MSPA Claims 1, LLC v. Liberty Mutual Fire Insurance Company

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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 18-12139
________________________
D.C. Docket No. 1:17-cv-23749-PAS
MSP RECOVERY CLAIMS, SERIES LLC,
Plaintiff - Appellant,
versus
ACE AMERICAN INSURANCE COMPANY,
Defendant – Appellee.
________________________
No. 18-12149
________________________
D.C. Docket No. 1:17-cv-23841-PAS
1:17-cv-23841-PAS
MSP RECOVERY CLAIMS, SERIES LLC,
a Delaware entity,
Plaintiff - Appellant,
versus
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AUTO-OWNERS INSURANCE COMPANY,
a foreign profit corporation,
Defendants - Appellees,
__________________________________________________________________
____________________
1:17-cv-24066-PAS
MSP RECOVERY CLAIMS, SERIES LLC,
a Delaware entity,
Plaintiff - Appellant,
versus
OWNERS INSURANCE COMPANY,
a foreign profit corporation,
Defendant - Appellee.
__________________________________________________________________
____________________
1:17-CV-24068-PAS
MSP RECOVERY CLAIMS, SERIES LLC,
a Delaware entity,
Plaintiff - Appellant,
versus
SOUTHERN-OWNERS INSURANCE COMPANY,
a foreign profit corporation,
Defendant - Appellee.
__________________________________________________________________
____________________
1:17-cv-24069-PAS
MSP RECOVERY CLAIMS, SERIES LLC,
2
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a Delaware entity,
Plaintiff - Appellant,
versus
AUTO-OWNERS INSURANCE COMPANY,
a foreign profit corporation,
Defendant - Appellee.
________________________
No. 18-13049
________________________
D.C. Docket No. 1:17-cv-23628-KMW
MSP RECOVERY CLAIMS, SERIES LLC,
a Delaware entity,
Plaintiff - Appellant,
versus
TRAVELERS CASUALTY AND SURETY COMPANY,
a foreign profit corporation,
Defendant - Appellee.
________________________
No. 18-13312
________________________
D.C. Docket No. 1:17-cv-22539-KMW
MSPA CLAIMS 1, LLC,
a Florida profit corporation,
Plaintiff - Appellant,
3
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versus
LIBERTY MUTUAL FIRE INSURANCE COMPANY,
a Foreign profit corporation,
Defendant - Appellee.
________________________
Appeals from the United States District Court
for the Southern District of Florida
________________________
(September 4, 2020)
Before JORDAN, JILL PRYOR, and WALKER, ∗ Circuit Judges.
WALKER, Circuit Judge:
MSP Recovery Claims, Series LLC (MSPRC), and MSPA Claims 1, LLC
(MSPA), collection agencies and Plaintiffs here, appeal from dismissals with
prejudice of their claims against ACE American Insurance Company, Auto-Owners
Insurance Company, Southern-Owners Insurance Company, Owners Insurance
Company, Travelers Casualty and Surety Company, and Liberty Mutual Fire
Insurance Company (collectively, Defendants). Plaintiffs sought double damages
against Defendants under the Medicare Secondary Payer Act. Plaintiffs alleged that
actors within the Medicare Advantage system, including Medicare Advantage
∗The Honorable John M. Walker, Jr., Circuit Judge for the United States Court of Appeals for the
Second Circuit, sitting by designation.
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Organizations (MAOs) and various “downstream actors” that contracted with
MAOs, had assigned their Medicare Secondary Payer Act claims to Plaintiffs for
collection. The district court dismissed Plaintiffs’ cases, now consolidated on
appeal, after finding that (1) some of Plaintiffs’ alleged assignments, including those
from MAOs, were invalid and (2) Plaintiffs’ downstream-actor assignors fell outside
the ambit of the Medicare Secondary Payer Act’s private right of action and thus
could not confer statutory standing on Plaintiffs through an assignment. On appeal,
Plaintiffs primarily argue that their downstream-actor assignors could access the
private right of action and had rights to assign under the Medicare Secondary Payer
Act. MSPRC individually argues that the district court erred in dismissing its claims
based on an alleged assignment from an MAO with prejudice because dismissals
based on defects in an assignment are not decisions on the merits and must be entered
without prejudice. And MSPA argues that all of its assignments were valid. We
agree with Plaintiffs on all issues.
Accordingly, we VACATE the dismissals of Plaintiffs’ claims based on
assignments from downstream actors, REMAND those claims for further
proceedings consistent with this opinion, and MODIFY the dismissals of MSPRC’s
claims based on its alleged assignment from an MAO to be without prejudice.
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I
Plaintiffs are collection agencies that specialize in recovering funds on behalf
of various actors in the Medicare Advantage system. By way of background, the
Medicare Advantage system is a public-private health insurance system that runs
parallel to Medicare. The Medicare Advantage system allows Medicare
beneficiaries to opt into private health insurance plans offered by Medicare
Advantage Organizations (MAOs) that provide coverage in excess of the coverage
provided by Medicare. To operate more nimbly and to better compete with
Medicare, some MAOs contract with smaller organizations, like independent
physician associations, that have closer connections to local healthcare providers.
These smaller organizations, or “downstream” actors, are also a part of the Medicare
Advantage system and are central to the present case.
Plaintiffs’ primary tool for recovering funds is the Medicare Secondary Payer
Act. Generally speaking, the Act established that Medicare—and, as an extension
of Medicare, the Medicare Advantage system—should not bear the costs of medical
procedures that are already covered by a “primary payer,” or other insurer such as a
provider of workers’ compensation insurance or automobile insurance. (Plaintiffs
allege that Defendants are all primary payers.) Under the Act, Medicare and MAOs
still can, as a stopgap measure, make a “conditional payment” to cover their
beneficiaries’ medical bills when the primary payer “cannot reasonably be expected
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to make payment with respect to such item or service promptly.” 42 U.S.C.
