MAO-MSO Recovery II, LLC et al v. The Farmers Insurance Exchange et al

Filing 97

MINUTES (IN CHAMBERS) by Judge Christina A. Snyder: RE DEFENDANTS MOTION TO STRIKE OR, IN THE ALTERNATIVE, DISMISS PLAINTIFFS SECOND AMENDED CLASS ACTION COMPLAINT in No. 17-2522 (Dkt 82, filed January 22, 2018). DEFENDANTS MOTIONS TO STRIKE OR, IN T HE ALTERNATIVE, DISMISS PLAINTIFFS SECOND AMENDED CLASS ACTION COMPLAINT in No. 17-2559 81 and 82 , filed January 22, 2018). The SECOND AMENDED COMPLAINTS are hereby DISMISSED WITHOUT PREJUDICE. Plaintiffs shall have 21 days from the date of this order to file amended complaints. Failure to do so may result in dismissal with prejudice. (lc). Modified on 5/7/2018 .(lc).

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
‘O’
Case Nos.  2:17-cv-02522-CAS(PLAx)
Date  May 7, 2018
2:17-cv-02559-CAS(PLAx)
Title 
MAO-MSO RECOVERY II, LLC, ET AL. v. FARMERS INSURANCE
EXCHANGE, ET AL.

Present: The Honorable

CHRISTINA A. SNYDER

Catherine Jeang
Deputy Clerk

Not Present
Court Reporter / Recorder

N/A
Tape No.

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants:

Not Present

Not Present

Proceedings:

(IN CHAMBERS) - DEFENDANTS’ MOTION TO STRIKE OR,
IN THE ALTERNATIVE, DISMISS PLAINTIFFS’ SECOND
AMENDED CLASS ACTION COMPLAINT in No. 17-2522 (Dkt.
82, filed January 22, 2018).
DEFENDANTS’ MOTIONS TO STRIKE OR, IN THE
ALTERNATIVE, DISMISS PLAINTIFFS’ SECOND AMENDED
CLASS ACTION COMPLAINT in No. 17-2559 (Dkts. 81 & 82,
filed January 22, 2018).

I.

INTRODUCTION

Plaintiffs MAO-MSO Recovery II, LLC, MSP Recovery Claims, Series LLC, and
MSPA Claims 1, LLC (collectively, “plaintiffs”) bring these two putative class action
lawsuits against various corporate entities within the Farmers Insurance Group of
Companies (hereinafter collectively referred to as “defendants”). Plaintiffs allege they
are assignees of numerous Medicare Advantage Organizations (“MAOs”) and seek to
recover double damages pursuant to the Medicare Secondary Payer (“MSP”) provisions
of the Medicare Act, 42 U.S.C. § 1395y(b), based on defendants’ failure to fulfill their
statutory obligation to reimburse the MAOs for accident-related medical expenses. More
than a dozen similar lawsuits have been filed by plaintiffs against other insurance
companies throughout the country.1

1

See, e.g., MAO-MSO Recovery II, LLC v. Allstate Ins. Co., Nos. 1:17-cv-01340,
1:17-cv-02370 (N.D. Ill.); MAO-MSO Recovery II, LLC v. Nationwide Mut. Ins. Co.,
Nos. 2:17-cv-00164, 2:17-cv-00263 (S.D. Ohio); MAO-MSO Recovery II, LLC v. Am.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
‘O’
Case Nos.  2:17-cv-02522-CAS(PLAx)
Date  May 7, 2018
2:17-cv-02559-CAS(PLAx)
Title 
MAO-MSO RECOVERY II, LLC, ET AL. v. FARMERS INSURANCE
EXCHANGE, ET AL.

On March 31, 2017, plaintiffs filed a complaint in Case No. 2:17-cv-02559, the
“Settlement Case,” which alleges that defendants have a duty to reimburse the MAOs
based on settlement agreements between tortfeasors insured by defendants and injured
Medicare beneficiaries. On April 3, 2017, plaintiffs filed a related complaint in Case No.
2:17-cv-02522, the “No-Fault Case,” alleging that defendants have reimbursement
obligations because they issued no-fault insurance policies to Medicare beneficiaries
injured in automobile accidents. Defendants filed motions to dismiss in both cases, but
plaintiffs mooted those motions by amending their complaints. On September 6, 2017,
defendants filed motions to dismiss the first amended complaints (“FACs”) for lack of
standing and failure to state a claim upon which relief can be granted pursuant to Rule
12(b)(1) and Rule 12(b)(6) of the Federal Rules of Civil Procedure. On November 20,
2017, the Court granted defendants’ motions and dismissed the FACs for lack of
standing, but granted leave to amend. On December 11, 2017, plaintiffs filed second
amended complaints (“SACs”) in both actions.
On January 22, 2018, defendants filed motions to strike or, in the alternative,
dismiss the SACs. See No. 17-2559, dkts. 81 & 82; No. 17-2522, dkt. 82 (collectively,
“Mot.”). On February 5, 2018, plaintiffs filed a joint opposition. No. 17-2559, dkt. 83;
No. 17-2522, dkt. 83 (“Opp’n”). On February 12, 2018, defendants filed reply briefs.
No. 17-2559, dkt. 84; No. 17-2522, dkt. 84 (collectively, “Reply”). On February 26,
2018, the Court heard oral argument, took the motions under submission, and directed the

Fam. Mutual Ins. Co., Nos. 3:17-cv-00175, 3:17-cv-00262 (W.D. Wis.); MAO-MSO
Recovery II, LLC v. USAA Cas. Ins. Co., No. 1:17-cv-20946 (S.D. Fla.); MAO-MSO
Recovery II, LLC v. Gov’t Emps. Ins. Co., Nos. 8:17-cv-00711, 8:17-cv-00964 (D. Md.);
MAO-MSO Recovery II, LLC v. Mercury Gen., Nos. 2:17-cv-2525, 2:17-cv-2557 (C.D.
Cal.); MAO-MSO Recovery II, LLC v. State Farm Mut. Auto. Ins. Co., No. 1:17-cv01541 (C.D. Ill.); MAO-MSO Recovery II, LLC v. Progressive Corp., No. 1:17-cv-00686
(N.D. Ohio); MAO-MSO Recovery II, LLC v. Infinity Prop. & Cas. Grp., No. 2:17-cv00513 (N.D. Ala. 2017); MAO-MSO Recovery II, LLC v. AAA Auto Club, Nos. 8:17cv-00601, 8:17-cv-00586 (C.D. Cal.); MAO-MSO Recovery II, LLC v. Erie Indemnity
Co., Nos. 1:17-cv-00081, 1:17-cv-00075 (W.D. Pa.); MAO-MSO Recovery II, LLC v.
Liberty Mut., Nos. 1:17-cv-10563, 1:17-cv-10564 (D. Mass.); MAO-MSO Recovery II,
LLC v. USAA Cas. Ins. Co., No. 1:17-cv-21289 (S.D. Fla.); MAO-MSO Recovery II,
LLC v. Boehringer Ingelheim Pharm., Inc., No. 1:17-cv-21996 (S.D. Fla.).

