Genord v. Blue Cross & Blue Shield of Michigan, 04-2486.

• Decision Date: 14 March 2006
• Docket Number: No. 04-2486.,04-2486.
• Citation: 440 F.3d 802
• Parties: Michael A. GENORD, M.D., John R. Sanborn, M.D., Paula M. Fishbaugh, M.D., Andrea L. Schiller, M.D., Mark D. Dykowski, M.D., John E. Eckele, M.D., and Betty S. Chu, M.D., Plaintiffs-Appellees, v. BLUE CROSS & BLUE SHIELD OF MICHIGAN, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

440 F.3d 802

Michael A. GENORD, M.D., John R. Sanborn, M.D., Paula M. Fishbaugh, M.D., Andrea L. Schiller, M.D., Mark D. Dykowski, M.D., John E. Eckele, M.D., and Betty S. Chu, M.D., Plaintiffs-Appellees, v. BLUE CROSS & BLUE SHIELD OF MICHIGAN, Defendant-Appellant.

No. 04-2486.

United States Court of Appeals, Sixth Circuit.

Argued: January 31, 2006.

Decided and Filed: March 14, 2006.

ARGUED:

Joseph A. Fink, Dickinson, Wright, PLLC, Detroit, Michigan, for Appellant. William H. Horton, Cox, Hodgman & Giarmarco, Troy, Michigan, for Appellees.

ON BRIEF:

Joseph A. Fink, Kathleen A. Lang, Phillip J. DeRosier, Dickinson, Wright, PLLC, Detroit, Michigan, for Appellant. William H. Horton, Cox, Hodgman & Giarmarco, Troy, Michigan, for Appellees. Joanne Geha Swanson, Michael A. Sneyd, Daniel J. Schulte, Kerr, Russell & Weber, Detroit, Michigan, for Amici Curiae.

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

OPINION

GILMAN, Circuit Judge.

The named gynecologists sued Blue Cross & Blue Shield of Michigan, alleging that Blue Cross had fraudulently denied their claims in violation of both the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1964(c), and various state laws. Blue Cross moved for dismissal on the ground that the district court lacked subject matter jurisdiction because the civil RICO action was "reverse preempted" by Michigan law in accordance with a provision of a federal statute commonly known as the McCarran-Ferguson Act, 15 U.S.C. § 1012. The district court denied Blue Cross's motion, thus allowing the civil RICO claim to proceed. After the district court certified the issue for interlocutory appeal, a panel of this court exercised its discretion to grant Blue Cross's petition to have the jurisdictional issue decided on an interlocutory basis. For the reasons set forth below, we AFFIRM the judgment of the district court.

I. BACKGROUND

A. Michigan's Nonprofit Health Care Corporation Reform Act

Blue Cross is a "health care corporation" that is regulated extensively by the Michigan Commissioner of Insurance under the Nonprofit Health Care Corporation Reform Act, Michigan Compiled Laws §§ 550.1101-1704 (Health Care Act). Under the Health Care Act, Blue Cross is required to enter into reimbursement agreements with various medical providers. Mich. Comp. Laws § 550.1504(1) ("A health care corporation shall, with respect to providers, contract with or enter into a reimbursement arrangement to assure subscribers reasonable access to, and reasonable cost and quality of, health care services . . . ."). Several provisions of the Health Care Act regulate the content of the reimbursement agreements. See, e.g., Mich. Comp. Laws § 550.1502 (setting forth licensing requirements that must be met before providers are eligible to participate).

Under the Act, Blue Cross can also structure reimbursement plans for an entire class of providers, such as "medical doctors" or "pharmacies." See Mich. Comp. Laws §§ 550.1505-1509. Such a provider-class plan requires the approval of the Michigan Commissioner of Insurance to ensure that the plan advances the goals set forth in the Health Care Act. Mich. Comp. Laws §§ 550.1504, 550.1506 (including goals such as assuring the availability and quality of medical services). Individual provider agreements in turn contain provisions implementing such provider-class plans.

The reimbursement agreements require that the providers request payment for services rendered to Blue Cross's individual policyholders by submitting to Blue Cross a claim form containing standardized billing codes. Participating providers must agree to accept payment at the regulated rate as payment in full for their services covered under the plan. Mich. Comp. Laws §§ 550.1107(2), 550.1502(1).

B. The doctors

The doctors sued on their own behalf and on behalf of a "statewide class of persons defined as all physicians performing gynecological medical services who, from November 1, 2002, to the date of certification, provided any services to any patient insured by or who was a member or beneficiary of any plan administered by Defendant." November 1, 2002 is the date on which the doctors allege that Blue Cross changed its billing codes for gynecological services and started systematically denying payment. At the time the district court ruled on Blue Cross's motion to dismiss, the class had not yet been certified.

