Riverview Health Institute LLC v. Medical Mutual of Ohio

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 10a0097p.06

UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________

X
-
RIVERVIEW HEALTH INSTITUTE LLC;
-
MIDDLETOWN SURGICAL ASSOCIATES INC.,
dba Surgical Weight Loss Center; OAK LEAF -
-
No. 08-4431
HEALTH GROUP LLC, dba St. Elizabeth’s
,
>
Plaintiffs-Appellants, -
Laboratories,

-
-
-
v.
-
MEDICAL MUTUAL OF OHIO; KENT W. CLAPP; -
-
Defendants-Appellees. -
DAVID G. QUIRING; KATHY SCHNEEBERGER,
N
Appeal from the United States District Court
for the Southern District of Ohio at Dayton.
No. 07-00354—Thomas M. Rose, District Judge.
Argued: October 8, 2009
Decided and Filed: April 7, 2010
Before: RYAN, COLE, and CLAY, Circuit Judges.

_________________

COUNSEL
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.

1
No. 08-4431 Riverview Health Inst. LLC, et al. v. Medical Page 2
Mutual of Ohio, et al.

_________________

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.
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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 “[a]s 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.
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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
1
preemption, 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,

1
Reverse preemption is a form of inverse preemption that prevents a generally applicable federal
law from inadvertently invalidating, impairing, or superseding state laws enacted to regulate the business
of insurance. See Humana Inc. v. Forsyth, 525 U.S. 299, 306-07 (1999); see also Ojo v. Farmers Group,
Inc., 565 F.3d 1175, 1179 (9th Cir. 2009).
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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 discretion. “Although a district court has discretion to deny a
motion to amend a complaint after an answer has been filed, [this Court] ha[s] held on
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several occasions that a district court abuses its discretion when it fails to state a basis
for its decision to deny a motion to amend.” Rose v. Hartford Underwriters Ins. Co.,
203 F.3d 417, 420 (6th Cir. 2000). However, such an abuse of discretion “could amount
to a harmless error if adding [the] proposed amendment would have been futile.” Id.
“A proposed amendment is futile if the amendment could not withstand a Rule 12(b)(6)
motion to dismiss.” Id. (citing Thiokol Corp. v. Dep’t of Treasury, State of Michigan,
Revenue Div., 987 F.2d 376, 382-83 (6th Cir. 1993)). Because the district court denied
Plaintiffs’ motion for leave to amend on the basis of futility, this Court reviews the
district court’s denial of Plaintiffs’ motion de novo. Midkiff v. Adams County Reg’l
Water Dist., 409 F.3d 758, 771 (6th Cir. 2005).

B. Plaintiffs’ RICO Claims

Plaintiffs argue that Medical Mutual, in its processing of insurance claims,
violated the federal RICO statute. Specifically, Plaintiffs allege that 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.” (Compl. ¶ 51.)

Federal RICO takes aim at “racketeering activity.” See 18 U.S.C. § 1961(1)
(defining “racketeering activity”). In order to establish racketeering activity, a plaintiff
must allege a predicate act. Riverview has alleged mail fraud, which satisfies the
predicate act requirement. 18 U.S.C. § 1961(1)(B). Mail fraud consists of a scheme or
artifice to defraud and a mailing for the purpose of executing the scheme. Pereira v.
United States, 347 U.S. 1, 8 (1954); Bender v. Southland Corp., 749 F.2d 1205, 1215-16
(6th Cir. 1984). A scheme to defraud involves “[i]ntentional fraud, consisting in
deception intentionally practiced to induce another to part with property or to surrender
some legal right, and which accomplishes the end designed.” Bender, 749 F.2d at 1216
(quoting Epstein v. United States, 174 F.2d 754, 765 (6th Cir. 1949)) (emphasis omitted).
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Mutual of Ohio, et al.

Pursuant to 18 U.S.C. § 1964(c), “[a]ny person injured in his business or property
by reason of a violation of § 1962” may bring a private action. Section 1962 makes it
unlawful for any person to: (1) use income derived from a “pattern of racketeering
activity,” to acquire interest in or establish operation of any enterprise engaged in, or the
activities of which affect, interstate commerce; (2) through a pattern of racketeering
activity, acquire or maintain an interest in or control of any enterprise engaged in, or the
activities of which affect, interstate commerce; (3) through a pattern of racketeering
activity, conduct or participate in the conduct of an enterprise engaged in, or the
activities of which affect, interstate commerce; or (4) conspire to violate any provision
of Section 1962. 18 U.S.C. § 1962. Riverview has alleged violations of the first and
third prohibitions set forth in Section 1962.

