MSP RECOVERY CLAIMS, SERIES LLC and SERIES 17-04-631, a series of MSP Recovery Claims, Series LLC v. PLYMOUTH ROCK ASSURANCE CORPORATION, INC
Civil Action No. 18-cv-11702-ADB
UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS
July 18, 2019
BURROUGHS, D.J.
BURROUGHS, D.J.
MSP Recovery Claims, Series LLC and Series 17-04-631 (together “MSPRC“) bring this putative class action under the Medicare Secondary Payer Act (“MSPA“) as the assignee of a Medicare Advantage Organization (“MAO“). Defendants Plymouth Rock Assurance Corporation, Inc. and The Plymouth Rock Company, Inc. (together “Plymouth“) offer automobile insurance and frequently settle claims for injuries that result from accidents involving the individuals they insure. MSPRC argues that at least one of those settlements rendered Plymouth liable for medical expenses that had been paid by its assignor MAO and claims that Plymouth failed to reimburse that MAO. MSPRC brings a single claim against Plymouth pursuant to the MSPA‘s private cause of action,
I. FACTUAL BACKGROUND
The following facts are drawn from the Complaint, the well-pleaded allegations of which are taken as true for the purposes of evaluating the motion to dismiss. See Ruivo v. Wells Fargo Bank, N.A., 766 F.3d 87, 90 (1st Cir. 2014) (citing A.G. ex rel. Maddox v. Elsevier, Inc., 732 F.3d 77, 80 (1st Cir. 2013). Certain details are also culled from documents attached to the Complaint and from documents whose authenticity is not disputed by the parties. See Alvarez-Mauras v. Banco Popular of P.R., 919 F.3d 617, 622 (1st Cir. 2019) (citing Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993)).
MSPRC brings this action as the assignee of MAO Fallon Community Health Plan (“Fallon“). [ECF No. 1 (“Compl.“) ¶¶ 7, 14].1 On April 12, 2012, an individual named A.C., who later enrolled in a Medicare Advantage plan administered by Fallon, was injured in an accident. Id. ¶ 8. Between April 16, 2012 and August 30, 2013, A.C. received numerous medical services for accident-related injuries. Id. ¶ 9. One of A.C.‘s medical providers billed Fallon $8,106.30 for accident-related services, and Fallon paid $1,782.02 to settle that charge. Id. ¶ 10.
Following the accident, A.C. asserted a claim against the tortfeasor involved in the accident, who was insured by Plymouth. Id. ¶¶ 8, 11. Plymouth settled A.C.‘s claim against its insured, reported the settlement to the Centers for Medicare & Medicaid Services (“CMS“), and thereby became the primary payer for A.C.‘s accident-related medical expenses. Id. ¶ 11. MSPRC alleges that, as of the date Plymouth notified CMS of the settlement, Plymouth knew it was obligated to reimburse Fallon for the $1,782.02 of accident-related medical expenses that Fallon had
On June 19, 2017, Fallon assigned all rights to recover conditional payments made for its enrollees’ healthcare services to MSP Recovery, LLC. Id. at 45. MSP Recovery, LLC then assigned all of the rights acquired from Fallon to Series 17-04-631, a designated series of MSP Recovery Claims, Series LLC. Id. at 53.
In addition to A.C.‘s accident-related medical expenses, MSPRC asserts that Plymouth is the primary payer for numerous other medical expenses that it will be able to identify once it obtains and organizes data from Plymouth. See id. ¶ 51. MSPRC brings a single count to recover those expenses from Plymouth under the MSPA‘s private cause of action. Id. ¶¶ 55–65. The claim is brought on behalf of the following putative class:
All Medicare Advantage Organizations, or their assignees, that provide benefits under Medicare Part C, in the United States of America and its territories, which made payments for a Medicare beneficiary‘s medical expenses where Defendant:
(1) is the primary payer by virtue of having settled a claim with Medicare beneficiary enrolled in a Medicare Advantage plan;
(2) settled a dispute to pay for personal injuries with a Medicare beneficiary enrolled in a Medicare Advantage plan; and
(3) failed to reimburse Medicare Advantage Organizations, or their assignees, the payments provided for medical items and services related to the claims settled by Defendant.
This class definition excludes (a) Defendant, its officers, directors, management, employees, subsidiaries, and affiliates; and (b) any judges or justices involved in this action and any members of their immediate families.
Id. ¶ 45.
