PT TODAY INC V COMMISSIONER OF THE OFC OF FINANCIAL AND INSUR SRV
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STATE OF MICHIGAN
COURT OF APPEALS
P.T. TODAY, INC., BRAD PUTVIN, GORDON
ALLEN, MICHAEL BEAUVAIS, ELAINE
COOPER, WILLIAM ROTH, LANA BAUM,
TIMOTHY BONDY, DAVID GILBOE, DIANA
INCH, SANDRA JENKINS, RICHARD FEBY,
MARY ANN KOENIG, JEFFREY GREEN, OSA
JACKSON-WYATT, RICHARD KOHLER,
JEROME MALONE, SHEILA ISLES, PARUL
SHAH, and MARTIN KATENBERG,
FOR PUBLICATION
February 28, 2006
9:10 a.m.
Plaintiff-Appellants,
and
BARBARA JOHNSON, ROBERT BAKER,
KAREN LEHMAN BORIN, MARGARET
KAMENEC, TERENCE HEATON, TERESA
HERRLINGER, RICHARD MILDER, JIM
SIMPSON, JANET WISENIEWSKI, TIMOTHY
STEGEMAN, MARK BEISSEL, BARBARA
HERZOG, and JOHN CZARNECKI,
Plaintiffs,
No. 259964
Ingham Circuit Court
LC No. 01-93039-AZ
Official Reported Version
v
COMMISSIONER OF THE OFFICE OF
FINANCIAL AND INSURANCE SERVICES and
BLUE CROSS BLUE SHIELD OF MICHIGAN,
Defendants-Appellees,
and
ATTORNEY GENERAL,
Intervening Appellee.
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Before: Smolenski, P.J., and Schuette and Borrello, JJ.
PER CURIAM.
Plaintiffs appeal as of right the trial court's grant of summary disposition in favor of
defendants in this case, which stems from their protracted challenges of administrative decisions
by the Commissioner of the Office of Financial and Insurance Services and the Attorney
General, as well as alleged tortious conduct by Blue Cross Blue Shield of Michigan (BCBSM).
We affirm.
I. FACTS
A. Overview
Plaintiff P.T. Today, Inc., is a nonprofit corporation whose members, several of whom
are individual plaintiffs, are licensed independent physical therapists; these individuals own and
operate freestanding physical therapy clinics in Michigan. The Michigan Commissioner of the
Office of Financial and Insurance Services (Commissioner)1 is empowered to regulate BCBSM
under 1980 PA 350, the Nonprofit Health Care Corporation Reform Act (the Act), MCL
550.1101 et seq.2 BCBSM is a nonprofit, charitable health care corporation that operates
pursuant to this act.
In this multicount action, plaintiffs sought (1) to compel the Commissioner to engage in
several specific regulatory enforcement actions against BCBSM for creating and facilitating
fraudulent business arrangements, (2) declaratory judgments delineating the Commissioner's
enforcement duties under the Act, and (3) damages from BCBSM for its alleged tortious
interference with a business interest through these fraudulent business arrangements.
Additionally, plaintiffs sought to join the Attorney General as a party defendant for (1) a
declaratory judgment that the Attorney General is required to engage in particular enforcement
activities against BCBSM under the Act and (2) a writ of mandamus compelling the Attorney
General to engage in these activities.
This case is but one of plaintiffs' challenges to the regulatory posture of the
Commissioner and the business practices of BCBSM. Consequently, we summarize these
related, yet distinctive, cases in part I(C) of this opinion, "Related Litigation." These cases often
proceeded simultaneously; for the purposes of clarity, we discuss each case chronologically and
note when the proceedings interacted. Additionally, this appeal concerns the intricacies of part 5
of BCBSM's enabling act, MCL 550.1501 et seq. As a result, we describe part 5 of the Act to
aid in understanding the procedural history of this appeal in part I(B) of this opinion, "The
1
This litigation spans two administrations, two commissioners, and two attorneys general.
However, neither the Commissioner's statutory duties nor the official policy of the
Commissioner in regard to this litigation have changed over the duration of the suit.
2
The statute is also referred to colloquially as "Act 350."
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Provider Class Plan Review Process."
procedural history of this case.
Finally, part I(D) of this opinion summarizes the
B. The Provider Class Plan Review Process
The Nonprofit Health Care Corporation Reform Act, MCL 550.1101 et seq., provides for
the comprehensive regulation of BCBSM, a charitable health insurance organization—as well as
Michigan's largest provider of health insurance. Part 5 of the Act, MCL 550.1501 et seq.,
controls how BCBSM reimburses health care providers (providers). MCL 550.1502 provides
that BCBSM may create "provider class plans" (PCPs) that govern its contracts with medical
service providers of like kind.3 BCBSM initiates the PCP approval process by preparing a
proposed PCP, which must explain how it meets the goals outlined in MCL 550.1503 (uniform
reporting by providers) and MCL 550.1504 (access, quality, and cost containment). The
proposed PCP must also include the contracts that providers, like plaintiffs, would be required to
sign under the PCP, as well as details regarding reimbursement arrangements under the proposed
PCP. MCL 550.1506(1). Additionally, BCBSM must "establish and implement procedures to
obtain advice and consultation from a provider class" when creating, modifying, or reviewing a
PCP. MCL 550.1505. Finally, BCBSM may only file a plan at certain times.4 MCL 550.1506.
MCL 550.1506(1) then requires BCBSM to submit the proposed PCP to the
Commissioner for review. MCL 550.1506(2) provides that the Commissioner then conduct a
limited review of the PCP, during which the Commissioner "shall examine the plan and shall
determine only if the plan contains a reimbursement arrangement and objectives for each goal
provided in [MCL 550.1504]." (Emphasis added.) If the Commissioner finds that BCBSM's
proposed plan is incomplete, BCBSM must submit a revised PCP in 15 days. MCL 550.1506(3)
and 550.1507. In other words, the Commissioner reviews the PCP for completeness, rather than
for its ability to achieve the Act's goals for PCPs outlined in MCL 550.1504. BCBSM may
modify a PCP placed in effect and "retained" for the Commissioner's records at any time, except
for the 180-day period after which the Commissioner declares a PCP "not retained" under MCL
550.1509. MCL 550.1508. The only preconditions to such an amendment are that it was
prepared after consultation with affected providers and subscribers, MCL 550.1508(2), and that
it "has been filed with and is agreed to by the commissioner," MCL 550.1508(1).
After a PCP has been in place for two years,5 the Commissioner may review it for
achievement of the PCP goals listed in MCL 550.1504. MCL 550.1509. When reviewing a PCP
under MCL 550.1509, the Commissioner may consider annual reports by BCBSM; demographic,
3
Providers benefit from inclusion in a PCP, because BCBSM refers its subscribers to class
members and allows class members to use an official symbol to show subscribers that BCBSM
reimburses them. MCL 550.1502(4) and (5).
4
The details of this are unimportant to the instant case.
5
For the purposes of MCL 550.1509, the filing of a modified PCP does not change the timing
requirements. MCL 550.1508(2).
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epidemiological, and long-term economic trends; sudden changes in circumstances; statutory
changes; administrative and judicial decisions; changes in health care practices and technology;
and comments from the affected provider group. MCL 550.1509(4). The Commissioner then
evaluates whether the PCP meets the goals outlined in MCL 550.1504(1):
(a) There will be an appropriate number of providers throughout this state
to assure the availability of certificate-covered health care services to each
subscriber.
(b) Providers will meet and abide by reasonable standards of health care
quality.
(c) Providers will be subject to reimbursement arrangements that will
assure a rate of change in the total corporation payment per member to each
provider class that is not higher than the compound rate of inflation and real
economic growth.