C. The McCarran-Ferguson Act

Defendants contend, and the district court agreed, that Riverview’s RICO claims
are reverse preempted in accordance with the McCarran-Ferguson Act. Plaintiffs argue
that McCarran-Ferguson does not apply to its RICO claims. For the following reasons,
we hold that Plaintiffs’ federal RICO claims are reverse preempted by the McCarran-
Ferguson Act.

The McCarran-Ferguson Act states 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). Moreover, the
McCarran-Ferguson Act declares 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.”2 Id. § 1012(b). Thus, this provision provides for “reverse
preemption” when regulation of the business of insurance is involved. Genord v. Blue

2
The McCarran-Ferguson Act also sets forth an “antitrust exception” to the reverse preemption
rule. This exception provides that the Clayton Act, the Sherman 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.” 15 U.S.C. § 1012(b).
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Cross & Blue Shield of Mich., 440 F.3d 802, 805 (6th Cir. 2006). Nonetheless, courts
should narrowly construe the McCarran-Ferguson Act. See SEC v. Nat’l Sec., Inc. 393
U.S. 453, 459-60 (1969) (“Insurance companies may do many things which are subject
to paramount federal regulation; only when they are engaged in the ‘business of
insurance’ does the [McCarran-Ferguson Act] apply.”).

Determining whether the reverse preemption rule applies requires us to answer
three questions. First, we must decide “whether the federal statute at issue ‘specifically
relates to the business of insurance.’” Genord, 440 F.3d at 805. If it does, then the
McCarran-Ferguson Act, by its own terms, does not permit reverse preemption.
15 U.S.C. § 1012(b) (establishing an exception to the reverse preemption rule where
federal law “specifically relates to the business of insurance.”). If it does not, then in
order for the federal RICO statute to be reverse preempted by state law, we must answer
both remaining questions affirmatively—“whether the state statute at issue was enacted
. . . for the purpose of regulating the business of insurance” and “whether the application
of the federal statute would invalidate, impair, or supersede the state statute.” Genord,
440 F.3d at 805-06 (internal quotation marks omitted). Neither party disputes that RICO
does not specifically relate to the business of insurance. See Kenty v. Bank One,
Columbus, N.A., 92 F.3d 384, 391 (6th Cir. 1996). Accordingly, our analysis will focus
on the “business of insurance” requirement and whether the application of RICO will
“invalidate, impair, or supersede” Ohio insurance law.

1. The “Business of Insurance” Requirement

Plaintiffs contend that their federal RICO claims do not fall within the ambit of
the “business of insurance” requirement for reverse preemption. We disagree.

In Union Labor Life Insurance Co. v. Pireno, 458 U.S. 119 (1982), the Supreme
Court articulated three criteria that determine whether an activity is part of the “business
of insurance”: (1) “whether the practice has the effect of transferring or spreading a
policyholder's risk,” (2) “whether the practice is an integral part of the policy
relationship between the insurer and the insured,” and (3) “whether the practice is
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limited to entities within the insurance industry.” Id. at 129; see also Genord, 440 F.3d
at 806.

No one factor is dispositive. Brown v. Cassens Transp. Co., 546 F.3d 347, 358
(6th Cir. 2008). When determining whether a state statute addresses the “business of
insurance” under the McCarran-Ferguson Act, “the focus is on how to characterize
conduct undertaken by private actors, rather than how to characterize state laws in regard
to what they regulate.” Id. (quoting Ky. Ass’n of Health Plans, Inc. v. Miller, 538 U.S.
329, 337 (2003)) (internal quotation marks omitted). The McCarran-Ferguson Act’s
general rule includes “a broad category of laws . . . [that] necessarily encompasses more
than just the ‘business of insurance.’” United States Dep’t of Treasury v. Fabe, 508 U.S.
491, 505 (1993). This Court has held that “to have been enacted . . . for the purpose of
regulating the business of insurance, [the state law] must possess the aim of regulating
activities that meet the Pireno criteria set forth above.” Genord, 440 F.3d at 806
(quoting Owensboro Nat’l Bank v. Stephens, 44 F.3d 388, 392 (6th Cir. 1994)) (internal
quotation marks omitted) (alteration in original).

In determining what is integral to the policy relationship, “the focus is on the
extent to which the state law furthers the interests of the policyholders.” Id. at 807.
Therefore, “[w]hat constitutes an ‘integral part of the policy relationship’ is . . .
determined by reference to the interests of the policyholders.” Id. at 808. “Where a state
law protects state insurance-policyholders, it is a ‘law enacted . . . for the purpose of
regulating the business of insurance.’” AmSouth Bank v. Dale, 386 F.3d 763, 781 (6th
Cir. 2004).