II. LEGAL FRAMEWORK FOR CLAIM
Traditional Medicare consists of Parts A and B of the Medicare Act. See
“Before 1980, ‘Medicare paid for all medical treatment within its scope and left private insurers merely to pick up whatever expenses remained.‘” Humana Med. Plan, Inc. v. W. Heritage Ins. Co., 832 F.3d 1229, 1234 (11th Cir. 2016) (quoting Bio-Med. Applications of Tenn., Inc. v. Cent. States Se. & Sw. Areas Health & Welfare Fund, 656 F.3d 277, 278 (6th Cir. 2011)). “In 1980, in an effort to curb the rising costs of Medicare, Congress enacted the MSPA, which ‘inverted that system; it made private insurers covering the same treatment the “primary” payers and Medicare the “secondary” payer.’ Medicare benefits became an entitlement of last resort, available only if no private insurer was liable.” Id. (citation omitted). Under the current Medicare system, an automobile insurance provider or a similarly situated entity is the primary payer relative to Medicare or an MAO whenever its policy holders cause Medicare eligible expenses
In 1986, in an effort to “encourage private parties to bring actions to enforce Medicare‘s rights” under the MSPA and thereby reduce instances of primary payers failing to cover costs or to reimburse CMS, Congress created the MSPA‘s private cause of action. See United Seniors Ass‘n v. Philip Morris USA, 500 F.3d 19, 22 (1st Cir. 2007). The private cause of action provides:
There is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A) [of
42 U.S.C. § 1395y(b) ].
In 1997, Congress enacted Part C of Medicare, the Medicare Advantage program, including the provisions that allowed for the creation of MAOs. See id. at 1235 & n.3 (citing
Advantage program, MAOs administer Medicare benefits pursuant to a contract with CMS, and CMS pays the MAOs a fixed fee per enrollee. An MAO must provide its enrollees at least the same benefits as they would receive under traditional Medicare. See
Medicare Part C includes a provision that allows MAOs to charge a primary payer, such as an auto insurance provider that insures a tortfeasor and thereby becomes a primary payer pursuant to the MSPA, or an individual who has received payments from such a primary payer. Specifically, “[o]rganization as secondary payer,” provides:
Notwithstanding any other provision of law, a [Medicare Advantage] organization
may (in the case of the provision of items and services to an individual under a [Medicare Advantage] plan under circumstances in which payment under this subchapter is made secondary pursuant to section 1395y(b)(2) of this title) charge or authorize the provider of such services to charge, in accordance with the charges allowed under a law, plan, or policy described in such section-- (A) the insurance carrier, employer, or other entity which under such law, plan, or policy is to pay for the provision of such services, or
(B) such individual to the extent that the individual has been paid under such law, plan, or policy for such services.
The cause of action that permits the United States to bring an action “against any or all entities that are or were required or responsible” for payment under the MSPA is unavailable to MAOs. That government cause of action, however, also permits the United States to recover double damages from secondary payers in accordance with the MSPA‘s private cause of action. See
III. MOTION TO DISMISS
Plymouth moves to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction and pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be granted. [ECF No. 8].
A. Legal Standard
When evaluating a motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(1) at the pleading stage, granting such a motion “is appropriate only when the facts alleged in the complaint, taken as true, do not justify the exercise of subject matter jurisdiction.” Muniz-Rivera v. United States, 326 F.3d 8, 11 (1st Cir. 2003). “When a district court considers a Rule 12(b)(1) motion, it must credit the
To withstand a motion to dismiss under Rule 12(b)(6), a complaint must allege a claim for relief that is “plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Assessing the plausibility of a claim is a two-step process:
First, the court must sift through the averments in the complaint, separating conclusory legal allegations (which may be disregarded) from allegations of fact (which must be credited). Second, the court must consider whether the winnowed residue of factual allegations gives rise to a plausible claim to relief.
Rodriguez-Reyes v. Molina-Rodriguez, 711 F.3d 49, 53 (1st Cir. 2013) (citation omitted). Along with all well-pleaded facts, the Court must draw all logical inferences from a complaint in favor of the plaintiff. Frappier v. Countrywide Home Loans, Inc., 750 F.3d 91, 96 (1st Cir. 2014). “If the factual allegations in the complaint are too meager, vague, or conclusory to remove the possibility of relief from the realm of mere conjecture, the complaint is open to dismissal.” Rodriguez-Reyes, 711 F.3d at 53 (quoting SEC v. Tambone, 597 F.3d 436, 442 (1st Cir. 2010) (en banc)).
“When a court is confronted with motions to dismiss under both Rules 12(b)(1) and 12(b)(6), it ordinarily ought to decide the former before broaching the latter,” because “if the court lacks subject matter jurisdiction, assessment of the merits becomes a matter of purely academic interest.” Deniz v. Municipality of Guaynabo, 285 F.3d 142, 149–50 (1st Cir. 2002).
