United States District Court, C.D. Illinois, Peoria Division
MAO-MSO RECOVERY II, LLC, MSP RECOVERY LLC, MSPA CLAIMS 1, LLC, and MSP RECOVERY CLAIMS, SERIES, LLC Plaintiffs,
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Defendant.
ORDER & OPINION
BILLY MCDADE UNITED STATES SENIOR DISTRICT JUDGE
matter is before the Court on Defendant State Farm Mutual
Automobile Insurance Company's (“State Farm”)
Motion to Dismiss the Amended Complaint. (Doc. 67). For the
reasons explained below, State Farm's Motion to Dismiss
is GRANTED for lack of subject matter jurisdiction.
putative class action is one of several filed around the
country by the Plaintiffs. Plaintiffs also have a separate but
related case pending before this Court-another putative class
action with slightly different facts, but consisting of
virtually identical allegations under the law. MAO-MSO
Recovery II, LLC et al. v. State Farm Mutual Automobile Ins.
Co., No. 17-cv-1537 (C.D. Ill. Feb. 23. 2017). This
lawsuit arises under the Medicare Secondary Payer
(“MSP”) provisions of the Medicare Act, 42 U.S.C.
§ 1395y et seq. A more comprehensive
explanation of the MSP provisions can be found in this
Court's first Order & Opinion dismissing
Plaintiffs' original complaint. MAO-MSO Recovery II,
LLC v. State Farm Mut. Auto. Ins. Co., No. 17-cv-1541,
2018 WL 340021, at *1 (C.D. Ill. Jan. 9, 2018).
originally being filed on March 28, 2017, this case has not
advanced passed preliminary stages because the parties have
litigated the issue of Article-III standing for months.
“Standing under Article III is a threshold question in
every federal case.” United States v. All Funds on
Deposit with R.J. O'Brien & Assocs., 783 F.3d
607, 616 (7th Cir. 2015) (internal citation omitted). As will
be described in detail below, it is obvious that Plaintiffs
here lack standing because they have suffered no injury in
fact. Plaintiffs have only feigned legitimacy through empty
documentation and the appearance of a sophisticated corporate
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
20271-CIV, 2016 WL 3751481, at *1 (S.D. Fla. July 14, 2016);
MSP Recovery, LLC v. Progressive Select Ins. Co., 96
F.Supp.3d 1356 (S.D. Fla. 2015). 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.
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.
Farm alleges that Plaintiffs do not in fact have standing,
regardless of the allegations in the Amended Complaint-a
factual challenge. In the alternative, State Farm brings a
facial challenge to the allegations in the Amended Complaint.
standing has three elements: “[t]he 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.” Spokeo, Inc. v. Robins, 136 S.Ct.
1540, 1547 (2016), as revised (May 24, 2016) (citing
Lujan, 504 U.S. at 560-61)). State Farm argues that
Plaintiffs cannot satisfy the first element, injury-in-fact.
To satisfy the first “injury” element, the
plaintiff must show, inter alia, that the injury
affects the plaintiff in a personal and individual way.
Id. at 1548; Valley Forge Christian College v.
Americans United for Separation of Church and State,
Inc., 454 U.S. 464, 472 (1982) (standing requires that
the plaintiff “‘personally has suffered some
actual or threatened injury'”). Plaintiffs here
have not suffered an injury, let alone an injury that affects
them in a personal and individual way. Therefore, Plaintiffs
lack standing and this case must be dismissed.
unpacking is necessary in order to demonstrate how
straightforward this case actually is, despite the voluminous
briefing and documentation provided to the Court by the
parties. Plaintiffs in this case are four entities: (1) MSP
Recovery LLC, a Florida entity; (2) MAO-MSO Recovery II, LLC,
a Delaware entity; (3) MSPA Claims 1, LLC, a Florida entity;
and (4) MSP Recovery Claims, Series, LLC, a Delaware entity.
Only one Plaintiff in this case can possibly confer
Article-III standing: MSP Recovery Claims, Series, LLC.
discussed in this Court's January 9, 2018, Order and
Opinion (Doc. 61), 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 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. § 1395y(b)(2)(B)(i)-(ii).
1395y(b)(3)(A) of the MSP provisions provides for a private
cause of action against primary payers who do not reimburse
secondary payers for conditional payments made to Medicare
beneficiaries. While the Seventh Circuit has not addressed
whether an MAO may avail itself of the private cause of
action afforded in subsection (3)(A), the Third and Eleventh
Circuits have held that subsection (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 Mktg., Sales Practices & Prods. Liab.
Litig., 685 F.3d 353, 355 (3d Cir. 2012). Since the
decisions by those 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).
are not MAOs. Plaintiffs allege that they are entities that
have obtained claims for reimbursement via assignment from an
MAO. (Doc. 63 at 1). In an attempt to show a valid
assignment, and therefore a valid right to pursue these
claims, Plaintiffs provided the Court with two documents: a
“Recovery Agreement, ” dated April 28, 2016,
between “Health First Administrative Plans”
(“HFAP”) and Plaintiff MSP Recovery, LLC. (Doc.
63-4). From the beginning, Plaintiffs have led the Court to
believe, and they continue to argue, that HFAP is an MAO. The
Recovery Agreement purports to assign all of HFAP's
rights of recovery under the MSP provisions to Plaintiff MSP
Recovery, LLC. See id.
Plaintiffs also provided the Court with a document titled
“Assignment, ” which is dated June 12, 2017,
wherein Plaintiff MSP Recovery, LLC assigns all of its rights
from HFAP to “Series 16-05-456 LLC, a series of MSP
Recovery Claims, Series LLC.” (Doc. 63-5).
such, there is no question that Plaintiffs MAO-MSO Recovery
II, LLC and MSPA Claims 1, LLC have no bearing on the issue
of Article-III standing, as those entities are not even
mentioned in the relevant documentation here. Furthermore,
any rights that Plaintiff MSP Recovery, LLC obtained from
HFAP by way of the Recovery Agreement were later assigned to
a series LLC of Plaintiff MSP Recovery Claims, Series, LLC.
Thus, MSP Recovery Claims, ...