C. The claims asserted by the doctors

In their amended complaint, the doctors allege four counts against Blue Cross: a civil RICO claim, an alleged violation of Michigan Compiled Laws § 500.2006 for failing to remit payment to the doctors within 45 days, and common-law claims of breach of contract and unjust enrichment. The district court had supplemental jurisdiction over the state-law claims.

In order to make out a civil RICO claim, the doctors must establish that they were "injured in [their] business or property by reason of a violation" of the criminal RICO provisions contained in 18 U.S.C. § 1962. See 18 U.S.C. § 1964(c). If such a claim is successful, they are entitled to treble damages and attorney fees. Id.

The doctors in this case claimed that, after Blue Cross changed its gynecological billing codes, it and other affiliated entities constituted an "enterprise" that, through a "common scheme, systematically denied and delayed payments due to physicians..., improperly paid reduced amounts, or made the claims process so daunting that some claims were simply abandoned or otherwise lost." According to the doctors, this scheme was perpetuated by Blue Cross falsely rejecting claims for payment through mailings and transmittals by wire (violations of 18 U.S.C. § 1341 for mail fraud and of 18 U.S.C. § 1343 for wire fraud).

D. Blue Cross's motion to dismiss

Blue Cross filed a motion under Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure to dismiss the civil RICO claim and the Michigan Compiled Laws § 500.2006 claim for failure to timely remit payment. The district court granted Blue Cross's motion as to the § 500.2006 claim because the Michigan statute does not provide for a private right of action.

In its motion to dismiss the civil RICO claim, Blue Cross argued that the district court lacked subject matter jurisdiction because the McCarran-Ferguson Act prevents the invocation of a private right of action under RICO. The district court denied Blue Cross's motion, thus allowing this part of the case to proceed. On appeal, Blue Cross is challenging the district court's ruling only as to the civil RICO count and not as to the § 500.2006 count.

II. ANALYSIS

A. Standard of review

Blue Cross argues that the district court lacked subject matter jurisdiction over the doctors' civil RICO claim. We review the district court's decision on this issue de novo. Simon v. Pfizer Inc., 398 F.3d 765, 772 (6th Cir.2005) ("District Court decisions on motions to dismiss under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) are generally subject to a de novo standard of review.").

B. The McCarran-Ferguson Act and "reverse preemption"

The McCarran-Ferguson Act declares that "[t]he business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such business." 15 U.S.C. § 1012(a). In the section specifically relied upon by Blue Cross, the Act provides that "[n]o Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, . . . unless such Act specifically relates to the business of insurance. . . ." 15 U.S.C. § 1012(b). Federal law thus provides for "reverse preemption" in the realm of regulating the insurance business. AmSouth Bank v. Dale, 386 F.3d 763, 780-83 (6th Cir.2004) (discussing the concept of reverse preemption under the McCarran-Ferguson Act). A general federal law that does not specifically relate to the business of insurance, therefore, cannot be construed to "invalidate, impair, or supersede" a state law enacted to regulate the insurance business. 15 U.S.C. § 1012(b).

The McCarran-Ferguson Act, however, provides an "antitrust exception" to the reverse-preemption rule. After setting forth the above rule, the Act goes on to say that the Sherman Act, the Clayton Act, and the Federal Trade Commission Act "shall be applicable to the business of insurance to the extent that such business is not regulated by State law." Id.

In its motion to dismiss the civil RICO claim, Blue Cross argued that Michigan's Health Care Act was enacted to regulate the business of insurance, and that the doctors' claims would "invalidate, impair, or impede" the state's law. This claim must be analyzed under the McCarran-Ferguson Act.

Pursuant to the Act, we are required to answer three questions. The threshold question is whether the federal statute at issue "specifically relates to the business of insurance." If it does, then the McCarran-Ferguson Act by its own terms does not allow for reverse preemption. See 15 U.S.C. § 1012(b) (setting forth as an exception to the reverse-preemption rule a case in which the federal law in question "specifically relates to the business of insurance"). If not, then there are two remaining questions that both must be answered in the affirmative in order to conclude that application of a federal law is reverse preempted by the existence of a state law. One is whether the state statute at issue was "enacted... for the purpose of regulating the business of insurance." The other is whether the application of the federal statute would "invalidate, impair, or supersede" the state statute. Kenty v. Bank One, Columbus, N.A., 92 F.3d 384, 392 (6th Cir.1996) (setting forth the McCarran-Ferguson Act analysis).

Both parties agree that the civil RICO statute does not specifically relate to the business of insurance. See also id. at 391 (holding as a preliminary matter...