Administration Systems Research Corp Intl v. Davita Healthcare
334902
| Mich. Ct. App. | Nov 16, 2017Background
- Defendants (dialysis providers) and plaintiff (third-party claims administrator) entered Provider Agreements with master payment schedules setting provider rates; plaintiff arranges for ERISA and non-ERISA plans to pay providers.
- § 8.14 of the Provider Agreements requires arbitration for disputes "arising hereunder" that fall outside ERISA; disputes involving ERISA provisions use ERISA remedies.
- Defendants demanded arbitration alleging plaintiff breached the Provider Agreements by arranging payments at rates lower than the master schedules (about $6M alleged shortfall) and sought damages and specific performance; they disclaimed ERISA claims.
- Plaintiff sued in circuit court to enjoin arbitration, arguing defendants’ claims are ERISA claims (thus exempt from arbitration), that defendants lack assignments, and that tort claims are barred by the economic-loss doctrine.
- Trial court granted defendants’ MCR 2.116(C)(7) motion to compel arbitration and denied plaintiff’s (C)(10) motion; Michigan Court of Appeals affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the dispute is "arising hereunder" and thus arbitrable | Plaintiff: Claims are ERISA-covered and therefore exempt from arbitration per §8.14 | Defendants: Dispute concerns contractual payment rates under separate Provider Agreements, not plan benefits | Held: Dispute is arguably within arbitration clause; it arises under the Provider Agreements and is arbitrable |
| Whether defendants’ claims are preempted by ERISA §502(a)(1)(B) | Plaintiff: Providers could have enforced rights under ERISA; state claims duplicate ERISA remedies | Defendants: Not participants/beneficiaries and did not bring plan-benefit claims; claims rest on duties independent of ERISA | Held: Not within §502(a)(1)(B) — defendants lack participant/beneficiary status and seek contract-rate enforcement independent of plan terms |
| Whether claims are preempted under ERISA §514 (relate to plans) | Plaintiff: State-law claims "relate to" ERISA plans and are thus preempted | Defendants: Provider Agreements are separate contracts between providers and administrator, not the plans or participants | Held: §514 does not preempt these state-law contract/tort claims tied to separate Provider Agreements |
| Other defenses (assignment, payer status, economic-loss doctrine) | Plaintiff: Defendants lacked assignments; plaintiff not a "payer"; torts barred by economic-loss doctrine | Defendants: Procedural and merits issues to be resolved in arbitration | Held: These are merits/procedural questions for the arbitrator, not for the court at the gateway stage |
Key Cases Cited
- Altobelli v. Hartmann, 499 Mich. 284 (Mich. 2016) (arbitration is a matter of contract; courts decide arbitrability)
- Fromm v. Meemic Ins. Co., 264 Mich. App. 302 (Mich. Ct. App. 2004) (framework for determining scope and exemptions to arbitration clauses)
- Aetna Health Inc. v. Davila, 542 U.S. 200 (U.S. 2004) (ERISA §502(a) provides exclusive remedy for plan-benefit claims)
- Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (U.S. 1987) (ERISA §514 preemption of state laws that relate to employee benefit plans)
- Pascack Valley Hosp. v. Local 464A UFCW Welfare Reimbursement Plan, 388 F.3d 393 (3d Cir. 2004) (distinguishes coverage/plan-benefit claims from payment-rate disputes under separate provider agreements)