MAO-MSO Recovery II, LLC v. State Farm Mutual Automobile I
994 F.3d 869
7th Cir.2021Background:
- MAO-MSO are assignee/debt‑collector entities that acquired broad "baskets" of purported Medicare Part C conditional‑payment receivables from Medicare Advantage Organizations (MAOs) and sued State Farm under 42 U.S.C. § 1395y(b)(3)(A) to recover unreimbursed conditional payments (with double damages).
- The assignments often transferred large, undifferentiated portfolios with little up‑front diligence; assignees planned to use litigation/discovery to identify recoverable claims.
- The district court required MAO‑MSO to identify at least one "illustrative beneficiary"—a concrete example of an unreimbursed conditional payment for which State Farm was the primary payer—to satisfy Article III standing.
- MAO‑MSO amended to identify a specific beneficiary, "O.D.," alleging physical‑therapy payments were accident‑related and unreimbursed by State Farm.
- At summary judgment the court found the record showed the PT was for prior knee surgery, not the later car accident; MAO‑MSO failed to raise a genuine dispute that State Farm owed reimbursement, so no injury‑in‑fact and no standing. The Seventh Circuit affirmed, and also upheld denials of a Rule 56(d) discovery stay and leave to file a third amended complaint.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a statutory assignment alone suffices for Article III standing | Assignment of MAO's statutory reimbursement right creates standing to sue | Assignment alone does not prove a concrete, particularized injury; must show an unreimbursed payment | Court: Assignment alone insufficient; plaintiff must prove an injury‑in‑fact (illustrative beneficiary) |
| Whether O.D.’s treatment established an unreimbursed conditional payment by State Farm | O.D. reported knee pain after the crash; PT sessions arose from accident-related care | Medical/therapy records show PT began before crash and related to prior knee surgery, not the accident | Court: No genuine dispute that PT was for knee surgery; O.D. fails as illustrative beneficiary; no standing |
| Whether district court abused discretion by denying Rule 56(d) discovery stay | Additional discovery would uncover evidence of unreimbursed claims and other illustrative beneficiaries | Plaintiffs waived objections to the magistrate order and had time to pursue discovery; gave only speculative reasons | Court: Denial not an abuse—plaintiffs failed to show specific need or diligence |
| Whether district court erred in denying leave to file third amended complaint | Proposed amendment would add other illustrative beneficiaries and facts | Plaintiffs unduly delayed (six months) after indicating intent; no good cause under Rule 16(b) | Court: Denial not an abuse—no good cause shown; amendment untimely |
Key Cases Cited
- Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (Sup. Ct.) (congressional statutory rights do not automatically satisfy Article III injury‑in‑fact requirement)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (Sup. Ct.) (plaintiff must prove injury‑in‑fact with evidence appropriate to the litigation stage)
- Raines v. Byrd, 521 U.S. 811 (Sup. Ct.) (Congress cannot eliminate Article III standing by statute)
- Friends of the Earth, Inc. v. Laidlaw, 528 U.S. 167 (Sup. Ct.) (standing requires a concrete, particularized injury)
- MAO‑MSO Recovery II, LLC v. State Farm Mut. Auto. Ins. Co., 935 F.3d 573 (7th Cir.) (prior Seventh Circuit decision affirming dismissal for lack of standing)