U.S. v. Stricker: Government Loses Big Time After Federal Judge Grants Defendants’ Motion to Dismiss Based on Statute of Limitations

 On September 30, 2010, the Stricker opinion was released by the Alabama District Court. The opinion validated all of the rumors as to the case being dismissed due to statute of limitations issues. As suspected, the case was dismissed on the fact that regardless of whether a three- or six-year statute of limitations was appropriate, the federal government's filing was untimely because it missed in either case. The Abernathy settlement was announced on August 20, 2003, $75M transferred into court escrow on August 26, 2003, settlement was approved by the state court on September 10, 2003 and a week later, Defendants paid $200M into the court settlement account; however, the settlement was technically not final until December 2, 2003 when the plaintiffs' counsel filed certification with the court that the last conditions had been met and distribution of funds could commence. While the government relied upon the December date in all of its filings, the Defendants made very convincing arguments that the earlier dates, at which time the actual "insurance payments" were made, was the appropriate triggering event pursuant to the Medicare manuals and that regardless of which statute of limitations the court applied, the government's filling was not timely on December 1, 2009.

While disappointing that the case did not provide all of the much desired judicial interpretation with regard to the claim for six years of post-settlement conditional payment recovery and the use of the Federal Claims Collection Act (FCCA) statute of limitations as opposed to the one expressly provided in the MSP, the court rationale did add a new flavor to the MSP debate. The court relied upon the parties' pleadings and stated that because the parties agreed that the MSP is silent as to a deadline for filing a claim for recovery, the relevant statute of limitations is the FCCA. Technically, they are right in that the MSP only states that the United States "may seek to recover conditional payments … within the 3-year period beginning on the date on which the item or service was furnished" and does not in fact say when it may bring that claim. The interesting twist the opinion took unnecessarily, because the point was moot as to all the parties, was the distinction between a recovery based upon tort or contract under the FCCA. The FCCA provides an action founded upon a tort a three-year filing period, whereas an action founded upon any contract, express or implied, is given six years. In the analysis, the corporate defendants were deemed to have been subject only to the three-year SOL because there were no contractual ties to the government, only the statutory obligation triggered by the underlying tort claim. The defendant attorneys on the other hand were granted contractual status as fiduciaries of Medicare beneficiaries contractually bound to the Medicare program to assist with its recovery program when necessary, and therefore were subject to the six-year SOL. A tenuous but interesting position to take.

Again the point was irrelevant because the December 2nd date was not adopted by the court as the triggering event, but an interesting distinction was made by the court that could set up the government for an appeal. The one date that the opinion is silent to is the date upon which the attorneys took their fee from the settlement funds. The opinion notes that on October 29, 2010, the defendant attorneys were transferred the settlement funds held by the court after certifying that 75% of the adult plaintiffs had signed releases; but the funds were not to be distributed until 97% had signed. If the attorneys' fee was included in the restriction on distribution, the government could still have an argument against the defendant attorneys. The government apparently made the argument about "receipt" in its pleadings; however, it was dismissed without much respect to the concepts of actual verses constructive receipt. Is constructive receipt truly enough to trigger the MSP obligations as contemplated by the 110th Congress when it adopted the MMA Section 301 amendment to the MSP three days after the Abernathy settlement was certified on December 2, 2003? Unlikely, as the Congressional record does not reflect much contemplation at all as to the MSP amendment, but that's a discussion for another time.

If the government is so bold as to appeal this decision, considering $69 million dollars is at stake, an appeal to the 11th Circuit would be most interesting. Just last week, the 11th Circuit Court of Appeals handed down the opinion in Bradley v. Sebelius, essentially adopting apportionment in MSP recovery actions regardless of all existing statutory and regulatory authority granting Medicare a right to 100% reimbursement. Medicare's statutory right applies from dollar one of any insurance recovery regardless of amount or admission of liability, and all of the subsequent case law supports that right. Bradley was the first MSP action to move in the direction that the Supreme Court took in ADHS v. Ahlborn in 2006 supporting apportionment in Medicaid recovery actions despite state law that granted the program similar rights as granted Medicare under the MSP regulations. Given that court's existing subject matter knowledge, further analysis of the MSP could get interesting should this case land on its doorstep.

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Jennifer C. Jordan, Esq., is the Editor-in-Chief of The Complete Guide to Medicare Secondary Payer Compliance (LexisNexis).

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