MAO-MSO Recovery II, LLC et al v. State Farm Mutual Automobile Insurance Company
Filing
216
ORDER and OPINION entered by Judge Joe Billy McDade on 11/25/2019. Plaintiffs' Motion for Leave to File Third Amended Complaint (Doc. 207) isDENIED and Defendant's Motion for Summary Judgment (Doc. 172) is GRANTED.This matter is dismissed for want of jurisdiction. This matter is TERMINATED. See full written Order.(VH, ilcd)
E-FILED
Monday, 25 November, 2019 04:54:24 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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)
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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 Defendant’s Motion for Summary Judgment
(Doc. 172) and Plaintiffs’ Motion for Leave to File Third Amended Complaint (Doc.
207). Both motions have been fully briefed (see Docs. 175, 206, 212, 213, 215) and the
matter is ripe for review.1 For the following reasons, Defendant’s motion is
GRANTED and Plaintiffs’ motion is DENIED.
BACKGROUND
I.
Legal Background
Originally enacted in 1965, Medicare “is a federal health insurance program
primarily benefitting those 65 years of age and older.” Parra v. PacifiCare of Ariz.,
Inc., 715 F.3d 1146, 1152 (9th Cir. 2013). Added in 1980, the Medicare Secondary
The parties are admonished for their failure to comply with Local Rule 5.8(A), which
requires courtesy paper copies be provided to the Court when a document is longer
than thirty pages.
1
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.” Id. (citing § 1395y(b)(2)(A)). Medicare generally does not pay medical
expenses when a primary plan will or can be reasonably expected to cover the costs.
§ 1395y(b)(2)(A). However, a payment “conditioned on reimbursement” may be made
where “a primary plan . . . has not or cannot reasonably be expected to make payment
with respect to [an] item or service promptly.” § 1395y(b)(2)(B)(i). “[I]f it is
demonstrated that [a] primary plan has or had a responsibility to make payment with
respect to” an item or service, the primary plan is required to reimburse “any payment
made by the Secretary under this subchapter.” § 1395y(b)(2)(B)(ii).
Part C of the Medicare Act, added in 1997, 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). Part C “authorizes,
but does not compel, a MAO to charge a primary plan for medical expenses paid on
behalf of a participant.” Parra, 715 F.3d at 1152–53. As this Court explained earlier
in the case “[a]n 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).
II.
Procedural Background
Plaintiffs are several corporations which have aggregated rights of recovery
under the MSP provisions by obtaining assignments from numerous MAOs and other
organizations holding or purporting to hold rights of recovery under those provisions.
2
Defendant is an automobile insurance company. In this action, Plaintiffs are seeking
to recover under the MSP provisions. Their theory of the 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.
This case was filed in the Southern District of Illinois on February 23, 2017.
(Doc. 1). The Southern District of Illinois transferred the matter to this District on
November 28, 2017, pursuant to a motion by Defendant under 28 U.S.C. § 1404(a).
(Doc. 57).
Defendant thrice moved to dismiss under Rule 12, on, inter alia, standing
grounds. (Docs. 26, 34, 68). The first motion to dismiss was made moot by Plaintiffs’
First Amended Complaint (Doc. 32), the second motion to dismiss was granted but
with leave to amend (Doc. 59), and the third motion to dismiss—addressed to
Plaintiffs’ Second Amended Complaint (Doc. 63)—was denied (Doc. 86). The Second
Amended Complaint, which is presently the operative complaint, provided detail on
two “exemplar” beneficiaries identified by initial as O.D. and C.S. (Doc. 63 at 3–9).
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 because the
assignment of the claim related to C.S. to a Plaintiff occurred after the lawsuit was
filed. (Doc. 86 at 6, 12–13).
3
Defendant requested a bifurcated discovery schedule between discovery
relevant to class certification and discovery on the merits, a deadline for amendment
of the pleadings, and a deadline for joinder of additional parties; Plaintiffs opposed
all of these requests. (Doc. 90). Magistrate Judge Jonathan E. Hawley accepted
Defendant’s discovery plan. (Doc. 91). Plaintiffs did not file an objection to Judge
Hawley’s decision.
The undersigned referred the matter to Magistrate Judge Tom SchanzleHaskins for a report and recommendation concerning class certification.2 (Docket
Entry dated 01/04/2019). Plaintiffs’ filed their Motion for Class Certification (Doc.
134) on June 24, 2019, Defendant filed a Memorandum of Law in Opposition to that
motion (Doc. 150) on July 24, 2019, and Plaintiffs filed a Reply Memorandum (Doc.
