Mao-Mso Recovery II, LLC v. Mercury General

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS FEB 7 2023
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
MAO-MSO RECOVERY II, LLC, a No. 21-56395
Delaware entity; MSP RECOVERY
CLAIMS SERIES LLC, a Delaware entity; D.C. No.
MSPA CLAIMS 1, LLC, a Florida entity, 2:17-cv-02525-AB-AFM
Plaintiffs-Appellants,
MEMORANDUM*
v.
MERCURY GENERAL, a California
company, its subsidiaries and affiliates,
Defendant-Appellee.
MAO-MSO RECOVERY II, LLC, a No. 21-56396
Delaware entity; MSP RECOVERY
CLAIMS SERIES LLC, a Delaware entity; D.C. No.
MSPA CLAIMS 1, LLC, a Florida entity, 2:17-cv-02557-AB-AFM
Plaintiffs-Appellants,
v.
MERCURY GENERAL, a California
company, its subsidiaries and affiliates,
Defendant-Appellee.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Appeal from the United States District Court
for the Central District of California
Andre Birotte, Jr., District Judge, Presiding
Argued and Submitted December 9, 2022
Pasadena, California
Before: BERZON, R. NELSON, and BADE, Circuit Judges.
Partial Dissent by Judge BERZON.
In these consolidated appeals, Appellants MAO-MSO Recovery II, LLC;
MSP Recovery Claims Series LLC; and MSPA Claims 1, LLC (collectively
“Appellants”) appeal the district court’s dismissal of their claims against Appellee
Mercury General (“Mercury”) for lack of standing and its denial of Appellants’
request for leave to amend the operative complaints. 1 We have jurisdiction under
28 U.S.C. § 1291, and we affirm.
Because “standing is an essential and unchanging part of the case-or-
controversy requirement of Article III,” federal courts cannot exercise jurisdiction
over parties that lack standing. See Lujan v. Defs. of Wildlife, 504 U.S. 555, 560
(1992). “The party invoking federal jurisdiction bears the burden of establishing”
standing at each stage in legal proceedings. Id. at 561. This requires a plaintiff to
show, among other things, that it “suffered an injury in fact—an invasion of a
legally protected interest which is (a) concrete and particularized and (b) actual or
1
We previously consolidated these appeals for argument, and now we
consolidate them for disposition.
2
imminent, not conjectural or hypothetical.” Id. at 560 (citations and internal
quotation marks omitted).
1. Appellants first contend the district court erred procedurally by not
requiring Mercury to move for summary judgment on the issue of standing
consistent with Federal Rule of Civil Procedure 56. But this court has long held
that a summary judgment motion is an inappropriate vehicle for challenging a
plaintiff’s standing “because ‘[t]he plaintiff’s obligation to establish standing
should not be passed to the defendant by the simple device of waiting for a
summary judgment motion.’” Am. Postal Workers Union v. U.S. Postal Serv., 861
F.2d 211, 213 (9th Cir. 1988); see also 10A CHARLES ALAN WRIGHT & ARTHUR R.
MILLER, FEDERAL PRACTICE AND PROCEDURE § 2713 (4th ed. 2022) (explaining
that the “general rule” in the federal system “is that it is improper for a district
court to enter judgment under Rule 56 for defendant because of a lack of
jurisdiction”). Appellants’ procedural arguments are thus foreclosed by precedent
and practice.
2. Appellants also contend the district court erred on the merits by
declining to find standing for Appellants to bring claims related to (1) an individual
named J.R., (2) an individual named D.M., and (3) unpled “data matching
exemplar” plaintiffs, whose relevant allegations were not part of either of the
operative complaints.
3
(a) Appellants first contend the district court erred in concluding
Appellants lacked standing to bring the claim related to J.R. because neither the
ultimate holder of J.R.’s recovery rights nor the holder’s “parent” LLC were
named plaintiffs. Appellants admit these parties are not identified as plaintiffs in
either of the operative complaints, but they contend that naming the wrong plaintiff
was a “ministerial or technical defect” they should be permitted to correct by
amending the complaint. But even if we accepted Appellants’ characterization of
their pleading errors, the fact remains that after years of litigation and multiple
amendments, Appellants’ operative complaints continued to assert allegations for
an entity that is not a party to the litigation and that is not alleged to have suffered
any harm. Given the procedural posture and age of this case, the district court did
not err in exercising its considerable discretion to deny Appellants’ request for
leave, see Chodos v. West Publ’g Co., 292 F.3d 992, 1003 (9th Cir. 2022), and in
dismissing the J.R. claim for lack of standing.
