MAO-MSO Recovery II, LLC v. American Family Mutual Insurance Company, 3:17-cv-00175

Background

Plaintiffs (MAO-MSO Recovery II, MSP Recovery, MSPA Claims 1) filed two related putative class actions under the Medicare Secondary Payer (MSP) provisions alleging insurers American Family failed to pay primary PIP/settlement obligations, entitling plaintiffs (as assignees from Medicare Advantage Organizations, MAOs) to reimbursement.
Plaintiffs allege MAOs paid beneficiaries’ medical expenses under Medicare Advantage, then assigned their reimbursement rights to the plaintiffs; plaintiffs seek statutory damages and contract-based recovery in one case.
Defendants moved to dismiss plaintiffs’ amended complaints for lack of Article III standing and for failure to meet Rule 8 plausibility standards (Iqbal/Twombly), arguing the complaints are conclusory and lack specifics tying assignments and payments to particular MAOs, beneficiaries, dates, or amounts.
The complaints contain boilerplate assignment allegations and two near-identical “representative” claim examples, but do not identify assignment documents, assignors, execution dates, consideration, or concrete transactional details.
The court found plaintiffs effectively concede they did not themselves pay the underlying claims; standing therefore depends on valid, sufficiently pleaded assignments (assignee standing), and plaintiffs were ordered to plead or produce evidence of assignments.
The court granted defendants’ motions to dismiss but gave plaintiffs one final opportunity to amend and to provide evidence of assignments by a set deadline; the case schedule was stayed pending resolution of jurisdiction/pleading defects.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Article III standing (assignee status)	Plaintiffs allege MAOs assigned their reimbursement rights to plaintiffs, so plaintiffs have standing to sue.	Plaintiffs allege only conclusory assignments; no facts show assignments to plaintiffs for particular claims, so no standing.	Dismissed for now; plaintiffs must plead/produce assignment evidence to demonstrate standing.
Sufficiency of assignment allegations under Rule 8	General allegations plus representative claims suffice; detailed assignment terms can await discovery.	Bare, boilerplate assignment assertions are legal conclusions and fail Iqbal/Twombly; more factual particularity required.	Court requires more specific factual/allegation detail or evidence of assignments before allowing discovery/class proceedings.
Pleading of merits (primary payer/payment)	Plaintiffs allege defendants were primary payers (PIP policies/settlements) and failed to reimburse MAOs.	Allegations lack specificity tying a defendant to a particular unpaid medical expense, beneficiary, MAO, or payment obligation.	Merits allegations are likewise too conclusory; plaintiffs must plead particulars to state plausible claims.
Case management/class schedule	Plaintiffs sought class schedule to proceed.	Defendants argued jurisdictional/pleading defects should be resolved first.	Court struck the schedule and postponed class-certification timetable until standing/pleading issues are resolved.

Key Cases Cited

Ashcroft v. Iqbal, 556 U.S. 662 (conclusory allegations insufficient under Rule 8)
Bell Atlantic v. Twombly, 550 U.S. 544 (complaint must plead factual matter to make claim plausible)
Lujan v. Defenders of Wildlife, 504 U.S. 555 (standing requires injury in fact, causation, redressability)
Sprint Communications Co. v. APCC Servs., 554 U.S. 269 (assignee may sue for assignor's injury)
Apex Digital, Inc. v. Sears, Roebuck & Co., 572 F.3d 440 (court may consider evidence outside the pleadings on jurisdictional issues)