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MAO-MSO Recovery II, LLC v. State Farm Mutual Automobile Insurance Co.

United States District Court, C.D. Illinois

September 17, 2019

MAO-MSO RECOVERY II, LLC, MSP RECOVERY LLC, MSP RECOVERY CLAIMS, SERIES LLC, & MSPA CLAIMS 1, LLC, Plaintiffs,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant.

          ORDER & OPINION

          JOE BILLY McDADE UNITED STATES SENIOR DISTRICT JUDGE

         This matter is before the Court on Plaintiffs' Motion to Stay or Deny Defendant's Motion for Summary Judgment (Doc. 184). Defendant has responded (Doc. 194). Plaintiffs have requested to file a reply (Doc. 202)-Defendant opposes the request (Doc. 203)-but for the reasons stated herein, the Court denies leave to file. Therefore, this matter is ripe for review.

         Background

         The Medicare Secondary Payer (MSP) provisions of the Medicare Act, 42 U.S.C. § 1395y et seq., “make[ ] 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)). Medicare generally does not pay medical expenses when a primary plan will cover the costs, but where such payment is unlikely, conditional payments may be made, with the primary insurer to reimburse Medicare. § 1395y(b)(2).

         Part C of the Medicare Act allows Medicare enrollees to obtain Medicare benefits through private insurers, Medicare Advantage Organizations (MAOs), rather than the government. 42 U.S.C. § 1395w-21(a). “An MAO may sue a primary plan . . . that fails to reimburse it for conditional payments made” under the private right of action provided in § 1395y(b)(3)(A). (Doc. 86 at 2).

         Plaintiffs are corporate entities which have been assigned rights of recovery under the MSP by numerous MAOs, among others. (Doc. 184 at 4). The basic theory of their case is members of the assignor-MAOs who were also insured under no-fault automobile insurance policies issued by Defendant were involved in car accidents requiring medical services; Plaintiffs allege Defendant failed to pay for the medical services or reimburse the assignor-MAOs for conditional payments issued. (Doc. 86 at 3).

         This action was commenced on February 23, 2017, in the Southern District of Illinois. (Doc. 1). Following a motion to dismiss for lack of subject matter jurisdiction on Article III standing grounds and for failure to plead sufficient facts under Rule 8 (Doc. 26), Plaintiffs filed a First Amended Complaint (Doc. 32). Defendant moved to transfer the case under 28 U.S.C. § 1404(a) (Doc. 28) and the case was transferred to this District (Doc. 57). In the interim, Defendant filed a second motion to dismiss (Doc. 34) asserting the amendments did not cure the issues identified in the original motion to dismiss. This Court denied as moot Defendant's original motion to dismiss (Doc. 26) but granted Defendant's second motion to dismiss (Doc. 34), holding Plaintiffs had failed to sufficiently allege an injury in fact, as necessary for Article III standing. (Doc. 59 at 8-9).

         Plaintiffs timely filed a Second Amended Complaint (Doc. 63) on January 30, 2018. In the Second Amended Complaint, Plaintiffs provided additional details about an accident resulting in medical fees for two Medicare beneficiaries, which they allege Defendant failed to pay or reimburse. (Doc. 63 at 3-9). The two beneficiaries were identified as O.D. and C.S. (Doc. 63 at 3). Defendant again moved to dismiss on standing grounds, inter alia. (Doc. 68). The Court held the O.D. allegations were sufficient to survive a motion under Rule 12(b)(1) to dismiss for lack of standing, but the C.S. allegations were not; the assignment of the claim related to C.S. occurred after the lawsuit was filed. (Doc. 86 at 6, 12-13).

         The parties differed on the discovery schedule. Defendant requested discovery be bifurcated between discovery on the merits and discovery on class certification as well as a deadline for amendment of the pleadings and joinder of additional parties, which Plaintiff opposed; Defendant also noted in its potential plan to file a motion for summary judgment on the named Plaintiffs' individual claims. (Doc. 90). Magistrate Judge Jonathan E. Hawley accepted Defendant's plan. (Doc. 91). Plaintiffs did not file an objection.

         The undersigned referred the case to Magistrate Judge Tom Schanzle-Haskins for a report and recommendation concerning class certification. (Docket Entry dated 01/04/2019).[1] Shortly before the briefing on class certification was completed, Defendant filed a motion for summary judgment, arguing the O.D. allegations did not provide Plaintiffs with standing. (Doc. 172). A previously set hearing, the report and recommendation, and a decision on class certification were put on hold pending resolution of the motion for summary judgment. (Docket Entry dated 08/07/2019). Plaintiffs then filed the instant motion, requesting Defendant's summary judgment motion be stayed or denied under Rule 56(d)(1). (Doc. 184). Further briefing on the summary judgment motion was postponed pending resolution of the Rule 56(d)(1) motion. (Docket Entry dated 08/16/2019).

         A related case was also before the Court between these parties. MAO-MSO Recovery II, LLC v. State Farm Mut. Auto. Ins. Co., No. 17-cv-1541, 2018 WL 2392827, at *1 (C.D. Ill. May 25, 2018) (describing this action as “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.”). To reduce a fairly complex story, “the question of standing [was] hotly disputed” in that case. MAO-MSO Recovery II, LLC v. State Farm Mut. Auto. Ins. Co., F.3d, Nos. 18-2377 and 18-2463, 2019 WL 3822156, at *3 (7th Cir. Aug. 15, 2019).[2]

         The procedural backgrounds are parallel to a large extent; “State Farm . . . moved to dismiss the initial complaint for lack of Article III standing (among other grounds), [and] the plaintiffs responded by filing an amended complaint to put more meat on the bone.” Id. But, as in this case, dismissal of the First Amended Complaint was warranted because “plaintiffs could not demonstrate an ‘injury in fact' for purposes of Article III standing.” Id. (describing this Court's reasoning). A Second Amended Complaint was dismissed on standing grounds as well. Id. at *3-*4. The Seventh Circuit agreed with this Court's disposition of the standing issue in that case, modifying that holding only to correct this Court's “use of the phrase ‘with prejudice' to signal that it would permit no more amendments.” Id. at *4-5.

         Legal Standard

         Under Federal Rule of Civil Procedure 56(d), when a nonmovant facing a motion for summary judgment demonstrates it cannot yet present facts “essential to justify its opposition, ” the court may defer or deny the motion for summary judgment. “A party seeking relief under Rule 56(d) must show by affidavit or declaration specific reasons discovery should be extended, which requires more than a fond hope that more fishing might net some good evidence.” Smith v. OSF HealthCare Sys., 933 F.3d 859, 864 (7th Cir. 2019). Although “[a]ppellate courts often remand a denial of additional time for discovery when the motion for summary judgment is filed before the close of discovery, ” ...


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