MSP Recovery Claims, Series LLC et al v. Merchants Mutual Insurance Company et al

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
______________________________________
MSP RECOVERY CLAIMS, SERIES LLC, a
Delaware limited liability company; and
SERIES 16-08-483, a designated series of
MSP Recovery Claims, Series, LLC,
Plaintiffs,
v.
MERCHANTS MUTUAL INSURANCE
COMPANY, a Delaware corporation;
MERCHANTS NATIONAL INSURANCE
COMPANY, a New Hampshire corporation;
and MERCHANTS PREFERRED
INSURANCE COMPANY, a Delaware
corporation,
Defendants.
______________________________________
REPORT AND RECOMMENDATION
1:19-cv-524-JLS-JJM
Plaintiffs MSP Recovery Claims, Series LLC (“MSP Series”) and Series 16-08-
483, a designated series of MSP Recovery Claims, Series, LLC (“Series 16-08-483”)
commenced this purported class action pursuant to 42 U.S.C. §1395y(b)(3)(A), the Medicare
Secondary Payer Act (“MSPA”). Plaintiffs allege that defendants are primary payers under the
statute because they issued automobile no-fault policies to certain Medicare beneficiaries.
Plaintiffs claim that defendants owe to them, as assignees of Health Insurance Plan of Greater
New York (“HIPGNY”), a Medicare Advantage Organization (“MAO”), reimbursement for
secondary payments that HIPGNY made for medical treatments provided to defendants’ policy
holders. See Plaintiffs’ Amended Class Action Complaint for Damages (the “Amended
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Complaint”) [19]. 1 	Before the court is defendants’ motion to dismiss pursuant to Fed. R. Civ.
P. (“Rule”) 12(b)(1) and 12(b)(6) [37], which has been referred to me by District Judge John L.
Sinatra for initial consideration [50]. Having reviewed the parties’ submissions [37, 47, 48, 52,
55, 58, 59] and heard oral argument on March 5, 2020, I recommend that the motion be granted,
without prejudice to filling an amended complaint.
BACKGROUND
This case involves plaintiffs’ claims for reimbursement from defendants pursuant
to the MSPA. Plaintiff MSP Series is a limited liability company (“LLC”) formed in the State of
Delaware to, among other things, pursue “claims recovery and reimbursement rights assigned to
the Company or any of its designated Series”. MSP Recovery Claims, Series LLC Amended and
Restated Limited Liability Company Operating Agreement (“Operating Agreement”) [58-2], p.
32 of 58 (CM/ECF pagination). Plaintiff Series 16-08-483 was established under Delaware law
as a series of MSP Series pursuant to the Operating Agreement and a Certificate of Designation,
effective March 20, 2018. See Id. at 32-33 of 58 (CM/ECF pagination); Certificate of
Designation [58-2], pp. 54-58 of 58 (CM/ECF pagination). Series 16-08-483 is the assignee of
some of HIPGNY’s MSPA claims. Assignment Agreement, effective March 20, 2018
(“Assignment”) [58-1], pp. 6-7 of 18 (CM/ECF pagination).
Because I recommend that the court grant this motion under Rule 12(b)(1), I
outline below only those facts and arguments relevant to that analysis.
1 	Bracketed references are to the CM/ECF docket entries. Unless otherwise indicated, page references are to
numbers reflected on the documents themselves rather than to the CM/ECF pagination.
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A. The Amended Complaint
Plaintiffs’ Amended Complaint [19] alleges that defendants are no-fault insurers
that failed to reimburse, as required by the MSPA, conditional payments that HIPGNY made for
the medical treatment of Medicare beneficiaries. Amended Complaint [19, ¶ 6. To demonstrate
their entitlement to relief, plaintiffs outlined in the Amended Complaint three exemplar claims
related to Medicare beneficiaries R.A. ([19] ¶¶ 7-13), J.O. (id., ¶¶ 14-20), and K.Y. (id., ¶¶ 21-
25). Plaintiffs allege that defendants issued to each of these beneficiaries a no-fault insurance
policy. Plaintiffs allege that each beneficiary was injured in an accident covered by the
defendants’ policies. Amended Complaint [19], ¶¶8, 15, 22. For each of the exemplar claims,
plaintiffs provided the date of accident, diagnosis codes for the beneficiaries’ injuries, the date
the medical service was provide to the beneficiary, the amounts billed by the providers for the
service rendered to the beneficiary, and the amount HIPGNY actually paid. See Amended
Complaint [19] ¶¶ 8-10, 15-17, 22-24.
On March 20, 2018, pursuant to the Assignment, nonparties EmblemHealth
Services Company, LLC, Group Health Incorporated (“EmblemHealth”), and HIPGNY assigned
to Series 16-08-483 and nonparty MSP Recovery, LLC (“MSP Recovery”):
“[A]ny and all of Assignor’s right, title, ownership and interest in
and to all Assigned Medicare Recovery Claims . . . and any and all
rights . . . to pursue and/or recover monies that Assignor had, may
have had, or has asserted against any party in connection with the
Assigned Medicare Recovery Claims and all rights and claims
against primary payers and/or, subject to the definition of Assigned
Medicare Recovery Claims, third parties that may be liable to
Assignor arising from or relating to the Assigned Medicare
Recovery Claims”.
Amended Complaint [19], p. 12, ¶ 29; Assignment [19-8], p. 2, ¶ 2.b. The Assignment defines
“Assigned Medicare Recovery Claims” as:
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“[A]ll right, title, interest in and ownership of Medicare Recovery
Claims – excluding Medicare Recovery Claims that can be
asserted against Assignor’s members, enrollees and/or contracted
providers, and excluding Medicare Recovery Claims that, as of the
Effective Date, have been assigned to and/or are being pursued by
other recovery vendors, including, but not limited to, The Rawlings
Group – related to Medicare Health Care Services that were
rendered and paid for by Assignor during the six (6) year period
beginning September 29, 2011 and ending September 29, 2017”.