§§ 1395y(b)(2)(B)(i), 1395w-22(a)(4). If Medicare or an MAO has made a
conditional payment, and the primary payer’s “responsibility for such payment” has
been “demonstrated,” as by a judgment or settlement agreement, the primary payer
is obligated to reimburse Medicare or the MAO within 60 days. 42 U.S.C.
§§ 1395y(b)(2)(B)(ii), 1395w-22(a)(4). When a primary payer fails to do so,
Medicare can seek “double damages,” or twice the amount of the conditional
payment, from the primary payer under the Medicare Secondary Payer Act’s right
of action for the government at 42 U.S.C. § 1395y(b)(2)(B)(iii). In Humana Med.
Plan v. Western Heritage Insurance Co., this circuit held that MAOs (and their
assignees) likewise can seek double damages under 42 U.S.C. § 1395y(b)(3)(A), the
Medicare Secondary Payer Act’s private right of action. 832 F.3d 1229 (11th Cir.
2016). Humana and this circuit’s other case law to date, however, are silent on
whether downstream actors that contract with MAOs, and in effect make conditional
payments pursuant to those contracts, can seek double damages under the Act’s
private right of action.
Here, Plaintiff MSPRC alleged that it held an assignment of Medicare
Secondary Payer Act claims against several of the defendants from an MAO. And
both Plaintiffs alleged that they held assignments of claims against others of the
defendants from various contractors of MAOs. Plaintiffs alleged that these
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downstream assignors had contracted with MAOs to fully cover beneficiaries’ costs
in exchange for a set capitation fee. Pursuant to these contracts, Plaintiffs’
downstream actors allegedly directly made conditional payments for MAOs or
reimbursed MAOs for their conditional payments.
The following took place before the district court:
A. ACE Claims
As is relevant to this appeal, MSPRC presented two representative claims in
its case for reimbursement against ACE American Insurance Company (ACE).
These claims were for medical expenses that MSPRC alleged were directly charged
to and paid by Hygea and Health Care Advisor Services, management services
organizations that contract with MAOs to assist in providing healthcare and
administrative services to beneficiaries. MSPRC’s third amended complaint alleged
that these downstream actors, pursuant to their contracts with MAOs, “made
conditional payments on behalf of [beneficiaries] to cover accident-related
expenses” that should have been covered by ACE as the primary payer. ACE D.E.
36 at 2.
The district court (Patricia A. Seitz, J.) dismissed MSPRC’s claims against
ACE after concluding that non-MAO downstream actors, like Hygea and Health
Care Advisor Services, cannot access the Medicare Secondary Payer Act’s private
right of action that allows MAOs to seek double damages. MSP Recovery Claims,
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Series LLC v. ACE Am. Ins. Co., No. 17-cv-23749, 2018 WL 1547600, at *8 (S.D.
Fla. Mar. 9, 2018). Having allowed MSPRC to amend its complaint numerous times,
the district court entered its dismissal with prejudice.
B. Auto-Owners Claims
MSPRC presented five representative claims for reimbursement in its case
against Auto-Owners Insurance Company, Southern-Owners Insurance Company,
and Owners Insurance Company (collectively, Auto-Owners). These claims were
for medical expenses allegedly paid by Health First Administrative Plans, Inc.
(HFAP) and Verimed IPA, LLC (Verimed).
MSPRC alleged that HFAP is an MAO, even though Health First Health
Plans, Inc. (Health First), a related company that is not HFAP, contracted directly
with Medicare to be a part of the Medicare Advantage system. In support of its
allegation, MSPRC submitted an affidavit from Michael Keeler, the Chief Operating
Officer of both HFAP and Health First. The Keeler affidavit explained that “HFAP
had and continues to have authority to manage and act on behalf of Health First
Health Plan, Inc. with respect to all financial assets, including the Assigned Claims.”
Auto-Owners D.E. 60-1 at 1. It further explained that “HFAP, on behalf of Health
First Health Plans, Inc., entered into a Recovery Agreement . . . whereby HFAP
assigned to MSP Recovery all right, title, interest in and ownership of the Assigned
Claims.” Id. The affidavit included an agreement between HFAP and Health First,
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which shows that the two companies have the same parent company, that HFAP
“shall act as the general, administrative and financial manager” of Health First, that
HFAP shall engage in “oversight with respect to the management of the assets of”
Health First, that HFAP has the authority to deposit Health First funds and make
payments on behalf of Health First, and that HFAP shall provide Health First with
“[c]onsultation and assistance with . . . legal affairs” and with “risk management and
compliance” services, as reasonably required. Id. at 4–5.
Verimed is an independent physician association that serves as an
intermediary between an MAO and medical service providers. MSPRC alleged that
Verimed, under its contract with its MAO, “is required to completely pay for
whatever accident-related medical expenses are incurred” by a beneficiary.
Auto-Owners D.E. 48 at 11. As described, Verimed reimbursed its MAO for
conditional payments. Id. at 22 (“[The MAO] paid $155.68 for the accident-related
expenses and, pursuant to their arrangement, required Verimed to fully reimburse
and pay for those medical expenses.”).
