preparation for judicial review.” Jd. (citing Lindemann v. Mobil Oil Co., 79 F.3d 647, 649 (7th
Cir. 1996)). While it is within this court’s discretion, “[t]he preference in this Circuit is to
require the exhaustion of administrative remedies before a plaintiff may file a federal claim
alleging an ERISA violation.” Koenig v. Waste Mgmt., Inc., 76 F. Supp. 2d 908, 912 (N_D. Ill.
1999) (citing Robyns v. Reliance Standard Life Ins. Co., 130 F.3d 1231, 1235 (7th Cir. 1997)).

Despite the fact that exhaustion may be required, some courts in this circuit have held that
an allegation of exhaustion is not necessary to properly state an ERISA claim. See Shaw v.
Doherty Employment Group, No. IP 00-0139-C, 2001 WL 290376, at *1-2 (S.D. Ind. Feb. 7,
2001) (holding that the “failure to exhaust remedies” requirement is not an element ofan ERISA
claim, but an affirmative defense); Moore v. ABB Power T & D Co., No. IP 00-0085-C, 2000
WL 1902185, at *1-2 (S.D. Ind. Dec. 13, 2000) (“There is no doubt that a failure to exhaust
administrative remedies is an affirmative defense under ERISA”). In those cases, the courts
determined that it was only necessary that a plaintiff did not allege facts from which it is clear
that plaintiff had failed to exhaust such remedies. Shaw, 2001 WL 290376, at *1-2 (holding that,
because plaintiff did not allege facts which showed that she failed to exhaust her administrative
remedies, defendants’ argument regarding plaintiff s failure to exhaust such remedies could only
be considered on a motion for summary judgment). See also Cen. States v. Cent. Cartage Co.,
84 F.3d 988, 990 (7th Cir. 1996) (recognizing “failure to exhaust administrative remedies” as
an affirmative defense). Cf Coats v. Kraft Foods, Inc., 12 F. Supp. 2d 862, 868-69 (N.D. Ind.
1999) (requiring that a plaintiff affirmatively plead that it has exhausted administrative

remedies).


Inthis case, plaintiff’s allegation— that it “has made numerous demands for payment from
the Defendant ... and the Defendant has refused and continues to refuse to pay” (P1.’s Compl. f
7) — does not state that all future attempts to pursue administrative remedies are certain to be
futile. It appears that plaintiff is alleging that it should be excused from exhausting such
remedies because it has made so many unsuccessful attempts that any further actions would be
futile. However, the current allegation does not satisfy the “certainty” element of the futility
exception. Further, plaintiff has not alleged any facts from which certain futility can be
established. Thus, plaintiff has failed to allege facts sufficient to excuse any failure to exhaust
administrative remedies. Accordingly, the court grants defendant’s motion to dismiss. However,
because it may be possible for plaintiff to cure these deficiencies, the court gives plaintiff leave
to file an amended complaint within twenty-one days. Thus, plaintiffis given until July 17, 2001
to file an amended complaint consistent with this court’s Memorandum Opinion and Order?

Ill. CONCLUSION

For the foregoing reasons, the court grants defendant’s motion to dismiss. Plaintiff is

given leave to file an amended complaint, consistent with this order, by July 17, 2001.

Defendant is given until July 31, 2001 to answer or otherwise plead.

JUN 26 2004 Jha hve

Date JAMES H. ALESIA
United States District Judge

1f plaintiff can make good-faith allegations which sufficiently plead either exhaustion
or futility, the court must take such allegations as true; any future motions on that issue would
be better brought with a more developed record (rather than solely on the factual allegations in
plaintiff's complaint).


motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the court must accept
all well-pleaded allegations in the complaint as true and draw all reasonable inferences in favor
of the plaintiff. FED. R. Civ. P. 12(b)(6); see also Szumny v. Am. Gen. Fin., Inc., 246 F.3d 1065,
1067 (7th Cir. 2000). If, when viewed in a light most favorable to the plaintiff, the complaint
fails to state a claim upon which relief can be granted, the court must dismiss the case. Gomez
y, Illinois State Bd. of Educ., 811 F.2d 1030, 1039 (7th Cir. 1987). However, dismissal is proper
only if it is clear from the complaint that no set of facts consistent with its allegations would
entitle the plaintiff to relief. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984). The federal
rules do not require detailed factual pleadings. FED. R. Clv. P. 8(a)(2). Rather, federal notice
pleading requires only that the plaintiff set out in its complaint a short and plain statement of the
claim. Scott v. City of Chicago, 195 F.3d 950, 951 (7th Cir. 1999).

