DOJ too late to recover share of $300 million class for Medicare, judge rules

Steve Korris Oct. 7, 2010, 9:16am


BIRMINGHAM, Ala. (Legal Newsline) - Department of Justice lawyers tried to twist Medicare law in their bid to recover a share of a $300 million class action settlement, U.S. District Judge Karon Bowdre ruled on Sept. 30.

She wrote that statutes of limitations ran out on government claims against plaintiff lawyers and Monsanto chemical company lawyers who settled a contamination suit.

Bowdre found that claims against the lawyers expired five weeks before the government sued, while claims against Monsanto probably died in 2006.

She dealt a blow to an Obama Administration initiative that would replenish Medicare coffers with proceeds of personal injury litigation.

For years Medicare possessed but did not exercise authority to demand reimbursement when its beneficiaries received payments from other sources.

Medicare officials announced last year that they would start seeking reimbursement.

Department of Justice civil lawyers filed the Alabama suit on Dec. 1, signaling their intent to recover from the past as well as in the future.

They alleged that 907 Medicare beneficiaries received payments in 2003, on claims that Monsanto polluted Anniston, Ala., with polychlorinated biphenyls.

Monsanto and successor companies Pharmacia and Solutia moved to dismiss.

So did lawyer Donald Stewart of Anniston and colleagues James Stricker and Daniel Benson of Kasowitz, Benson, Torres and Friedman, in New York City.

So did lawyers Charles Fell and Charles Cunningham of Louisville, Kentucky, and Don Barrett of Lexington, Mississippi.

So did insurers AIG and Travelers.

Lawyer Greg Cusimano of Gadsden, Ala., the firm of Johnston Druhan in Mobile, and Cody Law Firm of Birmingham did not move to dismiss.

Bowdre held a hearing on Sept. 13, and cut loose those who sought release.

She wrote that she didn't presume to know why the others didn't move to dismiss, adding that she couldn't determine when claims against them accrued.

"The government did not sue any of the alleged Medicare beneficiaries as defendants to this recovery action or identify them in pleadings," Bowdre wrote.

"In general terms, Medicare will not pay for medical expenses where a reasonable certainty exists that an insurance company, or another liable third party, will cover the costs."

In cases of uncertainty, she wrote, or where an injured or ill person is unlikely to receive prompt payment, Medicare may make payment conditioned on later reimbursement.

A recipient of a conditional payment must reimburse Medicare in 60 days, she wrote.

If Medicare doesn't receive reimbursement, she wrote, the government can sue.

The right to initiate recovery begins as soon as Medicare learns that payment has been made or could be made, she wrote.

She wrote that the Federal Claims Collection Act sets a three year limit on tort claims and a six year limit on contract claims.

She heaped sarcasm on the government's claim that an implied contract existed between it and the companies.

The government didn't cite a single case applying a six year limit, she wrote.

"This court declines the opportunity to be the first to do so using the government's implied at law contract theory," she wrote.

"The government raises no alternative contract theory for why the six year statute of limitations should apply and the court will not invent any," she wrote.

Then she explained that three years or six didn't matter.

"Regardless of which statute of limitations applies, the government's claims against the corporate defendants were filed too late," she wrote.

Parties to the contamination suit announced a settlement on Aug. 20, 2003, she wrote.

Parties signed it on Sept. 9, 2003, she wrote.

Defendants transferred $200 million to the court on Sept. 17, 2003, she wrote.

The government urged Bowdre to focus on Dec. 2, 2003, when the parties certified that enough plaintiffs had signed releases to close the deal, but she declined.

"This argument directly contradicts the plain reading of the language in the Medicare secondary payer statute," she wrote.

The statute expressly contemplates conditional payments as demonstrations of responsibility to pay, she wrote.

It doesn't reference unrestricted payment, fully distributed payment, or final payment, she wrote.

"Despite the government's attempts to twist the reading of the statute, its terms squarely contemplate that a payment conditioned upon release triggers a responsibility to reimburse Medicare," she

For the lawyer defendants, she concluded that the statute of limitations started running no later than Oct. 29, 2003, when they received payment of $275 million in escrow.

She called the conclusion generous, writing that the government could have intervened at any time in the litigation and certainly could have done so when the parties settled.

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