Allstate Insurance Co. v. Global Medical Billing, Inc.

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 13a0346n.06
No. 12-1263 FILED
Apr 08, 2013
UNITED STATES COURT OF APPEALS DEBORAH S. HUNT, Clerk
FOR THE SIXTH CIRCUIT
ALLSTATE INSURANCE CO.,
Plaintiff-Appellant,
v. ON APPEAL FROM THE UNITED
STATES DISTRICT COURT FOR THE
GLOBAL MEDICAL BILLING, INC., et al., EASTERN DISTRICT OF MICHIGAN
Defendants-Appellees.
/
BEFORE: MERRITT, CLAY, and GRIFFIN, Circuit Judges.
CLAY, Circuit Judge. Plaintiff Allstate Insurance Co. appeals the district court’s dismissal
of its complaint for lack of standing. Plaintiff filed a seven-count complaint against twenty-four
individual and corporate providers of medical services, alleging a scheme to obtain payment on
fraudulent insurance claims in violation of Michigan insurance law, see Mich. Comp. Laws
§ 500.4501, the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1964(c),
and various common law theories. Because Plaintiff failed to raise its only potentially winning
argument at the proper time, it cannot now receive a second bite at the apple. Therefore, we
AFFIRM the district court’s dismissal of Plaintiff’s complaint.
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BACKGROUND
Under Michigan’s “no-fault” automobile insurance statute, insurers are required to pay
personal protection insurance benefits without regard to fault when an individual suffers bodily
injury as a result of an automobile accident. See Mich. Comp. Laws § 500.3105. If a person is
injured in an automobile accident but has no insurance of his or her own, as would be the case with
a passenger or a pedestrian, that person’s claim for insurance benefits is assigned to an insurer by
the Assigned Claims Facility (“ACF”), an arm of Michigan’s Department of State. Id. § 500.3172.
The insurer to whom a claim is assigned is then obligated to make “prompt payment” on the claim,
and it will subsequently be reimbursed by the ACF for the payments, the insurer’s related costs, and
interest. Id. § 500.3175(1). This system, known as the Assigned Claims Plan, facilitates the
payment of claims to uninsured individuals by essentially outsourcing the processing and adjustment
of such claims to private insurance companies.
Plaintiff writes and sells automobile insurance policies in Michigan and is therefore subject
to have claims assigned to it by the ACF. In its complaint, Plaintiff alleged that Defendants engaged
in a complex scheme to submit false or fraudulent insurance claims to the ACF, that those claims
were assigned to it pursuant to the Assigned Claims Plan, and that it made payments on those claims
as required by law. Plaintiff alleged that it paid some $680,000 to Defendants over approximately
a six-year period.
On December 23, 2009, Plaintiff filed a seven-count complaint in the Eastern District of
Michigan against fourteen individuals and ten corporate entities. The complaint alleged that
Defendants violated Michigan’s insurance code and the federal RICO statute, along with common-
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law civil conspiracy, payment under mistake of fact, silent fraud, unjust enrichment,
misrepresentation, and practicing medicine without a license. Shortly thereafter, Defendants filed
a motion to dismiss the complaint for failure to state a claim pursuant to Federal Rule of Civil
Procedure 12(b)(6) and failure to plead fraud with specificity pursuant to Rule 9(b). Among other
arguments, the motion to dismiss asserted that Plaintiff lacked constitutional and prudential standing
to sue because it had been fully reimbursed by the ACF for all allegedly fraudulent claims it had
paid. (R. 15, Mot. to Dismiss 10–11.)
In its response to the motion to dismiss, Plaintiff entirely neglected to respond to the assertion
that it had been fully reimbursed by the ACF. (See R. 23, Resp. to Mot. to Dismiss.) From
Plaintiff’s silence, the district court deemed that assertion undisputed, and it granted Defendants’
motion to dismiss on the basis that Plaintiff lacked standing. A short time later, on March 9, 2011,
Plaintiff filed a motion for reconsideration, asserting for the first time that its complaint sought
recovery for non-reimbursed claims that it paid on behalf of its own insureds. On February 1, 2012,
the district court denied Plaintiff’s motion for reconsideration, and Plaintiff timely appealed.
