If you follow our blog, you will recall an entity called MSP Recovery LLC, a law firm in Miami, Florida which alleges to have received assignments on behalf of various Medicare Advantage Plans (MAPs) to pursue double damages Medicare Secondary Payer (MSP) private cause of action lawsuits and class actions nationwide.
The allegation by MSP Recovery in these lawsuits are that the primary plans have failed to make reimbursement for the MAP’s conditional payments which should have been the responsibility of the primary plan. For our prior blogs on MSP Recovery LLC and how MSP Recovery asserts it has obtained the necessary data through unique data sources to identify these recovery situations, click here.
Just recently, MSP Recovery LLC and several of its attorneys have been sanctioned by a District Court. The decision is entitled Recovery v. State Farm Mut. Auto. Ins. Co. 2018 U.S. Dist. LEXIS 95789, U.S. District Court for the Central Dist. Of Ill. (June 7, 2018). This class action involved the usual allegations by MSP Recovery LLC, essentially that MSP Recovery has assignments from various MAPs that have made Medicare conditional payments wherein State Farm should have been the primary payer and/or reimbursed the MAPs that made those conditional payments.
But, a huge void was present in MSP Recovery LLC’s complaint: In its first initial complaint, MSP Recovery failed to allege any facts supporting their claims. More particularly, MSP Recovery LLC failed to identify any MAPs that allegedly paid medical expenses on behalf of Medicare beneficiaries. MSP Recovery then filed its first Amended Complaint, which attempted to identify a representative MAP and a representative Medicare beneficiary. However, the court held that MSP Recovery failed to sufficiently allege injury in fact because they did not allege any particular or concrete injuries on behalf of the representative MAP and representative Medicare beneficiary. The Amended Complaint only mentioned the representative beneficiary and MAP in passing, without attributing any actual facts to those representatives to support standing.
MSP Recovery LLC then attempted a Second Amended Complaint. This time, MSP Recovery attached a Recovery Agreement and Assignment document, to demonstrate that MSP Recovery had valid legal assignment from Health First Administrative Plans (“HFAP”). However, in a similar action pending in the Southern District of Florida, the court determined that HFAP is not actually a MAP, but rather an administrative company, which services Health First Health Plans (“HFHP”). In other words, HFHP is a MAP, but HFAP simply services the MAP, which means that HFAP is not an MAP and has no recovery rights under the MSP. State Farm moved to dismiss based upon this reason.
MSP Recovery alleged that the decision in Florida was decided incorrectly, and insisted that it had a valid assignment to pursue this action against State Farm. However, MSP Recovery did admit to the court that HFAP was not a MAP, and not the entity that had paid medical expenses. Yet, in its next breath, MSP Recovery asserted to the court that amending the complaint further “would not change the substantive validity of the Health First assignments…” The court found MSP Recovery’s contradictory statements to be “palpably absurd and clearly wrong under the law.”
The court further commented that “it is not a minor clarification to say that an entirely separate corporation incurred injury,” and that “[i]t is well-settled under the law that corporations are separate and distinct legal entities and courts must be given good reason to ignore the corporate form.” Furthermore, the administrative and financial services agreement between HFAP and HFHP simply did not contain any provision suggesting, let alone explicitly stating, that HFHP intended to transfer claims under the MSP provisions to HFAP. Therefore, the Recovery Agreement and subsequent “Assignment” were nullities, HFAP had no rights to assign in the first place, and Plaintiffs lacked standing. It was not until Plaintiffs were threatened with possible sanctions that they acknowledged the “mistakes made by Plaintiffs, Plaintiffs’ counsel and Plaintiffs’ Assignor.”
The court issued sanctions in the amount of $5,000 against three of MSP Recovery LLC’s attorneys, as well as an additional $5,000 against MSP Recovery LLC itself, for a total of $20,000. We will continue to follow MSP Recovery LLC as well as all MAP MSP private cause of action litigation. For assistance with MAP Best Practices, please contact us at firstname.lastname@example.org.