192) on August 22, 2019. The parties also filed numerous evidentiary motions
attendant to the class certification dispute.
The instant Motion for Summary Judgment (Doc. 172) was filed on July 29,
2019. Plaintiffs moved under Rule 56(d)(1) to stay or deny Defendant’s Motion for
Summary Judgment (Doc. 184); the Court suspended the response and reply
deadlines to the Motion for Summary Judgment pending resolution of the Rule
56(d)(1) Motion (Docket Entry dated 8/16/2019). When the Rule 56(d)(1) Motion
became ripe, the Court reviewed it and denied it because the Court did not find the
This matter was reassigned to Judge Schanzle-Haskins due to Judge Hawley’s
recusal under 28 U.S.C. § 455(a).
2
4
Rule 56(d)(1) Motion sufficiently indicated specific evidence “essential to justify its
opposition,” Fed. R. Civ. P. 56(d), that would be uncovered. (Doc. 204).
Plaintiffs thereafter timely responded to the Motion for Summary Judgment.
(Doc. 206). Additionally, they submitted the Motion for Leave to File Third Amended
Complaint (Doc. 207) currently at issue. The purpose of the proposed amendments is
to include detail on three exemplars—M.M., M.P., and E.C.—collectively referred to
by the parties as the “Florida Exemplars,” because they were the exemplar
beneficiaries in a near-identical action in the United States District Court for the
Southern District of Florida.3 By including these exemplars, Plaintiffs seek to show
standing on a basis different from that in the Second Amended Complaint.
III.
Factual Background
O.D. was, at the relevant times, a beneficiary of MAO Florida Healthcare Plan
(FHP). (Doc. 206 at 11, 13). FHP assigned its right of reimbursement to La Ley
Recovery Systems, Inc., which in turn assigned the claims from FHP to Plaintiff
MSPA Claims 1, LLC, on February 20, 2015. (Docs. 86; 206 at 13–14); MSPA Claims
1, LLC v. State Farm Mut. Auto. Ins. Co., No. 18-cv-23165, Order Granting Mot. to
Dismiss, ECF No. 31 (S.D. Fla. Mar. 5, 2019). O.D. was also insured through
Defendant; the policy limits for the Florida Personal Injury Protection (PIP)
insurance under Defendant’s policy were $10,000. (Doc. 206 at 11).
The Florida case was dismissed without prejudice for lack of Article III standing
because the assignment with regard to the Florida Exemplars was not made until
after that case had been commenced. MSPA Claims 1, LLC v. State Farm Mut. Auto.
Ins. Co., No. 18-cv-23165, Order Granting Mot. to Dismiss, ECF No. 31 (S.D. Fla.
Mar. 5, 2019).
3
5
Defendant was notified O.D. had been in an automobile accident on October
23, 2013. (Doc. 212 at 4). On or about November 4, 2013, Defendant determined O.D.
was a Medicare beneficiary. (Doc. 212 at 5). O.D. received treatment at Central
Broward County Therapy Center (CBTC) and Florida Medical Center (FMC)
following the accident. (Doc. 206 at 14–15). Defendant made payments to CBTC
totaling $5,371.54 and to FMC totaling $4,628.46. (Doc. 206 at 14–15). Prior to
December 9, 2013, Defendant paid $2,813.13 to CBTC, with the remaining $2,558.41
paid to CBTC between December 9 and December 23. (Doc. 212 at 5, 9). The payment
to FMC was made on December 21, 2013 (Doc. 212 at 9).
O.D. was also receiving treatment at Select Physical Therapy Holdings, Inc.
(SPTH) in the relevant time period. (Doc. 212 at 5). Defendant argues the services
provided by SPTH were not related to the accident (Doc. 212 at 5–8); a fuller look at
the record and determination as to whether there is any genuine dispute as to that
issue is present in the Discussion. FHP made a payment to SPTH on December 9,
2013, although the amount and nature of that payment are a matter of disagreement.
(Doc. 212 at 5–9). It made a further payment to SPTH on December 23, 2013, for
either $160.95 or $164.23. (Doc. 212 at 9). FHP also may have made a payment to the
County of Broward Office of the Sheriff and a payment to FMC in January of 2014.
(Doc. 212 at 10).
The Court does not address the specific factual backgrounds of the Florida
Exemplars, because it finds it unnecessary to examine those facts to resolve the
instant motions.
6
LEGAL STANDARD
“The court shall grant summary judgment if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a). “A genuine dispute of material fact exists ‘if the
evidence is such that a reasonable jury could return a verdict for the nonmoving
party.’ ” Skiba v. Ill. Cent. R.R. Co., 884 F.3d 708, 717 (7th Cir. 2018) (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). “The nonmovant bears the
burden of demonstrating that such genuine issue of material fact exists.” Aregood v.
