11th Circuit Applies 4-year statute of Limitations to MSP Private Cause of Action Claim

In an interesting new Medicare Secondary Payer (MSP) decision, the U.S. Circuit Court of Appeals for the Eleventh Circuit[1] in MSPA Claims 1, LLC v. Tower Hill Prime Insurance Co., 2022 WL 3223801 (11th Cir. August 10, 2022) held that the “catch all” four-year limitations period contained in 28 U.S.C. § 1658 (a) was the statute of limitations (SOL) that applied to a claim for reimbursement of medical expenses filed by a Medicare Advantage Plans’ assignee under the MSP’s private cause of action (PCA) statute (42 U.S.C. § 1395y(b)(3)(A)).  As part of this ruling, the 11th Circuit declined to apply the SMART Act’s three-year statute of limitations, (42 U.S.C. § 1395y(b)(2)(B)(iii)), as argued by the parties, or follow the district court’s conclusion that a four-year Florida state law statute of limitations governed the action. 

In applying 28 U.S.C. § 1658 (a)’s four-year statute of limitations to the facts, the 11th Circuit found that MSPA Claims 1’s lawsuit was time-barred since it had filed its complaint more than four years after its cause of action accrued within the meaning of § 1658 (a), which the 11th Circuit determined was when MSPA Claims 1’s assignor (a Medicare Advantage plan) actually made payment for the enrollee’s accident related injuries, and not, when MSPA Claims 1 allegedly “learned” about the claim and settlement several years later.  Accordingly, the 11th Circuit affirmed the district court’s grant of summary judgment in favor of the insurer defendant, Tower Hill.    

From a wider compliance perspective, the 11th Circuit’s decision is the latest in a growing numbers of court cases to address the MSP’s PCA statute.  In this case, as noted, the dispute involved what SOL applied to PCA claims.  Going forward, it will be interesting to see to what extent the 11th Circuit’s ruling may influence future decisions from other courts on the PCA/SOL issue, and how this decision may impact current efforts to repeal the PCA statute altogether per the Repair Abuses of MSP Payments (RAMP Act)

For those interested in a deeper breakdown of this case the following general overview is presented:

Facts

In 2012, an individual referred to by the court as “D.L.,” was injured after being attacked by her neighbor’s dog.[2]  At the time of this incident, D.L. was enrolled in Florida Healthcare Plus, a now defunct Medicare Advantage Plan, which allegedly paid $8,146.09 in medical payments related to this matter.[3]  The neighbor was insured under a liability insurance policy provided by defendant Tower Hill (hereinafter also referenced as “insurer”).[4]   D.L. filed a claim against her neighbor as a result of this incident. 

On June 22, 2012, the parties entered into a settlement agreement whereby the insurer agreed to pay D.L. $25,000 in exchange for releasing it from liability.[5]  The insurer reported the settlement to the Centers for Medicare and Medicaid Services (CMS) in September 2012,[6] but did not reportedly reimburse Florida Healthcare.[7]  The plaintiff, MSPA Claims 1 (“MSPA”) was Florida Healthcare Plus’s assignee thereby holding the right to any claim that Florida Healthcare might have to recoup the payments it made to cover D.L.’s medical expenses.[8]

MSPA alleged that it learned of a possible claim against Tower Hill stemming from this incident in October 2015 at which time it issued a lien letter against the insurer demanding payment to the extent “Medical Payment or other applicable insurance coverage exists.”[9]  In response, the insurer advised MSPA that this case was settled on June 22, 2012.[10]   This was the first time MSPA had allegedly been directly informed of the settlement.[11]  MSPA issued a second demand letter in 2018, but, according to the court’s opinion, the insurer never provided reimbursement.[12]

On August 17, 2018, MSPA filed a lawsuit against the insurer alleging, in part, that the insurer had failed to provide reimbursement as required under the MSP’s private cause of action (PCA) statute, 42 U.S.C. 1395y(b)(3)(A), which, by way of note, provides for potential “double damages.”[13]  In response, the insurer challenged MSPA’s claim arguing that it was time-barred. 

The District Court ruled that MSPA’s private cause of action claim was untimely under a Florida four-year state law statute of limitations

The issue of whether MSPA’s action was filed timely came before the United States District Court for the Northern District of Florida twice on dueling motions for summary judgment.

The district court first addressed the issue as reported in MSPA Claims 1, LLC v. Tower Hill Prime Insurance Co., 2021 WL 1041662 (N.D. Fla. January 7, 2021).   At this initial hearing, the district court addressed whether the MSP’s three-year statute of limitations (SOL) per 42 U.S.C. § 1395y(b)(2)(B)(iii) governed action.  This statute, commonly referred to as the SMART Act’s SOL, states, in pertinent part, that “an action may not be brought by the United States under this clause with respect to payment owed unless the complaint is filed not later than 3 years after the date of the receipt of notice of a settlement, judgment, award, or other payment made pursuant to paragraph (8) relating to such payment owed.” 