Id., p. 1. The Amended Complaint alleges further that MSP Recovery assigned to Series 16-08-
483 the rights it acquired pursuant to the Assignment in an April 4, 2018 “Series Assignment”
purportedly attached to the Amended Complaint as Exhibit I. However, Exhibit I is a March 20,
2018 “Certificate of Designation” that appears to create Series 16-08-483 as a series of MSP
Series. The Certificate of Designation states that MSP Series (defined therein as the
“Company”) “has the right and authority to seek reimbursement of Medicare payments in respect
of any such assigned claims, whether in the name of the Series or the Company” and “maintains
the legal right to sue on behalf of the Series”. Certificate of Designation [19-2], p. 2, ¶ 1; see
also Amended Complaint [19], ¶¶ 53-54.
The Series Assignment is not attached to the Amended Complaint. However,
plaintiffs allege that in it, MSP Recovery assigned to Series 16-08-483 “any and all of Assignor’s
right, title, ownership and interest in and to the ‘Assigned Claims’, ‘Claims’, ‘Assigned
Assets’[,] ‘Assigned Medicare Recovery Claims’, and ‘Assigned Documents’ (and all proceeds
and products thereof) as such terms may be defined in the March 20, 2018 Assignment
Agreement.” Amended Complaint [19], ¶ 30. The Amended Complaint further alleges that
defendants are primary plans pursuant to the MSPA, 42 U.S.C. § 1395y(b)(2)(A), and are
required, but failed, to reimburse HIPGNY for the payments that HIPGNY made for the
enumerated medical services provided to the exemplar Medicare beneficiaries, among others.
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See id. at ¶¶ 44, 72, 76. Plaintiffs allege that they suffered damages due to defendants’ failure to
reimburse HIPGNY, and claim they are entitled to double damages pursuant to 42 U.S.C. §
1395y(b)(3)(A). Id., ¶¶ 77, 80.
B. Defendants’ Motion to Dismiss
Defendants argue that dismissal is appropriate pursuant to Rule 12(b)(1) because
plaintiffs lack standing to sue. Specifically, they assert that the Assignment is invalid because it
fails to identify which claims are included in the Assigned Medicare Recovery Claims described
therein and which are excluded. Defendants’ Memorandum of Law [37-3], pp. 12-14. In
addition, they argue that plaintiff MSP Series lacks standing because it is not a named assignee
and cannot, as a matter of Delaware law, assert standing on behalf of one of its series. Id., pp.
14-16.
Plaintiffs respond that the Amended Complaint [19] and the contracts attached
both to it and to their Memorandum of Law opposing defendants’ motion to dismiss [47]
demonstrate their standing as an assignee of HIPGNY’s MSPA claims, including those of the
exemplar beneficiaries outlined in the Amended Complaint. Plaintiffs’ Memorandum of Law
[47], pp. 6-11. Further, plaintiffs argue that MSP Series has standing because Series 16-08-483
is not an entity independent of MSP Series, and that MSP Series retained in its operating
agreement the right to sue, in its own name, to enforce the rights that Series 16-08-483 received
in the Assignment. Id., pp. 6-14; see also Amended Complaint [19], ¶¶ 53-56.
In reply, defendants argue that plaintiffs failed to cure the deficiencies noted in
their moving papers. Neither the unauthenticated Series Assignment plaintiffs attached to their
memorandum, nor the inferences plaintiffs ask the court to draw from the allegations in the
Amended Complaint, satisfy plaintiffs’ burden to demonstrate that the plaintiffs have standing
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and that the court has subject matter jurisdiction. Reply Memorandum of Law [48], pp. 1-2.
Defendants argue further that Delaware law concerning series LLCs demonstrates that the
“parent” of a series LLC does not have standing to sue on behalf of its series. Id., pp. 3-4.
C. Plaintiffs’ Evidentiary Submissions to Support Standing
Following oral argument, and given the plaintiffs’ burden to demonstrate
standing, I ordered plaintiffs to “make an evidentiary showing of their standing to pursue this
action by demonstrating through affidavit(s) (or declaration(s)) that they were assigned the
representative claims of R.A., J.O., and K.Y. as set forth in the Amended Complaint [19], and
authenticating the relevant assignments and related agreements”. Text Order [57]. In response,
plaintiffs filed a declaration of Carlos Manalansan [58-1] (the “Manalansan Declaration”), Vice
President and Deputy General Counsel of EmblemHealth; and affidavits of Jorge Lopez [58-2]
(the “Lopez Affidavit”), General Counsel for MSP Recovery and plaintiffs’ corporate
representative, and Christopher Miranda, Jr. [58-3] (the “Miranda Affidavit”), a health care data
analyst for MSP Recovery.
Mr. Manalansan is the Vice President and Deputy General Counsel of
EmblemHealth. Manalansan Affidavit [58-1], ¶ 2. HIPGNY is EmblemHealth’s subsidiary. Id.
¶ 3. In that capacity, he is familiar with HIPGNY’s contracts and has personal knowledge of the
assignments that HIPGNY made concerning claims arising under the MSPA. Id. ¶ 4. He
confirmed that HIPGNY assigned certain of its Medicare recovery claims for services rendered
between September 29, 2011 and September 29, 2017 to Series 16-08-483 pursuant to the
Assignment, and attached a copy to his declaration. Id. ¶6. Based upon his review of the
Amended Complaint and the information from The Rawlings Group, he stated that “the only
entities to which HIPGNY has ever assigned the R.A., J.O., and K.Y. claims are Series 16-08-
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483 and MSP Recovery LLC”, and that “no other person, entity, or recovery vendor – including
The Rawlings Group – has the legal right to pursue the R.A., J.O., and K.Y. claims against
Merchants on behalf of HIPGNY”. Id. ¶¶ 13-14.