The inquiry into whether the state statute at issue seeks to regulate a practice that
is limited to entities within the insurance industry is not determinative but “courts should
take this factor into account because ‘[a]rrangements between insurance companies and
parties outside the insurance industry can hardly be said to lie at the center of [the]
legislative concern’ of ‘protect[ing] intra-industry cooperation in the underwriting of
risks.’” Genord, 440 F.3d at 808 (alterations in original).
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In United States Department of Treasury v. Fabe, the Supreme Court held that
“[t]here can be no doubt that the actual performance of an insurance contract falls within
the business of insurance.” 508 U.S. at 503 (internal quotation marks omitted). The
Court added:

Without performance of the terms of the insurance policy, there is no risk
transfer at all. Moreover, performance of an insurance contract also
satisfies the remaining prongs of the Pireno test: It is central to the policy
relationship between insurer and insured and is confined entirely to
entities within the insurance industry.

Id. at 504.

In this case, Plaintiffs’ complaint focuses on the idea that 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.” (Compl. ¶ 51.) These allegations relate to the actual
performance of the insurance contract between Medical Mutual and its insureds, thus
satisfying all three prongs of the Pireno test. Accordingly, Plaintiffs’ federal RICO
claims fall within the “business of insurance” requirement for reverse preemption. Our
focus now turns to whether application of the federal RICO statute in this case will
“invalidate, impair, or supersede” any provision of the state law.

2. “The Invalidate, Supersede, or Impair” Requirement

Plaintiffs also argue that the application of the federal RICO statute in this
instance would not “impair” Ohio’s insurance regulatory scheme.3 For the following
reasons, we disagree.

3
The term “invalidate” ordinarily means “to render ineffective, generally without providing a
replacement rule or law.” Humana, 525 U.S. at 307. To “supersede” means to “set aside, render
unnecessary, suspend, or stay.” Black’s Law Dictionary 1437 (6th ed. 1990). Under these common
definitions, RICO’s application would neither “invalidate” nor “supersede” Ohio law. Thus, the parties
agree that the key question is whether federal RICO’s application would “impair” Ohio law. To “impair”
means “[t]o weaken, to make worse, to lessen in power, diminish, or relax, or otherwise affect in an
injurious manner.” Black’s, supra, at 752.
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“A party seeking to invoke McCarran-Ferguson cannot simply point to additional
procedural measures included in a federal law without identifying some substantive
aspect of the state law that is being invalidated, impaired or superseded. Thus, . . . this
is fundamentally a question of what effect RICO has on the state law.” Kenty, 92 F.3d
at 392.

Ohio has enacted a comprehensive regulatory scheme to regulate the business of
insurance. See Ohio Rev. Code § 3901.01 (“R.C.”), et seq.; Fabe, 508 U.S. at 494
(noting that the Ohio statute at issue “was enacted as part of a complex and specialized
administrative structure for the regulation of insurance companies from inception to
dissolution”). Included in Title 39 of the Ohio Revised Code is the Prompt Pay Act,
R.C. §§ 3901.38-3901.3814, which regulates the timely processing and payment of
insureds’ healthcare claims.

The Prompt Pay Act sets forth various time frames for processing insurance
claims, including time frames for payment or denial of insurance claims. R.C.
§ 3901.381(B)(1). “[W]hen a third-party payer receives from a provider5 or
4

beneficiary6 a claim . . . the third-party payer shall pay or deny the claim not later than
thirty days after receipt of the claim.” Id. A third-party payer cannot “[e]ngage in any
business practice that unfairly or unnecessarily delays the processing of a claim or the
payment of any amount due for health care services” provided. Id. § 3901.385(A).

A provider or beneficiary aggrieved by any act believed to be a third-party payer
violation of the Prompt Pay Act “may file a written complaint with the superintendent
of insurance regarding the violation.” Id. § 3901.3810. If, after investigation, the
Superintendent finds that the third-party payer has committed a series of violations