After building a record under MCL 550.1509 and considering the goals stated in MCL
550.1504(1), the Commissioner makes one of three rulings:
(1) that the PCP meets all the goals (thus retaining the PCP), MCL 550.1510(1)(a);
(2) that "although the provider class plan does not substantially achieve 1 or more of the
goals of the corporation, a change in the provider class plan is not required because there has
been competent, material, and substantial information obtained or submitted to support a
determination that the failure to achieve 1 or more of the goals was reasonable . . . . " (thus
retaining the PCP), MCL 550.1510(1)(b); or
(3) that the PCP failed to meet the Act's goals (thus declaring the PCP "not retained"),
MCL 550.1510(1)(c).
Subscribers (the insureds of BCBSM), BCBSM, the Attorney General, and organizations
representing affected provider classes (such as PT Today) have the right to appeal certain
determinations of the Commissioner, including determination reports issued pursuant to MCL
550.1509. MCL 550.1515. All appeals under part 5 are considered by an independent hearing
officer (IHO).6 MCL 550.1515(3) outlines the scope of the IHO's review of a determination
report by the Commissioner:
6
The IHO's qualifications are described in MCL 550.1514. "An appeal from an independent
hearing officer shall be conducted pursuant to chapter 6 of the administrative procedures act,
except that the appeal shall be taken within 30 days after the final determination, upon leave
granted, in the court of appeals." MCL 550.1518.
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In an appeal pursuant to this section, the relief available to a person, and
the decision of an independent hearing officer hearing an appeal, shall be limited
to the following:
(a) Affirming or reversing a determination of the commissioner under
[MCL 550.1509(1)] and [MCL 550.1510(1)].
(b) Determining, based on the information and factors described in [MCL
550.1509(4)] and the standards prescribed in [MCL 550.1516], 1 of the following:
(i) That the provider class plan prepared by the corporation under [MCL
550.1511(1)] was prepared in compliance with that section and shall be retained
as provided in [MCL 550.1506(4)].
(ii) That the provider class plan prepared by the commissioner under
[MCL 550.1513(2)(a)] was prepared in compliance with that section and shall be
retained as provided in [MCL 550.1506(4)].
(iii) That a provider class plan described in subparagraph (i) or (ii) was not
prepared in compliance with [MCL 550.1511(1)] or [MCL 550.1513(2)(a)],
respectively, and shall not be retained as provided in [MCL 550.1506(4)]. In this
case, the hearing officer shall order the corporation to prepare and submit a
provider class plan as provided in subsection (4). Detailed findings must
accompany the determination made by the hearing officer pursuant to this
subdivision.
If the IHO reverses a determination report under MCL 550.1515(3)(b)(iii), BCBSM must submit
an amended PCP within 180 days of the IHO's determination. MCL 550.1515(4). The IHO then
evaluates this PCP to ensure that it "substantially achieves the goals of [BCBSM] as provided in
[MCL 550.1504]." Id.
C. Related Litigation
Plaintiffs' original displeasure with BCBSM arose from its practice of reimbursing
freestanding, or "independent," physical therapy clinics (IPTs) at a lower rate than hospitalaffiliated, or "outpatient," physical therapy clinics (OPTs). In 1996, plaintiffs sued BCBSM in
the Wayne Circuit Court, challenging BCBSM's 1994 rehabilitation therapy PCP (RTPCP)7 and
seeking (1) a declaratory judgment that differential reimbursements violated the Act and (2)
damages because these differential reimbursement rates constituted a tortious interference with
plaintiffs' business interests. The trial court granted summary disposition in favor of BCBSM.
In the same month, plaintiffs also sued the Commissioner in the Ingham Circuit Court, seeking a
7
This PCP applied to IPTs only. OPTs operated under a different PCP that reimbursed them at
higher levels.
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declaratory judgment that the Commissioner was required by the Act to seek modification of the
1994 RTPCP and injunctive relief compelling the Commissioner to issue a cease and desist order
against BCBSM for engaging in discriminatory reimbursement practices.8 The trial court
granted summary disposition in favor of the Commissioner because the Act "contained no
provision imposing on the Commissioner a duty to order that BCBSM immediately cease and
desist its allegedly discriminatory conduct, and . . . while plaintiffs previously had sought the
Commissioner's review of BCBSM's Rehabilitation Therapy provider class plan the requested
view was premature" for failure to exhaust administrative remedies. PT Today, Inc v Blue Cross
& Blue Shield of Michigan, unpublished opinion per curiam of the Court of Appeals, issued July
20, 2001 (Docket Nos. 211294, 211309, and 215795), slip op at 4 (PT Today I). Plaintiffs
appealed both decisions to this Court, which consolidated the appeals in PT Today I. While this
Court considered plaintiffs' appeals, plaintiffs claim to have discovered that BCBSM was
engaging in fraudulent billing practices aimed at reducing plaintiffs' market share. Plaintiffs
requested leave to supplement the record with evidence of "false claims" activities by BCBSM.
This Court denied plaintiffs' first and second motions to supplement the record.
This Court affirmed both circuit courts' grants of summary disposition in favor of
defendants. The Court affirmed the Wayne Circuit Court's grant of summary disposition in favor
of BCBSM because health care providers do not have standing to sue BCBSM directly for
alleged violations of the Act. Id. at 4. It likewise affirmed the Wayne Circuit Court's grant of
summary disposition in favor of BCBSM on plaintiffs' action for tortious interference with a
business interest because plaintiffs "failed to demonstrate that BCBSM improperly intended any
interference" or that BCBSM's conduct was "improper, that is illegal, unethical, or fraudulent . . .
." Id. at 5. The Court then affirmed the Ingham Circuit Court's decision because plaintiffs had
failed to exhaust their administrative remedies under the part 5 PCP review process. Id. at 6-7,
citing Genesis Ctr, PLC v Financial & Ins Services Comm'r, 246 Mich App 531; 633 NW2d 834
(2001). Finally, this Court ruled that "'the commissioner had no clear legal duty under the [Act]
to issue a cease and desist order and because the statutory review proceedings present an
alternate and adequate remedy.'" Id. at 8, quoting Genesis Ctr, supra at 546.
While PT Today I was playing out, plaintiffs sought administrative relief through
the part 5 PCP review process. In 1997, BCBSM filed a new rehabilitation therapy PCP (the
1997 PCP), which again reimbursed IPTs at a lower rate than OPTs.9 In accord with the
Commissioner's limited power of initial review under MCL 550.1506(2), the Commissioner
retained the PCP. Upon request by plaintiffs and a related IPT organization, the Commissioner
evaluated the PCP under MCL 550.1509. The Commissioner's determination report concluded
that "BCBSM 'generally met' the access goal" and "did not meet the quality of care and cost
goals, but [this] failure was reasonable." Michigan Physical Therapy Ass'n, Inc v Ins Comm'r,
8
The Attorney General had filed a related complaint against BCBSM in the Ingham Circuit
Court. The trial court granted summary disposition in favor of BCBSM, and the Attorney
General did not appeal.
9
The parties refer to the separate PCP for OPTs as the "Physical Therapy PCP."
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unpublished opinion per curiam of the Court of Appeals, issued April 23, 2003 (Docket Nos.
230016 and 230017), slip op at 3 (PT Today II). Plaintiffs then appealed to the IHO under MCL
550.1515.
During one of the hearings before the IHO, BCBSM gave the Commissioner and
plaintiffs a copy of a proposed modified PCP for IPTs; BCBSM claims that this modified PCP
was drafted to address some of the Commissioner's concerns in the July 1999 determination and
order.10 BCBSM required many IPTs to accept the new provider agreement that accompanied
the modified PCP. Plaintiffs protested these changes, arguing that BCBSM was forcing them to
work under terms that violated the IHO's order. The Commissioner and the Attorney General
did not stop BCBSM's renegotiation of these agreements.
