Recently, the United States Court of Appeals for the Eleventh Circuit rendered its decision on United States v. Stricker et al., finding that under the applicable statutory provisions and federal regulations, the government’s action under the MSP Act accrued on October 29, 2003, when $275 million was transferred by the defendants to the plaintiffs’ lawyers. Since the government filed its lawsuit on December 1, 2009, even if the longer six-year limitations period applied, the government’s action was untimely.
For decades, from its chemical plant in Anniston, Alabama, the Monsanto Company and its predecessors—including Pharmacia Corporation and Solutia, Incorporated—allegedly produced polychlorinated biphenyls (“PCBs”), which are toxic pollutants linked to cancer and birth defects. In 1996, thousands of individuals sued Monsanto, Pharmacia, and Solutia (collectively “the PCB producers”) in state and federal courts in Alabama for injuries caused by PCBs.
Eventually, the parties reached a settlement whereby the PCB producers paid $300 million to the plaintiffs in return for their release of liability. More than six years after the PCB producers transferred $275 million to the PCB plaintiffs’ lawyers pursuant to the settlement, but before that money was distributed to the PCB plaintiffs, the government filed suit under the MSPA against the PCB producers, the PCB plaintiffs’ lawyers, and the insurance companies which furnished liability insurance to the PCB producers, seeking to recoup Medicare payments that it had made on behalf of 907 PCB plaintiffs.
The Federal Claims Collection Act provides that when an action is “founded upon a contract,” the government must sue within six years of the accrual of the cause of action. 28 U.S.C. § 2415(a). For actions “founded upon a tort,” the government must file suit within three years of accrual. 28 U.S.C. § 2415(b). As a result, the defendants moved to dismiss the government’s MSPA complaint, arguing that because the underlying cause of action related to a toxic tort claim, the three-
year statute of limitations under § 2415(b) applied to bar the government’s action as untimely. The defendants alternatively argued that, even if the six-year statute of limitations under § 2415(a) applied based upon the contract between the plaintiffs and their attorneys, the government’s action was still barred because the complaint was filed more than six years after the cause of action accrued. The district court agreed with both arguments and granted the motions to dismiss.
The events contemplated by the settlement agreement were as follows:
- August 20, 2003: The parties agreed to a settlement.
- August 26, 2003: The PCB producers transferred $75 million to the interest-bearing account.
- September 9, 2003: The parties signed a written settlement agreement.
- September 10, 2003: The state court approved the settlement agreement.
- September 17, 2003: The PCB producers wired the additional $200 million to the interest-bearing account.
- October 28, 2003: The PCB lawyers certified that 75% of the adult PCB plaintiffs had signed releases.
- October 29, 2003: The PCB producers paid $275 million to the PCB plaintiffs’ lawyers.
- December 2, 2003: The PCB plaintiffs’ lawyers certified that 97% of the PCB plaintiffs had signed releases.
On December 1, 2009, the government filed the lawsuit seeking reimbursement of conditional payments it had made.
The had government six years “after the right of action accrues” to bring an action “founded upon any contract express or implied in law or fact.” See § 2415(a). It had three years after the action accrued to bring an action “founded upon a tort.” See § 2415(b). The court found that it need not decide whether the government’s attempt to recoup Medicare payments under the MSPA after a toxic-tort settlement constituted an action founded upon a contract or an action founded upon a tort. Assuming that § 2415(a)’s six-year limitations period applies, the government’s action under the MSPA against the PCB producers, their insurers, and the PCB plaintiffs’ lawyers accrued on October 29, 2003, when the PCB producers transferred the $275 million from an interest-bearing account to the PCB plaintiffs’ lawyers. Because the government filed this lawsuit on December 1, 2009—six years, one month, and two days from when its action accrued—its lawsuit was untimely.
Interestingly, the court briefly mentioned that the recently signed legislation, (although not applicable in this case), clarifies the uncertainty concerning statute of limitations issues for MSPA reimbursement claims. The Strengthening Medicare and Repaying Taxpayers Act establishes a three-year statute of limitations for Medicare to file suit for recovery under the MSPA. See Pub. L. No. 112-242, § 205(a) (2013).
The case seems to answer many questions about the viability of conditional payment recovery actions by the federal government under the Medicare Secondary Payer Act. Medicare’s arguments are typically centered on the very broad language of the Act which, when considered alone, carries no limitations period on actions to recover funds paid by Medicare on behalf of injured Medicare beneficiaries. However, when coupled with The Federal Claims Collection Act, a cogent argument can be raised that the power of the federal government is not without limitations. As the court noted, actions accruing after the passage of the S.M.A.R.T. Act are subject to a three year limitations period. However, for all actions that ripened before the enactment of S.M.A.R.T., the arguments made by the defendants in the Stricker case have now been given deference by the Eleventh Circuit.