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
‘O’
Case Nos.  2:17-cv-02522-CAS(PLAx)
Date  May 7, 2018
2:17-cv-02559-CAS(PLAx)
Title 
MAO-MSO RECOVERY II, LLC, ET AL. v. FARMERS INSURANCE
EXCHANGE, ET AL.

parties to engage in limited jurisdictional discovery with respect to plaintiffs’ standing to
assert claims against the various Farmers entities named in the SACs. Having carefully
considered the parties arguments, the Court finds and concludes as follows.
II.

BACKGROUND
A.

Statutory Framework

Medicare, enacted in 1965, is a federal health insurance program primarily
benefitting those 65 years of age and older. See Social Security Amendments of 1965,
Pub. L. No. 89–97, 79 Stat. 286 (codified as amended at 42 U.S.C. §§ 1395 to 1395kkk–
1). The Medicare Act consists of five parts: Part A, Part B, Part C, Part D and Part E.
Parts A and B regulate the traditional fee-for-service Medicare program administered by
the Centers for Medicare & Medicaid Services (“CMS”). See 42 U.S.C. §§ 1395c to
1395i–5; §§ 1395–j to 1395–w. Part C is the Medicare Advantage program—described
in further detail below—wherein Medicare beneficiaries may elect to use private insurers,
i.e., MAOs, to deliver their Medicare benefits. See 42 U.S.C. §§ 1395w–21 to w–28.
Part D provides for prescription drug coverage, and Part E contains generally applicable
definitions and exclusions. One such exclusion is the MSP provisions of the Act. See 42
U.S.C. § 1395y(b).
1.

MSP Provisions of the Medicare Act

In 1980, Congress added the MSP provisions to the Medicare Act in an effort to
contain rising Medicare costs. See Omnibus Reconciliation Act of 1980, Pub. L. No. 96–
499, 94 Stat. 2599 (codified as amended at 42 U.S.C. § 1395y(b)); see also Zinman v.
Shalala, 67 F.3d 841, 843 (9th Cir. 1995). Prior to the MSP’s passage, Medicare often
acted as a primary insurer, that is, Medicare paid for its beneficiaries’ medical expenses
even if there was overlapping insurance coverage or when a third party had an obligation
to pay for the expenses. The MSP makes Medicare a “secondary payer” and shifts
responsibility for medical payments to other group health plans, workers’ compensation,
no-fault and liability insurers, which are considered “primary plans.” 42 U.S.C. §
1395y(b)(2). Specifically, the MSP prohibits Medicare from paying for items or services
if “payment has been made or can reasonably be expected to be made” by a primary
payer. Id. § 1395y(b)(2)(A)(ii).

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
‘O’
Case Nos.  2:17-cv-02522-CAS(PLAx)
Date  May 7, 2018
2:17-cv-02559-CAS(PLAx)
Title 
MAO-MSO RECOVERY II, LLC, ET AL. v. FARMERS INSURANCE
EXCHANGE, ET AL.

If a primary payer “has not made or cannot reasonably be expected to make
payment with respect to the item or service promptly,” Medicare is authorized to make a
“conditional payment.” Id. § 1395y(b)(2)(B)(i). However, since Medicare remains the
secondary payer, the primary payer must then reimburse Medicare for all conditional
payments “if it is demonstrated that such primary plan has or had a responsibility to make
payment with respect to such item or service.” Id. § 1395y(b)(2)(B)(ii). This
responsibility may be demonstrated by “a judgment, a payment conditioned upon the
recipient’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 plan or the primary plan’s insured, or by other means.” Id.
To facilitate recovery of these conditional payments, the MSP provides for a right
of action by the United States, for double damages, against “any or all entities that are or
were required or responsible” to make payment under a primary plan. Id. §
1395y(b)(2)(B)(iii). In addition to the right of action by the United States, Congress in
1986 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).” Omnibus Budget
Reconciliation Act of 1986, Pub. L. No. 99–509, 100 Stat. 1874 (codified as amended at
42 U.S.C. § 1395y(b)(3)(A)). “The private cause of action allows Medicare beneficiaries
and healthcare providers to recover medical expenses from primary plans.” Parra v.
PacifiCare of Arizona, Inc., 715 F.3d 1146, 1152 (9th Cir. 2013).
2.

MAOs as Secondary Payers

In 1997, Congress enacted Medicare Part C, now known as the Medicare
Advantage program. Balanced Budget Act of 1997, Pub. L. No. 105–33, 111 Stat. 251
(codified as amended at 42 U.S.C. §§ 1395w–21 to w–28). Part C allows eligible
participants to opt out of traditional Medicare and instead obtain benefits through MAOs,
which receive a fixed payment from the CMS for each enrollee. 42 U.S.C. §§ 1395w–21,
1395w–23. Part C is intended to “allow beneficiaries to have access to a wide array of
private health plan choices in addition to traditional fee-for-service Medicare. . . . [and]
enable the Medicare program to utilize innovations that have helped the private market
contain costs and expand health care delivery options.” H.R. Rep. No. 105–149, at 1251
(1997).

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
‘O’
Case Nos.  2:17-cv-02522-CAS(PLAx)
Date  May 7, 2018
2:17-cv-02559-CAS(PLAx)
Title 
MAO-MSO RECOVERY II, LLC, ET AL. v. FARMERS INSURANCE
EXCHANGE, ET AL.