Givaudan Flavors Corp., 904 F.3d 475, 482 (7th Cir. 2018).
All assertions that a fact is disputed or cannot genuinely be disputed must be
supported by citations to evidence in the record. Horton v. Pobjecky, 883 F.3d 941,
948 (7th Cir. 2018). The record is viewed and all reasonable inferences are drawn in
the nonmovant’s favor. BRC Rubber & Plastics, Inc. v. Cont’l Carbon Co., 900 F.3d
529, 536 (7th Cir. 2018). However, inferences “supported by only speculation or
conjecture will not defeat a summary judgment motion.” Carmody v. Bd. of Trs. of U.
of Ill., 893 F.3d 397, 401 (7th Cir. 2018).
The parties disagree on the standard for leave to amend the complaint at this
stage of the litigation. (Compare Doc. 207 at 7 with Doc. 213 at 9). The standard is
therefore elucidated, and their arguments considered, in the Discussion section.
DISCUSSION
“No principle is more fundamental to the judiciary’s proper role in our system
of government than the constitutional limitation of federal-court jurisdiction to actual
7
cases or controversies.” Raines v. Byrd, 521 U.S. 811, 818 (1997) (quoting Simon v. E.
Ky. Welfare Rights Org., 426 U.S. 26, 37 (1976)). The doctrine of standing arises from
that limitation. Meyers v. Nicolet Restaurant of De Pere, LLC, 843 F.3d 724, 726 (7th
Cir. 2016). Article III standing thus “serves to prevent the judicial process from being
used to usurp the powers of the political branches and confines the federal courts to
a properly judicial role.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016). A
Plaintiff’s burden of showing standing is not relieved by surviving a motion under
Rule 12(b)(1): “Beyond the pleading stage, standing must be supported ‘with the
manner and degree of evidence required at the successive stages of the litigation.’ ”
United States v. Funds in the Amount of $239,400, 795 F.3d 639, 642 (7th Cir. 2015)
(quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 561 (1992)).
“To demonstrate standing, a plaintiff must identify an injury caused by the
complained-of conduct and redressable by judicial decision.” Cornucopia Inst. v.
United States Dep’t of Agric. 884 F.3d 795, 796 (7th Cir. 2018). The injury must be
concrete and particularized as well as actual or imminent. Parvati Corp. v. City of
Oak Forest, Ill., 630 F.3d 512, 516 (7th Cir. 2010).
The central question in this matter is whether Plaintiffs have suffered an
injury in fact. Although Plaintiffs have aggregated numerous claims, the allegations
in their Second Amended Complaint supporting standing related to only one; the
injury asserted was the failure of Defendant to reimburse an assignor-MAO for
conditional payments, for which Defendant bore responsibility, related to O.D.’s
automobile accident. Additionally, Plaintiffs now seek to amend their complaint yet
8
again to include similar allegations related to three other beneficiaries. The
discussion begins with an examination of whether the O.D. exemplar beneficiary
payments survive Defendant’s Motion for Summary Judgment, then turns to
Plaintiffs’ request to amend.
I.
Standing Based Upon the O.D. Exemplar
The record reflects Defendant never made any payments to SPTH, and the
payments by FHP to SPTH occurred before the $10,000 limit in O.D.’s policy with
Defendant was reached. Defendant undisputedly paid FMC, by contrast, but if FHP
made duplicative payments—which is a matter of disagreement—they occurred well
after the exhaustion of the $10,000 limit. Plaintiffs argue Defendant had a
responsibility to reimburse FHP for payments made to SPTH and payments made to
FMC for treatment sought by O.D. (Doc. 206 at 38–39). Defendant argues the SPTH
payments were not related to the accident, the FMC payments were not valid
conditional payments giving rise to liability, and the exhaustion of policy limits
means FHP would have paid the same amount even if Defendant was responsible for
a given payment. (Doc. 212 at 5–9, 33–36). Additionally, Defendant argues this Court
would be unable to grant relief on the O.D. claim because no request for payment was
timely made and pre-suit notification under state law was not timely given; the Court
does not reach the additional arguments.
A.
The SPTH Payments
There are two issues with regard to the SPTH payments. First, the parties
disagree about whether the payments made were related to the automobile accident.