At this stage of the proceedings, both parties agreed that this statute governed the dispute, but they differed in terms of how it should be calculated.   Specifically, Tower Hill argued, in part, that MSPA’s claim was time-barred by 42 U.S.C. § 1395y(b)(2)(B)(iii)’s three year SOL on grounds that MSPA had filed its suit “over six years after [CMS] received notice of the claim” in 2012, and, therefore, was “barred by the three-year statute of limitations.”[14]  MSPA countered that the three-year period under this statute only begins to run when “a party is notified of a settlement” which, in this case, it insisted occurred, at the earliest, when it learned of the settlement in 2015.[15]  Accordingly, under this interpretation, MSPA argued that it had filed its suit “within the three-year notice-based statute of limitations.”[16]

The district court, however, disagreed that 42 U.S.C. § 1395y(b)(2)(B)(iii) governed the action. While a complete analysis of the district court’s ruling is beyond the scope of this article, very generally, the district court noted that while “[t[he parties’ initial arguments … focused on when the three-year limitations period started, [they ignored] the larger question of whether it applies to private actions at all.”[17]

On this latter question, the district court found, in general, that “[t]he three-year limitations period [as contained in 42 U.S.C. § 1395y(b)(2)(B)(iii)], as a textual matter, applies only to government causes of action—and that is not the action MSPA has brought.”[18]  Further, the court also noted that, for several practical reasons, 42 U.S.C. § 1395y(b)(2)(B)(iii) would be a “poor” and “imperfect”  in terms of “borrowing” this statute to govern claims brought under the private cause of action statute.[19]

Accordingly, the district court initially found that MSPA Claims 1’s suit was not time-barred, but it declined to “determine what the proper statute of limitations period is” based, in part, on grounds that since Tower Hill “based its time-barred argument exclusively on the federal three-year provision in the government action ... [and that] the only question before [the court was] whether the three-year federal provision applied.”[20]

Tower Hill then filed a motion for reconsideration (which the court treated as a new motion for summary judgment) bringing the issue back before the district court a second time as reported in MSPA Claims 1, LLC v. Tower Hill Prime Insurance Co., 2021 WL 1232780 (N.D. Fla. March 31, 2021).  As part of its motion, the insurer argued that MSPA’s action was barred by Florida’s four-year statute of limitations per Fla. Stat. Ann. § 95.11(3)(f), (k), and (n).[21] MSPA disagreed arguing, in part, that the court should, instead, use the False Claim Act’s six-year limitations period.[22]

While a complete review of the district court’s detailed analysis and ruling is beyond the scope of this article, the court granted summary judgment in favor of Tower Hill finding that Fla. Stat. § 95.11’s four-year limitations period properly governed the dispute and that MSPA’s action was untimely thereunder.[23]

MSPA then appealed the district court’s ruling to the 11th Circuit Court of Appeals.

Issues on appeal before the United States Eleventh Circuit Court of Appeals

The 11th Circuit Court of Appeals framed the issues before it as follows: “Our task is two-fold: [1] we must determine what limitations period applies [and] [2] applying that limitations period, we must decide whether [MSPA’s] complaint was timely filed.”[24]

Parties’ arguments on appeal

As part of this appeal, both parties agreed that the district court erred when it applied Florida’s general four-year statute of limitations per Fla. Stat. Ann. § 95.11.[25]  In addition, both parties took the position that 42 U.S.C. 1395y(b)(2)(B)(iii) — which the 11th Circuit referred to as the “government cause of action” —provided the applicable limitations period.[26]  However, they diverged significantly on when that period began to run.  On this point, similar to the positions they took before the district court, MSPA argued that the limitations period did not start to run until it first received notice of the claim in 2015 and, accordingly, its suit was filed timely in 2018.[27]  Conversely, Tower Hill argued that the limitations period started in 2012, either (1) when it entered into the settlement agreement with D.L., or (2) when it reported the settlement to [CMS] and, therefore, that MSPA suits was untimely.[28]   Importantly, as part of this appeal, the 11th Circuit sought supplemental briefing on the applicability of another statute, 28 U.S.C. § 1658 (a)’s four-year “catch-all” limitations period provision – which, as we will now see below, ultimately figured prominently in the 11th Circuit’s decision. 

The 11th Circuit ruled that 28 U.S.C. § 1658(a)’s four-year SOL governed MSPA’s private cause of action claim

On the first issue regarding which statutory limitations period applied, the 11th Circuit noted, in general, that when “there is no federal statute of limitations expressly applicable to a lawsuit, courts typically ‘borrow’ the most suitable statute or other rule of timeliness from some other source” [and] “[t]hat’s the course the district court took, and the course that (for the most part) the parties urge us to take.”[29]

Applying this principle, the 11th Circuit found that the four-year SOL period as contained in 28 U.S.C. § 1658 (a) was the proper SOL which governed whether MSPA had timely filed its private cause of action claim – and not the MSP’s three-year SOL as argued by the parties, nor the Florida four-year state law SOL as applied by the district court.

