United States District Court, C.D. Illinois, Peoria Division
MAO-MSO RECOVERY II, LLC, MSP RECOVERY LLC, MSP RECOVERY CLAIMS, SERIES 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 a Motion to Dismiss the Second
Amended Complaint, (Doc. 68), and a Motion to Strike or Deny
Class Allegations, (Doc. 77), filed by Defendant State Farm
Mutual Automobile Insurance Company (“State
Farm”). For the reasons explained below, both motions
have filed several putative class actions around the
country. The actions arise under the Medicare
Secondary Payer (“MSP”) provisions of the
Medicare Act, 42 U.S.C. § 1395y et seq.
“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)). Under the MSP
provisions, Medicare is not supposed to pay medical expenses
when payment has been made or can reasonably be expected to
be made by a primary plan, such as a car insurance plan.
§ 1395y(b)(2)(A)(ii). However, if a primary plan
“has not made or cannot reasonably be expected to make
payment, ” the Secretary can make a conditional
payment-but 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. 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. 42 U.S.C. § 1395w-21(a). An MAO may
sue a primary plan under subsection (b)(3)(A) that fails to
reimburse it for conditional payments made. 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).
in this case are not MAOs. Rather, they allege they have been
assigned rights of recovery under the MSP provisions by
numerous MAOs, “first-tier entities, ” and
“downstream entities.” (Doc. 63 at 1). Plaintiffs
allege that numerous Medicare beneficiaries were members of
the assignor-MAOs, but were also insured under no-fault
automobile insurance policies issued by State Farm. The
Medicare beneficiaries were involved in car accidents that
required medical services. Plaintiffs contend that State
Farm, as the primary payer, failed to pay for the medical
services, so the assignor-MAOs issued conditional payment.
Plaintiffs aver that State Farm has failed to reimburse the
assignor-MAOs for conditional payments made, giving rise to
liability under § 1395y(b)(3)(A). Plaintiffs also bring
one count for breach of contract under 42 C.F.R. §
filed their original complaint on February 23, 2017, in the
Southern District of Illinois. (Doc. 1). State Farm filed a
Motion to Dismiss on April 26, 2017, (Doc. 26), prompting
Plaintiffs to file their Amended Complaint on May 17, 2017.
(Doc. 32). On May 31, 2017, State Farm filed a Motion to
Dismiss the Amended Complaint for lack of standing. (Doc.
34). On January 9, 2018, after the case was transferred to
this district, this Court granted State Farm's motion to
dismiss for lack of standing. (Doc. 59). The Court held that
Plaintiffs failed to sufficiently allege injury in fact by
the proposed class representatives. Id. at 6.
Plaintiffs were granted leave to amend, giving rise to their
Second Amended Complaint, filed on January 30, 2018. (Doc.
March 6, 2018, State Farm filed a Motion to Dismiss the
Second Amended Complaint. (Doc. 68). State Farm again argues
that the matter should be dismissed for lack of standing, or
in the alternative, that Plaintiffs have failed to state a
claim upon which relief can be granted. On April 6, 2018,
Plaintiffs filed a response. (Doc. 73). On April 24, 2018,
State Farm also filed a Motion to Strike or Deny Class
Allegations. (Doc. 77). On May 8, 2018, Plaintiffs filed a
response to that motion. (Doc. 81). These matters are now
ripe for decision.
State Farm's Challenge to Subject Matter Jurisdiction
is an essential component of Article III's
case-or-controversy requirement.” Apex Dig., Inc.
v. Sears, Roebuck & Co., 572 F.3d 440, 443 (7th Cir.
2009) (citing Lujan v. Defs. of Wildlife, 504 U.S.
555, 560 (1992)). “As a jurisdictional requirement, the
plaintiff bears the burden of establishing standing.”
Id. (citing Perry v. Vill. of Arlington
Heights, 186 F.3d 826, 829 (7th Cir. 1999)).
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. “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 in a personal and individual
way.” Id. (internal citation omitted). For an
injury to be “concrete, ” it must be
“real” and “not abstract.”
Id. The threshold requirements of standing apply to
representative plaintiffs in class actions. Pierre v.
Midland Credit Mgmt., Inc., No. 16-2895, 2017 WL
1427070, *3 (N.D. Ill. Apr. 21, 2017).
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 v. ACT, Inc., 807 F.3d 169, 173
(7th Cir. 2015). A factual challenge contends that
“there is in fact no subject matter jurisdiction,
” even if the pleadings are formally sufficient.
Apex Dig., 572 F.3d at 444. “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 factual challenge to standing, arguing that
Plaintiffs do not in fact hold valid assignments from MAOs.
Plaintiffs Have Sufficiently Shown They Hold a Valid
Farm argues that Plaintiffs do not hold valid assignments to
pursue rights of recovery under the MSP provisions.
Plaintiffs contend that Florida Healthcare Plus
(“FHP”), an HMO, assigned its right of
reimbursement under the MSP to La Ley Recovery Systems, Inc.