The district court (Patricia A. Seitz, J.) dismissed MSPRC’s claims against
Auto-Owners after determining that HFAP was not an MAO, that MSPRC did not
hold any assignments from an MAO, and that non-MAOs like HFAP and Verimed
cannot access or assign a claim under the Medicare Secondary Payer Act’s private
right of action. MSP Recovery Claims, Series LLC v. Auto-Owners Ins. Co., Nos.
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17-cv-23841, 17-cv-24069, 17-cv-24066, & 17-cv-24068, 2018 WL 1953861, at *6
(S.D. Fla. Apr. 25, 2018). Having allowed MSPRC to amend its complaint
numerous times, the district court entered its dismissal with prejudice.
C. Travelers Claims
MSPRC did not present any representative claims in its case for
reimbursement against Travelers Casualty and Surety Company (Travelers).
Instead, it alleged that it “holds, and otherwise owns the rights and interests to,
claims that have been processed for items and/or services pertaining to Medicare
Beneficiaries for which the Defendant is the primary payer.” Travelers D.E. 20 at
12. MSPRC made this allegation on the basis that Travelers had “reported some or
all of [its] cases to [an agency within the Department of Health and Human Services]
admitting it has primary payer responsibility.” Id. MSPRC asserted that, pursuant
to the Health Insurance Portability and Accountability Act (HIPAA), the names of
the beneficiaries and their corresponding MAOs could be provided to Travelers
“upon execution of a qualified protective order.” Id. at 11 n.8.
MSPRC later indicated that its claims regarded medical expenses paid by
HFAP, which it alleged was an MAO. See MSP Recovery Claims, Series LLC v.
Travelers Cas. and Sur. Co., No. 17-23628, 2018 WL 3599360, at *3 (S.D. Fla. June
21, 2018). MSPRC submitted the same Keeler affidavit that was submitted in the
Auto-Owners case. Citing the opinion dismissing MSPRC’s claim against
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Auto-Owners, the district court (Kathleen M. Williams, J.) found that HFAP was
not an MAO, that MSPRC did not hold any assignments from an MAO, and that
HFAP categorically could not access the Medicare Secondary Payer Act’s private
right of action. Id. at *4. Here, too, the district court dismissed MSPRC’s claims
against Travelers with prejudice.
D. Liberty Claims
As is relevant on appeal, MSPA presented two representative claims in its
case against Liberty Mutual Fire Insurance Company (Liberty). These claims
regarded medical expenses allegedly paid by Florida Healthcare Plus (FHCP) and
the Interamerican Medical Center Group, LLC (IMC).
In its third amended complaint, MSPA alleged that FHCP “made conditional
payments” that should have been reimbursed by Liberty. Liberty D.E. 49 at 5.
MSPA dropped its allegation that FHCP was an MAO, instead arguing that, “[i]n
addition to MAOs, first-tier and downstream entities also suffer damages.” Id. at
21. On April 15, 2014, FHCP executed a contract with La Ley Recovery that
conveyed to the latter FHCP’s right “to recover costs already paid” for beneficiaries
from the appropriate primary payers. Liberty D.E. 49-8 at 2. In exchange, La Ley
Recovery would provide FHCP with 50% of the claims collected. The term of the
contract was for one year, with an automatic renewal for an additional year. The
contract empowered La Ley Recovery to “assign the Agreement in whole or in part
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but the assignee must be approved by [FHCP].” Id. at 3. La Ley Recovery then
assigned the rights it had acquired to MSPA. In its third amended complaint, MSPA
alleged that FHCP approved the assignment. Liberty D.E. 49 at 11. On December
10, 2014, the Florida Department of Financial Services was appointed FHCP’s
receiver. As FHCP’s receiver, the Department of Financial Services wrote to La
Ley Recovery to cancel its contract and subsequently filed a petition to enjoin La
Ley Recovery and MSPA from pursuing their recovery rights. After MSPA had
filed the present litigation, however, the Department of Financial Services
recognized the validity of FHCP’s contract with La Ley Recovery pursuant to a
settlement agreement.
MSPA also alleged that IMC, a management services organization, contracted
with MAOs “to manage and provide healthcare services and absorb the risk of
[financial] loss” for a defined population of beneficiaries. Liberty D.E. 58-2 at 3.
IMC “irrevocably assign[ed] all of [its] rights” to seek double damages from primary
payers to MSPRC, Liberty D.E. 49-14 at 9, which in turn assigned those rights to
MSPA, id. at 2. In its third amended complaint, MSPA alleged that MSPRC’s
assignment to MSPA was “ministerial in nature” and thus did not require IMC’s
approval under the terms of IMC’s contract with MSPRC, id. at 12, and that, in any
event, IMC “consented to any subsequent assignment from [MSPRC] to any then-
existing or future MSP Company, which include[d] MSPA,” Liberty D.E. 49 at 14.
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The district court (Kathleen M. Williams, J.) dismissed MSPA’s claims. The
district court determined that MSPA’s claim derived from the FHCP assignment was
legally deficient because the contract on which it was predicated was invalid at the
time of filing, in the period between when the Department of Financial Services
canceled FHCP’s assignment to La Ley Recovery and when the Department
concluded the settlement agreement. MSPA Claims 1, LLC v. Liberty Mut. Fire Ins.
Co., 322 F. Supp. 3d 1273, 1280–81 (S.D. Fla. 2018). The district court also found
that the FHCP and IMC assignments were legally deficient because MSPA had
failed to allege that FHCP and IMC consented to the assignments. Id. at 1280, 1282.
Additionally, the district court concluded that, even if the assignments were valid,
MSPA’s non-MAO assignors were categorically unable to access the Medicare
Secondary Payer Act’s private right of action. Id. at 1283. Having allowed MSPA
to amend its complaint numerous times, the district court entered its dismissal with
prejudice.
