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MAO-MSO Recovery II, LLC v. Farmers Insurance Exchange

United States District Court, C.D. California

November 20, 2017

MAO-MSO RECOVERY II, LLC, ET AL.
v.
FARMERS INSURANCE EXCHANGE, ET AL.

          Present: The Honorable CHRISTINA A. SNYDER Catherine Jeang

          CIVIL MINUTES - GENERAL

         Proceedings: DEFENDANTS' MOTION TO DISIMISS FIRST AMENDED COMPLAINT IN CASE NO. 2:17-cv-02522-CAS-PLA (Dkt. 54, filed September 6, 2017)

         DEFENDANTS' MOTION FOR ORDER TO TEMPORARILY STAY DISCOVERY AND, IF NECESSARY, TO THEN PHASE DISCOVERY IN CASE NO. 2:17-cv-02522-CAS-PLA (Dkt. 55, filed September 6, 2017)

         DEFENDANTS' MOTION TO DISIMISS FIRST AMENDED COMPLAINT IN CASE NO. 2:17-cv-02559-CAS-PLA (Dkt. 53, filed September 6, 2017)

         DEFENDANTS' MOTION FOR ORDER TO TEMPORARILY STAY DISCOVERY AND, IF NECESSARY, TO THEN PHASE DISCOVERY IN CASE NO. 2:17-cv-02559-CAS-PLA (Dkt. 54, filed September 6, 2017)

         I. INTRODUCTION

         Plaintiffs MAO-MSO Recovery II, LLC, MSP Recovery, LLC, and MSPA Claims 1, LLC (collectively, "plaintiffs") bring these two related, putative class actions against defendants Farmers Insurance Exchange, Farmers Insurance Company, Inc., Farmers Insurance Company of Arizona, Farmers Insurance Company of Idaho, Farmers Insurance Company of Oregon, Farmers Insurance Company of Washington, Farmers Insurance Company of Columbus, Inc., Farmers New Century Insurance Company, Farmers Texas Mutual Insurance Company, Illinois Farmers Insurance Company, and Texas Farmers Insurance Company (collectively, "defendants"). Plaintiffs allege that they are assignees of numerous, unidentified Medicare Advantage Organizations ("MAOs") and seek to recover double damages based on defendants' alleged failure to reimburse the MAOs for medical expenses that defendants were obligated to cover pursuant to the Medicare Secondary Payer Act ("MSPA"). 42 U.S.C. § 1395y(b).

         On March 31, 2017, plaintiffs filed a complaint in Case No. 2:17-cv-02559-CAS-PLA, alleging that defendants are responsible for paying the medical expenses of Medicare beneficiaries enrolled in MAO plans pursuant to the MSPA because the enrollees entered into settlement agreements with tortfeasors insured by defendants. On April 3, 2017, plaintiffs filed a separate but closely related complaint in Case No. 2:17-cv-02522-CAS-PLA, alleging that defendants' payment obligations under the MSPA arise from their issuance of no-fault automobile insurance policies to MAO enrollees injured in traffic accidents. After defendants filed motions to dismiss the complaints, plaintiffs amended both complaints as a matter of course on July 7, 2017, thereby rendering defendants' motions to dismiss moot. Case No. 17-2559, dkt. 36 ("Settlement FAC"); Case No. 17-2522, dkt. 38 ("No-Fault FAC").

         On September 6, 2017, defendants filed motions to dismiss the No-Fault and Settlement FACs on two grounds. First, defendants contend that both FACs fail to allege sufficient facts demonstrating that plaintiffs have Article III standing, and accordingly move to dismiss the complaints for lack of subject matter jurisdiction pursuant to Rule 12(b)(1). Second, defendants argue that the FACs fail to state a claim under Rule 12(b)(6) because plaintiffs do not allege sufficient facts showing defendants' responsibility for primary payment of the medical expenses at issue. Defendants further argue that the class action claims in both FACs should be dismissed or stricken. Case No. 17-2559, dkt. 53 ("Settlement MTD"); Case No. 17-2522, dkt. 54 ("No-Fault MTD"). Defendants also filed motions for orders to temporarily stay discovery in both cases. Case No. 17-2559, dkt. 54; Case No. 17-2522, dkt. 55. On September 22, 2017, plaintiffs filed combined oppositions to the motions to dismiss and the discovery motions. Case No. 17-2559, dkts. 59, 60 ("MTD Opp'n"); Case No. 17-2522, dkts. 60, 61. On September 29, 2017, defendants filed reply briefs. Case No. 17-2559, dkts. 64, 65; Case No. 17-2522, dkts. 65, 66.

         Having carefully considered the parties arguments, the Court concludes that plaintiffs have failed to allege sufficient facts to demonstrate Article III standing. Because standing is a threshold jurisdictional issue, the Court does not reach defendant's other bases for dismissal.

         II. BACKGROUND

         A. Statutory Framework

         Medicare, enacted in 1965, is a federal health insurance program primarily benefiting those 65 years of age and older. See Social Security Amendments of 1965, Pub. L. No. 89-97, 79 Stat. 286 (codified as amended at 42 U.S.C. §§1395 to 1395kkk-1). The Medicare Act consists of five parts: Part A, Part B, Part C, Part D, and Part E. Parts A and B regulate the traditional fee-for-service Medicare program administered by the Centers for Medicare & Medicaid Services ("CMS"). See 42 U.S.C. §§ 1395c to 1395i-5; §§ 1395-j to 1395-w). Part C outlines the Medicare Advantage program- described in further detail below-wherein Medicare beneficiaries may elect to use private insurers, i.e., MAOs, to deliver their Medicare benefits. See 42 U.S.C. §§ 1395w-21-29. Part D provides for prescription drug coverage for Medicare beneficiaries, and Part E contains various miscellaneous provisions.

         1. Medicare ...


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