(“La Ley Recovery”), a Florida Corporation, and
that La Ley Recovery then assigned its rights of recovery to
Plaintiff MSPA Claims 1, LLC. Plaintiffs further contend that
SummaCare, Inc. (“SummaCare”) assigned its right
of reimbursement to Plaintiff MSP Recovery, LLC. While the
Court concludes that the SummaCare agreement cannot confer
standing, the La Ley Recovery agreement is sufficient to
provided a document titled “Recovery Agreement”
entered into between SummaCare and Plaintiff MSP Recovery,
LLC. (Doc. 63-9). The Court need not consider whether the
Recovery Agreement is a valid assignment because even if it
is, it cannot confer Article-III standing in this case
because the Recovery Agreement was entered into on May 12,
2017, after this lawsuit was filed. (Doc. 63-9).
Constitutional standing must exist at the time the lawsuit is
filed. Friends of the Earth, Inc. v. Laidlaw Envtl.
Servs. (TOC), Inc., 528 U.S. 167, 180 (2000); Martin
v. United States, No. No. 13-03130, 2017 WL 59070, at *7
(C.D. Ill. Jan. 5, 2017); Gaylor v. Mnuchin, 278
F.Supp.3d 1081, 1089 (W.D. Wis. 2017); see also Freedom
from Religion Found., Inc. v. Lew, 773 F.3d 815, 824-25
(7th Cir. 2014) (“The Constitution does not allow
federal courts to hear suits filed by plaintiffs who lack
also provided a document titled “La Ley Recovery
Systems Agreement” (“LLR Agreement”)
entered into between FHP and La Ley Recovery on April 15,
2014. State Farm argues that the LLR Agreement is not an
assignment, but just a contingency-fee agreement.
Agreement does not have a governing law provision, and
neither party raises the issue of conflicts of law.
Generally, “[c]ourts do not worry about conflict of
laws unless the parties disagree on which state's law
applies.” Wood v. Mid-Valley Inc., 942 F.2d
425, 427 (7th Cir.1991). Illinois law provides that “a
chose in action is assignable personal property.”
Rawoof v. Texor Petroleum Co., 521 F.3d 750, 762
(7th Cir. 2008) (Ripple, J., dissenting). The legal landscape
regarding what constitutes an assignment under Illinois law
is fairly clear:
An assignment occurs when “there is a transfer of some
identifiable interest from the assignor to the
assignee.” Klehm v. Grecian Chalet, Ltd., 164
Ill.App.3d 610, 616, 115 Ill.Dec. 662, 518 N.E.2d 187 (1987).
“Generally, no particular form of assignment is
required; any document which sufficiently evidences the
intent of the assignor to vest ownership of the subject
matter of the assignment in the assignee is sufficient to
effect an assignment.” Stoller v. Exchange National
Bank of Chicago, 199 Ill.App.3d 674, 681, 145 Ill.Dec.
668, 557 N.E.2d 438 (1990). A valid assignment “needs
only to assign or transfer the whole or a part of some
particular thing, debt, or chose in action and it must
describe the subject matter of the assignment with sufficient
particularity to render it capable of identification.”
Klehm, 164 Ill.App.3d at 616, 115 Ill.Dec. 662, 518
N.E.2d 187. The assignment transfers to the assignee all the
“‘right, title or interest of the assignor in the
thing assigned.'” Owens v. McDermott, Will
& Emery, 316 Ill.App.3d 340, 350, 249 Ill.Dec. 303,
736 N.E.2d 145 (2000), quoting Litwin v. Timbercrest
Estates, Inc., 37 Ill.App.3d 956, 958, 347 N.E.2d 378
Brandon Apparel Grp. v. Kirkland & Ellis, 887
N.E.2d 748, 756 (Ill.App.Ct. 2008). Florida law is similar,
in that the intent of the parties controls. See Citizens
Prop. Ins. Corp. v. Ifergane, 114 So.3d 190, 195 (Fla.
Dist. Ct. App. 2012) (“In Florida, the intent of the
parties determines the existence of an assignment.”);
see Price v. RLI Ins. Co., 914 So.2d 1010,
1013-14 (Fla. Dist. Ct. App. 2005) (an assignment is a
transfer of all the interests and rights to the thing
Agreement provides that FHP retains “La Ley Recovery as
an independent contractor to recover costs already paid for
and/or generate revenue on a fee for services provided and/or
shift current expenses incurred” for FHP's
“insureds and/or members that have been involved in
accidents and/or have Workers Compensation claims and/or any
other incident/accident or for medical services of any kind
whereby” FHP “may either bill for services or
recovery for payment of medical services.” (Doc. 63-3
at 1). Significantly, it states,
It is the intent of the parties to assist each other in the
implementation of a system whereby Client [FHP] and/or any
entity it has contracted to recover, shift and/or bill on a
fee for service for all medical services and/or medications,
diagnostic test or any amount it is obligated to pay to/or on
behalf of any member or other liability that can be legally
collected directly through an assignment of any kind and/or
through Medicare and/or Medicaid rights and/or by State
and/or Federal statute of any kind and/or any other right of
any nature whatsoever that exists now or in the future.
By way of this agreement, Client [FHA] appoints,
directs and otherwise assigns all of Client's [FHA's]
rights as it pertains to the rights pursuant to any plan,
State or Federal statute whatsoever directly and/or
indirectly for any its members and/or plan ...