Part C also includes a secondary payer provision that authorizes a MAO to charge
a primary payer for medical expenses paid on behalf on an enrollee. See 42 U.S.C. §
1395w–22(a)(4). Although this provision does not expressly state that an MAO can avail
itself of the MSP private cause of action at § 1395y(b)(3)(A), CMS regulations state that
an “[MAO] will exercise the same rights to recover from a primary plan, entity, or
individual that the Secretary exercises under the MSP regulations in subparts B through
D of part 411 of this chapter.” 42 C.F.R. § 422.108(f). In addition, both the Eleventh
and Third Circuits have held that an MAO has a private right of action under §
1395y(b)(3)(A) to recover conditional payments it made on behalf of its enrollees. See
MSP Recovery, LLC v. Allstate Ins. Co., 835 F.3d 1351, 1361 (11th Cir. 2016); In re
Avandia Marketing, Sales Practices, & Products Liability Litigation, 685 F.3d 353, 356,
367 (3d Cir. 2012).
B.

Procedural History
1.

Settlement and No-Fault Complaints

On March 31 and April 3, 2017, plaintiffs filed their respective complaints in these
cases, naming the Farmers Insurance Exchange and the Farmers Group Inc. d/b/a Farmers
Underwriters Association as defendants. No. 17-2559, dkt. 1 (“Settlement Compl.”); No.
17-2522, dkt. 1 (“No-Fault Compl.”). The complaints allege that “numerous” MAOs
assigned their recovery rights under the MSP to plaintiffs. Settlement Compl. ¶¶ 39–42;
No-Fault Compl. ¶¶ 45–48.
In the Settlement Case, plaintiffs allege that numerous Medicare beneficiaries, who
were enrolled in Medicare Advantage plans administered by the MAOs, suffered injuries
in accidents and received treatment paid for by the MAOs. Settlement Compl. ¶ 45.
Plaintiffs allege that defendants had a primary responsibility to pay for these medical
expenses pursuant to the MSP based on settlement agreements between tortfeasors
insured by defendants and the injured Medicare beneficiaries, but failed to pay or
reimburse the MAOs for these expenses. Id. ¶ 46. The complaint indicates that there are
two “representative” MAOs and two “representative” Medicare beneficiaries but the
names of these entities and individuals were redacted. Id. ¶¶ 57–58. Plaintiffs noted that
the names of the beneficiaries and corresponding MAOs would be provided to defendants
following the entry of a protective order. Id. at 15 n.9. Plaintiffs assert two claims
against defendants: (1) a private cause of action for double damages pursuant to §

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
‘O’
Case Nos.  2:17-cv-02522-CAS(PLAx)
Date  May 7, 2018
2:17-cv-02559-CAS(PLAx)
Title 
MAO-MSO RECOVERY II, LLC, ET AL. v. FARMERS INSURANCE
EXCHANGE, ET AL.

1395y(b)(3)(A); and (2) breach of contract by way of subrogation under 42 C.F.R. §
411.24(e). Id. at 18–20.
In the No-Fault Case, plaintiffs allege that numerous Medicare beneficiaries
injured in automobile accidents were both enrolled in Medicare Advantage plans
administered by the MAOs and carried no-fault insurance policies issued by defendants
that provided coverage for medical expenses related to injuries sustained in automobile
accidents. No-Fault Compl. ¶ 52. Plaintiffs allege that defendants were required under
the MSP to make primary payment for the beneficiaries’ medical expenses covered by
the MAOs, but defendants failed to pay or reimburse the MAOs. Id. ¶ 53. As in the
Settlement Case, the identities of the “representative” beneficiaries and MAOs were
redacted. Id. ¶¶ 48–49. Plaintiffs assert a single claim for double damages pursuant to §
1395y(b)(3)(A). Id. at 14–16. Both cases seek to certify nationwide classes of similarly
situated MAOs. Settlement Compl. ¶ 50; No-Fault Compl. ¶ 59.
2.

First Amended Complaints

On May 28 and 30, 2017, Magistrate Judge Paul L. Abrams entered a protective
order in each case. On May 31, 2017, plaintiffs sent a letter to defendants disclosing the
identities of the representative MAO assignors and Medicare beneficiaries in both cases.
On June 30, 2017, defendants filed motions to dismiss the complaints. On July 7, 2017,
plaintiffs voluntarily amended their complaints as a matter of right, thereby rendering the
motions to dismiss moot. See No. 2:17-cv-02559, Dkt. 38 (“SFAC”); No. 2:17-cv02522, Dkt. 36 (“NFFAC”). The FACs removed Farmers Group Inc. d/b/a Farmers
Underwriters Association and added the following defendants: Farmers Insurance
Company of Arizona, Farmers Insurance Company of Idaho, Farmers Insurance
Company of Oregon, Farmers Insurance Company of Washington, Farmers Insurance
Company of Columbus, Inc., Farmers New Century Insurance Company, Farmers Texas
Mutual Insurance Company, Illinois Farmers Insurance Company, and Texas Farmers
Insurance Company. Id.
The FACs included additional factual allegations regarding the representative
claims. In the No-Fault Case, the FAC alleges that two Florida residents, V.C. and
S.H.F., were receiving Medicare benefits from unidentified MAOs whose MSP recovery
rights had been assigned to plaintiffs. NFFAC ¶ 67. V.C. and S.H.F. were both involved
in automobile accidents that required medical services “arising out of the use,
maintenance, and/or operation of a motor vehicle.” Id. At the time of their respective

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
‘O’
Case Nos.  2:17-cv-02522-CAS(PLAx)
Date  May 7, 2018
2:17-cv-02559-CAS(PLAx)
Title 
MAO-MSO RECOVERY II, LLC, ET AL. v. FARMERS INSURANCE
EXCHANGE, ET AL.

accidents, V.C. and S.H.F. also carried Personal Injury Protection (“PIP”) policies issued
by defendants, which required payment of medical expenses up to a $10,000 policy limit.
Id. However, defendants did not pay or reimburse the MAO for those expenses and did
not challenge the MAO’s payment of those medical expenses within the required time
frame. Id.
In the Settlement Case, the FAC in included allegations regarding M.C. and C.N.,
two Florida residents who were injured in accidents by individuals covered by insurance
policies issued by defendants. SFAC ¶ 63. The medical expenses of M.C. and C.N. were
subsequently paid by an MAO whose MSP recovery rights have been assigned to
plaintiffs. Id. Following M.C. and C.N.’s claims against defendants’ insureds,
defendants indemnified its insured tortfeasors and made payments pursuant to a
settlement of M.C. and C.N.’s claims. Id. However, defendants did not pay or reimburse
the MAO assignor for the medical expenses within the requisite time frame as required
by a primary payer, nor did they challenge the MAO’s payment of those medical
expenses within the required time frame. Id.
In both cases, plaintiffs seek to certify classes of “[a]ll non-governmental
organizations, and/or their assignees that provide benefits under Medicare Part C, in the
United States of America and its territories” who made payments for their enrollees’
medical expenses that were not reimbursed by defendants. NFFAC ¶ 68; SFAC ¶ 64.
However, plaintiffs did not identify in their complaints the identity of the MAO assignors
or the specific defendants that were allegedly responsible for the primary payments.
3.