(b) Appellants next argue the district court erred in dismissing the claims
related to D.M. because the evidence demonstrated they had received the rights of
recovery to this claim from a contract with Trinity Physicians, LLC. But the
record demonstrates that, prior to entering into this agreement with Appellants,
Trinity had already assigned those rights to another entity, Freedom Health Care.
Appellants’ contentions that this result is “mind-boggling,” are based on extrinsic
4
evidence and thus are irrelevant because the contract’s unambiguous text controls.
See, e.g., Trident Ctr. v. Conn. Gen. Life Ins. Co., 847 F.2d 564, 568 (9th Cir.
1988) (“Under traditional contract principles, extrinsic evidence is inadmissible to
interpret, vary or add to the terms of an unambiguous integrated written
instrument.”).
Their argument that the assignment of rights pertains to the merits rather
than standing is similarly unpersuasive: whether Appellants had the legal right to
seek reimbursement for payments allegedly made for the J.R. and D.M. claims
relates directly to whether Appellants have a sufficient “legally protected interest”
in bringing suit, a quintessential standing question. See Lujan, 504 U.S. at 560–61;
see also Flast v. Cohen, 392 U.S. 83, 99–100 (1968) (explaining that “when
standing is placed in issue in a case, the question is whether the person whose
standing is challenged is a proper party to request an adjudication of a particular
issue”). And Appellants’ contention that Trinity did not contractually assign to
Freedom its statutory rights of recovery is contradicted by the unambiguous text of
the agreement between Trinity and Freedom. Moreover, their argument is
logically unsound: if Trinity were unable to assign statutory remedies to Freedom
by contract (as Appellants claim), it is unclear how Trinity would nevertheless be
5
able to assign those same statutory remedies to Appellants by contract.2
(c) Finally, Appellants contend the district court erred by dismissing the
complaints for lack of standing when there were numerous unpled “data matching
exemplars” that purportedly established Appellants’ standing. Appellants’
contention that they can rely on unpled injuries to establish standing over a case
involving entirely unrelated injuries is foreclosed by well-established case law.
Standing “is not dispensed in gross”; instead, “a plaintiff must demonstrate
standing for each claim he seeks to press and for each form of relief that is sought.”
Davis v. Fed. Election Comm’n, 554 U.S. 724, 734 (2008) (internal quotation
marks and citations omitted). And dismissal of a complaint on the merits is proper
when the plaintiff alleges only “[t]hreadbare recitals of the elements of a cause of
action, supported by mere conclusory statements.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009). As Appellants concede that none of the operative facts related to the
“data matching exemplars” are pled in the operative complaints, they plainly fail to
establish these claims can support federal jurisdiction.
2
Appellants further contend they have standing to pursue the D.M. claims
because those claims were assigned to an unnamed “subsidiary series” LLC and
parent LLCs have standing to bring suit on behalf of their subsidiary series LLCs.
We have yet to determine whether a parent LLC has standing to bring suit on
behalf of a subsidiary series LLC, and we need not do so here as Appellants failed
to provide evidence demonstrating the series LLCs granted such authority to their
parent in the relevant operating agreement. Cf. MSP Recovery Claims, Series LLC
v. ACE Am. Ins. Co., 974 F.3d 1305, 1319–20 (11th Cir. 2020).
6
Accordingly, the district court did not err in its consideration of the merits of
Appellants’ standing, and it properly dismissed the complaints for lack of
jurisdiction.
3. Finally, Appellants contend the district court abused its discretion in
denying their request for leave to file third amended complaints. District courts
have broad discretion in denying subsequent requests for leave to amend where, as
here, previous requests were granted. See Chodos, 292 F.3d at 1003. Appellants’
contentions that leave to amend should be freely given to cure standing defects
relies on an overly solicitous reading of Northstar Financial Advisors Inc. v.
Schwab Investments, 779 F.3d 1036 (9th Cir. 2015), and characterizing their
substantive amendments—including adding and removing allegations and even
parties—as merely implicating standing concerns. Their assertion that they did not
unduly delay in seeking amendment given prior instructions from the district court
misreads the record and fails to explain why Appellants waited more than a month
after the dismissal order before seeking leave to amend their complaints. And the
argument that the proposed amendment is not prejudicial to Mercury because it is
the dismissal, not leave to amend, that would “essentially [require Mercury] to
restart the entire litigation and defend itself based on a new set of operative facts,”
ignores that these inefficiencies are the result of Appellants’ own scattershot
litigation strategy—a strategy, it should be noted, that has resulted in dismissals for
7
lack of standing in district courts across the country. See, e.g., MAO-MSO
Recovery II, LLC v. State Farm Mut. Auto. Ins. Co., 994 F.3d 869, 872 (7th Cir.
