MAO-MSO Recovery II, LLC et al v. State Farm Mutual Automobile Insurance Company

Filing 204

ORDER AND OPINION entered by Judge Joe Billy McDade on 9/17/2019. Plaintiffs' Motion for Leave to File a Reply in Support of the Motion under Rule 56(d) and Plaintiffs' Motion to Stay or Deny Defendant's Motion for Summary Judgment (Doc. 184) are DENIED. Within fourteen (14) days from the date of this Order, Plaintiffs SHALL file their response to Defendant's Motion for Summary Judgment (Doc. 172). See full written Order.(VH, ilcd)

E-FILED

Tuesday, 17 September, 2019 03:58:03 PM
Clerk, U.S. District Court, ILCD

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS
PEORIA DIVISION
MAO-MSO RECOVERY II, LLC, MSP
RECOVERY LLC, MSP RECOVERY
CLAIMS, SERIES LLC, & MSPA
CLAIMS 1, LLC,

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Plaintiffs,
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v.
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STATE FARM MUTUAL AUTOMOBILE )
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INSURANCE COMPANY,
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Defendant.

Case No. 1:17-cv-1537

ORDER & OPINION
This matter is before the Court on Plaintiffs’ Motion to Stay or Deny
Defendant’s Motion for Summary Judgment (Doc. 184). Defendant has responded
(Doc. 194). Plaintiffs have requested to file a reply (Doc. 202)—Defendant opposes the
request (Doc. 203)—but for the reasons stated herein, the Court denies leave to file.
Therefore, this matter is ripe for review.
BACKGROUND
The Medicare Secondary Payer (MSP) provisions of the Medicare Act, 42
U.S.C. § 1395y et seq., “make[ ] Medicare insurance secondary to any ‘primary plan’
obligated to pay a Medicare recipient’s medical expenses, including a third-party
tortfeasor’s automobile insurance.” Parra v. PacifiCare of Ariz., Inc., 715 F.3d 1146,
1152 (9th Cir. 2013) (citing § 1395y(b)(2)(A)). Medicare generally does not pay medical
expenses when a primary plan will cover the costs, but where such payment is

unlikely, conditional payments may be made, with the primary insurer to reimburse
Medicare. § 1395y(b)(2).
Part C of the Medicare Act allows Medicare enrollees to obtain Medicare
benefits through private insurers, Medicare Advantage Organizations (MAOs),
rather than the government. 42 U.S.C. § 1395w-21(a). “An MAO may sue a primary
plan . . . that fails to reimburse it for conditional payments made” under the private
right of action provided in § 1395y(b)(3)(A). (Doc. 86 at 2).
Plaintiffs are corporate entities which have been assigned rights of recovery
under the MSP by numerous MAOs, among others. (Doc. 184 at 4). The basic theory
of their case is members of the assignor-MAOs who were also insured under no-fault
automobile insurance policies issued by Defendant were involved in car accidents
requiring medical services; Plaintiffs allege Defendant failed to pay for the medical
services or reimburse the assignor-MAOs for conditional payments issued. (Doc. 86
at 3).
This action was commenced on February 23, 2017, in the Southern District of
Illinois. (Doc. 1). Following a motion to dismiss for lack of subject matter jurisdiction
on Article III standing grounds and for failure to plead sufficient facts under Rule 8
(Doc. 26), Plaintiffs filed a First Amended Complaint (Doc. 32). Defendant moved to
transfer the case under 28 U.S.C. § 1404(a) (Doc. 28) and the case was transferred to
this District (Doc. 57). In the interim, Defendant filed a second motion to dismiss
(Doc. 34) asserting the amendments did not cure the issues identified in the original
motion to dismiss. This Court denied as moot Defendant’s original motion to dismiss

