U.S. vs. Stricker – 11th Circuit Court of Appeals Affirms Dismissal of Government’s Medicare Claim
Roy Franco
July 29, 2013

The U.S. filed this lawsuit seeking damages for items and services paid by Medicare related to a settlement.  The underlying litigation involved a significant and well known mass tort case alleging exposure to polychlorinated biphenyls (PCBs).  The matter settled for $300M on September 9, 2003.   On December 9, 2009, the United States filed a lawsuit demanding reimbursement based on the Federal Debt Collection Act, as such debt was created because of the settlement under the Medicare Secondary Payer Act.

The District Court in which this case was originally filed dismissed the claim based on the statute of limitations.  The lower court held, as explained in a memo we posted at the time, there were two periods of limitations created by the Federal Debt Collection Act – 3 years (tort based); and 6 years (contract based).  The Court determined that the U.S. claim against the insurance carrier and self insured defendants ran 3 years after the settlement date.  For the Plaintiff attorney defendants sued by the U.S., the Court held a 6 year limitations was appropriate because of a contingency fee arrangement with plaintiffs.  The Court dismissed the U.S. action against those Parties, as well, because the settlement date took place more than 6 years ago.

The U.S. took the position that it did not have notice of the settlement as required under 42 C.F.R. §411.25(a).  Under this theory, the statute of limitations was stayed because notice was not provided by the insurance carrier and self insured defendants, or by plaintiffs’ attorneys.  The District Court rejected this argument, based mainly upon the fact that the case was so famous, reasoning that constructive notice had been provided.   The U.S. also argued that the settlement agreement was not completed until December 10, 2003, and therefore the lawsuit was within the 6 year period.  However, the Court rejected that argument as well, indicating the date of settlement controlled.

The U.S. appealed this decision to the U.S. Circuit Court of Appeals, which affirmed the lower Court’s ruling and clarified the starting point for when the limitations period.   The accrual of a federal cause of action is a matter of law and the general rule is that it accrues once a plaintiff has a ‘complete and present cause of action’.    Plaintiffs in their underlying mass tort case could begin to enforce the Agreement once it was signed.  Consequently, the date of the agreement would be the starting point.  Since the U.S. took more than 6 years from that date to file a claim, the claim must be dismissed.

The 11th Circuit Court of Appeals did take note of the recent SMART legislation which creates a three year limitations period.  It is concerning that the 11th Circuit states that SMART was “not applicable” to the case, without providing any additional analysis.  The limitations period was designed to stop the enforcement of claims under the Medicare Secondary Payer Act.  Such claims should not be resuscitated under the Federal Debt Collection Act if recovery rights have already been extinguished.  The Court was correct to state such claims would be time barred after three years, but the starting date should be from the date of Mandatory Insurance Reporting, not be the date of the settlement agreement, but from electronic reporting under 42  U.S.C. §1395y(b)(8), also known as the Medicare & Medicaid SCHIP Extension Act.