United States District Court, W.D. Wisconsin
MAO-MSO RECOVERY II, LLC, MSP RECOVERY, LLC, and MSPA CLAIMS 1, LLC, Plaintiffs,
AMERICAN FAMILY MUTUAL INSURANCE COMPANY and AMERICAN FAMILY INSURANCE, Defendants.
OPINION & ORDER
D. PETERSON, District Judge
two cases are both proposed class actions brought under the
Medicare Act, 42 U.S.C. § 1395y, and related
regulations. Plaintiffs MAO-MSO Recovery II, MSP Recovery,
and MSPA Claims 1 say that they are entitled to
“recover reimbursement of Medicare payments . . . that
should have been paid in the first instance by”
defendants American Family Mutual Insurance Company and
American Family Insurance. No. 17-cv-175, Dkt. 26.
¶¶ 44- 46; No. 17-cv-262, Dkt. 24, ¶¶
41-43. These cases are two of more than a dozen that
plaintiffs filed in federal courts across the country,
raising similar claims against other insurance
filed motions to dismiss in both No. 17-cv-175 and No.
17-cv-262, but plaintiffs mooted those motions by filing
amended complaints. Now defendants have filed renewed motions
to dismiss, contending that plaintiffs' amended
complaints do not cure the defects in the original
complaints, namely, that plaintiffs' allegations do not
show that they have standing to sue or that they have stated
plausible claims for relief under Rule 8 of the Federal Rules
of Civil Procedure. The court agrees with the growing number
of courts that have already dismissed similar complaints for
plaintiffs' failure to show that they have standing to
sue. The court will give plaintiffs one more opportunity to
cure the problems discussed in this opinion before dismissing
the case for lack of standing. Tate v. SCR Med.
Transp., 809 F.3d 343, 346 (7th Cir. 2015) (“[T]he
court should grant leave to amend after dismissal of the
first complaint unless it is certain from the face of the
complaint that any amendment would be futile or otherwise
Overview of claims and contentions
two lawsuits in this court are closely related. In both
cases, plaintiffs' claims arise out of the Medicare
Secondary Payer provisions of the Medicare Act. Under those
provisions, Medicare's responsibility for paying a
beneficiary's medical expenses is always
“secondary” to any other coverage the beneficiary
has, meaning that Medicare does not pay unless no other
coverage exists. 42 U.S.C. § 1395y. And if Medicare pays
expenses of a beneficiary who has other coverage, Medicare
may seek reimbursement from the other insurer, called the
“primary plan” in the Medicare Act. 42 U.S.C.
§ 1395y(b)(2)(B)(ii). In both No. 17-cv-175 and No.
17-cv-262, plaintiffs say that defendants were the primary
payers for medical expenses incurred by beneficiaries and
that defendants failed to pay those expenses as required by
federal government is not a party to these cases and
plaintiffs are not seeking to recover funds on the
government's behalf. Rather, plaintiffs offer a two-part
explanation for why they rather than the federal government
are entitled to reimbursement from defendants. First,
plaintiffs say that all of the beneficiaries at issue
participate in the Medicare Advantage Program, under which
beneficiaries may choose to receive Medicare benefits through
certain private insurers called Medicare Advantage
Organizations (MAOs). 42 U.S.C. § 1395w-21. Under the
program, the private insurer pays the beneficiary's
medical expenses and Medicare pays the private insurer a
fixed amount, which may be more or less than what the insurer
paid. Under the Medicare regulations, the MAO has the same
rights as Medicare to seek reimbursement from a primary
payer. 42 C.F.R. § 422.108(f). Second, plaintiffs say
that “numerous” MAOs assigned plaintiffs the
right to recover the payments owed to the MAOs. No.
17-cv-175, Dkt. 26, ¶¶ 44-46; No. 17-cv-262, Dkt.
24, ¶¶ 41-43.
only difference between the two lawsuits relates to the
reason that plaintiffs contend that defendants are the
primary payers of a beneficiary's medical expenses. In
case no. 17-cv-175, plaintiffs say that defendants are the
primary payers because they issued no-fault automobile
insurance policies to beneficiaries. In case no. 17-cv-262,
plaintiffs say that defendants were the primary payers
because they paid settlements to beneficiaries for accidents
between a beneficiary and someone insured by defendants. In
case no. 17-cv-175, plaintiffs say that defendants owe them
money under two theories: (1) under 42 U.S.C. §
1395y(b)(3)(A), plaintiffs have a right to double damages for
instances in which defendants were the primary payer but
failed to make the required payments; and (2) under 42 C.F.R.
