What’s in a Name? MSP Recovery LLC Sanctioned in Latest MAO Litigation

MSP Recovery LLC, welcome to the Illinois federal courts. This may not be the jurisdiction for you. In a recent decision from the United States District Court for the Central District of Illinois, Peoria Division, not only did the legal group from Miami, now infamous for bringing hundreds of complaints against various insurance carriers under Medicare Secondary Payer reimbursement theories, fail to prevail in yet another effort to collect big money, but it ended up costing them and their attorneys $5,000 each in sanctions.

There are several written decisions about MSP Recovery LLC, many sounding familiar. Assignments, amended complaints, failure to state a claim – it all begins to run together. But when a court states: “This is when things got hairy” halfway through its written decision, something is going down.

The case of 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), began back in March of 2017 when the Plaintiffs filed their original complaint alleging that they were assigned the right to seek reimbursement from the Defendant for Medicare conditional payments made on behalf of a Medicare Advantage Organization. The Defendant filed a successful Motion to Dismiss on the grounds that there was no standing because no injury-in-fact had been alleged. The complaint alleged the Plaintiff had received assignments from the MAO to seek recovery under the MSP, however, the Plaintiffs failed to name the MAO.

On June 2, 2017, the Plaintiffs filed the first Amended Complaint, apparently adding nothing more of consequence to the original complaint than the names of a representative Beneficiary (R.F.) and a representative MAO called Health First Administrative Plans (HFAP). Without furnishing additional details to support an injury-in-fact, the Plaintiffs’ Amended Complaint did not establish standing and was subsequently dismissed.

Undaunted, a Second Amended Complaint was filed on January 30, 2018, substituting the previous representative Beneficiary R.F. with the more representative R.Y. The allegation was that R.Y. was an enrollee in HFAP and Defendant, as a primary payer under the MSP, failed to reimburse HFAP for medical items and services in a timely manner. Illustrating the relationship between MSP Recovery and HFAP, the Plaintiffs attached documentation including a Recovery Agreement and an Assignment document, in which Plaintiff MSP Recovery LLC assigned the rights of HFAP to MSP Recovery Claims Series, LLC. On March 6, 2018, the Defendant filed a Motion to Dismiss the Second Amended Complaint due to lack of standing.

Elsewhere, a court in the Southern District of Florida was busy working on another similar lawsuit filed by MSP Recovery LLC against Auto-Owners Insurance Group. In the course of this litigation it was determined by the testimony of HFAP’s Chief Operating Officer that HFAP was a company that performed administrative duties for a Medicare Advantage Organization called Health First Health Plans.

This distinction was news to the U.S. District Court for the Central District of Illinois, Peoria Division. And they were none too happy that while the Plaintiff had known about it since April 12^th, it took a call from the Defendant on April 26^th to notify the Court of the mistaken identity. The next day the Court ordered the Plaintiffs to file a response as to why the case should not be dismissed.

That’s when things got hairy.

Apparently the Plaintiffs did not think it was significant to know details like exactly which company assigned to them its rights of recovery. In their May 11, 2018 response to the Court, the Plaintiffs admitted that it was HFHP, not HFAP that had made conditional payments on behalf of R.Y., but had they had an opportunity to make a “minor clarifying” amendment to the Second Amended Complaint, they may have been more precise. Next that they stated that said potential clarification “would not change the substantive validity of the Health First assignments or R.Y.’s adequacy as an exemplar beneficiary,” a position the Court referred to as “palpably absurd and clearly wrong under the law.” The Court was further perturbed that MSP Recovery had not brought the identity of their intended Defendant to their attention until there was a threat of sanctions, rather than when they learned of the distinction weeks earlier.

When a lawsuit is filed, there are obligations that exist to ensure that the facts alleged are truthful and well-researched. The Federal Rules of Civil Procedure provide for sanctions against frivolous lawsuits, and case law indicates that the imposition of sanctions is allowable if the litigating parties should have known their position was groundless. By bringing a lawsuit against a company that does not make any medical payments, much less Medicare conditional payments on behalf of R.Y., a question exists as to whether MSP Recovery’s position was groundless. The law recognizes that corporations are separate and distinct legal entities and cause must be shown to ignore the corporate form.

The MSP Recovery LLC attorneys attempted to show they were not personally involved in the Auto-Owners matter, presumably to suggest they weren’t aware of the testimony, because they had not entered appearances in that case. The Court did not buy it, nor did they buy the Plaintiff’s explanation that the two separate companies are all part of the Health First “corporate family,” complicating their ability to identify the correct entity. And while this case is certainly not the longest legal battle in MSP history, it went on long enough for the Court to acknowledge the Plaintiff had wasted time and resources with its groundless claim.

Upon issuing the sanctions, the Court stated its purpose to “deter repetition of the conduct or comparable conduct by others similarly situated.” Given the prolific manner in which MSP Recovery LLC has been filing complaints that other courts have also determined to be less than adequate, it will be interesting to see whether this case results in a true deterrent or merely a slap on the wrist.