Second Amended Complaints

On November 20, 2018, the Court granted defendants’ motions to dismiss the
FACs for lack of standing with leave to amend. No. 17-2559, dkt. 75; No. 17-2522, dkt.
76 (“Order”). On December 11, 2017, plaintiffs filed SACs in both cases. No. 17-2559,
dkt. 77 (“SSAC”); No. 17-2522, dkt. 78 (“NFSAC”). The SACs substitute one of the
original named plaintiffs, MSP Recovery, LLC, with another entity: MSP Recovery
Claims, Series LLC. SSAC ¶ 42; NFSAC ¶ 45. The SACs also allege claims against an
additional defendant: the 21st Century Insurance Company. SSAC ¶ 56; NFSAC ¶ 59.
Each SAC includes 38 pages listing and briefly describing assignment agreements
between plaintiffs and 78 different MAOs, Health Maintenance Organizations
(“HMOs”), Management Service Organizations (“MSOs”), and Independent Physician

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
‘O’
Case Nos.  2:17-cv-02522-CAS(PLAx)
Date  May 7, 2018
2:17-cv-02559-CAS(PLAx)
Title 
MAO-MSO RECOVERY II, LLC, ET AL. v. FARMERS INSURANCE
EXCHANGE, ET AL.

Associations (“IPAs”). See SSAC ¶¶ 58–138; NFSAC ¶¶ 61–141. The SACs allege that
each agreement assigned:
all legal rights of recovery and reimbursement for health care services and
Medicare benefits provided by health care organizations that administer
Medicare benefits for beneficiaries under Medicare Part C; whether said
rights arise from (i) contractual agreements, such as participation and
network agreements with capitation and risk sharing arrangements, and/or
(ii) state and federal laws that provide for the reimbursement of conditional
payments made by the assignor health plans, including the right to recover
claims for health care services billed on a fee-for-service basis.
SSAC ¶ 60; NFSAC ¶ 63. However, plaintiffs redacted the names of the MAOs, HMOs,
MSOs, and IPAs in addition to the dates of the assignments and the state law governing
each assignment. Plaintiffs did not request leave to file the SACs under seal as required
by Local Rule 79–5.
4.

Jurisdictional Discovery

On February 26, 2018, the Court heard oral argument on defendants’ instant
motions to strike or, in the alternative, dismiss the SACs. At the hearing, defendants
argued that the SACs should be dismissed for lack of standing because the four
representative claims involving V.C., S.H.F., M.C. and C.N. do not involve insurance
policies issued by any of the named defendants. Plaintiffs indicated that they have data
regarding hundreds prospective claims based on information disclosed by various
Farmers entities to third-party insurance claims databases. However, because some
entities listed in the databases were disclosed generically, i.e. “Farmers Insurance
Exchange,” “Farmers Insurance Group,” or just “Farmers,” plaintiffs contend it is
impossible to determine which specific Farmers entity is responsible for the insured in
each case. Plaintiffs include similar allegations in the SACs. See SSAC ¶ 147–50;
NFSAC ¶ 151–54.
The Court took the motions under submission and directed the parties to engage in
limited jurisdictional discovery to determine which Farmers entities should be named as
defendants in these actions. See No. 17-2559, dkt. 89; No. 17-2522, dkt. 89. In
particular, the Court direct plaintiffs to provide a list of prospective claims to defendants
including the names of the specific MAO assignors, identifying information regarding the

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
‘O’
Case Nos.  2:17-cv-02522-CAS(PLAx)
Date  May 7, 2018
2:17-cv-02559-CAS(PLAx)
Title 
MAO-MSO RECOVERY II, LLC, ET AL. v. FARMERS INSURANCE
EXCHANGE, ET AL.

relevant Medicare beneficiaries, in addition to copies of the relevant assignment
agreements. Id. at 2. The Court ordered defendants to respond by indicating whether
each Medicare beneficiary listed in plaintiffs’ submission was either insured by or
entered into a settlement agreement with an individual insured by an entity within the
Farmers Insurance Group of Companies; and, if so, identify which specific Farmers entity
issued the relevant insurance policy. Id.
On April 24, 2018, the parties filed a joint statement regarding the status of
jurisdictional discovery. See No. 17-2559, dkt. 93; No. 17-2522, dkt. 93 (“Joint
Statement”). The parties indicate that on March 5, 2018, plaintiffs provided defendants
with a list of 731 individuals associated with prospective claims against a Farmers entity
and 149 assignment agreements. Id. at 2, 15. However, plaintiffs did not identify which
claim was associated with which underlying assignor. Id. at 3, 15. On April 4, 2018,
plaintiffs provided an updated list identifying the underlying assignors for 515 claims but
indicated that they were still investigating the 217 remaining claims. Id. In response, on
April 19, 2018, for each of the 515 claims for which plaintiffs identified the assignor,
defendants identified the names of specific Farmers entities that issued the corresponding
insurance policies. Id. On April 30, 2018, the parties appeared for a status conference.
The Court indicated that it would rule on the pending motions.
III.

LEGAL STANDARDS
A.

Federal Rule of Civil Procedure 12(b)(1)

A motion pursuant to Rule 12(b)(1) tests whether the court has subject matter
jurisdiction to hear the claims alleged in the complaint. Article III standing is a threshold
jurisdictional matter and must be established before proceeding to the merits. See Bates
v. United Parcel Serv., Inc., 511 F.3d 974, 985 (9th Cir. 2007) (en banc). 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, ––– U.S. –––, 136 S.Ct. 1540, 1547 (2016) (citing Lujan v. Defenders of
Wildlife, 504 U.S. 555, 560–61 (1992)). Generally, a plaintiff may only bring a claim on
his own behalf and may not raise claims based on the rights of another party. Pony v.
Cty. of Los Angeles, 433 F.3d 1138, 1145 (9th Cir. 2006). However, “the assignee of a
claim has standing to assert the injury in fact suffered by the assignor.” Vermont Agency
of Nat. Res. v. U.S. ex rel. Stevens, 529 U.S. 765, 773 (2000). Thus, “the assignee stands