***
On appeal, we must address a series of issues raised by the following
arguments: Plaintiffs argue (1) that the district court misapprehended the scope of
the Medicare Secondary Payer Act’s private right of action and therefore
erroneously dismissed their claims on the basis that the assignments supporting those
claims were not from MAOs but were from downstream actors. MSPRC
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additionally argues (2) that the district court erred in ordering that the dismissals of
its HFAP claims be with prejudice. And MSPA argues (3) that the district court
erred in dismissing its claims after incorrectly concluding that the assignments to
MSPA were invalid. In response, Defendants present (4) a bevy of alternative bases
for affirmance, including that (a) Plaintiffs’ contracts with the downstream actors
were “mere contingency agreements” rather than assignments; (b) Plaintiffs failed
to comply with their supposed pre-suit notice requirements; and (c) there were
defects with MSPRC’s chain of assignments. We consider each of these arguments
in turn, reviewing the district court’s dismissals de novo and accepting Plaintiffs’
well-pled factual allegations as true. See MSPA Claims 1, LLC v. Tenet Fla., Inc.,
918 F.3d 1312, 1317 (11th Cir. 2019).
IIA
Because Plaintiffs’ claims (setting aside the HFAP claims) involve
assignments from non-MAOs in the Medicare Advantage system, they would be
properly dismissed if such non-MAOs are categorically barred from seeking
damages under the Medicare Secondary Payer Act. In dismissing each of Plaintiffs’
claims, the district court so interpreted the Act, concluding that only MAOs, not
downstream actors in the Medicare Advantage system, may access its private right
of action at § 1395y(b)(3)(A). On appeal, Plaintiffs argue that the district court
adopted a crabbed reading of § 1395y(b)(3)(A) and thus erred in dismissing their
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claims on the basis that their assignors were non-MAOs. We agree with Plaintiffs’
interpretation of § 1395y(b)(3)(A) and conclude that the district court erred by
narrowly construing this provision to categorically exclude claims by downstream
actors.
The language establishing the private right of action reads:
There is 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) in accordance with paragraphs (1) and
(2)(A).
42 U.S.C. § 1395y(b)(3)(A). We have previously recognized that this is a “broadly
worded provision that enables a plaintiff to vindicate harm caused by a primary
plan’s failure to meet its [Medicare Secondary Payer] primary payment or
reimbursement obligations.” Humana, 832 F.3d at 1238. And courts have generally
understood the underlying objective of § 1395y(b)(3)(A) to be “help[ing] the
government recover conditional payments from insurers or other primary payers” or
otherwise reducing the healthcare costs borne by Medicare. Stalley v. Cath. Health
Initiatives, 509 F.3d 517, 524 (8th Cir. 2007); see also Manning v. Utils. Mut. Ins.
Co., Inc., 254 F.3d 387, 397 n.8 (2d Cir. 2001) (“[W]hen Senator David
Durenberger, Republican of Minnesota, introduced President Reagan’s Medicare
proposals for 1986, which included adding a private right of action to enforce the
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[Medicare Secondary Payer Act], it was introduced as the President’s ‘health care
cost reduction proposals.’”).
Consistent with the breadth of § 1395y(b)(3)(A)’s text and its cost-reduction
and efficiency goals, this circuit and others have interpreted this section to allow
recovery when the plaintiff has a connection to Medicare’s unreimbursed conditional
payment; such plaintiffs are presumed to be “in a better position,” when incentivized
with double damages, “to recover on behalf of Medicare than the government itself.”
Netro v. Greater Baltimore Med. Ctr., Inc., 891 F.3d 522, 527 (4th Cir. 2018). In
Catholic Health Initiatives, the Eighth Circuit allowed Medicare beneficiaries to
access § 1395y(b)(3)(A)’s private right of action, even when those beneficiaries’
medical bills had already been paid by Medicare. 509 F.3d at 524–25. The Eighth
Circuit explained that affording beneficiaries access to the private right of action
would incentivize them to seek damages and “pay back the government for its
outlay,” thus reducing the cost of Medicare. Id. at 525. We endorsed that holding
in Stalley ex rel. U.S. v. Orlando Regional Healthcare System, 524 F.3d 1229, 1234
(11th Cir. 2008); accord Netro, 891 F.3d at 528. And the Sixth Circuit, in Michigan
Spine & Brain Surgeons, PLLC v. State Farm Mutual Automobile Insurance Co.,
interpreted § 1395y(b)(3)(A) to allow medical care providers who have already
received conditional payments from Medicare to bring a claim for double damages
against primary payers. 758 F.3d 787, 790 (6th Cir. 2014). The Sixth Circuit
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implied that providers would repay Medicare with the damages from the primary
payer, thereby advancing Congress’s intent to “curb skyrocketing health costs and
preserve the fiscal integrity of the Medicare system.” Id. at 793. We endorsed that
holding in Humana. 832 F.3d at 1234–35.
More recently, both the Third Circuit and this circuit interpreted
§ 1395y(b)(3)(A) to apply to MAOs in the Medicare Advantage system. They found
that denying MAOs access to the private right of action would “hamstring” them by
putting them at a “competitive disadvantage” relative to Medicare. In re Avandia
Mktg., Sales Practices & Prods. Liab. Litig., 685 F.3d 353, 364 (3d Cir. 2012);
Humana, 832 F.3d at 1235–38. This would thwart congressional intent with respect
to the Medicare Advantage system. In reaching their holdings, neither circuit
concluded that access to § 1395y(b)(3)(A) was limited to MAOs or otherwise
addressed downstream actors’ access to the private right of action. To the contrary,
and as we further explain below, the Third Circuit’s reasoning and our reasoning in
Humana fully support downstream actors having access.