4
A “third-party payer” includes an insurance company. R.C. § 3901.38(F)(1).
5
A provider “means a hospital, nursing home, physician, podiatrist, dentist, pharmacist,
chiropractor, or other health care provider entitled to reimbursement by a third-party payer for services
rendered to a beneficiary under a benefits contract.” R.C. § 3901.38(D).
6
A beneficiary “means any policyholder, subscriber, member, employee, or other person who is
eligible for benefits under a benefits contract.” R.C. § 3901.38(A).
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constituting a consistent pattern or practice of failing to comply with Ohio’s statutory
requirements for processing claims, the Superintendent can impose a monetary fine,
order the payment of interest, order the third-party payer to cease and desist conduct that
violates the statute, and impose various other administrative remedies. Id.
§ 3901.3812(A)-(B). The Superintendent must give the third-party payer notice of the
violation as well as the proposed penalty and conduct an administrative hearing if
requested by the third-party payer. Id. § 3901.3812(A). In determining whether a
consistent pattern or practice of violations has occurred, the Superintendent must “apply
the error tolerance standards for claims processing contained in the market conduct
examiners handbook issued by the national association of insurance commissioners in
effect at the time the claims were processed.” Id. The statute provides that “[t]he
remedies imposed by the superintendent . . . are in addition to, and not in lieu of, . . .
other remedies . . . providers and beneficiaries may otherwise have by law.” Id.
§ 3901.3812(C).

In Kenty v. Bank One, Columbus, N.A., this Court noted that “different liability
under Ohio law for violations, as well as different standards of proof necessary to
demonstrate misrepresentations, means that RICO does impair the ability of Ohio to
regulate this type of behavior.” 92 F.3d at 392. The Court added:

applying RICO to insurance companies would subject them to a different
standard of behavior than the one envisioned by Ohio. By holding
insurance companies liable under a federal law, such as RICO, when
Ohio law provides for no liability, RICO would impair the regulatory
framework within which Ohio expects its insurance companies to do
business.

Id.

Three years later in Humana Inc. v. Forsyth, 525 U.S. 299 (1999), the Supreme
Court held that a federal statute that “proscribes the same conduct as state law, but
provides materially different remedies” did not “impair” state law under the McCarran-
Ferguson Act. 525 U.S. at 305, 310. “When federal law does not directly conflict with
state regulation, and when application of the federal law would not frustrate any declared
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state policy or interfere with a State’s administrative regime, the McCarran-Ferguson
Act does not preclude its application.” Id. at 310. In reaching its conclusion, the Court
examined the interplay between RICO and the state insurance scheme at issue, pointing
to several factors. The factors the Court examined in Humana include: (1) the
availability of a private right of action under the state insurance scheme; (2) the
availability of a state common law remedy; (3) the possibility that other state statutes
provide the basis for suit; (4) the availability of punitive damages; (5) whether the
damages available under the state insurance scheme could exceed the damages
recoverable under RICO, even taking into account RICO’s treble damages provision;
(6) the absence of a position by the State regarding any interest in state policy or the
administrative scheme; and (7) the fact that insurers have relied on RICO to eliminate
insurance fraud. Humana, Id. at 311-14; Weiss v. First Unum Life Ins. Co., 482 F.3d
254, 261 (3d Cir. 2007). We consider each of these factors in turn.

a. Availability of a Private Right of Action and Common
Law Remedies
Ohio’s insurance scheme does not afford a private right of action. Nonetheless,
Plaintiffs contend that the absence of a private right of action is minimized by the fact
that the Ohio insurance statute does not “expressly provide” or “necessarily imply” that
the statute is the exclusive remedy under Ohio law for insurance fraud.

We find this argument unconvincing, particularly because Plaintiffs have no
common law remedies available, which renders Ohio’s Prompt Pay Act Plaintiffs’
exclusive source of remedies. Although Plaintiffs cite claims for the tort of bad faith on
the part of an insurance company and common law fraud, Plaintiffs have no such viable
claims.

First, in order to assert a bad faith claim, the parties must have a contractual
relationship. See Gillette v. Estate of Gillette, 837 N.E.2d 1283, 1287 (Ohio Ct. App.
2005) (“Given the contractual relationship requirement, Ohio courts have repeatedly
held that a third-party claimant cannot assert bad-faith claims against an insurer.”).
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Plaintiffs have conceded that they have no contractual relationship with Medical Mutual,
thus they have no viable bad-faith claim.

With regard to Plaintiffs’ assertion that common law fraud is actionable, “[w]hen
the legislature creates a statutory right unknown to the common law (as it did here, by
specifying [procedures and remedies regarding the timely payment of insurance claims]),
complete with meaningful statutory remedies, there can exist no parallel common-law
or public policy tort claim.” Lynch v. Dial Fin. Co. of Ohio No. 1, Inc., 656 N.E.2d 714,
719 (Ohio Ct. App. 1995). The Ohio General Assembly has specified the remedies for
violating the Prompt Pay Act and has therefore, preempted the field and a common law
cause of action cannot be implied. See id. at 719-20.