B. Motion to Dismiss for Lack of Subject Matter Jurisdiction
Plymouth asserts that MSPRC has not demonstrated that it holds a valid claim by assignment and therefore cannot establish standing to sue. [ECF No. 9 at 8–12, 25–28]. To satisfy the “irreducible constitutional minimum” of Article III standing, a “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.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016) (citing Lujan v. Defs. of Wildlife, 504 U.S. 555, 560–61 (1992)). A party “generally must assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights or interests of third parties.” Warth v. Seldin, 422 U.S. 490, 499 (1975). A plaintiff may, however, obtain standing to sue where it has received a valid assignment from a person who holds the rights to a claim. See Sprint Commc‘ns Co. v. APCC Servs., Inc., 554 U.S. 269, 285 (2008) (“[T]here is a strong tradition specifically of suits by assignees for collection. . . . Lawsuits by assignees, including assignees for collection only, are ‘cases and controversies of the sort traditionally amenable to, and resolved by, the judicial process.‘” (quoting Vt. Agency of Nat. Res. v. United States ex rel. Stevens, 529 U.S. 765, 777–78 (2000))).
Plymouth
[Fallon] hereby irrevocably assigns, transfers, conveys, sets over and delivers to MSP Recovery, and any of its successors and assigns, any and all of Client‘s right, title, ownership and interest in and to all Claims existing on the date hereof, whether based in contract, tort, statutory right, and any and all rights (including, but not limited to, subrogation) to pursue and/or recover monies for [Fallon] that [Fallon] had, may have had, or has asserted against any party in connection with the Claims and all rights and claims against primary payers and/or third Parties that may be liable to [Fallon] arising from or relating to the Claims, including claims under consumer protection statutes and laws, and all information relating thereto, all of which shall constitute the “Assigned Claims“. The transfer, grant, right, or assignment of any and all of [Fallon‘s] right, title, ownership, interest and entitlements in and to the Assigned Claims shall remain the confidential and exclusive property of MSP Recovery or its assigns. This assignment is irrevocable and absolute.
Id. at 45 (emphasis removed). On June 20, 2017, MSP Record, LLC in turn assigned the claims it had received from Fallon to Series 17-04-631, LLC, a series of MSP Recovery Claims, Series LLC. Id. at 53.5
assignment” given that Plaintiff Series 17-04-631, LLC was assigned the claim at issue. See [ECF No. 9 at 9].6 Under Delaware law, a series has “the power and capacity to, in its own name, . . . sue and be sued.”
The Court also finds the argument that Fallon merely provided a contingent fee agreement rather than an assignment unavailing. See [ECF No. 9 at 11–12]. Plymouth is correct that contingent fee agreements do not confer standing, see In re Comput. Eng‘g Assocs., Inc., 337 F.3d 38, 46 (1st Cir. 2003) (“assignor must divest itself of all right, interest, and control in the property assigned“); Advanced Magnetics, Inc. v. Bayfront Partners, Inc., 106 F.3d 11, 17–18 (2d Cir. 1997) (“power of attorney . . . is not the equivalent of an assignment of ownership“), but the assignment from Fallon is not merely a contingent fee agreement because the right to pursue the assigned claims has been irrevocably transferred. Although the assignment contains a termination clause, that clause does not “affect or revoke any claims already assigned to MSP
Recovery prior to the effective date of termination or which MSP Recovery has commenced recovery efforts.” Compl. at 48.7
Plymouth also argues that even if the assignment appears valid, the MSPA‘s private cause of action, the basis for the assigned claim, provides no cause of action to MAOs and therefore Fallon could not have conveyed such claims. [ECF No. 9 at 13–21]. Considering the language of the private cause of action and the structure of Medicare Part C, the Court disagrees. The First Circuit has not expressly decided whether the private cause of action allows an action by an MAO. It has, however, considered the statute in a case concerning whether the private cause of action was a qui tam statute. See United Seniors Ass‘n, 500 F.3d 19. In discussing whether
action is also available to a healthcare provider who has not been paid by a primary plan, not only a beneficiary); Parra, 715 F.3d at 1152 (same).
