Chalk up another win for corporations, insurance carriers, and attorneys against the federal government.
An Alabama federal court recently dismissed a U.S. government lawsuit against attorneys, corporate defendants, and their insurers for failing to take Medicare's interests into account in a 2003 $300 million settlement, citing the statute of limitations.
Federal law provides that Medicare may not pay for any item or service where payment has been made, or can reasonably be expected to be made, by a worker's compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance. 42 USC Section 1395y(b)(2)(A). In order to recover payments for such items or services, not only may the U.S. join or intervene in any action related to the events that gave rise to the need for the item or service, but the government may also bring an action against any entity which is required or responsible (directly, as third-party administrator, or otherwise) to make payment and may collect double damages against that entity, or against any other entity (including any attorney, physician or provider) that has received payment from that entity with respect to the item or service. 42 USC Section 1395y(b)(2)(B).
Government Files Suit
That law was the basis for a suit brought by the government late in 2009 against chemical companies, insurers and plaintiffs' attorneys who participated in the $300 million Abernathy v. Monsanto class action settlement. In that 2003 agreement, the chemical company defendants and their insurers resolved claims related to alleged exposure to polychlorinated biphenyls (PCBs) by Monsanto and other chemical companies. The plaintiffs' attorneys received and distributed certain of the settlement proceeds to individual claimants, allegedly without reimbursing Medicare for medical payments associated with their claims.
In US v. Stricker, (USDC ND Alabama 2010), the government sought reimbursement of those dollars.
The government filed a Motion for Partial Summary Judgment on liability; the defendants filed six motions to dismiss, arguing primarily that the government's claims should be time-barred by the statute of limitations. On Sept. 30, 2010, the court published its opinion, finding that the longest applicable statute of limitations of six years had expired prior to Dec. 1, 2009, when the government filed this suit; therefore, the claims against the defendants are barred by the statute of limitations.
Having established that the Medicare Secondary Payer (MSP) law applies to the corporate defendants as well as the attorney defendants, corporate defendants argued that the government's claim against them for Medicare reimbursement is founded upon tort and therefore the three-year bar should apply. 28 U.S.C. ? 2415(b). The government, however, strongly argued that an implied contract at law established a contractual relationship between itself and the corporate defendants, allowing for a six-year statute of limitations. 28 U.S.C. ? 2415(a). The court concludes in this scenario that logic and reason compel the application of the three-year statute of limitations founded upon tort, because the government's MSP claims are founded upon allegations of the corporate defendant's tort activity and the resulting tort settlement.
However, with regard to the attorney defendants, because counsel for attorney defendants based their statute of limitations argument on the six-year statute founded upon contract and did not argue applicability of the three-year limitations period founded upon tort, the court did not engage in any analysis as to which statute of limitations applies to the attorney defendants. The court, therefore, concurred that the six-year statute of limitations applies as to the attorney defendants.
In light of the facts, the court found that the corporate defendants' responsibility to pay arose no later than the point of execution and court approval of the Abernathy Settlement Agreement. All parties signed the finalized 20-page settlement agreement on Sept. 9, 2003, which the state court approved by order the next day. Consequently, as to the corporate defendants, the court finds that the government's cause of action accrued, at the latest, on Sept. 10, 2003, when the state court approved the executed Abernathy Settlement Agreement and at which point defendants' responsibility to pay was clearly established.
Court Finds for Defendants
As to the attorney defendants, the court employed a different standard for analyzing the point of accrual for statute of limitations purposes because they have a different basis for liability under the MSP as alleged "recipients" of payments owed to the government for Medicare reimbursement. The government argued that it could not have intervened with its MSP claim until the filing of the 97 Percent Certificate on Dec. 2, 2003, which released the funds for distribution. The court, however, noted that government most certainly could, and should, have intervened before the Abernathy settlement monies were actually distributed to the thousands of plaintiffs, finding that government's MSP claims were, therefore, ripe for accrual no later than Oct. 29, 2003, the date the attorney defendants received payment of the $275 million settlement monies in escrow.
For these reasons, the court held that the three-year statute of limitations began running against the corporate defendants no later than Sept. 10, 2003, the date the executed settlement agreement was approved by order of the state court. The statute of limitations, therefore, expired no later than Sept. 10, 2006, and bars the government's claims filed against the Corporate Defendants on Dec. 1, 2009, as untimely. As to the attorney defendants, the court holds that the six-year statute of limitations began running no later than Oct. 29, 2003, when they received the $275 million payment from the Abernathy settlement. The statute of limitations, therefore, expired no later than Oct. 29, 2009, and also bars the government's claims filed against the attorney defendants on Dec. 1, 2009.
Whether these statutes of limitations apply to all parties Medicare may seek reimbursement from, and whether they will remain in place for any length of time, is speculative for now. Although no appeal has been filed by the U.S. on this matter, there are rumors that possible legislation may be in the works that would allow for a time certain statute of limitations for all parties that also includes specific guidance as to when the limitation period would begin to run. Stay tuned.
Rafael Gonzalez is CEO of The Center for Medicare Set Aside Administration, LLC in Clearwater, Fla. www.msacenter.com.
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