Shareholder Class Action Against LifeWallet, John Ruiz Dismissed

Update published 8/29/2023 8:00 p.m.: On August 28, the chief judge's deadline to address deficiencies in the complaint, the plaintiff dropped the case against LifeWallet and notified the court he does not intend to refile it.

LifeWallet meanwhile filed a motion alleging that the Rosen Law Firm, which was representing the plaintiff, had improperly released ads soliciting clients for the lawsuit. According to the motion, marketing materials in which the firm sought out LifeWallet shareholders to represent did not receive the required approval of the Florida Bar.

Chief U.S. District Judge Cecilia Altonaga referred the motion to a magistrate judge on August 29.

Update published 8/25/2023 11:35 p.m.: A federal judge has dismissed the class action complaint against LifeWallet without prejudice, saying that it is formatted as an impermissible "shotgun pleading." The plaintiff's firm has until Monday, August 28, to refile the case to comply with the judge's order.

Chief U.S. District Judge Cecilia Altonaga took issue with complaint's use of boilerplate language, which she said made it unclear which specific claims apply to each count.

Since prominent Miami attorney John Ruiz's medical claims company went public in a record-breaking reverse merger, shareholders have been decimated as the company fell far short of its nearly billion-dollar revenue projection, and its stock lost nearly all its value.

It seemed it was only a matter of time before stockholder class-action claims started to flood federal courts — and that moment has apparently arrived.

On behalf of shareholders of MSP Recovery, AKA LifeWallet, New York-based Rosen Law Firm is suing Ruiz and the medical claims company in the Southern District of Florida, citing major accounting blunders and alleging the firm painted a bogus picture of its business prospects while paying exorbitant sums for air travel using Ruiz's decked-out, luxury plane. 

The class action claims Ruiz's aviation company was paid hundreds of thousands of dollars for air travel, including trips aboard a customized Boeing 767, previously owned by the airline Qantas. Citing past New Times coverage of Ruiz's acquisition of the aircraft, the lawsuit alleges shareholders, in effect, "pay for Ruiz to travel in a plane" with a master bedroom with a queen-size bed, alongside two lounge rooms, a theater, and a separate dining room.

LifeWallet rebutted the claims in a statement provided to New Times.

"The company denies the allegations in the class action lawsuit and intends to vigorously defend itself against this and any other duplicate lawsuits," the statement issued by LifeWallet's public relations agent reads.

In a previous court filing, Ruiz says he flew on the Boeing 767 only one time — during the test flight that New Times covered in April 2022, which was before MSP Recovery went public. He says the company that refurbished the plane paid the cost of the test flight.

The class action was filed August 23 in the Southern District of Florida, listing multiple counts for alleged violations of securities law.

Among other core allegations, the lawsuit says that LifeWallet downplayed financial problems and the risk that it would fail to meet its payment responsibilities to counterparties such as Miami-based Cano Health, which assigned a claims portfolio to LifeWallet in 2022 in exchange for a pledge of cash or stock. The complaint claims LifeWallet engaged in "underhanded business tactics" with Cano and concealed the misconduct from stockholders.

Many of the class action claims appear to be drawn from Cano's own civil case against LifeWallet. In that case, Cano alleges LifeWallet sought to "induce unwitting business partners to agree to accept worthless...shares in lieu of cash." Cano says LifeWallet missed a deadline to pay out $67 million due under their claims agreement and that the stock that it eventually received as compensation was not properly registered.

Calling Cano's case a "sham," Ruiz and LifeWallet filed a counter-suit asserting that Cano has been paid in full and failed to cooperate in collection efforts involving claims pursued on Cano's behalf. After new management took over Cano this year, Cano sought to repudiate the companies' deal, Ruiz says.

"As MSP Recovery/LifeWallet has stated in its motion to strike Cano's lawsuit, the allegations are false [and] based on unreliable and unsupported newspaper articles," the statement issued to New Times by LifeWallet reads.

Cano Health has had a tumultuous year in its own right, marked by steep stock value collapse and a messy battle over management that culminated in Cano founder Marlow Hernandez stepping down as CEO.

LifeWallet specializes in medical claims recovery in situations where a primary insurer, like an auto insurer, allegedly fails to pay up for the treatment of an injured patient, putting the burden on Medicare, Medicaid, or other healthcare entities. The company's share price collapsed almost immediately after going public, dropping more than 90 percent from its $10 pre-merger level. As of August 24, the stock price sits at 8 cents.

LifeWallet recently disclosed that it had received subpoenas from the U.S. Securities and Exchange Commission and the Department of Justice, which are apparently leading separate probes in connection with the company and the merger with Lionheart.

As the company's stock continued to plummet this year, the firm barely made a dent in its $992 million annual revenue projection. Last year, the company rebranded as LifeWallet and promoted new health technology features, but the stock price did not turn around.

In another high stakes legal dispute, Florida Power and Light (FPL) in April sought to remove MSP Recovery dba LifeWallet from its role as claims administrator in a sprawling lawsuit against FPL over Hurricane Irma power outages. FPL cited LifeWallet's alleged financial problems and said the company could not be a neutral administrator while Ruiz was serving as plaintiffs' counsel.

Ruiz bit back with a motion for sanctions. He also sought to strike an FPL pleading that he said "made baseless allegations and attempted to create the false impression that LifeWallet is facing imminent bankruptcy."

The dispute became increasingly tense in Miami-Dade County court before the parties agreed that LifeWallet would be dropped as the claims administrator and replaced by Epiq. Ruiz is still listed as plaintiffs' counsel in the case.

While that spat was still brewing, LifeWallet warned shareholders on April 14 that its 2022 financial statements were no longer accurate because of accounting errors. The company said its financials "were materially misstated." (The accounting blunders are cited at length in the shareholder class action.)

Former chief financial officer Calvin Hamstra and interim CFO Ricardo Rivera are named as defendants alongside Ruiz in the class action.

Defendants who served as board members for Lionheart Acquisition Corporation II, the special purpose acquisition company (SPAC) that took the company public with an eye-popping $32.6 billion valuation in 2022, are also being sued, including Ruiz's partner Ophir Sternberg.

A recent press release from LifeWallet maintains that the company is "seeing strong demand for [its] expertise and recovery services from health plans, providers, and self-insured entities." The release notes that LifeWallet's annual filing corrected the past accounting errors and that the company has renegotiated payment schedules with debt holders.

"The company continues its strategy, daily operations, and mission to disrupt the antiquated healthcare reimbursement system with data-driven solutions for consumers and industries," the release states.

Editor's note 8/25/2023 11:35 p.m.: This article has been updated to include statements from LifeWallet and John Ruiz along with additional details about pending litigation.