This Court finds the Third Circuit‘s reasoning in In re Avandia Marketing, Sales Practices & Products Liability Litigation, 685 F.3d 353 (3d Cir. 2012), persuasive. The court held that an MAO may bring suit under
The Court also disagrees with Plymouth‘s argument that the assignment should be held invalid because the cause of action is penal in that it allows a double recovery. See [ECF No. 9 at 9–10]. Where a statute creates a remedial cause of action that vests an individual with a valid claim, as the Court concludes occurred here, the assignment of those claims is permissible even where the statute provides double or treble damages. See Jefferson Cty. Pharm. Ass‘n, Inc. v. Abbott Labs., 460 U.S. 150, 152 (1983) (upholding assigned claims for treble damages under the Robinson-Patman Act); Cordes & Co. Fin. Servs. v. A.G. Edwards & Sons, Inc., 502 F.3d 91, 103 (2d Cir. 2007) (upholding assignment of antitrust claims and noting “such assignments are widely permitted, presumably in order to allow holders of claims to transfer the risk of loss to someone better able or more
MSPRC has shown that it holds a facially valid irrevocable assignment of a claim that originated from Fallon and for which there is a valid cause of action. MSPRC has also plausibly alleged that Fallon‘s right to recover the $1,782.02 paid for the accident-related medical expenses that it incurred for A.C. was included in the assignment from Fallon, and it has therefore demonstrated standing and federal question jurisdiction.
C. Motion to Dismiss for Failure to State a Claim
Plymouth argues that the claim should be also be dismissed because: (1) the complaint fails to establish Plymouth‘s “demonstrated responsibility” for the medical expenses at issue; (2) MSPRC failed to comply with applicable notice requirements; (3) the claim is barred by the statute of limitations; and (4) Defendant Plymouth Rock Company Inc. is not an insurer and therefore cannot be a primary payer under the MSPA. See [ECF No. 9 at 21–25, 28–30]. The Court finds these arguments unavailing.
1. Demonstrated Responsibility
Plymouth argues that its responsibility as a primary payer has not been adequately demonstrated. See id. at 21. Plymouth relies on Glover v. Liggett Grp., Inc., 459 F.3d 1304 (11th Cir. 2006), where the Eleventh Circuit explained that until a defendant‘s “responsibility to pay for a Medicare beneficiary‘s expenses has been demonstrated (for example, by a judgment), [its] obligation to reimburse Medicare does not exist . . . .” 459 F.3d at 1309. The Eleventh Circuit noted that a “tortfeasor‘s responsibility for payment of a Medicare beneficiary‘s medical costs must be demonstrated before an MSP private cause of action for failure to reimburse Medicare can correctly be brought under section 1395y(b)(3)(A).” Id. (emphasis omitted).
Here, the Complaint alleges that Plymouth settled A.C.‘s claim against its insured, was aware of “its responsibility to reimburse Fallon,” and admitted that it “should have paid for A.C.‘s accident-related injuries.” Compl. ¶ 11. Taking these well-pled allegations as true, as the Court must at this stage, Plymouth was aware of its obligation to reimburse Fallon for A.C.‘s accident-related medical services but failed to do so. The Court notes, however, that while the allegations are well-pled as to Plymouth‘s obligation to pay medical expenses related to A.C.‘s accident, claims related to other tortfeasors have not yet been alleged with sufficient particularity to justify more wide-ranging discovery. Cf. Hope v. Fair Acres Geriatric Ctr., 174 F. Supp. 3d 880, 891–92 (E.D. Pa. 2016) (dismissing MSPA claim where plaintiff had not demonstrated defendant‘s responsibility for any of the services rendered).
2. Notice Requirements
Plymouth next asserts that the claim should be dismissed because MSPRC has not shown its compliance with certain regulatory provisions. The regulations applicable to potential primary payers provide, in pertinent part:
(b) A primary payer‘s responsibility for payment may be demonstrated by— (1) A judgment;
(2) A payment conditioned upon the beneficiary‘s compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary payer or the primary payer‘s insured; or
(3) By other means, including but not limited to a settlement, award, or contractual obligation.
(c) The primary payer must make payment to either of the following:
(1) To the entity designated to receive repayments if the demonstration of primary payer responsibilities is other than receipt of a recovery demand letter from CMS or designated contractor.
(2) As directed in a recovery demand letter.
3. Statute of Limitations
Although the private cause of action is silent as to the limitations period, see
The Court assumes for the purposes of the motion to dismiss that the statute of limitations began to run no earlier than the date Plymouth settled A.C.‘s claims,
settlement); MSPA Claims 1, LLC v. Liberty Mut. Co., No. 1:15-CV-21417-UU, 2015 WL 4511284, at *3 (S.D. Fla. July 22, 2015) (“simply alleging the existence of a contractual or statutory obligation does not mean that a responsibility to pay has been demonstrated“). But see MSP Recovery, LLC v. Allstate Ins. Co., 835 F.3d 1351, 1362–63 (11th Cir. 2016) (holding that demonstrated responsibility requirement did not require a “judgment or settlement from a separate proceeding“). It is unclear when Fallon was on actual or inquiry notice of Plymouth‘s settlement with A.C., and the statute of limitations therefore presents a question that cannot be resolved at this stage. See [ECF No. 18 at 19 (asserting that MSPRC could not have received notice until at least June 2017)].
