United Seniors Ass'n, Inc. v. Philip Morris Usa, 06-2447.

• Decision Date: 20 August 2007
• Docket Number: No. 06-2447.,06-2447.
• Court: U.S. Court of Appeals — First Circuit
• Parties: UNITED SENIORS ASSOCIATION, INC., As a Private Attorney General, Plaintiff, Appellant, v. PHILIP MORRIS USA, R.J. Reynolds Tobacco Company, Brown & Williamson Tobacco Corporation, Individually and as the Successor to the American Tobacco Company, Lorillard Tobacco Company, and Liggett Group, Inc., Defendants, Appellees.

500 F.3d 19 UNITED SENIORS ASSOCIATION, INC., As a Private Attorney General, Plaintiff, Appellant,
v.
PHILIP MORRIS USA, R.J. Reynolds Tobacco Company, Brown & Williamson Tobacco Corporation, Individually and as the Successor to the American Tobacco Company, Lorillard Tobacco Company, and Liggett Group, Inc., Defendants, Appellees. No. 06-2447. United States Court of Appeals, First Circuit. Heard March 6, 2007. Decided August 20, 2007.

[500 F.3d 20]

Robert J. Cynkar, with whom Joseph R. Egan, Charles J. Fitzpatrick, Egan, Fitzpatrick, Malsch & Cynkar, PLLC, Christopher Weld, Jr., Kevin T. Peters, Raymond P. Ausrotas, Todd & Weld LLP, Jonathan W. Cuneo, Michael G. Lenett, and Cuneo, Gilbert & LaDuca, LLP, were on brief for appellant.

Richard B. Rosenthal, with whom Brian Stuart Kaukautchos was on brief for amicus.

Murray R. Garnick, with whom Arnold & Porter LLP, Robert A. McCarter III, Geoffrey J. Michael, Conn, Kavanaugh, Rosenthal, Peisch & Ford, LLP, Thomas E. Peisch, and Erin K. Higgins, were on brief for appellees.

Before BOUDIN, Chief Circuit Judge, CYR, Senior Circuit Judge, and HOWARD, Circuit Judge.

CYR, Senior Circuit Judge.

United Seniors Association, Inc. ("United Seniors"), a nonprofit taxpayer advocacy group, appeals from a district court judgment dismissing its claims pursuant to the Medicare Secondary Payer ("MSP") statute, 42 U.S.C. § 1395y(b)(3)(A), to force five tobacco companies to reimburse the federal Medicare program for the monies it has expended since 1999 for the medical treatment of persons suffering from smoking-related illnesses. The district court concluded that United Seniors could not file such a private § 1395y(b)(3)(A) cause of action for reimbursement before the tobacco companies' financial responsibility to pay for the Medicare beneficiaries' medical expenses had been determined by a judgment, compromise, waiver, or a release from the beneficiaries of their insurance claims against the companies, or some other comparable means. United Seniors Ass'n v. Philip Morris USA, No. 05-11623, 2006 WL 2471977, at *3-4 (D.Mass. Aug. 28,

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2006). We affirm the judgment of dismissal, albeit on another ground.

I BACKGROUND

A. The MSP Statute

Prior to 1980, Medicare generally paid for medical services whether or not the Medicare beneficiary also was covered by another health plan. See Fanning v. United States, 346 F.3d 386, 388 (3d Cir. 2003) (citing Social Security Amendments of 1965, Pub.L. No. 89-97, § 1862(b), 79 Stat. 286). The MSP statute, which was enacted in 1980 to reduce federal health care costs, makes Medicare the secondary payer for medical services provided to Medicare beneficiaries whenever payment is available from another primary payer. See United States v. R.I. Insurers' Insolvency Fund, 80 F.3d 616, 618 (1st Cir. 1996) (citing H.R.Rep. No. 96-1167, at 389 (1980), reprinted in 1980 U.S.C.C.A.N. 5526, 5752); see also Glover v. Liggett Group, Inc., 459 F.3d 1304, 1306-07 (11th Cir.2006).

To that end, the MSP statute prohibits Medicare from making any payment to a beneficiary for medical expenses if "payment has been made, or can reasonably be expected to be made promptly (as determined in accordance with regulations) under . . . an automobile or liability insurance policy or plan (including a self-insured plan) or under no-fault insurance." R.I. Insurers' Insolvency Fund, 80 F.3d at 618 (quoting 42 U.S.C. § 1395y(b)(2)(A)(i)). Should Medicare determine that the primary insurer has not paid and that no prompt payment reasonably can be expected from the primary insurer, however, Medicare may pay the beneficiary up front, but such payment is conditioned on Medicare's right to reimbursement in the event that a primary plan later pays or is found responsible for payment of the item or service. See id. (citing 42 U.S.C. § 1395y(b)(2)(B)).¹