Under the relevant policy, Defendant was only responsible for medical expenses
9
caused by a motor vehicle accident (Doc. 153-17 at 14); if the knee pain treated by
SPTH was solely caused by a prior knee replacement surgery, and not the automobile
accident, Defendant would not be responsible. Second, Defendant argues even if it
had a responsibility to make the SPTH payments, it exhausted the policy limits and,
as a practical matter, FHP would have paid the same amount for O.D.’s treatment as
a consequence. (Doc. 212 at 36). The Court finds it unnecessary to reach the second
issue because the first is dispositive.
The factual dispute about the SPTH payments is not genuine. O.D. had a knee
replacement surgery prior to the automobile accident; she first sought treatment from
SPTH prior to the accident in connection with that surgery. (Doc. 154-14 at 4–6).
SPTH recommended O.D. attend twelve physical therapy sessions over the next four
weeks. (Doc. 154-14 at 6). Before the accident, O.D. visited SPTH at least twice. (Doc.
154-14 at 4, 9). The day after the accident, O.D. had another appointment with SPTH;
she told her physical therapist she had been involved in an accident but “L knee was
unaffected by the incident . . . . Reports that L knee is feeling better today.” (Doc. 15414 at 11). Thereafter, the accident was not mentioned: O.D. attended at least two
more appointments before declining further treatment. (Doc. 154-14 at 14, 17, 23, 24–
25). On all of SPTH’s records, prior- and post-accident, the “mechanism of injury” is
reported as the knee replacement surgery, not the accident, and FHP is listed as the
payer. (Doc. 154-14 at 4, 9, 11, 14, 17, 23, 24).
Plaintiffs’ only proffered evidence that any treatment from SPTH was related
to the accident comes from a declaration by a nurse practitioner employed by Plaintiff
10
MSP Recovery, LLC. The declaration states an ambulance record—which Plaintiffs
have not adequately brought to the Court’s attention4—shows O.D. complained of left
knee pain following the accident, proffers an expert opinion that pain from a prior
knee surgery would be exacerbated by an automobile accident, and presents two
conclusions: (1) the accident either caused or exacerbated the knee pain and (2)
therefore, the subsequent SPTH treatment was related to the accident. (Doc. 206-5
at 3).
“An expert who supplies nothing but a bottom line supplies nothing of value to
the judicial process.” Mid-State Fertilizer Co. v. Exch. Nat’l Bank of Chi., 877 F.2d
1333, 1339 (7th Cir. 1989) (quoted in Biestek v. Berryhill, 139 S. Ct. 1148, 1159–60
(2019)). The expert here bases his opinion on his “knowledge, experience, and review
of the medical records.” (Doc. 206-5 at 3). But the expert’s statement that “treatment
for subjective complaints of left knee pain would be related to the accident” (Doc. 2065 at 3) is utterly foundationless. While there may be some indication from the expert’s
declaration that treatment for exacerbated knee pain would have been warranted
following the automobile accident, there is no basis for his conclusion that the
treatment provided by SPTH following the accident was at all related to the accident.
Compare Cripe v. Henkel Corp., 858 F.3d 1110, 1113–13 (7th Cir. 2017) (affirming the
The record in this case is voluminous; the Court will not attempt to track down a
document for the parties without even a hint of where to look, assuming the document
is in the record at all. See Harney v. Speedway SuperAmerica, LLC, 526 F.3d 1099,
1104 (7th Cir. 2008) (“It is not the duty of the court to scour the record in search of
evidence to defeat a motion for summary judgment; rather, the nonmoving party
bears the responsibility of identifying the evidence upon which he relies.”).
4
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grant of summary judgment where purported experts failed to sufficiently explain
their conclusions or the relation to the alleged injuries, explaining “[y]ou can’t beat
something with nothing.”). Plaintiffs have submitted only speculation, not
substantial evidence, that the SPTH treatment was in any way medical treatment
for a bodily injury caused by an automobile accident. See McMahon v. Bunn-O-Matic
Corp., 150 F.3d 651, 658 (7th Cir. 1998) (“Naked opinions cannot stave off summary
judgment.”).
The Court finds there is no genuine dispute of material fact as to this issue,
and the evidence before the Court demonstrates the post-accident appointments with
(and payments to) SPTH were not related to the accident. As Defendant had no
resulting responsibility to submit payments to SPTH for those appointments, FHP
had no right to be reimbursed. There is no legally cognizable injury arising from the
SPTH payments; they cannot provide the basis for standing.
B.