DISCUSSION
We review a dismissal for lack of standing de novo. McGlone v. Bell, 681 F.3d 718, 728 (6th
Cir. 2012) (citing Prime Media, Inc. v. City of Brentwood, 485 F.3d 343, 348 (6th Cir. 2007)).
Although the parties and the district court considered the issue of standing as a failure to state a
claim under Rule 12(b)(6), it is more properly considered an attack on the court’s subject-matter
jurisdiction under Rule 12(b)(1). Harold H. Huggins Realty, Inc. v. FNC, Inc., 634 F.3d 787, 795
n.2 (5th Cir. 2011); see also Murray v. U.S. Dep’t of Treasury, 681 F.3d 744, 748 (6th Cir. 2012)
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(noting that a party must have standing to invoke the subject-matter jurisdiction of the federal
courts). The distinction is important because a dismissal for failure to state a claim is considered an
adjudication on the merits with full preclusive effect in later litigation, while a dismissal for lack of
subject-matter jurisdiction does not operate as a merits adjudication and is presumably granted
without prejudice. See Pratt v. Ventas, Inc., 365 F.3d 514, 523 (6th Cir. 2004).
As with a motion under Rule 12(b)(6), a facial challenge to subject-matter jurisdiction under
Rule 12(b)(1) requires the district court to accept all the factual allegations in the complaint as true.
Carrier Corp. v. Outokumpu Oyj, 673 F.3d 430, 440 (6th Cir. 2012). To adequately allege
jurisdiction, the complaint “must contain non-conclusory facts which, if true, establish that the
district court had jurisdiction over the dispute.” Id.
In its motion for reconsideration before the district court and in its briefing before this Court,
Plaintiff argued that its complaint described two categories of claims: those for which it had been
reimbursed by the ACF, and those that it had paid on behalf of its own insureds. The district court
interpreted the complaint to refer only to the claims that had been reimbursed by the ACF and, on
that basis, dismissed the complaint for lack of standing. In its briefing before this Court, Plaintiff
did not challenge the district court’s conclusion with respect to the reimbursed claims, and at oral
argument, Plaintiff confirmed its concession that it lacked standing to assert claims for which it had
been reimbursed by the ACF.1
1
Plaintiff could not easily challenge the district court’s conclusion even if it had wished to
do so because it cannot establish redressability, one of the elements that comprises “the irreducible
constitutional minimum of standing.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992).
The ACF has already repaid Plaintiff’s losses. Any injury suffered as a result of Defendants’ alleged
fraud has therefore been remedied. Because Plaintiff cannot show that it “would benefit in a tangible
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The only issue before us, then, is whether the district court erred when it failed to consider
the argument raised in Plaintiff’s motion for reconsideration—namely, that the complaint sought
damages for fraudulent claims for which it had not been reimbursed. It is well established that an
argument raised for the first time in a motion for reconsideration is “untimely and forfeited on
appeal.” Evanston Ins. Co. v. Cogswell Props., LLC, 683 F.3d 684, 692 (6th Cir. 2012). This rule
is prudential, not jurisdictional, and can be overlooked “in exceptional cases” or when the rule would
produce a “plain miscarriage of justice.” Scottsdale Ins. Co. v. Flowers, 513 F.3d 546, 552 (6th Cir.
2008). Plaintiff has not argued that this case presents such exceptional circumstances, nor has it
attempted to excuse its failure to raise the argument about non-reimbursed claims prior to its motion
for reconsideration.
