Ninth Circuit Affirms Dismissal of Putative Class Actions Seeking Double Damages Under Medicare Secondary Payer Act

September 2023

A Gordon Rees Scully Mansukhani multi-state team, including Partners Jordan Altura, Robin Taylor SymonsFletcher Alford, and Quyen Le and Senior Counsel Adelle Greenfield, prevailed in the Ninth Circuit Court of Appeals, affirming the dismissal of a pair of putative national class actions brought under the Medicare Secondary Payer Act’s (“Act”) private cause of action against the firm’s client, an auto insurer. 

The named plaintiffs were part of a network of shell companies functioning as a collections agency. They attempted to exploit a gap in the Act’s claims settlement process which precluded auto insurers like the firm’s client from finding out whether a Medicare Advantage Organization (“MAO”) had made accident-related payments or whether the auto insurer was responsible for reimbursement. Despite this information gap, the plaintiffs sought double damages for alleged failures to reimburse medical expenses incurred by MAOs and related entities who allegedly assigned their claims to the plaintiffs. The putative classes included potentially thousands of MAOs, physicians’ groups, and other entities involved in the Medicare payment processing chain. There was credible exposure in the hundreds of millions of dollars, and other insurers across the country have been forced to spend millions of dollars defending similar lawsuits in recent years.

The Gordon & Rees team had argued from day one that the plaintiffs lacked Article III standing to pursue their reimbursement claims due to defects in the assignment agreements the plaintiffs had entered with MAOs and related entities. After requiring the plaintiffs to amend their complaints, the district court ultimately determined the plaintiffs’ allegations were sufficient to survive Rule 12 motions to dismiss. The Gordon & Rees team engaged in extensive discovery with the plaintiffs and non-parties and secured evidence that the purported assignments were invalid, including correspondence from an MAO to the plaintiff’s counsel demanding that he cease and desist attempting to collect on claims he did not own and for which he lacked recovery rights.

After several years of hard-fought litigation, the team won dismissal of the district court actions while the plaintiffs’ class certification motions were pending. The team’s arguments in opposition to class certification highlighted the assignment defects, prompting the district court to request additional briefing on the issue of the plaintiffs’ standing. After further briefing and two rounds of oral argument, the district court determined the plaintiffs failed to meet their burden of establishing an injury in fact as required to invoke federal subject matter jurisdiction and dismissed the actions in their entirety. The plaintiffs appealed. 

The Ninth Circuit affirmed the dismissal, following oral argument by Mr. Altura before an extremely hot bench. Ms. Greenfield took the lead on the appellate briefing. The plaintiffs argued that: (1) the dismissal was procedurally improper because the district court did not wait for a summary judgment motion; (2) the court erred in concluding the plaintiffs lacked standing; and (3) the court abused its discretion in denying leave to further amend the complaints to add new parties who might have standing. The Ninth Circuit rejected all of the plaintiffs’ arguments and criticized their “scattershot litigation strategy,” observing, “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.”

The complete dismissal of these cases is a major victory in a niche area of law, involving a statute described by various courts as one of “the most completely impenetrable texts within human experience.”