Eleventh Circuit Court of Appeals Affirms Stricker
In an unsurprising decision over a year in the making, on July 26, 2013, the US Court of Appeals for the Eleventh Circuit affirmed the district court opinion in US v. Stricker et al. dismissing the US’ suit against pharmaceutical companies, their insurers and the attorneys representing the plaintiffs in a 2003 toxic tort settlement as time barred. Despite taking 10 pages to say so, the appellate court found that the statutory phrase “payment conditioned upon … release” was the key in upholding the decision. The government’s argument on appeal was that statute of limitations (SOL) was triggered on December 2, 2003 when the plaintiffs certified to the court that 97% of releases had been secured, rather than when the $275 million was paid to plaintiffs in October, because had that condition not been satisfied, the settlement could have been voided. Unfortunately for the government, the court strictly read all of the words the government, through its congressmen and various agencies, used when writing the statute and regulations.
§1395y(b)(2)(B)(ii) of the MSP obligates a primary payer that is demonstrably responsible for medical damages, or anyone in receipt of a payment from that primary payer, to reimburse the government for any amount Medicare conditionally paid. A primary payer’s responsibility for payment is demonstrated by “a judgment, a payment conditioned upon the recipient’s compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment” for medical-bill claims, “or by other means.” If that statutory language is somehow ambiguous, the Secretary of Health and Human Services’ interpretation of it, found in 42 CFR 411.22(b) is as follows:
A primary payer’s responsibility for payment may be demonstrated by:
(1) A judgment;
(2) A payment conditioned upon the beneficiary’s compromise, waiver, or release (whether or not
there is a determination or admission of liability) of payment for items or services included in a claim
against the primary payer or the primary payer’s insured; or
(3) By other means, including but not limited to a settlement, award, or contractual obligation.
Working in conjunction with 42 CFR 411.24(b) which provides that the government “may initiate recovery as soon as it learns that payment has been made or could be made under workers’ compensation, any liability or no-fault insurance, or an employer group health plan,” there is no evidence anywhere in the statute or regulations that a settlement has to be irrevocable prior to the MSP being triggered. This makes sense given that one would think the government would want the ability to get to the money before it disappeared, unless of course they are waiting until the absolute last minute to file their suit, in which case then those rules don’t count.
It is assumed that the government based its statute of limitations assumptions on the 2001 decision in Manning v. Utility Mutual Insurance Company in which the Second Circuit Court of Appeals held that the Federal False Claims Act (FCA) SOL should apply to the MSP private cause of action. Had the government pled its case under the FCA instead of the Federal Claims Collection Act, it could possibly have made its arguments based on the concept of notice from which the FCA’s SOL runs six years. Given that the Fraud Enforcement and Recovery Act of 2009 was passed on May 20th of the same year that suit was intimated in December, it could have used the new provisions against simply improperly avoiding an obligation to pay money to the government. It is unlikely that the government could have proved that it remained in the dark until that final certification date in December when the lawsuit and settlement were widely covered by the media, however it would have made a better argument than use of the statute that attached its SOL to payment.
Regardless, Stricker remains DOA and we will never know to what extent the government’s claims would have stuck. Even though its claims for post-settlement payments were apparently based upon claims that were made to the PLF post-settlement and not post-settlement payments made on behalf of existing plaintiffs, it would still bring into question the government’s reach post-settlement. Additionally the claim was brought simultaneously against all possible responsible payers, so the joint and several nature of the government’s MSP recovery rights would have needed to be sorted out to determine each liability to the total debt. All good issues for which it would have been nice to gain some clarity, but we shall have to wait for another case to raise them.
UNITED STATES, Plaintiff-Appellant, versus JAMES STRICKER, et al., Defendants-Appellees. No. 11-14745 UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT 2013 U.S. App. LEXIS 15204 July 26, 2013, Decided