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MAO-MSO Recovery II, LLC v. Government Employees Insurance Co.

United States District Court, D. Maryland, Southern Division

February 21, 2018

MAO-MSO RECOVERY II, LLC, et al., Plaintiffs,
v.
GOVERNMENT EMPLOYEES INSURANCE COMPANY, Defendant.

          MEMORANDUM OPINION AND ORDER

          PAUL W. GRIMM, UNITED STATES DISTRICT JUDGE

         Plaintiffs MAO-MSO Recovery II, LLC, MSP Recovery, LLC, and MSPA Claims 1, LLC have filed two putative class action lawsuits, MAO-MSO Recovery II, LLC v. Government Employees Insurance Company, PWG-17-711 (the “No-Fault Case”), and MAO-MSO Recovery II, LLC v. Government Employees Insurance Company, PWG-17-964 (the “Settlement Case”), against Defendant Government Employees Insurance Company (“GEICO”).[1] They seek reimbursement for accident-related medical expenses that Medicare Advantage Organizations (“MAOs”) paid on behalf of Medicare-eligible beneficiaries, claiming that GEICO was statutorily-obligated to pay for the expenses. No-Fault Am. Compl. ¶¶ 4-5, ECF No. 33 in No-Fault Case; Sett. Am. Compl. ¶¶ 3-4, ECF No. 28 in Sett. Case. In both cases, “Plaintiffs assert the rights of MAOs via assignment of all rights, title, and interest allowing them to bring these claims.” No-Fault Am. Compl. 2 n.2; Sett. Am. Compl. ¶ 2.

         In the No-Fault Case, the injured beneficiaries had no-fault insurance policies through GEICO. No-Fault Am. Compl. ¶¶ 4-5.[2] In the Settlement Case, it was not the injured beneficiaries who were insured through GEICO; rather, the beneficiaries were injured in accidents in which the tortfeasors had insurance through GEICO, and the beneficiaries entered into settlements with GEICO following the accidents. Sett. Am. Compl. ¶¶ 3-4. Plaintiffs allege that, under both circumstances, GEICO “was responsible for paying those expenses . . . in the first instance, . . . under the Medicare Secondary Payer provisions, ” 42 U.S.C. § 1395y(b), and therefore was obligated to reimburse the MAOs, but failed to do so. No-Fault Am. Compl. ¶¶ 1- 5; see Sett. Am. Compl. ¶¶ 1-4. Plaintiffs filed both lawsuits on behalf of themselves and all others similarly situated.

         GEICO has moved to dismiss the complaints and specifically the class allegations in both cases. Because Plaintiffs have standing and pleaded plausible claims for relief, I will deny the motions to dismiss. As for GEICO's requests to dismiss the class allegations, I will deny them without prejudice to filing motions to strike in each case at the point of class certification. And, insofar as GEICO's motions allege that Plaintiffs lack standing, the denials are without prejudice to renewal at the close of discovery, should the record support the renewal.

         The Medicare Secondary Payer Provisions

         The Medicare Act, 42 U.S.C. §§ 1395-1395hhh, provides health care coverage, “serv[ing] as a federal health insurance program benefitting the disabled and persons over the age of sixty-five.” O'Connor v. Mayor of Balt., 494 F.Supp.2d 372, 373 (D. Md. 2007). Initially, it “often acted as a primary insurer, . . . pa[ying] for enrollees' medical expenses even if there was overlapping insurance coverage or when a third party had an obligation to pay for the expenses.” MAO-MSO Recovery II, LLC v. Farmers Ins. Exch. (“Farmers”), No. 217CV02522CASPLAX, 2017 WL 5634097, at *2 (C.D. Cal. Nov. 20, 2017). Then, Congress passed the Medicare Secondary Payer provisions (“MSPP”), 42 U.S.C. § 1395y, “to ‘reduce Medicare costs by making the government a secondary provider of medical insurance coverage when a Medicare recipient has other sources of primary insurance coverage.'” Brown v. Thompson, 374 F.3d 253, 257 (4th Cir. 2004) (quoting Thompson v. Goetzmann, 337 F.3d 489, 495 (5th Cir. 2003)); see Netro v. Greater Balt. Med. Ctr. Inc., No. GLR-16-3769, 2017 WL 5635446, at *2 (D. Md. Apr. 13, 2017) (same); O'Connor v. Mayor of Balt., 494 F.Supp.2d 372, 373 (D. Md. 2007) (same). The MSPP “shifts responsibility for medical payments to other group health plans, workers' compensation, no-fault and liability insurers, which are considered ‘primary plans.'” Farmers, 2017 WL 5634097, at *2 (quoting 42 U.S.C. § 1395y(b)(2)).