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
‘O’
Case Nos.  2:17-cv-02522-CAS(PLAx)
Date  May 7, 2018
2:17-cv-02559-CAS(PLAx)
Title 
MAO-MSO RECOVERY II, LLC, ET AL. v. FARMERS INSURANCE
EXCHANGE, ET AL.

in the shoes of the assignor, and, if the assignment is valid, has standing to assert
whatever rights the assignor possessed.” Spinedex Physical Therapy USA Inc. v. United
Healthcare of Ariz., Inc., 770 F.3d 1282, 1291 (9th Cir. 2014).
A Rule 12(b)(1) motion may be either facial, where the inquiry is limited to the
allegations in the complaint, or factual, where the court may look beyond the complaint
to consider extrinsic evidence. Wolfe v. Strankman, 392 F.3d 358, 362 (9th Cir. 2004).
Here, defendants make a facial attack on the sufficiency of the allegations in the SACs.
See Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004) (in a facial
attack under Rule 12(b)(1), “the challenger asserts that the allegations contained in a
complaint are insufficient on their face to invoke federal jurisdiction.”). A district court
“resolves a facial attack as it would a motion to dismiss under Rule 12(b)(6): Accepting
the plaintiff’s allegations as true and drawing all reasonable inferences in the plaintiff’s
favor, the court determines whether the allegations are sufficient as a legal matter to
invoke the court’s jurisdiction.” Leite v. Crane Co., 749 F.3d 1117, 1121 (9th Cir. 2014).
Plaintiffs, as the parties invoking federal jurisdiction, bear the burden of establishing the
elements of Article III standing, and at the pleading stage, must “‘clearly allege . . . facts
demonstrating’ each element.” Spokeo, 136 S.Ct. at 1547 (quoting Warth v. Seldin, 422
U.S. 490, 518 (1975)); see also Baker v. United States, 722 F.2d 517, 518 (9th Cir. 1983)
(“The facts to show standing must be clearly apparent on the face of the complaint.”).
B.

Federal Rule of Civil Procedure 12(b)(6)

A motion pursuant to Rule 12(b)(6) tests the legal sufficiency of the claims
asserted in a complaint. Under this Rule, a district court properly dismisses a claim if
“there is a ‘lack of a cognizable legal theory or the absence of sufficient facts alleged
under a cognizable legal theory.’” Conservation Force v. Salazar, 646 F.3d 1240, 1242
(9th Cir. 2011) (quoting Balisteri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir.
1988)). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need
detailed factual allegations, a plaintiff’s obligation to provide the ‘grounds’ of his
‘entitlement to relief’ requires more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007). “[F]actual allegations must be enough to raise a
right to relief above the speculative level.” Id.
In considering a motion pursuant to Rule 12(b)(6), a court must accept as true all
material allegations in the complaint, as well as all reasonable inferences to be drawn

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
‘O’
Case Nos.  2:17-cv-02522-CAS(PLAx)
Date  May 7, 2018
2:17-cv-02559-CAS(PLAx)
Title 
MAO-MSO RECOVERY II, LLC, ET AL. v. FARMERS INSURANCE
EXCHANGE, ET AL.

from them. Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). The complaint must be
read in the light most favorable to the nonmoving party. Sprewell v. Golden State
Warriors, 266 F.3d 979, 988 (9th Cir. 2001). However, “a court considering a motion to
dismiss can choose to begin by identifying pleadings that, because they are no more than
conclusions, are not entitled to the assumption of truth. While legal conclusions can
provide the framework of a complaint, they must be supported by factual allegations.”
Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009); see Moss v. United States Secret Service,
572 F.3d 962, 969 (9th Cir. 2009) (“[F]or a complaint to survive a motion to dismiss, the
non-conclusory ‘factual content,’ and reasonable inferences from that content, must be
plausibly suggestive of a claim entitling the plaintiff to relief.”). Ultimately,
“[d]etermining whether a complaint states a plausible claim for relief will . . . be a
context-specific task that requires the reviewing court to draw on its judicial experience
and common sense.” Iqbal, 556 U.S. at 679.
IV.

DISCUSSION

Defendants raise four arguments in their renewed motions to dismiss. First,
defendants move to strike the SACs for failure to comply with Local Rule 79–5. Second,
defendants move to dismiss the SACs pursuant to Rule 12(b)(1) for lack of standing.
Third, defendants move to dismiss the SACs pursuant to Rule 12(b)(6) for failure to state
a claim upon which relief can be granted. Finally, defendants move to dismiss or strike
the class allegations in the SACs. The Court addresses each argument below.
A.

Motions to Strike the SACs

Defendants argue that the SACs should be stricken because plaintiffs never sought
permission to file redacted pleadings and never filed un-redacted versions under seal in
violation of Local Rule 79–5.2 Mot. at 10. In response to the motions to strike, plaintiffs

2

Local Rule 79–5.2.2 provides that “[i]n a non-sealed civil case, no document may
be filed under seal without prior approval by the Court.” A party seeking to file a
document under seal must file an application with the Court including (1) a declaration
establishing good cause or demonstrating compelling reasons why the strong presumption
of public access in civil cases should be overcome, with citations to the applicable legal
standard, and informing the Court whether anyone opposes the application; (2) a

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
‘O’
Case Nos.  2:17-cv-02522-CAS(PLAx)
Date  May 7, 2018
2:17-cv-02559-CAS(PLAx)
Title 
MAO-MSO RECOVERY II, LLC, ET AL. v. FARMERS INSURANCE
EXCHANGE, ET AL.

filed un-redacted versions of the SACs as exhibits to their opposition brief. Opp’n, Exs.
2 & 3. These un-redacted SACs identify the 78 MAOs, HMOs, MSOs, and IPAs who
allegedly assigned their MSP recovery rights to plaintiffs through a series of agreements
executed between 2015 and 2017. Plaintiffs maintain that these exhibits moot the Local
Rule 79–5 compliance issue. Opp’n at 5. Although the Court declines to strike the SACs
for failure to comply with Local Rule 79–5, plaintiffs are admonished that they are
required to comply with all local rules, and failure to do so may result in rejection of their
pleadings.
B.