Instead of attempting to excuse its own failure to raise the argument at the proper time,
Plaintiff asserted repeatedly at oral argument that Defendants’ motion to dismiss never stated that
the ACF had reimbursed all of Plaintiff’s claims. On the contrary, the motion to dismiss stated
almost exactly that. Under the unmistakable heading that reads, in part, “Plaintiff has not suffered
any damages,” Defendants laid out the constitutional and prudential requirements of standing and
stated, in no uncertain terms, that Plaintiff “lost any right to assert a claim for indemnity or
reimbursement from Defendant when the [ACF] reimbursed Plaintiff for monies paid to Defendants
in accordance with the Michigan No-Fault Act . . . .” (R. 15, Mot. to Dismiss 10.) The motion to
dismiss went on to state that “Plaintiff has not suffered any money damages” because of the
way from the court’s intervention,” Warth v. Seldin, 422 U.S. 490, 508 (1975), it cannot establish
standing under Article III.
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“[r]eimbursements that have been provided to Plaintiff by the ACF.” (R. 15, Mot. to Dismiss 11.)
Having not suffered any damages, Defendants argued, Plaintiff lacked standing to maintain its
complaint.
In its response to Defendants’ motion to dismiss, Plaintiff seems to have misunderstood
Defendants’ standing argument. Plaintiff apparently believed that Defendants were challenging its
status as a real party in interest under Federal Rule of Civil Procedure 17(a). (See R. 23, Resp. to
Mot. to Dismiss 3–5.) It is unclear why Plaintiff would have thought this, as Defendants never
mentioned Rule 17 in their motion to dismiss.2 Nonetheless, Plaintiff never attempted to respond
to or refute Defendants’ standing arguments or the assertion that it was fully reimbursed by the ACF.
Only after the district court granted the motion to dismiss did Plaintiff argue that its
complaint also asserted claims based on payments it made to Defendants on behalf of its own
insureds. Plaintiff’s failure to respond to Defendants’ attack on its standing and its failure to refute
the assertion that it had been fully reimbursed amounts to a waiver of the argument, and we decline
to address it on appeal. See Humphrey v. U.S. Att’y Gen.’s Office, 279 F. App’x 328, 331 (6th Cir.
2008) (“[W]here, as here, plaintiff has not raised arguments in the district court by virtue of his
failure to oppose defendants’ motions to dismiss, the arguments have been waived.”); see also ZF
2
Rule 17(a)(1) states that “[a]n action must be prosecuted in the name of the real party in
interest.” Fed. R. Civ. P. 17(a)(1). Although this inquiry has some overlap with the standing
inquiry, in that both require a named party to have a real interest in the case, the two are conceptually
distinct. The Federal Rules cannot expand the subject-matter jurisdiction of the federal courts;
therefore, an analysis under Rule 17 can only be conducted after a party has established its standing
to sue. See Zurich Ins. Co. v. Logitrans, Inc., 297 F.3d 528, 531–32 (6th Cir. 2002).
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Meritor, LLC v. Eaton Corp., 696 F.3d 254, 299 (3d Cir. 2012) (“It is not the district court’s
responsibility to help a party correct an error or a poor exercise of judgment.”).
Plaintiff further argues that it should be permitted to amend its complaint to clarify that it was
seeking damages for non-reimbursed claims as well as those for which it had been reimbursed by
the ACF. Not only was this argument raised for the first time on appeal, but it is also an attempt to
resurrect the same argument that Plaintiff inexcusably waived by failing to raise it at the proper time
before the district court. As with arguments raised for the first time in motions for reconsideration,
arguments raised for the first time on appeal are generally deemed waived absent exceptional
circumstances or a “plain miscarriage of justice.” Flowers, 513 F.3d at 552. In order to encourage
litigants to fully and completely address all issues before the district court in the first instance and
avoid unfair surprises to the opposing party, we rarely exercise our discretion to address belatedly
raised arguments. See id. Because Plaintiff makes no persuasive argument to excuse its failure to
timely present to the district court the argument regarding its non-reimbursed claims or its request
to amend the complaint to include such claims, we find that Plaintiff has not properly preserved these
arguments for appeal.
CONCLUSION
For the foregoing reasons, we AFFIRM the district court’s dismissal of Plaintiff’s complaint.
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