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(Doc. 26) but granted Defendant’s second motion to dismiss (Doc. 34), holding
Plaintiffs had failed to sufficiently allege an injury in fact, as necessary for Article III
standing. (Doc. 59 at 8-9).
Plaintiffs timely filed a Second Amended Complaint (Doc. 63) on January 30,
2018. In the Second Amended Complaint, Plaintiffs provided additional details about
an accident resulting in medical fees for two Medicare beneficiaries, which they allege
Defendant failed to pay or reimburse. (Doc. 63 at 3-9). The two beneficiaries were
identified as O.D. and C.S. (Doc. 63 at 3). Defendant again moved to dismiss on
standing grounds, inter alia. (Doc. 68). The Court held the O.D. allegations were
sufficient to survive a motion under Rule 12(b)(1) to dismiss for lack of standing, but
the C.S. allegations were not; the assignment of the claim related to C.S. occurred
after the lawsuit was filed. (Doc. 86 at 6, 12-13).
The parties differed on the discovery schedule. Defendant requested discovery
be bifurcated between discovery on the merits and discovery on class certification as
well as a deadline for amendment of the pleadings and joinder of additional parties,
which Plaintiff opposed; Defendant also noted in its potential plan to file a motion for
summary judgment on the named Plaintiffs’ individual claims. (Doc. 90). Magistrate
Judge Jonathan E. Hawley accepted Defendant’s plan. (Doc. 91). Plaintiffs did not
file an objection.
The undersigned referred the case to Magistrate Judge Tom Schanzle-Haskins
for a report and recommendation concerning class certification. (Docket Entry dated

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01/04/2019).1 Shortly before the briefing on class certification was completed,
Defendant filed a motion for summary judgment, arguing the O.D. allegations did not
provide Plaintiffs with standing. (Doc. 172). A previously set hearing, the report and
recommendation, and a decision on class certification were put on hold pending
resolution of the motion for summary judgment. (Docket Entry dated 08/07/2019).
Plaintiffs then filed the instant motion, requesting Defendant’s summary judgment
motion be stayed or denied under Rule 56(d)(1). (Doc. 184). Further briefing on the
summary judgment motion was postponed pending resolution of the Rule 56(d)(1)
motion. (Docket Entry dated 08/16/2019).
A related case was also before the Court between these parties. MAO-MSO
Recovery II, LLC v. State Farm Mut. Auto. Ins. Co., No. 17-cv-1541, 2018 WL 2392827,
at *1 (C.D. Ill. May 25, 2018) (describing this action as “a separate but related case
pending before this Court—another putative class action with slightly different facts,
but consisting of virtually identical allegations under the law.”). To reduce a fairly
complex story, “the question of standing [was] hotly disputed” in that case. MAOMSO Recovery II, LLC v. State Farm Mut. Auto. Ins. Co., ___ F.3d ___, Nos. 18-2377
and 18-2463, 2019 WL 3822156, at *3 (7th Cir. Aug. 15, 2019).2
The procedural backgrounds are parallel to a large extent; “State Farm . . .
moved to dismiss the initial complaint for lack of Article III standing (among other
grounds), [and] the plaintiffs responded by filing an amended complaint to put more

Judge Hawley recused himself under 28 U.S.C. § 455(a), so the matter was
reassigned to Judge Schanzle-Haskins.
2 The Court will hereinafter refer to the Seventh Circuit’s decision as MAO-MSO I.
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meat on the bone.” Id. But, as in this case, dismissal of the First Amended Complaint
was warranted because “plaintiffs could not demonstrate an ‘injury in fact’ for
purposes of Article III standing.” Id. (describing this Court’s reasoning). A Second
Amended Complaint was dismissed on standing grounds as well. Id. at *3–*4. The
Seventh Circuit agreed with this Court’s disposition of the standing issue in that case,
modifying that holding only to correct this Court’s “use of the phrase ‘with prejudice’
to signal that it would permit no more amendments.” Id. at *4-5.
LEGAL STANDARD
Under Federal Rule of Civil Procedure 56(d), when a nonmovant facing a
motion for summary judgment demonstrates it cannot yet present facts “essential to
justify its opposition,” the court may defer or deny the motion for summary judgment.
“A party seeking relief under Rule 56(d) must show by affidavit or declaration specific
reasons discovery should be extended, which requires more than a fond hope that
more fishing might net some good evidence.” Smith v. OSF HealthCare Sys., 933 F.3d
859, 864 (7th Cir. 2019). Although “[a]ppellate courts often remand a denial of
additional time for discovery when the motion for summary judgment is filed before
the close of discovery,” “[t]he mere fact that discovery is incomplete is not enough to
prevent summary judgment.” Id. at 864–65 (citing Farmer v. Brennan, 81 F.3d 1444,
1450–51 (7th Cir. 1996) for both propositions).
DISCUSSION
I.