Motions to Dismiss for Lack of Standing

Defendants assert that plaintiffs have failed to cure the pleading deficiencies
identified by the Court in its November 20, 2017 order dismissing the FACs for lack of
standing. Mot. at 3. Specifically, defendants contend that the SACs “continue to fail to
trace any individual assignor’s injury to any single defendant or to demonstrate valid
assignments.” Id. Defendants also continue to argue that plaintiffs fail to allege facts
sufficient to show a “concrete” and “particularized” injury was suffered by any MAO
assignor. Id. at 12. These arguments raise three distinct standing issues addressed in the
Court’s prior order: (1) whether plaintiffs allege sufficient facts to demonstrate that the
MAO assignors suffered an injury in fact; (2) whether plaintiffs sufficiently allege that
the MAOs validly assigned their MSP recovery rights to plaintiffs; and (3) whether
plaintiffs allege sufficient facts to satisfy Article III’s traceability requirement in this
multidefendant class action. The Court addresses each issue in turn.
1.

Injury in Fact

Defendants argue that in order to satisfy the “injury in fact” requirement, plaintiffs
must plead detailed facts showing that the MAOs were entitled to reimbursement under
the MSP. Mot. at 12. Specifically, defendants contend plaintiffs must allege that: (1) a
medical bill was sent to the defendant for treatment of an insured who was also a
Medicare enrollee; (2) the treatment was reasonable and necessary in relation to the
alleged accident; (3) there was appropriate coverage under that defendant’s insurance

proposed order, and (3) both redacted and un-redacted versions of the document proposed
to be filed under seal. See C.D. Cal. L.R. 79–5.2.2.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
‘O’
Case Nos.  2:17-cv-02522-CAS(PLAx)
Date  May 7, 2018
2:17-cv-02559-CAS(PLAx)
Title 
MAO-MSO RECOVERY II, LLC, ET AL. v. FARMERS INSURANCE
EXCHANGE, ET AL.

policy for the specified claim which had not been exhausted, (4) the defendant did not
pay the bill; and (5) the MAO paid the bill. Id.
As discussed in further detail below, the Court previously found that the FACs
failed to adequately allege standing because plaintiffs (1) failed to allege facts showing
valid assignments, and (2) failed to trace any MAO assignor’s injury to any defendant.
Order at 11–12. However, the Court noted, as a general matter, that “plaintiffs need only
allege facts demonstrating that the MAOs ‘incurred reimbursable costs and were not
reimbursed’” in order to demonstrate that the MAOs suffered an injury in fact pursuant to
the MSP. Id. at 12 (quoting MAO-MSO Recovery II, LLC v. Boehringer Ingelheim
Pharm., Inc. (“Boehringer”), 281 F. Supp. 3d 1278, 1283 (S.D. Fla. 2017)). The Court
reviewed the representative facts regarding V.C., S.H.F., M.C., and C.N. and found them
“generally sufficient” to demonstrate that some unidentified MAO assignor suffered
economic injury. Id. at 13 (citing Boehringer, 281 F. Supp. 3d at 1282–83 (plaintiffs
demonstrated that MAOs suffered injury by alleging that (1) the MAOs’ enrollees
suffered injuries, and the MAOs paid for treatment of those injuries; (2) the enrollees
entered into settlement agreements with defendants; and (3) defendants had not
reimbursed the MAOs for the cost of the enrollees’ treatment)); accord MAO-MSO
Recovery II, LLC v. Gov’t Emps. Ins. Co. (“GEICO”), No. PWG-17-711, 2018 WL
999920, at *6 (D. Md. Feb. 21, 2018) (finding that plaintiffs “sufficiently pleaded injury
in fact by alleging that the MAOs incurred costs covering their beneficiaries’ medical
expenses under circumstances in which GEICO was obligated to reimburse the MAOs
but failed to do so.”) Thus, the facts alleged in the SACs remain sufficient to show that
one or more unidentified MAO assignors suffered an injury in fact.
2.

Validity of the Assignments

Defendants contend that the SACs remain deficient because they fail to
“demonstrate valid assignments.” Mot. at 3. Following MAO-MSO Recovery II, LLC v.
Mercury Gen., No. CV 17-2557-AB (FFMX), 2017 WL 5086293, at *5 (C.D. Cal. Nov.
2, 2017) and Boehringer, 281 F. Supp. 3d at 1283, the Court previously concluded that
the FACs “failed to allege sufficient facts demonstrating valid assignments by the
MAOs.” Order at 12. Specifically, the Court found that the FACs failed to allege “the
identity of the MAOs whose reimbursement rights they claim to own, the dates of the
assignments, or the essential terms.” Id. at 12. At least three district courts have
subsequently concluded that nearly identical assignment allegations by plaintiffs were too

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Page 13 of 19 

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
‘O’
Case Nos.  2:17-cv-02522-CAS(PLAx)
Date  May 7, 2018
2:17-cv-02559-CAS(PLAx)
Title 
MAO-MSO RECOVERY II, LLC, ET AL. v. FARMERS INSURANCE
EXCHANGE, ET AL.

conclusory to demonstrate standing. See MAO-MSO Recovery II, LLC v. Am. Fam.
Mutual Ins. Co. (“American Family Insurance”), No. 3:17-cv-00175-JDP (W.D. Wis.),
2018 WL 835160, at *5 (W.D. Wis. Feb. 12, 2018); MAO-MSO Recovery II, LLC v.
State Farm Mut. Auto. Ins. Co., No. 1:17-cv-01541-JBM-JEH, 2018 WL 340021, at *3
(C.D. Ill. Jan. 9, 2018); MAO-MSO Recovery II, LLC v. USAA Cas. Ins. Co., No. 1720946-CIV, 2018 WL 295527, at *4 (S.D. Fla. Jan. 3, 2018); but see GEICO, 2018 WL
999920, at *7 (finding plaintiffs’ assignment allegations sufficient for the purposes of
initial pleading but noting that plaintiffs are “expected to expedite production of the
assignments before they may seek discovery”).
Plaintiffs sought to cure this deficiency by including nearly 40 pages of redacted
paragraphs in their SACs describing various assignment agreements between plaintiffs
and 78 different MAOs, HMOs, MSOs, and IPAs. See SSAC ¶¶ 58–138; NFSAC ¶¶ 61–
141. The SACs further allege that these agreements assigned “all legal rights of recovery
and reimbursement for health care services and Medicare benefits provided by health care
organizations that administer Medicare benefits for beneficiaries under Medicare Part C”
whether these recovery rights “arise from (i) contractual agreements, such as participation
and network agreements with capitation and risk sharing arrangements, and/or (ii) state
and federal laws that provide for the reimbursement of conditional payments made by the
assignor health plans, including the right to recover claims for health care services billed
on a fee-for-service basis.” SSAC ¶ 60; NFSAC ¶ 63.
The Court finds that the un-redacted SACs filed as exhibits to plaintiffs’ opposition
are sufficient to cure the deficiencies outlined in the Court’s prior Order because the
pleadings identify the alleged assignors and the dates of the assignments. See Opp’n,
Exs. 2 & 3. Moreover, both the redacted and un-redacted versions describe the essential
terms of the assignment agreements—namely, that the MAOs, HMOs, MSOs, and IPAs
have assigned “all legal rights of recovery and reimbursement for health care services and
Medicare benefits” to the respective plaintiffs. SSAC ¶ 60; NFSAC ¶ 63. Accordingly,
the unredacted SACs sufficiently allege that the MAOs, HMOs, MSOs, and IPAs validly
assigned their MSP recovery rights to plaintiffs. See Opp’n, Exs. 2 & 3.
3.