Jorge Lopez is the General Counsel for MSP Recovery, the designated servicing
agent of MSP Series and Series 16-08-483, and a “corporate representative” of MSP Series and
Series 16-08-483. Lopez Affidavit [58-2], ¶¶2-3. In that capacity, he is familiar with MSP
Recovery’s business records, including the business records of MSP Series and Series 16-08-
483. Id. at ¶ 5. He confirmed that MSP Recovery’s business records include the Assignment
and a March 27, 2018 Amended and Restated Limited Liability Company Operating Agreement
for MSP Series (“Operating Agreement”), and attached a copy of these documents, among
others, to his affidavit. Id. at ¶¶ 6.A., 6.E, Exhibits A, and E. MSP Series’ Operating Agreement
permits MSP Series to “establish any number of designated series of members, managers, Series
Interests of assets (‘Series’)”, but reserves to MSP Series “the legal right to sue on behalf of each
Series and be entitled to pursue any and all rights, benefits, and causes of action arising from
assignments to a Series” and to “seek reimbursement of Medicare payments made by assignors”
“in its own name, or in the name of the Series”. Id. at ¶ 14; see also id., Operating Agreement
[58-2], pp. 32-33 of 58 (CM/ECF pagination), ¶¶ 3.1 (a) and (d). Series 16-08-483 is one of the
series created by the Operating Agreement. Id., Operating Agreement [58-2], pp. 32-33, 49 of
58 (CM/ECF pagination), ¶ 3.1 (a).
Christopher Miranda, Jr. is a licensed attorney employed by MSP Recovery,
plaintiffs’ servicing agent, as a health care data analyst. Miranda Affidavit [58-3], ¶¶ 3-4. He is
the custodian of MSP Recovery’s business records, and has personal knowledge of the data
collected and stored in MSP Recovery’s software system, including records from HIPGNY
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related to Medicare beneficiaries. Id. at ¶¶5-710. The claims data HIPGNY provided to MSP
Recovery “include[d] lists of those claims that are ‘carved-out,’ due to having already been
recovered or otherwise”. Id. at ¶ 16. He confirmed that plaintiffs “reviewed all carve-out lists
provided by HIPGNY” and that “R.A., J.O., and K.Y.’s claims are not included on
HIPGNY’s carve-out lists”. Id. at ¶ 21 (emphasis in original).
DISCUSSION
A. Standard Governing a Motion to Dismiss
To survive a defendant’s Rule 12(b)(1) motion to dismiss, a plaintiff “must allege
facts that affirmatively and plausibly suggest that it has standing to sue”. Amidax Trading Group
v. S.W.I.F.T. SCRL, 671 F.3d 140, 145 (2d Cir. 2011). “Because the judicial power of the
United States extends only to the resolution of cases and controversies, U.S. Const. art III, § 2,
courts have always required that a litigant have ‘standing’ to challenge the action sought to be
adjudicated.” 	Jackson-Bey v. Hanslmaeir, 115 F.3d 1091, 1095 (2d Cir. 1997) (citing Arizonans
for Official English v. Arizona, 520 U.S. 43, 64 (1997)). “The party invoking federal
jurisdiction bears the burden of establishing [the elements of standing].” Lujan v. Defenders of
Wildlife, 504 U.S. 555, 561 (1992).
Courts consider three elements to determine whether a plaintiff has met its burden
to prove it has standing:
“[T]o satisfy Article III’s standing requirements, a plaintiff must
show (1) it has suffered an ‘injury in fact’ that is (a) concrete and
particularized and (b) actual or imminent, not conjectural or
hypothetical; (2) the injury is fairly traceable to the challenged
action of the defendant; and 3) it is likely, as opposed to merely
speculative, that the injury will be redressed by a favorable
decision.”
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Friends of the Earth, Incorporated v. Laidlaw Environmental Services (TOC), Inc., 528 U.S.
167, 180-81 (2000) (citing Lujan, 504 U.S. at 560-61). “[A]n assignee of a claim has standing to
assert the injury in fact suffered by the assignor.” Vermont Agency of Natural Resources v.
United States ex rel. Stevens, 529 U.S. 765, 774 (2000).
“A plaintiff asserting subject matter jurisdiction has the burden of proving by a
preponderance of the evidence that it exists. . . . [J]urisdiction must be shown affirmatively, and
that showing is not made by drawing from the pleadings inferences favorable to the party
asserting it”. Morrison v. National Australia Bank Ltd., 547 F.3d 167, 170 (2d Cir. 2008)
(internal citations and quotations omitted). To the extent that a defendant’s motion places
jurisdictional facts in dispute, the court may consider evidence outside the pleadings. See
Amidax Trading, 671 F.3d at 145. By contrast, when a defendant makes a facial challenge to
standing, courts are limited to consideration of the allegations of the complaint, and any
documents either incorporated by reference into, or attached as exhibits to, the complaint. MSP
Recovery Claims, Series LLC v. New York Central Mutual Fires Insurance Co., 2019 WL
4222654, *2 n.2 (N.D.N.Y. 2019). Here, given defendants’ papers and the parties’ oral
arguments, I ordered plaintiffs to submit evidence in admissible form to demonstrate their
entitlement to standing. Accordingly, I treat defendants’ motion as a factual challenge.
B. The Medicare Secondary Payer Act
Originally effective in 1980, and subsequently amended, the MSPA prohibits
Medicare, including Medicare Advantage Organizations, from paying for covered medical items
or services where a primary payer exists. 42 U.S.C. § 1395y(b)(2)(A)(ii). In essence, the MSPA
makes Medicare coverage secondary to other sources of coverage for medical expenses. Primary
payers include group health plans, liability insurance policies, and no-fault insurance, among
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others. 42 U.S.C. § 1395y(b)(2)(A). However, Medicare is permitted to make a conditional
payment for covered items or services if the primary plan “has not made or cannot reasonably be
expected to make payment . . . promptly”. 42 U.S.C. § 1395y(b)(2)(B)(i). Such payments are
“conditioned on reimbursement” in accordance with other provision of the MSPA. Id. A
primary plan “shall reimburse” Medicare “if it is demonstrated that such primary plan has or had
a responsibility to make payment” for the item or service. 42 U.S.C. 1395y(b)(2)(B)(ii). The
MSPA includes enforcement provisions in favor to the United States and others:
“In order to recover payment made under this subchapter for an
item or service, the United States may bring an action against any
or all entities that are or were required or responsible . . . to make
payment with respect to the same item or service (or any portion
thereof) under a primary plan.”