To facilitate recovery of these conditional payments, the MSP (i) provides for a government action against any entity responsible for payment under a primary plan, 42 U.S.C. § 1395y(b)(2)(B)(iii);² (ii) subrogates the United States to the rights of a Medicare beneficiary to collect payment under a primary plan for items already

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paid by Medicare, § 1395y(b)(2)(B)(iv) ("The United States shall be subrogated (to the extent of payment made under this subchapter for such an item or service) to any right under this subsection of an individual or any other entity to payment with respect to such item or service under a primary plan."), and (iii) creates a private cause of action with double recovery to encourage private parties to bring actions to enforce Medicare's rights, § 1395y(b)(3)(A) ("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).").³ The present case implicates only the private cause of action provision.

B. United Seniors' Lawsuit

On August 4, 2005, United Seniors filed the instant action against five major tobacco companies in Massachusetts federal district court, demanding reimbursement for all smoking-related Medicare costs incurred since 1999,⁴ and also alleging that the tobacco companies were liable for the tort of battery. Plaintiff's complaint does not allege that any of its members are Medicare beneficiaries who were treated for smoking-related injuries, but simply invokes the private-cause-of-action provision set forth in § 1395y(b)(3)(A). Plaintiff contends that § 1395y(b)(3)(A) is available to any person who seeks to force a primary insurer to reimburse costs to Medicare, not only to affected Medicare beneficiaries.

Defendants moved to dismiss the complaint on three grounds: (i) United Seniors, which does not allege that any of its members were Medicare beneficiaries treated for smoking-related illnesses, possesses neither Article III nor statutory standing to maintain a § 1395y(b)(3)(A) reimbursement suit; (ii) United Seniors was in privity with the losing plaintiff in Glover, 459 F.3d at 1309; see supra note 4, and consequently is collaterally estopped from relitigating the defendants' reimbursement obligations to Medicare; and (iii) United Seniors failed to allege that defendants' financial responsibility for unreimbursed Medicare costs had been established previously by judgment, compromise, waiver, nor by a release from the beneficiaries of their insurance claims against the companies, nor by any other comparable means. On August 28, 2006, the district court dismissed the United Seniors complaint on the third ground alone, citing the rationale in Glover. United Seniors, 2006 WL 2471977, at *4.⁵

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II DISCUSSION

The defendants' Article III and statutory-standing argument, which calls into question our subject-matter jurisdiction, rests on Federal Rule of Civil Procedure 12(b)(1). The federal courts are required to determine whether Article III jurisdiction exists prior to proceeding to the merits of the case. See United States v. Union Bank for Sav. & Inv., 487 F.3d 8, 22 (1st Cir.2007) (citing Steel Co. v. Citizens for Better Env't, 523 U.S. 83, 94, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998)); see also Davignon v. Clemmey, 322 F.3d 1, 11 (1st Cir.2003) (holding that an appellate court remains free to bypass problematic jurisdictional issues provided those issues do not implicate the Article III "case or controversy" requirement); Dubois v. United States Dep't. of Agric., 102 F.3d 1273, 1281 (1st Cir.1996); accord In re Olympic Mills Corp., 477 F.3d 1, 6 (1st Cir.2007) (noting that "`we have an obligation to inquire sua sponte into our jurisdiction over the matter'") (citation omitted). We review de novo the district court's implicit legal conclusion that it had subject-matter jurisdiction to determine the merits of the complaint, see Baella-Silva v. Hulsey, 454 F.3d 5, 10 (1st Cir. 2006), and conclude that United Seniors lacks Article III standing.

Article III standing requirements "are expressed in a familiar three-part algorithm: a would-be plaintiff must demonstrate a concrete and particularized injury in fact, a causal connection that permits tracing the claimed injury to the defendant's actions, and a likelihood that prevailing in the action will afford some redress for the injury." Me. People's Alliance & Natural Res. Def. Council v. Mallinckrodt, Inc., 471 F.3d 277, 283 (1st Cir. 2006) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)). United Seniors, suing in its capacity as a nonprofit taxpayer advocacy group to vindicate the fiscal integrity of the Medicare program, utterly fails to meet this standard, in that it does not allege that it represents any particular Medicare beneficiary who received unreimbursed Medicare payments for treatment of smoking-related injuries. See id. (noting that an association has Article III standing only if its "individual members would have standing to sue in their own right"); Osediacz v. City of Cranston, 414 F.3d 136, 142 (1st Cir.2005) ("[W]ith certain narrow exceptions not implicated here, taxpayers, as such, lack generalized standing to challenge the constitutionality of governmental action.") (citing Frothingham v. Mellon, 262 U.S. 447, 487, 43 S.Ct. 597, 67 L.Ed. 1078 (1923)).

In order to overcome this fatal defect, United Seniors argues that Congress sought to create a qui tam action in §...