B. The exhaustion-of-remedies requirement under ERISA.

The ERISA statute does not explicitly state that a claimant must exhaust his or her
administrative remedies before filing suit in federal court. Gallegos v. Mt. Sinai Med. Cent.,210
F.3d 803, 807 (7th Cir. 2000). However, the Seventh Circuit has long established that the intent
of Congress, in enacting ERISA, “is best effectuated by granting district courts discretion to
require administrative exhaustion.” Jd. at 808. In fact, the Seventh Circuit has determined that
it is within the sound discretion of the district court to require administrative exhaustion. Jd.
The reasoning behind such a holding is to further the goals of “minimizing the number of
frivolous lawsuits, promoting non-adversarial dispute resolution, and decreasing the cost and

time necessary for claim settlement. ... [and enabling] the compilation of a complete record in


On the other hand, some courts have found that, when a plaintiff includes allegations
which seem to anticipate a defense like failure to exhaust administrative remedies, then plaintiff
must include allegations sufficient to show that such remedies were exhausted or that plaintiff
is excused from exhausting those remedies. See Wilczynski, 93 F.3d at 402-03 (finding that
plaintiffs allegations may be sufficient to excuse her failure to exhaust her administrative
remedies and refusing to grant defendant’s motion to dismiss). However, the court notes that
in Wilczynski, the Seventh Circuit acknowledged that, in most cases, the exhaustion doctrine is
applied to a more developed record at the summary judgment stage. Id. (holding that the
plaintiff's allegations were sufficient to survive a motion to dismiss).

This court finds that, because exhaustion is a discretionary requirement, a plaintiff does
not have to affirmatively plead such an allegation. However, the court agrees with those cases
that find if a plaintiff anticipates such an affirmative defense and makes allegations pertaining
to the exhaustion of administrative remedies, plaintiff could plead themselves out of court.

In this case, plaintiff contends that its complaint sufficiently alleges exhaustion. Plaintiff
points to paragraph seven of its own complaint in support of that contention. Paragraph seven
of the complaint states that plaintiff “has made numerous demands for payment from the
Defendant from June 16, 2000, to March 4, 2001, and the Defendant has refused and continues
to refuse to pay the Plaintiff as required.” (P1.’s Compl. at /7.) The court finds that paragraph
seven does not sufficiently allege exhaustion. Although plaintiff claims to have made numerous

demands, there is no allegation made regarding administrative appeals or procedures, and there


Minute Order Form (06/97)

‘ . United States District Court, Northern District of Illinois
Name of Assigned Judge i Sitting Judge if Other
or Magistrate Judge James H. Alesia than Assigned Judge
CASE NUMBER 01 C 2920 DATE June 26, 2001
CASE Medical Alliances, LLC vs. American Medical Security
TITLE
[In the following box (a) indicate the party filing the motion, ¢.g,, plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

MOTION: of the motion being presented.}

DOCKET ENTRY:

(1) o Filed motion of [ use listing in “Motion” box above.]

(2) Oo Brief in support of motion due

(3) oO Answer brief to motion due. - Reply to answer brief due :

(4) oO Ruling/Hearing on set for at

(5) Oo Status hearing[held/continued to] [set for/re-set for] on set for at

(6) im Pretrial conference[held/continued to] [set for/re-set for] on set for at :

(7) QO Trial[set for/re-set for] on at

(8) oOo [Bench/Jury trial] [Hearing] held/continued to at

(9) im This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

OFRCP4(m) CGeneral Rule2? CIFRCP41(a\(1) OF FRCP41(a)(2).

(0) +f [Other docket entry] Enter Memorandum Opinion and Order. The court grants defendant’s
motion to dismiss pursuant to FED. R. Cv. P. 12(b)(6). Plaintiff is given until July 17, 2001 to file
an amended complaint. Defendant is given until July 31, 2001 to answer to otherwise plead.

(11) a [For further detail see order attached to the original minute order.]

No notices required, advised in open court.

No notices required. umber of notices

Notices mailed by judge's staff. Hee

Tn 2 "7 20001
VY | Notified counsel by telephone. y 272
V_ | Docketing to mail notices.
Mail AO 450 form. \ seaiseti

Copy to judge/magistrate judge.

date miiled notice

cour oj JU 26 Pi WE SI
deputy's Gi JUK 26 Pi

initials

cw

Date/time received in

central Clerk’s Office mailing deputy iQals



is no allegation that plaintiff pursued all avenues of administrative relief. However, this does
not end the court’s inquiry.

