RIVERVIEW HEALTH INSTITUTE v. MEDICAL MUTUAL, OHIO, 08-4431.

• Citation: 601 F.3d 505
• Decision Date: 07 April 2010
• Docket Number: No. 08-4431.,08-4431.
• Parties: RIVERVIEW HEALTH INSTITUTE LLC; Middletown Surgical Associates Inc., dba Surgical Weight Loss Center; Oak Leaf Health Group LLC, dba St. Elizabeth's Laboratories, Plaintiffs-Appellants, v. MEDICAL MUTUAL OF OHIO; Kent W. Clapp; David G. Quiring; Kathy Schneeberger, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

601 F.3d 505

RIVERVIEW HEALTH INSTITUTE LLC; Middletown Surgical Associates Inc., dba Surgical Weight Loss Center; Oak Leaf Health Group LLC, dba St. Elizabeth's Laboratories, Plaintiffs-Appellants, v. MEDICAL MUTUAL OF OHIO; Kent W. Clapp; David G. Quiring; Kathy Schneeberger, Defendants-Appellees.

No. 08-4431.

United States Court of Appeals, Sixth Circuit.

Argued: October 8, 2009.

Decided and Filed: April 7, 2010.

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ARGUED: Kenneth A. Lazarus, Lazarus & Associates, Washington, D.C., G. Robert Blakey, Notre Dame Law School, Notre Dame, Indiana, for Appellants. James D. Thomas, Squire, Sanders & Dempsey L.L.P., Miami, Florida, for Appellees. ON BRIEF: Kenneth A. Lazarus, Lazarus & Associates, Washington, D.C., G. Robert Blakey, Notre Dame Law School, Notre Dame, Indiana, for Appellants. James D. Thomas, Squire, Sanders & Dempsey L.L.P., Miami, Florida, Philip M. Oliss, Mark J. Savage, Squire, Sanders & Dempsey L.L.P., Cleveland, Ohio, Pierre H. Bergeron, Squire, Sanders & Dempsey L.L.P., Cincinnati, Ohio, Michael E. Smith, Stephen F. Gladstone, Frantz Ward LLP, Cleveland, Ohio, for Appellees. W. Scott Myers, Office of the Ohio Attorney General, Columbus, Ohio, for Amicus Curiae.

Before: RYAN, COLE, and CLAY, Circuit Judges.

OPINION

CLAY, Circuit Judge.

Plaintiffs, Riverview Health Institute LLC; Middletown Surgical Associates Inc. d/b/a Surgical Weight Loss Center; and Oak Leaf Health Group LLC d/b/a St. Elizabeth's Laboratories, appeal an order entered by the district court dismissing Plaintiffs' claims filed pursuant to the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq., as reverse preempted by Ohio state law, pursuant to the McCarran-Ferguson Act, 15 U.S.C. § 1011, et seq., and denying leave for Plaintiffs to amend their complaint and add a claim for federal estoppel. For the reasons set forth below, we AFFIRM the district court's decision.

I. BACKGROUND

A. Factual Background

Plaintiff Riverview Health Institute LLC ("Riverview") is a small, private specialty hospital located in Dayton, Ohio. Riverview provides hospital services related to bariatrics, plastic surgery, orthopedics, gynecology, interventional radiology, and other surgical procedures. Plaintiffs Middletown Surgical Associates, Inc. and Oak Leaf Health Group LLC provide physician and laboratory services, respectively. Middletown Surgical Associates does business in Ohio as the Surgical Weight Loss Center ("SWLC") and is the professional practice corporation of Dr. David J. Fallang, a bariatric and general surgeon. Plaintiff Oak Leaf Health Group LLC ("Oak Leaf") does business in Ohio as St. Elizabeth's Laboratories. SWLC provides bariatric and general surgery services at Riverview, while Oak Leaf provides laboratory services to patients at Riverview and SWLC. Plaintiffs conduct their business at One Elizabeth Place in Dayton, Ohio.

Defendant Medical Mutual of Ohio ("Medical Mutual") is a health insurance company and the individual defendants are its officers. Defendant Kent W. Clapp is its President, David G. Quiring is its Vice President for Claims Operations, and Kathy Schneeberger is its Senior Financial Investigator.

All Plaintiffs are out-of-network providers of health care services and do not maintain any contractual agreements with health insurance carriers. Instead, Plaintiffs are paid for their services by direct patient payments and private insurance proceeds to the extent patients' insurance provides out-of-network coverage. All insureds must complete and sign a formal Assignment of Medical Benefits prior to the receipt of any medical service or procedure. Plaintiffs allege that from January 2004 to August 2006, Medical Mutual "frequently delayed, underpaid and/or denied claims submitted to it by Plaintiffs but continued to do business with them." (Br. of Appellant 7.)

