United States District Court, C.D. Illinois
MAO-MSO RECOVERY II, LLC, MSP RECOVERY LLC, and MSPA CLAIMS 1, LLC Plaintiffs,
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Respondent.
ORDER & OPINION
BILLY McDADE United States Senior District Judge
matter is before the Court on Defendant's Motion to
Dismiss. (Doc. 34). For the reasons explained below,
Defendant's Motion to Dismiss is GRANTED for lack of
subject matter jurisdiction. Plaintiffs have twenty-one days
to file a second amended complaint to cure the deficiencies
lawsuit arises under the Medicare Secondary Payer
(“MSP”) provisions of the Medicare Act, 42 U.S.C.
§ 1395y et seq. “The MSP is actually a
collection of statutory provisions codified during the 1980s
with the intention of reducing federal health care
costs.” United States v. Baxter Intern., Inc.,
345 F.3d 866, 874 (11th Cir. 2003). Part C of the Medicare
Act allows Medicare enrollees to obtain their Medicare
benefits through private insurers, called Medicare Advantage
Organizations (“MAOs”), instead of receiving
direct benefits from the government under Parts A and B. 42
U.S.C. § 1395w-21(a). The Center for Medicare and
Medicaid Services (“CMS”)“pays an MAO a
fixed amount for each enrollee, per capita (a
“capitation”), ” and “[t]he MAO then
administers Medicare benefits for those enrollees and assumes
the risk associated with insuring them.” In re
Avandia Mktg., Sales Practices & Prods. Liab.
Litig., 685 F.3d 353, 357-58 (3d Cir. 2012).
Congress's goal in creating the MAO program “was to
harness the power of private sector competition to stimulate
experimentation and innovation that would ultimately create a
more efficient and less expensive Medicare system.”
Id. at 363.
MSP makes Medicare insurance secondary to any ‘primary
plan' obligated to pay a Medicare recipient's medical
expenses, including a third-party tortfeasor's automobile
insurance.” Parra v. PacifiCare of Ariz.,
Inc., 715 F.3d 1146, 1152 (9th Cir. 2013) (citing §
1395y(b)(2)(A)). “In other words, ‘Medicare
serves as a back-up insurance plan to cover that which is not
paid for by a primary insurance plan.'” Caldera
v. Ins. Co. of the State of Pa., 716 F.3d 861, 863 (5th
Cir. 2013) (quoting Thompson v. Goetzmann, 337 F.3d
489, 496 (5th Cir. 2003)). The Medicare Act provides that
Medicare cannot pay medical expenses when “payment has
been made or can reasonably be expected to be made under . .
. an automobile or liability insurance policy or plan . . .
or no fault insurance.” § 1395y(b)(2)(A)(ii).
There is only one exception to the prohibition in paragraph
(2)(A): if a primary plan “has not made or cannot
reasonably be expected to make payment, ” the Secretary
can make a conditional payment; however, since Medicare
remains the secondary payer, the primary plan must reimburse
Medicare for the conditional payment. §
provides a private cause of action for damages in an amount
double the amount otherwise provided in the case of a primary
plan which fails to provide for primary payment or
appropriate reimbursement. § 1395y(b)(3)(A). Plaintiffs
in this case, who have been assigned the rights of recovery
by numerous MAOs, purport to bring a private cause of action
under subsection (3)(A) against Defendant State Farm Mutual
Automobile Insurance Company (“State Farm”) for
failure to provide reimbursement for the assignor-MAOs'
secondary payments. The Seventh Circuit has not determined
whether an MAO (or its assignee) may avail itself of the MSP
private cause of action in paragraph (3)(A). The Third and
Eleventh Circuits-the only circuit courts that have addressed
this issue-have held that paragraph (3)(A) permits an MAO to
sue a primary plan that fails to reimburse an MAO's
secondary payment. See Humana Med. Plan, Inc. v. W.
Heritage Ins. Co., 832 F.3d 1229, 1238 (11th Cir. 2016);
In re Avandia, 685 F.3d at 355. Since the decisions
by the Third and Eleventh Circuits, district courts around
the country have followed suit. See, e.g.,
Humana Ins. Co. v. Paris Blank LLP, 187 F.Supp.3d
676, 681 (E.D. Va. 2016); Humana Med. Plan, Inc. v. W.
Heritage Ins. Co., 94 F.Supp.3d 1285, 1290-91 (S.D. Fla.
2015); Cariten Health Plan, Inc. v. Mid-Century Ins.
Co., No. 14-476, 2015 WL 5449221, *5-*6 (E.D. Tenn.