Furthermore, several courts post-Humana have held that the McCarran-Ferguson
Act bars the application of RICO where, as here, the state insurance scheme does not
allow a private right of action for the conduct alleged by Plaintiffs. See, e.g., Saunders
v. Farmers Ins. Exch., 537 F.3d 961, 968 (8th Cir. 2008) (affirming the McCarran-
Ferguson Act’s preemption of federal claims where Missouri insurance laws do not
provide a private right of action for unfairly discriminatory insurance rates); LaBarre v.
Credit Acceptance Corp., 175 F.3d 640, 643 (8th Cir. 1999) (holding that the McCarran-
Ferguson Act barred plaintiff’s claims against insurers because Minnesota law only
allowed administrative recourse and did not provide for a private right of action); In re
Managed Care Litig., 185 F. Supp. 2d 1310, 1321-22 (S.D. Fla. 2002) (affirming
dismissal of RICO claims filed by plaintiffs residing in California, Florida, New Jersey,
and Virginia, because unlike the Nevada statute at issue in Humana, those states do not
expressly provide a private cause of action for victims of insurance fraud).

b. Other State Statutes

Plaintiffs contend that the fact that Ohio has a state RICO statute demonstrates
that the federal RICO statute does not impair Ohio’s insurance regulatory scheme, but
rather aids or enhances state law. However, as Defendants point out, an insurer’s alleged
violation of the Prompt Pay Act does not constitute “corrupt activity” for purposes of
No. 08-4431 Riverview Health Inst. LLC, et al. v. Medical Page 15
Mutual of Ohio, et al.

Ohio’s RICO statute. See R.C. § 2923.31(I)(2)(c) (noting that a violation of R.C.
§ 2913.47, which criminalizes insurance fraud against insurers, constitutes “corrupt
activity” for purposes of the state RICO statute). Thus, although Plaintiffs correctly
assert that Ohio’s RICO statute does not preclude recovery based on other claims of
relief, see R.C. § 2923.34(L), such an argument is misplaced because Ohio’s RICO
statute would not apply to the instant case.

c. Damages

The treble damages available under the federal RICO statute would greatly
exceed the administrative remedies available under Ohio law. See R.C. § 3901.22(F).
“[T]he existing remedies [under Ohio’s administrative scheme] are more than adequate
to deter any unfair or deceptive trade practices.” Strack v. Westfield Cos., 515 N.E.2d
1005, 1008 (Ohio Ct. App. 1986). Ohio’s insurance superintendent “is granted wide
latitude and authority in overseeing insurance companies” and Ohio’s insurance
regulatory scheme “enables the superintendent to impose administrative remedies on an
insurer who commits unfair or deceptive trade practices.” Id. As we noted previously,
Plaintiffs cannot state claims for either state common law fraud or the tort of bad faith
by an insurer. Accordingly, permitting Plaintiffs to recover treble damages under the
federal RICO statute would controvert Ohio’s insurance regulatory scheme.

d. State’s Position and the Use of RICO by Insurers

Plaintiffs initially claimed that the State’s failure to intervene in this suit
supported their position that application of the federal RICO statute would not frustrate
any state policy or interfere with Ohio’s administrative scheme. The State of Ohio
subsequently filed a brief in support of Defendants as amicus curiae, arguing that
application of federal RICO in this case would impair Ohio’s insurance scheme,
particularly the State’s ability to detect insurance fraud. The State argues that its
Department of Insurance must work with insurers to combat insurance fraud. The
application of federal RICO, Ohio asserts, would have a chilling effect on an insurer’s
No. 08-4431 Riverview Health Inst. LLC, et al. v. Medical Page 16
Mutual of Ohio, et al.

incentive to detect fraud because in doing so, insurers would expose themselves to
liability for federal RICO claims and treble damages.

As we previously noted, Ohio’s RICO statute deems fraud against insurers to be
“corrupt activity” for purposes of the statute. We find that this is an indication by the
Ohio legislature that it considered the regulatory scheme set forth in the Prompt Pay Act
to be sufficient to remedy and deter fraud perpetrated by insurers. Accordingly, insurers
still have a cause of action under both Ohio and federal RICO for fraud perpetrated
against them by insureds.

We conclude that application of federal RICO in this case would impair Ohio’s
insurance regulatory scheme. The conduct at the heart of Plaintiffs’ complaint
implicates Ohio’s law regarding payment of claims and the Ohio Department of
Insurance is charged with administering the applicable state law. In this case, Plaintiffs
have no common law remedy or private right of action. The state RICO statute is
inapplicable and the damages available pursuant to federal RICO would far exceed the
damages contemplated by the Ohio legislature when enacting its insurance regulatory
scheme. Moreover, the State of Ohio has filed a brief as amicus curiae in support of
Defendants, arguing that the imposition of the federal RICO statute will impair Ohio’s
ability to detect insurance fraud and reverse preemption will not prevent insurers from
using state or federal RICO to combat fraud. Accordingly, Plaintiffs’ RICO claims are
reverse preempted by the McCarran-Ferguson Act and we, therefore, affirm the district
court’s dismissal of Plaintiffs’ RICO claims.
No. 08-4431 Riverview Health Inst. LLC, et al. v. Medical Page 17
Mutual of Ohio, et al.