In August 2000, the IHO reversed the Commissioner's determination and order,
concluding that the 1997 PCP failed to meet the Act's goals and therefore should "not be
retained." In particular, the IHO found that the PCP did not meet the statutory goals concerning
costs, quality, and access because it favored higher-priced OPTs and reduced quality of care by
restricting convenient access to the 29 Michigan counties without OPTs. Additionally, the IHO
found that the four- to eightfold reimbursement disparity between IPTs and OPTs was
unlawfully discriminatory. Consequently, the IHO ordered BCBSM to prepare a remedial PCP
to comply with his order within 180 days. The Commissioner appealed to this Court. Shortly
thereafter, plaintiffs filed a separate suit in the Ingham Circuit Court, which is the instant case
and which will be discussed at length in part I(D) of this opinion. In the meantime, this Court
stayed the IHO's order. In April 2003, this Court vacated the IHO's order in PT Today II. It
reversed the IHO's determination and order on two grounds. First, it ruled that the IHO had
exceeded his scope of review when he found that the Commissioner's "'determination order must
be reversed because the provider class plan was not prepared in compliance with the act.'" PT
Today II, supra, slip op at 4. Rather, the Court, concluded, "the IHO's authority in this case is
limited to reviewing the [Commissioner's] determination report regarding the relevant statutory
goals." Id. Second, this Court found that the IHO had misinterpreted the scope of the
Commissioner's review of a PCP under MCL 550.1509 and had failed to accord the
Commissioner's determination report proper deference.11 Id. at 6-7.
10
All parties agree that this modified PCP did not end the PCP review process or address
plaintiffs' concerns regarding differential reimbursement to IPTs and OPTs. Additionally, the
modified PCP included provider agreements that required IPTs to earn Medicare certification,
which plaintiffs claim was no longer required under Medicare.
11
The Court stated:
The [Commissioner's] determination should not be disturbed unless it is
clearly wrong. However, despite the IHO's reference to this standard, we
conclude that his opinion does nothing to show that the [Commissioner's] analysis
regarding the statutory goals was clearly wrong, but merely indicates that the
[Commissioner] did not consider any impact of the differential in payment
between hospital and non-hospital physical therapy providers. . . . In essence the
(continued…)
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D. The Instant Case
In January 2001, plaintiffs filed a voluminous complaint against the Commissioner in the
Ingham Circuit Court. While plaintiffs requested various forms of relief and alleged many
individual violations of the Act, the gravamina of the complaints were that (1) the Commissioner
wrongfully acquiesced to the 2000 modified PCP and (2) the Commissioner was derelict in not
acting upon alleged violations of the Act by BCBSM.
Plaintiffs alleged that BCBSM and the Commissioner had circumvented the part 5 PCP
review process and thereby rendered plaintiffs' victory before the IHO meaningless. Plaintiffs
claimed that BCBSM's 2000 modified PCP contained provisions that the IHO explicitly found to
be contrary to the Act's goals and contended that, if BCBSM is able to file a "modified" PCP that
is essentially the same as the one a provider group challenges under MCL 550.1515, BCBSM
could perpetually avoid an adverse judgment. This, they claimed, vitiated the part 5 review
process, violated the Act, and infringed on plaintiffs' due process rights.
Plaintiffs further alleged that BCBSM encouraged and created fraudulent reimbursement
schemes in which IPTs were classified as OPTs so that BCBSM could give "bonus"
reimbursements to hospitals that were in fact unaffiliated with the IPTs. Further, they posited,
the Commissioner wrongfully ignored evidence plaintiffs presented regarding these crimes.
Plaintiffs reasoned that, as a monopoly, BCBSM had an incentive to pay these "bonus"
reimbursements because higher costs translate into higher revenues for monopolies.
Additionally, plaintiffs claimed that BCBSM favored hospital-centered care and therefore
wanted to remove IPTs from the market; these schemes supposedly furthered that goal.
Plaintiffs sought declaratory and injunctive relief for both of these grievances.
Six months into the litigation, the trial court joined BCBSM as a defendant by stipulation
of plaintiffs and the Commissioner. Plaintiffs filed a second amended complaint that added
requests for a declaratory judgment and damages from BCBSM for tortious interference. For
eight months, the lawsuit was at a standstill as BCBSM made two failed interlocutory appeals
and the parties stayed proceedings while they awaited rulings from this Court in PT Today II.
In April 2003, this Court issued the opinion in PT Today II. As discussed in part I(C) of
this opinion, this Court vacated the IHO's order, which meant that the 1997 PCP was again
"retained." In July 2004, plaintiffs moved to join the Attorney General to compel him to
investigate BCBSM's alleged conduct, and requested leave to file a third amended complaint
adding their complaints against the Attorney General and addressing this Court's ruling in PT
Today II. The trial court denied plaintiffs' motions because the amended complaint requested the
same relief and added only futile claims against the Attorney General. In November 2004, 35
months after the initiation of the lawsuit, the trial court granted summary disposition in favor of
the Commissioner and BCBSM for numerous reasons identified in part III of this opinion. We
now consider plaintiffs' appeal.
(…continued)
IHO substituted his fact finding in derogation of the [Commissioner's] expertise.
[PT Today II, supra, slip op at 7.]
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II. Standard of Review
A trial court's decision granting summary disposition is reviewed de novo to determine
whether the prevailing party was entitled to judgment as a matter of law. Allen v Keating, 205
Mich App 560, 562; 517 NW2d 830 (1994). When reviewing a motion under MCR
2.116(C)(10), the court must examine the documentary evidence presented below and, drawing
all reasonable inferences in favor of the nonmoving party, determine whether a genuine issue of
material fact exists. Quinto v Cross & Peters Co, 451 Mich 358, 362; 547 NW2d 314 (1996). A
question of fact exists when reasonable minds could differ regarding the conclusions to be drawn
from the evidence. Glittenberg v Doughboy Recreational Industries (On Rehearing), 441 Mich
379, 398-399; 491 NW2d 208 (1992).
Questions of statutory interpretation are also reviewed de novo. Heinz v Chicago Rd
Investment Co, 216 Mich App 289, 295; 549 NW2d 47 (1996). Questions involving the proper
interpretation of a contract or the legal effect of a contractual clause are likewise reviewed de
novo. Rory v Continental Ins Co, 473 Mich 457, 464; 703 NW2d 23 (2005).
III. ANALYSIS
A. Mootness
Plaintiffs appeal the denial of declaratory relief (which included a declaration that the
Commissioner's implementation of the PCP review process violated both the Act and plaintiffs'
constitutional right to procedural due process) for the reason that their claim was moot. In PT
Today II, this Court vacated the IHO's order invalidating the 1997 PCP with which the 2000
modified PCP allegedly conflicts. We conclude that the elimination of any contradiction
between the Commissioner's determination report and the IHO's order removed the basis of the
controversy on which plaintiffs sought declaratory judgment. Consequently, the trial court
exercised sound discretion in declining to grant declaratory relief to plaintiffs.
MCR 2.605 governs declaratory judgments. The language of MCR 2.605 is permissive
rather than mandatory; thus, it rests with the sound discretion of the court whether to grant
declaratory relief. City of Lake Angelus v Aeronautics Comm, 260 Mich App 371, 377 n 7; 676
NW2d 642 (2004). MCR 2.605(A) empowers a circuit court to issue a declaratory judgment in
"a case of actual controversy . . . ."12 The existence of an "actual controversy" is a condition
12
MCR 2.605(A) provides, in relevant part:
(1) In a case of actual controversy within its jurisdiction, a Michigan court
of record may declare the rights and other legal relations of an interested party
seeking a declaratory judgment, whether or not other relief is or could be sought
or granted.