The only limitation that circuit courts have placed on § 1395y(b)(3)(A)’s
breadth is that it cannot be treated as a qui tam provision. In other words, a plaintiff
with no connection to Medicare or the Medicare Advantage system lacks statutory
standing to seek double damages from a primary payer. This circuit, like others, see,
e.g., Catholic Health Initiatives, 509 F.3d at 527; Stalley v. Methodist Healthcare,
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517 F.3d 911, 919 (6th Cir. 2008), has foreclosed qui tam suits because plaintiffs
with no connection to a conditional payment likely would not reimburse Medicare
or an MAO and thus would not advance the Medicare Secondary Payer Act’s aim of
reducing costs for Medicare or the Medicare Advantage system. Distinguishing
§ 1395y(b)(3)(A) from the qui tam provision in the False Claims Act (FCA), we
reasoned that “[t]he private plaintiff in an action under the [Medicare Secondary
Payer Act] is entitled to the entire recovery if he or she is successful, unlike under
the FCA, which apportions the recovery between the relator and the government.”
Orlando Reg’l Healthcare Sys., Inc., 524 F.3d at 1234. We further explained that
the Medicare Secondary Payer Act “provides to the government none of the
procedural safeguards to manage or direct an action which are granted to it under the
FCA.” Id.The central issue in our case is whether actors downstream from MAOs, who
directly make conditional payments or fully reimburse MAOs for their conditional
payments, may themselves seek double damages from primary payers under
§ 1395y(b)(3)(A). In the wake of Humana’s holding that § 1395y(b)(3)(A) is a tool
not only for preserving the solvency of the Medicare Trust Funds but also for
reducing costs in the Medicare Advantage system, we believe this to be a
straightforward inquiry.
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The language of § 1395y(b)(3)(A), which has been interpreted to apply to
plaintiffs with a connection to a conditional payment, is easily read to cover
downstream actors who have borne the cost of a conditional payment and thus have
suffered damages. Furthermore, allowing downstream actors who have directly paid
beneficiaries’ medical bills or reimbursed an MAO to recoup damages would plainly
benefit the Medicare Advantage system. It would enable downstream actors to avoid
costs that, under the Medicare Secondary Payer Act, should be borne by primary
payers, not actors within the Medicare Advantage system. This, in turn, would
enable downstream actors to continue presenting attractive contracts to MAOs.
Ultimately, these attractive contracts are what enable MAOs to compete with
Medicare. Rejecting downstream actors’ access to § 1395y(b)(3)(A)’s private right
of action would jeopardize MAOs’ ability to negotiate favorable contract terms and
would pass primary payers’ statutorily-established risks and costs into the Medicare
Advantage system. Finally, rejecting downstream actors’ ability to seek double
damages would incentivize primary payers to delay making primary payments and
reimbursing conditional payments, in the hope that these costs would be permanently
passed from an MAO to a downstream actor with no recourse. Both the text and the
objective of § 1395y(b)(3)(A) support allowing downstream actors to bring suit, or
assign their right to bring suit, against primary payers.
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The Department of Health and Human Services’s interpretation of
§ 1395y(b)(3)(A) further supports allowing downstream actors like Plaintiffs’
alleged assignors to bring suit, or assign their right to bring suit, against primary
payers. At our request, the Department of Health and Human Services (HHS), which
administers Medicare, oversees the Medicare Advantage system, and promulgates
regulations regarding the Medicare Secondary Payer Act, submitted an amicus brief
(to which all parties were given an opportunity to respond) on the scope of
§ 1395y(b)(3)(A). In its briefing, which considered the relevant cases, statutes,
regulatory scheme, and legislative history, HHS urged that any downstream actor
that has “actually suffered an injury because it provided or paid for care from its own
coffers and was harmed by a primary plan’s failure to provide reimbursement”
should be able to access the private right of action. HHS amicus br. at 12. We afford
HHS’s well-reasoned and considered interpretation of § 1395y(b)(3)(A) Skidmore
deference, under which “an agency’s interpretation may merit some deference
depending upon the ‘thoroughness evident in its consideration, the validity of its
reasoning, its consistency with earlier and later pronouncements, and all those
factors which give it power to persuade, if lacking power to control.’” Buckner v.
Fla. Habilitation Network, Inc., 489 F.3d 1151, 1155 (11th Cir. 2007) (quoting
Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944)); see also Pugliese v. Pukka Dev.,
Inc., 550 F.3d 1299, 1305 (11th Cir. 2008) (affording Skidmore deference to agency
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amicus brief where “[t]he brief is thoroughly reasoned and demonstrates a high level
of consideration given to the issue; the brief thoroughly and rationally analyzes the
statute, the legislative history, and the policy implications of the statutory
interpretation”).
In response to Plaintiffs and HHS, Defendants advance two main arguments
to counter the textual and purposive arguments in favor of affording MAOs access
to § 1395y(b)(3)(A)’s private right of action. But neither of these arguments is
persuasive. First, Defendants emphasize that § 1395y(b)(3)(A) is not a qui tam
provision. Of course this is so, but it has little bearing on whether downstream actors
that have suffered financial losses in the amount of their MAOs’ unreimbursed
conditional payments can bring suit. Such downstream actors cannot be equated to
qui tam plaintiffs who sue on behalf of the government and have no personal
financial losses.