The FMC Payments
As with the payments to SPTH, there are both factual and legal issues to
adjudicate regarding the payments to FMC. Defendant maintains FHP did not, in
fact, ever make a payment to FMC; if it did, there is no documentation supporting
the claim that the payment was for the same items or services; and any proffered
documentation is inadmissible (Doc. 212 at 11–14); Plaintiffs claim FHP did indeed
pay FMC, and for the same items or services as Defendant. Defendant further argues
any payment made to FMC was not a conditional payment for which FHP was
entitled to reimbursement. The Court will assume, arguendo, the records submitted
12
by Plaintiffs are admissible and indicate payment for a service or item which
Defendant had previously paid, because Defendant’s legal argument is dispositive.
The Medicare Act has been called “among the most completely impenetrable
texts within human experience.” Rehab. Ass’n of Va. v. Kozlowski, 42 F.3d 1444, 1450
(4th Cir. 1994).5 As the Fourth Circuit noted, not only are the Medicare provisions
“dense reading of the most tortuous kind,” but in addition “Congress revisits the area
frequently . . . making any solid grasp of the matters addressed merely a passing
phase.” Id.
Before dashing into the trees, a moment on the forest. The gravamen of
Defendant’s argument is that because it made payment to FMC well before FHP did
so, any payments made by FHP were not conditional payments; consequently,
Defendant reasons, it is not liable. (Doc. 212 at 33). Plaintiffs disagree, stating any
payment actually made by an MAO for which Defendant was liable is secondary and
subject to reimbursement. (Doc. 215 at 5). With these arguments in mind, the Court
turns to the statute.
Pursuant to 42 U.S.C. § 1395y(b)(2)(A), payment
under this subchapter may not be made, except as provided in
subparagraph (B), with respect to any item or service to the extent that
. . . payment has been made or can reasonably be expected to be made
Accord Cooper Univ. Hosp. v. Sebelius, 636 F.3d 44, 45 (3d Cir. 2010); Pers. Care
Prods. v. Hawkins, 635 F.3d 155, 159 n.18 (5th Cir. 2011); Atrium Med. Ctr. v. United
States Dep’t of Health and Human Servs., 766 F.3d 560, 564 (6th Cir. 2014); Abraham
Lincoln Mem. Hosp. v. Sebelius, 698 F.3d 536, 541 (7th Cir. 2012); Alhambra Hosp.
v. Thompson, 259 F.3d 1071, 1076 (9th Cir. 2001); Sunshine Haven Nursing Ops.,
LLC. v. United States Dep’t of Health and Human Servs., 742 F.3d 1239, 1258 (10th
Cir. 2014); Ne. Hosp. Corp. v. Sebelius, 657 F.3d 1, 13 (D.C. Cir. 2011).
5
13
. . . under an automobile or liability insurance plan (including a selfinsured plan) or under no fault insurance.
The aforementioned subparagraph (B) provides
The Secretary may make payment under this subchapter with respect
to an item or service if a primary plan described in subparagraph (A)(ii)
has not made or cannot reasonably be expected to make payment with
respect to such item or service promptly (as determined in accordance
with regulations). Any such payment by the Secretary shall be
conditioned on reimbursement to the appropriate Trust Fund in
accordance with the succeeding provisions of this subsection.
42 U.S.C. § 1395y(b)(2)(B)(i).
The text is clear and repeated twice. Conditional payments may be made only
where the primary plan “has not made or cannot reasonably be expected to make
payment . . . promptly.” 42 U.S.C. § 1395y(b)(2)(B)(i); accord § 1395y(b)(2)(A)(ii)
(stating payment may not be made where “payment has been made” by a primary
insurer). As Defendant notes, to prevent situations like the present one the
implementing regulations require MAOs to identify and coordinate with primary
insurers. 42 C.F.R. § 422.108.
Plaintiffs respond by arguing Defendant’s position was “squarely dispelled” in
United States v. Baxter International, Inc., 345 F.3d 866, 881 (11th Cir. 2003). (Doc.
215 at 5). Plaintiffs’ citation to Baxter International is unavailing, however, because
they misunderstand the argument made by the defendants in that case. As the
Eleventh Circuit explained it, the “[d]efendants argue[d] that Medicare is entitled to
reimbursement only if Medicare pays after payment from a primary source either has
been made or is expected promptly.” Baxter Int’l, 345 F.3d at 885 (emphasis added).
By contrast, Defendant is arguing MAOs are not entitled to reimbursement in
14
precisely that situation. (Doc. 212 at 33). This argument is supported, rather than
refuted, by Baxter International: “[T]he only payments Defendants want to label as
conditional are the very payments which § 1395y(b)(2)(A) provides Medicare should
not make at all.” Baxter Int’l, 35 F.3d at 888 n.15. In short, Plaintiffs have Baxter
International completely reversed.