(2) For the purpose of this rule, an action is considered within the
jurisdiction of a court if the court would have jurisdiction of an action on the
(continued…)
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precedent to the invocation of declaratory relief. Citizens for Common Sense in Gov't v Attorney
General, 243 Mich App 43, 54-55; 620 NW2d 546 (2000). As such, a court may not "decide
moot questions in the guise of giving declaratory relief," Dep't of Social Services v Emmanuel
Baptist Preschool, 434 Mich 380, 470; 455 NW2d 1 (1990) (opinion by Boyle, J.), because moot
cases "present[] only abstract questions of law that do not rest upon existing facts or rights," B P
7 v Bureau of State Lottery, 231 Mich App 356, 359; 586 NW2d 117 (1998). However, in the
event the moot issue "is one of public significance that is likely to recur, yet evade judicial
review," a court may then grant injunctive relief. Federated Publications, Inc v City of Lansing,
467 Mich 98, 112; 649 NW2d 383 (2002).
We conclude that this Court's decision in PT Today II eliminated the conflict on which
plaintiffs based their request for declaratory judgment. Plaintiffs concede that the 2000 modified
PCP does not conflict with the 1997 PCP, which again became "retained" when this Court
vacated the IHO's order in PT Today II. Consequently, the question of the modified PCP's
validity, as well as that of the PCP review process, is hypothetical; in order to reach a fact
pattern similar to that which preceded this Court's ruling in PT Today II, the following must
occur:
(1) Plaintiffs would have to challenge a retained PCP;
(2) the Commissioner would have to decide to retain the PCP;
(3) plaintiffs would have to appeal to an IHO;
(4) plaintiffs would have to win before the IHO;
(5) BCBSM would have to file a modified PCP that contradicted the IHO's order;
(6) the Commissioner would have to either choose to not act against the modified PCP or
approve it;
(7) the Commissioner and BCBSM would both have to choose to not appeal their losses
before the IHO, or one of the two would have to lose on appeal; and
(8) the Commissioner would have to leave the contradictory modified PCP in place.
These contingencies have not recurred and are unlikely to recur. For example, in light of past
experience and the limited scope of review of the Commissioner and an IHO in the PCP review
process, BCBSM's physical therapy PCP is highly unlikely to be ordered "not retained."
Additionally, it seems unlikely that the Commissioner or BCBSM will delay as long as they did
in the instant case before requesting a stay of an IHO's order. Importantly, their delay in
requesting a stay allowed plaintiffs to complain that, in the interim between the IHO's order and
the stay, BCBSM ignored the order and thus sidestepped the part 5 PCP review process.
(…continued)
same claim or claims in which the plaintiff sought relief other than a declaratory
judgment.
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This does not end our inquiry on the issue of declaratory relief. As noted above, a trial
court may, in its sound exercise of discretion, grant declaratory relief if the moot issue "is one of
public significance that is likely to recur, yet evade judicial review." Federated Publications,
supra at 112. Although no party raised the authority on appeal, we note that in Lake Angelus,
this Court ruled that, while an individual opposing a local ordinance banning the use of seaplanes
on a lake had not yet initiated the administrative process that might lead to the promulgation of
an Aeronautics Commission rule overriding that ordinance, there was a sufficient case in
controversy, given that a declaratory judgment adverse to the individual would avoid the need to
engage in the lengthy and expensive administrative process. Id. at 376. The Court was willing
to so rule in part because of this individual's perseverant challenge to the city's ordinance, which
would seem similar to the persistence of plaintiffs in this case after even a brief survey of the
trial record and voluminous related litigation. See id. However, in Lake Angelus, this Court
affirmed the trial court's grant of a declaratory judgment as properly within its discretion, noting
that MCR 2.605 indicates that a court "may" grant declaratory relief. Id. at 377 n 7. Under the
deferential standard of review outlined in MCR 2.605, a reviewing court must affirm the trial
court's decision even if a reasonable person might differ with the trial court in its decision to
withhold relief. Thus, despite the likelihood that plaintiffs will attempt to re-create the factual
and legal situation meriting legal relief on this issue, much like in Lake Angelus, we will not
upset the trial court's sound exercise of discretion. See MCR 2.605; Lake Angelus, supra at 377
n 7.
B. Constitutional Due Process Violations
Plaintiffs next allege that the trial court interpreted the part 5 PCP review process in a
manner that denied them their constitutional rights to due process. We disagree. In addition to
noting that these claims were mooted by this Court's decision in PT Today II, we conclude that
plaintiffs failed to plead a prima facie case for denial of due process.
As discussed in part III(A) of this opinion, we conclude that any claim regarding
BCBSM circumventing the IHO's order was mooted by PT Today II. As such, plaintiffs ask this
Court to resolve a weighty constitutional question in the abstract, which the Supreme Court has
cautioned against in Council of Orgs & Others for Ed About Parochiaid, Inc v Governor 455
Mich 557, 568; 566 NW2d 208 (1997).
Plaintiffs correctly note that the United States Supreme Court "'consistently has held that
some form of hearing is required before an individual is finally deprived of a property interest.'"
Dow v Michigan, 396 Mich 192, 205 n 20; 240 NW2d 450 (1976), quoting Mathews v Eldridge,
424 US 319, 333; 96 S Ct 893; 47 L Ed 2d 18 (1976). For the purposes of a procedural due
process analysis, the United States Supreme Court has turned to state law when determining
whether a plaintiff holds a property interest:
The Fourteenth Amendment's procedural protection of property is a
safeguard of the security of interests that a person has already acquired in specific
benefits. . . .
* * *
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. . . To have a property interest in a benefit, a person clearly must have
more than an abstract need or desire for it. He must have more than a unilateral
expectation of it. He must, instead, have a legitimate claim of entitlement to it. It
is a purpose of the ancient institution of property to protect those claims upon
which people rely in their daily lives, reliance that must not be arbitrarily
undermined. It is a purpose of the constitutional right to a hearing to provide an
opportunity for a person to vindicate those claims. [Bd of Regents of State
Colleges v Roth, 408 US 564, 576-577; 92 S Ct 2701; 33 L Ed 2d 548 (1972)
(emphasis added).]
If a court finds that a plaintiff was indeed deprived of property, it must then determine what
process is due to him or her; to do so, the court considers (1) the private interest implicated, (2)
the government interest implicated, and (3) the risk of error inherent in current procedures
compared to the probability that alternative procedures would reduce error. See Ingraham v
Wright, 430 US 651; 97 S Ct 1401; 51 L Ed 2d 711 (1977).
In this case, plaintiffs' purported property interests are the right to conduct business in the
state of Michigan and, even vaguer, the right to an unspecified market share in the physical
therapy market. Plaintiffs fail to show any legally enforceable interest based on their
expectancies of business with BCBSM: they are based neither in contract nor statute. As such,
they are mere "unilateral" expectancies, and therefore do not rise to the level of property interests
for the purposes of a procedural due process analysis.13 Roth, supra at 577. By stating in a
conclusory fashion that they have a legally enforceable property interest, plaintiffs leave it to this
Court to discover and rationalize the basis for their claims. As such, they have abandoned the
argument on appeal. Wilson v Taylor, 457 Mich 232, 243; 577 NW2d 100 (1998).
Indeed, even if plaintiffs were able to establish that they were deprived of property by the
Commissioner's actions, they likely would not establish that they were due any more process
than is currently available under the Act. In fact, plaintiffs still have additional remedies beyond
the appeal of the 1997 PCP. For example, they may still challenge the 2000 modified PCP,
during which challenge there would be an evidentiary and hearing process as outlined in the Act.
That said, plaintiffs abandoned this element of the procedural due process analysis entirely.
13
The Act, if anything, provides for a relatively wide variability in how BCBSM's PCPs affect
market share. The only "rights" afforded plaintiffs by part 5 of the Act are purely procedural.
These include (1) the right to comment during the review of a PCP, MCL 550.1505 and
550.1509(4)(e); (2) the right to comment during the review of a modified PCP, MCL
550.1508(2); (3) the right to appeal the Commissioner's decision to retain or not retain a PCP,
MCL 550.1515(1); and (4) the right to comment during the preparation of a PCP pursuant to an
IHO's order, MCL 550.1515(4). Indeed, under MCL 550.1509(4)(e), no particular provider is
even entitled to a review. Rather, BCBSM is merely required to consult with at least one
organization representing the provider group. See MCL 550.1505(1). At the trial level,
plaintiffs claimed that BCBSM failed to notify them of the modified PCP; however, plaintiffs
abandoned this argument on appeal.
