U.S. v. Stricker UPDATE – Motion for Reconsideration: DENIED

This post follows up on PMSI’s prior legal bulletin dated October 5, 2010, which provides an in-depth discussion of the Stricker case, as well as the court’s reasoning for dismissal of the government’s complaint. For a copy of the October 5th bulletin, please click here.

By way of brief summary, the Stricker litigation involved a large class action settlement in which a great percentage of the plaintiffs were Medicare beneficiaries and the government alleged that Medicare’s interests were not considered and addressed as part of the settlement. Post-settlement, CMS sought recovery against plaintiff attorneys, insurers and corporate defendants for billions of dollars in conditional payments made. The court dismissed the government’s complaint on September 30, 2010 due to the statute of limitations hindering the government’s ability to recover. Shortly thereafter, the government filed an appeal.

On August 12, 2011, Judge Bowdre denied the government’s Motion for Reconsideration in a Memorandum Opinion & Order. For a copy of the Opinion & Order, please click here. The government rested their Motion for Reconsideration on the theory of continuing accrual that the statute of limitations begins to run each time a payment by a Corporate Defendant to an Attorney Defendant is made pursuant to the settlement agreement. Under this theory, each payment triggers a fresh start on the statute of limitations.

Judge Bowdre concluded that the government failed to properly raise this argument of continuing accrual in its brief, as well as in the amended complaint. The government, in response, pointed to various paragraphs of the complaint where it pled such a theory. While not agreeing completely with the government, the court decided to reconsider its original Order and conducted a review to insure it avoided any clear error.

In regard to the government’s continuing accrual theory, the court found this argument to be without legal merit. Judge Bowdre noted that such a theory is contrary to the MSP. She specifically cited the MSP to state that the government’s right to recovery begins “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 CFR §411.24(b).

Additionally, the court noted that the government failed to provide any supporting case law to support its continuing accrual argument. Therefore, the court concluded that it could not commit “clear error” when no authority or precedent exists to instruct it otherwise. The government also raised that the court committed error with respect to its decision on the government’s tolling argument, however the court declined to re-review the tolling issue.

The industry has long been waiting for the decision on this motion for reconsideration and the accompanying legal analysis concerning the government’s continuing accrual argument. As may be recalled, the initial litigation against the Stricker Defendants sent shockwaves through the liability industry as the government sought to make an example out of the Stricker settlement for failing to consider Medicare’s interests. It was a huge sigh of relief to the Stricker Defendants, who could have been held liable for millions of dollars in conditional payments.

The Stricker litigation was a learning experience for the liability industry as well as the government. Other class action settlements will certainly learn from the Stricker case. A good practice for class action settlements is to hold settlement funds for each class action plaintiff until MSP compliance is fulfilled for each individual plaintiff. This can be effectuated by hiring a class administrator who ensures the Medicare status of each plaintiff is checked. If the plaintiff is not a Medicare beneficiary, then the funds can be released to the class action plaintiff. If the plaintiff is a Medicare beneficiary, conditional payment resolution as well as the possibility of an MSA should be explored before funds are released to that particular plaintiff.

The government will be sure to learn its lessons as well, that recovery of conditional payments must be sought rapidly when it is known that payment has been made and a primary payer is available. With MMSEA Section 111 reporting for liability settlements  to commence shortly on January 1, 2012 (specifically for liability settlements occurring on or after October 1, 2011), the transparency of settlements made should assist the government with the recovery process and further ensure that they are aware of payments and settlements made.

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