Advocacy Organization for Patients and Providers v. Auto Club Ins. Ass'n

• Decision Date: 15 March 1999
• Docket Number: Nos. 97-1821,97-1832,s. 97-1821
• Citation: 176 F.3d 315
• Parties: RICO Bus.Disp.Guide 9671 ADVOCACY ORGANIZATION FOR PATIENTS AND PROVIDERS, a non-profit Michigan corporation, et al., Plaintiffs-Appellants/Cross-Appellees, v. AUTO CLUB INSURANCE ASSOCIATION, a Michigan corporation, et al.; Allstate Insurance Company, an Illinois corporation; Citizens Insurance Company of America, a Michigan corporation; Farm Bureau Insurance Company, a Michigan corporation; Farmers Insurance Exchange, a California corporation; Frankenmuth Mutual Insurance Company, a Michigan corporation; Imperial Midwest Insurance Company, a Michigan corporation, d/b/a Titan Insurance Company; Lincoln Mutual Casualty Company, a Michigan corporation; Secura Insurance Mutual Company, a Wisconsin corporation; State Farm Insurance Companies, an Illinois corporation; Transamerica Insurance Group, a California Corporation, d/b/a TIG; Wolverine Mutual Insurance Company, a Michigan corporation; Auto Owners Insurance Company, a Michigan corporation; Lahousse-Bartlett Disability Management, Inc., a Michigan Corporation, d/b/a Review Works, Rehab Works and Rehab Plans; Linkage Enterprises, Inc., a Michigan corporation, d/b/a M.I.E.S. Clinic; Manageability, Inc., a Michigan corporation, d/b/a Auditpro and Indemnicare; Medcheck Medical Audit Services, Inc., a Michigan corporation; Recovery Unlimited, Inc., a Michigan corporation, d/b/a Medical Review Systems, Defendants-Appellees/Cross-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

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176 F.3d 315 RICO Bus.Disp.Guide 9671 ADVOCACY ORGANIZATION FOR PATIENTS AND PROVIDERS, a
non-profit Michigan corporation, et al.,
Plaintiffs-Appellants/Cross-Appellees,
v.
AUTO CLUB INSURANCE ASSOCIATION, a Michigan corporation, et
al.; Allstate Insurance Company, an Illinois corporation;
Citizens Insurance Company of America, a Michigan
corporation; Farm Bureau Insurance Company, a Michigan
corporation; Farmers Insurance Exchange, a California
corporation; Frankenmuth Mutual Insurance Company, a
Michigan corporation; Imperial Midwest Insurance Company, a
Michigan corporation, d/b/a Titan Insurance Company;
Lincoln Mutual Casualty Company, a Michigan corporation;
Secura Insurance Mutual Company, a Wisconsin corporation;
State Farm Insurance Companies, an Illinois corporation;
Transamerica Insurance Group, a California Corporation,
d/b/a TIG; Wolverine Mutual Insurance Company, a Michigan
corporation; Auto Owners Insurance Company, a Michigan
corporation; Lahousse-Bartlett Disability Management, Inc.,
a Michigan Corporation, d/b/a Review Works, Rehab Works and
Rehab Plans; Linkage Enterprises, Inc., a Michigan
corporation, d/b/a M.I.E.S. Clinic; Manageability, Inc., a
Michigan corporation, d/b/a Auditpro and Indemnicare;
Medcheck Medical Audit Services, Inc., a Michigan
corporation; Recovery Unlimited, Inc., a Michigan
corporation, d/b/a Medical Review Systems,
Defendants-Appellees/Cross-Appellants. Nos. 97-1821, 97-1832. United States Court of Appeals,
Sixth Circuit. Argued Nov. 4, 1998.
Decided March 15, 1999.

Page 318

ARGUED: Linda S. Fausey, Lansing, Michigan, for Appellants. Lori M. Silsbury, Dykema Gossett, Lansing, Michigan, for Appellees. ON BRIEF: Linda S. Fausey, Lansing, Michigan, for Appellants. Lori M. Silsbury, Dykema Gossett, Lansing, Michigan, for Appellees.

Before: JONES, RYAN, and BATCHELDER, Circuit Judges.

OPINION

BATCHELDER, Circuit Judge.

Forty-Nine individual medical providers, two guardians of catastrophically injured auto accident victims, and a group established to be spokesperson for patients and providers ("Advocacy Organization for Patients and Providers," or "AOPP") filed a multi-count complaint against thirteen insurance companies, all of which have issued no-fault insurance polices to Michigan motorists, and five review companies, all of which have reviewed medical bills arising out of auto accidents for one or more of the insurance companies. Plaintiffs' complaint alleged, inter alia, claims under the Federal Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(b), against various combinations of the insurance companies and review companies, alleging that they had conspired to defraud patients and medical providers of reasonable medical fees. The district court granted Defendants' motions to dismiss, FED.R.CIV.P. 12(b)(6), and Plaintiffs appealed. For the reasons stated below we AFFIRM the judgment of the district court.

I. PROCEDURAL HISTORY

Plaintiffs originally filed their multi-count complaint, including its 104 attached exhibits, in the state court in Michigan. The complaint alleges fifteen counts: (1) a request for a declaratory injunction as to the rights and responsibilities of the Plaintiffs under Michigan's no-fault statute; (2) a request for interim injunctive relief while the matter is pending; (3) a request for permanent injunctive relief based on a denial of due process; (4) tortious interference with existing contractual relationships; (5) tortious interference with business relationships; (6) conspiracy to tortiously interfere with existing business and contractual relationships; (7) common law fraud; and (8)-(15), eight counts of RICO violations against various combinations of two or more of the Defendants.