Second, Defendants assert that downstream actors cannot suffer injuries under
the Medicare Secondary Payer Act because they make conditional payments or
reimburse MAOs’ conditional payments pursuant to their contractual obligations,
rather than “mak[ing] statutory conditional payments on behalf of Medicare or the
MAO.” Auto-Owners br. at 20 (emphasis added). Defendants reason that
downstream actors “accepted [MAOs’] risk under private sub-contracts” and are
trying to “push that risk on to insurers,” who are primary payers. ACE br. at 35.
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Defendants’ argument is a sleight of hand; the primary payers already have that risk.
The downstream actors’ alleged injury—the payment of medical expenses that
should have been covered by a primary payer—is precisely the kind of injury that
the Medicare Secondary Payer Act was meant to remove from the Medicare and
Medicare Advantage systems. Under the Act, the risk that Defendants assert
downstream actors accept from MAOs is in fact borne by primary payers and
covered by the insurance policies they issue, not by MAOs or any party with which
they contract.
In an attempt to bolster their argument that downstream actors’ status as
contractors of MAOs precludes their access to § 1395y(b)(3)(A)’s private right of
action, Defendants cite several cases in which various courts found that a plaintiff’s
contractual relationship was insufficient to sustain statutory standing. These cases
bear no resemblance to this case. In American Federation of Government
Employees, Local 2119 v. Cohen, the Seventh Circuit denied statutory standing to
federal employees who challenged a procurement process based on how the resulting
award would negatively affect their job security. The Seventh Circuit found that the
employees’ asserted injury fell within the province of their job contracts, not within
that of the procurement statute, which was designed to ensure fair bid processes for
potential government contractors. 171 F.3d 460, 472 (7th Cir. 1999). In Benjamin
v. Aroostook Medical Center, the First Circuit denied statutory standing to patients
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of a black doctor who alleged that a medical center’s racial discrimination against
the doctor had prevented them from contracting for and receiving their desired
medical procedures. Although the doctor had statutory standing under the anti-
discrimination statute, his patients, whose interest in contracting for and receiving
medical treatment fell outside the ambit of the anti-discrimination statute, could not
sue under the statute. 57 F.3d 101, 104 (1st Cir. 1995). In both cases, the plaintiffs’
injury was far removed from the interests protected by the statute at issue. As we
have discussed, when a downstream actor bears the cost of an MAO’s conditional
payments, that downstream actor suffers an injury squarely within the ambit of the
Medicare Secondary Payer Act.
Defendants have presented no persuasive rationale for limiting downstream
actors’ access to § 1395y(b)(3)(A)’s private right of action. The amici writing in
support of Defendants have similarly failed to persuade us that downstream actors
that fully cover MAOs’ conditional payments are situated differently from MAOs in
any material way. Therefore, and in light of the text, purpose, and persuasive agency
interpretation of § 1395y(b)(3)(A), we hold that downstream actors that have made
conditional payments in an MAO’s stead or that have reimbursed an MAO for its
conditional payment can bring suit for double damages against the primary payer.
The district court erred in dismissing Plaintiffs’ claims on the theory that, as a
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threshold matter, non-MAOs are categorically barred from accessing the Medicare
Secondary Payer Act’s private right of action no matter the circumstances.
IIB
MSPRC also appeals the district court’s dismissals of its HFAP claims,
insofar as those dismissals were entered with prejudice. MSPRC br. at 27. The
district court dismissed with prejudice MSPRC’s HFAP claims against
Auto-Owners and Travelers on the basis that HFAP lacked an assignment from
Health First—a recognized MAO that is tightly bound up and shares corporate
executives with HFAP. Explaining that “HFAP is not an MAO” and has “not been
assigned any rights by Health First Health Plans, Inc.,” the district court held that
HFAP, and therefore its assignee MSPRC, “lacks standing under § 1395y(b)(3)(A).”
Auto-Owners Ins. Co., 2018 WL 1953861, at *5. MSPRC argues that dismissals
based on a party’s lack of an assignment are dismissals for want of Article III
standing, not statutory standing, and that dismissal with prejudice was therefore
inappropriate. We agree with MSPRC.
As the Seventh Circuit explained in MAO-MSO Recovery II v. State Farm
Mutual Automobile Insurance Co., a case analogous to this one, if an assignment
from HFAP “conveyed nothing” from Health First, “plaintiffs had no rights to
enforce” at all. 935 F.3d 573, 581 (7th Cir. 2019). If MSPRC had no rights to
enforce because the HFAP assignment conveyed nothing, MSPRC had no injury in
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fact and thus no Article III standing. See Sprint Commc’ns Co., L.P. v. APCC Servs.,
Inc., 554 U.S. 269, 289 (2008) (treating the presence or absence of a valid
assignment as an issue of Article III standing). In the absence of Article III standing,
the district court lacked jurisdiction to resolve MSPRC’s claims on the merits. See
MAO-MSO Recovery II, 935 F.3d at 581. The district court therefore could not have
dismissed MSPRC’s claims with prejudice. See id.; see also MSP Recovery Claims,
Series LLC v. QBE Holdings, 965 F.3d 1210 (11th Cir. 2020) (vacating district court
order dismissing similar claim with prejudice and directing that the dismissal be
entered without prejudice).
Auto-Owners and Travelers contend that, even if the district court lacked
jurisdiction to resolve MSPRC’s case on the merits, the district court still had the
authority to dismiss MSPRC’s claims with prejudice because such claims were
frivolous and made in bad faith. In support of this contention, Auto-Owners and
Travelers marshal a plethora of unpublished, non-precedential Eleventh Circuit
cases affirming, as an example, a district court’s dismissal with prejudice of a
complaint that alleged “wild accusations and incredible stories” after the district
court “conclud[ed] that it did not have subject matter jurisdiction.” Gibbs v. United
States, 517 F. App’x 664, 667, 670 (11th Cir. 2013). We need not consider whether
this practice set forth in unpublished opinions is consistent with district courts’ lack
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of jurisdiction because we conclude, like the Seventh Circuit, that MSPRC did not
bring frivolous or bad-faith claims.