42 U.S.C. § 1395y(b)(2)(B)(iii).
“There is established a private cause of action for damages (which
shall be in an amount double the amount otherwise provided) in
the case of a primary plan which fails to provide for primary
payment (or appropriate reimbursement) in accordance with
paragraphs (1) and (2)(A).”
42 U.S.C. § 1395y(b)(3)(A). MAOs, and therefore their assignees, are entitled to seek
reimbursement for conditional payments pursuant to the MSPA’s private right of action.
Humana Medical Plan, Inc. v. Western Heritage Insurance Co., 832 F.3d 1229, 1238 (11th Cir.
2016); MSP Recovery Claims Series LLC v. Ace American Insurance, 974 F.3d 1305, 1316
(11th Cir. 2020).
C. Did Plaintiffs Demonstrate Standing?
MSP Recovery Claims, Series LLC v. New York Central Mutual Fire Insurance
Company, 2019 WL 4222654 (N.D.N.Y. 2019) and MSP Recovery Claims, Series LLC, v.
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Technology Insurance Company, 2020 WL 91540 (S.D.N.Y. 2020) involved the same plaintiffs,
and similar issues and arguments. The Second Circuit has not yet, so far as I am aware,
addressed these issues. Without Second Circuit authority to guide my analysis, and
notwithstanding that both of these cases involved a facial, rather than a factual, challenge to
plaintiffs’ standing, I find the analysis of both cases persuasive and begin my analysis there.
The court’s analysis in New York Central Mutual highlights the potential
deficiencies in the Amended Complaint that plaintiffs’ supplemental evidentiary submissions
may satisfy. 	There, the court considered a motion to dismiss an action brought by the same
plaintiffs against a different insurance company. The complaint, assignment agreements, facts,
and arguments both for and against defendants’ motion to dismiss were similar to those here.
The court held that plaintiffs failed to properly allege that they were assigned the right to sue
based upon the exemplar claim (R.L.) included in that complaint. Id. at *5. First, plaintiffs
failed “to actually allege whether R.L.’s claim was included in the assignment agreement.
Although the complaint broadly asserted that HIPGNY assigned “all rights to recover conditional
payments” to MSP Recovery and to Series 16-08-483, the assignment agreement demonstrated
that it assigned “only the Assigned Medicare Recovery Claims, and excluded the Assignor
Retained Claims from the assignment”. Id. at *5. The court found this deficiency fatal to
plaintiffs’ claims:
“There is nothing in the record to show whether the R.L. claim is
one of the ‘Assigned Medicare Recovery Claims’ or one of the
‘Assignor Retained Claims.’ Thus, the Court agrees with
Defendant that ‘[t]here is no way to identify whether the R.L.
claim – the exemplar claim here – has been assigned.’ . . . That
ambiguity is fatal to Plaintiff’s claim that they have standing and
the case must be dismissed for lack of jurisdiction.
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Id. at *6. The court noted further that MSP Series is not a party to any of the alleged assignment
agreements:
“Nothing in the Complaint or its Exhibits suggests that MSP
Recovery Claims, Series LLC received HIPGNY’s right to sue
under the MSPA. To the extent that Plaintiffs are arguing that
MSP Recovery Claims, Series LLC has standing to sue because
Series 16-08-483 is its Series, such an argument is an abuse of
corporate form and has been rejected by another court considering
these claims.”
Id., citing MSP Recovery Claims, Series LLC v. USAA General Indemnity Co., 2018 WL
5112998, *12 (S.D. Fla. 2018) (citing Delaware case law to demonstrate that a series entity is
similar to a corporation with subsidiaries, and parent corporations lack standing to sue on behalf
of their subsidiaries, but refusing to consider the corporate documents attached to plaintiff’s
opposing papers because defendants’ attach to standing was facial, rather than factual, and the
documents were not referenced in, or attached to, the complaint).
Plaintiffs’ evidentiary submissions address at least some of the deficiencies that
the court identified in New York Central Mutual, and that defendants raise here. I address them
in turn.
1. 	Is MSP Series a Proper Party?
I address first whether plaintiff MSP Series is a proper party.2 Defendants seek
dismissal as to MSP Series, arguing that it lacks standing and is not a proper party for two
reasons: 1) it was not a named assignee in the Assignment; and 2) the “parent” LLC of a series
LLC does not, pursuant to Delaware law, retain the right to sue on behalf of its series.
Defendants’ Memorandum of Law [37-3], pp. 14-16. I find that plaintiffs’ evidentiary
2 Defendants do not contest that Series 16-08-483 is a proper party pursuant to the Assignment.
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submission satisfies their burden to demonstrate that MSP Series is a proper party because it
retained in its Operating Agreement the right to sue on behalf its series, including Series 16-08-
483.
I agree with defendants that MSP Series is not a named assignee in any of the
assignment agreements before the court. However, that is not the end of the analysis.
Both parties make arguments concerning the ability of Series 16-08-483 to sue and be sued based
upon the version of 6 Delaware Code, section 18-215 in effect at the time.3 Delaware law
permits a limited liability company to establish any number of “series”:
“A limited liability company agreement may establish or provide
for the establishment of 1 or more designated series of . . . limited
liability company interests or assets. Any such series may have
separate rights, powers or duties with respect to specified property
or obligations of the limited liability company or profits and losses
associated with specified property or obligations, and any such
series may have a separate business purpose or investment
objective.”