         Pursuant to the MSPP, Medicare cannot make a payment “with respect to any item or service to the extent that . . . payment has been made, or can reasonably be expected to be made, with respect to the item or service” by a primary payer; Medicare may, however, make a “conditional payment” if a primary payer “has not made or cannot reasonably be expected to make payment with respect to such item or service promptly.” 42 U.S.C. § 1395y(b)(2)(A)(i), (B)(i). Conditional payments are made “with the expectation that the primary payer will later reimburse Medicare if responsible for the cost.” O'Connor, 494 F.Supp.2d at 373 (citing 42 U.S.C. § 1395y(b)(2)(B)). If Medicare makes a conditional payment, “the primary payer must then reimburse Medicare . . . ‘if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service.'” Farmers, 2017 WL 5634097, at *2 (quoting 42 U.S.C. § 1395y(b)(2)(B)(ii)). The MSPP permits “private citizens [to] sue primary payers when a primary payer ‘fails to provide for primary payment (or appropriate reimbursement), '” and it provides for double damages. Netro, 2017 WL 5635446, at *3 (quoting 42 U.S.C. § 1395y(b)(3)(A)); see O'Connor, 494 F.Supp.2d at 373.

         Procedural Background

         Plaintiffs filed the No-Fault Case on March 15, 2017, Compl., ECF No. 1 in No-Fault Case, and the Settlement Case on April 6, 2017, Compl., ECF No. 1 in Sett. Case. In both cases, I issued my customary order relating to the filing of motions. ECF No. 21 in No-Fault Case; ECF No. 15 in Sett. Case. In the No-Fault Case, GEICO complied with the order, filing a short letter describing the factual and legal basis for its belief that Plaintiffs' Complaint was deficient and failed to state a claim for reimbursement under the MSPP. ECF No. 22. GEICO also challenged the sufficiency of the class action allegations and noted that it was “researching other aspects of the case and . . . may raise other issues including whether the complaint should be dismissed pursuant to Rule 12(b)(1) for lack of subject matter jurisdiction.” Id. I held a conference call, ECF No. 25, and as agreed during that call, GEICO filed its motion to dismiss and memorandum in support in the No-Fault Case, ECF Nos. 30 and 31; Plaintiffs amended their pleadings in that case, ECF No. 33; and GEICO renewed its request to move to dismiss, ECF No. 34. It also sought leave to file a similar motion to dismiss in the Settlement Case. ECF No. 19 in Sett. Case. I struck the original motion to dismiss in the No-Fault Case, ECF No. 37 in No-Fault Case; permitted Plaintiffs to amend in the Settlement Case, ECF No. 26 in Sett. Case; and GEICO filed the motions to dismiss that now are pending, ECF No. 44 in No-Fault Case; ECF No. 31 in Sett. Case. Both of these motions challenge the Court's jurisdiction and argue that Plaintiffs fail to state a claim or present sufficient class allegations.

         Plaintiffs filed consolidated Oppositions, docketed as ECF No. 49 in the No-Fault Case and ECF No. 35 in the Settlement Case; GEICO filed consolidated Replies, docketed as ECF No. 53 in the No-Fault Case and ECF No. 39 in the Settlement Case; and the parties filed summaries of their memoranda and opposition in both cases, ECF Nos. 55, 56 in No-Fault Case; ECF Nos. 41, 42 in Sett. Case. A hearing is not necessary. See Loc. R. 105.6. Neither party discusses the jurisdictional issue at any length but, given that the cases cannot proceed without subject matter jurisdiction and the Court must consider the issue sua sponte and dismiss the lawsuit if jurisdiction is lacking, see Fed. R. Civ. P. 12(h)(3), I will address it first. In a nutshell, if the Plaintiffs have standing to sue GEICO, then there is subject matter jurisdiction. If not, there is not.

         Jurisdiction

         This Court may “adjudicate only actual cases and controversies.” Zaycer v. Sturm Foods, Inc., 896 F.Supp.2d 399, 407 (D. Md. 2012) (citing U.S. Const. art. III, § 2; O'Shea v. Littleton, 414 U.S. 488, 493 (1974); Bishop v. Bartlett, 575 F.3d 419, 423 (4th Cir. 2009)). Thus, this Court only has jurisdiction if

(1) [the plaintiff] has suffered an “injury in fact” that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.

Id. at 408 (quoting Bishop, 575 F.3d at 423). In other words, the plaintiff must have standing. See id.