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Plaintiffs' briefs and pleadings never weighed the competing interests of the providers, BCBSM,
and the Commissioner in their challenge to the Commissioner's interpretation of the PCP review
process. Again, the appellants have merely announced their position and have left it to this
Court to discover and rationalize the basis for their claims. Therefore we consider this element
of their appeal abandoned. Wilson, supra at 243.
C. Mandamus Against the Commissioner
Plaintiffs next claim that the trial court erred in granting summary disposition in favor of
the Commissioner in relation to plaintiffs' prayer for a writ of mandamus when plaintiffs
submitted affidavits alleging that (1) BCBSM participated in false claims activities, (2) that these
activities had ended, and (3) that the Commissioner, after reviewing plaintiffs' complaints, chose
not to engage in such enforcement actions. We disagree.
A trial court's decision whether to issue a writ of mandamus is reviewed for an abuse of
discretion, Baraga Co v State Tax Comm, 466 Mich 264, 268-269; 645 NW2d 13 (2002), but any
underlying issue of statutory interpretation is a question of law, which is reviewed de novo on
appeal,14 In re MCI Telecom Complaint, 460 Mich 396, 413; 596 NW2d 164 (1999). Mandamus
will not lie to control the exercise of discretion or for the purpose of reviewing, revising, or
controlling the exercise of discretion of administrative bodies, but will lie to require a body or an
officer charged with a duty to take action on the matter. Lee v Macomb Co Bd of Comm'rs, 235
Mich App 323, 332-333; 597 NW2d 545 (1999), rev'd on other grounds 464 Mich 726 (2001).
While plaintiffs do not precisely state under which provisions they seek mandamus
against the Commissioner,15 there are two candidates in part 6 of the Act under which the
Commissioner may possibly be compelled to enforce the Act against BCBSM. First, MCL
550.1603(4) provides that "[i]f it appears . . . . that this act or any other law of this state has been
violated, the commissioner immediately shall report the violation to the attorney general in
writing." (Emphasis added.) Second, MCL 550.1605(1) provides:
Upon due notice and an opportunity of evidentiary hearing pursuant to the
administrative procedures act, the commissioner may suspend or limit the
certificate of authority of a health care corporation if the commissioner
determines that any of the following circumstances exist:
(a) The health corporation does not meet the requirements of this act
respecting the adequacy of its reserves.
14
Concluding that plaintiffs' challenge to the PCP review process is moot does not dispose of the
instant issue. PT Today II did not concern plaintiffs' allegations of false claims activities by
BCBSM, for which plaintiffs request a writ of mandamus requiring particular enforcement
activities by the Commissioner and the Attorney General.
15
The Court need not have located these statutes, because plaintiffs fail to cite proper authority
on appeal. Silver Creek Twp v Corso, 246 Mich App 94, 99; 631 NW2d 346 (2001).
-13-
(b) The health care corporation is using methods or practices in the
conduct of its business which render further transactions hazardous or injurious to
subscribers of the corporation or the public.
(c) The health care corporation refuses or fails to comply with this act or
with a lawful order of the commissioner. [Emphasis added.]
The Commissioner fully complied with MCL 550.1603(4) by reporting to the Attorney
General in writing both alleged claims "schemes" identified by plaintiffs. Meanwhile, MCL
550.1605(1) indicates that the Commissioner may limit or revoke the certificate of authority for
BCBSM. The plain language of the provision gives the Commissioner discretion; as such, a writ
of mandamus will not lie. Lee, supra at 332-333. Indeed, this case illustrates precisely why a
trial court should not grant mandamus to require a particular exercise of discretion: Plaintiffs
asked the court to impose particular enforcement priorities, including staff allocations, on the
Commissioner and the Attorney General. These decisions properly fall within the ambit of the
political branches of government. Moreover, we agree with defendants that, at most, plaintiffs'
evidence shows only that false claims activities occurred in the past, while defendants' evidence
shows that any illegal activity has ended. As such, it is unclear what relief would be appropriate.
We conclude that the trial court did not abuse its discretion in denying plaintiffs' requests for
writs of mandamus and, therefore, should be affirmed.
D. Joinder of the Attorney General
Plaintiffs next appeal as an abuse of discretion the trial court's denial of their motion to
join the Attorney General under MCR 2.205 or 2.206. If the Attorney General had been joined,
plaintiffs would have sought a declaratory judgment and a writ of mandamus against the
Attorney General, both compelling the Attorney General to engage in particular enforcement
actions against BCBSM. We disagree, concluding that all of plaintiffs' proposed claims against
the Attorney General fail as a matter of law and, as such, joining the Attorney General would
neither have permitted the court to render complete relief nor promoted the convenient
administration of justice.
This court reviews a trial court's rulings on joinder for an abuse of discretion. Hofmann v
Auto Club Ins Ass'n, 211 Mich App 55, 95; 535 NW2d 529 (1995). An abuse of discretion exists
when the court's decision is so violative of fact and logic as to constitute a perversity of will or a
defiance of judgment. Messenger v Ingham Co Prosecutor, 232 Mich App 633, 647; 591 NW2d
393 (1998). Trial courts must consider the following when ruling on a party's motion for
compulsive joinder:
MCR 2.205(A) states that joinder is required of all parties "having such
interests in the subject matter of an action that their presence in the action is
essential to permit the court to render complete relief" (emphasis added). As this
Court found in Troutman v Ollis, 134 Mich App 332, 339-340; 351 NW2d 301
(1984), where a party's presence in the action is not essential to the court
rendering complete relief, factors such as judicial economy or avoidance of
multiple litigation are not enough to compel joinder. [Hofmann, supra at 96.]
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On the other hand, MCR 2.206(A)(2) provides:
All persons may be joined in one action as defendants
(a) if there is asserted against them jointly, severally, or in the alternative,
a right to relief in respect of or arising out of the same transaction, occurrence, or
series of transactions or occurrences and if a question of law or fact common to
all of the defendants will arise in the action; or
(b) if their presence in the action will promote the convenient
administration of justice. [Emphasis added.]
1. Compulsory Joinder
In regard to plaintiffs' attempt to join the Attorney General as a necessary party, we
conclude that the trial court did not abuse its discretion because the Attorney General's presence
was not "essential to permit the court to render complete relief . . . ." MCR 2.205(A). Plaintiffs
emphasize that the Attorney General may engage in enforcement actions against BCBSM
pursuant to MCL 550.1603(4), as well as compel BCBSM to comply with the Act through an ex
parte order from the Ingham Circuit Court under MCL 550.1603(5). However, the trial court
need not have joined the Attorney General to reach plaintiffs' desideratum: the end of the
alleged false claims activities. In the absence of the Attorney General, the trial court could have
issued a declaratory judgment that stated that BCBSM was engaging in ongoing violations of
MCL 550.1408, which prohibits false claims activities. If the trial court had issued such a
judgment, the Commissioner might have considered penalizing BCBSM pursuant to MCL
550.1605. Also, without joining the Attorney General, the trial court could have compelled the
Commissioner to consider plaintiffs' allegations of false claims activities by BCBSM (if the
Commissioner had not already fulfilled this duty pursuant to MCL 550.1603). Finally, as
discussed below, plaintiffs' requests for mandamus against the Attorney General would have
failed as a matter of law; consequently, joining the Attorney General would have granted
plaintiffs no additional relief. In summary, adding the Attorney General was not "essential to
permit the court to render complete relief . . . ." MCR 2.205 (emphasis added).
2. Permissive Joinder
In regard to plaintiffs' attempt to permissively join the Attorney General under MCR
2.206, we conclude that the trial court did not abuse its discretion because plaintiffs' requests for
a writ of mandamus and declaratory relief against the Attorney General fail as a matter of law.
MCR 2.206(A)(2)(b).
a. Writ of Mandamus
Plaintiffs' request for mandamus would have this Court control the exercise or direction
of the Attorney General's discretion. As such, an action for mandamus against the Attorney
General would not lie. Lee, supra at 332-333; In re MCI Telecom Complaint, supra at 442-443.