6 Del. C. § 18-215 (a) (effective August 2, 2016 to July 13, 2019). Subsection (b) permits
further limitation of liability, provided that specific provisions are incorporated into the parent
LLC’s operating agreement and in the certificate of formation of the series LLC, and the way the
records of the company account for the assets of each series. 6. Del. C. § 18-215 (b) (effective
August 2, 2016 to July 13, 2019). Subsection (c) provides that, “[u]nless otherwise provided in a
limited liability company agreement, a series established in accordance with subsection (b) of
this section shall have the power and capacity to, in its own name . . . sue and be sued”. 6. Del.
C. § 18-215 (c) (effective August 2, 2016 to July 13, 2019). Plaintiffs submitted MSP Series’
3 6 Del. C. § 18-215 was amended, effective August 1, 2019. The version of the statute relied upon by the
parties in their briefing was in effect from August 1, 2016 and July 31, 2019. Plaintiffs filed this action
on September 4, 2018. See Complaint [1].
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Amended and Restated Limited Liability Company Operating Agreement (“Operating
Agreement”) as an exhibit to the Lopez Affidavit. Lopez Affidavit [58-2], Exhibit E, pp. 25 to
52 of 58 (CM/ECF pagination). Mr. Lopez certified that the Operating Agreement is a business
record of MSP Recovery, which includes the records of MSP Series and Series 16-08-483. Id. at
2, ¶¶ 5-6. The Operating Agreement provides for the creation of “any number of designated
series” in accordance with 6 Del. C. §18-215, including Series 16-08-483. Id., pp. 32-33, 49 of
58 (CM/ECF pagination). Seemingly in accordance with 6 Del. C. §18-215(b), the Operating
Agreement provides that MSP Series (defined as the “Company”):
“will maintain records for any such Series and account for the
assets associated with such Series separately for the assets of the
Company or any other Series in accordance with the Act. The
debts, liabilities and obligations incurred, contracted for or
otherwise existing with respect to a particular Series will be
enforceable against the assets of such Series only, and not against
the assets of the Company generally or any other Series”.
Id., p. 33 of 58 (CM/ECF pagination). However, with respect to Series 16-08-483’s right to sue,
the Operating Agreement provides that:
“[T]he Company will own and control any and all Series as
provided for in this Agreement. Accordingly, (i) the Company will
maintain the legal right to sue on behalf of each Series and be
entitled to pursue any and all rights, benefits, and causes of action
arising from assignments to a Series, and (ii) the Company may in
its own name, or in the name of the Series, seek reimbursement of
Medicare payments made by assignors. Any claim or suit capable
of being asserted or brough by a Series may be brought by the
Company in its own name or it may elect to bring suit in the name
of the designated Series.”
Id.
Plaintiffs claim that paragraphs 53 through 56 of the Amended Complaint
“specify” that Series 16-08-483 “does not satisfy the conditions of § 18-215(b) and thereby is
merely a subset of [MSP Series], rather than an “independent entity”. Plaintiffs’ Memorandum
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of Law [47], p. 12. Citing MSP Recovery Claims, Series LLC v. Farmers Insurance Exchange,
2018 SL 5086623 (C.D. Cal. 2018), plaintiffs urge this court to focus on the language of the LLC
agreement. Plaintiffs’ Memorandum of Law [47], p. 13. Defendants, citing USAA General,
supra, and Hartsel v. Vanguard Group, Inc., 2011 WL 2421003 (Del. Ch. 2011) urge this court to
interpret plaintiffs’ allegations as “an abuse of corporate form” that “confuse the issue of
standing” because Series 16-08-483 is a separate entity that can sue in its own name.
Defendants’ Memorandum of Law [37-3], p. 15; Reply Memorandum of Law [48], pp. 8-9.
Although I am unaware of any Delaware case analyzing whether a “parent” of a
series has standing to sue on behalf of its series, other courts considering this issue as part of
both facial and factual challenges focus on the terms of the LLC’s operating agreement. For
example, Farmers, supra, involved plaintiff MSP Series attempting to sue on behalf of Series 16-
08-483, among others. There, as here, plaintiffs alleged in their complaint that MSP Series
maintained the legal right to sue on behalf of its designated series LLCs through its LLC
agreement. Id. at *13. Although the LLC agreement was not attached to the complaint,
plaintiffs there attached MSP Series’ amended LLC agreement to their papers opposing
defendants’ motion to dismiss. The court considered the terms of the amendment to MSP Series’
operating agreement and found it sufficient to demonstrate MSP Series’ standing:
“In opposition to the instant motions, plaintiffs have also attached
an amendment to MSP Recovery Claims, Series LLC’s operating
agreement, which provides in pertinent part that ‘the Company is
authorized to pursue or assert any claim or suit capable of being
asserted by any designated series arising from, or by virtue of, an
assignment to a designated series.’”
Id. at *13. Treating the submission as a Rule 15(d) supplemental pleading, the Farmers court
found the agreement was “sufficient to demonstrate plaintiff’s standing to assert claims on behalf
of its series assignees”. Id. at *14.
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The court in USAA General, cited by defendants, reached an opposite conclusion,
but applied the same principles. There, plaintiffs’ complaint did not contain allegations
explaining how MSP Series could sue on behalf of its series. Although plaintiff there attached
its limited liability and other agreements to its opposition papers, the court determined it was not
permitted to consider them. The plaintiffs did not reference the agreements in their complaint
and, because defendants had mounted a facial attack to plaintiffs’ standing, the court was limited
to the allegations in the complaint to determine whether plaintiff had standing. USAA General,
2018 WL 5113995 at *12. Left with nothing to the contrary, the court applied the general
principle that “[a] ‘series’ entity is similar to a corporation with subsidiaries . . . and parent
corporations lack standing to sue on behalf of their subsidiaries”. Id.
Here, in contrast to the motion the court considered in USAA General, defendants
assert a factual challenge to standing and a complaint that includes allegations concerning the
terms of MSP Series’ operating agreement. Accordingly, I agree with plaintiffs that the correct
approach here is to refer to the Operating Agreement, submitted here in evidentiary form. See
R&R Capital, LLC v. Buck & Doe Run Valley Farms, LLC, 2008 WL 3846319, *4 (Del. Ch.