D. Plaintiffs’ Request to Amend

Congress enacted ERISA, 29 U.S.C. § 1001, et seq., to “protect . . . the interests
of participants7 in employee benefit plans and their beneficiaries8 . . . by establishing
standards of conduct, responsibility, and obligation for fiduciaries of employee benefit
plans,” and to “provid[e] for appropriate remedies, sanctions, and ready access to the
Federal courts.” 29 U.S.C. § 1001(b) (emphasis added). “The purpose of ERISA is to
provide a uniform regulatory regime over employee benefit plans.”9 Aetna Health Inc.
v. Davila, 542 U.S. 200, 208 (2004). Because the record fails to identify any ERISA
plan at issue or to establish Medical Mutual’s status as an ERISA fiduciary, for purposes
of analyzing Plaintiffs’ estoppel claim, we assume, arguendo, that an ERISA plan is
involved and that Medical Mutual is an ERISA fiduciary.10

7
For purposes of ERISA, a “participant” is:
any employee or former employee of an employer, or any member or former member
of an employee organization, who is or may become eligible to receive a benefit of any
type from an employee benefit plan which covers employees of such employer or
members of such organization, or whose beneficiaries may be eligible to receive any
such benefit.
29 U.S.C. § 1002(7).
8
A “beneficiary” is “a person designated by a participant, or by the terms of an employee benefit
plan, who is or may become entitled to a benefit thereunder.” 29 U.S.C. § 1002(8).
9
An “employee benefit plan” includes an “employee welfare benefit plan,” which includes “any
plan, fund, or program . . . established or maintained by an employer or by an employee organization . . .
[that] was established or is maintained for the purpose of providing its participants or their beneficiaries,
through the purchase of insurance or otherwise, . . . medical, surgical, or hospital care benefits . . . .”
29 U.S.C. § 1002(1), (3).
10
Under ERISA, a person is a “fiduciary” with regard to the plan to the extent:
(i) he exercises any discretionary authority or discretionary control respecting
management of such plan or exercises any authority or control respecting management
or disposition of its assets;
(ii) he renders investment advice for a fee or other compensation, direct or indirect, with
respect to any moneys or other property of such plan, or has any authority or
responsibility to do so; or
(iii) he has any discretionary authority or discretionary responsibility in the
administration of such plan. Such term includes any person designated under [29 U.S.C.
§] 1105(c)(1)(B) . . . .
29 U.S.C. § 1002(21)(A). A “person” is “an individual, partnership, joint venture, corporation, mutual
company, joint-stock company, trust, estate, unincorporated organization, association, or employee
organization.” 29 U.S.C. § 1002(9).
No. 08-4431 Riverview Health Inst. LLC, et al. v. Medical Page 18
Mutual of Ohio, et al.

Plaintiffs claim in the Fourth Count of their complaint that they were the
assignees of patient benefit assignments and therefore qualified as “beneficiaries” within
the meaning of ERISA. At the summary judgment stage, Defendants argued not only
that Plaintiffs failed to allege the necessary facts to set forth an ERISA claim, but also
that Plaintiffs’ claims that they are assignees of patient benefits and, therefore,
beneficiaries, were barred because of the anti-assignment provision in Medical Mutual’s
health care certificates. In denying Plaintiffs’ request to amend, the district court noted
Defendants’ presentation of uncontested evidence that every insurance policy potentially
at issue in this case contained an anti-assignment provision, which states:

[Medical Mutual] is authorized to make payments directly to Providers
who have performed covered services for you. [Medical Mutual] also
reserves the right to make payment directly to you. When this occurs,
you must pay the provider and [Medical Mutual] is not legally obligated
to pay any additional amounts. You cannot assign your right to receive
payment to anyone else not [sic] can you authorize someone else to
receive your payments for you, including your Provider.

On appeal, Plaintiffs contend that the district court erred in denying their request
to amend the complaint in order to add a federal estoppel claim. Specifically, Plaintiffs
assert that Defendants paid claims Defendants believed were assigned to Plaintiffs for
more than two and a half years. Accordingly, argue Plaintiffs, repeated payment
pursuant to the assignments over that time period is a representation by Defendants that
such assignments were acceptable.