         For putative class actions, such as the cases before me, the Court “analyze[s] standing based on the allegations of personal injury made by the named plaintiffs. Without a sufficient allegation of harm to the named plaintiff in particular, plaintiffs cannot meet their burden of establishing standing.” Dreher v. Experian Info. Sols., Inc., 856 F.3d 337, 343 (4th Cir. 2017) (quoting Beck v. McDonald, 848 F.3d 262, 269-70 (4th Cir. 2017) (citation and internal quotation marks omitted) (alterations from Dreher removed)). Notably, “[a]ssignees of a claim . . . have long been permitted to bring suit, ” because “[l]awsuits by assignees . . . are ‘cases and controversies of the sort traditionally amenable to, and resolved by, the judicial process.'” Sprint Commc'ns Co., L.P. v. APCC Servs., Inc., 554 U.S. 269, 285-86 (2008) (quoting Vt. Agency of Nat. Res. v. United States ex rel. Stevens, 529 U.S. 765, 777-78 (2000) (internal quotation marks omitted)). Thus, “the assignee of a claim has standing to assert the injury in fact suffered by the assignor.” Vt. Agency of Nat. Res., 529 U.S. at 773.

         GEICO contends that this Court lacks subject matter jurisdiction because Plaintiffs lack standing. Def.'s No-Fault Mem. 7-8, 10; Def.'s Sett. Mem. 7, 9. When a defendant moves to dismiss pursuant to Fed.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction, asserting a facial challenge that “a complaint simply fails to allege facts upon which subject matter jurisdiction can be based, ” as GEICO does here, “the facts alleged in the complaint are assumed to be true and the plaintiff, in effect, is afforded the same procedural protection as he would receive under a 12(b)(6) consideration.” Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982); see Lutfi v. United States, 527 F. App'x 236, 241 (4th Cir. 2013); Fianko v. United States, No. PWG-12-2025, 2013 WL 3873226, at *4 (D. Md. July 24, 2013). Thus, “the facts alleged in the complaint are taken as true, and the motion must be denied if the complaint alleges sufficient facts to invoke subject matter jurisdiction.” Kerns v. United States, 585 F.3d 187, 192 (4th Cir. 2009); see In re KBR, Inc., Burn Pit Litig., 925 F.Supp.2d 752, 758 (D. Md. 2013) (quoting Kerns, 585 F.3d at 192). This Court must act “on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007) (citations omitted). The burden is on the plaintiff to establish jurisdiction. Sherill v. Mayor of Balt., 31 F.Supp.3d 750, 763 (D. Md. 2014). (citing Lovern v. Edwards, 190 F.3d 648, 654 (4th Cir. 1999)).

         Discussion

         GEICO insists that the Amended Complaints “fail[] to plead any facts demonstrating how Plaintiffs or their MAO assignor(s) suffered an injury in fact.” Def.'s No-Fault Mem. 10; see Def.'s Sett. Mem. 9. And, GEICO contends that Plaintiffs' amended pleadings still fail to allege “whether and when any valid assignments of rights were made by the MAO to any of the Plaintiffs, ” Def.'s No-Fault Mem. 11; see Id. at 10 n.5 (cross-referencing 12(b)(6) discussion in 12(b)(1) discussion); Def.'s Sett. Mem. 11. Plaintiffs counter:

Both FACs allege that the underlying MAOs, who assigned their rights of recovery to the Plaintiffs, suffered an economic injury as result of making payments GEICO was statutorily required to pay in the first place, whether by virture of an underlying no-fault insurance policy or a settlement agreement. E.g., No-Fault FAC ¶ 4 (“[T]he MAOs paid or otherwise incurred losses for the medical items or treatment even though the GEICO was responsible for paying those expenses.”); id. ¶¶ 5, 55, 57, 60-61, 75, 77, 81, 83, 88 (alleging how GEICO caused economic injury to the underlying MAOs); Settlement FAC ¶¶ 4, 5, 51, 56, 66, 69, 71, 72 (same). In either case, this quantifiable economic loss is a real and cognizable injury sufficient to confer standing to the underlying MAOs and thus, by assignment, to Plaintiffs.

Pls.' Opp'n 8. GEICO disagrees, arguing that Plaintiffs do nothing more than “[g]enerically declar[e] that unidentified MAO assignors have made payments that were not reimbursed by GEICO, ” which, in GEICO's view, “means nothing because GEICO's obligation to reimburse does not arise until several prerequisites are satisfied, ” and Plaintiffs have not alleged that those prerequisites were satisfied. Def.'s Reply 1. Thus, to determine whether Plaintiffs have standing, I must consider whether Plaintiffs sufficiently alleged that the MAOs suffered an injury in fact, see Bishop, 575 F.3d at 423, that is, that they were not reimbursed when they should have been, and whether the MAOs assigned their right to reimbursement to Plaintiffs, see Vt. Agency of Nat. Res., 529 U.S. at 773. See also MAO-MSO Recovery II, LLC v. USAA Cas. Ins. Co., No. 17-21289-CIV, 2017 WL 6411099, at *4 (S.D. Fla. Dec. 14, 2017) (noting that these facts must be alleged to establish standing).