Traceability in Multidefendant Class Actions

Finally, defendants argue that plaintiffs fail to allege they have standing to sue all
12 defendants because the “78 redacted assignment paragraphs, the un-redacted
assignments and the [four] ‘representative claims,’ make no connections between any

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CIVIL MINUTES - GENERAL

Page 14 of 19 

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
‘O’
Case Nos.  2:17-cv-02522-CAS(PLAx)
Date  May 7, 2018
2:17-cv-02559-CAS(PLAx)
Title 
MAO-MSO RECOVERY II, LLC, ET AL. v. FARMERS INSURANCE
EXCHANGE, ET AL.

specific assignor with any specific claim and any specific defendant.” Mot. at 12. As the
Court previously noted, one of the elements of standing is “traceability, i.e., a causal
connection between the injury and the actions” about which a plaintiff complains. Easter
v. American West Financial, 381 F.3d 948, 961–62 (9th Cir. 2004). “In multidefendant
class actions, the named plaintiffs must show that each defendant has harmed at least one
of them.” William B. Rubenstein, Newberg on Class Actions § 2:5 (5th ed. 2017). As
the district court in Henry v. Circus Circus Casinos, Inc. explained:
[T]o establish Article III standing in a class action, at least one named
plaintiff must have standing in his own right to assert a claim against each
named defendant before he may purport to represent a class claim against
that defendant. This is not to say that each named plaintiff must have a
claim against each named defendant . . . . Rather, what is required is that for
every named defendant there be at least one named plaintiff who can assert a
claim directly against that defendant.
223 F.R.D. 541, 544 (D. Nev. 2004); see also In re Carrier IQ, Inc., 78 F. Supp. 3d 1051,
1068–69 (N.D. Cal. 2015) (“[F]or a class action to proceed between the named parties,
each named plaintiff must have standing to sue at least one named defendant; to hold
each defendant in the case, there must be at least one named plaintiff with standing to sue
said defendant.”) (citing Easter, 381 F.3d at 961–62).
In dismissing the FACs for lack of standing, the Court noted that the “fundamental
flaw with plaintiffs’ pleadings is that there are no factual allegations tracing any
individual assignor MAO’s injury to any single defendant. The representative facts
regarding four individuals in Florida do not identify which MAOs are involved, and
include only blanket allegations against all defendants.” Order at 11; accord American
Family Insurance, 2018 WL 835160, at *5. In an effort to cure this defect, plaintiffs
allege in the SACs that they have data regarding 300 prospective claims gleaned from
third-party databases. SSAC ¶ 148; NFSAC ¶ 152. However, because many of the
entities in the databases are disclosed generically, i.e., “Farmers,” it is impossible to
know which Farmers entity is responsible for the insured. SSAC ¶ 147; NFSAC ¶ 151.
Plaintiffs allege it is impossible to determine which named defendant issued the relevant
policies absent some discovery. SSAC ¶ 150; NFSAC ¶ 154. Plaintiffs nevertheless
contend they have satisfied their burden at the pleading stage to show standing because
the factual allegations, when viewed in a light most favorable to plaintiffs, raise a

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CIVIL MINUTES - GENERAL

Page 15 of 19 

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
‘O’
Case Nos.  2:17-cv-02522-CAS(PLAx)
Date  May 7, 2018
2:17-cv-02559-CAS(PLAx)
Title 
MAO-MSO RECOVERY II, LLC, ET AL. v. FARMERS INSURANCE
EXCHANGE, ET AL.

“plausible inference” that at least one plaintiff has suffered an injury caused by each
defendant. Opp’n at 7.
However, it is a “long-settled principle that standing cannot be inferred
argumentatively from averments in the pleadings, but rather must affirmatively appear in
the record.” FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 231 (1990) (plurality opinion)
(citations and quotation marks omitted). The operative SACs therefore remain deficient
because there is nothing in the pleadings tying any claim by one or more of the MAO
assignors to any specific named defendant. Recognizing the difficulty faced by plaintiffs
in seeking to identify the proper defendants, Court ordered limited jurisdictional
discovery. Now, following the parties’ exchange of insurance claims data, plaintiffs seek
leave to amend to (1) voluntarily dismiss, without prejudice, plaintiff MAO-MSO
Recovery II, LLC from both complaints, (2) voluntarily dismiss, without prejudice, eight
of the specific named defendants in the No-Fault Case and six of the defendants in the
Settlement Case, and (3) add 14 new defendants to an amended complaint in the No-Fault
Case and 12 new defendants in the Settlement Case based on the information provided by
defendants. Joint Statement at 6–7.
The Court will accordingly grant defendants’ motions to dismiss the operative
SACs for lack of standing but allow plaintiffs leave to amend in order to assert claims
against the appropriate defendants. Plaintiffs’ amended complaints should include
allegations sufficient to demonstrate “that for every named defendant there [is] at least
one named plaintiff who can assert a claim directly against that defendant.” Henry, 223
F.R.D. at 544. Plaintiffs are not required to include detailed factual allegations regarding
individual “representative” claims for each named defendant so long as plaintiffs allege
that they are the assignees of an MAO which has been damaged by one of the named
defendant insurance companies. Any extraneous allegations regarding assignment
agreements that are no longer at issue should be removed; and any requested redactions
must be made only with leave of court in compliance with Local Rule 79–5.
C.

Motions to Dismiss for Failure to State a Claim

Although the Court will dismiss the operative SACs for lack of standing, the Court
nevertheless considers it prudent to address the merits of defendants’ motions to dismiss
pursuant Rule 12(b)(6) for failure to state a claim.

