550 (6th Cir. 1998) (holding that a healthcare provider was not a beneficiary because it did not obtain an assignment of benefits from the patient); Cromwell v. Equicor-Equitable HCA Corp., 944 F.2d 1272, 1277 (6th Cir. 1991).
Further, if Tendercare lacks standing under its ERISA claim, this Court must dismiss Tendercare's lawsuit because the Court does not have subject matter jurisdiction over Tendercare's state causes of action. Tendercare alleges that this Court has subject matter jurisdiction over this lawsuit pursuant to 28 U.S.C. § 1331 based on a cause of action arising under ERISA. (Am. Compl. ¶ 5.) Although not discussed in Tendercare's First Amended Complaint or in its response to Defendants' motion to dismiss, jurisdiction for Tendercare's state law claims is based on supplemental jurisdiction, 28 U.S.C. § 1367.
A district court can exercise supplemental jurisdiction over state law claims if the state law claims are so related as to form part of the same case or controversy as a claim that the district court has original subject matter jurisdiction over. 28 U.S.C. § 1367(a) (1993). However, if the district court dismisses the claim in the complaint on which original jurisdiction is based for lack of standing, then the court must dismiss the claims whose jurisdiction is based on supplemental jurisdiction. Ward, 261 F.3d at 626; see also Musson Theatrical, Inc. v. Federal Express Corp., 89 F.3d 1244, 1255 (6th Cir. 1996), reh'g denied and amended by 1998 WL 117980.
This case is similar to the Sixth Circuit case of Ward v. Alternative Health Delivery Systems, Inc., 261 F.3d 624 (6th Cir. 2001). In Ward, the plaintiff, a chiropractor, sued a HMO and the HMO's administrator in state court alleging various state law causes of action. Id. at 625. The plaintiff's lawsuit was essentially a contract dispute between the chiropractor and the HMO. The defendants argued that ERISA preempted the state law causes of action. Id. at 626. The plaintiff later amended her complaint to add two causes of action arising under ERISA. Id. The defendants then removed the lawsuit to federal court based on the ERISA federal question type subject matter jurisdiction presented by the two ERISA causes of action. Id. In defendants' notice of removal, they argued that the plaintiff was not a ERISA plan beneficiary and, therefore, lacked standing. Id. 626-27. The district court held that the plaintiff was not an ERISA plan beneficiary and, therefore, did not have standing to bring her ERISA claims. Id. at 627. However, the district court determined that it maintained jurisdiction over the state law causes of action. Id.
On appeal, the Sixth Circuit affirmed the district court's determination that the plaintiff chiropractor did not have standing under ERISA. Id. The court held that "once the district court determined that the plaintiff did not have standing to bring her ERISA claims, it should have remanded her remaining claims." Id. "ERISA standing is a jurisdictional matter. Once the district court dismissed the only claims within its original jurisdiction for lack of subject matter jurisdiction, it did not have jurisdiction to retain plaintiff's state law claims." Id. Thus, the Sixth Circuit held that the district court never should have decided whether the plaintiff's state law claims were preempted once it determined that the court did not have an independent basis of subject matter jurisdiction. Id.
This case is to similar to Ward. Because Tendercare does not have standing under ERISA, the Court holds that it does not have subject matter jurisdiction over Tendercare's state law claims. There is no allegation of diversity jurisdiction in this case, and Tendercare is claiming only $59,885.88 in damages, which is below the minimum $75,000 amount in controversy requirement necessary to invoke diversity jurisdiction. Because the Court does not have subject matter jurisdiction in this case, the Court will not decide whether Tendercare's state law causes of action are preempted.
It should be noted under the doctrine of complete preemption, a federal court does have subject matter jurisdiction over a defense based on ERISA preemption pursuant to 29 U.S.C. § 1132 where the state cause of action is equivalent to an ERISA civil enforcement action. See Alexander v. Electronic Data Sys. Corp., 13 F.3d 940, 945 (6th Cir. 1994). However, if the plaintiff is not a participant, beneficiary, or fiduciary as defined under ERISA, the plaintiff's state law cause of action is not equivalent to an ERISA civil enforcement action. Id. at 946-47; Ward, 261 F.3d at 627. In any event, the doctrine of complete preemption based on 29 U.S.C. § 1132 has not been raised by the parties. Further, the Defendants have only argued preemption under 29 U.S.C. § 1144. (Defs,' Mot. to Dismiss 4, 6.) Federal question jurisdiction can only arise under a preemption defense based on 29 U.S.C. § 1132. Alexander, 13 F.3d at 945.
IV. RECOMMENDATION
Tendercare lacks standing to assert a claim under ERISA. Because Tendercare does not have standing under its ERISA causes of action, Tendercare's First Amended Complaint does not allege an independent basis for subject matter jurisdiction. Therefore, the Court GRANTS Defendants' motion to dismiss without reaching the issues surrounding whether Tendercare's various state law causes of action are preempted.
SO ORDERED.