As the Seventh Circuit noted in MAO-MSO Recovery II, the “corporate
arrangement [between HFAP and Health First] was not just complex, but . . .
freighted with overlapping names and functions.” 935 F.3d at 585. In support of its
claims here, MSPRC submitted a contract between HFAP and Health First showing
that HFAP “manage[d]” the MAO’s general, administrative, and financial affairs.
The same contract shows that HFAP was tasked, in particular, with handling the
MAO’s “legal affairs.” Michael Keeler, the Chief Operating Officer of both HFAP
and Health First, signed the assignment between HFAP and MSPRC and stated in
an affidavit that he intended for “HFAP, on behalf of Health First Health Plans, Inc.,
. . . [to] assign[] to MSP Recovery all right, title, interest in and ownership of” any
claims against primary payers. Auto-Owners D.E. 60-1 at 1. As MSPRC argues on
appeal, it was eminently reasonable for MSPRC to plead that it had a valid
assignment of claims from an MAO. Moreover, if MSPRC in fact had a defective
assignment, MSPRC was well positioned to cure the technical defect and refile its
case with the same claims. Like the Seventh Circuit, because we find that the district
court erred insofar as it dismissed MSPRC’s HFAP claims with prejudice, we order
that the district court’s dismissal be without prejudice.
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III
In addition to dismissing MSPA’s claims because MSPA’s assignors were
non-MAOs, the district court dismissed the claims after finding that MSPA’s
assignments were invalid. Specifically, the district court found that (1) FHCP’s
assignment was canceled when FHCP went into receivership and (2) MSPA failed
to allege, with respect to both its FHCP and IMC claims, that FHCP and IMC
approved the assignment of their rights to MSPA. On appeal, MSPA argues that the
district court erred because (1) the purported cancellation of FHCP’s assignment did
not extinguish MSPA’s vested rights and (2) MSPA’s third amended complaint did
in fact allege that FHCP and IMC had approved the assignment of their rights to
MSPA. We agree with MSPA.
With respect to the purported cancellation of FHCP’s assignment, FHCP
executed a contract “assign[ing] all of [its] rights” under the Medicare Secondary
Payer Act to La Ley Recovery on April 15, 2014. Liberty D.E. 49-8 at 2. Because
nothing in this contract suggested that FHCP would retain an interest in its rights
with respect to these claims that were assigned under the contract or that its rights
with respect to these claims would revert to FHCP, the contract fully divested FHCP
of such rights. On February 20, 2015, La Ley Recovery executed a contract
“irrevocably assign[ing]” to MSPA “any and all” of La Ley Recovery’s “claims,
rights and causes of action set forth” in its contract with FHCP. Liberty D.E. 49-9
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at 1. This agreement transferred the claims under the Act that La Ley Recovery then
possessed to MSPA. That FHCP went into receivership after concluding its contract
with La Ley Recovery, and that FHCP’s receiver sought to cancel the contract, had
no effect on the chain of assignments. FHCP’s receiver had no authority to claw
back what FHCP had already irrevocably transferred. See State of Florida, ex rel.
Dep’t of Fin. Servs. v. Florida Healthcare Plus, Inc., No. 2014-CA-2762, Order
Dated Dec. 10, 2014, at 13 (Fla. 2d Cir. Ct. 2014) (giving FHCP’s receiver the
authority to “cancel[],” but not rescind, contracts); Samuel Williston & Richard A.
Lord, Williston on Contracts § 49:129 (4th ed. 1990) (“A rescission avoids the
contract ab initio, while cancellation merely terminates the policy prospectively, as
of the time the cancellation became effective.”). At most, FHCP’s receiver could
prevent La Ley Recovery, and subsequently MSPA, from acquiring new rights that
FHCP acquired after the date of the purported cancellation.
The district court’s finding that MSPA failed to allege that it had received
consent from FHCP and IMC for its assignments is belied by the record. MSPA’s
third amended complaint plainly alleged that FHCP had approved La Ley
Recovery’s assignment to MSPA. Liberty D.E. 49 at 11. The complaint also plainly
alleged that IMC had “accepted, acknowledged, approved, and consented to”
MSPRC’s assignment to MSPA. Id. at 14. Moreover, MSPA submitted an affidavit
from a manager of IMC stating that “IMC was aware of the subsequent assignment
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from [MSPRC] to MSPA” and that “[n]o prior written consent was needed to
effectuate that subsequent assignment because it was ministerial in nature” under the
terms of IMC’s contract with MSPRC. Liberty D.E. 58-2 at 3. Accordingly, we find
that the district court erred in dismissing MSPA’s FHCP and IMC claims based on
the purported cancellation and validity of MSPA’s assignments.
IV
Defendants advance several alternative bases for affirmance. Across claims,
Defendants argue that (1) Plaintiffs’ contracts are “mere contingency agreements”
rather than assignments; (2) Plaintiffs failed to comply with their supposed pre-suit
notice requirements; and (3) there exist potential defects with MSPRC’s chain of
assignments. These arguments are without merit.