If the court determines that exhaustion of administrative remedies is required, the district
court may still excuse a plaintiff’s failure to exhaust administrative remedies. Koenig, 76 F.
Supp. 2d at 912. Specifically, the court may excuse a plaintiff's failure to exhaust administrative
remedies (1) if the plaintiff lacked meaningful access to the review procedures or (2) if
exhaustion of internal procedures would be futile. Robyns, 130 F.3d at 1236; see also Wilczynski
v, Lumbermens Mut. Cas. Co., 93 F.3d 397, 402 (7th Cir. 1996). Thus, the court must now
determine whether plaintiff has alleged facts sufficient to excuse this failure. See Koenig, 76 F.
Supp. 2d at 913 (finding that the plaintiff had alleged facts sufficient to show that meaningful
access to review was severely curtailed).

To fall under the “futility” exception, a plaintiff must show that “it is certain that [its]
claim will be denied on appeal, not merely that [it] doubts that an appeal will result in a different
decision.” Koenig, 104 F. Supp. 2d at 967 (citing Ames v. Am. Nat’l Can Co., 170 F.3d 751, 756
(7th Cir. 1999)). Thus, a plaintiff must show that its claim would be denied with certainty. Id.
Further, the fact that the individual named defendant would be the one reviewing the plaintiff's
administrative appeal is not enough to relieve plan participants of the duty to exhaust remedies.

Ames, 170 F.3d at 756.

?However, in making such an allegation, the court finds that plaintiff was anticipating an
exhaustion defense. This is further evidence by plaintiff's response brief in which plaintiff
claims that the exhaustion of its remedies was futile. (See P1.’s Resp. Br. at 3-4 (citing paragraph
7 of Pl.’s Compl.).)


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
MEDICAL ALLIANCES, LLC, ) yy)
on
Plaintiff, ) iy “Mey,
) “2D
v. ) Case No: 01 C 2920 <p,
) (A
AMERICAN MEDICAL SECURITY, ) Judge James H. Alesia
)
Defendant. }

MEMORANDUM OPINION AND ORDER

Before the court is defendant American Medical Security’s motion to dismiss, pursuant
to Federal Rule of Civil Procedure 12(b)(6), plaintiff Medical Alliances LLC’s complaint. For
the following reasons, the court grants defendant’s motion to dismiss.

I. BACKGROUND

Plaintiff Medical Alliances LLC (“plaintiff”) is an Illinois corporation that provides
medical services for contracted clients. John Gunther (“Gunther”) was a client of plaintiff who
received medical services (neurological testing and interpretation) which totaled $10,600.00.
Defendant American Medical Security (“defendant”) is an insurance carrier who insured Gunther
for medical services. Gunther then assigned his right to payment to plaintiff. Plaintiff has
sought payment from defendant, however defendant has refused to pay for the cost of the
services. Plaintiff originally brought this action in the Circuit Court of Cook County, seeking
payment for medical services. Defendant removed this case, claiming that this court has

jurisdiction under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C.


§ 1003(1) et seg. Defendant now moves to dismiss plaintiff's complaint pursuant to Federal
Rule of Civil Procedure 12(b)(6).'

In its motion to dismiss, defendant argues that plaintiff’s claim must be dismissed because
plaintiff has failed to exhaust its administrative remedies. In response, plaintiff argues that, in
paragraph seven of its circuit court complaint, plaintiff clearly alleges that it exhausted its
administrative remedies. Paragraph seven of plaintiff's complaint states: “Plaintiff, Medical
Alliances, LLC has made numerous demands for payment from the Defendant from June 16,
2000, to March 4, 2001, and the Defendant has refused and continues to refuse to pay the
Plaintiff as required.” (PI.’s Compl. at 7.) Alternatively, plaintiff argues that, even ifit did not
exhaust its administrative remedies, any attempt to do so would be futile. The court addresses
these arguments below.

II. DISCUSSION
A. Standard for deciding a motion to dismiss
The purpose of a motion to dismiss is to test the sufficiency of the complaint, not to

decide the merits. Gibson v. Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). When deciding a

‘In its motion to dismiss, defendant refers to the plan’s review procedures. In addition,
defendant has attached a letter — addressed to plaintiff — which explains the terms of those appeal
procedures. However, this is a motion to dismiss and, consequently, any documents outside the
four corners of the complaint cannot be considered. While the court may convert such a motion
into a motion for summary judgment, the court may rule on the motion to dismiss if it excludes
any documents or materials not contained within the complaint. Berthold Types Ltd. v. Adobe
Sys. Inc.,242 F.3d 772, 775-76 (7th Cir. 2001) (holding that a “motion to dismiss must be treated
as a motion for summary judgment if the judge considers matters outside the complaint, but the
judge may elect to treat a motion as what it purports to be and disregard the additional papers”).
Thus, the court will decide the motion to dismiss without considering the additional documents.