         1. Injury in Fact

         O'Connor v. Mayor of Baltimore, 494 F.Supp.2d 372 (D. Md. 2007), provides guidance on what constitutes adequate pleading of injury in fact by a private party seeking to bring a claim under the MSPP. There, a former firefighter with the Baltimore City Fire Department contracted mesothelioma and “incurred significant medical expenses, paid by Medicare, in treating his disease.” Id. at 372. Finding that the disease resulted from his employment, the Maryland Workers' Compensation Commission ordered Baltimore City to pay O'Connor's related medical bills. Id. When Baltimore City (which, because it is self-insured, qualified as a primary payer under the MSPP) failed to pay, O'Connor sued it for damages representing twice the amount of the medical expenses that Medicare paid on his behalf, pursuant to the MSPP. Id.

         Baltimore City moved to dismiss, arguing that O'Connor lacked standing because he had not suffered an injury in fact. Id. at 373-74. This Court concluded that O'Connor “ha[d] alleged an injury in fact, ” reasoning:

In particular, the Complaint avers that the MSP statute renders the City responsible as a primary payer for O'Connor's medical expenses and that its refusal to fulfill this obligation has forced Medicare to make all mesothelioma-related payments on O'Connor's behalf. (Compl.¶¶ 5-6, 8, 11-15.) These general allegations of injury suffice at this early stage of the litigation. See White Tail Park, 413 F.3d at 459 (citing Lujan, 504 U.S. at 561, 112 S.Ct. 2130). Moreover, the MSP statute's citizen suit provision exists to redress exactly this type of injury. See Manning v. Utils. Mut. Ins. Co., 254 F.3d 387, 394 (2d Cir.2001) (“The MSP creates a private right of action for individuals whose medical bills are improperly denied by insurers and instead paid by Medicare....”).

Id. at 374.

         Here, similarly, in the No-Fault Case, Plaintiffs claim that the MAOs (their assignors) made conditional payments on behalf of their beneficiaries following automobile accidents in which the beneficiaries sustained injuries requiring medical services and/or supplies. No-Fault Am. Compl. ¶¶ 50-54. They also allege that GEICO, as those beneficiaries' primary insurer, was obligated to make the payments, but failed to reimburse the MAOs, as it was required to do by statute. Id. Specifically, they claim:

Plaintiffs have identified medical claims whereby Plaintiffs' beneficiaries were involved in automobile-related accidents and experienced medical expenses as a result. Of those claims, Plaintiffs have been able to determine that those Medicare beneficiaries possessed automobile insurance policies with the Defendant containing no-fault provisions. Thus, there is reasonable evidence of overlapping coverage and evidence that the payments were made by a Medicare Part C payer instead of the primary payer, the Defendant herein. . . .
. . .
. . . for the purposes of illustration alone, and subject to the collection of additional data through discovery, Plaintiffs allege, with specificity, the following representative claim involving payments for medical services that Defendant was primarily responsible for. A Florida resident was a receiving [sic] Medicare benefits from the an [sic] MAO whose right to recover under the MSP act have [sic] been assigned to Plaintiffs. That person was involved in an automobile accident on April 25, 2014 that required medical services arising out of the use, maintenance, and/or operation of a motor vehicle. Plaintiffs' MAO paid for those medical expenses. That person, however, at the time of the accident also possessed a PIP policy with the Defendant, which required payment of medical expesens [sic] up to the policy limit of $10, 000. Defendant, however, did not pay or reimburse the MAOs for those expenses within the required time frame, as required of a primary payer. Additionally, the Defendant did not challenge the MAO's payment of those medical expenses as reasonable and necessary within the required time frame.

Id. ¶¶ 55, 57. Although Plaintiffs do not name the “Medicare Beneficiary, . . . the corresponding MAO, Full Risk Payer and/or their assignee(s), ” they assert that they will do so “upon execution of a qualified protective order.” Id. at 15 n.10.

         And, likewise, in the Settlement Case, Plaintiffs claim that GEICO indemnified their insureds for accidents causing injury to the MAOs' beneficiaries and made payments pursuant to settlement agreements but failed to reimburse the MAOs for the beneficiaries' medical expenses that the MAOs had covered. Sett. Am. Compl. ¶¶ 47-49, 61-66. They assert that their allegations are based on their “review of claims data, ” through which they “have identified settlements which followed incidents involving Plaintiffs' beneficiaries and Defendant's insureds (Tortfeasors) where Plaintiffs' beneficiaries sustained injuries that required medical treatment.” Id. ¶ 50. They claim:

Such medical treatment was provided by Plaintiffs' MAOs. When Tortfeasors and Medicare Beneficiaries entered into settlements to resolve claims made against Tortfeasors, Defendant indemnified its insured Tortfeasors by making settlement payments. The data reviewed by Plaintiffs indicates that Defendant never reimbursed Plaintiffs' MAOs for the medical ...

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