Federal Rule of Civil Procedure 15(a)(2) provides that leave to amend shall be
freely given when justice so requires. However, a motion to amend may be denied
where there is “undue delay, bad faith or dilatory motive on the part of the movant,
repeated failure to cure deficiencies by amendments previously allowed, undue prejudice
to the opposing party by virtue of allowance of the amendment, futility of amendment,
etc.” Foman v. Davis, 371 U.S. 178, 182 (1962) (emphasis added). “A proposed
amendment is futile if the amendment could not withstand a Rule 12(b)(6) motion to
dismiss.” Rose, 203 F.3d at 420 (citing Thiokol, 987 F.2d at 382-83).
No. 08-4431 Riverview Health Inst. LLC, et al. v. Medical Page 19
Mutual of Ohio, et al.

Defendants argue first that as a threshold matter, Plaintiffs’ request for leave to
amend is procedurally improper because their request came after the district court’s
ruling on Defendants’ motion to dismiss. Consequently, argue Defendants, the request
for leave to amend must be viewed as an improper request for an advisory opinion,
pursuant to this Court’s opinion in Winget v. JP Morgan Chase Bank, N.A., 537 F.3d
565, 573 (6th Cir. 2008), that informs Plaintiffs of the complaint’s deficiencies and
affords the opportunity to cure those deficiencies.

We disagree. The plaintiff in Winget never requested leave to amend his
complaint. In this case, however, there is no dispute that Plaintiffs did actually request
leave to amend. Moreover, the district court has discretion regarding whether to grant
leave to amend following summary judgment. Ferris v. Santa Clara County, 891 F.2d
715, 718 (9th Cir. 1989); Verhein v. South Bend Lathe, Inc., 598 F.2d 1061, 1063 (7th
Cir. 1979); see Humphreys v. Roche Biomedical Labs., Inc., 990 F.2d 1078, 1082 (8th
Cir. 1993) (reviewing the district court’s denial of leave to amend for an abuse of
discretion after noting that summary judgment had been granted for most of the
defendants at the time plaintiff moved to amend).

This Court recognizes a federal common law claim for estoppel under ERISA.
In order to establish an estoppel claim: (1) there must be conduct or language that
amounts to a representation of material fact; (2) the party to be estopped must be aware
of the true facts; (3) the party to be estopped must have the intent that the representation
be acted on or the party seeking estoppel must reasonably believe that the party to be
estopped so intends; (4) the party asserting the estoppel must be unaware of the true
facts; and (5) the party seeking estoppel must reasonably or justifiably rely on the
representation to his detriment. Sprague v. General Motors Corp., 133 F.3d 388, 403
(6th Cir. 1998) (en banc). Despite this Court’s recognition of federal common law
estoppel claims under ERISA, we have also stated:

Principles of estoppel . . . cannot be applied to vary the terms of
unambiguous plan documents; estoppel can only be invoked in the
context of ambiguous plan provisions. . . . There are at least two reasons
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Mutual of Ohio, et al.

for this. First, as we have seen, estoppel requires reasonable or
justifiable reliance by the party asserting the estoppel. That party's
reliance can seldom, if ever, be reasonable or justifiable if it is
inconsistent with the clear and unambiguous terms of plan documents
available to or furnished to the party. Second, to allow estoppel to
override the clear terms of plan documents would be to enforce
something other than the plan documents themselves. That would not be
consistent with ERISA.

Id. at 404.

Plaintiffs proffer several reasons why the uncontested evidence regarding the
anti-assignment provision—an affidavit from Patricia Decensi, Medical Mutual’s
Director of Legal Affairs—is not dispositive of their federal estoppel claim. First,
Plaintiffs assert that even though the anti-assignment language is at least arguably
unambiguous, the health certificates referenced by Defendants may not be plan
documents at all and may not affect the terms of the plans governed by ERISA. Thus,
the ban on the estoppel claims set forth in Sprague would not apply. This argument
fails, however, because Plaintiffs offer no evidence to support these contentions.

Plaintiffs also contend that the anti-assignment provision is not dispositive
because Medical Mutual failed to establish that it provided documentation of the anti-
assignment provision to its insureds. In support of this assertion, Plaintiffs point to eight
affidavits they submitted to the district court from patients who are insured by Medical
Mutual and cite Sprague for the proposition that an insured or health care provider
cannot be said to have unreasonably relied on an insurer’s acts in the absence of proofs
that the insured or health care provider is made aware of the purported unambiguous
language.