Closely following Baxter International, Congress provided some measure of
clarity. When Baxter International was decided, the statute provided:
Any payment under this subchapter with respect to any item or service
to which subparagraph (A) applies shall be conditioned on
reimbursement to the appropriate Trust Fund established by this
subchapter when notice or other information is received that payment
for such item or service has been or could be made under such
paragraph.
Baxter Int’l, 345 F.3d at 885 (quoting 42 U.S.C. § 1395y(b)(2)(B)(i)). The confusion
that lead to Baxter International was erased by Congress’s 2003 amendments to the
MSP provisions. Brown v. Thompson, 374 F.3d 253, 258 (4th Cir. 2004). As relevant
to this case, the amendments clarified in subparagraph (B)(i) that a conditional
payment may only be made where the primary insurer has not made payment and
cannot be expected to promptly do so. Medicare Prescription Drug, Improvement, and
Modernization Act of 2003, Pub. L. 108-173, § 301, 117 Stat. 2066. Thus even if
Plaintiffs were reading Baxter International correctly—which they are not—the 2003
amendments would nonetheless compel the same result.
Plaintiffs also cite to Collins v. Wellcare Healthcare Plans, Inc., 73 F. Supp. 3d
653 (E.D. La. 2014) for support. (Doc. 215 at 6 n. 5.). In that case, an MAO was
unaware of the existence of a primary payer and therefore made a payment; the court
15
held because the MAO was unaware of a primary payer, it did not reasonably expect
the primary payer to make a payment. Id. at 669. But nothing in Plaintiffs allegations
or submitted facts suggests FHP was unaware of Defendant’s policy with O.D.,
causing it to not believe a primary payer would pay. Collins is therefore inapposite.
The Court finds Plaintiff has not demonstrated from record evidence that any
payment to FMC made by FHP was a “conditional payment” under the MSP. Rather,
the record reflects any duplicative payment made by FHP occurred after Defendant’s
payments, and therefore cannot have been a conditional payment.6 FHP, and by
assignment, Plaintiffs, did not suffer an injury in fact giving rise to standing based
upon the payments to FMC. Together with the ruling above, this means Plaintiffs
have failed to establish standing based upon the O.D. claim.
II.
The Motion to Amend
A.
Pleading Standards
The Court must begin by refuting an essential misunderstanding of pleading
standards articulated in Plaintiffs’ Motion for Leave to File (Doc. 207) which may
explain the difficulties Plaintiffs’ have faced litigating this and related cases.
Whether through ignorance or deliberate misleadingness, Plaintiffs recitation of
pleading standards fails to reckon with, and at times is contrary to, leading Supreme
Court cases regarding pleading standards. Plaintiffs state the standard as follows:
Plaintiffs’ argument in this case is the sweeping claim that any payment by
Medicare or an MAO is a conditional payment, regardless of whether a primary payer
made or could have been expected to make a payment. (See Doc. 215 at 6). In rejecting
that argument, the Court does not foreclose the possibility that with some further
showing, as in Collins, recovery might be possible even where a primary payer makes
a payment prior to Medicare or an MAO making a payment.
6
16
Under the notice pleading standard in federal court, a complaint need
“contain only a statement calculated to give the defendant fair notice of
what the plaintiff’s claim is and the ground upon which it rests.’ ” U.S.
v. Baxter Int’l, Inc., 345 F.3d 866, 881 (11th Cir. 2003). Thus a plaintiff
“is not required to plead either facts or legal theories.” Hefferman v.
Bass, 467 F.3d 596, 599 (7th Cir. 2006).
(Doc. 207 at 3–4). This is completely untethered from the last decade of law.
Both Baxter International and Hefferman rely on Conley v. Gibson, 355 U.S. 41
(1957), in rendering the pleading standard under Federal Rule of Civil Procedure
8(a). Baxter Int’l, 345 F.3d at 881; Hefferman, 467 F.3d at 599. Conley was abrogated
by Bell Atlantic Corporation v. Twombly, 550 U.S. 544, 560–63 (2007). Post-2007, at
minimum, a complaint must include “factual content that allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Thus, “Plaintiffs do have to raise factual
allegations in their complaints.” Chessie Logistics Co. v. Krinos Holdings, Inc., 867
F.3d 852, 859 (7th Cir. 2019). And those factual allegations must be more than mere
legal conclusions. Iqbal, 556 U.S. at 687.