Consequently, this potential cause of action does not justify permissive joinder. MCR
-15-
2.206(A)(2). The Attorney General has two sources of authority to enforce the Act. First, the
Attorney General may seek an order compelling BCBSM to comply with the Act:
Upon the request of the commissioner, the attorney general may petition
for, and the circuit court may issue, an ex parte order from the circuit court
directing a corporation to comply with this section. [MCL 550.1603(5) (emphasis
added).]
Second, the Attorney General may seek civil or criminal enforcement of the Act against any
person:
If it appears . . . . that this act or any other law of this state has been
violated, the commissioner immediately shall report the violation to the attorney
general . . . . The attorney general shall then take action on the alleged violation,
as the facts warrant. [MCL 550.1603(4) (emphasis added).]
While MCL 550.1603(4) and (5) arguably require the Attorney General to at least consider
allegations brought to him or her, defendants offer unchallenged evidence that the Commissioner
and the Attorney General indeed considered all of plaintiffs' allegations. Pursuant to MCL
550.1603(4), the Commissioner referred plaintiffs' allegations regarding the false claims at Kern
Hospital to the Attorney General. The Chief Deputy Attorney General performed at least a
perfunctory investigation by demanding a written response from BCBSM "explaining the past
and present relationship between BCBSM and Kern Hospital and the details of any settlement or
other resolution between BCBSM and Kern Hospital involving these allegations." BCBSM
responded, saying that, after discovering through its internal audit process that it had overpaid
Kern Hospital by over $3 million, it exacted a settlement of about $1.8 million before Kern
Hospital was sold in October 2003. The Health Care Fraud Division of the Attorney General's
office also communicated with the United States Attorney's office in Detroit for further
investigation. When the United States Attorney's office informed the Attorney General that it
was already investigating the matter, the Attorney General chose to not initiate an overlapping
investigation. The Attorney General later informed the Commissioner and plaintiffs that, on the
basis of its investigations and communications with the United States Attorney's office, there
was "insufficient basis to pursue criminal charges arising out of the allegations referred to us by
[the Office of Financial and Insurance Services]." The foregoing shows that the Attorney
General investigated the Kern Hospital scheme, thus fulfilling any duty under the Act to consider
plaintiffs' referrals. In regards to the alleged "Grand Rapids schemes," BCBSM offered an
affidavit from its plan administrator, testifying that BCBSM had revoked the provider numbers
of the physical therapists who were allegedly mischaracterizing their provider status in Grand
Rapids. Plaintiffs' affidavits do not controvert this testimony; instead, they assert that false
claims activities occurred in the past and that BCBSM was sending improper reimbursements to
one affiant, apparently to harass her into silence. As such, plaintiffs fail to show that there is any
ongoing activity in Grand Rapids that the Attorney General could stop.
Plaintiffs also requested a writ of mandamus compelling the Attorney General to initiate
enforcement proceedings against BCBSM and the perpetrators of the false claims activities it
discovered. However, they fail to establish that the Attorney General had a "clear legal duty" to
engage in these specific enforcement actions pursuant to In re MCI Telecom Complaint, supra at
-16-
442-443. As discussed above, MCL 550.1603(5) indicates that the Attorney General "may" seek
an ex parte order from the Ingham Circuit Court, and MCL 550.1603(4) indicates that the
Attorney General "shall" pursue other actions "as the facts warrant." Instead of asking that the
Attorney General investigate violations of Michigan law, plaintiffs asked the trial court to force
the Attorney General to adopt plaintiffs' enforcement priorities and to engage in specific
enforcement actions against BCBSM. While a reasonable person could disagree with the
Attorney General's enforcement priorities and evaluation of plaintiffs' complaints, the mandamus
standard is not a vehicle for a court to put itself in a government official's shoes. Lee, supra at
332-333. Rather, a trial court must decline to issue a writ of mandamus to compel a particular
exercise of discretion. Consequently, plaintiffs' request for mandamus would not afford them
additional relief and therefore would not justify joinder of the Attorney General to "promote the
convenient administration of justice." MCR 2.206(A)(2)(b).
b. Declaratory Judgment
Plaintiffs also seek to join the Attorney General so they may request a declaratory
judgment that the Attorney General must pursue enforcement actions against BCBSM and its
coconspirators in the Kern Hospital and Grand Rapids schemes. We conclude that the cessation
of the false claims activities in both of the schemes alleged by plaintiffs likewise ended any
"actual controversy." Without an "actual controversy," the trial court lacked jurisdiction to
consider plaintiffs' request for declaratory relief. Plaintiffs' request for declaratory relief would
not have afforded them additional relief and therefore did not justify joinder of the Attorney
General to "promote the convenient administration of justice." MCR 2.206(A)(2)(b).
MCR 2.605(A)(1) empowers the circuit court to issue a declaratory judgment in "a case
of actual controversy . . . ." The existence of an actual controversy is a condition precedent to
invocation of declaratory relief. Citizens for Common Sense in Gov't, supra at 54-55. An actual
controversy exists
where a declaratory judgment is necessary to guide a plaintiff 's future conduct in
order to preserve the plaintiffs' legal rights. "[W]hat is essential to an 'actual
controversy' under the declaratory judgment rule is that plaintiff plead and prove
facts which indicate an adverse interest necessitating a sharpening of the issues
raised." Generally, where the injury sought to be prevented is merely
hypothetical, a case of actual controversy does not exist. [Id. at 55 (citations
omitted).]
Moreover, the language of MCR 2.605 is permissive rather than mandatory; thus, it rests with
the sound discretion of the court whether to grant declaratory relief. Lake Angelus, supra at 377
n 7.
Plaintiffs' request for declaratory relief fails under each of the factors listed above.
Citizens for Common Sense in Gov't, supra at 55. First, plaintiffs failed to show how a
declaratory judgment in their favor in regard to the Attorney General's duties under part 6 of the
Act would "guide [their] future conduct." Id. Plaintiffs' only recourse under the Act against
false claims is to refer their allegations to the Commissioner and the Attorney General; there is
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no viable alternative course to preserve their rights. See MCL 550.1603. Second, plaintiffs have
not shown that they have any right to a particular share of the rehabilitation therapy market or
BCBSM's physical therapy business, and thus they do not have "'an adverse interest necessitating
a sharpening of the issues raised.'" Citizens for Common Sense in Government, supra at 55
(citation omitted). Third, BCBSM's uncontroverted evidence of the cessation of false claims
activities renders injuries to plaintiffs' business expectancies "merely hypothetical." Id. We
therefore affirm the trial court's order denying compulsory and permissive joinder of the
Attorney General as a defendant.
E. Amendment of Plaintiffs' Complaint
Plaintiffs allege that the trial court abused its discretion in denying them leave to file a
third amended complaint that (1) added the Attorney General as a party for the purposes of
seeking declaratory relief and a writ of mandamus compelling the Attorney General to engage in
particular enforcement activities, (2) added new factual allegations regarding the Kern Hospital
scheme, and (3) added new arguments interpreting this Court's ruling in PT Today II as it related
to plaintiffs' challenge to the Commissioner's interpretation of the part 5 PCP review process.
We conclude that the trial court exercised sound discretion in denying plaintiffs leave to file their
third amended complaint in regard to the Attorney General because such an amendment would
have been futile. We further conclude that, while the trial court erred in denying plaintiffs leave
to file a more limited amendment that addresses this Court's decision in PT Today II and newly
discovered information about the Kern Hospital scheme, any abuse of discretion by the trial
court on this matter constituted harmless error because nothing in the amended complaint would
have averted summary disposition.
The grant or denial of leave to amend pleadings is within the trial court's discretion.