2008) (noting that Delaware’s LLC Act “explicitly provides that it is the policy of this chapter to
give the maximum effect to the principle of freedom of contract and to the enforceability of
limited liability company agreements” (internal alterations omitted)). Although the parties here
appear to disagree under which subsection of 6 Del. C. § 18-215 Series 16-08-483 was formed, I
find that the Operating Agreement is controlling, regardless of which subsection applies.
Subsection (a) provides that “[a] limited liability company agreement may establish . . . 1 or
more designated series of . . . limited liability company interests or assets”. Id. Subsection (a)
provides that a series “may” (but not “must” or “shall”), have “separate rights, powers or duties”
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with respect to certain property of the LLC. Id. (emphasis added). Subsection (c) provides that
series established pursuant to subsection (b) “shall” have the power to sue, “[u]nless otherwise
provided in a limited liability company agreement”. Id. (emphasis added). Neither subsection
prohibits the ability of a limited liability company to retain the right to sue on behalf of its series.
Here, the Operating Agreement explicitly reserves to MSP Series “the legal right
to sue on behalf of each Series” and to “seek reimbursement of Medicare payments made by
assignors” “in its own name, or in the name of the Series”. Operating Agreement [58-2], p. 33 of
58 (CM/ECF pagination). Accordingly, plaintiffs here remedied with their supplemental
submission the deficiency identified by the court in New York Central Mutual, supra, and I find
that MSP Series is a proper plaintiff in this action and has standing to assert the rights, if any,
assigned to Series 16-08-493 in the Assignment.
2. 	Does the Record Demonstrate that the Exemplar Claims were Assigned or
Retained?
Next, I consider defendants’ arguments related to whether the plaintiffs satisfy the
“injury in fact” requirement with respect to the exemplar claims. Defendants focus on the
language of the Assignment, arguing that plaintiffs cannot demonstrate an injury in fact because
the language of the assignment is too vague to enable a reader to ascertain whether the exemplar
claims, or any others, were assigned. Defendants’ Memorandum of Law [37], pp. 12-14; Reply
Memorandum of Law [48], pp. 1-3. Defendants’ arguments implicate two issues, addressed in
turn below: 1) whether the assignments are facially invalid; and 2) whether plaintiffs satisfied
their burden to affirmatively demonstrate the exemplar claims are included in the assigned
claims. As explained below, I find the assignments are not facially invalid. However, I
recommend that the court grant defendants’ motion, without prejudice, because plaintiffs have
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failed to satisfy their burden to demonstrate the exemplar claims were included in the assigned
claims.
a. 	Is the Assignment Invalid?
I reject defendants’ argument that the Assignment is invalid because the
document itself does not permit the identification of either assigned or retained claims without
reference to materials outside the assignment itself. Defendants’ Memorandum of Law [37-3] ,
pp. 12-14; Reply Memorandum of Law [48], pp. 1-3. 	Defendants have not cited any case that
demonstrates - or even suggests - that the language of the Assignment is so vague as to void the
agreement. Defendants cite Hyde & Hyde, Incorporated v. Mount Franklin Foods, 523 Fed.
Appx. 301 (5th Cir. 2013) to support the general proposition that “[b]road pronouncements do
not describe the assignment of claims ‘with such particularity as to render [them] capable of
identification’”. Id. at 306 (quoting Schoonmaker v. Lawrence Brunoli, Inc., 828 A.2d 64, 79
(Conn. 2003)); see Defendants’ Memorandum of Law [37], p. 13. Hyde & Hyde involved a
settlement agreement concerning an equipment lease that assigned to appellants “all of [GE
Capital’s] rights and interests, if any, in the Equipment”. Id., 523 Fed.Appx. at 302. There, the
issue was whether that sentence effectively assigned to the appellant GE Capital’s tort claim for
conversion of the equipment. Finding that it did not, the court reasoned:
“The agreement itself makes no reference at all to conveying GE
Capital’s claims. . . . 	It is not enough that the language of an
assignment conceptually encompass whatever claim is at issue.
Rather, Connecticut law requires specificity.”
Id. at 306. This argument has been considered, and likewise rejected, by other courts
considering similar assignments:
“[B]y its plain language, the agreement demonstrates a clear intent
to assign MSPA claims arising between January 2009 and May
2017. The parties will be able to more specifically define, through
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discovery, the exact universe of claims that Plaintiffs believe may
fall within the purview of the assignment. If Plaintiffs are unable
to do so, Defendant may, of course, revisit this issue at later stages
in the proceedings.”
MSP Recovery Claims, Series LLC v. The Phoenix Insurance Company, 426 F.Supp.3d 458, 477
(N.D. Ohio 2019). See also MSP Recovery Claims, Series LLC v. Grange Insurance Company,
2019 WL 6770729, *11 (N.D. Ohio 2019) (“the Court rejects Defendant’s argument that the
Recovery Agreement is not a ‘true assignment’ because it fails to specifically identify individual
claims and/or Medicare beneficiaries. Defendant cites no legal authority for the proposition that
this level of specificity is required in the assignment itself” (emphasis in original)). Here, the
Assignment specifically identifies, defines, and assigns to nonparty MSP Recovery and to Series
16-08-483 its right to pursue claims arising under the MSPA:
Assignor hereby irrevocably assigns, transfers, conveys, sets over
and delivers to Assignee, and any of its successors and assigns, any
and all of Assignor’s right, title, ownership and interest in and to
all Assigned Medicare Recovery Claims, whether based in
contract, tort, statutory right, and any and all rights (including, but
not limited to, subrogation) to pursue and/or recover monies that
Assignor had, may have had, or has asserted against any party in
connection with the Assigned Medicare Recovery Claims and all
rights and claims against primary payers and/or, subject to the
definition of Assigned Medicare Recovery Claims, third parties
that may be liable to Assignor arising from or relating to the
Assigned Medicare Recovery Claims, including claims under
consumer protection statutes and laws, and all information relating
thereto, as may be applicable.