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Page 16 of 19 

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
‘O’
Case Nos.  2:17-cv-02522-CAS(PLAx)
Date  May 7, 2018
2:17-cv-02559-CAS(PLAx)
Title 
MAO-MSO RECOVERY II, LLC, ET AL. v. FARMERS INSURANCE
EXCHANGE, ET AL.

Although the Ninth Circuit has yet to define the elements of a claim pursuant to the
MSP private cause of action, 42 U.S.C. § 1395y(b)(3)(A), in Humana Med. Plan, Inc. v.
W. Heritage Ins. Co., the Eleventh Circuit held that “a plaintiff is entitled to summary
judgment on a § 1395y(b)(3)(A) claim when there is no genuine issue of material fact
regarding (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.” 832 F.3d 1229, 1239 (11th Cir. 2016). District courts have also concluded that
“there are three elements of the MSP’s private cause of action: (1) a primary plan, (2) that
is responsible to pay for an item or service, and (3) that failed to make the appropriate
payment to Medicare for the item or service.” Glover v. Philip Morris USA, 380 F.
Supp. 2d 1279, 1290 (M.D. Fla. 2005), aff’d sub nom. Glover v. Liggett Grp., Inc., 459
F.3d 1304 (11th Cir. 2006); accord O’Connor v. Mayor of Baltimore, 494 F. Supp. 2d
372, 374 (D. Md. 2007); GEICO, 2018 WL 999920, at *9.
Defendant argues that in order to satisfy these three elements, plaintiffs need to
allege facts demonstrating that: (1) a bill was sent to a defendant for medical treatment of
an insured; (2) there was coverage for the medical treatment under a policy issued by that
defendant; (3) the defendant should have paid the bill but did not; (4) one of plaintiffs’
assignors paid the bill instead; (5) the assignment covers the right to sue for
reimbursement; and (6) a plaintiff or its assignor demanded reimbursement, which was
disregarded by the defendant, such that the defendant may be penalized by double
damages. Mot. at 18. Defendants maintain that SACs fail to allege “any specific nonpayment of any bill,” and the representative claims consist of mere “conclusions and
formulaic recitation of the elements of the cause of action,” which “are insufficient to
survive a Rule 12(b)(6) motion to dismiss.” Id. at 18–19. Defendants further argue that
because CMS regulations provide that MAOs have a responsibility to identify primary
payers and coordinate their benefits, see 42 C.F.R. § 422.108, and the SACs do not allege
that the MAO assignors made efforts to comply with this regulation, plaintiffs therefore
fail to state a claim. Id. at 19.
Regardless of the standing deficiencies in the SACs, the Court finds that, as a
general matter, the representative claims regarding V.C., S.H.F., M.C., and C.N. include
sufficient factual allegations to state claims for relief pursuant to § 1395y(b)(3)(A). See
GEICO, 2018 WL 999920, at *12 (finding similar factual allegations sufficient for the
court to draw a reasonable inference that “the MAOs made payments of medical supplies
and services that GEICO, as the primary payer, was obligated to cover; that GEICO made

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Page 17 of 19 

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
‘O’
Case Nos.  2:17-cv-02522-CAS(PLAx)
Date  May 7, 2018
2:17-cv-02559-CAS(PLAx)
Title 
MAO-MSO RECOVERY II, LLC, ET AL. v. FARMERS INSURANCE
EXCHANGE, ET AL.

payments on behalf of its insureds pursuant to settlement agreements; and that GEICO
failed to pay or reimburse the MAOs.”). First, in the Settlement Case, plaintiffs allege
that defendants were primary payers because they entered into settlement agreements
with M.C. and C.N., who were injured in automobile accidents with tortfeasors insured
by defendants. SFAC ¶ 63. In the No-Fault Case, plaintiffs allege that defendants were
primary payers because they issued PIP policies to V.C. and S.H.F. NFFAC ¶ 67.
Defendants do not dispute that such settlement agreements or issuance of no-fault
insurance policies can render an insurer a primary plan under the MSP. Second, plaintiffs
allege that defendants failed to make primary payments or reimburse the MAO assignors
for the medical expenses of V.C., S.H.F., M.C., and C.N. SFAC ¶ 63; NFFAC ¶ 67.
Third, plaintiffs allege that the MAO assignors paid for the medical expenses and
therefore incurred damages. See id. The Court disagrees that plaintiffs must plead their
claims with the level of factual granularity demanded by defendants. Moreover, there is
no indication that CMS regulations requiring MAOs to identify primary payers and
coordinate their benefits imposes a prerequisite to asserting a cause of action pursuant to
§ 1395y(b)(3)(A).
Accordingly, the Court finds that plaintiffs have alleged facts sufficient to state a
claim pursuant to the MSP private right of action, 42 U.S.C. § 1395y(b)(3)(A).
D.

Motions to Strike or Dismiss the Class Allegations

Defendants also move to strike or dismiss plaintiffs’ class allegations on the
ground that individualized issues would make class treatment impossible. Mot. at 21–24.
The Court recognizes that there is no per se rule forbidding defendants from filing a
preemptive motion to deny certification before plaintiffs have filed their motions for class
certification. See Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 939–40 (9th
Cir. 2009). Nevertheless, the Court concludes that defendants’ motions are premature
given that discovery is in its early stages, no Rule 16 conference has occurred, and
plaintiffs have not filed motions for class certification. See In re Wal–Mart Stores, Inc.
Wage and Hour Litigation, 505 F.Supp.2d 609, 614–16 (N.D. Cal. 2007) (holding that
Wal–Mart’s motions to dismiss or strike class allegations were premature where “Wal–
Mart has not answered in this case, discovery has not yet commenced, and no motion for
class certification has been filed.”).

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Page 18 of 19 

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
‘O’
Case Nos.  2:17-cv-02522-CAS(PLAx)
Date  May 7, 2018
2:17-cv-02559-CAS(PLAx)
Title 
MAO-MSO RECOVERY II, LLC, ET AL. v. FARMERS INSURANCE
EXCHANGE, ET AL.

V.

CONCLUSION

In accordance with the foregoing, the SACs are hereby DISMISSED WITHOUT
PREJUDICE. Plaintiffs shall have twenty-one (21) days from the date of this order to
file amended complaints. Failure to do so may result in dismissal with prejudice.
IT IS SO ORDERED.
00
Initials of Preparer

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CIVIL MINUTES - GENERAL

:
CMJ

00

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