Weymers v Khera, 454 Mich 639, 654; 563 NW2d 647 (1997). But that discretion is not
boundless; the trial court must make findings regarding whether justice is served by the
amendment. Ben P Fyke & Sons v Gunter Co, 390 Mich 649, 658; 213 NW2d 134 (1973);
Terhaar v Hoekwater, 182 Mich App 747, 751; 452 NW2d 905 (1990). This Court will not
reverse a trial court's decision regarding leave to amend unless it constituted an abuse of
discretion that resulted in injustice. See Cassibo v Bodwin, 149 Mich App 474, 477; 386 NW2d
559 (1986). An abuse of discretion exists if the result is so palpably and grossly violative of fact
and logic that it evidences a perversity of will, a defiance of judgment, or the exercise of passion
or bias. Franchino v Franchino, 263 Mich App 172, 193; 687 NW2d 620 (2004). There is no
injustice if the proceedings would have reached the same result if the trial court had not denied a
party leave to amend its pleadings. Cassibo, supra at 477.
The rules pertaining to the amendment of pleadings16 are designed to facilitate
amendment except when prejudice to the opposing party would result; amendment is generally a
matter of right rather than grace. Ben P Fyke, supra at 659. Thus, a motion to amend should
ordinarily be denied only for particularized reasons, including undue delay, bad faith or a
16
See MCR 2.118(A).
-18-
dilatory motive, repeated failure to cure deficiencies by amendments previously allowed, undue
prejudice to the opposing party, or futility. Weymers, supra at 658; Franchino, supra at 189190. The trial court must specify its reasons for denying leave to amend, and the failure to do so
requires reversal unless the amendment would be futile. See Franchino, supra at 190.
The trial court denied plaintiffs' leave to amend their complaint because their
amendments would be futile. An amendment would be futile if (1) ignoring the substantive
merits of the claim, it is legally insufficient on its face, Hakari v Ski Brule, Inc, 230 Mich App
352, 355; 584 NW2d 345 (1998); (2) it merely restates allegations already made; or (3) it adds a
claim over which the court lacks jurisdiction, Lane v KinderCare Learning Centers, Inc, 231
Mich App 689, 697; 588 NW2d 715 (1998). In this case, plaintiffs' proposed claims against the
Attorney General constituted the larger share of the amendments in their proposed third amended
complaint. These complaints would have failed as a matter of law, as discussed in part III(D) of
this opinion. Consequently, these amendments were "'legally insufficient on [their] face'" and
did not justify amendment. Hakari, supra at 355, quoting Gonyea v Motor Parts Fed Credit
Union, 192 Mich App 74, 78; 480 NW2d 297 (1991).
Plaintiffs' proposed third amended complaint also included new pleadings regarding this
Court's decision in PT Today II as it related to their procedural due process claim against the
Commissioner, as well as additional facts to bolster their claims regarding the false claims
activities. MCR 2.118(E) provides that the court may, "on reasonable notice and on just terms,
permit the party to serve a supplemental pleading to state transactions or events that have
happened since the date of the pleading sought to be supplemented . . . ." In this case, all parties
anticipated changes related to the development of the PT Today II suit, and insofar as the
amendments related to developments in that suit, the trial court should have granted leave to
amend.17 MCR 2.118(E). Moreover, neither defendant was prejudiced by the amendments to
plaintiffs' pleadings in regards to PT Today II and the PCP review process, given that they
sought repeated stays pending this Court's decision—over plaintiffs' objections. As such, the
trial court abused its discretion in denying plaintiffs' leave to amend their complaint to reflect
this Court's decision in PT Today II.
However, this abuse of discretion did not constitute error requiring reversal because
nothing in the proposed amendments would have averted summary disposition, which the trial
court granted but one month later. See Cassibo, supra at 477. The trial court granted summary
disposition in favor of the Commissioner on plaintiffs' request for mandamus because, as a
matter of law, the trial court could not compel the Commissioner to exercise discretion in a
particular way, as plaintiffs desired. It ruled in favor of the Commissioner on plaintiffs' requests
for declaratory judgment because PT Today II mooted plaintiffs' procedural due process claims.
Plaintiffs' proposed amendments merely acknowledged this Court's decision in PT Today II and
17
While it does not appear to be the case from the trial record, we note that a trial court may not
let its view of the merits of the case affect its decision to grant or deny leave for amendment of
the pleadings. Commodities Export Co v Detroit, 116 Mich App 57, 71; 321 NW2d 842 (1982).
-19-
argued that plaintiffs still had a valid procedural due process claim. Even if the trial court had
granted plaintiffs leave to file these amendments, the trial court would have granted summary
disposition in favor of the Commissioner on plaintiffs' request for declaratory relief because
plaintiffs' pleadings failed to show that their claim was not moot. Id. In conclusion, we note that
the trial court erred in denying amendments to plaintiffs' complaint, but affirm because the trial
court's failure was harmless error.
F. Res Judicata and Plaintiffs' Tortious Interference Claims
Plaintiffs next appeal the trial court's order granting summary disposition in favor of
BCBSM on plaintiffs' claims of tortious interference with a business interest. We conclude that
the trial court erred in granting summary disposition based on the theory of res judicata because
plaintiffs' claims of tortious interference in PT Today I were premised on BCBSM's differential
reimbursement scheme, whereas plaintiffs' claims of tortious interference in the instant case are
premised on fraudulent billing activities, which were not part of the same transaction or
occurrence. Additionally, the doctrine of res judicata does not apply to this case because, after
exercising due diligence in trying to add the false claims tortious interference count to PT Today
I, plaintiffs were not allowed to do so.
The applicability of res judicata is a question of law that is reviewed de novo. Pierson
Sand & Gravel, Inc v Keeler Brass Co, 460 Mich 372, 379; 596 NW2d 153 (1999). A party's
claim is barred by the doctrine of res judicata when (1) the prior action was decided on the
merits, (2) the decree in the prior action was a final decision, (3) the matter contested in the
second case was or could have been resolved in the first, and (4) both actions involved the same
parties or their privies. See Baraga Co, supra at 269; Adair v Michigan, 470 Mich 105, 121; 680
NW2d 386 (2004).
In this case, plaintiffs correctly argue that, while their causes of action have the same
name in PT Today I and the instant case, they have distinct factual bases. Plaintiffs' tortious
interference claims in PT Today I were based on BCBSM's differential reimbursement of
hospital physical therapists and independent physical therapists. In the instant case, however,
plaintiffs argue that BCBSM is violating its own reimbursement scheme under the 1997 PCP and
the 2000 modified PCP, as well as MCL 550.1408.18 These transactions and occurrences are
removed from each other in time, subject matter, and legal basis. Moreover, they require
different factual proofs. In PT Today I, plaintiffs would have to have proved that the PCP was
discriminatory, that the Act proscribed discriminatory reimbursements, and that this
discrimination reduced plaintiffs' market share; in the instant case, plaintiffs must prove that
BCBSM knowingly promoted the mischaracterization of claims, that this mischaracterization
was unlawful, and that this mischaracterization reduced plaintiffs' market share. If different facts
or proofs would be required, res judicata does not apply; consequently, res judicata does not
18
Plaintiffs sometimes refer to this provision as the "False Claims Act."
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apply to the instant case. VanDeventer v Michigan Nat'l Bank, 172 Mich App 456, 464; 432
NW2d 338 (1988).
Additionally, plaintiffs convincingly argue that they were unable to litigate the instant
tortious interference claims in PT Today I. Plaintiffs claim (without challenge from defendants)
that they were not privy to the information on which they base the instant tortious interference
claims until PT Today I was already on appeal. Plaintiffs diligently attempted to reopen the
proceedings to introduce these new facts, but were barred from doing so by this Court.
Consequently, plaintiffs' tortious interference claims that arise out of BCBSM's alleged false
claims activities were neither actually litigated nor litigable after plaintiffs exercised reasonable
diligence. Therefore, they should not have been barred by the doctrine of res judicata. Adair,
supra at 121. Additionally, because these facts arose after PT Today I had reached this Court,
plaintiffs' claims would likely also be saved from res judicata because they are changed facts or
new facts. See In re Pardee, 190 Mich App 243, 248; 475 NW2d 870 (1991).