The Defendants removed the case to federal district court based on federal question jurisdiction arising out of the RICO counts. The Plaintiffs' motion to remand was denied.

The Defendants filed several motions seeking dismissal, including a "Joint Motion to Dismiss Pursuant to FED.R.CIV.P. 12(b)" that raised lack of standing, failure to state claims in various counts (including the RICO counts), and a statute of limitations defense. On June 23, 1997, the district court dismissed the RICO counts under Rule 12(b)(6) for failure adequately to allege a predicate act upon which the Plaintiffs could base their RICO claims and failure adequately to allege a RICO enterprise. The district court also dismissed the federal due process claim for lack of state action. Finding the remaining counts based exclusively upon Michigan law, the court remanded them to the

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state trial court. This timely appeal followed. ¹

In this appeal Plaintiffs challenge the district court's dismissal of their RICO claims and ask that we either reverse the district court or vacate the district court's judgment and remand the case so as to allow them to amend their complaint. Defendants ask that the district court's order remanding the state law claims be reversed in the event that we reverse the judgment dismissing the RICO counts. Because we affirm the district court's decision concerning the RICO counts, we need not address Defendants' arguments pertaining to the district court's remand order. Further, because we conclude that the RICO counts must be dismissed, we need not address Defendants' contention that they are preempted by the McCarran-Ferguson Act, 15 U.S.C. § 1012.

II. STANDARD OF REVIEW

We review de novo a district court's dismissal for failure to state a claim. Sistrunk v. City of Strongsville, 99 F.3d 194, 197 (6th Cir.1996). 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." Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir.1988) (internal quotation marks and citations omitted).

We must treat as true all of the well-pleaded allegations of the complaint. All allegations must be construed in the light most favorable to the plaintiff. In order for a dismissal to be proper, it must appear beyond doubt that the plaintiff would not be able to recover under any set of facts that could be presented consistent with the allegations of the complaint.

Bower v. Federal Express Corp., 96 F.3d 200, 203 (6th Cir.1996) (citations omitted). "Although this standard for Rule 12(b)(6) dismissals is quite liberal, more than bare assertions of legal conclusions is ordinarily required to satisfy federal notice pleading requirements." Scheid, 859 F.2d at 436 (citing 5A C. WRIGHT & A. MILLER, FEDERAL PRACTICE & PROCEDURE § 1357, at 596 (1969)).

III. "REASONABLE" MEDICAL EXPENSES UNDER MICHIGAN'S NO-FAULT

INSURANCE ACT

Michigan has a system of mandatory no-fault automobile insurance. Among other things, this system requires Michigan drivers to purchase "personal protection insurance" ("PPI"), see MICH. COMP. LAWS ANN. § 500.3101 (West 1993), under which "an insurer is liable to pay benefits for accidental bodily injury arising out of the ownership, operation, maintenance or use of a motor vehicle as a motor vehicle, subject to the provisions of [the no-fault statute]," MICH. COMP. LAWS ANN. § 500.3105. Specifically, coverage under PPI includes "[a]llowable expenses consisting of all reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person's care, recovery, or rehabilitation." MICH. COMP. LAWS ANN. § 500.3107(1)(a) (emphasis added). The statute also circumscribes the amounts that health care providers are permitted to charge for services performed for victims of auto accidents:

A physician, hospital, clinic or other person or institution lawfully rendering treatment to an injured person for an accidental bodily injury covered by personal

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protection insurance, and a person or institution providing rehabilitative occupational training following the injury, may charge a reasonable amount for the products, services and accommodations rendered. The charge shall not exceed the amount the person or institution customarily charges for like products, services and accommodations in cases not involving insurance.

MICH. COMP. LAWS ANN. § 500.3157 (emphasis added). These statutory provisions leave open the questions of what a "reasonable charge" is, who decides what is "reasonable," and what criteria may be used to determine what is "reasonable"--all questions at the core of this litigation. In 1992 and 1994 referenda and amendments were proposed which would have answered these questions by adding fee schedules to the no-fault act, but the proposals were not successful. See Munson Med. Ctr. v. Auto Club Ins. Assoc., 218 Mich.App. 375, 554 N.W.2d 49, 56 (1996), appeal denied, 453 Mich. 959, 564 N.W.2d 887 (1996).

In late 1994 and 1995 the Michigan Court of Appeals issued two opinions that shed some light on these questions. First, in McGill v. Auto. Assoc., 207 Mich.App. 402, 526 N.W.2d 12, 14 (1994), the court said, "When read in harmony, §§ 3107 and 3157 clearly indicate that an insurance carrier need pay no more than a reasonable charge and that a health care provider can charge no more than that." The opinion spoke at length about the important "medical cost-policing" function that no-fault insurers provide and how that function would be lost if they were not required to assess for themselves the "reasonableness" of the fees medical providers charged. See id. at 14-15. The court expressly declined to address whether insurers could use workers' compensation schedules as part of their "reasonableness" determinations. Id. at 15. Six months after McGill the court decided Hofmann v. Auto Club Ins. Assoc., 211 Mich.App. 55, 535 N.W.2d 529 (1995), appeal denied, 452 Mich. 870, 552 N.W.2d 170 (1996), which rejected Auto Club Insurance Association's ("ACIA's") argument that when a physician charges a certain amount, but...