We do not think Sprague supports Plaintiffs’ argument. Sprague merely says
that a party’s reliance can rarely, if ever, be reasonable or justifiable if such reliance is
“inconsistent with the clear and unambiguous terms of plan documents available to or
furnished to the party.” Id. (emphasis added). No language in Sprague suggests that an
insurer has an affirmative duty to make health care providers or its insureds aware of this
No. 08-4431 Riverview Health Inst. LLC, et al. v. Medical Page 21
Mutual of Ohio, et al.

kind of language. Plaintiffs point to no authority “requiring knowledge on the part of
the purported assignees nor [do they] give any reason why there should be a general
requirement of knowledge.” Wash. Hosp. Ctr. Corp. v. Group Hospitalization & Med.
Servs., Inc., 758 F. Supp. 750, 753 (D.D.C. 1991).

Moreover, Plaintiffs have offered no evidence that Medical Mutual failed to
either furnish its insureds a copy of the documents containing the anti-assignment
provision or make such documents available to them. The affidavits Plaintiffs reference
do not state that Medical Mutual failed to furnish or make available the documents
containing the anti-assignment provision. Instead, the affidavits state that the insureds
were never advised, informed, or told that they could not assign their health care
benefits. None of the insureds claim that Medical Mutual deprived them of access to the
documents containing the anti-assignment language. Because Plaintiffs have failed to
argue that the language of the anti-assignment provision is ambiguous and have offered
no evidence that Medical Mutual’s insureds were deprived of access to the documents
containing the anti-assignment clause, Plaintiffs’ argument fails.

Plaintiffs also claim that Decensi’s representation in her affidavit that every
health care certificate contains an anti-assignment provision loses force in light of the
fact that the claims at issue in this case involve multiple insured and self-insured
arrangements sponsored by numerous employers and covering hundreds of patient-
insureds. Therefore, argue Plaintiffs, there are potentially hundreds if not thousands of
documents—that may or may not include the health care certificates referenced in
Decensi’s affidavit—that are relevant to determining Medical Mutual’s legal
responsibilities to its insureds. Given the amount of purported relevant documents,
Plaintiffs contend that the district court improperly relied on just one—Decensi’s
affidavit— in deciding to deny leave to amend. Again, however, Plaintiffs present no
evidence to substantiate their claims regarding the relevance of other documents to the
issue of denial of leave to amend.
No. 08-4431 Riverview Health Inst. LLC, et al. v. Medical Page 22
Mutual of Ohio, et al.

Plaintiffs also argue that Medical Mutual only issues health care certificates in
insured arrangements and thus, the anti-assignment provision in the certificate does not
apply to claims of any self-insured plans at issue in the case. Defendants argue that
Plaintiffs cannot rely on this argument because: (1) Plaintiffs must first pursue claims
against self-insured plans before pursuing claims against a third-party administrator; and
(2) Plaintiffs failed to allege, with particularized facts, that Medical Mutual is a fiduciary
for purposes of ERISA. Plaintiffs counter that: (1) benefits due from self-insured plans
need not be pursued against the plan prior to pursuing claims against an administrator;
and (2) they did plead Medical Mutual’s status as an ERISA fiduciary.

While it is true that the proper defendant in an ERISA action concerning benefits
is the plan administrator, Daniel v. Eaton Corp., 839 F.2d 263, 266 (6th Cir. 1988), we
agree with Defendants that Plaintiffs failed to set forth particularized allegations
demonstrating that Medical Mutual is a “fiduciary” for purposes of ERISA. See
D’Amato v. Corporate Consulting, Inc., No. 94-3218, 1995 U.S. App. LEXIS 24611, at
*5 (6th Cir. Aug. 28, 1995) (“Although the complaint makes a conclusory allegation that
[the insurance company] was the administrator of the plan, it does not contain any
factual allegations to support this conclusion . . . .”). Accordingly, although Medical
Mutual could be the proper party in a benefits action, Plaintiffs failed to sufficiently
plead Medical Mutual’s status as an ERISA fiduciary. Moreover, Plaintiffs have failed
to identify any self-insured plans allegedly at issue in this case.

Because the language of the health care certificates is unambiguous, we conclude
that Plaintiffs cannot make out a viable estoppel claim. Consequently, a grant of leave
to amend would be futile and we, therefore, affirm the district court’s denial of leave to
amend the complaint.

III. CONCLUSION

In summary, we conclude that the district court properly dismissed Plaintiffs’
RICO claims as reversed preempted pursuant to the McCarran-Ferguson Act and
properly denied Plaintiffs’ request for leave to amend because amendment of the
No. 08-4431 Riverview Health Inst. LLC, et al. v. Medical Page 23
Mutual of Ohio, et al.

complaint would have been futile. For these reasons, the district court’s decision is
AFFIRMED.