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Stricker Court Adheres to Dismissal of Medicare Claims against Liability Insurers and Others; Rejects Government's Continuing Accrual and Tolling Arguments

August 19, 2011

In a significant victory for liability insurers and others, on Friday, August 12, 2011, United States District Court Judge Karon Owen Bowdre rejected the United States' motion to reconsider her September 30, 2010 order dismissing on statute of limitations grounds the Medicare recovery claims brought against the attorneys representing the Abernathy plaintiffs, the chemical companies sued in Abernathy as the alleged tortfeasor defendants and the chemical companies' liability insurance carriers. United States v. Stricker, et al., No. CV-09-BE-2423-E (N.D. Ala. Aug. 12, 20011). In her decision on reconsideration Friday, Judge Bowdre addressed the United States' theory of continuing accrual and its tolling argument.

The United States brought its Medicare recovery suit on December 1, 2009, seeking to recoup Medicare payments made to plaintiffs pursuant to a 2003 settlement in the Abernathy litigation. In its September 2010 opinion, the court found that the applicable statutes of limitations barred the government's complaint and granted motions to dismiss on that basis. As the court explained, the Abernathy Settlement Agreement provided for a $300 million settlement corpus that was to be distributed in installments apportioned by the terms of the Agreement. Under the settlement, the court has stated, $275 million was paid into the court registry by mid-September 2003, within one week of executing the Agreement, and the remainder of the settlement funds were to be paid in annual $2.5 million installments from 2004 through 2013.

In its motion to reconsider, the United States argued that the court erred in granting the motions to dismiss because the United States pled a claim with respect to the annual $2.5 million payments against all defendants under a theory of continuing accrual. The United States urged that the court "was mistaken" in stating that it inadequately raised a theory of continuing accrual, pointing to various paragraphs of the Amended Complaint that referenced continued receipt of payments under the Abernathy Settlement and Count VI of the First Amended Complaint which addressed the United States' rights with respect to the annual $2.5 million payments required by the Abernathy Settlement Agreement. Although finding that the theory should have been raised earlier, the court granted reconsideration to consider the merits of the United States' continuing accrual argument, notwithstanding the likelihood of abandonment.

Stating the theory was "lacking in law and logic," the court found the United States' arguments unpersuasive. It recognized that the United States could have sued the defendants in October 2003, if not earlier, seeking total reimbursement for everything that was to be paid pursuant to the Abernathy Settlement Agreement, including the continuing payments. The court emphasized that the regulations implementing the Medicare Secondary Payer Act (MSPA) define the government's right to initiate recovery as beginning "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). In rejecting the continuing accrual theory, the court also found that it was not supported by any case law.

The United States also argued that the court erred by placing on it the burden of pleading elements of tolling under 28 U.S.C. § 2416(c). Calling the United States' contention that it was somehow prevented from addressing this issue earlier "blatantly disingenuous," the court also rejected this argument on the merits. It noted that the tolling statute the United States relied upon holds that the statute of limitations period stopped during periods when "facts material to the right of action are not known and reasonably could not be known by an official of the United States charged with the responsibility to act in the circumstances." 28 U.S.C. § 2146(c). The court then explained that the United States' cause of action stemmed from the Abernathy Settlement Agreement and that it provided no support for the notion that "a CMS official charged with responsibility to act did not or reasonably could not have known about the MSPA implications of the widely publicized Abernathy Settlement Agreement." Accordingly, the court found that the United States did not make its case for tolling to apply.

As the court explained: "Congress has given CMS the right to recover medicare payments from settlements of litigation. However, waiting more than six years to file claims for reimbursement from settlement funds presents an inordinate burden on the parties to that settlement." It rejected the continuing accrual and tolling arguments made by the United States on reconsideration, finding the United States had not shown that the court committed "clear error" in its previous ruling. The court therefore declined to alter its September 30, 2010 ruling.