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A final ruling was issued in the Stricker matter on September 30^th, 2010.  The government’s claims were held to be time barred because they were not filed within the, arguably, applicable six year statute of limitations.

The Stricker case stemmed from a three hundred million dollar settlement of an environmental mass tort case.  The United States government filed suit against the plaintiff personal injury law firms that handled the case along with the corporate defendants and insurers that were parties to the settlement.  In the lawsuit, the government argued that the parties failed to investigate whether the settlement recipients were Medicare beneficiaries requiring reimbursement of Medicare conditional payments.  The government sought reimbursement of all of the Medicare conditional payments along with double damages against the corporate defendants under the Medicare Secondary Payer Act.  The lawsuit was instituted by the government 6 years after the settlement were distributed in 2003.  The primary issue in the case was what statute of limitations applied and was the suit time barred.

Applicable Statute of Limitations

The personal injury attorney defendants and the “corporate” defendants (the companies and insurers who were party to the settlement) argued that a three year statute of limitations applied and the government argued that a six year statute of limitations applied.  The MSP is silent as to a statute of limitations and both the government and the defendants agreed that the applicable statute came from the Federal Claims Collection Act (“FCCA”).  In Stricker, the court explained the controversy under the FCCA as follows “[s]ubsection (a) of the FCAA provides that “every action for money damages brought by the United States . . . which is founded upon any contract express or implied in law or fact, shall be barred unless the complaint is filed within six years after the right of action first accrues . . . .” 28 U.S.C. § 2415(a) (emphasis added). Subsection (b) states that “every action for money damages brought by the United States . . . which is founded upon a tort shall be barred unless the complaint is filed within three years after the right of action first accrues . . . .” 28 U.S.C. § 2415(b) (emphasis added). The issue in the present case then becomes whether the Government’s MSPA action is founded upon contract or tort.”  Interestingly, while the Stricker didn’t decide which SOL applied since the government claims were time barred either way, the court did engage in an analysis for both the corporate defendants and attorney defendants.  The court argued that it was more likely the applicable statute for the corporate defendants would be a 3 year period since there was no contract express or implied as to the corporate defendants, therefore recovery would be based in tort.  However, as for the attorney defendants the court found that a 6 year period would apply because of the contract of representation between the attorney and plaintiff.  The court stated that there was “an express contractual relationship with the Medicare beneficiaries—namely, any fee agreement or attorney client agreement between them.”

When did the statute start to run?

The court went on to then analyze when the government’s cause of action would begin to accrue.  Under the regulations implementing the MSP, an action can initiate a recovery action “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.” 42 C.F.R. § 411.24(b).”  As to the corporate defendants, the court pointed out that the critical issue was at what point the “responsibility to pay”arose in relation to the settlement.  The court held that this arose at the point of execution and court approval of the settlement.  There were two different payments made by the corporate defendants in August and September of 2003.  The government learned of these payments in December of 2003.  The court didn’t find the December 2003 date to be important because “the express terms of the MSPA unambiguously state that, in context, ‘responsibility to make payment,’ which then triggers the statutory obligation to reimburse Medicare, ‘may be 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) . . . or by other means,’ 42 U.S.C. § 1395y(b)(2)(B)(ii) (emphasis added).”  Accordingly, the court found that the cause of action accrued as of the September 2003 payment so the government’s suit in December of 2009 was outside the longest potentially applicable SOL of six years.

 As to the attorney defendants, the Stricker court engaged in a different analysis.  Instead of focusing on “responsibility to pay”, it focused on when was payment received from the primary payer.  The court set this date as 10/29/03 which is when settlement proceeds were transferred by the corporate defendants into the attorney’s escrow account.  Accordingly, the court held that “[t]o afford every possible benefit to the Government, however, the court reaches its generous conclusion that accrual of its MSPA claim occurred no later than October 29, 2003.”

Conclusion

The Stricker court’s conclusion is as follows:

 “For these reasons, the court holds that the three-year statute of limitations began running against the Corporate Defendants no later than September 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 September 10, 2006, and bars the Government’s claims filed against the Corporate Defendants on December 1, 2009 as untimely. Alternatively, under the six-year statute of limitations, the court finds that the Government’s claims against the Corporate Defendants expired no later than September 10, 2009, still barring the Government’s MSPA claims as untimely.

 As to the Attorney Defendants, the court holds that the six-year statute of limitations began running no later than October 29, 2003, when they received the $275 million payment from the Abernathy settlement. The statute of limitations, therefore, expired no later than October 17, 2009 and also bars the Government’s claims filed against the Attorney Defendants on December 1, 2009.”

The import of this decision from my perspective is the applicable statute of limitations for CMS actions against plaintiff attorneys for Medicare conditional payments.  Attorneys have open liability for six years post receipt of settlement proceeds involving a Medicare beneficiary.  That is a very long period of time and represents a large ongoing liability for personal injury attorneys.