2021); MSP Recovery Claims, Series LLC v. AIG Prop. Cas., Inc., No. 20-CV-
2102, 2021 WL 1164091, at *15–16 (S.D.N.Y. Mar. 26, 2021); MSP Recovery
Claims, Series LLC v. Tech. Ins. Co., Inc., No. 18 CIV 8036, 2020 WL 91540, at
*5 (S.D.N.Y. Jan. 8, 2020); MSP Recovery Claims, Series LLC v. USAA Gen.
Indem. Co., No. 18-21626, 2018 WL 5112998, at *13 (S.D. Fla. Oct. 19, 2018).
For these reasons, we conclude the district court did not abuse its discretion in
denying Appellants’ leave to amend the operative complaints.
AFFIRMED.
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FILED
MAO-MSO Recovery v. Mercury General
FEB 7 2023
Nos. 21-56395, 56396
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
BERZON, Circuit Judge, dissenting in part:
I agree that Appellants lack standing on the basis of the current complaints.
But I would hold that denying leave to amend was an abuse of discretion.
First, I would hold that Appellants did not unduly delay in seeking leave to
amend. There was no deadline in the scheduling order for the filing of amended
complaints. The district court stated that it did not want to consider the possibility
of any motions for leave to amend the complaints at least until the class
certification hearing, which was held in May 2021. In their supplemental briefs on
standing filed June 2021, Appellants concluded by stating that, if their arguments
were rejected, any standing defects should be cured through a supplemental or
amended pleading under Fed. R. Civ. P. 15(d).
This Court does not require formal motions for leave to amend. United
States v. $11,500.00 in U.S. Currency, 710 F.3d 1006, 1013 (9th Cir. 2013);
Edwards v. Occidental Chem. Corp., 892 F.2d 1442, 1445 n.2 (9th Cir. 1990).
Appellants provided sufficient notice of their desire for leave to amend to the
district court and to Mercury at least as early as June 2021, when the standing brief
was filed.
Second, permitting the proposed amendments would not be significantly
prejudicial to Mercury, in light of the district court’s dismissal of the complaints
1
without prejudice. In dismissing without prejudice, the district court has permitted
Appellants to restart litigation against Mercury through the filing of new
complaints that could include the proposed amendments. Allowing Appellants
instead to amend the current complaints would improve judicial efficiency and
minimize the burden on all parties by permitting the parties to build upon the
discovery and motions practice that have already occurred in these cases. The
majority asserts that any “inefficiencies” resulting from new litigation “are the
result of Appellants’ own scattershot litigation strategy.” Mem. Disp. at 7–8. While
Appellants have certainly struggled to sufficiently plead facts to establish standing,
those failings are not relevant to assessing the prejudice to Mercury caused by a
third amended complaint, as compared to an entirely new suit.
Moreover, the nature of the amendments Appellants seek to make are not
seriously “substantive,” as the majority suggests. Mem. Disp. at 7. At the hearing
on standing held July 2021, Appellants read into the record contractual language
indicating that the parent corporation had authority to sue on behalf of the series
LLCs, thus showing that the complaints could readily be amended to cure that
problem. Nor do the facts pertaining to additional beneficiaries constitute new
“claims,” as the claims alleged were on behalf of the Medicare Advantage
Organizations, not individual beneficiaries. So, adding new “exemplars” would not
be adding new claims. Finally, although technically new parties, the proper
2
corporate entities that would be added are closely related to the named parties, not
some entirely new third parties.
Appellants were certainly sloppy. And their mode of filing complaints
before ascertaining the possibly meritorious claims assigned is not to be
encouraged, and in some instances will appropriately lead to dismissal for lack of
standing. Here, however, enough of the errors appear to be easily curable that
amendment should have been allowed in lieu of dismissing the cases without
prejudice. Halting litigation on account of misnamed entities or failure to quote
from governing documents that actually exist is inefficient and pointless, in my
view.
For the foregoing reasons, I would hold that the district court abused its
discretion in denying Appellants leave to amend the operative complaints.
3