Top MD court holds assignments to seek reimbursements aren’t against public policy

An assignment of the right to seek and receive unpaid reimbursements of payments for expenses pursuant to a contingency compensation arrangement is not void as against Maryland public policy, the state’s highest court held Friday in delivering an incremental win for secondary payer companies in a longstanding Medicare-related dispute against GEICO.

In a unanimous ruling written by Justice Jonathan Biran, the Maryland Supreme Court held that six secondary payer companies, including MAO-MSO Recovery II LLC, seeking to recover unpaid reimbursements for Medicare Advantage Organizations and other clients did not violate the state’s barratry statute by obtaining the right to bring suit against GEICO in their own names through the assignments of the secondary payers’ claims.

The high court made the ruling following the U.S. District Court for the District of Maryland tasking the justices with deciding three questions of law. In finding the secondary payer companies’ assignments were not void as against public policy, the high court did not reach the reformulated second part of the inquiry as to the enforceability of a contingency compensation arrangement.

The secondary payer companies brought the federal putative class action lawsuit against GEICO in 2017, alleging violations of the Medicare Secondary Payer statute and breach of contract relating to GEICO’s failure to pay the companies’ clients for conditional payments for medical services. GEICO argued the companies’ assignments are void as against Maryland’s public policy. The district court has not made a ruling on the companies’ motion to certify the class.

“Plaintiffs obtained assignments from secondary payers that allowed them to seek reimbursements allegedly owed to the secondary payers by primary payers like GEICO. While GEICO may prefer that Plaintiffs be prevented from pursuing these claims, Maryland public policy does not prevent sophisticated parties like Plaintiffs and the assignors from striking a bargain they both deem valuable,” Biran wrote, noting Maryland’s barratry statute does not prohibit all litigation-related solicitations for personal gain.

Timothy Maloney, counsel for MAO-MSO Recovery and the other secondary payer companies, said his clients and co-counsel are pleased with the high court’s decision.

“I think GEICO’s challenge was premised on the state of the law in the last century and certainly not on modern jurisprudence,” Maloney said in a phone call Wednesday. “GEICO relied upon barratry and maintenance, but those doctrines, as the [Maryland Supreme Court] pointed out, haven’t been really viable since the middle part of the 1800s.”

Counsel for GEICO declined to comment.

According to the high court, GEICO argued Maryland has a narrow, but fundamental, modern public policy against schemes to promote litigation for the benefit of the promoter rather than the benefit of the real party interest—a public policy, the company argued, that derives from the common law doctrines of maintenance, champerty and barratry.

“Maintenance,” the court wrote, is defined as helping another prosecute or defend a suit; “champerty” means maintaining a suit in exchange for a financial interest in the outcome; and “barratry” is the continuing practice of maintenance or champerty.

Maloney said his clients had hoped the high court would abolish these three doctrines, which they argued have been obsolete for centuries.

The justices agreed the doctrines “are teetering on obsolescence,” the court wrote, but declined to decide whether an agreement under different circumstances might raise public policy concerns that warrant judicial intervention.

“The application of these ancient doctrines to modern circumstances could invalidate a broad range of legitimate contracts, harming parties acting in good faith to meet mutual interests,” Biran wrote. “Some commentators have also argued that litigation financing, like the contingency fee, may increase access to justice for both individuals and organizations.”

The secondary payer companies are expected to continue to seek class certification in U.S. District Court for Maryland.