Plaintiffs’ Request for Leave to File a Reply
“[T]he Court does not typically permit the moving party to file a reply in order

to introduce new arguments or evidence that could have been included in the motion
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itself, or to rehash the arguments made in the motion.” Shefts v. Petrakis, No. 10-cv1104, 2011 WL 5930469, at *8 (C.D. Ill. Nov. 29, 2011). Rather, replies are allowed
“if the party opposing a motion has introduced new and unexpected issues in . . .
response to the motion.” Id. Plaintiffs have not met this standard. Defendant’s
response—especially in the shadow of Defendant’s motion for summary judgment—
did not raise any new or unexpected issues. Moreover, much of Plaintiffs’ tendered
reply either rehashes the arguments from their initial motion or attacks Defendant’s
request for summary judgment itself; neither is a proper function for a reply in this
context. Therefore, leave to file is denied.
II.

Plaintiffs’ Rule 56(d) Motion
What Plaintiffs seek before consideration of Defendant’s motion for summary

judgment is both simple and vast: for Defendant to produce demographic evidence of
everyone in its claims database who is Medicare eligible and to then provide that
information to a third-party data vendor (selected by the parties) who will create a
report of names that exist in that list and in Plaintiffs’ list of MAO members. (Doc.
184 at 16-17). Then, both parties would produce additional data on the matched
beneficiaries to determine whether any made a claim to Defendant, whether the
MAO-assignors made payments on behalf of any matched beneficiary, and whether
Defendant made any reimbursements. (Doc. 184 at 16-17). Only “[a]fter this final
step,” Plaintiffs assert, Defendant “and the Court will know with certain[t]y the
extent of Plaintiffs’ individual claims against” Defendant. (Doc. 184 at 17).3

Plaintiffs argue “in all but identical circumstances” three of this Court’s colleagues
have ordered the data matching it requests. (Doc. 184 at 3 (citing MAO-MSO Recovery

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Defendant opposes Plaintiffs’ request. It argues Plaintiffs, who Defendant says
have what they need with regard to the exemplar beneficiary, are seeking in effect to
amend their pleadings to use new examplars to establish standing. (Doc. 194 at 16).
Moreover, Defendant argues Plaintiffs failed to engage in due diligence to uncover
such other exemplars. (Doc. 194 at 21). The Court agrees Plaintiffs’ request to probe
all possible claims cannot support its Rule 56(d) motion.
Just as they were in MAO-MSO I, Plaintiffs “were on notice from the outset
that the issue of standing would be front and center. If they were going to hang their
hat on a single ‘exemplar’ after two unsuccessful attempts, it was important to get it
right on the third try.” MAO-MSO I, 2019 WL 3822156, at *5; see also Reed v.
Columbia St. Mary’s Hosp., 915 F.3d 473, 479 (7th Cir. 2019) (“Pleadings shape the
litigation . . . . Many efficiencies are lost when claims or defenses are left out of
pleadings and a party then attempts to assert them at later stages.”). While Plaintiffs
got it right on the third try here, Defendant argues those allegations have since
proved to be incorrect. Plaintiffs now attempt to use Rule 56(d) to defend against
Defendant’s charge they cannot show standing by asking for discovery on other
potential exemplars.

II, LLC v. Mercury General, Case Nos. 17-cv-2525, 17-cv-2557 (C.D. Cal.); MAO-MSO
Recovery II, LLC v. The Farmers Ins. Exch., No. 17-cv-2522 (C.D. Cal.); and MAOMSO Recovery II, LLC v. GEICO, No. 17-cv-0711 (D. Md.)). But in each case, the
opposing party either assented to the requested matching discovery or was not in the
process of moving for summary judgment; the circumstances were therefore quite
different.
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Plaintiffs’ request is incongruous with the purpose of Rule 56(d). Rule 56(d) is
“intended as a safeguard against a premature grant of summary judgment.” King v.
Cooke, 26 F.3d 720, 726 (7th Cir. 1994). But Plaintiffs have had the chance to request
discovery related to their theory of standing based on exemplar O.D., and there is
nothing premature about reviewing summary judgment when there has been ample
opportunity for discovery on the relevant allegations in the pleadings. “[R]equesting
leave to cast a wider net with the apparent hope that” some relevant evidence will
materialize is simply not enough. In re Dairy Farmers of Am., Inc. Cheese Antitrust
Litig., 801 F.3d 758, 766 (7th Cir. 2015). Where, as here, a Rule 56(d) motion is “based
on nothing more than mere speculation and would amount to a fishing expedition,”
the Court may deny it. Id. (quoting Davis v. G.N. Mortg. Corp., 396 F.3d 869, 885 (7th
Cir. 2005)).
Due to Plaintiffs’ repeated attempts to adequately allege standing, the Court
is concerned that Plaintiffs’ belief that further discovery would unearth a new, viable
exemplar is based on mere speculation. As the Seventh Circuit explained, this Court
is “entitled to give little weight to [Plaintiffs’] request for another round of pleading”
where they fail to name other potential exemplars or present a sound reason “to
believe that the fourth time [will] be the charm.” MAO-MSO I, 2019 WL 3822156, at
*5. Although the Second Amended Complaint survived a motion to dismiss, a new
round of pleading is precisely what would result from the requested discovery.
“[W]hen a new argument is made in summary judgment briefing, the correct first
step is to consider whether it changes the complaint’s factual theory, or just the legal

