Humana Insurance Co. v. Paris Blank LLP, 187 F. Supp. 3d 676

Background

Humana Insurance Co. (a Medicare Advantage Organization or MAO) paid $191,612.09 in conditional Medicare benefits for an enrollee injured in a 2013 automobile accident and seeks reimbursement after the enrollee recovered settlement proceeds.
The enrollee (now deceased) retained Paris Blank LLP and attorney Keith Marcus; settlement checks were issued to Paris Blank (and some jointly to Humana and Paris Blank). Marcus allegedly caused or effected deposit of at least one check payable jointly to Humana and Paris Blank without Humana’s endorsement.
Humana notified the enrollee of the $191,612.09 reimbursement demand, the enrollee (through Marcus) requested a waiver, Humana denied the waiver, and no reimbursement was received before suit.
Humana filed suit in federal court under 42 U.S.C. § 1395y(b)(3)(A) seeking recovery (double damages) of conditional payments and declaratory relief; defendants moved to dismiss for failure to state a federal claim, arguing no private right of action exists for MAOs under the MSP statute.
The court considered Fourth Circuit precedent on pleading standards but found persuasive Third Circuit authority (In re Avandia) and CMS regulations supporting that MAOs have the same recovery rights as the Secretary and thus may sue under § 1395y(b)(3)(A).
The court denied the motion to dismiss: it held the statute (and related regulations/CMS guidance) authorize a private cause of action for MAOs and permit suits against entities or individuals (including attorneys) who received primary-plan payments.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether § 1395y(b)(3)(A) creates a private right of action that a MAO may use to recover conditional Medicare payments	§ 1395y(b)(3)(A) is broad and permits private parties (including MAOs) to sue for double damages; In re Avandia supports this	No private right of action exists for MAOs under the MSP statute; federal recovery is limited to the Secretary/government	Court followed In re Avandia reasoning and held MAOs can sue under § 1395y(b)(3)(A) to recover conditional payments
Whether CMS regulations and agency guidance support MAO recovery rights	Regulations (42 C.F.R. § 422.108) and CMS memoranda assign MAOs the same recovery rights/procedures as the Secretary	Regulations do not create a private cause of action beyond what statute allows	Court found regulations and CMS guidance a permissible interpretation under Chevron and persuasive that MAOs have recovery rights
Whether attorneys/law firms who receive settlement funds are proper defendants under MSP recovery claims	The statute’s plain language permits recovery from any primary plan, entity, or individual receiving payment; regulations identify attorneys as recoverable entities	Defendants are not primary payers and thus outside the statute’s scope	Court held statute and regulations permit suits against entities or individuals (including attorneys) who received primary-plan payments
Whether declaratory judgment and pendant state-law claims should be dismissed if federal claim fails	Humana: federal claim is viable, so declaratory and state claims remain	Defendants: if no federal private right of action, dismiss federal claim and decline supplemental jurisdiction over state claims	Because court sustained the federal claim, it denied dismissal of declaratory and state-law claims

Key Cases Cited

In re Avandia Mktg., Sales Practices & Prods. Liab. Litig., 685 F.3d 353 (3d Cir. 2012) (held MAOs may sue under § 1395y(b)(3)(A) to recover conditional payments)
Parra v. PacifiCare of Ariz., Inc., 715 F.3d 1146 (9th Cir. 2013) (declined to resolve Avandia question; reflects circuit split)
T.G. Slater & Son, Inc. v. Donald P. & Patricia Brennan LLC, 385 F.3d 836 (4th Cir. 2004) (standard for accepting factual allegations on a Rule 12(b)(6) motion)
Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250 (4th Cir. 2009) (court need not accept unwarranted inferences or legal conclusions on a motion to dismiss)
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard under Rule 12(b)(6))
Ashcroft v. Iqbal, 556 U.S. 662 (2009) (clarified Twombly; factual content must permit plausible inference of liability)