United States: Are RICO Claims Assignable? Maybe, Maybe Not

We often marvel at how plaintiffs' attorneys find new ways to sue businesses, including under RICO. Take for example the ever-increasing number of "MSP" plaintiffs that we are seeing in the published opinions. We see plaintiffs called MSP Recovery, MSPA Claims, MSP Series, MSP-MAO, etc., and we are told that many or all of them are affiliated with the same law firm. Regardless, they all grow out of the Medicare Secondary Payer Act (hence "MSP" in their names). Before the Medicare Secondary Payer Act was passed in 1980, Medicare often paid first and allowed private insurers to cover the balance, which inflated Medicare's costs. The Act reversed that and placed Medicare in the "secondary" payer position. The Act also created a private right of action for private parties to pursue reimbursement from primary payers. Medicare would get its cut, but the private plaintiffs could seek a double recovery and keep whatever was left over.

What does all this have to do with RICO? Well, the Act's private right of action incentivized plaintiffs' attorneys to gather claims from payers under the Medicare Advantage program, and then pursue reimbursement. They focused initially on the Medicare Secondary Payer Act's private right of action. They are, however, branching out—including to RICO and other statutory claims—with mixed success. See for example our posts here, here, and here.

A recent example of MSP entities branching out—and striking out—is MSP Recovery Claims, Series LLC v. Actelion Pharms. US, Inc., No. 22-cv-07604, 2023 WL 5725517 (N.D. Cal. Sept. 5, 2023). The plaintiffs purported to sue on behalf of third-party payers who made payments allegedly as the result of a purported kickback program. The plaintiffs also purported to hold valid assignments of claims from the third-party payers. But these were not private actions under the Medicare Secondary Payer Act. Instead, the plaintiffs asserted claims under RICO and the consumer statutes of multiple states. Id. at *2-*12. We suspect that these plaintiffs have already pursued Medicare Secondary Payer Act claims and are now just cycling through their assignments to try to squeeze out more juice.

The district judge ruled that the plaintiffs did not plead valid assignments of claims, and there were two reasons. First, some or all of the plaintiffs' claims were not assignable. Apparently claims under the Medicare Secondary Payer Act are assignable, or else we would not have the "MSP" litigation industry. But RICO claims? State consumer claims? The district court was not persuaded. For some, the answer is a hard no: Claims under California's notorious Unfair Competition Law are not assignable. Moreover, the plaintiffs' attempts to show assignability of other states' laws were either "suspect" or non-existent. Id. at *17-*18.

On RICO, the district judge noted that every court to consider the issue has ruled that RICO claims are assignable. But it remains an open question in the Ninth Circuit. In Silvers v. Sony Pictures Entertainment, Inc., 402 F.3d 881 (9th Cir. 2005), the Ninth Circuit held that certain copyright claims were not assignable because the statute creating the right to sue limited the claim to the person who owned the copyright when the alleged infringement occurred. Id. at *14-*16. The defendant in MSP Recovery argued that RICO similarly created a private right of action and similarly limited the claim to persons "injured in [their] business or property by reason of a statutory violation." It follows that RICO claims should similarly be unassignable. Id. at *16-*17 (citing 18 U.S.C. § 1964(c)).

The district court found "some force" in that argument, but eventually decided that the plaintiffs' pleadings were deficient for other reasons (see below). The court admonished the parties that "if a new motion to dismiss is filed, the parties should more thoroughly address the assignability of RICO claims." Id. at 17.

Second, even assuming that the plaintiffs were bringing assignable claims, they did not sufficiently plead them. A party invoking federal jurisdiction bears the burden of establishing standing. Although an assignee generally has standing to assert the injury in fact suffered by the assignor, "the Court must guard the standing requirement carefully in the assignment context." Id. at *21. As a result, "Plaintiffs must plead facts . . . support a plausible inference (1) the ultimate assignors suffered an injury in fact, and (2) the assignors' claim arising from the injury was validly assigned to Plaintiffs." Id. at *22.

These plaintiffs came up short. Most glaringly, the plaintiffs purported to bring claims on behalf of unpled "assignors" based on "representative assignments." We are not sure what a "representative assignment" is, but it seems to be an assertion of someone else's right, without identifying what the right is or to whom it belongs. That is not allowed:

Id. (citations omitted). The plaintiffs attached "representative" assignment agreements to their complaint and provided "claims data." But those merely confused matters more: The agreements were heavily redacted, and the data largely undermined the plaintiffs' claims. Id. at *23-*28. "At a minimum, Plaintiffs must plead some specific facts alleging a specific named assignor assigned its claims to Plaintiffs via a valid assignment agreement." Id. at *23.

In the end, the district court dismiss the non-assignable California UCL claims without leave to amend and everything else with leave. So the plaintiffs struck out this time around, but they will get another at bat. We can say, though, that the assignability of RICO claims in the Ninth Circuit is not necessarily a foregone conclusion. The same is true for several states' laws.