The necessity of resorting to dicta to explain this is threefold. First, it is almost
inconceivable that a decade after Twombly and Iqbal counseled parties would suggest
they lack a responsibility to plead the requisite factual content to “nudge[ ] their
claims across the line from conceivable to plausible.” Twombly, 550 U.S. at 570. To
the extent Plaintiffs have done so, the Court could not simply ignore it. Second, if
Plaintiffs were, somehow, unaware of the proper standard, that would explain
numerous issues in this and related litigation. Providing a detailed summary of the
stand could ensure a smoother progression in any future litigation. Third, it explains
17
why a motion for leave to amend the complaint is relevant in a summary judgment
dispute. As the Seventh Circuit has explained, “when a plaintiff does plead legal
theories, it can later alter those theories” but “[a]n attempt to alter the factual basis
of a claim at summary judgment may amount to an attempt to amend the complaint.”
Chessie Logistics, 867 F.3d at 859. Because the facts in the Second Amended
Complaint demonstrating standing are under attack, Plaintiffs seek a different
factual theory for standing than the one which was plausibly stated in the Second
Amended Complaint (the O.D. allegations). In the Court’s prior Opinion, it cautioned
the Plaintiffs this was an effective attempt to amend the complaint (Doc. 204 at 8–9);
Plaintiffs have chosen to formalize their request.
B.
Legal Standard
Plaintiffs make their argument largely under Federal Rule of Civil Procedure
15. (Doc. 207 at 7). In relevant part, that Rule provides: “a party may amend its
pleading . . . [with] the court’s leave. The court should freely grant leave when justice
so requires.” Fed. R. Civ. P. 15(a)(2). Defendant disagrees on the standard, arguing
Rule 16(b)(4) applies. (Doc. 213 at 9). That Rule provides: “A schedule may be
modified only for good cause and with the judge’s consent.” Fed. R. Civ. P. 16(b)(4).
Plaintiff appears to recognize the applicability of this rule (see Doc. 207 at 1, 6) and
makes some argument related to it (Doc. 207 at 6) but does not mention it at all in
the “Law and Argument” section (Doc. 207 at 7–13). However, as the Seventh Circuit
has definitively held, a motion to amend filed after the deadline to amend is reviewed
under “a two-step process” pursuant to which the Court applies “the heightened good-
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cause standard of Rule 16(b)(4) before considering whether the requirements of Rule
15(a)(2)” are met. Alioto v. Town of Lisbon, 651 F.3d 715, 720 (7th Cir. 2011).
The scheduling plan set a deadline of October 12, 2018, for amendment of the
pleadings. (Docs. 90 at 3, 91). Plaintiffs’ request to amend was submitted almost a
year beyond that deadline on October 2, 2019. (Doc. 207). The Seventh Circuit has
upheld denials of motions for leave to amend under Rule 16(b)(4) filed four, six, and
eight months after the respective deadlines where plaintiffs failed to demonstrate
good cause. Arrigo v. Link, 836 F.3d 787, 797–98 (7th Cir. 2016). The good cause
standard clearly applies in this instance.
C.
Good Cause
Plaintiffs have not made a showing of good cause. “In making a Rule 16(b)
good-cause determination, the primary consideration for district courts is the
diligence of the party seeking amendment.” Alioto, 651 F.3d at 720.
As an initial matter, Plaintiffs’ argument on this point is severely
underdeveloped. They quote a case stating good cause exists where “facts supporting
the supplementation and amendment did not occur or were not made known to (the
movant) [sic] until after the . . . deadline.” (Doc. 207 at 6 (citation omitted)). Plaintiffs
then assert they “could not be fully aware of potential defenses relating to the claims
for C.S. and O.D.’s healthcare until the parties had conducted discovery.” (Doc. 207
at 6). In their Response to Defendant’s Motion for Summary Judgment, Plaintiffs
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expand slightly upon this, stating Defendant did not produce the claim file relating
to O.D. until January 2019. (Doc. 206 at 40–41).7
Plaintiffs’ statement regarding “potential defenses” is deeply problematic. For
one thing, the C.S. claim does not provide a basis for standing, as Plaintiffs knew
before the deadline for amendment (Doc. 86 at 12), and is thus entirely irrelevant to
whether they have good cause to amend. For another, Plaintiffs do not even attempt
to support their assertion that there were facts related to O.D. which could not have
been discovered prior to the deadline for amendment and which bore on the decisive
question. The record here reflects since March 6, 2018, Plaintiffs have been on notice
that O.D.’s policy limits were exhausted by December 13, 2013. (Doc. 68-1 at 1–2).