In pertinent part, 28 U.S.C. § 1658 (a) provides that “[e]xcept as otherwise provided by law, a civil action arising under an Act of Congress enacted after [December 1, 1990] may not be commenced later than 4 years after the cause of action accrues.”[30]

The 11th Circuit, as part of its analysis finding that § 1658 (a) governed the action, explained that a key point for determination was whether MSPA’s action “[arose] under an Act of Congress enacted after December 1, 1990” as required under § 1658 (a).[31]  On this point, the 11th Circuit noted in general that for purposes of § 1658(a), “a cause of action ‘aris[es] under an Act of Congress enacted’ after December 1, 1990—and therefore is governed by § 1658’s 4-year statute of limitations—if the plaintiff’s claim against the defendant was made possible by a post-1990 enactment” (court’s emphasis).[32]   

Based on this, the 11th Circuit concluded that even though the PCA statute was enacted in 1986 – which was “well before § 1658 was enacted in 1990” – it concluded that § 1658(a) applied because the law that created the Medicare Advantage program, which included giving Medicare Advantage plans reimbursement rights “thereby empowering them to sue under the private cause action, wasn’t enacted until 1997.”[33]  Accordingly, the 11th Circuit concluded that “because [MSPA’s] cause of action ‘was made possible by’ Medicare Part C— ‘a post-1990 enactment’ — § 1658(a) provides the applicable limitations period.”[34]   With that issue down, the 11th Circuit then turned its attention to whether MSPA had filed its action timely under § 1658 as discussed in the next section.

Applying 28 U.S.C. § 1658(a)’s four-year limitations period to the case facts, the 11th Circuit ultimately found that MSPA’s private cause of action claim was untimely

Once the 11th Circuit determined that 28 U.S.C. § 1658(a) was the applicable statute governing the parties’ dispute, the court then focused on the second question --- that being, whether MSPA had filed its action timely under § 1658(a).  On this question, the 11th Circuit ultimately found that MSPA’s filing was untimely under this statute.  Understanding how the court reached this conclusion requires, as the 11th Circuit acknowledged, “some unpacking”[35] --- which the author will now attempt to do as follows:

As a starting point in its analysis, the 11th Circuit first had to determine when MSPA’s cause of action “accrued” within the meaning of § 1658(a).  On this point, the court explained that in determining a SOL’s start date, courts typically choose between two rules:  the “occurrence rule”— which begins the limitations period on the date that the violation of the plaintiff’s legal right occurred,[36]  or the “discovery rule”— which commences the limitations period on the date the plaintiff discovered or should have discovered the cause of action.[37]

By way of illustration, the 11th Circuit, applying the facts under each rule, noted that “under the occurrence rule, the limitations period for [MSPA’s] cause of action began running in 2012, rendering [MSPA’s] suit—filed six years later—untimely.”[38] However, using the discovery rule, the court noted that the limitations period “at least arguably wouldn’t have started running until 2015, when [MSPA] says it first learned about Tower Hill’s settlement with D.L.—i.e., within § 1658’s four-year limitations period.”[39]    

Thus, the 11th Circuit had to determine which rule applied under § 1658(a) -- the “occurrence” or “discovery” rule?  For the reasons outlined below, the 11th Circuit concluded that the “occurrence” rule applied and that MSPA’s action was untimely based on that rule. 

In arriving at this conclusion, the 11th Circuit first noted that, in general, “[i]f ‘there are two plausible constructions of a statute of limitations,’ we generally ‘adopt the construction’ ” that aligns with  ‘the standard rule that the limitations period commences when the plaintiff has a complete and present cause of action.’”[40] Further extending on the court stated that “[p]ut more directly, ‘in the absence of a clear Congressional directive or a self-concealing violation, the court should not graft a discovery rule onto a statute of limitations.’”[41]

Turning the focus to § 1658(a), the 11th Circuit noted that whether the term “accrues” as used in § 1658(a) was ambiguous was not entirely clear.  On the one hand the court noted that the Supreme Court in Gabelli v. S.E.C., 568 U.S. 442, 448, 133 S.Ct. 1216, 185 L.Ed.2d 297 (2013) found the term unambiguous indicating that a right accrues “when it comes into existence.”[42]  On the other hand, the court noted that 11th Circuit in Foudy v. Miami-Dade County, 823 F.3d 590 (11th Cir. 2016) “seems to have agreed” with an Eighth Circuit decision finding the term “accrues” as used in § 1658(a) ambiguous.[43]  Based on this prior 11th Circuit decision, the court ruled that “right or wrong we are bound by Foudy’s holding …  [and] that resolves the first-order question: the term “accrues” in § 1658(a) is ambiguous.”[44] 