Sept. 1, 2015); Collins v. Wellcare Healthcare Plans,
Inc., 73 F.Supp.3d 653, 664-65 (E.D. La. 2014);
Humana Ins. Co. v. Farmers Tex. Cnty. Mut. Ins. Co.,
95 F.Supp.3d 983, 986 (W.D. Tex. 2014).
Farm does not argue that Plaintiffs cannot bring a cause of
action under subsection (3)(A), and the Court finds no reason
to depart from the national trend interpreting subsection
(3)(A) to permit MAOs to bring private causes of action. Even
though Plaintiffs are not MAOs, but rather are the assignees
of several MAOs' rights of recovery, the Seventh Circuit
has held that “'the assignee stands in the shoes of
the assignor and assumes the same rights, title and interest
possessed by the assignor.'” Perry v. Globe
Auto Recycling, Inc., 227 F.3d 950, 953 (7th Cir. 2000)
(quoting Plumb v. Fluid Pump Serv. Inc., 124 F.3d
849, 864 (7th Cir. 1997) (finding that assignee of medical
benefits under ERISA plan can bring suit to collect benefits
under ERISA civil enforcement provisions). Therefore,
Plaintiffs, as assignees, stand in the shoes of the MAOs, and
can bring a private cause of action under subsection (3)(A).
of This Case 
filed this action on behalf of themselves and all other
similarly situated MAOs, and their assignees, for double
damages, pursuant to the MSP private cause of action in
paragraph (3)(A). (Doc. 32 ¶ 6). Plaintiffs assert that
Medicare beneficiaries were members of the assignor-MAOs and
were also insured under automobile insurance policies issued
by Defendant. Id. ¶ 51. Those policies provided
coverage of medical expenses related to injuries resulting in
medically necessary services stemming from car accidents.
Id. The Medicare beneficiaries were involved in car
accidents that required medical services. Id. ¶
52. “The bills for medical services . . . were required
to be paid for by Defendant, ” but “Defendant
failed to pay or reimburse the Medicare Beneficiaries'
MAOs for the payments made by the MAOs that were required to
be paid by Defendant as a result of said automobile
31, 2017, State Farm filed a motion to dismiss
Plaintiffs' amended complaint. (Doc. 34). State Farm argues
that Plaintiffs lack Article-III standing to sue because they
have not shown injury-in-fact and that Plaintiffs have failed
to state a claim for which relief may be granted because the
amended complaint is too generic. Plaintiffs filed a response
(Doc. 38) and this matter is ripe for decision. The Court
only addresses Defendant's first argument, and finds that
Plaintiffs lack standing.
the party invoking federal jurisdiction, a plaintiff bears
the burden of establishing the elements of Article III
standing.” Silha v. ACT, Inc., 807 F.3d 169,
173 (7th Cir. 2015) (citing Lujan v. Defs. of
Wildlife, 504 U.S. 555, 559-60 (1992)). Because standing
is “not [a] mere pleading requirement[ ] but rather an
indispensable part of the plaintiff's case, [it] must be
supported in the same way as any other matter on which the
plaintiff bears the burden of proof, i.e., with the manner
and degree of evidence required at the successive stages of
the litigation.” Lujan, 504 U.S. at 561. In
evaluating a challenge to subject matter jurisdiction under
Federal Rule of Civil Procedure 12(b)(1), the court must
first determine whether a factual or facial challenge has
been raised. Silha, 807 F.3d at 173. A factual
challenge contends that “there is in fact no subject
matter jurisdiction, ” even if the pleadings are
formally sufficient. Apex Dig., Inc. v. Sears, Roebuck
& Co., 572 F.3d 440, 444 (7th Cir. 2009). “In
reviewing a factual challenge, the court may look beyond the
pleadings and view any evidence submitted to determine if
subject matter jurisdiction exists.” Silha,
807 F.3d at 173. In contrast, a facial challenge argues that
the plaintiff has not sufficiently “alleged a basis of
subject matter jurisdiction.” Apex Dig, 572
F.3d at 443. “In reviewing a facial challenge, the
court must accept all well-pleaded factual allegations as
true and draw all reasonable inferences in favor of the
plaintiff.” Silha, 807 F.3d at 173. State Farm
brings a facial challenge to the amended complaint because it
contends that Plaintiffs' amended complaint lacks
sufficient factual allegations to establish standing.
is an essential component of Article III's
case-or-controversy requirement.” Apex Dig,
572 F.3d at 443 (citing Lujan, 504 U.S. at 560).
“‘In essence the question of standing is whether
the litigant is entitled to have the court decide the merits
of the dispute or particular issues.'” Perry v.
Vill. of Arlington Heights, 186 F.3d 826, 829 (7th Cir.
1999) (quoting Warth v. Seldin, 422 U.S. 490, 498
(1975)). “As a jurisdictional requirement, the
plaintiff bears the burden of establishing standing.”
Apex Dig, 572 F.3d at 443 (citing Perry,
186 F.3d at 829). Standing consists of three elements.
Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547 (2016).
“The plaintiff must have (1) suffered an injury in
fact, (2) that is fairly traceable to the challenged conduct
of the defendant, and (3) that is likely to be redressed by a
favorable judicial decision.” Id. State Farm
argues that Plaintiffs lack standing because they have failed
to allege the first element, that they suffered an
injury-in-fact. “To establish injury in fact, a
plaintiff must show that he or she suffered ‘an
invasion of a legally protected interest' that is
‘concrete and particularized' and ‘actual or
imminent, not conjectural or hypothetical.'”
Id. at 1548 (citing Lujan, 504 U.S. at
560). For an injury to be “particularized, ” it
“must affect the plaintiff ...