Federal Court Sides with Plaintiffs on Motion to Dismiss $40+ Million Dollar Suit for Unpaid and Underpaid Claims

Attorneys Matthew M. Lavin and Aaron R. Modiano recently secured a complete denial of Blue Cross & Blue Shield of Michigan’s Motion to Dismiss a $40+ million dollar lawsuit brought on behalf of behavioral health providers for unpaid and underpaid claims. The plaintiffs provide medically necessary care and treatment to patients suffering from the disease of addiction and claim that Blue Cross Michigan has refused to properly process more than 22,000 claims for these patients who received treatment at plaintiffs’ facilities. On September 24, 2021, the court, in Serenity Point Recovery v. Blue Cross Blue Shield of Michigan, denied Blue Cross Michigan’s motion to dismiss on all grounds asserted, allowing the behavioral health providers to move one step closer to recovering the tens of millions of dollars of claims unpaid and underpaid by Blue Cross Michigan.

Blue Cross Michigan raised three arguments, all of which were rejected by the court: (1) that Plaintiffs lacked standing to pursue benefits claims for benefits provided to insurers other than Blue Cross Michigan; (2) that the anti-assignment clauses in the PPO certificates barred Plaintiffs’ claims; and (3) that the Plaintiffs failed to exhaust administrative remedies, barring their claims.

The Court rejected Blue Cross of Michigan’s arguments holding that: (1) Blue Cross of Michigan was an ERISA fiduciary for patients with Blue Cross of Michigan plans and that for the other BlueCard network plans, that Blue Cross of Michigan was a fiduciary as it was responsible for claim inputs, pricing, discount information, and payment under the BlueShield Association’s own Inter-Plan Programs Policies and Provisions that Blue Cross Michigan submitted to the court citing to El Paso Energy Corp. Long Term Disability Plan, 477 F.3d 833, 842 (6th Cir. 2007) and DeLuca v. Blue Cross Blue Shield of Michigan, 628 F.3d 743, 747-48 (6th Cir. 2010); (2) the court found that the anti-assignment provisions cited by Blue Cross of Michigan did not bar the Plaintiffs’ suit, noting that assignments of benefits further ERISA’s purpose [citing N. Jersey Brain & Spine Ctr. v. Aetna, Inc., 801 F.3d 369, 372 (3d Cir. 2015)] and that the substantial course of dealing alleged in the complaint between the parties precluded the court from enforcing the anti-assignment provision [citing Luckey v. Blue Cross Blue Shield of Michigan, No. 11-11500, 2012 WL 2190833, at *3 (E.D. Mich. June 14, 2012)]; and (3) that Plaintiffs’ collective pleading was sufficient to allege the futility [citing Durand v. Hanover Ins. Group, Inc., 560 F.3d 436, 439 (6th Cir. 2009)] and, as to statutory violations of ERISA, exhaustion of administrative remedies was not required [citing Hitchcock v. Cumberland Univ. 403(b) DC Plan, 851 F.3d 552, 564-5 (6th Cir. 2017)]. For those and additional reasons set out in the court’s 18-page decision, the court denied Blue Cross of Michigan’s motion to dismiss on all three grounds.

The ruling will likely have a widespread precedential impact on pleading standards for ERISA claims in the 6^th Circuit. For more information about the Court’s decision, please click here.