With respect to their first argument, Defendants, despite claiming to do so,
see, e.g., Liberty br. at 29–30, point to no cases in which a court characterized
Plaintiffs’ contracts as contingency arrangements or collection-only agreements
rather than assignments. The one district court to consider this question was “not
persuaded” that Plaintiffs’ contracts were anything other than assignments. MSP
Recovery Claims, Series LLC v. Farmers Ins. Exchange, Nos. 17-cv-02522 & 17-
cv-02559, 2018 WL 5086623, at *12 (C.D. Cal. Aug. 13, 2018). Defendants contend
that Plaintiffs must have contingency arrangements or collection-only agreements
rather than assignments because their contracts grant the supposed assignors a
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contingency interest, and because the clear purpose of the contracts is to provide the
supposed assignors with recovered payments. But the Supreme Court has held that
contracts that include recovery-sharing provisions, even if they require the assignee
to “remit all litigation proceeds” to the assignor, are still properly construed as
assignments. Sprint Commc’ns, 554 U.S. at 273–85 (outlining the history of
“assignees for collection”). Defendants also argue that the fact that Plaintiffs’
contracts have termination provisions cuts against the contracts being assignments.
Although the termination provisions are curious in this context, given that an
assignor’s transferred rights would not revert after termination, this oddity alone
does not override the plain text of Plaintiffs’ contracts. Plaintiffs’ contracts
repeatedly refer to themselves as “Assignment[s] of Claims,” see, e.g., Liberty D.E.
49-9 at 2, and include language such as, “Client hereby irrevocably assigns,
transfers, conveys, sets over and delivers to [MSPRC], or its assigns, any and all of
Client’s . . . rights and entitlements . . . to pursue and/or recover monies” from
primary payers, see, e.g., Ace D.E. 28-1 at 2. We find this language dispositive of
the fact that Plaintiffs hold assignments from various downstream actors.
With respect to their second argument, that Plaintiffs failed to comply with
alleged pre-suit notice requirements, Defendants point to no law that obligated
Plaintiffs to submit “recovery demand letters” or otherwise provide advance notice
of their intent to bring a claim. The regulation that Defendants cite to support their
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argument contemplates that primary payers’ liability arises not only after the primary
payer receives a recovery demand letter but also in cases in which “the
demonstration of primary payer responsibilities is other than receipt of a recovery
demand letter.” 42 C.F.R. § 411.22. Although primary payers must have knowledge
that they owed a primary payment before a party can claim double damages under
the Medicare Secondary Payer Act, see Glover v. Liggett Grp., Inc., 459 F.3d 1304,
1309 (11th Cir. 2006); see also 42 C.F.R. § 411.24(i)(2), Plaintiffs plausibly alleged
that Defendants had such knowledge.
Plaintiffs alleged that they chose which claims to bring by comparing their
assignors’ claims data against two sets of documents: Defendants’ filings with HHS
under 42 U.S.C. § 1395y(b)(7)–(9), which obligates insurers like Defendants to
report the claims for which they are primary payers, and certain of Defendants’
settlement agreements to which MSPRC had access. The filings with HHS evidence
Defendants’ knowledge that they owed primary payments, including the primary
payments for which Plaintiffs seek reimbursement. For the remaining claims,
Defendants’ settlement agreements with beneficiaries show, at minimum, that
Defendants had constructive knowledge that they owed the primary payments. See
United States v. Baxter Int’l, Inc., 345 F.3d 866, 903 (11th Cir. 2003) (finding that a
complaint “sufficiently alleges constructive knowledge” on behalf of the primary
payer based on the primary payer’s entry into a settlement agreement with
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beneficiaries). Because Plaintiffs have plausibly alleged Defendants’ actual or
constructive knowledge, we decline to adopt Defendants’ second alternative basis
for affirmance.
Third and finally, Defendants argue that MSPRC “asserts defective (or
incomplete) assignment chains” because its proffered contracts are between
purported assignors and “series LLCs” that are affiliated with but are not themselves
MSPRC. ACE br. at 39–40. Defendants liken MSPRC to a parent corporation with
subsidiaries and note that parent corporations cannot sue on behalf of their
subsidiaries. But Delaware law, under which MSPRC is incorporated, uses
permissive language that provides that “series may have”—but are not required to
have—“separate rights, powers or duties with respect to specified property or
obligations of [its affiliated] limited liability company.” 6 Del. C. § 18-215
(emphasis added). Depending on how MSPRC’s relationships with its affiliated
series LLCs are structured, MSPRC may have the same rights as or rights separate
from the series LLCs with respect to the assignments. Nothing in the record suggests
that MSPRC’s relationships with its series LLCs preclude MSPRC from asserting
those series LLCs’ rights. At the pleading stage, we accept as true MSPRC’s
allegation that it has the right to bring claims under the proffered contracts. As with
the previous alternative bases for affirmance, we find this third basis meritless.
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V
We have considered Defendants’ remaining arguments for affirmance and
find them to be without merit. For the reasons stated above, in case numbers 18-
12139 (ACE) and 18-13312 (Liberty), we VACATE the dismissals of Plaintiffs’
claims based on assignments from downstream actors and REMAND those cases
for further proceedings consistent with this opinion. In case number 18-12149
(Auto-Owners), we AFFIRM IN PART the dismissal of the Plaintiffs’ claims in
this action to the extent that they involve claims for medical expenses allegedly paid
by Health First Administrative Plans, Inc. (HFAP). We MODIFY the dismissal of
these claims to be without prejudice. We VACATE the dismissal of the plaintiffs’
remaining claims in case number 18-12149. In case number 18-13049 (Travelers),
we AFFIRM the dismissal of the Plaintiffs’ claims but MODIFY the dismissal of
these claims to be without prejudice.
34