Assignment [58-1], p. 7 of 18 (CM/ECF pagination), ¶ 2.b.
The remaining cases that defendants cite in support of this point ([37-3], pp. 13-
14) do not discuss the language of the Assignment that excludes certain retained claims from the
definition of “Assigned Medicare Recovery Claims”. Rather, the cases cited by defendants
relate to assignments that were found ineffective because the assignor, an entity named Health
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First Administrative Plans or “HFAP”, did not actually own the assigned MSP claims. HFAP
administered MAO benefits on behalf of a related entity named Health First Health Plans, Inc.,
or “HFHP”, which actually owned the MSP claims. Courts in those cases discussed the
plaintiffs’ efforts to rectify that error, nunc pro tunc, with other, additional agreements signed
after those lawsuits were commenced, but purporting to have earlier effective dates. Here, we do
not have an issue similar to the HFAP vs. HFHP issue or a belated attempt to rectify such an
error. Defendants do not dispute that HIPGNY was able to assign its rights to pursue its claims
under the MSPA.
Further, many of the cases cited by defendants in this section of their
Memorandum have since been reversed, distinguished, or vacated in relevant part by the Court of
Appeals. For example, the Eleventh Circuit distinguished USAA General, supra, relied upon by
defendants, in MSP Recovery Claims, Series LLC v. QBE Holdings, Inc., 965 F.3d 1210, 1219
(11th Cir. 2020) (“[i]t thus makes sense that the USAA court limited its examination of the Nunc
Pro Tunc Assignment to the document’s value as parol evidence, whereas a court faced with a
complaint filed after this document was executed could consider it for its substance”). The
Seventh Circuit in MAO-MSO Recovery II, LLC v. State Farm Mutual Auto Insurance Co., 935
F.3d 573 (7th Cir. 2019) reversed the District Court’s imposition of sanctions, and its dismissal
of the case with prejudice (2018 WL 2732106). See State Farm Mutual, 935 F.3d at 584 (“[w]e
are hard-pressed to see any indication of intentional misrepresentation in this confused and
confusing record . . . Without knowledge of the HFAP/Health First Health distinction, most of
the supposed misrepresentations in the earlier filings regarding HFAP’s status as a [MAO] or as
the payer of R.Y.’s medical bills look more like honest mistakes”). Both MSP Recovery Claims,
Series LLC v. Travelers Casualty and Surety Co., 2018 WL 3599360 (S.D. Fla. 2018) and MSP
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Recovery Claims, Series LLC v. Auto-Owners Insurance Co., 2018 WL 1953861 (S.D. Fla.
2018), cited by defendants ([37-3], p.14) likewise involved the HFAP assignment. In both cases,
the Eleventh Circuit affirmed the District Court’s dismissal of plaintiffs’ claims, but modified
them to be without prejudice.
Accordingly, I find that the Assignment here is valid.
b. 	Did Plaintiffs Satisfy Their Burden to Demonstrate the Exemplar
Claims were Included in the Assigned Claims?
Next, I consider whether plaintiffs’ submissions affirmatively established that the
exemplar claims identified in the complaint were included in the Assigned Claims. The
Assignment excludes from the Assigned Claims certain Assignor Retained Claims. Although
plaintiffs’ submissions demonstrate that the exemplar claims were not excluded from the
Assigned Claims, I find that the plaintiffs’ submissions nonetheless fail to satisfy their
evidentiary burden. Neither the Amended Complaint nor the supplementary evidentiary
submissions state the date upon which HIPGNY paid for the medical services allegedly provided
to the exemplar beneficiaries.
First, the Assignment at issue here, which is authenticated by both the
Manalansan Declaration and the Lopez Affidavit, contains assignment language identical to the
language the court considered in New York Central Mutual concerning which claims are
assigned and which are excluded from the assignment to Series 16-08-483 and nonparty MSP
Recovery:
“Assignor wishes to assign to Assignee all right, title, interest in
and ownership of Medicare Recovery Claims . . . excluding
Medicare Recovery Claims that, as of the Effective Date, have
been assigned to and/or are being pursued by other recovery
vendors, including, but not limited to, The Rawlings Group –
related to Medicare Health Care Services that were rendered and
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paid for by Assignor during the six (6) year period beginning
September 29, 2011 and ending September 29, 2017”.
Assignment [58-1], p. 6 of 18 (CM/ECF pagination). The Manalansan Affidavit affirmatively
asserts that: “Rawlings did not pursue claims relating to R.A., J.O., and K.Y. prior to the
Effective Date of the Assignment (March 20, 2018)”; “each of those claims is included among
the ‘Assigned Medicare Recovery Claims’ conveyed under the Assignment”; and “no other
person, entity, or recovery vendor – including The Rawlings Group – has the legal right to
pursue the R.A., J.O., and K.Y. claims against Merchants on behalf of HIPGNY”. Manalansan
Affidavit [58-1], p. 3, ¶¶ 11, 13, 14. Mr. Manalansan based his statements upon his knowledge
of HIPGNY’s contract agreements and his review of “information provided to HIPGNY by The
Rawlings Group”. Id., pp. 2-3, ¶¶4, 11.
These statements, made in evidentiary form, remedy the first deficiency identified
in New York Central Mutual, that the Amended Complaint fails to allege that the exemplar
claims were never assigned to The Rawlings Group or any other vendor, and, therefore, were not
excluded from the assignment for this reason. I find that the Manalansan Declaration satisfied
plaintiff’s burden to demonstrate that the R.A., J.O., and K.Y. claims were not previously
assigned and/or pursued by other recovery vendors.
Regardless of whether plaintiffs have any other claims against defendants
pursuant to the Assignment, plaintiffs’ evidentiary submissions establish, at the very least, that
the exemplar claims cited here were not excluded from the Assigned Medicare Recovery Claims
and retained by HIPGNY due to prior assignment to The Rawlings Group or another recovery
vendor.