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theories plaintiff has pursued so far.” Chessie Logistics Co. v. Krinos Holdings, Inc.,
867 F.3d 852, 860 (7th Cir. 2017). If the former, use of the new facts is an “attempt[ ]
in effect to amend [the] complaint.” Id. Plaintiffs clearly hope discovery on every claim
in their possession would reveal at least one in which they suffered an injury in fact,
allowing them to counter Defendant’s motion for summary judgment with a new
exemplar by effectively amending their complaint. (See Doc. 184 at 14 (“[E]xchanging
data and matching beneficiaries will allow Plaintiffs to prove as to every assigned
claim” Defendant violated the MSP) (emphasis added)).
Nothing in Plaintiffs’ Rule 56(d) motion convinces the Court that further
discovery would successfully uncover a new exemplar which could be used to defend
against summary judgment, even if the Court were inclined to allow de facto
amendment to the complaint. Plaintiffs’ only argument that standing must exist for
one of their claims is the sheer number of claims they have amassed and Defendant’s
share of the auto-insurance market. (Doc. 184 at 15, 20). This argument is unavailing.
As Plaintiffs explain, the pool of beneficiaries they seek reimbursement for “grows
each day, as additional MA plans assign their claims.” (Doc. 184 at 4 n.4). But what
matters is whether any claim Plaintiffs had at the time the lawsuit was filed (Doc. 86
at 6); the simple number of claims Plaintiffs has amassed does not give the Court any
indication that Plaintiffs had a cognizable injury in fact on February 23, 2017. Indeed,
it may well be none of the claims Plaintiffs possessed when this suit was filed actually
provide them with standing. (See Doc. 184 at 20 (stating Plaintiffs “do not know
whether [Defendant] accepted coverage and made a payment to the insured or

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medical provider(s)” but if it “did accept coverage and paid anyone, but did not
reimburse Plaintiffs’ assignor, [Plaintiffs] have a reimbursement claim.”)). Like the
“proverbial ‘smoking gun’ ” in Davis, the existence of a situation in which an MAO
beneficiary insured by Defendant suffered an accident during which Defendant
improperly reimbursed and the MAO then assigned its MSP claim to Plaintiffs, “is
based on nothing more than mere speculation.” 396 F.3d at 885.
There may be plenty more exemplars in the sea, as it were, but claims related
to them will need to be pursued through a different suit if Plaintiffs cannot defend on
the exemplar claims alleged in the Second Amended Complaint. See MAO-MSO I,
2019 WL 3822156, at *5. Plaintiffs’ request to deny or delay Defendant’s motion for
summary judgment, untethered as it is from the allegations in their Second Amended
Complaint, ultimately boils down to a request to cast a wider net, premised on the
hope that a fishing expedition might reel in at least one exemplar allowing Plaintiffs
to assert standing.
The Court recognizes this result may require a recalibration of strategy for
Plaintiffs. In light of that, the Court will allow Plaintiffs fourteen (14) days from the
date of this Order to file their response to Defendant’s Motion for Summary Judgment
(Doc. 172).
CONCLUSION
Plaintiffs’ Motion for Leave to File a Reply in Support of the Motion under Rule
56(d) and Plaintiffs’ Motion to Stay or Deny Defendant’s Motion for Summary
Judgment (Doc. 184) are DENIED. Within fourteen (14) days from the date of this

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Order, Plaintiffs SHALL file their response to Defendant’s Motion for Summary
Judgment (Doc. 172).

SO ORDERED.
Entered this 17th day of September 2019.
s/ Joe B. McDade
JOE BILLY McDADE
United States Senior District Judge

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