4. Defendant Plymouth Rock Company Inc.
Plymouth argues that the Court should dismiss Plymouth Rock Company Inc. because it is not an insurance company and cannot be a primary payer. [ECF No. 9 at 29–30]. MSPRC responds that Plymouth is engaged in a “shell game” in which The Plymouth Rock Company Inc., as the corporate parent of insurer Plymouth Rock Assurance Corporation, Inc, settles claims brought by tort victims to allow its insurance policy issuing subsidiary to maintain the façade that it has not settled relevant claims. [ECF No. 18 at 20]. In light of this allegation, the Court declines to dismiss Plymouth Rock Company Inc. at this time.
The motion to dismiss this action for lack of subject matter jurisdiction or failure to state a claim on which relief can be granted will therefore be denied.
IV. MOTION TO STRIKE CLASS CLAIM
Federal Rule of Civil Procedure 12(f) provides that a “court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.”
This case presents a rare instance in which striking the class allegations is appropriate for three reasons. First, the class definition would include MAOs with claims that are time barred. “A court may strike class allegations that plainly encompass individuals whose claims are barred by jurisdictional or time limitations.” Monteferrante v. Williams-Sonoma, Inc., 241 F. Supp. 3d 264, 269 (D. Mass. 2017); see Barrett v. Forest Labs., Inc., 39 F. Supp. 3d 407, 458 (S.D.N.Y. 2014) (narrowing putative class to include only class members whose claims accrued within applicable limitations period). MSPRC has acknowledged that a three-year statute of limitations applies, but it has made no effort to provide a temporal limit in its class definition. See [ECF No. 18 at 19]. The class definition is therefore overbroad.
Second, the class is a “fail-safe class” because owning the rights to a claim for which Plymouth is liable is essentially a prerequisite for membership in the class. Fail-safe classes are those that “cannot be defined until the case is resolved on its merits,” Young v. Nationwide Mut. Ins. Co., 693 F.3d 532, 538 (6th Cir. 2012), and are impermissible because they make it “virtually impossible for the Defendants to ever ‘win’ the case, with the intended class preclusive effects” as any class member against whom Defendant succeeds is thereby excluded from the class, In re Nexium Antitrust Litig., 777 F.3d 9, 22 n.19 (1st Cir. 2015). To avoid such impermissible classes, “[i]n approving a proposed class definition, [a court] must ensure that ‘eligibility as a class member ... is not dependent upon a legal conclusion‘” of liability. Campbell v. First Am. Title Ins. Co., 269 F.R.D. 68, 74 (D. Me. 2010) (citing Alberton v. Commonwealth Land Title Ins. Co., 264 F.R.D. 203, 207 (E.D. Pa. 2010)). Here, the class definition essentially mirrors the elements for a MSPA private cause of action. MSPRC asserts that the “private right of action has three straightforward elements: (1) the defendant‘s status as a primary plan; (2) the defendant‘s failure to provide for primary payment or appropriate reimbursement; and; (3) the damages amount.” [ECF No. 19 at 1 (citing Humana Med. Plan, 832 F.3d at 1239)]. Those elements are each included within MSPRC‘s putative class definition, which requires class members be: (1) MAOs or assignees, (2) that made payments for medical services provided to a Medicare enrollee for its injuries, (3) for which Plymouth had the primary payment responsibility because it settled a Medicare enrollee‘s claim for medical services, and (4) for which Plymouth did not reimburse the MAO. See id. at 14. The class allegations may therefore be stricken because they seek to create an impermissible fail-safe class.
Third and lastly, even if a class of MAOs with viable claims could be ascertained and noticed, the pleadings and record demonstrate that the requirements of Federal Rule of Civil Procedure 23 will not be satisfied in this case because questions of law or fact common to class members will not predominate. See
V. CONCLUSION
Accordingly, the motion to dismiss [ECF No. 8] is DENIED, and the motion to strike [ECF No. 11] is GRANTED.
SO ORDERED.
July 18, 2019 /s/ Allison D. Burroughs
ALLISON D. BURROUGHS
U.S. DISTRICT JUDGE