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Don’t look now, but things have gotten a bit weird for Third-Party Payor (TPP) lawsuits in the District of Minnesota. It all started way back in 2006: Judge James Rosenbaum, presiding over the Medtronic Implantable Defibrillators MDL, denied a motion to dismiss a bevy of state-law claims brought by TPPs, including the usual litany of “economic loss” claims (sounding in consumer fraud, warranty, and unjust enrichment), all of which related to the recall of Medtronic’s implantable defibrillators. Of course, law geeks like us didn’t know what to make of the decision, since Judge Rosenbaum denied this motion without comment.
Fast forward a year, and Judge Donovan Frank, presiding over the Guidant Implantable Defibrillators MDL, granted a motion to dismiss similar state-law claims brought by TPPs relating to the recall of Guidant’s implantable defibrillators. See In re: Guidant Corp. Implantable Defibrillators Prods. Liab. Litig., 484 F. Supp. 2d 973 (D. Minn. 2007). The court agreed with Guidant that the TPPs lacked standing to bring state-law economic-loss claims, because the TPPs’ insureds were the persons who suffered direct injury. In a “don’t-blink or you’ll miss it” footnote, the court acknowledged “that its colleague in the Medtronic MDL recently denied a motion to dismiss the third-party payer claims in that MDL on the basis of standing.” Id. at 983 n.5. But the Guidant court declined to follow this previous decision and instead ruled that dismissal was appropriate “on the record before the Court in this MDL.” Id.  Round two to the Guidant MDL, and a result that warmed the hearts (no pun intended) of defendants in TPP cases across the country.
But our story doesn’t end there. Just a few weeks ago, Judge Rosenbaum responded with round three in the TPP standing war. It seems that after the initial Medtronic decision way back in 2006, one TPP, the Kinetic Co., sued Medtronic on behalf of itself and a putative class of TPPs, seeking reimbursement of medical expenses resulting from the recall of the cardiac defibrillators.  Kinetic Co. v. Medtronic, Inc., 2009 U.S. Dist. LEXIS 112918 (D. Minn. Dec. 4, 2009). The case was consolidated into the Implantable Defibrillator MDL, but later dismissed without prejudice and refiled as a stand-alone class action. Medtronic moved to dismiss plaintiff’s state-law claims, which sounded in – you guessed it – consumer fraud, misrepresentation, warranty, and subrogation. In moving to dismiss these claims for lack of standing, guess which recent decision Medtronic cited? Yup, the Guidant MDL decision. And guess which decision Judge Rosenbaum blew off in denying Medtronic’s motion to dismiss? Yup, the Guidant MDL decision. To be fair, Judge Rosenbaum “acknowledge[d]” the Guidant decision – by simply citing it – and then, “with great respect to its colleague,” Judge Rosenbaum declined to follow Guidant. Instead, the court launched into a two-page riff, heavy on policy and light on caselaw, explaining why, in the court’s view, denying standing would be unfair.  In a nutshell:

because this Nation’s present health care regime almost always requires third-party payors to shoulder a significant portion of the employees’ costs of medical services. To deny this fact, and to extract legal conclusions from this denial, denies reality, and real financial injuries occurring in the real world.

Kinetic, 2009 U.S. Dist. LEXIS 112918, at *9.
Umm, ok – but isn’t any economic loss suffered by a TPP the result of its contractual obligations to its insureds, and derivative of (and far more indirect than) the more direct injury suffered by those insureds? And when a putative class of TPPs is allowed to run alongside a personal injury MDL and seek damages that seem at least partially duplicative of the damages sought by the individual plaintiffs in the MDL, aren’t you creating a big administrative headache, or otherwise running the risk of double recovery? The Kinetic court didn’t really address these concerns – instead, it seemed content to merely defend on policy grounds its earlier unexplained decision in the Medtronic MDL, and then trot out the old, flawed war-horses of TPP standing that are the familiar refrain of plaintiffs’ lawyers in this field – Desiano, Zyprexa, Marshfield Clinic, and K Dur (some of our favorite cases – can’t you tell?)
The Kinetic court also struggled to address a huge problem that vexes (or should vex) all TPPs seeking to recover these types of damages – causation. In the Guidant MDL, the court concluded that the TPPs failed to show a direct causal connection between Guidant’s alleged conduct and the alleged harm suffered by the TPPs. In a passage that is music to the ears of anyone who deals with TPP consumer fraud claims on a regular basis, the court found:

Here, the named TPP Plaintiffs’purported standing rests on the independent choices of the doctors who recommend the devices to their patients and on the patients who decide to receive the devices, in lieu of other treatment options….Without a more direct connection, these claims are too speculative to establish a causal link between the alleged injury and the alleged misconduct.

Guidant, 484 F. Supp. 2d at 984.
The Kinetic court, by contrast, found “[t]he alleged causative chain is not complicated.”  2009 U.S. Dist. LEXIS 112918, at *16. In reaching this conclusion, the Kinetic court sidestepped the intractable causation problems highlighted by Guidant even as it acknowledged that the decisions of insureds’ medical providers are, in fact, intervening decisions. Id.
There are a host of other inconsistencies between Kinetic and Guidant – not least of which is whether these are “Third-Party Payors” or “Third-Party Payers,” a problem which, we confess, confuses even us. In the end, though, round three of the TPP standing dispute leaves us feeling a bit cold. We’re concerned that the decision has made litigating TPP cases in the District of Minnesota more confusing – at least if you’re not before Judge Rosenbaum or Judge Frank.
And we’re also eagerly waiting to see if there will be a fourth round of the TPP standing war in the Land of 10,000 Lawsuits – as in the Eighth Circuit – to straighten out this mess.