Defendant maintains it informed Plaintiffs of this in May 2017. (Doc. 213 at 11). As
the above analysis indicates, the timeline of payments is dispositive of the FMC
payments. That timeline was established by the date of exhaustion and records
belonging to FHP, which Plaintiffs had access to. There has never been any
indication, aside from one created by a purported expert in Plaintiffs’ employ, that
the SPTH payments were related to the automobile accident. Therefore, any
weakness in the O.D. exemplar claim could have been detected well before the
deadline for amendment.
At any rate, the contention that Plaintiffs have been diligent is unavailing.
Plaintiffs “were on notice from the outset that the issue of standing would be front
The Court considers this argument, but it does not approve of Plaintiffs’ decision to
make this argument in the briefing of the Motion for Summary Judgment as opposed
to the briefing for the Motion to Amend.
7
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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, 935 F.3d at 582 (discussing an effectively identical case filed by the Plaintiffs
against Defendant). Plaintiffs should have been careful in selecting O.D. and
attempted to verify the claim related to her would provide standing. See also Fed. R.
Civ. P. 11(b)(3) (requiring attorneys undertake a reasonable inquiry into allegations
and certify factual contentions have evidentiary support, unless the attorney
specifically identifies a factual contention that it believes will likely have evidentiary
support following discovery).
Moreover, Plaintiffs have been well aware of the Florida Exemplars for years,
as evidenced by the litigation history in Florida. The Florida Exemplars could have
been added to any version of the complaint in this case by Plaintiffs.8 But Plaintiffs
chose not to include the Florida Exemplars in this case until the Florida case was
Plaintiffs, incredibly, fault Defendant for the Florida Exemplars’ case being in the
Southern District of Florida. (Doc. 206 at 39–40). The record reflects the plaintiffs in
that case, including Plaintiffs MSPA Claims 1, LLC and MSP Recovery Claims, Series
LLC, moved to transfer jurisdiction to this Court on October 11, 2018—one day before
the deadline to amend in this case. MSPA Claims 1, LLC, No. 18-cv-23165, Motion to
Transfer Venue to the United States District Court for the Central District of Illinois,
ECF No. 12 (S.D. Fla. Oct. 11, 2018). As Defendant noted, however, the plaintiffs
could have simply dismissed the Florida case and added the exemplars to this action.
MSPA Claims 1, LLC, No. 18-cv-23165, Defendant’s Response to Plaintiffs’ Motion to
Transfer Venue, ECF No. 19 (S.D. Fla. Oct. 25, 2018). At any rate, the plaintiffs were
the ones who chose to begin the litigation by filing in Florida state court, thus barring
transfer until removal; they could have simply filed here at the beginning. Charitably,
this was a litigation mistake which the plaintiffs are simply required to live with;
uncharitably, the plaintiffs realized dismissal on standing grounds appeared possible
in the Southern District of Florida and were attempting to game the system by
transferring and consolidating with a case that had already passed the Rule 12(b)(1)
hurdle.
8
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dismissed and the future of this case appeared in peril, perhaps because such
inclusion would have interfered with their apparent litigation strategy “to throw their
allegations into as many federal courts as possible and see what sticks.” MSP
Recovery Claims, Series LLC v. N.Y. Cent. Mut. Fire Ins. Co., No. 6:19-cv-211, 2019
WL 4222654, at *6 (N.D.N.Y. Sep. 5, 2019). The Court cannot accept Plaintiffs have
acted diligently where they were on notice as to the issues with O.D. before the
deadline for pleadings and the proposed added exemplars have been known to them
for years.9
To the extent Plaintiffs believe they have exemplar claims which would
demonstrate an injury in fact, they may file a new suit. MAO-MSO I, 935 F.3d at 582.
But “enough is enough.” Id. Federal court is not a sounding board for litigants to test
various theories until they find one allowing the litigation to continue. Yet another
opportunity to cure deficiencies in Plaintiffs’ allegations is unwarranted.
CONCLUSION
Plaintiffs’ Motion for Leave to File Third Amended Complaint (Doc. 207) is
DENIED and Defendant’s Motion for Summary Judgment (Doc. 172) is GRANTED.
This matter is dismissed for want of jurisdiction. This matter is TERMINATED.
The Court also notes Plaintiffs stated they would “soon be moving to incorporate”
the Florida Exemplars into this case almost half a year before they moved to amend.
(Doc. 126 at 3 n.1). While this particular lack of diligence did not cause them to miss
the deadline for amendments—which had already passed when that statement was
made—it makes their protestations of diligence even less credible.
9
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SO ORDERED.
Entered this 25th day of November 2019.
s/ Joe B. McDade
JOE BILLY McDADE
United States Senior District Judge
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