§ 411.24(e), plaintiffs have a right to sue for
defendants' alleged breach of contract to their insureds.
In case no. 17-cv-262, plaintiffs seek to recover under the
first theory only.
their motions to dismiss, defendants assume that plaintiffs
have accurately described the requirements of the Medicare
laws. But defendants contend that plaintiffs' complaints
in both cases consist of little more than legal conclusions
and do not satisfy the pleading standards set forth in
Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell
Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), which
apply to issues related to both jurisdiction and the merits,
Silha v. ACT, Inc., 807 F.3d 169, 173-74 (7th Cir.
defendants say that plaintiffs have not adequately alleged
that they have standing to sue because the complaints do not
include facts showing that they have a valid assignment from
a particular MAO as to any particular claim against either
defendant. Second, defendants say that plaintiffs have not
adequately alleged the elements of their claims, including
that defendants were the primary payer of a particular
medical expense, that defendants failed to a pay a particular
medical expense that they were required to pay, that a
particular MAO paid a particular claim, or that a particular
beneficiary was a member of a particular MAO. Because
standing implicates subject matter jurisdiction, Spokeo,
Inc. v. Robins, 136 S.Ct. 1540, 1547 (2016), the court
will consider that issue first.
the doctrine of standing, plaintiffs must show that they
suffered an “injury in fact” that is
“fairly traceable” to defendants' conduct and
is capable of being redressed by a favorable decision from
the court. Lujan v. Defenders of Wildlife, 504 U.S.
555, 560B61 (1992). This is part of the limitation on federal
judicial power under Article III of the U.S. Constitution to
“Cases” and “Controversies.”
Hollingsworth v. Perry, 133 S.Ct. 2652, 2661 (2013).
Defendants contend that plaintiffs' complaints do not
show that plaintiffs have suffered an injury because the
complaints do not include facts showing that they have a
valid assignment from an MAO that paid medical expenses that
defendants should have paid.
threshold question is whether defendants have accurately
framed the issue as one of Article III standing, as opposed
to prudential standing. An assignment gives a party the right
to sue, but that is separate from the question whether there
has been an injury for Article III purposes. U.S. v.
$304, 980.00 in U.S. Currency, 732 F.3d 812, 818 (7th
Cir. 2013) (“[T]o have standing, a claimant need not
establish that a right of his has been infringed; that would
conflate the issue of standing with the merits of the
suit.”) (internal quotations omitted). If there has
been an injury, but plaintiffs do not have valid assignments,
that would implicate the doctrine of prudential standing,
which requires “plaintiffs [to] assert their own legal
rights and interests, and [prohibits them from] rest[ing]
their claims to relief on the legal rights or interests of
third parties.” G & S Holdings LLC v.
Cont'l Cas. Co., 697 F.3d 534, 540-41 (7th Cir.
complaints include inconsistent allegations on the question
whether plaintiffs suffered their own injury by paying
medical expenses that defendants should have paid.
Compare No. 17-cv-175, Dkt. 26, ¶ 4
(“Plaintiffs . . . paid Medicare benefits on behalf of
the Medicare-eligible beneficiaries enrolled under the
Medicare Advantage program.”) (footnote omitted),
and No. 17-cv-262, Dkt. 24, ¶ 3
(“Plaintiffs . . . paid for the medical items or
treatment.”), with No. 17-cv-175, Dkt. 26,
¶¶ 58-59 (“Plaintiffs' MAO paid for those
medical expenses”), and No. 17-cv-262, Dkt.
24, ¶ 51 (referring to “medical treatment . . .
provided by Plaintiffs' MAOs” and alleging that
defendants “never reimbursed Plaintiffs' MAOs for
the medical treatments”). In their motions to dismiss,
defendants take the position that plaintiffs admit in both
complaints that they did not make any payments themselves.
No. 17-cv-175, Dkt. 40, at 8 (“Plaintiffs concede that
they have not been injured as the result of direct dealings
with American Family's insureds-the FAC admits that only
unnamed MAOs, not the plaintiffs, made payments that American
Family allegedly failed to reimburse.”); No. 17-cv-262,
Dkt. 35, at 8 (“Plaintiffs concede that they have not
been injured as the result of direct dealings with American
Family's insureds-the FAC admits that unnamed MAOs made
payments that American Family allegedly failed to
reimburse.”). In their consolidated opposition brief,
plaintiffs do not contradict defendants on this point;
rather, they appear to agree with defendants when they say
that “[b]oth ...