From there, the next question the court had to decide was whether § 1658(a) is “plausibl[y] constru[ed]” to reflect “the standard rule that the limitations period commences when the plaintiff has a complete and present cause of action.”[45]  On this point, the court noted there were several reasons why it is was “at the very least ‘plausible’ that the term ‘accrues’ in § 1658(a) adopts the occurrence rule”[46] as follows:

First, the 11th Circuit, in part, noted that in Gabelli, the Supreme Court noted that under “common parlance a right accrues when it comes into existence.”[47]  Second, from this, the 11th Circuit concluded that this is “how the Supreme Court seems to understand the term ‘accrues.’”[48]  On this point, the 11th Circuit noted the case Graham Cnty. Soil & Water Conservation Dist. v. United States, 545 U.S. 409, 125 S.Ct. 2444, 162 L.Ed.2d 390 (2005) in which the Supreme Court, in addressing the limitations period related to the False Claims Act at issue in that action, noted, in part, that “analogous state statutes of limitations virtually all start to run when the cause of action accrues” and that it defined the phrase “when the cause of action accrues” to mean “when the retaliatory action accrues.”  (11th Circuit’s emphasis).[49] 

Finally, taking a look at § 1658(a) itself, the 11th Circuit found that “§ 1658(a)’s structure” indicates that subsection (a) “embodies an occurrence rule.”[50]  The court arrived at this conclusion by comparing subsections (a) and (b) of § 1658, noting in particular how the latter subsection “included an express discovery rule for certain claims.”[51]  From this, the 11th Circuit determined that  “’[t]he most natural reading‘ of § 1658(a), then, ‘is that Congress implicitly excluded a general discovery rule by explicitly including one’ in § 1658(b)(1).”[52]

From the foregoing, the 11th Circuit concluded that the “occurrence rule” was the applicable standard to use and MSPA’s action was untimely under this rule stating as follows:

Because it is at least “plausible” that the term “accrues” in § 1658(a) incorporates an occurrence rule —in fact, and setting presumptions aside, we think that’s the best interpretation—that is how we interpret it. Therefore, MSPA Claims 1’s cause of action accrued in 2012 when MSPA Claims 1’s assignor, Florida Healthcare, paid D.L.’s medical bills and became entitled to reimbursement through the Medicare Secondary Payer Act. Because that was more than four years before MSPA Claims 1 filed suit in 2018, its suit is not timely under 28 U.S.C. § 1658(a).[53]

Therefore, the 11th Circuit stated that “we hold that § 1658(a) provides the applicable limitations period and that, under that statute, MSPA Claims 1’s suit is untimely. Accordingly, we affirm the district court’s order granting summary judgment for Tower Hill.”[54] 

Bigger picture considerations

In the bigger picture, the 11th Circuit’s decision in Tower Hill is the latest in a series of disputes and questions involving the MSP’s private cause of action (PCA) statute which have made their way before the courts over the past several years.  In this case, as noted above, the main question involved what statute of limitations applied to PCA actions given that the PCA statute itself does not contain a SOL provision.  Here, as noted, the 11th Circuit ultimately found that the four-year “catch-all” limitations period contained in 28 U.S.C. § 1658 (a) governed PCA claims.  As part of its decision, the court essentially rejected the parties’ contention (as the district court did) that the SMART Act’s three-year SOL governed, finding that this statute applied to claims brought by the government, and not private actors suing under the PCA statute. However, while a complete survey of other decisions involving the question of the SOL in relation to the PCA statute is beyond the scope of this article, it is noted that other courts have applied the SMART Act’s SOL to PCA claims brought by Medicare Advantage Plans (or their assignees).  See e.g., Collins v. Wellcare Healthcare Plans, Inc., 73 F.Supp.3d 653 (Dec. 16, 2014) and MSP Recovery Claims, Series LLC. V. Farmers Insurance Exchange, 2019 WL 2574121 (C.D. California, June 12, 2019). 

Going forward, we will need to monitor to what extent the 11th Circuit’s ruling may impact future decisions from other courts and jurisdictions regarding the applicability (or non-applicability) of the SMART Act’s SOL with respect to PCA claims, including whether other Circuit Courts will ultimately follow the 11th Circuit’s ruling, to the extent a similar dispute is presented for their adjudication.  From another angle, it will also be interesting to see how the 11th Circuit’s decision may come into play regarding current efforts to repeal the MSP’s private cause of action statute per the Repair Abuses of MSP Payments (RAMP Act) which was recently introduced into the U.S. House of Representatives.  Verisk will continue to monitor any developments on these fronts and provide updates as warranted. 

By Mark Popolizio

Courtesy of Verisk

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