Litigation Funding Discovery from Secondary Payor Troll

If you’ve been practicing in mass torts for any length of time, you’ve probably dealt with MSP Recovery.  We’ve posted about this Medicare Secondary Payor Troll many times (most recently here).  One of MSP’s typical litigation approaches is to claim it has assignments of rights from certain Medicare Advantage Plans and then assert claims (usually in connection with existing MDLs) for reimbursement from drug and device manufacturers.  Today’s decision, MSP Recovery Claims Series, LLC v. Sanofi-Aventis U.S., LLC, 2024 WL 4100379 (D.N.J. Sept. 6, 2024), is a little different, in that MSP alleged that the defendants engaged in a pricing scheme to unlawfully raise the price of insulin. MSP sought recovery based on alleged assignments from 57 Medicare Advantage Plans that they contended made overpayments on behalf of the plans’ beneficiaries.  The decision addressed a discovery dispute where MSP refused to produce documents relating to (1) litigation funding, and (2) marketing materials aimed at its potential assignors. The Court affirmed a special master’s decision finding in favor of the defendants on both items.

As to litigation funding, plaintiffs initially took the position that they did not have to produce information in response to the District of New Jersey’s local rule requiring disclosure of certain litigation funding information (we’ve blogged about that local rule here). After losing a round with the special master, plaintiffs filed a certification stating that they had not received any litigation funding on a non-recourse basis. Despite that representation, the defendants argued that they were entitled to discovery on the topic because the websites of three entities involved with plaintiffs clearly indicated the entities’ core businesses were litigation funding and litigation finance.  Although plaintiffs asserted the entities were not litigation funders—despite all appearances otherwise—defendants sought to test that representation with discovery. The Court agreed with the defendants:

[Funding documents are] relevant in determining the real party in interest for this litigation and likewise are relevant to Defendants’ defenses of champerty and maintenance. Defendants have identified documents suggesting three entities—Virage Capital Management, RD Legal Finance, and Brickell Key Investments—have intimate involvement in Plaintiffs’ decision-making, and those entities’ websites indicate they are involved in litigation funding and/or litigation financing.

Id. at *6.  

Plaintiffs argued that their certification of no non-recourse funding should have shut down any discovery into litigation funding based on a decision in the Valsartan litigation holding that defendants must demonstrate good cause for litigation funding discovery—a decision that pre-dated the adoption of Local Rule 7.1.1.  In re: Valsartan NDMA Contamination Litigation, 405 F. Supp. 3d 612, 615 (D.N.J. 2019). But the Court noted that the Valsartan decision did not make litigation funding discovery “off limits.” Instead, the Valsartan court held that such discovery would be permissible if “good cause exists to show the discovery is relevant to claims and defenses in the case,” such as “where there is a sufficient showing that a non-party is making ultimate litigation or settlement decisions, the interests of plaintiffs or the class are sacrificed or not being protected, or conflicts of interest exist.” MSP Recovery Claims Series, 2024 WL 4100379 at *6.  The Court found that showing had been met:

Here, the Court finds good cause exists for Defendants to conduct limited discovery into litigation funding, particularly as it relates to the entities Virage Capital Management, RD Legal Finance, and/or Brickell Key Investments, to the extent any such documents exist, because Defendants have identified documents suggesting that these three entities have intimate involvement in Plaintiffs’ decision-making. Tellingly, Plaintiffs have not argued otherwise, nor have they argued that no such litigation funding documents exist.

Id.

With respect to marketing materials targeting potential assignors—which would seem to be integral to MSP’s business model and would expose how plaintiffs obtained the assignments that formed the bases of their claims—such documents would have been responsive to the defendants’ discovery requests but were absent from the productions.  MSP’s primary objections to production of these materials were that they were not relevant or captured by the agreed upon TAR (technology assisted review) ESI protocol. The Court rejected these arguments out of hand, finding that the materials were relevant and that the TAR protocol did not absolve the plaintiffs from producing responsive documents. 

The Court issued its decision granting the funding and marketing materials discovery from MSP on September 6, and the parties entered a stipulation of dismissal with prejudice of all claims on September 13. The defendants had a motion for sanctions pending, so it’s likely there were other factors impacting the dismissal. But the timing of the dismissal following the Court’s order requiring the production of marketing and litigation funding documentation is certainly worth noting.