In conclusion, the trial court erred in dismissing plaintiffs' tortious interference claims on
the basis of the doctrine of res judicata. However, as discussed in parts III(G) and (H) of this
opinion plaintiffs' victory on this issue fails to rescue their tortious interference claims. As such,
we conclude that the trial court reached the right conclusion for the wrong reasons and should be
affirmed. Gleason v Dep't of Transportation, 256 Mich App 1, 3; 662 NW2d 822 (2003).
G. Standing and Plaintiffs' Tortious Interference Claims
Plaintiffs appeal the trial court's order granting summary disposition in favor of BCBSM
on the grounds that plaintiffs had no standing to bring a private cause of action against BCBSM
under the Act. We conclude that the trial court correctly granted summary disposition in light of
this Court's interpretation of the Act in BPS Clinical Laboratories v Blue Cross & Blue Shield of
Michigan (On Remand), 217 Mich App 687, 698; 552 NW2d 919 (1996).
This Court reviews rulings on motions for summary disposition de novo. Maiden v
Rozwood, 461 Mich 109, 118; 597 NW2d 817 (1999). Statutory interpretation, as a question of
law, is likewise reviewed de novo. Adams v Linderman, 244 Mich App 178, 184; 624 NW2d
776 (2000).
The trial court dismissed plaintiffs' claims of tortious interference with a business
relationship. The elements of tortious interference with a business relationship or expectancy are
(1) the existence of a valid business relationship or expectancy, (2) knowledge of the relationship
or expectancy by the interferer, (3) an intentional and wrongful interference inducing or causing
a breach or termination of the relationship or expectancy, and (4) resultant damage to the party
whose relationship or expectancy was disrupted. See Badiee v Brighton Area Schools, 265 Mich
App 343, 365-366; 695 NW2d 521 (2005). In this case, plaintiffs sought to establish the third
element of this cause of action, intentional and wrongful interference, with evidence that
BCBSM violated MCL 550.1408.
However, in BPS Clinical Laboratories, this Court definitively stated that the Act "does
not grant a health care provider the right to sue a health care corporation directly" and that
"[o]nly the Attorney General and the Insurance Commissioner are entitled to enforce the act
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directly against a health care corporation," pursuant to MCL 550.1619(2) and (3). BPS Clinical
Laboratories, supra at 698. The Court described the preemptive effects of the Act in detail:
The only private right of action directly against a health care corporation
authorized by the act is an action by a subscriber against a health care corporation
for damages. . . . Because this statute only explicitly allows a private right of
action by a subscriber, we conclude that no other private rights of action directly
against a health care corporation are authorized. See Williams v Coleman, 194
Mich App 606, 613; 488 NW2d 464 (1992). The relief sought by plaintiffs
regarding the enforcement of Act 350 is available through the procedure set forth
in MCL 550.1619(3) . . . . Plaintiffs may commence an action in the Ingham
Circuit Court to compel the Insurance Commissioner to enforce the act. [Id.
(emphasis added).]
MCL 550.1408 is part of the Act. By premising their claims on a violation of MCL 550.1408,
plaintiffs are in effect using a common-law cause of action as a vehicle to enforce the Act. We
have spoken definitively on this tactic: only subscribers and the Attorney General may sue
BCBSM for violating the Act. To rule otherwise would damage the Act, which ensures uniform
and streamlined regulation of BCBSM's PCPs.19
H. Causation and Plaintiffs' Tortious Interference Claims
Plaintiffs also appeal the trial court's grant of summary disposition on their claims of
tortious interference with a business relationship or expectancy on the grounds that plaintiffs
failed to show a harm or a causal connection between the allegedly illegal activities and their
injuries. The trial court dismissed the claim under MCR 2.116(C)(10), under which summary
disposition of all or part of a claim or defense may be granted when, "[e]xcept as to the amount
of damages, there is no genuine issue as to any material fact, and the moving party is entitled to
judgment or partial judgment as a matter of law." While the movant has the initial burden of
showing that there are no disputed issues of material fact, MCR 2.116(G)(4), a nonmovant who
would have the burden of proof at trial may not rest on mere allegations or denials in the
pleadings, but must, by documentary evidence, set forth specific facts showing that there is a
genuine issue for trial, Quinto, supra at 362. The existence of a disputed fact must be
established by admissible evidence, MCR 2.116(G)(6); a mere promise to offer factual support at
trial is insufficient, Maiden, supra at 121.
19
Plaintiffs' argument regarding the single-object requirement for statutes is raised for the first
time on appeal. "Since the issue currently discussed was neither pleaded, nor mentioned at
pretrial, nor the subject of proper amendment at trial," we note that, "it may not be raised for the
first time at final argument or on appeal." Ewing v Heathcott, 348 Mich 250, 255; 83 NW2d 210
(1957). Also, this argument indicates a failure by plaintiffs to notify the Court that they seek to
invalidate a statute. MCR 7.212(C)(1).
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We enumerated the elements of tortious interference with a business relationship or
expectancy in part III(G) of this opinion. In regard to the harm suffered, plaintiffs must show
that their business expectancy is a reasonably likely or probable expectancy. First Pub Corp v
Parfet, 246 Mich App 182, 199; 631 NW2d 785 (2001), aff 'd in part and vacated in part on other
grounds 468 Mich 101 (2003). Plaintiffs state in a conclusory fashion that BCBSM has a
significant effect on the physical therapy market and on federal funds available for health care,
but they fail to plead that BCBSM's alleged schemes damaged any business relationship or
expectancy that had a reasonable likelihood of fruition. Id. On appeal, plaintiffs offer to provide
such proofs at trial, but this mere promise to offer factual support at trial is insufficient. Maiden,
supra at 121. We therefore affirm the trial court's grant of summary disposition because
plaintiffs' tortious interference claim failed for lack of causation.
I. Protective Orders
Finally, plaintiffs argue that the trial court abused its discretion in granting BCBSM a
protective order shielding its officers from being deposed when plaintiffs offered affidavits
alleging that these officers played a direct role in orchestrating false claims schemes. We
conclude that plaintiffs failed to preserve their objection for appellate review.
A trial court's decision whether to grant a protective order limiting discovery is reviewed
for an abuse of discretion. See MCR 2.302(C)(1). MRE 103 aids this Court in evaluating
whether a trial court's evidentiary rulings constitute an abuse of discretion:
(a) Effect of erroneous ruling. Error may not be predicated upon a ruling
which admits or excludes evidence unless a substantial right of the party is
affected, and
* * *
(2) Offer of Proof. In case the ruling is one excluding evidence, the
substance of the evidence was made known to the court by offer or was apparent
from the context within which questions were asked.
* * *
(b) Record of offer and ruling. The court may add any other or further
statement which shows the character of the evidence, the form in which it was
offered, the objection made, and the ruling thereon. It may direct the making of an
offer in question and answer form.
For similar reasons, this Court will refuse to consider issues for which the appellant failed to
produce the transcript. Myers v Jarnac, 189 Mich App 436, 443-444; 474 NW2d 302 (1991);
People v Coons, 158 Mich App 735, 740; 405 NW2d 153 (1987).
In this case, plaintiffs complain about the trial court's grant of a protective order for
executive officials of BCBSM, but fail to cite the record or provide a transcript of the hearing
regarding the protective order. The trial court's protective order states that the order was granted
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"for the reasons more fully set forth on the record . . . ." Without this transcript, this Court can
determine neither the trial court's reasoning for granting the order nor whether plaintiffs made a
persuasive offer of proof in accord with MRE 103. Moreover, in their brief on appeal, plaintiffs
do not state how this affects "the substantial right of a party," as required by MRE 103; rather,
they leave it to this Court to justify their characterization. Wilson, supra at 243. Finally, even if
plaintiffs were to establish that the trial court abused its discretion in granting the protective
order, their claims against BCBSM fail as a matter of law, as discussed above. Accordingly, we
affirm the trial court's grant of a protective order.
IV. CONCLUSION
In this exceedingly complex case, we affirm the trial court's grant of summary disposition
in favor of defendants.
/s/ Michael R. Smolenski
/s/ Bill Schuette
/s/ Stephen L. Borrello
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