The issue plaintiffs have failed to remedy with their evidentiary submissions,
however, is whether the claims were included in the Assigned Medicare Recovery Claims in the
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first instance. The Southern District of New York’s decision in Technology Insurance, supra,
highlights this issue. There, plaintiffs MSP Series and Series 16-08-483 made claims pursuant to
the MSPA similar to those alleged here. The assignment agreement under consideration there
assigned rights concerning “Medicare health care services that were rendered and paid for by
HIP during the six . . . year period beginning September 29, 2011 and ending September 29,
2017.” Id. at *2 (internal alterations omitted). Further, like the Assignment at issue here, that
assignment agreement also excluded claims that were “assigned to and/or are being pursued by
other recovery vendors”. Id. The defendants mounted a Rule 12(b)(1) facial challenge to
plaintiffs’ standing to sue. Id. at *1, *3. Specifically, defendants there argued that the
complaint did not “adequately allege facts sufficient to show that the claims asserted in the
complaint fall within the scope of that assignment”. The court agreed:
“The Complaint does not specify the date on which HIP paid for
any charges. . . . Without this information, the Court cannot assess
whether any of the representative claims actually fall within the
scope of the assignment, and therefore, whether Plaintiffs have
standing to sue. As a result, Plaintiffs’ claim is merely ‘conjectural
or hypothetical’ and not ‘concrete and particularized.’ Lujan, 504
U.S. at 560.”
Id. at *3. The court there also noted that plaintiffs there also failed to allege in their complaint
with respect to several of the exemplar claims “when an accident giving rise to the conditional
payments occurred” and “that the representative claims were never assigned to or are being
pursued by other recovery vendors”. Id. at *4.
Here, plaintiffs allege in their Amended Complaint the dates of the accidents or
injuries sustained by each of the exemplar beneficiaries, and the date of the medical services
allegedly provided to them. See Amended Complaint [19], ¶¶ 8, 9, 15, 16, 22, 23. Further, the
Amended Complaint alleges that HIPGNY paid for those services. Id., ¶¶ 10, 17, 24. It does
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not, however, state when HIPGNY paid for those expenses. See id. None of the exhibits
attached to the Amended Complaint appear to identify the date of HIPGNY’s payment. Without
this information, I cannot determine whether plaintiffs’ claims related to the exemplar
beneficiaries fall within the assigned claims, which the Assignment defines as those related to
medical services “that were rendered and paid for” by HIPGNY between September 29, 2011
and September 29, 2017. Assignment [58-1], p. 6 of 18 (CM/ECF pagination) (emphasis added).
Plaintiffs’ evidentiary submissions do not remedy this deficiency or satisfy their
burden to demonstrate standing. “A plaintiff asserting subject matter jurisdiction has the burden
of proving by a preponderance of the evidence that it exists . . . . [J]urisdiction must be shown
affirmatively, and that showing is not made by drawing from the pleadings inferences favorable
to the party asserting it”. Morrison v. National Australia Bank Ltd., 547 F.3d 167, 170 (2d Cir.
2008) (internal citations and quotations omitted).
Mr. Manalansan does not state in his declaration when HIPGNY paid for the
services identified in the exemplar claims. The Miranda Affidavit likewise fails to provide this
information. Mr. Miranda reviewed information in the MSP computer system concerning the
R.A, J.O., and K.Y. claims. Although Mr. Miranda states that R.A., J.O., and K.Y. were
“enrolled in an HMO Medicare Advantage plan operated by HIPGNY” (id. ¶ 15), he does not
state when HIPGNY paid for the services identified in the exemplar claims.
Accordingly, plaintiffs did not meet their burden to affirmatively demonstrate that
the exemplar claims were part of the Assigned Claims. Because plaintiffs have not met their
burden on this record, I recommend that the court dismiss plaintiff’s Amended Complaint. Such
a dismissal must be without prejudice. See Katz v. Donna Karan Company, L.L.C., 872 F.3d
114, 121 (2d Cir. 2017) (“where a case is dismissed for lack of Article III standing, as here, that
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disposition cannot be entered with prejudice, and instead must be dismissed without prejudice”)
(emphasis in original)). Further, I decline to consider defendants’ arguments under Rule
12(b)(6) because “without jurisdiction, the district court lacks the power to adjudicate the merits
of the case”. Carter v. HealthPort Technologies, LLC, 822 F.3d 47, 54-55 (2d Cir. 2016).
CONCLUSION
For these reasons, I recommend that defendants’ motion to dismiss for lack of
subject matter jurisdiction [37] be granted, without prejudice. Unless otherwise ordered by
District Judge Sinatra, any objections to this Report and Recommendation must be filed with the
clerk of this court by December 4, 2020. Any requests for extension of this deadline must be
made to Judge Sinatra. A party who “fails to object timely . . . waives any right to further
judicial review of [this] decision”. Wesolek v. Canadair Ltd., 838 F. 2d 55, 58 (2d Cir. 1988);
Thomas v. Arn, 474 U.S. 140, 155 (1985).
Moreover, the district judge will ordinarily refuse to consider de novo arguments,
case law and/or evidentiary material which could have been, but were not, presented to the
magistrate judge in the first instance. Patterson-Leitch Co. v. Massachusetts Municipal
Wholesale Electric Co., 840 F. 2d 985, 990-91 (1st Cir. 1988).
The parties are reminded that, pursuant to Rule 72(b) and (c) of this Court’s Local
Rules of Civil Procedure, written objections shall “specifically identify the portions of the
proposed findings and recommendations to which objection is made and the basis for each
objection . . . supported by legal authority”, and must include “a written statement either
certifying that the objections do not raise new legal/factual arguments, or identifying the new
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arguments and explaining why they were not raised to the Magistrate Judge”. Failure to comply
with these provisions may result in the district judge’s refusal to consider the objections.
Dated: November 20, 2020
____ 	_________
JEREMIAH J. MCCARTHY
United States Magistrate Judge
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