On August 8, 2006, Medical Mutual sent Dr. Fallang a letter stating that the Financial Investigations Department at Medical Mutual had performed a review of claims and clinical information Fallang submitted for payment and determined that "many of the billings submitted did not accurately reflect the services performed" and that "as a result, services were paid by Medical Mutual that should not have been paid." (R. at 43.) Included in the letter was a summary of billing issues Medical Mutual said it had identified and a statement that Medical Mutual sought to recover $796,629.41 from Riverview. Medical Mutual also stated in the letter that until this matter was resolved, "claims currently on hold and future claims will be rejected since the numerous billing issues can not sic be corrected by Medical Mutual." (R. at 44.) Riverview did not respond to Medical Mutual's August 8, 2006 letter.

On September 19, 2006, Medical Mutual sent Dr. Fallang another letter referencing its August 8, 2006 letter and the lack of response from Riverview. The September 19, 2006 letter also stated that Riverview's failure to respond within fourteen days would result in Medical Mutual pursuing other legal remedies. Dr. Fallang responded in a letter dated October 2, 2006, noting the seriousness of Medical Mutual's allegations and requesting as much detail as possible regarding Medical Mutual's billing concerns and a detailed calculation of the amount Medical Mutual was seeking to recover.

Medical Mutual replied via a letter dated January 10, 2007 accompanied by several attachments detailing Medical Mutual's billing concerns. In the January 10, 2007 letter, Medical Mutual noted that it would pursue its legal remedies if Riverview failed to respond within ten days. Riverview never responded to the January 10, 2007 letter.

B. Procedural History

On September 24, 2007, Plaintiffs filed a verified complaint in the United States District Court for the Southern District of Ohio setting forth seven claims for relief: (1) conspiracy to violate 18 U.S.C. § 1962(a) in violation of 18 U.S.C. § 1962(d); (2) violation of 18 U.S.C. § 1962(c); (3) conspiracy to violate 18 U.S.C. § 1962(c) in violation of 18 U.S.C. § 1962(d); (4) denial of benefits under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1132(a)(1)(B); (5) state-based breach of contract; (6) state-based common-law fraud; and (7) state-based tortious interference with business relationships. The first three claims arise under the federal RICO statute, 18 U.S.C. § 1961, et seq., the fourth under the federal ERISA statute, 29 U.S.C. § 1001, et seq., and the district court had subject matter jurisdiction over the last three by virtue of 28 U.S.C. § 1367.

According to the complaint, Medical Mutual "acted to delay, diminish and deny payment of ... lawful claims of patient-insureds as submitted by out-of-network health providers ... through a scheme or artifice, utilizing the U.S. Mail and demonstrating a specific intent to defraud the patient-insureds and out-of-network health-care providers in violation of 18 U.S.C. § 1341." (R. at 22.) The complaint also avers that Medical Mutual "acted unlawfully and inaccurately to underestimate and reduce the `usual, customary and reasonable' amounts due to out-of-network health providers through scheme or artifice, utilizing the U.S. mail." (R. at 22.) Additionally, the complaint alleges that Medical Mutual of Ohio has "inappropriately bundled provider services and procedures through scheme or artifice, utilizing the U.S. mail." (R. at 23.)

On December 5, 2007, Defendants filed a motion to dismiss for, inter alia, reverse preemption,¹ pursuant to the McCarran-Ferguson Act, of Plaintiffs' federal RICO claims by Ohio laws regulating the business of insurance. Plaintiffs opposed Defendants' motion to dismiss and submitted a cross-motion for leave to amend the complaint. On September 30, 2008, the district court granted Defendants' motion to dismiss, concluding that Plaintiffs' RICO claims were reverse preempted and dismissing them with prejudice. The district court denied Plaintiffs' request to amend their verified complaint to include a federal estoppel claim, finding that Plaintiffs' amendment would be futile. The district court subsequently dismissed Plaintiffs' remaining claims without prejudice. Plaintiffs appeal the dismissal of their RICO claims, arguing that such claims do not fall within the McCarran-Ferguson Act and therefore, are not reverse preempted. Plaintiffs also appeal the denial of their motion to amend and add a federal estoppel claim.

II. DISCUSSION

A. Standard of Review

We review de novo a district court's dismissal of a suit pursuant to Fed. R.Civ.P. 12(b)(6). Columbia Natural Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir.1995). A motion to dismiss under Fed. R.Civ.P. 12(b)(6) is designed to test the sufficiency of the complaint. "The district court must construe the complaint in a light most favorable to the plaintiff, accept all of the factual allegations as true, and determine whether the plaintiff undoubtedly can prove no set of facts in support of his claims that would entitle him to relief." Id. (citing Allard v. Weitzman (In re DeLorean Motor Co.), 991 F.2d 1236, 1240 (6th Cir.1993)). Therefore, a motion for dismissal pursuant to Rule 12(b)(6) will be granted if the facts as alleged are insufficient to make a valid claim or if the claim shows on its face that relief is barred by an affirmative defense. In a situation involving an affirmative defense, "the claim is stated adequately ..., but in addition to the claim the contents of the complaint includes matters of avoidance that effectively vitiate the pleader's ability to recover on the claim. In such a situation the complaint is said to have a built-in defense and is essentially self-defeating." 5B Wright & Miller, Federal Practice & Procedure § 1357 (3d ed.2004).

A district court's order denying a Rule 15(a) motion to amend is usually reviewed for an abuse of...